[Federal Register Volume 81, Number 45 (Tuesday, March 8, 2016)]
[Rules and Regulations]
[Pages 12203-12352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04439]



[[Page 12203]]

Vol. 81

Tuesday,

No. 45

March 8, 2016

Part II





Department of Health and Human Services





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45 CFR Parts 144, 147, 153, et al.





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2017; Final Rule

Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Rules 
and Regulations

[[Page 12204]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 147, 153, 154, 155, 156, and 158

[CMS-9937-F]
RIN 0938-AS57


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2017

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule sets forth payment parameters and provisions 
related to the risk adjustment, reinsurance, and risk corridors 
programs; cost-sharing parameters and cost-sharing reductions; and user 
fees for Federally-facilitated Exchanges. It also provides additional 
amendments regarding the annual open enrollment period for the 
individual market for the 2017 and 2018 benefit years; essential health 
benefits; cost sharing; qualified health plans; Exchange consumer 
assistance programs; network adequacy; patient safety; the Small 
Business Health Options Program; stand-alone dental plans; third-party 
payments to qualified health plans; the definitions of large employer 
and small employer; fair health insurance premiums; student health 
insurance coverage; the rate review program; the medical loss ratio 
program; eligibility and enrollment; exemptions and appeals; and other 
related topics.

DATES: These regulations are effective on May 9, 2016.

FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Krutika Amin, 
(301) 492-5153, or Lindsey Murtagh (301) 492-4106, for general 
information.
    David Mlawsky, (410) 786-6851, for matters related to fair health 
insurance premiums, student health insurance coverage, and the single 
risk pool.
    Kelly Drury, (410) 786-0558, for matters related to risk 
adjustment.
    Adrianne Glasgow, (410) 786-0686, for matters related to 
reinsurance, distributed data collection, and administrative appeals of 
financial transfers.
    Melissa Jaffe, (301) 492-4129, for matters related to risk 
corridors.
    Lisa Cuozzo, (410) 786-1746, for matters related to rate review.
    Jennifer Stolbach, (301) 492-4350, for matters related to 
establishing a State Exchange, and State-based Exchanges on the Federal 
Platform.
    Emily Ames, (301) 492-4246, and Michelle Koltov, (301) 492-4225, 
for matters related to Navigators, non-Navigator assistance personnel, 
and certified application counselors under part 155.
    Briana Levine, (301) 492-4247, for matters related to agents and 
brokers.
    Dana Krohn, (301) 492-4412, for matters related to employer 
notification and verification.
    Rachel Arguello, (301) 492-4263, for matters related to open 
enrollment periods and special enrollment periods under part 155.
    Anne Pesto, (410) 786-3492, for matters related to eligibility 
determinations and appeals of eligibility determinations for Exchange 
participation and insurance affordability programs, and eligibility 
determinations for exemptions.
    Kate Ficke, (301) 492-4256, for matters related to exemptions from 
the shared responsibility payment.
    Ryan Mooney, (301) 492-4405, for matters related to enrollment.
    Terence Kane, (301) 492-4449, for matters related to the income 
threshold.
    Christelle Jang, (410) 786-8438, for matters related to the SHOP.
    Krutika Amin, (301) 492-5153, for matters related to the Federally-
facilitated Exchange user fee.
    Leigha Basini, (301) 492-4380, for matters related to essential 
health benefits, network adequacy, essential community providers, and 
other standards for QHP issuers.
    Ielnaz Kashefipour, (301) 492-4376, for matters related to 
standardized options and third party payment of premiums and cost 
sharing.
    Rebecca Zimmermann, (301) 492-4396, for matters related to stand-
alone dental plans.
    Cindy Chiou, (301) 492-5142, for matters related to QHP issuer 
oversight.
    Pat Meisol, (410) 786-1917, for matters related to cost-sharing 
reductions and the premium adjustment percentage.
    Nidhi Singh Shah, (301) 492-5110, for matters related to patient 
safety standards.
    Christina Whitefield, (301) 492-4172, for matters related to the 
medical loss ratio program.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Final Rule
III. Provisions of the Final Regulations and Analyses and Responses 
to Public Comments
A. Part 144--Requirements Relating to Health Insurance Coverage
B. Part 146--Requirements for the Group Health Insurance Market
C. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets
D. Part 153--Standards Related to Reinsurance, Risk Corridors, and 
Risk Adjustment under the Affordable Care Act
E. Part 154--Health Insurance Issuer Rate Increases: Disclosure and 
Review Requirements
F. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
G. Part 156--Health Insurance Issuer Standards Under the Affordable 
Care Act, Including Standards Related to Exchanges
H. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
IV. Collection of Information Requirements
A. ICRs Regarding Student Health Insurance Coverage
B. ICRs Regarding Submission of Risk Corridors Data
C. ICRs Regarding Submission of Rate Filing Justification
D. ICRs Regarding Election to Operate an Exchange after 2014
E. ICRs Regarding Standards for Certified Application Counselors
F. ICRs Regarding Network Adequacy Standards
G. ICR Regarding Monthly SHOP Enrollment Reconciliation Files 
Submitted by Issuers
H. ICR Regarding Patient Safety Standards
I. ICRs Regarding Other Notices
V. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and Accounting 
Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism
H. Congressional Review Act

Acronyms and Abbreviations

Affordable Care Act The collective term for the Patient Protection 
and Affordable Care Act (Pub. L. 111-148) and the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended
AHRQ Agency for Healthcare Research and Quality
APTC Advance payments of the premium tax credit
AV Actuarial value
BBEDCA Balanced Budget and Emergency Deficit Control Act of 1985
CCN CMS Certification Number
CFR Code of Federal Regulations
CHIP Children's Health Insurance Program
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CSR Cost-sharing reduction
ECN Exemption certificate number
ECP Essential community provider
EHB Essential health benefits
FFE Federally-facilitated Exchange
FF-SHOP Federally-facilitated Small Business Health Options Program

[[Page 12205]]

FPL Federal poverty level
FR Federal Register
FTE Full-time equivalent
GDP Gross domestic product
HCC Hierarchical condition category
HEN Hospital engagement network
HHS United States Department of Health and Human Services
HICS Health Insurance Casework System
HIOS Health Insurance Oversight System
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
HRSA Health Resources and Services Administration
HSA Health Savings Account
IRS Internal Revenue Service
MAGI Modified adjusted gross income
MAT Medication assisted treatment
MLR Medical loss ratio
MV Minimum value
NAIC National Association of Insurance Commissioners
NHEA National Health Expenditure Accounts
OMB Office of Management and Budget
OPM United States Office of Personnel Management
PBM Prescription benefit manager
PHS Act Public Health Service Act
PII Personally identifiable information
PMPM Per member per month
PRA Paperwork Reduction Act of 1995
PSO Patient safety organization
PSQIA Patient Safety and Quality Improvement Act (Pub. L. 109-41)
QHP Qualified health plan
QIO Quality improvement organizations
RADV Risk adjustment data validation
SADP Stand-alone dental plan
SBC Summary of benefits and coverage
SBE State-based Exchange
SBE-FP State-based Exchange on the Federal platform
SHOP Small Business Health Options Program
The Code Internal Revenue Code of 1986 (26 U.S.C. 1, et seq.)

I. Executive Summary

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111-152), as amended (the Affordable Care Act) enacted a set of reforms 
that are making high-quality health insurance coverage and care more 
affordable and accessible to millions of Americans. These reforms 
include the creation of competitive marketplaces called Affordable 
Insurance Exchanges, or ``Exchanges'' (in this final rule, we also call 
an Exchange a Health Insurance Marketplace\SM\,\1\ or Marketplace\SM\) 
through which qualified individuals and qualified employers can 
purchase health insurance coverage. In addition, many individuals who 
enroll in qualified health plans (QHPs) through individual market 
Exchanges are eligible to receive a premium tax credit to make health 
insurance more affordable, and reductions in cost-sharing payments to 
reduce out-of-pocket expenses for health care services. These 
Affordable Care Act reforms also include the premium stabilization 
programs (risk adjustment, reinsurance and risk corridors) and rules 
that mitigate the potential impact of adverse selection and stabilize 
the price of health insurance in the individual and small group 
markets. In previous rulemaking, we have outlined the major provisions 
and parameters related to many Affordable Care Act programs.
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    \1\ Health Insurance Marketplace\SM\ and Marketplace\SM\ are 
service marks of the U.S. Department of Health & Human Services.
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    In this rule, we seek to improve States' ability to operate 
efficient Exchanges by leveraging the economies of scale available 
through the Federal eligibility and enrollment platform and information 
technology infrastructure. We are finalizing a codification of a new 
Exchange model--the State-based Exchange using the Federal platform 
(SBE-FP). This Exchange model will enable State-based Exchanges (SBEs) 
to execute certain processes using the Federal eligibility enrollment 
infrastructure. The SBE-FP will be required to enter into a Federal 
platform agreement with HHS that will define a set of mutual 
obligations, including the set of Federal services upon which the SBE-
FP agrees to rely. Under this Exchange model, certain requirements that 
were previously only applicable to QHPs offered on a Federally-
facilitated Exchange (FFE) and their downstream and delegated entities 
will apply to QHPs offered on an SBE-FP and their downstream and 
delegated entities. For 2017, we are finalizing a mechanism through 
which SBE-FPs will offset some of the Federal costs of providing this 
infrastructure. In addition, we are finalizing rules requiring agents 
and brokers facilitating enrollments through SBE-FPs to comply with the 
FFE registration and training requirements.
    We are also finalizing a number of amendments that will improve the 
stability of the Exchanges and support consumers' ability to make 
informed choices when purchasing health insurance. These include the 
introduction of ``standardized options'' in the individual market FFEs. 
Additional amendments will increase the accessibility of high-quality 
health insurance and improve competition, transparency, and 
affordability.
    Our intent in offering standardized options is to simplify the 
consumer shopping experience and to allow consumers to more easily 
compare plans across issuers in the individual market FFEs. We are 
finalizing a standardized option with a specified cost-sharing 
structure at each of the bronze, silver (with cost-sharing reduction 
(CSR) plan variations), and gold metal levels. This policy does not 
restrict issuers' ability to offer non-standardized options. We 
anticipate differentially displaying these standardized options to 
allow consumers to compare plans based on differences in price and 
quality rather than cost-sharing structures.
    We are also finalizing policies relating to network adequacy for 
QHPs on the FFEs. We proposed, but are not finalizing, a minimum 
quantitative network adequacy threshold for each State. As States 
continue their work to implement the National Association of Insurance 
Commissioners' (NAIC's) Health Benefit Plan Network Access and Adequacy 
Model Act (NAIC Network Adequacy Model Act), we will continue to use 
the same quantitative time-distance standards in our review of plans 
for QHP certification on the FFEs, which we will detail in the annual 
Letter to Issuers, which we are issuing in final form concurrently with 
this final rule. We are finalizing our proposed policy regarding 
standardized categorization of network breadth for QHPs on the FFEs on 
HealthCare.gov. We are also finalizing two provisions to address 
provider transitions in the FFE and a standard for all QHPs governing 
cost sharing that would apply in certain circumstances when an enrollee 
receives essential health benefit (EHB) provided by an out-of-network 
ancillary provider at an in-network setting.
    We discuss the authority for FFEs to continue to select QHPs based 
on meeting the interests of qualified individuals and qualified 
employers. We will use this authority to strengthen oversight as needed 
in the short term.
    We also seek to improve consumers' ability to make choices 
regarding health insurance coverage by ensuring they receive high-
quality assistance in their interactions with the Exchange. For 
example, this final rule amends program requirements for Navigators, 
certain non-Navigator assistance personnel, and certified application 
counselors. These amendments will require FFE Navigators to assist 
consumers with certain post-enrollment and other issues beginning in 
2018, require all Navigators to provide targeted assistance to 
underserved or vulnerable populations, and require Navigators and non-
Navigator assistance personnel to complete training prior to conducting 
outreach and education activities. We are also amending our rules 
regarding the giving of gifts by Navigators, certain non-Navigator 
assistance personnel, and certified application counselors. In

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addition, we are finalizing our proposal that certified application 
counselor designated organizations will be required to submit data and 
information related to the organization's certified application 
counselors, upon the request of the Exchanges in which they operate.
    In addition, this final rule takes several steps to increase 
transparency. This rule finalizes provisions to enhance the 
transparency of rates in all States and the effectiveness of the rate 
review program.
    This rule also establishes dates for the individual market annual 
open enrollment period for future benefit years. For 2017 and 2018, we 
will maintain the same open enrollment period we adopted for 2016--that 
is, November 1 of the year preceding the benefit year through January 
31 of the benefit year, and for 2019 and later benefit years, we are 
establishing an open enrollment period of November 1 through December 
15 of the year preceding the benefit year. The rule also finalizes two 
narrow changes to the Exchange re-enrollment hierarchy, prioritizing 
re-enrollment into silver plans, and providing Exchanges with the 
flexibility to re-enroll consumers into plans of other Exchange issuers 
if the consumer is enrolled in a plan from an issuer that does not have 
another plan available for re-enrollment through the Exchange.
    We summarize input we have received on whether special enrollment 
periods are being appropriately provided, and discuss our plans to 
conduct an assessment of special enrollment periods granted to 
consumers through the FFEs. We are also codifying a number of Exchange 
policies relating to exemptions in order to provide certainty and 
transparency around these policies for all stakeholders.
    We are finalizing our proposals for the risk adjustment program--in 
particular, we are finalizing our introduction of preventive services 
into the methodology, and our calculation of model coefficients based 
on the 2012, 2013, and 2014 MarketScan claims data. This final rule 
also amends the risk corridors provisions related to the reporting of 
allowable costs.
    In addition to provisions aimed at stabilizing premiums, we are 
finalizing several provisions related to cost sharing. First, we are 
finalizing the premium adjustment percentage for 2017, which is used to 
set the rate of increase for several parameters detailed in the 
Affordable Care Act, including the maximum annual limitation on cost 
sharing for 2017. We are also finalizing the maximum annual limitations 
on cost sharing for the 2017 benefit year for cost-sharing reduction 
plan variations. We also finalize standards for stand-alone dental 
plans (SADPs) related to the annual limitation on cost sharing, and 
standards related to third party payments for premiums and cost sharing 
made on behalf of enrollees by Federal, State, and local governments; 
Ryan White HIV/AIDS programs; and Indian tribes, tribal organizations, 
or urban Indian organizations.
    We finalize several improvements that seek to ensure consumers have 
access to affordable, high-quality health care coverage. We are 
amending requirements for QHPs, including essential community providers 
(ECPs) and meaningful difference requirements. This rule also contains 
technical amendments to QHP issuer oversight provisions. This rule 
includes amendments to further strengthen the patient safety 
requirements for QHP issuers offering coverage through Exchanges.
    For consumers purchasing coverage through the Small Business Health 
Options Program (SHOP), we finalize a new ``vertical choice'' model for 
Federally-facilitated SHOPs for plan years beginning on or after 
January 1, 2017, under which employers would be able to offer qualified 
employees a choice of all plans across all available actuarial value 
levels of coverage from a single issuer. States with a Federally-
facilitated Small Business Health Options Program (FF-SHOP) will have 
the opportunity to recommend that vertical choice not be implemented in 
their State, and SBEs relying on the FF-SHOP eligibility and enrollment 
platform will be able to choose not to have vertical choice implemented 
in their State.
    We also finalize adjustments to our programs and rules, as we do 
each year, so that our rules and policies reflect the latest market 
developments. We finalize the following changes and clarifications to 
the Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
and Affordable Care Act health insurance reform requirements. We revise 
the definitions of small employer and large employer to bring them into 
conformance with the Protecting Affordable Coverage for Employees Act 
(Pub. L. 114-60). We also finalize provisions to ensure that a network 
plan in the small group market with a limited service area can be 
appropriately rated for sale based on geography. Lastly, we finalize 
some of the proposed provisions regarding the application of the 
actuarial value (AV) and single risk pool provisions to student health 
insurance coverage.

II. Background

A. Legislative and Regulatory Overview

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised 
several provisions of the Patient Protection and Affordable Care Act, 
was enacted on March 30, 2010. In this final rule, we refer to the two 
statutes collectively as the Affordable Care Act.
    Subtitles A and C of title I of the Affordable Care Act 
reorganized, amended, and added to the provisions of part A of title 
XXVII of the Public Health Service Act (PHS Act) relating to group 
health plans and health insurance issuers in the group and individual 
markets.
    Section 2701 of the PHS Act, as added by the Affordable Care Act, 
restricts the variation in premium rates charged by a health insurance 
issuer for non-grandfathered health insurance coverage in the 
individual or small group market to certain specified factors. The 
factors are: Family size, rating area, age, and tobacco use.
    Section 2701 of the PHS Act operates in coordination with section 
1312(c) of the Affordable Care Act. Section 1312(c) of the Affordable 
Care Act generally requires a health insurance issuer to consider all 
enrollees in all health plans (except for grandfathered health plans) 
offered by such issuer to be members of a single risk pool for each of 
its individual and small group markets. States have the option to merge 
the individual market and small group market risk pools under section 
1312(c)(3) of the Affordable Care Act.
    Section 2702 of the PHS Act, as added by the Affordable Care Act, 
requires health insurance issuers that offer health insurance coverage 
in the group or individual market in a State to offer coverage to and 
accept every employer and individual in the State that applies for such 
coverage unless an exception applies.\2\
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    \2\ Before enactment of the Affordable Care Act, the Health 
Insurance Portability and Accountability Act of 1996 amended the PHS 
Act (formerly section 2711) to generally require guaranteed 
availability of coverage for employers in the small group market.
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    Section 2703 of the PHS Act, as added by the Affordable Care Act, 
and sections 2712 and 2741 of the PHS Act, as added by HIPAA and 
codified prior to the enactment of the Affordable Care Act, require 
health insurance issuers that offer health insurance coverage in the 
group or individual market to renew or

[[Page 12207]]

continue in force such coverage at the option of the plan sponsor or 
individual unless an exception applies.
    Section 2718 of the PHS Act, as added by the Affordable Care Act, 
generally requires health insurance issuers to submit an annual medical 
loss ratio (MLR) report to HHS, and provide rebates to enrollees if the 
issuers do not achieve specified MLR thresholds.
    Section 2794 of the PHS Act, as added by the Affordable Care Act, 
directs the Secretary of HHS (the Secretary), in conjunction with the 
States, to establish a process for the annual review of unreasonable 
increases in premiums for health insurance coverage.\3\ The law also 
requires health insurance issuers to submit to the Secretary and the 
applicable State justifications for unreasonable premium increases 
prior to the implementation of the increases. Section 2794(b)(2) of the 
PHS Act further directs the Secretary, in conjunction with the States, 
to monitor premium increases of health insurance coverage offered 
through an Exchange and outside of an Exchange beginning with plan 
years starting in 2014.
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    \3\ The implementing regulations in part 154 limit the scope of 
the requirements under section 2794 of the PHS Act to health 
insurance issuers offering health insurance coverage in the 
individual market or small group market. See Rate Increase 
Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23, 
2011).
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    Section 1252 of the Affordable Care Act provides that any standard 
or requirement adopted by a State under title I of the Affordable Care 
Act, or any amendment made by title I of the Affordable Care Act, is to 
be applied uniformly to all health plans in each insurance market to 
which the standard and requirement apply.
    Section 1302 of the Affordable Care Act provides for the 
establishment of an EHB package that includes coverage of EHB (as 
defined by the Secretary), cost-sharing limits, and actuarial value 
requirements. The law directs that EHBs be equal in scope to the 
benefits covered by a typical employer plan, and that they cover at 
least the following 10 general categories: Ambulatory patient services; 
emergency services; hospitalization; maternity and newborn care; mental 
health and substance use disorder services, including behavioral health 
treatment; prescription drugs; rehabilitative and habilitative services 
and devices; laboratory services; preventive and wellness services and 
chronic disease management; and pediatric services, including oral and 
vision care.
    Section 1301(a)(1)(B) of the Affordable Care Act directs all 
issuers of QHPs to cover the EHB package described in section 1302(a) 
of the Affordable Care Act, including coverage of the services 
described in section 1302(b) of the Affordable Care Act, to adhere to 
the cost-sharing limits described in section 1302(c) of the Affordable 
Care Act, and to meet the AV levels established in section 1302(d) of 
the Affordable Care Act. Section 2707(a) of the PHS Act, which is 
effective for plan or policy years beginning on or after January 1, 
2014, extends the coverage of the EHB package to non-grandfathered 
individual and small group coverage, irrespective of whether such 
coverage is offered through an Exchange. In addition, section 2707(b) 
of the PHS Act directs non-grandfathered group health plans to ensure 
that cost sharing under the plan does not exceed the limitations 
described in sections 1302(c)(1) and (2) of the Affordable Care Act.
    Section 1302(d) of the Affordable Care Act describes the various 
levels of coverage based on actuarial value. Consistent with section 
1302(d)(2)(A) of the Affordable Care Act, actuarial value is calculated 
based on the provision of EHB to a standard population. Section 
1302(d)(3) of the Affordable Care Act directs the Secretary to develop 
guidelines that allow for de minimis variation in AV calculations.
    Section 1311(b)(1)(B) of the Affordable Care Act directs that the 
Small Business Health Options Program assist qualified small employers 
in facilitating the enrollment of their employees in qualified health 
plans offered in the small group market. Sections 1312(f)(1) and (2) of 
the Affordable Care Act define qualified individuals and qualified 
employers. Under section 1312(f)(2)(B) of the Affordable Care Act, 
beginning in 2017, States will have the option to allow issuers to 
offer QHPs in the large group market through an Exchange.\4\
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    \4\ If a State elects this option, the rating rules in section 
2701 of the PHS Act and its implementing regulations will apply to 
all coverage offered in such State's large group market (except for 
self-insured group health plans) under section 2701(a)(5) of the PHS 
Act.
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    Section 1311(c)(1)(B) of the Affordable Care Act requires the 
Secretary to establish minimum criteria for provider network adequacy 
that a health plan must meet to be certified as a QHP.
    Section 1311(c)(5) of the Affordable Care Act requires the 
Secretary to continue to operate, maintain, and update the Internet 
portal developed under section 1103 of the Affordable Care Act to 
provide information to consumers and small businesses on affordable 
health insurance coverage options.
    Section 1311(c)(6)(B) of the Affordable Care Act states that the 
Secretary is to set annual open enrollment periods for Exchanges for 
calendar years after the initial enrollment period.
    Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act 
direct all Exchanges to establish a Navigator program.
    Section 1311(h)(1) of the Affordable Care Act specifies that a QHP 
may contract with health care providers and hospitals with more than 50 
beds only if they meet certain patient safety standards, including use 
of a patient safety evaluation system, a comprehensive hospital 
discharge program, and implementation of health care quality 
improvement activities. Section 1311(h)(2) of the Affordable Care Act 
also provides the Secretary flexibility to establish reasonable 
exceptions to these patient safety requirements and section 1311(h)(3) 
of the Affordable Care Act allows the Secretary flexibility to issue 
regulations to modify the number of beds described in section 
1311(h)(1)(A) of the Affordable Care Act.
    Section 1312(a)(2) of the Affordable Care Act provides that in a 
SHOP, a qualified employer may select any level of coverage under 
section 1302(d) of the Affordable Care Act to be made available to 
employees through the SHOP, and that employees may then, in turn, 
choose plans within the level selected by the qualified employer.
    Section 1321(a) of the Affordable Care Act provides broad authority 
for the Secretary to establish standards and regulations to implement 
the statutory requirements related to Exchanges, QHPs and other 
components of title I of the Affordable Care Act. Section 1321(a)(1) 
directs the Secretary to issue regulations that set standards for 
meeting the requirements of title I of the Affordable Care Act with 
respect to, among other things, the establishment and operation of 
Exchanges.
    Sections 1313 and 1321 of the Affordable Care Act provide the 
Secretary with the authority to oversee the financial integrity of 
State Exchanges, their compliance with HHS standards, and the efficient 
and non-discriminatory administration of State Exchange activities. 
Section 1321 of the Affordable Care Act provides for State flexibility 
in the operation and enforcement of Exchanges and related requirements.
    When operating an FFE under section 1321(c)(1) of the Affordable 
Care Act, HHS has the authority under sections

[[Page 12208]]

1321(c)(1) and 1311(d)(5)(A) of the Affordable Care Act to collect and 
spend user fees. In addition, 31 U.S.C. 9701 permits a Federal agency 
to establish a charge for a service provided by the agency. Office of 
Management and Budget (OMB) Circular A-25 Revised establishes Federal 
policy regarding user fees and specifies that a user charge will be 
assessed against each identifiable recipient for special benefits 
derived from Federal activities beyond those received by the general 
public.
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to enforce the Exchange standards using civil money penalties 
(CMPs) on the same basis as detailed in section 2723(b) of the PHS Act. 
Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs 
as a means of enforcing the individual and group market reforms 
contained in Part A of title XXVII of the PHS Act when a State fails to 
substantially enforce these provisions.
    Section 1321(d) of the Affordable Care Act provides that nothing in 
title I of the Affordable Care Act should be construed to preempt any 
State law that does not prevent the application of title I of the 
Affordable Care Act. Section 1311(k) of the Affordable Care Act 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    Section 1341 of the Affordable Care Act requires the establishment 
of a transitional reinsurance program in each State to help pay the 
cost of treating high-cost enrollees in the individual market in 
benefit years 2014 through 2016. Section 1342 of the Affordable Care 
Act directs the Secretary to establish a temporary risk corridors 
program that reduces the impact of inaccurate rate setting from 2014 
through 2016. Section 1343 of the Affordable Care Act establishes a 
permanent risk adjustment program to provide payments to health 
insurance issuers that attract higher-risk populations, such as those 
with chronic conditions, funded by payments from those that attract 
lower-risk populations, thereby reducing incentives for issuers to 
avoid higher-risk enrollees.
    Sections 1402 and 1412 of the Affordable Care Act provide for, 
among other things, reductions in cost sharing for EHB for qualified 
low- and moderate-income enrollees in silver level health plans offered 
through the individual market Exchanges.
    Section 5000A of the Internal Revenue Code of 1986 (the Code), as 
added by section 1501(b) of the Affordable Care Act, requires all non-
exempt individuals to maintain minimum essential coverage for each 
month or make the individual shared responsibility payment. Section 
5000A(f) of the Code defines minimum essential coverage as any of the 
following: (1) Coverage under a specified government sponsored program; 
(2) coverage under an eligible employer-sponsored plan; (3) coverage 
under a health plan offered in the individual market within a State; 
and (4) coverage under a grandfathered health plan. Section 
5000A(f)(1)(E) of the Code authorizes the Secretary of HHS, in 
coordination with the Secretary of the Treasury, to designate other 
health benefits coverage as minimum essential coverage.
    The Protecting Affordable Coverage for Employees Act amended 
section 1304(b) of the Patient Protection and Affordable Care Act and 
section 2791(e) of the PHS Act to amend the definition of small 
employer in these statutes to mean, in connection with a group health 
plan with respect to a calendar year and a plan year, an employer who 
employed an average of at least 1 but not more than 50 employees on 
business days during the preceding calendar year and who employs at 
least 1 employee on the first day of the plan year. It also amended 
these statutes to make conforming changes to the definition of large 
employer, and to provide that a State may treat as a small employer, 
with respect to a calendar year and a plan year, an employer who 
employed an average of at least 1 but not more than 100 employees on 
business days during the preceding calendar year and who employs at 
least 1 employee on the first day of the plan year.
1. Premium Stabilization Programs
    In the July 15, 2011 Federal Register (76 FR 41929), we published a 
proposed rule outlining the framework for the premium stabilization 
programs. We implemented the premium stabilization programs in a final 
rule, published in the March 23, 2012 Federal Register (77 FR 17219) 
(Premium Stabilization Rule). In the December 7, 2012 Federal Register 
(77 FR 73117), we published a proposed rule outlining the benefit and 
payment parameters for the 2014 benefit year to expand the provisions 
related to the premium stabilization programs and set forth payment 
parameters in those programs (proposed 2014 Payment Notice). We 
published the 2014 Payment Notice final rule in the March 11, 2013 
Federal Register (78 FR 15409).
    In the December 2, 2013 Federal Register (78 FR 72321), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2015 benefit year to expand the provisions related to the 
premium stabilization programs, setting forth certain oversight 
provisions and establishing the payment parameters in those programs 
(proposed 2015 Payment Notice). We published the 2015 Payment Notice 
final rule in the March 11, 2014 Federal Register (79 FR 13743).
    In the November 26, 2014 Federal Register (79 FR 70673), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2016 benefit year to expand the provisions related to the 
premium stabilization programs, setting forth certain oversight 
provisions and establishing the payment parameters in those programs 
(proposed 2016 Payment Notice). We published the 2016 Payment Notice 
final rule in the February 27, 2015 Federal Register (80 FR 10749).
2. Program Integrity
    In the June 19, 2013 Federal Register (78 FR 37031), we published a 
proposed rule that proposed certain program integrity standards related 
to Exchanges and the premium stabilization programs (proposed Program 
Integrity Rule). The provisions of that proposed rule were finalized in 
two rules, the ``first Program Integrity Rule'' published in the August 
30, 2013 Federal Register (78 FR 54069) and the ``second Program 
Integrity Rule'' published in the October 30, 2013 Federal Register (78 
FR 65045).
3. Exchanges
    We published a request for comment relating to Exchanges in the 
August 3, 2010 Federal Register (75 FR 45584). We issued initial 
guidance to States on Exchanges on November 18, 2010. We proposed a 
rule in the July 15, 2011 Federal Register (76 FR 41865) to implement 
components of the Exchanges, and a rule in the August 17, 2011 Federal 
Register (76 FR 51201) regarding Exchange functions in the individual 
market, eligibility determinations, and Exchange standards for 
employers. A final rule implementing components of the Exchanges and 
setting forth standards for eligibility for Exchanges was published in 
the March 27, 2012 Federal Register (77 FR 18309) (Exchange 
Establishment Rule).
    We established standards for SHOP in the 2014 Payment Notice. We 
also set forth standards related to Exchange user fees in the 2014 
Payment Notice. We established an adjustment to the FFE user fee in the 
Coverage of Certain Preventive Services Under the Affordable Care Act 
final rule, published in the July 2, 2013 Federal

[[Page 12209]]

Register (78 FR 39869) (Preventive Services Rule).
    In a final rule published in the July 17, 2013 Federal Register (78 
FR 42823), we established standards for Navigators and non-Navigator 
assistance personnel in FFEs and for non-Navigator assistance personnel 
funded through an Exchange establishment grant. This final rule also 
established a certified application counselor program for Exchanges and 
set standards for that program.
4. Essential Health Benefits and Actuarial Value
    On December 16, 2011, HHS released a bulletin \5\ (the EHB 
Bulletin) that outlined an intended regulatory approach for defining 
EHB, including a benchmark-based framework. HHS also published a 
bulletin that outlined its intended regulatory approach to calculations 
of AV on February 24, 2012.\6\ A proposed rule relating to EHBs and AVs 
was published in the November 26, 2012 Federal Register (77 FR 70643). 
We established requirements relating to EHBs and AVs in the Standards 
Related to Essential Health Benefits, Actuarial Value, and 
Accreditation Final Rule, which was published in the February 25, 2013 
Federal Register (78 FR 12833) (EHB Rule).
---------------------------------------------------------------------------

    \5\ Essential Health Benefits Bulletin. (Dec. 16, 2011), 
available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
    \6\ Actuarial Value and Cost-Sharing Reductions Bulletin. (Feb. 
24, 2012), available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.
---------------------------------------------------------------------------

5. Market Rules
    A proposed rule relating to the 2014 health insurance market rules 
was published in the November 26, 2012 Federal Register (77 FR 70584). 
A final rule implementing the health insurance market rules was 
published in the February 27, 2013 Federal Register (78 FR 13406) (2014 
Market Rules).
    A proposed rule relating to Exchanges and Insurance Market 
Standards for 2015 and Beyond was published in the March 21, 2014 
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A 
final rule implementing the Exchange and Insurance Market Standards for 
2015 and Beyond was published in the May 27, 2014 Federal Register (79 
FR 30239) (2015 Market Standards Rule).
6. Rate Review
    A proposed rule to establish the rate review program was published 
in the December 23, 2010 Federal Register (75 FR 81003). A final rule 
with comment period implementing the rate review program was published 
in the May 23, 2011 Federal Register (76 FR 29963) (Rate Review Rule). 
The provisions of the Rate Review Rule were amended in final rules 
published in the September 6, 2011 Federal Register (76 FR 54969), the 
February 27, 2013 Federal Register (78 FR 13405), the May 27, 2014 
Federal Register (79 FR 30339), and the February 27, 2015 Federal 
Register (80 FR 10749).
7. Medical Loss Ratio
    We published a request for comment on section 2718 of the PHS Act 
in the April 14, 2010 Federal Register (75 FR 19297), and published an 
interim final rule with a 60-day comment period relating to the MLR 
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day 
comment period was published in the December 7, 2011 Federal Register 
(76 FR 76573). An interim final rule with a 60-day comment period was 
published in the December 7, 2011 Federal Register (76 FR 76595). A 
final rule was published in the Federal Register on May 16, 2012 (77 FR 
28790).

B. Stakeholder Consultation and Input

    HHS consulted stakeholders on the policies related to the operation 
of Exchanges, including the SHOP and the premium stabilization 
programs. We have held a number of listening sessions with consumers, 
providers, employers, health plans, the actuarial community, and State 
representatives to gather public input. We consulted with stakeholders 
through regular meetings with the National Association of Insurance 
Commissioners, regular contact with States through the Exchange 
Establishment grant and Exchange Blueprint approval processes, and 
meetings with Tribal leaders and representatives, health insurance 
issuers, trade groups, consumer advocates, employers, and other 
interested parties. We considered all public input we received as we 
developed the policies in this final rule.

C. Structure of Final Rule

    The regulations outlined in this final rule will be codified in 45 
CFR parts 144, 147, 153, 154, 155, 156 and 158.
    The regulations in part 144, consistent with recent legislation, 
revise the definitions of ``large employer'' and ``small employer.''
    The regulations in part 147 clarify the definition of principal 
business address, and establish the appropriate rating area under 
specific circumstances, for purposes of geographic rating. They also 
address the treatment of student health insurance coverage with regard 
to the AV and single risk pool requirements.
    The regulations in part 153 codify how HHS will evaluate the risk 
adjustment and reinsurance data submitted to an issuer's dedicated 
distributed data environment. This rule also includes the risk 
adjustment user fee for 2017 and outlines certain modifications to the 
HHS risk adjustment methodology. This rule clarifies reporting 
requirements for the risk adjustment, reinsurance, and risk corridors 
programs.
    The regulations in part 154 outline certain modifications to 
enhance the transparency and effectiveness of the rate review program. 
We require the submission of a Unified Rate Review Template from all 
issuers offering single risk pool coverage in the individual and small 
group market, including coverage with rate decreases or unchanged 
rates, as well as rates for new plans. We also announce our intention 
to disclose all proposed rate increases for single risk pool coverage 
at a uniform time on the CMS Web site, including rates with increases 
of less than 10 percent. Finally, we reiterate the process for 
establishing the uniform timeline that proposed rate increases subject 
to review and all final rate increases (including those not subject to 
review) for single risk pool coverage must be posted at a uniform time 
by States with Effective Rate Review Programs.
    The regulations in part 155 include clarifications related to the 
functions of an Exchange, and establish the individual market open 
enrollment period for the 2017 and 2018 benefit years. Certain 
proposals in part 155 are related to the eligibility and verification 
processes related to eligibility for insurance affordability programs. 
We also amend and clarify rules related to enrollment of qualified 
individuals into QHPs. We describe changes to the process of submitting 
certain exemption applications and options for State Exchanges to 
handle exemptions. The finalized regulations also provide for a Federal 
platform agreement through which a State Exchange may agree to rely on 
the FFE for certain functions as an SBE-FP. We also finalize various 
proposals related to the SHOPs. We amend the standards applicable to 
the consumer assistance functions performed by Navigators, non-
Navigator assistance personnel, and certified application counselors. 
We also discuss our approach to QHP certification, and modify standards 
for FFE-registered agents and brokers and requirements for HHS-approved 
vendors of FFE training. Part 155 also includes clarification to

[[Page 12210]]

the policy regarding additional State-required benefits.
    The regulations in part 156 establish parameters related to cost 
sharing, including the premium adjustment percentage, the maximum 
annual limitation on cost sharing, and the reductions in the maximum 
annual limitation for cost-sharing plan variations for 2017. We amend 
the timeframe to request reconsideration under the administrative 
appeals process applicable to the premium stabilization programs. 
Amendments to part 156 also include provisions related to EHB 
prescription drug rules. We amend network adequacy requirements 
(including application of out-of-network costs to the annual limitation 
on cost sharing for EHBs covered under QHPs in the small group and 
individual markets), and essential community provider requirements. We 
establish standardized options for cost-sharing structures, indexing 
for the stand-alone dental plan annual limitation on cost sharing, 
changes to our process for updating the AV Calculator for QHPs, 
meaningful difference standards for QHPs, and minor changes to QHP 
issuer oversight standards. We also amend provisions related to the 
third-party premium payments from certain entities and the next phase 
of implementation for patient safety standards for issuers of QHPs 
offered on Exchanges.
    The amendments to the regulations in part 158 finalize revisions 
related to the definitions of large employer and small employer 
consistent with recent legislation.

III. Provisions of the Final Regulations and Analyses and Responses to 
Public Comments

    In the December 2, 2015 Federal Register (80 FR 75487), we 
published the ``Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters for 2017'' proposed rule. We received 
524 comments, including 112 substantially similar letters regarding our 
solicitation for comment on whether the substance use disorder 
requirement in essential health benefits needs additional clarification 
regarding medication-assisted treatment for opioid addiction. Comments 
were received from the National Association of Insurance Commissioners, 
State departments of insurance, State Exchanges, a member of Congress, 
health insurance issuers, providers, consumer groups, labor entities, 
industry groups, patient safety groups, national interest groups, and 
other stakeholders. The comments ranged from general support of or 
opposition to the proposed provisions to specific questions or comments 
regarding proposed changes. We received a number of comments and 
suggestions that were outside the scope of the proposed rule that will 
not be addressed in this final rule.
    In this final rule, we provide a summary of each proposed 
provision, a summary of those public comments received that directly 
related to proposals, our responses to them, and a description of the 
provisions we are finalizing.
    Comment: We received a number of comments stating that the comment 
period was unreasonably short, making it difficult for stakeholders to 
provide in-depth analysis and input. Commenters urged HHS to provide a 
comment period of 60 days from the date of publication in the Federal 
Register for this and future HHS Notices of Benefit and Payment 
Parameters.
    Response: The timeline for publication of this final rule 
accommodates issuer filing deadlines for the 2017 benefit year. A 60-
day comment period would have delayed the publication of this final 
rule, and created significant challenges for States, Exchanges, 
issuers, and other entities in meeting deadlines related to 
implementing these rules.
    Comment: We received a number of comments disapproving of the wide 
array of topics covered in the rule.
    Response: Many of the programs covered by this final rule are 
closely linked. To simplify the regulatory process, facilitate public 
comment, and provide the information needed to meet statutory 
deadlines, we have elected to propose and finalize these regulatory 
provisions in one rule, as we have in years past.
    Comment: A number of comments, many focused primarily on proposals 
related to network adequacy, urged HHS to allow States to continue 
their oversight of their insurance markets and defer to the NAIC for 
the development of important industry-wide, State-based standards.
    Response: We aim to establish Federal oversight standards that 
complement State standards while meeting Federal obligations, including 
for qualified health plans on Federally-facilitated Exchanges. We will 
continue to coordinate closely with State authorities to address 
compliance issues, eliminate duplicative requirements or review, and to 
reduce the burden on stakeholders.
    Comment: Several comments emphasized the importance of ensuring 
coverage is affordable to consumers, or expressed concern that coverage 
purchased through the Exchanges is not affordable.
    Response: We appreciate the importance of ensuring coverage 
purchased through the Exchanges is affordable to consumers, and believe 
affordability is critical to the success of the Exchanges.

A. Part 144--Requirements Relating to Health Insurance Coverage

1. Definitions (Sec.  144.103)
    Section 144.103 sets forth definitions of terms that are used 
throughout parts 146 through 150. In the proposed rule, we discussed 
the definition of ``plan year'' and proposed revisions to the 
definitions of small employer and large employer that would be 
consistent with recent legislation. We also proposed a technical 
correction in the definition of excepted benefits to cross reference 
the group market provisions in Sec.  146.145(b) rather than Sec.  
146.145(c). We are finalizing these provisions as proposed.
a. Plan Year
    In the preamble to the proposed rule (80 FR at 79495), we explained 
that we interpret the definition of plan year in Sec.  144.103 with 
respect to both grandfathered and non-grandfathered group health plans 
to mean a period that is no longer than 12 months.
    Comment: One commenter requested clarification that a plan year may 
be shorter than 12 months under certain circumstances.
    Response: A plan year may be shorter than 12 months under certain 
circumstances, but a plan year may not be longer than 12 months.
b. Large Employer and Small Employer
    We proposed to revise the regulatory definitions of large employer 
and small employer in Sec. Sec.  144.103 and 155.20 consistent with 
section 1304(b) of the Affordable Care Act and section 2791(e) of the 
PHS Act, as amended by the Protecting Affordable Coverage for Employees 
Act. We also proposed to codify statutory language providing that in 
the case of an employer that was not in existence throughout the 
preceding calendar year, the determination of whether the employer is a 
large employer or a small employer is based on the average number of 
employees that it is reasonably expected the employer will employ on 
business days in the current calendar year. We are finalizing these 
revisions as proposed.
    Comment: Several commenters supported our proposed definitions of 
large employer and small employer, including the codification related 
to employers that were not in existence throughout the preceding 
calendar year.
    Response: We are finalizing the revisions to the definitions of 
large

[[Page 12211]]

employer and small employer in Sec. Sec.  144.103 and 155.20 as 
proposed.\7\
---------------------------------------------------------------------------

    \7\ This final rule has no effect on previously issued guidance 
by CMS clarifying that offices of the Members of Congress, as 
qualified employers, are eligible to participate in a SHOP 
regardless of the size requirements set forth in the definition of 
``qualified employer'' in 45 CFR 155.20. See Members of Congress and 
Staff Accessing Coverage through Health Insurance Exchanges 
(Marketplaces) (Sept. 30, 2013), available at: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/members-of-congress-faq-9-30-2013.pdf.
---------------------------------------------------------------------------

B. Part 146--Requirements for the Group Health Insurance Market

1. Guaranteed Availability of Coverage for Employers in the Small Group 
Market (Sec.  146.150)
    For a discussion of the proposed amendment to Sec.  146.150, please 
see the preamble to Sec.  147.104.

C. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets

1. Fair Health Insurance Premiums (Sec.  147.102)
a. Principal Business Address
    Under section 2701 of the PHS Act and regulations at Sec.  147.102, 
the rating area for a small group plan is based on the group 
policyholder's principal business address. We proposed to amend Sec.  
147.102(a)(1)(ii) to provide that if the employer has registered an in-
State principal business address with the State, that location is the 
principal business address. We noted that an in-State address 
registered solely for purposes of service of process would not be 
considered the employer's principal business address, unless it is a 
substantial worksite for the employer's business. If an in-State 
principal business address is not registered with the State or is only 
registered for purposes of service of process and is not a substantial 
worksite, we proposed that the employer would designate as its 
principal business address the business address within the State where 
the greatest number of employees work in the applicable State.
    When a network plan offered in a State has a limited service area, 
we noted that this policy could result in an issuer having to make a 
plan available under the guaranteed availability rules to an employer--
because the employer has an employee who lives, works, or resides in 
the service area--but not be able to apply a geographic rating factor 
under the current rule--because the issuer might not have established 
rates applicable to the location of the employer's principal business 
address outside the plan's service area.
    We proposed to amend Sec.  147.102 to provide for an additional 
principal business address to be identified within a plan's service 
area in these circumstances so that the plan can be appropriately rated 
for sale to the employer. In such instances, the additional principal 
business address would be the business address within the plan's 
service area where the greatest number of employees work as of the 
beginning of the plan year, or, if there is no such business address, 
an address within the service area selected by the employer that 
reasonably reflects where the greatest number of employees live or 
reside as of the beginning of the plan year.
    As stated in the preamble to the proposed rule, SHOPs, including 
the FF-SHOPs, may use the address that was used to establish a 
qualified employer's eligibility for participation in the SHOP to 
determine the applicable geographic rating area when calculating 
premiums for participating employers. The intent of these proposals was 
to establish a uniform set of rules that can be applied as simply as 
possible, while allowing plans to be properly rated.
    We are finalizing the provisions proposed in Sec.  147.102 of the 
proposed rule without substantive modification. However, we are 
finalizing the regulatory text in a way that does not refer to a 
location where employees live or reside as a principal business 
address, as we believe doing so in the proposed regulatory text was 
confusing, and we are making additional minor edits for clarity. These 
are not substantive modifications, as the proposed rule and this final 
rule apply the same test to determine the policyholder's rating area 
with respect to a network plan in such a situation.
    Comment: Several commenters supported our proposed definition of 
principal business address, and our approach for allowing an employer 
to identify an additional principal business address within the service 
area of a network plan. Two commenters suggested HHS should not modify 
the standards for geographic rating, suggesting that the proposed rule 
provides opportunities and incentives for small employers to select an 
address based upon factors other than the true business location of the 
employer. These commenters did not provide an alternative approach to 
allow plans to be rated in this circumstance.
    Response: We have revised the proposed rule text such that it no 
longer refers to an employer selecting a location where employees live 
or reside as a principal business address. The rule instead provides 
that if an employer does not have a business location in the issuer's 
service area, but has employees who live or reside within the service 
area, the geographic rating area for purposes of the network plan is 
the rating area where the greatest number of employees within the 
plan's service area live or reside as of the beginning of the plan 
year. We believe these standards for identifying an applicable rating 
area within the issuer's service area will ensure that a network plan 
can be appropriately rated for sale to the employer consistent with 
guaranteed availability requirements.
    Comment: One commenter suggested we define ``substantial worksite'' 
to determine when a business address registered solely for purposes of 
service of process would be considered the employer's principal 
business address for rating purposes.
    Response: The final rule does not provide a specific definition of 
substantial worksite. We believe the term is sufficiently clear and 
will not cause confusion. Nevertheless, we will monitor the 
implementation of this policy in considering whether it is appropriate 
to clarify what constitutes a substantial worksite in the future.
    Comment: One commenter requested that the FF-SHOP verify that an 
address entered by an employer is the official principal place of 
business. We also received a comment requesting that we modify the FF-
SHOP application process to allow more than one account per State and 
thus, allow for more than one rating area for an employer.
    Response: Under Sec.  155.710(b)(3), one criterion for being a 
qualified employer eligible to purchase coverage through a SHOP is that 
the employer has its principal business address in the Exchange service 
area and offers coverage to all its full-time employees through that 
SHOP, or offers coverage to each eligible employee through the SHOP 
serving that employee's primary worksite. If we receive a report that 
incorrect or inaccurate information has been provided on an FF-SHOP 
application, we may investigate and take corrective action as needed. 
Further, as stated in the preamble to the proposed rule, due to 
operational limitations, the SHOPs, including the FF-SHOPs, may not be 
able to accommodate multiple principal business addresses within a 
State for premium calculation purposes. As a result, due to current 
operational limitations, when a single employer application is 
completed in a State with an FF-SHOP, plan availability and premium 
calculations will be based on the principal business address entered on 
the FF-SHOP employer application.

[[Page 12212]]

    Comment: One commenter asked for clarification on the interaction 
between Sec.  155.710(b)(3) (governing eligibility standards for SHOP) 
and Sec.  147.102(a)(1)(ii) (governing geographic rating).
    Response: If SHOPs, including the FF-SHOPs, have operational 
limitations that do not permit them to fully implement the policy 
described above, they may use the address that was used to establish a 
qualified employer's eligibility for participation in the SHOP to 
determine which plans are available to the employer, as well as the 
applicable geographic rating area when calculating premiums for 
participating employers.
b. Other Issues Related to Rating Areas
    In the preamble to the proposed rule, we noted that we have 
observed wide variations in the size of rating areas in the various 
States. We identified a concern that this variation could lead to 
smaller rating areas with a high concentration of higher-risk groups, 
which potentially compromises the risk-spreading objective that the 
single risk pool requirement is intended to achieve. At the same time, 
States are the primary regulators of health insurance, and we believe 
it is important to recognize the unique needs of each State. We also 
recognize the consumer disruption that could result from changes to 
rating areas. Therefore, we sought comment on whether we should seek 
more uniformity in the size of rating areas or establish a minimum size 
for rating areas, and if so, how that should be achieved, consistent 
with the principle of flexibility for States.
    We also recognized the inconsistency that can occur between an 
issuer's rating area and the service area of some of its network-based 
plans. We indicated that it could be beneficial for the rating area and 
the service area to generally be consistent and sought comment on 
whether and how to achieve this objective.
    Comment: One commenter supported rating areas of a minimum size as 
a way to spread risk, and two others suggested applying a minimum 
number of residents per rating area or a minimum number that is no less 
than a specified percentage of residents in the non-metropolitan 
statistical areas of a State. Many commenters, however, stated their 
opposition to any further Federal regulation defining rating areas, 
stating that the States are best equipped to determine how rating areas 
are established. One commenter stated that our example that each rating 
area be a contiguous area would adversely affect service area 
strategies that identify non-contiguous areas with similar pricing and 
network dynamics that may warrant placing them in the same service 
area. One commenter stated that limiting the number of rating areas to 
the number of metropolitan statistical areas plus one would be 
arbitrary. One commenter stated that basing rating areas on the 
relative population of each area would require frequent changes in 
rating areas due to population shifts.
    Many commenters also opposed aligning rating areas with service 
areas. One stated that such an alignment could cause issuers to leave 
an entire geographic area rather than attempt to establish contracts 
with providers in other parts of a rating area, due to additional costs 
associated with establishing a broader network. One commenter observed 
that rating areas are based on geographic differences in cost of care, 
while service areas are constructed to ensure that a network plan has 
providers that can serve enrollees in specific geographic locations. 
One commenter observed that aligning rating areas with service areas 
could result in a significant increase in the number of plans submitted 
for approval and rate review and Health Insurance Oversight System 
(HIOS) plan IDs.
    Response: We are not making changes to these regulations in this 
final rule, and will consider these comments as we continue to study 
these issues.
c. Child Age Rating
    Section 147.102(e) provides for a uniform age curve in each State. 
When a State does not specify an age curve, a Federal default uniform 
age curve will apply. We stated in the proposed rule that we are 
investigating the child age rating factor in the Federal uniform age 
curve, and seek to determine whether the default factor is appropriate, 
or fails to adequately differentiate the health risk of children of 
different ages. We sought comment and data on the most appropriate 
child age curve, and the policy reasons underlying any recommendation.
    Comment: One commenter did not support a varying child age curve, 
believing that in the individual market, children may need more care at 
certain ages, so a fixed age rating factor that applies to all children 
should continue to apply. With regard to the current fixed factor, 
several commenters stated that the current default factor of 0.635 for 
children under age 21 may be set too low.
    Several commenters supported a varying child age curve, and set 
forth specific age gradations. Two commenters stated that the child age 
curve should be increased by a set amount for plans with embedded 
pediatric dental benefits. One commenter stated that we should consider 
using data consistent with data used to calibrate risk adjustment to 
determine child age factors, while one commenter stated that the age 
calibration for children must be adjusted in the uniform age curve.
    Response: We recognize that the child age band and factor may need 
to be updated to better reflect the health risk of children and intend 
to address child age rating in future rulemaking or guidance.
2. Guaranteed Availability of Coverage (Sec.  147.104)
a. Product Discontinuance and Market Withdrawal Exceptions to 
Guaranteed Availability
    In the proposed rule, we expressed concern about whether it would 
be in consumers' or issuers' interest to require guaranteed 
availability of a product while the issuer is in the process of winding 
down operations with respect to that product or all its products in a 
market. Therefore, we proposed to codify an exception to the guaranteed 
availability requirements under Sec.  147.104 when the exception to 
guaranteed renewability of coverage related to discontinuing a product 
or all coverage in the market applies. Specifically, we proposed that 
an issuer may deny coverage to new individuals or employers during the 
applicable 90-day or 180-day notice period when the issuer is 
discontinuing a product or exiting the market. We proposed that an 
issuer must apply the denial uniformly to all employers or individuals 
in the large group, small group, or individual market, as applicable, 
in the State consistent with applicable State law, and without regard 
to the claims experience or any health-status related factor relating 
to those individuals or employers and their employees (or their 
respective dependents). We proposed that this exception not relieve 
issuers of their obligations to existing policyholders, such as their 
obligation to enroll dependents under an applicable special enrollment 
period. We proposed parallel provisions under Sec.  146.150 addressing 
guaranteed availability of coverage for employers in the small group 
market under the HIPAA rules.
    We are not finalizing the provisions proposed in Sec. Sec.  147.104 
and 146.150 of the proposed rule. As noted in the proposed rule, the 
product discontinuance exception to the guaranteed renewability 
requirement in

[[Page 12213]]

Sec.  147.106(c) requires an issuer to provide notice in writing, in 
the form and manner specified by the Secretary, to each plan sponsor or 
individual, as applicable, (and to all participants and beneficiaries 
covered under such coverage) of the discontinuation at least 90 
calendar days before the date the coverage will be discontinued. The 
market withdrawal exception to the guaranteed renewability requirement 
in Sec.  147.106(d) requires an issuer to provide notice in writing to 
the applicable State authority and to each plan sponsor or individual, 
as applicable (and to all participants and beneficiaries covered under 
the coverage) of the discontinuation at least 180 calendar days prior 
to the date the coverage will be discontinued. We therefore proposed to 
interpret the interaction between the guaranteed availability and these 
guaranteed renewability provisions to permit an issuer to deny 
enrollments during the applicable product discontinuance or market 
withdrawal notice period. However, with regard to situations where an 
issuer decides to discontinue a product, we are concerned that the 
proposed policy could have an impact on the issuer's risk pool and 
rating for its other products. While a market withdrawal does not have 
the same impact since all of the issuer's products in a market are 
being discontinued, we believe this interpretation of the interaction 
between the laws to provide for an exception to the guaranteed 
availability requirements would have to be applied consistently in both 
a product discontinuance and market withdrawal situation. Therefore, 
going forward, we will not interpret these statutes to recognize an 
exception to the guaranteed availability requirement in either 
scenario, and the issuer must continue to offer coverage to and accept 
every employer or individual in the State that applies for coverage 
under a product until such time that the product is discontinued.
    Consistent with previous guidance, with regard to individuals who 
enroll in a product after the specified deadline for providing the 
applicable product discontinuance or market withdrawal notice and 
before the particular product or products are discontinued, HHS will 
consider an issuer to satisfy the requirement to provide notice if the 
issuer provides prominent and effective notice at the time of 
application or enrollment that the product will be discontinued, in any 
form and manner permitted by applicable law and regulations.\8\
---------------------------------------------------------------------------

    \8\ CMS Insurance Standards Bulletin Series, Form and Manner of 
Notices when Discontinuing or Renewing a Product in the Group or 
Individual Market (Sept. 2, 2014), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Renewal-Notices-9-3-14-FINAL.pdf.
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b. Minimum Participation and Contribution Rules
    In the proposed rule, we expressed concern that the use of minimum 
group participation and employer contribution rules to deny coverage in 
the small group market could result in some applicable large employers, 
as defined in section 4980H of the Code, not reasonably being able to 
offer coverage to their full-time employees (and their dependents) and 
therefore potentially being liable for an employer shared 
responsibility payment under section 4980H of the Code, particularly in 
States that elect to expand the small group market to include employers 
with up to 100 employees.
    In recognition of this dynamic, we noted that a State electing to 
expand its small group market to include employers with up to 100 
employees may opt, under its own authority, to prohibit an issuer from 
restricting the availability of small group coverage based on employer 
contribution or group participation rules. Alternatively, in cases 
where a State expands the definition of a small employer to include 
employers with up to 100 employees, we could amend the guaranteed 
availability regulations, with respect to small employers with 51-100 
employees or with respect to all small employers altogether, to achieve 
this objective. We sought comment on such an approach.
    Comment: Several commenters stated that we should retain the 
ability of issuers to limit, to November 15 to December 15 of each 
year, when issuers must sell a policy to a small employer that fails to 
meet the issuer's group participation or contribution rules. Some 
commenters stated that issuers should retain this ability even with 
respect to groups of 51-100 employees, as doing otherwise would have an 
adverse impact on risk pools. One commenter stated that if we eliminate 
the ability of issuers to apply minimum contribution and participation 
rules, we should at least exempt issuers from having to offer and renew 
coverage to employers that selectively offer insured and self-funded 
coverage simultaneously to separate classes of employees. Such 
employers, the commenter stated, leave issuers with the highest-risk 
individuals. One commenter stated that we should amend the guaranteed 
availability requirements so that any employer, regardless of size, 
that can document that it is subject to Code section 4980H, must be 
sold a policy anytime during the year. The commenter stated that we 
should consider this approach for the entire small group market as 
well.
    Response: This final rule does not make any changes to the 
guaranteed availability requirements as they apply in connection with 
minimum participation or contribution rules. We note that States have 
flexibility to further restrict the use of minimum employer 
contribution or group participation rules as appropriate.
3. Guaranteed Renewability of Coverage (Sec.  147.106)
    Title XXVII of the PHS Act includes several exceptions to its 
guaranteed renewability provisions, including when a group health plan 
sponsor has violated a material plan provision relating to employer 
contribution or group participation rules, provided applicable State 
law allows an exception to guaranteed renewability under such 
circumstances; and for coverage made available in the individual 
market, or small or large group market only through one or more bona 
fide associations, if the individual's or employer's membership in the 
association ceases. Although the Affordable Care Act removed from Title 
XXVII these exceptions as they applied to guaranteed availability, it 
did not do so with respect to guaranteed renewability. Therefore, as we 
pointed out in the preamble to the proposed rule, a large employer 
whose coverage is non-renewed for one of these reasons, and a small 
employer whose coverage is non-renewed due to membership ceasing in an 
association, could be seen to have a right to immediately purchase that 
same coverage (if available in the market) from that same issuer in 
accordance with guaranteed availability. In the preamble to the 
proposed rule, we suggested that this renders effectively meaningless 
these two exceptions to guaranteed renewability in these contexts, and 
we proposed to amend Sec.  147.106 to remove these guaranteed 
renewability exceptions.
    For the reasons discussed in greater detail below, the final rule 
does not remove the guaranteed renewability exceptions related to 
failure to satisfy minimum employer contribution or group participation 
rules, or loss of association membership, because we have determined 
upon further consideration these exceptions can

[[Page 12214]]

affect the insurance plan choices available to consumers and employers.
    Comment: Two commenters suggested we should not remove the 
guaranteed renewability exceptions when a small employer's membership 
in an association ceases. The commenters stated that typically a 
blanket master policy is issued to the association and it would not be 
appropriate for small employers who leave the association to continue 
to receive coverage through the same policy.
    Response: Based on the comments received and after further review 
and consideration of the statutory provisions, we have concluded that 
the guaranteed availability requirements do not render effectively 
meaningless the guaranteed renewability exceptions for loss of 
association membership or failure to meet group participation or 
contribution rules. For example, an employer with association coverage 
leaving the association mid-year and losing coverage may be subject to 
a different premium rate under a new policy based on a quarterly rate 
update in the small group market or a new experience rate in the large 
group market. Further, we recognize that association members who cease 
membership in an association and lose coverage may have their 
deductible and maximum out of pocket limit reset under a new policy. 
The same logic applies with respect to employers whose coverage is 
terminated mid-year for failure to meet an issuer's participation or 
contribution rules. And, small employers whose coverage is terminated 
for failure to meet minimum participation or contribution rules might 
not be able to purchase new coverage until the next annual enrollment 
period from November 15 to December 15. For these reasons, we believe 
these exceptions to guaranteed renewability continue to have relevance, 
and we are not finalizing our proposal to remove them from the 
regulations.
4. Student Health Insurance Coverage (Sec.  147.145)
a. Index Rate Setting Methodology for Student Health Insurance Coverage
    Under Sec.  147.145, student health insurance coverage is a type of 
individual health insurance coverage that, subject to certain limited 
exceptions, must comply with the PHS Act requirements that apply to 
individual health insurance coverage. However, section 1560(c) of the 
Affordable Care Act provides that nothing in title I of the Affordable 
Care Act (or an amendment made by title I) is to be construed to 
prohibit an institution of higher education from offering a student 
health insurance plan to the extent that the requirement is otherwise 
permitted under applicable Federal, State, or local law. HHS has 
exercised its authority under section 1560(c) of the Affordable Care 
Act to modify some of its rules as applied to student health insurance 
coverage, including those related to the guaranteed availability, 
guaranteed renewability, and single risk pool requirements.
    As we stated in the preamble to the proposed rules, our intent in 
exempting student health insurance coverage from the single risk pool 
requirement was to provide that student health insurance issuers need 
not include their student health insurance coverage in their overall 
individual market (or merged market) risk pool, and also need not have 
one single risk pool composed of their total statewide book of student 
health insurance business. Rather, we intended that issuers could 
establish risk pools for students and their dependents separate from 
the issuer's individual market or merged market risk pool, including by 
establishing separate risk pools for different institutions of higher 
education, or multiple risk pools within a single institution. However, 
as explained in the preamble to the proposed rule, we have learned that 
student health insurance issuers may be using certain rating factors 
that lead to rates that might not be actuarially justified.
    As stated in the preamble to the proposed rule, we do not intend to 
disrupt rate setting for student health insurance, but we do seek to 
ensure that rates are based on actuarially justified factors. To 
clarify our intent, we proposed, for policy years beginning on or after 
January 1, 2017, that student health insurance coverage be subject to 
the index rate setting methodology of the single risk pool provision in 
the regulation at Sec.  156.80(d). However, student health insurance 
issuers still would be permitted to establish separate risk pools from 
their individual market single risk pool (or merged market risk pool, 
where applicable) for student health insurance coverage, including by 
establishing separate risk pools for different institutions of higher 
education, or multiple risk pools within a single institution, provided 
they are based on a bona fide school-related classification (for 
example, graduate students and undergraduate students) and not a health 
status-related factor as described in Sec.  146.121. Consistent with 
our single risk pool policy, the index rates for these risk pools would 
be based upon actuarially justified estimates of claims. We proposed 
that permissible plan-level adjustments to these index rates would be 
limited to those permitted under our rules. This approach would 
continue to allow rates for student health insurance coverage to 
reflect the unique characteristics of the student population at the 
particular institution, while more clearly delineating our intent with 
regard to the treatment of student health insurance coverage. We sought 
comment on any potential operational challenges associated with this 
proposal, including potential challenges related to filing rates for 
student health insurance coverage and how this policy might be adjusted 
to address those challenges.
    We finalize in this rule our proposal that student health insurance 
issuers may establish one or more risk pools per institution of higher 
education, provided that the risk pools are based on a bona fide 
school-related classification and not based on a health factor as 
described in Sec.  146.121. In response to comments, we are not 
finalizing our proposal that student health insurance coverage must 
comply with the single risk pool index rate setting methodology. 
However, we are requiring that student health insurance rates reflect 
the claims experience of individuals who comprise the risk pool and any 
adjustments to rates within a risk pool must be based on actuarially 
justified factors. We are also removing outdated provisions in Sec.  
147.145(b)(2) and (d) providing that student health insurance issuers 
may impose annual dollar limits for policy years beginning before 
January 1, 2014. Those provisions, by their own terms, no longer apply, 
as student health insurance issuers are subject to the provisions in 
Sec.  147.126 that prohibit annual dollar limits on EHB for policy 
years beginning on or after January 1, 2014. Accordingly, we are 
finalizing the AV provision proposed in paragraph (b)(4) at paragraph 
(b)(2), and deleting outdated paragraphs (d) and (e).
    Comment: While one commenter supported the proposal to subject 
student health insurance issuers to the index rate setting methodology, 
several commenters were opposed to the proposal, citing concerns about 
additional administrative and regulatory burdens on both issuers and 
State regulators, as well as concerns about limiting consumer choice 
and flexibility and undermining the role of institutions of higher 
education in arranging for coverage that best meets the needs of their 
student populations.
    Response: After carefully considering these comments, we have 
determined not to apply the single risk pool index

[[Page 12215]]

rate setting methodology to student health insurance coverage. While we 
continue to have concerns that student health insurance issuers may be 
setting rates that are not based upon actuarially justified estimates 
of claims, we are also mindful of the concerns about potential 
administrative burden. The single risk pool rate setting methodology is 
one means of ensuring rates are actuarially justified. Therefore, while 
student issuers will not be required to use that particular methodology 
to establish rates, the final rule requires that rates for student 
health insurance coverage reflect the claims experience of individuals 
who comprise the risk pool and any adjustments to rates within a risk 
pool must be actuarially justified. We intend to monitor whether 
factors are being used to develop rates for student health insurance 
coverage that are not actuarially justified, such as adjusting rates 
based upon the length of time the coverage has been underwritten by the 
issuer.
    Comment: Several commenters supported our proposal to permit 
issuers to establish one or more risk pools per institution of higher 
education, provided the risk pools are based on a bona fide school-
related classification and not a health factor as described in Sec.  
146.121. Two commenters urged us not to permit multiple risk pools 
within a single institution of higher education, expressing concern 
that subgroups could be discriminatory in nature. One commenter 
requested clarification that issuers may create risk pools comprised of 
more than one college or university.
    Response: The final rule provides that student risk pools must be 
based on a bona fide school-related classification and not a health 
factor as defined in Sec.  146.121. The risk pools may include 
enrollees at one or multiple institutions of higher educations in the 
State or nationally, or certain subgroups within a single institution 
of higher education, provided that the risk pools are based on a bona 
fide classification and not discriminatory based on health status. We 
believe these standards balance issuer flexibility with appropriate 
safeguards against potentially discriminatory risk pooling practices. 
We note that nothing prevents a State from requiring broader risk 
pooling with respect to student health insurance coverage than provided 
for in this final rule (for example, requiring each student health 
insurance issuer to establish one risk pool comprised of its entire 
student health insurance book of business).
    Comment: Some commenters requested clarification that issuers may 
establish separate risk pools for students and dependents. Other 
commenters suggested that issuers should be permitted to apply 
actuarially justified rating factors to distinguish between students 
and their dependents who are on the same plan or cross-subsidize 
between students and dependents in order to keep premiums for dependent 
coverage affordable.
    Response: Under this final rule, an issuer may create separate risk 
pools for students and dependents. Dependent rates may vary from those 
for students as long as dependents constitute a separate risk pool and 
are enrolled in separate coverage from students. However, consistent 
with the rating rules under section 2701 of the PHS Act, if students 
and dependents are enrolled in the same coverage, then rates may not 
vary based on student or dependent status, but may vary based on age 
and family size. Nothing in this final rule prevents an issuer from 
including students and dependents in the same risk pool.
b. Actuarial Value Requirements for Student Health Insurance Plans
    As stated in the preamble to the proposed rule, many colleges and 
universities have reported to us that they offer student health 
insurance plans that are rich in benefits (for example, providing an 
actuarial value of 96 percent) and that they are reluctant to reduce 
the level of benefits to meet an actuarial value metal level. We stated 
that because enrollees in student health insurance plans are not 
typically selecting among such plans, there is less need for 
standardization of actuarial levels in this part of the individual 
market. Therefore, we proposed to add an exemption to the requirements 
for student health insurance coverage in Sec.  147.145, under which, 
for plan years beginning on or after January 1, 2017, student health 
insurance coverage would be exempt from the actuarial value ``metal 
level'' requirements under section 1302(d) of the Affordable Care Act, 
as implemented in Sec. Sec.  156.135 and 156.140, but would be required 
to provide an actuarial value of at least 60 percent. To determine a 
plan's actuarial value for purposes of the application of the 60 
percent actuarial value requirement to student health insurance 
coverage, we proposed to require student health insurance coverage 
issuers to obtain certification by an actuary that the plan provides an 
actuarial value of at least 60 percent. This determination would be 
required to be made by a member of the American Academy of Actuaries, 
based on analysis in accordance with generally accepted actuarial 
principles and methodologies. We sought comment on this proposal, 
including whether to continue to require student health insurance 
issuers to determine the actuarial value of their coverages by using 
the actuarial value calculator, as currently required, instead of 
through actuarial certification.
    We are finalizing our proposal to require student health insurance 
coverage to meet a minimum 60 percent actuarial value, as opposed to 
meeting any specific metal level. We are not finalizing our proposal 
that actuarial value would be determined by certification of an actuary 
but rather require that it be determined using the actuarial value 
calculator, as is the case for other individual market and small group 
market coverage. Requiring the actuarial value of student health 
insurance coverage to be calculated using the same methodology as those 
other types of coverage will allow students and their dependents to 
better compare the generosity of student health insurance with other 
available coverage options, such as coverage under a parent's plan or 
coverage through the Exchange. We also specify that this provision will 
apply for ``policy years'' beginning on or after July 1, 2016 as 
opposed to plan years beginning on or after January 1, 2017. The 
reference to ``policy years'' is the more appropriate term with regard 
to student health insurance coverage, a type of individual market 
coverage. We recognize that student health plans typically operate on a 
policy year that is not the calendar year, and therefore we have 
modified the provision to take effect beginning with coverage for the 
upcoming academic year as was our intent in the proposed rule.
    Comment: Several commenters supported our proposal to require 
student health insurance plans to meet at least 60 percent actuarial 
value, instead of meeting any specific metal level. However, several 
commenters stated that student health insurance plans should be 
required to meet metal levels, for purposes of transparency and 
comparability with other plans.
    Response: Although we are finalizing the 60 percent actuarial value 
proposal, we agree that it is important for enrollees and potential 
enrollees in student health insurance plans to be able to compare such 
plans with others for which they may be eligible, such as their 
parents' plan or an individual market non-student plan. In the proposed 
rule, we had solicited comments on whether to require student health 
insurance issuers to specify, in their summary of benefits and coverage

[[Page 12216]]

(SBC) documents, enrollment materials, marketing materials, or other 
materials, the actuarial value of the coverage, the next lowest metal 
level the coverage would otherwise satisfy, based on its actuarial 
value, or any other data that would give enrollees and prospective 
enrollees information about the actuarial value of the coverage. 
Several commenters supported this general approach. One opposed it, 
arguing that the actuarial value for student health insurance coverage 
is an unreliable indicator of the true value of the plan. However, we 
believe that disclosing the actuarial value of the coverage, and the 
next lowest metal level the coverage would otherwise satisfy, based on 
its actuarial value, would be a helpful tool. Therefore, we are 
finalizing a requirement that student health insurance issuers must 
disclose, in any plan materials summarizing the terms of the coverage, 
the actuarial value of the coverage and the metal level (or next lowest 
metal level) the coverage would satisfy. This requirement will not 
apply to the SBC, unless and until such information is incorporated 
into the SBC template and instructions.
    Comment: One commenter recommended removing the 92 percent 
actuarial value cap on platinum level student plans instead of 
eliminating the metal level requirements altogether.
    Response: We believe that the same reasons to give platinum plans 
flexibility with respect to actuarial value also apply to other metal 
level plans. Therefore, we are providing flexibility in this final rule 
for student health insurance plans to provide any AV at or above 60 
percent.

D. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment Under the Affordable Care Act

    In the proposed rule, we proposed a number of modifications to the 
risk adjustment, reinsurance, and risk corridors programs.
    Comment: One commenter asked that HHS present all regulatory 
information related to the premium stabilization programs in a clear, 
transparent, reliable and timely manner. Another commenter asked that 
the risk adjustment and reinsurance data collection requirements be 
limited to data currently held by plans in order to not increase the 
administrative burden on providers.
    Response: HHS is committed to providing regulations and guidance in 
a clear and timely manner, and seeks to minimize the administrative 
burden of our data collection.
 1. Sequestration
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2016,\9\ both the transitional 
reinsurance program and permanent risk adjustment program are subject 
to the fiscal year 2016 sequestration. The Federal government's 2016 
fiscal year began on October 1, 2015. The reinsurance program will be 
sequestered at a rate of 6.8 percent for payments made from fiscal year 
2016 resources (that is, funds collected during the 2016 fiscal year). 
To meet the sequestration requirement for the risk adjustment program 
for fiscal year 2016, HHS will sequester risk adjustment payments made 
using fiscal year 2016 resources in all States where HHS operates risk 
adjustment at a sequestration rate of 7.0 percent. HHS estimates that 
increasing the sequestration rate for all risk adjustment payments made 
in fiscal year 2016 to all issuers in the States where HHS operates 
risk adjustment by 0.2 percent will permit HHS to meet the required 
national risk adjustment program sequestration percentage of 6.8 
percent noted in the OMB Report to Congress.
---------------------------------------------------------------------------

    \9\ Office of Management and Budget, OMB Report to the Congress 
on the Joint Committee Reductions for Fiscal Year 2016 (Feb. 2, 
2015), available at https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_jc_sequestration_report_speaker.pdf.
---------------------------------------------------------------------------

    HHS, in coordination with OMB, has determined that, under section 
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 
1985 (the BBEDCA), as amended, and the underlying authority for these 
programs, the funds that are sequestered in fiscal year 2016 from the 
reinsurance and risk adjustment programs will become available for 
payment to issuers in fiscal year 2017 without further Congressional 
action. If the Congress does not enact deficit reduction provisions 
that replace the Joint Committee reductions, these programs will be 
sequestered in future fiscal years, and any sequestered funding will 
become available in the fiscal year following the one in which it was 
sequestered.
    Comment: One commenter stated that risk adjustment payments should 
not be subject to sequestration because the risk adjustment program is 
budget neutral and the Federal government is simply transferring funds 
among issuers.
    Response: The BBEDCA requires all non-exempt budgetary resources be 
sequestered in amounts sufficient to achieve the savings targets 
established in the Budget Control Act of 2011. Risk adjustment payments 
are subject to sequestration as they are budgetary resources provided 
for by Federal law, and the risk adjustment program is not specifically 
exempted under section 255 of the BBEDCA. Therefore, as clarified in 
the OMB Report to Congress on the Joint Committee Reductions for Fiscal 
Year 2016, the risk adjustment program is subject to sequestration. 
Under section 256(k)(6) of the BBEDCA and the underlying authority for 
these programs, funds that are sequestered in fiscal year 2016 from the 
reinsurance and risk adjustment programs will become available for 
payment to issuers in fiscal year 2017 without further Congressional 
action.
2. Provisions and Parameters for the Permanent Risk Adjustment Program
    In subparts D and G of 45 CFR part 153, we established standards 
for the administration of the risk adjustment program. The risk 
adjustment program is a permanent program created by section 1343 of 
the Affordable Care Act that transfers funds from lower risk, non-
grandfathered plans to higher risk, non-grandfathered plans in the 
individual and small group markets, inside and outside the Exchanges. 
In accordance with Sec.  153.310(a), a State that is approved or 
conditionally approved by the Secretary to operate an Exchange may 
establish a risk adjustment program, or have HHS do so on its behalf.
    On January 8, 2016, we announced that HHS will hold a public 
conference to discuss potential improvements to the HHS risk adjustment 
methodology for the 2018 benefit year and beyond. The conference will 
take place on March 31, 2016, in the Grand Auditorium at the Centers 
for Medicare and Medicaid Services in Baltimore, Maryland.\10\ Prior to 
the conference, we intend to issue a White Paper that will be open for 
public comment. The conference and White Paper will focus on what we 
have learned from the 2014 benefit year of the risk adjustment program, 
and specific areas of potential refinements to the methodology, 
including prescription drug model exploration, accounting for partial 
year enrollment, future recalibrations using risk adjustment data, and 
discussion of the risk adjustment transfer formula. Registration for 
the conference opened on January 25, 2016, and is available at https://www.regtap.info/ until March 23, 2016, for onsite attendance 
registration, and March 28, 2016, for remote attendance registration. 
Stakeholders who are unable to attend

[[Page 12217]]

the conference in person may live stream the conference and provide 
feedback via the webinar. Additional information can be found at 
https://www.regtap.info/RAonsite.php.
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    \10\ HHS-Operated Risk Adjustment Methodology Meeting; March 31, 
2016, 81 FR 4633 (Jan. 27, 2016).
---------------------------------------------------------------------------

a. Overview of the HHS Risk Adjustment Model (Sec.  153.320)
    The HHS risk adjustment model predicts plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (risk 
factors), producing a risk score. The HHS risk adjustment methodology 
utilizes separate models for adults, children, and infants to account 
for cost differences in each of these age groups. In each of the adult 
and child models, the relative costs assigned to an individual's age, 
sex, and diagnoses are added together to produce a risk score. Infant 
risk scores are determined by inclusion in one of 25 mutually exclusive 
groups, based on the infant's maturity and the severity of its 
diagnoses. If applicable, the risk score is multiplied by a cost-
sharing reduction adjustment.
    The enrollment-weighted average risk score of all enrollees in a 
particular risk adjustment-covered plan, or the plan liability risk 
score, within a geographic rating area is one of the inputs into the 
risk adjustment payment transfer formula, which determines the payment 
or charge that an issuer will receive or be required to pay for that 
plan. Thus, the HHS risk adjustment model predicts average group costs 
to account for risk across plans, which, as we stated in the 2014 
Payment Notice, accords with the Actuarial Standards Board's Actuarial 
Standards of Practice for risk classification.
    We received several general comments regarding the HHS risk 
adjustment methodology.
    Comment: Many commenters reiterated their support for the HHS risk 
adjustment methodology. Some commenters requested a cap on risk 
adjustment transfers. Some commenters also suggested that, under our 
methodology, low-cost and low-risk-score issuers subsidize higher cost 
issuers, and that the model has adverse effects on limited network 
plans and new, small, and fast-growing plans. Commenters requested 
exempting new, small, and fast-growing plans from risk adjustment for 
the first 3 to 5 plan years, in recognition of the difficulty they are 
having in obtaining complete hierarchical condition categories (HCC) 
diagnostic classifications for their enrollees. Commenters also 
suggested gradually phasing in new issuers to risk adjustment or 
instituting a credibility threshold for participation. One commenter 
requested that issuers with fewer than 5,000 enrollees or less than 5 
percent market share be exempt from risk adjustment. Two commenters 
requested that HHS set a cap on risk adjustment transfers based on MLR 
when the amount of the transfer causes the issuer's MLR to hit 90 
percent. Specifically, the commenters requested excluding issuers with 
an MLR of 90 percent or greater, and capping an issuer's risk 
adjustment payment once it causes the issuer's MLR to rise to 90 
percent.
    Response: We agree that the risk adjustment program is intended to 
work with the fair rating rules under the Affordable Care Act to 
reimburse issuers who take on riskier enrollees, not to prevent 
issuers, including small and fast-growing issuers, from participating 
in the individual and small group markets. In this final rule, we are 
finalizing more accurate model coefficients for 2017 benefit year risk 
adjustment. We will discuss in the upcoming White Paper potential 
future improvements to the HHS risk adjustment methodology that we 
believe will continue to improve the accuracy of the model and benefit 
all consumers and issuers in these markets by helping ensure fair 
rating practices across those risk pools because issuers will have the 
expectation of accurate risk adjustment payments. Any changes we make 
to the HHS risk adjustment methodology would be implemented through 
rulemaking as necessary.
    Comment: One commenter requested that HHS verify that plans that 
are subject to risk adjustment data validation (RADV) are correctly 
implementing the definition of small group, suggesting that eligibility 
can be verified with an employer's wage and tax statements.
    Response: We will consider ways to enhance the RADV audits in 
operationally feasible ways without infringing on the States' primary 
regulatory and oversight authority over health insurance issuers.
    Comment: One commenter recommended that HHS advance its schedule 
for publishing the proposed Notice of Benefit and Payment Parameters to 
early fall, and requested that HHS provide a 60-day comment period to 
allow for more detailed and substantive comments on major proposed 
changes to the risk adjustment model.
    Response: We are exploring our flexibility in moving the Payment 
Notice schedule to an earlier timeframe.
b. Proposed Updates to the Risk Adjustment Model (Sec.  153.320)
    In the proposed rule, we proposed to continue to use the same risk 
adjustment methodology finalized in the 2014 Payment Notice. We 
proposed to make certain updates to the risk adjustment model to 
incorporate preventive services into our simulation of plan liability, 
and to reflect more current data. The proposed data updates are similar 
to the ones we effectuated for 2016 risk adjustment in the 2016 Payment 
Notice. We proposed to recalculate the weights assigned to the various 
hierarchical condition categories and demographic factors in our risk 
adjustment models using the most recent data available. As we 
previously described, in the adult and child models, enrollee health 
risks are estimated using the HHS risk adjustment model, which assigns 
a set of additive factors that reflect the relative costs attributable 
to demographics and diagnoses. Risk adjustment factors are developed 
using claims data and reflect the costs of a given disease relative to 
average spending. The longer the lag in data used to develop the risk 
factors, the greater the potential that the costs of treating one 
disease versus another have changed in a manner not fully reflected in 
the risk factors.
    To provide risk adjustment factors that best reflect more recent 
treatment patterns and costs, we proposed to recalibrate the HHS risk 
adjustment models for 2017 by using more recent claims data to develop 
updated risk factors. The risk factors published in the proposed 2017 
Payment Notice were developed using the Truven Health Analytics 2012 
and 2013 MarketScan[supreg] Commercial Claims and Encounters database 
(MarketScan); we proposed to update the risk factors in the HHS risk 
adjustment model using 2012, 2013, and 2014 MarketScan data in the 
final 2017 Payment Notice when 2014 MarketScan became available. In 
using 2012, 2013, and 2014 MarketScan data, we blend, or average, the 
resulting coefficients from the separately solved models from each 
dataset. We do not weight one year more heavily than the others.
    We stated that we believe we can more accurately account for high-
cost conditions with new treatments that are not reflected in our model 
due to lags in the data available to us for recalibration. We believe 
that stability across our models is important, but sought comment and 
data that may inform better methods of accurately compensating for new 
treatments for high cost conditions. For example, we

[[Page 12218]]

sought comment on whether there are ways to model the severity of these 
conditions in a manner that will more fully capture the highest cost 
enrollees.
    Comment: One commenter requested that HHS incorporate 2014 and 2015 
data for the individual and small group populations subject to risk 
adjustment, giving issuers notice of this incorporation no later than 
December 2016, so that they can determine and file plan year 2018 rates 
with each State.
    Response: Under our current distributed data collection approach, 
we do not have access to enrollee-level data, which is necessary for 
risk adjustment recalibration. However, we intend to discuss 
incorporating enrollee-level data in future recalibrations in the 
upcoming White Paper, which will be published for public comment.
    Comment: Commenters stated that risk adjustment coefficients are 
too low for enrollees without HCCs and too high for those with one or 
more HCCs. One commenter recommended that the adult and child models be 
calculated regionally or specifically for each State. One commenter 
encouraged HHS to include socioeconomic status and oral health services 
in the model, especially the child model.
    Response: We have attempted to address the range between enrollees 
without HCCs and those with HCCs by finalizing the incorporation of 
preventive services into our simulation of plan liability. While 
overall this is not a very large effect, it does have a noticeable 
effect on certain demographic subgroups, resulting in more accurate 
payments for enrollees without HCCs. As for calculating the adult and 
child models regionally or by State, we believe that the use of the 
geographic cost factor (GCF) in the payment transfer formula should 
reflect prevailing utilization and expenditure patterns in the 
geographic location of the plan's enrollees. We intend to explore 
whether accounting for socioeconomic status is feasible in the risk 
adjustment model in the future.
    Comment: All commenters on this section of the proposed rule 
supported HHS's efforts to make the risk adjustment models more 
accurate by addressing the lag in available health claims data. Many 
commenters also supported various approaches in more accurately 
addressing high-cost conditions, which are particularly susceptible to 
the lag in health claims costs because of the rapidly rising costs of 
certain specialty drugs. One commenter opposed the use of 2014 data 
unless the updated model is provided in time to be used for 2017 rate 
filings. Conversely, another commenter recommended HHS use 2013, 2014, 
and 2015 MarketScan data for 2017 risk adjustment, and 2014, 2015, and 
2016 MarketScan data for 2018 risk adjustment, stating that HHS should 
finalize the process and methodology in each year's Payment Notice and 
release the updated factors later. A commenter acknowledged that the 
incorporation of new 2014 data in the calibration of the risk weights 
helps address new high-cost treatments, but that under the current 
model, the benefits of the modification are limited because the use of 
3-year averaging means it will take 3 years for the risk weights to 
fully reflect changes in treatment patterns. Commenters recommended 
that HHS consider whether individual market data might show different 
relative weights for certain high-cost conditions than the population 
currently used for the risk adjustment calibration. Commenters also 
recommended that HHS evaluate the increase in costs for chronic 
conditions (specifically Hepatitis C, for which expensive prescription 
drug therapies have become recently available) year over year and trend 
or adjust the aggregated claims data or model to reflect the changes--
this would allow HHS to respond to changes in treatment practices 
without relying on additional external data. One commenter recommended 
that more weight and credibility should be given to the most recent 
data to best capture emerging trends in treatments, drug therapies, and 
costs.
    Response: We agree with commenters that there may be more precise 
ways to trend expenditures to accommodate the data lag and more 
accurately reflect the introduction of new treatments, including 
prescription drug therapies, for high cost conditions. Based on 
commenters' feedback on the need to better model the risk of high-cost 
conditions and rapidly changing health care costs, we re-examined the 
underlying trend factor we used to trend medical and prescription drug 
expenditures in the MarketScan data, because those expenditures account 
for a large portion of the recent changes in costs to treat high-cost 
conditions. Because we were using the same trend for both sets of 
expenditures, we looked at historical MarketScan drug data, subdivided 
by traditional (including branded and generic) drugs, specialty drugs, 
and medical and surgical expenditures, and found varying growth rates. 
In order to address commenters' feedback, we consulted with actuaries 
and industry reports to derive a specialty drug trend rate and 
traditional drug trend rate through 2017. We believe that using these 
more granular trend rates better reflect the growth in specialty drug 
expenditures and drugs generally as compared to medical and surgical 
expenditures. Further, we believe that more accurately trending drug 
expenditures through 2017 will more accurately compensate issuers 
providing new treatments associated with specific HCCs by providing a 
more finely tuned estimate of the relative costs of various conditions 
under the HHS risk adjustment methodology. We have incorporated 
different trend factors for (i) traditional drugs, (ii) specialty 
drugs, and (iii) medical and surgical expenditures, and are finalizing 
this approach for 2017 risk adjustment. This approach is reflected in 
the finalized coefficients in this final rule.
    We proposed to incorporate preventive services into our simulation 
of plan liability in the recalibration of the risk adjustment models 
for 2017. We identified preventive services for the 2012, 2013, and 
2014 MarketScan samples using procedure and diagnosis codes, 
prescription drug therapeutic classes, and enrollee age and sex. We 
relied on lists of preventive services from several major issuers, the 
preventive services used for the AV Calculator, and Medicare's 
preventive services benefit to operationalize preventive services 
definitions for incorporation in the risk adjustment models. We then 
adjusted plan liability by adding 100 percent of preventive services 
covered charges to simulate plan liability for all metal levels. We 
also applied standard benefit cost sharing rules by metal level to 
covered charges for non-preventive services. Total adjusted simulated 
plan liability is the sum of preventive services covered charges, and 
non-preventive services simulated plan liability.
    We re-estimated the risk adjustment models by metal level, 
predicting plan liability adjusted to account for preventive services 
without cost sharing. We compared the model coefficients predicting 
original (that is, non-adjusted for preventive services) and adjusted 
simulated plan liability. Adjusting for preventive services increases 
age-sex coefficients relative to HCC coefficients, especially in the 
lower metal tiers (bronze and silver), and in age/sex ranges with high 
preventive services expenditures (for example, young adult females). 
The implication of the changes to the model coefficients is that the 
risk scores of healthy enrollees (whose risk scores are based solely on 
model age-sex coefficients) will likely rise relative to the risk 
scores of the less healthy (whose risk scores

[[Page 12219]]

include one or more HCC coefficients in addition to an age-sex 
coefficient), especially in bronze and silver plans. As a result of the 
risk score changes for individuals, we expect that the incorporation of 
preventive services will increase the risk scores of bronze and silver 
plans with healthier enrollees relative to other plans' risk scores 
when preventive services are taken into account. This incorporation of 
preventive services will more accurately compensate risk adjustment 
covered plans with enrollees who use preventive services.
    Comment: Most commenters supported the incorporation of preventive 
services into our simulation of plan liability in the risk adjustment 
model. Two commenters expressed concern that this change would 
unintentionally create an incentive for issuers to attract and retain 
healthier individuals rather than higher risk individuals, while 
another commenter supported including preventive services, but 
suggested that the approach proposed by HHS appears to compensate all 
plans, regardless of whether their members receive preventive services, 
thereby creating a ``free rider'' problem. One commenter noted that 
while the incorporation of preventive services does increase 
demographic factors for catastrophic plans and for females within 
bronze plans, the impact of this change is relatively small and does 
not resolve concerns about unbalanced incentives to attract enrollees 
with HCC diagnoses.
    Response: Section 2713 of the PHS Act, as added by the Affordable 
Care Act requires that individual and small group non-grandfathered 
plans (among others) provide coverage for a range of preventive 
services and may not impose cost sharing on patients receiving these 
services. We believe it is essential that we are consistent with the 
goals of the Affordable Care Act and provide compensation to issuers 
who are required to provide these services without cost sharing. As 
such, we also believe that accurately accounting for services provided 
by issuers to healthier enrollees is a fair adjustment to real, 
baseline costs paid by these issuers. As for concerns about a ``free 
rider'' problem, all risk adjustment covered plans are required to 
provide zero cost sharing preventive services. Even if different 
enrollees use preventive services to different extents, by 
incorporating zero cost sharing preventive services in the calculation 
of plan liability when calibrating the models' coefficients, we will 
increase the accuracy of the model overall, accounting for any 
differential use of preventive services at the plan level. We believe 
that this increased accuracy for demographic factors coupled with our 
adjustments to medical and prescription drug expenditures will promote 
increased accuracy for all enrollees, with and without HCCs. We are 
finalizing the incorporation of preventive services into our simulation 
of plan liability as proposed.
    Additionally, we are evaluating whether and how we may incorporate 
prescription drug data in the Federally certified risk adjustment 
methodology that HHS uses when it operates risk adjustment. 
Prescription drug data could be used in the risk adjustment methodology 
to supplement diagnostic data by using the prescription drug data as a 
severity indicator, or as a proxy for diagnoses in cases where 
diagnostic data are likely to be incomplete. We are assessing these 
approaches, with particular sensitivity to reliability and the 
potential for strategic behavior with respect to prescribing behavior. 
As we noted in the 2014 Payment Notice, we did not use prescription 
drug utilization as a predictor of expenditures to avoid creating 
adverse incentives to modify discretionary prescribing. We are 
evaluating whether we can improve the models' predictive power through 
the incorporation of prescription drugs without unduly incentivizing 
altered prescribing behavior. We sought comment and any data that could 
inform effective methods of incorporating prescription drug data in 
future recalibrations.
    Comment: Most commenters supported incorporating prescription drugs 
as predictors in the risk adjustment model either as a proxy for 
missing diagnoses or an indicator of severity. Some commenters shared 
HHS's concerns about creating incentives to modify discretionary 
prescribing to artificially increase the severity of diagnoses and one 
commenter expressed concern about keeping the model current with 
pharmaceutical developments that could create an additional operational 
burden for both health plans and HHS. Some commenters suggested that 
prescription drugs be included for 2017 risk adjustment. One commenter 
requested that HHS incorporate prescription drugs as soon as possible. 
Commenters supported 2018 implementation (rather than 2017) and one 
commenter suggested that any changes to include prescription drugs 
should include greater detail and go through the regular notice and 
comment process. Commenters suggested that HHS include prescription 
drug data in a limited manner, such as drugs with no off label use or 
drugs approved for treatment of a single condition. One commenter 
recommended that all prescription drugs used to treat HCC conditions be 
included. Commenters stated that including prescription drugs could 
significantly increase payment accuracy and yield benefits to the 
payment system far in excess of any additional administrative burden. 
Commenters further stated that prescription drug claims data have 
certain advantages in that the data are fairly uniform across plans and 
do not have many of the issues associated with diagnosis data, such as 
timeliness and inconsistency of reporting across providers, in addition 
to already being included in EDGE Server data and readily available to 
HHS. Commenters also stated that including prescription drugs as a 
proxy for missing diagnoses could level the playing field for smaller 
issuers that are less experienced with medical coding. Similarly, 
commenters supported the inclusion of pharmacy data to address partial 
year enrollees with chronic conditions that have prescription drug 
claims, but may not have a provider encounter with a documented 
diagnosis. One commenter requested that HHS work with stakeholders to 
refine the prescription drug data that would be utilized if this 
proposal is finalized and requested that HHS consider how to gather and 
incorporate data on prescription drug utilization collected by 
electronic health records. Commenters cautioned HHS to be mindful that 
different characteristics of prescription drug utilization will be more 
or less predictive depending on the condition. Commenters also warned 
that gaming concerns need to be balanced with the desire to enhance the 
risk adjustment methodology's predictive power. A commenter also 
cautioned that the proposed use of prescription drug data should have 
definitions and guardrails that delineate its use. Lastly, commenters 
stated that using prescription drug data is important because without 
an accurate risk adjustment methodology that accounts for the extra 
costs that plans incur by enrolling high-risk patients, plans have an 
incentive to design benefits in a manner that discourages enrollment by 
these patients.
    Response: We will explore the incorporation of prescription drugs 
in the risk adjustment model in the White Paper and at the conference 
in March 2016. We agree with commenters that prescription drugs have 
the potential to increase the predictive power of the risk adjustment 
models. We agree that different prescription drugs will likely

[[Page 12220]]

be more or less predictive depending on the condition. We also remain 
cautious about creating incentives to modify discretionary prescribing 
to artificially increase the severity of diagnoses. However, we look 
forward to continuing to explore this potential improvement to the 
models with stakeholders and to share our developments in the White 
Paper and at the risk adjustment conference on March 31, 2016.
    Lastly, we stated in the proposed rule that we would like to 
explore the effect of partial year enrollment in the HHS risk 
adjustment methodology. We have received input that issuers are 
experiencing higher than expected claims costs for partial year 
enrollees. We have also received input that the methodology does not 
capture enrollees with chronic conditions who may not have accumulated 
diagnoses in their partial year enrollment. At the same time, as 
compared to full year enrollees of the same relative risk, partial year 
enrollees are less likely to have spending that exceeds the deductible 
or annual limitation on cost sharing. We sought comment on how the 
methodology could be made more predictive for partial year enrollees.
    Comment: Many commenters supported addressing partial year 
enrollees in the model. One commenter noted that many medical events 
for enrollees in the commercial market (for example, maternity, 
surgeries) represent acute rather than chronic events, so the enrollee 
can incur most of their annual medical expenses during a short period 
of time. Commenters suggested that the use of prescription drug claims 
could help address enrollees with a chronic condition but who do not 
have a provider encounter with a documented diagnosis. Commenters also 
suggested that the impact of partial year enrollment could be measured 
by taking a population that had multiple years of enrollment and 
comparing risk scores and health care costs when only a partial year is 
considered. Commenters noted Massachusetts' adjustment for partial-year 
enrollment, and suggested that HHS consider additional analysis to 
determine whether that approach is appropriate for the HHS risk 
adjustment methodology. One commenter suggested a member-level 
adjustment while another commenter suggested a duration-based 
adjustment. Another commenter recommended that the adjustment vary by 
metal level and length of time enrolled, with higher weights for gold 
and platinum plans and shorter enrollment periods. One commenter 
suggested that HHS should permit risk scores to travel with an enrollee 
across issuers. Two commenters opposed an explicit adjustment for 
partial year enrollees, because they said such an adjustment would 
accommodate liberal enforcement of special enrollment periods, 
incentivizing issuers to employ loose eligibility standards to gain 
members, but ultimately eroding individual market stability. A few 
commenters recommended that to better address partial year enrollment 
in risk adjustment, changes should be made to special enrollment period 
processes and policies to encourage continuous coverage and prevent 
fraud and abuse. Commenters stated that unverified special enrollment 
periods have produced selection issues for health plans, as enrollees 
enter through a special enrollment period, utilize high-cost services, 
and then switch to a lower metal level plan in the following open 
enrollment period or drop coverage altogether. One commenter cautioned 
that any additions to the model to account for partial year enrollment 
should improve reliability and predictive power, not influence clinical 
judgment or plan behavior with respect to enrollees' coverage.
    Response: We appreciate commenters' substantive feedback on 
accounting for partial year enrollment in future recalibrations and 
will continue to analyze this issue and include our findings in the 
White Paper for discussion at the March 31, 2016 risk adjustment 
conference.
c. List of Factors To Be Employed in the Model (Sec.  153.320)
    The HHS risk adjustment models predict annualized plan liability 
expenditures using age and sex categories and the HHS HCCs included in 
the HHS risk adjustment model. Dollar coefficients were estimated for 
these factors using weighted least squares regression, where the weight 
was the fraction of the year enrolled.
    We are including the same HCCs that were included in the original 
risk adjustment calibration in the 2014 Payment Notice. For each model, 
the factors are the statistical regression dollar values for each HCC 
in the model divided by a weighted average plan liability for the full 
modeling sample. The factors represent the predicted relative 
incremental expenditures for each HCC. The factors resulting from the 
blended factors from the 2012, 2013, and 2014 separately solved models 
(with the incorporation of preventive services, and with different 
trend rates for medical and surgical expenditures, for traditional 
prescription drug expenditures, and for specialty prescription drug 
expenditures) are shown in the tables below. For a given enrollee, the 
sums of the factors for the enrollee's HCCs are the total relative 
predicted expenditures for that enrollee. Table 1 contains factors for 
each adult model, including the interactions. Table 2 contains the HHS 
HCCs in the severity illness indicator variable. Table 3 contains the 
factors for each child model. Table 4 contains the factors for each 
infant model. We are finalizing these factors, with the adjustment for 
the differing medical and traditional and specialty prescription drug 
trend factors incorporated in the 2012, 2013, and 2014 blended 
coefficients.

                                  Table 1--Adult Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
             Factor                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male.................           0.236           0.180           0.119           0.082           0.081
Age 25-29, Male.................           0.246           0.186           0.122           0.083           0.082
Age 30-34, Male.................           0.287           0.216           0.138           0.089           0.088
Age 35-39, Male.................           0.346           0.264           0.172           0.112           0.111
Age 40-44, Male.................           0.420           0.326           0.221           0.151           0.149
Age 45-49, Male.................           0.496           0.392           0.273           0.192           0.191
Age 50-54, Male.................           0.633           0.512           0.372           0.275           0.274
Age 55-59, Male.................           0.722           0.585           0.429           0.320           0.318
Age 60-64, Male.................           0.843           0.683           0.502           0.372           0.369
Age 21-24, Female...............           0.379           0.296           0.200           0.138           0.137
Age 25-29, Female...............           0.460           0.359           0.247           0.173           0.172

[[Page 12221]]

 
Age 30-34, Female...............           0.582           0.466           0.337           0.254           0.252
Age 35-39, Female...............           0.668           0.542           0.405           0.318           0.316
Age 40-44, Female...............           0.742           0.604           0.455           0.357           0.355
Age 45-49, Female...............           0.750           0.608           0.450           0.344           0.342
Age 50-54, Female...............           0.845           0.691           0.518           0.398           0.395
Age 55-59, Female...............           0.849           0.690           0.510           0.380           0.378
Age 60-64, Female...............           0.909           0.734           0.537           0.395           0.392
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................           8.942           8.450           8.099           8.142           8.143
Septicemia, Sepsis, Systemic              10.686          10.511          10.405          10.461          10.462
 Inflammatory Response Syndrome/
 Shock..........................
Central Nervous System                     6.632           6.532           6.468           6.489           6.489
 Infections, Except Viral
 Meningitis.....................
Viral or Unspecified Meningitis.           4.657           4.422           4.263           4.222           4.222
Opportunistic Infections........           8.503           8.404           8.337           8.319           8.319
Metastatic Cancer...............          24.314          23.880          23.578          23.637          23.638
Lung, Brain, and Other Severe             12.630          12.296          12.062          12.066          12.066
 Cancers, Including Pediatric
 Acute Lymphoid Leukemia........
Non-Hodgkin`s Lymphomas and                5.845           5.611           5.435           5.388           5.387
 Other Cancers and Tumors.......
Colorectal, Breast (Age < 50),             5.152           4.918           4.738           4.690           4.689
 Kidney, and Other Cancers......
Breast (Age 50+) and Prostate              2.957           2.786           2.650           2.597           2.596
 Cancer, Benign/Uncertain Brain
 Tumors, and Other Cancers and
 Tumors.........................
Thyroid Cancer, Melanoma,                  1.448           1.295           1.160           1.069           1.067
 Neurofibromatosis, and Other
 Cancers and Tumors.............
Pancreas Transplant Status/                5.455           5.233           5.091           5.112           5.114
 Complications..................
Diabetes with Acute                        1.187           1.049           0.925           0.822           0.820
 Complications..................
Diabetes with Chronic                      1.187           1.049           0.925           0.822           0.820
 Complications..................
Diabetes without Complication...           1.187           1.049           0.925           0.822           0.820
Protein-Calorie Malnutrition....          13.686          13.693          13.702          13.762          13.763
Mucopolysaccharidosis...........           2.277           2.159           2.061           2.008           2.007
Lipidoses and Glycogenosis......           2.277           2.159           2.061           2.008           2.007
Amyloidosis, Porphyria, and                2.277           2.159           2.061           2.008           2.007
 Other Metabolic Disorders......
Adrenal, Pituitary, and Other              2.277           2.159           2.061           2.008           2.007
 Significant Endocrine Disorders
Liver Transplant Status/                  16.042          15.868          15.759          15.771          15.772
 Complications..................
End-Stage Liver Disease.........           7.119           6.877           6.718           6.736           6.737
Cirrhosis of Liver..............           3.852           3.690           3.569           3.535           3.535
Chronic Hepatitis...............           3.852           3.690           3.569           3.535           3.535
Acute Liver Failure/Disease,               4.430           4.269           4.158           4.148           4.148
 Including Neonatal Hepatitis...
Intestine Transplant Status/              32.604          32.555          32.516          32.559          32.559
 Complications..................
Peritonitis/Gastrointestinal              11.820          11.561          11.383          11.413          11.413
 Perforation/Necrotizing
 Enterocolitis..................
Intestinal Obstruction..........           6.537           6.272           6.101           6.120           6.121
Chronic Pancreatitis............           5.455           5.233           5.091           5.112           5.114
Acute Pancreatitis/Other                   2.702           2.515           2.379           2.331           2.331
 Pancreatic Disorders and
 Intestinal Malabsorption.......
Inflammatory Bowel Disease......           3.657           3.392           3.190           3.098           3.096
Necrotizing Fasciitis...........           6.576           6.378           6.239           6.254           6.255
Bone/Joint/Muscle Infections/              6.576           6.378           6.239           6.254           6.255
 Necrosis.......................
Rheumatoid Arthritis and                   4.848           4.587           4.394           4.385           4.385
 Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and           1.205           1.070           0.952           0.868           0.867
 Other Autoimmune Disorders.....
Osteogenesis Imperfecta and                3.115           2.917           2.758           2.699           2.697
 Other Osteodystrophies.........
Congenital/Developmental                   3.115           2.917           2.758           2.699           2.697
 Skeletal and Connective Tissue
 Disorders......................
Cleft Lip/Cleft Palate..........           1.295           1.137           1.010           0.942           0.941
Hemophilia......................          46.436          46.150          45.931          45.939          45.939
Myelodysplastic Syndromes and             12.671          12.534          12.440          12.448          12.449
 Myelofibrosis..................
Aplastic Anemia.................          12.671          12.534          12.440          12.448          12.449
Acquired Hemolytic Anemia,                 9.737           9.576           9.454           9.445           9.445
 Including Hemolytic Disease of
 Newborn........................
Sickle Cell Anemia (Hb-SS)......           9.737           9.576           9.454           9.445           9.445
Thalassemia Major...............           9.737           9.576           9.454           9.445           9.445
Combined and Other Severe                  5.432           5.284           5.182           5.183           5.183
 Immunodeficiencies.............
Disorders of the Immune                    5.432           5.284           5.182           5.183           5.183
 Mechanism......................
Coagulation Defects and Other              2.805           2.707           2.628           2.599           2.599
 Specified Hematological
 Disorders......................
Drug Psychosis..................           3.830           3.574           3.380           3.286           3.284
Drug Dependence.................           3.830           3.574           3.380           3.286           3.284

[[Page 12222]]

 
Schizophrenia...................           3.189           2.934           2.744           2.680           2.679
Major Depressive and Bipolar               1.714           1.547           1.404           1.308           1.307
 Disorders......................
Reactive and Unspecified                   1.714           1.547           1.404           1.308           1.307
 Psychosis, Delusional Disorders
Personality Disorders...........           1.176           1.043           0.910           0.814           0.812
Anorexia/Bulimia Nervosa........           2.693           2.527           2.392           2.334           2.333
Prader-Willi, Patau, Edwards,              2.632           2.504           2.403           2.354           2.353
 and Autosomal Deletion
 Syndromes......................
Down Syndrome, Fragile X, Other            1.056           0.951           0.849           0.778           0.776
 Chromosomal Anomalies, and
 Congenital Malformation
 Syndromes......................
Autistic Disorder...............           1.176           1.043           0.910           0.814           0.812
Pervasive Developmental                    1.176           1.043           0.910           0.814           0.812
 Disorders, Except Autistic
 Disorder.......................
Traumatic Complete Lesion                 12.005          11.851          11.737          11.735          11.735
 Cervical Spinal Cord...........
Quadriplegia....................          12.005          11.851          11.737          11.735          11.735
Traumatic Complete Lesion Dorsal           9.157           9.000           8.886           8.874           8.875
 Spinal Cord....................
Paraplegia......................           9.157           9.000           8.886           8.874           8.875
Spinal Cord Disorders/Injuries..           5.635           5.424           5.275           5.246           5.246
Amyotrophic Lateral Sclerosis              3.029           2.792           2.625           2.585           2.585
 and Other Anterior Horn Cell
 Disease........................
Quadriplegic Cerebral Palsy.....           1.206           0.997           0.839           0.777           0.776
Cerebral Palsy, Except                     0.124           0.068           0.034           0.011           0.011
 Quadriplegic...................
Spina Bifida and Other Brain/              0.071           0.019           0.000           0.000           0.000
 Spinal/Nervous System
 Congenital Anomalies...........
Myasthenia Gravis/Myoneural                5.247           5.099           4.994           4.971           4.971
 Disorders and Guillain-Barre
 Syndrome/Inflammatory and Toxic
 Neuropathy.....................
Muscular Dystrophy..............           2.147           1.981           1.860           1.785           1.784
Multiple Sclerosis..............          13.590          13.187          12.905          12.950          12.951
Parkinson`s, Huntington`s, and             2.147           1.981           1.860           1.785           1.784
 Spinocerebellar Disease, and
 Other Neurodegenerative
 Disorders......................
Seizure Disorders and                      1.495           1.337           1.207           1.137           1.136
 Convulsions....................
Hydrocephalus...................           6.388           6.266           6.165           6.139           6.138
Non-Traumatic Coma, and Brain              9.207           9.070           8.964           8.958           8.957
 Compression/Anoxic Damage......
Respirator Dependence/                    34.719          34.708          34.706          34.772          34.773
 Tracheostomy Status............
Respiratory Arrest..............          10.554          10.403          10.306          10.370          10.371
Cardio-Respiratory Failure and            10.554          10.403          10.306          10.370          10.371
 Shock, Including Respiratory
 Distress Syndromes.............
Heart Assistive Device/                   35.114          34.869          34.711          34.771          34.772
 Artificial Heart...............
Heart Transplant................          35.114          34.869          34.711          34.771          34.772
Congestive Heart Failure........           3.280           3.171           3.095           3.089           3.089
Acute Myocardial Infarction.....          10.129           9.795           9.580           9.691           9.693
Unstable Angina and Other Acute            5.227           4.952           4.779           4.793           4.794
 Ischemic Heart Disease.........
Heart Infection/Inflammation,              6.297           6.163           6.063           6.042           6.041
 Except Rheumatic...............
Specified Heart Arrhythmias.....           2.829           2.681           2.565           2.512           2.511
Intracranial Hemorrhage.........           9.423           9.144           8.954           8.963           8.964
Ischemic or Unspecified Stroke..           3.167           2.982           2.869           2.875           2.876
Cerebral Aneurysm and                      3.940           3.742           3.600           3.559           3.558
 Arteriovenous Malformation.....
Hemiplegia/Hemiparesis..........           5.468           5.374           5.317           5.360           5.361
Monoplegia, Other Paralytic                3.452           3.319           3.226           3.207           3.207
 Syndromes......................
Atherosclerosis of the                    10.940          10.840          10.784          10.853          10.854
 Extremities with Ulceration or
 Gangrene.......................
Vascular Disease with                      7.727           7.543           7.416           7.417           7.417
 Complications..................
Pulmonary Embolism and Deep Vein           3.841           3.675           3.555           3.529           3.529
 Thrombosis.....................
Lung Transplant Status/                   36.419          36.227          36.103          36.180          36.181
 Complications..................
Cystic Fibrosis.................          18.011          17.687          17.444          17.467          17.467
Chronic Obstructive Pulmonary              0.942           0.825           0.717           0.641           0.640
 Disease, Including
 Bronchiectasis.................
Asthma..........................           0.942           0.825           0.717           0.641           0.640
Fibrosis of Lung and Other Lung            1.889           1.771           1.682           1.641           1.640
 Disorders......................
Aspiration and Specified                   7.594           7.520           7.471           7.485           7.485
 Bacterial Pneumonias and Other
 Severe Lung Infections.........
Kidney Transplant Status........          10.183           9.919           9.744           9.735           9.735
End Stage Renal Disease.........          38.463          38.228          38.078          38.198          38.201
Chronic Kidney Disease, Stage 5.           2.088           1.989           1.925           1.920           1.920
Chronic Kidney Disease, Severe             2.088           1.989           1.925           1.920           1.920
 (Stage 4)......................
Ectopic and Molar Pregnancy,               1.340           1.156           0.979           0.795           0.791
 Except with Renal Failure,
 Shock, or Embolism.............
Miscarriage with Complications..           1.340           1.156           0.979           0.795           0.791
Miscarriage with No or Minor               1.340           1.156           0.979           0.795           0.791
 Complications..................
Completed Pregnancy With Major             3.630           3.150           2.862           2.712           2.713
 Complications..................
Completed Pregnancy With                   3.630           3.150           2.862           2.712           2.713
 Complications..................
Completed Pregnancy with No or             3.630           3.150           2.862           2.712           2.713
 Minor Complications............

[[Page 12223]]

 
Chronic Ulcer of Skin, Except              2.356           2.233           2.150           2.134           2.134
 Pressure.......................
Hip Fractures and Pathological             9.460           9.245           9.100           9.136           9.136
 Vertebral or Humerus Fractures.
Pathological Fractures, Except             2.000           1.871           1.758           1.688           1.687
 of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone                 31.027          31.022          31.017          31.035          31.036
 Marrow, Transplant Status/
 Complications..................
Artificial Openings for Feeding           10.038           9.946           9.886           9.924           9.925
 or Elimination.................
Amputation Status, Lower Limb/             5.263           5.112           5.015           5.044           5.045
 Amputation Complications.......
----------------------------------------------------------------------------------------------------------------
                                               Interaction Factors
----------------------------------------------------------------------------------------------------------------
Severe illness x Opportunistic            10.408          10.632          10.799          10.894          10.895
 Infections.....................
Severe illness x Metastatic               10.408          10.632          10.799          10.894          10.895
 Cancer.........................
Severe illness x Lung, Brain,             10.408          10.632          10.799          10.894          10.895
 and Other Severe Cancers,
 Including Pediatric Acute
 Lymphoid Leukemia..............
Severe illness x Non-Hodgkin`s            10.408          10.632          10.799          10.894          10.895
 Lymphomas and Other Cancers and
 Tumors.........................
Severe illness x Myasthenia               10.408          10.632          10.799          10.894          10.895
 Gravis/Myoneural Disorders and
 Guillain-Barre Syndrome/
 Inflammatory and Toxic
 Neuropathy.....................
Severe illness x Heart Infection/         10.408          10.632          10.799          10.894          10.895
 Inflammation, Except Rheumatic.
Severe illness x Intracranial             10.408          10.632          10.799          10.894          10.895
 Hemorrhage.....................
Severe illness x HCC group G06            10.408          10.632          10.799          10.894          10.895
 (G06 is HCC Group 6 which
 includes the following HCCs in
 the blood disease category: 67,
 68)............................
Severe illness x HCC group G08            10.408          10.632          10.799          10.894          10.895
 (G08 is HCC Group 8 which
 includes the following HCCs in
 the blood disease category: 73,
 74)............................
Severe illness x End-Stage Liver           1.906           2.039           2.141           2.225           2.226
 Disease........................
Severe illness x Acute Liver               1.906           2.039           2.141           2.225           2.226
 Failure/Disease, Including
 Neonatal Hepatitis.............
Severe illness x Atherosclerosis           1.906           2.039           2.141           2.225           2.226
 of the Extremities with
 Ulceration or Gangrene.........
Severe illness x Vascular                  1.906           2.039           2.141           2.225           2.226
 Disease with Complications.....
Severe illness x Aspiration and            1.906           2.039           2.141           2.225           2.226
 Specified Bacterial Pneumonias
 and Other Severe Lung
 Infections.....................
Severe illness x Artificial                1.906           2.039           2.141           2.225           2.226
 Openings for Feeding or
 Elimination....................
Severe illness x HCC group G03             1.906           2.039           2.141           2.225           2.226
 (G03 is HCC Group 3 which
 includes the following HCCs in
 the musculoskeletal disease
 category: 54, 55)..............
----------------------------------------------------------------------------------------------------------------


      Table 2--HHS HCCs in the Severity Illness Indicator Variable
------------------------------------------------------------------------
                               Description
-------------------------------------------------------------------------
Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.
Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis.
Seizure Disorders and Convulsions.
Non-Traumatic Coma, Brain Compression/Anoxic Damage.
Respirator Dependence/Tracheostomy Status.
Respiratory Arrest.
Cardio-Respiratory Failure and Shock, Including Respiratory Distress
 Syndromes.
Pulmonary Embolism and Deep Vein Thrombosis.
------------------------------------------------------------------------


                                  Table 3--Child Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
             Factor                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male...................           0.224           0.145           0.067           0.021           0.020
Age 5-9, Male...................           0.155           0.098           0.038           0.004           0.004
Age 10-14, Male.................           0.220           0.158           0.089           0.053           0.053
Age 15-20, Male.................           0.290           0.219           0.142           0.097           0.096
Age 2-4, Female.................           0.178           0.109           0.044           0.011           0.010
Age 5-9, Female.................           0.127           0.076           0.027           0.003           0.002
Age 10-14, Female...............           0.204           0.145           0.085           0.054           0.054

[[Page 12224]]

 
Age 15-20, Female...............           0.330           0.248           0.157           0.101           0.100
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................           4.875           4.437           4.110           4.033           4.032
Septicemia, Sepsis, Systemic              17.228          17.069          16.969          16.994          16.995
 Inflammatory Response Syndrome/
 Shock..........................
Central Nervous System                    10.808          10.631          10.506          10.511          10.511
 Infections, Except Viral
 Meningitis.....................
Viral or Unspecified Meningitis.           3.128           2.925           2.775           2.687           2.686
Opportunistic Infections........          22.943          22.880          22.834          22.825          22.825
Metastatic Cancer...............          36.648          36.404          36.207          36.207          36.207
Lung, Brain, and Other Severe             12.117          11.833          11.604          11.547          11.546
 Cancers, Including Pediatric
 Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and                9.328           9.058           8.836           8.754           8.753
 Other Cancers and Tumors.......
Colorectal, Breast (Age <50),              3.508           3.291           3.097           2.989           2.987
 Kidney, and Other Cancers......
Breast (Age 50+) and Prostate              3.016           2.816           2.642           2.538           2.537
 Cancer, Benign/Uncertain Brain
 Tumors, and Other Cancers and
 Tumors.........................
Thyroid Cancer, Melanoma,                  1.723           1.553           1.397           1.294           1.292
 Neurofibromatosis, and Other
 Cancers and Tumors.............
Pancreas Transplant Status/               30.468          30.333          30.245          30.256          30.256
 Complications..................
Diabetes with Acute                        2.521           2.197           1.946           1.703           1.699
 Complications..................
Diabetes with Chronic                      2.521           2.197           1.946           1.703           1.699
 Complications..................
Diabetes without Complication...           2.521           2.197           1.946           1.703           1.699
Protein-Calorie Malnutrition....          13.570          13.484          13.421          13.450          13.450
Mucopolysaccharidosis...........           8.509           8.238           8.020           7.987           7.986
Lipidoses and Glycogenosis......           8.509           8.238           8.020           7.987           7.986
Congenital Metabolic Disorders,            8.509           8.238           8.020           7.987           7.986
 Not Elsewhere Classified.......
Amyloidosis, Porphyria, and                8.509           8.238           8.020           7.987           7.986
 Other Metabolic Disorders......
Adrenal, Pituitary, and Other              8.509           8.238           8.020           7.987           7.986
 Significant Endocrine Disorders
Liver Transplant Status/                  30.468          30.333          30.245          30.256          30.256
 Complications..................
End-Stage Liver Disease.........          13.077          12.927          12.822          12.821          12.821
Cirrhosis of Liver..............           9.604           9.445           9.326           9.286           9.286
Chronic Hepatitis...............           2.567           2.418           2.280           2.216           2.215
Acute Liver Failure/Disease,              12.729          12.576          12.460          12.447          12.447
 Including Neonatal Hepatitis...
Intestine Transplant Status/              30.468          30.333          30.245          30.256          30.256
 Complications..................
Peritonitis/Gastrointestinal              14.795          14.463          14.217          14.238          14.238
 Perforation/Necrotizing
 Enterocolitis..................
Intestinal Obstruction..........           5.389           5.155           4.965           4.885           4.884
Chronic Pancreatitis............           9.713           9.478           9.319           9.319           9.319
Acute Pancreatitis/Other                   2.561           2.426           2.303           2.217           2.216
 Pancreatic Disorders and
 Intestinal Malabsorption.......
Inflammatory Bowel Disease......           6.321           5.943           5.650           5.553           5.551
Necrotizing Fasciitis...........           4.467           4.231           4.041           3.989           3.988
Bone/Joint/Muscle Infections/              4.467           4.231           4.041           3.989           3.988
 Necrosis.......................
Rheumatoid Arthritis and                   3.904           3.662           3.448           3.365           3.364
 Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and           1.305           1.154           1.003           0.893           0.891
 Other Autoimmune Disorders.....
Osteogenesis Imperfecta and                1.560           1.429           1.303           1.232           1.231
 Other Osteodystrophies.........
Congenital/Developmental                   1.560           1.429           1.303           1.232           1.231
 Skeletal and Connective Tissue
 Disorders......................
Cleft Lip/Cleft Palate..........           1.563           1.351           1.172           1.061           1.059
Hemophilia......................          66.792          66.309          65.939          65.927          65.927
Myelodysplastic Syndromes and             15.978          15.807          15.672          15.654          15.654
 Myelofibrosis..................
Aplastic Anemia.................          15.978          15.807          15.672          15.654          15.654
Acquired Hemolytic Anemia,                 7.706           7.432           7.214           7.145           7.144
 Including Hemolytic Disease of
 Newborn........................
Sickle Cell Anemia (Hb-SS)......           7.706           7.432           7.214           7.145           7.144
Thalassemia Major...............           7.706           7.432           7.214           7.145           7.144
Combined and Other Severe                  6.686           6.507           6.364           6.310           6.309
 Immunodeficiencies.............
Disorders of the Immune                    6.686           6.507           6.364           6.310           6.309
 Mechanism......................
Coagulation Defects and Other              4.828           4.689           4.560           4.494           4.493
 Specified Hematological
 Disorders......................
Drug Psychosis..................           5.390           5.135           4.948           4.887           4.887
Drug Dependence.................           5.390           5.135           4.948           4.887           4.887
Schizophrenia...................           5.242           4.853           4.561           4.472           4.471
Major Depressive and Bipolar               1.913           1.691           1.485           1.334           1.332
 Disorders......................
Reactive and Unspecified                   1.913           1.691           1.485           1.334           1.332
 Psychosis, Delusional Disorders
Personality Disorders...........           0.783           0.653           0.504           0.376           0.374
Anorexia/Bulimia Nervosa........           2.742           2.539           2.370           2.309           2.308

[[Page 12225]]

 
Prader-Willi, Patau, Edwards,              3.362           3.155           3.013           2.980           2.979
 and Autosomal Deletion
 Syndromes......................
Down Syndrome, Fragile X, Other            1.787           1.605           1.459           1.378           1.376
 Chromosomal Anomalies, and
 Congenital Malformation
 Syndromes......................
Autistic Disorder...............           1.771           1.577           1.389           1.248           1.246
Pervasive Developmental                    0.907           0.766           0.597           0.448           0.445
 Disorders, Except Autistic
 Disorder.......................
Traumatic Complete Lesion                 13.209          13.168          13.154          13.225          13.227
 Cervical Spinal Cord...........
Quadriplegia....................          13.209          13.168          13.154          13.225          13.227
Traumatic Complete Lesion Dorsal          11.619          11.410          11.267          11.269          11.270
 Spinal Cord....................
Paraplegia......................          11.619          11.410          11.267          11.269          11.270
Spinal Cord Disorders/Injuries..           4.847           4.614           4.433           4.359           4.358
Amyotrophic Lateral Sclerosis              8.218           7.979           7.791           7.744           7.744
 and Other Anterior Horn Cell
 Disease........................
Quadriplegic Cerebral Palsy.....           3.387           3.141           2.983           2.995           2.996
Cerebral Palsy, Except                     0.861           0.675           0.530           0.451           0.450
 Quadriplegic...................
Spina Bifida and Other Brain/              1.282           1.135           1.010           0.944           0.943
 Spinal/Nervous System
 Congenital Anomalies...........
Myasthenia Gravis/Myoneural                9.635           9.457           9.315           9.279           9.279
 Disorders and Guillain-Barre
 Syndrome/Inflammatory and Toxic
 Neuropathy.....................
Muscular Dystrophy..............           3.374           3.176           3.021           2.948           2.947
Multiple Sclerosis..............           8.431           8.101           7.852           7.820           7.820
Parkinson's, Huntington's, and             3.374           3.176           3.021           2.948           2.947
 Spinocerebellar Disease, and
 Other Neurodegenerative
 Disorders......................
Seizure Disorders and                      2.095           1.913           1.735           1.609           1.607
 Convulsions....................
Hydrocephalus...................           5.122           5.002           4.912           4.903           4.903
Non-Traumatic Coma, and Brain              7.539           7.391           7.276           7.236           7.235
 Compression/Anoxic Damage......
Respirator Dependence/                    40.112          40.012          39.969          40.084          40.086
 Tracheostomy Status............
Respiratory Arrest..............          12.354          12.151          12.015          12.013          12.013
Cardio-Respiratory Failure and            12.354          12.151          12.015          12.013          12.013
 Shock, Including Respiratory
 Distress Syndromes.............
Heart Assistive Device/                   30.468          30.333          30.245          30.256          30.256
 Artificial Heart...............
Heart Transplant................          30.468          30.333          30.245          30.256          30.256
Congestive Heart Failure........           6.999           6.888           6.791           6.751           6.751
Acute Myocardial Infarction.....           9.715           9.553           9.443           9.441           9.442
Unstable Angina and Other Acute            6.438           6.331           6.260           6.262           6.262
 Ischemic Heart Disease.........
Heart Infection/Inflammation,             16.113          15.984          15.888          15.866          15.866
 Except Rheumatic...............
Hypoplastic Left Heart Syndrome            6.323           6.111           5.905           5.794           5.792
 and Other Severe Congenital
 Heart Disorders................
Major Congenital Heart/                    1.778           1.651           1.493           1.391           1.389
 Circulatory Disorders..........
Atrial and Ventricular Septal              1.202           1.090           0.952           0.872           0.871
 Defects, Patent Ductus
 Arteriosus, and Other
 Congenital Heart/Circulatory
 Disorders......................
Specified Heart Arrhythmias.....           4.399           4.213           4.049           3.984           3.983
Intracranial Hemorrhage.........          15.936          15.685          15.510          15.504          15.504
Ischemic or Unspecified Stroke..           8.574           8.456           8.381           8.396           8.396
Cerebral Aneurysm and                      3.865           3.650           3.490           3.433           3.432
 Arteriovenous Malformation.....
Hemiplegia/Hemiparesis..........           4.815           4.703           4.625           4.610           4.610
Monoplegia, Other Paralytic                3.627           3.487           3.391           3.361           3.361
 Syndromes......................
Atherosclerosis of the                    15.571          15.296          15.096          15.012          15.011
 Extremities with Ulceration or
 Gangrene.......................
Vascular Disease with                     18.826          18.672          18.564          18.569          18.569
 Complications..................
Pulmonary Embolism and Deep Vein          15.291          15.130          15.023          15.041          15.042
 Thrombosis.....................
Lung Transplant Status/                   30.468          30.333          30.245          30.256          30.256
 Complications..................
Cystic Fibrosis.................          20.415          19.976          19.647          19.686          19.687
Chronic Obstructive Pulmonary              0.435           0.348           0.231           0.149           0.147
 Disease, Including
 Bronchiectasis.................
Asthma..........................           0.435           0.348           0.231           0.149           0.147
Fibrosis of Lung and Other Lung            4.116           3.973           3.845           3.789           3.788
 Disorders......................
Aspiration and Specified                  10.256          10.199          10.157          10.177          10.177
 Bacterial Pneumonias and Other
 Severe Lung Infections.........
Kidney Transplant Status........          16.425          16.083          15.843          15.848          15.848
End Stage Renal Disease.........          39.805          39.631          39.521          39.592          39.593
Chronic Kidney Disease, Stage 5.           7.087           6.923           6.771           6.675           6.673
Chronic Kidney Disease, Severe             7.087           6.923           6.771           6.675           6.673
 (Stage 4)......................
Ectopic and Molar Pregnancy,               1.126           0.939           0.750           0.559           0.555
 Except with Renal Failure,
 Shock, or Embolism.............
Miscarriage with Complications..           1.126           0.939           0.750           0.559           0.555
Miscarriage with No or Minor               1.126           0.939           0.750           0.559           0.555
 Complications..................
Completed Pregnancy With Major             3.159           2.712           2.427           2.240           2.240
 Complications..................
Completed Pregnancy With                   3.159           2.712           2.427           2.240           2.240
 Complications..................

[[Page 12226]]

 
Completed Pregnancy with No or             3.159           2.712           2.427           2.240           2.240
 Minor Complications............
Chronic Ulcer of Skin, Except              1.941           1.836           1.731           1.675           1.675
 Pressure.......................
Hip Fractures and Pathological             5.725           5.450           5.215           5.124           5.123
 Vertebral or Humerus Fractures.
Pathological Fractures, Except             1.574           1.428           1.264           1.147           1.145
 of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone                 30.468          30.333          30.245          30.256          30.256
 Marrow, Transplant Status/
 Complications..................
Artificial Openings for Feeding           14.575          14.480          14.443          14.551          14.553
 or Elimination.................
Amputation Status, Lower Limb/             8.195           7.923           7.727           7.631           7.630
 Amputation Complications.......
----------------------------------------------------------------------------------------------------------------


                                 TABLE 4--Infant Risk Adjustment Models Factors
----------------------------------------------------------------------------------------------------------------
              Group                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity            378.927         377.561         376.491         376.507         376.508
 Level 5 (Highest)..............
Extremely Immature * Severity            194.401         193.057         192.003         191.981         191.981
 Level 4........................
Extremely Immature * Severity             46.419          45.304          44.390          44.236          44.234
 Level 3........................
Extremely Immature * Severity             46.419          45.304          44.390          44.236          44.234
 Level 2........................
Extremely Immature * Severity             46.419          45.304          44.390          44.236          44.234
 Level 1 (Lowest)...............
Immature *Severity Level 5               190.323         189.030         188.013         188.027         188.028
 (Highest)......................
Immature *Severity Level 4......          85.852          84.500          83.442          83.437          83.437
Immature *Severity Level 3......          46.419          45.304          44.390          44.236          44.234
Immature *Severity Level 2......          28.986          27.832          26.907          26.738          26.736
Immature *Severity Level 1                28.986          27.832          26.907          26.738          26.736
 (Lowest).......................
Premature/Multiples * Severity           156.158         154.846         153.824         153.791         153.791
 Level 5 (Highest)..............
Premature/Multiples * Severity            32.573          31.292          30.290          30.173          30.173
 Level 4........................
Premature/Multiples * Severity            17.215          16.169          15.315          15.020          15.016
 Level 3........................
Premature/Multiples * Severity             8.942           8.081           7.334           6.884           6.876
 Level 2........................
Premature/Multiples * Severity             6.222           5.557           4.867           4.376           4.367
 Level 1 (Lowest)...............
Term *Severity Level 5 (Highest)         130.728         129.499         128.518         128.414         128.413
Term *Severity Level 4..........          16.874          15.867          15.038          14.685          14.681
Term *Severity Level 3..........           6.324           5.648           4.969           4.448           4.438
Term *Severity Level 2..........           3.857           3.319           2.700           2.139           2.128
Term *Severity Level 1 (Lowest).           1.639           1.321           0.772           0.358           0.350
Age1 *Severity Level 5 (Highest)          54.166          53.499          52.963          52.894          52.892
Age1 *Severity Level 4..........           9.298           8.787           8.351           8.169           8.167
Age1 *Severity Level 3..........           3.380           3.034           2.676           2.465           2.461
Age1 *Severity Level 2..........           2.155           1.873           1.549           1.320           1.316
Age1 *Severity Level 1 (Lowest).           0.572           0.441           0.274           0.199           0.197
Age 0 Male......................           0.685           0.637           0.608           0.554           0.553
Age 1 Male......................           0.145           0.127           0.106           0.081           0.081
----------------------------------------------------------------------------------------------------------------


                         Table 5--HHS HCCs Included in Infant Model Maturity Categories
----------------------------------------------------------------------------------------------------------------
                                Maturity category                                         HCC/description
----------------------------------------------------------------------------------------------------------------
Extremely Immature..............................................................  Extremely Immature Newborns,
                                                                                   Birthweight < 500 Grams.
Extremely Immature..............................................................  Extremely Immature Newborns,
                                                                                   Including Birthweight 500-749
                                                                                   Grams.
Extremely Immature..............................................................  Extremely Immature Newborns,
                                                                                   Including Birthweight 750-999
                                                                                   Grams.
Immature........................................................................  Premature Newborns, Including
                                                                                   Birthweight 1000-1499 Grams.
Immature........................................................................  Premature Newborns, Including
                                                                                   Birthweight 1500-1999 Grams.
Premature/Multiples.............................................................  Premature Newborns, Including
                                                                                   Birthweight 2000-2499 Grams.
Premature/Multiples.............................................................  Other Premature, Low
                                                                                   Birthweight, Malnourished, or
                                                                                   Multiple Birth Newborns.
Term............................................................................  Term or Post-Term Singleton
                                                                                   Newborn, Normal or High
                                                                                   Birthweight.
Age 1...........................................................................  All age 1 infants.
----------------------------------------------------------------------------------------------------------------


                         Table 6--HHS HCCs Included in Infant Model Severity Categories
----------------------------------------------------------------------------------------------------------------
                                Severity Category                                               HCC
----------------------------------------------------------------------------------------------------------------
Severity Level 5 (Highest)......................................................  Metastatic Cancer.
Severity Level 5................................................................  Pancreas Transplant Status/
                                                                                   Complications.
Severity Level 5................................................................  Liver Transplant Status/
                                                                                   Complications.
Severity Level 5................................................................  End-Stage Liver Disease.
Severity Level 5................................................................  Intestine Transplant Status/
                                                                                   Complications.
Severity Level 5................................................................  Peritonitis/Gastrointestinal
                                                                                   Perforation/Necrotizing
                                                                                   Enterocolitis.
Severity Level 5................................................................  Respirator Dependence/
                                                                                   Tracheostomy Status.
Severity Level 5................................................................  Heart Assistive Device/
                                                                                   Artificial Heart.

[[Page 12227]]

 
Severity Level 5................................................................  Heart Transplant.
Severity Level 5................................................................  Congestive Heart Failure.
Severity Level 5................................................................  Hypoplastic Left Heart
                                                                                   Syndrome and Other Severe
                                                                                   Congenital Heart Disorders.
Severity Level 5................................................................  Lung Transplant Status/
                                                                                   Complications.
Severity Level 5................................................................  Kidney Transplant Status.
Severity Level 5................................................................  End Stage Renal Disease.
Severity Level 5................................................................  Stem Cell, Including Bone
                                                                                   Marrow, Transplant Status/
                                                                                   Complications.
Severity Level 4................................................................  Septicemia, Sepsis, Systemic
                                                                                   Inflammatory Response
                                                                                   Syndrome/Shock.
Severity Level 4................................................................  Lung, Brain, and Other Severe
                                                                                   Cancers, Including Pediatric
                                                                                   Acute Lymphoid Leukemia.
Severity Level 4................................................................  Mucopolysaccharidosis.
Severity Level 4................................................................  Major Congenital Anomalies of
                                                                                   Diaphragm, Abdominal Wall,
                                                                                   and Esophagus, Age < 2.
Severity Level 4................................................................  Myelodysplastic Syndromes and
                                                                                   Myelofibrosis.
Severity Level 4................................................................  Aplastic Anemia.
Severity Level 4................................................................  Combined and Other Severe
                                                                                   Immunodeficiencies.
Severity Level 4................................................................  Traumatic Complete Lesion
                                                                                   Cervical Spinal Cord.
Severity Level 4................................................................  Quadriplegia.
Severity Level 4................................................................  Amyotrophic Lateral Sclerosis
                                                                                   and Other Anterior Horn Cell
                                                                                   Disease.
Severity Level 4................................................................  Quadriplegic Cerebral Palsy.
Severity Level 4................................................................  Myasthenia Gravis/Myoneural
                                                                                   Disorders and Guillain-Barre
                                                                                   Syndrome/Inflammatory and
                                                                                   Toxic Neuropathy.
Severity Level 4................................................................  Non-Traumatic Coma, Brain
                                                                                   Compression/Anoxic Damage.
Severity Level 4................................................................  Respiratory Arrest.
Severity Level 4................................................................  Cardio-Respiratory Failure and
                                                                                   Shock, Including Respiratory
                                                                                   Distress Syndromes.
Severity Level 4................................................................  Acute Myocardial Infarction.
Severity Level 4................................................................  Heart Infection/Inflammation,
                                                                                   Except Rheumatic.
Severity Level 4................................................................  Major Congenital Heart/
                                                                                   Circulatory Disorders.
Severity Level 4................................................................  Intracranial Hemorrhage.
Severity Level 4................................................................  Ischemic or Unspecified
                                                                                   Stroke.
Severity Level 4................................................................  Vascular Disease with
                                                                                   Complications.
Severity Level 4................................................................  Pulmonary Embolism and Deep
                                                                                   Vein Thrombosis.
Severity Level 4................................................................  Aspiration and Specified
                                                                                   Bacterial Pneumonias and
                                                                                   Other Severe Lung Infections.
Severity Level 4................................................................  Chronic Kidney Disease, Stage
                                                                                   5.
Severity Level 4................................................................  Hip Fractures and Pathological
                                                                                   Vertebral or Humerus
                                                                                   Fractures.
Severity Level 4................................................................  Artificial Openings for
                                                                                   Feeding or Elimination.
Severity Level 3................................................................  HIV/AIDS.
Severity Level 3................................................................  Central Nervous System
                                                                                   Infections, Except Viral
                                                                                   Meningitis.
Severity Level 3................................................................  Opportunistic Infections.
Severity Level 3................................................................  Non-Hodgkin's Lymphomas and
                                                                                   Other Cancers and Tumors.
Severity Level 3................................................................  Colorectal, Breast (Age < 50),
                                                                                   Kidney and Other Cancers.
Severity Level 3................................................................  Breast (Age 50+), Prostate
                                                                                   Cancer, Benign/Uncertain
                                                                                   Brain Tumors, and Other
                                                                                   Cancers and Tumors.
Severity Level 3................................................................  Lipidoses and Glycogenosis.
Severity Level 3................................................................  Adrenal, Pituitary, and Other
                                                                                   Significant Endocrine
                                                                                   Disorders.
Severity Level 3................................................................  Acute Liver Failure/Disease,
                                                                                   Including Neonatal Hepatitis.
Severity Level 3................................................................  Intestinal Obstruction.
Severity Level 3................................................................  Necrotizing Fasciitis.
Severity Level 3................................................................  Bone/Joint/Muscle Infections/
                                                                                   Necrosis.
Severity Level 3................................................................  Osteogenesis Imperfecta and
                                                                                   Other Osteodystrophies.
Severity Level 3................................................................  Cleft Lip/Cleft Palate.
Severity Level 3................................................................  Hemophilia.
Severity Level 3................................................................  Disorders of the Immune
                                                                                   Mechanism.
Severity Level 3................................................................  Coagulation Defects and Other
                                                                                   Specified Hematological
                                                                                   Disorders.
Severity Level 3................................................................  Prader-Willi, Patau, Edwards,
                                                                                   and Autosomal Deletion
                                                                                   Syndromes.
Severity Level 3................................................................  Traumatic Complete Lesion
                                                                                   Dorsal Spinal Cord.
Severity Level 3................................................................  Paraplegia.
Severity Level 3................................................................  Spinal Cord Disorders/
                                                                                   Injuries.
Severity Level 3................................................................  Cerebral Palsy, Except
                                                                                   Quadriplegic.
Severity Level 3................................................................  Muscular Dystrophy.
Severity Level 3................................................................  Parkinson's, Huntington's, and
                                                                                   Spinocerebellar Disease, and
                                                                                   Other Neurodegenerative
                                                                                   Disorders.
Severity Level 3................................................................  Hydrocephalus.
Severity Level 3................................................................  Unstable Angina and Other
                                                                                   Acute Ischemic Heart Disease.
Severity Level 3................................................................  Atrial and Ventricular Septal
                                                                                   Defects, Patent Ductus
                                                                                   Arteriosus, and Other
                                                                                   Congenital Heart/Circulatory
                                                                                   Disorders.
Severity Level 3................................................................  Specified Heart Arrhythmias.
Severity Level 3................................................................  Cerebral Aneurysm and
                                                                                   Arteriovenous Malformation.
Severity Level 3................................................................  Hemiplegia/Hemiparesis.
Severity Level 3................................................................  Cystic Fibrosis.
Severity Level 3................................................................  Fibrosis of Lung and Other
                                                                                   Lung Disorders.
Severity Level 3................................................................  Pathological Fractures, Except
                                                                                   of Vertebrae, Hip, or
                                                                                   Humerus.

[[Page 12228]]

 
Severity Level 2................................................................  Viral or Unspecified
                                                                                   Meningitis.
Severity Level 2................................................................  Thyroid, Melanoma,
                                                                                   Neurofibromatosis, and Other
                                                                                   Cancers and Tumors.
Severity Level 2................................................................  Diabetes with Acute
                                                                                   Complications.
Severity Level 2................................................................  Diabetes with Chronic
                                                                                   Complications.
Severity Level 2................................................................  Diabetes without Complication.
Severity Level 2................................................................  Protein-Calorie Malnutrition.
Severity Level 2................................................................  Congenital Metabolic
                                                                                   Disorders, Not Elsewhere
                                                                                   Classified.
Severity Level 2................................................................  Amyloidosis, Porphyria, and
                                                                                   Other Metabolic Disorders.
Severity Level 2................................................................  Cirrhosis of Liver.
Severity Level 2................................................................  Chronic Pancreatitis.
Severity Level 2................................................................  Inflammatory Bowel Disease.
Severity Level 2................................................................  Rheumatoid Arthritis and
                                                                                   Specified Autoimmune
                                                                                   Disorders.
Severity Level 2................................................................  Systemic Lupus Erythematosus
                                                                                   and Other Autoimmune
                                                                                   Disorders.
Severity Level 2................................................................  Congenital/Developmental
                                                                                   Skeletal and Connective
                                                                                   Tissue Disorders.
Severity Level 2................................................................  Acquired Hemolytic Anemia,
                                                                                   Including Hemolytic Disease
                                                                                   of Newborn.
Severity Level 2................................................................  Sickle Cell Anemia (Hb-SS).
Severity Level 2................................................................  Drug Psychosis.
Severity Level 2................................................................  Drug Dependence.
Severity Level 2................................................................  Down Syndrome, Fragile X,
                                                                                   Other Chromosomal Anomalies,
                                                                                   and Congenital Malformation
                                                                                   Syndromes.
Severity Level 2................................................................  Spina Bifida and Other Brain/
                                                                                   Spinal/Nervous System
                                                                                   Congenital Anomalies.
Severity Level 2................................................................  Seizure Disorders and
                                                                                   Convulsions.
Severity Level 2................................................................  Monoplegia, Other Paralytic
                                                                                   Syndromes.
Severity Level 2................................................................  Atherosclerosis of the
                                                                                   Extremities with Ulceration
                                                                                   or Gangrene.
Severity Level 2................................................................  Chronic Obstructive Pulmonary
                                                                                   Disease, Including
                                                                                   Bronchiectasis.
Severity Level 2................................................................  Chronic Ulcer of Skin, Except
                                                                                   Pressure.
Severity Level 1 (Lowest).......................................................  Chronic Hepatitis.
Severity Level 1................................................................  Acute Pancreatitis/Other
                                                                                   Pancreatic Disorders and
                                                                                   Intestinal Malabsorption.
Severity Level 1................................................................  Thalassemia Major.
Severity Level 1................................................................  Autistic Disorder.
Severity Level 1................................................................  Pervasive Developmental
                                                                                   Disorders, Except Autistic
                                                                                   Disorder.
Severity Level 1................................................................  Multiple Sclerosis.
Severity Level 1................................................................  Asthma.
Severity Level 1................................................................  Chronic Kidney Disease, Severe
                                                                                   (Stage 4).
Severity Level 1................................................................  Amputation Status, Lower Limb/
                                                                                   Amputation Complications.
Severity Level 1................................................................  No Severity HCCs.
----------------------------------------------------------------------------------------------------------------

d. Cost-Sharing Reductions Adjustments (Sec.  153.320)
    We proposed to continue including an adjustment for the receipt of 
cost-sharing reductions in the model to account for increased plan 
liability due to increased utilization of health care services by 
enrollees receiving cost-sharing reductions. The proposed cost-sharing 
reduction adjustment factors for 2017 risk adjustment are unchanged 
from those finalized in the 2016 Payment Notice and are set forth in 
Table 7. These adjustments are effective for 2015, 2016, and 2017 risk 
adjustment, and are multiplied against the sum of the demographic, 
diagnosis, and interaction factors. We will continue to evaluate this 
adjustment in future years as more data becomes available.
    Comment: One commenter also recommended that HHS consider looking 
at other elements of adverse selection and induced demand within the 
individual market that are not currently captured in the risk 
adjustment model. Another commenter requested that if HHS were to 
operate risk adjustment in Massachusetts in 2017, HHS should include a 
cost-sharing reduction adjustment table that will account for the 
higher AVs of the ``Connector Care'' plans with wrap-around subsidies 
in Massachusetts.
    Response: As we stated in the 2015 Payment Notice, in some States, 
expansion of Medicaid benefits under section 2001(a) of the Affordable 
Care Act may take the form of enrolling newly Medicaid-eligible 
enrollees into individual market plans. These enrollees could be placed 
into silver plan variations--either the 94 percent silver plan 
variation or the zero cost sharing plan variation--with a portion of 
the premiums and cost sharing paid for by Medicaid on their behalf. In 
Massachusetts, Connector Care plans represent these Medicaid 
alternative plans in the individual market. To address this induced 
utilization in the context of cost-sharing reduction plan variations in 
the HHS risk adjustment methodology, our methodology increases the risk 
score for individuals in these plan variations by the same factor that 
we use to adjust for induced utilization for individuals enrolled in 
cost-sharing plan variations to adjust for induced utilization for 
individuals enrolled in the corresponding Medicaid alternative plan 
variations. Here, those factors are both 1.12. We intend to evaluate 
these adjustments in the future after data from the initial years of 
risk adjustment is available. We are finalizing the cost-sharing 
reduction adjustment factors as proposed.

[[Page 12229]]



               Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
                                                              Induced
         Household income                  Plan AV          utilization
                                                              factor
------------------------------------------------------------------------
                     Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL...................  Plan Variation 94%..            1.12
150-200% of FPL...................  Plan Variation 87%..            1.12
200-250% of FPL...................  Plan Variation 73%..            1.00
>250% of FPL......................  Standard Plan 70%...            1.00
------------------------------------------------------------------------
                      Zero Cost-Sharing Recipients
------------------------------------------------------------------------
<300% of FPL............................................................
<300% of FPL............................................................
<300% of FPL............................................................
<300% of FPL............................................................
------------------------------------------------------------------------
                     Limited Cost-Sharing Recipients
------------------------------------------------------------------------
>300% of FPL......................  Platinum (90%)......            1.00
>300% of FPL......................  Gold (80%)..........            1.07
>300% of FPL......................  Silver (70%)........            1.12
>300% of FPL......................  Bronze (60%)........            1.15
------------------------------------------------------------------------

e. Model Performance Statistics (Sec.  153.320)
    To evaluate the model's performance, we examined its R-squared and 
predictive ratios. The R-squared statistic, which calculates the 
percentage of individual variation explained by a model, measures the 
predictive accuracy of the model overall. The predictive ratios measure 
the predictive accuracy of a model for different validation groups or 
subpopulations. The predictive ratio for each of the HHS risk 
adjustment models is the ratio of the weighted mean predicted plan 
liability for the model sample population to the weighted mean actual 
plan liability for the model sample population. The predictive ratio 
represents how well the model does on average at predicting plan 
liability for that subpopulation. A subpopulation that is predicted 
perfectly would have a predictive ratio of 1.0. For each of the HHS 
risk adjustment models, the R-squared statistic and the predictive 
ratio are in the range of published estimates for concurrent risk 
adjustment models.\11\ Because we are blending, that is to mean, 
averaging, the coefficients from separately solved models based on 
MarketScan 2012, 2013, and 2014 data, we are publishing the R-squared 
statistic for each model and year separately to verify their 
statistical validity. The R-squared statistic for each model is shown 
in Table 8.
---------------------------------------------------------------------------

    \11\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis 
of Claims-Based Tools for Health Risk Assessment.'' Society of 
Actuaries (Apr. 2007), available at https://www.soa.org/research/research-projects/health/hlth-risk-assement.aspx.

                           Table 8--R-Squared Statistic for HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
                                                                                R-Squared statistic
                      Risk adjustment model                      -----------------------------------------------
                                                                       2012            2013            2014
----------------------------------------------------------------------------------------------------------------
Platinum Adult..................................................          0.3905          0.3790          0.3610
Platinum Child..................................................          0.2669          0.2518          0.2341
Platinum Infant.................................................          0.2848          0.3223          0.3089
Gold Adult......................................................          0.3865          0.3746          0.3558
Gold Child......................................................          0.2621          0.2467          0.2288
Gold Infant.....................................................          0.2826          0.3204          0.3069
Silver Adult....................................................          0.3828          0.3707          0.3512
Silver Child....................................................          0.2576          0.2422          0.2241
Silver Infant...................................................          0.2812          0.3191          0.3054
Bronze Adult....................................................          0.3808          0.3686          0.3488
Bronze Child....................................................          0.2554          0.2400          0.2218
Bronze Infant...................................................          0.2812          0.3190          0.3052
Catastrophic Adult..............................................          0.3807          0.3685          0.3488
Catastrophic Child..............................................          0.2554          0.2400          0.2218
Catastrophic Infant.............................................          0.2812          0.3190          0.3052
----------------------------------------------------------------------------------------------------------------

f. Overview of the Payment Transfer Formula (Sec.  153.320)
    We did not propose to alter our payment transfer methodology. Plan 
average risk scores will continue to be calculated as the member month-
weighted average of individual enrollee risk scores. We defined the 
calculation of plan average actuarial risk and the calculation of 
payments and charges in the Premium Stabilization Rule. In the 2014 
Payment Notice, we combined those concepts into a risk adjustment 
payment transfer formula. Risk

[[Page 12230]]

adjustment transfers (payments and charges) will be calculated after 
issuers have completed risk adjustment data reporting. The payment 
transfer formula includes a set of cost adjustment terms that require 
transfers to be calculated at the geographic rating area level for each 
plan (that is, HHS will calculate two separate transfer amounts for a 
plan that operates in two rating areas).
    The payment transfer formula is designed to provide a per member 
per month (PMPM) transfer amount. The PMPM transfer amount derived from 
the payment transfer formula would be multiplied by each plan's total 
member months for the benefit year to determine the total payment due 
or charge owed by the issuer for that plan in a rating area.
    Comment: Commenters requested that administrative expenses be 
removed from the calculation of the statewide average premium. A 
commenter suggested that amending the transfer formula by eliminating 
administrative costs from the statewide average premium would make it 
``benefit cost based.'' A commenter suggested that HHS consider basing 
the payment transfer on a portion of State average premium--namely, the 
portion representing the sum of claims, claims adjustment expenses, and 
taxes that are calculated on premium after risk adjustment transfers, 
by using a specified percentage of State average premiums. The 
commenter suggested the specified percentage could be determined based 
on data submitted by issuers on the Unified Rate Review Template (URRT) 
for the portion of premium needed for claims and on data from financial 
reporting statements for claim adjustment expenses and relevant taxes 
as a percent of premium and could vary by State or market. Some 
commenters opposed the use of the statewide average premium because it 
disadvantages issuers with below average premiums. Commenters requested 
that 2014 and later risk adjustment transfers for all plans with below 
average premiums in a State be calculated using the plans' own average 
premium amount or average claims cost, so that efficient plans are not 
penalized using the Statewide average premium. Commenters requested use 
of a ``care coordination factor'' in the risk transfer formula, and 
stated that risk adjustment results are distorted by regional biases, 
risks, and coding and demographic differences. One commenter 
recommended that risk scores be compared to other scores in the same 
geographic region, not to State averages, to avoid regional biases and 
to permit a fairer and more accurate comparison.
    Response: We did not propose changes to the transfer formula, and 
therefore, are not addressing comments that are outside the scope of 
this rulemaking. We may be able to evaluate geographic differences in 
the future if we obtain enrollee-level data for future recalibrations--
a topic that we also intend to discuss in the White Paper and at the 
March 31, 2016 risk adjustment conference.
(1) Overview of the Payment Transfer Formula
    Although we did not propose to change the payment transfer formula 
from what was finalized in the 2014 Payment Notice (78 FR 15430 through 
15434), we believe it is useful to republish the formula in its 
entirety, since, as noted above, we are recalibrating the HHS risk 
adjustment model. Transfers (payments and charges) will be calculated 
as the difference between the plan premium estimate reflecting risk 
selection and the plan premium estimate not reflecting risk selection. 
As finalized in the 2014 Payment Notice, the HHS risk adjustment 
payment transfer formula is:
[GRAPHIC] [TIFF OMITTED] TR08MR16.000


Where:

P[Amacr]s = State average premium;
PLRSi = plan i's plan liability risk score;
AVi = plan i's metal level AV;
ARFi = allowable rating factor;
IDFi = plan i's induced demand factor;
GCFi = plan i's geographic cost factor;
si = plan i's share of State enrollment.

The denominator is summed across all plans in the risk pool in the 
market in the State.
    The difference between the two premium estimates in the payment 
transfer formula determines whether a plan pays a risk transfer charge 
or receives a risk transfer payment. Note that the value of the plan 
average risk score by itself does not determine whether a plan would be 
assessed a charge or receive a payment--even if the risk score is 
greater than 1.0, it is possible that the plan would be assessed a 
charge if the premium compensation that the plan may receive through 
its rating practices (as measured through the allowable rating factor) 
exceeds the plan's predicted liability associated with risk selection. 
Risk adjustment transfers are calculated at the risk pool level, and 
catastrophic plans are treated as a separate risk pool for purposes of 
risk adjustment.
g. State-Submitted Alternate Risk Adjustment Methodology
    We are not recertifying the alternate State methodology for use in 
Massachusetts for 2017 risk adjustment. Massachusetts and HHS will 
begin the transition that will allow HHS to operate risk adjustment in 
Massachusetts in 2017. HHS will operate risk adjustment in all States 
for the 2017 benefit year.
h. Risk Adjustment User Fee (Sec.  153.610(f))
    As noted above, if a State is not approved to operate or chooses to 
forgo operating its own risk adjustment program, HHS will operate risk 
adjustment on the State's behalf. As described in the 2014 Payment 
Notice, HHS's operation of risk adjustment on behalf of States is 
funded through a risk adjustment user fee. Section 153.610(f)(2) 
provides that an issuer of a risk adjustment covered plan with the 
meaning of Sec.  153.20 must remit a user fee to HHS equal to the 
product of its monthly enrollment in the plan and the per enrollee per 
month risk adjustment user fee specified in the annual HHS notice of 
benefit and payment parameters for the applicable benefit year.
    OMB Circular No. A-25R establishes Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public. The risk 
adjustment program will provide special benefits as defined in section 
6(a)(1)(b) of Circular No. A-25R to issuers of risk adjustment covered 
plans because it will mitigate the financial instability associated 
with potential adverse risk selection. The risk adjustment program also 
will contribute to consumer confidence in the health insurance industry 
by helping to stabilize premiums across the individual and small group 
health insurance markets.
    In the 2016 Payment Notice, we estimated Federal administrative

[[Page 12231]]

expenses of operating the risk adjustment program to be $1.75 per 
enrollee per year, based on our estimated contract costs for risk 
adjustment operations. For the 2017 benefit year, we proposed to use 
the same methodology to estimate our administrative expenses to operate 
the program. These contracts cover development of the model and 
methodology, collections, payments, account management, data 
collection, data validation, program integrity and audit functions, 
operational and fraud analytics, stakeholder training, and operational 
support. To calculate the user fee, we divided HHS's projected total 
costs for administering the risk adjustment programs on behalf of 
States by the expected number of enrollees in risk adjustment covered 
plans (other than plans not subject to market reforms and student 
health plans, which are not subject to payments and charges under the 
risk adjustment methodology HHS uses when it operates risk adjustment 
on behalf of a State) in HHS-operated risk adjustment programs for the 
benefit year.
    We estimated that the total cost for HHS to operate the risk 
adjustment program on behalf of States for 2017 would be approximately 
$52 million, and that the risk adjustment user fee would be $1.80 per 
enrollee per year. We stated that the risk adjustment user fee contract 
costs for 2017 include costs related to 2017 risk adjustment data 
validation, and are slightly higher than the 2016 contract costs 
because some contracts were rebid. We do not anticipate that 
Massachusetts' decision to use the Federal risk adjustment methodology 
will substantially affect the risk adjustment user fee rate for 2017.
    Comment: One commenter strongly supported the assessment of a 
higher risk adjustment user fee to support the RADV program. Another 
commenter requested transparency for the user fee rate and that HHS 
consider less costly alternatives. One commenter expressed concern over 
the risk adjustment user fee proposal since HHS collected increased 
user fees accounting for 2014 risk adjustment data validation in 2016 
but delayed 2014 risk adjustment data validation. This commenter 
recommended that HHS use those increased fees to pay for risk 
adjustment data validation in 2017 and decline to increase user fees 
for 2017 risk adjustment.
    Response: In response to the comment regarding risk adjustment data 
validation costs, we re-examined all assumptions that went into the 
calculation of the risk adjustment user fee. First, we determined that 
our expected contract costs for 2017 risk adjustment are lower than 
anticipated, currently estimated at approximately $24 million. Then, we 
looked at the enrollment assumptions we were using to calculate the 
previous benefit year user fees. Because we now have actual 2014 risk 
adjustment enrollment, we were able to base expected 2017 enrollment on 
projected member month enrollment rather than total enrollees. We are 
revising the risk adjustment user fee to reflect lower contract costs 
for the 2017 benefit year and more accurate enrollment projections. 
Therefore, we are finalizing the 2017 risk adjustment user fee at $1.56 
per enrollee per year, or $0.13 PMPM.
3. Provisions and Parameters for the Transitional Reinsurance Program
    The Affordable Care Act directs that a transitional reinsurance 
program be established in each State to help stabilize premiums for 
coverage in the individual market from 2014 through 2016. In the 2014 
Payment Notice, we expanded on the standards set forth in subparts C 
and E of the Premium Stabilization Rule and established the reinsurance 
payment parameters and uniform reinsurance contribution rate for the 
2014 benefit year. In the 2015 Payment Notice, we established the 
reinsurance payment parameters and uniform reinsurance contribution 
rate for the 2015 benefit year and certain oversight provisions related 
to the operation of the reinsurance program. In the 2016 Payment 
Notice, we established the reinsurance payment parameters and uniform 
reinsurance contribution rate for the 2016 benefit year and certain 
clarifying provisions related to the operation of the reinsurance 
program.
a. Decreasing the Reinsurance Attachment Point for the 2016 Benefit 
Year
    Section 1341(b)(2)(B) of the Affordable Care Act directs the 
Secretary, in establishing standards for the transitional reinsurance 
program, to include a formula for determining the amount of reinsurance 
payments to be made to non-grandfathered, individual market issuers for 
high-risk claims that provides for the equitable allocation of funds. 
In the Premium Stabilization Rule (77 FR 17228), we provided that 
reinsurance payments to issuers of reinsurance-eligible plans will be 
made for a portion of an enrollee's claims costs paid by the issuer 
(the coinsurance rate) that exceeds an attachment point (when 
reinsurance would begin), subject to a reinsurance cap (when the 
reinsurance program stops paying claims for a high-cost individual). 
The coinsurance rate, attachment point, and reinsurance cap together 
constitute the uniform reinsurance payment parameters.
    We provided in the 2015 Payment Notice (79 FR 13777) that HHS will 
use any excess contributions for reinsurance payments for a benefit 
year by increasing the coinsurance rate for that benefit year up to 100 
percent before rolling over any remaining funds in the next year. In 
the proposed rule, we proposed that if any contribution amounts remain 
after calculating reinsurance payments for the 2016 benefit year (and 
after HHS increases the coinsurance rate to 100 percent for the 2016 
benefit year), HHS would decrease the 2016 attachment point of $90,000 
to pay out any remaining contribution amounts to issuers of 
reinsurance-eligible plans in an equitable manner for the 2016 benefit 
year.
    We received numerous comments in support of this proposal and are 
finalizing this provision as proposed.
    Comment: One commenter stated that changing the reinsurance payment 
parameters at the end of the program--instead of identifying and 
updating the parameters in earlier benefit years as current information 
is available--would be disruptive. The commenter stated that this 
proposal would cause disruption for States that exercised the option to 
create supplemental reinsurance programs and that need to set uniform 
reinsurance payment parameters.
    Response: The final 2016 reinsurance coinsurance rate and 
attachment point, which would reflect a potential increase in 
coinsurance rate from 50 to 100 percent and a potential decrease in the 
attachment point from $90,000 to an amount that pays out remaining 
contributions in an equitable manner, will not be set until HHS 
confirms the total amount of contributions available and reinsurance 
payment requests for the 2016 benefit year. HHS understands that no 
State-operated reinsurance program established supplemental reinsurance 
payment parameters under Sec. Sec.  153.220(d) and 153.232 and 
therefore no States will be affected by this provision. We believe that 
expending all remaining reinsurance contribution funds as payments for 
the 2016 benefit year will support the reinsurance program's goals of 
promoting nationwide premium stabilization and market stability in the 
early years of Exchange operations while providing issuers with 
incentives to continue to effectively manage enrollee costs.

[[Page 12232]]

    Comment: One commenter asked that HHS use excess reinsurance 
contributions to fund the deficit in the risk corridors program.
    Response: Section 1341 of the Affordable Care Act establishes the 
transitional reinsurance program to compensate non-grandfathered 
individual market plans for high-cost enrollees in the initial years of 
the Exchange. We believe that our policy to expend any remaining 
reinsurance contribution funds as reinsurance payments for the 2016 
benefit best aligns with that statutory purpose.
b. Audit Authority Extends to Entities That Assist Contributing 
Entities (Sec.  153.405(i))
    In accordance with Sec.  153.405(i), HHS or its designee has the 
authority to audit a contributing entity to assess compliance with the 
reinsurance program requirements. In 2014, HHS implemented a 
streamlined approach through which a contributing entity, or a third 
party such as a third party administrator or an administrative 
services-only contractor acting on behalf of a contributing entity, 
could register on Pay.gov, calculate the annual enrollment count and 
schedule reinsurance contribution payments. During the 2014 and 2015 
contribution submission process, many third party administrators and 
administrative services-only contractors assisted contributing entities 
by calculating the contributing entity's annual enrollment count and 
maintaining the records necessary to validate that enrollment. In the 
proposed rule, we proposed to amend Sec.  153.405(i) to specify that 
the audit authority extends to any third party administrators, 
administrative services-only contractors, or other third parties that 
complete any part of the reinsurance contribution submission process on 
behalf of contributing entities or otherwise assist contributing 
entities with compliance with the requirements for the transitional 
reinsurance program. Additionally, we proposed to amend Sec.  
153.405(i) to specify that a contributing entity that chooses to use a 
third party administrator, administrative services-only contractor, or 
other third party to assist with its obligations under the reinsurance 
program must ensure that this third party administrator, administrative 
services-only contractor, or other third party cooperate with any audit 
under this section.
    After reviewing the comments received on this proposal, we will not 
finalize our amendment to Sec.  153.405(i) that extended the audit 
authority to third party administrators, administrative services-only 
contractors or other third parties that assist a contributing entity 
with compliance with reinsurance program requirements. However, HHS 
will finalize as proposed the amendment to Sec.  153.405(i) specifying 
that a contributing entity that chooses to use a third party 
administrator, administrative services-only contractor, or other third 
party to assist with its obligations under the reinsurance program must 
ensure that this third party administrator, administrative services-
only contractor, or other third party cooperates with any audit under 
that section. We note that under Sec.  153.405(i) HHS, or its designee, 
has the authority to audit contributing entities' compliance with their 
obligations under the reinsurance program.
    Comment: One commenter disagreed with HHS's proposal to extend the 
audit authority to third party administrators, administrative services-
only contractors, or other third parties, arguing that it was 
unnecessary and would increase the costs of compliance.
    Response: We recognize the commenter's concerns about increasing 
compliance costs, and are not finalizing our proposal to extend the 
audit authority. However, a contributing entity that uses a third party 
administrator, administrative services-only contractor, or other third 
party to assist with its obligations under the reinsurance program must 
ensure that such organization cooperates with any audit of the 
contributing entity under this section.
4. Provisions for the Temporary Risk Corridors Program
    This section contains proposals related to the temporary risk 
corridors program, and therefore applies only to issuers of QHPs, as 
defined at Sec.  153.500, with respect to the benefit years 2014 
through 2016.
a. Risk Corridors Payment Methodology (Sec.  153.510(g))
    To ensure the integrity of data used in risk corridors and MLR 
calculations, in prior guidance we indicated that we would propose in 
the HHS Notice of Benefit and Payment Parameters for 2017 an adjustment 
to correct for any inaccuracies in risk corridors payment and charge 
amounts that could result from issuers reporting a certified estimate 
of cost-sharing reductions on the 2014 MLR and Risk Corridors Annual 
Reporting Form.\12\ The use of a certified estimate that is lower than 
the actual cost-sharing reductions provided would affect the MLR 
calculation and the risk corridors financial transfers by increasing 
incurred claims and allowable costs, thereby increasing the MLR and 
potentially increasing the risk corridors payment or lowering the risk 
corridors charge. We believe that requiring an update of these reported 
amounts through recalculation of the risk corridors and MLR amounts for 
the 2014 benefit year will be disruptive to the market and consumers, 
as well as administratively burdensome and difficult to operationalize 
for issuers and HHS. Therefore, consistent with our earlier guidance, 
we proposed to add a new paragraph (g) to the risk corridors payment 
methodology set forth in Sec.  153.510 stating that if the issuer 
reported a certified estimate of 2014 cost-sharing reductions on its 
2014 MLR and Risk Corridors Annual Reporting Form that is lower than 
the actual cost-sharing reductions provided (as calculated under Sec.  
156.430(c) for the 2014 benefit year, which will take place in the 
spring of 2016), HHS would make an adjustment to the amount of the 
issuer's 2015 benefit year risk corridors payment or charge measured by 
the full difference between the certified estimate reported and the 
actual cost-sharing reductions provided as calculated under Sec.  
156.430(c) in order to address the impact of the inaccurate reporting 
on the risk corridors and MLR calculations for the 2014 benefit year. 
We are finalizing this policy and the amendment to Sec.  153.510(g) as 
proposed.
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    \12\ Cost-Sharing Reduction Amounts in Risk Corridors and 
Medical Loss Ratio Reporting (Jun. 19, 2015), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf.
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    Comment: Several commenters recommended that, to the extent the 
certified estimate of cost-sharing reductions reported on the 2014 MLR 
and Risk Corridors Annual Reporting Form is lower than the actual cost-
sharing reductions provided, the difference should be reflected as an 
adjustment to the cost-sharing reduction amount reported for the 2015 
benefit year rather than the risk corridors payment or charge.
    Response: We note that we are also amending Sec.  153.710(g) (see 
III.D.5.d of this preamble) to require that issuers adjust the cost-
sharing reduction amount reported for the 2015 benefit year to account 
for the difference between cost-sharing reduction amounts reported for 
the 2014 benefit year and actual cost-sharing reduction amounts as 
determined under Sec.  156.430(c). The separate, direct adjustment to 
the 2015 risk corridors payment or charge set

[[Page 12233]]

forth in Sec.  153.510(g) was intended as a program integrity measure, 
to help ensure that issuers did not report certified estimates of cost-
sharing reduction amounts for the 2014 benefit year that they knew 
would likely be lower than their advance payment amounts.
b. Risk Corridors Data Requirements (Sec.  153.530)
    In the proposed rule (80 FR 75488), we proposed to amend Sec.  
153.530 to require that for the 2015 and later benefit years, issuers 
must true up their claims liabilities and reserve amounts that were 
used to determine their allowable costs reported for the risk corridors 
program for the preceding benefit year to reflect the actual claims 
payments made through June 30 of the year following the benefit year. 
We also requested comments on how to handle the true-up of unpaid 
claims estimates for 2016, suggesting four alternatives: provide for a 
2017 payment or charge; provide for a simplified true-up process; 
require that the 2016 estimate be based on actual 2014 and 2015 
amounts; or provide for no true-up in the final year.
    Comment: One commenter supported our proposal. Several commenters 
opposed our proposal, noting that any improvement in the accuracy of 
risk corridor payments to issuers under the proposal would be 
outweighed by the administrative burden on issuers, and minimized by 
the operational mechanics of the risk corridor program and the 
potential for continued shortfall in the program. However, most of 
these commenters were primarily concerned with our proposal to require 
claims valuation at June 30 rather than March 31, and not with the 
proposal to true-up claims estimates. Other commenters opposed only the 
true-up of 2016 unpaid claims estimates, and additionally expressed 
concern that 2014 and 2015 claims experience may not accurately reflect 
2016 experience.
    Response: We acknowledge commenters' concern regarding the 
potential lack of practical advantages of requiring claims valuation at 
June 30 rather than March 31 and requiring a true-up of 2016 unpaid 
claims estimates. However, we continue to believe that a true-up of 
2014 and 2015 unpaid claims estimates is important to preserve the 
integrity of the risk corridors program. Therefore, we are finalizing 
the amendment adding Sec.  153.530(b)(2)(iv) as proposed with respect 
to the true-up of 2014 and 2015 experience in the reporting for the 
2015 and 2016 benefit years. We will address the true-up of 2016 
experience after we have evaluated the results of the true-up of 2014 
experience.
5. Distributed Data Collection for the HHS-Operated Programs
a. Interim Dedicated Distributed Data Environment Reports (Sec.  
153.710(d))
    In the proposed rule, we proposed deleting Sec.  153.710(d), which 
sets forth an interim discrepancy reporting process by which an issuer 
must notify HHS of any discrepancy it identifies between the data to 
which the issuer has provided access to HHS through its dedicated 
distributed data environment (that is, an issuer's EDGE server) and the 
interim dedicated distributed data environment report (that is, an 
issuer's interim EDGE report), or confirm to HHS that the information 
in the interim report accurately reflects the data to which the issuer 
has provided access to HHS through its dedicated distributed data 
environment in accordance with Sec.  153.700(a) for the timeframe 
specified in the report. We proposed that this change would be 
effective beginning with the 2016 benefit year.\13\
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    \13\ For the 2015 benefit year, issuers are not required to 
confirm that the information in the interim report accurately 
reflects the reinsurance and risk adjustment data to which the 
issuer has provided access through its EDGE server; or describe any 
discrepancy an issuer identifies in the interim report. See FAQ 
14247 (Dec. 15, 2015), available at www.regtap.info.
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    We received numerous comments in support of this proposal, and are 
finalizing this provision as proposed. We also finalize our proposal to 
remove any cross-references in Sec. Sec.  153.710 and 156.1220 to the 
interim discrepancy reporting process currently codified at Sec.  
153.710(d) and conforming amendments to redesignate paragraph (e) as 
paragraph (d), as well as to revise and redesignate paragraph (f) as 
(e).
    Comment: Some commenters asked that HHS confirm that there will 
continue to be a robust process to allow issuers to identify and 
resolve potential discrepancies throughout the data submission process.
    Response: HHS is committed to working with issuers prior to the 
data submission deadline to address any data issues so that reinsurance 
payment and risk adjustment transfer calculations can be made 
accurately and timely. Throughout the data collection period, HHS will 
continue to maintain a help desk, host user group calls and webinars, 
and make reports available to issuers on their respective EDGE servers 
to assist issuers with the identification and resolution of data 
submission errors and to provide technical assistance.
    Comment: One commenter asked that HHS allow issuers 30 days to 
respond to the final dedicated distributed data environment report with 
any discrepancies, rather than the 15-calendar-day timeframe set forth 
in Sec.  153.710(e) (now finalized as Sec.  153.710(d)).
    Response: HHS will continue to require issuers to respond within 15 
calendar days to the final dedicated distributed data environment 
report. As we explained in the 2015 Payment Notice final rule (79 FR 
13790), the 15-calendar day reporting timeframe for the final dedicated 
distributed data environment report is necessary so that HHS can notify 
issuers of their risk adjustment payment or charge and total estimated 
reinsurance payments by June 30 of the year following the applicable 
benefit year, as required under Sec. Sec.  153.310(e) and 
153.240(b)(1)(ii).
    Comment: One commenter asked HHS to release guidance on the 2015 
discrepancy reporting process in early January.
    Response: HHS intends to issue future guidance on the final 
discrepancy reporting process set forth in Sec.  153.710(e) (now 
finalized as Sec.  153.710(d)) prior to the final discrepancy reporting 
window.
b. Risk Adjustment Interim Reports
    We did not propose any provisions related to risk adjustment 
interim reports in the Payment Notice. However, we received a number of 
comments related to the schedule of risk adjustment reports and the 
availability of additional information prior to the final summary 
report on June 30 of the year following the applicable benefit year.
    Comment: Several commenters requested that HHS issue the summary 
report earlier than June 30. Commenters also requested interim or 
quarterly reports so that issuers could incorporate improved estimates 
into rate setting. Commenters suggested HHS provide interim reports 
with issuers' calculated risk scores, market-wide risk scores, and the 
other components of the payment transfer formula, including the 
Statewide average premium. Commenters also recommended that HHS 
disclose any issues with the completeness of data in the report so that 
issuers can take this into account when reviewing results. Commenters 
further suggested that HHS may want to consider publishing additional 
details such as the issuer's market share, market average distribution 
by metal plan, market allowable rating factor, and market proportion of 
claims with HCCs.

[[Page 12234]]

    Response: We issued an FAQ on January 8, 2016 \14\ stating that we 
will release an interim public summary report in March 2016 for those 
States and risk pools where the risk adjustment data that has been 
submitted by February 1, 2016 meets HHS's data sufficiency thresholds. 
The interim summary report will include the following transfer formula 
elements by State and risk pool: (1) Average monthly premiums; (2) 
average plan liability risk score; (3) average allowable rating factor; 
(4) average actuarial value; (5) billable member months; and (6) 
geographic cost factors. We will also provide issuers with an interim 
report that contains their own issuer-specific information and that 
will not be released publicly. We are providing this information 
because issuers have indicated that, taken in concert with other data 
available to them, it may help them formulate more accurate estimates 
of their risk adjustment transfers. However, we continue to caution 
that data provided in these interim reports will be preliminary, do not 
represent any determination by HHS regarding the credibility of the 
data submitted, and that final risk adjustment results may be 
substantially different.
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    \14\ See FAQ 14572, (Jan. 8, 2016), available at https://www.regtap.info/.
---------------------------------------------------------------------------

c. Evaluation of Quality and Quantity of EDGE Data Submissions (Sec.  
153.710(f))
    Under Sec.  153.740(b), if an issuer of a risk adjustment covered 
plan fails to provide HHS with access to the required data in a 
dedicated distributed data environment such that HHS cannot apply the 
applicable Federally certified risk adjustment methodology to calculate 
the risk adjustment payment transfer amount for the risk adjustment 
covered plan in a timely fashion, HHS will assess a default risk 
adjustment charge. Similarly, under Sec. Sec.  153.420 and 153.740(a), 
an issuer of a reinsurance-eligible plan will forfeit reinsurance 
payments it otherwise might have received if the issuer fails to 
establish a dedicated distributed data environment or fails to meet the 
data requirements set forth in Sec. Sec.  153.420 and 153.700 through 
153.730. On April 24, 2015, HHS released guidance entitled ``Evaluation 
of EDGE Data Submissions'' describing the approach it would use to 
evaluate whether the quality and quantity of the data that an issuer 
provided to a dedicated distributed data environment was sufficient for 
HHS to calculate reinsurance payments and apply the HHS risk adjustment 
methodology for the 2014 benefit year.\15\ In the proposed rule, we 
proposed to codify this practice for future benefit years to support 
the integrity of payments and charges under the HHS-operated risk 
adjustment program and payments under the reinsurance program, both of 
which depend upon the submission of accurate and complete by issuers.
---------------------------------------------------------------------------

    \15\ EDGE Server Data Bulletin--INFORMATION; Evaluation of EDGE 
Data Submissions (Apr. 24, 2015), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-guidance-42415-final.pdf.
---------------------------------------------------------------------------

    Consistent with the approach for review of 2014 benefit year data, 
to determine if an issuer meets data quantity standards, we proposed 
that HHS would compare an issuer's self-reported baseline data of total 
enrollment and claims counts by market to the data submitted to the 
issuer's dedicated distributed data environment. An issuer whose total 
enrollment counts were lower than its baseline data submission by the 
deadline for submitting data to the dedicated distributed data 
environment would be subject to a default risk adjustment charge under 
Sec.  153.740(b). An issuer whose total claims counts were lower than 
its baseline data submission by the deadline for submitting data to the 
dedicated distributed data environment would be subject to a default 
risk adjustment charge only if the default charge was lower than the 
charge it would have received through the risk adjustment transfer 
calculation. Additionally, an issuer with either a low enrollment count 
or a low claims count following the final data submission deadline 
would forgo reinsurance payments for any claims that it failed to 
submit. In the proposed rule, HHS stated that it would set forth in 
guidance, on an annual basis, the appropriate threshold by which HHS 
will deem data sufficient as to quantity for a given benefit year.\16\ 
We also stated that HHS would also specify in guidance the format and 
timeline for submission of baseline data to HHS.\17\
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    \16\ For information on the data quantity thresholds that will 
be used to evaluate issuer's EDGE server data for the 2015 benefit 
year related to the release of interim reinsurance payments and 
interim risk adjustment summary reports, see EDGE Server Data 
Bulletin--INFORMATION; Evaluation of EDGE Data Submissions for 2015 
Benefit Year for Interim Reinsurance Payment and Interim Risk 
Adjustment Summary Report (Jan. 20, 2016), available at  https://www.regtap.info/uploads/library/EDGEServer_DataBulletin_5CR_012016.pdf. Guidance on the on-going and 
final quantity evaluation processes will be released in the near 
future.
    \17\ Ibid.
---------------------------------------------------------------------------

    To determine if an issuer meets the data quality standards required 
for HHS to calculate reinsurance payments and apply the HHS risk 
adjustment methodology, HHS proposed to perform an outlier analysis 
using select metrics that target reinsurance data quality and risk 
adjustment data quality.\18\ As with our data quantity metrics, HHS 
plans to describe in guidance, on an annual basis, the metrics used for 
a given benefit year.\19\ An issuer may be assessed a risk adjustment 
default charge if it does not meet data quality standards on any of the 
risk adjustment metrics, and may forfeit reinsurance payments it might 
otherwise have received if it does not meet data quality standards for 
any of the reinsurance metrics.
---------------------------------------------------------------------------

    \18\ For the 2014 benefit year, HHS used the following five key 
metrics: Percentage of all enrollees with at least one HCC; average 
number of conditions per enrollee with at least one HCC; issuer 
average risk score; percentage of individual market enrollees with 
reinsurance payments; and average reinsurance payment per enrollee 
for which the issuer would receive reinsurance payments.
    \19\ For information on the data quality thresholds that will be 
used to evaluate issuer's EDGE server data for the 2015 benefit year 
related to the release of interim reinsurance payments and interim 
risk adjustment summary reports, see EDGE Server Data Bulletin--
INFORMATION; Evaluation of EDGE Data Submissions for 2015 Benefit 
Year for Interim Reinsurance Payment and Interim Risk Adjustment 
Summary Report (Jan. 20, 2016), available at  https://www.regtap.info/uploads/library/EDGEServer_DataBulletin_5CR_012016.pdf. Guidance on the on-going and 
final quantity evaluation processes will be released in the near 
future.
---------------------------------------------------------------------------

    HHS would conduct these data quantity and quality analyses after 
the deadline for submission of data specified in Sec.  153.730 (that 
is, April 30, of the year following the applicable benefit year).\20\ 
We proposed to add a new paragraph (f) to Sec.  153.710 to specify that 
HHS will assess default risk adjustment charges based on these analyses 
no later than the date of the notification provided by HHS under Sec.  
153.310(e) (that is, June 30 of the year following the applicable 
benefit year); and to describe the responsibilities of issuers in 
relation to the quantity and quality analyses. In Sec.  153.710(f)(1), 
we proposed to codify the requirement for issuers to provide baseline 
data on their total enrollment and claims counts by market, in a format 
and on a timeline specified by HHS in guidance. In Sec.  153.710(f)(2), 
we proposed that if HHS identifies a data outlier that would cause the 
data that a risk adjustment covered plan or a reinsurance-eligible plan 
made available through a dedicated distributed data environment to fail 
HHS's quality thresholds, the issuer may, within 10 calendar days of 
receiving notification of the outlier,

[[Page 12235]]

submit a justification of the outlier for HHS to consider in 
determining whether the issuer met the reinsurance and risk adjustment 
data requirements.
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    \20\ For the 2015 benefit year, the data submission deadline is 
Monday, May 2, 2016 because April 30, 2016 is a Sunday. See FAQ 
14472, (Dec. 21, 2015), available at https://www.regtap.info.
---------------------------------------------------------------------------

    We indicated that HHS expects to perform informal data quantity and 
quality analyses throughout the data submission process, providing 
issuers with time to address any outlier before the data submission 
deadline. Issuers may provide justifications of data outliers, updates 
to their respective EDGE server data, and corrected baseline enrollment 
or claims counts at any time during the data submission process, and 
are encouraged to do so as early as possible. The timeframe we proposed 
in Sec.  153.710(f)(2) would apply to the final data quantity and 
quality analyses only, which are performed following the deadline for 
submission of data specified in Sec.  153.730 (that is, April 30, of 
the year following the applicable benefit year).
    We are finalizing these provisions as proposed, with two 
modifications. In Sec.  153.710(f), we are removing the proposed 
language that set forth a time limitation for HHS to assess a default 
risk adjustment charge based on the data quantity and quality analyses 
because the administrative appeals process set forth in Sec.  156.1220 
could result in imposition of a default risk adjustment charge. For 
example, if we determine during the administrative appeals process that 
a data submission error was of such magnitude that the issuer did not 
meet the data quantity and quality thresholds set forth for that 
benefit year, then we may assess a default risk adjustment charge if 
that charge is lower than the charge the issuer is being assessed for 
that benefit year. We also changed the heading for Sec.  153.710(f) 
from ``Data Sufficiency'' to ``Evaluation of Dedicated Distributed 
Data.''
    Comment: Numerous commenters asked that HHS extend the 10-day 
deadline to submit an explanation of the outlier to HHS. Several 
commenters asked that HHS provide issuers 15 days or 30 days to 
respond. One commenter agreed with the 10-day deadline.
    Response: The 10-day deadline only applies when HHS conducts the 
final quality and quantity analyses of the data submitted to an 
issuer's dedicated distributed data environment, which are performed 
following the deadline for submission of data specified in Sec.  
153.730 (that is, April 30 of the year following the applicable benefit 
year). As noted above, HHS will continuously analyze the quantity and 
quality of an issuer's data, providing reports and notices to issuers 
and allowing time to correct any outliers during the data submission 
window. The 10-day deadline is necessary because HHS must review an 
issuer's outlier justification to calculate reinsurance payments and 
apply the HHS risk adjustment methodology by the June 30 notification.
    Comment: Some commenters asked that the data quantity and quality 
analysis prior to the data submission deadline for an applicable 
benefit year be robust and that HHS quickly respond to issuers to allow 
them to identify and resolve issues during the data submission process.
    Response: HHS will perform informal data quantity and quality 
analyses throughout the data submission process, providing issuers with 
reports and notices to allow time to address any outliers before the 
data submission deadline. HHS encourages issuers to work with HHS any 
time an issue or problem is encountered. Issuers may provide 
justifications, update their EDGE server data, and correct baseline 
enrollment or claims counts at any time during the data submission 
process, and are encouraged to do so as early as possible.
    Comment: One commenter recommended that HHS provide full 
transparency into the evaluation process, including with respect to how 
HHS intends to apply its measurements for baseline data and quality. 
Another commenter asked that HHS publish the timeframes for the data 
quantity and quality analysis in the annual Letter to Issuers.
    Response: HHS strives to be transparent with respect to these 
processes, and will issue guidance regarding the data quantity and 
quality process and timeframes. See https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html or http://www.regtap.info/.
    Comment: One commenter urged HHS to publish the timeline and format 
for submission of baseline data as soon as possible prior to the 
applicable benefit year.
    Response: HHS will continue to publish timeframe and guidance 
materials related to the baseline submission process as soon as 
practicable. HHS has already released guidance regarding the submission 
of baseline data for the 2015 benefit year.\21\
---------------------------------------------------------------------------

    \21\ 2015 EDGE Server Status and Baseline Reporting (Oct, 20, 
2015), available at https://www.regtap.info/reg_library.php?libfilter_topic=3.
---------------------------------------------------------------------------

    Comment: One commenter requested that HHS establish an appeals 
process for issuers whose data is determined to fail the data quantity 
and quality standards.
    Response: As we stated in the proposed rule in the preamble section 
to Sec.  156.1220, an issuer may file a request for reconsideration if 
it believes that HHS made a processing error, incorrectly applied its 
methodology, or made a mathematical error related to the data quantity 
and quality standards. For example, an issuer may file a request for 
reconsideration to challenge the assessment of a default risk 
adjustment charge if the issuer believes the default charge was 
assessed because HHS incorrectly applied its methodology regarding data 
quantity and quality standards. We note that, under Sec.  
156.1220(a)(4)(ii), a reconsideration with respect to a processing 
error by HHS, HHS's incorrect application of the relevant methodology, 
or HHS's mathematical error may be requested only if, to the extent the 
issue could have been previously identified by the issuer to HHS under 
Sec.  153.710(d)(2), it was identified and remains unresolved.
d. Data Requirements (Sec.  153.710(g))
    We proposed revising Sec.  153.710(g)(1)(iii) to require an issuer 
to report the amount of cost-sharing reductions calculated under Sec.  
156.430(c) in its annual MLR and risk corridors report, regardless of 
whether the issuer had any unresolved discrepancy under Sec.  156.1210, 
or whether the issuer had submitted a request for reconsideration under 
Sec.  156.1220(a)(1)(v). Additionally, consistent with the process 
outlined in Sec.  153.710(g)(2), we proposed to require an issuer to 
adjust the cost-sharing reduction amount it reports on its 2015 risk 
corridors and MLR forms by the difference (if any) between the reported 
cost-sharing reduction amount used to adjust allowable costs and 
incurred claims on the 2014 MLR Annual Reporting Form and the amount of 
cost-sharing reductions as calculated under Sec.  156.430(c) for the 
2014 benefit year.
    Consistent with the approach currently outlined in Sec.  
153.710(g)(2), we proposed to amend this paragraph to require an issuer 
to report any adjustment made or approved by HHS for any risk 
adjustment payment or charge, reinsurance payment, cost-sharing 
reduction payment to reflect actual cost-sharing reduction amounts 
received, or risk corridors payment or charge, where the adjustment has 
not been accounted for in a prior MLR and Risk Corridors Annual 
Reporting Form in the next following year. For example, if an issuer's 
risk adjustment charges or payments are adjusted as a result of the 
administrative appeals process, the issuer should adjust these reported 
amounts in the next MLR and risk corridors reporting cycle, after the

[[Page 12236]]

appeal has been resolved. Similarly, if HHS makes changes to an 
issuer's risk adjustment charges or payments after the risk corridors 
and MLR reporting cycle has closed for the applicable reporting year, 
the issuer should adjust these reported amounts in the next MLR and 
risk corridors reporting cycle to account for the difference between 
the reported amounts and the amounts actually received or paid for the 
previous benefit year. However, if an issuer is notified about the 
modification during an open MLR and risk corridors submission period, 
it must report the modified amounts in that open reporting cycle.
    We also proposed to clarify in Sec.  153.710(g)(1)(iii) that cost-
sharing reduction amounts to be reported under this section must 
exclude amounts reimbursed to providers of services or items. This 
clarifying language is consistent with how the instructions for cost-
sharing reductions amounts are reported under Sec. Sec.  
153.530(b)(2)(iii) (risk corridors data requirements) and 
158.140(b)(iii) (MLR data requirements).
    We also proposed to revise paragraph (g)(1)(iv) to require that for 
medical loss ratio reporting only, issuers should report the risk 
corridors payment to be made or charge assessed by HHS, as reflected 
under Sec.  153.510. Lastly, HHS learned in the first year of 
implementation of the premium stabilization and Exchange financial 
assistance programs that some flexibility is needed when reporting 
these program amounts for purposes of risk corridors and MLR reporting. 
As such, we proposed in Sec.  153.710(g)(3) that HHS have the ability 
to modify the reporting instructions set forth in Sec.  153.710(g)(1) 
and (2) through guidance. Our intent in issuing any such guidance would 
be to avoid having the application of the reporting instructions lead 
to unfair or misleading financial reporting in exceptional 
circumstances.
    Based on comments received, we are finalizing these provisions as 
proposed, with one modification. We are modifying Sec.  153.710(g)(2) 
to specify that an issuer must report any adjustment made or approved 
by HHS by August 15, or the next applicable business day, of the 
reporting year for any risk adjustment payment or charge, including an 
assessment of risk adjustment user fees; any reinsurance payment; any 
cost-sharing reduction payment or charge; or any risk corridors payment 
or charge, in the current MLR and risk corridors reporting year, unless 
the adjustment meets the criteria for a ``de minimis'' change outlined 
in prior guidance.\22\ HHS will also finalize as proposed the 
conforming amendments to the introductory language at Sec.  
153.710(g)(1) to remove the cross-references to the interim discrepancy 
reporting process currently codified at Sec.  153.710(d). See III.D.5.a 
of this preamble for a discussion of the conforming amendments related 
to the removal of interim discrepancy reporting process.
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    \22\ Risk Corridors and Medical Loss Ratio (MLR) Resubmissions 
for the 2014 Benefit Year, (Aug. 14, 2015), available at https://www.regtap.info/uploads/library/RC_MLR_ResubmissionFAQ_5CR_081415.pdf.
---------------------------------------------------------------------------

    Comment: One commenter agreed with the proposal to require an 
issuer to report any adjustment made or approved by HHS for any risk 
adjustment payment or charge, reinsurance payment, cost-sharing 
reduction payment to reflect actual cost-sharing reduction amounts 
received, or risk corridors payment or charge, where the adjustment has 
not been accounted for in a prior MLR and Risk Corridors Annual 
Reporting Form, in the following year, but further recommended that we 
establish a cut-off date for notifications of adjustments of June 30, 
after which adjustments must be reported in the following year's MLR 
and risk corridors reporting cycle. The commenter suggested that 
notifications by June 30 would give issuers sufficient time to 
incorporate data changes into their MLR and risk corridors submissions 
by the July 31 reporting deadline.
    Response: We recognize that, in some cases, the timing of 
notifications of changes to data such as risk adjustment charges or 
payments may affect an issuer's MLR and risk corridors submission. 
Issuers must adhere to the July 31 regulatory deadline for submitting 
MLR and risk corridors data for the preceding benefit year. In order to 
accommodate potential adjustments to reinsurance payments, risk 
adjustment payments or charges, or payments or charges resulting from 
the cost-sharing reduction reconciliation process, in the period 
immediately after the issuance of the June 30 report while also 
maintaining the accuracy of issuers' MLR and risk corridors 
submissions, we are modifying Sec.  153.710(g)(2) to specify that if 
HHS notifies an issuer about an adjustment by August 15, the issuer 
must report the adjustment in the current year reporting cycle, unless 
the adjustment meets the criteria for a ``de minimis'' change outlined 
in prior guidance.\23\ We note that we expect only a small number of 
issuers to be required to resubmit data due to such an adjustment, and 
that all issuers should prepare to disburse rebates by the September 30 
deadline. For those issuers who may be notified an adjustment that does 
not meet the ``de minimis'' criteria by August 15, HHS will work with 
the issuer to facilitate resubmission of its MLR and risk corridors 
submissions and to address the impact on MLR rebates, if necessary, in 
a manner that limits additional operational burden for the issuer.
---------------------------------------------------------------------------

    \23\ https://www.regtap.info/uploads/library/RC_MLR_ResubmissionFAQ_5CR_081415.pdf.
---------------------------------------------------------------------------

    Comment: One commenter asked that HHS not finalize Sec.  
153.710(g)(1)(iii), stating this change would limit the ability of 
issuers with alternative payment models to receive cost-sharing 
reduction amounts for capitated payment arrangements.
    Response: The language under Sec.  153.710(g)(1)(iii) does not 
limit the ability of issuers with alternative payment arrangements to 
receive cost-sharing reduction payments, and is consistent with other 
cost-sharing reduction reporting requirements, for example, allowable 
costs under Sec.  153.530(b)(2)(iii) (risk corridors data requirements) 
must be reduced by the amount of cost-sharing reduction payments 
received by the issuer, except for, or excluding, any part of those 
payments used by the issuer to reimburse providers.
e. Good Faith Safe Harbor
    In the second Program Integrity Rule, we finalized Sec.  
153.740(a), which permits HHS to impose civil money penalties upon 
issuers of risk adjustment covered plans and reinsurance-eligible plans 
for failure to adhere to certain standards relating to their dedicated 
distributed data environments. In the proposed rule, consistent with 
our previous statements in the 2016 Payment Notice (80 FR 10780), we 
stated that we would not be extending the good-faith safe harbor to 
2016. Starting in the 2016 calendar year and beyond, civil money 
penalties may be imposed if an issuer of a risk adjustment covered plan 
or reinsurance-eligible plan fails to establish a dedicated distributed 
data environment in a manner and timeframe specified by HHS; fails to 
provide HHS with access to the required data in such environment in 
accordance with Sec.  153.700(a) or otherwise fails to comply with the 
requirements of Sec. Sec.  153.700 through 153.730; fails to adhere to 
the reinsurance data submission requirements set forth in Sec.  
153.420; or fails to adhere to the risk adjustment data submission and 
data storage requirements set forth in Sec. Sec.  153.610 through 
153.630, even if the issuer has made good faith efforts to comply with

[[Page 12237]]

these requirements. This safe harbor provision parallels a similar safe 
harbor for QHP issuers in FFEs under Sec.  156.800 that also expired at 
the end of the 2015 calendar year. See III.G.7 of this preamble for the 
accompanying discussion of the safe harbor provision under Sec.  
156.800. However, we are clarifying that HHS will not impose civil 
money penalties under Sec.  153.740(a) in 2016 or later based on 
activities that occurred in the 2014 or 2015 calendar year if the 
issuer acted in good faith at that time.
    Comment: Several commenters asked HHS to extend the good faith safe 
harbor to 2016, while others supported our proposal. Some commenters 
asked that HHS allow a good faith safe harbor for all new processes, 
such as policy-based payments and reconciliation of advance payments of 
cost-sharing reductions.
    Response: HHS will not extend the good faith safe harbor to cover 
conduct in 2016 or later years (including with respect to activities 
that occur in the 2016 calendar year or later relating to data from 
earlier benefit years). We believe that the 2 calendar years that we 
provided under this policy were sufficient to permit issuers to 
transition into compliance with the applicable risk adjustment, 
reinsurance and distributed data collection requirements. Of course, in 
all our enforcement actions, we will continue to take into account all 
facts and circumstances, including the reasonable good faith action of 
issuers.
    Comment: A few commenters asked that HHS make clear that the good 
faith safe harbor continues to apply to conduct for benefit years prior 
to 2016 in perpetuity.
    Response: HHS will not impose civil money penalties in 2016 or 
later based on activities that occurred in the 2014 or 2015 calendar 
year if the issuer acted in good faith at that time.
f. Default Risk Adjustment Charge (Sec.  153.740(b))
    In the second Program Integrity Rule and the 2015 Payment Notice, 
HHS indicated that a default risk adjustment charge will be assessed if 
an issuer does not establish a dedicated distributed data environment 
or submits inadequate risk adjustment data. In the 2016 Payment Notice, 
we established how a default risk adjustment charge will be allocated 
among risk adjustment covered plans.
    As described in the second final Program Integrity Rule, the total 
risk adjustment default charge for a risk adjustment covered plan 
equals a PMPM amount multiplied by the plan's enrollment.

Tn = Cn * En

Where:

Tn = total default risk adjustment charge for a plan n;
Cn = the PMPM amount for plan n; and
En = the total enrollment (total billable member months) for plan n.

    In the second final Program Integrity Rule, we provided that En 
could be calculated using an enrollment count provided by the issuer, 
using enrollment data from the issuer's MLR and risk corridors filings 
for the applicable benefit year, or other reliable data sources.
    In the 2015 Payment Notice, we determined that we would calculate 
Cn--the PMPM amount for a plan--equal to the product of the statewide 
average premium (expressed as a PMPM amount) for a risk pool and the 
75th percentile plan risk transfer amount expressed as a percentage of 
the respective Statewide average PMPM premiums for the risk pool. The 
nationwide percentile would reflect only plans in States where HHS is 
operating the risk adjustment program and would be calculated based on 
the absolute value of plan risk transfer amounts. The PMPM amount 
determined using the method described here would be multiplied by the 
non-compliant plan's enrollment, as determined using the sources 
finalized in the second final Program Integrity Rule, to establish the 
plan's total default risk adjustment charge.
    For the second year of risk adjustment, the 2015 benefit year, we 
proposed to calculate Cn in the same manner, but increased to the 90th 
percentile plan risk transfer amount expressed as a percentage of the 
respective statewide average PMPM premiums for the risk pool. We 
believe that the 75th percentile was reasonable for the initial year of 
risk adjustment, as we did not yet know the distribution of risk 
adjustment transfers and issuers were more likely to experience 
technical difficulties in establishing a dedicated distributed data 
environment. In the second year of risk adjustment, now that issuers 
have set up EDGE servers and participated in the calculation of risk 
adjustment transfers, we believe that adjusting the default charge 
upwards to the 90th percentile of plan risk transfer amounts expressed 
as a percentage of the respective statewide average PMPM premiums for 
the risk pool will encourage continued compliance with risk adjustment 
data submission requirements. We are concerned that, absent this 
change, some issuers may prefer receiving a default charge at the 75th 
percentile over participating in the risk adjustment program; a default 
charge at this level might lack sufficient deterrent value. We stated 
that we believe the proposed 90th percentile default charge will 
incentivize issuers to participate in the risk adjustment program.
    Comment: Commenters generally supported the increased default risk 
adjustment charge for 2015 benefit year risk adjustment. Two commenters 
opposed the increase, stating the increase is overly punitive.
    Response: We believe that the increased default charge will 
encourage participation in the second year of implementation of the 
risk adjustment program. In establishing the amount of the default 
charge, we must balance setting a fair risk allocation and discouraging 
strategic behavior from issuers with low-risk enrollees against 
avoiding unduly penalizing issuers who fail to make proper submissions 
for operational, and not strategic, reasons. In the second year of risk 
adjustment, we believe that most issuers will encounter fewer 
operational difficulties in establishing an EDGE server and meeting 
data quantity and quality thresholds, and that the opportunity for 
strategic behavior is greater because risk transfer distributions will 
be better understood. We believe that raising the default risk 
adjustment charge from the 75th percentile PMPM transfer amount to the 
90th percentile transfer amount is a fair balancing of these goals. We 
are finalizing this policy as proposed
    For the 2016 benefit year, we proposed a separate calculation of Cn 
for issuers where En statewide, in the individual and small 
group markets combined, is 500 billable member months or fewer. For 
these issuers, we proposed to calculate Cn, or the PMPM charge for a 
plan, as 14 percent of premium, which we calculated as the mean charge 
as a percent of premium of issuers with 500 billable member months or 
fewer in the 2014 benefit year in the small group market. We based the 
charge itself on the experience of small group issuers in the 2014 
benefit year, as we believe that individual market issuers are more 
likely to set up an EDGE server because of the availability of 
reinsurance. Limiting the applicability in the 2016 benefit year of 
this default charge to issuers with 500 billable member months or fewer 
is intended to ensure that the only issuers with this option are 
issuers that are so small that their removal from the overall risk 
adjustment risk pool would have a minimal impact on transfers 
nationwide. In 2014, approximately 125 issuers would have had fewer 
than 500 member months in the individual and small group markets 
combined. Of those approximately 125 small issuers, 80

[[Page 12238]]

were assessed risk adjustment charges greater than the proposed default 
charge of 14 percent of premium PMPM. Those charges amounted to less 
than 0.09 percent (that is, less than one tenth of one percent) of 
total risk adjustment charges assessed nationally. Assuming every one 
of those issuers elect to accept the proposed 14 percent default risk 
charge, and none of the small issuers that received risk adjustment 
payments or with charges below 14 percent of premium PMPM did so (which 
we believe unlikely, due to the administrative expenses of setting up 
an EDGE server), the assessment of the proposed 14 percent of premium 
default charge on those 80 issuers would have resulted in a 0.05 
percent reduction in risk adjustment charges collected nationally. 
Because issuers of this size have a minimal impact on the overall risk 
adjustment risk pools and have a disproportionately high operational 
burden to comply with risk adjustment data submission requirements, we 
believe that a separate default charge for these issuers would promote 
efficiency and data quality in the risk adjustment program. We proposed 
to establish this risk adjustment default charge as the mean charge in 
the small group for these small issuers, or 14 percent of statewide 
average premium PMPM, to compensate on average for the absence of these 
immaterial amounts in the affected risk pools. We intend that this 
policy would apply only to the very smallest issuers, in recognition of 
the disproportionately high operational burden on these issuers.
    Comment: Commenters opposed the separate, lower default charge, 
stating that compliance with risk adjustment is a cost of doing 
business under the Affordable Care Act. One commenter stated that the 
500-member-months threshold is too small. One commenter recommended a 
graded approach to the default risk charge that would adjust the 
percentile factor from 50th to 75th for those issuers with 500 to 2,000 
billable members to allow an issuer more flexibility as they transition 
into participation on the EDGE server. One commenter recommended that 
the threshold should be 720,000 billable member months.
    Response: We agree that, in general, compliance with risk 
adjustment is a cost of doing business under the new market rules. 
However, as we explained in the proposed rule, we believe that an 
exception for the very smallest issuers recognizes that for those 
issuers the administrative costs of implementing an EDGE server will 
substantially outweigh the risk adjustment benefits to the risk pool. 
We are finalizing this policy as proposed.
g. Insolvent Issuers
    We are aware that a health insurance issuer may become insolvent or 
exit a market during a benefit year. In some cases, another entity, 
such as another issuer or liquidator may take over the issuer's 
operations, or a State guaranty fund may become responsible for paying 
claims for the insolvent issuer. In some instances when this occurs, 
both the insolvent issuer and the entity seeking to acquire business 
from the insolvent issuer would lack a full year of enrollee data to 
submit to the EDGE server for the risk adjustment or reinsurance 
programs.
    To address this concern, we proposed to clarify that an entity 
acquiring or entering into another arrangement with an issuer to serve 
the current enrollees under a plan, or a State guaranty fund that is 
responsible for paying claims on behalf of the insolvent issuer, with 
substantially the same coverage terms may accrue the previous months of 
claims experience for purposes of risk adjustment and reinsurance to 
fully reflect the enrollees' risk and claims costs. We proposed the 
``substantially the same'' standard because we understood that in many 
of these situations, an acquiring entity's platform may require some 
adjustments to the plan arrangements and coverage terms. As part of 
meeting this standard, an acquiring entity would be required to carry 
over of accumulators for deductibles and annual limitations on cost 
sharing. If the substantially the same standard is met, and the 
insolvent issuer and acquiring entity agree that the acquiring entity 
will accrue the previous months of claims experience, the acquiring 
entity must take responsibility for submitting to HHS complete and 
accurate claims and baseline information for that benefit year 
(including data from the insolvent issuer) in accordance with HHS's 
operational guidance to maintain eligibility to receive payments under 
this program for the given benefit year. Operationally, the acquiring 
entity may elect to have the insolvent issuer submit the data on behalf 
of both entities. We will work with issuers and other acquiring 
entities in these situations to facilitate the submission of the 
necessary data to EDGE servers for HHS to calculate risk adjustment 
financial transfers and reinsurance payments.
    We also recognized that guaranty funds may not meet all of the 
requirements to be considered a risk adjustment covered plan or 
reinsurance eligible plan (for example, they may not meet the 
definition of ``health insurance issuer''), and so we proposed to 
permit a guaranty fund to participate in those programs notwithstanding 
these definitions, to the extent it has taken over liability for a risk 
adjusted covered plan or reinsurance eligible plan during a benefit 
year.
    We sought comment on these policies, including with respect to 
permissible ways in which the acquiring entity's arrangements may 
differ and other ways of ensuring the submission of the data necessary 
for HHS to calculate the risk adjustment financial transfer amounts and 
the reinsurance payment amounts when another party will take over 
operations of the insolvent issuer, or pay claims on behalf of the 
insolvent issuer, during a benefit year. We also solicited comments on 
whether additional flexibility is needed with respect to the data 
submission requirements for the reinsurance and risk adjustment 
programs, such as with respect to the definition of a ``paid claim'' to 
account for situations when an issuer is unable to pay claims for 
covered services, for example, due to insolvency.
    We received a number of comments on these policies. Most commenters 
supported the general intent of the policies but requested additional 
information or clarification of certain aspects of them. We are 
finalizing this policy with certain clarifications, as detailed below.
    Comment: Two commenters requested that we clarify the term 
``substantially the same'' in this context, and one of these commenters 
questioned whether a guaranty fund that pays only a portion of the 
original covered benefits would meet this standard.
    Response: With respect to the acquisition of business from an 
insolvent issuer, an acquiring entity must, at a minimum, carry over 
accumulators for deductibles and annual limitations on cost sharing to 
meet the substantially the same standard. We note that this standard is 
unrelated to the standards under Sec.  153.500 for determining whether 
a health plan offered outside of the Exchange is the same as a QHP for 
the purposes of the risk corridors program. We will continue to monitor 
situations involving issuer insolvencies and intend to issue further 
guidance as necessary.
    Comment: Two commenters expressed concern about the opportunity for 
gaming by acquiring issuers if they have the option, but are not 
required to accrue and submit claims experience for the insolvent 
issuer, because they could select the

[[Page 12239]]

approach that would be most favorable to their risk adjustment 
calculation.
    Response: We appreciate the concern, but we believe that a single 
EDGE server submission better reflects the true economic risk of the 
enrollment in the plans of the insolvent issuer, and note that an 
acquiring entity taking over the insolvent issuer's business could 
structure the acquisition to provide for separate submissions. We will 
work with issuers and acquiring entities in these situations to 
facilitate the submission of accurate and complete data to EDGE servers 
that is necessary to calculate risk adjustment financial transfers and 
reinsurance payments.
    Comment: One commenter encouraged us to address situations 
involving a State guaranty fund or liquidator separately from those 
involving an acquiring issuer, given their differing roles and 
responsibilities. This commenter also requested that liquidators, in 
addition to guaranty funds, be given explicit ability to participate in 
the reinsurance and risk adjustment programs as they are often 
responsible for providing pre-liquidation coverage. Another commenter 
questioned whether a guaranty fund would be able to participate in risk 
adjustment under State law or operationally. A separate commenter 
proposed that the policies apply to providers in the same manner as 
guaranty associations, because the majority of issuers in its State are 
not subject to the guaranty association to pay claims; however, 
providers are required to hold consumers harmless if their insurance 
company becomes insolvent.
    Response: We clarify that this policy permits participation of a 
liquidator or a State guaranty fund in the risk adjustment and 
reinsurance programs, to the extent it has taken over liability for a 
risk adjustment covered plan or reinsurance eligible plan during a 
benefit year, unless otherwise prohibited by State law. We recognize 
that restrictions under State law, or operational limits, may apply. In 
the case where a guaranty fund assumes liability for a risk-adjustment 
covered plan or reinsurance eligible plan, the guaranty fund would 
submit data acting on behalf of the insolvent issuer; however, the 
insolvent issuer would retain responsibility for the coordination of 
the EDGE data submission. While we understand that policyholders in 
some States are not covered by guaranty funds, it is not clear how 
providers could coordinate the submission of an EDGE server because the 
responsibility to submit data to the EDGE server applies to the issuer 
and the EDGE server does not support the submission of individual 
claims from providers.
    Comment: One commenter recommended that, in the event that an 
issuer in a market in a State is unable to pay a risk adjustment charge 
in full, HHS adjust both risk adjustment payments and charges in that 
market and State, rather than only payments, to ensure that the 
shortfall is distributed proportionally among issuers in the risk pool.
    Response: We appreciate the recommendation and will consider 
proposing this approach in rulemaking for future benefit years.

E. Part 154--Health Insurance Issuer Rate Increases: Disclosure and 
Review Requirements

1. Disclosure and Review Provisions
a. Rate Increases Subject To Review (Sec.  154.200)
    In the proposed rule, we proposed amending paragraph (c)(2) of 
Sec.  154.200 to re-establish that a rate increase for single risk pool 
coverage effective on or after January 1, 2017, must be calculated as 
the premium-weighted average rate increase for all enrollees. The 
proposed change would reverse a previous amendment \24\ that defined a 
rate increase for single risk pool coverage effective on or after 
January 1, 2017 as an increase in the plan-adjusted index rate. We note 
that the previous amendment also established a plan level trigger for a 
product being subject to review for coverage effective on or after 
January 1, 2017. The proposed amendment maintained the plan level 
trigger for the subject-to-review threshold.
---------------------------------------------------------------------------

    \24\ 80 FR 10749, 10863 (Feb. 27, 2015).
---------------------------------------------------------------------------

    We proposed the amendment to the calculation method because an 
increase in the plan-adjusted index rate does not reflect changes to 
adjustment factors for rating area, age, or tobacco use. For example, 
an issuer could change geographic rating area factors such that members 
in a certain rating area receive a larger increase, but if the plan-
adjusted index rate did not meet or exceed the threshold then the rate 
increase would not be subject to rate review.
    We are finalizing this section as proposed, so that a rate increase 
for single risk pool coverage effective on or after January 1, 2017 is 
subject to review if the average increase, including premium rating 
factors described in Sec.  147.102, for all enrollees weighted by 
premium volume for any plan within the product meets or exceeds the 
applicable threshold. This amendment strengthens consumer protections 
against unreasonable rate increases by ensuring that coverage with a 
significant rate increase due to changes in rating factors is subject 
to review.
    We maintain that the plan level rate increase, as opposed to the 
product level rate increase, will determine whether the increase is 
subject to review. The plan level trigger was finalized in the 2016 
Payment Notice (80 FR 10781) effective for coverage beginning on or 
after January 1, 2017.
    Comment: Some commenters expressed concern regarding the inclusion 
of premium rating factors and requested HHS clarify how rate changes 
should be calculated according to the proposal.
    Response: All rating factors, including rating area and tobacco use 
factors, should be captured in the calculation of plan rate changes. 
The intent here, in the context of the rate review program, is to 
measure the premium change based on an issuer's current population 
compared to that same population if the new rates were implemented. 
This is not intended to capture demographic changes, such as a member 
aging up or moving to a new geographic location.
b. Submission of Rate Filing Justification (Sec.  154.215)
    In the proposed rule, we proposed to revise Sec.  154.215(a)(1) to 
require health insurance issuers to submit the Unified Rate Review 
Template (also known as Part I of the Rate Filing Justification) for 
all single risk pool coverage in the individual or small group (or 
merged) market, regardless of whether any plan within a product is 
subject to a rate increase. This proposal was made to carry out the 
Secretary's responsibility, in conjunction with the States, under 
section 2794(b)(2)(A) of the PHS Act to monitor premium increases of 
health insurance coverage offered through as well as outside of an 
Exchange. We also expressed our intent to disclose information that is 
not a trade secret or confidential commercial or financial information 
for all proposed rate increases for single risk pool coverage, rather 
than only proposed rate increases subject to review, as well as all 
final rate increases.
    We proposed to revise paragraph (a) to insert paragraph (a)(1) to 
establish that health insurance issuers must submit the Unified Rate 
Review Template (``URRT,'' also known as Part I of the Rate Filing 
Justification) for all single risk pool products in the individual or 
small group (or merged) market, regardless of whether any plan within a 
product is subject to a rate

[[Page 12240]]

increase. We also proposed to insert paragraph (a)(2) to capture the 
existing requirement that issuers must submit a URRT and an Actuarial 
Memorandum (also known as Parts I and III of the Rate Filing 
Justification) when a single risk pool product has a plan that is 
subject to a rate increase of any size. Similarly, we proposed to 
insert paragraph (a)(3) to capture the existing requirement that an 
issuer must provide that all three parts of the Rate Filing 
Justification (that is, the Part I URRT, the Part II written 
description justifying a rate increase, and the Part III Actuarial 
Memorandum) when a single risk pool product has a plan with a rate 
increase that is subject to review. Accordingly, we proposed to revise 
paragraph (b) to provide that a Rate Filing Justification for single 
risk pool plans must include one or more of the three parts, as 
appropriate, but not necessarily all three. We also proposed to remove 
and reserve paragraph (c), as it was unnecessary in light of the 
proposed amendments to paragraphs (a) and (b). We are finalizing all of 
the amendments to this regulation as proposed.
    Comment: A majority of commenters supported the proposal and 
several recommended that all proposed rate changes should be made 
public, rather than just proposed rate increases. Some commenters, 
however, expressed concern regarding the proposal, citing the statutory 
obligation to review only unreasonable premium increases, rather than 
all increases. A few commenters stated that publicizing rate filings 
before they are finalized eliminates competitive advantages for plans.
    Response: We are finalizing the proposal to collect rate filings 
for all single risk pool products in order to carry out the Secretary's 
statutory responsibility \25\ to monitor premium increases of health 
insurance coverage. HHS will post information for all proposed rate 
filings for the individual and small group markets within a state at a 
uniform time to promote fair market competition between issuers through 
and outside of the Exchange and further enhance transparency of the 
rate-setting process. We note that States with an Effective Rate Review 
Program are required to post proposed rate increases subject to review 
and have a mechanism for receiving public comments on those proposed 
rate increases. CMS's decision to post information for all proposed 
rate filings for single risk pool coverage does not affect or change 
the State's obligation to post proposed rate increases under Sec.  
154.301(b).
---------------------------------------------------------------------------

    \25\ Section 2794(b)(2)(A) of the Public Health Service Act.
---------------------------------------------------------------------------

    Comment: Some commenters requested that HHS should make final rate 
information publicly available at least 15 days before open enrollment.
    Response: Final rate increase information must be posted at a 
uniform time for all single risk pool coverage (regardless of whether 
the coverage is sold on the Exchange) by the first day of open 
enrollment,\26\ but States may establish an earlier uniform posting 
timeframe with appropriate notice to CMS.\27\ We believe this timeframe 
strikes a balance between providing State and Federal regulators 
sufficient time to complete their reviews, while providing consumers 
the information needed to make informed purchasing decisions.
---------------------------------------------------------------------------

    \26\ Sec.  154.301(b)(1)(ii).
    \27\ Sec.  154.301(b)(2).
---------------------------------------------------------------------------

c. Timing of Providing the Rate Filing Justification (Sec.  154.220)
    In the proposed rule, we proposed technical changes to Sec.  
154.220 to remove references to rate increases and clarify that the 
timeframes listed pertain to all single risk pool products with or 
without rate changes to conform with the proposed amendments to Sec.  
154.215. We are finalizing the amendments to this regulation as 
proposed.
    Comment: Some commenters requested that HHS change the filing 
deadline to a time after the risk adjustment report is released to 
issuers. Other commenters suggested States establish their own rate 
filing submission deadlines rather than adhering to HHS filing 
deadlines.
    Response: We acknowledge the comments, and consistent with the 
approach outlined in guidance being released with this rule,\28\ we are 
providing States with an effective rate review program \29\ with 
additional flexibility with respect to the submission deadline for 
proposed rate filings for single risk pool products. Issuers in a State 
effective rate review program must submit proposed rate filings for 
single risk pool coverage (for both QHPs and non-QHPs) on a date set by 
the State, so long as the date is not later than July 15, 2016. We 
encourage States with effective rate review programs that are served by 
the HealthCare.gov platform to set a date that aligns with the 
Federally-facilitated Exchange QHP filing deadlines; \30\ however, we 
understand some States may face challenges in doing so. Issuers in 
States without effective rate review programs \31\ must submit proposed 
rate filings for single risk pool coverage (for both QHPs and non-QHPs) 
on a date set by the State, so long as the date is not later than May 
11, 2016. Further, we note that all States retain flexibility to 
establish an earlier submission date under Sec.  154.220(b).
---------------------------------------------------------------------------

    \28\ CMS Insurance Standards Bulletin: Timing of Submission and 
Posting of Rate Filing Justifications for the 2016 Filing Year for 
Single Risk Pool Coverage, (Feb. 29, 2016).
    \29\ See 45 CFR 154.301 for a list of criteria that CMS 
considers when evaluating whether a State has an effective rate 
review program
    \30\ Final 2017 Letter to Issuers in the Federally-facilitated 
Marketplaces (Feb. 29, 2016).
    \31\ For the 2017 plan year, health insurance issuers in 
Alabama, Missouri, Oklahoma, Texas, and Wyoming are required to 
submit rate filings for review by CMS to determine reasonableness.
---------------------------------------------------------------------------

d. Submission and Posting of Final Justifications for Unreasonable Rate 
Increases (Sec.  154.230)
    We proposed to fix a typographical error and change the cross 
reference in Sec.  154.230(c)(2)(i) to reference Sec.  154.215(h) 
rather than Sec.  154.215(i). There were no comments submitted 
regarding this section. We are finalizing the amendment as proposed.
e. CMS's Determinations of Effective Rate Review Programs (Sec.  
154.301)
    In the proposed rule, we restated that making rate information 
available to the public at a uniform time (rather than a rolling basis) 
is one of the criteria for determining whether a State has an Effective 
Rate Review program.\32\ We expressed our intent to propose a uniform 
timeline for release of proposed rate increases subject to review and 
for all final rate increases for single risk pool coverage. We are 
maintaining the requirement for releasing rate information at a uniform 
time rather than on a rolling basis. We released the proposed timeline 
for the 2016 Filing Year on December 23, 2015.\33\ Public comments were 
accepted until January 22, 2016. We are releasing the final timeline in 
guidance \34\ with this final rule, as discussed above.
---------------------------------------------------------------------------

    \32\ Sec.  154.301(b).
    \33\ DRAFT Bulletin: Timing of Submission and Posting of Rate 
Filing Justifications for the 2016 Filing Year for Single Risk Pool 
Coverage1 Effective on or after January 1, 2017, (Dec. 23, 2015), 
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Timeline-Bulletin-12-23-15-FINAL.pdf.
    \34\ CMS Insurance Standards Bulletin: Timing of Submission and 
Posting of Rate Filing Justifications for the 2016 Filing Year for 
Single Risk Pool Coverage (Feb. 29, 2016).
---------------------------------------------------------------------------

    Comment: Many commenters expressed support for requiring States to 
post all rate increases at the same time. Some commenters opposed 
having a uniform posting timeline, requesting that States be able to 
establish the timeline for SBEs.

[[Page 12241]]

    Response: The requirement for a State with an Effective Rate Review 
program to post proposed rate increases that it reviews, and to have a 
mechanism for receiving public comments on those proposed rate 
increases, has been in effect for several years. The uniform timeline 
requires States to ensure that the proposed rate increases subject to 
review, as well as all final rate increases, are released to the public 
at the same time. This policy ensures that rate information is 
available simultaneously for coverage offered through and outside of 
the Exchange, which enhances transparency and promotes fair market 
competition. We note that the guidance being released with this final 
rule provides States with an effective rate review program with 
flexibility to set a date to post proposed rate filings for single risk 
pool products with rate increases subject to review, provided the date 
set by the State is no later than August 1, 2016. Nothing in this rule 
prevents States from making additional information available to the 
public, or prevents States from establishing earlier uniform timeframes 
for public disclosure.

F. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act

1. Definitions (Sec.  155.20)
    In Sec.  155.20, we proposed to amend the definition of 
``applicant'' for the small group market so that the term also includes 
an employer seeking eligibility to purchase coverage through a SHOP, 
without necessarily enrolling in that coverage themselves. The current 
definition of an applicant contemplates an employer, employee, or 
former employee seeking eligibility for enrollment in a QHP through the 
SHOP for himself or herself. For consistency with our existing 
regulations governing the SHOP application process at Sec. Sec.  
155.710 and 155.715 and for consistency with how the small group market 
typically works, we proposed that the term applicant also include an 
employer who is seeking eligibility to purchase coverage through a 
SHOP, but who is not seeking to enroll in that coverage for himself or 
herself. We received no comments on this proposal and are finalizing 
this amendment as proposed.
    We proposed to modify the definitions of ``small employer'' and 
``large employer'' at Sec.  155.20 to align with the Protecting 
Affordable Coverage for Employees Act, which was recently enacted, as 
further described in the preamble to Sec.  144.103. For a discussion of 
the provisions of this final rule related to the definitions of small 
employer and large employer in Sec.  155.20, please see the preamble to 
Sec.  144.103. We did not propose to change the applicability of the 
counting methodology under section 4980H(c)(2) of the Code to these 
definitions in Sec.  155.20, but we proposed amendments to these 
definitions that eliminate language about the timing of the 
applicability of the counting methodology under section 4980H(c)(2) of 
the Code under these definitions, because that language is no longer 
relevant. We did not receive any comments regarding this aspect of the 
proposal and are finalizing as proposed the elimination of the language 
about the timing of applicability of the counting methodology under 
section 4980H(c)(2) of the Code.
    We proposed to amend Sec.  155.20 to add a definition for ``Federal 
platform agreement'' to apply to this part. We defined a Federal 
platform agreement to mean an agreement entered into by a State 
Exchange and HHS, under which the State Exchange agrees to rely on the 
Federal platform to carry out select Exchange functions. We are 
finalizing the definition, with a slight modification to reflect the 
fact that the State election to implement the SBE-FP would occur 
through the Blueprint process in Sec.  155.106(c) rather than the 
Federal platform agreement, which will reflect the agreement between 
the parties and will be entered into at the end of the Blueprint 
process. The Federal platform agreement, which we will publish later 
this year, will also contain the parties' mutual obligations with 
respect to those Exchange functions and related matters.
    For a discussion of the provisions of this final rule regarding 
standardized options, please see the preamble to part 156, regarding 
standardized options.
2. General Standards Related to the Establishment of an Exchange
a. Election To Operate an Exchange After 2014 (Sec.  155.106)
    We proposed to modify the timeframes for submission and approval of 
documentation specifying how an Exchange established by a State or a 
regional Exchange meets the Exchange approval standards (that is, the 
Exchange Blueprint). Based on our experience over the last two open 
enrollment periods, we believe the current Exchange Blueprint 
application deadlines for States intending to operate a State Exchange 
do not sufficiently balance the need to provide States with time to 
adequately prepare their Blueprint applications against the need to 
ensure HHS has sufficient time to accurately assess a State's progress 
and ability to timely build the necessary Exchange information 
technology. In our experience, the process for seeking approval to 
operate a State Exchange involves substantial technical assistance and 
collaboration between HHS and the State in developing plans to 
transition from one Exchange operational model and information 
technology infrastructure to another, including key milestones, 
deadlines, and contingency measures. Since the completion of some of 
these key milestones and deadlines would need to occur prior to the 
submission of the Blueprint application, we proposed that we will make 
that technical assistance available and initiate the transition process 
following submission of a declaration letter from the State, as 
provided for in the Blueprint approval process. The declaration letter 
would serve as formal notification to HHS of a State's intent to 
operate a State Exchange, including operating an SBE-FP, and to submit 
a Blueprint (or Blueprint update) for HHS approval. The declaration 
letter would initiate coordination between the State and HHS on a 
transition plan. The declaration letter would also serve as a starting 
point for HHS to communicate the operational steps that a State must 
complete in order to become an SBE, as well as a starting point for HHS 
to assess a State's progress by the time of the State's Blueprint or 
Blueprint update submission. We would require a declaration letter 
approximately 21 months prior to the beginning of the SBE's first 
annual enrollment and approximately 9 months prior to the beginning of 
an SBE-FP's first annual open enrollment. HHS would assess later 
submissions on a case-by-case basis, recognizing operational realities 
and need for adequate notice for stakeholders, including issuers and 
consumers.
    In Sec.  155.106(a)(2), we proposed to require States that are 
establishing a State Exchange (not including a State Exchange using the 
Federal platform for certain functions) to submit an Exchange Blueprint 
at least 15 months prior to the date the Exchange proposes to begin 
open enrollment as a State Exchange. We also proposed in Sec.  
155.106(a)(3) to increase the time that the State must have in effect 
an approved or conditionally approved Exchange Blueprint from 6.5 
months to 14 months prior to the date the Exchange proposes to begin 
open enrollment as a State Exchange. We recognized that in some 
situations the open enrollment period may not have

[[Page 12242]]

been established when Blueprints are due. Therefore, we proposed in 
paragraph (a)(5), if the open enrollment period for the year the State 
intends to begin operating an SBE has not been established, a State 
should assume open enrollment will begin on the same date as open 
enrollment is to begin for the year in which they are submitting the 
Blueprint.
    We proposed to revise paragraph (b) to clarify that HHS will 
operate the Exchange if a State Exchange ceases operations.
    We proposed to add a paragraph (c) to establish requirements for a 
State that elects to operate an SBE-FP. These States must submit an 
Exchange Blueprint (or submit an update to an existing approved 
Exchange Blueprint) at least 3 months prior to the date open enrollment 
is to begin for the State as an SBE-FP; and must have in effect an 
approved, or conditionally approved, Exchange Blueprint and operational 
readiness assessment at least 2 months prior to the date on which the 
Exchange proposes to begin open enrollment as an SBE-FP. If the State 
Exchange has a conditionally approved Exchange Blueprint application, 
we proposed that it would not be required to submit a new Blueprint 
application, but instead must submit any significant changes to that 
application for HHS approval at least 3 months prior to the date on 
which the Exchange proposes to begin open enrollment as an SBE-FP. As 
part of HHS's approval or conditional approval of the Exchange 
Blueprint or amended Blueprint, these States must execute a Federal 
platform agreement and be required to coordinate with HHS on a 
transition plan.
    Lastly, we want to be clear that we only proposed changes to the 
timelines for submission of the Blueprint application. We did not 
otherwise propose any modifications to the information and documents 
that States must submit as part of the Exchange Blueprint application.
    We are finalizing our proposals as proposed, except that, in order 
to provide additional time for the transition, we are amending the 
timing of the Federal platform agreement, so that it must be executed 
prior to approval or conditional approval of the Exchange Blueprint.
    Comment: Several commenters expressed concern that the proposed 
Blueprint submission and approval timelines for a State transitioning 
to an SBE-FP do not allow sufficient time for a State and its issuers 
to make the necessary operational changes to prepare for the State's 
transition to the SBE-FP model, and for HHS to make an assessment of 
the State's progress. A commenter indicated that they would also like 
to see a timeline for when the Federal platform agreement must be fully 
executed. Finally, comments were received regarding the need for HHS to 
publish the operational steps involved in the transition to an SBE-FP, 
including the need for issuer outreach and flexibility in transition 
plans for individual States.
    Response: We are finalizing the regulations as proposed. We believe 
that the Blueprint timeline provides sufficient time for a State to 
become or transition to an SBE-FP because that transition will begin 
with the submission of the declaration letter. Part of the technical 
assistance provided upon submission of the declaration letter will be 
the communication of the operational steps that a State must complete 
in order to become an SBE-FP, including the operational steps States 
are required to take with their issuers. We plan to publish guidance on 
these operational steps.
b. Additional Required Benefits (Sec.  155.170)
    Section 1311(d)(3)(B) of the Affordable Care Act permits a State, 
at its option, to require QHPs to cover benefits in addition to the 
EHB, but requires a State to make payments, either to the individual 
enrollee or to the issuer on behalf of the enrollee, to defray the cost 
of these additional State-required benefits. In the 2016 Payment 
Notice, we instructed States to select a new EHB base-benchmark plan to 
take effect beginning for the 2017 plan year. The final EHB base-
benchmark plans selected as a result of this process have been made 
publicly available.\35\
---------------------------------------------------------------------------

    \35\ Available at https://downloads.cms.gov/cciio/FinalListofBMPs_15_10_21.pdf.
---------------------------------------------------------------------------

    Section 1311(d)(3)(B) of the Affordable Care Act refers to 
situations in which the State requires QHPs to cover benefits. That 
section is not specific to State statutes, and we have interpreted that 
section to apply not only in cases of legislative action but also in 
cases of State regulation, guidance, or other State action. Therefore, 
we proposed to reword Sec.  155.170(a)(2) to make clear that a benefit 
required by the State through action taking place on or before December 
31, 2011 is considered an EHB.
    In the EHB Rule (78 FR 12837 through 12838), we discussed Sec.  
155.170(a)(2), which implements section 1311(d)(3)(B) of the Affordable 
Care Act. In our discussion of that provision, we provided that State-
required benefits enacted on or before December 31, 2011 (even if not 
effective until a later date) may be considered EHB, which would 
obviate the requirement for the State to defray costs for these State-
required benefits. This policy continues to apply. Therefore, benefits 
required by a State through action taking place after December 31, 2011 
that directly apply to the QHPs are not considered EHB (unless 
enactment is directly attributable to State compliance with Federal 
requirements, as discussed below).
    Although benefits requirements enacted by States after December 31, 
2011 that directly apply to the QHP and that were not enacted for 
purposes of compliance with Federal requirements are not considered 
EHB,\36\ the base-benchmark plan might cover some of those non-EHB. 
Nonetheless, issuers must treat those benefits as they would other non-
EHB, such as those identified in Sec.  156.115(d),\37\ and the State 
must defray the cost. We proposed to codify this interpretation in 
Sec.  155.170(a)(2).
---------------------------------------------------------------------------

    \36\ The 2016 Payment Notice provides that States are not 
expected to defray the cost of State-required benefits enacted on or 
after January 1, 2012 that were required in order to comply with new 
Federal requirements. (80 FR 10749, 10813 (Feb. 27, 2015)).
    \37\ An issuer of a plan offering EHB may not include routine 
non-pediatric dental services, routine non-pediatric eye exam 
services, long-term/custodial nursing home care benefits, or non-
medically necessary orthodontia as EHB.
---------------------------------------------------------------------------

    At Sec.  155.170(a)(3), we currently require the Exchange to 
identify which additional State-required benefits, if any, are in 
excess of EHB. We proposed to amend paragraph (a)(3) to designate the 
State, rather than the Exchange, as the entity that identifies which 
State-required benefits are not EHB. We proposed this change because we 
believe insurance regulators are generally more familiar with State-
required benefits. We believe each State should determine the 
appropriate State entity best suited to identify newly required 
benefits. Additionally, for consistency of terminology, we proposed to 
amend paragraph (a)(3) to replace the reference to ``in excess of EHB'' 
with ``in addition to EHB.''
    In current Sec.  155.170(c)(2)(iii), we require QHP issuers to 
quantify the cost attributable to each additional State-required 
benefit and report their calculations to the Exchange. We proposed to 
designate the State as the entity that receives issuer calculations in 
paragraph (c)(2)(iii). Since the Affordable Care Act requires the State 
to remit a payment to an enrollee or issuer, we stated that we believe 
the calculation should be sent directly to the State rather than to the 
Exchange.

[[Page 12243]]

    The 2016 Payment Notice specified that a State may need to 
supplement habilitative services if the base-benchmark plan does not 
cover such services. We noted that if a State supplements the base-
benchmark plan, there is no requirement to defray the cost of the 
benefits added through supplementation, as long as the State must 
supplement the base-benchmark to comply with the Affordable Care Act or 
another Federal requirement. Examples of such Federal requirements 
include: Requirements to provide benefits and services in each of the 
10 categories of EHB; requirements to cover preventive services; 
requirements to comply with the Mental Health Parity and Addiction 
Equity Act; and the removal of discriminatory age limits from existing 
benefits.
    In some States, the base-benchmark plan may be a large group (non-
Medicaid HMO or State employee) plan. We stated that we have received 
questions regarding State-required benefits that are embedded in those 
large group base-benchmark plans. As stated earlier in this section, if 
the State-required benefit in question was required by State action 
after December 31, 2011, applies directly to the QHP, and was not 
enacted for purposes of compliance with Federal requirements, the 
benefit is not considered EHB, even if the benefit is embedded in the 
base-benchmark plan. However, we stated that a benefit required only in 
the large group market and reflected in a large group base-benchmark 
plan is not an EHB for QHPs offered in the individual or small group 
markets because such a benefit requirement does not apply directly to 
those plans, and to the extent it is included in the base-benchmark 
plan, it may be substituted for, in accordance with Sec.  156.115(b). 
Therefore, the State would not have to defray the cost of individual 
and small group market QHPs covering State-required benefits that are 
required in the large group market only. (However, to the extent the 
State permits large group plans to be sold as QHPs through the State's 
Exchange, the State would have to defray the cost of the large group 
QHPs covering the mandated benefit.) We noted that plans subject to the 
EHB requirements offered in the individual and small group markets in 
those States would have to be substantially equal to the base-benchmark 
plan, and therefore may cover the State-required benefit as EHB since 
it is embedded in the base-benchmark plan. In such a case, we proposed 
to clarify that the benefit is an EHB because it is covered by the 
base-benchmark plan, but the cost of coverage by individual and small 
group QHPs does not have to be defrayed, because the State-required 
benefit does not apply directly to those QHPs.
    We noted that some States have imposed new benefit requirements 
only on individual and small group plans that are not QHPs such that 
only individual and small group plans sold outside the Exchange must 
cover the State-required benefit. We noted that a QHP generally may be 
sold outside the Exchanges in which case it would be subject to these 
new benefit requirements. We cautioned States, however, that imposing 
different benefit mandates depending on a plan's status as a QHP or 
because it is sold through the Exchange may violate section 1252 of the 
Affordable Care Act. Under this section, State standards or 
requirements implementing, or related to, standards or requirements in 
title I of the Act must be applied uniformly within a given insurance 
market. Thus, if a State requires that non-QHPs in the individual or 
small group market provide any benefits, under section 1252, the State 
must require QHPs sold through the Exchange in that same market to 
provide those same benefits, and consistent with our earlier stated 
policy at Sec.  155.170(a)(2), States would generally be required to 
defray the cost of QHPs providing the required benefits if they were 
required through State action taking place after December 31, 2011.
    We noted that the Protecting Affordable Coverage for Employees Act, 
enacted in October 2015, amended the definitions of small employer and 
large employer in section 1304(b) of the Affordable Care Act and 
section 2791(e) of the PHS Act such that a small employer is generally 
\38\ an employer with 1-50 employees, with the option for States to 
expand the definition of small employer to 1-100 employees.\39\
---------------------------------------------------------------------------

    \38\ Prior to enactment of the Protecting Affordable Coverage 
for Employees Act, small employer was defined to mean, in connection 
with a group health plan with respect to a calendar year and a plan 
year, an employer who employed an average of at least 1 but not more 
than 100 employees on business days during the preceding calendar 
year and who employs at least 1 employee on the first day of the 
plan year. In case of plan years beginning before January 1, 2016, a 
State was able to elect to define small employer by substituting 
``50 employees'' for ``100 employees''. For ease of reference with 
regard to this section, we will refer to employers as having 1-50 or 
1-100 employees.
    \39\ States that elect to extend the small employer definition 
were requested to notify CMS of their election by October 30, 2015 
at [email protected].
---------------------------------------------------------------------------

    We noted that several States have enacted benefit requirements that 
would apply to small group insurance plans offered to employers with 
51-100 employees, but not to employers with 1-50 employees. This may 
arise because the State-required benefit was designed to apply only in 
the large group market when the large group market included employers 
with more than 50 employees, but the State has since then availed 
itself of the option to define a small employer as an employer with 1-
100 employees.
    We noted that section 2702 of the PHS Act and Sec.  147.104 
generally require an issuer to offer all approved products to any 
individual or employer in the market for which the product was approved 
and to accept any individual or employer that applies for any approved 
product in a given market. If a State elects to expand the definition 
of small employer so that it covers employers with 1-100 employees, all 
products approved for sale in the small group market (defined by the 
State as 1-100 employees) generally must be offered to employers with 
1-100 employees. This effectively means that existing State benefits 
mandates that apply to insurance coverage sold to employers with 51-100 
employees would then effectively also apply to all products sold to 
employers with 1-100 employees. As long as the benefit was required by 
State action taken on or before December 31, 2011, the expansion of 
coverage would not trigger the requirement to defray, because the 
expansion was required to comply with Federal guaranteed availability 
laws. If a State does not opt to expand the definition of small 
employer to 1-100 employees, then any State-required benefits 
applicable in the large group market (including to employers with 51-
100 employees) would continue to not apply in the small group market. 
If a State-required benefit was imposed by State action taking place 
January 1, 2012 or later, then defrayal generally would be required. We 
are finalizing our proposals and clarifications as proposed.
    Comment: Several commenters agreed that a benefit required by a 
State through action taking place on or before December 31, 2011 is 
considered an EHB. Multiple commenters supported the proposal that 
States and not the Exchange identify what is in addition to EHB.
    Response: We agree that a benefit required by action taking place 
on or before December 31, 2011 is considered EHB; this has been our 
policy since releasing the EHB Rule. We recognize that States 
regulators are generally more familiar with State-required benefits 
than an Exchange. We believe each State should determine the 
appropriate State entity best suited to identify newly

[[Page 12244]]

required benefits. Therefore, we are finalizing the rule as proposed.
    Comment: Numerous commenters questioned how States can supplement 
an EHB category without assuming the financial burden. Multiple 
commenters sought guidance on how to determine that a State 
requirement, particularly a habilitative services requirement, goes 
beyond EHB, and how to determine the additional cost attributed to each 
such additional required benefit.
    Response: The ten categories of EHB, and the process for 
supplementing base-benchmark plans to establish EHB-benchmark plans, 
are outlined in Sec.  156.110. In the 2016 Payment Notice (80 FR 10749, 
10813), we stated that benefit requirements enacted by States after 
December 31, 2011 that directly apply to QHPs, and that were not 
enacted for purposes of compliance with Federal requirements are not 
considered EHB. We also stated that if the base-benchmark plan does not 
include coverage for habilitative services, the State may define that 
benefit category. There is no requirement to defray the cost of the 
State-required benefits, as long as the State requirement is consistent 
with section 1302 of the Affordable Care Act and Sec.  156.110. We also 
note that Sec.  156.110(f) allows States to determine services included 
in the habilitative services and devices category if the base-benchmark 
plan does not include coverage; and that States are not expected to 
defray the cost of State-required benefits enacted after December 31, 
2011 that were required in order to comply with new Federal 
requirements. We are affirming that the State has the flexibility to 
define habilitative services; however, the State must use a reasonable 
interpretation as to what services are habilitative. Further, a State 
may also modify that definition in future years, as medical evidence 
and treatments evolve. We note that any State definition must comply 
with applicable nondiscrimination rules. This final rule requires the 
State to determine, based on these standards, when State requirements 
require issuers to provide benefits in addition to EHB.
    Section 155.170(c)(1) requires issuers to quantify the cost 
attributable to each additional State-required benefit. We are 
finalizing our proposal that QHP issuers must report their calculation 
to the State. Since the State is required by statute to remit a payment 
to an enrollee or issuer, we believe the calculation should be sent 
directly to the State rather than to the Exchange. The actual cost 
attributed can then be made public by the State, if it so chooses. 
Section 155.170(c)(2)(i) through (iii) states that QHP issuers' 
calculations must (1) be based on an analysis performed in accordance 
with generally accepted actuarial principles and methodologies; (2) 
conducted by a member of the American Academy of Actuaries; and (3) 
reported to the State.
    Comment: Some commenters disagreed with our interpretation that 
State-required benefits that apply only to individual and small group 
plans that are not QHPs may violate section 1252 of the Affordable Care 
Act.
    Response: Section 1252 of the Affordable Care Act provides that 
State requirements under Title I of the Affordable Care Act must be 
applied uniformly to all health plans in an insurance market. We 
reiterate that a requirement that depends upon a plan's status as a QHP 
or whether it is sold through the Exchange may violate section 1252 of 
the Affordable Care Act.
    Comment: Some commenters expressed concerns about discriminatory 
benefit design, and sought further guidance regarding what benefit 
designs could be deemed discriminatory.
    Response: Under Sec.  156.125(a), an issuer does not provide EHB if 
its benefit design, or the implementation of its benefit design, 
discriminates based on an individual's age, expected length of life, 
present or predicted disability, degree of medical dependency, quality 
of life, or other health conditions. Furthermore, plans may not 
establish annual dollar limits on individual items or services that are 
EHB. We will consider providing further guidance regarding 
discriminatory benefit design in the future.
3. General Functions of an Exchange
a. Functions of an Exchange (Sec.  155.200)
    We proposed a technical correction to Sec.  155.200(a) to include a 
reference to subpart M, which establishes oversight and program 
integrity standards for State Exchanges, and subpart O, which 
establishes quality reporting standards for Exchanges.
    We also proposed to amend Sec.  155.200 by adding a paragraph (f) 
to address SBE-FPs. This arrangement is intended to permit a State 
Exchange to leverage existing Federal assets and operations by relying 
on HHS services for performing certain Exchange functions, particularly 
eligibility and enrollment functions. The SBE-FP would also rely on HHS 
to perform certain consumer call center functions and casework 
processes, and maintain related information technology infrastructure. 
The SBE-FP would retain responsibility for plan management functions, 
including QHP certification functions, subject to certain rules 
requiring the SBE-FP to require its QHP issuers to comply with certain 
FFE standards governing QHPs and issuers (as proposed in Sec.  
155.200(f)(2) of this proposed rule), and consumer support functions, 
subject to FFE rules governing consumer assistance functions.
    Under Sec.  155.200(f)(1), we proposed that a State may receive 
approval or conditional approval to operate an SBE-FP through the 
Blueprint process under proposed Sec.  155.106(c) and meet its 
obligations under Sec.  155.200(a) by entering into a Federal platform 
agreement with HHS. Through the Federal platform agreement, an SBE-FP 
would agree to rely on HHS for services related to the individual 
market Exchange, the SHOP Exchange, or both the individual market and 
SHOP Exchanges. The Federal platform agreement would specify the 
Federal services on which the State Exchange relies, the user fee (as 
specified at Sec.  156.50(c)(2)) that HHS will collect from issuers in 
that SBE-FP for the Federal services, and other mutual obligations 
relating to the arrangement, including obligations for the transfer of 
data. The Federal platform agreement would specify expectations between 
the State and HHS across various operational areas. We indicated our 
intent to release the Federal platform agreement at a later date. We 
noted that at this point the Federal services on which SBE-FPs may rely 
will come as an entire package. That is, HHS will not at this time 
offer a ``menu'' of Federal services from which an SBE-FP may select 
some but not other services available on the Federal platform. However, 
we indicated we would explore the feasibility of doing so in the 
future.
    Although the SBE-FPs would retain primary responsibility for 
certifying QHPs and overseeing QHPs and issuers, we proposed under 
Sec.  155.200(f)(2) to require an SBE-FP to establish and oversee 
certain requirements for its QHPs and QHP issuers that are no less 
strict than the requirements that apply to QHPs and QHP issuers on an 
FFE. We proposed these requirements to include the existing and 
proposed standards under the following sections: Sec.  156.122(d)(2) 
(the requirement for QHPs to make available published up-to-date, 
accurate, and complete formulary drug list on its Web site in a format 
and at times determined by HHS); Sec.  156.230 (network adequacy 
standards); Sec.  156.235 (essential community providers standards);

[[Page 12245]]

Sec.  156.298 (meaningful difference standards); Sec.  156.330 (changes 
of ownership of issuers requirement); Sec.  156.340(a)(4) (QHP issuer 
compliance and compliance of delegated and downstream entities 
requirements); Sec.  156.705 (maintenance of records standard); Sec.  
156.715 (compliance reviews standard); and Sec.  156.1010 (casework 
standards).
    Applying the changes of ownership issuers' requirement to SBE-FPs 
will help fulfill the Federal platform's need for data and technical 
consistency. It will ensure that HHS maintains the most accurate and 
updated information to present a consistent experience to consumers 
through its branded platform, HealthCare.gov. HHS must be able to 
monitor and provide regulatory oversight over change in control 
situations with regards to the operation of the Federal platform. 
Change in control has a significant operational impact on the Federal 
platform and requires the expenditure of considerable technical 
resources to effectuate the change throughout the multiple systems that 
constitute the Federal platform.
    Applying the formulary drug list, network adequacy, meaningful 
difference, and essential community providers standards will ensure 
that all QHPs on HealthCare.gov meet a consistent minimum standard and 
that consumers obtaining coverage as a result of applying through 
HealthCare.gov are guaranteed plans that meet these minimum standards. 
HHS has designed and implemented policy and operations for the FFE such 
that shoppers at HealthCare.gov can experience a consistent standard of 
service. We proposed that SBE-FPs that wish to rely on the 
HealthCare.gov platform require their issuers to meet certain minimum 
standards as well, since their consumers are obtaining the coverage 
through HealthCare.gov. SBE-FPs have the flexibility to exceed these 
minimum standards to the extent they do not present display problems on 
HealthCare.gov. Although we clearly recognize that the SBE-FPs are 
SBEs, and thus legally distinct from FFEs, this difference will not 
always be apparent to HealthCare.gov consumers. Not having these 
standards apply may lead to consumer confusion and dilution of consumer 
goodwill with respect to the plans available on HealthCare.gov. The 
States would still be responsible for conducting QHP certification 
reviews for these standards.
    Applying the QHP issuer compliance and compliance of delegated or 
downstream entities requirement at Sec.  156.340(a)(4), which involves 
the maintenance of records standards of Sec.  156.705 and the 
compliance reviews for QHP issuers standards of Sec.  156.715, will 
ensure that the SBE-FP has authority at least as strong as that 
possessed by HHS to enforce compliance with these standards and will 
ensure that the SBE-FP and HHS are able to access all records upon 
request from the issuers in the SBE-FPs.
    Applying the casework standards at Sec.  156.1010 will ensure that 
the SBE-FP and HHS can respond to problems about which they both bear 
responsibility. Since SBE-FPs must use the Federally operated Health 
Insurance Casework System (HICS) for handling consumer casework and 
meeting casework resolution timeframes as part of utilizing the Federal 
platform for eligibility and enrollment functions, the SBE-FP would not 
be overseeing casework processes. However, as with all other Exchange 
types, State departments of insurance will still handle appropriate 
consumer complaints related to issuers in their States. For cases that 
are Exchange-related, or those in which the consumer has chosen to 
contact the Exchange even after contacting the appropriate department 
of insurance, HHS would oversee the routing and resolution of casework. 
HHS's intent is to work collaboratively with the SBE-FP, similar to how 
HHS works with SPMs.
    Finally, we proposed under Sec.  155.200(f)(3) that HHS will work 
with SBE-FPs to enforce the FFE standards listed under Sec.  
155.200(f)(2) directly against SBE-FP issuers or plans who do not meet 
these standards. In that circumstance, we proposed that HHS would have 
the authority to suppress a plan under Sec.  156.815. This will ensure 
that consumers shopping for coverage on HealthCare.gov have access to 
plans that are in compliance with the FFE standards with which SBE-FP 
issuers must comply as a condition of offering QHPs through a State 
Exchange on the Federal platform.
    We intend to work closely and collaboratively with SBE-FPs, and 
believe that our collaboration with States that currently use the 
Federal platform with respect to enforcement matters has been close and 
effective. We are finalizing our proposals as proposed.
    Comment: One commenter indicated that the inability of the Federal 
platform to accommodate State customization for SBE-FPs is a major 
disincentive for SBEs to use the Federal platform. The commenter also 
expressed concerns about the proposed Federal platform agreement not 
being able to be customized by individual State, as State procurement 
and contracting officials may require State specific language in 
contracts.
    Response: We are finalizing the regulations as proposed. We intend 
to describe the availability of new capabilities of the Federal 
platform that would allow for SBE-FPs to select certain Federal 
services to use or to customize particular functionality in future 
rules, through our annual rulemaking process, as well as in future 
versions of the Federal platform agreement. At this time we do not 
foresee State-specific customization of the language in the Federal 
platform agreement, but will engage with States as part of the process 
of finalizing the agreement.
    Comment: We received a comment that the proposed requirement to use 
the Federally operated HICS system creates procedural burdens on State-
based consumer advocacy staff. The commenter recommended that consumer 
complaints for SBE-FPs should be referred directly to the appropriate 
State authority for resolution.
    Response: We are finalizing the regulations as proposed. The 
Federally operated HICS system is closely tied to the SBE-FP's 
utilization of the Federal platform for eligibility and enrollment 
functions. While SBE-FPs must rely on the Federally operated HICS 
system for processing casework, we are open to future possibility of 
HHS coordination with SBE-FP States on consumer communications 
pertaining to casework and complaints to the extent it is operationally 
feasible. Should such coordination be operationally feasible, the roles 
and responsibilities between HHS and the State would be specified 
through the Federal platform agreement.
    Comment: Regarding our proposals to apply certain FFE QHP standards 
to SBE-FP issuers, along with our proposed requirements pertaining to 
the enforcement of those standards, we received some comments that were 
supportive and comments that were opposed. The commenters that opposed 
the proposed requirements stated that SBE-FP States should maintain 
sole authority for setting standards for, and certifying, QHPs. One 
commenter stated that using two sets of enforcement standards would 
lead to consumer harm and insurer confusion. Another commenter 
expressed concern that the application of FFE standards could result in 
inconsistent treatment of off-Exchange QHPs and recommended that SBE-FP 
QHPs should be governed by the same State rules as SBEs to ensure 
market parity. Another commenter stated that the proposed requirements 
may cause confusion regarding the legal

[[Page 12246]]

status of SBE-FPs and the true extent to which certain Federal Exchange 
requirements and limitations apply. One commenter recommended that we 
explicitly state in the final rule that the implementing guidance 
issued through the annual Letter to Issuers also applies to issuers on 
SBE-FPs.
    Response: We are finalizing the rules as proposed. HHS will 
coordinate with the SBE-FP on enforcement of FFE standards listed under 
Sec.  155.200(f)(2) through plan suppression. SBE-FP States are being 
required to incorporate certain FFE QHP standards into their State's 
QHP standards and QHP certification process; thus, there would be only 
one set of QHP standards that apply to all issuers in a particular SBE-
FP State. An SBE-FP would have the flexibility to exceed those FFE QHP 
standards when setting their QHP standards and QHP certification 
process should they elect to. There may be differences in standards set 
by an SBE-FP State for QHPs that participate in the Exchange versus 
plans that are offered outside of the Exchange, which can also occur in 
SBE and FFE States. Moving forward, the annual Letter to Issuers will 
include implementing guidance that is specific to SBE-FPs.
b. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    We proposed two amendments to Sec.  155.205 to address functions of 
an SBE-FP. First, because an SBE-FP relies on HHS to carry out 
eligibility and enrollment functions, which would include relying on 
the FFE call center to carry out these functions, we proposed to amend 
Sec.  155.205(a) to exempt an SBE-FP from the requirement to operate a 
toll-free call center, and instead provide that an SBE-FP must at a 
minimum operate a toll-free telephone hotline to respond to requests 
for assistance to consumers in their State, in accordance with section 
1311(d)(4)(B) of the Affordable Care Act.
    Secondly, we proposed to amend Sec.  155.205(b) by adding paragraph 
(b)(7) to provide that an SBE-FP must, at a minimum, operate an 
informational Internet Web site in accordance with section 
1311(d)(4)(C) of the Affordable Care Act. The informational Web site 
would direct consumers to HealthCare.gov to apply for, and enroll in, 
coverage through the Exchange.
    We are also finalizing an amendment to Sec.  155.205(b)(1), related 
to standardized options. For a discussion of this amendment, please see 
the preamble discussion of standardized options.
    Comment: Some comments stated that having SBE-FPs maintain these 
consumer assistance features is duplicative and would cause confusion 
among consumers. Commenters also recommended further clarification 
between a toll-free call center and a toll-free telephone hotline, and 
defining minimum functional requirements of a toll-free hotline. 
Commenters also asked that HHS clarify the minimum requirements for the 
SBE-FPs informational Web site.
    Response: We are finalizing the proposed requirement for the SBE-FP 
to operate a toll-free hotline and informational Web site, as this is 
based on statutory minimum functional requirements that an SBE 
(including an SBE-FP) must meet. A toll-free call center includes 
capabilities for processing eligibility and enrollment actions and 
accessing consumer information to process these actions, whereas a 
toll-free hotline includes the capability to provide information to 
consumers and appropriately direct consumers to the Federally operated 
call center or HealthCare.gov to apply for, and enroll in, coverage 
through the Exchange. Both the toll-free hotline and the informational 
Web site that an SBE-FP is required to operate must include the 
capability to direct consumers to the Federal platform services, 
including the FFE call center and HealthCare.gov Web site, to apply 
for, and enroll in, Exchange coverage. We are finalizing the 
requirement for SBE-FPs to operate a toll-free hotline and 
informational Web site.
c. Standards Applicable to Navigators Under Sec. Sec.  155.210 and 
155.215; Standards Applicable to Consumer Assistance Tools and Programs 
of an Exchange Under Sec.  155.205(d) and (e); and Standards Applicable 
to Non-Navigator Assistance Personnel in an FFE and to Non-Navigator 
Assistance Personnel Funded Through an Exchange Establishment Grant 
(Sec. Sec.  155.205, 155.210 and 155.215)
    To help consumers apply for and enroll in QHPs and insurance 
affordability programs through the Exchange, we established consumer 
assistance programs, including the Navigator program described at 
section 1311(d)(4)(K) and 1311(i) of the Affordable Care Act and Sec.  
155.210. Among other duties, Navigators are required to conduct public 
education activities to raise awareness of the availability of QHPs; to 
distribute fair and impartial information concerning enrollment in QHPs 
and the availability of Exchange financial assistance; to facilitate 
enrollment in QHPs; and to provide referrals for any enrollee with a 
grievance, complaint, or question regarding their health plan, 
coverage, or a determination under such plan or coverage. We have also 
established under Sec.  155.205(d) and (e) that each Exchange must 
provide consumer assistance, outreach, and education functions, which 
must include a Navigator program and can include a non-Navigator 
assistance personnel program.
    We proposed to amend Sec.  155.210(e) by adding a new paragraph 
(e)(8) to require Navigators in all Exchanges to provide targeted 
assistance to serve underserved or vulnerable populations within the 
Exchange service area. Navigators already must have expertise in the 
needs of underserved and vulnerable populations, and we believe that 
also requiring Navigators to provide targeted assistance to these 
populations is critical to improving access to health care for 
communities that often experience a disproportionate burden of disease. 
We also believe that Navigators should focus their outreach and 
enrollment assistance efforts on harder-to-reach populations and the 
remaining uninsured.
    Because the characteristics of underserved and vulnerable 
populations may vary over time and from region to region, we proposed 
to permit each Exchange to define and identify the underserved and 
vulnerable populations in its service area, and to update these 
definitions as appropriate. This could include an Exchange allowing its 
Navigator grantees to propose which communities to target, for the 
Exchange's approval (for example, in their grant applications). In 
FFEs, we proposed to identify populations as vulnerable or underserved 
through our Navigator funding opportunity announcements and to give FFE 
Navigator grant applicants an opportunity to propose additional 
communities to target during the grant application process. We proposed 
that the primary criteria used to identify such populations within the 
FFEs would be that the population is disproportionately without access 
to coverage or care, or at a greater risk for poor health outcomes. 
Members of these populations could be identified by age groups, 
demographics, disease, geography, or other characteristics as defined 
or approved by the Exchange. In FFEs, our proposal would apply 
beginning with the application process for Navigator grants awarded in 
2018.
    Although we did not propose to extend this requirement to certified 
application counselors and non-Navigator assistance personnel subject 
to Sec.  155.215, we stated in the preamble to the proposed rule that 
we would

[[Page 12247]]

encourage certified application counselors and non-Navigator assistance 
personnel subject to Sec.  155.215 to prioritize assisting the 
vulnerable and underserved populations identified by the Exchange in 
their communities, and we recognize that many of these assisters 
already focus their efforts on such populations.
    Navigators would not be serving these target populations 
exclusively, since all Navigators are required to assist any consumer 
seeking assistance. As we have explained previously, all Navigators 
should have the ability to help any individual who seeks assistance, 
even if that consumer is not a member of the community or group the 
Navigator intends to target (see 78 FR 20589; 78 FR 42830; 79 FR 30270; 
79 FR 30278).
    We are finalizing this provision as proposed.
    Comment: We received many comments supporting our proposal to 
require Navigators in all Exchanges to provide targeted assistance to 
serve underserved or vulnerable populations within the Exchange service 
area. Commenters agreed that reaching these populations is important to 
increasing awareness among remaining uninsured consumers regarding 
coverage options available through the Exchange, helping consumers find 
affordable coverage that meets their needs, and narrowing health 
disparities. In addition, commenters stated that Navigators are 
uniquely positioned to serve these populations because of established 
ties and pre-existing relationships. Commenters also agreed that this 
provision should not be extended to certified application counselors 
and non-Navigator assistance personnel subject to Sec.  155.215, but 
said that it would be helpful for HHS to educate these assister types 
about this kind of targeted assistance and how they can support 
Navigators' efforts.
    Response: We agree that requiring Navigators to target assistance 
to underserved and vulnerable populations is critical to improving 
access to health coverage. We are not extending this requirement to 
certified application counselors and non-Navigator assistance personnel 
subject to Sec.  155.215 in this final rule, but continue to encourage 
these assister types to prioritize reaching and assisting the 
vulnerable and underserved populations identified by the Exchange in 
their communities, and we recognize that many of these assister types 
already focus efforts on such populations. HHS has previously and will 
continue to provide technical assistance and resources on reaching and 
serving a variety of vulnerable and underserved populations to all 
Navigators, non-Navigator assistance personnel, and certified 
application counselors in the FFEs.
    Comment: We received several comments regarding how Exchanges 
should identify vulnerable or underserved populations. Many commenters 
suggested data sources to consult when identifying these populations. 
Several commenters requested that HHS provide a list of underserved or 
vulnerable populations, made up of populations where there was either a 
documented lower rate of insurance prior to the implementation of the 
Affordable Care Act or where current enrollment rates are lower than 
those of other populations. Commenters recommended specific populations 
for identification, including low-income individuals and families; 
people of color; women; people living with HIV/AIDS; people living with 
disabilities; rural communities; lesbian, gay, bisexual, and 
transgender people; people with limited English proficiency; people 
with transportation limitations; people with mental health needs; 
children and youth with special health care needs; cancer survivors; 
low income immigrants; patients with rare diseases; survivors of 
domestic violence; abandoned spouses; and pregnant women enrolled in 
coverage that is not minimum essential coverage. In addition, several 
commenters requested that HHS ensure that SBEs consult with local 
stakeholders when defining underserved and vulnerable populations.
    Response: Because the characteristics of underserved and vulnerable 
populations may vary over time and from region to region, we believe 
that SBEs are best positioned to identify the underserved and 
vulnerable populations in their States who most need targeted 
assistance and support. Therefore, we do not intend to provide a list 
or otherwise identify these populations in SBEs, including SBE-FPs. We 
encourage SBEs to work with local stakeholders and Navigators to 
identify populations to target, using reliable sources of data. For 
FFEs, HHS will identify vulnerable or underserved populations through 
our Navigator funding opportunity announcements and will give FFE 
Navigator grant applicants an opportunity to propose additional 
communities to target during the grant application process, beginning 
with the application process for Navigator grants awarded in 2018. The 
primary criteria the FFEs will use to identify vulnerable or 
underserved populations will be if they are disproportionately without 
access to coverage or care, or are at a greater risk for poor health 
outcomes.
    Comment: We received several comments requesting that HHS further 
explain how Navigators are expected to target or focus their work on 
these populations, while still fulfilling the requirement to assist any 
consumer seeking assistance. Commenters expressed concern that this 
requirement might compel Navigator organizations to limit their 
services to certain populations or create such a perception.
    Response: This provision does not require Navigators to limit their 
services to the specific populations they are targeting, and we rely on 
Navigators' creativity and local knowledge to structure their programs 
so that they target one or more vulnerable and underserved populations 
while remaining open to all consumers. For example, a Navigator grantee 
might open an application and enrollment assistance location in an area 
populated by a community that has historically experienced heath care 
access barriers, and reach out to community members in ways that are 
culturally competent and linguistically appropriate to that community, 
while remaining ready to serve any consumer seeking assistance. In the 
FFEs, we will provide more information regarding Navigator duties, 
scope of activities, and program requirements in the Navigator funding 
opportunity announcement. SBEs, including SBE-FPs, have flexibility to 
provide further guidance in this area as well. Finally, we continue to 
remind Navigators that we interpret Navigators' duty to provide fair 
and impartial information and services under Sec.  155.210(e)(2) to 
require that all Navigators should have the ability to help any 
individual who seeks assistance from the Navigator, even if that 
consumer is not a member of the community or group the Navigator 
intends to target.
    Comment: We received several comments regarding the selection 
process for Navigator grantees. Some commenters requested that HHS 
encourage Exchanges to prioritize entity types (such as safety net 
providers) or applicants capable of reaching underserved or vulnerable 
populations, and some recommended specific populations of Navigator 
grant applicants that should be given preference. In addition, 
commenters requested that HHS ensure that Exchanges adjust their grant-
making criteria to account for the greater time and resources necessary 
to reach underserved and vulnerable communities. A few commenters 
requested that Navigators be required or

[[Page 12248]]

encouraged to collaborate with providers and other organizations, such 
as patient-focused and community-based organizations that are also 
engaged in consumer health and patient education, in order to ensure 
that underserved and vulnerable populations are receiving assistance. A 
few commenters also requested that HHS develop guidance for FFE 
Navigators, FFE non-Navigator assistance personnel, and FFE certified 
application counselors on collaborating and forming partnerships with 
groups that are engaged in reaching populations, consumer health, and 
patient education.
    Response: For FFEs, we will take these comments into consideration 
when drafting Navigator selection criteria for the Navigator funding 
opportunity announcements for 2018 and future years. We agree that 
local collaboration and leveraging community partnerships might help 
Navigators reach marginalized communities, and we intend to issue 
guidance for FFE Navigators with additional information on 
collaborating or partnering with other community organizations. SBEs, 
including SBE-FPs, are responsible for administering their own 
Navigator programs, including determining their own selection process, 
consistent with statutory and regulatory authority.
    Comment: We received several comments regarding the timeframes in 
which these populations would be identified. Commenters requested that 
Exchanges regularly re-identify these populations. Some commenters 
requested that these populations be identified at least 3 months prior 
to the beginning of open enrollment and that applicants be allowed to 
identify new populations for each grant cycle.
    Response: SBEs, including SBE-FPs, retain flexibility to administer 
their own Navigator programs, and we encourage SBEs to regularly 
revisit the ways they define and identify vulnerable and underserved 
populations to ensure that the results remain current and relevant. In 
FFEs, we will continue to prioritize publicizing and awarding Navigator 
grants in a transparent and timely fashion. We intend to identify these 
populations when each funding opportunity announcement is published, at 
least 60 days prior to the date applications are due.
    Comment: Several commenters requested that HHS and States ensure 
that Navigators receive adequate resources, including funding and 
training, to work with vulnerable and underserved populations. 
Commenters urged HHS to tailor training opportunities to population-
specific messages and content. Several commenters were concerned about 
how these activities would be funded.
    Response: Under Sec.  155.210(b)(2)(i), Navigators in all Exchanges 
must be trained in the needs of underserved and vulnerable populations. 
Under Sec.  155.215(b)(2)(xii), Navigators in FFEs must additionally 
receive training on working effectively with individuals with limited 
English proficiency; people with a full range of disabilities; and 
vulnerable, rural, and underserved populations. SBEs, including SBE-
FPs, are responsible for administering their own Navigator programs, 
including funding and budgets, and may provide or require additional 
training and technical assistance to address the needs of the 
populations they have identified as vulnerable and underserved. In 
FFEs, Navigator applicants will have an opportunity to propose budgets 
in their Navigator applications to cover the costs of these activities.
    In Sec.  155.210, we proposed to add paragraph (e)(9) to specify 
that Navigators in all Exchanges would be required to help consumers 
with certain other types of assistance, including post-enrollment 
assistance. We designed this proposal to ensure that consumers would 
have access to skilled assistance beyond applying for and enrolling in 
health coverage, including, for example, assistance with the process of 
filing Exchange eligibility appeals or with applying through the 
Exchange for exemptions from the individual shared responsibility 
payment, providing basic information about reconciliation of premium 
tax credits, and understanding basic concepts related to using health 
coverage. We discussed the statutory authority for these proposals in 
the preamble to the proposed rule.
    We proposed at Sec.  155.210(e)(9)(i) to require Navigators in all 
Exchanges to help consumers with the process of filing appeals of 
Exchange eligibility determinations. We did not propose to establish a 
duty for Navigators to represent a consumer in an appeal, sign an 
appeal request, or file an appeal on the consumer's behalf. We 
explained that we believe that helping consumers understand Exchange 
appeal rights when they have received an adverse eligibility 
determination, and assisting them with the process of completing and 
submitting appeal forms, would help to facilitate enrollment and would 
help consumers obtain fair and impartial information about enrollment, 
including information about available exemptions from the individual 
shared responsibility payment that would help consumers decide whether 
or not to enroll in coverage. We interpreted this proposal to include 
helping consumers file appeals of eligibility determinations made by an 
Exchange (including SHOP Exchanges) related to enrollment in a QHP, 
special enrollment periods, exemptions from the individual shared 
responsibility payment that are granted by the Exchange, participation 
as an employer in a SHOP, and any insurance affordability program, 
including eligibility determinations for Exchange financial assistance, 
Medicaid, the Children's Health Insurance Program (CHIP), and Basic 
Health Programs.
    We also proposed at Sec.  155.210(e)(9)(ii) to require that 
Navigators in all Exchanges help consumers understand and apply for 
exemptions from the individual shared responsibility payment that are 
granted by the Exchange. We explained that this assistance with 
Exchange-granted exemptions would include informing consumers about the 
requirement to maintain minimum essential coverage and the individual 
shared responsibility payment; helping consumers fill out and submit 
Exchange-granted exemption applications and obtain any necessary forms 
prior to or after applying for the exemption; explaining what the 
exemption certificate number is and how to use it; and helping 
consumers understand and use the Exchange tool to find bronze plan 
premiums. We explained that this duty would also include explaining the 
general purpose of Internal Revenue Service (IRS) Form 8965, Health 
Coverage Exemptions, to consumers, consistent with IRS published 
guidance on the topic, and explaining how to access this form and 
related tax information on IRS.gov.
    Navigators may not provide tax assistance or interpret tax rules 
within their capacity as Exchange Navigators, and our proposal would 
not require Navigators to help consumers apply for exemptions claimed 
through the tax filing process. We noted that we would, however, 
interpret the assistance provided under Sec.  155.210(e)(9)(ii) to 
include helping consumers generally understand the availability of 
exemptions claimed through the tax filing process and how to obtain 
them. We noted that this interpretation would help ensure that 
Navigators share information about the full scope of possible 
exemptions while not providing actual tax assistance or tax advice. We 
requested comment on whether we should require that, prior to providing 
this assistance and information, Navigators provide consumers with a 
disclaimer stating that they are not acting as tax advisers and cannot 
provide tax advice within their capacity as Exchange Navigators. We

[[Page 12249]]

also sought comment on whether a Navigator's duty to provide assistance 
with filing exemption applications under proposed Sec.  
155.210(e)(9)(ii) and filing appeals of exemption application denials 
under proposed Sec.  155.210(e)(9)(i) should be limited, in light of 
the resource limitations that Navigators and their funding agencies may 
face. We sought comment on whether this assistance should be limited, 
for example, to consumers who have applied for or have been denied 
coverage or financial assistance, as opposed to those who only seek to 
avoid the individual shared responsibility payment, in order not to 
reduce the assistance available to consumers seeking coverage.
    In addition, we proposed at Sec.  155.210(e)(9)(iii) to require 
Navigators to help consumers with the Exchange-related components of 
the premium tax credit reconciliation process, such as by ensuring they 
have access to their Forms 1095-A, Health Insurance Marketplace 
Statement, and receive general, high-level information about the 
purpose of this form that is consistent with published IRS guidance on 
the topic. We explained that under the proposal, Navigators would be 
required to help consumers obtain IRS Forms 1095-A and 8962, Premium 
Tax Credit (PTC), and the instructions for Form 8962, and to provide 
general information, consistent with applicable IRS guidance, about the 
significance of the forms. Navigators would also be required to help 
consumers understand (1) how to report errors on the Form 1095-A; (2) 
how to find silver plan premiums using the Exchange tool; and (3) the 
difference between advance payments of the premium tax credit and the 
premium tax credit and the potential implications for enrollment and 
re-enrollment of not filing a tax return and not reconciling any 
advance payments of the premium tax credit that were paid on consumers' 
behalf.
    As noted above, Navigators may not provide tax assistance or 
advice, or interpret tax rules and forms within their capacity as 
Exchange Navigators, but their expertise related to the consumer-facing 
aspects of the Exchange, including eligibility and enrollment rules and 
procedures, uniquely qualifies them to help consumers understand and 
obtain information from the Exchange that is necessary to the premium 
tax credit reconciliation process. We indicated that because this 
proposal would include a requirement that Navigators provide consumers 
with information and assistance understanding the availability of IRS 
resources, Navigators would be expected to familiarize themselves with 
the availability of materials on IRS.gov, including the Form 8962 
instructions, IRS Publication 974 Premium Tax Credit, and relevant 
FAQs, and to refer consumers with questions about tax law to those 
resources or to other resources, such as free tax return preparation 
assistance from the Volunteer Income Tax Assistance or Tax Counseling 
for the Elderly programs.
    To help ensure consumers have seamless access to Exchange-related 
tax information beyond the basic information that Navigators can 
provide, we proposed at Sec.  155.210(e)(9)(v) that Navigators be 
required to refer consumers to licensed tax advisers, tax preparers, or 
other resources for assistance with tax preparation and tax advice 
related to consumer questions about the Exchange application and 
enrollment process, exemptions from the requirement to maintain minimum 
essential coverage and the individual shared responsibility payment, 
and premium tax credit reconciliation.
    We proposed at Sec.  155.210(e)(9)(iv) to require Navigators in all 
Exchanges to help consumers understand basic concepts related to health 
coverage and how to use it. We explained that these activities could be 
supported by existing resources such as the HHS From Coverage to Care 
initiative, which we encouraged Navigators to review, and which is now 
available in multiple languages at https://marketplace.cms.gov/c2c. We 
explained that this proposal would improve consumers' access to health 
coverage information both when selecting a plan and when using their 
coverage. We anticipated that this assistance would vary depending on 
each consumer's needs and goals.
    To ensure that all Navigators receive training in every area for 
which we proposed a corresponding Navigator duty, we proposed at Sec.  
155.210(b)(2)(v) through (viii) to require all Exchanges, including 
SBEs, to develop and disseminate training standards to be met by all 
entities and individuals carrying out Navigator functions to ensure 
expertise in: The process of filing appeals of Exchange eligibility 
determinations; general concepts regarding exemptions from the 
requirement to maintain minimum essential coverage and the individual 
shared responsibility payment, including the application process for 
exemptions granted through the Exchange, and IRS resources on 
exemptions; the Exchange-related components of the premium tax credit 
reconciliation process and IRS resources on this process; and basic 
concepts related to health coverage and how to use it.
    We noted that providing assistance with certain other post-
enrollment issues already falls within the scope of existing required 
Navigator duties. We explained that we interpret the existing 
requirements to facilitate enrollment in QHPs under section 
1311(i)(3)(C) of the Affordable Care Act and Sec.  155.210(e)(3), and 
to provide information that assists consumers with submitting the 
eligibility application under Sec.  155.210(e)(2), to include 
assistance with updating an application for coverage through an 
Exchange, including reporting changes in circumstances and assisting 
with submitting information for eligibility redeterminations.
    Additionally, we explained in the proposed rule preamble our 
interpretation that Navigators are already permitted under existing 
statutory and regulatory provisions to help with a variety of other 
post-enrollment issues. For example, Navigators may educate consumers 
about their rights with respect to coverage available through an 
Exchange, such as nondiscrimination protections, prohibitions on 
preexisting condition exclusions, and preventive services available 
without cost sharing. Navigators may also assist consumers with 
questions about paying premiums for coverage enrolled in through an 
Exchange and help consumers obtain assistance with coverage claims 
denials.
    We are finalizing the proposals with several modifications to 
paragraphs (b)(2) and (e)(9). We are revising the requirement that 
Navigators must provide the post-enrollment and other assistance 
activities described in Sec.  155.210(e)(9) to give SBEs the option of 
requiring or authorizing any of these activities, and to make all of 
these activities required in FFEs under Navigator grants awarded in 
2018 or any later year, and optional (but authorized) before then.
    We are revising the training requirements under Sec.  155.210(b)(2) 
to specify that in any Exchange opting to require Navigators to perform 
any of the assistance topics specified in paragraph (e)(9), the 
training topic corresponding to the required paragraph (e)(9) 
assistance topic would also be required. Because all assistance topics 
specified in paragraph (e)(9) will be required in FFEs under Navigator 
grants awarded in 2018 or any later year, all training topics will be 
required in all FFEs under Navigator grants awarded in 2018 or any 
later year. We are adding a training provision at Sec.  
155.210(b)(2)(ix) to ensure

[[Page 12250]]

that Navigators who are required under paragraph (e)(9)(v) to provide 
referrals to licensed tax advisers, tax preparers, or other resources 
are also trained on this topic.
    We are adding language to Sec. Sec.  155.210(e)(6)(i), 
155.215(g)(1), and 155.225(f)(1) to require that, prior to providing 
assistance, Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors must provide 
consumers with a disclaimer stating that they are not acting as tax 
advisers or attorneys when providing assistance as Navigators, non-
Navigator assistance personnel, and certified application counselors 
(respectively), and cannot provide tax or legal advice within their 
respective capacities as Navigators, non-Navigator assistance 
personnel, and certified application counselors.
    We are also revising the assistance provisions at paragraph (e)(9) 
as follows:
     To make it more clear that Navigator assistance with 
Exchange eligibility appeals under paragraph (e)(9)(i) does not require 
Navigators to help consumers through the entire Exchange eligibility 
appeals process, we have added the word ``understanding'' to this 
provision.
     To make minor changes to paragraphs (e)(9)(ii) and (v) to 
ensure consistent usage of the term ``individual shared responsibility 
payment,'' and to make a minor change to paragraph (e)(9)(ii) to 
consistently use the term ``claim'' to describe how consumers apply for 
exemptions through the tax filing process.
     To remove ``understanding'' from the beginning of 
paragraph (e)(9)(iii) because we interpret assistance with Exchange-
related components of the premium tax credit reconciliation process to 
also include helping consumers access and use certain Exchange tools 
and resources, and to add ``understanding'' before ``the availability 
of IRS resources'' in paragraph (e)(9)(iii) to more clearly specify the 
type of assistance with IRS resources that is included under this 
provision.
     To expand the assistance under paragraph (e)(9)(iv), with 
understanding basic concepts related to health coverage and how to use 
it, to also include helping consumers understand their rights related 
to health coverage, and to make a parallel change to the corresponding 
training topic at paragraph (b)(2)(viii).
    Comment: Many commenters supported our proposed additional 
Navigator duties to provide post-enrollment and other assistance. A 
number of commenters agreed that assistance beyond enrollment would 
help Navigators maintain relationships with consumers across coverage 
years, which may be vital to successful enrollment, reenrollment, 
coverage utilization, and coverage continuity for some consumers. 
Several commenters stated that SBEs should have the flexibility to 
choose whether to require Navigators in their States to perform these 
additional functions. Other commenters disagreed that post-enrollment 
assistance falls within Navigators' statutorily authorized duties. One 
commenter recommended delaying implementation of these requirements for 
2 years to give States time to establish and implement training 
requirements, and to give Navigators time to become familiar with these 
new requirements. Several commenters recommended making these 
activities optional for grantees.
    Response: We agree that SBEs should have the flexibility to 
determine effective approaches to post-enrollment and other Navigator 
assistance based on local experience. For example, some SBEs make the 
proposed types of assistance available to consumers through different 
types of community-based consumer advocacy and patient advocacy 
organizations, and business associations and tax clinics, rather than 
from Navigators. We do not want to compel SBEs to disrupt or replace 
successful consumer assistance strategies, and therefore the final rule 
gives SBEs, including SBE-FPs, the flexibility to decide whether or not 
they will require or authorize their Navigators to provide any or all 
of the assistance topics listed at Sec.  155.210(e)(9). Any SBE opting 
to require its Navigators to provide any or all of the types of 
assistance listed at Sec.  155.210(e)(9) would also be required to 
provide training on the corresponding training topics at Sec.  
155.210(b)(2)(v) through (ix), and we are modifying the training topic 
proposals to reflect this policy.
    We also agree that a 2-year delay will give FFEs more time to 
expand coverage of the new assistance topics in the formal FFE training 
materials, and give FFE Navigators more time to familiarize themselves 
with the new requirements. Such a delay also aligns with the timing of 
the next FFE Navigator funding opportunity announcement in 2018 and 
thus allows 2018 grant applicants to structure their proposals to meet 
these new requirements while not disrupting current grantee work plans 
and budgets. Therefore, we are specifying that the new assistance 
topics and the corresponding training provisions will be required in 
FFEs beginning with Navigator grants awarded in 2018.
    However, we want to emphasize that FFE Navigator grantees will be 
authorized to provide assistance with any of the topics listed in Sec.  
155.210(e)(9) before 2018, when providing assistance in all those 
topics will be required of them. If FFE Navigator grantees choose to 
provide any of the assistance specified in Sec.  155.210(e)(9) before 
2018, we would expect them to familiarize themselves with related needs 
in their communities and build competency in the assistance activities 
they are providing. As we noted in the preamble to the proposed rule, 
under Sec.  155.215(b)(2), Navigators in FFEs must already be trained 
on the tax implications of enrollment decisions, the individual 
responsibility to have health coverage, eligibility appeals, and rights 
and processes for QHP appeals and grievances. FFE Navigators are also 
already required under Sec.  155.215(b)(2) to receive training on 
applicable administrative rules, processes, and systems related to 
Exchanges and QHPs. HHS will continue to build and improve its training 
materials in these areas, and in 2018 will expand on the formal FFE 
Navigator training that HHS already provides on the new assistance 
topics listed in Sec.  155.210(e)(9). Until then, in addition to HHS's 
existing formal training, we will continue to provide FFE Navigators 
with additional information related to the new assistance activities 
through informal webinars, newsletters, and technical assistance tools 
like fact sheets and slide presentations. FFE Navigator grantees that 
opt to carry out any of the assistance activities in Sec.  
155.210(e)(9) should draw upon these materials to ensure their staff 
and volunteers are adequately prepared to provide that assistance.
    If SBEs, including SBE-FPs, choose to authorize (but not require) 
their Navigators to provide the assistance topics listed at Sec.  
155.210(e)(9), we would expect them to ensure that their Navigators are 
sufficiently prepared to provide this assistance, either by including 
the corresponding training topics at Sec.  155.210(b)(2)(v) through 
(ix) in their Navigator training standards, or through informal 
continuing education such as webinars, fact sheets, supplementary 
trainings and certifications, and other technical assistance. However, 
because we believe SBEs are in the best position to determine the 
extent of training that is appropriate for duties they are authorizing 
(but not requiring) their Navigators to perform, SBEs (including SBE-
FPs) would not be required to

[[Page 12251]]

provide training on the topics listed in Sec.  155.210(b)(2)(v) through 
(ix) unless they required the corresponding forms of assistance under 
Sec.  155.210(e)(9).
    Finally, in the preamble to the proposed rule we discussed the 
statutory authority for the assistance topics specified in Sec.  
155.210(e)(9), and we refer commenters to those discussions, at 80 FR 
75520-75522.
    Comment: Many commenters were concerned that requiring these new 
duties without additional funding would cause undue burden, discourage 
program participation, or detract from Navigators' time and resources 
to help consumers enroll in coverage. Many commenters requested that 
HHS invest in the Consumer Assistance Programs established under 
section 2793 of the PHS Act instead of, or in addition to, these 
requirements.
    Response: We expect that providing for SBE flexibility and phasing 
in implementation of Sec.  155.210(e)(9) in FFEs will mitigate some of 
commenters' concerns about funding sources. FFE Navigators may cover 
the costs of these additional activities using Navigator grant funds 
and will have the opportunity to propose budgets during the grant 
application process, and current FFE Navigators may revise their work 
plans if they opt to carry out these activities before they become 
required.
    We agree that Consumer Assistance Programs established under 
section 2793 of the PHS Act have served an important role for consumers 
with health insurance concerns. We also remind commenters that Sec.  
155.210(e)(4) already requires Navigators in all States to provide 
referrals to any applicable office of health insurance consumer 
assistance or health insurance ombudsman established under section 2793 
of the PHS Act, or any other appropriate State agency, for any enrollee 
with a grievance, complaint, or question regarding their health plan, 
coverage, or a determination under the plan or coverage. Many States 
operate an office of health insurance consumer assistance or a health 
insurance ombudsman. The critical assistance provided by these offices 
will continue to be an important complement to and resource for 
Navigators, and HHS will continue to explore ways to fund Consumer 
Assistance Programs. However, we note that this existing referral 
requirement is not sufficient to cover the new assistance activities 
under Sec.  155.210(e)(9).
    Comment: A few commenters said they believe the proposed Navigator 
duties duplicate services provided by issuers or agents and brokers. 
Several commenters requested that Navigators providing post-enrollment 
assistance be subject to background checks and required to be licensed, 
carry errors and omissions insurance, and be under the oversight of 
State regulators.
    Response: We believe it is important for consumers to have access 
to a variety of assistance options. Additionally, Navigators in all 
States are required under Sec.  155.210(c)(1)(iii) to meet any 
licensing, certification, or other standards prescribed by the State or 
Exchange, so long as the standards do not prevent the application of 
the provisions of title I of the Affordable Care Act.
    Comment: A number of commenters supported our proposal that all 
Exchanges be required to provide training that would prepare Navigators 
for the additional proposed areas of responsibility. Many commenters 
urged us to ensure that this training be robust, supported by technical 
assistance, and carefully monitored and updated. Many commenters 
suggested that we specify additional training topics. One commenter 
asked how HHS would ascertain training competency.
    Response: We are finalizing the new training provisions largely as 
proposed, but are adding introductory language so that their 
applicability is aligned to whether the corresponding assistance 
activities are required under final Sec.  155.210(e)(9). If an Exchange 
(including an FFE) opts to require its Navigators to perform any or all 
of the types of assistance specified in paragraph (e)(9), the 
Exchange's training standards under paragraph (b)(2) must include 
corresponding training on any of the required assistance topics. For 
example, an Exchange opting to require its Navigators to help consumers 
understand the process of filing Exchange eligibility appeals under 
Sec.  155.210(e)(9)(i) must ensure its Navigators have expertise in 
this topic by including the process of filing Exchange eligibility 
appeals under Sec.  155.210(b)(2)(v) in its training standards. All of 
the training topics in Sec.  155.210(b)(2)(v) through (ix) must be 
included in the training standards for Navigators in FFEs under 
Navigator grants awarded in 2018 or any later year, because that is 
when all the activities specified under paragraph (e)(9) will be 
required in FFEs, as discussed above and as specified in paragraph 
(e)(9). We believe this final policy will ensure that all Navigators 
required to perform functions under paragraph (e)(9) will be adequately 
trained in each required topic.
    We are also adding a new Sec.  155.210(b)(2)(ix) to correspond to 
the referral assistance specified in Sec.  155.210(e)(9)(v), and are 
adding the words ``and rights'' to Sec.  155.210(b)(2)(viii) to 
parallel a related modification to Sec.  155.210(e)(9)(iv) that is 
discussed below.
    Section 155.215(b)(1)(iii) already requires FFE Navigators, after 
completing required training, to complete and achieve a passing score 
on all approved certification examinations prior to carrying out any 
consumer assistance functions under Sec.  155.205(d) and (e) or Sec.  
155.210. FFE Navigators must also obtain continuing education and be 
certified or recertified on at least an annual basis under Sec.  
155.215(b)(1)(iv). Under Sec.  155.210(b)(2), all Exchanges, including 
SBEs and SBE-FPs, are required to develop training standards that 
ensure expertise in the topics specified at Sec.  155.210(b)(2), but 
SBEs, including SBE-FPs, have flexibility in creating examination or 
certification requirements for their Navigators.
    Comment: Many commenters said they do not believe the new Navigator 
post-enrollment requirements are appropriate for other assister types, 
such as certified application counselors or non-Navigator assistance 
personnel subject to Sec.  155.215, who may have more limited time and 
resources. One commenter thought that these assister types should be 
encouraged to help consumers understand and use their coverage. Another 
commenter stated that certified application counselors are well 
positioned to provide post-enrollment assistance because many are in 
community health centers. A few commenters recommended that certified 
application counselors, non-Navigator assistance personnel subject to 
Sec.  155.215, and Federally Qualified Health Center enrollment 
counselors should have access to the new Navigator training and 
resources related to post-enrollment and other assistance.
    Response: We agree that non-Navigator assistance personnel subject 
to Sec.  155.215 and certified application counselors may have more 
limited resources than Navigators, and that tailoring duties to each of 
these three assister types fosters a robust pool of different kinds of 
consumer assistance. Therefore, we are not finalizing any assistance or 
training requirements parallel to Sec.  155.210(b)(2)(v)-(ix) and 
(e)(9) for non-Navigator assistance personnel subject to Sec.  155.215 
or certified application counselors. As we noted in the preamble to the 
proposed rule, the requirement under Sec.  155.210(e)(2) to provide 
information that assists consumers with submitting the eligibility 
application (which also applies to certain non-Navigator

[[Page 12252]]

assistance personnel through Sec.  155.215(a)(2)(i)), could include 
helping consumers report changes in circumstances and submit 
information for eligibility redeterminations. We also noted in the 
preamble to the proposed rule that under Sec.  155.215(b), non-
Navigator assistance personnel subject to Sec.  155.215 and Navigators 
in FFEs are subject to the same training requirements. In addition, all 
FFE training modules can be accessed by the public, including by 
certified application counselors and non-Navigator assistance personnel 
subject to Sec.  155.215. As noted in the preamble to the proposed 
rule, nothing prevents non-Navigator assistance personnel subject to 
Sec.  155.215 or certified application counselors from helping with 
activities that are consistent with their existing regulatory duties.
    Although we are not requiring any assistance or training 
requirements parallel to the new provisions under Sec.  
155.210(b)(2)(v) through (ix) and (e)(9) for non-Navigator assistance 
personnel subject to Sec.  155.215 or certified application counselors, 
we believe that a disclaimer stating that these assisters are not 
acting as tax advisers or attorneys (as discussed below) is an 
important consumer protection that should apply regardless of whether 
these assisters are providing assistance on the topics specified at 
Sec.  155.210(e)(9). For this reason, and to align parallel provisions 
requiring Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors to provide 
consumers with information about their respective functions and 
responsibilities, we are revising Sec. Sec.  155.215(g)(1) and 
155.225(f)(1) to require that, prior to providing assistance, non-
Navigator assistance personnel subject to Sec.  155.215 and certified 
application counselors provide consumers with a disclaimer stating that 
they are not acting as tax advisers or attorneys when providing 
assistance (respectively) as non-Navigator assistance personnel and 
certified application counselors, and cannot provide tax or legal 
advice within their (respective) capacities as non-Navigator assistance 
personnel and certified application counselors.
    Comment: A number of commenters cautioned that Navigators should 
not be expected to become, or be held out as, experts in the new 
assistance topics specified in Sec.  155.210(e)(9). Several commenters 
asked that we further define what we mean by ``assistance with'' so 
that Navigators can be clear about the full extent of consumer support 
expected from them in these areas.
    Response: Each Navigator grantee and each individual Navigator 
should have the ability to help any individual who presents themselves 
for assistance. Additionally, we expect that all individuals carrying 
out Navigator duties would be trained to perform all of the duties of a 
Navigator and would be equipped to assist consumers with the activities 
described in Sec.  155.210(e)(9) in Exchanges where the activities 
described in Sec.  155.210(e)(9) are required or authorized. Below, we 
discuss examples of the kinds of assistance we interpret Sec.  
155.210(e)(9) to include.
    Comment: Several commenters asked us to explain whether Navigators 
are permitted to collect, disclose, access, maintain, store or use 
personally identifiable information (PII) to carry out these additional 
duties. One commenter asked us to explain how consumer privacy 
protections will be ensured and enforced.
    Response: Under their grant terms and conditions, FFE Navigators 
are permitted to create, collect, handle, disclose, access, maintain, 
store, or use consumer PII only to perform functions that they are 
authorized to perform under the terms of their grant, including 
functions authorized or required under Sec.  155.210, or for other 
purposes for which the consumer provides his or her specific, informed 
consent. Once this rule takes effect, the activities under paragraph 
(e)(9) will be authorized Navigator functions in FFEs, both before and 
after 2018. Therefore, after this rule takes effect, FFE Navigators may 
create, collect, handle, disclose, access, maintain, store, and use 
consumer PII to perform these functions, and we will update guidance 
and model consent forms to reflect this. HHS has a variety of 
enforcement options in the event of a violation of these standards, 
including implementing corrective action plans or pursuing civil money 
penalties under Sec.  155.206 or Sec.  155.285, or withholding or 
terminating grant funds. With respect to SBEs, Sec.  155.260(b) directs 
SBEs to execute a contract or agreement with Navigators that binds them 
to privacy and security standards that, among other things, take into 
consideration a Navigator's authorized duties and activities. If an SBE 
opts to require or authorize the activities specified in Sec.  
155.210(e)(9) after that provision takes effect, we would expect that 
SBE privacy and security standards would reflect SBEs' decisions to 
require or authorize Navigators to carry out these additional 
activities, and would give Navigators the ability to create, collect, 
handle, disclose, access, maintain, store, and use PII as needed to do 
so. In any event, the exact extent to which and the conditions under 
which each SBE may permit or require its Navigators to create, collect, 
handle, disclose, access, maintain, store, and use PII is a matter 
within the reasonable discretion of the SBE, so long as the SBE's 
standards comply with Sec.  155.260 and otherwise do not act as an 
impediment to the performance of required or authorized Navigator 
duties under Sec.  155.210.
    Comment: We asked for comment on whether we should make explicit in 
the regulation any of our interpretations of existing statutes and 
regulations that would permit (but not require) Navigators to perform 
certain kinds of post-enrollment assistance, such as assistance with 
coverage claims denials. We also asked for comment on whether there are 
additional forms of post-enrollment assistance that Exchanges should 
require Navigators to provide, commensurate with their general legal 
authority. One commenter recommended that we specify in regulation any 
Navigator activities we interpret to be permitted but not required. 
Some commenters recommended that additional post-enrollment activities 
should be required, including filing complaints with regulators, 
assisting pregnant women enrolled in QHPs to understand their coverage 
options and ensure continuity of coverage, and helping enrollees pursue 
coverage determination appeals and formulary exceptions.
    Response: Because we are sensitive to the concerns commenters 
expressed about Navigators' limited time and resources to perform the 
new activities described in Sec.  155.210(e)(9), we are not adding 
provisions that require or permit any additional activities commenters 
recommended at this time. Instead, we have tried to limit the 
modifications to the proposed activities in this final rule to changes 
that provide additional detail about the scope of the specific post-
enrollment and other new assistance activities that we proposed adding 
to the rule.
    Comment: With respect to our proposed requirement that Navigators 
provide information and assistance with filing Exchange eligibility 
appeals, many commenters were concerned that consumers' legal rights 
may be compromised without proper legal representation, and stated that 
Navigators should serve primarily as a bridge to connect consumers with 
legal assistance. One commenter stated that Navigators should have the 
option of assisting consumers with appeals only when they have the 
expertise to do so.

[[Page 12253]]

Several asked us to clarify that Navigators may not serve as authorized 
representatives for consumers filing appeals. Commenters urged HHS to 
clearly define the types of information Navigators must provide related 
to appeals and create guidelines to help Navigators and consumers 
recognize where legal assistance becomes appropriate or necessary. 
Several commenters recommended that this duty be limited to making 
consumers aware of their right to appeal, providing basic education on 
the appeals process, and making appropriate referrals for legal 
assistance when possible. To facilitate these referrals, commenters 
asked HHS to help FFE Navigator grantees identify methods of 
establishing relationships with local legal services organizations and 
other State offices to help with the appeals process. One commenter 
suggested that Navigators should also provide information and 
assistance with appeal denials. One commenter asked how these proposed 
requirements might affect Medicaid appeals in States that have 
delegated the authority to make Medicaid and CHIP eligibility 
determinations to the Exchange. A number of commenters interpreted our 
proposal to mean that Navigators would be required to help consumers 
appeal adverse coverage decisions.
    Response: We recognize that helping consumers through the entire 
Exchange appeals process may require more resources and expertise than 
many Navigators can offer. To that end, we are narrowing this provision 
by adding the word ``understanding'' to make clear that any assistance 
required under this provision is limited to activities that help 
consumers understand the process of filing Exchange eligibility 
appeals, and does not include a requirement to help consumers through 
the entire Exchange eligibility appeals process. It does not prevent 
Navigators who are authorized or required to provide assistance under 
this provision from providing such longer-term assistance, as long as 
they do not provide legal advice in their capacity as Navigators, as 
discussed below. We also appreciate the critical and established role 
that legal services organizations play in helping consumers understand 
and access their Exchange eligibility appeal rights, and have 
incorporated providing information about free and low-cost legal help 
into our expectations for assistance under this provision, as discussed 
below.
    We interpret assistance under this provision to include the 
following activities, as relevant to consumers' needs: (1) Helping 
consumers identify and meet the deadline for appealing an Exchange 
eligibility determination; (2) helping consumers understand that they 
have a right to appeal eligibility determinations made by an Exchange 
(including SHOP Exchanges) related to enrollment in a QHP, special 
enrollment periods, exemptions from the individual shared 
responsibility payment that are granted by the Exchange, participation 
as an employer in a SHOP, and any insurance affordability program, 
including eligibility determinations for Exchange financial assistance, 
Medicaid, the Children's Health Insurance Program, and Basic Health 
Programs; (3) helping consumers understand the process of appealing 
those eligibility determinations and what steps to take to complete an 
appeal; (4) helping consumers access relevant Exchange resources, such 
as appeal request forms and mailing addresses for appeals, and Exchange 
guidance on appeals; and (5) providing consumers with information about 
free or low-cost legal help in their area, including local legal aid or 
legal services organizations and other State offices to help with the 
Exchange eligibility appeals process. Assistance under this provision 
may also include helping consumers collect supporting documentation for 
the appeal (such as screenshots of relevant information from the online 
application).
    Although the assistance under Sec.  155.210(e)(9)(i) includes 
helping consumers understand the general availability of a right to 
appeal adverse Exchange eligibility determinations and the process for 
appealing them, Navigators should not, in their capacity as Navigators, 
cross the line into providing legal advice, such as by recommending 
that consumers take specific action with respect to that right. For 
example, Navigators could help consumers understand the difference 
between an appeal and an expedited appeal, but should not help them 
decide which one is best suited to their circumstances. We suggest that 
Navigators familiarize themselves with any laws defining legal advice 
in the States in which they operate, as this may help them ascertain 
when they might be taking an action that could constitute providing 
legal advice. We also note that we did not propose nor are we 
establishing a duty for Navigators to represent a consumer in an 
appeal, sign an appeal request, or file an appeal on the consumer's 
behalf, either as a legally authorized representative or otherwise. 
Although HHS regulations do not prohibit Navigators from serving as 
authorized representatives under Sec.  155.227 outside of their 
capacity as Navigators, they should keep any activities as a consumer's 
authorized representative separate from their Navigator duties and 
should not use Navigator grant funds for these activities, because 
these activities are not authorized Navigator functions under HHS 
regulations.
    Assistance provided under this provision does not include 
assistance with appeals of coverage decisions by issuers, but only 
assistance with appeals of eligibility determinations made by an 
Exchange. However, as we said in the preamble to the proposed rule, 
Navigators are already permitted, but not required, to help consumers 
obtain assistance with coverage claims denials and to educate consumers 
about their rights with respect to coverage available through an 
Exchange. Additionally, under the new language about rights that we are 
adding to Sec.  155.210(e)(9)(iv), Navigators providing assistance 
under that paragraph should inform consumers who have questions about 
coverage claims denials that they have the right to appeal adverse 
benefit determinations and to have the appeal reviewed by an 
independent third party. Finally, as indicated above, helping consumers 
with the process of filing Exchange eligibility appeals includes, where 
applicable, helping consumers understand the process of filing an 
appeal of a modified adjusted gross income (MAGI)-based Medicaid or 
CHIP eligibility determination, where the State has delegated authority 
to the Exchange to adjudicate these appeals.
    Comment: Commenters supported our proposals to require Navigators 
to provide consumers with information and assistance regarding 
exemptions. One commenter disagreed with our proposal, arguing that 
exemptions assistance is counter to the goal of the Affordable Care 
Act. The majority of commenters recommended exemptions assistance not 
be limited to certain consumers because helping with exemptions is 
minimally burdensome and because of the importance of skilled 
assistance to consumers who cannot access coverage. Several commenters 
suggested that Navigators should have the flexibility, if they are 
unable to fully meet consumer demand, to prioritize helping consumers 
apply for and enroll in coverage over helping consumers seek exemptions 
during open enrollment. Several commenters recommended that this duty 
include assistance with understanding the requirement to maintain 
minimum essential coverage and the individual shared responsibility 
payment, the general purpose of and where to access

[[Page 12254]]

IRS Form 8965, Health Coverage Exemptions, and how to use applicable 
Exchange tools to find bronze plan and second-lowest cost silver plan 
premiums. Several commenters recommended that Navigators' duty with 
respect to exemptions should be limited to education about, but not 
assistance with, obtaining an exemption. One commenter asked for 
guidance on how this requirement would apply to SBE Navigators, since 
most States' Exchange-granted exemptions are processed by an FFE, 
rather than an SBE.
    Response: We are not limiting Navigator assistance with exemptions 
under paragraph (e)(9)(ii) to a specific consumer population because we 
agree that Navigator services should not be exclusively available to a 
predefined set of consumers and closed to others. Where resources are 
limited, Navigators providing assistance under this provision may 
prioritize helping consumers seeking to apply for and enroll in 
coverage. For example, during a busy enrollment event, Navigators may 
choose to limit exemptions assistance to directing consumers to 
exemptions resources on HealthCare.gov and IRS.gov, and schedule 
another time for consumers to return for additional assistance. But we 
also continue to expect that Navigators will serve all consumers 
seeking assistance.
    We believe that the Affordable Care Act contemplates that 
Navigators will assist consumers with making an informed decision about 
whether to enroll in health coverage, and making this decision will 
often require consumers to have a basic understanding of available 
exemptions. We are finalizing Sec.  155.210(e)(9)(ii) generally as 
proposed, except that for clarity and consistent use of terminology we 
are modifying the reference to the individual shared responsibility 
requirement to refer to the individual shared responsibility payment, 
and are changing language about ``how to apply for'' exemptions claimed 
through the tax filing process to ``how to claim'' them. Because 
exemptions assistance needs will vary among consumers, and to avoid 
being overly prescriptive, we are not expanding the assistance 
specifically required under this provision to include the activities 
recommended by commenters. We interpret assistance under this provision 
to include the following activities, as relevant to consumers' needs: 
(1) Informing consumers about the requirement to maintain minimum 
essential coverage and the individual shared responsibility payment; 
(2) helping consumers fill out and submit Exchange-granted exemption 
applications and obtain any necessary forms prior to or after applying 
for the exemption; (3) explaining what the exemption certificate number 
is and how to use it; (4) helping consumers understand the availability 
of exemptions from the requirement to maintain minimum essential 
coverage and from the individual shared responsibility payment that are 
claimed through the tax filing process and how to claim them; (5) 
helping consumers use any applicable Exchange tool to find lowest cost 
bronze and second-lowest cost silver plan premiums (that is, the FFE 
tool or any similar tool offered by an SBE); and (6) helping consumers 
understand the availability of IRS resources on this topic, including 
explaining the general purpose of and how to access IRS Form 8965, 
Health Coverage Exemptions, and the instructions for that form. We 
emphasize that explaining the general purpose of IRS Form 8965 to 
consumers must be done consistent with IRS published guidance on the 
topic, and must include providing information on where to access this 
form and related tax information on IRS.gov.
    With respect to exemptions granted through the Exchange, we do not 
believe that Navigators' activities related to exemptions should be 
limited to education only. However, to help ensure that Navigators do 
not provide tax advice in their capacity as Navigators, we are 
finalizing the portion of this proposal that limits Navigators' 
required involvement in exemptions claimed through the tax filing 
process to providing general information and helping consumers access 
IRS resources, rather than assistance with claiming exemptions on the 
tax return or filling out IRS forms. For example, Navigators acting in 
their capacity as Navigators must not help consumers fill out IRS Form 
8965 or help them report having minimum essential coverage on their tax 
return. We believe this limitation is sufficient to protect both 
consumers and Navigators.
    In any SBEs that opt to require or authorize this assistance, 
Navigators will be required or authorized (respectively) to help 
consumers access Exchange-granted exemptions, whether consumers in that 
State access those exemptions through the SBE or FFEs, and, as in any 
Exchange, they will be limited to providing only general information 
about exemptions claimed on the tax return in their capacity as 
Navigators.
    Comment: Many commenters said that Navigators should provide 
consumers with a disclaimer stating that they are not acting as tax 
advisers and cannot provide tax advice within their capacity as 
Navigators. One commenter stated that requiring a disclaimer was 
unnecessary because Navigators do not provide tax advice and many 
already provide a disclaimer to this effect. Some commenters 
recommended that we require a similar disclaimer that Navigators are 
not acting as legal representatives and cannot provide legal advice or 
legal representation within their capacity as Navigators. Some 
commenters recommended that the disclaimer be required to be written, 
provided in a linguistically appropriate manner, or included in our 
model authorization form for FFE Navigators.
    Response: We agree that prior to providing assistance, Navigators 
should provide consumers with a disclaimer stating that they are not 
acting as tax advisers or attorneys when providing assistance as 
Navigators, and cannot provide tax or legal advice in their capacity as 
Navigators. We are therefore adding language to Sec.  155.210(e)(6)(i) 
to specify that such a disclaimer must be included as part of the 
information provided to applicants about the Navigator's functions and 
responsibilities and that both the disclaimer and the information 
provided about Navigator functions and responsibilities must be 
provided prior to providing assistance. We do not interpret this 
requirement to mean that Navigators must provide such a disclaimer 
prior to providing general outreach and education. Although we do not 
specify the method of delivering the disclaimers, we plan to add these 
disclaimers to our model authorization form for FFE Navigators. The 
requirement under Sec.  155.210(e)(5) that Navigators must provide 
information in a manner that is culturally and linguistically 
appropriate to the needs of the population being served by the Exchange 
and accessible to people with disabilities will apply to these 
disclaimers. Finally, as discussed above, we are adding a parallel 
disclaimer requirement for non-Navigator assistance personnel subject 
to Sec.  155.215 and certified application counselors, under Sec. Sec.  
155.215(g)(1) and 155.225(f)(1) (respectively).
    Comment: Many commenters supported our proposal to require 
Navigators to provide consumers with assistance with understanding the 
Exchange-related components of the premium tax credit reconciliation 
process, and the availability of IRS resources on this process. 
Commenters agreed that although Navigators should not provide tax 
advice, informing

[[Page 12255]]

consumers of the tax implications of receiving advance payment of the 
premium tax credit is an essential component of helping consumers 
enroll. Several commenters recommended that we specify that this 
assistance entails helping consumers: (1) Access and understand IRS 
Forms 1095-A, -B, and -C, (2) understand how to report Form 1095 
errors, (3) understand how to use applicable Exchange tools to find 
silver plan premiums, and (4) understand the purpose of IRS Form 8962. 
A few commenters suggested that Navigators should also provide 
information about reliable resources on this process from sources other 
than the IRS. Other commenters were concerned that our proposal would 
stretch Navigators' capacity and distract from enrollment, and that tax 
professionals, not Navigators, are best suited to assist consumers with 
tax-related issues. Some commenters asked us to clarify the prohibition 
on providing tax advice, one commenter requested that we add this 
prohibition to Sec.  155.210(d), and another asked how it will be 
enforced.
    Response: We are finalizing this provision largely as proposed. 
Because not all consumers will require information and assistance with 
each of the topics commenters recommended that we include in this 
provision, we are not expanding the final rule to include them. 
However, we interpret assistance under this provision to include 
helping consumers with the following, as relevant to their needs: (1) 
The Exchange-related components of the premium tax credit 
reconciliation process; (2) accessing and understanding the general 
purpose of IRS Form 1095-A; (3) understanding how to report Form 1095-A 
errors; (4) using any applicable Exchange tool to find second-lowest 
cost silver plan premiums (that is, the FFE tool or any similar tool 
offered by an SBE); and (5) understanding the availability of IRS 
resources on this process, including the general purpose of and how to 
access IRS Form 8962, and the instructions for that form. To avoid 
confusion about the scope of this provision, we are removing the word 
``understanding'' from the beginning of the provision, because 
Navigators' assistance with the Exchange-related components of the 
premium tax credit reconciliation process would include not only 
helping consumers understand Exchange tools and resources but also 
helping consumers access and use these tools and resources. We are also 
adding ``understanding'' before the provision's description of 
Navigators' assistance with respect to the availability of IRS 
resources on this process, to better capture our interpretation that 
Navigators are not authorized to interpret those resources, and can 
instead only direct consumers to them. This edit also helps align this 
provision with the similar requirement in Sec.  155.210(e)(9)(ii) that 
Navigators help consumers understand the availability of IRS resources 
on exemptions.
    Where Navigators are also tax professionals, they might be in a 
position to assist clients with both the Exchange-related and the tax 
filing components of the premium tax credit reconciliation process, but 
should keep these duties separate and not perform any tax assistance 
within their capacity as Navigators or using Navigator grant funds. As 
part of Navigators' assistance with Form 1095-A, they may, for example, 
explain to consumers why they received the form and what the 
information on the form means, explain why they may have received more 
than one copy of the form, help them find the form in their online 
account or get a copy of the form, explain what they should do if they 
think the form may have gone to the wrong address, or if they think the 
information on their form is incorrect or does not include a dependent 
they added to their coverage. On the other hand, Navigators who are 
acting in their capacity as Navigators should not, for example, help 
consumers fill out IRS Form 8962, advise consumers about whether to 
file an amended tax return, or help them complete their income tax 
return. We believe it is critically important to ensure that consumers 
are provided with the most authoritative, accurate, and up-to-date 
resources related to premium tax credit reconciliation, and thus IRS-
approved resources must be the primary resource to which Navigators 
refer consumers.
    We disagree with commenters that Navigators should be required to 
help consumers access and understand IRS Forms 1095-B and 1095-C. Form 
1095-B, Health Coverage, is an annual form issued by providers of 
minimum essential coverage to report certain information to the IRS and 
to taxpayers about individuals who had coverage during the year. Form 
1095-C, Employer-Provided Health Insurance Offer and Coverage, is an 
annual form issued by certain large employers to report to the IRS and 
to taxpayers information about offers of employer-sponsored coverage 
for the year. Unlike the Form 1095-A, these forms are not issued by an 
Exchange. The IRS has resources that explain the purpose of these 
forms, how they relate to the tax filing process, how to request copies 
of the forms, and how to request corrections to the forms. Navigators 
should be able to help consumers access IRS resources relating to these 
forms. However, we are not requiring Navigators providing assistance 
under this provision to help consumers access these forms or report 
errors.
    Comment: We received support from commenters for our proposal to 
require Navigators to help consumers understand basic concepts related 
to health coverage and how to use it. Several commenters recommended 
that this assistance include helping consumers understand their rights 
related to health coverage. Some recommended that we specify topics in 
addition to the examples we included in the preamble to the proposed 
rule, including helping consumers understand out-of-pocket cost 
calculators and provider and formulary lookup tools, common utilization 
management definitions, including step therapy and prior authorization, 
and what an Explanation of Benefits Statement is and how to read it. 
Other commenters stated that because this assistance will vary 
depending on each consumer's health insurance literacy, needs, and 
goals, additional specificity is unnecessary.
    Response: We agree with commenters that consumers' rights with 
respect to coverage available through an Exchange, such as 
nondiscrimination protections and prohibitions on preexisting condition 
exclusions, are critical for consumers to understand when accessing or 
attempting to access coverage through an Exchange. Additionally, in the 
preamble to the proposed rule, we explained that the assistance 
provided under this provision could include helping consumers 
understand the right to coverage of certain preventive health services 
without cost sharing, and that we interpret existing HHS regulations to 
permit Navigators to educate consumers about their rights with respect 
to coverage available through an Exchange. Therefore, we are adding the 
phrase ``and rights'' to Sec.  155.210(e)(9)(iv) to ensure that 
Navigators' activities in this area include education about these 
topics. However, to avoid crossing the line into providing legal 
advice, Navigators should not, in their capacity as Navigators, 
recommend that consumers take specific action with respect to these 
rights. We are also adding the phrase ``and rights'' to the 
corresponding training provision related to this duty at Sec.  
155.210(b)(2)(viii). Because the health literacy information consumers 
need varies depending on their circumstances, we are not

[[Page 12256]]

requiring Navigators to help consumers with specific health literacy 
topics. Instead, we interpret assistance under this provision to 
include, for example, helping consumers understand: (1) Key terms used 
in health coverage materials, such as ``deductible'' and 
``coinsurance,'' and how they relate to the consumer's health plan; (2) 
the cost and care differences between a visit to the emergency 
department and a visit to a primary care provider under the coverage 
options available to the consumer; (3) how to identify in-network 
providers and how to make and prepare for an appointment with a 
provider; (4) how the consumer's coverage addresses steps that often 
are taken after an appointment with a provider, such as making a 
follow-up appointment and filling a prescription; and (5) the right to 
coverage of certain preventive health services without cost sharing.
    Comment: A few commenters asked for clarification about whether the 
duty proposed in Sec.  155.210(e)(9)(iv) pertains to general education 
about health coverage or to assisting individuals with activities such 
as making appointments or filling prescriptions, which they believed 
would be overly burdensome. Several commenters stated that there are 
insufficient educational resources available and asked HHS to create 
template materials and identify other resources on these topics. One 
commenter asked HHS to undertake or support a thorough assessment of 
consumer health insurance literacy needs. Some commenters noted that 
issuers often provide additional training and materials to agents and 
brokers about their plans, and recommended that HHS require issuers to 
provide Navigators with this kind of information.
    Response: The assistance provided under Sec.  155.210(e)(9)(iv) 
only includes providing information and assistance with understanding 
basic concepts and rights related to health coverage and how to use it; 
it does not include patient advocacy or case management. With respect 
to needs assessments, we remind Navigators in FFEs of their obligations 
under Sec.  155.215(c)(1) to develop and maintain general knowledge 
about the racial, ethnic, and cultural groups in their service area, 
including each group's health literacy and other needs, and under Sec.  
155.215(c)(2) to collect and maintain updated information to help 
understand the composition of the communities in the service area.
    Agents and brokers often receive information on health plans from 
the issuers with whom they have a contractual relationship. While we do 
not require QHP issuers to provide their affiliated agents and brokers 
with plan information, we continue to leverage existing practices and 
encourage agents and brokers to work directly with QHP issuers within 
whom they have a contractual relationship to obtain the necessary 
information on that issuer's QHPs. Navigator organizations may invite 
issuers in their area to share information or attend education sessions 
regarding plan benefits and details. As long as all issuers in the 
Exchange service area are invited and all applicable Navigator 
conflict-of-interest provisions are followed, including the rule 
prohibiting Navigators from receiving any consideration directly or 
indirectly from any health insurance issuer or stop-loss insurance 
issuer in connection with the enrollment of any individuals or 
employees in a QHP or non-QHP, such an event would not represent a 
conflict of interest or violate a Navigator's duty under Sec.  
155.210(e)(2) to provide information and services in a fair, accurate, 
and impartial manner.
    Comment: Most commenters supported our proposal that Navigators be 
required to provide referrals to licensed tax advisers, tax preparers, 
or other resources for assistance with tax preparation and tax advice 
related to consumer questions about the Exchange application and 
enrollment process, exemptions from the requirement to maintain minimum 
essential coverage and from the individual shared responsibility 
requirement, and premium tax credit reconciliations. Commenters 
requested detail about how such a referral mechanism would work; for 
example, whether Navigators would be allowed to refer consumers to a 
specific tax professional, as opposed to a general listing of tax 
professionals. Other commenters asked HHS for guidance on limitations 
and strategies for referring and collaborating with tax preparation 
services, legal services organizations, community experts, patient-
focused and community-based organizations, and other State offices. One 
commenter questioned the term ``licensed tax adviser,'' noting that IRS 
does not provide such a license. Another asked HHS to specify IRS's 
Volunteer Income Tax Assistance (VITA) and Tax Counseling for the 
Elderly (TCE) programs as appropriate points of referral. And one 
commenter asked HHS to partner with the Internal Revenue Service (IRS) 
to provide training and education to tax preparers.
    Response: All referrals from a Navigator to other organizations 
must be consistent with applicable statutory and regulatory 
requirements, including the requirement at Sec.  155.210(e)(2) that 
Navigators provide information and services in a fair, accurate, and 
impartial manner, and the conflict of interest provision at Sec.  
155.210(d)(4) prohibiting Navigators from receiving any consideration 
directly or indirectly from any health insurance issuer or issuer of 
stop loss insurance in connection with the enrollment of any 
individuals or employees in a QHP or a non-QHP. We interpret the 
requirement under Sec.  155.210(e)(2) that Navigators provide 
information and services in a fair, accurate, and impartial manner to 
mean that Navigators must not accept payment in exchange for providing 
a referral or recommending the services of another organization. We 
intend to issue guidance for FFE Navigators with additional information 
on collaborating or partnering with other organizations.
    The referrals discussed under this provision include referrals to 
licensed tax advisers, tax preparers, or other resources for assistance 
with tax preparation and tax advice. Licensed tax advisers are one type 
of tax professional, but not the only type. ``Licensed'' can mean any 
type of professional license that qualifies someone to prepare taxes, 
and could include certified public accountants and attorneys. We agree 
that VITA and TCE programs may often be the best resources for referral 
under this provision.
    To ensure that Navigators who are required under paragraph (e)(9) 
to provide referrals to licensed tax advisers, tax preparers, or other 
resources for assistance with tax preparation and tax advice are also 
trained on this topic, we are adding a corresponding training provision 
at Sec.  155.210(b)(2)(ix). We are also replacing a reference in 
paragraph (e)(9)(v) to the individual shared responsibility requirement 
with a reference to the individual shared responsibility payment, to 
ensure consistent use of terminology.
    We also proposed to amend Sec. Sec.  155.205(d) and 
155.215(b)(1)(i) to specify that any individual or entity carrying out 
consumer assistance functions under Sec.  155.205(d) and (e) or Sec.  
155.210, in both SBEs and FFEs, would be required to complete training 
prior to performing any assister duties, including before conducting 
outreach and education activities, as well as before providing 
application and enrollment assistance. Section 155.215(b) already 
requires Navigators and non-Navigator assistance personnel in FFEs and 
non-Navigator assistance personnel funded through Exchange 
Establishment grants under section

[[Page 12257]]

1311(a) of the Affordable Care Act to obtain certification by the 
Exchange prior to carrying out any consumer assistance functions under 
Sec.  155.205(d) and (e) or Sec.  155.210. We proposed to amend Sec.  
155.215(b)(1)(i) to specify that the consumer assistance functions 
referenced in that provision would include outreach and education 
activities. In addition, we proposed to amend Sec.  155.205(d) to 
require that training be completed not only before providing the 
assistance described in that paragraph, but also before conducting the 
outreach and education activities specified in paragraph (e).
    This proposal sought to ensure that individuals and organizations 
subject to Sec. Sec.  155.205(d) and (e), 155.210, and 155.215 do not 
perform any Exchange outreach and education activities or application 
and enrollment assistance while identifying as or holding themselves 
out to the public as Exchange-approved Navigators or non-Navigator 
assistance personnel, prior to completing Exchange requirements, 
including training and certification. The proposed amendments would not 
apply to certified application counselors, but Sec.  155.225(d)(1) 
already requires certified application counselors to complete and 
achieve a passing score on all Exchange approved certification 
examinations prior to functioning as certified application counselors.
    We are finalizing these amendments as proposed.
    Comment: The majority of commenters supported our proposal to 
require that Navigators and non-Navigator assistance personnel complete 
training prior to performing any assister duties, including before 
conducting outreach and education activities, as well as before 
providing application and enrollment assistance. These commenters also 
recommended exempting Navigators in FFEs and non-Navigator assistance 
personnel subject to Sec.  155.215 who are eligible to be recertified 
from the requirement in Sec.  155.215(b) to complete recertification 
training prior to conducting outreach and education. A few commenters 
expressed concern regarding the availability and content of training. 
Commenters also were concerned that this provision would prevent 
Navigators and non-Navigator assistance personnel subject to Sec.  
155.215 from conducting year-round outreach education, if training is 
not available year round, or recommended that training be available at 
least 2 months prior to open enrollment so that new assisters subject 
to this requirement can complete the training and begin assisting 
consumers.
    Response: We appreciate the support for this proposal and agree 
that it is essential that consumers trust that Navigators and non-
Navigator assistance personnel are properly informed and trained when 
consumers seek out their services, whether those services include 
assistance with an Exchange application or education about the 
Exchange. We recognize commenters' concerns that the timing of the FFE 
Navigator and non-Navigator assistance personnel training may prevent 
some Navigators and non-Navigator assistance personnel in FFEs from 
conducting outreach and enrollment work during periods when training is 
being updated and relaunched prior to the start of a new open 
enrollment period for the individual market. We will continue to strive 
to complete FFE training updates prior to FFE Navigator and non-
Navigator assistance personnel certification deadlines. We believe 
there is great value in ensuring that Navigators in FFEs and non-
Navigator assistance personnel subject to Sec.  155.215 complete 
recertification training prior to providing any outreach or assistance 
to consumers because there are often changes in Exchange operations and 
policy from year to year and we want to ensure that these assisters are 
providing the most up to date and accurate information to consumers. 
Therefore, we are not exempting Navigators in FFEs and non-Navigator 
assistance personnel subject to Sec.  155.215 who are eligible to be 
recertified from this requirement.
    Comment: A few commenters requested clarification regarding 
individuals who are not yet certified or are not acting as Navigators 
or non-Navigator assistance personnel at Navigator and non-Navigator 
assistance personnel organizations but who may be serving as 
spokespeople and conducting public education activities about the 
Exchange and the Exchange assistance available from the organization. 
One commenter requested that HHS allow newly hired, but not fully 
trained or certified Navigators to conduct outreach, as long as they 
disclose they are not yet certified to conduct enrollment assistance 
and immediately refer consumers to a fully trained and certified 
Navigator. A few commenters opposed our proposal due to concern that it 
would prohibit such activities.
    Response: As explained in the proposed rule preamble, nothing in 
the Exchange regulations prohibits individuals who are not trained and 
certified as Exchange-approved Navigators, non-Navigator assistance 
personnel, or certified application counselors from conducting outreach 
about Exchanges and providing application and enrollment assistance. 
These individuals may of course conduct outreach and education about 
Exchanges as long as they do not represent themselves as Exchange-
approved Navigators, non-Navigator assistance personnel, or certified 
application counselors.
    Comment: One commenter expressed concern about how this provision 
could reasonably be enforced.
    Response: Exchanges have discretion to pursue a variety of 
enforcement options in the event of Navigator or non-Navigator 
assistance personnel noncompliance with any applicable statutory or 
regulatory requirements or prohibitions. These options include 
implementing corrective action plans or pursuing civil money penalties 
under Sec.  155.206 or withholding or terminating grant or contract 
funds. FFE Navigators and FFE non-Navigator assistance personnel who 
wish to file a complaint or grievance against other FFE Navigators or 
FFE non-Navigator assistance personnel can contact their Project 
Officer or point of contact at CMS. FFE certified application 
counselors should direct complaints or grievances to the certified 
application counselor inbox at [email protected]. We also rely 
on communication with State regulatory agencies (such as Departments of 
Insurance) and CMS Regional Offices regarding FFE Navigator and FFE 
non-Navigator assistance personnel conduct.
    Section 155.210(d)(6) currently prohibits Navigators from providing 
to an applicant or potential enrollee any gifts unless they are of 
nominal value; or any promotional items that market or promote the 
products or services of a third party, when those promotional items are 
being used as an inducement for enrollment. Through a cross-reference 
to Sec.  155.210(d) in Sec.  155.215(a)(2)(i) and a parallel provision 
in Sec.  155.225(g)(4), this prohibition also applies to non-Navigator 
assistance personnel subject to Sec.  155.215, and to certified 
application counselors.
    To reduce confusion about when gifts and promotional items can be 
provided to applicants and potential enrollees, we proposed to amend 
Sec. Sec.  155.210(d)(6) and 155.225(g)(4) to specify that gifts of any 
value (including third-party promotional items of any value) should 
never be provided to applicants or potential enrollees as an inducement 
for enrollment. We also proposed to specify that gifts that are not 
provided as an inducement for enrollment may be provided to applicants 
and potential enrollees if they do not exceed nominal

[[Page 12258]]

value.\40\ We proposed that this nominal value restriction would apply 
both to each individual gift and to the cumulative value of multiple 
gifts, including promotional items. We further proposed that the 
nominal value restriction on the cumulative value of multiple gifts 
would only apply to single encounters between the assister and an 
individual, and not to multiple encounters, so that assisters would not 
have to collect PII as a means of tracking the number and value of 
gifts provided to an individual consumer across multiple encounters, 
such as all encounters in a single calendar year or enrollment season. 
We noted that we would consider a single outreach or educational event 
to be a ``single encounter''; that is, the assisters subject to the 
proposed requirement would not be permitted to provide multiple gifts 
to the same consumer at the same outreach event if the cumulative value 
of those gifts exceeded nominal value.
---------------------------------------------------------------------------

    \40\ We have previously defined ``nominal value'' as a cash 
value of $15 or less, or an item worth $15 or less, based on the 
retail purchase price of the item, regardless of the actual cost. 
(79 FR 15807, 15831 (Mar. 21, 2014) and 79 FR 30239, 30283 (May 27, 
2014).
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    We proposed to define ``gifts,'' for purposes of Sec. Sec.  
155.210(d)(6) and 155.225(g)(4), to include gift items, gift cards, 
cash cards or cash, as well as promotional items that market or promote 
the products or services of a third party. Language in Sec. Sec.  
155.210(d)(6) and 155.225(g)(4) currently provides that gifts, gift 
cards, or cash may exceed nominal value for the purpose of providing 
reimbursement for legitimate expenses incurred by a consumer in an 
effort to receive Exchange application assistance, such as travel or 
postage expenses. We proposed to amend this language to indicate that 
the reimbursement of legitimate expenses, such as travel and postage 
expenses, when incurred by a consumer in an effort to receive Exchange 
application assistance, would not be considered a gift, and therefore, 
would not be subject to the proposed restrictions on providing gifts.
    Finally, existing regulations under Sec. Sec.  155.210(d)(7) and 
155.215(a)(2)(i) already prohibit the use of Exchange funds by 
Navigators and by non-Navigator assistance personnel subject to Sec.  
155.215 to purchase gifts or gift cards, or promotional items that 
market or promote the products or services of a third party, that would 
be provided to any applicant or potential enrollee. We did not propose 
to amend this provision.
    We are finalizing the amendments to Sec. Sec.  155.210(d)(6) and 
155.225(g)(4) as proposed.
    Comment: Many commenters supported our proposals, agreeing that the 
amendments clarify the rule and strike the right balance between 
allowing Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors to use gifts and 
promotional items in outreach while ensuring they are never used to 
induce enrollment. Some commenters asked for examples of permissible 
and impermissible gifts, promotional items, and legitimate expenses. 
Several commenters asked for guidance on the terms ``nominal'' and 
``products or services of a third party.'' One commenter suggested that 
our rule may conflict with the beneficiary inducement rules that apply 
to Medicare and State health care programs, potentially creating 
difficulties for Navigators that are health care providers.
    Response: As we noted in the preamble to the proposed rule, we have 
previously defined ``nominal value'' as a cash value of $15 or less, or 
an item worth $15 or less, based on the retail purchase price of the 
item, regardless of the actual cost (79 FR 15831 and 79 FR 30283). This 
nominal value limit applies to all gifts, including gift items, gift 
cards, cash cards, cash, and promotional items that market or promote 
the products or services of a third party. Some illustrative examples 
of permissible gifts and promotional items include pens, magnets, or 
key chains worth $15 or less each, including if such items bear the 
name or logo of a local business, or community or social service 
program. Such items may, for example, be provided to consumers at 
outreach and education events or at other forums attended by members of 
the general public, as long as they are not being provided as an 
inducement to enrollment. By ``inducing enrollment,'' we mean 
conditioning receipt of the items on a consumer's actually enrolling in 
coverage, as opposed to encouraging consumers to seek or receive 
application or other authorized assistance. To the extent that Federal 
or State health program beneficiary inducement rules apply to entities 
or individuals who also serve as Navigators, non-Navigator assistance 
personnel subject to Sec.  155.215, or certified application 
counselors, those entities and individuals must comply with those rules 
as well as the applicable program rules under Sec. Sec.  155.210(d)(6), 
155.215(a)(2)(i), and 155.225(g)(4).
d. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    We proposed additional standards under Sec.  155.220 for oversight 
and enforcement of standards applicable to agents, brokers, and web-
brokers who facilitate enrollment in the FFEs. These standards were 
proposed under the Secretary's authority to establish procedures for 
States to permit agents and brokers to assist consumers enrolling in 
QHPs through the FFEs, as described in sections 1312(e) of the 
Affordable Care Act.
    In the proposed rule, we explained that we were considering an 
option to enhance the direct enrollment process, so that an applicant 
who initiated enrollment directly with a web-broker entity using the 
web-broker's non-Exchange Web site could remain on the web-broker's Web 
site to complete the application and enroll in coverage, instead of 
being redirected to the Exchange Web site to complete the application 
and receive an eligibility determination. Under the proposal, the web-
broker's Web site could obtain eligibility information from the 
Exchange to support the consumer in selecting and enrolling in a QHP 
with Exchange financial assistance. Accordingly, we proposed to revise 
Sec.  155.220(c)(1) to ensure that the Exchange maintained its role in 
determining eligibility when an applicant initiates enrollment with a 
web-broker on the web-broker's non-Exchange Web site, by requiring the 
agent or broker to ensure that the applicant completed an eligibility 
verification and enrollment application through the Exchange Web site, 
or an Exchange-approved web service using the FFE single streamlined 
application. Additionally, we solicited comments on the proposal to 
require web-broker entities to use the FFE single streamlined 
application without deviation from the language of the application 
questions and the sequence of information required for an eligibility 
determination or redetermination. We solicited comments on how much 
flexibility web-broker entities should be afforded relative to the 
consumer experience on its non-Exchange Web site. We also sought 
comment on additional matters HHS should consider to improve the direct 
enrollment process, such as requiring HHS approval of alternative 
enrollment pathway processes, additional consumer safeguard 
protections, additional web-broker reporting requirements, and

[[Page 12259]]

establishing more robust privacy and security requirements including 
requiring adoption of cyber security best practices and specificity as 
to the collection and use of consumer information. We also proposed to 
adopt parallel standards for the use of QHP issuer Web sites under 
Sec.  156.265(b)(2)(ii). See III.G.5.c of this preamble for a 
discussion of the amendments to Sec.  156.265(b)(2)(ii).
    We proposed to amend paragraph (g)(2)(ii) to clarify that HHS could 
determine an agent or broker to be noncompliant if HHS finds that the 
agent or broker violated any term or condition of the agreement with 
the FFEs required under paragraph (d) of this section, or any term or 
condition of an agreement with the FFEs required under Sec.  
155.260(b). We proposed to add Sec.  155.220(g)(5) to address 
suspension or termination of an agent's or broker's agreements with the 
FFEs in cases involving potential fraud or abusive conduct. We proposed 
in Sec.  155.220(g)(5)(i)(A) that if HHS reasonably suspected that an 
agent or broker may have engaged in fraud or abusive conduct using PII 
of an Exchange applicant or enrollee, or in connection with an Exchange 
enrollment or application, HHS could suspend the agent's or broker's 
agreement and accompanying registration with the FFEs for up to 90 
calendar days, with the suspension effective as of the date of the 
notice to the agent or broker. We further proposed under Sec.  
155.220(g)(5)(i)(B) if the agent or broker failed to submit information 
during this 90-day period, HHS could terminate the required agreements 
for cause effective immediately upon expiration of the 90-day period, 
under Sec.  155.220(g)(5)(ii). In Sec.  155.220(g)(5)(ii), we proposed 
that if HHS reasonably confirmed the credibility of an allegation that 
an agent or broker engaged in fraud or abusive conduct using personally 
identifiable information of Exchange enrollees or applicants, or in 
connection with an Exchange enrollment or application, or was notified 
by a State or law enforcement authority of the State or law enforcement 
authority's finding or determination of fraud or behavior that would 
constitute abusive conduct in such a circumstance, HHS would notify the 
agent or broker and terminate, immediately and permanently, the agent's 
or broker's agreements with the FFEs. In Sec.  155.220(g)(5)(iii), we 
proposed that during the 90-day suspension period, as well as following 
the termination of the FFE agreements, the agent or broker would not be 
registered with the FFEs, or be permitted to assist with or facilitate 
enrollment through the FFEs, or assist individuals in applying for 
Exchange financial assistance for QHPs. For consistency with these 
proposed termination standards, we proposed corresponding updates to 
paragraphs (g)(3) and (4), and proposed amending paragraph (f)(4) to 
remove the unnecessary reference to paragraph (g).
    We proposed adding paragraph Sec.  155.220(j) to establish 
standards of conduct for agents and brokers that assist consumers to 
enroll in coverage through the FFEs to protect consumers and ensure the 
proper administration of the FFEs. In Sec.  155.220(j)(1)(i) through 
(iii), we proposed that an agent or broker that assisted with or 
facilitated enrollment of qualified individuals, qualified employers, 
or qualified employees through an FFE, or assisted individuals in 
applying for Exchange financial assistance for QHPs sold through the 
FFEs, would have to: (1) Execute the required agreement under Sec.  
155.260(b)(2); (2) register with the FFEs as described in paragraph 
(d)(1) of this section; and (3) comply with the FFE standards of 
conduct proposed in this paragraph. In Sec.  155.220(j)(2), we proposed 
that the agents and brokers described in paragraph (j)(1) would have 
to: (1) Provide consumers with correct information, without omission of 
material fact, regarding the FFEs, QHPs (including SADPs \41\) offered 
through the FFEs and insurance affordability programs, and refrain from 
marketing or conduct that is misleading or coercive, or discriminates 
based on race, color, national origin, disability, age, sex, gender 
identity, or sexual orientation; (2) provide the FFEs with correct 
information under section 1411(b) of the Affordable Care Act; (3) 
obtain the consent of the individual, employer, or employee prior to 
assisting with or facilitating enrollment in coverage through an FFE, 
or prior to assisting with the application for financial assistance for 
QHPs sold through the FFEs; (4) protect consumer PII in accordance with 
Sec.  155.260(b)(3) and the agreement described in Sec.  155.260(b)(2); 
and (5) comply with all applicable Federal and State laws and 
regulations. In Sec.  155.220(j)(3), we proposed that an agent or 
broker would be considered to be in compliance with the standard of 
conduct requirements to provide consumers and the FFEs with correct 
information if HHS determined that the agent or broker had a reasonable 
cause for any failure to provide correct information and that the agent 
or broker acted in good faith. We also proposed that the violation of 
these standards could result in the termination for cause of the 
agent's or broker's agreements with the FFEs as described in Sec.  
155.220(g), or the imposition of other penalties as authorized by law.
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    \41\ As detailed in the Exchange Establishment Rule (77 FR 
18309, 18315) (Mar. 27, 2012), with some limited exceptions, SADPs 
are considered a type of QHP. We expect agents, brokers, and web-
brokers registered with the FFEs to comply with applicable rules and 
requirements in connection with SADPs, just as they must comply with 
those rules in connection with medical QHPs.
---------------------------------------------------------------------------

    In Sec.  155.220(k), we proposed penalties for agents and brokers 
registered with the FFEs other than termination of the agreements with 
the FFEs. In Sec.  155.220(k)(1), we proposed that if HHS determined 
that an agent or broker failed to comply with the requirements of Sec.  
155.220 he or she could be denied the right to enter into an agreement 
with the FFEs in future years, and could be subject to CMPs as 
described in Sec.  155.285 if the violation involved the provision of 
false or fraudulent information to an Exchange or the improper use or 
disclosure of information. In Sec.  155.220(k)(2), we proposed that the 
denial of the right to enter into an agreement with the FFEs in future 
years would be subject to 30 calendar days' advance notice and the 
reconsideration process established in Sec.  155.220(h). The imposition 
of CMPs for the provision of false or fraudulent information to an 
Exchange or the improper use or disclosure of information would be 
subject to the advance notice and appeals process described in Sec.  
155.285.
    Finally, in Sec.  155.220(l) we proposed that an agent or broker 
who enrolled qualified individuals, qualified employers, or qualified 
employees in coverage in a manner that constituted enrollment through 
an SBE-FP, or assisted individual market consumers with submission of 
applications for Exchange financial assistance through an SBE-FP would 
have to comply with all applicable FFE standards in Sec.  155.220.
    Comment: The proposal for the enhanced direct enrollment process 
received broad support by many commenters, who stated they believe 
enabling the applicant to remain on a web-broker's or issuer's non-
Exchange Web site would improve the consumer experience by supporting 
more seamless transitions than the existing direct enrollment 
functionality. One commenter stated the proposal would increase 
enrollment, as the current direct enrollment functionality requires a 
consumer to be directed back and forth between the direct enrollment 
Web site and HealthCare.gov, leading some

[[Page 12260]]

consumers to drop out of the process before completing enrollment out 
of frustration over operational ineffeciencies or duplication. 
Commenters also broadly supported our proposal for the Exchange to 
continue being the entity responsible for making eligibility 
determinations and to continue to be the system of record for 
enrollment. Other commenters opposed the proposal, citing the increased 
risk of consumers receiving inaccurate or misleading information that 
might affect eligibility determinations and consumer choice. Some 
commenters urged HHS to take several considerations into account before 
moving forward with the proposal, including the potential negative 
impact on Medicaid-eligible populations.
    FFE single streamlined application. We proposed to require web-
brokers to use the single streamlined application without deviation 
from the language of the application questions and the sequence of 
information required for an eligibility determination. In support of 
the proposal, a few commenters stated that HHS should grant entities 
flexibility in the application process to enable integration into 
existing processes, and enable more innovation for a better consumer 
experience. Some commenters recommended that HHS instead use the FFE 
single streamlined application as a baseline, and allow web-brokers the 
opportunity to tailor applications for specific target populations. One 
commenter stated that consumers should only be required to answer 
questions that are relevant to their personal circumstances, so as to 
reduce consumer burden and application time. Another commenter stated 
that allowing minor changes to the wording of specific questions could 
help enhance the consumer experience, so long as the overall meaning of 
the question is maintained.
    Other commenters called HHS's proposal to require web-brokers and 
issuers to strictly adhere to existing eligibility Exchange language a 
``prudent safeguard,'' citing concerns that enhanced direct enrollment 
would increase the risk of consumers receiving inaccurate or misleading 
information that might affect eligibility determinations and consumer 
choice, and the potential for consumer confusion around communication 
with Exchanges.
    HHS approval of alternative enrollment pathway processes. HHS 
solicited comments on requiring HHS approval of alternative enrollment 
processes in the proposed rule. Some commenters urged that HHS 
implement the approval process in a collaborative and flexible manner, 
with clear and concise guidelines. Other commenters strongly 
recommended that HHS confirm that all web-brokers adhere to certain 
criteria prior to offering enhanced direct enrollment services, 
including ensuring web-broker's application questions and flows provide 
accurate eligibility assessments and meet other requirements, such as 
providing appropriate consumer support, displaying all plan information 
fully and accurately, and demonstrating compliance with privacy and 
security standards via regular audits. One commenter asked HHS to adopt 
a ``check-list and review of required plan choice elements'' template 
that would enable HHS to validate the entities' plan choice displays, 
tools, and elements of their application. Another commenter encouraged 
HHS to minimally require web-brokers to submit a Minimum Acceptable 
Risk Standards for Exchanges ``(MARS-E) Compliance Manual'' as a pre-
condition to offering the enhanced direct enrollment eligibility 
service, which would detail how they manage and comply with MARS-E 
compliance processes. One commenter stated that HHS should require web-
based entities to seek prior approval for alternative direct enrollment 
processes by presenting their alternatives to HHS for review, before 
using any display features or tools that vary from those available on 
the Exchange Web site.
    Timing. We received many comments on the timing related to 
implementation of the enhanced direct enrollment proposal. Some 
commenters wanted an aggressive implementation timeline, urging HHS to 
finalize and implement the FFE single streamline application process 
early in 2016 so that testing could occur well in advance of the 2017 
Individual Market Open Enrollment period. Other commenters recommended 
HHS pursue a more measured approach, noting that developing, testing, 
and implementing the enhanced process will be a significant undertaking 
for HHS, web-brokers, and QHP issuers. One commenter stated that a 
measured approach would allow entities to use the Exchange approved web 
service for a transitional period alongside the traditional direct 
enrollment pathway. Another commenter urged that HHS wait several years 
before implementing the proposal, and gather and analyze data on the 
consumer experience with web-based entities during 2016, conduct an 
examination of its oversight of web-brokers and QHP issuers in 2017, 
and then propose any expansion with sufficient detail for 
implementation no earlier than 2018.
    Response: Based on the comments received, we are finalizing the 
proposal to enhance the direct enrollment process with some 
modifications, as noted below.
    We appreciate the many comments and recommendations on the direct 
enrollment proposal we received. While we believe that an enhanced 
direct enrollment process will provide a more seamless consumer 
experience, we agree with commenters that implementing the proposal 
will be a significant undertaking for HHS, web-brokers, and issuers, 
and that such an effort will require sufficient time for operational 
planning and preparation, such as identifying and testing the Exchange-
approved web services under Sec.  155.220(c)(1) that can be used to 
support the enhanced direct enrollment process, and ensuring privacy 
and security risks are addressed and mitigated. HHS will not provide 
such an option during the individual market open enrollment period for 
2017 coverage, but seeks to make this option available for the 
individual market open enrollment period for 2018 coverage. We intend 
to supplement the framework we are finalizing in this rule with more 
specific guidance and requirements in future rulemaking, such as 
specific guidelines for a pre-approval process under Sec.  
155.220(c)(4)(i)(F), and requirements for privacy and security. Until 
then, web-brokers must continue to comply with the current direct 
enrollment process, through which a consumer is directed to 
HealthCare.gov to complete the eligibility application, and all 
associated guidance. This means direct enrollment entities are not 
permitted at this time to use non-Exchange Web sites to complete the 
Exchange eligibility application or automatically populate data 
collected from consumers into HealthCare.gov through any non-Exchange 
Web site. Completion of the Exchange eligibility application on a non-
Exchange Web site, or collection of data through a non-Exchange Web 
site that is then used to complete the eligibility application, will be 
considered a violation of the direct enrollment entity's agreement with 
the FFEs.
    While enhanced direct enrollment will not be available in the 
individual market open enrollment period for 2017 coverage, we are 
finalizing our proposal to revise Sec.  155.220(c)(1) to enable web-
broker entities who use HHS-approved direct enrollment processes to 
facilitate enrollment through the FFEs to either ensure the applicant's 
completion of an eligibility verification and enrollment

[[Page 12261]]

through the Exchange Internet Web site as described in Sec.  155.405, 
or ensure that the eligibility application information is submitted for 
an eligibility determination through an Exchange-approved web service. 
This will allow applicants to complete the entire Exchange application 
and enrollment process on the web-broker's non-Exchange Web site. We 
believe this process will grant direct enrollment entities the 
operational flexibility to expand front-end, consumer-facing channels 
for enrollment, and provide consumers with a more seamless experience.
    However, we also share commenters' concerns that allowing this 
flexibility without additional protections in place may increase the 
risk of imprecise, inaccurate, or misleading eligibility results. In 
light of those considerations and the accompanying comments received, 
we are adding new Sec.  155.220(c)(3)(ii)(A) through (D) to clearly 
articulate the requirements associated with completing an Exchange 
eligibility application on a web-broker's non-Exchange Web site. These 
requirements may be amended over time as implementation activities 
begin and once experience is gained under the new process (once 
implemented).
    Consistent with the proposal in the proposed rule, Sec.  
155.220(c)(3)(ii)(B) requires all language related to application 
questions, and the sequence the questions are presented on the direct 
enrollment entity's non-Exchange Web site to be identical to that of 
the FFE Single Streamlined Application. We acknowledge the comments 
requesting deviations from the FFE single streamlined application to 
enhance the consumer experience, and are finalizing language permitting 
such deviations with HHS approval. We will only approve minor 
modifications that do not change the intent or meaning of the 
questions, decrease the probability of accurate answers and eligibility 
determinations, or affect the dependencies and structure of the dynamic 
application.
    We are also adding new Sec.  155.220(c)(3)(ii)(C), which sets out a 
more general requirement that any non-Exchange Web site facilitating 
the completion of an Exchange eligibility application ensure that all 
information necessary for the completion of the application related to 
the consumer's applicable eligibility circumstance are submitted 
through an Exchange-approved web service. New Sec.  
155.220(c)(3)(ii)(D) requires that the process used for consumers to 
complete the eligibility application on the non-Exchange Web site 
comply with all applicable Exchange standards, including Exchange 
notice requirements under Sec.  155.230 and Exchange privacy and 
security standards related to handling PII under Sec.  155.260(b).
    We have also renumbered the current requirements that apply when an 
Internet Web site of an agent or broker is used to complete the QHP 
selection process in new Sec.  155.220(c)(3)(i). No changes were made 
to these existing requirements or the accompanying regulatory text. We 
note that, as outlined in Sec.  155.220(c)(3)(ii)(A), these 
requirements would also apply when an Internet Web site of an agent or 
broker is used to complete the Exchange eligibility application.
    We agree with commenters that urged HHS to adopt an approval 
process to ensure that the web-broker non-Exchange Web site seeking to 
offer stand-alone direct enrollment eligibility services meets all 
applicable requirements in order to protect consumers. Accordingly, we 
have added Sec.  155.220(c)(4)(i)(F) to outline a process for HHS to 
verify that these entities have met all of the applicable requirements 
of this section before the non-Exchange Web site is used to complete 
the Exchange eligibility application.
    The primary objective of the new requirements outlined in Sec.  
155.220(c)(3)(ii) and (c)(4)(i)(F) is to ensure that the Exchange is 
able to produce an accurate eligibility determination from an 
eligibility application completed by a direct enrollment entity on a 
non-Exchange Web site for enrollment in a QHP offered through the 
Exchange, including eligibility for advance payments of the premium tax 
credit and cost-sharing reductions, as well as enrollments in Medicaid, 
CHIP or the Basic Health Program. Alignment with the FFE Single 
Streamlined Application regarding sequence and language on a non-
Exchange Web site to the FFE application is critical to ensuring that 
the information provided to the Exchange through the Exchange approved 
web-service represents a complete understanding of a consumer's 
circumstance, and is directly tied to ensuring accurate eligibility 
results. As noted above, HHS will consider allowing minor deviations 
from the standardized language, in order to improve readability or the 
consumer experience. We will provide guidance on the process for 
seeking approval to deviate from the standardized language.
    We clarify that the requirements related to the direct enrollment 
process rules are applicable to FFEs (including FFEs where States 
perform plan management functions) and SBE-FPs only, and would not 
apply to SBEs that do not use the HealthCare.gov platform, nor alter 
any State-specific rules related to Medicaid eligibility.
    Comment: HHS solicited feedback on experiences with enrollment 
through web-brokers, including any concerns with privacy and security 
of the information transmitted through web-brokers by expanding direct 
enrollment to incorporate the FFE single streamlined application and 
suggestions for improvements, including requiring additional 
information display requirements (such as the lowest cost plan at each 
metal level) beyond those outlined in Sec.  155.220(c)(3) to ensure 
that consumers understand basic information about cost and availability 
of qualified health plans. We received several comments opposing HHS 
implementing additional consumer protection and privacy and security 
standards with respect to the use of the enhanced direct enrollment 
process. Some commenters stated that existing web-broker requirements 
are sufficient to ensure appropriate consumer protections. One 
commenter said issuers and web-brokers should not be required to 
display the lowest-cost plan in each metal level because existing 
decision support tools can filter plans based on customer input. 
However, one commenter suggested requiring conspicuous notice to 
consumers to ensure they are aware they are applying for Exchange 
coverage. Several commenters provided specific recommendations to 
ensure that consumers understand that they are applying for Exchange 
coverage, including creating standardized application ID numbers that 
enable consumers to create HealthCare.gov accounts that would link to 
their web-broker accounts. Several commenters did not support requiring 
branding on web-brokers' sites, since many web-brokers build platforms 
for their strategic partners with an expectation of maintaining brand 
continuity. Others supported specific branding requirements, 
recommending a consumer-tested ``seal of approval'' to demonstrate that 
the web-broker's application was approved by HHS. One commenter 
suggested that direct enrollment non-Exchange Web sites display a 
standard disclaimer that notifies consumers that eligibility 
determinations for Exchange coverage are made by the Exchange and not 
the web-broker or issuer, and directing that any questions, concerns, 
or appeals related to an eligibility determination be submitted to the 
Exchange.
    Commenters generally agreed that web-brokers should continue to 
follow

[[Page 12262]]

existing privacy and security standards, including the Minimum 
Acceptable Risk Standards for Exchanges (MARS-E). Specific suggestions 
include requiring approval from CMS's Chief Information Security 
Officer, and the CMS Chief Technology Officer, providing CMS with a 
current MARS-E Compliance Manual and SSP System Security Plan (SSP) 
subject to verification via a pre-delegation audit by CMS, and 
appointing a designated, dedicated Privacy Officer responsible for 
attesting to the organization's adherence to privacy standards as 
outlined in the web-broker's agreement with HHS.
    Other comments raised several concerns about the privacy and 
security of consumers' personally identifiable information, 
particularly citizenship and immigration status, and asked HHS to 
clarify how these entities would collect, store, and use PII. Some 
commenters wanted HHS to clarify that web-based entities will not 
gather and store data beyond that necessary for HealthCare.gov, State-
based Exchanges, and Medicaid eligibility and enrollment via 
``cookies'' or other tracking tools, and would not store or use 
information gathered from consumers in the application process for 
marketing other products.
    Response: We agree that implementing the proposal will be a 
significant undertaking for HHS, and that privacy and security risks 
must be addressed prior to implementation. We intend for the standards 
outlined in this section to provide a framework to prepare for the 
implementation to support use of the enhanced direct enrollment option 
in future years. We will continue to consider commenters' 
recommendations on ensuring consumers are protected, and intend to 
propose further protections in future rulemaking.
    Comment: HHS also solicited comments on about the current agent and 
broker provisions in Sec.  155.220 as applied to web-brokers, including 
suggestions for improvements in the future, such as increased 
monitoring and oversight activities. Commenters supported HHS 
conducting regular audits over web-brokers. Additionally, some 
commenters supported ongoing monitoring of plan selection and 
enrollment patterns through comprehensive data analysis. Others stated 
that audits need to be conducted ``equitably,'' and that HHS should 
assist web-brokers in coming into compliance if violations are 
identified.
    Response: We agree with commenters that supported HHS conducting 
regular audits of agents and brokers under this section to ensure 
ongoing compliance with applicable standards. We are adding Sec.  
155.220(c)(5), which authorizes HHS to periodically monitor and audit 
agents and brokers approved under this subpart. This audit authority 
would extend to agents or brokers who follow the current direct 
enrollment pathway that uses a non-Exchange Web site to complete QHP 
selection, as well as agents or brokers who follow the enhanced direct 
enrollment pathway that uses a non-Exchange Web site to complete the 
Exchange eligibility application.
    Comment: One commenter stated that there was a drafting error in 
paragraph (f)(4). That paragraph relates to termination without cause, 
but the language in that paragraph uses the phrase ``for cause.''
    Response: We confirm the drafting error--we are correcting the 
paragraph to read ``without cause.''
    Comment: While many commenters supported the proposal for 
suspension and termination of an agent's or broker's agreements with 
the FFEs in cases of potential fraud or abusive conduct, several 
commenters opposed the proposal as an encroachment on, or preemption 
of, State law. These commenters asked that HHS refer instances of fraud 
and abuse to the State, encouraged the FFE to work closely with the 
State regulator to ensure consumers are protected, and urged HHS to 
allow the States to regulate agents licensed do business in their State 
``without interference.'' Commenters also requested that HHS coordinate 
with issuers on issues of agent and broker fraud, and inform issuers 
when HHS has notified a State's department of insurance regarding 
specific fraud or misconduct issues.
    Response: The proposal we are finalizing relating to agent or 
broker suspension or termination if HHS reasonably suspects fraud or 
abusive conduct pertains only to agents' and brokers' agreements and 
registration with the FFEs to assist consumers with enrollments through 
the FFEs; it does not otherwise interfere with any State authority to 
regulate agents or brokers who are licensed to business in their 
jurisdiction. While HHS may suspend or terminate the FFE agreements 
with an agent or broker, this suspension or termination would not 
impact State licensure of an agent or broker. As stated in the preamble 
to the proposed rule, the investigations and enforcement related to the 
conduct of agents and brokers with respect to enrollments through or 
interactions with the FFEs will be conducted in coordination with 
States. We are finalizing paragraph (g)(5)(ii) to clarify that HHS will 
limit terminations without 30-days advance notice to those situations 
where there is a finding or determination by a Federal or State entity 
that an agent or broker has engaged in fraud, or abusive conduct that 
may result in imminent or ongoing consumer harm. In response to 
comments received from the public on this matter, we are also adding 
paragraph (g)(6) to clarify that the State department of insurance or 
equivalent State producer licensing authority will be notified by HHS 
in cases of a suspension or termination of the agent's or broker's 
agreements and registration with an FFE effectuated under paragraph 
(g). HHS will also coordinate with affected QHP issuers if it will not 
impede any State or Federal law enforcement investigation and as 
permitted under applicable Federal or State law.
    Comment: Several commenters were concerned that the proposal did 
not afford sufficient due process protections to agents and brokers, 
and pointed out that a 90-day suspension period could prevent a wrongly 
accused agent or broker from participating in most or all of an 
individual market open enrollment period for a given plan year. These 
commenters urged HHS to provide notice and opportunity to respond 
before implementing a suspension, as well as provide further guidance 
on what would define `fraud' or `abusive conduct.' Commenters proposed 
measures such as suspending or terminating based on clear, unequivocal, 
and convincing evidence, a threat of immediate consumer harm, and the 
opportunity for an appeal hearing before an administrative law judge. 
Some commenters suggested that a 90-day suspension period may not be 
sufficient to conduct a full investigation, and suggested a longer 
timeframe for suspension as well as a reference to Sec.  155.1210 to 
emphasize the record retention obligation of an agent along with HHS's 
ability to access or audit agent and broker records.
    Response: Section 1313(a)(5) of the Affordable Care Act provides 
the authority to implement any measure or procedure that the Secretary 
determines is appropriate to reduce fraud and abuse in the 
administration of the Exchanges. We believe that a 90-day suspension is 
not an unreasonable timeframe where there is suspected fraud or abuse 
by an agent or broker, who may sell plans through the FFE not only 
during open enrollment but throughout the year. We note that a similar 
requirement for Medicare providers, 42 CFR 405.371, gives HHS the 
authority to suspend payments for at least 180 days where

[[Page 12263]]

there is reliable information that an overpayment exists, or there is a 
credible allegation of fraud. HHS intends to use this suspension and 
termination authority to stop further FFE enrollment activity by the 
agent or broker in cases where the misconduct may cause imminent or 
ongoing consumer harm. Further, we are modifying paragraph (g)(5)(i)(B) 
to require HHS to review and make a determination whether to lift the 
suspension within 30 days of receipt of evidence to rebut the 
allegation of fraud or abusive conduct. This provides an opportunity to 
limit the length of the suspension with the timely submission of 
rebuttal evidence.
    We are finalizing the proposed paragraphs (g)(5)(i)-(ii) so that 
suspension or termination will be effective starting on the date of the 
notice in cases of actions related to suspected fraud, or abusive 
conduct that may cause imminent or ongoing consumer harm; for other 
terminations for cause under paragraph (g)(1), agents and brokers will 
receive 30 days' notice with opportunity to respond prior to 
termination as currently described in paragraph (g)(3). We are 
finalizing proposed paragraph(g)(5)(i)(B) with modification, so that in 
cases where the agent or broker submits evidence during the suspension 
period, HHS will review it and make a determination whether to lift the 
suspension within 30 days of receipt of the evidence; if the rebuttal 
evidence fails to convince HHS to lift the suspension, or if the agent 
or broker fails to submit rebuttal evidence during the 90-day 
suspension period, HHS may terminate for cause the agent or broker's 
agreements with the FFEs under paragraph (g)(5)(ii).
    We note that Sec.  155.1210 applies to Exchanges and agents of 
Exchanges, but not agents of QHP issuers. However, agents and brokers 
are downstream entities of QHP issuers, and they should be bound by 
their agreement with the QHP issuer to provide access to records, under 
Sec.  156.340(b)(4), and maintain records in accordance with the 
standard at Sec.  156.705, and HHS may request those records as part of 
an investigation or audit.
    Comment: Commenters generally agreed with the standards of conduct 
proposed in Sec.  155.220(j) for agents and brokers as important 
consumer protections. One commenter suggested HHS go further in 
implementing standards for protecting PII, protected health information 
(PHI), and Federal tax information. Other commenters suggested that 
agents should be able to maintain flexibility to answer consumers' 
questions in a manner that is best understood by the consumers they 
serve, which may result in minor inaccuracies in the information 
provided to FFEs, and asked HHS to adopt a standard of good faith 
without the necessity of a finding of reasonable cause. Two commenters 
requested clarification of the requirement for consumer consent. 
Commenters also requested clarification on the prohibition on the use 
of the words ``exchange'' and ``marketplace'' in business names and Web 
sites since the words ``exchange'' and ``marketplace'' are common and 
have been part of the names of Web addresses of many long-standing 
insurance-related businesses that pre-date the Exchanges and are not 
intentionally misleading.
    Response: In addition to the standards of conduct requirements in 
Sec.  155.220(j), the FFE privacy and security agreement contains 
specific requirements for protecting PII, PHI, and Federal tax 
information. The requirement to provide accurate information to 
consumers is not intended to target generalities or minor imprecisions, 
but rather misrepresentations of material information that would affect 
a consumer's choice of coverage or subsidies. As described in preamble 
to the proposed rule,\42\ we would interpret Sec.  155.220(j)(2)(i), 
which requires agents, brokers and web-brokers to refrain from 
marketing or conduct that is misleading, to require that agents, 
brokers, and web-brokers avoid the use of the terms Marketplace or 
Exchange or other words in the name of a business or Web site if doing 
so could reasonably cause confusion with a Federal program or Web site. 
We intend to provide further information on the requirements for 
consumer consent under Sec.  155.220(j)(2)(iii) in future guidance.
---------------------------------------------------------------------------

    \42\ 80 FR 75526 (December 2, 2015).
---------------------------------------------------------------------------

    Comment: While several commenters approved of extending the FFE 
standards for agents and brokers to SBE-FP States, others wanted more 
flexibility for SBE-FP States to train, register, and provide oversight 
of agents and brokers. Commenters suggested allowing SBE-FPs to design 
and administer their own individual training and certification program 
with treatment of State-specific requirements and regulations that may 
not be adequately addressed by FFE training and registration. One 
commenter suggested that State-specific regulations and training 
materials should be made available for voluntary incorporation by the 
individual SBE-FP. Another commenter requested that all allegations of 
agent misconduct in SBE-FP States be referred to the State so State 
regulators can investigate the misconduct to see if additional consumer 
harm has occurred in off-Exchange sales.
    Response: Because agents and brokers will be accessing the Federal 
platform to enroll consumers in SBE-FP QHPs, we are finalizing Sec.  
155.220(l), to require that they be registered with HHS (which includes 
training through HHS or an HHS-approved vendor as described in Sec.  
155.222 for agents and brokers serving individual market consumers), 
and that that they comply with all applicable FFE standards in Sec.  
155.220. As stated above, HHS will work closely with State departments 
of insurance (or equivalent State regulators of agents and brokers) in 
SBE-FP States in oversight of agents and brokers. The roles and 
responsibilities of HHS and the State will be specified through the 
Federal platform agreement. While HHS will consider future alternatives 
that would allow SBE-FPs to provide Exchange training, we note that 
States may require licensed agents and brokers to receive State-
specific SBE-FP training as part of their continuing education to 
maintain a State license.
    We are finalizing these provisions as proposed, with the following 
modifications. We are finalizing Sec.  155.220(c)(1) to require agents 
or brokers to ensure an applicant's completion of an eligibility 
verification and enrollment application through an Exchange Internet 
Web site, or through an Exchange-approved Web service, subject to 
meeting the requirements under new paragraphs Sec.  155.220(c)(3)(ii) 
and (c)(4)(i)(F). To ensure that the information provided to the 
Exchange through non-Exchange Web sites represents a complete and 
accurate determination of a consumer's eligibility for enrollment 
through the FFEs, we are adding Sec.  155.220(c)(3)(ii)(B) to require 
all language related to application questions, and the sequence of 
questions presented on the agent or broker's non-Exchange Web site, to 
use the same language as the FFE single streamlined application in 
Sec.  155.405. We are also adding Sec.  155.220(c)(3)(ii)(C) to require 
all information for the consumer's applicable eligibility circumstances 
are submitted through an Exchange-approved Web service; and Sec.  
155.220(c)(3)(ii)(D) to require the process used for consumers to 
complete the eligibility application to comply with all applicable 
Exchange standards, including Sec. Sec.  155.230 and 155.260(b). To 
ensure maximum consumer protection, we are also adding new Sec.  
155.220(c)(4)(i)(F) to outline a process for HHS to verify entities 
meet all requirements of this section prior to

[[Page 12264]]

using a non-Exchange Web site to complete the Exchange eligibility 
application. In addition, we are adding Sec.  155.220(c)(5) to enable 
HHS to periodically monitor and audit entities to assess compliance 
with standards in this section. We are correcting an error in paragraph 
(f)(4) to change ``for cause'' to ``without cause.'' We are finalizing 
(g)(5)(i)(A) to add ``that may cause imminent or ongoing consumer 
harm'' after ``abusive conduct.'' To clarify the process for submitting 
evidence to rebut the allegation of fraud or abusive conduct, we are 
amending paragraph (g)(5)(i)(B) to add that if the agent or broker 
submits such evidence during the suspension period, HHS will review the 
evidence and make a determination whether to lift the suspension within 
30 days after HHS's receipt of evidence. If the rebuttal evidence does 
not persuade HHS to lift the suspension, or if the agent or broker 
fails to submit rebuttal evidence during the suspension period, HHS may 
terminate the agent's or broker's agreements required under paragraph 
(d) of this section and under Sec.  155.260(b) for cause under 
paragraph (g)(5)(ii) of this section. We are changing the language in 
paragraph (g)(5)(ii), relating to grounds for termination without 
notice. The proposed rule stated that if HHS reasonably confirms the 
credibility of an allegation that an agent or broker engaged in fraud 
or abusive conduct (or is notified by a State or law enforcement 
authority of the State or law enforcement authority's finding or 
determination of fraud or behavior that would constitute abusive 
conduct). Based on comments discussed above, we are revising this 
provision in order to clarify the grounds for termination without 
advance notice and the role of the State.
    We are also eliminating a redundancy within the proposed rule. 
Paragraph (g)(5)(ii), as originally proposed, described the termination 
of the agent's or broker's agreement with the Exchange under Sec.  
155.260(b) as of the date of the notice. Consequently, to reduce 
duplication, we are deleting a similar sentence from (g)(5)(iii). We 
are adding paragraph (g)(6) so that the State department of insurance 
or equivalent State agent or broker licensing authority will be 
notified in cases of suspensions or terminations effectuated under 
paragraph (g).
    Finally, we have made a small number of non-substantive changes to 
the rule to make language consistent as well as to clarify the date on 
which the 30-day window for reconsideration requests begins.
e. Standards for HHS-Approved Vendors of FFE Training for Agents and 
Brokers (Sec.  155.222)
    In the proposed rule, we proposed changes to the standards for HHS-
approved vendors of FFE training for agents and brokers outlined in 
Sec.  155.222. To prevent duplication with HHS functions, we proposed 
eliminating the requirement that vendors perform information 
verification functions, including State licensure verification and 
identity proofing, as well as other changes to improve the vendor 
training model.
    To reflect that HHS-approved vendors would no longer be required to 
perform information verification functions, we proposed amending Sec.  
155.222(a)(1) to provide that a vendor must be approved by HHS, and 
removing the reference to information verification. We also proposed in 
Sec.  155.222(a)(2) to remove the requirement that vendors must require 
agents and brokers to provide proof of valid State licensure. 
Consistent with these changes, we proposed amending Sec.  155.222(b)(1) 
through (5) and (d) to remove standards for information verification, 
identity proofing, verification of agents' and brokers' valid State 
licensure, and all related standards that support these functions. We 
proposed to eliminate the requirements in paragraphs (b)(1)(i) through 
(ii) to submit an application demonstrating prior experience with 
verification of State licensure and identity proofing, and instead 
combine into paragraph (b)(1) the existing requirements to demonstrate 
prior experience with online training and technical support for a large 
customer base. In paragraph (b)(2) we proposed to eliminate the 
requirement to adhere to HHS specifications for content, format, and 
delivery of information verification. In paragraph (b)(4) we proposed 
to amend the standards for the agreement that vendors must execute with 
HHS, to eliminate the requirement that vendors implement information 
verification processes. We proposed amending Sec.  155.222(b)(5) and 
(d) to remove references to information verification.
    Other proposed changes to this section incorporated the proposed 
standards for SBE-FPs, privacy and security measures, and technical 
support requirements. In paragraph (b)(2), we proposed to include SBE-
FP States in the requirement to offer continuing education units (CEUs) 
in five FFE States. In paragraph (b)(3) we proposed to eliminate the 
requirement that vendors collect, store, and share with HHS all data 
from agent and broker users of the vendor's training; instead we 
proposed that vendors would only be required to collect, store and 
share with HHS FFE training completion data. We also proposed adding a 
paragraph (b)(6) to require vendors to provide technical support to 
agent and broker users of the vendor's FFE training as specified by 
HHS. In preamble, we noted that HHS has the authority to require 
approved vendors to provide technical support, as well as FFE training, 
in accordance with HHS guidelines and in a manner and format that 
complies with Section 508 of the Rehabilitation Act of 1973.\43\ We 
also proposed that, the World Wide Web Consortium's Web Content 
Accessibility Guidelines (WCAG) 2.0 Level AA standards \44\ could also 
be considered an acceptable national standard for Web site 
accessibility.
---------------------------------------------------------------------------

    \43\ 80 FR 75487, 75528 (December 2, 2015).
    \44\ For more information see, the WCAG Web site at http://www.w3.org/TR/WCAG20/.
---------------------------------------------------------------------------

    Comment: Commenters supported the proposed improvements to 
standards for vendors that wish to be approved by HHS to offer agent 
and broker FFE training. They supported the proposed change to Sec.  
155.222 that would eliminate the requirement that vendors conduct 
identity-proofing, as the current years' experience indicated that it 
was not needed and was duplicative of existing Exchange practices. They 
also supported the proposed requirement that vendors offer tier one 
help desk support for agent and broker users. One commenter requested 
that vendors be able to provide an additional level of help desk 
support (that is, tier two support) to brokers who were having trouble 
navigating the CMS Enterprise Portal. The commenter also suggested that 
scripted responses, reflecting vendor input, be provided to vendors at 
least two weeks prior to the FFE training launch. One commenter 
supported the provisions at Sec.  155.222(b)(3) that require vendors to 
share only training completion data with HHS, as opposed to all data 
about users, and asked that HHS use that data to provide consumers with 
information about the availability of the assistance that agents and 
brokers provide.
    Response: HHS will continue to work with approved vendors to 
enhance customer service and technical support to agents and brokers. 
Requirements for vendors' customer support and help desks will be 
included in guidance provided to conditionally approved vendors. All 
agents and brokers who successfully complete FFE training through an 
approved vendor or the CMS Marketplace Learning Management System 
(MLMS), in addition to other

[[Page 12265]]

FFE registration steps, will be added to Find Local Help if they choose 
to make their contact information publicly available.
    We are finalizing these provisions as proposed.
f. Standards Applicable to Certified Application Counselors (Sec.  
155.225)
    We proposed to amend Sec.  155.225(b)(1) to provide that certified 
application counselor designated organizations must, as a condition of 
their designation as certified application counselor organizations by 
the Exchange, provide the Exchange with information and data related to 
the number and performance of the organization's certified application 
counselors, and about the consumer assistance being provided by the 
organization's certified application counselors, upon request, in the 
form and manner specified by the Exchange.
    We explained that Sec.  155.225(b)(1)(ii) already requires 
certified application counselor designated organizations to maintain a 
registration process and method to track the performance of certified 
application counselors, but it does not specify the type of performance 
information that must be tracked, nor does it require that information 
be provided to the Exchange. We stated that our proposed amendment 
would give Exchanges valuable information that will aid in their 
oversight of certified application counselor programs and improve 
Exchanges' understanding of the scope of consumer assistance being 
provided in the Exchange service area. The requirement would also 
improve the consumer assistance functions of the Exchange in other 
significant ways, for example, by providing information that could help 
an Exchange focus its outreach and education efforts, target its 
recruitment of certified application counselor organizations, and 
identify the need for increased technical assistance and support for 
certified application counselor organizations.
    We explained that under this proposal, Exchanges could establish 
reporting standards tailored to their own specific needs and 
objectives. In States with FFEs, we proposed that HHS would collect 
information and data from certified application counselor designated 
organizations on a monthly basis beginning in January 2017. We proposed 
that the FFEs would require these organizations to report, at a 
minimum, data regarding the number of individuals who have been 
certified by the organization; the total number of consumers who 
received application and enrollment assistance from the organization; 
and of that number, the number of consumers who received assistance 
applying for and selecting a QHP, enrolling in a QHP, or applying for 
Medicaid or CHIP. We anticipated that the monthly reports submitted to 
the FFEs would provide information and data from the preceding month, 
and would be submitted electronically, through HIOS or another 
electronic submission vehicle. We also said that we expected that some 
of the data that FFEs would require from certified application 
counselor designated organizations would be similar to what is 
collected from Navigator grantees in the FFEs.\45\ We explained that we 
did not expect this information collection to include consumers' PII. 
We requested comments on our proposal, on the scope of information and 
data that Exchanges should collect, and on HHS's specific proposals for 
collecting information and data from certified application counselor 
organizations in the FFEs, including the proposed scope and timing of 
reports by these organizations to the FFEs.
---------------------------------------------------------------------------

    \45\ The data collection requirements for FFE Navigator grantees 
in 2015-2016 are specified in the Information Collection Request 
(OMB control number 0938-1215) under the Cooperative Agreement to 
Support Navigators in Federally-facilitated and State Partnership 
Exchanges (see the Paperwork Reduction Act package associated with 
80 FR 36810). http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201507-0938-001.
---------------------------------------------------------------------------

    We are finalizing this provision largely as proposed, with a 
modification to the frequency and timing of reporting required by FFEs, 
from a monthly basis beginning in January 2017, to a quarterly basis 
beginning with reports for the third quarter of calendar year 2017.
    Comment: We received mixed comments related to our proposal to 
collect data from certified application counselor organizations. Many 
commenters supported the proposal, noting the value of tracking 
performance data. Many commenters also requested that we coordinate 
with the Health Resources and Services Administration (HRSA), which has 
reporting requirements related to their Affordable Care Act Health 
Center Outreach and Enrollment Assistance grants, in order to reduce 
duplication and administrative burden for Federally Qualified Health 
Centers that are both HRSA grantees and serving as FFE-designated 
certified application counselor organizations. We also received several 
specific suggestions for data elements to be collected by Exchanges, 
including metrics related to re-enrollment, assistance to consumers 
with limited English proficiency, and post-enrollment activities. One 
commenter requested that we develop a means for certified application 
counselor organizations to voluntarily report additional information 
that falls outside of the proposed performance measures.
    Response: We agree that in general, tracking performance data will 
enhance the Exchanges' ability to oversee and support certified 
application counselor organizations, target outreach and education 
efforts, and identify training needs. In FFEs, we believe the 
information and data reporting we proposed aligns well with HRSA's 
Affordable Care Act Health Center Outreach and Enrollment Assistance 
grant reporting metrics. We also appreciate commenters' suggestions for 
additional FFE data elements to be reported. However, to minimize the 
burden on certified application counselor organizations, we are not 
adding to or changing the kind of information and data to be collected 
in FFEs.
    Comment: A few commenters opposed this proposal, arguing that the 
requirements would be overly burdensome and could lead some certified 
application counselor organizations to discontinue their programs. Many 
commenters urged us to minimize the burden associated with certified 
application counselor performance data reporting. Commenters expressed 
concern that unfunded reporting burdens would further reduce the number 
of organizations able to provide critical enrollment assistance. 
Several commenters expressed concern regarding the scope and frequency 
of the proposed FFE reporting requirements, and recommended requiring 
less frequent reporting.
    Response: We intend that any FFE information collection be 
straightforward, and place little burden on certified application 
counselor organizations, particularly given the resource constraints 
faced by many certified application counselor organizations. We 
recognize that certified application counselor organizations are not 
expected or required to be funded by Exchanges. In FFEs, to help 
minimize any burden on certified application counselors and certified 
application counselor organizations, while still providing FFEs enough 
information to meaningfully improve oversight of certified application 
counselor programs, we are finalizing a quarterly, rather than monthly, 
reporting schedule, beginning with reports for the third quarter of 
calendar year 2017, and are otherwise finalizing the provision as

[[Page 12266]]

proposed. Quarterly reporting submitted to the FFEs will be aligned 
with calendar year quarters (that is, Quarter 1: January 1-March 31; 
Quarter 2: April 1-June 30; Quarter 3: July 1-September 30; and Quarter 
4: October 1-December 31). Quarterly reports submitted to the FFEs 
should provide information and data from the quarter and will be due 30 
days after the end of the quarter. For example, the first report that 
will be due under this rule, the third quarter report for calendar year 
2017, will cover the period from July 1, 2017 through September 30, 
2017, and will be due October 30, 2017. This quarterly reporting period 
and deadline will generally align with both the FFE Navigator grant 
metrics and HRSA's Affordable Care Act Health Center Outreach and 
Enrollment Assistance grant reporting metrics. FFE Navigator quarterly 
reports are also due 30 days after the end of the quarter, and the 
quarterly reports under HRSA's grants are due approximately 10-15 days 
after the end of the quarter. We believe that quarterly reports will 
provide the FFEs with sufficient information to meaningfully improve 
oversight of certified application counselor programs.
    We believe our final rule strikes the right balance between 
minimized burden and effective monitoring, and that it will improve the 
consumer assistance functions of the Exchange by providing Exchanges 
with information that could help focus their outreach and education 
efforts, target recruitment of certified application counselor 
organizations, and identify the need for increased technical assistance 
and support for certified application counselor organizations. We also 
remind SBEs (including SBE-FPs) that this provision gives them the 
option, but does not require them, to establish reporting standards and 
collect data from certified application counselor organizations, 
because the rule only requires organizations to provide data and 
information to the Exchange upon the Exchange's request.
    Comment: We received many comments requesting additional guidance 
regarding performance metrics and the submission process for FFE 
reporting. Commenters requested clear guidance and instructions on 
defining the specific data elements to ensure that organizations can 
easily and consistently report data. In addition, commenters requested 
that the system for FFE reporting be easy to understand and access, and 
that HHS provide adequate training and support for the system. We 
received many comments suggesting that the FFE leverage existing IT and 
data collection platforms to avoid duplicative efforts. For example, 
commenters noted that certified application counselors working in FFEs 
provide their identification number and organization number on 
applications submitted through HealthCare.gov and that this number 
should be used to quantify the number of clients who received 
application assistance. Commenters also suggested that the FFEs track 
the number of certified application counselors through the FFE online 
training system.
    Response: In FFEs, additional guidance on the reporting 
requirements will be published through instructions and trainings. We 
anticipate that quarterly reports submitted to FFEs would provide 
information and data from the preceding quarter, and would be submitted 
electronically, through HIOS or another electronic submission vehicle. 
We have considered commenters' suggestions related to alternative 
collection methods, but have significant concerns with the quality, 
completeness, and accuracy of data collected using these methods. The 
certified application counselor identification number field on 
applications submitted through HealthCare.gov is not a required field, 
and therefore is underreported. In addition, this number would not 
account for assistance certified application counselors provide to 
consumers who do not complete an application through HealthCare.gov. 
Tracking the number of certified application counselors in FFEs through 
our online training system only tracks who has completed the FFE 
training, not who has been formally certified. In FFEs, designated 
certified application counselor organizations, not FFEs, certify 
individual certified application counselors, and completion of the FFE 
training may be only one of several criteria prerequisite to 
certification. For example, certified application counselor 
organizations may require additional employee training, and some States 
have additional requirements that must be met before an individual can 
be certified as a certified application counselor. By collecting more 
accurate information, we believe FFEs will be better positioned to 
ensure adequate assistance is available to consumers.
    Comment: A few commenters agreed that SBEs should have the option 
to establish their own reporting requirements to align with their 
needs. A few commenters requested that SBEs be allowed an exemption 
from this proposal if they determine that the administrative costs are 
too burdensome. One commenter requested that HHS establish limits on 
both the scope and frequency of performance data reporting requirements 
in all Exchanges. Commenters also noted that certified application 
counselor organizations that operate under the umbrella of national 
organizations would benefit from standardized reporting requirements 
across all Exchanges.
    Response: In SBEs, including SBE-FPs, this provision only requires 
that organizations submit information and data to the SBE upon request, 
in the form and manner specified by the SBE, and therefore affords SBEs 
the flexibility to establish standards appropriate to their own 
specific needs and objectives. SBEs, including SBE-FPs, may weigh any 
increased administrative costs of requiring regular reports against the 
benefits of having additional information about the consumer assistance 
landscape in their State and decide whether, how, and when to collect 
data from certified application counselor organizations. In addition, 
we encourage SBEs to take into consideration the impact their reporting 
requirements will have on organizations that also serve as certified 
application counselor organizations in States with an FFE. We encourage 
SBEs to consider using, at a minimum, the data elements used by the 
FFEs, in order to minimize the burden on organizations that also serve 
as certified application counselor organizations in States with an FFE, 
but they are not required to do so if they do not believe that doing so 
fits their State's circumstances.
    As discussed earlier in this preamble, in the discussion of the 
amendments to Sec.  155.210(d)(6), we proposed to amend Sec.  
155.225(g)(4), which prohibits certified application counselors in all 
Exchanges from providing certain kinds of gifts and promotional items 
to an applicant or potential enrollee. For the same reasons discussed 
above, we proposed to amend Sec.  155.225(g)(4) consistent with our 
proposed amendments to Sec.  155.210(d)(6). Based on comments received, 
discussed above with the amendments to Sec.  155.210(d)(6), we are 
finalizing this provision as proposed.
g. Privacy and Security of Personally Identifiable Information (Sec.  
155.260)
    Section 155.260(a)(1) refers to insurance affordability programs, 
as defined in Sec.  155.20. We proposed to make a technical correction 
to this paragraph so that Sec.  155.300, which contains the definition 
of insurance affordability programs, is referenced instead. We are 
finalizing this provision as proposed.

[[Page 12267]]

h. Oversight and Monitoring of Privacy and Security Requirements (Sec.  
155.280)
    Section 155.280(a) permits HHS to oversee and monitor the FFEs and 
non-Exchange entities associated with FFEs to ensure compliance with 
the privacy and security standards established and implemented by an 
FFE under Sec.  155.260. Section 155.280(a) also provides authority for 
HHS to monitor State Exchanges for compliance with the privacy and 
security standards established and implemented by the State Exchanges 
under Sec.  155.260. We proposed amending paragraph (a) to permit HHS 
to also oversee and monitor SBE-FPs' compliance with the privacy and 
security standards established and implemented by an FFE under Sec.  
155.260.
    Comment: We received only a few comments on this proposal. A few 
commenters supported extending HHS's authority to oversee and monitor 
privacy and security standards to SBE-FPs, but expressed concern that 
since SBE-FPs conduct some operations themselves, HHS should be 
required to oversee and monitor SBE-FPs to ensure protection of 
consumer PII.
    Response: We agree with the commenter that it is critical to ensure 
protection of consumer's PII, as well as ensure cybersecurity 
generally, across all Exchange models. We are committed to continue 
working with States to ensure compliance with all State and Federal 
requirements related to Exchanges, including Exchange privacy and 
security standards. We are finalizing the rule as proposed.
4. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Options for Conducting Eligibility Determinations (Sec.  155.302)
    We proposed to amend Sec.  155.302(a) by adding an option for an 
SBE-FP to satisfy the requirement of conducting eligibility 
determinations by relying on HHS to carry out eligibility determination 
activity and other requirements within subpart D, through a Federal 
platform agreement. We did not receive any comments on this proposal, 
and are finalizing it as proposed.
b. Eligibility Process (Sec.  155.310(h))
    We proposed to amend Sec.  155.310(h), which currently directs the 
Exchange to notify an employer that an employee has been determined 
eligible for Exchange financial assistance. We proposed to revise this 
requirement so that the Exchange must notify an employer that an 
employee has been determined eligible for Exchange financial assistance 
only if the employee has also enrolled in a QHP through the Exchange. 
We also proposed to revise paragraph (h)(2) so that a notice sent in 
accordance with Sec.  155.310(h) must indicate that an employee has 
been determined eligible for Exchange financial assistance and has 
enrolled in a QHP through the Exchange. We clarified that for purposes 
of Sec.  155.310(h), an employee is determined eligible for cost-
sharing reductions when the employee is determined eligible for cost-
sharing reductions based on income in accordance with Sec.  155.305(g) 
or Sec.  155.350(a).
    With regard to the timing of the employer notification required 
under paragraph (h), we proposed that the Exchange may choose to either 
(a) notify employers on an employee-by-employee basis as eligibility 
determinations are made for Exchange financial assistance and 
enrollment in a QHP through the Exchange, or (b) notify employers for 
groups of employees who are determined eligible for Exchange financial 
assistance and enroll in a QHP through the Exchange. Under both 
options, the Exchange must notify employers within a reasonable 
timeframe following any month an employee was determined eligible for 
either form of Exchange financial assistance and enrolled in a QHP, 
with the goal to notify employers as soon as possible to provide the 
greatest benefit to enrollees. We sought comment on these proposals.
    Comment: Many commenters supported the requirement that an Exchange 
must notify an employer that an employee has been determined eligible 
for Exchange financial assistance only if the employee has also 
enrolled in a QHP through the Exchange. A few commenters stated that 
the proposed change would reduce consumer confusion and minimize 
administrative burden.
    Response: We are finalizing Sec.  155.310(h) as proposed.
    Comment: Several commenters expressed concern that employer notices 
may contribute to employer retaliation and requested that HHS expressly 
prohibit employer retaliation and include such language on employer 
notices and elsewhere.
    Response: Section 1558 of the Affordable Care Act amended the Fair 
Labor Standards Act of 1938 to provide that no employer may discharge 
or in any manner discriminate against any employee with respect to his 
or her compensation, terms, conditions, or other privileges of 
employment because the employee (or an individual acting at the request 
of the employee) has received financial assistance under the Affordable 
Care Act. We intend to include language referencing section 1558 of the 
Affordable Care Act in notices from the FFEs under Sec.  155.310(h) for 
2016, and we encourage SBEs to do the same.
    Comment: We received comments supporting both the policy that 
notices be sent in groups of employees and that notices be sent on an 
employee-by-employee basis. For example, one commenter expressed 
concern that notifying employers in groups of employees could delay the 
notification process. Another commenter supported the proposal that the 
Exchange may choose the manner and timing by which to send notices.
    Response: To allow for operational flexibility and the varying 
needs of different Exchanges, we are finalizing the proposed language 
allowing an Exchange to choose to send notices on an employee-by-
employee basis or in groups of employees. We note, however, that for 
2016, the FFEs intend to send notices in groups of employees.
    Comment: A few commenters requested that we further define the 
requirement to notify employers within a reasonable timeframe following 
any month an employee was determined eligible for Exchange financial 
assistance and enrolled in a QHP through the Exchange. They stated that 
that failure to send notices within one month could result in adverse 
tax consequences for the employee.
    Response: While we understand the concerns that the commenters 
expressed, we are finalizing this provision as proposed in order to 
provide the Exchange with flexibility to make decisions based on its 
operational capabilities. As we stated in the proposed rule, the 
Exchange must notify employers within a reasonable timeframe following 
any month an employee was determined eligible for either form of 
Exchange financial assistance and enrolled in a QHP through the 
Exchange, with the goal to notify employers as soon as possible to 
provide the greatest benefit to enrollees (Emphasis added). The goal of 
the Exchange must be to send notices as soon as possible. We remind 
stakeholders that tax liability is determined by the IRS, and is not 
affected by these notices or the employer appeals process.
    Based on the comments received, we are finalizing paragraph (h) as 
proposed. The FFEs intend to publish a sample notice that complies with 
Sec.  155.310(h)

[[Page 12268]]

for the benefit of employers, employees, SBEs, and other stakeholders.
c. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  155.320)
    In Sec.  155.320(c), we proposed to allow an Exchange to establish 
a reasonable threshold at which the Exchange must follow the alternate 
verification process where the applicant's attested projected annual 
household income is sufficiently below the annual income computed in 
accordance with Sec.  155.320(c)(3)(ii)(A). Currently, an applicant 
enters the alternate verification process if the attested annual 
household income submitted by the applicant is more than 10 percent 
less than income data received from trusted data sources, or if no data 
is available from trusted data sources. Under the proposal, in place of 
the 10 percent threshold, the Exchange would establish a reasonable 
threshold in guidance that must be approved by HHS, must not be less 
than 10 percent, and can also include a threshold dollar amount.
    We are finalizing this rule as proposed.
    Comment: Commenters overwhelmingly supported adjusting the 
threshold in Sec.  155.320(c). Commenters stated that the current 10 
percent threshold is too restrictive and causes too many applicants to 
enter the alternate verification process. Commenters stated that the 
alternate verification process is burdensome to applicants because 
providing proof of projected income can be difficult. Some commenters 
suggested that a reasonable threshold should not be less than 20 
percent or 25 percent. Other commenters recommended that HHS also do 
more to assist applicants in the resolution of annual income data 
matching issues.
    Response: HHS will continue to study what threshold may be most 
appropriate, taking into account normal fluctuations in applicants' 
annual household income and experience with the tax reconciliation 
process. HHS will release guidance for Exchanges on what constitutes a 
reasonable threshold and to clarify the process for an Exchange to 
receive approval from HHS. HHS believes that clear outreach and notice 
for applicants related to the annual household income attestation 
process is critical. To that end, HHS released a new guide for 
applicants with annual household income data matching issues. The guide 
is available at the HHS Web site: https://marketplace.HHS.gov/outreach-and-education/household-income-data-matching-issues.pdf.
    Comment: One commenter recommended against adjusting the threshold 
because it would result in adverse tax consequences for applicants. 
Instead, the commenter suggested that HHS should broaden the time 
period it uses when checking income from trusted data sources during 
the verification process like Equifax Workforce Solutions from 90 to 
360 days.
    Response: HHS may examine the proposal for expanding data used as 
part of the electronic data service for upfront verification of income 
as part of consumers' initial application submission.
    Comment: One commenter suggested that an Exchange use the same 
standard for entering the alternate verification process as the 
Exchange uses to resolve applicants with annual household income data 
matching issues.
    Response: The two processes are different since they are comparing 
different data elements. The purpose of the alternate verification 
process is to examine the difference in an applicant's attested 
projected annual household income and information from trusted data 
sources, whereas the resolution of data matching issues depends on an 
examination of whether an applicant's submitted documentation is 
satisfactory evidence to support their attested projected annual 
household income.
    Comment: One commenter suggested that applicants be allowed to 
provide an explanation for discrepancies in their income, and that a 
standardized form should be provided for applicants to attest to their 
income as a means of verifying their income in the alternate 
verification process.
    Response: HHS believes the use of written explanations that include 
sufficient information to calculate an annual income are a valuable 
tool for applicants, and has implemented procedures for handling 
explanations of income that accompany documentation of income.
    Comment: The majority of commenters expressed support for granting 
the Exchanges flexibility in setting a reasonable threshold to meet 
varying Exchange needs, including related to State demographics. One 
commenter stated that all Exchanges should use the same threshold for 
applicants entering the alternate verification process.
    Response: HHS supports granting Exchanges flexibility to establish 
a reasonable threshold, but all thresholds are subject to the same 
reasonability standard.
    Comment: One commenter suggested that as a strategy to help 
applicants avoid repayment of advance payments of the premium tax 
credit (APTC) at tax time, Exchanges should set the default applied 
APTC amount at 85 percent. The commenter stated that this would allow 
for some flexibility for income changes during the year, and protect 
applicants against repayment during tax reconciliation.
    Response: HHS believes that it is important to educate applicants 
about how changes in their income affect their eligibility for the 
premium tax credit. During plan selection, applicants are notified that 
they can accept the full amount of advance payments of the premium tax 
credit for which they have been determined eligible, accept a smaller 
amount, or accept no advance payments and claim any premium tax credit 
they are eligible for on their tax returns. Applicants are also 
notified that they may have to pay money back through the tax 
reconciliation process if the APTC they receive exceeds the PTC they 
can claim on their tax return.
    Comment: One commenter suggested allowing for additional 
flexibility in verification for annual household income for certain 
occupations that have greater variability in their income such as self-
employed merchants, artists, and small business owners.
    Response: HHS understands that projecting annual household income 
can be difficult, particularly for applicants who have occupations that 
have high variability in income. HHS has worked to improve the 
resolution of annual household income data matching issues for these 
applicants by performing outreach and creating educational materials 
with instructions for verifying variable income.
    In Sec.  155.320(d), we made certain proposals related to 
alternative processes relating to verification of enrollment in an 
eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan. In paragraph (d)(3), 
we proposed to redesignate paragraph (d)(3)(i) as (d)(3)(ii) and 
redesignate paragraph (d)(3)(ii) as (d)(3)(i). To preserve the accuracy 
of the redesignated paragraph (d)(3)(ii), we proposed to update the 
cross-reference to paragraph (d)(3)(ii) with (d)(3)(i), and paragraph 
(d)(3)(iii) with (d)(4)(i), discussed below. We also proposed to modify 
the requirement that the Exchange select a statistically significant 
random sample of applicants for whom the Exchange does not have data as 
specified in paragraphs (d)(2)(i) through (iii) and take steps to 
contact any employer identified on the application for the applicant 
and the members of his or her household to

[[Page 12269]]

verify whether the applicant is enrolled in an eligible employer-
sponsored plan or is eligible for qualifying coverage in an eligible 
employer-sponsored plan for the benefit year for which coverage is 
requested. This process is referred to as sampling. We proposed to 
modify this requirement as described in our in our discussion of 
proposed paragraph (d)(4) of the proposed rule. These proposed changes 
were intended to organize and simplify the regulatory text.
    We proposed to add paragraph (d)(4), proposing that for any benefit 
year for which an Exchange does not reasonably expect to obtain 
sufficient verification data, the Exchange must follow the procedures 
described in paragraph (d)(4)(i) or, in the alternative, for benefit 
years 2016 and 2017, the Exchange may establish an alternative process 
approved by HHS. For the purposes of this section, the Exchange 
reasonably expects to obtain sufficient verification data for any 
benefit year when, for the benefit year, the Exchange is able to obtain 
data about enrollment in and eligibility for qualifying coverage in an 
eligible employer-sponsored plan from at least one electronic data 
source that is available to the Exchange and has been approved by HHS, 
based on evidence showing that the data source is sufficiently current, 
accurate, and minimizes administrative burden.
    In paragraph (d)(4)(i), we proposed that the Exchange may conduct 
sampling. This paragraph is substantially the same as current paragraph 
(d)(3)(iii), with three differences described in the proposed rule: we 
proposed to (1) remove the absolute requirement to conduct sampling, 
and, for benefit years 2016 and 2017, allow the Exchange to implement 
an alternative process approved by HHS; (2) remove the language that 
appears in current paragraph (d)(3)(iv), which discusses relief that is 
no longer applicable; and (3) appropriately update internal cross-
references. We proposed moving the sampling requirement from paragraph 
(d)(3) and adding it to new paragraph (d)(4) to more accurately reflect 
the role of the sampling process. In paragraph (d)(4)(ii), we proposed 
to permit an Exchange the option to implement an alternate process to 
sampling approved by HHS for the benefit years 2016 and 2017.
    Comment: Commenters generally supported the proposal to permit an 
Exchange to implement an alternate process to sampling approved by HHS 
for the benefit years 2016 and 2017. A few SBEs opposed the sunset for 
the alternate process to sampling.
    Response: We understand that certain SBEs may prefer the 
flexibility to implement either sampling or an alternate process 
indefinitely. However, the alternate process should be used as an 
interim measure to gather information about the verification process as 
Exchanges improve their long-term verification programs. We will take 
these comments under advisement for future rulemaking.
    Comment: We also received several comments pertaining more broadly 
to verification of enrollment in an eligible employer-sponsored plan 
and eligibility for qualifying coverage in an eligible employer-
sponsored plan.
    Response: We agree with commenters on both the benefits of a 
comprehensive verification system for employer sponsored coverage, and 
on the considerable operational challenges of creating one.
    We are finalizing the changes to Sec.  155.320(d) as proposed.
d. Medicare Notices
    We recognize the importance of a smooth transition to Medicare 
coverage, and sought comment on whether and how to implement a 
notification that an enrollee may have become eligible for Medicare. 
For example, for enrollees in an FFE, we considered pop up text on 
HealthCare.gov for individuals who are going to turn 65 during the 
benefit year. We sought comment on this and other ways to promote 
smooth coverage transitions.
    Comment: All commenters supported implementation of the pop-up text 
on HealthCare.gov for individuals who are going to turn 65 during the 
benefit year. Most commenters also expressed a desire for more robust 
notice and screening requirements. Several commenters requested that 
the FFE implement a screening process to identify QHP enrollees who are 
Medicare-eligible or who will be reaching Medicare eligibility during 
the benefit year. Several commenters suggested that the FFE provide 
additional education to QHP enrollees nearing Medicare eligibility, 
including information related to Medicare enrollment, penalties for not 
timely enrolling in Medicare, the requirement to return to the FFE in 
order to terminate financial assistance for which Medicare 
beneficiaries no longer are eligible or to terminate their QHP 
enrollments, and options for those automatically enrolled into a 
Medicare Advantage plan. Most commenters also requested that the option 
of a pop-up screen on HealthCare.gov be augmented by notices sent to 
QHP enrollees nearing eligibility to enroll in Medicare (including 
those QHP enrollees whose eligibility to enroll in Medicare is due to 
disability or end stage renal disease). Commenters had varied 
suggestions related to the form and content of the notices, but most 
suggested notices containing information related to deadlines for 
Medicare enrollment and penalties for late enrollment, instructions on 
how to terminate enrollment in a QHP or to remove a Medicare 
beneficiary from an enrollment group prior to enrolling in Medicare, 
and instructions on how to terminate financial assistance, such as 
APTC, for which Medicare beneficiaries are no longer eligible. Some 
commenters had specific suggestions related to identifying and 
notifying QHP enrollees who are eligible for Medicare benefits due to 
disability or end stage renal disease. Finally, some commenters 
requested information related to how State-based Exchanges would be 
affected by new Medicare notice requirements.
    Response: We appreciate the comments related to this issue. We are 
working to incorporate additional online content to help clarify for 
consumers who may be close to aging into Medicare, or who may already 
be eligible for Medicare or receiving Medicare benefits, to provide 
better clarity around how Medicare and Exchange coverage are intended 
to work, and options consumers may have as they transition into 
Medicare coverage from Exchange coverage. In addition, we are working 
on enhancing consumer communications on how to transition from Exchange 
coverage to Medicare, and helping consumers understand where to find 
helpful resources for both programs. We welcome further input and 
assistance as we work towards implementing a framework to ease QHP 
enrollees' transition from coverage through the Exchanges to Medicare 
enrollment.
5. Exchange Functions in the Individual Market: Enrollment in Qualified 
Health Plans
a. Annual Eligibility Redetermination (Sec.  155.335(j))
    In the Patient Protection and Affordable Care Act; Annual 
Eligibility Redeterminations for Exchange Participation and Insurance 
Affordability Programs; Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges final 
rule (79 FR 52994, 53000 (Sept. 5, 2014)), we established a renewal and 
re-enrollment hierarchy at Sec.  155.335(j) to minimize potential 
enrollment

[[Page 12270]]

disruptions. To further minimize potential disruptions of enrollee 
eligibility for cost-sharing reductions, we proposed to amend Sec.  
155.335(j)(1) to create a new re-enrollment hierarchy for all enrollees 
in a silver-level QHP that is no longer available for re-enrollment. 
Specifically, if such an enrollee's current silver-level QHP is not 
available and the enrollee's current product no longer includes a 
silver-level QHP available through the Exchange, we proposed that the 
enrollee's coverage would be renewed in a silver-level QHP in the 
product offered by the same issuer that is the most similar to the 
enrollee's current product, rather than in a plan one metal level 
higher or lower than his or her current silver-level QHP, but within 
the same product. Transitioning enrollees in this manner is an 
operationally efficient way to maintain continuity for enrollees 
eligible for cost-sharing reductions, and, because the benchmark plans 
for establishing the amount of the premium tax credit for which an 
eligible taxpayer is eligible is a silver-level plan, continued 
enrollment in a silver-level plan, as opposed to enrollment in a plan 
at a different metal level but in the same product is likely to be more 
consumer protective.
    We also sought comment on whether the hierarchy, together with 
rules related to guaranteed renewability, should permit a QHP enrollee 
to be automatically re-enrolled into a plan not available through an 
Exchange, and under what circumstances such a re-enrollment should 
occur.
    As in the 2016 Payment Notice proposed rule, we also noted that we 
are exploring a change to the re-enrollment hierarchy at Sec.  
155.335(j), which currently prioritizes re-enrollment with the same 
issuer in the same or a similar plan.
    In the proposed rule, we stated we were considering an approach 
under which an enrollee in an FFE would be offered a choice of re-
enrollment hierarchies at the time of initial enrollment, and could opt 
into being re-enrolled by default for the subsequent year into a low-
cost plan, rather than his or her current plan or the plan specified in 
the current re-enrollment hierarchy.
    Comment: Many commenters supported our proposal with respect to 
silver-level QHPs, agreeing that it assists enrollees in those plans in 
maintaining access to cost-sharing reductions. These commenters 
stressed that access to that financial assistance can be of vital 
importance to many enrollees. Several commenters expressed concern that 
automatically re-enrolling a silver-level plan enrollee into a 
different product might affect the enrollee's provider network, 
benefits, and continuity of care, or stand-alone dental coverage. Some 
commenters stated that education and proper notices could help ensure 
that enrollees actively re-enroll in coverage if they are automatically 
re-enrolled in a plan that does not fit their needs. Several commenters 
stressed that issuers, who have the experience and information 
necessary to ensure enrollees are matched with a product that most 
closely fits their needs while minimizing potential disruptions in 
coverage and cost-sharing reductions, are in the best position to 
determine which available plans are the most similar to plans that are 
no longer available.
    Response: We are sympathetic to the comments stating that enrollees 
should return to the FFEs to actively re-enroll in the coverage that 
best fits their needs. We recognize, however, that automatic re-
enrollment hierarchies must exist to help those who do not take 
advantage of the opportunity actively to choose coverage for the 
benefit year. Therefore, while we acknowledge that re-enrollment 
between products can result in disruption to provider networks, 
benefits, and continuity of care, we believe it is important to 
maintain enrollees' access to cost-sharing reductions in silver plans, 
which might be vital to their ability to pay for coverage or care. We 
are finalizing this provision of the rule as proposed, except that for 
the purpose of clarity we are finalizing a slight modified version of 
the language in paragraph (j)(1).
    Comment: We received many comments regarding the proposed 
alternative re-enrollment hierarchy, many of them mirroring comments 
made to our proposal in the 2016 Payment Notice. Commenters who opposed 
permitting an alternative low-cost enrollment hierarchy stated that, in 
most cases, the plan a consumer chooses during open enrollment is one 
that the consumer has shopped for and has determined best meets his or 
her needs. Additionally, commenters said that low-cost premiums do not 
necessarily lead to lower overall cost of coverage because deductibles, 
copayments, coinsurance, and out-of pocket limits may be higher in QHPs 
with low premiums. A minority of commenters supported the proposal's 
emphasis on low premiums.
    Response: We appreciate the many comments received regarding 
alternative re-enrollment hierarchies and are sensitive to the concerns 
raised by commenters. We recognize that consumers consider many factors 
in addition to premium when selecting health coverage, including the 
provider network, cost-sharing, deductibles, and other factors that 
affect overall costs, continuity of care, and the consumer experience. 
We are not finalizing this proposed additional re-enrollment hierarchy.
    Comment: Many commenters responded unfavorably to the suggestion 
that enrollees in QHPs could be automatically re-enrolled into off-
Exchange plans because they would lose any advance payments of the 
premium tax credit or cost-sharing reductions they had been receiving. 
Several stressed that such a plan would cause consumer confusion.
    Response: In response to these comments, and in order in to 
maintain coverage with advance payments of the premium tax credit and 
cost-sharing reductions for the majority of Exchange enrollees who are 
receiving them, we are finalizing a rule that would provide for auto-
reenrollment through the Exchange, as opposed to permitting auto-
reenrollment outside the Exchange. Under this rule, an enrollee could 
automatically be re-enrolled into a QHP from a different issuer through 
the Exchange. Such reenrollments would be conducted as directed by the 
applicable State regulatory authority, or, where the applicable State's 
regulatory authority declines to act, to the extent permitted by 
applicable State law, in a similar QHP as determined by the Exchange. 
With regard to how Exchanges will determine which plans such enrollees 
should be auto-reenrolled into, we note that this policy provides 
considerable flexibility to Exchanges to implement this rule, in 
recognition of the operational realities of implementing a re-
enrollment hierarchy in the often unique circumstances in which an 
issuer is not returning to the Exchange. However, whenever feasible, 
the Exchange should, and the FFE will attempt to, re-enroll enrollees 
in silver metal-level QHPs no longer available through the Exchange 
into the silver metal-level QHP offered by another issuer through the 
Exchanges of the same product network type with the lowest premium. If 
the QHPs that have become unavailable are in metal levels other than 
silver, then whenever feasible, the Exchange should and the FFE will 
seek to re-enroll the affected enrollees in the QHP available on the 
Exchange of the same metal level of the same product network type with 
the lowest premium. Exchanges should, and the FFEs will endeavor to, 
implement such a re-enrollment process for enrollees of QHPs whose 
issuers are discontinuing their coverage, for as many groups as is 
feasible given the short timelines and complex operations

[[Page 12271]]

that could be required in these scenarios. Those groups for which such 
reenrollment is not feasible will need to make an active plan selection 
to remain enrolled in a QHP through the Exchange. We note that such a 
re-enrollment generally would require a binder payment from a consumer 
in order to be effectuated. In future guidance, we intend to update the 
Federal standard notices that address how issuers that no longer have 
plans available through the Exchange should communicate with consumers. 
We anticipate providing that an issuer that no longer has plans 
available through the Exchange may notify its enrollees of that fact, 
and may encourage them to enroll in the issuer's off-Exchange plans, 
but may not automatically enroll them in those plans, to avoid 
automatic enrollment in more than one plan. We intend to provide 
additional guidance on the application of the rules related to 
guaranteed renewability to this type of situation in the future.
    Comment: We received a few comments requesting more information 
regarding how the proposed alternative re-enrollment hierarchy would 
affect stand-alone dental plans. Some commenters stated that the 
process for re-enrolling in a SADP should be independent from re-
enrollment in a QHP.
    Response: Because we will not implement the proposed alternative 
reenrollment hierarchy at this time and the policy for consumers whose 
issuer exited the Exchange would not apply to SADPs, we are not 
addressing how this policy would affect SADPs. However, we appreciate 
the comments raising this issue and, if the proposal is revisited in 
the future, we will address concerns regarding SADPs then.
b. Enrollment of Qualified Individuals Into QHPs (Sec.  155.400)
(1) Rules for First Month's Premium Payments for Individuals Enrolling 
With Regular, Special, and Retroactive Coverage Effective Dates
    We proposed to amend Sec.  155.400(e) related to the payment of the 
first month's premium (that is, binder payments), including deadlines, 
to codify previously released guidance in section 8.2 of the updated 
Federally-facilitated Marketplace and Federally-facilitated Small 
Business Health Options Program Enrollment Manual,\46\ that specified 
our interpretation of these requirements. Specifically, we proposed to 
amend Sec.  155.400(e)(1)(i) and (ii) to provide that, for prospective 
coverage, the binder payment must consist of the first month's premium. 
To provide added flexibility for issuers, we also proposed that the 
deadline for a binder payment related to prospective coverage with a 
prospective special effective date, would have to be no earlier than 
the coverage effective date and no later than 30 calendar days from the 
date the issuer receives the enrollment transaction or the coverage 
effective date, whichever is later. This would align the requirement 
for enrollments with prospective special effective dates with the 
requirement for enrollments with regular effective dates. We proposed 
to add Sec.  155.400(e)(1)(iii) to reflect our interpretation, intended 
to limit the risk that issuers would provide retroactive coverage 
without receiving sufficient premium payments from enrollees, that 
applicants requesting coverage being effectuated under retroactive 
effective dates, such as coverage in accordance with a special 
enrollment period or a successful eligibility appeal, must pay a binder 
payment that consists of all premium due (meaning the premium for all 
months of retroactive coverage). If the applicant pays only the premium 
for one month of coverage, we proposed that the issuer would be 
required to enroll the applicant in prospective coverage in accordance 
with regular effective dates. We also proposed to specify that the 
deadline for payment of all premium due must be no earlier than 30 
calendar days from the date the issuer receives the enrollment 
transaction or notification of the enrollment. This change to the 
binder payment rules was intended to allow issuers flexibility to set a 
reasonable deadline for enrollees to submit payment of retroactive 
premium, the total amount of which may consist of payment for several 
months of coverage.
---------------------------------------------------------------------------

    \46\ Federally-facilitated Marketplace and Federally-facilitated 
Small Business Health Options Program Enrollment Manual (eff. Oct. 
1, 2015), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated_ENR_Manual.pdf.
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    Based on our experience implementing the grace period provisions 
under our previous rulemaking, particularly in cases involving advance 
payments of the premium tax credit, we identified the need for 
additional flexibility for issuers to establish reasonable policies 
regarding premium collection that would allow issuers to collect a 
minimal amount of premium less than that which is owed without 
necessarily triggering the consequences for non-payment of premiums. 
For example, in the Exchange Establishment Rule, we established that 
enrollees receiving advance payments of the premium tax credit must 
make full payment on all outstanding premiums owed in order to avoid 
entering a grace period or having their coverage terminated. In 
response to requests from issuers, we proposed to add flexibility to 
this rule to allow issuers the option to adopt a premium payment 
threshold policy to avoid situations in which an enrollee who owes only 
a de minimis amount of premium has his or her enrollment terminated for 
non-payment of premiums.
    Accordingly, at new Sec.  155.400(g), we proposed to codify a 
provision related to premium payment threshold policies that would 
allow additional issuer flexibility regarding when amounts collected 
will be considered to satisfy the obligation to pay amounts due, so 
long as issuers implement such a policy uniformly and without regard to 
health status, and the premium payment threshold adopted is reasonable. 
This would allow issuers flexibility to effectuate an enrollment, not 
to place an enrollee in a grace period for failure to pay 100 percent 
of the amount due, and not to terminate enrollments after exhaustion of 
the applicable grace period for enrollees. We are finalizing these 
policies as proposed.
    Comment: We received several comments regarding the proposal to set 
deadlines for payment of the first month's premium (binder payments). 
Some commenters appreciated the flexibility that such a proposal gives 
to issuers to set such deadlines while others commented that the 
proposal would resolve ambiguity revolving around the binder payment 
deadlines for special and retroactive effective dates. Several 
commented that the guidelines would provide consumer protection by not 
allowing payment due dates before the effective date of coverage. One 
commenter suggested that the final rule allow issuers flexibility to 
offer consumers coverage effective dates that would be more generous 
than those contained in the proposal and another commenter stated that 
issuers should be permitted to set a binder payment deadline no later 
than the coverage effective date.
    Response: The final rule allows issuers flexibility to set binder 
payment deadlines within a set of parameters we believe balances 
concerns about consumer protection and issuers' desire to have 
flexibility regarding business decisions. While we are sympathetic to 
the desire to give consumers a generous amount of time to pay binder 
payments, we believe that the final rule allows issuers to set payment 
deadlines in such a way that consumers have ample time

[[Page 12272]]

to effectuate coverage. We also note that the final rule allows issuers 
to set the binder payment deadline on the coverage effective date, but 
not on a date earlier than the coverage effective date.
    Comment: Some commenters were confused about the additional 
language to allow first month's premium payments after the coverage 
effective date, thinking that a person's coverage could be effectuated 
prior to the person making their payment. These commenters opposed 
allowing more individuals to appear to have effective coverage and then 
have the coverage not be effectuated due to non-payment of premium by 
the payment deadline.
    Response: As we previously have stated, payment for first month's 
premium is required prior to coverage being effectuated. For the FFE, 
in cases where an enrollee, consistent with an issuer's payment policy, 
makes his or her premium payment after the coverage effective date, but 
before the premium payment deadline set by the issuer, the enrollee 
would receive a retroactive effective date. Issuers may pend claims 
while waiting for the first month's premium payment and either deny or 
reverse those claims based on whether the enrollee makes the first 
month's payment by the premium payment deadline. We believe that it is 
appropriate to allow payments, if the issuer chooses, after the 
coverage effective date.
    Comment: One commenter recommended a modification to Sec.  
155.400(e)(1)(iii) to give consumers requesting retroactive coverage 
effective dates more flexibility. The commenter felt that requiring a 
binder payment consisting of all premium due would be a hardship to 
lower-income enrollees and, in order to avoid such hardship, issuers 
should be required to accept payment plans when consumers enroll with a 
retroactive effective date.
    Response: While we understand it might be difficult for some 
consumers to pay all premium due to effectuate with a retroactive 
effective date, we believe that such a policy is necessary to minimize 
the risk that providers and issuers would honor claims during, 
potentially, several months of retroactive coverage without receiving 
corresponding premium payments from consumers. The proposed rule allows 
consumers who might have difficulty paying for retroactive coverage to 
enroll with prospective coverage only. It is our interpretation of 
Sec.  155.400(e)(1)(iii) that a binder payment for retroactive coverage 
consists of all premium due, or a payment sufficient to satisfy the 
issuer's premium payment threshold, if applicable.
    Comment: One commenter expressed concern about the proposed binder 
payment rules for coverage with retroactive effective dates, noting 
that if an issuer receives only the premium for one month of coverage, 
the enrollees would effectuate for prospective coverage with a regular 
effective date. The commenter thought this proposal to be inconsistent 
with the FFE's current guidance related to altering coverage effective 
dates without instruction to do so from the FFE, which generally, but 
not always, requires a transaction from the FFE in order to set or 
alter enrollees' coverage effective dates.
    Response: Although issuers generally should not grant or alter 
coverage effective dates without a transaction from the FFE, there are 
cases where FFE guidance is sufficient to give rise to such an 
alteration. For example, current FFE guidance allows issuers to cancel 
coverage, without any directive from the FFE, for enrollees who have 
not paid their binder payments by the applicable due date. We believe 
that allowing enrollees who make a binder payment insufficient to 
satisfy all premium due but sufficient to effectuate prospective 
coverage to effectuate prospectively with a regular effective date 
protects consumers and promotes the goal of getting consumers into 
coverage while not conflicting with current regulations or FFE 
policies.
    Comment: Several organizations commented on the proposal to codify 
the provision related to premium payment threshold policies which 
allows additional issuer flexibility regarding when amounts collected 
will be considered to satisfy the obligation to pay amounts due, so 
long as issuers implement such a policy uniformly and without regard to 
health status and that the premium payment threshold adopted is 
reasonable. Most commenters saw the proposal as providing important 
consumer protections and allowing sufficient flexibility for issuers to 
tailor the threshold as they wished, within the parameters set by HHS. 
A few of the commenters, however, claimed that the proposed rule would 
cause providers to bear the burden of claims, subsequently reversed by 
issuers, incurred during the second and third months of a grace period 
for enrollees receiving APTC.
    Response: We do not believe that codifying the premium payment 
threshold will lead to additional uncompensated claims. The purpose of 
the threshold, which issuers may utilize at their option, is to keep 
enrollees from entering a grace period or having their enrollments 
terminated for non-payment of premium when the amount they owe is 
within a reasonable threshold. Issuers' adoption of the premium payment 
threshold could serve as a method to avoid terminating enrollments for 
non-payment of premium for enrollees who only owe a small amount of 
premium. We do not believe this policy will have the effect of 
increasing the number of consumers who enter the grace period or who 
are terminated from coverage for non-payment, the predicate for pended 
claims that are not eventually paid.
    Comment: One commenter sought clarification that, under the premium 
payment threshold policy proposed in the rule, unpaid premium within a 
reasonable threshold tolerance, is still an amount owed by the enrollee 
and cannot be forgiven by the issuer.
    Response: Any amount that is unpaid but within the tolerance of a 
reasonable premium payment threshold established by an issuer remains 
an amount owed by the enrollee and cannot be forgiven by the issuer. 
This remains true whether the premium payment threshold is utilized for 
any of the following payments: binder payments, regularly-billed 
payments, or amounts owed by an enrollee while in a grace period.
    Comment: Two commenters requested that, due to that the complexity 
of creating the necessary operations framework to institute the premium 
payment threshold policy, the regulation should not be effective until 
2017 or 2018. One commenter requested that the final rule provide for 
implementation of a threshold based, at an issuer's discretion, on a 
flat dollar amount or a percentage of the total member responsible 
portion of premium owed.
    Finally, one commenter requested that we amend the proposed rule to 
make the premium payment threshold mandatory for all issuers. 
Additionally, the commenter sought a change to the proposed rule 
setting a 90 percent percentage of member responsible portion of 
premium as the mandatory threshold for all issuers.
    Response: The proposed rule included flexibility for issuers to 
implement a premium payment threshold to suit their specific business, 
provided the threshold adopted is reasonable. We did not consider 
utilizing a flat dollar amount threshold rather than a percentage of 
premium owed to be reasonable, because such an approach would not take 
into account the possibility that even a low flat dollar amount may 
represent a large portion of an enrollee's portion of premium after 
application of APTC. We previously have recommended a premium payment

[[Page 12273]]

threshold of 95 percent,\47\ which we consider to be reasonable. 
Although we understand the desire to provide uniformity of consumer 
protections across the FFEs, we do not wish to make the premium payment 
threshold a mandatory policy nor to set a mandatory threshold at a 
fixed percentage, as specific facts may justify a higher or lower one. 
Finally, because the premium payment threshold policy is implemented at 
the option of each issuer, we do not believe there is a reason to delay 
implementation of the regulation due to operational complexity.
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    \47\ Federally-facilitated Marketplace and Federally-facilitated 
Small Business Health Options Program Enrollment Manual, updated 
October 1, 2015, section 6.1, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated_ENR_Manual.pdf.
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(2) Reliance on HHS to Carry Out Enrollment and Related Functions

    We also proposed to amend Sec.  155.400 by adding a new paragraph 
(h) to reflect that SBE-FPs must agree to rely on HHS to implement the 
functions related to eligibility and enrollment within subpart E, 
through the Federal platform agreement. This reflects that eligibility 
and enrollment functions must be performed together in the FFE, and 
that neither function can be performed separately by an SBE-FPs at this 
time. We did not receive any comments on this proposal and are 
finalizing the policy as proposed.
c. Annual Open Enrollment Period (Sec.  155.410)
    We proposed to amend paragraph (e) of Sec.  155.410, which provides 
the dates for the annual open enrollment period in which qualified 
individuals may apply for or change coverage in a QHP. We proposed to 
amend paragraph (e)(2) to define the open enrollment period for 
coverage year 2017 to be November 1, 2016, through January 31, 2017. We 
also proposed to amend the annual open enrollment period coverage 
effective date provisions in paragraphs (f)(2)(i) through (iii) to 
include the coverage effective dates for 2017.
    We proposed this time period and these coverage effective dates to 
remain consistent with the 2016 open enrollment period. This timeframe 
will continue to partially overlap with the annual open enrollment 
period for Medicare and most employer offerings, which will benefit 
consumers by facilitating smooth transitions between coverage and 
creating process efficiencies for issuers handling enrollments and re-
enrollments during the same period.
    We also sought comment on what the open enrollment period for 
coverage year 2018 and subsequent years should be.
    We are finalizing the open enrollment period for coverage year 2017 
as proposed.
    In response to comments received, we are similarly defining, at 
Sec.  155.410(e)(2), the open enrollment period for coverage year 2018 
to be November 1, 2017 through January 31, 2018. These are the same 
start and end dates as for the open enrollment periods for the 2016 and 
2017 benefit years. We define the coverage start dates for all open 
enrollment periods beginning with the open enrollment period for the 
2016 benefit year, in three paragraphs at Sec.  155.410(f)(2). 
Accordingly, for example, for the 2018 coverage year, the Exchange must 
ensure that coverage is effective January 1, 2018, for QHP selections 
received by the Exchange on or before December 15, 2017; February 1, 
2018, for QHP selections received by the Exchange on or before January 
15, 2018; and March 1, 2018, for QHP selections received by the 
Exchange on or before January 31, 2018, and similarly for other 
coverage years. We believe that this open enrollment period provides 
sufficient time for operational readiness by the FFE and issuers, and 
provides consistency for consumers and sufficient time for them to 
enroll in coverage. However, as further explained below, we plan to 
shift to an earlier open enrollment end date for future open enrollment 
periods, starting with the open enrollment period for the 2019 coverage 
year, and are therefore finalizing at Sec.  155.410(e)(3) an open 
enrollment period for all future coverage years to run from November 1 
through December 15 of the year prior to the coverage year, with 
coverage effective the first day of the coverage year.
    Comment: We received support from most commenters for maintaining 
the same open enrollment period for coverage year 2017 as for coverage 
year 2016, as it provides consistency for consumers, reduces consumer 
confusion about coverage effective dates, and continues to partially 
overlap with the open enrollment period for Medicare and for most 
employer offerings. We received several comments requesting an earlier 
open enrollment period that ends prior to the start of the benefit year 
and several comments requesting a later open enrollment period that 
continues through the Federal tax-filing season. Several commenters 
requested shortening the open enrollment period for the 2017 coverage 
year by two weeks, while other commenters requested lengthening the 
open enrollment period by a month or through part of the Federal tax 
filing season.
    Response: After consideration of the comments, we are finalizing 
the open enrollment period for coverage year 2017 as proposed, for 
consistency with the 2016 open enrollment period, as discussed above.
    Comment: We received varied comments regarding the open enrollment 
period for coverage year 2018 and for future coverage years. Many 
commenters recommended shifting to an earlier open enrollment period 
that starts and ends prior to the start of the coverage year, so that 
all consumers have a full year of coverage. Among these commenters, 
some recommended shortening the open enrollment period by two weeks for 
an open enrollment period that starts on October 1 and runs through 
December 15. Some of these commenters recommended shortening the 
duration of the open enrollment period from 3 months to 2 months for an 
open enrollment period that starts on October 15 and runs through 
December 15. Other commenters recommended shortening the duration of 
the open enrollment period to about six weeks, so it starts on November 
1 and runs through December 15. Several commenters recommended an open 
enrollment period that starts on October 15 and runs through either 
December 7 or December 15 in order to align the Exchange and Medicare 
open enrollment periods.
    Commenters opposed to an earlier open enrollment period start date 
expressed concerns about providing sufficient time for plans to be 
certified and for plans to be previewed prior to the start of the open 
enrollment period. Those opposed to an earlier open enrollment period 
end date expressed concern about consumer confusion over the enrollment 
deadline. And, those opposed to shortening the duration of the open 
enrollment period expressed concerns about the workforce constraints of 
assisters, such as Navigators and certified application counselors, 
agents, and brokers who provide enrollment assistance throughout the 
open enrollment period.
    Several commenters recommended a gradual shift to an earlier open 
enrollment period. These commenters stressed the importance of enabling 
consumers to enroll in coverage in January, since many consumers travel 
or are otherwise occupied during the last few months of the year. Among 
these commenters, some recommended maintaining the same open enrollment 
period duration of 3 months for an open

[[Page 12274]]

enrollment period that starts on October 15 and runs through January 
15. Other commenters recommended shortening the open enrollment period 
by approximately two weeks and keeping the same open enrollment start 
dates as for coverage years 2016 and 2017, for an open enrollment 
period that starts on November 1 and runs through January 15. Lastly, 
some of these commenters recommended shortening the open enrollment 
period to 2 months for one that starts on November 15 and runs through 
January 15.
    Several other commenters recommended maintaining the same open 
enrollment period for 2018 and for future coverage years as for 
coverage years 2016 and 2017. Doing so, these commenters point out, 
would allow for better planning and consistency. Many of these 
commenters also recommended that HHS establish an open enrollment 
period for all future benefit years, which would enable issuers to 
engage in longer term planning, assist with outreach and enrollment 
efforts, and reduce consumer confusion.
    Lastly, many commenters recommended a later closing of the open 
enrollment period to better align with the Federal tax filing season. 
These commenters noted that it is through the Federal tax filing 
process that many consumers have learned about the individual shared 
responsibility coverage requirement. While all of these commenters 
agreed that the duration of the open enrollment period should be 
extended, commenters were divided about whether the start of the open 
enrollment period should be the same as for the 2016 and 2017 coverage 
years, November 1, or should start slightly later on November 15. These 
commenters were also divided about whether the open enrollment period 
should continue through most of the tax filing season by continuing 
through March 15 or whether the open enrollment period should continue 
past the April tax-filing deadline to run through April 30. However, 
the majority of these commenters recommended an open enrollment period 
that begins on November 15 and runs through March 15.
    Response: After consideration of the comments received, we are 
finalizing an open enrollment period for 2018 that starts on November 
1, 2017 and runs through January 31, 2018. Maintaining the same open 
enrollment period start and end dates for coverage years 2016 through 
2018, will provide consistency for consumers and will avoid putting new 
pressure on the QHP certification timeline for issuers. An open 
enrollment period end date of January 31 ensures that consumers are 
enrolled by March, which supports coverage for most consumers for the 
majority of the 2018 coverage year and does not put any new burdens on 
assisters, such as Navigators and certified application counselors, 
agents, brokers, and others providing enrollment assistance. However, 
to support a full year of coverage for most consumers, we plan to shift 
to an earlier open enrollment end date for the 2019 open enrollment 
period and all future open enrollment periods. Starting with the 2019 
coverage year and beyond, we are setting an open enrollment period that 
runs through December 15. This change achieves our goals of shifting to 
an earlier open enrollment so that all consumers who enroll during this 
time will receive a full year of coverage and this will reduce 
selection risk for issuers. We believe that shifting the open 
enrollment period end date to December 15 for the 2019 coverage year 
provides sufficient time for all entities involved in the annual open 
enrollment period process, including Exchanges and issuers, to make the 
necessary adjustments to meet this earlier deadline. We also believe 
that, as the Exchanges grow and mature, a month-and-a-half open 
enrollment period provides sufficient time for consumers to enroll in 
or change QHPs for the upcoming coverage year.
d. Special Enrollment Periods (Sec.  155.420)
    Special enrollment periods are available to consumers under a 
variety of circumstances as described in Sec.  155.420. We stated in 
the proposed rule that we had heard concerns regarding abuse of special 
enrollment periods, and we sought comments and data regarding existing 
special enrollment periods.
    In order to review the integrity of special enrollment periods, the 
FFE will be conducting an assessment under which we collect and review 
documents from consumers to confirm their eligibility for the special 
enrollment periods under which they enrolled. We note that where an 
Exchange undertakes such a review, the Exchange may either 
retroactively or prospectively end coverage, consistent with Exchange 
regulations, if the Exchange determines that the special enrollment 
period was improperly granted under Sec.  155.420.
    Comment: We received many comments related to amending the number 
and scope of special enrollment periods. Several commenters requested 
the addition of new special enrollment periods, including special 
enrollment periods for pregnancy and for individuals facing the 
individual shared responsibility payment at tax time. Other commenters 
requested the expansion of existing special enrollment periods, 
including adding provider network and drug formulary errors to the 
special enrollment period for plan or benefit display errors under 
paragraph (d)(4) of this section, allowing dependents of Indians to 
enroll in or change enrollments along with the Indian through the 
special enrollment period in paragraph (d)(8) of this section, and 
allowing for a retroactive coverage start date for consumers who 
qualify for the special enrollment period due to a loss of minimum 
essential coverage in paragraph (d)(1) of this section. Several 
commenters requested expansions to the timeframe and applicability of 
special enrollment periods, including extending the length of time in 
which a consumer may enroll after qualifying for a special enrollment 
period from 60 to 90 days, and extending all special enrollment periods 
offered through the Exchange to the off-Exchange market.
    Other commenters requested restrictions in the number and 
availability of special enrollment periods. One commenter requested the 
elimination of all special enrollment periods that do not align with 
those special enrollment periods offered by Medicare or are not 
required by HIPAA, while another commenter stated that special 
enrollment periods should be limited to certain life-changing events. 
One commenter requested restricting the eligibility of the special 
enrollment period for gaining access to new QHPs as a result of a 
permanent move to only consumers who were previously enrolled in other 
minimum essential coverage, and only allowing the new dependent to 
enroll in or change his or her enrollment into a new QHP under the 
special enrollment period described in paragraph (d)(2). One commenter 
requested that States with SBE-FPs have the flexibility to establish 
State-specific special enrollment periods to address the particular 
needs of consumers in their State.
    Response: We are not finalizing new qualifying events, eliminating 
current qualifying events, or changing the scope of current qualifying 
events for special enrollment periods at this time, but are continuing 
to study this issue. As explained in guidance released on January 19, 
2016,\48\ HHS has removed

[[Page 12275]]

certain special enrollment periods that were available in 2014 and 2015 
because the specified time period has ended, the situation it addressed 
has been resolved, or needed system updates have been made. HHS 
continues to review rules and guidance related to special enrollment 
periods.
---------------------------------------------------------------------------

    \48\ Special Enrollment Periods No Longer Utilized by the 
Federally-facilitated Marketplaces and State-based Marketplaces 
using the Federal Platform and Future CMS Actions (Jan. 19, 2016), 
available at https://www.regtap.info/uploads/library/ENR_RetiredSEPs_011916_v1_5CR_011916.pdf; see also FAQs on the 
Marketplace Residency Requirement and the Special Enrollment Period 
due to a Permanent Move (Jan. 19, 2016), available at https://www.regtap.info/uploads/library/ENR_FAQ_ResidencyPermanentMove_SEP_5CR_011916.pdf.
---------------------------------------------------------------------------

    Comment: Commenters expressed concerns about current misuse or 
abuse of special enrollment periods, including consumers who 
inappropriately obtain a special enrollment period on the basis of a 
loss of minimum essential coverage after being terminated from coverage 
due to a failure to pay premiums in violation of Sec.  155.420(e)(1). 
Some commenters supported more clearly defining the eligibility 
parameters of existing special enrollment periods, as well as the 
consequences for inappropriately utilizing a special enrollment period 
to enroll in coverage.
    In response to our request for comment and data to assess whether 
special enrollment periods are being abused and to minimize potential 
misuse and abuse of special enrollment periods, commenters expressed 
strong support for the Exchange to take actions to verify consumer 
eligibility for special enrollment periods moving forward, including 
requesting documentation supporting consumers' eligibility for special 
enrollment periods. Several commenters requested that the Exchange 
require consumers to submit documentation to either the Exchange or 
issuers to verify their eligibility for a special enrollment period. 
Some commenters noted that requesting such documentation at the time of 
the eligibility determination and before coverage has begun is least 
burdensome for consumers and is preferred by issuers. To aid in 
verification of special enrollment period eligibility, one issuer 
suggested implementing an online directory for issuers of consumers who 
have been terminated due to nonpayment of premiums. Some commenters 
requested that, until such verification has taken place, coverage not 
be effectuated under the special enrollment period. Other commenters 
suggested that the coverage of consumers who were ultimately found to 
be ineligible for special enrollment periods which they used to enroll 
in coverage or did not submit the necessary documentation in a timely 
manner should be canceled as of the date the enrollment became 
effective.
    Conversely, other commenters expressed concern about the 
elimination or limitation of existing special enrollment periods 
without documented proof of abuse. Commenters stressed the important 
role special enrollment periods play in providing access to needed 
coverage for consumers throughout the year. Commenters encouraged HHS 
to analyze how consumers access special enrollment periods by using 
available data sources, and encouraged HHS to look at the findings by 
SBEs that have already conducted similar analyses. In addition, 
commenters cautioned against ending a consumer's coverage unless fraud 
has been proven.
    Response: We appreciate the important concerns being raised 
regarding this issue. We believe it is important that consumers and 
others providing enrollment assistance understand the eligibility 
criteria for special enrollment periods, and so we will consider 
providing additional clarification around existing special enrollment 
periods. We continue to be interested in better understanding how 
consumers are accessing special enrollment periods and whether they are 
doing so in an appropriate and accurate way. In light of the strong 
support commenters expressed for verifying eligibility for special 
enrollment periods, we intend to conduct an assessment of QHP 
enrollments that have been made through special enrollment periods in 
the FFE to ensure that consumers properly accessed coverage and will 
require documentation for select SEPs going forward, as described in 
recent guidance posted on February 24, 2016.\49\
---------------------------------------------------------------------------

    \49\ 2017 Final HHS Notice of Benefit and Payment Parameters 
Fact Sheet. February 24, 2016. Available at, https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/index.html#Premium.
---------------------------------------------------------------------------

e. Termination of Coverage (Sec.  155.430)
    Under current rules, Sec.  155.430(b)(1) requires an Exchange to 
permit an enrollee to cancel or terminate his or her coverage in a QHP 
following appropriate notice to the Exchange or the QHP issuer. We 
proposed to add paragraph (b)(1)(iv) to allow an enrollee to 
retroactively cancel or terminate his or her enrollment in a QHP 
through the Exchange in very limited circumstances. For enrollees whose 
enrollment or continued enrollment in a QHP resulted from an error, 
misconduct, or fraud committed by an entity other than the enrollee, we 
aim to increase flexibility under the regulations to permit such 
enrollees to avoid the consequences of that entity's actions by 
canceling the QHP coverage. To this end, we proposed to redesignate 
current paragraph (b)(2)(vi) as (b)(2)(vii) and add a new paragraph 
(b)(2)(vi) to permit the Exchange to cancel an enrollee's enrollment in 
a QHP under certain circumstances. This rule would permit cancellations 
of fraudulent enrollments that the Exchange discovers, even if the 
enrollee is never aware of the enrollment.
    We proposed new paragraph (b)(1)(iv)(A), which would permit an 
enrollee to retroactively terminate his or her coverage or enrollment 
if he or she demonstrates to the Exchange that he or she attempted to 
terminate his or her coverage or enrollment and experienced a technical 
error that did not allow the enrollee to effectuate termination of his 
or her coverage or enrollment through the Exchange. Such an enrollee 
would have 60 days after he or she discovered the technical error to 
request retroactive termination.
    We proposed a new paragraph (d)(9), which would provide that the 
retroactive termination date under paragraph (b)(1)(iv)(A) would be no 
sooner than 14 days after the earliest date that the enrollee could 
demonstrate that he or she contacted the Exchange to terminate his or 
her coverage or enrollment through the Exchange, unless the issuer 
agrees to an earlier effective date as set forth in Sec.  
155.430(d)(2)(iii).
    We proposed in paragraph (b)(1)(iv)(B) to provide for cancellation 
for an enrollee who demonstrates to the Exchange that his or her 
enrollment in a QHP through the Exchange was unintentional, 
inadvertent, or erroneous and was the result of the error or misconduct 
of an officer, employee, or agent of the Exchange or HHS, its 
instrumentalities, or a non-Exchange entity providing enrollment 
assistance or conducting enrollment activities. Such an enrollee would 
have 60 days from the point he or she discovered the unintentional, 
inadvertent, or erroneous enrollment to request cancellation. In 
determining whether an enrollee has demonstrated to the Exchange that 
his or her enrollment meets the criteria for cancellation under this 
paragraph, the Exchange would examine the totality of the circumstances 
surrounding the enrollment, such as whether the enrollee was enrolled 
in other minimum essential coverage at the time of his or her QHP 
enrollment and whether he or she submitted claims for services rendered 
to the QHP. These factors would serve to indicate the intentions of the 
enrollee and whether the enrollment really was undesired and unintended 
and would be weighed in making a

[[Page 12276]]

determination whether a cancellation is warranted. We sought comment on 
what other factors are indicative of an enrollee's bona fide intent and 
could limit gaming and should be considered in this analysis.
    In new paragraph (b)(1)(iv)(C), we proposed to allow cancellations 
for enrollees who are enrolled in a QHP without their knowledge or 
consent due to the fraudulent activity of any third party, including 
third parties who have no connection with the Exchange. Such an 
enrollee would have 60 days from the point at which he or she 
discovered the fraudulent enrollment to request cancellation.
    We proposed new paragraph (d)(10), which would provide that for 
cancellation or retroactive terminations granted in accordance with 
paragraphs (b)(1)(iv)(B) and (C), the cancellation or termination date 
would be the original coverage effective date or a later date, as 
determined appropriate by the Exchange, based on the circumstances of 
the cancellation or termination.
    Finally, under our current rules, Sec.  155.430(b)(2) allows the 
Exchange to initiate termination of an enrollee's coverage or 
enrollment in a QHP through the Exchange, and permits a QHP issuer to 
terminate such coverage or enrollment in certain circumstances. We 
proposed to amend paragraph (b)(2)(ii)(A) to reflect the change to 
Sec.  156.270(d) and (g) that gives an enrollee who, upon failing to 
timely pay premium, is receiving APTC, a 3-month grace period.
    We also proposed in new paragraph (b)(2)(vi) that the Exchange 
could cancel an enrollee's enrollment that the Exchange determines was 
due to fraudulent activity, including fraudulent activity by a third 
party with no connection with the Exchange. New paragraph (d)(11) would 
provide that for cancellations granted in accordance with paragraph 
(b)(2)(vi), the cancellation date would be the original coverage 
effective date. The Exchange only would send the cancellation 
transaction following reasonable notice to the enrollee (recognizing 
that where no contact information or false contact information is 
available that notice may be impossible or impracticable).
    We noted that our current guidance recognizes that at some point, 
the Exchange must discontinue the ability for enrollees to 
retroactively adjust coverage for the preceding coverage year. We 
stated that we are considering codifying a deadline for requesting 
cancellations or retroactive terminations.
    We received the following comments concerning the proposed 
provisions around retroactive terminations and cancellations.
    Comment: Most commenters supported the proposed ``60-days from 
discovery'' window for requesting the termination, while a few 
commenters suggested shorter windows (30-45 days). A few commenters 
agreed with the importance of providing a date after which retroactive 
terminations and cancellations will no longer be granted for the 
preceding coverage year.
    Response: We chose 60 days to align with our standard 60-day 
special enrollment period window under Sec.  155.420. We recognize the 
need to discontinue the ability for enrollees to retroactively adjust 
coverage for the preceding coverage year at some point. To that end, 
HHS issued a cut-off date in 2015 after which retroactive terminations 
through the FFE for 2014 coverage would no longer be granted, with the 
exception of those cases adjudicated through the appeals process. In 
determining the cut-off date for terminations of enrollments through 
FFEs and SBE-FPs for future years, we want to balance the operational 
needs of issuers and potential future functionality changes to the 
FFEs' enrollment system against the need to provide adequate time to 
identify and address erroneous, unknown, or nonconsensual enrollments 
through retroactive terminations and cancellations. Accordingly, we are 
codifying a provision permitting the Exchange to set a date after which 
retroactive terminations and cancellations will no longer be granted 
for the preceding coverage year, with the exception of those cases 
adjudicated through the appeals process, based on these factors.
    Comment: Many commenters supported our proposal to permit 
retroactive terminations for enrollees who experienced a technical 
error by the Exchange that prevented them from terminating their 
coverage. Some supporters noted enrollees sometimes face challenges in 
terminating coverage timely. Two commenters suggested we make the 
effective date of termination the date of the demonstrated attempt, 
rather than 14 days following the attempt. A few commenters expressed 
concerns about potential gaming.
    Response: This 14-day window proposed aligns with the regulation on 
voluntary, enrollee-initiated prospective terminations, and we note 
that issuers may permit earlier effective dates of terminations under 
Sec.  155.430(d)(2)(iii). To minimize any opportunities for gaming, the 
Exchange will make these determinations based on research performed by 
HHS caseworkers.
    Comment: Many commenters endorsed our proposal to permit 
retroactive terminations and cancellations for enrollees whose 
enrollment was unintentional, inadvertent, or erroneous and was the 
result of Exchange error or misconduct, citing examples of enrollments 
occurring under these circumstances and stressing the importance of 
this protection for consumers against undue financial burden. One 
commenter felt the provision did not go far enough to adequately 
protect a Medicaid-eligible enrollee who is unaware of his or her 
Medicaid eligibility or unaware of his or her ineligibility for the 
premium tax credit. A few commenters expressed concern about harm to 
the risk pool and the stability of the Exchanges through gaming. They 
noted limitations in the Exchange's ability to verify eligibility for 
special enrollment periods. One commenter recommended that enrollees 
only be permitted to initiate retroactive terminations or cancellations 
when permitted under State law or in the case of death. A few others 
recommended no retroactive terminations or cancellations be granted if 
premiums were paid or claims were incurred.
    Response: We understand issuers' concerns regarding adverse 
selection if retroactive terminations or cancellations are granted 
without merit. Our aim is to provide these types of retroactive 
terminations or cancellations only for enrollees who were clearly 
harmed by an error or misconduct. It is not intended for enrollees who 
either simply did not understand the rules of their enrollment when 
they enrolled and want to reduce any tax liability they face due to 
ineligibility for the premium tax credit, or who wish to retroactively 
drop coverage when they realize they did not use it. We expect these 
terminations and cancellations to be granted rarely and only following 
thorough research of the facts and circumstances. To that point, the 
FFE will make these determinations only based on research performed by 
HHS caseworkers.
    Comment: Several commenters commented on our provisions around 
granting enrollee-initiated and Exchange-initiated retroactive 
cancellations in cases involving fraudulent activity. Supporters cited 
examples of enrollee harm due to fraudulent activity by agents and 
brokers. A few commenters noted that coverage would not be effectuated 
without a binder payment and that member materials would be sent that 
would signify enrollment. A few commenters felt this authority is 
already permitted under issuers' rescission

[[Page 12277]]

authority (Sec.  147.128(a)(1)). One recommended we align the language 
with the language around agent and broker fraud in Sec.  155.220. 
Others recommended that we clearly define fraud and ensure verification 
of instances of fraud.
    Response: These proposed rules around cancellations for fraudulent 
activity are intended, in part, to address concerns regarding 
individuals who may have been enrolled without their knowledge or 
consent, potentially resulting in adverse tax consequences. In some 
cases, the enrollee may not discover the enrollment in time to request 
cancellation on his or her own behalf.
    We recognize the legal and administrative complexities involved in 
determining fraud and we understand the importance of making this rule 
narrow enough to prevent abuse, but not so narrow that it could never 
be used. To that end, we are finalizing paragraphs (b)(1)(iv)(C), 
(b)(2)(vi), and (d)(11), except that we are replacing references to 
fraud with references to enrollments performed without enrollee 
``knowledge or consent.'' In addition, in paragraph (b)(1)(iv)(C), we 
are adding that the enrollee must ``demonstrate to the Exchange'' that 
he or she was enrolled without his or her knowledge or consent.
    Comment: Some commenters suggested retroactive terminations or 
cancellations in circumstances other than those we proposed. For 
example, a few commenters recommended that the Exchange retroactively 
terminate or cancel enrollments granted under special enrollment 
periods for which the enrollee was not truly eligible. Another 
commenter recommended we not permit retroactive cancellation when a 
consumer does not pay his or her premium in the fourth quarter, and 
then moves to a different plan during open enrollment with coverage 
effective January 1. Another commenter recommended we create parameters 
to permit retroactive terminations or cancellations in instances of 
credit card theft. Finally, one commenter recommended we allow 
termination without penalty to auto-enrollees in the first 60 days of 
the year, or due to confusion over covered benefits or providers.
    Response: We understand the commenters' concerns; however, this 
proposed rule was limited to scenarios involving technical errors, 
misconduct or fraudulent activity. We address some of our future 
activities around special enrollment periods elsewhere in this rule. We 
are finalizing the provisions proposed in Sec.  155.430 of the proposed 
rule with a few modifications. Specifically, as discussed above, we are 
eliminating references to fraud in paragraphs (b)(1)(iv)(C), 
(b)(2)(vi), and (d)(11) and referring instead to enrollments performed 
without the enrollee's knowledge or consent. We believe that in certain 
cases a retroactive termination can be justified where the enrollment 
was performed without knowledge or consent, even if fraud did not 
occur. In paragraph (b)(2)(vi), we also clarify that the enrollment 
performed without the enrollee's knowledge or consent could be 
performed by a third party that has no connection with the Exchange. In 
addition, for consistency with paragraphs (b)(1)(iv)(A) and (B), in 
paragraph (b)(1)(iv)(C), we are requiring that the enrollee 
``demonstrates to the Exchange'' that he or she was enrolled without 
his or her knowledge or consent. Finally, as described in response to 
comments above, we are adding a new paragraph (d)(12) permitting the 
Exchange to establish a timeframe during which retroactive terminations 
and cancellations for the preceding coverage year must be initiated.
6. Appeals of Eligibility Determinations for Exchange Participation and 
Insurance Affordability Programs
a. General Eligibility Appeals Requirements (Sec.  155.505)
    In Sec.  155.505, we made certain proposals related to the general 
eligibility appeals requirements. We proposed to add paragraph 
(b)(1)(iii) to state more clearly that applicants and enrollees have 
the right to appeal a determination of eligibility for an enrollment 
period. We also proposed to add paragraph (b)(5) to clarify the 
existing right under Sec.  155.520(c) that applicants and enrollees 
have to appeal a decision issued by the State Exchange appeals entity. 
In paragraph (b)(4), we proposed to correct a typographical error by 
replacing the word ``or'' with the word ``of,'' and to replace 
``pursuant to'' with ``under.''
    We are finalizing the changes as proposed.
    Comment: Commenters all supported the proposal to clarify the 
existing rights to appeal a determination of eligibility for an 
enrollment period and appeal a decision issued by the State Exchange 
appeals entity. One commenter sought clarification that the change to 
Sec.  155.505(b)(5), related to the right to appeal a decision issued 
by a State Exchange appeals entity, applies only to Exchange decisions 
related to eligibility for enrollment in a qualified health plan and 
financial assistance through the Exchange, but not Medicaid or CHIP.
    Response: In certain circumstances, it is possible that a State 
Exchange appeals entity appeal decision regarding eligibility for 
Medicaid, CHIP, or the BHP could be escalated to and adjudicated by the 
HHS appeals entity. However, as discussed below, at the time of 
publication of this final rule, no State agency administering Medicaid, 
CHIP, or the BHP has delegated appeals to the State Exchange appeals 
entity in a manner that would permit the HHS appeals entity to 
adjudicate these appeals. Therefore, we confirm that the right to 
appeal a decision issued by a State Exchange appeals entity under Sec.  
155.505(b) currently is limited to decisions related to eligibility for 
enrollment in a qualified health plan through the Exchange (including 
enrollment periods), Exchange financial assistance, exemptions from the 
individual shared responsibility requirement, and denials of requests 
to vacate dismissals by the State Exchange appeals entity.
    As we explained in the final rule in the July 15, 2013 Federal 
Register (78 FR 42160), States may choose to delegate authority to 
conduct Medicaid fair hearings for MAGI-based eligibility 
determinations to the Exchange operating in the State regardless of 
whether the Exchange is an FFE, State Exchange, or a State Partnership 
Exchange, in accordance with the Medicaid regulations at 42 CFR 
431.10(c) and (d). If a State agency delegates authority to conduct 
MAGI-based eligibility appeals to an Exchange, including a State 
Exchange, in accordance with 45 CFR 431.10(c) and (d), such a 
delegation would extend to the HHS appeals entity, if the State 
Exchange appeals entity's appeal decision were escalated under Sec.  
155.505(c)(2)(i).
    However, States with State Exchanges that are State governmental 
agencies may also coordinate appeals, beyond delegation under our 
rules, through a waiver granted under the Intergovernmental Cooperation 
Act. If a State delegates authority to conduct fair hearings through an 
Intergovernmental Cooperation Act waiver to another State agency, 
including a State Exchange or State Exchange appeals entity, Medicaid 
appeal decisions made by that entity could not be escalated to the HHS 
appeals entity (78 FR 42,160, 42,165 (July 15, 2013)).
    As of this publication, all State Exchanges have coordinated 
appeals through an Intergovernmental Cooperation Act waiver, and 
therefore Medicaid appeal decisions made by a

[[Page 12278]]

State Exchange appeals entity are not appealable to the HHS appeals 
entity under Sec.  155.520(c) or Sec.  155.505(b)(5).
b. Appeals Coordination (Sec.  155.510)
    We proposed to revise Sec.  155.510(a)(1) to allow the appeals 
entity, the Exchange, or the agency administering insurance 
affordability programs to request information or documentation from the 
appellant that the appellant already has provided if the agency does 
not have access to such information or documentation and cannot 
reasonably obtain it. Currently, Sec.  155.510(a)(1) prohibits the 
appeals entity or agency administering insurance affordability programs 
from asking an appellant to provide information or documentation that 
the appellant already provided in order to minimize the burden on the 
appellant.
    We are finalizing our proposal, with an addition as described 
below.
    Comment: Commenters all supported the proposed change to Sec.  
155.510(a)(1). A few commenters cautioned that the proposed amendment 
to paragraph (a)(1) should not overly burden appellants and recommended 
that it be used as a time-limited, interim measure until system 
functionality improves.
    Response: We agree that proposed paragraph (a)(1) should not overly 
burden appellants. As proposed, paragraph (a)(1) permits the appeals 
entity, Exchange, or agency administering insurance affordability 
programs to request information or documentation from the appellant if 
the agency does not have access to such information or documentation 
and cannot reasonably obtain it. To further ensure that paragraph 
(a)(1) does not overly burden appellants, we are finalizing paragraph 
(a)(1) to also require that the information or documentation requested 
is necessary to properly adjudicate the appellant's appeal. We believe 
that the addition of this language will minimize any unnecessary burden 
on the appellant while also ensuring that appeals are adjudicated 
accurately.
c. Appeal Requests (Sec.  155.520)
    We proposed to add paragraph (d)(2)(i)(D), concerning appellants 
whose appeal request is determined invalid for failure to request an 
appeal by the date determined in paragraph (b) or (c) of this section. 
The proposed addition would require the appeals entity to notify an 
appellant that, in the event the appeal request is invalid because it 
was not timely submitted, the appeal request may be considered valid if 
the applicant or enrollee demonstrates within a reasonable timeframe 
determined by the appeals entity that failure to timely submit was due 
to exceptional circumstances and should not preclude the appeal.
    We proposed that the appeals entity may determine what constitutes 
an exceptional circumstance that should not preclude an appeal 
notwithstanding the appellant's failure to timely submit an appeal 
request. We also proposed that the appeals entity may determine what is 
considered a reasonable timeframe for an appellant to demonstrate an 
exceptional circumstance.
    We are finalizing the provision as proposed.
    Comment: Commenters supported the proposed change to Sec.  
155.520(d)(2)(i)(D). A few commenters requested additional examples or 
guidelines as to what constitutes an ``exceptional circumstance'' such 
that failure to timely submit an appeal request should not preclude an 
appeal. Commenters also requested additional guidance on what 
constitutes a ``reasonable timeframe'' to demonstrate an exceptional 
circumstance. One SBE supported the proposed amendment as long as 
Exchange appeal entities have the flexibility to determine what 
constitutions an exceptional circumstance and a reasonable timeframe.
    Response: In the proposed rule, we provided several examples of 
situations that might constitute an exceptional circumstance under 
proposed paragraph (d)(2)(i)(d). We stated that a weather emergency, 
such as a blizzard, hurricane or tornado, may constitute an exceptional 
circumstance. We discussed scenarios in which severe weather causes a 
power outage making it impossible to prepare, mail, or fax appeal 
requests to the appeals entity, and situations when a disaster may 
cause consumers to lose access to the documents they need to complete 
and submit appeal requests. We also noted that if a consumer suffers a 
catastrophic medical event and is consequently unable to submit an 
appeal request on time, the appeals entity may determine that this 
constitutes an exceptional circumstance under the proposed exception.
    We also provided guidance in the proposed rule as to what 
constitutes a reasonable timeframe to demonstrate an exceptional 
circumstance. We stated that if an appellant was unable to send an 
appeal request on time due to a snow storm and power outage and sent 
the request four months after the snow storm and power outage had been 
resolved, the appeals entity may find that the appellant experienced an 
exceptional circumstance as contemplated by the proposed rule, but that 
the appellant waited an unreasonable amount of time to demonstrate it.
    The examples above provide guidance to appellants and 
representatives as to what the appeals entity may consider an 
exceptional circumstance such that failure to timely submit an appeal 
request should not preclude an appeal, and a reasonable timeframe to 
demonstrate an exceptional circumstance. We intend for these examples 
to be illustrative and not exhaustive, and believe that the appeals 
entity should decide on a case-by-case basis whether an appeal request 
that is invalid due to untimely submission nevertheless should be 
allowed to proceed under paragraph (d)(2)(i)(d).
d. Dismissals (Sec.  155.530)
    We proposed to revise Sec.  155.530(a)(4) to allow an appeal to 
continue when an appellant dies if the executor, administrator, or 
other duly authorized representative of the estate requests to continue 
the appeal.
    Comment: Commenters supported the proposed change to Sec.  
155.530(a)(4). A few commenters also recommended allowing a spouse, 
partner, parent, or guardian of a deceased appellant to continue an 
appeal. They believed this may be necessary when an appellant, 
especially a child or incapacitated adult, has not gone through the 
legal process of establishing an executor, administrator, or other duly 
authorized representative. In such cases, the commenters recommend 
allowing a family member to step into the shoes of the deceased 
appellant to prevent the dismissal of an appeal from imposing a 
financial hardship on the surviving members of the family.
    Response: We agree with the commenters. Therefore, we are 
clarifying that if a deceased appellant has not designated an executor, 
administrator, or other duly authorized representative, and one has not 
been appointed by the court, the deceased appellant's spouse, legal 
civil or domestic partner, or for a minor or unmarried incapacitated 
appellant, parent or legal guardian, is considered a duly authorized 
representative and may continue the appeal.
    We are finalizing Sec.  155.530(a)(4) as proposed.
e. Informal Resolution and Hearing Requirements (Sec.  155.535)
    In Sec.  155.535, we proposed amendments to the informal resolution 
and notice of hearing requirements. In Sec.  155.535(a), we proposed a 
change to

[[Page 12279]]

clarify that the requirements of the informal resolution process 
described in paragraphs (a)(1) through (4) apply to both the HHS 
appeals entity and a State Exchange appeals entity.
    In Sec.  155.535(b), we proposed providing two exceptions to the 
requirement that the appeals entity must send written notice to the 
appellant of the date, time, and location or format of the hearing no 
later than 15 days prior to the hearing date. In paragraph (b)(1), we 
proposed an exception when an appellant requests an earlier hearing 
date. In paragraph (b)(2), we proposed an exception to the notice 
requirement under paragraph (b) when a hearing date sooner than 15 days 
is necessary to process an expedited appeal, as described in Sec.  
155.540(a), and the appeals entity and appellant have mutually agreed 
to the date, time, and location or format of the hearing. These 
proposals were intended to create a more agreeable experience for the 
appellant overall while also improving efficiency for the appeals 
process.
    Comment: The comments received on these proposed changes were 
largely supportive. Commenters recommended that if written notice is 
not sent to an appellant under paragraph (b)(2), then the appeals 
entity must contact both the appellant and the appellant's authorized 
representative, if any, to agree upon a date, time, and location or 
format of the hearing.
    Response: We agree with the commenter's recommendation. The simple 
act of contacting the appellant's authorized representative could 
reduce the likelihood of an unintended failure to appear that could 
harm both the appellant and the overall efficiency of the appeals 
process. This may be especially true for limited-English proficient 
appellants who should not suffer the harsh consequences because of a 
language barrier.
    We are finalizing Sec.  155.535(a) and (b)(1) as proposed. We are 
finalizing Sec.  155.535(b)(2) to allow an exception to the notice 
requirement under paragraph (b) when a hearing date sooner than 15 days 
is necessary to process an expedited appeal, as described in Sec.  
155.540(a), and the appeals entity, has contacted the appellant and 
appellant's authorized representative, if any, to schedule a hearing on 
a mutually agreed to date, time, and location or format.
f. Appeal Decisions (Sec.  155.545)
    In paragraph (b)(1), we proposed to remove the third appearance of 
the word ``of'' to correct a typographical error. We proposed to revise 
paragraph (c)(1)(i) to include cross references to Sec.  155.330(f)(4) 
and (5), which aligns with our proposed change Sec.  155.505(b) to 
clarify that applicants and enrollees have the right to appeal a 
determination of eligibility for an enrollment period. Finally, we 
proposed to revise Sec.  155.545(c)(1)(ii) so that the coverage 
effective date for eligible appellants requesting a retroactive appeal 
decision effective date is the coverage effective date that the 
appellant did receive or could have received if the appellant had 
enrolled in coverage under the incorrect eligibility determination that 
is the subject of the appeal.
    Comment: Commenters all supported the proposed changes to Sec.  
155.545. Some commenters recommended that, in the event the appeals 
entity takes more than 90 days to process an appeal through no fault of 
the appellant, the appellant may choose a coverage effective date that 
falls between the initial eligibility determination date and the date 
of the appeals decision. They pointed out that while waiting for an 
appeal to be adjudicated, an appellant may have experienced a health 
issue for which retroactive coverage would be helpful, but may not be 
in the financial situation to pay back premiums for more than a limited 
number of months.
    Response: To remain consistent with other effective date 
regulations, we cannot permit an appellant to choose a coverage 
effective date that falls between the initial eligibility determination 
date and the date of the appeal decision, except in the limited 
circumstance described below. Existing effective date regulations 
including those at Sec. Sec.  155.410(f), 155.330(f), and 155.420(b) 
allow for prospective or retroactive coverage effective dates, as 
appropriate, based on a triggering event such as an eligibility 
determination or the birth of a child. The special coverage effective 
dates for certain special enrollment periods under Sec.  
155.420(b)(2)(iii), which requires the Exchange to ensure a coverage 
effective date that is appropriate based on the circumstances of the 
special enrollment period, must be tied to a triggering event and may 
not be chosen by the qualified individual or enrollee.
    In the event an appeals entity finds that an eligibility 
determination, as described in Sec.  155.505(b)(1), was incorrect, and 
the appellant had more than one coverage effective date available in 
the enrollment period that the eligibility determination was made, the 
appellant may be permitted to choose a coverage effective date 
associated with the enrollment period. For example, if the appeals 
entity determines that an eligibility determination made on November 
25, 2015 for the 2016 coverage year was incorrect, the appellant may 
choose a retroactive coverage effective date of January 1, 2016, 
February 1, 2016, or March 1, 2016 because the appellant would have had 
the opportunity to make a QHP selection between November 25, 2015 and 
January 31, 2016 and receive one of those coverage effective dates 
(depending on when the QHP was selected). Even in this situation, the 
appellant may choose only from among those coverage effective dates 
that would have been available under the original enrollment period, 
and may not chose any coverage effective date between the initial 
eligibility determination date and the date of the appeals decision.
    Accordingly, we are finalizing paragraph (c)(1)(ii) as proposed, 
with one modification. Under the final regulation, an appeals entity 
may only implement an appeal decision retroactively to the coverage 
effective date the appellant did receive or could have received if the 
appellant had enrolled in coverage under the incorrect eligibility 
determination that is the subject of the appeal. We are changing the 
phrase ``would have received'' to ``could have received'' to clarify 
that an eligible appellant may choose from among the coverage effective 
dates that would have been available under the original enrollment 
period.
g. Employer Appeals Process (Sec.  155.555)
    We proposed to make a technical correction to Sec.  155.555(e)(1) 
by removing the cross-reference to paragraph (d)(3) of this section, 
which does not exist, and replacing it with paragraph (d)(1)(iii).
    We also proposed to amend Sec.  155.555(l) by revising paragraph 
(l) and adding paragraphs (l)(1) and (2) to give the Exchange more 
operational flexibility in implementing an employer appeal decision. 
Currently under Sec.  155.555(l), when an employer appeal decision 
affects an employee's eligibility, the Exchange is directed to 
redetermine the employee's eligibility and the eligibility of the 
employee's household members, if applicable. We proposed to amend Sec.  
155.555(l) so that, after receipt of the notice from the appeals entity 
under paragraph (k)(3) of this section, the Exchange must follow the 
requirements in either paragraph (l)(1) or (2) if the appeal decision 
affects the employee's eligibility. Under proposed paragraph (l)(1), 
the Exchange must promptly redetermine the employee's eligibility and 
the eligibility of the employee's household members, if applicable, in 
accordance with the standards specified in Sec.  155.305, as currently 
provided in paragraph (l).

[[Page 12280]]

Under proposed paragraph (l)(2), the Exchange must promptly notify the 
employee of the requirement to report changes in eligibility as 
described in Sec.  155.330(b)(1). We sought comment on the addition of 
the option described in paragraph (1)(2), and whether it would help 
ensure the most accurate redetermination of eligibility for insurance 
affordability programs by giving employees the opportunity to report 
any additional changes in their eligibility information.
    We are finalizing Sec.  155.555(l), and the technical correction to 
Sec.  155.555(e)(1), as proposed.
    Comment: Commenters generally supported the proposed addition of 
Sec.  155.555(l)(2). Several commenters supported this change because 
it would give consumers the opportunity to update their application 
with any other changes that could affect eligibility which would result 
in a more accurate eligibility determination. One commenter provided an 
example of an applicant who had employer-sponsored coverage through his 
or her spouse at the time of applying for coverage through the 
Exchange, but later received a legal separation. One commenter who 
disagreed with the proposed addition of paragraph (l)(2) expressed 
concern that an employee who fails to update his or her eligibility may 
face a greater tax liability when filing his or her Federal tax return.
    Response: As described in Sec.  155.330(b)(1), an enrollee is 
required to report any change with respect to the eligibility standards 
specified in Sec.  155.305 within 30 days of such change. Before 
enrolling in coverage through the Exchange, applicants for coverage 
must confirm their understanding that they must notify the entity 
administering the program they enroll in if information on their 
application changes, and that such changes may affect the eligibility 
for member(s) of their household. Nevertheless, we agree with 
commenters that the proposed change in Sec.  155.555(l)(2) would give 
employees another opportunity to update their application with changes 
that affect their eligibility or the eligibility of household members 
when an appeal decision under Sec.  155.555 affects the employee's 
eligibility. We are finalizing Sec.  155.555(l) as proposed to permit 
the Exchange, after receipt of the notice under paragraph (k)(3) of 
this section, to follow either the requirements in either paragraph 
(l)(1) or (2) if the appeal decision affects the employee's 
eligibility. As stated in the proposed rule, for the 2016 benefit year, 
the FFE intends to implement appeal decisions that affects the 
employee's eligibility by following the procedure described in 
paragraph (1)(2).
    Comment: One commenter who supported the proposed changes to Sec.  
155.555(l) wrote that, in order for the option described in paragraph 
(l)(2) to be meaningful, employees must have very clear instructions on 
how to update their application.
    Response: We agree that a notice under Sec.  155.555(l)(2) must 
provide clear instructions to the employee in order to be effective. 
For notices submitted by the FFE, we intend to provide guidance on 
reporting changes in information with respect to eligibility through 
the online application and the Marketplace Call Center, instructions on 
updating the online application questions to reflect that the employee 
has an offer of employer-sponsored coverage that provides minimum value 
and is affordable for the employee, and instructions on terminating 
enrollment in a QHP through the Exchange for those who want to 
terminate enrollment upon being redetermined ineligible for Exchange 
financial assistance.
    Comment: Commenters suggested that the Exchange be required to 
follow the procedures outlined in both paragraphs (l)(1) and (2). They 
recommended that the Exchange send a notice under paragraph (l)(2) and, 
if an employee does not update his or her application within a 
specified period of time, the Exchange follow the procedure described 
paragraph (l)(1) to redetermine the employee's eligibility and the 
eligibility of the employee's household members, if applicable.
    Response: We are concerned that such a policy would cause 
considerable operational burden to the Exchange while providing minimal 
benefit to the employee. We believe that the policy as proposed 
balances the need for employees to receive an updated eligibility 
determination after an appeal decision affects the employee's 
eligibility, with the need to provide operational flexibility to the 
Exchange. Accordingly, we are finalizing this provision as proposed, to 
give the Exchange the option to follow either paragraph (l)(1) or (2) 
after receipt of the notice under paragraph (k)(3) of this section.
    Comment: One commenter expressed concern that an employee who does 
not report his or her change in eligibility could place the employer at 
greater risk for an assessable payment under section 4980H of the Code.
    Response: We disagree with the proposition that an employee who 
does not report his or her change in eligibility could place the 
employer at greater risk for being liable for an assessable payment 
under section 4980H of the Code. An employee is subject to the 
requirement to report a change in his or her eligibility under Sec.  
155.330(b)(1) when the appeals entity determines that his or her 
employer offered employer-sponsored coverage that provides minimum 
value and is affordable for the employee. Independently, the Internal 
Revenue Service (IRS) will determine whether an employer is liable for 
an employer shared responsibility payment based on the employer shared 
responsibility provisions.\50\ If the IRS, in its own review, 
determines that an employee of an applicable large employer is 
ultimately not eligible for the premium tax credit under section 36B of 
the Code, then, in general, the employer will not owe an employer 
shared responsibility payment with respect to that full-time employee, 
even if the employee enrolled in a QHP with APTC (regardless of whether 
the employee reported a change with respect to eligibility to the 
Exchange following the outcome of an employer appeal).
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    \50\ In general, an applicable large employer (an employer with 
at least 50 full-time employees, including full-time equivalent 
employees) will owe an assessable payment to the IRS under section 
4980H(a) of the Code if the employer fails to offer coverage to its 
full-time employees (and their dependents) and at least one full-
time employee receives the premium tax credit. An assessable payment 
under section 4980H(a) of the Code is calculated based on the 
employer's number of full-time employees, without regard to how many 
full-time employees receive the premium tax credit. An applicable 
large employer will owe an assessable payment under section 4980H(b) 
of the Code if it offers coverage to its full-time employees (and 
their dependents) but at least one full-time employee receives the 
premium tax credit, which could occur if the coverage offered did 
not provide minimum value or was not affordable. (For purposes of 
section 4980H, coverage may be considered affordable under an 
affordability safe harbor even if the coverage is not affordable for 
purposes of section 36B of the Code. 26 CFR 54.4980H-5(e)(2)). An 
assessable payment under section 4980H(b) of the Code is calculated 
based on the number of full-time employees who receive the premium 
tax credit.
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7. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Eligibility Standards for Exemptions (Sec.  155.605)
    In Sec.  155.605, we proposed to clarify and streamline policies 
related to exemptions. Consistent with prior guidance, we proposed to 
permit any applicant whose gross income is below his or her applicable 
filing threshold to qualify for a hardship exemption and claim the 
exemption through the tax filing process. In addition, we proposed to 
permit individuals eligible for services from an Indian health care

[[Page 12281]]

provider to claim a hardship exemption through the tax filing process. 
We proposed that for the 2016 tax year and later that the Exchange no 
longer issue exemption certificate numbers (ECNs) for the following 
exemption types: members of a Health Care Sharing Ministry, individuals 
who are incarcerated, members of Federally recognized tribes, and 
individuals who are eligible for services from an Indian health care 
provider. We also proposed to codify a list of other hardship 
exemptions previously established in prior guidance and to clarify 
operational standards for timeframes of hardship events and the 
duration of certain hardship exemptions. We are finalizing the policy 
of streamlining of exemptions offered through the tax filing process as 
proposed; however, at this time, we will not codify the list of 
hardship exemptions established in prior guidance and will not finalize 
the proposal to permit an individual to obtain a hardship exemption for 
a hardship experienced within 3 years of the date of application.
    Comment: We received comments in favor of eliminating unnecessary 
paperwork for individuals seeking an exemption due to their State not 
expanding Medicaid coverage. Commenters also supported streamlining the 
exemption process for members of a Health Care Sharing Ministry, 
members of Federally recognized Indian tribes and individuals eligible 
for services from an Indian health care provider, and individuals who 
were incarcerated by delegating these exemption types fully to the IRS.
    Response: In this final rule, we are finalizing the proposal to 
streamline the exemption application process for consumers and to 
minimize paperwork requirements for consumers in States that did not 
expand Medicaid coverage. We are finalizing the proposal to no longer 
require a denial notice for the hardship exemption for applicants 
ineligible for Medicaid because their State did not expand Medicaid 
coverage. In addition, we are finalizing the proposal to streamline 
exemption processing for members of a Health Care Sharing Ministry, 
individuals who are incarcerated, members of Federally recognized 
Indian tribes, and individuals who are eligible for services from an 
Indian health care provider.
    Comment: We received comments supporting and opposing our proposal 
to codify hardship criteria established in regulatory guidance. 
Commenters stated that any expansion of the hardship exemption criteria 
could weaken the individual shared responsibility provision and create 
instability in insurance risk pools. In addition, we received a request 
for clarification of factors that an Exchange would examine in order to 
approve a hardship exemption.
    Response: We will continue to examine these comments and will not 
codify the list of hardship exemptions previously established in public 
guidance at this time.
    Comment: We received comments both in support of and against the 
proposal to allow individuals to apply for a hardship that occurred up 
to 3 calendar years in the past. Commenters who supported this proposal 
thought that it would provide greater flexibility for Exchanges to 
approve hardship exemptions. Commenters who did not support the 
proposal stated that 3 years was overly broad and could lead to a 
destabilization of a health insurance risk pool by providing an 
additional incentive for healthy consumers to claim an exemption in 
lieu of obtaining health coverage.
    Response: In response to the concerns raised by commenters, we will 
not finalize Sec.  155.605(d)(2) at this time. Similarly, we will not 
finalize the last sentence of the introductory paragraph of Sec.  
155.605(d)(1), which establishes a maximum length of any hardship 
exemption of the month before the circumstance, the remainder of the 
calendar year, and the next calendar year.
    Comment: We received a suggestion that the Exchange establish an 
exemption for people who are erroneously determined ineligible for APTC 
and who do not enroll in a qualified health plan as a result.
    We also received one comment that our proposal to codify the 
existing hardship exemption time period related to an appeal in Sec.  
155.605(d)(2)(xiv) should be expanded to include the date of 
application, rather than a consumer's potential coverage effective 
date. The commenter stated that the current timeframe is too narrow for 
individuals who were unable to file an appeal of an eligibility 
determination within 90 days due to the fact that a data inconsistency 
generated during the application process must be adjudicated before a 
consumer may file an appeal.
    Response: We are not codifying Sec.  155.605(d)(2)(xiv) at this 
time, but will continue to consider these issues and comments for 
future rulemaking.
b. Required Contribution Percentage (Sec.  155.605(e)(3))
    Under section 5000A of the Code, an individual must have minimum 
essential coverage for each month, qualify for an exemption, or make a 
shared responsibility payment with his or her Federal income tax 
return. Under section 5000A(e)(1) of the Code, an individual is exempt 
if the amount that he or she would be required to pay for minimum 
essential coverage (the required contribution) exceeds a particular 
percentage (the required contribution percentage) of his or her actual 
household income for a taxable year. In addition, under Sec.  
155.605(g)(2) (redesignated as Sec.  155.605(d)(2) in this final rule), 
an individual is exempt if his or her required contribution exceeds the 
required contribution percentage of his or her projected household 
income for a year. Finally, under Sec.  155.605(g)(5) (redesignated as 
Sec.  155.605(d)(5) in this final rule), certain employed individuals 
are exempt if, on an individual basis, the cost of self-only coverage 
is less than the required contribution percentage, but the aggregate 
cost of individual coverage through employers exceeds the required 
contribution percentage, and no family coverage is available through an 
employer at a cost less than the required contribution percentage.
    Section 5000A established the 2014 required contribution percentage 
at 8 percent. For plan years after 2014, section 5000A(e)(1)(D) of the 
Code and 26 CFR 1.5000A-3(e)(2)(ii) provide that the required 
contribution percentage is the percentage determined by the Secretary 
of HHS that reflects the excess of the rate of premium growth between 
the preceding calendar year and 2013, over the rate of income growth 
for that period.
    We established a methodology for determining the excess of the rate 
of premium growth over the rate of income growth for plan years after 
2014 in the 2015 Market Standards Rule (79 FR 30302), and we said 
future adjustments would be published annually in the HHS notice of 
benefit and payment parameters.
    Under the HHS methodology, the rate of premium growth over the rate 
of income growth for a particular calendar year is the quotient of (x) 
1 plus the rate of premium growth between the preceding calendar year 
and 2013, carried out to ten significant digits, divided by (y) 1 plus 
the rate of income growth between the preceding calendar year and 2013, 
carried out to ten significant digits.\51\
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    \51\ We also defined the required contribution percentage at 
Sec.  155.600(a) to mean the product of 8 percent and the rate of 
premium growth over the rate of income growth for the calendar year, 
rounded to the nearest one-hundredth of one percent.
---------------------------------------------------------------------------

    As the measure of premium growth for a calendar year, we 
established in the 2015 Market Standards Rule that we

[[Page 12282]]

would use the premium adjustment percentage. The premium adjustment 
percentage is based on projections of average per enrollee employer-
sponsored insurance premiums from the National Health Expenditure 
Accounts (NHEA), which are calculated by the CMS Office of the 
Actuary.\52\ (Below, in Sec.  156.130, we finalize the proposed 2017 
premium adjustment percentage of 1.1325256291 (or an increase of about 
13.3 percent) over the period from 2013 to 2016. This reflects an 
increase of about 4.9 percentage points (1.1325256291-1.0831604752) for 
2015-2016.)
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    \52\ For any given year the premium adjustment percentage is the 
percentage (if any) by which the most recent NHEA projection of per 
enrollee employer-sponsored insurance premiums for the current year 
exceeds the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2013.
---------------------------------------------------------------------------

    As the measure of income growth for a calendar year, we established 
in the 2015 Market Standards Rule that we would use per capita Gross 
Domestic Product (GDP), using the projections of per capita GDP used 
for the NHEA, which is calculated by the Office of the Actuary. We also 
stated in the 2015 Market Standards Rule (79 FR 30304), that we would-
consider alternative measures of income and premium growth should 
projections of those measures become available. Subsequently, as part 
of its projections of National Health Expenditures, the Office of the 
Actuary published projections of personal income (PI) for the first 
time in September 2014 and subsequently in July 2015. As a result, in 
the proposed rule we said we were considering substituting this new 
measure of per capita PI for per capita GDP in the calculation for the 
required contribution percentage. We received one comment in support of 
our proposal to substitute per capita PI for per capita GDP in the 
calculation to establish the rate of income growth for the required 
contribution percentage, and are finalizing it here. As stated in the 
proposed rule, we believe per capita PI better aligns with the 
statutory intent of measuring the income of an individual than per 
capita GDP. The projections of PI published by the Office of the 
Actuary are consistent with the measure published by the Bureau of 
Economic Analysis, which reflects income received by individuals from 
all sources, including income from participation in production. 
Specifically, it includes compensation of employees (received), 
supplements to wages and salaries, proprietors' income with adjustments 
for inventory valuation and capital consumption, personal income 
receipts on assets, rental income, and personal current transfer 
receipts, less contributions for government social insurance.
    The Office of the Actuary's PI projection is generated using the 
University of Maryland's Long Term Inter-industry Forecasting Tool. The 
Long Term Inter-industry Forecasting Tool model is a macro-economic 
model that is based on the historical relationships that exist between 
PI growth, GDP growth, and changes in other macro-economic variables. 
For instance, the correlation between PI and GDP is influenced by 
fluctuations in taxes and government transfer payments, depreciation of 
capital stock, and retained earnings and transfer payments of private 
business.\53\ Estimates of GDP in the NHE projections reflect economic 
assumptions from the 2015 Medicare Trustees Report and are updated to 
incorporate the latest available consensus data from the monthly Blue 
Chip Economic Indicators. These same economic assumptions are used for 
producing projections of PI and employer-sponsored insurance premiums, 
so using this estimate will generate an internally consistent estimate 
of the growth in premiums relative to growth in income.
---------------------------------------------------------------------------

    \53\ For projections of PI and GDP, see Table 1 at Centers for 
Medicare & Medicaid Services. National Health Expenditure Data: 
Projected, available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html.
---------------------------------------------------------------------------

    As stated in the proposed rule, we will continue to consider other 
changes to the measures of income per capita and premium growth as 
additional information becomes available and as we gain experience with 
the current measures; we received no comments on other indices that we 
should develop or consider.
    Since updating the required contribution percentage for 2017 
requires calculating the cumulative difference between premium growth 
and income growth between the preceding calendar year and 2013, we also 
proposed in the proposed rule to replace per capita GDP with per capita 
PI for all years beginning in 2013 and then calculate cumulative income 
growth through 2016. We received no comments on this retrospective 
approach, and are finalizing it here; as stated in the proposed rule, a 
retrospective approach allows for consistency across all years with the 
most recent data available. We note that potential future changes based 
on new data that are not available for 2013 may be made on a 
prospective basis.
    Therefore, under the approach finalized here, and using the NHEA 
data, the rate of income growth for 2017 is the percentage (if any) by 
which the most recent projection of per capita PI for the preceding 
calendar year ($49,875 for 2016) exceeds the per capita PI for 2013, 
($44,925), carried out to ten significant digits. The ratio of per 
capita PI for 2016 over the per capita PI for 2013, using the finalized 
approach for both years, is estimated to be 1.1101836394 (that is, per 
capita income growth of about 11.0 percent). This reflects an increase 
of about 3.0 percentage points (1.1101836394-1.0798864830) for 2015-
2016.
    Thus, using the 2017 premium adjustment percentage finalized in 
this rule, the excess of the rate of premium growth over the rate of 
income growth for 2013-2016 is 1.1325256291/1.1101836394, or 
1.0201245892. This results in a required contribution percentage for 
2017 of 8.00*1.0201245892, or 8.16 percent, when rounded to the nearest 
one-hundredth of one percent, an increase of 0.27 percentage points 
from 2016 (8.16100-8.13399). The excess of the rate of premium growth 
over the rate of income growth also is used for determining the 
applicable percentage in section 36B(b)(3)(A) and the required 
contribution percentage in section 36(c)(2)(C).
c. Eligibility Process for Exemptions (Sec.  155.610)
    In Sec.  155.610, we proposed adding new paragraph in Sec.  
155.610(k) which describes how the Exchange will handle incomplete 
exemption applications. We proposed that the Exchange will handle 
incomplete exemption applications in a similar manner to the procedure 
for handling incomplete health coverage applications established under 
Sec.  155.310(k). Specifically, when the Exchange receives an 
application that does not contain sufficient information to make an 
eligibility determination, the Exchange will: (1) Provide notice to the 
applicant indicating that information necessary to complete an 
eligibility determination is missing, specify the missing information, 
and provide instructions for submitting the missing information; (2) 
provide the applicant with a period of no less than 10 and no more than 
90 days starting from the date on which the notice is sent to the 
applicant to provide the information needed to complete the application 
to the Exchange; and (3) if the Exchange does not receive the requested 
information, then the Exchange will

[[Page 12283]]

notify the applicant that the Exchange will not process the application 
and will provide appeal rights to the applicant. We sought comment on 
this proposal.
    Comment: We received comments which supported this proposal to 
handle incomplete exemption applications, however many commenters found 
the 10-day minimum timeframe to be too short and recommended a minimum 
of 30 days to submit missing information to the Exchange instead.
    Response: We accept this recommendation, and will amend the 
regulation text to establish a minimum of 30 days from the date on 
which the notice is sent to an applicant to provide required 
information to the Exchange.
d. Verification Process Related to Eligibility for Exemptions (Sec.  
155.615)
    In Sec.  155.615, we proposed to delete Sec.  155.615(c), (d), (e), 
and (f)(3) to conform with a proposal under Sec.  155.605 that would 
remove the ability for consumers to obtain an ECN from the Exchange for 
certain exemptions. We also proposed conforming redesignations of the 
remaining paragraphs under Sec.  155.615. Elsewhere in this final rule, 
we are finalizing the relevant proposals under Sec.  155.605. 
Accordingly, we are finalizing as proposed the deletions of paragraphs 
(c), (d), (e), and (f)(3) from Sec.  155.615 and the conforming 
redesignations.
    Comment: We received comments both in support of and against the 3-
year period for exemption criteria under the proposed rule at Sec.  
155.605(d)(3) and the conforming amendment to Sec.  155.615(c)(2).
    Response: We will continue to consider the issues presented by 
commenters, and will not finalize Sec.  155.615(c)(2) at this time.
e. Options for Conducting Eligibility Determinations for Exemptions 
(Sec.  155.625)
    We proposed to amend Sec.  155.625(a)(2) and (b) to remove the 
deadline after which a State Exchange would be required to process 
exemption applications for residents of the State by the start of open 
enrollment for 2016, and to instead permit an Exchange to adopt the 
exemption eligibility determination service operated by HHS 
indefinitely. Based on HHS's operation of this service to date, we have 
determined that the HHS exemption option is an efficient process for 
State Exchanges that has minimized confusion for consumers. This 
proposal follows an FAQ published on July 28, 2015 in which HHS stated 
that it will not take any enforcement action against State Exchanges 
that continue to use the HHS service for exemptions beyond the start of 
open enrollment for 2016.
    Comment: We received one comment about this section that supports 
the recommendation to permit States to elect to use the HHS service for 
exemptions. This commenter also suggested that an SBE should be able to 
grant the hardship exemption established in Sec.  155.605(d)(2) for 
lack of affordable coverage even if it does not process other 
exemptions, because the State would have the eligibility information 
needed to determine whether an individual qualifies for this exemption 
from an individual's health coverage application.
    Response: We accept this comment and have amended the regulation 
text to permit a State Exchange to grant a hardship exemption to 
consumers the Exchange determines unable to afford coverage based on 
their projected annual household income under Sec.  155.605(d)(2) 
regardless of whether the Exchange will grant other exemption types.
8. Exchange Functions: Small Business Health Options Program (SHOP)
a. Functions of a SHOP (Sec.  155.705)
    In Sec.  155.705, we proposed to add new paragraphs (b)(3)(viii) 
and (ix) to specify that the FF-SHOPs would provide additional options 
for employer choice for plan years beginning on or after January 1, 
2017, namely a ``vertical choice'' option for QHPs and SADPs. Under 
this option, employers will be able to offer qualified employees a 
choice of all plans across all available levels of coverage from a 
single issuer. We noted that existing SHOP regulations at Sec.  
155.705(b)(3)(i)(B) and (b)(3)(ii)(B) provide State-based SHOPs with 
the flexibility to provide employers with vertical choice or other 
employer choice options in addition to ``horizontal choice,'' in which 
an employer selects a single actuarial value coverage level and makes 
all plans at that coverage level available to qualified employees. We 
did not propose to alter State-based SHOPs' flexibility in this regard, 
unless the State-based SHOP was relying on the Federal platform for 
SHOP enrollment functions.
    We also sought comment on whether the FF-SHOPs should make other 
employer choice options available, including allowing participating 
employers to select an actuarial value level of coverage, after which 
employees could choose from plans available at that level and at the 
level above it, which we refer to below as ``contiguous choice.'' We 
also sought comment on whether to give the State in which the FF-SHOP 
is operating an opportunity to recommend whether the FF-SHOP in that 
State should implement any additional model of employer choice. 
However, in all States, the FF-SHOPs would continue to give employers 
the option of offering a single QHP (or single SADP) as well as the 
option of offering a choice of all QHPs (or SADPs) at a single 
actuarial value level of coverage, and States would not be given an 
opportunity to recommend that these options not be implemented in their 
State.
    We also proposed adding new paragraph Sec.  155.705(b)(3)(x) to 
provide that the employer choice models available through the FF-SHOP 
platform would be available for SBE-FPs utilizing the Federal platform 
for SHOP enrollment functions. We discussed how, if we gave States with 
FF-SHOPs an opportunity to recommend implementation of additional 
employer choice models, States with SBE-FPs would be given the same 
opportunity.
    Additionally, we proposed to amend paragraph (b)(4)(ii)(B) to 
specify the timeline under which qualified employers in an FF-SHOP must 
make initial premium payments. We proposed to add paragraph 
(b)(4)(ii)(B)(1) to specify that in the FF-SHOPs, payment for the 
group's first month of coverage must be received by the premium 
aggregation services vendor on or before the 20th day of the month 
prior to the month that coverage begins. We explained that electronic 
payments would have to be completed or the premium aggregation services 
vendor must have receipt of any hard copy check on or before the 20th 
day of the month prior to the month that coverage would begin. We also 
explained that if an initial premium payment is not received by the 
premium aggregation services vendor on or before the 20th day of the 
month prior to the month that coverage would begin, coverage would not 
be effectuated. We further explained that grace period and 
reinstatement opportunities under Sec.  155.735(c)(2), which are 
provided to groups that do not make timely payments after coverage has 
taken effect, are not relevant in this context, and we proposed 
amendments to introductory language at Sec.  155.735(c)(2) to reflect 
this.
    In circumstances where an FF-SHOP would be retroactively 
effectuating coverage for qualified employer groups, the FF-SHOP would 
need to receive payment prior to effectuating coverage. We sought 
comment on the timing of when a premium payment should be

[[Page 12284]]

required to be received by an FF-SHOP when coverage is effectuated 
retroactively, and explained that we were considering a policy under 
which payments for the first month's coverage and all months of the 
retroactive coverage would have to be received and processed no later 
than 30 days after the event that triggers the eligibility for 
retroactive coverage.
    At paragraph (b)(4)(ii)(C)(2), we proposed to correct a cross 
reference to Sec.  155.705(b)(4)(ii)(B)(1) that should have been 
updated to cross-reference Sec.  155.705(b)(4)(ii)(C)(1) when paragraph 
(b)(4)(ii)(A) was added in the 2016 Payment Notice.
    We also proposed amendments to Sec.  155.705(b)(11)(ii) to provide 
for FF-SHOPs to use a ``fixed contribution methodology'' in addition to 
the reference plan methodology set forth in the current regulation. We 
proposed to specify that when an employer decides to offer a single 
plan to qualified employees, the employer would be required to use the 
fixed contribution methodology. We also proposed to permit employers to 
choose between the reference plan contribution methodology and the 
proposed fixed contribution methodology when offering a choice of 
plans. Additionally, we proposed to add language to Sec.  
155.705(b)(11)(ii) explaining that a tobacco surcharge, if applicable, 
would be added to the monthly premium after the employer contribution 
is applied to the premium. Finally, we proposed to streamline the 
discussion of the reference plan contribution methodology described in 
Sec.  155.705(b)(11)(ii) and proposed removing Sec.  
155.705(b)(11)(ii)(D) because the FF-SHOPs are currently not able to 
support basing employer contributions on calculated composite premiums.
    We are finalizing the provisions regarding the FF-SHOP's authority 
to provide vertical choice, but will provide States with FF-SHOPs an 
opportunity to recommend that the FF-SHOP in their State not offer 
vertical choice in their State. States with SBE-FPs utilizing the 
Federal platform for SHOP enrollment functions will have the authority 
to opt out of making vertical choice available in their States. 
Information about whether vertical choice will be available in specific 
States with an FF-SHOP or SBE-FP will be made public prior to the 
deadline for QHP certification application submissions for the 
applicable year. We are also making a minor modification to add ``stand 
alone dental'' to the first sentence of Sec.  155.705(b)(3)(ix)(C).
    Comment: We received several comments concerning the additional 
proposed employer choice options. Many commenters supported the 
additional employer choice options because they would enhance the 
appeal of FF-SHOPs for both employees and employers. One commenter 
encouraged HHS to expand its proposal by allowing FF-SHOP employees to 
select from a wider variety of plans. Some commenters did not support 
adding vertical choice as an additional employer choice option, 
expressing concern about adverse selection because vertical choice 
could lead smaller employer groups with enrollees in need of more 
medical services to enroll in higher metal level QHPs. Additionally, 
there is concern that even if vertical choice is available to 
employers, an employer could still select horizontal choice or a single 
plan causing adverse selection. Commenters recommended that HHS 
consider the impact on selection and resulting changes in plan pricing 
when considering offering vertical choice in an FF-SHOP. One commenter 
recommended that FF-SHOP members only be allowed to enroll in one plan 
with one carrier to reduce complexity in the FF-SHOPs. Some commenters 
recommended that HHS promote the existing employer choice options 
instead of adding new employer choice options at this time. Other 
commenters believed that additional changes to employer choice will 
create confusion, add complexity, and create administrative challenges 
which would discourage participation in FF-SHOPs. One commenter also 
expressed concern about employer choice options, stating that if 
employers are required to select a specific issuer to offer coverage to 
the group, provider networks for employees could potentially be 
disrupted. To address this, the commenter recommended that HHS open all 
QHPs to employees enrolling in coverage through an FF-SHOP.
    Response: We are finalizing the proposal to provide for a vertical 
choice option in FF-SHOPs, for plan years beginning on or after January 
1, 2017. We agree with commenters that additional employer choice 
options can enhance the appeal of the FF-SHOPs, and intend to work with 
stakeholders to minimize any confusion stemming from the introduction 
of vertical choice. Due to operational limitations, at this time we are 
not offering a wider variety of employer choice options. We appreciate 
the concerns raised about adverse selection, but believe the fact that 
our proposal limits vertical choice to a single issuer's plans will 
help allow the issuer to manage the risk of adverse selection. Offering 
multiple plans to a qualified employer group allows an issuer to enroll 
a greater share of the group than if multiple issuers offering coverage 
in a single coverage level were vying for members of the group. Issuers 
would thus likely enroll a more diverse risk pool from the qualified 
employer's group. While qualified employers may still choose to offer 
their qualified employees horizontal choice or a single plan, the 
availability of the additional vertical choice option may help to 
mitigate the risk for adverse selection. To mitigate concerns raised by 
commenters and because we believe States are best positioned to 
understand the small group market dynamic in their State, HHS will 
provide States with an FF-SHOP an opportunity to recommend that the FF-
SHOP in their State not make vertical choice available in their State. 
For similar reasons, States with SBE-FPs utilizing the Federal platform 
for SHOP enrollment functions will be able to opt out of making 
vertical choice available in their States. In States where vertical 
choice is available, a qualified employer would have a choice of three 
employer choice options for both QHPs and SADPs: A single plan, all 
available plans at a single level of coverage (horizontal choice, as 
provided for by the statute), and a choice of all plans offered by a 
single issuer across all levels of coverage (vertical choice). In 
States where vertical choice is not an available option for qualified 
employers, the single plan option and horizontal choice option would 
continue to be available to qualified employers.
    Comment: We received several comments supporting adding contiguous 
choice as an additional employer choice option because employers would 
have more QHP options available to offer to their employees. One 
commenter recommends that HHS consider the additional administrative 
costs of allowing additional choice options.
    Response: As stated, we believe additional employer choice options 
could enhance the appeal of the FF-SHOPs, and we will continue to 
explore adding the option of contiguous choice in the future, but are 
not adding a contiguous choice option at this time, so that we can 
further consider the potential for adverse selection that could result 
from that option.
    Comment: One commenter recommended that States should not be 
permitted to make the decision on whether to implement new approaches 
for employer choice in FF-SHOPs and that it should be at the issuer's 
option about which QHPs and SADPs to make available to qualified 
employees. The

[[Page 12285]]

commenter recommended that HHS require States to conduct an assessment 
on the actuarial impact of various employer choice approaches, and 
determine safeguards that will protect against adverse selection. Other 
commenters also stated they do not agree with allowing States to opt in 
and out of offering vertical choice, and supported standardizing 
employer choice options across all States that have an FF-SHOP or that 
rely on the Federal platform for SHOP enrollment. Another commenter 
encouraged HHS to only allow additional employer choice options in 
States where the same option currently exists in the off-Exchange 
market, to prevent possible adverse selection while promoting a stable 
small group market.
    Response: In order to provide for State-specific evaluations of the 
impact of vertical choice on adverse selection and resulting changes in 
plan pricing, and to provide for more uniform small group market 
coverage options both on and off-Exchange, States with an FF-SHOP will 
be given an opportunity to recommend that the FF-SHOP in their State 
not offer vertical choice. States with SBE-FPs utilizing the Federal 
platform for SHOP enrollment functions will be able to opt out of 
making vertical choice available in their States. We believe that 
States are best positioned to assess the impact of additional employer 
choice options based on local market conditions. A State with an FF-
SHOP that wishes to recommend against offering vertical choice in that 
State must submit a letter to HHS in advance of the annual QHP 
certification application deadline, by a date to be established by HHS, 
describing and justifying the State's recommendation, based on the 
anticipated impact vertical choice would have on the small group market 
and consumers. A State-based Exchange utilizing the Federal platform 
for SHOP enrollment functions may decide against offering vertical 
choice by notifying HHS of that decision.
    HHS is requiring that a State with an FF-SHOP that wishes to 
recommend against offering vertical choice in that State make its 
recommendation to the FF-SHOP by submitting a letter to HHS in advance 
of the annual QHP certification application deadline, by a date to be 
established by HHS. The State's letter must describe and justify the 
State's recommendation, based on the anticipated impact this additional 
option would have on the small group market and consumers. This 
deadline will give issuers sufficient time to make informed decisions 
about whether to participate in the FF-SHOP, and will give the FF-SHOPs 
sufficient time to implement the State's recommendation. States with 
FF-SHOPs will be able to make recommendations regarding vertical choice 
on an annual basis. For plan years beginning in 2017 only, we strongly 
recommend that States with FF-SHOPs submit their recommendations to HHS 
on or before March 25, 2016, via email to [email protected]. States that 
meet this deadline will provide the FF-SHOPs sufficient time to review 
and implement State recommendations. HHS anticipates that its decisions 
regarding State recommendations for plan years beginning in 2017 would 
be made by April 1, 2016, which would provide issuers with sufficient 
time to determine their involvement in the FF-SHOPs for the following 
year.
    For these same reasons, we are finalizing our proposal to add a new 
paragraph at Sec.  155.705(b)(3)(x) to provide that the employer choice 
models available through the FF-SHOP platform will be available for 
SBE-FPs utilizing the Federal platform for SHOP enrollment functions, 
except that SBE-FPs may decide against offering the employer choice 
models specified in paragraphs (b)(3)(viii)(C) and (b)(3)(ix)(C). Under 
the final rule, a State with an SBE-FP must notify HHS of its decision 
against offering vertical choice in that State in advance of the annual 
QHP certification application deadline, by a date to be established by 
HHS. Again, this deadline will give issuers sufficient time to make 
informed decisions about whether to participate in the SHOP, and will 
give us sufficient time to implement the State's decision. States with 
SBE-FPs will be able to make decisions regarding vertical choice on an 
annual basis. For plan years beginning in 2017 only, we strongly 
recommend that States with an SBE-FP utilizing the Federal platform for 
SHOP enrollment functions notify HHS of their decisions on or before 
March 25, 2016, via email to [email protected]. Again, States that meet 
this deadline will provide the FF-SHOPs sufficient lead time to 
implement the State's decision. HHS anticipates that it will announce 
the SBE-FP States that have decided against offering vertical choice 
for plan years beginning in 2017 on or around April 1, 2016, which 
would provide issuers with sufficient time to decide whether to 
participate in the SHOP for the following year.
    Additional guidance will be provided to States regarding the 
notification or recommendation time frames for plan years beginning in 
2018 and beyond.
    Comment: Some commenters believe that requiring employer groups to 
make initial premium payments by the 20th day of the month prior to the 
month that coverage begins increases the potential for issuers not to 
receive the initial premium payment until after the first month of 
effectuated coverage. These commenters recommended that issuers not be 
required to effectuate coverage without payment from the FF-SHOP.
    Response: We are finalizing the provision with a modification to 
specify that a similar policy also applies under circumstances of 
retroactive coverage. Under Sec.  156.285(c)(8)(iii), FF-SHOP issuers 
are required to effectuate coverage unless the FF-SHOP sends a 
cancellation notice prior to the coverage effective date. Section 
156.285(c)(8)(iii) does not require issuers to effectuate coverage if 
the FF-SHOP does not receive a premium payment by the deadline 
established for the FF-SHOP. If payment is not received by the FF-SHOP 
prior to that deadline, the FF-SHOP will issue a cancellation notice.
    We are finalizing the following premium payment policies for 
circumstances where an FF-SHOP would be retroactively effectuating 
coverage. These policies differ somewhat from the policies we explained 
we were considering in the preamble to the proposed rule, because for 
operational reasons, premium payments must be received by the FF-SHOP 
premium aggregation services vendor by a certain date in order to be 
processed in a timely manner. When coverage is effectuated 
retroactively, as discussed in the proposed rule preamble, payment for 
the first month's coverage and all months of the retroactive coverage 
must be received and processed no later than 30 days after the event 
that triggers the eligibility for retroactive coverage. Additionally, 
however, in order for coverage to be effectuated by the first day of 
the following month, the employer must also make this payment by the 
20th day of the preceding month. If payment is made after the 20th day 
of a month, coverage will take effect as of the retroactive coverage 
effective date, but coverage will not be effectuated until the first 
day of the second month following the payment, and the payment must 
include the premium for the intervening month. Regardless, in order to 
effectuate retroactive coverage for a qualified employer or qualified 
employee, such as under an appeal decision, all premiums owed must be 
paid in full, including any prior premiums owed for coverage back to 
the retroactive coverage effective date, as well as a premium pre-
payment for the next month's coverage.
    These policies also apply to SBE-FPs that are utilizing the Federal 
platform

[[Page 12286]]

for SHOP enrollment and premium aggregation functions, because premium 
aggregation is an integral part of the eligibility and enrollment 
functions managed through the FF-SHOP platform.
    Comment: We received a comment expressing concern that employer 
groups will not be able to make the full premium payment within 30 days 
after the event that triggers eligibility for retroactive coverage, 
depending on how many months of retroactivity are covered. The 
commenter recommended that issuers not be required to effectuate 
retroactive coverage without full payment.
    Response: We believe that 30 days after the event that triggers 
eligibility for retroactive coverage is sufficient time for employer 
groups to make their full premium payment in order to have retroactive 
coverage. This policy also ensures that issuers receive payments in a 
timely manner. Issuers are not required to effectuate coverage if an 
employer's full payment is not received by the deadline set by the FF-
SHOP. Issuers should not cancel an enrollment transaction unless the 
FF-SHOP sends a cancellation transaction.
    Comment: We received no comments regarding our proposal to correct 
the cross reference from Sec.  155.705(b)(4)(ii)(B)(1) to Sec.  
155.705(b)(4)(ii)(C)(1).
    Response: We are finalizing this provision as proposed.
    Comment: With respect to our proposals to amend Sec.  
155.705(b)(11)(ii), one commenter recommended that HHS clarify that any 
tobacco surcharge would be paid to the FF-SHOP and not to issuers 
separately. Another commenter recommended that the tobacco surcharges 
should be spread across the costs of coverage for an entire group, 
rather than for the tobacco users only.
    Response: Any applicable tobacco surcharges will continue to be 
paid directly to the FF-SHOP as part of the group's total premium 
payment and will not be paid to issuers separately. We disagree that 
the tobacco surcharge should be spread across the entire group. The 
surcharge is a cost borne by the tobacco user and other enrollees in a 
group should not be responsible for sharing in its cost. We are 
finalizing the proposed amendments to Sec.  155.705(b)(11)(ii) with a 
modification to the language about tobacco surcharges for clarity. We 
are also modifying the proposed language about the contribution 
methodologies available to employers that offer a choice of plans to 
replace a reference to ``the level of coverage offered'' with a 
reference to the ``plans offered,'' to reflect the possibility that 
employers might offer vertical choice under the amendments finalized in 
this rule.
    Comment: With respect to our proposals to amend Sec.  
155.705(b)(11)(ii), we received one comment stating that if the FF-SHOP 
cannot support basing employer contributions on calculated composite 
premiums, employers may lose interest in participating in FF-SHOPs. 
Another commenter stated that because this feature is widely available 
off-Exchange, removing this option would put FF-SHOPs at a competitive 
disadvantage. Several commenters urged HHS to continue seeking feedback 
on this feature.
    Response: Because of operational limitations, FF-SHOPs are not 
currently able to support basing employer contributions on calculated 
composite premiums. However, we appreciate the concerns expressed by 
commenters and we are therefore not finalizing the removal of this 
provision as proposed. Instead, we are modifying the provision at Sec.  
155.705(b)(11)(ii)(D) to state that an FF-SHOP may permit employers to 
base contributions on a calculated composite premium for employees, for 
adult dependents, and for dependents below age 21, which gives the FF-
SHOPs the flexibility to implement this approach in the future. We are 
also removing the reference to ``the reference plan'' in this provision 
to reflect the availability of the fixed contribution methodology under 
the amendments finalized in this rule. We will continue to examine 
supporting employer contributions based on calculated composite 
premiums in the FF-SHOPs.
b. Eligibility Determination Process for SHOP (Sec.  155.715)
    In order to align with our interpretation of guaranteed 
availability and guaranteed renewability, we proposed to specify that 
the termination described in Sec.  155.715(g)(1) would be a termination 
of the employer group's enrollment through the SHOP, rather than a 
termination of a group's coverage. In many circumstances, an employer 
may offer to continue the same coverage outside of the SHOP, in which 
case the issuer should not terminate the coverage. We are finalizing 
this provision as proposed.
    Comment: Some commenters support removing automatic terminations of 
SHOP coverage in order to be consistent with guaranteed renewability 
requirements. One commenter recommended that if an employer no longer 
has SHOP coverage, the employer should be able to make no contribution 
toward the cost of employee coverage through the SHOP. Employees would 
be responsible for paying the full premium amount. Another commenter 
stated that making the coverage available outside of the SHOP and 
requiring employers to make payments and send data directly to issuers 
will introduce complexity, undue burden, and unnecessary confusion due 
to the differing issuer and SHOP data and payment methods. We also 
received one comment recommending that HHS wait to implement 
terminations of SHOP enrollment, rather than a termination of the 
group's coverage, until the infrastructure exists to automate the 
process.
    Response: In order to align with regulations around guaranteed 
availability and guaranteed renewability, we are finalizing the 
provision as proposed. Employers can decide whether to contribute 
toward the cost of employee coverage regardless of whether the employee 
has coverage through a SHOP. Employer groups wishing to maintain their 
small group coverage outside of a SHOP are encouraged to work directly 
with issuers to do so. If an employer offers coverage outside of a 
SHOP, enrollment and payment functions will be between the group and 
the specific issuer, and not through the SHOP. SHOPs are encouraged to 
work directly with issuers and groups to address any questions and 
concerns about the transfer of responsibility from the SHOP to the 
issuer. SHOPs, and not issuers, initiate all terminations of a group's 
enrollment through the SHOP, and this is how the FF-SHOP currently 
operationalizes terminations of group enrollments. FF-SHOPs are not 
able to automate the process of terminating FF-SHOP enrollment because 
it requires information from issuers and groups to ensure a transfer of 
responsibility should a group's coverage continue outside of the FF-
SHOP.
c. Enrollment Periods Under SHOP (Sec.  155.725)
    In Sec.  155.725, we proposed to amend paragraph (c). Specifically, 
we proposed to delete paragraph (c)(1) because it is outdated, 
redesignate current paragraph (c)(2) as introductory text to paragraph 
(c), and redesignate the remaining paragraphs to reflect the new 
structure of paragraph (c).
    We also proposed to redesignate Sec.  155.725(e) as Sec.  
155.725(e)(1), and add paragraph (e)(2) to specify that qualified 
employers in the FF-SHOP must provide qualified employees with an 
annual open enrollment period of at least 1 week. Like all of Sec.  
155.725(e), this amendment would only apply to renewals of SHOP 
participation.

[[Page 12287]]

    Additionally, we proposed amendments to Sec.  155.725(h)(2) to 
specify that in the case of an initial group enrollment or renewal, the 
event that triggers the group's coverage effective date in an FF-SHOP 
is not the plan selection of an individual qualified employee being 
enrolled as part of the group enrollment, but the employer's submission 
of all plan selections for the group, which we refer to in rule text as 
the group enrollment. This amendment would permit qualified employers 
to set initial and annual enrollment periods for their qualified 
employees that could include qualified employee plan selections both 
before and after the 15th day of the month. We also proposed to permit 
employers to select a coverage effective date up to 2 months in 
advance, provided that small group market rates are available for the 
quarter in which the employer would like coverage to take effect. Under 
the proposal, if an employer submits its group enrollment by the 15th 
day of any month, the FF-SHOP would ensure a coverage effective date of 
the first day of the following month, unless the employer opts for a 
later effective date for which rates are available. If an employer 
submits its group enrollment between the 16th day of the month and the 
last day of the month, we proposed that the FF-SHOP ensure a coverage 
effective date of the first day of the second following month, unless 
the employer opts for a later effective date for which rates are 
available. We note that the effective date of coverage selected by a 
qualified employer remains subject to the limit on waiting periods 
under Sec.  147.116.
    We also proposed to amend Sec.  155.725(i)(1) to provide that a 
SHOP be permitted to, but not be required to, provide for auto-renewals 
of qualified employees. We also proposed to amend the language of the 
provision for consistency with our interpretation of guaranteed 
renewability. Specifically, if a SHOP does not provide for auto-
renewals for qualified employees, qualified employees would have to 
review and provide a response to the employer's renewal offer of 
coverage. If auto-renewal is available in a SHOP, qualified employees 
would not be required to take any action to continue in the prior 
year's coverage through the SHOP.
    Finally, we proposed to amend Sec.  155.725(j)(2)(i) to remove a 
reference to Sec.  155.420(d)(10), which was deleted in the 2016 
Payment Notice. We also proposed to specify that there would not be a 
SHOP special enrollment period when a qualified employee or dependent 
of a qualified employee experiences an event described in Sec.  
155.420(d)(1)(ii), which provides for a special enrollment period for 
individuals enrolled in a non-calendar year group health plan or 
individual health insurance coverage.
    We are finalizing these amendments as proposed.
    Comment: We received several comments about the length of a 
qualified employee's annual open enrollment period for renewals. Some 
commenters stated they believe the proposed minimum annual open 
enrollment period of one week is insufficient. One commenter 
recommended that employees be provided with a 30-day annual open 
enrollment period, or at a minimum, a two-week annual open enrollment 
period.
    Response: The proposed amendment would not prevent a qualified 
employer from offering annual enrollment periods to qualified employees 
that are longer than one week. This regulation specifies only the 
minimum length of the annual open enrollment period for qualified 
employees. We are finalizing this provision as proposed because it 
would enable qualified employers and qualified employees, especially at 
very small companies, to finalize their annual renewal process more 
quickly.
    Comment: We received one comment supporting our proposal to allow 
employers to opt for a coverage effective date up to 2 months in 
advance. The commenter stated that this amendment increases employer 
flexibility and may improve the consumer's experiences with SHOP.
    Response: We are finalizing the provision as proposed. We note that 
the effective date of coverage selected by a qualified employer remains 
subject to the limit on waiting periods under Sec.  147.116.
    Comment: One commenter supported the proposed change to allow SHOPs 
to offer auto-renewals of qualified employees. However, another 
commenter did not support this automated process because of the risk of 
error.
    Response: Auto-renewals provide a more streamlined, efficient way 
to renew coverage with minimal risk for error, and our rule will permit 
SHOPs to do so. We note that the FF-SHOPs are not able to support this 
feature at this time. Additional guidance will be provided if auto-
renewal becomes available in the FF-SHOPs.
    Comment: We received one comment supporting the proposal that there 
not be a SHOP special enrollment period when a qualified employee or 
dependent of a qualified employee is enrolled in a non-calendar year 
group health plan or individual health insurance coverage.
    Response: We are finalizing the provision as proposed.
d. Termination of SHOP Enrollment or Coverage (Sec.  155.735)
    To align with proposed amendments to Sec.  155.705(b)(4), we 
proposed to modify the introductory language of Sec.  155.735(c)(2) to 
specify that the provisions related to termination of employer group 
health coverage for non-payment of premiums in FF-SHOPs under paragraph 
(c)(2) do not apply to premium payments for the first month of 
coverage. We did not receive any comments regarding this proposal, and 
are finalizing it as proposed.
    We also proposed amendments to Sec.  155.735(d) to specify that if 
an enrollee changes from one QHP to another during the annual open 
enrollment period or during a special enrollment period, the last day 
of coverage would be the day before the effective date of coverage in 
the enrollee's new QHP.
    Additionally, we proposed at Sec.  155.735(d)(2)(iii) to require 
FF-SHOPs to send advance notices to qualified employees before their 
dependents age off of their plan. The notice would be sent 90 days in 
advance of the date when the child dependent enrollee is no longer 
eligible for coverage under the plan the employer purchased through the 
FF-SHOP because he or she has reached the maximum child dependent age 
for the plan. The notice would include information about the plan in 
which the dependent is currently enrolled, the date the dependent would 
age off the plan, and information about next steps. In the FF-SHOPs, a 
dependent aging off of the plan loses eligibility for dependent 
coverage at the end of the month of the dependent's 26th birthday or at 
the end of the month in which the issuer has set the maximum dependent 
age limit (but in some cases might have the option to keep the coverage 
for a period of time after that date under applicable continuation 
coverage laws). This notice is intended to be a courtesy notice as 
enrollees would still receive a termination notice when their coverage 
through the SHOP is terminating.
    We are finalizing these provisions generally as proposed, with the 
exception of a technical correction to paragraph (d)(2)(ii) to replace 
the citation to Sec.  155.420(b)(2) with a citation to Sec.  
155.725(j)(5), the SHOP rule under which SHOP enrollments are 
effectuated pursuant to special enrollment periods. Section

[[Page 12288]]

155.725(j)(5) cross-references Sec.  155.420(b), and thus also cross-
references the retroactivity possible under Sec.  155.420(b)(2).
    Comment: We received one comment supporting our proposal to send 
qualified employees 90 days advance notice of when a child dependent is 
no longer eligible for coverage under the plan the employer purchased 
through the FF-SHOP because he or she has reached the maximum child 
dependent age for the plan. The commenter notes that it is important to 
recognize that the age-off date may go well beyond a dependent's 
twenty-sixth birthday, depending on State dependent coverage laws.
    Response: We are finalizing the provision as proposed. If a State 
or issuer sets maximum dependent age limits greater than 26 years, the 
FF-SHOPs will send the notice 90 days in advance of when the child 
dependent is no longer eligible for coverage under the plan the 
employer purchased through an FF-SHOP. The FF-SHOPs will be able to 
accommodate issuer-specific and State-specific maximum dependent age 
limits.
e. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.  
155.740)
    In Sec.  155.740, we proposed amendments relating to SHOP appeals. 
We proposed to provide that employers and employees may file an appeal 
not only if a SHOP fails to provide an eligibility determination in a 
timely manner, but also if a SHOP fails to provide timely notice of an 
eligibility determination. We also proposed to allow employers and 
employees who successfully appeal a denial of SHOP eligibility to 
select whether the effective date of coverage or enrollment through the 
SHOP under their appeal decision will be retroactive to the effective 
date of coverage or enrollment through the SHOP that the employer or 
employee would have had if they had correctly been determined eligible, 
or prospective from the first day of the month following the date of 
the notice of the appeal decision. Additionally, we proposed that if 
eligibility is denied under an appeal decision, the appeal decision 
would be effective on the first day of the month following the date of 
the notice of the appeal decision.
    Comment: Some commenters said they believe that if an employer only 
adds eligible employees to the roster, then the SHOP will have no 
knowledge of ineligible employees. Therefore, the process of employees 
appealing to the SHOP will never be a valid scenario because no 
ineligibility notification will ever be sent by the SHOP to the 
employee. Another commenter suggested that HHS retain the current 
regulatory language about the coverage effective date after a 
successful appeal decision or adopt an effective date that is the first 
of the month following the appeal decision, but not allow each group to 
choose. Some commenters stated that only those who had retroactive 
claims would select the retroactive date. Commenters also recommended 
that coverage should never take effect more than a month retroactively, 
or that coverage should start immediately.
    Response: We are finalizing as proposed our proposal that employers 
and employees may file an appeal not only if a SHOP fails to provide an 
eligibility determination in a timely manner, but also if a SHOP fails 
to provide timely notice of an eligibility determination. SHOPs may 
send a notice of ineligibility if the information provided by an 
employee does not match the information provided by the qualified 
employer. An FF-SHOP might send a notice of ineligibility to an 
employee, for example, if the employee inaccurately enters his or her 
unique participation code in the FF-SHOP employee application. We note 
that employers do not make SHOP eligibility determinations for 
employees. The SHOPs make all eligibility determinations for employees. 
Employers must offer SHOP coverage to all full-time employees; other 
employees and former employees added to the employee roster are also 
eligible for SHOP coverage.
    We are making a minor modification to our proposal allowing 
employers and employees to select either a retroactive or prospective 
coverage or enrollment effective date if the appeal decision finds the 
employer or employee eligible, to specify that individual employees may 
select an effective date only when the appeal is of an individual 
employee's eligibility determination (rather than an appeal of a 
determination of eligibility for an employer, which affects coverage or 
enrollment for the entire group). We believe that if an employer or 
employee applied for coverage or enrollment with the intention that 
coverage would be effective on a specific date, received a denial of 
eligibility, and successfully appealed the decision, the employer or 
employee should be provided with the option to select retroactive or 
prospective coverage or enrollment, because the employer or employee 
was found to be eligible for SHOP coverage and the group or employee 
could have had SHOP coverage as early as the original desired date had 
the original eligibility determination been correct. Regardless of 
whether the group or employee has incurred claims, to provide maximum 
flexibility to consumers, we believe that the decision about whether to 
select a retroactive or prospective coverage or enrollment effective 
date should be the employer's or employee's. While we acknowledge 
issuers' concerns about who might select retroactive coverage, we note 
that retroactive coverage would be effectuated only if the requisite 
premium payment is made in accordance with Sec.  
155.705(b)(4)(ii)(B)(2), as finalized here. In the FF-SHOPs, premiums 
owed for employees that are found eligible under an employee appeal 
decision will be collected from employers as part of the next monthly 
invoice for the group.
    We are finalizing Sec.  155.740(l)(3)(iii), regarding the effective 
date of a denial of eligibility under an appeal decision, with a 
revision specifying that the appeal decision would be effective as of 
the date of the notice of the appeal decision. This is the same 
effective date that applies under the current version of Sec.  
155.740(l)(3), so there will not be any change in policy regarding the 
effective date of a denial of eligibility under an appeal decision 
under this rule. We have decided to maintain the current policy because 
if an employer or employee is denied eligibility and their appeal is 
also denied, the employer or employee might never have had enrollment 
or coverage through the SHOP, and even if they did, would not have been 
entitled to it. The SHOP should therefore be able to make the appeal 
decision effective as of the date of the notice of the appeal decision.
9. Exchange Functions: Certification of Qualified Health Plans
a. Certification Standards for QHPs (Sec.  155.1000)
(1) Denial of Certification
    Section 1311(e)(1)(B) of the Affordable Care Act states that 
Exchanges may certify a health plan as a QHP if such health plan meets 
the requirements for certification as promulgated by the Secretary and 
the Exchange determines that making available such health plan through 
such Exchange is in the interests of qualified individuals and 
qualified employers. Section 1311(e)(1)(B) thereby affords Exchanges 
the discretion to deny certification of QHPs that meet minimum QHP 
certification standards, but are not ultimately in the interests of 
qualified individuals and qualified employers. In the proposed rule, we

[[Page 12289]]

stated that we interpret the ``interest'' standard to mean QHPs should 
provide quality coverage to consumers to meet the Affordable Care Act's 
goals.
    Section 155.1000 provides Exchanges with broad discretion to 
certify health plans that otherwise meet the QHP certification 
standards specified in part 156. HHS expects to continue to certify the 
vast majority of plans that meet certification standards. HHS will 
focus denials of certification in the FFEs based on the ``interest of 
the qualified individuals and qualified employers'' standard on cases 
involving the integrity of the FFEs and the plans offered through them. 
Examples of issues that could result in non-certification of a plan 
include concerns related to an issuer's material non-compliance with 
applicable requirements, an issuer's financial insolvency, or data 
errors related to QHP applications and data submissions. Under this 
approach, HHS could consider an assessment of past performance, 
including with respect to oversight concerns raised through compliance 
reviews and consumer complaints received, and the frequency and extent 
of any data submission errors. In exercising this authority, HHS 
intends to adopt a measured approach that would take into consideration 
several factors, including available market competition and the 
availability of operational resources.
    We noted that the Office of Personnel Management (OPM) has the sole 
discretion for contracting with multi-State plans and as such retains 
the authority to selectively contract with multi-State plans.
    Comment: Several commenters opposed HHS's proposal to deny 
certification to plans based on the interest standard, stating 
``additional'' or ``new'' HHS certification authority would reduce 
competition and innovation, lead to arbitrary, inconsistent, and 
capricious certification decisions, and interfere with State reviews. 
Other commenters agreed that HHS has existing authority to deny 
certification and supported the proposal. Those commenters believe that 
the use of such authority could promote the availability of high-value 
health plans and innovative health care delivery system reforms, 
encourage insurers to minimize annual rate increases, and enable FFEs 
to become a ``trusted source of quality coverage for consumers.''
    Response: The interest standard was previously codified in Sec.  
155.1000 (77 FR 18467); thus, we did not propose new or additional 
certification authority.
    Comment: Some commenters stated HHS should work with plans to 
address concerns and meet certification requirements rather than 
denying certification, and denials should only be used when a health 
plan is financially impaired. They also recommended HHS make specific 
requirements and examples available for comment (for example, 
clarifying how consumer complaints would be used to assess past 
performance) before finalizing any criteria. Other commenters agreed 
that HHS should use factors outlined in the proposed rule, such as 
consumer complaints and past performance, as criteria for denying 
certification. Some States shared information on their models. Other 
commenters wanted HHS to take additional factors into account, such as 
a ``history of repeated or egregious violations'' of nondiscrimination 
standards and network adequacy requirements. Another commenter asked 
HHS to consider safe harbors for innovative plan designs that provide 
incentives to reduce the cost of health care to consumers while 
providing EHB and meeting or exceeding minimum value (MV).
    Response: As stated above, while we have existing authority to deny 
certification based on the interest standard, we are not including any 
specific requirements or criteria in this final rule. HHS will continue 
to focus on cases involving the integrity of the FFEs and the plans 
offered through them, and, as discussed in the proposed rule, will 
consider factors such as an issuer's material non-compliance with 
applicable requirements, an issuer's financial insolvency, or data 
errors related to QHP applications and data submissions. We expect to 
continue to certify the vast majority of plans that meet certification 
standards.

G. Part 156--Health Insurance Issuer Standards Under the Affordable 
Care Act, Including Standards Related to Exchanges

1. Standardized Options
    In order to provide a new option that could further simplify the 
consumer plan selection process, we proposed six standardized options 
that issuers could choose to offer in the individual market FFEs in 
plan year 2017. At Sec.  156.20, we proposed to define a standardized 
option as a QHP with a cost-sharing structure specified by HHS. Each 
standardized option consists of a fixed deductible; fixed annual 
limitation on cost-sharing; and fixed copayment or coinsurance for a 
key set of EHB that comprise a large percentage of the total allowable 
costs for an average enrollee (these are the EHB in the Actuarial Value 
Calculator with the addition of urgent care). We proposed one 
standardized option at each of the bronze, silver (and the three 
associated silver CSR plan variations), and gold levels of coverage. We 
proposed that an issuer could offer a standardized option at one or 
more levels of coverage, with the exception that if it offers a silver 
standardized option, it must also offer the three associated 
standardized silver CSR plan variations. We did not propose a 
standardized option at the platinum level of coverage since only a 
small proportion of QHP issuers in the FFEs offer platinum plans.
    We proposed that an issuer could offer more than one plan for each 
standardized option within a service area, subject to the meaningful 
difference requirements defined at Sec.  156.298. This could be 
accomplished, for example, if the issuer offers an HMO standardized 
option at a particular level of coverage as well as a PPO standardized 
option at the same level of coverage. We also proposed that issuers 
would retain the flexibility to offer an unlimited number of non-
standardized plans and that we would not limit the total number of QHPs 
that may be sold through an FFE in a rating area or county, outside of 
any limitations under the meaningful difference and other applicable 
QHP certification requirements.
    We encouraged issuers to offer at least one standardized option, 
particularly at the silver level of coverage (and the associated silver 
CSR plan variation levels). This would simplify the consumer shopping 
experience for the greatest number of FFE QHP enrollees, since silver 
plans are the most common and popular plans in terms of enrollment in 
the FFEs.
    We designed the standardized options to be as similar as possible 
to the most popular (weighted by enrollment) QHPs in the 2015 FFEs in 
order to minimize market disruption and impact on premiums.
    We proposed that standardized options have the four drug tiers 
currently utilized in our consumer-facing applications--generic, 
preferred brand, non-preferred brand, and specialty drug tiers--with 
the option for issuers to offer additional lower-cost tiers if desired, 
since slightly more than half (56 percent) of the proposed 2016 FFE 
QHPs had more than four drug tiers.
    We proposed that standardized options have no more than one in-
network provider tier since varying cost sharing by provider tier 
affects the actuarial value of a plan, making it difficult to 
standardize a cost-sharing

[[Page 12290]]

structure. Additionally, only 14 percent of FFE enrollees in 2015 were 
enrolled in QHPs with more than one in-network tier, and only 6 percent 
of enrollees were covered by an issuer that did not offer a single-tier 
plan in addition to a multi-tier plan in the same county.
    We proposed that the standardized options would exempt from the 
deductible certain routine services, such as primary care, specialist 
visits (at the silver and gold metal levels), and generic drugs, to 
ensure that access to coverage translates into access to care for 
routine and chronic conditions and that enrollees receive some up-front 
value for their premium dollars. Among 2015 FFE QHPs, more than 85 
percent of silver plan enrollees and more than 50 percent of bronze 
plan enrollees selected plans that cover certain services prior to 
application of the deductible. (The figure for gold plan enrollees was 
more than 90 percent. However, many gold plans have a $0 deductible, in 
which case, the concept of deductible-exempt services would not be 
meaningful.) Primary care and generic drugs are the services most 
likely to be covered without a deductible at all metal levels. Other 
services that are also likely to be covered prior to the deductible, 
particularly by silver and gold plans, include specialist visits and 
mental/behavioral health and substance use disorder outpatient 
services.
    We proposed that the standardized options balance consumer 
preference for copayments over coinsurance with the potential impact on 
premiums. Research shows that consumers often prefer copayments to 
coinsurance because copayments are more transparent and make it easier 
for consumers to predict their out-of-pocket costs. On the other hand, 
setting fixed copayments on a national level for high-cost services 
could lead to disparate premium effects due to regional and issuer-
specific cost differences, or it could lead to premium increases or 
require corresponding increases in other forms of cost sharing, if set 
too low.
    To reduce operational complexity, we proposed to not vary the 
standardized options by State or by region. We proposed one set of 
standardized options for all FFEs, including those in which States 
perform plan management functions, recognizing that some States 
regulate the level of cost sharing applied to certain benefits, such as 
emergency room services and specialty drugs.
    We noted that we would be conducting consumer testing to help us 
evaluate ways in which standardized options, when certified by an FFE, 
could be displayed on our consumer-facing plan comparison features in a 
manner that makes it easier for consumers to find and identify them, 
including distinguish them from non-standardized plans. We noted that 
we anticipate differentially displaying the standardized options to 
allow consumers to compare plans based on differences in price and 
quality rather than cost-sharing structure as well as providing 
information to explain the standardized options concept to consumers. 
We also noted that we are considering whether to require QHP issuers or 
web-brokers to differentially display standardized options when a non-
FFE Web site is used to facilitate enrollment in an FFE.
    We noted that multi-State plan issuers may use the standardized 
options, but that OPM, at its discretion, may design additional 
standardized options applicable only to multi-State plan issuers. We 
would not display the OPM-designed standardized options applicable only 
to multi-State plan issuers in a differential manner, however, in order 
to preserve consistency in the standardized options identified by HHS 
in the FFEs.
    We are finalizing the HHS-specified standardized options, but as 
further described below, we are specifying some changes to the 
standardized options' cost sharing, including one technical correction. 
These changes remain consistent with the general features and 
principles of standardized options described in the preamble to the 
proposed rule. We will make any additional changes to the standardized 
options in future rulemaking. The plans finalized in this rule apply 
beginning with the 2017 plan year and until any future changes are 
finalized.
    In addition, we are adding to Sec.  155.205(b)(1) a new provision 
codifying the Exchange's authority to differentially display 
standardized options on our consumer-facing plan comparison and 
shopping tools. (How standardized options will be displayed will take 
into consideration the results of consumer testing, which is currently 
in process.) We do not intend to require QHP issuers or web-brokers to 
adhere to differential display requirements of standardized options 
when using a non-Exchange Web site to facilitate enrollment in a QHP 
through an Exchange at this time, but will consider whether we should 
propose such a standard in the future. Additionally, because the 
provision in Sec.  155.205(b)(1) refers to standardized options, we 
will finalize the definition of standardized option at Sec.  155.20, 
which specifies the definitions for part 155, instead of at Sec.  
156.20, which specifies definitions for part 156.
    Overall, commenters were supportive of the specific standardized 
plan designs, but suggested some modifications. The proposed 2017 
bronze standardized option closely resembled a catastrophic plan, with 
a $6,650 deductible, an annual limitation on cost sharing equal to the 
maximum allowable annual limitation on cost sharing for 2017 (proposed 
to be $7,150), and 50 percent coinsurance for most types of benefits. 
Primary care visits (for the first three visits) and mental health/
substance use outpatient services were exempt from the deductible with 
a copayment of $45. Generic drugs were also exempt from the deductible 
with a copayment of $35. The top three drug tiers each had a 50 percent 
coinsurance rate. We are making a change to the cost sharing for each 
of the top three drug tiers in the bronze standardized option. In 
response to commenters who noted the relative paucity of bronze plans 
on the FFEs with 50 percent coinsurance rates for drugs, the preferred 
brand drug tier now has a 35 percent coinsurance; the non-preferred 
brand drug tier now has a 40 percent coinsurance; and the specialty 
drug tier now has a 45 percent coinsurance. We are also making a 
technical correction to the Bronze plan's AV calculation to ensure that 
the deductible and coinsurance apply correctly after the first three 
primary care visits, to align with the Final 2017 AV Calculator User 
Guide instructions. Making this technical correction and the above 
changes to drug coinsurance rates raises the AV for the plan to 61.88. 
Thus, the AV for the final bronze standardized option is 0.06 percent 
higher than the AV of the proposed bronze standardized option, which 
was 61.82 (rounded to 61.8). The coinsurance rate for each of the top 
three drug tiers more closely reflects the average coinsurance rate for 
each of the top three drug tiers in the most popular (weighted by 
enrollment) QHPs in the 2015 FFEs, which were 25 percent, 35 percent, 
and 45 percent, respectively. The new bronze standardized option also 
addresses commenters' concerns that the proposed design was 
inconsistent with the principle of having four different drug tiers. 
Non-generic drugs would all have had a 50 percent coinsurance rate with 
the proposed version of the bronze standardized option.
    The proposed 2017 silver standardized option had a $3,500 
deductible, an annual limitation on cost sharing equal to the maximum 
allowable annual limitation on sharing

[[Page 12291]]

for 2017, and a 20 percent enrollee coinsurance rate. Primary care 
visits, mental health/substance use outpatient services, specialist 
visits, urgent care visits, and all drug benefits were exempt from the 
deductible, and all of the deductible-exempt benefits had copayments 
instead of coinsurance, except for the specialty drugs tier, which had 
a 40 percent coinsurance rate. Emergency room services were subject to 
the deductible, with a $400 copayment applicable after the deductible.
    In the final rule, we are making a change to the proposed silver 
standardized option in response to comments. The proposed silver 
standardized option and gold standardized option had the same copayment 
value for generic drugs. We are increasing the copayment for generic 
drugs to $15 for the silver standardized option to more closely reflect 
the average copayment rate for generic drugs in the most popular QHPs 
in the 2015 FFEs (weighted by enrollment). The actuarial value of the 
new standardized silver option is 70.63 percent (0.37 percent lower 
than the AV of the proposed version).
    The proposed silver cost-sharing reduction standardized options 
reduced all cost sharing parameters successively to meet the 73 
percent, 87 percent, and 94 percent AV requirements. Where possible, 
the cost-sharing reduction standardized options and the non-cost-
sharing reduction standardized silver option maintain similar 
differentials between the cost sharing for certain benefits like 
primary care and specialty visits. We are finalizing the three 
standardized options at the silver cost-sharing reduction variation 
levels.
    The proposed 2017 gold standardized option, which we are also 
finalizing as proposed, has a $1,250 deductible, a $4,750 annual 
limitation on cost sharing, and a 20 percent coinsurance rate for most 
types of benefits. Primary care visits, mental health and substance use 
outpatient services, specialist visits, urgent care visits, and all 
drug benefits are not subject to the deductible. All of the benefits 
not subject to the deductible have copayments except for specialty 
drugs.

                                                        Table 9--Final 2017 Standardized Options
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Silver 73%          Silver 87%          Silver 94%
                                        Bronze              Silver          actuarial value     actuarial value     actuarial value          Gold
                                                                               variation           variation           variation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value (%).............  61.88.............  70.63.............  73.55.............  87.47.............  94.30.............  79.98.
Deductible......................  $6,650............  $3,500............  $3,000............  $700..............  $250..............  $1,250.
Annual Limitation on Cost         $7,150............  $7,150............  $5,700............  $2,000............  $1,250............  $4,750.
 Sharing.
Emergency Room Services.........  50%...............  $400 (copay         $300 (copay         $150 (copay         $100 (copay         $250 (copay
                                                       applies only        applies only        applies only        applies only        applies only
                                                       after deductible).  after deductible).  after deductible).  after deductible).  after
                                                                                                                                       deductible).
Urgent Care.....................  50%...............  $75 (*)...........  $75 (*)...........  $40 (*)...........  $25 (*)...........  $65 (*).
Inpatient Hospital Services.....  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Primary Care Visit..............  $45 (* first 3      $30 (*)...........  $30 (*)...........  $10 (*)...........  $5 (*)............  $20 (*).
                                   visits, then
                                   subject to
                                   deductible and
                                   50% coinsurance).
Specialist Visit................  50%...............  $65 (*)...........  $65 (*)...........  $25 (*)...........  $15 (*)...........  $50 (*).
Mental Health/Substance Use       $45 (*)...........  $30 (*)...........  $30 (*)...........  $10 (*)...........  $5 (*)............  $20 (*).
 Disorder Outpatient Services.
Imaging (CT/PET Scans, MRIs)....  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Rehabilitative Speech Therapy...  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Rehabilitative OT/PT............  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Laboratory Services.............  50%...............  20%...............  20%...............  20%...............  5%................  20%.
X-rays..........................  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Skilled Nursing Facility........  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Outpatient Facility Fee.........  50%...............  20%...............  20%...............  20%...............  5%................  20%.
Outpatient Surgery Physician/     50%...............  20%...............  20%...............  20%...............  5%................  20%.
 Surgical.
Generic Drugs...................  $35 (*)...........  $15 (*)...........  $10 (*)...........  $5 (*)............  $3 (*)............  $10 (*).
Preferred Brand Drugs...........  35%...............  $50 (*)...........  $50 (*)...........  $25 (*)...........  $5 (*)............  $30 (*).
Non-Preferred Brand Drugs.......  40%...............  $100 (*)..........  $100 (*)..........  $50 (*)...........  $10 (*)...........  $75 (*).
Specialty Drugs.................  45%...............  40% (*)...........  40% (*)...........  30% (*)...........  25% (*)...........  30% (*).
--------------------------------------------------------------------------------------------------------------------------------------------------------
(*) = not subject to the deductible.

    Comment: Many commenters supported our proposal to establish 
standardized options in the individual market FFEs in plan year 2017, 
as a step towards simplifying the consumer experience, both when 
shopping for

[[Page 12292]]

health insurance and when making cost-sharing payments to use covered 
health care services. Some commenters opposed our standardized options 
proposal, arguing that it will hamper innovation and limit competition 
and choice, and that differential or preferential display of 
standardized options could inadvertently steer consumers with specific 
or special health care needs towards selecting standardized options 
that are designed for the average QHP enrollee and not for a specific 
population. These commenters expressed their concern that our proposal 
represents a first step toward ultimately limiting or excluding non-
standardized plans. These commenters stated that making standardized 
options mandatory in the future could stifle innovation in plan design, 
including value based insurance design offerings, as well as 
competition in the case that standardized options are sorted above non-
standardized plans on our consumer-facing plan comparison and shopping 
tools. Among those who supported the standardized options proposal, 
many urged that offering them should be mandatory, even in 2017.
    Response: We believe that standardized options can simplify the 
consumer shopping experience and are therefore finalizing the proposal 
for issuers to be able to offer standardized options if they choose. We 
recognize that these cost-sharing structures may not be appropriate for 
all issuers or all markets. We are not requiring issuers to offer 
standardized options, nor limiting their ability to offer other QHPs, 
and as a result, we do not believe that standardized options will 
hamper innovation or limit choice. Additionally, we will seek to 
mitigate the risk that consumers with special health care coverage 
needs incorrectly choose a standardized option through the use of tools 
that explain to consumers which cost-sharing features are standardized, 
and how they may differ from one another and from non-standardized 
plans, as well as how they can be used to simplify the shopping 
experience. We believe that most consumers with specialized health care 
needs will carefully shop for coverage that provides the right mix of 
cost-sharing protections, benefits, and networks.
    Comment: Several commenters agreed with the features of our 
proposed standardized options, including the inclusion of certain 
deductible-exempt services, a single in-network provider tier, four 
drug tiers with the option of lower-cost tiers, and copayments in place 
of coinsurance where possible. We also received many recommended 
specific changes to the standardized option designs, particularly with 
respect to prescription drugs. Some commenters opposed the use of 
coinsurance for the specialty drug tier across all metal levels without 
the inclusion of specific and reasonable dollar level caps. Some 
commenters noted that the proposed bronze standardized option in effect 
has only two tiers, since the generic drug tier has a proposed 
copayment of $35 while the top three drug tiers all have the same 
coinsurance rate of 50 percent. Some commenters noted that the proposed 
copayments for generic drugs were set at the same copayment rate ($10) 
for both the gold standardized option and the silver standardized 
option and recommended that the generic copayment be lower in the gold 
plan than in the silver plan. Some commenters asked that all four drug 
tiers be exempt from the deductible, while others asked that drugs be 
subject to a separate deductible. Some commenters asked that we clarify 
that the copayment amounts for the drug tiers are for thirty-day retail 
fills. Some commenters asked that we clarify that issuers are permitted 
to create lower cost tiers for any of the four drug tiers, not just for 
the generic drugs tier. For example, commenters suggested that issuers 
should be permitted to create a preferred specialty tier with lower 
cost sharing than the specialty tier. Some commenters ask that we 
clarify that preferred and non-preferred pharmacies are permitted with 
differential cost sharing and that differential cost sharing is 
permitted for mail-service and retail pharmacies, such that the 
standardized cost sharing could represent cost sharing at non-preferred 
retail pharmacies, with lower cost sharing available at preferred 
retail or mail-service pharmacies.
    Response: We are finalizing the standardized options as proposed 
except for the changes to the bronze and silver standardized options 
discussed above and the following clarifications. We clarify that that 
copayment amounts listed for the drug tiers are for thirty-day 
prescription fills at retail pharmacies and that issuers (or their 
prescription benefit managers) may offer a lower cost-sharing rate for 
mail order prescription fills, as is the most common practice in the 
current market. We also clarify that issuers may create a lower cost 
tier for the generic drugs tier for standardized options, but may not 
do so for the three higher drug tiers in the standardized options.
    Comment: One commenter recommended that we create standardized 
options for family plans in addition to individual plans.
    Response: We clarify that issuers may offer the standardized 
options as family plans by doubling the maximum annual limitation on 
cost-sharing and setting the family (other than self-only) deductible 
at twice the deductible provided here.
    Comment: Some commenters urged that we exempt habilitative and 
rehabilitative outpatient services from the deductible in the 
standardized options. Some commenters also encouraged the creation of a 
standardized platinum option. Some commenters opposed designing the 
standardized options to be as similar as possible to the 2015 QHPs, 
noting that in their opinion, the 2015 QHPs often did not meet the 
needs of people with chronic conditions.
    Response: We designed the plans to be as similar as possible to the 
2015 QHPs (as measured on an enrollment-weighted basis) in order to 
minimize disruption to the market and impact on premiums. Only a 
minority of these plans exempted habilitative and rehabilitative 
outpatient services from the deductible. We will consider more 
deductible exempt services in future years depending on changes in the 
QHP markets, enrollment patterns, and other considerations.
    Comment: Several commenters expressed concern with our proposal to 
establish a set of standardized options that would apply in all States 
in which an FFE is currently operating, noting that States may have 
established or may wish to establish their own standardized plans 
specific to their State-wide markets.
    Response: As we note in the preamble to Sec.  156.350 in this final 
rule, it is not possible at this time for the Federal platform to 
accommodate State customization, such as State-specific display 
elements on Plan Compare. State-defined standardized plans that are 
different from HHS's standardized options will not be displayed in the 
same manner as HHS's standardized options on the Federal platform 
because of the limitations described above.
    Further, in a State that has required standardization of certain 
cost-sharing features of its QHPs or is considering doing so in 2017 or 
beyond, issuers must comply with State law, which may mean that issuers 
in those States will be unable to offer some or all of the standardized 
options established through this rule-making. At this time, the FFEs 
will not be able to give differential display to QHPs that differ from 
the standardized options finalized in this final rule, even if the only 
differences are to comply with State

[[Page 12293]]

laws. We will consider whether we may be able to do so in the future, 
however.
    Comment: HHS solicited comments on whether it should require QHP 
issuers or web-brokers to differentially display standardized options 
when using a non-Exchange Web site to facilitate enrollment in a QHP 
through the Exchange. Commenters voiced concerns that web-brokers 
already have to comply with existing plan display requirements, such as 
displaying all plans sold on the Exchange, and not displaying plans 
based on compensation, and that should HHS adopt this policy, web 
brokers would need clear guidance and sufficient time to prepare.
    Response: We recognize that currently, web-brokers are expected to 
comply with display requirements under Sec.  155.220(c)(3), which 
includes disclosing and displaying all QHP information provided by the 
Exchange or directly by QHP issuers consistent with the requirements of 
Sec.  155.205(b)(1) and (c), providing consumers the ability to view 
all QHPs offered through the Exchange, and displaying all QHP data 
provided by the Exchange. We are not requiring QHP issuers or web-
brokers to adhere to differential display requirements of standardized 
options when using a non-Exchange Web site to facilitate enrollment in 
a QHP through an Exchange at this time. We will consider whether such a 
standard should apply to non-Exchange Web sites in the future. Web-
brokers and issuers should continue to comply with all existing plan 
display requirements.
2. FFE User Fee for the 2017 Benefit Year (Sec.  156.50)
    Section 1311(d)(5)(A) of the Affordable Care Act permits an 
Exchange to charge assessments or user fees on participating health 
insurance issuers as a means of generating funding to support its 
operations. In addition, 31 U.S.C. 9701 permits a Federal agency to 
establish a charge for a service provided by the agency. If a State 
does not elect to operate an Exchange or does not have an approved 
Exchange, section 1321(c)(1) of the Affordable Care Act directs HHS to 
operate an Exchange within the State. Accordingly, at Sec.  156.50(c), 
we specify that a participating issuer offering a plan through an FFE 
must remit a user fee to HHS each month that is equal to the product of 
the monthly user fee rate specified in the annual HHS notice of benefit 
and payment parameters for FFEs for the applicable benefit year and the 
monthly premium charged by the issuer for each policy under the plan 
where enrollment is through an FFE.
    OMB Circular No. A-25R establishes Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public. As in benefit 
years 2014 to 2016, issuers seeking to participate in an FFE in benefit 
year 2017 will receive two special benefits not available to the 
general public: (1) The certification of their plans as QHPs; and (2) 
the ability to sell health insurance coverage through an FFE to 
individuals determined eligible for enrollment in a QHP. These special 
benefits are provided to participating issuers through the following 
Federal activities in connection with the operation of FFEs:
     Provision of consumer assistance tools.
     Consumer outreach and education.
     Management of a Navigator program.
     Regulation of agents and brokers.
     Eligibility determinations.
     Enrollment processes.
     Certification processes for QHPs (including ongoing 
compliance verification, recertification and decertification).
     Administration of a SHOP Exchange. Activities performed by 
the Federal government that do not provide issuers participating in an 
FFE with a special benefit will not be covered by this user fee.
    OMB Circular No. A-25R further states that user fee charges should 
generally be set at a level so that they are sufficient to recover the 
full cost to the Federal government of providing the service when the 
government is acting in its capacity as sovereign (as is the case when 
HHS operates an FFE). Accordingly, we proposed to set the 2017 user fee 
rate for all participating FFE issuers at 3.5 percent. This user fee 
rate assessed on FFE issuers is the same as the 2014 to 2016 user fee 
rate. We are finalizing the 2017 user fee rate for all participating 
FFE issuers as proposed. In addition, OMB Circular No. A-25R requires 
that the user fee charge be sufficient to recover the full cost to the 
Federal government of providing the special benefit. An exception was 
in place for the 2014 to 2016 user fee rates, to ensure that FFEs could 
support the goals of the Affordable Care Act, including improving the 
health of the population, reducing health care costs, and providing 
access to health coverage. We have sought an exception to this policy 
again for 2017.
    Comment: Some commenters requested conversion of the FFE user fee 
assessment from percent of premium to a per member per month amount to 
decouple the user fee from medical inflation. We received one comment 
asking whether the user fees collected in 2017 will exceed the costs of 
the FFE. We also received comments stating that the user fee rate is 
likely too low to cover the full costs of the FFE.
    Response: We will continue to assess the FFE user fee as a percent 
of the monthly premium charged by issuers participating in an FFE, in 
particular as it relates to the adequacy of funding for ongoing 
marketing and outreach. In accordance with OMB Circular No. A-25R, 
issuers are charged the user fee in exchange for receiving special 
benefits beyond those that are offered to the general public. Setting 
the user fee as a percent of premium ensures that the user fee 
generally aligns with the business generated by the issuer as a result 
of participation in an FFE. Additionally, the user fee rate is set to 
collect costs incurred for the special benefits, no more or less, and 
user fee collections are used solely to support FFE user fee eligible 
functions.
    Additionally, we proposed under Sec. Sec.  155.106(c) and 
155.200(f) to allow State Exchanges to enter into a Federal platform 
agreement with HHS so that the State Exchange may rely on the Federal 
platform for certain Exchange functions to enhance efficiency and 
coordination between State and Federal programs, and to leverage the 
systems established by the FFE to perform certain Exchange functions. 
We proposed in Sec.  156.50(c)(2) to charge SBE-FP issuers a user fee 
for the services and benefits provided to the issuers by HHS. For 2017, 
these functions will include the Federal Exchange information 
technology and call center infrastructure used in connection with 
eligibility determinations for enrollment in QHPs and other applicable 
State health subsidy programs, as defined at section 1413(e) of the 
Affordable Care Act and enrollment in QHPs under Sec.  155.400. As 
previously discussed, OMB Circular No. A-25R establishes Federal policy 
regarding user fees, and specifies that a user charge will be assessed 
against each identifiable recipient for special benefits derived from 
Federal activities beyond those received by the general public. We are 
finalizing our proposals under Sec.  155.106(c) and Sec.  155.200(f), 
and issuers seeking to participate in an SBE-FP in benefit year 2017 
and beyond will receive special benefits not available to the general 
public: The ability to sell health insurance coverage through a State 
Exchange that realizes efficiencies by using the Federal platform to 
enroll

[[Page 12294]]

individuals determined eligible for enrollment in a QHP, including 
individuals who may be eligible for insurance affordability programs 
that may support premiums paid to issuers offering plans through the 
State Exchange by way of the Federal platform (HealthCare.gov), and the 
ability to sell health insurance coverage to small employers eligible 
to purchase QHPs for its employees through a SHOP Exchange. Other 
services that will be provided to issuers offering plans through an 
SBE-FP include the Federal Exchange information technology and call 
center infrastructure used in connection with eligibility 
determinations for enrollment in QHPs and other applicable State health 
subsidy programs. We proposed to charge issuers offering QHPs through 
an SBE-FP a user fee rate of 3.0 percent of the monthly premium charged 
by the issuer for each policy under a plan offered through an SBE-FP. 
This fee would recover funding to support FFE operations incurred by 
the Federal government associated with providing the services described 
above.
    The proposed user fee rate was calculated based on the proportion 
of FFE costs that are associated with the FFE information technology 
infrastructure, the consumer call center, and eligibility and 
enrollment services, and allocating a share of those costs to issuers 
in the relevant SBE-FPs. A significant portion of expenditures for FFE 
services are associated with the information technology, call center 
infrastructure, and personnel who conduct eligibility determinations 
for enrollment in QHPs and other applicable State health subsidy 
programs as defined at section 1413(e) of the Affordable Care Act, and 
who perform the functions set forth in Sec.  155.400 to facilitate 
enrollment in QHPs. We intend to review the costs incurred to provide 
these special benefits each year, and revise the user fee rate for 
issuers in SBE-FPs accordingly in the annual HHS notice of benefit and 
payment parameters.
    Comment: Commenters requested a one-year delay in assessing the 
user fee on issuers operating in an SBE-FP or a reduction of the user 
fee for 2017, particularly noting that SBE-FPs require additional time 
to integrate the user fee into their State's budget, and also that the 
impact of this user fee on premiums in SBE-FP States will be 
significant. Commenters also noted charging SBE-FP issuers the full 
user fee rate would allow the State to make a fully informed decision 
on the type of model to use for 2017. We also have received questions 
as to why we have not charged the SBE-FP user fees until now.
    Response: While a user fee rate of 3.0 percent reflects HHS's 
actual costs, we recognize that State Exchanges that are currently 
using the Federal platform may find the abrupt change of the proposed 
user fee in 2017 challenging for their health insurance markets. 
Therefore, for the 2017 benefit year, we have sought a waiver from OMB 
to the requirement that the user fee with respect to SBE-FPs cover the 
full share of costs incurred by the FFE for providing these services, 
and, if we receive this waiver, would reduce the user fee rate by one-
half for the issuers in an SBE-FP, to provide these States additional 
transition time to support the costs incurred by the FFE. That is, for 
the 2017 benefit year, issuers operating in an SBE-FP will be charged 
an amount equal to 1.5 percent of premiums in the SBE-FP.
    We expect, in future rulemaking, to propose that SBE-FP issuers 
would be charged the full user fee rate covering the full share of 
costs incurred by the Federal platform for the special benefits 
provided to issuers in SBE-FPs. We note that we did not immediately 
assess a user fee on SBE-FP issuers because we did not establish our 
authority and intent to do so through rulemaking in time for rate-
setting. We are drawing on our experience with SBE-FP operations in the 
2014 and 2015 benefit years to establish a regulatory structure for 
SBE-FPs and to help determine an appropriate cost estimate for the SBE-
FP user fee. As was the case with the FFEs, the user fee will not fully 
capture our costs, so that we can ease the transition for States and 
their issuers to adapt to these higher fees. We note that we similarly 
sought a waiver from OMB from the requirement that FFE user fees fully 
account for costs in the early years of the FFEs.
    Comment: Some commenters requested that HHS implement the user fee 
in SBE-FP States by invoicing the State directly for the costs incurred 
or setting up a different methodology for recouping the costs incurred. 
These commenters indicated that a State that wishes to fund its 
Exchange operations by assessing a fee on all insurance carriers 
selling individual market major medical policies, both on and off 
Exchange, the Federal user fee structure would require the SBE-FP to 
execute a complex reconciliation process.
    Response: We will assess the user fee rate as a percent of monthly 
premiums charged by issuers operating in an SBE-FP, as established in 
prior rulemaking. Setting the user fee as a percent of premium charged 
by issuers ensures that the user fee generally aligns with the business 
generated by the issuer as a result of the special benefits provided. 
We recognize that SBE-FPs may have elected to cover Exchange costs 
differently. Therefore, at an SBE-FP's written request, HHS will 
collect from the SBE-FP the total amount that would result from the 
user fee collected from issuers based on the percent of monthly 
premiums charged by invoicing the State for the total user fee charge, 
and not by collecting the fee directly from SBE-FP issuers.
    Comment: One commenter requested unbundling of the costs of the 
Federal platform, as States may not utilize all aspects of the Federal 
platform bundle. We also received comments urging HHS to set a limit on 
the State's portion of the assessment for covering the State's costs. 
Commenters' suggestions for the user fee limit ranged from 3.5 percent 
to 5 percent of premiums for combined Federal and State user fee 
charges.
    Response: As we discuss in Sec.  155.106, HHS will not--at this 
time--offer a menu of Federal services from which an SBE-FP may select 
some but not other services on the Federal platform. As such, we are 
finalizing the SBE-FP user fee eligible costs as a bundle as proposed, 
and do not at this time anticipate unbundling the costs for each 
Federal service. We will also continue assessing the user fee by 
market. This means that, if an SBE-FP is not utilizing Federal services 
for the SHOP Exchange, the user fee would not be charged on SHOP 
issuers. Additionally, we do recognize the benefits of States operating 
their own plan management and customer support functions, and do not 
intend to limit the State's ability to generate revenue to support 
these functions.
    Comment: One commenter sought confirmation that if a State is 
currently developing its own SBE platform, but later decides instead to 
rely on the Federal platform under the SBE-FP model, the SBE-FP model 
would be available to the State. Additionally, the commenter requested 
that in such a situation the State be charged the same user fee as 
charged to existing SBE-FPs.
    Response: The SBE-FP model option will be available per the 
timelines and conditions we describe in Sec.  155.106. The SBE-FP user 
fee for a particular benefit year, established through rulemaking, will 
apply to all States that use the SBE-FP for that benefit year, 
including those States that do not currently use the SBE-FP model. All 
issuers on SBE-FPs for the 2017 benefit year would receive the reduced 
1.5 percent transitional rate. Additionally, we note that nothing 
restricts a State

[[Page 12295]]

from using its own revenue to support developing its own SBE platform.
    Comment: Other commenters stated that the FFE and SBE-FP user fee 
rates are likely too low to provide all of the necessary functions for 
consumers, and that the assumption that FFE spend only 15 percent of 
user fee collections on marketing, outreach, and plan management is too 
low.
    Response: Our current user fee rates for issuers in an FFE and an 
SBE-FP are based on our current anticipated contract costs for 
providing the special benefits. Our cost distributions are based on 
larger estimated enrollment through FFEs, and are not comparable to 
what individual States may spend on these functions. Further, to ensure 
FFEs can support many of the goals of the Affordable Care Act, we 
continuously assess our operational strategy for FFE functions to 
maximize access to health insurance coverage, and could seek, through 
notice and comment rulemaking, to change the user fee rate in future 
years to accommodate increased or decreased spending on areas such as 
marketing and consumer outreach.
    Additionally, to ease administrative burdens on issuers and States, 
HHS proposed to offer States the option to have HHS collect an 
additional user fee from issuers at a rate specified by the State to 
cover costs incurred by the State-based Exchange for the functions the 
State retains. HHS would undertake this collection under the 
Intergovernmental Cooperation Act of 1968 (IGCA) if a written request 
is made by a State. If HHS agrees to provide such services, States may 
be required to reimburse HHS any additional costs that are associated 
with HHS's provision of such service. This coordination between the 
State and Federal programs would reduce administrative burden on 
issuers as well as the SBEs-FP. We did not receive any comments on this 
proposal for HHS to collect an additional user fee from issuers on 
behalf of the State. We will provide additional guidance if we receive 
such a request.
3. Single Risk Pool (Sec.  156.80)
    We proposed to codify that any new rates set by an issuer in the 
small group market as part of a quarterly rate change would apply for 
new or renewing coverage on or after the rate effective date, and would 
apply for the entire the plan year. This policy is consistent with the 
preamble to the second Program Integrity Rule (78 FR 65067). We also 
proposed to make non-substantive changes to the wording of that 
paragraph, including to delete an outdated reference to when quarterly 
rate changes could first be implemented.
    We also reiterated that a health insurance issuer may vary the 
plan-adjusted index rate for a particular plan from its market-wide 
index rate adjusting only for the explicitly stated factors in Sec.  
156.80(d)(2). Any plan level adjustment not specifically stated, 
including adjusting for morbidity of plan enrollees, is not 
permissible.
    We received no comments on these specific issues and are finalizing 
the provisions as proposed.
4. Essential Health Benefits Package
a. Provision of EHB (Sec.  156.115)
    In the 2016 final Payment Notice, we finalized regulation text at 
Sec.  156.115(a)(5) that discussed habilitative services and devices. 
Due to a technical error in the amendatory instructions, the current 
CFR does not reflect this finalized language, and instead retains the 
language that was finalized prior to being amended by the 2016 Payment 
Notice; therefore, we are including regulation text in this rulemaking 
to make a technical correction to update the CFR to language that was 
previously finalized.
b. Prescription Drug Benefits (Sec.  156.122)
    In the proposed rule, we discussed three proposals related to 
prescription drug benefits. First, Sec.  156.122(c) requires plans 
providing EHB to have processes in place that allow an enrollee, an 
enrollee's designee, or the enrollee's prescribing physician (or other 
prescriber) to request and gain access to clinically appropriate drugs 
not covered by the plan. Such procedures must include a process to 
request an expedited review based on exigent circumstances meeting the 
requirements under Sec.  156.122(c)(2). For plan years beginning in 
2016 and thereafter, these processes must also include certain 
processes and timeframes for the standard review process, and have an 
external review process if the internal review request is denied. The 
costs of the non-formulary drug provided through the exceptions process 
must count towards the annual limitation on cost sharing and AV of the 
plan. As discussed in the 2016 Payment Notice (80 FR 10750), the 
exceptions process established in this section is distinct from the 
coverage appeals process established under Sec.  147.136. Specifically, 
the drug exceptions process applies to drugs that are not included on 
the plan's formulary drug list, while the coverage appeals regulations 
apply if an enrollee receives an adverse benefit determination for a 
drug that is included on the plan's formulary drug list. Because these 
two processes serve different purposes, we reaffirmed our belief that 
they are not duplicative and we did not propose to change these 
definitions. However, we also clarified in the 2016 Payment Notice that 
``nothing under this policy (Sec.  156.122(c)) precludes a State from 
requiring stricter standards in this area.'' We stated in the proposed 
rule that we received additional comment regarding States' coverage 
appeals laws and regulations and non-formulary drugs. In our 
discussion, we noted that if a State is subjecting non-formulary drugs 
to the standards under Sec.  147.136 as opposed to Sec.  156.122(c), 
the State's coverage appeals laws or regulations would provide the 
enrollee with a different process for review, and as a result a 
different process for obtaining coverage of the non-formulary drug. 
Specifically, Sec.  147.136 has separate requirements for its external 
review process and allows for a secondary level of internal review 
before the final internal review determination for group plans.
    As a result, if the State is subjecting non-formulary drugs to 
Sec.  147.136 and the health plans are also required to comply with 
Sec.  156.122(c), the health plan may have to satisfy two standards for 
non-formulary drugs. Therefore, we proposed amending Sec.  156.122(c) 
to establish that a plan, in a State that has coverage appeals laws or 
regulations that are more stringent than or are in conflict with our 
exceptions process under Sec.  156.122(c), and that include reviews for 
non-formulary drugs, the health plan's exception process satisfies 
Sec.  156.122(c) if it complies with the State's coverage appeals laws 
or regulations. The purpose of Sec.  156.122(c) is to ensure that an 
enrollee has the ability to request and gain access to clinically 
appropriate drugs not covered by the plan. Regardless of whether a 
State's coverage appeals laws or regulations satisfy Sec.  156.122(c) 
or if the health plan meets Sec.  156.122(c) through its exception 
process, we would expect that an enrollee would retain the ability to 
request and gain access to clinically appropriate drugs not covered by 
the plan. Therefore, we solicited comments on the scope of application 
of State appeals laws or regulations that include determinations for 
non-formulary drugs for this purpose, especially under medical 
necessity provisions. We also sought comment as to whether these 
provisions would allow the enrollee the ability to request and gain 
access to clinically appropriate drugs not covered by the plan in all 
cases through a State's coverage appeals laws or regulations. As

[[Page 12296]]

the State generally is the primary enforcer of the EHB requirements, 
the State would determine whether its coverage appeals laws or 
regulations would satisfy Sec.  156.122(c) and therefore, would allow 
the health plans in the State to defer to the States' coverage laws or 
regulations. We noted that we consider multi-State plans that comply 
with OPM's coverage appeals requirements to satisfy Sec.  156.122(c). 
We considered codifying this interpretation.
    Second, we proposed amending the process at Sec.  156.122(c) to 
allow for a second level of internal review. For example, we considered 
using the same timelines as the first level of internal review, 72 
hours for the standard review request and 24 hours for the expedited 
review request.
    Lastly, we sought comment on whether the substance use disorder 
requirement under EHB needs additional clarification with regard to 
medication assisted treatment (MAT) for opioid addiction.
    We are finalizing one provision under this final rule to allow a 
State to determine that the health plans in the State satisfy Sec.  
156.122(c) when the health plans are required to adopt an exceptions 
process under the State's coverage appeals laws and regulations that 
include review of non-formulary drugs, and the exceptions process 
contains requirements at least as stringent as those under Sec.  
156.122(c).
    Comment: Some commenters supported allowing the State to determine 
that health plans in the State comply with Sec.  156.122(c) by virtue 
of the State's coverage appeals laws and regulations applying to non-
formulary drugs, as long as the health plans treat the denied formulary 
exception as an adverse coverage determination under Sec.  147.136. 
These commenters believed that this proposal is within the State's 
scope and would avoid duplication and potential operational and 
financial burdens of having the two different external review 
processes. Other commenters stated that HHS should require States to 
prove that they have a stronger standard than that required by the 
exception process and wanted HHS to make the determination as to 
whether a State has a stronger standard. Commenters wanted to know what 
would make a State law ``in conflict with'' the Federal standard and 
wanted HHS to study the issue to define the problem. These commenters 
were generally concerned with the timeframe differences between 
Sec. Sec.  156.122(c) and 147.136. Some commenters also wanted the 
State to certify that their laws comply with Sec.  156.122(c), such as 
with a tool, and to make the determinations publically available. 
Similarly, commenters supported or had concerns with the OPM 
clarification with regard to satisfying Sec.  156.122(c). Some 
commenters requested additional clarification as to whether drugs count 
towards the annual limitation on cost sharing, such as cases when a 
State's coverage appeals laws and regulations are applying to non-
formulary drugs. Some commenters wanted clarification that this 
exceptions process is different from the preventive services' 
exceptions process. Other commenters submitted comments about other 
prescription drug related issues beyond the scope of the proposed rule.
    Response: We are finalizing our proposal that a State may determine 
that health plans in the State satisfy the requirements of Sec.  
156.122(c) if the health plans have a process through the State's 
coverage appeals laws and regulations to allow an enrollee to request 
and gain access to clinically appropriate drugs not otherwise covered 
by the health plan under standards at least as stringent as the 
requirements at Sec.  156.122(c). To meet this standard, the process 
must include an internal review, an external review, the ability to 
expedite the reviews, and timeframes that are the same as or shorter 
than timeframes established under paragraphs (c)(1)(ii) and (c)(2)(iii) 
of this paragraph. In the event that an exception request is granted 
under Sec.  156.122(c)(4), the excepted drug(s) are treated as an EHB 
including counting any cost-sharing towards the plan's annual 
limitation on cost-sharing under Sec.  156.130.
    While we appreciate commenters' concerns about potential confusion 
if two processes apply, we do not believe that applying timeframes less 
stringent than those in the current Sec.  156.122(c) would benefit 
enrollees. We understand that States may not be able to meet these 
timeframes under their current coverage appeals laws and regulations 
and that States may have to change their laws and regulations in order 
to align the timeframes under Sec.  156.122(c), if the State wishes to 
use its current laws and regulations to streamline processes and create 
efficiencies. The State is not required to undertake this option. We 
also reaffirm that we consider multi-State plans that comply with OPM's 
coverage appeals requirements to satisfy Sec.  156.122(c). Lastly, we 
note that the exceptions process under Sec.  156.122(c) is separate 
from other exceptions process required under applicable Federal or 
State law. In particular, compliance with the exceptions process under 
Sec.  156.122(c) does not constitute compliance with the exceptions 
process for contraceptive services as clarified in guidance under 
section 2713 of the PHS Act, both of which apply to non-grandfathered 
individual and small group market plans that are required to provide 
EHB.\54\
---------------------------------------------------------------------------

    \54\ See the section entitled ``Coverage of Food and Drug 
Administration (FDA)-approved Contraceptives'' in FAQS about 
Affordable Care Act Implementation (PART XXVI), (May 11, 2015), 
available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/aca_implementation_faqs26.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters supported a second level of internal 
review and noted that including two levels of internal review is 
consistent with current practices, improves administrative efficiency, 
and ensures enrollees obtain medically necessary medications as soon as 
possible. The commenters noted that having only one level of internal 
review means more enrollees will rely on the external review process, 
which is costly. Some commenters sought additional time for the second 
level of review. Other commenters opposed a second level of internal 
review altogether and were primarily concerned that the second level of 
review could delay access and could burden enrollees. Some commenters 
wanted evidence that the second level of review would help enrollees, 
since the health plan conducts the internal review, as opposed to a 
third party. Some commenters wanted clarification as to whether this 
revised rule would be effective for the 2016 plan year or apply with 
enforcement discretion. Other commenters were concerned that the rule 
would apply different standards in 2016 versus 2017 (one level of 
internal review versus two).
    Response: We are not finalizing new requirements in this area. A 
health plan, at its election, may conduct a concurrent second internal 
review in the standard review process and the expedited review process 
within the timeframes established under Sec.  156.122(c)(1) and (2), 
but the health plan is not required to do so. As discussed in the 
preamble of the 2016 Payment Notice (80 FR 10818), all of the 
timeframes begin when the health plan or its designee receives a 
request. An enrollee or the enrollee's prescribing physician (or other 
prescriber) should strive to submit a completed request; however, 
health plans should not fail to commence review if they have not yet 
received information that is not necessary to begin review. Therefore, 
we interpret Sec.  156.122(c)'s reference to receipt of the request to 
mean that the health plan must begin the review following the receipt 
of information

[[Page 12297]]

sufficient to begin the review. We note that the processes specified in 
Sec.  156.122(c) are only required in connection with requesting and 
gaining access to clinically appropriate non-formulary drugs, and are 
not required in connection with utilization management processes for 
drugs on the plan's formulary drug list. We also note that Sec.  
156.122(c) only applies to non-grandfathered individual and small group 
market plans that are required to provide EHB under section 2707(a) of 
the PHS Act and section 1302 of the Affordable Care Act, as well as to 
QHPs under Sec. Sec.  156.200(b)(3) and 156.20. We will continue to 
monitor the implementation of the drug exceptions processes to 
determine whether further guidance on these processes is needed.
    Comment: We received many comments supporting requiring coverage of 
medication assisted treatment for opioid addiction as an EHB. These 
comments cited cost effectiveness, clinical evidence, and inability to 
interchange MAT options in support of requiring that all MATs be 
covered as an EHB. Commenters noted a lack of covered providers and 
related services limiting access to appropriate MAT; a lack of and 
variation in coverage of specific types of treatments, such as 
methadone; utilization management practices for MAT as areas of concern 
and reasons to require coverage of MAT. Commenters also noted the lack 
of MAT coverage by certain new State base-benchmark plans, including 
explicit exclusions. Other commenters were not supportive of additional 
clarification on MAT coverage for substance use disorders or wanted to 
review a specific proposal for additional coverage, as MAT is required 
to be covered under certain United States Pharmacopeia (USP) categories 
and classes at Sec.  156.122(a)(1). Commenters were also concerned 
about setting a precedent in which MAT coverage is treated differently 
from other EHB or drugs, noting that EHBs are required under the 
statute to be equal to the scope of benefits provided under a typical 
employer plan. Some commenters supported the use of Pharmacy & 
Therapeutics (P&T) Committees in making drug coverage determinations 
and stated they were concerned that any coverage requirements could 
restrict and impede P&T Committees' clinical judgment. Others commented 
that requiring MAT coverage could increase premiums.
    Response: In October 2015, the President issued a Memorandum 
directing Federal Departments and Agencies to identify barriers to 
medication-assisted treatment for opioid use disorders and develop 
action plans to address these barriers. Both the EHB requirement and 
Federal mental health and substance use disorder parity requirements 
apply to QHP coverage of medications to treat opioid dependence. 
Because these requirements extend beyond QHPs, we anticipate issuing 
separate guidance with respect to MAT in the near future.
c. Premium Adjustment Percentage (Sec.  156.130)
    Section 1302(c)(4) of the Affordable Care Act directs the Secretary 
to determine an annual premium adjustment percentage, which is used to 
set the rate of increase for three parameters detailed in the 
Affordable Care Act: the maximum annual limitation on cost sharing 
(defined at Sec.  156.130(a)), the required contribution percentage by 
individuals for minimum essential coverage the Secretary may use to 
determine eligibility for hardship exemptions under section 5000A of 
the Code, and the assessable payment amounts under section 4980H(a) and 
(b) of the Code. Section 156.130(e) provides that the premium 
adjustment percentage is the percentage (if any) by which the average 
per capita premium for health insurance coverage for the preceding 
calendar year exceeds such average per capita premium for health 
insurance for 2013, and that this percentage will be published annually 
in the HHS notice of benefit and payment parameters.
    Under the methodology established in the 2015 Payment Notice and 
amended in the 2015 Market Standards Rule for estimating average per 
capita premium for purposes of calculating the premium adjustment 
percentage, the premium adjustment percentage is calculated based on 
the projections of average per enrollee employer-sponsored insurance 
premiums from the NHEA, which is calculated by the Office of the 
Actuary. Accordingly, using the employer-sponsored insurance data, the 
premium adjustment percentage for 2017 is the percentage (if any) by 
which the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2016 ($6,076) exceeds the most recent 
NHEA projection of per enrollee employer-sponsored insurance premiums 
for 2013 ($5,365).\55\ Using this formula, we proposed and are 
finalizing the premium adjustment percentage for 2017 at 13.25256291 
percent. We note that the 2013 premium used for this calculation has 
been updated to reflect the latest NHEA data. We are also finalizing 
the following cost-sharing parameters for calendar year 2017 based on 
our finalized 2017 premium adjustment percentage.
---------------------------------------------------------------------------

    \55\ See Projections of National Health Expenditures: 
Methodology and Model Specifications (Jul. 28, 2015), available at 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf; Projections of National Health 
Expenditures: Methodology and Model Specification (Sept. 18, 2013), 
available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology2012.pdf; and Table 17: Health 
Insurance Enrollment and Enrollment Growth Rates (Jul. 22, 2015), 
available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html (located in the NHE Projections 
2014-2024--Tables link). For additional information, see, also, 
National Health Expenditure Projections 2012-2022, available at 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf.
---------------------------------------------------------------------------

    Maximum Annual Limitation on Cost Sharing for Calendar Year 2017. 
Under Sec.  156.130(a)(2), for the 2017 calendar year, cost sharing for 
self-only coverage may not exceed the dollar limit for calendar year 
2014, increased by an amount equal to the product of that amount and 
the premium adjustment percentage for 2017, and for other than self-
only coverage, the limit is twice the dollar limit for self-only 
coverage. Under Sec.  156.130(d), these amounts must be rounded down to 
the next lowest multiple of 50. Using the premium adjustment percentage 
of 13.25256291 percent for 2017 we established above, and the 2014 
maximum annual limitation on cost sharing of $6,350 for self-only 
coverage, which was published by the IRS on May 2, 2013,\56\ we are 
finalizing the 2017 maximum annual limitation on cost sharing as 
proposed at $7,150 for self-only coverage and $14,300 for other than 
self-only coverage.
---------------------------------------------------------------------------

    \56\ See: IRS, 26 CFR 601.602: Tax forms and instructions (May 
2, 2013), available at http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

    Comment: Two commenters said the annual rate of increase in the 
MOOP ($300 for individuals this year after a $250 increase last year, 
and $600 for other than self-only coverage this year on top of a $500 
increase last year) is unsustainable and negatively affects enrollees' 
willingness to use prescription drugs, which in turn affects health 
outcomes. The commenters asked HHS to engage with stakeholders to 
develop an alternative methodology to calculate the maximum annual 
limitation on cost sharing.
    Response: As discussed above, the maximum annual limitation on cost 
sharing is calculated based on the premium adjustment percentage for 
the

[[Page 12298]]

benefit year. The methodology established in 2015 to calculate the 
premium adjustment percentage is based on a projection of annual 
increases in per enrollee employer-sponsored insurance premiums from 
the National Health Expenditure Accounts (estimated by the CMS Office 
of the Actuary). HHS believes it is the best available source of 
projected growth for premium given statutory requirements and 
interaction with other measurements. However, as discussed in the 2015 
Notice of Benefits and Payment Parameters (79 FR 13802), HHS intends to 
review the methodology for calculating annual premium growth after the 
initial years of reform-driven changes to benefits and plan design, 
after the premium trend is more stable, and as data on premiums become 
available.
    Comment: One commenter expressed concern over a growing gap between 
the Affordable Care Act's maximum annual limitation on cost sharing and 
the Internal Revenue Service's out-of-pocket limit for high deductible 
health plans (HDHPs) used with health savings accounts. (The 2016 HHS 
maximum out-of-pocket limitation for other than self-only coverage was 
$600 above the 2016 IRS out-of-pocket limit on high deductible health 
plans for other than self-only coverage.) The commenter also expressed 
concern that the IRS limit is not announced for some months after the 
HHS limit is known, leading issuers to price products conservatively, 
and higher than they might otherwise if the IRS limit had been known.
    Response: HHS and IRS are bound by different statutory parameters 
when calculating annual out-of-pocket limits. HHS uses the premium 
adjustment percentage described above to adjust the maximum out-of-
pocket limit, and the IRS uses the Consumer Price Index, a measure of 
inflation, to adjust its out-of-pocket limitation.
d. Reduced Maximum Annual Limitation on Cost Sharing (Sec.  156.130)
    Sections 1402(a) through (c) of the Affordable Care Act direct 
issuers to reduce cost sharing for EHBs for eligible individuals 
enrolled in a silver level QHP. In the 2014 Payment Notice, we 
established standards related to the provision of these cost-sharing 
reductions. Specifically, in 45 CFR part 156, subpart E, we specified 
that QHP issuers must provide cost-sharing reductions by developing 
plan variations, which are separate cost-sharing structures for each 
eligibility category that change how the cost sharing required under 
the QHP is to be shared between the enrollee and the Federal 
government. At Sec.  156.420(a), we detailed the structure of these 
plan variations and specified that QHP issuers must ensure that each 
silver plan variation has an annual limitation on cost sharing no 
greater than the applicable reduced maximum annual limitation on cost 
sharing specified in the annual HHS notice of benefit and payment 
parameters. Although the amount of the reduction in the maximum annual 
limitation on cost sharing is specified in section 1402(c)(1)(A) of the 
Affordable Care Act, section 1402(c)(1)(B)(ii) of the Affordable Care 
Act states that the Secretary may adjust the cost-sharing limits to 
ensure that the resulting limits do not cause the AVs of the health 
plans to exceed the levels specified in section 1402(c)(1)(B)(i) of the 
Affordable Care Act (that is, 73 percent, 87 percent, or 94 percent, 
depending on the income of the enrollee). Accordingly, we propose to 
use a method we established in the 2014 Payment Notice for determining 
the appropriate reductions in the maximum annual limitation on cost 
sharing for cost-sharing plan variations. As we proposed above, the 
2017 maximum annual limitation on cost sharing would be $7,150 for 
self-only coverage and $14,300 for other than self-only group coverage. 
We analyzed the effect on AV of the reductions in the maximum annual 
limitation on cost sharing described in the statute to determine 
whether to adjust the reductions so that the AV of a silver plan 
variation will not exceed the AV specified in the statute. Below, we 
describe our analysis for the 2017 benefit year and our proposed 
results.
    Consistent with our analysis in the 2014, 2015, and 2016 Payment 
Notices, we developed three test silver level QHPs, and analyzed the 
impact on AV of the reductions described in the Affordable Care Act to 
the estimated 2017 maximum annual limitation on cost sharing for self-
only coverage ($7,150). The test plan designs are based on data 
collected for 2016 plan year QHP certification to ensure that they 
represent a range of plan designs that we expect issuers to offer at 
the silver level of coverage through the Exchanges. For 2017, the test 
silver level QHPs included a PPO with typical cost-sharing structure 
($7,150 annual limitation on cost sharing, $2,175 deductible, and 20 
percent in-network coinsurance rate), a PPO with a lower annual 
limitation on cost sharing ($4,800 annual limitation on cost sharing, 
$2,775 deductible, and 20 percent in-network coinsurance rate), and an 
HMO ($7,150 annual limitation on cost sharing, $3,000 deductible, 20 
percent in-network coinsurance rate, and the following services with 
copayments that are not subject to the deductible or coinsurance: $500 
inpatient stay per day, $350 emergency department visit, $25 primary 
care office visit, and $50 specialist office visit). All three test 
QHPs meet the AV requirements for silver level health plans.
    We then entered these test plans into the proposed 2017 AV 
Calculator developed by HHS and observed how the reductions in the 
maximum annual limitation on cost sharing specified in the Affordable 
Care Act affected the AVs of the plans. We found that the reduction in 
the maximum annual limitation on cost sharing specified in the 
Affordable Care Act for enrollees with a household income between 100 
and 150 percent of the Federal poverty line (FPL) (2/3 reduction in the 
maximum annual limitation on cost sharing), and 150 and 200 percent of 
the FPL (2/3 reduction), would not cause the AV of any of the model 
QHPs to exceed the statutorily specified AV level (94 and 87 percent, 
respectively). In contrast, the reduction in the maximum annual 
limitation on cost sharing specified in the Affordable Care Act for 
enrollees with a household income between 200 and 250 percent of FPL 
(1/2 reduction), would cause the AVs of two of the test QHPs to exceed 
the specified AV level of 73 percent. As a result, we proposed that the 
maximum annual limitation on cost sharing for enrollees in the 2017 
benefit year with a household income between 200 and 250 percent of FPL 
be reduced by approximately 1/5, rather than 1/2. We further proposed 
that the maximum annual limitation on cost sharing for enrollees with a 
household income between 100 and 200 percent of the FPL be reduced by 
approximately 2/3, as specified in the statute, and as shown in Table 
10. These proposed reductions in the maximum annual limitation on cost 
sharing should adequately account for unique plan designs that may not 
be captured by our three model QHPs. We also noted that selecting a 
reduction for the maximum annual limitation on cost sharing that is 
less than the reduction specified in the statute would not reduce the 
benefit afforded to enrollees in aggregate because QHP issuers are 
required to further reduce their annual limitation on cost sharing, or 
reduce other types of cost sharing, if the required reduction does not 
cause the AV of the QHP to meet the specified level. We did not receive 
comments on this proposal, and are finalizing the

[[Page 12299]]

reductions in the maximum annual limitation on cost sharing for 2017 as 
proposed.
    We note that for 2017, as described in Sec.  156.135(d), States are 
permitted to submit for approval by HHS State-specific data sets for 
use as the standard population to calculate AV. No State submitted a 
data set by the September 1 deadline.

  Table 10--Reductions in Maximum Annual Limitation on Cost Sharing for
                                  2017
------------------------------------------------------------------------
                                                        Reduced  maximum
                                     Reduced  maximum        annual
                                          annual         limitation on
       Eligibility category           limitation on     cost sharing for
                                     cost sharing for   other than self-
                                        self-only        only  coverage
                                    coverage for 2017       for 2017
------------------------------------------------------------------------
Individuals eligible for cost-                 $2,350             $4,700
 sharing reductions under Sec.
 155.305(g)(2)(i) (that is, 100-
 150 percent of FPL)..............
Individuals eligible for cost-                  2,350              4,700
 sharing reductions under Sec.
 155.305(g)(2)(ii) (that is, 150-
 200 percent of FPL)..............
Individuals eligible for cost-                  5,700             11,400
 sharing reductions under Sec.
 155.305(g)(2)(iii) (that is, 200-
 250 percent of FPL)..............
------------------------------------------------------------------------

e. AV Calculation for Determining Level of Coverage (Sec.  156.135)
    Section 2707(a) of the PHS Act and section 1302 of the Affordable 
Care Act direct issuers of non-grandfathered health insurance in the 
individual and small group markets, including QHPs, to ensure that 
plans meet a level of coverage specified in section 1302(d)(1) of the 
Affordable Care Act and codified at Sec.  156.140(b). On February 25, 
2013, HHS published the EHB Rule (78 FR 12833), implementing section 
1302(d) of the Affordable Care Act, which required that, to determine 
the level of coverage for a given metal tier level, the calculation of 
AV be based upon the provision of EHB to a standard population. Section 
156.135(a) establishes that AV is generally to be calculated using the 
AV Calculator developed and made available by HHS for a given benefit 
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.  
156.135(g) provisions for updating the AV Calculator in future plan 
years and in the proposed rule, we proposed to amend those provisions 
to allow for additional flexibility in our approach and options for 
updating of the AV Calculator in the future.
    Specifically, we proposed that HHS will update the AV Calculator 
annually for material changes that may include costs, plan designs, the 
standard population, developments in the function and operation of the 
AV Calculator and other actuarially relevant factors. Under the amended 
regulation, we will continue to make updates to the AV Calculator, as 
we have in previous years, including updates to the trend factor, 
algorithms changes, and user interface changes. We will also update the 
claims data and demographic distribution being used in the AV 
Calculator as needed, and continue to update the AV Calculator's annual 
limitation on cost sharing based on a projected estimate to allow for 
compliance with Sec.  156.130(a). Therefore, the major difference that 
we proposed under the revised Sec.  156.135(g) was that the 
methodology, data sources, and trigger for making updates in the AV 
Calculator would be more flexible than the previous Sec.  156.135(g). 
This amended provision will allow us more options in considering 
approaches to making changes in the AV Calculator, particularly as the 
health insurance market and the AV Calculator evolve, new 
methodological approaches are developed, and new data becomes 
available.
    We would also not be required to make each of these changes each 
year, although we could include these types of material changes in our 
annual updating of the AV Calculator. We proposed that in developing 
the annual updates to the AV Calculator, we would continue to take into 
consideration stakeholder feedback on needed changes to the AV 
Calculator (through [email protected]) and to publicly release 
a draft version of the AV Calculator and the AV Calculator Methodology 
for comment before releasing the final AV Calculator. We are finalizing 
these provisions as proposed.
    Comment: Commenters were concerned about the timing of the release 
of the AV Calculator, and wanted the AV Calculator to be available 
sooner. Certain commenters did not support the revised language without 
a timeframe. Commenters generally wanted the final AV Calculator to be 
available around January 1 of the preceding benefit year, in 
anticipation of State filing deadlines.
    Response: We are finalizing the provision as proposed. One reason 
for changing Sec.  156.135(g) is to provide HHS with the flexibility to 
update the AV Calculator sooner. We understand the importance for 
issuers and States to have time to use the final version of the AV 
Calculator to develop and adjust plan designs in advance of State 
filing deadlines. We believe that revised Sec.  156.135(g) will give 
HHS added flexibility in changing the AV Calculator, which may result 
in HHS releasing the final AV Calculator earlier, such as by January 1 
of the preceding benefit year. Regardless, we anticipate releasing the 
final AV Calculator no later than the end of the first quarter of the 
preceding benefit year.
    Comment: Some commenters supported the flexibility for the trend 
factor calculation. Others expressed wanting predictable and consistent 
updates, wanting less frequent updates, and wanting an increase to the 
de minimis range.
    Response: We recognize the importance of ensuring that the AV 
Calculator accurately reflects the current market and that changes to 
the AV Calculator minimize disruption to current plan designs through 
keeping AVs stable. We intend to carefully weigh these factors when 
making changes. We do not intend to make changes to the de minimis 
range at this time. The de minimis range is intended to allow plans to 
float within a reasonable range of +/- 2 percent.
    We will also continue to work with stakeholders on the development 
of the AV Calculator updates. As noted above, in developing the annual 
updates to the AV Calculator, we will continue to take into 
consideration stakeholder feedback on needed changes to the AV 
Calculator (through [email protected]) and to publicly release 
a draft version of the AV Calculator and the AV Calculator Methodology 
for comment before releasing the final AV Calculator.

[[Page 12300]]

Additionally, we also intend to consult as needed with the American 
Academy of Actuaries and the NAIC on needed changes to the AV 
Calculator.
    Comment: One commenter was concerned that the AV Calculator does 
not take into account the scope of networks and formularies. Other 
commenters asked for the Minimum Value Calculator to be updated 
consistently and discussed issues for large group plans that use the MV 
Calculator, such as accounting for the annual limitation on cost 
sharing.
    Response: AV measures a plan's cost sharing generosity on the basis 
of the EHB being provided to a standard population (and without regard 
to the population to which that plan may actually provide benefits) to 
determine the level of coverage. AV is not intended to measure the 
scope of a network or formulary. All plans required to comply with AV 
must comply with EHB requirements (which establish the scope of 
benefits, including the formulary, being offered) and State and, in the 
case of QHPs, Federal laws and regulations establish a plan's network 
requirements.
    We will work with the Department of Treasury and the Internal 
Revenue Service to consider whether further guidance is needed with 
regards to the MV Calculator. Updates to the MV Calculator are beyond 
the scope of this rulemaking.
f. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.  
156.150)
    At Sec.  156.150, we proposed revisions to increase the annual 
limitation on cost sharing for SADPs. To make adjustments to the annual 
limitation on cost sharing in subsequent years to keep pace with 
inflation, we proposed in paragraph (a)(1) that for a plan year 
beginning after 2016, the dollar limit applicable to a SADP for one 
covered child be increased by an amount equal to the product of that 
amount and the quotient of consumer price index for dental services for 
the year 2 years prior to the benefit year, divided by the consumer 
price index for dental services for 2016. In paragraph (a)(2), we 
proposed that the dollar limit for two or more covered children be 
twice the dollar limit for one child described in paragraph (a)(1) of 
this section. We sought comment on whether the premium adjustment 
percentage defined in Sec.  156.130(e) should be used instead.
    In paragraph (c), we proposed to define the dental CPI, which is a 
sub-component of the U.S. Department of Labor's Bureau of Labor 
Statistics Consumer Price Index specific to dental services. We would 
use the annual dental CPI published by the Department of Labor. In 
paragraph (d), we proposed that increases in the annual dollar limits 
for one child that do not result in a multiple of $25 will be rounded 
down, to the next lowest multiple of $25.
    We are finalizing the provision with modifications to paragraphs 
(a)(1) and (2) to apply the indexing formula to plan years beginning 
after 2017 and with a modification of the language of the formula for 
increasing the annual limitation on cost sharing for purposes of 
clarity.
    Comment: Several commenters supported our proposed approach to 
raise the annual limitation on cost sharing over time using the CPI for 
dental services. Some commenters asked that the proposal be implemented 
sooner than for plan years beginning after 2016. Others requested using 
the 2014 CPI for dental services rather than the 2016 in order to have 
the annual limitation on cost sharing increase in the next few years. 
Others asked that we also consider increasing the annual limitation on 
cost sharing to a set level and then applying the indexing formula via 
the CPI for dental services in order to meet HHS's stated interest in 
providing preventive care without cost sharing. We also received 
several comments requesting clarification of the formula.
    Response: When we established specific values for the annual 
limitation on cost sharing for SADPs in previous rules,\57\ we intended 
to eventually index the limitation to keep pace with inflation and 
moderate potential increases in premiums, similar to the annual 
limitation on cost sharing for medical QHPs. Without such an increase, 
over time we could see an increase in SADP premiums and fewer 
affordable dental options for consumers. We believe that this formula 
balances the need to establish a process to increase the annual 
limitation on cost sharing over time against concerns with increasing 
the maximum financial liability to consumers.
---------------------------------------------------------------------------

    \57\ Exchange Establishment Rule, 77 FR 18309 (Mar. 27, 2012); 
EHB Rule, 78 FR 12833 (Feb. 25, 2013).
---------------------------------------------------------------------------

    In the regulatory impact assessment in the proposed rule, we noted 
our desire for consumers to have access to preventive services without 
cost sharing. We acknowledge that this may be difficult to achieve at 
the low AV level of 70 percent. However, we believe that to implement a 
one-time increase to the annual limitation on cost sharing by a 
significant amount would be overly burdensome for consumers.
    Accordingly, we are finalizing the proposal as proposed, with minor 
modifications. We are modifying paragraphs (a)(1) and (2) to apply the 
indexing formula to plan years beginning after 2017 rather than 2016. 
We acknowledge that applying the indexing formula to plan years 
beginning after 2017 will ensure that the first application of the 
formula, for the 2018 benefit year, will result in neither an increase 
nor a decrease in the annual limitation on cost sharing for that 
benefit year. However, we are seeking to balance stability in plan 
designs with the desire to increase the annual limitation on cost 
sharing to keep pace with inflation. We will continue to monitor the 
increase over time to ensure we are working towards our stated goals. 
As noted in the proposed rule, we will propose and finalize the annual 
increase to the dental annual limitation on cost sharing according to 
the formula specified here in the annual Payment Notice.
    We did not receive any comments suggesting that we use the premium 
adjustment percentage defined in Sec.  156.130(e) instead. We did not 
receive any comments opposing our proposal to increase the annual 
limitation on cost sharing in $25 increments and will finalize this 
provision as proposed.
    We also are making a modification to the wording of the formula, 
though not to its meaning. Under this final rule, as under the 
proposal, the annual limitation on cost sharing will be increased by 
the same percentage the CPI for dental services increased between 2016 
and the year that is 2 years prior to the applicable benefit year.
    Comment: A commenter asked that we clarify that the annual 
limitation on cost sharing would never be reduced. Another requested 
clarification whether the provisions would be applied to off-Exchange 
SADPs.
    Response: We are clarifying that the proposed formula will not be 
used to reduce the annual limitation on cost sharing for SADPs. The 
updated formula language in paragraph (a)(1) specifically notes that 
the annual dollar limit is increased by the percent increase of the 
consumer price index for dental services. We do not include a provision 
that would require a reduction.
    We also note that all Exchange-certified SADPs must meet the same 
certification standards, including the annual limitation on cost 
sharing, regardless of whether they are offered on or off Exchanges.

[[Page 12301]]

5. Qualified Health Plan Minimum Certification Standards
a. Network Adequacy Standards (Sec.  156.230)
    At Sec.  156.230, we established the minimum criteria for network 
adequacy that health and dental plan issuers must meet to be certified 
as QHPs, including SADPs, in accordance with the Secretary's authority 
in section 1311(c)(1)(B) of the Affordable Care Act. Section 
156.230(a)(2) requires all issuers to maintain a network that is 
sufficient in number and types of providers to assure that all services 
will be accessible without unreasonable delay. Section 156.230(b) sets 
forth standards for access to provider directories requiring issuers to 
publish an up-to-date, accurate, and complete provider directory for 
plan years beginning on or after January 1, 2016, and Sec.  156.230(c) 
requires QHPs in the FFE to make this provider directory data available 
on its Web site in an HHS-specified format and also submit this 
information to HHS in a format and manner and at times determined by 
HHS.
(1) State Selection of Minimum Network Adequacy Standards
    The NAIC's Network Adequacy Model Review Subgroup has completed 
significant work in the area of network adequacy, which includes 
finalization of a Network Adequacy Model Act, which can be found at 
http://www.naic.org/store/free/MDL-74.pdf, that States can adopt in 
whole or in part. We will continue to monitor the work of the NAIC in 
this area and of States' implementation of these standards, and look 
forward to partnering with States and the NAIC in developing and 
promulgating network adequacy protections. In the interest of 
furthering this work, we proposed a number of standards related to 
network adequacy.
    In recognition of the traditional role States have in developing 
and enforcing network adequacy standards, we proposed that FFEs would 
rely on State reviews for network adequacy in States in which an FFE is 
operating, provided that HHS determined that the State uses an 
acceptable quantifiable network adequacy metric commonly used in the 
health insurance industry to measure network adequacy.
    We proposed that HHS would determine that a State's network 
adequacy assessment methodology meets the standard above if the State 
selects one or more standards from a list of metrics provided by HHS 
and applies them prospectively to the QHP issuers in the State. We 
anticipated including at least the following metrics in the list:
     Prospective time and distance standards at least as 
stringent as the FFE standard.
     Prospective minimum provider-covered person ratios for the 
specialties with the highest utilization rate for its State.
    We proposed that after HHS discussed with States their selection to 
determine whether the State's network adequacy standard would be 
acceptable under the standard above, we would notify issuers via 
regulatory guidance about whether the State standards or Federal 
default standard would apply.
    We proposed that when HHS determined that a State's network 
adequacy standard is acceptable under the standard above, the State 
would certify to the FFE which plans meet the network adequacy 
standard, and the FFE in that State would rely on the State's review 
for purposes of determining whether a QHP meets the requirements under 
Sec.  156.230(a)(2), although those issuers would still be required to 
submit to HHS provider data, attest to the HHS network adequacy 
certification requirements, and meet other applicable HHS standards, 
including the other standards under Sec.  156.230.
    In the proposed rule, we stated that for States that do not review 
for network adequacy, or do not select a standard as described above, 
the FFE would conduct an independent review under a Federal default 
standard. We proposed the Federal default standard to be a time and 
distance standard. For the certification cycle for plan years beginning 
in 2017, we stated that we anticipated evaluating the QHP issuer 
networks under this standard based on the numbers and types of 
providers, in addition to their general geographic location. The 
standard proposed involved using a time and distance standard at the 
county level. We also stated that we were considering using standards 
similar to those used in Medicare Advantage, utilizing the National 
Provider Identifier database, and focusing on the specialties that 
enrollees most generally use. Further, we explained that HHS was also 
carefully considering other network standards, including those of 
individual States, accrediting entities, and Federal health care 
programs, as it developed the time and distance standards for the FFEs.
    We also stated that the proposed county-specific time and distance 
parameters that plans would be required to meet, including 
specifications for specific provider and facility types, would be 
detailed annually in conjunction with the Letter to Issuers.
    We also proposed that issuers that did not meet the specified 
standards would be able to submit a justification to account for any 
variances, and that the FFE would review the justification to determine 
whether the variance is reasonable based on circumstances, such as the 
availability of providers and variables reflected in local patterns of 
care.
    We explained that we did not intend in establishing these default 
standards to prohibit certification of plans with narrow networks or 
otherwise impede innovation in plan design. Instead, we stated that we 
intended to establish a minimum floor consistent with the levels 
generally maintained in the market today, so that generally a very 
small number of plans would be identified as having networks deemed 
inadequate. Our discussion of the Federal default standard was intended 
to provide issuers with more transparency regarding our certification 
processes. In that discussion, we clarified that the process would be 
designed and implemented to achieve results similar to those yielded by 
the reviews conducted by the FFEs in prior certification cycles. We 
explained that we believed this standard would promote predictability 
for issuers in the course of certification. We noted in the proposed 
rule that multi-State plan options will be considered to meet the 
network adequacy requirements under Sec.  156.230(a)(2) if they meet 
network adequacy standards established by OPM.
    For the reasons noted below, we are not finalizing Sec.  156.230(d) 
as proposed at this time and will continue to work with States to 
determine how to best ensure reasonable access while preventing 
duplicate review.
    Comment: Many commenters raised concerns about the use of a time 
and distance Federal default standard, and stated the new NAIC Network 
Adequacy Model Act does not include time and distance standards. 
Commenters also raised concerns that the proposed standard could 
increase health care costs, would not adequately address network 
adequacy issues in all areas, and would not fit all types of plans, and 
numerous commenters asked that HHS give States time to enact the new 
NAIC Network Adequacy Model Act rather than implementing the standard 
in the final rule.
    Response: We appreciate the concerns raised and in response are 
declining to finalize Sec.  156.230(d) as proposed for the 2017 plan 
year. Our intention is to give States time to adopt the NAIC Network

[[Page 12302]]

Adequacy Model Act provisions. We note in particular that the NAIC 
Network Adequacy Model Act highlights ``specific quantitative standards 
to ensure adequate access that carriers must, at a minimum, satisfy in 
order to be considered to have a sufficient network,'' and these 
include provisions requiring a minimum numbers of providers, and 
setting limits on travel times and wait times. The Act explains how 
these standards can be incorporated either in statute or in regulation. 
Further, we note that the NAIC Network Adequacy Model Act was approved 
unanimously by all States and Washington, DC, and the NAIC has stated 
that it will be a priority of the organization to have a majority of 
States adopt the NAIC Network Adequacy Model Act within 3 years. We 
note our expectation that all States, including FFE States, will 
actively implement these provisions, and we look forward to monitoring 
States' progress this year, with a particular view to avoiding 
duplicative Federal and State review processes. We will revisit this 
proposal in future rulemaking. We will continue the process used in 
previous years to review network adequacy as part of the annual 
certification process, and will review network data for reasonable 
access.
    For transparency, we are publishing separately details of the FFEs' 
internal QHP certification process for network adequacy, including the 
metric used for the internal review, to assess plans for network 
adequacy.\58\ These standards are consistent with those we have used in 
the past to assess potential QHPs for compliance with the network 
adequacy requirements; we believe that providing additional 
transparency about these standards will help issuers with their network 
planning.
---------------------------------------------------------------------------

    \58\ Final 2017 Letter to Issuers in the Federally-facilitated 
Marketplaces (Feb. 29, 2016).
---------------------------------------------------------------------------

    Comment: Many commenters expressed support for the proposed time 
and distance standards, and many requested specific standards for 
specific types of specialty care including pediatrics, cancer centers, 
women's health, and transplant providers. Commenters also requested 
that additional standards be added to the quantitative standards, 
including requirements regarding wait times, language services, 
telehealth, disability accessibility and reasonable access being 
provided at the lowest cost sharing tier. Some commenters also 
expressed concerns about the applicability of time and distance to 
dental issuers and urged that other standards be used. Some commenters 
supported the use of time and distance standards for SADPs. Some 
commenters requested that the time and distance standards be expanded 
to SBEs and multi-State plans, and that they be used as the required 
standards, not a default.
    Response: We appreciate the comments; however, we are not 
finalizing the default time and distance standard at this time. As 
discussed above, our intention is to give States time to adopt the NAIC 
Network Adequacy Model Act provisions and implement associated 
standards.
    Comment: Many commenters offered suggestions for changing and 
expanding the State metrics listed in the preamble, including keeping 
or removing the time and distance metric and provider-covered person 
ratios, adding the network sufficiency metrics from the recently 
completed NAIC Network Adequacy Model Act, adding a metric related to 
standards for wait times, and altering the two listed metrics to 
specify that they apply to specialties and subspecialties. Some 
commenters suggested we implement an effective network access review 
standard comparable to the effective rate review standard by State.
    Response: We are not finalizing our proposal establishing a minimum 
quantitative State network adequacy measurement at this time. We wish 
to provide States time to adopt the NAIC Network Adequacy Model Act 
provisions and associated standards.
    Comment: Some commenters suggested that HHS provide that only 
providers available through the plan's lowest tier of cost-sharing be 
counted for purposes of determining a network's adequacy.
    Response: We intend to monitor the practice of tiering of providers 
and will consider implications of the practice for network adequacy 
review in the future. We remind all issuers, including those that use 
tiered networks, that they must continue to meet the current 
requirement in Sec.  156.230(a)(2) to provide reasonable access to all 
covered services at all times throughout the plan year.
    As States continue their work to implement the NAIC Network 
Adequacy Model Act, we will continue to use quantitative time-distance 
standards in our review of plans for QHP certification on the FFEs, and 
will be providing details of the criteria for review in the annual 
Letter to Issuers.
    We are finalizing a number of policies relating to network 
adequacy. We are finalizing two provisions to address provider 
transitions in the FFE and a standard for all QHPs governing cost 
sharing that would apply in certain circumstances when an enrollee 
receives EHB provided by an out-of-network ancillary provider at an in-
network setting. We are also finalizing our proposed policy regarding 
standardized categorization of network breadth for QHPs on the Federal 
platform.
(2) Additional Network Adequacy Standards
    Under proposed Sec.  156.230(e), which we are finalizing as 
paragraph (d), we proposed two new requirements to address provider 
transitions. First, we proposed new Sec.  156.230(e)(1) to require QHP 
issuers in all FFEs to notify enrollees about a discontinuation in 
their network coverage of a contracted provider. We proposed that a QHP 
in an FFE be required to make a good faith effort to provide written 
notice of a discontinued provider, 30 days prior to the effective date 
of the change or otherwise as soon as practicable, to all enrollees who 
are patients seen on a regular basis by the provider or receive primary 
care from the provider whose contract is being discontinued, 
irrespective of whether the contract is being discontinued due to a 
termination for cause or without cause, or due to a non-renewal.
    We also proposed that a discontinued provider include both a 
provider that is being involuntarily removed from the network, and a 
provider that is voluntarily leaving the network. To satisfy this 
requirement, we stated that we expect the issuer to try to work with 
the provider to obtain the list of affected patients or to use its 
claims data system to identify enrollees who see the affected 
providers. We said that we would encourage issuers, as part of the 
notice to consumers, to notify the enrollee of other comparable in-
network providers in the enrollee's service area, provide information 
on how an enrollee could access the plan's continuity of care coverage, 
and encourage the enrollee to contact the plan with any questions.
    Second, we proposed a new Sec.  156.230(e)(2) to require that QHP 
issuers in all FFEs ensure continuity of care for enrollees in cases 
where a provider is terminated without cause. Specifically, we proposed 
to require the issuer, in cases where the provider is terminated 
without cause, to allow an enrollee in active treatment to continue 
treatment until the treatment is complete or for 90 days, whichever is 
shorter, at in-network cost-sharing rates. We proposed the following 
definition of active treatment in paragraph (e)(2): (1) An ongoing 
course of treatment for a life-threatening condition; (2) an

[[Page 12303]]

ongoing course of treatment for a serious acute condition; (3) the 
second or third trimester of pregnancy; or (4) an ongoing course of 
treatment for a health condition for which a treating physician or 
health care provider attests that discontinuing care by that physician 
or health care provider would worsen the condition or interfere with 
anticipated outcomes. In relation to the proposed definition of active 
treatment, we stated that an ongoing course of treatment includes 
treatments for mental health and substance use disorders that fall 
within the proposed definition. For the purposes of the active 
treatment definition, we proposed to interpret a life-threatening 
condition as a disease or condition for which likelihood of death is 
probable unless the course of the disease or condition is interrupted; 
and a serious acute condition as a disease or condition requiring 
complex on-going care which the covered person is currently receiving, 
such as chemotherapy, post-operative visits, or radiation therapy. 
Finally, we proposed under paragraph (e)(2)(ii) that any decisions made 
for a request for continuity of care be subject to the issuer's 
internal and external grievance and appeal processes in accordance with 
applicable State or Federal law or regulations. We solicited comments 
on several issues related proposed Sec.  156.230(e), such as the 
definitions of key terms and timeframes, when these provisions should 
apply, whether exceptions should be allowed for States that already 
have requirements, whether additional provisions should be allowed for 
continuity of care in cases of pregnancy as far as extending beyond 90 
days and whether that care should limited to obstetric care and whether 
other provisions are needed to protect an enrollee when a provider 
contract is terminated.
    We are finalizing these requirements as proposed, with certain 
modifications to better align with the NAIC Network Adequacy Model Act, 
including extending continuity of care coverage for the second or third 
trimester of pregnancy through the postpartum period and codifying the 
definitions of life-threatening condition and serious acute condition. 
Additionally, we note that these standards are not intended to, and do 
not, preempt State provider transition notices and continuity of care 
requirements, and that we intend to defer to a State's enforcement of 
substantially similar or more stringent standards.
    Comment: Many commenters supported deferring to State provider 
transition policies instead of the proposals in the proposed rule, with 
some commenters only supporting deference when the State has stronger 
consumer protections. Justifications for deferring to State provider 
transition policies included problems with conflicting State law and 
the associated burden with conflicting requirements. In the absence of 
applicable State laws, some commenters recommended aligning standards 
to those in the NAIC Network Adequacy Model Act that are 
administratively feasible or allow issuers to maintain their current 
practices.
    Response: We are finalizing these proposed provider transition 
policies in Sec.  156.230(d), but note that these standards are not 
intended to, and do not, preempt State provider transition notices and 
continuity of care rules, and that we would defer to a State's 
enforcement of substantially similar or more stringent requirements. 
This flexibility would apply to any State that chooses to enact these 
parts of the NAIC Network Adequacy Model Act under section 6(L).\59\ We 
recognize that the NAIC Network Adequacy Model Act differs in certain 
respects from our requirements under Sec.  156.230(d)(1) and (2); we 
intend to monitor States' implementation of the NAIC Network Adequacy 
Model Act and may consider revisions to this policy in the future if 
needed.
---------------------------------------------------------------------------

    \59\ See http://www.naic.org/store/free/MDL-74.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters wanted more than 30 days' notice, or asked 
that the timeframes align with the NAIC Network Adequacy Model Act. 
Some commenters supported requiring all enrollees of a primary care 
provider to be required to be notified. Other commenters stated that 
the notices should not be required if providers are leaving a practice 
with other in-network providers from that practice available. Some 
commenters advocated for the development of enrollee registries through 
which enrollees can be informed of changes or receive a list of 
providers being discontinued. Some commenters expressed concern about 
the value of notifications, and others expressed concern about the 
confidentiality of provider notices.
    Response: We are finalizing the notice requirements at Sec.  
156.230(d)(1) as proposed. While our notice requirements are not the 
same as those in the NAIC Network Adequacy Model Act, we did consider 
these notice requirements and requirements from other programs in 
proposing Sec.  156.230(d)(1). We understand that issuers need timely 
notification from the provider leaving the network in order to meet the 
30-day timeframe, but as the issuer has the contracting relationship 
with the provider, the issuer is in the best position to require 
providers to provide a termination notice to the issuer.
    We note that paragraph (d)(1) requires that the issuer make a good 
faith effort to provide the required notification. We understand that 
there are certain situations that cannot be anticipated, and in those 
cases, we would expect the issuer to send the notice to the enrollee as 
soon as practically possible. Issuers can send the notification to the 
enrollee electronically or by mail. In response to comments, we clarify 
that when the provider is leaving a practice, and as a result will no 
longer belong to the issuer's network, but other providers from the 
practice remain in-network, paragraph (d)(1) would not require the 
issuer to provide notice to the enrollees. We believe in those cases 
the provider's practice is better positioned to provide notification to 
the enrollee.
    Comment: Comments on the appropriate definition of ``regular 
basis'' generally either preferred to leave the definition to the 
discretion of the issuer or suggested that we define it to include an 
enrollee that has received services from the provider within one year. 
Some commenters specifically wanted the definitions related to primary 
care from the NAIC Network Adequacy Model Act to be incorporated in the 
rule to clarify how the provisions under paragraph (d)(1) should apply. 
Some commenters wanted additional protections in cases of provider 
transitions, such as special enrollment periods for provider 
terminations, or limits on the ability of issuers to terminate 
providers mid-year (or recourse for the providers in the event of such 
a termination), while other comments expressed concern about the 
difficulty in coordinating with providers to identify affected 
enrollees. Other commenters wanted issuers to be required to include 
information in the notice about other comparable in-network providers 
and to inform the enrollee of rights to receive continuity of coverage.
    Response: The purpose of Sec.  156.230(d)(1) is to ensure that 
enrollees are notified of changes to their provider network on a timely 
basis. At this time, we are not extending this provision to include 
additional requirements. However, notwithstanding a provider 
termination, all QHP issuers are required under Sec.  156.230(b) to 
maintain a network that is sufficient in number and types of providers, 
including providers that specialize in mental health and substance 
abuse services, to assure that

[[Page 12304]]

all services will be accessible without unreasonable delay. For 
purposes of paragraph (d)(1), we will not finalize a uniform definition 
of regular basis at this time, and will permit issuers to implement a 
reasonable definition of that term. The NAIC Network Adequacy Model Act 
similarly did not include a definition of regular basis. For purposes 
of paragraph (d)(1), we note that, in alignment with the NAIC Network 
Adequacy Model Act, we generally understand primary care to mean health 
care services for a range of common physical, mental or behavioral 
health conditions provided by a physician or non-physician primary care 
provider, and a provider of primary care to mean a participating health 
care professional designated by the issuer to supervise, coordinate, or 
provide initial care or continuing care to an enrollee, and who may be 
required by the issuer to initiate a referral for specialty care and 
maintain supervision of health care services rendered to the covered 
person, but that an issuer may implement reasonable definitions of 
these terms. To identify enrollees who see a provider who is 
terminating, we expect the issuer to work with the provider to obtain 
the list of affected patients, use its claims data system to identify 
enrollees who see the affected providers, or use another reasonable 
method. The issuer does not need to use more than one method. For the 
written notice required under paragraph (d)(1), we encourage issuers to 
notify the enrollee of other comparable in-network providers in the 
enrollee's service area, provide information on how an enrollee may 
access the plan's continuity of care coverage, and encourage the 
enrollee to contact the plan with any questions.
    Comment: Some commenters stated that continuity of care should 
cover non-renewals and terminations without cause; other commenters 
disagreed. Commenters sought clarifications regarding the cost sharing 
during the continuity of care period, and some commenters asked us to 
adopt provisions from the NAIC Network Adequacy Model Act, including 
providing that the issuer is only required to provide the continuity of 
care if the provider agrees to accept the previously contracted in-
network rate and to ensure protections against balance billing. Some 
stated that failure to include such a request could increase premiums.
    Response: While we expect issuers to negotiate with a provider for 
payment for services under Sec.  156.230(d)(2), issuers would only be 
responsible for paying to a provider what was previously being paid 
under the same terms and conditions of the provider contract, including 
any protections against balance billing, if the provider agrees to 
provide care under Sec.  156.230(d)(2). We cannot require non-
contracted providers to accept a particular payment rate under Sec.  
156.230(d)(2). Therefore, nothing under Sec.  156.230(d)(2) would 
prohibit balance billing for non-contracted providers in accordance 
with section 1302(c)(3)(B) of the Affordable Care Act and Sec.  155.20. 
This means that an enrollee could be balance billed for the services 
under Sec.  156.230(d)(2), absent another prohibition on balance 
billing in this situation, and those balance billing amounts would not 
be required to count toward the plan's annual limitation on cost 
sharing established at Sec.  156.130.
    In response to comments, we are limiting paragraph (d)(2) to cases 
where the provider is terminated without cause, including non-renewals 
without cause, and clarify that Sec.  156.230(d)(2) does not apply in 
cases where the contract is terminated or not renewed with cause. A 
termination or non-renewal without cause could be initiated by either 
the issuer or the provider or could be mutual. In any of these cases, 
enrollee continuity of care should be ensured. Furthermore, we clarify 
that if the enrollee remains in the same plan across plan years, Sec.  
156.230(d)(2) will apply across plan years. However, if an enrollee 
switches plans, Sec.  156.230(d)(2) would not apply, since there would 
not necessarily be an expectation that the same provider would be 
available under the new plan.
    Comment: Some commenters sought clarifications or expansions of the 
proposed definition of the course of active treatment, such as changes 
that would require inclusion of certain conditions or transitional 
coverage of drugs. While some commenters sought clarifications on the 
definition of active treatment or wanted the issuer's medical director 
to make the determination of whether an enrollee was in the course of 
active treatment, commenters generally supported the proposed 
definition of ``active treatment'' and our proposal that would make the 
continuity of coverage rule subject to internal and external appeal 
processes. Commenters supported requiring continuity of coverage for 
pregnancy through the post-partum period. Some commenters also sought 
90 days as the minimum transitional period, not the maximum period for 
continuity of care coverage, or urged us to adopt a longer or shorter 
period.
    Response: We are not making changes to the definition of ``active 
treatment'', except to amend the definition to ``active course of 
treatment'' to align with the language in the NAIC Network Adequacy 
Model Act. This change is not intended to alter the meaning of the 
proposed rule. We are also finalizing, to align with the NAIC Network 
Adequacy Model Act, the definitions of a life-threatening condition as 
a disease or condition for which likelihood of death is probable unless 
the course of the disease or condition is interrupted; and a serious 
acute condition as a disease or condition requiring complex ongoing 
care which the covered person is currently receiving, such as 
chemotherapy, radiation therapy, or post-operative visits. For the 
purposes of the active course of treatment definition, an ongoing 
course of treatment includes treatments for mental health and substance 
use disorders that fall within the definition of active course of 
treatment. Additionally, if the enrollee has successfully transitioned 
to a participating provider, if the benefit limitations of the plan are 
met or exceeded, or if care is not medically necessary, Sec.  
156.230(d)(2) would no longer apply to the enrollee.
    In response to comments supporting the extension of this policy to 
cases of pregnancy, we are revising the definition of active course of 
treatment to include the second or third trimester of pregnancy through 
the postpartum period. We are leaving the definition of what 
constitutes ``postpartum period'' and the scope of related services to 
the reasonable interpretation of the issuer.
    At Sec.  156.230(f), which we are now finalizing as paragraph (e), 
we proposed to require, notwithstanding Sec.  156.130(c) of the 
subpart, that for a network to be deemed adequate, each QHP that uses a 
provider network must count cost sharing paid by an enrollee for an EHB 
provided by an out-of-network provider in an in-network setting under 
certain circumstances towards the enrollee's annual limitation on cost 
sharing. Alternatively, we proposed that the plan could provide a 
written notice to the enrollee at least 10 business days before the 
provision of the benefit that additional costs may be incurred for EHB 
provided by an out-of-network provider in an in-network setting, 
including balance billing charges, unless such costs are prohibited 
under State law, and that any additional charges may not count toward 
the in-network annual limitation on cost sharing.
    We solicited comments on whether 10 business days' advance notice 
is the appropriate timeframe. We also sought comment on whether issuers 
should be

[[Page 12305]]

required to provide customized information to the consumer (including 
information on potential in-network providers) or if a form 
notification would be sufficient. We proposed that this policy would 
apply to all QHP issuers, in all Exchanges.
    We are finalizing our proposed policy, with four modifications. 
First, we provide that this policy would only apply to cost sharing 
paid by an enrollee for an EHB provided by an out-of-network ancillary 
provider in an in-network setting. Second, we are shortening the 
timeframe from 10 business days to the longer of the issuer's prior 
authorization timeline (that is, when the issuer would typically 
respond to a prior authorization request submitted timely) or 48 hours 
prior to the scheduled service. Third, we are finalizing this proposal 
so that it will take effect beginning for the 2018 benefit year. 
Fourth, we are making a minor edit for clarity.
    Comment: Many commenters supported HHS's efforts to address 
surprise out-of-pocket costs for consumers. Other commenters supported 
the proposal, but felt that it did not go far enough to protect 
consumers, and stated that HHS should consider including a prohibition 
on balance billing or otherwise restricting consumer financial 
responsibility in these scenarios. Other commenters thought that it may 
be difficult for consumers to locate an in-network provider within this 
timeframe. Commenters also suggested expanding the proposal to include 
situations in which an in-network provider is not available, when the 
provider directory is not up to date, and emergency care.
    Several commenters did not support our proposal, and asked that 
States be given the time and discretion to implement network adequacy 
standards. Others requested that HHS adopt NAIC Network Adequacy Model 
Act provisions instead. Other commenters were concerned that the 
proposal may have unintended consequences, such as disincentivizing 
providers from contracting with issuers in order to be able to balance 
bill consumers, or incentivizing consumers and out-of-network providers 
to elect to perform procedures at an in-network facility.
    Response: We are finalizing, for the 2018 and later benefit years, 
a modified Sec.  156.230(e) to count services provided by an out-of-
network ancillary provider in an in-network facility towards the in-
network annual limitation on cost sharing if the issuer does not 
provide timely notice, with the modifications described above. We did 
not propose to prohibit balance billing by out-of-network providers or 
limit the financial liability associated with out-of-network services 
to consumers. Our intent in establishing this policy beginning for the 
2018 benefit year is to permit us to monitor ongoing efforts by issuers 
and providers to address the complex issue of surprise out-of-network 
cost sharing at in-network facilities across all CMS programs in a 
holistic manner, and amend our policy in the future to accommodate 
progress on this issue, if warranted.
    While not a solution to all adverse financial consequences of 
receiving treatment from an out-of-network provider in this situation, 
we believe the policy we are finalizing will help provide transparency 
and ensure that consumers receive notice of the possible consequences 
where an out-of-network ancillary provider may be seen and are provided 
some mitigation of these consequences where proper, timely notice is 
not provided by the issuer. We believe that this policy provides a 
measure of financial protection for consumers against surprise out-of-
network cost sharing, while maintaining the larger part of the QHP's 
cost-sharing structure and avoids significant impacts on premiums.
    We are making a modification to this policy to limit its 
application to ancillary providers (that is, the provider of a service 
ancillary to what is being provided by the primary provider, such as 
anesthesiology or radiology) rather than the services supplied by the 
primary provider. In response to comments, we were concerned that the 
proposed policy could have had the unintended consequence of providing 
for reduced cost sharing for a primary provider, such as a surgeon 
known to be out-of-network. We acknowledge commenters' concerns that as 
previously written, the policy could allow for a consumer who has 
selected an out-of-network provider to deliberately seek to have the 
services rendered in an in-network facility in order to reduce cost 
sharing. We believe that this modification will address this concern.
    We intend to continue to monitor these situations, including 
issuers' timely compliance with this provision to consider whether 
further rulemaking is needed. Lastly, as we stated in the proposed 
rule, this proposal is not intended to, and does not, preempt any State 
laws on this topic.
    Comment: Some commenters supported the requirement that issuers 
notify consumers of the potential for additional cost-sharing from out-
of-network providers, but did not support the exception for issuers to 
not count the cost sharing towards the annual limitation on cost 
sharing. Others thought that the notification timeframe of 10 days was 
arbitrary, not long enough for consumers to arrange in-network care, or 
too long because prior authorization frequently happens closer to 
service delivery. Some commenters requested that facilities be required 
to notify consumers about whether or not providers were in-network for 
a consumer. Others noted that the 10 days' notice timeframe prior to 
the service may incentivize issuers to delay approval to utilize the 
notification exception.
    Commenters also provided feedback on the type of information that 
should be included in a notice--many suggested that issuers be required 
to include information on available network providers, information on 
costs, and how a consumer could appeal a determination. Other 
commenters thought the notification process was overly burdensome for 
issuers, especially if customized information was required.
    Response: In response to comments, we are modifying the 10-day 
timeline to account for issuers' prior authorization timelines. We are 
requiring notice from issuers by the longer of the issuer's prior 
authorization timeline (that is, when the issuer would typically 
provide the prior authorization) or 48 hours. This new timeline is more 
in line with existing issuer prior authorization timelines and will be 
less administratively burdensome for QHP issuers to implement, while 
providing consumers with the same time period to adjust their plans 
that they would have with respect to notification of prior 
authorization.
    We are also finalizing our proposal that a form notice be provided 
to the enrollee in these circumstances indicating that additional costs 
may be incurred for an EHB provided by an out-of-network ancillary 
provider in an in-network setting, including balance billing charges, 
unless such costs are prohibited under State law, and that any 
additional charges may not count toward the in-network annual 
limitation on cost sharing. While customized information for each 
consumer is preferable, we understand that creating such a notice may 
be burdensome to QHP issuers and may delay the notification process. 
Additionally, the provider directories that QHP issuers must provide 
may ease the burden on the enrollee to find an appropriate in-network 
provider. Therefore, while we are not requiring that customized 
information be provided to the enrollee in these circumstances, 
including

[[Page 12306]]

information on available network providers, costs, and how a consumer 
could appeal a determination, we strongly encourage QHP issuers to 
provide that information.
    Comment: Commenters asked if Sec.  156.230(e), which was proposed 
Sec.  156.230(f), would apply to QHPs with tiered networks or QHPs that 
do not provide out-of-network services. Another commenter asked for 
clarification on whether this provision would apply to QHPs on and off 
Exchanges. Other commenters asked HHS to clarify that this does not 
apply to emergency services which are already covered by Sec.  
147.138(b).
    Response: We clarify that Sec.  156.230(e) applies to QHPs, both on 
and off Exchanges, and to QHPs with tiered networks, but it does not 
apply to QHPs that do not cover out-of-network services. It also does 
not apply to emergency services, which are governed by other Federal 
regulations.
    Comment: Several commenters requested that Sec.  156.230(d) and (e) 
not apply to SADPs as the NAIC determined that these types of standards 
were not necessary for dental plans. The commenters stated that the 
structure of SADPs and the services covered by SADPs are different from 
medical plans as dental services are scheduled well ahead of time, the 
course of treatment does not include more serious conditions, and 
services are almost uniformly provided in the dentist's office.
    Response: While we agree that these provisions are more suitable to 
medical services, Sec.  155.1065 provides that SADPs must meet QHP 
certification standards, except for any certification requirement that 
cannot be met because the SADP is an excepted benefit that provides 
only a limited scope of coverage. However, we also believe due to the 
nature of these policies and the services provided by SADPs that any 
instances in which a SADP would need to apply these provisions would be 
rare.
(3) Other Comments on the Preamble to Sec.  156.230
    In the proposed rule, we solicited comments on a number of other 
network adequacy standards, including standards included in the work 
being done by the NAIC's Network Adequacy Model Review Subgroup. Our 
solicitation of comment included:
     Whether a QHP in an FFE should have a network resilience 
policy for disaster preparedness. Network resilience refers to the 
provider network's capacity to withstand and recover from natural or 
man-made disasters that may threaten enrollees' continuous access to 
quality care.
     Whether measuring network adequacy based on enrollee wait 
times for scheduled appointments, including the variation in wait times 
depending on the type of provider, such as for primary care or non-
primary care services, and whether we should add a wait time standard 
as an option under the proposed permissible State standards mentioned 
in the proposed rule, or if we should apply a broad wait time standard 
across QHPs in the FFEs.
     Whether an issuer should be required to survey all of its 
contracted providers on a regular basis to determine if a sufficient 
number of network providers are accepting new patients.
     Whether issuers should be required to make available their 
selection and tiering criteria for review and approval by HHS and the 
State upon request.
    We also stated that we were considering providing on HealthCare.gov 
a rating of each QHP's relative network coverage. This rating or 
classification would be made available to a consumer when making a plan 
selection. We explained that such a rating would help an enrollee 
select the plan that best meets his or her needs, and that we 
anticipated that this analysis would compare the breadth of the QHP 
network at the plan level as compared to the breadth of the other plan 
networks for plans available in the same geographic area.
    We stated that we anticipated analyzing the QHP network by 
calculating the number of specific providers that are accessible within 
specified time and distance standards. We explained that we would then 
classify the QHP networks into three categories. We stated that we were 
considering performing the calculation based on the provider 
information submitted by all QHP issuers in the existing network 
adequacy FFE QHP certification template.
    In the proposed rule, we explained that this network breadth rating 
would allow an enrollee to better understand plans' designs, and, like 
other consumer tools, could help improve plan satisfaction. We stated 
that we anticipated providing additional details about how we would 
classify networks in the Letter to Issuers and in the QHP certification 
instructions, and we solicited comments on what types of methods should 
be used to identify each network's breadth, what specific specialties 
should be included in the analysis, what sorts of adjustments should be 
made to address provider shortages, and other possible data sources to 
obtain information about available providers in the area. We also 
welcomed comments on the best way to make this information available to 
consumers. We intend to implement this proposal for open enrollment for 
the 2017 benefit year, if following consumer testing we determine that 
we can display this information in a manner useful to consumers. At 
this time, we plan to provide the classifications of network breadth 
for each plan at the county level. These classifications will be 
determined by calculating the percentage of providers in a plan's 
network, compared to the total number of providers in QHP networks 
available in a county. We plan to provide additional details on this 
methodology in the Letter to Issuers.
    Comment: Commenters had concerns about Federal requirements on 
network resilience, such as geographic variation issues. Others 
generally support network resilience policies offering recommendations, 
such as broad standards, deferring to States if they have strong 
standards, or Medicare standards.
    Response: We intend to work with stakeholders to consider best 
practices for network resilience policies. We want to ensure that any 
standards that we consider in this area are reasonable and 
operationally feasible, and take into account geographical variation.
    Comment: Some commenters had concerns about requiring providers to 
be surveyed on whether they are accepting new patients because of 
concerns about accuracy of this reporting, the associated difficulty 
and burden on issuers and providers, the risk of undermining current 
efforts by stakeholders to improve data quality, and concerns about 
``accepting new patients'' being a poor standard for determining 
network sufficiency. Other commenters generally supported requiring 
issuers to survey providers on whether they are accepting new patients, 
as the information could be used to update the provider directory.
    Response: In the 2016 Payment Notice, we finalized requirements 
under Sec.  156.230(b) that a QHP issuer must publish an up-to-date, 
accurate, and complete provider directory, including information on 
which providers are accepting new patients, the provider's location, 
contact information, specialty, medical group, and any institutional 
affiliations, in a manner that is easily accessible to plan enrollees, 
prospective enrollees, the State, the Exchange, HHS and OPM. We also 
stated that all the required data, including information on whether a 
provider is accepting new patients, are critical for consumers to

[[Page 12307]]

make educated decisions about their health coverage. While we believe 
that it is important that enrollees have access to providers who are 
willing to accept new patients and issuers should ensure providers are 
available within the network, we intend to continue to monitor this 
issue, including industry's efforts in this area, to consider whether 
further requirements are needed.
    Comment: Some commenters had concerns about issuers being required 
to provide selection and tiering criteria, noting the information is 
proprietary and that greater regulatory authority over network adequacy 
could have a chilling effect on network and product design. Other 
commenters supported such a provision. Many noted concerns that issuers 
are currently only making selection and tiering determinations on costs 
and not quality, and oversight of this criteria could prevent 
discrimination.
    Response: We encourage issuers to be more transparent about 
selecting and tiering criteria. We believe that transparency of 
selecting and tiering criteria would help enrollees and providers 
better understand how the issuer designed its network, which could help 
enrollees use the network more effectively and efficiently.
    Comment: Some commenters opposed a wait time standard, stating it 
is difficult to measure and assess consistently across providers, 
operationally and technically challenging for issuers, does not take 
into account quality, and would be problematic to apply across all FFEs 
given State variation. Other commenters supported requiring issuers to 
comply with wait time standards. Many supported applying such a 
requirement to all QHPs or all QHPs in FFEs.
    Response: We understand that a Federal wait time standard would 
need to take into consideration market and geographical variation of 
States. We intend to continue to monitor the use of and development of 
wait time standards.
    Comment: Some commenters supported providing network breadth 
information to consumers at the time of plan selection, and supported 
the implementation we described. Other commenters raised concerns about 
a rating system, believing it might be problematic because it does not 
factor in quality and could be confusing. Some commenters requested 
comprehensive consumer testing. Some commenters also requested that the 
rating information should include both physicians and hospitals.
    Response: We plan to proceed with providing information about each 
QHP's relative network breadth on HealthCare.gov. We will base the 
rating information of the network data for each QHP that is submitted 
as part of the certification process. This rating will be made 
available to a consumer when making a plan selection. We are conducting 
consumer testing to help inform how to display the rating in a way that 
will assist the consumer in selecting the plan that best meets his or 
her needs. We anticipate providing details about what specialties the 
ratings will include in the 2017 Final Letter to Issuers and in the QHP 
certification instructions.
    Comment: Commenters provided comments on other network adequacy 
issues, such as wanting additional requirements on provider 
directories, provider non-discrimination, access to specialized care, 
strong oversight and enforcement of network adequacy standards, and 
standards for material network changes. Other commenters wanted the 
proposed provisions to apply to all QHPs instead of QHPs in FFEs only.
    Response: We are not implementing additional network adequacy 
related provisions at this time. Our intention is to give States time 
to adopt the NAIC Network Adequacy Model Act provisions and potentially 
reconsider this area in the future. Therefore, we are finalizing new 
Sec.  156.230(d) to apply to all QHPs in an FFE only, and new Sec.  
156.230(e) to apply to all QHPs.
b. Essential Community Providers (Sec.  156.235)
    On June 5, 2015, we proposed through a Paperwork Reduction Act 
(PRA) notice a provider petition process to update the ECP list against 
which issuer compliance with the ECP standard is measured. We completed 
this data collection for the 2017 benefit year and will provide 
additional opportunities for ECPs to submit provider data to HHS for 
benefit years beyond 2017. The degree of provider participation in this 
data collection effort has allowed HHS to assemble a more complete 
listing of ECPs.
    In the proposed rule, we proposed that, for the 2017 QHP 
certification cycle, HHS would continue to credit a health plan seeking 
certification to be offered through an FFE with multiple providers at a 
single location counting as a single ECP toward both the available ECPs 
in the plan's service area and the issuer's satisfaction of the ECP 
participation standard. For QHP certification cycles beginning with the 
2018 benefit year, we sought comment on whether we should revise Sec.  
156.235(a)(2)(i) and (b)(2)(i) to credit issuers for multiple 
contracted full-time equivalent (FTE) practitioners at a single 
location, up to the number of available FTE practitioners reported to 
HHS by the ECP facility through the ECP petition process. We proposed 
to apply this FTE count to the numerator of an issuer's percentage 
satisfaction of the general ECP standard described in paragraphs (a)(1) 
and (2) of Sec.  156.235 and the alternate ECP standard described in 
paragraphs (b)(1) and (2) of that section. We proposed that the 
denominator of an issuer's percentage satisfaction of the ECP standard 
would reflect the number of available FTE practitioners reported to HHS 
by each ECP facility located in the issuer's plan service area.
    In the proposed rule, we stated that our analysis of the available 
ECPs in each of the additional ECP subcategories previously considered 
for disaggregation (that is, children's hospitals, rural health 
clinics, freestanding cancer centers, community mental health centers, 
and hemophilia treatment centers) does not support further 
disaggregation of these categories at this time. We explained that 
there are too few ECPs within each of these additional ECP categories 
appearing on our ECP list to afford issuers sufficient flexibility in 
their contracting. We stated that we may revisit this consideration in 
the future, and encouraged QHP issuers to include in their networks 
these additional providers to best meet the needs of the populations 
they serve.
    We are finalizing the provisions under Sec.  156.235 as proposed.
    Comment: We received numerous comments in support of our proposal 
for benefit year 2017 to continue crediting a health plan seeking 
certification to be offered through an FFE with multiple providers at a 
single location counting as a single ECP toward both the available ECPs 
in the plan's service area and the issuer's satisfaction of the ECP 
participation standard. Other commenters urged that HHS credit issuers 
for multiple contracted FTE practitioners at a single location.
    We received many comments in support of our proposal for QHP 
certification cycles beginning with the 2018 benefit year to credit 
issuers that qualify for the general and alternate ECP standard for 
multiple contracted FTE practitioners at a single location, up to the 
number of available FTE practitioners reported to HHS by the ECP 
facility. These commenters stated that the wide variability in the 
number of available practitioners at each ECP facility and broad range 
of health care services that ECPs provide favor this position, and 
urged that ECP facilities

[[Page 12308]]

should not all be credited equally toward an issuer's satisfaction of 
the 30 percent ECP standard. In addition, they stated that many issuers 
contract with multiple unaffiliated providers that rent space in the 
same building and should be credited for more than one ECP at that 
location. Some of these commenters stated that while they support 
crediting issuers for multiple ECPs at a given site, they urged us to 
not rely solely on issuer satisfaction of the 30 percent ECP threshold 
to ensure adequate access to care for low-income medically underserved 
individuals.
    We also received comments in opposition to this proposal for 
benefit year 2018. Many of the commenters stated that issuers do not 
always know how many FTE practitioners are available at a specific 
provider facility, and it would be burdensome for issuers to be 
required to collect such provider data. Many commenters opposed the 
proposal due to concerns that the policy might not ensure geographic 
distribution of ECPs and an adequate range of health care services 
provided by ECPs.
    A few commenters stated that FTE practitioners at a facility often 
fluctuate, or they divide their time among several facilities, and so 
FTEs might be an unpredictable measure of an issuer's satisfaction of 
the ECP standard.
    Response: On December 9, 2015, HHS launched its ECP petition 
initiative to give providers an opportunity to request to be added to 
our ECP list, update their provider data on our ECP list, and provide 
missing provider data, including FTE practitioner data that issuers 
rely upon to identify qualified ECPs for inclusion in their provider 
networks. The web-based ECP petition link is available at https://data.healthcare.gov/cciio/ecp_petition. HHS anticipates that this 
provider data collection initiative will require several months of 
provider outreach in order to collect the requisite FTE practitioner 
data. For benefit year 2017, we are finalizing our proposal at Sec.  
156.235(a)(2)(i) to count multiple providers at a single location as a 
single ECP toward both the available ECPs in the plan's service area 
and the issuer's satisfaction of the ECP participation standard.
    For QHP certification cycles beginning with the 2018 benefit year, 
we are finalizing our proposal at Sec.  156.235(a)(2)(i) to credit 
issuers for multiple contracted FTE practitioners at a single location, 
up to the number of available FTE practitioners reported to HHS by the 
ECP facility through the ECP petition process. As HHS collects the 
number of FTE practitioners from providers via the ECP petition for 
purposes of the benefit year 2018 certification cycle, HHS intends to 
clarify to issuers through guidance that issuers must report on their 
ECP template only the number of FTE practitioners at each ECP facility 
that the issuer has included in its provider networks for its member 
enrollees. That number must not exceed the number of available FTE 
practitioners reported to HHS by the ECP facility through the ECP 
petition process. Due to the wide variability in the number of 
available practitioners at each ECP facility and broad range of health 
care services that ECPs provide, HHS believes that this methodology for 
calculating an issuer's satisfaction of the ECP standard will provide a 
more accurate representation of the issuer's ECP participation in its 
provider networks.
    For benefit years 2017 and beyond, HHS will continue to require 
issuers to satisfy the separate ECP requirement to offer a contract in 
good faith to at least one ECP per ECP category, where an ECP in that 
category is available, within each county in the plan's service area. 
In addition, issuers must continue to offer a contract to all available 
Indian health care providers in the plan's service area. In previous 
years, HHS relied in part on crediting a health plan with multiple 
providers at a single location as a single ECP toward the issuer's 
satisfaction of the ECP participation standard to better ensure 
geographic distribution of ECPs. For benefit year 2018, HHS expects to 
have collected the necessary ECP category-specific data directly from 
all qualified providers on our ECP list via the ECP petition 
initiative, so that reliance on counting multiple providers at a single 
location as a single ECP will no longer be necessary for purposes of 
ensuring geographic distribution of ECPs. We expect that the ECP 
category per county contract offering requirement will serve to better 
ensure geographic distribution of ECPs and an adequate range of health 
care services.
    In order to address fluctuations in FTE practitioners at a 
facility, HHS intends to keep the ECP petition submission window open 
throughout the year, permitting providers to report the fluctuations 
and for issuers to view these updates in preparation for the following 
benefit year contract negotiations. For provider facilities that employ 
or contract with practitioners who divide their time among several 
facilities, the ECP should divide their FTE counts among the facilities 
when completing the ECP petition. For instance, an ECP should report a 
practitioner who practices half time at two separate facilities as 0.5 
FTE at each facility to ensure a more accurate count of FTEs at each 
facility. Lastly, HHS has instructed providers to submit only one ECP 
petition for each facility location using the facility-level National 
Provider Identifier (NPI), rather than each individual practitioner at 
the facility submitting a separate ECP petition. Therefore, HHS intends 
to continue reflecting only facility-level ECPs on its ECP list, 
although some facilities may be composed of a solo practitioner 
beginning with the 2017 benefit year ECP list.
    For the reasons stated above, we are finalizing our proposal to 
revise Sec.  156.235(a)(2)(i) and Sec.  156.235(b)(2)(i) to credit 
issuers that qualify for the general or alternate ECP standard 
described in Sec.  156.235 that seek certification to be offered 
through an FFE (or SBE-FP) for multiple contracted FTE practitioners at 
a single location toward the issuer's satisfaction of the ECP standard, 
beginning with the 2018 benefit year. In addition, we are finalizing 
our proposal that for the 2017 benefit year, HHS will continue to 
credit an issuer that qualifies for the general or alternate ECP 
standard and is seeking certification to be offered through an FFE with 
multiple providers at a single location counting as a single ECP toward 
both the available ECPs in the plan's service area and the issuer's 
satisfaction of the ECP participation standard.
    Comment: Several commenters urged that HHS disaggregate the 
providers listed in the ``Hospitals'' ECP category and the ``Other ECP 
Providers'' category. These commenters stated that by grouping together 
providers such as hemophilia treatment centers, community mental health 
centers, and rural health clinics into one ECP category, HHS runs the 
risk that low-income, underserved enrollees will have inadequate access 
to key providers that are uniquely suited to meet their specialized 
health needs. These commenters urged that HHS modify the ECP categories 
to separate the distinct entities and require contracting with each of 
them. Several commenters expressed concern that children's hospitals 
are grouped with hospitals that do not specialize in children's health 
care services. These commenters emphasized that children's hospitals 
are uniquely suited to meet the needs of children with complex medical 
conditions, and they urged HHS to establish a separate ECP category for 
children's hospitals. Some commenters expressed concern that HHS might 
be underestimating the number of providers in each of these ECP

[[Page 12309]]

subcategories, because the ECP categories reflected on the benefit year 
2016 ECP list combine these providers with other provider types, rather 
than classifying them separately. One commenter recommended that HHS 
require that health plans offer contracts to all ECPs from each of the 
categories in each county that is in a health professional shortage 
area (HPSA), with the Health Resources and Services Administration 
serving as a resource for identifying those areas. In contrast, several 
health plans supported not disaggregating the ECP categories, 
expressing concern that issuers would not have sufficient flexibility 
in contracting.
    Response: Based on our analysis of the available ECPs in each of 
the additional ECP subcategories previously considered for 
disaggregation (that is, children's hospitals, rural health clinics, 
freestanding cancer centers, community mental health centers, and 
hemophilia treatment centers), we believe that too few ECPs appear on 
the ECP list to afford issuers sufficient flexibility in their 
contracting. In order to address this concern, HHS launched its ECP 
Petition initiative on December 9, 2015, to give providers an 
opportunity to request to be added to the ECP list, update their 
provider data on the ECP list, and provide missing provider data. 
Provider participation in this ECP petition initiative is critical to 
ensure that issuers are aware of a provider's ECP status and that 
accurate provider data are reflected on the ECP list, including ECP 
category classifications. We believe that HHS's network adequacy 
standards, coupled with the ECP standards, including the 30 percent 
inclusion standard and the requirement that issuers offer a contract to 
at least one ECP in each ECP category in each county in the plan's 
service area, afford both providers and issuers sufficient contracting 
flexibility as HHS continues to update the ECP list. In addition, we 
continue to partner with HRSA to identify HPSAs for determining 
provider qualification for inclusion on the ECP list.
    Comment: Several commenters urged that HHS require QHP issuers to 
contract with any willing provider, rather than only 30 percent of the 
available ECPs in a plan's service area. Some of these commenters 
suggested that HHS require that QHP issuers offer good faith contracts 
to all willing providers in specific ECP categories (that is, FQHCs, 
Ryan White providers, hemophilia treatment centers) in the plan's 
service area.
    Response: While we appreciate the commenters' suggestions, we did 
not propose changes to the 30 percent ECP standard and consider these 
comments to be outside the scope of the proposed rule.
c. Enrollment Process for Qualified Individuals (Sec.  156.265)
    Under Sec.  156.265(b)(2), if an applicant initiates enrollment 
directly with the QHP issuer for enrollment through the Exchange 
(direct enrollment through an issuer), the QHP issuer must redirect an 
applicant directly to the Exchange Web site to complete the application 
and receive an eligibility determination. HHS requested comment on an 
option to enhance the direct enrollment process, like that described in 
this final rule in the preamble to Sec.  155.220, such that an 
applicant could remain on the QHP issuer's Web site to complete the 
application and enroll in coverage, and the QHP issuer's Web site could 
obtain eligibility information from the Exchange in order to support 
the consumer in selecting and enrolling in a QHP. Our intent is to have 
this information exchange occur through an Exchange-approved Web 
service to provide Exchanges offering direct enrollment and QHP issuers 
more operational flexibility to expand front-end, consumer-facing 
channels for enrollment through a more seamless consumer experience. 
Accordingly, as in Sec.  155.220, we proposed to revise Sec.  
156.265(b)(2)(ii) to ensure that an applicant who initiates enrollment 
directly with the QHP issuer for enrollment through the Exchange 
receives an eligibility determination for coverage through the Exchange 
Web site or through an Exchange-approved web service via the FFE single 
streamlined application. Comments regarding the enhanced direct 
enrollment proposal by web-brokers are discussed in this final rule in 
the preamble to Sec.  155.220. We sought comment on the same direct 
enrollment options for issuers, including whether to expand oversight, 
auditing and monitoring activities, and how to best maintain privacy 
and security standards. We also solicited comments on whether standards 
should differ for a web-broker compared to a QHP issuer. We did not 
receive comments indicating standards should differ for a web-broker 
compared to a QHP issuer in regards to direct enrollment; thus, we are 
finalizing the proposal to require effectively the same set of 
standards regarding direct enrollment.
    Comments on the general enhanced direct enrollment proposal, use of 
the FFE single streamlined application, HHS approval of alternative 
enrollment pathway processes, and the timing of direct enrollment are 
discussed in this final rule at the preamble to Sec.  155.220(c)(3).
    Comment: Commenters aligned their comments for web-brokers with 
comments for issuers, and a few commenters generally noted that a level 
playing field is essential to Exchange stability.
    Response: Based on the comments received, as summarized above, we 
are finalizing the proposal to enhance the direct enrollment process 
with some modifications, as noted below.
    We appreciate the many comments and recommendations on the direct 
enrollment proposal we received. While we believe that an enhanced 
direct enrollment process will provide a more seamless consumer 
experience, we agree with commenters that implementing the proposal 
will be a significant undertaking for HHS, web-brokers, and issuers, 
and that such an effort will require sufficient time for operational 
planning and preparations, such as identifying and testing the 
Exchange-approved web services under Sec.  156.265(b) that can be used 
to support the enhanced direct enrollment process, and ensuring privacy 
and security risks are addressed and mitigated. HHS will not provide 
such an option during the individual market open enrollment period for 
2017 coverage, but intends to provide the option by the open enrollment 
period for 2018 coverage. We intend to supplement the framework we are 
finalizing in this rule with more specific guidance and requirements in 
future rulemaking, such as specific guidelines for a pre-approval 
process under Sec.  156.265(b)(3), and requirements for privacy and 
security. Until then, issuers must continue to comply with the current 
direct enrollment process, through which a consumer is directed to 
HealthCare.gov to complete the eligibility application, and all 
associated guidance. This means direct enrollment entities are not 
permitted at this time to use non-Exchange Web sites to complete the 
Exchange eligibility application or automatically populate data 
collected from consumers into HealthCare.gov through any non-Exchange 
Web site. Completion of the Exchange eligibility application on a non-
Exchange Web site, or collection of data through a non-Exchange Web 
site that is then used to complete the eligibility application will be 
considered a violation of the direct enrollment entity's agreement with 
the FFEs.
    See preamble to Sec.  155.220(c)(3), above, for a discussion of the 
existing direct enrollment requirements.
    While enhanced direct enrollment will not be available in the 
individual

[[Page 12310]]

market open enrollment period for 2017 coverage, we are finalizing our 
proposal to revise Sec.  156.265(b)(2)(ii) to enable issuers who use 
HHS-approved direct enrollment processes to facilitate enrollment 
through the FFEs to either ensure the applicant's completion of an 
eligibility verification and enrollment through the Exchange internet 
Web site as required by Sec.  155.405, or ensure that the eligibility 
application information is submitted for an eligibility determination 
through an Exchange-approved web service. This will allow applicants to 
complete the entire Exchange application and enrollment process on the 
web-broker's non-Exchange Web site. We believe this process will grant 
direct enrollment entities the operational flexibility to expand front-
end, consumer-facing channels for enrollment.
    However, we also share commenters' concerns that allowing this 
flexibility without additional protections in place may increase the 
risk of imprecise, inaccurate, or misleading eligibility results. In 
light of those considerations and the accompanying comments received, 
we are adding new paragraphs (b)(3)(i) through (iii) to clearly 
articulate the requirements associated with completing an Exchange 
eligibility application on a direct enrollment entity's non-Exchange 
Web site. These requirements may be amended over time as implementation 
activities begin and once experience is gained under the new process 
(once implemented).
    Consistent with the proposal in the proposed rule, Sec.  
156.265(b)(3)(i) requires all language related to application 
questions, and the sequence in which the questions are presented on the 
direct enrollment entity's non-Exchange Web site to be identical to 
that of the FFE Single Streamlined Application. We acknowledge the 
comments requesting deviations from the FFE single streamlined 
application to enhance the consumer experience, and, as we are for web-
brokers, we are finalizing language permitting such deviations with HHS 
approval. We will only approve minor modifications that do not change 
the intent or meaning of the questions, decrease the probability of 
accurate answers and eligibility determinations, or affect the 
dependencies and structure of the dynamic application.
    We are also adding new Sec.  156.265(b)(3)(ii), which sets out a 
more general requirement that any non-Exchange Web site facilitating 
the completion of an Exchange eligibility application ensure that all 
information necessary for the completion of the application related to 
the consumer's applicable eligibility circumstance are submitted 
through the Exchange-approved web service. New Sec.  156.265(b)(3)(iii) 
requires that the process used for consumers to complete the 
eligibility application on the non-Exchange Web site comply with all 
applicable Exchange standards, including Exchange notice requirements 
under Sec.  155.230 and Exchange privacy and security standards related 
to handling PII under Sec.  155.260(b).
    We also agree with commenters that urged HHS to adopt an approval 
process to ensure that the non-Exchange Web site seeking to offer 
stand-alone direct enrollment eligibility services meets all applicable 
requirements in order to protect consumers. Accordingly, we have added 
Sec.  156.265(b)(4) to outline a process for HHS to verify entities 
meet all requirements of this section prior to using a non-Exchange Web 
site to complete the Exchange eligibility application.
    See preamble under Sec.  155.220 for a discussion on the primary 
objective of these changes.
    We clarify that the requirements related to the direct enrollment 
process rules are applicable to FFEs (including FFEs where States 
perform plan management functions) and SBE-FPs only, and would not 
apply to SBEs that do not use the Federal platform, nor alter any 
State-specific rules related to Medicaid eligibility.
    Comment: Commenters generally supported HHS conducting regular 
audits on issuers and requiring issuers to adhere regulatory standards 
for direct enrollment activities.
    Response: We agree with commenters that supported HHS conducting 
regular audits of issuers under this section to ensure ongoing 
compliance with applicable standards and are adding Sec.  
156.265(b)(5), which enables HHS to periodically monitor and audit 
entities to assess compliance with standards in this section.
    Comment: One commenter stated HHS should work with issuers as it 
develops new direct enrollment functionality, leverage existing 
security standards as much as possible, and leave sufficient time for 
testing and implementation of any requirements. Other comments raised 
several concerns about the privacy and security of consumers' 
personally identifiable information, particularly citizenship and 
immigration status, and asked HHS to clarify how these entities would 
collect, store, and use PII. Some commenters wanted HHS to clarify that 
web-based entities will not gather and store data beyond that necessary 
for the Federal platform, State-based Exchanges, and Medicaid 
eligibility and enrollment via ``cookies'' or other tracking tools, and 
would not store or use information gathered from consumers in the 
application process for marketing other products.
    Response: We agree that implementing the proposal will be a 
significant undertaking for HHS, and that privacy and security risks 
must be addressed prior to implementation. We intend for the standards 
outlined in this section to provide a framework to prepare for the 
implementation to support use of the enhanced direct enrollment option 
in future years. We will continue to consider commenters' 
recommendations on ensuring consumers are protected, and intend to 
propose further protections in future rulemaking.
d. Termination of Coverage or Enrollment for Qualified Individuals 
(Sec.  156.270)
    We proposed to amend Sec.  156.270(d) to specify that a QHP issuer 
must provide a 3-month grace period to an enrollee who, upon failing to 
timely pay his or her premiums, is receiving advance payments of the 
premium tax credit. Because we believe that changing the length of an 
enrollee's grace period during the middle of the grace period would be 
confusing to enrollees and could result in otherwise avoidable 
terminations for failure to pay premiums, enrollees receiving APTC who 
enter a grace period for failing to timely pay premiums and who also 
lose their eligibility for APTC for any reason during the grace period 
would be able to complete the remaining portion of the grace period as 
though the loss of eligibility for APTC did not occur. Although the 
length of the grace period would continue as though the loss of 
eligibility for APTC did not occur, payment of APTC would terminate 
through normal Exchange operations as a result of the loss of 
eligibility. The proposed amendment to Sec.  156.270(d) also would 
eliminate language limiting the 3-month grace period for enrollees who 
are receiving APTC to only those enrollees who made a payment during 
the benefit year. This would permit enrollees renewing coverage that 
does not require a binder payment who fail to pay January premiums in 
full (or fail to pay within an issuer's premium payment threshold 
policy, if applicable) to receive the full grace period of 3 months. 
This change would align more closely with our interpretation of the 
interaction between grace periods, guaranteed availability and 
renewability, and the binder payment requirement, that a binder payment 
is

[[Page 12311]]

not necessary when an enrollee enrolls, either actively or passively, 
in a plan within the same insurance product, and would prevent 
enrollees who re-enroll in the same plan or product from unfairly 
losing their right to a grace period because they do not make a payment 
for January coverage. Finally, we proposed to codify with regard to the 
grace period standards our policy described in the preamble for Sec.  
155.400 of this part that if an enrollee receiving advance payments of 
the premium tax credit can satisfy the requirement to pay all 
outstanding premiums, or if the enrollee satisfies an issuer's premium 
payment threshold implemented under Sec.  155.400(g), if applicable, 
the QHP issuer must not terminate for non-payment of premium the 
enrollee's enrollment through the Exchange. This change to the rule 
would reflect the extension of the premium threshold policy to 
enrollees who are in a grace period for non-payment of premium.
    Comment: Many commenters supported the proposed rule because it 
offers an important consumer protection and reduces confusion about the 
length of an enrollee's grace period if the enrollee had his or her 
APTC adjusted to $0 during the 3-month grace period for enrollees 
receiving APTC. Several commenters, however, stated that the proposed 
rule would cause providers to bear the burden of claims, subsequently 
reversed by issuers, incurred during the second and third months of a 
grace period for enrollees receiving APTC. Some, opposing the proposed 
rule, preferred that enrollees losing their APTC during a 3-month grace 
period revert to State rules to determine the length of the remainder 
of the grace period. Several other commenters approved of the proposed 
rule so long as providers were guaranteed to be reimbursed for claims 
incurred during the second and third months of the 3-month grace 
period. Finally, several commenters offered suggestions relating to 
enhancing the requirement contained in Sec.  156.270(d)(3) that issuers 
notify providers of the possibility for denied claims when an enrollee 
is in the second and third months of the grace period.
    Response: We recognize that the proposed rule could allow for 
claims to be submitted and pended during the second and third months of 
a grace period that, absent this amendment to the rule, would have been 
disallowed for lack of coverage if the length of the enrollee's 
remaining grace period had been shorter under State rules. However, the 
proposed standard is consistent with our current rules, and because of 
the importance we attach to the consumer protection inherent in the 
proposed rule, we are finalizing the proposal as proposed.
    Comment: One commenter requested clarification that non-payment of 
a binder payment would not give rise to a grace period under the 
proposed rule. Other commenters requested clarification that, under the 
proposed rule, an enrollee is not eligible to receive a 3-month grace 
period for non-payment of premium for a plan which is not being paid, 
at least in part, by APTC. One commenter requested that, due to the 
complexity of creating the systems operations necessary to implement 
the rule, the proposed rule not go into effect, until after the date it 
is finalized.
    Response: The changes to Sec.  156.270(d) do not conflict with or 
change the binder payment rule at Sec.  155.400(e), which states that 
Exchanges may, and the Federally-facilitated Exchange will, require 
payment of the first month's premium to effectuate an enrollment. 
Likewise, the changes to the binder payment rule at Sec.  155.400(e) do 
not eliminate the need for an enrollee to pay a binder payment to 
effectuate coverage. The rule also does not change the existing rule 
that an enrollee is not eligible to receive a 3-month grace period for 
non-payment of premium for a plan which is not being paid, at least in 
part, by APTC. Similarly, the rule does not make any change to the 
rules related to the gain or loss of APTC. As with the other parts of 
this rule, the amendments to Sec.  156.270(d) would be effective only 
after the effective date, identified at the beginning of this rule.
    Comment: While some commenters expressed support for the 
codification of our interpretation that our rules do not require a 
binder payment when an enrollee enrolls, either actively or passively, 
in a plan within the same insurance product (but does require a binder 
payment when a consumer enrolls in a new product or with a new issuer), 
several commenters raised objections to the proposed rule's amendment 
of Sec.  156.270(d) to eliminate language limiting the 3-month grace 
period for enrollees who are receiving APTC to only those enrollees who 
made a payment during the benefit year. Some commenters stated that 
such a change would have an adverse actuarial effect on the risk pool, 
and encourage enrollees to neglect their premium payments in favor of 
receiving free coverage during the 3-month grace period for enrollees 
receiving APTC.
    Response: We do not interpret our rules to require a binder payment 
for re-enrollment from an enrollee who is enrolling with the same 
issuer in the same plan or product. We characterize such a re-
enrollment as a renewal of coverage, which, according to our 
interpretation of our rules, is treated the same as a regularly-billed 
monthly premium payment. Because a binder payment is not required by 
our rules in such circumstances, we do not believe that an enrollee 
receiving APTC who is re-enrolling, either actively or passively, into 
the same plan or product should be denied a 3-month grace period if he 
or she does not make full payment (or a payment within the issuer's 
premium payment threshold, if any) for January of a benefit year. 
Additionally, we do not believe that this causes actuarial risk to the 
coverage pool or an enticement to game the system any more than such 
dangers would exist during any other part of the benefit year. Because 
we believe that this amendment offers an important consumer protection, 
we are finalizing the proposed rule as written. At the same time, we 
will carefully monitor consumer use of grace periods and make any 
necessary changes in future rules or guidance.
e. Additional Standards Specific to SHOP (Sec.  156.285)
    In Sec.  156.285(c)(5), we proposed to specify additional details 
about how a QHP issuer offering a QHP through an FF-SHOP should 
reconcile enrollment files with the FF-SHOP. Issuers would be required 
to send enrollment reconciliation files on at least a monthly basis 
according to a process and timeline established by the FF-SHOP, and in 
a file format specified by the FF-SHOP.
    We also proposed to delete Sec.  156.285(d)(2), to be consistent 
with our interpretation of guaranteed availability and guaranteed 
renewability. We specifically proposed that if a qualified employer 
withdraws from a SHOP, the SHOP, not the issuer should terminate the 
group's enrollment through the SHOP, and coverage might in many 
circumstances continue outside the SHOP.
    We received no comments on these proposals. We are finalizing the 
amendment to delete Sec.  156.285(d)(2) as proposed, and are finalizing 
the amendment to Sec.  156.285(c)(5) with modifications to clarify that 
a general requirement under this provision still appliesin all SHOPs 
and to delete the word ``must'' because it is superfluous in light of 
the introductory language in Sec.  156.285(c).

[[Page 12312]]

f. Meaningful Difference Standard for Qualified Health Plans in the 
Federally-Facilitated Exchanges (Sec.  156.298)
    At Sec.  156.298, we proposed modifications to the meaningful 
difference standard for QHPs in the FFEs. We proposed to remove the 
criterion in paragraph (b)(5) that otherwise identical plans would be 
considered meaningfully different on the basis of one QHP being health 
savings account (HSA) eligible. We also proposed to delete ``self-
only'' and ``non-self-only'' from paragraph (b)(6). We further proposed 
to redesignate paragraph (b)(6) as paragraph (b)(5) and add the word 
``or'' to paragraph (b)(4).
    Comment: Commenters generally supported the removal of HSA 
eligibility as a criterion for determining meaningful difference from 
otherwise identical plans, so long as standard key differences in how 
the deductible applies will be accounted for in the existing cost 
sharing meaningful difference standard at Sec.  156.298(b)(1). One 
commenter noted that it is important that HHS permit an issuer to offer 
different QHPs that look similar in terms of deductible and copayments, 
where one is HSA-compatible but the other is not, because certain 
services may be covered without a deductible.
    Response: We have determined that HSA eligibility is a cost-sharing 
status that may be assessed by examining the QHP's cost sharing, which 
is included at paragraph (b)(1) and that the ``Health Savings Account 
eligibility'' criterion is therefore redundant.
    Comment: Commenters also generally supported removing the self-only 
and non self-only criteria and questioned why the ``child-only'' status 
was retained.
    Response: We are finalizing the removal of the self-only and non 
self-only criteria. Self-only (that is, individual) plans do not allow 
any dependent relationships, while non-self-only (that is, enrollee 
group or family) plans allow at least one dependent relationship type. 
An individual can enroll in individual and family plans. The allowance 
of dependents is the only difference between two plans if they are 
identified as individual only or family. These statuses alone are not 
indicative of meaningful differences among QHPs.
    We will maintain the ``child-only'' versus non-child-only status. 
It is permissible for QHP issuers to offer child-only plans in which 
the only enrollees are individuals who have not attained the age of 21. 
We believe that such a child-only plan would be meaningfully different 
from a non child-only plan.
    Comment: Several commenters asked that HHS consider other ways to 
strengthen meaningful difference standards, such as by adding 
additional quantitative standards.
    Response: We are not proposing any additional meaningful difference 
standards at this time, but will continue to review the implementation 
of this policy over time.
g. Other Considerations
    We reminded issuers that certain other Federal civil rights laws 
impose non-discrimination requirements. Issuers that receive Federal 
financial assistance, including in connection with offering a QHP on an 
Exchange, are subject to Title VI of the Civil Rights Act of 1964, the 
Age Discrimination Act of 1975, section 504 of the Rehabilitation Act 
of 1973, and section 1557 of the Affordable Care Act. The Office for 
Civil Rights (OCR), which enforces these statutes, published a notice 
of proposed rulemaking on September 9, 2015 (80 FR 54172) on the 
requirements of section 1557. Issuers that intend to seek certification 
of one or more QHPs are directed to that proposed rule and to http://www.hhs.gov/ocr/civilrights for additional information.
    We also sought comments on fostering market-driven programs that 
can improve the management of costs and care. We noted that innovative 
issuer, provider, and local programs or strategies may be successful in 
promoting and managing care, potentially resulting in better health 
outcomes and lower rates while creating important differentiation 
opportunities for market participants. We sought comment on ways in 
which we can facilitate such innovation, and in particular on whether 
there are regulations or policies in place that we should modify in 
order to foster this innovation.
    Comment: A few commenters stated that the exclusion of quality 
improvement activities in the MLR definition (for example, drug 
utilization review programs, and value-based oncology management 
programs) deters issuers from pursuing such innovative programs. 
Commenters recommended HHS revise the MLR numerator definition to 
include the costs of such programs.
    A few commenters also suggested that HHS revisit last year's 
requirements requiring issuers to cover the greater of one drug in 
every USP category and class, or the same number of prescription drugs 
in each category and class as the EHB-benchmark, and also establishing 
P&T committees. Commenters stated that the administrative expense is 
significant and unnecessary.
    One commenter also asked HHS to reconsider the mail order and 
specialty pharmacy restrictions in the 2016 final Payment Notice (Sec.  
156.122(e) and (d)) starting for the 2017 benefit year, and instead 
establish less restrictive methods to achieve its policy goals, for 
example by requiring issuers and their prescription benefit managers 
(PBMs) to establish protocols that facilitate mail order delivery to 
enrollees with transitional living situations, multiple addresses, or 
other living arrangements requiring non-standard delivery. The 
commenter suggested that HHS could require that any mandatory mail 
order programs offered only apply to maintenance medications and only 
after a first fill of a new medication, as is common in the 
marketplace.
    We received a comment stating that any willing provider laws can 
prevent selective contracting between issuers and providers as any 
willing provider that accepts the issuers' terms is considered in-
network. The commenter stated that HHS should take into account the 
negative impact of such restrictions on innovation and avoid imposing 
similar regulatory impediments on issuers participating in the 
Exchange. Another commenter urged HHS to focus on addressing true 
drivers of costs, and avoid putting all financial responsibility on 
consumers. The commenter stated that consumer-based programs like 
reference pricing and benefit design structures are difficult for 
consumers to understand, particularly for those with low income 
literacy. Additionally, the commenter suggested addressing utilization 
of more evidence-based care with incentives for providers, and the need 
for broader efforts on price variation. Another comment requested HHS 
develop tools to allow consumers to pick plans based on quality and 
cost-effectiveness, adopt policies to increase transparency in costs 
(public reporting on costs for episodes), promote technology-enabled 
care delivery, and adopt policies to encourage total community health. 
We received one comment requesting that HHS not require SADPs to offer 
plans within its three categories (routine, basic and major), as it 
results in inaccurate plan representation and consumer confusion.
    Another commenter suggested HHS explore options to waive the 
Medicaid rebate program, specifically the best price restriction, under 
which the Exchange QHP drug prices are included. This sets a pricing 
floor and prevents PBMs from negotiating lower drug prices or 
manufacturer rebates.

[[Page 12313]]

    Response: We appreciate these comments and will consider them for 
future rulemaking.
6. Standards for Qualified Health Plan Issuers on Federally-Facilitated 
Exchanges and State-Based Exchanges on the Federal Platform (Sec.  
156.350)
    To make it operationally feasible for a State-based Exchange to 
rely on the Federal platform for eligibility and enrollment functions, 
issuers and plans offered on the SBE-FP must comply with rules, as 
interpreted and implemented in policy and guidance related to the 
Federal eligibility and enrollment infrastructure. These would be the 
same requirements related to eligibility and enrollment that are 
applicable to QHP issuers and plans on FFEs. For example, SBE-FP 
special enrollment periods must be administered within the guidelines 
of the FFE special enrollment periods, as it is not possible at this 
time for the Federal platform to accommodate State customization in 
policy or operations, such as State-specific special enrollment 
periods, application questions, display elements in plan compare, or 
data analysis. Additionally, if the Federal platform is to perform 
eligibility and enrollment functions, the Federal platform would also 
need to provide for certain consumer tools (for example, plan compare, 
premium estimator, second-lowest cost silver plan tool) to support 
those functions. Thus, the Federal platform would need SBE-FP QHP plan 
data by the dates specified in the annual Letter to Issuers to provide 
for adequate testing and loading of the data into the various consumer 
tools the FFEs offer. Issuers must also comply with certain FFE 
enrollment policies and operations (for example, premium payment and 
grace period rules, effective date logic, acceptable transaction codes, 
and reconciliation rules) for the Federal platform to successfully 
process 834 transactions with issuers and minimize any data 
discrepancies for reconciliation.
    Therefore, we proposed to add Sec.  156.350 to address eligibility 
and enrollment standards for QHP issuers participating on an SBE-FP. In 
paragraph (a) of new Sec.  156.350, we proposed that QHP issuers 
participating in an SBE-FP must comply with HHS regulations, and 
guidance related to the eligibility and enrollment functions for which 
the State-based Exchange relies on the Federal platform. For example, 
those issuers would be required to comply with operational standards in 
the Federally-facilitated Exchange and Federally-facilitated Small 
Business Health Options Program Enrollment Manual. We proposed in 
paragraph (a) a list of provisions with which QHP issuers participating 
in an SBE-FP would be required to comply. These provisions relate to 
eligibility and enrollment functions directly, or are critical to 
enabling HHS to assess compliance with eligibility and enrollment 
functions. For example, we would require QHP issuers to comply with the 
requirements regarding compliance reviews of QHP issuers to the extent 
relating directly to applicable eligibility and enrollment functions. 
Without this requirement, we would be severely limited in our ability 
to determine whether an issuer is complying with the requirements 
related directly to the Federal platform's eligibility and enrollment 
functions. In paragraph (b), we proposed to permit these issuers to 
directly enroll applicants in a manner that is considered to be through 
the Exchange, under Sec.  156.1230, just as QHP issuers on FFEs are 
permitted.
    In paragraph (c), we proposed that if an SBE-FP does not 
substantially enforce the eligibility and enrollment standards 
described in paragraph (a), then HHS may enforce against the issuer or 
plan using the enforcement remedies and processes described in subpart 
I of part 156. We also proposed that the administrative review process 
in subpart J of part 156 would apply to enforcement actions taken 
against QHP issuers or plans under proposed Sec.  156.350. Because 
timely compliance with paragraph (a) is vital to the smooth functioning 
of the Federal platform and because the Federal platform would apply a 
uniform compliance and enforcement regime for reasons of efficiency and 
speed, we believe it is appropriate that HHS have this authority in 
this circumstance.
    Because this proposal would insert a section applicable to SBE-FPs 
in subpart D, which currently describes only standards for QHP issuers 
on the FFEs, we proposed to amend the title of subpart D to read 
Standards for Qualified Health Plan Issuers on Federally-Facilitated 
Exchanges and State-Based Exchanges on the Federal Platform.
    Comment: We received comments stating the disadvantages of the 
Federal platform not being able to accommodate State customization. One 
commenter requested clarification that if a State elects to use the 
Federal platform for only the individual market or only for the SHOP 
market, the State should only be required to comply with the 
operational standards of the FFE for that market, not both. We also 
received comments supporting this proposal, noting that for issuers 
participating in both FFE and SBE-FP States this policy enables 
streamlined policies across platforms and would decrease operational 
burden for issuers, enrollees, and Exchanges.
    Response: As we discuss above, at this time the Federal platform is 
not able to accommodate State customization in policy or operations. We 
are finalizing this policy as proposed. However, we are confirming that 
there is the flexibility for a State to elect to use the Federal 
platform for certain functions for either the individual market, or the 
SHOP market, or both. We are also confirming that should a State elect 
to use the Federal platform for certain functions for only one market, 
the requirements in Sec.  156.350 would only apply for the market for 
which the State elects to rely on the Federal platform.
7. Enforcement Remedies in Federally-Facilitated Exchanges (Sec. Sec.  
156.800, 156.805, and 156.810)
    In the proposed rule, we discussed four proposed rule changes. 
First, we proposed to revise paragraph Sec.  156.805(d) to explain 
fully the effect of appealing a CMP. In the interest of aligning our 
CMP and decertification regulations, we proposed to rename paragraph 
(d) ``Request for hearing.'' We proposed to state affirmatively the 
issuer's right to file a request for hearing on the assessment of a CMP 
and we proposed to add language stating that the request for hearing 
will suspend the assessment of CMP until a final administrative 
decision on the appeal. This was similar to language in the 
decertification rule.
    Second, we proposed to amend Sec.  156.810 to present the appeal 
rights of QHP issuers and the impact of an appeal more clearly. 
Specifically, we added language to explain how an appeal will affect 
the effective date of a decertification depending on whether the 
decertification is standard or expedited.
    Third, we proposed to remove Sec.  156.800(c), in which we stated 
that sanctions will not be imposed on a QHP issuer on an FFE if it has 
made good faith efforts to comply with applicable requirements for 
calendar years 2014 and 2015. Starting in the 2016 calendar year and 
beyond, we proposed to impose sanctions on a QHP issuer in an FFE if 
the issuer fails to comply with applicable standards, even if the QHP 
issuer has made good faith efforts to comply with these requirements. 
We intend to use a progressive compliance model for determining 
sanctions.

[[Page 12314]]

    Fourth, we proposed to add new bases for decertification of a QHP 
to Sec.  156.810. One of the bases for decertification, Sec.  
156.810(a)(5), authorizes decertification if a QHP issuer is hindering 
the efficient and effective operation of a Federally-facilitated 
Exchange. We explained our intent to interpret hindering the efficient 
and effective operation of the FFEs to include impeding displaying 
plans properly to enrollees who purchase coverage under that plan. 
Where an issuer has informed HHS that it cannot continue to provide 
coverage under a QHP, HHS will interpret this information to mean that 
the efficient and effective operation of the FFE will be hindered 
because it will incorrectly display plans on the FFE platform. In such 
a case, we proposed to take all necessary steps to suppress or 
decertify the QHP.
    We also proposed to add a basis for decertification to Sec.  
156.810 to address situations where a QHP issuer is the subject of a 
pending or existing State enforcement action, including a consent 
order, or where HHS has reasonably determined that an issuer lacks the 
funds to continue providing coverage to its consumers for the remainder 
of the plan year. Under its obligation to determine that making a plan 
available on the FFEs is in the interest of qualified individuals and 
employers, we proposed to adopt these decertification bases as a 
consumer protection measure.
    We invited comments from affected parties on the proposal to end 
the good faith compliance policy and on the proposed bases for 
decertification.
    Comment: We received comments requesting that we extend the good 
faith compliance policy into 2016. Some commenters only asked for an 
extension of the good faith compliance policy for new 2016 
requirements. Commenters also requested that we clarify that any 
conduct occurring in 2014 and 2015 remain subject to the good faith 
compliance policy in the future. Others requested that, if the policy 
ended, we use a progressive compliance model for any compliance 
enforcement in the future. One commenter supported ending the policy.
    Response: We are not extending Sec.  156.800(c) to cover calendar 
year 2016. While there are new requirements for issuers in 2016, we 
believe that issuers have had sufficient time to acquaint themselves 
with how to comply with the fundamental regulations underpinning 
participation in the FFEs. We will be using a progressive compliance 
model for compliance conduct in the future, and may evaluate how new a 
particular requirement is when determining the appropriate enforcement 
remedy. We believe, based on past and current compliance monitoring and 
enforcement efforts, that issuers have gained enough experience with 
the FFEs to comply fully with participation standards. Of course, in 
all our enforcement actions, we will continue to take into account all 
facts and circumstances, including the reasonable good faith action of 
issuers.
    Comment: We received comments that the expansion of bases for 
decertification, especially a basis for decertification based on 
financial solvency, falls under State, not Federal authority. One 
commenter expressed support for the expanded bases for decertification.
    Response: We are finalizing the regulation as proposed. We believe 
that the added bases are necessary to provide consumers a consistent 
and reliable coverage experience through the FFEs. We do not believe 
this constitutes any infringement on State authority. While State 
regulators do have primary authority over whether issuers may sell 
coverage within the State, issuers must also comply with Federal 
requirements for participation in the FFEs and avoid conduct that 
violates Federal standards for decertification if they wish to sell 
QHPs on an FFE. When HHS reasonably determines, in coordination with 
information received from State regulators, that the issuer lacks the 
financial ability to provide coverage until the end of the coverage 
period, HHS must be able to take action to protect FFE consumers. Any 
action for consumers not enrolled in a QHP on an FFE generally remains 
the primary authority of the State regulator and outside the influence 
of these regulations.
8. Quality Standards
a. Patient Safety Standards for QHP Issuers (Sec.  156.1110)
    In the proposed rule, we proposed to strengthen QHP patient safety 
standards at Sec.  156.1110 in accordance with section 1311(h) of the 
Affordable Care Act for plan years beginning on or after January 1, 
2017. We noted the importance of alignment of the QHP issuer standards 
with effective patient safety interventions and leveraging the 
successful work already being done at national, regional, and local 
hospital systems for health care quality improvement and harm reduction 
to achieve greater impact on reducing patient harm. We proposed 
amending Sec.  156.1110 to capture the current patient safety standards 
that continue to apply for plan years beginning before January 1, 2017 
in new paragraph (a)(1). We also proposed to add new paragraph 
(a)(2)(i)(A) to specify that for plan years beginning on or after 
January 1, 2017, a QHP issuer that contracts with a hospital with 
greater than 50 beds must verify that the hospital uses a patient 
safety evaluation system as defined in 42 CFR 3.20. We proposed to 
require, under new paragraph (a)(2)(i)(B), that for plan years 
beginning on or after January 1, 2017 a QHP issuer that contracts with 
a hospital with greater than 50 beds must ensure that the hospital 
implements a comprehensive person-centered discharge program to improve 
care coordination and health care quality for each patient. We noted 
that use of a data-driven approach, analytic feedback, and shared 
learning to advance patient safety, such as working with a Patient 
Safety Organization (PSO), are essential to implementing meaningful 
interventions to improve patient health care quality.
    We also proposed to exercise the authority provided to the 
Secretary under section 1311(h)(2) of the Affordable Care Act to 
establish reasonable exceptions to the QHP issuer patient safety 
requirements. Specifically, in new paragraph (a)(2)(ii), for plan years 
beginning on or after January 1, 2017, QHP issuers can verify that a 
contracted hospital with greater than 50 beds implements evidence-based 
initiatives to reduce all cause preventable harm,\60\ prevent hospital 
readmission, improve care coordination and improve health care quality 
through the collection, management and analysis of patient safety 
events by a means other than reporting of such information to a PSO. We 
noted that this would allow flexibility and promote alignment for 
hospitals that already engage in effective national, State, public and 
private patient safety programs.
---------------------------------------------------------------------------

    \60\ All cause preventable harm or all adverse events-any event 
during the care process that results in harm to a patient, 
regardless of cause (Letter from Center for Clinical Standards and 
Quality/Survey & Certification Group to State Survey Agency 
Directors regarding AHRQ Common Formats--Information for Hospitals 
and State Survey Agencies (SAs)--Comprehensive Patient Safety 
Reporting Using AHRQ Common Formats (Mar. 15, 2013), available at 
https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf).
---------------------------------------------------------------------------

    We proposed to amend the documentation requirement for plan years 
beginning on or after January 1, 2017, from the collection of the 
hospital's CMS Certification Number to materials which reflect 
implementation of PSO activities, such as documentation of PSOs and 
hospitals working together to collect, report and

[[Page 12315]]

analyze patient safety events, and implementation of a comprehensive 
person-centered hospital discharge program to demonstrate compliance 
with the proposed requirements in Sec.  156.1110(a)(2)(i); or 
documentation to reflect implementation of other patient safety 
initiatives to reduce all cause preventable harm, prevent hospital 
readmission, improve care coordination and improve health care quality 
through the collection, management and analysis of patient safety 
events to demonstrate compliance with the reasonable exception 
provision proposed to be captured in Sec.  156.1110(a)(2)(ii).
    We noted that we were considering providing that QHP issuers must 
ensure that their contracted hospitals as described in section 1311(h) 
are standardizing reporting of patient safety events with the use of 
the Agency for Healthcare Research and Quality (AHRQ) Common Formats. 
We also noted that these proposed standards would leverage the 
successful work already being done at national, regional, and local 
hospital systems for health care quality improvement and harm 
reduction, and align with effective patient safety interventions to 
achieve greater impact.
    We are finalizing these proposals with the following modification. 
We are modifying the reasonable exceptions provision in Sec.  
156.1110(a)(2)(ii) to state that QHP issuers must verify that their 
applicable contracted hospitals with greater than 50 beds, if not 
working with a PSO, implement an evidence-based initiative, to improve 
health care quality through the collection, management and analysis of 
patient safety events, that reduces all cause preventable harm, 
prevents hospital readmission or improves care coordination. We 
acknowledge that some of the patient safety activities that a hospital 
performs with a PSO may be very similar, if not identical to, some of 
the activities that hospitals will perform as part of the initiatives 
described in Sec.  156.1110(a)(2)(ii). If a provider undertakes 
activities to improve patient safety and health care quality, but does 
not do so in conjunction with a PSO, subject to the requirements of the 
Patient Safety and Quality Improvement Act (PSQIA) and its implementing 
regulation, 42 CFR part 3, the patient safety and quality information 
involved in such initiatives would not be subject to the PSQIA's 
privilege and confidentiality protections.
    Comment: Most commenters generally supported our proposals and 
agreed with strengthening QHP issuer patient safety standards. 
Commenters agreed with HHS's approach of aligning existing, effective 
patient safety initiatives, including by requiring applicable hospitals 
to report to PSOs, as well as providing flexibility to allow compliance 
with Sec.  156.1110 by implementing evidence-based initiatives other 
than working with a PSO. One commenter stated that the proposal 
outlined in Sec.  156.1110(a)(2)(i)--to require a QHP issuer that 
contracts with a hospital with greater than 50 beds to verify that the 
hospital uses a patient safety evaluation system as defined in 42 CFR 
3.20--should be the preferred option versus establishing reasonable 
exceptions in the proposed requirement in Sec.  156.1110(a)(2)(ii). The 
commenter strongly supported reporting to a patient safety evaluation 
system because most PSOs collect all types of information from all 
types of health care organizations, unlike Hospital Engagement Networks 
(HENs) initiatives and Quality Improvement Organizations (QIOs) 
commissioned work, which are typically focused on certain conditions or 
topics. The commenter also stated that requiring hospital providers to 
contract with a Federally-listed PSO would decrease QHP operational 
burden and expenses versus the QHP burden of keeping track of multiple 
organizations and HEN patient safety initiatives with tenuous, variable 
funding.
    Response: We agree with the majority of commenters and are 
finalizing the proposed approach of requiring QHP issuers, for plan 
years beginning on or after January 1, 2017 to verify that their 
contracted hospitals, with more than 50 beds, have current agreements 
with PSOs, while also providing reasonable exceptions to the PSO 
requirement. We believe that these requirements allow for increased 
alignment of QHP issuer standards with effective patient safety 
interventions. We agree that PSOs collect and analyze valuable 
information through patient safety evaluation systems to reduce harm 
and we believe that the requirements finalized in Sec.  156.1110 for 
plan years beginning on or after January 1, 2017, will allow for both 
flexibility and innovation for hospitals to choose the most relevant 
patient safety initiative for their populations. We believe hospitals 
may choose to work with a PSO as their preferred option. We acknowledge 
that the different initiatives mentioned in the proposed rule, 
including HENs, QIOs and PSOs, may work on focused topic areas to 
reduce patient harm. Therefore, we believe that it is important for 
hospitals and their partners to determine and engage in the appropriate 
strategies reflecting the needs of their respective patient 
populations.
    Comment: One commenter requested that HHS amend the proposed 
regulatory language in Sec.  156.1110(a)(2)(ii) because it would be 
difficult to find any single patient safety initiative that addresses 
the reduction of all cause preventable harm,\61\ prevention of hospital 
readmission, improved care coordination and improved health care 
quality through the collection, management and analysis of patient 
safety events, as currently proposed.
---------------------------------------------------------------------------

    \61\ All cause preventable harm or all adverse events--any event 
during the care process that results in harm to a patient, 
regardless of cause (Letter from Center for Clinical Standards and 
Quality/Survey & Certification Group to State Survey Agency 
Directors regarding AHRQ Common Formats--Information for Hospitals 
and State Survey Agencies (SAs)--Comprehensive Patient Safety 
Reporting Using AHRQ Common Formats (Mar. 15, 2013), available at 
https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf).
---------------------------------------------------------------------------

    Response: We are finalizing the proposed requirement at Sec.  
156.1110(a)(2)(ii), with one modification. We are modifying the 
reasonable exceptions provision to state that for plan years beginning 
on or after January 1, 2017, QHP issuers must verify that their 
contracted hospitals with greater than 50 beds, if not working with a 
PSO, implement an evidence-based initiative, to improve health care 
quality through the collection, management and analysis of patient 
safety events that reduces all cause preventable harm, prevents 
hospital readmission or improves care coordination. We clarify that the 
evidence-based initiatives described in this reasonable exception 
provision are not intended to address all aspects of all-cause 
preventable harm, hospital readmission, care coordination, and health 
care quality in one single initiative.
    Comment: Several commenters requested that HHS recognize State-
level patient safety reporting programs, such as the mandatory Patient 
Safety Reporting System required in Pennsylvania, and Maine's Sentinel 
Event Reporting Program. Commenters noted that these State-level 
reporting programs are robust, evidence-based, effective patient safety 
programs that have delivered high value and improved patient safety 
across their regions. They recommended granting such exceptions because 
reporting to a PSO or other entity would be burdensome, duplicative, 
and would not align with reporting by hospitals in those States.

[[Page 12316]]

    Response: We acknowledge that there could be local, State, or 
national patient safety reporting programs that meet or exceed the 
patient safety standards for plan years beginning on or after January 
1, 2017, as outlined in Sec.  156.1110(a)(2). Therefore, the QHP issuer 
patient safety requirements are intended to be broad and inclusive of 
various initiatives, such as State-level, evidence-based programs that 
improve health care quality through the collection, management and 
analysis of patient safety events, and that reduce all cause 
preventable harm, prevent hospital readmission, or improve care 
coordination. We describe, in the reasonable exceptions provision 
finalized at Sec.  156.1110(a)(2)(ii), the key concepts characterizing 
an evidence-based patient safety initiative that are consistent with 
the National Quality Strategy and existing public and private patient 
safety programs. However, we do not intend to provide an exhaustive 
list of initiatives, to allow for flexibility and innovation for future 
advances in patient safety.
    Comment: A few commenters suggested amending the proposed 
documentation requirement outlined in Sec.  156.1110(b), and 
recommended allowing hospitals to attest that they participate in a 
patient safety activity to minimize the documentation requirement and 
ensure efficient, consistent mechanisms for compliance by hospitals.
    Response: We maintain the documentation requirement as outlined in 
Sec.  156.1110(b) and clarify that we intend the requirement for plan 
years beginning on or after January 1, 2017, to be broad and inclusive 
of examples such as hospital attestations or current agreements to 
partner with a PSO, HEN, or QIO. We believe that the patient safety 
standards support a common goal of preventing the risk of patient harm 
in an effective, sustainable way. We believe it is important to allow 
for flexibility regarding methods of complying with the new 
documentation requirements at Sec.  156.1110(b)(2) in order to balance 
both issuer and hospital burden and to accommodate a variety of types 
of patient safety initiatives in which hospitals may engage. We also 
believe that QHP issuers and their contracted hospitals should have 
flexibility in how they comply with the documentation requirement as 
they develop their contracts.
    Comment: One commenter did not agree with the proposed 
documentation requirement to have hospitals share their PSO agreements 
with QHPs because of concern of violating confidentiality provisions of 
sharing patient safety work products and analyses outside of the PSO 
per the PSQIA. Another commenter requested clarification regarding 
whether HHS would collect and publish data on the patient safety 
evaluation system as defined in 42 CFR 3.20.
    Response: PSO contracts with hospitals for the purpose of receiving 
and reviewing patient safety work product (referred to as Patient 
Safety Act contracts) do not meet the definition of ``patient safety 
work product'', and thus, are not subject to the protections and 
requirements in the PSO statute and regulations. We do not intend to 
collect and publish data on the patient safety evaluation system nor 
are we generally permitted to publish patient safety work product. We 
clarify that these QHP issuer patient safety requirements are intended 
to support implementation of the PSQIA and would not violate the 
confidentiality provisions of patient safety work product, as defined 
in the PSQIA. We clarify that the QHP issuer documentation requirement 
in Sec.  156.1110(b)(2) is intended to direct issuers to collect basic, 
administrative-type information from their contracted hospitals, with 
greater than 50 beds, to demonstrate compliance with the patient safety 
requirement for plan years beginning on or after January 1, 2017. For 
example, we expect such information could include current hospital 
agreements or attestations to partner with a PSO, which we note would 
not contain patient safety work product. In addition, we clarify that 
such information to demonstrate compliance would be submitted to an 
Exchange, upon request by the Exchange per the established requirement 
in Sec.  156.1110(c).
    Comment: Several commenters requested that HHS consider that the 
timeframes of hospital patient safety initiatives may not coincide with 
plan years, and that HHS allow flexibility so that a hospital may 
attest to the fact that it is already or will start to take part in a 
patient safety activity during the relevant plan year or base 
compliance on a hospital's previous year's activities. One commenter 
urged HHS to build a process for approving new initiatives in the 
future.
    Response: We acknowledge that timeframes of hospital patient safety 
initiatives may not exactly align with plan years. We are finalizing 
the patient safety requirement in Sec.  156.1110(a)(2) to state that 
for plan years beginning on or after January 1, 2017, issuers must 
verify that their applicable contracted hospitals with greater than 50 
beds use a patient safety evaluation system as defined in 42 CFR 3.20, 
as well as implement a mechanism for comprehensive hospital discharge 
to improve care coordination and quality or implement an alternative 
evidence-based initiative. We clarify that we do not specify dates of 
activity regarding patient safety initiatives because we believe it is 
the responsibility of the issuer and contracted hospital to maintain 
current documentation and ensure compliance with these patient safety 
standards.
    Comment: Several commenters supported the proposed discharge 
planning requirements outlined in Sec.  156.1110(a)(2)(i)(B) that 
states that a QHP issuer that contracts with a hospital with greater 
than 50 beds must ensure that the hospital implemented a comprehensive 
person-centered discharge program to improve care coordination and 
health care quality for each patient. Commenters expressed that it is 
critical that the discharge planning process reflect the needs of all 
populations and sub-populations. Some commenters noted that HHS is 
already addressing hospital discharge planning requirements in a 
separate proposed rule, CMS 3377-P (80 FR 68125 (Nov. 3, 2015)), which 
should be used to meet the discharge requirements in section 1311(h) of 
the Affordable Care Act and to minimize unnecessary burden on QHP 
issuers and hospitals.
    Response: We acknowledge that HHS has currently proposed 
implementing discharge planning requirements mandated in section 
1899B(i) of the Improving Medicare Post-Acute Care Transformation Act 
of 2014 (IMPACT Act, Pub. L. 113-185) by modifying the discharge 
planning or discharge summary Condition of Participation requirements 
for hospitals. We agree with aligning discharge planning requirements 
to minimize burden, and clarify that continued collection of CMS 
Certification Numbers (CCNs) would be sufficient for issuers to comply 
with Sec.  156.1110(a)(2)(i)(B). We believe there would be no 
additional burden because QHP issuers have already been collecting this 
documentation since January 1, 2015, for the initial phase of the QHP 
issuer patient safety standards. We are finalizing the documentation 
requirement in Sec.  156.1110(b)(2) for plan years beginning on or 
after January 1, 2017 and clarify that the information to be collected 
by a QHP issuer could include CCNs to demonstrate that their contracted 
hospitals implement mechanisms for comprehensive person-centered 
hospital discharge to improve care coordination and health care quality 
for each patient. We also believe it is important to provide 
flexibility to hospitals and QHP issuers and note that

[[Page 12317]]

other types of information may be collected to demonstrate compliance 
with comprehensive person-centered hospital discharge if hospitals 
choose to implement this in alternative ways, other than meeting 
Condition of Participation requirements.
    Comment: Many commenters did not support mandating the use of AHRQ 
Common Formats for standardizing reporting of patient safety events. 
They stated that requiring use of Common Formats would stifle private 
sector innovation and investment in the development of PSOs, would add 
burden and costs to PSO formation, and could cause existing PSOs to 
voluntary delist. Some commenters noted that hospitals that already 
report patient safety data in a standardized manner through other 
reporting systems that meet or exceed the Patient Safety and Quality 
Improvement Act requirements, would incur undue burden as well. 
Commenters urged HHS to allow flexibility to PSOs and their 
participants to choose the reporting format or tool they use to submit 
patient safety event data.
    Response: We continue to strongly support hospital tracking of 
patient safety events using the AHRQ Common Formats,\62\ which are a 
useful tool for a hospital regardless of what patient safety 
interventions are implemented for ongoing, data-driven quality 
assessment. We also note that use of Common Formats, and aligning with 
existing HHS recommendations for hospitals,\63\ is integral, whether a 
hospital chooses to work with a PSO to comply with the proposed 
requirement in Sec.  156.1110(a)(2)(i), or implements an alternative 
approach under the reasonable exception provision in Sec.  
156.1110(a)(2)(ii). We also remind PSOs of their requirement to collect 
patient safety work product in a standardized manner, as set forth in 
42 CFR 3.102(b)(2)(i)(F) and (b)(2)(iii). However, we clarify that the 
QHP issuer patient safety standards finalized in this rule do not 
require the use of the Common Formats for patient safety event 
reporting at this time.
---------------------------------------------------------------------------

    \62\ https://www.pso.ahrq.gov/common.
    \63\ Letter from Center for Clinical Standards and Quality/
Survey & Certification Group to State Survey Agency Directors 
regarding AHRQ Common Formats--Information for Hospitals and State 
Survey Agencies (SAs)--Comprehensive Patient Safety Reporting Using 
AHRQ Common Formats (Mar. 15, 2013), available at https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters provided recommendations regarding the 
requirement to collect and maintain CCNs and to establish quality 
improvement strategies.
    Response: We clarify that we are finalizing requirements to 
transition from the first phase of patient safety standards that 
required, beginning on January 1, 2015, QHP issuers to verify that 
certain contracted hospitals meet Medicare Hospital Conditions of 
Participation requirements regarding a quality assessment and 
performance improvement program and a discharge planning process. In 
other words, we are finalizing the amendments to Sec.  156.1110 to 
begin the second phase of the patient safety standards to require for 
plan years beginning on January 1, 2017, QHP issuers to verify that 
their contracted hospitals with greater than 50 beds use a patient 
safety evaluation system as defined in 42 CFR 3.20, and implement a 
comprehensive person-centered discharge program to improve care 
coordination and health care quality for each patient; or implement an 
evidence-based initiative, to improve health care quality through the 
collection, management and analysis of patient safety events that 
reduces all cause preventable harm, prevents hospital readmission, or 
improves care coordination by a means other than reporting of such 
information to or by a PSO. We clarify that the collection of CCNs 
would be sufficient under Sec.  156.1110(b)(2) for QHP issuers to 
document compliance with Sec.  156.1110(a)(2)(i)(B).
    We also note that QHP issuer requirements relating to quality 
improvement strategies were established in the 2016 Payment Notice (80 
FR 10844); therefore, comments specific to QHP issuer implementation 
and reporting of quality improvement strategies are out of scope of 
this rule. However, we expect QHP issuers would align and coordinate 
implementation of their contracted hospital patient safety initiatives 
with their QHP quality improvement strategies if applicable.
    Comment: Several commenters requested clarifications regarding the 
timeframe for the effective date for data collection to ensure that 
hospitals have sufficient time to comply with the standards. One 
commenter suggested one year from the date of the final rule as the 
effective date of data collection since hospitals would need 
considerable time to implement activities to comply with these patient 
safety standards. One commenter requested more detail about how 
hospitals that meet the standard can be prospectively identified by 
plans, consumers and regulators.
    Response: We believe that the majority of hospitals with greater 
than 50 beds already partner with a PSO, or implement an alternative 
national, State, public, or private evidence-based patient safety 
initiative that uses the collection, management and analysis of patient 
safety events to reduce all cause preventable harm, prevent hospital 
readmission, or improve care coordination. We believe that there is an 
adequate amount of time from the publication of this final rule for QHP 
issuers and their contracted hospitals to be able to comply with these 
patient safety standards for plan years beginning on or after January 
1, 2017. We expect that issuers would continue their efforts to 
prospectively identify hospitals to contract with that meet all 
applicable Federal and State health care quality and safety 
requirements.
    Comment: One commenter requested clarifications regarding the 
regulatory reference for ``a comprehensive person-centered discharge 
program to improve care coordination and health care quality for each 
patient'' and how this is tracked or published.
    Response: The language being finalized at Sec.  
156.1110(a)(2)(i)(B) implements the patient safety standard captured at 
section 1311(h)(1)(A)(ii) of the Affordable Care Act, which refers to a 
mechanism to ensure that each patient receives a comprehensive program 
for hospital discharge that includes patient-centered education and 
counseling, comprehensive discharge planning, and post discharge 
reinforcement. We do not intend to track or publish patient safety 
event data regarding hospital discharge programs at this time. Instead, 
Sec.  156.1110(b)(2) requires QHP issuers, for plan years beginning on 
or after January 1, 2017, to collect and maintain documentation to 
demonstrate that its contracted hospitals with greater than 50 beds 
meet the required patient safety standards. We also clarify that 
documentation to demonstrate compliance with the discharge planning 
requirement (for example, the hospital's CCN) would be submitted to an 
Exchange, upon request by the Exchange per the established requirement 
in Sec.  156.1110(c).
9. Qualified Health Plan Issuer Responsibilities
a. Payment and Collections Processes (Sec.  156.1215)
    In the 2015 Payment Notice, HHS established a monthly payment and 
collections cycle for insurance affordability programs, user fees, and 
premium stabilization programs. In 2017, as discussed elsewhere in this 
document, we are finalizing our proposal to charge issuers in SBE-FPs 
for eligibility and enrollment services a

[[Page 12318]]

user fee for the benefits issuers in SBE-FPs will receive as a result 
of the SBE-FP's reliance on the Federal platform. To streamline our 
payment and collections process, we proposed that, for 2017 and later 
years, for purposes of the netting process, the reference to FFE user 
fees in Sec.  156.1215(b) would be interpreted to include any fees for 
issuers in State-based Exchanges using the Federal platform.
    In the 2015 Payment Notice, we established in Sec.  156.1215(c) 
that any amount owed to the Federal government by an issuer and its 
affiliates is the basis for calculating a debt owed to the Federal 
government. In this rulemaking, we proposed that, for 2017 and later 
years, for purposes of calculating the debt owed to the Federal 
government, we would interpret the reference to FFE user fees to 
include any fees for issuers in State-based Exchanges using the Federal 
platform. We also sought comment on whether the regulations should be 
amended to reflect these interpretations.
    We are adopting the interpretations of Sec.  156.1215 we announced 
in the proposed rule by finalizing conforming amendments to paragraphs 
(b) and (c) of Sec.  156.1215.
    Comment: We received one comment on these proposals requesting that 
HHS clarify if it intends to collect user fees from issuers in State-
based Exchanges using the Federal platform beginning in 2015.
    Response: Our intent in this section was to establish our authority 
to collect the user fee from SBE-FP issuers through netting, but only 
once such a fee has been established. As described elsewhere in this 
rule, HHS will begin assessing the user fee on issuers in State-based 
Exchanges using the Federal platform beginning with plan years that 
start on or after January 1, 2017, or, at the State's request, 
collecting an equivalent amount from the State. We are finalizing our 
proposal that, for purposes of the netting process and calculating the 
debt owed to the Federal government, we will interpret the reference to 
FFE user fees at Sec.  156.1215(b) and (c) to include any fees for 
issuers in SBE-FPs, beginning with plan years that start on or after 
January 1, 2017.
b. Administrative Appeals (Sec.  156.1220)
    In the 2015 Payment Notice (79 FR 13818), we established an 
administrative appeals process for issuers. We established a three-
tiered appeals process: a request for reconsideration under Sec.  
156.1220(a); a request for an informal hearing before a CMS hearing 
officer under Sec.  156.1220(b); and a request for review by the 
Administrator of CMS under Sec.  156.1220(c). In light of HHS's 
finalization of the proposal around SBE-FPs, we interpret this 
administrative appeals process to also apply to user fee payments that 
we collect from SBE-FP QHP issuers that offer plans on an SBE-FP.
    Under Sec.  156.1220(a), an issuer may only file a request for 
reconsideration based on the following: A processing error by HHS, 
HHS's incorrect application of the relevant methodology, or HHS's 
mathematical error. For example, an issuer may file a request for 
reconsideration that challenges the assessment of a default risk 
adjustment charge if the issuer believes the default charge was 
assessed because HHS incorrectly applied its methodology regarding data 
quantity and quality standards set forth in Sec.  153.710(f); however, 
the issuer may not file a request for reconsideration to challenge the 
methodology itself. We also clarify that an issuer may not file a 
request for reconsideration regarding issues arising from the issuer's 
failure to load complete and accurate data to its dedicated distributed 
data environment within the data submission window. Errors by the 
issuer are not appealable.
    In line with our proposal to delete Sec.  153.710(d), we proposed 
to make conforming amendments to modify Sec.  156.1220 to remove cross-
references to the interim discrepancy reporting process. Under Sec.  
156.1220(a)(4)(ii), a reconsideration relating to risk adjustment or 
reinsurance may only be requested if, to the extent the issue could 
have been previously identified by the issuer to HHS under the final 
discrepancy reporting process proposed to be redesignated at Sec.  
153.710(d)(2), it was so identified and remains unresolved. As proposed 
to be redesignated, Sec.  153.710(d)(2) states that an issuer must 
identify to HHS any discrepancies it identified in the final 
distributed data environment reports. We clarify that issuers may 
identify issues during the discrepancy reporting process under newly 
designated Sec.  153.710(d)(2) that are not subject to appeal; that is, 
issuers may identify issues that are not processing errors by HHS, 
HHS's incorrect application of the relevant methodology, or HHS's 
mathematical errors. We clarify that, in contrast, an issuer may only 
request a reconsideration of unresolved issues that were identified (if 
they could have been so identified) under the final discrepancy 
reporting process proposed to be redesignated at Sec.  153.710(d)(2), 
if contesting a processing error by HHS, HHS's incorrect application of 
the relevant methodology, or HHS's mathematical error. We also 
clarified that the existence of an unresolved discrepancy is not alone 
a sufficient basis on which to request a reconsideration.
    Additionally, we clarified the grounds for appeals related to the 
risk corridors program. An issuer may not file a request for 
reconsideration to challenge the standards for the risk corridors 
program, including those established in Sec. Sec.  153.500 through 
153.540 and in guidance issued by HHS. In addition, appeals related to 
data for programs other than risk corridors covered in Sec.  
156.1220(a) cannot be grounds for risk corridors appeals. We proposed 
to clarify that the last submission of data to which the issuer has 
attested serves as the notification for purposes of Sec.  153.510(d).
    We also proposed to shorten the deadline for filing a request for 
reconsideration in Sec.  156.1220(a)(3) from 60 to 30 calendar days.
    Additionally, we proposed to clarify that an issuer must pay the 
full amount owed to HHS as set forth in the applicable notification, 
even if the issuer files a request for reconsideration under Sec.  
156.1220. Failure to pay an amount owed will result in interest 
accruing after the applicable payment deadline. Therefore, if an appeal 
is unsuccessful, and the issuer has not already remitted the charge 
amount owed, the issuer would owe the debt plus the interest, and 
administrative fees which accrue from delayed payment. If an appeal is 
successful, HHS will refund the amount paid in accordance with the 
final appeal decision. HHS is finalizing this clarification.
    We are finalizing our proposal to shorten the timeframe for 
requesting reconsideration related to the risk adjustment, reinsurance 
and risk corridors programs to 30 calendar days. This final rule will 
become effective 60 days after it is published--that is, prior to the 
June 30 notification of risk adjustment and reinsurance amounts. 
Therefore, requests for reconsideration related to the risk adjustment, 
reinsurance and risk corridors programs for the 2015 benefit year must 
be made within 30 calendar days of notification of the payment or 
charge. However, HHS will maintain a 60 calendar day timeframe to 
request reconsideration for the APTC, CSR and user fee programs. 
Therefore, the request for reconsideration must be filed in accordance 
with the following timeframes: (1) For the premium tax credit and cost-
sharing reduction portions of the advance payments, or

[[Page 12319]]

FFE user fee charges, within 60 calendar days after the date of the 
final reconsideration notification specifying the aggregate amount of 
such advance payments or user fees for the applicable benefit year; (2) 
for a risk adjustment payment or charge, including an assessment of 
risk adjustment user fees, within 30 calendar days of the date of the 
notification under Sec.  153.310(e); (3) for a reinsurance payment, 
within 30 calendar days of the date of the notification provided under 
Sec.  153.240(b)(1)(ii); (4) for a default risk adjustment charge, 
within 30 calendar days of the date of the notification of such charge; 
(5) for reconciliation of the cost-sharing reduction portion of the 
advance payments, within 60 calendar days of the date of the 
notification of such payment or charge; and (6) for a risk corridors 
payment or charge, within 30 calendar days of the date of the 
notification of such payment or charge for the purposes of Sec.  
153.510(d). In the proposed rule, we proposed to clarify that the last 
submission of data to which the issuer has attested serves as the 
notification for purposes of Sec.  153.510(d). We have since issued a 
public FAQ stating that for the purposes of the 2014 benefit year the 
public notification of final estimated risk corridors payments and 
charge amounts served as the notification for purposes of Sec.  
153.510(d).\64\
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    \64\ For the 2014 benefit year, we clarified this deadline in 
FAQ 14470 (Dec. 21, 2015), available at https://www.regtap.info.
---------------------------------------------------------------------------

    Comment: One commenter agreed with the shortening the deadline to 
request reconsideration related to risk adjustment to 30 days from 60 
days. Other commenters asked that HHS maintain the 60-day deadline. One 
commenter requested a 90-day timeline to request reconsideration. Some 
commenters asked that HHS maintain the longer deadline due to new 
processes surrounding policy based payments and cost-sharing reductions 
and advance payments of the premium tax credit reconciliation. Another 
commenter requested that HHS extend the deadline to file a request for 
reconsideration to 120 days to allow cost-sharing reductions and 
advance payments of the premium tax credit adjustments due to the 3-
month grace period.
    Response: We are finalizing our proposal to shorten the timeframe 
for requesting reconsideration related to the risk adjustment, 
reinsurance and risk corridors programs to 30 calendar days. 
Conversely, HHS will maintain a 60-day deadline to request 
reconsideration for the APTC, CSR and user fee programs. Finalizing a 
shorter timeline for the premium stabilization programs requests for 
reconsideration would permit HHS to resolve administrative appeals, 
calculate final payments and charges, and make payments in a manner 
consistent with the reporting and payment timelines for those programs. 
We agree with commenters that there are several benefits to maintaining 
the longer 60-day timeframe for the APTC, CSR and user fee programs.
    Comment: One commenter asked that HHS pay interest to any issuer 
who pays and then wins a request for reconsideration.
    Response: If an appeal is successful, HHS will issue a refund in 
accordance with the final appeal decision.
    Comment: A few commenters suggested HHS allow unresolved 
discrepancies to be appealed even if the discrepancy does not fit 
within one of the three reconsideration basis, otherwise discrepancies 
could be identified and not resolved within the timeframe without an 
opportunity for resolution.
    Response: Issuers cannot appeal data submission errors that 
resulted from an issuer error because it is the responsibility of the 
issuer to submit complete and accurate data (with corrections to any 
errors) prior to the data submission deadline. Throughout the data 
collection period, HHS maintains a help desk, hosts user group calls 
and webinars to assist issuers with the identification and resolution 
of data submission errors and to provide general technical assistance. 
Issuers are encouraged to review their data and the EDGE server 
generated reports, as well as to notify HHS of any problems as soon as 
possible so that, to the extent feasible, assistance can be provided to 
resolve those problems before the final data submission deadline. 
Therefore, HHS will only consider requests for reconsideration related 
to risk adjustment or reinsurance on the basis that HHS made a 
processing error, incorrectly applied a relevant methodology, or made a 
mathematical error. Additionally, HHS would continue to require issuers 
to identify issues through the final formal discrepancy reporting 
process, if the issue is identifiable at the time, so HHS can work to 
address such issues prior to the final risk adjustment transfers and 
reinsurance payment calculations.
    Comment: Some commenters asked that HHS provide a timeline for when 
requests for reconsideration and appeals will be decided.
    Response: HHS understands that receiving a reconsideration decision 
promptly promotes the timely release of funds, however, due to the 
varying nature, complexity and number of reconsiderations, HHS cannot 
set forth a specific deadline. HHS is committed to providing a decision 
as quickly and efficiently as possible.
c. Third Party Payment of Qualified Health Plan Premiums (Sec.  
156.1250)
    We proposed to amend Sec.  156.1250 to clarify that a Federal or 
State government program includes programs of the political 
subdivisions of the State, namely counties and municipalities, which we 
referred to as local governments. Including this clarification in 
regulations will ensure that States have the flexibility to distribute 
care and Exchange financial assistance to their vulnerable populations 
through local governments, consistent with their statutory and 
regulatory authority.
    In terms of the distinction between programs sponsored and operated 
by the government (such as the Ryan White HIV/AIDS programs) and 
programs that involve Federal grantees that receive considerable public 
funding, we acknowledged that programs such as the Ryan White HIV/AIDS 
program operate by working with cities, States, and local, community-
based organizations to provide services in line with their statutory 
authority. Sections 2604(c)(3)(F), 2612(b)(3)(F), and 2651(c)(3)(F) of 
the PHS Act authorize Ryan White HIV/AIDS program grantees and sub-
grantees to use program funds for premium and cost-sharing assistance. 
These grantees and sub-grantees must provide the assistance through 
third-party payments as they are prohibited from making payments 
directly to patients. Though many Ryan White HIV/AIDS program grantees 
are State and local governments, not all are; similarly, many of the 
State and local government grantees administer funds through sub-
grantees that are not government entities. We proposed to distinguish 
government programs from government grantees such that the requirement 
at Sec.  156.1250 would apply to government programs, but not 
necessarily to entities that are government grantees, unless 
specifically authorized and funded by the Federal, State, or local 
government program to make the payments on behalf of the program, 
consistent with the government programs' statutory and regulatory 
authority to provide premium and cost-sharing assistance through grants 
and grantees. In other words, if such Federal, State, and local 
governments are authorized to administer their premium and cost-

[[Page 12320]]

sharing assistance through grantees or sub-grantees, the payments may 
not be rejected on the grounds that they did not come directly from the 
government programs. In such cases, the source of the Exchange 
financial assistance is the government program, and administration or 
distribution of that assistance through grants and grantees is 
authorized under statute or regulation.
    We also proposed to require entities that make third party payments 
of premiums under this section to notify HHS, in a format and timeline 
specified in guidance. We proposed that the notification must reflect 
the entity's intent to make payments of premiums under this section and 
the number of consumers for whom it intends to make payments.
    We also proposed to clarify that while issuers offering individual 
market QHPs, including SADPs, generally do not collect cost-sharing 
payments, they are required to accept third party cost-sharing payments 
on behalf of enrollees in circumstances where the issuer or the 
issuer's downstream entity accepts cost-sharing payments from plan 
enrollees. We noted that although cost-sharing payments are generally 
made to providers, rather than to issuers, there are certain 
contractual circumstances in which an issuer's non-provider downstream 
entity engages in activities such as the collection of cost-sharing 
payments. For example, an issuer's pharmacy benefits manager may 
collect cost-sharing payments from the issuer's plan enrollees for 
prescription drugs. We proposed to clarify that in such situations, the 
rules at Sec.  156.1250 regarding the requirement to accept third-party 
payments would apply to cost sharing payments.
    We noted that we are considering whether to expand the list of 
entities from whom issuers are required to accept payment under Sec.  
156.1250 to include not-for-profit charitable organizations in future 
years, subject to certain guardrails intended to minimize risk pool 
impacts, such as limiting assistance to individuals not eligible for 
other minimum essential coverage and requiring assistance until the end 
of the calendar year.
    Comment: Some commenters expressed concern that the language 
proposed in Sec.  156.1250(a)(3), ``consistent with the program's 
statutory authority,'' might be read to require explicit statutory 
authority to make premium and cost-sharing payments. The commenters 
stated that such a reading could unduly restrict the ability of some 
programs to assist clients and cause confusion for both programs and 
issuers.
    Response: We are amending Sec.  156.1250(a) to remove the phrase, 
``consistent with the program's statutory authority,'' in order to 
avoid such confusion. We believe that the phrase, ``directed by a 
government program to make payments on its behalf,'' is sufficiently 
specific and clear.
    Comment: Several commenters asked that we provide a specific list 
of entities that qualify as government programs from which third party 
payments must be accepted. Several other commenters urged that we 
immediately include not-for-profit, charitable organizations as 
entities from which third party payments for QHP premiums and cost-
sharing must be accepted, with certain guardrails intended to minimize 
adverse selection. Some of these commenters also urged that HHS provide 
a list of acceptable foundation types as referenced in HHS's February 
7, 2014 FAQ,\65\ which stated that the concerns addressed in the 
November 4, 2013 FAQ \66\ do not apply to payments from private, not-
for-profit foundations if they are made on behalf of QHP enrollees who 
satisfy defined criteria that are based on financial status and do not 
consider enrollees' health status. These commenters expressed that the 
provision of a list of acceptable foundation types is critical to 
ensure that these foundations meet the criteria noted in the February 
7, 2014 FAQ. Some commenters asked that we collect the following 
information under our proposed information collection: Number of 
consumers for whom the entity will be making payments (by State or 
rating area); volume of payments over a specified time period; contact 
information; tax ID and filing status; governance (for example, 
leadership, members of Board of Directors, principal shareholders, 
etc.); funding sources; information on relationships with provider 
organizations (financial or other); and information on relationships 
with pharmaceutical companies (financial or other).
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    \65\ Third Party Payments of Premiums for Qualified Health Plans 
in the Marketplaces (Feb. 7, 2014), available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-payments-of-premiums-for-qualified-health-plans-in-the-marketplaces-2-7-14.pdf.
    \66\ Third Party Payments of Premiums for Qualified Health Plans 
in the Marketplaces (Nov. 4, 2013), available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-qa-11-04-2013.pdf.
---------------------------------------------------------------------------

    Response: We are not providing a specific list of entities that 
qualify as government programs at this time, as we believe that the 
parameters established in Sec.  156.1250(a) are sufficiently precise.
    We are removing Sec.  156.1250(b), the information collection 
provision, as we believe it will unduly burden Indian tribes, Ryan 
White HIV/AIDS programs, and government programs to provide such 
notification to HHS. Although HRSA collects information regarding 
premium assistance from its Ryan White HIV AIDS programs and grantees, 
Indian tribes and other Federal, State, and Local government programs 
may not currently collect or maintain this information. Further, we 
believe that payment information from these entities would be unlikely 
to inform the impacts on the risk pool that may result from expanding 
the requirement at Sec.  156.1250 to third party payments made by non-
profit organizations. The latter may make payments for a different 
population with different health care needs and conditions. We defer 
the question of acceptance of third-party payments made by non-profit 
organizations to future rulemaking. We refer stakeholders to our 
February 7, 2014, FAQ, which clarified that the concerns addressed in 
our November 4, 2013 FAQ \67\ do not apply to payments from private, 
not-for-profit foundations if the payments are made on behalf of QHP 
enrollees who satisfy defined criteria that are based on financial 
status and do not consider enrollees' health status. In this situation, 
the FAQ stated that HHS would expect that the premium and any cost-
sharing payments cover the entire policy year.
---------------------------------------------------------------------------

    \67\ Third Party Payments of Premiums for Qualified Health Plans 
in the Marketplaces (Nov. 4, 2013), available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-qa-11-04-2013.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters raised concerns that it would be confusing 
to create a requirement for issuers or their downstream entities such 
as PBMs to accept cost sharing from third party payers because there is 
currently no industry infrastructure in place to facilitate third-party 
payments, including the lack of the following: Secondary payer 
guidelines; enrollment file sharing requirements; specific guidelines 
for accumulators; a coordination of benefits entity to collect and 
share data with issuers; a transaction facilitator; data exchange 
agreements; the ability of plans to use common identifiers; and an 
National Council for Prescription Drug Programs transaction process. 
Other commenters agreed that when an issuer uses an entity, such as a 
PBM, to provide a benefit such as prescription drugs, that entity is 
required to accept third party payments of cost-sharing by virtue of 
being a downstream entity.

[[Page 12321]]

    Response: We are finalizing our proposal, with an additional 
clarification that while issuers offering individual market QHPs, 
including SADPs, generally do not collect cost-sharing payments, their 
downstream entities, or agents of the issuer, are required to accept 
third party cost-sharing payments made by the entities listed at Sec.  
156.1250(a) on behalf of QHP enrollees if the downstream entities or 
agent routinely accept cost-sharing payments from enrollees. We are 
also clarifying in response to comments, that an agent of the QHP 
issuer with a mail order pharmacy, such as a PBM with a mail order 
pharmacy, must accept the third party cost-sharing payments directly 
from the entities listed at Sec.  156.1250(a).
d. Other Notices (Sec.  156.1256)
    We proposed to add a new Sec.  156.1256, which would add a 
requirement for issuers, in the case of a plan or benefit display error 
included in Sec.  155.420(d)(4), to notify their enrollees within 30 
calendar days after the error has been identified, if directed to do so 
by the FFE. We believe that enrollees should be made aware of any error 
that may have impacted their QHP selection and enrollment and any 
associated monthly or annual costs. Therefore, we proposed a 
requirement that issuers, if directed to do so by the FFE, must notify 
their enrollees of such error, as well as the availability of a special 
enrollment period, under Sec.  155.420(d)(4), for the enrollee to 
select a different QHP, if desired.
    We are finalizing the provisions with two modifications. In 
response to comments received, we are amending the timeframe within 
which issuers must notify their affected enrollees of a plan or benefit 
display error and the availability of a special enrollment period, from 
30 calendar days after the error is identified to 30 calendar days 
after the issuer is notified by the FFE that the error has been fixed. 
By waiting until after the error has been corrected, issuers will be 
more likely to have a complete list of affected enrollees to notify. In 
addition, by waiting until the error has been corrected and the plan 
information is properly displayed, enrollees will be able to compare 
their current plan to others in the service area when deciding whether 
or not to change plans under the special enrollment period. In 
addition, we are clarifying that this rule will apply to issuers on 
SBE-FPs.
    Comment: We received general support from commenters for finalizing 
this proposal, so that consumers are informed about plan or benefit 
information that was incorrect when they selected that plan and may 
have impacted their plan selection. One commenter requested that the 
proposal be extended to State-based Exchanges. Other commenters 
supported this requirement, but requested that it be limited to those 
plan or benefit display errors for which issuers are responsible or in 
cases when issuers fail to comply with the FFE's correction procedures.
    Response: We agree with commenters that issuers should notify 
affected enrollees of display errors that may have impacted plan 
selection and of their opportunity to select a different plan through 
the FFE. While we agree that all affected enrollees, regardless of 
location, should be notified of such errors, we leave it to States 
operating SBEs to determine the method and timeframe for which 
enrollees in their Exchanges should be notified. However, SBE-FPs will 
be using the FFE eligibility and enrollment platform, and, as we note 
in the preamble to Sec.  156.350 in this final rule, it is not possible 
at this time for the FFEs to accommodate State customization in policy 
or operations, such as State-specific display elements in plan compare. 
Accordingly, we are modifying the regulation text to specify that this 
rule would require issuers offering QHPs through SBE-FPs to comply with 
FFE directions to provide notice under this section.
    The plan and benefit display errors included in this noticing 
requirement includes information submitted by issuers to the FFE to be 
displayed for consumers on Plan Compare. Many errors falling into this 
category thus far have been due to errors in plan information provided 
by issuers and all errors in this category have a specific impact on 
the information available to consumers about one or more plans provided 
by a particular issuer.
    Comment: Many commenters requested additional clarification of the 
parameters of plan or benefit display errors under Sec.  155.420(d)(4), 
including whether errors in provider directories or drug formularies, 
such as those newly accessible through the premium estimator tool, are 
included in this new notification requirement.
    Response: Plan or benefit display errors under Sec.  155.420(d)(4) 
refer to misinformation, including errors related to service areas, 
covered services, and premiums, displayed incorrectly on the Exchange 
Web site. For the FFEs, this only includes the Plan Compare section of 
the application where a consumer may enroll in a plan. If the plan 
information incorrectly displayed does not have a direct bearing on 
coverage or benefits, such as plan contact information, those errors 
generally do not enable an enrollee to qualify for a special enrollment 
period under Sec.  155.420(d)(4). Only those plan or benefit display 
errors that qualify an enrollee for a special enrollment period under 
Sec.  155.420(d)(4) would trigger this new noticing requirement.
    Errors to provider networks or drug formularies, whether 
incorrectly displayed on the issuer's Web site or accessible through 
the premium estimator tool on HealthCare.gov, generally do not qualify 
an enrollee for a special enrollment period. Therefore, issuers are not 
required to notify affected enrollees in the manner and timeframe 
outlined in this provision, although notifying enrollees of important 
changes is encouraged. HHS notes the importance of issuers providing 
accurate and complete plan information, including provider network and 
drug formulary information, so that consumers may make informed 
choices. QHP issuers are reminded that Sec.  156.225(b) prohibits them 
from employing marketing practices or benefit designs that will have 
the effect of discouraging the enrollment of individuals with 
significant health needs. Issuers may also be subject to Federal civil 
rights laws that prohibit discriminatory marketing practices and 
benefit designs, such as section 1557 of the Affordable Care Act.
    Comment: Some commenters requested that that HHS provide model 
notices for issuers to send to enrollees in the event of a plan or 
benefit display error. Other requested that issuers retain the 
flexibility to draft notices to consumers the best way that they see 
fit.
    Response: HHS recognizes that notifying their enrollees of a plan 
or benefit display error is already included in the business practices 
of many issuers offering QHPs through the Exchanges and, therefore, 
issuers have an established method of communicating such errors to 
their enrollees. HHS also recognizes the need to communicate accurate 
and standard information about the availability of a special enrollment 
period to consumers. Therefore, HHS will provide issuers with suggested 
special enrollment period language that they could use in their 
existing consumer notices to satisfy the requirement that they notify 
enrollees of their eligibility for a special enrollment period.
    Comment: Several issuers requested that we amend the amount of time 
issuers have to notify affected enrollees, either by extending it from 
30 to 60 calendar days or by starting the 30 calendar days from the 
date that the

[[Page 12322]]

plan or benefit display error has been fixed, while other commenters 
wanted to ensure that enrollees are notified of an error in a timely 
manner.
    Response: We believe that 30 calendar days is sufficient time for 
issuers to notify their enrollees affected by a plan or benefit display 
error and is soon enough to minimize sustained harm to affected 
enrollees. However, as discussed above, we agree that the 30 calendar 
days should begin on the date that the issuer is notified that the 
error has been fixed, and we are amending this provision accordingly.
    Comment: One commenter stated that State regulators, including SBEs 
and departments of insurance, should be responsible for the 
identification of plan and benefit display errors.
    Response: We agree that, States should play a role in identifying 
plan or benefit display errors, and we encourage State regulators to 
notify the applicable Exchange of the error. Nothing in this rule 
prohibits a State from taking that role. We also note that issuers 
offering QHPs through an FFE must obtain State authorization to change 
QHP data after certification.

H. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements

1. Definitions (Sec.  158.103)
    In the proposed rule, we proposed to revise the regulatory 
definitions of large employer and small employer in Sec.  158.103 to 
cross-reference the definitions of those terms in Sec.  144.103, in 
order to ensure consistency in those definitions between the MLR 
regulation and the market reform requirements, and to reflect the 
recent amendments made by the Protecting Affordable Coverage for 
Employees Act (Pub. L. 114-60).
    Comment: We received two comments supporting this proposal. One 
commenter suggested that the amendment not apply until the 2016 and 
later MLR reporting years.
    Response: We appreciate the comments regarding the definitions of 
large employer and small employer. We also agree that although the 
Protecting Affordable Coverage for Employees Act was passed in and 
effective as of October 2015, policies that were in effect in 2015 were 
issued using the group definitions that existed prior to this Act. 
Therefore, we are finalizing the proposed definitional changes 
effective with the 2016 MLR reporting year.
2. Reporting of Incurred Claims (Sec. Sec.  158.103 and 158.140(a))
    The MLR December 1, 2010 interim final rule (75 FR 74864) and the 
May 16, 2012 technical corrections to that rule (77 FR 28788) direct 
issuers to report incurred claims with a 3-month run-out period, and 
define unpaid claim reserves to mean reserves and liabilities 
established to account for claims that were incurred during the MLR 
reporting year but had not been paid within 3 months of the end of the 
MLR reporting year. In the proposed rule, we proposed to amend the 
definition of unpaid claims reserves in Sec.  158.103 and the 
requirements for reporting incurred claims in Sec.  158.140(a) to 
utilize a 6-month, rather than a 3-month run-out period, beginning with 
the 2015 reporting year. The proposed amendment was intended to improve 
the accuracy of incurred claims amounts in MLR calculation as well as 
in the risk corridors calculation under a related proposed amendment to 
Sec.  153.530.
    Comment: We received many comments, split equally between 
supporting the change and opposing it. Some commenters that opposed our 
proposal requested that any extension in the run-out period include an 
extension to the filing deadline. Other commenters were principally 
concerned that the MLR rebate deadline would also be extended, which 
they believed would harm consumers. One commenter also noted that a 
longer run-out period could negatively affect States' timely review of 
issuers' rate filings. Additionally, many opponents noted that the NAIC 
had considered a 6-month run-out period in 2010 and determined that it 
would not result in a materially more accurate MLR. The commenters 
stated that any increase in accuracy would therefore be outweighed by 
the administrative burden required to update issuer processes. Further, 
some of these commenters noted that since two of the three premium 
stabilization programs are temporary and will expire in the near 
future, HHS could, at that time, revert back to the June 1 MLR filing 
deadline, rather than maintain the current July 31 deadline that was 
adopted to accommodate the premium stabilization programs. Commenters 
point out that this would allow consumers to receive rebates sooner. 
Supporters of the 6-month run-out period agreed that a longer run-out 
period would improve the accuracy of MLRs and rebate amounts by 
utilizing actual rather than estimated claims amounts.
    Response: We appreciate the comments supporting our proposal, but 
also acknowledge the practical considerations raised by the commenters 
that opposed our proposal. We agree with those commenters that 
suggested that it may be more beneficial for all stakeholders if we do 
not modify the run-out period at this time, but instead explore ways to 
restore the earlier MLR deadlines after two of the three premium 
stabilization programs expire. Consequently, we are not finalizing the 
proposed amendments to Sec. Sec.  158.103 and 158.140(a) regarding 
unpaid claims reserves and incurred claims, and are retaining the 
existing 3-month run-out period.
3. Reporting of Fraud Prevention Expenditures
    In the proposed rule, we invited comment on whether we should 
modify the treatment of a health insurance issuer's investments in 
fraud prevention activities for MLR reporting purposes, noting that we 
were considering amending the MLR regulation to permit the counting of 
a health insurance issuer's investments in fraud prevention activities 
among those expenses attributable to incurred claims. We asked for 
comments on this approach, including whether safeguards against 
potential abuse should be included (such as an upper limit on this 
allowance); whether we should collect fraud prevention activity expense 
data as an informational item on the MLR Annual Reporting Form before 
amending the regulation; as well as on potential alternative treatment 
of these expenses for MLR reporting or rebate calculation purposes. We 
also asked for any specific, actual data with respect to the additional 
incentives that would result for health plan investments of this sort.
    Comment: We received numerous comments, with the majority opposing 
any deviation from the current treatment of fraud prevention in MLR. 
Opponents stated that our proposal to modify treatment of fraud 
prevention expenses in MLR directly contradicts the NAIC's previous 
recommendation that such expenses should not be allowed. These 
commenters noted that the NAIC had conducted extensive debate and 
analysis of this issue with input from all stakeholders, and had 
concluded that allowing any additional fraud-related costs in the MLR 
calculation would be inappropriate. These commenters further stressed 
that the current rule is working as intended and that there is no 
evidence that a change is necessary, that fraud prevention is 
principally a cost-containment expense that should be part of the cost 
of doing business, and that any benefit to consumers is indirect, or 
difficult or impossible to isolate. Several commenters requested that 
we not proceed without additional data, or that we limit any allowance 
to

[[Page 12323]]

0.5 percent of earned premium. Many commenters requested that HHS not 
finalize the proposal until the NAIC's recently reconvened MLR Quality 
Improvement Activities subgroup determines whether to support a change 
in the treatment of fraud prevention expenses. In contrast, other 
commenters fully supported the proposal, expressing a view that 
allowing fraud prevention expenses in the MLR calculation would provide 
issuers an incentive to invest in preventing fraud, waste and abuse. 
Some of these commenters did not believe that we should impose any 
caps, while one commenter suggested a cap of 0.3 percent of earned 
premium. Many of these commenters additionally did not believe that 
data collection prior to finalizing the proposal would be useful, 
arguing that issuers have been underinvesting in fraud prevention. Some 
supporters stated that fraud prevention has a patient safety component, 
while others focused on the monetary savings for issuers. Some 
commenters further suggested that issuers would use the money saved 
through fraud prevention to lower premiums or cost sharing, or on 
medical services.
    Response: We note that no stakeholder has provided specific data to 
support the notion that allowing fraud prevention expenses in the MLR 
calculation would have a positive impact. We agree with the commenters 
who stated that fraud prevention is principally a cost-containment 
activity, which generally is not permitted in the MLR calculation. In 
addition, we appreciate the NAIC's indication in its comment letter 
that its views regarding inclusion of fraud prevention as an adjustment 
to incurred claims have not changed since its 2010 recommendation. We 
also agree that, given the possibility that the treatment of fraud 
prevention may be addressed during the NAIC's review of quality 
improvement activities that is currently under way, it would be 
premature for HHS to modify the MLR regulation at this time. Therefore, 
we are not adopting any changes to the treatment of fraud prevention 
activities for MLR purposes.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. This 
final rule contains information collection requirements (ICRs) that are 
subject to review by OMB. A description of these provisions is given in 
the following paragraphs with an estimate of the annual burden, 
summarized in Table 11. In the December 2, 2015 (80 FR 75487) proposed 
rule, we requested public comment on each of the following collection 
of information requirements. The comments and our responses to them are 
discussed below.

A. ICRs Regarding Student Health Insurance Coverage (Sec.  147.145)

    The final rule requires issuers of student health insurance 
coverage to specify the AV of the coverage and the metal level (or next 
lowest metal level) the coverage would otherwise satisfy. This 
information must be included in any plan materials summarizing the 
terms of coverage. We estimate that there are 49 student health 
insurance issuers nationwide that will each need to provide an average 
of 25,612 notifications annually.\68\ We estimate that each student 
health insurance issuer will require an average of one hour for 
clerical staff (at a labor cost of $33.18 per hour) to insert the AV 
and metal level information into plan materials for all plans offered 
by the issuer, resulting in a total annual burden of 1 hour and an 
associated cost of $33.18 per issuer. There is no additional burden to 
determine these values as student health insurance issuers are 
currently required to calculate a plan's AV using the AV Calculator. 
For all 49 issuers currently providing student health insurance 
coverage, the total combined hour burden is estimated to be 49 hours 
with a total combined cost of $1,625.82 annually. This information will 
be included in existing plan materials; therefore, we do not estimate 
any additional distribution costs.
---------------------------------------------------------------------------

    \68\ Estimate based on data from Medical Loss Ratio submissions 
for 2014 reporting year.
---------------------------------------------------------------------------

    The final rule discontinues the outdated requirement that student 
health insurance issuers provide notice informing students that the 
coverage does not meet the annual limits requirements under section 
2711 of the PHS Act. This regulatory provision, by its own terms, no 
longer applies, as student health insurance coverage is subject to the 
prohibition on annual dollar limits for policy years beginning or after 
January 1, 2014. Issuers will experience a reduction in burden related 
to the discontinued notices, which was previously estimated to be 1,071 
hours, with an equivalent labor and mailing cost of $43,757.14 for all 
student health insurance issuer (under OMB Control No. 0938-1157).

B. ICRs Regarding Submission of Risk Corridors Data (Sec.  153.530)

    We finalized our amendment to the risk corridors program 
requirements at Sec.  153.530 to require issuers to true-up claims 
liabilities and reserves used to determine the allowable costs reported 
for the preceding benefit year to reflect the actual claims payments 
made through March 31 of the year following the benefit year. This 
policy requires issuers to submit data indicating the difference 
between their incurred liability estimated as of March 31 following the 
preceding benefit year and March 31 following the current benefit year. 
While we believe that issuers will be recording these amounts as part 
of their normal business practices, we estimate that it will take 
approximately 1 hour for each issuer at $54.44 per hour (according to 
the wage estimates provided in the MLR notice CMS-10418-OCN 0938-1164) 
to record these amounts. Therefore, we estimate the overall cost burden 
of implementing this policy will be $54.44 per issuer, for 
approximately 320 applicable risk corridors program issuers, for a 
total cost burden of $17,421.

C. ICRs Regarding Submission of Rate Filing Justification (Sec.  
154.215)

    This final rule amends Sec.  154.215 to require health insurance 
issuers to submit a Unified Rate Review Template (URRT) for all single 
risk pool coverage regardless of whether there is a plan within a 
product that experiences a rate increase. The existing information 
collection requirement is approved under OMB Control Number 0938-1141. 
This includes the URRT and instructions for rate filing documentation 
that issuers currently use to submit rate information to HHS for rate 
increases of any size for single risk pool coverage. We believe most 
issuers already report this information. However, we estimate the 
number of URRT submissions may increase by 1 percent due to this 
requirement. We released information regarding revisions to the 
information collection template and instructions in accordance with the 
Paperwork Reduction Act of 1995, in CMS-10379, for a 60-day comment 
period.\69\
---------------------------------------------------------------------------

    \69\ 81 FR 8498 (February 19, 2016). Available at, https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-03474.pdf.
---------------------------------------------------------------------------

D. ICRs Regarding Election To Operate an Exchange After 2014 (Sec.  
155.106)

    This final rule amends the dates for application submission and 
approval for States seeking to operate an SBE, and have an approved or 
conditionally

[[Page 12324]]

approved Exchange Blueprint application and operational readiness 
assessment. We are not modifying the documents that States already must 
submit as part of the required Exchange Blueprint application. 
Therefore, we do not anticipate any additional impact to the 
administrative burden associated with the regulatory changes to Sec.  
155.106. HHS is utilizing the existing PRA package approved under OMB 
Control Number 0938-1172 for the Exchange Blueprint application.

E. ICRs Regarding Standards for Certified Application Counselors (Sec.  
155.225(b)(1)(iii))

    Section 155.225(b)(1)(ii) requires certified application counselor 
designated organizations to maintain a registration process and method 
to track the performance of certified application counselors. This 
final rule adds a new Sec.  155.225(b)(1)(iii) requiring certified 
application counselor designated organizations to provide the Exchange 
with information and data regarding the number and performance of the 
organization's certified application counselors, and the consumer 
assistance they provide. Although the requirement at Sec.  
155.225(b)(1)(ii) does not specify the type of performance information 
that must be tracked, or require that the information be provided to 
the Exchange, we expect that certified application counselor designated 
organizations already have a tracking process in place to collect 
performance information from individual certified application 
counselors, and that individual certified application counselors are 
already recording and submitting this required information to their 
organization. Therefore, we expect this final rule to have minimal 
impact on individual certified application counselors and on certified 
application counselor designated organizations.
    Section 155.225(b)(1)(iii) would add a new burden of compiling the 
performance information and submitting it to the Exchanges. In States 
with FFEs, HHS anticipates that, beginning for the third quarter of 
calendar year 2017, it will collect three performance data points each 
quarter from certified application counselor designated organizations: 
The number of individuals who have been certified by the organization; 
the total number of consumers who received application and enrollment 
assistance from the organization; and of that number, the number of 
consumers who received assistance applying for and selecting a QHP, 
enrolling in a QHP, or applying for Medicaid or CHIP. We anticipate 
that this data will be reported to FFEs electronically, through HIOS or 
another electronic submission vehicle. For the purpose of estimating 
costs and burdens, we assume that SBEs will collect the same 
information with the same frequency, although our rule gives Exchanges 
the flexibility to determine which data to collect and the form and 
manner of the collection. We estimate that certified application 
counselor designated organizations will have a mid-level health policy 
analyst prepare the reports and a senior manager will review each 
quarterly report. HHS expects that a mid-level health policy analyst 
(at an hourly wage rate of $40.64) will spend 2 hours each quarter to 
provide the required quarterly submissions and a senior manager (at an 
hourly wage rate of $91.31) will spend \3/8\ hour to review the 
submissions. Therefore, we estimate each quarterly report will require 
2.375 hours and a cost burden of $115.52 per quarter per organization, 
or 9.50 hours with a cost (four quarterly reports) of $462.08 annually 
per certified application counselor designated organization. 
Nationwide, we estimate there are 5,000 certified application counselor 
designated organizations, resulting in an annual cost burden of 
$2,310,400 and 47,500 hours for certified application counselor 
designated organizations.
    Under Sec.  155.225(b)(1)(iii), if an Exchange requests these 
certified application counselor reports, the Exchange would also need 
to review the reports. We assume that all Exchanges will require 
quarterly reports and will utilize in-house staff to review them. We 
assume that an employee earning a wage that is equivalent to a mid-
level GS-11 employee would review quarterly report submissions from 
certified application counselor designated organizations.\70\ We 
estimate that a mid-level employee (at an hourly wage rate of $43.13) 
will spend 10 minutes reviewing each quarterly report for a cost burden 
of approximately $7.19 per quarterly report per certified application 
counselor designated organization. For all SBEs, we estimate that there 
are 1,500 certified application counselor designated organizations 
resulting in a cost burden of 1,000 hours and approximately $43,130 
annually. Costs to the FFEs are estimated separately in the Regulatory 
Impact Analysis section of this final rule.
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    \70\ Federal wage rates are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2015/GS_h.pdf.
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F. ICRs Regarding Network Adequacy Standards (Sec.  156.230(d) and (e))

    Section 156.230(d) requires that QHP issuers make a good faith 
effort to provide written notice of discontinuation of a provider 30 
days prior to the effective date of the change or otherwise as soon as 
practicable, to enrollees who are patients seen on a regular basis by 
the provider or who receive primary care from the provider whose 
contract is being discontinued, irrespective of whether the contract is 
being discontinued due to a termination for cause or without cause, or 
due to a non-renewal. This is a third-party disclosure requirement. The 
notification requirement under Sec.  156.230(d)(1) is a common practice 
in the current market as several States, Medicare Advantage, Medicaid 
Managed Care, and the NAIC Network Adequacy Model Act have standards 
regarding enrollee notification of a provider leaving a network. As 
discussed in the preamble, under State laws, many QHP issuers will 
already be under this obligation, and therefore, our notification 
requirements will apply in a more limited fashion. Additionally, we 
incorporated SADPs into our calculations, but we recognize given the 
notification requirements that SADPs may rarely need to send a 
notification.
    We estimate that a total of 475 issuers participate in the FFE and 
would be required to comply with the standard. We estimated that 5 
percent of providers discontinue contracts per year, and that an issuer 
in the FFE covers 7,500 National Provider Identifiers, which means that 
we estimate an issuer would have 375 provider discontinuations in a 
year. In response to comment to the proposed rule, we are clarifying 
that our assumption is that the database manager will receive 
notification from the issuer's contracting team that a provider 
contract is being discontinued. From that notification, the database 
manager would aggregate the claims data associated with the provider to 
develop the list of effected enrollees with associated enrollee 
information for the notice. This list of affected enrollees and 
associated enrollee information would be sent to an administrative 
assistant to aggregate into a notification template to be sent to the 
enrollee. Assuming 375 notifications per year, we believe that this 
task would be a routine process for the administrative assistant to 
undertake that would need little to no oversight to produce. As the 
issuer has the discretion to define regular basis and that the number 
of notifications are likely to widely varying between network and type 
of provider, we did not estimate based on the number of

[[Page 12325]]

individual notifications, but rather the number of provider 
discontinuations. For each provider discontinuation, we estimate that 
it will take a database administrator 30 minutes for data analysis to 
produce the list of affected enrollees, at $55.37 an hour, and an 
administrative assistant 30 minutes to develop the notification and 
send the notification to the affected enrollees, at $29.93 an hour. In 
response to comment, we are also clarifying these hourly rates include 
35 percent adjustment for fringe benefits and overhead costs. The total 
costs per issuer would be $15,993.75. The total annual costs estimate 
would be $7,597,031. Because we are already collecting information 
regarding network classifications as part of the existing QHP 
certification process, we do not believe that the network 
classifications described in the preamble will result in additional 
information collection requirements for issuers.
    In Sec.  156.230(e), we require QHP issuers to provide a notice to 
enrollees of the possibility of out-of-network charges from an 
ancillary out-of-network provider in an in-network setting prior to the 
benefit being provided, to avoid counting the out-of-network costs 
against the annual limitation on cost sharing. This provision applies 
to all QHPs, which includes 575 issuers, and would start in 2018. We 
estimate it would take an issuer's mid-level health policy analyst (at 
an hourly wage rate of $54.87) approximately 6 minutes to create a 
notification and send the information. In response comments, we are 
clarifying the hourly rates include 35 percent adjustment for fringe 
benefits and overhead costs. We estimate that approximately two notices 
would be sent for every 100 enrollees. Assuming approximately 24 
million enrollees in QHPs for 2018,\71\ we estimate QHPs would send 
approximately 320,000 total notices, for a total 21,334.40 hours, at a 
total cost of $1,170,619.
---------------------------------------------------------------------------

    \71\ We used the most recent CBO estimates for enrollment from 
March 2015 available at https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf.
---------------------------------------------------------------------------

G. ICR Regarding Monthly SHOP Enrollment Reconciliation Files Submitted 
by Issuers (156.285(c)(5))

    We are finalizing amendments to Sec.  156.285(c)(5) to specify that 
issuers in a Federally-facilitated SHOP would send monthly enrollment 
reconciliation files to the SHOP according to a process, timeline and 
file format established by the FF-SHOP. We anticipate that this would 
require FF-SHOP issuers to submit a standard file with specific data 
elements and submit their files in a process set out by the SHOP, at 
least monthly. Issuers of QHPs available through the SHOP are already 
required under the current version of Sec.  156.285(c)(5) to reconcile 
enrollment files with the SHOP at least monthly. Therefore, we expect 
this policy to have minimal impact on SHOP issuers.

H. ICR Regarding Patient Safety Standards (Sec.  156. 1110)

    In Sec.  156.1110(a)(2)(i), for plan years beginning on or after 
January 1, 2017, a QHP issuer that contracts with a hospital with 
greater than 50 beds must verify that the hospital uses a patient 
safety evaluation system and implements a mechanism for comprehensive 
person-centered hospital discharge to improve care coordination and 
health care quality for each patient. In Sec.  156.1100(a)(2)(ii), we 
also establish reasonable exceptions to these new QHP issuer patient 
safety requirements (rather than requiring reporting of such 
information to a Patient Safety Organization). The burden estimate 
associated with the information collection, recordkeeping, and 
disclosure requirements to demonstrate compliance with these standards 
includes the time and effort required for QHP issuers to maintain and 
submit to the applicable Exchanges documentation that would include 
hospital agreements to partner with, or other information demonstrating 
a partnership with, a Patient Safety Organization, a Hospital 
Engagement Network, or a Quality Improvement Organization that 
demonstrate that each of its contracted hospitals with greater than 50 
beds meets the patient safety standards required in Sec.  
156.1110(a)(2) for plan years beginning on or after January 1, 2017. 
QHP issuers may not already be collecting such network provider 
information; therefore, we estimate the cost and burden to collect this 
administrative information as follows: For a total of 575 QHP issuers, 
offering 15 plans as potential QHPs, we estimated each issuer would 
require one senior manager an average of 3 hours to collect and 
maintain the hospital agreements or other information necessary to 
demonstrate compliance as required in Sec.  156.1110(a)(2) for their 
QHPs offered on Exchanges for plan years beginning on or after January 
1, 2017. For a senior manager (at an hourly wage rate of $91.31), we 
estimated the total annual cost for a QHP issuer to be $273.93. 
Therefore, we estimated a total annual burden of 1,725 hours, resulting 
in an annual cost of $157,510.

I. ICRs Regarding Other Notices (Sec.  156.1256)

    We are adding a new section at Sec.  156.1256 to require that, in 
the event of a plan or benefit display error, QHP issuers notify their 
enrollees within 30 calendar days after the issuer is informed by the 
FFE that the error has been fixed, if directed to do so by the FFE, 
both of the plan or benefit display error and of the opportunity to 
enroll in a new QHP under a special enrollment period at Sec.  
155.420(d)(4), if directed to do so by the FFE. This provision would 
apply to all QHPs in the FFEs, as well as all QHPs in the SBE-FPs, 
which includes 475 issuers. We anticipate that issuers will need to 
notify multiple enrollees of the same display error, and therefore 
estimate that one form notice would cover approximately 100 of the 
enrollees receiving such a notice. For each group of 100 form notices, 
we estimate that it would take approximately 30 minutes for an issuer's 
mid-level health policy analyst (at an hourly wage rate of $54.87) to 
amend, add SEP language provided by the FFE, and send the information. 
We estimate that approximately 4 percent of enrollees would receive 
such a notice. Assuming approximately 19 million FFE and SBE-FP 
enrollees in 2017,\72\ we estimate QHPs in the FFEs and SBE-FPs would 
send approximately 760,000 total notices (4 percent of the estimated 19 
million FFE and SBE-FP enrollees), for a total hours of 3,800, with a 
total cost of $208,506.
---------------------------------------------------------------------------

    \72\ We applied the current FFE to total Exchange enrollment 
ratio to the most recent CBO estimates for total Exchange enrollment 
from March 2015 available at https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf.
---------------------------------------------------------------------------

    Although this final rule requires issuers to send notices for the 
specified situation, sending these notices is already part of normal 
issuer business practices and issuers are already working with the FFE 
to include language in their notices about special enrollment periods, 
as applicable and appropriate. Therefore, there will be no additional 
information required by issuers and no new administrative burden as a 
result of this final rule. In accordance with the implementing 
regulations of the PRA at 5 CFR 1320.3(b)(2), we believe the burden 
associated with this requirement would be exempt as it associated with 
a usual and customary business practice.

[[Page 12326]]



                                                                 TABLE 11--Annual Reporting, Recordkeeping and Disclosure Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Burden  per    Total  annual   Hourly  labor   Total  labor
                       Regulation Section                          OMB  Control      Number of       Responses       response         burden          cost of         cost of       Total cost
                                                                        No.         respondents                       (hours)         (hours)     reporting  ($)  reporting  ($)        ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   147.145--AV..............................................       0938-1157              49          25,612               1              49           33.18        1,625.82        1,625.82
Sec.   153.530..................................................       0938-1164             320               1               1             320           54.44          17,421          17,421
Sec.   155.225 (b)(1)(iii)--certified application counselor            0938-1172           5,000               4           2.375          47,500           48.64       2,310,400       2,310,400
 (CAC) organizations............................................
Sec.   155.225 (b)(1)(iii)--SBE.................................       0938-1172           1,500               4           0.167           1,000           43.13          43,130          43,130
Sec.   156.230(d)...............................................        0938-NEW             475             375               1             375            85.3       7,597,031       7,597,031
Sec.   156.230(e)...............................................        0938-NEW             575         320,000             0.1          32,000           54.87       1,170,619       1,170,619
Sec.   156.1110.................................................       0938-1249             575           8,625             0.2           1,725           91.31         157,510         157,510
Sec.   156.1256.................................................        0938-NEW             475         760,000             0.5           3,800           54.87         208,506         208,506
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total.......................................................  ..............           5,575  ..............  ..............          86,769  ..............      11,506,243      11,506,243
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: There are no capital/maintenance costs associated with the information collection requirements contained in this rule; therefore, we have removed the associated column from Table 11.

    We have submitted an information collection request to OMB for 
review and approval of the ICRs contained in this final rule. The 
requirements are not effective until approved by OMB and assigned a 
valid OMB control number.

V. Regulatory Impact Analysis

A. Statement of Need

    This rule sets forth standards related to the premium stabilization 
programs (risk adjustment, reinsurance, and risk corridors) for the 
2017 benefit year, as well as certain modifications to these programs 
that will protect issuers from the potential effects of adverse 
selection and protect consumers from increases in premiums due to 
issuer uncertainty. The Premium Stabilization Rule and previous Payment 
Notices provided detail on the implementation of these programs, 
including the specific parameters for the 2014, 2015, and 2016 benefit 
years applicable to these programs. This rule provides additional 
standards related to essential health benefits, consumer assistance 
tools and programs of an Exchange, Navigators, non-Navigator assistance 
personnel, agents and brokers registered with the Federally-facilitated 
Exchange, certified application counselors, cost-sharing parameters and 
cost-sharing reduction notices, essential community providers, 
qualified health plans, network adequacy, stand-alone dental plans, 
acceptance of third-party payments by QHP issuers, patient safety 
standards for issuers of qualified health plans participating in 
Exchanges, the rate review program, the medical loss ratio program, the 
Small Business Health Options Program, and FFE user fees.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act 
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
rules with economically significant effects ($100 million or more in 
any 1 year).
    OMB has determined that this final rule is ``economically 
significant'' within the meaning of section 3(f)(1) of Executive Order 
12866, because it is likely to have an annual effect of $100 million in 
any 1 year. Accordingly, we have prepared an RIA that presents the 
costs and benefits of this rule.
    Although it is difficult to assess the effects of these provisions 
in isolation, the overarching goal of the premium stabilization, market 
standards, and Exchange-related provisions and policies in the 
Affordable Care Act is to make affordable health insurance available to 
individuals who do not have access to affordable employer-sponsored 
coverage. The provisions within this rule are integral to the goal of 
expanding coverage. For example, the premium stabilization programs 
help prevent risk selection and decrease the risk of financial loss 
that health insurance issuers might otherwise expect in 2017 and 
Exchange financial assistance assists low- and moderate-income 
consumers and American Indians/Alaska Natives in purchasing health 
insurance. The combined impacts of these provisions affect the private 
sector, issuers, and consumers, through increased access to health care 
services including preventive services, decreased uncompensated care, 
lower premiums, establishment of the next phase of patient safety 
standards, and increased plan transparency. Through the reduction in 
financial uncertainty for issuers and increased affordability for 
consumers, these provisions are expected to increase access to 
affordable health coverage.
    HHS anticipates that the provisions of this rule will help further 
the Department's goal of ensuring that all consumers have access to 
quality and affordable health care and are able to make informed 
choices, that Exchanges operate smoothly, that premium stabilization 
programs work as intended, that SHOPs are provided flexibility, and 
that employers and consumers are protected from fraudulent and criminal 
activities. Affected entities such as QHP issuers would incur costs to 
comply with the established provisions, including administrative costs 
related to notices, new patient safety requirements, and training and 
recertification requirements. In accordance with Executive Order 12866, 
HHS believes that the benefits of this regulatory action justify the 
costs.
    Comment: A commenter criticized the regulatory analysis for lacking 
an adequate economic analysis. The

[[Page 12327]]

commenter criticized the credibility of the sources of the estimates 
and assumptions used. Additionally, the commenter noted that in Table 
12 the magnitude of cost estimates is not labeled, and the costs 
associated with the user fee to be assessed on issuers in State-based 
Exchanges using the Federal platform were not included in the analysis.
    Response: We previously estimated the annualized impact on issuers, 
contributing entities, and States of transfers and other programs in 
the 2014, 2015 and 2016 Payment Notice rules. Therefore, to avoid 
double-counting, Table 12 contains only incremental changes incurred as 
a result of provisions in this rule. The results of HHS's internal 
analyses were used to assess the impact of the policies of this rule. 
For this analysis, we continue to believe that the best available 
estimates of the impact of the Affordable Care Act on the Federal 
budget, enrollment in health insurance programs, and revenue collection 
are by the Congressional Budget Office. The CBO's most recent updates 
are available at https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf. We have clarified the units 
for the cost estimates in Table 12. We also note that the estimate of 
user fees to be assessed on issuers in State-based Exchanges using the 
Federal platform has been incorporated in the annual monetized costs 
described in Table 12.

C. Impact Estimates of the Payment Notice Provisions and Accounting 
Table

    In accordance with OMB Circular A-4, Table 12 depicts an accounting 
statement summarizing HHS's assessment of the benefits, costs, and 
transfers associated with this regulatory action.
    This final rule implements standards for programs that will have 
numerous effects, including providing consumers with affordable health 
insurance coverage, reducing the impact of adverse selection, and 
stabilizing premiums in the individual and small group health insurance 
markets and in an Exchange. We are unable to quantify certain benefits 
of this final rule--such as improved health outcomes and longevity due 
to continuous quality improvement, improved patient safety and 
increased insurance enrollment--and certain costs--such as the cost of 
providing additional medical services to newly-enrolled individuals. 
The effects in Table 12 reflect qualitative impacts and estimated 
direct monetary costs and transfers resulting from the provisions of 
this final rule for health insurance issuers. The annualized monetized 
costs described in Table 12 reflect direct administrative costs to 
health insurance issuers as a result of the finalized provisions, and 
include administrative costs related to student health insurance 
coverage, rate filing justification, notices, new patient safety 
requirements, and training and recertification requirements that are 
estimated in the Collection of Information section of this final rule. 
The annual monetized transfers described in Table 12 include costs 
associated with FFE user fees and the risk adjustment user fee paid to 
HHS by issuers. We estimate that that the total cost for HHS to operate 
the risk adjustment program on behalf of States for 2017 will be 
approximately $24 million and that the risk adjustment user fee would 
be $1.56 per enrollee per year from risk adjustment issuers, which is 
less than the anticipated $50 million in benefit year 2016 for which we 
established a $1.75 per-enrollee-per-year risk adjustment user fee 
amount. We reassessed our contract costs for 2017 and were able to base 
2017 risk adjustment eligible plan enrollment projections on actual 
2014 risk adjustment enrollment. We revised our user fee rate from the 
proposed amount to reflect these considerations. Also, the increase in 
FFE user fee collections is the result of expected growth in enrollment 
in the FFEs rather than an increase in the user fee rate, which at 3.5 
percent remains the same from 2016 to 2017. Beginning in 2017, we are 
also charging a user fee for State-based Exchanges using the Federal 
platform for eligibility and enrollment services. This user fee rate 
would be set at 1.5 percent for benefit year 2017.

                                           TABLE 12--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
Qualitative:
     Increased enrollment in the individual market leading to improved access to health care for the
     previously uninsured, especially individuals with medical conditions, which will result in improved health
     and protection from the risk of catastrophic medical expenditures..........................................
     Continuous quality improvement among QHP issuers to reduce patient harm and improve health outcomes
     at lower costs.............................................................................................
     More informed Exchange QHP certification decisions.................................................
     Increased coverage options for small businesses and employees with minimal adverse selection.......
----------------------------------------------------------------------------------------------------------------
Costs                                                   Estimate            Year        Discount          Period
                                                                          dollar            rate         covered
                                                                                         percent
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/year)...........          $11.67            2016               7       2016-2020
                                                          $11.67            2016               3       2016-2020
----------------------------------------------------------------------------------------------------------------
Quantitative:
     Costs reflect administrative costs incurred by issuers and States to comply with provisions in this
     final rule.................................................................................................
----------------------------------------------------------------------------------------------------------------
Transfers                                               Estimate            Year        Discount          Period
                                                                          dollar            rate         covered
                                                                                         percent
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/year)...........          $25.89            2016               7       2016-2020
                                                          $25.86            2016               3       2016-2020
----------------------------------------------------------------------------------------------------------------
 Transfers reflect a decrease in annual cost of risk adjustment user fees (the total risk adjustment
 user fee amount for 2016 was $50 million and $24 million for 2017), which are transfers from health insurance
 issuers to the Federal government. Transfers also reflect an increase of $30 million in 2017 and $65million in
 future years, in the amount of user fees collected from State-based Exchanges that use the Federal platform for
 eligibility and enrollment which are transfers from issuers to the Federal government..........................
 Unquantified: Lower premium rates in the individual market due to the improved risk profile of the
 insured, competition, and pooling..............................................................................
----------------------------------------------------------------------------------------------------------------


[[Page 12328]]

    This RIA expands upon the impact analyses of previous rules and 
utilizes the Congressional Budget Office's (CBO) analysis of the 
Affordable Care Act's impact on Federal spending, revenue collection, 
and insurance enrollment. The temporary risk corridors program and the 
transitional reinsurance program end after the 2016 benefit year. 
Therefore, the costs associated with those programs are not included in 
Tables 12 or 13 for fiscal years 2019-2020. Table 13 summarizes the 
effects of the risk adjustment program on the Federal budget from 
fiscal years 2016 through 2020, with the additional, societal effects 
of this rule discussed in this RIA. We do not expect the provisions of 
this final rule to significantly alter CBO's estimates of the budget 
impact of the premium stabilization programs that are described in 
Table 13. We note that transfers associated with the risk adjustment 
and reinsurance programs were previously estimated in the Premium 
Stabilization Rule; therefore, to avoid double-counting, we do not 
include them in the accounting statement for this rule (Table 12).
    In addition to utilizing CBO projections, HHS conducted an internal 
analysis of the effects of its regulations on enrollment and premiums. 
Based on these internal analyses, we anticipate that the quantitative 
effects of the provisions in this rule are consistent with our previous 
estimates in the 2016 Payment Notice for the impacts associated with 
the advance payments of cost-sharing reductions and premium tax 
credits, the premium stabilization programs, and FFE user fee 
requirements.

  Table 13--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk Corridors Programs From Fiscal Year 2016-
                                                              2020, in Billions of Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Year                                 2016            2017            2018            2019            2020          2016-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and Risk Corridors Program            16.5            19.5              13              15              16              80
 Payments...............................................
Risk Adjustment, Reinsurance, and Risk Corridors Program            15.5            18.5              13              15              16              78
 Collections *..........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time.
Note 2: The CBO score reflects an additional $2 million in collections in FY 2015 that are outlayed in the FY 2016-FY 2020 timeframe. CBO does not
  expect a shortfall in these programs.
Source: Congressional Budget Office. Insurance Coverage Provisions of the Affordable Care Act--CBO's March 2015 Baseline Table https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf.

1. Fair Health Insurance Premiums
    The final rule permits a rating area to be identified for a small 
employer that is within the service area of an issuer's network plan, 
for purposes of rating based on geography where the employer's 
principal business address is not within that service area. This will 
ensure that the network plan can be appropriately rated for sale to the 
group policyholder, benefitting both issuers and employers.
2. Student Health Insurance Coverage
    The final rule eliminates the requirement that issuers of student 
health insurance coverage provide coverage comprised of the specific 
metal levels, and instead requires that student health insurance 
coverage provide at least 60 percent AV. The final rule also requires 
issuers of student health insurance coverage to specify in any plan 
materials summarizing the terms of coverage the AV of the coverage and 
the metal level (or next lowest metal level) the coverage would 
otherwise satisfy. This will provide flexibility for institutions of 
higher education to offer student health insurance plans that are more 
generous than the standard metal levels, while providing students with 
information that allows them to compare the generosity of student 
health insurance coverage with other available coverage options. This 
will affect an estimated 49 issuers nationwide that offer student 
health insurance coverage and approximately 1.4 million students and 
dependents enrolled in such plans.\73\
---------------------------------------------------------------------------

    \73\ Source: Data from Medical Loss Ratio submissions for 2014 
reporting year.
---------------------------------------------------------------------------

3. Risk Adjustment
    The risk adjustment program is a permanent program created by the 
Affordable Care Act that transfers funds from lower risk, non-
grandfathered plans to higher risk, non-grandfathered plans in the 
individual and small group markets, inside and outside the Exchanges. 
We established standards for the administration of the risk adjustment 
program, in subparts D and G of part 45 of the CFR.
    A State approved or conditionally approved by the Secretary to 
operate an Exchange may establish a risk adjustment program, or have 
HHS do so on its behalf. As described in the 2014, 2015, and 2016 
Payment Notices, if HHS operates risk adjustment on behalf of a State, 
it will fund its risk adjustment program operations by assessing a risk 
adjustment user fee on issuers of risk adjustment covered plans. For 
the 2017 benefit year, we estimate that the total cost for HHS to 
operate the risk adjustment program on behalf of States for 2017 will 
be approximately $24 million, and that the risk adjustment user fee 
would be $1.56 per enrollee per year. This user fee reflects our 
reassessment of both contract costs to support the risk adjustment 
program in 2017 and the expected member month enrollment in risk 
adjustment covered QHPs.
4. Risk Corridors
    The Federally operated temporary risk corridors program ends in 
benefit year 2016 as required by statute. Because risk corridors 
charges are collected in the year following the applicable benefit 
year, and risk corridors payments lag receipt of collections by one 
quarter, we estimate that risk corridors transfers will continue 
through fiscal year 2018. In this rule, we establish that for the 2015 
and 2016 benefit years, the issuer must true up claims liabilities and 
reserves used to determine the allowable costs reported for the 
preceding benefit year to reflect the actual claims payments made 
through March 31 of the year following the benefit year. This amendment 
provides for a more accurate risk corridors calculation by substituting 
actual experience in place of estimates. Some issuers overestimate 
their claims and liabilities, while others underestimate them. Based on 
the 2014 MLR and risk corridors data, we estimate that this amendment 
will result in a combined total reduction in risk corridors payments or 
increase in risk corridors charges for some issuers; and a combined 
total increase in risk corridors payments or decrease in risk corridors 
charges for other issuers. HHS

[[Page 12329]]

continues to implement the risk corridors program in a budget neutral 
manner such that payments are made from collections that are received. 
If collections are insufficient to fund payment obligations, HHS will 
apply a pro rata reduction to risk corridors payments to issuers for 
the benefit year. Because of uncertainty in the amount of collections 
that will be received for payment for the 2015 benefit year, we are 
unable to estimate the magnitude of the net impact of the modification 
in the final rule, but believe that it will reduce the overall amount 
of risk corridors transfers for the 2015 benefit year.
5. Rate Review
    In Sec.  154.215, we amend the criteria for submission of the 
Unified Rate Review Template for single risk pool coverage to HHS. We 
expect URRT submissions may increase by 1 percent. We have revised the 
information collection currently approved under OMB Control Number 
0938-1141 to clarify instructions related to completing the template 
for single risk pool coverage.
6. Additional Required Benefits
    In Sec.  155.170, we amended the requirement for coverage of 
benefits in addition to the essential health benefits. Specifically, we 
are rewording Sec.  155.170(a)(2) to make clear that a benefit required 
by the State through action taking place on or before December 31, 2011 
is considered an EHB and one required by the State through action 
taking place after December 31, 2011 is considered in addition to EHB. 
As we see this as a clarification, we do not anticipate an additional 
burden on States or issuers. At Sec.  155.170(a)(3), we currently 
require the Exchange to identify which additional State-required 
benefits, if any, are in excess of EHB. We amended paragraph (a)(3) to 
designate the State, rather than the Exchange, as the entity that 
identifies which State-required benefits are not EHB. Because Exchanges 
have been relying upon State departments of insurance in determining 
what constitutes an essential health benefit, we do not anticipate any 
additional burden to States because of this modification, but simply a 
shift in burden from one State agency to another.
7. Standards for Navigators and certain Non-Navigator Assistance 
Personnel
    This final rule amends some of the standards for consumer 
assistance functions under Sec.  155.205(d) and (e), as well as for the 
activities of Navigators under Sec.  155.210, and non-Navigator 
assistance personnel subject to Sec.  155.215. The changes include 
ensuring consumers have access to skilled assistance with Exchange-
related issues beyond applying for and enrolling in coverage. Such post 
enrollment and other assistance includes assisting consumers with 
applying for exemptions from the individual shared responsibility 
payment that are granted through the Exchange, with understanding the 
process of filing Exchange appeals, and with understanding basic 
concepts and rights related to health coverage and how to use it. The 
final rule also requires Navigators to provide targeted assistance to 
serve underserved or vulnerable populations, as identified by each 
Exchange. In addition, the final rule specifies that any individual or 
entity carrying out consumer assistance functions under Sec.  
155.205(d) and (e) or Sec.  155.210 must complete training prior to 
performing any assister duties, including conducting outreach and 
education activities.
    The final rule's amendments to Sec. Sec.  155.205(d) and 
155.215(b)(1)(i) related to completing training for Navigators and non-
Navigator assistance personnel apply only to the timing of the training 
and do not have any impact on the training itself. Therefore, they do 
not affect the burden or cost for entities already subject to training 
requirements. Because under existing Sec.  155.215(b)(2), Navigators in 
FFEs must already be trained on the tax implications of enrollment 
decisions, the individual responsibility to have health coverage, 
eligibility appeals, and rights and processes for QHP appeals and 
grievances, we expect our amendments to Sec.  155.210(b)(2)(v) through 
(ix) to have minimal impact on FFE training. If any SBEs do not already 
provide training on these topics, we expect they would incur minimal 
costs in developing and implementing this training. Our final rule 
requiring Navigators to provide targeted assistance to underserved or 
vulnerable populations will have an increased benefit for consumers, 
especially hard to reach populations. All costs associated with 
reaching these consumers in FFEs are considered allowable costs that 
would be covered by the Navigator grants for the FFEs and that may be 
drawn down as the grantee incurs such costs. Additionally, Sec.  
155.210(b)(2)(i) already requires Navigators in all Exchanges to 
receive training on the needs of underserved and vulnerable 
populations.
8. Certified Application Counselors
    This final rule requires certified application counselor 
organizations to submit data and information to the Exchanges regarding 
the number and performance of their certified application counselors 
and the consumer assistance they provide, upon request, in a form and 
manner specified by the Exchange. Under Sec.  155.225(b)(1)(iii), if an 
Exchange requests these certified application counselor reports, the 
Exchange would also need to review them. We assume that all Exchanges 
will require quarterly reports and will utilize in-house staff to 
review them. We assume that an employee earning a wage that is 
equivalent to a mid-level GS-11 employee would review quarterly report 
submissions from certified application counselor designated 
organizations.\74\ We estimate that a mid-level employee (at an hourly 
wage rate of $43.13) will spend 10 minutes reviewing each quarterly 
report for a cost burden of approximately $7.19 per quarterly report 
per certified application counselor designated organization. We 
estimate the costs of this requirement for State Exchanges in the 
Collection of Information Requirements section of this final rule. For 
the FFEs, we estimate there are 3,500 certified application counselor 
designated organizations, resulting in a total annual burden for FFEs 
of 2,333 hours, at a cost of $100,660.
---------------------------------------------------------------------------

    \74\ Federal wage rates are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2015/GS_h.pdf.
---------------------------------------------------------------------------

9. SHOP
    The SHOP facilitates the enrollment of eligible employees of 
eligible small employers into small group health insurance plans. A 
qualitative analysis of the costs and benefits of establishing a SHOP 
was included in the RIA published in conjunction with the Exchange 
Establishment Rule.\75\ Section 155.735(d)(2)(iii), added in this rule, 
requires the FF-SHOPs to send qualified employees a notice notifying 
them in advance of a child dependent's loss of eligibility for 
dependent child coverage under their plan because of age. The notice 
will be sent 90 days in advance of the date when the dependent enrollee 
would lose eligibility for dependent child coverage. We estimate the 
FF-SHOPs will spend roughly 35 hours annually, per State, to prepare 
the notice, for a total cost of $1,775, per State, to design and 
implement the notices under Sec.  155.735(d)(2)(iii). We estimate that 
there will be approximately 32 States operating under the FF-SHOPs and 
all will be subject to this requirement. Therefore, we estimate

[[Page 12330]]

a total annual cost of $58,575 for the FF-SHOPs as a result of this 
requirement.
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    \75\ Available at http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
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10. Standardized Options
    In assessing the burden associated with implementing standardized 
options, as described in Sec.  156.20, we assessed the potential impact 
on premiums established by QHP issuers in the FFEs. We anticipate that 
an issuer will price a standardized option based on how similar or 
different the standardized option is to the issuer's current shelf 
(plan offerings). Because of the large variation across the country, we 
expect that how standardized options will be priced will vary by issuer 
and by State. We do not anticipate that it will significantly affect 
2017 plan premiums. We expect that issuers will offer standardized 
options at a given metal level if the standardized options are similar 
to their existing plans and can be priced competitively.
    The premium impact on issuers' non-standard plan offerings is 
difficult to estimate. Among the six State Exchanges that standardized 
plans and required standardized options to be offered by QHP issuers in 
2014, two (California and New York) that attempted to conduct premium 
impact analysis found that introduction of the requirement on issuers 
to offer standardized options was associated with a negligible or 
downward impact on premiums. However, these SBEs found it was difficult 
to isolate the effects of plan standardization on premiums given the 
many changes that occurred in the insurance market in 2014 (including 
the uptake in individual market enrollment, the movement to narrow 
networks, and active purchasing and rate negotiation in California).
    Again, we note that there is a great deal of uncertainty in how 
this policy will affect Exchanges due to several considerations:
     While we standardize cost-sharing on key essential health 
benefits, there are a wide range of other benefit design parameters 
that we will not standardize. It is not clear how this differentiation 
will manifest among plans or affect consumer choice.
     There is also wide geographic variation in health care 
markets, including with respect to prices, plan designs, and provider 
networks. As such, we anticipate that the take-up of standardized 
options and their impacts on consumers will vary in different locations 
across the country.
11. User Fees
    To support the operation of FFEs, we require in Sec.  156.50(c) 
that a participating issuer offering a plan through an FFE must remit a 
user fee to HHS each month equal to the product of the monthly user fee 
rate specified in the annual HHS notice of benefit and payment 
parameters for the applicable benefit year and the monthly premium 
charged by the issuer for each policy under the plan where enrollment 
is through an FFE. In this final rule, for the 2017 benefit year, we 
finalize a monthly FFE user fee rate equal to 3.5 percent of the 
monthly premium. For a State-based Exchange using the Federal platform, 
we finalize a user fee rate equal to 1.5 percent of the monthly 
premium. For the accounting statement of this rule, we have reduced the 
incremental increase in the user fee collected for the first year by 
one-half, after which we estimate $30 million in the amount of user 
fees collected from State-based Exchanges that use the Federal platform 
for 2017 and $65 million for years after 2017. For the user fee charges 
assessed on issuers in the FFE, we have previously received a waiver to 
OMB Circular No. A-25R, which requires that the user fee charge be 
sufficient to recover the full cost to the Federal government of 
providing the special benefit. Similarly, for this year, for the user 
fee charges assessed on issuers in the FFE and State-based Exchanges 
using the Federal platform, we have sought an exception to OMB Circular 
No. A-25R, which requires that the user fee charge be sufficient to 
recover the full cost to the Federal government of providing the 
special benefit. This exception ensures that the FFE can support many 
of the goals of the Affordable Care Act, including improving the health 
of the population, reducing health care costs, and providing access to 
health coverage as advanced by Sec.  156.50(d).
12. Actuarial Value
    In response to comments, we are clarifying that we take into 
consideration stakeholder feedback on needed changes. One commenter 
asked for the basis on which we concluded that the cost sharing changes 
that might be required by a change to the AV calculator would likely be 
minor. We note that because of the de minimis range established at 
Sec.  156.140, many plans do not require significant changes to cost-
sharing structure each year beyond those permitted by the statute (such 
as for changes to the annual limitation on cost sharing). However, 
where significant changes are required, for example when a plan has 
reached the permissible de minimis limit and the change in annual 
limitation on cost sharing does not fully accommodate changed 
calculations established by an updated AV Calculator, we acknowledge 
that plans likely engage in significant analysis in order to establish 
new cost-sharing structures. We do not anticipate that our policy 
providing us with additional flexibility in updating the AV Calculator 
will substantially change the number of plans for which new cost-
sharing structures must be calculated each year--it is our intent to 
continue to provide annual updates to the AV Calculator.
13. Network Adequacy
    In Sec.  156.230(e), we are finalizing our proposal to require QHPs 
in the FFEs to count certain out-of-network cost sharing towards the 
in-network annual limitation on cost sharing for enrollees who receive 
EHB from an out-of-network ancillary provider at an in-network setting, 
with modifications. The premium impact will vary based on existing 
State laws. We received no comments on this estimate.
14. Provisions Related to Cost Sharing
    The Affordable Care Act provides for the reduction or elimination 
of cost sharing for certain eligible individuals enrolled in QHPs 
offered through the Exchanges. This assistance will help many low- and 
moderate-income individuals and families obtain health insurance--for 
many people, cost sharing is a barrier to obtaining needed health 
care.\76\
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    \76\ Brook, Robert H., John E. Ware, William H. Rogers, Emmett 
B. Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A. 
Goldberg, Kathleen N. Lohr, Patricia Camp and Joseph P. Newhouse. 
The Effect of Coinsurance on the Health of Adults: Results from the 
RAND Health Insurance Experiment. Santa Monica, CA: RAND 
Corporation, 1984. Available at http://www.rand.org/pubs/reports/R3055.
---------------------------------------------------------------------------

    We set forth in this rule the reductions in the maximum annual 
limitation on cost sharing for silver plan variations. Consistent with 
our analysis in previous Payment Notices, we developed three model 
silver level QHPs and analyzed the impact on their AVs of the 
reductions described in the Affordable Care Act to the estimated 2017 
maximum annual limitation on cost sharing for self only coverage 
($7,150). We do not believe these changes will result in a significant 
economic impact. Therefore, we do not believe the provisions related to 
cost-sharing reductions in this rule will have an impact on the program 
established by and described in the 2015 and 2016 Payment Notices.

[[Page 12331]]

    We also finalize the premium adjustment percentage for the 2017 
benefit year. Section 156.130(e) provides that the premium adjustment 
percentage is the percentage (if any) by which the average per capita 
premium for health insurance coverage for the preceding calendar year 
exceeds such average per capita premium for health insurance for 2013. 
The annual premium adjustment percentage sets the rate of increase for 
three parameters detailed in the Affordable Care Act: the annual 
limitation on cost sharing (defined at Sec.  156.130(a)), the required 
contribution percentage by individuals for minimum essential coverage 
the Secretary may use to determine eligibility for hardship exemptions 
under section 5000A of the Code, and the assessable payments under 
sections 4980H(a) and 4980H(b). We believe that the 2017 premium 
adjustment percentage of 13.25256291 percent is well within the 
parameters used in the modeling of the Affordable Care Act, and we do 
not expect that these provisions will have a substantial, if any, 
effect on CBO's March 2016 baseline estimates of the budget impact.
15. Stand-Alone Dental Plans
    In Sec.  156.150, we are increasing the annual limitation on cost 
sharing for stand-alone dental plans being certified by the Exchanges. 
We believe that the benefit of increasing the annual limit on cost 
sharing is that issuers would be able to offer consumers SADPs that 
provide preventive care without any cost sharing, similar to what is 
generally offered by SADPs in the large group market. We received 
several comments noting that preventive care without any cost sharing 
would be easier to achieve with a high annual limitation on cost 
sharing. We have established that increasing the annual limitation on 
cost sharing over time will decrease the likelihood of premium 
increases.
16. Meaningful Difference
    In Sec.  156.298, we remove the health savings account eligibility 
and the individual coverage or enrollment group coverage criteria as 
options for meeting the meaningful difference standard. As we believe 
the health savings account eligibility criterion to overlap with cost-
sharing criterion (that is, we believe that a plan that meets the 
meaningful difference standard for health savings account eligibility 
would also meet the standard under the cost-sharing criterion), we do 
not believe that removing this criterion will have any impact on 
issuers. Additionally, our records indicate that no other than self-
only coverage plans were reviewed for meaningful difference in 2015 and 
none are offered for 2016 Open Enrollment, meaning that there will be 
limited impact on removing these criteria. As such, we estimate that 
the impact of this change is negligible.
17. Patient Safety Standards
    The next phase of patient safety standards requires QHP issuers 
participating in Exchanges to track hospital participation with PSOs or 
other evidence-based patient safety initiatives. We believe this new 
requirement to verify that hospitals use a patient safety evaluation 
tool and implement a comprehensive person-centered hospital discharge 
program would encourage continuous quality improvement among QHP 
issuers by strengthening system-wide efforts to reduce patient harm in 
a measurable way, improve health outcomes at lower costs, allow for 
flexibility and innovation in patient safety interventions and 
practices, and encourage meaningful health care quality improvements. 
We discuss the administrative costs associated with submitting this 
information in the Collection of Information section of this final 
rule.
18. Acceptance of Certain Third Party Payments
    On March 19, 2014, we published in the Federal Register an interim 
final rule (IFR) with comment period titled, Patient Protection and 
Affordable Care Act; Third Party Payment of Qualified Health Plan 
Premiums (79 FR 15240). In Sec.  156.1250, we finalize this rule to 
require individual market QHPs and SADPs to accept premium payments 
made by certain third parties. This rule describes the circumstances in 
which individual market QHPs and SADPs must accept payments made by 
Ryan White HIV/AIDS program; Federal and State government programs that 
provide premium and cost sharing support for specific individuals; and 
Indian tribes, tribal organizations, and urban Indian organizations. We 
do not believe these actions would impose any significant new costs on 
issuers because we assume that most issuers already accept such 
payments under our interim final rule.
19. Medical Loss Ratio
    This final rule amends the risk corridors program requirements at 
Sec.  153.530 to require issuers to true-up the claims liabilities and 
reserves used to determine the 2014 and 2015 allowable costs to reflect 
the actual claims payments made through March 31, 2016 and March 31, 
2017, respectively. We discuss the impact of this proposal on the risk 
corridors program elsewhere in this RIA. Because risk corridors 
payments and charges are a component of the MLR and rebate calculation, 
the impact of this amendment on risk corridors payments and charges may 
in turn affect MLR rebates to consumers. While, as noted previously, we 
are unable to estimate the magnitude of the net impact of this 
modification on risk corridors transfers, and consequently on MLR 
rebates, we believe that this amendment would increase rebate payments 
from issuers to consumers.

D. Regulatory Alternatives Considered

    In developing the policies contained in this final rule, we 
considered numerous alternatives to the presented proposals. Below we 
discuss the key regulatory alternatives that we considered.
    Regarding the open enrollment periods for 2017 and beyond, we 
considered gradually shifting the end of the open enrollment period 
earlier. However, we believe keeping the open enrollment period the 
same for benefit years 2017 and 2018 as it was for 2016 and then moving 
to a December 15 end date simplifies messaging to consumers, while 
achieving our ultimate goal of shifting the open enrollment period so 
that it ends prior to the start of the benefit year.
    Regarding the 2017 required contribution percentage, which 
establishes the threshold for spending on minimum essential coverage 
required for an affordability exemption from the individual shared 
responsibility requirement, we considered continuing to use the per 
capita gross domestic product as the measure of income growth. However, 
a new measure of income growth, per capita personal income, became 
available for the first time last year as part of the National Health 
Expenditure's projections, and includes not only participation in 
production but also transfer payments. We believe that this broader 
measure of personal income more accurately reflects individual income 
than GDP per capita.
    For SBE-FP model provisions at Sec.  155.200(f), we considered a 
number of alternatives. We considered not codifying the SBE-FP model, 
and winding down use of the Federal platform by SBEs. In this 
alternative, SBEs currently utilizing these services would have had to 
find a way to perform all required Exchange eligibility and enrollment 
functions themselves, including the implementation of an Exchange 
technology platform, or else convert to FFEs. We finalized the

[[Page 12332]]

proposal without significant change because we believe that it is 
technically feasible and will permit a number of SBEs to access the 
Federal government's greater economies of scale. We also considered a 
more customized option, under which an SBE would be permitted to select 
from a menu of Federal services. While we are considering providing 
more flexibility to SBE-FPs in the future, at this point we do not have 
the operational ability to permit that level of customization. Finally, 
we considered alternatives under which issuers and other delegated and 
downstream entities in States with SBE-FPs would not be required to 
meet FFE standards, or HHS would not participate in enforcement against 
issuers violating those FFE rules. We believe that applying Federal 
standards to issuers and their downstream entities for SBE-FPs helps 
promote consistent minimum standards associated with HealthCare.gov.
    For employer choice in the FF-SHOPs, we considered offering an 
additional employer choice option that would permit an employer to 
select an actuarial value level of coverage, after which employees 
could choose from plans available at that level and at the level above 
it. Recognizing that small group market dynamics differ by State, we 
decided to seek comment on, but not finalize this option at this time. 
We also considered requiring all SHOPs to offer the additional employer 
choice options we proposed, but instead generally opted to maintain 
State-based SHOPs' flexibility under the current regulations, so that 
States can decide whether implementing additional employer choice 
options would be in the best interest of small group market consumers 
in their State.
    We considered requiring QHP issuers to offer standardized options 
as a condition of participation in the FFEs. However, we believe that 
markets and Exchanges may be at different stages of readiness for 
standardized options, and that the cost-sharing structure that HHS 
specifies may not be well tailored for all States. Similarly, we 
believe that some issuers may have difficulty offering standardized 
options in the short run because of operational constraints.
    Since releasing the proposed rule, the NAIC has adopted the NAIC 
Network Adequacy Model Act.\77\ We applaud NAIC's work on the Model Act 
and appreciate the extensive efforts of the Network Adequacy Model 
Review Subgroup members, as well as the participating stakeholders. As 
a result of the NAIC Network Adequacy Model Act finalization, we made 
revisions to this rule to give States more opportunity to implement the 
NAIC Network Adequacy Model Act. For example, we elected not to 
finalize our policy requiring each State with an FFE to establish a 
minimum quantitative network adequacy threshold this year, and stated 
we would closely monitor States' efforts to implement the provisions of 
the NAIC Network Adequacy Model Act.
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    \77\ http://www.naic.org/store/free/MDL-74.pdf.
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    In Sec.  156.1110, we considered maintaining the current approach 
of aligning with Medicare hospital Conditions of Participation 
standards and not establishing further regulations at this time for QHP 
issuers to collect information, such as hospital participation 
agreements with PSOs, to comply with new patient safety standards for 
plan years beginning on or after January 1, 2017. However, we decided 
to adopt this next phase in this final rule because we believe that 
strengthening patient safety standards and aligning with current, 
effective patient safety interventions will achieve greater impact for 
consumers, in terms of health care quality improvement and harm 
reduction, resulting in higher quality QHPs being offered in the 
Exchanges. Additionally, we considered an approach that did not include 
establishing reasonable exceptions to the requirements for a QHP issuer 
that contracts with a hospital with greater than 50 beds to utilize a 
patient safety evaluation system and implement a mechanism for 
comprehensive person-centered hospital discharges, as described in 
section 1311(h)(1) of the Affordable Care Act. However, we determined 
that it is important to support national patient safety efforts, 
promote evidence-based patient safety interventions and allow for 
flexibility, innovation, and minimal burden for issuers and hospitals.

E. Regulatory Flexibility Act

    The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), requires 
agencies to prepare an initial regulatory flexibility analysis to 
describe the impact of the rule on small entities, unless the head of 
the agency can certify that the rule will not have a significant 
economic impact on a substantial number of small entities. The RFA 
generally defines a ``small entity'' as (1) a proprietary firm meeting 
the size standards of the Small Business Administration (SBA), (2) a 
not-for-profit organization that is not dominant in its field, or (3) a 
small government jurisdiction with a population of less than 50,000. 
States and individuals are not included in the definition of small 
entity. HHS uses a change in revenues of more than 3 to 5 percent as 
its measure of significant economic impact on a substantial number of 
small entities.
    In this rule, we set forth standards for the risk adjustment, 
reinsurance, and risk corridors programs, which are intended to 
stabilize premiums as insurance market reforms are implemented and 
Exchanges facilitate increased enrollment. Because we believe that 
insurance firms offering comprehensive health insurance policies 
generally exceed the size thresholds for small entities established by 
the SBA, we do not believe that an initial regulatory flexibility 
analysis is required for such firms.
    For purposes of the RFA, we expect the following types of entities 
to be affected by this rule:
     Health insurance issuers.
     Group health plans.
    We believe that health insurance issuers and group health plans 
would be classified under the North American Industry Classification 
System code 524114 (Direct Health and Medical Insurance Carriers). 
According to SBA size standards, entities with average annual receipts 
of $38.5 million or less would be considered small entities for these 
North American Industry Classification System codes. Issuers could 
possibly be classified in 621491 (HMO Medical Centers) and, if this is 
the case, the SBA size standard would be $32.5 million or less.
    Based on data from MLR annual report submissions for the 2014 MLR 
reporting year, approximately 118 out of 525 issuers of health 
insurance coverage nationwide had total premium revenue of $38.5 
million or less. This estimate may overstate the actual number of small 
health insurance companies that may be affected, since almost 80 
percent of these small companies belong to larger holding groups, and 
many if not all of these small companies are likely to have non-health 
lines of business that would result in their revenues exceeding $38.5 
million. Based on data from the 2014 MLR and risk corridors annual 
report submissions, 20 of these 118 potentially small entities had risk 
corridors payments or charges for the 2014 benefit year. Only one of 
these entities is estimated to experience a decrease in its risk 
corridors payment under the provisions in Sec.  153.530(b)(2)(iv), with 
no impact on its rebate liability. Therefore, we do not expect the 
provisions of this rule to affect a substantial number of small health 
insurance issuers or group health plans.
    Among the policies established by this rule are policies that could 
increase the choice of QHPs available to small

[[Page 12333]]

groups participating in an FF-SHOP, and policies imposing requirements, 
including information collection requirements, on Navigators, non-
Navigator assistance personnel, and certified application counselor 
organizations. We believe that the effects on small employers 
participating in an FF-SHOP are difficult to quantify, but will not 
result in substantial additional burden, since they will simply permit 
certain small employers greater choice in the QHPs they may make 
available. The burden estimates for Navigators, non-Navigator 
assistance personnel, and certified application counselor organizations 
are described elsewhere in the ICR and RIA sections of this final rule.

F. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a rule that includes any Federal 
mandate that may result in expenditures in any 1 year by a State, 
local, or Tribal governments, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. Currently that threshold is approximately $144 million. 
Although we have not been able to quantify all costs, the combined 
administrative cost and user fee impact on State, local, or Tribal 
governments and the private sector may be above the threshold. Earlier 
portions of this RIA constitute our UMRA analysis.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. Because States have 
flexibility in designing their Exchange and Exchange-related programs, 
State decisions will ultimately influence both administrative expenses 
and overall premiums. States are not required to establish an Exchange 
or risk adjustment or reinsurance program. For States electing to 
operate an Exchange, risk adjustment or reinsurance program, much of 
the initial cost of creating these programs was funded by Exchange 
Planning and Establishment Grants. After establishment, Exchanges will 
be financially self-sustaining, with revenue sources at the discretion 
of the State. Current State Exchanges may charge user fees to issuers.
    In HHS's view, while this rule would not impose substantial direct 
requirement costs on State and local governments, this regulation has 
Federalism implications due to direct effects on the distribution of 
power and responsibilities among the State and Federal governments 
relating to determining standards relating to health insurance that is 
offered in the individual and small group markets. For example, in this 
final rule we have established a number of policies relating to network 
adequacy and continuity of care for QHPs on FFEs. States have 
traditionally played a major role in regulating these aspects of health 
insurance, when offered off the Exchange.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policy making discretion of the States, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected States, including participating in conference calls with and 
attending conferences of the National Association of Insurance 
Commissioners, and consulting with State insurance officials on an 
individual basis. Following review of comments from State insurance 
officials and the NAIC, we have made substantial changes to our network 
adequacy policies in this final rule.
    Throughout the process of developing the proposed and final rule, 
HHS has attempted to balance the States' interests in regulating health 
insurance issuers, and Congress' intent to provide access to Affordable 
Insurance Exchanges for consumers in every State. By doing so, it is 
HHS's view that we have complied with the requirements of Executive 
Order 13132.

H. Congressional Review Act

    This rule is subject to the Congressional Review Act provisions of 
the Small Business Regulatory Enforcement Fairness Act of 1996 (5 
U.S.C. 801, et seq.), which specifies that before a rule can take 
effect, the Federal agency promulgating the rule shall submit to each 
House of the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has been transmitted to Congress and the Comptroller General for 
review.

List of Subjects

45 CFR Parts 144 and 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 153

    Administrative practice and procedure, Health care, Health 
insurance, Health records, Organization and functions (Government 
agencies), Reporting and recordkeeping requirements.

45 CFR Part 154

    Administrative practice and procedure, Claims, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

45 CFR Part 155

    Administrative practice and procedure, Health care, Health 
insurance, Reporting and recordkeeping requirements, State and local 
governments

45 CFR Part 156

    Administrative practice and procedure, Advertising, American 
Indian/Alaska Natives, Conflict of interest, Consumer protection, Cost-
sharing reductions, Grant programs--health, Grants administration, 
Health care, Health insurance, Health maintenance organization (HMO), 
Health records, Hospitals, Individuals with disabilities, Loan 
programs--health, Medicaid, Organization and functions (Government 
agencies), Public assistance programs, Reporting and recordkeeping 
requirements, State and local governments, Sunshine Act, Technical 
assistance, Women, Youth.

45 CFR Part 158

    Administrative practice and procedure, Claims, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 144, 147, 153, 154, 155, 156, 
and 158 as set forth below.

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
1. The authority citation for part 144 continues to read as follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public 
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92.


0
2. Section 144.103 is amended by revising paragraph (1) of the 
definition of ``Excepted benefits'' and revising the definitions of 
``Large employer'' and ``Small employer'' to read as follows:


Sec.  144.103  Definitions.

* * * * *
    Excepted benefits * * *

[[Page 12334]]

    (1) Group market provisions in 45 CFR part 146, subpart D, is 
defined in 45 CFR 146.145(b); and
* * * * *
    Large employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 51 employees on business days during the preceding 
calendar year and who employs at least 1 employee on the first day of 
the plan year. A State may elect to define large employer by 
substituting ``101 employees'' for ``51 employees.'' In the case of an 
employer that was not in existence throughout the preceding calendar 
year, the determination of whether the employer is a large employer is 
based on the average number of employees that it is reasonably expected 
the employer will employ on business days in the current calendar year.
* * * * *
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 1 but not more than 50 employees on business days 
during the preceding calendar year and who employs at least 1 employee 
on the first day of the plan year. A State may elect to define small 
employer by substituting ``100 employees'' for ``50 employees.'' In the 
case of an employer that was not in existence throughout the preceding 
calendar year, the determination of whether the employer is a small 
employer is based on the average number of employees that it is 
reasonably expected the employer will employ on business days in the 
current calendar year.
* * * * *

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
3. The authority citation for part 147 continues to read as follows:

    Authority: Secs 2701 through 2763, 2791, and 2792 of the Public 
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92), as amended.


0
4. Section 147.102 is amended by revising paragraph (a)(1)(ii) to read 
as follows:


Sec.  147.102  Fair health insurance premiums.

    (a) * * *
    (1) * * *
    (ii) Rating area, as established in accordance with paragraph (b) 
of this section. For purposes of this paragraph (a), rating area is 
determined--
    (A) In the individual market, using the primary policyholder's 
address.
    (B) In the small group market, using the group policyholder's 
principal business address. For purposes of this paragraph 
(a)(1)(ii)(B), principal business address means the principal business 
address registered with the State or, if a principal business address 
is not registered with the State, or is registered solely for purposes 
of service of process and is not a substantial worksite for the 
policyholder's business, the business address within the State where 
the greatest number of employees of such policyholder works. If, for a 
network plan, the group policyholder's principal business address is 
not within the service area of such plan, and the policyholder has 
employees who live, reside, or work within the service area, the 
principal business address for purposes of the network plan is the 
business address within the plan's service area where the greatest 
number of employees work as of the beginning of the plan year. If there 
is no such business address, the rating area for purposes of the 
network plan is the rating area that reflects where the greatest number 
of employees within the plan's service area live or reside as of the 
beginning of the plan year.
* * * * *

0
5. Section 147.145 is amended by revising paragraphs (b)(2) and (3) and 
removing paragraphs (d) and (e) to read as follows:


Sec.  147.145  Student health insurance coverage.

* * * * *
    (b) * * *
    (2) Levels of coverage. The requirement to provide a specific level 
of coverage described in section 1302(d) of the Affordable Care Act 
does not apply to student health insurance coverage for policy years 
beginning on or after July 1, 2016. However, the benefits provided by 
such coverage must provide at least 60 percent actuarial value, as 
calculated in accordance with Sec.  156.135 of this subchapter. The 
issuer must specify in any plan materials summarizing the terms of the 
coverage the actuarial value and level of coverage (or next lowest 
level of coverage) the coverage would otherwise satisfy under Sec.  
156.140 of this subchapter.
    (3) Single risk pool. Student health insurance coverage is not 
subject to the requirements of section 1312(c) of the Affordable Care 
Act. A health insurance issuer that offers student health insurance 
coverage may establish one or more separate risk pools for an 
institution of higher education, if the distinction between or among 
groups of students (or dependents of students) who form the risk pool 
is based on a bona fide school-related classification and not based on 
a health factor (as described in Sec.  146.121 of this subchapter). 
However, student health insurance rates must reflect the claims 
experience of individuals who comprise the risk pool, and any 
adjustments to rates within a risk pool must be actuarially justified.
* * * * *

PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND 
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT

0
6. The authority citation for part 153 continues to read as follows:

    Authority: Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24 
Stat. 119.


0
7. Section 153.405 is amended by revising paragraph (i) to read as 
follows:


Sec.  153.405  Calculation of reinsurance contributions.

* * * * *
    (i) Audits. HHS or its designee may audit a contributing entity to 
assess its compliance with the requirements of this subpart. A 
contributing entity that uses a third party administrator, 
administrative services-only contractor, or other third party to assist 
with its obligations under this subpart must ensure that the third 
party administrator, administrative services-only contractor, or other 
third party cooperates with any audit under this section.

0
8. Section 153.510 is amended by adding paragraph (g) to read as 
follows:


Sec.  153.510  Risk corridors establishment and payment methodology.

* * * * *
    (g) Adjustment to risk corridors payments and charges. If an issuer 
reported a certified estimate of 2014 cost-sharing reductions on its 
2014 MLR and Risk Corridors Annual Reporting Form that is lower than 
the actual value of cost-sharing reductions calculated under Sec.  
156.430(c) of this subchapter for the 2014 benefit year, HHS will make 
an adjustment to the amount of the issuer's 2015 benefit year risk 
corridors payment or charge measured by the full difference between the 
certified estimate of 2014 cost-sharing reductions reported and the 
actual value of cost-sharing reductions provided as calculated under 
Sec.  156.430(c) for the 2014 benefit year.

0
9. Section 153.530 is amended by revising paragraphs (b)(2)(ii) and 
(iii) and adding paragraph (b)(2)(iv) to read as follows:

[[Page 12335]]

Sec.  153.530  Risk corridors data requirements.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Any reinsurance payments received by the issuer for the non-
grandfathered health plans under the transitional reinsurance program 
established under subpart C of this part;
    (iii) A cost-sharing reduction amount equal to the amount of cost-
sharing reductions for the benefit year as calculated under Sec.  
156.430(c) of this subchapter, to the extent not reimbursed to the 
provider furnishing the item or service.
    (iv) For the 2015 and 2016 benefit years, any difference between--
    (A) The sum of unpaid claims reserves and claims incurred but not 
reported, as set forth in Sec. Sec.  158.103 and 158.140(a)(2) and (3) 
of this subchapter, that were reported on the MLR and Risk Corridors 
Annual Reporting Form for the year preceding the benefit year; and
    (B) The actual claims incurred during the year preceding the 
benefit year and paid between March 31 of the benefit year and March 31 
of the year following the benefit year.
* * * * *

0
10. Section 153.710 is amended by--
0
a. Removing paragraph (d).
0
b. Redesignating paragraphs (e) and (f) as paragraphs (d) and (e), 
respectively.
0
c. Revising newly redesignated paragraph (e).
0
d. Adding paragraph (f).
0
e. Adding paragraph (g) introductory text and revising paragraphs 
(g)(1) introductory text, (g)(1)(iii) and (iv), and (g)(2).
0
f. Adding paragraph (g)(3).
    The revisions and additions read as follows:


Sec.  153.710  Data requirements.

* * * * *
    (e) Unresolved discrepancies. If a discrepancy first identified in 
a final dedicated distributed data environment report in accordance 
with paragraph (d)(2) of this section remains unresolved after the 
issuance of the notification of risk adjustment payments and charges or 
reinsurance payments under Sec.  153.310(e) or Sec.  153.240(b)(1)(ii), 
respectively, an issuer of a risk adjustment covered plan or 
reinsurance-eligible plan may make a request for reconsideration 
regarding such discrepancy under the process set forth in Sec.  
156.1220(a) of this subchapter.
    (f) Evaluation of dedicated distributed data. If an issuer of a 
risk adjustment covered plan fails to provide sufficient required data, 
such that HHS cannot apply the applicable methodology to calculate the 
risk adjustment payment transfer amount for the risk adjustment covered 
plan in a timely or appropriate fashion, then HHS will assess a default 
risk adjustment charge under Sec.  153.740(b). If an issuer of a 
reinsurance eligible plan fails to provide data sufficient for HHS to 
calculate reinsurance payments, the issuer will forfeit reinsurance 
payments for claims it fails to submit.
    (1) Data quantity. An issuer of a risk adjustment covered plan or a 
reinsurance-eligible plan must provide, in a format and on a timeline 
specified by HHS, data on its total enrollment and claims counts by 
market, which HHS may use in evaluating whether the issuer provided 
access in the dedicated distributed data environment to a sufficient 
quantity of data to meet reinsurance and risk adjustment data 
requirements.
    (2) Data quality. If, following the deadline for submission of data 
specified in Sec.  153.730, HHS identifies an outlier that would cause 
the data that a risk adjustment covered plan or a reinsurance-eligible 
plan made available through a dedicated distributed data environment to 
fail HHS's data quality thresholds, the issuer may, within 10 calendar 
days of receiving notification of the outlier, submit an explanation of 
the outlier for HHS to consider in determining whether the issuer met 
the reinsurance and risk adjustment data requirements.
    (g) Risk corridors and MLR reporting. Except as provided in 
paragraph (g)(3) of this section:
    (1) Notwithstanding any discrepancy report made under paragraph 
(d)(2) of this section, or any request for reconsideration under Sec.  
156.1220(a) of this subchapter with respect to any risk adjustment 
payment or charge, including an assessment of risk adjustment user 
fees; reinsurance payment; cost-sharing reduction payment or charge; or 
risk corridors payment or charge, unless the dispute has been resolved, 
an issuer must report, for purposes of the risk corridors and MLR 
programs:
* * * * *
    (iii) A cost-sharing reduction amount equal to the actual amount of 
cost-sharing reductions for the benefit year as calculated under Sec.  
156.430(c) of this subchapter, to the extent not reimbursed to the 
provider furnishing the item or service; and
    (iv) For medical loss ratio reporting only, the risk corridors 
payment to be made or charge assessed by HHS under Sec.  153.510.
    (2) An issuer must report during the current MLR and risk corridors 
reporting year any adjustment made or approved by HHS for any risk 
adjustment payment or charge, including an assessment of risk 
adjustment user fees; any reinsurance payment; any cost-sharing 
reduction payment or charge; or any risk corridors payment or charge 
before August 15, or the next applicable business day, of the current 
MLR and risk corridors reporting year unless instructed otherwise by 
HHS. An issuer must report any adjustment made or approved by HHS for 
any risk adjustment payment or charge, including an assessment of risk 
adjustment user fees; any reinsurance payment; any cost-sharing 
reduction payment or charge; or any risk corridors payment or charge 
where such adjustment has not been accounted for in a prior MLR and 
Risk Corridor Annual Reporting Form, in the MLR and Risk Corridors 
Annual Reporting Form for the following reporting year.
    (3) In cases where HHS reasonably determines that the reporting 
instructions in paragraph (g)(1) or (2) of this section would lead to 
unfair or misleading financial reporting, issuers must correct their 
data submissions in a form and manner to be specified by HHS.

PART 154--HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND 
REVIEW REQUIREMENTS

0
11. The authority citation for part 154 continues to read as follows:

    Authority:  Section 2794 of the Public Health Service Act (42 
U.S.C. 300gg-94).


0
12. Section 154.200 is amended by revising paragraph (c)(2) to read as 
follows:


Sec.  154.200  Rate increases subject to review.

* * * * *
    (c) * * *
    (2) For rates filed for single risk pool coverage beginning on or 
after January 1, 2017, the average increase, including premium rating 
factors described in Sec.  147.102 of this subchapter, for all 
enrollees weighted by premium volume for any plan within the product 
meets or exceeds the applicable threshold.
* * * * *

0
13. Section 154.215 is amended by revising paragraphs (a) and (b) 
introductory text and removing and reserving paragraph (c) to read as 
follows:

[[Page 12336]]

Sec.  154.215  Submission of rate filing justification.

    (a) A health insurance issuer must submit to CMS and to the 
applicable State (if the State accepts such submissions) the 
information specified below on a form and in a manner prescribed by the 
Secretary.
    (1) For all single risk pool products, including new and 
discontinuing products, the Unified Rate Review Template, as described 
in paragraph (d) of this section;
    (2) For each single risk pool product that includes a plan that is 
subject to a rate increase, regardless of the size of the increase, the 
unified rate review template and actuarial memorandum, as described in 
paragraph (f) of this section;
    (3) For each single risk pool product that includes a plan with a 
rate increase that is subject to review under Sec.  154.210, all parts 
of the Rate Filing Justification, as described in paragraph (b) of this 
section
    (b) A Rate Filing Justification includes one or more of the 
following:
* * * * *

0
14. Section 154.220 is amended by revising the introductory text and 
paragraphs (b) introductory text and (b)(1) to read as follows:


Sec.  154.220  Timing of providing the rate filing justification.

    A health insurance issuer must submit applicable sections of the 
Rate Filing Justification for all single risk pool coverage in the 
individual or small group market, as follows:
* * * * *
    (b) For coverage effective on or after January 1, 2017, by the 
earlier of the following:
    (1) The date by which the State requires submission of a rate 
filing; or
* * * * *

0
15. Section 154.230 is amended by revising paragraph (c)(2)(i) to read 
as follows:


Sec.  154.230  Submission and posting of Final Justifications for 
unreasonable rate increases.

* * * * *
    (c) * * *
    (2) * * *
    (i) The information made available to the public by CMS and 
described in Sec.  154.215(h).
* * * * *

PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED 
STANDARDS UNDER THE AFFORDABLE CARE ACT

0
16. The authority citation for part 155 continues to read as follows:

    Authority:  Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334, 
1402, 1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 
18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 
18081-18083).


0
17. Section 155.20 is amended by--
0
a. Revising paragraph (2) in the definition of ``Applicant''.
0
b. Adding the definitions of ``Federal platform agreement'' and 
``Standardized option'' in alphabetical order.
0
c. Revising the definitions of ``Large employer'' and ``Small 
employer''.
    The addition and revisions read as follows:


Sec.  155.20  Definitions.

* * * * *
    Applicant * * *
    (2) For SHOP:
    (i) An employer seeking eligibility to purchase coverage through 
the SHOP; or
    (ii) An employer, employee, or a former employee seeking 
eligibility for enrollment in a QHP through the SHOP for himself or 
herself and, if the qualified employer offers dependent coverage 
through the SHOP, seeking eligibility to enroll his or her dependents 
in a QHP through the SHOP.
* * * * *
    Federal platform agreement means an agreement between a State 
Exchange and HHS under which a State Exchange agrees to rely on the 
Federal platform to carry out select Exchange functions.
* * * * *
    Large employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 51 employees on business days during the preceding 
calendar year and who employs at least 1 employee on the first day of 
the plan year. In the case of an employer that was not in existence 
throughout the preceding calendar year, the determination of whether 
the employer is a large employer is based on the average number of 
employees that it is reasonably expected the employer will employ on 
business days in the current calendar year. A State may elect to define 
large employer by substituting ``101 employees'' for ``51 employees.'' 
The number of employees must be determined using the method set forth 
in section 4980H(c)(2) of the Code.
* * * * *
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least one but not more than 50 employees on business days 
during the preceding calendar year and who employs at least one 
employee on the first day of the plan year. In the case of an employer 
that was not in existence throughout the preceding calendar year, the 
determination of whether the employer is a small employer is based on 
the average number of employees that it is reasonably expected the 
employer will employ on business days in the current calendar year. A 
State may elect to define small employer by substituting ``100 
employees'' for ``50 employees.'' The number of employees must be 
determined using the method set forth in section 4980H(c)(2) of the 
Code.
* * * * *
    Standardized option means a QHP with a standardized cost-sharing 
structure specified by HHS in rulemaking and that is offered for sale 
through an individual market Exchange.
* * * * *

0
18. Section 155.106 is amended by--
0
a. Revising paragraphs (a) introductory text, (a)(2) and (3), and (b) 
introductory text.
0
b. Adding paragraphs (a)(4) and (5) and (c).
    The revisions and additions read as follows:


Sec.  155.106  Election to operate an Exchange after 2014.

    (a) Election to operate an Exchange. Except as provided in 
paragraph (c) of this section, a State electing to seek approval of its 
Exchange must:
* * * * *
    (2) Submit an Exchange Blueprint application for HHS approval at 
least 15 months prior to the date on which the Exchange proposes to 
begin open enrollment as a State Exchange;
    (3) Have in effect an approved, or conditionally approved, Exchange 
Blueprint and operational readiness assessment at least 14 months prior 
to the date on which the Exchange proposes to begin open enrollment as 
a State Exchange;
    (4) Develop a plan jointly with HHS to facilitate the transition to 
a State Exchange; and
    (5) If the open enrollment period for the year the State intends to 
begin operating an SBE has not been established, this deadline must be 
calculated based on the date open enrollment began or will begin in the 
year in which the State is submitting the Blueprint application.

[[Page 12337]]

    (b) Transition process for State Exchanges that cease operations. 
If a State intends to cease operation of its Exchange, HHS will operate 
the Exchange on behalf of the State. Therefore, a State that intends to 
cease operations of its Exchange must:
* * * * *
    (c) Process for State Exchanges that seek to utilize the Federal 
platform for select functions. A State seeking approval as a State 
Exchange utilizing the Federal platform to support select functions 
through a Federal platform agreement under Sec.  155.200(f) must:
    (1) If the State Exchange does not have a conditionally approved 
Exchange Blueprint application, submit one for HHS approval at least 3 
months prior to the date on which the Exchange proposes to begin open 
enrollment as an SBE-FP;
    (2) If the State Exchange has a conditionally approved Exchange 
Blueprint application, submit any significant changes to that 
application for HHS approval, in accordance with Sec.  155.105(e), at 
least 3 months prior to the date on which the Exchange proposes to 
begin open enrollment as an SBE-FP;
    (3) Have in effect an approved, or conditionally approved, Exchange 
Blueprint and operational readiness assessment at least 2 months prior 
to the date on which the Exchange proposes to begin open enrollment as 
an SBE-FP, in accordance with HHS rules, as a State Exchange utilizing 
the Federal platform;
    (4) Prior to approval, or conditional approval, of the Exchange 
Blueprint, execute a Federal platform agreement for utilizing the 
Federal platform for select functions; and
    (5) Coordinate with HHS on a transition plan to be developed 
jointly between HHS and the State.

0
19. Section 155.170 is amended by revising paragraphs (a)(2) and (3) 
and (c)(2)(iii) to read as follows:


Sec.  155.170  Additional required benefits.

    (a) * * *
    (2) A benefit required by State action taking place on or before 
December 31, 2011 is considered an EHB. A benefit required by State 
action taking place on or after January 1, 2012, other than for 
purposes of compliance with Federal requirements, is considered in 
addition to the essential health benefits.
    (3) The State will identify which State-required benefits are in 
addition to the EHB.
* * * * *
    (c) * * *
    (2) * * *
    (iii) Reported to the State.

0
20. Section 155.200 is amended by revising paragraph (a) and adding 
paragraph (f) to read as follows:


Sec.  155.200  Functions of an Exchange.

    (a) General requirements. An Exchange must perform the functions 
described in this subpart and in subparts D, E, F, G, H, K, M, and O of 
this part unless the State is approved to operate only a SHOP by HHS 
under Sec.  155.100(a)(2), in which case the Exchange operated by the 
State must perform the functions described in subpart H of this part 
and all applicable provisions of other subparts referenced in that 
subpart. In a State that is approved to operate only a SHOP, the 
individual market Exchange operated by HHS in that State will perform 
the functions described in this subpart and in subparts D, E, F, G, K, 
M, and O of this part.
* * * * *
    (f) Requirements for State Exchanges on the Federal platform. (1) A 
State that receives approval or conditional approval to operate a State 
Exchange on the Federal platform under Sec.  155.106(c) may meet its 
obligations under paragraph (a) of this section by relying on Federal 
services that the Federal government agrees to provide under a Federal 
platform agreement.
    (2) A State Exchange on the Federal platform must establish and 
oversee requirements for its issuers that are no less strict than the 
following requirements that are applied to Federally-facilitated 
Exchange issuers:
    (i) Data submission requirements under Sec.  156.122(d)(2) of this 
subchapter;
    (ii) Network adequacy standards under Sec.  156.230 of this 
subchapter;
    (iii) Essential community providers standards under Sec.  156.235 
of this subchapter;
    (iv) Meaningful difference standards under Sec.  156.298 of this 
subchapter;
    (v) Changes of ownership of issuers requirements under Sec.  
156.330 of this subchapter;
    (vi) QHP issuer compliance and compliance of delegated or 
downstream entities requirements under Sec.  156.340(a)(4) of this 
subchapter; and
    (vii) Casework requirements under Sec.  156.1010 of this 
subchapter.
    (3) If a State is not substantially enforcing any requirement 
listed under Sec.  155.200(f)(2) with respect to a QHP issuer or plan 
in a State-based Exchange on the Federal platform, HHS may enforce that 
requirement directly against the issuer or plan by means of plan 
suppression under Sec.  156.815 of this subchapter.
0
21. Section 155.205 is amended by--
0
a. Revising paragraphs (a), (b)(1) introductory text, and (d)(1).
0
b. Adding paragraph (b)(7).
    The addition and revisions read as follows:


Sec.  155.205  Consumer assistance tools and programs of an Exchange.

    (a) Call center. The Exchange must provide for operation of a toll-
free call center that addresses the needs of consumers requesting 
assistance and meets the requirements outlined in paragraphs (c)(1), 
(c)(2)(i), and (c)(3) of this section, unless it enters into a Federal 
platform agreement through which it relies on HHS to carry out call 
center functions, in which case the Exchange must provide at a minimum 
a toll-free telephone hotline to respond to requests for assistance and 
appropriately directs consumers to Federal platform services to apply 
for, and enroll in, Exchange coverage.
    (b) * * *
    (1) Provides standardized comparative information on each available 
QHP, which may include differential display of standardized options on 
consumer-facing plan comparison and shopping tools, and at a minimum 
includes:
* * * * *
    (7) A State-based Exchange on the Federal platform must at a 
minimum maintain an informational Internet Web site that includes the 
capability to direct consumers to Federal platform services to apply 
for, and enroll in, Exchange coverage.
* * * * *
    (d) * * *
    (1) The Exchange must have a consumer assistance function that 
meets the standards in paragraph (c) of this section, including the 
Navigator program described in Sec.  155.210. Any individual providing 
such consumer assistance must be trained regarding QHP options, 
insurance affordability programs, eligibility, and benefits rules and 
regulations governing all insurance affordability programs operated in 
the State, as implemented in the State, prior to providing such 
assistance or the outreach and education activities specified in 
paragraph (e) of this section.
* * * * *

0
22. Section 155.210 is amended by--
0
a. Revising paragraphs (b)(2)(iii) and (iv).
0
b. Adding paragraphs (b)(2)(v) through (ix).
0
c. Revising paragraphs (d)(6) and (e)(6)(i).
0
d. In paragraph (e)(7), removing the period at the end of the paragraph 
and adding a semicolon in its place.

[[Page 12338]]

0
e. Adding paragraphs (e)(8) and (9).
    The revisions and additions read as follows:


Sec.  155.210  Navigator program standards.

* * * * *
    (b) * * *
    (2) * * *
    (iii) The range of QHP options and insurance affordability 
programs;
    (iv) The privacy and security standards applicable under Sec.  
155.260;
    (v) In an Exchange that requires Navigators to provide the 
assistance specified in paragraph (e)(9)(i) of this section, the 
process of filing Exchange eligibility appeals;
    (vi) In an Exchange that requires Navigators to provide the 
assistance specified in paragraph (e)(9)(ii) of this section, general 
concepts regarding exemptions from the requirement to maintain minimum 
essential coverage and from the individual shared responsibility 
payment, including the application process for exemptions granted 
through the Exchange, and IRS resources on exemptions;
    (vii) In an Exchange that requires Navigators to provide the 
assistance specified in paragraph (e)(9)(iii) of this section, the 
Exchange-related components of the premium tax credit reconciliation 
process and IRS resources on this process;
    (viii) In an Exchange that requires Navigators to provide the 
assistance specified in paragraph (e)(9)(iv) of this section, basic 
concepts and rights related to health coverage and how to use it; and
    (ix) In an Exchange that requires Navigators to provide the 
assistance specified in paragraph (e)(9)(v) of this section, providing 
referrals to licensed tax advisers, tax preparers, or other resources 
for assistance with tax preparation and tax advice related to consumer 
questions about the Exchange application and enrollment process, 
exemptions from the requirement to maintain minimum essential coverage 
and from the individual shared responsibility payment, and premium tax 
credit reconciliations.
* * * * *
    (d) * * *
    (6) Provide to an applicant or potential enrollee gifts of any 
value as an inducement for enrollment. The value of gifts provided to 
applicants and potential enrollees for purposes other than as an 
inducement for enrollment must not exceed nominal value, either 
individually or in the aggregate, when provided to that individual 
during a single encounter. For purposes of this paragraph (d)(6), the 
term gifts includes gift items, gift cards, cash cards, cash, and 
promotional items that market or promote the products or services of a 
third party, but does not include the reimbursement of legitimate 
expenses incurred by a consumer in an effort to receive Exchange 
application assistance, such as travel or postage expenses.
* * * * *
    (e) * * *
    (6) * * *
    (i) Are informed, prior to receiving assistance, of the functions 
and responsibilities of Navigators, including that Navigators are not 
acting as tax advisers or attorneys when providing assistance as 
Navigators and cannot provide tax or legal advice within their capacity 
as Navigators;
* * * * *
    (8) Provide targeted assistance to serve underserved or vulnerable 
populations, as identified by the Exchange, within the Exchange service 
area.
    (i) In a Federally-facilitated Exchange, this paragraph (e)(8) will 
apply beginning with the Navigator grant application process for 
Navigator grants awarded in 2018. The Federally-facilitated Exchange 
will identify populations as vulnerable or underserved that are 
disproportionately without access to coverage or care, or that are at a 
greater risk for poor health outcomes, in the funding opportunity 
announcement for its Navigator grants, and applicants for those grants 
will have an opportunity to propose additional vulnerable or 
underserved populations in their applications for the Federally-
facilitated Exchange's approval.
    (ii) [Reserved]
    (9) The Exchange may require or authorize Navigators to provide 
information and assistance with any of the following topics. In 
Federally-facilitated Exchanges, Navigators are authorized to provide 
information and assistance with any of the following topics and will be 
required to provide information and assistance with all of the 
following topics under Navigator grants awarded in 2018 or any later 
year.
    (i) Understanding the process of filing Exchange eligibility 
appeals;
    (ii) Understanding and applying for exemptions from the individual 
shared responsibility payment that are granted through the Exchange, 
understanding the availability of exemptions from the requirement to 
maintain minimum essential coverage and from the individual shared 
responsibility payment that are claimed through the tax filing process 
and how to claim them, and understanding the availability of IRS 
resources on this topic;
    (iii) The Exchange-related components of the premium tax credit 
reconciliation process, and understanding the availability of IRS 
resources on this process;
    (iv) Understanding basic concepts and rights related to health 
coverage and how to use it; and
    (v) Referrals to licensed tax advisers, tax preparers, or other 
resources for assistance with tax preparation and tax advice related to 
consumer questions about the Exchange application and enrollment 
process, exemptions from the requirement to maintain minimum essential 
coverage and from the individual shared responsibility payment, and 
premium tax credit reconciliations.
* * * * *

0
23. Section 155.215 is amended by revising paragraphs (b)(1)(i) and 
(g)(1) to read as follows:


Sec.  155.215  Standards applicab