Title 42—Public Health--Volume 1
PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
§ 423.520   Prompt payment by Part D sponsors.
(a) Contract between CMS and the Part D sponsor. (1) Effective contract year 2010, the contract between the Part D sponsor and CMS must provide that the Part D sponsor will issue, mail, or otherwise transmit payment with respect to all clean claims, as defined in paragraph (b) of this section, submitted by network pharmacies (other than mail-order and long-term care pharmacies) within—
(i) 14 days after the date on which the claim is received, as defined in paragraph (a)(2)(i) of this section, for an electronic claim; or
(ii) 30 days after the date on which the claim is received, as defined in paragraph (a)(2)(ii) of this section, for any other claim.
(2) Date of receipt of claim. A claim is considered to have been received—
(i) On the date on which the claim is transferred, for an electronic claim; or
(ii) On the 5th day after the postmark day of the claim or the date specified in the time stamp of the transmission, for any other claim, whichever is sooner.
(b) Clean claim. A clean claim means a claim that has no defect or impropriety (including any lack of any required substantiating documentation) or particular circumstance requiring special treatment that prevents timely payment of the claim from being made under this section.
(c) Procedures involving claims —(1) Claims determined to be clean. A claim is deemed to be a clean claim if the Part D sponsor receiving the claim does not provide notice to the submitting network pharmacy of any deficiency in the claim within—
(i) 10 days after the date on which the claim is received, as defined in paragraph (a)(2)(i) of this section, for an electronic claim; or
(ii) 15 days after the date on which the claim is received, as defined in paragraph (a)(2)(ii) of this section, for any other claim.
(2) Claims determined not to be clean —(i) General. If a Part D sponsor determines that a submitted claim is not a clean claim, as defined in paragraph (b) of this section, the Part D sponsor must notify the submitting network pharmacy of such determination within the period described in paragraph (c)(1) of this section. Such notification must specify all defects or improprieties in the claim and must list all additional information necessary for the proper processing and payment of the claim.
(ii) Determination after submission of additional information. A claim is deemed to be a clean claim under paragraph (b) of this section if the Part D sponsor that receives the claim does not provide notice to the submitting network pharmacy of any remaining defect or impropriety, or of any new defect or impropriety raised by the additional information, in the claim within 10 days of the date on which additional information is received under paragraph (c)(2)(i) of this section. A Part D sponsor may not provide notice of a new deficiency or impropriety in the claim that could have been identified by the sponsor in the original claim submission under this paragraph.
(3) Obligation to pay. A claim submitted to a Part D sponsor that is not paid by the Part D sponsor within the timeframes specified in paragraphs (a)(1)(i) and (ii) or contested by the Part D sponsor within the timeframe specified in paragraph (c)(1)(i) and (ii) of this section must be deemed to be a clean claim and must be paid by the Part D sponsor in accordance with paragraph (a) of this section.
(d) Date of payment of claim. Payment of a clean claim under paragraph (c)(3) of this section is considered to have been made on the date on which—
(1) The payment is transferred, for an electronic claim; or
(2) The payment is submitted to the United States Postal Service or common carrier for delivery, for any other claim.
(e) Interest payment —(1) General. Subject to paragraph (e)(2) of this section, if payment is not issued, mailed or otherwise transmitted for a clean claim as required under paragraph (a) of this section, the Part D sponsor must pay interest to the network pharmacy that submitted the claim at a rate equal to the weighted average of interest on 3-month marketable Treasury securities determined for such period, increased by 0.1 percentage point for the period beginning on the day after the required payment date and ending on the date on which the payment is made, as determined under paragraph (d). Interest amounts paid under this paragraph will not count against the Part D sponsor's administrative costs, as defined in § 423.308, and will not be treated as allowable risk corridor costs, as defined in § 423.308.
(2) Authority not to charge interest. As CMS determines, a Part D sponsor is not charged interest under paragraph (e)(1) in exigent circumstances that prevent the timely processing of claims, including natural disasters and other unique and unexpected events.
(f) Electronic transfer of funds. A Part D sponsor must pay all clean claims submitted electronically by electronic transfer of funds provided the submitting network pharmacy so requests or has so requested previously that contract year. When such payment is made electronically, remittance may also be made electronically by the Part D sponsor.
(g) Protecting the rights of the claimants —(1) General. Nothing in this section may be construed to prohibit or limit a claim or action that any individual or organization has against a pharmacy, provider, or Part D sponsor that is not covered by the subject matter of this section.
(2) Anti-retaliation. Consistent with applicable Federal or State law, a Part D sponsor may not retaliate against an individual, pharmacy, or provider for exercising a right of action under paragraph (g)(1) of this section.
(h) Construction. A determination under this section that a claim submitted by a network pharmacy is a clean claim shall not be construed as a positive determination regarding eligibility for payment under title XVIII of the Act, nor is it an indication of government approval of, or acquiescence regarding, the claim submitted. The determination does not relieve any party of civil or criminal liability with respect to the claim, nor does it offer a defense to any administrative, civil, or criminal action with respect to the claim.
§ 423.521   Final settlement process and payment.
(a) Notice of final settlement. After the calculation of the final settlement amount, CMS sends the Part D sponsor a notice of final settlement. The notice of final settlement contains at least the following information:
(1) A final settlement amount for the contract that has been consolidated, nonrenewed, or terminated, which may be one of the following:
(i) An amount due to the Part D sponsor.
(ii) An amount due from the Part D sponsor.
(iii) $0 if nothing is due to or from the Part D sponsor.
(2) Relevant banking and financial mailing instructions for Part D sponsors that owe CMS a final settlement amount.
(3) Relevant CMS contact information.
(4) A description of the steps for requesting an appeal of the final settlement amount calculation, in accordance with the requirements specified in § 423.522.
(b) Request for an appeal. A Part D sponsor that disagrees with the final settlement amount has 15 calendar days from issuance of the notice of final settlement, as described in paragraph (a) of this section, to request an appeal of the final settlement amount under the process described in § 423.522.
(1) If a Part D sponsor agrees with the final settlement amount, no response is required.
(2) If a Part D sponsor disagrees with the final settlement amount but does not request an appeal within 15 calendar days from the date of the issuance of the notice of final settlement, CMS does not consider subsequent requests for appeal.
(c) Actions if a Part D sponsor does not request an appeal. (1) For Part D sponsors that are owed money by CMS, CMS remits payment to the Part D sponsor within 60 calendar days from the date of the issuance of the notice of final settlement.
(2) For Part D sponsors that owe CMS money, the Part D sponsor is required to remit payment to CMS within 120 calendar days from issuance of the notice of final settlement. If the Part D sponsor fails to remit payment within that 120-calendar-day period, CMS refers the debt owed to CMS to the Department of the Treasury for collection.
(d) Actions following a request for appeal. If a Part D sponsor responds to the notice of final settlement disagreeing with the final settlement amount and requesting appeal, CMS conducts a review process under the process described at § 423.522.
(e) No additional payment adjustments. After the final settlement amount is calculated and the notice of final settlement, as described under § 423.521(a), is issued to the Part D sponsor, CMS—
(1) No longer applies retroactive payment adjustments to the terminated, consolidated or nonrenewed contract; and
(2) There are no adjustments applied to amounts used in the calculation of the final settlement amount.
§ 423.522   Requesting an appeal of the final settlement amount.
(a) Appeals process. If a Part D sponsor does not agree with the final settlement amount described in § 423.521(a) of this section, it may appeal under the following three-level appeal process:
(1) Reconsideration. A Part D sponsor may request reconsideration of the final settlement amount described in § 423.521(a) according to the following process:
(i) Manner and timing of request. A written request for reconsideration must be filed within 15 days from the date that CMS issued the notice of final settlement to the Part D sponsor.
(ii) Content of request. The written request for reconsideration must do all of the following:
(A) Specify the calculation with which the Part D sponsor disagrees and the reasons for its disagreement.
(B) Include evidence supporting the assertion that CMS's calculation of the final settlement amount is incorrect.
(C) Not include new reconciliation data or data that was submitted to CMS after the final settlement notice was issued. CMS does not consider information submitted for the purposes of retroactively adjusting a prior reconciliation.
(iii) Conduct of reconsideration. In conducting the reconsideration, the CMS reconsideration official reviews the calculations that were used to determine the final settlement amount and any additional evidence timely submitted by the Part D sponsor.
(iv) Reconsideration decision. The CMS reconsideration official informs the Part D sponsor of its decision on the reconsideration in writing.
(v) Effect of reconsideration decision. The decision of the CMS reconsideration official is final and binding unless a timely request for an informal hearing is filed in accordance with paragraph (a)(2) of this section.
(2) Informal hearing. A Part D sponsor dissatisfied with CMS's reconsideration decision made under paragraph (a)(1) of this section is entitled to an informal hearing as provided for under paragraphs (a)(2)(i) through (a)(2)(iv) of this section.
(i) Manner and timing of request. A request for an informal hearing must be made in writing and filed with CMS within 15 calendar days of the date of CMS's reconsideration decision.
(ii) Content of request. The request for an informal hearing must include a copy of the reconsideration decision and must specify the findings or issues in the decision with which the Part D sponsor disagrees and the reasons for its disagreement.
(iii) Informal hearing procedures. The informal hearing is conducted in accordance with the following:
(A) The CMS Hearing Officer provides written notice of the time and place of the informal hearing at least 30 calendar days before the scheduled date.
(B) The CMS reconsideration official provides a copy of the record that was before CMS when CMS made its decision to the hearing officer.
(C) The hearing officer review is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence. The CMS hearing officer is limited to the review of the record that was before CMS when CMS made its decision.
(iv) Decision of the CMS hearing officer. The CMS hearing officer decides the case and sends a written decision to the Part D sponsor explaining the basis for the decision.
(v) Effect of hearing officer's decision. The hearing officer's decision is final and binding, unless the decision is reversed or modified by the CMS Administrator in accordance with paragraph (a)(3) of this section.
(3) Review by the Administrator. The Administrator's review is conducted in the following manner:
(i) Manner and timing of request. A Part D sponsor that has received a hearing officer's decision may request review by the Administrator within 15 calendar days of the date of issuance of the hearing officer's decision under paragraph (a)(2)(iv) of this section. The Part D sponsor may submit written arguments to the Administrator for review.
(ii) Discretionary review. (A) After receiving a request for review, the Administrator has the discretion to elect to review the hearing officer's determination in accordance with paragraph (a)(3)(iii) of this section or to decline to review the hearing officer's decision within 30 calendar days of receiving the request for review.
(B) If the Administrator declines to review the hearing officer's decision, the hearing officer's decision is final and binding.
(iii) Electing to review. If the Administrator elects to review the hearing officer's decision, the Administrator reviews the hearing officer's decision, as well as any information included in the record of the hearing officer's decision and any written argument submitted by the Part D sponsor, and determine whether to uphold, reverse, or modify the hearing officer's decision.
(iv) Effect of Administrator's decision. The Administrator's decision is final and binding.
(b) Matters subject to appeal and burden of proof. (1) The Part D sponsor's appeal is limited to CMS's calculation of the final settlement amount. CMS does not consider information submitted for the purposes of retroactively adjusting a prior reconciliation.
(2) The Part D sponsor bears the burden of proof by providing evidence demonstrating that CMS' calculation of the final settlement amount is incorrect.
(c) Stay of financial transaction until appeals are exhausted. If a Part D sponsor requests review of the final settlement amount, the financial transaction associated with the issuance or payment of the final settlement amount is stayed until all appeals are exhausted. Once all levels of appeal are exhausted or the Part D sponsor fails to request further review within the applicable 15-calendar-day timeframe, CMS communicates with the Part D sponsor to complete the financial transaction associated with the issuance or payment of the final settlement amount, as appropriate.
(d) Continued compliance with other law required. Nothing in this section limits a Part D sponsor's responsibility to comply with any other statute or regulation.
§ 423.530   Plan crosswalks.
(a) General rules —(1) Definition of plan crosswalk. A plan crosswalk is the movement of enrollees from one plan benefit package (PBP) in a PDP contract to another PBP under a PDP contract between a Part D Sponsor and CMS. To crosswalk enrollees from one PBP to another is to change the enrollment from the first PBP to the second.
(2) Prohibitions. (i) Plan crosswalks between PBPs under one PDP contract and PBPs under another PDP contract are prohibited unless both the PDP sponsors with which CMS contracts are the same legal entity or have the same parent organization.
(ii) Plan crosswalks are prohibited that split the enrollment of one PBP into multiple PBPs.
(iii) Plan crosswalks are prohibited from a PBP offering basic prescription drug coverage to a PBP offering enhanced alternative coverage.
(3) Compliance with renewal/non-renewal rules. The PDP sponsor must comply with renewal and non-renewal rules in §§ 423.506 and 423.507 in order to complete plan crosswalks.
(4) Eligibility. Enrollees must be eligible for enrollment under § 423.30 in order to be moved from one PBP to another PBP.
(5) Applicability to Employer group health or waiver plans. Nothing in this section permits the crosswalk of enrollees in an employer group health or waiver plan PBP to another PBP outside the usual process for enrollment in employer group health or waiver plans.
(b) Mandatory plan crosswalks. A Part D sponsor of a PDP must perform a plan crosswalk in the following circumstances:
(1) Renewal of a PBP offering basic prescription drug coverage. A PDP sponsor that plans to continue operating a PBP offering basic prescription coverage in the same service area for the upcoming contract year must crosswalk enrollment from the PBP offering basic prescription drug coverage in the current contract year into a PBP offering basic prescription drug coverage under the same PDP contract in the upcoming contract year. The PBP for the upcoming contract year must retain the same plan ID as the PBP for the current contract year.
(2) Renewal of a PBP offering enhanced alternative drug coverage. A PDP sponsor that plans to continue operating a PBP offering enhanced alternative coverage in the same service area for the upcoming contract year must crosswalk enrollment from the PBP offering enhanced alternative drug coverage in the current contract year into a PBP offering enhanced alternative drug coverage in the upcoming contract year. The PBP for the upcoming contract year PBP must retain the same plan ID as the PBP for the current contract year.
(c) Plan crosswalk exceptions. A Part D sponsor of a PDP may perform a plan crosswalk in the following circumstances after receiving approval from CMS under the procedures described in paragraph (d) of this section.
(1) Consolidated renewals. If a PDP sponsor wishes to non-renew a PBP offering enhanced alternative prescription drug coverage under a PDP contract that is not non-renewing or reducing its service area so that the contract no longer includes the service area of the non-renewing PBP, it may crosswalk enrollment from the non-renewing PBP into a PBP offered under the contract in the upcoming contract year.
(i) The plan ID for the upcoming contract year PBP must be the same plan ID as one of PBPs for the current contract year.
(ii) The PBPs being consolidated must be under the same PDP contract.
(iii) A PBP offering basic prescription drug coverage may not be discontinued if the PDP contract continues to offer coverage (other than employer group waiver plans) in the service area of the PBP.
(iv) Enrollment from a PBP offering enhanced alternative coverage may be crosswalked into a PBP offering either enhanced alternative or basic prescription drug coverage.
(v) If the PDP contract includes more than one renewing PBP into which enrollment of the non-renewing PBP can be crosswalked, the enrollment of the non-renewing PBP must be crosswalked into the renewing PBP that will result in lowest increase in monthly premiums for the enrollees.
(vi) A plan crosswalk is not approved under this paragraph if it will result in a premium increase for the following benefit year (as reflected in the bid for the receiving PBP submitted on the first Monday in June) that is higher than the greater of the following:
(A) The current year's premium for the non-renewing PBP.
(B) The current year's average base beneficiary premium, as described in § 423.286(c) of this part, for the PDP region in which the PBP operates.
(vii) If an organization that non-renews an enhanced alternative PBP does not request and receive a plan crosswalk exception as provided in paragraph (d) of this section, CMS does not approve a new enhanced alternative PBP in the same service area as the non-renewing PBP in the following contract year.
(2) Contract consolidations. If a PDP sponsor non-renews all or part of the service area of its contract with CMS in accordance with §§ 423.507 or 423.508, the enrollees of the non-renewing PBPs may be crosswalked into one or more PBPs in another PDP contract (the surviving contract).
(i) The non-renewing PDP contract and the surviving contract must be held by the same legal entity or by legal entities with the same parent organization.
(ii) The approved service area of the surviving contract must include the service area of the non-renewing PBPs whose enrollment will be crosswalked into the surviving contract.
(iii) Enrollment may be crosswalked between PBPs offering the same type of prescription drug coverage (basic or enhanced alternative).
(iv) Enrollment from a PBP offering enhanced alternative coverage may be crosswalked into a PBP offering basic prescription drug coverage.
(v) Enrollment from a PBP offering enhanced alternative coverage must be crosswalked into the PBP in the surviving contract that will result in the lowest premium increase.
(vi) A plan crosswalk is not approved under this paragraph if it will result in a premium increase for the following benefit year (as reflected in the bid for the receiving PBP submitted on the first Monday in June) that is higher than the greater of:
(A) The current year's premium for the non-renewing PBP, or
(B) The current year's average base beneficiary premium, as described in § 423.286(c), for the region in which the PBP operates.
(d) Procedures. (1) A PDP sponsor must submit the following:
(i) All plan crosswalks described in paragraph (b) of this section in writing through the bid submission process in HPMS by the bid submission deadline.
(ii) All plan crosswalk exception requests described in paragraph (c) of this section in writing through the plan crosswalk exceptions process in HPMS by the plan crosswalk exception request deadline announced annually by CMS.
(2) CMS verifies the requests and notifies a requesting PDP sponsor of the approval or denial after the crosswalk exception request deadline.
§ 423.551   General provisions.
(a) Change of ownership. The following constitute a change of ownership:
(1) Partnership. The removal, addition, or substitution of a partner, unless the partners expressly agree otherwise as permitted by applicable State law, constitutes a change of ownership.
(2) Asset transfer. Transfer of substantially all the assets of the sponsor to another party constitutes a change of ownership.
(3) Corporation. The merger of the PDP sponsor's corporation into another corporation or the consolidation of the PDP sponsor's organization with one or more other corporations, resulting in a new corporate body.
(b) Change of ownership, exception. Transfer of corporate stock or the merger of another corporation into the PDP sponsor's corporation, with the PDP sponsor surviving, does not ordinarily constitute change of ownership.
(c) Advance notice requirement. (1) A PDP sponsor that has a Medicare contract in effect under § 423.502 and is considering or is negotiating a change in ownership must notify CMS at least 60 days before the anticipated effective date of the change. The PDP sponsor must also provide updated financial information and a discussion of the financial and solvency impact of the change of ownership on the surviving organization.
(2) If the PDP sponsor fails to give CMS the required notice in a timely manner, it continues to be liable for payments that CMS makes to it on behalf of Medicare enrollees after the date of change of ownership.
(d) Novation agreement defined. A novation agreement is an agreement among the current owner of the PDP sponsor, the prospective new owner, and CMS that—
(1) Is embodied in a document executed and signed by all 3 parties;
(2) Meets the requirements of § 423.552; and
(3) Recognizes the new owner as the successor in interest to the current owner's Medicare contract.
(e) Effect of change of ownership without novation agreement. Except to the extent provided in paragraph (c)(2) of this section, the effect of a change of ownership without a novation agreement is that—
(1) The current PDP sponsor, with respect to the affected contract, has substantially failed to comply with the regulatory requirements as described in § 423.509(a)(4)(ix) and the contract may be subject to intermediate enrollment and marketing sanctions as outlined in § 423.750(a)(1) and (a)(3). Intermediate sanctions imposed as part of this section remain in place until CMS approves the change of ownership (including execution of an approved novation agreement), or the contract is terminated.
(i)(A) If the new owner does not participate in the Medicare program in the same service area as the affected contract, it must apply for, and enter into, a contract in accordance with subpart K of this part and part 422 if applicable; and
(B) If the application is conditionally approved, must submit, within 30 days of the conditional approval, the documentation required under § 423.551(d) for review and approval by CMS; or
(ii) If the new owner currently participates in the Medicare program and operates in the same service area as the affected contract, it must, within 30 days of imposition of intermediate sanctions as outlined in paragraph (e)(1) of this section, submit the documentation required under § 423.551(d) for review and approval by CMS.
(2) If the new owner fails to begin the processes required under paragraph (e)(1)(i) or (e)(1)(ii) of this section, within 30 days of imposition of intermediate sanctions as outlined in paragraph (e)(1) of this section, the existing contract is subject to termination in accordance with § 423.509(a)(4)(ix).
(f) Effect of change of ownership with novation agreement. If the PDP sponsor submits a novation agreement that meets the requirements of § 423.552 and CMS signs it, the new owner becomes the successor in interest to the current owner's Medicare contract under § 423.502.
(g) Sale of beneficiaries not permitted. (1) CMS will only recognize the sale or transfer of an organization's entire PDP line of business, consisting of all PDP contracts held by the PDP sponsor with the exception of the sale or transfer of a full contract between wholly owned subsidiaries of the same parent organization which will be recognized and allowed by CMS.
(2) CMS does not recognize or allow a sale or transfer that consists solely of the sale or transfer of individual beneficiaries or groups of beneficiaries enrolled in a plan benefit package.
§ 423.552   Novation agreement requirements.
(a) Conditions for CMS approval of a novation agreement. CMS approves a novation agreement if the following conditions are met:
(1) Advance notification. The PDP sponsor notifies CMS at least 60 days before the date of the proposed change of ownership. The PDP sponsor also provides CMS with updated financial information and a discussion of the financial and solvency impact of the change of ownership on the surviving organization.
(2) Advance submittal of agreement. The PDP sponsor submits to CMS, at least 30 days before the proposed change of ownership date, three signed copies of the novation agreement containing the provisions specified in paragraph (b) of this section, and one copy of other relevant documents required by CMS.
(3) CMS's determination. When reviewing a novation agreement, CMS makes a determination concerning the following:
(i) The proposed new owner is in fact a successor in interest to the contract.
(ii) Recognition of the new owner as a successor in interest to the contract is in the best interest of the Medicare program.
(iii) The successor organization meets the requirements to qualify as a PDP sponsor under subpart K of this part.
(b) Provisions of a novation agreement. A valid novation agreement requires the following:
(1) Assumption of contract obligations. The new owner must assume all obligations under the contract.
(2) Waiver of right to reimbursement. The previous owner must waive its rights to reimbursement for covered services furnished during the rest of the current contract period.
(3) Guarantee of performance. The previous owner must—
(i) Guarantee performance of the contract by the new owner during the contract period; or
(ii) Post a performance bond that is satisfactory to CMS.
(4) Records access. The previous owner must agree to make its books and records and other necessary information available to the new owner and to CMS to permit an accurate determination of costs for the final settlement of the contract period.
§ 423.553   Effect of leasing of a PDP sponsor's facilities.
(a) General effect of leasing. If a PDP sponsor leases all or part of its facilities to another entity, the other entity does not acquire PDP sponsor status under section 1860D-12(b) of the Act.
(b) Effect of lease of all facilities. (1) If a PDP sponsor leases all of its facilities to another entity, the contract terminates.
(2) If the other entity wishes to participate in Medicare as a PDP sponsor, it must apply for and enter into a contract in accordance with § 423.502.
(c) Effect of partial lease of facilities. If the PDP sponsor leases part of its facilities to another entity, its contract with CMS remains in effect while CMS surveys the PDP sponsor to determine whether it continues to be in compliance with the applicable requirements and qualifying conditions specified in subpart K of this part.
§ 423.558   Scope.
(a) This subpart sets forth the requirements relating to the following:
(1) Part D plan sponsors with respect to grievances, coverage determinations, and redeterminations.
(2) Part D IRE with respect to reconsiderations.
(3) Part D enrollees' rights with respect to grievances, coverage determinations, redeterminations, and reconsiderations.
(4) Review of at-risk determinations made under a drug management program in accordance with § 423.153(f).
(b) The requirements regarding reopenings, ALJ hearings and ALJ and attorney adjudicator decisions, Council review, and judicial review are set forth in subpart U of this chapter.
§ 423.560   Definitions.
As used in this subpart, unless the context indicates otherwise—
Appeal means any of the procedures that deal with the review of adverse coverage determinations made by the Part D plan sponsor on the benefits under a Part D plan the enrollee believes he or she is entitled to receive, including delay in providing or approving the drug coverage (when a delay would adversely affect the health of the enrollee), or on any amounts the enrollee must pay for the drug coverage, as defined in § 423.566(b). Appeal also includes the review of at-risk determinations made under a drug management program in accordance with § 423.153(f). These procedures include redeterminations by the Part D plan sponsor, reconsiderations by the independent review entity, ALJ hearings, reviews by the Medicare Appeals Council (Council), and judicial reviews.
At-risk determination means a decision made under a plan sponsor's drug management program in accordance with § 423.153(f) that involves the identification of an individual as an at-risk beneficiary for prescription drug abuse; a limitation, or the continuation of a limitation, on an at-risk beneficiary's access to coverage for frequently abused drugs (that is, a beneficiary specific point-of-sale edit or the selection of a prescriber and/or pharmacy and implementation of lock-in, or); and information sharing for subsequent plan enrollments.
Drug Use means an enrollee is receiving the drug in the course of treatment, including time off if it is part of the treatment.
Enrollee means a Part D eligible individual who has elected or has been enrolled in a Part D plan.
Grievance means any complaint or dispute, other than one that involves a coverage determination or at-risk determination, expressing dissatisfaction with any aspect of the operations, activities, or behavior of a Part D plan sponsor, regardless of whether remedial action is requested.
Other prescriber means a health care professional other than a physician who is authorized under State law or other applicable law to write prescriptions.
Physician has the meaning given the term in section 1861(r) of the Act.
Projected value of a Part D drug or drugs includes any costs the enrollee could incur based on the number of refills prescribed for the drug(s) in dispute during the plan year. Projected value includes enrollee co-payments, all expenditures incurred after an enrollee's expenditures exceed the initial coverage limit, and expenditures paid by other entities.
Reconsideration means a review of an adverse coverage determination or at-risk determination by an independent review entity (IRE), the evidence and findings upon which it was based, and any other evidence the enrollee submits or the IRE obtains.
Redetermination means a review of an adverse coverage determination or at-risk determination by a Part D plan sponsor, the evidence and findings upon which it is based, and any other evidence the enrollee submits or the Part D plan sponsor obtains.
Representative means an individual either appointed by an enrollee or authorized under State or other applicable law to act on behalf of the enrollee in filing a grievance, obtaining a coverage determination, or in dealing with any of the levels of the appeals process. Unless otherwise stated in this subpart, the representative has all of the rights and responsibilities of an enrollee in filing a grievance, obtaining a coverage determination, or in dealing with any of the levels of the appeals process, subject to the rules described in part 422, subpart M, of this chapter.
Specialty tier: (1) Before January 1, 2022, means a formulary cost-sharing tier dedicated to very high cost Part D drugs that exceed a cost threshold established by the Secretary; and
(2) Beginning January 1, 2022, has the meaning given the term in § 423.104.
§ 423.562   General provisions.
(a) Responsibilities of the Part D plan sponsor. A Part D plan sponsor must meet all of the following requirements.
(1) A Part D plan sponsor, for each Part D plan that it offers, must establish and maintain—
(i) A grievance procedure as described in § 423.564 for addressing issues that do not involve coverage determinations;
(ii) Use a single, uniform exceptions and appeals process which includes procedures for accepting oral and written requests for coverage determinations and redeterminations that are in accordance with § 423.128(b)(7) and (d)(1)(iv).
(iii) A procedure for making timely coverage determinations, including determinations on requests for exceptions to a tiered cost-sharing structure or to a formulary; and
(iv) Appeal procedures that meet the requirements of this subpart for issues that involve coverage determinations.
(v) Appeal procedures that meet the requirements of this subpart for issues that involve at-risk determinations. Determinations made in accordance with the processes at § 423.153(f) are collectively referred to as an at-risk determination, defined at § 423.560, made under a drug management program.
(2) A Part D plan sponsor must ensure that all enrollees receive written information about the—
(i) Grievance and appeal procedures that are available to them through the Part D plan sponsor; and
(ii) Complaint process available to the enrollee under the QIO process as set forth under section 1154(a)(14) of the Act.
(3) A Part D plan sponsor must arrange with its network pharmacies to distribute notices instructing enrollees how to contact their plans to obtain a coverage determination or request an exception. These notices must comply with the standards established in § 423.128(b)(7)(iii).
(4) In accordance with subpart K of this part, if the Part D plan sponsor delegates any of its responsibilities under this subpart to another entity or individual through which the Part D plan sponsor provides covered benefits, the Part D plan sponsor is ultimately responsible for ensuring that the entity or individual satisfies the relevant requirements of this subpart.
(5) A Part D plan sponsor must employ a medical director who is responsible for ensuring the clinical accuracy of all coverage determinations and redeterminations involving medical necessity. The medical director must be a physician with a current and unrestricted license to practice medicine in a State, Territory, Commonwealth of the United States (that is, Puerto Rico), or the District of Columbia.
(b) Rights of enrollees. In accordance with the provisions of this subpart, enrollees have all of the following rights under Part D plans:
(1) The right to have grievances between the enrollee and the Part D plan sponsor heard and resolved by the plan sponsor, as described in § 423.564.
(2) The right to a timely coverage determination by the Part D plan sponsor, as specified in § 423.566 and § 423.568, including the right to request from the Part D plan sponsor an exception to its tiered cost-sharing structure or formulary, as specified in § 423.578.
(3) The right to request from the Part D plan sponsor an expedited coverage determination, as specified in § 423.570.
(4) If dissatisfied with any part of a coverage determination or an at-risk determination under a drug management program in accordance with § 423.153(f), all of the following appeal rights:
(i) The right to a redetermination of the adverse coverage determination or at-risk determination by the Part D plan sponsor, as specified in § 423.580.
(ii) The right to request an expedited redetermination, as provided under § 423.584.
(iii) If, as a result of the redetermination, a Part D plan sponsor affirms, in whole or in part, its adverse coverage determination or at-risk determination, the right to a reconsideration or expedited reconsideration by an independent review entity (IRE) contracted by CMS, as specified in § 423.600.
(iv) If the IRE affirms the plan's adverse coverage determination or at-risk determination, in whole or in part, the right to an ALJ hearing if the amount in controversy meets the requirements in § 423.2006.
(v) If the ALJ or attorney adjudicator affirms the IRE's adverse coverage determination or at-risk determination, in whole or in part, the right to request Council review of the ALJ's or attorney adjudicator's decision, as specified in § 423.2100.
(vi) If the Council affirms the ALJ's or attorney adjudicator's adverse coverage determination or at-risk determination, in whole or in part, the right to judicial review of the decision if the amount in controversy meets the requirements in § 423.2006.
(c) When other regulations apply. Unless this subpart provides otherwise, the regulations in part 422, subpart M of this chapter (concerning the administrative review and hearing processes under titles II and XVIII, and representation of parties under title XVIII of the Act) and any interpretive rules or CMS rulings issued under these regulations, apply under this subpart to the extent they are appropriate.
(d) Relation to ERISA Requirements. Consistent with section 1860D-22(b) of the Act, provisions of this subpart may, to the extent applicable under the regulations adopted by the Secretary of Labor, apply to claims for benefits under group health plans subject to the Employee Retirement Income Security Act.
§ 423.564   Grievance procedures.
(a) General rule. Each Part D plan sponsor must provide meaningful procedures for timely hearing and resolving grievances between enrollees and the Part D plan sponsor or any other entity or individual through whom the Part D plan sponsor provides covered benefits under any Part D plan it offers.
(b) Distinguished from appeals. Grievance procedures are separate and distinct from appeal procedures, which address coverage determinations as defined in § 423.566(b) and at-risk determinations made under a drug management program in accordance with § 423.153(f). Upon receiving a complaint, a Part D plan sponsor must promptly determine and inform the enrollee whether the complaint is subject to its grievance procedures or its appeal procedures.
(c) Distinguished from the quality improvement organization complaint process. Under section 1154(a)(14) of the Act, the quality improvement organization (QIO) must review enrollees' written complaints about the quality of services they have received under the Medicare program. This process is separate and distinct from the grievance procedures of the Part D plan sponsor. For quality of care issues, an enrollee may file a grievance with the Part D plan sponsor, file a written complaint with the QIO, or both. For any complaint submitted to a QIO, the Part D plan sponsor must cooperate with the QIO in resolving the complaint.
(d) Method for filing a grievance. (1) An enrollee may file a grievance with the Part D plan sponsor either orally or in writing.
(2) An enrollee must file a grievance no later than 60 calendar days after the event or incident that precipitates the grievance.
(e) Grievance disposition and notification. (1) The Part D plan sponsor must notify the enrollee of its decision as expeditiously as the case requires, based on the enrollee's health status, but no later than 30 calendar days after the date the Part D plan sponsor receives the oral or written grievance.
(2) The Part D plan sponsor may extend the 30 calendar day timeframe by up to 14 calendar days if the enrollee requests the extension or if the Part D plan sponsor justifies a need for additional information and documents how the delay is in the interest of the enrollee. When the Part D plan sponsor extends the deadline, it must immediately notify the enrollee in writing of the reason(s) for the delay.
(3) The Part D plan sponsor must inform the enrollee of the disposition of the grievance in accordance with the following procedures:
(i) All grievances submitted in writing must be responded to in writing.
(ii) Grievances submitted orally may be responded to either orally or in writing, unless the enrollee requests a written response.
(iii) All grievances related to quality of care, regardless of how the grievance is filed, must be responded to in writing. The response must include a description of the enrollee's right to file a written complaint with the QIO. For any complaint submitted to a QIO, the Part D plan sponsor must cooperate with the QIO in resolving the complaint.
(f) Expedited grievances. A Part D plan sponsor must respond to an enrollee's grievance within 24 hours if the complaint involves a refusal by the Part D plan sponsor to grant an enrollee's request for an expedited coverage determination under § 423.570 or an expedited redetermination under § 423.584, and the enrollee has not yet purchased or received the drug that is in dispute.
(g) Record keeping. The Part D plan sponsor must have an established process to track and maintain records on all grievances received both orally and in writing, including, at a minimum, the date of receipt, final disposition of the grievance, and the date that the enrollee was notified of the disposition.
§ 423.566   Coverage determinations.
(a) Responsibilities of the Part D plan sponsor. Each Part D plan sponsor must have a procedure for making timely coverage determinations in accordance with the requirements of this subpart regarding the prescription drug benefits an enrollee is entitled to receive under the plan, including basic prescription drug coverage as specified in § 423.100 and supplemental benefits as specified in § 423.104(f)(1)(ii), and the amount, including cost sharing, if any, that the enrollee is required to pay for a drug. The Part D plan sponsor must have a standard procedure for making determinations, in accordance with § 423.568, and an expedited procedure for situations in which applying the standard procedure may seriously jeopardize the enrollee's life, health, or ability to regain maximum function, in accordance with § 423.570.
(b) Actions that are coverage determinations. The following actions by a Part D plan sponsor are coverage determinations:
(1) A decision not to provide or pay for a Part D drug (including a decision not to pay because the drug is not on the plan's formulary, because the drug is determined not to be medically necessary, because the drug is furnished by an out-of-network pharmacy, or because the Part D plan sponsor determines that the drug is otherwise excludable under section 1862(a) of the Act if applied to Medicare Part D) that the enrollee believes may be covered by the plan;
(2) Failure to provide a coverage determination in a timely manner, when a delay would adversely affect the health of the enrollee;
(3) A decision concerning an exceptions request under § 423.578(a);
(4) A decision concerning an exceptions request under § 423.578(b); or
(5) A decision on the amount of cost sharing for a drug.
(c) Who can request a coverage determination. Individuals who can request a standard or expedited coverage determination are—
(1) The enrollee;
(2) The enrollee's representative, on behalf of the enrollee; or
(3) The prescribing physician or other prescriber, on behalf of the enrollee.
(d) Who must review coverage determinations. If the Part D plan sponsor expects to issue a partially or fully adverse medical necessity (or any substantively equivalent term used to describe the concept of medical necessity) decision based on the initial review of the request, the coverage determination must be reviewed by a physician or other appropriate health care professional with sufficient medical and other expertise, including knowledge of Medicare coverage criteria, before the Part D plan sponsor issues the coverage determination decision. The physician or other health care professional must have a current and unrestricted license to practice within the scope of his or her profession in a State, Territory, Commonwealth of the United States (that is, Puerto Rico), or the District of Columbia.
§ 423.568   Standard timeframe and notice requirements for coverage determinations.
(a) Method and place for filing a request. An enrollee must ask for a standard coverage determination by making a request with the Part D plan sponsor in accordance with the following:
(1) Except as specified in paragraph (a)(2) of this section, the request may be made orally or in writing.
(2) Requests for payment must be made in writing (unless the Part D plan sponsor has implemented a voluntary policy of accepting oral payment requests).
(3) The Part D plan sponsor must establish and maintain a method of documenting all oral requests and retain the documentation in the case file.
(b) Timeframe for requests for drug benefits. When a party makes a request for a drug benefit, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receipt of the request. For an exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receipt of the physician's or other prescriber's supporting statement. If a supporting statement is not received by the end of 14 calendar days from receipt of the exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours from the end of 14 calendar days from receipt of the exceptions request.
(c) Timeframe for requests for payment. When a party makes a request for payment, the Part D plan sponsor must notify the enrollee of its determination and make payment (when applicable) no later than 14 calendar days after receipt of the request.
(d) Written notice for favorable decisions by a Part D plan sponsor. If a Part D plan sponsor makes a completely favorable decision under paragraph (b) of this section, it must give the enrollee written notice of the determination. The initial notice may be provided orally, so long as a written follow-up notice is sent within 3 calendar days of the oral notification.
(e) Form and content of the approval notice. The notice of any approval under paragraph (d) of this section must explain the conditions of the approval in a readable and understandable form.
(f) Written notice for denials by a Part D plan sponsor. If a Part D plan sponsor decides to deny a drug benefit, in whole or in part, it must give the enrollee written notice of the determination. The initial notice may be provided orally, so long as a written follow-up notice is mailed to the enrollee within 3 calendar days of the oral notification.
(g) Form and content of the denial notice. The notice of any denial under paragraph (f) of this section must meet the following requirements:
(1) Use approved notice language in a readable and understandable form.
(2) State the specific reasons for the denial.
(i) For drug coverage denials, describe both the standard and expedited redetermination processes, including the enrollee's right to, and conditions for, obtaining an expedited redetermination and the rest of the appeals process.
(ii) For payment denials, describe the standard redetermination process and the rest of the appeals process.
(3) Inform the enrollee of his or her right to a redetermination.
(4) Comply with any other notice requirements specified by CMS.
(h) Effect of failure to meet the adjudicatory timeframes. If the Part D plan sponsor fails to notify the enrollee of its determination in the appropriate timeframe under paragraphs (b) or (c) of this section, the failure constitutes an adverse coverage determination, and the plan sponsor must forward the enrollee's request to the IRE within 24 hours of the expiration of the adjudication timeframe.
(i) Dismissing a request. The Part D plan sponsor dismisses a coverage determination request, either entirely or as to any stated issue, under any of the following circumstances:
(1) When the individual making the request is not permitted to request a coverage determination under § 423.566(c).
(2) When the Part D plan sponsor determines the party failed to make out a valid request for a coverage determination that substantially complies with paragraph (a) of this section.
(3) When an enrollee or the enrollee's representative files a request for a coverage determination, but the enrollee dies while the request is pending, and both of the following criteria apply:
(i) The enrollee's surviving spouse or estate has no remaining financial interest in the case.
(ii) The enrollee's representative, if any, does not wish to pursue the request for coverage.
(4) When a party filing the coverage determination request submits a timely request for withdrawal of the request for a coverage determination with the Part D plan sponsor.
(j) Notice of dismissal. The Part D plan must mail or otherwise transmit a written notice of the dismissal of the coverage determination request to the parties. The notice must state all of the following:
(1) The reason for the dismissal.
(2) The right to request that the Part D plan sponsor vacate the dismissal action.
(3) The right to request redetermination of the dismissal.
(k) Vacating a dismissal. If good cause is established, the Part D plan sponsor may vacate its dismissal of a request for coverage determination within 6 months from the date of the notice of dismissal.
( l ) Effect of dismissal. The Part D plan sponsor's dismissal is binding unless it is modified or reversed by the Part D plan sponsor or vacated under paragraph (k) of this section.
(m) Withdrawing a request. A party that requests a coverage determination may withdraw its request at any time before the decision is issued by filing a request with the Part D plan sponsor.
§ 423.570   Expediting certain coverage determinations.
(a) Request for expedited determination. An enrollee or an enrollee's prescribing physician or other prescriber may request that a Part D plan sponsor expedite a coverage determination involving issues described in § 423.566(b) of this part. This does not include requests for payment of Part D drugs already furnished.
(b) How to make a request. (1) To ask for an expedited determination, an enrollee or an enrollee's prescribing physician or other prescriber on behalf of the enrollee must submit an oral or written request directly to the Part D plan sponsor or, if applicable, to the entity responsible for making the determination, as directed by the Part D plan sponsor.
(2) A prescribing physician or other prescriber may provide oral or written support for an enrollee's request for an expedited determination.
(c) How the Part D plan sponsor must process requests. The Part D plan sponsor must establish and maintain the following procedures for processing requests for expedited determinations:
(1) An efficient and convenient means for accepting oral or written requests submitted by enrollees, prescribing physicians, or other prescribers.
(2) A method for documenting all oral requests and maintaining the documentation in the case file; and
(3) A means for issuing prompt decisions on expediting a determination, based on the following requirements:
(i) For a request made by an enrollee, provide an expedited determination if it determines that applying the standard timeframe for making a determination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function.
(ii) For a request made or supported by an enrollee's prescribing physician or other prescriber, provide an expedited determination if the physician or other prescriber indicates that applying the standard timeframe for making a determination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function.
(d) Actions following denial. If a Part D plan sponsor denies a request for expedited determination, it must take the following actions:
(1) Make the determination within the 72-hour timeframe established in § 423.568(b) for a standard determination. The 72-hour period begins on the day the Part D plan sponsor receives the request for expedited determination. For an exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours after receipt of the physician's or other prescriber's supporting statement. If a supporting statement is not received by the end of 14 calendar days from receipt of the exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours from the end of 14 calendar days from receipt of the exceptions request.
(2) Give the enrollee and prescribing physician or other prescriber prompt oral notice of the denial that—
(i) Explains that the Part D plan sponsor must process the request using the 72 hour timeframe for standard determinations;
(ii) Informs the enrollee of the right to file an expedited grievance if he or she disagrees with the decision by the Part D plan sponsor not to expedite;
(iii) Informs the enrollee of the right to resubmit a request for an expedited determination with the prescribing physician's or other prescriber's support and
(iv) Provides instructions about the plan's grievance process and its timeframes.
(3) Subsequently deliver to the enrollee, within 3 calendar days, equivalent written notice.
(e) Actions on accepted requests for expedited determination. If a Part D plan sponsor grants a request for expedited determination, it must make the determination and give notice in accordance with § 423.572.
(f) Dismissing a request. The Part D plan sponsor dismisses an expedited coverage determination in accordance with § 423.568.
§ 423.572   Timeframes and notice requirements for expedited coverage determinations.
(a) Timeframe for determination and notification. Except as provided in paragraph (b) of this section, a Part D plan sponsor that approves a request for expedited determination must make its determination and notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its decision, whether adverse or favorable, as expeditiously as the enrollee's health condition requires, but no later than 24 hours after receiving the request. For an exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 24 hours after receipt of the physician's or other prescriber's supporting statement. If a supporting statement is not received by the end of 14 calendar days from receipt of the exceptions request, the Part D plan sponsor must notify the enrollee (and the prescribing physician or other prescriber involved, as appropriate) of its determination as expeditiously as the enrollee's health condition requires, but no later than 24 hours from the end of 14 calendar days from receipt of the exceptions request.
(b) Confirmation of oral notice. If the Part D plan sponsor first notifies an enrollee of an adverse or favorable expedited determination orally, it must mail written confirmation to the enrollee within 3 calendar days of the oral notification.
(c) Content of the notice of expedited determination. (1) If the determination is completely favorable to the enrollee, the notice must explain the conditions of the approval in a readable and understandable form.
(2) If the determination is not completely favorable to the enrollee, the notice must—
(i) Use approved language in a readable and understandable form;
(ii) State the specific reasons for the denial;
(iii) Inform the enrollee of his or her right to a redetermination;
(iv) Describe—
(A) Both the standard and expedited redetermination processes, including the enrollee's right to request an expedited redetermination;
(B) Conditions for obtaining an expedited redetermination; and
(C) Other aspects of the appeal process.
(d) Effect of failure to meet the adjudicatory timeframes. If the Part D plan sponsor fails to notify the enrollee of its determination in the timeframe specified in paragraph (a) of this section, the failure constitutes an adverse coverage determination, and the Part D plan sponsor must forward the enrollee's request to the IRE within 24 hours of the expiration of the adjudication timeframe.
§ 423.576   Effect of a coverage determination.
The coverage determination is binding on the Part D plan sponsor and the enrollee unless it is reviewed and revised under §§ 423.580 through 423.604 and §§ 423.2000 through 423.2140 or is reopened and revised under § 423.1978.
§ 423.578   Exceptions process.
(a) Requests for exceptions to a plan's tiered cost-sharing structure. Each Part D plan sponsor that provides prescription drug benefits for Part D drugs and manages this benefit through the use of a tiered formulary must establish and maintain reasonable and complete exceptions procedures subject to CMS' approval for this type of coverage determination. The Part D plan sponsor grants an exception whenever it determines that the requested non-preferred drug for treatment of the enrollee's condition is medically necessary, consistent with the physician's or other prescriber's statement under paragraph (a)(4) of this section.
(1) The tiering exceptions procedures must address situations where a formulary's tiering structure changes during the year and an enrollee is using a drug affected by the change.
(2) Part D plan sponsors must establish criteria that provide for a tiering exception, consistent with paragraphs (a)(3) through (6) of this section.
(3) An enrollee or the enrollee's prescribing physician or other prescriber may file a request for an exception.
(4) A prescribing physician or other prescriber must provide an oral or written supporting statement that the preferred drug(s) for the treatment of the enrollee's condition—
(i) Would not be as effective for the enrollee as the requested drug;
(ii) Would have adverse effects for the enrollee; or
(iii) Both paragraphs (a)(4)(i) and (a)(4)(ii) of this section apply.
(5) If the physician or other prescriber provides an oral supporting statement, the Part D plan sponsor may require the physician or other prescriber to subsequently provide a written supporting statement. The Part D plan sponsor may require the prescribing physician or other prescriber to provide additional supporting medical documentation as part of the written follow-up.
(6) Limitations on tiering exceptions: A Part D plan sponsor is permitted to design its tiering exceptions procedures such that an exception is not approvable in the following circumstances:
(i) To cover a brand name drug, as defined in § 423.4, at a preferred cost-sharing level that applies only to alternative drugs that are—
(A) Generic drugs, for which an application is approved under section 505(j) of the Federal Food, Drug, and Cosmetic Act; or
(B) Authorized generic drugs as defined in section 505(t)(3) of the Federal Food, Drug, and Cosmetic Act.
(ii) To cover a biological product licensed under section 351 of the Public Health Service Act at a preferred cost-sharing level that does not contain any alternative drug(s) that are biological products.
(iii)(A) Before January 1, 2022, if a Part D plan sponsor maintains a specialty tier, as defined in § 423.560, the Part D sponsor may design its exception process so that Part D drugs on the specialty tier are not eligible for a tiering exception.
(B) Beginning January 1, 2022, if a Part D sponsor maintains one or two specialty tiers, as defined in § 423.104, the Part D sponsor may design its exception process so that Part D drugs on the specialty tier(s) are not eligible for tiering exception(s) to non-specialty tiers.
(b) Request for exceptions involving a non-formulary Part D drug. Each Part D plan sponsor that provides prescription drug benefits for Part D drugs and manages this benefit through the use of a formulary must establish and maintain exceptions procedures subject to CMS' approval for receipt of an off-formulary drug. The Part D plan sponsor must grant an exception whenever it determines that the drug is medically necessary, consistent with the physician's or other prescriber's statement under paragraph (b)(5) of this section, and that the drug would be covered but for the fact that it is an off-formulary drug. Formulary use includes the application of cost utilization tools, such as a dose restriction, including the dosage form, that causes a particular Part D drug not to be covered for the number of doses prescribed or a step therapy requirement that causes a particular Part D drug not to be covered until the requirements of the plan's coverage policy are met, or a therapeutic substitution requirement.
(1) The plan's formulary exceptions process must address each of the following circumstances:
(i) Situations where a formulary changes during the year, and situations where an enrollee is already using a given drug.
(ii) Continued coverage of a particular Part D prescription drug that the Part D plan sponsor is discontinuing coverage on the formulary for reasons other than safety or because the Part D prescription drug cannot be supplied by or was withdrawn from the market by the drug's manufacturer.
(iii) An exception to a plan's coverage policy that causes a Part D prescription drug not to be covered because of cost utilization tools, such as a requirement for step therapy, dosage limitations, or therapeutic substitution.
(2) The exception criteria of a Part D plan sponsor must include, but are not limited to—
(i) A description of the criteria a Part D plan sponsor uses to evaluate a prescribing physician's or other prescriber's determination made under paragraph (b)(5) of this section;
(ii) A process for gathering and comparing applicable medical and scientific evidence on the safety and effectiveness of the requested non-formulary drug with the formulary drug for the enrollee, including safety information generated by an authoritative government body; and
(iii) A description of the cost-sharing scheme that will be applied when coverage is provided for a non-formulary drug.
(3) If the Part D plan sponsor covers a non-formulary drug, the cost(s) incurred by the enrollee for that drug are treated as being included for purposes of calculating and meeting the annual out-of-pocket threshold.
(4) An enrollee, the enrollee's representative, or the prescribing physician or other prescriber (on behalf of the enrollee) may file a request for an exception.
(5) A prescribing physician or other prescriber must provide an oral or written supporting statement that the requested prescription drug is medically necessary to treat the enrollee's disease or medical condition because—
(i) All of the covered Part D drugs on any tier of a plan's formulary for treatment for the same condition would not be as effective for the enrollee as the non-formulary drug, would have adverse effects for the enrollee, or both;
(ii) The prescription drug alternative(s) listed on the formulary or required to be used in accordance with step therapy requirements—
(A) Has been ineffective in the treatment of the enrollee's disease or medical condition or, based on both sound clinical evidence and medical and scientific evidence and the known relevant physical or mental characteristics of the enrollee and known characteristics of the drug regimen, is likely to be ineffective or adversely affect the drug's effectiveness or patient compliance; or
(B) Has caused or based on sound clinical evidence and medical and scientific evidence, is likely to cause an adverse reaction or other harm to the enrollee; or
(iii) The number of doses that is available under a dose restriction for the prescription drug has been ineffective in the treatment of the enrollee's disease or medical condition or, based on both sound clinical evidence and medical and scientific evidence and the known relevant physical or mental characteristics of the enrollee and known characteristics of the drug regimen, is likely to be ineffective or adversely affect the drug's effectiveness or patient compliance.
(6) If the physician or other prescriber provides an oral supporting statement, the Part D plan sponsor may require the physician or other prescriber to subsequently provide a written supporting statement. The Part D plan sponsor may require the prescribing physician or other prescriber to provide additional supporting medical documentation as part of the written follow-up.
(c) Requirements for exceptions —(1) General rule. A decision by a Part D plan sponsor concerning an exceptions request under this section constitutes a coverage determination as specified at § 423.566.
(2) When a Part D plan sponsor does not make a timely decision. If the Part D plan sponsor fails to make a decision on an exceptions request and provide notice of the decision within the timeframe required under § 423.568(a) or § 423.572(a), as applicable, the failure constitutes an adverse coverage determination, and the Part D plan sponsor must forward the enrollee's request to the IRE within 24 hours of the expiration of the adjudication timeframe.
(3) When a tiering exceptions request is approved. Whenever an exceptions request made under paragraph (a) of this section is approved—
(i) The Part D plan sponsor may not require the enrollee to request approval for a refill, or a new prescription to continue using the Part D prescription drug after the refills for the initial prescription are exhausted, as long as—
(A) The enrollee's prescribing physician or other prescriber continues to prescribe the drug;
(B) The drug continues to be considered safe for treating the enrollee's disease or medical condition; and
(C) The enrollment period has not expired. If an enrollee renews his or her membership after the plan year, the plan may choose to continue coverage into the subsequent plan year.
(ii) The Part D plan sponsor must provide coverage for the approved prescription drug at the cost-sharing level that applies to preferred alternative drugs. If the plan's formulary contains alternative drugs on multiple tiers, cost-sharing must be assigned at the lowest applicable tier, under the requirements in paragraph (a) of this section.
(4) When a non-formulary exceptions request is approved. Whenever an exceptions request made under § 423.578(b) is approved—
(i) The Part D plan sponsor may not require the enrollee to request approval for a refill, or a new prescription to continue using the Part D prescription drug after the refills for the initial prescription are exhausted, as long as—
(A) The enrollee's prescribing physician or other prescriber continues to prescribe the drug;
(B) The drug continues to be considered safe for treating the enrollee's disease or medical condition; and
(C) The enrollment period has not expired. If an enrollee renews his or her membership after the plan year, the plan may choose to continue coverage into the subsequent plan year.
(ii) The Part D plan sponsor must not establish a special formulary tier or co-payment or other cost-sharing requirement that is applicable only to prescription drugs approved for coverage under this section.
(iii) An enrollee may not request a tiering exception for a non-formulary prescription drug approved under § 423.578(b).
(d) Notice regarding formulary changes. Whenever a Part D plan sponsor makes any negative formulary change, as defined in § 423.100, to its CMS-approved formulary, the Part D plan sponsor must provide notice in accordance with the requirements at § 423.120(b)(5) and (f).
(e) Limitation of the exceptions procedures to Part D drugs. Nothing in this section may be construed to allow an enrollee to use the exceptions processes set out in this section to request or be granted coverage for a prescription drug that does not meet the definition of a Part D drug.
(f) Implication of the physician's or other prescriber's supporting statement. Nothing in this section should be construed to mean that the physician's or other prescriber's supporting statement required for an exceptions request will result in an automatic favorable decision.
§ 423.580   Right to a redetermination.
An enrollee who has received a coverage determination (including one that is reopened and revised as described in § 423.1978) or an at-risk determination under a drug management program in accordance with § 423.153(f) may request that it be redetermined under the procedures described in § 423.582, which address requests for a standard redetermination. The prescribing physician or other prescriber (acting on behalf of an enrollee), upon providing notice to the enrollee, may request a standard redetermination under the procedures described in § 423.582. An enrollee or an enrollee's prescribing physician or other prescriber (acting on behalf of an enrollee) may request an expedited redetermination as specified in § 423.584.
§ 423.582   Request for a standard redetermination.
(a) Method and place for filing a request. An enrollee or an enrollee's prescribing physician or other prescriber (acting on behalf of the enrollee) must ask for a redetermination by making a written request with the Part D plan sponsor that made the coverage determination or the at-risk determination under a drug management program in accordance with § 423.153(f). The Part D plan sponsor may adopt a policy for accepting oral requests.
(b) Timeframe for filing a request. Except as provided in paragraph (c) of this section, a request for a redetermination must be filed within 60 calendar days after receipt of the written coverage determination notice or the at-risk determination under a drug management program in accordance with § 423.153(f).
(1) The date of receipt of the coverage determination or at-risk determination is presumed to be 5 calendar days after the date of the written coverage determination or at-risk determination, unless there is evidence to the contrary.
(2) For purposes of meeting the 60-calendar day filing deadline, the request is considered as filed on the date it is received by the Part D plan sponsor or delegated entity specified in the Part D plan sponsor's written coverage determination or at-risk determination.
(c) Extending the time for filing a request —(1) General rule. If an enrollee or prescribing physician or other prescriber acting on behalf of an enrollee shows good cause, the Part D plan sponsor may extend the timeframe for filing a request for redetermination.
(2) How to request an extension of timeframe. If the 60 calendar day period in which to file a request for a redetermination has expired, an enrollee or a prescribing physician or other prescriber acting on behalf of an enrollee may file a request for redetermination and extension of time frame with the Part D plan sponsor. The request for redetermination and to extend the timeframe must—
(i) Be in writing; and
(ii) State why the request for redetermination was not filed on time.
(d) Withdrawing a request. The person who files a request for redetermination may withdraw it by filing a request with the Part D sponsor.
(e) Dismissing a request. A Part D plan sponsor dismisses a redetermination request, either entirely or as to any stated issue, under any of the following circumstances:
(1) When the person or entity requesting a redetermination is not a proper party under § 423.580.
(2) When the Part D plan sponsor determines the party failed to make out a valid request for redetermination that substantially complies with paragraph (a) of this section.
(3) When the party fails to file the redetermination request within the proper filing time frame in accordance with paragraph (b) of this section.
(4) When the enrollee or the enrollee's representative files a request for redetermination, but the enrollee dies while the request is pending, and both of the following criteria apply:
(i) The enrollee's surviving spouse or estate has no remaining financial interest in the case.
(ii) The enrollee's representative, if any, does not wish to pursue the request for coverage.
(5) When a party filing the redetermination request submits a timely request for withdrawal of the request for a redetermination with the Part D plan sponsor.
(f) Notice of dismissal. The Part D plan sponsor must mail or otherwise transmit a written notice of the dismissal of the redetermination request to the parties. The notice must state all of the following:
(1) The reason for the dismissal.
(2) The right to request that the Part D plan sponsor vacate the dismissal action.
(3) The right to request review of the dismissal by the independent entity.
(g) Vacating a dismissal. If good cause is established, a Part D sponsor may vacate its dismissal of a request for redetermination within 6 months from the date of the notice of dismissal.
(h) Effect of dismissal. The dismissal of a request for redetermination is binding unless the enrollee or other party requests review by the IRE or the decision is vacated under paragraph (g) of this section.
§ 423.584   Expediting certain redeterminations.
(a) Who may request an expedited redetermination. An enrollee or an enrollee's prescribing physician or other prescriber may request that a Part D plan sponsor expedite a redetermination that involves the issues specified in § 423.566(b) or an at-risk determination made under a drug management program in accordance with § 423.153(f). (This does not include requests for payment of drugs already furnished.)
(b) Procedure and timeframe for filing a request. A request for a redetermination must be filed within 60 calendar days after receipt of the written coverage determination notice or at-risk determination notice. (1) To ask for an expedited redetermination, an enrollee or a prescribing physician or other prescriber acting on behalf of an enrollee must submit an oral or written request directly to the Part D plan sponsor or, if applicable, to the entity responsible for making the redetermination, as directed by the Part D plan sponsor.
(2) A prescribing physician or other prescriber may provide oral or written support for an enrollee's request for an expedited redetermination.
(3) The date of receipt of the coverage determination or at-risk determination is presumed to be 5 calendar days after the date of the written coverage determination or at-risk determination, unless there is evidence to the contrary.
(4) For purposes of meeting the 60-calendar day filing deadline, the request is considered as filed on the date it is received by the Part D plan sponsor or delegated entity specified in the Part D plan sponsor's written coverage determination or at-risk determination.
(c) How the Part D plan sponsor must process requests. The Part D plan sponsor must establish and maintain the following procedures for processing requests for expedited redetermination:
(1) Handling of requests. The Part D plan sponsor must establish an efficient and convenient means for individuals to submit oral or written requests, document all oral requests in writing, and maintain the documentation in the case file.
(2) Prompt decision making. The Part D plan sponsor must promptly decide whether to expedite the redetermination or follow the timeframe for standard redetermination based on the following requirements:
(i) For a request made by an enrollee, the Part D plan sponsor must provide an expedited redetermination if it determines that applying the standard timeframe for making a redetermination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function.
(ii) For a request made or supported by a prescribing physician or other prescriber, the Part D plan sponsor must provide an expedited redetermination if the physician or other prescriber indicates that applying the standard timeframe for conducting a redetermination may seriously jeopardize the life or health of the enrollee or the enrollee's ability to regain maximum function.
(d) Actions following denial of a request. If a Part D plan sponsor denies a request for expedited redetermination, it must take the following actions:
(1) Make the determination within the 7 calendar day timeframe established in § 423.590(a). The 7 calendar day period begins the day the Part D plan sponsor receives the request for expedited redetermination.
(2) Give the enrollee prompt oral notice of the denial that—
(i) Explains that the Part D plan sponsor processes the enrollee's request using the 7 calendar day timeframe for standard redetermination;
(ii) Informs the enrollee of the right to file an expedited grievance if he or she disagrees with the decision by the Part D plan sponsor not to expedite;
(iii) Informs the enrollee of the right to resubmit a request for an expedited redetermination with the prescribing physician's or other prescriber's support; and
(iv) Provides instructions about the expedited grievance process and its timeframes.
(3) Subsequently deliver, within three calendar days, equivalent written notice.
(e) Action following acceptance of a request. If a Part D plan sponsor grants a request for expedited redetermination, it must conduct the redetermination and give notice in accordance with § 423.590(d).
(f) Dismissing a request. The Part D plan sponsor dismisses an expedited redetermination in accordance with § 423.582.
§ 423.586   Opportunity to submit evidence.
The Part D plan sponsor must provide the enrollee or the prescribing physician or other prescriber, as appropriate, with a reasonable opportunity to present evidence and allegations of fact or law, related to the issue in dispute, in person as well as in writing. In the case of an expedited redetermination, the opportunity to present evidence is limited by the short timeframe for making a decision. Therefore, the Part D plan sponsor must inform the enrollee or the prescribing physician or other prescriber of the conditions for submitting the evidence.
§ 423.590   Timeframes and responsibility for making redeterminations.
(a) Standard redetermination—request for covered drug benefits or review of an at-risk determination. (1) If the Part D plan sponsor makes a redetermination that is completely favorable to the enrollee, the Part D plan sponsor must notify the enrollee in writing of its redetermination (and effectuate it in accordance with § 423.636(a)(1) or (3) as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days from the date it receives the request for a standard redetermination.
(2) If the Part D plan sponsor makes a redetermination that affirms, in whole or in part, its adverse coverage determination or at-risk determination, it must notify the enrollee in writing of its redetermination as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days from the date it receives the request for a standard redetermination.
(b) Standard redetermination—request for payment. (1) If the Part D plan sponsor makes a redetermination that is completely favorable to the enrollee, the Part D plan sponsor must issue its redetermination (and effectuate it in accordance with § 423.636(a)(2)) no later than 14 calendar days from the date it receives the request for redetermination.
(2) If the Part D plan sponsor affirms, in whole or in part, its adverse coverage determination, it must notify the enrollee in writing of its redetermination no later than 14 calendar days from the date it receives the request for redetermination.
(c) Effect of failure to meet timeframe for standard redeterminations. If the Part D plan sponsor fails to provide the enrollee with a redetermination within the timeframes specified in paragraphs (a) or (b) of this section, the failure constitutes an adverse redetermination decision, and the Part D plan sponsor must forward the enrollee's request to the IRE within 24 hours of the expiration of the adjudication timeframe.
(d) Expedited redetermination —(1) Timeframe. A Part D plan sponsor that approves a request for expedited redetermination must complete its redetermination and give the enrollee (and the prescribing physician or other prescriber involved, as appropriate), notice of its decision as expeditiously as the enrollee's health condition requires but no later than 72 hours after receiving the request.
(2) Confirmation of oral notice. If the Part D plan sponsor first notifies an enrollee of an adverse or favorable expedited redetermination orally, it must mail written confirmation to the enrollee within 3 calendar days of the oral notification.
(3) How the Part D plan sponsor must request additional information. If the Part D plan sponsor must receive medical information, the Part D plan sponsor must request the necessary information within 24 hours of the initial request for an expedited redetermination. Regardless of whether the Part D plan sponsor requests additional information, the Part D plan sponsor is responsible for meeting the timeframe and notice requirements.
(e) Failure to meet timeframe for expedited redetermination. If the Part D plan sponsor fails to provide the enrollee or the prescribing physician or other prescriber, as appropriate, with the results of its expedited redetermination within the timeframe described in paragraph (d) of this section, the failure constitutes an adverse redetermination decision, and the Part D plan sponsor must forward the enrollee's request to the IRE within 24 hours of the expiration of the adjudication timeframe.
(f) Who must conduct the review of an adverse coverage determination or at-risk determination. (1) A person or persons who were not involved in making the coverage determination or an at-risk determination under a drug management program in accordance with § 423.153(f) must conduct the redetermination.
(2) When the issue is the denial of coverage based on a lack of medical necessity (or any substantively equivalent term used to describe the concept of medical necessity), the redetermination must be made by a physician with expertise in the field of medicine that is appropriate for the services at issue. The physician making the redetermination need not, in all cases, be of the same specialty or subspecialty as the prescribing physician or other prescriber.
(g) Form and content of an adverse redetermination notice. The notice of any adverse determination under paragraphs (a)(2), (b)(2), (d)(1) or (d)(2) of this section must—
(1) Use approved notice language in a readable and understandable form;
(2) State the specific reasons for the denial;
(3) Inform the enrollee of his or her right to a reconsideration;
(i) For adverse drug coverage redeterminations, or redeterminations related to a drug management program in accordance with § 423.153(f), describe both the standard and expedited reconsideration processes, including the enrollee's right to, and conditions for, obtaining an expedited reconsideration and the rest of the appeals process;
(ii) For adverse payment redeterminations, describe the standard reconsideration process and the rest of the appeals process; and
(4) Comply with any other notice requirements specified by CMS.
(h) Form and content of a completely favorable redetermination notice. The notice of any completely favorable determination under paragraphs (a)(1), (d)(1) or (d)(2) of this section must explain the conditions of the approval in a readable and understandable form.
(i) Automatic forwarding of redeterminations made under a drug management program. If on redetermination the plan sponsor affirms, in whole or in part, its denial related to an at-risk determination under a drug management program in accordance with § 423.153(f), the Part D plan sponsor must forward the case to the IRE contracted with CMS within 24 hours of the expiration of the applicable adjudication timeframe under paragraph (a)(2), (b)(2), or (d)(1) of this section.
(j) Requests for review of a dismissal by the independent entity. If the Part D plan sponsor dismisses a request for a reconsideration in accordance with § 423.582(e) or § 423.584(f), the enrollee or other proper party has the right to request review of the dismissal by the independent entity. A request for review of a dismissal must be filed in writing with the independent entity within 60 calendar days from the date of the Part D plan sponsor's dismissal notice.
§ 423.600   Reconsideration by an independent review entity (IRE).
(a) An enrollee who is dissatisfied with the redetermination of a Part D plan sponsor has a right to a reconsideration by an independent review entity that contracts with CMS. The prescribing physician or other prescriber (acting on behalf of an enrollee), upon providing notice to the enrollee, may request an IRE reconsideration. The enrollee, or the enrollee's prescribing physician or other prescriber (acting on behalf of the enrollee) must file a written request for reconsideration with the IRE within 60 calendar days after receipt of the written redetermination by the Part D plan sponsor.
(1) The date of receipt of the redetermination is presumed to be 5 calendar days after the date of the Part D plan sponsor's written redetermination, unless there is evidence to the contrary.
(2) For purposes of meeting the 60-calendar day filing deadline, the request is considered as filed on the date it is received by the IRE specified in the Part D plan sponsor's written redetermination.
(b) When an enrollee, or an enrollee's prescribing physician or other prescriber (acting on behalf of the enrollee), files an appeal or a determination is forwarded to the IRE by a Part D plan sponsor, the IRE is required to solicit the views of the prescribing physician or other prescriber.
(1) The IRE may solicit the views of the prescribing physician or other prescriber orally or in writing.
(2) A written account of the prescribing physician's or other prescriber's views (prepared by either the prescribing physician, other prescriber, or IRE, as appropriate) must be contained in the IRE record.
(c) In order for an enrollee or a prescribing physician or other prescriber (acting on behalf of an enrollee) to request an IRE reconsideration of a determination by a Part D plan sponsor not to provide for a Part D drug that is not on the formulary, the prescribing physician or other prescriber must determine that all covered Part D drugs on any tier of the formulary for treatment of the same condition would not be as effective for the individual as the non-formulary drug, would have adverse effects for the individual, or both.
(d) The independent review entity must conduct the reconsideration as expeditiously as the enrollee's health condition requires but must not exceed the deadlines applicable in § 423.590, including those deadlines that are applicable when a request for an expedited reconsideration is received and granted.
(e) When the issue is the denial of coverage based on a lack of medical necessity (or any substantively equivalent term used to describe the concept of medical necessity), the reconsideration must be made by a physician with expertise in the field of medicine that is appropriate for the services at issue. The physician making the reconsideration need not, in all cases, be of the same specialty or subspecialty as the prescribing physician or other prescriber.
(f) The party who files a request for reconsideration may withdraw it by filing a request with the IRE.
(g) The independent entity dismisses a reconsideration request, either entirely or as to any stated issue, under any of the following circumstances:
(1) When the person or entity requesting a reconsideration is not a proper party under paragraph (a) of this section.
(2) When the IRE determines the party failed to make out a valid request for reconsideration that substantially complies with paragraph (a) of this section.
(3) When the party fails to file the reconsideration request within the proper filing time frame in accordance with paragraph (a) of this section.
(4) When an enrollee or the enrollee's representative files a request for reconsideration, but the enrollee dies while the request is pending, and both of the following criteria apply:
(i) The enrollee's surviving spouse or estate has no remaining financial interest in the case.
(ii) The enrollee's representative, if any, does not wish to continue the appeal.
(5) When a party filing the reconsideration request submits a timely request for withdrawal of the request for a reconsideration with the IRE.
(h) The IRE mails or otherwise transmits a written notice of the dismissal of the reconsideration request to the parties. The notice must state all of the following:
(1) The reason for the dismissal.
(2) That there is a right to request that the IRE vacate the dismissal action.
(3) The right to a review of the dismissal in accordance with § 423.2004.
(i) If good cause is established, the IRE may vacate its dismissal of a request for redetermination within 6 months from the date of the notice of dismissal.
(j) An enrollee has a right to have an IRE's dismissal reconsidered in accordance with § 423.2004.
(k) If the IRE determines that the Part D plan sponsor's dismissal was in error, the IRE vacates the dismissal and remands the case to the Part D plan sponsor for reconsideration consistent with § 423.590. The IRE's decision regarding an Part D plan sponsor's dismissal, including a decision to deny a request for review of a dismissal, is binding and not subject to further review.
§ 423.602   Notice of reconsideration determination by the independent review entity.
(a) Responsibility for the notice. When the IRE makes its reconsideration determination, it is responsible for mailing a notice of its determination to the enrollee and the Part D plan sponsor, and for sending a copy to CMS. When the prescribing physician or other prescriber requests the reconsideration on behalf of the enrollee, the IRE is also responsible for notifying the prescribing physician or other prescriber of its decision.
(b) Content of the notice. The notice must—
(1) State the specific reasons for the IRE's decision in understandable language;
(2) If the reconsideration determination is adverse (that is, does not completely reverse the adverse coverage determination or redetermination by the Part D plan sponsor), inform the enrollee of his or her right to an ALJ hearing if the amount in controversy meets the threshold requirement under § 423.2006;
(3) Describe the procedures that must be followed to obtain an ALJ hearing; and
(4) Comply with any other requirements specified by CMS.
§ 423.604   Effect of a reconsideration determination.
A reconsideration determination is final and binding on the enrollee and the Part D plan sponsor, unless the enrollee files a request for a hearing under the provisions of § 423.2014.
§§ 423.610-423.634   [Reserved]
§ 423.636   How a Part D plan sponsor must effectuate standard redeterminations, reconsiderations, or decisions.
(a) Reversals by the Part D plan sponsor —(1) Requests for benefits. If, on redetermination of a request for benefit, the Part D plan sponsor reverses its coverage determination, the Part D plan sponsor must authorize or provide the benefit under dispute as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days from the date it receives the request for redetermination.
(2) Requests for payment. If, on redetermination of a request for payment, the Part D plan sponsor reverses its coverage determination, the Part D plan sponsor must authorize payment for the benefit within 14 calendar days from the date it receives the request for redetermination, and make payment no later than 30 calendar days after the date the plan sponsor receives the request for redetermination.
(3) Review of an at-risk determination. If, on redetermination of an at-risk determination made under a drug management program in accordance with § 423.153(f), the Part D plan sponsor reverses its at-risk determination, the Part D plan sponsor must implement the change to the at-risk determination as expeditiously as the enrollee's health condition requires, but no later than 7 calendar days from the date it receives the request for redetermination.
(b) Reversals other than by the Part D plan sponsor —(1) Requests for benefits. If, on appeal of a request for benefit, the determination by the Part D plan sponsor is reversed in whole or in part by the independent review entity, or at a higher level of appeal, the Part D plan sponsor must authorize or provide the benefit under dispute within 72 hours from the date it receives notice reversing the determination. The Part D plan sponsor must inform the independent review entity that the Part D plan sponsor has effectuated the decision.
(2) Requests for payment. If, on appeal of a request for payment, the determination by the Part D plan sponsor is reversed in whole or in part by the independent review entity, or at a higher level of appeal, the Part D plan sponsor must authorize payment for the benefit within 72 hours, but make payment no later than 30 calendar days from the date it receives notice reversing the coverage determination. The Part D plan sponsor must inform the independent review entity that the Part D plan sponsor has effectuated the decision.
(3) Review of an at-risk determination. If, on appeal of an at-risk determination made under a drug management program in accordance with § 423.153(f), the determination by the Part D plan sponsor is reversed in whole or in part by the independent review entity, or at a higher level of appeal, the Part D plan sponsor must implement the change to the at-risk determination within 72 hours from the date it receives notice reversing the determination. The Part D plan sponsor must inform the independent review entity that the Part D plan sponsor has effectuated the decision.
§ 423.638   How a Part D plan sponsor must effectuate expedited redeterminations or reconsiderations.
(a) Reversals by the Part D plan sponsor —(1) Requests for benefits. If, on an expedited redetermination of a request for benefits, the Part D plan sponsor reverses its coverage determination, the Part D plan sponsor must authorize or provide the benefit under dispute as expeditiously as the enrollee's health condition requires, but no later than 72 hours after the date the Part D plan sponsor receives the request for redetermination.
(2) Review of an at-risk determination. If, on an expedited redetermination of an at-risk determination made under a drug management program in accordance with § 423.153(f), the Part D plan sponsor reverses its at-risk determination, the Part D plan sponsor must implement the change to the at-risk determination as expeditiously as the enrollee's health condition requires, but no later than 72 hours after the date the Part D plan sponsor receives the request for redetermination.
(b) Reversals other than by the Part D plan sponsor —(1) Requests for benefits. If the expedited determination or expedited redetermination for benefits by the Part D plan sponsor is reversed in whole or in part by the independent review entity, or at a higher level of appeal, the Part D plan sponsor must authorize or provide the benefit under dispute as expeditiously as the enrollee's health condition requires but no later than 24 hours from the date it receives notice reversing the determination. The Part D plan sponsor must inform the independent review entity that the Part D plan sponsor has effectuated the decision.
(2) Review of an at-risk determination. If the expedited redetermination of an at-risk determination made under a drug management program in accordance with § 423.153(f) by the Part D plan sponsor is reversed in whole or in part by the independent review entity, or at a higher level of appeal, the Part D plan sponsor must implement the change to the at-risk determination as expeditiously as the enrollee's health condition requires but no later than 24 hours from the date it receives notice reversing the determination. The Part D plan sponsor must inform the independent review entity that the Part D plan sponsor has effectuated the decision.
§ 423.641   Contract determinations.
This subpart establishes the procedures for reviewing the following contract determinations:
(a) A determination that an entity is not qualified to enter into a contract with CMS under Part D of title XVIII of the Act.
(b) A determination not to authorize a renewal of a contract with a PDP sponsor in accordance with § 423.507(b).
(c) A determination to terminate a contract with a PDP sponsor in accordance with § 423.509.
(d) Fallback entities are governed under subpart Q of this part, and are not subject to this subpart, except to the extent a fallback prescription drug plan contract is terminated by CMS.
§ 423.642   Notice of contract determination.
(a) When CMS makes a contract determination under § 423.641, it gives the PDP sponsor written notice.
(b) The notice specifies the—
(1) Reasons for the determination; and
(2) The Part D sponsor's right to request a hearing.
(c) CMS-initiated terminations —(1) General rule. Except as provided in (c)(2) of this section, CMS mails notice to the Part D plan sponsor 45 calendar days before the anticipated effective date of the termination.
(2) Exception. If a contract is terminated in accordance with § 423.509(b)(2)(i) of this part, CMS notifies the Part D plan sponsor of the date that it will terminate the Part D plan sponsor's contract.
(d) When CMS determines that it will not authorize a contract renewal, CMS mails the notice to the Part D sponsor by August 1 of the current contract year.
§ 423.643   Effect of contract determination.
The contract determination is final and binding unless a timely request for a hearing is filed under 423.651.
§ 423.650   Right to a hearing, burden of proof, standard of proof, and standards of review.
(a) Right to a hearing. The following parties are entitled to a hearing:
(1) A contract applicant that has been determined to be unqualified to enter into a contract with CMS under Part D of Title XVIII of the Act in accordance with § 423.502 and § 423.503 of this part.
(2) A Part D sponsor whose contract has been terminated in accordance with § 423.509 of this part.
(3) A Part D sponsor whose contract has not been renewed in accordance with § 423.507 of this part.
(4) A Part D sponsor who has had an intermediate sanction imposed in accordance with § 423.752(a) through (b).
(b) Burden of proof, standard of proof, and standard of review at hearing. (1) During a hearing to review a contract determination as described at § 423.641(a) of this subpart, the applicant has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.502 and § 423.503 of this part.
(2) During a hearing to review a contract determination as described at § 423.641(b) of this part, the Part D plan sponsor has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.507 of this part.
(3) During a hearing to review a contract determination as described at § 423.641(c) of this subpart, the Part D plan sponsor has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.509 of this part.
(4) During a hearing to review the imposition of an intermediate sanction as described at § 423.750 of this part, the Part D sponsor has the burden of proving by a preponderance of the evidence that CMS' determination was inconsistent with the requirements of § 423.752 of this part.
(c) Timing of favorable decision. Notice of any decision favorable to the Part D sponsor appealing a determination that it is not qualified to enter into a contract with CMS must be issued by September 1 for the contract in question to be effective on January 1 of the following year.
§ 423.651   Request for hearing.
(a) Method and place for filing a request. (1) A request for a hearing must be made in writing and filed by an authorized official of the contract applicant or Part D plan sponsor that was the party to the determination under the appeal.
(2) The request for the hearing must be filed in accordance with the requirements specified in the notice.
(b) Time for filing a request. A request for a hearing must be filed within 15 calendar days after the receipt of the notice of the contract determination or intermediate sanction.
(c) Parties to a hearing. The parties to a hearing must be—
(1) The parties described in § 423.650;
(2) At the discretion of the hearing officer, any interested parties who make a showing that their rights may be prejudiced by the decision to be rendered at the hearing; and
(3) CMS.
§ 423.652   Postponement of effective date of a contract determination when a request for a hearing is filed timely.
(a) Hearing. When a request for a hearing is timely filed, CMS will postpone the proposed effective date of the contract determination listed at 423.641 until a hearing decision is reached and affirmed by the Administrator following review pursuant to 423.666 in instances where a Part D sponsor or CMS requests Administrator review and the Administrator accepts the matter for review.
(b) Exceptions: (1) If a final decision is not reached on CMS' determination for an initial contract by September 1, CMS will not enter into a contract with the applicant for the following year.
(2) A contract terminated in accordance with § 423.509(b)(2)(i) of this part will be terminated on the date specified by CMS and will not be postponed if a hearing is requested.
§ 423.653   Designation of hearing officer.
CMS designates a hearing officer to conduct the hearing. The hearing officer need not be an ALJ.
§ 423.654   Disqualification of hearing officer.
(a) A hearing officer may not conduct a hearing in a case in which he or she is prejudiced or partial to any party or has any interest in the matter pending for decision.
(b) A party to the hearing who objects to the designated hearing officer must notify that officer in writing at the earliest opportunity.
(c) The hearing officer must consider the objections, and may, at his or her discretion, either proceed with the hearing or withdraw.
(1) If the hearing officer withdraws, CMS designates another hearing officer to conduct the hearing.
(2) If the hearing officer does not withdraw, the objecting party may, after the hearing, present objections and request that the officer's decision be revised or a new hearing be held before another hearing officer. The objections must be submitted in writing to CMS.
§ 423.655   Time and place of hearing.
(a) The hearing officer—
(1) Fixes a time and place for the hearing, which is not to exceed 30 calendar days after the receipt of request for the hearing;
(2) Sends written notice to the parties that informs the parties of the general and specific issues to be resolved, the burden of proof, and information about the hearing procedure.
(b)(1) The hearing officer may, on his or her own motion, change the time and place of the hearing.
(2) The hearing officer may adjourn or postpone the hearing.
(c)(1) The Part D plan sponsor or CMS may request an extension by filing a written request no later than 10 calendar days prior to the scheduled hearing.
(2) When either the Part D plan sponsor or CMS requests an extension the hearing officer will provide a one-time 15-calendar day extension.
(3) Additional extensions may be granted at the discretion of the hearing officer.
§ 423.656   Appointment of representatives.
A party may appoint as its representative at the hearing anyone not disqualified or suspended from acting as a representative before the Secretary or otherwise prohibited by law.
§ 423.657   Authority of representatives.
(a) A representative appointed and qualified in accordance with § 423.656, on behalf of the represented party—
(1) Gives or accepts any notice or request pertinent to the proceedings set forth in this subpart;
(2) Presents evidence and allegations as to facts and law in any proceedings affecting that party; and
(3) Obtains information to the same extent as the party.
(b) A notice or request sent to the representative has the same force and effect as if it is sent to the party.
§ 423.658   Conduct of hearing.
(a) The hearing is open to the parties and to the public.
(b) The hearing officer inquires fully into all the matters at issue and receives in evidence the testimony of witnesses and any documents that are relevant and material.
(c) The hearing officer provides the parties an opportunity to enter any objection to the inclusion of any document.
(d) The Part D sponsor bears the burden of going forward and must first present evidence and argument before CMS presents its evidence and argument.
§ 423.659   Evidence.
The hearing officer rules on the admissibility of evidence and may admit evidence that is inadmissible under rules applicable to court procedures.
§ 423.660   Witnesses.
(a) The hearing officer may examine the witnesses.
(b) The parties or their representatives are permitted to examine their witnesses and cross-examine witnesses of other parties.
§ 423.661   Witnesses lists and documents.
Witness lists and documents must be identified and exchanged at least 5 calendar days prior to the scheduled hearing
§ 423.662   Prehearing and summary judgment.
(a) Prehearing. The hearing officer may schedule a prehearing conference if he or she believes that a conference would more clearly define the issues.
(b) Summary judgment. Either party to the hearing, may ask the hearing officer to rule on a motion for summary judgment.
§ 423.663   Record of hearing.
(a) A complete record of the proceedings at the hearing is made and transcribed and made available to all parties upon request.
(b) The record may not be closed until a hearing decision is issued.
§ 423.664   Authority of hearing officer.
In exercising his or her authority, the hearing officer must comply with the provisions of title XVIII and related provisions of the Act, the regulations issued by the Secretary, and general instructions issued by CMS in implementing the Act.
§ 423.665   Notice and effect of hearing decision.
(a) As soon as practical after the close of the hearing, the hearing officer issues a written decision that—
(1) Is based upon the evidence of record; and
(2) Contains separately numbered findings of fact and conclusions of law.
(b) The hearing officer provides a copy of the hearing decision to each party.
(c) The hearing decision is final and binding unless it is reversed or modified by the Administrator following review under § 423.666, or reopened and revised in accordance with § 423.668.
§ 423.666   Review by the Administrator.
(a) Request for review by Administrator. CMS or a Part D plan sponsor that has received a hearing decision may request a review by the Administrator within 15 calendar days after receipt of the hearing decision as provided under § 423.665(b) of this subpart. Both the Part D plan sponsor and CMS may provide written arguments to the Administrator for review.
(b) Decision to review the hearing decision. After receiving a request for review, the Administrator has the discretion to elect to review the hearing determination in accordance with paragraph (d) of this section or to decline to review the hearing decision.
(c) Notification of Administrator determination. The Administrator notifies both parties of his or her determination regarding review of the hearing decision within 30 calendar days after receipt of request for review. If the Administrator declines to review the hearing decision or the Administrator does not make a determination regarding review within 30 calendar days, the decision of the hearing officer is final.
(d) Review by the Administrator. If the Administrator elects to review the hearing decision regarding a contract determination, the Administrator shall review the hearing officer's decision and determine, based upon this decision, the hearing record, and any written arguments submitted by the Part D sponsor or CMS, whether the determination should be upheld, reversed, or modified.
(e) Decision by the Administrator. The Administrator issues a written decision, and furnishes the decision to the PDP sponsor requesting review.
§ 423.667   Effect of Administrator's decision.
A decision by the Administrator under section § 423.666(c) is final and binding unless it is reopened and revised in accordance with § 423.668.
§ 423.668   Reopening of a contract determination or decision of a hearing officer or the Administrator.
(a) CMS may reopen and revise an initial determination upon its own motion.
(b) Contract determination. A decision of a hearing officer that is unfavorable to any party and is otherwise final may be reopened and revised by the hearing officer upon the officer's own motion within 1 year of the notice of the hearing decision. Another hearing officer designated by CMS may reopen and revise the decision if the hearing officer who issued the decision is unavailable.
(c) Decision of Administrator. A decision by the Administrator that is otherwise final may be reopened and revised by the Administrator upon the Administrator's own motion within 1 year of the notice of the Administrator's decision.
(d) Notices. (1) The notice of reopening and of any revisions following the reopening is mailed to the parties.
(2) The notice of revision specifies the reasons for revisions.
§ 423.750   Types of intermediate sanctions and civil money penalties.
(a) The following intermediate sanctions may be imposed and will continue in effect until CMS is satisfied that the deficiencies that are the basis for the sanction determination have been corrected and are not likely to recur:
(1) Suspension of the Part D plan sponsor's enrollment of Medicare beneficiaries.
(2) Suspension of payment to the Part D plan sponsor for Medicare beneficiaries enrolled after the date CMS notifies the organization of the intermediate sanction.
(3) Suspension of communication activities to Medicare beneficiaries by a Part D plan sponsor, as defined by CMS.
(b) CMS may impose civil money penalties as specified in 423.760.
§ 423.752   Basis for imposing intermediate sanctions and civil money penalties.
(a) All intermediate sanctions. For the violations listed in this paragraph (a), CMS may impose one or more of the sanctions specified in § 423.750(a) of this subpart on any Part D plan sponsor with a contract. The Part D plan sponsor may also be subject to other remedies authorized under law.
(1) Fails substantially to provide medically necessary items and services that are required (under law or under the contract) to be provided to an individual covered under the contract, if the failure has adversely affected (or has the substantial likelihood of adversely affecting) the individual.
(2) Imposes on Part D plan enrollees premiums in excess of the monthly basic and supplemental beneficiary premiums permitted under section 1860D-1 et seq. of the Act and subpart F of this part.
(3) Acts to expel or refuses to re-enroll a beneficiary in violation of the provisions of this part.
(4) Engages in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment (except as permitted by this part) by eligible individuals with the organization whose medical condition or history indicates a need for substantial future medical services.
(5) Misrepresents or falsifies information that it furnishes—
(i) To CMS; or
(ii) To an individual or to any other entity under the Part D drug benefit program.
(6) Employs or contracts with an individual or entity who is excluded from participation in Medicare under section 1128 or 1128A of the Act (or with an entity that employs or contracts with an excluded individual or entity) for the provision of any of the following:
(i) Health care.
(ii) Utilization review.
(iii) Medical social work.
(iv) Administrative services.
(7) Except as provided under § 423.34, enrolls an individual in any plan under this part without the prior consent of the individual or the designee of the individual.
(8) Transfers an individual enrolled under this part from one plan to another without the prior consent of the individual or the designee of the individual or solely for the purpose of earning a commission.
(9) Fails to comply with communication restrictions described in subpart V of this part or applicable implementing guidance.
(10) Employs or contracts with any individual, agent, provider, supplier or entity who engages in the conduct described in paragraphs (a)(1) through (9) of this section.
(b) Suspension of enrollment and communications. If CMS makes a determination that could lead to a contract termination under § 423.509(a), CMS may impose the intermediate sanctions at § 423.750(a)(1) and (3).
(c) Civil money penalties (1) CMS. In addition to, or in place of, any intermediate sanctions, CMS may impose civil money penalties in the amounts specified in either of the following:
(i) Section 423.760(b) for any of the determinations at § 423.509(a), except § 423.509(a)(4)(i).
(ii) Section 423.760(c) for any of the determinations in paragraph (a) of this section except § 422.752(a)(5) of this chapter.
(2) OIG. In addition to, or in place of any intermediate sanctions imposed by CMS, the OIG, in accordance with part 1003 of Chapter V of this title, may impose civil money penalties for the following:
(i) Violations listed at 423.752(a).
(ii) Determinations made pursuant to § 422.510(a)(4)(i) of this chapter.
§ 423.756   Procedures for imposing intermediate sanctions and civil money penalties.
(a) Notice of intermediate sanction and opportunity to respond —(1) Notice of intent. Before imposing the intermediate sanctions, CMS—
(i) Sends a written notice to the Part D plan sponsor stating the nature and basis of the proposed intermediate sanction, and the Part D plan sponsor's right to a hearing as specified in paragraph (b) of this section; and
(ii) Sends the OIG a copy of the notice.
(2) Opportunity to respond. CMS allows the Part D plan sponsor 10 calendar days after receipt of the notice to provide a written rebuttal. CMS considers receipt of the notice as the day after notice is sent by fax, e-mail, or submitted for overnight mail.
(b) Hearing. (1) The Part D plan sponsor may request a hearing before a CMS hearing officer.
(2) A written request must be received by the designated CMS office within 15 calendar days after the receipt of the notice.
(3) A request for a hearing under § 423.650 of this part does not delay the date specified by CMS when the sanction becomes effective.
(4) The Part D plan sponsor must follow the right to a hearing procedure as specified at subpart N of this part.
(c) Effective date and duration of sanctions —(1) Effective date. The effective date of the sanction is the date specified by CMS in the notice.
(2) Exception. If CMS determines that the Part D sponsor's conduct poses a serious threat to an enrollee's health and safety, CMS may make the sanction effective on an earlier date that CMS specifies.
(3) Duration of sanction. The sanction remains in effect until CMS is satisfied that the deficiencies that are the basis for the sanction determination have been corrected and are not likely to recur.
(i) CMS may require that the Part D plan sponsor hire an independent auditor to provide CMS with additional information to determine if the deficiencies that are the basis for the sanction determination have been corrected and are not likely to recur. The independent auditor must work in accordance with CMS specifications and must be willing to attest that a complete and full independent review has been performed.
(ii) In instances where intermediate sanctions have been imposed, CMS may require a Part D plan sponsor to market or to accept enrollments or both for a limited period of time in order to assist CMS in making a determination as to whether the deficiencies that are the bases for the intermediate sanctions have been corrected and are not likely to recur.
(A) If, following this time period, CMS determines the deficiencies have not been corrected or are likely to recur, the intermediate sanctions will remain in effect until such time that CMS is assured the deficiencies have been corrected and are not likely to recur.
(B) The Part D plan sponsor does not have a right to a hearing under § 423.650(a)(4) of this subpart to challenge CMS' determination to keep the intermediate sanctions in effect.
(C) During the limited time period, sanctioned Part D plan sponsors under the benchmark that would normally participate in the annual and monthly auto enrollment process for enrollees receiving the low income subsidy will not be allowed to receive or process these types of enrollments.
(d) Non-renewal or termination by CMS. In addition to or as an alternative to the sanctions described in § 423.750, CMS may decline to authorize the renewal of an organization's contract in accordance with § 423.507(b), or terminate the contract in accordance with § 423.509.
(1) Decline to authorize the renewal of an organization's contract in accordance with § 423.507(b); or
(2) Terminate the contract in accordance with § 423.509.
(e) Notice to impose civil money penalties —(1) CMS notice to OIG. If CMS determines that a Part D sponsor has committed an act or failed to comply with a requirement as described in 423.752, CMS notifies the OIG of this determination. OIG may impose a civil money penalty upon a Part D sponsor as specified at 423.752(c)(2).
(2) CMS notice of civil money penalties to Part D plan sponsors. If CMS makes a determination to impose a CMP described in 423.752(c)(1), CMS will send a written notice of the Agency's decision to impose a civil money penalty to include—
(i) A description of the basis for the determination.
(ii) The basis for the penalty.
(iii) The amount of the penalty.
(iv) The date the penalty is due.
(v) The Part D sponsor's right to a hearing as specified under Subpart T of this part.
(vi) Information about where to file the request for hearing.
§ 423.758   Collection of civil money penalties imposed by CMS.
(a) When a Part D plan sponsor does not request a hearing CMS initiates collection of the civil money penalty following the expiration of the timeframe for requesting an ALJ hearing as specified in subpart T.
(b) If a Part D sponsor requests a hearing and CMS' decision to impose a civil money penalty is upheld, CMS may initiate collection of the civil money penalty once the administrative decision is final.
§ 423.760   Determinations regarding the amount of civil money penalties and assessment imposed by CMS.
(a) Determining the appropriate amount of any penalty. In determining the amount of penalty imposed under § 423.752(c)(1), CMS considers the following as appropriate:
(1) The nature of the conduct.
(2) The degree of culpability of the Part D sponsor.
(3) The adverse effect to enrollees which resulted or could have resulted from the conduct of the Part D sponsor.
(4) The financial condition of the Part D sponsor.
(5) The history of prior offenses by the Part D sponsor or principals of the Part D sponsor.
(6) Such other matters as justice may require.
(b) Amount of penalty. CMS may impose civil money penalties in the following amounts:
(1) If the deficiency on which the determination is based has directly adversely affected (or has the substantial likelihood of adversely affecting) one or more Part D enrollees—up to $25,000 as adjusted annually under 45 CFR part 102 for each determination.
(2) If the deficiency on which the determination is based has directly adversely affected (or has the substantial likelihood of adversely affecting) one or more Part D enrollees, CMS may calculate a CMP of up to $25,000 as adjusted annually under 45 CFR part 102 for each Part D enrollee directly adversely affected (or with a substantial likelihood of being adversely affected) by a deficiency .
(3)(i) Definitions for calculating penalty amounts—
(A) Per determination. The penalty amounts calculated under paragraph (b)(1) of this section.
(B) Per enrollee. The penalty amounts calculated under paragraph (b)(2) of this section.
(C) Standard minimum penalty. The per enrollee or per determination penalty amount that is dependent on the type of adverse impact that occurred.
(D) Aggravating factor(s). Specific penalty amounts that may increase the per enrollee or per determination standard minimum penalty and are determined based on criteria under paragraph (a) of this section.
(ii) CMS sets minimum penalty amounts in accordance with paragraphs (b)(1) and (2) of this section.
(iii) CMS announces the standard minimum penalty amounts and aggravating factor amounts for per determination and per enrollee penalties on an annual basis.
(iv) CMS has the discretion to issue penalties up to the maximum amount under paragraphs (b)(1) and (2) of this section when CMS determines that an organization's non-compliance warrants a penalty that is higher than would be applied under the minimum penalty amounts set by CMS.
(4) For each week that a deficiency remains uncorrected after the week in which the Part D sponsor receives CMS' notice of the determination—up to $10,000 as adjusted annually under 45 CFR part 102.
(5) If CMS makes a determination that a Part D sponsor has terminated its contract other than in a manner described under 423.510 and that the Part D sponsor has therefore failed to substantially carry out the terms of the contract, $250 as adjusted annually under 45 CFR part 102 per Medicare enrollee from the terminated Part D sponsor or plans at the time the Part D sponsor terminated its contract, or $100,000 as adjusted annually under 45 CFR part 102, whichever is greater.
(c) Amount of penalty imposed by CMS or OIG. CMS or the OIG may impose civil money penalties in the following amounts for a determination made under § 423.752(a):
(1) Civil money penalties of not more than $25,000 as adjusted annually under 45 CFR part 102 for each determination made.
(2) With respect to a determination made under § 423.752(a)(4) or (a)(5)(i), not more than $100,000 as adjusted annually under 45 CFR part 102 for each such determination except with respect to a determination made under § 423.752(a)(5), an assessment of not more than the amount claimed by such plan or PDP sponsor based upon the misrepresentation or falsified information involved.
(3) Plus with respect to a determination made under § 423.752(a)(2), double the excess amount charged in violation of such paragraph (and the excess amount charged must be deducted from the penalty and returned to the individual concerned).
(4) Plus with respect to a determination made under § 423.752(a)(4), $15,000 as adjusted annually under 45 CFR part 102 for each individual not enrolled as a result of the practice involved.
§ 423.762   Settlement of penalties.
For civil money penalties imposed by CMS, CMS may settle civil money penalty cases at any time before a final decision is rendered.
§ 423.764   Other applicable provisions.
The provisions of section 1128A of the Act (except paragraphs (a) and (b)) apply to civil money penalties under this subpart to the same extent that they apply to a civil money penalty or procedure under section 1128A of the Act.
§ 423.771   Basis and scope.
(a) Basis. This subpart is based on section 1860D-14 of the Act.
(b) Scope. This subpart sets forth the requirements and limitations for payments by and on behalf of low-income Medicare beneficiaries who enroll in a Part D plan.
§ 423.772   Definitions.
For purposes of this subpart, the following definitions apply:
Applicant means the Part D eligible individual applying for the subsidies available to subsidy eligible individuals under this subpart.
Best available evidence means evidence recognized by CMS as documentation or other information that is directly tied to State or Social Security Administration systems that confirm an individual's low-income subsidy eligibility status, and that must be accepted and used by the Part D sponsor to change low-income subsidy status.
Family size means the applicant, the spouse who is living in the same household, if any and the number of individuals who are related to the applicant or applicants, who are living in the same household and who are dependent on the applicant or the applicant's spouse for at least one-half of their financial support.
Federal poverty line (FPL) has the meaning given that term in section 673(2) of the Community Services Block Grant Act (42 USC 9902(2)), including any revision required by that section.
Full-benefit dual eligible individual means an individual who, for any month—
(1) Has coverage for the month under a prescription drug plan under Part D of title XVIII, or under an MA-PD plan under Part C of title XVIII; and
(2) Is determined eligible by the State for medical assistance for full benefits under title XIX for the month under any eligibility category covered under the State plan or comprehensive benefits under a demonstration under section 1115 of the Act. (This does not include individuals under Pharmacy Plus program demonstrations or under a section 1115 demonstration that provides pharmacy-only benefits to these individuals.). It also includes any individual who is determined by the State to be eligible for medical assistance under section 1902(a)(10)(C) of the Act (medically needy) or section 1902(f) of the Act (States that use more restrictive eligibility criteria than are used by the SSI program) of the Act for any month if the individual was eligible for medical assistance in any part of the month.
Full subsidy means the subsidies available to full subsidy eligible individuals under § 423.780(a) and § 423.782(a).
Full subsidy eligible individuals means individuals meeting the eligibility requirements under § 423.773(b).
Income means income as described under section 1905(p)(1) of the Act without use of any more liberal disregards under section 1902(r)(2) of the Act (that is defined by section 1612 of the Act) and exempts support and maintenance furnished in kind. This definition includes the income of the applicant and spouse who is living in the same household, if any, regardless of whether the spouse is also an applicant.
Individual receiving home and community-based services means a full-benefit dual-eligible individual who is receiving services under a home and community-based program authorized for a State in accordance with one of the following:
(1) Section 1115 of the Act.
(2) Section 1915(c) or (d) of the Act.
(3) State plan amendment under section 1915(i) of the Act.
(4) Services are provided through enrollment in a Medicaid managed care organization with a contract under section 1903(m) of the Act or section 1932 of the Act.
Institutionalized individual means a full-benefit dual eligible individual who is an inpatient in a medical institution or nursing facility for which payment is made under Medicaid throughout a month, as defined under section 1902(q)(1)(B) of the Act.
Other subsidy eligible individuals means those individuals meeting the eligibility requirements under § 423.773(d).
Personal representative for purposes of this subpart means—
(1) An individual who is authorized to act on behalf of the applicant;
(2) If the applicant is incapacitated; or incompetent, someone acting responsibly on their behalf, or
(3) An individual of the applicant's choice who is requested by the applicant to act as his or her representative in the application process.
Resources means liquid resources of the applicant (and, if married, his or her spouse who is living in the same household), such as checking and savings accounts, stocks, bonds, and other resources that can be readily converted to cash within 20 days, that are not excluded from resources in section 1613 of the Act, and real estate that is not the applicant's primary residence or the land on which the primary residence is located. It exempts the value of any life insurance policy.
State means for purposes of this subpart each of the 50 States and the District of Columbia.
§ 423.773   Requirements for eligibility.
(a) Subsidy eligible individual. A subsidy eligible individual is a Part D eligible individual residing in a State who is enrolled in, or seeking to enroll in a Part D plan and meets the following requirements:
(1) Has income below 150 percent of the FPL applicable to the individual's family size.
(2) Has resources at or below the resource thresholds set forth in § 423.773(b)(2) or (d)(2).
(b) Full subsidy eligible individual. A full subsidy eligible individual is a subsidy eligible individual who—
(1) Has income below 135 percent of the FPL applicable to the individual's family size or, with respect to a plan year beginning on or after January 1, 2024, has income below 150 percent of the FPL applicable to the individual's family size; and
(2) Has resources that do not exceed—
(i) For 2006, 3 times the amount of resources an individual may have and still be eligible for benefits under the Supplemental Security Income (SSI) program under title XVI of the Act (including the assets or resources of the individual's spouse).
(ii) For years 2007 through 2023, the amount of resources allowable for the previous year under this paragraph (b)(2) increased by the annual percentage increase in the consumer price index (all items, U.S. city average) as of September of that previous year, rounded to the nearest multiple of $10. The nearest multiple are rounded up if it is equal to or greater than $5 and down if it is less than $5.
(iii) For plan years beginning on or after January 1, 2024, the amount of resources specified at paragraph (d)(2) of this section.
(c)(1) Individuals treated as full subsidy eligible. An individual must be treated as meeting the eligibility requirements for full subsidy eligible individuals under paragraph (b) of this section if the individual is a—
(i) Full-benefit dual eligible individual;
(ii) Beneficiary of SSI benefits under title XVI of the Act; or
(iii) Eligible for Medicaid as a Qualified Medicare Beneficiary (QMB), Specified Low Income Medicare Beneficiary (SLMB), or a Qualifying Individual (QI) under a State's plan.
(2) CMS notifies an individual treated as a full-subsidy eligible under this paragraph (c) that he or she does not need to apply for the subsidies under this subpart, and, at a minimum, is deemed eligible for a full subsidy as follows:
(i) For an individual deemed eligible between January 1 and June 30 of a calendar year, the individual is deemed eligible for a full subsidy for the remainder of the calendar year.
(ii) For an individual deemed eligible between July 1 and December 31 of a calendar year, the individual is deemed eligible for the remainder of the calendar year and the following calendar year.
(d) Other low-income subsidy individuals. Other low-income subsidy individuals are subsidy eligible individuals who, for plan years beginning before January 1, 2024—
(1) Have income less than 150 percent of the FPL applicable to the individual's family size; and
(2) Have resources that do not exceed—
(i) For 2006, $10,000 if single or $20,000 if married (including the assets or resources of the individual's spouse).
(ii) For subsequent years, the resource amount allowable for the previous year under this paragraph (d)(2), increased by the annual percentage increase in the consumer price index (all items, U.S. city average) as of September of the previous year, rounded to the nearest multiple of $10. The nearest multiple will be rounded up if it is equal to or greater than $5 and down if it is less than $5.
§ 423.774   Eligibility determinations, redeterminations, and applications.
(a) Determinations of whether an individual is a subsidy eligible individual. Determinations of eligibility for subsidies under this subpart are made by the State under its State plan under title XIX of the Act if the individual applies with the Medicaid agency, or if the individual applies with the Social Security Administration (SSA), the Commissioner of Social Security in accordance with the requirements of section 1860D-14(a)(3) of the Act.
(b) Effective date of initial eligibility determinations. Initial eligibility determinations are effective beginning with the first day of the month in which the individual applies, but no earlier than January 1, 2006 and remain in effect for a period not to exceed 1 year.
(c) Redeterminations and appeals of low-income subsidy eligibility —(1) Redeterminations and appeals of low-income subsidy eligibility determinations—eligibility determinations made by States. Redeterminations and appeals of low-income subsidy eligibility determinations by States must be made in the same manner and frequency as the redeterminations and appeals are made under the State's plan.
(2) Redeterminations and appeals of low-income subsidy eligibility—eligibility determinations made by Commissioner of Social Security. Redeterminations and appeals of eligibility determinations made by the Commissioner will be made in the manner specified by the Commissioner of Social Security.
(d) Application requirements. (1) In order for applications for the subsidies under this subpart to be considered complete, applicants or personal representatives applying on the individual's behalf, must—
(i) Complete all required elements of the application; (ii) Provide any statements from financial institutions, as requested, to support information in the application; and
(iii) Certify, under penalty of perjury or similar sanction for false statements, as to the accuracy of the information provided on the application form.
(2) Multiple applications. If the individual or his or her personal representative has previously filed an application with the State or SSA which seeks subsidy eligibility for any portion of the eligibility period covered by a subsequent application, the later application is void if the individual has received a positive subsidy determination on that earlier application from the State or SSA.
§ 423.780   Premium subsidy.
(a) Full subsidy eligible individuals. Full subsidy eligible individuals are entitled to a premium subsidy equal to 100 percent of the premium subsidy amount.
(b) Premium subsidy amount. (1) The premium subsidy amount is equal to the lesser of—
(i) Under the Part D plan selected by the beneficiary, the portion of the monthly beneficiary premium attributable to basic coverage (for enrollees in PDPs) or the portion of the MA monthly prescription drug beneficiary premium attributable to basic prescription drug coverage (for enrollees in MA-PD plans); or
(ii) The greater of the low-income benchmark premium amount (determined under paragraph (b)(2) of this section) for the PDP region in which the subsidy eligible individual resides or the lowest monthly beneficiary premium for a PDP that offers basic prescription drug coverage in the PDP region.
(2) Calculation of the low-income benchmark premium amount. (i) The low-income benchmark premium amount for a PDP region is a weighted average of the premium amounts described in paragraph (b)(2)(ii) of this section, with the weight for each PDP and MA-PD plan equal to a percentage, the numerator being equal to the number of Part D low-income subsidy eligible individuals enrolled in the plan in the reference month (as defined in § 422.258(c)(1) of this chapter) and the denominator equal to the total number of Part D low-income subsidy eligible individuals enrolled in all PDP and MA-PD plans (but not including PACE, private fee-for-service plans or 1876 cost plans) in a PDP region in the reference month.
(ii) Premium amounts. The premium amounts used to calculate the low-income benchmark premium amount are as follows:
(A) The monthly beneficiary premium for a PDP that is basic prescription drug coverage;
(B) The portion of the monthly beneficiary premium attributable to basic prescription drug coverage for a PDP that is enhanced alternative coverage; or,
(C) The MA monthly prescription drug beneficiary premium (as defined under section 1854(b)(2)(B) of the Act) for a MA-PD plan and determined before the application of the monthly rebate computed under section 1854(b)(1)(C)(i) of the Act for that plan and year involved.
(c) Special rule for 2006 to weight the low-income benchmark premium. For purposes of calculating the low-income benchmark premium amount for 2006, CMS assigns equal weighting to PDP sponsors (including fallback entities) and assigns MA-PD plans a weight based on prior enrollment. New MA-PD plans are assigned a zero weight. PACE, private fee-for-service plans and 1876 cost plans are not included.
(d) Other low-income subsidy eligible individuals—sliding scale premium. Other low-income subsidy eligible individuals are entitled to a premium subsidy for plan years beginning before January 1, 2024, based on a linear sliding scale ranging from 100 percent of the premium subsidy amount described in paragraph (b) of this section as follows:
(1) For individuals with income at or below 135 percent of the FPL applicable to their family size, the full premium subsidy amount.
(2) For individuals with income greater than 135 percent but at or below 140 percent of the FPL applicable to the family size, a premium subsidy equal to 75 percent of the premium subsidy amount.
(3) For individual with income greater than 140 percent but at or below 145 percent of the FPL applicable to the family size a premium subsidy equal to 50 percent of the premium subsidy amount.
(4) For individuals with income greater than 145 percent but below 150 percent of FPL applicable to the family size a premium subsidy equal to 25 percent of the premium subsidy amount.
(e) Waiver of late enrollment penalty for subsidy-eligible individuals. Subsidy eligible individuals, as defined in § 423.773, are not subject to a late enrollment penalty, as defined in § 423.46.
(f) Waiver of de minimis premium amounts. CMS will permit a Part D plan to waive a de minimis amount that is above the monthly beneficiary premium defined in § 423.780(b)(2)(ii)(A) or (B) for full subsidy individuals as defined in § 423.780(a) or § 423.780(d)(1), provided waiving the de minimis amount results in a monthly beneficiary premium that is equal to the established low income benchmark as defined in § 423.780(b)(2).
§ 423.782   Cost-sharing subsidy.
(a) Full subsidy eligible individuals. Full subsidy eligible individuals are entitled to the following:
(1) Elimination of the annual deductible under § 423.104(d)(1).
(2) Reduction in cost-sharing for all covered Part D drugs covered under the PDP or MA-PD plan below the out-of-pocket limit (under § 423.104), including Part D drugs covered under the PDP or MA-PD plan obtained after the initial coverage limit (under § 423.104(d)(4)), as follows:
(i) Except as provided under paragraphs (a)(2)(ii) and (a)(2)(iii) of this section, copayment amounts not to exceed the copayment amounts specified in § 423.104(d)(5)(A). This applies to both:
(A) Those full-benefit dual eligible individuals who are not institutionalized and who have income above 100 percent of the Federal poverty line applicable to the individual's family size and
(B) Those individuals who have income under 135 percent of the Federal poverty line applicable to the individual's family size who meet the resources test described at § 423.773(b)(2).
(ii) Full-benefit dual-eligible individuals who are institutionalized or who are receiving home and community-based services have no cost-sharing for Part D drugs covered under their PDP or MA-PD plans.
(iii) Full-benefit dual eligible individuals with incomes that do not exceed 100 percent of the Federal poverty line applicable to the individual's family size are subject to cost-sharing for covered Part D drugs equal to the lesser of:
(A) A copayment amount of not more than $1 for a generic drug, biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred drugs that are multiple source (as defined under section 1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A) for the percentage increase in the Consumer Price Index, rounded to the nearest multiple of 5 cents or 10 cents, respectively; or
(B) The copayment amount charged to other individuals under this paragraph (a)(2)(i) of this section.
(3) Elimination of all cost-sharing for covered Part D drugs covered under the PDP or MA-PD plan above the out-of-pocket limit (under § 423.104(d)(5)).
(b) Other low-income subsidy eligible individuals. Other low-income subsidy eligible individuals are entitled to the following:
(1) In 2006, reduction in the annual deductible to $50. This amount is increased each year beginning in 2007 by the annual percentage increase in average per capita aggregate expenditures for Part D drugs, rounded to the nearest multiple of $1.
(2) Fifteen percent coinsurance for all covered Part D drugs obtained after the annual deductible under the plan up to the out-of-pocket limit (under § 423.104(d)(5)(iii)).
(3) For covered Part D drugs above the out-of-pocket limit (under § 423.104(d)(5)(iii)) in 2006, copayments not to exceed $2 for a generic drug, biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred drugs that are multiple source drugs (as defined under section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug. For years beginning in 2007, the amounts specified in this paragraph (b)(3) for the previous years increased by the annual percentage increase in average per capita aggregate expenditures for covered Part D drugs, rounded to the nearest multiple of 5 cents.
(c) When the out-of-pocket cost for a covered Part D drug under a Part D sponsor's plan benefit package is less than the maximum allowable copayment, coinsurance or deductible amounts under paragraphs (a) and (b) of this section, the Part D sponsor may only charge the lower benefit package amount.
§ 423.800   Administration of subsidy program.
(a) Notification of eligibility for low-income subsidy. CMS notifies the Part D sponsor offering the Part D plan, in which a subsidy eligible individual is enrolled, of the individual's eligibility for a subsidy under this section and the amount of the subsidy.
(b) Reduction of premium or cost-sharing by PDP sponsor or organization. Based on information provided by CMS under paragraph (a) of this section, or obtained under paragraph (d) of this section, the Part D sponsor offering the Part D plan in which a subsidy eligible individual is enrolled must reduce the individual's premiums and cost-sharing as applicable, and provide information to CMS on the amount of those reductions, in a manner determined by CMS. The Part D sponsor must track the application of the subsidies under this subpart to be applied to the out-of-pocket threshold.
(c) Reimbursement for cost-sharing paid before notification of eligibility for low-income subsidy. The Part D sponsor offering the Part D plan must reimburse subsidy eligible individuals, and organizations paying cost-sharing on behalf of such individuals, any excess premiums and cost-sharing paid by such individual or organization after the effective date of the individual's eligibility for a subsidy under this subpart.
(d) Use of the best available evidence process to establish cost-sharing. Part D sponsors must—
(1) Accept best available evidence as defined in § 423.772 of this part received from beneficiaries or other individuals acting directly on their behalf; and
(2) Update the subsidy eligible individual's LIS status. and respond to requests for assistance in securing acceptable evidence of subsidy eligibility from beneficiaries or other individuals acting directly on their behalf in accordance with the process(es) established by CMS, and within the reasonable timeframe(s) as determined by CMS.
(e) Timeframe for refunds and recoveries due to retroactive adjustments to cost sharing. Sponsors must process retroactive adjustments to cost-sharing for low-income subsidy eligible individuals and any resulting refunds and recoveries in accordance with the timeframe specified in § 423.466(a) of this part.
§ 423.851   Scope.
This subpart sets forth—the rights of beneficiaries to a choice of at least two sources of qualified prescription drug coverage; requirements and limitations on the bid submission, review and approval of fallback prescription drug plans, and the determination of enrollee premium and plan payments for these plans.
§ 423.855   Definitions.
As used in this subpart, unless specified otherwise-
Actual costs means the subset of prescription drug costs (not including administrative costs or return on investment, but including costs directly related to the dispensing of covered Part D drugs during the year) that are attributable to standard benefits only and that are incurred and actually paid by the sponsor or organization under the plan.
Actually paid has the same meaning described in § 423.308.
Eligible fallback entity or fallback entity means an entity that, for a particular contract period-
(1) Is a PDP sponsor that does not have to be a risk-bearing entity (or, if applying to become a fallback entity, an entity that meets all the requirements to become a Part D plan sponsor except that it does not have to be a risk-bearing entity); and
(2) Does not submit a risk bid under § 423.265 for offering a prescription drug plan for any PDP region for the first year of that contract period. An entity is treated as submitting a risk bid if the entity is acting as a subcontractor for an integral part of the drug benefit management activities of an entity that is or applies to become a non-fallback PDP sponsor. An entity is not treated as submitting a bid if it is a subcontractor of an MA organization, unless that organization is acting as or applies to become a non-fallback PDP sponsor for a prescription drug plan.
Fallback prescription drug plan means a prescription drug plan (PDP) offered by a fallback entity that—
(1) Offers only defined standard or actuarially equivalent standard prescription drug coverage as defined in § 423.100;
(2) Provides access to negotiated prices, including discounts from manufacturers; and
(3) Meets all other requirements established for prescription drug plans, except as otherwise specified by CMS in this subpart or in separate guidance.
Qualifying plan means a full-risk or limited-risk prescription drug plan, as defined in § 423.258, or an MA-PD plan described in section 1851(a)(2)(A)(i) of the Act, that provides required prescription drug coverage, as defined in § 423.100 An MA-PD plan must be open for enrollment and not operating under a capacity waiver to be counted as a qualifying plan. A PDP must not be operating under a restricted enrollment waiver, such as those that may be granted to special needs plans or employer group plans, in order to be counted as a qualifying plan in an area.
§ 423.859   Assuring access to a choice of coverage.
(a) Choice of at least 2 qualifying plans in each area. Each Part D eligible individual must have available a choice of enrollment in at least 2 qualifying plans (as defined in § 423.855) in the area in which the individual resides. This requirement is not satisfied if only one entity offers all the qualifying plans in the area. At least 1 of the 2 qualifying plans must be a prescription drug plan.
(b) Fallback service area —(1) For coverage year. Before the start of each coverage year CMS determines if Part D eligible individuals residing in a PDP region have access to a choice of enrollment in a minimum of 2 qualifying plans, as described in paragraph (a) of this section. If CMS determines that Part D eligible individuals in a PDP region, or some portion of the region, do not have available a choice of enrollment in a minimum of two qualified plans, CMS designates the region or portion of a region as a fallback service area. Each Part D eligible individual in a fallback service area is given the opportunity to enroll in a fallback prescription drug plan.
(2) For mid-year changes. If a contract with a qualifying plan is terminated in the middle of a contract year (as provided for in § 423.508, § 423.509, or § 423.510), CMS determines if Part D eligible individuals residing in the affected PDP region still have access to a choice of enrollment in a minimum of 2 qualifying plans, as described in paragraph (a) of this section. If CMS determines that Part D eligible individuals in a PDP region, or some portion of the region, no longer have available a choice of enrollment in a minimum of two qualifying plans, CMS designates the region or portion of a region as a fallback service area.
(c) Access to coverage in the territories. CMS may waive or modify the requirements of this part if—
(1) CMS determines that waiver or modification is necessary to secure access to qualified prescription drug coverage for Part D eligible individuals residing in a State other than the 50 States or the District of Columbia; or
(2) An entity seeking to become a prescription drug plan in an area such as a territory, other than the 50 States or the District of Columbia requests waiver or modification of any Part D requirement in order to provide qualified prescription drug coverage.
§ 423.863   Submission and approval of bids.
(a) Submission of bids —(1) Solicitation of bids. Separate from the risk bidding process under § 423.265, CMS solicits bids from eligible fallback entities for the offering in all fallback service areas in one or more PDP regions of a fallback prescription drug plan during the contract period specified in § 423.871(b).
(2) Timing of bids. CMS determines when to solicit bids for 2006 so that potential fallback prescription drug plans have enough time to prepare a bid. After that, bids are solicited on 3 year cycles, or annually thereafter as needed to replace contractors between contracting cycles.
(3) Format of bid. CMS specifies the form and manner in which fallback bids are submitted in separate guidance to bidders.
(b) Negotiation and acceptance of bids —(1) General rule. Except as provided in this section, the provisions of § 423.272 apply for the approval or disapproval of fallback prescription drug plans. CMS enters into contracts under this paragraph with eligible fallback entities for the offering of approved fallback prescription drug plans in potential fallback service areas.
(2) Flexibility in risk assumed and application of fallback prescription drug plan. In order to ensure access in an area in accordance with § 423.859(a), CMS may approve limited risk plans under § 423.272(c) for that area. If the access requirement is still not met after applying § 423.272(c), CMS provides for the offering of a fallback prescription drug plan in that area.
(3) Limitation of 1 Plan for all fallback service areas in a PDP region. All fallback service areas in any PDP region for a contract period must be served by the same fallback prescription drug plan.
(4) Competitive procedures. CMS uses competitive procedures (as defined in section 4(5) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(5)) to enter into a contract under this paragraph. The provisions of section 1874A(d) of the Act apply to a contract under this section in the same manner as they apply to a contract under that section.
(5) Timing of contracts. CMS approves a fallback prescription drug plan for a PDP region in a manner so that, if there are any fallback service areas in the region for a year, the fallback prescription drug plan is offered at the same time as prescription drug plans are otherwise offered. In the event of mid-year changes and as required by § 423.859(b)(2), CMS approves a fallback prescription drug plan for a PDP region in a manner so that the fallback prescription drug plan is offered within 90 days of notice.
(6) No national fallback prescription drug plan. CMS may not enter into a contract with a single fallback entity for the offering of fallback prescription drug plans throughout the United States.
§ 423.867   Rules regarding premiums.
(a) Monthly beneficiary premium. Except as provided in § 423.286(d)(3) (relating to late enrollment penalty) and subject to subpart P (relating to low-income assistance), the monthly beneficiary premium under a fallback prescription drug plan must be uniform for all fallback service areas in a PDP region. It must equal 25.5 percent of CMS's estimate of the average monthly per capita actuarial cost, including administrative expenses, of providing coverage in the PDP region based on similar expenses of prescription drug plans that are not fallback prescription drug plans.
(b) Special rule for collection of premiums in fallback prescription drug plans. In the case of a fallback prescription drug plan, the provisions of § 423.293 (b) concerning payments of the late enrollment penalty to the PDP sponsor do not apply and the monthly beneficiary premium is collected in the manner specified in § 422.262(f)(1) of this chapter, or paid directly to the fallback entity by the beneficiary if there are either no benefits, or insufficient benefits available to be collected in the manner specified under § 422.262(f)(1) of this chapter. The amount of any premiums collected by the fallback entity is deducted from management fees due from CMS.
§ 423.871   Contract terms and conditions.
(a) General. Except as may be appropriate to carry out the requirements of this section, the terms and conditions of contracts with eligible fallback entities offering fallback prescription drug plans are the same as the terms and conditions of contracts at §§ 423.504 and 423.505 for Part D plans.
(b) Period of contract. A contract with a fallback entity for fallback service areas for a PDP region is in effect for a period of 3 years. However, a fallback prescription drug plan may be offered for any year within the contract period for a particular area only if the area is a fallback service area for that year.
(c) Entity not permitted to market or brand fallback prescription drug plans. Notwithstanding any other provisions of this part, an eligible fallback entity with a contract under this part may not engage in any marketing or branding of a fallback prescription drug plan.
(d) Performance measures. CMS issues guidance establishing performance measures for fallback prescription drug plans based on the following:
(1) Types of performance measures. Performance measures include at least measures for each of the following:
(i) Costs. The entity contains costs to the Medicare Prescription Drug Account and to Part D eligible individuals enrolled in a fallback prescription drug plan offered by the entity through mechanisms such as generic substitution and price discounts.
(ii) Quality programs. The entity provides the enrollees in its fallback prescription drug plan with quality programs that avoid adverse drug reactions, monitor for appropriate utilization, and reduce medical errors.
(iii) Customer service. The entity provides timely and accurate delivery of services and pharmacy and beneficiary support services.
(iv) Benefit administration and claims adjudication. The entity provides efficient and effective benefit administration and claims adjudication.
(2) Development of performance measures. CMS establishes detailed performance measures for use in evaluating fallback entity performance and determination of certain management fees based on criteria from historical performance, application of acceptable statistical measures of variation to fallback entity and PDP sponsor (other than fallback entities) experience nationwide during a base period, or changing program emphases or requirements.
(e) Payment terms. A contract approved with a fallback entity includes terms for payment for—
(1) The actual costs of covered Part D drugs provided to Part D eligible individuals enrolled in a fallback prescription drug plan offered by the entity; and
(2) Management fees that consist of administrative costs and return on investment and are tied to the performance measures established by CMS for the management, administration, and delivery of the benefits under the contract as provided under paragraph (d) of this section.
(f) Requirement for the submission of information. Each contract for a fallback prescription drug plan requires an eligible fallback entity offering a fallback prescription drug plan to provide CMS with the information CMS determines is necessary to carry out the payment provisions under subpart G or under this subpart, or as required by law. Information disclosed to determine Medicare payment or reimbursement to the fallback entity may be used by the officers, employees and contractors of the Department of Health and Human Services only for the purposes of, and to the extent necessary in, determining such payment or reimbursement. This restriction does not limit CMS or OIG authority to conduct audits and evaluations necessary to ensure accurate and correct payment and to otherwise oversee Medicare reimbursement
(g) Amendment to reflect changes in service area. The contract may be amended by CMS at any time as needed to reflect the exact regions or counties where the fallback plan are required to operate within the contracted service area(s).
§ 423.875   Payment to fallback plans.
The amount payable for a fallback prescription drug plan is the amount determined under the contract for the plan in accordance with § 423.871(e).
§ 423.880   Basis and scope.
(a) Basis. This subpart is based on section 1860D-22 of the Act, as amended by section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).
(b) Scope. This section implements the statutory requirement that a subsidy payment be made to sponsors of qualified retiree prescription drug plans.
§ 423.882   Definitions.
For the purposes of this subpart, the following definitions apply:
Actually paid means that the costs must be actually incurred by the qualified retiree prescription drug plan and must be net of any direct or indirect remuneration (including discounts, charge backs or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits offered to some or all purchasers) from any source that would serve to decrease the costs incurred under the qualified retiree prescription drug plan.
Administrative costs means costs incurred by a qualified retiree prescription drug plan that are not drug costs incurred to purchase or reimburse the purchase of Part D drugs.
Allowable retiree costs means the subset of gross covered retiree plan-related prescription drug costs actually paid by the sponsor of the qualified retiree prescription drug plan or by (or on behalf of) a qualifying covered retiree under the plan.
Benefit option means a particular benefit design, category of benefits, or cost-sharing arrangement offered within a group health plan.
Employment-based retiree health coverage means coverage of health care costs under a group health plan based on an individual's status as a retired participant in the plan, or as the spouse or dependent of a retired participant. The term includes coverage provided by voluntary insurance coverage, or coverage as a result of a statutory or contractual obligation.
Gross covered retiree plan-related prescription drug costs , or gross retiree costs , means those Part D drug costs incurred under a qualified retiree prescription drug plan, excluding administrative costs, but including dispensing fees, during the coverage year. They equal the sum of the following:
(1) The share of prices paid by the qualified retiree prescription drug plan that is received as reimbursement by the pharmacy or by an intermediary contracting organization, and reimbursement paid to indemnify a qualifying covered retiree when the reimbursement is associated with a qualifying covered retiree obtaining Part D drugs under the qualified retiree prescription drug plan.
(2) All amounts paid under the qualified retiree prescription drug plan by or on behalf of a qualifying covered retiree (such as the deductible, coinsurance, or cost sharing) in order to obtain Part D drugs that are covered under the qualified retiree prescription drug plan.
Group health plans include plans as defined in section 607(1) of ERISA, 29 U.S.C. § 1167(1). They also include the following plans:
(1) A Federal or State governmental plan, which is a plan providing medical care that is established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision of a State (including a county or local government), or by any agency or instrumentality or any of the foregoing, including a health benefits plan offered under chapter 89 of Title 5, United States Code (the Federal Employee Health Benefit Plan (FEHBP)).
(2) A collectively bargained plan, which is a plan providing medical care that is established or maintained under or by one or more collective bargaining agreements.
(3) A church plan, which is a plan providing medical care that is established and maintained for its employees or their beneficiaries by a church or by a convention or association of churches that is exempt from tax under section 501 of the Internal Revenue Code of 1986 (26 U.S.C. 501).
(4) An account-based medical plan such as a Health Reimbursement Arrangement (HRA) as defined in Internal Revenue Service Notice 2002-45, 2002-28 I.R.B. 93, a health Flexible Spending Arrangement (FSA) as defined in Internal Revenue Code (Code) section 106(c)(2), a health savings account (HSA) as defined in Code section 223, or an Archer MSA as defined in Code section 220, to the extent they are subject to ERISA as employee welfare benefit plans providing medical care (or would be subject to ERISA but for the exclusion in ERISA section 4(b), 29 U.S.C.§ . § 1003(b), for governmental plans or church plans).
Part D drug is defined in § 423.100 of this part.
Part D eligible individual is defined in § 423.4 of this part.
Qualified retiree prescription drug plan means employment-based retiree health coverage that meets the requirements set forth in § 423.884 of this chapter for a Part D eligible individual who is a retired participant or the spouse or dependent of a retired participant under the coverage.
Qualifying covered retiree means a Part D eligible individual who is: a participant or the spouse or dependent of a participant; covered under employment-based retiree health coverage that qualifies as a qualified retiree prescription drug plan; and not enrolled in a Part D plan. For this purpose, the determination of whether an individual is covered under employment-based retiree health coverage is made by the sponsor in accordance with the rules of its plan. For purposes of this subpart, however, an individual is presumed not to be covered under employment-based retiree health coverage if, under the Medicare Secondary Payer rules in § 411.104 of this chapter and related CMS guidance, the person is considered to be receiving coverage by reason of current employment status. The presumption applies whether or not the Medicare Secondary Payer rules actually apply to the sponsor. For this purpose, a sponsor also may treat a person receiving coverage under its qualified retiree prescription drug plan as the dependent of a qualifying covered retiree in accordance with the rules of its plan, regardless of whether that person constitutes the qualifying covered retiree's dependent for Federal or State tax purposes.
Retiree drug subsidy amount, or subsidy payment , means the subsidy amount paid to sponsors of qualified retiree prescription drug coverage under § 423.886(a).
Standard prescription drug coverage is defined in § 423.100 of this part.
Sponsor is a plan sponsor as defined in section 3(16)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1002(16)(B), except that, in the case of a plan maintained jointly by one employer and an employee organization and for which the employer is the primary source of financing, the term means the employer.
Sponsor agreement means an agreement by the sponsor to comply with the provisions of this subpart.
§ 423.884   Requirements for qualified retiree prescription drug plans.
(a) General. Employment-based retiree health coverage is considered to be a qualified retiree prescription drug plan if all of the following requirements are satisfied:
(1) An actuarial attestation is submitted in accordance with paragraph (d) of this section. The rules for submitting attestations as part of subsidy applications are described in paragraph (c) of this section.
(2) Part D eligible individuals covered under the plan are provided with creditable coverage notices in accordance with § 423.56.
(3) Records are maintained and made available for audit in accordance with paragraph (f) of this section and § 423.888(d).
(b) Disclosure of information. The sponsor must have a written agreement with its health insurance issuer (as defined in 45 CFR 160.103), or group health plan (as applicable) regarding disclosure of information to CMS, and the issuer or plan must disclose to CMS, on behalf of the sponsor, the information necessary for the sponsor to comply with this subpart.
(c) Application —(1) Submitting an application. The sponsor (or its designee) must submit an application for the subsidy to CMS that is signed by an authorized representative of the sponsor. The application must be provided in a form and manner specified by CMS.
(2) Required information. In connection with each application the sponsor (either directly or through its designee) must submit the following:
(i) Employer Tax ID Number (if applicable).
(ii) Sponsor name and address.
(iii) Contact name and email address.
(iv) Actuarial attestation that satisfies the standards specified in paragraph (d) of this section and any other supporting documentation required by CMS for each qualified retiree prescription drug plan for which the sponsor seeks subsidy payments.
(v) A list of all individuals the sponsor believes (using information reasonably available to the sponsor when it submits the application) are qualifying covered retirees enrolled in each prescription drug plan (including spouses and dependents, if Medicare-eligible), along with the information about each person listed below in this paragraph:
(A) Full name.
(B) Health Insurance Claim (HIC) number or Social Security number.
(C) Date of birth.
(D) Gender.
(E) Relationship to the retired employee.
(vi) A sponsor may satisfy paragraph (c)(2)(v) of this section by entering into a voluntary data sharing agreement (VDSA) with CMS (or any other arrangement CMS may make available).
(vii) A signed sponsor agreement.
(viii) Any other information specified by CMS.
(3) Terms and conditions. To receive a subsidy payment, the sponsor (through the signed sponsor agreement or as otherwise specified by CMS) must specifically accept and agree to:
(i) Comply with the terms and conditions of eligibility for a subsidy payment set forth in this regulation and in any related CMS guidance;
(ii) Acknowledge that at the same time CMS releases Part C and Part D summary payment data in accordance with §§ 422.504(n) and 423.505(o) CMS will also release Part D retiree drug subsidy payment data for the most recently reconciled year including the name of the eligible sponsor, the total gross aggregate dollar amount of the CMS subsidy, and the number of eligible retirees;
(iii) Acknowledge that the information in the application is being provided to obtain Federal funds; and
(iv) Require that all subcontractors, including plan administrators, acknowledge that information provided in connection with the subcontract is used for purposes of obtaining Federal funds.
(4) Signature by sponsor. An authorized representative of the requesting sponsor must sign the completed application and certify that the information contained in the application is true and accurate to the best of the sponsor's knowledge and belief.
(5) Timing —(i) General rule. An application for a given plan year must be submitted prior to the beginning of the plan year by a date specified by CMS in published guidance, unless a request for an extension has been filed and approved under procedures set forth in such guidance.
(ii) Transition rule. For plan years that end in 2006, an application must be submitted by September 30, 2005 unless a request for an extension has been filed and approved under procedures established by CMS.
(6) Updates. The sponsor (or the designee) must provide updates to CMS in a manner specified by CMS of the information required in paragraph (c)(2) of this section on a monthly basis or at a frequency specified by CMS.
(7) Data match. Once the full application for the subsidy payment is submitted, CMS—
(i) Matches the names and identifying information for the individuals submitted as qualifying covered retirees with a CMS database(s) to determine which retirees are Part D eligible individuals who are not enrolled in a Part D plan.
(ii) Provides information concerning the results of the search in paragraph (c)(7)(i) of this paragraph (such as names and other identifying information, if necessary) to the sponsor (or to a designee).
(d) Actuarial attestation—general. The sponsor of the plan must provide to CMS an attestation in a form and manner specified by CMS that the actuarial value of the retiree prescription drug coverage under the plan is at least equal to the actuarial value of the defined standard prescription coverage (as defined at § 423.100), not taking into account the value of any discount or coverage provided during the coverage gap (as defined at § 423.100). The attestation must meet all of the following standards:
(1) Contents of the attestation include the following assurances:
(i) The actuarial gross value of the retiree prescription drug coverage under the plan for the plan year is at least equal to the actuarial gross value of the defined standard prescription drug coverage under Part D for the plan year in question, not taking into account the value of any discount or coverage provided during the coverage gap.
(ii) The actuarial net value of the retiree prescription drug coverage under the plan for that plan year is at least equal to the actuarial net value of the defined standard prescription drug coverage under Part D for that plan year in question, not taking into account the value of any discount or coverage provided during the coverage gap.
(iii) The actuarial values must be determined using the methodology in paragraph (d)(5) of this section.
(2) The attestation must be made by a qualified actuary who is a member of the American Academy of Actuaries. Applicants may use qualified outside actuaries, including (but not limited to) actuaries employed by the plan administrator or an insurer providing benefits under the plan. If an applicant uses an outside actuary, the attestation can be submitted directly by the outside actuary or by the plan sponsor.
(3) The attestation must be signed by a qualified actuary and must state that the attestation is true and accurate to the best of the attester's knowledge and belief.
(4) The attestation must contain an acknowledgement that the information being provided in the attestation is being used to obtain Federal funds.
(5) Methodology —(i) Basis of the attestation. The attestation must be based on generally accepted actuarial principles and any actuarial guidelines established by CMS in this section or in future guidance. To the extent CMS has not provided guidance on a specific aspect of the actuarial equivalence standard under this section, an actuary providing the attestation may rely on any reasonable interpretation of this section and section 1860D-22(a) of the Act consistent with generally accepted actuarial principles in determining actuarial values.
(ii) Specific rules for determining the actuarial value of the sponsor's retiree prescription drug coverage. (A) The gross value of coverage under the sponsor's retiree prescription drug plan must be determined using the actual claims experience and demographic data for Part D eligible individuals who are participants and beneficiaries in the sponsor's plan, provided that sponsors without creditable data due to their size or other factors, may use normative databases as specified by CMS. Sponsors may use other actuarial approaches specified by CMS as an alternative to the actuarial valuation specified by this paragraph (d)(5)(ii)(A).
(B) The net value of coverage provided under the sponsor's retiree prescription drug plan must be determined by reducing the gross value of such coverage as determined under paragraph (d)(5)(ii)(A) of this section by the expected premiums paid by Part D eligible individuals who are plan participants or their spouses and dependents. For sponsors of plans that charge a single, integrated premium or contribution to their retirees for both prescription drug coverage and other types of medical coverage, the attestation must allocate a portion of the premium/contribution to prescription drug coverage under the sponsor's plan, under any method determined by the sponsor or its actuary.
(iii) Specific rules for calculating the actuarial value of defined standard prescription drug coverage under Part D. (A) The gross value of defined standard prescription drug coverage under Part D must be determined using the actual claims experience and demographic data for Part D eligible individuals in the sponsor's plan, provided that sponsors without credible data due to their size or other factors may use normative databases as specified by CMS. Sponsors may use other actuarial approaches specified by CMS as an alternative to the actuarial valuation specified by this paragraph (d)(5)(iii)(A).
(B) To calculate the net value of defined standard prescription drug coverage under Part D, the gross value of defined standard prescription drug coverage under Part D as determined by paragraph (d)(5)(iii)(A) of this section is reduced by the following amounts:
( 1 ) The monthly beneficiary premiums (as defined in § 423.286) expected to be paid for standard prescription drug coverage; and
( 2 ) An amount calculated to reflect the impact on the value of defined standard prescription drug coverage of supplemental coverage actually provided by the sponsor. Sponsors may use other actuarial approaches specified by CMS as an alternative to the actuarial valuation specified in this paragraph (d)(5)(iii)(B)( 2 ).
(C) The valuation of defined standard prescription drug coverage for a given plan year is based on the initial coverage limit cost-sharing and out-of-pocket threshold for defined standard prescription drug coverage under Part D in effect at the start of such plan year, not taking into account the value of any discount or coverage provided during the coverage gap.
(D) Example: If a sponsor's retiree prescription drug plan operates under a plan year that ends March 30, the sponsor has a choice of basing the attestation for the year April 1, 2007 through March 30, 2008 on either the initial coverage limit, cost-sharing amounts, and out-of-pocket threshold amounts that apply to defined standard prescription drug coverage under Part D in CY 2007, or the amounts announced for CY 2008. However, in order to use the amounts applicable in CY 2007, the sponsor must submit the attestation within 60 days after the publication of the Part D coverage limits for CY 2008. If the attestation is submitted more than 60 days after the 2008 coverage limits have been published, the CY 2008 coverage limits would apply.
(iv) Employment-based retiree health coverage with two or more benefit options. For the assurance required under paragraph (d)(1)(i) of this section, the assurance must be provided separately for each benefit option for which the sponsor requests a subsidy under this subpart. For the assurance required under paragraph (d)(1)(ii) of this section, the assurance may be provided either separately for each benefit option for which the sponsor provided assurances under paragraph (d)(1)(i) of this section, or in the aggregate for all benefit options (or for a subset of the benefit options).
(6) Timing —(i) Annual submission. The attestation must be provided annually at the time the sponsor's subsidy application is submitted, or at such other times as specified by CMS in further guidance.
(ii) Submission following material change. The attestation must be provided no later than 90 days before the implementation of a material change to the drug coverage of the sponsor's retiree prescription drug plan. For purposes of this clause, the term “material change” means the addition of a benefit option that does not impact the actuarial value of the retiree prescription drug coverage under the sponsor's plan such that it no longer meets the standards set forth in paragraph (d)(1)(i) or (ii) of this section.
(7) Notice of failure to continue to satisfy the actuarial equivalence standards. A sponsor must notify CMS, in a form and manner specified by CMS, no later than 90 days before the implementation of a change to the drug coverage that impacts the actuarial value of the retiree prescription drug coverage under the sponsor's plan such that it no longer meets the standards set forth in paragraph (d)(1)(i) or (ii) of this section.
(e) Disclosure of creditable prescription drug coverage status. The sponsor must disclose to all of its retirees and their spouses and dependents eligible to participate in its plan who are Part D eligible individuals whether the coverage is creditable prescription drug coverage under § 423.56 in accordance with the notification requirements under that section.
(f) Access to records for audit. The sponsor (and where applicable, its designee) must meet the requirements of § 423.888(d). Failure to comply with § 423.888(d) may result in nonpayment or recoupment of all or part of a subsidy payment.
§ 423.886   Retiree drug subsidy amounts.
(a) Amount of subsidy payment. (1) For each qualifying covered retiree enrolled with the sponsor of a qualified retiree prescription drug plan in a plan year, the sponsor receives a subsidy payment in the amount of 28 percent of the allowable retiree costs (as defined in § 423.882) in the plan year for such retiree attributable to gross retiree costs between the cost threshold and the cost limit as defined in paragraph (b) of this section. The subsidy payment is calculated by first determining gross retiree costs between the cost threshold and cost limit, and then determining allowable retiree costs attributable to the gross retiree costs. For this purpose and where otherwise relevant in this subpart, plan year is the calendar, policy, or fiscal year on which the records of a plan are kept.
(2) Transition provision. For a qualified retiree prescription drug plan that has a plan year which begins in calendar year 2005 and ends in calendar year 2006, the subsidy for the plan year must be determined in the following manner. Claims incurred in all months of the plan year (including claims incurred in 2005) are taken into account in determining which claims fall within the cost threshold and cost limit for the plan year. The subsidy amount is determined based only on costs incurred on and after January 1, 2006.
(b) Cost threshold and cost limit. The following cost threshold and cost limits apply—
(1) Subject to paragraph (b)(3) of this section, the cost threshold under this section is equal to $250 for plan years that end in 2006.
(2) Subject to paragraph (b)(3) of this section, the cost limit under this section is equal to $5,000 for plan years that end in 2006.
(3) The cost threshold and cost limit specified in paragraphs (b)(1) and (b)(2) of this section, for plan years that end in years after 2006, are adjusted in the same manner as the annual Part D deductible and the annual Part D out-of-pocket threshold are adjusted annually under § 423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively.
§ 423.888   Payment methods, including provision of necessary information.
(a) Basis. The provisions of § 423.301 through § 423.343, including requirements to provide information necessary to ensure accurate subsidy payments, govern payment under § 423.886 except to the extent the provisions in this section specify otherwise.
(b) General payment rules. Payment under § 423.886 is conditioned on provision of accurate information. The information must be submitted, in a form and manner and at the times provided in this paragraph and under other guidance specified by CMS, by the sponsor or its designee.
(1) Timing. Payment can be made on a monthly, quarterly or annual basis, as elected by the plansponsor under guidance specified by CMS, unless CMS determines that the options must be restricted because of operational limitations.
(i) Monthly or quarterly payments. If the plan sponsor elects for payment on a monthly or quarterly basis, it must provide information described in paragraph (b)(2)(i) of this section on the same monthly or quarterly basis, or at such time as CMS specifies.
(ii) Annual payments. If the sponsor elects an annual payment, it must submit to CMS actual rebate and other price concession data within 15 months after the end of the plan year.
(2) Submission of cost data —(i) Monthly or quarterly payments. If the plan sponsor elects to receive payment on a monthly or quarterly basis, it must submit to CMS, in a manner specified by CMS, the gross covered retiree plan-related prescription drug costs (as defined in § 423.882) incurred for its qualifying covered retirees during the payment period for which it is claiming a subsidy payment and any other data CMS may require. Except as otherwise provided by CMS in future guidance, the sponsor must also submit, using historical data and generally accepted actuarial principles, an estimate of the extent to which its expected allowable retiree costs differs from the gross covered retiree plan-related prescription drug costs, based on expected rebates and other price concessions for the upcoming plan year. The estimate must be used to reduce the periodic payments for the plan year. Final allocation of price concession data must occur after the end of the year under the reconciliation provisions of paragraph (b)(4) of this section
(ii) Annual payments. If the plan sponsor elects a one-time final annual payment, it must submit, in a manner specified by CMS, within 15 months, or within any other longer time limit specified by CMS, after the end of the plan year, the total gross covered retiree plan-related prescription drug costs (as defined in § 423.882) for the plan year for which it is claiming a subsidy payment, actual rebate and other price concession data described in paragraph (b)(1)(ii) of this section, and any other data CMS may require. The alternative is that the sponsor can elect an interim annual payment, in which case it must submit the following to CMS, at a time and in a manner specified by CMS: the gross covered retiree plan-related prescription drug costs (as defined in § 423.882) incurred for all of its qualifying covered retirees during the payment period for which it is claiming a subsidy payment; an estimate (using historical data and generally accepted actuarial principles) of the difference between such gross costs and allowable costs (based on expected rebates and other price concessions for the upcoming plan year); and any other data CMS may require.
(3) Payment by CMS. CMS makes payment after the sponsor's submission of the cost data at a time and in a manner to be specified by CMS.
(4) Reconciliation. (i) Sponsors who elect either monthly, quarterly or an interim annual payment must submit to CMS, within 15 months, or within any other longer time limit specified by CMS, after the end of its plan year, the total gross covered retiree plan-related prescription drug costs (as defined in § 423.882), in a manner specified by CMS; actual rebate and other price concession data for the plan year in question; and any other data CMS may require.
(ii) Upon receiving this data, CMS adjusts the payments made for the plan year in question in a manner to be specified by CMS.
(5) Special rule for insured plans —(i) Interim payments. Sponsors of group health plans that provide benefits through health insurance coverage (as defined in 45 CFR 144.103) and that choose either monthly payments, quarterly payments or an interim annual payment in paragraphs (b)(1) and (b)(2) of this section, may elect to determine gross covered plan-related retiree prescription drug costs for purposes of the monthly, quarterly or interim annual payments based on a portion of the premium costs paid by the sponsor (or by the qualifying covered retirees) for coverage of the covered retirees under the group health plan. Premium costs that are determined, using generally accepted actuarial principles, may be attributable to the gross covered plan-related retiree prescription drug costs incurred by the health insurance issuer (as defined in 45 CFR 144.103) for the sponsor's qualifying covered retirees, except that administrative costs and risk charges must be subtracted from the premium.
(ii) Final payments. At the end of the plan year, actual gross retiree plan-related prescription drug costs incurred by the insurer (or the retiree), and the allowable costs attributable to the gross costs, are determined for each of the sponsor's qualifying covered retirees and submitted for reconciliation after the end of the plan year as specified in paragraph (b)(4)of this section. The data for the reconciliation can be submitted directly to CMS by the insurer in a manner to be specified by CMS. Upon receiving this data, CMS adjusts the payments made for the relevant plan year in a manner to be specified by CMS.
(c) Use of information provided. Officers, employees and contractors of the Department of Health and Human Services, including the Office of Inspector General (OIG), may use information collected under this section only for the purposes of, and to the extent necessary in, carrying out this subpart including, but not limited to, determination of payments and payment-related oversight and program integrity activities, or as otherwise required by law. This restriction does not limit OIG authority to conduct audits and evaluations necessary for carrying out these regulations.
(d) Maintenance of records. (1) The sponsor of the qualified retiree prescription drug plan (or a designee), as applicable, must maintain, and furnish to CMS or the OIG upon request, the records enumerated in paragraph (d)(3) of this section. The records must be maintained for 6 years after the expiration of the plan year in which the costs were incurred for the purposes of audits and other oversight activities conducted by CMS to assure the accuracy of the actuarial attestation and the accuracy of payments.
(2) CMS or the OIG may extend the 6-year retention requirement for the records enumerated in paragraph (d)(3) of this section in the event of an ongoing investigation, litigation, or negotiation involving civil, administrative or criminal liability. In addition, the sponsor of the qualified retiree prescription drug plan (or a designee), as applicable, must maintain the records enumerated in paragraph (d)(3) of this section longer than 6 years if it knows or should know that the records are the subject of an ongoing investigation, litigation or negotiation involving civil, administrative or criminal liability.
(3) The records that must be retained are:
(i) Reports and working documents of the actuaries who wrote the attestation submitted in accordance with § 423.884(a).
(ii) All documentation of costs incurred and other relevant information utilized for calculating the amount of the subsidy payment made in accordance with § 423.886, including the underlying claims data.
(iii) Any other records specified by CMS.
(4) CMS may issue additional guidance addressing recordkeeping requirements, including (but not limited to) the use of electronic media.
§ 423.890   Appeals.
(a) Informal written reconsideration —(1) Initial determinations. A sponsor is entitled to an informal written reconsideration of an adverse initial determination. An initial determination is a determination regarding the following:
(i) The amount of the subsidy payment.
(ii) The actuarial equivalence of the sponsor's retiree prescription drug plan.
(iii) If an enrollee in a retiree prescription drug plan is a qualifying covered retiree; or
(iv) Any other similar determination (as determined by CMS) that affects eligibility for, or the amount of, a subsidy payment.
(2) Effect of an initial determination regarding the retiree drug subsidy. An initial determination is final and binding unless reconsidered in accordance with this paragraph (a) of this section.
(3) Manner and timing for request. A request for reconsideration must be made in writing and filed with CMS within 15 days of the date on the notice of adverse determination.
(4) Content of request. The request for reconsideration must specify the findings or issues with which the sponsor disagrees and the reasons for the disagreements. The request for reconsideration may include additional documentary evidence the sponsor wishes CMS to consider.
(5) Conduct of informal written reconsideration. In conducting the reconsideration, CMS reviews the subsidy determination, the evidence and findings upon which it was based, and any other written evidence submitted by the sponsor or by CMS before notice of the reconsidered determination is made.
(6) Decision of the informal written reconsideration. CMS informs the sponsor of the decision orally or through electronic mail. CMS sends a written decision to the sponsor on the sponsor's request.
(7) Effect of CMS informal written reconsideration. A reconsideration decision, whether delivered orally or in writing, is final and binding unless a request for hearing is filed in accordance with paragraph (b) of this section, or it is revised in accordance paragraph (d) of this section.
(b) Right to informal hearing. A sponsor dissatisfied with the CMS reconsideration decision is entitled to an informal hearing as provided in this section.
(1) Manner and timing for request. A request for a hearing must be made in writing and filed with CMS within 15 days of the date the sponsor receives the CMS reconsideration decision.
(2) Content of request. The request for informal hearing must include a copy of the CMS reconsideration decision (if any) and must specify the findings or issues in the decision with which the sponsor disagrees and the reasons for the disagreements.
(3) Informal hearing procedures. (i)CMS provides written notice of the time and place of the informal hearing at least 10 days before the scheduled date.
(ii) The hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not presented with the reconsideration request. The CMS hearing officer is limited to the review of the record that was before CMS when CMS made both its initial and reconsideration determinations.
(iii) If CMS did not issue a written reconsideration decision, the hearing officer may request, but not require, a written statement from CMS or its contractors explaining CMS' determination, or CMS or its contractors may, on their own, submit the written statement to the hearing officer. Failure of CMS to submit a written statement does not result in any adverse findings against CMS and may not in any way be taken into account by the hearing officer in reaching a decision.
(4) Decision of the CMS hearing officer. The CMS hearing officer decides the case and sends a written decision to the sponsor, explaining the basis for the decision.
(5) Effect of hearing officer decision. The hearing officer decision is final and binding, unless the decision is reversed or modified by the Administrator in accordance with paragraph (c) of this section.
(c) Review by the Administrator. (1) A sponsor that has received a hearing officer decision upholding a CMS initial or reconsidered determination may request review by the Administrator within 15 days of receipt of the hearing officer's decision.
(2) The Administrator may review the hearing officer's decision, any written documents submitted to CMS or to the hearing officer, as well as any other information included in the record of the hearing officer's decision and determine whether to uphold, reverse or modify the hearing officer's decision.
(3) The Administrator's determination is final and binding.
(d) Reopening —(1) Ability to reopen. CMS may reopen and revise an initial or reconsidered determination upon its own motion or upon the request of a sponsor:
(i) Within 1 year of the date of the notice of determination for any reason.
(ii) Within 4 years for good cause.
(iii) At any time when the underlying decision was obtained through fraud or similar fault.
(2) Notice of reopening. (i) Notice of reopening and any revisions following the reopening are mailed to the sponsor.
(ii) Notice of reopening specifies the reasons for revision.
(3) Effect of reopening. The revision of an initial or reconsidered determination is final and binding unless-
(i) The sponsor requests reconsideration in accordance with paragraph (a) of this section;
(ii) A timely request for a hearing is filed under paragraph (b) of this section;
(iii) The determination is reviewed by the Administrator in accordance with paragraph (c) of this section; or
(iv) The determination is reopened and revised in accordance with paragraph (d) of this section.
(4) Good cause. For purposes of this section, CMS finds good cause if—
(i) New and material evidence exists that was not readily available at the time the initial determination was made;
(ii) A clerical error in the computation of payments was made; or
(iii) The evidence that was considered in making the determination clearly shows on its face that an error was made.
(5) For purposes of this section, CMS does not find good cause if the only reason for reopening is a change of legal interpretation or administrative ruling upon which the initial determination was made.
(6) A decision by CMS not to reopen an initial or reconsidered determination is final and binding and cannot be appealed.
§ 423.892   Change of ownership.
(a) Change of ownership. Any of the following constitutes a change of ownership:
(1) Partnership. The removal, addition, or substitution of a partner, unless the partners expressly agree otherwise as permitted by applicable State law.
(2) Asset sale. Transfer of all or substantially all of the assets of the sponsor to another party.
(3) Corporation. The merger of the sponsor's corporation into another corporation or the consolidation of the sponsor's organization with one or more other corporations, resulting in a new corporate body.
(b) Change of ownership, exception. Transfer of corporate stock or the merger of another corporation into the sponsor's corporation, with the sponsor surviving, does not ordinarily constitute change of ownership.
(c) Advance notice requirement. A sponsor that has a sponsor agreement in effect under this part and is considering or negotiating a change in ownership must notify CMS at least 60 days before the anticipated effective date of the change.
(d) Assignment of agreement. When there is a change of ownership as specified in paragraph (a) of this section, and this results in a transfer of the liability for prescription drug costs, the existing sponsor agreement is automatically assigned to the new owner.
(e) Conditions that apply to assigned agreements. The new owner to whom a sponsor agreement is assigned is subject to all applicable statutes and regulations and to the terms and conditions of the sponsor agreement.