T h i s d o c u m e n t i s s c h e d u l e d t o b e p u b l i s h e d i n t h e F e d e r a l R e g i s t e r o n 0 3 / 2 1 / 2 0 1 4 a n d a v a i l a b l e o n l i n e a t h t t p : / / f e d e r a l r e g i s t e r . g o v / a / 2 0 1 4 - 0 6 1 3 4 , a n d o n F D s y s . g o vCMS-9949-P 2

Revenue Code; grounds for imposing civil money penalties on persons who provide false or fraudulent information to the Exchange and on persons who improperly use or disclose information; updated standards for the consumer assistance programs; stan dards related to the opt-out provisions for self-funde d, non-Federal governmental pl ans and the individual market provisions under the Health Insurance Portability and Accountability Act of 1996; standards for recognition of certain types of foreign group health coverage as minimum essential coverage; amendments to Exchange appeals standards and coverage enrollment and termination standards; and time-limited adjustments to the standards re lating to the medical loss ratio program. DATES: To be assured consideration, comments mu st be received at one of the addresses provided below no later than 5 p.m. on [ OFR—INSERT DATE 30 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER.] ADDRESSES: In commenting, please refer to file code CMS-9949-P. Because of staff and resource limitations, we ca nnot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically . You may submit electronic comments on this regulation to http://www.regulations.gov. Follow th e "Submit a comment" instructions. 2. By regular mail . You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9949-P, P.O. Box 8016, Baltimore, MD 21244-8016.CMS-9949-P 3

Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail . You may send written comments to the following

address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9949-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier . Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prio r to the close of the comment period: a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201 (Because access to the interior of the H ubert H. Humphrey Building is not readily available to persons without Federal governmentidentification, commenters are encouraged to

leave their comments in the CMS drop slots located in the main lobby of the building. A stampin clock is available for persons wishing to reta in a proof of filing by st amping in and retaining an extra copy of the comments being filed.)CMS-9949-P 4

b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members. Comments erroneously mailed to the addres ses indicated as appr opriate for hand or courier delivery may be delayed a nd received after the comment period. For information on viewing public comments, see the beginning of the "SUPPLEMENTARY

INFORMATION" section.

FOR FURTHER INFORMATION CONTACT: For general matters and matters related to Parts 146 through 148: Jacob Ackerman, (301) 492-4179. For matters related to reinsurance, unde r Part 153: Adrianne Glasgow, (410) 786-0686. For matters related to risk corridors, unde r Part 153: Jaya Ghildiyal, (301) 492-5149.

For matters related to non-inte rference with Federal law and non-discrimination standards, and Navigator, non-Navigator assistance personnel, and certified applica tion counselor program standards, under Part 155, subparts B and C: Joan Matlack, (301) 492-4223. For matters related to civil money penalties a nd consumer authorization forms, under Part 155, subpart C: Emily Ames, (301) 492-4246. For matters related to civil money penalties for false or fraudulent information or improper use of information, under Part 155, subp art C: Julia Cassidy, (301) 492-4412.CMS-9949-P 5

For matters related to enrollmen t of a qualified indivi dual, under Part 155, subpart E: Jack Lavelle, (410) 786-0639. For matters related to special enrollment periods and exempti ons under Part 155, subparts D and G, and matters related to elig ibility appeals, under Part 155, subparts F and H: Christine Hammer, (301) 492-4431.

For matters related to the Sma ll Business Health Options Program, under Part 155, subpart H: Christelle Jang, (410) 786-8438. For matters related to the requi red contribution percentage for affordability exemptions, under Part 155, subpart G: Ariel Novick, (301) 492-4309.

For matters related to cost sharing, under Part 156, subpart B: Pat Meisol, (410) 786-1917. For matters related to quality standard s, under Parts 155 and 156: Nidhi Singh Shah, (301) 492-5110.

For matters related to minimum essential cove rage, under Part 156, subpart G: Cam Clemmons, (410) 786-1565.

For all other matters related to Parts 155 and 156: Leigha Basini, (301) 492-4380.

For matters related to the medical loss ratio program, under Part 158: Julie McCune, (301) 492-4196. SUPPLEMENTARY INFORMATION:

Electronic Access

This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys) , a service of the U.S. Government Printing

Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys.CMS-9949-P 6

Inspection of Public Comments : All comments received before the close of the comment period are available for viewing by the public , including any persona lly identifiable or

confidential business information that is included in a comment. We post all comments received before the close of the comment period on the fo llowing website as soon as possible after they have been received: http://www.regulations.gov. Fo llow the search instruc tions on that website to view public comments. Comments received timely will also be av ailable for public inspection as they are received, generally beginning approximately 3 w eeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Table of Contents I. Executive Summary II. Background A. Legislative Overview B. Stakeholder Consultation and Input C. Structure of Proposed Rule III. Provisions of the Proposed Rule A. Part 146 – Requirements for th e Group Health Insurance Market 1. HIPAA Opt-Out Provisions for Plan Sponsors of Self-Funded, Non-Federal Governmental Plans (§146.180)

B. Part 147 – Health Insurance Reform Requirements for the Group and Individual

Health Insurance MarketsCMS-9949-P 7

1. Guaranteed Availability and Guarant eed Renewability of Coverage (§§147.104 and 147.106)

a. No Effect on Other Laws

b. Product Withdrawal and Uniform Modificati on of Coverage Exceptions to Guaranteed Renewability Requirements C. Part 148 – Requirements for the I ndividual Health Insurance Market 1. Conforming Changes to Individual Market Regulations (§§148.101 through 148.128) 2. Fixed Indemnity Insurance in the I ndividual Health Insu rance Market (§148.220)

D. Part 153 – Standards Related to Reinsura nce, Risk Corridors, and Risk Adjustment

under the Affordable Care Act

1. Provisions and Parameters for the Transitional Reinsurance Program (§153.405) 2. Provisions for the Temporar y Risk Corridors Program (§153.500) E. Part 155 – Exchange Establishment Sta ndards and Other Related Standards under the

Affordable Care Act 1. Subpart B – General Standards Related to the Establishment of the Exchange

a. Non-Interference with Federal Law and Non-Discrimination Standards (§155.120) 2. Subpart C – General Functions of an Exchange a. Civil Money Penalties for Violations of Applicable Exchange Standards by Consumer Assistance Entities in Federally-F acilitated Exchanges (§155.206) b. Navigator, Non-Navigator Assistance Pers onnel, and Certified Application Counselor Program Standards (§§155.210, 155.215, and 155.225) c. Certified Appli cation Counselors (§155.225) d. Payment of Premiums (§155.240)CMS-9949-P 8

e. Privacy and Security of Persona lly Identifiable Information (§155.260) f. Bases and Process for Imposing Civil Money Penalties for Provision of False or Fraudulent Information to an Exchange or Improper Use or Disclosure of Information (§155.285) 3. Subpart D – Exchange Functions in the I ndividual Market: Eligib ility Determinations for Exchange Participation and Insurance Affordability Programs a. Verification of Eligibility for Minimu m Essential Coverage Other Than Through an Eligible Employer-Spon sored Plan (§155.320) b. Eligibility Redetermination During a Benefit Year (§155.330) 4. Subpart E – Exchange Functions in the Individual Market: Enrollment in Qualified

Health Plans a. Enrollment of Qualified Individuals in a QHP (§155.400) b. Initial and Annual Open Enrollment Periods (§155.410) c. Special Enrollment Periods (§155.420) d. Termination of Coverage (§155.430) 5. Subpart F – Appeals of Eligibility Dete rminations for Exchange Participation and Insurance Affordability Programs a. General Eligibility A ppeals Requirements (§155.505) b. Dismissals (§155.530) c. Employer Appeals Process (§155.555) 6. Subpart G—Exchange Functions in the I ndividual Market: Eligib ility Determinations for Exemptions a. Required Contribution PercentageCMS-9949-P 9

b. Options for Conducting Eligibility Determinations for Exemptions (§155.625) 7. Subpart H – Exchange Functions: Sm all Business Health Options Program a. Functions of a SHOP (§155.705) b. Enrollment Periods under SHOP (§155.725) c. SHOP Employer and Employee Eligib ility Appeals Requirements (§155.740) 8. Subpart O – Quality Standards for Exchanges a. Quality Rating System (§155.1400)

b. Enrollee Satisfaction Survey System (§155.1405)

F. Part 156 – Health Insurance Issuer Standards under the Affordable Care Act, Including Standards Related to Exchanges 1. Subpart B – Essential Health Benefits Package a. Prescription Drug Benefits (§156.122) b. Cost-Sharing Requirements (§156.130) 2. Subpart C – General Functions of an Exchange a. QHP Issuer Partic ipation Standards (§156.200) 3. Subpart G – Minimum Essential Coverage a. Other Coverage That Qualifies as Minimum Essential Coverage (§156.602) b. Requirements for Recognition as Minimum Essential Coverage for Types of Coverage Not Otherwise Designated Minimum Essential Co verage in the Statut e or This Subpart (§156.604) 4. Subpart I – Enforcement Remedies in Federally-Faci litated Exchanges a. Available Remedies; Scope (§156.800)CMS-9949-P 10

b. Bases and Process for Imposing Civil M oney Penalties in Federally-Facilitated Exchanges (§156.805)

c. Bases and Process for Decertification of a QHP Offered by an Issuer Through a Federally-Facilitated Exchange (§156.810) 5. Subpart L – Quality Standards

a. Establishment of Standards for HHS-A pproved Enrollee Satisfaction Survey Vendors for Use by QHP Issuers in Exchanges (§156.1105) b. Quality Rating System (§156.1120)

c. Enrollee Satisfact ion Survey (§156.1125)

G. Part 158 – Issuer Use of Premium Re venue: Reporting and Rebate Requirements 1. Subpart A – Disclosure and Reporting a. ICD–10 Conversion Expenses (§158.150) 2. Subpart B – Calculating and Providing the Rebate a. MLR and Rebate Calculations in States with Merged Individual and Small Group Markets (§§158.211, 158.220, 158.231) b. Accounting for Special Circumstances (§158.221)

c. Distribution of De Minimis Rebates (§158.243) IV. Collection of Information Requirements A. ICRs Regarding Recertification fo r Certified Applicat ion Counselors (§155.225) B. ICRs Regarding Consumer Authorization (§§155.210 and 155.215) C. ICRs Regarding Enrollee Satisfa ction & Marketplace Surveys (§§155.1200, 156.1105, and 156.1125) D. ICR Regarding Quality Rating System (§156.1120)CMS-9949-P 11

E. ICRs Regarding Quality Standards for Exchanges (§§155.1400 and 155.1405) F. ICR Regarding Medical Lo ss Ratio Requirements (§§158.150, 158.211, 158.220, 158.221, 158.231, and 158.243) G. ICRs Regarding Civil Money Penalties (§§155.206 and 155.285) H. ICRs regarding Fixed Indemnity Plans, Minimum Essential Coverage, Certifications of Creditable Coverage and HIPAA Opt-Out El ection Notice, Notice of Discontinuation, Notice of Renewal (§§146.152, 146.180, 147.106, 148.122, 148.220, and 156.602) V. Regulatory Impact Analysis A. Summary

B. Executive Orders 13563 and 12866 1. Need for Regulatory Action 2. Summary of Impacts 3. Anticipated Benefits, Costs and Transfers C. Regulatory Alternatives 1. Collecting ESS Data at the Product Leve l Instead of Each Pr oduct Per Metal Tier 2. Using Medicaid CAHPS As Is Instead of Adding Additional and New Questions to

the ESS 3. Collecting QRS Data for Each Product Per Metal Tier Instead of at the Product Level 4. Using the Medicare Advantage (MA) CAHPS Instrument and Star System D. Regulatory Flexibility Act

E. Unfunded Mandates Reform Act

F. Federalism G. Congressional Review ActCMS-9949-P 12

VI. Regulations Text

Abbreviations

Affordable Care Act The collective term for th e Patient Protection and Affordable Care Act (Pub. L. 111–148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152)

AV Actuarial Value CAC Certified Ap plication Counselor

CAHPS ® Consumer Assessment of H ealthcare Providers and Systems CFR Code of Federal Regulations CMP Civil Money Penalty

CMS Centers for Medicare & Medicaid Services CSR Cost-Sharing Reductions DSH Disproportionate Share Hospital

EHB Essential Health Benefits ERISA Employee Retirement Income Security Act of 1974 (Pub. L. 93-406) ESS Enrollee Satisfaction Survey FFE Federally-facilitated Exchange FF-SHOP Federally-facilitated Sma ll Business Health Options Program FQHC Federally Qualified Health Center HHS United States Department of Health and Human Services

HIPAA Health Insurance Portabi lity and Accountability Act of 1996 (Pub. L. 104-191)

IRS Internal Revenue ServiceCMS-9949-P 13

MLR Medical Loss Ratio

NAIC National Association of Insurance Commissioners OMB Office of Management and Budget OPM United States Office of Personnel Management

PHS Act Public Health Service Act PRA Paperwork Reduction Act of 1995 PSO Patient Safety Organization QHP Qualified health plan QRS Quality Rating System SHOP Small Business Health Options Program

The Code Internal Revenue Code of 1986

URL Uniform Resource Locator I. Executive Summary Since January 1, 2014, qualified individuals a nd small employers have been able to obtain private health insurance through Affordable Insurance Ex changes, or “Exchanges” (also

known as Health Insurance Mark etplaces, or “Marketplaces”). 1 The Exchanges provide competitive marketplaces where individuals and sm all employers can compare available private health insurance options on the basis of price, quality, and other factors. The Exchanges help enhance competition in the health insurance market, improve choice of affordable health insurance, and give small businesses the same purchasing power as large businesses.

1 The word “Exchanges” refers to both State Exchange s, also called State-based Exchanges, and Federallyfacilitated Exchanges (FFEs). In this proposed rule, we use the terms “State Exchange” or “FFE” when we are referring to a particular type of Exchange. When we re fer to “FFEs,” we are also referring to State Partnership Exchanges, which are a form of FFEs.CMS-9949-P 14

Individuals who enroll in qua lified health plans (QHPs) through individual market Exchanges may be eligible to receive premium ta x credits to make hea lth insurance purchased through an Exchange more affordable and cost -sharing reductions that lower out-of-pocket expenses for health care services. The premiu m tax credits, combined with the new insurance reforms, will significantly increase the number of individuals with healthinsurance coverage. Premium stabilization programs—risk adjustment , reinsurance, and risk corridors—protect against adverse selection in the newly enrolled population. These programs, in combination with the medical loss ratio program and market reform s extending guaranteed availability (also known as guaranteed issue) protections, prohibiting the use of factors such as health status, medical history, gender, and industry of employment to set premium rates, will help to ensure that every American has access to high quality, affordable health insurance. This proposed rule would address various re quirements applicable to health insurance issuers, Exchanges, Navigators, non-Navigator assistance personnel, and other entities under the Affordable Care Act. Specifica lly, the rule proposes standards related to product discontinuation and renewal, quality reporting, non-discrimina tion standards, minimum certification standards and responsibilities of qualified health plan (QHP ) issuers, the Small Business Health Options Program, and enforcement remedies in Federally-f acilitated Exchanges. It also proposes: a

modification of HHS’s allocation of reinsurance c ontributions collected if those contributions do not meet our projections; certain changes to the ceiling on allowable administrative expenses in the risk corridors calculation; modifications to the way we calculate certain cost-sharing parameters so that we round those parameters down to the nearest $50 increment; certain approaches we are considering to index the required contribution used to determine eligibility for an exemption from the shared responsibility payment under section 5000A of the InternalCMS-9949-P 15

Revenue Code; grounds for imposing civil money penalties on persons who provide false or fraudulent information to the Exchange and on persons who improperly use or disclose information; updated standards for the consumer assistance programs; stan dards related to the opt-out provisions for self-funde d, non-Federal governmental pl ans and the individual market provisions under the Health Insurance Portability and Accountability Act of 1996; standards for recognition of certain types of foreign group health coverage as minimum essential coverage; amendments to Exchange appeals standards and coverage enrollment and termination standards; and time-limited adjustments to the standards rela ting to the medical loss ratio program. Nearly all of these proposed polic ies were described in the preamble to the final rule titled, HHS Notice of Benefit and Payment Parameters for 2015, published on March 11, 2014 (79 FR 13744) (2015 Payment Notice). 2

Product Withdrawal and Uniform Modification of Coverage Exceptions to Guaranteed Renewability Requirements : Under sections 2702 and 2703 of the Public Health Service Act (PHS Act), as added by the Affordable Care Ac t, health insurance i ssuers in the group and individual markets must guarant ee the availability and renewabi lity of coverage unless an exception applies. In this proposed rule, we prop ose criteria for determining when modifications made by an issuer to the health insurance coverage for a produc t would and would not constitute the discontinuation of an existing product and th e creation of a new product. We also propose

that issuers use standard consumer notices in a format designated by the Secretary when discontinuing or renewing a product in the group or individual market. Additionally, we propose

2 Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2015, 79 FR 13744 (March 11, 2014).CMS-9949-P 16

to clarify that the guaranteed av ailability and renewability requ irements should not be construed to supersede other provisions of Fe deral law in certain circumstances. Conforming Changes to Indi vidual Market Provisions : Sections 2741 through 2744 of the PHS Act were added by HIPAA to improve the por tability and continuity of coverage in the

individual health insurance mark et. These provisions are implemented through regulations in 45 CFR Part 148. In this proposed rule, we propose to amend the individual market provisions in Part 148 to reflect the amendments made by the Af fordable Care Act. These amendments are for clarity only. Fixed Indemnity Insurance in the Individual Market : Consistent with previously released guidance, we propose to amend the criteria for fi xed indemnity insurance to be treated as an excepted benefit in the individual health insurance market. 3 The proposed amendments would eliminate the requirement that individual fixe d indemnity insurance must pay on a per-period basis (as opposed to a per-service basis), and inst ead require, among other things, that it be sold only as secondary to other health coverage that is minimum essential cove rage to be considered an excepted benefit. HIPAA Opt-Out for Self-Funded, N on-Federal Governmental Plans : Prior to enactment of the Affordable Care Act, sponsors of self-funded, non-Federal governmental plans were permitted to elect to exempt those plans from (“op t out of”) certain provis ions of title XXVII of

the PHS Act. Consistent with previously released guidance, we propose amendments to the non-

3 FAQs about Affordable Care Act Implementation (Part XVIII) and Mental Health Parity Implementation, Q11 (January 9, 2014). Available at: http://www.cms.gov/CCIIO/R esources/Fact-Sheets-andFAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa /faqs/faq-aca18.html

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Federal governmental plan regulations (45 CFR 146.180) to reflect the amendments made by the Affordable Care Act to these provisions. 4 Premium Stabilization Programs : The Affordable Care Act establishes three premium stabilization programs—risk adjustment, reinsu rance, and risk corrido rs—to protect against adverse selection. The goal of the permanent risk adjustment program is to mitigate the impacts of possible adverse selection and stabilize the premiums in the individual and small group

markets as and after insurance market reforms ar e implemented. The Affordable Care Act also directs that a transitional reinsurance program be established in each State to help stabilize premiums for coverage by helping to pay the cost of treating high-co st enrollees in the individual market from 2014 through 2016.

Both the reinsurance and risk adjustment programs are subj ect to the fiscal year 2015 sequestration. The risk adjustment and reinsura nce programs will be sequestered at a rate of 7.3 percent in fiscal year 2015. The Federal gov ernment’s 2015 fiscal yearbegins on October 1, 2014. HHS, in coordination with the OMB, has dete rmined that, pursuant to section 256(k)(6) of the Balanced Budget and Emergency Defic it Control Act of 1985 as amended, and the underlying authority for these program s, funds that are sequestered in fiscal year 2015 from the reinsurance and risk adjustment programs will become available for payment to issuers in fiscal year 2016 without further Congressional acti on. HHS is still working through operational questions regarding the structure and timing of these payments, but aims to make payments of sequestered fiscal year 2015 f unding for the reinsurance and risk adjustment programs, which would have otherwise been paid in the summer of 2015, as soon as practicably possible in fiscal

4 Amendments to the HIPAA opt-out provision (formerly sec tion 2721(b)(2) of the Public Health Service Act) made by the Affordable Care Act (Septe mber 21, 2010). Available at: http://www.cms.gov/CCIIO/R esources/Files/Downloads/opt_out_memo.pdf

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year 2016, which begins on October 1, 2015. Should C ongress fail to enact deficit reduction that replaces the Joint Committee redu ctions, these programs would be sequestered in future fiscal years, and any sequestered funding would become av ailable in the fiscal year following that in which it was sequestered. In this proposed rule, we solicit feedback on potential revisions to the allocation of reinsurance contributions collected and we sugge st an approach such that the contributions collected under that program ar e allocated first to the reinsurance pool and administrative expenses, and second to the U.S. Treasury. In addition, we invite comment on alternative allocation approaches to maximize the premiu m stabilization benefits of the program. We also propose changing the limit on allowable administrative cost s to 22 percent and the limit on profits to 5 percent in the risk corridors calculation, in recognition of the ongoing uncertainty and changes in the market in 2015; we expect to implement this change in a budget neutral way. Exchange Establishment and QHP Issuer Standards : The rule proposes amending oversight standards regarding QHP decertification and CMPs. It also proposes that QHP issuers provide enrollees with an annual notice of coverage changes. Th is rule proposes a process for survey vendors to appeal an HHS decision not to approve its application to become an enrollee satisfaction survey (ESS) vendor, as well as standards for revoking HHS-approval of ESS vendors. Finally, it proposes standards for the ESS and quality rating system (QRS) related to the display of such information by Exchanges and the submission of validated data by QHP

issuers. We propose to align the start of annual empl oyer election periods in all SHOPs for plan years beginning in 2015 with the start of open en rollment in the corresponding individual marketCMS-9949-P 19

Exchange for the 2015 benefit year and to eliminate the 30-day minimum time frames for the employer and employee annual election periods. We also propose to allow State departments of insurance to recommend that, in 2015, a SHOP not provide employers with the option of selecting a level of coverage as described in section 1302(d)(1) of the Affordable Care Act, and making all QHPs at that level of coverage avai lable to their employees if making that option available would result in significan t adverse selection in the Stat e’s small group market resulting in market disruptions that could not be a ddressed by the premium stabilization programs or single risk pool, or if there woul d be insufficient issuers of qua lified health plans or qualified stand-alone dental plans to al low for meaningful choice among pl ans. We propose to allow the opportunity for a person appealing a determination of SHOP eligibil ity to withdraw an appeal by telephone, if the appeals entity is capable of accepting telephonic signatures. Civil Money Penalties for False Information or Improper Use of Information : The proposed rule specifies the grounds for imposing civil money penalties on persons who provide false or fraudulent information to the Exchange and on persons who use or disclose information in violation of section 1411(g) of the Affordable Care Act. The grounds for imposing a penalty include: negligent failure to provide correct in formation, knowing and willful provision of false or fraudulent information, and knowing and willful us e or disclosure of information in violation of section 1411(g). This section proposes the factors used to de termine the amount of the CMP to be imposed against a person. The section also provides for the requirements for notices which must be provided to a person if HHS proposes to impose a CMP, and the processes a person may follow should the person wish to challenge HHS ’ determination that a CMP should be imposed, including a process pursuant to which a person may request a hearing before an administrative law judge. We also propose to amend current privacy and security regulations at 45 CFRCMS-9949-P 20

155.260 to reference the new CMP provisions associ ated with knowingly and willfully using or disclosing information in viol ation of section 1411(g) of the Affordable Care Act. Civil Money Penalties for C onsumer Assistance Entities : The proposed rule would provide that HHS may impose CMPs against Na vigators, non-Navigator assistance personnel, certified application counselor designated organi zations, and certified application counselors in FFEs, if these entities and/or individuals viol ate Federal requirements applicable to their

activities. Navigator, Non-Navigator Assistance Personne l, and Certified Application Counselor Program Standards : In this proposed rule, we propose to specify certain ty pes of State laws applicable to Navigators, non-Navigator assi stance personnel, and certified application

counselors that HHS considers to conflict with orprevent the applicati on of the provisions of

title I of the Affordable Care Act within the m eaning of section 1321(d) of the Affordable Care Act. We would also make several changes to upd ate the standards applicable to these consumer assistance entities and individuals, such as pr ohibiting them from specified marketing or

solicitation activities. We propose to require Navigators an d non-Navigator assistance personnel to obtain authorization before accessing a consume r’s personally identifiable information and to prohibit them from charging consumers for their services. We also pr opose to require that certified application counselors be recertified on at least an annual basis, and propose to prohibit certified application counselors and certified application counselor designated organizations from receiving consideration, direc tly or indirectly, from healthinsurance issuers or stop loss

insurance issuers in connection with the enrollment of consumer s in QHPs or non-QHPs. We further propose that, in specific circumstan ces, certified applicati on counselor designatedCMS-9949-P 21

organizations can serve targeted populations without violating the broad non-discrimination requirement related to Exchange functions. Indexing of Cost-Sharing Requirements : Under §156.130(a), the annual limitation on cost sharing and the annual limitation on deductib les in the small group market for years after 2014 are to be indexed by the premium adjustme nt percentage. We established our methodology for calculating the premium adjustment percentage in the 2015 Payment Notice. In this rule, we propose calculating these limitati ons based on the premium adju stment percentage by rounding down to the nearest $50 increment. Required Contribution Percentage : Under section 5000A of the Code, an applicable

individual must maintain minimu m essential coverage for each month, qualify for an exemption, or make a shared responsibility payment. An individual may qualify for an exemption from the shared responsibility payment if the amount thathe or she would be required to pay towards minimum essential coverage (requi red contribution) exceeds a particul ar percentage (the required contribution percentage) of his or her household income. Under section 5000A of the Code, the required contribution percentage for 2014 is 8 pe rcent, and for each plan year beginning in a calendar year after 2014, the percentage, as dete rmined by the Secretary of Health and Human Services (the Secretary), that reflects the exce ss of the rate of prem ium growth between the preceding calendar year and 2013 over the rate of in come growth for the same period. In this preamble to this proposed rule, we describe issues related to possible methodologies for determining the percentage reflecting the excess of the rate of premium gr owth over the rate of income growth for plan years after 2014. Eligibility Appeals : This rule proposes to amend sta ndards related to eligibility appeals provisions in subparts F and H of Part 155. To faci litate the efficient conc lusion of an appeal atCMS-9949-P 22

the request of the appellant, we propose to amend the withdrawal procedure to permit

withdrawals made via telephonic signature. Minimum Essential Coverage : On October 31, 2013, we published guidance indicating that certain types of foreign group health co verage are recognized as minimum essential

coverage. 5 In this proposed rule, we propose amendm ents codifying the treatment of foreign group coverage as described in the October 31, 2013 guidance. We also clarify that entities other than plan sponsors (for example, issuers) can apply for their coverage to be recognized as minimum essential coverage, pursuant to the process outlined in 45 CFR 156.604 and guidance

thereunder.

Medical Loss Ratio : The MLR program created pursuan t to the Affordable Care Act generally requires issuers to re bate a portion of premiums if their MLR fails to meet the applicable MLR standard in a St ate and market for the applicable reporting year. An issuer’s MLR is the ratio of claims plus quality improve ment activities to premium revenue, with the premium adjusted by the amounts paid for taxes, licensing and regulatory fees, and the premium stabilization programs. On December 1, 2010, we published an interim final rule entitled “Health Insurance Issuers Implementing Medi cal Loss Ratio (MLR) Requirements under the

Patient Protection and Affordable Care Act” (75 FR 74864), which established standards for the MLR program. Since then, we have made severa l revisions and technical corrections to those rules. In this proposed rule, we propose to m odify the timeframe for which issuers can include

their ICD-10 conversion costs in their MLR calculation. We also propose to modify the regulation to clarif y how issuers would calcula te MLRs and rebates in States that require the

5 See CCIIO Sub-Regulatory Guidance: Process for Ob taining Recognition as Minimum Essential Coverage (October 31, 2013). Available at: http://www.cms.gov/CCIIO/Res ources/Regulations-andGuidance/Downloads/mec-gu idance-10-31-2013.pdf

.CMS-9949-P 23

individual and small group markets to be merg ed. We note that the standards for ICD-10 conversion costs and merged markets would also apply to the risk corridors program. Further, we propose to modify the regulation to account for the special circumstances of the issuers affected by the CMS November 2013 transitional policy and th e issuers impacted by systems challenges during the implementation of the Ex changes. We also propose to amend the requirements for distribution of de minimis rebates. II. Background A. Legislative Overview

The Patient Protection and Affordable Ca re Act (Pub. L. 111–148) was enacted on March 23, 2010. The Health Care and Education R econciliation Act of 2010 (Pub. L. 111–152), which amended and revised several provi sions of the Patient Protection and Affordable Care Act, was enacted on March 30, 2010. In this proposed rule, we refer to the two statutes collectively as the

“Affordable Care Act.” The Affordable Care Act reorganizes, amends , and adds to the pr ovisions of title XXVII of the PHS Act relating to group health plans and health insurance issuers in the group and

individual markets.

Section 1201 of the Affordable Care Act a dded sections 2702 and 2703 of the PHS Act. Section 2702 of the PHS Act generally requires an i ssuer that offers health insurance coverage in the individual or group market in a State to offer coverage to and accept every individual or employer in the State that applies for such c overage. Section 2703 of the PHS Act generally requires an issuer to renew or c ontinue in force coverage in the group or individual market at the option of the plan sponsor or the individual.CMS-9949-P 24

Prior to enactment of the Affordable Care Act, HIPAA amended the PHS Act to improve access to individual health insurance coverage for certain eligible individuals who previously had group coverage, and to guarantee the renewability of all coverage in the individual market. These reforms were added as sections 2741 through 2744 of the PHS Act. HIPAA also added PHS Act provisions permitting sponsors of self-funded, non-Federal governmental plans to elect to exempt those plans from (“opt out of”) certain provisions of title

XXVII of the PHS Act. This election was authorized under section 2721(b )(2) of the PHS Act, which is now designated as s ection 2722(a)(2) of the PHS Act by the Affordable Care Act. Section 2718 of the PHS Act, as added by the Affordable Care Act, generally requires

health insurance issuers to submit an annua l MLR report to HHS and provide rebates to consumers if they do not achieve specified MLRs. Sections 2722 and 2763 of the PHS Act, as implemented in 45 CFR 146.145(b) and 148.220, provide that the requirements of parts A and B of title XXVII of the PHS Act shall not apply to any individual coverage or any group he alth plan (or group health insurance coverage) in relation to its provis ion of excepted benefits. Excepted benefits are desc ribed in section 2791(c) of the PHS Act. One category of ex cepted benefits, called “noncoordinated excepted benefits,” includes coverage for only a specified disease or illn ess, and hospital indemnity or other fixed indemnity insurance. Benefits in this category are excep ted only if they meet certain conditions specified in th e statute and regulations. Section 1302(c) of the Affordable Care Ac t establishes an annual limitation on cost sharing and an annual limitation on deductibles in the small group market for 2014, and provides

that those limitations are to be increased for eac h year after 2014 by the pe rcentage by which the average per capita premium for health insurance coverage in the United States for the precedingCMS-9949-P 25

year exceeds the average per capita premium for 2013. Under se ction 1302(c), those limitations are to be rounded to the next lowest multiple of $50. Section 1311(b) of the Affordable Care Act provides that each St ate has the opportunity to establish an Exchange that: (1) facilitates the pur chase of insurance coverage by qualified individuals through QHPs; (2) pr ovides for the establishment of a SHOP designed to assist qualified employers in the enrollment of their qualified employees in QHPs; and (3) meets other requirements specified in the Affordable Care Act. Section 1311(c)(3) of the Affo rdable Care Act requires the Secretary to develop a rating system to rate QHPs offered through an Exchange on the basis of quality and price. Section 1311(c)(4) of the Affordable Care Act directs th e Secretary to establis h an ESS system that

would evaluate the level of enrollee satisfaction of member s in QHPs offered through an Exchange, for each QHP with more than 500 enroll ees in the previous year. Sections 1311(c)(3) and 1311(c)(4) of the Affordable Care Act further require an Exchange to provide information to individuals and employers from the rating and ESS systems on the Exchange’s website. We have already promulgated regulations in 45 CF R 155.200(d) that direct Exchanges to oversee implementation of ESSs and ratings of hea lth care quality and outcomes, and 45 CFR 156.200(b)(5) 6 that directs QHP issuers that participate in Exchanges to report health care quality and outcomes information and to implement an E SS consistent with the Affordable Care Act. Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Ac t direct all Exchanges to establish a Navigator program.

6 Patient Protection and Affordable Care Act; Establishmen t of Exchanges and Qualified Health Plans; Exchange Standards for Employers; Final Rule, 77 FR 18310 (Mar. 27, 2012) (to be codified at 45 CFR parts 155, 156, & 157).CMS-9949-P 26

Section 1321(a) of the Affordable Care Act provides broad authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, QHPs and other components of title I of the Affo rdable Care Act. Sec tion 1321(a)(1) directs the Secretary to issue regulations th at set standards for meeting the requirements of title I of the Affordable Care Act with respect to, among ot her things, the establishment and operation of Exchanges. Section 1321(a)(2) requires the Secretary to enga ge in consultation to ensure balanced representation am ong interested parties. Section 1321 of the Affordable Care Act pr ovides for State flexibility in the operation and enforcement of Exchanges and related requ irements. Section 1321(d) provides that nothing

in title I of the Affordable Care Act shall be construed to preempt any State law that does not prevent the application of title I of the Affordab le Care Act. Section 1311(k) specifies that Exchanges may not establish rules that conflict with orprevent the application of regulations promulgated by the Secretary. Section 1321(c)(1) requires the Secretary of HHS (referred to throughout this rule as the Secretary) to establish and operate an FFE within States that eith er: (1) Did not elect to establish an Exchange; or (2) as determined by the S ecretary, did not have a ny required Exchange operational by January 1, 2014. Section 1321(c)(2) of the Affo rdable Care Act provides that the provisions of section 2723(b) of the PHS Act 7 shall apply to the enforcement unde r section 1321(c)(1 ) of requirements of section 1321(a)(1), without re gard to any limitation on the app lication of those provisions to group health plans. Section 2723(b) of the PHS Ac t authorizes the Secretary to impose CMPs as

7 Section 1321(c) of the Affordable Care Act erroneously cites to section 2736(b) of the PHS Act instead of 2723(b) of the PHS Act. This was clearly a typo graphical error, and we have interpreted section 1321(c) of the Affordable Care Act to incorporate section 2723(b) of the PHS Act.CMS-9949-P 27

a means of enforcing the individual and group ma rket reforms contained in Part A of title XXVII of the PHS Act when, in the Secr etary’s determination, a State fails to substa ntially enforce these provisions.

Section 1341 of the Affordable Care Act re quires the establishment of a transitional reinsurance program in each State to help pay th e cost of treating high-cost enrollees in the

individual market from 2014 th rough 2016. Section 1342 of the Affo rdable Care Act directs the Secretary to establish a temporary risk corridors program that provides for the sharing in gains or losses resulting from inaccurate rate sett ing from 2014 through 2016 between the Federal government and certain participating health plans. Section 1411(f)(1) of the Afford able Care Act provides that the Secretary, in consultation with the Secretary of the Treasury, the Secretar y of Homeland Security, and the Commissioner of Social Security, shall establis h procedures by which the Secretar y or one of such other Federal officers hears and makes decisions with respect to appeals of any determination under subsection (e) and redetermines eligibility on a periodic basis in appropriate circumstances. Section 1411(f)(2) of the Affordable Care Act provides that the Secretary shal l establish a separate appeals process for employers who are notified under section 1411(e)(4)(C) of the Affordable Care Act that the employer may be liable for a tax imposed by section 4980H of the Internal Revenue Code of 1986 (the Code) with respect to an employee because of a determination that the employer does not provide minimum essential coverage through an em ployer-sponsored plan or that the employer does provide th at coverage but it is not afford able coverage with respect to an employee.CMS-9949-P 28

Section 1411(h) of the Affordable Care Act sets forth CMPs to which any person may be subject if that person provides in accurate information as part of an Exchange application or improperly uses or discloses an applicant’s information. Section 1501(b) of the Affordable Care Ac t added section 5000A to the Code. That section, as amended by the TRICARE Affi rmation Act of 2010 (PL 111–159, 124 Stat. 1123) and Public Law 111–173 (124 Stat. 1215), requires nonexempt individuals to either maintain minimum essential coverage or make a shared responsibility payment for each month beginning in 2014. It also describes categ ories of individuals who may qua lify for an exemption from the individual shared responsibility payment. Section 1311(d)(4)(H) of the Affordable Care Act specifies that the Exchange will, subject to section 1411 of the Affordable Care Act, grant certifications of exemption from the individual sh ared responsibility payment specified in section

5000A of the Code. Standards re lating to these provisions were established in IRS regulations titled, Shared Responsibility Payment for Not Ma intaining Minimum Essential Coverage Final Rule published in the August 30, 2013 Federal Register (78 FR 53646) (IRS Minimum Essential Coverage Final Rule) and HHS regulations titled, Exch ange Functions: Eligibility for Exemptions; Miscellaneous Minimum Essential C overage Provisions Final Rule published in the July 1, 2013 Federal Register(78 FR 39494) (HHS Minimum Esse ntial Coverage Final Rule). B. Stakeholder Consultation and Input HHS has consulted with stakeholders on polic ies related to the ope ration of Exchanges, including the SHOP and the premium stabili zation programs. HHS has held a number of listening sessions with consumers, providers, employers, health plans, the actuarial community, and State representatives to ga ther public input. HHS consu lted with stakeholders through regular meetings with the National Associati on of Insurance Commissi oners (NAIC), regularCMS-9949-P 29

contact with States through the Exchange Esta blishment grant and Exchange Blueprint approval processes, technical health car e quality measurement experts, health care survey development experts, and meetings with Trib al leaders and representatives, health insurance issuers, trade groups, consumer advocates, employers, and other in terested parties. In addition, HHS received public comment on various notices published in the Federal Register relating to health care quality in the Exchanges, 8 enrollee experience measures and domains, 9 and the quality rating system, which provided valuable feedback on quali ty reporting and quality rating requirements. 10 We considered all of the public input as we developed the policies in this proposed rule. C. Structure of Proposed Rule The regulations outlined in this proposed rule would be codified in 45 CFR parts 146, 147, 148, 153, 155, 156, and 158. Part 146 outlines the group health insurance market requirements of the PHS Act added by HIPAA and other laws, including gu aranteed renewability standards and opt-out provisions for sponsors of self-funded, non- Federal governmental plans. Part 147 outlines health insurance reform requi rements for the group and individual markets added by the Affordable Care Act, including stan dards related to guarant eed availability and guaranteed renewability of coverage. Part 148 outlines the individual he alth insurance market requirements of the PHS Act added by HIPAA an d other laws, including standards related to guaranteed availability with respect to certain eligible individuals and guaranteed renewability

for all individuals. Part 153 outlines standards re lated to reinsurance program and risk corridors

8 Request for Information Regarding Health Care Quality for Exchanges: http://www.gpo.gov/fdsys/pkg/FR-2012- 11-27/pdf/2012-28473.pdf

. 9 Request for Domains, Instruments, and Measures for Development of a Standardized Instrument for Use in Public Reporting of Enrollee Satisfaction With Th eir Qualified Health Plan and Exchange: http://www.gpo.gov/fdsys/pkg/FR- 2012-06-21/html/2012-15162.htm

. 10 Patient Protection and Affordable Care Act; Exchanges and Qualified Health Plans, Quality Rating System (QRS) Framework, Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 2013).CMS-9949-P 30

programs. Part 155 outlines sta ndards related to the operations and functions of an Exchange, including standards related to non-discrimination, accessibility, and enforcement remedies; standards applicable to the consumer assi stance functions performed by Navigators, nonNavigator assistance pers onnel, and certified application c ounselors; standa rds related to eligibility appeals; standards related to exempti ons; standards related to quality reporting; and

standards related to SHOP. Part 156 outlines heal th insurance issuer responsibilities, including the methodology for calculating the annual limit on cost-sharing and deductibles for years after 2014; minimum certification standards; standards for recognition of certain types of foreign group health coverage as minimum essential co verage; quality standards for QHPs; and other QHP issuer responsibilities. Part 158 outlines standards related to the medical loss ratio program, including standards relate d to treatment of ICD-10 convers ion costs, standards related to adjustments for issuers affected by the November 2013 CMS transitional policy and issuers that incurred costs due to the technical probl ems during the implementa tion of the Exchanges, standards related to MLR reporting and rebate calculations in States with merged individual and small group markets, and standards rela ted to distribution of de minimis rebates. III. Provisions of the Proposed Rule A. Part 146—Requirements for th e Group Health Insurance Market 1. HIPAA Opt-Out Provisions for Plan Spons ors of Self-Funded, Non-Federal Governmental Plans (§146.180)

Prior to enactment of the Affordable Care Act, sponsors of self-funded, non-Federal governmental plans were permitted to elect to ex empt those plans from (“opt out of”) certain provisions of title XXVII of the PHS Act. This election was authorized under section 2721(b)(2)CMS-9949-P 31

of the PHS Act. Sponsors of thos e plans could elect to opt out of all or any of the following title XXVII requirement categories: 1. Limitations on preexisting condition exclus ion periods under section 2701 of the PHS Act (redesignated as section 2704 by the Affordable Care Act). 2. Requirements for special enrollment pe riods under section 2701 of the PHS Act (redesignated as section 2704 by th e Affordable Care Act). 3. Prohibitions against discrimi nating against individual part icipants and beneficiaries based on health status (but not including provisions added by the Genetic Information Nondiscrimination Act of 2008) under 2702 of the PHS Act (redesignated as section 2705 by the Affordable Care Act). 4. Standards relating to benefits for newborns and mothers under se ction 2704 of the PHS Act (redesignated as section 2725 by the Affordable Care Act). 5. Parity in the application of certain limits to mental health and substance use disorder benefits (including requirements of the Mental Health Parity and Addi ction Equity Act of 2008) under section 2705 of the PHS Act (redesi gnated as section 2726 by the Affordable Care Act). 6. Required coverage for reconstructive su rgery following mastectomies under section 2706 of the PHS Act (redesignated as section 2727 of the PHS Act). 7. Coverage of dependent students on a me dically necessary le ave of absence under section 2707 of the PHS Act (redesignated as section 2728 by the Affordable Care Act).

The Affordable Care Act made a number of cha nges, with the result that sponsors of selffunded, non-Federal governmental plans can no longe r opt out of as many requirements of title XXVII. First, PHS Act section 2721 was rede signated as section 2722. The new sectionCMS-9949-P 32

2722(a)(2) no longer allows a sponsor of a self-funded, non-Federal governmental plan to exempt that plan from the first 3 requiremen t categories listed above, but may continue to exempt the plan from requirement categories 4 through 7. In response to the Affordable Care Act am endments, HHS issued guidance on September 21, 2010 indicating that, for plan years beginni ng on or after September 23, 2010, plan sponsors of non-collectively bargained plan s can only elect to be exempt from provisions 4-7 and that provisions 1-3 are no longer available for exemption. 11 Group health plans maintained pursuant to a collective bargaining agreement that was ratified before March 23, 2010, and that has been exempted from any of the first 3 requirement categories listed above, would not have to come into compliance with those provisions until the commencement of the first plan year following the expiration of the last plan year governed by the collective bargaining agreement. Because of the timing of the guidance, HHS elected not to ta ke any enforcement actions with respect to optout elections for plan years beginning prio r to April 1, 2011 on th e provisions 1-3. We propose to revise the provisions of §146.180 to reflect the amendments of the Affordable Care Act and the September 21, 2010 guida nce. While the proposedrule restates the current rule in the procedures for filing an opt-out election withCMS, the following revisions are being proposed primarily to reflect the Affordab le Care Act amendments: identification of PHS Act provisions subject to the opt- out election as noted above; deleti on of references to the notice of creditable coverage requirement since that re quirement has been superseded; and the deletion of examples referencing provisions that are no longer available for opt-out elections.

11 Amendments to the HIPAA opt-out provision (formerly section 2721(b)(2) of the Public Health Service Act) made by the Affordable Care Act (S eptember 21, 2010). Available at: http://www.cms.gov/CCIIO/R esources/Files/Downloads/opt_out_memo.pdf

.CMS-9949-P 33

Additionally, we propose to replace the addr ess for submitting the election documents with language indicating that opt-out elections must be submitted in an electronic format as specified by the Secretary in guida nce. We believe that electroni c submissions will be easier and more efficient for both the plan sponsors and for CMS to track the submissions. We welcome comments on improving the election process in order for elections to be submitted electronically. Until the issuance of final regulations, elections will be accepted via U.S. Mail or facsimile. The current address for the submission, as noted on th e CMS/CCIIO website, is Centers for Medicare & Medicaid Services (CMS), Ce nter for Consumer Information and Insurance Oversight (CCIIO), Attn: HIPAA Opt-Out, 200 Indepe ndence Avenue, SW, Room 733H-02, Washington,

DC 20201. Elections can also be submitted via f acsimile at 301-492-4462. Questions regarding the opt-out process can be submitted to CMS at HIPAAOptOut@cms.hhs.gov. CMS makes publicly available on its website a list of self-funded, non-Federal governmental plans that have submitted an opt-out election and the PHS Act provisions subject to the election. 12 The proposed rule would clarify that plan sponsors of self-funded, non-Federal governmental plans offering health coverage subj ect to a collectively bargained agreement that was ratified before March 23, 2010 can continue to be exempt from any of the 7 original provisions for which a timely election was filed w ith CMS until the expiration of the last plan year subject to the agreement. These proposed amendments would generally become applicable upon the effective date

of the final rule. Comments are welcome on th e proposed revisions and on any aspect of the proposed rule, including th e provisions unchanged from the current regulation.

12 See List of HIPAA Opt-Out Elections for Self-Funded Non-Federal Governmental Plans. Available at: http://www.cms.gov/CCIIO/Res ources/Files/Downloads/hi paa-nfgp-list-7-9-2013.pdf

.CMS-9949-P 34

Finally, we note that some plan administrato rs have been submitting one opt-out election to CMS for multiple group health plans. While this is permitted for plans subject to the same collective bargaining agreement, single elections have been recei ved for multiple plans not under a collective bargaining agreement. The current re gulations expressly requ ire a separate election for each group health plan not subject to collective bargaining. We request comments on whether the regulation should be modified to allow a single opt-out submission for multiple group health plans not subject to collective bargaining. We are also considering requiring, as part of the opt-out election docum ent, that sponsors of plans s ubject to a colle ctive bargaining agreement be required to list all plans subject to the agreement. We welcome comments on this proposal. B. Part 147—Health Insurance Reform Require ments for the Group and Individual Health

Insurance Markets 1. Guaranteed Availability and GuaranteedRenewability of Coverage (§§147.104 and 147.106)

a. No Effect on Other Laws Section 2702 of the PHS Act generally require s a health insurance issuer that offers health insurance coverage in th e individual or group market in a State to offer coverage to and accept every individual or employer in the State th at applies for coverage. Section 2703 of the PHS Act generally requires a health insuran ce issuer to renew or continue in force 13 coverage in the group or individual market at the option of the plan sponsor or the individual. These sections are implemented by regulations at 45 CFR 147.104 and 147.106, respectively. They apply to health plans offered both through and outside of an Exchange.

13 “Continue in force” means that the issuer maintains the same policy form that the plan sponsor or individual purchased.CMS-9949-P 35

There are several exceptions to these requireme nts. In addition to statutorily specified exceptions set forth in sections 2702 and 2703 of th e PHS Act, other Federal laws restrict the products that are available to ce rtain individuals. For example, section 1882(d) of the Social Security Act establishes an anti -duplication provision that makes it unlawful for an issuer to knowingly sell to an individual en titled to benefits under Medicare part A or enrolled under Medicare part B an individual he alth insurance policy that duplicates Medicare benefits; sections 1311(d)(2) and 1312(f) of the Affordable Care Act limit access of an individual market QHP offered through an Exchange to citizens and lawful residents; 14 and section 1302(e) of the Affordable Care Act provides that only i ndividuals under age 30, a nd individuals who are certified as exempt from the requirement to ma intain minimum essential coverage based on lack of affordable coverage or hardship, are eligible to enroll in catastrophic plans. Consistent with the canons of statutory construc tion, which provide that specific statutory language ordinarily trumps conflicting general language, 15 the guaranteed availability and renewability requirements

are subordinated to these and other Federal law requirements limiting access to coverage. As a result, issuers of coverage subjec t to specific Federal statutes that conflict with PHS Act sections 2702 and 2703 could deny enrollment or reenrollme nt in coverage where doing otherwise is contrary to law.

14 Although the Affordable Care Act creates a limited ex ception to the guaranteed availability requirements for qualified individuals purchasing coverage through an Exchange , if an individual declines or is ineligible to enroll through an Exchange and seeks enrollment directly with th e issuer, issuers of coverage subject to the guaranteed availability requirements of section 2 702 of the PHS Act must accept every i ndividual in the State that applies for such coverage unless an exception applies. 15 See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 228 (1957) (citations omitted) (providing that, “However inclusive may be the general language of a statut e, it will not be held to apply to a matter specifically dealt with in another part of the same enactment.” The same principle is used to resolve conflict between two statutes. See also, e.g., United States v. Estate of Romani, 523 U.S. 517, 532 (1998) (later, more specific statute governs). See also Morton v. Mancari, 417 U.S. 535, 550-51 (1974) (a general statute will not be held to have repealed by implication a more specific one unless there is “clear intention otherwise”).CMS-9949-P 36

We propose to amend the guaranteed availability and renewability regulations to codify this interpretation in regulation text. We propose to add new paragraph (h) in §147.104 providing that nothing in the guara nteed availability requirements should be construed to require an issuer to offer coverage where other Federal laws operate to prohibit the issuance of such coverage. Similarly, we propose to redesignate paragraphs (g) a nd (h) as (h) and (i), and add new paragraph (g) in §147.106 providing that nothing in the guaranteed renewability requirements should be construed to require an issuer to renew or continue in force coverage for which continued eligibility would otherwise be prohibited under applicab le Federal law. We believe that these regulatory changes are consiste nt with current market practice and will cause no disruption in the health insurance market. We solicit comment on these and other clarifications that may be helpful. We note th at only Federal laws, not State laws, can create exceptions to the Federal guaranteed availabi lity and renewability requirements. We also note that, due to a formatting error inthe interim final rule with comment period titled, Patient Protection and Affordable Care Act; Maximizing January 1, 2014 Coverage Opportunities (78 FR 76212), the regulation te xt at §147.104(b)(1)(i) contains a duplicate reference to the SHOP regulation at §155.725. We propose to correct the duplicate reference in this proposed rule, and to make other minor regul atory revisions in this paragraph for clarity.

b. Product Withdrawal and Uniform Modificati on of Coverage Exceptions to Guaranteed Renewability Requirements The PHS Act provisions enacted by HIPAA and the Affordable Care Act require health insurance issuers to guarantee the renewal of coverage unless at least one of several listedCMS-9949-P 37

exceptions applies. 16 One exception to the guaranteed rene wability requirements permits an issuer to cease offering a partic ular product in a market and to discontinuing existing blocks of business with respect to that product (product withdrawal). This may be done, in accordance with State law, provided certain other requirements are met. The PHS Act also provides for issuers, only at the time of coverage renewal, to modify the health insurance coverage for a product offered to a group health plan or an individual in the indi vidual market, if the

modification is consistent with State law and e ffective uniformly for all group health plans or individuals with that product (u niform modification of coverage). The law contemplates that a

uniform modification does not a lter a policyholder’s right to renewability, and that such

modifications do not in effect result in the te rmination of the existing policy under the product

withdrawal rules. In this proposed rule, we propose standards defining whether certain modifications to a policy would constitute “uniform modifications” within the mean ing of the PHS Act, or would

constitute the withdrawal of the existing product and the creation of a new product. These provisions would be codified in each of the guaranteed renewability regulations at 45 CFR 146.152, 147.106, and 148.122, and would therefore appl y to both grandfathered and nongrandfathered coverage in th e group and individual markets. 17

Definition of Uniform M odification of Coverage

16 See PHS Act sections 2703 (applicable to non-grandfathered health plans in the group and individual markets), section 2712 as codified prior to enactment of the Affordable Care Act (appli cable to grandfathered health plans in the group market), and section 2742 (applicable to both grandfathered and non-grandfathered health plans in the individual market), as implemented in 45 CFR 146.152, 147.106, and 148.122. 17 While the Affordable Care Act amended section 2703 of the PHS Act to generally apply to health insurance issuers in the group and individual markets, the uniform modification of coverage exception in section 2703(d) of the PHS Act addresses only the large and small group market s. Section 2742 of the PHS Act and the regulations at §148.122(g) contain parallel provisions allowing for the uniform modification of coverage in the individual market. For ease of reference and to facilitate compliance, we pr opose to add a provision in §147.106(e)(1) reiterating the uniform modification of coverage exception for non-grandfathered coverage in the individual market.CMS-9949-P 38

We propose that a modification made solely pu rsuant to applicable Federal or State law

would be considered a modification of covera ge rather than a product withdrawal. These

modifications could include cha nges required to comply with Af fordable Care Act standards (such as elimination of a prohibited annual limit) and changes permitted based on updated standards (such as increasing an annual limitatio n on cost sharing based on the annual increase in the limit permitted as a result of the application of the premium adjustment percentage). Additionally, we propose that if an issuer makes changes to the health in surance coverage for a product that are not pursuant to applicable Federal or State law, the modifications would

constitute a uniform modificati on of coverage for purposes of the guaranteed renewability requirements under the PHS Act if the product that has been modified meet s all of the following

criteria:

• The product is offered by the same health insu rance issuer (within the meaning of section 2791(b)(2) of the PHS Act);

• The product is offered as the same product type (e.g., preferred provider organization (PPO) or health maintenance organization (HMO));

• The product covers a majority of the same counties in its service area;

• The product has the same cost-sharing struct ure, except for variation in cost sharing solely related to changes in cost and utiliza tion of medical care, or to maintain the same level of coverage described in sections 1302(d) and (e) of the Affordable Care Act (e.g., bronze, silver, gold, platin um or catastrophic); and

• The product provides the same covered benef its, except for changes in benefits that cumulatively impact the rate for the product by no more than 2 percent (not including changes required by applicable Federal or State law).CMS-9949-P 39

Under this proposal, if an issuer modifies the coverage for a product and the resulting product is consistent with the above criteria, the issuer would be considered under the PHS Act to have made a uniform modification of coverage and th erefore not to have w ithdrawn the product from that market. Conversely, if an issuer modifies the coverage for a product in a manner that results in a product that differs from the above criteria, the issuer would be considered to have changed the coverage to such extent th at the issuer has withdrawn the existing product and created a new product. 18 These criteria, if finalized, would estab lish minimum Federal standards determining whether coverage modifications constitute the co ntinuance of an existi ng product in a market within a State for products offered both through a nd outside of an Exchange. We believe these proposed standards will minimize unnecessary terminations of cove rage, ensuring predictability and continuity for consumers, while reasonabl y providing issuers the flexibility to make necessary adjustments to coverage. We recognize that some States may have differe nt definitions of what changes to a health insurance product constitute modifications and what changes constitute withdrawals and refilings of new products. The definitions propos ed here would preempt any conflicting State definitions. We acknowledge that the guaranteed renewability sections of the PHS Act provide

that a uniform modification of coverage must, among other things , be “consistent with State law.” We interpret this statutor y language as governing the extent or type of modifications that may legally be made under State law. As discusse d in the preamble to the final rule published on February 27, 2013 under section 2703 of the PHS Act (78 FR 13419), State laws that prevent

18 Whether an issuer is considered to offer the same product for purposes of this proposal is unrelated to and would not determine whether a plan maintains st atus as a grandfathered health plan under section 1251 of the Affordable Care Act and its implementing regulations. 26 CFR 26 CFR 54.9815-1251T, 29 CFR 2590.715-1251, and 45 CFR 147.140.CMS-9949-P 40

issuers from uniformly modifying coverage to comply with Federal la w requirements would, in effect, prevent the application of such requirements and therefore be preempted. 19 Accordingly, under the approach we are proposing, States wo uld have the flexibility to apply additional criteria that broaden the scope of what would be considered a uniform modification, but not narrow its scope. We request comment on all as pects of this proposal.

Standard Consumer Notices When Disconti nuing or Renewing a Pr oduct in the Group or

Individual Market

To reduce confusion and ensure consumers receive clear, accurat e, and consistent information about their coverage options, we are also proposing standard notice requirements when issuers discontinue or renew coverage in the group and indi vidual markets. First, under the current regulations, issuers el ecting to discontinue offering a particular product in a market must provide to each plan sponsor or individual provided that product (and to all participants and benefi ciaries covered under such covera ge) at least 90 calendar days’

notice of the discontinuation in wr iting. We propose that, to satisfy this requirement, the issuer must provide notice “in a form and manner specified by the Secretary.” Second, we propose to establish a new notice requirement when issuers provide the option to renew coverage, includ ing a renewal of coverage with modifications. We propose the issuer in this situation must pr ovide written notice of the renewa l to each plan sponsor in the small or large group market and to each indi vidual policyholder in the individual market (as

19 Patient Protection and Affordable Care Act; Health Insura nce Market Rules; Rate Review, 78 FR 13406 (February 27, 2013).CMS-9949-P 41

applicable). We propose this not ice must also be provided in a form and manner specified by the Secretary. We request comment on these proposals. Concu rrently with the issu ance of this proposed rule, we are publishing four draf t notices in guidance that would be required to be used when issuers elect to discontinue or renew a pr oduct, consistent with the above discussion. 20 We

solicit comments on the draft notices as described in the guidance.

Rate Review Section 2794 of the PHS Act, and regulati ons at 45 CFR Part 154, establish a process whereby CMS or the applicable State will review ra te increases of health insurance coverage that meet or exceed specified thresholds to determine if the rate increases are unreasonable. It has come to our attention, however, that some issuer s may attempt to avoid review of rate increases by withdrawing a product(s) offered in the indivi dual or small group market in a State and refiling the product(s) as a “new” product(s) th e following year. Under §154.102, a “rate increase” is defined as “any increase of the rates for a sp ecific product offered in the individual or small group market,” and a “product” is defined as “a package of health insura nce coverage benefits with a discrete set of rating and pricing methodologies that a health insurance issuer offers in a

State.” CMS intends to apply the cr iteria outlined above regard ing product discontinuation and renewal to determine whether the rate filing is subject to review under 45 CFR Part 154. Specifically, if an issuer wit hdraws a product in a market in a State and, within a 12-month period, reintroduces a product in th at market with modi fications of the discontinued product that

20 Standard Notices When Discontinuing or Renewing a Particular Product in the Group or Individual Market (March 14, 2014). Available at: http://www.cms.gov/CCIIO/Res ources/Files/Downloads/ draft-notice--renewaldiscontinuation-bulletin-3-14-2014.pdf

.CMS-9949-P 42

do not differ from the above criteria, we would cons ider the issuer to be continuing to offer the same “product” within the meani ng of that term under §154.102. As such, the rate filing for the product would be subject to the annual review of rate increases of hea lth insurance coverage should it meet or exceed the specified threshol ds to determine if the rate increase is unreasonable. CMS will consider compliance with the proposed criteria to constitute compliance with PHS Act section 2794 until this rulemaking is finalized. We request comment on whether this clarific ation, or a cross-refe rence to the proposed

definition of a uniform modification of covera ge in §147.106 of this prop osed rule, should be

added to Part 154. C. Part 148—Requirements for the Individual Health Insurance Market 1. Conforming Changes to Individual Market Regulations (§§148.101 through 148.128)

The Health Insurance Port ability and Accountability Ac t of 1996 (HIPAA), Pub. L. 104- 191, was enacted in 1996 to provide for, among othe r things, improved portab ility and continuity of coverage in both the group and individual hea lth insurance markets. Section 111 of HIPAA added sections 2741 through 2744 of the PHS Act to improve availa bility and renewability in the

individual market. HIPAA also added provisions of the Code, the Employee Retirement Income Security Act of 1974 (ERISA), and the PHS Ac t governing the group health insurance market and group health plan coverage provided in c onnection with employment. These provisions permitted limited exclusions of coverage under certain circumstances based on preexisting

conditions. The individual health insurance market prov isions of HIPAA are implemented in 45 CFR Part 148. These provisions guarantee the availab ility of individual hea lth insurance coverage without preexisting condition exclus ions for certain eligible individuals who lose group healthCMS-9949-P 43

insurance coverage; require issuance of certific ates of creditable c overage; guarantee the renewability of individual health insurance covera ge for all individuals; and set forth procedures for States that choose to impl ement an alternative mechanism under State law with respect to guaranteed availability for eligible individuals.

The Affordable Care Act added a new sec tion 2704 of the PHS Act, which renumbered and amended the HIPAA requirements rela ting to preexisting condition exclusions. 21 In general, the new PHS Act section 2704 provides that a group health plan and a health insurance issuer offering group or individual health insurance co verage may not impose any preexisting condition

exclusions. Section 2704 and the regulations under that section ar e generally effective for plan years (in the individual mark et, policy years) beginning on or after January 1, 2014, but for enrollees under the age of 19, th e prohibition became effective for plan years (in the individual market, policy years) beginni ng on or after September 23, 2010. 22 This proposed rule would make conformi ng amendments to the individual market provisions contained in Part 148 by removing provisions con cerning preexisting condition exclusions that are superseded by new section 2704 of the PHS Act. These amendments would generally become applicable upon the effective da te of the final rule. However, the proposed amendment to eliminate the requir ement to issue certificates of creditable coverage is proposed to apply December 31, 2014, so that individuals needing to offset a preexisting condition exclusion under a group health plan that will become subject to the prohibition on preexisting

21 The Affordable Care Act adds section 715(a)(1) of ERIS A and section 9815(a)(1) of th e Code to incorporate the provisions of part A of title XXVII of the PHS Act, in cluding section 2704 of the PHS Act, into ERISA and the Code, and to make them applicable to group health plans and health insurance issuers providing health insurance coverage in connection with group health plans. 22 PHS Act section 2704 applies to grandfathered and non-grandfathered group health plans and group health insurance coverage, and non-grandfathered individual health insurance coverage. It does not apply to grandfathered individual health insurance coverage. For more information on grandfathered health plans, see section 1251 of the Affordable Care Act and its implementing regulations at 26 CFR 54.9815-1251T, 29 CFR 2590.715-1251, and 45 CFR 147.140.CMS-9949-P 44

condition exclusions starting with a plan ye ar beginning on December 31, 2014, would still have access to the certificate for proof of coverage un til that time. These proposed amendments are consistent with rulemaking amending th e group market regulations under HIPAA 23 and with previously released guidance addressing the maintenance of State alternative mechanisms. 24 We solicit comment on this proposal. 2. Fixed Indemnity Insurance in the I ndividual Health Insu rance Market (§148.220) Pursuant to PHS Act sections 2722(c)(2), 2763 (b) and 2791(c)(3)(B), in surance that pays a fixed amount under specified conditions without regard to other insura nce (“fixed indemnity insurance”) is considered to be an excepted bene fit, exempt from many of the provisions of title XXVII of the PHS Act for the group and individual markets, if it meets all of the following conditions: (1) The benefits are be provided under a separate policy, certif icate or contract of insurance; (2) there is no coordination between th e provision of such benefits and any exclusion of benefits under any group health plan mainta ined by the same plan sponsor; and (3) such benefits are paid with respect to an event without regard to whet her benefits are provided with respect to such event under a ny group health plan maintained by the same plan sponsor. These statutory requirements are reflected in regulations at 45 CFR 146.145(b)(4) and 148.220(b)(3). In addition, under §146.145(b)(4), in corporated through §148.220(b)(3), benefits of fixed indemnity insurance in the group and i ndividual markets must be paid on a fixed amount basis without regard to the costof the item or service and can only be paid on a per-period basis as opposed to on a per-service basis in orde r to be treated as an excepted benefit.

23 See Ninety-Day Waiting Period Limitation and Technical Am endments to Certain Health Coverage Requirements Under the Affordable Care Act, 78 FR 10296 (February 24, 2014). 24 See Questions and Answers Related to Health Insurance Market Rules, Q2. Available at: http://www.cms.gov/CCIIO/R esources/Fact-Sheets-and-FAQs/qa_hmr.html

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The primary reason fixed indemnity insurance is considered to be an excepted benefit if it meets the statutory and regulatory criteria is th at its primary purpose is not to provide major medical coverage but to provide a cash-replacem ent benefit for those individuals with other health coverage. Since the issuance of the regul ations, however, various s ituations have come to the attention of HHS, the Department of Labor, and the Department of the Treasury (the Departments) where a health insurance policy is a dvertised as fixed indemnity coverage but pays a fixed amount based not on a period of time, but if a particular service is received. For example, the fixed indemnity coverage pays a fixed $50 per visit for doctors’ visits, or $100 for a day of hospitalization, different fixed dollar amounts for other various surgical procedures, and/or a fixed $15 per prescription without regard to cost . In all cases, these fixed amounts are paid under these policies without regard to costs, and without regardto other insurance payments that may cover the same services. In such circum stances, the fixed payments for doctors’ visits, surgery, and prescription drugs are not made noton a per-period basis, but instead based on the type of procedure or item, such as the surger y or doctor visit actually performed or the drug prescribed, and the amount of payment varies widely based on the type of surgery or the cost of the drug. Because these payments are not based on a “fixed dollar amount per day (or per other period),” such a policy is not an exceptedbenefit under the current regulations. The Departments issued a frequently asked question (FAQ) on January 24, 2013 affirming that under the current regulations, for fixed indemnity insurance to be an excepted benefit, payment based on an event must be pa id on a per-period basis as opposed to on a perservice basis. 25 While the FAQ only addressed fixed indemnity insurance sold in the group

25 See FAQs about Affordable Care Act Impl ementation (Part XI), Q7, available at http://www.cms.gov/CCIIO /Resources/Fact-Sheets-and-FAQs /aca_implementation_faqs11.html and http://www.dol.gov/ebsa /faqs/faq-aca11.html

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health insurance market, the same analysis also applies to fixed indemnity insurance sold in the individual health insurance market, as noted above. Since the issuance of the January 24, 2013 FAQ, however, stakeholders have expressed

concerns over the distinction made under the current regulations betw een payment on a perperiod basis (which is permitted) and payment on a per-service basis (which is not permitted). State insurance regulators indicat ed that they have for years b een approving policies as fixed indemnity insurance that pay on a per-service basi s and treating such coverage as an excepted benefit. In an August 27, 2013 letter to the Se cretaries of the Depart ments on behalf of the

National Association of Insurance Commissioners (NAIC), it was stated that “state regulators believe hospital and other fixed indemnity c overage with variable fixed amounts based on service types could provide important options for consumers as supplemental coverage. Consumers who purchase major medical coverage that meets the defi nition of ‘minimum essential coverage’ may still want to buy fixed indemnity c overage to help meet out-of-pocket medical and other costs.” Industry groups repr esenting health insurance issuers have also expressed similar concerns.

Based on the feedback from stakeholders and the fact that, st arting in 2014, most individuals are required to have minimum essential coverage in order to satisfy the individual shared responsibility requirement under section 5000A of the Code, CMS agrees that it is appropriate to revise the curre nt regulatory criteria for indi vidual market fixed indemnity coverage to be treated as an excepted benefit by (1) eliminating the current requirement that payment be made on a per-period basis and not on a per-service basis, and (2) among otherCMS-9949-P 47

things, imposing a new requirement that fixed inde mnity insurance be sold only as secondary to other health coverage that meets the de finition of minimum essential coverage. 26 On January 9, 2014, the Departments published an FAQ stating that, “HHS intends to propose amendments to 45 CFR 148.220(b)(3) that would allow fixed indemnity coverage sold

in the individual health insurance market to be considered to be an ex cepted benefit if it meets the following conditions: (1) It is sold only to indi viduals who have other h ealth coverage that is minimum essential coverage within the meaning of section 5000A(f) of th e Code; (2) there is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage; (3) the benefits are paid in a fixed dollar am ount regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and (4) a notice is displayed prominently in the plan materials informing policyholders that the cove rage does not meet the definition of minimum essential coverage and will not satisfy the indi vidual responsibility requirements of section

5000A of the Code.” 27 The FAQ further provided that, “U ntil HHS finalizes this rulemaking related to these proposed amendments, HHS will tr eat fixed indemnity coverage in the individual market as excepted benefits for enforcement purpos es if it meets the conditions above in States where HHS has direct enforcement authority. Fo r States with primary enforcement authority, HHS encourages those States to also treat this coverage as an excepted benefit and will not

26 Fixed indemnity plans paying fixed amounts per service that meet these requirements to be excepted benefits do not qualify as permitted insurance that can be provided in a ddition to a High Deductible Health plan to an eligible individual under section 223(c)(3) of the Code. The statutory language for permitted hospitalization insurance specifically refers to “insurance paying a fixed amount per day (or other period) of hospitalization” rather than “hospital indemnity or other fixed indemnity insurance.” 27 FAQs about Affordable Care Act Implementation (Part XVIII) and Mental Health Parity Implementation, Q11 (January 9, 2014). Available at: http://www.cms.gov/CCIIO/Res ources/Fact-Sheets-andFAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa /faqs/faq-aca18.html

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consider that a State is not substantially enforcing the individual market requirements merely

because it does so.” Consistent with the January 9, 2014 FAQ, we are proposing the following revised criteria for fixed indemnity insurance to be treated as an excepted benefit in the individual health insurance market: (1) The benef its are provided only to individuals who have other health coverage that is minimum essential coverage within the meaning of section 5000A(f) of the Code; (2) there is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage; (3) the benefits are paid in a fixed dollar amount per day of hospitalization or illness or per service (for example, $100/day or $50/visit) regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect

to the event or service under a ny other health coverage; and (4) a notice is displayed prominently in the plan materials in at least 14 point type that has the following language: “THIS IS A

SUPPLEMENT TO HEALTH INSURANCE A ND IS NOT A SUBSTITUTE FOR MAJOR

MEDICAL COVERAGE. LACK OF MA JOR MEDICAL COVERAGE (OR OTHER MINIMUM ESSENTIAL COVERAGE) MAY RESULT IN AN ADDITIONAL PAYMENT

WITH YOUR TAXES.”

CMS is aware of at least one State law that re quires fixed indemnity insurance to be sold as secondary to major medical insurance in order to be treated as an excepted benefit. We welcome comments on this approachincluding the language in the required notice. We also solicit comments on whether the requirement for i ndividuals to have other minimum essential coverage in order to be sold fixed indemnity in surance is sufficient protection, especially given the fact that a group health pl an that provides minimum benef its can be minimum essential coverage. For example, we solicit comment on whether to require that fixed indemnity insuranceCMS-9949-P 49

must only be sold to individuals with other heal th coverage that meets the EHB requirements.

To meet the standard that fixed indemnity insurance must be sold on a secondary basis, an issuer of fixed indemnity insurance would have to be reasonably assured that an individual has obtained other health coverage that is minimum essentia l coverage. We seek comments on the extent of verification issuers should requ ire from applicants to be reas onably assured that they have minimum essential coverage, including whether an attestation included in the application is

sufficient. The current regulation requires fixed indemnity insurance to be sold under a separate policy, certificate or contract of insurance but does not require th at it be provided by an issuer other than the issuer providi ng the major medical coverage to the enrollees of the fixed indemnity insurance. The Departments previously released guidance establishing a safe harbor under which supplemental health insurance coverage will be considered to be an excepted

benefit. 28 In the guidance, one of the criteria fo r the safe harbor is that the supplemental coverage has to be issued by an entity that doe s not provide the primary coverage under the plan in order for the supplemental coverage to be an ex cepted benefit. This prevents an issuer from carving out certain benefits from its major medical coverage and packaging those benefits with the major medical coverage as a supplemental excepted benefit. We are considering adding the same protection for fixed indemnity insurance sold in the individual market and welcome comments on this approach.

28 See CMS Insurance Standards Bulletin 08-01 (available at http://www.cms.gov/CCIIO/R esources/Files/Downloads/hipaa_08_01_508.pdf) ; the Department of Labor's Employee Benefits Security Administration's Fiel d Assistance Bulletin No. 2007-04 (available at http://www.dol.gov/ebsa/pdf/fab2007-4.pdf ); and Internal Revenue Servic e Notice 2008-23 (available at http://www.irs.gov/irb/2008-07_IRB/ar09.html ).CMS-9949-P 50

This proposal only addresses fixed indemnity insurance sold in th e individual market. For fixed indemnity insurance sold in the group health insurance market, see the FAQ published by the Departments on January 9, 2014. We believe that most fixed indemnity products in the individual market today will largely satisfy these criteria and we welcome commenton how this proposal would affect existing market arrangements. If these proposals ar e finalized, they would apply for policy years beginning on or after January 1, 2015. We welc ome comments on whether this would provide a sufficient transition period. We also solicit co mments on whether the exis ting regulatory criteria for fixed indemnity insurance to be an excepte d benefit (as interpreted in our January 24, 2013 FAQ) should instead remain in place on a permanen t basis or at least on a temporary basis to ensure a sufficient transition that avoids market disruption. D. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment under the

Affordable Care Act

1. Provisions and Parameters for the Tr ansitional Reinsurance Program (§153.405)

The Affordable Care Act directs that a transi tional reinsurance program be established in each State to help stabilize premiums for cove rage in the individual market from 2014 through 2016. In the 2014 Payment Notice and the 2015 Paym ent Notice, we expanded on the standards set forth in subparts C and E of the Premium St abilization Rule, and established the reinsurance payment parameters and uniform reinsurance contribution rate for the 2014 and 2015 benefit years. In this proposed rule, we solicit fee dback on a potential revision to the allocation of

reinsurance contributions collected for all bene fit years such that reinsurance contributions

collected are allocated first to the reinsuran ce payment pool and administrative expenses and second to payments to the U.S. Treasury.CMS-9949-P 51

Section 1341(b)(3)(B)(iii) of the Affordable Care Act specifies the total contribution amounts to be collected from contributing en tities for the reinsurance payment pool as $10 billion for 2014, $6 billion for 2015, and $4 bill ion for 2016. Sections 1341(b)(3)(B)(iv) and 1341(b)(4) of the Affordable Care Act direct the collection of funds for c ontribution to the U.S. Treasury in the amounts of $2 billion for 2014, $2 billion for 2015, and $1 billion for 2016. Section 1341(b)(3)(B)(ii) of the Affordable Care Act allows for the collection of additional amounts for administrative expenses. Taken toge ther, these three components make up the total

dollar amount to be collected from contributing entities for e ach of the three years of the reinsurance program under a national per capit a contribution rate. For 2014, to collect $12.02 billion, HHS set a per capita contribution rate of $63; for 2015, to collect $8.025 billion, HHS set a per capita contribution rate of $44. In the 2014 and 2015 Payment Notices, we provide d that if total cont ributions collected for 2014 and 2015 exceed $12.02 billion and $8.025 b illion, respectively, we would allocate $2 billion to the U.S. Treasury, $20.3 or $25.4 million, as applicable, to administrative expenses, and would allocate all remaining contributions for reinsurance pa yments, thus prioritizing excess

contributions towards reinsurance contributions. Due to the uncertainty in our estimates of

reinsurance contributions to be co llected, and to help assure thatthe reinsurance payment pool is sufficient to provide the premium stabilization benefits intended by the statute, we propose to

revise our allocation of reinsura nce contributions colle cted and adopt a similar prioritization in

the event that reinsurance collections fall short of our estimates. Specifica lly, if collections fall short of our estimates for a particular benefit ye ar, we propose to alter th e allocation so that the

reinsurance contributions that are collected are allocated firs t to the reinsurance pool and administrative expenses, and are allocated to th e U.S. Treasury once the targets for reinsuranceCMS-9949-P 52

payments and administrative expenses are met. For example, as Table 1 provides, in 2014, reinsurance contributions would go first to th e reinsurance payment pool and administrative expenses, up to $10.02 billion, and any additional c ontributions collected would be allocated to the U.S. Treasury, up to the total $12.02 billion. Table 1: Proportion of Reinsurance Contributions Collected under the Uniform Reinsurance Contribution Rate for the 2014 Benefit Year for Reinsurance Payments, Payments to the U.S. Treasury, and Administrative Expenses Proportion or amount for: If total contribution collections under the 2014 uniform reinsurance contribution rate are less than or equal to $10.02 billion If total contribution collections under the 2014 uniform reinsurance contribution rate are more than $10.02 billion, but less than or equal to $12.02 billion If total contribution collections under the 2014 uniform reinsurance contribution rate are more than $12.02 billion

Reinsurance payments 99.9 percent ($10 billion/$10.02 billion) $10 billion Total collections less $2.02 billion (U.S. Treasury and administrative expenses) Payments to the U.S. Treasury 0 percent Total collections less $10.02 billion $2 billion

Administrative expenses 0.1 percent ($20.3 million/$10.02 billion) $20.3 million $20.3 million

Therefore, if we collect $11 billion insteadof $12.02 billion for 2014, we propose to fully fund the reinsurance payment pool and administrative expenses, and to pay to the U.S. Treasury $0.98

billion. Similarly, for 2015, reinsurance contributions would go first to the reinsurance payment pool and administrative expenses, up to $6.025 billi on, and any additional contributions collected

would be allocated to the U.S. Treasury, up to the total $8.025 billion. Table 2: Proportion of Reinsurance Contributions Collected under the Uniform Reinsurance Contribution Rate for the 2015 Benefit Year for Reinsurance Payments, Payments to the U.S. Treasury, and Administrative ExpensesCMS-9949-P 53

Proportion or amount for: If total contribution collections under the 2015 uniform reinsurance contribution rate are less than or equal to $6.025 billion If total contribution collections under the 2015 uniform reinsurance contribution rate are more than $6.025 billion, but less than or equal to $8.025 billion If total contribution collections under the 2015 uniform reinsurance contribution rate are more than $8.025 billion

Reinsurance payments 99.9 percent ($6 billion/$6.025 billion) $6 billion Total collections less $2.025 billion (U.S. Treasury and administrative expenses) Payments to the U.S. Treasury 0 percent Total collections less $6.025 billion $2 billion

Administrative expenses 0.1 percent ($25.4 million/$6.025 billion) $25.4 million $25.4 million

Therefore, if we collect $7 billion instead of $8.025 billion in 2015, we propose to fully fund the reinsurance payment pool and administrative expenses, and to pay to the U.S. Treasury $0.975

billion. We note that in the 2015 Payment Notice, we amended 45 CFR 153.405(c) to provide a bifurcated contribution collection schedule, under which contributing entities would submit reinsurance contributions via two payments. The first payment would cover the contribution amount allocated to reinsurance payments a nd administrative expenses; the second payment

would cover the contribution amount allocated to payments to the U.S. Treasury for the applicable benefit year. In light of our propos ed allocation policy, we note that contributions

collected in the second colle ction would be allocated for reinsurance payments and administrative expenses if the first collection do es not fully provide for the target reinsurance pool and administrative expenses. Therefore, for 2014, if the first collecti on resulted in a totalCMS-9949-P 54

collection of $9 billion, any contribution collect ed via the second collection up to $1.02 billion would be allocated for reinsurance paym ents and administrative expenses. We seek comment on this allocation propos al, including on the le gal authority to implement a prioritization of re insurance contributions to reinsurance payments over payments to the U.S. Treasury. We also seek comment on the appropriate and permi ssible prioritization of reinsurance administrative expenses, and whethe r those expenses should have the same or different priority as reinsuran ce payments or payments to the U.S. Treasury. In addition, we seek comment on alternative allocation approaches to provide the premium stabilization benefits of the reinsurance program, as intended by the statute. 2. Provisions for the Temporar y Risk Corridors Program (§153.500) In the 2015 Payment Notice, we indicated that we would consider additional adjustments to the risk corridors program for benefit year 2015. We did so recognizing that issuers of QHPs may face additional administrative costs, risk pool effects, and uncertainty for that benefit year

related to State extensions of renewals of plans that do not comply with 2014 market reforms, including the rating rules, the additional time it will take to fully assess the risk profile of 2014 enrollees given the six-month in itial open enrollment period, protracted phase-outs of high-risk pools, and the scheduled decline in the reinsura nce program payments. We also recognize that issuers of QHPs may face additional costs from other transitions to the 2014 market rules, including the infrastructure requirements around Exchanges, and the distributed data collection methodology for risk adjustment and reinsurance. We note that these uncertainties will continue through the summer of 2014, while issuers are in the process of setting their rates for the 2015 benefit year. Therefore, for the 2015 benefit year , we are considering further adjustments to the risk corridors formula that would help to m itigate these additional administrative costs andCMS-9949-P 55

uncertainties around operations and th e risk pool, and to stabilize the market as it continues to transition to full compliance with Affordable Care Act provisions. We propose to implement an adjustment to the risk corridors formula set forth in subpart F of part 153 for each of the individual and small group markets by increasing the ceiling on allowable administrative costs (currently set at 20 percent, plus the adju stment percentage, of after-tax premiums). Such an adjustment could increase a QHP issuer’s risk corridors ratio if administrative expenses are unexpectedly high orclaims costs are unexpectedly low, thereby increasing risk corridors payments or decreasing risk corridors charges. We propose to raise the administrative cost ceiling by 2 percentage poin ts, from 20 percent to 22 percent. We also propose to increase the profit margin floor in th e risk corridors formul a (currently set at 3 percent, plus the adjustment pe rcentage, of after-tax premiums). Such an adjustment could increase a QHP issuer’s risk corridors ratio if claims costs are unexpectedly high, thereby increasing risk corridors payments or decreasing risk corridors charges. We propose to raise the profit margin floor by 2 percentage po ints, from 3 percent to 5 percent. We are proposing to implement this proposed increase to the administrative cost ceiling and profit floor in a manner similar to the risk co rridors adjustment percen tage set forth in the 2015 Payment Notice. In the 2015 Payment Notice, we provided for an adjustment that would increase the administrative cost ceiling and prof it floor in the risk corridors formula for QHP issuers in transitional States, in order to account fo r the effects of the transitional policy. In this proposed rule, we are proposing to increase the administrative cost and profit floor for 2015 for QHP issuers in every State for the reasons described below. We note that, because the risk corridors progr am applies only to certain plans defined to be qualified health plans at 45 CFR 153.500, the exte nt to which an issuer may receive the fullCMS-9949-P 56

effect of this adjustment would depend upon th e portion of an issuer’s individual and small group enrollees in plans subject to risk corridors . We intend to implement this program in a budget neutral manner, and may make future adju stments to program parameters, upwards or downwards, as necessary to achieve this goal. We are proposing that these adjustments ap ply on a national basis for the 2015 benefit year because we believe that these additional tran sitional costs and uncertainties will be faced by issuers in all States, not just States adopting th e transitional policy. Because many of these costs and uncertainties are difficult to measure, we belie ve it would be difficult to estimate them on an issuer-by-issuer or State-by-Stat e basis. Additionally, we beli eve that a national adjustment would be administratively simple for issuers. For example, issuers will con tinue to face administrative expe nses in seeking to measure

the extent to which issuers will extend renewa ls of plans through the 2015 rate-setting period. They will continue to accrue additional expenses monitoring the risk pr ofile of 2014 enrollees during this period, particularly w ith the protracted phase-outs of high-risk pools. And they will continue to face uncertainty a nd administrative costs in measuring likely payouts from the reinsurance program. These costs were not an ticipated when we established the 20 percent ceiling on administrative expenses; and we believe that these uncertainties will be difficult to accommodate as part of 2015 rate setting. Although the adjustments that we are consider ing would affect each issuer differently, depending on its particular experience and administrative cost rate, we believe that, on average, the adjustment could suitably offset some of these increased costs. We also propose that the medi cal loss ratio formula not take into account any additional risk corridors payments resulting from this adjustment, under our authority under section 2718(c)CMS-9949-P 57

of the PHS Act to “take into ac count the special circumstances of smaller plans, different types of plans, and newer plans.” This proposed appro ach is similar to the policy established forth in the 2015 Payment Notice, which rem oves the effect of the risk co rridors adjustment percentage

from an issuer’s MLR calculation. We request comment on all aspects of this pr oposal. In particular , we request comment on the specific administrative cost s associated with each of thes e policies, and other types of additional administrative or other expenses that will be incurred by issuers of QHP in 2015. We seek comment on the magnitude of these expenses , and whether these expenses could have been fairly estimated and included in premium rating. We seek comment on whether the administrative ceiling or the profit floor should be raised (or both), and in each case, by how much, to account for these costs and uncertainties. We also seek comment on alternate ways of implementing adjustments to the risk corri dors program, including whether raising the administrative cost ceiling or raising the profit floor would alone be sufficient to help offset issuer’s unexpected administra tive expenses. Finally, we seek comment on whether certain limitations or conditions should be placed on the adjustment, and whether the adjustment should be limited to certain types of plans or should apply only in certain States. E. Part 155—Exchange Establishment Standa rds and Other Related Standards Under the

Affordable Care Act 1. Subpart B—General Standards Related to the Establishment of the Exchange

a. Non-Interference with Federal Law and Non-Discrimination Standards (§155.120) In section 45 CFR 155.120(c), we establishe d the requirement thatthe State and the Exchange, when carrying out the requirements of Part 155, must comply with any applicable non-discrimination statutes, and must not discrimina te on the basis of race, color, national origin,CMS-9949-P 58

disability, age, sex, gender identity or sexual or ientation. We stated th at the non-discrimination provisions of §155.120(c) apply not just to th e Exchanges themselves, but to Exchange contractors and all Exchange act ivities (including but not limite d to marketing, outreach and enrollment), Navigators, non-Navigator assistance personnel, certified application counselors, and organizations designated to certify their staff and vol unteers as certified application counselors (78 FR 42829). We also established in 45 CFR 1 55.105(f) that this nondiscrimination requirement applies to th e Federally-facilitated Exchanges. We now propose to re-desi gnate the introductory language in existing §155.120(c) as a new section §155.120(c)(1), re-des ignate existing §155.120(c)(1) as a new §155.120(c)(1)(i), and re-designate existing §155.120(c )(2) as a new §155.120(c)(1)(ii). We are proposing to make these technical changes to exis ting §155.120(c) so that we can add a new paragraph (c)(2) to §155.120 that creates a limited exception to th e non-discrimination pr ovisions in existing §155.120(c)(1) and (c)(2). Under this proposed exception, an organizatio n receiving Federal funds to provide services to a defined population under the terms of Federal legal authorities (for example, a Ryan White HIV/AIDS Program or an I ndian health provider) that participates in the certified application counselor program unde r 45 CFR 155.225 may lim it its provision of certified application counselor services to the same defined population w ithout violating the nondiscrimination provisions in exis ting §155.120(c). We are proposing to adopt this exception to the non-discrimination provisions in order to allow such organi zations to provide certified application counselor services a nd assist their defined populations in enrolling in health coverage offered through the Exchanges consistent with the Federal legal authorities under which such organizations operate.CMS-9949-P 59

To the extent that one of these organiza tions decides to take advantage of this exception, but is approached for certified applicati on counselor services by an individual who is not included in the defined population that th e organization serves, we propose that the organization must refer the indi vidual to other Exchange-approve d resources, such as the tollfree Exchange call center, a Navigator, non- Navigator assistance personnel, or another designated certified application c ounselor organization, that are able to provide assistance to the

individual. However, to the extent that one of thes e organizations decides that it will not take advantage of this proposed exception, we propos e that the non-discrimination provisions in existing §155.120(c) would continue to apply. That is, if an organizatio n decides that it will provide certified application counsel or services to individuals thatare not included in the defined population that it serves, it must provide those services to all i ndividuals consistent with the nondiscrimination provisions in existing §155.120(c). 2. Subpart C—General Functions of an Exchange a. Civil Money Penalties for Violations of Applicable Exchange Standards by Consumer Assistance Entities in Federally-F acilitated Exchanges (§155.206) In a new §155.206, as part of HHS’s enforcem ent authority under section 1321(c)(2) of the Affordable Care Act, we propose to provi de for the imposition of civil money penalties (CMPs) on Navigators, non-Naviga tor assistance personnel, and cer tified application counselors and certified application counsel or designated organizations in FFEs and State Partnership Exchanges that do not comply with applicable Fe deral requirements. Th is proposal is designed

to deter these entities and individuals from faili ng to comply with the Federal requirements that apply to them, and to ensure that consumers inte racting with the Exchange receive high-qualityCMS-9949-P 60

assistance and robust consumer protection. As a general principle, while HHS proposes to establish authority to assess CMPs when appropria te, consistent with this proposed rule, we note

that we also intend to continue to work coll aboratively with consumer assistance entities and personnel to prevent noncompliance i ssues and address any that may arise before they might rise

to the level where CMP would be assessed. The Secretary, under the authority of sections 1311(i) and 132 1(a)(1) of the Affordable Care Act, has previously estab lished a range of consumer assist ance programs to help consumers apply for and enroll in QHPs and insurance affordability programs through the Exchange. These consumer assistance programs include the Navigato r program described at section 1311(i) of the Affordable Care Act and 45 CFR 155.210; the c onsumer assistance, outreach, and education functions authorized by section 1321(a)(1) of the Affordable Care Act and established at 45 CFR 155.205(d) and (e), which can include a non-Navi gator assistance person nel program; and the certified application counselor program authori zed by section 1321(a)(1) of the Affordable Care

Act and set forth at 45 CFR 155.225. Under these authorities and the authority granted to the Secretary by section 1321(c)(1 ) of the Affordable Care Act, the FFE has implemented a Navigator and certified application counselor program in all States that did not elect to establish an Exchange, and has implemented a non-Navigator assistance program in some of those States, through an enrollment assistance contract. Under section 1321(c)(2) of the Affordable Care Act, the provisions of section 2723(b) of

the PHS Act 29 apply to the Secretary’s enforcement, under section 1321(c)(1) of the Affordable Care Act, of the standards established by the Secretary under se ction 1321(a)(1) of the

29 Section 1321(c)(2) of the Affordable Care Act erroneously cites to section 2736(b) of the PHS Act instead of 2723(b) of the PHS Act. This was clearly a typographical error, and we have therefore interpreted section 1321(c)(2) of the Affordable Care Act to incorporate section 2723(b) of the PHS Act.CMS-9949-P 61

Affordable Care Act for meeting the requirement s under title I of the Affordable Care Act, including the establishment and operation of Exchanges, without regard to any limitation on the application of the provisions of section 2723(b) of the PHS Act to group health plans. Section 2723(b) of the PHS Act provides the Secretary with authority to assess CMPs against health insurance issuers that fail to meet certain Federal requirements set forth in the PHS Act that apply to group health plans, in circumstances wh ere, in the Secretary’s determination, the State that regulates the issuer has failed to “substan tially enforce” those require ments. We interpret

the cross-reference to section 2723(b) of the PHS Act in secti on 1321(c)(2) of the Affordable Care Act as providing the Secret ary with authority to assess CMPs to enforce requirements

established under section 1321(a)(1) of the Affordable Care Ac t against any enti ty subject to those requirements, under circumstances where th e Secretary is exercising her authority under 1321(c)(1) of the Affordable Care Act. For purpo ses of this proposal, we would consider that any State that has not elected to establish an Ex change, and in which the Secretary has therefore had to establish and operate an Exchange under section 1321(c)(1), is not “substantially enforcing” the requirements related to Exchanges that the Secretary has es tablished under section 1321(a)(1). Accordingly, HHS has the authority under se ction 1321(c)(2) of the Affordable Care Act to assess CMPs against Navigators, non-Navigato r assistance personnel, and certified application counselors and certified applica tion counselor designated organiza tions in FFEs, including State Partnership Exchanges, for violations of the re quirements of the Navigator, non-Navigator, and certified application counselor programs that th e Secretary established under section 1321(a)(1) of the Affordable Care Act. This proposal sets forth the circumst ances under which the Secretary would exercise this authority. It is based on the enforcement scheme laid out inCMS-9949-P 62

section 2723(b) of the PHS Act, and the implementing regulati ons at 45 CFR 150.301 et seq ., but

it does not follow that enforcement scheme exac tly, in light of the differences between the circumstances in which the Secretary would ex ercise her authority under PHS Act 2723(b)

versus those under which she would exercise he r authority under sec tion 1321(c)(2) of the

Affordable Care Act. Proposed §155.206(a) would establish the scope and purpose of the proposed CMP provisions and explains when and against whom HHS would assess a CMP under this proposal. At §155.206(a)(2), we propose that HHS could perm it an entity or individual to whom it has

issued a notice of assessment of CMP to enter into a corrective action plan instead of paying the CMP. We specify that permitting an entity to enter into a corrective action plan would not limit HHS’s authority to require payment of the assess ed CMP if the corrective action plan is not followed. Under this proposal, the determination of whether HHS would enter into a corrective action plan in place of imposing a CMP would depend upon the factors proposed in §155.206(h). We believe this approach would allow us not only to penalize violations if necessary, but also to prioritize working collaboratively with consumer a ssistance entities to ensure that improvements are made and future violations are prevented. We also believe this approach is consistent with the limitation on imposing CMPs that is set forth at PHS Act section 2723(b)(2)(C)(iii)(II), under which no CMP may be assessed for violations due to reasonable cause and not due to willful neglect, if the violati on is corrected during the 30-day peri od beginning on the first day any of the entities against whom the penalty would be assessed knew, or exercising reasonable diligence would have known, that such failure existed. We are considering whether to provide for an expedited process through which HHS may assess and impose CMPs, if extenuating circumstances exist or if necessary to protect the public.CMS-9949-P 63

We believe HHS’s ability to take swift action mightbe particularly useful in cases where HHS permits an entity to enter into a corrective action plan in lieu of a CMP, so that the entity would promptly begin remedial efforts under the correct ive action plan without undue delay. We are considering an expedited process through which HHS would provide the consumer assistance entity less than the 30-day period provided fo r under proposed paragraph (e) to respond to the notice of investigation under propos ed paragraph (e)(1), or possibly omit that period altogether. In all cases where an expedited pr ocess would apply, we anticipate that the entity against which a CMP is assessed would have an opportunity to appeal the imposition of the penalty after it has

been assessed. We seek comment on whether HHS should provide for such an expedited process and on all aspects of how it shoul d be structured, including comme nts on how such an expedited process could provide sufficient protection to the public, comments on how such an expedited process could be sufficiently protective of the ri ghts of entities and individuals that might be assessed a CMP, and comments on other ways through which the process for imposing CMPs under this proposal could be expedited if necessary to protect the public. We are also considering implementing an approach that would give the HHS Office of Inspector General (OIG) concurrent authority with CMS to enforce violations under this section. Given OIG’s expertise in invest igating waste, fraud, and abuse in the Medicare and Medicaid programs, we are considering whether certain vi olations of an Exchange consumer assistance entity’s program requirements might be most eff ectively investigated by OIG, or whether a more streamlined approach with a single enforcement authority would be prefer able. In considering

whether OIG should have concurrent enforcemen t authority under this proposed section, we are considering whether both CMS and OIG should use the procedures laid out in proposed §155.206 for investigating potential violations and conducting admini strative appeals, or whetherCMS-9949-P 64

and to what extent OIG should rely on its own enforcement procedures under 42 CFR, chapter V, subchapter B for either the investigative process or the administrative appeals process, or both, and whether some of the procedures outlined in OIG’s enforcement procedures under those regulations should be incorporat ed into this section. We not e that because our enforcement authority under section 1321(c)(2 ) of the Affordable Care Act requires compliance with the provisions of section 2723(b) of the PHS Act, any process used by OIG would have to comply with the requirements in those statutory provi sions. We seek comment on whether OIG should have concurrent authority to enforce these proposed CMP provi sions. In addition, we seek comment on what procedures we should use to determine which cases should fall under CMS or OIG enforcement authority, in the event OIG has concurrent authority. For example, we are considering providing that OIG would enforce only consumer assistance personnel or entity noncompliance involving systemic fraud or gross mi sconduct, rather than isol ated incidents. We invite comment on this issue, and how those determinations would be made, as well as comments on any other aspects of a concurrent authority scheme that we should consider. In proposed §155.206(b), we specify the individual s and entities that could be subject to HHS’ enforcement authority under this proposal. These individuals and entities would include Navigators, non-Navigator assistance personnel (also referred to as in-person assistance personnel) authorized under §155.205(d) and (e ), and certified applic ation counselors and organizations designated as certified application counselor organizations in FFEs, including in State Partnership Exchanges. We refer to these individuals and entities in the proposed rule as “consumer assistance entities,” but these proposed CMPs could be assessed against both entities

and individuals. We seek comment on whether all of the individuals and entities listed inCMS-9949-P 65

proposed §155.205(b) should be subject to CMPs, and on whether other en tities and individuals

should be added to that list. In §155.206(c), we propose the grounds on which HHS could impose CMPs on the entities and individuals specifiedin §155.206(b). Section 1321(c)(2 ) of the Affordable Care Act authorizes the Secretary to enforce the requireme nts of section 1321(a)(1) of the Affordable Care Act, which include the requirements established by the Secretary regarding Exchange consumer

assistance functions. Under our proposal, this statutory provisi on would authorize HHS to assess a CMP or, in lieu of a CMP, a corrective act ion plan against Navigators, non-Navigator assistance personnel, certified ap plication counselors, and cer tified applica tion counselor organizations in FFEs if HHS determines that th ese individuals or entitie s are not in compliance with the Exchange standards applicable to them . These Exchange standards would include any applicable regulations implement ed under title I of the Affordab le Care Act, as interpreted through applicable HHS guidance, such as the regulations governing consumer assistance tools and programs of an Exchange at §155.205; those governing Navigators at §155.210 and Navigators in FFEs at §155.215; those governing cer tified application counselors at §155.225; and those under §155.215 governing non-Navigator assistance personnel in FFEs. These standards would also include any applicable HHS guidance interpre ting an existing regulatory or statutory provision. For example, §155.215(b)(1)(i) requires FFE Na vigators to obtain certification by the Exchange prior to carrying out any consumerassistance functions under §155.210. Under this proposal, a Navigator who facilitates the se lection of a QHP (a Navigator duty under §155.210(e)(3)) prior to obtaining his or her Ex change certification might, depending on the circumstances, be subject to CMPs under §155.206.CMS-9949-P 66

As another example, §155.210(e)(2) requires Navigators to provide information and services in a fair, accurate, and impartial manne r, and §155.215(a)(2)(i) extends this duty to nonNavigator assistance pe rsonnel in FFEs. Any FFE Navigato r or FFE non-Navigator assistance personnel who, while carrying out Exchange-related activities, furnishes information that he or

she knew or should have known is false or fraudulent to consumers, the Exchange, or to HHS, would have violated these provi sions and might, depending upon the circumstances, be subject to CMPs under proposed §155.206. If a Navigator or any non-Navigator assist ance personnel in a FFE encourages an applicant or enrollee to submit false information on an application for coverage though the Exchange, we woul d also consider that to be a violation of his or her duty to provide information in a fair, accurate, and impartial manner; and this violation might, depending on the circumstances, also subject the individua l or entity to the proposed CMPs. Such a Navigator or non-Navigator assistance personne l would not be providi ng fair or accurate information to consumers, because in light of th e penalties at section 1411 (h) of the Affordable Care Act for providing false information on an Excha nge application, it is not fair or accurate to state or imply that a consumer would be pe rmitted to falsify application information. As a final example, a certified application counselor in an FFE who steers consumers toward one particular QHP would not be acting in the best interest of consumers, as required by §155.225(d)(4), and would not be giving consumer s information about the full range of QHP options and insurance affordability programs fo r which they are eligible, as required by §155.225(c)(1). Such a certified application co unselor might, depending on the circumstances, be subject to CMPs under our proposed § 155.206. We note that §155.285 of this proposed rule w ould extend CMPs to consumer assistance entities who misuse or impermissibly disclose pe rsonally identifiable inform ation in violation ofCMS-9949-P 67

section 1411 of the Affordable Care Act. Theref ore, we have not addressed penalties for those actions here. Some conduct by consumer assist ance entities may warrant CMPs under either §155.285 or §155.206, and in such cases we believe HHS has discretion to determine whether to impose a CMP under this regulationor under §155.285 of this subpart. However, we specify in proposed §155.206(c) that HHS would not assess a CMP under this section if a CMP has already

been assessed for the same conduct under §155.285. Additionally, CMPs are not the only enforcement remedy that would apply to the ent ities and individuals w ho would be subject to proposed §155.206. For instance, HHS could take other enforcement actions against FFE Navigators, which are Federal grantees, unde r the regulations governing HHS grants. Furthermore, some of the actions described above may subject consumer assistance entities to criminal liability under Federal or State law. In §155.206(d), we propose the basis for init iating an investiga tion of a potential violation. We propose that HHS could initiate an investigation based on any information it receives indicating that a consumer assistance en tity might be in noncompliance with applicable Exchange standards. Such information could in clude consumer complaints, reports from State insurance departments and other Federal and State agencies, and any other information indicating such a violation. We also propose that any entity or individual could file such a complaint with HHS. In §155.206(e), (f) and (g), we propose to out line the process that HHS would follow to investigate potential violations in order to determine whether the consumer assistance entity has engaged in noncompliance of applicable Exch ange standards. Under proposed §155.206(e), if HHS learns of a potential violati on through the means described in paragraph (d) in this section

and determines that further inve stigation is warranted, HHS woul d provide written notice of itsCMS-9949-P 68

investigation to the consumer assistance entit y. Such notice would de scribe the potential violation, provide 30 days from the date of th e notice for the consumer assistance entity to respond and provide HHS with information and documents, including information and documents to refute an alleged violation, and w ould state that a CMP mi ght be assessed if the consumer assistance entity fa ils to refute the allegations in HHS’ determination. In §155.206(f), we propose a process for a cons umer assistance entity to request an extension from HHS when the entity cannot prepar e a response to HHS’s notice of investigation within the 30 days provided in the notice. U nder our proposal, if HHS gr ants the extension, the responsible entity would be re quired to respond to the notice of investigation within the time frame specified in HHS’s letter granting the exte nsion of time, and failure to respond within 30 days, or within the extended time frame, coul d result in HHS’s imposition of the CMP that would apply based upon HHS’s initial determination of a potential vi olation as set forth in the notice of investigation under §155.206(e). In §155.206(g), we propose that HHS could review and consider documents or

information received or collectedin accordance with paragraph (d)(1 ) of this section or provided by the consumer assistance entity in response to receiving a notice in acco rdance with paragraph (e)(2) of this section. We also propose that HHS may conduct an independent investigation into the alleged violation, which may include site vi sits and interviews, if applicable, and may consider the results of this investigation in its determination. The purpose of these proposed provisions is to ensure that HHS would follow reasonable procedures when investigating a potential violation, and to allow a consumer assi stance entity a reasonable timeframe to provide evidence refuting the allegation or other information regarding the allege d violation, including its severity or mitigating circumstances.CMS-9949-P 69

In §155.206(h), we propose the factors that HHS would use to determine the appropriate CMP amount, and to determine whether it would be appropriate to offer th e entity or individual an opportunity to enter into a co rrective action plan in place of the CMP. We intend that the CMP amount, and opportunity to enter into a co rrective action plan, would vary based on our assessment of the consumer assistance entity’s previous or ongoing record of compliance; the gravity of the violation, as determined in part by the frequency of the vi olation and the financial harm incurred by a consumer; and the culpabili ty of the consumer assistance entity, as determined, in part, by whether the entity rece ived payment for committing the violation. We

believe these factors would allow us to tailor en forcement actions to specific violations, while maintaining robust enforcement authority in the interest of protecting consumers. Section 2723(b)(2)(C) of the PHS Act limits the amount of CMPs authorized under section 1321(c)(2) of the Affordable Care Act to $100 for each day for each individual directly affected. Therefore in §155.206(i), we propose that the maximum daily amount of penalty assessed for each violation would be $100 for each da y, for each consumer assistance entity, for each individual directly affectedby the entity’s non-compliance. Similar to our rules on the maximum penalty for noncompliant QHP issuer s in 45 CFR 156.805(c), we anticipate that there might be situations where HHS cannot determine the number of individual s directly affected. Therefore, we propose, consistent with the approach under existing ru les at 45 CFR 156.805(c), that in such situations HHS may reasonabl y estimate this number, based on available information, such as data from a Federal Navi gator grantee’s quarterl y or weekly report concerning the number of consumers assisted. We also clarify that imposing $100 for each day an individual is directly affect ed would mean that we would l ook at the entirety of time the consumer was affected by the noncompliance of the assistance entity. For example, if a certifiedCMS-9949-P 70

application counselor in an FFE is found to be steering consumers into a specific plan without regard to the consumers’ best interests in violation of §155.225(d)(4), we might assess CMPs

based on our reasonable estimate of the number of consumers affected by the conduct, as well as the entire time the conduct took place, includi ng the time during which each consumer is enrolled in the plan to which he or she was improperly steered. Although we have proposed a maximum per day penalty, we have not proposed a cap on the total penalty that could be assessed by HHS, and we seek comment on whether we should propose such a cap. In proposed §155.206(j), we propose to clarify that nothing in this section limits HHS’s authority to settle any issue or case describe d in the notice furnishe d in accordance with paragraph (e), or to compromise on any CMP provide d for in this section. This provision is based on a similar provision in the HIPAA enforcement scheme at 45 CFR 150.325. Section 2723(b)(2)(C) of the PHS Act places certain limita tions on CMPs authorized under section 1321(c)(2) of the Affordable Care Ac t, including the limitation that HHS will not assess a CMP where the entity di d not know, or exercising reasonable diligence would not have known, of the violation. We propose to implemen t these limitations in §155.206(k). We believe these limitations would help balance the interests of HHS, the Exchange, and consumers to have

consumer assistance entities exercise reasonabl e diligence in understanding and executing their obligations, while not unnecessari ly penalizing consumer assist ance entities who are acting in good faith. We also propose, based on the HIPAA enforcement structure at 45 CFR 150.341, that the burden is on the consumer assistance entity to establish that the circumstances triggering

these limitations existed. In §155.206(l), we propose standards for notif ying consumer assistan ce entities of the intent to assess a CMP, which notice would include an explanation of the entity’s right to anCMS-9949-P 71

appeal pursuant to the process set forth at 45 CFR Part 150, Subpart D, as provided in proposed §155.206(m). We seek comment on whether all aspect s of that process shoul d be applicable to appeals of these CMPs. Finally, in §155.205(n), we propose that HHS may require payment of the proposed CMP if the consumer assistance entity does not timely request a hearing. We seek comment on all aspects of these pr oposals, including but not limited to whether other provisions of 45 CFR Part 150 should be ad opted and made applicable to this proposed enforcement scheme, whether a specific limita tions period should apply, and if so, what limitations period would be appropriate for viol ations of applicable Exchange standards by

consumer assistance entities in FFEs. b. Navigator, Non-Navigator Assistance Pers onnel, and Certified Application Counselor Program Standards (§§155.210, 155.215, and 155.225) Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Ac t direct all Exchanges to establish a Navigator program. Section 1321(a)(1 ) of the Affordable Care Act directs the Secretary to issue regulations th at set standards for meeting the requirements of title I of the Affordable Care Act, with respect to, among ot her things, the establis hment and operation of Exchanges. Pursuant to the authority establishe d in section 1321(a)(1), the Secretary issued 45 CFR 155.205(d) and (e), which authorize Excha nges to perform certain consumer service functions in addition to the Navigator program. 45 CFR 155.205(d) provides that each Exchange must conduct consumer assistance activities, a nd § 155.205(e) provides that each Exchange must

conduct outreach and education activities to inform consumers about the Exchange and insurance affordability programs, to encourage participation.

The consumer assistance function author ized by § 155.205(d) includes the Navigator grant program established under section 1311(i) of the Affordable Care Act. Section 155.205(d)CMS-9949-P 72

and (e) also allow for the establishment of a non-Navigator consumer assistance program. 45 CFR 155.215 establishes standards for non-Naviga tor assistance personnel in FFEs, including State Partnership Exchanges, and for non-Navigato r assistance personnel in State Exchanges if they are funded with section 1311(a) Exchange Es tablishment grant funds. Also pursuant to the authority established in section 1321(a)(1), the Secretary issued 45 CFR 155.225, which

establishes the certified application counselor program as a c onsumer assistance function of the Exchange, separate from and in addition to th e functions described in §§ 155.205(d) and (e), 155.210, and 155.215. Navigator duties and requirements for all Exch anges are set forth in section 1311(i) of the

Affordable Care Act and 45 CFR 155.210. Additiona l duties and requirements for Navigators in Federally-facilitated and State Partnership Exchanges are set forth at 45 CFR 155.215. Section 155.215 also sets forth duties and requirements for non-Navigator assistance personnel in Federally-facilitated and Stat e Partnership Exchanges, a nd for non-Navigator assistance personnel in State Exchanges if those personne l are funded with sec tion 1311(a) Exchange Establishment grant funds. Ce rtified application counselor duties and requirements for all Exchanges are set forth in 45 CFR 155.225. In accordance with sections 1311(i)(4) and 1321( d) of the Affordable Care Act, we previously established in 45 CF R 155.210(c)(1)(iii) that Navigato rs “must meet any licensing,

certification or other stan dards prescribed by the State or Excha nge, if applicable, so long as such standards do not prevent the application of the provisions of t itle I of the Affordable Care Act.” We have not established a similar requirement for the non-Navigator assistance personnel that are subject to 45 CFR 155.215. No r did we finalize a proposed re quirement that would have required certified application couns elors to comply with State law as a condition of certification.CMS-9949-P 73

However, we noted in the preamble to the ru lemaking establishing the certified application counselor program that section 1321(d) of the Affo rdable Care Act provides that State laws that do not prevent the application of the provisions of title I of the Affordable Care Act are not preempted. 30 These preemption principles apply to al l of the Federal stan dards and duties that apply to Navigators, non-Naviga tor assistance personnel and cert ified application counselors,

since these have been authorized and established under title I of the Affordable Care Act. We now propose to specify certain non-Fe deral requirements that would prevent the application of provisions of title I of the Affordable Care Act with respect to the Navigator, nonNavigator assistance pers onnel, and certified application coun selor programs, within the meaning of section 1321(d) of the Affordable Care Ac t. This proposal does not purport to capture the complete universe of State requirements that might be preempted in this context, and we therefore recognize that a Federa l court may also find other non- Federal requirements that we do not expressly mention in this proposed rule to be preempted. 31 We propose amending §155.210(c)(1)(iii) by addi ng new paragraphs (A) through (F) to specify certain non-Federal require ments that would prevent the application of the provisions of

title I of the Affordable Care Ac t, within the meaning of secti on 1321(d) of the Affordable Care Act, with respect to the Navigator program. We also propose to amend § 155.215(f) to make

clear that we would consider the same t ypes of non-Federal requirements listed in

30 Patient Protection and Affordable Care Act; Exchange Functions: Standards for Navigators and Non-Navigator Assistance Personnel; Consumer Assistance Tools and Programs of an Exchange and Certified Application Counselors, 78 FR 42845 (finalized July 17, 2013). 31 The U.S. District Court for the We stern District of Misso uri recently granted the plaintiff’s motion for a preliminary injunction in litigation challenging a Missouri law regulating Navigators and other Exchange consumer assistance personnel on the grounds, inter alia, that certain provisions of the Mi ssouri law are preempted by Federal law. The court concluded that “state laws that make ope ration of the [Federally-facilitated Exchange] more difficult or onerous run afoul of the Affordable Care Act’s purp ose and are subject to preemp tion.” St. Louis Effort for AIDS, et al. v. Huff , No. 13-4246-CV-C-ODS, 2014 WL 273201, at *5 (W.D. Mo. Jan. 23, 2014) (order granting preliminary injunction). This decision is currently under appeal before the United States Court of Appeals for the Eighth Circuit, St. Louis Effort for AIDS v. Huff, No. 14-1520 (8th Cir. appeal docketed Mar. 6, 2014).CMS-9949-P 74

§155.210(c)(1)(iii)(A) through (F) (except for 155.210(c )(1)(iii)(D)) to prevent the ap plication of the provisions of title I of the Affordable Care Act within the meaning of section 1321(d) of the Affordable Care Act, when applied to non-Na vigator assistance pers onnel subject to § 155.215. Similarly, with respect to th e certified applica tion counselor program, we propose amending §155.225(d) by adding a new paragraph (d)(8) to speci fy that certified application counselors must meet any licensing, certification or other standards prescribed by the State or Exchange, if applicable, so long as such standards do not preven t the application of the provisions of title I of the Affordable Care Act within the meaning of s ection 1321(d) of the Affordable Care Act. New §155.225(d)(8) would also make clear that we woul d consider non-Federal requirements similar to those listed in §155.210( c)(1)(iii)(A) through (F ) (except for 155.210(c)(1)( iii)(D)) to prevent the application of the provisions of title I of the Affordable Care Act within the meaning of section 1321(d) of the Affordable Care Act, whenapplied to certified a pplication counselors. As we discuss in greater detail below, thes e proposed amendments are directed at nonFederal requirements that conflict with Federal st atutory or regulatory standards and that either, on their face, prevent assisters from performing their Federally required duties, or that would conflict with Federal standards in specific factual circumstances. The purpose of these proposed provisions is to specify a non-exhaustive list of

circumstances under which HHS would consider a non-Federal requirement applicable to Navigators, non-Navigator assistan ce personnel, or certified applica tion counselors to prevent the application of provisions of title I of the Afford able Care Act, within the meaning of section 1321(d) of the Affordable Care Act. As a genera l principle, if a non-Federal requirement would, on its face, prevent Navigators, non-Navigat or assistance personnel subject to §155.215, or certified application counselors from carrying out Federally mandated duties or from otherwiseCMS-9949-P 75

meeting Federal standards that apply to them, or if a non-Federal requirement would make it impossible for an Exchange to implement those consumer assistance programs consistent with the Federal statutes and regulations governing those programs, then, in HHS’s view, such a requirement would prevent the application of the pr ovisions of title I of the Affordable Care Act. These proposed preemption standards would not preclude a State from establishing or implementing additional State law protections for its consumers, so long as such laws do not prevent the application of Fede ral requirements for these cons umer assistance programs. For example, a State may require these types of Exchange-approved assisters to undergo fingerprinting or background check s before they can operate in a State, so long as a State’s implementation of these additional requireme nts does not prevent the Exchange from implementing these consumer assistance programs inthe State consistent with Federal standards or make it impossible for the assisters to pe rform their Federally required duties. We propose to make some, but not all, of the proposed provisions applicable to Navigators, non-Navigator assistance pers onnel subject to 45 CF R 155.215, and certified application counselors (or certif ied application counselor desi gnated organizations) that are operating in State Exchanges. Non- Federal requirements that woul d prevent these individuals or entities from carrying out their Federally mandated duties or from otherwise meeting applicable Federal statutory and regulatory standards and requirements woul d prevent the application of

title I of the Affordable Care Act. Genera lly, for the reasons addressed below, proposed §155.210(c)(1)(iii)(A) through (D) would apply to Navigators in State Exchanges; through the cross reference to §155.210(c)(1)(iii), pr oposed §155.215(f) would apply provisions §155.210(c)(1)(iii)(A) through (C) to non-Navigator assistance en tities or individuals in State Exchanges that are funded through an Exchange Establishment Grant under section 1311(a) ofCMS-9949-P 76

the Affordable Care Act; and proposed §155.225(d )(8)(i) through (iii) woul d apply to certified application counselors and/or desi gnated certified app lication counselor organizations in State Exchanges. In general, we be lieve that the provisions listed above should apply in a State Exchange because these provisions address requi rements that, in HHS’ view, would facially conflict with Federal requirements or standards established under Fe deral law, while the provisions that we propose would not apply in State Exchanges rela te to how the State interacts with an FFE or implements State requirements for the relevant consumer assistance personnel. Based on our observations, a State Exchange has an enhanced ability to work with the State to

establish its own standards and c oordinate the implementation of State law applicable to assisters

in a manner that does not conflict with Federal standards or prevent the State Exchange from implementing consumer assistance programs consis tent with Federal requirements. We solicit comments on whether all the proposed provisions s hould apply in State Exchanges. We also seek comments on whether there are other types of non-Federal requirements for these types of assisters in a State Exchange that might prev ent the application of Federal law within the meaning of section 1321(d) of the Affordable Care Act. In our proposal, we first propose that non-Fe deral laws or regulations which require Navigators, non-Navigator assistance personnel subject to §155.215, and cer tified application counselors to refer consumers to agents or brok ers, or to any other sources not required to provide them with impartial advice, would preven t the application of the provisions of title I of

the Affordable Care Act. Non-Federal laws or re gulations that require re ferrals to sources that are not required to provide impartial advice w ould, on their face, make it impossible for these assisters to comply with existing Federal st atutory and regulatory duties and standards. Navigators are required to “distribute fair a nd impartial information concerning enrollment inCMS-9949-P 77

qualified health plans, and the ava ilability of premium tax credits . . . and cost-sharing reductions . . .,” under section 1311(i)(3)(B) of the Affordable Care Act. Additionall y, section 1311(i)(5) of the Affordable Care Act requires the Secretary, in collaboration with States, to “develop

standards to ensure that information made av ailable by [N]avigators is fair, accurate, and impartial.” Accordingly, HHS regulations at §155.210(e)(2) require Navigators in all Exchanges to provide “information and services in a fair, accurate and impartial manner” and HHS regulations at §155.215(a)(1)(iii) require Navigators in Fe derally-facilitated and State Partnership Exchanges to “provide informati on to consumers about the full range of QHP options and insurance affordability programs for which they are eligible.” HHS regulations at §155.215(a)(2)(i) and (iv) impose the same requirements upon non-Navigator assistance personnel in Federally-facilitated and State Partnership Exch anges. Similarly, §155.225(c)(1) requires certified application c ounselors to provide “i nformation to individuals and employees about the full range of QHP options and insurance affordability programs for which they are eligible” and §155.225(d)(4) requi res certified application counselors to act in the best interest of the applicants assisted. If a non- Federal law or regulation requires Navigators or non-Navigator assistance personnel subject to §155. 215 to refer consumers to third parties that do not have a duty to provide consumers with information that is fair, accurate, and impartial or requires a certified application counselor to refer consumers to third parties that do not have a duty to act in the consumer’s best interest, that non-Feder al law would prevent Na vigators, non-Navigator assistance personnel, or certifi ed application counselors from meeting the above-mentioned Federal requirements. This proposal would appl y in all Exchanges, with the following limited exception for certain Navigators. Where a State has elected to establish and operate only a SHOP Exchange pursuant to 45 C.F.R. §155.100(a)(2), and has opted under 45 C.F.R.CMS-9949-P 78

§ 155.705(d) to permit Navigator duties at § 15 5.210(e)(3) and (4) in the SHOP-only State Exchange to be fulfilled through referrals to ag ents and brokers, we would not consider State laws or regulations that permit the State to take the option at § 155.705(d) to prevent the application of the provisions of tit le I of the Affordable Care Act, since that option is authorized

under Federal law.

We solicit comment on whether non-Federal requirements that obligate Navigators, nonNavigator assistance pe rsonnel subject to §155.215, and certified application counselors to refer employers and employees in the small group ma rket to agents and brokers should not be considered to prevent the appli cation of the provisions of title I of the Affordable Care Act within the meaning of section 1321(d) of the A ffordable Care Act. Second, we propose that non-Federal laws or regulations that prevent Navigators, nonNavigator assistance pe rsonnel subject to §155.215, and certified application counselors from providing services to all persons to whom they are required to provide assistance would also, on their face, prevent the application of the provision s of title I of the Affordable Care Act within the meaning of section 1321(d) of the Affordab le Care Act. For example, if a non-Federal requirement prohibited Navigators and non-Navi gator assistance personn el subject to §155.215 from assisting an employer or employee regarding SHOP coverage or from acting as an intermediary between that employer and an issu er without being a licen sed insurance agent or broker, then such a prohibition would prevent Navigators from performing their Federally required duties and would therefore prevent the a pplication of the provisions of title I of the Affordable Care Act within the meaning of section 1321(d) of the Affordable Care Act. Specifically, such non-Federal requirements would prevent Navigators from providing “information and services in a fair, accurate an d impartial manner” as required by 45 C.F.R.CMS-9949-P 79

§155.210(e)(2). They would also prevent non-Na vigator assistance pers onnel subject to 155.215 from complying with the same requirement, as is required by §155.215(a)(2)( i). We interpret the requirement that Navigators and non-Navigato r assistance pers onnel subject to §155.215 provide information and services fairly and impartially as a requirement that these assisters provide their services to all consumers seeking assistance. As we have mentioned in prior rulemaking, Navigators and non-Navigator assist ance personnel should have the ab ility to help any individual who presents him or herself for assistance (s ee 78 FR 42830).Further, these requirements would prevent Navigators and non-Navigator assist ance personnel subject to §155.215 from being prepared to serve both the individual Exch ange and SHOP, as required by §155.215(b)(1)(v). Similarly, with respect to certified applicati on counselors and certifiedapplication counselor organizations, if a non-Federal requ irement barred these individuals or entities from assisting an employee with SHOP coverage, then such a re quirement would prevent them from performing their Federally required duty to provide inform ation to employees about the full range of QHP options for which they are eligible and assist employees to apply for coverage in a QHP through the Exchange and for insurance affordability programs, as set forth under §155.225(c)(1) and (2). As another example, with respect to Na vigators, non-Navigator assistance personnel subject to §155.215, and certified application coun selors and organizations, if a non-Federal law required these individuals or entities to either cease assisting a consumer or to discourage the consumer from seeking assistance from the assister whenever a consumer disclosed that he or she was currently insured or had previously purchas ed health insurance with the aid of an agent or broker (even if that consumer expresses to the assister that he or she does not want to be assisted by an agent or broker), then such a non-Federal requirem ent would prevent the application of the provisions of tit le I of the Affordable Care Ac t within the meaning of sectionCMS-9949-P 80

1321(d) of the Affordable Care Act. Specifically, these types of requirements would prevent Navigators from providing “information and services in a fair, accurate and impartial manner” as required by 45 C.F.R. §155.210(e)(2). They w ould also prevent non-Navigator assistance personnel subject to 155.215 from complying with the same requirement, as is required by §155.215(a)(2)(i). We interpret the requirement th at Navigators and non-Navigator assistance personnel subject to §155.215 provide information and services fairly and impartially as a requirement that these assisters serve any consumer who presents him or herself for assistance, without regard to whether the consumer has existi ng health insurance covera ge or previously had such coverage. Such a non-Federal requirement w ould also keep these as sisters from performing their Federally required duty to be prepared to serve both the individual Exchange and SHOP, as required by §155.215(b)(1)(v). With respect to certif ied application counselors, these types of requirements would prevent them from carry ing out required dutie s under §155.225(c)(1) and (2), which require that certifie d application counselors provide information to employees about the full range of QHP options for which they ar e eligible and assist employees to apply for coverage in a QHP through the Exchange. Require ments of this type would also potentially prevent certified application counselors from ac ting in the best intere sts of the applicants assisted, as required by §155.225(d)(4), especially in circumstances where a consumer expresses a desire to not consult an agent or broker.

Where a State has elected to establish and operate only a SHOP Exchange pursuant to 45 C.F.R. §155.100(a)(2), and has opted under 45 C.F. R. § 155.705(d) to permit Navigator duties at § 155.210(e)(3) and (4) in the SHOP-only State Exchange to be fulfilled through referrals to agents and brokers, we would not consider State la ws or regulations that permit the State to takeCMS-9949-P 81

the option at § 155.705(d) to prevent the application of the provisions of title I of the Affordable Care Act, since that option is authorized under Federal law. Third, we propose that non-Federal laws that prevent Navigators, non-Navigator assistance personnel subject to §155.215, and certifie d application counselors from discussing the terms of coverage of any particular policy or plan, or from providing advice regarding substantive benefits or comparativ e benefits of different health plans, would also, on their face, prevent the application of the provi sions of title I of the Affordab le Care Act within the meaning of section 1321(d) of the Affordable Care Ac t. Such non-Federal requirements would prevent Navigators from fulfilling their statutory and regulatory duties under section 1311(i)(3) of the

Affordable Care Act and 45 CFR 155.210(e)(2) and (3) to di stribute fair and impartial information concerning enrollment in qualified health plans and to facilitate enrollment in qualified health plans. Such non-Federal re quirements would also prevent non-Navigator assistance personnel subject to §155.215 from carrying out their re quired duties under §155.215(a)(2)(i), which requires that they comp ly with §155.210(e)(2). Finally, such nonFederal requirements would also prevent certified app lication counselors and organizations from fulfilling regulatory duties established under §155.225(c) to provide information to individuals and employees about the full range of QHP options and insuran ce affordability programs for which they are eligible, assist individuals and employees to appl y for coverage in a QHP through the Exchange and for insurance affordability prog rams, and help to facilitate enrollment of eligible individuals in QHPs and insurance a ffordability programs. CMS interprets these statutory and regulatory provisi ons to require Navigators, no n-Navigator assistance personnel subject to § 155.215, and certified application counselors to be prep ared to discuss the terms and features of any coverage for which a consumer is or might be eligible, consistent with eachCMS-9949-P 82

consumer’s expressed interests and needs, in cluding, for example, plan features such as deductibles, coinsurance and copa yments, coverage limitations or exclusions, and/or whether a particular provider or hospital is included within a plan’s netw ork. CMS has always interpreted the statute and regulations to prohibit Navigators, non-Navigato rs, and certified application counselors from steering a consumer toward a par ticular plan or plans. However, under 45 CFR 155.210(e)(3) and 155.215(a)(2)(i), Na vigators and non-Navigator as sistance personnel subject to §155.215 have a duty to “facilitate selection of a QHP,” and that duty includes providing

information to consumers about the substantive benef its or particular features of a health plan. Similarly, certified application c ounselors are required to provide this same type of information to consumers, since they have a duty under 45 CF R 155.225(c)(3) to help to facilitate enrollment of eligible individuals in QHPs and insurance affo rdability programs. We therefore propose that non-Federal requirements that prevent assisters from describing or providing information about the substantive benefits or particular features of a health plan, including comparative information

to facilitate a consumer’s selec tion of a plan, would prevent the application of the provisions of

title I of the Affordable Care Act within the m eaning of section 1321(d) of the Affordable Care

Act. Fourth, we propose to put into regulatory te xt a position we previously expressed in preamble, that a State or an Exchange must not requi re that all Navigators be agents or brokers or carry errors and omissions cove rage. Section 1311(i)(2)(B) of the Affordable Care Act provides that various types of entities may serve as Navigators, and through §155.210(c)(2), we established the requirement that in all Exchanges, at least two types of entities, including one community and consumer-focused nonprofit group, must serve as Navigators. Requiring that each Navigator be a licensed agent or broker or carry errors and omissions coverage (which isCMS-9949-P 83

typically held only by licensed pr ofessionals such as agents an d brokers) would mean that all Navigators would fall under only one type of entity listed in 155.210(c)(2), specifically, agents and brokers, and would therefore prevent the app lication of §155.210(c)(2)(i). In other words, these types of non-Federal requirements would make it impossible for the Exchange in such States to fulfill the Federal requirement that at least two types of entities listed at 155.210(c)(2), including one community and consumer-focused nonprofit group, serve as Navigators. HHS has previously advised (see 77 FR18310, 18331-32) that such requirements would prevent the application of §155.210(c)(2) within the meaning of section 1321(d) of the A ffordable Care Act; this proposal makes this policy ex plicit in regulation text. Fifth, we propose to specify th at, in States with an FFE, non-Federal requirements may not, in effect, render ineligible any individuals or entities that the FFE would deem eligible under applicable Federal standards. Such non-Fede ral requirements would prevent the FFE from implementing the consumer assistance programs that they are required (or authorized) to implement under section 1311(i) of the A ffordable Care Act, and 45 CFR 155.205, 155.210, 155.215, and 155.225, consistent with Federal requireme nts established for those programs. For example, non-Federal requirements that prohibit Navigators, non-Navigator assistance personnel, or certified application counselors or or ganizations in an FFE from receiving any considerati on, directly or indirectly , from a health insurance issuer offering health insurance coverage in or outside of an Exchange, even if not in connection with the enrollment of individuals into a QHP, go be yond Federal conflict of interest standards se t forth in section 1311(i)(4)(A)(i) and (ii) of the Affordab le Care Act and §§155.210(d)(4), 155.215(a) and 155.225(d)(2) and (4), as interpreted in Federal guidance, and would also go beyond the parallel conflict of interest standards proposed for certi fied application counselors in our proposedCMS-9949-P 84

§155.225(g)(2). For Navigators, secti on 1311(i)(4)(A)(i) and (ii) of the Affordable Care Act and 45 CFR 155.210(d)(4) together provide that a Navigator shall not be a health insurance or stop

loss insurance issuer or receive a ny consideration directly or indirectly from a health insurance issuer or issuer of stop loss insurance in c onnection with the enrollment of any qualified individuals or employees of a qualified employer in a qualified health plan or a non-qualified health plan. Under 45 CFR 155.215(a)(2), a set of pa rallel conflict of interest standards apply in FFEs (including State Partnership Exchanges) to non-Navigator assist ance personnel carrying out consumer assistance functions under 155.205(d) and (e), and to non-Navigator assistance personnel in a State Exchange funded through Federal Exchange Es tablishment grants. 32 For certified application counselors, conflict of interest standards in §155.225(d)(2) require that each staff member or volunteer seeking certification disclose to the organization, or to the Exchange if directly certified by an Exchange, and to poten tial applicants, any relationships the certified application counselor or sponsoring agency has with QHPs or insurance affordability programs, or other potential c onflicts of interest. 33 A non-Federal requirement that prohibits cons umer assistance enti ties and individuals from receiving any consideration, directly or indi rectly, from a health insurance issuer offering health insurance coverage in oroutside of an Exchange, even if not in connection with the

32 For Navigators and non-Navigator assistance personnel subject to 155.215, we have clarified in Federal guidance the scope of these conflict of interest standards. Speci fically, conflict of interest standards do not apply to consideration received by a provider to support specific activities, su ch as the provision of medical services, if the consideration is not connected to the enrollment of indivi duals or employees in QHPs (78 FR 42831). In addition, Federal regulations do not inherently prohibit Navigators fr om receiving grants and othe r consideration from health insurance issuers for activities unrelated to enrollment into health plans (77 FR 18332); For example, entities such as chambers of commerce, that include as a constituent memb er an association that has members of or lobbies on behalf of the insurance industry, are not prohibited from serving as Navigator grantees (78 FR 42835). 33 We have clarified in guidance that no conflict of interest should bar an otherwise eligible individual from serving as a certified application counselor, provid ed that they disclose any conflicts of interest, including but not limited to, any relationships with QHPs or insurance affordability programs, such as Medicaid plans and Medicaid managed care organizations (78 FR 42842).CMS-9949-P 85

enrollment of individuals into a QHP, would pr event an FFE from approving as Navigators, nonNavigator assistance pers onnel, or certified application coun selors and organizations certain entities, including hospitals and community health care clinics, that would otherwise be eligible to serve in those capacities. Further, with respect to the Navigato r program, we further note that such a requirement could bar the FFE from awarding a grant to the most qualified applicants as required and therefore might prevent HHS fr om allocating Federal money in the most appropriate manner. As another example, if a State with an FFE effectively prohibits an individual or organization from serving as a Navigator, non- Navigator assistance pe rsonnel or certified application counselor in the FFE merely because the individual or entity does not maintain its principal place of business in that State, that Stat e could render ineligible individuals or entities that the FFE would deem eligible under applicab le Federal standards. Such a standard would therefore prevent the FFE from implementing the consumer assistance programs that it is required (or authorized) to implem ent, within the meaning of s ection 1321(d) of the Affordable Care Act. We mean to address here only non-Federal requirements that would interpret “principal place of business” as meaning that a business could have only one principal place of business nationwide, in a single State (similar to the legal concept that may be used in determining corporate citizenship for purposes of establishing diversity jurisdiction in Federal court, as required under 28 U.S.C. §1332(c)). States may however, require organizations to register with or be incorporated in the State, which will allow States and Exchanges to work with these organizations to ensure that they ar e meeting the needs of their consumers. Sixth and last, we propose to specify th at in the FFEs, States may not impose requirements that, as applied or as implemented in the State, prevent the application of FederalCMS-9949-P 86

standards applicable to Excha nges, Navigators, non-Navigator assistance personnel subject to §155.215, and certified application c ounselors and designated organiza tions. For example, with respect to the Navigator program, if a State with an FFE implemented a requirement that prevented the only Navigator enti ty operating in the State from continuing to perform its Federally required duties, then such a provision, as applied, would prevent the Exchange from operating a Navigator program in that State as se ction 1311(i)(1) of the Affordable Care Act and §155.210(a) require. As another ex ample, a State might impose requirements as mandatory conditions for continuing to perf orm any applicable Federally requi red duties, such as additional training or fingerprinting or background checks, which, on their face, we consider as generally permissible, but might also set a deadline for compliance that made it impossible for any of individual or entity approved by the FFE to comp ly on a timely basis, despite good faith efforts to comply. Under such circumstances these enti ties and individuals could not fulfill any of their Federally required duties, and the FFE could not operate the consumer assistance programs that it is required (or author ized) to implement under section 1311(i) of the Affordable Care Act, and 45 CFR 155.205, 155.210, 155.215, and 155.225. We believe these proposals will provide addi tional clarity regarding HHS’s position with respect to whether a non-exhausti ve list of specific non-Federal requirements would prevent the application of Federal require ments applicable to Naviga tors, non-Navigator assistance personnel, and certified application counselors and Exchanges’ operation of such programs, within the meaning of section 1321 (d) of the Affordable Care Act. In advancing these proposals, HHS’s intent is to accord all States the comity that they are due under section 1321(d) of the Affordable Care Act, while preserving the ability of Exchanges, and the individuals and entities approved by Exchanges, to carry out such progr ams. HHS proposes these provisions to ensureCMS-9949-P 87

that it can establish and operate the consumer assi stance functions of an FFE consistent with the Federal requirements set forth in section 1311( i) of the Affordable Care Act and 45 CFR 155.205, 155.210, 155.215, and 155.225. We solicit comments on all aspects of these proposals. This proposed rule would also amend some of the current regula tory prohibitions on Navigator conduct. If these propos als are finalized, we expect th at they would be effective on the date the final regulations are effective. Section 155.210(d), among other th ings, currently prohibits Navi gators from being health insurance issuers or stop-lo ss issuers. We propose to amend section 155.210(d) by adding a provision that would provide th at Navigators may not charge consumers for performing any Navigator duties. Our proposal would prohibit Navigators from requesting any form of remuneration from consumers for Navigator duties, such as charging fees, asking for favors in exchange for services provided, or requesti ng compensation from consumers for Navigator duties. As we previously explained in preambl e when existing rules establishing a prohibition on charging fees by certified applic ation counselors were finalized, HHS does not believe that it would be consistent with the purpose of the Na vigator program or the consumer assistance, education, and outreach functions under § 155.205(d) and (e), for Navigators to charge consumers for their services. (78 FR 42829) Th e goal of the Navigator program is to provide

consumers with information about and assistan ce with enrollment in coverage through the Exchange, without cost to the consumer. That is why the Affordable Care Act, at section 1311(i)(1), makes clear that Navi gator duties must be funded by the Exchange through grants. We believe that having free assistance available to consumers helps further both the goals of the Navigator program and the Exchanges generally by supporting access for low-income individuals who might previously have been priced out of the h ealth insurance market. We nowCMS-9949-P 88

propose to make this an express prohibition in our regulations, through the addition of a new provision at §155.210(d)(5). If fi nalized, this prohibition woul d also apply to non-Navigator assistance personnel carrying out consumer a ssistance functions under §§155.205(d) and (e) in an FFE and to non-Navigator assistance personn el funded through an Exchange Establishment Grant, since existing rules at §155.21 5(a)(2)(i) require th at these entities must comply with the prohibitions on Navigator conduct se t forth at §155.210(d). We thi nk the same rationale for the prohibition generally applies in the case of non-Navigator personne l. This proposal would also align the Navigator and non-Navi gator assistance personnel provisi ons with the similar provision applicable to certified applica tion counselors in existing §155.225(g). Our proposal would not prevent Navigators from charging for other, non-Navigatorrelated services the organization may offer, given that section 1311(i) (2) of the Affordable Care Act and implementing regulations at §155.210(c)(2 ) allow for various commercial entities or associations to become Navigators. 34 We do not intend to preven t a Navigator entity or individual Navigators from pursuing the normal course of their non-Navigator-related business or established non-Navigator-related programs. However, Navigators would not be permitted to solicit customers for their other, non-Navigator -related services in connection with their Navigator duties. For example, a hospital c onducting outreach and education events as a Navigator would not be permitted to use these ev ents as opportunities to solicit new patients. We also propose to amend §155.210(d) to provide that Navigator organizations would be prohibited from compensati ng individual Navigators on a per-a pplication, per-person assisted, or per-enrollment basis. We believe that such prac tices create adverse incentives that may result in

34 Specifically, section 1311(i)(2)(B) and §155.210(c)(2) provide that Navigator entities may include, among others, trade, industry, and professional associations; commercial fishing industry organizations; ranching and farming organizations; community and consumer-focused nonprofit groups; chambers of commerce; unions, resource partners of the Small Business Administration; and licensed agents and brokers.CMS-9949-P 89

enrollment errors or even improper conduct on th e part of the Navigator, such as favoring

consumers who take less time to assist than othe r consumers, or pressuring consumers to make quick decisions about their health coverage, rather than ensuring that they are fully informed about the full range of their options. A dditionally, such a compensation methodology is

inconsistent with the statutor y and regulatory scheme for Navi gators. We request comment on whether this proposal would negatively affect existing Navigator programs, including whether it would present implementation challenges for th ese programs if it becomes effective before November 15, 2014. The duties of a Navigator under section 1311( i)(3) of the Afford able Care Act and §155.210(e) are not limited to facili tating selection of a QHP. Navigators’ duties also include conducting public education activities; distri buting fair and impartial in formation about qualified health plans and advance payments of the pr emium tax credit and cost-sharing reductions; providing appropriate referrals fo r consumers with complaints, questions, or grievances about their health plan, coverage, or a determination under such plan or coverage; and providing information in a manner that is culturally and linguistically appropriate and accessible to people with disabilities. We believe that compensati ng Navigators based on the number of successful applications or enrollments may create disincen tives to perform the full spectrum of required duties. To discourage improper conduct and ensure that Navigators fully perform each of their required duties, we propose to prohibit such compensation arrangements. Under the proposal, Navigators would be permitted to pay employees on a salaried basis, on a per-hour basis, or any other way that is not tied to the numbers of c onsumers who apply or enroll successfully with the Navigator’s assistance. Because §155.210 applies to all Navigators, including those in States with State Exchanges, this prohibition would apply to Navigators in all States. We seekCMS-9949-P 90

comment on this proposal and alte rnatives that build in reward s for performance without the unintended consequences pr eviously described. As with Navigators, we believe it is importa nt that non-Navigator assistance personnel authorized under §155.205(d) and (e) in FFEs and in State Exch anges if funded through section 1311(a) Exchange Establishment grants focus on providing full and accurate information rather than on meeting quotas. Because §155.215(a)(2) applies the prohibitions on certain conduct established for Navigators in §155.210(d) to non -Navigator assistance pe rsonnel in FFEs, State Partnership Exchanges, and in State Exchanges if funded wi th section 1311(a) Exchange Establishment grants, these prohibitions on Navi gator conduct would also apply to these nonNavigator assistance pers onnel, and would help decrease the risk of creating adverse incentives that could potentially lead to improper conduct. In §155.210(d)(7), we propose that Navigators be prohibited from providing gifts to applicants or potential enrollees as an inducem ent for application assistance or enrollment, including gift cards or cash, unl ess they are of nominal value. We propose to define nominal value as a cash value of $15 of less, or an item worth $15 or less, based on the retail purchase price of the item regardless of the actual cost. This definition would be consistent with the

definition used for nominal value in connection with prohibitions ap plicable to the marketing of Medicare Advantage and Medicare Part D pl ans. (See 73 FR 54236) CMS proposes that it would update the definition of nominal value in guidance as necessary to account for inflation

and other relevant factors. We seek comment on how nominal value should be defined in this

context. We also propose in §155.210(d)(7 ) to prohibit Navigators fr om providing any applicant or potential enrollee with promotional items, that is, items that market or promote the products orCMS-9949-P 91

services of a third party. Ther e are several reasons we are proposing these prohibitions. First, providing cash or gifts, other th an those of nominal value, would not be an appropriate use of Navigator grant funds, which are intended to be used to support a Navigator’s outreach, education, and application assistance activities. In addition, sect ion 1311(d)(5)(B) of the Affordable Care Act prohibits an Exchange from utilizing any funds intended for the administrative and operational expenses of the Ex change, which would include the funds used to pay for the Exchange’s grants to Navigators, to pay for promotional giveaways. Second, the provision of cash or gifts to poten tial applicants or enrollees may shift the focus of a Navigator’s interaction with a potential appli cant or enrollee away from its du ties to provide information and services in a fair, accurate, and impartial manne r and to facilitate selection of a QHP, in appropriate circumstances. Offe ring cash or gifts to potential appl icants or enrollees could also cause some consumers to approach Navigators fo r reasons other than the receipt of information and Exchange application assistance. Third, provi ding to applicants or potential enrollees any promotional items that market or promote the produc ts or services of a third party would be in conflict with the Navigator’s duty to be fair and impartial in its dealings with consumers, since it introduces a third party’s interests and marketing goals into the relations hip between a Navigator and the consumers they serve. We believe that the duty of a Navigator to provide information and services in a fair, accurate and impartial ma nner make it inappropriate for a Navigator to engage in activities that give th e appearance of promoting or ma rketing the products or services of third party business interests when it is pe rforming Navigator activit ies and services. We are also proposing in §155.210(d)(8) and (9 ) new standards for Navigators with respect to their contacts and interaction w ith consumers, and the outreach and marketing practices they use when offering their serv ices. In §155.210(d)(8), we propose to prohibitCMS-9949-P 92

Navigators from going door-to-door or using other unsolicited mean s of direct contact to help consumers fill out applications or enroll in h ealth coverage, although these proposed rules would not prohibit a Navigator from going door-to-door to provide consumers with educational or outreach materials. This would include making co ld calls to a consumer to provide application or enrollment assistance, without the consumerinitiating the contact. In §155.210(d)(9), we propose to prohibit Navigators from making robocal ls, or calls that use an automatic telephone dialing system or an artificial or prerecorded voice, when initiati ng contact with consumers. We

believe that these standards will ensure that Navi gator practices are protective of the privacy and security interests of the consumers they serv e, and will also provide important guidance and peace of mind to consumers, when they are face d with questions or concerns about what to expect in their interactions with individuals offering Exchange assistance. We seek comment about whether any of the activitie s and strategies that we propos e to prohibit for Navigators are appropriate and consistent with secti on 1311(i) of the Affordable Care Act. For the same reasons, the proposed standards established in §155.210(d)(7), (8) and (9) would also apply to non-Navigato r assistance pers onnel in FFEs, State Partnership Exchanges, and in State Exchanges if funded with section 1311(a) Exchange Establishment grants, through the reference in §155.215(a)(2), which applies the prohibitions on conduct established for Navigators in §155.210(d) to these types of non-Navigator as sistance personnel. In addition, we propose to amend paragraph (e), which describes the duties of a Navigator, by adding a new paragraph (e)(6) that would require Navigators to provide applicants and enrollees seeking their assi stance with notice of the func tions and responsibilities of Navigators, to obtain written aut horization from those they are a ssisting, in a form determined by the Secretary, and to retain these authorization fo rms. We propose that Exchanges must establishCMS-9949-P 93

a reasonable retention period for maintaining this authorization, and that in FFEs the retention period would be three years, unle ss a different retention period has already been provided in the administrative requirements for CMS grant and cooperative agreement recipients at 45 CFR

92.42 and 45 CFR 74.53 or in other applicable Federal law. We have considered specifying a retention period for all Exchange s, including specifying either a minimum re tention period or a specified retention period rangi ng from three to five years, and solicit comments on the best approach. We also propose thatconsumers would be able to re voke this authorization at any time. These provisions would ensure that all co nsumers receive adequate notice of the role and duties of a Navigator and that all consumers give their inform ed consent before sharing any personally identifiable information with the Navigator. For the same reasons, we also propose to add a new §155.215(g) applying these authorization provisions to non-Navigator as sistance personnel authorized under §155.205(d) and (e) in FFEs, State Partnership Exchanges, and in State Exchanges if funded through section 1311(a) Exchange Establishment grants. Finally, we propose to add a new §155.210(e)(7), requiring Navigators to maintain a physical presence in their Exchange service area, so th at face-to-face assist ance can be provided to applicants and enrollees. Under this proposal , a Navigator would not be required to have its principal place of business in the State in which Navigator services are be ing provided. For the same reasons, we also propose to add a new §155.215(g), to make the same provisions proposed for Navigators under §155.205(e)(7), as outline d above, also applicable to non-Navigator assistance personnel subject to § 155.215. We solicit comments on all aspects of these proposals. c. Certified Appli cation Counselors (§155.225)CMS-9949-P 94

Section 1321(a)(1) of the Affo rdable Care Act directs and authorizes the Secretary to issue regulations setting standards for meeting the requirements under titl e I of the Affordable Care Act, with respect to, among other things, the establishment and operation of Exchanges. Pursuant to this authority, the Secretary issued § 155.225, which establishes the certified application counselor program as a consumer assi stance function of the Exchange separate from and in addition to the functions described in §§ 155.205(d) and (e), 155.210, and 155.215. Section 155.225(b) establishes standards for the designation of a certified application counselor organization by an Exchange. We pr opose to add to these designation standards a new §155.225(b)(iii) which would establish the requireme nt that certified application counselor organizations maintain a physical presence in the Exchange service area, so that face-to-face assistance would be provided to applicants and enrollees. This proposed requirement would also facilitate consumer protection efforts by a State. We note that, under th is proposal, an entity designated as a certified applica tion counselor organization would not be required to have its principal place of business in the State in which certified application coun selor services are being provided by the organization. Section 155.225(d) currently sets forth CA C certification standards, including the successful completion of Exchange-approve d training. We propose to amend 45 CFR 155.225(d) to propose, in a new paragraph (d)(7), th at individual certifie d application counselors would also be required to successfully complete Exchange-approved recertification training and

be recertified on at leas t an annual basis. This proposal woul d ensure that certified application counselors keep up to date w ith current Exchange requireme nts and that they remain appropriately trained in order to best serve consumers. Under this proposal, each Exchange

would establish its own recertif ication standards consistent with these requirements.CMS-9949-P 95

Existing §155.225(f)(2) provides th at certified application couns elor organizations, or, if applicable, an Exchange that certifies staff memb ers or volunteers of orga nizations directly, must establish procedures to ensure that consumers pr ovide authorization before a certified application counselor has access to the consumer’s personal ly identifiable information, and that the organization or application counsel or must maintain a record of the authorization. We propose to revise this paragraph to clarify the retention period of the auth orization form. We propose that Exchanges would be required to establish a re asonable retention period for maintaining this authorization, and specify that in FFEs, the reten tion period would be three years. We based this period on the retention period in the current ad ministrative requirements for CMS grant and cooperative agreement recipients at 45 CFR 92.42 and 45 CFR 74.53. Because certified application counselors perform similar duties to Navigators and are subject to similar privacy and security requirements, we believe a si milar retention period should apply, even though certified application counselors would not necessarily be HHS grantees. We have considered specifying a retention period for all Exchanges, including specifyi ng either a minimum retention period or a specified retention period ranging from three to five years, and solicit comments on the best approach. Under existing regulations at 45 CFR 155.225(g) , certified applicati on counselors “may not impose any charge on applicants for applicati on or other assistance related to the Exchange.” This was intended as a strict prohibition on th e imposition of charges or fees by certified application counselors. We now propose to amend §155.225(g) to substitute “must not” for “may not,” so that there can be no doubt a bout the intent of th is requirement. We also propose to amend 45 CFR 155.225(g) to reorganize and renumber this section and to propose several additional standards for certified application counselors. We propose thatCMS-9949-P 96

what is now §155.225(g) should be renamed as a sect ion establishing standard s related to “fees, consideration, solic itation and marketing.” We propose to redesignate amended §155.225(g) as §155.225(g)(1) and add the new prohibitions in this amended section to new §§155.225(g)(2) through (6). In §155.225(g)(2), we propose to expressly prohi bit certified applica tion counselors from receiving consideration, di rectly or indirectly, from health in surance issuers or stop loss issuers

in connection with the enrollment of consumers in qualified health plans (QHPs) or non-QHPs. This proposed new requirement w ould align with the same standards of conduct applicable to Navigators and certain non-Navigator assi stance personnel under 45 CFR 155.210(d)(4) and 155.215(a)(2)(ii), and would apply to i ndividual certified application counselors as well as to the organizations that have been designated as ce rtified application counsel or organizations. The reason for this proposal is that, in our view, r eceiving commissions or other consideration for enrollment in QHPs or non-QHPs is not consiste nt with the purpose and scope of certified application counselor program activities. U nder §155.225(c), certified ap plication counselors

must act in the best interest of consumers they assist, inform consumers about the full range of health coverage options and affordability progra ms for which they are eligible, and help to facilitate enrollment of eligible individuals in QHPs and insurance affordability programs. As such, neither an individual cer tified application couns elor nor his or her designated organization should have any personal financia l incentive to recommend a particular health coverage option. Under this proposed amendment, while an Exch ange could certify individuals as certified application counselors who are agents or brok ers, and a designated certified application counselor organization similarly could certify staff or volunteers as certified application counselors who are agents or brokers, those in dividuals and the certifie d application counselorCMS-9949-P 97

organization itself would not be permitted to rece ive compensation from health insurance or stop

loss insurance issuers for enro lling individuals in QHPs or non-QHPs. Under this proposed amendment, in other words, certified application counselors and the certified application counselor designated organizations with which they are affiliated would not be strictly prohibited from being agents and brokers, as long as they do not receive any cons ideration in connection with enrollment of a consumer in a QHP or non -QHP. Therefore, agents and brokers who sell

lines of insurance other than health insurance or stop loss insurance (for example, auto, life, and homeowners’ policies) would not be prohibited from receiving cons ideration from the sale of those other lines of insurance while serving as a certified application counselor, provided they disclose the relationship to the consumer receiving assistance. We note that §155.225(d)(2) requires a certified application couns elor to disclose any relationshi p he or she or the sponsoring certified application counselor agency has with QHPs or insurance affordability programs, “or other potential conflicts of in terest,” to the appropriate parties outlined in that provision. Consistent with the interpretation we advancedwith respect to the Navigator program, we interpret “other potential conflicts of interest” in this context to include any private or personal interest sufficient to influence, or appear to influence, the objective exercise of a certified application counselor’s or certif ied application counselor organi zation’s official duties (see 77 FR 18330-31). In an FFE, we interpret “other pote ntial conflicts of interest” to encompass any relationship with a certified application counselor which may have an influence on the information or scope of assistance being provid ed to the consumer during the course of the certified application counselor’s assistance or an y relationship that would confer benefits or indirect financial gain that could potentially compromise a certified application counselor’s ability to act in the best interests of the consumer.CMS-9949-P 98

We also propose to add a new §155.225(g)(3), which would prohibit individual certified application counselors from bei ng compensated on a per-applicati on, per-individual - assisted, or per-enrollment basis. As with Navigators and non-Navigator assistance personnel, we believe that in order for application and enrollment a ssistance to be effective and appropriate for each consumer, per-enrollment or per-application incen tives that might encourage certified application counselors to rush through sessions with consum ers, or not to provide them with complete information or enough time to make complex and important health coverage decisions, should not be permitted. Such incentives would impede a certified application couns elor’s ability to act

in the best in the best interests of cons umers, as they are required to do under §155.225(d)(4).This proposal would al so help streamline requiremen ts for these three types of assistance personnel. We seek comment on this pr oposal and alternatives that build in rewards for performance without the unintended c onsequences previously described. We also propose to add a new paragraph (g)(4) to prohibit ce rtified application counselors from providing applicants or potential en rollees any gifts, including gift cards or cash, unless they are of nominal value. As we also pr oposed in our earlier di scussion with respect to Navigators, we propose to define nominal value c onsistent with the definition used for nominal value in connection with prohibi tions applicable to the marke ting of Medicare Advantage and Medicare Part D plans. (See 73 FR 54236) Speci fically, nominal value would be defined as a cash value of $15 of less, or an item worth $15 or less, based on the retail purchase price of the item regardless of the actual cost. CMS proposes that it would update th e definition of nominal value in guidance as necessary to account for infl ation and other relevant factors. We seek

comment on how nominal value should be defined in this context. We also propose in this section to prohibit certified appl ication counselors from provid ing applicants and potentialCMS-9949-P 99

enrollees with promotional items that market or promote the products or services of a third party, in connection with, or as an inducement for application assistance or enrollment. We are proposing this prohibition for certified applic ation counselors for sim ilar reasons to those expressed above in connection with the proh ibition in the Navigator and non-Navigator assistance programs. We are concerned that the pr ovision of cash or gifts to potential applicants or enrollees might interfere with the duties of th e individual provi ding assistance to that applicant or potential enrollee; and in the case of a certifie d application counselor, mi ght shift the focus of a certified application couns elor’s interaction with a potentia l applicant or enrollee away from the certified application c ounselor’s duties to act in the consume r’s best interest and to facilitate selection of a QHP. In addition, if a certified application counselor provides promotional items that market or promote the products or services of a third party, this too would conflict with the duty of a certified application coun selor to act in the best interest of the consumer, since it introduces a third party’s interests and marketing goals into the relationship between the certified application counselor and the consumer they ar e assisting and may also cause consumers to approach certified application couns elors for reasons unrelated to the receipt of information and Exchange application assistance. In proposed section §155.225(g )(5), we would establish a standard for certified application counselors that woul d prohibit them from soliciting consumers for application or enrollment assistance by going door-t o-door to provide this assistan ce, or to use other unsolicited means of direct contact, including calling a co nsumer, to provide application or enrollment assistance without the consumer initiating the contact. We also propose in a new §155.225(g)(6) to prohibit certified application counselors from making robocalls to consumers, such as those that are initiated to a consumer using an automa tic telephone dialing systemor an artificial orCMS-9949-P 100

prerecorded voice. As we explai ned earlier in this preamble in relation to the parallel proposed standard for Navigators and non- Navigator assistance personnel, we believe restrictions on doorto-door solicitation and cold-c alling would ensure that certif ied application counselors use practices that are protective of the privacy and security interests of the consumers they serve, and give those consumers the greatest peace of mind. We also believe that these standards would provide important guidance to consumers about what to expect in their inte ractions with certified application counselors. As with the parallel proposal for Naviga tors and non-Navigator assistance personnel, we clarify that this propo sal would not prohibit a certified application counselor from going door-to-door to provide consumers with information about the availability of application assistance services, or other educational or outreach materials, 35 We seek comment about whether any of the activitie s and strategies that we propos e to prohibit are appropriate and consistent with Federal requirements. We solicit public comments on all aspects of these proposals. d. Payment of Premiums (§155.240)

There are a limited number of circumstances in which an individual will be enrolled in a qualified health plan through the Ex change for less than a full month. In particular, these include

situations in which a child is born, adopted, placed for adoption, or placed for foster care, or when an individual voluntarily terminates enro llment. Currently, there are no Federal standards for how premiums are prorated in these limited s ituations. In order to provide flexibility for Exchanges to establish a standardized methodol ogy for partial month premiums or rely on issuers to prorate premiums in accordance with State law and issuer policies, we propose in §155.240(e) that the Exchange may establish one or more standard processes for premium

35 We note that certified application counselors are not re quired to perform outreach activities. (see 78 FR 42826).CMS-9949-P 101

calculation. Further, consistent with th e methodology finalized for the FF-SHOP at §155.705(b)(4)(ii)(B) in the 2015 Payment Notice, in paragraph (e)(1), we propose that for the Federally-facilitated Exchange, th e premium for coverage lasting less than one month must equal the product of the premium for one month of coverage divided by the number of days in the month and the number of days for which coverage is being provided in the month described in paragraph (e)(1)(i) of this sect ion. Adopting this policy for th e Federally-facilitated Exchange

will address situations in which enrollees have mid-month changes in enrollment. For example, the proposed policy will also address mid-month bi rths or adoptions and prevent these enrollees from paying for coverage on days they were not enrolled in coverage. In addition, the proposed policy will eliminate issues where consumers who transition to Medicaid are charged premiums for days on which they are enrolled in Medi caid. Although it is not a new occurrence for consumers to transition from private health insurance to Medicaid without the benefit of premiums that are prorated precis ely to the last day of private h ealth insurance and the first day of Medicaid coverage, we anticipate that the e xpansion of private hea lth insurance through the Exchange will increase the number of individuals who will be able to move between coverage types. We believe that the proposed policy wi ll benefit this broadening group. This policy will also be consistent with proposed 26 CFR 1.36B-3(d )(2), which specifies that when coverage is terminated before the last day of the month, and the issuer reduces or refunds a portion of the monthly premium, the premium ta x credit is adjusted using th e same methodology described in this regulation for the FF-SHOP. Aligning with the premium tax credit calculation will provide a cohesive policy across the Fede rally-facilitated Exchange for handling mid-month changes in enrollment, and will simplify the calculation of net premiums. Finally, the proposed Federallyfacilitated Exchange policy will protect consum ers and prevent them from paying premiums forCMS-9949-P 102

days in which they are not enrolled in coverage. We intend to work closely with QHP issuers to implement this provision in the Federally-facilitate d Exchange as soon as is reasonably possible. We seek comment on this proposed amendment. e. Privacy and Security of Persona lly Identifiable Information (§155.260) We propose amending §155.260(g) to add a reference to §155.285, which is being proposed as part of this proposed rule. S ection 155.285 proposes to specify the grounds for imposing civil money penalties, the notice required to be given to a person when a civil money penalty is assessed, and factors to be used to determine the amount of civil money penalties assessed, as well as some aspects of the process for imposing civil money penalties. We propose this addition to §155.260(g) to clearly link these two regulatory provisions and to ensure that readers fully understand how civil money penalties will be assessed for any improper use or

disclosure of information. f. Bases and Process for Imposing Civil Money Penalties for Provision of False or Fraudulent Information to an Exchange or Improper Use or Disclosure of Information (§155.285)

Section 1411 of the Affordable Care Act se ts forth the procedures for determining eligibility for Exchange participation, premium tax credit s and reduced cost-sharing, and the individual responsibility exemp tions. Section 1411(b) specifies minimum information required to be provided by an applicant, including name, address, date of birth, social security number (if applicable, based on the applicant’s citizenship or immigration status), and immigration status. For applicants seeking eligibility for advance paym ent of the premium tax credit or cost sharing reductions, section 1411(b) also sp ecifies that the applicant mustprovide information regarding income and family size, and information regardi ng employer sponsored coverage. For applicants for an exemption from the shared responsibil ity payment for failure to maintain minimumCMS-9949-P 103

essential coverage, section 1411(b) also requires submission of information relevant to the specific exemption sought by the ap plicant. In addition, section 1411(g) of the Affordable Care Act also requires that any person who receiv es information provided by an applicant under section 1411(b), whether directly from the app licant, by another person at the request of the applicant, or from a Federal ag ency may use the information only for the purposes of, and to the extent necessary in, ensuring the efficient oper ation of the Exchange. Finally, section 1411(h) specifies the civil money penalties which can be imposed for the provision of false or fraudulent information as well as for the improper use and disclosure of information. In §155.285, we propose to regulate on this statut ory authority to impose civil money penalties for the provision

of false and fraudulent informati on in violation of section 1411(h )(1) of the Affordable Care Act and the improper use and disclosure of inform ation in violation of section 1411(g) of the

Affordable Care Act. In §155.285(a), in accordance with the grounds on which penalties may be imposed as specified in section 1411(h) of th e Affordable Care Act, we propose the circumstances in which HHS may impose civil money pena lties (CMPs) on a person if HHS determines that the person has provided false or fraudulent information as prohibited by section 1411(h)(1) or improperly

used or disclosed information in violation of se ction 1411(g). We want to ensure that any person who does not comply with relevant statutory a nd regulatory provisions, which limit the ways in which information provided by an applicant or from a Federal agency can be used, may be appropriately penalized. HHS may impose CMPs fo r three specific types of actions related to the provision of false or fraudulent informa tion and the improper use of information. HHS

intends to work in collaboration with States to oversee, monitor, and enforce compliance withCMS-9949-P 104

§155.285 in order to protect consumers, avoid dup lication of efforts, a nd provide consistent enforcement practices. Section 1411(b) specifies the in formation that is required to be provided by an applicant for enrollment in a QHP offered through an Excha nge in the individual market, for premium tax credits or cost sharing reductions , or for an exemption from the individual shared responsibility payment based on the individual’s status as a member of an exempt religious sect or division, as an Indian, or as an individual eligible for a hard ship exemption, or based on the individual’s lack of affordable coverage or the i ndividual’s status as a taxpayer with household income less than 100 percent of the poverty line. In §155.285(a)(1)(i), we propose th at if any person (as defined at proposed §155.285(a)(2)) fails to provide corr ect information under section 1411(b) of the

Affordable Care Act and such failure is attributab le to negligence or disregard of any regulations of the Secretary, the person may be subject to a CM P. For purposes of this subsection, the terms “negligence” and “disregard” have the same meaning as those in section 6662 of the Code. Thus, we propose that “negligence” includes any failu re to make a reasonable attempt to provide accurate, complete, and comprehensive information, and the term “disregard” includes any careless, reckless, or intentional disregard for any rules or regula tions of the Secretary. Under proposed §155.285(a)(1)(i), if a pers on fails to make a reasonable attempt to provide accurate, complete and comprehensive information and as a result provides incorrect information, the person may be subject to a CMP. Second, in §155.285(a)(1)(ii), we propose thatif a person knowingly and willfully provides false or fraudulent information under sec tion 1411(b) of the Afford able Care Act, the person may be subject to a CMP. Here, HHS must find that a person provided false or fraudulent information “knowingly and willfully.” This pr ovision aims to ensure that any person whoCMS-9949-P 105

intentionally provides informati on required under section 1411(b) of the Affordable Care Act that the person knew to be false could be subject to a CMP. In addition, if consumer assistance personnel such as an agent, broker, Navigator, ce rtified applicati on counselor, or non-Navigator assistance personnel, were to in some manner di rectly provide false or incorrect information required under section 1411(b), they may also be subject to a CMP. If consumer assistance personnel subject to §155.206 of this subpart were to engage in this type of behavior, we propose

that it should be left to HHS’ discretion to determine whether it was appropriate to impose a CMP under this regulation, or under §155.206 of this subpart, if applicable. We note that §155.206 would only apply to Navigators, certifie d application counselors, and non-Navigator assistance personnel in a Federally-facilitated Exchange and that violations of §155.285 may not necessarily also constitu te violations of §155.206. In such instances where consumer assistance personnel may be subject to a CMP unde r both §§155.206 and 155.285, we have considered specifying that HHS may only impose a CM P under §155.285. However, we propose that it

should be left to HHS’ discretion to determine wh ether it would be appropriate to impose a CMP under §155.206 or §155.285. We seek comment on this proposal and whether any alternative approaches should be used. Third, in §155.285(a)(1)(iii), we propose that if a person knowingly and willfully uses or

discloses information in violation of Affordab le Care Act section 1411(g), the person may be subject to a CMP. Section 1411(g) of the Affo rdable Care Act specifies that any person who receives information required to be provided by an applicant, whether the person receives the information directly or by another person at the re quest of the applicant, or receives information from a Federal agency that has been verified as being consistent or inconsistent with the records of that Federal agency, may use the informati on only for the purposes of, and to the extentCMS-9949-P 106

necessary in, ensuring the efficient operation of the Exchange. We will refer to the personally identifiable information (PII) described in the previous sentence as “Exchange PII” for the purposes of this section. Secti on 1411(g) of the Affordable Care Act also specifies that any person who receives Exchange PII may not disclo se the information to any other person except as provided in section 1411 of the Affordab le Care Act. Section 155.260(a)(1) and (2) implement section 1411(g) of the Affordable Care Act by specifying that an Exchange may only use or disclose Exchange PII to carry out the functions desc ribed at §155.200 or to carry out

additional functions which the S ecretary has determined ensure the efficient operation of the Exchange and for which the individual has providedconsent for his or her information to be so

used or disclosed. In §155.285(a)(1)(iii)(A) through (C ), we propose types of activ ities that would be in violation of section 1411(g) of the Affordable Care Act. Because §155.260 further describes the limitations on the use and disclosure of Exchange PII, we propose that any use or disclosure of Exchange PII that violates relevant privacy a nd security standards established by the Exchange pursuant to §155.260 of this subpart may constitu te a violation of section 1411(g) of the

Affordable Care Act. We also propose that any other use or disclosure that has not been determined by the Secretary to ensure the effici ent operation of the Exchange be compliant with section 1411(g)(2)(A) of the Affo rdable Care Act pursuant to §155.260(a), and which is not necessary to carry out a function described in a contract with a non-Exchange entity executed pursuant to §155.260(b)(2) of this subpart, may constitute a violation of section 1411(g) Affordable Care Act. More specific examples of activities that would violate section 1411(g) Affordable Care Act include a person selling list s of Exchange PII belonging to individuals who apply for enrollment or enroll in an Exchange qualified health plan, ora non-Exchange entityCMS-9949-P 107

using the PII of individuals who sought enrollmen t in an Exchange qualified health plan to market products or services to those individuals. We note thatwithout the express, specific

consent of the consumer for their PII to be usedfor marketing purposes, use of Exchange PII for marketing purposes is prohibited by section 1411(g ). In addition, we note that any person who obtains specific consent from an applicant or enrollee to use PII for marketing purposes must clearly inform the applicant or enrollee that th e marketing activities have no relationship to or bearing on an eligibility determination for or en rollment in the Exchange. To the extent any person plans to obtain such consent to market pro ducts to Exchange applicants and enrollees, the person should be prepared to provide proof of consent upon re quest by the agency during the course of the agency’s norm al oversight activities. In §155.285(a)(2), we propose a definition of the term “person.” We propose that for purposes of this regulation, the term “person” sh ould be defined to include, but should not be limited to, all individuals; corporations; Exchanges; Medicaid and CHIP agencies; other entities gaining access to PII submitted to an Exchange to carry out additional functions which the Secretary has determined ensure the effici ent operation of the Exchange pursuant to 155.260(a)(1); and non-Exchange entities as defi ned in §155.260(b) of th is subsection, which includes agents, brokers, Web-brokers, QHP i ssuers, Navigators, certified application counselors, in-person assistors, a nd other third party contractors. The term “person” would also include the employees of the af orementioned entities. We propose to define the term very broadly because there are several different types of individuals and entities that could engage in the actions enumerated in §155.285(a)(1), and we hope to ensure that all such individuals and entities are aware of the penalties they could incur. We seek comment on these proposals.CMS-9949-P 108

In §155.285(b), we propose the factors that HHS may take into consideration when determining the amount of CMPs to impose. We propose in §155.285(b)(1) that HHS may take

into account factors that include , but are not limited to, the foll owing factors: the nature and circumstances of the conduct including the number of individual violations; the severity of the violations; the person’s history with the Exchange, including a ny prior violations that would

indicate whether the violation is an isolated occurrence or represents a pattern of behavior; the length of time during which the violation(s) occu rred; the number of i ndividuals affected or potentially affected; and the extent to wh ich the person received compensation or other

consideration associated with the violation. We also propose in §155.285(b)(2) that HHS take

into account the nature and exte nt of the harm resulting from th e action, including the number of individuals affected; whether the violation resultedin financial harm; whether there was harm to an individual’s reputation; whethe r the violation hindered or coul d have hindered an individual’s ability to obtain health care coverage; the actu al or potential impact of the provision of false or fraudulent information or of the improper use or disclosure of information; and whether any person received a more favorable eligibility determination for enrollment in a QHP or insuranceaffordability program, such as greater advance payment of the premium tax credits or costsharing reduction than he or she would be elig ible for if the correct information had been provided. In §155.285(b)(3), we implement the reas onable cause exception of section 1411(h)(1)(A)(ii) of the Affordable Care Act pu rsuant to which no penalty will be imposed under §155.285(a)(1)(i) if HHS determines that there was a reasonable cau se for the failure to provide correct information required on an Exchange appli cation and that the person acted in good faith.CMS-9949-P 109

We feel that this reasonable cau se exception is very important to ensure that no CMP may be imposed for a situation in which a pe rson was acting in good faith. In §155.285(c), we propose maximum penalties fo r each different type of violation, in accordance with the statutory limitations set forth in section 1411(h) of the A ffordable Care Act. Section 155.285(c)(1) addresses maximum penalt ies for provision of incorrect information, where such failure is attributable to negligence or disregard of any rule s or regulations of the Secretary, and for knowing and will ful provision of false or fraudul ent information in violation of section 1411(h) of the Affordable Care Act. We propose that the maximum penalty may be imposed on a per application basis, as define d at proposed §155.285(c)(1 )(iii), during a single “plan year.” We propose to use the definiti on for “plan year” at §155.20, where a “plan year” means a consecutive 12 month period during which a health plan provides coverage for health benefits and which may be a calendar year or otherwise. In §155.285(c)(1)(i), we propose that any person who fails to provide correct inform ation as specified in §155.285(a)(1)(i) may be subject to a maximum CMP, as specified in sect ion 1411(h)(1)(A)(i) of the Affordable Care Act, for each “application” on which the person fa ils to provide correct information. In §155.285(c)(1)(ii), we propose that any person w ho knowingly and willfully provides false information as specified in §155.285(a)(1)(ii) may be subject to a maximum CMP, as specified in section 1411(h)(1 )(A)(i) of the Affordable Care Act, for each application on which the person knowingly and willfully provides false informa tion. Since we are proposing that we would impose a penalty on a plan year basis, if a pers on were to elect to use the same information

which he or she entered on an in itial application for the subseque nt plan year, and the person had knowingly and willfully entered false inform ation on an application as described in §155.285(c)(1)(ii), the person may be subject to two CMPs, each up to the maximum CMPCMS-9949-P 110

specified in section 1411(h )(1)(A)(i) of the Affordable Care Ac t, based on the provision of false information for two plan years. In §155.285(c)(1)(iii), we propose that for th e purposes of this subsection, an “application” is defined as a submission of information whether submitted through an online portal, over the telephone through a call center, or through a pape r submission process. This submission of information is provided in relati on to any of the following: an eligibility determination; an eligibility redetermination base d on a change in an individual’s circumstances; or an annual eligibility redeterm ination for either enrollment in a qualified health plan, for premium tax credits or cost shar ing reductions, or for an exemption from the individual shared responsibility payment. By proposing this definition of application, we intend for each submission of information, regardless of the mean s of submission, to be considered a distinct application. For example, where a person submits an initial application fo r enrollment in a QHP, and later updates his or her information to reflect a change in circumstance, we propose that this person would have submitted two ap plications. We anticipate that there may be situations where a person submits a false piece of information on an initial application for c overage, and this false

information could be seen as re-submitted on a second application in the same plan year. We propose to provide HHS flexibility in such situa tions as that described above so that HHS may, in its discretion, and depending on the particular facts of the case, determine the number of incorrect pieces of information submitted, and therefore determine the appropriate penalty for

this situation. We solicit co mment on this proposal as well as on alternate methods through which HHS could determine the appropriate amount of penalties to impose. In §155.285(c)(2), we propose that any person who knowingly or willfully uses or discloses information as specified in §155.285(a)(1)( iii) may be subject to a CMP. We proposeCMS-9949-P 111

in §155.285(c)(2)(i) that a person may be subject to a maximum CMP, as specified in section 1411(h)(2) of the Affordable Care Act, for each use or disclosure described in paragraph (a)(1)(iii) of this sect ion, per use or disclosure. We also propose to define, in §155.285(d)(2)(ii)

that a use or disclosure includes one separate use or disclosure of a single individual’s PII that the person against whom a civil money penalty ma y be imposed has made. For example, if an agent were to sell a list of 100 consumers’ name s and other identifiable information to another entity, the proposed definition of a use or disclosure would mean that HHS could impose a total of 100 CMPs, each with a maximum penalty of th e amount specified in section1411(h)(2) of the Affordable Care Act because the agent ha d disclosed the PII of 100 individuals. In §155.285(c)(3), we also propose that these penaltie s may be imposed in addition to any other penalties that may be prescribed by law. In §155.285(d), we propose standards for a notic e of intent to issue a CMP that HHS must send to the person against whom the CMP is being imposed. We propose that the written notice will be either hand delivered, sent by certified mail, return receipt requested, or sent by overnight delivery service with signature upon delivery required. In §155.285(d)(1)(i)-(viii), we propose eight elements that must be included in the notice. The elements which must be included are as follows: (1) a description of the findings of fact regarding the violations with respect to which the CMP is propos ed; (2) the basis and reasons w hy the findings of fact subject the person to a penalty; (3) any circumstances described in §155.285( c) that were considered in determining the amount of the proposed penalty; (4 ) the amount of the proposed penalty; (5) an explanation of the person’s ri ght to a hearing under any appl icable administrative hearing process; (6) a statement that the failure to reques t a hearing within 60 cale ndar days after the date of the notice permits the assessment of the propos ed penalty; and (7) information explaining howCMS-9949-P 112

to file a request for a hearing and the address to which the hear ing request must be sent. We propose that the person may request a hearing be fore an ALJ on the proposed penalty by filing a request pursuant to the procedure that will be out lined in the notice of intent to issue a penalty that the person receives. In §155.285(e), we propose the consequences fo r a person who fails to request a hearing in a timely manner. We propose that HHS may assess the proposed CMP 60 calendar days after the date of issuance printed on the notice of intent to issue a CMP. In §155.285(e)(1), we propose that HHS will notify the pe rson in writing of any penalty that has been imposed, the means by which the person can satisfy the penalty, and the date on which the penalty is due. We propose in §155.285(e)(2) that a person has no right to appeal a penalty with respect to which the person has not timely requested a hearing. We be lieve 60 days is a sufficient period for a person to request a hearing. We seek comment on these proposals. In §155.285(f), we propose to use the existing ap peals framework in regulation at 45 CFR Part 150, Subpart D. We propose to exclude §§ 150.461, 150.463, and 150.465 based on their lack of applicability to §155.285. In §155.285(g) , we propose that CMS and OIG will share enforcement authority to impose the CMPs in §155.285. In §155.285(g)(1), we propose that CMS may impose CMPs for any of the violatio ns at §155.285(a). In §155.285(g)(2), we propose that OIG may impose CMPs for violations specifi ed at §155.285(a)(1)(ii) a nd (iii) in place of imposition of penalties by CMS. We believe OIG has the investigative capabilities which would be necessary to determine whether a person performed an action knowingly and willfully, a finding which would be required before imposi ng a CMP for the violations specified at §155.285(a)(1)(ii) and (iii). In light of our proposal to allow OIG to impose CMPs for violations specified at §155.285(a)(1)(ii) and (i ii), we anticipate that OIG w ould amend its regulations atCMS-9949-P 113

part 1003 of Chapter V of title 42 to encompass the st andards set forth in this section. We seek comment on the proposed use of the regulator y framework for appeal s at 45 CFR Part 150, Subpart D and on the question of whether any other regulatory framework used by HHS for appeals presents a more appropriate framework. In §155.285(h), we propose a settlement author ity provision to ensure CMS is able to settle any issue or case described in §155.285( a) if necessary. Fi nally, in §155.285(i), we propose a six year statute of limitations, begi nning from the date on which the violation occurred, within which HHS may impose a CMP against a person. We seek comment on the proposed 6 year statute of limitations. 3. Subpart D—Exchange Functions in the Indi vidual Market: Eligibility Determinations for Exchange Participation and Insurance Affordability Programs a. Verification of Eligibility for Minimum Esse ntial Coverage Other Than Through an Eligible Employer-Sponsored Plan (§155.320) In §155.320(d)(4), we established an option unde r which a State Exchange could rely on

HHS to conduct verifications of enrollment inan eligible employe r-sponsored plan and eligibility for qualifying coverage in an elig ible employer-sponsored plan for purposes of eligibility for advance payments of the premium tax credit. This option was made available for eligibility determinations that are effective on or after January 1, 2015. Under this option, a State Exchange would need to develop an interface through which to transfer information to HHS, HHS would need to develop a wa y to receive and process the in formation, check data sources, potentially communicate with consumers, and then return information to the State Exchange, and the State Exchange would need to modify system s to integrate this re sponse into what should otherwise be a near-real-time eligibility proces s. Responsibilities for customer service wouldCMS-9949-P 114

likely be split across the State Exchange and HHS, which would be difficult to coordinate and

increase administrative costs. Accordingly, we have determined that th e benefit gained by having HHS provide this function is far outweighed by the information technology development and administrative and consumer complexity that would be introduced for a State through this approach. As such, we propose to strike paragraph (d)(4). We remain committed to working with State Exchanges to develop effective solutions for verifying enrollm ent in an eligible employer-sponsored plan and eligibility for qualifying coverage in an eligible employer-sponsored plan, and will work to make any additional electronic data sources that are accessible to HHS equally available to State Exchanges. We note that this proposed modifi cation does not change the substantive rules regarding the verification of enro llment in an eligible employer-spons ored plan and eligibility for qualifying coverage in an eligib le employer-sponsored plan. Therefore, the change does not affect program integrity. b. Eligibility Redetermination During a Benefit Year (§155.330) We propose a te chnical correction in paragraph (d)(2 )(ii) to remove the reference to paragraph (e)(3) of this secti on. In the final rule titled, “Medicaid and Children’s Health Insurance Programs: Essential Health Benefits inAlternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processe s, and Premiums and Cost Sharin g; Exchanges: Eligibility and Enrollment”, 78 FR 32319, we previously removed paragraph (e)(3) from th is section. As such, we now clarify that paragraph (d)(2)(ii) should on ly refer to the standards specified in paragraph (e)(2) of this section. 4. Subpart E—Exchange Functions in the Indivi dual Market: Enrollment in Qualified Health

PlansCMS-9949-P 115

a. Enrollment of Qualified Individuals in a QHP (§155.400) In §155.400, we propose to add paragraph (e). In this paragraph, we propose to establish that the Exchange would provide instructions to issuers regardi ng payment of the first month’s premium for enrollments. Additionally, in §156.2 65 we propose to establish a requirement for issuers in the Federally-facilitated Exchanges re garding payment due dates to collect premiums no later than the day before the c overage effective date. Our inte ntion is to give the Exchange the flexibility to establish policy and pr ocess rules regarding premium payment.

We also propose to add paragraph (f), which would authorize Exchanges to provide requirements to QHP issuers regarding the instru ctions for processing electronic enrollmentrelated transactions. b. Initial and Annual Open Enrollment Periods (§155.410) In 45 CFR 155.410(d), we specify that star ting in 2014, the Exchange must provide a written annual open enrollment no tification to each enrollee no earlier than September 1, and no later than September 30. In 45 CFR 155.335(d), we specify that notice of annual redetermination for coverage effective January 1, 2015 be provide d as a single, consolidated notice with the notice specified in 45 CFR 155.410(d). In the 2015 Payment Notice, we amended 45 CFR 155.410(e) to specify that for the benefit year beginning on January 1, 2015, the annual open enrollment period begins on November 15, 2014. Acco rdingly, we believe th at it is appropriate to modify the timing of the notice of annual open enrollment and annual redetermination. Two options we could consider for this notice incl ude, but are not limited to : (1) shifting the period during which the notice would be sent by a month, so that the notice would be sent no earlier than October 1, and no later than October 31; an d (2) shifting the period during which the noticeCMS-9949-P 116

would be sent by a month and lengthening this peri od so that the notice would be sent no earlier than October 1, and no later than November 15, provi ded that electronic no tices are available for any consumer who contacts the Exchange on N ovember 15. We solicit comment on which of these options we should implement, or if we should implement another option. c. Special Enrollment Periods (§155.420) In 45 CFR 155.420, we set forth provisions for special enrollment periods. We now propose amending §155.420(b)(2)(ii), (d )(1), (d)(6)(iii) and (e), wh ich pertain to the special enrollment period for loss of coverage; §155.420(b)(2 )(i) and (iii), which pertain to effective dates for certain special enrollment periods; a nd §155.420(c), to address the length of the special enrollment periods. In paragraph (b)(2)(i), we propose to provide flexibility for coverage effective dates in the case of birth, adoption, placement for adoption, or placement in foster care. We continue to require the Exchange to ensure th at coverage is effective for a qualified individual or enrollee on the date of birth, adoption, placement for adoption, or placement in foster care, but we allow Exchanges to permit the qualified in dividual or enrollee to elect a la ter coverage effe ctive date. If the Exchange permits the qualified individual or enrollee to elect a later coverage effective date, the Exchange must ensure coverage is effective on the date elected by th e qualified individual or enrollee. We are considering establishing parame ters for the dates that may be chosen by the qualified individua l or enrollee. In §147.104(b)(2), we specified that, “a health insurance issuer in the individual market must provide, with respect to individuals enrolled in non-ca lendar year individual health insurance policies, a limited open enrollment period...” Accordingly, in order to align Exchange regulations with those of the broader insurance market, in paragraph (d)(1 ), we propose that theCMS-9949-P 117

Exchange permit qualified individuals and their depe ndents to enroll in or change from one QHP to another if they are enrolled in a non-calendar year individual health insurance policy in 2014 described in §147.104(b)(2), even if such non- calendar year policies are renewing. Thus, consumers whose individual health insurance po licies that renew outside the Exchange open enrollment period have an opportunity to enroll in an Exchange, just as they would if their policies renewed during the Exchange open enroll ment period. Without this addition, consumers with individual health insurance policies renewi ng outside the Exchange open enrollment period would be required to renew such policies, and wa it to terminate the policies during the Exchange open enrollment period, should they wish to enro ll in the Exchange, thus disadvantaging these consumers as compared to consumers enrolled in calendar year individua l market policies. In 26 CFR 1.5000A-2(b)(1)(ii)(C), the Secretar y of the Treasury specified that coverage of pregnancy-related services under section 1902(a)(10 )(A)(i)(IV) and (a)(10 )(A)(ii)(IX) of the Social Security Act (42 U.S. C. 1396a(a)(10)(A)(i)(IV), (a)(1 0)(A)(ii)(IX)) was not minimum essential coverage. In order to ensure that women losing eligibil ity for coverage of pregnancyrelated services as described above are not left without an option to en roll in a QHP after the conclusion of Medicaid eligibilit y, in paragraph (d)(1), we pro pose that the Exchange permit qualified individuals and their depend ents to enroll in a new QHP if they lose eligibility for such pregnancy-related services. We note that HHS may designate certa in specific pregnancy-related programs to be minimum essential coverage under section 5000A(f)(1)(E ) of the Affordable Care Act, though we propose to require th is special enrollment period, regardless. We solicit comments regarding whether there ar e other situations in which an individual loses coverage that is not defined as minimum essential coverage, such as AmeriCorps coverage, and should be provided with a special enrollment period.CMS-9949-P 118

We propose to add to paragraph (c) to speci fy that the Exchange must permit qualified individuals and their dependents to access the speci al enrollment periods described in paragraph (d)(1) for up to 60 days prior to the end of the qualified individua l’s or his or her dependent’s existing coverage. This is consistent with exis ting regulations in paragr aph (d)(6)(iii) that are specific to an individual who is enrolled in an eligible employer-sponsored plan who is determined newly eligible for advance payments of the premium tax credit based in part on a finding that such individual is ineligible for qualifying covera ge in an eligible employersponsored plan. To improve the clarity and stru cture of this rule, we propose to move the language in paragraph (d)(6)(iii) regarding the 60 days prior access to the SEP to paragraph (c). The proposed change, to paragraph (d)(1) that wo uld expand the ability to report a change in

advance to all individuals who are described in paragraph (d)( 1) is designed to allow an individual who is losing eligibil ity for coverage outside the Exch ange to transition to coverage offered through an Exchange without a gap in co verage, but with protections to ensure that advance payments of the premium tax credit are not provided in advance of the loss of eligibility for minimum essential coverage outside the Exchange. Accordingl y, we note that individuals are not eligible for advance payments of the premiu m tax credit until they are no longer enrolled in minimum essential coverage outside the Exchan ge. Lastly, we propose to make conforming changes to paragraphs (b)(2)(ii) and (e) to align with the chan ges in terminology proposed in paragraph (d)(1). In paragraphs (d)(4), (d)(5), (d)(9) and (d)(1 0), we provide special enrollment periods for errors, contract violations, exceptional ci rcumstances and misconduct. Existing paragraph (b)(2)(iii) specifies that for a plan selection ma de during one of the speci al enrollment periods under paragraphs (d)(4), (d)(5), and (d)(9), covera ge must be effective on an appropriate dateCMS-9949-P 119

based on the circumstances of the special enro llment period, in accordance with guidelines issued by HHS, and provides two options for th at effective date. We propose to add special enrollment periods triggered unde r paragraph (d)(10) to those sp ecial enrollment periods for which these special coverage effective dates are ava ilable. In order to ensure that the Exchange has sufficient flexibility with which to address the types of scenarios that may trigger these special enrollment periods, we propose to amend paragraph (b)(2)(iii) to re move the restriction to these two options. The resulting re gulatory text would allow the Exchange to set an effective date based on what is appropria te to the circumstances, in accor dance with any guidelines issued by HHS. Similarly, in order to ensure that the Ex change sets the length of these same special enrollment periods to be appropr iate to the circumstances of the specific enrollment period, we propose to modify paragraph (c) to specify that the Exchange may define the length of these special enrollment periods as appropriate based on the circumstances of the special enrollment period, in accordance with any gui delines issued by HHS. We believ e that this flexibility is important to ensure that the special enrollm ent periods can be implemented as intended. Section 155.420(e) clarifies what qualifies as loss of coverage for purposes of the special enrollment period described in paragraph (d)(1). We propose to m odify this paragraph to clarify that voluntary termination does not qualify as loss of coverage for purposes of a special enrollment period, since the intent of this special enrollment period is to ensure that an individual who is losing coverage can transition to the Ex change without interruptio n, and not to allow an

individual to switch from anothe r form of coverage to the Exch ange during the year when the other form of coverage remains available and he or she does not quali fy for another special enrollment period described in this section. We solicit comments regardi ng this clarification. d. Termination of Coverage (§155.430)CMS-9949-P 120

We propose to add paragraph (e) to §155.430 to establish the difference between a

termination and a cancellation a nd establish the significance of a reinstatement action in the context of QHP coverage offered through an Exch ange. Specifically, we propose to specify that a cancellation is a specific type of termination action taken either prior to or after the effective date of coverage that ends a qualif ied individual’s covera ge on or before the effective date, thus rendering coverage as never effective. In contra st, a termination is an action taken after the effective date of coverage that ends an enrollee’ s coverage effective on a date after the coverage

effective date. In a cancellati on, the effect of the QHP’s ac tion would be that a qualified individual never receives coverage from the QHP, whereas in a termination the QHP covers the enrollee for some period of time and would be lia ble for covered services that the enrollee received during the time period be tween the coverage effective date and the termination date, under the terms of the coverage. A reinstatem ent action is a correc tion of an erroneous termination or cancellation action resulting in rest oration of an enrollment with no break in

coverage. In addition to establishing the difference be tween cancellations and terminations, we also propose that an Exchange may establish operatio nal standards for QHP issuers for implementing terminations, cancellations, and reinstatements. Enrollment systems for both SBEs and the FFE continue to evolve, and we believe that the Exchange’s ability to issue operational instructions will enable both the Exchange and the issuer co mmunity to respond more effectively to changing systems and changing processes. We believe the effectiveness of this approach has been demonstrated in other programs administered by CMS, specifically the Medicare Advantage and Medicare Part D programs.CMS-9949-P 121

Further, we are proposing to clarify in paragr aph (d)(6) that the termination effective date being the day before the effective date of covera ge in the new QHP would also apply in cases of

retroactive enrollments. This could occur when a consumer is granted a special enrollment period to change QHPs with a retroactive coverage effective date under 155.420(b)(2)(iii). For coverage that is terminated retroactively, CMS will adjust any applicable payments to the original QHP issuer based on the retroactive te rmination date, in order to recoup any advance payments of the premium tax credit and cost-shari ng reductions made to the former issuer for the enrollee. The Exchange would be required to ensure that the former issuer refunds or credits any premium paid to the issuer by the enrollee, re versing claim payments, and ensuring the provision of refunds for out-of-pocket payments made by or for the enrollee for covered benefits and services incurred, during the retroactive coverage period. We seek comment on whether to add a specific requirement to this effect on issuers in Part 156. Conversely, in the case of a retroactive coverage date, CMS will provide the gaining issuer any applicable advance payments of the premium tax cr edit and cost-sharing reductions based on the retroactive coverage effective date. Cost-sharing reduction reconciliation will occur for all cost-sharing reductions provided beginning with the retroactive coverage date. The gaining issuer would collect the enrollee’s portion of the premium fo r all months of coverage and will be required to adjudicate the enrollee’s clai ms incurred during the retroactive period, and provide any applicable cost-sharing reductions. 5. Subpart F—Appeals of Eligib ility Determinations for Exchange Participation and Insurance Affordability Programs a. General Eligibility A ppeals Requirements (§155.505)CMS-9949-P 122

In §155.505, we propose a technical correction to paragraph (b)(4) by removing “; and” at the end of the paragraph a nd adding a period in its place. b. Dismissals (§155.530) In §155.530, we propose to amend paragraph (a )(1) to provide an additional method for appellants to withdraw appeal requests. The existing provisi on requires an appellant who wishes to withdraw his or her appeal request to do so in writing (har d copy or electronic). We are proposing to include the alternativ e for an appellant to withdraw his or her appeal by telephone, if the appeals entity is capabl e of accepting telephonic withdrawals. In paragraphs (a)(1)(i)(A) and (B), we propose the requirements for pr oviding a telephonic withdrawal process. Specifically, we propose that the appeals entity must record in full the appellant’s statement and telephonic signature made under penalty of perj ury, and provide a writte n (in hard copy or electronically) confirmation to the appellant documenting the te lephonic interaction. This written confirmation can be captured in the dismi ssal notice required in the case of a withdrawal under §155.530(b). We note that a telephonic signature is a verbal acknowledgement in place of a written signature. The intent of this proposed amendment is to provide a more efficient and convenient method for appellants and appeals en tities to conclude an appeal at the request of the appellant. For example, under the current rules, an appeals entity must keep an appeal open and proceed to hearing following an informal resolution in every case where the appellant has not communicated his or her wish to withdraw the appeal in writing, even if the appellant is satisfied

with the informal resolution decision. Because we anticipate that many appellants will not take the step of withdrawing their appeal requests in writing in this scenario, we believe the proposed amendment will provide appellants an easier process through which they can indicate their wishCMS-9949-P 123

to end the appeals process. In addition, we be lieve the proposed amendm ent will also benefit appeals entities by reducing administrative bu rden, such as the requirement to convene unnecessary hearings described in the example above. The telephonic signature process provides a verifiable record of the appe llant’s intention to withdraw the appeal and end the appeals process, including where the appellant is satisfied with a result he or she has obtained without fully exhausting the ap peals process. We request comments on this proposed amendm ent, including the proposed requirements for accepting telephonic withdrawals. We also note that, although the proposed amendments to this provision will put the Exchange rules for withdrawal of an appeal request out of alignment with the Medicaid fair hearing ru les, and we seek comment specifically on the impacts of this proposed change. Finally, we note that this pr oposed amendment also impacts withdrawal procedures for an employer appeal through the cross-reference in §155.555(f)(1), which currently requires wi thdrawals in writing. c. Employer Appeals Process (§155.555) We propose to amend §155.555 by redesignating paragraphs (d)(1) through (d)(4) to more clearly delineate between the requirements associated with valid appeal requests versus invalid appeal requests. We note that under th is proposed redesignation, paragraph (d)(4) would become new paragraph (d)(2), stating that upon recei pt of an invalid appeal request, the appeals entity must promptly and without undue delay se nd written notice to the em ployer that the appeal request is not valid because it fails to meet the requirements of this section. New paragraph (d)(2) would also provide introduc tory language for the requirements provided in paragraphs (d)(2)(i) through (iv). The resu lt of this proposed revisions would be to separate theCMS-9949-P 124

requirements for valid appeal requests in redesign ated paragraph (d)(1) a nd the requirements for invalid appeal requests in new paragraph (d)(2). 6. Subpart G—Exchange Functions in the Indi vidual Market: Eligibility Determinations for Exemptions a. Required Contribution Percentage Under section 5000A of the Code, an indivi dual must maintain minimum essential coverage for each month, qualify for an exemption, or make a shared responsibility payment. Sections 5000A(d) and (e) provide for nine categories of exempti ons, and authorize the Secretary to determine individuals’ eligibility for some of the exemptions, in cluding the hardship exemption. Sections 1.5000A-3(a) through (h) of 26 CFR enumerate the circumstances in which an individual may be exempt from the shared responsibility payment. These grounds for exemption include: (1) under 26 CFR 1.5000A-3(e), the individual lacks affordable coverage because the individual’s annualized required cont ribution for minimum essential coverage for the month exceeds the required contribution percentage of the indi vidual’s household income; (2) the individual has in effect a hardship exem ption certification described in 26 CFR 1.5000A-3(h) and issued by an Exchange, as described in 26 CFR 1.5000A-3(h) and, based on the individual’s projected household income, will have no affordable coverage; and (3) the individual and one or more employed members of his or her family has been determined eligible for affordable selfonly employer-sponsored coverage through their respective employers , but the aggregate cost of employer-sponsored coverage for all the employed members of the family exceeds 8 percent of household income for that calendar year, as described in 45 CFR 155.605(g)(5). Determining eligibility for these exemptions requires compar ison between the individual’s share of the costs for obtaining minimum essential coverage and a certain percentage of the individual’s householdCMS-9949-P 125

income, actual or projected, for the taxable year . Under section 5000A(e)( 1)(A) of the Code, the percentage of the individual’s household income is 8 percent. Secti on 5000A(e)(1)(D) of the Code and 26 CFR 1.5000A-3(e)(2)(ii ) further provide that, for plan years beginning in any calendar year after 2014, the percen tage is determined by the Secr etary to reflect the excess of the rate of premium growth be tween the preceding calendar y ear and 2013 over the rate of income growth for the period. Below, we outline and request comments on is sues related to various methodologies we are considering for determining the excess of the ra te of premium growth ove r the rate of income growth. We are considering publis hing the excess of the rate of premium growth over the rate of income growth for calendar years after 2015 in the annual HHS notice of benefit and payment parameters. We are also considering modi fying §155.605(g)(5), which currently sets the required contribution percentage at 8 percent, so that the required contribution percentage for this exemption in future years reflects the require d contribution percentage for the applicable calendar year. Methodology for Determining the Excess of Rate of Premium Growth Over Rate of Income

Growth As one possibility, we are considering estab lishing the rate of premium growth over the rate of income growth for a particular calendar year as the quotie nt of (x) one plus the rate of premium growth between the pre ceding calendar year and 2013, carried out to ten significant digits, over (y) one plus the rate of income growth between the preceding calendar year and 2013, carried out to ten significant digits. (To avoid magnifying roundi ng errors, any ratio of this sort would also be carried out to ten significant digits.) This would be multiplied by the required contribution percentage for 2014, for ease of appli cation, and the result woul d be rounded to theCMS-9949-P 126

nearest hundredth of a per cent to yield the required contributi on percentage for the calendar year. We note that this methodology would lead to a re duction in the required c ontribution percentage if the ratio of premium growth to income growth is less than one. Allowing for such a possibility would help ensure that changes in the required contri bution standard are pr oportional to changes in the ratio of premiums over income observed in th e private market as a whole. In contrast, we are also considering constraining this ratio, th e excess of premium growth over income growth, to be greater than or equal to one. In additi on, as discussed in furthe r detail below, we are considering constraining the rate of premium growth and/or the rate of income growth to be equal to or greater than zero in any given y ear, and seek comment of the impact of these constraints on the excess of the rate of premiu m growth over the rate of income growth. We welcome comment on approaches for determining th e excess of the rate of premium growth over the rate of income growth. In particular, we seek comment on whether th e excess of the rate of premium growth over income growth should be calculated based on the difference between the growth rates, the ratio of the growth rates, or through other methods, and whether the result should be subject to other adjustments.

Premium Growth : We are considering se tting the rate of premium growth for a calendar year to be the premium adjustment percentage for the year. We provided in the 2015 Payment Notice that the premium adjustment percen tage, described at 45 CFR 156.130(e), will be published each year in the HHS notice of benefit and payment parameters, and will be used to adjust certain cost-sharing parameters established by the Affordable Care Act. As discussed in the 2015 Payment Notice, the premium adjustment pe rcentage is calculatedbased on projections of average per enrollee employe r-sponsored insurance premiums from the National Health Expenditure Accounts (NHEA), which are calculat ed by the CMS Office of the Actuary. AfterCMS-9949-P 127

the initial years of implementati on of market reforms, once the premium trend is more stable, we may propose to change the methodology for calculati ng the premium adjustment percentage. For 2015, the premium adjustment percentage is 4.21 3431463 percent. We note that incorporating the premium adjustment percentage into the methodology for determining the required contribution percentage will ensure that adju stments for premium growth are made in a consistent manner across programs established by the Affordable Care Act. We welcome comment on whether we should use the premium adjustment percentage as a measure of premium growth for the purpose of calculating the contribution percentage index. We also seek comment on whether adjustments, such as ceilings or floors, should be made to that index. For example, we are also considering constraining th e rate of premium growth to be equal to or greater than zero in any given year. We note the language of section 5000A(e)(1)(D) of the Code could be read to support su ch an interpretation. That se ction uses the term “premium growth,” which could be read to mean that the statute envisions an adjustment of the required contribution percentage to only incorporate an in crease in premiums. However, for purposes of this calculation, we seek comment on whether gr owth should be interpre ted to refer to both positive and negative growth. We also seek comm ent on whether other data sources or methods should be used, such as alternative NHEA da ta sources, premium data from the Federal Employee Health Benefits Program, or any of the data sources discussed in connection with our proposal for the premium adjustment percentage i ndex in the proposed 2015 Payment Notice.

Income Growth : We are contemplating calculating the rate of income growth for a calendar year as the percentage by which the per capita GDP for the preceding calendar year exceeds the per capita GDP for 2013, carried out to te n significant digits. In alignment with the premium adjustment percentage, we are consider ing using the projections of per capita GDPCMS-9949-P 128

used for the NHEA. 36 If we were to use the projection of per capita GDP used for the NHEA as a measure of income growth, the rate of in come growth for 2015 would be 3.608458790 percent. We note that GDP is a commonly used measure of income growth, but we are also considering other measures of income, such as indices of wages and salaries, and measures of personal income. We welcome comment on our proposed method for calculating the rate of income growth as well as alternative sour ces of income data that we shoul d consider. In particular, we request comment on whether adju stments should be made to our data source or methodology, such as ceilings or floors. For example, sim ilar to our discussion of “premium growth” above, we note that section 5000A(e)(1)(D) of the Code refers to “the ra te of income growth.” Again, seek comment on whether growth should be interpreted to refer to both positive and negative growth. We also seek comment on whether we should seek to measure growth in GDP per person under the age of 65 or per worker, or growthin some other form of income index only for persons under the age of 65 or per worker, which may align more closely with certain measures of premium growth. We seek comment on all aspects of these potential approaches. b. Options for Conducting Eligibility Determinations for Exemptions (§155.625) In §155.625, we established an option under which a State Exchange could adopt an eligibility determination for an exemption from the shared respons ibility payment that was made by HHS, provided that certain conditions were me t. Section 1311(d)(4)(H ) of the Affordable Care Act specifies that one of the minimum functions of an Exchange is to, “...grant a certification attesting that...an individual is exempt...” Acco rdingly, §155.625(b)(2) specified

36 See Table 1 in http://www.cms.gov/Research-Statis tics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/Proj2012.pdf

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that under this option, effective October 15, 2014, the Exchange would need to accept the exemption application, transmit it securely to HHS , receive the result, and notify the consumer. This process introduces significant informa tion technology development and administrative burden into a process that could ot herwise be executed at a single en tity. In particular, such an arrangement would require a split of customer service responsibilit ies, which could make it very difficult for consumers to navigate the process. It also creates challenges for exemptions that

involve information that can only be obtained through the eligibility process for insurance affordability programs, like the cost of the lowest-cost bronze plan net of advance payments of the premium tax credit, which is a component of one of the hardship exemptions described in this subpart, and is only avai lable through a State Exchange. Accordingly, we propose to revise §155.625 to remove the option for a State Exchange to adopt an eligibility determination for an exempti on from the shared responsibility payment made by HHS for applications submitted on or afte r November 15, 2014 and, for applications submitted before November 15, 2014, to retain the conditions currently imposed for adopting an eligibility determination for an exemption from the shared respons ibility payment that was made by HHS under paragraph (b)(1). Under this propo sal, HHS would continue to provide support in this area for applications up until that date. HHS has developed and released a set of model paper applications that can be adopted by State Exch anges, and is committed to providing technical

assistance to assist State Excha nges in developing the capability to handle the minimum function of granting certificates of exemption. 7. Subpart H—Exchange Functions: Small Business Health Options Program a. Functions of a SHOP ( § 155.705)CMS-9949-P 130

Section 155.705(b)(2) and (3) curr ently provide that, for plan years beginning on or after January 1, 2015, all SHOPs must make available to qualified employers the option of selecting

an actuarial value level of cove rage as described in section 1302(d)(1) of the Affordable Care Act and making all qualified health plans at that level available to qualified employees (“employee choice”). Based on communicati ons with issuers and State insurance commissioners, HHS has become concerned that, in some circumstances, implementing employee choice in 2015 might significantly di srupt some small group markets, and might therefore have a negative effect on the ability of small business owners to access coverage. HHS is specifically concerned that in certain circumstances, employee choice might lead to sicker people enrolling in disproportionate numbers in certain plans, wh ich could have the effect of discouraging issuers from participating in the SHOP or causi ng adverse selection in the market that cannot be fully addressed by the single risk pool provisions of the statute or the premium stabilization programs. We have also heard concerns from issuers and State insurance commissioners that requiring em ployee choice might reduce issu er participation, leading to

minimal value to consumers when there is not br oad participation among i ssuers in the SHOP. At the same time, HHS does not anticipate that th ese conditions will apply in most markets, and HHS is continuing to work toward implementing employee choice in all SHOPs, because in the long run employee choice will bring significant be nefits to small business owners and their employees. Not implementing employee choice may also disrupt the implementation efforts that issuers, States, Exchanges, and other stakeholders have already undertaken. To address these concerns, we propose to amend §155.705(b)(2) and (3) to provide for a one year transition policy under which a SHOP would be permitted to not implement employee choice in 2015 under specific circ umstances: (1) if employee choice would result in significantCMS-9949-P 131

adverse selection in the State’s small group mark et that could not be fully remediated by the single risk pool or premium stabil ization programs; or (2) if ther e is an insufficient number of issuers offering qualified health plans or quali fied stand-alone dental plans to allow for meaningful plan choice among qualified health plans or qualified stand-alone dental plans for all

actuarial value levels in the St ate’s SHOP. We believe that m eaningful choice means sufficient competition in the market to allow for partic ipation in the SHOP from multiple issuers throughout the State. Meaningful choice provides affordable, quali ty plan options throughout the

State’s SHOP for all actuarial value levels. Under this proposal, a State regulatory agency, su ch as the State department of insurance, would submit a recommendation to the SHOP (or in the case of an FF-SHOP, to the Secretary) in support of either circumstance for plan years beginning in 2015. We ar e considering whether such a recommendation by the State regulatory agency should include a mitigation plan describing the process the State regulatory agency will take to ensure that full implementation of employee choice in 2016 would not result in the occurrence of either aforementioned circumstance, and seek comment on whether su ch a plan should be included with the recommendation. We expect that the State woul d be required to provide in the recommendation to the SHOP concrete evidence that employ ee choice would result in significant adverse selection in the State’s small group market th at cannot be remediat ed through the premium stabilization programs or the single risk pool, or that there would not be a meaningful choice of QHPs and/or stand-alone dental plans in the Stat e’s SHOP. The SHOP would then evaluate the State’s recommendation and reque st and determine whether th e State’s small group market would be significantly adversely affected by th e implementation of employee choice. In the FFSHOPs, CMS would seek public comment on th e State’s request regarding employee choiceCMS-9949-P 132

before making this determination. We seek comme nt on all aspects of the process SHOPs should follow in making this determination. We seek comment on all aspects of this pr oposal, including, but not limited to: (1) the effect of such a policy on all SHOPs; (2) the effect of such a policy on each State’s small group market; (3) the effect of such a policy on sma ll employers and their employees and dependents; (4) the information the State regulatory agency should provide in support of any recommendation; (5) the criteria the SHOP (including, in the case of an FF-SHOP, the Secretary) should use in assessing a State regulatory ag ency recommendation; (6) whether all SHOPs should seek public comment on the State’s requ est regarding employee choice; (7) whether employee choice would have to exist for both medi cal QHPs and stand-alone dental plans, or for neither; and (8) whether other pr ovisions of the HHS regulations applicable to SHOPs should also be subject to a transition in SHOPs that exerci se the proposed option. In particular, we seek comments on what should qualify as a significant ri sk of adverse selectio n, what should qualify as a lack of meaningful plan choice, and how both these conditions should be measured. We also recognize the importance of the timing of a State regulatory agency’s recommendation and the SHOP’s decision regard ing employee choice under this proposal. Whether or not employee choice is available in a SHOP may be re levant information for issuers to consider as they make QHP submissions, but State regulatory agencies also need time to evaluate market dynamics before they can ma ke a recommendation about whether the SHOP should not implement employee choice in 2015. We are considering establishing a deadline for the State regulatory agency’s recommendation to the SHOP. One option we are considering is that State regulatory agencies w ould make recommendations prior to the close of the initial QHP application window, with sufficient time for issuer s to decide whether or not to participate inCMS-9949-P 133

SHOP for the following plan year. Another option would be as follows: (1) all issuers interested in participating in SHOP would apply during the initial applica tion window; (2) state regulatory agencies then would have a specific window of time within which to make a recommendation regarding whether to not implement employee choi ce in 2015 based on the applications received; (3) the SHOP would then have a specific window of time within which to make a decision about not implementing employee choice in 2015 based on that recommendation; (4) issuers could, based upon the SHOP’s decision, decide whether to maintain, modify, or withdraw their QHP applications. In the FF-SHOPs, under this sec ond scenario, we do not anticipate that issuers would be able to submit applications after the initial deadline to apply for QHP certification had passed. We solicit comment on these two options for timing the State regulatory agency’s recommendation and the SHOP’s decision, and also solicit additional, alternative suggestions for how best to operationalize this pr oposal. Generally, we request comment on the appropriate time for State regulatory agencies to submit a request to the Exchange regarding employee choice, on the appropriate time for the Exchange to make a decision on those requests, and on the effect of the timing of the decision making process on the QHP certification timeline as described in HHS regulations and guidance (including in the 2015 Annual Issuer Letter). 37 In any event, we expect that SHOPs would reach a decision about employ ee choice no later than early Fall 2014. We

also seek comment on whether adverse selecti on could be avoided by allowing an employer to provide employee choice under the following circum stances: (1) within a single issuer’s plan offerings within an actuarial value level; (2) for all plans from a single issuer across two contiguous actuarial value levels; and (3) for all plans, all actuari al value levels, from a single

37 2015 Letter to Issuers in the Federally-facilitated Marketplaces (M arch 14, 2014). Available at: http://www.cms.gov/CCIIO/Res ources/Regulations-and-Guidance/Down loads/2015-final-issuer-letter-3-14- 2014.pdf

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issuer. These circumstances are transitional policies and do not reflect the full implementation of employee choice; we seek comment on how th e proposed provisions would apply in these

circumstances. b. Enrollment Periods under SHOP (§155.725) We propose amendments to §155.725(c) and (e) to amend the dates for the annual open enrollment periods for qualified employers and qualified employees in all SHOPs, both State-based or Federally-facilita ted. In proposed §§155.725(c)(1), we pr opose to align the start of annual employer election periods in all SHOPs for plan years begi nning in 2015 with the start of open enrollment in the corresponding individual market Exchange for the 2015 benefit year, as amended in the 2015 Payment Notice. In accordan ce with this proposal, we propose to modify paragraph (e) of this section to remove the refe rence to a period of no less than 30 days for the annual employee open enrollment period. Under this proposal, the annual employer and employee election periods would begin no sooner than November 15, 2014 with employers making selections first, followed by employees. Th e employer’s annual election period will end when the employer makes relevant decisions about the coming year’s participation. Qualified employers and qualified employees would still have adequate time to perform plan selection for plan years beginning in 2015 under this proposal. SHOPs would be nefit from having the same amount of time to complete the QHP certification pr ocess for the SHOP as they have to complete this process for the individual Exchange. Notific ation standards described in paragraph (d) and (f) of this section woul d still apply, as the standards merely require the SHOP to notify qualified employers of annual employer election periods a nd to notify qualified employees of the annual employee open enrollment periods in advance of such periods.CMS-9949-P 135

The lack of alignment of the start of annua l employer election peri ods in the SHOP for plan years beginning in 2015 with th e start of open enrollment in the individual market Exchange for 2015 would place a burden on SHOPs and QHP issuers. Many Exchanges rely on the same technology solutions for plan management and other minimum functions of Exchanges in both the individual and small group markets. Aligning the start dates for the employer election period with the start of individual market Exchange open enrollment for 2015 would provide Exchanges with a uniform timeline for improving and launching Exchange services for 2015. Additionally, a uniform QHP filing and review timeline for bo th markets for 2015 would reduce confusion and provide efficiencies to scale in review, providing potential re source savings to Exchanges and QHP issuers. These efficiencies would still ex ist even if the SHOP and individual market Exchange were operated by different entities (s uch where a State has ex ercised the option at § 155.100(a)(2) to establish and operate only a SHOP, as many QHP issuers seek QHP

certification in both markets. We note that pursuant to §147.104(b)(1)(i), gr oup coverage purcha sed in the SHOP between November 15 and December 15 of each year is not subject to employer contribution or group participation rules as defined in §147.106(b)(3). FF-SHOPs do not enforce minimum participation requirements between November 15 and December 15 of each year, but they are enforced upon initial enrollment outside of th is window and at renewal. Aligning the annual employer election period to the start of the indi vidual market Exchange to begin no sooner than November 15, 2014 will provide qualified employers and employees with a period of time to enroll for 2015 coverage when the FF-SHOP mini mum participation provisions are not enforced. We request comments on whether the proposed policy concerning aligning the timing of the SHOP employer election period for 2015 with the individual market annual open enrollmentCMS-9949-P 136

period would pose challenges for State-Based SHOPs as well as comments on any special circumstances that they would face in implemen ting the proposed policy. If implementing the proposed policy would disrupt th e operations of State-Based SHOPs, we request comments on what flexibilities or adjustments to the proposed policy may be necessary to address these concerns. For example, a State-based SHOP might have a 2015 small group market QHP certification process under whic h QHPs for 2015 coverage would be available sooner than November 15, 2014, such that the State-based SHOP’s annual employer election period could

start earlier than that date. In §§155.725(c)(2) and 155.725(e), we propose to remove the required minimum lengths of both the employer election period and the employee open enrollment period to provide additional flexibility to SHOPs and qualified employers. The existing minimum standards may make it difficult for groups partic ipating in the SHOP to renew coverage in a timely manner, as under the current regulations, the entire process could take as many as 75 days or longer to complete: up to 30 days for the employer’s elec tion, 30 days for the employees to enroll, and, depending on when in a given month that enrollme nt occurs, 15 or more days before coverage becomes effective. Further, this timeframe is not feasible in light of the proposal above to align the earliest date that an employer election pe riod could begin in all SHOPs for plan years beginning in 2015 with the start of open enrollme nt in the correspondi ng individual market Exchange for the 2015 benefit year. This proposal to remove the existing mini mum timeframes for qualified employer and qualified employee enrollment decisions will permit SHOPs and qualified employers to act more quickly to renew coverage. Additionally, the ex isting minimum lengths for the employer election and employee open enrollment periods further co mplicate the renewal process for qualifiedCMS-9949-P 137

employers renewing throughout the calendar year in SHOPs that permit the quarterly update of rates for QHPs. In many States, the updated ra te may be published fewer than 45 days prior to the rate taking effect. Therefore, under th e existing minimum standard, a qualified employer might not be able to consider the most up-to-dat e rate information for the coverage it intends to offer. Instead, such rate information might only become available during the employee open enrollment period, in which case the qualified empl oyer may need to reopen either the employer election period or the employee open enrollment period to determine whether the selected QHPs

still meet their needs under the new rates. This proposal will ameliorate this concern by permitting SHOPs to complete the entire election and enrollment processes in fewer than 45 days. We seek comment on all aspects of these proposals. c. SHOP Employer and Employee Eligib ility Appeals Requirements (§155.740) We propose to amend §155.740(g) by redesign ating paragraphs (g )(1) through (g)(3) to more clearly delineate between the requirement s associated with valid appeals and those associated with invalid appeals. In §155.740(i)(1)(i), we propose to amend the provision by cross-referencing the withdrawal standards proposed in the individual market at §155.530(a )(1). Under current rules, an appellant who wishes to withdraw his or he r appeal request must do so in writing (hard copy or electronic). The amended provision would allo w an appellant to withdraw his or her appeal request in writing or by telephone, if the appe als entity is capable of accepting telephonic withdrawals. As noted above in the preambl e to §155.530(a), appeals entities that wish to provide telephonic withdrawals mu st record, in full, the appellant’s statement and telephonic signature made under penalty of pe rjury and provide a written (in hard copy or electronically)CMS-9949-P 138

confirmation to the appellant documenting the te lephonic interaction. Written confirmation can be captured in the dismissal notice required in the case of a withdrawal under §155.740(i)(2). Like the proposal in the indivi dual market, this amendment is intended to provide greater efficiency and convenience for an appellant and app eals entity to close an appeal in accordance with the appellant’s wishes. We seek comment on this proposal. 8. Subpart O—Quality Reporting Standards for Exchanges a. Quality Rating System (§155.1400) To implement section 1311(c)(3) of the Affo rdable Care Act, we propose standards for data collection by QHP issuers and the public reporting by Exchange s of quality rating

information. We intend to have a beta testi ng period in 2015 to provide early feedback to Exchanges and QHP issuers and begin public repor ting of quality rating information and enrollee satisfaction survey information in 2016. We beli eve that it is important that the QRS provide QHP ratings that are based on health care quali ty, health outcomes, consumer experience, accessibility of care and affordability of care, which is information that is essential to inform consumer choices and to perform certain required functions of an Exchange. As outlined in the November 19, 2013 Federal Register Notice with Comment 38 on the QRS framework (QRS Notice), in the initial years, HHS aims to align the measures included in the QRS, to the extent possible, with measures health plans currently report in the commercial markets and public programs. The general functions of an Exchan ge outlined in 45 CFR 15 5.200(d) already include a requirement for an Exchange to oversee implem entation of quality activities, including the ESS and QRS, and to ensure the reporting of data for these quality activities.

38 Patient Protection and Affordable Care Act; Exchanges and Qualified Health Plans, Quality Rating System (QRS) Framework, Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 2013).CMS-9949-P 139

In §155.1400, we propose that the Exchange must prominently display on its website, in accordance with 45 CFR 155.205(b)(1)(v), quality rating information assigned for each QHP under the QRS, as calculated by HHS and in a fo rm and manner specif ied by HHS, starting in 2016. The standards for QHP issuers regarding the collection and submission of validated quality measures data for the QRS are described in Part 156, Subpart L of this proposed rule. The list of proposed individual quality measures and the prop osed organization of the QRS measure sets are described in the QRS Notice. In addition, we intend to release the proposed methodology for calculating quality ratings as well as details regarding measure specifications and data validation processes in technical guidance in 2014. We believe that the proposed approach wher e each Exchange displays quality ratings calculated by HHS based on a standard scoring methodology allows for reliable, uniform, and comparable QHP ratings across Exchanges. Ther efore, HHS intends to calculate the quality ratings and provide the ratings to Exchanges for prominent displa y of quality rating information for each QHP offered in the Exchange. We encour age State Exchanges to have a plan review period, similar to what we intend to offer QHP issu ers that participate in the Federally-facilitated Exchange, to allow issuers to review their QHP s’ quality rating information before the data become public and to identify any discrepancies or errors with the data submitted, as appropriate. We have not incorporated specific criteria fo r public display by the Exchanges of the QHP quality rating information in proposed §155.1400. However, we intend to do so in future technical guidance and are considering modelin g the display of QHP quality ratings in a consistent manner with existing CMS programs. As outlined in the QRS Notice, we intend to implement a methodology that would assign a quality rating to a QHP using a five star scale. The star ratings would be di splayed in a similar style and formatto that of Medicare Advantage andCMS-9949-P 140

Prescription Drug Plan ratings. We believe that the five star qua lity rating displa y of Medicare Advantage health plans offers reliable data that is understandable for consumers. HHS anticipates providing the calcula ted rating information, as prop osed in §155.1400, for display on an Exchange website on an annual basis for the open enrollment period. We seek comment on the display of quality ratings of QHPs offered in an Exchange for consumers and employers, which aids comprehension of QHP quality info rmation and which facilitates plan selection. HHS recognizes that some States already have requirements for and publicly report health plan quality and outcomes data, and we wa nt to encourage State flexibility and innovation,

consistent with the Affordable Care Act. In addition to prominently displaying quality rating information for each QHP, as calculated by HHS in accordance with the QRS, a State Exchange may display additional QHP quality-related informa tion, as appropriate, to enhance the consumer experience and help consumers compare QHPs being offered in an Exchange. We believe this proposed approach ensures that standardized info rmation on the quality of health care will be collected and displayed across Ex changes but also provides flexib ility for State Exchanges to incorporate additional informati on on their websites to support th e plan comparison and selection process by consumers. We also are consideri ng allowing State Exchanges the flexibility to display the QRS rating information, and sati sfy the obligation under 45 CFR 155.205(b)(1)(v), by prominently displaying a link to the Federa lly-facilitated Exchange website that would present the Federal quality rating information. We seek comment on this approach including effective ways to display quality rating informa tion to help consumers compare and select QHPs offered in an Exchange.

b. Enrollee Satisfaction Su rvey System (§155.1405)CMS-9949-P 141

Similar to the display requirement for the QR S, we propose a display requirement for the Exchange in §155.1405 relating to the Enrollee Satis faction Survey (ESS) to implement section 1311(c)(4) of the Affordable Care Act. We propose that the Exchange would prominently display results from the ESS on its website, in accordance with §155.205(b )(1)(iv), as calculated by HHS, and in a form and manner specified by HHS, starting in 2016. The standards for QHP issuers regarding the collection and submission of validated data for the ESS are described in Part 156, Subpart L of this proposed rule. B ecause we believe that information regarding enrollee experience with the QHP is a fundament al aspect of the overall quality rating, HHS intends to incorporate enrollee experience data from the results of the ESS into the quality rating for each QHP. Research 39 has shown that synthesizing and simplifying health plan quality information presented to consumers eases cons umer comprehension; therefore, we have developed a methodology to incorporate enrollee e xperience data as part of the quality rating information. We intend for the display of quality ratings, including the member experience data from the ESS, to be capable of drilling down to the results for individual quality measures if

consumers should choose to access more detail of the data underlying the synthesized global quality rating. We theref ore believe that by displaying quality rating information as described in §155.1400 of this proposed rule (which would in corporate member experience data from the ESS), an Exchange would meet the requirement of displaying ESS information to consumers and employers for the purposes of plan comparison and satisfy the standard outlined in 45 CFR 155.205(b)(1)(iv). HHS anticipates providing results to the full E SS survey to an Exchange on an annual basis. An Exchange may choose to di splay on its website all ESS results, including

39 Peters EM, Dieckmann N, Dixon A, Hibbard JH, Mertz CK. Less is more in presenting quality information to consumers. Med Care Res Rev. 2007;64 (2):169–90; Hibbard JH, Peters EM. Supporting informed consumer health care decisions: data presentation approa ches that facilitate the use of info rmation in choice. Annual Review of Public Health. 2003; 24:413–33.CMS-9949-P 142

those scores not used as part of the QRS. We seek comment on this proposed approach for displaying ESS information on an Exchange website. Similar to our approach with the QRS, we al so want to encourage State flexibility and innovation, consistent with the Affordable Care Act, with respect to enrollee satisfaction

information. We therefore seek comment on whether State Exchanges should have flexibility to display the ESS 2015 beta test resu lts prior to the scheduled public display of the Federal ESS in

2016. 40 Specifically, we solicit feedback on effect ive ways State Exchanges may share enrollee satisfaction information to help consumers compare and select QHPs offered in an Exchange prior to the availability of the Federa l ESS data for the 2017 open enrollment period.

F. Part 156—Health Insurance Issuer Standards under the Affordable Care Act, Including Standards Related to Exchanges 1. Subpart B – Essential Health Benefits Package a. Prescription Drug Benefits (§156.122) Section 156.122(c) requires issu ers that provide EHB to have procedures in place that allow an enrollee to request and gain access to clinically appropriate drugs not covered by the plan. We are concerned that some enrollees, particularly those with certain complex medical conditions, are having trouble accessing in a timely fashion clinically appropriate prescription drugs, such as prescription drugs that are co mbination drugs not c overed by their plans’ formularies. Accordingly, we are consideri ng amending the formulary exceptions standards under §156.122(c) to require that these processes can be exped ited when necessary based on exigent circumstances, such as when an enrollee is suffering from a serious health condition or

40 The standards for QHP issuers regarding the collection and submission of data for the ESS, including the proposed timeline for public reporting of such data, are described below in Part 156, Subpart L of this proposed rule. Also see Agency Information Collecti on Activities: Health Insurance Marketplace Consumer Experience Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data Collection; Notice, 78 FR 65658 (Nov. 1, 2013).CMS-9949-P 143

an enrollee is in a current course of treatment using a non-formulary drug. For example, we could specify that an issuer re nder decisions regarding formul ary exceptions requests within 24 hours following the issuers’ receipt of the exceptions requests. This is currently s uggested in the

2014 Letter to Issuers. 41 As clarification, the prescripti on drug standard in §156.122(a)(1) was not intended to discourage issu ers from offering clinically appr opriate drugs to enrollees, including combination drugs. We seek comment on what specific standard s would be appropriate for defining this expedited exceptions process, and on all other aspects of this proposal. b. Cost-Sharing Requirements (§156.130) Under §156.130(a), cost sharing for 2014 for self-only coverage may not exceed the

annual dollar limit described in se ction 223(c)(2)(A)(ii )(I) of the Code. Under §156.130(b), for a plan year beginning in calendar year 2014, the annua l deductible for a health plan in the small group market for self-only coverage may not exceed $2,000. For 2015 and later years, these limitations are to be increased by an amount eq ual to the products of these amounts and the premium adjustment percentage es tablished pursuant to paragraph (e) of th at section. (The limitations for other than self-only coverage are twice the limitations for self-only coverage.) Under §156.130(d), any increase in these annual limits that does not result in a multiple of $50 is to be rounded to the next lowest multiple of 50 dollars. Section 156.130(e) provides that the premium ad justment percentage is the percentage (if any) by which the average per capita premium fo r health insurance coverage for the preceding calendar year exceeds such average per capita premium for health insurance for 2013, and that

41 See Appendix C of the 2014 Letter to Issuers on Federa lly-facilitated and State Partnership Exchanges (April 5, 2013). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/2014_letter_to_issuers_04052013.pdf

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this percentage will be published annually in th e HHS notice of benefit and payment parameters. The 2015 Payment Notice established our methodol ogy for calculating the premium adjustment percentage. In calculating the proposed limitations on cost sharing and small group deductible in the proposed 2015 Payment Notice, we rounded these limitations up to the next lowest multiple of $50. However, we subsequently learned that the IRS convention for interpreting similar language for a number of longstanding tax parame ters – such as indexing methodologies for the

alternative minimum tax and the st andard deduction – is to round down to the nearest applicable multiple. For example, the Department of th e Treasury, in a rule on how employers should calculate average annual full-time-equivalent wa ges for purposes of the small employer health insurance tax credit, provides that if the result is not a multiple of $1,000, employers should round the result to the next lowest multiple of $1,000. 42 As a result, to align our rounding rules with those used by the Department of the Treasury and the Internal Revenue Service, we propos e to amend §156.130(d) to specify that when indexing the annual limitation on cost shar ing and the annual limitation on small group deductibles for years after 2014, we will round to the multiple of 50 dollars that is lower than the number calculated by the formula. Under this proposed amendment to § 156.130(d), using the premium adjustment percentage of 4.213431463 percent for 2015 we esta blished in the 2015 Payment Notice and the 2014 maximum annual limitation on cost sharing of $6,350 for self-only coverage, which was

42 See 26 CFR 1.45R-2(f)(1).CMS-9949-P 145

published by the IRS on May 2, 2013, 43 the 2015 maximum annual limitation on cost sharing would be $6,600 for self-only coverage and $13,200 for other than self-only coverage. Similarly, under the proposed amendment to §156.130(d), using the premium adjustment percentage for 2015 of 4.213431463 percent a nd the 2014 maximum annual limitation on deductibles of $2,000 for self- only coverage, as specified in §156.130(b)(1)(i), the 2015

maximum annual limitation on deductibles w ould be $2,050 for self-only coverage and $4,100 for other than self-only coverage. We seek comment on our proposed amen dment and its application for 2015. 2. Subpart C – General Functions of an Exchange a. QHP Issuer Partic ipation Standards (§156.200) In §156.200(b)(5), we propose technical amendm ents to clarify that implementing and reporting for the QRS and implementing a qual ity improvement strategy are conditions of participation in an Exchange. Specifically, we propose to include a re ference to sections 1311(c)(3) and (c)(1)(E ) of the Affordable Care Act to correctly align with other quality standards listed as part of QHP certif ication standards, including the ESS. We also propose to amend §156.200 to add para graph (h) to require that, in order to receive QHP certification, the offering issuer attest that, subseque nt to receiving such certification, it will comply with all operationa l requirements contained in Part 156, Subparts D, E, H, K, L, and M. We are proposing to add paragraph (h), however, to ensure that issuers seeking QHP certification understand and have fully committed to compliance with all operational requirements. 3. Subpart G—Minimum Essential Coverage

43 See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf

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a. Other Coverage That Qualifies as Minimum Essential Coverage (§156.602) In the final rule published on July 1, 2013 ( 78 FR 39494), we designated certain types of coverage as minimum essential c overage, including self-funded studenthealth coverage (for plan or policy years beginning on or before D ecember 31, 2014), Refugee Medical Assistance supported by the Administration for Children and Families, Medicare advantage plans, Statehigh risk pool coverage (for pl an or policy years beginning on orbefore December 31, 2014) and other coverage that qualifies pur suant to the minimum essential c overage application process in 45 CFR 156.604. We also established a proce ss by which sponsors of other coverage not designated as minimum essential coverage could apply with HHS to be recognized as minimum essential coverage. In guidance published on October 31, 2013, we further indicated that coverage under a group health plan provided through insurance regulated by a foreign government (and not regulated by a State) is recognized as minimum essential coverage for a month with respect to an individual who, for such month, is physically abse nt from the United States for at least one day of the month. In addition, coverage under a group health plan pr ovided through insurance regulated by a foreign government (and not regu lated by a State) will also be recognized as minimum essential coverage with respect to an individual who is physically present in the United

States for an entire month if th e coverage provides health benef its within the United States while the individual is an expatriate. 44 The rationale behind this policy was that insurance that is regulated by a foreign government and not subj ect to regulation by a State does not meet the definition of health insurance coverage under the PH S Act, and thus should not be considered for

44 See CCIIO Sub-Regulatory Guidance: Process for Obta ining Recognition as Minimum Essential Coverage (October 31, 2013. Available at: http://www.cms.gov/CCIIO/Res ources/Regulations-andGuidance/Downloads/mec-gu idance-10-31-2013.pdf

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purposes of a PHS Act analysis. The effect of this policy is to place group health coverage provided through foreign insurance on the same f ooting as self-insured group health coverage with respect to being deemed minimal essen tial coverage without ha ving to go through the application process. We now propose to add new paragraph (e) to §156.602 codifying the treatment of foreign group health coverage as stated in the October 31, 2013 guidance. We propose to designate foreign group health coverage fo r expatriates as minimum essentia l coverage if the coverage is self-insured, or is insured by an entity that is not subject to regulation by a State. Specifically, we propose to clarify in the regulations that foreign group health coverage is group health coverage that (1) is not insure d by an issuer regulated by a Stat e and (2) is for expatriates who

are citizens or nationals of the United States residing abroad, or is for expatriates who are not

citizens or nationals of the United States residi ng in the United States. We propose that if coverage for expatriates who are citizens or nationals of the Unite d States who reside abroad is provided by a self-insured group health plan, or is provided by group health insurance not regulated by a State or group health coverage provided by a foreign national health plan, the coverage is designated as minimu m essential coverage for any month that the citizen or national of the United States is physically absent from the United States for at least one day of the month. For purposes of this section, we propose to define an “expatriate” as an individual for whom there is a good faith expectation that such individual will reside outside of their home country for at least six months of a 12-month period, including any covered dependents. This definition was adopted from the January 9, 2014 Affordable Care Act Implementation FAQs. 45

45 See FAQs about Affordable Care Act Implementation (Par t XVIII) and Mental Health Parity Implementation (January 9, 2014). Available at: http://www.cms.gov/CCIIO/Res ources/Fact-Sheets-andFAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa /faqs/faq-aca18.html

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Another option is that we define “expatriate” more broadly to apply to i ndividuals that are living outside of their home country for less than six m onths. For example, the Black’s Law Dictionary defines “expatriate” as a citizen of country A living in country B where the classification of this citizen occurs regardless of if the citizen has a short stay or an extended or lifetime stay in country B. 46 We solicit comments on either definition of expatriate discus sed above or another

definition that would be a ppropriate for this section. If an expatriate is a citizen or national of th e United States and is physically present in the United States for an entire month, we propose that their foreign group health coverage is designated as minimum essential co verage if the coverage provide s health benefits within the United States, and is provided by a self-insur ed group health plan, group health insurance regulated by a foreign government (and not by a State), or group health coverage provided by a foreign national health plan. We propose this time period so that expatriates who are citizens or nationals of the United States working abroad ma y visit the United States for a short period of time without their foreign group health coverage losing its designation as minimum essential coverage. We propose that the cove rage must provide health benefits within the United States to ensure that the coverage is not limited to providing health benefits while an individual is absent

from the United States. We solicit comments on th e time period that expatriates who are citizens or nationals of the United States working abroad can remain in the United States without their foreign group health coverage losing its designation as minimum essential coverage. In 45 CFR 156.602(e), we propose that if th e foreign group health coverage is for expatriates residing in the United States who are not citizens or nationals of the United States, the coverage is designated as minimum essen tial coverage if the c overage provides health

46 See Black’s Law Dictionary Free (2d ed. 2014). Ava ilable at: http://thelawdictionary.org/expatriate.CMS-9949-P 149

benefits within the United States, and is provi ded by a self-insured group health plan, group health insurance regulated by a foreign governme nt (and not regulated by a State), or group health coverage provided by a fore ign national health plan. We propose that the coverage must provide health benefits w ithin the United States so as to ensure that the coverage provides health

insurance benefits in the United States while an individual is living in the United States. To ensure that expatriates enrolled in fore ign group health coverage are aware that their coverage has been designated as minimum esse ntial coverage and that foreign group health coverage complies with the same reporting requi rements as other types of minimum essential coverage, we propose to require that the sponsor, i ssuer, or plan administrator, as applicable, of any foreign group health coverage must provide notice to enrollees who are citizens or nationals

of the United States of its minimum essential co verage status and comply with the information and reporting requirements of s ection 6055 of the Code and implementing regulations with respect to those enrollees. We welcome comments on any aspect of these proposals. b. Requirements for Recognition as Minimum Esse ntial Coverage for Types of Coverage Not Otherwise Designated Minimum Essential Coverage in the Statute or This Subpart (§156.604) Section 45 CFR 156.604 outlined a process by wh ich types of coverage not statutorily specified and not designated by regulation as minimum essential coverage may seek to be recognized as minimum essential coverage. We es tablished the requirement that the application must be submitted to HHS on behalf of the plan or policy by the sponsor of the coverage or government agency. We now propose to clarify that the application may also be submitted to HHS on behalf of the plan or policy by a health insurance issu er or a plan administrator because the health insurance issuer or plan administrator may be the more appropriate party to submit theCMS-9949-P 150

application. For example, a heal th insurance issuer may more e fficiently provide the information required for an application on behalf of a forei gn health insurance plan sold in the individual market to expatriates living ab road. We welcome comments on all aspects of these proposals. 4. Subpart I—Enforcement Remedies in Federally-Faci litated Exchanges a. Available Remedies; Scope (§156.800) In subpart I of 45 CFR part 156, finali zed on August 30, 2013 in the rule Patient Protection and Affordable Care Act; Program Integrity: Exchange, SHOP, and Eligibility Appeals (Program Integrity Rule), 47 we established the enforcement remedies available to HHS for enforcing standards applicable to issuers offering QHPs in the FFEs. Since the publication of

that rule and in the course of our routine monitoring of QHP issuers for compliance with applicable FFE standards, we have received mu ltiple inquiries from QHP issuers and States about whether HHS will be coordinating and sharing information about QHP issuers with State regulatory entities as part of its oversight activ ities. We propose adding pa ragraph (d) to clarify that HHS may consult and share information a bout QHP issuers with other Federal and State regulatory and enforcement entities to the extent that this information is necessary for HHS to determine whether an enforcement remedy under s ubpart I is appropriate. We believe this is

consistent with our intent to coordinate with St ates in enforcement actions as described in the proposed Program Integrity Rule. 48 b. Bases and Process for Imposing Civil Money Penalties in Federally- Facilitated Exchanges (§156.805)

47 Patient Protection and Affordable Care Act; Program In tegrity: Exchange, SHOP, and Eligibility Appeals, 78 FR 54070 (August 30, 2013) (to be codified at 45 CFR parts 147, 153, 155, and 156). 48 Patient Protection and Affordable Care Act; Program Integrity: Exchange, SHOP, Premium Stabilization Programs, and Market Standards; Proposed Rule, 78 FR 37032 (June 19, 2013).CMS-9949-P 151

In the Program Integrity Rules, we establ ished the bases for HHS to impose CMPs against QHP issuers for violations of certain stan dards applicable to issuers offering QHPs in the FFEs. In §156.805(d) we set forth the general pro cess for notifying the QHP issuer against which the CMP is being imposed. The general process did not address how prio r to the imposition of the CMP, the QHP issuer would be notified of th e alleged violation which forms the basis for the imposition of CMP. We propose adding §156.806 to explain that HHS will provide a written notice to the issuer, to include a description of the potential vi olation, a 30-day period for the QHP issuer to respond and to pr ovide additional information to refute an alleged violation.

If HHS determines that a CMP will be im posed, HHS will notify the QHP issuer as required under §156.805(d). We note that §156.805(d) does not specify the method of delivery of such notice. We believe it is important to en sure that such notices are appropriately delivered to the QHP issuer to provide the QHP issuer with proper notice. We propose adding §156.805(d)(3) to require that deliver y of the notice required in para graph (d) will be either hand delivered, sent by certified mail, return receipt re quested, or sent by overn ight delivery service with signature upon delivery requir ed. This requirement is iden tical to the requirement under §158.613 which applies to the delivery of notice of civil penalties under 45 CFR Part 158, with which we believe QHP issuers will generally be familiar. We believe this proposed requirement will ensure that QHP issuers have proper notice of HHS’s intent to impose CMPs. Finally, we also note that paragraph (e)(2) requires HHS to notify the QHP issuer of any penalty that has been assessed and of the means by which the resp onsible entity may satisfy the judgment. We propose rewording the regulatory text to clarify th at the responsible enti ty refers to the QHP issuer against whom a CMP is being imposed oranother entity responsible for satisfying the CMP assessment and that the judgment refers to the CMP assessed under of this subpart.CMS-9949-P 152

c. Bases and Process for Decertification of a QHP Offered by an Issuer Through a FederallyFacilitated Exchange (§156.810) In subpart I of 45 CFR part 156, finalized in the Program In tegrity Rule, we established the bases for HHS to decertify QHPs for violations of certain standards applicable to issuers offering QHPs in the Federally-facilitated Ex changes. Under §156.810(a) we set forth the bases for decertification. Since the publication of this final rule, we believe th at certain paragraphs should be clarified. For example, paragraph (a )(6) should be reworded to clarify that the

certification criteria means the st andards under subpart C of this part. In paragraph (a)(9), it was unclear which laws were intended and we proposi ng clarifying that violation of State or Federal law relating to internal claims and appeals and external review pr ocesses are bases for decertification under this paragraph. We propos e aligning the standards set forth under subparts

K and M with the bases for decertification. We propose adding a paragraph (12) to reflect that HHS may decertify a QHP if the QHP issuer substantially fails to meet the requirements related to the cases forwarded to QHP issuers under Subp art K, and adding a para graph (13) to reflect that HHS may decertify a QHP if the QHP issuer s ubstantially fails to m eet the requirements in Subpart M. Finally, in the preamble to the propo sed Program Integrity Rule, we explained that

when the basis for a decertification is one in which the QHP enrollees’ ability to access necessary medical items or services is at risk or the integrity of an FFE is substantially compromised, HHS would have th e authority to pursue an expedited decertification (78 FR 37062). Because QHP issuers are required to demonstrate compliance with the minimum certification standards in subpa rt C of part 156 and Exchanges are required under section 155.1010(a)(2) to monitor QHP issuers for demo nstration of ongoing compliance with the certification requirements, we believe that it is appropriate for the FFEs to be able to pursue anCMS-9949-P 153

expedited decertification when HHS has determin ed that the QHP no longer meets applicable

certification standards. Accord ingly, we propose amending §156.810(d) to reflect this change. 5. Subpart L—Quality Standards a. Establishment of Standards for HHS-Approve d Enrollee Satisfaction Survey Vendors for Use by QHP Issuers in Exchanges (§156.1105)

In the rule Patient Protection and Affordab le Care Act; Program Integrity: Exchange, Premium Stabilization Programs, and Market St andards; Amendments to the HHS Notice of Benefit and Payment Parameters for 2014 (Second Program Integrity Rule) 49 at 45 CFR 156.1105, we established processes for HHS to approve and oversee ESS vendors that will administer the ESS on behalf of QHP issuer s. We outlined a process by which enrollee satisfaction survey vendors would submit an annual application dem onstrating that they meet all of the application and approval st andards in paragraphs (a) and (b). Lastly, we noted that HHS would publish a list of approved enrollee sati sfaction survey vendors on an HHS website. We propose to amend §156.1105 to also include monitoring and app eals processes that would apply for plan years beginning 2015. In paragraph (d), we propose that HHS will monitor HHS-approved enrollee satisfaction survey vendo rs to ensure ongoing compliance with the application and approval standards. Further, we propose that if HHS determines that an approved vendor is non-compliant with the standa rds outlined in paragraph (b), they may be removed from the approved list described in paragraph (c) and/or the submitted survey results may be ineligible to be included for ESS results.

49 Patient Protection and Affordable Care Act; Program Integrity: Exchange, Premium Stabilization Programs, and Market Standards; Amendments to the HHS Notice of Benefit and Payment Parameters for 2014, 78 FR 65046 (Oct. 30, 2013) (to be codified at 45 CFR parts 144, 146, 147, 153, 155, and 156).CMS-9949-P 154

We propose to establish a monitoring process to prepare for situations when an HHSapproved enrollee satisfaction su rvey vendor is no longer in compliance with the standards outlined in §156.1105. It is possible that once the enrollee satisfaction survey vendor is approved and contracts with a QHP issuer to provide survey ad ministration services, the HHSapproved vendor may stop participating in or co mplying with required activities described in paragraph (b)(1) (for example, th e vendor does not participate in si te visits or conferences calls or fails to become a registered user for the ESS data warehouse). We propose that in the event that HHS determines, through its oversight activ ities, that the HHS-approved survey vendor is non-compliant, a process would already be in place to take appropriate reme dial action as well as notify QHP issuers and the public of any changes to the approved list of vendors. We propose that, in addition to other exis ting remedies, HHS would have the ability to remove a survey vendor from the approved list and/ordetermine that the submitted su rvey results are ineligible to be included for ESS results, as the validity of the results may be impacted. HHS would also update the published list of approved vendors to reflect any changes. We seek comment to inform future guidance on the factors that should be considered, as well as the conditions that may lead to the removal of an approved survey vendor from the HHS approved list and/or a determination that the submitted survey results ar e ineligible to be included for ESS results. In paragraph (e), we propose an appeals process for an ESS vendor that submits an application to HHS for approval, as described in paragraph (a), and is not approved. Specifically, we propose that an enrollee satisfaction survey vendor may appeal HHS’s decision by notifying HHS in writing within 15 days of the notification of not being approved by HHS and submitting additional documentation demonstrating how the vendor meets the standards in paragraph (b).

HHS will review the submitted documentation and make a final approval determination withinCMS-9949-P 155

30 days from receipt of the additional documenta tion. An enrollee satisfaction survey vendor that becomes approved via the appeals process would be included in the appr oved list, described in paragraph (c). We seek comment on the proposed approach to implementing an appeals process for survey vendors that are not approved by HHS af ter submission of an application for approval. b. Quality Rating System (§156.1120) In addition to proposing standards for Excha nges to oversee the QRS and display quality rating information on Exchange websites as set fo rth in §155.1400 of this proposed rule, we also propose standards for QHP issuers to collect and report the necessary information to implement the QRS pursuant to section 1311(c)(3) of the Af fordable Care Act. While the QRS Notice describes areas such as the overarching goals , framework, measure selection process and individual measures of the QRS, this propos ed rule outlines the QRS implementation and reporting standards for QHP issuers. In the QRS Notice, we proposed a QRS measur e set that applies to QHPs that provide family and adult self-only coverage and we proposed a separate Child-only QRS measure set applying to QHPs that provide ch ild-only coverage. CMS continue s to monitor the number of child-only QHP offerings on the Exchanges. A limited number of child-only QHPs and enrollees may prohibit reliable child-only QHP ra ting calculations. As mentioned in the QRS Notice, we will also consider the development of a quality rating system applicable to other Exchange offerings, such as stand-alone dental plans, catastrophic pl ans and health savings accounts. After considering public comment as we ll as the review by the Measures Application Partnership’s Health Insurance Exchange Task force convened by the National Quality Forum, we intend to finalize the quality measures out lined in the QRS Notice and provide measure specifications in future technical guidance. Our goal is to publish this future technical guidanceCMS-9949-P 156

on a HHS website in 2014 to provide time for QHP issuers to collect and submit the relevant

validated data for the 2015 beta test. QRS Implementation and Reporting At §156.1120(a), we propose data submission requirements for a QHP issuer for the information necessary to calcu late the quality ratings under the QRS, and in §156.1120(b), we propose to direct a QHP issuer to annually submit data necessary to calculate the QHP’s quality ratings to HHS and the Exchange, on a timeline a nd in a standardized form and manner specified by HHS. In paragraph (a)(1), we propose that a QHPissuer must submit data to calculate quality ratings for each QHP that has been offered in an Exchange for at least one year. HHS proposes to phase in implementation of the QRS over time in recognition of the fact that QHP issuers would need time to collect, ensure the reliabilit y of, and report quality measure data. In addition, certain quality measures require one or two yearreference periods, and QHP issuers would need time for data collection, validation and submission. Therefore, we propose that for the first year that a QHP is offered in an Exchange, the QHP issuer would prepare to submit the required validated data elements for QRS beta testing in the second year that the QHP is offered in an Exchange. The QHP issuer would then submit th e required validated data elements for QRS public reporting in the third year that the QHP offers coverage (re flecting second year data). For example, an issuer that offers a QHP in the Exchange during the 2013 open enrollment period for coverage beginning in January 2014 would submit the required validated data for a QRS beta testing period beginning in mid- 2015 (coverage year two), which would not be publicly reported by the Federally-facilitated Exchange. The issuer would next be required to submit the required validated data for the QHP offered in the Exch ange to calculate quality rating information for QRS public reporting during the 2016 open enroll ment period for the 2017 coverage yearCMS-9949-P 157

(coverage year four). Specifically, we intend for the QRS data reporting period to begin the first month of a calendar year thr ough the middle of the sixth mont h of the calendar year. For example, a QHP issuer submitting data for the 2015 QRS beta testing period would submit data on or around June 15, 2015 and would submit data for its first QRS public reporting on or around June 15, 2016. We intend for the QRS to include data from all eligible QHP enrollees covered during the measurement year which would be the previous calendar year(s) and based on measure specifications for that year’s collection. We intend to provide details of the QRS rating methodology, measure specifications , criteria for quality ratin g display, and information regarding QRS data validation in technical gu idance that would be periodically updated. In paragraph (a)(2), we propose to direct a QHP issuer to submit data that has been validated in a form and manner specified by HHS. We believe that the submission of validated data by QHP issuers is necessary to ensure the integrity and reliability of the QRS to allow consumers objective and meaningful comparisons of the QHPs’ quality data. We believe that review of quality measures data by an independentthird party entity will ensure that only valid and appropriate data are usedto calculate the quality rati ng information for QRS public reporting. In the initial years, HHS intends to di rect QHP issuers to follow the process specified by the quality measure steward for validation of it s quality measures that are incorporated into the QRS. For example, for any Healthcare E ffectiveness Data and Information Set (HEDIS) ® measure in the QRS, the measure should be validated through the HEDIS ® Compliance Audit process using a certified auditor, as defined by the Nationa l Committee for Quality Assurance (NCQA). We have drawn from our experience with the Medicare program which also ensures that clinical quality HEDIS ® data submitted and reported on behalf of the Medicare Advantage and Prescription Drug Programs are valid and reliab le by requiring data to be validated throughCMS-9949-P 158

the NCQA HEDIS® Compliance Audit process before being provided to CMS for public reporting. HHS would specify in technical guidance a validation process for any measures for

which the measure steward has not defined a valida tion process. In the future and as the QRS evolves, HHS is considering establishing an application and approval process for independent third party data validators to allow QHP issuer s to contract with validators that would be approved and monitored by HHS. In paragraph (a)(3), we propose that a QHP i ssuer must include information in its data submission only for those QHP enrollees at th e reporting level specifi ed by HHS that is necessary to calculate the quality ratings. As we stated in the QRS Notice, HHS intends to specify that for the initial years of QRS impl ementation, a QHP issuer must collect and submit data for enrollees in each product type offered by a QHP issuer in each State for which the QHP operates (for example, Health Maintenance Organization (HMO), Point of Service (POS), and Preferred Provider Organization (PPO)). 50 While we understand that there may be value in reporting quality rating information at more gra nular QHP levels, such as the QHP product metal level, we believe that a QHP’s enrollment size at the product metal leve l will be too small to ensure reliable QRS results across the measure do mains in the beginning years of the Exchange. We intend to revisit the level of QHP issuer reporting for the QRS as Exchanges mature and enrollment sizes increase. We also recognize that a QHP issuer may offer a QHP outside an Exchange that would be considered the same plan as one that is certified as a QHP and offered through the Exchange, if the benefits package, provider network, service areas and cost-sharing

50 Patient Protection and Affordable Care Act; Exchanges and Qualified Health Plans, Quality Rating System (QRS) Framework, Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 2013).CMS-9949-P 159

structure of the two offerings are identical as outlined in the Program Integrity Final Rule. 51 We intend to allow a QHP issuer to collect data for the QRS based on enrollees of QHPs offered through and outside of the Exchange as long as they are consider ed the same plan. If this approach is finalized, we intend to clarify the operational details of this approach in future technical guidance. We seek comment on the data submission requirements proposed in paragraph (a) including comment regarding the reporting tim eframes and any additional criteria for the submission or reporting of quality data for QRS purposes. We seek comment on the proposed approach, for the initial years of QRS implementation, of pro duct level reporting and allowing the incorporation of quality meas ure data from QHPs offered outsi de the Exchange, if they are considered the same plan as the QHP offered th rough the Exchange. We also solicit comment to inform future rulemaking regarding the potential requirement for QHP issuers to use independent third party data validators that would be a pproved and monitored by HHS for QRS purposes. As described in 45 CFR 156.275, QHP issuers are required to be accredited on the basis of local performance of a QHP by an accreditati on entity recognized by HHS, and to submit to such entity clinical quality measures, such as HEDIS®. We are seeking comment to inform future rulemaking on how best to align QR S measures reporting re quirements with the accreditation standards for QHP issuers. We note that multi-State plans, as define d in §155.1000(a), are subject to reporting QRS data for calculation of quality ratings by HHS, as described in para graph (a). The U.S. Office of

51 Patient Protection and Affordable Care Act; Program In tegrity: Exchange, SHOP, and Eligibility Appeals; Final rule, 78 FR 54070 (Aug 30, 2013).CMS-9949-P 160

Personnel Management (OPM) will provide guidance on quality reporting to issuers with whom it holds multi-State plan contracts. Marketing Materials In paragraph (c), we propose that an issuer may reference its QHP’s quality rating information in its marketing materials, in a ma nner specified by HHS. In the subsequent section 156.1125 regarding the ESS, we propose a similar marketing standard in §156.1125(c) that a QHP issuer may reference the ESS results for its QHPs in its marketing materials, in a manner specified by HHS. A QHP issuer has the option to use quality rating information and ESS results in its marketing materials; however, an issuer that elec ts to use the information must do so in a manner that does not mislead consumers into enrolling in a QHP based on inaccurate information. We intend to provide details regard ing display of rating information and ESS results in marketing materials in technical guidance that we an ticipate releasing in 2015. We seek comment regarding the proposed allowance for issuers to include its QHPs’ quality rating information and ESS results in its marketing materials in paragraphs (c) of 156.1120 and 156.1125 and ways to prevent the use of the information in a mislead ing manner when being presented to consumers.

c. Enrollee Satisfact ion Survey (§156.1125) Section 1311(c)(4) of the Affo rdable Care Act directs the Secretary to establish an enrollee satisfaction survey (ESS) system that woul d evaluate the level of enrollee satisfaction of members in each QHP with more than 500 enrollees in the previous year that is offered through an Exchange. It also directs Exchanges to display enrollee satisfact ion information on their websites to allow individuals to readily compar e enrollee satisfaction data between QHPs. To implement this provision, HHS is developing the E SS as described in the Federal Register NoticeCMS-9949-P 161

dated Nov. 1, 2013 (ESS Notice). 52 We outline standards in this proposed rule for a QHP issuer to collect and submit validated enrollee expe rience data from QHPs offered through an Exchange. We believe it is important that QHPs offe red through Exchanges be assessed using a reliable and valid survey, administered and scored according to standards developed and monitored by independent organizations. We based the ESS on the Consumer Assessment of Health Providers and Systems (CAHPS ® ) Health Plan 5.0 Medicaid su rvey to assure consumers and stakeholders that the ESS survey data subm itted meet the validity and reliability standards reported by the CAHPS® program and are comparab le to data from other quality comparison tools. We used existing CAHPS ® supplemental item sets or other CAHPS ® surveys, when available and appropriate, to identify a ny additional items for the ESS.

ESS Administration At §156.1125(a), we propose to direct QHP i ssuers to contract with an HHS-approved ESS vendor, as identified by §156.1105, to administer the ESS of the QHP’s enrollees. We also propose to direct a QHP issuer to authorize its contracted ESS ve ndor to report survey results to HHS and the Exchange on the issuer’s behalf. We believe this proposed approach aligns with the Medicare program, which uses a similar process by having approved survey vendors

administer the CAHPS ® survey to an issuer’s Medicare Advantage and Prescription Drug Program enrollees. Similar to the proposed general requirement for the QRS in §156.1120(a), which directs a QHP issuer to submit data to HHS and the Exchange, QHPs must ensure that their contracted ESS vendors submit the data collected from the ESS survey to HHS and the

52 Agency Information Collection Activities: Health Insura nce Marketplace Consumer Experience Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data Co llection; Notice, 78 FR65658 (Nov. 1, 2013).CMS-9949-P 162

Exchange so that HHS can calculate the ESS scor es and benchmarks based on a standard scoring methodology that will allow for reliable, uniform, and comparable scoring across Exchanges.

HHS intends to send calculated ESS scores to th e Exchanges for their respective QHPs and also

intends to use a subset of scores from the ESS as part of the quality rating for QHPs as described in §156.1120. We intend for the ESS to be administered from January through April of each calendar year beginning in 2015. HHS is considering the development of an ESS child-only survey to assess the experience of children enrolled in child-only plans. Similar to the implementation of the QRS child-only measure set, CMS is currently asse ssing the feasibility of a child-only ESS based upon the number of child-only QHPs and enrollees in Exchanges. In paragraph (b), we propose several datarequirements to clarify the standards for collection and submission of ESS data. At §15 6.1125(b)(1), we propose to direct a QHP issuer to collect data of eligible enrollees for each QHP with more than 500 enrollees in the previous year that has been offered in an Exchange fo r at least one year following a survey sampling methodology provided by HHS. We propose that elig ible enrollees would be those individuals enrolled for at least six months during the year prior to the administration of the survey and solicit comment on this approach. In paragraph (b)(2), we propose to direct a QHP issuer to submit data, necessary to conduct the ESS, that has been validated in a form and manner specif ied by HHS. We propose that the data for the sample of eligible enrollees that a QHP issuer provid es to their contracted ESS vendor be validated in a consistent way as da ta validated for the QRS. For example, if a QHP issuer submits data collected for a quality measure that is validated through the HEDIS ® Compliance Audit process using a NCQA certified a uditor, we expect the data that the QHPCMS-9949-P 163

issuer provides to its HHS-approved ESS vendor for the ESS sample be included in that validation process. We solicit comment on this approach for validation of the data for the ESS sample of eligible enrollees. In paragraph (b)(3), we propose to directa QHP issuer to include only those QHP enrollees at the reporting level specified by HHS, for data submitted for the ESS. We believe that the QHP metal level (i.e., HMO Silver, HM O Bronze, PPO Silver, PPO Bronze) for each of the issuer’s products is the appropr iate level (if enrollment is suffi cient to ensure credibility) to assess enrollee experience and would provide information regarding experience with plans charging differing premiums. We intend to aggreg ate the ESS data from the QHP metal level to the QHP product level (for example, a QHP i ssuer’s HMO silver and HMO bronze would be aggregated into one HMO level score) for public reporting purposes to provide consistency with the product-level data that would be submitted for the QRS and align with the QRS methodology in the initial years of implementation of these proposed quality standards for QHPs. We recognize that a QHP issuer may offer a plan outside an Exchange that would be considered the same plan as one that is certif ied as a QHP and offered through the Exchange, as defined in §153.500. Similar to our proposed appro ach with the QRS, we are considering in the initial years to allow a QHP issu er to include enrollees of QHPs offered through and outside of the Exchange, to ensure a reliable ESS sample size, as long as they are co nsidered the same plan as established in §153.500. We intend to clarify the operational details of this approach in future technical guidance. OPM will issue technical guidance regarding the sampling methodology for multi-State plans, as defined in 45 CFR 155.1000(a). We envision that the sampling methodology for multi-State plans w ill align with that of QHPs.CMS-9949-P 164

In paragraph (d), we propose to direct a QHP issuer to submit data necessary to conduct the survey to its contracted ESS vendor on a timeline and in a form and manner specified by HHS. We intend to align the timeframes of th e proposed reporting requirements for the ESS and the QRS. In future technical guidance, we also intend to specify the timeframes for a QHP issuer to submit the sampling data to its contracted ESS vendor and for the vendor to submit to HHS and the Exchange, data from the administration of the survey. ESS Implementation and Reporting HHS proposes to phase in implementation of th e ESS over time which is consistent with the proposed implementation of the QRS. We believe this will allow for appropriate development and testing of the ESS and the survey methodology; time for QHP issuers to prepare for data collection, valid ation and submission; and time for QHP enrollees to build experience with the QHP and their providers to ad equately assess their experience and to ensure reliable survey results. Ther efore, we propose that for QHPs o ffered in the Exchange during the 2014 open enrollment period, the QHP issuer would submit the required data elements for ESS beta testing in 2015. The QHP Issuer would then submit the required data elements in 2016 for ESS public reporting during the 2017 open enrollmen t period. Specifically, we intend for QHP issuers to provide data necessary to conduct the survey to th eir contracted HHS-approved ESS vendors, as described in paragra ph (a), during the first month of the calendar year and to ensure that survey results are submitted to HHS or its’ designee, by the fifth month of the calendar year. For example, a QHP issuer reporting data fo r the 2015 ESS beta test would provide sample frame data necessary to conduct the ESS for eligib le enrollees who would be surveyed, to their contracted survey vendor in January 2015, allowi ng adequate time for the vendor to draw the sample in time to begin fielding the survey on Fe bruary 1. Then, a QHP issuer would ensure thatCMS-9949-P 165

the ESS survey results are submitted to HHS on or around May 31, 2015. For the first year of ESS public reporting, a QHP issuer would provide sample frame data necessary to conduct the ESS in January 2016 and ensure that results are submitted to HHS or its’ designee on or around May 31, 2016. We intend for the ESS sample to include all eligible QHP enrollees covered during the measurement year whic h would be the previous calendar year and based on sampling specifications. We intend to provide detail s of the ESS sampling methodology in technical guidance that would be periodically updated a nd which will be published in draft form on an

HHS website to obtain feedb ack from stakeholders. We seek comment on the proposed requirement in paragraph (a) to direct a QHP issuer to contract with an HHS-approved enrollee satisf action survey vendor and to authorize its

contracted vendor to submit data to HHS and th e Exchange. Specifically, request feedback on our proposed approaches for data collection from eligible enrollees for each QHP with more than 500 enrollees in the previous year that has been of fered in an Exchange for at least one year, to require validation consistent w ith the process for QRS measure data and to provide data for eligible enrollees at the QHP metal level for each of th e issuer’s products offered on the Exchange. We also seek comment on the pr oposed annual data submission requirements in paragraph (b) and (d). We note that Multi-State Plans, as de fined in 45 CFR 155.1000(a), are subject to providing the data described in paragraph (b). The OPM will provide guidance on ESS reporting

to issuers with whom it holds Multi-State Plan contracts. Marketplace Survey Sections 1313 and 1321(a) of the Affordable Care Act provide the Secretary with general authority to establish standa rds and regulations related to Exchanges, QHPs, and otherCMS-9949-P 166

components of title I of the Affordable Care Ac t. In §155.1200(b)(3), we direct State Exchanges to submit performance monitoring data on an a nnual basis, which would include information on

consumer satisfaction. Pursuant to this legal authority, HHS has proposed a consumer experience survey, or the Marketplace survey, to assess consumer experience with the Exchange. 53 Similar to the ESS, the Marketplace survey has been developed based on the core

set of CAHPS ® principles and the format and language of the survey drew from existing

CAHPS ® items, to the extent possible. However since the CAHPS ® program does not have a comparable survey to assess entities similar to Exchanges, the Marketplace survey items are new and were developed based on research and feedback from public comment, technical experts and focus groups. We believe it is important to asse ss experience of consumers interacting with an Exchange including obtaining information regarding aspects such as the application and eligibility determination process for Medicaid /Children’s Health Insurance Program (CHIP) coverage and the Insurance Affo rdability Programs. We anticipate that results from the Marketplace survey would drive quality improveme nt in Exchanges and provide regulators and

stakeholders with information to us e for monitoring and oversight purposes. We intend to use a single contracted survey vendor to administer the annual Marketplace survey for each Exchange. We are currently in the survey deve lopmental testing period for the Marketplace survey in the States in the Fede rally-facilitated Exchange and we anticipate the survey beta test to be conducted in early 2015 in all States. We intend to provide each Exchange with its respective Ma rketplace survey results, beginni ng in 2015, to be able to make improvements for upcoming open enrollment periods.

53 Agency Information Collection Activities: Health Insura nce Marketplace Consumer Experience Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data Co llection; Notice, 78 FR65658 (Nov. 1, 2013).CMS-9949-P 167

We seek further comment to inform future rulemaking regarding da ta provided by State Exchanges to conduct the Marketplace survey. We are considering directi ng a State Exchange to provide sampling data for four types of consum ers in an Exchange in cluding: (1) potential applicants (individuals who provi ded contact information but did not submit an application); (2) potential enrollees (individuals who successfully applied and we re given eligibility and plan information but did not enroll); (3) enrollees (individuals su ccessfully enrolled); and (4) effectuated enrollees (individuals who have made their first premium payment). We are also considering directing a State Exchange to s ubmit sampling data for the Marketplace survey based on language preference and disability status across each Exchange and we seek comment on the feasibility for a State Exch ange to provide such data.

G. Part 158 – Issuer Use of Premium Revenue: Reporting and Rebate Requirements 1. Subpart A – Disclosure and Reporting a. ICD–10 Conversion Expenses (§158.150) In September 2012, the Secretary changed the da te on which issuers are required to adopt

ICD-10 as the standard medical code set from October 1, 2013 to October 1, 2014. Because HHS cannot accept claims using the ICD-10 code sets prior to that date, issuers may incur conversion

costs in 2014 that would otherwise have b een incurred only in 2012 and 2013. In the 2012 and 2013 MLR reporting years, issuers were allowed to report their ICD-10 conversion costs as expenditures for activities that improve health care quality (QIA), up to 0.3 percent of an issuer’s earned premium in the relevant State and mark et (MLR Final Rule, 76 FR 76574). Because the ICD-10 implementation date has been postponed to 2014, we propose that issuers be allowed to report their 2014 ICD-10 conversion costs as QIA in the 2014 reporting year , up to 0.3 percent of an issuer’s earned premium in the relevant State and market. Although there are no plans toCMS-9949-P 168

further postpone the ICD-10 implementation date, in recognition of this po ssibility and to avoid the need for additional regulatory changes, the re gulatory change proposed herein permits issuers to include their ICD-10 conversion costs as QI A through the MLR reporting year in which ICD10 implementation is requi red by the Secretary. 2. Subpart B—Calculating and Providing the Rebate

a. MLR and Rebate Calculations in States with Merged Individual and Small Group Markets (§§158.211, 158.220, 158.231) Our previous rulemakings concerning PHS Act section 2718 permitted issuers to aggregate individual and small group market data fo r MLR purposes in States that require these two markets to be merged pursuant to section 13 12(c)(3) of the Affordable Care Act. This proposed rule would modify the requiremen ts for data aggregation in §158.220(a) and §158.231(a) to specify that the individual and small group market data must always be aggregated if a State requires these two markets to be merged. In addition, this proposed rule would modify the requirements regarding a hi gher State MLR standard in §158.211 to clarify that if a State establishes a higher MLR standardfor the merged market, this higher standard must be used to calculate any rebates for the merged market. These modifications would align the MLR methodology in the Federal MLR rule with the MLR methodolog ies applied by the

affected States. b. Accounting for Special Circumstances (§158.221) On November 14, 2013, the Federal government announced a policy under which, if certain conditions were met, it would decline to enforce certain specified 2014 market reforms against certain non-grandf athered health insurance coverage in the individual or small group market renewed between January 1, 2014 and Octobe r 1, 2014, and requested that States adopt aCMS-9949-P 169

similar non-enforcement policy. 54 CMS noted in the Proposed 2015 Payment Notice (78 FR 72322) that this transitional policy would not have been anticipated by issuers in setting rates for 2014 and stated that we were expl oring modifications to different programs to help mitigate the impact of this policy. Issuers that provided transitional coverage may have incurred additional administrative costs, such as expenses related to devel oping and sending required consumers notices, and creating and submitting new policy and rate filings. We also recognize that issuers of QHPs in the individual and small group markets may have incurred costs due to technical problems during the launch of the State and Federal Exchanges. Pursuant to the direction under PHS Act 2718( c), our development of the standardized methodologies for calculating an i ssuer’s MLR must be designed to “take into account the special circumstances of smaller plans, different types of plans, and newer plans.” In the MLR Interim Final Rule (75 FR 74864), HHS exercised this authority by making adjustments to the formula for calculating an issuer’s MLR with respect to “expatriate plans” (i.e., policies that provide coverage to employees outside their co untry of citizenship, employees outside their country of citizenship and outsi de their employer’s country of domicile, and non-U.S. citizens working in their home country) and “mini-med” pl ans (i.e., plans with a total annual benefit maximum of $250,000 or less). In its discussion of the “special circumstan ces” that applied to expatriate plans, the Interim Final Rule noted that “their unique nature results in a higher perc entage of administrative costs in relation to premiums than plans that provide coverage primarily within the United

54 Letter to Insurance Commissioners, Center for Consumer Information and Insurance Oversight, November 14, 2013. Available at: http://www.cms.gov/CCIIO/Resou rces/Letters/Downloads/commi ssioner-letter-11-14-2013.pdf.CMS-9949-P 170

States.” 55 Examples of the higher ad ministrative costs for these plans include: identifying and credentialing providers worldwide in countries with different licensing and other requirements from those found in the United States, processing claims submitted in various languages that follow various billing procedures and standards, providing translation an d other services to enrollees, and helping subscribers locate qualified providers in di fferent countries. The Interim Final Rule also recognized the “special circumst ances” that applied to mini-med plans. In this latter case, it was not higher administrative costs, but lowe r claims costs relative to administrative costs, due to the very low annual do llar limits of mini-med plans. In both cases, adjustments were made to the MLR methodology as applied to such plans so that they would not be required to pay rebates based on their plan desi gn, even if they were relatively as efficient as other plans that are able to meet the ML R standard under the standard methodology. Consistent with this appro ach, we are proposing to exercise our authority to account for the special circumstances of pl ans affected by the transitional policy or the technical problems during the launch of the State and Federal Exch anges. These adjustments would only extend to issuers in the individual and small group mark ets that offered tran sitional coverage or participated in the State a nd Federal Exchanges, and only for the 2014 reporting year. A transitional policy cost adjustment to the formula for calculating an issuer’s MLR would not apply in States that did not implement the transiti onal policy, or in States th at did, to issuers that did not elect to implement it. With respect to the adjustment for issuer s offering transitiona l coverage, we are proposing that the MLR calcula tion methodology for the individual and small group markets would be changed to allow these issuers to multi ply the incurred claims and expenses for quality

55 75 CFR 74871CMS-9949-P 171

improving activities incurred in 2014 in the MLR numerator by 1.0001. This adjustment takes

into account the fact that the multiplier would be applied to th e issuer’s entire experience in 2014, which may also include experience for plans other than transitional coverage in that State and market. In developing this adjustment, we c onsidered the following costs as they relate to the transitional policy: (1) developing and sending required notices; (2) actuarial work, including that with respect to premium stabilization programs; (3) regulatory and rate filings; and (4) activities related to re-contracting. With respect to the adjustment for issuers o ffering coverage through the State and Federal Exchanges, we are proposing that the MLR cal culation methodology for the individual and small group markets would be changed to allow issuers participating in the Exchanges to multiply the incurred claims and expenses for quality im proving activities incurre d in 2014 in the MLR numerator by 1.0004. This adjustment takes into account the fact that the multiplier would be applied to the issuer’s entire experience in 2014, which may also include experience for plans offered off the Exchange in that State and market . In developing this adjustment, we considered the following costs as they relate to the techni cal issues during the launch of the State and Federal Exchanges: (1) information technology (I T) development and testing; (2) IT system modifications and re-programming; (3) providing feedback to CM S or a State on functionality and data transmission; (4) assistance to enro llees (e.g., enhanced cal l center activity); (5) engaging in pilot projects relati ng to direct enrollment; (6) deve loping technical “tickets” for the CMS or a State help desk; (7) work with the Exch ange(s) to resolve these technical problems; (8) manual processing of enrollment data, including bu t not limited to enrollment and payment data template creation, monthly submission of data re ports, and monthly submission of data accuracy certification forms; and (9) devel opment of other manual workarounds.CMS-9949-P 172

HHS believes that these adjustments woul d appropriately account for the special circumstances related to implementation of th e transitional policy and the rollout of the Exchanges, while still requiring issuers to comply with the statutory MLR requirement. In addition to seeking comment on the above pr oposed approach, we also invite comment on other options for making an appropriate adjustment to the MLR formula to account for the unanticipated costs related to the transitio nal policy and the Exchange implementation.

c. Distribution of De Minimis Rebates (§158.243) The MLR December 7, 2011 final rule defines the threshold amounts below which

rebates are considered to be de minimis and sets forth the provisions for distribution of such rebates. In this proposed rule, we propos e to amend the provisions for de minimis rebates in §158.243 to clarify how issuers must distribute rebates where (1) all of an i ssuer’s rebates are de

minimis , or (2) distribution of de minimis rebates to enrollee(s) whos e rebates are not de minimis would result in an enrollee receiving a rebate that exceeds the enrollee’s annual premium. We propose that in these two situations, th e issuer must distribute de minimis rebates to enrollees in the policies that generated the de minimis rebates. The current de minimis rebate provisions

allow issuers not to distribute de minimis rebates to enrollees in the policies that generated those rebates, but instead to aggregate such rebate s and distribute them to other enrollees whose

rebates are not de minimis

. IV. Collection of Information Requirements Under the Paperwork Reduction Act (PRA) of 1995, we are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. This proposed rule contains info rmation collection requirements (ICRs) that areCMS-9949-P 173

subject to review by OMB. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:

• The need for the information collection a nd its usefulness in carrying out the proper functions of our agency.

• The accuracy of our estimate of the information collection burden.

• The quality, utility, and clarity of the information to be collected.

• Recommendations to minimize the informati on collection burden on the affected public, including automated collection techniques. We are soliciting public comment on each of these issues, which contain ICRs. A. ICRs Regarding Recertification fo r Certified Applicat ion Counselors (§155.225) Under proposed §155.225(d)(7), certi fied application counselors would be required to be

recertified on at least an annual basis after su ccessfully completing rece rtification training as required by the Exchange. Each Exchange would be required to establis h its own recertification process and standards consistent with these requirements. We e xpect that establishing a process

for recertification would include cr eating a recertification request form (or similar document) in Exchanges that directly certify certified application counselors. We estimate that up to 18 State Exchanges would develop their ow n recertification request form. 56 We estimate that the development of a recertification request form, as may be applicab le for Exchanges that directly certify certified application c ounselors would take a health po licy analyst (at $49.35 labor cost per hour) up to 1 hour to create, a senior ma nager (at $79.08 cost per hour) up to .5 hours (30

56 We estimate 18 State Exchanges (whi ch includes Utah) will develop their own processes for recertification. HHS will establish a single process in all FFEs.CMS-9949-P 174

minutes) for review, and an attorney up to .5 hours (at $90.15 labor cost per hour) for legal

review. We estimate that the one-time cost bur den would be two hours with a cost burden of $134 for each Exchange, and the total burden for 18 State Exchanges would be 36 hours with a cost burden of $2,412. There are recordkeeping requirements asso ciated with developi ng and maintaining a request form. We estimate that the time burde n associated with maintaining a copy of the request form would be .016 hours (1 minute); we a ssume a mid-level health policy analyst would maintain the form through electronic copies at minimal cost, which we estimate as $0.79 as a one-time requirement for the Exchange. The total burden for 18 Exchanges would be 1.08 hours and the total cost burden would be $14.22.

There would also be third- party disclosure requirements for 18 State Exchanges associated with reviewing each certified applic ation counselor’s recertif ication request, which would require the Exchange to not ify the individual of the result of its review and issue a new certificate for each individual who successfully completes recertifi cation. This notice requirement would apply to the Exchange on an annual basis. We estimate that it would take a mid-level health policy analyst in the Excha nge up to .08 hours (5 minutes) to notify an

individual. The estimated cost burden is $4.11 for each individual notice, including the certificate. For purposes of this analysis, we estimate that there would be approximately 30,000 certified application counselors nationwide, or approximately 10,600 appl ication counselors in 18 State Exchanges. The total cost burden would be approximately $2,422 for each State Exchange. The total burden for 18 State Exch anges would be approximately 883 hours and the total cost burden would be $43,593. There would be recordkeeping requirements associated with issuing each individual notice. We estimate thatthe time burden associated with maintaining aCMS-9949-P 175

copy of the notice and certificat e would be .016 hours (1 minute); we assume a mid-level health policy analyst, with a labor co st of $49.35 an hour, would mainta in the form through electronic copies at minimal cost, which we estimate as $0.79 per notice for each individual certified application counselor. The total recordk eeping burden for 10,600 certified application counselors in 18 State Exchanges would be 170 hours and the total cost burden would be $8,374, or $265 per Exchange. For Exchanges that designate organizations to directly certify certified application counselors under §155.225(b)(1), th ere would be requirements asso ciated with implementing a recertification process un der the applicable Excha nge’s standards. We ex pect that this process would include creating and issui ng a recertification re quest form (or similar document) for an organization’s certified applica tion counselors to submit to i ndicate their intention to be recertified and provide an updated co nflicts of interest disclosure orother attestations as may be required. We estimate that up to 5,000 desi gnated organizations would develop their own recertification request form. We estimate that th e development of a recertification request form would take a health policy analys t (at $49.35 labor cost per hour) up to 1 hour to create, a senior manager (at $79.08 labor cost per hour) up to .5 hour s (30 minutes) for review, and an attorney (at $90.15 labor cost per hour) up to .5 hours (30 minutes) for legal re view. We estimate that the one-time cost burden would be $134 for each or ganization. The total one-time burden for 5,000 organizations nationwide would be 10,000 hours and the total cost burden would be $670,000. There would be recordkeeping requirements associated with developing and maintaining a request form. We estimate that the time burde n associated with maintaining a copy of the request form would be .016 hours (1 minute); we a ssume a mid-level health policy analyst with a labor cost of $49.35 an hour would maintain the fo rm through electronic copies at minimal cost,CMS-9949-P 176

which we estimate as $0.79 as a one-time require ment for each organization. The total one-time burden for 5,000 organizations nationwide would be 80 hours and the total cost burden would be $3,950. There would also be third-party disclosure requirements for de signated organizations associated with reviewing each certified applic ation counselor’s recertif ication request, which would require the organization to notify the individual of the result of its review and issue a new certificate as appropriate. This notice requirement would apply to the organization on an annual basis. For purposes of estimating the burden on designated organizations, we assume that of the estimated 30,000 certified application counsel ors nationwide, approximately 19,400 would be directly certified by designated organizations, or four certified applications counselors on average per designated organization. We estimate that it would take a mid-level health policy analyst up to .08 hours (5 minutes) to notify an individual a nd issue a new certificate. The estimated cost burden is $4.11 for each indivi dual notice. For an estimated 19,400 certified application counselors nationwide, or approximate ly four certified app lication counselors on average in each organization, the total cost burden would be approximately $16.44 for each organization. The total burden for 5,000 desi gnated organizations nationwide would be approximately 1,617 hours and the total cost burden would be approximately $79,734. There would be recordkeeping requirements a ssociated with issuing a certificate. We

estimate that the time burden associated with ma intaining a copy of each certificate issued at

recertification would be .016 hours (1 minute); we assume a mi d-level health policy analyst with a labor cost of $49.35 an hour would maintain th e form through electronic copies at minimal cost, which we estimate as $0.79 as a per ce rtificate for each organization. The totalCMS-9949-P 177

recordkeeping cost per organization would be $3.16. The total burden for 5,000 organizations

nationwide would be 323 hours and the total co st burden would be approximately $ 15,326. There would be third-party disclosure requi rements for individual certified application counselors associated with completing the requirem ents for recertification, whether done directly through the Exchange or through an Exchange-d esignated certified application counselor organization. Such recertification requireme nts would include completing Exchange required training and might also include satisfying othe r requirements consistent with the Exchangeestablished processes, such as pr oviding conflicts of interest disc losures, other a ttestations and submitting a recertification request form (or similar document) and other attestations. These requirements would apply to certified applicati on counselors on an annual basis. Although nothing prohibits individual certif ied application counselors or or ganizations from being funded through sources such as applicable private, State, or Federal programs, we expect that certified application counselors would not be guaranteed any specifi c funding. We estimate the professional wage of certified applica tion counselors for this type of work as e quivalent to that of an eligibility interviewer for assistance from government programs and agency resources. We

estimate that it would take a certified application counselor with a labor cost of $26.65 an hour up to 0.17 hours (10 minutes) to complete and submit the recertification request to the organization or Exchange, as applicable. Th e estimated cost burden would be $4.53 for each individual seeking recertifica tion. We estimate that there would be approximately 30,000

recertification re quests provided, for a total burden of 5,000 hours and a total cost burden of $135,915 for all certified applicatio n counselors nationwide. There would be third-party disclosure requi rements associated with taking recertification training. We expect that an indi vidual certified applic ation counselor would provide proof to theCMS-9949-P 178

organization or Exchange that he or she has suc cessfully completed the re certification training, in accordance with the Exchange’s process. We estim ate that it would take a certified application counselor with a labor cost of $26.65 an hour up to .03 hours (2 minutes) to provide the training certificate to the organization or Exchange, as may be required. The total estimated cost burden is $0.80 for each individual seeking recertific ation. We estimate that there would be approximately 30,000 training certificates provide d, and the total burden would be 1,000 hours,

with a total cost burden of $24,000 for all certified applica tion counselors nationwide. In addition, there would be recordkeeping requirements a ssociated with the training certification. We expect each person who receives training would obtain and maintain a record of training certification. We es timate that the time burden associated with maintaining proof of training certification is .016 hours (1 minute), since we assume th is proof would be maintained through electronic copies, at minimal cost. Th e total cost estimated for each individual to maintain proof of training certification woul d be $0.43. The total burden would be 500 hours and the total cost burden would be $12,900 for all certified application counselors nationwide. B. ICRs Regarding Consumer Authorization (§§ 155.210 and 155.215) For purposes of the ICRs associated with this proposal, we use the same labor cost

estimates that were used in th e final Navigator and non-Navigator assistance personnel standards rule (Patient Protection and Affordable Care Ac t; Exchange Functions: Standards for Navigators and Non-Navigator Assistance Personnel, July 17, 2013, 78 FR 42842). Navigator personnel and non-Navigator assistance personnel to whic h §155.215 applies are estimated to have a labor cost of $20 per hour. Navigator and non-Naviga tor assistance project leads to which §155.215 applies are estimated to have a labor cost of $29 per hour. Navigator a nd non-Navigator senior executives to which §155.215 applies are estimated to have a labor cost of $48 per hour. TheseCMS-9949-P 179

are estimates commonly used for estimati ng paperwork burden and do not represent a recommendation or a requirement of how much Navigator and non-Navigato r personnel to which §155.215 applies are to be paid. There is nothing in the proposed regulations that would require any of these workers to be paid any specific amount. In the ICR currently approved under OM B control number (OCN) 0938-1220, we noted that there were 105 Navigator gran tee organizations at that time in FFEs, including SPEs, and we estimated that there were 3,000 individuals worki ng as Navigators. We estimated the number of non-Navigator assistance project leads to be 300 and 1,800 for personnel and we use those

estimates here as well. In accordance with proposed §155.210(e)(6) and §155.215(g), Navigators, as well as those non-Navigator personnel to whom §155.215 a pplies, would be required to maintain procedures to inform consumers of the functi ons and responsibilities of Navigators and nonNavigator assistance personnel (as applicab le), and to obtain authorizat ion for the disclosure of consumer information to the Navigator or non-Na vigator assistance perso nnel (as applicable). This would be a one-time requirement for the or ganization. We estimate that it would take a Navigator or non-Navigator assistance personnel proj ect lead up to 2 hours to create the form for providing authorization to applican ts, and a Navigator or non-Navig ator senior executive up to 1 hour to review the procedure, for a total time burden of up to 3 hours. We estimate the cost burden associated with creating this procedure would be $106 pe r organization. The total cost for all 105 Navigator grantee organizations is es timated to be $11,130. The total cost for all 300 non-Navigator assistance personnel organi zations is estimated to be $31,800. There are also recordkeeping requirements associated with devel oping and maintaining a model agreement and authorization form. Each or ganization is expected to maintain a copy ofCMS-9949-P 180

the executed forms. We estimate that the time burden associated with maintaining a copy of executed agreement and authorization form s for each consumer would be 0.016 hours (1 minute); we assume these would be maintained through electronic copies with minimal cost. In addition, there would be burdens on i ndividual Navigators, as well as those nonNavigator assistance pers onnel to whom §155.215 applie s. Under §155.210(e)(6) and §155.215(g), respectively, Navigators and non-Naviga tor assistance personne l would be required

to inform consumers of the functions and re sponsibilities of Naviga tors and non-Navigator assistance personnel and obtain auth orization for the disclosure of consumer information to a Navigator or non-Navigator assistance personnel prior to obtaining the consumer’s personally

identifiable information. In the final rule on certified application counselors (78 FR 42824, 42854-42855), we estimated that it would take a certified application counselor 0.25 hours (15 minutes) to provide consumers with information about the functions and responsibilities of a certified application counselor, obtain their auth orizations, and provide an y applicable conflict of interest disclosures. Because here we are only estimating the time required to provide consumers

with information about the functions and res ponsibilities of a Navi gator or non-Navigator assistance personnel and obtain their authorization, we estimate that it would take a Navigator or non-Navigator assistance personnel 0.1667 hours (10 mi nutes) to perform this task. The total

cost estimate for the consumer authorizati on process for Navigators and non-Navigator assistance personnel therefore would be $3.33. The total time burden on all 3,000 Navigators is estimated to be approximately 500 hours, and th e total cost burden on all 3,000 Navigators is estimated to be $9,990. The total time burden on all 1,800 non-Navigator a ssistance personnel is estimated to be 300 hours, and the total co st burden on all 1,800 non-Navigator assistance personnel is estimated to be $5,994.CMS-9949-P 181

C. ICRs Regarding Enrollee Satisfac tion & Marketplace Surveys (§§155.1200, 156.1105 and 156.1125) In §156.1105 of this proposed rule, we would establish a monitoring and appeals process for HHS-approved enrollee satisfaction survey vendors. Specifically, in §156.1105(d), we would establish a process in which HHS would m onitor approved vendors for ongoing compliance. HHS might require additional information from a pproved vendors to be periodically submitted in order to ensure continued compliance. We es timate that HHS would approve approximately 40

ESS vendors. We estimate that it would take no longer than one hour for each vendor (at a cost of $24.10 per hour) to comply with any additional monitoring by HHS . Therefore, we estimate a

total annual burden of 40 hours for all vendors for a total cost burden estimate of $964.00. In §156.1105(e) of this proposed rule, we propose a process by which an enrollee satisfaction survey vendor that is not approved by HHS could appeal HHS’s determination. It is estimated that filing an appeal with HHS would take no longer than one hour. We estimate that five survey vendors that apply would not be approved and all of those vendors would appeal HHS’s determination and submit additional documentation to HHS. Therefore, we estimate five responses, for a total of five burde n hours, for a total cost of $120.50. The burden estimate associated with quality standards for QHP issuers related to the ESS outlined in §156.1125 would include the time and e ffort required for QHP issuers to collect,

submit and validate ESS data on an annual basis. The burden and cost related to the survey respondents and ESS vendors associated with the ESS has been approved under OCN 0938- 1221. In addition, we estimate that each QHP would need an average of 54 hours or $1,349.60 for the ESS to be administered by mail, phone an d/or by web for its QHPs. Assuming a total of 575 QHP issuers, we estimate that the annual burden would be 31,050 hours or $776,020.CMS-9949-P 182

The burden with the Marketplace survey under §155.1200(b)(3) would include the time,

cost and effort related to survey respondents and has been approved under OCN 0938-1221. In addition, we will revise the information colle ction currently approved under OCN 0938–1119 to account for any additional burden for an Exchan ge if sampling data is needed from State Exchanges for CMS to administer the Marketplace survey. D. ICR Regarding Quality Rating System (§156.1120)

The burden and cost estimates associated w ith quality standards for QHP issuers related to the QRS outlined in §156.1120 would include estimates for QRS measure data collection, validation, and submission to CMS. We estimat e that a total of 575 QHP issuers would be collecting and reporting QRS measure data, by pr oduct type, using administrative data sources and medical records. Using the BLS labor cate gory estimates for a general operations manager, computer programmer, business operations specialis t, registered nurse, and medical records and health information analyst, the estimated annual cost and hourly burden for a QHP issuer would be $117,424 and 1650 hours, for an issuer who has performance measures data collection experience. We estimate that approximately eighty percent of all issuers, or 460 issuers, have such experience. We anticipate additional software purchases to generate measure data and rates and increased third-party data validation fees for i ssuers that do not have the experience in data collection and reporting for th e QRS as proposed in §156.1120. Therefore, we estimate that the

additional cost burden for each of the remain ing 115 issuers would be approximately $102,500 in the initial year as they develop their data collection systems and processes, for a total of approximately $11,787,500. We estimate $67,518,800 and 948,750 hours as the total annual burden for the anticipated 575 QHP issuer s to collect and report QRS data. E. ICRs Regarding Quality Standards for Exchanges (§§155.1400 and 155.1405)CMS-9949-P 183

In §155.1400 and §155.1405, we propose that each Exchange must display, on its website, quality rating and enrollee satisfaction survey result information for QHPs offered on the Exchange. We estimate 18 State Exchanges a nd the FFE would collect the relevant QRS and ESS information for display. The burden estimate associated with these standards would include collection of the necessary data by each Exchan ge to display on its website. This burden and cost for Exchanges are currently approved unde r ONC 0938-1156 in the total website site that provides information including ESS and quality ra tings, on available QHPs. The provisions of this proposed rule would not affect the burden. F. ICR Regarding Medical Loss Ratio Requirements (§§158.150, 158.211, 158.220, 158.221, 158.231 and 158.243) This proposed rule would amend the MLR pr ovisions regarding the treatment of ICD-10 conversion costs. This proposed rule further proposes MLR calculation adjustments for issuers affected by the transitional policy announced in the CMS letter dated November 14, 2013 and for issuers participating in the Stat e and Federal Exchanges. This proposed rule would also clarify

how issuers are to calculate th eir MLRs in States that requi re the small group market and individual market to be merge d. In addition, this proposed rule would clarify how issuers must

distribute de minimis rebates. Both MLRs and rebates ar e reported on the ML R annual reporting

form. The burden for the existing information colle ction requirement is approved under OCN 0938–1164. This includes the annual reporting form and instructions that are currently used by issuers to submit MLR information to HHS. The MLR annual reporting form collects

information on all distributed and owed rebate amounts, regardless of whether they are de

minimis . Prior to the July 31, 2015 deadline for the submission of the annual MLR report for theCMS-9949-P 184

2014 MLR reporting year, and in accordance with the PRA, HHS plans to solicit public comment and seek OMB approval for an update d MLR annual form that would reflect the changes in MLR calculations. In addition, a lthough HHS is seeking OMB approval for updates

to the MLR annual form that refl ect changes in MLR calculations in States that require the small group market and individual market to be merg ed, and changes that would allow issuers to separately report transitional coverage, these changes are no t considered new reporting requirements as they utilize information that is a subset of information that issuers already submit to HHS. We do not anticipate that the proposed changes would increase the burden on

issuers. G. ICRs Regarding Civil Money Penalties (§§155.206 and 155.285) Section 155.206 describes the bases and pro cesses HHS proposes to use to impose CMPs on noncompliant consumer assistance personnel and organizations. Section 155.285 describes the bases and processes HHS propos es to use to impose CMPs on persons who provide false or fraudulent information required under section 14 11(b) of the Affordab le Care Act or who knowingly and willfully use or disclose inform ation in violation of section 1411(g) of the Affordable Care Act. The ICRs proposed in these provisions are exempt from PRA requirements in accordance with 5 CFR 1320.4(a)(2) because this information would be collected during the con duct of an administrative action or investigation involving an agency against specific individuals or entities. H. ICRs Regarding Fixed Indemnity Insurance, Minimum Essential Coverage, Certifications of Creditable Coverage and HIPAA Opt-Out Electio n Notice, Notice of Di scontinuation, Notice of Renewal (§§146.152, 146.180, 147.106, 148.122, 148.124, 148.220, and 156.602)CMS-9949-P 185

In §148.220 of this proposed rule, we propose that issuers of individual market fixed indemnity insurance include a notice in plan material s stating that the coverage is not a substitute for major medical coverage and that lack of minimum essential coverage may result in an additional payment with one’s taxes. The noti ce requirement could be satisfied by inserting a statement into existing plan documents. HHS w ould provide the exact te xt of the notice and it

would not need to be customized. In a ddition, under proposed §156.602, issuers of foreign group health coverage would be required to pr ovide notice to enrollee s who are citizens or

nationals of the United States of its minimum e ssential coverage status. Plan documents are usually reviewed and updated annually before a new plan year begins. Issu ers would be able to insert the statements in their plan documents at that time at minimal cost. Once the notice is included in the plan documents the first year, no additional cost would be incurred in future years. Sections 146.152, 147.106 and 148.122 of this pr oposed rule provide that issuers that discontinue a product in the group or individual market, or thatprovide the option to renew coverage, would also be required to provide written notices to enrollees in a form and manner specified by the Secretary. HHS wo uld provide the exact text of the notices and they would not

need to be customized. The burden associated with these notices would not be subject to the Paperwork Reduction Act of 1995 in accordance with 5 CFR 1320.3(c)(2).

Certifications of creditab le coverage under §148.124 would no longer be required to be provided starting December 31, 2014. The bur den is currently approved under OCN 0938-0702. In the individual market, the anticipated reduction in annual bur den hours would be 835,517, with an anticipated reduction in cost of $25,625,306. The burden for HIPAA Opt-out Election notices under §146.180 is currently approved und er OCN 0938-0702 as well. ElectronicCMS-9949-P 186

submission of opt-out election notice will also re duce costs for plans by eliminating the need for mailing paper forms. If you comment on these information collecti on requirements, please do either of the following: 1. Submit your comments electronically as spec ified in the ADDRESSES section of this proposed rule; or 2. Submit your comments to the Office of Info rmation and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, CMS-9949-P. Fa x: (202) 395–6974; or Email: OIRA_submission@omb.eop.gov. V. Regulatory Impact Analysis A. Summary This proposed rule addresses various requirements applicable to health insurance issuers, Exchanges, Navigators, non-Navigator assist ance personnel, and othe r entities under the Affordable Care Act. It also proposes a number of amendments relating to the premium stabilization programs, the medical loss ratio pr ogram, certified application counselor programs, affordability exemptions, guaranteed availability and renewability of coverage, and quality reporting requirements. Additionally, it propos es the grounds for imposing CMPs on persons who provide false or fraudulent information to the Exchange and on persons improperly using or disclosing information; to modify standards related to opt-out provi sions for self-funded nonFederal governmental plans and individual mark et provisions under the Health Insurance Portability and Accountability Act of 1996; and standards for recognition of certain types of foreign group coverage as minimum essential coverage.CMS-9949-P 187

CMS has crafted this rule to implement th e protections intended by Congress in an economically efficient manner. We have examin ed the effects of this rule as required by Executive Order 12866 (58 FR 51735, September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the Congression al Review Act (5 U.S.C. 804(2)). In accordance with OMB Circular A–4, CMS has quantif ied the benefits, costs and transfers where possible, and has also provided a qualitative discussion of some of the benefits, costs and transfers that may stem from this proposed rule.

B. Executive Orders 13563 and 12866 Executive Order 12866 (58 FR 51735) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and e quity). Executive Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and reaffirms the prin ciples, structures, and definitions governing regulatory review as established in Executive Order 12866. Section 3(f) of Executive Order 12866 define s a “significant regulatory action” as an action that is likely to result in a proposed rule--(1) having an annual effect on the economy of $100 million or more in any one year, or adversel y and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities (also refe rred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, orCMS-9949-P 188

loan programs or the rights and obligations of re cipients thereof; or (4 ) raising novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in

the Executive Order. A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year), and a “significa nt” regulatory action is subject to review by the OMB. HHS has conclude d that this rule is likely to have economic impacts of $100 million or more in any one year, and therefore meets the definition of “significant rule” under Execu tive Order 12866. Therefore, HHS has provided an assessment of the potential costs, benefits, and transfers associ ated with this pr oposed regulation. 1. Need for Regulatory Action Starting in 2014, qualified indi viduals and qualified empl oyers are able to obtain coverage provided through Exchanges. The pro posed provisions, amendments and clarifications in this proposed rule would address stakehol der concerns and inquiries and ensure smooth functioning of health insurance markets and Exch anges and ensure that individuals have access to high quality and affordable health insurance coverage. In addition, th is proposed rule would establish methodologies for calculating the MLR to address ICD-10 conversion costs, MLR and

rebate calculations in States th at require the individual and sm all group markets to be merged,

the distribution of de minimis rebates, and to accommodate the special circumstances of issuers affected by the transitional policy announced in the CMS letter dated November 14, 2013, and issuers participating in the St ate and Federal Exchanges. 2. Summary of ImpactsCMS-9949-P 189

In accordance with OMB Circular A-4, Table V.1 below depicts an accounting statement summarizing CMS’s assessment of the benefits, costs, and transfers associated with this regulatory action. The period covered by the RIA is 2014 – 2018. HHS anticipates that the provisi ons of this proposed rule wi ll ensure that all consumers have access to quality and affordable health care and are able to make informed choices, ensure smooth operation of Exchanges, ensure that prem ium stabilization progra ms work as intended, provide flexibility to SHOPs and employers, and protect consumers from fraudulent and criminal activities. Affected entities such as QHP i ssuers, Navigators and non-Navigator assistance personnel, designated certified application counselor organizations , survey vendors, and States, would incur costs to comply w ith the proposed provisions, includi ng administrative costs related to notices, surveys, training, and recertification requirements. In accordance with Executive Order 12866, HHS believes that the benefits of this regulatory acti on justify the costs. Table V.1: Accounting Table

Benefits: Qualitative: * Ensure access to affordable and quality heal th insurance coverage for all individuals * Allow consumers to make informed choices * Lower out-of-pocket costs for individuals who purchase fixed indemnity insurance *Possible reduction in cost sharing due to adjustment in methodol ogy for calculating annual limitations on cost-sharing and small group deductibles * Ensure sufficiency of funds in the reinsurance payment pool * Ensure consumer protection a nd privacy and security of PII * Discourage fraudulent or criminal activity by consumer assistance personnel and entities * Provide additional flexibility to SHOPs and em ployers and allow employers to select plans with updated rate information * Improve consistency of MLR calculations among issuers in States with merged individual and small group markets and improve accuracy of rebate payments

Costs: Estimate Year dollar Discount rate percent Period covered $48.78 million 1 2013 7 2014-2018 Annualized Monetized ($millions/year) $49.52 million 1 2013 3 2014-2018 Net annual costs to enrollees related to ESS and Marketplace survey; recer tification of certifiedCMS-9949-P 190

application counselors by States ; administrative cost s incurred by survey vendors to appeal application denials; administrative costs to QHP issuers related to data submissions for QRS and ESS administration; costs related to not ice and disclosure requirements for certified application counselor recertificat ion; consumer authorization fo r Navigators and non-Navigator personnel; and a reduction in costs for issuers in the individual market due to discontinuation of certification of creditable coverage. Qualitative: * Costs to certified application counselors to obtain required trai ning for recertification * Reduction in costs to consumers due to abilit y to make requests to dismiss appeals by telephone *Possible increase is premiums due to adju stments in methodology for calculating annual limitations on cost-sharing and small group deductibles Transfers: Estimate Year dollar Discount rate percent Period covered $2.93 million 2013 7 2014-2018 Annualized Monetized ($millions/year) $2.99 million 2013 3 2014-2018 Net annual transfer of rebate dol lars to enrollees from sharehol ders or nonprofit stakeholders, resulting from adjustment in MLR methodology fo r issuers in States with merged individual and small group markets Qualitative: *Possible reduction in rebates paid by issuers to enrollees due to adjustment in MLR methodology for issuers affected by the November 2013 transitional policy and unexpected costs during the implementation of the Exchange s, and to account for ICD-10 conversion costs *Possible transfer of transitio nal reinsurance program funds from the Federal government to non-grandfathered reinsurance-eligible plans in the individual market * Possible increase in total ri sk corridors payment amounts ma de by the Federal government and decrease in total risk corridors receipt s, although the Federal government intends to implement the risk corridors pr ogram in a budget neutral manner 1. Note: Approximately $13 million in costs are estim ated in the RIA below and the remaining costs related to ICRs are estim ated in section IV above. 3. Anticipated Benefits, Costs and Transfers The impacts of the existing regulations th at are being amended and clarified in this proposed rule have already been addressed in RIAs included in previous rulemaking. This RIA only includes the impacts of new provisions and any changes to previous estimates as a result of amendments to existing provisions.

BenefitsCMS-9949-P 191

Provisions of this proposed rule would ensu re that all individu als have access to affordable and quality health insurance cove rage and the necessary information to make informed choices. Making quality rating and enro llee satisfaction survey information available

to consumers would allow them to make informedchoices and provide issu ers with an incentive to improve quality of care and consumer experience. The results from the Marketplace survey would drive quality improvement in Exchanges and provide regulators and stakeholders with information to use for monitoring and oversight purposes. The proposed amendments to special enrollment periods would ensure that individual s who experience loss of coverage or exceptional

circumstances have continued access to healthcare. The proposal to designate foreign group health coverage for individuals on expatriate status as minimum essential coverage would ensure that such individuals have appropriate coverage while abroad or visiting the United States. The proposed amendments for fixed indemnity insurance would allow such plans to be sold as secondary to other health insurance coverage that meets th e definition of minimum essential coverage. This would allow individuals that buy such coverage to lower their out-ofpocket costs. The proposed adjustments to the transitional reinsurance program would ensure that the reinsurance pool is sufficient to provide the premiu m stabilization benefits intended by statute. The proposed adjustments to the risk corridors formula for the 2015 benefit year would help to mitigate issuers’ unexpected administrative co sts and uncertainties around operations and the risk pool, and to stabilize the market as it continues to tran sition to full compliance with Affordable Care Act requirements. The proposed regulations would clarify some of the standards for Navigator and certified application counselor conduct that would ensure consumer protecti on and ensure that NavigatorsCMS-9949-P 192

provide information and services concerning enro llment in QHPs in a fair and impartial manner and that certified application c ounselors act in consumers’ best interests. The proposed rule would also provide HHS with the authority to impose CMPs on Navigators, non-Navigator assistance personnel, certified ap plication counselors, and cer tified applica tion counselor organizations in the FFE who violate the Exchan ge standards applicable to them. This would ensure that consumers interacting with the Ex change receive high-quality assistance and robust consumer protection. The proposed provisions to impose CMPs for provision of false or fraudulent information, and improper use or disclosu re of information would also ensure privacy and security of consumers’ PII. The proposed amendments to the annual empl oyer and employee enrollment periods in the SHOP would benefit SHOPs by providing issuers with the same amount of time to complete the SHOP QHP certification process as that ava ilable for the individual Exchange. Aligning the start dates for the employer election period with the start of individual market Exchange open enrollment for 2015 would provide Exchanges with a uniform timeline for improving and launching Exchange services for 2015. Additiona lly, a uniform QHP filing and review timeline

for both markets for 2015 would reduce confusion a nd provide efficiencies to scale in review, providing potential resource savings to Exchan ges and QHP issuers. Removing the required minimum lengths of both the employer election period and the employee open enrollment period would provide additional flexibility to SHOPs and employers and allow employers to select plans with the most up-to-date rate information. The proposed amendment to provide for a one year transition policy under which a SHOP would be permitted to not implement employee choice in 2015 would alleviate concerns that HHS has with specific circumstances where employ ee choice would result in significant adverseCMS-9949-P 193

selection in the State’s small group market th at cannot be remediat ed through the premium stabilization programs or the single risk pool, or that there would not be a meaningful choice of QHPs and/or stand-alone dental plans in the Stat e’s SHOP. Allowing for this transitional policy in 2015 will provide minimal disruption to small group markets. The proposed amendment to our methodology for calculating the annual limitation on cost sharing and the annual limitation on small group deductibles could reduce cost sharing paid by some enrollees in the i ndividual and group markets. The proposed amendments to the MLR methodology in States that require the small group market and individual market to be me rged would improve the consistency of MLR calculations among issuers in those States and improve the accuracy of rebate payments. The approaches we are considering to define the required contribution percentage would provide that determinations of affordability ex emptions would take in to account the rate of premium growth over the rate of income growth. We do not anticipate that these approaches would significantly alter the numbe r of individuals who would be expected to enroll in health insurance plans or make shared responsibility payments.

Costs

Affected entities would incur co sts to comply with the provis ions of this proposed rule. Costs related to ICRs subject to PRA are disc ussed in detail in section IV and include administrative costs incurred by survey vendors to appeal application denials; costs to QHP issuers related to data submissions for QRS, ESS administration; cost s related to notice and disclosure requirements for certified application counselor recertification, consumer authorization for Navigators and non-Navigator assistance personnel; and a reduction in costs forCMS-9949-P 194

issuers in the individual due to discontinuation of certif ication of creditable coverage. In this section, we discuss other costs relate d to the proposed provisions. Each Exchange must establish its own rece rtification process for certified application counselors and designated certifi ed application counselor orga nizations. We expect that establishing a process for recertif ication would include updating rece rtification training materials in all Exchanges. We estimate that up to 18 State Exchanges will develop their own training materials. We expect that an Exchange would develop training materials for recertification on an

annual basis. We assume that it would take a mid-level health insurance analyst (with an hourly labor cost of $49.35) 8 hours to update the trai ning, 4 hours for a computer programmer (at $52.50 per hour) to update the online training mo dule and 1 hour by a senior manager (at $79.08 per hour) to review. The total co st for each State Exchange is estimated to be approximately $680, and the total cost for18 State Exchanges would be approximately $12,240. The proposed requirement for appeals entities to dismiss an appeal if the request is received via telephonic signature (if the a ppeals entity is capable of accepting telephonic withdrawals) would make the process more effi cient and may reduce costs to the appellant. The enrollee satisfaction survey would impact enrollees responding to the survey, survey vendors and QHP issuers. In 2014, a psychometric te st of the survey would be carried out, while in 2015 a beta test would be performed. The costto issuers is addresse d in section IV. We anticipate that in 2014, 4,200 enrollees would par ticipate in the psychometric test and in 2015 onwards, 6,000,040 enrollees would complete the survey. The total cost in 2014 of administering the survey to enro llees is estimated to be approximately $45,549 and the total cost to enrollees and survey vendors is estimated to be approximately $6,507,964 in 2015 and future years. In 2014, only one survey vendor w ould conduct the psychometric test and in theCMS-9949-P 195

following years, about 40 vendors are expected to conduct the survey. 57 In addition, each QHP

issuer would have to contract with an E SS vendor. We estimate approximately $16,000 as the annual cost for a QHP issuer to contract withan ESS vendor, for a total annual cost of $9.2 million for 575 QHP issuers. The Marketplace survey would be administer ed by a survey vendor under contract with HHS. A psychometric test would be conducted in 2014 with a beta test in 2015. Consumers would incur burden to respond to the survey. We estimate that each response would take 0.4 hours for a total of 3,150 responses requiring 1,2 60 hours in 2014 and a total of 61,200 responses requiring 24,480 hours in 2015 onwards. Total co sts would be approximately $30,366 in 2014 and $589,968 in following years. 58 The proposed amendment to our methodology for calculating the annual limitation on cost sharing and the annual limitation on sma ll group deductibles could lead some issuers to increase premiums slightly, potentially re sulting in higher premiums for consumers.

Transfers Currently, the MLR regulation permits inclus ion of ICD-10 conversion costs in quality improving activity expenses only through the 2013 MLR reporting year . However, the Secretary has changed the date by which issuers are required to adopt ICD-10 as the standard medical code set from October 1, 2013 to October 1, 2014. Ther efore, this proposed ru le proposes to permit

issuers to include their ICD- 10 conversion costs through the ML R reporting year in which the Secretary requires conversion to be completed, whic h is currently expected to be 2014. Based on

57 Detailed burden estimates can be found in the Sup porting Statement for the H ealth Insurance Marketplace Consumer Experience Surveys: Enroll ee Satisfaction Survey an d Marketplace Survey Data Collection, found at https://www.cms.gov/Regulations-and-G uidance/Legislation/PaperworkRe ductionActof1995/PRA-Listing.html. 58 Detailed burden estimates can be found in the Sup porting Statement for the H ealth Insurance Marketplace Consumer Experience Surveys: Enroll ee Satisfaction Survey an d Marketplace Survey Data Collection, found at https://www.cms.gov/Regulations-and-G uidance/Legislation/PaperworkRe ductionActof1995/PRA-Listing.html.CMS-9949-P 196

the 2012 MLR data, we estimate that the curren t ICD-10 provision reduced total rebates for 2012 by less than 2 percent. To the extent issuers may have complete d a substantial por tion of ICD-10 conversion prior to 2014, we exp ect that the impact of the pr oposed change on the 2014 rebates

would be even smaller. This proposed rule also proposes to account for the special circumstances of issuers affected by the CMS November 2013 transitional policy by allowing those issuers to multiply the incurred claims and expenses for quality im proving activities incurre d in 2014 in the MLR numerator by 1.0001. This adjustment would be limited to issuers that provided transitional coverage in the individual or sm all group markets in States that adopted the transitional policy. In addition, this proposed rule pr oposes to account for the special circumstances of the issuers that provided coverage through the State and Federal Exchange s by allowing those issuers to multiply the incurred claims and expenses for quality improving activities incurred in 2014 in the numerator by 1.0004. This adjustment would be limited to issuers offering coverage in the individual or small group markets through the Exchanges. Based on the 2012 MLR data, we estimate that the proposed adjustment for issuer s affected by the transi tional policy and for issuers affected by the Exchanges rollout might reduce the total rebates by 0.5 percent for 2014. In addition, this proposed ru le proposes to amend the MLR methodology to clarify how

issuers must calculate MLRs in States that require the small gr oup market and individual market to be merged for MLR calculation purposes. This would improve the consistency of MLR calculations among issuers in those States and improve the accuracy of rebate payments. Currently, only Massachusetts, Vermont, and the District of Columbia require the small group market and individual market to be merged (the Vermont and the District of Columbia requirements take effect in 2014). If an issuer met the respective MLR standards in the separateCMS-9949-P 197

markets, then this provision would not have any im pact on rebates. However, if an issuer met the MLR standards only in one market and merging the two markets would result in the issuer meeting (or being unable to meet ) the MLR standards in the merged market, the issuer might have to pay lower (or higher) reba tes and there would be a transfer from enrollees to issuers (or from issuers to enrollees). Based on the 2012 MLR data, we anticipate that the proposed change might result in issuers paying an additional $3.8 million in rebates. This proposed rule also proposes that issuers must distribute rebates directly to enrollees where (1) all of an issuer’s rebates are de minimis , or (2) distribution of de minimis rebates to enrollee(s) whose rebate s are not de minimis would result in an enroll ee receiving a rebate that exceeds the enrollee’s annual premium. The current de minimis rebate provisions allow issuers

not to distribute de minimis rebates to enrollees, but instead to aggregate such rebates and

distribute them to enrollees w hose rebates are not de minimis . With respect to the first proposed

de minimis provision, the current de minimis rebate provisions do notaccount for a situation

where all of an issuer’s rebates are de minimis . It is presumed that in such a circumstance,

issuers would distribute the de minimis rebates to all enrollees w hose rebates are de minimis

since these issuers would not have any enrollees with non-de minimis rebates; therefore, we do not consider the proposed clarifi cation to create any additional bur den. We are currently aware of one issuer that was in this situation, but more i ssuers may benefit from this clarification as they begin to come closer to meeting the MLR standard in future years. With respect to the second proposed de minimis provision, we are not currently aware of any issuers that experienced this circumstance. Further, there s hould not be any impact to the to tal amount of rebates disbursed because the changes proposed here only impact the recipient of rebates and not the total amount paid.CMS-9949-P 198

In this proposed rule, we propose to revise our allocation of rein surance contributions collected for the 2014 and 2015 benefit years so th at reinsurance contri butions collected are allocated first to the reinsurance pool and admini strative expenses and sec ond to payments to the U.S. Treasury. We expect that this proposal wo uld not have a significant effect on transfers,

because we estimate that we will collect the fu ll amount of reinsurance contributions. This proposal could lower premiums by reducing the uncertainty associated with reinsurance payments to non-grandfathered plan s in the individual market that are eligible for such payments

under 45 CFR 153.234. The Affordable Care Act creates a temporar y risk corridors program for the years 2014, 2015, and 2016 that applies to QHPs, as defined in §153.500. The risk corridors program creates a mechanism for sharing risk for allowable co sts between the Federa l government and QHP

issuers. The Affordable Care Act establishes the risk corridors program as a Federal program; consequently, HHS will operate the risk corridor s program under Federal rules with no State variation. The risk corridors progr am will help protect against inaccu rate rate setting in the early years of the Exchanges by limiting the extent of issuer losses and gains. For the 2015 benefit year, we are proposing an adjustment to the ri sk corridors formula that would help mitigate potential QHP issuers’ unexpected administrative costs. Alt hough our initial modeling suggests that this adjustment could increase the total ri sk corridors payment amou nt made by the Federal government and decrease risk corridors receipts, we estimate that, even with this change, the program can be implemented in a budget neutral manner. C. Regulatory Alternatives Under the Executive Order, CMS is required to consider alternatives to issuing rules and alternative regulatory approaches. CMS cons idered the regulatory alternatives below:CMS-9949-P 199

1. Collecting ESS Data at the Product Leve l Instead of Each Pr oduct Per Metal Tier Under this alternative, HHS would require QHPs to collect ESS data from a single sample for each product (versus each product in e ach metal tier). This option would reduce the cost for issuers who offer the same product in mu ltiple tiers. However, collecting data at the product level would prevent consumers from understa nding differences in en rollee satisfaction at the individual product per tier leve l, which may vary with differences in cost sharing. This would

reduce the benefits that cons umers derive from ESS data. 2. Using Medicaid CAHPS As Is Instead of Adding Additional and New Questions to the ESS Under this alternative, HHS would requi re QHPs to collect enrollee satisfaction information using the Medicaid CAHPS instrume nt without further enhancement. The ESS will include more questions than the Medicaid C AHPS—including detailed questions about the patient’s costs—that are partic ularly appropriate to Exchange enrollees. Eliminating these questions would reduce the cost to issuers, but al so reduce benefits that consumers derive from

the ESS data. 3. Collecting QRS Data for Each Product Per Me tal Tier Instead of at the Product Level Under this alternative, HHS would require QHPs to collect the QRS data at the same level (individual product per meta l tier) as they collect ESS information. Assuming that QHPs offer each product in two metal tiers this optio n would double the cost to QHPs of collecting QRS data. However, it might not appreciably in crease consumer information about QHPs in the early years of the Exchanges if the qualit y of care in the same product does not differ significantly within tiers (i.e., the variation should only be by the configuration of cost sharing within a limited range of actuarial value). Further, a QHP’s enrollm ent size at the product metal level may be too small in the early years of Exch ange implementation to ensure reliable results.CMS-9949-P 200

4. Using the Medicare Advantage (MA) CAHPS Instrument and Star System Under this alternative, HHS would requi re QHPs to collect enrollee satisfaction information from Exchange enrollees using the MA CAHPS instrument. The ESS presently includes 29 more questions, than MA CAHPS. Us e of the MA CAHPS woul d reduce the cost to consumers and also the QHP cost of data entr y. However, the MA CAHPS instrument and Star ratings are designed for a differe nt population and are not nece ssarily suitable to measure experience among Exchange enrollees. It also would have limited applicability for use by consumers for QHP comparison and selection purposes. CMS believes that the options adopted for th is proposed rule would be more efficient ways to extend the protections of the Afford able Care Act to enrollees without imposing significant burden on issuers and States. D. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) requires agencies that issue a rule to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. The RFA generally defines a “small entity” as--(1) a proprietary firm meeting the size standards of the Small Bu siness Administration (SBA), (2) a nonprofit organization that is not domina nt in its field, or (3) a small government jurisdiction with a population of less than 50,000 (States and individuals are not included in th e definition of “small entity”). CMS uses as its measure of signifi cant economic impact on a substantial number of small entities a change in revenues of more than 3 percent to 5 percent.

As discussed in the Web Portal interim fina l rule with comment period published on May 5, 2010 (75 FR 24481), CMS examined the health in surance industry in depth in the RIA we prepared for the proposed rule on establishment of the Medicare Advantage program (69 FRCMS-9949-P 201

46866, August 3, 2004). In that analysis it was determ ined that there were few, if any, insurance firms underwriting comprehensive health insurance policies (in contrast, for example, to travel insurance policies or dental di scount policies) that fell below the size thresholds for “small entity” established by the SBA. Based on data from MLR annual report submissions for the 2012 MLR reporting year, 59 out of 510 companies offering comprehensive health insurance policies nationwide, there are 58 small entities, each with le ss than $35.5 million in earned premiums, that offer individual or group healthinsurance coverage and would therefore be subject to the provisions of this proposed rule. 60 Forty three percent of these small entities belong to holding groups, and many if not all of th ese small entities are likely to have other lines of business (e.g., insurance busin ess other than health insura nce, and business other than insurance) that would result in their revenues exceeding $35.5 million. Based on this analysis, HHS expects that the proposed prov isions would not affect a substa ntial number of small issuers. The proposed amendments to the annual empl oyer and employee election periods in the SHOP, including removing the required minimum lengths of both the employer election period and the employee open enrollment period would benefit SHOPs and employers. HHS does not anticipate that this will impos e any costs on small employers. Some of the entities that voluntarily act as Navigators and non-Navigator assistance personnel subject to §155.215, or as designated certified applicat ion counselor organizations, might be small entities and would incur costs to comply with th e provisions of this proposed rule. It should be noted that HHS, in its role as the operator of the FFEs, does not impose any

59 These data can be accessed at http://www.cms .gov/CCIIO/Resources/Data-Resources/mlr.html. 60 The size threshold for “small” business established by th e SBA is currently $35.5 million in annual receipts for health insurance issuers. See ‘‘Table of Small Business Size Standards Matched To North American Industry Classification System Codes,’’ effective July 23, 2013, U.S. Small Business Administration, available at http://www.sba.gov

.CMS-9949-P 202

fees on these entities for participating in their respective programs, nor are there fees for taking the Federally required training or completing con tinuing education or rece rtification in FFEs. Further, the cost burden related to continuing education and recertifica tion, and recordkeeping would generally be considered an allowed cost th at would be covered by th e Navigator grants for the FFEs, and these grant funds may be drawn down as the grantee incurs such costs. The costs associated with these proposals might also be covered by other compensation provided by an Exchange, such as payments through contract s to non-Navigator assist ance personnel. Though it is very likely that all costs asso ciated with these proposals would be largely covered by affected

entities’ and individuals’ fundi ng sources, HHS cannot guarantee th at all such costs would be covered because of the possibility of budget limitations applicable to the FFE in any given period, and because there may be variations in how State Exchanges provide funding for these programs. To the extent that all such cost s would not covered by these funding sources, other outside sources may also be available to cove r unfunded costs that remain. Costs incurred by designated certified application counselor organizations relate d to continuing education and recertification and recordkeeping are expected to be low. In some circumstances funds from sources outside of the Exchange, including Federal funds such as Health Resources and Services Administration (HRSA) grants to health centers, or private or St ate funds might be available to cover certified application counselor costs.

E. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Re form Act (UMRA) of 1995 requires that agencies assess anticipated costs and benefits be fore issuing any proposedrule that includes a

Federal mandate that could resu lt in expenditure in any one ye ar by State, local or tribalCMS-9949-P 203

governments, in the aggregate, or by the priv ate sector, of $100 million in 1995 dollars, updated annually for inflation. In 2014, that thre shold level is approximately $141 million.

UMRA does not address the tota l cost of a proposed rule. Rather, it focuses on certain categories of cost, mainly those “Federal mandate” costs resulting from--(1) imposing enforceable duties on State, local, or tribal gove rnments, or on the private sector; or (2) increasing the stringency of conditio ns in, or decreasing the funding of, State, local, or tribal governments under entitlement programs. This proposed rule includes mandates on Stat e, local, or tribal governments. Issuers, certified application counselors and Exchanges are expected to incur costs of approximately $13 million in 2014 and approximately $85 million in 2015 onwards to comply with the provisions of this proposed rule. However, beginning in 2015, issuers in the individual market would experience a reduction in costs of approximately $26 million due to the discontinuation of the

certification of creditable covera ge. Consistent with policy embodied in UMRA, this proposed rule has been designed to be the least burdens ome alternative for State, local and tribal governments, and the private sector while achieving the objectives of the Affordable Care Act.

F. Federalism

Executive Order 13132 establishe s certain requirements that an agency must meet when it promulgates a proposed rule that imposes subs tantial direct requirement costs on State and local governments, preempts State law, or ot herwise has Federalism implications. States are the primary regulators of health in surance coverage. Stat es will continue to apply State laws regarding health insurance covera ge. However, if any State law or requirement prevents the application of a Federal standard, then that particular St ate law or requirement would be preempted. State requirements that are more stringent than th e Federal requirementsCMS-9949-P 204

would be not be preempted by this proposed rule, unless they conflict with or prevent application of the provisions of title I of the Affordable Care Act within the meani ng of section 1321(d) of the Affordable Care Act. Accordingly, States have significant latitude to impose requirements with respect to health insurance coverage th at are more restrictive than the Federal law requirements. The proposed amendment to §155.225(d) woul d clarify that certified application counselors must meet any licensi ng, certification or other standards prescribed by the State so long as such standards do not prev ent the application of the provision s of title I of the Affordable Care Act, within the meaning of section 1321(d) of the Affordable Care Act. The proposed provisions also specify State re quirements applicable to Naviga tors, non-Navigator assistance personnel, or certified application counselors that would prevent th e application of the provisions

of title I of the Affordable Care Act, within the meaning of se ction 1321(d) of the Affordable Care Act. They include requireme nts that require referrals to enti ties or individuals not required to provide impartial information or act in a consum er’s best interest, or prevent Navigators, nonNavigator assistance personnel, or certified app lication counselors from providing services to all individuals seeking assistance, or providing advice regarding subs tantive benefits or comparative benefits of different health plans; in FFEs conf lict with Federal standards or make it impossible to fulfill required duties, as such requirements ar e applied or implemented in the State; in FFEs, render ineligible otherwise eligib le individuals or entities from participating as Navigators, nonNavigator assistance pe rsonnel subject to §155.215 or certif ied application counselors under standards applicable to an FFE; and requiring that Navigators hold an agent or broker license or carry errors or omissions insurance.CMS-9949-P 205

Some States already have requirements for and publicly report hea lth plan quality and outcomes data, and we want to encourage State flexibility and innovation, consistent with the Affordable Care Act. In addition to prominen tly displaying quality rating information for each QHP, as calculated by HHS in accordance with the QRS, a State Exchange may display additional QHP quality-related information, as appropriate. In compliance with the requirement of Ex ecutive Order 13132 that agencies examine closely any policies that may ha ve Federalism implications or limit the policymaking discretion of the States, HHS has engaged in efforts to c onsult with and work cooperatively with affected

States. HHS has consulted with stakeholders on policies related to the op eration of Exchanges, including the SHOP and the premium stabili zation programs. HHS has held a number of listening sessions with State representatives to gather public input. HHS consulted with State representatives through regular meetings w ith the National Associ ation of Insurance Commissioners (NAIC) a nd regular contact with States through the Exchange Establishment grant and Exchange Bluepr int approval processes. Throughout the process of developing this pr oposed rule, CMS has attempted to balance the States’ interests in regulating health insurance issuers. By doing so, it is CMS’ view that it has complied with the requirements of Executive Order 13132. Under the requirements set forth in section 8(a) of Executive Order 13132, and by the signatures affixed to th is rule, HHS certifies

that the CMS Center for Consumer Information and Insurance Oversight has complied with the requirements of Executive Order 13132 for the attached proposed rule in a meaningful and timely manner. G. Congressional Review ActCMS-9949-P 206

This proposed rule is subjectto the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.), which specifies

that before a rule can take eff ect, the Federal agency promulgati ng the rule shall submit to each House of the Congress and to th e Comptroller General a report containing a copy of the rule along with other specified information, and has been transmitted to Congress and the Comptroller General for review.CMS-9949-P 207

List of Subjects

45 CFR Part 146 Health care, Health insurance, Re porting and recordkeeping requirements.

45 CFR Part 147 Health care, Health insurance, Reporti ng and recordkeeping requirements, State regulation of health insurance.

45 CFR Part 148 Administrative practice and procedure, Health care, Health insurance, Penalties, Reporting and recordkeeping requirements

45 CFR Part 153 Administrative practice and pro cedure, Adverse selection, Hea lth care, Health insurance, Health records, Organization and functions (Government agencies), Premium stabilization, Reporting and recordkeeping requirements, Reinsura nce, Risk adjustment, Risk corridors, Risk mitigation, State and local governments.

45 CFR Part 155 Administrative practice and pr ocedure, Health care access, Health insurance, Reporting and recordkeeping requirements, State and local governments, Cost-sharing reductions, Advance payments of premium tax credit, Administrati on and calculation of advance payments of the premium tax credit, Plan va riations, Actuarial value.

45 CFR Part 156 Administrative appeals, Ad ministrative practice and pr ocedure, Administration and calculation of advance payments of premium tax credit, Advertising, Advisory Committees, Brokers, Conflict of interest, Consumer prot ection, Cost-sharing reductions, Grant programs-CMS-9949-P 208

health, Grants administration, Health care, Heal th insurance, Health maintenance organization (HMO), Health records, Hospitals, American Indian/Alaska Natives, Individuals with disabilities, Loan programs-health, Organiza tion and functions (Government agencies), Medicaid, Payment and collections reports, Public assistance pr ograms, Reporting and recordkeeping requirements, State and local gover nments, Sunshine Act, Technical assistance, Women, and Youth.

45 CFR Part 158 Administrative practice and pr ocedure, Claims, Health care, Health insurance, Health plans, Penalties, Reporting a nd recordkeeping requirements, Premium revenues, Medical loss ratio, Rebating.For the reasons set forth in the preamble, th e Department of Health and Human Services proposes to amend 45 CFR parts 146, 147, 148, 153, 155, 156, and 158 as set forth below: PART 146 – REQUIREMENTS FOR THE GROUP HEALTH IN SURANCE MARKET 1. The authority citation for part 146 continues to read as follows: Authority : Secs. 2702 through 2705, 2711 through 2723, 2791, and 2792 of the PHSAct (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 through 300gg-23, 300gg-91, and 300gg92). 2. Section 146.152 is amended by— A. Revising paragraphs (c)(1) and (f). B. Redesignating paragraph (g) as paragraph (h). C. Adding new paragraph (g).

The revision and addition read as follows: §146.152 Guaranteed renewability of coverage for employers in the group market.

* * * * * (c) * * * (1) The issuer provides no tice in writing, in a form and manner specified by the Secretary, to each plan sponsor provided that particular product in that market (and to all participants and beneficiaries covered under such coverage) of the discontinuation at least 90 days before the date the c overage will be discontinued;

* * * * * (f) Exception for uniform modification of coverage . (1) Only at the time of coverage renewal may issuers modify the health insurance coverage for a product offered to a group health plan in the following—CMS-9949-P 210

(i) Large group market; and (ii) Small group market if, for coverage avai lable in this market (other than only through one or more bona fide associations), the modificati on is consistent with St ate law and is effective uniformly among group health plans with that product. (2) For purposes of this paragraph (f), modifi cations made solely pursuant to applicable

Federal or State law are considered a uniform modification of covera ge. Other types of

modifications are considered a uniform modification of coverage if the product that has been modified meets all of the following criteria: (i) The product is offered by the same heal th insurance issuer (within the meaning of section 2791(b)(2) of the PHS Act). (ii) The product is offered as the same pr oduct type (e.g., preferred provider organization (PPO) or health maintenance organization (HMO)). (iii) The product covers a majority of the same counties in its service area; (iv) The product has the same cost-sharing st ructure, except for vari ation in cost sharing solely related to changes in cost and utilization of medical care, or to maintain the same level of coverage described in sections 1302(d) and (e) of the Affordable Care Act. (v) The product provides the same covered be nefits, except for change s in benefits that cumulatively impact the rate for the product by no more than 2 percent (not including changes required by applicable Federal or State law). (3) A State may establish criteria that br oaden, but not restrict, the definition of a uniform modification of coverage unde r paragraph (f)(2) of this section. (g) Notice of renewal of coverage . If an issuer is renewi ng coverage as described in paragraph (a) of this section, or uniformly modifying coverage as described in paragraph (f) ofCMS-9949-P 211

this section, the issuer must provide to each plan sponsor written notice of the renewal in a form and manner specified by the Secretary.

* * * * *

3. Section 146.180 is revised to read as follows: §146.180 Treatment of non-Federal governmental plans. (a) Opt-out electi on for self-funded non-Fede ral governmental plans —(1) Requirements subject to exemption . The PHS Act requirements described in this paragraph are the following: (i) Limitations on preexisting condition excl usion periods in acco rdance with section

2701 of the PHS Act as codified before en actment of the Affordable Care Act. (ii) Special enrollment periods for indi viduals and dependents described under section 2704(f) of the PHS Act. (iii) Prohibitions against discriminating against individual participants and beneficiaries

based on health status under section 2705 of the PHS Act, except that the sponsor of a self-funded non-Federal governmental plan cannot el ect to exempt its plan from requirements under section 2705(a)(6) and 2705(c) through (f) that prohibit discrimination with respect to genetic information. (iv) Standards relating to benefits for mothers and newborns under section 2725 of the

PHS Act. (v) Parity in mental health and substan ce use disorder benefits under section 2726 of the

PHS Act. (vi) Required coverage for reconstruc tive surgery following mastectomies under section

2727 of the PHS Act.CMS-9949-P 212

(vii) Coverage of dependent students on a medically necessary leave of absence under

section 2728 of the PHS Act. (2) General rule . For plan years beginning on or after September 23, 2010, a sponsor of a non-Federal governmental plan may elect to exem pt its plan, to the extent the plan is not provided through health insurance co verage (that is, it is self-funded), from one or more of the requirements described in paragraphs (a )(1)(iv) through (vii ) of this section. (3) Special rule for certai n collectively bargained plans . In the case of a plan that is maintained pursuant to a collective bargaining agreement that was ratified before March 23, 2010, and whose sponsor made an election to exempt its plan from any of the requirements described in paragraphs (a)(1)(i) through (iii) of this section, the provision s of paragraph (a)(2) of this section apply for plan years beginning afte r the expiration of the te rm of the agreement. (4) Examples —(i) Example 1 . A non-Federal governmental employer has elected to exempt its self-funded group health plan from a ll of the requirements described in paragraph (a)(1) of this section. The plan year commences September 1 of each year. The plan is not subject to the provisions of paragraph (a)(1)(ii) of this section until the plan year that commences on September 1, 2011. Accordingly, for that plan y ear and any subsequent plan years, the plan sponsor may elect to exempt its plan only fr om the requirements described in paragraphs (a)(1)(iv) through (vii) of this section. (ii) Example 2 . A non-Federal governmental employer has elected to exempt its collectively bargained se lf-funded plan from all of the re quirements described in paragraph (a)(1) of this section. The co llective bargaining agreement applies to five plan years, October 1, 2009 through September 30, 2014. For th e plan year that begins on October 1, 2014, the plan sponsor is no longer pe rmitted to elect to exempt its plan from the requirementsCMS-9949-P 213

described in paragraph (a)(1) of this section. Ac cordingly, for that plan year and any subsequent plan years, the plan sponsor may elect to exempt its plan only from the requirements described in paragraphs (a)(1)(iv) through (vii) of this section. (5) Limitations . (i) An election underthis section cannot circumvent a requirement of the PHS Act to the extent the requirement applied to the plan before the effective date of the

election. Example 1 . A plan is subject to requirements of section 2727 of the PHS Act, under which a plan that covers medical and surgical be nefits with respect to a mastectomy must cover reconstructive surgery and certa in other services following a ma stectomy. An enrollee who has had a mastectomy receives reconstructive surger y on August 24. Claims with respect to the surgery are submitted to and processed by the pl an in September. The group health plan commences a new plan year each September 1. E ffective September 1, the plan sponsor elects to exempt its plan from section 2727 of the PHS Act. The plan cannot, on the basis of its exemption election, decline to pay fo r the claims incurred on August 24. (ii) If a group health plan is co-spons ored by two or more employers, then only plan enrollees of the non-Federal governmental employe r(s) with a valid elec tion under this section are affected by the election. (6) Stop-loss or excess risk coverage . For purposes of this section— (i) Subject to paragraph (a)(6 )(ii) of this section, the purch ase of stop-loss or excess risk coverage by a self-funded non-Federal governmental plan does not prevent an election under this

section. (ii) Regardless of whether coverage offere d by an issuer is designated as “stop-loss” coverage or “excess risk” coverage, if it is regulated as group health insurance under anCMS-9949-P 214

applicable State law, then for purposes of this section, a non-Federal governmental plan that purchases the coverage is considered to be fully insured. In that event, a plan may not be exempted under this section from the requirements described in paragraph (a )(1) of this section. (7) Construction . Nothing in this part should be construed as imposing collective bargaining obligations on any party to the collective bargaining process. (b) Form and manner of election —(1) Election requirements . The election must meet the following requirements: (i) Be made in an electronic format in a form and manner as described by the Secretary in guidance. (ii) Be made in conformance with all of the plan sponsor's rules, including any public hearing requirements. (iii) Specify the beginning and ending date s of the period to which the election is to apply. This period can be eith er of the following periods: (A) A single specified plan year, as defined in §144.103 of this subchapter. (B) The “term of the agreement,” as specifiedin paragraph (b)(2) of this section, in the case of a plan governed by collective bargaining. (iv) Specify the name of the plan and the na me and address of the plan administrator, and include the name and telephone number of a pe rson CMS may contact re garding the election. (v) State that the plan does not include health insurance coverage, or identify which portion of the plan is not funded through health insurance coverage. (vi) Specify each requirement described in paragraph (a)(1) of this section from which the plan sponsor elects to exempt the plan.CMS-9949-P 215

(vii) Certify that the person signing the election document, incl uding (if applicable) a third party plan administrator, is legally authorized to do so by the plan sponsor. (viii) Include, as an atta chment, a copy of the notice descri bed in paragraph (f) of this

section. (2) “Term of the agreement” defined . Except as provided in para graphs (b)(2)(i) and (ii), for purposes of this section “ter m of the agreement” means all group health plan years governed by a single collective bargaining agreement. (i) In the case of a group health plan fo r which the last plan year governed by a prior collective bargaining agreement expires during the bargaining process for a new agreement, the term of the prior agreement includes all plan y ears governed by the agreement plus the period of time that precedes the latest of the following dates, as applicable, with respect to the new agreement: (A) The date of an agreement between th e governmental employer and union officials. (B) The date of ratification of an agr eement between the governmental employer and the

union. (C) The date impasse resolu tion, arbitration or other closur e of the collec tive bargaining process is finalized when agreement is not reached. (ii) In the case of a group health plan governed by a collective bargaining agreement for

which closure is not reached before the last plan year under the immediately preceding agreement expires, the term of the new agr eement includes all plan years governed by the agreement excluding the period that precedes the la test applicable date specified in paragraph (b)(2)(i) of this section.CMS-9949-P 216

(3) Construction —(i) Dispute resolution . Nothing in paragraph (b )(1)(ii) of this section

should be construed to mean that CMS arbitrates disputes between plan sponsors, participants, beneficiaries, or their representa tives regarding whether an electi on complies with all of a plan sponsor’s rules. (ii) Future elections not preempted . If a plan must comply with one or more requirements described in paragraph (a)(1) of this section for a give n plan year or period of plan coverage, nothing in this sect ion should be construed as pr eventing a plan sponsor from submitting an election in accordance with this sec tion for a subsequent plan year or period of plan coverage. (c) Filing a timely election —(1) Plan not governed by collective bargaining . Subject to paragraph (c)(4) of this section, if a plan is not governed by a collective bargaining agreement, a plan sponsor or entity acting on behalf of a plan sponsor must file an election with CMS before the first day of the plan year. (2) Plan governed by a co llective bargaining agreement . Subject to para graph (d)(4) of this section, if a plan is gove rned by a collective bargaining agr eement that was ratified before March 23, 2010, a plan sponsor or entity acting on be half of a plan sponsor must file an election with CMS before the first day of the first pl an year governed by a collective bargaining agreement, or by the 45th day after the latest app licable date specified in paragraph (b)(2)(i) of this section, if the 45th day falls on or af ter the first day of the plan year. (3) Verifying timely filing . For elections submitted via hard copy through U.S. Mail, CMS uses the postmark on the envelope in which the election is submitted to determine that the election is timely filed as specifiedunder paragraphs (c)(1) or (2) of this section, as applicable.CMS-9949-P 217

If the latest filing date falls on a Saturday, S unday, or a State or Federal holiday, CMS accepts a postmark on the next business day. (4) Filing extension based on good cause . CMS may extend the deadlines specified in paragraphs (c)(1) and (2) of this section for good cau se if the plan substan tially complies with the requirements of paragraph (e) of this section. (5) Failure to file a timely election . Absent an extension unde r paragraph (c)(4) of this section, a plan sponsor’s failure to file a timel y election under paragraph (c)(1) or (2) of this section makes the plan subject to all requirements of this part for the entire plan year to which the election would have applied, or, in the cas e of a plan governed by a collective bargaining agreement, for any plan years under the agreemen t for which the election is not timely filed. (d) Additional information required —(1) Written notification . If an election is timely filed, but CMS determines that the election docum ent (or the notice to plan enrollees) does not meet all of the requirements of this section, CM S may notify the plan sponsor, or other entity that filed the election, that it must submit any additional information that CMS has determined is necessary to meet those requirements. The a dditional information must be filed with CMS by the later of the following dates: (i) The last day of the plan year. (ii) The 45th day after the date of CMS's written notification requesting additional

information. (2) Timely response . For submissions via hard copy via U.S. Mail, CMS uses the postmark on the envelope in which the additional information is submitted to determine that the information is timely filed as specified under paragra ph (d)(1) of this sectio n. If the latest filingCMS-9949-P 218

date falls on a Saturday, Sunday, or a State or Federal holiday, CMS accepts a postmark on the next business day. (3) Failure to respond timely . CMS may invalidate an election if the plan sponsor, or other entity that filed the elec tion, fails to timely submit the additional information as specified under paragraph (d)(1) of this section. (e) Notice to enrollees —(1) Mandatory notification . (i) A plan that makes the election described in this section must notify each aff ected enrollee of the election, and explain the consequences of the election. For purposes of this paragraph (e), if the dependent(s) of a participant reside(s) with the participant, a pl an need only provide notic e to the participant. (ii) The notice must be in writing and, ex cept as provided in paragraph (e)(2) of this section with regard to initial noti ces, must be provided to each enro llee at the time of enrollment under the plan, and on an annual basis no later than the last day of each plan year (as defined in §144.103 of this subchapter) for which there is an election. (iii) A plan may meet the notification requirements of this paragraph (e) by prominently printing the notice in a summary pl an description, or equivalent description, that it provides to each enrollee at the time of enrollment, and annua lly. Also, when a plan provides a notice to an enrollee at the time of enrollment, that notice may serve as the initial annual notice for that

enrollee. (2) Initial notices . (i) If a plan is not governed by a collective bargaining agreement, with regard to the initial plan year to which an election under this section applies, the plan must provide the initial annual notice of the election to a ll enrollees before the first day of that plan year, and notice at the time of enrollment to a ll individuals who enroll during that plan year.CMS-9949-P 219

(ii) In the case of a collec tively bargained plan, with regard to the initial plan year to which an election under this section applies, the pl an must provide the initial annual notice of the election to all enrollees before the first day of th e plan year, or within 30 days after the latest applicable date specified in paragraph (b)(2)(i) of this section if the 30th day falls on or after the first day of the plan year. Also, the plan mu st provide a notice at the time of enrollment to

individuals who— (A) Enroll on or after the fi rst day of the plan year, wh en closure of the collective bargaining process is reached befo re the plan year begins; or (B) Enroll on or after the latest applicable date specified in paragraph (b)(2)(i) of this

section if that date falls on or af ter the first day of the plan year. (3) Notice content . The notice must include at least the following information: (i) The specific requirements described in paragraph (a)(1) of this section from which the plan sponsor is electing to exempt the plan, and a statement that, in general, Federal law imposes these requirements upon group health plans. (ii) A statement that Federal law gives the plan sponsor of a self-funded non-Federal governmental plan the right to exempt the plan in whole, or in part, from the listed requirements, and that the plan sponsor has elected to do so. (iii) A statement identifying which parts of the plan are subject to the election. (iv) A statement identifying which of th e listed requirements, if any, apply under the terms of the plan, or as required by State law, wi thout regard to an exemption under this section. (f) Subsequent elections —(1) Election renewal . A plan sponsor may renew an election under this section through subseque nt elections. The timeliness st andards described in paragraph (c) of this section apply to electi on renewals under this paragraph (f).CMS-9949-P 220

(2) Form and manner of renewal

. Except for the requirement to forward to CMS a copy of the notice to enrollees under paragraph (b)(1 )(viii) of this section, the plan sponsor must comply with the election requirements of paragraph (b)(1) of this section. In lieu of providing a copy of the notice under (b)(1)(viii) , the plan sponsor may include a statement that the notice has been, or will be, provided to enrollees as sp ecified under paragraph (e ) of this section. (3) Election renewal includes provisions from which plan not previously exempted . If an election renewal includes a requirement descri bed in paragraph (a)(1) of this section from which the plan sponsor did not elect to exempt the plan for the preceding plan year, the advance notification requirements of paragr aph (e)(2) of this se ction apply with resp ect to the additional requirement(s) of paragraph (a) from which the plan sponsor is electi ng to exempt the plan. (4) Special rules regarding renewal of an election under a collective bargaining agreement —(i) If protracted negotiati ons with respect to a new agr eement result in an extension of the term of the prior agreement (as provided under paragraph (b)(2)(i) of this section) under

which an election under this section was in eff ect, the plan must comply with the enrollee notification requirements of paragraph (e)(1) of th is section, and, following closure of the collective bargaining process, must file an election renewal with CMS as provided under paragraph (c)(2) of this section. (ii) If a single plan applies to more than one bargaining unit, and the plan is governed by collective bargaining agreements of varying lengths, para graph (c)(2) of this section, with respect to an election renewal, applies to the plan as governed by the agreemen t that results in the earliest filing date. (g) Requirements not subject to exemption —(1) Genetic information . Without regard to

an election under this section th at exempts a non-Federal governmen tal plan from any or all ofCMS-9949-P 221

the provisions of §§146.111 and 146.121, the exempti on election must not be construed to exempt the plan from any provisions of this part 146 that pertain to genetic information. (2) Enforcement . CMS enforces these requirements as provided under paragraph (j) of

this section. (h) Effect of failure to comply w ith certification and notification requirements —(1)

Substantial failure —(i) General rule . Except as provided in paragra ph (h)(1)(iii) of this section, a substantial failure to comply with paragraph (e) or (g)(1) of this section results in the

invalidation of an electio n under this section with respect to all plan enro llees for the entire plan year. That is, the plan is subject to all requirements of this part for the entire plan year to which the election otherwise would have applied. (ii) Determination of substantial failure . CMS determines whether a plan has substantially failed to comply with a requirement of paragraph (e) or paragraph (g)(1) of this

section based on all relevant f acts and circumstances, including pr evious record of compliance, gravity of the violation and whether a plan corrects the failure, as warranted, within 30 days of learning of the violation. However, in general, a plan’s failure to provide a notice of the fact and consequences of an election under this section to an individual at the time of enrollment, or on an annual basis before a given plan year e xpires, constitutes a substantial failure. (iii) Exceptions —(A) Multiple employers . If the plan is sponsored by multiple employers, and only certain employers substantia lly fail to comply with the requirements of paragraph (e) or (g)(1) of this section, then the election is i nvalidated with respect to those employers only, and not with respect to other employers that complied wi th those requirements, unless the plan chooses to cancel its election entirely.CMS-9949-P 222

(B) Limited failure to provide notice . If a substantial failure to notify enrollees of the fact and consequences of an election is limited to certain individuals, the election under this section is valid only if, for the pl an year with respect to which th e failure has occurred, the plan agrees not to apply the election with respect to the individuals who we re not notified and so informs those individuals in writing. (2) Examples —(i) Example 1 . A self-funded, non-Federa l group health plan is co-sponsored by 10 school districts. Nine of th e school districts have fully complied with the requirements of paragraph (e) of this section, in cluding providing notice to new employees at the time of their enrollment in the plan, regardi ng the group health plan’s exemption under this section from requirements of this part. One school district, which hired 10 new teachers during the summer for the upcoming school year, neglecte d to notify three of th e new hires about the group health plan’s exemption elect ion at the time they enrolled in the plan. The school district has substantially failed to comply with a requiremen t of paragraph (e) of th is section with respect

to these individuals. The school district learned of the oversight six week s into the school year, and promptly (within 30 days of learning of th e oversight) provided notic e to the three teachers regarding the plan’s exemption unde r this section and that the ex emption does not apply to them, or their dependents, during the plan year of thei r enrollment because of the plan’s failure to timely notify them of its exemption. The plan co mplies with the requiremen ts of this part for these individuals for the plan year of their enro llment. CMS would not require the plan to come into compliance with the requirements of this part for other enrollees. (ii) Example 2 . Two non-Federal governmental employers cosponsor a self-funded group health plan. One employer substantially fails to comply with the requirements of paragraph (e) of this section. While the plan may limit the invalidation of the election toCMS-9949-P 223

enrollees of the plan sponsor th at is responsible for the substa ntial failure, the plan sponsors determine that administering the plan in that ma nner would be too burdensome. Accordingly, in this example, the plan sponsors choose to cancel the election entirely. Bo th plan sponsors come into compliance with the requirements of this part with respect to all enrollees for the plan year

for which the substantial failure has occurred. (i) Election invalidated . If CMS finds cause to invalidat e an election under this section, the following rules apply: (1) CMS notifies the plan sponsor (and the plan administrator if other than the plan sponsor and the administrator’s address is know n to CMS) in writing that CMS has made a preliminary determination that an election is inva lid, and states the basis for that determination. (2) CMS’s notice informs the plan sponsor that it has 45 days after the date of CMS’s notice to explain in writing why it believes its election is valid. The plan sponsor should provide applicable statutory and regulatory citations to support its position. (3) CMS verifies that the plan sponsor’s response is timely filed as provided under paragraph (c)(3) of this section. CMS will not consider a response that is not timely filed. (4) If CMS’s preliminary determination th at an election is in valid remains unchanged after CMS considers the plan sponsor’s timely re sponse (or in the event that the plan sponsor fails to respond timely), CMS provides written notice to the plan sponsor (and the plan

administrator if other than the plan sponsor and the administrato r’s address is known to CMS) of

CMS’s final determination that th e election is invalid. Also, CMS informs the plan sponsor that, within 45 days of the date of the notice of fina l determination, the plan, subject to paragraph (i)(1)(iii) of this section, must comply with all requirements of this part for the specified period

for which CMS has determined the election to be invalid.CMS-9949-P 224

(j) Enforcement . To the extent that an election under this section has not been filed or a non-Federal governmental plan othe rwise is subject to one or mo re requirements of this part, CMS enforces those requirements under part 150 of this subchapter. This may include imposing a civil money penalty against the plan or plan sponsor, as determined under subpart C of part

150. (k) Construction . Nothing in this sec tion should be construed to prevent a State from taking the following actions: (1) Establishing, and enforcing compliance with, the requirements of State law (as defined in §146.143(d)(1)), including requirements that parallel provision s of title XXVII of the PHS Act, that apply to non-Federa l governmental plans or sponsors. (2) Prohibiting a sponsor of a non-Federal governmental plan within the State from making an election under this section. PART 147 – HEALTH INSURANCE REFO RM REQUIREMENTS FOR THE GROUP

AND INDIVIDUAL HEALTH INSURANCE MARKETS 4. The authority citation for part 147 continues to read as follows: Authority : Secs. 2701 through 2763, 2791, and 2792 of the Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92), as amended. 5. Section 147.104 is amended by revising para graph (b)(1)(i) and adding paragraph (h)

to read as follows: §147.104 Guaranteed availability of coverage.

* * * * * (b) * * * (1) * * *CMS-9949-P 225

(i) Group market . (A) Subject to paragraph (b)( 1)(i)(B) of this section, a health insurance issuer in the group market must a llow an employer to purchase health insurance coverage for a group health plan at any point during the year. (B) In the case of a group health plan in the small group market that cannot comply with employer contribution or group participation rules for the offering of health insurance coverage, as allowed under applicable State law and in the case of a QHP offered in the SHOP, as permitted by §156.1250(c) of this subchapter, a h ealth insurance issuer may restrict the availability of coverage to an annual enrollment period that begins November 15 and extends through December 15 of each calendar year. (C) With respect to coverage in the small group market, and in the large group market if such coverage is offered through a Small Busine ss Health Options Program (SHOP) in a State, coverage must become effective consistent w ith the dates described in §155.725(a)(2) of this subchapter, except as provided in para graph (b)(1)(iii) of this section.

* * * * * (h) Construction . Nothing in this secti on should be construed to require an issuer to offer coverage otherwise prohibited under applicable Federal law. 6. Section 147.106 is amended by— A. Revising paragraphs (c)(1) and (e). B. Redesignating paragraphs (f), (g), a nd (h) as paragraphs (h), (i) and (j). D. Adding new paragraphs (f) and (g).

The revisions and additions read as follows: §147.106 Guaranteed renewability of coverage.

* * * * *CMS-9949-P 226

(c) * * * (1) The issuer provides no tice in writing, in a form and manner specified by the Secretary, to each plan sponsor orindividual, as applicable, provi ded that particular product in that market (and to all participants and bene ficiaries covered under such coverage) of the

discontinuation at least 90 cale ndar days before the date the coverage will be discontinued.

* * * * * (e) Exception for uniform modification of coverage . (1) Only at the time of coverage renewal may issuers modify the health insurance coverage for a product offered to a group health plan or an individual, as applicable, in the following: (i) Large group market. (ii) Small group market if, for coverage avai lable in this market (other than only through one or more bona fide associations), the modificati on is consistent with St ate law and is effective uniformly among group health plans with that product. (iii) Individual market if th e modification is consistent with State law and is effective uniformly for all individu als with that product. (2) For purposes of this paragraph (e), modifi cations made solely pursuant to applicable

Federal or State law are considered a uniform modification of covera ge. Other types of

modifications are considered a uniform modification of coverage if the product that has been modified meets all of the following criteria: (i) The product is offered by the same heal th insurance issuer (within the meaning of section 2791(b)(2) of the PHS Act). (ii) The product is offered as the same pr oduct type (e.g., preferred provider organization (PPO) or health maintenance organization (HMO)).CMS-9949-P 227

(iii) The product covers a majority of the same counties in its service area; (iv) The product has the same cost-sharing st ructure, except for vari ation in cost sharing solely related to changes in cost and utilization of medical care, or to maintain the same level of coverage described in sections 1302(d) and (e) of the Affordable Care Act. (v) The product provides the same covered be nefits, except for change s in benefits that cumulatively impact the plan-adjusted index rate for the product (as de scribed in §156.80(d)(2)) by no more than 2 percent (not including change s required by applicable Federal or State law). (3) A State may establish criteria that br oaden, but not restrict, the definition of a uniform modification of coverage unde r paragraph (e)(2) of this section. (f) Notice of renewal of coverage . If an issuer is renewi ng coverage as described in paragraph (a) of this section, or uniformly modifying coverage as described in paragraph (e) of this section, the issuer must provide to each plan sponsor or individual, as applicable, written

notice of the renewal in a form a nd manner specified by the Secretary. (g) Construction . Nothing in this secti on should be construed to require an issuer to

renew or continue in force c overage for which continued e ligibility would otherwise be prohibited under applicable Federal law.

* * * * * PART 148 – REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE

MARKET 7. The authority citation for part 148 continues to read as follows: Authority : Secs. 2701 through 2763, 2791, and 2792 of the Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92), as amended.

8. Section 148.101 is revised to read as follows:CMS-9949-P 228

§148.101 Basis and purpose. This part implements sections 2741 through 2763 and 2791 and 2792 of the PHS Act. Its purpose is to guarantee the renewability of all covera ge in the individual market. It also provides certain protections for mothers and newborns wi th respect to coverage for hospital stays in connection with childbirth and protects all indi viduals and family members who have, or seek, individual health insurance coverage from discrimination based on genetic information.

9. Section 148.102 is revised to read as follows: §148.102 Scope, applicability, and effective dates. (a) Scope and applicability . (1) Individual health insura nce coverage includes all health insurance coverage (as defined in §144.103 of this subchapter) thatis neither health insurance coverage sold in connection w ith an employment-related group health plan, nor short-term, limited-duration coverage as defi ned in §144.103 of this subchapter. (2) The requirements that pertain to guara nteed renewability for all individuals, to protections for mothers and newborns with re spect to hospital stays in connection with childbirth, and to protections ag ainst discrimination based on gene tic information apply to all

issuers of individual health insu rance coverage in the State. (b) Applicability date . Except as provided in §1 48.124 (certificate of creditable coverage), §148.170 (standards re lating to benefits for mothers and newborns), and §148.180 (prohibition of health discrimina tion based on genetic information), the requirements of this part apply to health insurance coverage offered, sol d, issued, renewed, in effect, or operated in the individual market after June 30, 1997. §148.103 [Removed]

10. Section 148.103 is removed.CMS-9949-P 229

11. Section 148.120 is revised to read as follows: §148.120 Guaranteed availability of individual he alth insurance coverage to certain individuals with prior group coverage. The rules for guaranteeing the availability of individual health insurance coverage to certain eligible individuals with prior group coverage have been superseded by the requirements of §147.104 of this subchapter, which set forth Fede ral requirements for guar anteed availability of coverage in the group a nd individual markets. 12. Section 148.122 is amended by— A. Revising paragraphs (a), (d)(1), and (g). B. Redesignating paragraph (h) as paragraph (i). C. Adding new paragraph (h).

The revisions and addition read as follows: §148.122 Guaranteed renewability of indivi dual health insurance coverage. (a) Applicability . This section applies to non-gra ndfathered and gra ndfathered health plans (within the meaning of §147.140 of this subc hapter) that are indivi dual health insurance coverage. See also §147.106 of this subchapter for requirements relating to guaranteed renewability of coverage with respec t to non-grandfathered health plans.

* * * * * (d) * * * (1) Provides notice in writing, in a form a nd manner specified by th e Secretary, to each individual provided coverage of that type of heal th insurance at least 90 calendar days before the date the coverage will be discontinued.

* * * * *CMS-9949-P 230

(g) Exception for uniform modification of coverage . (1) An issuer may, only at the time of coverage renewal, modify the health insura nce coverage for a policy form offered in the

individual market if the modifica tion is consistent with State law and is effective uniformly for all individuals with that policy form. (2) For purposes of this paragraph (g), modifi cations made solely pursuant to applicable

Federal or State law are considered a uniform modification of covera ge. Other types of

modifications are considered a uniform modification of coverage if the product that has been modified meets all of the following criteria: (i) The product is offered by the same heal th insurance issuer (within the meaning of section 2791(b)(2) of the PHS Act). (ii) The product is offered as the same pr oduct type (e.g., preferred provider organization (PPO) or health maintenance organization (HMO)). (iii) The product covers a majority of the same counties in its service area; (iv) The product has the same cost-sharing st ructure, except for vari ation in cost sharing solely related to changes in cost and utilization of medical care, or to maintain the same level of coverage described in sections 1302(d) and (e) of the Affordable Care Act. (v) The product provides the same covered be nefits, except for change s in benefits that cumulatively impact the rate for the product by no more than 2 percent (not including changes required by applicable Federal or State law). (3) A State may establish criteria that br oaden, but not restrict, the definition of a uniform modification of coverage unde r paragraph (g)(2) of this section. (h) Notice of renewal of coverage . If an issuer is renewi ng coverage as described in paragraph (b) of this section, or uniformly modifying coverage as described in paragraph (g) ofCMS-9949-P 231

this section, the issuer must provide to each in dividual written notice of the renewal in a form and manner specified by the Secretary.

* * * * *

13. Section 148.124 is revised to read as follows: §148.124 Certification and disclosure of coverage. (a) General rule . The rules for providi ng certificates of cred itable coverage and demonstrating creditable coverage have been superseded by the prohibition on preexisting

condition exclusions. See §147.108 of this subchapter for rules prohibiting the imposition of a preexisting condition exclusion. (b) Applicability . The provisions of this section apply beginning December 31, 2014.

14. Section 148.126 is revised to read as follows: §148.126 Determination of an eligible individual. The rules for guaranteeing the availability of individual health insurance coverage to certain eligible individuals with prior group coverage have been superseded by the requirements of §147.104 of this subchapter, which set forth Fede ral requirements for guar anteed availability of coverage in the group and individual markets.

15. Section 148.128 is revised to read as follows: §148.128 State flexibility in individual mark et reforms—alternative mechanisms. The rules for a State to implement an acceptable alternative mechanism for purposes of guaranteeing the availability of individual health insurance co verage to certain eligible individuals with prior group coverage have been superseded by the requirements of §147.104 of this subchapter, which set forth Federal requiremen ts for guaranteed availab ility of coverage in the group and individual markets.CMS-9949-P 232

16. Section 148.220 is amended by— A. Revising the introductory text. B. Revising paragraph (b)(3). C. Redesignating paragraphs (b)(4) thr ough (6) as paragraphs (b)(5) through (7), respectively. D. Adding new paragraph (b)(4).

The revisions and additions read as follows: §148.220 Excepted benefits. The requirements of this part and part 147 do not apply to indivi dual health insurance coverage in relation to its provisi on of the benefits described in paragraphs (a) and (b) of this section (or any combina tion of the benefits).

* * * * * (b) * * * (3) Coverage only for a specified disease or illness (for example, cancer policies) if the policies meet the requirements of §146.145(b)(4)(ii)(B) and (C) of this subchapter regarding

noncoordination of benefits. (4) Hospital indemnity or other fixed indemnity insurance only if— (i) The benefits are provided only to individu als who have other health coverage that is minimum essential coverage within the meaning of section 5000A(f) of the Internal Revenue

Code. (ii) There is no coordinati on between the provision of be nefits and an exclusion of benefits under any other health coverage.CMS-9949-P 233

(iii) The benefits are paid in a fixed dollar amount per day of hospitalization or illness or per service (for example, $100/day or $50/visit) regardless of th e amount of expenses incurred and without regard to the amount of benefits provided with resp ect to the event or service under any other health coverage. (iv) A notice is displayed prom inently in the plan materials in at least 14 point type that has the following language: “THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND IS

NOT A SUBSTITUTE FOR MAJOR MEDICA L COVERAGE. LACK OF MAJOR MEDICAL COVERAGE (OR OTHER MI NIMUM ESSENTIAL COVERAGE) MAY

RESULT IN AN ADDITIONAL PA YMENT WITH YOUR TAXES.”

* * * * * PART 153 – STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND RISK ADJUSTMENT UNDERTHE AFFORDABLE CARE ACT 17. The authority citation for part 153 continues to read as follows: Authority : Secs. 1311, 1321, 1341–1343, Pub. L. 111–148, 24 Stat. 119. 18. Section 153.500 is amended by revising the definition of “adjustment percentage,” as added on March 11, 2014 (79 FR 13835), effect ive on May 12, 2014, to read as follows: § 153.500 Definitions.

* * * * * Adjustment percentage means, with respect to a QHP: (1) For benefit year 2014, for a QHP offered by a health insurance issuer with allowable costs of at least 80 percent of af ter-tax premium in a transitional State, the percentage specified by HHS for such QHPs in the transitiona l State; and otherwise zero percent.CMS-9949-P 234

(2) For benefit year 2015, for a QHP offered by a health insurance issuer in any State, two percent.

* * * * * PART 155 – EXCHANGE ESTABLISHMEN T STANDARDS AND OTHER RELATED STANDARDS UNDER THE AFFORDABLE CARE ACT 19. The authority citation for part 155 continues to read as follows: Authority: Title I of the Affordable Care Act, sections 1301, 1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334, 1402, 1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 18081- 18083). 20. Section 155.120 is amended by revising paragraph (c) to read as follows: §155.120 Non-interference with Federal law a nd non-discrimination standards.

* * * * * (c) Non-discrimination . (1) In carrying out the require ments of this part, the State and the Exchange must: (i) Comply with applicable non-discrimination statutes; and (ii) Not discriminate based on race, color, national origin, disability, age, sex, gender identity or sexual orientation. (2) Exception . Notwithstanding the provisions of paragraph (c)(1) of this section, an organization that receives Federa l funds to provide services to a defined population under the terms of Federal legal au thorities that participates in the ce rtified application counselor program under §155.225 may limit its pr ovision of certified application c ounselor services to the same defined population. If the organization limits it s provision of certified application counselorCMS-9949-P 235

services pursuant to this exception, but is approa ched for certified application counselor services by an individual who is not included in the defi ned population that the or ganization serves, the organization must refer the indi vidual to other Exchange-approve d resources that can provide assistance. If the organization does not limit it s provision of certified application counselor services pursuant to this excepti on, the organization must comply with paragraph (c)(1) of this

section.

21. Section 155.206 is added to read as follows: §155.206 Civil money penalties for violations of applicable Exchange standards by

consumer assistance entities in Federally-facilitated Exchanges. (a) Enforcement actions . If an individual or entity sp ecified in paragraph (b) of this section engages in activity specifi ed in paragraph (c) of this se ction, the Department of Health and Human Services (HHS) may impose the following sanctions: (1) Civil money penalties (CMPs), subjec t to the provisions of this section. (2) Corrective action plans. In the notice of assessment of CMPs specified in paragraph (l) of this section, HHS may provide an individual or entity specified in paragraph (b) of this section the opportunity to enter into a corrective action plan to correct the viola tion instead of paying the CMP, based on evaluation of the factors set forth in paragraph (h) of this section. In

the event that the individual or entity does not follow such a corrective action plan, HHS could require payment of the CMP. (b) Consumer assistance entities . CMPs may be assessed unde r this section against the following consumer assistance entities:CMS-9949-P 236

(1) Individual Navigators and Navigator entities in Federally-facilitated Exchanges, including grantees, sub-grantees , and all personnel ca rrying out Navigator duties on behalf of a grantee or sub-grantee; (2) Non-Navigator assistan ce personnel authorized unde r §155.205(d) and (e) and nonNavigator assistance pers onnel entities in Federally-facil itated Exchanges, including but not

limited to individuals and entities under contract with HHS to facilitate consumer enrollment in QHPs in Federally-facilitated Exchanges; and (3) Organizations that the Fe derally-facilitated Exchanges ha ve designated as certified application counselor organizati ons and individual certified a pplication counsel ors carrying out certified application counselor duties in the Federally-facilitated Exchanges. (c) Grounds for assessing CMPs . HHS may assess CMPs against a consumer assistance entity if, based on the outcome of the investigat ive process outlined in paragraphs (d) through (i) of this section, HHS has reasonably determined th at the consumer assistance entity has failed to comply with the Federally-facilitated Exchange requirements and standards applicable to the consumer assistance entity, unle ss a CMP has been assessed fo r the same conduct under 45 CFR

155.285. (d) Basis for initiating an inve stigation of a pot ential violation . (1) Information . Any information received by HHS that indicates that a consumer assistance entity may have engaged or may be engaging in activity specified in paragraph (c) of this section may warrant an investigation. Information that mi ght trigger an investigation incl udes, but is not limited to, the following: (i) Complaints from the general public; (ii) Reports from State regulatory agencies , and other Federal a nd State agencies; orCMS-9949-P 237

(iii) Any other information that indicates po tential involvement in activity specified in paragraph (c) of this section. (2) Who may file a complaint . Any entity or individual, or the legally authorized representative of an entity or individual, may f ile a complaint with HHS alleging that a consumer assistance entity has engaged or is engaging in an activity specified in paragraph (c) of this

section. (e) Notice of investigation . If HHS learns of a potential violation described in paragraph (c) of this section through th e means described in paragraph (d) of this section, HHS must provide a written notice of its i nvestigation to the consumer assi stance entity. This notice must include the following: (1) Description of the activit y that is being investigated. (2) Explanation that the consumer assistance entity ha s 30 days from the date of the notice to respond with additiona l information or documentation, including information or documentation to refute an alleged violation. (3) State that a CMP might be assessed if the allegations are not, as determined by HHS, refuted within 30 days from the date of the notice. (f) Request for extension . In circumstances in which a consumer assistance entity cannot prepare a response to HHS within the 30 days provided in the noti ce of investigation described in (e) of this section, the entity ma y make a written request for an extension from HHS detailing the reason for the extension request and showing good cause. If HHS grants the extension, the consumer assistance entity must respond to the no tice within the time frame specified in HHS’s letter granting the extension of time. Failure to respond within 30 days, or , if applicable, withinCMS-9949-P 238

an extended time frame, may result in HHS’s imposition of a CMP depending upon the outcome of HHS’s investigation of the alleged violation. (g) Responses to alle gations of noncompliance . In determining whether to impose a CMP, HHS may review and consider documents or information received or collected in accordance with paragraph (d)(1) of this section, as well as add itional documents or information provided by the consumer assistance entity in re sponse to receiving a noti ce of investigation in accordance with paragraph (e)(2) of this se ction. HHS may also conduct an independent investigation into the alleged violation, which may include site visits and interviews, if applicable, and may consider the results of this investigation in its determination. (h) Factors in determining noncompliance and CMPs, if any . In determining whether there has been noncompliance by the consumer assistance entity, and whether CMPs are appropriate, (1) HHS must take into account the following: (i) The consumer assistance entity’s previ ous or ongoing record of compliance, including but not limited to compliance or noncompliance w ith any corrective action plan under section (c)

of this section. (ii) The gravity of the violation, which may be determined in part by— (A) The frequency of the viol ation, taking into consideration whether any violation is an isolated occurrence, represents a pattern, or is widespread; and (B) Whether the violation cause d, or could reasonably be expe cted to cause, financial or other adverse impacts on consumer(s), and the magnitude of those impacts; (2) HHS may take into account the following:CMS-9949-P 239

(i) The degree of culpability of the consumer assistance enti ty, including but not limited

to— (A) Whether the violation was beyond the di rect control of the consumer assistance entity; and (B) The extent to which the consumer assist ance entity received compensation—legal or

otherwise—for the services asso ciated with the violation; (ii) Aggravating or mitigating circumstances; or (iii) Other such factors as justice may require. (i) Maximum per-day penalty . The maximum amount of penalty imposed for each violation is $100 for each day for each consumer assistance entity for each individual directly affected by the consumer assistance entity’s noncompliance; and where the number of

individuals cannot be determin ed, the Exchange may reasonably estimate the number of individuals directly a ffected by the violation. (j) Settlement authority . Nothing in §155.206 limits the au thority of HHS to settle any

issue or case described in the notice furnis hed in accordance with paragraph (e) or to compromise on any penalty provided for in this section. (k) Limitations on penalties . (1) Circumstances under which a civil money penalty is not imposed . HHS will not impose any civil money penalty on: (i) Any violation for the period of time dur ing which none of the consumer assistance entities knew, or exercising re asonable diligence would have known, of the violation; or (ii) The period of time after any of the cons umer assistance entities knew, or exercising reasonable diligence would have known, of the failure, if the violation was due to reasonable cause and not due to willful neglect and the viol ation was corrected within 30 days of the firstCMS-9949-P 240

day that any of the consumer assistance entiti es against whom the pe nalty would be imposed knew, or exercising reasonable diligence would have known, that the violation existed. (2) Burden of establishing knowledge . The burden is on the consumer assistance entity

or entities to establish to HHS ’s satisfaction that the consumer assistance entity did not know, or exercising reasonable diligence would have know n, that the violation existed, as well as the period of time during which that limitation applie s; or that the violati on was due to reasonable cause and not due to willful neglect and was corr ected pursuant to the elements in subparagraph (k)(1)(ii). (l) Notice of assessment of CMP . If HHS proposes to assess a CMP in accordance with this section, HHS will send a written notice of this decision to— (1) The consumer assistance entity agains t whom the sanction is being imposed, which notice must include the following: (i) A description of the ba sis for the determination; (ii) The basis for the CMP; (iii) The amount of the CMP, if applicable; (iv) The date the CMP, if applicable, is due; (v) Whether HHS would permit the consumer a ssistance entity to enter into a corrective action plan in place of paying the CMP, and th e terms of any such corrective action plan; (vi) An explanation of the consumer assistance entity’s right to a hearing under paragraph (m) of this section; and (vii) Information about the proce ss for filing a request for a hearing.CMS-9949-P 241

(m) Appeal of proposed sanction . Any consumer assistance entity against which HHS has assessed a sanction may appeal that penalty in accordance with the procedures set forth at 45 CFR Part 150, Subpart D. (n) Failure to request a hearing . (1) If the consumer assi stance entity does not request a hearing within 30 days of the issuance of th e notice of assessment of CMP described in paragraph (l) of this section, HHS may require payment of the proposed CMP. (2) HHS will notify the consumer assistance en tity in writing of any CMP that has been assessed and of the means by which the consum er assistance entity may pay the CMP. (3) The consumer assistance entity has no righ t to appeal a CMP with respect to which it has not requested a hearing in accordance with para graph (m) of this section unless the consumer assistance entity can show good cause in accordan ce with §150.405(b) of this subchapter for failing to timely exercise its right to a hearing.

22. Section 155.210 is amended— A. By revising paragraph (c)(1)(iii). B. In paragraph (d)(3) by rem oving “or,” after the semicolon. C. In paragraph (d)(4) by removing the peri od at the end of the paragraph and adding a semicolon in its place. D. By adding paragraphs (d)(5) through (9) and (e )(6) and (7).

The revision and additions read as follows: §155.210 Navigator program standards. (c) * * * (1) * * *CMS-9949-P 242

(iii) Meet any licensing, certi fication or other standards prescribed by the State or Exchange, if applicable, so long as such st andards do not prevent th e applicati on of the provisions of title I of the Affordable Care Act. Standards that would prevent the application of the provisions of title I of the Affordable Care Act include but are not limited to the following: (A) Except as otherwise provided under §155.705( d), requirements that Navigators refer consumers to other entities not required to pr ovide fair, accurate, and impartial information. (B) Except as otherwise provided under §155.70 5(d), requirements that would prevent Navigators from providing services to all pe rsons to whom they ar e required to provide

assistance. (C) Requirements that would prevent Na vigators from providing advice regarding substantive benefits or comparative be nefits of different health plans. (D) Requiring that a Navigato r hold an agent or broker li cense or carry errors or omissions insurance. (E) In a Federally-facilitated Exchange , imposing standards that would prohibit

individuals or entities from acti ng as Navigators that would be eligible to participate as Navigators under standards applicable to the Federally-facilitated Exchange. (F) In a Federally-facilitated Exchange, impos ing standards that woul d, as applied or as implemented in a State, prevent the applicati on of requirements applic able to the Federallyfacilitated Exchange.

* * * * * (d) * * *CMS-9949-P 243

(5) Charge any applicant or enrollee, or request or rece ive any form of remuneration

from or on behalf of an indivi dual applicant or enrollee, for application or other assistance related to Navigator duties; or (6) Provide compensation to individual Na vigators on a per-app lication, per-individualassisted, or per-enrollment basis. (7) Provide gifts, including gift cards or cash, unless they are of nominal value, or provide promotional items that market or promote th e products or services of a third party, to any applicant or potential enrollee in connection withor as an inducement for application assistance

or enrollment. (8) Solicit any consumer for application or enrollment assistance by going door-to-door or through other unsolicited means of direct c ontact, including calling a consumer to provide application or enrollment a ssistance without th e consumer initiating the contact. (9) Initiate any telephone cal l to a consumer using an auto matic telephone dialing system or an artificial or prerecorded voice. (e) * * * (6) Ensure that applicants— (i) Are informed of the functions and responsibilitie s of Navigators; (ii) Provide authorization in a form and ma nner as determined by the Secretary prior to a Navigator’s obtaining access to an applicant’s personally identifiable information, and that the Navigator maintains a record of the authori zation provided. The Exchange must establish a reasonable retention period for maintaining these records. In Federally-f acilitated Exchanges, this period is three years, unless a different retention period has already been provided under 45

CFR 92.42 and 45 CFR 74.53 or other applicable Federal law; andCMS-9949-P 244

(iii) May revoke at any time the authoriz ation provided the Navigator pursuant to paragraph (e)(6)(ii) of this section. (7) Maintain a physical presence in the Ex change service area, so that face-to-face assistance can be provided to applicants and enrollees.

* * * * * 23. Section 155.215 is amended by adding paragr aphs (f) and (g) to read as follows: §155.215 Standards applicable to Navigators and Non-Navigator Assistance Personnel carrying out consumer assistance func tions under §§155.205(d) and (e) and 155.210 in a Federally-facilitated Exchange and to Non-N avigator Assistance Personnel funded through an Exchange Establishment Grant.

* * * * * (f) State or Exchange standards . All non-Navigator entities or individuals carrying out consumer assistance functions under §155.205(d) a nd (e) must comply w ith the eligibility standard set forth under §155.210(c)(1)(ii i), except for §155.210(c)(1)(iii)(D).

(g) Consumer authorization . All non-Navigator entities or individuals carrying out consumer assistance functions under §155.205(d) and (e) must establish procedures to ensure that applicants— (1) Are informed of the functions and re sponsibilities of non-Na vigator assistance personnel; (2) Provide authorization in a form and manne r as determined by the Secretary prior to a non-Navigator assistance personnel’ s obtaining access to an appli cant’s personally identifiable information, and that the non-Navigator assist ance personnel maintains a record of the authorization provided. The Exchange must es tablish a reasonable retention period forCMS-9949-P 245

maintaining these records. In Fe derally-facilitated Exchanges, th is period is three years, unless an different retention period ha s already been provided in applicable Federal law; and (3) May revoke at any time the authoriz ation provided the non- Navigator assistance personnel pursuant to paragra ph (g)(2) of this section.

24. Section 155.225 is amended— A. In paragraph (b)(1)(i) by re moving “and” after the semicolon. B. In paragraph (b)(1)(ii) by removing the pe riod at the end of the paragraph and adding “; and” in its place. C. By adding paragraph (b)(1)(iii). D. In paragraph (d)(5) by removing “and” after the semicolon. E. In paragraph (d)(6) by removing the peri od at the end of the paragraph and adding a semicolon in its place. F. By adding paragraphs (d)(7) and (8). G. By revising paragraphs (f)(1) and (2) and (g).

The revisions and additions read as follows: §155.225 Certified application counselors.

* * * * * (b) * * * (1) * * * (iii) Maintain a physical presence in the Exchange service area, so that face-to-face assistance can be provided to applicants and enrollees.

* * * * * (d) * * *CMS-9949-P 246

(7) Is recertified on at leas t an annual basis after successfully completing recertification training as required by the Exchange; and (8) Meets any licensing, certification, or other standards prescr ibed by the State or Exchange, if applicable, so long as such st andards do not prevent th e applicati on of the provisions of title I of the Affordable Care Act. Standards that would prevent the application of the provisions of title I of the Affordable Care Act include but are not limited to the following: (i) Requirements that certified application counselors refer consum ers to other entities not required to act in the best interest of applicants assisted. (ii) Requirements that would prevent certi fied application couns elors from providing services to all persons to whom they are required to provide assistance. (iii) Requirements that would prevent certified application counselors from providing advice regarding substantive benefits or compar ative benefits of different health plans. (iv) In a Federally-facilitated Excha nge, imposing standards that would prohibit

individuals or entities from acti ng as certified application counsel ors that would be eligible to participate as certified application counselors under standards applicab le to the Federallyfacilitated Exchange. (v) In a Federally-facilitated Exchange, impos ing standards that woul d, as applied or as implemented in a State, prevent the applicati on of requirements applic able to the Federallyfacilitated Exchange.

* * * * * (f) * * * (1) Are informed of the functions and responsib ilities of certified application counselors;CMS-9949-P 247

(2) Provide authorization prio r to a certified application c ounselor obtaining access to an applicant's personally identifiable information and that the organization or certified application

counselor maintains a record of the authorization. The Exchange must establish a reasonable retention period for maintaining these records. In Federally-facilitated Exch anges, this period is three years, unless a different retention period has already been provided under other applicable Federal law; and

* * * * * (g) Fees, consideration, solicitation, and marketing . Organizations designated by the Exchange under paragraph (b) of this section and certified application counselors must not— (1) Impose any charge on applicants or en rollees for application or other assistance related to the Exchange; (2) Receive any consideration directly or indi rectly from any health insurance issuer or issuer of stop-loss insurance in connection with the enrollment of any individuals in a QHP or a non-QHP; (3) Provide compensation to individual ce rtified application counselors on a perapplication, per-individual- assist ed, or per-enrollment basis; (4) Provide gifts, including gift cards or cash, unless they are of nominal value, or provide promotional items that market or promote th e products or services of a third party, to any applicant or potential enrollee in connection with or as an inducement for application assistance or enrollment; (5) Solicit any consumer for application or enrollment assistance by going door-to-door or through other unsolicited means of direct c ontact, including calling a consumer to provide application or enrollment a ssistance without th e consumer initiating the contact; orCMS-9949-P 248

(6) Initiate any telephone cal l to a consumer using an auto matic telephone dialing system or an artificial or prerecorded voice. 25. Section 155.240 is amended by adding paragraph (e) to read as follows: §155.240 Payment of premium.

* * * * * (e) Premium calculation . The Exchange may establish one or more standard processes for premium calculation. (1) For a Federally-facilitated Exchange, th e premium for coverage lasting less than one month must equal the product of— (i) The premium for one month of coverage di vided by the number of days in the month;

and (ii) The number of days for which coverage is being provided in the month described in paragraph (e)(1)(i) of this section. (2) [Reserved] 26. Section 156.260 is amended by revising paragraph (g) to read as follows: §155.260 Privacy and security of person ally identifiable information.

* * * * * (g) Improper use and disclosure of information . Any person who knowingly and willfully uses or discloses information in viola tion of section 1411(g) of the Affordable Care Act will be subject to a CMP of not more than th e maximum amount specif ied in section 1411(h)(2) of the Affordable Care Act per person or entity, per use or disclosure, consistent with the bases and process for imposing civil penaltie s specified at §155.285 of this subpart, in addition to other penalties that may be prescribed by law.CMS-9949-P 249

27. Section 155.285 is added to s ubpart C to read as follows: §155.285 Bases and process for imposing civil pena lties for provision of false or fraudulent information to an Exchange or improper use or disclosure of information. (a) Grounds for imposing civil money penalties . (1) HHS may impose civil money penalties on any person, as defined in paragraph (a)(2) of this section, if, based on credible evidence, HHS reasonably determines that a pers on has engaged in one or more of the following

actions: (i) Failure to provide correct information under section 1411(b) of the Affordable Care Act where such failure is attributable to negligen ce or disregard of any rules or regulations of the Secretary with negligence and disregard defined as they are in section 6662 of the Internal

Revenue Code of 1986: (A) “Negligence” includes any failure to make a reasonable attempt to provide accurate, complete, and comprehensive information; and (B) “Disregard” includes any careless, reckless, or intentional disregard for any rules or regulations of the Secretary. (ii) Knowing and willful provision of fa lse or fraudulent information required under section 1411(b) of the Affordable Care Act, where knowing and willful means the intentional provision of information that th e person knows to be false; or (iii) Knowing and willful use or disclosure of information in violation of section 1411(g) of the Affordable Care Act, where knowing and willf ul means the intentional use or disclosure of information in violation of section 1411(g). Such violations would includ e, but not be limited to, the following:CMS-9949-P 250

(A) Any use or disclosure performed whic h violates relevant privacy and security standards established by the Exchange pursuant to §155.260; (B) Any other use or disclosure which has not been determined by the Secretary to be in compliance with section 1411(g)(2 )(A) of the Affordable Care Act pursuant to §155.260(a); and (C) Any other use or disclosure which is not necessary to carry out a function described in a contract with a non-Exchange entity executed pursuant to §155.260(b)(2). (2) For purposes of this section, the term “person” is de fined to include, but is not limited to, all individuals; corporations; Exchanges; Medicaid and CHIP agencies; other entities gaining access to personally identifiable information submitted to an Exchange to carry out

additional functions which the S ecretary has determined ensure the efficient operation of the Exchange pursuant to §155.260(a)(1); and non- Exchange entities as defined in §155.260(b) which includes agents, brokers, Web-brokers, QHP issuers, Navigators, non-Navigator assistance personnel; certified application c ounselors, in-person assistors, a nd other third party contractors. (b) Factors in determining the amount of civil money penalties imposed . In determining the amount of civil money penalties, HHS may ta ke into account factors which include, but are not limited to, the following: (1) The nature and circumstances of the conduct including: (i) The number of violations; (ii) The severity of the violations; (iii) The person’s history with the Exchange including any prior violations that would

indicate whether the violation is an isolated occurrence or represents a pattern of behavior; (iv) The length of time of the violation; (v) The number of individuals a ffected or potentially affected;CMS-9949-P 251

(vi) The extent to which the person r eceived compensation or other consideration associated with the violation; and (vii) Any documentation provided in any comp laint or other information, as well as any additional information provided by the individual to refute performing the violation. (2) The nature of the harm resulting from, or reasonably expected to result from, the violation including: (i) Whether the violation resulted in financial harm; (ii) Whether there was harm to an individual’s reputation; (iii) Whether the violation hindered or coul d have hindered an indi vidual’s ability to obtain health insurance coverage; (v) The actual or potential im pact of the provision of fals e or fraudulent information or of the improper use or disclosure of the information; and (vi) Whether any person received a more favorable eligibility determination for enrollment in a QHP or insurance affordability program, such as greater advance payment of the premium tax credits or cost-sharing reductions than he or she would be eligible for if the correct information had been provided. (3) No penalty will be imposed under para graph (a)(1)(i) of th is section if HHS

determines that there was a reasonable cause for the failure to provi de correct information required under section 1411(b) of the Affordable Care Act an d that the person acted in good

faith. (c) Maximum penalty . The amount of a civil money pe nalty will be determined by HHS in accordance with paragraph (b) of this section.CMS-9949-P 252

(1) The following provisions provide maximu m penalties for a single “plan year,” where “plan year” has the same meaning as at §155.20 of this part: (i) Any person who fails to provide correctinformation as specified in paragraph (a)(1)(i) of this section may be subject to a maximum civil money penalty as specified in section 1411(h)(1)(A)(i) of the Affordable Care Act for each application, as defined at paragraph (c)(1)(iii) of this se ction, pursuant to which a person fails to provide correct information. (ii) Any person who knowingly and willfully pr ovides false information as specified in paragraph (a)(1)(ii) of this section may be subject to a maximum civil money penalty as specified in section 1411(h)(1)(B) of the Affordable Care Act for each application, as defined at paragraph (c)(1)(iii) of this section, on which a person knowingly and willfully provides false

information. (iii) For the purposes of this subsection, “application” is defined as a submission of information, whether through an online portal, ov er the telephone thr ough a call center, or through a paper submission process, in which th e information is provided in relation to an eligibility determination; an eligibility redete rmination based on a change in an individual’s circumstances; or an annual eligibility redetermination for any of the following: (A) Enrollment in a qualified health plan; (B) Premium tax credits or co st sharing reductions; or (C) An exemption from the individu al shared responsibility payment. (2) Any person who knowingly or willfully uses or discloses information as specified in paragraph (a)(1)(iii) of this section may be subject to th e following civil money penalty:CMS-9949-P 253

(i) A civil money penalty for each use or disc losure described in paragraph (a)(1)(iii) of

this section of not more than the maximum amount specified in se ction 1411(h)(2) of the Affordable Care Act per use or disclosure. (ii) For purposes of this subsection, a use or disclosure includes one separate use or disclosure of a single individual’s personally id entifiable information where the person against whom a civil money penalty may be impos ed has made the use or disclosure. (3) These penalties may be imposed in a ddition to any other penalties that may be prescribed by law. (d) Notice of intent to issue civil money penalty . If HHS intends to impose a civil money penalty in accordance with this part, HHS w ill send a written notice of such intent to the person against whom it intends to impose a civil money penalty. (1) This written notice will be either hand deli vered, sent by certified mail, return receipt requested, or sent by overnight delivery serv ice with signature upon de livery required. The written notice must include the following elements: (i) A description of the findings of fact rega rding the violations with respect to which the civil money penalty is proposed; (ii) The basis and reasons why the findings of fact subject th e person to a penalty; (iii) Any circumstances described in paragraph (b) of this section that were considered in determining the amount of the proposed penalty; (iv) The amount of the proposed penalty; (v) An explanation of the person’s right to a hearing under any app licable administrative hearing process;CMS-9949-P 254

(vi) A statement that failure to request a he aring within 60 calendar da ys after the date of issuance printed on the notice permits the assessment of the proposed penalty; and (vii) Information explaining how to file a re quest for a hearing and the address to which the hearing request must be sent. (2) The person may request a hearing before an ALJ on the proposed penalty by filing a request in accordance with the procedure to file a request specified in the notice of intent to issue a civil money penalty. (e) Failure to request a hearing . If the person does not re quest a hearing within 60 calendar days of the date of issuance printed on the notice described in paragraph (d) of this section, HHS may impose the pr oposed civil money penalty. (1) HHS will notify the person in writing of any penalty that has been imposed, the means by which the person may satisfy the penalty, and the date on which the penalty is due. (2) A person has no right to appeal a pena lty with respect to which the person has not timely requested a hearing in accordance w ith paragraph (d) of this section. (f) Appeal of proposed penalty . Subject to paragraph (e)(2) of this section, any person against whom HHS has imposed a civil money pe nalty may appeal that penalty in accordance with the rules and procedur es outlined at 45 CFR part 150, subpart D, excluding §§150.461, 150.463, and 150.465. (g) Enforcement authority. (1) CMS

. CMS may impose civil money penalties up to the maximum amounts specified in paragr aph (d) of this section for a ny of the violations described in paragraph (a) of this section.CMS-9949-P 255

(2) OIG . In accordance with the rules and pro cedures of 42 CFR part 1003, and in place of imposition of penalties by CMS, the OIG may impose civil money penalties for violations described in paragraphs (a)(1)( ii) and (iii) of this section. (h) Settlement authority . Nothing in this section limits the authority of CMS to settle any issue or case described in the notice furnished in accordance with § 155.285(d) or to compromise on any penalty provided for in this section. (i) Limitations. No action under this section will be entertained unless commenced, in accordance with § 155.285(d), within 6 years from the date on which the violation occurred. 28. Section 155.320 is amended by revising the section heading and removing paragraph (d)(4).

The revision reads as follows: §155.320 Verification process related to eligib ility for insurance affordability programs.

* * * * * 29. Section 155.330 is amended by revising para graph (d)(2)(ii) to read as follows: §155.330 Eligibility redetermination during a benefit year.

* * * * * (d) * * * (2) * * * (ii) Comply with the standards specified in paragraph (e)(2) of this section.

* * * * * 30. Section 155.400 is amended by adding paragr aphs (e) and (f) to read as follows: §155.400 Enrollment of qualified individuals into QHPs.

* * * * *CMS-9949-P 256

(e) Premium payment . Exchanges may, and the Federa lly-facilitated Exchange will, require payment of the first month’s pr emium to effectuate an enrollment. (f) Processing enrollment transactions . The Exchange may provide requirements to QHP issuers regarding the instructi ons for processing electronic en rollment-related transactions. 31. Section 155.420 is amended by revising paragrap hs (b)(2)(i) through (i ii), (c), (d)(1), (d)(6)(iii), and (e) introductory text to read as follows: §155.420 Special enrollment periods.

* * * * * (b) * * * (2) * * * (i) In the case of birth, a doption, placement for adoption, or placement in foster care, the Exchange must ensure that coverage is effective for a qualified individual or enrollee on the date of birth, adoption, placement for adoption, or pl acement in foster care, but may permit the qualified individual or enrollee to elect a later co verage effective date. If the Exchange permits the qualified individual or enrollee to elect a later coverage effective date, the Exchange must ensure coverage is effective on the date electedby the qualified indi vidual or enrollee. (ii) In the case of marriage, or in th e case where a qualified i ndividual loses minimum essential coverage or other cove rage, as described in paragraph (d)(1) of this section, the Exchange must ensure that coverage is effective for a qualified individual or enrollee on the first day of the following month. (iii) In the case of a qualifi ed individual or enrollee eligible for a special enrollment period as described in paragraphs (d)(4), (d)(5), (d)(9), or (d)(10) of this section, the ExchangeCMS-9949-P 257

must ensure that coverage is effective on an a ppropriate date based on the circumstances of the special enrollment period, in accordance with guidelines issued by HHS.

* * * * * (c) Availability and length of special enrollment periods . (1) Unless specifically stated otherwise herein, a qualified indi vidual or enrollee has 60 days from the date of a triggering event to select a QHP; (2) A qualified individual or enrollee whos e coverage specified in paragraph (d)(1) or whose eligibility for qualifying coverage in an el igible-employer sponsored plan as specified in paragraph (d)(6)(iii) of this sec tion will end within the next 60 da ys has 120 days from the date that is 60 days prior to the end of such coverage or eligibility to select a QHP, including prior to the end of his or her existing c overage or eligibility for qualifying coverage in an eligibleemployer sponsored plan as specified in paragraph (d)(6)(iii) of this secti on, although he or she is not eligible for advance payments of the premium tax credit until the end of his or her existing coverage or eligibility for qualifying coverage in an eligible-employer sponsored plan as specified in paragraph (d)(6)(iii) of this section; (3) In the case of a qualified individual or enrollee eligible for a special enrollment period as described in paragraphs (d)(4), (d)(5), (d)(9), or (d)(10) of this section, the Exchange may define the length of this special enro llment period as appropriate based on the circumstances of the special enrollment peri od, in accordance with guidelines issued by HHS. (d) * * * (1) The qualified individual or his or her de pendent loses minimum essential coverage, is enrolled in any non-calendar ye ar individual health insura nce policy as described in §147.104(b)(2) of this subchapter, ev en if the qualified individual or his her or dependent has theCMS-9949-P 258

option to renew the expiring non-calendar year individual health insu rance policy, or loses pregnancy-related coverage desc ribed under section 1902(a)(10)(A)( i)(IV) and (a)(10)(A)(ii)(IX) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)).

* * * * * (6) * * * (iii) A qualified individual or his or her dependent who is enrolled in an eligible employer-sponsored plan is determined newly elig ible for advance payments of the premium tax credit based in part on a finding th at such individual is ineligible for qualifying coverage in an eligible-employer sponsored plan in accordance with 26 CFR 1.36B-2(c)(3), including as a result of his or her employer discontin uing or changing available covera ge within the next 60 days, provided that such individual is allo wed to terminate existing coverage.

* * * * * (e) Loss of coverage . Loss of minimum essential covera ge or other coverage described in paragraph (d)(1) of this section include s those circumstances described in 26 CFR 54.9801- 6(a)(3)(i) through (iii). Loss of coverage does not include voluntary termination or loss due to—

* * * * * 32. Section 155.430 is amended by revising para graph (d)(6) and addi ng paragraph (e) to

read as follows: §155.430 Termination of coverage.

* * * * * (d) * * * (6) In the case of a termina tion in accordance with paragraph (b)(2)(v) of this section, the last day of coverage in an enrollee's prior QHP is the day before the effectiv e date of coverage inCMS-9949-P 259

his or her new QHP, including any retroactive enrollments effectuate d under §155.420(b)(2)(iii). In cases of retroactive terminations dates, the Exchange will ensure that appropriate actions aretaken to make necessary adjustments to advance payments of the premium tax credit, costsharing reductions, premiums, and claims.

* * * * * (e) Termination, cancellation, and reinstatement . The Exchange may establish operational instructions as to the form, manner, and method for addressing each of the following: (1) Termination . A termination is an action taken af ter a coverage effective date that ends an enrollee’s coverage through the Exchange fo r a date after the original coverage effective date, resulting in a period during which the individual was covered by the issuer. (2) Cancellation . A cancellation is specific type of termination action that ends a qualified individuals’ enrollment on the date cove rage became effective resulting in coverage never having been effective with the QHP. (3) Reinstatement . A reinstatement is a correction of an erroneous termination or

cancellation action and results in restoration of an enrollment with no break in coverage. §155.505 [Amended]. 33. Section 155.505 is amended in paragraph (b)(4) by removing “; and” at the end of the paragraph and adding a period in its place. 34. Section 155.530 is amended by revising paragraph (a)(1) to read as follows: §155.530 Dismissals. (a) * * * (1) Withdraws the appeal requ est in writing or by telephone, if the appeals entity is capable of accepting te lephonic withdrawals.CMS-9949-P 260

(i) Accepting telephonic withdr awals means the appeals entity— (A) Records in full the appellant’s stat ement and telephonic signature made under penalty of perjury; and (B) Provides a written confirmation to the appellant documenting the telephonic

interaction. (ii) [Reserved]

* * * * * 35. Section 155.555 is amended by— A. Redesignating paragraphs (d) introducto ry text, (d)(1), (d)(2 ) introductory text, (d)(2)(i), (ii), (iii), (d)(3), and (d)(4) as paragraphs (d)(1) introductory text, (d)(1)(i), (d)(1)(ii) introductory text, (d)(1)(ii)(A ), (B), (C), (d)(1 )(iii), and (d)(2). B. Revising new paragraph (d)(2) introductory text.

The revision reads as follows: §155.555 Employer appeals process.

* * * * * (d) * * * (2) Upon receipt of an invalid appeal re quest, the appeals entity must promptly and without undue delay send written notice to the employer that the appeal request is not valid because it fails to meet the requirements of this section. The written notice must inform the employer—

* * * * *

36. Section 155.625 is revised to read as follows: §155.625 Options for conducting eligibility determinations for exemptions.CMS-9949-P 261

(a) Options for conducting eligibility determinations . The Exchange may satisfy the requirements of this subpart— (1) Directly or through c ontracting arrangements in accordance with §155.110(a); or (2) For an application submitted befo re November 15, 2014, through the approach described in paragraph (b) of this section. (b) Use of HHS service . Notwithstanding the requirements of this subpart, for an application submitted before November 15, 2014, the Exchange may adopt an exemption eligibility determination ma de by HHS, provided that— (1) The Exchange adheres to the el igibility determination made by HHS; (2) The Exchange furnishes to HHS any info rmation available through the Exchange that is necessary for an applicant to util ize the process administered by HHS; and (3) The Exchange call center and Intern et website specified in §155.205(a) and (b), respectively, provide information to consumers regarding the exemption eligibility process. 37. Section 155.705, as amended March 11, 2014 (79 FR 13838), and effective May 12, 2014, is amended by— A. Revising paragraphs (b)(2) and (b)(3)(ii) intro ductory text and (b)(3)(iv) introductory

text. B. Adding paragraph (b)(3)(vi).

The revisions and addition read as follows: § 155.705 Functions of a SHOP.

* * * * * (b) * * *CMS-9949-P 262

(2) Employer choice requirements . With regard to QHPs offered through the SHOP for plan years beginning on or afte r January 1, 2015, the SHOP must allow a qualified employer to select a level of coverage as described in secti on 1302(d)(1) of the Affordable Care Act, in which all QHPs within that level are made available to the qualified employees of the employer, unless the SHOP makes an election pursuant to paragraph (b)(3)(vi) of this section. (3) * * * (ii) Unless the SHOP makes an election pursu ant to paragraph (b)(3)(v i) of this section, for plan years beginning on or after January 1, 2015, a SHOP:

* * * * * (iv) Unless the Secretary makes an election pursuant to pa ragraph (b)(3)(vi) of this section, for plan years beginning on or after January 1, 2015, a Federally -facilitated SHOP will provide a qualified employer a choice of two methods to make QHPs available to qualified employees:

* * * * * (vi) For plan years beginning in 2015, th e SHOP may, based on the recommendation of a State regulatory agency, elect to provide employers only with the options set forth at paragraph (b)(3)(ii)(B) or in the case of a Federally-facil itated SHOP, only with the option set forth at paragraph (b)(3)(iv)(B) of this section, only if: (A) The implementation of paragraphs (b)(3)(ii )(A) or (b)(3)(iv)(A) of this section would result in significant adverse selection in the State’s small group market resulting in market disruptions that could not be remediated by sections 1312(c) , 1342, and 1343 of the Affordable Care Act (relating to single risk pool, ri sk corridors, and risk adjustment); orCMS-9949-P 263

(B) There are insufficient issuers of qualified he alth plans or qualified stand-alone dental plans in the SHOP to allow for meaningful choice among qualified health plans or qualified stand-alone dental plans for all levels of coverage as descri bed in section 1302(d)(1) of the

Affordable Care Act.

* * * * * 38. Section 155.725 is amended by revising paragr aphs (c) and (e) to read as follows: §155.725 Enrollment periods under SHOP.

* * * * * (c) Annual employer election period . (1) Notwithstanding any other paragraph in this section, for coverage beginning in 2015, a qualifie d employer’s annual election period may begin no sooner than November 15, 2014. (2) The SHOP must provide qualified employe rs with a standard el ection period prior to the completion of the employer’s plan year and before the annual employee open enrollment period, in which the qualified employer may change its participation in the SHOP for the next plan year, including— (i) The method by which the qualified em ployer makes QHPs available to qualified employees pursuant to §155.705(b)(2) and (3); (ii) The employer contribution towards the premium cost of coverage; (iii) The level of coverage offered to qualified employees as described in §155.705(b)(2) and (3); and (iv) The QHP or QHPs offered to qualified employees in accordance with §155.705.

* * * * *CMS-9949-P 264

(e) Annual employee open enrollment period . The SHOP must establish a standardized annual open enrollment period for qualified employ ees prior to the comple tion of the applicable qualified employer’s plan year and after that employer's annual election period.

* * * * * 39. Section 155.740 is amended by— A. Redesignating paragraphs (g) introductory text, (g)(1) introducto ry text, (g)(1)(i), (g)(1)(ii), (g)(2), and (g)(3) as paragraphs (g)(1)(i) intr oductory text, (g)(1)(i)(A), (g)(1)(i)(B), (g)(1)(ii), and (g)(2). B. Revising paragraph (i)(1)(i).

The revision read as follows: §155.740 SHOP employer and employee eligibility appeals requirements.

* * * * * (i) * * * (1) * * * (i) Withdraws the request in accordance withthe standards set fort h in §155.530(a)(1); or

* * * * * 40. Subpart O is added to read as follows: Subpart O—Quality Reporting Standards for Exchanges

Sec. 155.1400 Quality rating system.

155.1405 Enrollee satisfacti on survey system. Subpart O—Quality Reporting Standards for Exchanges §155.1400 Quality rating system.CMS-9949-P 265

The Exchange must prominently display the quality rating information assigned to each QHP on its website, in accordance with §155.205(b)(1 )(v), as calculated by HHS and in a form and manner specified by HHS. §155.1405 Enrollee satisfaction survey system. The Exchange must prominently display result s from the Enrollee Satisfaction Survey for each QHP on its website, in accordance with §155.205(b)(1)(iv), as calculated by HHS and in a form and manner specified by HHS. PART 156—HEALTH INSURANCE IS SUER STANDARD S UNDER THE AFFORDABLE CARE ACT, INCLUDING ST ANDARDS RELATED TO EXCHANGES 41. The authority citation for part 156 continues to read as follows: Authority : Title I of the Affordable Care Act, sections 1301–1304, 1311–1313, 1321- 1322, 1324, 1334, 1342–1343, 1401–1402, Pub. L. 111-148, 124 Stat. 119 42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, 26 U.S.C. 36B, and 31 U.S.C. 9701). 42. Section 156.130 is amended by revising paragraph (d) to read as follows: §156.130 Cost-sharing requirements.

* * * * * (d) Increase annual dollar limits in multiples of 50

. For a plan year beginning in a calendar year after 2014, any increas e in the annual dollar limits de scribed in paragraphs (a) and (b) of this section that does not result in a multiple of 50 dollars will be rounded down, to the next lowest multiple of 50 dollars.

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43. Section 156.200 is amended by revising para graph (b)(5) and addi ng paragraph (h) to

read as follows: §156.200 QHP issuer participation standards.

* * * * * (b) * * * (5) Implement and report on a quality improve ment strategy or stra tegies described in section 1311(c)(1)(E) of the Affordable Care Act consiste nt with the standards of section 1311(g) of the Affordable Care Act, disclose and report inform ation on health care quality and

outcomes described in sections 1311 (c)(1)(H), (c)(1)(I), and (c)(3) of the Affordable Care Act, and implement appropriate enroll ee satisfaction surveys consistentwith section 1311(c)(4) of the Affordable Care Act;

* * * * * (h) Operational requirements . As a condition of certificatio n of a QHP, an issuer must attest that it will comply with all QHP operational requirements described in Subparts D, E, H, K, L and M of this part. 44. Section 156.265 is amended by revising paragraph (d) to read as follows: §156.265 Enrollment process for qualified individuals.

* * * * * (d) Premium payment. A QHP issuer – (1) Must follow the premium payment pr ocess established by the Exchange in accordance with §155.240. (2) Must, for QHPs offered through a Federally -facilitated Exchange, establish the date by which a qualified individual that has selected a QHP within the enrollment period dates inCMS-9949-P 267

§155.410(b) of this subchapter must make a premium payment in order to e ffectuate coverage by the applicable coverage date, provided that: (i) The payment date is no later than th e day before the coverage effective date. (ii) The payment date policy is applied consistently to all applicants in a nondiscriminatory manner.

* * * * * 45. Section 156.602 is amended by redesignati ng paragraph (e) as paragraph (f) and adding a new paragraph (e) to read as follows: §156.602 Other coverage that qualifies as minimum essential coverage.

* * * * * (e) Foreign group health coverage . (1) Foreign group health coverage for expatriates

. The following types of foreign group health cove rage will be recognized as minimum essential coverage for expatriates: (i) Group health coverage for citizens or na tionals of the United States working abroad, provided by either of the following: (A) A foreign, self-insured group health plan. (B) Health insurance regulated by a foreign government or health coverage provided by a foreign national health plan w ith respect to a citizen or natio nal of the United States who, for such month, is physically absent from the United States for at least one day of the month, or who is physically present in the Unite d States for an entire month if the coverage provides health

benefits within the United States. (ii) Group health coverage for non-United St ates citizens or nati onals residing in the United States, provided by a self -insured group health plan, h ealth insurance regulated by aCMS-9949-P 268

foreign government, or health coverage provide d by a foreign national health plan, if the coverage provides health benef its within the United States. (2) Notice . The sponsor, issuer, or plan administrator of foreign group health coverage as described in this paragraph (e) must provide notice to enrollees who are citizens or nationals

of the United States of its minimum essential co verage status and must comply, if applicable, with the information and reporting requirements of section 6055 of the Code and implementing regulations with respect to those enrollees. (3) Definition of expatriate . For purposes of this sect ion, an expatriate means an individual for whom there is a good faith expecta tion that such individual will reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents.

* * * * * 46. Section 156.604 is amended by revising paragrap hs (a)(2) introductory text and (d) to

read as follows: §156.604 Requirements for recognition as mini mum essential coverage for types of coverage not otherwise designated minimum e ssential coverage in the statute or this subpart. (a) * * * (2) Procedural requirements for reco gnition as minimum essential coverage . To be considered for recognition as minimum essen tial coverage, the sponsor of the coverage, government agency, health insurance issuer, or plan administrator must submit the following

information to HHS:

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(d) Notice . Once recognized as minimum esse ntial coverage, the sponsor of the coverage, government agency, health insurance is suer, or plan administrator must provide notice to all enrollees of its minimum essential coverage status and must comply with the information reporting requirements of section 6055 of the Code and implementing regulations. 47. Section 156.800 is amended by adding paragraph (d) to read as follows: §156.800 Available remedies; Scope.

* * * * * (d) HHS may consult and share informati on about QHP issuers with other Federal and State regulatory and enforcement entities to the ex tent that the consultation and information is necessary for HHS to determine whether an en forcement remedy under subpart I is appropriate. 48. Section 156.805 is amended by— A. Removing “or” after the semicolon in paragraph (a)(6). B. Removing the period in paragraph (a)(7) and adding “; or” in its place. C. Adding paragraph (d)(3). D. Revising paragraph (e)(2).

The revisions and additions read as follows: §156.805 Bases and process for imposing civil money penalties in Federally-facilitated Exchanges.

* * * * * (d) * * * (3) HHS will deliver notice under this paragr aph by either hand delivery, certified mail, return receipt requested, or by overnight delivery service with signature upon delivery required. (e) * * *CMS-9949-P 270

(2) HHS will notify the issuer in writing of any penalty that has been assessed under this subpart and of the means by which the QHP issuer or another responsible entity may satisfy the

CMP assessment.

* * * * *

49. Section 156.806 is added to read as follows: §156.806 Notice of non-compliance. If HHS learns of a potential violation described in §156.805 or if a State informs HHS of a potential violation, prior to imposing any CM Ps, HHS must provide a written notice to the issuer, to include the following: (a) Describe the potential violation. (b) Provide 30 days from the date of the notice for the QHP issuer to respond and to provide additional information to refute an alleged violation. (c) State that a civil money penalty may be assessed if the allegations are not, as determined by HHS, refuted.

50. Section 156.810 is amended— A. By revising paragraph (a)(6). C. In paragraph (a)(9) by removing “or” after the semicolon. D. In paragraph (a)(10) by removing the period and adding a semicolon in its place. E. By revising paragraph (a)(11). F. By adding a new paragraph (a)(12). G. By revising paragrap h (d) introductory text.

The revisions and additions read as follows:CMS-9949-P 271

§156.810 Bases and process for decertification of a QHP offered by an issuer through a Federally-facilitated Exchange. (a) * * * (6) The QHP no longer meets the applicable st andards set forth under subpart C of Part

156.

* * * * * (12) The QHP issuer substantially fails to meet the requirements related to the cases forwarded to QHP issuers under Subpart K; or (13) The QHP issuer substantially fails to m eet the requirements related to the offering of a QHP under Subpart M.

* * * * * (d) Expedited decertification process . For decertification actions on grounds described in paragraphs (a)(6), (7), (8), or (9) of this section, HHS will provide written notice to the QHP issuer, enrollees, and the State department of insurance in the State in which the QHP is being decertified. The written not ice must include the following:

* * * * * 51. Section 156.1105 is amended by adding paragrap hs (d) and (e) to read as follows: §156.1105 Establishment of standards for HHS- approved enrollee satisfaction survey vendors for use by QHP issuers in Exchanges.

* * * * * (d) Monitoring . HHS will periodically monitor HHS-approved enrollee satisfaction survey vendors to ensure ongoing co mpliance with the standards in paragraph (b) of this section. If HHS determines that an HHS-approved enroll ee satisfaction survey vendor is non-compliantCMS-9949-P 272

with the standards required in paragraph (b) of this section, th e survey vendor may be removed from the approved list described in paragraph (c ) of this section and/or the submitted survey results may be ineligible to be included for ESS results. (e) Appeals . An enrollee satisfaction survey ven dor that is not approved by HHS after submitting the application described in paragraph (a) of this section may appeal HHS’s decision by notifying HHS in writing within 15 days fr om receipt of the notif ication of not being approved and submitting additional documentati on demonstrating how the vendor meets the standards in paragraph (b) of this section. HHS will review the submitted documentation and make a final approval determination within 30 days from receipt of the additional

documentation.

52. Section 156.1120 is added to s ubpart L to read as follows: §156.1120 Quality rating system. (a) Data submission requirement . (1) A QHP issuer must submit data to HHS and Exchanges to support the calculation of quality ratings for each QHP that has been offered in an Exchange for at least one year. (2) In order to ensure the integrity of th e data required to calculate the QRS, a QHP

issuer must submit data that has been valid ated in a form and manner specified by HHS. (3) A QHP issuer must include in its da ta submission information only for those QHP enrollees at the reporting level specified by HHS. (b) Timeline . A QHP issuer must annually submit data necessary to calculate the QHP’s quality ratings to HHS and Exchanges, on a ti meline and in a standardized form and manner specified by HHS.CMS-9949-P 273

(c) Marketing requirement . A QHP issuer may reference th e quality ratings for its QHPs in its marketing materials, in a manner specified by HHS. (d) Multi-State plans . Issuers of multi-State plans, as defined in §155.1000(a) of this subchapter, must provide the data described in paragraph (a) of this section to the U.S. Office of Personnel management, in the time and manner specified by the U.S. Office of Personnel Management.

53. Section 156.1125 is added to s ubpart L to read as follows: §156.1125 Enrollee satisfaction survey system. (a) General requirement . A QHP issuer must contract with an HHS-approved enrollee satisfaction survey (ESS) vendor, as identified by §156.1105, in order to administer the Enrollee Satisfaction Survey of the QHP’s enrollees. A QHP issuer must authorize its contracted ESS vendor to report survey results to HHS a nd the Exchange on th e issuer’s behalf. (b) Data requirement . (1) A QHP issuer must collect data for each QHP, with more than 500 enrollees in the previous year that has been of fered in an Exchange for at least one year and following a survey sampling methodology provided by HHS. (2) In order to ensure the integrity of th e data required to conduct the survey, a QHP

issuer must submit data that has been validat ed in a form and manner specified by HHS, and

submit this data to its contracted ESS vendor. (3) A QHP issuer must include in its da ta submission information only for those QHP enrollees at the reporting level specified by HHS. (c) Marketing requirement . A QHP issuer may reference the survey results for its QHPs in its marketing materials, in a manner specified by HHS.CMS-9949-P 274

(d) Timeline . A QHP issuer must annually submit da ta necessary to conduct the survey

to its contracted ESS vendor on a timeline and in a standardized form and manner specified by

HHS. (e) Multi-State plans . Issuers of multi-State plans, as defined in §155.1000(a) of this subchapter, must provide the data described in paragraph (b) of this section to the U.S. Office of Personnel management, in the time and manner specified by the U.S. Office of Personnel Management. PART 158—ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE REQUIREMENTS 54. The authority citation for part 158 continues to read as follows: Authority : Section 2718 of the Pub lic Health Service Act (42 U.S.C. 300gg-18), as

amended. 55. Section 158.150 is amended by revising paragraph (b)(2)(i)(A)(6 ) to read as follows: §158.150 Activities that improve health care quality.

* * * * * (b) * * * (2) * * * (i) * * * (A) * * * (6 ) Commencing with the 2012 reporting yearand extending through the first reporting year in which the Secretary requires ICD-10 as th e standard medical data code set, implementing ICD-10 code sets that are designe d to improve quality and are a dopted pursuant to the HealthCMS-9949-P 275

Insurance Portability and A ccountability Act (HIPAA), 42 U.S.C. 1320d-2, as amended, limited to 0.3 percent of an issuer's earned premium as defined in §158.130.

* * * * * 56. Section 158.211 is amended by revising paragraph (a) to read as follows: §158.211 Requirement in States with a higher medical loss ratio. (a) State option to set higher minimum loss ratio . For coverage offered in a State whose law provides that issuers in the State must meet a higher MLR th an that set forth in §158.210, the State's higher percentage must be substituted fo r the percentage stated in §158.210. If a State requires the small group market and individual mark et to be merged and also sets a higher MLR standard for the merged market, the State’s higher percentage must be substituted for the percentage stated in §158.210 for both th e small group and individual markets.

* * * * * 57. Section 158.220 is amended by revising paragraph (a) to read as follows: §158.220 Aggregation of data in calculat ing an issuer's medical loss ratio. (a) Aggregation by State and by market . In general, an issuer's MLR must be calculated separately for the large group market, small grou p market and individual market within each State. However, if a State requires the small group market and individual market to be merged, then the data reported separately under subpart A for the small group and individual market in that State must be merged for purposes of cal culating an issuer's MLR and any rebates owing.

* * * * * 58. Section 158.221 is amended by adding paragrap hs (b)(6) and (7) to read as follows: §158.221 Formula for calculating an issuer’s medical loss ratio.

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(b) * * * (6) The numerator of the MLR in the indivi dual and small group markets in States that adopted the transitional policy outlined in the CMS letter dated November 14, 2013 must be the amount specified in this paragraph (b), except th at issuers that provided transitional coverage may multiply the total incurred claims and expend itures for activities that improve health care quality incurred in 2014 in the respective State and market by a factor of 1.0001. (7) The numerator of the MLR in the individual and small group markets for issuers participating in the State and Federal Exchanges (sometimes referred to as “Marketplaces”) must be the amount specified in this paragraph (b), except that the tota l incurred claims and expenditures for activities that improve health care quality incurred in 2014 in the respective State and market may be multiplied by a factor of 1.0004.

* * * * * 59. Section 158.231 is amended by revising paragraph (a) to read as follows: §158.231 Life-years used to determine credible experience. (a) The life-years used to de termine the credibility of an issuer's experience are the life-years for the MLR reporting year plus the life -years for the two prior MLR reporting years. If a State requires the small group market and i ndividual market to be merged, then life-years used to determine credibility must be the life-years from the small group market and the

individual market for the MLR reporting year plus the life-years from the small group market and the individual market for the two prior MLR reporting years.

* * * * * 60. Section 158.243 is amended by revising para graph (b)(1) and adding paragraph (b)(3)

to read as follows:CMS-9949-P 277

§158.243 De minimis rebates.

* * * * * (b) * * * (1) Except as provided in para graph (b)(3) of this section, an issuer must aggregate and distribute any rebates not provided because they di d not meet the minimum threshold set forth in paragraph (a) of this section by aggregating the unpaid rebates by individual market, small group market and large group market in a State and us e them to increase the rebates provided to

enrollees who receive rebates ba sed upon the same MLR reporting y ear as the aggregated unpaid

rebates. An issuer must distribute such a ggregated rebates by providing additional premium credit or payment divided evenly among en rollees who are being provided a rebate.

* * * * * (3) If distribution of aggregated unpaid rebates according to paragraph (b)(1) of this section would result in any enro llee(s) receiving rebates that ex ceed their premium paid during the MLR reporting year, or if no enrollees re ceive rebates based upon the same MLR reporting year as the aggregated unpaid rebates, then the issuer must not aggregate the unpaid rebates according to paragraph (b)(1) of this section and must instead distribute them according to §158.241 directly to those enrollees whose rebates did not meet the minimum threshold set forth in paragraph (a) of this section.

Dated: March 11, 2014

_______________________________ Marilyn Tavenner,CMS-9949-P 278

Administrator , Centers for Medicare & Medicaid Services

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Approved: March 13, 2014

__________________________________ Kathleen Sebelius, Secretary , Department of Health and Human Services

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BILLING CODE 4120-01-P

[FR Doc. 2014-06134 Filed 03/17/2014 at 4:15 pm; Publication Date: 03/21/2014]