This document is scheduled to be published in the

Federal Register on 03/21/2014 and available online at

http://federalregister.gov/a/2014-06134, and on FDsys.gov

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

45 CFR Parts 146, 147, 148, 153, 155, 156, and 158 

[CMS-9949-P] 

RIN 0938-AS02 

Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards 

for 2015 and Beyond 

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of Health and 

Human Services (HHS). 

ACTION: Proposed rule. 

SUMMARY: This proposed rule addresses various requirements applicable to health insurance 

issuers, Affordable Insurance Exchanges (“Exchanges”), Navigators, non-Navigator assistance 

personnel, and other entities under the Patient Protection and Affordable Care Act and the Health 

Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care 

Act). Specifically, the rule proposes standards related to product discontinuation and renewal, 

quality reporting, non-discrimination standards, minimum certification standards and 

responsibilities of qualified health plan (QHP) issuers, the Small Business Health Options 

Program, and enforcement remedies in Federally-facilitated Exchanges. It also proposes: a 

modification of HHS’s allocation of reinsurance contributions 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 Internal 
CMS-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; standards related to the 

opt-out provisions for self-funded, non-Federal governmental plans 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 relating to the medical loss ratio program. 

DATES: To be assured consideration, comments must 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 cannot 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 the "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 prior 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 Hubert H. Humphrey Building is not readily 

available to persons without Federal government identification, 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 retain a proof of filing by stamping 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 addresses indicated as appropriate for hand or 

courier delivery may be delayed and 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, under Part 153: Adrianne Glasgow, (410) 786-0686. 

For matters related to risk corridors, under Part 153: Jaya Ghildiyal, (301) 492-5149. 

For matters related to non-interference with Federal law and non-discrimination standards, and 

Navigator, non-Navigator assistance personnel, and certified application counselor program 

standards, under Part 155, subparts B and C: Joan Matlack, (301) 492-4223. 

For matters related to civil money penalties and 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, subpart C: Julia Cassidy, (301) 492-4412. 
CMS-9949-P 5 

For matters related to enrollment of a qualified individual, under Part 155, subpart E: Jack 

Lavelle, (410) 786-0639. 

For matters related to special enrollment periods and exemptions under Part 155, subparts D and 

G, and matters related to eligibility appeals, under Part 155, subparts F and H: Christine 

Hammer, (301) 492-4431. 

For matters related to the Small Business Health Options Program, under Part 155, subpart H: 

Christelle Jang, (410) 786-8438. 

For matters related to the required 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 standards, under Parts 155 and 156: Nidhi Singh Shah, 

(301) 492-5110. 

For matters related to minimum essential coverage, 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 personally 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 following website as soon as possible after they 

have been received: http://www.regulations.gov. Follow the search instructions on that website 

to view public comments. 

 Comments received timely will also be available for public inspection as they are 

received, generally beginning approximately 3 weeks 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 the 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 Markets 
CMS-9949-P 7 

1. Guaranteed Availability and Guaranteed Renewability of Coverage (§§147.104 and 

147.106) 

a. No Effect on Other Laws 

b. Product Withdrawal and Uniform Modification of Coverage Exceptions to Guaranteed 

Renewability Requirements 

C. Part 148 – Requirements for the Individual Health Insurance Market 

1. Conforming Changes to Individual Market Regulations (§§148.101 through 148.128) 

2. Fixed Indemnity Insurance in the Individual Health Insurance Market (§148.220) 

D. Part 153 – Standards Related to Reinsurance, 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 Temporary Risk Corridors Program (§153.500) 

E. Part 155 – Exchange Establishment Standards 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-Facilitated Exchanges (§155.206) 

b. Navigator, Non-Navigator Assistance Personnel, and Certified Application Counselor 

Program Standards (§§155.210, 155.215, and 155.225) 

c. Certified Application Counselors (§155.225) 

d. Payment of Premiums (§155.240) 
CMS-9949-P 8 

e. Privacy and Security of Personally 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 Individual Market: Eligibility Determinations 

for Exchange Participation and Insurance Affordability Programs 

a. Verification of Eligibility for Minimum Essential Coverage Other Than Through an 

Eligible Employer-Sponsored 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 Determinations for Exchange Participation and 

Insurance Affordability Programs 

a. General Eligibility Appeals Requirements (§155.505) 

b. Dismissals (§155.530) 

c. Employer Appeals Process (§155.555) 

6. Subpart G—Exchange Functions in the Individual Market: Eligibility Determinations 

for Exemptions 

a. Required Contribution Percentage 
CMS-9949-P 9 

b. Options for Conducting Eligibility Determinations for Exemptions (§155.625) 

7. Subpart H – Exchange Functions: Small Business Health Options Program 

a. Functions of a SHOP (§155.705) 

b. Enrollment Periods under SHOP (§155.725) 

c. SHOP Employer and Employee Eligibility 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 Participation 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 Coverage in the Statute or This Subpart 

(§156.604) 

4. Subpart I – Enforcement Remedies in Federally-Facilitated Exchanges 

a. Available Remedies; Scope (§156.800) 
CMS-9949-P 10 

b. Bases and Process for Imposing Civil Money 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-Approved Enrollee Satisfaction Survey Vendors 

for Use by QHP Issuers in Exchanges (§156.1105) 

b. Quality Rating System (§156.1120) 

c. Enrollee Satisfaction Survey (§156.1125) 

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) 

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 for Certified Application Counselors (§155.225) 

B. ICRs Regarding Consumer Authorization (§§155.210 and 155.215) 

C. ICRs Regarding Enrollee Satisfaction & 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 Loss 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 Election 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 Level Instead of Each Product 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 Act 
CMS-9949-P 12 

VI. Regulations Text 

Abbreviations

Affordable Care Act The collective term for the Patient Protection and Affordable Care Act 

(Pub. L. 111–148) and the Health Care and Education Reconciliation Act 

of 2010 (Pub. L. 111–152) 

AV Actuarial Value 

CAC Certified Application Counselor 

CAHPS® Consumer Assessment of Healthcare 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 Small Business Health Options Program 

FQHC Federally Qualified Health Center 

HHS United States Department of Health and Human Services 

HIPAA Health Insurance Portability and Accountability Act of 1996 

(Pub. L. 104-191) 

IRS Internal Revenue Service 
CMS-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 and small employers have been able to 

obtain private health insurance through Affordable Insurance Exchanges, or “Exchanges” (also 

known as Health Insurance Marketplaces, or “Marketplaces”).1

 The Exchanges provide 

competitive marketplaces where individuals and small 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 Exchanges, 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 refer to “FFEs,” we are also referring to State Partnership 

Exchanges, which are a form of FFEs. 
CMS-9949-P 14 

Individuals who enroll in qualified health plans (QHPs) through individual market 

Exchanges may be eligible to receive premium tax credits to make health insurance purchased 

through an Exchange more affordable and cost-sharing reductions that lower out-of-pocket 

expenses for health care services. The premium tax credits, combined with the new insurance 

reforms, will significantly increase the number of individuals with health insurance 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 reforms 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 requirements applicable to health insurance 

issuers, Exchanges, Navigators, non-Navigator assistance personnel, and other entities under the 

Affordable Care Act. Specifically, the rule proposes standards related to product discontinuation 

and renewal, quality reporting, non-discrimination standards, minimum certification standards 

and responsibilities of qualified health plan (QHP) issuers, the Small Business Health Options 

Program, and enforcement remedies in Federally-facilitated Exchanges. It also proposes: a 

modification of HHS’s allocation of reinsurance contributions 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 Internal 
CMS-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; standards related to the 

opt-out provisions for self-funded, non-Federal governmental plans 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 relating to the medical loss ratio program. Nearly 

all of these proposed policies 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 Act, health insurance issuers in the group and 

individual markets must guarantee the availability and renewability of coverage unless an 

exception applies. In this proposed rule, we propose criteria for determining when modifications 

made by an issuer to the health insurance coverage for a product would and would not constitute 

the discontinuation of an existing product and the 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 availability and renewability requirements should not be construed 

to supersede other provisions of Federal law in certain circumstances. 

Conforming Changes to Individual Market Provisions: Sections 2741 through 2744 of 

the PHS Act were added by HIPAA to improve the portability and continuity of coverage in the 

individual health insurance market. 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 Affordable 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 fixed 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 fixed indemnity insurance must pay on a per-period 

basis (as opposed to a per-service basis), and instead require, among other things, that it be sold 

only as secondary to other health coverage that is minimum essential coverage to be considered 

an excepted benefit. 

HIPAA Opt-Out for Self-Funded, Non-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 (“opt out of”) certain provisions 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/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-aca18.html. 
CMS-9949-P 17 

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, reinsurance, and risk corridors—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 are 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-cost enrollees in the individual 

market from 2014 through 2016. 

Both the reinsurance and risk adjustment programs are subject to the fiscal year 2015 

sequestration. The risk adjustment and reinsurance programs will be sequestered at a rate of 7.3 

percent in fiscal year 2015. The Federal government’s 2015 fiscal year begins on October 1, 

2014. HHS, in coordination with the OMB, has determined that, pursuant to section 256(k)(6) of 

the Balanced Budget and Emergency Deficit Control Act of 1985 as amended, and the 

underlying authority for these programs, 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 action. 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 funding 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 section 2721(b)(2) of the Public Health Service Act) made 

by the Affordable Care Act (September 21, 2010). Available at: 

http://www.cms.gov/CCIIO/Resources/Files/Downloads/opt_out_memo.pdf. 
CMS-9949-P 18 

year 2016, which begins on October 1, 2015. Should Congress fail to enact deficit reduction that 

replaces the Joint Committee reductions, these programs would be sequestered in future fiscal 

years, and any sequestered funding would become available 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 suggest an approach such that the contributions 

collected under that program are 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 premium stabilization benefits of the program. 

We also propose changing the limit on allowable administrative costs 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. This 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 employer election periods in all SHOPs for plan 

years beginning in 2015 with the start of open enrollment in the corresponding individual market 
CMS-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 available to their employees if making that option 

available would result in significant adverse selection in the State’s small group market resulting 

in market disruptions that could not be addressed by the premium stabilization programs or 

single risk pool, or if there would be insufficient issuers of qualified health plans or qualified 

stand-alone dental plans to allow for meaningful choice among plans. We propose to allow the 

opportunity for a person appealing a determination of SHOP eligibility 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 information, knowing and willful provision of false 

or fraudulent information, and knowing and willful use or disclosure of information in violation 

of section 1411(g). This section proposes the factors used to determine 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 CFR 
CMS-9949-P 20 

155.260 to reference the new CMP provisions associated with knowingly and willfully using or 

disclosing information in violation of section 1411(g) of the Affordable Care Act. 

Civil Money Penalties for Consumer Assistance Entities: The proposed rule would 

provide that HHS may impose CMPs against Navigators, non-Navigator assistance personnel, 

certified application counselor designated organizations, and certified application counselors in 

FFEs, if these entities and/or individuals violate Federal requirements applicable to their 

activities. 

Navigator, Non-Navigator Assistance Personnel, and Certified Application Counselor 

Program Standards: In this proposed rule, we propose to specify certain types of State laws 

applicable to Navigators, non-Navigator assistance personnel, and certified application 

counselors that HHS considers to conflict with or 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. We would also make several changes to update the standards applicable to these consumer 

assistance entities and individuals, such as prohibiting them from specified marketing or 

solicitation activities. We propose to require Navigators and non-Navigator assistance personnel 

to obtain authorization before accessing a consumer’s personally identifiable information and to 

prohibit them from charging consumers for their services. We also propose 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, directly or indirectly, from health insurance issuers or stop loss 

insurance issuers in connection with the enrollment of consumers in QHPs or non-QHPs. We 

further propose that, in specific circumstances, certified application counselor designated 
CMS-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 deductibles in the small group market for years after 

2014 are to be indexed by the premium adjustment percentage. We established our methodology 

for calculating the premium adjustment percentage in the 2015 Payment Notice. In this rule, we 

propose calculating these limitations based on the premium adjustment percentage by rounding 

down to the nearest $50 increment. 

Required Contribution Percentage: Under section 5000A of the Code, an applicable 

individual must maintain minimum 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 that he or she would be required to pay towards 

minimum essential coverage (required contribution) exceeds a particular 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 percent, and for each plan year beginning in a 

calendar year after 2014, the percentage, as determined by the Secretary of Health and Human 

Services (the Secretary), that reflects the excess of the rate of premium growth between the 

preceding calendar year and 2013 over the rate of income 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 growth over the rate of 

income growth for plan years after 2014. 

Eligibility Appeals: This rule proposes to amend standards related to eligibility appeals 

provisions in subparts F and H of Part 155. To facilitate the efficient conclusion of an appeal at 
CMS-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 coverage are recognized as minimum essential 

coverage.5 In this proposed rule, we propose amendments 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 pursuant to the Affordable Care Act 

generally requires issuers to rebate a portion of premiums if their MLR fails to meet the 

applicable MLR standard in a State and market for the applicable reporting year. An issuer’s 

MLR is the ratio of claims plus quality improvement 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 Medical 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 several revisions and technical corrections to those 

rules. In this proposed rule, we propose to modify the timeframe for which issuers can include 

their ICD-10 conversion costs in their MLR calculation. We also propose to modify the 

regulation to clarify how issuers would calculate MLRs and rebates in States that require the 

 

5

 See CCIIO Sub-Regulatory Guidance: Process for Obtaining Recognition as Minimum Essential Coverage 

(October 31, 2013). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/mec-guidance-10-31-2013.pdf. 
CMS-9949-P 23 

individual and small group markets to be merged. 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 the issuers impacted by systems 

challenges during the implementation of the Exchanges. We also propose to amend the 

requirements for distribution of de minimis rebates. 

II. Background 

A. Legislative Overview 

The Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted on March 

23, 2010. The Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152), which 

amended and revised several provisions of the Patient Protection and Affordable Care Act, was 

enacted on March 30, 2010. In this proposed rule, we refer to the two statutes collectively as the 

“Affordable Care Act.” 

The Affordable Care Act reorganizes, amends, and adds to the provisions 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 added sections 2702 and 2703 of the PHS Act. 

Section 2702 of the PHS Act generally requires an issuer 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 coverage. Section 2703 of the PHS Act generally 

requires an issuer to renew or continue 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 section 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 annual 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 health plan (or group health insurance coverage) 

in relation to its provision of excepted benefits. Excepted benefits are described in section 

2791(c) of the PHS Act. One category of excepted benefits, called “noncoordinated excepted 

benefits,” includes coverage for only a specified disease or illness, and hospital indemnity or 

other fixed indemnity insurance. Benefits in this category are excepted only if they meet certain 

conditions specified in the statute and regulations. 

Section 1302(c) of the Affordable Care Act 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 each year after 2014 by the percentage by which the 

average per capita premium for health insurance coverage in the United States for the preceding 
CMS-9949-P 25 

year exceeds the average per capita premium for 2013. Under section 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 State has the opportunity 

to establish an Exchange that: (1) facilitates the purchase of insurance coverage by qualified 

individuals through QHPs; (2) provides 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 Affordable 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 the Secretary to establish an ESS system that 

would evaluate the level of enrollee satisfaction of members in QHPs offered through an 

Exchange, for each QHP with more than 500 enrollees 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 CFR 155.200(d) that direct Exchanges to oversee 

implementation of ESSs and ratings of health 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 ESS consistent with the Affordable Care Act. 

Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act direct all Exchanges to 

establish a Navigator program. 

 

6

 Patient Protection and Affordable Care Act; Establishment 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 Affordable Care Act. Section 1321(a)(1) directs the 

Secretary to issue regulations that set standards for meeting the requirements of title I of the 

Affordable Care Act with respect to, among other things, the establishment and operation of 

Exchanges. Section 1321(a)(2) requires the Secretary to engage in consultation to ensure 

balanced representation among interested parties. 

Section 1321 of the Affordable Care Act provides for State flexibility in the operation 

and enforcement of Exchanges and related requirements. 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 Affordable Care Act. Section 1311(k) specifies that 

Exchanges may not establish rules that conflict with or prevent 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 either: (1) Did not elect to establish 

an Exchange; or (2) as determined by the Secretary, did not have any required Exchange 

operational by January 1, 2014. 

Section 1321(c)(2) of the Affordable Care Act provides that the provisions of section 

2723(b) of the PHS Act7

 shall apply to the enforcement under section 1321(c)(1) of requirements 

of section 1321(a)(1), without regard to any limitation on the application of those provisions to 

group health plans. Section 2723(b) of the PHS Act 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 typographical 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 market reforms contained in Part A of title XXVII 

of the PHS Act when, in the Secretary’s determination, a State fails to substantially enforce these 

provisions. 

Section 1341 of the Affordable Care Act requires the establishment of a transitional 

reinsurance program in each State to help pay the cost of treating high-cost enrollees in the 

individual market from 2014 through 2016. Section 1342 of the Affordable 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 setting from 2014 through 2016 between the Federal 

government and certain participating health plans. 

Section 1411(f)(1) of the Affordable Care Act provides that the Secretary, in consultation 

with the Secretary of the Treasury, the Secretary of Homeland Security, and the Commissioner 

of Social Security, shall establish procedures by which the Secretary 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 shall 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 employer-sponsored plan 

or that the employer does provide that coverage but it is not affordable 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 inaccurate information as part of an Exchange application or 

improperly uses or discloses an applicant’s information. 

Section 1501(b) of the Affordable Care Act added section 5000A to the Code. That 

section, as amended by the TRICARE Affirmation 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 categories of individuals who may qualify 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 shared responsibility payment specified in section 

5000A of the Code. Standards relating to these provisions were established in IRS regulations 

titled, Shared Responsibility Payment for Not Maintaining 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, Exchange Functions: Eligibility for 

Exemptions; Miscellaneous Minimum Essential Coverage Provisions Final Rule published in the 

July 1, 2013 Federal Register (78 FR 39494) (HHS Minimum Essential Coverage Final Rule). 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders on policies related to the operation of Exchanges, 

including the SHOP and the premium stabilization programs. HHS has held a number of 

listening sessions with consumers, providers, employers, health plans, the actuarial community, 

and State representatives to gather public input. HHS consulted with stakeholders through 

regular meetings with the National Association of Insurance Commissioners (NAIC), regular 
CMS-9949-P 29 

contact with States through the Exchange Establishment grant and Exchange Blueprint approval 

processes, technical health care quality measurement experts, health care survey development 

experts, and meetings with Tribal leaders and representatives, health insurance issuers, trade 

groups, consumer advocates, employers, and other interested 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 quality 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 guaranteed renewability 

standards and opt-out provisions for sponsors of self-funded, non-Federal governmental plans. 

Part 147 outlines health insurance reform requirements for the group and individual markets 

added by the Affordable Care Act, including standards related to guaranteed availability and 

guaranteed renewability of coverage. Part 148 outlines the individual health insurance market 

requirements of the PHS Act added by HIPAA and other laws, including standards related to 

guaranteed availability with respect to certain eligible individuals and guaranteed renewability 

for all individuals. Part 153 outlines standards related 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 Their 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 standards related to the operations and functions of an Exchange, 

including standards related to non-discrimination, accessibility, and enforcement remedies; 

standards applicable to the consumer assistance functions performed by Navigators, nonNavigator assistance personnel, and certified application counselors; standards related to 

eligibility appeals; standards related to exemptions; standards related to quality reporting; and 

standards related to SHOP. Part 156 outlines health 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 coverage; quality standards for QHPs; and other 

QHP issuer responsibilities. Part 158 outlines standards related to the medical loss ratio 

program, including standards related to treatment of ICD-10 conversion costs, standards related 

to adjustments for issuers affected by the November 2013 CMS transitional policy and issuers 

that incurred costs due to the technical problems during the implementation of the Exchanges, 

standards related to MLR reporting and rebate calculations in States with merged individual and 

small group markets, and standards related to distribution of de minimis rebates. 

III. Provisions of the Proposed Rule

A. Part 146—Requirements for the Group Health Insurance Market

1. HIPAA Opt-Out Provisions for Plan Sponsors 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 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) 
CMS-9949-P 31 

of the PHS Act. Sponsors of those plans could elect to opt out of all or any of the following title 

XXVII requirement categories: 

1. Limitations on preexisting condition exclusion periods under section 2701 of the PHS 

Act (redesignated as section 2704 by the Affordable Care Act). 

2. Requirements for special enrollment periods under section 2701 of the PHS Act 

(redesignated as section 2704 by the Affordable Care Act). 

3. Prohibitions against discriminating against individual participants 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 section 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 Addiction Equity Act of 

2008) under section 2705 of the PHS Act (redesignated as section 2726 by the Affordable 

Care Act). 

6. Required coverage for reconstructive surgery following mastectomies under section 

2706 of the PHS Act (redesignated as section 2727 of the PHS Act). 

7. Coverage of dependent students on a medically necessary leave 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 changes, with the result that sponsors of selffunded, non-Federal governmental plans can no longer opt out of as many requirements of title 

XXVII. First, PHS Act section 2721 was redesignated as section 2722. The new section 
CMS-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 requirement categories listed above, but may continue to 

exempt the plan from requirement categories 4 through 7. 

In response to the Affordable Care Act amendments, HHS issued guidance on September 

21, 2010 indicating that, for plan years beginning on or after September 23, 2010, plan sponsors 

of non-collectively bargained plans 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 take any enforcement actions with respect to optout elections for plan years beginning prior to April 1, 2011 on the 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 guidance. While the proposed rule restates the 

current rule in the procedures for filing an opt-out election with CMS, the following revisions are 

being proposed primarily to reflect the Affordable Care Act amendments: identification of PHS 

Act provisions subject to the opt-out election as noted above; deletion of references to the notice 

of creditable coverage requirement since that requirement 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 (September 21, 2010). Available at: 

http://www.cms.gov/CCIIO/Resources/Files/Downloads/opt_out_memo.pdf. 
CMS-9949-P 33 

Additionally, we propose to replace the address 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 guidance. We believe that electronic 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 the CMS/CCIIO website, is Centers for Medicare 

& Medicaid Services (CMS), Center for Consumer Information and Insurance Oversight 

(CCIIO), Attn: HIPAA Opt-Out, 200 Independence Avenue, SW, Room 733H-02, Washington, 

DC 20201. Elections can also be submitted via facsimile 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 subject 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 with 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 the proposed revisions and on any aspect of the 

proposed rule, including the 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/Resources/Files/Downloads/hipaa-nfgp-list-7-9-2013.pdf. 
CMS-9949-P 34 

Finally, we note that some plan administrators 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 received for multiple plans not under 

a collective bargaining agreement. The current regulations expressly require 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 document, that sponsors of plans subject to a collective bargaining 

agreement be required to list all plans subject to the agreement. We welcome comments on this 

proposal. 

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

Insurance Markets

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

a. No Effect on Other Laws 

Section 2702 of the PHS Act generally requires a health insurance issuer 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 coverage. Section 2703 of the 

PHS Act generally requires a health insurance issuer to renew or continue in force13 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 requirements. In addition to statutorily specified 

exceptions set forth in sections 2702 and 2703 of the PHS Act, other Federal laws restrict the 

products that are available to certain 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 entitled to benefits under Medicare part A or enrolled under 

Medicare part B an individual health 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 individuals under age 30, and individuals who are 

certified as exempt from the requirement to maintain minimum essential coverage based on lack 

of affordable coverage or hardship, are eligible to enroll in catastrophic plans. Consistent with 

the canons of statutory construction, 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 subject to specific Federal statutes that conflict with PHS Act sections 

2702 and 2703 could deny enrollment or reenrollment in coverage where doing otherwise is 

contrary to law. 

 

14 Although the Affordable Care Act creates a limited exception 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 the issuer, issuers of coverage subject to the guaranteed 

availability requirements of section 2702 of the PHS Act must accept every individual 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 statute, 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 guaranteed 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) and (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 applicable Federal law. We 

believe that these regulatory changes are consistent 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 that only Federal laws, not State laws, can create 

exceptions to the Federal guaranteed availability and renewability requirements. 

We also note that, due to a formatting error in the interim final rule with comment period 

titled, Patient Protection and Affordable Care Act; Maximizing January 1, 2014 Coverage 

Opportunities (78 FR 76212), the regulation text 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 regulatory revisions in this paragraph for clarity. 

b. Product Withdrawal and Uniform Modification 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 listed 
CMS-9949-P 37 

exceptions applies.16 One exception to the guaranteed renewability requirements permits an 

issuer to cease offering a particular 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 individual market, if the 

modification is consistent with State law and effective uniformly for all group health plans or 

individuals with that product (uniform modification of coverage). The law contemplates that a 

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

modifications do not in effect result in the termination 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 meaning 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 apply to both grandfathered and nongrandfathered coverage in the group and individual markets.17 

Definition of Uniform Modification 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 (applicable 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 markets. 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 propose 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 pursuant to applicable Federal or State law 

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

modifications could include changes required to comply with Affordable Care Act standards 

(such as elimination of a prohibited annual limit) and changes permitted based on updated 

standards (such as increasing an annual limitation 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 insurance coverage for a 

product that are not pursuant to applicable Federal or State law, the modifications would 

constitute a uniform modification of coverage for purposes of the guaranteed renewability 

requirements under the PHS Act if the product that has been modified meets all of the following 

criteria: 

• The product is offered by the same health insurance 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 structure, except for variation 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 (e.g., 

bronze, silver, gold, platinum or catastrophic); and 

• The product provides the same covered benefits, 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 therefore not to have withdrawn 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 that the issuer has withdrawn the existing product and created a new 

product.18 

These criteria, if finalized, would establish minimum Federal standards determining 

whether coverage modifications constitute the continuance of an existing product in a market 

within a State for products offered both through and outside of an Exchange. We believe these 

proposed standards will minimize unnecessary terminations of coverage, ensuring predictability 

and continuity for consumers, while reasonably providing issuers the flexibility to make 

necessary adjustments to coverage. 

We recognize that some States may have different definitions of what changes to a health 

insurance product constitute modifications and what changes constitute withdrawals and refilings of new products. The definitions proposed 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 statutory language as governing the extent or type of modifications that 

may legally be made under State law. As discussed 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 status 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 law requirements would, in 

effect, prevent the application of such requirements and therefore be preempted.19 Accordingly, 

under the approach we are proposing, States would 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 aspects of this proposal. 

Standard Consumer Notices When Discontinuing or Renewing a Product in the Group or 

Individual Market

To reduce confusion and ensure consumers receive clear, accurate, and consistent 

information about their coverage options, we are also proposing standard notice requirements 

when issuers discontinue or renew coverage in the group and individual markets. 

First, under the current regulations, issuers electing 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 beneficiaries covered under such coverage) at least 90 calendar days’ 

notice of the discontinuation in writing. 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, including a renewal of coverage with modifications. We propose the 

issuer in this situation must provide written notice of the renewal to each plan sponsor in the 

small or large group market and to each individual policyholder in the individual market (as 

 

19 Patient Protection and Affordable Care Act; Health Insurance Market Rules; Rate Review, 78 FR 13406 (February 

27, 2013). 
CMS-9949-P 41 

applicable). We propose this notice must also be provided in a form and manner specified by the 

Secretary. 

We request comment on these proposals. Concurrently with the issuance of this proposed 

rule, we are publishing four draft notices in guidance that would be required to be used when 

issuers elect to discontinue or renew a product, 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 regulations at 45 CFR Part 154, establish a process 

whereby CMS or the applicable State will review rate 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 issuers may attempt to avoid review of rate increases 

by withdrawing a product(s) offered in the individual or small group market in a State and refiling the product(s) as a “new” product(s) the following year. Under §154.102, a “rate increase” 

is defined as “any increase of the rates for a specific product offered in the individual or small 

group market,” and a “product” is defined as “a package of health insurance 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 criteria outlined above regarding product discontinuation and 

renewal to determine whether the rate filing is subject to review under 45 CFR Part 154. 

Specifically, if an issuer withdraws a product in a market in a State and, within a 12-month 

period, reintroduces a product in that market with modifications 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/Resources/Files/Downloads/draft-notice--renewaldiscontinuation-bulletin-3-14-2014.pdf. 
CMS-9949-P 42 

do not differ from the above criteria, we would consider the issuer to be continuing to offer the 

same “product” within the meaning 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 health insurance coverage 

should it meet or exceed the specified thresholds 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 clarification, or a cross-reference to the proposed 

definition of a uniform modification of coverage in §147.106 of this proposed 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 Portability and Accountability Act of 1996 (HIPAA), Pub. L. 104-

191, was enacted in 1996 to provide for, among other things, improved portability and continuity 

of coverage in both the group and individual health insurance markets. Section 111 of HIPAA 

added sections 2741 through 2744 of the PHS Act to improve availability 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 Act governing the group health insurance market 

and group health plan coverage provided in connection with employment. These provisions 

permitted limited exclusions of coverage under certain circumstances based on preexisting 

conditions. 

The individual health insurance market provisions of HIPAA are implemented in 45 CFR 

Part 148. These provisions guarantee the availability of individual health insurance coverage 

without preexisting condition exclusions for certain eligible individuals who lose group health 
CMS-9949-P 43 

insurance coverage; require issuance of certificates of creditable coverage; guarantee the 

renewability of individual health insurance coverage for all individuals; and set forth procedures 

for States that choose to implement an alternative mechanism under State law with respect to 

guaranteed availability for eligible individuals. 

 The Affordable Care Act added a new section 2704 of the PHS Act, which renumbered 

and amended the HIPAA requirements relating 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 coverage may not impose any preexisting condition 

exclusions. Section 2704 and the regulations under that section are generally effective for plan 

years (in the individual market, policy years) beginning on or after January 1, 2014, but for 

enrollees under the age of 19, the prohibition became effective for plan years (in the individual 

market, policy years) beginning on or after September 23, 2010.22 

This proposed rule would make conforming amendments to the individual market 

provisions contained in Part 148 by removing provisions concerning preexisting condition 

exclusions that are superseded by new section 2704 of the PHS Act. These amendments would 

generally become applicable upon the effective date of the final rule. However, the proposed 

amendment to eliminate the requirement 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 ERISA and section 9815(a)(1) of the Code to incorporate the 

provisions of part A of title XXVII of the PHS Act, including 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 year beginning on December 31, 2014, would still have 

access to the certificate for proof of coverage until that time. These proposed amendments are 

consistent with rulemaking amending the group market regulations under HIPAA23 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 Individual Health Insurance Market (§148.220) 

Pursuant to PHS Act sections 2722(c)(2), 2763(b) and 2791(c)(3)(B), insurance that pays 

a fixed amount under specified conditions without regard to other insurance (“fixed indemnity 

insurance”) is considered to be an excepted benefit, 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, certificate or contract of 

insurance; (2) there is no coordination between the provision of such benefits and any exclusion 

of benefits under any group health plan maintained by the same plan sponsor; and (3) such 

benefits are paid with respect to an event without regard to whether benefits are provided with 

respect to such event under any 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), incorporated through §148.220(b)(3), benefits 

of fixed indemnity insurance in the group and individual markets must be paid on a fixed amount 

basis without regard to the cost of the item or service and can only be paid on a per-period basis 

as opposed to on a per-service basis in order to be treated as an excepted benefit. 

 

23 See Ninety-Day Waiting Period Limitation and Technical Amendments 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/Resources/Fact-Sheets-and-FAQs/qa_hmr.html. 
CMS-9949-P 45 

The primary reason fixed indemnity insurance is considered to be an excepted benefit if it 

meets the statutory and regulatory criteria is that its primary purpose is not to provide major 

medical coverage but to provide a cash-replacement benefit for those individuals with other 

health coverage. Since the issuance of the regulations, however, various situations 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 advertised 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 regard to other insurance payments that 

may cover the same services. In such circumstances, the fixed payments for doctors’ visits, 

surgery, and prescription drugs are not made not on a per-period basis, but instead based on the 

type of procedure or item, such as the surgery 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 excepted benefit 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 paid 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 Implementation (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. 
CMS-9949-P 46 

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 between payment on a perperiod basis (which is permitted) and payment on a per-service basis (which is not permitted). 

State insurance regulators indicated that they have for years been approving policies as fixed 

indemnity insurance that pay on a per-service basis and treating such coverage as an excepted 

benefit. In an August 27, 2013 letter to the Secretaries of the Departments on behalf of the 

National Association of Insurance Commissioners (NAIC), it was stated that “state regulators 

believe hospital and other fixed indemnity coverage 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 definition of ‘minimum 

essential coverage’ may still want to buy fixed indemnity coverage to help meet out-of-pocket 

medical and other costs.” Industry groups representing health insurance issuers have also 

expressed similar concerns. 

Based on the feedback from stakeholders and the fact that, starting 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 current regulatory criteria for individual 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 other 
CMS-9949-P 47 

things, imposing a new requirement that fixed indemnity insurance be sold only as secondary to 

other health coverage that meets the definition 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 excepted benefit if it meets 

the following conditions: (1) It is sold 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 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 coverage does not meet the definition of minimum 

essential coverage and will not satisfy the individual responsibility requirements of section 

5000A of the Code.”27 The FAQ further provided that, “Until HHS finalizes this rulemaking 

related to these proposed amendments, HHS will treat fixed indemnity coverage in the individual 

market as excepted benefits for enforcement purposes if it meets the conditions above in States 

where HHS has direct enforcement authority. For 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 addition 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/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-aca18.html. 
CMS-9949-P 48 

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 benefits 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 any 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 AND IS NOT A SUBSTITUTE FOR MAJOR 

MEDICAL COVERAGE. LACK OF MAJOR 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 requires 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 approach including the language in the required notice. We also 

solicit comments on whether the requirement for individuals to have other minimum essential 

coverage in order to be sold fixed indemnity insurance is sufficient protection, especially given 

the fact that a group health plan that provides minimum benefits can be minimum essential 

coverage. For example, we solicit comment on whether to require that fixed indemnity insurance 
CMS-9949-P 49 

must only be sold to individuals with other health 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 essential coverage. We seek comments on the extent of 

verification issuers should require from applicants to be reasonably 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 that it be provided by an issuer 

other than the issuer providing 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 for the safe harbor is that the supplemental 

coverage has to be issued by an entity that does not provide the primary coverage under the plan 

in order for the supplemental coverage to be an excepted 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/Resources/Files/Downloads/hipaa_08_01_508.pdf) ; the Department of Labor's 

Employee Benefits Security Administration's Field Assistance Bulletin No. 2007-04 (available at 

http://www.dol.gov/ebsa/pdf/fab2007-4.pdf); and Internal Revenue Service 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 the 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 comment on how this proposal would affect existing 

market arrangements. If these proposals are finalized, they would apply for policy years 

beginning on or after January 1, 2015. We welcome comments on whether this would provide a 

sufficient transition period. We also solicit comments on whether the existing regulatory criteria 

for fixed indemnity insurance to be an excepted benefit (as interpreted in our January 24, 2013 

FAQ) should instead remain in place on a permanent 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 Transitional Reinsurance Program (§153.405) 

The Affordable Care Act directs that a transitional reinsurance program be established in 

each State to help stabilize premiums for coverage in the individual market from 2014 through 

2016. In the 2014 Payment Notice and the 2015 Payment Notice, we expanded on the standards 

set forth in subparts C and E of the Premium Stabilization Rule, and established the reinsurance 

payment parameters and uniform reinsurance contribution rate for the 2014 and 2015 benefit 

years. In this proposed rule, we solicit feedback on a potential revision to the allocation of 

reinsurance contributions collected for all benefit years such that reinsurance contributions 

collected are allocated first to the reinsurance 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 entities for the reinsurance payment pool as $10 

billion for 2014, $6 billion for 2015, and $4 billion for 2016. Sections 1341(b)(3)(B)(iv) and 

1341(b)(4) of the Affordable Care Act direct the collection of funds for contribution 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 together, these three components make up the total 

dollar amount to be collected from contributing entities for each of the three years of the 

reinsurance program under a national per capita 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 provided that if total contributions collected 

for 2014 and 2015 exceed $12.02 billion and $8.025 billion, 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 payments, thus prioritizing excess 

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

reinsurance contributions to be collected, and to help assure that the reinsurance payment pool is 

sufficient to provide the premium stabilization benefits intended by the statute, we propose to 

revise our allocation of reinsurance contributions collected and adopt a similar prioritization in 

the event that reinsurance collections fall short of our estimates. Specifically, if collections fall 

short of our estimates for a particular benefit year, we propose to alter the allocation so that the 

reinsurance contributions that are collected are allocated first to the reinsurance pool and 

administrative expenses, and are allocated to the U.S. Treasury once the targets for reinsurance 
CMS-9949-P 52 

payments and administrative expenses are met. For example, as Table 1 provides, in 2014, 

reinsurance contributions would go first to the reinsurance payment pool and administrative 

expenses, up to $10.02 billion, and any additional contributions 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 instead of $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 billion, 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 Expenses 
CMS-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 and 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 proposed allocation policy, we note that contributions 

collected in the second collection would be allocated for reinsurance payments and 

administrative expenses if the first collection does not fully provide for the target reinsurance 

pool and administrative expenses. Therefore, for 2014, if the first collection resulted in a total 
CMS-9949-P 54 

collection of $9 billion, any contribution collected via the second collection up to $1.02 billion 

would be allocated for reinsurance payments and administrative expenses. 

We seek comment on this allocation proposal, including on the legal authority to 

implement a prioritization of reinsurance contributions to reinsurance payments over payments 

to the U.S. Treasury. We also seek comment on the appropriate and permissible prioritization of 

reinsurance administrative expenses, and whether those expenses should have the same or 

different priority as reinsurance 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 Temporary 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 initial open enrollment period, protracted phase-outs of high-risk 

pools, and the scheduled decline in the reinsurance 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 mitigate these additional administrative costs and 
CMS-9949-P 55 

uncertainties around operations and the 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 adjustment percentage, of 

after-tax premiums). Such an adjustment could increase a QHP issuer’s risk corridors ratio if 

administrative expenses are unexpectedly high or claims 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 points, from 20 percent to 22 percent. We also 

propose to increase the profit margin floor in the risk corridors formula (currently set at 3 

percent, plus the adjustment percentage, 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 points, 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 corridors adjustment percentage 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 profit floor in the risk corridors formula for QHP 

issuers in transitional States, in order to account for 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 program applies only to certain plans defined to 

be qualified health plans at 45 CFR 153.500, the extent to which an issuer may receive the full 
CMS-9949-P 56 

effect of this adjustment would depend upon the 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 adjustments to program parameters, upwards or 

downwards, as necessary to achieve this goal. 

We are proposing that these adjustments apply on a national basis for the 2015 benefit 

year because we believe that these additional transitional costs and uncertainties will be faced by 

issuers in all States, not just States adopting the transitional policy. Because many of these costs 

and uncertainties are difficult to measure, we believe it would be difficult to estimate them on an 

issuer-by-issuer or State-by-State basis. Additionally, we believe that a national adjustment 

would be administratively simple for issuers. 

For example, issuers will continue to face administrative expenses in seeking to measure 

the extent to which issuers will extend renewals of plans through the 2015 rate-setting period. 

They will continue to accrue additional expenses monitoring the risk profile of 2014 enrollees 

during this period, particularly with the protracted phase-outs of high-risk pools. And they will 

continue to face uncertainty and administrative costs in measuring likely payouts from the 

reinsurance program. These costs were not anticipated 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 considering 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 medical 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 account the special circumstances of smaller plans, different types 

of plans, and newer plans.” This proposed approach is similar to the policy established forth in 

the 2015 Payment Notice, which removes the effect of the risk corridors adjustment percentage 

from an issuer’s MLR calculation. 

We request comment on all aspects of this proposal. In particular, we request comment 

on the specific administrative costs associated with each of these 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 corridors program, including whether raising the 

administrative cost ceiling or raising the profit floor would alone be sufficient to help offset 

issuer’s unexpected administrative 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 Standards 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 established the requirement that the State and the 

Exchange, when carrying out the requirements of Part 155, must comply with any applicable 

non-discrimination statutes, and must not discriminate on the basis of race, color, national origin, 
CMS-9949-P 58 

disability, age, sex, gender identity or sexual orientation. We stated that the non-discrimination 

provisions of §155.120(c) apply not just to the Exchanges themselves, but to Exchange 

contractors and all Exchange activities (including but not limited to marketing, outreach and 

enrollment), Navigators, non-Navigator assistance personnel, certified application counselors, 

and organizations designated to certify their staff and volunteers as certified application 

counselors (78 FR 42829). We also established in 45 CFR 155.105(f) that this nondiscrimination requirement applies to the Federally-facilitated Exchanges. 

 We now propose to re-designate the introductory language in existing §155.120(c) as a 

new section §155.120(c)(1), re-designate 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 existing §155.120(c) so that we can add a new paragraph (c)(2) to 

§155.120 that creates a limited exception to the non-discrimination provisions in existing 

§155.120(c)(1) and (c)(2). Under this proposed exception, an organization 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 Indian health provider) that participates in the 

certified application counselor program under 45 CFR 155.225 may limit its provision of 

certified application counselor services to the same defined population without violating the nondiscrimination provisions in existing §155.120(c). We are proposing to adopt this exception to 

the non-discrimination provisions in order to allow such organizations to provide certified 

application counselor services and 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 organizations decides to take advantage of this 

exception, but is approached for certified application counselor services by an individual who is 

not included in the defined population that the organization serves, we propose that the 

organization must refer the individual to other Exchange-approved resources, such as the tollfree Exchange call center, a Navigator, non-Navigator assistance personnel, or another 

designated certified application counselor organization, that are able to provide assistance to the 

individual. 

 However, to the extent that one of these organizations decides that it will not take 

advantage of this proposed exception, we propose that the non-discrimination provisions in 

existing §155.120(c) would continue to apply. That is, if an organization decides that it will 

provide certified application counselor services to individuals that are not included in the defined 

population that it serves, it must provide those services to all individuals 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-Facilitated Exchanges (§155.206) 

In a new §155.206, as part of HHS’s enforcement authority under section 1321(c)(2) of 

the Affordable Care Act, we propose to provide for the imposition of civil money penalties 

(CMPs) on Navigators, non-Navigator assistance personnel, and certified application counselors 

and certified application counselor designated organizations in FFEs and State Partnership 

Exchanges that do not comply with applicable Federal requirements. This proposal is designed 

to deter these entities and individuals from failing to comply with the Federal requirements that 

apply to them, and to ensure that consumers interacting with the Exchange receive high-quality 
CMS-9949-P 60 

assistance and robust consumer protection. As a general principle, while HHS proposes to 

establish authority to assess CMPs when appropriate, consistent with this proposed rule, we note 

that we also intend to continue to work collaboratively with consumer assistance entities and 

personnel to prevent noncompliance issues 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 1321(a)(1) of the Affordable 

Care Act, has previously established a range of consumer assistance programs to help consumers 

apply for and enroll in QHPs and insurance affordability programs through the Exchange. These 

consumer assistance programs include the Navigator program described at section 1311(i) of the 

Affordable Care Act and 45 CFR 155.210; the consumer 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-Navigator assistance personnel program; and the 

certified application counselor program authorized 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 Act29 apply to the Secretary’s enforcement, under section 1321(c)(1) of the Affordable 

Care Act, of the standards established by the Secretary under section 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 requirements 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 where, in the Secretary’s determination, the State 

that regulates the issuer has failed to “substantially enforce” those requirements. We interpret 

the cross-reference to section 2723(b) of the PHS Act in section 1321(c)(2) of the Affordable 

Care Act as providing the Secretary with authority to assess CMPs to enforce requirements 

established under section 1321(a)(1) of the Affordable Care Act against any entity subject to 

those requirements, under circumstances where the Secretary is exercising her authority under 

1321(c)(1) of the Affordable Care Act. For purposes of this proposal, we would consider that 

any State that has not elected to establish an Exchange, 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 established under section 

1321(a)(1). 

Accordingly, HHS has the authority under section 1321(c)(2) of the Affordable Care Act 

to assess CMPs against Navigators, non-Navigator assistance personnel, and certified application 

counselors and certified application counselor designated organizations in FFEs, including State 

Partnership Exchanges, for violations of the requirements of the Navigator, non-Navigator, and 

certified application counselor programs that the Secretary established under section 1321(a)(1) 

of the Affordable Care Act. This proposal sets forth the circumstances under which the 

Secretary would exercise this authority. It is based on the enforcement scheme laid out in 
CMS-9949-P 62 

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

it does not follow that enforcement scheme exactly, in light of the differences between the 

circumstances in which the Secretary would exercise her authority under PHS Act 2723(b) 

versus those under which she would exercise her authority under section 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 permit 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 assessed 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 assistance 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 violation is corrected during the 30-day period 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 might be 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 corrective 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 for under proposed paragraph (e) to respond to the 

notice of investigation under proposed paragraph (e)(1), or possibly omit that period altogether. 

In all cases where an expedited process 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 should be structured, including comments 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 rights 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 investigating waste, fraud, and abuse in the Medicare and Medicaid 

programs, we are considering whether certain violations of an Exchange consumer assistance 

entity’s program requirements might be most effectively investigated by OIG, or whether a more 

streamlined approach with a single enforcement authority would be preferable. In considering 

whether OIG should have concurrent enforcement 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 administrative appeals, or whether 
CMS-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 incorporated into this section. We note 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 provisions. We seek comment on whether OIG should 

have concurrent authority to enforce these proposed CMP provisions. 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 misconduct, rather than isolated 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 individuals 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 application 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 in 
CMS-9949-P 65 

proposed §155.205(b) should be subject to CMPs, and on whether other entities 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 specified in §155.206(b). Section 1321(c)(2) of the Affordable Care Act 

authorizes the Secretary to enforce the requirements 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 provision would authorize HHS to assess 

a CMP or, in lieu of a CMP, a corrective action plan against Navigators, non-Navigator 

assistance personnel, certified application counselors, and certified application counselor 

organizations in FFEs if HHS determines that these individuals or entities are not in compliance 

with the Exchange standards applicable to them. These Exchange standards would include any 

applicable regulations implemented under title I of the Affordable 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 certified 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 interpreting an existing regulatory or 

statutory provision. 

For example, §155.215(b)(1)(i) requires FFE Navigators to obtain certification by the 

Exchange prior to carrying out any consumer assistance functions under §155.210. Under this 

proposal, a Navigator who facilitates the selection of a QHP (a Navigator duty under 

§155.210(e)(3)) prior to obtaining his or her Exchange 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 manner, and §155.215(a)(2)(i) extends this duty to nonNavigator assistance personnel in FFEs. Any FFE Navigator 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 provisions and might, depending upon the circumstances, be subject to 

CMPs under proposed §155.206. If a Navigator or any non-Navigator assistance personnel in a 

FFE encourages an applicant or enrollee to submit false information on an application for 

coverage though the Exchange, we would 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 individual or entity to the proposed CMPs. Such a 

Navigator or non-Navigator assistance personnel would not be providing fair or accurate 

information to consumers, because in light of the penalties at section 1411(h) of the Affordable 

Care Act for providing false information on an Exchange application, it is not fair or accurate to 

state or imply that a consumer would be permitted 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 consumers information about the full range of QHP 

options and insurance affordability programs for which they are eligible, as required by 

§155.225(c)(1). Such a certified application counselor might, depending on the circumstances, 

be subject to CMPs under our proposed § 155.206. 

We note that §155.285 of this proposed rule would extend CMPs to consumer assistance 

entities who misuse or impermissibly disclose personally identifiable information in violation of 
CMS-9949-P 67 

section 1411 of the Affordable Care Act. Therefore, we have not addressed penalties for those 

actions here. Some conduct by consumer assistance 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 regulation or 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 entities and individuals who would be subject to 

proposed §155.206. For instance, HHS could take other enforcement actions against FFE 

Navigators, which are Federal grantees, under 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 initiating an investigation of a potential 

violation. We propose that HHS could initiate an investigation based on any information it 

receives indicating that a consumer assistance entity might be in noncompliance with applicable 

Exchange standards. Such information could include 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 outline 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 Exchange standards. Under proposed §155.206(e), if 

HHS learns of a potential violation through the means described in paragraph (d) in this section 

and determines that further investigation is warranted, HHS would provide written notice of its 
CMS-9949-P 68 

investigation to the consumer assistance entity. Such notice would describe the potential 

violation, provide 30 days from the date of the 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 would state that a CMP might be assessed if the 

consumer assistance entity fails to refute the allegations in HHS’ determination. 

In §155.206(f), we propose a process for a consumer assistance entity to request an 

extension from HHS when the entity cannot prepare a response to HHS’s notice of investigation 

within the 30 days provided in the notice. Under our proposal, if HHS grants the extension, the 

responsible entity would be required to respond to the notice of investigation within the time 

frame specified in HHS’s letter granting the extension of time, and failure to respond within 30 

days, or within the extended time frame, could result in HHS’s imposition of the CMP that 

would apply based upon HHS’s initial determination of a potential violation 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 collected in accordance with paragraph (d)(1) of this section or provided 

by the consumer assistance entity in response to receiving a notice in accordance 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 visits 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 assistance entity a reasonable timeframe to provide 

evidence refuting the allegation or other information regarding the alleged 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 the entity or individual 

an opportunity to enter into a corrective action plan in place of the CMP. We intend that the 

CMP amount, and opportunity to enter into a corrective 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 violation and the financial 

harm incurred by a consumer; and the culpability of the consumer assistance entity, as 

determined, in part, by whether the entity received payment for committing the violation. We 

believe these factors would allow us to tailor enforcement 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 day, for each consumer assistance entity, for 

each individual directly affected by the entity’s non-compliance. Similar to our rules on the 

maximum penalty for noncompliant QHP issuers in 45 CFR 156.805(c), we anticipate that there 

might be situations where HHS cannot determine the number of individuals directly affected. 

Therefore, we propose, consistent with the approach under existing rules at 45 CFR 156.805(c), 

that in such situations HHS may reasonably estimate this number, based on available 

information, such as data from a Federal Navigator grantee’s quarterly or weekly report 

concerning the number of consumers assisted. We also clarify that imposing $100 for each day 

an individual is directly affected would mean that we would look at the entirety of time the 

consumer was affected by the noncompliance of the assistance entity. For example, if a certified 
CMS-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, including 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 described in the notice furnished in accordance with 

paragraph (e), or to compromise on any CMP provided 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 limitations on CMPs authorized 

under section 1321(c)(2) of the Affordable Care Act, including the limitation that HHS will not 

assess a CMP where the entity did not know, or exercising reasonable diligence would not have 

known, of the violation. We propose to implement 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 reasonable diligence in understanding and executing their 

obligations, while not unnecessarily penalizing consumer assistance 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 notifying consumer assistance entities of the 

intent to assess a CMP, which notice would include an explanation of the entity’s right to an 
CMS-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 aspects of that process should 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 proposals, including but not limited to whether 

other provisions of 45 CFR Part 150 should be adopted and made applicable to this proposed 

enforcement scheme, whether a specific limitations period should apply, and if so, what 

limitations period would be appropriate for violations of applicable Exchange standards by 

consumer assistance entities in FFEs. 

b. Navigator, Non-Navigator Assistance Personnel, 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 Act direct all Exchanges to 

establish a Navigator program. Section 1321(a)(1) of the Affordable Care Act directs the 

Secretary to issue regulations that set standards for meeting the requirements of title I of the 

Affordable Care Act, with respect to, among other things, the establishment and operation of 

Exchanges. Pursuant to the authority established in section 1321(a)(1), the Secretary issued 45 

CFR 155.205(d) and (e), which authorize Exchanges 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, and § 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 authorized 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-Navigator assistance personnel in FFEs, including 

State Partnership Exchanges, and for non-Navigator assistance personnel in State Exchanges if 

they are funded with section 1311(a) Exchange Establishment 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 consumer assistance function of the 

Exchange, separate from and in addition to the functions described in §§ 155.205(d) and (e), 

155.210, and 155.215. 

Navigator duties and requirements for all Exchanges are set forth in section 1311(i) of the 

Affordable Care Act and 45 CFR 155.210. Additional 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 State Partnership Exchanges, and for non-Navigator assistance 

personnel in State Exchanges if those personnel are funded with section 1311(a) Exchange 

Establishment grant funds. Certified 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 CFR 155.210(c)(1)(iii) that Navigators “must meet any licensing, 

certification or other standards prescribed by the State or Exchange, if applicable, so long as such 

standards do not prevent the application of the provisions of title 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. Nor did we finalize a proposed requirement that would have 

required certified application counselors to comply with State law as a condition of certification. 
CMS-9949-P 73 

However, we noted in the preamble to the rulemaking establishing the certified application 

counselor program that section 1321(d) of the Affordable 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 all of the Federal standards and duties that 

apply to Navigators, non-Navigator assistance personnel and certified application counselors, 

since these have been authorized and established under title I of the Affordable Care Act. 

We now propose to specify certain non-Federal requirements that would prevent the 

application of provisions of title I of the Affordable Care Act with respect to the Navigator, nonNavigator assistance personnel, and certified application counselor programs, within the meaning 

of section 1321(d) of the Affordable Care Act. 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 Federal 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 adding new paragraphs (A) through (F) to 

specify certain non-Federal requirements that would 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, with respect to the Navigator program. We also propose to amend § 155.215(f) to make 

clear that we would consider the same types 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 Western District of Missouri 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 Missouri law are preempted by Federal 

law. The court concluded that “state laws that make operation of the [Federally-facilitated Exchange] more difficult 

or onerous run afoul of the Affordable Care Act’s purpose and are subject to preemption.” 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 application 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-Navigator assistance personnel subject to § 155.215. 

Similarly, with respect to the certified application counselor program, we propose amending 

§155.225(d) by adding a new paragraph (d)(8) to specify 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 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. New 

§155.225(d)(8) would also make clear that we would 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, when applied to certified application counselors. 

As we discuss in greater detail below, these proposed amendments are directed at nonFederal requirements that conflict with Federal statutory 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 assistance personnel, or certified application counselors to prevent the 

application of provisions of title I of the Affordable Care Act, within the meaning of section 

1321(d) of the Affordable Care Act. As a general principle, if a non-Federal requirement would, 

on its face, prevent Navigators, non-Navigator assistance personnel subject to §155.215, or 

certified application counselors from carrying out Federally mandated duties or from otherwise 
CMS-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 provisions 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 Federal requirements for these consumer assistance programs. For 

example, a State may require these types of Exchange-approved assisters to undergo 

fingerprinting or background checks before they can operate in a State, so long as a State’s 

implementation of these additional requirements does not prevent the Exchange from 

implementing these consumer assistance programs in the State consistent with Federal standards 

or make it impossible for the assisters to perform their Federally required duties. 

We propose to make some, but not all, of the proposed provisions applicable to 

Navigators, non-Navigator assistance personnel subject to 45 CFR 155.215, and certified 

application counselors (or certified application counselor designated organizations) that are 

operating in State Exchanges. Non-Federal requirements that would prevent these individuals or 

entities from carrying out their Federally mandated duties or from otherwise meeting applicable 

Federal statutory and regulatory standards and requirements would prevent the application of 

title I of the Affordable Care Act. Generally, 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), proposed §155.215(f) would apply provisions 

§155.210(c)(1)(iii)(A) through (C) to non-Navigator assistance entities or individuals in State 

Exchanges that are funded through an Exchange Establishment Grant under section 1311(a) of 
CMS-9949-P 76 

the Affordable Care Act; and proposed §155.225(d)(8)(i) through (iii) would apply to certified 

application counselors and/or designated certified application counselor organizations in State 

Exchanges. In general, we believe that the provisions listed above should apply in a State 

Exchange because these provisions address requirements that, in HHS’ view, would facially 

conflict with Federal requirements or standards established under Federal law, while the 

provisions that we propose would not apply in State Exchanges relate 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 coordinate 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 consistent with Federal requirements. We solicit 

comments on whether all the proposed provisions should 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 prevent 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-Federal laws or regulations which require 

Navigators, non-Navigator assistance personnel subject to §155.215, and certified application 

counselors to refer consumers to agents or brokers, or to any other sources not required to 

provide them with impartial advice, would prevent the application of the provisions of title I of 

the Affordable Care Act. Non-Federal laws or regulations that require referrals to sources that 

are not required to provide impartial advice would, on their face, make it impossible for these 

assisters to comply with existing Federal statutory and regulatory duties and standards. 

Navigators are required to “distribute fair and impartial information concerning enrollment in 
CMS-9949-P 77 

qualified health plans, and the availability of premium tax credits . . . and cost-sharing reductions 

. . .,” under section 1311(i)(3)(B) of the Affordable Care Act. Additionally, section 1311(i)(5) of 

the Affordable Care Act requires the Secretary, in collaboration with States, to “develop 

standards to ensure that information made available 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 Federally-facilitated and State 

Partnership Exchanges to “provide information 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 Exchanges. Similarly, §155.225(c)(1) 

requires certified application counselors to provide “information 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) requires 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-Federal law would prevent Navigators, non-Navigator 

assistance personnel, or certified application counselors from meeting the above-mentioned 

Federal requirements. This proposal would apply 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 § 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 

laws or regulations that permit the State to take 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. 

We solicit comment on whether non-Federal requirements that obligate Navigators, nonNavigator assistance personnel subject to §155.215, and certified application counselors to refer 

employers and employees in the small group market to agents and brokers should not be 

considered 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. 

Second, we propose that non-Federal laws or regulations that prevent Navigators, nonNavigator assistance personnel 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 provisions of title I of the Affordable Care Act within 

the meaning of section 1321(d) of the Affordable Care Act. For example, if a non-Federal 

requirement prohibited Navigators and non-Navigator assistance personnel subject to §155.215 

from assisting an employer or employee regarding SHOP coverage or from acting as an 

intermediary between that employer and an issuer without being a licensed insurance agent or 

broker, then such a prohibition would prevent Navigators from performing their Federally 

required duties and would therefore 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. 

Specifically, such non-Federal requirements would prevent Navigators from providing 

“information and services in a fair, accurate and impartial manner” as required by 45 C.F.R. 
CMS-9949-P 79 

§155.210(e)(2). They would 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 that Navigators and non-Navigator assistance personnel 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 assistance personnel should have the ability to help any individual 

who presents him or herself for assistance (see 78 FR 42830).Further, these requirements would 

prevent Navigators and non-Navigator assistance personnel subject to §155.215 from being 

prepared to serve both the individual Exchange and SHOP, as required by §155.215(b)(1)(v). 

Similarly, with respect to certified application counselors and certified application counselor 

organizations, if a non-Federal requirement barred these individuals or entities from assisting an 

employee with SHOP coverage, then such a requirement would prevent them from performing 

their Federally required duty to provide information 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 Navigators, non-Navigator assistance personnel 

subject to §155.215, and certified application counselors 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 purchased 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 requirement would prevent the 

application of the provisions of title I of the Affordable Care Act within the meaning of section 
CMS-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 would 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 that 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 existing health insurance coverage or previously had 

such coverage. Such a non-Federal requirement would also keep these assisters 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 certified application counselors, these types of 

requirements would prevent them from carrying out required duties under §155.225(c)(1) and 

(2), which require that certified application counselors provide information 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. Requirements of this type would also potentially 

prevent certified application counselors from acting in the best interests 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 laws or regulations that permit the State to take 
CMS-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 certified application counselors from discussing 

the terms of coverage of any particular policy or plan, or from providing advice regarding 

substantive benefits or comparative benefits of different health plans, would also, on their face, 

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. 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 distribute fair and impartial 

information concerning enrollment in qualified health plans and to facilitate enrollment in 

qualified health plans. Such non-Federal requirements would also prevent non-Navigator 

assistance personnel subject to §155.215 from carrying out their required duties under 

§155.215(a)(2)(i), which requires that they comply with §155.210(e)(2). Finally, such nonFederal requirements would also prevent certified application 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 insurance affordability programs for 

which they are eligible, assist individuals and employees to apply for coverage in a QHP through 

the Exchange and for insurance affordability programs, and help to facilitate enrollment of 

eligible individuals in QHPs and insurance affordability programs. CMS interprets these 

statutory and regulatory provisions to require Navigators, non-Navigator assistance personnel 

subject to § 155.215, and certified application counselors to be prepared to discuss the terms and 

features of any coverage for which a consumer is or might be eligible, consistent with each 
CMS-9949-P 82 

consumer’s expressed interests and needs, including, for example, plan features such as 

deductibles, coinsurance and copayments, coverage limitations or exclusions, and/or whether a 

particular provider or hospital is included within a plan’s network. CMS has always interpreted 

the statute and regulations to prohibit Navigators, non-Navigators, and certified application 

counselors from steering a consumer toward a particular plan or plans. However, under 45 CFR 

155.210(e)(3) and 155.215(a)(2)(i), Navigators and non-Navigator assistance 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 benefits or particular features of a health plan. 

Similarly, certified application counselors are required to provide this same type of information 

to consumers, since they have a duty under 45 CFR 155.225(c)(3) to help to facilitate enrollment 

of eligible individuals in QHPs and insurance affordability 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 selection of a plan, would 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. 

Fourth, we propose to put into regulatory text a position we previously expressed in 

preamble, that a State or an Exchange must not require that all Navigators be agents or brokers or 

carry errors and omissions coverage. 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 is 
CMS-9949-P 83 

typically held only by licensed professionals such as agents and 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 application 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 FR 18310, 18331-32) that such requirements would prevent the 

application of §155.210(c)(2) within the meaning of section 1321(d) of the Affordable Care Act; 

this proposal makes this policy explicit in regulation text. 

Fifth, we propose to specify that, 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-Federal 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 Affordable Care Act, and 45 CFR 155.205, 155.210, 

155.215, and 155.225, consistent with Federal requirements established for those programs. 

For example, non-Federal requirements that prohibit Navigators, non-Navigator 

assistance personnel, or certified application counselors or organizations in an FFE from 

receiving any consideration, 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 beyond Federal conflict of interest standards set forth in section 

1311(i)(4)(A)(i) and (ii) of the Affordable 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 certified application counselors in our proposed 
CMS-9949-P 84 

§155.225(g)(2). For Navigators, section 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 any consideration directly or indirectly from a health insurance 

issuer or issuer of stop loss insurance in connection 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 parallel conflict of interest standards apply in 

FFEs (including State Partnership Exchanges) to non-Navigator assistance 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 Establishment 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 potential applicants, any relationships the certified 

application counselor or sponsoring agency has with QHPs or insurance affordability programs, 

or other potential conflicts of interest.33 

A non-Federal requirement that prohibits consumer assistance entities and individuals 

from receiving any consideration, 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 

 

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. Specifically, conflict of interest standards do not apply to 

consideration received by a provider to support specific activities, such as the provision of medical services, if the 

consideration is not connected to the enrollment of individuals or employees in QHPs (78 FR 42831). In addition, 

Federal regulations do not inherently prohibit Navigators from receiving grants and other 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 member 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, provided 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 prevent an FFE from approving as Navigators, nonNavigator assistance personnel, or certified application counselors 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 Navigator 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 from 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 personnel 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 State could render ineligible individuals or entities 

that the FFE would deem eligible under applicable Federal standards. Such a standard would 

therefore prevent the FFE from implementing the consumer assistance programs that it is 

required (or authorized) to implement, within the meaning of section 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 are meeting the needs of their consumers. 

Sixth and last, we propose to specify that in the FFEs, States may not impose 

requirements that, as applied or as implemented in the State, prevent the application of Federal 
CMS-9949-P 86 

standards applicable to Exchanges, Navigators, non-Navigator assistance personnel subject to 

§155.215, and certified application counselors and designated organizations. For example, with 

respect to the Navigator program, if a State with an FFE implemented a requirement that 

prevented the only Navigator entity 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 section 1311(i)(1) of the Affordable Care Act and 

§155.210(a) require. As another example, a State might impose requirements as mandatory 

conditions for continuing to perform any applicable Federally required 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 comply on a timely basis, despite good faith efforts 

to comply. Under such circumstances these entities 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 authorized) 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 additional clarity regarding HHS’s position with 

respect to whether a non-exhaustive list of specific non-Federal requirements would prevent the 

application of Federal requirements applicable to Navigators, 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 programs. HHS proposes these provisions to ensure 
CMS-9949-P 87 

that it can establish and operate the consumer assistance 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 regulatory prohibitions on 

Navigator conduct. If these proposals are finalized, we expect that they would be effective on 

the date the final regulations are effective. 

Section 155.210(d), among other things, currently prohibits Navigators from being health 

insurance issuers or stop-loss issuers. We propose to amend section 155.210(d) by adding a 

provision that would provide that 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 requesting compensation from consumers for Navigator 

duties. As we previously explained in preamble when existing rules establishing a prohibition on 

charging fees by certified application counselors were finalized, HHS does not believe that it 

would be consistent with the purpose of the Navigator 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) The goal of the Navigator program is to provide 

consumers with information about and assistance 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 Navigator 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 health insurance market. We now 
CMS-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 finalized, this prohibition would also apply to non-Navigator 

assistance personnel carrying out consumer assistance functions under §§155.205(d) and (e) in 

an FFE and to non-Navigator assistance personnel funded through an Exchange Establishment 

Grant, since existing rules at §155.215(a)(2)(i) require that these entities must comply with the 

prohibitions on Navigator conduct set forth at §155.210(d). We think the same rationale for the 

prohibition generally applies in the case of non-Navigator personnel. This proposal would also 

align the Navigator and non-Navigator assistance personnel provisions with the similar provision 

applicable to certified application 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 prevent 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 conducting outreach and education events as a 

Navigator would not be permitted to use these events as opportunities to solicit new patients. 

We also propose to amend §155.210(d) to provide that Navigator organizations would be 

prohibited from compensating individual Navigators on a per-application, per-person assisted, or 

per-enrollment basis. We believe that such practices 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 the part of the Navigator, such as favoring 

consumers who take less time to assist than other 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. Additionally, such a compensation methodology is 

inconsistent with the statutory and regulatory scheme for Navigators. We request comment on 

whether this proposal would negatively affect existing Navigator programs, including whether it 

would present implementation challenges for these programs if it becomes effective before 

November 15, 2014. 

The duties of a Navigator under section 1311(i)(3) of the Affordable Care Act and 

§155.210(e) are not limited to facilitating selection of a QHP. Navigators’ duties also include 

conducting public education activities; distributing fair and impartial information about qualified 

health plans and advance payments of the premium tax credit and cost-sharing reductions; 

providing appropriate referrals for 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 compensating Navigators based on the number of successful 

applications or enrollments may create disincentives 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 consumers 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 seek 
CMS-9949-P 90 

comment on this proposal and alternatives that build in rewards for performance without the 

unintended consequences previously described. 

As with Navigators, we believe it is important that non-Navigator assistance personnel 

authorized under §155.205(d) and (e) in FFEs and in State Exchanges 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 personnel in FFEs, State 

Partnership Exchanges, and in State Exchanges if funded with section 1311(a) Exchange 

Establishment grants, these prohibitions on Navigator conduct would also apply to these nonNavigator assistance personnel, 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 inducement for application assistance or enrollment, 

including gift cards or cash, unless 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 applicable to the marketing of 

Medicare Advantage and Medicare Part D plans. (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 from providing any applicant 

or potential enrollee with promotional items, that is, items that market or promote the products or 
CMS-9949-P 91 

services of a third party. There are several reasons we are proposing these prohibitions. First, 

providing cash or gifts, other than 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, section 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 Exchange, 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 potential applicants or enrollees may shift the focus of a Navigator’s 

interaction with a potential applicant or enrollee away from its duties to provide information and 

services in a fair, accurate, and impartial manner and to facilitate selection of a QHP, in 

appropriate circumstances. Offering cash or gifts to potential applicants or enrollees could also 

cause some consumers to approach Navigators for reasons other than the receipt of information 

and Exchange application assistance. Third, providing to applicants or potential enrollees any 

promotional items that market or promote the products 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 relationship 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 manner make it inappropriate for a Navigator to 

engage in activities that give the appearance of promoting or marketing the products or services 

of third party business interests when it is performing Navigator activities and services. 

We are also proposing in §155.210(d)(8) and (9) new standards for Navigators with 

respect to their contacts and interaction with consumers, and the outreach and marketing 

practices they use when offering their services. In §155.210(d)(8), we propose to prohibit 
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Navigators from going door-to-door or using other unsolicited means of direct contact to help 

consumers fill out applications or enroll in health 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 cold calls to a consumer to provide application 

or enrollment assistance, without the consumer initiating the contact. In §155.210(d)(9), we 

propose to prohibit Navigators from making robocalls, or calls that use an automatic telephone 

dialing system or an artificial or prerecorded voice, when initiating contact with consumers. We 

believe that these standards will ensure that Navigator practices are protective of the privacy and 

security interests of the consumers they serve, and will also provide important guidance and 

peace of mind to consumers, when they are faced with questions or concerns about what to 

expect in their interactions with individuals offering Exchange assistance. We seek comment 

about whether any of the activities and strategies that we propose to prohibit for Navigators are 

appropriate and consistent with section 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-Navigator assistance personnel 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 assistance 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 assistance with notice of the functions and responsibilities of 

Navigators, to obtain written authorization from those they are assisting, in a form determined by 

the Secretary, and to retain these authorization forms. We propose that Exchanges must establish 
CMS-9949-P 93 

a reasonable retention period for maintaining this authorization, and that in FFEs the retention 

period would be three years, unless 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 Exchanges, including specifying either a minimum retention period or a 

specified retention period ranging from three to five years, and solicit comments on the best 

approach. We also propose that consumers would be able to revoke this authorization at any 

time. These provisions would ensure that all consumers receive adequate notice of the role and 

duties of a Navigator and that all consumers give their informed 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 assistance 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 that face-to-face assistance 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 being 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 outlined above, also applicable to non-Navigator 

assistance personnel subject to § 155.215. 

We solicit comments on all aspects of these proposals. 

c. Certified Application Counselors (§155.225) 
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Section 1321(a)(1) of the Affordable Care Act directs and authorizes the Secretary to 

issue regulations setting standards for meeting the requirements under title 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 assistance 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 propose to add to these designation standards a new 

§155.225(b)(iii) which would establish the requirement 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 this proposal, an entity 

designated as a certified application counselor organization would not be required to have its 

principal place of business in the State in which certified application counselor services are being 

provided by the organization. 

Section 155.225(d) currently sets forth CAC certification standards, including the 

successful completion of Exchange-approved training. We propose to amend 45 CFR 

155.225(d) to propose, in a new paragraph (d)(7), that individual certified application counselors 

would also be required to successfully complete Exchange-approved recertification training and 

be recertified on at least an annual basis. This proposal would ensure that certified application 

counselors keep up to date with current Exchange requirements and that they remain 

appropriately trained in order to best serve consumers. Under this proposal, each Exchange 

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

Existing §155.225(f)(2) provides that certified application counselor organizations, or, if 

applicable, an Exchange that certifies staff members or volunteers of organizations directly, must 

establish procedures to ensure that consumers provide authorization before a certified application 

counselor has access to the consumer’s personally identifiable information, and that the 

organization or application counselor must maintain a record of the authorization. We propose to 

revise this paragraph to clarify the retention period of the authorization form. We propose that 

Exchanges would be required to establish a reasonable retention period for maintaining this 

authorization, and specify that in FFEs, the retention period would be three years. We based this 

period on the retention period in the current administrative 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 similar 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 specifying 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 application counselors “may 

not impose any charge on applicants for application or other assistance related to the Exchange.” 

This was intended as a strict prohibition on the 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 about the intent of this 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 that 
CMS-9949-P 96 

what is now §155.225(g) should be renamed as a section establishing standards related to “fees, 

consideration, solicitation 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 prohibit certified application counselors from 

receiving consideration, directly or indirectly, from health insurance issuers or stop loss issuers 

in connection with the enrollment of consumers in qualified health plans (QHPs) or non-QHPs. 

This proposed new requirement would align with the same standards of conduct applicable to 

Navigators and certain non-Navigator assistance personnel under 45 CFR 155.210(d)(4) and 

155.215(a)(2)(ii), and would apply to individual certified application counselors as well as to the 

organizations that have been designated as certified application counselor organizations. The 

reason for this proposal is that, in our view, receiving commissions or other consideration for 

enrollment in QHPs or non-QHPs is not consistent with the purpose and scope of certified 

application counselor program activities. Under §155.225(c), certified application counselors 

must act in the best interest of consumers they assist, inform consumers about the full range of 

health coverage options and affordability programs for which they are eligible, and help to 

facilitate enrollment of eligible individuals in QHPs and insurance affordability programs. As 

such, neither an individual certified application counselor nor his or her designated organization 

should have any personal financial incentive to recommend a particular health coverage option. 

Under this proposed amendment, while an Exchange could certify individuals as certified 

application counselors who are agents or brokers, and a designated certified application 

counselor organization similarly could certify staff or volunteers as certified application 

counselors who are agents or brokers, those individuals and the certified application counselor 
CMS-9949-P 97 

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

loss insurance issuers for enrolling 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 consideration 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 consideration 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 counselor to disclose any relationship he or she or the sponsoring 

certified application counselor agency has with QHPs or insurance affordability programs, “or 

other potential conflicts of interest,” to the appropriate parties outlined in that provision. 

Consistent with the interpretation we advanced with 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 certified application counselor organization’s official duties (see 77 

FR 18330-31). In an FFE, we interpret “other potential 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 provided to the consumer during the course of the 

certified application counselor’s assistance or any 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 being compensated on a per-application, per-individual- assisted, or 

per-enrollment basis. As with Navigators and non-Navigator assistance personnel, we believe 

that in order for application and enrollment assistance to be effective and appropriate for each 

consumer, per-enrollment or per-application incentives that might encourage certified application 

counselors to rush through sessions with consumers, 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 counselor’s ability to act 

in the best in the best interests of consumers, as they are required to do under 

§155.225(d)(4).This proposal would also help streamline requirements for these three types of 

assistance personnel. We seek comment on this proposal and alternatives that build in rewards 

for performance without the unintended consequences previously described. 

We also propose to add a new paragraph (g)(4) to prohibit certified application 

counselors from providing applicants or potential enrollees any gifts, including gift cards or cash, 

unless they are of nominal value. As we also proposed in our earlier discussion with respect to 

Navigators, we propose to define nominal value consistent with the definition used for nominal 

value in connection with prohibitions applicable to the marketing of Medicare Advantage and 

Medicare Part D plans. (See 73 FR 54236) Specifically, 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 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 this 

section to prohibit certified application counselors from providing applicants and potential 
CMS-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 application counselors for similar reasons to those 

expressed above in connection with the prohibition in the Navigator and non-Navigator 

assistance programs. We are concerned that the provision of cash or gifts to potential applicants 

or enrollees might interfere with the duties of the individual providing assistance to that applicant 

or potential enrollee; and in the case of a certified application counselor, might shift the focus of 

a certified application counselor’s interaction with a potential applicant or enrollee away from 

the certified application counselor’s duties to act in the consumer’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 counselor 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 are assisting and may also cause consumers to 

approach certified application counselors 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 would prohibit them from soliciting consumers for application or 

enrollment assistance by going door-to-door to provide this assistance, or to use other unsolicited 

means of direct contact, including calling a consumer, 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 automatic telephone dialing system or an artificial or 
CMS-9949-P 100 

prerecorded voice. As we explained 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-calling would ensure that certified 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 interactions with certified 

application counselors. As with the parallel proposal for Navigators and non-Navigator 

assistance personnel, we clarify that this proposal 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 activities and strategies that we propose 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 Exchange 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 enrollment. Currently, there are no Federal standards 

for how premiums are prorated in these limited situations. In order to provide flexibility for 

Exchanges to establish a standardized methodology 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 required to perform outreach activities. (see 78 FR 42826). 
CMS-9949-P 101 

calculation. Further, consistent with the 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, the 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 section. Adopting this policy for the 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 births 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 Medicaid. 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 precisely to the last day of private health insurance and the first day 

of Medicaid coverage, we anticipate that the expansion of private health 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 will 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 tax credit is adjusted using the same methodology described in 

this regulation for the FF-SHOP. Aligning with the premium tax credit calculation will provide a 

cohesive policy across the Federally-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 consumers and prevent them from paying premiums for 
CMS-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-facilitated Exchange as soon as is reasonably possible. 

We seek comment on this proposed amendment. 

e. Privacy and Security of Personally 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. Section 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 sets forth the procedures for determining 

eligibility for Exchange participation, premium tax credits and reduced cost-sharing, and the 

individual responsibility exemptions. 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 payment of the premium tax credit or cost sharing 

reductions, section 1411(b) also specifies that the applicant must provide information regarding 

income and family size, and information regarding employer sponsored coverage. For applicants 

for an exemption from the shared responsibility payment for failure to maintain minimum 
CMS-9949-P 103 

essential coverage, section 1411(b) also requires submission of information relevant to the 

specific exemption sought by the applicant. In addition, section 1411(g) of the Affordable Care 

Act also requires that any person who receives information provided by an applicant under 

section 1411(b), whether directly from the applicant, by another person at the request of the 

applicant, or from a Federal agency may use the information only for the purposes of, and to the 

extent necessary in, ensuring the efficient operation 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 statutory authority to impose civil money penalties for the provision 

of false and fraudulent information in violation of section 1411(h)(1) of the Affordable Care Act 

and the improper use and disclosure of information 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 the Affordable Care Act, we propose the circumstances in which 

HHS may impose civil money penalties (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 section 1411(g). We want to ensure that any person 

who does not comply with relevant statutory and 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 for three specific types of actions related to 

the provision of false or fraudulent information and the improper use of information. HHS 

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

§155.285 in order to protect consumers, avoid duplication of efforts, and provide consistent 

enforcement practices. 

Section 1411(b) specifies the information that is required to be provided by an applicant 

for enrollment in a QHP offered through an Exchange 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 hardship exemption, or based on the individual’s lack 

of affordable coverage or the individual’s status as a taxpayer with household income less than 

100 percent of the poverty line. In §155.285(a)(1)(i), we propose that if any person (as defined 

at proposed §155.285(a)(2)) fails to provide correct information under section 1411(b) of the 

Affordable Care Act and such failure is attributable to negligence or disregard of any regulations 

of the Secretary, the person may be subject to a CMP. 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 failure 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 regulations of the Secretary. Under 

proposed §155.285(a)(1)(i), if a person 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 that if a person knowingly and willfully 

provides false or fraudulent information under section 1411(b) of the Affordable 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 provision aims to ensure that any person who 
CMS-9949-P 105 

intentionally provides information 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, certified application counselor, or non-Navigator 

assistance personnel, were to in some manner directly 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, certified application counselors, and non-Navigator 

assistance personnel in a Federally-facilitated Exchange and that violations of §155.285 may not 

necessarily also constitute violations of §155.206. In such instances where consumer assistance 

personnel may be subject to a CMP under both §§155.206 and 155.285, we have considered 

specifying that HHS may only impose a CMP under §155.285. However, we propose that it 

should be left to HHS’ discretion to determine whether 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 Affordable Care Act section 1411(g), the person may be 

subject to a CMP. Section 1411(g) of the Affordable 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 request 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 information only for the purposes of, and to the extent 
CMS-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. Section 1411(g) of the Affordable Care Act also specifies that any 

person who receives Exchange PII may not disclose the information to any other person except 

as provided in section 1411 of the Affordable 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 described at §155.200 or to carry out 

additional functions which the Secretary has determined ensure the efficient operation of the 

Exchange and for which the individual has provided consent for his or her information to be so 

used or disclosed. 

In §155.285(a)(1)(iii)(A) through (C), we propose types of activities 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 and security standards established by the Exchange 

pursuant to §155.260 of this subpart may constitute 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 efficient operation of the Exchange be compliant with 

section 1411(g)(2)(A) of the Affordable 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 lists of Exchange PII belonging to individuals who 

apply for enrollment or enroll in an Exchange qualified health plan, or a non-Exchange entity 
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using the PII of individuals who sought enrollment in an Exchange qualified health plan to 

market products or services to those individuals. We note that without the express, specific 

consent of the consumer for their PII to be used for 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 the marketing activities have no relationship to or 

bearing on an eligibility determination for or enrollment in the Exchange. To the extent any 

person plans to obtain such consent to market products to Exchange applicants and enrollees, the 

person should be prepared to provide proof of consent upon request by the agency during the 

course of the agency’s normal 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” should 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 efficient operation of the Exchange pursuant to 

155.260(a)(1); and non-Exchange entities as defined in §155.260(b) of this subsection, which 

includes agents, brokers, Web-brokers, QHP issuers, Navigators, certified application 

counselors, in-person assistors, and other third party contractors. The term “person” would also 

include the employees of the aforementioned 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 following 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 any 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) occurred; the number of individuals affected or 

potentially affected; and the extent to which 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 extent of the harm resulting from the action, including the number of 

individuals affected; whether the violation resulted in financial harm; whether there was harm to 

an individual’s reputation; whether the violation hindered or could have hindered an individual’s 

ability to obtain health care coverage; the actual 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 insurance 

affordability program, such as greater advance payment of the premium tax credits or costsharing reduction than he or she would be eligible for if the correct information had been 

provided. 

In §155.285(b)(3), we implement the reasonable cause exception of section 

1411(h)(1)(A)(ii) of the Affordable Care Act pursuant to which no penalty will be imposed under 

§155.285(a)(1)(i) if HHS determines that there was a reasonable cause for the failure to provide 

correct information required on an Exchange application and that the person acted in good faith. 
CMS-9949-P 109 

We feel that this reasonable cause exception is very important to ensure that no CMP may be 

imposed for a situation in which a person was acting in good faith. 

In §155.285(c), we propose maximum penalties for each different type of violation, in 

accordance with the statutory limitations set forth in section 1411(h) of the Affordable Care Act. 

Section 155.285(c)(1) addresses maximum penalties for provision of incorrect information, 

where such failure is attributable to negligence or disregard of any rules or regulations of the 

Secretary, and for knowing and willful provision of false or fraudulent 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 defined at proposed §155.285(c)(1)(iii), during a single 

“plan year.” We propose to use the definition 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 information as specified in §155.285(a)(1)(i) 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 fails to provide correct information. In 

§155.285(c)(1)(ii), we propose that any person who 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 information. Since we are proposing that we would 

impose a penalty on a plan year basis, if a person were to elect to use the same information 

which he or she entered on an initial application for the subsequent plan year, and the person had 

knowingly and willfully entered false information on an application as described in 

§155.285(c)(1)(ii), the person may be subject to two CMPs, each up to the maximum CMP 
CMS-9949-P 110 

specified in section 1411(h)(1)(A)(i) of the Affordable Care Act, based on the provision of false 

information for two plan years. 

In §155.285(c)(1)(iii), we propose that for the 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 paper submission process. This 

submission of information is provided in relation to any of the following: an eligibility 

determination; an eligibility redetermination based on a change in an individual’s circumstances; 

or an annual eligibility redetermination for either enrollment in a qualified health plan, for 

premium tax credits or cost sharing 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 means of submission, to be considered a distinct 

application. For example, where a person submits an initial application for 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 applications. We anticipate that there may be situations where 

a person submits a false piece of information on an initial application for coverage, 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 situations 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 comment 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 propose 
CMS-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 section, 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 may be imposed has made. For example, if an 

agent were to sell a list of 100 consumers’ names 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 the amount specified in section1411(h)(2) of the 

Affordable Care Act because the agent had disclosed the PII of 100 individuals. In 

§155.285(c)(3), we also propose that these penalties may be imposed in addition to any other 

penalties that may be prescribed by law. 

In §155.285(d), we propose standards for a notice 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 proposed; (2) the basis and reasons why 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 right to a hearing under any applicable administrative hearing 

process; (6) a statement that the failure to request a hearing within 60 calendar days after the date 

of the notice permits the assessment of the proposed penalty; and (7) information explaining how 
CMS-9949-P 112 

to file a request for a hearing and the address to which the hearing request must be sent. We 

propose that the person may request a hearing before an ALJ on the proposed penalty by filing a 

request pursuant to the procedure that will be outlined in the notice of intent to issue a penalty 

that the person receives. 

In §155.285(e), we propose the consequences for 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 person 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 believe 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 appeals 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 violations at §155.285(a). In §155.285(g)(2), we propose 

that OIG may impose CMPs for violations specified at §155.285(a)(1)(ii) and (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 imposing 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 (iii), we anticipate that OIG would amend its regulations at 
CMS-9949-P 113 

part 1003 of Chapter V of title 42 to encompass the standards set forth in this section. We seek 

comment on the proposed use of the regulatory framework for appeals 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 authority provision to ensure CMS is able to 

settle any issue or case described in §155.285(a) if necessary. Finally, in §155.285(i), we 

propose a six year statute of limitations, beginning 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 Individual Market: Eligibility Determinations for 

Exchange Participation and Insurance Affordability Programs 

a. Verification of Eligibility for Minimum Essential Coverage Other Than Through an Eligible 

Employer-Sponsored Plan (§155.320) 

In §155.320(d)(4), we established an option under which a State Exchange could rely on 

HHS to conduct verifications of enrollment in an eligible employer-sponsored plan and 

eligibility for qualifying coverage in an eligible 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 way to receive and process the information, check data sources, 

potentially communicate with consumers, and then return information to the State Exchange, and 

the State Exchange would need to modify systems to integrate this response into what should 

otherwise be a near-real-time eligibility process. Responsibilities for customer service would 
CMS-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 the 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 enrollment 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 modification does not change the substantive rules 

regarding the verification of enrollment in an eligible employer-sponsored plan and eligibility for 

qualifying coverage in an eligible employer-sponsored plan. Therefore, the change does not 

affect program integrity. 

b. Eligibility Redetermination During a Benefit Year (§155.330) 

 We propose a technical correction in paragraph (d)(2)(ii) to remove the reference to 

paragraph (e)(3) of this section. In the final rule titled, “Medicaid and Children’s Health 

Insurance Programs: Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, 

Fair Hearing and Appeal Processes, and Premiums and Cost Sharing; Exchanges: Eligibility and 

Enrollment”, 78 FR 32319, we previously removed paragraph (e)(3) from this section. As such, 

we now clarify that paragraph (d)(2)(ii) should only refer to the standards specified in paragraph 

(e)(2) of this section. 

4. Subpart E—Exchange Functions in the Individual Market: Enrollment in Qualified Health 

Plans 
CMS-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 regarding payment of the first month’s 

premium for enrollments. Additionally, in §156.265 we propose to establish a requirement for 

issuers in the Federally-facilitated Exchanges regarding payment due dates to collect premiums 

no later than the day before the coverage effective date. Our intention is to give the Exchange 

the flexibility to establish policy and process rules regarding premium payment. 

 We also propose to add paragraph (f), which would authorize Exchanges to provide 

requirements to QHP issuers regarding the instructions for processing electronic enrollmentrelated transactions. 

b. Initial and Annual Open Enrollment Periods (§155.410) 

 In 45 CFR 155.410(d), we specify that starting in 2014, the Exchange must provide a 

written annual open enrollment notification 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 provided 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. Accordingly, we believe that 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 include, 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; and (2) shifting the period during which the notice 
CMS-9949-P 116 

would be sent by a month and lengthening this period so that the notice would be sent no earlier 

than October 1, and no later than November 15, provided that electronic notices are available for 

any consumer who contacts the Exchange on November 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), which 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; and §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 that 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 individual or enrollee to elect a later coverage 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 elected by the qualified individual or 

enrollee. We are considering establishing parameters for the dates that may be chosen by the 

qualified individual 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-calendar 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 the 
CMS-9949-P 117 

Exchange permit qualified individuals and their dependents 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 policies 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 enrollment period. Without this addition, consumers 

with individual health insurance policies renewing outside the Exchange open enrollment period 

would be required to renew such policies, and wait to terminate the policies during the Exchange 

open enrollment period, should they wish to enroll in the Exchange, thus disadvantaging these 

consumers as compared to consumers enrolled in calendar year individual market policies. 

In 26 CFR 1.5000A-2(b)(1)(ii)(C), the Secretary 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)(10)(A)(ii)(IX)) was not minimum 

essential coverage. In order to ensure that women losing eligibility for coverage of pregnancyrelated services as described above are not left without an option to enroll in a QHP after the 

conclusion of Medicaid eligibility, in paragraph (d)(1), we propose that the Exchange permit 

qualified individuals and their dependents to enroll in a new QHP if they lose eligibility for such 

pregnancy-related services. We note that HHS may designate certain 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 this special enrollment period, regardless. We solicit 

comments regarding whether there are 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 specify that the Exchange must permit qualified 

individuals and their dependents to access the special enrollment periods described in paragraph 

(d)(1) for up to 60 days prior to the end of the qualified individual’s or his or her dependent’s 

existing coverage. This is consistent with existing regulations in paragraph (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 coverage in an eligible employersponsored plan. To improve the clarity and structure 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 would 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 eligibility for coverage outside the Exchange to transition to coverage 

offered through an Exchange without a gap in coverage, 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. Accordingly, we note that individuals are 

not eligible for advance payments of the premium tax credit until they are no longer enrolled in 

minimum essential coverage outside the Exchange. Lastly, we propose to make conforming 

changes to paragraphs (b)(2)(ii) and (e) to align with the changes in terminology proposed in 

paragraph (d)(1). 

In paragraphs (d)(4), (d)(5), (d)(9) and (d)(10), we provide special enrollment periods for 

errors, contract violations, exceptional circumstances and misconduct. Existing paragraph 

(b)(2)(iii) specifies that for a plan selection made during one of the special enrollment periods 

under paragraphs (d)(4), (d)(5), and (d)(9), coverage must be effective on an appropriate date 
CMS-9949-P 119 

based on the circumstances of the special enrollment period, in accordance with guidelines 

issued by HHS, and provides two options for that effective date. We propose to add special 

enrollment periods triggered under paragraph (d)(10) to those special enrollment periods for 

which these special coverage effective dates are available. 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 remove the restriction to 

these two options. The resulting regulatory text would allow the Exchange to set an effective 

date based on what is appropriate to the circumstances, in accordance with any guidelines issued 

by HHS. Similarly, in order to ensure that the Exchange sets the length of these same special 

enrollment periods to be appropriate 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 guidelines issued by HHS. We believe that this flexibility is 

important to ensure that the special enrollment 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 modify 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 Exchange without interruption, and not to allow an 

individual to switch from another form of coverage to the Exchange during the year when the 

other form of coverage remains available and he or she does not qualify for another special 

enrollment period described in this section. We solicit comments regarding 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 and establish the significance of a reinstatement action in the 

context of QHP coverage offered through an Exchange. 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 qualified individual’s coverage on or before the effective date, thus 

rendering coverage as never effective. In contrast, 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 cancellation, the effect of the QHP’s action 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 liable for covered services that the enrollee 

received during the time period between the coverage effective date and the termination date, 

under the terms of the coverage. A reinstatement action is a correction of an erroneous 

termination or cancellation action resulting in restoration of an enrollment with no break in 

coverage. 

In addition to establishing the difference between cancellations and terminations, we also 

propose that an Exchange may establish operational 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 community 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 paragraph (d)(6) that the termination effective date 

being the day before the effective date of coverage 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 termination date, in order to recoup any advance 

payments of the premium tax credit and cost-sharing 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, reversing 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 credit 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 for all months of coverage and 

will be required to adjudicate the enrollee’s claims incurred during the retroactive period, and 

provide any applicable cost-sharing reductions. 

5. Subpart F—Appeals of Eligibility Determinations for Exchange Participation and Insurance 

Affordability Programs 

a. General Eligibility Appeals 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 and 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 provision requires an appellant who wishes 

to withdraw his or her appeal request to do so in writing (hard copy or electronic). We are 

proposing to include the alternative for an appellant to withdraw his or her appeal by telephone, 

if the appeals entity is capable of accepting telephonic withdrawals. In paragraphs (a)(1)(i)(A) 

and (B), we propose the requirements for providing 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 perjury, and provide a written (in hard copy or 

electronically) confirmation to the appellant documenting the telephonic interaction. This 

written confirmation can be captured in the dismissal 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 entities 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 wish 
CMS-9949-P 123 

to end the appeals process. In addition, we believe the proposed amendment will also benefit 

appeals entities by reducing administrative burden, such as the requirement to convene 

unnecessary hearings described in the example above. The telephonic signature process provides 

a verifiable record of the appellant’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 appeals process. 

We request comments on this proposed amendment, 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 rules, and we seek comment specifically on the impacts of this 

proposed change. Finally, we note that this proposed amendment also impacts withdrawal 

procedures for an employer appeal through the cross-reference in §155.555(f)(1), which 

currently requires withdrawals 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 this proposed redesignation, paragraph (d)(4) would 

become new paragraph (d)(2), stating that upon receipt of an invalid appeal request, 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. New paragraph 

(d)(2) would also provide introductory language for the requirements provided in paragraphs 

(d)(2)(i) through (iv). The result of this proposed revisions would be to separate the 
CMS-9949-P 124 

requirements for valid appeal requests in redesignated paragraph (d)(1) and the requirements for 

invalid appeal requests in new paragraph (d)(2). 

6. Subpart G—Exchange Functions in the Individual Market: Eligibility Determinations for 

Exemptions 

a. Required Contribution Percentage 

Under section 5000A of the Code, an individual 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 exemptions, and authorize the Secretary 

to determine individuals’ eligibility for some of the exemptions, including 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 contribution for minimum essential coverage for the 

month exceeds the required contribution percentage of the individual’s household income; (2) 

the individual has in effect a hardship exemption 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 comparison between the individual’s share of the costs 

for obtaining minimum essential coverage and a certain percentage of the individual’s household 
CMS-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. Section 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 percentage is determined by the Secretary to reflect the excess of 

the rate of premium growth between the preceding calendar year and 2013 over the rate of 

income growth for the period. 

Below, we outline and request comments on issues related to various methodologies we 

are considering for determining the excess of the rate of premium growth over the rate of income 

growth. We are considering publishing 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 modifying §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 required 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 establishing the rate of premium growth over the 

rate of income growth for a particular calendar year as the quotient of (x) one plus the rate of 

premium growth between the preceding 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 rounding 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 application, and the result would be rounded to the 
CMS-9949-P 126 

nearest hundredth of a percent to yield the required contribution percentage for the calendar year. 

We note that this methodology would lead to a reduction in the required contribution 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 contribution standard are proportional to changes 

in the ratio of premiums over income observed in the private market as a whole. In contrast, we 

are also considering constraining this ratio, the excess of premium growth over income growth, 

to be greater than or equal to one. In addition, as discussed in further 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 year, and seek comment of the impact of these 

constraints on the excess of the rate of premium growth over the rate of income growth. We 

welcome comment on approaches for determining the excess of the rate of premium growth over 

the rate of income growth. In particular, we seek comment on whether the 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 setting 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 percentage, 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 percentage is calculated based on projections 

of average per enrollee employer-sponsored insurance premiums from the National Health 

Expenditure Accounts (NHEA), which are calculated by the CMS Office of the Actuary. After 
CMS-9949-P 127 

the initial years of implementation of market reforms, once the premium trend is more stable, we 

may propose to change the methodology for calculating the premium adjustment percentage. For 

2015, the premium adjustment percentage is 4.213431463 percent. We note that incorporating 

the premium adjustment percentage into the methodology for determining the required 

contribution percentage will ensure that adjustments 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 the 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 such an interpretation. That section 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 increase in premiums. However, for purposes of 

this calculation, we seek comment on whether growth should be interpreted to refer to both 

positive and negative growth. We also seek comment on whether other data sources or methods 

should be used, such as alternative NHEA data 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 index 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 ten significant digits. In alignment with the 

premium adjustment percentage, we are considering using the projections of per capita GDP 
CMS-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 income 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 sources of income data that we should consider. In particular, we 

request comment on whether adjustments should be made to our data source or methodology, 

such as ceilings or floors. For example, similar to our discussion of “premium growth” above, 

we note that section 5000A(e)(1)(D) of the Code refers to “the rate 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 growth in 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 responsibility payment that was made 

by HHS, provided that certain conditions were met. 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...” Accordingly, §155.625(b)(2) specified 

 

36 See Table 1 in http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/Proj2012.pdf. 
CMS-9949-P 129 

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 information technology development and administrative 

burden into a process that could otherwise be executed at a single entity. In particular, such an 

arrangement would require a split of customer service responsibilities, 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 available 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 exemption from the shared responsibility payment made 

by HHS for applications submitted on or after 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 responsibility payment that was made 

by HHS under paragraph (b)(1). Under this proposal, 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 Exchanges, and is committed to providing technical 

assistance to assist State Exchanges 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) currently 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 coverage 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 communications with issuers and State insurance 

commissioners, HHS has become concerned that, in some circumstances, implementing 

employee choice in 2015 might significantly disrupt 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, which could have the effect of 

discouraging issuers from participating in the SHOP or causing 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 employee choice might reduce issuer participation, leading to 

minimal value to consumers when there is not broad participation among issuers in the SHOP. At 

the same time, HHS does not anticipate that these 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 benefits 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 circumstances: (1) if employee choice would result in significant 
CMS-9949-P 131 

adverse selection in the State’s small group market that could not be fully remediated by the 

single risk pool or premium stabilization programs; or (2) if there is an insufficient number of 

issuers offering qualified health plans or qualified 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 State’s SHOP. We believe that meaningful choice means sufficient 

competition in the market to allow for participation in the SHOP from multiple issuers 

throughout the State. Meaningful choice provides affordable, quality plan options throughout the 

State’s SHOP for all actuarial value levels. 

Under this proposal, a State regulatory agency, such 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 are 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 such a plan should be included with the 

recommendation. We expect that the State would be required to provide in the recommendation 

to the SHOP concrete evidence that employee choice would result in significant adverse 

selection in the State’s small group market that cannot be remediated 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 State’s SHOP. The SHOP would then evaluate the 

State’s recommendation and request and determine whether the State’s small group market 

would be significantly adversely affected by the implementation of employee choice. In the FFSHOPs, CMS would seek public comment on the State’s request regarding employee choice 
CMS-9949-P 132 

before making this determination. We seek comment on all aspects of the process SHOPs should 

follow in making this determination. 

We seek comment on all aspects of this proposal, 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 small 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 agency recommendation; (6) whether all SHOPs 

should seek public comment on the State’s request regarding employee choice; (7) whether 

employee choice would have to exist for both medical QHPs and stand-alone dental plans, or for 

neither; and (8) whether other provisions of the HHS regulations applicable to SHOPs should 

also be subject to a transition in SHOPs that exercise the proposed option. In particular, we seek 

comments on what should qualify as a significant risk of adverse selection, 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 regarding employee choice under this proposal. 

Whether or not employee choice is available in a SHOP may be relevant information for issuers 

to consider as they make QHP submissions, but State regulatory agencies also need time to 

evaluate market dynamics before they can make 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 would make recommendations prior to the close of the initial QHP 

application window, with sufficient time for issuers to decide whether or not to participate in 
CMS-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 application 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 choice 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 second 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 proposal. 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 employee choice no later than early Fall 2014. We 

also seek comment on whether adverse selection could be avoided by allowing an employer to 

provide employee choice under the following circumstances: (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 actuarial value levels, from a single 

 

37 2015 Letter to Issuers in the Federally-facilitated Marketplaces (March 14, 2014). Available at: 

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-final-issuer-letter-3-14-

2014.pdf. 
CMS-9949-P 134 

issuer. These circumstances are transitional policies and do not reflect the full implementation of 

employee choice; we seek comment on how the 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-facilitated. In proposed §§155.725(c)(1), we propose to align the start of 

annual employer election periods in all SHOPs for plan years beginning 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 accordance with this proposal, we propose to modify 

paragraph (e) of this section to remove the reference 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. The 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 benefit from having the same 

amount of time to complete the QHP certification process for the SHOP as they have to complete 

this process for the individual Exchange. Notification standards described in paragraph (d) and 

(f) of this section would still apply, as the standards merely require the SHOP to notify qualified 

employers of annual employer election periods and 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 annual employer election periods in the SHOP for 

plan years beginning in 2015 with the 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 both markets for 2015 would reduce confusion and 

provide efficiencies to scale in review, providing potential resource savings to Exchanges and 

QHP issuers. These efficiencies would still exist even if the SHOP and individual market 

Exchange were operated by different entities (such where a State has exercised 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), group coverage purchased 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 this window and at renewal. Aligning the annual 

employer election period to the start of the individual 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 minimum 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 enrollment 
CMS-9949-P 136 

period would pose challenges for State-Based SHOPs as well as comments on any special 

circumstances that they would face in implementing the proposed policy. If implementing the 

proposed policy would disrupt the 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 which 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 participating 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 election, 30 days for the employees to enroll, and, 

depending on when in a given month that enrollment 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 period could begin in all SHOPs for plan years 

beginning in 2015 with the start of open enrollment in the corresponding individual market 

Exchange for the 2015 benefit year. 

This proposal to remove the existing minimum timeframes for qualified employer and 

qualified employee enrollment decisions will permit SHOPs and qualified employers to act more 

quickly to renew coverage. Additionally, the existing minimum lengths for the employer election 

and employee open enrollment periods further complicate the renewal process for qualified 
CMS-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 rate may be published fewer than 45 days prior to 

the rate taking effect. Therefore, under the existing minimum standard, a qualified employer 

might not be able to consider the most up-to-date 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 employer 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 Eligibility Appeals Requirements (§155.740) 

We propose to amend §155.740(g) by redesignating paragraphs (g)(1) through (g)(3) to 

more clearly delineate between the requirements 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 her appeal request must do so in writing (hard copy 

or electronic). The amended provision would allow an appellant to withdraw his or her appeal 

request in writing or by telephone, if the appeals entity is capable of accepting telephonic 

withdrawals. As noted above in the preamble to §155.530(a), appeals entities that wish to 

provide telephonic withdrawals must record, in full, the appellant’s statement and telephonic 

signature made under penalty of perjury and provide a written (in hard copy or electronically) 
CMS-9949-P 138 

confirmation to the appellant documenting the telephonic 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 individual market, this amendment is intended to provide greater 

efficiency and convenience for an appellant and appeals 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 Affordable Care Act, we propose standards for 

data collection by QHP issuers and the public reporting by Exchanges of quality rating 

information. We intend to have a beta testing period in 2015 to provide early feedback to 

Exchanges and QHP issuers and begin public reporting of quality rating information and enrollee 

satisfaction survey information in 2016. We believe that it is important that the QRS provide 

QHP ratings that are based on health care quality, 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 Comment38 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 Exchange outlined in 45 CFR 155.200(d) already include 

a requirement for an Exchange to oversee implementation 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 form and manner specified 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 proposed 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 where each Exchange displays quality ratings 

calculated by HHS based on a standard scoring methodology allows for reliable, uniform, and 

comparable QHP ratings across Exchanges. Therefore, HHS intends to calculate the quality 

ratings and provide the ratings to Exchanges for prominent display of quality rating information 

for each QHP offered in the Exchange. We encourage State Exchanges to have a plan review 

period, similar to what we intend to offer QHP issuers that participate in the Federally-facilitated 

Exchange, to allow issuers to review their QHPs’ 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 for 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 modeling 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 displayed in a similar style and format to that of Medicare Advantage and 
CMS-9949-P 140 

Prescription Drug Plan ratings. We believe that the five star quality rating display of Medicare 

Advantage health plans offers reliable data that is understandable for consumers. HHS 

anticipates providing the calculated rating information, as proposed 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 information 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 want 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 information, 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 information on the quality of health care will be 

collected and displayed across Exchanges but also provides flexibility for State Exchanges to 

incorporate additional information on their websites to support the plan comparison and selection 

process by consumers. We also are considering allowing State Exchanges the flexibility to 

display the QRS rating information, and satisfy the obligation under 45 CFR 155.205(b)(1)(v), 

by prominently displaying a link to the Federally-facilitated Exchange website that would 

present the Federal quality rating information. We seek comment on this approach including 

effective ways to display quality rating information to help consumers compare and select QHPs 

offered in an Exchange. 

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

Similar to the display requirement for the QRS, we propose a display requirement for the 

Exchange in §155.1405 relating to the Enrollee Satisfaction 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. Because we believe that information regarding 

enrollee experience with the QHP is a fundamental 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. Research39 has shown that synthesizing and simplifying health plan quality 

information presented to consumers eases consumer comprehension; therefore, we have 

developed a methodology to incorporate enrollee experience 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 therefore believe that by displaying quality rating information as described in 

§155.1400 of this proposed rule (which would incorporate 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 ESS survey to an Exchange on 

an annual basis. An Exchange may choose to display 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 approaches that facilitate the use of information 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 also 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 results prior to the scheduled public display of the Federal ESS in 

2016.40 Specifically, we solicit feedback on effective 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 Federal 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 issuers 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 combination drugs not covered by their plans’ 

formularies. Accordingly, we are considering amending the formulary exceptions standards 

under §156.122(c) to require that these processes can be expedited 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 Collection 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 render decisions regarding formulary exceptions requests within 24 

hours following the issuers’ receipt of the exceptions requests. This is currently suggested in the 

2014 Letter to Issuers.41 As clarification, the prescription drug standard in §156.122(a)(1) was 

not intended to discourage issuers from offering clinically appropriate drugs to enrollees, 

including combination drugs. 

We seek comment on what specific standards 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 section 223(c)(2)(A)(ii)(I) of the Code. Under §156.130(b), for a 

plan year beginning in calendar year 2014, the annual 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 equal to the products of these amounts and the 

premium adjustment percentage established pursuant to paragraph (e) of that 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 adjustment percentage is the percentage (if 

any) by which the average per capita premium for health insurance coverage for the preceding 

calendar year exceeds such average per capita premium for health insurance for 2013, and that 

 

41 See Appendix C of the 2014 Letter to Issuers on Federally-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. 
CMS-9949-P 144 

this percentage will be published annually in the HHS notice of benefit and payment parameters. 

The 2015 Payment Notice established our methodology 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 parameters – such as indexing methodologies for the 

alternative minimum tax and the standard deduction – is to round down to the nearest applicable 

multiple. For example, the Department of the Treasury, in a rule on how employers should 

calculate average annual full-time-equivalent wages 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 propose to amend §156.130(d) to specify that when 

indexing the annual limitation on cost sharing 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 established 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 and 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 would be $2,050 for self-only coverage and $4,100 

for other than self-only coverage. 

We seek comment on our proposed amendment and its application for 2015. 

2. Subpart C – General Functions of an Exchange 

a. QHP Issuer Participation Standards (§156.200) 

In §156.200(b)(5), we propose technical amendments to clarify that implementing and 

reporting for the QRS and implementing a quality improvement strategy are conditions of 

participation in an Exchange. Specifically, we propose to include a reference 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 certification standards, including the ESS. 

We also propose to amend §156.200 to add paragraph (h) to require that, in order to 

receive QHP certification, the offering issuer attest that, subsequent to receiving such 

certification, it will comply with all operational 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. 
CMS-9949-P 146 

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 coverage, including self-funded student health coverage (for plan 

or policy years beginning on or before December 31, 2014), Refugee Medical Assistance 

supported by the Administration for Children and Families, Medicare advantage plans, Statehigh risk pool coverage (for plan or policy years beginning on or before December 31, 2014) and 

other coverage that qualifies pursuant to the minimum essential coverage application process in 

45 CFR 156.604. We also established a process 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 absent from the United States for at least one day 

of the month. In addition, coverage under a group health plan provided through insurance 

regulated by a foreign government (and not regulated 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 the coverage provides health benefits 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 subject to regulation by a State does not meet the 

definition of health insurance coverage under the PHS Act, and thus should not be considered for 

 

44 See CCIIO Sub-Regulatory Guidance: Process for Obtaining Recognition as Minimum Essential Coverage 

(October 31, 2013. Available at: http://www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/mec-guidance-10-31-2013.pdf. 
CMS-9949-P 147 

purposes of a PHS Act analysis. The effect of this policy is to place group health coverage 

provided through foreign insurance on the same footing as self-insured group health coverage 

with respect to being deemed minimal essential coverage without having 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 for expatriates as minimum essential 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 insured by an issuer regulated by a State 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 residing in the United States. We propose that if 

coverage for expatriates who are citizens or nationals of the United 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 minimum 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 (Part XVIII) and Mental Health Parity Implementation 

(January 9, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-aca18.html. 
CMS-9949-P 148 

Another option is that we define “expatriate” more broadly to apply to individuals that are living 

outside of their home country for less than six months. 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 discussed above or another 

definition that would be appropriate for this section. 

If an expatriate is a citizen or national of the 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 coverage if the coverage provides health benefits within the 

United States, and is provided by a self-insured 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 may 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 coverage 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 the 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 the 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 essential coverage if the coverage provides health 

 

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

benefits within the United States, and is provided by a self-insured group health plan, group 

health insurance regulated by a foreign government (and not regulated by a State), or group 

health coverage provided by a foreign national health plan. We propose that the coverage must 

provide health benefits within 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 foreign group health coverage are aware that their 

coverage has been designated as minimum essential coverage and that foreign group health 

coverage complies with the same reporting requirements as other types of minimum essential 

coverage, we propose to require that the sponsor, issuer, 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 coverage status and comply with the information 

and reporting requirements of section 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 Essential 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 which 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 established 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 issuer or a plan administrator because the health 

insurance issuer or plan administrator may be the more appropriate party to submit the 
CMS-9949-P 150 

application. For example, a health insurance issuer may more efficiently provide the information 

required for an application on behalf of a foreign health insurance plan sold in the individual 

market to expatriates living abroad. We welcome comments on all aspects of these proposals. 

4. Subpart I—Enforcement Remedies in Federally-Facilitated Exchanges 

a. Available Remedies; Scope (§156.800) 

 In subpart I of 45 CFR part 156, finalized 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 multiple 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 activities. We propose adding paragraph (d) to clarify 

that HHS may consult and share information about 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 subpart I is appropriate. We believe this is 

consistent with our intent to coordinate with States 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 Integrity: 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 established the bases for HHS to impose CMPs 

against QHP issuers for violations of certain standards applicable to issuers offering QHPs in the 

FFEs. In §156.805(d) we set forth the general process for notifying the QHP issuer against which 

the CMP is being imposed. The general process did not address how prior to the imposition of 

the CMP, the QHP issuer would be notified of the 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 violation, a 30-day period for the 

QHP issuer to respond and to provide additional information to refute an alleged violation. 

If HHS determines that a CMP will be imposed, 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 ensure 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 delivery of the notice required in paragraph (d) will be either hand 

delivered, sent by certified mail, return receipt requested, or sent by overnight delivery service 

with signature upon delivery required. This requirement is identical 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 responsible entity may satisfy the judgment. We 

propose rewording the regulatory text to clarify that the responsible entity refers to the QHP 

issuer against whom a CMP is being imposed or another 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 Integrity Rule, we established 

the bases for HHS to decertify QHPs for violations of certain standards applicable to issuers 

offering QHPs in the Federally-facilitated Exchanges. Under §156.810(a) we set forth the bases 

for decertification. Since the publication of this final rule, we believe that certain paragraphs 

should be clarified. For example, paragraph (a)(6) should be reworded to clarify that the 

certification criteria means the standards under subpart C of this part. In paragraph (a)(9), it was 

unclear which laws were intended and we proposing clarifying that violation of State or Federal 

law relating to internal claims and appeals and external review processes are bases for 

decertification under this paragraph. We propose 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 Subpart K, and adding a paragraph (13) to reflect 

that HHS may decertify a QHP if the QHP issuer substantially fails to meet the requirements in 

Subpart M. Finally, in the preamble to the proposed 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 the authority to pursue an expedited decertification (78 FR 

37062). Because QHP issuers are required to demonstrate compliance with the minimum 

certification standards in subpart C of part 156 and Exchanges are required under section 

155.1010(a)(2) to monitor QHP issuers for demonstration of ongoing compliance with the 

certification requirements, we believe that it is appropriate for the FFEs to be able to pursue an 
CMS-9949-P 153 

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

certification standards. Accordingly, we propose amending §156.810(d) to reflect this change. 

5. Subpart L—Quality Standards 

a. Establishment of Standards for HHS-Approved Enrollee Satisfaction Survey Vendors for Use 

by QHP Issuers in Exchanges (§156.1105) 

In the rule 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 (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 issuers. We outlined a process by which enrollee 

satisfaction survey vendors would submit an annual application demonstrating that they meet all 

of the application and approval standards in paragraphs (a) and (b). Lastly, we noted that HHS 

would publish a list of approved enrollee satisfaction survey vendors on an HHS website. 

 We propose to amend §156.1105 to also include monitoring and appeals processes that 

would apply for plan years beginning 2015. In paragraph (d), we propose that HHS will monitor 

HHS-approved enrollee satisfaction survey vendors 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 standards 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 survey 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 administration services, the HHSapproved vendor may stop participating in or complying with required activities described in 

paragraph (b)(1) (for example, the vendor does not participate in site 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 activities, that the HHS-approved survey vendor is 

non-compliant, a process would already be in place to take appropriate remedial 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 existing remedies, HHS would have the ability to remove a survey 

vendor from the approved list and/or determine that the submitted survey 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 are 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 within 
CMS-9949-P 155 

30 days from receipt of the additional documentation. An enrollee satisfaction survey vendor that 

becomes approved via the appeals process would be included in the approved 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 after submission of an application for approval. 

b. Quality Rating System (§156.1120) 

In addition to proposing standards for Exchanges to oversee the QRS and display quality 

rating information on Exchange websites as set forth 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 Affordable Care Act. While the QRS Notice 

describes areas such as the overarching goals, framework, measure selection process and 

individual measures of the QRS, this proposed rule outlines the QRS implementation and 

reporting standards for QHP issuers. 

In the QRS Notice, we proposed a QRS measure 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 child-only coverage. CMS continues 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 rating 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 plans and health savings 

accounts. After considering public comment as well as the review by the Measures Application 

Partnership’s Health Insurance Exchange Taskforce convened by the National Quality Forum, 

we intend to finalize the quality measures outlined in the QRS Notice and provide measure 

specifications in future technical guidance. Our goal is to publish this future technical guidance 
CMS-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 calculate 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 and in a standardized form and manner specified 

by HHS. In paragraph (a)(1), we propose that a QHP issuer 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 reliability of, and report quality measure data. In addition, 

certain quality measures require one or two year reference 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 the required validated data elements for QRS 

public reporting in the third year that the QHP offers coverage (reflecting 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 Exchange to calculate quality rating information for 

QRS public reporting during the 2016 open enrollment period for the 2017 coverage year 
CMS-9949-P 157 

(coverage year four). Specifically, we intend for the QRS data reporting period to begin the first 

month of a calendar year through the middle of the sixth month 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 rating display, and information 

regarding QRS data validation in technical guidance 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 independent third party entity will ensure that only valid 

and appropriate data are used to calculate the quality rating information for QRS public 

reporting. In the initial years, HHS intends to direct QHP issuers to follow the process specified 

by the quality measure steward for validation of its quality measures that are incorporated into 

the QRS. For example, for any Healthcare Effectiveness 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 National 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 reliable by requiring data to be validated through 
CMS-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 validation 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 issuers to contract with validators that would be 

approved and monitored by HHS. 

In paragraph (a)(3), we propose that a QHP issuer must include information in its data 

submission only for those QHP enrollees at the reporting level specified 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 implementation, 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 granular QHP levels, such as the QHP product metal 

level, we believe that a QHP’s enrollment size at the product metal level will be too small to 

ensure reliable QRS results across the measure domains 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 considered 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 timeframes 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 product level reporting and allowing 

the incorporation of quality measure data from QHPs offered outside the Exchange, if they are 

considered the same plan as the QHP offered through 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 approved 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 accreditation 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 QRS measures reporting requirements with the 

accreditation standards for QHP issuers. 

We note that multi-State plans, as defined in §155.1000(a), are subject to reporting QRS 

data for calculation of quality ratings by HHS, as described in paragraph (a). The U.S. Office of 

 

51 Patient Protection and Affordable Care Act; Program Integrity: 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 manner 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 elects 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 regarding display of rating information and ESS results in marketing 

materials in technical guidance that we anticipate 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 misleading manner when being presented to consumers. 

c. Enrollee Satisfaction Survey (§156.1125) 

Section 1311(c)(4) of the Affordable Care Act directs the Secretary to establish an 

enrollee satisfaction survey (ESS) system that would 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 satisfaction information on their 

websites to allow individuals to readily compare enrollee satisfaction data between QHPs. To 

implement this provision, HHS is developing the ESS as described in the Federal Register Notice 
CMS-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 experience data from QHPs offered through an 

Exchange. 

We believe it is important that QHPs offered 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 survey to assure consumers 

and stakeholders that the ESS survey data submitted meet the validity and reliability standards 

reported by the CAHPS® program and are comparable to data from other quality comparison 

tools. We used existing CAHPS® supplemental item sets or other CAHPS® surveys, when 

available and appropriate, to identify any additional items for the ESS. 

ESS Administration

At §156.1125(a), we propose to direct QHP issuers 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 vendor 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 Insurance Marketplace Consumer Experience Surveys: Enrollee 

Satisfaction Survey and Marketplace Survey Data Collection; Notice, 78 FR 65658 (Nov. 1, 2013). 
CMS-9949-P 162 

Exchange so that HHS can calculate the ESS scores 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 the 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 assessing 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 data requirements to clarify the standards for 

collection and submission of ESS data. At §156.1125(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 for at least one year following a survey sampling 

methodology provided by HHS. We propose that eligible 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 specified by HHS. We propose 

that the data for the sample of eligible enrollees that a QHP issuer provides to their contracted 

ESS vendor be validated in a consistent way as data 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 auditor, we expect the data that the QHP 
CMS-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 direct a 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, HMO Bronze, PPO Silver, PPO Bronze) for each of 

the issuer’s products is the appropriate level (if enrollment is sufficient to ensure credibility) to 

assess enrollee experience and would provide information regarding experience with plans 

charging differing premiums. We intend to aggregate the ESS data from the QHP metal level to 

the QHP product level (for example, a QHP issuer’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 certified as a QHP and offered through the Exchange, as 

defined in §153.500. Similar to our proposed approach with the QRS, we are considering in the 

initial years to allow a QHP issuer to include enrollees of QHPs offered through and outside of 

the Exchange, to ensure a reliable ESS sample size, as long as they are considered 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 will 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 the 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 the 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, validation and submission; and time for QHP enrollees to build 

experience with the QHP and their providers to adequately assess their experience and to ensure 

reliable survey results. Therefore, we propose that for QHPs offered 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 enrollment period. Specifically, we intend for QHP 

issuers to provide data necessary to conduct the survey to their contracted HHS-approved ESS 

vendors, as described in paragraph (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 for the 2015 ESS beta test would provide sample 

frame data necessary to conduct the ESS for eligible enrollees who would be surveyed, to their 

contracted survey vendor in January 2015, allowing adequate time for the vendor to draw the 

sample in time to begin fielding the survey on February 1. Then, a QHP issuer would ensure that 
CMS-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 which would be the previous calendar year and based on sampling 

specifications. We intend to provide details of the ESS sampling methodology in technical 

guidance that would be periodically updated and which will be published in draft form on an 

HHS website to obtain feedback from stakeholders. 

We seek comment on the proposed requirement in paragraph (a) to direct a QHP issuer to 

contract with an HHS-approved enrollee satisfaction survey vendor and to authorize its 

contracted vendor to submit data to HHS and the 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 offered in an Exchange for at least one year, to 

require validation consistent with the process for QRS measure data and to provide data for 

eligible enrollees at the QHP metal level for each of the issuer’s products offered on the 

Exchange. We also seek comment on the proposed annual data submission requirements in 

paragraph (b) and (d). 

We note that Multi-State Plans, as defined 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 standards and regulations related to Exchanges, QHPs, and other 
CMS-9949-P 166 

components of title I of the Affordable Care Act. In §155.1200(b)(3), we direct State Exchanges 

to submit performance monitoring data on an annual 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 assess 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 Affordability Programs. We anticipate that 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. 

 We intend to use a single contracted survey vendor to administer the annual Marketplace 

survey for each Exchange. We are currently in the survey developmental testing period for the 

Marketplace survey in the States in the Federally-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 Marketplace survey results, beginning in 2015, to be able to make 

improvements for upcoming open enrollment periods. 

 

53 Agency Information Collection 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 167 

 We seek further comment to inform future rulemaking regarding data provided by State 

Exchanges to conduct the Marketplace survey. We are considering directing a State Exchange to 

provide sampling data for four types of consumers in an Exchange including: (1) potential 

applicants (individuals who provided contact information but did not submit an application); (2) 

potential enrollees (individuals who successfully applied and were given eligibility and plan 

information but did not enroll); (3) enrollees (individuals successfully enrolled); and (4) 

effectuated enrollees (individuals who have made their first premium payment). We are also 

considering directing a State Exchange to submit 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 Exchange 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 date 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 been 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 market (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 to 
CMS-9949-P 168 

further postpone the ICD-10 implementation date, in recognition of this possibility and to avoid 

the need for additional regulatory changes, the regulatory change proposed herein permits issuers 

to include their ICD-10 conversion costs as QIA through the MLR reporting year in which ICD10 implementation is required 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 for MLR purposes in States that require these 

two markets to be merged pursuant to section 1312(c)(3) of the Affordable Care Act. This 

proposed rule would modify the requirements 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 higher State MLR standard in §158.211 to clarify 

that if a State establishes a higher MLR standard for 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 methodologies 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-grandfathered health insurance coverage in the individual or small group 

market renewed between January 1, 2014 and October 1, 2014, and requested that States adopt a 
CMS-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 exploring 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 developing 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 issuer’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 country of citizenship, employees outside their 

country of citizenship and outside their employer’s country of domicile, and non-U.S. citizens 

working in their home country) and “mini-med” plans (i.e., plans with a total annual benefit 

maximum of $250,000 or less). 

In its discussion of the “special circumstances” that applied to expatriate plans, the 

Interim Final Rule noted that “their unique nature results in a higher percentage 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/Resources/Letters/Downloads/commissioner-letter-11-14-2013.pdf.
CMS-9949-P 170 

States.”55 Examples of the higher administrative 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 and other services to 

enrollees, and helping subscribers locate qualified providers in different countries. The Interim 

Final Rule also recognized the “special circumstances” that applied to mini-med plans. In this 

latter case, it was not higher administrative costs, but lower claims costs relative to 

administrative costs, due to the very low annual dollar 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 design, even if they were relatively as efficient as 

other plans that are able to meet the MLR standard under the standard methodology. 

 Consistent with this approach, we are proposing to exercise our authority to account for 

the special circumstances of plans affected by the transitional policy or the technical problems 

during the launch of the State and Federal Exchanges. These adjustments would only extend to 

issuers in the individual and small group markets that offered transitional coverage or 

participated in the State and 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 transitional policy, or in States that did, to issuers that 

did not elect to implement it. 

With respect to the adjustment for issuers offering transitional coverage, we are 

proposing that the MLR calculation methodology for the individual and small group markets 

would be changed to allow these issuers to multiply the incurred claims and expenses for quality 

 

55 75 CFR 74871 
CMS-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 the 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 considered 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 offering coverage through the State and Federal 

Exchanges, we are proposing that the MLR calculation 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 improving activities incurred 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 technical issues during the launch of the State and 

Federal Exchanges: (1) information technology (IT) development and testing; (2) IT system 

modifications and re-programming; (3) providing feedback to CMS or a State on functionality 

and data transmission; (4) assistance to enrollees (e.g., enhanced call center activity); (5) 

engaging in pilot projects relating to direct enrollment; (6) developing technical “tickets” for the 

CMS or a State help desk; (7) work with the Exchange(s) to resolve these technical problems; (8) 

manual processing of enrollment data, including but not limited to enrollment and payment data 

template creation, monthly submission of data reports, and monthly submission of data accuracy 

certification forms; and (9) development of other manual workarounds. 
CMS-9949-P 172 

HHS believes that these adjustments would appropriately account for the special 

circumstances related to implementation of the 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 proposed 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 transitional 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 propose to amend the provisions for de minimis rebates in 

§158.243 to clarify how issuers must distribute rebates where (1) all of an issuer’s rebates are de 

minimis, or (2) distribution of de minimis rebates to enrollee(s) whose 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, the 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 rebates 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 information collection requirements (ICRs) that are 
CMS-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 and 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 information 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 for Certified Application Counselors (§155.225)

 Under proposed §155.225(d)(7), certified application counselors would be required to be 

recertified on at least an annual basis after successfully completing recertification training as 

required by the Exchange. Each Exchange would be required to establish its own recertification 

process and standards consistent with these requirements. We expect that establishing a process 

for recertification would include creating 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 own recertification request form.56 We estimate that the 

development of a recertification request form, as may be applicable for Exchanges that directly 

certify certified application counselors would take a health policy analyst (at $49.35 labor cost 

per hour) up to 1 hour to create, a senior manager (at $79.08 cost per hour) up to .5 hours (30 

 

56 We estimate 18 State Exchanges (which 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 burden 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 associated with developing and maintaining a 

request form. We estimate that the time burden associated with maintaining a copy of the 

request form would be .016 hours (1 minute); we assume 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 application counselor’s recertification request, which 

would require the Exchange to notify the individual of the result of its review and issue a new 

certificate for each individual who successfully completes recertification. 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 Exchange 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 application counselors in 

18 State Exchanges. The total cost burden would be approximately $2,422 for each State 

Exchange. The total burden for 18 State Exchanges 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 that the time burden associated with maintaining a 
CMS-9949-P 175 

copy of the notice and certificate would be .016 hours (1 minute); we assume a mid-level health 

policy analyst, with a labor cost of $49.35 an hour, would maintain the form through electronic 

copies at minimal cost, which we estimate as $0.79 per notice for each individual certified 

application counselor. The total recordkeeping 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), there would be requirements associated with implementing a 

recertification process under the applicable Exchange’s standards. We expect that this process 

would include creating and issuing a recertification request form (or similar document) for an 

organization’s certified application counselors to submit to indicate their intention to be 

recertified and provide an updated conflicts of interest disclosure or other attestations as may be 

required. We estimate that up to 5,000 designated organizations would develop their own 

recertification request form. We estimate that the development of a recertification request form 

would take a health policy analyst (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 hours (30 minutes) for review, and an attorney 

(at $90.15 labor cost per hour) up to .5 hours (30 minutes) for legal review. We estimate that the 

one-time cost burden would be $134 for each organization. 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 burden associated with maintaining a copy of the 

request form would be .016 hours (1 minute); we assume a mid-level health policy analyst with a 

labor cost of $49.35 an hour would maintain the form through electronic copies at minimal cost, 
CMS-9949-P 176 

which we estimate as $0.79 as a one-time requirement 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 designated organizations 

associated with reviewing each certified application counselor’s recertification 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 counselors 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 and issue a new certificate. The 

estimated cost burden is $4.11 for each individual notice. For an estimated 19,400 certified 

application counselors nationwide, or approximately four certified application counselors on 

average in each organization, the total cost burden would be approximately $16.44 for each 

organization. The total burden for 5,000 designated organizations nationwide would be 

approximately 1,617 hours and the total cost burden would be approximately $79,734. 

 There would be recordkeeping requirements associated with issuing a certificate. We 

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

recertification would be .016 hours (1 minute); we assume a mid-level health policy analyst with 

a labor cost of $49.35 an hour would maintain the form through electronic copies at minimal 

cost, which we estimate as $0.79 as a per certificate for each organization. The total 
CMS-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 cost burden would be approximately $ 15,326. 

 There would be third-party disclosure requirements for individual certified application 

counselors associated with completing the requirements for recertification, whether done directly 

through the Exchange or through an Exchange-designated certified application counselor 

organization. Such recertification requirements would include completing Exchange required 

training and might also include satisfying other requirements consistent with the Exchangeestablished processes, such as providing conflicts of interest disclosures, other attestations and 

submitting a recertification request form (or similar document) and other attestations. These 

requirements would apply to certified application counselors on an annual basis. Although 

nothing prohibits individual certified application counselors or organizations from being funded 

through sources such as applicable private, State, or Federal programs, we expect that certified 

application counselors would not be guaranteed any specific funding. We estimate the 

professional wage of certified application counselors for this type of work as equivalent 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. The estimated cost burden would be $4.53 for each 

individual seeking recertification. We estimate that there would be approximately 30,000 

recertification requests provided, for a total burden of 5,000 hours and a total cost burden of 

$135,915 for all certified application counselors nationwide. 

 There would be third-party disclosure requirements associated with taking recertification 

training. We expect that an individual certified application counselor would provide proof to the 
CMS-9949-P 178 

organization or Exchange that he or she has successfully completed the recertification training, in 

accordance with the Exchange’s process. We estimate 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 recertification. We estimate that there would be 

approximately 30,000 training certificates provided, and the total burden would be 1,000 hours, 

with a total cost burden of $24,000 for all certified application counselors nationwide. 

 In addition, there would be recordkeeping requirements associated with the training 

certification. We expect each person who receives training would obtain and maintain a record 

of training certification. We estimate that the time burden associated with maintaining proof of 

training certification is .016 hours (1 minute), since we assume this proof would be maintained 

through electronic copies, at minimal cost. The total cost estimated for each individual to 

maintain proof of training certification would 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 the final Navigator and non-Navigator assistance personnel standards 

rule (Patient Protection and Affordable Care Act; Exchange Functions: Standards for Navigators 

and Non-Navigator Assistance Personnel, July 17, 2013, 78 FR 42842). Navigator personnel 

and non-Navigator assistance personnel to which §155.215 applies are estimated to have a labor 

cost of $20 per hour. Navigator and non-Navigator assistance project leads to which §155.215 

applies are estimated to have a labor cost of $29 per hour. Navigator and non-Navigator senior 

executives to which §155.215 applies are estimated to have a labor cost of $48 per hour. These 
CMS-9949-P 179 

are estimates commonly used for estimating paperwork burden and do not represent a 

recommendation or a requirement of how much Navigator and non-Navigator 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 OMB control number (OCN) 0938-1220, we noted 

that there were 105 Navigator grantee organizations at that time in FFEs, including SPEs, and we 

estimated that there were 3,000 individuals working 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 applies, would be required to maintain 

procedures to inform consumers of the functions and responsibilities of Navigators and nonNavigator assistance personnel (as applicable), and to obtain authorization for the disclosure of 

consumer information to the Navigator or non-Navigator assistance personnel (as applicable). 

This would be a one-time requirement for the organization. We estimate that it would take a 

Navigator or non-Navigator assistance personnel project lead up to 2 hours to create the form for 

providing authorization to applicants, and a Navigator or non-Navigator 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 per organization. The total cost 

for all 105 Navigator grantee organizations is estimated to be $11,130. The total cost for all 300 

non-Navigator assistance personnel organizations is estimated to be $31,800. 

 There are also recordkeeping requirements associated with developing and maintaining a 

model agreement and authorization form. Each organization is expected to maintain a copy of 
CMS-9949-P 180 

the executed forms. We estimate that the time burden associated with maintaining a copy of 

executed agreement and authorization forms 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 individual Navigators, as well as those nonNavigator assistance personnel to whom §155.215 applies. Under §155.210(e)(6) and 

§155.215(g), respectively, Navigators and non-Navigator assistance personnel would be required 

to inform consumers of the functions and responsibilities of Navigators and non-Navigator 

assistance personnel and obtain authorization 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 authorizations, and provide any applicable conflict of 

interest disclosures. Because here we are only estimating the time required to provide consumers 

with information about the functions and responsibilities of a Navigator 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 minutes) to perform this task. The total 

cost estimate for the consumer authorization 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 the total cost burden on all 3,000 Navigators is 

estimated to be $9,990. The total time burden on all 1,800 non-Navigator assistance personnel is 

estimated to be 300 hours, and the total cost burden on all 1,800 non-Navigator assistance 

personnel is estimated to be $5,994. 
CMS-9949-P 181 

C. ICRs Regarding Enrollee Satisfaction & 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 monitor approved vendors for ongoing compliance. 

HHS might require additional information from approved vendors to be periodically submitted in 

order to ensure continued compliance. We estimate 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 burden 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 effort 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 and/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 collection currently approved under OCN 0938–1119 to 

account for any additional burden for an Exchange 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 with 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 estimate that a total of 575 QHP issuers would be 

collecting and reporting QRS measure data, by product type, using administrative data sources 

and medical records. Using the BLS labor category estimates for a general operations manager, 

computer programmer, business operations specialist, 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 issuers that do not have the experience in data 

collection and reporting for the QRS as proposed in §156.1120. Therefore, we estimate that the 

additional cost burden for each of the remaining 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 issuers 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 and 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 Exchange to display on its website. This burden and 

cost for Exchanges are currently approved under ONC 0938-1156 in the total website site that 

provides information including ESS and quality ratings, 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 provisions 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 State and Federal Exchanges. This proposed rule would also clarify 

how issuers are to calculate their MLRs in States that require the small group market and 

individual market to be merged. In addition, this proposed rule would clarify how issuers must 

distribute de minimis rebates. Both MLRs and rebates are reported on the MLR annual reporting 

form. 

The burden for the existing information collection 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 the 
CMS-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 updated MLR annual form that would reflect the 

changes in MLR calculations. In addition, although HHS is seeking OMB approval for updates 

to the MLR annual form that reflect changes in MLR calculations in States that require the small 

group market and individual market to be merged, and changes that would allow issuers to 

separately report transitional coverage, these changes are not 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 processes HHS proposes to use to impose CMPs 

on noncompliant consumer assistance personnel and organizations. Section 155.285 describes 

the bases and processes HHS proposes to use to impose CMPs on persons who provide false or 

fraudulent information required under section 1411(b) of the Affordable Care Act or who 

knowingly and willfully use or disclose information 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 conduct 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 Election Notice, Notice of Discontinuation, 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 materials 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 notice requirement could be satisfied by inserting a 

statement into existing plan documents. HHS would provide the exact text of the notice and it 

would not need to be customized. In addition, under proposed §156.602, issuers of foreign 

group health coverage would be required to provide notice to enrollees who are citizens or 

nationals of the United States of its minimum essential coverage status. Plan documents are 

usually reviewed and updated annually before a new plan year begins. Issuers 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 proposed rule provide that issuers that 

discontinue a product in the group or individual market, or that provide 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 would 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 creditable coverage under §148.124 would no longer be required to be 

provided starting December 31, 2014. The burden is currently approved under OCN 0938-0702. 

In the individual market, the anticipated reduction in annual burden 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 under OCN 0938-0702 as well. Electronic 
CMS-9949-P 186 

submission of opt-out election notice will also reduce costs for plans by eliminating the need for 

mailing paper forms. 

If you comment on these information collection requirements, please do either of the 

following: 

1. Submit your comments electronically as specified in the ADDRESSES section of this 

proposed rule; or 

2. Submit your comments to the Office of Information and Regulatory Affairs, Office of 

Management and Budget, Attention: CMS Desk Officer, CMS-9949-P. Fax: (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 assistance personnel, and other entities under the 

Affordable Care Act. It also proposes a number of amendments relating to the premium 

stabilization programs, the medical loss ratio program, certified application counselor programs, 

affordability exemptions, guaranteed availability and renewability of coverage, and quality 

reporting requirements. Additionally, it proposes 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 provisions for self-funded nonFederal governmental plans and individual market 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 the protections intended by Congress in an 

economically efficient manner. We have examined 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 Congressional Review Act (5 U.S.C. 804(2)). In 

accordance with OMB Circular A–4, CMS has quantified 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 equity). Executive Order 13563 (76 FR 3821, January 

21, 2011) is supplemental to and reaffirms the principles, structures, and definitions governing 

regulatory review as established in Executive Order 12866. 

Section 3(f) of Executive Order 12866 defines 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 adversely 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 referred 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, or 
CMS-9949-P 188 

loan programs or the rights and obligations of recipients 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 “significant” regulatory action is 

subject to review by the OMB. HHS has concluded 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 Executive Order 12866. Therefore, HHS has provided an assessment of 

the potential costs, benefits, and transfers associated with this proposed regulation. 

1. Need for Regulatory Action 

Starting in 2014, qualified individuals and qualified employers are able to obtain 

coverage provided through Exchanges. The proposed provisions, amendments and clarifications 

in this proposed rule would address stakeholder concerns and inquiries and ensure smooth 

functioning of health insurance markets and Exchanges and ensure that individuals have access 

to high quality and affordable health insurance coverage. In addition, this proposed rule would 

establish methodologies for calculating the MLR to address ICD-10 conversion costs, MLR and 

rebate calculations in States that require the individual and small 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 State and Federal Exchanges. 

2. Summary of Impacts 
CMS-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 provisions of this proposed rule will 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 premium stabilization programs work as intended, 

provide flexibility to SHOPs and employers, and protect consumers from fraudulent and criminal 

activities. Affected entities such as QHP issuers, Navigators and non-Navigator assistance 

personnel, designated certified application counselor organizations, survey vendors, and States, 

would incur costs to comply with the proposed provisions, including administrative costs related 

to notices, surveys, training, and recertification requirements. In accordance with Executive 

Order 12866, HHS believes that the benefits of this regulatory action justify the costs. 

Table V.1: Accounting Table 

Benefits:

Qualitative: 

* Ensure access to affordable and quality health 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 methodology for calculating annual 

limitations on cost-sharing and small group deductibles 

* Ensure sufficiency of funds in the reinsurance payment pool 

* Ensure consumer protection and privacy and security of PII 

* Discourage fraudulent or criminal activity by consumer assistance personnel and entities 

* Provide additional flexibility to SHOPs and employers 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 million1 Annualized Monetized 2013 7 2014-2018

($millions/year) $49.52 million1 2013 3 2014-2018

Net annual costs to enrollees related to ESS and Marketplace survey; recertification of certified 
CMS-9949-P 190 

application counselors by States; administrative costs 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 notice and disclosure requirements for certified 

application counselor recertification; consumer authorization for 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 training for recertification 

* Reduction in costs to consumers due to ability to make requests to dismiss appeals by 

telephone 

*Possible increase is premiums due to adjustments in methodology for calculating annual 

limitations on cost-sharing and small group deductibles 

Transfers: Estimate Year 

dollar 

Discount 

rate 

percent 

Period 

covered 

Annualized Monetized $2.93 million 2013 7 2014-2018

($millions/year) $2.99 million 2013 3 2014-2018

Net annual transfer of rebate dollars to enrollees from shareholders or nonprofit stakeholders, 

resulting from adjustment in MLR methodology for 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 Exchanges, and to account for ICD-10 conversion costs 

*Possible transfer of transitional reinsurance program funds from the Federal government to 

non-grandfathered reinsurance-eligible plans in the individual market 

* Possible increase in total risk corridors payment amounts made by the Federal government 

and decrease in total risk corridors receipts, although the Federal government intends to 

implement the risk corridors program in a budget neutral manner 

1. Note: Approximately $13 million in costs are estimated in the RIA below and the remaining 

costs related to ICRs are estimated in section IV above. 

3. Anticipated Benefits, Costs and Transfers 

 The impacts of the existing regulations that 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. 

Benefits
CMS-9949-P 191 

Provisions of this proposed rule would ensure that all individuals have access to 

affordable and quality health insurance coverage and the necessary information to make 

informed choices. Making quality rating and enrollee satisfaction survey information available 

to consumers would allow them to make informed choices and provide issuers 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 individuals 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 the 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 premium 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 costs and uncertainties around operations and the 

risk pool, and to stabilize the market as it continues to transition 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 protection and ensure that Navigators 
CMS-9949-P 192 

provide information and services concerning enrollment in QHPs in a fair and impartial manner 

and that certified application counselors 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 application counselors, and certified application counselor 

organizations in the FFE who violate the Exchange standards applicable to them. This would 

ensure that consumers interacting with the Exchange 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 disclosure of information would also ensure privacy 

and security of consumers’ PII. 

The proposed amendments to the annual employer 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 available 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. Additionally, a uniform QHP filing and review timeline 

for both markets for 2015 would reduce confusion and provide efficiencies to scale in review, 

providing potential resource savings to Exchanges 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 employee choice would result in significant adverse 
CMS-9949-P 193 

selection in the State’s small group market that cannot be remediated 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 State’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 individual and group markets. 

The proposed amendments to the MLR methodology in States that require the small 

group market and individual market to be merged 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 exemptions would take into account the rate of 

premium growth over the rate of income growth. We do not anticipate that these approaches 

would significantly alter the number of individuals who would be expected to enroll in health 

insurance plans or make shared responsibility payments. 

Costs

Affected entities would incur costs to comply with the provisions of this proposed rule. 

Costs related to ICRs subject to PRA are discussed 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; costs 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 for 
CMS-9949-P 194 

issuers in the individual due to discontinuation of certification of creditable coverage. In this 

section, we discuss other costs related to the proposed provisions. 

 Each Exchange must establish its own recertification process for certified application 

counselors and designated certified application counselor organizations. We expect that 

establishing a process for recertification would include updating recertification 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 training, 4 hours for a computer programmer (at 

$52.50 per hour) to update the online training module and 1 hour by a senior manager (at $79.08 

per hour) to review. The total cost 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 appeals entity is capable of accepting telephonic 

withdrawals) would make the process more efficient 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 test of the survey would be carried out, while 

in 2015 a beta test would be performed. The cost to issuers is addressed in section IV. We 

anticipate that in 2014, 4,200 enrollees would participate 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 enrollees 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 would conduct the psychometric test and in the 
CMS-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 ESS vendor. We estimate approximately $16,000 as the 

annual cost for a QHP issuer to contract with an ESS vendor, for a total annual cost of $9.2 

million for 575 QHP issuers. 

The Marketplace survey would be administered 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 1,260 hours in 2014 and a total of 61,200 responses 

requiring 24,480 hours in 2015 onwards. Total costs 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 small group deductibles could lead some issuers to 

increase premiums slightly, potentially resulting in higher premiums for consumers. 

Transfers

Currently, the MLR regulation permits inclusion 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. Therefore, this proposed rule proposes to permit 

issuers to include their ICD-10 conversion costs through the MLR reporting year in which the 

Secretary requires conversion to be completed, which is currently expected to be 2014. Based on 

 

57 Detailed burden estimates can be found in the Supporting Statement for the Health Insurance Marketplace 

Consumer Experience Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data Collection, found at 

https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html. 58 Detailed burden estimates can be found in the Supporting Statement for the Health Insurance Marketplace 

Consumer Experience Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data Collection, found at 

https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html. 
CMS-9949-P 196 

the 2012 MLR data, we estimate that the current ICD-10 provision reduced total rebates for 2012 

by less than 2 percent. To the extent issuers may have completed a substantial portion of ICD-10 

conversion prior to 2014, we expect that the impact of the proposed 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 improving activities incurred in 2014 in the MLR 

numerator by 1.0001. This adjustment would be limited to issuers that provided transitional 

coverage in the individual or small group markets in States that adopted the transitional policy. 

In addition, this proposed rule proposes to account for the special circumstances of the issuers 

that provided coverage through the State and Federal Exchanges 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 issuers affected by the transitional policy and for 

issuers affected by the Exchanges rollout might reduce the total rebates by 0.5 percent for 2014. 

In addition, this proposed rule proposes to amend the MLR methodology to clarify how 

issuers must calculate MLRs in States that require the small group 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 separate 
CMS-9949-P 197 

markets, then this provision would not have any impact 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) rebates 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 rebates are not de minimis would result in an enrollee 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 whose rebates are not de minimis. With respect to the first proposed 

de minimis provision, the current de minimis rebate provisions do not account 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 whose rebates are de minimis

since these issuers would not have any enrollees with non-de minimis rebates; therefore, we do 

not consider the proposed clarification to create any additional burden. We are currently aware of 

one issuer that was in this situation, but more issuers 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 should not be any impact to the total 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 reinsurance contributions 

collected for the 2014 and 2015 benefit years so that reinsurance contributions collected are 

allocated first to the reinsurance pool and administrative expenses and second to payments to the 

U.S. Treasury. We expect that this proposal would not have a significant effect on transfers, 

because we estimate that we will collect the full amount of reinsurance contributions. This 

proposal could lower premiums by reducing the uncertainty associated with reinsurance 

payments to non-grandfathered plans in the individual market that are eligible for such payments 

under 45 CFR 153.234. 

The Affordable Care Act creates a temporary 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 costs between the Federal government and QHP 

issuers. The Affordable Care Act establishes the risk corridors program as a Federal program; 

consequently, HHS will operate the risk corridors program under Federal rules with no State 

variation. The risk corridors program will help protect against inaccurate 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 risk corridors formula that would help mitigate 

potential QHP issuers’ unexpected administrative costs. Although our initial modeling suggests 

that this adjustment could increase the total risk corridors payment amount 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 considered the regulatory alternatives below: 
CMS-9949-P 199 

1. Collecting ESS Data at the Product Level Instead of Each Product 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 each metal tier). This option would reduce the 

cost for issuers who offer the same product in multiple tiers. However, collecting data at the 

product level would prevent consumers from understanding differences in enrollee satisfaction at 

the individual product per tier level, which may vary with differences in cost sharing. This would 

reduce the benefits that consumers 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 require QHPs to collect enrollee satisfaction 

information using the Medicaid CAHPS instrument without further enhancement. The ESS will 

include more questions than the Medicaid CAHPS—including detailed questions about the 

patient’s costs—that are particularly appropriate to Exchange enrollees. Eliminating these 

questions would reduce the cost to issuers, but also reduce benefits that consumers derive from 

the ESS data. 

3. Collecting QRS Data for Each Product Per Metal 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 metal tier) as they collect ESS information. Assuming that QHPs 

offer each product in two metal tiers this option would double the cost to QHPs of collecting 

QRS data. However, it might not appreciably increase consumer information about QHPs in the 

early years of the Exchanges if the quality 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 enrollment size at the product metal 

level may be too small in the early years of Exchange 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 require QHPs to collect enrollee satisfaction 

information from Exchange enrollees using the MA CAHPS instrument. The ESS presently 

includes 29 more questions, than MA CAHPS. Use of the MA CAHPS would reduce the cost to 

consumers and also the QHP cost of data entry. However, the MA CAHPS instrument and Star 

ratings are designed for a different population and are not necessarily 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 this proposed rule would be more efficient 

ways to extend the protections of the Affordable 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 Business Administration (SBA), (2) a nonprofit 

organization that is not dominant in its field, or (3) a small government jurisdiction with a 

population of less than 50,000 (States and individuals are not included in the definition of “small 

entity”). CMS uses as its measure of significant 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 final rule with comment period published on May 

5, 2010 (75 FR 24481), CMS examined the health insurance industry in depth in the RIA we 

prepared for the proposed rule on establishment of the Medicare Advantage program (69 FR 
CMS-9949-P 201 

46866, August 3, 2004). In that analysis it was determined that there were few, if any, insurance 

firms underwriting comprehensive health insurance policies (in contrast, for example, to travel 

insurance policies or dental discount 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 less than $35.5 million in earned 

premiums, that offer individual or group health insurance 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 these small entities are likely to have other lines 

of business (e.g., insurance business other than health insurance, and business other than 

insurance) that would result in their revenues exceeding $35.5 million. Based on this analysis, 

HHS expects that the proposed provisions would not affect a substantial number of small issuers. 

The proposed amendments to the annual employer 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 impose 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 application counselor organizations, 

might be small entities and would incur costs to comply with the 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 the 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 continuing education or recertification in FFEs. 

Further, the cost burden related to continuing education and recertification, and recordkeeping 

would generally be considered an allowed cost that would be covered by the 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 contracts to non-Navigator assistance personnel. Though it 

is very likely that all costs associated with these proposals would be largely covered by affected 

entities’ and individuals’ funding sources, HHS cannot guarantee that 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 costs would not covered by these funding sources, other 

outside sources may also be available to cover unfunded costs that remain. Costs incurred by 

designated certified application counselor organizations related 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 State funds might be available to 

cover certified application counselor costs. 

E. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 requires that 

agencies assess anticipated costs and benefits before issuing any proposed rule that includes a 

Federal mandate that could result in expenditure in any one year by State, local or tribal 
CMS-9949-P 203 

governments, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated 

annually for inflation. In 2014, that threshold level is approximately $141 million. 

UMRA does not address the total 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 governments, or on the private sector; or (2) 

increasing the stringency of conditions in, or decreasing the funding of, State, local, or tribal 

governments under entitlement programs. 

This proposed rule includes mandates on State, 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 coverage. Consistent with policy embodied in UMRA, this proposed 

rule has been designed to be the least burdensome 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 establishes certain requirements that an agency must meet when 

it promulgates a proposed rule that imposes substantial direct requirement costs on State and 

local governments, preempts State law, or otherwise has Federalism implications. 

States are the primary regulators of health insurance coverage. States will continue to 

apply State laws regarding health insurance coverage. However, if any State law or requirement 

prevents the application of a Federal standard, then that particular State law or requirement 

would be preempted. State requirements that are more stringent than the Federal requirements 
CMS-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 meaning of section 1321(d) of 

the Affordable Care Act. Accordingly, States have significant latitude to impose requirements 

with respect to health insurance coverage that are more restrictive than the Federal law 

requirements. 

The proposed amendment to §155.225(d) would clarify that certified application 

counselors must meet any licensing, certification or other standards prescribed by the State so 

long as such standards do not 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. The proposed 

provisions also specify State requirements applicable to Navigators, non-Navigator assistance 

personnel, or certified application counselors that would 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. They include requirements that require referrals to entities or individuals not required 

to provide impartial information or act in a consumer’s best interest, or prevent Navigators, nonNavigator assistance personnel, or certified application counselors from providing services to all 

individuals seeking assistance, or providing advice regarding substantive benefits or comparative 

benefits of different health plans; in FFEs conflict with Federal standards or make it impossible 

to fulfill required duties, as such requirements are applied or implemented in the State; in FFEs, 

render ineligible otherwise eligible individuals or entities from participating as Navigators, nonNavigator assistance personnel subject to §155.215 or certified 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 health plan quality and 

outcomes data, and we want 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 information, as appropriate. 

In compliance with the requirement of Executive Order 13132 that agencies examine 

closely any policies that may have Federalism implications or limit the policymaking discretion 

of the States, HHS has engaged in efforts to consult with and work cooperatively with affected 

States. HHS has consulted with stakeholders on policies related to the operation of Exchanges, 

including the SHOP and the premium stabilization programs. HHS has held a number of 

listening sessions with State representatives to gather public input. HHS consulted with State 

representatives through regular meetings with the National Association of Insurance 

Commissioners (NAIC) and regular contact with States through the Exchange Establishment 

grant and Exchange Blueprint approval processes. 

Throughout the process of developing this proposed 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 this 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 Act
CMS-9949-P 206 

 This proposed rule is subject to the Congressional Review Act provisions of the Small 

Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.), which specifies 

that before a rule can take effect, the Federal agency promulgating the rule shall submit to each 

House of the Congress and to the Comptroller General a report containing a copy of the rule 

along with other specified information, and has been transmitted to Congress and the 

Comptroller General for review.
CMS-9949-P 207 

List of Subjects 

45 CFR Part 146

 Health care, Health insurance, Reporting and recordkeeping requirements. 

45 CFR Part 147

 Health care, Health insurance, Reporting 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 procedure, Adverse selection, Health care, Health insurance, 

Health records, Organization and functions (Government agencies), Premium stabilization, 

Reporting and recordkeeping requirements, Reinsurance, Risk adjustment, Risk corridors, Risk 

mitigation, State and local governments. 

45 CFR Part 155 

 Administrative practice and procedure, Health care access, Health insurance, Reporting 

and recordkeeping requirements, State and local governments, Cost-sharing reductions, Advance 

payments of premium tax credit, Administration and calculation of advance payments of the 

premium tax credit, Plan variations, Actuarial value. 

45 CFR Part 156

Administrative appeals, Administrative practice and procedure, Administration and 

calculation of advance payments of premium tax credit, Advertising, Advisory Committees, 

Brokers, Conflict of interest, Consumer protection, Cost-sharing reductions, Grant programs-
CMS-9949-P 208 

health, Grants administration, Health care, Health insurance, Health maintenance organization 

(HMO), Health records, Hospitals, American Indian/Alaska Natives, Individuals with 

disabilities, Loan programs-health, Organization and functions (Government agencies), 

Medicaid, Payment and collections reports, Public assistance programs, Reporting and 

recordkeeping requirements, State and local governments, Sunshine Act, Technical assistance, 

Women, and Youth. 

45 CFR Part 158

 Administrative practice and procedure, Claims, Health care, Health insurance, Health 

plans, Penalties, Reporting and recordkeeping requirements, Premium revenues, Medical loss 

ratio, Rebating. 
For the reasons set forth in the preamble, the 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 INSURANCE 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 PHS 

Act (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 notice 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 coverage 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 available in this market (other than only through 

one or more bona fide associations), the modification is consistent with State law and is effective 

uniformly among group health plans with that product. 

(2) For purposes of this paragraph (f), modifications made solely pursuant to applicable 

Federal or State law are considered a uniform modification of coverage. 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 health insurance issuer (within the meaning of 

section 2791(b)(2) of the PHS Act). 

(ii) The product is offered as the same product 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 structure, except for variation 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 benefits, 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). 

(3) A State may establish criteria that broaden, but not restrict, the definition of a 

uniform modification of coverage under paragraph (f)(2) of this section. 

(g) Notice of renewal of coverage. If an issuer is renewing coverage as described in 

paragraph (a) of this section, or uniformly modifying coverage as described in paragraph (f) of 
CMS-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 election for self-funded non-Federal governmental plans—(1) Requirements 

subject to exemption. The PHS Act requirements described in this paragraph are the following: 

 (i) Limitations on preexisting condition exclusion periods in accordance with section 

2701 of the PHS Act as codified before enactment of the Affordable Care Act. 

 (ii) Special enrollment periods for individuals 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 elect 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 substance use disorder benefits under section 2726 of the 

PHS Act. 

 (vi) Required coverage for reconstructive 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 exempt its plan, to the extent the plan is not 

provided through health insurance coverage (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 certain 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 provisions of paragraph (a)(2) 

of this section apply for plan years beginning after the expiration of the term of the agreement. 

(4) Examples—(i) Example 1. A non-Federal governmental employer has elected to 

exempt its self-funded group health plan from all 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 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. 

 (ii) Example 2. A non-Federal governmental employer has elected to exempt its 

collectively bargained self-funded plan from all of the requirements described in paragraph 

(a)(1) of this section. The collective bargaining agreement applies to five plan years, 

October 1, 2009 through September 30, 2014. For the plan year that begins on October 1, 2014, 

the plan sponsor is no longer permitted to elect to exempt its plan from the requirements 
CMS-9949-P 213 

described in paragraph (a)(1) of this section. Accordingly, 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 under this 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 benefits with respect to a mastectomy must cover 

reconstructive surgery and certain other services following a mastectomy. An enrollee who has 

had a mastectomy receives reconstructive surgery on August 24. Claims with respect to the 

surgery are submitted to and processed by the plan in September. The group health plan 

commences a new plan year each September 1. Effective 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 for the claims incurred on August 24. 

 (ii) If a group health plan is co-sponsored by two or more employers, then only plan 

enrollees of the non-Federal governmental employer(s) with a valid election 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 purchase 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 offered by an issuer is designated as “stop-loss” 

coverage or “excess risk” coverage, if it is regulated as group health insurance under an 
CMS-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 dates of the period to which the election is to 

apply. This period can be either 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 specified in 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 name and address of the plan administrator, and 

include the name and telephone number of a person CMS may contact regarding 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, including (if applicable) a 

third party plan administrator, is legally authorized to do so by the plan sponsor. 

 (viii) Include, as an attachment, a copy of the notice described in paragraph (f) of this 

section. 

 (2) “Term of the agreement” defined. Except as provided in paragraphs (b)(2)(i) and (ii), 

for purposes of this section “term 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 for 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 years 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 the governmental employer and union officials. 

 (B) The date of ratification of an agreement between the governmental employer and the 

union. 

 (C) The date impasse resolution, arbitration or other closure of the collective 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 agreement includes all plan years governed by the 

agreement excluding the period that precedes the latest 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 representatives regarding whether an election 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 given plan year or period of plan 

coverage, nothing in this section should be construed as preventing a plan sponsor from 

submitting an election in accordance with this section 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 collective bargaining agreement. Subject to paragraph (d)(4) of 

this section, if a plan is governed by a collective bargaining agreement that was ratified before 

March 23, 2010, a plan sponsor or entity acting on behalf of a plan sponsor must file an election 

with CMS before the first day of the first plan year governed by a collective bargaining 

agreement, or by the 45th day after the latest applicable date specified in paragraph (b)(2)(i) of 

this section, if the 45th day falls on or after 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 specified under paragraphs (c)(1) or (2) of this section, as applicable. 
CMS-9949-P 217 

If the latest filing date falls on a Saturday, Sunday, 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 cause if the plan substantially complies with the 

requirements of paragraph (e) of this section. 

 (5) Failure to file a timely election. Absent an extension under paragraph (c)(4) of this 

section, a plan sponsor’s failure to file a timely 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 case of a plan governed by a collective bargaining 

agreement, for any plan years under the agreement 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 document (or the notice to plan enrollees) does not 

meet all of the requirements of this section, CMS 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 additional 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 paragraph (d)(1) of this section. If the latest filing 
CMS-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 election, 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 affected 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 plan need only provide notice to the participant. 

 (ii) The notice must be in writing and, except as provided in paragraph (e)(2) of this 

section with regard to initial notices, must be provided to each enrollee 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 plan description, or equivalent description, that it provides to 

each enrollee at the time of enrollment, and annually. 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 all enrollees before the first day of that plan 

year, and notice at the time of enrollment to all individuals who enroll during that plan year. 
CMS-9949-P 219 

 (ii) In the case of a collectively bargained plan, 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 all enrollees before the first day of the 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 must provide a notice at the time of enrollment to 

individuals who— 

 (A) Enroll on or after the first day of the plan year, when closure of the collective 

bargaining process is reached before 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 after 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 the listed requirements, if any, apply under the 

terms of the plan, or as required by State law, without regard to an exemption under this section. 

 (f) Subsequent elections—(1) Election renewal. A plan sponsor may renew an election 

under this section through subsequent elections. The timeliness standards described in paragraph 

(c) of this section apply to election 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 specified under paragraph (e) of this section. 

 (3) Election renewal includes provisions from which plan not previously exempted. If 

an election renewal includes a requirement described 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 paragraph (e)(2) of this section apply with respect to the additional 

requirement(s) of paragraph (a) from which the plan sponsor is electing to exempt the plan. 

 (4) Special rules regarding renewal of an election under a collective bargaining 

agreement—(i) If protracted negotiations with respect to a new agreement 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 effect, the plan must comply with the enrollee 

notification requirements of paragraph (e)(1) of this 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, paragraph (c)(2) of this section, with respect 

to an election renewal, applies to the plan as governed by the agreement that results in the 

earliest filing date. 

 (g) Requirements not subject to exemption—(1) Genetic information. Without regard to 

an election under this section that exempts a non-Federal governmental plan from any or all of 
CMS-9949-P 221 

the provisions of §§146.111 and 146.121, the exemption 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 with certification and notification requirements—(1) 

Substantial failure—(i) General rule. Except as provided in paragraph (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 election under this section with respect to all plan enrollees 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 facts and circumstances, including previous 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 expires, constitutes a substantial failure. 

 (iii) Exceptions—(A) Multiple employers. If the plan is sponsored by multiple 

employers, and only certain employers substantially fail to comply with the requirements of 

paragraph (e) or (g)(1) of this section, then the election is invalidated with respect to those 

employers only, and not with respect to other employers that complied with 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 plan year with respect to which the failure has occurred, the plan 

agrees not to apply the election with respect to the individuals who were not notified and so 

informs those individuals in writing. 

 (2) Examples—(i) Example 1. A self-funded, non-Federal group health plan is 

co-sponsored by 10 school districts. Nine of the school districts have fully complied with the 

requirements of paragraph (e) of this section, including providing notice to new employees at the 

time of their enrollment in the plan, regarding 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, neglected to notify three of the new hires about the 

group health plan’s exemption election at the time they enrolled in the plan. The school district 

has substantially failed to comply with a requirement of paragraph (e) of this section with respect 

to these individuals. The school district learned of the oversight six weeks into the school year, 

and promptly (within 30 days of learning of the oversight) provided notice to the three teachers 

regarding the plan’s exemption under this section and that the exemption does not apply to them, 

or their dependents, during the plan year of their enrollment because of the plan’s failure to 

timely notify them of its exemption. The plan complies with the requirements of this part for 

these individuals for the plan year of their enrollment. 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 to 
CMS-9949-P 223 

enrollees of the plan sponsor that is responsible for the substantial failure, the plan sponsors 

determine that administering the plan in that manner would be too burdensome. Accordingly, in 

this example, the plan sponsors choose to cancel the election entirely. Both 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 invalidate 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 known to CMS) in writing that CMS has made a 

preliminary determination that an election is invalid, 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 that an election is invalid remains unchanged 

after CMS considers the plan sponsor’s timely response (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 administrator’s address is known to CMS) of 

CMS’s final determination that the election is invalid. Also, CMS informs the plan sponsor that, 

within 45 days of the date of the notice of final 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 otherwise is subject to one or more 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 section 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 provisions of title XXVII of the 

PHS Act, that apply to non-Federal 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 REFORM 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 paragraph (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 allow 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 health 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 Business Health Options Program (SHOP) in a State, 

coverage must become effective consistent with the dates described in §155.725(a)(2) of this 

subchapter, except as provided in paragraph (b)(1)(iii) of this section. 

* * * * * 

(h) Construction. Nothing in this section 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), and (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 notice in writing, in a form and manner specified by the 

Secretary, to each plan sponsor or individual, as applicable, provided that particular product in 

that market (and to all participants and beneficiaries covered under such coverage) of the 

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

* * * * * 

(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 available in this market (other than only through 

one or more bona fide associations), the modification is consistent with State law and is effective 

uniformly among group health plans with that product. 

(iii) Individual market if the modification is consistent with State law and is effective 

uniformly for all individuals with that product. 

(2) For purposes of this paragraph (e), modifications made solely pursuant to applicable 

Federal or State law are considered a uniform modification of coverage. 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 health insurance issuer (within the meaning of 

section 2791(b)(2) of the PHS Act). 

(ii) The product is offered as the same product 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 structure, except for variation 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 benefits, except for changes in benefits that 

cumulatively impact the plan-adjusted index rate for the product (as described in §156.80(d)(2)) 

by no more than 2 percent (not including changes required by applicable Federal or State law). 

(3) A State may establish criteria that broaden, but not restrict, the definition of a 

uniform modification of coverage under paragraph (e)(2) of this section. 

(f) Notice of renewal of coverage. If an issuer is renewing 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 and manner specified by the Secretary. 

(g) Construction. Nothing in this section should be construed to require an issuer to 

renew or continue in force coverage for which continued eligibility 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 coverage in the individual market. It also provides 

certain protections for mothers and newborns with respect to coverage for hospital stays in 

connection with childbirth and protects all individuals 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 insurance coverage includes all health 

insurance coverage (as defined in §144.103 of this subchapter) that is neither health insurance 

coverage sold in connection with an employment-related group health plan, nor short-term, 

limited-duration coverage as defined in §144.103 of this subchapter. 

(2) The requirements that pertain to guaranteed renewability for all individuals, to 

protections for mothers and newborns with respect to hospital stays in connection with 

childbirth, and to protections against discrimination based on genetic information apply to all 

issuers of individual health insurance coverage in the State. 

(b) Applicability date. Except as provided in §148.124 (certificate of creditable 

coverage), §148.170 (standards relating to benefits for mothers and newborns), and §148.180 

(prohibition of health discrimination based on genetic information), the requirements of this part 

apply to health insurance coverage offered, sold, 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 health 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 Federal requirements for guaranteed availability 

of coverage in the group and 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 individual health insurance coverage. 

(a) Applicability. This section applies to non-grandfathered and grandfathered health 

plans (within the meaning of §147.140 of this subchapter) that are individual health insurance 

coverage. See also §147.106 of this subchapter for requirements relating to guaranteed 

renewability of coverage with respect to non-grandfathered health plans. 

* * * * * 

(d) * * * 

(1) Provides notice in writing, in a form and manner specified by the Secretary, to each 

individual provided coverage of that type of health 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 insurance coverage for a policy form offered in the 

individual market if the modification is consistent with State law and is effective uniformly for 

all individuals with that policy form. 

(2) For purposes of this paragraph (g), modifications made solely pursuant to applicable 

Federal or State law are considered a uniform modification of coverage. 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 health insurance issuer (within the meaning of 

section 2791(b)(2) of the PHS Act). 

(ii) The product is offered as the same product 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 structure, except for variation 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 benefits, 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). 

(3) A State may establish criteria that broaden, but not restrict, the definition of a 

uniform modification of coverage under paragraph (g)(2) of this section. 

(h) Notice of renewal of coverage. If an issuer is renewing coverage as described in 

paragraph (b) of this section, or uniformly modifying coverage as described in paragraph (g) of 
CMS-9949-P 231 

this section, the issuer must provide to each individual 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 providing certificates of creditable 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 Federal requirements for guaranteed 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 market reforms—alternative mechanisms.

The rules for a State to implement an acceptable alternative mechanism for purposes of 

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 Federal requirements for guaranteed availability 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) through (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 individual health insurance 

coverage in relation to its provision of the benefits described in paragraphs (a) and (b) of this 

section (or any combination 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 individuals 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 coordination between the provision of benefits 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 the amount of expenses incurred 

and without regard to the amount of benefits provided with respect to the event or service under 

any other health coverage. 

(iv) 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 AND IS 

NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. LACK OF MAJOR 

MEDICAL COVERAGE (OR OTHER MINIMUM ESSENTIAL COVERAGE) MAY 

RESULT IN AN ADDITIONAL PAYMENT WITH YOUR TAXES.” 

* * * * * 

PART 153 – STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND 

RISK ADJUSTMENT UNDER THE 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), effective 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 after-tax premium in a transitional State, the percentage specified 

by HHS for such QHPs in the transitional 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 ESTABLISHMENT 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 and non-discrimination standards. 

* * * * * 

(c) Non-discrimination. (1) In carrying out the requirements 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 Federal funds to provide services to a defined population under the 

terms of Federal legal authorities that participates in the certified application counselor program 

under §155.225 may limit its provision of certified application counselor services to the same 

defined population. If the organization limits its provision of certified application counselor 
CMS-9949-P 235 

services pursuant to this exception, but is approached for certified application counselor services 

by an individual who is not included in the defined population that the organization serves, the 

organization must refer the individual to other Exchange-approved resources that can provide 

assistance. If the organization does not limit its provision of certified application counselor 

services pursuant to this exception, 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 specified in paragraph (b) of this 

section engages in activity specified in paragraph (c) of this section, the Department of Health 

and Human Services (HHS) may impose the following sanctions: 

(1) Civil money penalties (CMPs), subject 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 violation 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 under 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 carrying out Navigator duties on behalf of a 

grantee or sub-grantee; 

(2) Non-Navigator assistance personnel authorized under §155.205(d) and (e) and nonNavigator assistance personnel entities in Federally-facilitated 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 Federally-facilitated Exchanges have designated as certified 

application counselor organizations and individual certified application counselors 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 investigative process outlined in paragraphs (d) through (i) 

of this section, HHS has reasonably determined that the consumer assistance entity has failed to 

comply with the Federally-facilitated Exchange requirements and standards applicable to the 

consumer assistance entity, unless a CMP has been assessed for the same conduct under 45 CFR 

155.285. 

(d) Basis for initiating an investigation of a potential 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 might trigger an investigation includes, but is not limited to, the 

following: 

(i) Complaints from the general public; 

(ii) Reports from State regulatory agencies, and other Federal and State agencies; or 
CMS-9949-P 237 

(iii) Any other information that indicates potential 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 file 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 the means described in paragraph (d) of this section, HHS must 

provide a written notice of its investigation to the consumer assistance entity. This notice must 

include the following: 

(1) Description of the activity that is being investigated. 

(2) Explanation that the consumer assistance entity has 30 days from the date of the 

notice to respond with additional 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 notice of investigation described in 

(e) of this section, the entity may 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 notice within the time frame specified in HHS’s 

letter granting the extension of time. Failure to respond within 30 days, or, if applicable, within 
CMS-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 allegations 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 additional documents or information 

provided by the consumer assistance entity in response to receiving a notice of investigation in 

accordance with paragraph (e)(2) of this section. 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 previous or ongoing record of compliance, including 

but not limited to compliance or noncompliance with 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 violation, taking into consideration whether any violation is an 

isolated occurrence, represents a pattern, or is widespread; and 

(B) Whether the violation caused, or could reasonably be expected 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 entity, including but not limited 

to— 

(A) Whether the violation was beyond the direct control of the consumer assistance 

entity; and 

(B) The extent to which the consumer assistance entity received compensation—legal or 

otherwise—for the services associated 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 determined, the Exchange may reasonably estimate the number of 

individuals directly affected by the violation. 

(j) Settlement authority. Nothing in §155.206 limits the authority of HHS to settle any 

issue or case described in the notice furnished 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 during which none of the consumer assistance 

entities knew, or exercising reasonable diligence would have known, of the violation; or 

(ii) The period of time after any of the consumer 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 violation was corrected within 30 days of the first 
CMS-9949-P 240 

day that any of the consumer assistance entities against whom the penalty 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 known, that the violation existed, as well as the 

period of time during which that limitation applies; or that the violation was due to reasonable 

cause and not due to willful neglect and was corrected 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 against whom the sanction is being imposed, which 

notice must include the following: 

(i) A description of the basis 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 assistance entity to enter into a corrective 

action plan in place of paying the CMP, and the 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 process 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 assistance entity does not request a 

hearing within 30 days of the issuance of the 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 entity in writing of any CMP that has been 

assessed and of the means by which the consumer assistance entity may pay the CMP. 

(3) The consumer assistance entity has no right to appeal a CMP with respect to which it 

has not requested a hearing in accordance with paragraph (m) of this section unless the consumer 

assistance entity can show good cause in accordance 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 removing “or,” after the semicolon. 

C. In paragraph (d)(4) by removing the period 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, certification or other standards prescribed by the State or 

Exchange, if applicable, so long as such standards do not prevent the application 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 provide fair, accurate, and impartial information. 

(B) Except as otherwise provided under §155.705(d), requirements that would prevent 

Navigators from providing services to all persons to whom they are required to provide 

assistance. 

(C) Requirements that would prevent Navigators from providing advice regarding 

substantive benefits or comparative benefits of different health plans. 

(D) Requiring that a Navigator hold an agent or broker license or carry errors or 

omissions insurance. 

(E) In a Federally-facilitated Exchange, imposing standards that would prohibit 

individuals or entities from acting as Navigators that would be eligible to participate as 

Navigators under standards applicable to the Federally-facilitated Exchange. 

(F) In a Federally-facilitated Exchange, imposing standards that would, as applied or as 

implemented in a State, prevent the application of requirements applicable to the Federallyfacilitated Exchange. 

* * * * * 

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

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

from or on behalf of an individual applicant or enrollee, for application or other assistance 

related to Navigator duties; or 

(6) Provide compensation to individual Navigators on a per-application, 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 the 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. 

(8) Solicit any consumer for application or enrollment assistance by going door-to-door 

or through other unsolicited means of direct contact, including calling a consumer to provide 

application or enrollment assistance without the consumer initiating the contact. 

(9) Initiate any telephone call to a consumer using an automatic telephone dialing system 

or an artificial or prerecorded voice. 

(e) * * * 

(6) Ensure that applicants— 

(i) Are informed of the functions and responsibilities of Navigators; 

(ii) Provide authorization in a form and manner 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 authorization provided. The Exchange must establish a 

reasonable retention period for maintaining these records. In Federally-facilitated 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; and 
CMS-9949-P 244 

(iii) May revoke at any time the authorization provided the Navigator pursuant to 

paragraph (e)(6)(ii) of this section. 

(7) Maintain a physical presence in the Exchange service area, so that face-to-face 

assistance can be provided to applicants and enrollees. 

* * * * * 

23. Section 155.215 is amended by adding paragraphs (f) and (g) to read as follows: 

§155.215 Standards applicable to Navigators and Non-Navigator Assistance Personnel 

carrying out consumer assistance functions under §§155.205(d) and (e) and 155.210 in a 

Federally-facilitated Exchange and to Non-Navigator 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) and (e) must comply with the eligibility 

standard set forth under §155.210(c)(1)(iii), 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 responsibilities of non-Navigator assistance 

personnel; 

(2) Provide authorization in a form and manner as determined by the Secretary prior to a 

non-Navigator assistance personnel’s obtaining access to an applicant’s personally identifiable 

information, and that the non-Navigator assistance personnel maintains a record of the 

authorization provided. The Exchange must establish a reasonable retention period for 
CMS-9949-P 245 

maintaining these records. In Federally-facilitated Exchanges, this period is three years, unless 

an different retention period has already been provided in applicable Federal law; and 

(3) May revoke at any time the authorization provided the non-Navigator assistance 

personnel pursuant to paragraph (g)(2) of this section. 

24. Section 155.225 is amended— 

A. In paragraph (b)(1)(i) by removing “and” after the semicolon. 

B. In paragraph (b)(1)(ii) by removing the period 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 period 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 least an annual basis after successfully completing recertification 

training as required by the Exchange; and 

(8) Meets any licensing, certification, or other standards prescribed by the State or 

Exchange, if applicable, so long as such standards do not prevent the application 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 consumers to other entities 

not required to act in the best interest of applicants assisted. 

(ii) Requirements that would prevent certified application counselors 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 comparative benefits of different health plans. 

(iv) In a Federally-facilitated Exchange, imposing standards that would prohibit 

individuals or entities from acting as certified application counselors that would be eligible to 

participate as certified application counselors under standards applicable to the Federallyfacilitated Exchange. 

(v) In a Federally-facilitated Exchange, imposing standards that would, as applied or as 

implemented in a State, prevent the application of requirements applicable to the Federallyfacilitated Exchange. 

* * * * * 

(f) * * * 

(1) Are informed of the functions and responsibilities of certified application counselors; 
CMS-9949-P 247 

(2) Provide authorization prior to a certified application counselor 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 Exchanges, 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 enrollees for application or other assistance 

related to the Exchange; 

(2) Receive any consideration directly or indirectly 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 certified application counselors on a perapplication, per-individual- assisted, 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 the 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 contact, including calling a consumer to provide 

application or enrollment assistance without the consumer initiating the contact; or 
CMS-9949-P 248 

(6) Initiate any telephone call to a consumer using an automatic 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, the premium for coverage lasting less than one 

month must equal the product of— 

(i) The premium for one month of coverage divided 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 personally identifiable information. 

* * * * * 

(g) Improper use and disclosure of information. Any person who knowingly and 

willfully uses or discloses information in violation of section 1411(g) of the Affordable Care Act 

will be subject to a CMP of not more than the maximum amount specified 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 penalties 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 subpart C to read as follows: 

§155.285 Bases and process for imposing civil penalties 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 person 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 negligence 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 false or fraudulent information required under 

section 1411(b) of the Affordable Care Act, where knowing and willful means the intentional 

provision of information that the 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 willful means the intentional use or disclosure of 

information in violation of section 1411(g). Such violations would include, but not be limited to, 

the following: 
CMS-9949-P 250 

(A) Any use or disclosure performed which 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 defined 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 Secretary 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 counselors, in-person assistors, and 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 take 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 affected or potentially affected; 
CMS-9949-P 251 

(vi) The extent to which the person received compensation or other consideration 

associated with the violation; and 

(vii) Any documentation provided in any complaint 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 could have hindered an individual’s ability to 

obtain health insurance coverage; 

(v) The actual or potential impact of the provision of false 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 paragraph (a)(1)(i) of this section if HHS 

determines that there was a reasonable cause for the failure to provide correct information 

required under section 1411(b) of the Affordable Care Act and that the person acted in good 

faith. 

(c) Maximum penalty. The amount of a civil money penalty will be determined by HHS 

in accordance with paragraph (b) of this section. 
CMS-9949-P 252 

(1) The following provisions provide maximum 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 correct information 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 section, pursuant to which a person fails to provide correct information. 

(ii) Any person who knowingly and willfully provides 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, over the telephone through a call center, or 

through a paper submission process, in which the information is provided in relation to an 

eligibility determination; an eligibility redetermination 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 cost sharing reductions; or 

(C) An exemption from the individual 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 the following civil money penalty: 
CMS-9949-P 253 

(i) A civil money penalty for each use or disclosure described in paragraph (a)(1)(iii) of 

this section of not more than the maximum amount specified in section 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 identifiable information where the person against 

whom a civil money penalty may be imposed has made the use or disclosure. 

(3) These penalties may be imposed in addition 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 will 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 delivered, sent by certified mail, return receipt 

requested, or sent by overnight delivery service with signature upon delivery required. The 

written notice must include the following elements: 

(i) A description of the findings of fact regarding the violations with respect to which the 

civil money penalty is proposed; 

(ii) The basis and reasons why the findings of fact subject the 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 applicable administrative 

hearing process; 
CMS-9949-P 254 

(vi) A statement that failure to request a hearing within 60 calendar days after the date of 

issuance printed on the notice permits the assessment of the proposed penalty; and 

(vii) Information explaining how to file a request 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 request 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 proposed 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 penalty with respect to which the person has not 

timely requested a hearing in accordance with 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 penalty may appeal that penalty in accordance 

with the rules and procedures 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 paragraph (d) of this section for any of the violations described 

in paragraph (a) of this section. 
CMS-9949-P 255 

(2) OIG. In accordance with the rules and procedures 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 eligibility for insurance affordability programs. 

* * * * * 

29. Section 155.330 is amended by revising paragraph (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 paragraphs (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 Federally-facilitated Exchange will, 

require payment of the first month’s premium to effectuate an enrollment. 

(f) Processing enrollment transactions. The Exchange may provide requirements to QHP 

issuers regarding the instructions for processing electronic enrollment-related transactions. 

31. Section 155.420 is amended by revising paragraphs (b)(2)(i) through (iii), (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, adoption, 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 placement in foster care, but may permit the 

qualified individual or enrollee to elect a later coverage 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 elected by the qualified individual or enrollee. 

(ii) In the case of marriage, or in the case where a qualified individual loses minimum 

essential coverage or other coverage, 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 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 
CMS-9949-P 257 

must ensure that coverage is effective on an appropriate 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 individual or enrollee has 60 days from the date of a triggering 

event to select a QHP; 

(2) A qualified individual or enrollee whose coverage specified in paragraph (d)(1) or 

whose eligibility for qualifying coverage in an eligible-employer sponsored plan as specified in 

paragraph (d)(6)(iii) of this section will end within the next 60 days 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 coverage or eligibility for qualifying coverage in an eligibleemployer sponsored plan as specified in paragraph (d)(6)(iii) of this section, 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 enrollment period as appropriate based on the 

circumstances of the special enrollment period, in accordance with guidelines issued by HHS. 

(d) * * * 

(1) The qualified individual or his or her dependent loses minimum essential coverage, is 

enrolled in any non-calendar year individual health insurance policy as described in 

§147.104(b)(2) of this subchapter, even if the qualified individual or his her or dependent has the 
CMS-9949-P 258 

option to renew the expiring non-calendar year individual health insurance policy, or loses 

pregnancy-related coverage described 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 eligible for advance payments of the premium tax 

credit based in part on a finding that 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 discontinuing or changing available coverage within the next 60 days, 

provided that such individual is allowed to terminate existing coverage. 

* * * * * 

 (e) Loss of coverage. Loss of minimum essential coverage or other coverage described 

in paragraph (d)(1) of this section includes 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 paragraph (d)(6) and adding paragraph (e) to 

read as follows: 

§155.430 Termination of coverage. 

* * * * * 

(d) * * * 

(6) In the case of a termination 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 effective date of coverage in 
CMS-9949-P 259 

his or her new QHP, including any retroactive enrollments effectuated under §155.420(b)(2)(iii). 

In cases of retroactive terminations dates, the Exchange will ensure that appropriate actions are 

taken 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 after a coverage effective date that 

ends an enrollee’s coverage through the Exchange for 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 coverage 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 request in writing or by telephone, if the appeals entity is 

capable of accepting telephonic withdrawals. 
CMS-9949-P 260 

(i) Accepting telephonic withdrawals means the appeals entity— 

(A) Records in full the appellant’s statement 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) introductory 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 request, 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 contracting arrangements in accordance with §155.110(a); or 

(2) For an application submitted before 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 made by HHS, provided that— 

(1) The Exchange adheres to the eligibility determination made by HHS; 

(2) The Exchange furnishes to HHS any information available through the Exchange that 

is necessary for an applicant to utilize the process administered by HHS; and 

(3) The Exchange call center and Internet 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) introductory 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 after January 1, 2015, the SHOP must allow a qualified employer to 

select a level of coverage as described in section 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 pursuant to paragraph (b)(3)(vi) of this section, 

for plan years beginning on or after January 1, 2015, a SHOP: 

* * * * * 

(iv) Unless the Secretary makes an election pursuant to paragraph (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, the 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-facilitated 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, risk corridors, and risk adjustment); or 
CMS-9949-P 263 

(B) There are insufficient issuers of qualified health 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 described in section 1302(d)(1) of the 

Affordable Care Act. 

* * * * * 

38. Section 155.725 is amended by revising paragraphs (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 qualified employer’s annual election period may begin 

no sooner than November 15, 2014. 

(2) The SHOP must provide qualified employers with a standard election 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 employer 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 employees prior to the completion 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) introductory text, (g)(1)(i), 

(g)(1)(ii), (g)(2), and (g)(3) as paragraphs (g)(1)(i) introductory 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 with the standards set forth 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 satisfaction 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 results 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 ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING STANDARDS 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 increase in the annual dollar limits described 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. 

* * * * * 
CMS-9949-P 266 

43. Section 156.200 is amended by revising paragraph (b)(5) and adding paragraph (h) to 

read as follows: 

§156.200 QHP issuer participation standards. 

* * * * * 

(b) * * * 

(5) Implement and report on a quality improvement strategy or strategies described in 

section 1311(c)(1)(E) of the Affordable Care Act consistent with the standards of section 

1311(g) of the Affordable Care Act, disclose and report information 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 enrollee satisfaction surveys consistent with section 1311(c)(4) of the 

Affordable Care Act; 

* * * * * 

(h) Operational requirements. As a condition of certification 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 process 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 in 
CMS-9949-P 267 

§155.410(b) of this subchapter must make a premium payment in order to effectuate coverage by 

the applicable coverage date, provided that: 

(i) The payment date is no later than the 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 redesignating 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 coverage will be recognized as minimum essential 

coverage for expatriates: 

(i) Group health coverage for citizens or nationals 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 with respect to a citizen or national 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 United States for an entire month if the coverage provides health 

benefits within the United States. 

(ii) Group health coverage for non-United States citizens or nationals residing in the 

United States, provided by a self-insured group health plan, health insurance regulated by a 
CMS-9949-P 268 

foreign government, or health coverage provided by a foreign national health plan, if the 

coverage provides health benefits 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 coverage 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 section, an expatriate means an 

individual for whom there is a good faith expectation 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 paragraphs (a)(2) introductory text and (d) to 

read as follows: 

§156.604 Requirements for recognition as minimum essential coverage for types of 

coverage not otherwise designated minimum essential coverage in the statute or this 

subpart. 

(a) * * * 

(2) Procedural requirements for recognition as minimum essential coverage. To be 

considered for recognition as minimum essential coverage, the sponsor of the coverage, 

government agency, health insurance issuer, or plan administrator must submit the following 

information to HHS: 

* * * * * 
CMS-9949-P 269 

(d) Notice. Once recognized as minimum essential coverage, the sponsor of the 

coverage, government agency, health insurance issuer, 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 information about QHP issuers with other Federal and 

State regulatory and enforcement entities to the extent that the consultation and information is 

necessary for HHS to determine whether an enforcement 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 paragraph 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 CMPs, 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 paragraph (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 standards 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 meet 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 notice must include the following: 

 * * * * * 

51. Section 156.1105 is amended by adding paragraphs (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 compliance with the standards in paragraph (b) of this section. 

If HHS determines that an HHS-approved enrollee satisfaction survey vendor is non-compliant 
CMS-9949-P 272 

with the standards required in paragraph (b) of this section, the 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 vendor 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 from receipt of the notification of not being 

approved and submitting additional documentation 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 subpart 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 the data required to calculate the QRS, a QHP 

issuer must submit data that has been validated in a form and manner specified by HHS. 

(3) A QHP issuer must include in its data 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 timeline and in a standardized form and manner 

specified by HHS. 
CMS-9949-P 273 

(c) Marketing requirement. A QHP issuer may reference the 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 subpart 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 and the Exchange on the 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 offered 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 the data required to conduct the survey, a QHP 

issuer must submit data that has been validated 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 data 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 data 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 Public 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 year and extending through the first reporting 

year in which the Secretary requires ICD-10 as the standard medical data code set, implementing 

ICD-10 code sets that are designed to improve quality and are adopted pursuant to the Health 
CMS-9949-P 275 

Insurance Portability and Accountability 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 than that set forth in §158.210, the 

State's higher percentage must be substituted for the percentage stated in §158.210. If a State 

requires the small group market and individual market 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 the 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 calculating 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 group 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 calculating an issuer's MLR and any rebates owing. 

* * * * * 

58. Section 158.221 is amended by adding paragraphs (b)(6) and (7) to read as follows: 

§158.221 Formula for calculating an issuer’s medical loss ratio. 

* * * * * 
CMS-9949-P 276 

(b) * * * 

(6) The numerator of the MLR in the individual 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 that issuers that provided transitional coverage 

may multiply the total incurred claims and expenditures 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 total 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 determine 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 individual 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 paragraph (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 paragraph (b)(3) of this section, an issuer must aggregate and 

distribute any rebates not provided because they did 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 use them to increase the rebates provided to 

enrollees who receive rebates based upon the same MLR reporting year as the aggregated unpaid 

rebates. An issuer must distribute such aggregated rebates by providing additional premium 

credit or payment divided evenly among enrollees 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 enrollee(s) receiving rebates that exceed their premium paid during 

the MLR reporting year, or if no enrollees receive 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. 

Approved: March 13, 2014 

 __________________________________ 

Kathleen Sebelius, 

Secretary, 

Department of Health and Human Services. 

BILLING CODE 4120-01-P 

[FR Doc. 2014-06134 Filed 03/17/2014 at 4:15 pm; Publication Date: 03/21/2014]