Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Proposed Rules 15553 

1Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health 

Plans; Exchange Standards for Employers, 77 FR 

18310 (Mar. 27, 2012) (to be codified at 45 CFR 

parts 155, 156, & 157). 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 155 and 156 

[CMS–9964–P2] 

RIN 0938–AR76 

Patient Protection and Affordable Care 

Act; Establishment of Exchanges and 

Qualified Health Plans; Small Business 

Health Options Program 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement provisions of 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) 

related to the Small Business Health 

Options Program (SHOP). Specifically, 

this proposed rule would amend 

existing regulations regarding triggering 

events and special enrollment periods 

for qualified employees and their 

dependents and would implement a 

transitional policy regarding employees’ 

choice of qualified health plans (QHPs) 

in the SHOP. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on April 1, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–9964–P2. 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–9964–P2, P.O. Box 8016, 

Baltimore, MD 21244–8016. 

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–9964–P2, 

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 stamp-in 

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.) 

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) 786–7195 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: 

Leigha Basini at (301) 492–4307. 

SUPPLEMENTARY INFORMATION: 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 Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site 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. 

I. Executive Summary 

Beginning in 2014, individuals and 

small businesses will be able to 

purchase private health insurance 

through competitive marketplaces, 

called Affordable Insurance Exchanges 

or ‘‘Exchanges.’’ Section 1311(b)(1)(B) of 

the Affordable Care Act directs each 

state that chooses to operate an 

Exchange to also establish a SHOP that 

assists eligible small businesses in 

providing health insurance options for 

their employees. The final rule Patient 

Protection and Affordable Care Act; 

Establishment of Exchanges and 

Qualified Health Plans; Exchange 

Standards for Employers (Exchange 

Establishment Rule) 1 as modified by the 

Notice of Benefit and Payment 

Parameters for 2014, published 

elsewhere in this issue of the Federal 

Register, set forth standards for the 

administration of SHOP Exchanges. In 

this proposed rule, we would amend 

some of the standards established in 

that final rule. 

In the Exchange Establishment Rule, 

we established standards for special 

enrollment periods for people enrolled 

through an Exchange or SHOP and 

provided that, in most instances, a 

special enrollment period is 60 days 

from the date of the triggering event. See 

45 CFR 155.420. We also made these 

provisions applicable to SHOPs, at 

§ 155.725(a)(3). We now propose to 

amend the special enrollment period for 

the SHOP to 30 days for most applicable 

triggering events, so that it aligns with 

the special enrollment periods for the 

group market established by the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA). To 

further align the SHOP provisions with 

HIPAA, we also propose that if an 

employee or dependent becomes 

eligible for premium assistance under 

Medicaid or the Children’s Health 

Insurance Program (CHIP) or loses 

eligibility for Medicaid or CHIP, this 

would be a triggering event, and the 

employee or dependent would have a 

60-day special enrollment period to 

select a QHP. This triggering event had 

previously been inadvertently omitted 

from the regulations because it applies 

only to group health plans and health 

insurance coverage in the group market. 

We are also proposing to make a 

conforming change to § 156.285(b)(2), so 

that this section references the SHOP 

special enrollment periods in a way that 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

15554 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Proposed Rules 

2Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health 

Plans; Proposed Rule, 76 FR 41866 (July 15, 2011) 

(to be codified at 45 CFR parts 155 and 156). 

3Patient Protection and Affordable Care Act; HHS 

Notice of Benefit and Payment Parameters for 2014; 

Proposed Rule, 77 FR 73118 (Dec. 7, 2012) (to be 

codified at 45 CFR parts 153, 155, 156, 157, and 

158). 

is consistent with our proposed changes 

to § 155.725. 

In the Exchange Establishment Rule, 

we also set forth the minimum functions 

of a SHOP, including that the SHOP 

must allow employers the option to 

offer employees all QHPs at a level of 

coverage chosen by the employer, and 

that the SHOP may allow employers to 

offer one or more QHPs to qualified 

employees by other methods. We now 

propose the following transitional 

policy. For plan years beginning on or 

after January 1, 2014 and before January 

1, 2015, a SHOP would not be required 

to permit qualified employers to offer 

their qualified employees a choice of 

QHPs at a single level of coverage but 

would have the option of doing so. For 

plan years beginning on or after January 

1, 2014 and before January 1, 2015, 

Federally-facilitated SHOPs (FF– 

SHOPs) would not exercise this option, 

but would instead assist employers in 

choosing a single QHP to offer their 

qualified employees. This transitional 

policy is intended to provide additional 

time to prepare for an employee choice 

model and to increase the stability of 

the small group market while providing 

small groups with the benefits of SHOP 

in 2014 (such as a choice among 

competing QHPs and access for 

qualifying small employers to the small 

business health insurance tax credit). 

We are also proposing changes to the 

effective date of the SHOP premium 

aggregation function set forth at 

§ 155.705(b)(4) in the Exchange 

Establishment Rule consistent with this 

transitional policy. 

II. Background 

A. Legislative Overview 

Section 1311(b) of the Affordable Care 

Act establishes that each state that 

operates an Exchange will also operate 

a SHOP. The SHOP is designed to assist 

qualified small employers in providing 

health insurance options to their 

employees. 

Section 1311(c)(6) of the Affordable 

Care Act sets forth that the Secretary of 

Health and Human Services (HHS) shall 

require Exchanges to provide for special 

enrollment periods. Section 155.420 of 

the Exchange Establishment Rule 

established special enrollment periods 

for the individual market, and 

§ 155.725(a)(3) established them for the 

SHOP. 

Section 1312(a)(2) of the Affordable 

Care Act provides that qualified 

employers may offer qualified 

employees a choice among all QHPs at 

a level of coverage chosen by the 

employer. Section 1312(f)(2)(A) defines 

a qualified employer as a small 

employer that elects to make all fulltime employees of such employer 

eligible for one or more QHPs offered in 

the small group market through an 

Exchange that offers QHPs. The 

Exchange Establishment Rule set forth 

standards for the SHOP and 

implemented section 1312 at 45 CFR, 

part 155, subpart H. 

B. Stakeholder Consultation and Input 

HHS has consulted with a wide range 

of interested stakeholders on policy 

matters related to the SHOP, including 

through regular conversations with the 

National Association of Insurance 

Commissioners (NAIC), health 

insurance issuers, trade groups, 

consumer advocates, employers, agents 

and brokers, and other interested 

parties. HHS has also held many 

consultations with states about the 

SHOP, both individually and through 

group conversations. HHS received 

many comments in response to the 

Exchange Establishment proposed rule,2

including comments regarding the 

statutory provisions on SHOP employee 

choice and special enrollment periods 

for employees and their dependents, to 

which we responded in the Exchange 

Establishment Rule. HHS also received 

comments in response to the December 

2012 Notice of Benefit and Payment 

Parameters for 2014 proposed rule,3 to 

which we responded in the Notice of 

Benefit and Payment Parameters for 

2014 final rule, published elsewhere in 

this issue of the Federal Register. We 

considered these stakeholder comments 

in developing this proposed rule. 

C. Structure of the Proposed Rule 

The regulations outlined in this 

proposed rule would be codified in 45 

CFR parts 155 and 156. The provisions 

in part 155 outline the standards 

relative to the establishment, operation, 

and functions of Exchanges, including 

the SHOP. The provisions in part 156 

outline the health insurance issuer 

standards under the Affordable Care 

Act, including standards related to 

Exchanges and SHOPs. 

III. Provisions of the Proposed 

Regulations 

A. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart H—Exchange Functions: 

Small Business Health Options Program 

(SHOP) 

a. Functions of a SHOP (§ 155.705) 

Facilitating employee choice at a 

single level of coverage selected by the 

employer—bronze, silver, gold, or 

platinum—is a required SHOP function 

established in the Exchange 

Establishment Rule (45 CFR 

155.705(b)(2)) and discussed in greater 

detail in the preamble to the December 

2012 HHS Notice of Benefit and 

Payment Parameters for 2014 proposed 

rule. In addition, the rules permit 

SHOPs to allow a qualified employer to 

choose one QHP for employees 

(§ 155.705(b)(3)). Because providing 

employees with a choice of QHPs at the 

same level of coverage would create no 

additional costs for an employer who 

would otherwise offer only one QHP to 

its employees, we proposed in the 

December 2012 HHS Notice of Benefit 

and Payment Parameters for 2014 

proposed rule that qualified employers 

in FF–SHOPs would choose a level of 

coverage (bronze, silver, gold, or 

platinum) and a contribution, and 

employees would then choose any QHP 

at that level. 

When we proposed this policy, we 

also sought comments on a transitional 

policy in which a FF–SHOP would 

allow or direct employers to offer to 

their employees a single QHP from 

those offered through the SHOP (77 FR 

73184). A few commenters opposed 

offering the single QHP option, 

suggesting that each FF–SHOP should 

focus on providing employee choice. 

Most commenters on this issue, 

however, supported offering a single 

QHP option for employers, either as an 

additional option or as the only option 

in the initial years of the FF–SHOP. The 

commenters who supported providing a 

qualified employer only the option of 

offering a single QHP in the initial years 

of FF–SHOP operation cited several 

concerns, including the following: 

Whether issuers could meet the 

deadlines for submission of small group 

market QHPs given the new small group 

market rating rules; whether issuers 

could complete enrollment and 

accounting system changes required to 

interact with the SHOP enrollment and 

premium aggregation systems required 

by employee choice; and whether there 

would be adequate time to educate 

employers, employees, and brokers 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Proposed Rules 15555 

4See 26 CFR 54.9801–6, 29 CFR 2590.701–6, and 

45 CFR 146.117 for regulations regarding special 

enrollment periods under HIPAA. 

about the employer and employee 

choices available in the SHOP. The 

commenters stated that issuer efforts to 

prepare and price QHPs for an employee 

choice environment and to make the 

systems and operational changes 

required for SHOP enrollment and 

premium aggregation could compete 

with efforts to prepare for participation 

in the Exchange (both individual and 

SHOP). 

Most of these comments supported 

allowing employers the option to offer 

only a single QHP in the FF–SHOP. 

Consequently, we concluded in the final 

HHS Notice of Benefit and Payment 

Parameters for 2014, published 

concurrently with this proposed rule, 

that the FF–SHOP would provide 

employers the choice of offering only a 

single QHP, as employers customarily 

do today, in addition to the choice of 

offering all QHPs at a single level of 

coverage. 

We note that the comments in 

response to the draft Notice of Benefit 

and Payment Parameters for 2014 

identified challenges to effective 

implementation of employee choice in 

the FF–SHOP in 2014; we also note that 

most of the comments also apply to 

implementation challenges in Statebased SHOPs. In order to respond to 

these comments and to provide both 

State-based SHOPs and FF–SHOPs with 

greater flexibility, we therefore now 

propose to delay until 2015 

implementation of the employee choice 

model as a requirement for all SHOPs. 

We also now propose that FF–SHOPs 

should assist qualified employers in 

offering qualified employees a single 

QHP choice for plan years beginning 

during calendar year 2014, which 

qualifies certain of these employers for 

the small business tax credit. 

The Exchange Establishment Rule 

also included a premium aggregation 

function for the SHOP that was 

designed to assist employers whose 

employees were enrolled in multiple 

QHPs. Because this function will not be 

necessary in 2014 for SHOPs that delay 

implementation of the employee choice 

model, we have also proposed at 

§ 155.705(b)(4) that the premium 

aggregation function be optional for 

plan years beginning before January 1, 

2015. 

Specifically, we are now proposing 

amendments to § 155.705(b)(2), (b)(3), 

and (b)(4) providing as follows: (1) The 

effective date of the employer choice 

requirements at § 155.705(b)(2) and the 

premium aggregation requirements at 

§ 155.705(b)(4) for both State-based 

SHOPs and FF–SHOPs will be January 

1, 2015; (2) State-based SHOPs could 

elect to offer employee choice and 

perform premium aggregation for plan 

years beginning before January 1, 2015, 

but need not do so; and (3) FF–SHOPs 

will begin to offer employee choice and 

premium aggregation in plan years 

beginning on or after January 1, 2015. 

We welcome further comment on this 

proposal. 

b. Enrollment Periods Under SHOP 

(§ 155.725) 

The Exchange Establishment Rule 

established special enrollment periods 

for Exchanges serving the individual 

market (§ 155.420), and the SHOP 

regulations adopted most of these 

provisions by reference (§ 155.725(a)(3)). 

Under these regulations, unless 

specifically stated otherwise in the 

regulations, a qualified individual has 

60 days from the date of the triggering 

event to select a QHP (§ 155.420(c)). 

This SHOP provision differs from the 

length of special enrollment periods in 

group markets provided by HIPAA, 

which last for 30 days after loss of 

eligibility for other private insurance 

coverage or after a person becomes a 

dependent through marriage, birth, 

adoption, or placement for adoption.4

Because we believe that there is no 

rationale for providing a longer special 

enrollment period in a SHOP than is 

provided in the group market outside 

the SHOP, we propose amendments to 

§ 155.725 to clarify that a qualified 

employee or dependent of a qualified 

employee who has obtained coverage 

through the SHOP would have 30 days 

from the date of most of the triggering 

events specified in § 155.420 to select a 

QHP. Additionally, consistent with 

revisions to HIPAA enacted by the 

Children’s Health Insurance Program 

Reauthorization Act of 2009 (CHIPRA), 

Public Law 111–3, § 311 (Feb. 4, 2009), 

we propose that a qualified employee or 

dependent of a qualified employee who 

has become ineligible for Medicaid or 

CHIP or who has become eligible for 

state premium assistance under a 

Medicaid or CHIP program would be 

eligible for a special enrollment period 

in a SHOP and would have 60 days from 

the date of the triggering event to select 

a QHP. Specifically, we propose striking 

§ 155.725(a)(3) and adding a new 

paragraph (j) consolidating the proposed 

SHOP special enrollment provisions in 

one paragraph. We propose a provision 

clarifying that a dependent of a 

qualified employee is only eligible for a 

special enrollment period if the 

employer offers coverage to dependents 

of qualified employees. We also propose 

paragraphs (j)(5) and (j)(6) that retain 

certain provisions relating to effective 

dates of coverage and loss of minimum 

essential coverage from the original 

§ 155.420. We propose conforming 

revisions to § 156.285(b)(2), so that 

provision would reference the special 

enrollment periods in proposed 

§ 155.725(j) instead of those set forth at 

§ 155.420. We believe these changes 

appropriately align the SHOP provisions 

with provisions applicable to the rest of 

the group market, and welcome 

comment on the proposal. 

IV. Collection of Information 

Requirements 

This proposed rule, if finalized, 

would not impose new or alter existing 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Analysis 

We have examined the impact of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993) and 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011). Executive Orders 

12866 and 13563 direct agencies to 

assess all costs and benefits of available 

regulatory alternatives and, if regulation 

is necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any one year). 

It is HHS’s belief that this proposed rule 

does not reach this economic threshold 

and thus is not considered a major rule. 

This proposed rule consists of a 

provision to amend the duration of 

certain special enrollment periods to 

correspond to the duration in group 

markets under HIPAA. The rule also 

proposes to add a triggering event that 

would create a special enrollment 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

15556 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Proposed Rules 

5Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health 

Plans, Exchange Standards for Employers and 

Standards Related to Reinsurance, Risk Corridors 

and Risk Adjustment Regulatory Impact Analysis, 

March 2012. Available at: http://cciio.cms.gov/ 

resources/files/Files2/03162012/hie3r-ria032012.pdf. 

6Health Insurance Issuers Implementing Medical 

Loss Ratio (MLR) Requirements Under the Patient 

Protection and Affordable Care Act; Interim Final 

Rule, 75 FR 74864, 74918–20 (Dec. 1, 2010) (to be 

codified at 45 CFR part 158). 

7According to SBA size standards, entities with 

average annual receipts of $7 million or less would 

be considered small entities for North American 

Industry Classification System (NAICS) Code 

524114 (Direct Health and Medical Insurance 

Carriers). For more information, see ‘‘Table of Size 

Standards Matched To North American Industry 

Classification System Codes,’’ effective March 26, 

2012, U.S. Small Business Administration, available 

at http://www.sba.gov. 

period for qualified employees and/or 

their eligible dependents when an 

employee or qualified dependent with 

coverage through the SHOP becomes 

eligible for state premium assistance 

under Medicaid or CHIP or loses 

eligibility for Medicaid or CHIP. HIPAA, 

as revised by CHIPRA, already includes 

this triggering event, which was 

inadvertently omitted from the original 

list in § 155.420(d) because it applies 

only to group health plans and health 

insurance coverage in the group market. 

We do not believe either of these actions 

would impose any new costs on issuers, 

employers, enrollees, or the SHOP. In 

fact, the proposed amendment would 

create alignment of SHOP regulations 

with laws for the existing group market 

and could potentially create efficiencies 

for QHP issuers. 

Finally, this proposed rule would 

require SHOPs to provide qualified 

employers the option to offer qualified 

employees a choice of any QHP at a 

single metal level starting with plan 

years beginning on or after January 1, 

2015, instead of January 1, 2014. For 

plan years beginning in calendar year 

2014, qualified employers would offer 

qualified employees coverage under a 

single QHP in FF–SHOPs; State-based 

SHOPs would have the flexibility to 

offer either employer or employee 

choice in 2014. In our analysis of the 

impact of employer and employee 

choices in the Notice of Benefit and 

Payment Parameters for 2014 final rule, 

published elsewhere in this issue of the 

Federal Register, we noted that adding 

the option for employers to offer a single 

QHP would have the potential effect of 

reducing adverse selection and any 

associated risk premium and a slight 

effect of decreasing the consumer 

benefit resulting from choice. We 

believe the same analysis applies to our 

proposal to provide employer choice in 

2014. 

Issuers will incur costs adapting their 

enrollment and financial systems to 

interact with a SHOPs enrollment and 

premium aggregation systems. The costs 

and benefits of Exchange and SHOP 

implementation were assessed in the 

RIA for the Exchange Establishment 

final rule, titled Patient Protection and 

Affordable Care Act; Establishment of 

Exchanges and Qualified Health Plans, 

Exchange Standards for Employers and 

Standards Related to Reinsurance, Risk 

Corridors and Risk Adjustment 

Regulatory Impact Analysis (Exchange 

RIA).5 Because issuers may now have an 

additional year to develop these systems 

and may thus be able to stage their 

efforts rather than implementing all 

system changes by October 1, 2013, we 

believe that the total cost will be 

unchanged in total. 

From the Exchange perspective, in the 

Exchange RIA, we noted that a Statebased Exchange could incur costs in 

establishing a premium aggregation 

function for the SHOP. Therefore, the 

policy in this proposed rule could 

decrease costs to states that operate a 

State-based Exchange for the 2014 plan 

year. 

VII. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) requires 

agencies to prepare an initial regulatory 

flexibility analysis to describe the 

impact of the proposed rule on small 

entities, unless the head of the agency 

can certify that the rule would not have 

a significant economic impact on a 

substantial number of small entities. 

The RFA generally defines a ‘‘small 

entity’’ as—(1) a proprietary firm 

meeting the size standards of the Small 

Business Administration (SBA); (2) a 

not-for-profit organization that is not 

dominant in its field; or (3) a small 

government jurisdiction with a 

population of less than 50,000. States 

and individuals are not included in the 

definition of ‘‘small entity.’’ HHS uses 

as its measure of significant economic 

impact on a substantial number of small 

entities a change in revenues of more 

than 3 percent. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a proposed rule has a 

significant impact on a substantial 

number of small entities. For purposes 

of the RFA, small entities include small 

businesses, nonprofit organizations, and 

small government jurisdictions. Small 

businesses are those with sizes below 

thresholds established by the SBA. 

For the purposes of the regulatory 

flexibility analysis, we expect the 

following types of entities to be affected 

by this proposed rule—(1) small 

employers and (2) QHP issuers. 

As discussed in Health Insurance 

Issuers Implementing Medical Loss 

Ratio (MLR) Requirements Under the 

Patient Protection and Affordable Care 

Act; Interim Final Rule,6 few, if any, 

issuers are small enough to fall below 

the size thresholds for small business 

established by the SBA. In that rule, we 

used a data set created from 2009 

National Association of Insurance 

Commissioners (NAIC) Health and Life 

Blank annual financial statement data to 

develop an updated estimate of the 

number of small entities that offer 

comprehensive major medical coverage 

in the individual and group markets. 

For purposes of that analysis, HHS used 

total Accident and Health earned 

premiums as a proxy for annual 

receipts. We estimated that there are 28 

small entities with less than $7 million 

in accident and health earned premiums 

offering individual or group 

comprehensive major medical 

coverage.7 However, this estimate may 

overstate the actual number of small 

health insurance issuers offering such 

coverage, since it does not include 

receipts from these companies’ other 

lines of business. We further estimate 

that any issuers that would be 

considered small businesses are likely 

to be subsidiaries of larger issuers that 

are not small businesses. 

The SHOP is limited by statute to 

employers with at least one but not 

more than 100 employees. For this 

reason, we expect that many employers 

would meet the SBA standard for small 

entities. We do not believe that this 

proposed regulation would impose 

requirements on employers offering 

coverage through the SHOP that are 

more restrictive than current 

requirements on employers offering 

employer-sponsored health insurance. 

Specifically, small employers are 

currently required to offer the special 

enrollment period that we propose 

would apply to eligible employees and 

dependents with coverage through the 

SHOP, and the triggering event that we 

propose currently applies to eligible 

individuals and dependents, as well. 

The proposed provision would merely 

apply existing standards to the SHOP. 

Additionally, the transitional policy 

regarding employee choice does not 

impose new requirements on small 

employers because most small 

employers currently offer only one 

health insurance plan to their 

employees. 

Based on the foregoing, we are not 

preparing an analysis for the RFA 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Proposed Rules 15557 

because we have determined, and the 

Secretary certifies, that this proposed 

rule would not have a significant 

economic impact on a substantial 

number of small entities. 

VIII. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a proposed rule 

(and subsequent final rule) that includes 

any federal mandate that may result in 

expenditures in any one year by a state, 

local, or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2012, that 

threshold is approximately $139 

million. UMRA does not address the 

total cost of a rule. Rather, it focuses on 

certain categories of costs, 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 does not place any 

financial mandates on state, local, or 

tribal governments. It proposes the 

application of a triggering event and 

special enrollment period to coverage 

through the SHOP, modification of the 

duration of certain special enrollment 

periods, and implementation of 

employee choice in the SHOP starting 

with plan years on or after January 1, 

2015. These proposed amendments 

would only affect state governments to 

the extent that they operate a SHOP and, 

if they are affected, would not place any 

new financial mandates on them. 

IX. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

costs on state and local governments, 

preempts state law, or otherwise has 

Federalism implications. This proposed 

regulation does not impose any costs on 

state or local governments. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policy making discretion of the 

states, HHS has engaged in efforts to 

consult with and work cooperatively 

with affected states, including 

participating in conference calls with 

and attending conferences of the 

National Association of Insurance 

Commissioners (NAIC), and consulting 

with State insurance officials on an 

individual basis. We believe that this 

proposed rule does not impose 

substantial direct costs on state and 

local governments, preempt state law, or 

otherwise have federalism implications. 

We note that we have attempted to 

provide states that choose to operate a 

SHOP with flexibility such that states 

may, if they choose, offer employee 

choice beginning with plan years 

starting on or after January 1, 2014, or 

they may delay this implementation 

until plan years starting on or after 

January 1, 2015. 

Pursuant to the requirements set forth 

in section 8(a) of Executive Order 

13132, and by the signatures affixed to 

this regulation, the Department of 

Health and Human Services certifies 

that CMS has complied with the 

requirements of Executive Order 13132 

for the attached proposed regulation in 

a meaningful and timely manner. 

List of Subjects 

45 CFR Part 155 

Administrative practice and 

procedure, Advertising, Advisory 

Committees, Brokers, Conflict of 

interest, Consumer protection, Grant 

programs-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, 

Public assistance programs, Reporting 

and recordkeeping requirements, State 

and local governments, Sunshine Act, 

Technical assistance, Women, and 

Youth. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

Committees, Brokers, Conflict of 

interest, Consumer protection, Grant 

programs-health, Grants administration, 

Health care, Health insurance, Health 

maintenance organization (HMO), 

Health records, Hospitals, Indians, 

Individuals with disabilities, Loan 

programs-health, Organization and 

functions (Government agencies), 

Medicaid, Public assistance programs, 

Reporting and recordkeeping 

requirements, Safety, State and local 

governments, Sunshine Act, Technical 

assistance, Women, and Youth 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR parts 155 and 156 as set forth 

below: 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 1. 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, 1334, 1402, 

1411, 1412, 1413. 

■ 2. Section 155.705 is amended by 

revising paragraphs (b)(2), (b)(3), and 

(b)(4) to read as follows: 

§ 155.705 Functions of a SHOP. 

* * * * * 

(b) * * * 

(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. 

(3) SHOP options with respect to 

employer choice requirements. (i) For 

plan years beginning before January 1, 

2015, a SHOP may allow a qualified 

employer to make one or more QHPs 

available to qualified employees: 

(A) By the method described in 

paragraph (b)(2) of this section, or 

(B) By a method other than the 

method described in paragraph (b)(2) of 

this section. 

(ii) For plan years beginning on or 

after January 1, 2015, a SHOP: 

(A) Must allow an employer to make 

available to qualified employees all 

QHPs at the level of coverage selected 

by the employer as described in 

paragraph (b)(2) of this section, and 

(B) May allow an employer to make 

one or more QHPs available to qualified 

employees by a method other than the 

method described in paragraph (b)(2) of 

this section. 

(iii) For plan years beginning before 

January 1, 2015, a Federally-facilitated 

SHOP will only provide a qualified 

employer the choice to make available 

to qualified employees a single QHP. 

(iv) For plan years beginning on or 

after January 1, 2015, a Federallyfacilitated SHOP will provide a 

qualified employer a choice of two 

methods to make QHPs available to 

qualified employees: 

(A) The employer may choose a level 

of coverage as described in paragraph 

(b)(2) of this section, or 

(B) The employer may choose a single 

QHP. 

(4)(i) Premium aggregation. Consistent 

with the effective dates set forth in 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

15558 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Proposed Rules 

paragraph (b)(4)(ii)of this section, the 

SHOP must perform the following 

functions related to premium payment 

administration: 

(A) Provide each qualified employer 

with a bill on a monthly basis that 

identifies the employer contribution, the 

employee contribution, and the total 

amount that is due to the QHP issuers 

from the qualified employer; 

(B) Collect from each employer the 

total amount due and make payments to 

QHP issuers in the SHOP for all 

enrollees; and 

(C) Maintain books, records, 

documents, and other evidence of 

accounting procedures and practices of 

the premium aggregation program for 

each benefit year for at least 10 years. 

(ii) Effective dates. 

(A) A State-based SHOP may elect to 

perform these functions for plan years 

beginning before January 1, 2015, but 

need not do so. 

(B) A Federally-facilitated SHOP will 

perform these functions only in plan 

years beginning on or after January 1, 

2015. 

* * * * * 

■ 3. Section 155.725 is amended by 

removing paragraph (a)(3), and adding 

paragraph (j) to read as follows: 

§ 155.725 Enrollment periods under SHOP. 

* * * * * 

(j)(1) Special enrollment periods. The 

SHOP must provide special enrollment 

periods consistent with this section, 

during which certain qualified 

employees or a dependent of a qualified 

employee may enroll in QHPs and 

enrollees may change QHPs. 

(2) The SHOP must provide a special 

enrollment period for a qualified 

employee or dependent of a qualified 

employee who: 

(i) Experiences an event described in 

§ 155.420 (d)(1), (2), (4), (5), (7), (8), or 

(9); 

(ii) Loses eligibility for coverage 

under a Medicaid plan under title XIX 

of the Social Security Act or a state 

child health plan under title XXI of the 

Social Security Act; or 

(iii) Becomes eligible for assistance, 

with respect to coverage under a SHOP, 

under such Medicaid plan or a state 

child health plan (including any waiver 

or demonstration project conducted 

under or in relation to such a plan). 

(3) A qualified employee or 

dependent of a qualified employee who 

experiences a qualifying event described 

in paragraph (j)(2) of this section has: 

(i) 30 days from the date of a 

triggering event described in paragraph 

(j)(2)(i) of this section to select a QHP 

through the SHOP; and 

(ii) 60 days from the date of a 

triggering event described in paragraph 

(j)(2)(ii) of this section or (iii) of this 

section to select a QHP through the 

SHOP; 

(4) A dependent of a qualified 

employee is not eligible for a special 

election period if the employer does not 

extend the offer of coverage to 

dependents. 

(5) The effective dates of coverage are 

determined using the provisions of 

§ 155.420(b). 

(6) Loss of minimum essential 

coverage is determined using the 

provisions of § 155.420(e). 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 4. The authority citation for part 156 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301–1304, 1311–1312, 1321, 

1322, 1324, 1334, 1341–1343, and 1401– 

1402, Pub l. 111–148, 124 Stat. 119 (42 U.S.C. 

18042). 

■ 5. Section 156.285 is amended by 

revising paragraph (b)(2) to read as 

follows: 

§ 156.285 Additional standards specific to 

SHOP. 

* * * * * 

(b) * * * 

(2) Provide special enrollment periods 

as described in § 155.725(j). 

* * * * * 

Dated: February 25, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: February 27, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–04952 Filed 3–1–13; 11:15 am] 

BILLING CODE 4120–01–P 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2