This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

227 

Vol. 84, No. 16 

Thursday, January 24, 2019 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 146, 147, 148, 153, 155, 

and 156 

[CMS–9926–P] 

RIN 0938–AT37 

Patient Protection and Affordable Care 

Act; HHS Notice of Benefit and 

Payment Parameters for 2020 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule sets forth 

payment parameters and provisions 

related to the risk adjustment and risk 

adjustment data validation programs; 

cost-sharing parameters; and user fees 

for Federally-facilitated Exchanges 

(FFEs) and State-based Exchanges on 

the Federal Platform (SBE–FPs). It 

proposes changes that would allow 

greater flexibility related to the duties 

and training requirements for the 

Navigator program and proposes 

changes that would provide greater 

flexibility for direct enrollment entities, 

while strengthening program integrity 

oversight over those entities. It proposes 

policies that are intended to reduce the 

costs of prescription drugs. It includes 

proposed changes to Exchange 

standards related to eligibility and 

enrollment; exemptions; and other 

related topics. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on February 19, 2019. 

ADDRESSES: In commenting, please refer 

to file code CMS–9926–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

Comments, including mass comment 

submissions, must be submitted in one 

of the following three 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–9926–P, 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–9926–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Jeff Wu, (301) 492–4305, Ken Buerger, 

(410) 786–1190, or Abigail Walker, (410) 

786–1725, for general information. 

David Mlawsky, (410) 786–6851, for 

matters related to guaranteed 

renewability. 

Avareena Cropper, (410) 786–3794, 

for matters related to sequestration. 

Krutika Amin, (301) 492–5153, or 

Allison Yadsko, (410) 786–1740, for 

matters related to risk adjustment. 

Krutika Amin, (301) 492–5153, for 

matters related to Federally-facilitated 

Exchange and State-based Exchange on 

the Federal Platform user fees. 

Abigail Walker, (410) 786–1725, Alper 

Ozinal, (301) 492–4178, Allison Yadsko, 

(410) 786–1740, or Adam Shaw, (410) 

786–1091, for matters related to risk 

adjustment data validation. 

Ken Buerger, (410) 786–1190, or 

LeAnn Brodhead, (410) 786–3943, for 

matters related to the opioid crisis. 

Amir Al-Kourainy, (301) 492–5210, 

for matters related to Navigators. 

Carly Rhyne, (301) 492–4188, for 

matters related to special enrollment 

periods. 

Amanda Brander, (202) 690–7892, for 

matters related to exemptions. 

Daniel Brown, (434) 995–5886, for 

matters related to direct enrollment. 

Rebecca Zimmermann, (301) 492– 

4396, for matters related to health 

insurance issuer drug policy, essential 

health benefits, and qualified health 

plan certification requirements. 

Amy Spiridon, (301) 492–4417, for 

matters related to the required 

contribution percentage, cost-sharing 

parameters and the premium adjustment 

percentage. 

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 

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 and Regulatory Overview 

B. Stakeholder Consultation and Input 

C. Structure of Proposed Rule 

III. Provisions of the Proposed HHS Notice of 

Benefit and Payment Parameters for 2020 

A. Part 146—Requirements for the Group 

Health Insurance Market 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

C. Part 148—Requirements for the 

Individual Health Insurance Market 

D. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

E. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

F. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

IV. Collection of Information Requirements 

A. Wage Estimates 

B. ICRs Regarding Guaranteed 

Renewability of Coverage 

C. ICRs Regarding Varying the Risk 

Adjustment Initial Validation Audit 

Sample Size 

D. ICRs Regarding Risk Adjustment Data 

Validation Exemptions 


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1The PPACA (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 

PPACA, was enacted on March 30, 2010. In this 

proposed rule, we refer to the two statutes 

collectively as the ‘‘Patient Protection and 

Affordable Care Act’’ or ‘‘PPACA’’. 2CMS Exchange enrollment and payment data. 

E. ICRs Regarding Upload of Risk 

Adjustment Data 

F. ICRs Regarding Agent or Broker 

Termination and Web Broker Data 

Collection 

G. ICRs Regarding Direct Enrollment Entity 

Standardized Disclaimer 

H. ICRs Regarding Special Enrollment 

Periods 

I. ICRs Regarding Eligibility Standards for 

Exemptions 

J. Summary of Annual Burden Estimates 

for Proposed Requirements 

K. Submission of PRA-Related Comments 

V. Response to Comments 

VI. Regulatory Impact Analysis 

A. Statement of Need 

B. Overall Impact 

C. Impact Estimates of the Payment Notice 

Provisions and Accounting Table 

D. Regulatory Alternatives Considered 

E. Regulatory Flexibility Act 

F. Unfunded Mandates 

G. Federalism 

H. Congressional Review Act 

I. Reducing Regulation and Controlling 

Regulatory Costs 

J. Conclusion 

I. Executive Summary 

American Health Benefit Exchanges, 

or ‘‘Exchanges’’ are entities established 

under the Patient Protection and 

Affordable Care Act 1 (PPACA) through 

which qualified individuals and 

qualified employers can purchase health 

insurance coverage. Many individuals 

who enroll in qualified health plans 

(QHPs) through individual market 

Exchanges are eligible to receive a 

premium tax credit to reduce their costs 

for health insurance premiums and to 

receive reductions in required costsharing payments to reduce out-ofpocket expenses for health care services. 

The PPACA also established the risk 

adjustment program, which is intended 

to increase the workability of the 

PPACA regulatory changes in the 

individual and small group markets, 

both on and off Exchanges. 

On January 20, 2017, the President 

issued an Executive Order which stated 

that, to the maximum extent permitted 

by law, the Secretary of HHS and heads 

of all other executive departments and 

agencies with authorities and 

responsibilities under the PPACA 

should exercise all authority and 

discretion available to them to waive, 

defer, grant exemptions from, or delay 

the implementation of any provision or 

requirement of the PPACA that would 

impose a fiscal burden on any state or 

a cost, fee, tax, penalty, or regulatory 

burden on individuals, families, health 

care providers, health insurers, patients, 

recipients of health care services, 

purchasers of health insurance, or 

makers of medical devices, products, or 

medications. In this proposed rule, we 

are proposing, within the limitations of 

the current statute, to reduce fiscal and 

regulatory burdens across different 

program areas, and to provide 

stakeholders with greater flexibility. 

Over time, issuer exits and increasing 

insurance rates have threatened the 

stability of the individual and small 

group market Exchanges in many 

geographic areas. Unfortunately, 

Exchange plans are now almost entirely 

unaffordable for people who do not 

qualify for PPACA’s advance payments 

of premium tax credits at enrollment. In 

the first half of 2018, 87 percent of 

Exchange enrollees received advance 

payments of the premium tax credit, 

with the amount covering 87 percent of 

the premium, on average. Sixteen 

percent of enrollees were enrolled in 

plans with zero premium after the 

application of premium tax credit, and 

another 19 percent of enrollees received 

a tax credit that covered at least 95 

percent of the premium.2

In previous rulemaking, we 

established provisions and parameters 

to implement many PPACA 

requirements and programs. In this 

proposed rule, we propose to amend 

these provisions and parameters, with a 

focus on maintaining a stable regulatory 

environment to provide issuers with 

greater predictability for upcoming plan 

years, while simultaneously enhancing 

the role of states in these programs and 

providing states with additional 

flexibilities, reducing unnecessary 

regulatory burdens on stakeholders, 

empowering consumers, and improving 

affordability. 

Risk adjustment continues to be a core 

program in the individual and small 

group markets both on and off the 

Exchanges, and we propose recalibrated 

parameters for the HHS-operated risk 

adjustment methodology. We propose 

several changes related to the risk 

adjustment data validation program that 

are intended to ensure the integrity of 

the results of risk adjustment, and 

others intended to alleviate issuer 

burden associated with participating in 

risk adjustment data validation. 

As we do every year in the HHS 

notice of benefit and payment 

parameters, we propose updated 

parameters applicable in the individual 

and small group markets. We propose 

the user fee rate for issuers participating 

on Federally-facilitated Exchanges 

(FFEs) and State-based Exchanges on 

the Federal platform (SBE–FPs) for 2020 

to be 3.0 and 2.5 percent of premiums, 

respectively. These rates would be a 

decrease from past years, which would 

increase affordability for consumers. We 

propose to use a new premium measure 

to determine the rate of premium 

growth for purposes of calculating the 

premium adjustment percentage for 

2020 and beyond, which is used to set 

the maximum annual limitation on cost 

sharing, the required contribution 

percentage used to determine eligibility 

for certain exemptions under section 

5000A of the Internal Revenue Code (the 

Code), and the employer shared 

responsibility payment amounts under 

section 4980H(a) and (b) of the Code. 

We propose to update the maximum 

annual limitations on cost sharing for 

the 2020 benefit year, including those 

for cost-sharing reduction plan 

variations. 

We also propose changes to the 

requirements regarding Navigators to 

reduce burden, increase flexibility, and 

enable Exchanges to more easily and 

cost-effectively operate their programs. 

We are committed to promoting a 

consumer-driven health care system in 

which consumers are empowered to 

select and maintain health care coverage 

of their choosing. To this end, we 

propose to expand the QHP options 

available to consumers on the Exchange 

by requiring QHP issuers that provide 

coverage of certain abortion services in 

QHPs to provide otherwise identical 

QHP benefit coverage that omits 

coverage of such abortion services in a 

separate QHP, to the extent permissible 

under applicable state law. 

We also propose a number of changes 

in this rule that are intended to reduce 

the burden for consumers by making it 

easier to enroll in affordable coverage 

through the Exchange. First, we propose 

to provide additional flexibility to those 

in need of a hardship exemption, which 

consumers apply for now through 

Exchanges, by expanding the types of 

hardship exemptions that consumers 

may claim for 2018 through the tax 

filing process. Second, we believe 

consumers should have greater 

flexibility in how they shop for 

coverage, including the avenues through 

which they enroll in QHPs. As such, we 

have been working to expand 

opportunities for individuals to directly 

enroll in Exchange coverage by 

enrolling through the websites of certain 

third parties, called direct enrollment 

entities, rather than having to visit 

HealthCare.gov. We propose several 

regulatory changes to streamline the 

regulatory requirements applicable to 


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3 Includes Federally-facilitated Exchanges and 

State Exchanges that use the federal eligibility and 

enrollment platform. 

4CMS Multi-Dimensional Insurance Data 

Analytics System (MIDAS). 

5CMS–10572, Transparency in Coverage 

Reporting by Qualified Health Plan Issuers 

(approved June 16, 2016). 

6Section 2715A of the PHS Act extends the 

transparency reporting provisions in section 

1311(e)(3) of the PPACA to non-grandfathered 

group health plans and health insurance issuers 

offering non-grandfathered group or individual 

health insurance coverage and the Departments of 

HHS, Labor and the Treasury (the Departments) 

have concurrent jurisdiction over that provision. 

The Departments have not provided final guidance 

implementing any transparency reporting 

requirements under PHS Act section 2715A and the 

PRA resubmission referred to above does not relate 

to PHS Act section 2715A. See FAQs about 

Affordable Care Act Implementation (Part XXVIII). 

Available at https://www.cms.gov/CCIIO/Resources/ 

Fact-Sheets-and-FAQs/Downloads/ACA-FAQ-PartXXVIII-transparency-reporting-final-8-11-15.pdf. 

these direct enrollment entities. Third, 

we propose to create a special 

enrollment period for off-Exchange 

enrollees who experience a decrease in 

household income and are determined 

to be eligible for advance payments of 

the premium tax credit (APTC) by the 

Exchange. This would allow enrollees to 

enroll in a more affordable on-Exchange 

product when a consumer’s household 

income decreases mid-year. 

Currently, enrollees in plans offered 

through a Federally-facilitated Exchange 

or a State-based Exchange using the 

Federal platform can take action to reenroll in their current plan, can take 

action to select a new plan, or can take 

no action and be re-enrolled in their 

current plan. Since the program’s 

inception, these Exchanges have 

maintained an automatic re-enrollment 

process which generally continues 

enrollment for current enrollees who do 

not notify the Exchange of eligibility 

changes or take action to actively select 

the same or different plan. In the open 

enrollment period for 2019 coverage, 1.8 

million people in states using the 

Federal platform 3 were automatically 

re-enrolled in coverage, including about 

270,000 who were enrolled in a plan 

with zero premium after application of 

advance payments of the premium tax 

credit.4 Automatic re-enrollment 

significantly reduces issuer 

administrative expenses and makes 

enrolling in health insurance more 

convenient for the consumer. While 

allowing auto-re-enrollment was 

designed to be consistent with broader 

industry practices, this market is 

arguably different, since most current 

enrollees receive significant government 

subsidies, making them potentially less 

sensitive to premiums and premium 

changes. For the first half of 2018, for 

example, 16 percent of enrollees were 

enrolled in a plan with zero premiums 

after application of advance payments of 

the premium tax credit, another 19 

percent of enrollees paid a premium of 

less than 5 percent of the total plan 

premium after application of advance 

payments of the premium tax credit, 

and the average subsidized enrollee 

received a premium tax credit covering 

87 percent of the total premium cost. 

The practice of automatic reenrollment in the Exchanges gives rise 

to several concerns. Some consumers 

who are automatically re-enrolled in 

their current plan may be shielded from 

changes to their coverage, which may 

result in consumers being less aware of 

their options from year to year. There is 

a concern that automatic re-enrollment 

eliminates an opportunity for 

consumers to update their coverage and 

premium tax credit eligibility as their 

personal circumstances change, 

potentially leading to eligibility errors, 

tax credit miscalculations, 

unrecoverable federal spending on the 

credits, and general consumer 

confusion. 

We seek comment on the automatic 

re-enrollment processes and capabilities 

as well as additional policies or program 

measures that would reduce eligibility 

errors and potential government 

misspending for potential action in 

future rulemaking applicable not sooner 

than plan year 2021. 

In addition, we believe increased 

transparency is a critical component of 

a consumer driven health care system, 

and are interested in ways to provide 

consumers with greater transparency 

with regards to their own health care 

data, QHP offerings on the FFEs, and the 

cost of health care services. In general, 

we encourage QHP issuers and 

Exchanges to undertake efforts to engage 

in consumer-friendly communication of 

their services to help consumers 

understand the value of services they 

would potentially obtain. We believe 

that when consumers have access to 

relevant, consumer-friendly information 

that is meaningful to them, they are 

empowered to make more informed 

decisions with regards to their care. 

This can have the effect of aligning with 

consumers’ goals and preferences, 

promoting value and improving health 

outcomes. 

Specifically, we are exploring ways to 

increase the interoperability of patientmediated health care data across health 

care programs, including in coverage 

purchased through the Exchanges. We 

believe that providing data in an easily 

accessible manner through common 

technologies in a convenient, timely, 

and portable way is in the best interest 

of consumers and the health care system 

as a whole. This can prevent duplicative 

medical services, assist in supporting 

health care value through the 

prevention of fraud, waste, and abuse, 

reduce health care spending, and drive 

down the costs of health care for 

consumers. We expect to provide 

further information on these 

interoperability efforts, and an 

opportunity for public input, in the near 

future. 

Additionally, in an effort to increase 

consumer transparency through access 

to information that may assist 

consumers in selecting a QHP offered 

through an Exchange and navigating 

their coverage, we are exploring 

opportunities to expand the 

transparency in coverage data 

collection.5 Under section 1311(e)(3) of 

the PPACA, as implemented by 45 CFR 

155.1040(a) and 156.220, QHP issuers 

must post and make available to the 

public, data related to transparency in 

coverage in plain language and submit 

this data to HHS, the Exchange, and the 

state insurance commissioner.6 These 

standards provide greater transparency 

for consumers and may assist in the 

decision-making process. This 

resubmission of the information 

collections approved under the 

Paperwork Reduction Act package was 

posted at the Federal Register for 60- 

day public comment through December 

24, 2018. Separate from the PRA 

submission, we seek comment on ways 

to further implement § 156.220(d), 

enrollee cost-sharing transparency, 

where a QHP issuer must make 

available the amount of enrollee cost 

sharing under the individual’s plan or 

coverage for the furnishing of a specific 

item or service by a participating 

provider in a timely manner upon the 

request of the individual. We are 

particularly interested in input 

regarding what types of data would be 

most useful to improving consumers’ 

abilities to make informed health care 

decisions, including decisions related to 

their coverage. 

Finally, we are interested in ways to 

improve consumers’ access to 

information about health care costs. We 

believe that consumers would benefit 

from a greater understanding of what 

their potential out-of-pocket costs 

would be for various services, based on 

which QHP they are enrolled in and 

which provider they see. We believe 

that such a policy would promote 

consumers’ ability to shop for covered 

services, and to play a more active role 

in their health care. In particular, we are 

aware that it can be difficult for 

consumers to anticipate their financial 


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7The Hyde Amendment is not permanent federal 

law. 

responsibility when a QHP applies 

coinsurance, because consumers are 

largely unaware of the negotiated rate 

until they receive an explanation of 

benefits document after the provider 

renders the service. We are considering 

different options for disclosure of costsharing information, recognizing that 

cost is a significant factor in creating 

greater value in health care delivery. For 

example, we are considering whether to 

require issuers to disclose a consumer’s 

anticipated costs for particular services 

upon request within a certain 

timeframe, or whether to require issuers 

to disclose anticipated costs for a set 

number of common coverage scenarios, 

similar to what they must currently 

disclose in the Summary of Benefits and 

Coverage (SBC). 

To increase transparency for the 

individual and small group markets 

more generally, we are proposing to 

expand the collection of masked 

enrollee-level data from the External 

Data Gathering Environment (EDGE) 

servers, and to broaden the permissible 

uses of such data currently submitted 

for purposes of risk adjustment. We 

believe this proposal, if finalized, would 

increase understanding of these markets 

among HHS, researchers, and the 

general public, and therefore contribute 

to greater transparency. 

We seek comments on whether there 

are any existing regulatory barriers that 

stand in the way of privately led efforts 

at pricing transparency, and ways that 

we can facilitate or support increased 

private innovation in pricing 

transparency. As part of our ongoing 

efforts to empower consumers in their 

health care decisions, we also seek 

comment on how we can promote 

transparency for consumers and valuebased insurance design. We seek 

comment on ways that we can promote 

the offering and take-up of High 

Deductible Health Plans (HDHPs) that 

can be paired with Health Savings 

Accounts (HSAs), which can serve as an 

effective and tax-advantageous method 

for certain consumers to manage their 

health care expenditures. We are 

particularly interested in comments that 

address ways to increase the visibility of 

HSA-eligible HDHPs on HealthCare.gov. 

In furtherance of the Administration’s 

priority to reduce prescription drug 

costs and to align with the President’s 

American Patients First blueprint, we 

propose a series of changes to the 

prescription drug benefits, to the extent 

permitted by applicable state law. These 

proposals include allowing issuers to 

adopt mid-year formulary changes to 

incentivize greater enrollee use of 

lower-cost generic drugs; allowing 

issuers to not count certain cost sharing 

toward the annual limitation on cost 

sharing if a consumer selects a brand 

drug when a medically appropriate 

generic drug is available; and allowing 

issuers to exclude drug manufacturer 

coupons from counting toward the 

annual limitation on cost sharing when 

a medically appropriate generic drug is 

available. We believe these proposals 

will support issuers’ ability to lower the 

cost of coverage and generate cost 

savings while also ensuring efficient use 

of federal funds and sufficient coverage 

for people with diverse health needs. 

II. Background 

A. Legislative and Regulatory Overview 

Title I of the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) added a new title XXVII 

to the Public Health Service Act (PHS 

Act) to establish various reforms to the 

group and individual health insurance 

markets, including a guaranteed 

renewability requirement in the 

individual, small group, and large group 

markets. 

Subtitles A and C of title I of the 

PPACA reorganized, amended, and 

added to the provisions of part A of title 

XXVII of the PHS Act) relating to group 

health plans and health insurance 

issuers in the group and individual 

markets. 

Section 1302 of the PPACA provides 

for the establishment of an essential 

health benefits (EHB) package that 

includes coverage of EHB (as defined by 

the Secretary), cost-sharing limits, and 

actuarial value requirements. The law 

directs that EHBs be equal in scope to 

the benefits provided under a typical 

employer plan, and that they cover at 

least the following 10 general categories: 

Ambulatory patient services; emergency 

services; hospitalization; maternity and 

newborn care; mental health and 

substance use disorder services, 

including behavioral health treatment; 

prescription drugs; rehabilitative and 

habilitative services and devices; 

laboratory services; preventive and 

wellness services and chronic disease 

management; and pediatric services, 

including oral and vision care. 

Section 1301(a)(1)(B) of the PPACA 

directs all issuers of QHPs to cover the 

EHB package described in section 

1302(a) of the PPACA, including 

coverage of the services described in 

section 1302(b) of the PPACA, 

adherence to the cost-sharing limits 

described in section 1302(c) of the 

PPACA, and meeting the actuarial value 

(AV) levels established in section 

1302(d) of the PPACA. Section 2707(a) 

of the PHS Act, which is effective for 

plan or policy years beginning on or 

after January 1, 2014, extends the 

requirement to cover the EHB package 

to non-grandfathered individual and 

small group health insurance coverage, 

irrespective of whether such coverage is 

offered through an Exchange. In 

addition, section 2707(b) of the PHS Act 

directs non-grandfathered group health 

plans to ensure that cost sharing under 

the plan does not exceed the limitations 

described in sections 1302(c)(1) of the 

PPACA. 

Section 1303 of the PPACA provides 

special rules for QHPs that offer 

abortion coverage in the individual 

market Exchanges. Under this section, 

QHP issuers may elect whether to 

provide coverage for abortion services 

through their QHPs offered on the 

Exchange. Section 1303 of the PPACA 

covers a variety of other requirements 

and provisions relating to QHP coverage 

of abortion services, including 

parameters for when federal funding is 

prohibited for abortion coverage, how 

QHPs shall ensure that no such federal 

funding is attributed to coverage of 

certain abortion services, provisions on 

non-preemption of certain state laws 

regarding abortion coverage, and 

provisions on non-preemption of federal 

conscience, nondiscrimination, and 

emergency services laws. 

Since 1976, Congress has annually 

attached language, commonly known as 

the Hyde Amendment, to its annual 

Labor, Health and Human Services, 

Education, and Related Agencies 

appropriations legislation.7 The Hyde 

Amendment as currently in effect 

permits federal funds to be used for 

abortions only in the limited cases of 

rape, incest, or if a woman suffers from 

a life-threatening physical disorder, 

physical injury, or physical illness, 

including a life-endangering physical 

condition caused by or arising from the 

pregnancy itself, as certified by a 

physician (‘‘Hyde abortion coverage’’). 

The Hyde Amendment prohibits the use 

of federal funds for abortions or abortion 

coverage in instances beyond those 

limited circumstances (‘‘non-Hyde 

abortion coverage’’ or ‘‘abortion 

coverage’’). 

Section 1311(d)(3)(B) of the PPACA 

permits a state, at its option, to require 

QHPs to cover benefits in addition to 

the EHB. This section also requires a 

state to make payments, either to the 

individual enrollee or to the issuer on 

behalf of the enrollee, to defray the cost 

of these additional state-required 

benefits. 

Section 1302(d) of the PPACA 

describes the various levels of coverage 


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8 If a state elects this option, the rating rules in 

section 2701 of the PHS Act and its implementing 

regulations will apply to all coverage offered in 

such state’s large group market (except for selfinsured group health plans) under section 

2701(a)(5) of the PHS Act. 

9Public Law 115–97, 131 Stat. 2054 (2017). 

10The term premium stabilization programs 

refers to the risk adjustment, risk corridors, and 

reinsurance programs established by the PPACA. 

See 42 U.S.C. 18061, 18062, and 18063. 

based on AV. Consistent with section 

1302(d)(2)(A) of the PPACA, AV is 

calculated based on the provision of 

EHB to a standard population. Section 

1302(d)(3) of the PPACA directs the 

Secretary to develop guidelines that 

allow for de minimis variation in AV 

calculations. 

Section 1311(b)(1)(B) of the PPACA 

directs that the Small Business Health 

Options Program assist qualified small 

employers in facilitating the enrollment 

of their employees in QHPs offered in 

the small group market. Sections 

1312(f)(1) and (2) of the PPACA define 

qualified individuals and qualified 

employers. Under section 1312(f)(2)(B) 

of the PPACA, beginning in 2017, states 

have the option to allow issuers to offer 

QHPs in the large group market through 

an Exchange.8

Section 1311(d)(4)(B) of the PPACA 

requires an Exchange to provide for the 

operation of a toll-free telephone hotline 

to respond to requests for assistance. 

Sections 1311(d)(4)(K) and 1311(i) of 

the PPACA direct all Exchanges to 

establish a Navigator program. 

Section 1311(c)(6)(C) of the PPACA 

establishes special enrollment periods 

and section 1311(c)(6)(D) of the PPACA 

establishes the monthly enrollment 

period for Indians, as defined by section 

4 of the Indian Health Care 

Improvement Act. 

Section 1312(c) of the Affordable Care 

Act generally requires a health 

insurance issuer to consider all 

enrollees in all health plans (except 

grandfathered health plans) offered by 

such issuer to be members of a single 

risk pool for each of its individual and 

small group markets. States have the 

option to merge the individual and 

small group market risk pools under 

section 1312(c)(3) of the Affordable Care 

Act. 

Section 1312(e) of the PPACA directs 

the Secretary to establish procedures 

under which a state may permit agents 

and brokers to enroll qualified 

individuals and qualified employers in 

QHPs through an Exchange and to assist 

individuals in applying for premium tax 

credits and cost-sharing reductions for 

QHPs sold through an Exchange. 

Section 1321(a) of the PPACA 

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 PPACA. Section 1321(a)(1) of the 

PPACA directs the Secretary to issue 

regulations that set standards for 

meeting the requirements of title I of the 

PPACA for, among other things, the 

establishment and operation of 

Exchanges. 

Section 1311(c) of the PPACA 

provides the Secretary the authority to 

issue regulations to establish criteria for 

the certification of QHPs. Section 

1311(e)(1) of the PPACA grants the 

Exchange the authority to certify a 

health plan as a QHP if the health plan 

meets the Secretary’s requirements for 

certification issued under section 

1311(c) of the PPACA, and the Exchange 

determines that making the plan 

available through the Exchange is in the 

interests of individuals and employers 

in the state. 

Sections 1313 and 1321 of the PPACA 

provide the Secretary with the authority 

to oversee the financial integrity of State 

Exchanges, their compliance with HHS 

standards, and the efficient and nondiscriminatory administration of State 

Exchange activities. Section 1321 of the 

PPACA provides for state flexibility in 

the operation and enforcement of 

Exchanges and related requirements. 

When operating an FFE under section 

1321(c)(1) of the PPACA, HHS has the 

authority under sections 1321(c)(1) and 

1311(d)(5)(A) of the PPACA to collect 

and spend user fees. In addition, 31 

U.S.C. 9701 permits a federal agency to 

establish a charge for a service provided 

by the agency. Office of Management 

and Budget (OMB) Circular A–25 

Revised establishes federal policy 

regarding user fees and specifies that a 

user charge will be assessed against 

each identifiable recipient for special 

benefits derived from federal activities 

beyond those received by the general 

public. 

Section 1321(d) of the PPACA 

provides that nothing in title I of the 

PPACA should be construed to preempt 

any state law that does not prevent the 

application of title I of the PPACA. 

Section 1311(k) of the PPACA specifies 

that Exchanges may not establish rules 

that conflict with or prevent the 

application of regulations issued by the 

Secretary. 

Section 1343 of the PPACA 

establishes a permanent risk adjustment 

program to provide payments to health 

insurance issuers that attract higherthan average risk populations, such as 

those with chronic conditions, funded 

by payments from those that attract 

lower- than average risk populations, 

thereby reducing incentives for issuers 

to avoid higher-risk enrollees. 

Section 1402 of the PPACA provides 

for, among other things, reductions in 

cost sharing for EHB for qualified lowand moderate-income enrollees in silver 

level health plans offered through the 

individual market Exchanges. This 

section also provides for reductions in 

cost sharing for Indians enrolled in 

QHPs at any metal level. 

Section 5000A of the Code, as added 

by section 1501(b) of the PPACA 

requires individuals to have minimum 

essential coverage (MEC) for each 

month, qualify for an exemption, or 

make an individual shared 

responsibility payment. Under the Tax 

Cuts and Jobs Act, which was enacted 

on December 22, 2017, the individual 

shared responsibility payment is 

reduced to $0, effective for months 

beginning after December 31, 2018.9

Notwithstanding that reduction, certain 

exemptions are still relevant to 

determine whether individuals above 

the age of 30 qualify to enroll in 

catastrophic coverage under 

§ 155.305(h). 

The Protecting Affordable Coverage 

for Employees Act (Pub. L. 114–60, 

enacted on October 7, 2015) amended 

the definition of small employer in 

section 1304(b) of the PPACA and 

section 2791(e) of the PHS Act to mean, 

in connection with a group health plan 

for a calendar year and a plan year, an 

employer who employed an average of 

at least 1 but not more than 50 

employees on business days during the 

preceding calendar year and who 

employs at least 1 employee on the first 

day of the plan year. It also amended 

these statutes to make conforming 

changes to the definition of large 

employer, and to provide that a state 

may treat as a small employer, for a 

calendar year and a plan year, an 

employer who employed an average of 

at least 1 but not more than 100 

employees on business days during the 

preceding calendar year and who 

employs at least 1 employee on the first 

day of the plan year. 

1. Premium Stabilization Programs 10

In the July 15, 2011 Federal Register 

(76 FR 41929), we published a proposed 

rule outlining the framework for the 

premium stabilization programs. We 

implemented the premium stabilization 

programs in a final rule, published in 

the March 23, 2012 Federal Register (77 

FR 17219) (Premium Stabilization Rule). 

In the December 7, 2012 Federal 

Register (77 FR 73117), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2014 benefit 

year to expand the provisions related to 


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11 ‘‘Updated 2019 Benefit Year Final HHS Risk 

Adjustment Model Coefficients.’’ July 27, 2018. 

Available at https://www.cms.gov/CCIIO/Resources/ 

Regulations-and-Guidance/Downloads/2019-

Updtd-Final-HHS-RA-Model-Coefficients.pdf. 

12 ‘‘Update on the HHS-operated Risk Adjustment 

Program for the 2017 Benefit Year.’’ July 27, 2018. 

Available at https://www.cms.gov/CCIIO/Resources/ 

Regulations-and-Guidance/Downloads/2017-RAFinal-Rule-Resumption-RAOps.pdf. 

the premium stabilization programs and 

set forth payment parameters in those 

programs (proposed 2014 Payment 

Notice). We published the 2014 

Payment Notice final rule in the March 

11, 2013 Federal Register (78 FR 

15409). In the June 19, 2013 Federal 

Register (78 FR 37032), we proposed a 

modification to the HHS-operated 

methodology related to community 

rating states. In the October 30, 2013 

Federal Register (78 FR 65046), we 

finalized the proposed modification to 

the HHS-operated methodology related 

to community rating states. We 

published a correcting amendment to 

the 2014 Payment Notice final rule in 

the November 6, 2013 Federal Register 

(78 FR 66653) to address how an 

enrollee’s age for the risk score 

calculation would be determined under 

the HHS-operated risk adjustment 

methodology. 

In the December 2, 2013 Federal 

Register (78 FR 72321), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2015 benefit 

year to expand the provisions related to 

the premium stabilization programs, 

setting forth certain oversight provisions 

and establishing the payment 

parameters in those programs (proposed 

2015 Payment Notice). We published 

the 2015 Payment Notice final rule in 

the March 11, 2014 Federal Register (79 

FR 13743). In the May 27, 2014 Federal 

Register (79 FR 30240), the 2015 fiscal 

year sequestration rate for the risk 

adjustment program was announced. 

In the November 26, 2014 Federal 

Register (79 FR 70673), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2016 benefit 

year to expand the provisions related to 

the premium stabilization programs, 

setting forth certain oversight provisions 

and establishing the payment 

parameters in those programs (proposed 

2016 Payment Notice). We published 

the 2016 Payment Notice final rule in 

the February 27, 2015 Federal Register 

(80 FR 10749). 

In the December 2, 2015 Federal 

Register (80 FR 75487), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2017 benefit 

year to expand the provisions related to 

the premium stabilization programs, 

setting forth certain oversight provisions 

and establishing the payment 

parameters in those programs (proposed 

2017 Payment Notice). We published 

the 2017 Payment Notice final rule in 

the March 8, 2016 Federal Register (81 

FR 12203). 

In the September 6, 2016 Federal 

Register (81 FR 61455), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2018 benefit 

year, and to further promote stable 

premiums in the individual and small 

group markets. We proposed updates to 

the risk adjustment methodology, new 

policies around the use of external data 

for recalibration of our risk adjustment 

models, and amendments to the risk 

adjustment data validation process 

(proposed 2018 Payment Notice). We 

published the 2018 Payment Notice 

final rule in the December 22, 2016 

Federal Register (81 FR 94058). 

In the November 2, 2017 Federal 

Register (82 FR 51042), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2019 benefit 

year, and to further promote stable 

premiums in the individual and small 

group markets. We proposed updates to 

the risk adjustment methodology and 

amendments to the risk adjustment data 

validation process (proposed 2019 

Payment Notice). We published the 

2019 Payment Notice final rule in the 

April 17, 2018 Federal Register (83 FR 

16930). We published a correction to the 

2019 risk adjustment coefficients in the 

2019 Payment Notice final rule in the 

May 11, 2018 Federal Register (83 FR 

21925). On July 27, 2018, consistent 

with 45 CFR 153.320(b)(1)(i), we 

updated the 2019 benefit year final risk 

adjustment model coefficients to reflect 

an additional recalibration related to an 

update to the 2016 enrollee-level EDGE 

dataset.11

In the July 30, 2018 Federal Register 

(83 FR 36456), we published a final rule 

that adopted the 2017 benefit year risk 

adjustment methodology as established 

in the final rules published in the March 

23, 2012 (77 FR 17220 through 17252) 

and in the March 8, 2016 editions of the 

Federal Register (81 FR 12204 through 

12352). This final rule set forth 

additional explanation of the rationale 

supporting use of statewide average 

premium in the HHS-operated risk 

adjustment state payment transfer 

formula for the 2017 benefit year, 

including the reasons why the program 

is operated in a budget-neutral manner. 

This final rule permitted HHS to resume 

2017 benefit year risk adjustment 

payments and charges. HHS also 

provided guidance as to the operation of 

the HHS-operated risk adjustment 

program for the 2017 benefit year in 

light of publication of this final rule.12

In the August 10, 2018 Federal 

Register (83 FR 39644), we published a 

proposed rule seeking comment on 

adopting the 2018 benefit year risk 

adjustment methodology in the final 

rules published in the March 23, 2012 

(77 FR 17219) and in the December 22, 

2016 editions of the Federal Register 

(81 FR 94058). The proposed rule set 

forth additional explanation of the 

rationale supporting use of statewide 

average premium in the HHS-operated 

risk adjustment state payment transfer 

formula for the 2018 benefit year, 

including the reasons why the program 

is operated in a budget-neutral manner. 

In the December 10, 2018 Federal 

Register (83 FR 63419), we issued a 

final rule adopting the 2018 benefit year 

HHS-operated risk adjustment 

methodology as established in the final 

rules published in the March 23, 2012 

(77 FR 17219) and the December 22, 

2016 (81 FR 94058) editions of the 

Federal Register. This final rule sets 

forth additional explanation of the 

rationale supporting use of statewide 

average premium in the HHS-operated 

risk adjustment state payment transfer 

formula for the 2018 benefit year, 

including the reasons why the program 

is operated in a budget-neutral manner. 

2. Program Integrity 

In the June 19, 2013 Federal Register 

(78 FR 37031), we published a proposed 

rule that proposed certain program 

integrity standards related to Exchanges 

and the premium stabilization programs 

(proposed Program Integrity Rule). The 

provisions of that proposed rule were 

finalized in two rules, the ‘‘first Program 

Integrity Rule’’ published in the August 

30, 2013 Federal Register (78 FR 54069) 

and the ‘‘second Program Integrity 

Rule’’ published in the October 30, 2013 

Federal Register (78 FR 65045). 

3. Market Rules 

An interim final rule relating to the 

HIPAA health insurance reforms was 

published in the April 8, 1997 Federal 

Register (62 FR 16894). A proposed rule 

relating to the 2014 health insurance 

market rules was published in the 

November 26, 2012 Federal Register (77 

FR 70584). A final rule implementing 

the health insurance market rules was 

published in the February 27, 2013 

Federal Register (78 FR 13406) (2014 

Market Rules). 

A proposed rule relating to Exchanges 

and Insurance Market Standards for 

2015 and Beyond was published in the 

March 21, 2014 Federal Register (79 FR 

15808) (2015 Market Standards 

Proposed Rule). A final rule 

implementing the Exchange and 

Insurance Market Standards for 2015 


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13 77 FR 18309. 

14 80 FR 10749. 

15CMS Bulletin Addressing Enforcement of 

Section 1303 of the Patient Protection and 

Affordable Care Act (October 6, 2017). Available at 

https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/Section-1303-Bulletin10-6-2017-FINAL-508.pdf. 

16 ‘‘Essential Health Benefits Bulletin.’’ December 

16, 2011. Available at https://www.cms.gov/CCIIO/ 

Resources/Files/Downloads/essential_health_

benefits_bulletin.pdf. 

and Beyond was published in the May 

27, 2014 Federal Register (79 FR 30240) 

(2015 Market Standards Rule). The 2018 

Payment Notice final rule in the 

December 22, 2016 Federal Register (81 

FR 94058) provided additional guidance 

on guaranteed availability and 

guaranteed renewability. In the April 

18, 2017 Market Stabilization final rule 

(82 FR 18346), we released further 

guidance related to guaranteed 

availability. 

4. Exchanges 

We published a request for comment 

relating to Exchanges in the August 3, 

2010 Federal Register (75 FR 45584). 

We issued initial guidance to states on 

Exchanges on November 18, 2010. We 

proposed a rule in the July 15, 2011 

Federal Register (76 FR 41865) to 

implement components of the 

Exchanges, and a rule in the August 17, 

2011 Federal Register (76 FR 51201) 

regarding Exchange functions in the 

individual market and SHOP, eligibility 

determinations, and Exchange standards 

for employers. A final rule 

implementing components of the 

Exchanges and setting forth standards 

for eligibility for Exchanges was 

published in the March 27, 2012 

Federal Register (77 FR 18309) 

(Exchange Establishment Rule). 

We established additional standards 

for SHOP in the 2014 Payment Notice 

and in the Amendments to the HHS 

Notice of Benefit and Payment 

Parameters for 2014 interim final rule, 

published in the March 11, 2013 

Federal Register (78 FR 15541). The 

provisions established in the interim 

final rule were finalized in the second 

Program Integrity Rule. We also set forth 

standards related to Exchange user fees 

in the 2014 Payment Notice. We 

established an adjustment to the FFE 

user fee in the Coverage of Certain 

Preventive Services Under the 

Affordable Care Act final rule, 

published in the July 2, 2013 Federal 

Register (78 FR 39869) (Preventive 

Services Rule). 

In a final rule published in the March 

27, 2012 Federal Register (77 FR 

18309), we established the original 

regulatory Navigator duties and training 

requirements. In a final rule published 

in the July 17, 2013 Federal Register (78 

FR 42823), we established standards for 

Navigators and non-Navigator assistance 

personnel in FFEs and for nonNavigator assistance personnel funded 

through an Exchange establishment 

grant. This final rule also established a 

certified application counselor program 

for Exchanges and set standards for that 

program. In the 2017 Payment Notice 

final rule, published in the March 8, 

2016 Federal Register (81 FR 12204), we 

expanded Navigator duties and training 

requirements. In the 2019 Payment 

Notice final rule, published in the April 

17, 2018 Federal Register (83 FR 

16930), we removed the requirements 

that each Exchange must have at least 

two Navigator entities; that one of these 

entities must be a community and 

consumer-focused nonprofit group; and 

that each Navigator entity must 

maintain a physical presence in the 

Exchange service area. 

In an interim final rule, published in 

the May 11, 2016 Federal Register (81 

FR 29146), we made amendments to the 

parameters of certain special enrollment 

periods (2016 Interim Final Rule). We 

finalized these in the 2018 Payment 

Notice final rule, published in the 

December 22, 2016 Federal Register (81 

FR 94058). In the April 18, 2017 Market 

Stabilization final rule Federal Register 

(82 FR 18346), we amended standards 

relating to special enrollment periods 

and QHP certification. In the 2019 

Payment Notice final rule, published in 

the April 17, 2018 Federal Register (83 

FR 16930), we modified parameters 

around certain special enrollment 

periods. 

In a final rule published in the March 

27, 2012 Federal Register (2012 

Exchange Establishment Rule), we 

codified the statutory provisions of 

section 1303 of the PPACA at § 156.280, 

including the accounting and notice 

requirements.13 In the February 20, 

2015 Federal Register, we published the 

HHS Notice of Benefit and Payment 

Parameters for 2016 (2016 Payment 

Notice). In that final rule, we clarified 

these requirements and established that 

states and state insurance 

commissioners are the entities primarily 

responsible for implementing and 

enforcing the provisions in section 1303 

of the PPACA related to individual 

market QHP coverage of non-Hyde 

abortion services.14 In the 2016 Payment 

Notice, we also established acceptable 

methods that a QHP offering non-Hyde 

abortion coverage on the Exchange may 

use to comply with these accounting 

and notice requirements. On October 6, 

2017, we released a bulletin that again 

outlined these requirements in greater 

detail and set forth how they are to be 

enforced beginning in plan year 2018.15

On November 9, 2018, we published the 

Patient Protection and Affordable Care 

Act; Exchange Program Integrity 

proposed rule in the Federal Register 

(83 FR 56015) that would require QHP 

issuers to issue separate bills for 

coverage of non-Hyde abortion, as well 

as noting the obligation of QHP issuers 

to maintain records of their compliance 

with the requirements of section 1303 of 

the PPACA and the related regulatory 

provisions and to make them available 

for audits, compliance reviews, and 

investigations of noncompliance. 

5. Essential Health Benefits 

On December 16, 2011, HHS released 

a bulletin 16 that outlined an intended 

regulatory approach for defining EHB, 

including a benchmark-based 

framework. A proposed rule relating to 

EHBs was published in the November 

26, 2012 Federal Register (77 FR 

70643). We established requirements 

relating to EHBs in the Standards 

Related to Essential Health Benefits, 

Actuarial Value, and Accreditation 

Final Rule, which was published in the 

February 25, 2013 Federal Register (78 

FR 12833) (EHB Rule). In the 2019 

Payment Notice, published in the April 

17, 2018 Federal Register (83 FR 

16930), we added § 156.111 to provide 

states with additional options from 

which to select an EHB-benchmark plan 

for plan years 2020 and beyond. 

6. Minimum Essential Coverage 

In the February 1, 2013 Federal 

Register (78 FR 7348), we published a 

proposed rule that designates other 

health benefits coverage as MEC and 

outlines substantive and procedural 

requirements that other types of 

coverage must fulfill to be recognized as 

MEC. The provisions were finalized in 

the July 1, 2013 Federal Register (78 FR 

39494). 

In the November 26, 2014 Federal 

Register (79 FR 70674), we published a 

proposed rule seeking comments on 

whether state high risk pools should be 

permanently designated as MEC or 

whether the designation should be timelimited. In the February 27, 2015 

Federal Register (80 FR 10750), we 

designated state high risk pools 

established on or before November 26, 

2014 as MEC. 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders 

on policies related to the operation of 

Exchanges, including the SHOP, and the 

risk adjustment and risk adjustment 

data validation programs. We have held 

a number of listening sessions with 


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17This assistance includes: Understanding the 

process of filing Exchange eligibility appeals; 

understanding and applying for exemptions from 

the individual shared responsibility payment that 

are granted through the Exchange; understanding 

the availability of exemptions from the requirement 

to maintain MEC and from the individual shared 

responsibility payment that are claimed through the 

tax filing process and how to claim them; the 

Exchange-related components of the premium tax 

credit reconciliation process; understanding basic 

concepts and rights related to health coverage and 

how to use it; and referrals to licensed tax advisers, 

tax preparers, or other resources for assistance with 

tax preparation and tax advice on certain Exchangerelated topics. 18 80 FR at 10822. 

consumers, providers, employers, health 

plans, and the actuarial community to 

gather public input. We have solicited 

input from state representatives on 

numerous topics, particularly essential 

health benefits, QHP certification, 

Exchange establishment, and risk 

adjustment. We consulted with 

stakeholders through regular meetings 

with the National Association of 

Insurance Commissioners (NAIC), 

regular contact with states through the 

Exchange Establishment grant and 

Exchange Blueprint approval processes, 

and meetings with Tribal leaders and 

representatives, health insurance 

issuers, trade groups, consumer 

advocates, employers, and other 

interested parties. We considered all 

public input we received as we 

developed the policies in this 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, and 

156. 

The proposed changes to 45 CFR parts 

146, 147, and 148 would allow issuers, 

beginning with plan years on or after 

January 1, 2020, to update their 

prescription drug formularies by 

allowing certain mid-year formulary 

changes, subject to applicable state law, 

in an effort to optimize the use of new 

generic drugs as they become available. 

The proposed changes to 45 CFR part 

153 would recalibrate the risk 

adjustment models consistent with the 

methodology finalized for the 2019 

benefit year and the incorporation of the 

blended most recent benefit years of 

MarketScan® and enrollee-level EDGE 

data that are available. The proposed 

regulations address high-cost risk 

pooling, where we are proposing to 

implement the same parameters that 

applied to the 2018 and 2019 benefit 

years to the 2020 benefit year and 

beyond. The proposals regarding part 

153 also relate to the risk adjustment 

user fee for the 2020 benefit year and 

modifications to risk adjustment data 

validation requirements. 

The proposed regulations in 45 CFR 

part 155 would provide more flexibility 

related to the training requirements for 

Navigators by streamlining 20 existing 

specific training topics into 4 broad 

categories. We also propose to provide 

more flexibility to FFE Navigators by 

making the provision of certain types of 

assistance, including post-enrollment 

assistance, permissible for FFE 

Navigators, not required.17 We propose 

to amend and streamline our regulations 

related to direct enrollment. We propose 

to establish a new special enrollment 

period, at the option of the Exchange, 

for off-Exchange enrollees who 

experience a decrease in income and are 

newly determined to be eligible for 

APTC by the Exchange. We also propose 

to increase flexibility for individuals 

seeking the general hardship exemption 

by allowing them to alternatively claim 

the exemption on their federal income 

tax return for 2018 without obtaining an 

exemption certificate number from the 

Exchange. We propose several 

amendments to the definitions 

applicable to part 155. 

The proposed regulations in 45 CFR 

part 156 set forth proposals related to 

cost sharing, including the premium 

adjustment percentage, the maximum 

annual limitation on cost sharing, and 

the reductions in the maximum annual 

limitation for cost-sharing plan 

variations for 2020. We propose to use 

a different premium measure for 

calculating the premium adjustment 

percentage for the 2020 benefit year and 

subsequent benefit years. As we do 

every year in the HHS notice of benefit 

and payment parameters, we propose to 

update the required contribution 

percentage, the maximum annual 

limitation on cost sharing, and the 

reduced maximum annual limitation on 

cost sharing based on the premium 

adjustment percentage. We propose to 

update the FFE and SBE–FP user fee 

rates for the 2020 benefit year for all 

issuers participating on the FFEs or 

SBE–FPs. The proposed regulations in 

part 156 also include policies to 

incentivize the use of generic drugs to 

direct consumers to more cost effective 

treatment options. In addition, the 

proposed regulation regarding part 156 

includes changes related to direct 

enrollment. 

III. Provisions of the Proposed HHS 

Notice of Benefit and Payment 

Parameters for 2020 

A. Part 146—Requirements for the 

Group Health Insurance Market 

Section 147.106 implements the 

guaranteed renewability requirements 

under the PPACA (applicable to nongrandfathered plans), and §§ 146.152 

and 148.122 implement the guaranteed 

renewability requirements enacted by 

HIPAA (applicable to both 

grandfathered and non-grandfathered 

plans). We propose to make conforming 

amendments to §§ 146.152 and 148.122, 

consistent with the proposals in 

§ 147.106 that are discussed below, to 

ensure consistency in the uniform 

modification rules to both grandfathered 

and non-grandfathered coverage. We 

seek comment on this approach. 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

Throughout this rule we propose a 

number of changes related to policy for 

prescription drugs that aim to reduce 

the increases of prescription drug 

expenditures. Taken together, the 

proposals and discussions at §§ 146.152, 

147.106, 148.122, 156.122, and 156.130 

within this proposed rule are meant to 

offer a suite of changes toward that goal. 

Section 147.106(e), implementing 

guaranteed renewability requirements, 

enacted by the PPACA, generally 

prohibits issuers from making 

modifications to health insurance 

coverage, other than at the time of 

yearly coverage renewal. In the 2016 

Payment Notice, we expressed concerns 

about the impact on consumers of midyear formulary changes. We noted that, 

under guaranteed renewability 

requirements and the definitions of 

‘‘product’’ and ‘‘plan,’’ issuers generally 

may not make plan design changes, 

including changes to drug formularies, 

other than at the time of plan renewal. 

We also stated that certain mid-year 

changes to drug formularies related to 

the availability of drugs in the market 

may be necessary and appropriate.18

At this time, we believe there are 

opportunities to increase the use of 

lower-cost prescription drugs, such as 

generics, especially as new genericequivalent drugs become available on 

the market, by providing additional 

flexibility for issuers to make mid-year 

formulary changes, consistent with 

applicable state law. Therefore, we 

propose to add § 147.106(e)(5) to allow 

issuers in the individual, small group, 

and large group markets, beginning with 

plan years on or after January 1, 2020, 

to update their prescription drug 

formularies by allowing certain midyear formulary changes, if permitted by 

applicable state law. 

Specifically at § 147.106(e)(5), we 

propose allowing issuers, for plan years 

beginning on or after January 1, 2020, to 


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19 Generic substitution laws may, among other 

things, address when and how pharmacists or other 

health care professionals authorized to dispense 

medication under state law may substitute a generic 

drug for a brand drug. 

20 In 2017, spending for prescription drugs 

accounted for 10 percent of health care spending, 

while DME costs accounted for 2 percent. Centers 

for Medicare and Medicaid Services. (2018). 

National Health Expenditures 2017 Highlights. 

https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/ 

NationalHealthExpendData/Downloads/ 

highlights.pdf. 

21We note that whether an issuer’s removal of a 

brand drug from its formulary, or its transfer of a 

brand drug to a different tier under this proposal 

falls within the parameters of the uniformmodification-of coverage rules is unrelated to and 

does not determine whether or not the plan 

maintains its status as a grandfathered plan under 

45 CFR 147.140. 

make formulary changes during the plan 

year when a generic equivalent of a 

prescription drug becomes available on 

the market, within a reasonable time 

after that drug becomes available. We 

propose that the issuer be permitted to 

modify its plans’ formularies to add the 

generic equivalent drug. At that time, 

the issuer also would be permitted to 

remove the equivalent brand drug(s) 

from the formulary or move the 

equivalent brand drug(s) to a different 

cost-sharing tier on the formulary. Any 

mid-year formulary changes would have 

to be consistent with the standards 

applicable to uniform modifications in 

paragraph (e)(2) or (e)(3). 

Issuers, including issuers of 

grandfathered plans, also would be 

required to provide enrollees the option 

to request coverage for a brand drug that 

was removed from the formulary 

through the applicable coverage appeal 

process under § 147.136 or the drug 

exception request process under 

§ 156.122(c). 

Before removing a brand drug from 

the formulary or moving it to a different 

cost-sharing tier, a health insurance 

issuer would be required to notify all 

plan enrollees of the change in writing 

a minimum of 60 days prior to initiating 

the change. This would allow enrollees 

to begin working with their health care 

provider on any exception request 

processes before the change occurs. This 

notice would identify the name of the 

brand drug that is the subject of the 

change, disclose whether the brand drug 

would be removed from the formulary 

or placed on a different cost-sharing tier, 

provide the name of the generic 

equivalent that will be made available, 

specify the date the changes will 

become effective, and state that under 

the appeals processes outlined in 

§ 147.136 or the exceptions processes 

outlined in § 156.122(c), enrollees and 

dependents may request and gain access 

to the brand drug when clinically 

appropriate and not otherwise covered 

by the health plan. We solicit comments 

on whether a different advance notice 

period would be more appropriate, such 

as 90 days or 120 days. 

Issuers are not required to use a form 

notice, but must include certain 

information in the written notice itself. 

The specifics of the written notice 

requirements will be addressed through 

the PRA process. We recognize that 

issuers have complex contracting 

arrangements, that whether a brand drug 

or its generic equivalent is less costly is 

a complex question, and that certain 

states have generic substitution laws.19

We also recognize that some consumers 

may have concerns about the impact 

this proposed change may have, given 

that consumers often purchase a plan 

based on the plans’ prescription drug 

coverage. However, we believe these 

concerns may be alleviated given the 

addition made to the formulary of the 

generic equivalent, which would 

generally be more affordable. 

We also believe that it is appropriate 

to permit this flexibility (subject to the 

uniform modification provision) to 

make mid-year changes to prescription 

drug coverage because prescription 

drugs are a unique benefit category for 

which this type of mid-year change is 

warranted. Generic equivalents of brand 

drugs already approved by the Food and 

Drug Administration, which contain the 

same active ingredients as those brand 

drugs and generally can readily be 

substituted for the brand drug, are 

approved for sale throughout the year. 

New alternatives to covered items and 

services other than prescription drugs 

typically do not become available 

during a given year with the same 

frequency as in the prescription drug 

market. While the rationale for this 

proposed policy related to prescription 

drugs could arguably be applied to 

allow similar flexibility for durable 

medical equipment (DME), we believe 

that the frequency of changes and 

potential impact on overall 

expenditures is greater for prescription 

drugs and would result in positive cost 

impacts for both consumers and 

issuers.20 Nothing under this proposed 

policy would prevent states or federal 

agencies that establish standards for 

federal governmental plans, such as the 

U.S. Office of Personnel Management 

(OPM), including with respect to the 

Federal Employees Health Benefits 

Program from prohibiting or narrowing 

the circumstances under which issuers 

may make such mid-year formulary 

changes. We encourage issuers of multistate plans to contact OPM for mid-year 

formulary change requirements. We also 

note that this proposal would not 

require health insurance issuers to avail 

themselves of this proposal. 

We seek comment on all aspects of 

this proposal, including whether to 

limit it to individual and small group 

health insurance issuers. Large group 

issuers are generally not subject to the 

limitations on changes that can be made 

at the time of yearly coverage renewal 

under the uniform modification 

provisions, which provides them 

additional flexibility. If the rule is 

finalized as proposed, large group 

health insurance issuers, like issuers in 

the individual and small group markets, 

would only be permitted to make midyear formulary changes that conform to 

the limitations on modifications under 

the uniform modification provisions, 

even though those limitations would 

continue not to apply to formulary or 

other changes made at the time of yearly 

coverage renewal. This would ensure 

that for any mid-year formulary 

changes, the product remains the same 

‘‘product,’’ as defined in § 144.103 

(which is based on the uniform 

modification standards) throughout the 

entire plan year. 

We also propose changes to 

§ 147.106(a) to reflect that paragraph (e) 

currently provides an exception to the 

general rule on guaranteed renewability. 

This is merely a technical correction, 

not a substantive change. We seek 

comment on these proposals related to 

prescription drug benefits and coverage. 

Section 147.106 implements the 

guaranteed renewability requirements 

under the PPACA (applicable to nongrandfathered plans), and §§ 146.152 

and 148.122 implement the guaranteed 

renewability requirements enacted by 

HIPAA (applicable to both 

grandfathered and non-grandfathered 

plans). We propose to make conforming 

amendments to §§ 146.152 and 148.122 

consistent with the proposals in 

§ 147.106 to ensure consistency in the 

uniform modification rules to both 

grandfathered and non-grandfathered 

coverage.21 We seek comment on this 

approach. 

C. Part 148—Requirements for the 

Individual Health Insurance Market 

We propose to make conforming 

amendments to §§ 146.152 and 148.122, 

consistent with the proposals in 

§ 147.106 discussed above, to ensure 

consistency in the uniform modification 

rules to both grandfathered and nongrandfathered coverage. We seek 

comment on this approach. 


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236 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

22 ‘‘OMB Report to Congress on the Joint 

Committee Reductions for Fiscal Year 2019’’, p. 6. 

February 12, 2018. Available at https://

www.whitehouse.gov/wp-content/uploads/2018/02/ 

Sequestration_Report_February_2018.pdf. 23See 83 FR 16930 at 16939. 

D. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

1. Sequestration 

In accordance with the OMB Report to 

Congress on the Joint Committee 

Reductions for Fiscal Year 2019,22 both 

the transitional reinsurance program 

and permanent risk adjustment program 

are subject to the fiscal year 2019 

sequestration. The federal government’s 

2019 fiscal year began October 1, 2018. 

Although the 2016 benefit year was the 

final year of the transitional reinsurance 

program, we will continue to make 

reinsurance payments in the 2019 fiscal 

year for close-out activities. Therefore, 

the risk adjustment and reinsurance 

programs will be sequestered at a rate of 

6.2 percent for payments made from 

fiscal year 2019 resources (that is, funds 

collected during the 2019 fiscal year). 

HHS, in coordination with the OMB, 

has determined that, under section 

256(k)(6) of the Balanced Budget and 

Emergency Deficit Control Act of 1985 

(Pub. L. 99–177, enacted on December 

12, 1985), as amended, and the 

underlying authority for the reinsurance 

and risk adjustment programs, the funds 

that are sequestered in fiscal year 2019 

from the reinsurance and risk 

adjustment programs will become 

available for payment to issuers in fiscal 

year 2020 without further Congressional 

action. If Congress does not enact deficit 

reduction provisions that replace 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. 

2. Provisions and Parameters for the 

Risk Adjustment Program 

In subparts A, B, D, G, and H of part 

153, we established standards for the 

administration of the risk adjustment 

program. The risk adjustment program 

is a permanent program created by 

section 1343 of the PPACA that transfers 

funds from lower-than-average risk, risk 

adjustment covered plans to higherthan-average risk, risk adjustment 

covered plans in the individual and 

small group markets (including merged 

markets), inside and outside the 

Exchanges. In accordance with 

§ 153.310(a), a state that is approved or 

conditionally approved by the Secretary 

to operate an Exchange may establish a 

risk adjustment program, or have HHS 

do so on its behalf. HHS did not receive 

any requests from states to operate risk 

adjustment for the 2020 benefit year. 

Therefore, HHS will operate risk 

adjustment in every state and the 

District of Columbia for the 2020 benefit 

year. 

a. HHS Risk Adjustment (§ 153.320) 

The HHS risk adjustment models 

predict plan liability for an average 

enrollee based on that person’s age, sex, 

and diagnoses (also referred to as 

hierarchical condition categories 

(HCCs)), producing a risk score. The 

current structure of these models is 

described in the 2019 Payment Notice.23

The HHS risk adjustment methodology 

utilizes separate models for adults, 

children, and infants to account for cost 

differences in each age group. In the 

adult and child models, the relative risk 

assigned to an individual’s age, sex, and 

diagnoses are added together to produce 

an individual risk score. Additionally, 

to calculate enrollee risk scores in the 

adult models, we added enrollment 

duration factors beginning with the 

2017 benefit year, and prescription drug 

categories (RXCs) beginning with the 

2018 benefit year. Infant risk scores are 

determined by inclusion in one of 25 

mutually exclusive groups, based on the 

infant’s maturity and the severity of 

diagnoses. If applicable, the risk score 

for adults, children, or infants is 

multiplied by a cost-sharing reduction 

adjustment that accounts for differences 

in induced demand at various levels of 

cost sharing. 

The enrollment-weighted average risk 

score of all enrollees in a particular risk 

adjustment covered plan (also referred 

to as the plan liability risk score) within 

a geographic rating area is one of the 

inputs into the risk adjustment state 

payment transfer formula, which 

determines the payment or charge that 

an issuer will receive or be required to 

pay for that plan. Thus, the HHS risk 

adjustment models predict average 

group costs to account for risk across 

plans, in keeping with the Actuarial 

Standards Board’s Actuarial Standards 

of Practice for risk classification. 

i. Updates to the Risk Adjustment 

Model Recalibration 

We used the 3 most recent years of 

MarketScan® data available to 

recalibrate the 2016, 2017, and 2018 

benefit year risk adjustment models. For 

the 2019 benefit year, we recalibrated 

the models using 2 years of 

MarketScan® data (2014 and 2015) with 

2016 enrollee-level EDGE data. The 

2019 benefit year was the first 

recalibration year in which enrolleelevel EDGE data was used for this 

purpose. This approach used blended, 

or averaged, coefficients from 3 years of 

separately solved models to provide 

stability for the risk adjustment 

coefficients year-to-year, while 

reflecting the most recent years’ claims 

experience available. 

Similarly, for the 2020 benefit year, 

we propose to blend the 2 most recent 

years of enrollee-level EDGE data (2016 

and 2017) with the most recent year of 

MarketScan® data (2017) that will be 

available. This approach would 

incorporate the most recent years’ 

claims experience, and would reduce 

year-to-year changes to risk scores by 

keeping 1 year’s data consistent for the 

2019 and 2020 benefit years. It also 

would continue our efforts to recalibrate 

the risk adjustment models using actual 

data from issuers’ individual and small 

group populations and transition from 

the MarketScan® commercial database 

that approximates individual and small 

group market populations. Beginning 

with the 2021 benefit year’s 

recalibration, we expect to propose 

solely using enrollee-level EDGE data 

for model recalibration, and continuing 

to use the 3 most recent years’ data 

available for the model recalibration to 

minimize volatility in risk scores, 

particularly for rare conditions with 

small sample sizes. We seek comment 

on our proposal to determine 

coefficients for the 2020 benefit year 

based on a blend of separately solved 

coefficients from the 2016 and 2017 

benefit year enrollee-level EDGE data 

and the 2017 MarketScan® data. 

Due to the timing of this proposed 

rule, we are unable to incorporate the 

2017 MarketScan® data in the 

calculation of the proposed coefficients 

in this rule. Therefore, the coefficients 

listed below are based on the 2016 

MarketScan® data and 2016 and 2017 

benefit year enrollee-level EDGE data. 

We used the 2016 MarketScan® data for 

purposes of illustrating draft coefficients 

in this rule because our experience with 

MarketScan® data suggests that solved 

coefficients generally remain stable from 

year to year. Further, we were able to 

blend the one older year of MarketScan®

data with the 2016 and 2017 enrolleelevel EDGE data that would be used as 

part of the proposed 2020 benefit year 

recalibration. We therefore believe that 

the draft coefficients listed below 

provide a relatively close approximation 

of what could be anticipated from 

blending the 2016 and 2017 enrolleelevel EDGE data with the 2017 

MarketScan® dataset, once the 2017 

MarketScan® dataset is available. If we 


amozie on DSK3GDR082PROD with PROPOSALS1
Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 237 

24For example, see 2018 Payment Notice final 

rule, 81 FR 94058 (December 22, 2016). 

25See 83 FR 16939. 

26See http://www.gilead.com/news/pressreleases/2018/9/gilead-subsidiary-to-launchauthorized-generics-of-epclusasofosbuvirvelpatasvir-and-harvoniledipasvirsofosbuvir-for-the-treatment-of-chronichepatitis-c. 

Also see https://news.abbvie.com/news/abbviereceives-us-fda-approval-mavyretglecaprevirpibrentasvir-for-treatment-chronichepatitis-c-in-all-major-genotypes-gt-1-6-in-asshort-as-8-weeks.htm. 

27See Section 4.0, ‘‘Constraints on RXC 

Coefficients to Limit Incentives for Inappropriate 

Prescribing’’ of the Creation of the 2018 Benefit 

Year HHS-Operated Risk Adjustment Adult Models 

Draft Prescription Drug (RXCUIs) to HHS Drug 

Classes (RXCs) Crosswalk Memo. Available at, 

https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/Draft-RxC-CrosswalkMemo-9-18-17.pdf. 

28See 81 FR 94058 at 94080 and 83 FR 16930 at 

16943. 

finalize the recalibration proposal 

outlined herein and are unable to obtain 

the 2017 MarketScan® data in time for 

incorporation of coefficients in the final 

rule, consistent with 45 CFR 

153.320(b)(1)(i), and as we have done 

for certain prior benefit years,24 we 

would publish the final coefficients for 

the 2020 benefit year in guidance after 

the publication of the final rule. 

We are not proposing to make changes 

to the categories included in the HHS 

risk adjustment models for the 2020 

benefit year from those finalized in the 

2019 benefit year models. That is, we 

propose to maintain the same age, sex, 

enrollment duration, HCC, RXC, and 

severity categories for the 2020 benefit 

year models as those used for the 2019 

benefit year models.25 However, we are 

proposing to make a pricing adjustment 

for one RXC coefficient for the 2020 

benefit year adult models. We are 

cognizant that issuers might seek to 

influence provider prescribing patterns 

if a drug claim can trigger a large 

increase in an enrollee’s risk score, and 

therefore, make the risk adjustment 

transfer results more favorable for the 

issuer. After reviewing the significant 

pricing changes in Hepatitis C drugs,26

and consistent with our treatment of 

other RXCs where we constrain the RXC 

coefficient to the average cost of the 

drugs in the category,27 we propose to 

make a pricing adjustment to the 

Hepatitis C RXC to mitigate 

overprescribing incentives in the 2020 

benefit year adult models. For the RXC 

coefficients listed in Table 1 of this 

proposed rule, we constrained the 

Hepatitis C coefficient to the average 

expected costs of Hepatitis C drugs. This 

has the material effect of reducing the 

Hepatitis C RXC, and the RXC–HCC 

interaction coefficients. For the final 

2020 benefit year Hepatitis C factors in 

the adult models, we propose to make 

an adjustment to the plan liability 

associated with Hepatitis C drugs to 

reflect future market pricing of Hepatitis 

C drugs before solving for the adult 

model coefficients; applying an 

adjustment to the plan liability would 

ensure that enrollees can continue to 

receive incremental credit for having 

both the RXC and HCC for Hepatitis C, 

and allow for differential plan liability 

across metal levels. 

We seek comment on these proposals. 

We also seek comment on ways to better 

anticipate and more precisely adjust the 

drug categories in the HHS risk 

adjustment adult models for the rapidly 

changing drug prices, and the plan 

liability expenditures calculation in all 

of the HHS risk adjustment models for 

the rebates, discounts and price 

concessions that are passed through to 

the plans. 

We note that for HCCs that have 

corresponding RXCs and RXC–HCC 

interaction factors in the proposed 2020 

benefit year HHS risk adjustment 

models, we are observing year-to-year 

fluctuations in the risk score weights 

between the HCC, RXC, and RXC–HCC 

interaction factors. This fluctuation is 

mainly due to the collinearity between 

these factors, making the statistical 

models, and therefore the coefficients 

solved for these factors, sensitive to 

small changes in the data. Although the 

HCC, RXC and RXC–HCC interaction 

factors may have changed between the 

2019 benefit year final models and the 

factors displayed in this rule, the sum 

of the factors have remained relatively 

stable between recalibration updates, 

except for the deliberate changes we 

propose above to mitigate 

overprescribing incentives for certain 

drugs. 

ii. High-Cost Risk Pooling (§ 153.320) 

HHS finalized a high-cost risk pool 

adjustment in the 2018 Payment Notice 

to account for the incorporation of risk 

associated with high-cost enrollees in 

the HHS risk adjustment models. 

Specifically, we finalized adjusting the 

models for high-cost enrollees beginning 

with the 2018 benefit year by excluding 

a percentage of costs above a certain 

threshold in the calculation of enrolleelevel plan liability risk scores so that 

risk adjustment factors are calculated 

without the high-cost risk, since the 

average risk associated with HCCs and 

RXCs is better accounted for without the 

inclusion of the high-cost enrollees. In 

addition, to account for issuers’ risk 

associated with the high-cost enrollees, 

issuers receive a percentage of costs 

above the threshold (coinsurance rate). 

We set the threshold and coinsurance 

rate at a level that would continue to 

incentivize issuers to control costs 

while improving the risk prediction of 

the HHS risk adjustment models. Issuers 

with high-cost enrollees receive a 

payment for the percentage of costs 

above the threshold in their respective 

transfers. Using claims data submitted 

to the EDGE servers by issuers of risk 

adjustment covered plans, we calculate 

the total amount of paid claims costs for 

high-cost enrollees based on the 

threshold and the coinsurance rate. We 

then calculate a charge as a percentage 

of the issuers’ total premiums in the 

individual (including catastrophic and 

non-catastrophic plans and merged 

market plans) or small group markets, 

which is applied to the total transfer 

amount in each market, thus 

maintaining the balance of payments 

and charges within the HHS-operated 

risk adjustment program. We finalized a 

threshold of $1 million and a 

coinsurance rate of 60 percent across all 

states for the individual (including 

catastrophic and non-catastrophic plans 

and merged market plans) and small 

group markets for the 2018 and 2019 

benefit years.28 For the 2020 benefit year 

and beyond, we propose to maintain the 

same parameters that apply to the 2018 

and 2019 benefit years, unless amended 

through notice and comment 

rulemaking for future benefit years. We 

believe the $1 million threshold and 60 

percent coinsurance rate would result in 

total high-cost risk pool payments or 

charges nationally that are very small as 

a percentage of premiums for issuers, 

and would prevent states and issuers 

with very high-cost enrollees from 

bearing a disproportionate amount of 

unpredictable risk. Further, as noted 

previously in this proposed rule, these 

parameters are set at a level intended to 

continue to incentivize issuers to 

control costs while improving the risk 

prediction of the HHS risk adjustment 

models. Maintaining the same threshold 

and coinsurance rate from year to year 

would also help promote stability and 

predictability for issuers in rate setting. 

We seek comment on this proposal. 

iii. List of Factors To Be Employed in 

the Risk Adjustment Models (§ 153.320) 

The factors resulting from the equally 

weighted blended factors from the 2016 

MarketScan® data and the 2016 and 

2017 enrollee-level EDGE data 

separately solved models, including the 

proposed constraints for the Hepatitis C 

RXC coefficient, are shown in Tables 1, 

3, and 4. As detailed above, we used 

2016 MarketScan® data for purposes of 

illustrating coefficients in this proposed 

rule because our experience with 


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238 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

MarketScan® data suggests that solved 

coefficients generally remain stable year 

to year. We therefore believe that the 

draft factors listed below provide a 

relatively close approximation of what 

could be anticipated from blending the 

2016 and 2017 enrollee-level EDGE data 

with the 2017 MarketScan® dataset, 

once the 2017 MarketScan® dataset 

becomes available. The adult, child, and 

infant models have been truncated to 

account for the high-cost enrollee pool 

payment parameters by removing 60 

percent of costs above the $1 million 

threshold as proposed in this rule. Table 

1 contains factors for each adult model, 

including the age-sex, HCCs, RXCs, 

RXC–HCC interactions, and enrollment 

duration coefficients. 

Table 2 contains the HHS HCCs in the 

severity illness indicator variable. Table 

3 contains the factors for each child 

model. Table 4 contains the factors for 

each infant model. Tables 5 and 6 

contain the HCCs included in the infant 

model maturity and severity categories, 

respectively. 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

Demographic Factors 

Age 21–24, Male .......................................................................................... 0.156 0.124 0.087 0.051 0.047 

Age 25–29, Male .......................................................................................... 0.154 0.121 0.083 0.046 0.041 

Age 30–34, Male .......................................................................................... 0.187 0.147 0.102 0.057 0.051 

Age 35–39, Male .......................................................................................... 0.221 0.174 0.120 0.066 0.060 

Age 40–44, Male .......................................................................................... 0.263 0.211 0.150 0.089 0.082 

Age 45–49, Male .......................................................................................... 0.307 0.247 0.180 0.111 0.103 

Age 50–54, Male .......................................................................................... 0.391 0.322 0.242 0.161 0.151 

Age 55–59, Male .......................................................................................... 0.438 0.360 0.273 0.183 0.172 

Age 60–64, Male .......................................................................................... 0.479 0.392 0.294 0.194 0.181 

Age 21–24, Female ..................................................................................... 0.237 0.189 0.128 0.068 0.061 

Age 25–29, Female ..................................................................................... 0.267 0.213 0.145 0.078 0.069 

Age 30–34, Female ..................................................................................... 0.357 0.290 0.213 0.136 0.127 

Age 35–39, Female ..................................................................................... 0.428 0.352 0.268 0.186 0.176 

Age 40–44, Female ..................................................................................... 0.472 0.389 0.296 0.205 0.194 

Age 45–49, Female ..................................................................................... 0.483 0.395 0.297 0.197 0.185 

Age 50–54, Female ..................................................................................... 0.525 0.433 0.329 0.221 0.208 

Age 55–59, Female ..................................................................................... 0.500 0.408 0.302 0.192 0.178 

Age 60–64, Female ..................................................................................... 0.509 0.412 0.301 0.185 0.170 

Diagnosis Factors 

HCC001 .......................... HIV/AIDS ...................................................................................................... 4.173 3.838 3.606 3.544 3.538 

HCC002 .......................... Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock .. 7.217 7.014 6.899 6.924 6.931 

HCC003 .......................... Central Nervous System Infections, Except Viral Meningitis ...................... 5.816 5.737 5.683 5.696 5.698 

HCC004 .......................... Viral or Unspecified Meningitis .................................................................... 4.789 4.58 4.455 4.377 4.369 

HCC006 .......................... Opportunistic Infections ............................................................................... 5.865 5.794 5.748 5.709 5.703 

HCC008 .......................... Metastatic Cancer ........................................................................................ 21.512 21.036 20.714 20.742 20.746 

HCC009 .......................... Lung, Brain, and Other Severe Cancers, Including Pediatric Acute 

Lymphoid Leukemia.

11.444 11.106 10.878 10.843 10.838 

HCC010 .......................... Non-Hodgkin‘s Lymphomas and Other Cancers and Tumors .................... 5.259 5.028 4.864 4.787 4.777 

HCC011 .......................... Colorectal, Breast (Age < 50), Kidney, and Other Cancers ........................ 3.74 3.515 3.353 3.269 3.258 

HCC012 .......................... Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, 

and Other Cancers and Tumors.

2.463 2.299 2.175 2.096 2.086 

HCC013 .......................... Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and 

Tumors.

1.093 0.968 0.863 0.747 0.732 

HCC018 .......................... Pancreas Transplant Status/Complications ................................................. 3.808 3.608 3.489 3.484 3.485 

HCC019 .......................... Diabetes with Acute Complications ............................................................. 0.47 0.407 0.347 0.285 0.276 

HCC020 .......................... Diabetes with Chronic Complications .......................................................... 0.47 0.407 0.347 0.285 0.276 

HCC021 .......................... Diabetes without Complication .................................................................... 0.47 0.407 0.347 0.285 0.276 

HCC023 .......................... Protein-Calorie Malnutrition ......................................................................... 10.841 10.828 10.818 10.902 10.912 

HCC026 .......................... Mucopolysaccharidosis ................................................................................ 2.438 2.341 2.265 2.206 2.199 

HCC027 .......................... Lipidoses and Glycogenosis ........................................................................ 2.438 2.341 2.265 2.206 2.199 

HCC029 .......................... Amyloidosis, Porphyria, and Other Metabolic Disorders ............................. 2.438 2.341 2.265 2.206 2.199 

HCC030 .......................... Adrenal, Pituitary, and Other Significant Endocrine Disorders .................... 2.438 2.341 2.265 2.206 2.199 

HCC034 .......................... Liver Transplant Status/Complications ........................................................ 9.468 9.382 9.324 9.297 9.292 

HCC035 .......................... End-Stage Liver Disease ............................................................................. 4.913 4.709 4.579 4.55 4.546 

HCC036 .......................... Cirrhosis of Liver .......................................................................................... 1.267 1.147 1.066 1.003 0.995 

HCC037_1 ...................... Chronic Viral Hepatitis C ............................................................................. 0.8 0.692 0.616 0.552 0.544 

HCC037_2 ...................... Chronic Hepatitis, Other/Unspecified ........................................................... 0.8 0.692 0.616 0.552 0.544 

HCC038 .......................... Acute Liver Failure/Disease, Including Neonatal Hepatitis .......................... 4.575 4.413 4.31 4.278 4.275 

HCC041 .......................... Intestine Transplant Status/Complications .................................................. 27.645 27.629 27.621 27.643 27.65 

HCC042 .......................... Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis ................. 8.876 8.644 8.49 8.491 8.492 

HCC045 .......................... Intestinal Obstruction ................................................................................... 5.286 5.051 4.908 4.885 4.884 

HCC046 .......................... Chronic Pancreatitis ..................................................................................... 3.808 3.608 3.489 3.484 3.485 

HCC047 .......................... Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption.1.978 1.822 1.716 1.632 1.621 

HCC048 .......................... Inflammatory Bowel Disease ....................................................................... 2.851 2.668 2.531 2.44 2.428 

HCC054 .......................... Necrotizing Fasciitis ..................................................................................... 5.225 5.043 4.919 4.918 4.919 

HCC055 .......................... Bone/Joint/Muscle Infections/Necrosis ........................................................ 5.225 5.043 4.919 4.918 4.919 

HCC056 .......................... Rheumatoid Arthritis and Specified Autoimmune Disorders ....................... 4.286 4.06 3.896 3.848 3.842 

HCC057 .......................... Systemic Lupus Erythematosus and Other Autoimmune Disorders ........... 0.839 0.726 0.63 0.516 0.5 

HCC061 .......................... Osteogenesis Imperfecta and Other Osteodystrophies ............................... 2.625 2.441 2.308 2.229 2.218 

HCC062 .......................... Congenital/Developmental Skeletal and Connective Tissue Disorders ...... 2.625 2.441 2.308 2.229 2.218 

HCC063 .......................... Cleft Lip/Cleft Palate .................................................................................... 1.863 1.716 1.608 1.52 1.511 

HCC066 .......................... Hemophilia ................................................................................................... 62.079 61.707 61.443 61.446 61.447 

HCC067 .......................... Myelodysplastic Syndromes and Myelofibrosis ........................................... 11.971 11.848 11.764 11.754 11.752 


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Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 239 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

HCC068 .......................... Aplastic Anemia ........................................................................................... 11.971 11.848 11.764 11.754 11.752 

HCC069 .......................... Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn ..... 6.945 6.842 6.766 6.732 6.728 

HCC070 .......................... Sickle Cell Anemia (Hb-SS) ......................................................................... 6.945 6.842 6.766 6.732 6.728 

HCC071 .......................... Thalassemia Major ....................................................................................... 6.945 6.842 6.766 6.732 6.728 

HCC073 .......................... Combined and Other Severe Immunodeficiencies ...................................... 4.768 4.642 4.557 4.547 4.545 

HCC074 .......................... Disorders of the Immune Mechanism .......................................................... 4.768 4.642 4.557 4.547 4.545 

HCC075 .......................... Coagulation Defects and Other Specified Hematological Disorders ........... 2.804 2.716 2.651 2.614 2.609 

HCC081 .......................... Drug Psychosis ............................................................................................ 3.383 3.152 2.985 2.848 2.829 

HCC082 .......................... Drug Dependence ........................................................................................ 3.383 3.152 2.985 2.848 2.829 

HCC087 .......................... Schizophrenia .............................................................................................. 2.833 2.599 2.438 2.332 2.319 

HCC088 .......................... Major Depressive and Bipolar Disorders ..................................................... 1.686 1.518 1.389 1.263 1.246 

HCC089 .......................... Reactive and Unspecified Psychosis, Delusional Disorders ....................... 1.633 1.484 1.369 1.247 1.23 

HCC090 .......................... Personality Disorders ................................................................................... 1.171 1.053 0.943 0.814 0.797 

HCC094 .......................... Anorexia/Bulimia Nervosa ............................................................................ 2.484 2.323 2.199 2.115 2.103 

HCC096 .......................... Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes ........... 5.256 5.16 5.089 5.029 5.02 

HCC097 .......................... Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes.1.431 1.337 1.26 1.192 1.184 

HCC102 .......................... Autistic Disorder ........................................................................................... 1.171 1.053 0.943 0.814 0.797 

HCC103 .......................... Pervasive Developmental Disorders, Except Autistic Disorder ................... 1.171 1.053 0.943 0.814 0.797 

HCC106 .......................... Traumatic Complete Lesion Cervical Spinal Cord ....................................... 10.509 10.376 10.285 10.261 10.258 

HCC107 .......................... Quadriplegia ................................................................................................. 10.509 10.376 10.285 10.261 10.258 

HCC108 .......................... Traumatic Complete Lesion Dorsal Spinal Cord ......................................... 7.28 7.122 7.013 6.977 6.971 

HCC109 .......................... Paraplegia .................................................................................................... 7.28 7.122 7.013 6.977 6.971 

HCC110 .......................... Spinal Cord Disorders/Injuries ..................................................................... 5.144 4.923 4.775 4.733 4.727 

HCC111 .......................... Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease ........ 1.157 0.987 0.899 0.821 0.811 

HCC112 .......................... Quadriplegic Cerebral Palsy ........................................................................ 0.544 0.472 0.434 0.412 0.41 

HCC113 .......................... Cerebral Palsy, Except Quadriplegic ........................................................... 0.014 0 0 0 0 

HCC114 .......................... Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies.0.719 0.598 0.512 0.443 0.434 

HCC115 .......................... Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy.5.452 5.328 5.247 5.234 5.232 

HCC117 .......................... Muscular Dystrophy ..................................................................................... 1.931 1.791 1.692 1.594 1.579 

HCC118 .......................... Multiple Sclerosis ......................................................................................... 3.977 3.768 3.619 3.539 3.528 

HCC119 .......................... Parkinson’s, Huntington’s, and Spinocerebellar Disease, and Other 

Neurodegenerative Disorders.

1.931 1.791 1.692 1.594 1.579 

HCC120 .......................... Seizure Disorders and Convulsions ............................................................ 1.272 1.127 1.02 0.922 0.909 

HCC121 .......................... Hydrocephalus ............................................................................................. 7.157 7.057 6.982 6.966 6.964 

HCC122 .......................... Non-Traumatic Coma, and Brain Compression/Anoxic Damage ................ 7.845 7.701 7.598 7.581 7.578 

HCC125 .......................... Respirator Dependence/Tracheostomy Status ............................................ 24.729 24.677 24.64 24.727 24.736 

HCC126 .......................... Respiratory Arrest ........................................................................................ 7.301 7.135 7.037 7.105 7.117 

HCC127 .......................... Cardio-Respiratory Failure and Shock, Including Respiratory Distress 

Syndromes.

7.301 7.135 7.037 7.105 7.117 

HCC128 .......................... Heart Assistive Device/Artificial Heart ......................................................... 26.627 26.441 26.323 26.356 26.362 

HCC129 .......................... Heart Transplant .......................................................................................... 26.627 26.441 26.323 26.356 26.362 

HCC130 .......................... Congestive Heart Failure ............................................................................. 2.564 2.466 2.4 2.387 2.387 

HCC131 .......................... Acute Myocardial Infarction ......................................................................... 6.677 6.408 6.236 6.283 6.292 

HCC132 .......................... Unstable Angina and Other Acute Ischemic Heart Disease ....................... 4.921 4.63 4.463 4.448 4.449 

HCC135 .......................... Heart Infection/Inflammation, Except Rheumatic ........................................ 5.682 5.566 5.487 5.459 5.456 

HCC142 .......................... Specified Heart Arrhythmias ........................................................................ 2.439 2.304 2.205 2.133 2.125 

HCC145 .......................... Intracranial Hemorrhage .............................................................................. 7.172 6.911 6.743 6.701 6.697 

HCC146 .......................... Ischemic or Unspecified Stroke ................................................................... 1.917 1.769 1.684 1.641 1.637 

HCC149 .......................... Cerebral Aneurysm and Arteriovenous Malformation .................................. 2.665 2.491 2.375 2.295 2.285 

HCC150 .......................... Hemiplegia/Hemiparesis .............................................................................. 4.306 4.195 4.129 4.172 4.18 

HCC151 .......................... Monoplegia, Other Paralytic Syndromes ..................................................... 3.069 2.941 2.854 2.806 2.8 

HCC153 .......................... Atherosclerosis of the Extremities with Ulceration or Gangrene ................. 8.757 8.663 8.604 8.68 8.691 

HCC154 .......................... Vascular Disease with Complications .......................................................... 6.185 6.039 5.939 5.915 5.912 

HCC156 .......................... Pulmonary Embolism and Deep Vein Thrombosis ...................................... 3.378 3.232 3.131 3.06 3.051 

HCC158 .......................... Lung Transplant Status/Complications ........................................................ 22.316 22.217 22.149 22.211 22.218 

HCC159 .......................... Cystic Fibrosis .............................................................................................. 6.742 6.485 6.296 6.272 6.269 

HCC160 .......................... Chronic Obstructive Pulmonary Disease, Including Bronchiectasis ............ 0.871 0.764 0.671 0.572 0.559 

HCC161 .......................... Asthma ......................................................................................................... 0.871 0.764 0.671 0.572 0.559 

HCC162 .......................... Fibrosis of Lung and Other Lung Disorders ................................................ 1.939 1.836 1.768 1.717 1.709 

HCC163 .......................... Aspiration and Specified Bacterial Pneumonias and Other Severe Lung 

Infections.

6.337 6.305 6.282 6.282 6.281 

HCC183 .......................... Kidney Transplant Status ............................................................................. 6.199 6.014 5.894 5.835 5.84 

HCC184 .......................... End Stage Renal Disease ........................................................................... 25.151 24.907 24.748 24.906 25 

HCC187 .......................... Chronic Kidney Disease, Stage 5 ................................................................ 0.89 0.843 0.815 0.826 0.834 

HCC188 .......................... Chronic Kidney Disease, Stage 4 ................................................................ 0.89 0.843 0.815 0.826 0.834 

HCC203 .......................... Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism.1.003 0.871 0.747 0.556 0.528 

HCC204 .......................... Miscarriage with Complications ................................................................... 1.003 0.871 0.747 0.556 0.528 

HCC205 .......................... Miscarriage with No or Minor Complications ............................................... 1.003 0.871 0.747 0.556 0.528 

HCC207 .......................... Completed Pregnancy With Major Complications ....................................... 3.267 2.869 2.658 2.336 2.295 

HCC208 .......................... Completed Pregnancy With Complications ................................................. 3.267 2.869 2.658 2.336 2.295 

HCC209 .......................... Completed Pregnancy with No or Minor Complications .............................. 3.267 2.869 2.658 2.336 2.295 

HCC217 .......................... Chronic Ulcer of Skin, Except Pressure ...................................................... 1.925 1.819 1.75 1.725 1.722 

HCC226 .......................... Hip Fractures and Pathological Vertebral or Humerus Fractures ............... 8.32 8.091 7.941 7.959 7.961 

HCC227 .......................... Pathological Fractures, Except of Vertebrae, Hip, or Humerus .................. 6.002 5.848 5.746 5.709 5.704 

HCC251 .......................... Stem Cell, Including Bone Marrow, Transplant Status/Complications ........ 25.922 25.916 25.908 25.939 25.943 

HCC253 .......................... Artificial Openings for Feeding or Elimination ............................................. 7.612 7.528 7.472 7.499 7.503 

HCC254 .......................... Amputation Status, Lower Limb/Amputation Complications ........................ 2.739 2.619 2.547 2.555 2.558 


amozie on DSK3GDR082PROD with PROPOSALS1
240 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

Interaction Factors 

SEVERE x HCC006 ....... Severe illness x Opportunistic Infections ..................................................... 6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC008 ....... Severe illness x Metastatic Cancer ............................................................. 6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC009 ....... Severe illness x Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia.6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC010 ....... Severe illness x Non-Hodgkin’s Lymphomas and Other Cancers and Tumors.6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC115 ....... Severe illness x Myasthenia Gravis/Myoneural Disorders and GuillainBarre Syndrome/Inflammatory and Toxic Neuropathy.6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC135 ....... Severe illness x Heart Infection/Inflammation, Except Rheumatic .............. 6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC145 ....... Severe illness x Intracranial Hemorrhage .................................................... 6.689 6.895 7.031 7.192 7.212 

SEVERE x G06 .............. Severe illness x HCC group G06 (G06 is HCC Group 6 which includes 

the following HCCs in the blood disease category: 67, 68).

6.689 6.895 7.031 7.192 7.212 

SEVERE x G08 .............. Severe illness x HCC group G08 (G08 is HCC Group 8 which includes 

the following HCCs in the blood disease category: 73, 74).

6.689 6.895 7.031 7.192 7.212 

SEVERE x HCC035 ....... Severe illness x End-Stage Liver Disease .................................................. 0.752 0.815 0.857 0.997 1.014 

SEVERE x HCC038 ....... Severe illness x Acute Liver Failure/Disease, Including Neonatal Hepatitis 0.752 0.815 0.857 0.997 1.014 

SEVERE x HCC153 ....... Severe illness x Atherosclerosis of the Extremities with Ulceration or 

Gangrene.

0.752 0.815 0.857 0.997 1.014 

SEVERE x HCC154 ....... Severe illness x Vascular Disease with Complications ............................... 0.752 0.815 0.857 0.997 1.014 

SEVERE x HCC163 ....... Severe illness x Aspiration and Specified Bacterial Pneumonias and 

Other Severe Lung Infections.

0.752 0.815 0.857 0.997 1.014 

SEVERE x HCC253 ....... Severe illness x Artificial Openings for Feeding or Elimination ................... 0.752 0.815 0.857 0.997 1.014 

SEVERE x G03 .............. Severe illness x HCC group G03 (G03 is HCC Group 3 which includes 

the following HCCs in the musculoskeletal disease category: 54, 55).

0.752 0.815 0.857 0.997 1.014 

Enrollment Duration Factors 

1 month of enrollment .................................................................................. 0.320 0.282 0.254 0.239 0.237 

2 months of enrollment ................................................................................ 0.284 0.247 0.221 0.207 0.206 

3 months of enrollment ................................................................................ 0.270 0.235 0.208 0.194 0.192 

4 months of enrollment ................................................................................ 0.235 0.204 0.177 0.164 0.163 

5 months of enrollment ................................................................................ 0.206 0.178 0.152 0.138 0.137 

6 months of enrollment ................................................................................ 0.182 0.158 0.136 0.123 0.121 

7 months of enrollment ................................................................................ 0.139 0.120 0.101 0.090 0.089 

8 months of enrollment ................................................................................ 0.100 0.086 0.072 0.063 0.062 

9 months of enrollment ................................................................................ 0.059 0.051 0.042 0.037 0.036 

10 months of enrollment .............................................................................. 0.024 0.021 0.019 0.017 0.016 

11 months of enrollment .............................................................................. 0.024 0.021 0.019 0.017 0.016 

Prescription Drug Factors 

RXC 01 ........................... Anti-HIV Agents ........................................................................................... 7.550 6.937 6.500 6.183 6.145 

RXC 02 ........................... Anti-Hepatitis C (HCV) Agents .................................................................... 8.134 8.134 8.134 8.134 8.134 

RXC 03 ........................... Antiarrhythmics ............................................................................................ 0.128 0.117 0.109 0.074 0.057 

RXC 04 ........................... Phosphate Binders ....................................................................................... 1.989 1.977 1.956 1.911 1.766 

RXC 05 ........................... Inflammatory Bowel Disease Agents ........................................................... 1.699 1.542 1.421 1.246 1.221 

RXC 06 ........................... Insulin ........................................................................................................... 1.754 1.586 1.411 1.217 1.191 

RXC 07 ........................... Anti-Diabetic Agents, Except Insulin and Metformin Only ........................... 0.696 0.595 0.500 0.362 0.342 

RXC 08 ........................... Multiple Sclerosis Agents ............................................................................. 20.745 19.805 19.185 19.063 19.046 

RXC 09 ........................... Immune Suppressants and Immunomodulators .......................................... 13.889 13.300 12.918 13.002 13.015 

RXC 10 ........................... Cystic Fibrosis Agents ................................................................................. 12.787 12.411 12.191 12.224 12.231 

RXC 01 x HCC001 ......... Additional effect for enrollees with RXC 01 (Anti-HIV Agents) and HCC 

001 (HIV/AIDS).

¥0.897 ¥0.571 ¥0.320 0.104 0.155 

RXC 02 x HCC037_1, 

036, 035, 034.

Additional effect for enrollees with RXC 02 (Anti-Hepatitis C (HCV) 

Agents) and (HCC 037_1 (Chronic Viral Hepatitis C) or 036 (Cirrhosis 

of Liver) or 035 (End-Stage Liver Disease) or 034 (Liver Transplant 

Status/Complications)).

0.263 0.484 0.641 0.712 0.720 

RXC 03 x HCC142 ......... Additional effect for enrollees with RxC 03 (Antiarrhythmics) and HCC 

142 (Specified Heart Arrhythmias).

0.000 0.000 0.000 0.000 0.000 

RXC 04 x HCC184, 183, 

187, 188.

Additional effect for enrollees with RxC 04 (Phosphate Binders) and 

(HCC 184 (End Stage Renal Disease) or 183 (Kidney Transplant Status) or 187 (Chronic Kidney Disease, Stage 5) or 188 (Chronic Kidney 

Disease, Severe Stage 4)).

0.000 0.000 0.000 0.000 0.000 

RXC 05 x HCC048, 041 Additional effect for enrollees with RxC 05 (Inflammatory Bowel Disease 

Agents) and (HCC 048 (Inflammatory Bowel Disease) or 041 (Intestine 

Transplant Status/Complications)).

¥0.889 ¥0.828 ¥0.759 ¥0.700 ¥0.692 

RXC 06 x HCC018, 019, 

020, 021.

Additional effect for enrollees with RxC 06 (Insulin) and (HCC 018 (Pancreas Transplant Status/Complications) or 019 (Diabetes with Acute 

Complications) or 020 (Diabetes with Chronic Complications) or 021 

(Diabetes without Complication)).

0.373 0.332 0.391 0.440 0.445 

RXC 07 x HCC018, 019, 

020, 021.

Additional effect for enrollees with RxC 07 (Anti-Diabetic Agents, Except 

Insulin and Metformin Only) and (HCC 018 (Pancreas Transplant Status/Complications) or 019 (Diabetes with Acute Complications) or 020 

(Diabetes with Chronic Complications) or 021 (Diabetes without Complication)).

¥0.322 ¥0.278 ¥0.229 ¥0.187 ¥0.182 

RXC 08 x HCC118 ......... Additional effect for enrollees with RxC 08 (Multiple Sclerosis Agents) 

and HCC 118 (Multiple Sclerosis).

¥1.470 ¥0.952 ¥0.608 ¥0.303 ¥0.259 


amozie on DSK3GDR082PROD with PROPOSALS1
Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 241 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

RXC 09 x HCC056 or 

057 and 048 or 041.

Additional effect for enrollees with RxC 09 (Immune Suppressants and 

Immunomodulators) and (HCC 048 (Inflammatory Bowel Disease) or 

041 (Intestine Transplant Status/Complications)) and (HCC 056 (Rheumatoid Arthritis and Specified Autoimmune Disorders) or 057 (Systemic 

Lupus Erythematosus and Other Autoimmune Disorders)).

0.620 0.735 0.828 0.916 0.928 

RXC 09 x HCC056 ......... Additional effect for enrollees with RxC 09 (Immune Suppressants and 

Immunomodulators) and HCC 056 (Rheumatoid Arthritis and Specified 

Autoimmune Disorders).

¥4.286 ¥4.060 ¥3.896 ¥3.848 ¥3.842 

RXC 09 x HCC057 ......... Additional effect for enrollees with RxC 09 (Immune Suppressants and 

Immunomodulators) and HCC 057 (Systemic Lupus Erythematosus 

and Other Autoimmune Disorders).

¥0.839 ¥0.726 ¥0.630 ¥0.516 ¥0.500 

RXC 09 x HCC048, 041 Additional effect for enrollees with RxC 09 (Immune Suppressants and 

Immunomodulators) and (HCC 048 (Inflammatory Bowel Disease) or 

041 (Intestine Transplant Status/Complications)).

¥1.853 ¥1.676 ¥1.573 ¥1.500 ¥1.491 

RXC 10 x HCC159, 158 Additional effect for enrollees with RxC 10 (Cystic Fibrosis Agents) and 

(HCC 159 (Cystic Fibrosis) or 158 (Lung Transplant Status/Complications)).

48.353 48.538 48.622 48.768 48.783 

TABLE 2—HHS HCCS IN THE SEVERITY ILLNESS INDICATOR VARIABLE

HCC/description 

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock. 

Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis. 

Seizure Disorders and Convulsions. 

Non-Traumatic Coma, Brain Compression/Anoxic Damage. 

Respirator Dependence/Tracheostomy Status. 

Respiratory Arrest. 

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes. 

Pulmonary Embolism and Deep Vein Thrombosis. 

TABLE 3—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR

Factor Platinum Gold Silver Bronze Catastrophic 

Demographic Factors 

Age 2–4, Male ...................................................................... 0.202 0.159 0.111 0.067 0.062 

Age 5–9, Male ...................................................................... 0.142 0.107 0.067 0.035 0.031 

Age 10–14, Male .................................................................. 0.182 0.147 0.103 0.068 0.065 

Age 15–20, Male .................................................................. 0.239 0.195 0.142 0.096 0.091 

Age 2–4, Female ................................................................. 0.153 0.118 0.080 0.048 0.044 

Age 5–9, Female ................................................................. 0.094 0.065 0.033 0.009 0.007 

Age 10–14, Female ............................................................. 0.172 0.137 0.097 0.066 0.063 

Age 15–20, Female ............................................................. 0.259 0.205 0.140 0.080 0.073 

Diagnosis Factors 

HIV/AIDS .............................................................................. 4.611 4.183 3.893 3.780 3.768 

Septicemia, Sepsis, Systemic Inflammatory Response 

Syndrome/Shock .............................................................. 12.287 12.089 11.976 11.970 11.972 

Central Nervous System Infections, Except Viral Meningitis ................................................................................... 7.545 7.385 7.283 7.288 7.289 

Viral or Unspecified Meningitis ............................................ 2.963 2.733 2.588 2.429 2.408 

Opportunistic Infections ....................................................... 13.893 13.845 13.807 13.777 13.772 

Metastatic Cancer ................................................................ 33.270 33.040 32.867 32.878 32.878 

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ....................................... 8.930 8.681 8.496 8.406 8.394 

Non-Hodgkin‘s Lymphomas and Other Cancers and Tumors .................................................................................. 7.078 6.840 6.663 6.554 6.539 

Colorectal, Breast (Age < 50), Kidney, and Other Cancers 3.504 3.333 3.200 3.084 3.067 

Breast (Age 50+) and Prostate Cancer, Benign/Uncertain 

Brain Tumors, and Other Cancers and Tumors .............. 3.504 3.333 3.200 3.084 3.067 

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other 

Cancers and Tumors ........................................................ 0.980 0.860 0.756 0.641 0.625 

Pancreas Transplant Status/Complications ......................... 25.040 24.763 24.576 24.596 24.599 

Diabetes with Acute Complications ..................................... 2.657 2.318 2.114 1.837 1.803 

Diabetes with Chronic Complications .................................. 2.657 2.318 2.114 1.837 1.803 

Diabetes without Complication ............................................ 2.657 2.318 2.114 1.837 1.803 

Protein-Calorie Malnutrition ................................................. 14.512 14.408 14.335 14.372 14.376 

Mucopolysaccharidosis ........................................................ 6.393 6.178 6.015 5.966 5.960 

Lipidoses and Glycogenosis ................................................ 6.393 6.178 6.015 5.966 5.960 

Congenital Metabolic Disorders, Not Elsewhere Classified 6.393 6.178 6.015 5.966 5.960 


amozie on DSK3GDR082PROD with PROPOSALS1
242 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

TABLE 3—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Amyloidosis, Porphyria, and Other Metabolic Disorders ..... 6.393 6.178 6.015 5.966 5.960 

Adrenal, Pituitary, and Other Significant Endocrine Disorders ............................................................................... 6.393 6.178 6.015 5.966 5.960 

Liver Transplant Status/Complications ................................ 25.040 24.763 24.576 24.596 24.599 

End-Stage Liver Disease ..................................................... 16.435 16.242 16.115 16.121 16.122 

Cirrhosis of Liver .................................................................. 5.140 5.020 4.929 4.917 4.916 

Chronic Viral Hepatitis C ..................................................... 5.140 5.020 4.929 4.917 4.916 

Chronic Hepatitis, Other/Unspecified ................................... 0.351 0.272 0.207 0.174 0.171 

Acute Liver Failure/Disease, Including Neonatal Hepatitis 10.604 10.503 10.440 10.464 10.467 

Intestine Transplant Status/Complications .......................... 25.040 24.763 24.576 24.596 24.599 

Peritonitis/Gastrointestinal Perforation/Necrotizing 

Enterocolitis ...................................................................... 11.608 11.319 11.124 11.105 11.105 

Intestinal Obstruction ........................................................... 4.466 4.269 4.121 4.015 4.002 

Chronic Pancreatitis ............................................................. 11.424 11.182 11.022 11.002 10.998 

Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption ........................................................... 2.537 2.423 2.328 2.237 2.224 

Inflammatory Bowel Disease ............................................... 8.035 7.623 7.338 7.231 7.216 

Necrotizing Fasciitis ............................................................. 3.791 3.578 3.421 3.339 3.329 

Bone/Joint/Muscle Infections/Necrosis ................................ 3.791 3.578 3.421 3.339 3.329 

Rheumatoid Arthritis and Specified Autoimmune Disorders 4.536 4.289 4.098 4.012 4.003 

Systemic Lupus Erythematosus and Other Autoimmune 

Disorders .......................................................................... 0.625 0.508 0.403 0.297 0.287 

Osteogenesis Imperfecta and Other Osteodystrophies ...... 1.254 1.144 1.050 0.970 0.959 

Congenital/Developmental Skeletal and Connective Tissue 

Disorders .......................................................................... 1.254 1.144 1.050 0.970 0.959 

Cleft Lip/Cleft Palate ............................................................ 1.308 1.132 1.003 0.875 0.859 

Hemophilia ........................................................................... 63.950 63.414 63.032 62.993 62.988 

Myelodysplastic Syndromes and Myelofibrosis ................... 15.020 14.898 14.815 14.791 14.788 

Aplastic Anemia ................................................................... 15.020 14.898 14.815 14.791 14.788 

Acquired Hemolytic Anemia, Including Hemolytic Disease 

of Newborn ....................................................................... 6.294 6.099 5.957 5.876 5.866 

Sickle Cell Anemia (Hb-SS) ................................................. 6.294 6.099 5.957 5.876 5.866 

Thalassemia Major ............................................................... 6.294 6.099 5.957 5.876 5.866 

Combined and Other Severe Immunodeficiencies .............. 5.190 5.046 4.940 4.889 4.881 

Disorders of the Immune Mechanism .................................. 5.190 5.046 4.940 4.889 4.881 

Coagulation Defects and Other Specified Hematological 

Disorders .......................................................................... 4.235 4.117 4.023 3.948 3.938 

Drug Psychosis .................................................................... 5.458 5.181 5.004 4.916 4.907 

Drug Dependence ................................................................ 5.458 5.181 5.004 4.916 4.907 

Schizophrenia ...................................................................... 4.740 4.391 4.152 4.003 3.982 

Major Depressive and Bipolar Disorders ............................. 2.636 2.401 2.219 2.044 2.021 

Reactive and Unspecified Psychosis, Delusional Disorders 2.409 2.199 2.026 1.860 1.838 

Personality Disorders ........................................................... 0.495 0.398 0.294 0.162 0.144 

Anorexia/Bulimia Nervosa .................................................... 2.145 1.951 1.799 1.696 1.682 

Prader-Willi, Patau, Edwards, and Autosomal Deletion 

Syndromes ....................................................................... 1.587 1.444 1.343 1.261 1.250 

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes ................ 1.587 1.444 1.343 1.261 1.250 

Autistic Disorder ................................................................... 2.409 2.199 2.026 1.860 1.838 

Pervasive Developmental Disorders, Except Autistic Disorder ................................................................................. 0.517 0.433 0.337 0.221 0.206 

Traumatic Complete Lesion Cervical Spinal Cord .............. 8.958 8.915 8.889 8.959 8.970 

Quadriplegia ......................................................................... 8.958 8.915 8.889 8.959 8.970 

Traumatic Complete Lesion Dorsal Spinal Cord ................. 6.394 6.185 6.048 6.010 6.003 

Paraplegia ............................................................................ 6.394 6.185 6.048 6.010 6.003 

Spinal Cord Disorders/Injuries ............................................. 3.906 3.725 3.590 3.500 3.486 

Amyotrophic Lateral Sclerosis and Other Anterior Horn 

Cell Disease ..................................................................... 14.768 14.524 14.336 14.254 14.245 

Quadriplegic Cerebral Palsy ................................................ 2.129 1.935 1.833 1.835 1.837 

Cerebral Palsy, Except Quadriplegic ................................... 0.075 0.023 0.000 0.000 0.000 

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies ............................................................. 1.530 1.401 1.310 1.242 1.234 

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre 

Syndrome/Inflammatory and Toxic Neuropathy ............... 10.932 10.765 10.651 10.665 10.666 

Muscular Dystrophy ............................................................. 2.931 2.750 2.624 2.513 2.500 

Multiple Sclerosis ................................................................. 10.587 10.201 9.935 9.905 9.901 

Parkinson‘s, Huntington‘s, and Spinocerebellar Disease, 

and Other Neurodegenerative Disorders ......................... 2.931 2.750 2.624 2.513 2.500 

Seizure Disorders and Convulsions .................................... 2.059 1.902 1.765 1.624 1.605 

Hydrocephalus ..................................................................... 4.187 4.075 3.994 3.966 3.963 

Non-Traumatic Coma, and Brain Compression/Anoxic 

Damage ............................................................................ 5.415 5.281 5.178 5.128 5.122 


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TABLE 3—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Respirator Dependence/Tracheostomy Status .................... 31.093 30.989 30.935 31.080 31.098 

Respiratory Arrest ................................................................ 9.405 9.149 8.993 8.948 8.944 

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes ............................................ 9.405 9.149 8.993 8.948 8.944 

Heart Assistive Device/Artificial Heart ................................. 25.040 24.763 24.576 24.596 24.599 

Heart Transplant .................................................................. 25.040 24.763 24.576 24.596 24.599 

Congestive Heart Failure ..................................................... 6.029 5.921 5.840 5.798 5.791 

Acute Myocardial Infarction ................................................. 7.344 7.228 7.177 7.172 7.172 

Unstable Angina and Other Acute Ischemic Heart Disease 3.504 3.402 3.332 3.315 3.316 

Heart Infection/Inflammation, Except Rheumatic ................ 11.511 11.410 11.340 11.333 11.332 

Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders .................................................... 3.677 3.535 3.395 3.291 3.277 

Major Congenital Heart/Circulatory Disorders ..................... 1.134 1.035 0.919 0.811 0.798 

Atrial and Ventricular Septal Defects, Patent Ductus 

Arteriosus, and Other Congenital Heart/Circulatory Disorders ............................................................................... 0.881 0.792 0.696 0.609 0.598 

Specified Heart Arrhythmias ................................................ 3.476 3.315 3.184 3.105 3.094 

Intracranial Hemorrhage ...................................................... 12.102 11.890 11.755 11.749 11.750 

Ischemic or Unspecified Stroke ........................................... 3.871 3.785 3.733 3.727 3.729 

Cerebral Aneurysm and Arteriovenous Malformation ......... 3.267 3.093 2.973 2.888 2.878 

Hemiplegia/Hemiparesis ...................................................... 4.268 4.144 4.058 3.991 3.981 

Monoplegia, Other Paralytic Syndromes ............................. 3.081 2.919 2.807 2.735 2.723 

Atherosclerosis of the Extremities with Ulceration or Gangrene ................................................................................ 12.857 12.610 12.435 12.371 12.360 

Vascular Disease with Complications .................................. 9.797 9.675 9.591 9.613 9.616 

Pulmonary Embolism and Deep Vein Thrombosis .............. 15.445 15.336 15.272 15.286 15.289 

Lung Transplant Status/Complications ................................ 25.040 24.763 24.576 24.596 24.599 

Cystic Fibrosis ...................................................................... 25.040 24.763 24.576 24.596 24.599 

Chronic Obstructive Pulmonary Disease, Including 

Bronchiectasis .................................................................. 0.374 0.308 0.224 0.138 0.128 

Asthma ................................................................................. 0.374 0.308 0.224 0.138 0.128 

Fibrosis of Lung and Other Lung Disorders ........................ 2.370 2.276 2.185 2.110 2.100 

Aspiration and Specified Bacterial Pneumonias and Other 

Severe Lung Infections .................................................... 6.769 6.708 6.661 6.681 6.683 

Kidney Transplant Status ..................................................... 10.730 10.468 10.302 10.253 10.248 

End Stage Renal Disease ................................................... 30.597 30.449 30.350 30.434 30.447 

Chronic Kidney Disease, Stage 5 ........................................ 4.660 4.547 4.456 4.378 4.368 

Chronic Kidney Disease, Severe (Stage 4) ......................... 4.660 4.547 4.456 4.378 4.368 

Ectopic and Molar Pregnancy, Except with Renal Failure, 

Shock, or Embolism ......................................................... 0.871 0.728 0.586 0.372 0.341 

Miscarriage with Complications ........................................... 0.871 0.728 0.586 0.372 0.341 

Miscarriage with No or Minor Complications ....................... 0.871 0.728 0.586 0.372 0.341 

Completed Pregnancy With Major Complications ............... 2.793 2.422 2.207 1.846 1.794 

Completed Pregnancy With Complications ......................... 2.793 2.422 2.207 1.846 1.794 

Completed Pregnancy with No or Minor Complications ...... 2.793 2.422 2.207 1.846 1.794 

Chronic Ulcer of Skin, Except Pressure .............................. 2.682 2.590 2.504 2.434 2.427 

Hip Fractures and Pathological Vertebral or Humerus 

Fractures .......................................................................... 6.615 6.304 6.079 5.971 5.961 

Pathological Fractures, Except of Vertebrae, Hip, or Humerus ................................................................................ 2.459 2.300 2.161 2.013 1.994 

Stem Cell, Including Bone Marrow, Transplant Status/ 

Complications ................................................................... 25.040 24.763 24.576 24.596 24.599 

Artificial Openings for Feeding or Elimination ..................... 10.982 10.855 10.790 10.886 10.900 

Amputation Status, Lower Limb/Amputation Complications 5.801 5.550 5.379 5.260 5.242 

TABLE 4—PROPOSED INFANT RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR

Group Platinum Gold Silver Bronze Catastrophic 

Extremely Immature * Severity Level 5 (Highest) ............... 235.032 233.488 232.362 232.346 232.348 

Extremely Immature * Severity Level 4 ............................... 151.475 149.762 148.512 148.339 148.323 

Extremely Immature * Severity Level 3 ............................... 32.324 31.070 30.143 29.908 29.888 

Extremely Immature * Severity Level 2 ............................... 32.324 31.070 30.143 29.908 29.888 

Extremely Immature * Severity Level 1 (Lowest) ................ 32.324 31.070 30.143 29.908 29.888 

Immature *Severity Level 5 (Highest) .................................. 147.235 145.696 144.571 144.525 144.518 

Immature *Severity Level 4 ................................................. 71.633 70.103 68.980 68.867 68.853 

Immature *Severity Level 3 ................................................. 32.324 31.070 30.143 29.908 29.888 

Immature *Severity Level 2 ................................................. 24.191 22.948 22.048 21.783 21.752 

Immature *Severity Level 1 (Lowest) .................................. 23.385 22.183 21.291 20.988 20.950 

Premature/Multiples * Severity Level 5 (Highest) ................ 103.160 101.773 100.762 100.642 100.628 

Premature/Multiples * Severity Level 4 ............................... 26.232 24.897 23.942 23.684 23.658 


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244 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

TABLE 4—PROPOSED INFANT RISK ADJUSTMENT MODEL FACTORS FOR 2020 BENEFIT YEAR—Continued 

Group Platinum Gold Silver Bronze Catastrophic 

Premature/Multiples * Severity Level 3 ............................... 13.556 12.549 11.807 11.337 11.281 

Premature/Multiples * Severity Level 2 ............................... 8.366 7.612 6.984 6.350 6.260 

Premature/Multiples * Severity Level 1 (Lowest) ................ 5.323 4.803 4.276 3.736 3.670 

Term *Severity Level 5 (Highest) ........................................ 78.324 77.140 76.266 76.059 76.035 

Term *Severity Level 4 ........................................................ 13.891 13.024 12.388 11.954 11.904 

Term *Severity Level 3 ........................................................ 5.671 5.137 4.631 4.060 3.982 

Term *Severity Level 2 ........................................................ 3.599 3.195 2.719 2.122 2.049 

Term *Severity Level 1 (Lowest) ......................................... 1.619 1.412 1.037 0.702 0.672 

Age1 *Severity Level 5 (Highest) ........................................ 56.287 55.575 55.039 54.927 54.915 

Age1 *Severity Level 4 ........................................................ 10.505 9.976 9.550 9.263 9.230 

Age1 *Severity Level 3 ........................................................ 3.079 2.821 2.586 2.384 2.360 

Age1 *Severity Level 2 ........................................................ 1.932 1.734 1.531 1.322 1.296 

Age1 *Severity Level 1 (Lowest) ......................................... 0.527 0.480 0.424 0.376 0.370 

Age 0 Male ........................................................................... 0.623 0.574 0.537 0.467 0.456 

Age 1 Male ........................................................................... 0.120 0.106 0.092 0.073 0.070 

TABLE 5—HHS HCCS INCLUDED IN INFANT MODEL MATURITY CATEGORIES

Maturity category HCC/description 

Extremely Immature ............................................ Extremely Immature Newborns, Birth weight < 500 Grams. 

Extremely Immature ............................................ Extremely Immature Newborns, Including Birth weight 500–749 Grams. 

Extremely Immature ............................................ Extremely Immature Newborns, Including Birth weight 750–999 Grams. 

Immature ............................................................. Premature Newborns, Including Birth weight 1000–1499 Grams. 

Immature ............................................................. Premature Newborns, Including Birth weight 1500–1999 Grams. 

Premature/Multiples ............................................ Premature Newborns, Including Birth weight 2000–2499 Grams. 

Premature/Multiples ............................................ Other Premature, Low Birth weight, Malnourished, or Multiple Birth Newborns. 

Term .................................................................... Term or Post-Term Singleton Newborn, Normal or High Birth weight. 

Age 1 .................................................................. All age 1 infants. 

TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES

Severity category HCC/description 

Severity Level 5 (Highest) .................................. Metastatic Cancer. 

Severity Level 5 .................................................. Pancreas Transplant Status/Complications. 

Severity Level 5 .................................................. Liver Transplant Status/Complications. 

Severity Level 5 .................................................. End-Stage Liver Disease. 

Severity Level 5 .................................................. Intestine Transplant Status/Complications. 

Severity Level 5 .................................................. Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis. 

Severity Level 5 .................................................. Respirator Dependence/Tracheostomy Status. 

Severity Level 5 .................................................. Heart Assistive Device/Artificial Heart. 

Severity Level 5 .................................................. Heart Transplant. 

Severity Level 5 .................................................. Congestive Heart Failure. 

Severity Level 5 .................................................. Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders. 

Severity Level 5 .................................................. Lung Transplant Status/Complications. 

Severity Level 5 .................................................. Kidney Transplant Status. 

Severity Level 5 .................................................. End Stage Renal Disease. 

Severity Level 5 .................................................. Stem Cell, Including Bone Marrow, Transplant Status/Complications. 

Severity Level 4 .................................................. Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock. 

Severity Level 4 .................................................. Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia. 

Severity Level 4 .................................................. Mucopolysaccharidosis. 

Severity Level 4 .................................................. Major Congenital Anomalies of Diaphragm, Abdominal Wall, and Esophagus, Age < 2. 

Severity Level 4 .................................................. Myelodysplastic Syndromes and Myelofibrosis. 

Severity Level 4 .................................................. Aplastic Anemia. 

Severity Level 4 .................................................. Combined and Other Severe Immunodeficiencies. 

Severity Level 4 .................................................. Traumatic Complete Lesion Cervical Spinal Cord. 

Severity Level 4 .................................................. Quadriplegia. 

Severity Level 4 .................................................. Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease. 

Severity Level 4 .................................................. Quadriplegic Cerebral Palsy. 

Severity Level 4 .................................................. Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic 

Neuropathy. 

Severity Level 4 .................................................. Non-Traumatic Coma, Brain Compression/Anoxic Damage. 

Severity Level 4 .................................................. Respiratory Arrest. 

Severity Level 4 .................................................. Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes. 

Severity Level 4 .................................................. Acute Myocardial Infarction. 

Severity Level 4 .................................................. Heart Infection/Inflammation, Except Rheumatic. 

Severity Level 4 .................................................. Major Congenital Heart/Circulatory Disorders. 

Severity Level 4 .................................................. Intracranial Hemorrhage. 

Severity Level 4 .................................................. Ischemic or Unspecified Stroke. 


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TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES—Continued 

Severity category HCC/description 

Severity Level 4 .................................................. Vascular Disease with Complications. 

Severity Level 4 .................................................. Pulmonary Embolism and Deep Vein Thrombosis. 

Severity Level 4 .................................................. Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections. 

Severity Level 4 .................................................. Chronic Kidney Disease, Stage 5. 

Severity Level 4 .................................................. Hip Fractures and Pathological Vertebral or Humerus Fractures. 

Severity Level 4 .................................................. Artificial Openings for Feeding or Elimination. 

Severity Level 3 .................................................. HIV/AIDS. 

Severity Level 3 .................................................. Central Nervous System Infections, Except Viral Meningitis. 

Severity Level 3 .................................................. Opportunistic Infections. 

Severity Level 3 .................................................. Non-Hodgkin’s Lymphomas and Other Cancers and Tumors. 

Severity Level 3 .................................................. Colorectal, Breast (Age < 50), Kidney and Other Cancers. 

Severity Level 3 .................................................. Breast (Age 50+), Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and 

Tumors. 

Severity Level 3 .................................................. Lipidoses and Glycogenosis. 

Severity Level 3 .................................................. Adrenal, Pituitary, and Other Significant Endocrine Disorders. 

Severity Level 3 .................................................. Acute Liver Failure/Disease, Including Neonatal Hepatitis. 

Severity Level 3 .................................................. Intestinal Obstruction. 

Severity Level 3 .................................................. Necrotizing Fasciitis. 

Severity Level 3 .................................................. Bone/Joint/Muscle Infections/Necrosis. 

Severity Level 3 .................................................. Osteogenesis Imperfecta and Other Osteodystrophies. 

Severity Level 3 .................................................. Cleft Lip/Cleft Palate. 

Severity Level 3 .................................................. Hemophilia. 

Severity Level 3 .................................................. Disorders of the Immune Mechanism. 

Severity Level 3 .................................................. Coagulation Defects and Other Specified Hematological Disorders. 

Severity Level 3 .................................................. Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes. 

Severity Level 3 .................................................. Traumatic Complete Lesion Dorsal Spinal Cord. 

Severity Level 3 .................................................. Paraplegia. 

Severity Level 3 .................................................. Spinal Cord Disorders/Injuries. 

Severity Level 3 .................................................. Cerebral Palsy, Except Quadriplegic. 

Severity Level 3 .................................................. Muscular Dystrophy. 

Severity Level 3 .................................................. Parkinson’s, Huntington’s, and Spinocerebellar Disease, and Other Neurodegenerative Disorders. 

Severity Level 3 .................................................. Hydrocephalus. 

Severity Level 3 .................................................. Unstable Angina and Other Acute Ischemic Heart Disease. 

Severity Level 3 .................................................. Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital Heart/ 

Circulatory Disorders. 

Severity Level 3 .................................................. Specified Heart Arrhythmias. 

Severity Level 3 .................................................. Cerebral Aneurysm and Arteriovenous Malformation. 

Severity Level 3 .................................................. Hemiplegia/Hemiparesis. 

Severity Level 3 .................................................. Cystic Fibrosis. 

Severity Level 3 .................................................. Fibrosis of Lung and Other Lung Disorders. 

Severity Level 3 .................................................. Pathological Fractures, Except of Vertebrae, Hip, or Humerus.

Severity Level 2 .................................................. Viral or Unspecified Meningitis. 

Severity Level 2 .................................................. Thyroid, Melanoma, Neurofibromatosis, and Other Cancers and Tumors. 

Severity Level 2 .................................................. Diabetes with Acute Complications. 

Severity Level 2 .................................................. Diabetes with Chronic Complications. 

Severity Level 2 .................................................. Diabetes without Complication. 

Severity Level 2 .................................................. Protein-Calorie Malnutrition. 

Severity Level 2 .................................................. Congenital Metabolic Disorders, Not Elsewhere Classified. 

Severity Level 2 .................................................. Amyloidosis, Porphyria, and Other Metabolic Disorders. 

Severity Level 2 .................................................. Cirrhosis of Liver. 

Severity Level 2 .................................................. Chronic Pancreatitis. 

Severity Level 2 .................................................. Inflammatory Bowel Disease. 

Severity Level 2 .................................................. Rheumatoid Arthritis and Specified Autoimmune Disorders. 

Severity Level 2 .................................................. Systemic Lupus Erythematosus and Other Autoimmune Disorders. 

Severity Level 2 .................................................. Congenital/Developmental Skeletal and Connective Tissue Disorders. 

Severity Level 2 .................................................. Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn. 

Severity Level 2 .................................................. Sickle Cell Anemia (Hb-SS). 

Severity Level 2 .................................................. Drug Psychosis. 

Severity Level 2 .................................................. Drug Dependence. 

Severity Level 2 .................................................. Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation 

Syndromes. 

Severity Level 2 .................................................. Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies. 

Severity Level 2 .................................................. Seizure Disorders and Convulsions. 

Severity Level 2 .................................................. Monoplegia, Other Paralytic Syndromes. 

Severity Level 2 .................................................. Atherosclerosis of the Extremities with Ulceration or Gangrene. 

Severity Level 2 .................................................. Chronic Obstructive Pulmonary Disease, Including Bronchiectasis. 

Severity Level 2 .................................................. Chronic Ulcer of Skin, Except Pressure. 

Severity Level 1 (Lowest) ................................... Chronic Hepatitis. 

Severity Level 1 .................................................. Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption. 

Severity Level 1 .................................................. Thalassemia Major. 

Severity Level 1 .................................................. Autistic Disorder. 


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246 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

29See 83 FR 16930 at 16953. 

30See 81 FR 12203 at 12228. 

31Winkleman, Ross and Syed Mehmud. ‘‘A 

Comparative Analysis of Claims-Based Tools for 

Health Risk Assessment.’’ Society of Actuaries. 

April 2007. 

TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES—Continued 

Severity category HCC/description 

Severity Level 1 .................................................. Pervasive Developmental Disorders, Except Autistic Disorder. 

Severity Level 1 .................................................. Multiple Sclerosis. 

Severity Level 1 .................................................. Asthma. 

Severity Level 1 .................................................. Chronic Kidney Disease, Severe (Stage 4). 

Severity Level 1 .................................................. Amputation Status, Lower Limb/Amputation Complications. 

Severity Level 1 .................................................. No Severity HCCs. 

iv. Cost-Sharing Reduction Adjustments 

We propose to continue including an 

adjustment for the receipt of costsharing reductions in the risk 

adjustment models to account for 

increased plan liability due to increased 

utilization of health care services by 

enrollees receiving cost-sharing 

reductions in all 50 states and the 

District of Columbia. For the 2020 

benefit year, to maintain stability and 

certainty for issuers, we are proposing to 

maintain the cost-sharing reduction 

factors finalized in the 2019 Payment 

Notice.29 See Table 7. We seek comment 

on this proposal. 

Consistent with the approach 

finalized in the 2017 Payment Notice,30

we will continue to use cost-sharing 

reduction adjustment factors of 1.12 for 

all Massachusetts wrap-around plans in 

the risk adjustment plan liability risk 

score calculation, as all of 

Massachusetts’ cost-sharing plan 

variations have actuarial values above 

94 percent. 

TABLE 7—COST-SHARING REDUCTION ADJUSTMENT

Household income Plan AV 

Induced 

utilization 

factor 

Silver Plan Variant Recipients 

100–150% of FPL ....................................................................... Plan Variation 94% .................................................................... 1.12 

150–200% of FPL ....................................................................... Plan Variation 87% .................................................................... 1.12 

200–250% of FPL ....................................................................... Plan Variation 73% .................................................................... 1.00 

>250% of FPL ............................................................................. Standard Plan 70% .................................................................... 1.00 

Zero Cost Sharing Recipients 

<300% of FPL ............................................................................. Platinum (90%) .......................................................................... 1.00 

<300% of FPL ............................................................................. Gold (80%) ................................................................................. 1.07 

<300% of FPL ............................................................................. Silver (70%) ............................................................................... 1.12 

<300% of FPL ............................................................................. Bronze (60%) ............................................................................. 1.15 

Limited Cost Sharing Recipients 

>300% of FPL ............................................................................. Platinum (90%) .......................................................................... 1.00 

>300% of FPL ............................................................................. Gold (80%) ................................................................................. 1.07 

>300% of FPL ............................................................................. Silver (70%) ............................................................................... 1.12 

>300% of FPL ............................................................................. Bronze (60%) ............................................................................. 1.15 

v. Model Performance Statistics 

To evaluate risk adjustment model 

performance, we examined each 

model’s R-squared statistic and 

predictive ratios. The R-squared 

statistic, which calculates the 

percentage of individual variation 

explained by a model, measures the 

predictive accuracy of the model 

overall. The predictive ratios measure 

the predictive accuracy of a model for 

different validation groups or 

subpopulations. The predictive ratio for 

each of the HHS risk adjustment models 

is the ratio of the weighted mean 

predicted plan liability for the model 

sample population to the weighted 

mean actual plan liability for the model 

sample population. The predictive ratio 

represents how well the model does on 

average at predicting plan liability for 

that subpopulation. A subpopulation 

that is predicted perfectly would have a 

predictive ratio of 1.0. For each of the 

HHS risk adjustment models, the Rsquared statistic and the predictive 

ratios are in the range of published 

estimates for concurrent risk adjustment 

models.31 Because we blended the 

coefficients from separately solved 

models based on 2016 MarketScan®

data and 2016 and 2017 enrollee-level 

EDGE data in this proposed rule, we are 

publishing the R-squared statistic for 

each model separately to verify their 

statistical validity. The R-squared 

statistic for each model is shown in 

Table 8. We intend to publish updated 

R-squared statistics to reflect results 

from the blending of the 2017 

MarketScan® and 2016 and 2017 benefit 

year enrollee-level EDGE datasets used 

to recalibrate the models for the 2020 

benefit year if the proposal is finalized 

in the final rule. 


amozie on DSK3GDR082PROD with PROPOSALS1
Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 247 

32The state payment transfer formula refers to the 

part of the HHS risk adjustment methodology that 

calculates payments and charges prior to the 

calculation of the high-cost risk pool payment and 

charge terms that apply beginning with the 2018 

benefit year. 

33For example, see Standards Related to 

Reinsurance, Risk Corridors, and Risk Adjustment, 

Proposed Rule, 76 FR 41938 (July 15, 2011); 

Standards Related to Reinsurance, Risk Corridors, 

and Risk Adjustment, Final Rule, 77 FR 17232 

(March 23, 2012); and the 2014 Payment Notice, 

Final Rule, 78 FR 15441 (March 11, 2013). Also see, 

the 2018 Payment Notice, Final Rule, 81 FR 94058 

(December 22, 2016); and the 2019 Payment Notice, 

Final Rule, 83 FR 16930 (April 17, 2018). Also see 

the Adoption of the Methodology for the HHSOperated Permanent Risk Adjustment Program 

Under the Patient Protection and Affordable Care 

Act for the 2017 Benefit Year, Final Rule, 83 FR 

36456 (July 30, 2018) and the Patient Protection and 

Affordable Care Act; and Adoption of the 

Methodology for the HHS-Operated Permanent Risk 

Adjustment Program for the 2018 Benefit Year Final 

Rule, 83 FR 63419 (December 10, 2018). 

TABLE 8—R-SQUARED STATISTIC FOR PROPOSED HHS RISK ADJUSTMENT MODELS

R-squared statistic 

Models 

2016 Enrollee 

level EDGE 

data 

2017 Enrolleelevel EDGE 

data 

R-squared 

2016 

MarketScan®

data 

R-squared 

Platinum Adult .............................................................................................................................. 0.4336 0.4192 0.4139 

Gold Adult .................................................................................................................................... 0.4283 0.4127 0.4090 

Silver Adult ................................................................................................................................... 0.4241 0.4075 0.4052 

Bronze Adult ................................................................................................................................ 0.4214 0.4040 0.4026 

Catastrophic Adult ....................................................................................................................... 0.4209 0.4033 0.4021 

Platinum Child .............................................................................................................................. 0.3074 0.3214 0.3345 

Gold Child .................................................................................................................................... 0.3028 0.3164 0.3297 

Silver Child ................................................................................................................................... 0.2990 0.3121 0.3259 

Bronze Child ................................................................................................................................ 0.2957 0.3083 0.3223 

Catastrophic Child ....................................................................................................................... 0.2952 0.3077 0.3217 

Platinum Infant ............................................................................................................................. 0.3263 0.3166 0.3579 

Gold Infant ................................................................................................................................... 0.3225 0.3126 0.3559 

Silver Infant .................................................................................................................................. 0.3196 0.3094 0.3545 

Bronze Infant ............................................................................................................................... 0.3181 0.3078 0.3541 

Catastrophic Infant ....................................................................................................................... 0.3179 0.3075 0.3540 

b. Overview of the Payment Transfer 

Formula (§ 153.320) 

We previously defined the calculation 

of plan average actuarial risk and the 

calculation of payments and charges in 

the Premium Stabilization Rule. In the 

2014 Payment Notice, we combined 

those concepts into a risk adjustment 

state payment transfer formula.32 Risk 

adjustment transfers (total payments 

and charges including high-cost risk 

pool payments and charges) are 

calculated after issuers have completed 

their risk adjustment EDGE data 

submissions for the applicable benefit 

year. The state payment transfer formula 

includes a set of cost adjustment terms 

that require transfers to be calculated at 

the geographic rating area level for each 

plan (that is, we calculate separate 

transfer amounts for each rating area in 

which a risk adjustment covered plan 

operates). 

The risk adjustment state payment 

transfer formula generally calculates the 

difference between the revenues 

required by a plan, based on the health 

risk of the plan’s enrollees, and the 

revenues that a plan can generate for 

those enrollees. These differences are 

then compared across plans in the state 

market risk pool and converted to a 

dollar amount based on the statewide 

average premium. HHS chose to use 

statewide average premium and 

normalize the risk adjustment state 

payment transfer formula to reflect state 

average factors so that each plan’s 

enrollment characteristics are compared 

to the state average and the calculated 

payment amounts equal calculated 

charges in each state market risk pool. 

Thus, each plan in the risk pool receives 

a risk adjustment payment or charge 

designed to compensate for risk for a 

plan with average risk in a budgetneutral manner. This approach supports 

the overall goals of the risk adjustment 

program, which are to encourage issuers 

to rate for the average risk in the 

applicable state market risk pool, to 

stabilize premiums, and to avoid the 

creation of incentives for issuers to 

operate less efficiently, set higher 

prices, develop benefit designs or create 

marketing strategies to avoid high-risk 

enrollees. Such incentives could arise if 

we used each issuer’s plan’s own 

premium in the risk adjustment state 

payment transfer formula, instead of 

statewide average premium. 

In the absence of additional funding, 

we established, through notice and 

comment rulemaking,33 the HHSoperated risk adjustment program as a 

budget-neutral program to provide 

certainty to issuers regarding risk 

adjustment payments and charges, 

which allows issuers to set rates based 

on those expectations. Adopting an 

approach that would not result in 

balanced payments and charges would 

create considerable uncertainty for 

issuers regarding the proportion of risk 

adjustment payments they could expect 

to receive. Additionally, in establishing 

the HHS-operated risk adjustment 

program, we could not have relied on 

the potential availability of general 

appropriation funds without creating 

the same uncertainty for issuers in the 

amount of risk adjustment payments 

they could expect, or reducing funding 

available for other programs. Relying on 

each year’s budget process also would 

have required us to delay setting the 

parameters for any risk adjustment 

payment proration rates well after the 

plans were in effect for the applicable 

benefit year. HHS also could not have 

relied on any potential state budget 

appropriations in states that elected to 

operate a state-based risk adjustment 

program, as such funds would not have 

been available for purposes of 

administering the HHS-operated risk 

adjustment program. Without the 

adoption of a budget-neutral framework, 

HHS would have needed to assess a 

charge or otherwise collect additional 

funds to avoid prorating risk adjustment 

payments. The resulting uncertainty 

would have also conflicted with the 

overall goals of the risk adjustment 

program—to stabilize premiums and 

reduce incentives for issuers to avoid 

enrolling individuals with higher-thanaverage actuarial risk. 

In light of the budget-neutral 

framework, HHS uses statewide average 

premium as the cost-scaling factor in the 

state payment transfer formula under 


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34For example, see September 12, 2011, Risk 

Adjustment Implementation Issues White Paper, 

available at: https://www.cms.gov/CCIIO/Resources/ 

Files/Downloads/riskadjustment_whitepaper_

web.pdf. Also see the Adoption of the Methodology 

for the HHS-Operated Permanent Risk Adjustment 

Program Under the Patient Protection and 

Affordable Care Act for the 2017 Benefit Year, Final 

Rule, 83 FR 36456 (July 30, 2018) and the Patient 

Protection and Affordable Care Act; Adoption of the 

Methodology for the HHS-Operated Permanent Risk 

Adjustment Program for the 2018 Benefit Year, 

Final Rule, 83 FR 63419 (December 10, 2018). 

35There are many reasons why an issuer could 

have lower-than-average premiums. For example, 

the low premium could be the result of efficiency, 

mispricing, a strategy to gain market share or some 

combination thereof. 36See 83 FR 16930 at 16954. 

37 2019 Payment Notice Final Rule, 83 FR 16930 

(April 17, 2018) and 45 CFR 153.320(d)(3). 

the HHS-operated risk adjustment 

methodology, rather than a different 

parameter, such as each plan’s own 

premium, which would not have 

automatically achieved equality 

between risk adjustment payments and 

charges in each benefit year. As set forth 

in prior discussions,34 use of a plan’s 

own premium or a similar parameter 

would have required a balancing 

adjustment in light of the program’s 

need for budget neutrality—either 

reducing payments to issuers owed a 

payment, increasing charges on issuers 

assessed a charge, or splitting the 

difference in some fashion between 

issuers owed payments and issuers 

assessed charges. Such adjustments 

would have impaired the risk 

adjustment program’s goals, as 

discussed previously in this proposed 

rule, of encouraging issuers to rate for 

the average risk in the applicable state 

market risk pool, stabilizing premiums, 

and avoiding the creation of incentives 

for issuers to operate less efficiently, set 

higher prices, develop benefit designs or 

create marketing strategies to avoid 

higher-risk enrollees. Use of an afterthe-fact balancing adjustment is also 

less predictable for issuers than a 

methodology that is established in 

advance of a benefit year. Stakeholders 

who support use of a plan’s own 

premium state that use of statewide 

average premium penalizes issuers with 

efficient care management. While 

effective care management may make a 

plan more likely to have lower costs,35

we do not believe that the care 

management strategies make the plan 

more likely to enroll lower-than-average 

risk enrollees; effective care 

management strategies might even make 

the plan more likely to attract higherthan-average risk enrollees, in which 

case the plan would benefit from the use 

of statewide average premium in the 

state payment transfer formula in the 

HHS risk adjustment methodology. As 

noted by commenters to the 2014 

Payment Notice proposed rule, transfers 

may also be more volatile from year to 

year and sensitive to anomalous 

premiums if scaled to a plan’s own 

premium instead of the statewide 

average premium. In all, the advantages 

of using statewide average premium 

outweigh the pricing instability and 

other challenges associated with 

calculating transfers based on a plan’s 

own premium. 

In the HHS risk adjustment 

methodology, the state payment transfer 

formula is designed to provide a per 

member per month (PMPM) transfer 

amount. The PMPM transfer amount 

derived from the state payment transfer 

formula is multiplied by each plan’s 

total billable member months for the 

benefit year to determine the payment 

due to or charge owed by the issuer for 

that plan in a rating area. The payment 

or charge under the state payment 

transfer formula is thus calculated to 

balance the state market risk pool in 

question. 

i. Accounting for High-Cost Risk Pool in 

the Transfer Formula 

In addition to the charge or payment 

assessed under the state payment 

transfer formula for an issuer in a state 

market risk pool based on plan liability 

risk scores, in the 2018 Payment Notice, 

we added to the HHS-operated risk 

adjustment methodology additional 

transfers that would reflect the 

payments and charges assessed for the 

high-cost risk pool discussed above. To 

account for costs associated with 

exceptionally high-risk enrollees, we 

added transfer terms (a payment term 

and a charge term) that would be 

calculated separately from the state 

payment transfer formula in the HHSoperated risk adjustment methodology. 

For the 2019 benefit year, we finalized 

the addition of a term that reflects 60 

percent of costs above $1 million (HRPi), 

in the total plan transfer calculation 

described below, and another term that 

reflects a percentage of premium 

adjustment to fund the high-cost risk 

pool and maintain the balance of 

payments and charges within the HHSoperated risk adjustment program for a 

given benefit year. We described in 

detail how these terms will be 

calculated in conjunction with the 

calculations under the state payment 

transfer formula for the 2019 benefit 

year in the 2019 Payment Notice.36 We 

believe it is helpful to republish how 

these terms will be applied. Therefore, 

these adjustments are described in 

detail below along with the calculations 

under the state payment transfer 

formula. 

As discussed in detail above, for the 

2020 benefit year, we are proposing to 

maintain the high-cost risk pool with 

the threshold of $1 million and a 

coinsurance rate of 60 percent, and the 

same parameters would apply for the 

2021 benefit year and beyond, unless 

otherwise amended through notice-andcomment rulemaking. Similar to the 

2019 benefit year, we propose to add a 

term that reflects 60 percent of costs 

above $1 million (HRPi), in the total 

plan transfer calculation described 

below, and another term that reflects a 

percentage of premium adjustment to 

fund the high-cost risk pool and 

maintain the balance of payment and 

charges within the HHS-operated risk 

adjustment program for a given benefit 

year. For the 2020 benefit year, we 

propose to use a percentage of premium 

adjustment factor that would be applied 

to each plan’s total premium amount, 

rather than the percentage of PMPM 

premium adjustment factor, consistent 

with the approach finalized in the 2019 

Payment Notice. The percentage of 

premium adjustment factor applied to a 

plan’s total premium amount results in 

the same adjustment as a percentage of 

the PMPM premium adjustment factor 

applied to a plan’s PMPM premium 

amount and multiplied by the plan’s 

number of billable member months. We 

propose to apply these same terms for 

future benefit years that maintain the 

same underlying parameters for the 

high-cost risk pool adjustment (that is, 

$1 million threshold and 60 percent 

coinsurance rate). We seek comment on 

these proposals. 

ii. State Flexibility Requests 

(§ 153.320(d)) 

In the 2019 Payment Notice, we 

provided states the flexibility to request 

a reduction to the otherwise applicable 

risk adjustment transfers calculated 

under the HHS-operated risk adjustment 

methodology, which is calibrated on a 

national dataset, for the state’s 

individual, small group, or merged 

markets by up to 50 percent to more 

precisely account for differences in 

actuarial risk in the applicable state’s 

market(s). We finalized that any 

requests received would be published in 

the respective benefit year’s proposed 

notice of benefit and payment 

parameters, and the supporting 

evidence would be made available for 

public comment.37

In accordance with § 153.320(d)(2), 

beginning with the 2020 benefit year, 

states must submit such requests with 

the supporting evidence and analysis 


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38See 45 CFR 154.215(h)(2). 

39See 83 FR 16930 at 16960. 

40As detailed elsewhere in this proposed rule, 

catastrophic plans are considered part of the 

individual market for purposes of the national highcost risk pool payment and charge calculations. 

outlined under § 153.320(d)(1) by 

August 1st of the calendar year that is 

2 calendar years prior to the beginning 

of the applicable benefit year. 

In this rule, we propose to amend 

§ 153.320(d)(3) to add language to 

provide that if the state requests that 

HHS not make publicly available certain 

supporting evidence and analysis 

because it contains trade secrets or 

confidential commercial or financial 

information within the meaning of the 

HHS Freedom of Information Act 

(FOIA) regulations at 45 CFR 5.31(d), 

HHS will do so, making available on the 

CMS website only the supporting 

evidence submitted by the state that is 

not a trade secret or confidential 

commercial or financial information. 

Similar to the rate review program 

established under section 2794 of the 

PHS Act, under this proposal, HHS 

would release only information that is 

not a trade secret or confidential 

commercial or financial information as 

defined under the HHS FOIA 

regulations.38 In these circumstances, 

similar to the federal rate review 

requirements, we propose that the states 

requesting a reduction would need to 

provide a version for public release that 

redacts the trade secret and confidential 

commercial or financial information as 

defined under the HHS FOIA 

regulations, while also providing an 

unredacted version to HHS for its 

review of the state’s reduction request. 

We also propose that state requests for 

individual market risk adjustment 

transfers reduction would be applied to 

both the catastrophic and noncatastrophic individual market risk 

pools, unless state regulators request 

otherwise. 

We seek comment on these proposals. 

For the 2020 benefit year, HHS 

received a request to reduce risk 

adjustment transfers for the Alabama 

small group market by 50 percent. 

Alabama’s request states that the 

presence of a dominant carrier in the 

small group market precludes the HHSoperated risk adjustment program from 

working as precisely as it would with a 

more balanced distribution of market 

share. The state regulators stated that 

their review of the risk adjustment 

payment issuers’ financial data 

suggested that any premium increase 

resulting from a reduction to risk 

adjustment payments of 50 percent in 

the small group market for the 2020 

benefit year would not exceed 1 percent, 

the de minimis premium increase 

threshold set forth in the 2019 Payment 

Notice. We seek comment on this 

request to reduce risk adjustment 

transfers in the Alabama small group 

market by 50 percent for the 2020 

benefit year. The request and additional 

documentation submitted by Alabama 

are posted under the ‘‘State Flexibility 

Requests’’ heading at https://

www.cms.gov/CCIIO/Programs-andInitiatives/Premium-StabilizationPrograms/index.html. 

iii. The Payment Transfer Formula 

Although the proposed HHS payment 

transfer formula for the 2020 benefit 

year is unchanged from what was 

finalized in the 2019 Payment Notice 

(83 FR 16954 through 16961), we 

believe it is useful to republish the 

formula in its entirety in this proposed 

rule. Additionally, we are republishing 

the description of the administrative 

cost reduction to the statewide average 

premium and high-cost risk pool factors 

that we previously described in the 

2019 Payment Notice although these 

factors remain unchanged in this 

proposed rule.39 Transfers (payments 

and charges) under the state payment 

transfer formula would be calculated as 

the difference between the plan 

premium estimate reflecting risk 

selection and the plan premium 

estimate not reflecting risk selection. 

The state payment transfer calculation 

that is part of the HHS risk adjustment 

payment transfer formula is: 

Where: 

P ̄ S = Statewide average premium; 

PLRSi = plan i’s plan liability risk score; 

AVi = plan i’s metal level AV; 

ARFi = allowable rating factor; 

IDFi = plan i’s induced demand factor; 

GCFi = plan i’s geographic cost factor; 

si = plan i’s share of state enrollment. 

The denominator would be summed 

across all risk adjustment covered plans 

in the risk pool in the market in the 

state. 

The difference between the two 

premium estimates in the state payment 

transfer formula determines whether a 

plan pays a risk adjustment charge or 

receives a risk adjustment payment. The 

value of the plan average risk score by 

itself does not determine whether a plan 

would be assessed a charge or receive a 

payment—even if the risk score is 

greater than 1.0, it is possible that the 

plan would be assessed a charge if the 

premium compensation that the plan 

may receive through its rating (as 

measured through the allowable rating 

factor) exceeds the plan’s predicted 

liability associated with risk selection. 

Risk adjustment transfers under the 

state payment transfer formula are 

calculated at the risk pool level, and 

catastrophic plans are treated as a 

separate risk pool for purposes of the 

risk adjustment state payment transfer 

calculations.40 This resulting PMPM 

plan payment or charge would be 

multiplied by the number of billable 

member months to determine the plan 

payment or charge based on plan 

liability risk scores for a plan’s 

geographic rating area for the risk pool 

market within the state. 

We previously defined the cost 

scaling factor, or the statewide average 

premium term, as the sum of the average 

premium per member month of plan i 

(Pi) multiplied by plan i’s share of 

statewide enrollment in the market risk 

pool (si). The statewide average 

premium would be adjusted to remove 

a portion of the administrative costs that 

do not vary with claims (14 percent) as 

follows: 

P ̄ S = (Si(si · Pi)) * (1¥0.14) = (Si(si · Pi)) 

* 0.86 

Where: 

si = plan i’s share of statewide enrollment in 

the market in the risk pool; 

Pi = average premium per member month of 

plan i. 

The high-cost risk pool adjustment 

amount would be added to the state 

payment transfer formula to account for: 

(1) The payment term, representing the 

portion of costs above the threshold 

reimbursed to the issuer for high-cost 

risk pool payments (HRPi), if applicable; 

and (2) the charge term, representing a 

percentage of premium adjustment, 

which is the product of the high-cost 

risk pool adjustment factor (HRPCm) for 

the respective national high-cost risk 

pool m (one for the individual market, 

including catastrophic, non-catastrophic 


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41See 81 FR 94058 at 94101. 

42Available at https://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/

Enrollee-level-EDGE-Dataset-for-Research-Requests05-18-18.pdf. 

43HHS does not currently collect any of the other 

18 identifiers under 45 CFR 164.514(b)(2) that 

would require de-identification. 

44Available at https://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/ 

Enrollee-level-EDGE-Dataset-for-Research-Requests05-18-18.pdf. 

and merged market plans, and another 

for the small group market), and the 

plan’s total premiums (TPi). For this 

calculation, we would use a percent of 

premium adjustment factor that is 

applied to each plan’s total premium 

amount. 

The total plan transfers for a given 

benefit year would be calculated as the 

product of the plan PMPM’s transfer 

amount (Ti) multiplied by the plan’s 

billable member months (Mi), plus the 

high-cost risk pool adjustments. The 

total plan transfer (payment or charge) 

amounts under the HHS risk adjustment 

payment transfer formula would be 

calculated as follows: 

Total transferi = (Ti · Mi) + 

HRPi¥(HRPCm · TPi) 

Where: 

Total Transferi = Plan i’s total HHS risk 

adjustment program transfer amount; 

Ti = Plan i’s PMPM transfer amount based on 

the state transfer calculation; 

Mi = Plan i’s billable member months; 

HRPi = Plan i’s total high-cost risk pool 

payment; 

HRPCm = High-cost risk pool percent of 

premium adjustment factor for the 

respective national high-cost risk pool m; 

TPi = Plan i’s total premium amounts. 

As we noted above, we received a 

request to reduce transfers in the 

Alabama small group market by 50 

percent for the 2020 benefit year. If the 

request is approved and finalized by 

HHS for the 2020 benefit year, the 

approved reduction percentage would 

be applied to the plan PMPM payment 

or charge transfer amount (Ti) under the 

state payment transfer calculation for 

the Alabama small group market risk 

pool. This potential reduction to the 

PMPM transfer amounts is not shown in 

the HHS risk adjustment state payment 

transfer formula above. 

c. Risk Adjustment Issuer Data 

Requirements (§§ 153.610, 153.710) 

In the 2018 Payment Notice,41 we 

finalized the collection of masked 

enrollee-level data from issuers’ EDGE 

servers (referred to as ‘‘enrollee-level 

EDGE data’’) beginning with the 2016 

benefit year to recalibrate the risk 

adjustment models and inform 

development of the AV Calculator and 

methodology. 

In the 2018 Payment Notice, we also 

stated that we would consider using this 

enrollee-level EDGE data in the future 

for calibrating other HHS programs in 

the individual and small group markets, 

and to produce a public use file to help 

governmental entities and independent 

researchers better understand these 

markets. We noted that a public use file 

derived from these data would be deidentified in accordance with the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

requirements, would not include 

proprietary issuer or plan identifying 

data, and would adhere to HHS rules 

and policies regarding protected health 

information (PHI) and personally 

identifiable information (PII). We also 

described in guidance the data elements 

in the enrollee-level EDGE dataset and 

the data elements proposed to be made 

available for research requests.42

Under the HIPAA safe harbor for deidentification of data at 45 CFR 

164.514(b)(2), public use files are 

considered de-identified if they exclude 

18 specific identifiers that could be used 

alone or in combination with other 

information to identify an individual 

who is a subject of the information. To 

make the enrollee-level EDGE data 

available as a public use file that 

comports with the requirements of 

§ 164.514(b)(2), we would have to 

remove dates (other than the year) and 

ages for enrollees ages 90 or older.43

Commenters have stated that the public 

use file would be limited in its 

usefulness because it excludes dates 

that would be useful to conduct health 

services research. A limited data set, as 

defined at § 164.514(e)(2), may include 

dates, which could enable requestors to 

do analyses they would not be able to 

with a public use file. We believe 

entities seeking to use the enrollee-level 

EDGE data would be able to better 

understand the individual and small 

group markets with a limited data set. 

Thus, we propose to create and make 

available by request a limited data set 

file rather than a public use file, as we 

believe a limited data set file would be 

more useful to requestors for research, 

public health, or health care operations 

purposes. Under this proposal, if 

finalized, we would make enrollee-level 

EDGE data, beginning with the 2016 

benefit year EDGE data, available as a 

‘‘Limited Data Set’’ file under 

§ 164.514(e). This limited data set file 

would not include the direct identifiers 

of the individual or of relatives, 

employers, or household members of 

the individual, which are required to be 

removed under the limited data set 

definition at § 164.514(e)(2), as issuers 

do not submit these identifiers to their 

EDGE servers. We also propose to limit 

disclosures of the limited data set to 

requestors who seek the data for 

research, public health, or health care 

operations purposes, as those terms are 

defined under § 164.501, as is done with 

other limited data sets made available 

by HHS. We would require qualified 

requestors to sign a data use agreement 

to ensure the data will be maintained, 

used, and disclosed only as permitted 

under the HIPAA Privacy Rule, and to 

ensure that any inappropriate uses or 

disclosures are reported to HHS. HHS 

components would also be able to 

request the limited data set file for 

research, public health, or health care 

operations purposes, as those terms are 

defined under § 164.501. We also clarify 

that, if this proposal is finalized, we 

would make a limited data set file 

available on an annual basis, reflecting 

enrollee-level data from the most recent 

benefit year available on EDGE servers. 

If this proposal is finalized, we would 

not offer a public use file based on the 

enrollee-level EDGE data. We seek 

comment on this proposal. 

In addition, we received comments in 

response to the guidance describing the 

data elements to be made available as 

part of the public use file for research 

requests 44 noting that researchers 

would benefit from additional data 

elements on enrollees’ geographic 

identifiers, enrollees’ income level, 

provider identifier, provider’s 

geographic location, internal claim 

identifier, enrollees’ plan benefit design 

details, and enrollees’ out-of-pocket 

costs by cost-sharing type (deductible, 

coinsurance, and copayment). We began 

collecting a claim identifier to associate 

all services rendered under the same 

claim beginning with the 2017 benefit 

year enrollee-level EDGE data. 

Therefore, if the proposal to make a 

limited data set is finalized, we would 

be able to include this grouped claims 

identifier beginning for the 2017 benefit 

year enrollee-level EDGE limited data 

set file. However, regarding the other 

data elements commenters requested, 

either issuers do not submit them to 

their EDGE servers, or we currently do 

not extract them from issuers’ EDGE 

servers due to concerns about the ability 

to use the data element(s) to identify 

issuers or plans. For example, issuers do 

not currently submit data to their EDGE 

servers on enrollees’ plan benefit 

design, specific cost-sharing elements 

(deductibles, copayments), provider 

identifiers or providers’ geographic 

location, enrollees’ income level or 

enrollees’ geographic location more 


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45See 78 FR 15409 at 15416. 

46 83 FR 16930 at 16972. 

specific than the rating area, and 

therefore, we are unable to extract such 

information as part of the enrollee-level 

EDGE data. However, issuers do submit 

enrollees’ state and rating areas as part 

of the EDGE server submissions, making 

it possible to extract these elements 

from the issuers’ EDGE servers as part 

of the enrollee-level EDGE data. If we 

were to extract state and rating areas, we 

could also make such details available 

as part of the proposed enrollee-level 

EDGE limited data set file. We continue 

to believe the enrollee-level EDGE data 

can increase cost transparency for 

consumers and stakeholders for the 

individual and small group markets and 

can be a useful resource for government 

entities and independent researchers to 

better understand these markets. We 

also recognize access and use of 

enrollee-level EDGE data should 

continue to safeguard enrollee privacy 

and security and issuers’ proprietary 

information. Based on the comments 

received, we are seeking comment on 

whether to extract state and rating area 

information for enrollees as part of the 

enrollee-level EDGE data. As noted 

previously, we use the enrollee-level 

EDGE data to recalibrate the risk 

adjustment models and inform 

development of the AV Calculator and 

methodology. Extracting additional state 

and rating area information could 

enable HHS to assess the impact of 

differences in geographic factors in the 

HHS risk adjustment methodology. In 

addition, stakeholders have noted that 

adding geographic elements to the AV 

Calculator would better estimate the AV 

of plans based on the cost differences 

across regions. Extraction of these 

geographic details (state and rating area) 

from issuers’ EDGE servers could also 

help support other HHS programs and 

policy priorities, as well as provide 

additional data elements for researchers. 

We note that although these geographic 

data elements are not currently 

extracted from the enrollee-level EDGE 

dataset, extracting them will not 

increase burden for issuers, as issuers 

already submit these data elements as 

part of the EDGE server data submission 

process. We seek comment on how 

these data elements could be used in the 

HHS-operated risk adjustment program, 

AV Calculator and methodology, and 

other HHS programs in the individual 

and small group (including merged) 

markets, as well as on how these data 

elements could benefit researchers and 

public health. If we were to extract state 

and rating area information, we would 

do so as part of the enrollee-level EDGE 

data extraction and would use this 

information to support the recalibration 

and policy development related to the 

HHS-operated risk adjustment program, 

the AV Calculator and methodology, as 

well as other HHS programs in the 

individual and small group (including 

merged) markets. We also seek comment 

on if we were to extract these data 

elements, whether to make state and 

rating area information available as part 

of the proposed limited data set that 

would be made available to qualified 

requestors. We seek comment on the 

advantages and disadvantages of using 

state and rating area information for 

recalibration of the HHS-operated risk 

adjustment program, the AV Calculator 

and methodology, and other HHS 

individual and small group (including 

merged) market programs. We seek 

specific comments on possible research 

purposes for these data elements, 

whether the benefits of extracting these 

additional data elements outweigh the 

potential risk to issuers’ proprietary 

information, and whether extraction of 

this data is consistent with the goals of 

a distributed data environment. We 

reiterate that these data would not 

include direct identifiers of an 

individual or of relatives, employers, or 

household members of the individual, 

as issuers do not submit these elements 

to their EDGE servers, and qualified 

requestors would be required to sign a 

data use agreement to ensure the data 

would be maintained, used, and 

disclosed only as permitted under the 

HIPAA Privacy Rule. We also seek 

specific comment on the other data 

elements outlined above that 

commenters requested be part of the 

enrollee-level EDGE dataset, but that 

issuers do not currently submit to their 

EDGE servers, and other enrollment and 

claims data elements not otherwise 

described above, and whether collection 

of such data elements could benefit the 

calibration of the HHS risk adjustment 

program, the AV calculator and 

methodology, and other HHS individual 

and small group (including merged) 

markets programs. We also seek specific 

comment with examples on whether 

other data elements that issuers do not 

currently submit to their EDGE servers 

could benefit further research, public 

health or health care operations as part 

of a limited data set file made available 

to qualified requestors. 

In addition, we propose to extend the 

use of enrollee-level EDGE data and 

reports extracted from issuers’ EDGE 

servers (including data reports and ad 

hoc querying tool reports) to calibrate 

and operationalize our individual and 

small group (including merged) market 

programs (for example, the HHSoperated risk adjustment program, the 

AV calculator and methodology, and the 

out-of-pocket calculator), as well as to 

conduct policy analysis for the 

individual and small group (including 

merged) markets (for example, to assess 

the market impacts of policy options 

being deliberated). We believe these 

additional uses of the enrollee-level 

EDGE data will enhance our ability to 

develop and set policy for the 

individual and small group (including 

merged) markets and avoid burdensome 

data collections from issuers. 

d. Risk Adjustment User Fee for 2020 

Benefit Year (§ 153.610(f)) 

As noted above, if a state is not 

approved to operate, or chooses to forgo 

operating its own risk adjustment 

program, HHS will operate a risk 

adjustment program on its behalf. For 

the 2020 benefit year, HHS will operate 

a risk adjustment program in every state 

and the District of Columbia. As 

described in the 2014 Payment Notice,45

HHS’s operation of risk adjustment on 

behalf of states is funded through a risk 

adjustment user fee. Section 

153.610(f)(2) provides that an issuer of 

a risk adjustment covered plan must 

remit a user fee to HHS equal to the 

product of its monthly billable member 

enrollment in the plan and the PMPM 

risk adjustment user fee rate specified in 

the annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year. 

OMB Circular No. A–25R established 

federal policy regarding user fees, and 

specified that a user charge will be 

assessed against each identifiable 

recipient for special benefits derived 

from federal activities beyond those 

received by the general public. The risk 

adjustment program will provide special 

benefits as defined in section 6(a)(1)(B) 

of Circular No. A–25R to issuers of risk 

adjustment covered plans because it 

mitigates the financial instability 

associated with potential adverse risk 

selection. The risk adjustment program 

also contributes to consumer confidence 

in the health insurance industry by 

helping to stabilize premiums across the 

individual, merged, and small group 

markets. 

In the 2019 Payment Notice,46 we 

calculated the federal administrative 

expenses of operating the risk 

adjustment program for the 2019 benefit 

year to result in a risk adjustment user 

fee rate of $1.80 per billable member per 

year or $0.15 PMPM, based on our 

estimated contract costs for risk 

adjustment operations, estimates of 

billable member months for individuals 


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47Although the 2016 benefit year was the final 

benefit year for the reinsurance program, close-out 

activities continued in the 2018 fiscal year, 

including the collection of the second part of the 

2016 benefit year contributions for contributing 

entities that elected the bifurcated schedule, which 

were due by November 15, 2017, and are expected 

to continue in the 2019 fiscal year. 

48See 79 FR 13743 at 13756. 

49Neyman allocation is a method to allocate 

samples to strata based on the strata’s variances and 

similar sampling costs in the strata. A Neyman 

allocation scheme provides the most precision for 

estimating a population mean given a fixed total 

sample size. See http://methods.sagepub.com/ 

reference/encyclopedia-of-survey-researchmethods/n324.xml. 

enrolled in a risk adjustment covered 

plan, and eligible administrative and 

personnel costs related to the 

administration of the HHS-operated risk 

adjustment program. For the 2020 

benefit year, we propose to generally 

use the same methodology to estimate 

our administrative expenses to operate 

the program, with the modifications 

described below. These costs cover 

development of the risk adjustment 

models and methodology, collections, 

payments, account management, data 

collection, data validation, program 

integrity and audit functions, 

operational and fraud analytics, 

stakeholder training, operational 

support, and administrative and 

personnel costs dedicated to risk 

adjustment activities related to the HHSoperated program. To calculate the user 

fee, we divided HHS’s projected total 

costs for administering the risk 

adjustment program by the expected 

number of billable member months in 

risk adjustment covered plans in the 50 

states and the District of Columbia 

where HHS will operate risk adjustment 

for the 2020 benefit year. 

We estimate that the total cost for 

HHS to operate the risk adjustment 

program for the 2020 benefit year would 

be approximately $50 million, and the 

risk adjustment user fee would be $2.16 

per billable member per year, or $0.18 

PMPM. The updated cost estimates 

attribute all costs related to the EDGE 

server data collection and data 

evaluation (quantity and quality 

evaluations) activities to the risk 

adjustment program rather than sharing 

them with the reinsurance program, 

which is no longer operational.47 In 

addition, we previously collected 

amounts under the reinsurance program 

for administrative expenses related to 

that program, which partially funded 

contracts that were used for both the 

risk adjustment and reinsurance 

programs. We no longer allocate indirect 

costs for personnel or administrative 

costs to the reinsurance program, and 

are reflecting the full value of those 

costs as part of risk adjustment 

operations for the 2020 benefit year. The 

risk adjustment user fee costs are also 

estimated to be slightly higher due to 

increased contract costs based on 

additional activities for the risk 

adjustment data validation program 

development and execution, including 

updated cost estimates associated with 

the non-pilot years of the risk 

adjustment data validation program, 

including estimates for error rate 

adjustments, development of the new 

risk adjustment data validation audit 

tool, and additional contractor support 

for risk adjustment data validation 

discrepancies and appeals. The 

estimated costs also incorporate the full 

personnel and administrative costs 

associated with risk adjustment program 

development and operations in the risk 

adjustment user fee for the 2020 benefit 

year. The personnel and administrative 

costs included in the calculation of the 

2019 benefit year risk adjustment user 

fee for the 2019 Payment Notice final 

rule incorporated only a portion of the 

personnel costs, and excluded indirect 

costs. The proposed 2020 benefit year 

risk adjustment user fee includes the 

full amount for eligible personnel costs, 

as well as eligible indirect costs. Finally, 

we estimate individual and small group 

market billable member months for the 

2020 benefit year to remain roughly the 

same, as observed in the most recent 

risk adjustment data available for the 

2017 benefit year. We seek comment on 

the proposed risk adjustment user fee 

for the 2020 benefit year. 

3. Risk Adjustment Data Validation 

Requirements When HHS Operates Risk 

Adjustment (§ 153.630) 

We conduct risk adjustment data 

validation under §§ 153.630 and 

153.350 in any state where HHS is 

operating risk adjustment on a state’s 

behalf, which for the 2020 benefit year 

is all 50 states and the District of 

Columbia. The purpose of risk 

adjustment data validation is to ensure 

issuers are providing accurate and 

complete risk adjustment data to HHS, 

which is crucial to the purpose and 

proper functioning of the HHS-operated 

risk adjustment program. Risk 

adjustment data validation consists of 

an initial validation audit and a second 

validation audit. Under § 153.630, each 

issuer of a risk adjustment covered plan 

must engage an independent initial 

validation auditor. The issuer provides 

demographic, enrollment, and medical 

record documentation for a sample of 

enrollees selected by HHS to its initial 

validation auditor for data validation. 

Each issuer’s initial validation audit is 

followed by a second validation audit, 

which is conducted by an entity HHS 

retains to verify the accuracy of the 

findings of the initial validation audit. 

Set forth below are proposed 

amendments and clarifications to the 

risk adjustment data validation program 

in light of experience and feedback from 

issuers during the first 2 pilot years of 

the program. 

a. Varying Initial Validation Audit 

Sample Size (§ 153.630(b)) 

In the 2014 Payment Notice, we 

established the risk adjustment data 

validation program that HHS uses when 

operating risk adjustment on behalf of a 

state. Consistent with § 153.350(a), HHS 

is required to ensure proper validation 

of a statistically valid sample of risk 

adjustment data from each issuer that 

offers at least one risk adjustment 

covered plan in that state. The current 

enrollee sample size selected for the 

initial validation audit is 200 enrollees 

statewide (that is, combining an issuer’s 

individual, small group, and merged 

market enrollees (as applicable) in risk 

adjustment covered plans in the state) 

for each issuer’s Health Insurance 

Oversight System (HIOS) ID, based on 

sample size precision analyses we 

conducted using proxy data from the 

Medicare Advantage program. Those 

analyses calculated a range of sample 

sizes to target a 10 percent precision at 

a 95 percent confidence level. The 

resulting range of sample sizes were 

between 100 and 300, and we selected 

200 as a midpoint.48 In the 2015 

Payment Notice, we stated that, after the 

initial years of risk adjustment data 

validation, we would evaluate our 

sampling assumptions using actual 

enrollee data and consider using larger 

sample sizes for issuers that are larger 

or have higher variability in their 

enrollee risk score error rates, and 

smaller sample sizes for issuers that are 

smaller or have lower variability in their 

enrollee risk score error rates. We also 

stated that we would use our sampling 

experience in the initial years of risk 

adjustment data validation to evaluate 

using issuer-specific sample sizes. 

Additionally, in the initial years of 

risk adjustment data validation, we 

constrained the ‘‘10th stratum’’ of the 

initial validation audit sample—that is, 

enrollees without HCCs selected for the 

initial validation audit sample—to be 

one-third of the sampled initial 

validation audit enrollees. Under the 

current approach, the remaining 9 agerisk strata are selected using a Neyman 

allocation 49 which optimizes the 

number of enrollees per stratum for the 

remaining two-thirds of sampled 


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50Activities related to the 2019 benefit year risk 

adjustment data validation generally begin in the 

second quarter of 2020 calendar year. 

enrollees. Because we expected 

enrollees without HCCs to make up the 

majority of issuers’ enrollees, in the 

absence of data from the individual and 

small group markets, we constrained 

stratum 10 to ensure that healthy 

enrollees were sampled in the initial 

years of risk adjustment data validation 

to establish adequate sampling 

assumptions. 

In this proposed rule, we propose to 

extend the Neyman allocation sampling 

methodology to also include the 10th 

stratum of enrollees without HCCs, such 

that samples would be assigned to all 10 

strata using a Neyman allocation. Since 

a Neyman allocation approach is 

expected to provide a more optimal 

sample size allocation, we believe that 

using the Neyman allocation for all 

strata would optimize issuers’ initial 

validation samples and yield better 

precision than the one-third/two-thirds 

approach currently used in the enrollee 

initial validation audit sample. Further, 

an approach that permits for a larger 

portion of the sample to be allocated to 

the HCC strata as compared to the twothirds allocation used in the current 

approach would result in a more robust 

HCC sample in support of the 

measurement of HCC failure rates under 

the HCC failure rate methodology 

finalized in the 2019 Payment Notice. 

Finally, it would increase the 

probability of achieving our original 

target of 10 percent precision based on 

our historical observations of greater 

error rate variances among the HCC 

strata. We seek comment on this 

proposal to extend the Neyman 

allocation sampling methodology to the 

10th stratum of enrollees without HCCs. 

As previously discussed, the current 

initial validation audit sample size of 

200 was selected to achieve an 

estimated 10 percent precision, 

assuming a distribution of risk score 

errors similar to that found in the 

Medicare Advantage risk adjustment 

data validation program. However, since 

the HCC group failure rate approach to 

error estimation (referred to as the HCC 

failure rate methodology) will be 

implemented beginning with the 2017 

benefit year of risk adjustment data 

validation, we anticipate that the 

calculated precision will differ from the 

estimate we used, which was based on 

the Medicare Advantage error rate data. 

Therefore, beginning with the 2019 

benefit year of risk adjustment data 

validation,50 we propose to vary the 

initial validation audit sample size 

based on issuer characteristics, such as 

issuer size and prior year HCC failure 

rates. We are considering, and seek 

comment on, several different 

approaches for varying the initial 

validation audit sample size. We note 

that HHS will not increase the sample 

above 200 enrollees when it performs 

the second validation audit pairwise 

means test because a 200 enrollee 

sample will be sufficient to achieve 

statistical significance in that test. If we 

finalize an approach that incorporates 

the use of prior year HCC failure rates, 

we propose to use the 2017 benefit year 

risk adjustment data validation results— 

the only year of risk adjustment data 

validation results used for transfer 

adjustments that will be available at that 

time—as an initial basis for determining 

the 2019 benefit year initial validation 

audit samples. The 2017 risk adjustment 

data validation program year will also 

be the first year in which the audit 

results will impact risk adjustment risk 

scores and subsequently, risk 

adjustment transfers. Thus, we 

recognize there is considerable 

uncertainty in adopting a proposal to 

adjust sample sizes based on HCC 

failure rates where we do not yet have 

experience with risk adjustment data 

validation transfer data (that is, using 

HCC failure rate results to adjust risk 

scores that affect risk adjustment 

transfers). To account for the possibility 

of large variation in HCC failure rates in 

2017 risk adjustment data validation 

results, we propose to increase the 

precision of initial validation audit 

samples above 200 enrollees for issuers 

with lower or higher-than-average 

failure rates that are not precisely 

measured, as described further below. 

We also propose to require a minimum 

sample size of 400 enrollees for each 

larger issuer (defined as an issuer with 

50,000 or more enrollees calculated 

statewide based on the benefit year 

being validated) with lower or higherthan-average failure rates that are not 

precisely measured, as we believe that 

larger issuers have the capability to 

absorb the increased burden and 

validate larger samples and represent a 

greater part of the risk pool, such that 

having any risk score adjustments 

resulting from risk adjustment data 

validation would have a greater impact 

on overall risk adjustment transfers. We 

solicit comment on this proposed 

approach, particularly with regard to the 

benefit year that we should use to 

calculate issuers’ enrollment for the 

applicable risk adjustment data 

validation benefit year. 

We also seek comment on whether we 

should finalize an approach that uses 

HCC failure rates to determine sample 

size, and whether HHS should use the 

latest available benefit year HCC failure 

rate results alone, or use multiple prior 

years’ HCC failure rates when 

determining an issuer’s sample size. 

Under this proposed approach, we 

would also vary sample size based on 

issuers’ sample precision for issuers 

with HCC failure rates close to the 

threshold that determines whether an 

issuer will have a transfer adjustment. 

Of the issuers outside of a confidence 

interval threshold around the mean HCC 

failure rates by HCC group, we would 

maintain the current minimum sample 

size of 200 enrollees for smaller issuers 

(defined as issuers with between 3,000 

and 49,999 enrollees calculated 

statewide based on the benefit year 

being validated), with sample sizes 

increasing for issuers in this cohort with 

poor precision. For larger issuers (that 

is, those with 50,000 or more enrollees 

calculated statewide based on the 

benefit year being validated), we 

propose to establish a minimum sample 

size of 400 enrollees, with sample sizes 

increasing for issuers with poor 

precision. For very small issuers 

(defined as issuers with below 3,000 

enrollees calculated statewide based on 

the benefit year being validated), we 

propose to maintain a sample size of 

200 enrollees regardless of the issuer’s 

measured precision. 

We are also considering an alternative 

approach to adjusting sample size that 

would increase sample sizes based on 

issuer size alone, and would continue to 

use the proxy Medicare Advantage risk 

score error rate data for the 

accompanying precision analyses. 

Additionally, we solicit comment on 

whether the issuers’ enrollment should 

be calculated based on the year that is 

being validated or based on the benefit 

year in which the HCC failure occurred. 

Additionally, in response to a 

comment we received on the 2019 

Payment Notice that larger sample sizes 

could improve the accuracy of issuers’ 

risk adjustment data validation samples, 

we solicit comment on whether to 

permit issuers of any size and HCC 

failure rate to request a larger sample 

size before the applicable benefit year’s 

initial validation audit commences. 

Regardless of an issuer’s sample size, all 

issuers would be required to adhere to 

the same risk adjustment data validation 

timelines such that data validation 

activities related to the same benefit 

year occur at the same time, regardless 

of the issuer’s sample size. We also 

request comment on whether this 

potential flexibility for issuers to 

determine their initial validation audit 

sample size necessitates any changes to 

the second validation audit pairwise 


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51As noted previously in this proposed rule, 

Neyman allocation is a method to allocate samples 

to strata based on the strata’s variances and similar 

sampling costs in the strata. A Neyman allocation 

scheme provides the most precision for estimating 

a population mean given a fixed total sample size. 

See http://methods.sagepub.com/reference/ 

encyclopedia-of-survey-research-methods/ 

n324.xml. 

means test, as well as on safeguards that 

can help ensure that the collection of 

larger amounts of enrollee data does not 

increase privacy risks for consumers. 

A discussion of the options we are 

considering to vary the initial validation 

audit sample size, including certain 

advantages and disadvantages for each, 

follows below. We solicit comment on 

all of these proposals. 

i. Varying Sample Size Based on HCC 

Failure Rates, Sample Precision, and 

Issuer Size 

One approach we are considering 

would vary sample size based on a 

combination of the following issuer 

characteristics: HCC failure rates, 

sample precision, and issuer size. As 

stated above, we would use the 2017 

risk adjustment data validation results 

as an initial basis for determining 2019 

initial validation audit sample sizes. We 

would increase the precision of initial 

validation audit samples above 200 

enrollees for issuers with lower or 

higher than average HCC failure rates 

that are not precisely measured, as 

described further below. For issuers 

with average HCC failure rates, the 

initial validation audit sample size 

would remain at 200 enrollees. 

Under this approach, we would adjust 

sample sizes above the applicable 

baseline sample size of 200 only for 

issuers who are more than 1.644 

standard deviations away from the mean 

for any HCC failure rate group. This 

targeted sampling adjustment would 

ensure that all issuers outside or just 

inside of the HCC failure rate outlier 

threshold (1.96 standard deviations) 

receive sample sizes that better meet our 

targeted precision, that issuers receiving 

error rates are in fact outliers, and that 

issuers that did not receive an error rate, 

but had higher-than-average HCC failure 

rates, were not false negatives due to 

low precision in their sample. Issuers in 

this cohort whose sample size does not 

meet the targeted precision would have 

their initial validation audit sample size 

adjusted above 200 enrollees to more 

closely achieve the targeted precision 

level. 

Issuers with HCC failure rates within 

1.644 standard deviations of the mean 

for all HCC failure rate groups would 

have initial validation audit sample 

sizes of 200 enrollees, as we do not 

believe a larger sample size would result 

in a meaningful impact on the error 

rates for these issuers. By including 

issuers with HCC failure rates above 

1.644 standard deviations from the 

mean, but who were not outliers (above 

1.96 standard deviations from the 

mean), the sampling approach would 

take into account issuers that were not 

identified as outliers under the HCC 

failure rate methodology, but may have 

been outliers with a larger sample size. 

By expanding these issuers’ sample 

sizes and outlier issuers’ sample sizes 

where issuers’ initial sample precision 

did not meet the targeted value, we can 

evaluate a more accurate representation 

of those issuers’ populations by 

capturing more enrollees to better reflect 

the variation in an issuer’s population 

in the next year of risk adjustment data 

validation. The proposed use of 1.644 

standard deviations (a 90 percent 

confidence interval) would ensure that 

we are evaluating the sampling 

precision of approximately 10 percent of 

issuers, to assess the potential for false 

positives or false negatives around the 

approximate 5 percent of issuers 

identified as outliers by HCC failure rate 

group using 1.96 standard deviations (a 

95 percent confidence interval). 

This proposal is consistent with the 

approach used for error estimation 

under the HCC failure rate methodology 

that will be used beginning with the 

2017 benefit year risk adjustment data 

validation, and would reduce the 

aggregate issuer burden associated with 

an increased sample size by only 

affecting outlier issuers and those 

issuers that are slightly inside of the 

1.96 standard deviations from the mean 

outlier threshold—that is, issuers with 

HCC failure rates results that affect or 

potentially affect transfer adjustments. 

This approach considers issuers that are 

closer to the mean to have samples that 

are of an appropriate precision level, 

and thus would have the effect of most 

issuers’ (approximately 90 percent) 

samples remaining unchanged from the 

current baseline sample size of 200. 

For smaller issuers (those with 

between 3,000 and 49,999 enrollees 

calculated statewide based on the 

benefit year being validated) outside of 

1.644 standard deviations from the 

mean of any HCC failure rate group, we 

propose starting with a minimum 

sample size of 200 enrollees equivalent 

to the initial validation audit sample 

size that will be used for 2018 risk 

adjustment data validation, which will 

increase based on the issuer’s measured 

precision. For larger issuers (those with 

50,000 or more enrollees calculated 

statewide based on the benefit year 

being validated) that are outside of 

1.644 standard deviations from the 

mean of any HCC failure rate group, we 

propose starting with an initial 

validation audit sample size of 400 

enrollees, which would similarly 

increase based on the issuer’s measured 

precision. For very small issuers 

(defined for this purpose as issuers with 

below 3,000 enrollees calculated 

statewide based on the benefit year 

being validated) outside of 1.644 

standard deviations from the mean of 

any HCC failure rate group, we propose 

to maintain the sample size at 200 

enrollees. We are not proposing to 

increase the sample size for very small 

issuers because the current 200 enrollee 

sample size is already statistically 

significant for issuers with fewer than 

3,000 enrollees (calculated statewide 

based on the benefit year being 

validated), and any further sample size 

increase would be especially 

burdensome for these issuers. We 

propose to use the Neyman allocation 

for the allocation of enrollees to all 10 

strata,51 if the above accompanying 

proposal to extend the Neyman 

allocation sampling methodology to also 

include the 10th stratum of enrollees 

without HCCs is finalized. 

To determine the precision of the 

sample of group failure rates, we would 

estimate the absolute precision at a 95 

percent confidence level using the 

formula below. 


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The standard error, and thus, 

precision, is inversely proportional to 

the square root of the sample size (n). 

Therefore, as the sample size increases, 

the standard error which is the metric 

to measure precision would decrease 

(better precision would be achieved, as 

lower values of the precision 

measurement indicate a better 

precision). The proposed approach to 

calculate the new sample size reflects 

the inverse relationship between the 

precision and the sample size, as 

illustrated in the formula below: 

Substituting the values for the original 

sample size and the precision target 

yields: 

In the summer of 2019, once we have 

2017 benefit year risk adjustment data 

validation HCC failure rates, we will be 

able to develop the relative precision of 

the sample; however, at this time, we 

cannot definitively determine the 

sample sizes that would result from this 

proposed approach. Because we propose 

using 1.644 standard deviations (a 90 

percent confidence interval) to identify 

issuers for sampling adjustments, we 

estimate that approximately 55 issuers 

would have their sample size increased 

under this approach out of the 

approximately 500 issuers expected to 

participate in risk adjustment data 

validation for the 2019 benefit year. 

Using the results of 2016 risk 

adjustment data validation, we expect 

that approximately 40 larger issuers 

would have their sample sizes increased 

to at least 400 enrollees, and 

approximately 5 of these larger issuers 

would have their sample sizes increased 

above 400 enrollees as a result of poor 

sample precision. For the remaining 30 

smaller issuers, we expect that 

approximately 50 percent would have 

sample precision that meets or is better 

than the target 10 percent precision and 

therefore would maintain a sample size 

of 200 enrollees, with the majority of the 

other 15 smaller issuers facing moderate 

sample size increases to improve the 

precision of their samples. Based on our 

analysis of 2016 risk adjustment data 

validation, we believe that under this 

proposed approach, only a very small 

number of the subset of issuers outside 

1.644 standard deviations from the 

mean HCC failure rate with poor 

precision (for example, precision greater 

than 20 percent) could have sample 

sizes up to 500 enrollees for smaller 

issuers and up to 800 for larger issuers. 

For smaller issuers with HCC failure 

rates above 1.644 standard deviations of 

the mean HCC group failure rates, and 

an assumed precision above the 10 

percent target, we estimate approximate 

sample size ranges for issuer precision 

groups below: 

• Issuers with 10 percent precision or 

lower. 

++ 2019 approximate sample size: 200 

• Issuers with precision between 10 

percent and 20 percent. 

++ 2019 approximate sample size 

range: 250 to 350 

• Issuers with precision above 20 

percent. 

++ 2019 approximate sample size 

range: 400 to 500 

As stated above, we believe that larger 

samples for larger issuers allows for 

increased samples for issuers that have 

the capability to undertake the 

increased burden and whose errors will 

have a greater impact on the state 

market risk pool, which may also help 

to inform our future sampling 

methodology. As a result, we are 

proposing baseline minimum sample 

sizes of 400 enrollees for larger issuers 

with HCC failure rates above 1.644 

standard deviations of the mean HCC 

group failure rates. For larger issuers 

with HCC failure rates above 1.644 

standard deviations of the mean HCC 

group failure rates, and an assumed 

precision above the 10 percent target, 

we estimate approximate sample size 

ranges for issuer precision groups 

below: 

• Issuers with 10 percent precision or 

lower. 

++ 2019 approximate sample size: 400 

• Issuers with precision between 10 

percent and 20 percent. 

++ 2019 approximate sample size 

range: 450 to 650 


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256 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

52Our assumption is that most issuers with fewer 

than 50 enrollees are likely exempt from 

participating in risk adjustment data validation for 

the benefit year because the issuer has less than 500 

billable member months, but if an issuer has more 

than 500 billable member months and less than 50 

enrollees, the issuer would still be required to 

participate in risk adjustment data validation in a 

given benefit year. For those issuers, the sample 

size would remain the same as prior years. 

• Issuers with precision above 20 

percent. 

++ 2019 approximate sample size 

range: 700 to 800 

We believe that increasing issuer 

sample sizes would provide more data 

that HHS could use to further refine risk 

adjustment data validation error rate 

assumptions and precision rate targets 

for future risk adjustment data 

validation. Additionally, we believe that 

any increase in burden would be 

outweighed by the increased accuracy 

and precision of the risk adjustment 

data validation results which are used to 

adjust risk adjustment transfers. 

We request comment on the approach 

for determining sample sizes for very 

small issuers, smaller issuers, and larger 

issuers based on HCC failure rates and 

sample precision described above, and 

any alternative approaches that could 

limit burden for smaller and medium 

size issuers while achieving our target 

precision. We also request comment on 

whether larger issuers with over 50,000 

enrollees (calculated statewide based on 

the benefit year being validated) should 

have larger initial sample sizes, as well 

as alternative approaches that would 

provide HHS with data it could use to 

further refine risk adjustment data 

validation error rate assumptions while 

also limiting unnecessary burdens for 

these issuers. 

ii. Varying Initial Validation Audit 

Sample Size Based Only on Issuer Size 

An alternative approach we are 

considering would increase the sample 

sizes based on issuer size only and 

continue to use the proxy Medicare 

Advantage risk score error rate data for 

conducting precision analyses. Larger 

sample sizes provide more opportunity 

to test variance in an issuer’s population 

as compared to the current sampling 

method, which samples 200 enrollees 

regardless of the size of the issuer. The 

use of larger sample sizes based on 

issuer size could allow HHS to better 

ensure confidence in the risk 

adjustment data validation process 

while increasing the financial and 

administrative burden on issuers 

proportionally to their size. As noted 

above, larger issuers have the capability 

to undertake the increased burden, and 

their errors will have a greater 

proportional impact on the state market 

risk pool. If we were to modify sample 

size based on issuer size alone, we 

propose to develop sample sizes based 

on issuer size for four groups using the 

total number of unique enrollees in risk 

pools across all states where the issuer 

is subject to risk adjustment transfers 

(that is, combining enrollment for all 

risk pools where the issuer offers risk 

adjustment covered plans, except for 

states where there is only one issuer in 

the risk pool). Under this proposed 

approach, HHS would use an issuer’s 

population size for an applicable benefit 

year of risk adjustment to determine the 

issuer size group for the same benefit 

year of risk adjustment data validation 

sampling. The sample sizes would 

apply to all issuers in the applicable 

size category, without regard to their 

HCC failure rates or sample precision. 

Under this option, we would use the 

following groupings calculated based on 

the issuer’s total number of enrollees in 

all risk pools receiving risk adjustment 

transfers in the applicable benefit year 

of risk adjustment: 

• Issuers with 51–3,000 enrollees.52

++ 2019 approximate sample size for 

small issuers: 90 

• Issuers with 3,001–20,000 enrollees. 

++ 2019 approximate sample size for 

medium issuers: 250 

• Issuers with 20,001–100,000 

enrollees. 

++ 2019 approximate sample size for 

large issuers: 400 

• Issuers with 100,001 and above. 

++ 2019 approximate sample size for 

extra-large issuers: 500 

Enrollment in risk pools where there 

are no risk adjustment transfers (that is, 

where there is only a single issuer) 

would be excluded from this 

calculation. We note that, under this 

approach, larger samples would be 

required for most issuers. However, we 

believe that any increase in burden 

would be outweighed by the increased 

precision of the risk adjustment data 

validation results which are used to 

adjust risk adjustment risk scores and 

subsequently risk adjustment transfers. 

While this approach is the most 

predictable for issuers, based on HHS’s 

analysis of increasing the sample size 

based on issuer size, we do not believe 

this is the best approach, as it would 

increase burden while not meaningfully 

improving precision for issuers with 

large variances in HCC failure rates or 

error rates. This approach also would 

unnecessarily increase sample sizes for 

issuers with good precision using a 

sample of 200 due to low variability in 

HCC failure rates or risk score errors. 

Notwithstanding these disadvantages, 

we acknowledge that varying the sample 

size using issuer size is the only way to 

incorporate the most current issuers’ 

characteristics in the sample size 

determination, as the use of issuers’ risk 

score errors or HCC failure rates would 

be based on prior years for a future 

initial validation sample. 

We seek comment on this alternative 

approach. Additionally, if we finalize an 

approach that adjusts initial validation 

audit samples using issuers’ size only, 

we request comment on whether to 

further subdivide each of the issuer size 

groups outlined above, and seek 

comment on what the characteristics 

and number of subgroups should be, 

and why. 

We seek comment on all aspects of 

these potential approaches to varying 

the initial validation audit sample size 

and whether HHS should consider any 

other sampling approaches to determine 

sample sizes. We solicit comment on 

whether, beginning with 2019 benefit 

year risk adjustment data validation, we 

should vary sample size based on HCC 

failure rate outliers and issuers with 

lower and higher-than-average HCC 

failure rates’ precision, incorporating 

minimum sample sizes for larger and 

smaller issuers with lower- or higherthan-average HCC failure rates, or 

varying sample size by issuer size only. 

Specifically, we seek comment on 

whether HHS should use the 2017 

benefit year HCC failure rates to develop 

sample sizes for the 2019 benefit year, 

as HHS can only estimate an expected 

range in issuers’ precisions to estimate 

the potential impact on sample size at 

this point in time. Finally, we request 

comment on whether HHS should 

maintain the current initial validation 

audit sampling approach of 200 

enrollees for all issuers for 2019 benefit 

year risk adjustment data validation, 

while continuing to evaluate our 

sampling assumptions using actual 

enrollee data. 

b. Second Validation Audit and Error 

Rate Discrepancy Reporting 

(§ 153.630(d)(2)) 

Under § 153.630(d)(2), issuers have 30 

calendar days to confirm the findings of 

the second validation audit or the 

calculation of the risk score error rate, 

or file a discrepancy report, in the 

manner set forth by HHS, to dispute the 

foregoing. We propose to amend 

paragraph (d)(2) to shorten the window 

to confirm the findings of the second 

validation audit (if applicable) or the 

calculation of the risk score error rate, 

or file a discrepancy, to within 15 

calendar days of the notification by 

HHS, beginning with the 2018 benefit 


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Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 257 

53 81 FR 94106. 

54See 78 FR at 72334 through 72337 and 79 FR 

at 13761 through 13768. 

55 79 FR at 13769. 

56As established in the 2015 Payment Notice at 

79 FR 13790, a PMPM default charge is equal to the 

product of the statewide average premium 

(expressed as a PMPM amount) for a risk pool and 

the 75th percentile plan risk transfer amount 

expressed as a percentage of the respective 

statewide average PMPM premiums for the risk 

pool. This rule does not propose any changes to this 

aspect of the calculation of the default data 

validation charge. 

57 In the 2015 Payment Notice at 79 FR 13790, we 

provided that En could be calculated using an 

enrollment count provided by the issuer, 

enrollment data from the issuer’s MLR and risk 

corridors filings for the applicable benefit year, or 

other reliable data sources. This rule does not 

propose any changes to the sources that could be 

used. 

year risk adjustment data validation. We 

also clarify that there are two 

discrepancy reporting windows under 

§ 153.630(d)(2). First, at the conclusion 

of the second validation audit, we will 

distribute to issuers their results for the 

given benefit year. These results would 

only include second validation audit 

findings in the event there is 

insufficient agreement between the 

initial validation audit and second 

validation audit results during the 

pairwise means analysis, and the second 

validation audit findings are used for 

the risk score error rate calculation. For 

issuers who receive second validation 

audit findings, the 15 calendar day 

window to confirm the findings or file 

a discrepancy, in the manner set forth 

by HHS, would begin when the second 

validation audit findings reports are 

issued. At the conclusion of the risk 

score error rate calculation process, we 

will distribute the risk score error rate 

calculation results to all issuers for the 

given benefit year. Once the risk score 

error rate calculation results are 

distributed, the 15 calendar day window 

to confirm the error rate calculation 

results or file a discrepancy, in the 

manner set forth by HHS, would begin. 

The proposed shorter discrepancy 

reporting timeframes are intended to 

ensure that we can resolve as many 

issues as possible in advance of 

publication of calculated risk 

adjustment transfer amounts under 

§ 153.310(e), since any adjusted risk 

scores would result in an adjustment to 

risk adjustment transfers. Based on the 

first 2 pilot years of risk adjustment data 

validation, HHS believes that this 

shortened window would not be overly 

burdensome on issuers, and that any 

disadvantages of this shortened window 

would be outweighed by the benefits of 

timely resolution of as many 

discrepancies as possible prior to the 

release of the summary report on risk 

adjustment results by the end of June. 

We further note that a 15-day 

discrepancy reporting window is 

consistent with the initial validation 

audit sample and EDGE discrepancy 

reporting windows at §§ 153.630(d)(1) 

and 153.710(d), respectively. 

We also propose to amend 

§ 153.630(d)(2) to clarify the reference to 

the ‘‘audit and error rate’’ for which an 

issuer must confirm or file a 

discrepancy by replacing that phrase at 

the end of the provision with ‘‘the 

findings of the second validation audit 

(if applicable) or the calculation of a risk 

score error rate as a result of risk 

adjustment data validation.’’ We 

reiterate, as stated in the 2018 Payment 

Notice, that issuers are not permitted to 

appeal the resolution of any interim 

discrepancy disputing the initial 

validation audit sample, or to file a 

discrepancy or appeal the results of the 

initial validation audit.53 As detailed in 

the 2015 Payment Notice 54 and 

discussed later in this proposed rule, if 

sufficient pairwise means agreement is 

achieved, the initial validation audit 

findings will be used for purposes of the 

risk score error rate calculation, and 

therefore, those issuers will only be 

permitted to file a discrepancy or appeal 

the risk score error rate calculation. We 

seek comment on the proposed 

amendments to § 153.630(d)(2). 

c. Default Data Validation Charge 

Under § 153.630(b)(10), if an issuer of 

a risk adjustment covered plan fails to 

engage an initial validation auditor or 

submit initial validation audit results, 

we impose a ‘‘default data validation 

charge,’’ which the regulation currently 

refers to in paragraph (b)(10) as a 

‘‘default risk adjustment charge.’’ As 

explained in the 2015 Payment Notice, 

the default data validation charge is 

calculated in the same manner as the 

default risk adjustment charge under 

§ 153.740(b).55 With the 2017 benefit 

year being the first non-pilot year of risk 

adjustment data validation, and the first 

year for which HHS may impose the 

default data validation charge for 

noncompliance with applicable data 

validation requirements, we are 

proposing several amendments to clarify 

and further distinguish the default data 

validation charge assessed under 

§ 153.630(b)(10) from the default risk 

adjustment charge assessed under 

§ 153.740(b). First, we propose to amend 

§ 153.630(b)(10) to replace the phrase 

‘‘HHS will impose a default risk 

adjustment charge’’ with ‘‘HHS will 

impose a default data validation 

charge.’’ This change is intended to 

more clearly distinguish between the 

two separate risk adjustment-related 

default charges. Second, we propose to 

modify how the default data validation 

charge under § 153.630(b)(10) would be 

calculated. While we would generally 

continue to calculate the default data 

validation charge in the same manner as 

the risk adjustment default charge under 

§ 153.740(b), we propose to calculate the 

default data validation charge based on 

the enrollment for the benefit year being 

audited in risk adjustment data 

validation, rather than the benefit year 

during which transfers would be 

adjusted as a result of risk adjustment 

data validation. By way of example, if 

an issuer is subject to the default data 

validation charge for 2021 benefit year 

risk adjustment data validation and it 

offers risk adjustment covered plans in 

the same state risk pool in the 2022 

benefit year, its default data validation 

charge would be calculated based on 

2021 benefit year enrollment data 

(rather than 2022 benefit year 

enrollment data). Under this example, 

the default data validation charge this 

issuer would receive for failing to 

comply with the 2021 benefit year risk 

adjustment data validation requirements 

would equal a per member per month 

(PMPM) amount for the 2021 benefit 

year multiplied by the plan’s enrollment 

for the 2021 benefit year as follows: 

Tn = Cn * En

Where: 

Tn = total default data validation charge for 

a plan n; 

Cn = the PMPM amount for plan n; 56 and 

En = the total enrollment (total billable 

member months) for plan n.57

Third, we propose to amend the 

allocation approach for distribution of 

default data validation charges among 

issuers. We propose to allocate a default 

data validation charge to the risk 

adjustment data validation issuers that 

were part of the same benefit year risk 

pool(s) as the noncompliant issuer. 

However, we would not allocate default 

data validation charges to any other 

noncompliant issuers in the same 

benefit year risk pool(s). This approach 

is consistent with the methodology for 

allocating the default risk adjustment 

charges under § 153.740(b), and 

includes all issuers in the same benefit 

year risk pool(s) that would be subject 

to a risk score adjustment as the result 

of other issuers’ risk adjustment data 

validation results. Issuers in the same 

benefit year risk pool(s) that are exempt 

from the risk adjustment data validation 

requirements would also be included in 

the allocation of any default data 

validation charges. Therefore, we 

propose to allocate any default data 


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58For example, see Section VII, Default Risk 

Adjustment Charge, in the Summary Report on 

Permanent Risk Adjustment Transfers for the 2017 

Benefit Year (July 9, 2018), available at https://

downloads.cms.gov/cciio/Summary-Report-RiskAdjustment-2017.pdf. 

59 78 FR 15437. 

60 79 FR 13761. 

validation charges collected from 

noncompliant issuers among the 

compliant and exempt issuers in the 

same benefit year risk pool(s) in 

proportion to their respective market 

shares and risk adjustment transfer 

amounts for the benefit year being 

audited for risk adjustment data 

validation. 

As an illustrative example, there are 

4 issuers (A, B, C, and D) in the 

individual non-catastrophic risk pool in 

state X for the 2017 benefit year, and an 

additional issuer, E, in the 2018 benefit 

year individual non-catastrophic risk 

pool in state X. For the 2017 benefit 

year: 

• Issuer A does not comply with risk 

adjustment data validation and is 

assessed a default data validation 

charge. 

• Issuer B was exempt from risk 

adjustment data validation for the 2017 

benefit year because it was a small 

issuer (that is, it had 500 or fewer 

billable member months statewide in 

state X). 

• Issuers C and D complied with 

applicable 2017 benefit year risk 

adjustment data validation 

requirements. 

• Issuer E was not in the individual 

non-catastrophic risk pool in state X for 

2017. 

Issuer A’s default data validation 

charge would be allocated to issuers B, 

C, and D in proportion to their 2017 

transfer amounts and market shares. As 

detailed further below, this allocation 

would occur in the 2019 calendar year 

alongside the collection and payment of 

2018 benefit year risk adjustment 

transfers. While Issuer B was not subject 

to risk adjustment data validation for 

the 2017 benefit year, it was still part of 

the same state market risk pool and 

would be subject to possible risk score 

adjustments due to the risk adjustment 

data validation results of issuers C and 

D. Since issuers C and D also 

participated in the individual noncatastrophic risk pool in state X for 2017 

and complied with applicable data 

validation requirements, they would 

also receive part of Issuer A’s default 

data validation charge. However, Issuer 

E was not part of the individual noncatastrophic risk pool in state X until 

2018, and therefore would not receive 

any part of Issuer A’s 2017 benefit year 

default data validation charge. 

We intend to publish the default data 

validation charge information in the 

benefit year’s report(s) released under 

§ 153.310(e) in which transfers are 

adjusted based on risk adjustment data 

validation results, similar to how 

information on the risk adjustment 

default charge under § 153.740(b) is 

currently provided.58 Information on 

default data validation charges would be 

included as part of the summary risk 

adjustment report made publicly 

available beginning with the 2018 

benefit year reports released under 

§ 153.310(e). For example, for the 2017 

benefit year risk adjustment data 

validation, we would publish 

information on default data validation 

charges and allocation of those charges 

to eligible 2017 benefit year issuers in 

the affected risk pools as part of the 

2018 benefit year summary risk 

adjustment report. Following release of 

this report, these amounts would then 

be included as part of the monthly 

payment and collection processes 

described in 45 CFR 156.1215 alongside 

the collection of risk adjustment charges 

and payments calculated under the 

HHS-operated risk adjustment 

methodology. 

Fourth, we clarify that a default data 

validation charge under § 153.630(b)(10) 

is separate from risk adjustment 

transfers for a given benefit year, unlike 

a default risk adjustment charge under 

§ 153.740(b), which replaces the issuer’s 

transfer amount for that benefit year. For 

example, if an issuer fails to submit 

initial validation audit results for the 

2017 benefit year, it would receive a 

default data validation charge based on 

2017 benefit year data calculated in 

accordance with the formula outlined 

above, if finalized as proposed. This 

default data validation charge for the 

2017 benefit year would be in addition 

to, and separate from, the issuer’s 2018 

benefit year risk adjustment payment or 

charge amount as calculated under the 

HHS-operated risk adjustment 

methodology. This means that an issuer 

may owe both a default risk adjustment 

charge and a default data validation 

charge in the same calendar year (for 

example, in the 2019 calendar year, an 

issuer could owe a risk adjustment 

default charge for the 2018 benefit year 

and a default data validation charge for 

the 2017 benefit year risk adjustment 

data validation). Similarly, an issuer 

may owe in the same benefit year a risk 

adjustment charge for a given benefit 

year, alongside a default data validation 

charge for the benefit year being audited 

(for example, in the 2019 calendar year, 

an issuer could owe a risk adjustment 

charge for the 2018 benefit year as well 

as a default data validation charge for 

the 2017 benefit year). 

We offer these proposals and 

clarifications about how HHS will 

assess and allocate the default data 

validation charge at this time to allow 

issuers to better understand the 

implications of noncompliance with 

initial validation audit requirements as 

risk adjustment data validation 

operations transition away from the 

pilot years of the program. The 

proposed amendments would apply 

beginning with the 2017 benefit year 

risk adjustment data validation. 

We seek comment on these proposals. 

d. Second Validation Audit Pairwise 

Means Test 

In the 2014 Payment Notice, we 

provided that a second validation audit, 

will be conducted by an entity retained 

by HHS to verify the accuracy of the 

findings of the initial validation audit.59

Consistent with § 153.630(c), HHS must 

select a subsample of the risk 

adjustment data validated by the initial 

validation audit for the second 

validation audit. In the 2015 Payment 

Notice, we indicated that to select the 

subsample, the second validation 

auditor will use a sampling 

methodology that allows for pairwise 

means testing to establish a statistical 

difference between the initial and 

second validation audit results.60 This 

pairwise means test uses a 95 percent 

confidence interval (and a standard 

deviation of 1.96). To do pairwise 

means testing under the current 

approach, the second validation auditor 

tests a subsample of enrollees from an 

issuer’s initial validation audit sample 

of 200 enrollees. If the pairwise means 

test results for a subsample indicate that 

the difference in enrollee results 

between the initial and second 

validation audits is not statistically 

significant, the initial validation audit 

results are used for calculation of HCC 

failure rates and risk score error rates. If 

the pairwise means test results for the 

subsample yields a statistically 

significant difference, the second 

validation auditor performs another 

validation audit on a larger subsample 

of enrollees from the initial validation 

audit. The results from the second 

validation audit of the larger subsample 

are again compared to the results of the 

initial validation audit using the 

pairwise means test with a subsample 

size of up to 100 enrollees. If there is no 

statistically significant difference 

between the initial and second 

validation audits of the larger 

subsample, HHS will apply the initial 

validation audit error results to 


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61 83 FR 16961. 

62 81 FR 94058 at 94074–94080. 

63These principles are outlined in the 2018 

Payment Notice at 81 FR 94058 at 94075. 

64The severity-only RXCs are included in the 

2018 benefit year risk adjustment adult models, but 

are removed beginning with the 2019 benefit year 

risk adjustment models, as they did not 

meaningfully predict risk after being constrained. 

See 83 FR 16930 at 16941. 

65 83 FR 16961–16967. 

calculate the HCC failure rates and risk 

score error rates. However, if a 

statistically significant difference is 

found based on the second validation 

audit of the larger subsample up to 100 

enrollees, HHS will apply the second 

validation audit results to the larger 

subsample to calculate the HCC failure 

rates and risk score error rates. 

Based on the results of the second 

validation audit for the 2016 risk 

adjustment data validation pilot year, 

we propose to modify the statistical 

subsampling methodology to further 

expand the comparison of results 

between the initial and second 

validation audits beginning with the 

2017 benefit year risk adjustment data 

validation. Specifically, when the larger 

subsample (of 100 enrollees) results 

indicate a statistically significant 

difference, we believe that further 

sampling by the second validation 

auditor is necessary and appropriate to 

determine whether the second 

validation audit results from the full 

sample should be used in place of the 

initial validation audit results. 

Therefore, we propose that, if a 

statistically significant difference is 

found based on the second validation 

audit of the larger subsample (of 100 

enrollees), HHS would expand its 

sample to the full initial validation 

audit sample to consider whether the 

second validation audit results of the 

full sample or the subsample (of 100 

enrollees) results should be used in 

place of initial validation audit results. 

Allowing the further testing of the 

sample provides assurance and 

confidence in the second validation 

audit results and the associated error 

estimation rate that would ultimately be 

used to adjust risk scores and transfers. 

To determine whether to expand the 

second validation audit to the full initial 

validation audit sample, we propose to 

use a precision analysis. We would use 

precision metrics, including the 

standard error and confidence intervals, 

to determine if the second validation 

audit review of the larger subsample (of 

100 enrollees) is of high or low 

precision. If the results of the second 

validation audit precision analysis 

determine that the precision level is 

good, HHS would use the second 

validation audit results for the larger 

subsample (of 100 enrollees) in place of 

the initial validation audit results for 

the error estimation and calculation of 

adjustments for plan average risk score, 

as applicable. However, if the second 

validation audit precision analysis for a 

larger subsample (of 100 enrollees) 

determines that the precision level is 

poor, the second validation audit would 

expand and use the full initial 

validation audit sample of 200 enrollees 

for error estimation and calculation of 

adjustments for plan average risk score. 

If any of the proposals to vary the 

initial validation audit sample size 

described above are finalized beginning 

with the 2019 benefit year risk 

adjustment data validation, we propose 

to maintain the maximum expansion of 

the sample for the pairwise comparison 

at 200 enrollees, and if the sample is 

smaller than 200 enrollees for an 

issuer’s initial validation audit, the 

maximum expansion for pairwise means 

testing would be the full sample size. 

We seek comments on these 

proposals. 

e. Error Estimation for Prescription 

Drugs 

Under § 153.350(c), we may adjust 

risk adjustment transfers to all issuers of 

risk adjustment covered plans in a state 

market risk pool based on adjustments 

to the average actuarial risk of a risk 

adjustment covered plan due to errors 

discovered during risk adjustment data 

validation. In the 2019 Payment Notice, 

we recognized that some variation and 

error should be expected in the 

compilation of data for risk scores, 

because providers’ documentation of 

enrollee health status varies across 

provider types and groups.61 To avoid 

adjusting all issuers’ risk scores, and by 

extension their risk adjustment transfers 

for expected variation and error, we 

finalized an approach in the 2019 

Payment Notice that uses failure rates 

specific to HCC groups and 

subsequently adjusts each issuer’s risk 

score when the issuer’s failure rate for 

a group of HCCs is statistically different 

from the weighted mean failure rate for 

that group of HCCs for all issuers that 

submit initial validation audit results. 

We believe that determining outlier 

failure rates based on HCC groups yields 

a more equitable measure to evaluate 

statistically different HCC failure rates 

affecting an issuer’s error rate than an 

approach based on an overall failure 

rate. Further, this approach is intended 

to streamline the risk adjustment data 

validation process and improve issuers’ 

ability to predict risk score adjustments 

that would impact risk adjustment 

transfers (including adjustments made 

as a result of risk adjustment data 

validation results) while ensuring the 

integrity and quality of data provided by 

issuers. 

Additionally, in the 2018 Payment 

Notice,62 we finalized that, starting with 

the 2018 benefit year, prescription drug 

utilization indicators would be 

incorporated into the HHS risk 

adjustment models to create ‘‘hybrid’’ 

drug-diagnosis risk adjustment models 

for adults. To develop the hybrid drugdiagnosis risk adjustment models for 

adults, we finalized a set of clinically 

and empirically cohesive drug classes 

and created several Prescription Drug 

Categories (RXCs) to select and to group 

drugs. Based on a set of principles to 

guide our decision-making,63 we 

selected RXCs to impute diagnoses and 

to indicate the severity of diagnoses 

otherwise indicated through medical 

coding. Specifically, we created 

‘‘payment’’ RXCs and interactions 

between RXCs and HCCs, referred to as 

‘‘RXC–HCCs,’’ that serve as indicators of 

incremental risk. The RXCs 

incorporated in the risk adjustment 

models for adults are closely associated 

to a specific HCC or group of HCCs that 

are potentially suitable for inclusion in 

the HHS risk adjustment models. When 

these RXCs are present, they can be 

used to impute a missing HCC, or to 

indicate the severity of a condition 

when coupled with a particular HCC. 

We also created ‘‘severity-only RXCs’’ 

that only indicate incremental risk 

when an HCC is also present for an 

enrollee. These severity-only RXCs are 

not included in the adult models to 

impute the associated diagnosis when 

an HCC is not present.64 The 

incorporation of prescription drug data 

helps reduce incentives for issuers to 

avoid making available treatments for 

high-cost conditions in their 

formularies, and can effectively indicate 

health risk in cases where diagnoses 

may be missing. Because of the 

incorporation of payment RXCs into the 

risk adjustment models for adults 

beginning with the 2018 benefit year, 

we believe further modification may be 

appropriate to the error estimation 

methodology to take into account these 

RXCs’ failure rates as part of the HHS 

risk adjustment data validation process. 

HCCs are used in the 2017 risk 

adjustment data validation error 

estimation methodology finalized in the 

2019 Payment Notice 65 in two key 

components of the methodology. First, 

the HCCs are grouped into low, 

medium, and high HCC groups based on 

the national failure rates for each HCC. 

Specifically, using data from the benefit 

year’s risk adjustment data validation, 


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260 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

66To clarify the formula finalized in the 2019 

Payment Notice, we added the definition of h, 

which was included in the 2019 Payment Notice, 

but was not explicitly defined. 

67The proposed RXC methodologies in this 

section are intended to start applying with the 2018 

benefit year risk adjustment data validation where 

there was 12 RXCs being used in the risk 

adjustment models for adults; however, starting 

with the 2019 benefit year, the two severity-only 

RXCs are removed from the adult risk adjustment 

models. See 83 FR at 16941. Therefore, only 10 

RXCs exist for the 2019 benefit year and adoption 

of this proposal would mean that the number of 

factors for groupings for risk adjustment data 

validation would increase for 2019 benefit year risk 

adjustment data validation from 128 HCCs to 138 

HCCs/RXCs. 

HHS first calculates the failure rate for 

each HCC in issuers’ initial validation 

audit samples as: 

Where: 

Freq_EDGE h is the frequency of HCC code h 

occurring on EDGE, which is the number 

of sampled enrollees recording HCC code 

h on EDGE. 

FreqlIVAh is the frequency of HCC code h 

occurring in initial validation audit 

results, which is the number of sampled 

enrollees with HCC code h in initial 

validation audit results. 

FRh is the failure rate of HCC code h. 

h is the set of codes including all HCCs.66

Based on the above calculation, HHS 

then creates three HCC groups (low, 

medium, and high) from the derived 

HCC failure rates. These HCC groups are 

determined by first ranking all HCC 

failure rates and then dividing the 

rankings into three groups, weighted by 

total observations or frequencies, of that 

HCC across all issuers’ initial validation 

audit samples, to assign each unique 

HCC in the initial validation audit 

samples to a high, medium, or low 

failure rate group with an approximately 

even number of observations in each 

group. Those three HCC groupings are 

used to calculate each issuer’s HCC 

group failure rate to set the national 

means and confidence intervals for each 

HCC group. These national confidence 

intervals determine the thresholds for 

being an outlier for each of the three 

HCC groups, and the individual issuer’s 

HCC group failure rates are compared to 

these national confidence intervals to 

determine if the issuer is an outlier. 

Second, HCCs are used in the 

calculation of the issuer’s error rate, 

which we use to adjust the issuer’s risk 

score, if applicable. To calculate this 

adjustment, we first calculate the 

adjustment to an enrollee’s total risk 

score, as the ratio of the total adjusted 

risk score for individual HCCs to the 

total risk score components for 

individual HCCs. Then, we calculate the 

total adjustment to an issuer’s risk score 

amount across all HCCs per enrollee as: 

Adjustmenti,e is the calculated adjustment 

amount to adjust Enrollee e of Issuer i’s 

EDGE risk score. 

In this rule, we propose to incorporate 

RXCs into the error estimation 

methodology beginning with the 2018 

benefit year risk adjustment data 

validation error estimation, and are 

considering several alternatives for 

adding RXCs into these two parts of the 

risk adjustment data validation error 

estimation methodology, as outlined 

further below. We seek comments on all 

of the proposals and alternatives, 

including an alternative method 

described later in this section that 

would not require changes to the error 

estimation methodology to incorporate 

RXCs into HHS risk adjustment data 

validation. 

In considering how to incorporate 

prescription drugs in the error 

estimation methodology, we recognize 

that differences between HCCs and 

RXCs need to be considered. 

Specifically, RXCs and HCCs are interdependent in the enrollee’s risk score 

calculation and the risk score impact of 

RXCs can reflect interaction terms of the 

RXC between more than one HCC. 

Additionally, the method for 

validating an enrollee’s RXC would be 

different than the method for validating 

an enrollee’s HCC. Specifically, our 

assumption is that it may be more 

straightforward for initial validation 

auditors to validate an RXC than an 

HCC because in many cases, only a 

validated prescription would need to be 

obtained to validate the RXC, whereas 

HCC validation requires recoding a 

medical record, which likely has the 

potential for greater variation. 

With these considerations in mind, 

the first proposal we are considering 

would incorporate RXCs into the HCC 

failure rate methodology by adding each 

RXC as a separate factor, similar to an 

‘‘HCC’’, for classification into the low, 

medium, and high HCC groups 

determined by the national failure rates 

for each RXC. For example, because 

there are 12 RXCs and 128 single 

component HCCs in the 2018 benefit 

year,67 incorporating RXCs in this 

manner would mean that the number of 

factors for groupings for risk adjustment 

data validation would increase from 128 

HCCs to 140 HCCs/RXCs. To apply this 

change to the error estimation 

methodology finalized in the 2019 

Payment Notice, we propose the 

definition of superscript h would 

expand to a list of codes including both 

the 128 HCCs and 12 RXCs whereby 

HHS would first calculate the failure 

rate for each HCC and RXC in issuers’ 

samples as: 

Where: 

h_r is the set of codes including 128 HHS_

HCCs and 12 RXCs. 

Freq_EDGEh_r is the frequency of HCC code 

h or RXC code r occurring on EDGE, 

which is the number of sampled 

enrollees recording HCC code h or RXC 

code r on EDGE. 


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68 83 FR 16930 at 16963. 

Freq_IVAh_r is the frequency of HCC code h 

or RXC code r occurring in initial 

validation audit results, which is the 

number of sampled enrollees with HCC 

code h or RXC code r in initial validation 

audit results. 

FRh_r is the failure rate of HCC code h or RXC 

code r. 

HHS would then create three ‘‘HCC/ 

RXC’’ groups based on the HCC failure 

rates and RXC failure rates derived in 

the calculation above. These ‘‘HCC/ 

RXC’’ failure rate groups would rank all 

HCC failure rates and RXC failure rates 

to assign each unique HCC and RXC in 

the initial validation audit samples to a 

high, medium, or low failure rate group. 

To assign each HCC and RXC to a 

‘‘HCC/RXC’’ failure rate group, we 

propose to use the current HCC failure 

rate ranking methodology that ranks 

each HCC/RXC failure rate divided into 

three groupings based on weighted total 

observations or frequencies of that HCC/ 

RXC across all issuers’ initial validation 

sample, or assigning HCCs and RXCs 

failure rates by taking into consideration 

the ranking of related HCCs and RXCs 

in the grouping. Under this proposed 

approach, we would maintain a single 

classification for HCC and RXC high, 

medium, or low groups, instead of 

creating two separate classifications of 

RXCs and single component HCCs. We 

believe this proposed approach would 

be the most simplified manner to 

incorporate RXCs and builds upon the 

current HCC group failure rate 

methodology. 

Alternatively, we could incorporate 

the RXCs as a separate ‘‘HCC’’ grouping 

in the error estimation methodology. 

Under this proposed approach, we 

would keep the 128 HCCs in the three 

groups, but combine all RXCs into an 

additional, fourth separate group. 

Therefore, a separate RXC and the HCCs 

groups would be created, and their 

failure rates would be computed within 

those four groupings. This proposed 

approach to group RXCs would be the 

same as for HCC groupings, which is 

based on the failure rates FRr of the 12 

RXCs: 

Where: 

r is the set of 12 RXCs. 

Freq_EDGEr is the frequency of RXC code r 

occurring on EDGE, which is the number 

of sampled enrollees recording RXC code 

r on EDGE. 

Freq_IVAr is the frequency of RXC code r 

occurring in initial validation audit 

results, which is the number of sampled 

enrollees with RXC code r in initial 

validation audit results. 

FRr is the failure rate of RXC code r. 

While we assume that RXCs may be 

easier to validate, this type of approach 

could take into consideration the 

potential differing failure rates within 

the RXC groupings as opposed to the 

single component HCC groupings, or 

isolate the RXC failure rates to a 

separate grouping from HCCs before 

applying those failure rates to the error 

rate calculation. This alternative 

approach would also result in an 

additional grouping in the error 

estimation methodology, and having 

more groupings means that the number 

of groupings where it is possible for an 

issuer to be an outlier would increase. 

Further, in the event that all RXCs do 

not have similar, low failure rates, the 

confidence interval for an RXC-only 

group could be quite large, resulting in 

a significant difference between the 

outliers’ failure rates to the group’s 

failure rate mean, and by extension, 

could result in a larger failure rate 

adjustment factor for the RXC-only 

group. 

In addition to adopting one of the 

above approaches to group RXCs as part 

of the error estimation methodology, we 

would also need to incorporate RXCs 

into the error rate calculation under the 

error estimation methodology. To do so, 

we propose three alternative approaches 

to incorporate and adjust for RXCs and 

RXC–HCC interaction factors in the 

error rate calculation. The error rate 

calculation represents the issuer’s risk 

score error rate as a result of risk 

adjustment data validation and 

constitutes the percentage of the issuer’s 

risk score that is incorrect due to the 

issuer’s outlier group failure rate(s). As 

an example, an issuer could have a 50 

percent failure rate for a group of HCCs, 

in that twenty of forty instances of the 

HCC could not be validated. The impact 

of that HCC failure rate on an issuer’s 

error rate calculation will then depend 

on the mean group failure rate where 

the issuer was identified as an outlier, 

the magnitude of the HCCs’ coefficients 

in that group, and the incidence of those 

HCCs in the audit sample. 

One option to incorporate the RXCs in 

the error rate calculation that we 

propose would be to add RXCs to the 

current methodology of calculating error 

rates, without accounting for any HCC– 

RXC interaction factors. To incorporate 

RXCs in the current error rate 

calculation, we propose to modify the 

formula to calculate an enrollee’s 

adjustment Adjustmenti,e as follows: 


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However, this proposed approach 

would mean that the interaction of the 

risk score coefficients between the 

single component HCC and the RXC are 

not considered in the error rate 

calculation, which may be an 

oversimplification of this calculation. 


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Alternatively, we solicit comments on the adjustment of the RXCs in the error rate 

calculation as part of the risk score coefficient for a single component HCC by adjusting the risk 

score coefficient of the RXC-HCC interaction factor, if the coefficient exists. This step would 

start with the coefficient for a single component HCC and RXC and then adjust both single 

component coefficients with the full interaction term for both the HCC and RXC to calculate the 

error rate. Under this proposed approach, if there is no coefficient, the single component HCC 

and RXC would not be adjusted by an interaction term. Under this proposed approach, RSi~~c 

would be defined as: 

RS~,G = RS~_hccjrxc,G + RS~_x_hXr,G 

~e ~e ~e 

Where: 

Rst;hccfrxc,c is the risk score component of a code c as a single HCC or RXC, without 

considering the interaction coefficients between code c and other codes for Enrollee e oflssuer i. 

RStex_hxr,c is the risk coefficient for the interaction between an HCC and an RXC, with 

the interaction term existing between code c and another codex for Enrollee e of Issuer i. 

G is the HCC/RXC group for code c. 

For example, if an Enrollee (e) of Issuer (i) coded HCC 48 (Inflammatory Bowel 

Disease) and RXC 05 (Inflammatory Bowel Disease Agents) on EDGE, the risk component for 

HCC 48 (Rsr~c s,c) is calculated as: 

RS~cc48,G = RS~cc48_hccjrxc,G + RS~cc48_rxcOS_hXr,G 

~e ~e ~e 

The risk component for RXC 05 (Rs[:cos,c) is calculated as: 

Rs:xcos,c = RS:xcoS_hhcjrxc,G + Rs:xcoS_hcc48_hXr,G 

t,e t,e t,e 

B th Rshcc48 rxcOS hXr,G d RSrxcOS hcc48 hXr,G ld b 1 1 t d · th o i,e - - an i,e - - wou e ca cu a e usmg e 

interaction term. 
264 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

69See 83 FR 16930 at 16970 through 16971. 70 83 FR at 16965. 

In short, this alternative proposed 

approach for incorporating RXCs in the 

error rate calculation would capture the 

sampled enrollee’s characteristics and 

interaction between the single 

component HCC and RXC that may 

provide a more accurate calculation 

than not accounting for any interaction 

between the single component HCC and 

RXC. However, this proposed approach 

would add an additional step to the 

error rate calculation, whereby the risk 

score coefficient for a condition would 

be adjusted by the interaction 

coefficients between the single 

component HCC and the RXC and 

would take into account the full 

interaction coefficient separately for the 

HCC and RXC, which may result in an 

over-adjustment for the interaction 

terms. 

A third alternative to incorporating 

RXCs as part of the error rate calculation 

would be to adjust the risk score 

coefficient for a single component HCC 

and RXC by a modified interaction 

coefficient between the single 

component HCC and RXC indicator, if 

the coefficient exists. If there is no 

coefficient, the single component HCC 

and the RXC would not be adjusted by 

an interaction coefficient. This 

alternative approach would capture a 

sampled enrollee’s specific 

characteristics and interaction between 

HCC and RXC and modify the 

interaction such that the total 

adjustments are equal to the total 

interaction term value. That is, if an 

interaction would be applied to two 

codes, each of the codes receives a 

fraction of the interaction adjustment 

that equals the full value of the 

interaction factor. Specifically, this 

approach would add two steps to the 

risk score error rate calculation, first, to 

include interaction terms and second, to 

modify the interaction to ensure that it 

does not exceed the interaction term, 

which would be more complex to 

implement. However, this proposed 

approach would have the benefit of 

limiting the potential for over- or underadjusting an issuer’s risk score error rate 

to account for interaction terms because 

the total adjustment would not exceed 

the interaction term. Thus, this 

alternative could provide a balanced 

approach between the two previous 

proposed options for incorporating 

RXCs as part of the error rate calculation 

where no HCC and RXC interactions 

were being considered or the impact of 

HCC and RXC interaction terms was not 

being limited. 

We also generally solicit comment on 

how to weight risk score coefficients 

and account for the interaction terms 

between the single component HCC and 

the RXCs in calculating the error rate 

under these alternative proposed 

approaches. Additionally, in the error 

estimation methodology finalized in the 

2019 Payment Notice, we did not 

include the severity illness indicator 

interactions for HCCs as they can be 

triggered by multiple combinations of 

HCCs, which would be overly complex 

to implement. As part of our current 

evaluation of the impact of adjusting for 

the RXC–HCC interactions in the error 

estimation methodology, we also seek 

comment on whether we should 

similarly not adjust for the RXC–HCC 

interactions. 

We solicit comment on all of these 

proposed approaches for incorporating 

RXCs into the error estimation 

methodology and error rate calculation, 

including whether we should consider 

alternative options. For example, for the 

2018 benefit year, we could finalize one 

method for incorporating RXCs into the 

error estimation process with the 

intention of reconsidering that method 

for future benefit years once we have 

data and experience from the 2018 

benefit year risk adjustment data 

validation. 

As an alternative to the 

aforementioned proposed policies, we 

are also considering other methods for 

incorporating RXCs (or all drugs) into 

the risk adjustment data validation 

process rather than as part of the error 

estimation methodology and error rate 

calculation. Since it may be 

significantly easier to validate RXCs 

than HCCs, we could treat RXC errors as 

a data submission issue. Specifically, 

we could incorporate RXCs or all drugs 

into risk adjustment data validation as 

a method of discovering materially 

incorrect EDGE server data submissions 

in the same or similar manner to how 

we address demographic and 

enrollment errors discovered during risk 

adjustment data validation.69 Under this 

alternative proposed approach, instead 

of incorporating RXCs into the error 

estimation methodology and error rate 

calculation, we would treat RXC or 

general drug errors discovered during 

risk adjustment data validation in a 

manner similar to an EDGE data 

discrepancy, which is addressed in the 

current benefit year under § 153.710(d). 

As such, these RXC or general drug 

errors would be the basis for an 

adjustment to the applicable benefit 

year risk score and original transfer 

amount, rather than the subsequent 

benefit year risk score. Any material 

errors identified through this process 

would result in a decrease to the issuer’s 

original risk score, thereby resulting in 

a reduced risk adjustment payment or 

an increased risk adjustment charge for 

that issuer. If this alternative approach 

is adopted, the identification of RXC or 

general drug errors could also have the 

effect of reducing charges or increasing 

payments to other issuers in the state 

market risk pool, holding constant the 

other elements of the state payment 

transfer formula. We solicit comment on 

this alternative approach, especially in 

comparison to the proposals for 

incorporating RXCs into the error 

estimation methodology and/or error 

rate calculation, and on whether other 

specific requirements would be needed 

to verify materiality of risk score 

impacts if we were to treat RXC or 

general drug errors discovered during 

risk adjustment data validation as a data 

submission issue through the EDGE data 

discrepancy process under § 153.710(d). 

f. Risk Adjustment Data Validation 

Adjustments in Exiting and Single 

Issuer Markets and Negative Error Rate 

Outlier Markets 

Under the risk adjustment data 

validation program, adjustments to 

transfers are generally made in the 

benefit year following the benefit year 

that was audited. For issuers that exit 

the market following the benefit year 

being audited, and therefore do not have 

transfers to adjust during the following 

benefit year, we have previously 

finalized an exception to this general 

rule such that we will adjust the exiting 

issuer’s prior year risk scores and 

associated transfers where it has been 

identified as an outlier through the HCC 

failure rate methodology during risk 

adjustment data validation.70 We 

propose to amend our policy to provide 

that, if an exiting issuer is found to be 

a negative error rate outlier, HHS will 

not make adjustments to that issuer’s 

risk score and its associated risk 

adjustment transfers as a result of this 

negative error rate outlier finding. A 

negative error rate would have the effect 

of increasing an issuer’s risk score and 

thereby increasing their calculated risk 

adjustment payment or reducing their 

calculated risk adjustment charge. To 

avoid retroactively re-opening a risk 

pool to make adjustments to other 

issuers’ transfers based on an exiting 

issuer’s negative error rate, we propose 

to re-open the issuer’s risk score and its 

associated risk adjustment transfers in a 

prior benefit year only if the exiting 

issuer was found to have had a positive 

error rate, and was therefore, overpaid 

or undercharged based on its risk 

adjustment data validation results. 

When the exiting issuer is a positive 


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71See 83 FR at 16967. 

72 Id. 

73 79 FR 13743 at 13768–13769. 

74For example, we stated in the 2015 Payment 

Notice that ‘‘the effect of an issuer’s risk score error 

adjustment will depend upon its magnitude and 

direction compared to the average risk score error 

adjustment and direction for the entire market’’. See 

79 FR 13743 at 13769. 

error rate outlier, HHS would collect 

funds (either increasing the charge 

amount or reducing the payment 

amount) from the exiting issuer and 

redistribute the amounts to other issuers 

who participated in the same state 

market risk pool in the prior benefit 

year. This proposed approach is 

intended to help ensure that issuers are 

made whole even if an issuer with a 

positive error rate exits the state, 

without the additional burdens 

associated with having transfers 

adjusted (including the potential for 

additional charges being assessed) for a 

prior benefit year for a negative error 

rate outlier when an issuer decides to 

exit a state. 

Further, we also propose that to be 

considered an exiting issuer under this 

proposed policy, that issuer would have 

to exit all of the markets and all of the 

risk pools in the state (that is, not selling 

or offering any new plans in the state). 

If an issuer only exits some of the 

markets or risk pools in the state, but 

continues to sell or offer new plans in 

others, it would not be considered an 

exiting issuer under this proposed 

policy. Finally, we clarify that under 

this proposal, small group market 

issuers with off-calendar year coverage 

who exit the market but only have carryover coverage that ends in the next 

benefit year (that is, carry-over of run 

out claims for individuals enrolled in 

the previous benefit year, with no new 

coverage being offered or sold) would be 

considered an exiting issuer and would 

be exempt from risk adjustment data 

validation for the benefit year with the 

carry-over coverage. Individual market 

issuers offering or selling any new 

individual market coverage in the 

subsequent benefit year would be 

subject to risk adjustment data 

validation, unless another exemption 

applies. These proposed policies, if 

finalized, would be effective for 2017 

benefit year risk adjustment data 

validation and beyond. We solicit 

comment on these proposals and on the 

potential impact of any carry-over 

coverage by individual market plans 

and how HHS would be able to confirm 

that any individual market plan has 

carry-over coverage. 

We also propose to clarify how we 

would approach applying risk 

adjustment data validation results in 

circumstances where an issuer is 

entering what was previously a sole 

issuer risk pool. For issuers that are the 

sole issuer in a state market risk pool in 

a benefit year, there are no risk 

adjustment transfers under the state 

payment transfer formula and thus, no 

payment or financial accountability to 

other issuers for that risk pool.71 We do 

not calculate risk adjustment transfers 

for a benefit year in a state market risk 

pool in which there is only one issuer, 

and that issuer is not required to 

conduct risk adjustment data validation 

for that state market risk pool.72

However, if the sole issuer was 

participating in multiple risk pools in 

the state during the year that is being 

audited, that issuer would be subject to 

risk adjustment data validation for those 

risk pools with other issuers that had 

risk adjustment transfers calculated. In 

addition, the sole issuer may have been 

identified as an outlier for risk 

adjustment data validation, and its error 

rate would be applied to all of the 

issuer’s risk adjustment covered plans 

in the state’s market risk pools where it 

was not the sole issuer. Its error rate 

would also be applied to adjust the 

subsequent benefit year’s transfers for 

other issuers in the same state market 

risk pool(s). If that sole issuer 

participated in risk adjustment data 

validation for the benefit year, and in 

the following benefit year, a new issuer 

entered the formerly sole issuer risk 

pool, we propose that the formerly sole 

issuer’s error rate would also apply to 

the risk scores for its risk adjustment 

covered plans in the subsequent benefit 

year in the risk pool(s) in which it was 

formerly the sole issuer—that is, the 

formerly sole issuer’s risk scores and 

transfer amounts calculated for the 

benefit year in which a new issuer 

entered the state market risk pool which 

did not have risk adjustment transfers 

calculated in the prior year would be 

subject to adjustment based on the 

formerly sole issuer’s error rate. In 

addition, the new issuer may also have 

its risk adjustment transfer adjusted in 

the subsequent benefit year if the 

formerly sole issuer was an outlier with 

risk score error rates in the prior benefit 

year’s risk adjustment data validation. 

This is consistent with the policy 

established in the 2015 Payment Notice, 

specifying that each issuer’s risk score 

adjustment (from risk adjustment data 

validation results) will be applied to 

adjust the plan’s average risk score for 

each of the issuer’s risk adjustment 

covered plans.73 This proposed policy 

also aligns with how error rates would 

be applied if a new issuer entered a state 

market risk pool with more than one 

issuer. This proposed policy, if 

finalized, would be effective for 2017 

benefit year risk adjustment data 

validation and beyond. We solicit 

comment on this proposal. 

Lastly, as discussed in this section 

earlier, if an issuer is a negative error 

rate outlier, its risk score would be 

adjusted upwards. Assuming no 

changes to risk scores for the other 

issuers in the risk pool, this upward 

adjustment would reduce the issuer’s 

risk adjustment charge or increase its 

risk adjustment payment for the 

applicable benefit year, leading to an 

increase in risk adjustment charges or a 

decrease in risk adjustment payments 

for the other non-outlier issuers in the 

state market risk pool. The intent of this 

two-sided outlier identification, and the 

resulting adjustments for outlier issuers 

that have significantly better than 

average (negative error rate) and poorer 

than average (positive error rate) data 

validation results is to ensure that risk 

adjustment data validation adjusts risk 

adjustment transfers for identified, 

material risk differences between what 

issuers submitted to their EDGE servers 

and what was validated in medical 

records. The increase to risk score(s) for 

negative error rate outliers is consistent 

with the upward and downward risk 

score adjustments that were finalized as 

part of the original risk adjustment data 

validation methodology in the 2015 

Payment Notice 74 and the HCC failure 

rate approach to error estimation 

finalized in the 2019 Payment Notice. 

That is, the long-standing intent of HHSoperated risk adjustment data validation 

has been to account for identified risk 

differences, regardless of the direction 

of those differences. Except as proposed 

above for negative error rate outliers 

from exiting issuers, we believe that 

adjusting for both negative and positive 

error rate outliers ensures that issuers’ 

actuarial risk is reflected in transfers 

and incentivizes issuers to achieve the 

most accurate EDGE data submissions 

for initial risk adjustment transfer 

calculations; therefore, we do not 

believe that further changes are needed 

to the error estimation methodology or 

the outlier adjustment policy to account 

for the impact of negative error rate 

outliers on non-outlier issuers in the 

state market risk pool at this time. 

The 2016 benefit year risk adjustment 

data validation pilot year results 

suggested that there could be a large 

number of negative error rate outlier 

issuers affecting numerous state market 

risk pools, but this result was largely 

due to the modifications made to the 


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75See 81 FR 94058 at 94104 and 83 FR 16930 at 

16966. 

76Exemption from HHS-Operated Risk 

Adjustment Data Validation (HHS-RADV) for 

Issuers in Liquidation or Entering Liquidation 

(April 9, 2018). https://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/ 

RADV-Exemption-for-Liquidation-Guidance.pdf. 

77 83 FR 16930 at 16966. 

78 81 FR 94058 at 94104–94105. 

79When selecting issuers at or below the 

materiality threshold for more frequent initial 

validation audits, we would consider the issuer’s 

prior risk adjustment data validation results and 

any material changes in risk adjustment data 

submissions, as measured by our quality metrics. 

See 81 FR 94105. 

80See 83 FR 16966. 

2016 benefit year national benchmarks, 

which dropped a large number of high 

HCC failure rate outliers from the 

calculations, artificially increasing the 

number of negative error rate outliers. 

We do not yet have 2017 risk 

adjustment data validation results and 

therefore do not know whether the 

number of negative error rate outlier 

issuers and the size of the negative error 

rates would be significant in a risk 

adjustment data validation year that 

results in risk score adjustments. 

Therefore, we are seeking comment on 

the impact of the current approach 

under the error estimation methodology 

and the outlier adjustment policy for 

negative error rate outlier issuers, or 

issuers with significantly lower-thanaverage HCC failure rates, on other 

issuers in a state market risk pool, the 

incentives that negative error rate 

adjustments may create, and potential 

modifications to the error rate 

estimation methodology or the outlier 

adjustment policy, such as to utilize the 

state mean failure rate instead of the 

national mean failure rate, to modify the 

error rate calculation to the confidence 

interval instead of the mean, to exclude 

negative error rate outliers or to use 

other methods of lessening the impact of 

negative error rate issuers on affected 

risk pools, beginning with the 2018 

benefit year of risk adjustment data 

validation or later. 

g. Exemptions From Risk Adjustment 

Data Validation 

In previous rules,75 we established 

exemptions from the HHS-operated risk 

adjustment data validation requirements 

for issuers with 500 or fewer billable 

member months statewide and issuers at 

or below a materiality threshold for the 

benefit year being audited. Additionally, 

on April 9, 2018, we released guidance 

indicating that we intended to propose 

a similar exemption from risk 

adjustment data validation requirements 

for certain issuers in or entering 

liquidation.76 The purpose of these 

policies is to address numerous 

concerns, particularly from smaller 

issuers, regarding the regulatory burden 

and costs associated with complying 

with the HHS-operated risk adjustment 

data validation program. HHS has 

previously considered these concerns 

and provided relief where possible, and 

under this proposed rule, we propose to 

codify these exceptions in regulation at 

§ 153.630(g), as described below. 

In the 2019 Payment Notice, we 

finalized that beginning with 2017 

benefit year HHS-operated risk 

adjustment data validation, issuers with 

500 billable member months or fewer 

statewide in the benefit year being 

audited that elect to establish and 

submit data to an EDGE server will not 

be subject to the requirement to hire an 

initial validation auditor or submit 

initial validation audit results.77 We 

explained that exempting these issuers 

from the requirement to hire an initial 

validation auditor is appropriate 

because they would have a 

disproportionately high operational 

burden for compliance with risk 

adjustment data validation. We noted 

that, beginning with 2018 benefit year 

risk adjustment data validation, these 

issuers would not be subject to random 

(and targeted) sampling under the 

materiality threshold discussed below, 

and they would continue to not be 

subject to the requirement to hire an 

initial validation auditor or submit 

initial validation audit results. Issuers 

who qualify for this exemption would 

not be subject to enforcement action for 

non-compliance with risk adjustment 

data validation requirements, or be 

assessed the default data validation 

charge under § 153.630(b)(10). We stated 

that the determination of whether an 

issuer has 500 or fewer billable member 

months would be made on a statewide 

basis (that is, by combining an issuer’s 

enrollment in a state’s individual, small 

group, and merged markets, as 

applicable, in a benefit year). In this 

proposed rule, we propose to codify this 

exemption at § 153.630(g)(1) beginning 

with the 2017 benefit year of risk 

adjustment data validation. 

Second, in the 2018 Payment Notice, 

HHS finalized a materiality threshold 

for risk adjustment data validation to 

ease the burden of annual audit 

requirements for smaller issuers of risk 

adjustment covered plans.78 We 

evaluated the burden associated with 

risk adjustment data validation, 

particularly, the fixed costs associated 

with hiring an initial validation auditor 

and submitting results to HHS. We 

established a materiality threshold for 

risk adjustment data validation that 

considered the burden of such a process 

on smaller plans. Specifically, we stated 

that issuers with total annual premiums 

at or below $15 million for risk 

adjustment covered plans (calculated 

statewide based on the premiums of the 

benefit year being validated) will not be 

subject to the annual initial validation 

audit requirements, but will still be 

subject to an initial validation audit 

approximately every 3 years (barring 

any risk-based triggers due to 

experience that would warrant more 

frequent audits). Under the established 

process, we will conduct random and 

targeted sampling for issuers at or below 

the materiality threshold, beginning 

with the 2018 benefit year of risk 

adjustment data validation. We noted 

that, even if an issuer is exempt from 

initial validation audit requirements 

under the materiality threshold, HHS 

may require these issuers to make 

records available for review or to 

comply with an audit by the federal 

government under § 153.620. 

In this rule, we propose to codify the 

materiality threshold policy at 

§ 153.630(g)(2), providing that an issuer 

of a risk adjustment covered plan will 

be exempt from the data validation 

requirements in § 153.630(b) if the 

issuer is at or below the materiality 

threshold defined by HHS and is not 

selected by HHS to participate in the 

data validation requirements in an 

applicable benefit year under a random 

and targeted sampling conducted 

approximately every 3 years (barring 

any risk-based triggers due to 

experience that would warrant more 

frequent participation in risk adjustment 

data validation), beginning with the 

2018 benefit year of risk adjustment data 

validation.79

Consistent with the materiality 

threshold finalized in the 2019 Payment 

Notice,80 we propose to define the 

materiality threshold as total annual 

premiums at or below $15 million, 

based on the premiums of the benefit 

year being validated for all of the 

issuer’s risk adjustment covered plans 

in the individual, small group, and 

merged markets (as applicable) in the 

state. We solicit comments on the 

definition of materiality and whether 

the materiality threshold should be 

adjusted in future benefit years, given 

the potential for increased premiums 

and decreased enrollment in certain 

state market risk pools. We are not 

proposing such an adjustment to the 

materiality threshold at this time, but if 

we were to modify the definition of 

materiality to trend the $15 million 

threshold in future benefit years, we 


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81National Association of Insurance 

Commissioners Model Act, Issuer Receivership Act. 

2007. http://www.naic.org/store/free/MDL-555.pdf. 

would propose that change through 

notice and comment rulemaking. 

We note that if an issuer of a risk 

adjustment covered plan within the 

materiality threshold is not exempt from 

the data validation requirements for a 

given benefit year (that is, the issuer is 

selected for a random and targeted 

sampling), and fails to engage an initial 

validation auditor or to submit the 

results of an initial validation audit to 

HHS, the issuer would be subject to a 

default data validation charge in 

accordance with § 153.630(b)(10) and 

may be subject to other enforcement 

action. 

Lastly, as noted above, HHS released 

guidance on April 9, 2018 indicating 

our intention to propose in future 

rulemaking an exemption from risk 

adjustment data validation requirements 

for certain issuers in liquidation or that 

will enter liquidation. The purpose of 

exempting these issuers is similar to the 

reasons outlined above for smaller 

issuers and those below the materiality 

threshold—to recognize the burdens and 

costs associated with the risk 

adjustment data validation requirements 

on these issuers given their reduced 

financial and staff resources. Under this 

proposal, certain issuers in liquidation 

or that will enter liquidation would be 

exempt from the requirement to hire an 

initial validation auditor and submit 

initial validation audit results, as well 

as the second validation audit 

requirements, and would not be subject 

to enforcement actions for noncompliance with risk adjustment data 

validation requirements or be assessed 

the default data validation charge under 

§ 153.630(b)(10). 

In this proposed rule, we propose to 

codify at § 153.630(g)(3) that an issuer 

would be exempt from the applicable 

benefit year of risk adjustment data 

validation if the issuer is in liquidation 

as of April 30th of the year when 

transfer adjustments based on data 

validation results are made (that is, 2 

benefit years after the benefit year being 

audited). We propose to apply this 

exemption starting with the 2017 benefit 

year risk adjustment data validation. For 

example, a 2017 benefit year risk 

adjustment data validation issuer would 

need to be in liquidation on or before 

April 30, 2019 to be eligible for the 

proposed exemption. For the 2018 

benefit year and beyond, we propose 

that to qualify for the exemption, the 

issuer must also not be a positive error 

rate outlier in the prior benefit year of 

risk adjustment data validation (that is, 

the issuer is not a positive error rate 

outlier under the error estimation 

methodology in the prior year’s risk 

adjustment data validation) as outlined 

in proposed paragraph (g)(3)(ii). If an 

issuer in liquidation or that would enter 

liquidation by the applicable date was a 

positive error rate outlier in the 

previous year’s risk adjustment data 

validation, we propose not to exempt 

the issuer from the subsequent benefit 

year’s risk adjustment data validation, 

and the issuer would be required to 

participate in risk adjustment data 

validation or receive the default data 

validation charge in accordance with 

§ 153.630(b)(10) unless another 

exemption applies. 

To qualify for this exemption in any 

year, we propose under paragraph 

(g)(3)(i) that the issuer must provide to 

HHS, in a manner and timeframe to be 

specified by HHS, an attestation that the 

issuer is in or will enter liquidation no 

later than April 30th 2 years after the 

benefit year being audited that is signed 

by an individual with the authority to 

legally and financially bind the issuer. 

In paragraph (g)(3)(iii), we propose to 

define liquidation as meaning that a 

state court has issued an order of 

liquidation for the issuer that fixes the 

rights and liabilities of the issuer and its 

creditors, policyholders, shareholders, 

members, and all other persons of 

interest. 

Our intention with this proposed 

policy is to align the definition of 

liquidation with state law on liquidation 

of health insurance issuers and the 

National Association of Insurance 

Commissioners’ Model Act on 

receivership where possible.81 Thus, we 

solicit general comments on this 

proposed definition, and on whether 

modifications are needed to this 

definition to better align with state law. 

Additionally, we specifically solicit 

comments on the proposed April 30th 

date by which the issuer must be in 

liquidation and the advantages and 

disadvantages of potentially using a 

later date as the deadline by which the 

issuer must be in liquidation to be 

eligible for this proposed exemption. 

We also seek comment on whether the 

proposed April 30th date by which the 

issuer must be in liquidation should be 

later for the 2017 benefit year only. 

While we understand that the exact 

date of a liquidation order may be 

uncertain in specific circumstances, we 

propose that the individual signing the 

attestation must be reasonably certain 

that the issuer would enter liquidation 

by April 30th 2 benefit years after the 

benefit year being audited. 

Under our proposal, we would accept 

an attestation from a representative of 

the state’s department of insurance, an 

appointed liquidator, or other 

appropriate individual who can legally 

and financially bind the issuer. HHS 

would verify the issuers’ liquidation 

status with the applicable state 

regulators for issuers who submitted an 

attestation under § 153.630(g)(3). We 

also propose that, because the April 

30th two benefit years after the benefit 

year being audited is after the deadline 

for completing the initial validation 

audit for a given benefit year, an issuer 

who submits an attestation for this 

exemption but is determined by HHS to 

not meet the criteria for the exemption 

would receive a default data validation 

charge in accordance with 

§ 153.630(b)(10) if the issuer fails to 

complete or comply with the risk 

adjustment data validation process 

within the established timeframes for 

the given benefit year, unless another 

exemption applies. 

Additionally, we also note that any 

issuer that qualifies for any of the three 

exemptions in proposed § 153.630(g) 

would not have its risk score and its 

associated risk adjustment transfers 

adjusted due to its own risk score error 

rate, but that issuer’s risk score and its 

associated risk adjustment transfers 

could be adjusted if other issuers in that 

state market risk pool were outliers and 

received risk score error rates for that 

benefit year’s risk adjustment data 

validation. We solicit comments on the 

proposed codification of the exemptions 

for issuers with 500 or fewer billable 

member months statewide and issuers at 

or below a materiality threshold, as well 

as the new proposed exemption for 

certain issuers who are in, or would be 

entering liquidation. 

We solicit comments on these 

proposals. 

E. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Definitions (§ 155.20) 

We propose to amend § 155.20 to add 

definitions of ‘‘direct enrollment 

technology provider,’’ ‘‘direct 

enrollment entity,’’ ‘‘direct enrollment 

entity application assister,’’ and ‘‘webbroker’’. For a discussion of these 

proposed changes, please see the 

preamble to §§ 155.220, 155.221, and 

155.415. 

We seek comment on these proposals. 

2. General Functions of an Exchange 

a. Consumer Assistance Tools and 

Programs of an Exchange (§ 155.205) 

Section 1311(d)(4)(B) of the PPACA 

requires an Exchange to provide for the 

operation of a toll-free telephone hotline 


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82 81 FR at 12246. 

83 83 FR at 16997. 

84These topics are: Understanding the process of 

filing Exchange eligibility appeals; understanding 

and applying for exemptions from the individual 

shared responsibility payment that are granted 

through the Exchange; the Exchange-related 

components of the premium tax credit 

reconciliation process; understanding basic 

concepts and rights related to health coverage and 

how to use it; and, referrals to licensed tax advisers, 

tax preparers, or other resources for assistance with 

tax preparation and tax advice on certain Exchangerelated topics. 

to respond to requests for assistance. In 

the 2017 Payment Notice, we explained 

the distinction between a toll-free call 

center and a toll-free hotline, for 

purposes of specifying the different 

requirements for SBE–FPs and other 

Exchanges.82 In the 2019 Payment 

Notice, we finalized regulations 

providing for a leaner FF–SHOP 

implementation, and have adopted that 

approach. In that rulemaking, we 

explained that the FF–SHOPs would 

continue to provide call centers to 

answer questions related to the SHOP.83

Currently, employers purchase and 

enroll their employees in new FF–SHOP 

coverage through issuers and through 

agents and brokers registered with the 

FFE, and no longer enroll in SHOP 

coverage using an online FF–SHOP 

platform. 

Under this approach, FF–SHOP call 

center volume has been extremely low. 

Given this experience, we propose to 

amend § 155.205(a) to allow SHOPs 

operating in the leaner fashion 

described in the 2019 Payment Notice to 

operate a toll-free telephone hotline, as 

required by section 1311(d)(4)(B) of the 

PPACA, and to eliminate the 

requirement to operate a more robust 

call center. We propose to amend the 

interpretation provided in the 2017 

Payment Notice of what is required to 

establish a toll-free hotline, as required 

by section 1311(d)(4)(B) of the PPACA. 

There, we stated that a toll-free hotline 

includes the capability to provide 

information to consumers and 

appropriately direct consumers to the 

federally operated call center or 

HealthCare.gov to apply for, and enroll 

in, coverage through the Exchange. 

Given that SHOPs that operate in the 

leaner fashion no longer offer online 

enrollment and to reflect the option for 

such SHOPs to provide a toll-free 

hotline, rather than a more robust call 

center, we propose that a toll-free 

hotline include the capability to provide 

information to consumers about 

eligibility and enrollment processes, 

and to appropriately direct consumers 

to the applicable Exchange website and 

other applicable resources. 

The toll-free hotline provided by such 

SHOPs would consist of a toll-free 

number linked to interactive voice 

response capability, with prompts to 

pre-recorded responses to frequently 

asked questions, information about 

locating an agent and broker in the 

caller’s area, and the ability for the 

caller to leave a message regarding any 

additional information needed. We 

believe this hotline would adequately 

address the needs of potential FF–SHOP 

consumers requesting assistance, and 

appropriately direct consumers to 

services to apply for, and enroll in, FF– 

SHOP coverage. 

b. Navigator Program Standards 

(§ 155.210) 

Section 1311(d)(4)(K) and 1311(i) of 

the PPACA require each Exchange to 

establish a Navigator program under 

which it awards grants to entities to 

conduct public education activities to 

raise awareness of the availability of 

QHPs, distribute fair and impartial 

information concerning enrollment in 

QHPs, the availability of premium tax 

credits, and cost-sharing reductions; 

facilitate enrollment in QHPs; provide 

referrals to any applicable office of 

health insurance consumer assistance or 

health insurance ombudsman 

established under section 2793 of the 

PHS Act, or any other appropriate state 

agency or agencies for any enrollee with 

a grievance, complaint, or question 

regarding their health plan, coverage, or 

a determination under such plan or 

coverage; and provide information in a 

manner that is culturally and 

linguistically appropriate to the needs of 

the population being served by the 

Exchange. The statute also requires the 

Secretary to develop standards to ensure 

that information made available by 

Navigators is fair, accurate, and 

impartial. We have implemented the 

statutorily required Navigator duties 

through regulations at § 155.210 (for all 

Exchanges) and § 155.215 (for 

Navigators in FFEs). 

Further, section 1311(i)(4) of the 

PPACA requires the Secretary to 

establish standards for Navigators to 

ensure that Navigators are qualified, and 

licensed, if appropriate, to engage in the 

Navigator activities described in the 

statute. This provision has been 

implemented at § 155.210(b) (for all 

Exchanges) and at § 155.215(b) (for 

Navigators in FFEs). 

Section 155.210(e)(9) specifies that an 

Exchange may require or authorize 

Navigators to provide assistance with a 

number of topics not specifically 

mentioned in the statute, including 

certain post-enrollment activities. This 

section specifies that Navigators 

operating in FFEs are authorized to 

provide assistance on these topics and 

are required to do so under Navigator 

grants awarded in 2018 or later.84 To 

provide more flexibility related to the 

required duties for Navigators operating 

in FFEs, we propose to amend 

§ 155.210(e)(9) to make assistance with 

these topics permissible for FFE 

Navigators, not required, effective upon 

the awarding of the FEE navigator grants 

in 2019. We believe making assistance 

with these topics optional for FFE 

Navigators would reduce regulatory 

burden on FFE Navigator entities and 

better meet consumers’ needs by 

allowing FFE Navigators to prioritize 

work according to consumer demand, 

community needs, and organizational 

resources. 

We acknowledge that HHS added 

these duties 2 years ago to ensure the 

availability of more robust consumer 

assistance; however, since that time, 

there have been programmatic and 

health care coverage policy changes that 

have caused us to reflect further. We 

now believe that consumers will be 

better served by allowing more 

flexibility for Navigators to tailor their 

services to make the most of their 

resources and to fit the needs of their 

communities. For example, this change 

would allow FFE Navigators working 

with fewer resources to continue 

prioritizing providing help to 

consumers who are seeking to apply for 

and enroll in coverage over other 

permissible duties, such as the types of 

assistance listed at § 155.210(e)(9). 

With this proposal, we want to 

emphasize that FFE Navigators would 

be authorized to continue to provide 

assistance with any of the topics listed 

under § 155.210(e)(9). Under the 

proposed approach, if FFE Navigator 

grantees choose to provide any of the 

assistance specified in § 155.210(e)(9), 

we would continue to expect them to 

assess their communities’ needs and 

build competency in the assistance 

activities in which they are engaging. It 

is important to note that the current FFE 

Navigator training for annual 

certification or recertification might 

continue to include training on some of 

the § 155.210(e)(9) topics. To 

supplement the required FFE Navigator 

training, we also plan to continue 

providing FFE Navigators with 

additional information related to these 

assistance activities through informal 

webinars, newsletters, and technical 

assistance resources such as fact sheets 

and slide presentations. FFE Navigator 

grantees that opt to carry out any of the 

assistance activities in § 155.210(e)(9) 

will be expected to draw upon these 


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85These areas include: The needs of underserved 

and vulnerable populations; eligibility and 

enrollment rules and procedures; the range of QHP 

options and insurance affordability programs; and, 

the privacy and security standards applicable under 

§ 155.260. 

86These areas include: Information on QHPs, 

including benefits covered, differences among 

plans, payment process, rights and processes for 

appeals and grievances, and contacting individual 

plans; the tax implication of enrollment decisions; 

information on affordability programs; Exchange 

eligibility and enrollment rules and procedures; 

privacy and security standards, customer service 

standards; outreach and education methods and 

strategies; appropriate contact information for other 

agencies for consumers seeking information about 

coverage options not offered through the Exchange; 

basic concepts about health insurance and the 

Exchange; working effectively with individuals 

with limited English proficiency, and disabled, 

rural, underserved or vulnerable individuals; 

providing linguistically and culturally appropriate 

services; ensuring physical and other accessibility 

for people with a full range of disabilities; and 

applicable administrative rules, processes and 

systems related to Exchanges and QHPs. 

87We note that § 155.215 also applies to nonNavigator assistance personnel, also referred to as 

enrollment assistance personnel. However, at this 

time, this program is no longer in operation in the 

FFEs. 

materials to ensure their staff and 

volunteers are adequately prepared to 

provide that assistance. Our proposal 

would also retain SBE autonomy to 

determine whether requiring or 

authorizing the SBE’s Navigators to 

perform the activities listed in 

§ 155.210(e)(9) best meets the state’s 

needs and resources. 

We recognize that the time FFE 

Navigators currently spend providing 

assistance with the § 155.210(e)(9) 

topics varies. 

To better understand the future 

impact of removing this requirement, 

we request comment on how many 

hours per month FFE Navigator grantees 

and individual Navigators currently 

spend providing the assistance activities 

described at § 155.210(e)(9), what 

percentage of their current work 

involves providing these types of 

assistance, and how that amount of 

work would be impacted if providing 

these types of assistance would no 

longer be required. We also request 

comment on how FFE Navigator 

grantees and individual Navigators 

might reprioritize work and spend time 

fulfilling their other duties, if not 

required to provide the types of 

assistance described under 

§ 155.210(e)(9). Examples of how 

Navigators might elect to reprioritize 

work and fulfill other duties may 

include activities like helping 

consumers enroll in health coverage or 

conducting outreach and education in 

the community. We anticipate this may 

include many other activities. 

In addition to proposing to increase 

FFE Navigator flexibility with regard to 

the types of assistance they provide, we 

also propose to provide more flexibility 

related to the training requirements that 

Exchanges establish for Navigators. 

Sections 155.210(b)(2) and 155.215(b)(2) 

establish Navigator training standards 

consistent with section 1311(i)(4) of the 

PPACA. Section 155.210(b)(2) specifies 

that Exchanges must develop and 

publicly disseminate a set of training 

standards to be met by all entities and 

individuals carrying out Navigator 

functions under the terms of a Navigator 

grant, to ensure expertise in several 

specific topic areas.85 Currently, under 

§ 155.210(b)(2), Exchanges (including 

SBEs) that opt to require their 

Navigators to perform the assistance 

described in § 155.210(e)(9) must also 

develop and disseminate training 

standards related to the specific 

assistance areas they require under 

§ 155.210(e)(9). Additionally Navigators 

in FFEs currently must be trained in 

fifteen additional topic areas identified 

at § 155.215(b)(2).86

To provide more flexibility related to 

the training requirements for Navigators, 

we propose to streamline both the 

requirement in § 155.210(b)(2) for all 

Exchanges to develop and disseminate 

Navigator training standards on specific 

topics, and the list of required training 

topics for FFE Navigators in 

§ 155.215(b)(2). We propose to amend 

the requirement at § 155.210(b)(2) to 

require Exchanges to develop and 

publicly disseminate training standards 

to ensure that the entities and 

individuals are qualified to engage in 

Navigator activities, including in the 

four major areas currently specified at 

§ 155.210(b)(2)(i) through (iv). This 

proposal would eliminate the training 

requirements at current 

§ 155.210(b)(2)(v)–(ix) that correspond 

to the activities outlines in 

§ 155.210(e)(9), since under our 

proposal those activities would no 

longer be required. We also propose to 

replace the current list of fifteen 

additional FFE Navigator training topics 

at § 155.215(b)(2) with a cross-reference 

to the amended § 155.210(b)(2) topics.87

We believe the revised regulations 

under this proposal would be broad 

enough to ensure that each Navigator 

program fulfills the requirements 

described in section 1311(i) of the 

PPACA. 

We believe the revised regulations 

under this proposal would be broad 

enough to ensure that each Navigator 

program fulfills the requirements 

described in section 1311(i) of the 

PPACA 

This approach would provide 

Exchanges greater flexibility in 

designing their Navigator training 

programs to ensure coverage of the most 

instructive and timely topics and to 

align the training with future changes in 

the Navigator program or the operation 

of the Exchanges, while still ensuring 

that Navigators are qualified to carry out 

their required duties. This additional 

flexibility would also allow Exchanges 

to focus on training areas they 

determine to be most relevant to the 

populations they serve and on the 

policy and operations of the Exchange 

in which they operate. 

Furthermore, Exchanges could opt to 

provide more training than would be 

required under these proposed 

amendments. For example, in addition 

to the FFE annual Navigator training, 

required for Navigator certification 

under § 155.215(b), Navigators in FFEs 

are provided with training throughout 

the year that serves as a supplement to 

the annual FFE Navigator training by 

covering timely and appropriate training 

topics that might not be included in the 

annual FFE Navigator training. This 

additional training provided by FFEs, is 

consistent with the requirement that 

FFE Navigators obtain continuing 

education, as specified at 

§ 155.215(b)(1)(iv), and we intend to 

continue this practice. 

Currently, HHS provides SBEs, 

including SBE–FPs, the flexibility to 

decide whether they will require or 

authorize their Navigators to provide 

assistance on any or all of the areas 

described at § 155.210(e)(9). Nothing in 

our proposals would change that 

flexibility. If SBEs choose to authorize 

or require their Navigators to provide 

assistance in any of the areas listed at 

§ 155.210(e)(9), they would still be 

required to ensure that their Navigators 

are qualified to provide this assistance. 

However, under our proposed 

amendments, any SBEs opting to 

authorize or require their Navigators to 

provide any or all of the types of 

assistance listed at § 155.210(e)(9) 

would have the flexibility to determine 

effective approaches to training their 

Navigators on performing these types of 

assistance based on local experience. 

We believe each Exchange is best 

positioned to determine the training that 

is most appropriate for the activities of 

their Navigators. 

These proposals are intended to 

increase program flexibility within 

Exchanges and decrease regulatory 

burden related to Navigator training 

while maintaining standards that will 

ensure that Navigators are sufficiently 

prepared to carry out all required or 

authorized activities. We solicit 

comments on these proposals. 


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88HHS currently defines the term ‘‘web-broker’’ 

as including an individual agent or broker, a group 

of agents and brokers, or a company that is 

interested in providing a non-Federally-facilitated 

Exchange website to assist consumers in the QHP 

selection and enrollment process as described in 45 

CFR 155.220(c)(3). 

89We also propose minor technical edits to the 

last sentence of paragraph (g)(5)(iii) to more closely 

align this provision with the language at paragraph 

(g)(4), which establishes similar parameters 

following the termination of an agent’s, broker’s, or 

web-broker’s agreements and registration with the 

Federally-facilitated Exchanges. 

Finally, we also propose allowing, but 

not requiring, Navigators to assist 

consumers with applying for eligibility 

for insurance affordability programs and 

QHP enrollment through web-broker 

websites under certain circumstances. 

For a discussion of the provisions of this 

proposed rule related to that proposal, 

please see the preamble to § 155.220. 

c. 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 (§ 155.215) 

For a discussion of the provisions of 

this proposed rule related to standards 

applicable to Navigators subject to 

§ 155.215, please see the preamble to 

§ 155.210. 

d. Ability of States To Permit Agents 

and Brokers To Assist Qualified 

Individuals, Qualified Employers, or 

Qualified Employees Enrolling in QHPs 

(§ 155.220). 

Throughout the preamble for 

§§ 155.220 and 155.221, we propose to 

use the term ‘‘web-broker’’ to refer to an 

individual agent or broker, a group of 

agents or brokers, or an agent or broker 

business entity, registered with an 

Exchange under § 155.220(d)(1) that 

develops and hosts a non-Exchange 

website that interfaces with an 

Exchange to assist consumers with the 

selection and enrollment in QHPs 

offered through the Exchange, a process 

referred to as direct enrollment. We 

have used the term web-broker in the 

preamble of prior rules, as well as in 

guidance, and are proposing to generally 

replace that informal definition with the 

one proposed in this rulemaking.88 In 

this proposed rule, as described further 

below, we propose to define web-broker 

in § 155.20 and to use that term in 

§§ 155.220 and 155.221, where 

applicable, to avoid confusion. We 

clarify that general references to agents 

or brokers would also be applicable to 

web-brokers when a web-broker is a 

licensed agent or broker. We are also 

proposing to define ‘‘direct enrollment 

technology providers’’ as a type of webbroker that is not a licensed agent, 

broker, or producer under state law and 

has been engaged or created by, or is 

owned by, an agent or broker to provide 

technology services to facilitate 

participation in direct enrollment as a 

web-broker under §§ 155.220(c)(3) and 

155.221. The proposed definition of 

web-broker reflects the inclusion of 

direct enrollment technology providers. 

Therefore, references to web-brokers are 

intended to include direct enrollment 

technology providers, as well as 

licensed agents or brokers that develop 

and host non-Exchange websites to 

facilitate QHP selection and enrollment, 

unless indicated otherwise. Please see 

the below preamble discussion related 

to § 155.221 for further details. 

As described in the preamble to 

§ 155.221, we are proposing significant 

changes to § 155.221 to streamline and 

consolidate the requirements applicable 

to all direct enrollment entities—both 

issuers and web-brokers—in one 

regulation. To reflect these changes, we 

also propose several amendments to 

§ 155.220. First, we propose to move 

certain requirements that apply to all 

direct enrollment entities from 

§ 155.220 to § 155.221. Specifically, we 

propose to move the requirements 

currently captured in 

§ 155.220(c)(3)(i)(K) and (L), and to 

amend the requirement currently in (L), 

which as described further below, are 

proposed at § 155.221(b)(4) and (d), 

respectively. 

We propose conforming edits 

throughout § 155.220 to incorporate the 

use of the term ‘‘web-broker,’’ as 

proposed to be defined in this rule, in 

applicable paragraphs to more clearly 

identify which FFE requirements extend 

to web-brokers. In the introductory text 

to paragraphs (a), (c), and (d), and in 

paragraphs (c)(1), (c)(5), (e), (f)(1), (f)(2), 

(f)(3), (f)(3)(i), (f)(4), (g)(1), (g)(2), 

(g)(2)(iii), (g)(2)(iv), (g)(4), (g)(5)(i)(A), 

(g)(5)(i)(B), (g)(5)(ii), (g)(5)(iii),89 (h)(1), 

(h)(2), (h)(3), (i), (j)(1), (j)(3), (k)(1), 

(k)(2), and (l), we propose to add a 

reference to web-broker each time 

agents or brokers are referenced, in 

order to clarify that these paragraphs 

also apply to all web-brokers, including 

direct enrollment technology providers. 

In paragraphs (c)(3)(i), (c)(3)(i)(A), 

(c)(3)(ii), (c)(4), (c)(4)(i), (c)(4)(i)(E), 

(c)(4)(i)(F), and (c)(4)(ii), we propose to 

replace some references to ‘‘agent or 

broker’’ with a reference to ‘‘webbroker’’ to clarify when these 

paragraphs apply to only web-brokers, 

and not to other types of agents or 

brokers who do not host or develop a 

non-Exchange website to assist 

consumers with direct enrollment in 

QHPs offered through the FFEs or SBE– 

FPs. We also propose to revise the 

section heading for § 155.220 to ‘‘Ability 

of States to permit agents, brokers, and 

web-brokers to assist qualified 

individuals, qualified employers, or 

qualified employees enrolling in QHPs’’, 

as well as the section heading for 

paragraph (i) to similarly add a 

reference to web-broker. Please see the 

preamble discussion related to § 155.221 

for further details on other proposed 

changes related to streamlining these 

regulations and clarifying the 

requirements applicable to web-brokers 

and other direct enrollment entities. 

We also propose to amend 

§ 155.220(c)(3)(i) to add a new 

paragraph (c)(3)(i)(K) that requires webbroker websites to comply with the 

applicable requirements in § 155.221 

when an internet website of a webbroker is used to complete the QHP 

selection. We note that this new 

proposed requirement would also apply 

when an internet website of a webbroker is used to complete the Exchange 

eligibility application, through the 

existing cross reference to paragraph 

(c)(3)(i) in paragraph (c)(3)(ii)(A), but 

the applicable requirements under 

§ 155.221 may differ depending on 

whether the non-FFE website is used to 

complete the Exchange eligibility 

application or is used to complete the 

QHP selection. Please see the below 

preamble discussion related to § 155.221 

for further details. 

We also propose to amend 

§ 155.220(c)(3)(i) to add a new 

requirement at new paragraph 

(c)(3)(i)(L) that prohibits web-broker 

websites from displaying 

recommendations for QHPs based on 

compensation the web-broker, agent, or 

broker receives from QHP issuers. The 

term ‘‘compensation’’ includes 

commissions, fees, or other incentives 

as established in the relevant contract 

between an issuer and the web-broker. 

Web-broker websites often ask for 

certain information from consumers to 

assist with the display and sorting of 

QHP options on their non-Exchange 

websites. This may include estimated 

annual income, preferences regarding 

health care providers, prescription 

drugs the consumer takes, expected 

frequency of doctors’ visits, or other 

information. Web-brokers sometimes 

display QHP recommendations or assign 

scores to QHPs using the information 

they collect. We support the 

development and use of innovative 

consumer-assistance tools to help 

consumers shop for and select QHPs 


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90See 45 CFR 155.220(c)(4)(i)(A). 

that best fit their needs, consistent with 

applicable requirements. However, we 

believe such recommendations should 

not be based on compensation webbrokers, agents, or brokers may receive 

from QHP issuers when consumers 

enroll in QHPs offered through 

Exchanges using web-broker nonExchange websites. 

We also propose to amend 

§ 155.220(c)(4)(i)(A) to require a webbroker to provide HHS with a list of the 

agents or brokers who, through a 

contract or other arrangement, use the 

web-broker’s non-Exchange website to 

assist consumers with completion of 

QHP selection and/or for the Exchange 

eligibility application, in a form or 

manner to be specified by HHS. The 

authority currently exists for HHS to 

request this information for agents or 

brokers who, through a contract or other 

arrangement, use the non-Exchange 

website to complete the QHP selection 

process.90 However, due to the trend of 

increased use and expansion of direct 

enrollment pathways for QHP 

enrollment, we believe it is appropriate 

to collect this information proactively 

and to also extend its collection to 

include the use of web-broker nonExchange websites for completion of the 

Exchange eligibility application, so that 

we may investigate and respond more 

efficiently and effectively to any 

potential instances of noncompliance 

that may involve agents or brokers using 

a web-broker’s direct enrollment 

pathway. Having this information will, 

for example, enable us to identify more 

quickly whether noncompliance is 

attributable to a specific individual or 

individuals, instead of the web-broker 

entity. We anticipate issuing further 

guidance on the form and manner for 

these submissions and are considering 

requiring the list must include, at 

minimum, each agent’s or broker’s 

name, state(s) of licensure, and National 

Producer Number. We are considering 

adopting quarterly or monthly 

submission requirements, except for the 

month before the individual market 

open enrollment period and during the 

individual market open enrollment 

period, during which we are 

considering adopting weekly or daily 

submission requirements. We are 

considering requiring the submission of 

this data via email using an encrypted 

file format, such as a passwordprotected Excel spreadsheet, or 

alternatively requiring submission 

through a secure portal. We invite 

comments on the frequency and manner 

for these submissions, as well as other 

data elements that we should consider 

for inclusion as part of this required 

reporting. We also propose to remove 

the final clause in § 155.220(c)(4) that 

limits the scope of that section to agents 

or brokers using web-broker websites 

who are listed as the agent of record on 

the enrollments. Several years of 

experience observing web-broker 

operations has informed us that webbrokers often submit an entity-level 

National Producer Number for all QHP 

enrollments completed through their 

websites. Therefore the web-broker 

business entity is the agent of record. 

However, the requirements stated in 

§ 155.220(c)(4) are intended to apply 

broadly to agents or brokers using webbroker non-Exchange websites to assist 

with QHP selections and enrollments. 

We believe the existing requirements for 

web-brokers that provide access to their 

non-Exchange websites to other agents 

and brokers, such as verifying agents or 

brokers are licensed in the states in 

which they are assisting consumers and 

have completed the FFE registration 

process (see § 155.220(c)(4)(i)(B)), as 

well as reporting to HHS and applicable 

state departments of insurance any 

potential material breaches of applicable 

§ 155.220 standards (see 

§ 155.220(c)(4)(i)(E)), should apply 

broadly to agents and brokers using 

web-broker non-Exchange websites, and 

not only to those listed as the agents of 

record. 

Currently, § 155.20 defines an ‘‘agent 

or broker’’ as a person or entity licensed 

by the state as an agent, broker, or 

insurance producer. Under § 155.220(d), 

an agent or broker that enrolls 

individuals in QHPs in a manner that 

constitutes enrollment through the 

Exchange or assists individuals with 

applying for APTCs or cost-sharing 

reductions must execute an agreement 

with the Exchange, register with the 

Exchange, receive training, and comply 

with the Exchange’s privacy and 

security standards. When these 

regulatory provisions were originally 

drafted, it was anticipated that agents 

and brokers were predominantly 

individuals. However, with the 

expansion of direct enrollment, there 

are more FFE agents and brokers, 

including web-brokers, that have 

obtained FFE registration in their 

capacities as licensed business entities, 

and not in their individual capacities as 

licensed agents or brokers (nonindividual entities). Certain regulatory 

requirements, such as those regarding 

training are less suited for these nonindividual types of licensed agents or 

brokers. For example, to comply with 

the requirement to complete training at 

§ 155.220(d)(2), we currently require 

agents or brokers that are registered with 

the FFEs as non-individual entities to 

designate an individual to take training 

on the entity’s behalf, even though all 

individual agents or brokers assisting 

FFE consumers through the entity have 

to complete the training as individual 

agents and brokers. Because the training 

is not designed for representatives of a 

non-individual entity who are not 

providing direct assistance to FFE 

consumers, we believe it would be 

appropriate to remove this requirement 

for licensed agent or broker nonindividual entities. Therefore, we 

propose to amend § 155.220(d)(2) to 

exempt from the training requirement a 

licensed agent or broker entity that 

registers with the FFE in its capacity as 

a business organized under the laws of 

a state, and not as an individual person. 

HHS does not intend for this change to 

alter the requirement that individual 

agents or brokers must complete 

training, as applicable, as part of the 

annual FFE registration process. 

Therefore, all individual agents and 

brokers interacting with individual 

market FFE or SBE–FP consumers, 

whether working independently or with 

a non-individual agent or broker entity, 

including web-brokers, would continue 

to be required to complete annual 

training. Individual agents or brokers 

interacting with FFE–SHOP or SBE–FP– 

SHOP consumers would continue to be 

encouraged to take FFE training on an 

annual basis. We also propose to 

include language in § 155.220(d)(2) to 

clarify that direct enrollment technology 

providers would not be required to 

complete FFE annual training because 

these non-individual entities would not 

be interacting with individual market 

FFE or SBE–FP consumers without the 

assistance of an individual agent or 

broker; they are another example of a 

non-individual entity for which this 

training requirement is less suited. 

To improve program integrity, we also 

propose to delete the existing 

§ 155.220(g)(3) and add new paragraphs 

(g)(3)(i) and (ii) to allow HHS to 

immediately terminate an agent’s or 

broker’s agreement with the FFEs for 

cause with notice to the agent or broker 

if an agent or broker fails to comply 

with the requirement to maintain the 

appropriate license under state law in 

every state in which the agent or broker 

actively assists consumers with 

selecting or enrolling in QHPs offered 

through the FFEs or SBE–FPs. The FFE 

agreements required under 

§§ 155.220(d) and § 155.260(b) that 

agents and brokers execute with the 

FFEs as part of the annual FFE 

registration process includes the 


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91This provision also currently applies when an 

internet website of an agent or broker is used to 

complete the Exchange eligibility application 

through the existing cross reference to paragraph 

(c)(3)(i) in § 155.220(c)(3)(ii)(A). 

92As described elsewhere in this rule, we propose 

to delete §§ 155.220(c)(3)(i)(L) and 156.1230(b)(1) 

and replace them with similar authority in 

proposed § 155.221(d) that would be applicable to 

all direct enrollment entities. 

93For more information on the Marketplace 

pathway, please see the Health Insurance 

Marketplace Guidance: Role of Agents, Brokers, and 

Web-brokers in Health Insurance Marketplace 

(November 8, 2016) Available at https://

www.cms.gov/CCIIO/Programs-and-Initiatives/ 

Health-Insurance-Marketplaces/Downloads/Role-ofABs-in-Marketplace_Nov-2016_Final.pdf. 

requirement to maintain valid licensure 

in every state that the agent or broker 

assists Exchange consumers. State 

licensure as an agent, broker, or 

insurance producer is a critical 

consumer protection to ensure that 

when assisting Exchange consumers 

these individuals and entities are 

familiar with rules and regulations 

applicable in all states in which they 

provide assistance to FFE or SBE–FP 

consumers. Licensure in every state 

where the agent or broker is actively 

assisting FFE or SBE–FP consumers is a 

predicate requirement to registering 

with the FFEs to provide such 

assistance. Allowing for immediate 

termination of an agent’s or broker’s 

agreements with the FFEs for failure to 

adhere to the applicable state licensure 

requirements ensures that an unlicensed 

individual may not continue to possess 

the agent/broker role that enables access 

to the FFEs or SBE–FPs to provide 

assistance to Exchange consumers as an 

agent or broker during the advance 30- 

day notice period that would otherwise 

apply under the current § 155.220(g)(3). 

We believe that allowing for immediate 

termination in these circumstances is 

appropriate to protect consumers, as 

well as Exchange operations and 

systems. Under this proposal, we would 

confirm information about licensure (or 

the lack thereof) with the applicable 

state regulators prior to taking action 

under the new proposed paragraph 

(g)(3)(ii). In addition, we propose that an 

agent or, broker whose agreement(s) 

with the FFEs are immediately 

terminated for cause under the new 

proposed paragraph (g)(3)(ii) would be 

able to request reconsideration under 

§ 155.220(h). We further propose 

amendments to paragraph (g)(4), such 

that, consistent with other terminations 

for cause under paragraph (g)(3), 

immediate terminations under the new 

proposed paragraph (g)(3)(ii) would 

result in the agent or broker not being 

registered with the FFEs or permitted to 

assist with or facilitate enrollment of 

qualified individuals, qualified 

employers or qualified employees in 

QHPs through the FFEs or SBE–FPs or 

assist individuals in applying for APTC 

and cost-sharing reductions (CSRs) for 

QHPs after the applicable period has 

elapsed. However, the agent or broker 

would be required to continue to protect 

any personally identifiable information 

accessed during the term of his or her 

or its agreements with the FFEs. We also 

propose to create a new paragraph 

(g)(3)(i) to retain the existing language 

describing the current notification 

process and timelines for termination 

for cause under paragraph (g) with 

advance 30-days’ notice, except that we 

propose a clarifying edit to reflect that 

the proposed paragraph (g)(3)(ii) would 

constitute an exception to the current 

process described in existing paragraph 

(g)(3). As detailed earlier in this 

preamble, we also propose to add a 

reference to web-broker to the existing 

paragraph (g)(3) (proposed as new 

paragraph (g)(3)(i)) to clarify this 

paragraph also applies to web-brokers. 

To promote information technology 

system security in the FFEs and SBE– 

FPs, including the protection of 

consumer data, we are proposing to 

amend § 155.220(k) by adding a new 

paragraph (k)(3) that would continue to 

allow HHS to immediately suspend an 

agent’s or broker’s ability to transact 

information with the Exchange if HHS 

discovers circumstances that pose 

unacceptable risk to Exchange 

operations or Exchange information 

technology systems until the incident or 

breach is remedied or sufficiently 

mitigated to HHS’s satisfaction. This 

proposed language is identical to an 

existing provision that applies when an 

internet website of an agent or broker is 

used to complete QHP selection at 

current § 155.220(c)(3)(i)(L) 91 and a 

similar provision applicable to QHP 

issuers participating in direct 

enrollment at current § 156.1230(b)(1).92

In proposed § 155.220(k)(3), we intend 

for this provision to apply to agents and 

brokers who, once registered under 

§ 155.220(d)(1), obtain credentials that 

provide access to FFE systems that may 

be misused in a manner that threatens 

the security of the Exchange’s 

operations or information technology 

systems. We believe this proposed 

change is necessary to ensure that HHS 

can continue to take immediate action 

to stop unacceptable risks to Exchange 

operations or systems posed by agents 

and brokers. Because the potential risks 

posed by agents and brokers with access 

to FFE systems are similar to those 

posed by web-brokers or QHP issuers 

participating in direct enrollment, we 

believe this change is necessary and 

appropriate to provide a uniform 

process and ability to protect Exchange 

systems and operations from 

unacceptable risks, as well as to protect 

sensitive consumer data. We note that 

agents and brokers whose ability to 

transact information with the Exchange 

is suspended under this proposed 

authority would remain registered with 

the FFEs and authorized to assist 

consumers using the Marketplace (or 

side-by-side) pathway,93 unless and 

until their agreements were suspended 

or terminated under § 155.220(f) or (g). 

To further improve program integrity, 

we are proposing in a new § 155.220(m) 

several additional areas in which we 

would propose to regulate web-brokers 

differently from agents or brokers. HHS 

believes these additional proposed 

changes in new paragraph (m) are 

important to further protect against 

potential fraudulent enrollment 

activities, including the improper 

payment of APTC and CSRs, to 

safeguard consumer data and Exchange 

operations and systems, and to ensure 

direct enrollment remains a safe and 

consumer-friendly enrollment pathway. 

At § 155.220(m)(1), we propose to 

allow a web-broker’s agreement(s) to be 

suspended or terminated for cause 

under § 155.220(g), or a web-broker to 

be denied the right to enter into 

agreements with the FFEs under 

§ 155.220(k)(1)(i), based on the actions 

of its officers, employees, contractors, or 

agents. For example, if the actions of 

such individuals or entities are in 

violation of any standard specified in 

§ 155.220, any terms or conditions of the 

web-broker’s agreements with the FFEs, 

or any applicable federal or state 

statutory or regulatory requirements, 

whether or not the officer, employee, 

contractor, or agent is registered with 

the FFEs as an agent or broker, the webbroker’s agreement(s) may be terminated 

under paragraph (g)(3) if HHS 

determines the specific finding of 

noncompliance or pattern of 

noncompliance is sufficiently severe. 

Similarly, if HHS reasonably suspects 

that an officer, employee, contractor, or 

agent of a web-broker may have engaged 

in fraud, whether or not such individual 

or entity is registered with the FFEs as 

an agent or broker, HHS may 

temporarily suspend the web-broker’s 

agreement(s) for up to 90 days 

consistent with § 155.220(g)(5)(i)(A). 

At § 155.220(m)(2), we propose to 

allow a web-broker’s agreement to be 

suspended or terminated under 

§ 155.220(g) or to deny it the right to 

enter into agreements with the FFEs 

under § 155.220(k)(1)(i), if it is under 


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the common ownership or control, or is 

an affiliated business, of another webbroker that had its agreement suspended 

or terminated under § 155.220(g). In 

general, for purposes of this provision, 

we propose to define ‘‘common 

ownership or control’’ based on whether 

there is significant overlap in the 

leadership or governance of the entities. 

We also propose to collect data during 

the web-broker onboarding process to 

assist with the analysis of whether the 

web-broker is under the common 

ownership or control, or is an affiliated 

business, of another web-broker that had 

its agreement suspended or terminated 

under § 155.220(g). At § 155.220(m)(3), 

we propose allowing the Exchange to 

collect information from a web-broker 

during its registration with the 

Exchange, or at another time on an 

annual basis, in a form and manner to 

be specified by HHS, sufficient to 

establish the identities of the 

individuals who comprise its corporate 

leadership and to ascertain any 

corporate or business relationships it 

has with other entities that may seek to 

register with the Federally-facilitated 

Exchange as web-brokers. These 

provisions are important to maintain 

program integrity, because they would 

provide authority to collect information 

that would be used to minimize the risk 

that an individual or entity can 

circumvent an Exchange suspension or 

termination or other enforcement action 

related to noncompliance. 

As noted previously in this proposed 

rule, the use of direct enrollment 

through websites other than 

HealthCare.gov has expanded, as have 

the requirements on web-brokers 

seeking to participate in FFEs and SBE– 

FPs. For those reasons, we are also 

proposing to modify prior policy that 

prohibited Navigators and certified 

application counselors (CACs) (together 

referred to here as ‘‘assisters’’) from 

using web-broker websites to assist with 

QHP selection and enrollment. Our 

proposal would permit, but not require, 

assisters in FFEs and SBE–FPs, to the 

extent permitted by state law, to use 

web-broker websites to assist consumers 

with QHP selection and enrollment, if 

the website meets certain conditions 

designed to ensure that assisters are able 

to use it while still meeting their 

statutory and regulatory obligations to 

provide fair, accurate, and impartial 

information and assistance to 

consumers. To promote state flexibility 

and autonomy under this proposal, 

SBEs other than SBE–FPs would have 

discretion to permit their assisters to use 

web-broker websites, so long as the webbroker websites that assisters are 

permitted to use in SBEs, at a minimum, 

adhere to the standards outlined in this 

proposal. SBEs may-instead choose to 

preserve the prohibition on assister use 

of web-broker websites. 

Direct enrollment is a mechanism for 

third parties to directly enroll QHP 

applicants through a non-Exchange 

website in a manner considered to be 

through the Exchange, and web-brokers 

are a type of direct enrollment entity. 

Web-brokers have developed innovative 

tools to support consumers shopping for 

QHP coverage through their websites 

that assisters and the consumers they 

assist may find helpful when shopping 

for and enrolling in QHPs offered 

through Exchanges. Additionally, 

recently an enhanced form of direct 

enrollment has been implemented that 

provides new options for consumers to 

receive comprehensive services related 

to Exchange application and QHP 

enrollment, as well as year round 

support services through a nonExchange website. Please see the 

preamble discussion related to § 155.221 

for further details about direct 

enrollment and enhanced direct 

enrollment. 

With the expansion of direct 

enrollment and the implementation of 

enhanced direct enrollment, both webbrokers and assisters have expressed 

interest in allowing assisters to use webbroker websites to assist consumers 

with selection and enrollment in QHPs 

offered through Exchanges. Because of 

the unique role assisters serve in many 

communities, some web-brokers have 

supported the idea of allowing assisters 

to facilitate selection and enrollment in 

QHPs offered through Exchanges using 

their non-Exchange websites to broaden 

the range of consumers these websites 

serve. Some web-brokers would also 

like to use assisters’ expertise in 

navigating more complex enrollment 

cases to provide additional support to 

the consumers they serve. Assisters 

have also expressed a desire to use webbroker websites to provide an improved 

consumer experience by leveraging 

innovative and unique consumer 

assistance tools and display features 

many web-brokers have developed. 

Additionally, some assisters have 

expressed a desire to have access to realtime information on the status of 

submitted applications and enrollments 

to more effectively assist consumers. 

Although we are not proposing to 

require web-brokers to develop assister 

portals at this time, so long as their sites 

meet the other proposed requirements 

described further below, some webbrokers may consider developing portals 

that would enable assisters to gain 

access to real-time information for each 

of the consumers they assist using a 

web-broker’s website, similar to portals 

web-brokers may have already 

developed for affiliated agents and 

brokers. 

The implementation of enhanced 

direct enrollment by some web-brokers 

also presents consumers with an 

additional method of applying for 

insurance affordability programs, 

selecting and enrolling in QHPs offered 

through Exchanges, and receiving postenrollment support services. We believe 

this new option should be available to 

all FFE and SBE–FP assisters who 

provide application and enrollment 

assistance, provided that the 

information and assistance the assister 

provides would still remain fair, 

accurate, and impartial. And as 

previously stated, even when webbrokers have not yet implemented 

enhanced direct enrollment, we would 

like to provide assisters with the option 

to use the innovative and unique 

consumer-assistance tools and display 

features many web-brokers have 

developed to facilitate selection of QHPs 

offered through FFEs and SBE–FPs. 

We also hope that allowing FFE and 

SBE–FP assisters to use web-broker 

websites to enroll consumers will 

encourage collaboration between 

assisters and web-brokers to the benefit 

of consumers by providing consumers 

the most appropriate support at each 

stage of the Exchange application and 

QHP selection and enrollment 

processes. We also believe that, moving 

forward, it is essential for assisters to 

evolve by collaborating with new 

partners to better accomplish the shared 

goals of educating consumers and 

helping them to enroll in QHPs offered 

through Exchanges that best fit their 

needs. We would also like to empower 

assisters to use tools that may be 

available outside of the HealthCare.gov 

platform that can best help assisters to 

serve their consumers and expand their 

reach and impact. 

While we believe consumers working 

with assisters should have access to new 

options for selection and enrollment in 

QHPs offered through Exchanges that 

may be available through web-broker 

websites, we also want to ensure 

assisters working with consumers using 

these sites continue to comply with the 

statutory and regulatory standards 

governing their role and duties. Section 

1311(i)(3)(B) and 1311(i)(5) of the 

PPACA and its implementing regulation 

at § 155.210(e)(2) require Navigators to 

provide fair, accurate, and impartial 

information to consumers in connection 

with their role as assisters. A similar 

requirement applies to CACs under 

§ 155.225(c)(1). Under § 155.210(d), 


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274 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

94 Information and Tips for Assisters: How and 

when to provide information about agent and 

broker services to consumers, and other information 

about engaging with agents and brokers. Available 

at https://marketplace.cms.gov/technicalassistance-resources/agents-and-brokers-guidancefor-assisters.pdf. 

95See 45 CFR 155.220(c)(3)(i)(B). Also see 45 CFR 

155.220(c)(3)(ii)(A). 

96Under this proposal, web-brokers that do not 

make their websites available for assister use would 

remain subject to § 155.220(c)(3)(i)(A), which 

requires display of all QHP information provided by 

the Exchange and/or directly by QHP issuers 

consistent with the requirements of § 155.205(b)(1) 

and the prominent display of a standardized 

disclaimer provided by HHS to the extent that all 

of the required information is not displayed on the 

web-broker’s website. 

Navigators are also prohibited from 

being a health insurance issuer or 

receiving any consideration directly or 

indirectly from any health insurance 

issuer in connection with the 

enrollment of any qualified individuals 

in a QHP. Finally, under § 155.210(b)(1) 

and (c)(1)(iv) (for all Navigators) and 

§ 155.215(a) (for Navigators in FFEs) 

Navigators must be free from any 

prohibited conflicts of interest, 

including being a health insurance 

issuer or issuer of stop loss insurance; 

a subsidiary of a health insurance issuer 

or issuer of stop loss insurance; or an 

association that includes members of, or 

lobbies on behalf of, the insurance 

industry. Similarly, CACs are prohibited 

under § 155.225(g)(2) from receiving any 

consideration directly or indirectly from 

any health insurance issuer. These 

regulations ensure that assisters remain 

free from any influence that might 

interfere with their duty to provide 

consumers with the fair, accurate, and 

impartial information they need to make 

informed plan choices, while not 

influencing a consumer’s ultimate QHP 

selection. We have previously 

interpreted the requirement to provide 

fair, accurate, and impartial information 

to mean that assisters are prohibited 

from using a web-broker’s website to 

perform QHP application and 

enrollment assistance, unless the 

assister is using it as a reference tool to 

supplement the information available 

on HealthCare.gov.94 This guidance was 

issued due to concerns that web-brokers 

are not required to provide fair, 

accurate, and impartial information, and 

are not prohibited from recommending 

specific products, including QHPs, to 

their clients. Therefore, we believed that 

assisters would be unable to use a webbroker website consistent with their 

duty to provide fair, accurate, and 

impartial information. Since then, we 

have required at § 155.220(j)(2)(i) that 

all agents and brokers (including webbrokers) enrolling consumers in QHPs 

offered through an Exchange in a 

manner considered to be enrollment 

through the FFEs provide consumers 

correct information, without omission of 

material fact, about QHPs and insurance 

affordability programs, and refrain from 

marketing or conduct that is misleading, 

coercive, or discriminatory. In addition, 

when a web-broker’s non-Exchange 

website is used to facilitate QHP 

enrollment, it must provide consumers 

the ability to view all QHPs offered 

through the Exchange.95

To ensure that assisters are meeting 

their statutory and regulatory 

obligations to provide fair, accurate, and 

impartial information and assistance to 

consumers when assisting them with 

selection and enrollment in QHPs 

offered through Exchanges using a webbroker website, we propose a number of 

additional standards in this rule that 

would have to be met by a web-broker’s 

website for an assister to be able to use 

the site when assisting a consumer with 

an Exchange application or QHP 

selection and enrollment, to the extent 

permitted by state law. A web-broker 

interested in making its non-Exchange 

website available to assisters may obtain 

certification from the Exchange that its 

website meets these standards, but 

would not be required to obtain 

certification, so long as the standards 

are met. 

First, we propose to replace 

§ 155.220(c)(3)(i)(D) with a requirement 

at new paragraph (c)(3)(i)(D)(1) for webbroker websites to display all QHP data 

provided by the Exchange, consistent 

with the requirements of § 155.205(b)(1) 

and (c), for such websites to be eligible 

for use by assisters when otherwise 

permitted under state law.96 We note 

that web-brokers may obtain all QHP 

information they would be required to 

display in FFEs and SBE–FPs for 

assisters to be permitted to use their 

websites by integrating with the FFEs’ 

Marketplace application programming 

interface (API). For FFEs and SBE–FPs, 

we are considering an optional annual 

certification process for web-brokers 

that would be integrated into the 

existing annual web-broker registration 

process, or could occur during another 

time of year, during which a web-broker 

could be certified by the Exchange by 

attesting to its compliance with the 

requirements proposed in new 

§ 155.220(c)(3)(i)(D)(I). We propose to 

capture this optional annual 

certification process at new paragraph 

(c)(3)(i)(D)(2). We are also considering 

maintaining a public list of certified 

web-brokers in FFEs or SBE–FPs, so that 

assisters may more easily identify webbroker websites they may use in FFEs 

and SBE–FPs, when such arrangements 

are permitted under state law. The 

proposed amendments to 

§ 155.220(c)(3)(i)(D)(1) also provide that 

if a web-broker website does not 

facilitate enrollment in all QHPs, it 

would be required to identify to 

consumers the QHPs, if any, for which 

the web-broker website does not 

facilitate enrollment by prominently 

displaying a standardized disclaimer 

provided by the Exchange, in a form and 

manner specified by the Exchange, 

stating that the consumer can enroll in 

such QHPs through the Exchange 

website, and display a link to the 

Exchange website. We anticipate issuing 

further guidance on the form and 

manner for how the disclaimer should 

be displayed so that it is clearly 

associated with any QHPs for which the 

web-broker does not facilitate 

enrollment. We are considering whether 

the disclaimer or a link to the disclaimer 

should replace the link or other 

mechanism the web-broker would 

otherwise display to allow a consumer 

to proceed with selecting and enrolling 

in a QHP, or whether the disclaimer 

should be displayed in some other 

fashion. We invite comments on what 

requirements should be adopted in 

reference to how this disclaimer should 

be displayed on a web-broker’s website. 

We note assisters, as part of providing 

information that is fair, accurate, and 

impartial, are prohibited from steering 

consumers to choose particular plans or 

recommend enrollment in any plan. 

However, we also want to encourage 

web-brokers to provide innovative 

consumer assistance tools that could be 

used by assisters and the consumers 

they serve, including those related to 

displaying QHP recommendations that 

are based on consumer preferences or 

based on algorithms that take into 

account unique consumer 

characteristics, but that are not based on 

compensation that the web-broker, or an 

agent or broker that is assisting the 

consumer, may receive from QHP 

issuers. Therefore, in addition to 

requiring web-broker websites to 

display all QHP information provided 

by the Exchange and a standardized 

disclaimer if the non-Exchange website 

does not facilitate enrollment in all 

QHPs offered through the Exchange, we 

are considering the extent to which 

web-broker websites, when used by 

assisters, should be prohibited from 

making plan recommendations or 

otherwise reflecting a preference for 

certain plans over others. We also note 

that we are proposing at new 

§ 155.220(c)(3)(i)(L) to prohibit webbroker websites from displaying QHP 

recommendations based on 


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97Proxy direct enrollment was implemented on a 

temporary basis for plan year 2018. More 

information is available at https://www.cms.gov/ 

CCIIO/Resources/Regulations-and-Guidance/

Downloads/Guidance-for-the-Proxy-DirectEnrollment-Pathway-for-2018-Individual-MarketOpen-Enrollment-Period.pdf. 

98 81 FR at 94118. 

compensation received from QHP 

issuers. For more information about the 

proposal to prohibit web-broker 

websites from displaying QHP 

recommendations based on 

compensation received from QHP 

issuers, please refer to the earlier 

preamble in § 155.220. 

We acknowledge that the proposal at 

§ 155.220(c)(3)(i)(L) does not prohibit 

web-brokers from otherwise implicitly 

making recommendations based on how 

they display QHPs. For example, webbrokers may implicitly recommend 

QHPs based on compensation they 

receive by listing those that are not 

offered by issuers with whom they have 

contractual agreements at the bottom of 

the listings of all QHPs offered through 

the Exchange. We have also considered 

if web-brokers wanting to make their 

websites available for assister use 

should be able to maintain existing 

pathways for agents and brokers or 

unassisted consumers that may include 

non-prohibited QHP recommendations 

by creating a separate assister pathway 

through which either no or limited QHP 

recommendations are made (whether 

implicitly or directly). We seek 

comment on this approach regarding 

display of QHP recommendations as it 

relates to the proposal to allow assisters 

to use web-broker websites subject to 

certain conditions and when otherwise 

permitted under state law. 

We also believe that, for assisters to be 

permitted to use a web-broker website, 

there would need to be a mechanism to 

capture information about assisters 

assisting consumers with Exchange 

applications or QHP enrollment on the 

non-Exchange website and would need 

to transmit that data to the Exchange. 

However, in FFEs and SBE–FPs, webbrokers not participating in enhanced 

direct enrollment currently redirect 

consumers to HealthCare.gov to 

complete the eligibility application, and 

the eligibility application on 

HealthCare.gov includes fields to 

capture information about assisters and 

would therefore comply with such a 

requirement. For web-brokers in FFEs 

and SBE–FPs that offer an enhanced 

direct enrollment pathway, as indicated 

in operational guidance, specifically the 

Enhanced Direct Enrollment User 

Interface Question Companion Guide, 

the eligibility application must contain 

the same fields to capture information 

about assisters that are included in the 

application on HealthCare.gov. 

Therefore, we do not believe a 

regulatory change is required to 

accomplish this at this time, but clarify 

that, under our proposals related to use 

of web-broker websites by assisters, 

there would need to be a mechanism to 

capture information about assisters 

assisting consumers with Exchange 

applications or QHP enrollment. 

Nothing we are proposing is intended 

to change the prohibition at 

§ 155.210(d)(4) on Navigators receiving 

any consideration, in cash, or in kind, 

directly or indirectly, from any health 

insurance issuer or issuer of stop loss 

insurance in connection with 

enrollment of any individuals or 

employees in a QHP or non-QHP, or on 

the parallel prohibition on CACs 

receiving any consideration directly or 

indirectly from any health insurance 

issuer or issuers of stop-loss insurance 

at § 155.225(g)(2). Therefore, if the 

proposed changes outlined above are 

implemented, all assisters using webbroker websites would continue to be 

prohibited from receiving compensation 

related to the assistance they provide 

with enrollments of consumers. 

We seek comments on all of these 

proposals. 

e. Standards for Third-Party Entities To 

Perform Audits of Agents, Brokers, and 

Issuers Participating in Direct 

Enrollment (§ 155.221) 

Direct enrollment is a mechanism for 

third parties to directly enroll 

consumers seeking QHPs through a nonExchange website in a manner 

considered to be through the Exchange. 

Direct enrollment was created to 

provide consumers different options to 

shop for and enroll in QHPs offered 

through the Exchange. The entities that 

are authorized to offer direct enrollment 

pathways to date are QHP issuers, as 

well as agents and brokers who develop 

and host non-Exchange websites to 

facilitate consumer selection of and 

enrollment in QHPs, referred to as webbrokers. As described in the preamble 

for § 155.220, we propose to use the 

term web-broker throughout this 

proposed rule when we are referring to 

agents and brokers who develop and 

host non-Exchange websites to facilitate 

consumer selection of and enrollment in 

QHPs offered through an Exchange, 

otherwise known as direct enrollment, 

as well as direct enrollment technology 

providers. The original version of direct 

enrollment, or classic direct enrollment, 

is still in operation. It utilizes a double 

redirect from a direct enrollment 

entity’s website where QHP shopping 

occurs, to HealthCare.gov where the 

eligibility application is completed, and 

back to the entity’s website to finalize 

the selection of the QHP. Classic direct 

enrollment allows QHP issuers and 

web-brokers who meet applicable 

requirements to design and host a plan 

shopping experience, and assist 

consumers with the QHP selection 

process using relatively simple and 

limited application programming 

interfaces (APIs). The FFE direct 

enrollment program has expanded 

beyond the classic (that is, doubleredirect) direct enrollment pathway as 

the FFEs’ technical capabilities have 

significantly increased, beginning with 

proxy direct enrollment for plan year 

2018 97 and continuing with the 

implementation of enhanced direct 

enrollment for plan year 2019 and 

beyond.98 The requirements and 

technical expertise needed to participate 

in each new iteration of direct 

enrollment have similarly increased as 

participants have greater access to and 

responsibility for sensitive consumer 

data and Exchange systems. With 

enhanced direct enrollment, HHS 

allows participants to create and host a 

dynamic eligibility application and 

integrate several new APIs that facilitate 

eligibility determinations, as well as the 

consumer’s enrollment in a QHP, and 

data sharing with the applicable 

Exchange. Enhanced direct enrollment 

provides new options for consumers to 

receive more comprehensive services 

through a non-Exchange website, 

without the need to redirect to 

HealthCare.gov, for application and 

enrollment and ongoing support 

throughout the plan year. We believe 

this will promote innovation and 

competition, and ultimately lead to 

better experiences for more consumers. 

We also believe streamlining and 

consolidating regulatory requirements, 

when possible, will simplify the 

otherwise complex requirements to 

participate in direct enrollment and 

make it easier for direct enrollment 

entities and organizations interested in 

participating in direct enrollment to 

understand and comply with applicable 

requirements. We also believe the 

complex and evolving nature of direct 

enrollment requires updates to 

accommodate innovation, ensure 

program integrity, and protect sensitive 

consumer data. 

As mentioned previously, the entities 

that have been permitted to offer direct 

enrollment pathways to date have been 

QHP issuers and web-brokers that 

develop and host non-Exchange 

websites to facilitate selection and 

enrollment in QHPs offered through an 

FFE or SBE–FP. Direct enrollment 

regulatory provisions have likewise 


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276 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

99For example, proposed amendments to 

§ 155.220(d)(2) would exempt direct enrollment 

technology providers from the training requirement 

that is part of the annual FFE registration process. 

100 Direct enrollment operational readiness 

review requirements are currently captured at 45 

CFR 155.220(c)(3)(i)(K) for web-brokers and 45 CFR 

156.1230(b)(2) for QHP issuers. 

101See 45 CFR 156.1230(b)(2) for issuers 

participating in direct enrollment and 45 CFR 

155.220(c)(3)(i)(K) for web-brokers. 

102See 45 CFR 155.221(b)(5). Also see 45 CFR 

156.1230(b)(2). 

been divided into sections that are 

separately applicable to QHP issuers 

participating in direct enrollment and 

web-brokers. As direct enrollment has 

evolved with the implementation of 

enhanced direct enrollment, many of 

the requirements applicable to QHP 

issuers performing direct enrollment 

and web-brokers have become 

increasingly similar. Therefore, we 

propose to revise § 155.221 to apply to 

all types of direct enrollment entities 

and to expand the requirements 

captured in this regulation beyond 

audits of direct enrollment entities. 

Further details are provided below. To 

reflect this change we propose to revise 

the section heading of § 155.221 to 

‘‘Standards for direct enrollment entities 

and for third-parties to perform audits of 

direct enrollment entities.’’ We believe 

this approach would enhance clarity, 

reduce burdens, and better reflect an 

approach to direct enrollment that 

standardizes requirements across all 

entities participating in direct 

enrollment, where appropriate. 

We propose to amend § 155.20 to 

include definitions of several terms we 

propose to use in § 155.221 including: 

‘‘direct enrollment entity’’ and ‘‘webbroker.’’ Specifically, we propose to 

define ‘‘direct enrollment entity’’ as an 

entity that an Exchange permits to assist 

consumers with direct enrollment in 

QHPs offered through the Exchange in 

a manner considered to be through the 

Exchange as authorized by 

§§ 155.220(c)(3), 155.221, or 156.1230. 

We propose to define ‘‘web-broker’’ as 

an individual agent or broker, group of 

agents or brokers, or business entity 

registered with an Exchange under 

§ 155.220(d)(1) that develops and hosts 

a non-Exchange website that interfaces 

with an Exchange to assist consumers 

with direct enrollment in QHPs offered 

through the Exchange as described in 

§§ 155.220(c)(3) and 155.221. As 

explained elsewhere in this preamble, 

we also propose to define the term 

‘‘web-broker’’ to include direct 

enrollment technology providers. If this 

definition is finalized as proposed it 

would replace HHS’s current webbroker definition. We believe it is 

important to distinguish ‘‘web-brokers’’ 

from other agents and brokers utilizing 

a non-Exchange website to assist 

consumers with direct enrollment in 

QHPs offered through the Exchanges 

when they did not develop and do not 

host the non-Exchange website. Stated 

differently, agents and brokers using a 

non-Exchange website developed and 

hosted by a web-broker are not 

themselves necessarily web-brokers. For 

the reasons outlined in the preamble to 

§ 155.220, we are of the view that it is 

appropriate to impose different 

requirements on web-brokers and agents 

and brokers who are not web-brokers. 

We believe this proposed definition and 

the proposed changes to §§ 155.220 and 

155.221 outlined in this rulemaking 

reflect this approach and will enable 

web-brokers, agents, and brokers to 

more clearly identify when 

requirements are applicable to only 

web-brokers. 

We also propose to amend § 155.20 to 

define ‘‘direct enrollment technology 

provider’’ as a type of web-broker 

business entity that is not a licensed 

agent, broker, or producer under state 

law and has been engaged or created by, 

or is owned by, an agent or broker to 

provide technology services to facilitate 

participation in direct enrollment as a 

web-broker in accordance with 

§§ 155.220(c)(3) and 155.221. This 

definition is intended to capture 

instances when an individual agent or 

broker, a group of agents or brokers, or 

an agent or broker business entity, 

engages the services of or creates a 

technology company that is not licensed 

as an agent or broker, in order to assist 

with the development and maintenance 

of a non-Exchange website that 

interfaces with an Exchange to assist 

consumers with direct enrollment in 

QHPs offered through the Exchanges as 

described in §§ 155.220(c)(3) and 

155.221. When the technology company 

is not itself licensed as an insurance 

agency or brokerage, but otherwise is 

functioning as a web-broker would, we 

propose that these technology 

companies would be considered a type 

of web-broker that must comply with 

applicable web-broker requirements 

under §§ 155.220 and 155.221, unless 

indicated otherwise.99 The proposed 

definition of ‘‘web-broker’’ reflects the 

inclusion of direct enrollment 

technology providers. 

We propose to generally maintain the 

current requirements in § 155.221 that 

describe the standards for third-parties 

to perform audits of direct enrollment 

entities. However, to accommodate new 

content we are proposing to add to this 

regulation, we propose to redesignate 

the existing paragraphs (a) through (c) as 

paragraphs (e) through (g), respectively. 

We also propose some amendments to 

existing requirements currently 

captured in paragraphs (a) through (c), 

as described more fully below. In 

addition, throughout the redesignated 

paragraphs (e), (f), (f)(2), (f)(3), (f)(4), 

(f)(6), (f)(7), and (g), we propose 

conforming edits to change references to 

agents, brokers, and issuers to direct 

enrollment entities. We also propose to 

update the regulatory cross-references in 

the redesignated paragraph (f)(6) and 

(f)(7) from § 155.221(a) to § 155.221(e) to 

align with the streamlining changes 

proposed in this rulemaking. We also 

propose to add paragraph headings 

throughout this revised regulation for 

further clarity. In paragraph (e), we also 

propose to add language to require that 

the third-party entities that conduct 

annual reviews of direct enrollment 

entities to demonstrate operational 

readiness consistent with new proposed 

§ 155.221(b)(4) 100 be independent of the 

entities they are auditing. We are 

proposing this change because we 

believe an independent audit is less 

likely to be influenced by a direct 

enrollment entity’s business 

considerations and therefore is more 

reliable. We note that current 

§ 155.221(b)(4) requires third-party 

auditors to disclose to HHS any 

financial relationships they have with 

the entities they are auditing. We 

believe this disclosure requirement 

remains relevant even with the 

proposed addition to proposed 

paragraph (e) that would require 

auditors to be independent, because an 

auditor may be independent while also 

contracting with the entity it is auditing 

(and therefore having a financial 

relationship with the entity) to perform 

audits or other activities unrelated to 

those described in § 155.221. We 

therefore propose to retain this 

disclosure requirement at new 

§ 155.221(f)(4). We also propose to 

clarify in paragraph (e) that an initial 

audit is required, in addition to 

subsequent annual audits, and that 

these audits must include review of the 

entity’s compliance with applicable 

direct enrollment requirements. These 

clarifications do not represent a change 

from the current approach, as direct 

enrollment entities are currently 

required to demonstrate operational 

readiness before their websites may be 

used to complete QHP selections,101 and 

these audits must confirm compliance 

with applicable requirements.102 In 

paragraph (e), we propose to add 

language to clarify that operational 

readiness must be demonstrated prior to 


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Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 277 

103Federally-facilitated Exchange and Federallyfacilitated Small Business Health Options Program 

Enrollment Manual. Available at https://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Enrollment-Manual062618.pdf. 

104 Guidance for Web-brokers Registered with the 

Federally-Facilitated Marketplaces (2016). 

Available at https://www.cms.gov/CCIIO/Programsand-Initiatives/Health-Insurance-Marketplaces/

Downloads/Guidance-Web-brokers-FFMs.pdf. 

105This new proposed standardized disclaimer 

would be in addition to the existing requirements 

at 45 CFR 155.220(c)(3)(i)(A) and (G) for webbrokers and at 45 CFR 156.1230(a)(1)(iv) for QHP 

issuers participating in direct enrollment. 

the direct enrollment entity’s website 

being used to complete an Exchange 

eligibility application or make a QHP 

selection. This language is consistent 

with the operational readiness review 

requirements currently captured at 

§ 155.220(c)(3)(i)(K) for web-brokers and 

§ 156.1230(b)(2) for QHP issuers, which 

are proposed in this rulemaking to be 

moved to § 155.221(b)(4), and accounts 

for the fact that direct enrollment 

entities participating in enhanced direct 

enrollment will host the eligibility 

application in addition to QHP 

selection. Lastly, we propose to 

maintain the last sentence that currently 

appears in § 155.221(a) as the last 

sentence of the new paragraph (e) that 

states the third-party entity will be the 

downstream or delegated entity of the 

agent, broker, or issuer that participates 

or wishes to participate in direct 

enrollment, replacing the references to 

agent, broker, and issuer with direct 

enrollment entity. In paragraph (f), we 

propose to generally maintain the 

current requirement captured in 

§ 155.221(b) that a direct enrollment 

entity must satisfy the requirement to 

demonstrate operational readiness by 

engaging a third-party entity that 

complies with the specified 

requirements. We also propose to 

require under new paragraph (f) that a 

written agreement must be executed 

between the direct enrollment entity 

and its auditor stating that the auditor 

will comply with the standards outlined 

in paragraph (f). We are proposing this 

new requirement because we believe the 

most effective way to ensure a direct 

enrollment entity has the necessary 

control and oversight over its auditor to 

ensure compliance with the applicable 

standards in § 155.221 is for those 

standards to be memorialized in a 

written agreement between the parties. 

We propose to delete the provision in 

current paragraph (c) that refers to each 

third-party entity having to satisfy the 

standards outlined in current paragraph 

(b), to avoid duplication with a nearly 

identical provision in proposed 

paragraph (f). The nearly identical 

provision in proposed paragraph (f), 

which, if finalized, would be the 

redesignated version of current 

paragraph (b), states that a third-party 

entity must execute an agreement with 

a direct enrollment entity under which 

the third-party entity agrees to comply 

with each of the standards in proposed 

paragraph (f). We otherwise propose to 

maintain, in the redesignated new 

paragraph (g), the provision that 

clarifies that direct enrollment entities 

may engage multiple third-party entities 

to conduct the operational readiness 

audits under proposed § 155.221(e). 

We propose a new paragraph (a) in 

§ 155.221 that would establish the types 

of entities the FFEs will permit to assist 

consumers with direct enrollment in 

QHPs offered through an Exchange in a 

manner that is considered to be through 

the Exchange, to the extent permitted by 

state law. We propose to capture in 

§ 155.221(a) the two types of entities 

that are already permitted by the FFEs 

to use and offer a non-Exchange website 

to facilitate direct enrollment: QHP 

issuers who meet the requirements in 

§ 156.1230 and web-brokers who meet 

the requirements in § 155.220. New 

paragraph (a) also reflects that these 

entities would also be required to 

comply with the applicable 

requirements outlined in the new 

proposed § 155.221, which as described 

more fully above and below, we propose 

to capture the direct enrollment 

requirements that would apply to both 

web-brokers and QHP issuers 

participating in direct enrollment. For 

the remaining requirements that only 

apply to web-brokers or only apply to 

QHP issuers participating in direct 

enrollment, we propose to retain those 

requirements in §§ 155.220 and 

156.1230, respectively. 

We have issued guidance describing 

several existing display standards 

applicable to issuers or web-brokers 

participating in direct enrollment. 

Section 4.3 of the Federally-facilitated 

Marketplace and Federally-facilitated 

Small Business Health Options Program 

Enrollment Manual 103 states a QHP 

issuer’s direct enrollment website 

should not include the offering of nonQHP health plans or non-QHP ancillary 

products (for example, vision or 

accident) alongside QHPs. It also states 

that QHP issuers should provide 

applicants the ability to search for offExchange products in a separate section 

of the website other than the QHP web 

pages, and that such plans may be 

marketed and displayed after the QHP 

selection process has been completed. 

Guidance for Web-brokers Registered 

with the Federally-facilitated 

Marketplaces, released October 17, 

2016,104 established similar 

expectations for web-brokers. Section 

II.B states that web-brokers are expected 

to display QHPs and stand-alone dental 

plans offered through the applicable 

Exchange separately or in a manner that 

clearly distinguishes them from other 

available coverage options (for example, 

off-Exchange plans). It also provides 

that web-brokers should offer a QHP 

selection experience that is free from 

advertisements or information for other 

health insurance-related products and 

sponsored links promoting health 

insurance-related products. 

We have received feedback from 

issuers and web-brokers that suggests 

there is some confusion about the 

current standards and guidance related 

to the display of QHPs and non-QHPs 

on non-Exchange websites used to 

facilitate direct enrollment. In an effort 

to clarify expectations, achieve greater 

uniformity in standards for all direct 

enrollment entities, and provide 

flexibility for innovation, we are 

proposing to establish requirements 

under § 155.221(b) for the FFEs, which 

would apply to all FFE direct 

enrollment entities. As noted elsewhere 

in preamble, some of the proposed 

requirements in § 155.221(b) are 

intended to streamline existing webbroker and QHP issuer direct enrollment 

requirements that are currently 

separately imposed under §§ 155.220 

and 156.1230 by capturing these similar 

requirements in one regulation. Other 

proposed standards in § 155.221(b) are 

new regulatory requirements and are 

proposed to clarify or otherwise address 

compliance questions that have arisen 

under the existing regulations and 

guidance. 

At new § 155.221(b)(1), we propose to 

require direct enrollment entities to 

display and market QHPs and nonQHPs on separate website pages on their 

respective non-Exchange websites. We 

believe this proposal balances the goals 

of minimizing consumer confusion 

about distinct products with 

substantially different characteristics, 

and allowing marketing flexibility and 

opportunities for innovation. At 

§ 155.221(b)(2), we propose to require 

direct enrollment entities to 

prominently display a standardized 

disclaimer in the form and manner 

provided by HHS.105 Consistent with 

current practice for the other 

standardized disclaimers provided by 

HHS under §§ 155.220 and 156.1230, we 

would provide further details on the 

text and other display details for the 

standardized disclaimer in guidance, 

but note its purpose would be to assist 


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106Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, SHOP, and Eligibility 

Appeals; Final Rule, 78 FR 54070 (August 30, 

2013). 

consumers in distinguishing between 

direct enrollment entity website pages 

that display QHPs and those that 

display non-QHPs, and for which 

products APTCs and CSRs are available, 

during a single shopping experience. In 

new § 155.221(b)(3), HHS proposes that 

direct enrollment entities must limit the 

marketing of non-QHPs during the 

Exchange eligibility application and 

QHP plan selection process in a manner 

that would minimize the likelihood that 

consumers would be confused as to 

what products are available through the 

Exchange and what products are not. 

For example, under the proposed 

display standards captured at 

§ 155.220(b)(1)–(3), direct enrollment 

entities would be required to offer an 

Exchange eligibility application and 

QHP selection process that is free from 

advertisements or information for nonQHPs and sponsored links promoting 

health insurance-related products. 

However, it would be permissible for a 

direct enrollment entity to market or 

display non-QHP health plans and other 

off-Exchange products in a section of 

the entity’s website that is separate from 

the QHP web pages if the entity 

otherwise complied with the proposed 

standardized disclaimer requirements. 

In this example, the direct enrollment 

entity could begin marketing and 

displaying the non-QHP health plans 

and/or off-Exchange products after the 

consumer completes the Exchange 

eligibility application and QHP 

selection process, but before he or she 

has completed the shopping experience. 

The proposed requirements captured at 

§ 155.221(b)(1)–(3) are intended to 

provide flexibility for direct enrollment 

entities to market valuable additional 

coverage that complements QHP 

coverage, while also allowing HHS to 

establish important parameters around 

the manner and type of non-QHPs that 

direct enrollment entities may market as 

part of a single shopping experience 

with QHPs. We believe marketing some 

products in conjunction with QHPs may 

cause consumer confusion, especially as 

it relates to the availability of financial 

assistance for QHPs purchased through 

the Exchanges. But we also appreciate 

that having flexibility to update these 

standards would allow us to adapt the 

display guidance as new products come 

to market and as technologies evolve 

that can assist with differentiating 

between QHPs offered through the 

Exchange and other products consumers 

may be interested in. We also believe 

that the convenience in being able to 

purchase additional products as part of 

a single shopping experience outweighs 

potential consumer confusion, if proper 

safeguards can be put in place. We 

believe that the proposal at 

§ 155.221(b)(3) would not unnecessarily 

constrain marketing by direct 

enrollment entities that takes place 

outside of the QHP application, 

selection, and enrollment experience as 

the proposal is specifically tailored to 

prohibit display and marketing of nonQHPs during the Exchange eligibility 

application and QHP selection process, 

but not during subsequent parts (if any) 

of the consumer shopping experience on 

the direct enrollment entity’s website. In 

§ 155.221(b)(4), we propose to move and 

consolidate the parallel requirements 

currently captured in 

§§ 155.220(c)(3)(i)(K) and 156.1230(b)(2) 

that web-brokers and QHP issuers, 

respectively, demonstrate operational 

readiness and compliance with 

applicable requirements prior to their 

internet websites being used to 

complete a QHP selection. We also 

include language in proposed 

§ 155.221(b)(4) that would to clarify that 

operational readiness and compliance 

with applicable requirements must also 

be demonstrated prior to their internet 

websites being used to complete an 

Exchange eligibility application. This 

clarification is important as enhanced 

direct enrollment is implemented and 

approved direct enrollment entities are 

hosting the Exchange eligibility 

application on their non-Exchange 

websites. We propose accompanying 

amendments to remove the operational 

readiness requirements from §§ 155.220 

and 156.1230 as part of our efforts to 

streamline the regulatory requirements 

applicable to direct enrollment entities. 

Lastly, in § 155.221(b)(5), we propose to 

capture the requirement for direct 

enrollment entities to comply with all 

applicable federal and state 

requirements. This would include, but 

not be limited to, the additional 

Exchange requirements in §§ 155.220 

and 156.1230 that apply to web-brokers 

and QHP issuers that participate in 

direct enrollment, respectively. 

In § 155.221(c), we propose FFE 

requirements related to direct 

enrollment entity application assisters. 

Please see the preamble to § 155.415 for 

a discussion of these proposed 

requirements. 

In § 155.221(d), we propose to 

consolidate and amend the existing 

parallel provisions in 

§§ 155.220(c)(3)(i)(L) and 156.1230(b)(1) 

to authorize HHS to immediately 

suspend the direct enrollment entity’s 

ability to transact information with the 

Exchange if HHS discovers 

circumstances that pose unacceptable 

risk to the accuracy of the Exchange’s 

eligibility determinations, Exchange 

operations or Exchange information 

technology systems until such 

circumstances are resolved, remedied or 

sufficiently mitigated to HHS’s 

satisfaction. We propose to remove the 

provisions from §§ 155.220(c)(3)(i)(L) 

and 156.1230(b)(1) as part of our efforts 

to streamline and consolidate the 

requirements applicable to direct 

enrollment entities in one regulation. 

The proposal captured in § 155.221(d) 

includes language that would extend the 

authority to suspend the ability to 

transact information with the Exchange 

to also include discovery of 

circumstances by HHS that pose 

unacceptable risk to the accuracy of the 

Exchange’s eligibility determinations. 

We believe this addition is necessary 

and appropriate as enhanced direct 

enrollment allows direct enrollment 

entities to collect and transmit the 

application data that the Exchanges use 

to complete eligibility determinations. 

Lastly, to account for direct 

enrollment entities that may be assisting 

consumers in SBE–FP states, we are 

proposing a new § 155.221(h) to clarify 

that such entities are also required to 

comply with applicable standards in 

§ 155.221. 

We seek comment on all of these 

proposals. 

f. Certified Application Counselors 

(§ 155.225) 

We propose allowing, but not 

requiring, certified application 

counselors to assist consumers with 

applying for eligibility for insurance 

affordability programs and QHP 

enrollment through web-broker websites 

under certain circumstances. For a 

discussion of the provisions of this 

proposed rule related to that proposal, 

please see the preamble to § 155.220. 

3. Exchange Functions in the Individual 

Market: Enrollment in Qualified Health 

Plans 

a. Allowing Issuer Application Assisters 

To Assist With Eligibility Applications 

(§ 155.415) 

In the first Program Integrity Rule,106

we finalized § 155.415, which allows an 

Exchange, to the extent permitted by 

state law, to permit issuer application 

assisters to assist consumers in the 

individual market with an Exchange 

eligibility application if they met certain 

requirements. At § 155.20, we define 

issuer application assister as an 

employee, contractor, or agent of a QHP 

issuer who is not licensed as an agent, 


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broker, or producer under state law and 

who assists individuals in the 

individual market with applying for a 

determination or redetermination of 

eligibility for coverage through the 

Exchange or for insurance affordability 

programs. At § 156.1230(a)(2), when 

permitted by an Exchange under 

§ 155.415, and to the extent permitted 

by state law, we require QHP issuers 

that elect to use application assisters to 

ensure that each of their application 

assisters at least: (1) Receives training 

on QHP options and insurance 

affordability programs, eligibility, and 

benefits rules; (2) complies with the 

Exchange privacy and security 

standards consistent with § 155.260; and 

(3) complies with applicable state law 

related to the sale, solicitation, and 

negotiation of health insurance 

products, including laws related to 

agent, broker, and producer licensure, 

confidentiality, and conflicts of interest. 

In adopting this approach, we 

recognized that, in some states, a license 

may be required to assist an applicant 

applying for an eligibility determination 

or redetermination. We deferred to 

existing state laws related to enrollment 

assistance when deciding which 

individuals may assist applicants and 

enrollees as authorized under 

§ 156.1230(a)(2), and whether licensure 

would be required to provide such 

assistance. We stated that if state law 

requires a license to enroll applicants in 

coverage, then issuers and their 

application assisters would need to 

follow state law for licensure 

requirements. We also recognized that 

there were certain functions that issuers 

generally had their staff perform prior to 

the issuance of the first Program 

Integrity Rule, such as answering 

general information about plans, and we 

wanted to allow those individuals to 

continue to perform those functions, 

without meeting additional standards, if 

permitted by state law. We indicated 

that, if an issuer wants those individuals 

to perform additional functions, such as 

helping consumers as they apply for an 

eligibility determination or 

redetermination for coverage through 

the Exchange, or as they apply for 

insurance affordability programs, or as 

they report changes to an Exchange, 

those individuals could assist 

consumers with applications subject to 

the standards in § 156.1230(a)(2), so 

long as providing such assistance did 

not otherwise conflict with state law. 

Additionally, we stated that facilitating 

selection of a QHP may be a typical 

function of issuer staff and issuer staff 

would be able to perform post-eligibility 

functions such as plan compare and 

selection, if permitted by state law, 

without being subject to the standards of 

§ 156.1230(a)(2). As currently codified, 

the application assister definition and 

accompanying requirements only apply 

to issuer application assisters. 

As described elsewhere in this 

rulemaking, we believe providing parity 

for direct enrollment entities, when 

possible, promotes fair competition and 

maximizes consumer choice. In 

addition, there is no apparent reason 

why issuer staff are more qualified to 

assist consumers with the Exchange 

eligibility application than the staff of 

other direct enrollment entities, 

assuming all receive appropriate 

training and when otherwise permitted 

under applicable state law. Therefore, 

we propose to expand the flexibility to 

employ or contract with application 

assisters to all direct enrollment entities, 

to create parity between issuers and 

other types of direct enrollment entities. 

Accordingly, we propose changes to 

several regulatory sections. Specifically, 

we propose to amend § 155.20 by 

adding the term ‘‘direct enrollment 

entity application assister,’’ which we 

propose to define as an employee, 

contractor, or agent of a direct 

enrollment entity who is not licensed as 

an agent, broker, or producer under state 

law and who assists individuals in the 

individual market with applying for a 

determination or redetermination of 

eligibility for coverage through the 

Exchange or for insurance affordability 

programs. We propose to adopt the same 

approach for direct enrollment entity 

application assisters as the existing one 

for issuer application assisters. In other 

words, under our proposal, these 

application assisters would need to 

comply with applicable state law, 

including any licensure requirements, 

and we would continue to defer to 

existing state laws related to enrollment 

assistance when deciding which 

individuals may assist applicants and 

enrollees and whether licensure is 

required to provide such assistance. 

We also propose to revise § 155.415(a) 

to authorize an Exchange, to the extent 

permitted by state law, to permit issuer 

and direct enrollment entity application 

assisters, as defined at § 155.20, to assist 

individuals in the individual market 

with applying for a determination or 

redetermination of eligibility for 

coverage through the Exchange and 

insurance affordability programs. 

Additionally, we propose to maintain 

language in § 155.415(a) to mandate that 

all direct enrollment entities who seek 

to use application assisters, and not just 

QHP issuers, must ensure that their 

application assisters meet the standards 

currently captured in § 156.1230(a)(2), 

which we propose to move to new 

paragraphs (b)(1) through (3) of 

§ 155.415, with two proposed 

amendments. Currently, 

§ 156.1230(a)(2)(i) requires all QHP 

issuer application assisters to receive 

training on QHP options and insurance 

affordability programs, eligibility, and 

benefits rules and regulations. Licensed 

agents and brokers currently assisting 

consumers with QHP enrollment 

through the FFEs and SBE–FPs must 

have credentials to access FFE systems 

to offer that assistance. Those 

credentials are obtained during the FFE 

registration and training processes for 

agents and brokers. For application 

assisters to have similar access to FFE 

systems, so that they are also able to 

assist consumers as described above, 

they would need credentials similar to 

those obtained by agents and brokers 

during the FFE registration and training 

processes. Therefore, we propose to 

require that application assisters 

providing assistance in the FFEs and 

SBE–FPs complete a similar annual 

registration and training process as to 

what is required for agents and brokers 

under § 155.220(d)(1) and (2), in a form 

and manner to be specified by HHS, so 

that they would have the necessary 

training before being provided 

credentials to assist consumers. This 

proposed new training and registration 

requirement for application assisters is 

captured in the new proposed 

§ 155.415(b)(1). Currently, 

§ 156.1230(a)(2)(iii) requires all QHP 

issuer application assisters to comply 

with applicable agent, broker, and 

producer licensure laws, which may not 

be applicable in a given circumstance. 

For example, another state licensure law 

may exist for professionals whose 

functions are more similar to 

application assisters than licensed 

agents, brokers, and producers. We, 

therefore, propose to amend this 

standard (proposed to be redesignated at 

§ 155.415(b)(3)) to require all 

application assisters to comply with 

applicable state law related to the sale, 

solicitation and negotiation of health 

insurance products, including any state 

licensure laws applicable to the 

functions to be performed by the 

application assister; confidentiality; and 

conflicts of interest. We are not 

proposing any changes to the other 

standard for application assisters that 

requires compliance with the 

Exchange’s privacy and security 

standards adopted consistent with 

§ 155.260 (proposed to be redesignated 

from § 156.1230(a)(2)(ii) to new 

§ 155.415(b)(2)). We also propose to 

delete and reserve § 156.1230(a)(2) to 


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107 Instructions for consumers to verify their 

eligibility for a special enrollment period are 

available at https://www.healthcare.gov/coverageoutside-open-enrollment/confirm-specialenrollment-period/. 

reduce redundancies, as QHP issuers 

subject to the current standards 

captured at § 156.1230(a)(2) would be 

subject to the requirements in proposed 

§ 155.415(b). We note that any QHP 

issuers that are not direct enrollment 

entities, but use application assisters, 

would also be subject to these proposed 

requirements and able to use 

application assisters, to the extent 

permitted by the applicable Exchange 

and state law. Finally, consistent with 

the proposed new paragraphs at 

§ 155.221(c) and (h), we clarify that 

direct enrollment entities participating 

in FFEs and/or SBE–FPs would be 

permitted to use application assisters, to 

the extent permitted by state law. 

We seek comment on these proposed 

changes. 

b. Special Enrollment Periods 

(§ 155.420) 

Under our current rules, individuals 

who are enrolled in employer-sponsored 

coverage or coverage purchased through 

an Exchange are eligible for a special 

enrollment period if they become newly 

eligible for APTC. However, no 

comparable special enrollment period 

exists for individuals who are enrolled 

in off-Exchange individual market 

coverage. We believe this may present a 

significant barrier for some individuals 

to remain in continuous coverage for the 

full plan year. Therefore, we propose to 

amend § 155.420(d) to add new 

paragraph (d)(6)(v) to authorize 

Exchanges, at their option, to provide a 

special enrollment period to enroll in 

Exchange coverage for off-Exchange 

individual market enrollees who 

experience a decrease in household 

income and receive a new 

determination of eligibility for APTC by 

an Exchange. We propose to make this 

special enrollment period available to 

qualified individuals and their 

dependents who experience 

circumstances that result in a decrease 

in household income if the qualified 

individual or his or her dependent are 

both (1) newly determined eligible for 

APTC by an Exchange, and (2) had MEC 

in which they were enrolled in and 

entitled to receive benefits under as 

described in 26 CFR 1.5000A–1(b) for 

one or more days during the 60 days 

preceding the change in circumstances. 

We cite 26 CFR 1.5000A–1(b) because it 

sets forth criteria for what it means to 

‘‘have MEC,’’ including general 

requirements to be enrolled in and 

entitled to receive benefits under a 

program or plan identified as MEC in 26 

CFR 1.5000A–2 and certain situations 

under which an individual is not 

enrolled in MEC but is treated as 

‘‘having MEC.’’ Under this special 

enrollment period, qualified individuals 

and dependents would be eligible for 

Exchange coverage following the regular 

prospective coverage effective date rules 

described in paragraph (b)(1) of this 

section, and must enroll within 60 days 

from the date of the financial change, in 

accordance with paragraph (c)(1) of this 

section. 

We seek to provide individuals with 

more health coverage options and to 

empower them to enroll in the health 

coverage that best meets their needs and 

the needs of their families. For 

individuals and families with 

household incomes greater than 400 

percent of the federal poverty level 

(FPL) who are not eligible for APTC, 

this may mean that they choose to 

purchase health insurance coverage 

outside of the Exchange during the 

annual open enrollment period or 

another eligible enrollment period, 

especially if the market outside of the 

Exchange offers additional plan options 

at more affordable prices. However, 

these individuals or families may 

experience a change in household 

income during the benefit year that 

makes their current health coverage no 

longer affordable. While paragraphs 

(d)(6)(iii) and (d)(6)(iv) currently 

provide special enrollment periods for 

individuals whose employer-sponsored 

coverage becomes unaffordable or does 

not meet minimum value, resulting in 

the employee becoming newly eligible 

for APTC, and for individuals 

previously in the coverage gap who 

become newly eligible for APTC as a 

result of a change in household income 

or move, respectively, there is no 

current pathway to Exchange coverage 

for enrollees in off-Exchange individual 

market plans who are newly eligible for 

APTC. Since no pathway to Exchange 

coverage currently exists, we believe 

that unsubsidized individual market 

enrollees whose household income has 

decreased may no longer be able to 

afford their unsubsidized health plans 

and may decide to terminate coverage 

mid-year. Therefore, the proposed 

special enrollment period in paragraph 

(d)(6)(v) would address this issue by 

establishing a pathway to Exchange 

coverage for qualified individuals 

enrolled in off-Exchange coverage who 

experience a decrease in household 

income and are newly determined 

eligible for APTC. We believe that this 

proposed policy would help promote 

continuous enrollment in health 

coverage and bring additional stability 

to the individual market risk pool, 

which would likely have a positive 

impact on health insurance premiums. 

Individuals seeking to access the 

proposed special enrollment period 

would not be current Exchange 

enrollees and would receive a new 

determination of eligibility for APTC 

through the Exchange’s consumer 

application. For the FFEs, an 

individual’s current household income 

and eligibility for APTC would be 

verified through the FFE’s eligibility 

system and data matching issue 

resolution process, in accordance with 

the requirements in § 155.320(c). To 

ensure that the proposed special 

enrollment period is available to the 

intended population while mitigating 

risks of adverse selection and 

inappropriate use, we propose to require 

the individual seeking access to the 

proposed special enrollment period to 

provide evidence of both a change in 

household income and of prior health 

coverage. Verifying that a decrease in 

household income occurred would 

prevent individuals who enrolled in 

health coverage off-Exchange, but have 

not experienced a financial change, 

from attempting to use this special 

enrollment period for the sole purpose 

of purchasing a more or less 

comprehensive level of coverage midyear. To protect the individual market 

risk pool from adverse selection, as 

mentioned above, we propose to include 

a prior coverage requirement, which 

would protect against individuals who 

opted not to enroll in health coverage 

during the annual open enrollment 

period from using this special 

enrollment period to enroll in Exchange 

coverage mid-year. Additionally, this 

prior coverage requirement would 

promote continuous coverage. The 

proposed prior-coverage requirement 

aligns with existing prior-coverage 

requirements for special enrollment 

periods at § 155.420(d)(2)(i) and (d)(7). 

We envision leveraging existing preenrollment verification procedures 107 to 

confirm eligibility for the proposed 

special enrollment period, either 

through review of an individual’s 

submitted documentation or through 

use of electronic data sources, when 

available, prior to sending the 

individual’s plan selection to the issuer 

for enrollment. Consistent with current 

practices, in cases where eligibility is 

not verified electronically, individuals 

would be required to submit 

documentation within 30 days of plan 

selection to verify their prior coverage 

and their decrease in income. 

Consumer-submitted documents 

currently accepted by the FFE for 


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108Available at https://www.healthcare.gov/help/ 

prove-coverage-loss/ and https://

www.healthcare.gov/verify-information/documentsand-deadlines/. 

109https://www.cms.gov/CCIIO/Resources/

Regulations-and-Guidance/Downloads/Authorityto-Grant-HS-Exemptions-2018-Final-91218.pdf. 

110https://www.irs.gov/pub/irs-drop/n-19-05.pdf. 

purposes of demonstrating prior 

coverage and verifying attested income 

are currently available on 

HealthCare.gov,108 and we anticipate 

developing additional consumer 

instructions around submitting 

documents to verify a decrease in 

income. 

We recognize that State Exchanges 

maintain flexibility to determine 

whether and how to implement preenrollment verification of eligibility for 

special enrollment periods and may not 

have the operational capacity to 

immediately implement and verify 

eligibility for this special enrollment 

period. Some State Exchanges may also 

determine there is insufficient need 

among off-Exchange consumers for this 

special enrollment period because of the 

rating and pricing practices specific to 

their state markets. Therefore, we are 

proposing to make this special 

enrollment period available at the 

option of the Exchange. 

This proposed special enrollment 

period is intended only for individuals 

not currently enrolled in Exchange 

coverage, since current Exchange 

enrollees who experience a decrease in 

household income mid-year may 

already qualify for a special enrollment 

period under paragraphs (d)(6)(i) and 

(ii), or may enroll in off-Exchange plans 

if they become newly ineligible for 

APTC under § 147.104(b)(2)(i)(B). 

Paragraph (a)(4)(iii) of § 155.420 

generally limits the plans into which an 

enrollee who qualifies for a special 

enrollment period or is adding a 

dependent through a special enrollment 

period may enroll. Several special 

enrollment periods are excluded from 

this limitation. However, we propose 

that the proposed new special 

enrollment period would be subject to 

the rule in paragraph (a)(4)(iii). 

Therefore, should a qualified individual 

who qualifies for the proposed special 

enrollment period in paragraph (d)(6)(v) 

already have members of his or her 

household enrolled in Exchange 

coverage and those enrollees do not 

qualify for another special enrollment 

period at the same time that provides 

them with additional plan enrollment 

flexibilities, the Exchange must allow 

the qualified individual to be added to 

the same QHP as the Exchange enrollees 

in his or her household, if the plan 

business rules allow. If the plan’s 

business rules do not allow the qualified 

individual to enroll, the Exchange must 

allow the current enrollees to change to 

another QHP within the same level of 

coverage (or one metal level higher or 

lower if no such QHP is available), and 

to add the qualified individual to the 

same plan as outlined under 

§ 156.140(b). As always, and at the 

option of the qualified individual, he or 

she may enroll in a separate QHP at any 

metal level, in accordance with 

§ 155.420(a)(4)(iii)(B). We anticipate that 

this situation will arise relatively 

infrequently due to the availability of 

the special enrollment periods at 

(d)(6)(i) and (d)(6)(ii) of § 155.420 for 

enrollees who become newly eligible for 

APTC or experience a change in 

eligibility for cost-sharing reductions. 

We also propose to modify the types 

of coverage that may satisfy the prior 

coverage requirement by amending 

§ 155.420(a)(5) to include the coverage 

types described in paragraphs (d)(1)(iii) 

and (iv) of this section, such as 

pregnancy Medicaid, CHIP unborn 

child, and Medically Needy Medicaid, 

in addition to MEC described in 26 CFR 

1.5000A–1(b). We believe that this 

clarification is necessary to ensure 

consistency across our special 

enrollment period regulations for the 

types of coverage that qualify an 

individual for a special enrollment 

period. We already treat certain types of 

coverage, including pregnancy 

Medicaid, CHIP unborn child, and 

Medically Needy Medicaid, although 

not independently designated as MEC 

under 26 CFR 1.5000A–1(b), as MEC for 

purposes of qualifying for the loss of 

MEC special enrollment period 

described in § 155.420(d)(1). However, 

individuals currently enrolled in these 

types of coverage would not qualify for 

special enrollment periods that require 

prior coverage. To avoid treating the 

same types of coverage differently for 

purposes of eligibility for different 

special enrollment periods, we propose 

an aligning edit to paragraph (a)(5). 

Lastly, we propose to clarify certain 

terms in § 155.420(b)(2)(iv), which 

addresses the coverage effective dates 

that apply to the special enrollment 

periods in § 155.420(d)(1), (d)(3), 

(d)(6)(iii), (d)(6)(iv), and (d)(7). 

Specifically, we propose to replace the 

word ‘‘consumer’’ with the phrase 

‘‘qualified individual, enrollee, or 

dependent, as applicable,’’ to align with 

the terminology used at § 155.420(d) to 

describe special enrollment period 

triggering events. We do not anticipate 

that this proposed wording change will 

create additional cost or burden for 

Exchanges or for any other stakeholders. 

We seek comment on these proposals. 

4. Eligibility Standards for Exemptions 

(§ 155.605) 

a. Eligibility for an Exemption Through 

the IRS (§ 155.605(e)) 

Individuals can currently claim 

hardship exemptions through the tax 

filing process for hardships described in 

§ 155.605(e)(1) through (4) which 

include most hardship exemptions, but 

not the general hardship types described 

in paragraph (d)(1) of this section. 

Allowing the general hardship 

exemption types to be claimed through 

the Internal Revenue Service (IRS) 

would increase flexibility and decrease 

burdens for individuals seeking 

hardship exemptions. Therefore, we 

propose to amend § 155.605(e), which 

describes the exemptions that can be 

claimed through the IRS tax filing 

process without an individual having to 

obtain an exemption certificate number 

from an Exchange, to add a new 

paragraph (e)(5) that will allow 

consumers to claim through the tax 

filing process hardship exemptions 

within all of the categories described in 

paragraph (d)(1) of this section on a 

federal income tax return for tax year 

2018 only. 

This proposal aligns with HHS 

guidance published September 12, 2018, 

entitled, ‘‘Guidance on Claiming a 

Hardship Exemption through the 

Internal Revenue Service (IRS)’’ 109 and 

with IRS Notice 2019–05.110 We 

anticipate that the guidance and this 

proposal would provide individuals 

with additional flexibility for claiming a 

hardship exemption by providing 

individuals the additional option of 

claiming this exemption on their federal 

income tax return for 2018 only. 

We seek comments on this proposal. 

b. Required Contribution Percentage 

(§ 155.605(d)(2)) 

Under section 5000A of the Code, an 

individual must have MEC for each 

month, qualify for an exemption, or 

make an individual shared 

responsibility payment. Under 

§ 155.605(d)(2), an individual is exempt 

from the requirement to have MEC if the 

amount that he or she would be 

required to pay for MEC (the required 

contribution) exceeds a particular 

percentage (the required contribution 

percentage) of his or her projected 

household income for a year. Although 

the Tax Cuts and Jobs Act reduces the 

individual shared responsibility 

payment to $0 for months beginning 

after December 31, 2018, the required 


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111U.S Department of Commerce Bureau of 

Economic Analysis (BEA) Table 3.12 Government 

Social Benefits. Available at https://apps.bea.gov/

iTable/iTable.cfm?reqid=19&step=3&isuri=1&

categories=survey&nipa_table_list=110. 

contribution percentage is still used to 

determine whether individuals above 

the age of 30 qualify for an affordability 

exemption that would enable them to 

enroll in catastrophic coverage under 

§ 155.305(h). 

The initial 2014 required contribution 

percentage under section 5000A of the 

Code was 8 percent. For plan years after 

2014, section 5000A(e)(1)(D) of the Code 

and Treasury regulations at 26 CFR 

1.5000A–3(e)(2)(ii) provide that the 

required contribution percentage is the 

percentage determined by the Secretary 

of HHS that reflects the excess of the 

rate of premium growth between the 

preceding calendar year and 2013, over 

the rate of income growth for that 

period. The excess of the rate of 

premium growth over the rate of income 

growth is also used for determining the 

applicable percentage in section 

36B(b)(3)(A) of the Code and the 

required contribution percentage in 

section 36B(c)(2)(C) of the Code. 

As discussed elsewhere in this 

preamble, we are proposing as the 

measure for premium growth a 2020 

premium adjustment percentage of 

1.2969721275 (or an increase of about 

29.7 percent over the period from 2013 

to 2019). This reflects an increase of 

about 3.6 percent over the 2019 

premium adjustment percentage 

(1.2969721275/1.2516634051). 

However, we note that this percentage 

increase does not reflect a comparison 

of identical premium measures, as it has 

in previous years, since we are 

proposing to incorporate individual 

market insurance premium growth in 

our calculation of the 2020 benefit year 

premium adjustment percentage. 

As the measure of income growth for 

a calendar year, we established in the 

2017 Payment Notice that we would use 

per capita personal income (PI). Under 

the approach finalized in the 2017 

Payment Notice, using the National 

Health Expenditure Account (NHEA) 

data, the rate of income growth for 2020 

is the percentage (if any) by which the 

most recent projection of per capita PI 

for the preceding calendar year ($55,136 

for 2019) exceeds per capita PI for 2013 

($44,586), carried out to ten significant 

digits. The ratio of per capita PI for 2019 

over the per capita PI for 2013 is 

estimated to be 1.2366213610 (that is, 

per capita income growth of about 24 

percent). This reflects an increase of 

approximately 2.5 percent relative to the 

increase for 2013 to 2018 

(1.2366213610/1.2059028167) used in 

the 2019 Payment Notice. Per capita PI 

includes government transfers, which 

refers to benefits individuals receive 

from federal, state, and local 

governments (for example, Social 

Security, Medicare, unemployment 

insurance, workers’ compensation, 

etc.).111

Thus, using the 2020 premium 

adjustment percentage proposed in this 

rule, the excess of the rate of premium 

growth over the rate of income growth 

for 2013 to 2019 is 1.2969721275/ 

1.2366213610, or 1.0488029468. This 

results in a proposed required 

contribution percentage for 2020 of 

8.00 * 1.0488029468 or 8.39 percent, 

when rounded to the nearest onehundredth of one percent, an increase of 

0.09 percentage point from 

2019 (8.39042¥8.30358). 

We seek comment on this proposal. 

F. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. FFE and SBE–FP User Fee Rates for 

the 2020 Benefit Year (§ 156.50) 

Section 1311(d)(5)(A) of the PPACA 

permits an Exchange to charge 

assessments or user fees on participating 

health insurance issuers as a means of 

generating funding to support its 

operations. In addition, 31 U.S.C. 9701 

permits a federal agency to establish a 

charge for a service provided by the 

agency. If a state does not elect to 

operate an Exchange or does not have an 

approved Exchange, section 1321(c)(1) 

of the PPACA directs HHS to operate an 

Exchange within the state. Accordingly, 

in § 156.50(c), we specified that a 

participating issuer offering a plan 

through an FFE or SBE–FP must remit 

a user fee to HHS each month that is 

equal to the product of the annual user 

fee rate specified in the annual HHS 

notice of benefit and payment 

parameters for FFEs and SBE–FPs for 

the applicable benefit year, and the 

monthly premium charged by the issuer 

for each policy where enrollment is 

through an FFE or SBE–FP. 

OMB Circular No. A–25R established 

federal policy regarding user fees; it 

specifies that a user fee charge will be 

assessed against each identifiable 

recipient of special benefits derived 

from federal activities beyond those 

received by the general public. 

Activities performed by the federal 

government that do not provide issuers 

participating in an FFE with a special 

benefit are not covered by this user fee. 

As in benefit years 2014 through 2019, 

issuers seeking to participate in an FFE 

in the 2020 benefit year will receive two 

special benefits not available to the 

general public: (1) The certification of 

their plans as QHPs; and (2) the ability 

to sell health insurance coverage 

through an FFE to individuals 

determined eligible for enrollment in a 

QHP. For the 2020 benefit year, issuers 

participating in an FFE will receive 

special benefits from the following 

federal activities: 

• Provision of consumer assistance 

tools; 

• Consumer outreach and education; 

• Management of a Navigator 

program; 

• Regulation of agents and brokers; 

• Eligibility determinations; 

• Enrollment processes; and 

• Certification processes for QHPs 

(including ongoing compliance 

verification, recertification, and 

decertification). 

Based on estimated costs, enrollment, 

and premiums for the 2020 benefit year, 

we propose a 2020 benefit year user fee 

rate for all participating FFE issuers of 

3.0 percent of total monthly premiums. 

This proposed rate is lower than the 3.5 

percent FFE user fee rate that we had 

established for benefit years 2014 

through 2019. The lower proposed user 

fee rate for the 2020 benefit year reflects 

our estimates of premium increases and 

enrollment decreases for the 2020 

benefit year. We seek comment on this 

proposal. 

As previously discussed, OMB 

Circular No. A–25R established federal 

policy regarding user fees, and specified 

that a user charge will be assessed 

against each identifiable recipient for 

special benefits derived from federal 

activities beyond those received by the 

general public. SBE–FPs enter into a 

Federal platform agreement with HHS to 

leverage the systems established for the 

FFEs to perform certain Exchange 

functions, and to enhance efficiency and 

coordination between state and federal 

programs. Accordingly, in 

§ 156.50(c)(2), we specified that an 

issuer offering a plan through an SBE– 

FP must remit a user fee to HHS, in the 

timeframe and manner established by 

HHS, equal to the product of the 

monthly user fee rate specified in the 

annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year, unless the SBE–FP and 

HHS agree on an alternative mechanism 

to collect the funds from the SBE–FP or 

state instead of direct collection from 

SBE–FP issuers. The benefits provided 

to issuers in SBE–FPs by the federal 

government include use of the federal 

Exchange information technology and 

call center infrastructure used in 

connection with eligibility 

determinations for enrollment in QHPs 


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112CBO estimates that, under current law, outlays 

for health insurance subsidies and related spending 

would rise by about 60 percent over the projection 

period, increasing from $58 billion in 2018 to $91 

billion by 2028. See CBO report The Budget and 

Economic Outlook: 2018 to 2028, April 2018, page 

51. Available at https://www.cbo.gov/system/files/

115th-congress-2017-2018/reports/53651- 

outlook.pdf. 

113 IL DOI Press Release, ‘‘Illinois becomes first 

and only state to change Essential Health Benefitbenchmark plan,’’ Aug. 27, 2018. Available at 

https://www2.illinois.gov/IISNews/18098-DOI_

Essential_Health_Benefit-benchmark_plan_

Release.pdf. 

114This would be delayed, if necessary, to be on 

or after the effective date of the 2020 Payment 

Notice Final Rule. 

and other applicable state health 

subsidy programs, as defined at section 

1413(e) of the PPACA, and QHP 

enrollment functions under § 155.400. 

The user fee rate for SBE–FPs is 

calculated based on the proportion of 

FFE costs that are associated with the 

FFE information technology 

infrastructure, the consumer call center 

infrastructure, and eligibility and 

enrollment services, and allocating a 

share of those costs to issuers in the 

relevant SBE–FPs. Based on this 

methodology, we propose to charge 

issuers offering QHPs through an SBE– 

FP a user fee rate of 2.5 percent of the 

monthly premium charged by the issuer 

for each policy under plans offered 

through an SBE–FP. This proposed rate 

is lower than the 3.0 percent user fee 

rate that we had established for benefit 

year 2019. The lower proposed user fee 

rate for SBE–FP issuers for the 2020 

benefit year reflects our estimates of 

premium increases and enrollment 

decreases for the 2020 benefit year. We 

seek comment on this proposal. 

We will continue to examine contract 

cost estimates for the special benefits 

provided to issuers offering QHPs on the 

FFEs and SBE–FPs for the 2020 benefit 

year as we finalize the FFE and SBE–FP 

user fee rates, which will be reflected in 

the final rule. 

2. Silver Loading 

Section 1402 of the PPACA requires 

issuers to provide CSRs to help make 

coverage affordable for certain low- and 

moderate-income consumers who enroll 

in silver level QHPs, as well as Indians 

who enroll in QHPs at any metal level. 

Section 1402 of the PPACA further 

states that HHS will reimburse issuers 

for the cost of providing CSRs. Until 

October 2017, the federal government 

relied on the permanent appropriation 

at 31 U.S.C. 1324 as the source of funds 

for federal CSR payments to issuers. 

However, on October 11, 2017, the 

Attorney General of the United States 

provided HHS and the Department of 

the Treasury with a legal opinion 

indicating that the permanent 

appropriation at 31 U.S.C. 1324 cannot 

be used to fund CSR payments to 

insurers. In light of this opinion—and in 

the absence of any other appropriation 

that could be used to fund CSR 

payments—HHS directed CMS to 

discontinue CSR payments to issuers 

until Congress provides a valid 

appropriation. In response to the 

termination of CSR payments to issuers, 

many issuers increased premiums in 

2018 and 2019 only on silver level 

QHPs to compensate for the cost of 

CSRs—a practice sometimes referred to 

as ‘‘silver loading’’ or ‘‘actuarial 

loading.’’ Because premium tax credits 

are generally calculated based on the 

second-lowest cost silver plan offered 

through the Exchange, this practice has 

led to consumers receiving higher 

premium tax credits. These higher 

premium tax credits are being borne by 

taxpayers. 

Silver loading is the result of Congress 

not appropriating funds to pay CSRs, 

with the result being an increase to the 

premiums of benchmark plans used to 

calculate premium tax credits, and the 

federal deficit.112 The Administration 

supports a legislative solution that 

would appropriate CSR payments and 

end silver loading. In the absence of 

Congressional action, we seek comment 

on ways in which HHS might address 

silver loading, for potential action in 

future rulemaking applicable not sooner 

than plan year 2021. 

3. Essential Health Benefits Package 

a. State Selection of EHB-Benchmark 

Plan for Plan Years Beginning on or 

After January 1, 2020 (§ 156.111) 

In the 2019 Payment Notice, we 

finalized options for states to select new 

EHB-benchmark plans starting with the 

2020 benefit year. Under 45 CFR 

156.111, a state may modify its EHBbenchmark plan by: 

(1) Selecting the EHB-benchmark plan 

that another state used for the 2017 plan 

year; 

(2) Replacing one or more EHB 

categories of benefits in its EHBbenchmark plan used for the 2017 plan 

year with the same categories of benefits 

from another state’s EHB-benchmark 

plan used for the 2017 plan year; or 

(3) Otherwise selecting a set of 

benefits that would become the state’s 

EHB-benchmark plan. 

Under any of these three options, the 

EHB-benchmark plan would also have 

to meet additional standards, including 

scope of benefits requirements. These 

options were intended to provide states 

with more flexibility in the selection of 

their EHB-benchmark plan than had 

previously existed. In the 2019 Payment 

Notice, we encouraged states to consider 

the potential impact on vulnerable 

populations as they select their new 

EHB-benchmark plans, and the need to 

educate consumers on benefit design 

changes. We also remind states to 

inform issuers of such changes should 

they select a new EHB-benchmark plan. 

We believe that the three new 

options—the third in particular—may 

provide states with additional flexibility 

to address the opioid epidemic. For 

example, Illinois made changes to its 

EHB-benchmark plan for plan year 2020 

that aim to reduce opioid addiction and 

overdose by including in its EHBbenchmark plan alternative therapies for 

chronic pain, restricting access to 

prescription opioids, and expanded 

coverage of mental health and substance 

use disorder treatment and services.113

We encourage other states to explore 

whether modifications to their EHBbenchmark plan would be helpful in 

fighting the opioid epidemic. 

Additionally, the 2019 Payment 

Notice stated that we would propose 

subsequent EHB-benchmark plan 

submission deadlines in the HHS 

annual Notice of Benefit and Payment 

Parameters. Accordingly, we propose 

May 6, 2019, as the deadline for states 

to submit the required documents for 

the state’s EHB-benchmark plan 

selection for the 2021 plan year.114 To 

give advance notice to states and 

issuers, we are simultaneously 

proposing May 8, 2020, as the deadline 

for states to submit the required 

documents for the state’s EHBbenchmark plan selection for the 2022 

plan year. We recognize that these 

deadlines are earlier in the year than the 

July 2, 2018 deadline for the state’s 

EHB-benchmark plan selection for the 

2020 plan year. These deadlines would 

allow for an earlier finalization of a 

state’s EHB-benchmark plan and a 

longer time period for issuers to develop 

plans that adhere to their state’s new 

EHB-benchmark plan. We emphasize 

that these deadlines would be firm, and 

that states should optimally have one of 

their points of contact who have been 

predesignated to use the EHB Plan 

Management Community reach out to us 

using the EHB Plan Management 

Community well in advance of the 

deadlines with any questions. Although 

not a requirement, we recommend states 

submit applications at least 30 days 

prior to the submission deadlines to 

ensure completion of their documents 

by the proposed deadlines. We also 

remind states that they must have 

completed the required public comment 


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115Pengxiang, L., Sanford Shwartz, J., & Doshi, 

J.A. (2016). Impact of Cost Sharing on Therapeutic 

Substitution: The Story of Statins in 2006. Journal 

of the American Heart Association. 

116Robinson, J.C, Whaley, C.M., & Brown, T.T. 

(2017). Association of Reference Pricing with Drug 

Selection and Spending. New England Journal of 

Medicine, 377:658665. Doi:10.1065/ 

NEJMsa1700087. 

117CDC/NCHS, National Vital Statistics System, 

Mortality. CDC Wonder, Atlanta, GA: US 

Department of Health and Human Services, CDC; 

2017. https://wonder.cdc.gov. 118Florence CS, Zhou C, Luo F, Xu L. The 

Economic Burden of Prescription Opioid Overdose, 

Abuse, and Dependence in the United States, 2013. 

Med Care. 2016; 54(10):901–906. doi:10.1097/ 

MLR.0000000000000625. Available at https://

www.ncbi.nlm.nih.gov/pubmed/27623005. 

119As determined by Acting Secretary Eric D. 

Hargan. ‘‘Determination that a Public Health 

Emergency Exists’’. October 26, 2017. Available at 

https://www.phe.gov/emergency/news/ 

healthactions/phe/Pages/opioids.aspx. Renewed by 

Acting Secretary Hargan. ‘‘Renewal of 

Determination that a Public Health Emergency 

Exists’’. January 19, 2018. Available at https://

www.phe.gov/emergency/news/healthactions/phe/ 

Pages/opioid-24Jan2018.aspx. Renewed by 

Secretary Alex M. Azar II. ‘‘Renewal of 

Determination that a Public Health Emergency 

Exists’’. April 20, 2018. Available at https://

www.phe.gov/emergency/news/healthactions/phe/

Pages/opioid-20Apr2018.aspx. Renewed by 

Secretary Azar. ‘‘Renewal of Determination that a 

Public Health Emergency Exists’’. July 19, 2018. 

Available at https://www.phe.gov/emergency/news/ 

healthactions/phe/Pages/opioid-19July2018.aspx. 

Renewed by Secretary Azar. ‘‘Renewal of 

Determination that a Public Health Emergency 

Exists’’. October 18, 2018. Available at https://

www.phe.gov/emergency/news/healthactions/phe/ 

Pages/opioid-18Oct2018-aspx.aspx. 

120 ‘‘The President’s Commission on Combating 

Drug Addiction and the Opioid Crisis’’. Pages 19– 

period and submit a complete 

application by the deadlines. We seek 

comment on these proposed deadlines. 

b. Provision of EHB (§ 156.115) 

In the 2019 Payment Notice, we also 

finalized a policy through which states 

may opt to permit issuers to substitute 

benefits between EHB categories. In the 

preamble to that rule, we stated that the 

deadlines applicable to state selection of 

a new benchmark plan would also apply 

to this state opt-in process. We therefore 

propose May 6, 2019 as the deadline for 

states to notify us that they wish to 

permit between-category substitution for 

the 2021 plan year and May 8, 2020 as 

the deadline for states to notify us that 

they wish to permit between-category 

substitution for the 2022 plan year. 

States wishing to make such an election 

must do so via the EHB Plan 

Management Community. We seek 

comment on these proposed deadlines. 

c. Prescription Drug Benefits (§ 156.122) 

At new § 156.122(d)(3), we propose 

that for plan years beginning on or after 

January 1, 2020, QHP issuers in the 

FFEs would be required to notify HHS 

annually in an HHS-specified format of 

any mid-year formulary changes made 

in the prior plan year consistent with 

the proposed changes to § 147.106(e). 

Under this proposal, QHP issuers in the 

FFEs would be required to report the 

name of the drug being removed from 

the formulary, dosage, name of the 

generic equivalent, the Rx Norm 

Concept Unique Identifier (RxCUI) 

associated with the brand and generic 

drug, if the brand drug was moved to a 

higher cost sharing tier or removed from 

the formulary, in a manner specified in 

the forthcoming PRA associated with 

this rule. We intend to use this 

information to understand how the 

proposed change would affect QHP 

enrollees. We seek comment on this 

proposal. 

In addition to policies proposed above 

and at §§ 147.106 and 156.130, we are 

soliciting comments on two additional 

drug policies that would be intended to 

consider the potential of therapeutic 

substitution. First, the prescription drug 

market became more efficient after 

several states passed laws that allowed 

for generic substitution. Similarly, 

therapeutic substitution, which consists 

of substituting chemically different 

compounds within the same class for 

one another,115 could be employed to 

improve the efficiency of the 

pharmaceutical market. We 

acknowledge that many stakeholders are 

opposed to therapeutic substitution and 

that there are concerns regarding 

efficacy, adverse effects, drug 

interactions, and different indications 

for drugs within a class. If therapeutic 

substitution were to become 

commonplace, efficient systems that 

allow for seamless communication 

among prescribers, pharmacies, and 

insurance companies would need to be 

in place. Therapeutic substitution may 

help decrease drug costs if it can be 

implemented in a way that does not 

negatively affect quality and access to 

care. We solicit comment on whether 

therapeutic substitution and generic 

substitution policies should both be 

pursued since each of the two options 

might offset any potential premium 

impact of the other, as well as whether 

certain drug categories and classes are 

better suited to therapeutic substitution 

than others. We are also interested in 

comments on any existing standards of 

practice for therapeutic substitution and 

whether those standards are nationally 

recognized and readily available for 

providers to use. 

Second, the majority of issuers, 

employers, and pharmaceutical benefit 

managers negotiate price discounts and 

rebates from pharmaceutical 

manufacturers by implementing tiered 

formularies, which link patients’ costsharing obligation to the price of each 

drug. Tiered formularies have been 

successful in attenuating the growth in 

pharmaceutical spending and overall 

drug spending. However, in recent 

years, drug spending has again 

increased. Reference-based pricing is 

one strategy for attenuating increases in 

pharmaceutical spending. Referencebased drug pricing occurs when an 

issuer in a commercial market covers a 

group of similar drugs, such as within 

the same therapeutic class, up to a set 

price, with the enrollee paying the 

difference in cost if the enrollee desires 

a drug that exceeds the set (reference) 

price.116 Implementation of referencebased pricing for drugs could bring 

down overall health plan costs, and 

perhaps premium increases, while 

increasing consumer out-of-pocket costs 

in some instances. Durable medical 

equipment benefits like eyeglasses and 

contacts are sometimes covered in a 

similar manner. Although referencebased pricing is often discussed in the 

context of network adequacy and using 

certain providers within a particular 

network who are willing to accept a 

reference price, we do not intend for 

this drug policy to have network 

implications, and issuers are currently 

free to impose lower cost sharing for 

drugs obtained via mail order. We seek 

comment on the opportunities and risks 

of implementing or incentivizing 

reference-based pricing for prescription 

drugs. 

d. Prohibition on Discrimination 

(§ 156.125) 

Opioid misuse and addiction is a 

serious national crisis that affects public 

health, as well as social and economic 

welfare. More than 115 people in the 

United States die each day from opioid 

overdoses.117 The Centers for Disease 

Control and Prevention estimates that 

the total costs of prescription opioid 

misuse alone in the United States is 

$78.5 billion per year, including the 

costs of health care, lost productivity, 

addiction treatment, and criminal 

justice involvement.118 It has been an 

active Public Health Emergency, as 

determined by the Secretary under 42 

U.S.C. 247d, since October 26, 2017.119

Several factors have influenced the 

opioid crisis, including: The opioid 

pharmaceutical manufacturing and 

supply chain industry; deficient patient 

and provider pain management 

education; rogue pharmacies and 

unethical physician prescribing; and the 

insufficient availability of treatment 

services, including Medication-Assisted 

Treatment (MAT).120


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23. November 1, 2017. Available at https://

www.whitehouse.gov/sites/whitehouse.gov/files/ 

images/Final_Report_Draft_11-1-2017.pdf. 

121There are four drugs currently used in MAT: 

Buprenorphine; naltrexone; buprenorphine in 

combination with naloxone; and methadone. 

122 ‘‘Medication and Counseling Treatment’’. 

September 28, 2015. Available at https://

www.samhsa.gov/medication-assisted-treatment/ 

treatment. 

123 ‘‘For many people struggling with addiction, 

failing to offer MAT is like trying to treat an 

infection without antibiotics . . . We know that 

there is sometimes stigma associated with MAT— 

especially with long term therapy. But someone on 

MAT, even one who requires long-term treatment, 

is not an addict. They need medicine to return to 

work; re-engage with their families; and regain the 

dignity that comes with being in control of their 

lives. These outcomes are literally the opposite of 

how we define addiction. Our fellow citizens who 

commit to treatment should not be treated as 

pariahs—they are role models.’’ Azar, Alex. Plenary 

Address to National Governors Association, 

February 24, 2018. Available at https://

www.hhs.gov/about/leadership/secretary/speeches/ 

2018-speeches/plenary-addres-to-nationalgovernors-association.html. 

124MHPAEA originally applied to large group 

health plans and large group health insurance 

coverage, and PPACA extended it to apply to 

individual health insurance coverage. 

125 45 CFR 156.115(a)(3). 

126For examples of nonquantitative treatment 

limitations, see 45 CFR 146.136(c)(4)(ii). 

127Classifications under MHPAEA are as follows: 

Inpatient, in-network; inpatient, out-of-network; 

outpatient, in-network; outpatient, out-of-network; 

emergency care; and prescription drugs. 45 CFR 

146.136(c)(2)(ii). 

128See 45 CFR 146.136(c)(4)(iii), Ex. 10. 

MAT is any treatment for opioid use 

disorder that includes a medication 

approved by the Food and Drug 

Administration for opioid addiction 

detoxification or maintenance 

treatment.121 MAT has proven to be 

clinically effective in treating opioid use 

disorder and to significantly reduce the 

need for inpatient detoxification 

services for individuals with opioid use 

disorder.122

Despite this evidence, and despite the 

attention paid to the nationwide opioid 

Public Health Emergency, there is not 

comprehensive, nationwide coverage of 

the drugs used in MAT, at least among 

QHP issuers. A review of QHP issuer 

formularies in the 39 FFE and SBE–FP 

states for which we have data reveals 

that, while many QHPs cover all four 

MAT drugs, not all do. Specifically, for 

plan year 2018, 2,553 QHPs (95 percent) 

in these 39 FFE and SBE–FP states cover 

all four of these drugs; 105 QHPs (4 

percent) cover three; and 25 QHPs (<1 

percent) cover two. Given the 

effectiveness of MAT and the severity of 

the nationwide opioid Public Health 

Emergency, we encourage every health 

insurance plan to provide 

comprehensive coverage of MAT, even 

if the applicable EHB-benchmark plan 

does not require the inclusion of all four 

MAT drugs on a formulary. We 

encourage issuers to take every 

opportunity to address opioid use 

disorder, including increasing access to 

MAT and normalizing its use.123

In addition, we have become aware 

that a MAT drug’s inclusion on a 

formulary does not necessarily ensure 

coverage of that drug when 

administered for MAT. We are aware 

that some issuers utilize plan designs 

which exclude coverage of certain drugs 

when used for MAT while the same 

drugs are covered for other medically 

necessary purposes, such as analgesia or 

alcohol use disorder. Under § 156.125, 

which implements the provision 

prohibiting discrimination, an issuer 

does not provide EHB if its benefit 

design, or the implementation of its 

benefit design, discriminates based on 

an individual’s age, expected length of 

life, present or predicted disability, 

degree of medical dependency, quality 

of life, or other health conditions. 

We remind issuers that any indication 

of a reduction in the generosity of a 

benefit in some manner for subsets of 

individuals that is not based on 

clinically indicated, reasonable medical 

management practices is potentially 

discriminatory. As is the case for any 

EHB, issuers are expected to impose 

limitations and exclusions on the 

coverage of benefits to treat opioid use 

disorder, including the drugs used for 

MAT or any associated benefit such as 

counseling or drug screenings, based on 

clinical guidelines and medical 

evidence, and are expected to use 

reasonable medical management. If a 

plan excludes certain treatment of 

opioid use disorder, but covers the same 

treatment for other medically necessary 

purposes, the issuer must be able to 

justify such an exclusion with 

supporting documentation explaining 

how such a plan design is not 

discriminatory. 

We note that a similar standard is 

imposed under the Paul Wellstone and 

Pete Domenici Mental Health Parity and 

Addiction Equity Act of 2008 

(MHPAEA) (section 2726 of the PHS 

Act).124 Under regulations 

implementing the EHB requirements,125

the requirements of MHPAEA are 

extended to issuers of nongrandfathered health insurance coverage 

in the individual and small group 

markets, both on and off the Exchange. 

Under HHS regulations at § 146.136 

implementing MHPAEA, if a drug is 

offered under a plan for treatment of a 

medical condition but is excluded for 

MAT purposes, that is considered to be 

a nonquantitative treatment 

limitation.126 A nonquantitative 

treatment limitation cannot be imposed 

on mental health or substance use 

disorder benefits in any classification 127

unless, under the terms of the plan (or 

health insurance coverage) as written 

and in operation, any processes, 

strategies, evidentiary standards or other 

factors used in applying the limitation 

to the mental health or substance use 

disorder benefits in the classification are 

comparable to, and are applied no more 

stringently than the processes, 

strategies, evidentiary standards and 

other factors used in applying the 

limitation to medical surgical benefits in 

the same classification. In other words, 

the issuer must demonstrate that, as 

written and in operation, the processes, 

strategies, evidentiary standards, and 

other factors it applied in deciding that 

the drug is covered for medical/surgical 

purposes, are comparable to those it 

used in deciding that the drug is not 

covered for MAT purposes, and that 

there are no limitations that apply only 

for mental health or substance use 

disorder benefits.128

We also note that federal civil rights 

laws, such as title II of the Americans 

with Disabilities Act and section 504 of 

the Rehabilitation Act, prohibit 

discrimination against individuals who 

participate in or have completed 

substance use disorder treatment, 

including MAT. 

e. Premium Adjustment Percentage 

(§ 156.130) 

Section 1302(c)(4) of the PPACA 

directs the Secretary to determine an 

annual premium adjustment percentage, 

a measure of premium growth that is 

used to set the rate of increase for three 

parameters detailed in the PPACA: (1) 

The maximum annual limitation on cost 

sharing (defined at § 156.130(a)); (2) the 

required contribution percentage used 

to determine eligibility for certain 

exemptions under section 5000A of the 

Code (defined at § 155.605(d)(2)); and 

(3) the employer shared responsibility 

payment amounts under section 

4980H(a) and (b) of the Code (see 

section 4980H(c)(5) of the Code). 

Section 1302(c)(4) of the PPACA and 

§ 156.130(e) provide 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 the 

regulations provide that this percentage 

will be published in the annual HHS 

notice of benefit and payment 

parameters. 

The 2015 Payment Notice (79 FR 

13743) and 2015 Market Standards Rule 


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129The 2013 and 2019 premiums used for this 

calculation reflect the latest NHEA data. The series 

used in the determinations of the adjustment 

percentages can be found in Tables 1 and 17 on the 

CMS website, which can be accessed by clicking the 

‘‘NHE Projections 2017–2026—Tables’’ link located 

in the Downloads section at the following address: 

http://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/ 

NationalHealthExpendData/ 

NationalHealthAccountsProjected.html. A detailed 

description of the NHE projection methodology is 

available at https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/ 

proj2016.pdf. 

(79 FR 30240) established a 

methodology for estimating the average 

per capita premium for purposes of 

calculating the premium adjustment 

percentage for the 2015 benefit year and 

beyond. Beginning with the 2015 benefit 

year, the premium adjustment 

percentage was calculated based on the 

estimates and projections of average per 

enrollee employer-sponsored insurance 

premiums from the NHEA, which are 

calculated by the CMS Office of the 

Actuary. In the proposed 2015 Payment 

Notice, we proposed that the premium 

adjustment percentage be calculated 

based on the projections of average per 

enrollee private health insurance 

premiums. Based on comments 

received, we finalized the 2015 Payment 

Notice to instead use per enrollee 

employer-sponsored insurance 

premiums in the methodology for 

calculating the premium adjustment 

percentage. We chose employersponsored insurance premiums because 

they reflected trends in health care costs 

without being skewed by individual 

market premium fluctuations resulting 

from the early years of implementation 

of the PPACA market reforms. We 

adopted this methodology in subsequent 

Payment Notices for 2016 through 2019, 

but noted in the 2015 Payment Notice 

that we may propose to change our 

methodology after the initial years of 

implementation of the market reforms, 

once the premium trend is more stable. 

We are proposing to use an alternative 

premium measure that captures 

increases in individual market 

premiums in addition to increases in 

employer-sponsored insurance 

premiums for purposes of calculating 

the premium adjustment percentage for 

the 2020 benefit year and beyond. The 

premium measure we propose to use to 

calculate the premium adjustment 

percentage for the 2020 benefit year and 

beyond is an adjusted private individual 

and group market health insurance 

premium measure, which is similar to 

NHEA’s private health insurance 

premium measure. NHEA’s private 

health insurance premium measure 

includes premiums for employersponsored insurance, ‘‘direct purchase 

insurance,’’ which includes individual 

market health insurance purchased 

directly by consumers from health 

insurance issuers, both on and off the 

Exchanges, and Medigap insurance, and 

the medical portion of accident 

insurance (‘‘property and casualty’’ 

insurance). The measure we propose to 

use is published by NHEA and includes 

NHEA estimates and projections of 

employer-sponsored insurance and 

direct purchase insurance premiums, 

but would exclude premiums for 

Medigap and property and casualty 

insurance (we refer to the proposed 

measure as ‘‘private health insurance 

(excluding Medigap and property and 

casualty insurance)’’). We are proposing 

to exclude Medigap and property and 

casualty insurance from the premium 

measure since these types of coverage 

are not considered primary medical 

coverage for individuals who elect to 

enroll. For example, Medigap coverage 

supplements the primary coverage 

obtained through Medicare by offering 

protection against certain out-of-pocket 

costs not covered by that program such 

as its associated co-payments and 

deductibles. We are proposing to use 

per enrollee premiums for private health 

insurance (excluding Medigap and 

property and casualty insurance) so that 

the premium growth measure more 

closely reflects premium trends for all 

individuals primarily covered in the 

private health insurance market since 

2013. Between 2014 and 2018, private 

individual health insurance market per 

enrollee premiums, specifically, 

premiums for coverage through the 

Exchanges, have grown faster than 

employer-sponsored insurance 

premiums. The majority of Exchange 

enrollees qualify to receive the premium 

tax credit, and federal premium tax 

credit expenditures have increased as 

Exchange premiums have increased. We 

anticipate that the proposed change to 

use per enrollee premiums for private 

health insurance (excluding Medigap 

and property and casualty insurance) 

would make the premium index more 

closely reflect premium trends for 

individuals covered in the private 

health insurance market, and would 

additionally reduce federal premium tax 

credit expenditures, if the Department 

of the Treasury and the IRS adopt the 

proposed change, as explained later in 

this section. Specifically, to calculate 

the premium adjustment percentage for 

the 2020 benefit year, the measures for 

2013 and 2019 would be calculated as 

private health insurance premiums 

minus premiums paid for Medigap 

insurance and property and casualty 

insurance, divided by the unrounded 

number of unique private health 

insurance enrollees, excluding all 

Medigap enrollees. These results would 

then be rounded to the nearest $1 

followed by a division of the 2019 figure 

by the 2013 figure rounded to 10 

significant digits. The proposed 

premium measure would reflect 

cumulative, historic growth in 

premiums for private health insurance 

markets (excluding Medigap and 

property and casualty insurance) from 

2013 onwards. 

As discussed in the 2015 Payment 

Notice, we considered four criteria 

when finalizing the premium 

adjustment percentage methodology for 

the 2015 benefit year: (1) 

Comprehensiveness—the premium 

adjustment percentage should be 

calculated based on the average per 

capita premium for health insurance 

coverage for the entire market, including 

the individual and group markets, and 

both fully insured and self-insured 

group health plans; (2) Availability—the 

data underlying the calculation should 

be available by the summer of the year 

that is prior to the calendar year so that 

the premium adjustment percentage can 

be published in the annual HHS notice 

of benefit and payment parameters in 

time for issuers to develop their plan 

designs; (3) Transparency—the 

methodology for estimating the average 

premium should be easily 

understandable and predictable; and (4) 

Accuracy—the methodology should 

have a record of accurately estimating 

average premiums. We continue to 

consider these criteria as we evaluate 

other sources of premium data that 

could be used in calculating the 

premium adjustment percentage. 

Using the private health insurance 

premium measure data (excluding 

Medigap and property and casualty 

insurance) proposed above, we propose 

that the premium adjustment percentage 

for 2020 be the percentage (if any) by 

which the most recent NHEA projection 

of per enrollee premiums for private 

health insurance (excluding Medigap 

and property and casualty insurance) for 

2019 ($6,468) exceeds the most recent 

NHEA estimate of per enrollee 

premiums for private health insurance 

(excluding Medigap and property and 

casualty insurance) for 2013 ($4,987).129

Using this formula, the proposed 

premium adjustment percentage for 

2020 is 1.2969721275 ($6,468/$4,987), 

which is an increase in private health 

insurance (excluding Medigap and 

property and casualty insurance) 

premiums of approximately 29.7 


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130 IRS Rev. Proc. 14–37. 

131See also IRS Notice 2015–87, Q&A 12 for 

discussion of the adjustment of the required 

contribution percentage as applied for certain 

purposes under sections 4980H and 6056 of the 

Code. 

132See IRS Rev. Proc. 2014–37. 

133See PPACA section 9010(e)(2). However, 

pursuant to section 4003 of Public Law 115–120, 

Division D—Suspension of Certain Health-Related 

Taxes, enacted on January 22, 2018, the collection 

of the Health Insurance Providers Fee is suspended 

for the 2019 calendar year. 

percent over the period from 2013 to 

2019. 

We believe that our proposal to use 

per enrollee private health insurance 

premiums (excluding Medigap and 

property and casualty insurance) in the 

premium adjustment percentage 

calculation could result in a faster 

premium growth rate for the foreseeable 

future than if we continued to use only 

employer-sponsored insurance 

premiums as in prior benefit years. We 

anticipate that this proposed change 

could have several impacts on the 

health insurance market. As explained 

above, the premium adjustment 

percentage is used to set the rate of 

increase for the maximum annual 

limitation on cost sharing, the required 

contribution percentage used to 

determine eligibility for certain 

exemptions under section 5000A of the 

Code, and the employer shared 

responsibility payment amounts under 

section 4980H(a) and (b) of the Code. 

Accordingly, a premium adjustment 

percentage that reflects a faster premium 

growth rate would result in a higher 

maximum annual limitation on cost 

sharing, a higher required contribution 

percentage, and higher employer shared 

responsibility payment amounts than if 

the current premium adjustment 

percentage premium measure 

(employer-sponsored insurance only) 

were adopted for the 2020 benefit year. 

Furthermore, to date the NHEA 

projections of per enrollee employersponsored insurance premiums have 

also been used by the Department of the 

Treasury and the IRS for determining 

the applicable percentage in section 

36B(b)(3)(A) of the Code and the 

required contribution percentage in 

section 36B(c)(2)(C) of the Code.130 The 

applicable percentage in section 

36B(b)(3)(A) of the Code is used to 

determine the amount an individual 

must contribute to the cost of an 

Exchange QHP and thus, relates to the 

amount of the individual’s premium tax 

credit. This is because, in general, an 

individual’s premium tax credit is the 

lesser of (1) the premiums paid for the 

Exchange QHP, and (2) the excess of the 

premium for the benchmark plan over 

the contribution amount. The 

contribution amount is the product of 

the individual’s household income and 

the applicable percentage. 

The required contribution percentage 

in section 36B(c)(2)(C) of the Code is 

used to determine whether an offer of 

employer-sponsored insurance is 

considered affordable for an individual, 

which relates to eligibility for the 

premium tax credit because an 

individual with an offer of affordable 

employer-sponsored insurance that 

provides minimum value is ineligible 

for the premium tax credit. Specifically, 

an offer of employer-sponsored 

insurance is considered affordable for 

an individual if the employee’s required 

contribution for employer-sponsored 

insurance is less than or equal to the 

required contribution percentage (set at 

9.5 percent in 2014) of the individual’s 

household income.131

Section 36B(b)(3)(A)(ii) of the Code 

generally provides that the applicable 

percentages are to be adjusted after 2014 

to reflect the excess of the rate of 

premium growth over the rate of income 

growth for the preceding year. Section 

36B(c)(2)(C) of the Code provides that 

the required contribution percentage is 

to be adjusted after 2014 in the same 

manner as the applicable percentages 

are adjusted in section 36B(b)(3)(A)(ii) 

of the Code. As noted above, the 

Department of the Treasury and the IRS 

have issued guidance providing that the 

rate of premium growth for purposes of 

these section 36B provisions is based on 

per enrollee spending for employersponsored insurance as published in the 

NHEA.132 If we finalize a change to the 

premium measure used in the premium 

adjustment percentage for the 2020 

benefit year, we expect the Department 

of the Treasury and the IRS to issue 

additional guidance to adopt the same 

premium measure for purposes of future 

indexing of the applicable percentage 

and required contribution percentage 

under section 36B of the Code. 

We anticipate that a measure of 

premium growth that reflects a faster 

premium growth rate would increase 

the portion of the premium the 

consumer is responsible for paying and 

therefore would decrease the amount of 

premium tax credit for which 

consumers qualify under section 

36B(b)(3)(A) of the Code. It also would 

increase the required contribution 

percentage under section 36B(c)(2)(C) of 

the Code, such that individuals with an 

offer of employer-sponsored insurance 

would be more likely to be ineligible for 

the premium tax credit. We recognize 

that federal outlays for the premium tax 

credit increased significantly in the 

2018 benefit year, as many issuers 

increased silver plan premiums to offset 

the cost of providing cost-sharing 

reductions to eligible enrollees. The 

proposed change to the measure of 

premium growth, if also adopted by the 

Department of the Treasury and the IRS 

for purposes of indexing the parameters 

under section 36B of the Code, would 

help to slow the increase in premium 

tax credit expenditures that results from 

this practice, thereby reducing taxpayer 

burden associated with premium tax 

credit expenditures. However, the 

proposed change could also contribute 

to a decline in Exchange enrollment 

among premium tax credit eligible 

consumers, and could ultimately result 

in net premium increases for enrollees 

that remain in the individual market, 

both on and off the Exchanges, as 

healthier enrollees elect not to purchase 

Exchange coverage. 

Additionally, the Health Insurance 

Providers Fee established under section 

9010 of the PPACA also takes the 

measure of premium growth used for 

the applicable percentage in section 

36B(b)(3)(A)(ii) into consideration for 

purposes of calculating the fee for 2019 

and beyond.133 If the Department of the 

Treasury and the IRS adopt a faster 

premium growth rate, that would result 

in higher Health Insurance Providers 

Fees imposed on health insurance 

issuers that are required to pay the fee, 

over the long term. We anticipate that 

health insurance issuers subject to the 

Health Insurance Providers Fee may 

pass the fee on to consumers, thereby 

increasing premiums in the individual, 

small, and large group markets, 

although we anticipate the increases in 

premiums due to the increase in the 

Health Insurance Providers Fee will be 

marginal. 

We considered using Exchange 

premiums as the measure for premium 

growth instead of the proposed private 

health insurance (excluding Medigap 

and property and casualty insurance) 

premium measure. Using Exchange 

premiums would result in a faster 

premium growth rate than the proposed 

measure and the employer-sponsored 

insurance measure used in the premium 

adjustment percentage calculation for 

the 2015 through 2019 benefit years. As 

such, we anticipate that a premium 

growth measure based on Exchange 

premiums would result in even larger 

increases in the maximum annual 

limitation on cost sharing, required 

contribution percentage, and employer 

shared responsibility payment amounts, 

and, if adopted by the Department of the 

Treasury and the IRS, would result in 

even larger reductions in premium tax 

credit expenditures. However, a 


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134See http://www.irs.gov/pub/irs-drop/rp-13- 

25.pdf. 

significant drawback with using 

Exchange premiums is that the 

Exchanges did not exist in 2013, and 

therefore Exchange premiums are not 

available for 2013. NHEA does not 

currently publish projections of 

Exchange premiums separate from the 

estimates and projections that they 

include within the direct purchase 

premium measure (a projection would 

be needed for the 2019 premium 

amount). 

Based on the proposed 2020 premium 

adjustment percentage, we propose the 

following cost-sharing parameters for 

benefit year 2020. 

Maximum Annual Limitation on Cost 

Sharing for Plan Year 2020 

Under § 156.130(a)(2), for the 2020 

calendar year, cost sharing for self-only 

coverage may not exceed the dollar limit 

for calendar year 2014 increased by an 

amount equal to the product of that 

amount and the premium adjustment 

percentage for 2020. For other than selfonly coverage, the limit is twice the 

dollar limit for self-only coverage. 

Under § 156.130(d), these amounts must 

be rounded down to the next lowest 

multiple of $50. Using the premium 

adjustment percentage of 1.2969721275 

for 2020 as proposed above, and the 

2014 maximum annual limitation on 

cost sharing of $6,350 for self-only 

coverage, which was published by the 

IRS on May 2, 2013,134 we propose that 

the 2020 maximum annual limitation on 

cost sharing would be $8,200 for selfonly coverage and $16,400 for other 

than self-only coverage. This represents 

an approximately 3.8 percent increase 

above the 2019 parameters of $7,900 for 

self-only coverage and $15,800 for other 

than self-only coverage. We seek 

comment on this proposal. 

f. Reduced Maximum Annual 

Limitation on Cost Sharing (§ 156.130) 

Sections 1402(a) through (c) of the 

PPACA direct issuers to reduce cost 

sharing for EHBs for eligible individuals 

enrolled in a silver-level QHP. In the 

2014 Payment Notice, we established 

standards related to the provision of 

these cost-sharing reductions. 

Specifically, in part 156, subpart E, we 

specified that QHP issuers must provide 

cost-sharing reductions by developing 

plan variations, which are separate costsharing structures for each eligibility 

category that change how the cost 

sharing required under the QHP is to be 

shared between the enrollee and the 

federal government. At § 156.420(a), we 

detailed the structure of these plan 

variations and specified that QHP 

issuers must ensure that each silverplan variation has an annual limitation 

on cost sharing no greater than the 

applicable reduced maximum annual 

limitation on cost sharing specified in 

the annual HHS notice of benefit and 

payment parameters. Although the 

amount of the reduction in the 

maximum annual limitation on cost 

sharing is specified in section 

1402(c)(1)(A) of the PPACA, section 

1402(c)(1)(B)(ii) states that the Secretary 

may adjust the cost-sharing limits to 

ensure that the resulting limits do not 

cause the AV of the health plans to 

exceed the levels specified in section 

1402(c)(1)(B)(i) (that is, 73 percent, 87 

percent, or 94 percent, depending on the 

income of the enrollee). Accordingly, 

we propose to continue to use the 

method we established in the 2014 

Payment Notice for determining the 

appropriate reductions in the maximum 

annual limitation on cost sharing for 

cost-sharing plan variations. 

As we proposed above, the 2020 

maximum annual limitation on cost 

sharing would be $8,200 for self-only 

coverage and $16,400 for other than selfonly coverage. We analyzed the effect 

on AV of the reductions in the 

maximum annual limitation on cost 

sharing described in the statute to 

determine whether to adjust the 

reductions so that the AV of a silver 

plan variation will not exceed the AV 

specified in the statute. Below, we 

describe our analysis for the 2020 plan 

year and our proposed results. 

Consistent with our analysis in the 

Payment Notices for 2014 through 2019, 

we developed three test silver level 

QHPs, and analyzed the impact on AV 

of the reductions described in the 

PPACA to the proposed estimated 2020 

maximum annual limitation on cost 

sharing for self-only coverage ($8,200). 

The test plan designs are based on data 

collected for 2019 plan year QHP 

certification to ensure that they 

represent a range of plan designs that 

we expect issuers to offer at the silver 

level of coverage through the Exchanges. 

For 2020, the test silver level QHPs 

included a PPO with typical costsharing structure ($8,200 annual 

limitation on cost sharing, $2,575 

deductible, and 20 percent in-network 

coinsurance rate); a PPO with a lower 

annual limitation on cost sharing 

($5,250 annual limitation on cost 

sharing, $3,500 deductible, and 20 

percent in-network coinsurance rate); 

and an HMO ($8,200 annual limitation 

on cost sharing, $4,300 deductible, 20 

percent in-network coinsurance rate, 

and the following services with 

copayments that are not subject to the 

deductible or coinsurance: $500 

inpatient stay per day, $500 emergency 

department visit, $25 primary care 

office visit, and $55 specialist office 

visit). All three test QHPs meet the AV 

requirements for silver level health 

plans. 

We then entered these test plans into 

the proposed 2020 AV Calculator and 

observed how the reductions in the 

maximum annual limitation on cost 

sharing specified in the PPACA affected 

the AVs of the plans. We found that the 

reduction in the maximum annual 

limitation on cost sharing specified in 

the PPACA for enrollees with a 

household income between 100 and 150 

percent of FPL (2⁄3 reduction in the 

maximum annual limitation on cost 

sharing), and 150 and 200 percent of 

FPL (2⁄3 reduction), would not cause the 

AV of any of the model QHPs to exceed 

the statutorily specified AV levels (94 

and 87 percent, respectively). In 

contrast, the reduction in the maximum 

annual limitation on cost sharing 

specified in the PPACA for enrollees 

with a household income between 200 

and 250 percent of FPL (1⁄2 reduction), 

would cause the AVs of two of the test 

QHPs to exceed the specified AV level 

of 73 percent. As a result, we propose 

that the maximum annual limitation on 

cost sharing for enrollees with a 

household income between 200 and 250 

percent of FPL be reduced by 

approximately 1⁄5, rather than 1⁄2, 

consistent with the approach taken for 

benefit years 2017 through 2019. We 

further propose that the maximum 

annual limitation on cost sharing for 

enrollees with a household income 

between 100 and 200 percent of FPL be 

reduced by approximately 2⁄3, as 

specified in the statute, and as shown in 

Table 9. These proposed reductions in 

the maximum annual limitation on cost 

sharing should adequately account for 

unique plan designs that may not be 

captured by our three model QHPs. We 

also note that selecting a reduction for 

the maximum annual limitation on cost 

sharing that is less than the reduction 

specified in the statute would not 

reduce the benefit afforded to enrollees 

in the aggregate because QHP issuers are 

required to further reduce their annual 

limitation on cost sharing, or reduce 

other types of cost sharing, if the 

required reduction does not cause the 

AV of the QHP to meet the specified 

level. 

In prior years we found, and we 

continue to find, that for individuals 

with household incomes of 250 to 400 

percent of FPL, without any change in 

other forms of cost sharing, any 

reduction in the maximum annual 

limitation on cost sharing will cause an 


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135Sections 2707(b) and 2711 of the PHS Act 

apply the annual cost-sharing limitation on EHBs 

and the prohibition on annual dollar limits on EHBs 

to non-grandfathered non-federal governmental 

group health plans of all sizes, and by implication, 

to large group health insurance issuers through 

which such plan provide coverage. Additionally, 

section 715 of ERISA and section 9815 of the Code 

incorporates those provisions by reference, 

applying them to non-grandfathered privately 

sponsored group health plans and their health 

insurance issuers in the small and large group 

markets. 

136 Generally, for this purpose, a group health 

plan or health insurance issuer that is not required 

to provide EHB must define such benefits in a 

manner that is consistent with—(1) one of the EHBbenchmark plans applicable in a state under 45 CFR 

156.110, or (2) one of the three Federal Employees 

Health Benefits Program plan options. 45 CFR 

147.126(c). 

137FAQs About Affordable Care Act 

Implementation (Part XIX). May 2, 2014. Available 

at https://www.cms.gov/CCIIO/Resources/FactSheets-and-FAQs/aca_implementation_

faqs19.html. This FAQ remains in effect for large 

group market and self-insured group health plans. 

138 In determining whether a generic is medically 

appropriate, the FAQ provides that a plan may use 

a reasonable exception process. For example, the 

plan may defer to the recommendation of an 

individual’s personal physician, or it may offer an 

exceptions process meeting the requirements of 45 

CFR 156.122(c). 

139For example, these plans have to meet the 

EHB drug count standard at § 156.122(a) that sets 

a minimum threshold for drug coverage and while 

the drug count standard is based on chemically 

distinct drugs, these plans have to consider other 

factors in establishing their prescription drug 

benefit. 

140 78 FR 12834, 12845 (February 25, 2013). 

141 80 FR 10817. 

increase in AV that exceeds the 

maximum 70 percent level in the 

statute. As a result, we do not propose 

to reduce the maximum annual 

limitation on cost sharing for 

individuals with household incomes 

between 250 and 400 percent of FPL. 

We seek comment on this analysis 

and the proposed reductions in the 

maximum annual limitation on cost 

sharing for 2020. 

We note that for 2020, as described in 

§ 156.135(d), states are permitted to 

submit for approval by HHS statespecific datasets for use as the standard 

population to calculate AV. No state 

submitted a dataset by the September 1, 

2018 deadline. 

TABLE 9—REDUCTIONS IN MAXIMUM ANNUAL LIMITATION ON COST SHARING FOR 2020 

Eligibility category 

Reduced maximum annual 

limitation on cost 

sharing for selfonly coverage for 

2020 

Reduced maximum annual 

limitation on cost 

sharing for other 

than self-only coverage for 2020 

Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(i) (100–150 percent of FPL) .......... $2,700 $5,400 

Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(ii) (151–200 percent of FPL) ......... 2,700 5,400 

Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(iii) (201–250 percent of FPL) ........ 6,550 13,100 

g. Application to Cost-Sharing 

Requirements and Annual and Lifetime 

Dollar Limitations (§ 156.130) 

We are proposing several policy 

changes to cost-sharing requirements, 

including a policy change as to what is 

included as EHB, which affects the 

annual out-of-pocket limitation under 

PHS Act section 2707(b) and the annual 

and lifetime dollar limit prohibition 

under PHS Act section 2711. Although 

large group market coverage and selfinsured group health plans are not 

required to cover all EHB, nongrandfathered group health plans and 

health insurance issuers are subject to 

PHS Act section 2707(b), and all group 

health plans and group health insurance 

issuers are subject to PHS Act section 

2711, which are incorporated by 

reference in the Employee Retirement 

Income Security Act of 1974 (ERISA) 

and the Code.135 To comply with those 

sections, such plans and issuers must 

choose a definition of EHB to determine 

which benefits are subject to the annual 

out-of-pocket limitation and the 

prohibition on lifetime and annual 

dollar limits.136 Therefore, these 

proposals are relevant to, and would 

apply to, all health coverage and plans. 

i. Cost-Sharing Requirements for 

Generic Drugs 

In 2014, the Departments of Labor, 

HHS, and the Treasury 137 (the tridepartments) released an FAQ on the 

treatment by large group market health 

insurance issuers and self-insured group 

health plans, with regard to the annual 

out-of-pocket limitation, of an 

individual’s out-of-pocket costs for a 

brand drug when a generic equivalent is 

available and medically appropriate. 

Because large group market health 

insurance issuers and self-insured group 

health plans are not required to offer 

EHB, the FAQ states that such plans 

may include only generic drugs, if 

medically appropriate (as determined by 

the individual’s personal physician) and 

available as EHB, while providing a 

separate option (not as part of EHB) of 

selecting a brand drug at a higher costsharing amount, as non-EHB. Thus, 

such plans could choose not to count 

toward the annual limit on cost sharing 

some or all of the amounts paid toward 

the brand drugs that are not EHB, if the 

participant or beneficiary selects a 

brand name prescription drug in 

circumstances in which a generic was 

available and medically appropriate (as 

determined by the individual’s personal 

physician).138

The FAQ also states that for nongrandfathered health plans in the 

individual and small group markets that 

must provide coverage of EHB, 

additional requirements apply.139 This 

reflects the implementation of the EHB 

requirements as implemented in the 

Patient Protection and Affordable Care 

Act (PPACA); Standards Related to 

Essential Health Benefits, Actuarial 

Value and Accreditation; Final Rule 

(EHB Final Rule),140 in which we stated 

that plans are permitted to go beyond 

the number of drugs offered by the EHBbenchmark plan without exceeding 

EHB. We further clarified in the 2016 

Payment Notice that, if the plan is 

covering drugs beyond the number of 

drugs covered by the EHB-benchmark 

plan, all of these drugs are EHB and cost 

sharing paid for the drugs must count 

toward the annual limitation on cost 

sharing.141

Given the increase in the cost of 

prescription drugs, and particularly 

brand drugs, HHS believes additional 

flexibility is needed for health plans in 

the individual and small group markets 

that must provide coverage of the EHB 

to encourage consumers to use more 

cost effective generic drugs. Therefore, 

we propose, subject to applicable state 

law, to allow a plan that covers both a 

brand prescription drug and its generic 

equivalent, for plan years beginning on 

or after January 1, 2020, to consider the 

brand drug to not be EHB, if the generic 

drug is available and medically 

appropriate for the enrollee, unless 


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142 Van Nuys, K., Joyce, G., Ribero, R., & 

Goldman, D.P. (2018). A Perspective on 

Prescription Drug Copayment Coupons. Los 

Angeles, CA: Leonard D. Schaeffer Center for Health 

Policy & Economics. 

143For example, see, https://malegislature.gov/ 

Laws/GeneralLaws/PartI/TitleXXII/Chapter175H/ 

Section3. 

coverage of the brand drug is 

determined to be required under an 

exception process at § 156.122(c). 

Under such circumstances, if an 

enrollee purchases the brand drug when 

the generic equivalent was available and 

medically appropriate, we propose that 

the issuer would be permitted to not 

count the difference in cost sharing 

between that which is paid for the brand 

drug and that which would be paid for 

the generic equivalent drug toward the 

annual limitation on cost sharing under 

§ 156.130, but would still be required to 

attribute the cost sharing that would 

have been paid for the generic 

equivalent toward the annual limitation 

on cost sharing under § 156.130. This 

would maintain a balance between 

incentivizing the use of lower-cost drugs 

and the consumer protection provided 

by the annual limitation on cost sharing. 

We further propose that for a plan to 

do so, the plan must have an exception 

process in place in accordance with 

§ 156.122(c) for the enrollee to request 

coverage of the brand drug. 

If finalized, this interpretation would 

permit all group health plans and group 

health insurance issuers to impose 

lifetime and annual dollar limits on 

such brand drugs because they would 

no longer be considered EHB subject to 

the prohibition on such limits. 

HHS is also considering an alternate 

proposal, under which an issuer would 

be permitted to except the entire 

amount paid by a patient for a brand 

drug for which there is a medically 

appropriate generic alternative from the 

annual limitation on cost sharing at 

§ 156.130. Because this alternate 

proposal also relies on an interpretation 

of what is considered EHB, the alternate 

proposal would also apply to nongrandfathered group health plans and 

health insurance issuers subject to the 

annual limit on cost-sharing provision 

under PHS Act 2707(b), and in ERISA 

section 715 and Code section 9815. 

Under the alternate proposal, for 

example, if an enrollee with a 10 

percent coinsurance obligation is 

selecting between a brand drug for 

which the allowable charge is $100 and 

an available and medically appropriate 

generic equivalent for which the 

allowable charge is $60, if the enrollee 

selects the generic equivalent, the 

enrollee would pay $6 in coinsurance 

(10 percent of the $60 allowable charge) 

and the issuer would attribute that $6 to 

the annual limitation on cost sharing. If 

the enrollee selects the brand drug, the 

enrollee would pay $10 in coinsurance 

(10 percent of $100), but the issuer 

could attribute $6 to the annual 

limitation on cost sharing under the first 

proposal (due to the enrollee selecting a 

brand name drug when a generic 

equivalent is available and medically 

appropriate) or $0 under the alternate 

proposal to the annual limitation on 

cost sharing. 

We propose that these changes to the 

annual limitations on cost sharing 

would be effective starting with the 

2020 plan year. We solicit comments on 

these alternatives, both of which we 

propose to apply to group health plans, 

group health insurance coverage, and 

individual market coverage, regardless 

of whether they are required to cover 

EHBs. 

An issuer taking advantage of this 

proposed flexibility would be excluding 

the brand drug from coverage as EHB. 

Therefore, the issuer also could impose 

annual or lifetime dollar limits on 

coverage of the brand drug under those 

circumstances. Additionally, PTC (and 

APTC) could not be applied to any 

portion of the premium attributable to 

coverage of brand name drugs not 

covered as EHB, so issuers of QHPs 

would be required to calculate that 

portion of QHPs’ premiums and report 

it to the applicable Exchange. 

We also solicit comments on any 

limitation on group health plans’ and 

health insurance issuers’ information 

technology systems being able to 

accumulate the cost sharing consistent 

with this policy, whether this proposed 

policy should be subject to or preempt 

any state law regarding the application 

of cost sharing between the generic and 

branded version of a drug that would 

prevent the application of this proposed 

policy, and whether an issuer not 

attributing cost-sharing to the annual 

limitation on cost sharing under this 

approach should be considered an 

adverse coverage determination and 

subject to the coverage appeals 

processes under § 147.136. 

Finally, we seek comment regarding 

whether we should require, instead of 

permit, issuers to exclude brand drugs 

from being EHB if the generic drug is 

available and medically appropriate for 

the enrollee, unless coverage of the 

brand drug is determined to be required 

under the exception process under 

156.122(c), and to exclude the cost 

sharing for the brand name drug from 

accumulating toward the annual 

limitation on cost sharing according to 

one of the alternatives proposed above. 

ii. Cost-Sharing Requirements and Drug 

Manufacturers’ Coupons 

Drug manufacturers often offer 

coupons to patients to reduce patient 

out-of-pocket costs. Drug manufacturers 

may offer these coupons for various 

reasons: To compete with another brand 

name drug in the same therapeutic 

class, to compete with a generic 

equivalent when released, or to assist 

consumers whose drug costs would 

otherwise be extremely high due to a 

rare or costly condition.142 Some states 

prohibit the use of such coupons if a 

generic alternative is available.143

We recognize that copayment support 

may help beneficiaries by encouraging 

adherence to existing medication 

regimens, particularly when 

copayments may be unaffordable to 

many patients. However, the availability 

of a coupon may cause physicians and 

beneficiaries to choose an expensive 

brand-name drug when a less expensive 

and equally effective generic or other 

alternative is available. When 

consumers are relieved of copayment 

obligations, manufacturers are relieved 

of a market constraint on drug prices 

which can distort the market and the 

true costs of drugs. Such coupons can 

add significant long-term costs to the 

health care system that may outweigh 

the short-term benefits of allowing the 

coupons, and counter-balance issuers’ 

efforts to point enrollees to more cost 

effective drugs. 

The Administration has identified 

high and rising out-of-pocket costs for 

prescription drugs, among other issues, 

as a challenge to consumers. In some 

cases, manufacturer coupons may be 

increasing overall drug costs and can 

lead to unnecessary spending by issuers, 

which is passed on to all patients in the 

form of increased premiums and 

reduced coverage of other potentially 

useful health care interventions. While 

the PPACA does not speak directly to 

the accounting and use of drug 

manufacturer coupons to the annual 

limitation on cost sharing, we believe 

that the overall intent of the law was to 

establish annual limitations on cost 

sharing that reflect the actual costs that 

are paid by the enrollee. The 

proliferation of drug coupons supports 

higher cost brand drugs when generic 

alternatives are available which in turn 

supports higher drug prices and 

increased costs to all Americans and for 

other federal health programs. 

For these reasons, at new 

§ 156.130(h)(2), we propose, for plan 

years beginning on or after January 1, 

2020, notwithstanding any other 

provision of the annual limitation on 

cost sharing regulation, that amounts 

paid toward cost sharing using any form 


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Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 291 

144Section 1303(b)(1)(A)(ii) of the PPACA 

provides (‘‘[n]otwithstanding any other provision of 

[title I of the PPACA] (or any amendment made by 

this title)’’), that if a state has not prohibited 

abortion coverage on the Exchange, ‘‘the issuer of 

a qualified health plan shall determine whether or 

not the plan provides coverage’’ of abortion services 

as part of the EHB covered under the QHP. 

145Based on the Dictionary Act at 1 U.S. Code 1, 

which enables the use of plural in place of singular 

and vice versa unless context indicates otherwise, 

the common usage of issuer in section 

1303(b)(1)(A)(ii) of PPACA may be read to refer to 

the issuer’s right to decide whether or not to offer 

abortion coverage at all for that plan year rather 

than the right to make such a decision for each of 

the issuer’s plans for that plan year. 

of direct support offered by drug 

manufacturers to insured patients to 

reduce or eliminate immediate out-ofpocket costs for specific prescription 

brand drugs that have a generic 

equivalent are not required to be 

counted toward the annual limitation on 

cost sharing. Not counting such 

amounts toward the annual limitation 

on cost sharing would promote: (1) 

Prudent prescribing and purchasing 

choices by physicians and patients 

based on the true costs of drugs and (2) 

price competition in the pharmaceutical 

market. 

We seek comment on this proposal 

and whether states should be able to 

decide how coupons are treated. 

Additionally, we seek comment on 

whether it would be difficult for issuers 

to carve out direct support offered by 

drug manufacturers from their 

calculation of enrollees’ payments 

toward their annual limitation on cost 

sharing, and to carve out exceptions (for 

when a generic equivalent is not 

available, for example), when cost 

sharing paid by direct support offered 

by drug manufacturers would be 

counted toward the annual limitation on 

cost sharing, including whether 

information technology systems could 

be easily updated for this purpose. We 

also seek comment on issuers’ ability to 

differentiate between drug manufacturer 

coupons and other drug coupons, 

whether their information technology 

systems would need modifications to 

make such differentiation, what a 

reasonable implementation date would 

be if implementation barriers exist, and 

how drug discount programs (as 

opposed to coupons) should be treated 

under this proposal. Finally, we seek 

comment regarding whether this policy 

should be limited to QHPs only. 

4. Segregation of Funds for Abortion 

Services (§ 156.280) 

We believe that consumers are best 

served by the Exchanges when they 

have a choice of QHPs, understand the 

benefits their coverage provides, and 

can select a QHP that best meets their 

needs. To that end, the Exchanges were 

established such that issuers may offer 

consumers coverage at different metal 

levels, and with different benefits, cost 

sharing, and networks, among other 

things. In the FFEs, we have taken steps 

to improve transparency regarding QHP 

offerings and make it easier for 

consumers to select plans that they 

believe are best suited to their needs 

and preferences, such as providing 

information to identify QHPs that offer 

non-Hyde abortion services. State 

Exchanges have taken similar steps. For 

example, Exchanges display different 

plan attributes to consumers to foster 

the decision-making process, and allow 

consumers to view plan offerings by 

selecting filters that show plans with 

their desired plan characteristics. In 

addition, SBC requirements help ensure 

that consumers have access to easy-tounderstand information about coverage. 

However, in spite of these steps, there 

may be instances where a consumer 

prefers to enroll in a QHP that does not 

offer coverage for non-Hyde abortion 

services, but is unable to do so if such 

a plan is not offered in his or her service 

area. 

In particular, we are concerned that 

there are consumers who wish to enroll 

in a QHP but who may object to having 

non-Hyde abortion benefits included in 

their health insurance coverage based 

on religious or moral (collectively, 

conscience) objections. To the extent 

that potential enrollees will not enroll 

in, or are discouraged from enrolling in 

QHPs because all plans available in 

their service area cover non-Hyde 

abortion, we want to ensure that they 

are offered plan options that do not 

cover such services, to encourage QHP 

enrollment. Therefore, we propose at 

§ 156.280(c)(3) that, beginning with plan 

year 2020, if a QHP issuer provides 

coverage of non-Hyde abortion services 

in one or more QHPs, the QHP issuer 

must also offer at least one ‘‘mirror 

QHP’’ that omits coverage of non-Hyde 

abortion services throughout each 

service area in which it offers QHP 

coverage through the Exchange, to the 

extent permissible under state law. We 

propose that a ‘‘mirror QHP’’ provide 

identical benefit coverage to one of the 

QHPs with non-Hyde abortion coverage, 

with the exception of the inclusion of 

the coverage of non-Hyde abortion 

services. Under this proposal, the QHP 

issuer would only be required to offer at 

least one ‘‘mirror QHP’’ throughout each 

service area that the QHP issuer offers 

plans covering non-Hyde abortion 

coverage, even if the issuer has multiple 

plans that offer non-Hyde abortion 

services in a single service area. Under 

this proposal, the QHP issuer would 

determine at which metal level the 

mirror plan is offered. We seek 

comment on the extent to which 

allowing QHP issuers to determine at 

which metal level the mirror plan is 

offered may inhibit access to these 

plans. 

This proposal implements our 

authority in section 1321 of the PPACA 

to impose, through rulemaking, such 

‘‘requirements’’ pertaining to PPACA 

provisions not codified in the Public 

Health Service Act ‘‘as the Secretary 

determines appropriate’’ to establish 

standards for certification of QHPs, 

consistent with section 1311(c)(1) of the 

PPACA. The proposed requirement at 

§ 156.280(c)(3) to offer a mirror QHP 

would help ensure that individuals who 

would otherwise purchase a QHP, but 

could not avail themselves of such plans 

because of the policy’s coverage of nonHyde abortion services, could get the 

same plan benefits through the 

Exchange under a policy that does not 

include the coverage to which they 

object. 

We recognize the argument that the 

requirement to offer a mirror QHP that 

we are proposing at § 156.280(c)(3) may 

be inconsistent with a QHP issuer’s 

right under section 1303(b)(1)(A)(ii) of 

the PPACA to decide whether or not to 

provide coverage of non-Hyde abortions 

services as part of its essential health 

benefits, if not prohibited from doing so 

under state law.144 However, we do not 

believe that such a requirement is 

inconsistent with section 

1303(b)(1)(A)(ii) of the PPACA. We 

interpret that provision as giving issuers 

offering QHPs in states that do not 

prohibit coverage of non-Hyde abortion 

services the right to decide whether or 

not to provide coverage of such abortion 

services. Specifically, we interpret 

section 1303(b)(1)(A)(ii) of the PPACA 

as intended to ensure, where applicable, 

that the decision on whether or not to 

provide coverage of non-Hyde abortion 

services is up to the issuer.145 That is, 

section 1303(b)(1)(A)(ii) of the PPACA 

would preclude the federal government 

from prohibiting QHP issuers from 

offering QHPs that offer abortion 

coverage, including non-Hyde abortion 

coverage; it does not preclude requiring 

a QHP issuer that offers non-Hyde 

abortion services in its QHPs to also 

offer at least one mirror QHP in each 

service area that does not cover nonHyde abortion services. 

This issuer’s right to decide whether 

or not to offer coverage of non-Hyde 

abortion services in a QHP need not 

necessarily be read to give issuers a 

right under federal law to provide such 

coverage under every single QHP they 

offer, where not prohibited by the state 


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292 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

146 ‘‘Meaningful Measures Hub.’’ May 5, 2018. 

Available at https://www.cms.gov/Medicare/ 

Quality-Initiatives-Patient-Assessment-Instruments/

QualityInitiativesGenInfo/MMF/General-info-SubPage.html. 

147Remarks by Administrator Seema Verma at the 

Health Care Payment Learning and Action Network 

(LAN) Fall Summit, as prepared for delivery on 

October 30, 2017. Available at https://

www.cms.gov/Newsroom/MediaReleaseDatabase/ 

Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html. 

148Final 2018 Call Letter for the QRS and QHP 

Enrollee Survey. Available at https://www.cms.gov/ 

Medicare/Quality-Initiatives-Patient-AssessmentInstruments/QualityInitiativesGenInfo/Downloads/

2018-QRS-Call-Letter_July2018.pdf. 

149See May 2017 Bureau of Labor Statistics, 

Occupational Employment Statistics, National 

Occupational Employment and Wage Estimates. 

Available at https://www.bls.gov/oes/current/oes_

nat.htm. 

from doing so. Under our proposed 

interpretation at § 156.280(c)(3), as long 

as the state permits the QHP issuer to 

decide whether or not to provide 

coverage of non-Hyde abortion services 

under a QHP and does not affirmatively 

require the QHP issuers in the state to 

cover such services in all plans, section 

1303(b)(1)(A)(ii) of the PPACA is 

satisfied, and the issuer’s rights under 

section 1303(b)(1)(A)(ii) of the PPACA 

would not be undermined by the 

proposed requirement that issuers 

providing coverage of non-Hyde 

abortion services under a QHP also offer 

a QHP with identical coverage, with the 

exception of the inclusion of the 

coverage of non-Hyde abortion services. 

We also seek comment on ways that 

Exchanges, and HealthCare.gov in 

particular, can differentiate between the 

QHP that covers non-Hyde abortions 

and the QHP that does not cover nonHyde abortions. We realize that but for 

the premium and benefit description, 

the QHPs would otherwise appear 

identical, and are concerned that 

consumers who do not carefully study 

their plan options may be confused by 

the premium differential. Similarly, we 

seek comment on the extent to which 

QHP issuers participating in direct 

enrollment under § 156.1230 and agents 

and brokers utilizing an internet website 

in accordance with § 155.220(c)(3)(i) 

should be required to adhere to any 

standards established for Exchanges in 

terms of differential display of these two 

types of QHPs. 

Given the proposed changes to this 

section, we are further proposing to 

rename this section ‘‘Rules relating to 

coverage of abortion services and 

segregation of premiums for such 

services.’’ to better reflect its contents. 

We seek comment on this proposal. 

5. Quality Standards (§§ 156.1120, 

156.1125, 156.1130) 

Regulatory reform and reducing 

regulatory burden are high priorities for 

us. To lower health care costs, enhance 

patient care, and reduce the regulatory 

burden on the health care industry, 

including for health plan issuers and the 

providers who deliver services through 

their plans, in October 2017, we 

launched the Meaningful Measures 

Initiative.146 This initiative is one 

component of our agency-wide Patients 

Over Paperwork Initiative.147

The Meaningful Measures Framework 

is a strategic tool for putting patients 

over paperwork by reducing measure 

reporting burden, aligning with the 

national health care priorities, and 

fostering operational efficiencies that 

include decreasing data collection and 

reporting burden while focusing on 

quality measurement aligned with 

meaningful outcomes. 

By including Meaningful Measures in 

our quality reporting and quality 

improvement programs such as the 

Quality Rating System, QHP Enrollee 

Experience Survey and the Quality 

Improvement Strategy, we believe that 

we can also address the following crosscutting measure criteria: 

• Eliminating disparities; 

• Tracking measurable outcomes and 

impact; 

• Safeguarding public health; 

• Achieving cost savings; 

• Improving access for rural 

communities; and 

• Reducing burden. 

We encourage QHP issuers to use 

performance measures aligned with the 

Meaningful Measures Initiative in 

fulfilling their certification requirement 

to implement a Quality Improvement 

Strategy that provides increased 

reimbursement or other market-based 

incentives for improving health 

outcomes of plan enrollees. 

In addition, we will continue to assess 

quality measures in our programs 

including the Quality Rating System 

and the QHP Enrollee Experience 

Survey, to ensure that we are using a 

parsimonious set of the most 

meaningful measures for patients, 

clinicians, and health plans in those 

quality programs. If we propose any 

changes or removal of measures, we will 

include those for public comment in the 

Annual Call Letter for the QRS and QHP 

Enrollee Survey,148 as well as address 

potential changes to information 

collection requirements to comply with 

the Paperwork Reduction Act. 

6. Direct Enrollment With the QHP 

Issuer in a Manner Considered To Be 

Through the Exchange (§ 156.1230) 

As previously described in the 

preamble to §§ 155.220, 155.221, and 

155.415 we are proposing significant 

changes to §§ 155.221 and 155.415 to 

streamline and consolidate the 

requirements applicable to all direct 

enrollment entities—both QHP issuers 

and web-brokers. To reflect these 

changes, we propose conforming 

changes in § 156.1230(a)(2) and (b). We 

propose to amend § 156.1230(b) to add 

a new paragraph (b)(1) that would 

require issuers participating in direct 

enrollment to comply with the 

applicable requirements in § 155.221. 

We also propose to delete and reserve 

paragraph (a)(2) of § 156.1230 to reduce 

redundancies in light of the proposed 

changes to § 155.415 that are described 

earlier in this rulemaking. For a more 

thorough discussion of these proposed 

changes, please see the preamble to 

§§ 155.220, 155.221, and 155.415. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), 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 OMB for 

review and approval. To fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the PRA 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. 

A. Wage Estimates 

To derive wage estimates, we 

generally used data from the Bureau of 

Labor Statistics to derive average labor 

costs (including a 100 percent increase 

for fringe benefits and overhead) for 

estimating the burden associated with 

the ICRs.149 Table 10 in this proposed 

rule presents the mean hourly wage, the 

cost of fringe benefits and overhead, and 

the adjusted hourly wage. 

As indicated, employee hourly wage 

estimates have been adjusted by a factor 

of 100 percent. This is necessarily a 

rough adjustment, both because fringe 

benefits and overhead costs vary 

significantly across employers, and 

because methods of estimating these 

costs vary widely across studies. 

Nonetheless, there is no practical 


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150See ANDA (Generic) Drug Approval Reports2018. Available at https://www.fda.gov/Drugs/ 

DevelopmentApprovalProcess/ 

HowDrugsareDevelopedandApproved/ 

DrugandBiologicApprovalReports/ANDAGeneric

DrugApprovals/default.htm. See also ANDA 

(Generic Drug Approval Reports Previous Years— 

2016–17. Available at https://www.fda.gov/Drugs/ 

DevelopmentApprovalProcess/ 

HowDrugsareDevelopedandApproved/ 

DrugandBiologicApprovalReports/ 

ANDAGenericDrugApprovals/ucm050527.htm. 

alternative, and we believe that 

doubling the hourly wage to estimate 

total cost is a reasonably accurate 

estimation method. 

TABLE 10—ADJUSTED HOURLY WAGES USED IN BURDEN ESTIMATES

Occupation title Occupational 

code 

Mean hourly 

wage 

($/hr.) 

Fringe benefits 

and overhead 

($/hr.) 

Adjusted 

hourly wage 

($/hr.) 

Information and Record Clerks ........................................................................ 43–4199 $19.56 $19.56 $39.12 

Computer Programmer .................................................................................... 15–1131 42.08 42.08 84.16 

Medical Records and Health Information Technician ...................................... 29–2071 26.76 26.76 53.52 

Compliance officer ........................................................................................... 13–1041 34.39 34.39 68.78 

Operations manager ........................................................................................ 11–1021 59.35 59.35 118.70 

All Occupations ................................................................................................ 00–0000 24.34 24.34 48.68 

B. ICRs Regarding Guaranteed 

Renewability of Coverage (§§ 146.152, 

147.106, 148.122, 156.122) 

In an effort to optimize the use of new 

generic drugs as they become available, 

we proposed to allow issuers, beginning 

with plan years on or after January 1, 

2020, to update their prescription drug 

formularies by allowing certain midyear formulary changes, subject to 

applicable state law. 

We propose that a health insurance 

issuer that makes one of the following 

mid-year drug formulary changes would 

be required to send a written notice to 

enrollees 60 days prior to implementing 

any of the following drug formulary 

changes: 

• Adding a generic equivalent drug to 

the formulary, while removing the 

brand name drug from the formulary; or 

• Adding a generic equivalent to a 

formulary and moving the equivalent 

brand name drug to a different costsharing tier. 

Such changes would not be permitted 

to exceed the scope of what would 

otherwise be a uniform modification, 

and enrollees would retain the option to 

request coverage for a brand name drug 

that was removed from the formulary 

through the applicable coverage appeal 

process under § 147.136 or the drug 

exception request process under 

§ 156.122(c). 

Based on the 2016 Medical Loss Ratio 

(MLR) totals, there are 520 health 

insurance issuers with estimated 75.6 

million enrollees. Given the approval 

trends from 2016 through 2018, we also 

estimate that the Food and Drug 

Administration approves an average of 

76 first time generic drug applications 

per calendar year, allowing a first time 

generic equivalent of a brand drug to be 

manufactured.150 However, not all of 

these drugs are suitable for a drug 

formulary; some are only administered 

in a clinical setting, and others may be 

approved for over-the counter (OTC) 

use. We also considered that not all 

issuers will opt to make mid-year 

formulary changes. In reviewing the 

recent first time FDA generic equivalent 

approvals for 2018, 60 percent, or 37 

generic equivalent drugs are available 

by prescription and could potentially be 

found on an issuers’ formulary, 

resulting in a mid-year formulary 

change. If finalized as proposed, all 

enrollees would receive a notice 

regarding the mid-year formulary 

change. Finally, we estimate that 62 

percent of notices will be sent by mail 

and the remaining electronically. The 

cost to print and send the notice would 

include $0.05 per 1-page and $0.50 per 

notice to mail. The total cost of sending 

notices by mail would be approximately 

$15,481,400. 

Issuers would have two options to 

make formulary changes, therefore we 

have provided two notice cost estimates 

for removing a brand drug from the 

formulary and for changing the costsharing tier for a brand drug. 

Notice of Change: Removal of a Brand 

Drug From the Formulary 

A health insurance issuer would be 

required to provide a written notice 60 

days in advance. This notice would be 

required to identify the name of the 

brand drug that is the subject of the 

change, disclose whether the brand drug 

will be removed from the formulary or 

placed on a different cost-sharing tier, 

provide the name of the generic 

equivalent that will be made available, 

specify the date the changes will 

become effective, and state that under 

the appeals processes outlined in 

§ 147.136 or the exceptions processes 

outlined in § 156.122(c), enrollees and 

dependents may request and gain access 

to the brand drug when clinically 

appropriate and not otherwise covered 

by the health plan. Issuers also would 

be required to provide enrollees the 

option to request coverage for a brand 

drug that was removed from the 

formulary through the applicable 

coverage appeal process under § 147.136 

or the drug exception request process 

under § 156.122(c). Therefore, we 

estimate that a ‘‘Notice of Change: 

Removal of a brand drug from the 

formulary,’’ would require issuers 10 

hours of clerical labor (at a cost of 

$39.12 per hour) to prepare the custom 

notice using an existing standard notice 

or a standard notice provided by the 

issuer’s state. The cost to print and send 

the notice would include $0.05 per page 

and $0.50 to mail. It would take an 

estimated 2 hour for a senior manager 

(at a cost of $118.70 per hour) to review 

the notice template. We also estimate 

that it would take a computer 

programmer 10 hours (at a cost $84.16 

per hour) to write and test a program to 

automate the electronic notices. The 

total annual burden for each issuer to 

prepare the template would be 22 hours 

with an equivalent cost of 

approximately $1,470. For all 520 health 

insurance issuers, the total annual 

burden would be 11,440 hours with an 

equivalent cost of approximately 

$764,504. We assume that 

approximately half of the notices sent 

would be of this type, with a mailing 

cost of approximately $7,740,700. The 

total annual cost for all issuers would be 

approximately $8,505,204. 

Notice of Change: Change to CostSharing Tier for a Brand Drug 

A health insurance issuer would 

provide the notice 60-days prior to 

adding a generic equivalent to a 

formulary, and moving the equivalent 

brand name drug to a different costsharing tier. Therefore, we estimate that 

a ‘‘Notice of Change: Change to costsharing tier for a brand drug,’’ would 

require 6 hours of clerical labor (at a 


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294 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

151Activities related to the 2019 benefit year risk 

adjustment data validation generally begin in the 

second quarter of the 2020 calendar year. 

152As detailed in the above preamble, under this 

proposed approach, the sample size for very small 

issuers (those with below 3,000 enrollees calculated 

statewide based on the benefit year being validated) 

outside of 1.644 standard deviations from the mean 

of any HCC failure rate group, as well for issuers 

with HCC failure rates within 1.644 standard 

deviations of the mean for all HCC failure rate 

groups, would remain at 200 enrollees. 

cost of $39.12 per hour) to prepare the 

custom notice using an existing 

standard notice or a standard notice 

provided by the issuer’s state. The cost 

to print and send the notice would 

include $0.05 per 1-page and $0.50 per 

notice to mail. It would take an 

estimated 2 hours for a senior manager 

(at a cost of $118.70 per hour) to review 

the notice template. We also estimate 

that it would take a computer 

programmer 10 hours (at a cost $84.16 

per hour) to write and test a program to 

automate the electronic notices. The 

total annual burden for each issuer to 

prepare the template would be 18 hours 

with an equivalent cost of 

approximately $1,314. For all 520 health 

insurance issuers, the total annual 

burden would be 9,360 hours with an 

equivalent cost of approximately 

$683,134. We assume that 

approximately half of the notices sent 

would be of this type, with a mailing 

cost of approximately $7,740,700. The 

total annual cost for all issuers would be 

approximately $8,423,834. 

As a subset of this notice requirement, 

at § 156.122(d)(3) we propose that QHP 

issuers in the FFEs would be required 

to notify HHS annually in an HHSspecified format of any mid-year 

formulary changes made in the prior 

plan year consistent with the policy 

proposed at § 147.106(e) that would 

allow an issuer to make mid-year drug 

formulary changes. QHP issuers in the 

FFEs would be required to report the 

name of the drug being removed from 

the formulary, dosage, name of the 

generic equivalent, the Rx Norm 

Concept Unique Identifier (RxCUI) 

associated with the brand and generic 

drug, if the brand drug was moved to a 

higher cost sharing tier or removed from 

the formulary. Issuers would be 

required to submit the formulary 

changes in a template as specified by 

HHS. We estimate 66 QHP issuers (not 

including SADPs, but encompassing 

both individual and SHOP markets) will 

offer QHPs in an FFE and thus be 

subject to this requirement. The 

estimate of 66 is based on the number 

of issuers whose QHP issuers in an FFE, 

that appeared on HealthCare.gov in the 

2019 plan year. 

We estimate that it will take 42 hours 

per year for a QHP issuer in an FFE to 

meet this reporting requirement, which 

will occur annually. On average, we 

estimate that it will take an Information 

and Records Clerk 36 hours (at $39.12 

an hour), and a Senior Manager 6 hours 

(at $118.70 an hour) to fulfill these 

requirements. The total estimated 

annual burden is 42 hours with an 

equivalent cost of approximately $2,121 

per reporting entity. The aggregate 

annual burden for all issuers would be 

2,772 hours with an equivalent cost of 

approximately $139,954. 

TABLE 11—ESTIMATED ANNUALIZED BURDEN FOR NOTICES OF CHANGE FOR ALL HEALTH PLANS

Respondent Type of notice Number of 

respondents 

Number of 

notices per 

respondent 

Burden per 

notice 

(hours) 

Cost per 

notice 

Total burden 

for all 

respondents 

Total labor 

cost for all 

respondents 

Total cost 

(including 

mailing costs) 

for all 

respondents 

Health Insurance Issuer.Notice of Change: Removal of a brand drug 

from the formulary.

520 1 22 $1470.20 11,444 $764,504.00 $8,505,204 

Health Insurance Issuer.Notice of Change: Change 

to Cost-sharing tier for a 

brand drug.

520 1 18 1313.72 9,360 683,134.40 8,423,834 

Total ........ ........................................... 520 ........................ ........................ ........................ 20,804 1,447,638.40 ........................

TABLE 12—ESTIMATED ANNUALIZED BURDEN FOR MID-YEAR FORMULARY CHANGE REPORTING TO QHP FFE ISSUERS

Labor category Number of 

employees 

Hourly labor 

costs 

(hourly rate 

+ 35% fringe 

benefits) 

Burden hours Total burden 

costs 

Total burden 

cost 

(per year) 

Information and Records Clerk ............................................ 1 $39.12 36 $1,408.32 ........................

Senior Manager ................................................................... 1 118.70 6 712.20 ........................

Total per Issuer .................................................................... ........................ ........................ 42 2,120.52 ........................

Total for the 66 QHP FFE Issuers ....................................... ........................ ........................ ........................ ........................ $139,954.32 

C. ICRs Regarding Varying the Risk 

Adjustment Initial Validation Audit 

Sample Size (§ 153.630(b)) 

The current enrollee sample size 

selected for the risk adjustment initial 

validation audit is 200 enrollees for 

each issuer’s HIOS ID based on sample 

size precision analyses using data from 

the Medicare Advantage risk adjustment 

program. 

Beginning with the 2019 benefit year 

of risk adjustment data validation,151 we 

propose to vary the initial validation 

audit sample size, and one proposed 

approach would vary sample size based 

on issuer characteristics, such as issuer 

size, HCC failure rates, and sample 

precision. Larger initial validation audit 

samples could be required under our 

proposed approach; however, we 

believe that any increased burden 

would be outweighed by the increased 

precision of the risk adjustment data 

validation results which are used to 

adjust risk scores and associated risk 

adjustment transfers. 

The first proposed approach we are 

considering would recalculate adjusted 

sample sizes above the current baseline 

sample size of 200 only for larger and 

smaller issuers who are more than 1.644 

standard deviations away from the mean 

for any HCC failure rate group.152 This 

targeted sampling adjustment would 

ensure that all issuers outside or just 

inside of the HCC failure rate outlier 

threshold (1.96 standard deviations) 


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receive sample sizes that better meet our 

targeted precision, that issuers receiving 

error rates are in fact outliers, and that 

issuers that did not receive an error rate, 

but had higher than average HCC failure 

rates were not false negatives due to low 

precision in their sample. Issuers in this 

subset whose sample size does not meet 

the targeted precision would have their 

initial validation audit sample size 

adjusted to more closely achieve the 

targeted precision level. 

For smaller issuers (those with 

between 3,000 and 49,999 enrollees 

calculated statewide based on the 

benefit year being validated) with HCC 

failure rates above 1.644 standard 

deviations from the mean of any HCC 

failure rate group, and an assumed 

precision above the 10 percent target, 

we estimate approximate sample size 

ranges for issuer precision groups 

below: 

• Issuers with 10 percent precision or 

lower. 

++ 2019 approximate sample size: 200 

• Issuers with precision between 10 

percent and 20 percent. 

++ 2019 approximate sample size 

range: 250 to 350 

• Issuers with precision at 20 percent 

and above. 

++ 2019 approximate sample size 

range: 400 to 500 

For larger issuers (those with 50,000 

or more enrollees calculated statewide 

based on the benefit year being 

validated) with HCC failure rates above 

1.644 standard deviations of any mean 

HCC group failure rate, and an assumed 

precision above the 10 percent target, 

we estimate approximate sample size 

ranges for issuer precision groups 

below: 

• Issuers with 10 percent precision or 

lower. 

++ 2019 approximate sample size: 400 

• Issuers with precision between 10 

percent and 20 percent. 

++ 2019 approximate sample size 

range: 450 to 650 

• Issuers with precision at 20 percent 

and above. 

++ 2019 approximate sample size 

range: 700 to 800 

We estimate that approximately 70 of 

the 500 issuers expected to participate 

in risk adjustment data validation for 

the 2019 benefit year would be outside 

1.644 standard deviations from the 

mean HCC failure rate. Of those issuers, 

we estimate that approximately 30 

issuers would be smaller issuers, and 

approximately 40 issuers would have 

50,000 or more enrollees calculated 

statewide based on the benefit year 

being validated. Of the 30 smaller 

issuers, we estimate that approximately 

50 percent, or 15 issuers, would have 

sample precision that meets or is better 

than the target precision of 10 percent, 

and therefore would not have their 

sample sizes increased above the 

current 200 enrollee sample size. 

For our monetary and hourly burden 

estimates, we are incorporating labor 

and wage costs from the most recent 

premium stabilization programs PRA, 

‘‘Standards Related to Reinsurance, Risk 

Corridors, Risk Adjustment, and 

Payment Appeals’’ (CMS–1041/OMB 

control number 0938–1155). We are 

continuing to use the previously 

estimated annual hourly burden of 

approximately 740 hours and cost of 

$45,430 for each issuer with a 200 

enrollee sample. We estimate it will take 

1 Medical Records and Health 

Information Technician (at an hourly 

rate of $53.52) approximately 620 hours, 

1 compliance officer (at an hourly rate 

of $68.78) working 40 hours, and 2 

operations managers working 40 hours 

each for a total of 80 hours (at an hourly 

rate of $118.70), resulting in a combined 

total annual burden of 740 hours per 

issuer. We are using the same 

assumptions from the supporting 

statement to develop the below 

estimates, and are not changing burden 

estimates but are estimating the effect of 

changing sample sizes for affected 

issuers. Given that the total cost when 

the sample size is 200 enrollees is 

$45,430 per issuer, we estimate that 150 

additional enrollees per issuer over the 

200 baseline number, or a sample size 

of 350 enrollees per issuer, would result 

in an annual increased burden of 555 

hours, with an associated increase in 

cost of approximately $34,072, and 

therefore, the estimated total annual 

burden per issuer with a sample of 350 

enrollees would be 1,295 hours with an 

associated cost of approximately 

$79,502 under this proposed approach. 

We estimate that for the 15 smaller 

issuers with HCC failure rates above 

1.644 standard deviations of any mean 

HCC group failure rate we believe will 

face a sample size increase as a result of 

poor precision, an average sample size 

of approximately 350 enrollees would 

result in an estimated overall annual 

burden increase of 8,325 hours, with an 

approximate increase in cost of 

$511,083. 

We are proposing to increase 

minimum sample sizes from 200 to 400 

enrollees for all larger issuers (those 

with 50,000 or more enrollees 

calculated statewide based on the 

benefit year being validated) that are 

outside 1.644 standard deviations of the 

mean HCC failure rate. As noted above, 

we estimate that approximately 40 

larger issuers would have their sample 

sizes increased under this proposed 

approach. Of these 40 larger issuers, we 

estimate that approximately 35 would 

have good sample precision of 10 

percent or lower and samples of 400 

enrollees. Based on the assumptions 

above we estimate that a sample 

increase to 400 enrollees represents an 

annual increase of 740 hours and 

$45,430 for each issuer, resulting in a 

total annual burden of 1,480 hours and 

associated cost of $90,860 per issuer, 

and an aggregate burden increase of 

25,900 hours and a cost of $1,590,036 

for those 35 issuers. We further estimate 

that 5 of the 40 larger issuers would 

have poor sample precision under this 

proposed approach, with at least one of 

those issuers having a precision above 

20 percent, resulting in an average 

increased sample size for these issuers 

of approximately 500 enrollees. We 

estimate that the additional 300 

enrollees (added to the current 200 

enrollee sample size) would result in an 

additional annual burden of 1,110 hours 

and an associated cost of $68,144 for 

each issuer. Therefore, for 5 issuers, we 

estimate an overall annual increase in 

burden of 5,550 hours with an 

associated cost of $340,722. Therefore, 

for the approximately 55 issuers that 

would be impacted by the first proposed 

approach to modify the initial 

validation audit sample sizes, we 

estimate a total annual burden increase 

of approximately 39,775 hours, with an 

associated increase in cost of $2,441,841 

as a result of the proposed provision. 

Alternatively, we are also considering 

an approach that would adjust an 

issuer’s sample size based on issuer size 

only. Therefore, we are also estimating 

the burden associated with developing 

the sample size based on issuer size 

only in the following groupings 

calculated based on the issuer’s total 

number of enrollees in all risk pools 

receiving risk adjustment transfers 

(calculated statewide based on the 

benefit year being validated). Below, we 

estimate hours and costs per issuer 

based on the labor and wage costs from 

the most recent premium stabilization 

programs’ PRA, which estimated hourly 

burden of approximately 740 hours and 

cost of $45,430 per issuer with a 200 

enrollee sample: 

• Issuers with fewer than 51 enrollees 

(Note: These issuers would have no 

additional burden): 

++ 2019 sample size for issuers with 50 

enrollees or fewer: All enrollees 

(No more than 185 hours and 

$11,357.50 per issuer) 


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• Issuers with 51–3,000 enrollees 

(Note: These issuers would have no 

additional burden): 

++ 2019 approximate sample size for 

small issuers: 90 

(333 hours and $20,443.32 per issuer) 

An estimated annual burden decrease 

per issuer of: 407 hours and $24,986.28. 

• Issuers with 3,001–20,000 enrollees: 

++ 2019 approximate sample size for 

medium issuers: 250 

(925 hours and $56,787.00 per issuer) 

An estimated annual burden increase 

per issuer of: 185 hours and $11,357.40. 

• Issuers with 20,001–100,000 

enrollees: 

++ 2019 approximate sample size for 

large issuers: 400 

(1,480 hours and $90,860.00 per issuer) 

An estimated annual burden increase 

per issuer of 740 hours and $45,430. 

• Issuers with 100,001 enrollees and 

above: 

++ 2019 approximate sample size for 

extra-large issuers: 500 

(1,850 hours and $113,575.00 per issuer) 

An estimated annual burden increase 

per issuer of 1,110 hours and $68,145. 

If HHS were to finalize the proposal 

where any issuer can request larger 

sample sizes, the burden associated 

with that larger sample would align 

with the estimates set forth above, but 

would vary depending on the specific 

size that the issuer selects. For example, 

we estimate that a sample size of 

approximately 500 enrollees would 

require approximately 1,850 hours and 

cost approximately $113,574.00, 

including an annual additional burden 

of 1,110 hours and an associated cost 

increase of $68,144 per issuer. We 

assume that only larger issuers with 

more than 50,000 enrollees would 

choose to incur the additional burden 

required to elect to increase their 

sample size, and that 50 percent of the 

40 larger issuers (20 issuers) that are 

outside 1.644 standard deviations 

would voluntarily choose to increase 

their sample size. As stated above, the 

burden associated with this option 

would vary depending on the specific 

size that the issuer selects. For example, 

we estimate that a sample size of 500 

enrollees would require each issuer 

1,850 hours with an associated cost of 

$113,574, including an annual 

additional burden of 1,110 hours and 

associated cost increase of $68,144 per 

issuer. If we assume 20 issuers would 

choose this proposed method, we 

estimate a total burden of 22,200 hours 

and an associated cost of $1,362,888. 

We seek comment on this proposal and 

the estimated burdens discussed above. 

If we finalize any of the proposed 

approaches to varying initial validation 

audit sample sizes, we intend to amend 

the information collection currently 

approved under OMB control number 

0938–1155 (CMS–10401—Standards 

Related to Reinsurance, Risk Corridors, 

and Risk Adjustment) to account for this 

additional burden. 

D. ICRs Regarding Risk Adjustment Data 

Validation Exemptions (§ 153.630(g)) 

In proposed § 153.630(g)(3), we 

propose an exemption from risk 

adjustment data validation, beginning 

with the 2017 benefit year of risk 

adjustment data validation, if an issuer 

is in liquidation, or will enter 

liquidation no later than April 30th of 

the benefit year that is 2 benefit years 

after the benefit year being audited, 

provided that the issuer meets certain 

requirements. To qualify for this 

exemption, we propose that the issuer 

must provide to HHS, in a manner and 

timeframe to be specified by HHS, an 

attestation that the issuer will enter 

liquidation no later than April 30th of 

the benefit year that is 2 benefit years 

after the benefit year being audited that 

is signed by an individual who can 

legally and financially bind the issuer. 

Beginning with the 2018 benefit year 

data validation, we propose that, to 

qualify for an exemption, an issuer also 

could not have been a positive error rate 

outlier in the prior benefit year’s risk 

adjustment data validation. We 

anticipate that fewer than 10 issuers 

will submit this information to HHS 

annually. Under 5 CFR 1320.3(c)(4), this 

ICR would not be subject to the PRA, as 

it will affect fewer than 10 entities in a 

12-month period. 

We are also proposing to codify at 

§ 153.630(g)(1) and (2) two exemptions 

for certain issuers from risk adjustment 

data validation that were finalized in 

the 2018 and 2019 Payment Notices. 

The reduction in burden for issuers who 

meet the criteria to be exempted under 

proposed § 153.630(g)(1) and (2) was 

estimated in those rules and have been 

incorporated into OMB Control Number 

0938–1155 (CMS–10401—Standards 

Related to Reinsurance, Risk Corridors, 

and Risk Adjustment). Codifying these 

policies as part of HHS regulations as 

proposed in this rulemaking would not 

affect current burden estimates. 

E. ICRs Regarding Upload of Risk 

Adjustment Data (§§ 153.610, 153.710) 

We seek comment on extracting state 

and rating area data elements that 

issuers already submit to their EDGE 

servers beginning with the 2018 benefit 

year enrollee-level EDGE data. To 

extract these additional elements as part 

of the enrollee-level EDGE data, HHS 

would send a command to all issuers’ 

EDGE servers that issuers must execute. 

Because the additional data elements we 

solicit comment on extracting would not 

require issuers to collect or upload any 

additional data elements to their EDGE 

servers and would be added to the 

command execution for the enrolleelevel EDGE data finalized in the 2018 

Payment Notice, we do not believe it 

would impose any additional burden on 

issuers of risk adjustment covered plans 

described under the information 

collection currently approved under 

OMB Control Number 0938–1155 

(CMS–10401—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment). 

F. ICRs Regarding Agent or Broker 

Termination and Web Broker Data 

Collection (§ 155.220) 

At § 155.220(c)(3)(i)(D)(1), we are 

proposing to require web-brokers that 

would like assisters to be permitted to 

use their respective websites to display 

all QHP data provided by the Exchange, 

consistent with the requirements of 

§ 155.205(b)(1) and (c), including a 

standardized disclaimer provided by the 

Exchange if the web-broker website does 

not facilitate enrollment in all QHPs 

offered through the Exchange. The 

Exchange would provide the exact text 

for this disclaimer and the language 

would not need to be customized. The 

burden associated with this disclaimer 

is not subject to the Paperwork 

Reduction Act of 1995 in accordance 

with 5 CFR 1320.3(c)(2) because it does 

not contain a ‘‘collection of 

information’’ as defined in 44 U.S.C. 

3502(3). 

At § 155.220(c)(4)(i)(A), we propose to 

require web-brokers to provide HHS a 

list of agents or brokers that by contract 

or other arrangement use the webbroker’s website to assist consumers 

with QHP selection or completion of the 

Exchange eligibility application, in a 

form and manner to be specified by 

HHS. Currently, § 155.220(c)(4)(i)(A) 

requires the provision of this 

information if requested by HHS. The 

burden on a web-broker to comply with 

this requirement is covered by the 

information collection currently 

approved under OMB control number 

0938–1349 (CMS–10650—State 

Permissions for Enrollment in Qualified 

Health Plans in the Federally Facilitated 

Exchange & Non-Exchange Entities). 

At § 155.220(g)(3)(ii), we are 

proposing to allow HHS to immediately 

terminate an agent’s or broker’s 

agreement(s) with the FFEs for cause 

with notice if an agent or broker fails to 

comply with the requirement to 

maintain the appropriate licensure in 

every state in which the agent or broker 


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153Consumer submitted documents currently 

accepted by the FFE for purposes of demonstrating 

prior coverage and verifying attested income are 

available at https://www.healthcare.gov/help/provecoverage-loss/ and https://www.healthcare.gov/ 

verify-information/documents-and-deadlines/, 

respectively. 

154Although the Tax Cuts and Jobs Act reduces 

to $0 the individual shared responsibility payment 

for months beginning after December 31, 2018, 

individuals may still have a need to seek a hardship 

exemption for 2019 and future years due to a lack 

of affordable coverage based on projected income. 

155HHS processes exemptions for all SBEs except 

Connecticut. 

actively assists consumers with 

enrolling in QHPs on the Exchange. An 

agent or broker whose agreement(s) with 

the FFEs are immediately terminated for 

cause under the new proposed 

paragraph (g)(3)(ii) would be able to 

request reconsideration under 

§ 155.220(h). Although the process to 

request reconsideration imposes a small 

burden on agents or brokers subjected to 

terminations, we anticipate fewer than 

10 terminations annually under this 

new authority. Under 5 CFR 

1320.3(c)(4), this ICR would not be 

subject to the PRA as we anticipate it 

would affect fewer than 10 entities in a 

12-month period. 

At § 155.220(m)(3), we are proposing 

that the Exchange may collect from a 

web-broker during its registration with 

the Exchange under § 155.220(d)(1) or at 

another time on an annual basis, in a 

form and manner specified by HHS, 

information sufficient to identify the 

individuals who comprise the entity’s 

corporate leadership or ownership, as 

well as any corporate or business 

relationships with other entities that 

may seek to register with the FFE as a 

web-broker. We believe the burden on a 

web-broker to comply with these 

requirements is covered by the 

information collection currently 

approved under OMB control number 

0938–1349 (CMS–10650—State 

Permissions for Enrollment in Qualified 

Health Plans in the Federally Facilitated 

Exchange & Non-Exchange Entities). In 

the supporting statement for that 

information collection, we stated webbrokers will also be required to provide 

other documentation as requested in 

response to emerging compliance issues, 

for HHS to monitor compliance. The 

information we are proposing to collect 

based on proposed § 155.220(m)(3) is 

the type of information we anticipated 

when we referenced other 

documentation in response to emerging 

compliance issues. 

G. ICRs Regarding Direct Enrollment 

Entity Standardized Disclaimer 

(§ 155.221) 

At § 155.221(b)(2), we are proposing 

to require direct enrollment entities 

(both QHP issuers and web-brokers) to 

prominently display a standardized 

disclaimer, in the form and manner 

provided by HHS, to assist consumers in 

distinguishing between direct 

enrollment entity website pages that 

display QHPs and those that display 

non-QHPs during a single shopping 

experience. HHS would provide the 

exact text for this disclaimer and the 

language would not need to be 

customized. The burden associated with 

this disclaimer is not subject to the 

Paperwork Reduction Act of 1995 in 

accordance with 5 CFR 1320.3(c)(2) 

because it does not contain a ‘‘collection 

of information’’ as defined in 44 U.S.C. 

3502(3). 

H. ICRs Regarding Special Enrollment 

Periods (§ 155.420) 

The proposed special enrollment 

period at § 155.420(d)(6)(v) would be 

subject to pre-enrollment verification of 

eligibility for the FFEs. Where possible, 

the FFE makes every effort to verify an 

individual’s eligibility for the applicable 

special enrollment period through 

automated electronic means instead of 

through an applicant’s submission of 

documentation. Consistent with other 

special enrollment periods subject to 

pre-enrollment verification, individuals 

would be required to provide 

supporting documentation 153 within 30 

days of plan selection. 

We estimate an additional 4,700 

consumers would submit documents 

annually to verify their eligibility to 

enroll through the proposed special 

enrollment period in the FFE, and that 

a consumer would, on average, spend 

approximately 1 hour gathering and 

submitting required documentation. 

Using the average hourly wage for all 

occupations (at an hourly rate of 

$48.68), we estimate the opportunity 

cost to a consumer completing this task 

to be approximately $48.68. We estimate 

the total annual burden on those 

consumers submitting documentation 

would be approximately 4,700 hours 

with an equivalent cost of 

approximately $228,796. 

We are revising the information 

collection currently approved under 

OMB control number 0938–1207 (CMS– 

10468—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) to account for this 

additional burden. SBEs that choose to 

operationalize the proposed special 

enrollment period are encouraged to 

follow the same approach for preenrollment verification of special 

enrollment period eligibility. We invite 

comments regarding the number of State 

Exchanges that anticipate adopting this 

approach. 

I. ICRs Regarding Eligibility Standards 

for Exemptions (§ 155.605) 

We do not anticipate that the 

proposed amendment to § 155.605(e) 

would create additional costs on, or 

burdens to, the Exchanges. We 

anticipate it would decrease burden on 

those consumers who, when applying 

for a hardship exemption, choose to 

apply for the exemption through the 

IRS, saving them approximately 16 

minutes since they would not be 

required to complete the exemption 

application or submit supporting 

documentation. HHS will continue to 

process exemptions under current 

regulations for all SBEs that elect this 

option, and anticipate a decrease in 

volume. 

Based on historical data of the 

exemptions program and anticipating a 

decrease in individuals applying for 

exemptions as a result of the Tax Cuts 

and Jobs Act that reduced to $0 the 

individual shared responsibility 

payment for months beginning after 

December 31, 2018, we estimate that 

approximately 50,000 individuals 

would apply for a hardship exemption 

annually through the FFE.154 We expect 

60 percent of those individuals would 

apply for a hardship exemption through 

IRS for 2018, totaling 30,000 requests. 

We estimate that the annual reduction 

in burden for the expected 30,000 

hardship exemptions through the IRS 

for 2018 would be approximately 8,100 

hours. Using the average hourly wage 

for all occupations (at an hourly rate of 

$48.68 per hour) we estimate that the 

annual reduction in cost for each 

consumer would be approximately $13, 

and the annual cost reduction for all 

consumers applying for hardship 

exemptions through the IRS for 2018 

would be approximately $394,308. 

We anticipate the burden would also 

be reduced for those consumers who 

currently apply through Connecticut.155

Based on the population of Connecticut, 

we expect 330 consumers from that state 

will apply for a hardship exemption 

through the IRS for 2018, as opposed to 

through the state. We estimate that the 

annual reduction in burden for the 330 

hardship exemptions through the IRS 

would be approximately 89 hours. 

Using the average hourly wage for all 

occupations (at an hourly rate of $48.68 

per hour) we estimate the annual 

reduction in cost for each consumer 


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298 Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 

156Adoption of the Methodology for the HHSOperated Permanent Risk Adjustment Program 

Under the Patient Protection and Affordable Care 

Act for the 2017 Benefit Year, Final Rule, 83 FR 

36456 (July 30, 2018) and Patient Protection and 

Affordable Care Act; Adoption of the Methodology 

for the HHS-Operated Permanent Risk Adjustment 

Program for the 2018 Benefit Year, Final Rule, 83 

FR 63419 (Dec. 10, 2018). 

would be approximately $13, and the 

annual cost reduction for all consumers 

in Connecticut applying for a hardship 

exemption through IRS for 2018 would 

be approximately $4,337. 

J. Summary of Annual Burden Estimates 

for Proposed Requirements 

TABLE 13—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation section(s) 

OMB 

control 

number 

Respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting 

($) 

Total cost 

($) 

147.106(e)(5)(i)(A) ....... 0938–NEW .... * 520 22,700,000 22 11,444 $66.83 $8,505,204 

147.106(e)(5)(i)(B) ....... 0938–NEW .... * 520 22,700,000 18 9,360 72.98 8,423,834 

156.122(d)(3) ............... 0938–NEW .... 66 66 42 2,772 50.49 139,954 

153.630(b) .................... 0938–1155 ..... 55 55 723 39,775 68.78 2,441,841 

155.420 ........................ 0938–1207 ..... 4,700 4,700 1 4,700 48.68 228,796 

Total ...................... ........................ 5,341 45,404,821 ........................ 68,051 ........................ 19,739,629 

* Denotes the same entities. For purposes of calculating the total, this value is used only once. 

** There are no capital/maintenance costs associated with the information collection requirements contained in this rule; therefore, we have removed the associated column from Table 13. 

K. Submission of PRA-Related 

Comments 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the rule’s information collection and 

recordkeeping requirements. These 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed collections discussed above, 

please visit CMS’s website at 

www.cms.hhs.gov/ 

PaperworkReductionActof1995, or call 

the Reports Clearance Office at 410– 

786–1326. 

We invite public comments on these 

potential information collection 

requirements. If you wish to comment, 

please submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule 

and identify the rule (CMS–9926–P), the 

ICR’s CFR citation, CMS ID number, and 

OMB control number. 

ICR-related comments are due March 

25, 2019. 

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 proposed rule, and, when we 

proceed with a subsequent document, 

we will respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Analysis 

A. Statement of Need 

This rule proposes standards related 

to the risk adjustment program for the 

2020 benefit year, clarifications and 

improvements to the risk adjustment 

data validation program, as well as 

certain modifications that will promote 

transparency, innovation in the private 

sector, reduce burden on stakeholders, 

and improve program integrity. The 

Premium Stabilization Rule, previous 

Payment Notices, and recently released 

final 156 rules provided details on the 

implementation of the risk adjustment 

program, including the specific 

parameters applicable for the 2014, 

2015, 2016, 2017, 2018, and 2019 

benefit years. This rule proposes 

additional standards related to mid-year 

formulary changes, essential health 

benefits; cost-sharing parameters; the 

Exchanges, including exemptions, 

eligibility and enrollment; calculation of 

the premium adjustment percentage; 

and FFE and SBE–FP user fees. The rule 

also proposes that QHP issuers that elect 

to offer coverage for non-Hyde abortion 

services in QHPs offered on the 

Exchanges must also offer at least one 

otherwise identical QHP that does not 

offer non-Hyde abortion coverage 

throughout each service area that the 

QHP issuer offers plans covering nonHyde abortion services, to the extent 

permissible under state law. 

B. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995, Pub. L. 104–4), Executive 

Order 13132 on Federalism (August 4, 

1999), the Congressional Review Act (5 

U.S.C. 804(2)), and Executive Order 

13771 on Reducing Regulation and 

Controlling Regulatory Costs (January 

30, 2017). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for rules with economically 

significant effects ($100 million or more 

in any 1 year). 

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule: (1) Having an annual effect on the 

economy of $100 million or more in any 

1 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 loan programs or the rights and 

obligations of recipients thereof; or (4) 


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157As noted earlier in this proposed rule, no state 

has elected to operate the risk adjustment program 

for the 2020 benefit year; therefore, HHS will operate the program for all 50 states and the District 

of Columbia. 

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 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 OMB. HHS has concluded 

that this rule is likely to have economic 

impacts of $100 million or more in at 

least 1 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 rule. In accordance 

with the provisions of Executive Order 

12866, this regulation was reviewed by 

the Office of Management and Budget. 

The provisions in this proposed rule 

aim to ensure taxpayer money is more 

appropriately spent and that states have 

additional flexibility and control over 

their insurance markets. They would 

reduce regulatory burden, reduce 

administrative costs for issuers and 

states, and would lower net premiums 

for consumers. Through the reduction in 

financial uncertainty for issuers and 

increased affordability for consumers, 

these provisions are expected to 

increase access to affordable health 

coverage. Although there is some 

uncertainty regarding the net effect on 

enrollment and premiums, we 

anticipate that the provisions of this 

proposed rule would help further HHS’s 

goal of ensuring that all consumers have 

access to quality, affordable health care; 

that markets are stable; and that 

Exchanges operate smoothly. 

We believe the proposal at 

§ 156.280(c)(3) requiring issuers of 

QHPs that provide coverage of certain 

abortions to provide at least one 

otherwise identical QHP that omits 

coverage of such abortion services in a 

separate QHP throughout each service 

area in the Exchange in which the QHP 

issuer offers plans covering non-Hyde 

abortion services, to the extent 

permissible under state law, would 

increase consumer choice by requiring 

certain QHP issuers to offer additional 

QHPs. This proposal would especially 

benefit those consumers who have 

religious or conscience objections to 

abortion by providing them the option 

to choose a compatible plan without 

non-Hyde abortion coverage. However, 

we understand that this proposal may 

also potentially reduce the availability 

of non-Hyde abortion coverage in 

insurance, thereby increasing out-ofpocket costs for some women seeking 

those services. The proposal may also 

increase costs and regulatory and 

administrative burdens for certain QHP 

issuers and states, and could result in 

increased costs for some consumers. 

However, we believe that the need to 

promote consumer choice and 

enrollment offsets such burdens. 

HHS anticipates that the provisions of 

this proposed rule will help further the 

HHS’s goal of ensuring that all 

consumers have access to quality and 

affordable health care and are able to 

make informed choices, that the 

insurance market offers choices, and 

that states have more control and 

flexibility over the operation and 

establishment of Exchanges. Affected 

entities such as direct enrollment 

entities, and QHP issuers would incur 

costs to comply with the proposed new 

provisions, for example, those related to 

direct enrollment; and states would 

incur costs if they choose to implement 

the proposed special enrollment period. 

In accordance with Executive Order 

12866, HHS believes that the benefits of 

this regulatory action justify the costs. 

C. Impact Estimates of the Payment 

Notice Provisions and Accounting Table 

In accordance with OMB Circular 

A–4, Table 14 depicts an accounting 

statement summarizing HHS’s 

assessment of the benefits, costs, and 

transfers associated with this regulatory 

action. 

This proposed rule implements 

standards for programs that will have 

numerous effects, including providing 

consumers with access to affordable 

health insurance coverage, reducing the 

impact of adverse selection, and 

stabilizing premiums in the individual 

and small group health insurance 

markets and in an Exchange. We are 

unable to quantify all benefits and costs 

of this proposed rule. The effects in 

Table 14 reflect qualitative impacts and 

estimated direct monetary costs and 

transfers resulting from the provisions 

of this proposed rule for health 

insurance issuers and consumers. The 

annualized monetized costs described 

in Table 14 reflect direct administrative 

costs and savings to health insurance 

issuers and consumers as a result of the 

proposed provisions regarding special 

enrollment periods, use of direct 

enrollment entity application assisters 

to carry out responsibilities currently 

performed by agents or brokers, and 

applying for hardships exemptions. The 

annual monetized transfers described in 

Table 14 include changes to costs 

associated with the risk adjustment user 

fee paid to HHS by issuers and the 

potential increase in PTC for those 

qualifying individuals that use the new 

SEP. We are proposing the risk 

adjustment user fee of $2.16 per billable 

member per year for the 2020 benefit 

year to operate the risk adjustment 

program on behalf of states,157 which 

we estimate to cost approximately $50 

million in benefit year 2020. We expect 

risk adjustment user fee transfers from 

issuers to the federal government to 

increase by $10 million, compared to 

the $40 million estimated for the 2019 

benefit year; this increase is included in 

Table 14. Additionally, we are 

proposing a lower FFE user fee rate of 

3.0 percent for the 2020 benefit year, 

which is lower than the 3.5 percent FFE 

user fee rate finalized for 2014 to 2019 

benefit years. We also propose to lower 

SBE–FP user fee rate to 2.5 percent for 

the 2020 benefit year from the 3.0 

percent SBE–FP user fee rate we 

finalized for the 2019 benefit year. We 

do not expect this change in the SBE– 

FP user fee rate to alter transfers 

previously estimated from the FFE and 

SBE–FP issuers. We are estimating FFE 

and SBE–FP user fee transfers similar to 

those estimated for prior benefit years, 

and therefore, there would be no 

changes to transfers from issuers to the 

federal government due to the proposed 

lower FFE and SBE–FP user fee rates. 

Also, we propose a change to the 

premium measure we use to calculate 

the premium adjustment percentage, 

which would result in a proposed 

premium adjustment percentage of 

1.2969721275 percent for the 2020 

benefit year. 

TABLE 14—ACCOUNTING TABLE

Benefits 

Qualitative: 

• Greater market stability resulting from updates to the risk adjustment methodology. 


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TABLE 14—ACCOUNTING TABLE—Continued 

• Potential increased enrollment in the individual market stemming from lower premiums due to proposed expansion of direct enrollment 

opportunities, leading to improved access to health care for the previously uninsured, especially individuals with medical conditions, 

which will result in improved health and protection from the risk of catastrophic medical expenditures. 

• Greater continuity of coverage for consumers related to the proposed special enrollment period. 

• Reduced Navigator training compliance burden and increased flexibility in training design for Exchanges by streamlining the existing 

training topics into four broad categories. 

• Reduced burden to FFE Navigators by making the duties listed at § 155.210(e)(9) permissible for FFE Navigators, not required. 

• Strengthened program integrity related to the proposals regarding agents and brokers and direct enrollment entities, as well as from the 

proposed sampling changes for the risk adjustment data validation program. 

• Reduction in burden associated with risk adjustment data validation for issuers eligible for the proposed liquidation exemption. 

• Potential reduction in economic distortions, and improvement in economic efficiency as a result of the reduction in Exchange enrollment 

due to the change in the method of calculating the premium adjustment percentage. 

Costs Estimate 

(million) 

Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

Annualized Monetized ($/year) ........................................................................ $1.57 2018 7 2019–2023 

1.84 2018 3 2019–2023 

Quantitative: 

• Costs incurred by issuers and consumers to comply with provisions in the proposed rule related to mid-year formulary changes, varying 

the risk adjustment initial validation audit sample size, and special enrollment periods. 

• Reduction in burden and costs for consumers applying for hardship exemptions through IRS. 

• Reduction in burden and cost for direct enrollment entities that choose to use direct enrollment entity application assisters to carry out responsibilities currently performed by agents or brokers. 

• Regulatory familiarization costs. 

Qualitative: 

• Costs to issuers due to increases in providing medical services if health insurance enrollment increases. 

• Potential costs to Exchanges that opt to implement special enrollment period for qualified individuals who experience a decrease in 

household income and are newly determined eligible for APTC, and to issuers for processing related enrollments and terminations. 

• Costs to health insurance issuers for implementing risk adjustment data validation to ensure the integrity of the risk adjustment transfers. 

Transfers Estimate 

(million) 

Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

Federal Annualized Monetized ($/year) ........................................................... $828.3 2018 7 2019–2023 

848.4 2018 3 2019–2023 

Quantitative: 

• Transfer from health insurance issuers to the federal government of $50 million as risk adjustment user fees for 2023 (the amount will increase by $10 million from that previously estimated for 2020–2022). 

• Transfer from federal government of $15.3 million in premium tax credits to consumers enrolling through proposed special enrollment period. 

• Health Insurance Providers Fees of approximately $100 million in 2023, which is a transfer from issuers to the federal government, and 

Employer Shared Responsibility Payments of $100 million per year between 2020 and 2023, which is a transfer from employers to the 

federal government. 

• Reductions in federal premium tax credit spending of approximately $900 million in 2020 and 2021, and $1 billion in 2022 and 2023, 

which is a transfer from consumers to the federal government. 

• Between 2020 and 2023, net premium increases of approximately 1 percent or $181 million in additional net premiums per year, which is 

a transfer from consumers and the federal government to issuers. 

Qualitative: 

• The net effects on premiums based on proposed changes at § 156.130(h) is uncertain. 

• Potential increase in federal and state uncompensated care costs as a result of lower Exchange enrollment due to the change in the 

method of calculating the premium adjustment percentage. 

This RIA expands upon the impact 

analyses of previous rules and utilizes 

the Congressional Budget Office’s (CBO) 

analysis of the PPACA’s impact on 

federal spending, revenue collection, 

and insurance enrollment. The PPACA 

transitional reinsurance and temporary 

risk corridors programs ended after the 

2016 benefit year. Therefore, the costs 

associated with those programs are not 

included in Tables 14 or 15 for fiscal 

years 2020–2023. Table 15 summarizes 

the effects of the risk adjustment 

program on the federal budget from 

fiscal years 2019 through 2023, with the 

additional, societal effects of this 

proposed rule discussed in this RIA. We 

do not expect the provisions of this 

proposed rule to significantly alter 

CBO’s estimates of the budget impact of 

the risk adjustment program that is 

described in Table 15. We note that 

transfers associated with the risk 

adjustment program were previously 

estimated in the Premium Stabilization 

Rule; therefore, to avoid doublecounting, we do not include them in the 

accounting statement for this proposed 

rule (Table 14). 

In addition to utilizing CBO 

projections, HHS conducted an internal 

analysis of the effects of its regulations 

on enrollment and premiums. Based on 

this internal analysis, we anticipate that 

the quantitative effects of the provisions 

proposed in this rule are consistent with 

our previous estimates in the 2019 

Payment Notice for the impacts 

associated with the APTC, the premium 

stabilization programs, and FFE user fee 

requirements. 


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Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 301 

158Activities related to the 2019 benefit year risk 

adjustment data validation will generally begin in 

the second quarter of the 2020 calendar year. 

TABLE 15—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT PROGRAMS FROM

FISCAL YEAR 2019–2023, IN BILLIONS OF DOLLARS

Year 2019 2020 2021 2022 2023 2019–2023 

Risk Adjustment Program Payments ............................... 5 6 6 6 7 30 

Risk Adjustment Program Collections * ........................... 5 6 6 7 7 31 

Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipts will fully offset payments over time. 

Note 2: The CBO score reflects an additional $1 million in payments in FY 2018 that are collected in prior fiscal years. CBO does not expect a 

shortfall in these programs. 

Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2018 to 2028 Table 2. May 

2018. Available at https://www.cbo.gov/system/files?file=2018-06/51298-2018-05-healthinsurance.pdf. 

1. Guaranteed Renewability of Coverage 

(Parts 146, 147, and 148) 

In §§ 146.152, 147.106, and 148.122, 

we propose to allow issuers to make 

certain mid-year formulary changes in 

an effort to optimize the use of new 

generic drugs as they become available. 

At §§ 146.152(f)(5), 147.106(e)(5), and 

148.122(g)(5), we propose to allow 

issuers, subject to applicable state law, 

to remove the brand name drug from the 

formulary or move it to a higher costsharing tier when a generic equivalent 

becomes available and is added to the 

formulary. In the Collection of 

Information section of this proposed 

rule, we estimate the cost to issuers to 

provide the related notices. We believe 

that allowing issuers to make mid-year 

formulary changes will result in curbing 

the cost of prescription drug coverage. 

2. Risk Adjustment 

The risk adjustment program is a 

permanent program created by section 

1343 of the PPACA that transfers funds 

from issuers with lower-than-average 

risk populations to issuers with higherthan-average risk populations in the 

individual, small group and merged 

markets, (as applicable) inside and 

outside the Exchanges. We established 

standards for the administration of the 

risk adjustment program in subparts A, 

B, D, G, and H of 45 CFR part 153. 

A state approved or conditionally 

approved by the Secretary to operate an 

Exchange may establish a risk 

adjustment program, or have HHS do so 

on its behalf. Consistent with 45 CFR 

153.610(f), if HHS operates risk 

adjustment on behalf of a state, it will 

fund its risk adjustment program 

operations by assessing a risk 

adjustment user fee on issuers of risk 

adjustment covered plans. For the 2020 

benefit year, we estimate that the total 

cost for HHS to operate the risk 

adjustment program on behalf of all 

states would be approximately $50 

million, and that the risk adjustment 

user fee would be approximately $2.16 

per billable member per year. The 

updated cost estimates attribute all costs 

related to the EDGE server data 

collection and data evaluation (quantity 

and quality evaluations) activities to 

risk adjustment alone rather than 

sharing them with the reinsurance 

program, which is no longer 

operational. Previously, we had 

collected amounts for reinsurance 

administrative expenses which would 

partially fund contracts that were used 

for both the risk adjustment and 

reinsurance programs. Now, those costs 

are borne by the risk adjustment 

program alone. Additionally, based on 

experience with the risk adjustment 

data validation program development 

and execution, including development 

of the new risk adjustment data 

validation audit tool and additional 

contractor support for processing risk 

adjustment data validation 

discrepancies and appeals, we estimate 

higher costs associated with the risk 

adjustment data validation program. 

Finally, we are incorporating the full 

amount of eligible personnel and 

administrative costs associated with risk 

adjustment program development and 

operations, including indirect costs, in 

the risk adjustment user fee for the 2020 

benefit year. The personnel and 

administrative costs included in the 

calculation of the 2019 benefit year risk 

adjustment user fees in the 2019 

Payment Notice final rule incorporated 

only a portion of the eligible personnel 

costs, and excluded indirect costs. 

Finally, we estimated similar billable 

member month enrollment for the 2020 

benefit year as the most recent 2017 

benefit year individual and small group 

market enrollment. 

We believe that the proposed 

approach of blending the coefficients 

calculated from the 2016 and 2017 

benefit year enrollee-level EDGE data 

with the 2017 MarketScan® data would 

provide stability within the risk 

adjustment program and minimize 

volatility in changes to risk scores from 

the 2019 benefit year to the 2020 benefit 

year due to differences in the datasets’ 

underlying populations. We solicit 

comment on extracting state and rating 

area information that issuers already 

collect and upload to the EDGE servers. 

We believe these geographic data 

elements could better inform 

recalibration of the HHS-operated risk 

adjustment program, the AV Calculator 

and methodology, and other HHS 

programs for the individual and small 

group markets, as well as provide more 

useful information to researchers or 

other qualified requestors as to the state 

of the individual, small group and 

merged markets if included as part of 

the proposed EDGE enrollee-level 

limited data set. Furthermore, we 

propose to use the enrollee-level EDGE 

dataset and reports extracted from issuer 

EDGE servers to calibrate and 

operationalize HHS programs for the 

individual and small group (including 

merged) market programs, as well as to 

more broadly conduct policy analysis 

for the individual and small group 

(including merged) markets. 

3. Risk Adjustment Data Validation 

(§ 153.630) 

Under § 153.630, we are proposing 

several changes to the requirements for 

risk adjustment data validation. 

Beginning with the 2019 benefit year of 

risk adjustment data validation,158 we 

propose to vary the initial validation 

audit sample size based on HCC failure 

rates, sampled precision, and issuer 

size. We also outline an alternative 

proposal that would vary sample size by 

issuer size only, and we are considering 

permitting issuers of any size and with 

any HCC failure rate to request a larger 

sample size. 

In the Collection of Information 

section of this proposed rule, we 

estimate the increase in administrative 

burden that could result from all of the 

approaches under consideration to vary 

the initial validation audit sample size. 

We note that, in certain cases, while the 

administrative burden would increase 

as an issuer’s sample size increases, we 

believe that any increase in sample sizes 

would produce more precise risk 

adjustment data validation results 

which are used to adjust risk scores and 


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159 45 CFR 153.630(b)(7)(iii) states that the risk 

score of each enrollee in the sample must be 

validated by, beginning with the 2018 benefit year, 

validating enrollee health status through review of 

all relevant paid pharmacy claims. Under the 2018 

Payment Notice (81 FR 94058 to 94105), we 

previously revised the estimated burden for 

reviewing and validating pharmacy claims for risk 

adjustment data validation. 

associated risk adjustment transfers. 

While this could affect the data 

validation adjustments to risk 

adjustment transfers for an individual 

issuer, we do not expect an impact on 

aggregate risk adjustment transfer 

adjustments based on HCC failure rates 

as a result of the proposed modifications 

to the initial validation audit sample 

size methodology. 

Because issuers are already required 

to provide the initial and second 

validation audit entities with all 

documentation necessary to complete 

the audits, the proposed changes to the 

pairwise means test that would increase 

the second validation audit sample to 

the full 200 enrollee sample size in 

certain cases would not increase burden 

on issuers, as the second validation 

audit is conducted by HHS, not issuers. 

Instead, we believe that increasing the 

second validation audit sample size to 

the full initial validation sample of 200 

enrollees, in certain cases, may increase 

the costs to the federal government of 

conducting the second validation audit, 

but we also believe that the benefits 

from improving the process for 

validating the second validation audit 

results and the accompanying precision 

it would bring to risk score error rate 

adjustments would outweigh the 

increased costs to the federal 

government and better ensure the 

integrity of the risk adjustment program. 

We believe that incorporating 

prescription drug categories in the error 

estimation methodology for risk 

adjustment data validation would add 

complexity, but revising this calculation 

would align risk adjustment data 

validation with the accompanying risk 

adjustment program requirements, as 

the HHS-operated risk adjustment 

methodology started incorporating 

prescription drug factors beginning with 

the 2018 benefit year. The purpose of 

this proposed alignment would be to 

ensure that prescription drugs are being 

validated as part of risk adjustment data 

validation process. Because HHS 

calculates issuers’ error rates, issuers 

will not incur additional expenses as a 

result of revisions to the error 

estimation calculation,159 but HHS and 

its second validation auditor will incur 

expenses to update its methodology and 

its calculation and make the necessary 

adjustments to systems to modify the 

procedures for calculating the error 

estimation. 

The exemptions in this proposed rule 

for risk adjustment data validation 

codify two policies finalized in the 2018 

and 2019 Payment Notices and also 

include one new proposed exemption 

policy for issuers in or entering 

liquidation. The impact of the 

previously finalized exemptions was 

addressed in the 2018 and 2019 

Payment Notices. We believe that the 

number of issuers that will qualify for 

the proposed exemption for issuers in 

liquidation will be very small each year, 

and therefore, we believe that the 

overall reduction in burden will be 

limited. However, those issuers that are 

exempted from risk adjustment data 

validation would have less burden and 

administrative costs than an issuer that 

is not exempt from these requirements. 

4. Ability of States To Permit Agents 

and Brokers To Assist Qualified 

Individuals, Qualified Employers, or 

Qualified Employees Enrolling in QHPs 

(§ 155.220) 

In § 155.220(c)(3)(i)(D)(1), we are 

proposing to require web-brokers that 

would like assisters to be permitted to 

use their non-Exchange websites when 

assisting with Exchange applications or 

QHP enrollments to display all QHP 

data provided by the Exchange 

consistent with the requirements of 

§ 155.205(b)(1) and (c). We are not 

proposing to require web-broker 

websites that assisters would be 

permitted to use to facilitate enrollment 

in all QHPs offered through the 

Exchange. However, web-broker 

websites that do not facilitate 

enrollment in all QHPs would be 

required to identify to consumers the 

QHPs, if any, for which the web-broker 

website does not facilitate enrollment by 

prominently displaying a standardized 

disclaimer, in the form and manner 

provided by the Exchange, stating that 

enrollment in such QHPs can be 

completed through the Exchange and 

providing a link to the Exchange. 

Consistent with the existing 

requirement at § 155.220(c)(i)(F), all 

web-brokers, including those that would 

like assisters to be permitted to use their 

non-Exchange websites, must provide 

consumers with the ability to withdraw 

from the entity’s non-Exchange website 

and use the Exchange at any time. We 

note that web-brokers may obtain all 

QHP information they would be 

required to display for assisters to be 

permitted to use their non-Exchange 

websites in FFEs and SBE–FPs by 

integrating with the FFEs’ Marketplace 

application programming interface 

(API). In combination with this 

proposal, we have proposed to reverse 

our prior policy prohibiting assisters 

from using web-broker websites to assist 

consumers in most circumstances. It is 

difficult to quantify the number of webbrokers that would modify their 

websites to permit assisters to use them 

or the number of assisters that would 

use web-broker websites. However, 

since both avenues are optional, we do 

not anticipate any negative impact on 

either community. Instead, we see this 

as increasing flexibility for both webbrokers and assisters, as well as creating 

the potential for new mechanisms for 

consumers to receive assistance with 

Exchange eligibility applications and 

QHP enrollments. 

In § 155.220(c)(3)(i), we propose at 

new paragraph (c)(3)(i)(L) to prohibit 

web-brokers from displaying QHP 

recommendations on their websites 

based on compensation received from 

QHP issuers. Web-brokers often collect 

certain information from consumers and 

on the basis of that information display 

or sort QHPs, or apply a score to all 

available QHPs, indicating which QHP 

they believe is the best option for those 

consumers. We support the 

development and use of innovative 

consumer-assistance tools that may help 

consumers select QHPs that best fit their 

needs. However, we believe such 

recommendations should be based on 

information consumers have provided 

to web-brokers and not based on 

compensation received from QHP 

issuers when consumers enroll in their 

plans. We are not aware of any webbrokers currently recommending QHPs 

based on compensation received from 

QHP issuers, so we expect the impact of 

this proposal to be very limited. This 

proposal also helps support the use of 

web-broker websites by FFE and SBE– 

FP assisters to ensure assisters can 

continue to meet their statutory and 

regulatory obligations. 

In § 155.220(c)(4)(i)(A), we propose to 

require web-brokers to provide HHS 

with a list of agents or brokers who, 

through a contract or other arrangement, 

use the web-brokers’ websites to assist 

consumers with QHP selection or 

completion of the Exchange eligibility 

application, in a form or manner to be 

specified by HHS. The authority 

currently exists for HHS to obtain this 

information by request. However, due to 

the trend of increased use and 

expansion of direct enrollment 

pathways, we believe it is appropriate to 

collect this information proactively, so 

that we may respond more efficiently 

and effectively to any potential 

instances of noncompliance that may 

involve agents or brokers using a webbroker’s direct enrollment pathway. 


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160 Direct enrollment operational readiness 

review requirements are currently captured at 45 

CFR 155.220(c)(3)(i)(K) for web-brokers and 

156.1230(b)(2) for QHP issuers. 

161See 45 CFR 156.1230(b)(2) for issuers 

participating in direct enrollment and 45 CFR 

155.220(c)(3)(i)(K) for web-brokers. 

Having this information will, for 

example, enable us to identify more 

quickly whether noncompliance is 

attributable to a specific individual or 

individuals, instead of the web-broker 

entity. We anticipate releasing guidance 

that would require the list to include, at 

minimum, each agent’s or broker’s 

name, state(s) of licensure, and National 

Producer Number. We believe the 

burden associated with this data 

collection will be relatively limited, as 

we understand that web-brokers collect 

and store this information as part of 

their normal business operations to 

identify individual agents or brokers 

utilizing their systems. The burden 

related to this provision is discussed 

previously in the Collection of 

Information Requirements section. 

In § 155.220(g)(3)(ii), we propose to 

allow HHS to immediately terminate an 

agent’s or broker’s agreement if the 

agent or broker fails to maintain 

applicable state licensure as an agent, 

broker, or insurance producer in every 

state in which the agent or broker 

actively assists consumers with 

applying for APTC or CSRs or with 

enrolling in QHPs through the FFEs or 

SBE–FPs. State licensure for agents and 

brokers in every state in which they are 

assisting consumers is a fundamental 

consumer protection and critical for 

program integrity. It has been a 

requirement in the FFE agreements with 

agents and brokers since the inception 

of the FFEs, and is adhered to by the 

overwhelming majority of agents and 

brokers. Therefore, we believe the 

impact of this provision on agents and 

brokers would be minimal, but the 

proposal would benefit consumers who 

might otherwise interact with 

unlicensed individuals and would 

improve Exchange program integrity. 

In § 155.220(k), we are proposing to 

add a new paragraph (k)(3) that would 

allow HHS to immediately suspend an 

agent’s or broker’s ability to transact 

information with the Exchange if HHS 

discovers circumstances that pose 

unacceptable risk to Exchange 

operations or Exchange information 

technology systems until the incident or 

breach is remedied or sufficiently 

mitigated to HHS’s satisfaction. This 

proposed language is identical to an 

existing provision intended to apply to 

web-brokers at § 155.220(c)(3)(i)(L) and 

a similar provision applicable to QHP 

issuers participating in direct 

enrollment at § 156.1230(b)(1). Those 

provisions are proposed to be replaced 

with a very similar new requirement 

that would apply to both types of direct 

enrollment entities in proposed 

§ 155.221(d). Because the potential risks 

posed by agents and brokers with access 

to FFE systems are similar to those 

posed by web-brokers and QHP issuers 

participating in direct enrollment, we 

believe this change is necessary to 

provide a uniform process and ability to 

protect Exchange systems and 

operations from unacceptable risks, as 

well as to protect sensitive consumer 

data. We note that agents and brokers 

whose ability to transact information 

with the Exchange is suspended under 

this proposed authority would remain 

registered and authorized to assist 

consumers using the Marketplace (or 

side-by-side) pathway, unless and until 

their agreements were suspended or 

terminated under § 155.220(f) or (g). We 

believe this proposed authority would 

be used infrequently and only in cases 

where there would likely be the 

reasonable basis to suspend their 

agreements under § 155.220(g)(5)(i) but 

there is a need to take immediate action 

to protect sensitive consumer data or 

Exchange systems and operations. 

Therefore its effect on agents and 

brokers is expected to be relatively 

limited. 

In § 155.220(m)(1), we propose to 

allow a web-broker’s agreement to be 

suspended or terminated for cause 

under § 155.220(g), and a web-broker to 

be denied the right to enter into 

agreements with the FFEs under 

paragraph (k)(1)(i) of this section based 

on the actions of its officers, employees, 

contractors, or agents, even if those 

persons are not agents or brokers 

registered with the FFE. In 

§ 155.220(m)(2), we propose to allow a 

web-broker’s agreement to be suspended 

or terminated under § 155.220(g), and 

for the entity to be denied the right to 

enter into agreements with the FFEs 

under § 155.220(k)(1)(i), if it is under 

the common ownership or control, or is 

an affiliated business, of another webbroker that has had its agreement 

suspended or terminated for cause. We 

expect these provisions to have limited 

impact, as they are designed to protect 

program integrity and will only be 

utilized in limited cases when there is 

evidence of significant misconduct or 

non-compliance. In those cases, we 

anticipate benefits to consumers 

stemming from our enhanced ability to 

address program integrity concerns and 

non-compliance issues. In 

§ 155.220(m)(3), we propose to require 

the Exchange to collect information 

from a web-broker sufficient to establish 

the identities of individuals who 

comprise its corporate leadership and to 

determine any business relationships 

with other entities that may seek to 

register with the Exchange as webbrokers. These provisions are also 

intended to protect program integrity by 

enabling the Exchange to have 

information necessary to determine if 

any individuals seeking to be webbrokers are attempting to circumvent a 

previous termination or suspension for 

cause of an FFE agreement(s). The 

burden related to this provision is 

discussed previously in the Collection 

of Information Requirements section. 

5. Direct Enrollment (§§ 155.20, 

155.220, 155.221, 155.415, 156.1230) 

The proposed changes to § 155.220 

are discussed above. In § 155.221, we 

propose to amend and redesignate the 

existing paragraphs (a), (b) and (c) to 

new proposed paragraphs (e), (f), and 

(g). In proposed new § 155.220(e), we 

propose to add language to require that 

the third-party entities that conduct 

annual reviews of direct enrollment 

entities to demonstrate operational 

readiness consistent with newly 

proposed § 155.221(b)(4) 160 be 

independent of the entities they are 

auditing. We are proposing this change 

because we believe an independent 

audit is less likely to be influenced by 

a direct enrollment entity’s business 

considerations and therefore is more 

reliable. We expect no impact from this 

provision as it was included as a 

requirement in the agreements we 

executed with direct enrollment entities 

subject to these audits for plan year 

2019. We also propose to clarify in 

proposed § 155.221(e) that an initial 

audit is required, in addition to 

subsequent annual audits. This 

clarification does not represent a change 

from the current approach, as direct 

enrollment entities are currently 

required to demonstrate operational 

readiness before their websites may be 

used to complete QHP selections.161

Therefore we anticipate no impact of 

this proposed change. In proposed 

§ 155.221(f), we propose to require that 

a written agreement must be executed 

between a direct enrollment entity and 

its auditor stating that the auditor will 

comply with the requirements of 

paragraph (f). We are proposing this 

new requirement because we believe the 

most effective way to ensure a direct 

enrollment entity has the necessary 

control and oversight over its auditor to 

ensure compliance with the applicable 

standards in § 155.221 is for those 

standards to be memorialized in a 

written agreement. We expect most, if 


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162Bureau of Labor Statistics mean hourly wage 

for an Insurance Sales Agent (Occupational Code 

41–3021) at $32.21 an hour, plus 100 percent fringe. 

not all, direct enrollment entities 

already execute written agreements with 

their contractors that would incorporate 

any regulatory requirements that fall 

within the scope of the work the 

contractor is performing for the entity, 

so we expect little to no impact from 

this proposed change. 

In the new § 155.221(a), we propose to 

codify in regulation the types of entities 

the FFEs will permit to offer nonExchange websites to facilitate direct 

enrollment in coverage offered through 

the Exchange in a manner that is 

considered to be through the Exchange. 

There are two types of entities that are 

authorized by the FFEs to offer direct 

enrollment pathways: QHP issuers and 

web-brokers. We expect this provision 

to have little or no impact as QHP 

issuers and web-brokers are already 

authorized by the FFEs to participate in 

direct enrollment. 

In the new § 155.221(b), we propose 

to establish and consolidate certain 

requirements that apply to all direct 

enrollment entities. Specifically, we 

propose to add in § 155.221(b)(1) that 

QHPs and non-QHPs must be displayed 

and marketed on separate website pages 

on the direct enrollment entity’s nonExchange website. We consider this a 

clarification of existing standards that 

would have minimal impact on direct 

enrollment entities, and would 

minimize the chance that consumers are 

confused by the display or marketing of 

QHPs and non-QHPs on a single website 

page. In the new § 155.221(b)(2) we 

propose to require the prominent 

display of a standardized disclaimer in 

a form and manner provided by HHS. 

Similar uniform disclaimer 

requirements already exist for all direct 

enrollment entities. As a result, and 

because we will provide the disclaimer 

text, we expect the overall impact of this 

provision to be minimal. In the new 

§ 155.221(b)(3), we propose to limit the 

marketing of non-QHPs during the 

Exchange eligibility application and 

QHP selection process on direct 

enrollment entities’ websites in a 

manner that minimizes the likelihood 

that consumers will be confused as to 

what products are available through the 

Exchange and what products are not. 

This will also assist consumers in 

understanding the applicability of APTC 

and CSRs that they may be eligible for. 

Most direct enrollment entities have 

refrained from marketing non-QHPs in 

conjunction with QHPs citing a lack of 

clear guidance. Therefore we expect the 

impact of this provision to be minimal, 

and to be perceived as allowing 

increased flexibility. In the new 

§ 155.221(b)(4), we propose to 

consolidate a provision requiring direct 

enrollment entities demonstrate 

operational readiness and compliance 

with applicable requirements prior to 

the entities’ websites being used to 

complete an Exchange eligibility 

application or a QHP selection. Because 

this is an existing requirement, we 

expect no impact. 

In the new § 155.221(c), we propose 

that the authority to use application 

assisters and the corresponding 

requirements when doing so apply for 

all issuers and direct enrollment entities 

and not solely QHP issuers. We have 

proposed a new definition of ‘‘direct 

enrollment entity application assister’’ 

in § 155.20 that mirrors the existing 

definition of ‘‘issuer application 

assister’’, as well as amendments to 

§ 155.415 to capture the requirements 

for entities using application assisters 

that align with the existing requirements 

currently in § 156.1230(a)(2) for QHP 

issuer application assisters. We do 

propose one significant deviation from 

the existing requirements for 

application assisters. Currently, 

§ 156.1230(a)(2)(i) requires all 

application assisters to receive training 

on QHP options and insurance 

affordability programs, eligibility, and 

benefits rules and regulations. Licensed 

agents and brokers currently assisting 

consumers with QHP enrollment 

through the FFEs or SBE–FPs must have 

credentials to access FFE systems to 

offer that assistance. Those credentials 

are obtained during the FFE registration 

and training processes for agents and 

brokers. For application assisters to 

have similar access to FFE systems, so 

that they are also able to assist 

consumers as described here and in the 

preamble above, they would need 

credentials similar to those obtained by 

agents and brokers during FFE 

registration and training. Therefore, we 

propose to require that application 

assisters providing assistance in the 

FFEs and SBE–FPs comply with this 

training requirement by completing a 

similar registration and training process, 

in a form and manner to be specified by 

HHS, so that they would have the 

necessary credentials to provide 

consumer assistance. This proposed 

new training and registration 

requirement for application assisters is 

captured in the new proposed 

§ 155.415(b)(1). The burden placed on 

application assisters to complete the 

FFE training may exceed what may have 

otherwise existed if direct enrollment 

entities were developing and managing 

their own training programs. However, 

by requiring the FFE training to be 

completed by application assisters 

assisting consumers in the FFEs and 

SBE–FPs, it would relieve direct 

enrollment entities from the burdens 

associated with having to develop and 

manage their own training programs. 

Importantly, FFE systems would require 

this approach to comply with system 

security requirements and to enable 

application assisters to meaningfully be 

able to assist consumers in the FFEs and 

SBE–FPs. Therefore, taken together, we 

believe the net burden associated with 

this proposal would be minimal and 

would be acceptable to participating 

direct enrollment entities that elect to 

use application assisters, when 

permitted under state law. The reason 

we believe the net burden would be 

minimal is because the bulk of time 

associated with application assisters 

completing the training requirement 

would likely be comparable whether the 

training is developed and administered 

by direct enrollment entities or by HHS. 

However, there would likely be a small 

increase in the amount of time 

application assisters would have to 

devote to the registration process apart 

from training, specifically to creating an 

FFE account and completing identity 

proofing. In contrast, there would likely 

be a substantial reduction in burden on 

direct enrollment entities, because they 

would not have to develop and manage 

their own training programs. Instead 

they would be able to simply confirm 

their application assisters have 

completed the FFE registration and 

training process. 

We estimate allowing QHP issuers to 

use application assisters in the FFEs and 

SBE–FPs, and expanding that option to 

other issuers and web-brokers will 

provide cost savings to these entities. It 

is difficult to precisely estimate the 

number of applications for which a 

direct enrollment entity application 

assister provided help may be 

submitted. However, based on available 

data, we estimate that approximately 

980,000 agent or broker-assisted direct 

enrollment applications will be 

submitted in plan year 2019. We 

estimate that it would take an insurance 

sales agent 162 (at an hourly rate of 

$64.42) one hour to complete an 

application. We do not have information 

related to the number of states that 

would allow for unlicensed application 

assisters, as well as how many direct 

enrollment entities would hire 

application assisters or train existing 

staff as application assisters. Therefore, 

we estimate that half of assisted direct 

enrollment applications would be 

completed with the assistance of an 


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163Bureau of Labor Statistics mean hourly wage 

for an Insurance Claims and Policy Processing Clerk 

(Occupational Code 43–9041) at $19.76 an hour, 

plus 100 percent fringe. 

application assister instead of an agent 

or broker. Based on these assumptions, 

we estimate that it would take an 

insurance claims and policy processing 

clerk 163 (at an hourly rate of $39.52) one 

hour to complete each application. 

Thus, we estimate that the applications 

for 490,000 applicants would result in 

an estimated total burden of 

approximately 490,000 hours with an 

associated cost of approximately 

$19,364,800. If the applications are 

completed by an agent or broker instead, 

the total cost would be approximately 

$31,565,800. Based on these 

assumptions, we estimate an overall 

annual savings of approximately $12.2 

million for direct enrollment entities 

using application assisters instead of 

only agents or brokers. In addition, we 

expect that the time that agents or 

brokers may otherwise have spent 

assisting consumers with their 

eligibility applications would often 

instead be devoted to assisting more 

consumers with plan selection and 

finalizing their enrollments. As a result, 

we expect this policy may also result in 

an overall increase in enrollment 

through the FFEs and SBE–FPs. Lastly, 

these proposals provide increased 

flexibility and a level playing field to all 

direct enrollment entities and issuers. 

In the new § 155.221(d), we propose 

to consolidate existing authority to 

immediately suspend a direct 

enrollment entity’s ability to transact 

information with the Exchange if HHS 

discovers circumstances that pose 

unacceptable risk to the Exchange’s 

ability to make accurate eligibility 

determinations, or Exchange operations 

or systems until such circumstances are 

remedied or sufficiently mitigated to 

HHS’s satisfaction. We expect little or 

no impact from this proposal, since this 

is largely based on an existing authority. 

We also propose to codify new 

definitions for the following terms in 

§ 155.20: Direct enrollment entity, direct 

enrollment technology provider, and 

web-broker. We propose to define 

‘‘direct enrollment entity’’ as an entity 

that an Exchange permits to assist 

consumers with direct enrollment in 

QHPs offered through an Exchange in a 

manner considered to be through the 

Exchange as authorized by 

§§ 155.220(c)(3), 155.221, or 156.1230. 

We expect no impact from this proposal 

as it merely codifies a definition for the 

term in such a way that the entities that 

are currently authorized by the FFE to 

host a direct enrollment pathway are 

direct enrollment entities. We also 

propose to amend § 155.20 to define 

‘‘direct enrollment technology provider’’ 

as a type of web-broker business entity 

that is not a licensed agent, broker, or 

producer under state law and has been 

engaged or created by, or is owned by, 

an agent or broker, to provide 

technology services to facilitate 

participation in direct enrollment as a 

web-broker in accordance with 

§§ 155.220(c)(3) and 155.221. There may 

be instances when an individual agent 

or broker, a group of agents or brokers, 

or an agent or broker business entity 

engages the services of or creates a 

technology company that is not licensed 

as an agent or broker to assist with the 

development and maintenance of a nonExchange website that interfaces with 

an Exchange to assist consumers with 

direct enrollment in QHPs offered 

through the Exchanges as described in 

§§ 155.220(c)(3) and 155.221. In such 

cases, when the technology company is 

not itself licensed as an insurance 

agency or brokerage, we propose that 

these technology companies will be 

considered a type of web-broker that 

must comply with applicable webbroker requirements under §§ 155.220 

and 155.221, unless noted otherwise. 

We expect no new burden associated 

with this requirement as it merely 

allows some flexibility in terms of how 

licensed agents or brokers may organize 

their businesses or pursue business 

relationships when seeking to become 

web-brokers. We also propose to codify 

a definition of ‘‘web-broker’’ as an 

individual agent or broker, group of 

agents or brokers, or business entity 

registered with an Exchange under 

§ 155.220(d)(1) that develops and hosts 

a non-Exchange website that interfaces 

with an Exchange to assist consumers 

with direct enrollment in QHPs offered 

through the Exchanges as described in 

§§ 155.220(c)(3) and 155.221. As 

explained in the preamble, we also 

propose to define the term ‘‘web-broker’’ 

to generally include direct enrollment 

technology providers. Importantly, if 

this definition is finalized as proposed 

it would replace HHS’s current webbroker definition, which is slightly 

different. However, we expect no 

impact, because all existing web-brokers 

would fall within the new proposed 

definition of web-broker. 

Conforming edits are also proposed to 

§ 156.1230 as part of the effort to 

streamline and consolidate similar 

requirements that apply to all direct 

enrollment entities in one regulation. 

We propose to amend § 156.1230(b) to 

add a new paragraph (b)(1) that requires 

issuers participating in direct 

enrollment to comply with the 

applicable requirements in § 155.221. 

There were minimal substantive 

changes to the underlying requirements 

applicable to issuers participating in 

direct enrollment. We therefore expect 

no new impact to issuers except to the 

extent previously discussed. We also 

propose to delete and reserve 

§ 156.1230(a)(2) to align with the 

changes, described above, to § 155.415 

regarding application assisters. 

6. Consumer Assistance Tools and 

Programs of an Exchange (§ 155.205) 

Since implementing the direct-toissuer enrollment system in plan year 

2018, we have seen a marked decrease 

(greater than fifty percent (50 percent) in 

SHOP Call Center volume of calls. We 

anticipate that the SHOP Call Center 

volume would continue to decrease in 

plan year 2020, as employers would be 

in the third year of enrolling with 

issuers, often with the assistance of 

agents and brokers. In addition, agents 

and brokers and small employers can 

now resolve most issues directly with 

impacted issuers using well-established 

issuer call centers and small group 

processes unique to each market. We 

would anticipate minimal number of 

new appeals of SHOP eligibility and 

SEPs given anticipated employer 

participation and our observation that 

very few employers ever appeal SHOP 

determinations. 

In short, we would maintain a tollfree telephone hotline that the statute 

requires (at present 12 full-time 

equivalent employees are devoted to 

SHOP Call Center operations). We 

envision minimal contractor and staff 

support to maintain the hotline content 

and to respond to very few voicemail 

messages. Although we would maintain 

language translation service and incur 

the associated costs, we anticipate that 

such costs would be minimal given call 

volume and historical information. 

Moving to an interactive voice response 

system would eliminate staffing for 12 

full-time equivalent employees required 

at the call center under the SHOP Plan 

Aggregate and Call Center contract and 

would provide a net savings to the 

government of approximately $2 million 

annually. 

7. Navigator Program Standards 

(§§ 155.210 and 155.215) 

We propose to provide more 

flexibility to FFE Navigators by making 

the provision of certain types of 

assistance, including post-enrollment 

assistance, permissible for FFE 

Navigators, not required. The proposal 

to amend § 155.210 to remove the 

requirement that Navigators in FFEs 


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164Bureau of Labor Statistics mean hourly wage 

for a Software Developer, Systems Software 

(Occupational Code 15–1133) at $53.74 an hour, 

plus 100 percent fringe. 

165ASPE ‘‘2019 Health Plan Choice and 

Premiums in HealthCare.gov states.’’ https://

aspe.hhs.gov/system/files/pdf/260041/2019Landsc

apeBrief.pdf. 

provide the assistance specified at 

§ 155.210(e)(9) would reduce regulatory 

burden and allow FFE Navigators to 

better prioritize work according to 

consumer demand, community needs, 

and organizational resources. Under the 

proposal, Navigators in FFEs may 

continue to provide the types of 

assistance listed at § 155.210(e)(9), but 

would not be required to do so. 

The time FFE Navigators currently 

spend providing assistance with the 

§ 155.210(e)(9) topics varies. To help 

quantify this burden reduction, we 

request comment on how many hours 

per month FFE Navigator grantees and 

individual Navigators currently spend 

providing the assistance activities in 

§ 155.210(e)(9), what percentage of their 

current work involves providing these 

types of assistance, and how that 

amount of work would be impacted if 

providing these types of assistance 

would no longer be required. We also 

request comment on how Navigator 

grantees and individual Navigators 

might reprioritize work and spend time 

fulfilling their other duties, if not 

required to provide the types of 

assistance described under 

§ 155.210(e)(9). In particular, we seek 

comment on what tasks Navigators 

might prioritize and complete during 

the time they otherwise might have 

provided these types of assistance. 

Examples of how Navigators might elect 

to reprioritize work and fulfill duties, 

may include activities such as assisting 

consumers enroll in health coverage or 

conducting outreach and education in 

the community. We anticipate this may 

include many other activities. 

Our proposal to amend Navigator 

training requirements at § 155.210(b)(2) 

and § 155.215(b)(2) would provide 

greater flexibility to Exchanges in 

designing their Navigator training 

programs to ensure coverage of the most 

instructive and timely topics in a 

streamlined fashion and to align the 

training with future changes in the 

Navigator program or the operation of 

the Exchanges, while still ensuring that 

Navigators are qualified to carry out 

their activities as required by the 

Navigator statute and regulations. This 

additional flexibility would allow 

Exchanges to focus on training areas 

they determine to be most relevant to 

the populations in the Exchange service 

area, while still addressing all required 

or authorized Navigator functions. 

Because it would provide greater 

flexibility to tailor the training to 

current, local conditions in each 

Exchange, the revised approach might 

also help to ensure cost-effective use of 

Exchange Navigator funding. 

Moreover, we believe these changes 

would also grant greater flexibility to 

SBEs, including SBE–FPs, in designing 

their respective Navigator training, since 

under our proposal, SBEs that decide to 

authorize or require their Navigators to 

provide the assistance specified under 

§ 155.210(e)(9) would not have 

corresponding training topics 

prescribed, but would have the 

flexibility to decide how best to prepare 

their Navigators to provide such 

assistance. This is similar to the 

flexibility SBEs have for creating 

training for other required Navigator 

duties. We believe granting SBEs the 

flexibility to focus on the topics they 

find best suited to prepare their 

Navigators for assisting consumers 

would allow for a more effective 

training program, and would reduce the 

regulatory compliance burden on these 

Exchanges. 

However, the burden reduction that 

this proposal would achieve cannot be 

estimated since these changes are not 

intended to reduce the total number of 

hours of Navigator training annually 

and we are uncertain how each 

Exchange would choose to structure its 

respective Navigator training given this 

increase in flexibility. We continue to 

believe that each Exchange is in the best 

position to determine the training that is 

appropriate for the activities of its 

Navigators. 

8. Special Enrollment Periods 

(§ 155.420) 

We anticipate the proposals to amend 

§ 155.420 would impose moderate costs 

on Exchanges that opt to implement the 

proposed special enrollment period to 

update their user interfaces and make 

changes to their eligibility systems, but 

also acknowledge that Exchanges may 

choose to offer the special enrollment 

period through their call center or other 

existing enrollment avenues that could 

greatly reduce implementation costs to 

an Exchange. Additionally, we 

anticipate that verification requirements 

would impose costs relating to special 

enrollment period pre-enrollment 

verification systems, caseloads, and 

consumer messaging for Exchanges that 

perform pre-enrollment verification of 

special enrollment period eligibility. We 

expect utilization of the special 

enrollment period may vary among 

Exchanges depending on total Exchange 

enrollment and Exchange plan rates and 

pricing practices. Given these variable 

factors, we are not providing a 

quantitative cost estimate at this time 

and request comments regarding 

anticipated costs, benefits and 

implementation approaches among 

Exchanges to assist in forming a future 

estimate. 

We do not anticipate this proposal 

would significantly increase regulatory 

burden on issuers, but acknowledge 

issuers may encounter marginal costs 

associated with processing new 

enrollments and terminations related to 

the special enrollment period, and 

direct enrollment entities may also face 

minor implementation costs associated 

with updating their applications and 

systems to include the new special 

enrollment period. We estimate that it 

would take a mid-level software 

developer 164 (at an hourly rate of 

$107.48) approximately 10 hours to 

make the required modifications to the 

direct enrollment entity’s applications 

and system logic. We estimate a onetime cost burden of approximately 

$1,075 per direct enrollment entity. We 

further estimate a total one-time burden 

for 35 direct enrollment entities would 

be approximately 350 hours with an 

equivalent cost of approximately 

$37,618. 

Because this policy provides 

improved pathways to continuous 

coverage for special enrollment periodeligible consumers, we anticipate that 

the proposal would promote continuous 

coverage for consumers and thereby 

have a positive effect on the individual 

market risk pool. Additionally, we 

anticipate that eligible consumers may 

experience reduced out-of-pocket costs 

related to health care expenses resulting 

from access to more affordable health 

plans and a new pathway to 

maintaining continuous health care 

coverage, compared to if they had to 

drop out of off-Exchange coverage and 

pay out-of-pocket for all health care 

expenses incurred for the remainder of 

the year. We estimate that 

approximately 4,700 new consumers 

would use this special enrollment 

period on an annual basis to enroll in 

Exchange coverage, and that these 

consumers would be enrolled in an 

average of six months of Exchange 

coverage during the benefit year. Using 

the plan year 2019 average monthly 

APTC amount of $544, we estimate total 

APTC transferred to consumers as a 

result of the proposed special 

enrollment period would be 

approximately $15,340,800 annually.165

We invite comments on the potential 

costs and savings to Exchanges, issuers, 


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166As explained in § 155.605(d)(2), for plan years 

after 2014, section 5000A(e)(1)(D) of the Code and 

Treasury regulations at 26 CFR 1.5000A–3(e)(2)(ii) 

provide that the required contribution percentage is 

the percentage determined by the Secretary of HHS 

that reflects the excess of the rate of premium 

growth between the preceding calendar year and 

2013, over the rate of income growth for that period. 

Refer to § 155.605(d)(2) for the calculations for the 

proposed required contribution of 8.39 percent for 

2020. To calculate the required contribution we 

would have proposed of 8.18 percent if employersponsored insurance premiums continued to be 

used in the premium adjustment percentage 

calculation for the 2020 benefit year, we used 

employer-sponsored insurance premiums in the 

calculation: 8.00 * 1.0230638688 (1.2651426338/ 

1.2366213610), or 8.18 percent. 

167CMS Office of the Actuary’s estimates are 

based on their health reform model, which is an 

amalgam of various estimation approaches 

involving federal programs, employer-sponsored 

insurance, and individual insurance choice models 

that ensure consistent estimates of coverage and 

spending in considering legislative changes to 

current law. 

direct enrollment entities, and 

consumers associated with the proposed 

special enrollment period. 

9. Eligibility Standards for Exemptions 

(§ 155.605) 

We do not anticipate that the 

proposed amendment to § 155.605(e) 

would create additional costs or 

burdens on Exchanges, and we 

anticipate it would decrease burden on 

consumers. The addition of 

§ 155.605(e)(5) would enable 

individuals to claim a general hardship 

exemption on their federal income taxes 

for 2018 without an exemption 

certificate number from an Exchange. 

This policy would allow for more 

flexibility and would not result in any 

additional costs or burdens for issuers. 

The reduction in burden to consumers 

is discussed previously in the Collection 

of Information Requirements section. 

10. FFE and SBE–FP User Fees 

(§ 156.50) 

To support the operation of FFEs, we 

require in § 156.50(c) that a 

participating issuer offering a plan 

through an FFE or SBE–FP must remit 

a user fee to HHS each month equal to 

the product of the monthly user fee rate 

specified in the annual HHS notice of 

benefit and payment parameters for the 

applicable benefit year and the monthly 

premium charged by the issuer for each 

policy under the plan where enrollment 

is through an FFE or SBE–FP. In this 

proposed rule, for the 2020 benefit year, 

we propose an FFE user fee rate of 3.0 

percent of the monthly premium, and 

SBE–FP user fee rate of 2.5 percent of 

the monthly premium. We estimate 

similar FFE and SBE–FP user fee 

transfers as those estimated for prior 

benefit years, and therefore, we are 

proposing no changes to transfers from 

issuers to the federal government due to 

the proposed lower FFE and SBE–FP 

user fee rates. 

11. Prescription Drug Benefit (§ 156.122) 

At new § 156.122(d)(3), we propose 

that for plan years beginning on or after 

January 1, 2020, QHP issuers in the 

FFEs would be required to notify HHS 

annually in an HHS-specified format of 

any mid-year formulary changes made 

in the prior plan year consistent with 

the proposed changes to § 147.106(e). If 

finalized, we recognize that this 

proposal would increase issuers’ burden 

due to an additional reporting 

requirement. However, we believe that 

the additional burden would be 

minimal. Issuers would only be required 

to submit changes to their formulary, 

and some issuers may not make changes 

or may have minimal changes to report. 

Finally, issuers would only be required 

to submit formulary changes yearly, and 

the submission process would be 

aligned with other submission 

processes. 

12. Prohibition on Discrimination 

(§ 156.125) 

In the preamble to § 156.125, we 

discuss a potentially discriminatory 

benefit design under § 156.125: The 

exclusion of MAT drugs for the 

treatment of opioid use disorder while 

covering the same drugs for other 

medically necessary purposes, such as 

analgesia or alcohol use disorder. 

Because we are not proposing a change 

to policy, we do not anticipate any 

additional burden on states or issuers. 

However, to the extent this clarification 

causes issuers to cease prohibited 

discriminatory practices, the 

clarification could help consumers 

obtain needed MAT, lead to better 

health outcomes, and reduce the burden 

and out-of-pocket costs individuals may 

have otherwise incurred in attempts to 

obtain MAT. 

13. Provisions Related to Cost-Sharing 

(§ 156.130) 

We propose a premium adjustment 

percentage of 1.2969721275 for the 2020 

benefit year, including a proposed 

change to the premium measure for 

calculating the premium adjustment 

percentage. Under § 156.130(e), we 

propose to use average per enrollee 

private health insurance premiums 

(excluding Medigap and property and 

casualty insurance), instead of 

employer-sponsored insurance 

premiums, which were used in the 

calculation for previous benefit years, 

for purposes of calculating the premium 

adjustment percentage for the 2020 

benefit year. The annual premium 

adjustment percentage sets the rate of 

increase for several parameters detailed 

in the PPACA, including: The annual 

limitation on cost sharing (defined at 

§ 156.130(a)), the required contribution 

percentage used to determine eligibility 

for certain exemptions under section 

5000A of the Code (defined at 

§ 155.605(d)(2)), and the employer 

shared responsibility payments under 

sections 4980H(a) and 4980H(b) of the 

Code. 

As explained earlier in the preamble, 

our proposal to use private health 

insurance premiums (excluding 

Medigap and property and casualty 

insurance) in the premium adjustment 

percentage calculation would result in a 

faster premium growth rate measure 

than if we continued to use employersponsored insurance premiums as was 

used for prior benefit years. 

To further elaborate on the potential 

impacts of this proposed policy change, 

in § 155.605(d)(2), we propose a 

required contribution of 8.39 percent 

using the proposed premium adjustment 

percentage in § 156.130, whereas we 

would have proposed a required 

contribution of 8.18 percent if 

employer-sponsored insurance 

premiums continued to be used in the 

premium adjustment percentage 

calculation for the 2020 benefit year.166

In § 156.130(a)(2), we propose a 

maximum annual limitation on cost 

sharing of $8,200 for self-only coverage, 

whereas we would have proposed a 

maximum annual limitation on cost 

sharing of $8,000 for self-only coverage 

if employer-sponsored insurance 

premiums continued to be used in the 

premium adjustment percentage 

calculation for the 2020 benefit year. 

The CMS Office of the Actuary 

estimates that the proposed change in 

methodology for the calculation of the 

premium adjustment percentage may 

have the following impacts between 

2019 and 2023: 167


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168Manning, W. G., Newhouse, J. P., Duan, N., 

Keeler, E. B., & Leibowitz, A. (1987). Health 

insurance and the demand for medical care: 

evidence from a randomized experiment. The 

American economic review, 251–277; Keeler, E. B., 

& Rolph, J. E. (1988). The demand for episodes of 

treatment in the health insurance experiment. 

Journal of health economics, 7(4), 337–367; 

Finkelstein, A., et al. (2012). The Oregon health 

insurance experiment: evidence from the first year. 

The Quarterly journal of economics, 127(3), 1057– 

1106. 

TABLE 16—IMPACTS OF PROPOSED MODIFICATIONS TO THE 2020 BENEFIT YEAR PREMIUM ADJUSTMENT PERCENTAGE

Calendar year 2019 2020 2021 2022 2023 

Exchange Enrollment Impact (enrollees, thousands) .......... N/A ¥100 ¥100 ¥100 ¥100 

Premium Impacts: 

Gross Premium Impact (change from 2018, %) .......... N/A 0% 0% 0% 0% 

Net Premium Impact (change from 2018, %) .............. N/A 1% 1% 1% 1% 

Federal Impacts (dollars, millions): 

Premium Tax Credits (million, $) .................................. N/A ¥900 ¥900 ¥1,000 ¥1,000 

Health Insurance Providers Fee Impact (million, $) ..... N/A 0 0 0 100 

Employer Shared Responsibility Payment Impact (million, $) ....................................................................... N/A 100 100 100 100 

Total Federal Impact (million, $) ........................... ........................ ¥800 ¥800 ¥900 ¥800 

As noted in Table 16, we expect that 

the proposed change in measure of 

premium growth used to calculate the 

premium adjustment percentage for the 

2020 benefit year may result in: 

• Net premium increases of 

approximately $181 million per year, 

which is approximately one percent of 

2018 benefit year net premiums, for the 

2020 through 2023 benefit years. Net 

premiums are calculated for Exchange 

enrollees as premium charged by issuers 

minus APTC. 

• A decrease in federal PTC spending 

of $900 million in 2020 and 2021, and 

$1 billion in 2022 and 2023, due to an 

increase in the PTC applicable 

percentage and a decline in Exchange 

enrollment of approximately 100,000 

individuals in benefit year 2020, based 

on an assumption that the Department 

of the Treasury and the IRS will adopt 

the use of the same premium measure 

proposed for the calculation of the 

premium adjustment percentage in this 

rule for purposes of calculating the 

indexing of the PTC applicable 

percentage and the required 

contribution percentage under section 

36B of the Code. We anticipate that 

enrollment may decline by 100,000 

individuals in benefit year 2020, and 

enrollment would remain lower by 

100,000 individuals in each year 

between 2020 and 2023 than it would if 

there were no proposed change in 

premium measure for the premium 

adjustment percentage for the 2020 

benefit year. 

• Increased Health Insurance 

Providers Fees on health insurance 

issuers of approximately $100 million in 

2023, based on an assumption that the 

Department of the Treasury and the IRS 

would adopt the use of the same 

premium measure proposed for the 

calculation of the premium adjustment 

percentage in this rule for purposes of 

calculating the indexing of the Health 

Insurance Providers Fee. We anticipate 

that the Health Insurance Providers Fee 

would initially not be noticeably 

affected, but would increase in 2023 and 

beyond due to the cumulative indexing 

effect. 

• Increased Employer Shared 

Responsibility Payments of $100 million 

each year between 2020 and 2023. 

Some of the 100,000 individuals 

estimated to not enroll in Exchange 

coverage as a result of the proposed 

change in the measure of premium 

growth used to calculate the premium 

adjustment percentage may purchase 

short-term, limited-duration insurance, 

though a majority is likely to become 

uninsured. Either transition may result 

in greater exposure to health care costs, 

which previous research suggests 

reduces utilization of health care 

services.168 Economic distortions may 

be reduced, and economic efficiency 

and social benefits improved, because 

these individuals will be bearing a 

larger share of the costs of their own 

health care consumption, potentially 

reducing spending on health care 

services that are personally only 

marginally valued but that imposes 

costs on the federal government through 

subsidies. In addition, to the extent that 

this proposed rule reduces federal 

outlays and thereby reduces the need to 

collect taxes in the future, the 

distortionary effects of taxation on the 

economy may be reduced. However, the 

increased number of uninsured may 

increase federal and state 

uncompensated care costs. We seek 

feedback from stakeholders about these 

impacts and the magnitude of these 

changes. 

As noted above, the premium 

adjustment percentage is the measure of 

premium growth that is used to set the 

rate of increase for the maximum annual 

limitation on cost sharing, defined at 

§ 156.130(a). In § 156.130(a)(2), we 

propose a maximum annual limitation 

on cost sharing of $8,200 for self-only 

coverage. Additionally, we propose 

reductions in the maximum annual 

limitation on cost sharing for silver plan 

variations. Consistent with our analyses 

in previous Payment Notices, we 

developed three test silver level QHPs 

and analyzed the impact on their AVs 

of the reductions described in the 

PPACA to the estimated 2020 maximum 

annual limitation on cost sharing for 

self-only coverage. We do not believe 

the proposed changes to the reductions 

in the maximum annual limitation on 

cost sharing for silver plan variations 

would result in a significant economic 

impact. 

We propose two new policies at 

§ 156.130(h) which aim to reduce costs 

associated with coverage of in 

prescription drugs by giving health 

insurance issuers more flexibility in 

changing how drugs costs are counted 

toward the annual limitation on cost 

sharing. According to our research, we 

believe these new flexibilities will allow 

health insurance issuers to reduce 

premiums between 1.5 percent and 3 

percent of drug spending with moderate 

variation by plan type, geography, or 

metal level. These estimates reflect an 

impact separate from the quantitative 

estimates above. 

14. Provisions Related to Abortion 

Services (§ 156.280) 

In § 156.280(c)(3), we propose that, 

beginning with plan year 2020, QHP 

issuers that provide coverage of nonHyde abortion services in one or more 

QHPs at any metal level in a particular 

service area must also provide at least 

one ‘‘mirror QHP’’ throughout that 

service area that provides otherwise 

identical benefits as one of the QHPs 

with non-Hyde abortion coverage, but 

that omits coverage of such services. 

This requirement would apply to the 


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169We note, however, that the proposal is to 

require at least one mirror QHP throughout each 

service area in which the QHP issuer offers plans 

covering non-Hyde abortion, that provides 

otherwise identical benefits as one of the QHPs 

with non-Hyde abortion coverage, but that omits 

coverage of such services. As such, issuers with 

QHPs that cover non-Hyde abortion would already 

have developed the basic plan design and structure 

of the mirror QHP, and we believe this will 

significantly aid issuers in filling out and reviewing 

the additional rate and policy forms for the mirror 

plan. 

170See also n. 158, supra. 

171Some state laws prohibit QHPs from offering 

any abortion coverage on the Exchange, even in 

cases where the Hyde Amendment would permit 

federal funding to be used for such coverage; others 

prohibit all private insurers in the state from 

offering abortion coverage, regardless of whether 

the plan is offered on the Exchange; and many limit 

on-Exchange QHPs to only offering Hyde-abortion 

coverage. 

172California requires all insurance carriers 

(except for multi-state plans) to cover non-Hyde 

abortion. See Michelle Rouillard, Director of 

Department of Managed Health Care letter to Mark 

Morgan, California President of Anthem Blue Cross, 

RE: Limitations or Exclusions of Abortion Services 

(August 22, 2014). Available at https://

www.dmhc.ca.gov/Portals/0/082214letters/ 

abc082214.pdf. Also see Cal. Health & Safety Code 

§ 1340 et seq. New York requires all insurance 

policies that provide hospital, surgical, or medical 

expense coverage to also include coverage for 

abortions that are medically necessary. See N.Y. Ins 

Law § 3217 (2015); N.Y. Comp. Codes R. & Regs. tit. 

11, § 52.2 (2016). 

173The Oregon law requires all health insurance 

plans in the state to cover non-Hyde abortions with 

no out-of-pocket costs. See https://

olis.leg.state.or.us/liz/2017R1/Downloads/Measure

Document/HB3391/Enrolled. 

174As of 2014, there were 23 states with laws 

restricting the circumstances under which QHPs 

could offer non-Hyde abortion services as a covered 

benefit. Twenty-eight states had no laws restricting 

the circumstances under which QHPs could offer 

non-Hyde abortion services. In 5 states 

(Connecticut, Hawaii, New Jersey, Rhode Island, 

and Vermont) all QHPs covered non-Hyde abortion 

services. https://www.gao.gov/assets/670/ 

665800.pdf. 

extent permitted by state law. To date, 

QHP issuers have not been required to 

offer such a plan. 

Based on 2018 QHP certification data 

in FFEs and SBE–FPs, we estimate that 

15 issuers offered a total of 111 plans 

with coverage of non-Hyde abortion 

services in 7 states. In SBEs we estimate 

that 60 QHP issuers offered a total of 

approximately 1,000 plans offering nonHyde abortion coverage across 10 SBEs. 

In total, this leads to an estimate of 75 

QHP issuers offering a total of 1,111 

plans covering non-Hyde abortion 

services across 17 states. Requiring 

issuers to offer mirror QHPs would 

require issuers offering coverage for 

non-Hyde abortion services to create at 

least one additional QHP that does not 

offer coverage for such services 

throughout each of their service areas in 

the Exchange where they offer QHPs 

covering non-Hyde abortion services. 

We believe that the proposal would 

attract potential customers who may 

find the benefits offered under the QHP 

attractive, but would not, on conscience 

grounds, purchase a QHP that includes 

coverage of non-Hyde abortion services. 

However, we recognize that issuers 

may find this proposal unfavorable 

because of the increase in burden to 

develop and review additional plans, 

including additional resources to create 

additional plan designs and administer 

additional plans.169 Due to the 

increased burden this proposed policy 

change may place on issuers, some 

issuers may choose to not offer nonHyde abortion coverage at all as part of 

their benefit package (rather than offer 

mirror QHPs). If, issuers choose to not 

offer non-Hyde abortion coverage, this 

may lead to an increase in women who 

lack options for enrolling in plans that 

offer coverage for non-Hyde abortion, 

thus requiring more women to pay outof-pocket for these services, if they 

become pregnant and choose to have an 

abortion. The cost of abortion services 

without insurance coverage is 

dependent on a variety of factors, such 

as location, type of medical facility, 

timing of the procedure, and type of 

procedure. 

If finalized, this proposal would also 

increase the burden on states operating 

their own Exchange by requiring that 

they conduct additional QHP reviews, 

approve additional products, and 

review additional rate and policy 

forms.170 This proposal would increase 

the number of benefit reviews states 

would have to conduct for these plans 

as a part of the QHP certification 

process, depending on the number of 

mirror QHPs without non-Hyde abortion 

coverage the QHP issuers opt to offer. 

However, state law on abortion coverage 

significantly shapes and limits the 

availability of abortion coverage on the 

Exchanges. Although many states have 

enacted laws more restrictive than the 

federal requirements in section 1303 of 

the PPACA,171 other states have laws 

requiring QHPs to offer abortion 

coverage on the Exchange. For example, 

California and New York currently 

require QHPs to offer abortion coverage 

on the Exchange.172 Oregon recently 

signed into law a requirement for QHPs 

to include coverage for abortion, 

effective for 2019.173 Therefore, the 

impact would depend on the applicable 

state law.174

Finally, we believe that the proposed 

requirement would increase consumer 

choice by offering additional plan 

options to potential enrollees who may 

refuse to enroll in, or may be 

discouraged from enrolling in QHPs 

because the plans in their service area 

cover non-Hyde abortion services. We 

realize that but for the premium and 

benefit description, the QHPs would 

otherwise appear identical, and are 

concerned that consumers who do not 

carefully study their plan options may 

be confused by the premium 

differential; accordingly, we request 

comment on appropriate measures or 

requirements to limit the possibility of 

such confusion. Research has shown 

that offering consumers additional 

health plan options may result in 

consumers opting to not purchase a plan 

at all. 

We seek comment on the overall 

impact of the proposal. 

15. Regulatory Review Costs 

If regulations impose administrative 

costs on private entities, such as the 

time needed to read and interpret this 

proposed rule, we should estimate the 

cost associated with regulatory review. 

Due to the uncertainty involved with 

accurately quantifying the number of 

entities that will review the rule, we 

assume that the total number of unique 

commenters on last year’s proposed rule 

will be the number of reviewers of this 

proposed rule. We acknowledge that 

this assumption may understate or 

overstate the costs of reviewing this 

rule. It is possible that not all 

commenters reviewed last year’s rule in 

detail, and it is also possible that some 

reviewers chose not to comment on the 

proposed rule. For these reasons we 

thought that the number of past 

commenters would be a fair estimate of 

the number of reviewers of this rule. We 

welcome any comments on the 

approach in estimating the number of 

entities which will review this proposed 

rule. 

We are required to issue a substantial 

portion of this rule each year under our 

regulations and we estimate that 

approximately half of the remaining 

provisions would cause additional 

regulatory review burden that 

stakeholders do not already anticipate. 

We also recognize that different types of 

entities are in many cases affected by 

mutually exclusive sections of this 

proposed rule, and therefore, for the 

purposes of our estimate we assume that 

each reviewer reads approximately 50 

percent of the rule, excluding the 

portion of the rule that we are required 

to issue each year. 

Using the wage information from the 

BLS for medical and health service 

managers (Code 11–9111), we estimate 

that the cost of reviewing this rule is 

$107.38 per hour, including overhead 


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175https://www.bls.gov/oes/current/oes_nat.htm. 

176Activities related to the 2019 benefit year risk 

adjustment data validation generally begin in the 

second quarter of the 2020 calendar year. 

and fringe benefits.175 Assuming an 

average reading speed, we estimate that 

it would take approximately 1 hour for 

the staff to review the relevant portions 

of this proposed rule that causes 

unanticipated burden. We assume that 

321 entities will review this proposed 

rule. For each entity that reviews the 

rule, the estimated a cost of 

approximately $107.38. Therefore, we 

estimate that the total cost of reviewing 

this regulation is approximately $34,469 

($107.38 × 321 reviewers). 

D. Regulatory Alternatives Considered 

In developing the policies contained 

in this proposed rule, we considered 

numerous alternatives to the presented 

proposals. Below we discuss the key 

regulatory alternatives that we 

considered. 

At § 147.106 we propose to allow 

issuers to make certain mid-year 

formulary changes in an effort to 

optimize the use of new generic drugs 

as they become available. We recognize 

that the question of whether 

incentivizing the use of generic drugs 

will result in lowered costs is a complex 

question given certain dynamics in the 

drug market, such as rebates, and we, 

therefore, considered not proposing 

these changes. However, we believe that 

allowing issuers to make mid-year 

formulary changes or the option to 

direct consumers to generic drugs over 

the branded drug will result in a 

reduction in prescription drug costs. 

In proposing the risk adjustment 

model recalibration in part 153, we 

considered multiple alternatives such as 

maintaining the prior year’s 

recalibration methodology of 

recalibrating the models using 2 years of 

MarketScan® data and the most recent 

year of EDGE data. However, while we 

are maintaining our approach of 

recalibrating the models using 3 years of 

blended data, we are proposing to use 

to the 2 most recent years of enrolleelevel EDGE data (2016 and 2017) and 

the most recent year for MarketScan®

data (2017) available. We believe that 

this approach will better reflect the 

experience of issuers in the individual 

and small group markets by using the 

most recent claims data available. 

We considered updating the induced 

demand factors (IDFs) in the risk 

adjustment state payment transfer 

formula and the cost-sharing reduction 

adjustment factors using results from 

2016 enrollee-level EDGE data to 

evaluate the differences in enrollee 

spending patterns. However, although 

we have begun our analysis of 2016 

enrollee-level EDGE data to evaluate 

differences in induced demand, we are 

not proposing any changes to the 

existing IDFs for the 2020 benefit year 

with the intention of evaluating 

additional data before proposing to 

make any changes. We intend to 

consider amending IDFs for the 2021 

benefit year when we can also evaluate 

2017 enrollee-level EDGE data to 

examine differences in induced demand 

by market. 

Beginning with the 2019 benefit year 

of risk adjustment data validation,176 we 

propose to vary the initial validation 

audit sample size, and outline several 

different approaches we are considering 

for doing so. For example, we could 

vary sample size based on HCC failure 

rates, sample precision, and issuer size. 

An alternative approach would vary the 

initial validation audit sample size 

based only on issuer size. We also 

solicit comment on whether to permit 

issuers of any size and with any HCC 

failure rate the flexibility to request a 

larger sample size. Larger initial 

validation audit sample sizes could be 

required for some issuers under these 

approaches; however, we believe any 

increased burden would be outweighed 

by the increased precision of the risk 

adjustment data validation results 

which are used to adjust issuers risk 

scores and associated risk adjustment 

transfers. 

Regarding proposed changes to 

§§ 155.210 and 155.215, we considered 

taking no action to amend certain 

Navigator training requirements and 

duties, but determined that the 

proposed changes regarding training 

requirements would provide Exchanges 

with needed flexibility, and the 

proposed changes regarding duties of 

FFE Navigators would help reduce 

burden on FFE Navigators. 

After several years of agent, broker 

and web-broker participation in the 

FFEs, we have identified key differences 

between individual agents or brokers 

and agent or broker entities, and believe 

these differences warrant a more 

tailored approach to regulating agents, 

brokers and web-brokers. For example, 

we believe the requirement for an agent, 

broker or web-broker entity to complete 

FFE training imposes a regulatory 

burden with little benefit, because 

entities are businesses employing or 

contracting with many individuals, 

many of whom are licensed agents or 

brokers who have to take the FFE 

training as part of their respective FFE 

registration as individuals. Instead of 

continuing to require these entities to 

identify an individual agent or broker to 

complete training on their behalf, we 

propose to eliminate a separate training 

requirement for agent, broker or webbroker entities. All individual agents 

and brokers assisting Exchange 

consumers in the individual market, 

whether or not they are assisting 

consumers in partnership with an agent, 

broker or web-broker entity, would 

continue to be required to receive 

training as part of the annual FFE 

registration process. Similarly, because 

of the different characteristics of 

individual agents or brokers and webbrokers, we propose to include 

provisions specifically related to 

suspension and termination of a webbroker’s agreement that are inapplicable 

to individual agents or brokers but that 

generally mirror the standards and 

existing procedures for suspension or 

termination of an individual agent’s or 

broker’s agreement(s). 

In proposing revisions to § 155.221, 

we considered maintaining the existing 

regulatory framework that established 

standards for issuers and web-brokers 

participating in direct enrollment in 

separate sections, but we believe 

streamlining and consolidating the 

requirements applicable to all direct 

enrollment entities, when possible, 

improves clarity and promotes fair 

competition. In proposing the display 

requirements at § 155.221(b), we 

contemplated maintaining the current 

standards in regulations and guidance, 

but based on feedback received from 

direct enrollment entities, we believe 

the current framework has caused 

confusion and limited innovation. 

Therefore, we determined that the 

establishment of clarified standards for 

the marketing and display of QHPs and 

non-QHPs is the best way to provide 

greater clarity for direct enrollment 

entities about what is required to 

minimize the potential for consumer 

confusion while allowing direct 

enrollment entities more flexibility to be 

innovative in the marketing of nonQHPs to consumers who are interested 

in those products. In proposing the 

addition of a new § 155.221(c), we 

considered continuing to limit the 

authority to use application assisters to 

QHP issuers. However, to promote fair 

competition for all direct enrollment 

entities and issuers, we believe a better 

approach is to expand this authority to 

include all direct enrollment entities 

and all issuers. 

We considered broader eligibility 

requirements for the special enrollment 

period proposed at § 155.420(d)(6)(v). 

We considered if a special enrollment 

period could be offered without a 

decrease in household income to all 


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Exchange applicants who were enrolled 

in MEC and determined eligible for 

APTC by the Exchange, or if changes in 

the applicant’s household size could be 

considered in the eligibility criteria for 

this special enrollment period. We 

determined that eliminating the criteria 

for a decrease in household income 

would be problematic because it 

eliminates a triggering event for the 

special enrollment period and could 

allow for consumers who are potentially 

APTC-eligible to avoid the metal level 

restrictions in paragraph (a)(4) of this 

section by initially enrolling in offExchange coverage and then later 

choosing to buy a higher or lower level 

of coverage mid-year. We also 

determined that verification of 

household size changes would be 

operationally problematic, as electronic 

data sources would not reflect recent 

changes to household size. Further, the 

special enrollment periods at 

§ 155.420(d)(2)(i) are currently available 

to qualified individuals whose 

household size changes due to gaining 

or becoming a dependent and already 

provides a pathway to Exchange 

coverage for individuals in this 

situation. We also considered if the 

special enrollment period could be 

offered without a prior coverage 

requirement and determined that this 

requirement is necessary to ensure the 

special enrollment period is only 

available to the intended population, to 

promote continuous coverage among 

individual market enrollees, and to 

protect the Exchanges against adverse 

selection. Finally we considered the 

impact of not proposing this special 

enrollment period. Without the 

proposed special enrollment period at 

§ 155.420(d)(6)(v), unsubsidized 

consumers who experience a decrease 

in household income midyear and are 

APTC eligible would remain without a 

pathway to Exchange coverage. These 

consumers would remain at risk of 

terminating their unsubsidized coverage 

midyear because it is unaffordable, 

rather than maintaining continuous 

enrollment in health coverage by 

transitioning to an Exchange plan. 

Without the recommended revisions 

to § 155.605(e), individuals may 

experience a general hardship that 

prevents them from obtaining qualifying 

health coverage, and may experience 

undue burden to apply and qualify for 

an exemption from the individual 

shared responsibility provision to 

purchase qualifying health coverage. 

This change allows for more flexibility 

for individuals to claim these 

exemptions through the IRS tax filing 

process for 2018. 

In proposing the change to the 

premium measure used in the premium 

adjustment percentage calculation 

under § 156.130, we considered 

continuing to use the current premium 

measure, as well as other premium 

measures for purposes of calculating the 

premium adjustment percentage for the 

2020 benefit year. We considered 

continuing to use the current premium 

measure, NHEA’s estimates and 

projections of average per enrollee 

employer-sponsored insurance 

premiums. We are proposing a change 

to this measure to instead use a private 

health insurance premium measure 

(excluding Medigap and property and 

casualty insurance), so that the 

premium growth measure more closely 

reflects premium trends in the private 

health insurance market since 2013. 

Alternatively, we considered using 

NHEA estimates and projections of 

average per enrollee private health 

insurance premiums. NHEA’s private 

health insurance premium measure 

includes premiums for employersponsored insurance, direct purchase 

insurance (which includes Medigap 

insurance), and property and casualty 

insurance. However, we propose to 

include only those premiums for 

expenditures associated with the 

acquisition of one’s primary health 

insurance coverage purchased through 

their employer or purchased directly 

from a health insurance issuer. We 

believe it is inappropriate to include 

Medigap premiums in the measure as 

this type of coverage is not considered 

primary coverage for those enrollees 

who supplement their Medicare 

coverage with these plans. Moreover, 

although total spending for private 

health insurance in the NHEAs includes 

the medical portion of accident 

insurance (property and casualty 

insurance), we do not believe it would 

be appropriate to include those 

expenditures for this purpose as they 

are associated with policies that do not 

serve as a primary source of health 

insurance coverage. 

Accordingly, in § 156.130 we propose 

using a measure that includes only 

premiums for employer-sponsored 

insurance and direct purchase 

insurance, but not premiums for 

property and casualty, or Medigap 

insurance. In addition to considering 

NHEA’s private health insurance 

premiums as an alternative for 

measuring premium growth in the 

premium adjustment percentage 

calculation, we considered using 

Exchange premiums as the measure for 

premium growth. However, a significant 

drawback with using Exchange 

premiums is that the Exchanges did not 

exist in 2013 and therefore Exchange 

premiums are not available for 2013. 

NHEA does not currently publish 

projections of Exchange premiums 

separate from the estimates and 

projections that they include within the 

direct purchase premium measure, and 

a projection would be needed for the 

2019 premium amount given the timing 

of this proposed rule and the estimated 

timing of the final HHS Notice of 

Benefit and Payment Parameters for 

2020 rule. We seek comment on the 

source of premium data we use in the 

premium adjustment percentage 

calculation, and specifically the 

proposal to use average per enrollee 

private health insurance premiums 

(excluding Medigap and property and 

casualty insurance) or whether we 

continue to use employer-sponsored 

insurance premiums for purposes of 

calculating the premium adjustment 

percentage for the 2020 benefit year. 

At § 156.130 we also propose that 

plans are not required to count drug 

manufacturer coupons toward the 

annual limitation on cost sharing, 

starting with plan years beginning on or 

after January 1, 2020. We considered not 

proposing this flexibility, as these 

coupons may result in lower costs to 

individual consumers. However, 

manufacturer coupons may incentivize 

selection of higher-cost drugs when a 

less costly therapeutic equivalent is 

available which can distort the market 

and the true costs of drugs, adding 

significant long-term costs to the health 

care system. 

In proposing § 156.280(c)(3), we 

considered whether regulatory action 

was necessary at all. However, without 

regulatory action, some people may not 

be able to enroll in what would 

otherwise be their desired QHP, but for 

the QHP covering non-Hyde abortion, 

due to religious or conscience 

objections. This proposal would allow 

people who do not desire coverage of 

non-Hyde abortion to have coverage 

alternatives. We also considered 

requiring issuers to offer QHPs that do 

not cover non-Hyde abortion services on 

a one-to-one basis with QHPs that do 

cover non-Hyde abortion services. 

However, we were concerned that this 

would be too burdensome to QHP 

issuers and that a proliferation of so 

many more QHPs could be confusing to 

consumers. 

E. Regulatory Flexibility Act 

The Regulatory Flexibility Act, (5 

U.S.C. 601, et seq.), requires agencies to 

prepare an initial regulatory flexibility 

analysis to describe the impact of the 

proposed rule on small entities, unless 


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177https://www.sba.gov/document/support-- 

table-size-standards. 

178Available at https://www.cms.gov/CCIIO/ 

Resources/Data-Resources/mlr.html. 

the head of the agency can certify that 

the rule will not have a significant 

economic impact on a substantial 

number of small entities. The RFA 

generally defines a ‘‘small entity’’ as (1) 

a proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA), (2) a not-forprofit organization that is not dominant 

in its field, or (3) a small government 

jurisdiction with a population of less 

than 50,000. States and individuals are 

not included in the definition of ‘‘small 

entity.’’ HHS uses a change in revenues 

of more than 3 to 5 percent as its 

measure of significant economic impact 

on a substantial number of small 

entities. 

In this proposed rule, we propose 

standards for the risk adjustment and 

risk adjustment data validation 

programs, which are intended to 

stabilize premiums as insurance market 

reforms are implemented and Exchanges 

facilitate increased enrollment. Because 

we believe that insurance firms offering 

comprehensive health insurance 

policies generally exceed the size 

thresholds for ‘‘small entities’’ 

established by the SBA, we do not 

believe that an initial regulatory 

flexibility analysis is required for such 

firms. 

We believe that health insurance 

issuers and group health plans would be 

classified under the North American 

Industry Classification System code 

524114 (Direct Health and Medical 

Insurance Carriers). According to SBA 

size standards, entities with average 

annual receipts of $38.5 million or less 

would be considered small entities for 

these North American Industry 

Classification System codes. Issuers 

could possibly be classified in 621491 

(HMO Medical Centers) and, if this is 

the case, the SBA size standard would 

be $32.5 million or less.177 We believe 

that few, if any, insurance companies 

underwriting comprehensive health 

insurance policies (in contrast, for 

example, to travel insurance policies or 

dental discount policies) fall below 

these size thresholds. Based on data 

from MLR annual report 178 submissions 

for the 2016 MLR reporting year, 

approximately 85 out of over 520 issuers 

of health insurance coverage nationwide 

had total premium revenue of $38.5 

million or less. This estimate may 

overstate the actual number of small 

health insurance companies that may be 

affected, since almost 79 percent of 

these small companies belong to larger 

holding groups, and many if not all of 

these small companies are likely to have 

non-health lines of business that will 

result in their revenues exceeding $38.5 

million. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This proposed rule 

would not affect small rural hospitals. 

Therefore, the Secretary has determined 

that this will not have a significant 

impact on the operations of a substantial 

number of small rural hospitals. 

F. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a proposed rule 

that includes any federal mandate that 

may result in expenditures in any 1 year 

by a state, local, or Tribal governments, 

in the aggregate, or by the private sector, 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2018, that 

threshold is approximately $150 

million. Although we have not been 

able to quantify all costs, we expect the 

combined impact on state, local, or 

Tribal governments and the private 

sector to be below the threshold. 

G. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it issues a proposed 

rule that imposes substantial direct 

costs on state and local governments, 

preempts state law, or otherwise has 

Federalism implications. 

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, we have engaged in efforts to 

consult with and work cooperatively 

with affected states, including 

participating in conference calls with 

and attending conferences of the 

National Association of Insurance 

Commissioners, and consulting with 

state insurance officials on an 

individual basis. 

While developing this rule, we 

attempted to balance the states’ interests 

in regulating health insurance issuers 

with the need to ensure market stability. 

By doing so, it is our view that we have 

complied with the requirements of 

Executive Order 13132. 

Because states have flexibility in 

designing their Exchange and Exchangerelated programs, state decisions will 

ultimately influence both administrative 

expenses and overall premiums. States 

are not required to establish an 

Exchange or risk adjustment program. 

For states that elected previously to 

operate an Exchange, or risk adjustment 

program, much of the initial cost of 

creating these programs was funded by 

Exchange Planning and Establishment 

Grants. After establishment, Exchanges 

must be financially self-sustaining, with 

revenue sources at the discretion of the 

state. Current State Exchanges charge 

user fees to issuers. 

In our view, while this proposed rule 

would not impose substantial direct 

requirement costs on state and local 

governments, this regulation has 

Federalism implications due to direct 

effects on the distribution of power and 

responsibilities among the state and 

federal governments relating to 

determining standards relating to health 

insurance that is offered in the 

individual and small group markets. For 

example, for risk adjustment, we are 

proposing more flexibility for states that 

want to use something other than 

statewide average premium in the 

calculation of transfers. We are also 

proposing to make the proposed special 

enrollment period at § 155.420(d)(6)(v) 

at the option of Exchanges, to give states 

flexibility in whether they choose to 

implement it. 

H. Congressional Review Act 

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 the Congress and 

the Comptroller for review. 

I. Reducing Regulation and Controlling 

Regulatory Costs 

Executive Order 13771, titled 

Reducing Regulation and Controlling 

Regulatory Costs, was issued on January 

30, 2017. Section 2(a) of Executive 

Order 13771 requires an agency, unless 

prohibited by law, to identify at least 

two existing regulations to be repealed 

when the agency publicly proposes for 

notice and comment, or otherwise 

issues, a new regulation. In furtherance 

of this requirement, section 2(c) of 


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Executive Order 13771 requires that the 

new incremental costs associated with 

new regulations shall, to the extent 

permitted by law, be offset by the 

elimination of existing costs associated 

with at least two prior regulations. 

The designation of this rule, if 

finalized, will be informed by public 

comments received. 

J. Conclusion 

The analysis above, together with the 

remainder of this preamble, provides a 

Regulatory Impact Analysis. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

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. 

45 CFR Part 148 

Administrative practice and 

procedure, Health care, Health 

insurance, Insurance companies, 

Penalties, Reporting and recordkeeping 

requirements. 

45 CFR Part 153 

Administrative practice and 

procedure, Health care, Health 

insurance, Health records, 

Intergovernmental relations, 

Organization and functions 

(Government agencies), Reporting and 

recordkeeping requirements. 

45 CFR Part 155 

Administrative practice and 

procedure, Advertising, Brokers, 

Conflict of interests, Consumer 

protection, Grants administration, Grant 

programs—health, Health care, Health 

insurance, Health maintenance 

organizations (HMO), Health records, 

Hospitals, Indians, Individuals with 

disabilities, Intergovernmental relations, 

Loan programs—health, Medicaid, 

Organization and functions 

(Government agencies), Public 

assistance programs, Reporting and 

recordkeeping requirements, Technical 

assistance, Women and youth. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

committees, Brokers, Conflict of 

interests, 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, 

Medicaid, Organization and functions 

(Government agencies), Public 

assistance programs, Reporting and 

recordkeeping requirements, State and 

local governments, Sunshine Act, 

Technical assistance, Women, Youth. 

For the reasons set forth in the 

preamble, under the authority at 5 

U.S.C. 301, the Department of Health 

and Human Services proposes to amend 

45 CFR 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: 42 U.S.C. 300gg–1 through 

300gg–5, 300gg–11 through 300gg–23, 300gg– 

91, and 300gg–92. 

■ 2. Section 146.152 is amended by 

revising paragraphs (a) and (f)(1) 

introductory text and adding paragraph 

(f)(5) to read as follows: 

§ 146.152 Guaranteed renewability of 

coverage for employers in the group 

market. 

(a) General rule. Subject to paragraphs 

(b) through (f) of this section, a health 

insurance issuer offering health 

insurance coverage in the small or large 

group market is required to renew or 

continue in force the coverage at the 

option of the plan sponsor or the 

individual, as applicable. 

* * * * * 

(f) * * * 

(1) Subject to paragraph (f)(5) of this 

section, 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: 

* * * * * 

(5) For plan years beginning on or 

after January 1, 2020, a group health 

insurance issuer may make the 

following mid-year formulary changes, 

to the extent permitted by applicable 

State law: It may add a generic 

equivalent to a formulary within a 

reasonable time after the generic 

equivalent becomes available, and, if it 

does so, it may remove the equivalent 

brand drug or drugs from the formulary 

or move the equivalent brand drug or 

drugs to a higher formulary drug tier. If 

the issuer makes any such changes: 

(i) The issuer must notify plan 

enrollees in writing a minimum of 60 

days prior to making the changes. This 

notice must identify the name of the 

brand drug that is the subject of the 

change, disclose whether the brand drug 

will be removed from the formulary or 

placed on a different cost-sharing tier, 

provide the name of the generic 

equivalent that will be made available, 

specify the date the changes will 

become effective, and state that under 

the appeals processes outlined in 

§ 147.136 of this subchapter or the 

exceptions processes outlined in 

§ 156.122(c) of this subchapter, 

enrollees and dependents may request 

and gain access to the brand drug when 

clinically appropriate and not otherwise 

covered by the health plan. 

(ii) The mid-year formulary changes 

must not exceed the scope of a uniform 

modification as defined in this 

paragraph (f). 

(iii) All plan enrollees must have 

access to the applicable coverage appeal 

process under § 147.136 of this 

subchapter or the drug exception 

request process under § 156.122(c) of 

this subchapter to request access to the 

equivalent brand drug or drugs. 

* * * * * 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 3. The authority citation for part 147 

is revised to read as follows: 

Authority: 42 U.S.C. 300gg through 300gg– 

63, 300gg–91, and 300gg–92. 

■ 4. Section 147.106 is amended by 

revising paragraphs (a) and (e)(1) 

introductory text and adding paragraph 

(e)(5) to read as follows: 

§ 147.106 Guaranteed renewability of 

coverage. 

(a) General rule. Subject to paragraphs 

(b) through (e) of this section, a health 

insurance issuer offering health 

insurance coverage in the individual, 

small group, or large group market is 

required to renew or continue in force 

the coverage at the option of the plan 

sponsor or the individual, as applicable. 

* * * * * 

(e) * * * 

(1) Subject to paragraph (e)(5) of this 

section, 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: 

* * * * * 

(5) For plan years beginning on or 

after January 1, 2020, a health insurance 

issuer may make the following mid-year 

formulary changes, to the extent 

permitted by applicable State law: It 

may add a generic equivalent to a 


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formulary within a reasonable time after 

the generic equivalent becomes 

available, and, if it does so, it may 

remove the equivalent brand drug or 

drugs from the formulary or move the 

equivalent brand drug or drugs to a 

higher formulary drug tier. If the issuer 

makes any such changes: 

(i) The issuer must notify plan 

enrollees in writing a minimum of 60 

days prior to making the changes. This 

notice must identify the name of the 

brand drug that is the subject of the 

change, disclose whether the brand drug 

will be removed from the formulary or 

placed on a different cost-sharing tier, 

provide the name of the generic 

equivalent that will be made available, 

specify the date the changes will 

become effective, and state that under 

the appeals processes outlined in 

§ 147.136 of this subchapter or the 

exceptions processes outlined in 

§ 156.122(c) of this subchapter, 

enrollees and dependents may request 

and gain access to the brand drug when 

clinically appropriate and not otherwise 

covered by the health plan. 

(ii) The mid-year formulary changes 

must not exceed the scope of a uniform 

modification as defined in this 

paragraph (e). 

(iii) All plan enrollees must have 

access to the applicable coverage appeal 

process under § 147.136 of this 

subchapter or the drug exception 

request process under § 156.122(c) of 

this subchapter to request access to the 

equivalent brand drug or drugs. 

* * * * * 

PART 148—REQUIREMENTS FOR THE 

INDIVIDUAL HEALTH INSURANCE 

MARKET 

■ 5. The authority citation for part 148 

is revised to read as follows: 

Authority: 42 U.S.C. 300gg through 300gg– 

63, 300gg–11 300gg–91, and 300gg–92, as 

amended. 

■ 6. Section 148.122 is amended by 

revising paragraphs (b)(1) and (g)(1) and 

adding paragraph (g)(5) to read as 

follows: 

§ 148.122 Guaranteed renewability of 

individual health insurance coverage. 

* * * * * 

(b) * * * 

(1) Except as provided in paragraphs 

(c) through (g) of this section, an issuer 

must renew or continue in force the 

coverage at the option of the individual. 

* * * * * 

(g) * * * 

(1) Subject to paragraph (g)(5) of this 

section, an issuer may, only at the time 

of coverage renewal, modify the health 

insurance coverage for a product offered 

in the individual market if the 

modification is consistent with State 

law and is effective uniformly for all 

individuals with that product. 

* * * * * 

(5) For plan years beginning on or 

after January 1, 2020, an individual 

market health insurance issuer may 

make the following mid-year formulary 

changes, to the extent permitted by 

applicable State law: It may add a 

generic equivalent to a formulary within 

a reasonable time after the generic 

equivalent becomes available, and, if it 

does so, it may remove the equivalent 

brand drug or drugs from the formulary 

or move the equivalent brand drug or 

drugs to a higher formulary drug tier. If 

the issuer makes any such changes: 

(i) The issuer must notify plan 

enrollees in writing a minimum of 60 

days prior to making the changes. This 

notice must identify the name of the 

brand drug that is the subject of the 

change, disclose whether the brand drug 

will be removed from the formulary or 

placed on a different cost-sharing tier, 

provide the name of the generic 

equivalent that will be made available, 

specify the date the changes will 

become effective, and state that under 

the appeals processes outlined in 

§ 147.136 of this subchapter or the 

exceptions processes outlined in 

§ 156.122(c) of this subchapter, 

enrollees and dependents may request 

and gain access to the brand drug when 

clinically appropriate and not otherwise 

covered by the health plan. 

(ii) The mid-year formulary changes 

must not exceed the scope of a uniform 

modification as defined in this 

paragraph (g). 

(iii) All plan enrollees must have 

access to the applicable coverage appeal 

process under § 147.136 of this 

subchapter or the drug exception 

request process under § 156.122(c) of 

this subchapter to request access to the 

equivalent brand drug or drugs. 

* * * * * 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS, 

AND RISK ADJUSTMENT UNDER THE 

AFFORDABLE CARE ACT 

■ 7. The authority citation for part 153 

is revised to read as follows: 

Authority: 42 U.S.C. 18031, 18041, and 

18061 through 18063. 

■ 8. Section 153.320 is amended by 

revising paragraph (d)(3) to read as 

follows: 

§ 153.320 Federally certified risk 

adjustment methodology. 

* * * * * 

(d) * * * 

(3) Publication of Reduction Requests. 

HHS will publish State reduction 

requests in the applicable benefit year’s 

HHS notice of benefit and payment 

parameters proposed rule and make the 

supporting evidence available to the 

public for comment, except to the extent 

the State requests HHS not publish 

certain supporting evidence because it 

contains trade secrets or confidential 

commercial or financial information as 

defined in HHS’s Freedom of 

Information regulations under 45 CFR 

5.31(d). HHS will publish any approved 

State reduction requests or denied State 

reduction requests in the applicable 

benefit year’s HHS notice of benefit and 

payment parameters final rule. 

* * * * * 

■ 9. Section 153.630 is amended by 

revising paragraphs (b)(10) and (d)(2) 

and adding paragraph (g) to read as 

follows: 

§ 153.630 Data validation requirements 

when HHS operates risk adjustment. 

* * * * * 

(b) * * * 

(10) If an issuer of a risk adjustment 

covered plan fails to engage an initial 

validation auditor or to submit the 

results of an initial validation audit to 

HHS, HHS will impose a default data 

validation charge. 

* * * * * 

(d) * * * 

(2) Within 15 calendar days of the 

notification by HHS of the findings of a 

second validation audit (if applicable) 

or the calculation of a risk score error 

rate, in the manner set forth by HHS, an 

issuer must confirm the findings of the 

second validation audit (if applicable) 

or the calculation of the risk score error 

rate as a result of risk adjustment data 

validation, or file a discrepancy report 

to dispute the findings of a second 

validation audit (if applicable) or the 

calculation of a risk score error rate as 

a result of risk adjustment data 

validation. 

* * * * * 

(g) Exemptions. An issuer of a risk 

adjustment covered plan will be 

exempted by HHS from the data 

validation requirement set forth in 

paragraph (b) of this section for a given 

benefit year if: 

(1) The issuer has 500 or fewer 

billable member months of enrollment 

in the individual, small group and 

merged markets (as applicable) for the 

applicable benefit year, calculated on a 

Statewide basis beginning with the 2017 

benefit year of risk adjustment data 

validation; 

(2) The issuer is at or below the 

materiality threshold as defined by HHS 


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and is not selected by HHS to 

participate in the data validation 

requirements in an applicable benefit 

year under random and targeted 

sampling conducted approximately 

every 3 years (barring any risk-based 

triggers based on experience that would 

warrant more frequent audits) beginning 

with the 2018 benefit year of risk 

adjustment data validation; or 

(3) The issuer is in liquidation, or will 

enter liquidation no later than April 

30th of the benefit year that is 2 benefit 

years after the benefit year being 

audited, provided that: 

(i) Beginning with the 2017 benefit 

year and beyond, the issuer provides to 

HHS, in the manner and timeframe 

specified by HHS, an attestation that the 

issuer is in liquidation or will enter 

liquidation no later than April 30th of 

the benefit year that is 2 benefit years 

after the benefit year being audited that 

is signed by an individual with the 

authority to legally and financially bind 

the issuer; and 

(ii) Beginning with the 2018 benefit 

year and beyond, the issuer is not a 

positive error rate outlier under the 

error estimation methodology in risk 

adjustment data validation for the prior 

benefit year of risk adjustment data 

validation. 

(iii) For purposes of this paragraph 

(g)(3), liquidation means that a State 

court has issued an order of liquidation 

for the issuer that fixes the rights and 

liabilities of the issuer and its creditors, 

policyholders, shareholders, members, 

and all other persons of interest. 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 10. The authority citation for part 155 

is revised to read as follows: 

Authority: 42 U.S.C. 18021–18024, 18031– 

18033, 18041–18042, 18051, 18054, 18071, 

and 18081–18083. 

■ 11. Section 155.20 is amended by 

adding in alphabetical order definitions 

for ‘‘Direct enrollment entity,’’ ‘‘Direct 

enrollment entity application assister,’’ 

‘‘Direct enrollment technology 

provider,’’ and ‘‘Web-broker’’ to read as 

follows: 

§ 155.20 Definitions. 

* * * * * 

Direct enrollment entity means an 

entity that an Exchange permits to assist 

consumers with direct enrollment in 

qualified health plans offered through 

the Exchange in a manner considered to 

be through the Exchange as authorized 

by § 155.220(c)(3), § 155.221, or 

§ 156.1230 of this subchapter. 

Direct enrollment entity application 

assister means an employee, contractor, 

or agent of a direct enrollment entity 

who is not licensed as an agent, broker, 

or producer under State law and who 

assists individuals in the individual 

market with applying for a 

determination or redetermination of 

eligibility for coverage through the 

Exchange or for insurance affordability 

programs. 

Direct enrollment technology provider 

means a type of web-broker business 

entity that is not a licensed agent, 

broker, or producer under State law and 

has been engaged or created by, or is 

owned by an agent or broker, to provide 

technology services to facilitate 

participation in direct enrollment under 

§§ 155.220(c)(3) and 155.221. 

* * * * * 

Web-broker means an individual 

agent or broker, group of agents or 

brokers, or business entity registered 

with an Exchange under § 155.220(d)(1) 

that develops and hosts a non-Exchange 

website that interfaces with an 

Exchange to assist consumers with 

direct enrollment in qualified health 

plans offered through the Exchange as 

described in §§ 155.220(c)(3) and 

155.221. The term also includes a direct 

enrollment technology provider. 

■ 12. Section 155.205 is amended by 

revising paragraph (a) to read as follows: 

§ 155.205 Consumer assistance tools and 

programs of an Exchange. 

(a) Call center. The Exchange must 

provide for operation of a toll-free call 

center that addresses the needs of 

consumers requesting assistance and 

meets the requirements outlined in 

paragraphs (c)(1), (c)(2)(i), and (c)(3) of 

this section, unless it is an Exchange 

described in paragraphs (a)(1) or (2) of 

this section, in which case, the 

Exchange must provide at a minimum a 

toll-free telephone hotline that includes 

the capability to provide information to 

consumers about eligibility and 

enrollment processes, and to 

appropriately direct consumers to the 

applicable Exchange website and other 

applicable resources. 

(1) An Exchange described in this 

paragraph is one that enters into a 

Federal platform agreement through 

which it relies on HHS to operate its 

eligibility and enrollment functions, as 

applicable. 

(2) An Exchange described in this 

paragraph is a SHOP that does not 

provide for enrollment in SHOP 

coverage through an online SHOP 

enrollment platform, but rather provides 

for enrollment through SHOP issuers or 

agents and brokers registered with the 

Exchange. 

* * * * * 

■ 13. Section 155.210 is amended by: 

■ a. Revising paragraph (b)(2) 

introductory text and paragraphs 

(b)(2)(iii) and (iv); 

■ b. Removing paragraphs (b)(2)(v) 

through (ix); and 

■ c. Revising the paragraph (e)(9) 

introductory text. 

The revisions read as follows: 

§ 155.210 Navigator program standards. 

* * * * * 

(b) * * * 

(2) A set of training standards, to be 

met by all entities and individuals 

carrying out Navigator functions under 

the terms of a Navigator grant, to ensure 

the entities and individuals are 

qualified to engage in Navigator 

activities, including training standards 

on the following topics: 

* * * * * 

(iii) The range of QHP options and 

insurance affordability programs; and 

(iv) The privacy and security 

standards applicable under § 155.260. 

* * * * * 

(e) * * * 

(9) The Exchange may require or 

authorize Navigators to provide 

information and assistance with any of 

the following topics. In Federallyfacilitated Exchanges, Navigators are 

required to provide information and 

assistance with all of the following 

topics under Navigator grants awarded 

in 2018, and will be authorized to 

provide information and assistance with 

all of the following topics under 

Navigator grants awarded in 2019 or any 

later year. 

* * * * * 

■ 14. Section 155.215 is amended by 

revising paragraph (b)(2) 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. 

* * * * * 

(b) * * * 

(2) Training module content 

standards. All individuals who carry 

out the consumer assistance functions 

under §§ 155.205(d) and (e) and 155.210 

of this subpart must receive training 

consistent with standards established by 

the Exchange consistent with 

§ 155.210(b)(2) of this subpart. 

* * * * * 

■ 15. Section 155.220 is amended by: 


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■ a. Revising the section heading; 

■ b. Revising paragraphs (a) 

introductory text, (c) introductory text, 

(c)(1), (c)(3)(i) introductory text and 

(c)(3)(i)(A), (D), (K) and (L), (c)(3)(ii) 

introductory text, (c)(4) introductory 

text, (c)(4)(i) introductory text, 

(c)(4)(i)(A), (E) and (F), (c)(4)(ii), (c)(5), 

(d) introductory text, (d)(2), (e), (f)(1) 

and (2), (f)(3) introductory text, (f)(3)(i), 

(f)(4), (g)(1), (g)(2) introductory text, 

(g)(3) and (4), (g)(5)(i) through (iii), (h), 

(i), (j)(1) introductory text, (j)(3), (k)(1) 

introductory text, and (k)(2); 

■ c. Adding paragraph (k)(3); 

■ d. Revising paragraph (l); and 

■ e. Adding paragraph (m). 

The additions and revisions read as 

follows: 

§ 155.220 Ability of States to permit agents 

and brokers and web-brokers to assist 

qualified individuals, qualified employers, 

or qualified employees enrolling in QHPs. 

(a) General rule. A State may permit 

agents, brokers, and web-brokers to— 

* * * * * 

(c) Enrollment through the Exchange. 

A qualified individual may be enrolled 

in a QHP through the Exchange with the 

assistance of an agent, broker, or webbroker if— 

(1) The agent, broker, or web-broker 

ensures the applicant’s completion of an 

eligibility verification and enrollment 

application through the Exchange 

internet website as described in 

§ 155.405, or ensures that the eligibility 

application information is submitted for 

an eligibility determination through the 

Exchange-approved web service subject 

to meeting the requirements in 

paragraphs (c)(3)(ii) and (c)(4)(i)(F) of 

this section; 

* * * * * 

(3)(i) When an internet website of a 

web-broker is used to complete the QHP 

selection, at a minimum the internet 

website must: 

(A) Disclose and display all QHP 

information provided by the Exchange 

or directly by QHP issuers consistent 

with the requirements of § 155.205(b)(1) 

and (c), and to the extent that not all 

information required under 

§ 155.205(b)(1) is displayed on the webbroker’s internet website for a QHP, 

prominently display a standardized 

disclaimer provided by HHS stating that 

information required under 

§ 155.205(b)(1) for the QHP is available 

on the Exchange website, and provide a 

Web link to the Exchange website; 

* * * * * 

(D) When permitted under state law, 

Navigators and certified application 

counselors may use the website of a 

web-broker while assisting an applicant 

to enroll in a QHP offered through the 

Exchange if: 

(1) The website displays all QHP data 

provided by the Exchange consistent 

with the requirements of § 155.205(b)(1) 

and (c), and to the extent the web-broker 

website does not facilitate enrollment in 

all QHPs offered through the Exchange, 

identifies such QHPs (if any) to 

consumers by prominently displaying a 

standardized disclaimer provided by the 

Exchange, in a manner and form 

specified by the Exchange, stating that 

enrollment in such QHPs can be 

completed through the Exchange 

website and providing a link to the 

Exchange website; and 

(2) The web-broker who makes its 

website available may complete an 

annual certification process with the 

Exchange, in the manner and form 

specified by the Exchange, by attesting 

to its compliance with the requirements 

in paragraph (c)(3)(i)(D)(1) of this 

section; 

* * * * * 

(K) Comply with the applicable 

requirements in § 155.221; and 

(L) Not display QHP 

recommendations based on 

compensation the agent, broker, or webbroker receives from QHP issuers. 

(ii) When an internet website of a 

web-broker is used to complete the 

Exchange eligibility application, at a 

minimum the internet website must: 

* * * * * 

(4) When an agent or broker, through 

a contract or other arrangement, uses the 

internet website of a web-broker to help 

an applicant or enrollee complete a QHP 

selection or complete the Exchange 

eligibility application in the Federallyfacilitated Exchange: 

(i) The web-broker who makes the 

website available must: 

(A) Provide HHS with a list of agents 

and brokers who enter into such a 

contract or other arrangement to use the 

web-broker’s website, in a form and 

manner to be specified by HHS; 

* * * * * 

(E) Report to HHS and applicable 

State departments of insurance any 

potential material breach of the 

standards in paragraphs (c) and (d) of 

this section, or the agreement entered 

into under § 155.260(b), by the agent or 

broker accessing the internet website, 

should it become aware of any such 

potential breach. A web-broker that 

provides access to its website to 

complete the QHP selection or the 

Exchange eligibility application or 

ability to transact information with HHS 

to another web-broker website is 

responsible for ensuring compliance 

with applicable requirements in 

paragraph (c)(3) of this section for any 

web pages of the other web-broker’s 

website that assist consumers, 

applicants, qualified individuals, and 

enrollees in applying for APTC and 

CSRs for QHPs, or in completing 

enrollment in QHPs, offered in the 

Exchanges. 

(F) When an internet website of a 

web-broker is used to complete the 

Exchange eligibility application, obtain 

HHS approval verifying that all 

requirements in this section are met. 

(ii) HHS retains the right to 

temporarily suspend the ability of the 

web-broker making its website available 

to transact information with HHS, if 

HHS discovers a security and privacy 

incident or breach, for the period in 

which HHS begins to conduct an 

investigation and until the incident or 

breach is remedied to HHS’s 

satisfaction. 

(5) HHS or its designee may 

periodically monitor and audit an agent, 

broker, or web-broker under this subpart 

to assess its compliance with the 

applicable requirements of this section. 

(d) Agreement. An agent, broker, or 

web-broker that enrolls qualified 

individuals in a QHP in a manner that 

constitutes enrollment through the 

Exchange or assists individuals in 

applying for advance payments of the 

premium tax credit and cost-sharing 

reductions for QHPs must comply with 

the terms of an agreement between the 

agent, broker, or web-broker and the 

Exchange under which the agent, 

broker, or web-broker at least: 

* * * * * 

(2) Receives training in the range of 

QHP options and insurance affordability 

programs, except that a licensed agent 

or broker entity that registers with the 

Federally-facilitated Exchange in its 

capacity as a business organized under 

the laws of a State, and not as an 

individual person, and direct 

enrollment technology providers are 

exempt from this requirement; and 

* * * * * 

(e) Compliance with State law. An 

agent, broker, or web-broker that enrolls 

qualified individuals in a QHP in a 

manner that constitutes enrollment 

through the Exchange or assists 

individuals in applying for advance 

payments of the premium tax credit and 

cost-sharing reductions for QHPs must 

comply with applicable State law 

related to agents, brokers, or webbrokers including applicable State law 

related to confidentiality and conflicts 

of interest. 

(f) * * * 

(1) An agent, broker, or web-broker 

may terminate its agreement with HHS 


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by sending to HHS a written notice at 

least 30 days in advance of the date of 

intended termination. 

(2) The notice must include the 

intended date of termination, but if it 

does not specify a date of termination, 

or the date provided is not acceptable to 

HHS, HHS may set a different 

termination date that will be no less 

than 30 days from the date on the 

agent’s, broker’s, or web-broker’s notice 

of termination. 

(3) Prior to the date of termination, an 

agent, broker, or web-broker should— 

(i) Notify applicants, qualified 

individuals, or enrollees that the agent, 

broker, or web-broker is assisting, of the 

agent’s, broker’s, or web-broker’s 

intended date of termination; 

* * * * * 

(4) When the agreement between the 

agent, broker, or web-broker and the 

Exchange under paragraph (d) of this 

section is terminated under paragraph 

(f) of this section, the agent, broker, or 

web-broker will no longer be registered 

with the Federally-facilitated 

Exchanges, or be permitted to assist 

with or facilitate enrollment of qualified 

individuals, qualified employers or 

qualified employees in coverage in a 

manner that constitutes enrollment 

through a Federally-facilitated 

Exchange, or be permitted to assist 

individuals in applying for advance 

payments of the premium tax credit and 

cost-sharing reductions for QHPs. The 

agent’s, broker’s, or web-broker’s 

agreement with the Exchange under 

§ 155.260(b) will also be terminated 

through the termination without cause 

process set forth in that agreement. The 

agent, broker, or web-broker must 

continue to protect any personally 

identifiable information accessed during 

the term of either of these agreements 

with the Federally-facilitated 

Exchanges. 

(g) * * * 

(1) If, in HHS’s determination, a 

specific finding of noncompliance or 

pattern of noncompliance is sufficiently 

severe, HHS may terminate an agent’s, 

broker’s, or web-broker’s agreement 

with the Federally-facilitated Exchange 

for cause. 

(2) An agent, broker, or web-broker 

may be determined noncompliant if 

HHS finds that the agent, broker, or 

web-broker violated— 

* * * * * 

(iii) Any State law applicable to 

agents, brokers, or web-brokers, as 

required under paragraph (e) of this 

section, including but not limited to 

State laws related to confidentiality and 

conflicts of interest; or 

(iv) Any Federal law applicable to 

agents, brokers, or web-brokers. 

* * * * * 

(3)(i) Except as provided in paragraph 

(g)(3)(ii) of this section, HHS will notify 

the agent, broker, or web-broker of the 

specific finding of noncompliance or 

pattern of noncompliance made under 

paragraph (g)(1) of this section, and after 

30 days from the date of the notice, may 

terminate the agreement for cause if the 

matter is not resolved to the satisfaction 

of HHS. 

(ii) HHS may immediately terminate 

the agreement for cause upon notice to 

the agent or broker without any further 

opportunity to resolve the matter if an 

agent or broker fails to maintain the 

appropriate license under State law as 

an agent, broker, or insurance producer 

in every State in which the agent or 

broker actively assists consumers with 

applying for advance payments of the 

premium tax credit or cost-sharing 

reductions or with enrolling in QHPs 

through the Federally-facilitated 

Exchanges. 

(4) After the applicable period in 

paragraph (g)(3) of this section has 

elapsed and the agreement under 

paragraph (d) of this section is 

terminated, the agent, broker, or webbroker will no longer be registered with 

the Federally-facilitated Exchanges, or 

be permitted to assist with or facilitate 

enrollment of a qualified individual, 

qualified employer, or qualified 

employee in coverage in a manner that 

constitutes enrollment through a 

Federally-facilitated Exchange, or be 

permitted to assist individuals in 

applying for advance payments of the 

premium tax credit and cost-sharing 

reductions for QHPs. The agent’s, 

broker’s, or web-broker’s agreement 

with the Exchange under § 155.260(b)(2) 

will also be terminated through the 

process set forth in that agreement. The 

agent, broker, or web-broker must 

continue to protect any personally 

identifiable information accessed during 

the term of either of these agreements 

with the Federally-facilitated 

Exchanges. 

(5) * * * 

(i)(A) If HHS reasonably suspects that 

an agent, broker, or web-broker may 

have may have engaged in fraud, or in 

abusive conduct that may cause 

imminent or ongoing consumer harm 

using personally identifiable 

information of an Exchange enrollee or 

applicant or in connection with an 

Exchange enrollment or application, 

HHS may temporarily suspend the 

agent’s, broker’s, or web-broker’s 

agreements required under paragraph 

(d) of this section and under 

§ 155.260(b) for up to 90 calendar days. 

Suspension will be effective on the date 

of the notice that HHS sends to the 

agent, broker, or web-broker advising of 

the suspension of the agreements. 

(B) The agent, broker, or web-broker 

may submit evidence in a form and 

manner to be specified by HHS, to rebut 

the allegation during this 90-day period. 

If the agent, broker, or web-broker 

submits such evidence during the 

suspension period, HHS will review the 

evidence and make a determination 

whether to lift the suspension within 30 

days of receipt of such evidence. If the 

rebuttal evidence does not persuade 

HHS to lift the suspension, or if the 

agent, broker, or web-broker fails to 

submit rebuttal evidence during the 

suspension period, HHS may terminate 

the agent’s, broker’s, or web-broker’s 

agreements required under paragraph 

(d) of this section and under 

§ 155.260(b) for cause under paragraph 

(g)(5)(ii) of this section. 

(ii) If there is a finding or 

determination by a Federal or State 

entity that an agent, broker, or webbroker engaged in fraud, or abusive 

conduct that may result in imminent or 

ongoing consumer harm, using 

personally identifiable information of 

Exchange enrollees or applicants or in 

connection with an Exchange 

enrollment or application, HHS will 

terminate the agent’s, broker’s, or webbroker’s agreements required under 

paragraph (d) of this section and under 

§ 155.260(b) for cause. The termination 

will be effective starting on the date of 

the notice that HHS sends to the agent, 

broker, or web-broker advising of the 

termination of the agreements. 

(iii) During the suspension period 

under paragraph (g)(5)(i) of this section 

and following termination of the 

agreements under paragraph (g)(5)(i)(B) 

or (g)(5)(ii) of this section, the agent, 

broker, or web-broker will not be 

registered with the Federally-facilitated 

Exchanges, or be permitted to assist 

with or facilitate enrollment of qualified 

individuals, qualified employers, or 

qualified employees in coverage in a 

manner that constitutes enrollment 

through a Federally-facilitated 

Exchange, or be permitted to assist 

individuals in applying for advance 

payments of the premium tax credit and 

cost-sharing reductions for QHPs. The 

agent, broker, or web-broker must 

continue to protect any personally 

identifiable information accessed during 

the term of either of these agreements 

with the Federally-facilitated 

Exchanges. 

* * * * * 


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(h) Request for reconsideration of 

termination for cause from the 

Federally-facilitated Exchange—(1) 

Request for reconsideration. An agent, 

broker, or web-broker whose agreement 

with the Federally-facilitated Exchange 

has been terminated may request 

reconsideration of such action in the 

manner and form established by HHS. 

(2) Timeframe for request. The agent, 

broker, or web-broker must submit a 

request for reconsideration to the HHS 

reconsideration entity within 30 

calendar days of the date of the written 

notice from HHS. 

(3) Notice of reconsideration decision. 

The HHS reconsideration entity will 

provide the agent, broker, or web-broker 

with a written notice of the 

reconsideration decision within 30 

calendar days of the date it receives the 

request for reconsideration. This 

decision will constitute HHS’s final 

determination. 

* * * * * 

(i) Use of agents’ and brokers’ and 

web-brokers’ internet websites for 

SHOP. For plan years beginning on or 

after January 1, 2015, in States that 

permit this activity under State law, a 

SHOP may permit agents, brokers, and 

web-brokers to use an internet website 

to assist qualified employers and 

facilitate enrollment of enrollees in a 

QHP through the Exchange, under 

paragraph (c)(3) of this section. 

(j) * * * 

(1) An agent, broker, or web-broker 

that assists with or facilitates enrollment 

of qualified individuals, qualified 

employers, or qualified employees, in 

coverage in a manner that constitutes 

enrollment through a Federallyfacilitated Exchange, or assists 

individuals in applying for advance 

payments of the premium tax credit and 

cost-sharing reductions for QHPs sold 

through a Federally-facilitated 

Exchange, must— 

* * * * * 

(3) If an agent, broker, or web-broker 

fails to provide correct information, he, 

she, or it will nonetheless be deemed in 

compliance with paragraphs (j)(2)(i) and 

(ii) of this section if HHS determines 

that there was a reasonable cause for the 

failure to provide correct information 

and that the agent, broker, or web-broker 

acted in good faith. 

(k) * * * 

(1) If HHS determines that an agent, 

broker, or web-broker has failed to 

comply with the requirements of this 

section, in addition to any other 

available remedies, that agent, broker, or 

web-broker— 

* * * * * 

(2) HHS will notify the agent, broker, 

or web-broker of the proposed 

imposition of penalties under paragraph 

(k)(1)(i) of this section as part of the 

termination notice issued under 

paragraph (g) and, after 30 calendar days 

from the date of the notice, may impose 

the penalty if the agent, broker, or webbroker has not requested a 

reconsideration under paragraph (h) of 

this section. The proposed imposition of 

penalties under paragraph (k)(1)(ii) of 

this section will follow the process 

outlined under § 155.285. 

(3) HHS may immediately suspend 

the agent’s or broker’s ability to transact 

information with the Exchange if HHS 

discovers circumstances that pose 

unacceptable risk to Exchange 

operations or Exchange information 

technology systems until the incident or 

breach is remedied or sufficiently 

mitigated to HHS’s satisfaction. 

(l) Application to State Exchanges 

using a Federal platform. An agent, 

broker, or web-broker who enrolls 

qualified individuals, qualified 

employers, or qualified employees in 

coverage in a manner that constitutes 

enrollment through an State Exchange 

using a Federal platform, or assists 

individual market consumers with 

submission of applications for advance 

payments of the premium tax credit and 

cost-sharing reductions through an State 

Exchange using a Federal platform must 

comply with all applicable Federallyfacilitated Exchange standards in this 

section. 

(m) Web-broker agreement 

suspension, termination, and denial and 

information collection. (1) A webbroker’s agreement executed under 

paragraph (d) of this section, may be 

suspended or terminated under 

paragraph (g) of this section, and a webbroker may be denied the right to enter 

into agreements with the Federallyfacilitated Exchanges under paragraph 

(k)(1)(i) of this section, based on the 

actions of its officers, employees, 

contractors, or agents, whether or not 

the officer, employee, contractor, or 

agent is registered with the Exchange as 

an agent or broker. 

(2) A web-broker’s agreement 

executed under paragraph (d) of this 

section may be suspended or terminated 

under paragraph (g) of this section, and 

a web-broker may be denied the right to 

enter into agreements with the 

Federally-facilitated Exchanges under 

paragraph (k)(1)(i) of this section, if it is 

under the common ownership or control 

or is an affiliated business of another 

web-broker that had its agreement 

suspended or terminated under 

paragraph (g) of this section. 

(3) The Exchange may collect 

information from a web-broker during 

its registration with the Exchange under 

paragraph (d)(1) of this section, or at 

another time on an annual basis, in a 

form and manner to be specified by 

HHS, sufficient to establish the 

identities of the individuals who 

comprise its corporate ownership and 

leadership and to ascertain any 

corporate or business relationships it 

has with other entities that may seek to 

register with the Federally-facilitated 

Exchange as web-brokers. 

■ 16. Section 155.221 is amended by: 

■ a. Revising the section heading; 

■ b. Redesignating paragraphs (a), (b), 

and (c) as paragraphs (e), (f), and (g), 

respectively; 

■ c. Adding new paragraphs (a), (b), and 

(c) and adding paragraph (d); 

■ d. Revising newly redesignated 

paragraphs (e), (f) introductory text, 

(f)(2) through (4) and (6) and (7), and (g); 

and 

■ e. Adding paragraph (h). 

The revisions and additions read as 

follows: 

§ 155.221 Standards for direct enrollment 

entities and for third-parties to perform 

audits of direct enrollment entities. 

(a) Direct enrollment entities. The 

Federally-facilitated Exchanges will 

permit the following entities to assist 

consumers with direct enrollment in 

QHPs offered through the Exchange in 

a manner that is considered to be 

through the Exchange, to the extent 

permitted by applicable State law: 

(1) QHP issuers that meet the 

applicable requirements in this section 

and § 156.1230 of this subchapter; and 

(2) Web-brokers that meet the 

applicable requirements in this section 

and § 155.220. 

(b) Direct enrollment entity 

requirements. For the Federallyfacilitated Exchanges, a direct 

enrollment entity must: 

(1) Display and market QHPs and 

non-QHPs on separate website pages on 

its non-Exchange website; 

(2) Prominently display a 

standardized disclaimer in the form and 

manner provided by HHS; 

(3) Limit marketing of non-QHPs 

during the Exchange eligibility 

application and QHP plan selection 

process in a manner that minimizes the 

likelihood that consumers will be 

confused as to what products are 

available through the Exchange and 

what products are not; 

(4) Demonstrate operational readiness 

and compliance with applicable 

requirements prior to the direct 

enrollment entity’s internet website 

being used to complete an Exchange 


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eligibility application or a QHP 

selection; and 

(5) Comply with applicable Federal 

and State requirements. 

(c) Direct enrollment entity 

application assister requirements. For 

the Federally-facilitated Exchanges, to 

the extent permitted under state law, a 

direct enrollment entity may permit its 

direct enrollment entity application 

assisters, as defined at § 155.20, to assist 

individuals in the individual market 

with applying for a determination or 

redetermination of eligibility for 

coverage through the Exchange and for 

insurance affordability programs, 

provided that such direct enrollment 

entity ensures that each of its direct 

enrollment entity application assisters 

meets the requirements in § 155.415(b). 

(d) Federally-facilitated Exchange 

direct enrollment entity suspension. 

HHS may immediately suspend the 

direct enrollment entity’s ability to 

transact information with the Exchange 

if HHS discovers circumstances that 

pose unacceptable risk to the accuracy 

of the Exchange’s eligibility 

determinations, Exchange operations, or 

Exchange information technology 

systems until the incident or breach is 

remedied or sufficiently mitigated to 

HHS’s satisfaction. 

(e) Third parties to perform audits of 

direct enrollment entities. A direct 

enrollment entity must engage an 

independent, third-party entity to 

conduct an initial and annual review to 

demonstrate the direct enrollment 

entity’s operational readiness and 

compliance with applicable direct 

enrollment entity requirements in 

accordance with paragraph (b)(4) of this 

section prior to the direct enrollment 

entity’s internet website being used to 

complete an Exchange eligibility 

application or a QHP selection. The 

third-party entity will be a downstream 

or delegated entity of the direct 

enrollment entity that participates or 

wishes to participate in direct 

enrollment. 

(f) Third-party auditor standards. A 

direct enrollment entity must satisfy the 

requirement to demonstrate operational 

readiness under paragraph (e) of this 

section by engaging a third-party entity 

that executes a written agreement with 

the direct enrollment entity under 

which the third-party entity agrees to 

comply with each of the following 

standards: 

* * * * * 

(2) Adheres to HHS specifications for 

content, format, privacy, and security in 

the conduct of an operational readiness 

review, which includes ensuring that 

direct enrollment entities are in 

compliance with the applicable privacy 

and security standards and other 

applicable requirements; 

(3) Collects, stores, and shares with 

HHS all data related to the third-party 

entity’s audit of direct enrollment 

entities in a manner, format, and 

frequency specified by HHS until 10 

years from the date of creation, and 

complies with the privacy and security 

standards HHS adopts for direct 

enrollment entities as required in 

accordance with § 155.260; 

(4) Discloses to HHS any financial 

relationships between the entity and 

individuals who own or are employed 

by a direct enrollment entity for which 

it is conducting an operational readiness 

review; 

* * * * * 

(6) Ensures, on an annual basis, that 

appropriate staff successfully complete 

operational readiness review training as 

established by HHS prior to conducting 

audits under paragraph (e) of this 

section; 

(7) Permits access by the Secretary 

and the Office of the Inspector General 

or their designees in connection with 

their right to evaluate through audit, 

inspection, or other means, to the thirdparty entity’s books, contracts, 

computers, or other electronic systems, 

relating to the third-party entity’s audits 

of a direct enrollment entity’s 

obligations in accordance with 

standards under paragraph (e) of this 

section until 10 years from the date of 

creation of a specific audit; and 

* * * * * 

(g) Multiple auditors. A direct 

enrollment entity may engage multiple 

third-party entities to conduct the audit 

under paragraph (e) of this section. 

(h) Application to State Exchanges 

using a Federal platform. A direct 

enrollment entity that enrolls qualified 

individuals in coverage in a manner that 

constitutes enrollment through a State 

Exchange using a Federal platform, or 

assists individual market consumers 

with submission of applications for 

advance payments of the premium tax 

credit and cost-sharing reductions 

through a State Exchange using a 

Federal platform must comply with all 

applicable federally-facilitated 

Exchange standards in this section. 

■ 17. Section 155.415 is revised to read 

as follows: 

§ 155.415 Allowing issuer or direct 

enrollment entity application assisters to 

assist with eligibility applications. 

(a) Exchange option. An Exchange, to 

the extent permitted by State law, may 

permit issuer application assisters and 

direct enrollment entity application 

assisters, as defined at § 155.20, to assist 

individuals in the individual market 

with applying for a determination or 

redetermination of eligibility for 

coverage through the Exchange and 

insurance affordability programs, 

provided that such issuer application 

assisters or direct enrollment entity 

application assisters meet the 

requirements set forth in paragraph (b) 

of this section. 

(b) Application assister requirements. 

If permitted by an Exchange under 

paragraph (a) of this section, and to the 

extent permitted by State law, an issuer 

may permit its issuer application 

assisters and a direct enrollment entity 

may permit its direct enrollment entity 

application assisters to assist 

individuals in the individual market 

with applying for a determination or 

redetermination of eligibility for 

coverage through the Exchange and for 

insurance affordability programs, 

provided that such issuer or direct 

enrollment entity ensures that each of 

its issuer application assisters or direct 

enrollment entity application assisters 

at least— 

(1) Receives training on QHP options 

and insurance affordability programs, 

eligibility, and benefits rules and 

regulations, and for application assisters 

providing assistance in the Federallyfacilitated Exchanges or a State 

Exchange using a Federal platform, the 

assisters must fulfill this requirement by 

completing registration and training in a 

form and manner to be specified by 

HHS; 

(2) Complies with the Exchange’s 

privacy and security standards adopted 

consistent with § 155.260; and 

(3) Complies with applicable State 

law related to the sale, solicitation, and 

negotiation of health insurance 

products, including any State licensure 

laws applicable to the functions to be 

performed by the issuer application 

assister or direct enrollment entity 

application assister; confidentiality; and 

conflicts of interest. 

■ 18. Section 155.420 is amended— 

■ a. By revising paragraphs (a)(5) and 

(b)(2)(iv); 

■ b. In paragraph (d)(6)(ii) by removing 

‘‘; or’’ and adding in its place ‘‘;’’; 

■ c. In paragraph (d)(6)(iii) by removing 

‘‘.’’ and adding in its place ‘‘;’’; 

■ d. In paragraph (d)(6)(iv) by removing 

‘‘;’’ and adding in its place ‘‘; or’’; and 

■ e. By adding paragraph (d)(6)(v). 

The revisions and addition reads as 

follows: 

§ 155.420 Special enrollment periods. 

(a) * * * 

(5) Prior coverage requirement. 

Qualified individuals who are required 

to demonstrate coverage in the 60 days 


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prior to a qualifying event can either 

demonstrate that they had minimum 

essential coverage as described in 26 

CFR 1.5000A–1(b) or demonstrate that 

they had coverage as described in 

paragraphs (d)(1)(iii) through (iv) of this 

section for 1 or more days during the 60 

days preceding the date of the 

qualifying event; lived in a foreign 

country or in a United States territory 

for 1 or more days during the 60 days 

preceding the date of the qualifying 

event; are an Indian as defined by 

section 4 of the Indian Health Care 

Improvement Act; or lived for 1 or more 

days during the 60 days preceding the 

qualifying event or during their most 

recent preceding enrollment period, as 

specified in §§ 155.410 and 155.420, in 

a service area where no qualified health 

plan was available through the 

Exchange. 

(b) * * * 

(2) * * * 

(iv) If a qualified individual, enrollee, 

or dependent, as applicable, loses 

coverage as described in paragraph 

(d)(1) or (d)(6)(iii) of this section, gains 

access to a new QHP as described in 

paragraph (d)(7) of this section, becomes 

newly eligible for enrollment in a QHP 

through the Exchange in accordance 

with § 155.305(a)(2) as described in 

paragraph (d)(3) of this section, or 

becomes newly eligible for advance 

payments of the premium tax credit in 

conjunction with a permanent move as 

described in paragraph (d)(6)(iv) of this 

section, and if the plan selection is 

made on or before the day of the 

triggering event, the Exchange must 

ensure that the coverage effective date is 

the first day of the month following the 

date of the triggering event. If the plan 

selection is made after the date of the 

triggering event, the Exchange must 

ensure that coverage is effective in 

accordance with paragraph (b)(1) of this 

section or on the first day of the 

following month, at the option of the 

Exchange. 

* * * * * 

(d) * * * 

(6) * * * 

(v) At the option of the Exchange, the 

qualified individual, or his or her 

dependent— 

(A) Experiences a decrease in 

household income; 

(B) Is newly determined eligible by 

the Exchange for advanced payments of 

the premium tax credit; and 

(C) Had minimum essential coverage 

as described in 26 CFR 1.5000A–1(b) for 

one or more days during the 60 days 

preceding the date of the financial 

change. 

* * * * * 

■ 19. Section 155.605 is amended by 

adding paragraph (e)(5) to read as 

follows: 

§ 155.605 Eligibility standards for 

exemptions. 

* * * * * 

(e) * * * 

(5) General Hardship. The IRS may 

allow an applicant to claim the 

exemption specified in HHS Guidance 

published September 12, 2018, entitled, 

‘‘Guidance on Claiming a Hardship 

Exemption through the Internal 

Revenue Service (IRS)’’ (see https://

www.cms.gov/CCIIO/Resources/ 

Regulations-and-Guidance/Downloads/ 

Authority-to-Grant-HS-Exemptions2018-Final-91218.pdf) and in IRS Notice 

2019–05 (see https://www.irs.gov/pub/ 

irs-drop/n-19–05.pdf), for the 2018 tax 

year. 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 20. The authority citation for part 156 

continues to read as follows: 

Authority: 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. 

■ 21. Section 156.122 is amended by 

adding paragraph (d)(3) to read as 

follows: 

§ 156.122 Prescription drug benefits. 

* * * * * 

(d) * * * 

(3) For plan years beginning on or 

after January 1, 2020, QHP issuers in a 

Federally-facilitated Exchange must 

notify HHS annually in an HHSspecified format of any mid-year 

formulary changes made in the prior 

plan year consistent with 45 CFR 

147.106(e). 

* * * * * 

■ 22. Section 156.130 is amended by 

adding paragraph (h) to read as follows: 

§ 156.130 Cost-sharing requirements. 

* * * * * 

(h) Use of generic drugs and coupons. 

For plan years beginning on or after 

January 1, 2020: 

(1) Notwithstanding any other 

provision of this section, for plans that 

cover both a brand drug that is a 

prescription drug and its generic 

equivalent, only the amount of cost 

sharing that would have been paid for 

the generic equivalent is required to 

count toward the annual limitation on 

cost sharing as defined in paragraph (a) 

of this section when: 

(i) An enrollee purchases a brand 

drug, if a generic alternative is available 

and medically appropriate for the 

enrollee; 

(ii) The plan has an exceptions 

process under section 156.122(c) of this 

subpart, and coverage of the brand drug 

has not been required under that 

process; and 

(iii) Notwithstanding the general rule 

that all prescription drugs covered by 

such a plan are considered EHB, the 

plan treats the covered brand drug as 

being in addition to EHB under the 

circumstances described in this 

paragraphs (h)(1)(i) and (ii) of this 

section. 

(2) Notwithstanding any other 

provision of this section, amounts paid 

toward cost sharing using any form of 

direct support offered by drug 

manufacturers to insured patients to 

reduce or eliminate immediate out-ofpocket costs for specific prescription 

brand drugs that have a generic 

equivalent is not required to be counted 

toward the annual limitation on cost 

sharing (as defined in paragraph (a) of 

this section). 

■ 23. Section 156.280 is amended by 

revising the section heading and adding 

paragraph (c)(3) to read as follows: 

§ 156.280 Rules relating to coverage of 

abortion services and segregation of 

premiums for such services. 

* * * * * 

(c) * * * 

(3) Subject to paragraphs (a) and (b) of 

this section, for plan years 2020 and 

beyond, if a QHP issuer provides 

coverage of services described in 

paragraph (d)(1) of this section in one or 

more QHPs at any actuarial value level 

of coverage specified at § 156.140 of this 

part, the QHP issuer must also offer 

throughout each service area in the 

Exchange in which it offers such 

coverage at least one QHP at any metal 

level that provides otherwise identical 

benefits to one of the QHPs providing 

coverage of services described in 

paragraph (d)(1) of this section, but that 

omits coverage of such services to the 

extent permissible under applicable 

state law. 

* * * * * 

■ 24. Section 156.1230 is amended by— 

■ a. Removing and reserving paragraph 

(a)(2); 

■ b. Revising paragraph (b)(1); 

■ c. Removing paragraph (b)(2); and 

■ d. Redesignating paragraph (b)(3) as 

(b)(2). 

The revisions read as follows: 

§ 156.1230 Direct enrollment with the QHP 

issuer in a manner considered to be 

through the Exchange. 

* * * * * 


amozie on DSK3GDR082PROD with PROPOSALS1
Federal Register / Vol. 84, No. 16 / Thursday, January 24, 2019 / Proposed Rules 321 

(b) * * * 

(1)The QHP issuer must comply with 

applicable requirements in § 155.221 of 

this subchapter. 

* * * * * 

Dated: December 14, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: December 18, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2019–00077 Filed 1–17–19; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 217 

RIN 0648–BI44 

Taking and Importing Marine 

Mammals; Taking Marine Mammals 

Incidental to U.S. Air Force Launches 

and Operations at Vandenberg Air 

Force Base, California 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: NMFS has received a request 

from the U.S. Air Force (USAF) for 

authorization to take marine mammals 

incidental to launching space launch 

vehicles, intercontinental ballistic and 

small missiles, and aircraft and 

helicopter operations at Vandenberg Air 

Force Base (VAFB) from March 2019 to 

March 2024. As required by the Marine 

Mammal Protection Act (MMPA), NMFS 

is proposing regulations to govern that 

take, and requests comments on the 

proposed regulations. NMFS will 

consider public comments prior to 

making any final decision on the 

issuance of the requested incidental take 

regulations and agency responses will 

be summarized in the final notice of our 

decision. 

DATES: Comments and information must 

be received no later than February 22, 

2019. 

ADDRESSES: You may submit comments, 

identified by NOAA–NMFS–2018–0047, 

by any of the following methods: 

• Electronic submissions: submit all 

electronic public comments via the 

Federal eRulemaking Portal, Go to 

www.regulations.gov/ 

#!docketDetail;D=NOAA-NMFS-2018- 

0047, click the ‘‘Comment Now!’’ icon, 

complete the required fields, and enter 

or attach your comments. Alternately, 

electronic comments may be emailed to 

ITP.laws@noaa.gov. 

• Mail: Submit comments to Jolie 

Harrison, Chief, Permits and 

Conservation Division, Office of 

Protected Resources, National Marine 

Fisheries Service, 1315 East-West 

Highway, Silver Spring, MD 20910– 

3225. 

Instructions: Comments sent by any 

other method, to any other address or 

individual, or received after the end of 

the comment period, may not be 

considered by NMFS. All comments 

received are a part of the public record 

and will generally be posted for public 

viewing on www.regulations.gov 

without change. All personal identifying 

information (e.g., name, address, etc.), 

confidential business information, or 

otherwise sensitive information 

submitted voluntarily by the sender may 

be publicly accessible. Do not submit 

Confidential Business Information or 

otherwise sensitive or protected 

information. NMFS will accept 

anonymous comments (enter ‘‘N/A’’ in 

the required fields if you wish to remain 

anonymous). Attachments to electronic 

comments will be accepted in Microsoft 

Word, Excel, or Adobe PDF file formats 

only. 

FOR FURTHER INFORMATION CONTACT: 

Jordan Carduner, Office of Protected 

Resources, NMFS; phone: (301) 427– 

8401. 

SUPPLEMENTARY INFORMATION: 

Availability 

A copy of the USAF’s application and 

any supporting documents, as well as a 

list of the references cited in this 

document, may be obtained online at: 

www.fisheries.noaa.gov/permit/ 

incidental-take-authorizations-undermarine-mammal-protection-act. In case 

of problems accessing these documents, 

please call the contact listed above (see 

FOR FURTHER INFORMATION CONTACT). 

Purpose and Need for Regulatory 

Action 

This proposed rule would establish a 

framework under the authority of the 

MMPA (16 U.S.C. 1361 et seq.) to allow 

for the authorization of take of marine 

mammals incidental to launching space 

launch vehicles, intercontinental 

ballistic and small missiles, and aircraft 

and helicopter operations at VAFB. 

We received an application from the 

USAF requesting the five-year 

regulations and authorization to take 

marine mammals. Take would occur by 

Level B harassment incidental to launch 

noise and sonic booms. Please see 

‘‘Background’’ below for definitions of 

harassment. 

Legal Authority for the Proposed Action 

Section 101(a)(5)(A) of the MMPA (16 

U.S.C. 1371(a)(5)(A)) directs the 

Secretary of Commerce to allow, upon 

request, the incidental, but not 

intentional taking of small numbers of 

marine mammals by U.S. citizens who 

engage in a specified activity (other than 

commercial fishing) within a specified 

geographical region for up to five years 

if, after notice and public comment, the 

agency makes certain findings and 

issues regulations that set forth 

permissible methods of taking pursuant 

to that activity and other means of 

effecting the ‘‘least practicable adverse 

impact’’ on the affected species or 

stocks and their habitat (see the 

discussion below in the ‘‘Proposed 

Mitigation’’ section), as well as 

monitoring and reporting requirements. 

Section 101(a)(5)(A) of the MMPA and 

the implementing regulations at 50 CFR 

part 216, subpart I, provide the legal 

basis for issuing this proposed rule 

containing five-year regulations, and for 

any subsequent LOAs. As directed by 

this legal authority, this proposed rule 

contains mitigation, monitoring, and 

reporting requirements. 

Summary of Major Provisions Within 

the Proposed Rule 

Following is a summary of the major 

provisions of this proposed rule 

regarding space launch activities. These 

measures include: 

• Required acoustic monitoring to 

measure the sound levels associated 

with the proposed activities. 

• Required biological monitoring to 

record the presence of marine mammals 

during the proposed activities and to 

document responses to the proposed 

activities. 

• Mitigation measures to minimize 

harassment of the most sensitive marine 

mammal species. 

Background 

Sections 101(a)(5)(A) and (D) of the 

MMPA (16 U.S.C. 1361 et seq.) direct 

the Secretary of Commerce to allow, 

upon request, the incidental, but not 

intentional, taking of small numbers of 

marine mammals by U.S. citizens who 

engage in a specified activity (other than 

commercial fishing) within a specified 

geographical region if certain findings 

are made and either regulations are 

issued or, if the taking is limited to 

harassment, a notice of a proposed 

authorization is provided to the public 

for review. 


amozie on DSK3GDR082PROD with PROPOSALS1