78572 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

DEPARTMENT OF THE TREASURY 

31 CFR Part 33 

RIN 1505–AC72 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 147, 150, 153, 155, 156, 

158, and 184 

[CMS–9914–P] 

RIN 0938–AU18 

Patient Protection and Affordable Care 

Act; HHS Notice of Benefit and 

Payment Parameters for 2022 and 

Pharmacy Benefit Manager Standards; 

Updates To State Innovation Waiver 

(Section 1332 Waiver) Implementing 

Regulations 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health & Human Services (HHS), 

Department of the Treasury. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule sets forth 

payment parameters and provisions 

related to the risk adjustment program; 

cost-sharing parameters and costsharing reductions; and user fees for 

Federally-facilitated Exchanges and 

State-based Exchanges on the Federal 

platform. It includes proposed changes 

related to special enrollment periods; 

Navigator program standards; direct 

enrollment entities; the administrative 

appeals processes with respect to health 

insurance issuers and non-federal 

governmental group health plans; the 

medical loss ratio program; acceptance 

of payments by issuers of individual 

market Qualified Health Plans; and 

other related topics. It proposes 

clarifications to the regulation imposing 

network adequacy standards with regard 

to Qualified Health Plans that do not 

use provider networks. It proposes 

changes to the regulation requiring the 

reporting of certain prescription drug 

information by qualified health plans or 

their pharmacy benefit managers. It also 

proposes a new direct enrollment option 

for Federally-facilitated Exchanges and 

State Exchanges. This proposed rule 

also proposes changes related to section 

1332 State Innovation Waivers. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on December 30, 2020. 

ADDRESSES: In commenting, please refer 

to file code CMS–9914–P. 

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–9914–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–9914–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: 

Usree Bandyopadhyay, (410) 786– 

6650, Grace Bristol, (410) 786–8437, 

Kiahana Brooks, (301) 492–5229, or Ken 

Buerger, (410) 786–1190, for general 

information. 

Cam Clemmons, (206) 615–2338, for 

matters related to health insurance 

reform requirements for the group and 

individual insurance markets and 

administrative appeals for health 

insurance issuers and non-federal 

governmental group health plans. 

Allison Yadsko, (410) 786–1740, for 

matters related to risk adjustment. 

Aaron Franz, (410) 786- 8027, for 

matters related to user fees. 

Isadora Gil, (410) 786–4532, or 

Colleen Gravens, (301) 492–4107, for 

matters related to EDGE discrepancies. 

Joshua Paul, (301) 492–4347, Renee 

O’Neill, (410) 786–8821, or Ruthanne 

Romero, (410) 786–8757, for matters 

related to risk adjustment data 

validation. 

Dan Brown, (434) 995–5886, for 

matters related to web-brokers or direct 

enrollment, other than the direct 

enrollment option for Federallyfacilitated and State Exchanges. 

Robert Yates, (301) 492–5151, for 

matters related to the direct enrollment 

option for Federally-facilitated and State 

Exchanges. 

Emily Ames, (301) 492–4246, for 

matters related to termination notices. 

Marisa Beatley, (301) 492–4307, for 

matters related to employer-sponsored 

coverage verification. 

Carolyn Kraemer, (301) 492–4197, for 

matters related to special enrollment 

periods for Exchange enrollment under 

part 155. 

Katherine Bentley, (301) 492–5209, 

for matters related to special enrollment 

period verification. 

Ken Buerger, (410) 786–1190, for 

matters related to EHB-benchmark 

plans, defrayal of state-required 

benefits, network adequacy standards, 

and PBM transparency reporting 

requirements. 

Joshua Paul, (301) 492–4347, for 

matters related to the premium 

adjustment percentage. 

Adrianne Carter, (303) 844–5810, or 

Amber Bellsdale, (301) 492–4411, for 

matters related to disputes under 45 

CFR 156.1210. 

Leigha Basini, (301) 492–4380, for 

matters related to acceptance of 

payments by QHP issuers. 

Nidhi Singh Shah, (301) 492–5110, for 

matters related to the Quality Rating 

System and the Qualified Health Plan 

Enrollee Experience Survey. 

Alper Ozinal, (301) 492–4178, for 

matters related to financial program 

audits and civil money penalties. 

Adrianne Patterson, 410–786–0696, 

for matters related to netting of 

payments under 45 CFR 156.1215 and 

administrative appeals under 45 CFR 

156.1220. 

Christina Whitefield, (301) 492–4172, 

for matters related to the MLR program. 

Lina Rashid, (443) 902–2823, 

Michelle Koltov, (301) 492–4225, or 

Kimberly Koch, (202) 622–0854 for 

matters related to State Innovation 

Waivers. 

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. 

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 2022 

A. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

B. Part 150—CMS Enforcement in Group 

and Individual Markets 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78573 

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’’. 

C. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment 

D. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

E. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

F. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

G. Part 184—Pharmacy Benefit Manager 

Standards Under the Affordable Care Act 

IV. Provisions of the Proposed Rule for State 

Innovation Waivers 

A. 31 CFR Part 33 and 45 CFR Part 155— 

State Innovation Waivers 

V. Collection of Information Requirements 

A. Wage Estimates 

B. ICRs Regarding State Flexibility for Risk 

Adjustment 

C. ICRs Regarding Submission of Adjusted 

Premium Amounts for Risk Adjustment 

D. ICRs Regarding Direct Enrollment 

Agents and Brokers 

E. ICRs Regarding Prescription Drug 

Distribution and Cost Reporting by QHP 

Issuers and PBMs 

F. ICRs Regarding Medical Loss Ratio 

G. ICRs Regarding State Innovation 

Waivers 

H. Summary of Annual Burden Estimates 

for Proposed Requirements 

I. Submission of PRA Related Comments 

VI. Response to Comments 

VII. 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 

I. Executive Summary 

American Health Benefit Exchanges, 

or ‘‘Exchanges,’’ are entities established 

under the Patient Protection and 

Affordable Care Act (PPACA) 1 through 

which qualified individuals and 

qualified employers can purchase health 

insurance coverage in qualified health 

plans (QHPs). Many individuals who 

enroll in QHPs through individual 

market Exchanges are eligible to receive 

a premium tax credit (PTC) to reduce 

their costs for health insurance 

premiums and to receive reductions in 

required cost-sharing payments to 

reduce out-of-pocket 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 offExchange. 

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, 

within the limitations of current law, we 

propose to reduce fiscal and regulatory 

burdens across different program areas 

and to provide stakeholders with greater 

flexibility. 

In previous rulemakings, we 

established provisions and parameters 

to implement many PPACA 

requirements and programs. In this 

proposed rule, we propose to amend 

some of these provisions and 

parameters, with a focus on maintaining 

a stable regulatory environment. These 

proposed changes would provide 

issuers with greater predictability for 

upcoming plan years, while 

simultaneously enhancing the role of 

states in these programs. The proposals 

would also provide states with 

additional flexibilities, reduce 

unnecessary regulatory burdens on 

stakeholders, empower consumers, 

ensure program integrity, and improve 

affordability. 

Risk adjustment continues to be a core 

program in the individual and small 

group markets both on and off 

Exchanges, and some of the major 

proposals in this rule include proposed 

recalibrated parameters for the HHSoperated risk adjustment methodology. 

We also propose changes to the risk 

adjustment models to include a twostage specification in the adult and 

child models, add severity and 

transplant indicators interacted with 

hierarchical condition category (HCC) 

counts factors to the adult and child 

models, and modify the enrollment 

duration factors in the adult models. 

Additionally, we propose to allow states 

to request multi-year state risk 

adjustment transfer reductions of up to 

3 years, as well as clarifications to the 

process for HHS to audit and conduct 

compliance reviews of issuers of risk 

adjustment covered plans and 

reinsurance-eligible plans. 

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 2022 benefit year user fee rates for 

issuers offering plans through the 

Exchanges using the Federal platform. 

We propose lowering the Federallyfacilitated Exchange (FFE) and Statebased Exchange on the Federal platform 

(SBE–FP) user fees rates to 2.25 and 1.75 

percent of total monthly premiums, 

respectively, in order to reflect 

enrollment, premium and HHS contract 

estimates for the 2022 plan year. We 

also propose user fee rates of 1.5 percent 

of total monthly premiums for FFE and 

SBE–FP states that elect the proposed 

direct enrollment option discussed later 

in the preamble. 

In addition, we propose the 2022 

benefit year premium adjustment 

percentage, required contribution 

percentage, and maximum annual 

limitations on cost sharing, including 

those for cost-sharing reduction (CSR) 

plan variations. These updates, required 

by law, will raise the annual limit on 

cost sharing for 2022 relative to the 

annual limit on cost sharing for 2021, 

thereby increasing cost sharing and outof-pocket spending for consumers who 

will incur total costs close to the annual 

cost-sharing limit in the 2022 benefit 

year. For the 2023 benefit year and 

beyond, we also propose to publish 

these parameters in guidance annually, 

and if not in guidance, in the annual 

notice of benefit and payment 

parameters. Additionally, we propose 

clarifications to the process under 

which HHS audits QHP issuers related 

to advance payments of the premium 

tax credit (APTC), CSRs, and user fees. 

We propose changes to the 

information that FFE-registered webbrokers are required to display on their 

websites. In addition, we propose 

amendments to codify more detail 

describing the operational readiness 

reviews that must be successfully 

completed as a prerequisite to a webbroker’s non-Exchange website being 

approved for use by consumers to 

complete an Exchange eligibility 

application or a QHP selection. We 

similarly propose to add additional 

detail about the operational readiness 

reviews applicable to direct enrollment 

entities. 

Stable and affordable Exchanges with 

healthy risk pools are necessary for 

78574 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

2The term ‘‘group health plan’’ is used in title 

XXVII of the PHS Act and is distinct from the term 

‘‘health plan’’ as used in other provisions of title I 

of PPACA. The term ‘‘health plan’’ does not include 

self-insured group health plans. 

3Before enactment of the PPACA, HIPAA 

amended the PHS Act (formerly section 2711) to 

generally require guaranteed availability of coverage 

for employers in the small group market. 

ensuring consumers maintain stable 

access to health insurance options. In 

order to minimize the potential for 

adverse selection in the Exchanges, we 

are sharing our future plans for 

rulemaking under which we will 

propose requirements related to 

Exchange verifications of whether 

applicants for QHP coverage with APTC 

or CSR have access to employer 

sponsored coverage that is affordable 

and offers minimum value. Until we 

engage in future rulemaking, we 

propose to extend our current 

enforcement posture under which 

Exchanges may exercise flexibility not 

to implement risk-based employer 

sponsored coverage verification and to 

remove the requirement that Exchanges 

select a statistically random sample of 

applicants when no electronic data 

sources are available. 

We propose new rules related to 

special enrollment periods. In addition, 

we propose to require Exchanges to 

conduct special enrollment period 

verification for at least 75 percent of 

new enrollments through special 

enrollment periods granted to 

consumers not already enrolled in 

coverage through the applicable 

Exchange. 

We also propose minor procedural 

changes to provisions regarding 

administrative hearings in parts 150 and 

156 to align with the Departmental 

Appeals Board’s current practices for 

administrative hearings to appeal civil 

money penalties (CMPs). 

We propose to release additional data 

from the QHP Enrollee Experience 

Survey (QHP Enrollee Survey). We also 

solicit comments on potential changes 

to the framework for the Quality Rating 

System (QRS) to support alignment with 

other CMS quality reporting programs 

and to further balance the individual 

survey and clinical quality measures on 

the overall quality scores. We are 

considering ways to modify the 

hierarchical structure for the QRS, 

which is how the measures are 

organized together for maximum 

simplicity and understanding of the 

quality rating information provided by 

the QRS. 

We propose revisions to the 

regulations requiring the collection of 

certain prescription drug data from QHP 

issuers, and propose to implement a 

requirement for the reporting of this 

data from pharmacy benefit managers 

(PBMs) when a QHP issuer contracts 

with a PBM to administer its 

prescription drug benefit. 

We propose to further regulate the 

standards related to QHP issuers’ 

acceptance of payments for premiums 

and cost sharing. We also propose to 

make clarifications to the network 

adequacy rules to reflect that § 156.230 

does not apply to indemnity plans 

seeking QHP certification. 

We propose to establish a new direct 

enrollment option under which a State 

Exchange, State-based Exchange on the 

Federal platform or an FFE state 

(through an agreement with HHS) can 

leverage the potential of direct 

enrollment to offer consumers an 

enhanced QHP shopping experience. 

Under this option, instead of operating 

a centralized enrollment website, states 

could use direct enrollment technology 

to establish direct pathways to QHP 

issuers and web-brokers, through which 

consumers would apply for and enroll 

in a QHP and receive a determination of 

eligibility for APTC and CSRs. 

We propose to establish the definition 

of prescription drug rebates and other 

price concessions that issuers must 

deduct from incurred claims for medical 

loss ratio (MLR) reporting and rebate 

calculation purposes. We additionally 

propose to explicitly allow issuers the 

option to prepay a portion or all of the 

estimated MLR rebate for a given MLR 

reporting year in advance of the 

deadlines set forth in §§ 158.240(e) and 

158.241(a)(2) and the filing of the MLR 

Annual Reporting Form, and propose to 

establish a safe harbor allowing such 

issuers, under certain conditions, to 

defer the payment of any remaining 

rebates owed after prepayment until the 

following MLR reporting year. We also 

propose to allow issuers to provide MLR 

rebates in the form of a premium credit 

prior to the date that the rules currently 

provide. Lastly, we propose to clarify 

MLR reporting and rebate requirements 

for issuers that choose to offer 

temporary premium credits during a 

public health emergency (PHE) declared 

by the Secretary of HHS in the 2021 

benefit year and beyond, when such 

credits are permitted by HHS. 

In this proposed rule, the Secretaries 

of HHS and the Department of the 

Treasury propose to reference and 

incorporate specific guidance published 

in the Federal Register in order to give 

states certainty regarding the 

requirements to receive and maintain 

approval by the Departments for State 

Innovation Waivers under section 1332 

of the PPACA. 

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. 

These provisions of the PHS Act were 

later augmented by other laws, 

including the PPACA. 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 2 and 

health insurance issuers in the group 

and individual markets. The term 

‘‘group health plan’’ includes both 

insured and self-insured group health 

plans. 

Section 2702 of the PHS Act, as added 

by the PPACA, establishes requirements 

for guaranteed availability of coverage 

in the group and individual markets, 

including qualifying events that trigger 

special enrollment periods under 

section 2702(b) of the PHS Act.3

Section 2718 of the PHS Act, as added 

by the PPACA, generally requires health 

insurance issuers to submit an annual 

MLR report to HHS, and provide rebates 

to enrollees if the issuers do not achieve 

specified MLR thresholds. 

Section 2723(b) of the PHS Act 

authorizes the Secretary to impose 

CMPs as a means of enforcing the 

individual and group insurance market 

requirements contained in Part A of title 

XXVII of the PHS Act with respect to 

health insurance issuers when a state 

does not have authority to enforce or 

fails to substantially enforce these 

provisions and with respect to group 

health plans that are non-federal 

governmental plans. 

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

directs all issuers of QHPs to cover the 

Essential Health Benefit (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 costsharing 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 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78575 

4The Indian Health Care Improvement Act 

(IHCIA), the cornerstone legal authority for the 

provision of health care to American Indians and 

Alaska Natives, was made permanent when 

President Obama signed the bill on March 23, 2010, 

as part of the PPACA. 

5The term ‘‘quality rating information’’ includes 

the QRS scores and ratings and the results of the 

enrollee satisfaction survey (which is also known as 

the ‘‘Qualified Health Plan (QHP) Enrollee 

Experience Survey’’). 

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 1302 of the PPACA provides 

for the establishment of an EHB package 

that includes coverage of EHBs (as 

defined by the Secretary), cost-sharing 

limits, and AV requirements. Section 

1302(b) of the PPACA 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. 

To set cost-sharing limits, 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: (1) The maximum annual 

limitation on cost sharing (section 

1302(c)(1) of the PPACA); (2) the 

required contribution percentage used 

to determine whether an individual can 

afford minimum essential coverage 

(MEC) (section 5000A of the Internal 

Revenue Code of 1986 (the Code), as 

enacted by section 1501 of the PPACA); 

and (3) the employer shared 

responsibility payment amounts 

(section 4980H of the Code, as enacted 

by section 1513 of the PPACA). 

Section 1302(d) of the PPACA 

describes the various levels of coverage 

based on their 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. 

Sections 1311(b) and 1321(b) of the 

PPACA provide that each state has the 

opportunity to establish an individual 

market Exchange that facilitates the 

purchase of insurance coverage by 

qualified individuals through QHPs and 

meets other standards specified in the 

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

PPACA directs the Secretary to establish 

and operate such Exchange within states 

that do not elect to establish an 

Exchange or, as determined by the 

Secretary on or before January 1, 2013, 

will not have an Exchange operable by 

January 1, 2014. 

Section 1311(c)(1) of the PPACA 

provides the Secretary the authority to 

issue regulations to establish criteria for 

the certification of QHPs, including 

network adequacy standards at section 

1311(c)(1)(B) of the PPACA. Section 

1311(d) of the PPACA describes the 

minimum functions of an Exchange. 

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)(1) of the PPACA, and the 

Exchange determines that making the 

plan available through the Exchange is 

in the interests of qualified individuals 

and qualified employers in the state. 

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.4

Section 1311(c)(3) of the PPACA 

directs the Secretary to develop a 

system to rate QHPs offered through an 

Exchange, based on relative quality and 

price. Section 1311(c)(4) of the PPACA 

requires the Secretary to establish an 

enrollee satisfaction survey that 

evaluates the level of enrollee 

satisfaction of members with QHPs 

offered through an Exchange, for each 

QHP with more than 500 enrollees in 

the prior year. Further, sections 

1311(c)(3) and 1311(c)(4) of the PPACA 

require Exchanges to provide this 

quality rating information 5 to 

individuals and employers on the 

Exchange’s website. 

Section 1312(c) of the PPACA 

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 PPACA. 

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 financial 

assistance for QHPs sold through an 

Exchange. 

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. 

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. 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. 

Office of Management and Budget 

(OMB) Circular A–25 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(c)(2) of the PPACA 

provides that the provisions of section 

2723(b) of the PHS Act shall apply to 

the enforcement of the Federal 

Exchange standards and authorizes the 

Secretary to enforce the Exchange 

standards using CMPs on the same basis 

as detailed in section 2723(b) of the PHS 

Act. 

Section 1321(d) of the PPACA 

provides that nothing in title I of the 

PPACA must 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 1332 of the PPACA provides 

the Secretary of HHS and the Secretary 

of the Treasury (collectively, the 

Secretaries) with the discretion to 

approve a state’s proposal to waive 

specific provisions of the PPACA, 

provided the state’s section 1332 waiver 

plan meets certain requirements. The 

Department of Health and Human 

Services and the Department of the 

78576 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

6The 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. 

Treasury (collectively, the Departments) 

finalized implementing regulations on 

February 27, 2012 (76 FR 13553) and 

published detailed guidance on the 

Department’s application of section 

1332 to proposed state waivers on 

October 24, 2018 (83 FR 53575). 

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 QHPs offered through the 

individual market Exchanges. This 

section also provides for reductions in 

cost sharing for American Indians 

enrolled in QHPs at any metal level. 

Section 1411(c) of the PPACA 

requires the Secretary to submit certain 

information provided by applicants 

under section 1411(b) of the PPACA to 

other federal officials for verification, 

including income and family size 

information to the Secretary of the 

Treasury. 

Section 1411(d) of the PPACA 

provides that the Secretary must verify 

the accuracy of information provided by 

applicants under section 1411(b) of the 

PPACA for which section 1411(c) of the 

PPACA does not prescribe a specific 

verification procedure, in such manner 

as the Secretary determines appropriate. 

Section 1411(f) of the PPACA requires 

the Secretary, in consultation with the 

Secretary of the Treasury, the Secretary 

of Homeland Security, and the 

Commissioner of Social Security, to 

establish procedures for hearing and 

making decisions governing appeals of 

Exchange eligibility determinations. 

Section 1411(f)(1)(B) of the PPACA 

requires the Secretary to establish 

procedures to redetermine eligibility on 

a periodic basis, in appropriate 

circumstances, including eligibility to 

purchase a QHP through the Exchange 

and for APTC and CSRs. 

Section 1411(g) of the PPACA allows 

the use or disclosure of applicant 

information only for the limited 

purposes of, and to the extent necessary 

to, ensure the efficient operation of the 

Exchange, including by verifying 

eligibility to enroll through the 

Exchange and for APTC and CSRs. 

Section 5000A of the Code, as added 

by section 1501(b) of the PPACA, 

requires individuals to have MEC for 

each month, qualify for an exemption, 

or make an individual shared 

responsibility payment. Under the Tax 

Cuts and Jobs Act (Pub. L. 115–97, 

December 22, 2017) the individual 

shared responsibility payment has been 

reduced to $0, effective for months 

beginning after December 31, 2018. 

Notwithstanding that reduction, certain 

exemptions are still relevant to 

determine whether individuals age 30 

and above qualify to enroll in 

catastrophic coverage under 45 CFR 

155.305(h) or 45 CFR 156.155. 

Section 1150A(a) of the Social 

Security Act (the Act) requires a health 

benefits plan or PBM that manages 

prescription drug coverage under a 

contract with a QHP issuer to provide 

certain prescription drug information to 

the Secretary at such times, and in such 

form and manner, as the Secretary shall 

specify. HHS will limit disclosure of the 

information disclosed by a health 

benefits plan or PBM under this section 

as required by section 1150A of the Act 

and may only disclose the information 

in a form which does not disclose the 

identity of a specific PBM or plan, or 

prices charged for specific drugs, except 

that for limited purposes, HHS may 

disclose the information to states to 

carry out section 1311 of the PPACA. 

An issuer or PBM that fails to provide 

the information on a timely basis or that 

knowingly provides false information 

may be subject to a civil monetary 

penalty under section 1927(b)(3)(C) of 

the Act in the same manner as such 

provisions apply to a manufacturer with 

an agreement under that section. 

1. Premium Stabilization Programs 6

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 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 HHS– 

RADV process (proposed 2018 Payment 

Notice). We published the 2018 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78577 

7 ‘‘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. 

8 ‘‘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. 

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 HHS–RADV 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 External Data 

Gathering Environment (EDGE) dataset.7

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 Federal Register (77 FR 17220 

through 17252) and in the March 8, 

2016 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.8

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 

Federal Register (77 FR 17219) and in 

the December 22, 2016 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 

Federal Register (77 FR 17219) and the 

December 22, 2016 Federal Register (81 

FR 94058). 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. 

In the January 24, 2019 Federal 

Register (84 FR 227), we published a 

proposed rule outlining updates to the 

calibration of the risk adjustment 

methodology, the use of EDGE data for 

research purposes, and updates to HHS– 

RADV audits. We published the 2020 

Payment Notice final rule in the April 

25, 2019 Federal Register (84 FR 

17454). 

In the February 6, 2020 Federal 

Register (85 FR 7088), we published a 

proposed rule that included updates to 

the in the risk adjustment models’ HCCs 

and a modification HHS–RADV error 

rate calculation methodology. We 

published the 2021 Payment Notice 

final rule in the May 14, 2020 Federal 

Register (85 FR 29164). 

In the June 2, 2020 Federal Register 

(85 FR 33595), we published a proposed 

rule that proposed updates to various 

aspects of the HHS–RADV 

methodologies and processes. These 

updates included revisions to the HCC 

failure rate grouping algorithm, the 

introduction of a sliding scale 

adjustment in HHS–RADV error rate 

calculation, the introduction of a 

constraint on risk score adjustments for 

low-side failure rate outliers, and the 

transition from the prospective 

application of HHS–RADV adjustments 

to an application of HHS–RADV results 

to risk scores from the same benefit year 

as that being audited. 

In the September 2, 2020 Federal 

Register (85 FR 54820), HHS issued an 

interim final rule containing certain 

policy and regulatory revisions in 

response to the COVID–19 PHE, 

wherein we set forth risk adjustment 

reporting requirements for issuers 

offering temporary premium credits in 

the 2020 benefit year (interim final rule 

on COVID–19). 

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). In the 

December 27, 2019 Federal Register (84 

FR 71674), we published a final rule 

that revised standards relating to 

oversight of Exchanges established by 

states and periodic data matching 

frequency. 

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 PPACA health insurance 

market reforms that became effective in 

2014 was published in the November 

26, 2012 Federal Register (77 FR 

70584). A final rule implementing those 

provisions 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 

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 Market 

Stabilization final rule that was 

published in the April 18, 2017 Federal 

Register (82 FR 18346), we released 

further guidance related to guaranteed 

availability. In the 2019 Payment Notice 

final rule in the April 17, 2018 Federal 

Register (83 FR 17058), we clarified that 

certain exceptions to the special 

enrollment periods only apply with 

respect to coverage offered outside of 

the Exchange in the individual market. 

78578 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

9 ‘‘Essential Health Benefits Bulletin,’’ December 

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

Resources/Files/Downloads/essential_health_

benefits_bulletin.pdf. 

4. Administrative Appeals Process 

Related to Federal Enforcement in 

Group and Individual Health Insurance 

Markets and Non-Federal Governmental 

Group Health Plans 

On April 8, 1997 an interim final rule 

with comment period was published in 

the Federal Register (62 FR 16894) that 

implemented the HIPAA health 

insurance reforms by adding 45 CFR 

parts 144, 146, and 148. Included in 

those regulations were enforcement 

provisions. In the June 10, 1997 Federal 

Register (62 FR 31669), we published 

technical corrections to these interim 

final rules. After gaining some 

experience with direct federal 

enforcement in some states, we 

determined that it was necessary to 

provide more detail on the procedures 

that will be used to enforce HIPAA 

when a state does not do so. On August 

20, 1999, an interim final rule with 

comment period was published in the 

Federal Register (64 FR 45786) that 

provided more detail on the procedures 

for enforcing title XXVII of the PHS Act, 

as added by HIPAA, and as amended by 

the Mental Health Parity Act of 1996 

(Pub. L. 104–204, September 26, 1996), 

the Newborns’ and Mothers’ Health 

Protection Act of 1996 (Pub. L. 104–204, 

September 26, 1996), and the Women’s 

Health and Cancer Rights Act of 1998 

(Pub. L. 105–277, October 21, 1998), 

when a state does not enforce such laws. 

We published a final rule on November 

25, 2005 in the Federal Register (70 FR 

71020) that finalized this interim final 

rule, and made non-substantive 

amendments to the regulations detailing 

procedures for enforcing title XXVII of 

the PHS Act. 

5. 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. In the 

July 15, 2011 Federal Register (76 FR 

41865), we published a proposed rule 

with proposals 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 Small Business Health 

Options Program (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). 

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), we set forth standards related to 

Exchange user fees. 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 the May 11, 2016 Federal Register 

(81 FR 29146), we published an interim 

final rule with 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 March 8, 2016 Federal 

Register (81 FR 12203), the final 2017 

Payment Notice codified State 

Exchanges on the Federal platform 

along with relevant requirements. 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 

the April 25, 2019 Federal Register (84 

FR 17454), the final 2020 Payment 

Notice established a new special 

enrollment period. In the May 14, 2020 

Federal Register (85 FR 29204), the 

2021 Payment Notice final rule made 

certain changes to plan category 

limitations and special enrollment 

period coverage effective date rules, 

allowed individuals provided a noncalendar year qualified small employer 

health reimbursement arrangement 

(QSEHRA) to qualify for an existing 

special enrollment period, and 

discussed plans for future rulemaking 

for employer-sponsored coverage 

verification and non-enforcement 

discretion for Exchanges that do not 

conduct random sampling until plan 

year 2021. 

6. Essential Health Benefits 

On December 16, 2011, HHS released 

a bulletin 9 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. 

The 2015 Payment Notice final rule, 

established a methodology for 

estimating the average per capita 

premium for purposes of calculating the 

premium adjustment percentage. 

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 National Health 

Expenditure Accounts (NHEA), which 

are calculated by the CMS Office of the 

Actuary. In the 2020 Payment Notice 

final rule, we amended the methodology 

for calculating the premium adjustment 

percentage by estimating per capita 

insurance premiums 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. Additionally, in response to 

public comments to the proposed 2021 

Payment Notice, the 2021 Payment 

Notice final rule included a policy 

stating that we will finalize payment 

parameters that depend on NHEA data, 

including the premium adjustment 

percentage, based on the data that are 

available as of the publication of the 

proposed rule for that benefit year, even 

if NHEA data are updated between the 

proposed and final rules. 

In a proposed rule published in the 

July 15, 2020 Federal Register (85 FR 

42782), HHS, along with the 

Departments of Labor and the Treasury, 

proposed using the premium adjustment 

percentage as one alternative in setting 

the parameters for permissible increases 

in fixed-amount cost-sharing 

requirements for grandfathered group 

health plans. 

7. Medical Loss Ratio (MLR) 

We published a request for comment 

on section 2718 of the PHS Act in the 

April 14, 2010 Federal Register (75 FR 

19297), and published an interim final 

rule with a 60-day comment period 

relating to the MLR program on 

December 1, 2010 (75 FR 74863). A final 

rule with a 30-day comment period was 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78579 

10Patient Protection and Affordable Care Act; 

Exchange and Insurance Market Standards for 2015 

and Beyond, Final Rule, 79 FR 30240 at 30352 (May 

27, 2014). Also see the ‘‘CMS Bulletin on display 

of QRS star ratings and Qualified Health Plan (QHP) 

Enrollee Survey results for QHPs offered through 

Exchanges,’’ August 15, 2019. Available at https:// 

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/QualityRatingInformation

BulletinforPlanYear2020.pdf. 

11See, for example, ‘‘Center for Clinical 

Standards & Quality, CMS, The Quality Rating 

System and Qualified Health Plan Enrollee 

Experience Survey: Technical Guidance for 2021,’’ 

September 2020. Available at https://www.cms.gov/ 

files/document/quality-rating-system-and-qualifiedhealth-plan-enrollee-experience-survey-technicalguidance-2021.pdf. 

12https://www.govinfo.gov/content/pkg/FR-2011- 

03-14/pdf/2011-5583.pdf. 13https://www.govinfo.gov/content/pkg/FR-2012- 

02-27/pdf/2012-4395.pdf. 

14https://www.govinfo.gov/content/pkg/FR-2018- 

10-24/pdf/2018-23182.pdf. 

15https://www.govinfo.gov/content/pkg/FR-2015- 

12-16/pdf/2015-31563.pdf. 

16https://www.federalregister.gov/documents/ 

2020/11/06/2020-24332/additional-policy-andregulatory-revisions-in-response-to-the-covid-19- 

public-health-emergency. 

published in the December 7, 2011 

Federal Register (76 FR 76573). An 

interim final rule with a 60-day 

comment period was published in the 

December 7, 2011 Federal Register (76 

FR 76595). A final rule was published 

in the Federal Register on May 16, 2012 

(77 FR 28790). The MLR program 

requirements were amended in final 

rules published in the March 11, 2014 

Federal Register (79 FR 13743), the May 

27, 2014 Federal Register (79 FR 

30339), the February 27, 2015 Federal 

Register (80 FR 10749), the March 8, 

2016 Federal Register (81 FR 12203), 

the December 22, 2016 Federal Register 

(81 FR 94183), the April 17, 2018 

Federal Register (83 FR 16930), the May 

14, 2020 Federal Register (85 FR 29164) 

and an interim final rule was published 

in the September 2, 2020 Federal 

Register (85 FR 54820). 

8. Quality Rating System and Enrollee 

Satisfaction Survey 

The overall framework and elements 

of the rating methodology for the QRS 

were published in the November 19, 

2013 Federal Register (78 FR 69418). 

Consistent with statutory provisions, in 

May 2014, HHS issued regulations at 

§§ 155.1400 and 155.1405 to establish 

the QRS and the QHP Enrollee 

Experience Survey display requirements 

for Exchanges and has worked towards 

requiring nationwide the prominent 

display of quality rating information on 

Exchange websites.10 As a condition of 

certification and participation in the 

Exchanges, HHS requires that QHP 

issuers submit QRS clinical measure 

data and QHP Enrollee Survey response 

data for their respective QHPs offered 

through an Exchange in accordance 

with HHS guidance, which has been 

issued annually for each forthcoming 

plan year.11

9. State Innovation Waivers 

Section 1332(a)(4)(B) of the PPACA 

requires the Secretaries to issue 

regulations regarding procedures for 

State Innovation Waivers. On March 14, 

2011, the Departments published the 

‘‘Application, Review, and Reporting 

Process for Waivers for State 

Innovation’’ proposed rule 12 in the 

Federal Register (76 FR 13553) to 

implement section 1332(a)(4)(B) of the 

PPACA. On February 27, 2012, the 

Departments published the 

‘‘Application, Review, and Reporting 

Process for Waivers for State 

Innovation’’ final rule 13 in the Federal 

Register (77 FR 11700) (hereinafter 

referred to as the ‘‘2012 Final Rule’’). On 

October 24, 2018, the Departments 

issued the ‘‘State Relief and 

Empowerment Waivers’’ guidance 14 in 

the Federal Register (83 FR 53575) 

(hereinafter referred to as the ‘‘2018 

Guidance’’), which superseded the 

previous guidance 15 published on 

December 16, 2015 in the Federal 

Register (80 FR 78131) and provided 

additional information about the 

requirements that states must meet for 

waiver proposals, the Secretaries’ 

application review procedures, passthrough funding determinations, certain 

analytical requirements, and operational 

considerations. On November 6, 2020, 

the Departments issued an interim final 

rule 16 in the Federal Register (85 FR 

71142), which revises regulations to set 

forth flexibilities in the public notice 

requirements and post-award public 

participation requirements for State 

Innovation Waivers under section 1332 

of the PPACA during the COVID–19 

PHE. 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders 

on policies related to the operation of 

Exchanges and the risk adjustment and 

HHS–RADV programs. We have held a 

number of listening sessions with 

consumers, providers, employers, health 

plans, advocacy groups and the 

actuarial community to gather public 

input. We have solicited input from 

state representatives on numerous 

topics, particularly risk adjustment and 

the direct enrollment option for FFEs 

and State Exchanges. 

We consulted with stakeholders 

through regular meetings with the 

National Association of Insurance 

Commissioners (NAIC), regular contact 

with states, and 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 147, 150, 153, 155, 156, 158, 

and 184. In addition, the regulations 

outlined in this proposed rule governing 

State Innovation Waivers under section 

1332 of the PPACA at 45 CFR part 155 

subpart N would also be codified in 31 

CFR part 33. 

The proposed changes to 45 CFR part 

147 would make technical and 

conforming amendments regarding 

limited and special enrollment periods 

in the individual market. 

The proposed changes to 45 CFR part 

150 would make minor procedural 

changes to the requirements for 

administrative appeals of CMPs by 

health insurance issuers and non-federal 

governmental group health plans to 

align with current practices for the 

Departmental Appeals Board. We 

propose to make parallel changes to the 

requirements for administrative appeals 

of CMPs by QHP issuers under 45 CFR 

part 156, subpart J. 

The proposed changes to 45 CFR part 

153 would recalibrate the HHS risk 

adjustment models consistent with the 

approach outlined in the 2020 Payment 

Notice to transition away from the use 

of MarketScan® data. However, we 

propose to use the enrollee-level EDGE 

data from 2016, 2017 and 2018, the 

same data used for the 2021 model 

recalibration. We also propose changes 

to the HHS risk adjustment models to 

include a two-stage specification in the 

adult and child models, add severity 

and transplant indicators interacted 

with HCC counts factors in the adult 

and child models, and modify the 

enrollment duration factors in the adult 

models. In addition, we propose to 

clarify risk adjustment reporting 

requirements for issuers that choose to 

offer premium credits, if permitted by 

HHS for future benefit years. In order to 

provide greater market predictability, 

we propose to allow states to request a 

reduction of risk adjustment transfers 

for multiple years and set forth the 

request from Alabama to reduce risk 

adjustment transfers for the 2022 benefit 

year. Additionally, we propose 

clarifications to the process for HHS to 

audit issuers of risk adjustment covered 

plans and reinsurance-eligible plans and 

also propose to establish authority for 

HHS to conduct compliance reviews of 

these issuers. The proposals in part 153 

78580 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

also relate to the risk adjustment user 

fee for the 2022 benefit year. We also 

propose to revise the schedule for the 

collection of HHS–RADV charges and 

disbursement of payments such that 

these charges and disbursements will 

occur in the same calendar year in 

which HHS–RADV results are released. 

Finally, the proposals regarding part 153 

include a proposal to shorten the 

discrepancy reporting windows for 

HHS–RADV, update the applicable 

regulations regarding when second 

validation audit (SVA) findings can be 

disputed or appealed, expand the 

conflict of interest standard for IVA 

Entities, and codify two previously 

established exemptions from the 

requirement to participate in HHS– 

RADV. 

We propose to amend the definition 

of direct enrollment technology 

provider and add a definition of QHP 

issuer direct enrollment technology 

provider in part 155 to recognize that 

QHP issuers may also use QHP issuer 

direct enrollment technology providers 

to facilitate participation in direct 

enrollment under §§ 155.221 and 

156.1230, and make conforming 

amendments to the definition of webbroker. We also propose changes to webbroker website display requirements, 

and propose to codify more specific 

operational readiness review 

requirements for web-brokers and direct 

enrollment entities. In addition, we 

propose allowing Navigators and 

certified application counselors (CACs) 

to assist consumers with applying for 

eligibility for insurance affordability 

programs and QHP enrollment through 

web-broker non-Exchange websites 

under certain circumstances. We also 

propose to amend the marketing and 

display requirements for direct 

enrollment entities. 

We also propose to establish a new 

direct enrollment option for State 

Exchanges, SBE–FPs and FFE states to 

use direct enrollment technology and 

non-Exchange websites developed by 

approved web brokers, issuers and other 

direct enrollment partners to enroll 

qualified individuals in QHPs offered 

through the Exchange. 

We also propose several amendments 

to special enrollment period policy. 

Specifically, we propose: To add a new 

flexibility to allow current Exchange 

enrollees and their dependents to 

change to a QHP of a lower metal level 

if they qualify for a special enrollment 

period due to becoming newly ineligible 

for APTC; to allow a qualified 

individual, enrollee, or dependent who 

did not receive timely notice of a 

triggering event and otherwise was 

reasonably unaware that a triggering 

event occurred to select a plan within 

60 days of the date that he or she knew, 

or reasonably should have known, of the 

occurrence of the triggering event; and 

to clarify that a special enrollment 

period is triggered when a qualified 

individual or his or her dependent is 

enrolled in COBRA continuation 

coverage, and the employer 

contributions for such coverage 

completely cease. We also propose to 

require Exchanges to verify eligibility 

for at least 75 percent of special 

enrollments for consumers newly 

enrolling in Exchange coverage. 

As we do every year in the annual 

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. 

Additionally, we propose to amend part 

156 to establish that for the 2023 benefit 

year and beyond, we will publish the 

annual updates to the premium 

adjustment percentage, maximum 

annual limitation on cost sharing, 

reduced maximum annual limitation on 

cost sharing and required contribution 

percentage in guidance in January of the 

benefit year prior to the applicable 

benefit year, rather than in the 

applicable benefit year’s annual HHS 

notice of benefit and payment 

parameters, as long as no change to the 

methodologies to calculate these 

amounts are proposed. We also propose 

a methodology for analyzing the impact 

of preliminary values of the reduced 

annual maximum limitations on cost 

sharing on the AVs of silver plan 

variations. Additionally, we propose 

clarifications to the process for HHS to 

audit QHP issuers related to APTC, 

CSRs, and user fees and propose to 

establish authority for HHS to conduct 

compliance reviews to ensure 

compliance with Federal APTC, CSRs, 

and user fee standards. We propose to 

update the user fee rates for the 2022 

benefit year for all issuers participating 

on the Exchanges using the Federal 

platform. We also propose modifications 

to the regulations addressing network 

adequacy standards for non-network 

plans and payments accepted by QHP 

issuers. Finally, we propose to require 

QHP issuers to accept premium 

payments made on behalf of an enrollee 

from an individual coverage health 

reimbursement arrangement (individual 

coverage HRA) or QSEHRA. 

The proposed changes to part 158 

would establish the definition of 

prescription drug rebates and other 

price concessions that issuers must 

deduct from incurred claims for MLR 

reporting and rebate calculation 

purposes. The proposed changes to part 

158 would also explicitly allow issuers 

the option to prepay a portion or all of 

the estimated MLR rebate for a given 

MLR reporting year in advance of the 

deadlines set forth in §§ 158.240(e) and 

158.241(a)(2) and filing the MLR Annual 

Reporting Form, and establish a safe 

harbor allowing such issuers, under 

certain conditions, to defer the payment 

of rebates remaining after prepayment 

until the following MLR reporting year. 

In addition, the proposed changes to 

part 158 would allow issuers to provide 

MLR rebates in the form of a premium 

credit prior to the date that the rules 

currently provide. Lastly, we propose to 

clarify MLR reporting and rebate 

requirements for issuers that choose to 

offer temporary premium credits during 

a PHE declared by the Secretary of HHS 

in the 2021 benefit year and beyond 

when such credits are permitted by 

HHS. 

The proposed addition of part 184 

would require PBMs under contract 

with an issuer of QHPs to report 

prescription drug data required by 

section 1150A of the Act. 

The proposed changes in 31 CFR part 

33 and 45 CFR part 155 related to State 

Innovation Waivers would reference 

and incorporate the existing 2018 

Guidance into regulations in order to 

give states certainty regarding the 

requirements to receive and maintain 

approval by the Departments. 

III. Provisions of the Proposed HHS 

Notice of Benefit and Payment 

Parameters for 2022—Department of 

Health and Human Services 

A. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability of Coverage 

(§ 147.104) 

Section 147.104(b)(2) incorporates by 

reference certain Exchange special 

enrollment periods described in 

§ 155.420, making those special 

enrollment periods applicable to nongrandfathered coverage offered in the 

individual market through or outside of 

an Exchange. We propose amendments 

to § 147.104(b)(2) to clarify that 

paragraph (b)(2)(ii) does not apply to 

references in § 155.420(d)(4) (relating to 

errors of the Exchange), and to make a 

conforming amendment consistent with 

the proposal in § 155.420(c)(5) relating 

to special enrollment period availability 

for individuals who do not receive 

timely notice of a triggering event. 

Section 155.420(d)(4) establishes an 

Exchange special enrollment period for 

a qualified individual or their 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78581 

17 42 U.S.C. 18063. 

18Also see 42 U.S.C. 18041(c)(1). 

dependent if their enrollment or nonenrollment in a QHP is unintentional, 

inadvertent, or erroneous and is the 

result of the error, misrepresentation, 

misconduct, or inaction of an officer, 

employee, or agent of the Exchange or 

HHS, its instrumentalities, or a nonExchange entity providing enrollment 

assistance or conducting enrollment 

activities. Section 147.104(b)(2)(ii) states 

that, when determining the application 

of a special enrollment period for 

individual market coverage offered 

outside the Exchange, a reference in 

§ 155.420 to a ‘‘QHP’’ is deemed to refer 

to a plan, a reference to ‘‘the Exchange’’ 

is deemed to refer to the applicable state 

authority, and a reference to a ‘‘qualified 

individual’’ is deemed to refer to an 

individual in the individual market. 

However, this paragraph was not 

intended to apply to § 155.420(d)(4), 

which is specific to errors of the 

Exchange, not the applicable state 

authority. It would be inappropriate for 

the triggering event in this case to apply 

to errors of the applicable state authority 

because the state does not perform the 

same functions as the Exchange. For 

example, the state authority does not 

perform an enrollment function. Thus, 

basing the triggering event on errors of 

the state is inappropriate and could 

create different special enrollment 

periods in the individual market on and 

off of the Exchange. 

Therefore, we propose to clarify that 

§ 147.104(b)(2)(ii) does not apply to 

references in § 155.420(d)(4). As a 

result, issuers offering health insurance 

coverage in the individual market must 

provide a limited open enrollment 

period under the same circumstances as 

described in § 155.420(d)(4). 

In addition, we propose a conforming 

amendment to § 147.104(b)(4)(ii), 

consistent with the proposal in 

§ 155.420(c)(5), to establish that if an 

individual did not receive timely notice 

of a triggering event described in 

paragraph (b)(2) or (3) of § 147.104, and 

otherwise was reasonably unaware that 

such a triggering event occurred, an 

issuer of non-grandfathered coverage in 

the individual market, whether inside or 

outside an Exchange, must assign the 

date the individual knew, or reasonably 

should have known, of the occurrence 

of the triggering event as the date of the 

triggering event for a special enrollment 

period. Consistent with §§ 147.104(b)(5) 

and 155.420(b), this proposal would 

allow the individual or dependent to 

choose the earliest effective date that 

would have been available if he or she 

had received timely notice of the 

triggering event or another effective date 

that would otherwise be available 

pursuant to § 155.420(b). We solicit 

comments on this approach. We note 

that this rule would not apply for 

special enrollment periods in the group 

market, and seek comment on whether 

we should exclude the reference to the 

triggering events in § 147.104(b)(3) in 

the amended § 147.104(b)(4)(ii) in order 

to retain alignment of the individual 

and group market special enrollment 

periods required under § 147.104(b)(3). 

B. Part 150—CMS Enforcement in Group 

and Individual Markets 

1. Technical Corrections 

Part 150 sets forth our enforcement 

processes for all the requirements of 

title XXVII of the PHS Act with respect 

to health insurance issuers and nonfederal governmental group health 

plans. This proposed rule would make 

technical corrections to multiple 

sections of part 150. Specifically, we 

propose removing all references to 

‘‘HIPAA’’ and replacing them with 

‘‘PHS Act’’ to clarify that the part 150 

processes are used for enforcing not 

only the requirements emanating from 

HIPAA, but also the PPACA and other 

legislation enacted subsequent to 

HIPAA. These proposed wording 

changes were made in the February 27, 

2013 Federal Register final rule entitled 

‘‘Patient Protection and Affordable Care 

Act; Health Insurance Market Rules; 

Rate Review’’ (78 FR 13406). However, 

because of an oversight, some references 

were not updated at that time. In this 

rule, we propose this change to the 

definition of ‘‘Complaint’’ in § 150.103; 

the introductory text to § 150.303(a), as 

well as to §§ 150.205(e)(2); 150.213(b); 

150.305(a)(1), (a)(2), (b)(1) and (c)(1); 

150.311(g) and 150.313(b). 

2. Administrative Hearings 

Additionally, we propose certain 

procedural changes to part 150 sections 

regarding administrative hearings. 

These proposed changes are intended to 

align with the Departmental Appeals 

Board’s current practices for 

administrative hearings to appeal CMPs. 

Specifically, we propose changes that 

would remove requirements to file 

submissions in triplicate and instead 

require electronic filing. This change is 

reflected in the proposed amendments 

to the definition of ‘‘Filing date’’ in 

§ 150.401, to the introductory text in 

§ 150.427(a), and to the service of 

submission requirements captured in 

§ 150.427(b). We also propose 

amendments to several provisions in 

part 150 to allow for the option of video 

conferencing as a form of administrative 

hearing in part 150 in addition to the 

forms already allowed. To capture this 

flexibility, we propose amendments to 

the definition of ‘‘Hearing’’ in § 150.401 

and to the requirements outlined in 

§ 150.419(a) related to the forms for the 

hearing, § 150.441(e) related to 

prehearing conferences, and 

§ 150.447(a) related to the record of the 

hearing. Finally, we propose to update 

§ 150.431 to allow the Administrative 

Law Judge (ALJ) to communicate the 

next steps for a hearing in either the 

acknowledgement of a request for 

hearing or on a later date. We propose 

parallel amendments to the 

administrative hearings requirements 

under subpart J of part 156. We seek 

comment on these proposals. 

C. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment 

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.17 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.18 We did not receive 

any requests from states to operate risk 

adjustment for the 2022 benefit year; 

therefore, HHS will operate risk 

adjustment in every state and the 

District of Columbia for the 2022 benefit 

year. 

We propose changes in this rule to the 

identification of the 3 benefit years of 

enrollee-level EDGE data that would be 

used for purposes of the annual 

recalibration of the risk adjustment 

models. We also propose modeling 

updates to improve the models’ 

predictive power for certain subgroups 

of enrollees, as well as proposed 

changes to the enrollment duration 

factors for the adult models, and we 

propose to continue a pricing 

adjustment related to the Hepatitis C 

drugs. We propose to allow states to 

submit multi-year requests for 

reductions to transfer calculations under 

the state payment transfer formula and 

we outline the 2022 benefit year 

reduction request submitted by 

Alabama. Additionally, we propose to 

clarify risk adjustment reporting 

requirements for issuers that choose to 

78582 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

19For the 2018 benefit year, there were 12 RXCs, 

but starting with the 2019 benefit year, the two 

severity-only RXCs were removed from the adult 

risk adjustment models. See, for example, 83 FR 

16941. 

20 84 FR 17463 through 17466. 

21 85 FR 29173 through 29175. 

22See, for example, the 2018 Payment Notice 

final rule, 81 FR 94058; and the 2021 Payment 

Notice final rule, 85 FR 29173 through 29175. 

23See 85 FR 7097 through 7098 and 7104 through 

7112. 

24See 85 FR 29173 through 29175. Also see 

https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/Final-2021-Benefit-YearFinal-HHS-Risk-Adjustment-Model-Coefficients.pdf. 

25See, for example, the 2018 Payment Notice 

rule, 81 FR 94084. Also see https://www.cms.gov/ 

CCIIO/Programs-and-Initiatives/PremiumStabilization-Programs/Downloads/2018-BenefitYear-Final-HHS-Risk-Adjustment-ModelCoefficients.pdf. 

26See, for example, 81 FR 94084 through 94085. 

offer premium credits, if permitted by 

HHS for future benefit years. We 

propose the risk adjustment user fee for 

the 2022 benefit year and propose to 

codify in regulation the previously 

established exemptions from HHS– 

RADV requirements for issuers with 

only small group market carryover 

coverage in the benefit year being 

audited and for sole issuers in a state 

market risk pool during the benefit year 

being audited. We also propose to revise 

the schedule for the collection of HHS– 

RADV charges and disbursement of 

payments such that these charges and 

disbursements will occur in the same 

calendar year in which HHS–RADV 

results are released. Finally, we propose 

to shorten the discrepancy reporting 

windows during HHS–RADV, clarify 

and expand the conflict of interest 

standards that will be applied to initial 

validation audit (IVA) entities, and 

update the risk adjustment regulations 

to more clearly reflect the limitations on 

the ability to dispute or appeal SVA 

findings. 

1. 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 

HHS risk adjustment methodology 

utilizes separate models for adults, 

children, and infants to account for 

clinical and 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.19

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 

CSR 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 state transfer payment or 

charge that an issuer will receive or be 

required to pay for that plan for the 

applicable state market risk pool. 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. 

a. Updates to Data Used for Risk 

Adjustment Model Recalibration 

Consistent with the approach outlined 

in the 2020 Payment Notice to no longer 

rely upon MarketScan® data 20 for 

recalibrating the risk adjustment 

models, we propose to continue to 

recalibrate the risk adjustment models 

for the 2022 benefit year using only 

enrollee-level EDGE data. However, 

rather than using 2017, 2018 and 2019 

enrollee-level EDGE data, we propose to 

use the 2016, 2017, and 2018 enrolleelevel EDGE data (the same years’ data 

used to recalibrate the 2021 risk 

adjustment models) to recalibrate the 

risk adjustment models for the 2022 

benefit year. We also propose to 

continue to use blended, or averaged, 

coefficients from the 3 years of 

separately solved models for the 2022 

benefit year model recalibration. 

Previously, we used the 3 most recent 

years of MarketScan® data available to 

recalibrate the 2016, 2017, and 2018 

benefit year risk adjustment models. 

Then, starting with the 2019 benefit 

year, we began transitioning from using 

the MarketScan® data to using the 

enrollee-level EDGE data to recalibrate 

the risk adjustment models. The 2021 

benefit year was the first year that we 

recalibrated the risk adjustment models 

using 3 years of enrollee-level EDGE 

data.21 Specifically, for the 2021 benefit 

year, we used the 2016, 2017, and 2018 

benefit years of enrollee-level EDGE 

data to recalibrate the risk adjustment 

models. During prior recalibrations, we 

implemented an approach that 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. In some prior 

years, this approach resulted in reliance 

on data that could not be incorporated 

into the coefficients until after the 

publication of the applicable benefit 

year’s Payment Notice, because the 

associated data was not available in 

time to incorporate into the models in 

time for publication in the Payment 

Notice.22 For example, due to the timing 

of the proposed 2021 Payment Notice, 

we were unable to incorporate the 2018 

benefit year enrollee-level EDGE data 

into the proposed coefficients in the 

proposed 2021 Payment Notice, and 

instead included draft coefficients in the 

proposed rule reflecting only 2016 and 

2017 benefit years’ enrollee-level EDGE 

data.23 We were also unable to 

incorporate the 2018 benefit year 

enrollee-level EDGE data in the final 

coefficients in the 2021 Payment Notice; 

therefore, consistent with 

§ 153.320(b)(1)(i), we released the final 

2021 benefit year coefficients in 

guidance after publication of the 2021 

Payment Notice.24 We followed a 

similar approach in other benefit years 

when we were unable to incorporate the 

most recent year of available data in the 

applicable benefit year’s Payment 

Notice.25

Some commenters to the proposed 

2021 Payment Notice expressed concern 

about when the final blended 

coefficients would be available, asking 

that final coefficients be made available 

earlier. Having the risk adjustment 

coefficients for the upcoming benefit 

year available earlier allows issuers 

more time to incorporate this 

information when pricing their plans for 

the upcoming benefit year. Commenters 

offered suggestions for ways HHS could 

propose coefficients using all of the data 

years that HHS would use for the final 

coefficients. Stakeholders submitted 

similar comments in prior years when 

the final coefficients were released in 

guidance after publication of the 

applicable benefit year’s Payment 

Notice.26 We have continued to 

consider these comments and, in this 

rulemaking, we propose to change our 

approach for identifying the 3 most 

recent years of enrollee-level EDGE data 

that would be used to recalibrate the 

risk adjustment models. Previously, we 

used the three most recent years of data 

that are available in time for publication 

in the final rule or soon thereafter in 

guidance. However, beginning with the 

2022 benefit year, we are proposing to 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78583 

27As detailed earlier, the 2022 benefit year 

recalibration would rely on the same 3 years of 

enrollee-level EDGE data that were used in the 2021 

benefit year. For the 2023 benefit year and beyond, 

the recalibration would rely on 2 years of the 

enrollee-level data that were used in the prior year. 

28See, for example, 78 FR 15420 and Section 3.7 

of the ‘‘March 31, 2016 HHS-Operated Risk 

Adjustment Methodology Meeting Discussion 

Paper,’’ March 24, 2016. Available at https://

www.cms.gov/CCIIO/Resources/Forms-Reports-andOther-Resources/Downloads/RA-March-31-WhitePaper-032416.pdf. 

29 85 FR 29188 and 29189. 

30 Ibid. 

31 ‘‘Advance Notice of Methodological Changes 

for Calendar Year (CY) 2020 for the Medicare 

Advantage (MA) CMS–HCC Risk Adjustment 

Model,’’ December 20, 2018. Available at https://

www.cms.gov/Medicare/Health-Plans/ 

MedicareAdvtgSpecRateStats/Downloads/ 

Advance2020Part1.pdf. 

32 85 FR 7101 through 7104. 

use the 3 most recent consecutive years 

of enrollee-level EDGE data that are 

available in time for incorporating the 

data in the draft recalibrated coefficients 

published in the proposed rule and we 

propose to not update the coefficients 

between the proposed and final rules if 

an additional year of enrollee-level 

EDGE data becomes available for 

incorporation. The purpose of this 

proposed change is to respond to 

stakeholders’ request to provide the 

proposed coefficients in the proposed 

rule while continuing to use the 3 most 

recent consecutive years of enrolleelevel EDGE data available to recalibrate 

the risk adjustment models. We believe 

this approach promotes stability and 

avoids the delays in publication of the 

coefficients while continuing to develop 

blended, or averaged, coefficients from 

the 3 years of separately solved models 

for model recalibration. This proposed 

approach also would continue to use 

actual data from issuers’ individual and 

small group (or merged) market 

populations, as well as maintain year-toyear stability in risk scores as the 

recalibration would continue to use at 

least two years of enrollee-level EDGE 

data that were used in the previous 

year’s models.27

For these reasons, we propose to use 

2016, 2017, and 2018 benefit years’ 

enrollee-level EDGE data for the 2022 

benefit year model recalibration. We 

seek comment on our proposal to 

determine coefficients for the 2022 

benefit year based on a blend of 

separately solved coefficients from the 

2016, 2017, and 2018 benefit years’ 

enrollee-level EDGE data and our 

proposed approach to identify the 3 

most recent years of data available for 

the annual recalibration of the risk 

adjustment models moving forward. 

Additionally, we seek comment on 

whether we should instead maintain the 

approach that would use the 2017, 2018, 

and 2019 benefit years’ data to 

recalibrate the risk adjustment models 

for the 2022 benefit year. 

The draft coefficients listed below in 

Tables 1 through 6 reflect the use of 

2016, 2017, and 2018 benefit year 

enrollee-level EDGE data, as well as 

other risk adjustment model updates 

proposed in this proposed rule 

(including changes to the model 

specifications, changes to the 

enrollment duration factors and the 

pricing adjustment to Hepatitis C drugs). 

However, we note that the coefficients 

could change if the proposed 

recalibration policies, or other proposed 

modeling parameters, are not finalized 

or are modified in response to 

comments. In addition, consistent with 

§ 153.320(b)(1)(i), if we are unable to 

finalize the final coefficients in time for 

the final rule, we would publish the 

final coefficients for the 2022 benefit 

year in guidance soon after the 

publication of the final rule. 

b. Risk Adjustment Model Updates 

Beginning with the 2022 benefit year, 

we are proposing two modeling updates 

to the risk adjustment models. These 

proposed updates include changes to 

the model specifications for the adult 

and child models and to the enrollment 

duration factors in the adult models to 

improve the models’ prediction. We are 

also proposing to continue the market 

pricing adjustment for the Hepatitis C 

drugs that has been in place since the 

2020 benefit year. 

(1) Changes to the Model Specifications 

Beginning with the 2022 benefit year, 

we are proposing to modify the adult 

and child models specifications to 

improve prediction for enrollees at both 

the low and highest ends of expected 

expenditures. The current HHS–HCC 

models are estimated by a weighted 

least squares regression.28 The 

dependent variable is annualized 

simulated plan liability expenditures, 

and the weight is the person-specific 

sample eligibility fraction. The effective 

outcome is that the models predict per 

member per month (PMPM) 

expenditures. 

As described in the 2021 Payment 

Notice, the current HHS–HCC models, 

which are linear models, modestly 

underpredict plan liability for enrollees 

without HCCs (enrollees with low 

expected expenditures) and modestly 

underpredict plan liability for enrollees 

with the highest HCC counts.29 In the 

2021 Payment Notice, we described 

options that we were considering to 

address these issues, such as adding a 

non-linear term or HCC counts terms to 

the risk adjustment models.30 For the 

non-linear model option, we considered 

adding a coefficient-weighted sum of 

payment HCCs raised to a power that 

could be interpreted as a measure of 

overall disease burden. For the HCC 

counts model option, we considered 

adding eight indicator variables 

corresponding to 1 to 8-or-more 

payment HCCs, similar to the CMS–HCC 

risk adjustment counts models used for 

Medicare Advantage.31 We have further 

evaluated the performance of these 

options, their potential for improved 

prediction, and considered other 

alternatives to improve the HHS risk 

adjustment models’ prediction. 

Our initial analyses showed that the 

non-linear and HCC counts models 

would yield considerable gains in 

predictive accuracy in the adult models 

across several groups when compared to 

the current linear models.32 We tested 

both the count and non-linear models’ 

impact on the adult silver risk 

adjustment models and found that the 

enrollees in the lowest cost deciles had 

better predictive ratios under either the 

HCC counts or non-linear model 

specification than under the current 

linear model specification. However, 

both models had shortcomings that 

prompted us to consider alternate model 

options. For the HCC counts model, we 

were concerned that the presence of 

counts across all HCCs may promote 

gaming in coding practices. We 

explored ways to assure modeling 

convergence across all metals and data 

years, and found that the non-linear 

models did not consistently converge in 

all testing scenarios, and that 

convergence could not reliably be 

assured without constraining model 

factors and revising those techniques 

with each metal and data year model 

run. Therefore, we continued to explore 

additional types of model specifications 

refinements that could balance the goals 

of improving the models’ prediction 

with mitigating modeling complexity 

and gaming concerns. Specifically, as 

described later in this section, we 

explored a two-stage specification with 

additional weighting in the second stage 

based on the inverse capped prediction 

from the first stage (‘‘two-stage 

specification’’), a specification with 

HCC counts included for a small 

number of severe and transplant HCCs 

(‘‘interacted HCC counts factors’’), and 

an approach combining the two-stage 

specification with the interacted HCC 

counts factors. 

For the two-stage specification, we 

explored calibrating the adult and child 

models in two stages: In the first-stage 

78584 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

33This weighted approach is similar to the 

weighted least squares approach with the weight 

equal to the reciprocal of the estimated variance 

that is often used to correct for heteroskedasticity. 

However, in our proposed approach, we would use 

the reciprocal of predictions from the first step as 

weights to correct for underprediction of lowvalued coefficients. 

34We are proposing to modify the enrollment 

duration factors in the adult models, as described 

elsewhere in this proposed rule. 

35Under the two-stage specification and 

interacted HCC counts model proposal described 

later in this section, we are proposing to replace the 

severity illness indicators in the adult risk 

adjustment models with the interacted HCC counts. 

36For HCCs in a group, the group is counted at 

most once. These groups of HCCs in the risk 

adjustment models are typically detailed in the 

Tables 6 and 7 of the HHS-Developed Risk 

Adjustment Model Algorithm ‘‘Do It Yourself 

(DIY)’’ Software. 

37This is in addition to the HCC coefficients for 

any other HCCs that the enrollee has, as well other 

risk adjustment factors that the enrollee has (such 

as demographic factors). If an enrollee has no severe 

HCCs the severe count interaction term coefficients 

are not applicable. 

38We note that one transplant HCC (HCC 18 

Pancreas Transplant) is not included on the list in 

Table 3. HCC 18 has a much lower coefficient than 

any of the other transplant HCCs in the adult 

models and was not underpredicted by the models. 

Therefore, we propose to exclude it from the list in 

Table 3 and solicit comments on the proposed 

treatment of HCC 18. 

estimation, the model coefficients 

would be estimated using the current 

model specifications; and in the second 

stage, we would re-estimate the model 

weighted by the reciprocal of the 

predicted values of relative 

expenditures from the first step 

estimation with the same model 

specification.33 The first stage of the 

weighted estimation method involves a 

linear regression (weighted by the 

person-specific eligibility fraction of the 

number of months enrolled divided by 

12) of simulated plan liability on agesex factors, payment HCC factors, the 

enrollment duration factors,34 and RXCs 

for the adult models. For the child 

models, the first stage of the weighted 

estimation method involves a linear 

regression of simulated plan liability on 

age-sex factors and payment HCC 

factors. The second stage involves using 

the reciprocal of first-stage predictions 

as weights for a second linear 

regression.35 To stabilize the weights for 

the second stage estimation, we 

imposed lower and upper bound caps 

on the first-stage predictions at the 2.5th 

and 97.5th percentiles in the adult 

models, and the 2.5th and 99.5th 

percentiles in the child models. We 

tested various caps for the weights 

based on the distribution of costs, and 

found these lower and upper bound 

caps achieved better prediction on 

average. This approach has the material 

effect of weighting the healthier 

enrollees, who represent a majority of 

enrollees in the individual and small 

group (including merged) markets but 

who are underpredicted by the current 

models, more heavily so that the 

statistical model predicts their 

expenditures more accurately. On the 

other hand, this approach systematically 

underweights, and therefore 

underpredicts, very expensive enrollees. 

However, the capped weighting 

approach mitigated the potential to 

underpredict at the high end for 

expensive enrollees, as well as any 

possible low-end overprediction. In our 

consideration of this option, we tested 

various weights, including reciprocals 

of square root of prediction, log of 

prediction, and residuals from first step 

estimation, but the reciprocal of the 

capped predictions resulted in better 

predictive ratios for low-cost enrollees 

compared to any of these alternative 

weighting functions. 

We also explored how the addition of 

severe and transplant indicators 

interacted with HCC counts, wherein an 

indicator flagging the presence of at 

least one severe or transplant payment 

HCC is being interacted with counts of 

the enrollee’s payment HCCs.36 The 

goals for this approach were to: (1) 

Address the non-linearity in costs 

between enrollees with no or very low 

costs and enrollees with high costs; (2) 

empirically incorporate the cost impact 

of multiple complex diseases; and (3) 

mitigate the gaming concerns with the 

HCC counts model. We tested different 

types of severity and transplant 

indicators interacted with HCC counts 

with the goal of improving prediction 

for enrollees with the highest costs and 

multiple HCCs to counter balance the 

reciprocal prediction weights that 

relatively underpredicted costs for these 

enrollees. For this approach, we 

assessed the HCCs for enrollees with 

extremely high costs, and HCCs that 

were being underpredicted in the 

current risk adjustment models. We 

found that many of the HCCs that were 

flagged as being underpredicted were 

those HCCs in the severe illness 

indicators, the transplant HCCs, and 

other HCCs related to severity of 

disease; therefore, we considered 

dropping the current severity illness 

indicators in the adult models and 

replacing them with severity and 

transplant indicators interacted with 

HCC counts factors in the adult and 

child models. Table 3 lists the HCCs 

that were selected for the severity and 

transplant indicators for the adult and 

child models for purposes of exploring 

this option. The severity and transplant 

indicators were then interacted with 

HCC counts factors, which are described 

below. 

The purpose of adding severity and 

transplant indicators interacted with 

HCC counts factors is to account for the 

fact that costs of certain HCCs rise 

significantly when they occur with 

multiple other HCCs. However, in order 

to mitigate the incentive to upcode 

multiple HCCs, we only increased 

incremental risk scores in the presence 

of at least one of the selected HCCs in 

the severity or transplant indicator 

groups in Table 3. That is, an enrollee 

must have at least one HCC in the 

‘‘severity’’ or ‘‘transplant’’ indicator 

groups in Table 3 to receive the 

interacted HCC counts coefficient 

toward their risk score. 

Under this approach, when an 

enrollee has a severity indicator HCC in 

Table 3, the enrollee’s risk score 

includes the sum of: (1) Severity HCC 

variable coefficient; 37 and (2) applicable 

severity HCC counts variable coefficient. 

The HCC counts factors, which indicate 

the counts of all payment HCCs for an 

enrollee with at least one HCC, 

interacted with the severity indicator in 

Table 3, range from one, two, to 10+ 

payment HCCs (1, 2, . . . , 10+) for the 

adult models, and from one, two, to 5, 

then 6 or 7, and 8+ payment HCCs for 

the child models. To implement the 

severity indicator HCC counts factors 

and further explore this option, we 

removed the current severe illness 

indicators in the adult models, and 

added severity indicator interacted HCC 

counts variables for the adult and child 

models. 

For the transplant-related HCCs 

within the severity indicator HCC 

counts in Table 3,38 we found separating 

out transplant HCCs into their own 

additional indicator to interact HCC 

counts factors improved prediction for 

these high-cost enrollees. Therefore, for 

the transplant HCCs, we created a 

separate transplant indicator to interact 

with payment HCC counts of 4, 5, 6, 7, 

or 8+ for the adult models, and a single 

indicator variable of payment HCC 

counts of 4+ for the child models. For 

example, an adult enrollee with a 

transplant HCC 34 ‘‘Liver Transplant 

Status/Complications’’ in the transplant 

indicator group and three other payment 

HCCs received the following factors 

toward their risk score in the adult 

models: (1) The four coefficients for 

their individual HCCs (the three nontransplant HCCs and the HCC 34 

transplant HCC coefficient), (2) severity 

interacted HCC counts of 4 coefficient, 

and (3) transplant interacted HCC 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78585 

39This is in addition to other risk adjustment 

factors that the enrollee has (such as demographic 

factors). 

40See 85 FR 7103 and 7104. 

41 In the enrollee-level EDGE data, merged market 

enrollees are assigned to the individual or small 

group market indicator based on their plan. 

counts of 4 coefficient.39 The child 

model operated similarly. For a child 

enrollee with a transplant HCC in the 

transplant indicator group and three 

other payment HCCs, the following was 

used to calculate the enrollee’s risk 

score: (1) Coefficients for all four HCCs, 

(including the transplant HCC 

coefficient), (2) severity interacted HCC 

counts of 4 coefficient, and (3) 

transplant interacted HCC counts of 4 

coefficient. 

As an alternative, we explored 

interacting the HCC counts factors with 

each selected severity and transplant 

HCC, but found it was sufficient to 

interact the HCC counts factors with a 

variable indicating the presence of at 

least one of the selected HCCs in each 

group to improve prediction for 

enrollees with these HCCs. We also 

explored different combinations of HCC 

counts to identify the counts factors for 

both indicator groups in the adult and 

child models that provided the best 

balance of reasonable sample sizes and 

relative cost differences between each 

counts factor. More specifically, in the 

adult models, we found that starting 

with 4+ HCCs for the transplant 

interacted factors improved predictions 

of enrollees at the very high end in 

terms of risk and cost and ending at 8+ 

HCCs instead of 10+ HCCs addressed 

the small sample sizes of enrollees with 

a transplant and 9 or more payment 

HCCs. For the child models, we found 

having one variable for 4+ payment 

HCCs provided more stable estimates 

given the smaller sample sizes for 

children than those for adults. 

Lastly, we tested combining these 

specifications into an alternative 

approach that incorporated both the 

two-stage specification and the severity 

and transplant indicators interacted 

HCC counts factors described above. We 

found this combined approach generally 

improved prediction for enrollees at 

both the low and highest ends of 

expected expenditures. Specifically, 

even though we found that the age-sex 

factors and some HCCs might have 

slightly worse predictive ratios under 

the proposed combined approach than 

the current linear models, we found that 

this combined approach improves 

predictive ratios in comparison to the 

current models in each decile of 

predicted plan liability. We also found 

that this combined approach improves 

R-squared in comparison to the current 

model and that even though the 

coefficients for the model factors that 

are most impacted by the combined 

approach (the age-sex factors and the 

severe and transplant HCCs) are 

changing under the 2022 benefit year 

models compared to the 2021 benefit 

year models, the average enrollee’s adult 

risk score in the recalibration sample in 

the silver metal level is only increasing 

slightly between 2021 benefit year 

models to 2022 benefit year models. 

Therefore, we propose to modify the 

HHS risk adjustment model 

specifications for the adult and child 

models by combining a two-stage 

specification and adding interacted HCC 

counts factors. For the two-stage 

specification, we propose calibrating the 

adult and child models in two stages. 

The first stage of the weighted 

estimation method would involve a 

linear regression of simulated plan 

liability on age-sex factors and payment 

HCC factors for the adult and child 

models, with the addition of the 

enrollment duration and RXCs factors 

for the adult models. The second stage 

would use the reciprocal of prediction 

as weights from the first step as a 

second stage linear regression. To 

stabilize the weights from the first stage 

predictions, we propose lower and 

upper bound caps on the predictions at 

the 2.5th and 97.5th percentiles in the 

adult models and the 2.5th and 99.5th 

percentiles in the child models. This 

two-stage specification would be 

combined with the severity and 

transplant indicators from the interacted 

HCC counts factors. For the severity 

indicator group, we propose to add 

separate count factors for one to 10+ 

payment HCCs counts factors (1, 2, 

. . . , 10+) for the adult models and one 

to 5, 6 or 7, and 8+ payment HCCs (1, 

2, . . . 5, 6 or 7, 8+) for the child 

models. The HCCs that flag the severity 

indicator are listed in Table 3. For the 

transplant HCCs, we propose to 

incorporate variables for 4 to 8+ 

payment HCCs (4, 5, 6, 7, 8+) for the 

adult models and one variable for 4+ 

payment HCCs for the child models. All 

variables, including the severity and 

transplant indicators interacted in the 

interacted HCC counts factors, would be 

included in both stages of the 

regressions. We propose to incorporate 

these model specification updates 

beginning with the 2022 benefit year 

HHS risk adjustment adult and child 

models. We also propose to remove the 

current severity illness indicators in the 

adult models beginning with the 2022 

benefit year. 

The coefficients presented in Tables 1 

and 2 incorporate these proposed 

changes and Table 3 provides the list of 

severity and transplant HCCs that apply 

for the interacted HCC counts factors. 

We seek comment on these proposals, 

including on the HCCs selected for 

flagging as severity and transplant 

indicators listed in Table 3 such as 

whether we should include HCC 18 

Pancreas Transplant in the transplant 

indicator group, and the alternatives 

described above. We also request 

comment on whether we should pursue 

both the interacted HCC counts factors 

and the two-stage specification 

beginning with the 2022 benefit year (as 

proposed), if we should implement one 

of the two approaches beginning with 

the 2022 benefit year (and if so, which 

one), or if we should wait to implement 

the proposed changes that combines the 

proposed model specification updates 

until the 2023 benefit year. 

c. Changes to the Enrollment Duration 

Factors 

In this rule, we propose changes to 

the enrollment duration factors in the 

adult risk adjustment models to improve 

the prediction for partial year enrollees 

with HCCs. As described in the 

proposed 2021 Payment Notice, we have 

been considering potential adjustments 

to the enrollment duration factors and 

previously analyzed the current factors 

using the 2016 and 2017 enrollee-level 

EDGE data.40 We explored heterogeneity 

(variations) of costs for partial year 

enrollees in the presence of certain 

diagnosis codes, by market (individual 

or small group),41 and under various 

enrollment circumstances, such as 

enrollment beginning later in the year or 

ending before the end of the year. Our 

preliminary analysis of 2017 enrolleelevel EDGE data found that the current 

enrollment duration factors are driven 

by enrollees with HCCs. That is, partial 

year enrollees with HCCs had higher 

PMPM expenditures on average as 

compared to full year enrollees with 

HCCs. On the other hand, partial year 

enrollees without HCCs were not 

significantly different in PMPM 

expenditures compared to full year 

enrollees without HCCs. In the 2021 

Payment Notice, we also explained that 

our preliminary analysis found that, in 

comparison to the effect of the presence 

of HCCs on enrollment duration factors, 

enrollment timing (for example, 

enrollment at the beginning of the year 

compared to enrollment after open 

enrollment period, or drop in 

enrollment before the end of the year) 

did not appear to affect PMPM 

expenditures on average. While we did 

not make changes to the enrollment 

78586 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

42As explained in the 2021 Payment Notice 

proposed rule, we found that partial year enrollees 

in the child models did not have the same risk 

differences as partial year enrollees in the adult 

models and they tended to have similar risk to full 

year enrollees in the child models. In the infant 

models, we found that partial year infants had 

higher expenditures on average compared to their 

full year counterparts; however, the incorporation 

of enrollment duration factors created interaction 

issues with the current severity and maturity factors 

and did not have a meaningful impact on the 

general predictive accuracy of the infant models. 

See 85 FR 7103 and 7104. 43 84 FR 17463 through 17466. 

44 85 FR 29185. 

45The Hepatitis C drugs market pricing 

adjustment to plan liability is applied for all 

enrollees taking Hepatitis C drugs in the data used 

for recalibration. 

46As detailed below, we are not proposing 

changes to the high-cost risk pool parameters for the 

2022 benefit year. Therefore, as proposed, we 

would maintain the $1 million threshold and 60 

percent coinsurance rate. 

duration factors in the 2021 Payment 

Notice, we stated that we were 

considering eliminating the monthly 

enrollment duration factors up to 11 

months and replacing them with 

monthly enrollment duration factors up 

to 6 months for enrollees with HCCs. 

We also stated that we intended to 

review the trends observed in our 

preliminary analysis using an additional 

year’s data before proposing changes. 

Since the publication of the 2021 

Payment Notice, we have reassessed 

enrollment duration factors for adults 

using the 2018 benefit year enrolleelevel EDGE data. The additional data 

year’s findings were consistent with our 

prior finding that partial year enrollees 

without HCCs do not have PMPM 

expenditures that are significantly 

different compared to full year enrollees 

without HCCs. We also found that the 

current enrollment duration factors 

underpredict plan liability for partial 

year adult enrollees with HCCs, and 

overpredict plan liability for partial year 

adult enrollees without HCCs. 

Therefore, beginning with the 2022 

benefit year, we are proposing to remove 

the current 11 enrollment duration 

factors of up to 11 months for all 

enrollees in the adult models, and add 

new monthly enrollment duration 

factors of up to 6 months to the adult 

models that would only apply for 

enrollees with payment HCCs. If 

finalized as proposed, this would mean 

there would be no enrollment duration 

factors for adult enrollees without 

payment HCCs starting with the 2022 

benefit year adult models. As part of 

this analysis, we also considered 

adoption of enrollment duration factors 

by market, but we did not find a 

meaningful distinction in relative costs 

between markets on average once we 

implemented the proposed enrollment 

duration factors of up to 6 months for 

adult enrollees with payment HCCs. 

Therefore, we are not proposing 

enrollment duration factors for the adult 

models by market type at this time. We 

are also proposing to continue to 

incorporate enrollment duration factors 

only in the adult models.42 We solicit 

comment on the proposed changes to 

the enrollment duration factors for the 

adult models. We also seek comment on 

whether we should implement these 

model changes starting with the 2022 

benefit year, whether we should delay 

implementation until the 2023 benefit 

year, or whether we should create the 

enrollment duration factors for different 

lengths, such as up to 9 months of 

enrollment, instead of up to 6 months, 

as proposed. 

d. Pricing Adjustment for the Hepatitis 

C Drugs 

For the 2022 benefit year models, we 

propose to continue applying the market 

pricing adjustment to the plan liability 

associated with Hepatitis C drugs that 

has been in place beginning with the 

2020 benefit year final risk adjustment 

models.43 We continue to believe this 

market pricing adjustment is necessary 

to account for the significant pricing 

changes associated with the 

introduction of new and generic 

Hepatitis C drugs between the data years 

used for recalibrating the models and 

the applicable recalibration benefit year. 

We also continue to be 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 that is higher than the actual 

plan liability of the drug claim, and 

therefore, make the risk adjustment 

transfer results more favorable for the 

issuer. We previously stated that we 

intended to reassess this pricing 

adjustment with future benefit years’ 

enrollee-level EDGE data.44 We remain 

committed to doing so. However, we are 

proposing to use the same 3 years of 

enrollee-level EDGE data for the 2022 

benefit year model recalibration as those 

used for the 2021 benefit year. 

Therefore, we propose to continue 

making the market pricing adjustment to 

the plan liability associated with 

Hepatitis C drugs to reflect future 

market pricing prior to solving for 

coefficients for the 2022 benefit year 

models.45 We intend to reassess this 

pricing adjustment in future 

recalibrations with additional years of 

enrollee-level EDGE data. We seek 

comment on this proposal. 

e. List of Factors To Be Employed in the 

Risk Adjustment Models (§ 153.320) 

The proposed 2022 benefit year risk 

adjustment model factors resulting from 

the equally weighted (averaged) blended 

factors from separately solved models 

using the 2016, 2017, and 2018 enrolleelevel EDGE data, including all of the 

proposed model changes detailed above, 

are shown in Tables 1 through 6. The 

adult, child, and infant models have 

been truncated to account for the highcost risk pool payment parameters by 

removing 60 percent of costs above the 

$1 million threshold.46 Table 1 contains 

factors for each adult model, including 

the age-sex, HCCs, RXCs, RXC–HCC 

interactions, interacted HCC counts, and 

enrollment duration coefficients. Table 

2 contains the factors for each child 

model. Table 3 lists the HHS–HCCs in 

the proposed severity and transplant 

indicator flags selected for the 

interacted HCC counts factors that 

would apply to the adult and child 

models beginning with the 2022 benefit 

year. Table 4 contains the factors for 

each infant model. Tables 5 and 6 

contain the HCCs included in the infant 

models’ maturity and severity 

categories, respectively. 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

Demographic Factors 

Age 21–24, Male ..................................................... 0.179 0.134 0.098 0.070 0.068 

Age 25–29, Male ..................................................... 0.184 0.138 0.102 0.074 0.073 

Age 30–34, Male ..................................................... 0.214 0.162 0.120 0.087 0.085 

Age 35–39, Male ..................................................... 0.248 0.188 0.140 0.100 0.097 

Age 40–44, Male ..................................................... 0.277 0.213 0.159 0.114 0.111 

Age 45–49, Male ..................................................... 0.310 0.240 0.182 0.131 0.128 

Age 50–54, Male ..................................................... 0.393 0.316 0.249 0.191 0.188 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78587 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

Age 55–59, Male ..................................................... 0.446 0.359 0.285 0.221 0.217 

Age 60–64, Male ..................................................... 0.524 0.427 0.343 0.270 0.265 

Age 21–24, Female ................................................. 0.292 0.223 0.167 0.125 0.123 

Age 25–29, Female ................................................. 0.319 0.244 0.183 0.138 0.136 

Age 30–34, Female ................................................. 0.375 0.290 0.221 0.165 0.162 

Age 35–39, Female ................................................. 0.428 0.336 0.258 0.194 0.190 

Age 40–44, Female ................................................. 0.484 0.383 0.297 0.223 0.218 

Age 45–49, Female ................................................. 0.507 0.401 0.309 0.229 0.225 

Age 50–54, Female ................................................. 0.565 0.459 0.364 0.281 0.276 

Age 55–59, Female ................................................. 0.569 0.461 0.366 0.283 0.278 

Age 60–64, Female ................................................. 0.616 0.505 0.405 0.320 0.315 

Diagnosis Factors 

HCC001 .......................... HIV/AIDS ................................................................. 1.372 1.241 1.148 1.066 1.062 

HCC002 .......................... Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.9.748 9.526 9.394 9.265 9.261 

HCC003 .......................... Central Nervous System Infections, Except Viral 

Meningitis.

8.571 8.427 8.323 8.202 8.195 

HCC004 .......................... Viral or Unspecified Meningitis ................................ 8.571 8.427 8.323 8.202 8.195 

HCC006 .......................... Opportunistic Infections ........................................... 8.171 8.081 7.987 7.849 7.840 

HCC008 .......................... Metastatic Cancer .................................................... 24.079 23.695 23.536 23.460 23.461 

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

Pediatric Acute Lymphoid Leukemia.

14.384 14.117 13.991 13.897 13.896 

HCC010 .......................... Non-Hodgkin Lymphomas and Other Cancers and 

Tumors.

5.887 5.722 5.626 5.532 5.528 

HCC011 .......................... Colorectal, Breast (Age <50), Kidney, and Other 

Cancers.

3.865 3.677 3.547 3.410 3.404 

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

Tumors.

2.559 2.414 2.305 2.185 2.180 

HCC013 .......................... Thyroid Cancer, Melanoma, Neurofibromatosis, 

and Other Cancers and Tumors.

1.134 1.018 0.893 0.744 0.735 

HCC018 .......................... Pancreas Transplant Status .................................... 0.875 0.813 0.806 1.044 1.021 

HCC019 .......................... Diabetes with Acute Complications ......................... 0.385 0.323 0.262 0.202 0.198 

HCC020 .......................... Diabetes with Chronic Complications ...................... 0.385 0.323 0.262 0.202 0.198 

HCC021 .......................... Diabetes without Complication ................................ 0.385 0.323 0.262 0.202 0.198 

HCC022 .......................... Type 1 Diabetes Mellitus, add-on to Diabetes 

HCCs 19–21.

0.311 0.276 0.242 0.173 0.169 

HCC023 .......................... Protein-Calorie Malnutrition ..................................... 10.875 10.752 10.670 10.587 10.582 

HCC026 .......................... Mucopolysaccharidosis ............................................ 28.668 28.458 28.362 28.308 28.309 

HCC027 .......................... Lipidoses and Glycogenosis .................................... 28.668 28.458 28.362 28.308 28.309 

HCC029 .......................... Amyloidosis, Porphyria, and Other Metabolic Disorders.7.531 7.405 7.319 7.244 7.242 

HCC030 .......................... Adrenal, Pituitary, and Other Significant Endocrine 

Disorders.

1.328 1.224 1.125 1.007 1.001 

HCC034 .......................... Liver Transplant Status/Complications .................... 8.038 7.973 7.884 7.864 7.853 

HCC035_1 47 ................... Acute Liver Failure/Disease, Including Neonatal 

Hepatitis.

7.063 6.914 6.849 6.800 6.798 

HCC035_2 ....................... Chronic Liver Failure/End-Stage Liver Disorders .... 2.906 2.734 2.630 2.520 2.516 

HCC036 .......................... Cirrhosis of Liver ..................................................... 1.283 1.180 1.078 0.946 0.938 

HCC037_1 ....................... Chronic Viral Hepatitis C ......................................... 0.830 0.731 0.637 0.529 0.523 

HCC037_2 ....................... Chronic Hepatitis, Except Chronic Viral Hepatitis C 0.830 0.731 0.637 0.529 0.523 

HCC041 .......................... Intestine Transplant Status/Complications .............. 23.291 23.157 23.033 22.817 22.812 

HCC042 .......................... Peritonitis/Gastrointestinal Perforation/Necrotizing 

Enterocolitis.

11.657 11.449 11.339 11.253 11.250 

HCC045 .......................... Intestinal Obstruction ............................................... 4.859 4.672 4.585 4.484 4.482 

HCC046 .......................... Chronic Pancreatitis ................................................ 3.262 3.088 3.000 2.913 2.912 

HCC047 .......................... Acute Pancreatitis .................................................... 2.933 2.727 2.593 2.418 2.412 

HCC048 .......................... Inflammatory Bowel Disease ................................... 0.820 0.731 0.626 0.488 0.479 

HCC054 .......................... Necrotizing Fasciitis ................................................. 8.872 8.708 8.632 8.596 8.595 

HCC055 .......................... Bone/Joint/Muscle Infections/Necrosis .................... 4.708 4.536 4.467 4.432 4.432 

HCC056 .......................... Rheumatoid Arthritis and Specified Autoimmune 

Disorders.

1.340 1.230 1.121 1.001 0.994 

HCC057 .......................... Systemic Lupus Erythematosus and Other Autoimmune Disorders.0.878 0.782 0.664 0.514 0.505 

HCC061 .......................... Osteogenesis Imperfecta and Other 

Osteodystrophies.

2.463 2.304 2.185 2.051 2.044 

HCC062 .......................... Congenital/Developmental Skeletal and Connective Tissue Disorders.2.463 2.304 2.185 2.051 2.044 

HCC063 .......................... Cleft Lip/Cleft Palate ................................................ 1.676 1.544 1.437 1.309 1.303 

HCC066 .......................... Hemophilia ............................................................... 69.981 69.651 69.503 69.435 69.435 

HCC067 .......................... Myelodysplastic Syndromes and Myelofibrosis ....... 13.285 13.162 13.096 13.039 13.036 

HCC068 .......................... Aplastic Anemia ....................................................... 13.285 13.162 13.096 13.039 13.036 

HCC069 .......................... Acquired Hemolytic Anemia, Including Hemolytic 

Disease of Newborn.

13.285 13.162 13.096 13.039 13.036 

HCC070 .......................... Sickle Cell Anemia (Hb-SS) .................................... 2.395 2.283 2.191 2.082 2.077 

HCC071 .......................... Beta Thalassemia Major .......................................... 2.395 2.283 2.191 2.082 2.077 

HCC073 .......................... Combined and Other Severe Immunodeficiencies 4.039 3.936 3.888 3.840 3.839 

HCC074 .......................... Disorders of the Immune Mechanism ..................... 4.039 3.936 3.888 3.840 3.839 

HCC075 .......................... Coagulation Defects and Other Specified 

Hematological Disorders.

1.763 1.672 1.594 1.499 1.495 

78588 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

HCC081 .......................... Drug Use with Psychotic Complications ................. 2.438 2.264 2.108 1.897 1.885 

HCC082 .......................... Drug Use Disorder, Moderate/Severe, or Drug Use 

with Non-Psychotic Complications.

2.438 2.264 2.108 1.897 1.885 

HCC083 .......................... Alcohol Use with Psychotic Complications ............. 1.296 1.171 1.057 0.911 0.903 

HCC084 .......................... Alcohol Use Disorder, Moderate/Severe, or Alcohol 

Use with Specified Non-Psychotic Complications.

1.296 1.171 1.057 0.911 0.903 

HCC087_1 ....................... Schizophrenia .......................................................... 2.445 2.260 2.121 1.961 1.954 

HCC087_2 ....................... Delusional and Other Specified Psychotic Disorders, Unspecified Psychosis.2.372 2.199 2.067 1.894 1.886 

HCC088 .......................... Major Depressive Disorder, Severe, and Bipolar 

Disorders.

1.271 1.141 1.008 0.838 0.829 

HCC090 .......................... Personality Disorders .............................................. 0.856 0.742 0.606 0.446 0.435 

HCC094 .......................... Anorexia/Bulimia Nervosa ....................................... 2.223 2.099 1.993 1.875 1.869 

HCC096 .......................... Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes.8.930 8.904 8.869 8.785 8.778 

HCC097 .......................... Down Syndrome, Fragile X, Other Chromosomal 

Anomalies, and Congenital Malformation Syndromes.

1.051 0.965 0.880 0.783 0.777 

HCC102 .......................... Autistic Disorder ...................................................... 0.974 0.865 0.741 0.602 0.593 

HCC103 .......................... Pervasive Developmental Disorders, Except Autistic Disorder.0.856 0.742 0.606 0.446 0.435 

HCC106 .......................... Traumatic Complete Lesion Cervical Spinal Cord .. 10.321 10.159 10.050 9.940 9.936 

HCC107 .......................... Quadriplegia ............................................................ 10.321 10.159 10.050 9.940 9.936 

HCC108 .......................... Traumatic Complete Lesion Dorsal Spinal Cord ..... 7.300 7.190 7.148 7.079 7.076 

HCC109 .......................... Paraplegia ................................................................ 7.300 7.190 7.148 7.079 7.076 

HCC110 .......................... Spinal Cord Disorders/Injuries ................................. 5.109 4.928 4.832 4.737 4.734 

HCC111 .......................... Amyotrophic Lateral Sclerosis and Other Anterior 

Horn Cell Disease.

3.983 3.791 3.637 3.454 3.445 

HCC112 .......................... Quadriplegic Cerebral Palsy .................................... 2.457 2.306 2.196 2.073 2.070 

HCC113 .......................... Cerebral Palsy, Except Quadriplegic ...................... 0.911 0.825 0.739 0.628 0.621 

HCC114 .......................... Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies.1.633 1.516 1.406 1.273 1.266 

HCC115 .......................... Myasthenia Gravis/Myoneural Disorders and 

Guillain-Barre Syndrome/Inflammatory and Toxic 

Neuropathy.

5.117 5.042 5.019 4.999 4.999 

HCC117 .......................... Muscular Dystrophy ................................................. 1.717 1.593 1.473 1.307 1.298 

HCC118 .......................... Multiple Sclerosis ..................................................... 3.304 3.144 3.019 2.877 2.870 

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

Disease, and Other Neurodegenerative Disorders.

1.717 1.593 1.473 1.307 1.298 

HCC120 .......................... Seizure Disorders and Convulsions ........................ 1.262 1.142 1.028 0.887 0.879 

HCC121 .......................... Hydrocephalus ......................................................... 10.147 10.050 9.987 9.914 9.910 

HCC122 .......................... Coma, Brain Compression/Anoxic Damage ............ 10.005 9.852 9.745 9.624 9.618 

HCC123 .......................... Narcolepsy and Cataplexy ...................................... 5.856 5.690 5.554 5.405 5.397 

HCC125 .......................... Respirator Dependence/Tracheostomy Status ....... 21.425 21.213 21.080 20.954 20.949 

HCC126 .......................... Respiratory Arrest .................................................... 8.941 8.754 8.635 8.523 8.520 

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

Respiratory Distress Syndromes.

8.941 8.754 8.635 8.523 8.520 

HCC128 .......................... Heart Assistive Device/Artificial Heart ..................... 21.035 20.838 20.709 20.586 20.580 

HCC129 .......................... Heart Transplant Status/Complications ................... 21.035 20.838 20.709 20.586 20.580 

HCC130 .......................... Heart Failure ............................................................ 2.046 1.947 1.874 1.792 1.788 

HCC131 .......................... Acute Myocardial Infarction ..................................... 6.142 5.902 5.813 5.777 5.781 

HCC132 .......................... Unstable Angina and Other Acute Ischemic Heart 

Disease.

4.704 4.470 4.361 4.250 4.250 

HCC135 .......................... Heart Infection/Inflammation, Except Rheumatic .... 8.866 8.749 8.645 8.507 8.499 

HCC137 .......................... Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders.1.910 1.809 1.715 1.613 1.608 

HCC138 .......................... Major Congenital Heart/Circulatory Disorders ......... 1.910 1.809 1.715 1.613 1.608 

HCC139 .......................... Atrial and Ventricular Septal Defects, Patent 

Ductus Arteriosus, and Other Congenital Heart/ 

Circulatory Disorders.

1.910 1.809 1.715 1.613 1.608 

HCC142 .......................... Specified Heart Arrhythmias .................................... 1.838 1.717 1.608 1.473 1.469 

HCC145 .......................... Intracranial Hemorrhage .......................................... 11.065 10.884 10.774 10.662 10.658 

HCC146 .......................... Ischemic or Unspecified Stroke ............................... 1.590 1.463 1.368 1.236 1.231 

HCC149 .......................... Cerebral Aneurysm and Arteriovenous Malformation.2.570 2.429 2.321 2.184 2.178 

HCC150 .......................... Hemiplegia/Hemiparesis .......................................... 3.409 3.301 3.271 3.263 3.266 

HCC151 .......................... Monoplegia, Other Paralytic Syndromes ................. 2.405 2.286 2.199 2.086 2.081 

HCC153 .......................... Atherosclerosis of the Extremities with Ulceration 

or Gangrene.

7.875 7.759 7.732 7.746 7.750 

HCC154 .......................... Vascular Disease with Complications ..................... 5.620 5.504 5.463 5.427 5.427 

HCC156 .......................... Pulmonary Embolism and Deep Vein Thrombosis 7.977 7.859 7.751 7.617 7.608 

HCC158 .......................... Lung Transplant Status/Complications .................... 12.435 12.247 12.124 12.008 11.999 

HCC159 .......................... Cystic Fibrosis ......................................................... 5.177 5.040 4.976 4.910 4.908 

HCC160 .......................... Chronic Obstructive Pulmonary Disease, Including 

Bronchiectasis.

0.824 0.726 0.617 0.488 0.481 

HCC161_1 ....................... Severe Asthma ........................................................ 0.824 0.726 0.617 0.488 0.481 

HCC161_2 ....................... Asthma, Except Severe ........................................... 0.824 0.726 0.617 0.488 0.481 

HCC162 .......................... Fibrosis of Lung and Other Lung Disorders ............ 1.742 1.631 1.532 1.403 1.396 

HCC163 .......................... Aspiration and Specified Bacterial Pneumonias 

and Other Severe Lung Infections.

7.455 7.417 7.378 7.350 7.349 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78589 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

HCC174 .......................... Exudative Macular Degeneration ............................ 1.438 1.298 1.167 0.991 0.982 

HCC183 .......................... Kidney Transplant Status/Complications ................. 8.681 8.609 8.503 8.269 8.263 

HCC184 .......................... End Stage Renal Disease ....................................... 22.696 22.390 22.310 22.358 22.400 

HCC187 .......................... Chronic Kidney Disease, Stage 5 ........................... 0.863 0.794 0.736 0.668 0.665 

HCC188 .......................... Chronic Kidney Disease, Severe (Stage 4) ............ 0.863 0.794 0.736 0.668 0.665 

HCC203 .......................... Ectopic and Molar Pregnancy ................................. 2.155 1.952 1.753 1.433 1.416 

HCC204 .......................... Miscarriage with Complications ............................... 0.924 0.813 0.657 0.430 0.413 

HCC205 .......................... Miscarriage with No or Minor Complications .......... 0.924 0.813 0.657 0.430 0.413 

HCC207 .......................... Pregnancy with Delivery with Major Complications 4.064 3.783 3.551 3.135 3.118 

HCC208 .......................... Pregnancy with Delivery with Complications .......... 4.064 3.783 3.551 3.135 3.118 

HCC209 .......................... Pregnancy with Delivery with No or Minor Complications.2.847 2.639 2.414 1.955 1.928 

HCC210 .......................... (Ongoing) Pregnancy without Delivery with Major 

Complications.

1.280 1.141 0.959 0.726 0.711 

HCC211 .......................... (Ongoing) Pregnancy without Delivery with Complications.0.879 0.766 0.607 0.438 0.427 

HCC212 .......................... (Ongoing) Pregnancy without Delivery with No or 

Minor Complications.

0.352 0.280 0.190 0.123 0.119 

HCC217 .......................... Chronic Ulcer of Skin, Except Pressure .................. 1.533 1.420 1.330 1.220 1.215 

HCC218 .......................... Extensive Third Degree Burns ................................ 23.966 23.738 23.617 23.538 23.536 

HCC219 .......................... Major Skin Burn or Condition .................................. 2.364 2.241 2.145 2.041 2.036 

HCC223 .......................... Severe Head Injury .................................................. 17.030 16.895 16.771 16.632 16.624 

HCC226 .......................... Hip and Pelvic Fractures ......................................... 8.337 8.132 8.048 7.995 7.996 

HCC228 .......................... Vertebral Fractures without Spinal Cord Injury ....... 4.358 4.194 4.090 3.962 3.956 

HCC234 .......................... Traumatic Amputations and Amputation Complications.4.952 4.795 4.736 4.696 4.697 

HCC251 .......................... Stem Cell, Including Bone Marrow, Transplant Status/Complications.22.648 22.602 22.510 22.387 22.377 

HCC253 .......................... Artificial Openings for Feeding or Elimination ......... 6.513 6.413 6.376 6.352 6.352 

HCC254 .......................... Amputation Status, Upper Limb or Lower Limb ...... 1.806 1.671 1.574 1.456 1.451 

Interacted HCC Counts Factors 

Severe illness, 1 payment HCC .............................. ¥6.091 ¥6.125 ¥6.181 ¥6.267 ¥6.271 

Severe illness, 2 payment HCCs ............................ ¥5.758 ¥5.804 ¥5.824 ¥5.883 ¥5.886 

Severe illness, 3 payment HCCs ............................ ¥4.600 ¥4.607 ¥4.526 ¥4.404 ¥4.393 

Severe illness, 4 payment HCCs ............................ ¥3.648 ¥3.586 ¥3.415 ¥3.138 ¥3.118 

Severe illness, 5 payment HCCs ............................ ¥2.965 ¥2.815 ¥2.554 ¥2.137 ¥2.110 

Severe illness, 6 payment HCCs ............................ ¥2.718 ¥2.456 ¥2.103 ¥1.561 ¥1.528 

Severe illness, 7 payment HCCs ............................ ¥1.848 ¥1.445 ¥0.987 ¥0.319 ¥0.281 

Severe illness, 8 payment HCCs ............................ ¥1.328 ¥0.842 ¥0.328 0.405 0.446 

Severe illness, 9 payment HCCs ............................ 0.191 0.836 1.458 2.310 2.355 

Severe illness, 10 or more payment HCCs ............ 8.579 9.578 10.431 11.526 11.579 

Transplant severe illness, 4 payment HCCs ........... 3.559 3.502 3.483 3.483 3.487 

Transplant severe illness, 5 payment HCCs ........... 7.420 7.365 7.353 7.363 7.368 

Transplant severe illness, 6 payment HCCs ........... 12.674 12.625 12.622 12.645 12.652 

Transplant severe illness, 7 payment HCCs ........... 18.766 18.696 18.688 18.707 18.715 

Transplant severe illness, 8 or more payment 

HCCs.

33.796 33.788 33.829 33.905 33.916 

Enrollment Duration Factors 

Enrolled for 1 month, at least one payment HCC ... 9.287 7.981 6.876 5.547 5.462 

Enrolled for 2 months, at least one payment HCC 3.618 2.896 2.336 1.799 1.768 

Enrolled for 3 months, at least one payment HCC 2.088 1.641 1.282 0.965 0.947 

Enrolled for 4 months, at least one payment HCC 1.105 0.816 0.572 0.376 0.366 

Enrolled for 5 months, at least one payment HCC 0.770 0.563 0.380 0.235 0.226 

Enrolled for 6 months, at least one payment HCC 0.499 0.351 0.215 0.123 0.120 

Prescription Drug Factors 

RXC 01 ........................... Anti-HIV Agents ....................................................... 8.499 7.914 7.511 7.007 6.990 

RXC 02 ........................... Anti-Hepatitis C (HCV) Agents, Direct Acting 

Agents.

6.593 6.146 5.958 5.830 5.835 

RXC 03 ........................... Antiarrhythmics ........................................................ 0.117 0.107 0.103 0.069 0.050 

RXC 04 ........................... Phosphate Binders .................................................. 2.009 2.016 2.007 1.953 1.880 

RXC 05 ........................... Inflammatory Bowel Disease Agents ...................... 1.519 1.374 1.206 0.941 0.924 

RXC 06 ........................... Insulin ...................................................................... 1.227 1.005 0.762 0.500 0.483 

RXC 07 ........................... Anti-Diabetic Agents, Except Insulin and Metformin 

Only.

0.671 0.570 0.463 0.346 0.339 

RXC 08 ........................... Multiple Sclerosis Agents ........................................ 23.184 22.318 21.874 21.467 21.466 

RXC 09 ........................... Immune Suppressants and Immunomodulators ..... 12.774 12.347 12.139 11.992 11.988 

RXC 10 ........................... Cystic Fibrosis Agents ............................................. 17.803 17.474 17.358 17.299 17.304 

RXC 01 x HCC001 ......... Additional effect for enrollees with RXC 01 and 

HCC 001.

2.316 2.503 2.790 3.284 3.310 

RXC 02 x HCC 37_1, 36_

035_s_34.

Additional effect for enrollees with RXC 02 and 

(HCC 037_1 or 036 or 035_2 or 035_1 or 034).

¥0.678 ¥0.555 ¥0.433 ¥0.264 ¥0.256 

RXC_03_x_HCC142 ........ Additional effect for enrollees with RXC 03 and 

HCC 142.

0.000 0.000 0.000 0.000 0.000 

RXC_04_x_HCC184_

183_187_188.

Additional effect for enrollees with RXC 04 and 

(HCC 184 or 183 or 187 or 188).

0.000 0.000 0.000 0.000 0.000 

78590 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

47HCC numbers that appear with an underscore 

in this document will appear without the 

underscore in the DIY software. For example, HCC 35_1 in this table will appear as HCC 351 in the 

DIY software. 

TABLE 1—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR—Continued 

HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic 

RXC_05_x_HCC048_041 Additional effect for enrollees with RXC 05 and 

(HCC 048 or 041).

¥0.381 ¥0.341 ¥0.282 ¥0.235 ¥0.231 

RXC_06_x_HCC018_

019_020_021.

Additional effect for enrollees with RXC 06 and 

(HCC 018 or 019 or 020 or 021).

0.560 0.647 0.761 0.781 0.784 

RXC_07_x_HCC018_

019_020_021.

Additional effect for enrollees with RXC 07 and 

(HCC 018 or 019 or 020 or 021).

¥0.204 ¥0.151 ¥0.117 ¥0.134 ¥0.136 

RXC_08_x_HCC118 ........ Additional effect for enrollees with RXC 08 and 

HCC 118.

¥0.539 ¥0.056 0.316 0.813 0.827 

RXC_09_x_HCC056_

057_and_048_041.

Additional effect for enrollees with RXC 09 and 

(HCC 048 or 041) and (HCC 056 or 057).

0.693 0.764 0.827 0.909 0.915 

RXC_09_x_HCC056 ........ Additional effect for enrollees with RXC 09 and 

HCC 056.

0.757 0.824 0.959 1.153 1.166 

RXC_09_x_HCC057 ........ Additional effect for enrollees with RXC 09 and 

HCC 057.

¥0.878 ¥0.782 ¥0.664 ¥0.514 ¥0.505 

RXC_09_x_HCC048_041 Additional effect for enrollees with RXC 09 and 

(HCC 048 or 041).

3.331 3.335 3.439 3.648 3.664 

RXC_10_x_HCC159_158 Additional effect for enrollees with RXC 10 and 

(HCC 159 or 158).

46.175 46.175 46.180 46.278 46.282 

TABLE 2—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR

Factor Platinum Gold Silver Bronze Catastrophic 

Demographic Factors 

Age 2–4, Male ...................................................................... 0.267 0.201 0.153 0.116 0.113 

Age 5–9, Male ...................................................................... 0.192 0.135 0.097 0.070 0.068 

Age 10–14, Male .................................................................. 0.223 0.164 0.120 0.093 0.091 

Age 15–20, Male .................................................................. 0.271 0.208 0.156 0.117 0.115 

Age 2–4, Female ................................................................. 0.221 0.163 0.126 0.100 0.098 

Age 5–9, Female ................................................................. 0.163 0.112 0.080 0.060 0.058 

Age 10–14, Female ............................................................. 0.212 0.155 0.116 0.091 0.089 

Age 15–20, Female ............................................................. 0.336 0.258 0.195 0.147 0.144 

Diagnosis Factors 

HIV/AIDS .............................................................................. 5.961 5.577 5.357 5.139 5.133 

Septicemia, Sepsis, Systemic Inflammatory Response 

Syndrome/Shock .............................................................. 16.453 16.237 16.111 15.962 15.955 

Central Nervous System Infections, Except Viral Meningitis ................................................................................... 14.787 14.627 14.548 14.496 14.493 

Viral or Unspecified Meningitis ............................................ 12.890 12.778 12.672 12.532 12.528 

Opportunistic Infections ....................................................... 18.089 18.031 17.967 17.889 17.881 

Metastatic Cancer ................................................................ 33.956 33.679 33.535 33.432 33.430 

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ....................................... 9.363 9.131 8.985 8.839 8.833 

Non-Hodgkin Lymphomas and Other Cancers and Tumors 7.171 6.961 6.817 6.657 6.649 

Colorectal, Breast (Age <50), Kidney, and Other Cancers 3.764 3.582 3.413 3.207 3.192 

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

Brain Tumors, and Other Cancers and Tumors .............. 3.764 3.582 3.413 3.207 3.192 

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other 

Cancers and Tumors ........................................................ 1.098 0.968 0.841 0.678 0.675 

Pancreas Transplant Status ................................................ 14.723 14.594 14.579 14.489 14.535 

Diabetes with Acute Complications ..................................... 2.527 2.261 2.012 1.649 1.685 

Diabetes with Chronic Complications .................................. 2.527 2.261 2.012 1.649 1.685 

Diabetes without Complication ............................................ 2.527 2.261 2.012 1.649 1.685 

Protein-Calorie Malnutrition ................................................. 18.838 18.721 18.666 18.639 18.634 

Mucopolysaccharidosis ........................................................ 39.199 38.932 38.800 38.702 38.699 

Lipidoses and Glycogenosis ................................................ 39.199 38.932 38.800 38.702 38.699 

Congenital Metabolic Disorders, Not Elsewhere Classified 5.406 5.282 5.186 5.086 5.081 

Amyloidosis, Porphyria, and Other Metabolic Disorders ..... 5.406 5.282 5.186 5.086 5.081 

Adrenal, Pituitary, and Other Significant Endocrine Disorders ............................................................................... 6.355 6.124 5.993 5.896 5.892 

Liver Transplant Status/Complications ................................ 14.723 14.594 14.579 14.489 14.535 

Acute Liver Failure/Disease, Including Neonatal Hepatitis 11.829 11.676 11.608 11.560 11.558 

Chronic Liver Failure/End-Stage Liver Disorders ................ 11.044 10.886 10.801 10.710 10.707 

Cirrhosis of Liver .................................................................. 3.402 3.311 3.228 3.084 3.080 

Chronic Viral Hepatitis C ..................................................... 2.086 1.923 1.815 1.753 1.754 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78591 

TABLE 2—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Chronic Hepatitis, Except Chronic Viral Hepatitis C ........... 0.755 0.637 0.542 0.431 0.422 

Intestine Transplant Status/Complications .......................... 16.105 16.018 15.984 15.983 15.990 

Peritonitis/Gastrointestinal Perforation/Necrotizing 

Enterocolitis ...................................................................... 18.426 18.175 18.075 18.044 18.045 

Intestinal Obstruction ........................................................... 3.900 3.703 3.548 3.358 3.348 

Chronic Pancreatitis ............................................................. 10.399 10.199 10.109 10.054 10.048 

Acute Pancreatitis ................................................................ 5.156 4.921 4.757 4.537 4.524 

Inflammatory Bowel Disease ............................................... 9.409 9.061 8.862 8.668 8.661 

Necrotizing Fasciitis ............................................................. 3.086 2.881 2.730 2.580 2.572 

Bone/Joint/Muscle Infections/Necrosis ................................ 3.086 2.881 2.730 2.580 2.572 

Rheumatoid Arthritis and Specified Autoimmune Disorders 4.935 4.699 4.541 4.399 4.393 

Systemic Lupus Erythematosus and Other Autoimmune 

Disorders .......................................................................... 1.271 1.141 1.004 0.853 0.841 

Osteogenesis Imperfecta and Other Osteodystrophies ...... 1.247 1.140 1.045 0.942 0.936 

Congenital/Developmental Skeletal and Connective Tissue 

Disorders .......................................................................... 1.247 1.140 1.045 0.942 0.936 

Cleft Lip/Cleft Palate ............................................................ 1.394 1.228 1.039 0.852 0.840 

Hemophilia ........................................................................... 71.996 71.523 71.295 71.146 71.145 

Myelodysplastic Syndromes and Myelofibrosis ................... 13.679 13.505 13.401 13.301 13.296 

Aplastic Anemia ................................................................... 13.679 13.505 13.401 13.301 13.296 

Acquired Hemolytic Anemia, Including Hemolytic Disease 

of Newborn ....................................................................... 13.679 13.505 13.401 13.301 13.296 

Sickle Cell Anemia (Hb-SS) ................................................. 5.557 5.356 5.213 5.061 5.056 

Beta Thalassemia Major ...................................................... 5.557 5.356 5.213 5.061 5.056 

Combined and Other Severe Immunodeficiencies .............. 4.311 4.157 4.042 3.914 3.904 

Disorders of the Immune Mechanism .................................. 4.311 4.157 4.042 3.914 3.904 

Coagulation Defects and Other Specified Hematological 

Disorders .......................................................................... 3.342 3.212 3.096 2.963 2.955 

Drug Use with Psychotic Complications .............................. 2.473 2.289 2.136 1.945 1.934 

Drug Use Disorder, Moderate/Severe, or Drug Use with 

Non-Psychotic Complications ........................................... 2.473 2.289 2.136 1.945 1.934 

Alcohol Use with Psychotic Complications .......................... 1.387 1.245 1.107 0.925 0.913 

Alcohol Use Disorder, Moderate/Severe, or Alcohol Use 

with Specified Non-Psychotic Complications ................... 1.387 1.245 1.107 0.925 0.913 

Schizophrenia ...................................................................... 4.545 4.264 4.068 3.841 3.830 

Delusional and Other Specified Psychotic Disorders, Unspecified Psychosis .......................................................... 3.056 2.824 2.627 2.376 2.362 

Major Depressive Disorder, Severe, and Bipolar Disorders 2.587 2.379 2.188 1.947 1.935 

Personality Disorders ........................................................... 0.612 0.515 0.397 0.272 0.265 

Anorexia/Bulimia Nervosa .................................................... 2.511 2.348 2.211 2.071 2.063 

Prader-Willi, Patau, Edwards, and Autosomal Deletion 

Syndromes ....................................................................... 12.839 12.760 12.707 12.664 12.658 

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes ................ 1.547 1.401 1.266 1.082 1.063 

Autistic Disorder ................................................................... 2.587 2.379 2.188 1.947 1.935 

Pervasive Developmental Disorders, Except Autistic Disorder ................................................................................. 0.612 0.515 0.404 0.304 0.299 

Traumatic Complete Lesion Cervical Spinal Cord .............. 9.556 9.348 9.228 9.121 9.119 

Quadriplegia ......................................................................... 9.556 9.348 9.228 9.121 9.119 

Traumatic Complete Lesion Dorsal Spinal Cord ................. 8.665 8.452 8.339 8.216 8.212 

Paraplegia ............................................................................ 8.665 8.452 8.339 8.216 8.212 

Spinal Cord Disorders/Injuries ............................................. 3.428 3.241 3.094 2.912 2.898 

Amyotrophic Lateral Sclerosis and Other Anterior Horn 

Cell Disease ..................................................................... 32.864 32.642 32.500 32.372 32.367 

Quadriplegic Cerebral Palsy ................................................ 3.270 3.108 3.041 3.010 3.014 

Cerebral Palsy, Except Quadriplegic ................................... 1.319 1.156 1.018 0.836 0.823 

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies ............................................................. 1.890 1.769 1.676 1.566 1.559 

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre 

Syndrome/Inflammatory and Toxic Neuropathy ............... 9.947 9.789 9.713 9.665 9.664 

Muscular Dystrophy ............................................................. 4.361 4.165 3.981 3.767 3.751 

Multiple Sclerosis ................................................................. 12.642 12.278 12.119 12.017 12.015 

Parkinson’s, Huntington’s, and Spinocerebellar Disease, 

and Other Neurodegenerative Disorders ......................... 4.361 4.165 3.981 3.767 3.751 

Seizure Disorders and Convulsions .................................... 1.619 1.477 1.313 1.130 1.119 

Hydrocephalus ..................................................................... 12.782 12.747 12.714 12.712 12.717 

Coma, Brain Compression/Anoxic Damage ........................ 12.827 12.750 12.666 12.598 12.595 

Narcolepsy and Cataplexy ................................................... 5.101 4.922 4.761 4.563 4.549 

Respirator Dependence/Tracheostomy Status .................... 30.364 30.125 30.016 29.935 29.930 

Respiratory Arrest ................................................................ 15.552 15.311 15.186 15.055 15.047 

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes ............................................ 15.552 15.311 15.186 15.055 15.047 

78592 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

TABLE 2—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Heart Assistive Device/Artificial Heart ................................. 16.105 16.018 15.984 15.983 15.990 

Heart Transplant Status/Complications ............................... 16.105 16.018 15.984 15.983 15.990 

Heart Failure ........................................................................ 4.636 4.513 4.419 4.297 4.290 

Acute Myocardial Infarction ................................................. 1.745 1.578 1.435 1.332 1.336 

Unstable Angina and Other Acute Ischemic Heart Disease 1.745 1.578 1.435 1.332 1.336 

Heart Infection/Inflammation, Except Rheumatic ................ 15.639 15.486 15.366 15.212 15.200 

Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders .................................................... 3.058 2.842 2.650 2.438 2.418 

Major Congenital Heart/Circulatory Disorders ..................... 0.999 0.865 0.721 0.605 0.596 

Atrial and Ventricular Septal Defects, Patent Ductus 

Arteriosus, and Other Congenital Heart/Circulatory Disorders ............................................................................... 0.747 0.646 0.546 0.467 0.461 

Specified Heart Arrhythmias ................................................ 2.745 2.562 2.384 2.227 2.217 

Intracranial Hemorrhage ...................................................... 14.578 14.462 14.366 14.264 14.261 

Ischemic or Unspecified Stroke ........................................... 1.440 1.361 1.277 1.198 1.197 

Cerebral Aneurysm and Arteriovenous Malformation ......... 2.668 2.517 2.365 2.101 2.085 

Hemiplegia/Hemiparesis ...................................................... 4.576 4.442 4.359 4.245 4.236 

Monoplegia, Other Paralytic Syndromes ............................. 3.018 2.871 2.758 2.618 2.610 

Atherosclerosis of the Extremities with Ulceration or Gangrene ................................................................................ 11.183 10.985 10.861 10.737 10.734 

Vascular Disease with Complications .................................. 6.308 6.163 6.068 5.980 5.976 

Pulmonary Embolism and Deep Vein Thrombosis .............. 20.304 20.162 20.087 20.027 20.021 

Lung Transplant Status/Complications ................................ 16.105 16.018 15.984 15.983 15.990 

Cystic Fibrosis ...................................................................... 48.367 47.908 47.701 47.590 47.584 

Chronic Obstructive Pulmonary Disease, Including 

Bronchiectasis .................................................................. 2.003 1.844 1.699 1.518 1.508 

Severe Asthma .................................................................... 1.185 1.018 0.827 0.633 0.622 

Asthma, Except Severe ....................................................... 0.382 0.297 0.203 0.123 0.119 

Fibrosis of Lung and Other Lung Disorders ........................ 1.185 1.018 0.827 0.633 0.622 

Aspiration and Specified Bacterial Pneumonias and Other 

Severe Lung Infections .................................................... 12.351 12.306 12.275 12.298 12.298 

Kidney Transplant Status/Complications ............................. 14.723 14.594 14.579 14.489 14.535 

End Stage Renal Disease ................................................... 37.215 37.008 36.936 36.933 36.936 

Chronic Kidney Disease, Stage 5 ........................................ 3.859 3.728 3.618 3.482 3.475 

Chronic Kidney Disease, Severe (Stage 4) ......................... 3.859 3.728 3.618 3.482 3.475 

Ectopic and Molar Pregnancy .............................................. 2.067 1.842 1.626 1.295 1.279 

Miscarriage with Complications ........................................... 0.912 0.778 0.597 0.346 0.329 

Miscarriage with No or Minor Complications ....................... 0.912 0.778 0.597 0.346 0.329 

Pregnancy with Delivery with Major Complications ............. 3.751 3.463 3.195 2.691 2.661 

Pregnancy with Delivery with Complications ....................... 3.751 3.463 3.195 2.691 2.661 

Pregnancy with Delivery with No or Minor Complications .. 2.650 2.428 2.165 1.661 1.624 

(Ongoing) Pregnancy without Delivery with Major Complications ........................................................................... 0.977 0.822 0.619 0.388 0.374 

(Ongoing) Pregnancy without Delivery with Complications 0.977 0.822 0.619 0.388 0.374 

(Ongoing) Pregnancy without Delivery with No or Minor 

Complications ................................................................... 0.485 0.378 0.252 0.147 0.142 

Chronic Ulcer of Skin, Except Pressure .............................. 1.504 1.383 1.263 1.141 1.135 

Extensive Third Degree Burns ............................................. 20.205 19.995 19.885 19.821 19.818 

Major Skin Burn or Condition .............................................. 1.867 1.723 1.600 1.455 1.447 

Severe Head Injury .............................................................. 20.205 19.995 19.885 19.821 19.818 

Hip and Pelvic Fractures ..................................................... 3.665 3.439 3.263 3.101 3.095 

Vertebral Fractures without Spinal Cord Injury ................... 3.353 3.148 2.963 2.739 2.726 

Traumatic Amputations and Amputation Complications ...... 3.936 3.723 3.565 3.352 3.338 

Stem Cell, Including Bone Marrow, Transplant Status/ 

Complications ................................................................... 16.105 16.018 15.984 15.983 15.990 

Artificial Openings for Feeding or Elimination ..................... 7.197 7.036 6.985 6.947 6.949 

Amputation Status, Upper Limb or Lower Limb .................. 3.936 3.723 3.565 3.352 3.338 

Interacted HCC Counts Factors 

Severe illness, 1 payment HCC .......................................... ¥11.292 ¥11.358 ¥11.441 ¥11.583 ¥11.595 

Severe illness, 2 payment HCCs ......................................... ¥11.146 ¥11.138 ¥11.169 ¥11.269 ¥11.257 

Severe illness, 3 payment HCCs ......................................... ¥9.366 ¥9.392 ¥9.391 ¥9.345 ¥9.341 

Severe illness, 4 payment HCCs ......................................... ¥8.988 ¥8.982 ¥8.891 ¥8.710 ¥8.694 

Severe illness, 5 payment HCCs ......................................... ¥7.182 ¥7.013 ¥6.744 ¥6.377 ¥6.349 

Severe illness, 6 or 7 payment HCCs ................................. ¥1.583 ¥1.238 ¥0.827 ¥0.285 ¥0.249 

Severe illness, 8 or more payment HCCs ........................... 18.271 19.100 19.861 20.772 20.830 

Transplant severe illness, 4 or more payment HCCs ......... 17.085 17.121 17.096 17.068 17.040 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78593 

48We note that one transplant HCC (HCC 18 

Pancreas Transplant) is not included on this list. 

HCC 18 had a much lower coefficient than any of 

the other transplant HCCs in the adult models and 

was not underpredicted by the models. However, 

we are considering whether we should add HCC 18 

to the interacted HCC counts model specifications. 

TABLE 3—HCCS SELECTED FOR THE PROPOSED HCC INTERACTED COUNTS VARIABLES FOR THE ADULT AND CHILD

MODELS BEGINNING WITH THE 2022 BENEFIT YEAR

Payment HCC Severity illness 

indicator 

Transplant 

indicator 48

HCC 2 Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock ....................................... X ........................

HCC 3 Central Nervous System Infections, Except Viral Meningitis ........................................................... X ........................

HCC 4 Viral or Unspecified Meningitis ......................................................................................................... X ........................

HCC 6 Opportunistic Infections ..................................................................................................................... X ........................

HCC 23 Protein-Calorie Malnutrition ............................................................................................................. X ........................

HCC 34 Liver Transplant Status/Complications ........................................................................................... X X 

HCC 41 Intestine Transplant Status/Complications ...................................................................................... X X 

HCC 42 Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis .................................................... X ........................

HCC 96 Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes .............................................. X ........................

HCC 121 Hydrocephalus .............................................................................................................................. X ........................

HCC 122 Coma, Brain Compression/Anoxic Damage ................................................................................. X ........................

HCC 125 Respirator Dependence/Tracheostomy Status ............................................................................. X ........................

HCC 135 Heart Infection/Inflammation, Except Rheumatic .......................................................................... X ........................

HCC 145 Intracranial Hemorrhage ............................................................................................................... X ........................

HCC 156 Pulmonary Embolism and Deep Vein Thrombosis ....................................................................... X ........................

HCC 158 Lung Transplant Status/Complications ......................................................................................... X X 

HCC 163 Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections ................... X ........................

HCC 183 Kidney Transplant Status/Complications ...................................................................................... X X 

HCC 218 Extensive Third Degree Burns ...................................................................................................... X ........................

HCC 223 Severe Head Injury ....................................................................................................................... X ........................

HCC 251 Stem Cell, Including Bone Marrow, Transplant Status/Complications ......................................... X X 

G13 (Includes HCC 126 Respiratory Arrest and HCC 127 Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes) .......................................................................................................... X ........................

G14 (Includes HCC 128 Heart Assistive Device/Artificial Heart and HCC 129 Heart Transplant Status/ 

Complications) .............................................................................................................................................. X X 

TABLE 4—PROPOSED INFANT RISK ADJUSTMENT MODEL FACTORS FOR 2022 BENEFIT YEAR

Group Platinum Gold Silver Bronze Catastrophic 

Extremely Immature * Severity Level 5 (Highest) ............... 228.512 227.071 226.378 225.986 225.985 

Extremely Immature * Severity Level 4 ............................... 143.939 142.392 141.573 140.987 140.976 

Extremely Immature * Severity Level 3 ............................... 32.833 31.691 31.019 30.471 30.451 

Extremely Immature * Severity Level 2 ............................... 32.833 31.691 31.019 30.471 30.451 

Extremely Immature * Severity Level 1 (Lowest) ................ 32.833 31.691 31.019 30.471 30.451 

Immature * Severity Level 5 (Highest) ................................ 132.085 130.648 129.935 129.486 129.480 

Immature * Severity Level 4 ................................................ 69.277 67.949 67.232 66.691 66.675 

Immature * Severity Level 3 ................................................ 32.833 31.691 31.019 30.471 30.451 

Immature * Severity Level 2 ................................................ 28.029 26.918 26.246 25.672 25.650 

Immature * Severity Level 1 (Lowest) ................................. 25.390 24.329 23.673 23.095 23.072 

Premature/Multiples * Severity Level 5 (Highest) ................ 109.526 108.295 107.661 107.236 107.227 

Premature/Multiples * Severity Level 4 ............................... 28.669 27.553 26.884 26.312 26.294 

Premature/Multiples * Severity Level 3 ............................... 14.196 13.345 12.721 12.054 12.022 

Premature/Multiples * Severity Level 2 ............................... 8.093 7.463 6.897 6.212 6.173 

Premature/Multiples * Severity Level 1 (Lowest) ................ 5.774 5.254 4.759 4.243 4.214 

Term * Severity Level 5 (Highest) ....................................... 82.605 81.544 80.955 80.511 80.498 

Term * Severity Level 4 ....................................................... 15.976 15.156 14.564 13.941 13.916 

Term * Severity Level 3 ....................................................... 6.071 5.541 5.020 4.437 4.404 

Term * Severity Level 2 ....................................................... 3.634 3.194 2.696 2.144 2.111 

Term * Severity Level 1 (Lowest) ........................................ 1.853 1.534 1.163 0.917 0.905 

Age 1 * Severity Level 5 (Highest) ...................................... 63.472 62.803 62.434 62.174 62.167 

Age 1 * Severity Level 4 ...................................................... 12.474 12.010 11.689 11.375 11.362 

Age 1 * Severity Level 3 ...................................................... 3.139 2.867 2.637 2.419 2.408 

Age 1 * Severity Level 2 ...................................................... 1.980 1.751 1.529 1.304 1.291 

Age 1 * Severity Level 1 (Lowest) ....................................... 0.573 0.496 0.442 0.403 0.401 

Age 0 Male ........................................................................... 0.608 0.566 0.525 0.459 0.455 

Age 1 Male ........................................................................... 0.106 0.090 0.072 0.051 0.050 

78594 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

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. 

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

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 Status/Complications. 

Severity Level 5 .............................. 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/Complications. 

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 .............................. Adrenal, Pituitary, and Other Significant Endocrine Disorders. 

Severity Level 4 .............................. Acute Liver Failure/Disease, Including Neonatal Hepatitis. 

Severity Level 4 .............................. Chronic Liver Failure/End-Stage Liver Disorders. 

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 .............................. 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. 

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 .............................. 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 Lymphomas and Other Cancers and Tumors. 

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

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

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

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. 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78595 

49See 83 FR 16930 at 16953; 84 FR 17454 at 

17478 through 17479; and 85 FR 29164 at 29190. 

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

Severity category HCC/Description 

Severity Level 3 .............................. Drug Use with Psychotic Complications. 

Severity Level 3 .............................. Drug Use Disorder, Moderate/Severe, or Drug Use with Non-Psychotic Complications.

Severity Level 3 .............................. Alcohol Use with Psychotic Complications. 

Severity Level 3 .............................. Alcohol Use Disorder, Moderate/Severe, or Alcohol Use with Specified Non-Psychotic Complications. 

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

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 .............................. Extensive Third Degree Burns. 

Severity Level 3 .............................. Severe Head Injury. 

Severity Level 3 .............................. Hip and Pelvic Fractures. 

Severity Level 3 .............................. Vertebral Fractures without Spinal Cord Injury. 

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

Severity Level 2 .............................. Thyroid Cancer, 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 .............................. Acute 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 .............................. Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes. 

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 .............................. Severe Asthma. 

Severity Level 2 .............................. Fibrosis of Lung and Other Lung Disorders. 

Severity Level 2 .............................. Chronic Kidney Disease, Severe (Stage 4). 

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

Severity Level 2 .............................. Major Skin Burn or Condition. 

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

Severity Level 1 .............................. Chronic Hepatitis, Except Chronic Viral Hepatitis C. 

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

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

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

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

Severity Level 1 .............................. Asthma, Except Severe. 

Severity Level 1 .............................. Traumatic Amputations and Amputation Complications. 

Severity Level 1 .............................. Amputation Status, Upper Limb or Lower Limb. 

f. Cost-Sharing Reduction Adjustments 

We propose to continue including an 

adjustment for the receipt of CSRs in the 

risk adjustment models to account for 

increased plan liability due to increased 

utilization of health care services by 

enrollees receiving CSRs in all 50 states 

and the District of Columbia. For the 

2022 benefit year, to maintain stability 

and certainty for issuers, we are 

proposing to maintain the CSR factors 

finalized in the 2019, 2020, and 2021 

Payment Notices.49 See Table 7. 

78596 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

50See 81 FR 12203 at 12228. 51Hileman, Geof and Spenser Steele. ‘‘Accuracy 

of Claims-Based Risk Scoring Models.’’ Society of 

Actuaries. October 2016. 

Consistent with the approach 

finalized in the 2017 Payment Notice,50

we propose to continue to use a CSR 

adjustment factor 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 AVs 

above 94 percent. 

We seek comment on these proposals. 

TABLE 7—COST-SHARING REDUCTION ADJUSTMENT

Household income Plan AV 

Induced 

utilization 

factor 

Silver Plan Variant Recipients 

100–150% of Federal Poverty Line (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 

g. 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 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 R-squared 

statistic and the predictive ratios are in 

the range of published estimates for 

concurrent risk adjustment models.51

We note that the proposed model 

specification updates generally 

demonstrate improvements in R-squared 

as well as predictive ratios. Because we 

propose to blend the coefficients from 

separately solved models based on the 

2016, 2017, and 2018 benefit years’ 

enrollee-level EDGE data, 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. 

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

R-Squared Statistic 

Models 

2016 Enrolleelevel EDGE 

data 

2017 Enrolleelevel EDGE 

data 

2018 Enrolleelevel EDGE 

data 

Platinum Adult .............................................................................................................................. 0.4488 0.4465 0.4319 

Gold Adult .................................................................................................................................... 0.4439 0.4412 0.4265 

Silver Adult ................................................................................................................................... 0.4406 0.4376 0.4227 

Bronze Adult ................................................................................................................................ 0.4367 0.4335 0.4182 

Catastrophic Adult ....................................................................................................................... 0.4364 0.4332 0.4179 

Platinum Child .............................................................................................................................. 0.3375 0.3517 0.3535 

Gold Child .................................................................................................................................... 0.3348 0.3488 0.3506 

Silver Child ................................................................................................................................... 0.3325 0.3463 0.3481 

Bronze Child ................................................................................................................................ 0.3294 0.3432 0.3449 

Catastrophic Child ....................................................................................................................... 0.3292 0.3430 0.3447 

Platinum Infant ............................................................................................................................. 0.3268 0.3272 0.2888 

Gold Infant ................................................................................................................................... 0.3238 0.3242 0.2855 

Silver Infant .................................................................................................................................. 0.3218 0.3220 0.2833 

Bronze Infant ............................................................................................................................... 0.3195 0.3197 0.2810 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78597 

52 ‘‘Temporary Policy on 2020 Premium Credits 

Associated with the COVID–19 Public Health 

Emergency,’’ August 4, 2020. https://www.cms.gov/ 

CCIIO/Programs-and-Initiatives/Health-InsuranceMarketplaces/Downloads/Premium-CreditGuidance.pdf. 

53 2014 Payment Notice final rule, 78 FR 15409. 

Also see the 2020 Payment Notice final rule, 84 FR 

17454. 

54The Secretary of the Department of HHS may, 

under section 319 of the PHS Act determine that: 

(a) A disease or disorder presents a public health 

emergency; or (b) that a public health emergency, 

including significant outbreaks of infectious disease 

or bioterrorist attacks, otherwise exists. 

55 84 FR 17454 at 17480 and 17485; and 85 FR 

29164 at 29191. 

56 Ibid. 

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

R-Squared Statistic 

Models 

2016 Enrolleelevel EDGE 

data 

2017 Enrolleelevel EDGE 

data 

2018 Enrolleelevel EDGE 

data 

Catastrophic Infant ....................................................................................................................... 0.3194 0.3196 0.2809 

h. Calculation of Plan Average Premium 

and State Average Premium 

Requirements for Extending Future 

Premium Credits (§ 153.320) 

On August 4, 2020, HHS adopted 

temporary policies of relaxed 

enforcement for the premium rules set 

forth at 45 CFR 147.102, 155.200(f)(4), 

155.400(e) and (g), 155.706(b)(6)(1)(A), 

156.80(d), 156.210(a), and 156.286(a)(2) 

through (4) to allow issuers in the 

individual and small group markets the 

flexibility, when consistent with state 

law, to temporarily offer premium 

credits for 2020 coverage.52 HHS 

provided this flexibility with the intent 

of supporting continuity of coverage for 

individuals, families, and small 

employers who may struggle to pay 

premiums because of illness or loss of 

incomes or revenue resulting from the 

COVID–19 PHE. 

In prior rulemaking,53 CMS finalized 

the calculation of plan average premium 

in the risk adjustment state payment 

transfer formula as equal to the actual 

premiums charged to plan enrollees, 

weighted by the number of months 

enrolled, and finalized the calculation 

of the state average premium as equal to 

the average of individual plan average 

premiums, weighted by each plan’s 

share of statewide enrollment in the risk 

pool market, based on billable member 

months. In the interim final rule on 

COVID–19, HHS set forth risk 

adjustment reporting requirements for 

issuers offering temporary premium 

credits in the 2020 benefit year. In this 

rule, we propose how HHS would treat 

temporary premium credits provided for 

purposes of applying the state payment 

transfer formula for the 2021 benefit 

year and beyond should HHS adopt a 

similar relaxed enforcement stance and 

permit such temporary premium credits 

in future benefit years during a PHE 

declared by the Secretary of HHS 

(declared PHE).54 For states where 

issuers of risk adjustment covered plans 

provide temporary premium credits 

when permitted by HHS, the plan 

average premium and statewide average 

premium used in the state payment 

transfer formula would be calculated 

using issuers’ adjusted premium 

amounts. Thus, the actual premiums 

billed to plan enrollees would be the 

amounts used in the calculations under 

the state payment transfer formula. This 

is consistent with the general approach 

adopted in the interim final rule on 

COVID–19 for temporary premium 

credits in the 2020 benefit year. 

We further propose that HHS would 

use adjusted plan premiums for all 

enrollees to whom the issuer has 

actually provided premium credits as a 

reduction to the applicable benefit year 

premiums, when calculating transfers 

under the state payment transfer 

formula for the 2022 benefit year and 

beyond. This approach would also 

extend to the calculation of transfers 

under the state payment transfer 

formula in states that receive approval 

for a request to reduce transfers under 

§ 153.320(d)—that is, the lower actual 

premiums for which plan enrollees 

would be responsible would be the 

amounts used in the calculations under 

the state payment transfer formula to 

reflect these temporary premium 

credits. As such, if an issuer in a state 

with an approved 50 percent small 

group market reduction request for a 

given benefit year chooses to provide 

temporary premium credits, the state 

average premium will decrease, and 

HHS would apply the 50 percent 

transfer reduction to the lower PMPM 

payment or charge transfer amount 

calculated under the state payment 

transfer formula for that state’s small 

group market for that benefit year. As 

detailed further later in this preamble, 

we also propose that issuers providing 

these temporary premium credits must 

report the lower, actual premium 

amounts billed to plan enrollees to their 

respective EDGE servers. We believe 

that the applicable definitions of plan 

average premium and state average 

premium retain the meaning previously 

finalized by reflecting the actual 

monthly premium billed to enrollees. 

This proposal builds on lessons learned 

from the COVID–19 PHE and would 

establish a framework to recognize 

premium credits as a reduction in 

premium for purposes of the HHSoperated risk adjustment program in 

order to align risk adjustment charges 

and payments under the state payment 

transfer formula with flexibilities HHS 

may provide to issuers and states in 

future benefit years. This proposal 

would not change any other aspect of 

the state payment transfer formula or 

the method for calculating payments 

and charges under the HHS risk 

adjustment methodology (inclusive of 

the state payment transfer formula and 

high-cost risk pool parameters). 

2. Overview of the HHS Risk 

Adjustment Methodology (§ 153.320) 

We propose to continue to use the 

HHS state payment transfer formula that 

was finalized in the 2021 Payment 

Notice.55 Although the proposed HHS 

state payment transfer formula for the 

2022 benefit year is unchanged from 

what was finalized for the previous 

benefit year, we are republishing it in 

this proposed rule. Additionally, we are 

republishing the description of the 

administrative cost reduction to the 

statewide average premium and highcost risk pool factors, although these 

factors and terms also remain 

unchanged in this proposed rule.56 We 

also propose to apply this state payment 

transfer formula, including the 

administrative cost reduction, for the 

2022 benefit year and beyond, unless 

changed through notice-and-comment 

rulemaking. If this policy is finalized as 

proposed, we would no longer republish 

these formulas in future annual HHS 

notice of benefit and payment parameter 

rules unless changes are being 

proposed. To align with this proposal, 

we propose to update § 153.320(c) to 

replace the current language that refers 

78598 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

57 77 FR 17220 at 17246. 58The state payment transfer formula refers to the 

part of the HHS risk adjustment methodology that 

calculates payments and charges at the state market 

risk pool level prior to the calculation of the highcost risk pool payment and charge terms that apply 

beginning with the 2018 benefit year. 

59For 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). 

60See the 2020 Payment Notice final rule for 

further details on why statewide average premium 

is the cost-scaling factor in the state payment 

transfer formula. See 84 FR 17454 at 17480 through 

17484. 

61As 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. 

62See 84 FR 17454 at 17486. 

63 84 FR 17466 through 17468. 

to HHS specifying the applicable 

Federally certified risk adjustment 

methodology in the annual HHS notice 

of benefit and payment parameters for 

the applicable year to instead require 

HHS to specify the applicable Federally 

certified risk adjustment methodology 

in notice and comment rulemaking that 

is published in advance of the 

applicable benefit year. 

We previously defined the calculation 

of plan average actuarial risk and the 

calculation of payments and charges in 

the Premium Stabilization Rule.57 In the 

2014 Payment Notice, we combined 

those concepts into a risk adjustment 

state payment transfer formula.58 This 

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 the 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 via a cost scaling factor. 

In the absence of additional funding, we 

established, through notice and 

comment rulemaking,59 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. In light of the 

budget-neutral framework, HHS uses 

statewide average premium as the costscaling factor in the state payment 

transfer formula under the HHSoperated 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.60

Risk adjustment transfers (total 

payments and charges, including highcost risk pool payments and charges) are 

calculated after issuers have completed 

their risk adjustment EDGE data 

submissions for the applicable benefit 

year. Transfers (payments and charges) 

under the state payment transfer 

formula are 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 methodology follows the 

formula: 

Where: 

PS = 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 denominators are 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 combination of 

metal level AV, allowable rating factor, 

induced demand factor, and geographic 

cost 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.61 This resulting PMPM 

plan payment or charge is 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. The 

payment or charge under the state 

payment transfer formula is thus 

calculated to balance the state market 

risk pool in question. 

We previously defined the cost 

scaling factor, or the statewide average 

premium term, as the sum of the average 

premium per member month of each 

plan i (Pi) multiplied by plan i’s share 

of statewide enrollment in the market 

risk pool (si). The statewide average 

premium will be adjusted to remove a 

portion of the administrative costs that 

do not vary with claims (14 percent) as 

follows: 

PS = (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. 

We previously adopted a 14 percent 

administrative cost reduction to the 

statewide average premium 62 and 

propose maintaining it for the 2022 

benefit year and beyond, unless 

amended through notice-and-comment 

rulemaking. 

To account for costs associated with 

exceptionally high-risk enrollees, we 

previously added a high-cost risk pool 

adjustment to the HHS risk adjustment 

transfer methodology. As finalized in 

the 2020 Payment Notice,63 we intend to 

maintain the high-cost risk pool 

parameters with a threshold of $1 

million and a coinsurance rate of 60 

percent for benefit years 2020 and 

onward, unless amended through 

notice-and-comment rulemaking. We 

are not proposing any changes to the 

high-cost risk pool parameters as part of 

this proposed rule; therefore, we would 

maintain the threshold of $1 million 


EP04DE20.022</GPH>
Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78599 

64 83 FR 16955 through 16960. 

65 45 CFR 153.320(d)(3). 

66See 45 CFR 153.320(d)(3). 

67See 84 FR 17484 through 17485 and 85 FR 

29193 through 29194. 

68Alabama’s individual market request is for a 50 

percent reduction to risk adjustment transfers for its 

individual market non-catastrophic and 

catastrophic risk pools. 

69 Due to the COVID–19 PHE, we permitted states 

seeking to request a reduction in risk adjustment 

transfers for the 2022 benefit year an extension until 

September 1, 2020 to submit such request. 

and coinsurance rate of 60 percent for 

the 2022 benefit year. 

The high-cost risk pool adjustment 

amount is 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 

and merged market plans, and another 

for the small group market), and the 

plan’s total premiums (TPi). For this 

calculation, we 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 are calculated as the 

product of the plan’s PMPM 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 are 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; 

and 

TPi = Plan i’s total premium amounts. 

We seek comment on the proposed HHS 

risk adjustment methodology for the 

2022 benefit year and beyond, unless 

changed through notice-and-comment 

rulemaking. 

3. 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 state transfers 

calculated by HHS under the state 

payment transfer formula, which is 

calibrated on a national dataset, for the 

state’s individual (catastrophic or noncatastrophic risk pools), small group, or 

merged markets by up to 50 percent to 

more precisely account for differences 

in actuarial risk in the applicable state’s 

markets.64 We finalized that any 

requests received would be published in 

the applicable benefit year’s proposed 

HHS notice of benefit and payment 

parameters, and the supporting 

evidence provided by the state in 

support of its request would be made 

available for public comment.65

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 only make available on the 

CMS website the supporting evidence 

submitted by the state that is not a trade 

secret or confidential commercial or 

financial information by posting a 

redacted version of the state’s 

supporting evidence.66 In accordance 

with § 153.320(d)(2), beginning with the 

2020 benefit year, states must submit 

such requests with the supporting 

evidence and analysis 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. If approved by HHS, state 

reduction requests will be applied to the 

plan PMPM payment or charge state 

payment transfer amount (Ti in the state 

payment transfer formula above). For 

the 2020 and 2021 benefit years, the 

state of Alabama submitted a 50 percent 

risk adjustment transfer reduction 

request for its small group market and 

HHS approved both requests.67

a. Requests To Reduce Risk Adjustment 

Transfers for the 2022 Benefit Year 

For the 2022 benefit year, HHS 

received a request to reduce risk 

adjustment state transfers for the 

Alabama individual and small group 

markets 68 by 50 percent.69 Alabama’s 

request states that the presence of a 

dominant carrier in the individual and 

small group markets 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 individual and small group markets 

for the 2022 benefit year would not 

exceed 1 percent, the de minimis 

premium increase threshold set forth in 

§ 153.320(d)(1)(iii) and (d)(4)(i)(B). We 

seek comment on this request to reduce 

risk adjustment state transfers in the 

Alabama individual and small group 

markets by 50 percent for the 2022 

benefit year. The request and additional 

documentation submitted by Alabama is 

posted under the ‘‘State Flexibility 

Requests’’ heading at https://

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

b. Multi-Year State Flexibility Requests 

We propose several amendments to 

§ 153.320(d) to allow states to request a 

reduction to otherwise applicable risk 

adjustment state transfers calculated 

under the HHS-operated risk adjustment 

methodology for up to 3 years, 

beginning with the 2023 benefit year. 

Under current policy, states seeking to 

reduce risk adjustment state transfers in 

one or more of their market risk pools 

must submit a request to HHS each year 

describing the nature of their request 

and providing supporting 

documentation. HHS then reviews the 

request, sets forth the request in the 

applicable benefit year’s HHS notice of 

benefit and payment parameters, and 

approves or denies it based on the 

evidence and analysis provided by the 

state in the request and the comments 

received to the applicable benefit year’s 

proposed HHS notice of benefit and 

payment parameters. Pursuant to 

§ 153.320(d)(1), states must submit this 

request annually, and HHS publishes 

state requests in the applicable benefit 

year’s proposed and final annual HHS 

notice of benefit and payment 

parameters. Stakeholders have 

requested that HHS allow states to 

request multi-year risk adjustment 

flexibility reductions. We have 

continued to consider these comments 

and the potential benefits that multiyear requests could provide. HHS 

believes that there may be potential for 

multi-year risk adjustment flexibility 

requests to promote greater 

predictability and stability in state 

markets, as issuers would be able to 

consider the impact of a reduction to 

risk adjustment state transfers for their 

decisions on rating and participation in 

a state market beyond the upcoming 

benefit year, and the reduction in 

burden to states to complete this process 

annually. We note, however, that a 

potential increase in predictability and 

78600 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

70Terminations of or modifications to state risk 

adjustment flexibility requests would be posted 

under the ‘‘Risk Adjustment State Flexibility 

Requests’’ heading on the CMS website at https:// 

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

Premium-Stabilization-Programs. 

71State withdrawals of risk adjustment flexibility 

requests would be posted under the ‘‘Risk 

Adjustment State Flexibility Requests’’ heading on 

stability assumes that the request 

remains in effect for longer than 1 year. 

In recognition of those comments, we 

propose to provide the flexibility for 

states to request a reduction to 

otherwise applicable risk adjustment 

state transfers calculated under the 

HHS-operated risk adjustment 

methodology’s state payment transfer 

formula for up to 3 years beginning with 

the 2023 benefit year. At § 153.320, we 

propose to redesignate current 

paragraph (d)(2) as paragraph (d)(3) and 

create a new proposed paragraph (d)(2) 

to capture the ability for states to 

request a multi-year reduction in risk 

adjustment state transfers. Consistent 

with the existing requirements captured 

in § 153.320(d)(1)(i) through (iii), states 

making single or multi-year requests 

would be required to submit evidence 

and analysis as applicable that 

demonstrate the following for all years 

to which the request would apply: (1) 

State-specific factors that warrant an 

adjustment to more precisely account 

for differences in actuarial risk in the 

state market risk pool; (2) the percentage 

reductions to risk adjustment state 

transfers; and (3) a justification for the 

requested reduction in risk adjustment 

state transfers, or evidence 

demonstrating that the requested state 

transfer reduction would have de 

minimis impact on premiums, such that 

any necessary premium increase for 

issuers likely to receive reduced 

payments as a result of the requested 

reduction to risk adjustment state 

transfers would not exceed 1 percent for 

each year for which they are requesting 

a reduction to risk adjustment state 

transfers. This requirement for multiyear requests would be captured in new 

proposed § 153.320(d)(2)(i)(A). 

Additionally, for multi-year requests, 

the state would be required to confirm 

that it does not anticipate any 

significant changes to the impacted state 

market risk pools (for example, a 

material change in issuer participation 

in the insurance market, or significant 

changes in issuer market share or 

enrollment) for the benefit years 

included in its multi-year request. We 

propose to capture the new 

confirmation requirement applicable to 

multi-year requests at the new proposed 

§ 153.320(d)(2)(i)(B). 

As part of the new framework to 

permit multi-year requests, at § 153.320, 

we also propose to redesignate current 

paragraph (d)(4) as paragraph (d)(5) and 

to amend the reference in redesignated 

paragraph (d)(5)(i) to refer to 

redesignated paragraph (d)(5)(ii) and 

new proposed paragraph (d)(5)(iii). This 

new proposed paragraph would add 

language to provide HHS with authority 

to approve a shorter duration than that 

requested by the state if the supporting 

evidence and analysis provided by the 

state do not support the requested 

duration. This is similar to the existing 

authority in redesignated paragraph 

(d)(5)(ii) for HHS to approve a reduction 

amount that is lower than the amount 

requested by the state if the supporting 

evidence and analysis do not fully 

support the requested reduction 

amount. We believe this language is 

necessary and appropriate as it remains 

unclear if a state would have all of the 

necessary information to support a 

multi-year request at the time of initial 

application. Rather than adopt an 

approach that requires HHS to either 

approve all of the years requested by the 

state or none of them, the new proposed 

paragraph (d)(5)(iii) provides flexibility 

for HHS to approve the reduction for 

those years for which the supporting 

evidence and analysis support the 

requested reduction. We clarify that, if 

adopted as proposed, nothing in this 

new framework would prevent a state 

whose multi-year request was approved 

for a shorter duration to pursue a new, 

separate state flexibility request for the 

applicable benefit years that were not 

supported in the state’s initial reduction 

request. 

Recognizing that market conditions 

can change from one year to the next, 

we propose to reserve the right to 

require states with approved multi-year 

reduction requests to submit 

supplemental evidence in any 

subsequent year of the request after its 

initial approval, in the timeframe, form, 

and manner specified by HHS, when 

circumstances warrant. For example, 

after we have approved a multi-year 

request, if we become aware of an 

anticipated change in the state market 

risk pool to which the request applies 

(for example, new entrants or significant 

shifts in enrollment), we would ask the 

state to submit supplemental evidence 

demonstrating that it anticipates the 

applicable requirements regarding the 

impact of the reduction will still be met 

in the subsequent benefit years of the 

request. We would require the state to 

respond to our request for supplemental 

evidence within 30 calendar days of our 

request, and we would make such a 

request no later than February of the 

benefit year prior to the applicable 

benefit year (thus, we would request 

supplemental evidence from the state by 

February 2023 for the 2024 benefit year). 

We propose to create a new proposed 

§ 153.320(d)(5)(iv) to capture this 

authority and to make a parallel 

amendment to add a new proposed 

paragraph (d)(2)(i)(C) to capture the 

state’s obligation to respond to such 

requests. Codifying the ability for HHS 

to request that the state submit 

additional supplemental evidence after 

an initial approval of a multi-year state 

flexibility request is intended to address 

situations where a state may need to 

justify the continued application of the 

state flexibility request in the event that 

HHS projects a significant change in 

state market risk pool conditions during 

the term of the approved multi-year 

request based on review of newly 

available information or data. 

HHS also proposes to retain the 

ability to terminate or modify the 

request during any one of the 

subsequent years of an approved multiyear request if additional data or new 

information does not support the 

continuation of the state’s reduction 

request as written and the state has not 

provided sufficient supplemental 

evidence to rebut such data or 

information. HHS would inform the 

state department of insurance (DOI) of 

the termination or modification of its 

reduction request, require the state DOI 

to notify the impacted issuers within 15 

calendar days of HHS’s notice to the 

state, and publish information on the 

early termination or modification of a 

state’s multi-year request on the CMS 

website 70 no later than March of the 

year preceding the applicable benefit 

year, or 30 days after receipt of 

information requested under new 

proposed § 153.320(d)(5)(iv), whichever 

is later. We propose to add paragraph 

(d)(5)(v) to capture HHS’s authority to 

terminate or modify a previously 

approved multi-year request in these 

circumstances. 

In addition, we propose to permit a 

state to withdraw its request before its 

natural expiration by notifying HHS of 

its requested withdrawal. A state would 

need to notify HHS of its intent to 

withdraw its request, in the form and 

manner specified by HHS, 60 calendar 

days prior to the state’s deadline for rate 

setting for the applicable benefit year. 

HHS would require the state DOI to 

notify the impacted issuers at least 45 

calendar days prior to the state’s 

deadline for rate setting for the 

applicable benefit year, and would 

publish the information on the state’s 

withdrawal request on the CMS 

website.71 We propose to add 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78601 

the CMS website at https://www.cms.gov/CCIIO/ 

Programs-and-Initiatives/Premium-StabilizationPrograms. 72For further details, please see 78 FR 65100. 

§ 153.320(d)(2)(ii) to capture the 

requirements related to a state 

withdrawal of its approved multi-year 

reduction request prior to the natural 

expiration of the request. 

We also propose to redesignate 

paragraph (d)(3) as paragraph (d)(4) and 

amend it to reflect that, beginning for 

the 2023 benefit year, all multi-year 

reduction requests would be published 

in the annual HHS notice of benefit and 

payment parameters that corresponds to 

the first year of the state’s request (for 

example, a multi-year request applicable 

for the 2023 through 2025 benefit years 

would be published in the 2023 

Payment Notice proposed rule). As 

noted above, we propose to publish 

information on any early terminations 

or modifications by HHS or state 

withdrawals of approved state multiyear reduction requests on the CMS 

website. 

We seek comment on all aspects of 

the proposed framework to permit states 

to pursue multi-year state flexibility 

reduction requests under § 153.320(d) 

for up to 3 years, including the 

additional components that would 

apply to such requests, the timeframe 

for states to respond to HHS requests for 

supplemental data and evidence 

pertaining to multi-year reduction 

requests, and the proposal to only 

publish and solicit comments on multiyear reduction requests in the annual 

HHS notice of benefit and payment 

parameters that corresponds to the first 

year in which the flexibility is being 

requested. 

4. Audits and Compliance Reviews of 

Issuers of Reinsurance-Eligible Plans 

(§ 153.410(d)) and Audits and 

Compliance Reviews of Issuers of Risk 

Adjustment Covered Plans (§ 153.620(c)) 

a. Audits and Compliance Reviews of 

Issuers of Reinsurance-Eligible Plans 

(§ 153.410(d)) 

HHS recently completed the 2014 

benefit year audits of a sample of issuers 

of PPACA transitional reinsuranceeligible plans. During this process, HHS 

encountered significant challenges that 

impeded its ability to efficiently 

administer and complete the audits. 

More specifically, HHS experienced 

difficulties receiving requested audit 

data and materials in a timely fashion 

from some issuers, and had difficulty 

obtaining data from these issuers in a 

format that was usable by HHS. HHS is 

of the view that codifying additional 

audit requirements and parameters is an 

appropriate and necessary measure to 

ensure that 2015 and 2016 benefit year 

audits of PPACA transitional 

reinsurance-eligible plans appropriately 

function to protect the integrity of our 

programs. 

We propose several amendments to 

§ 153.410(d) to provide more clarity 

around the audit requirements for 

issuers of reinsurance-eligible plans. 

The proposed amendments explain the 

audit process, including what it means 

to properly comply with an audit and 

the consequences for failing to comply 

with audit requirements. We also 

propose to expand the oversight tools 

available to HHS to also provide 

authority for HHS to conduct 

compliance reviews of issuers of 

reinsurance-eligible plans to assess 

compliance with the applicable 

requirements of subparts E and H of part 

153. These proposed HHS compliance 

reviews would follow the standards set 

forth for compliance review of QHP 

issuers participating in FFEs established 

in 45 CFR 156.715. However, 

compliance reviews under this section 

would only be conducted in connection 

with confirming reinsurance-eligible 

plans’ compliance with the standards 

related to reinsurance payments in 

subparts E and H of part 153. A 

compliance review may be targeted at a 

specific potential error and conducted 

on an ad hoc basis.72 For example, HHS 

may require an issuer to submit data 

pertaining to a specific data submission 

(for example, capitated claims). Unlike 

the compliance review authority 

established in § 156.715, which is 

limited to QHP issuers participating in 

FFEs, the compliance review authority 

we propose to codify in the 

amendments to § 153.410(d) would 

apply to all issuers of reinsuranceeligible plans. We believe this flexibility 

is necessary and appropriate to provide 

a mechanism for HHS to address 

situations in which a systematic error or 

issue is identified during the random 

and targeted auditing of issuers of 

reinsurance-eligible plans, and HHS 

suspects similarly situated issuers may 

have experienced the same systematic 

error or issue, but were not selected for 

audit in the year in question. 

Specifically, we propose to rename 

§ 153.410(d) to ‘‘Audits and Compliance 

Reviews’’ in order to clarify that the 

authority described in this section 

would apply to audits and the proposed 

HHS compliance reviews to evaluate 

issuers of reinsurance-eligible plans’ 

compliance with the applicable 

requirements in subparts E and H of part 

153. We similarly propose to update the 

introductory language in § 153.410(d) to 

incorporate a reference to HHS 

compliance reviews and to note that we 

would conduct these compliance 

reviews consistent with the standards 

set forth in § 156.715. 

We also propose to amend the 

existing introductory language in 

§ 153.410(d) to remove the last sentence 

that discusses audit results and the 

accompanying requirements that an 

issuer must follow if an audit results in 

a finding of material weakness or 

significant deficiency. Additionally, as 

detailed further below, we propose to 

replace this with a new proposed 

framework that captures more details on 

the audit process and requirements for 

reinsurance-eligible plans. As amended, 

the introductory language at 

§ 153.410(d) would reflect the authority 

for HHS, or its designee, to audit or 

conduct a compliance review of an 

issuer of a reinsurance-eligible plan to 

assess its compliance with the 

applicable requirements of subparts E 

and H of part 153. We also propose to 

move the existing introductory language 

in paragraph (d) requiring an issuer to 

ensure its relevant contractors, 

subcontractors, and agents cooperate 

with audits to a new proposed section, 

as detailed further below. 

Also at § 153.410, we propose to add 

new paragraph (d)(1) to establish notice 

and conference requirements for these 

audits. The introductory language in 

proposed new paragraph (d)(1) reflects 

that HHS would provide at least 15 

calendar days advance notice of its 

intent to conduct an audit of an issuer 

of a reinsurance-eligible plan. In 

proposed new paragraph (d)(1)(i), we 

propose to codify that all audits under 

this section would include an entrance 

conference at which the scope of the 

audit would be presented and an exit 

conference at which the initial audit 

findings would be discussed. 

Further, we propose to amend 

§ 153.410(d) to add a new paragraph 

(d)(2) to capture the requirements 

issuers must meet to comply with an 

audit under this section. Under the 

proposed paragraph (d)(2)(i), we 

propose to capture the requirement that 

currently appears in the introductory 

text of paragraph (d) for the issuer to 

ensure that its relevant contractors, 

subcontractors, and agents cooperate 

with any audit or compliance review 

under this section and also propose to 

expand it to similarly require the issuer 

to ensure its relevant employees, 

downstream entities and delegated 

entities also cooperate with any audit or 

compliance review under this section. 

In new proposed paragraph (d)(2)(ii), we 

propose to require issuers to submit 

complete and accurate data to HHS or 

78602 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

73See the Patient Protection and Affordable Care 

Act; Exchange and Insurance Market Standards for 

2015 and Beyond, Final Rule, 79 FR 30240 at 30257 

through 30259 (May 27, 2014). 

its designees that is necessary to 

complete the audit. Specifically, such 

data would need to support the 

appropriateness and accuracy of the 

reinsurance payments under review as 

part of the audit. For example, HHS may 

request that issuers of reinsuranceeligible plans provide enrollment and 

claims files, plan reference data, and 

associated enrollee data sufficient to 

show that reinsurance payments 

received were appropriate. HHS 

encountered significant challenges in 

the 2014 benefit year audits when some 

issuers submitted data in a format that 

was not readable by HHS or its systems. 

To address this issue, we propose in 

new paragraph (d)(2)(ii) that issuers 

must submit audit data in the format 

and manner specified by HHS no later 

than 30 calendar days after the initial 

deadline communicated and established 

by HHS at the entrance conference 

described in proposed paragraph 

(d)(1)(i). For example, HHS may require 

issuers to submit the requested audit 

data via Electronic File Transfer. 

Additionally, under proposed paragraph 

(d)(2)(iii), HHS proposes to require that 

issuers respond to any audit notices, 

letters, request, and inquiries, including 

requests for supplemental or supporting 

information, no later than 15 calendar 

days after the date of the notice, letter, 

request, or inquiry. We believe that the 

proposed requirements in paragraph 

(d)(2) are necessary and appropriate to 

ensure the timely completion of audits 

and to prevent waste that results from 

repeated, fruitless attempts by HHS to 

obtain data. 

Recognizing that there may be 

situations that warrant an extension of 

the timeframes under § 153.410(d)(2)(ii) 

or (iii), as applicable, we propose to also 

add a new paragraph (d)(2)(iv) to 

establish a process for issuers to request 

an extension for good cause. To request 

an extension, we propose to require the 

issuer to submit a written request to 

HHS within the applicable timeframe 

established in paragraphs (d)(2)(ii) or 

(iii). The written request would have to 

detail the reasons for the extension 

request and good cause in support of the 

request. For example, good cause may 

include an inability to produce 

information in light of unforeseen 

emergencies, natural disasters, or a lack 

of resources due to a PHE. If the 

extension is granted, the issuer must 

respond within the timeframe specified 

in HHS’ notice granting the extension of 

time. 

Under § 153.410(d)(3), HHS proposes 

that it would share its preliminary audit 

findings with the issuer, and further 

proposes that the issuer would then 

have 30 calendar days to respond to 

such findings in the format and manner 

specified by HHS. HHS would describe 

the process, format, and manner by 

which an issuer can dispute the 

preliminary findings in the preliminary 

audit report sent to the issuer. For 

example, if the issuer disagrees with the 

findings set forth in the preliminary 

audit report, HHS would require the 

issuer to respond to such findings by 

submitting written explanations that 

detail its dispute(s) or additional 

rebuttal information via Electronic File 

Transfer. Additionally, we propose 

under paragraph (d)(3)(i) that if the 

issuer does not dispute or otherwise 

respond to the preliminary findings 

within 30 calendar days, the audit 

findings would become final. We 

propose in new paragraph (d)(3)(ii) that 

if the issuer timely responds and 

disputes any audit finding within 30 

calendar days, HHS would review and 

consider such response and finalize the 

audit findings after such review. HHS 

would provide contact and other 

information necessary for an issuer to 

respond to the preliminary audit 

findings in the preliminary audit report 

sent to the issuer. 

HHS proposes to add a new paragraph 

§ 153.410(d)(4) to capture the process 

and requirements related to final audit 

findings and reports. If an audit results 

in the inclusion of a finding in the final 

audit report, the issuer must comply 

with the actions set forth in the final 

audit report in the manner and 

timeframe established by HHS. We note 

that the actions set forth in the final 

audit report could require an issuer to 

return reinsurance payments. We 

maintain the regulatory requirements 

related to corrective action plans for 

reinsurance audits that currently appear 

in paragraph (d) in new proposed 

paragraph (d)(4), which states that (1) 

the issuer must provide a written 

corrective action plan to HHS for 

approval within 30 calendar days of the 

issuance of the final audit report; (2) the 

issuer must implement the corrective 

action plan; and (3) the issuer must 

provide HHS with written 

documentation demonstrating the 

adoption and completion of the required 

corrective actions. 

Lastly, if an issuer fails to comply 

with the audit requirements set forth in 

proposed § 153.410(d), HHS proposes in 

paragraph (d)(5)(i) that HHS would 

notify the issuer of reinsurance 

payments received that the issuer has 

not adequately substantiated, and under 

new proposed paragraph (d)(5)(ii), HHS 

would notify the issuer that HHS may 

recoup any payments identified as not 

adequately substantiated if the 

reinsurance debt is not paid. Therefore, 

the continued failure to comply with the 

audit requirements and provide the 

necessary information to substantiate 

the payments made could result in HHS 

recouping up to 100 percent of the 

reinsurance payments made to an issuer 

for the applicable benefit year(s) that are 

the subject of the audit if the 

reinsurance debt is not paid. 

Reinsurance payment amounts 

recovered by HHS as a result of an audit 

under § 153.410(d) would be allocated, 

on a pro rata basis, as further payments 

to the U.S. Treasury under section 

1341(b)(3)(B)(iv) of the PPACA and 

further reimbursement of administrative 

expenses related to operating the 

reinsurance program under section 

1341(b)(3)(B)(ii) of the PPACA.73

We seek comment on these proposals, 

including HHS’s clarification of its 

compliance review authority, the 

proposed timeframes for issuers to 

respond to audit notices, reports, 

inquiries, and requests for supplemental 

information, and the process for issuers 

to request an extension to respond to 

such requests. 

b. Audits and Compliance Reviews of 

Issuers of Risk Adjustment Covered 

Plans (§ 153.620(c)) 

Although currently HHS primarily 

uses the HHS–RADV process to audit 

issuers of risk adjustment covered plans, 

§ 153.620(c) provides HHS with the 

authority to conduct audits of issuers of 

risk adjustment-covered plans outside of 

the HHS–RADV process. HHS intends to 

begin audits of issuers of risk 

adjustment covered plans to ensure the 

proper payment of high-cost risk pool 

payments and confirm compliance with 

applicable requirements. As such, 

similar to the proposals related to audits 

and compliance reviews of issuers of 

reinsurance-eligible plans and learning 

from our experience with those 2014 

benefit year audits, we propose to 

provide more clarity around the audit 

requirements for issuers of risk 

adjustment covered plans. These 

proposals seek to explain the audit 

process, including what it means to 

properly comply with an audit and the 

consequences for failing to comply with 

such requirements. 

We also propose to expand the 

oversight tools available to HHS beyond 

traditional audits to also provide 

authority for HHS to conduct 

compliance reviews of risk adjustment 

covered plans to assess compliance with 

the applicable requirements of subparts 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78603 

74For further details, please see 78 FR 65100. 

G and H of part 153. These proposed 

HHS compliance reviews would follow 

the standards set forth for compliance 

review of QHP issuers participating in 

FFEs established in 45 CFR 156.715. 

However, compliance reviews under 

this section would only be conducted in 

connection with confirming risk 

adjustment covered plans’ compliance 

with the applicable requirements related 

to the risk adjustment program in 

subparts G and H of part 153. A 

compliance review may be targeted at a 

specific potential error and conducted 

on an ad hoc basis.74 For example, HHS 

may require an issuer to submit data 

pertaining to a specific data submission 

(for example, capitated claims). Unlike 

the compliance review authority 

established in § 156.715, which is 

limited to QHP issuers participating in 

FFEs, the compliance review authority 

we propose to codify in the 

amendments to § 153.620(c) would 

apply to all issuers of risk adjustment 

covered plans. We believe this 

flexibility is necessary and appropriate 

to provide a mechanism for HHS to 

address situations in which a systematic 

error or issue is identified during the 

random and targeted auditing of a 

sample of issuers of risk adjustment 

covered plans, and HHS suspects 

similarly situated issuers may have 

experienced the same systematic error 

or issue but were not selected for audit 

in the year in question. As noted above, 

at this time, we anticipate focusing our 

audit and compliance review activities 

under § 153.620(c) on ensuring 

compliance with requirements 

applicable to the high-cost risk pool 

payments under the HHS risk 

adjustment methodology. 

Specifically, we propose to rename 

§ 153.620(c) to ‘‘Audits and Compliance 

Reviews’’ in order to clarify that the 

authority described in this section 

would apply to audits and the proposed 

HHS compliance reviews to evaluate 

risk adjustment covered plans’ 

compliance with the applicable 

requirements in subparts G and H of 

part 153. We similarly propose to 

update the introductory language in 

paragraph (c) to incorporate a reference 

to HHS compliance reviews and to note 

that we would conduct these 

compliance reviews consistent with the 

standards set forth in 45 CFR 156.715. 

We also propose to amend the 

existing introductory language in 

§ 153.620(c) to remove the last sentence 

that discusses audit results and the 

accompanying requirements that an 

issuer must follow if an audit results in 

a finding of material weakness or 

significant deficiency. As detailed 

further below, we propose to replace 

this with a new proposed framework 

that captures more details on the audit 

process and requirements for risk 

adjustment covered plans. As amended, 

the introductory language at paragraph 

(c) would reflect the authority for HHS 

or its designee to audit or conduct a 

compliance review of an issuer of a risk 

adjustment covered plan to assess its 

compliance with the applicable 

requirements of subparts G and H of 

part 153. We also propose to move the 

existing introductory language in 

paragraph (c) requiring an issuer to 

ensure its relevant contractors, 

subcontractors, and agents cooperate 

with audits to a new proposed section, 

as detailed further below. 

We propose to add new paragraph 

(c)(1) to establish notice and conference 

requirements for these audits. The 

introductory language in proposed new 

paragraph (c)(1) reflects that HHS would 

provide at least 15 calendar days 

advance notice of its intent to conduct 

an audit of an issuer of a risk adjustment 

covered plan. In new proposed 

paragraph (c)(1)(i), we propose to codify 

that all audits under this section would 

include an entrance conference at which 

the scope of the audit would be 

presented and an exit conference at 

which the initial audit findings would 

be discussed. 

Further, HHS proposes to amend 

§ 153.620(c) to add paragraph (c)(2) to 

capture the requirements issuers must 

meet to comply with an audit under this 

section. Under the proposed paragraph 

(c)(2)(i), we propose to capture the 

requirement that currently appears in 

the introductory text of paragraph (c) for 

the issuer to ensure that its relevant 

agents, contractors, and subcontractors 

cooperate with any audit or compliance 

review under this section and also 

propose to expand it to similarly require 

the issuer to ensure its relevant 

employees, downstream entities and 

delegated entities also cooperate with 

any audit or compliance review under 

this section. In new proposed paragraph 

(c)(2)(ii), we propose to require issuers 

to submit complete and accurate data to 

HHS or its designees that is necessary to 

complete the audit. Specifically, such 

data would need to support the 

appropriateness and accuracy of the risk 

adjustment transfers (including highcost risk pool payments and charges) 

under review as part of the audit. For 

example, HHS may request that issuers 

of risk adjustment covered plans 

provide enrollment and claims files and 

plan reference data and associated 

enrollee data. 

In new paragraph (c)(2)(ii), we 

propose that issuers must submit audit 

data, in the format and manner specified 

by HHS, no later than 30 calendar days 

after the initial deadline communicated 

and established by HHS at the entrance 

conference described in proposed 

paragraph (c)(1)(i). For example, HHS 

may require issuers to submit the 

requested audit data via Electronic File 

Transfer. Additionally, under proposed 

paragraph (c)(2)(iii), HHS proposes to 

require that issuers respond to any audit 

notices, letters, and inquires, including 

requests for supplemental or supporting 

information, no later than 15 calendar 

days after the date of the notice, letter, 

request, or inquiry. We believe that the 

proposed requirements in paragraph 

(c)(2) are necessary and appropriate to 

ensure the timely completion of audits 

and to prevent waste that results from 

repeated, fruitless attempts by HHS to 

obtain necessary data. 

Recognizing that there may be 

situations that warrant an extension of 

the timeframes under § 153.620(c)(2)(ii) 

or (iii), as applicable, we propose to also 

add a new paragraph (c)(2)(iv) to 

establish a process for issuers to request 

an extension for good cause. To request 

an extension, we propose to require the 

issuer to submit a written request to 

HHS within the applicable timeframe 

established in paragraph (c)(2)(ii) or 

(iii). The written request would have to 

detail the reasons for the extension 

request and the good cause in support 

of the request. For example, good cause 

may include an inability to produce 

information in light of unforeseen 

emergencies, natural disasters, or a lack 

of resources due to a PHE. If the 

extension is granted, the issuer must 

respond within the timeframe specified 

in HHS’ notice granting the extension of 

time. 

Under § 153.620(c)(3), HHS proposes 

that it would share its preliminary audit 

findings with the issuer, and further 

proposes that the issuer would then 

have 30 calendar days to respond to 

such findings in the format and manner 

specified by HHS. HHS would describe 

the process, format, and manner by 

which an issuer can dispute the 

preliminary findings in the preliminary 

audit report sent to the issuer. For 

example, if the issuer disagrees with the 

findings set forth in the preliminary 

audit report, HHS would require the 

issuer to respond to such findings by 

submitting written explanations that 

detail its dispute(s) or additional 

rebuttal information via Electronic File 

Transfer. Additionally, we propose 

under paragraph (c)(3)(i) that if the 

issuer does not dispute or otherwise 

respond to the preliminary findings 

78604 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

75See the 2016 Payment Notice final rule, 80 FR 

10780–10781. 

76This is also known as the dedicated distributed 

data collection environment. 

77These reports are: Enrollee (Without) Claims 

Summary (ECS), Enrollee (Without) Claims Detail 

(ECD), Frequency Report by Data Element for 

Medical Accepted Files (FDEMAF), Frequency 

Report by Data Element for Pharmacy Accepted 

Files (FDEPAF), Frequency Report by Data Element 

for Supplemental Accepted Files (FDESAF), 

Frequency Report by Data Element for Enrollment 

Accepted Files (FDEEAF), Claim and Enrollee 

Frequency Report (CEFR), High Cost Risk Pool 

Summary (HCRPS), High Cost Risk Pool Detail 

Enrollee (HCRPDE), Risk Adjustment Claims 

Selection Summary (RACSS), Risk Adjustment 

Claims Selection Detail (RACSD), Risk Adjustment 

Transfer Elements Extract (RATEE), Risk 

Adjustment Risk Score Summary (RARSS), Risk 

Adjustment Risk Score Detail (RARSD), Risk 

Adjustment Data Validation Population Summary 

(RADVPS), Risk Adjustment Payment Hierarchical 

Condition Category Enrollee (RAPHCCER), Risk 

Adjustment User Fee (RAUF). 

78See, for example, https://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/ 

EDGE-2019-QQ-Guidance.pdf. Also see 83 FR 

16970 through 16971. 

79HHS may also take action on reported material 

EDGE discrepancy if the discrepancy involved a 

processing error by HHS, HHS’s incorrect 

application of the relevant methodology, or a HHS 

mathematical error, consistent with the bases upon 

which an issuer may request reconsideration under 

§ 156.1220. 

80We are not proposing any changes to the 

materiality threshold for reconsideration requests in 

§ 156.1220(a)(2). 

within 30 calendar days, the audit 

findings would become final. We 

propose under paragraph (c)(3)(ii) that if 

the issuer timely responds and disputes 

any audit finding within 30 calendar 

days, HHS would review and consider 

such response and finalize the audit 

findings after such review. HHS would 

provide contact and other information 

necessary for an issuer to respond to the 

preliminary audit findings in the 

preliminary audit report sent to the 

issuer. 

HHS proposes to add a new 

§ 153.620(c)(4) to capture the process 

and requirements related to final audit 

findings and reports. If an audit results 

in the inclusion of a finding in the final 

audit report, the issuer must comply 

with the actions set forth in the final 

audit report in the manner and 

timeframe established by HHS. We note 

that the actions set forth in the final 

audit reports could require an issuer to 

return risk adjustment (including highcost risk pool) payments, or pay 

increased risk adjustment (including 

high-cost risk pool) charges. We 

maintain the regulatory requirements for 

corrective action plans for risk 

adjustment (including high-cost risk 

pool) audits that currently appear in 

§ 153.620(c) in new proposed paragraph 

(c)(4), which states that (1) the issuer 

must provide a written corrective action 

plan to HHS for approval within 30 

calendar days of the issuance of the 

final audit report; (2) the issuer must 

implement the corrective action plan; 

and (3) the issuer must provide HHS 

with written documentation 

demonstrating the adoption and 

completion of the required corrective 

actions. 

Lastly, if an issuer fails to comply 

with the audit requirements set forth in 

proposed § 153.620(c)(2) HHS proposes 

in paragraph (c)(5)(i) that HHS would 

notify the issuer of payments received 

that the issuer has not adequately 

substantiated, and in new proposed 

paragraph (c)(5)(ii), HHS would notify 

the issuer that HHS may recoup any 

payments identified as not adequately 

substantiated. Therefore, the continued 

failure to comply with the audit 

requirements and provide the necessary 

information to substantiate the transfer 

amounts under review could result in 

HHS recouping up to 100 percent of the 

risk adjustment (including high-cost risk 

pool) payments, or increased risk 

adjustment (including high-cost risk 

pool) charges, made to an issuer for the 

applicable benefit year(s) that are the 

subject of the audit. 

We note that any risk adjustment 

payments or charges recovered by HHS 

during an audit of a risk adjustment 

covered plan would be paid on a pro 

rata basis similar to the process for risk 

adjustment default charge allocations to 

the other issuers participating in the 

applicable state market risk pool in the 

applicable benefit year.75 We note that 

any high-cost risk pool payments or 

charges recovered by HHS during an 

audit of a risk adjustment covered plan 

would be paid on a pro rata basis to 

other issuers in the relevant national 

market in the form of a reduced highcost risk pool charge in the applicable 

benefit year. HHS would not, however, 

re-run or otherwise recalculate transfers 

for the applicable benefit year if monies 

are recouped as a result of an audit 

under § 153.620(c). 

We seek comment on these proposals, 

including HHS’s clarification of its 

compliance review authority, the 

proposed timeframes for issuers to 

respond to audit notices, reports, and 

requests for supplemental information, 

and the process for issuers to request an 

extension to respond to such requests. 

5. EDGE Discrepancy Materiality 

Threshold 

As stated in § 153.710(a) through (c), 

an issuer of a risk adjustment covered 

plan must provide to HHS, through their 

EDGE server,76 access to enrollee-level 

plan enrollment data, enrollee claims 

data, and enrollee encounter data as 

specified by HHS for a benefit year. 

Consistent with § 153.730, to be 

considered for risk adjustment 

payments and charges, issuers of risk 

adjustment covered plans must submit 

their respective EDGE data by April 30 

of the year following the applicable 

benefit year. At the end of the EDGE 

data submission process, HHS issues 

final EDGE server reports 77 which 

reflect an issuer’s data that was 

successfully submitted by the data 

submission deadline. Within 15 

calendar days of the date of these final 

EDGE server reports, the issuer must 

confirm to HHS that the information in 

the final EDGE server reports accurately 

reflect the data to which the issuer has 

provided access to HHS through its 

EDGE server for the applicable benefit 

year by submitting an attestation; or the 

issuer must describe to HHS any 

discrepancies it identifies in the final 

EDGE server reports. 

HHS reviews all reported EDGE 

discrepancies to evaluate the 

implications of each incorrect data 

submission for risk adjustment transfers 

and risk adjustment data validation. For 

risk adjustment transfers calculated 

under the state payment transfer 

formula, HHS evaluates whether the 

reported EDGE discrepancy is material 

and has a process to address incorrect 

EDGE data submissions that have a 

material impact on risk adjustment 

transfers for a state market risk pool.78 79

Currently, HHS uses the same 

materiality threshold for reconsideration 

requests set forth in § 156.1220(a)(2) for 

determining whether the EDGE 

discrepancy has a material impact on 

the risk adjustment transfers calculated 

under the state payment transfer 

formula. Consequently, the reported 

EDGE discrepancy is considered 

material if the amount in dispute is 

equal to or exceeds the lower of either 

$10,000 or one percent of the total 

estimated transfers in the applicable 

state market risk pool. After analyzing 

reported EDGE discrepancies in prior 

benefit years, we propose to codify a 

materiality threshold for EDGE 

discrepancies and also propose to 

establish a higher materiality threshold 

for EDGE discrepancies. More 

specifically, we propose the following 

materiality threshold for EDGE 

discrepancies: The amount in dispute 

must equal or exceed $100,000 or one 

percent of the total estimated transfer 

amount in the applicable state market 

risk pool, whichever is less.80 Where an 

identified material EDGE discrepancy 

negatively affects the issuer without 

having a negative effect on other issuers 

within the state market risk pool, issuers 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78605 

81Consistent with the current process, HHS may 

also take action on reported material EDGE 

discrepancies if the discrepancy involved a 

processing error by HHS, HHS’s incorrect 

application of the relevant methodology, or a HHS 

mathematical error, consistent with the bases upon 

which an issuer may request reconsideration under 

§ 156.1220. 

82The deadline for submission of 2020 benefit 

year risk adjustment data is April 30, 2021. See 45 

CFR 153.730. As such, the EDGE discrepancy 

reporting process for the 2020 benefit year will not 

begin until May 2021. 83 78 FR 15416 through 15417. 84 45 CFR 153.630(a) through (c). 

would be required to adhere to the 

initial data submission and accept the 

consequences of the data submission, 

even when the monetary impact of the 

inaccuracy on the issuer submitting 

incorrect data is potentially substantial. 

Therefore, HHS would generally only 

take action on material discrepancies 

that harm other issuers in the same state 

market risk pool.81

We propose to amend § 153.710, by 

creating new paragraph (e) and 

redesignating paragraphs (e), (f) and (g), 

as (f), (g) and (h) respectively, to capture 

the proposed EDGE discrepancy 

materiality threshold and propose to 

apply it beginning with the 2020 benefit 

year.82 We believe this increased 

materiality threshold will reduce 

burden on issuers having to submit 

additional data to HHS when a 

discrepancy is determined to be 

potentially material and allow more 

certainty and stability for risk 

adjustment transfers. If a reported EDGE 

discrepancy is determined to not meet 

the materiality threshold, HHS would 

take no action on the discrepancy and 

the issuer’s data submission would 

remain as submitted by the data 

submission deadline for the applicable 

benefit year. 

While HHS generally only takes 

action on reported material EDGE 

discrepancies that are determined to 

harm other issuers, issuers must 

continue to report and describe any 

identified EDGE discrepancy to HHS in 

a format specified by HHS for each 

benefit year. Issuers must report all data 

discrepancies in order to permit HHS to 

determine whether such an error is 

material and actionable and to evaluate 

the impact on other issuers in the state 

market risk pool. We seek comment on 

this proposal. 

6. Risk Adjustment User Fee for 2022 

Benefit Year (§ 153.610(f)) 

If a state is not approved to operate, 

or chooses to forgo operating, its own 

risk adjustment program, HHS will 

operate risk adjustment on its behalf. As 

noted previously in this proposed rule, 

for the 2022 benefit year, HHS will be 

operating the risk adjustment program 

in every state and the District of 

Columbia. As described in the 2014 

Payment Notice, HHS’s operation of risk 

adjustment on behalf of states is funded 

through a risk adjustment user fee.83

Section 153.610(f)(2) provides that, 

where HHS operates a risk adjustment 

program on behalf of a state, 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 specified in the 

annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year. 

OMB Circular No. A–25 established 

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. The risk 

adjustment program will provide special 

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

of Circular No. A–25 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 2021 Payment Notice, we 

calculated the federal administrative 

expenses of operating the risk 

adjustment program for the 2021 benefit 

year to result in a risk adjustment user 

fee rate of $0.25 PMPM based on our 

estimated costs for risk adjustment 

operations and estimated billable 

member months for individuals enrolled 

in risk adjustment covered plans. For 

the 2022 benefit year, we propose to use 

the same methodology to estimate our 

administrative expenses to operate the 

program. These costs cover 

development of the model 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 program activities. To 

calculate the user fee, we divided HHS’s 

projected total costs for administering 

the risk adjustment programs on behalf 

of states by the expected number of 

billable member months in risk 

adjustment covered plans in states 

where the HHS-operated risk 

adjustment program will apply in the 

2022 benefit year. 

We estimate that the total cost for 

HHS to operate the risk adjustment 

program on behalf of states for the 2022 

benefit year will be approximately $60 

million, and the risk adjustment user fee 

would be $0.25 PMPM. The risk 

adjustment user fee costs for the 2022 

benefit year are expected to remain 

steady from the prior 2021 benefit year 

estimates. However, we project a small 

decline in billable member months in 

the individual and small group markets 

overall in the 2022 benefit year based on 

the declines observed in the 2019 

benefit year. We seek comment on the 

proposed risk adjustment user fee for 

the 2022 benefit year. We will continue 

to examine the costs and enrollment 

projections for the 2022 benefit year, 

particularly as we receive more 

information on the impact of the 

coronavirus disease 2019 (COVID–19) 

PHE, and propose to incorporate any 

such newly available data to update the 

final 2022 benefit year risk adjustment 

user fee rate that we would announce in 

the final rule. We seek comment on 

these estimates and the use of any 

newly available data to update the 

estimates to reflect any emerging cost or 

enrollment trends for the final 2022 

benefit year user fee. 

7. Risk Adjustment Data Validation 

Requirements When HHS Operates Risk 

Adjustment (HHS–RADV) (§ 153.630) 

To ensure the integrity of the HHSoperated risk adjustment program, HHS 

conducts risk adjustment data 

validation (HHS–RADV) under 

§§ 153.350 and 153.630 in any state 

where HHS is operating risk adjustment 

on a state’s behalf. The purpose of HHS– 

RADV 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. 

HHS–RADV also ensures that risk 

adjustment transfers reflect verifiable 

actuarial risk differences among issuers, 

rather than risk score calculations that 

are based on poor data quality, thereby 

helping to ensure that the HHS-operated 

risk adjustment program assess charges 

to issuers with plans with lower-thanaverage actuarial risk while making 

payments to issuer with plans with 

higher-than-average actuarial risk. HHS– 

RADV consists of an initial validation 

audit and a second validation audit.84

Under § 153.630, each issuer of a risk 

adjustment covered plan must engage an 

independent initial validation audit 

entity. The issuer provides 

demographic, enrollment, and medical 

record documentation for a sample of 

78606 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

85 84 FR 17503 through 17504. 

86 Ibid. 

87 84 FR 17504. 

88 Ibid. 89See 79 FR 13758. 

90The 2014 Payment Notice final rule required 

that that issuers ensure that IVA Entities are 

reasonably capable of performing the audit, the 

audit is completed, the auditor is free from conflicts 

of interest, and the auditor submits information 

regarding the IVA to HHS in the manner and 

timeframe specified by HHS. 78 FR 15410 at 15437. 

The 2015 Payment Notice final rule established 

standards and guidelines regarding the 

qualifications of the IVA Entity, including further 

details on the conflict of interest standards. 79 FR 

13744 at 13758–13759. 

91 78 FR 13818 through 13820. 

92 81 FR 94106. 

93 Ibid. 

94See, for example, Sections 9.1, 9.5 and 9.7 of 

the ‘‘2017 Benefit Year Protocols PPACA HHS Risk 

Adjustment Data Validation, Version 2.0,’’ August 

10, 2018. 

95As detailed further below, we propose similar 

conforming amendments to the references to an 

issuer’s ability to appeal the findings of the second 

validation audit in 45 CFR 156.1220(a)(1) and (a)(3). 

enrollees selected by HHS to the issuer’s 

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. 

a. Exemptions From HHS–RADV 

(§ 153.630(g)) 

In 2020 Payment Notice, we codified 

several exemptions from the HHS– 

RADV requirements. In this rule, we 

propose to codify the previously 

established exemption 85 for issuers who 

only offer small-group carryover 

coverage in the state during the benefit 

year being audited at new proposed 

§ 153.630(g)(4). As we discussed in the 

2020 Payment Notice, under this policy, 

a small group market issuer with offcalendar year coverage who exits the 

market but has only carry-over 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 in the state) would 

be considered an exiting issuer and 

would be exempt from HHS–RADV for 

the benefit year with the carry-over 

coverage.86

We also propose to codify the 

previously established exemption 87 for 

issuers who are the sole issuer in a state 

market risk pool during the benefit year 

that is being audited at new proposed 

§ 153.630(g)(5). As we discussed in the 

2020 Payment Notice, for single issuer 

market risk pool(s), there are no risk 

adjustment transfers calculated under 

the state payment transfer formula and 

thus, no payment or financial 

accountability to other issuers for that 

risk pool.88 As such, a sole issuer in a 

state market risk pool is not required to 

participate in the HHS-operated risk 

adjustment program (except for 

purposes of high-cost risk pool 

payments and charges) for that state 

market risk pool. However, if the sole 

issuer was participating in multiple risk 

pools in the state during the year that is 

being audited, that issuer will be subject 

to HHS–RADV for those risk pools with 

other issuers that had risk adjustment 

transfers calculated under the state 

payment transfer formula. 

These exemptions do not introduce 

new policies; instead, the proposed 

amendments to § 153.630(g) are simply 

to codify these previously established 

exemptions in regulation. We also 

clarify that any issuer that qualifies for 

the small group carryover coverage 

exemption in new proposed paragraph 

(g)(4) would not have its risk score and 

its associated risk adjustment transfers 

adjusted due to its own risk score error 

rate, as the issuer would not have 

participated in HHS–RADV for the 

benefit year in which it only offered the 

small group carryover coverage. 

However, that issuer’s risk score and 

resulting risk adjustment transfers could 

be subject to HHS–RADV adjustments if 

other issuers in that state market risk 

pool were outliers and received HHS– 

RADV risk score error rates for that 

benefit year. 

We solicit comments on these 

proposals. 

b. IVA Requirements (§ 153.630(b)(3)) 

In accordance with § 153.630(b)(3), an 

issuer must ensure that its IVA Entity is 

reasonably free of conflicts of interest, 

such that it is able to conduct the IVA 

in an impartial manner and its 

impartiality is not reasonably open to 

question. In prior rulemaking, we 

explained that to meet this standard, the 

IVA Entity, among other things, may not 

have had a role in establishing any 

relevant internal controls of the issuer 

related to the risk adjustment data 

validation process when HHS is 

operating risk adjustment on behalf of a 

state, or serve in any capacity as an 

advisor to the issuer regarding the 

IVA.89 In this proposed rule, we propose 

to amend this standard and clarify that 

in order to demonstrate that the IVA 

Entity is reasonably free of conflicts, the 

IVA Entity must also not have or 

previously have had a role in 

establishing any relevant internal 

controls of the issuer related to risk 

adjustment or the EDGE server data 

submission process for the applicable 

benefit year for which the IVA Entity is 

performing the IVA on behalf of the 

issuer. Additionally, the IVA Entity 

must also not have served in any 

capacity as an advisor to the issuer 

regarding the risk adjustment or EDGE 

server data submission for the 

applicable benefit year. For example, 

the IVA Entity cannot serve as the 

issuer’s third party administrator (TPA) 

for purposes of the EDGE data 

submission for HHS-operated risk 

adjustment in the 2020 benefit year and 

serve as the IVA Entity for that issuer for 

the 2020 benefit year. We are proposing 

these changes because HHS is 

concerned about conflicts of interest 

that could arise if the same entity assists 

or completes the EDGE data 

submissions for an issuer for an 

applicable benefit year, and then also 

serves as the IVA Entity auditing the 

submission of that data in HHS–RADV. 

This proposal is in addition to the 

requirements set forth in 2014 and 2015 

Payment Notices.90 We seek comment 

on this proposal. 

c. HHS–RADV Administrative Appeals 

In the 2015 Payment Notice, we 

established a three-level administrative 

appeals process for issuers to seek 

reconsideration of amounts under 

certain PPACA programs, including the 

calculation of risk adjustment charges, 

payments and user fees.91 In the 2018 

Payment Notice final rule, we extended 

this three-level administrative appeal 

process to permit issuers to dispute the 

findings of a second validation audit 

with respect to the 2016 benefit year 

HHS–RADV and beyond.92 Issuers are 

not permitted to use the discrepancy 

reporting or administrative appeal 

processes under §§ 153.630(d)(2) and 

156.1220, respectively, to contest the 

IVA findings, because HHS does not 

conduct the IVA or produce those 

results.93 Instead, issuers should review 

their IVA findings and discuss any 

concerns with its IVA Entity prior to 

attesting to and submitting those results 

to HHS.94 The existing regulation at 

§ 153.630(d)(2) captures this policy. In 

this rule, we propose conforming 

amendments to paragraph (d)(3) to 

similarly add ‘‘if applicable’’ to the 

reference to an issuer’s ability to appeal 

the findings of the second validation 

audit to ensure these regulatory 

provisions also appropriately capture 

this limitation.95 As explained in the 

2020 Payment Notice, only those issuers 

who have insufficient pairwise 

agreement between the IVA and second 

validation audit will receive a Second 

Validation Audit Findings Report and 

therefore have the right to appeal the 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78607 

96 84 FR 17495. 

97 84 FR 17506 through 17507. 

98See 79 FR 13768 and 13769. Also see, for 

example, Table 3 in the document entitled 

‘‘Proposed Key Dates for Calendar Year 2019: 

Qualified Health Plan (QHP) Certification in the 

Federally-facilitated Exchanges (FFEs); Rate 

Review; and Risk Adjustment.’’ Available at https:// 

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Key-Dates-Table-forCY2019.pdf. 

99The one exception is for the rare circumstances 

that HHS is unable to collect full risk adjustment 

charges in a state market risk pool or high-cost risk 

pool charges in a national market risk pool. In such 

situations, issuers receiving lesser payments can 

reflect the reductions in their MLR reports. 

100HHS–RADV adjustments for the 2019 benefit 

year will be published under a different timeline 

due to the COVID–19-related delay in HHS–RADV 

activities for the 2019 benefit year. See https://

www.cms.gov/files/document/2019-HHS-RADVPostponement-Memo.pdf. 

101https://www.cms.gov/CCIIO/Programs-andInitiatives/Premium-Stabilization-Programs/ 

Downloads/BY2017-HHSRADV-Adjustments-to-RATransfers-Summary-Report.pdf. 

102 Issuer MLRs are calculated using a three-year 

average. See section 2718(b)(1)(B)(ii) of the PHS Act 

and 45 CFR 158.220(b). 

second validation audit findings.96 We 

seek comment on these proposed 

amendments. 

d. Timeline for Collection of HHS– 

RADV Payments and Charges 

In the 2020 Payment Notice,97 we 

finalized an updated timeline for the 

publication, collection, and distribution 

of HHS–RADV adjustments to transfers. 

This timeline allowed issuers to report 

HHS–RADV adjustments in a later MLR 

reporting year and to consider, in 

accordance with any guidance from the 

state DOIs, these adjustments in rate 

setting during a later benefit year 

(specifically, the year in which the 

HHS–RADV adjustments are collected 

and paid). Beginning with 2019 benefit 

year HHS–RADV, we propose to revert 

to the previous schedule 98 for the 

collection of HHS–RADV charges and 

disbursement of payments in the 

calendar year in which HHS–RADV 

results are released (for example, 

collection and disbursement of 2021 

benefit year HHS–RADV adjustments 

would begin in summer or fall of 2023). 

HHS publishes the final summary 

report of risk adjustment transfers 

(without HHS–RADV adjustments) and 

information on risk adjustment default 

charges for the applicable benefit year in 

the summer of the year after the 

applicable benefit year (typically June 

30th of the year after the applicable 

benefit year), and issuers report those 

risk adjustment amounts in their MLR 

reports by July 31st of the year after the 

applicable benefit year.99 Payment and 

collection of these risk adjustment 

transfer and default charge amounts 

generally occurs in August and 

September of the year after the 

applicable benefit year. HHS separately 

reports the HHS–RADV adjustments and 

information on default data validation 

charges for the applicable benefit year 

approximately one year after the final 

summary report of risk adjustment 

transfers for that benefit year is 

published (typically 2 years after the 

applicable benefit year in August).100

Under the current HHS–RADV 

timeline, HHS begins collection and 

disbursement of HHS–RADV 

adjustments and default data validation 

charges and allocations 2 years after 

announcing the HHS–RADV 

adjustments (for example, collection 

and disbursement of 2017 benefit year 

HHS–RADV adjustments will begin in 

2021).101 For MLR reporting purposes, 

under the current approach finalized in 

the 2020 Payment Notice, issuers will 

reflect the HHS–RADV adjustment 

amounts and default data validation 

charges and allocations in the MLR 

reporting year in which collections and 

payments of those amounts occur. 

Subject to approval by state DOIs, 

issuers are also permitted to reflect 

these amounts in rate setting for the 

same benefit year in which those 

amounts are paid or collected. For 

example, 2017 benefit year HHS–RADV 

adjustments and default data validation 

charges and allocations were announced 

in August 2019 and issuers will report 

these amounts in the 2021 MLR 

reporting year (MLR reports filed in 

2022), the same year that the 

adjustments and default data validation 

charges will be collected and paid. 

Additionally, subject to permission by 

state DOIs, issuers were permitted to 

account for the impacts of those 2017 

benefit year HHS–RADV adjustments in 

rate setting for the 2021 benefit year. 

The current timeline was intended to 

address stakeholder concerns regarding 

the predictability of HHS–RADV 

adjustments, especially for the initial 

payment year. However, since the 

publication of the 2020 Payment Notice, 

we have received feedback stating that 

the extended timeline has not provided 

the increased flexibility intended by the 

policy and instead has introduced 

undue complexity. Specifically, 

stakeholders have expressed concern 

that this policy conflicts with state 

requirements for financial accounting, 

and can negatively impact their MLR 

rebate position, particularly if the issuer 

experiences substantial changes in 

enrollment over the 3-year MLR 

calculation period.102

Although the operational timelines of 

the risk adjustment program and the 

nature of HHS–RADV causes HHS– 

RADV results to always be at least a year 

behind the associated risk adjustment 

transfers report, we have continued to 

consider these issues. We adopted the 

current timeline to provide issuers (and 

states) with more options on how and 

when to account for the financial 

impacts from HHS–RADV. However, as 

noted above, stakeholder feedback has 

indicated that the approach did not 

achieve its policy goal and instead 

introduced unnecessary complexity. In 

this rule, we therefore propose to revert 

to the previous schedule for collection 

and disbursement of HHS–RADV 

adjustments and default data validation 

charges and begin such activities in the 

summer or fall of the calendar year in 

which HHS–RADV results are released. 

For example, collection of 2021 benefit 

year HHS–RADV adjustments and 

default data validation charges and 

disbursement of such amounts would 

begin in summer or fall of 2023. In 

support of the new proposed timeline 

for collection and disbursement of 

HHS–RADV adjustments and default 

data validation charges, HHS would 

need to release the applicable benefit 

year’s report on HHS–RADV 

adjustments and default data validation 

charges earlier in the year so the 

amounts are available for issuers to use 

for MLR reporting purposes. We 

therefore also propose to release the 

applicable benefit year’s HHS–RADV 

summary report no later than early 

summer, and require issuers to report 

those amounts in the MLR reports 

submitted by July 31st of the same 

calendar year in which the results are 

released. For example, as proposed, the 

summary report on 2021 benefit year 

HHS–RADV adjustments and default 

data validation charges and allocations 

would be released no later than early 

summer 2023, and issuers would be 

instructed to report these amounts in 

the 2022 MLR reporting year (MLR 

reports that include 2022 benefit year 

data that are submitted by July 31, 

2023). We would then collect and 

disburse HHS–RADV adjustments and 

default data validation charges and 

allocations in summer or fall of the 

calendar year in which HHS–RADV 

results are released (for example, 

collection and disbursement of 2021 

benefit year HHS–RADV adjustments 

and default data validation charges 

would begin in summer or fall of 2023). 

We note the Unified Rate Review 

Template (URRT) instructions currently 

permit issuers and states to consider 

HHS–RADV impacts in rates for the year 

78608 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

103HHS–RADV adjustments for the 2019 benefit 

year will be published under a different timeline 

due to the COVID–19-related delay in HHS–RADV 

activities for the 2019 benefit year. See https://

www.cms.gov/files/document/2019-HHS-RADVPostponement-Memo.pdf. 104 In the proposed 2020 HHS–RADV 

Amendments Rule (85 FR 33595), we proposed a 

transition from the prospective application of HHS– 

RADV adjustments to a concurrent application 

beginning with 2020 benefit year HHS–RADV. In 

that proposed rule, we also solicited comment on 

an alternative timeline for the transition beginning 

with 2019 benefit year HHS–RADV. We believe that 

either of these timelines to transition to a 

concurrent application of HHS–RADV results is 

compatible with the proposal in this rule to change 

the timing of HHS–RADV collections and 

disbursements. 

105See https://www.cms.gov/files/document/ 

2019-HHS-RADV-Postponement-Memo.pdf. 106 84 FR 17495. 

107See, for example, ‘‘Temporary Policy on 2020 

Premium Credits Associated with the COVID–19 

Public Health Emergency,’’ August 4, 2020. 

Available at https://www.cms.gov/CCIIO/Programsand-Initiatives/Health-Insurance-Marketplaces/ 

Downloads/Premium-Credit-Guidance.pdf. 

108The Secretary of the Department of HHS may, 

under section 319 of the PHS Act determine that: 

(a) A disease or disorder presents a public health 

emergency; or (b) that a public health emergency, 

including significant outbreaks of infectious disease 

or bioterrorist attacks, otherwise exists. 

when these amounts will be collected 

and disbursed, however if this proposal 

is finalized, we would remove this 

flexibility from the URRT instructions. 

The new proposed timeline would 

help mitigate concerns regarding the 

incongruity with state financial 

accounting requirements, as well as 

potential undue impacts of HHS–RADV 

adjustments on MLR rebate liability, 

which could result from the HHS– 

RADV adjustments being reported 

outside the 3-year MLR aggregation 

window and thus potentially distorting 

the MLR experience of the benefit year 

to which HHS–RADV adjustments 

apply. This change may also help 

mitigate the impact of any substantial 

changes in enrollment between benefit 

years. 

We propose to begin this policy with 

the collection and disbursement of 

HHS–RADV adjustments and default 

data validation charges for the 2019 

benefit year. However, due to the delay 

in the 2019 benefit year HHS–RADV,103

the timing of collections and 

disbursements is different for the 2019 

benefit year. If finalized as proposed, 

HHS would publish the 2019 benefit 

year HHS–RADV Summary Report in 

early summer of 2022. HHS will also 

publish the 2020 benefit year HHS– 

RADV Summary report in early summer 

of 2022.104 Issuers would be required to 

include any payments and charges 

reflected on these reports, along with 

risk adjustment transfers for the 2021 

benefit year, in their 2021 MLR reports, 

which must be filed by July 31, 2022. 

Finally, HHS would begin collecting 

both 2019 105 and 2020 HHS–RADV 

adjustments to transfers for non-exiting 

issuers along with any default data 

validation charges imposed for these 

two benefit years and disbursing related 

payments in late summer or early fall of 

2022. Issuers would be required to 

report the 2019 and 2020 benefit year 

HHS–RADV adjustments to transfers in 

their MLR reports for the 2021 MLR 

reporting year (MLR reports that include 

2021 benefit year data that are 

submitted by July 31, 2022). We seek 

comment on this proposal and whether 

any consideration should be made in 

the transition to this policy to account 

for 2017 and 2018 benefit year HHS– 

RADV collection and disbursement of 

payments and charges (under the 

current timeline) also occurring in 2021 

and 2022. 

e. Second Validation Audit and Error 

Rate Discrepancy Reporting Windows 

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

calendar days to confirm the findings of 

the SVA (if applicable) 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. As explained in the 2020 

Payment Notice, only those issuers who 

have insufficient pairwise agreement 

between the IVA and SVA receive SVA 

findings.106 We propose to amend 

paragraph (d)(2) to shorten the window 

to confirm the findings of the SVA (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 

2020 benefit year HHS–RADV. The 

proposed shorter discrepancy reporting 

timeframes are intended to ensure that 

we can resolve as many issues as 

possible in advance of publication of the 

Summary Report of Risk Adjustment 

Data Validation Adjustments to Risk 

Adjustment Transfers for the applicable 

benefit year. Based on the first 2 

payment years of HHS–RADV, HHS 

believes that this shortened window 

would not be overly burdensome to 

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 of Risk Adjustment 

Data Validation Adjustments to Risk 

Adjustment Transfers for the applicable 

benefit year. We further note that a 15 

calendar day discrepancy reporting 

window is consistent with the IVA 

sample and EDGE discrepancy reporting 

windows at §§ 153.630(d)(1) and 

153.710(d), respectively. We proposed 

shortening the discrepancy window in 

the 2020 Payment Notice, but did not 

finalize the proposal in response to 

comments suggesting that we revisit this 

proposal once we had completed a 

payment year of HHS–RADV. 

We seek comment on the proposed 

shortened discrepancy windows under 

proposed § 153.630(d)(2). 

8. Risk Adjustment Data Reporting 

Requirements for Future Premium 

Credits (§ 153.710) 

As detailed earlier in this preamble, 

on September 2, 2020, HHS issued an 

interim final rule on COVID–19 wherein 

we set forth risk adjustment reporting 

requirements for issuers offering 

temporary premium credits in the 2020 

benefit year to align with the relaxed 

enforcement policy announced in 

guidance.107 For the 2021 benefit year 

and beyond, we propose to permanently 

adopt these risk adjustment reporting 

requirements for all health insurance 

issuers in the individual and small 

group markets who elect to offer 

premium credits during a PHE declared 

by the Secretary of HHS (declared 

PHE) 108 if the premium credits are 

permitted by HHS in future benefit 

years. Specifically, we propose that 

issuers of risk adjustment covered plans 

that provide temporary premium credits 

when permitted by HHS in future 

benefit years must report to their EDGE 

servers adjusted plan premiums that 

reflect actual premiums billed to 

enrollees, taking the premium credits 

into account as a reduction in 

premiums. Elsewhere in this proposed 

rule, we also propose to clarify that 

HHS’s calculation of risk adjustment 

payment and charges for the 2021 

benefit year and beyond under the state 

payment transfer formula would be 

calculated using the statewide average 

premium that reflects actual premiums 

billed, taking into account any 

temporary premium credits provided as 

a reduction in premium for the 

applicable months of coverage when 

permitted by HHS in future benefit 

years. 

As noted in the September, 2020 

interim final rule on COVID–19, we 

believe that these requirements are 

necessary and appropriate because if 

HHS permitted issuers that provided 

premium credits to submit unadjusted 

premiums for the purposes of 

calculating risk adjustment, distortions 

could occur that financially impact 

individual issuers. For example, absent 

the requirement that issuers that offer 

premium credits report the adjusted, 

lower premium amount for risk 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78609 

109See Patient Protection and Affordable Care 

Act; HHS Notice of Benefit and Payment 

Parameters; Final rule, 84 FR 17454 at 17562 (April 

25, 2019). 

110For example, § 155.220(d)(2) exempts direct 

enrollment technology providers from the training 

requirement that is part of the annual FFE 

registration process for agents and brokers. 

adjustment purposes, an issuer with a 

large market share with higher-thanaverage risk enrollees that provides 

temporary premium credits would 

inflate the statewide average premium 

by submitting the higher, unadjusted 

premium amount, thereby increasing its 

risk adjustment payment. In such a 

scenario, a smaller issuer in the same 

state market risk pool that owes a risk 

adjustment charge, and also provides 

premium credits to enrollees, would pay 

a risk adjustment charge that is 

relatively higher than it would have 

been if it were calculated based on a 

statewide average that reflected the 

actual, reduced premium charged to 

enrollees by issuers in the state market 

risk pool. 

Therefore, we believe that requiring 

issuers that offer temporary premium 

credits, when permitted by HHS, to 

accurately report to the EDGE server the 

adjusted, lower premium amounts 

actually charged to enrollees is most 

consistent with existing risk adjustment 

program requirements and mitigates the 

distortions that would occur if issuers 

that offer these temporary premium 

credits did not report the actual 

amounts charged to enrollees, while not 

imposing additional financial burdens 

on issuers, as compared to an approach 

that would permit issuers to report 

unadjusted premium amounts. We 

request comment on this proposal. 

D. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Definitions (§ 155.20) 

a. Definitions of QHP Issuer Direct 

Enrollment Technology Provider and 

Agent or Broker Direct Enrollment 

Technology Provider 

We propose to amend § 155.20 to add 

a definition of QHP issuer direct 

enrollment technology provider, which 

we propose to mean a business entity 

that provides technology services or 

provides access to an information 

technology platform to QHP issuers to 

facilitate participation in direct 

enrollment under §§ 155.221 and 

156.1230. We also propose that this 

definition of QHP issuer direct 

enrollment technology provider 

explicitly acknowledge that a webbroker may also provide services to QHP 

issuers as a QHP issuer direct 

enrollment technology provider to 

clarify that being a web-broker does not 

preclude that entity from providing 

technology services or an information 

technology platform to QHP issuers to 

facilitate QHP issuers’ participation in 

direct enrollment. In addition, we 

propose to modify the current definition 

of direct enrollment technology 

provider in § 155.20 to distinguish it 

from the new proposed definition of 

QHP issuer direct enrollment 

technology provider by renaming the 

term agent or broker direct enrollment 

technology provider. We propose these 

new and modified definitions to capture 

the full array of potential arrangements 

between technology companies and 

entities seeking to use the direct 

enrollment pathways to facilitate 

enrollments in QHPs offered in an FFE 

or SBE–FP in a manner that constitutes 

enrollment in the Exchange. To align 

with these proposed new and modified 

definitions, we further propose to 

modify the definition of web-broker to 

replace the current last sentence, which 

states that the term includes a direct 

enrollment technology provider, to 

instead indicate a web-broker includes 

an agent or broker direct enrollment 

technology provider. 

In the 2020 Payment Notice, we 

amended § 155.20 to define ‘‘direct 

enrollment technology provider’’ to 

mean ‘‘a type of web-broker business 

entity that is not a licensed agent, 

broker, or producer under [s]tate 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.’’ 109 This 

definition captures instances in which 

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, broker, or producer 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, the current framework 

establishes that these technology 

companies are a type of web-broker that 

must comply with applicable webbroker requirements under §§ 155.220 

and 155.221, unless indicated 

otherwise.110

As the FFE direct enrollment program 

has evolved, particularly with the 

introduction and increased utilization of 

the enhanced direct enrollment (EDE) 

pathway, the technical requirements 

and expertise needed to participate in 

direct enrollment have become 

substantially more complex. As a result, 

technology companies are increasingly 

relied upon to develop, host, manage, 

and customize the technical platforms 

that underpin direct enrollment entity 

non-Exchange websites. Technology 

companies have emerged to support the 

participation of QHP issuers in direct 

enrollment, as well as agents, brokers, 

and web-brokers. In the context of EDE, 

some of these technology companies 

build technical platforms prior to 

finalizing contractual relationships with 

agents, brokers, web-brokers, or QHP 

issuers and some of these technology 

companies provide platforms that are 

used to host direct enrollment websites 

for both QHP issuers and agents, 

brokers, or web-brokers. Under the 

current framework, the technology 

company is itself a web-broker and often 

provides direct enrollment services 

under its own branding while also 

wanting to offer its technology platform 

and accompanying services to other 

agents, brokers, web-brokers, or QHP 

issuers to facilitate their respective 

participation in direct enrollment. As 

part of the services it provides as a 

technology company, it may offer 

customized direct enrollment websites 

that leverage its technical platform to 

other entities that allows for additional 

systems or functionality or the use of 

the other entity’s branding. Because the 

current regulatory definition does not 

include a reference to QHP issuers, 

questions have arisen regarding the 

ability and accompanying requirements 

for QHP issuers to engage such entities 

to assist with the development and 

hosting of a non-Exchange website to 

facilitate the QHP issuer’s participation 

in direct enrollment. For these reasons 

we propose to create a new definition of 

QHP issuer direct enrollment 

technology provider and update the 

definitions of direct enrollment 

technology provider and web-broker as 

described above, to clarify that QHP 

issuers can also engage the services of 

these technology companies and better 

align with the evolving business models 

of entities involved in the FFE direct 

enrollment program. We also propose to 

include language in the new definition 

of QHP issuer direct enrollment 

technology provider to clarify that when 

such entities partner with QHP issuers, 

they are downstream or delegated 

entities of the QHP issuer. This is 

similar to the approach adopted in 

§ 155.221(e) for third-party auditors 

hired by QHP issuers or web-brokers to 

perform operational readiness audits. By 

78610 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

111See 84 FR 17563. 

112See also ‘‘Guidance and Population Data for 

Exchange, Qualified Health Plan Issuers, and WebBrokers to Ensure Meaningful Access by LimitedEnglish Proficient Speakers Under 45 CFR 

155.205(c) and § 156.250,’’ March 30, 2016. 

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

Regulations-and-Guidance/Downloads/Languageaccess-guidance.pdf. 

including this language, we intend to 

clarify and ensure that these QHP issuer 

direct enrollment technology providers 

would be subject to HHS oversight as 

the delegated or downstream entity of 

the QHP issuer, and the QHP issuer 

would be responsible for compliance 

with all applicable requirements. This 

approach is also intended to clarify that 

when providing its technology services 

and support, or providing access to an 

information technology platform, to a 

QHP issuer, QHP issuer direct 

enrollment technology providers would 

be subject to the rules applicable to the 

QHP issuer with whom they are 

partnering to the extent they are 

performing activities on behalf of the 

QHP issuer implicating those rules. For 

example, if a QHP issuer direct 

enrollment technology provider is 

assisting with the development of a nonExchange website for a QHP issuer, the 

QHP issuer display requirements 

captured at § 156.1230(a)(1)(ii) would 

apply. 

We seek comment on this proposal. 

b. Definition of Exchanges 

Since 2013, qualified individuals and 

qualified employers have been able to 

purchase QHPs—private health 

insurance that has been certified as 

meeting certain standards—through 

competitive marketplaces called 

Exchanges or Health Insurance 

Marketplaces. 45 CFR 155.20 defines an 

Exchange as a governmental agency or 

non-profit entity that meets the 

applicable standards of part 155 and 

makes QHPs available to qualified 

individuals and/or qualified employers. 

In this proposed rule, the word 

‘‘Exchanges’’ collectively refers to, but is 

not limited to, the following models of 

Exchange: State Exchanges, also called 

State-based Exchanges (SBEs); 

Federally-facilitated Exchanges (FFEs); 

State-based Exchanges on the Federal 

platform (SBE–FPs); and the new 

proposed Direct Enrollment (DE) 

Exchanges (FFE–DEs, SBE–FP–DEs, or 

SBE–DEs). When we refer to ‘‘the 

Exchange(s)’’ and ‘‘an Exchange,’’ we 

are referring to Exchanges established 

and operated by a state (including a 

regional Exchange or subsidiary 

exchange) or by HHS. 

2. Consumer Assistance Tools and 

Programs of an Exchange (§ 155.205) 

To continue our efforts to standardize 

regulatory references to web-brokers, we 

propose to replace all references in 

§ 155.205(c) to ‘‘an agent or broker 

subject to § 155.220(c)(3)(i)’’ with the 

term ‘‘web-broker.’’ In the 2020 Payment 

Notice, we amended § 155.20 to define 

the term ‘‘web-broker’’ 111 to mean an 

individual agent or broker, a group of 

agents or brokers, or an agent or broker 

business entity, that is registered with 

an Exchange under § 155.220(d)(1) and 

develops and hosts a non-Exchange 

website that interfaces with an 

Exchange to assist consumers with the 

selection of and enrollment in QHPs 

offered through the Exchange (a process 

referred to as direct enrollment). We 

also amended §§ 155.220 and 155.221 to 

incorporate the term web-broker as 

newly defined, where applicable. 

However, at the time we overlooked the 

fact that § 155.205(c) also contains 

several of these general references to 

agents and brokers subject to 

§ 155.220(c)(3)(i) that should have been 

updated as part of this earlier effort to 

use the term web-broker as newly 

defined. Such references appear in 

§ 155.205 paragraphs (c)(2)(i)(B), 

(c)(2)(iii)(B), (c)(2)(iv) introductory text, 

and (c)(2)(iv)(C). To avoid confusion 

and correct this oversight, we propose to 

standardize regulatory references to 

web-brokers by replacing all references 

in § 155.205(c) to ‘‘an agent or broker 

subject to § 155.220(c)(3)(i)’’ with the 

term ‘‘web-broker.’’ We seek comment 

on this proposal. 

In addition, we propose to revise a 

requirement related to website content 

translations for QHP issuers and webbrokers participating in the FFE EDE 

program that are subject to 

§§ 155.205(c)(2)(iv)(B) and 

155.205(c)(2)(iv)(C) respectively. 

Currently under §§ 155.205(c)(2)(iv)(B) 

and (C), QHP issuers and web-brokers 

are required to translate website content 

into any non-English language that is 

spoken by a limited English proficient 

(LEP) population that makes up 10 

percent or more of the total population 

of the relevant state. Web-brokers are 

currently required to translate website 

content within one year of registering 

with the Exchange, while QHP issuers 

are currently required to translate 

website content beginning no later than 

the first day of the individual market 

open enrollment period for the 2017 

benefit year. 

In this proposed rule, we propose to 

allow QHP issuers and web-brokers 

participating in the FFE EDE program 

additional time to come into compliance 

with the website content translation 

requirements. Specifically, we propose 

that a QHP issuer or web-broker 

participating in the FFE EDE program 

would have 12 months from the date the 

QHP issuer or web-broker begins 

operating its FFE-approved EDE website 

in the relevant state to comply with 

website content translation 

requirements under 

§§ 155.205(c)(2)(iv)(B) and (C) for 

website content added to their websites 

as a condition of participation in the 

FFE EDE program. We note this 

proposed flexibility would not absolve 

QHP issuers and web-brokers from 

complying with website content 

translation requirements under 

paragraphs (c)(2)(iv)(B) and (C) that is 

unrelated to their participation in the 

FFE EDE program within the applicable 

timeframes.112 For example, a QHP 

issuer’s or web-broker’s implementation 

of the Exchange eligibility application 

on its website for purposes of 

participation in the FFE EDE program 

would be considered content added to 

its website to participate in the FFE EDE 

program and would be afforded the 

additional time for translation into 

applicable languages. However, QHP 

issuer website content that was not 

added to participate in the FFE EDE 

program and that is subject to the 

paragraph (c)(2)(iv)(C) requirements, 

such as Summaries of Benefits and 

Coverage or provider directories, would 

not be afforded additional time for 

translation into applicable languages. 

Similarly, website content related to a 

web-broker’s participation in Classic DE 

that is subject to the paragraph 

(c)(2)(iv)(C) requirements, such as plan 

selection pages displaying QHPs, would 

not be afforded additional time for 

translation into applicable languages 

beyond the one year after the webbroker has been registered with the 

Exchange. 

This proposed change does not alter 

the additional accessibility 

requirements QHP issuers and webbrokers must comply with under 

paragraphs (c)(2)(i), (ii), and (iii). This 

includes oral interpretation services, 

including telephonic interpreter 

services in at least 150 languages, 

written translations, and applicable 

tagline requirements for website content 

and documents critical for obtaining 

health insurance coverage or access to 

health care services through a QHP for 

qualified individuals, applicants, 

qualified employers, qualified 

employees, or enrollees. These 

obligations on QHP issuers and webbrokers would continue to protect 

individuals with LEP and assure that 

these entities are taking the necessary 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78611 

113See 84 FR 17515 through 17521. 

steps to provide meaningful access to 

LEP individuals, as required under title 

VI and the non-discrimination 

provisions contained in section 1557 of 

the PPACA. 

In addition, this proposed revision 

also would not extend to QHP issuers 

and web-brokers approved to participate 

in a state that elects to use a direct 

enrollment option as proposed in 

§ 155.221(j) of this rule. Under this 

proposed rule, QHP issuers and webbrokers that participate in a state that 

elects to implement the direct 

enrollment option as proposed in 

paragraph (j) of this rule would not be 

afforded the flexibility to delay website 

translations as otherwise permitted 

under § 155.205(c)(2)(iv)(C), with or 

without the proposed revisions in this 

rule. Thus, website content that is 

intended for consumers, qualified 

individuals, applicants, or enrollees on 

an enrollment website maintained by a 

web-broker or QHP issuer within a 

relevant state pursuant to new proposed 

§ 155.221(j) must be translated into any 

non-English language that is spoken by 

a LEP population that makes up 10 

percent or more of the total population 

of the relevant state, as soon as the webbroker or QHP issuer begins operating in 

that state. 

We believe that providing QHP 

issuers and web-brokers participating in 

the FFE EDE program with additional 

time to come into compliance with the 

website content translation requirement 

for the website content added to their 

websites to participate in the FFE EDE 

program is warranted given the 

significant resources associated with 

entering a new state market and 

obtaining approval to participate in the 

FFE EDE program generally as well as 

the significant cost of third-party EDE 

audit requirements. Given these 

considerations, we believe that this 

proposed revision will provide an 

incentive for such entities to enter 

markets where there is a significant 

number of LEP individuals, while also 

ensuring that website content is 

accessible for individuals with LEP 

within a reasonable period of time. We 

are of the view that this flexibility will 

enable interested QHP issuers and webbrokers participating in the FFE EDE 

program to test markets before incurring 

significant additional translation costs. 

We are also of the view that this 

proposal would enable smaller QHP 

issuers and web-brokers to compete 

more effectively in state markets. In 

addition, lessening the burden on QHP 

issuers and web-brokers participating in 

the FFE EDE program should encourage 

entities that are interested in entering 

markets with large numbers of LEP 

individuals to focus on enhancing and 

tailoring services to meet the needs of 

consumers, qualified individuals, 

applicants, qualified employers, 

qualified employees, or enrollees. We 

believe this proposed change that would 

provide additional time for such entities 

to come into compliance with website 

content translation requirements will 

allow them more flexibility and time to 

assess the viability of a market prior to 

committing substantial resources to 

completing translations of website 

content added to their websites as a 

condition of participation in the FFE 

EDE program. The proposal could 

thereby ease entry of QHP issuers and 

web-brokers into relevant states, and 

allow costs associated with translation 

services and the related third-party 

audit to be spread out over time. 

We seek comment on whether this 

added flexibility for QHP issuers and 

web-brokers participating in the FFE 

EDE program in relevant states could 

impact accessibility to Exchange 

coverage for LEP communities, or 

otherwise negatively impact the 

operation of and consumer access to 

Exchanges. In addition, we seek 

comment from QHP issuers and webbrokers as to whether this proposed 

change would foster investment in 

states where there is a significant LEP 

community and provide additional 

incentives for such entities to expand 

into relevant states. We would 

particularly like to hear from smaller 

QHP issuers and web-brokers as to 

whether the proposed flexibility 

provides sufficient time to encourage 

entry into states that meet the 10 

percent LEP population threshold. 

Lastly, we seek comment from assisters 

about any impacts this proposed change 

would have on their ability to work with 

web-brokers and use EDE websites as 

proposed in § 155.220(c)(3)(iii) in this 

proposed rule when assisting members 

of the LEP community with Exchange 

enrollment. 

3. Navigator Program Standards 

(§ 155.210) 

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

the PPACA require the Secretary to 

establish a Navigator program under 

which HHS 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 and the availability of APTC and 

CSRs, and 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, in collaboration with states, 

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). Certified Application 

Counselors (CACs) duties have been 

implemented through regulations at 

§ 155.225. 

We propose allowing, but not 

requiring, Navigators and CACs in FFEs 

and SBE–FPs to use web-broker nonExchange websites to assist consumers 

with applying for insurance 

affordability programs and QHP 

enrollment under certain circumstances 

and to the extent permitted by state law. 

For a discussion of the proposal to allow 

Navigators and CACs to use web-broker 

non-Exchange websites to assist 

consumers with applying for insurance 

affordability programs and QHP 

enrollment, please see the preamble to 

§ 155.220. 

4. Ability of States To Permit Agents 

and Brokers To Assist Qualified 

Individuals, Qualified Employers, or 

Qualified Employees Enrolling in QHPs 

(§ 155.220) 

a. Navigator and Certified Application 

Counselor Use of Web-broker Websites 

In the 2020 Payment Notice, we 

proposed, but did not finalize, a 

modification of our policy that prohibits 

Navigators and CACs (together referred 

to here as ‘‘assisters’’) from using webbroker websites to assist with QHP 

selection and enrollment.113 At the 

time, adoption of EDE functionality by 

web-brokers was still limited, and we 

decided to focus on the implementation 

and oversight of the EDE pathway before 

revisiting the current policy regarding 

assister use of web-broker websites. 

Since then, EDE functionality has 

become more user-friendly and 

increasingly more consumers are using 

the EDE pathway to enroll in Exchange 

coverage. Some stakeholders have 

continued to express interest in 

allowing for the use of web-broker nonExchange websites by assisters to 

broaden the range of consumers these 

78612 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

websites serve, to improve the consumer 

shopping and enrollment experience, 

and to leverage assisters’ expertise in 

navigating more complex enrollment 

cases. For these reasons, we are 

revisiting these issues and propose to 

modify the current policy that prohibits 

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 use web-broker non-Exchange 

websites to assist consumers with QHP 

selection and enrollment, provided the 

non-Exchange website meets certain 

conditions. The conditions we propose 

to require for these types of 

arrangements are designed to ensure 

that assisters are able to use web-broker 

non-Exchange websites while still 

meeting their statutory and regulatory 

obligations to provide fair, accurate, and 

impartial information and assistance to 

consumers, and that each web-broker’s 

website captures and transmits assister 

data to the Exchange to facilitate HHS 

oversight of the entities using the EDE 

pathway. To promote state flexibility 

and autonomy, we propose to provide 

states with a State Exchange that does 

not rely on HealthCare.gov the 

discretion to permit their assisters to use 

web-broker non-Exchange websites. 

Alternatively, states with a State 

Exchange may instead choose to 

preserve the prohibition on assister use 

of web-broker websites. 

Direct enrollment is a mechanism for 

approved third parties to assist 

consumers with QHP plan selection and 

enrollment through a non-Exchange 

website in a manner considered to be 

through the Exchange. Web-brokers are 

one of the entities eligible to become a 

direct enrollment entity. There are 

currently two direct enrollment 

pathways available in states with FFEs 

and SBE–FPs—Classic Direct 

Enrollment (Classic DE) and EDE. 

Classic DE is the original version of 

direct enrollment, which utilizes a 

‘double redirect’ from a direct 

enrollment entity’s non-Exchange 

website to HealthCare.gov where the 

eligibility application is submitted and 

an eligibility determination is made by 

the Exchange, and then back to the 

direct enrollment entity’s non-Exchange 

website for QHP shopping and plan 

selection consistent with applicable 

requirements in §§ 155.220(c)(3)(i), 

155.221, 156.265 and/or 156.1230(b). 

EDE is the version of direct enrollment 

which allows consumers to complete all 

steps in the application, eligibility and 

enrollment processes on the direct 

enrollment entity’s non-Exchange 

website consistent with applicable 

requirements in § 155.220(c)(3)(ii), 

155.221, 156.265 and/or 156.1230(b). 

EDE uses application programming 

interfaces (APIs) that are made 

available, owned, and maintained by 

CMS to transfer data between 

HealthCare.gov and the direct 

enrollment entity’s non-Exchange 

website. 

Web-brokers have developed 

innovative tools to support consumers 

shopping for QHP coverage through 

their non-Exchange websites for both 

Classic DE and EDE that assisters and 

the consumers they assist may find 

helpful when shopping for and 

enrolling in QHPs offered through 

Exchanges. In addition, some webbrokers have expressed interest in 

leveraging assisters’ expertise in 

navigating more complex enrollment 

cases to provide additional support to 

the consumers they serve. At the same 

time, assisters have expressed a desire 

to obtain access to an improved 

consumer experience by leveraging 

innovative and unique consumer 

assistance tools and display features 

many web-brokers have developed for 

Classic DE and EDE. Additionally, some 

assisters have expressed a desire to have 

access to real-time information on the 

status of submitted applications and 

enrollments that is available through 

current EDE platform web portals to 

more effectively assist consumers. 

Although we are not proposing to 

require web-brokers to develop such 

web portals, we recognize that some 

web-brokers may consider developing 

web portals to enable assisters, with the 

consent of the consumer, to gain easy 

access to real-time information for each 

of the consumers they assist using a 

web-broker’s non-Exchange website. 

Where a web-broker’s non-Exchange 

website meets applicable requirements, 

we want to encourage this type of 

innovation to improve the experience 

for assisters and the consumers they 

assist with shopping for and enrolling in 

QHPs offered through an Exchange. 

The implementation of EDE by a 

growing number of web-brokers has 

presented consumers with an additional 

method of applying for insurance 

affordability programs and selecting and 

enrolling in QHPs offered through 

Exchanges. We believe this additional 

enrollment pathway option should also 

be available to all FFE and SBE–FP 

assisters who provide application and 

enrollment assistance, when permitted 

under state law, provided there are 

safeguards in place to ensure that the 

information and help the assisters 

provide remains fair, accurate, and 

impartial. While we anticipate assisters 

and web-brokers would be most 

interested in exploring this flexibility 

for EDE, we believe assisters should also 

have 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 through Classic DE. We therefore 

clarify that this proposal, if finalized, 

would permit assisters in FFE and SBE– 

FP states to use a web-broker’s nonExchange website for Classic DE and 

EDE if applicable requirements are met 

and such arrangements are otherwise 

permitted under state law. As noted 

above, under this proposal, states with 

State Exchanges that do not use 

HealthCare.gov would also retain 

discretion to adopt a similar approach 

for assisters to permit the use of nonExchange websites, or these states could 

maintain the current prohibition on the 

use of such websites by assisters. 

We also anticipate that allowing FFE 

and SBE–FP assisters to use web-broker 

non-Exchange websites to enroll 

consumers in QHPs will encourage 

collaboration between assisters and 

web-brokers that will benefit consumers 

by providing them with the most 

appropriate support at each stage of the 

Exchange application, QHP selection, 

and QHP enrollment processes. We 

believe that 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 further believe this proposal 

will 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 

additional options for selection of and 

enrollment in QHPs offered through 

Exchanges that may be available 

through web-broker non-Exchange 

websites, we believe it is necessary to 

put safeguards in place to ensure 

assisters working with consumers using 

these sites continue to comply with the 

statutory and regulatory standards 

governing their role and duties. Sections 

1311(i)(3)(B) and (i)(5) of the PPACA 

and their implementing regulation at 

§ 155.210(e)(2) require Navigators to 

provide fair, accurate, and impartial 

information to consumers in connection 

with their role. A similar requirement 

applies to CACs under § 155.225(c)(1). 

Under § 155.210(d), Navigators are also 

prohibited from being a health 

insurance issuer or issuer of stop loss 

insurance; a subsidiary of a health 

insurance issuer or issuer of stop loss 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78613 

114See 79 FR 30239. 

115 45 CFR 155.220(j)(2)(i) and (l). 116 Id. 117See 45 CFR 155.220(c)(3)(i)(B), (C), and (L) 

(extending these requirements to Classic DE) and 

155.220(c)(3)(ii)(A) (extending these requirements 

to EDE). 

insurance; or an association that 

includes members of, or lobbies on 

behalf of, the insurance industry; or 

receiving any consideration directly or 

indirectly from any health insurance 

issuer or issuer of stop loss insurance in 

connection with the enrollment of any 

qualified individuals or employees in a 

QHP or a non-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. Similarly, CACs are prohibited 

under § 155.225(g)(2) from receiving any 

consideration directly or indirectly from 

any health insurance issuer or issuer of 

stop loss insurance in connection with 

the enrollment of any individuals in a 

QHP or non-QHP, and are required 

under § 155.225(d)(2) to disclose any 

relationships they or their sponsoring 

agencies have with QHPs or insurance 

affordability programs, or other 

potential conflicts of interest. These 

rules help 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 previously interpreted the 

requirement to provide fair, accurate, 

and impartial information to mean that 

assisters are prohibited from using a 

web-broker’s non-Exchange website to 

provide QHP shopping, application, and 

enrollment assistance, unless the 

assister is using it as a reference tool to 

supplement the information available 

on HealthCare.gov.114 This approach 

was adopted due to concerns that webbrokers 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 concluded 

that assisters would be unable to use a 

web-broker website consistent with 

their duty to provide fair, accurate, and 

impartial information. Since then, we 

have expanded the requirements 

applicable to agents and brokers 

(including web-brokers) facilitating 

enrollment of qualified individuals, 

qualified employers, or qualified 

employees in QHPs offered through the 

FFEs and SBE–FPs, including webbrokers that host non-Exchange 

websites. This includes FFE standards 

of conduct that apply to agents, brokers, 

and web-brokers participating in Classic 

DE and EDE, as well as those who use 

the HealthCare.gov website when 

assisting Exchange consumers. For 

example, agents and brokers (including 

web-brokers) must provide consumers 

with correct information, without 

omission of material fact, regarding the 

Exchanges, QHPs offered through the 

FFEs or SBE–FPs, and insurance 

affordability programs.115 In addition, 

agents and brokers (including webbrokers) must refrain from marketing or 

conduct that is misleading (including by 

having a direct enrollment website that 

HHS determines could mislead a 

consumer into believing they are 

visiting HealthCare.gov), coercive, or 

discriminatory.116 Finally, the webbroker’s non-Exchange website must 

provide consumers with the ability to 

view all QHPs offered through the 

Exchange, not provide financial 

incentives such as rebates or giveaways, 

and not display QHP recommendations 

based on compensation the web-broker 

receives from QHP issuers.117 We 

believe that the combination of these 

requirements can be relied upon to 

ensure that assisters are continuing to 

meet 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 the FFEs when using a 

web-broker’s non-Exchange website. 

We are proposing several 

amendments to § 155.220 to capture the 

flexibility for assisters in FFE and SBE– 

FP states to use web-broker nonExchange websites to assist consumers. 

As noted previously in this proposed 

rule, this proposed flexibility would 

extend to both Classic DE and EDE 

options that web-brokers may offer to 

assist consumers in FFE and SBE–FP 

states. First, we propose at paragraph 

(c)(3)(iii)(A) for web-broker 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. We note that webbrokers 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 

API. 

For web-brokers operating in FFE and 

SBE–FP states, we propose an optional 

annual certification process at new 

proposed paragraph (c)(3)(iii)(B) under 

which a web-broker could be certified 

by the Exchange by attesting to its 

compliance with the requirements 

proposed in § 155.220(c)(3)(iii)(A). We 

propose that the optional annual 

certification process would be 

integrated into the existing annual webbroker registration process, or could 

occur during another time of year. We 

propose to maintain a public list of 

approved web-brokers in FFEs or SBE– 

FPs and may add to that list information 

about whether a web-broker is certified, 

so that assisters may more easily 

identify web-broker websites they may 

seek to use in FFE and SBE–FP states, 

when such arrangements are permitted 

under state law. 

The proposed amendments to 

§ 155.220(c)(3)(iii)(A) also provide that 

if a web-broker non-Exchange website 

does not facilitate enrollment in all 

available QHPs in the state, it would be 

required to identify for 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, 

and in a form and manner specified by 

the Exchange. The disclaimer would 

state that the consumer can enroll in 

such QHPs through the Exchangeoperated website, and would display a 

link to the Exchange website. We 

anticipate issuing further guidance on 

the form and manner in which the 

disclaimer should be displayed to 

ensure 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 nonExchange 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. 

With this general framework in mind, 

we encourage web-brokers who elect to 

make their non-Exchange websites 

available to assisters to consider 

developing innovative consumer 

assistance tools that could be used by 

assisters and the consumers they serve, 

including those related to displaying 

QHPs that are based on consumer 

preferences or based on algorithms that 

take into account unique consumer 

characteristics (for example, consumer’s 

age, zip code, or family composition), 

but that are not based on compensation 

78614 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

118See 45 CFR 155.220(c)(3)(i)(L). 

119See Patient Protection and Affordable Care 

Act; Program Integrity: Exchange, SHOP, and 

Eligibility Appeals; Final Rule, 78 FR 54069 at 

54134 (August 30, 2013). 

that the web-broker may receive from 

QHP issuers. Consistent with the 

existing prohibition in 

§ 155.220(c)(3)(i)(L), if a web-broker 

makes its non-Exchange website 

available to assisters, the website may 

not display QHP recommendations 

based on compensation the web-broker 

receives from QHP issuers.118 Under our 

proposal, all of the other requirements 

outlined in §§ 155.220 and 155.221 that 

otherwise apply to web-broker nonExchange websites would continue to 

apply to such websites when used by 

assisters. For example, a web-broker 

non-Exchange website made available to 

assisters would be required to refrain 

from marketing or conduct that is 

misleading (including by having a direct 

enrollment website that HHS 

determines could mislead a consumer 

into believing they are visiting 

HealthCare.gov), coercive, or 

discriminatory. In addition, the webbroker non-Exchange website would 

have to provide correct information, 

without omission of material fact, 

regarding the Exchanges, QHPs offered 

through the FFEs or SBE–FPs, and 

insurance affordability programs. We 

note that the proposed addition of 

§ 155.220(n)(1) described in the 

preamble below that proposes to create 

flexibility for web-broker non-Exchange 

websites to display limited QHP details 

in certain circumstances and subject to 

certain requirements would not extend 

to web-broker non-Exchange websites 

used by assisters, which is why 

proposed § 155.220(c)(3)(iii)(A) begins 

with ‘‘[n]otwithstanding paragraph 

(n)(1) of this section.’’ 

We still believe that, for assisters to be 

permitted to use a web-broker’s nonExchange 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 that would transmit that 

data to the Exchange. For example, the 

web-broker would need to capture and 

transmit assister unique ID numbers to 

HealthCare.gov. This information is 

necessary to facilitate HHS oversight of 

the direct enrollment program and these 

details are collected for agents and 

brokers that use web-broker nonExchange websites. In FFEs and SBE– 

FPs, web-brokers that offer their nonExchange websites for use with Classic 

DE include the redirect to 

HealthCare.gov for consumers to 

complete the eligibility application, and 

the eligibility application on 

HealthCare.gov includes fields to 

capture this information and would 

therefore comply with such a 

requirement. For web-brokers 

participating in FFEs and SBE–FPs that 

offer their non-Exchange website for use 

with EDE, as indicated in operational 

guidance, specifically the EDE User 

Interface Question Companion Guide, 

the eligibility application hosted on the 

web-broker non-Exchange website must 

contain the same fields to capture 

information that are included in the 

application on HealthCare.gov. We do 

not believe a regulatory change is 

needed to capture this requirement, but 

clarify that we would interpret the 

existing requirements for an eligibility 

application hosted on the web-broker’s 

non-Exchange website to capture the 

information included on the 

HealthCare.gov application to mandate 

that web-brokers that offer their nonExchange website for use by assisters 

must have a mechanism to capture 

identifying information about assisters 

assisting consumers with Exchange 

applications or QHP enrollment and 

must transmit such information to the 

Exchange. 

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 qualified individuals 

or qualified employees in a QHP or nonQHP, 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 

web-broker non-Exchange websites in 

FFE and SBE–FP states would continue 

to be prohibited from receiving 

compensation related to the enrollment 

assistance they provide. 

We seek comment on all of these 

proposals. 

b. QHP Information Display on WebBroker Websites 

We propose to provide flexibility to 

web-brokers regarding the information 

they are required to display on their 

non-Exchange websites for QHPs in 

certain circumstances. Currently, 

§ 155.220(c)(3)(i)(A) requires that a webbroker non-Exchange website must 

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). To the extent that not all 

information required under 

§ 155.205(b)(1) is displayed for a QHP, 

a web-broker must 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 link to the Exchange website. 

Section 155.220(c)(i)(D) similarly 

currently requires web-brokers to 

display all QHP data provided by an 

Exchange on its non-Exchange website 

used to participate in the FFE direct 

enrollment program (whether Classic DE 

or EDE). These display requirements 

have evolved over time as the 

Exchanges have matured. For example, 

in the early years of Exchange 

operations, we released a data file with 

limited QHP details (the QHP limited 

file) that provided web-brokers with a 

basic set of QHP data that could be used 

to satisfy the display requirement. In 

adopting this approach, we recognized 

that the Exchange may not have been 

able to provide web-brokers with certain 

data elements necessary to meet the 

§ 155.205(b)(1) requirements, such as 

premium information, due to 

confidentiality requirements, webbroker appointments with QHP issuers, 

and state law. We also recognized some 

of the data elements, such as quality 

rating information, were not going to be 

available in the initial years of the 

Exchanges’ operation.119 Display of 

these data elements from the QHP 

limited file data, in combination with a 

standardized disclaimer (the plan detail 

disclaimer), became the de facto 

minimum required to satisfy the webbroker’s obligation to display QHP 

information on its non-Exchange 

website. 

In new proposed § 155.220(n), we 

propose to establish an exception to the 

web-broker display requirements 

captured at paragraphs (c)(3)(i)(A) and 

(D). We propose to revise paragraph 

(c)(3)(i)(A) to require a web-broker nonExchange website to 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), except as 

permitted under § 155.220(n). We 

propose a similar revision to 

§ 155.220(c)(3)(i)(D). At new proposed 

paragraph (n), we propose certain 

flexibilities regarding display of QHP 

information if a web-broker’s nonExchange website does not support 

enrollment in a QHP, except in cases 

where the web-broker’s website is 

intended to be available for use by 

assisters consistent with proposed 

paragraph (c)(3)(iii)(A). In that case, the 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78615 

120The current plan detail disclaimer states: 

‘‘[Name of Company] isn’t able to display all 

required plan information about this Qualified 

Health Plan at this time. To get more information 

about this Qualified Health Plan, visit the Health 

Insurance Marketplace® website at 

HealthCare.gov.’’ See also Section 5.3.2 of the 

‘‘Federally-Facilitated Exchanges (FFEs) and 

Federally-Facilitated Small Business Health 

Options Program (FF–SHOP) Enrollment Manual.’’ 

Available at https://www.regtap.info/uploads/ 

library/ENR_FFEFFSHOPEnrollmentManual2020_

5CR_090220.pdf. 

121Section 155.205(b)(1) references the following 

comparative QHP information: Premium and costsharing information, the summary of benefits and 

coverage, metal level, results of enrollee satisfaction 

surveys, quality ratings, medical loss ratio 

information, transparency of coverage measures, 

and the provider directory. 

122See 81 FR 94176. 

123See 81 FR 94120. 

124See 81 FR 94152. 

125See 84 FR 17524. 

126See, for example, ‘‘Updated Web-broker Direct 

Enrollment Program Participation Minimum 

Requirements,’’ May 21, 2020. Available at https:// 

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

Continued 

flexibility at new proposed paragraph 

(n) would not be available. A webbroker’s non-Exchange website may not 

support enrollment in a QHP if the webbroker does not have an appointment 

with a QHP issuer and therefore is not 

permitted under state law to enroll 

consumers in the coverage offered by 

that QHP issuer. In such circumstances, 

we propose that the web-broker’s nonExchange website would not be required 

to provide all the information identified 

under § 155.205(b)(1). Instead, webbrokers would be required to display the 

following limited, minimum 

information for such QHPs: Issuer 

marketing name, plan marketing name, 

plan type, metal level, and premium 

and cost-sharing information. To take 

advantage of this new proposed 

flexibility, we also propose that the 

web-broker’s non-Exchange website 

would be required to identify to 

consumers the QHPs, if any, for which 

the web-broker’s website does not 

facilitate enrollment by prominently 

displaying the plan detail disclaimer 

provided by the Exchange. The plan 

detail disclaimer explains that the 

consumer can get more information 

about such QHPs on the Exchange 

website, and includes a link to the 

Exchange website. We believe this 

proposal strikes an appropriate balance 

by recognizing that web-brokers may not 

be permitted to assist with enrollments 

in QHPs for which they do not have an 

appointment while still providing key 

information about all QHPs on webbroker non-Exchange websites to allow 

consumers to window shop and identify 

whether they may want to explore other 

QHP options. It also would minimize 

burdens for web-brokers by not 

requiring them to build functionality 

and processes to display all of the 

required comparative information listed 

in § 155.205(b)(1) for those QHPs for 

which they do not have an appointment 

to sell. 

To more closely align the plan detail 

disclaimer text 120 with the intent of this 

proposal, we plan to issue further 

guidance revising the text of the 

disclaimer so that it can be clearly 

associated with any QHPs for which the 

web-broker website does not facilitate 

enrollment. For example, the current 

disclaimer text states, in relevant part, 

the web-broker ‘‘isn’t able to display all 

required plan information about this 

Qualified Health Plan at this time.’’ We 

are considering modifying this text so 

that it states, in relevant part, the webbroker ‘‘doesn’t display all plan 

information about, and doesn’t facilitate 

enrollment in, this Qualified Health 

Plan at this time.’’ 

We invite comments on the proposed 

required limited, minimum QHP details 

that must be displayed for those QHPs 

that the web-broker does not facilitate 

enrollment in through its non-Exchange 

website and the proposed edits to the 

plan detail disclaimer text. We also seek 

comment on whether to require display 

of any additional elements identified 

under § 155.205(b)(1) among the 

limited, minimum information, such as 

summaries of benefits and coverage.121

c. Web-Broker Operational Readiness 

Review Requirements 

We propose amendments to further 

clarify the operational readiness 

requirements applicable to web-brokers 

by adding a new proposed 

§ 155.220(c)(6). In the 2018 Payment 

Notice final rule, we adopted rules to 

require web-brokers to demonstrate 

operational readiness, including 

compliance with applicable privacy and 

security requirements, prior to 

participating in the FFE direct 

enrollment program.122 Our intent in 

codifying this requirement was to build 

on the onboarding and testing processes 

for a web-broker to be approved to use 

the direct enrollment pathways. We 

noted the expectation that additional 

operational readiness requirements 

would be established specific to EDE to 

account for the additional functionality 

associated with that pathway.123 At the 

same time, we established similar 

requirements for QHP issuers to 

demonstrate operational readiness and 

compliance with applicable 

requirements prior to their use of the 

direct enrollment pathway.124 In the 

2020 Payment Notice, we consolidated 

these similar requirements from their 

prior locations at §§ 155.220(c)(3)(i)(K) 

and 156.1230(b)(2) into § 155.221(b)(4) 

as part of our effort to streamline 

requirements applicable to all direct 

enrollment entities.125 In this rule, we 

propose to create a new proposed 

§ 155.220(c)(6) to capture operational 

readiness requirements applicable to 

web-brokers that host non-Exchange 

websites to complete QHP selection or 

the Exchange eligibility application. In 

proposed paragraph (c)(6), we propose 

to include introductory language that 

reflects the requirement for a webbroker to demonstrate operational 

readiness and compliance with 

applicable requirements prior to the 

web-broker’s non-Exchange website 

being used to complete an Exchange 

eligibility application or a QHP 

selection, which may include 

submission or completion, in a form and 

manner specified by HHS, of certain 

information or testing processes. As 

reflected in proposed paragraphs 

(c)(6)(i) through (v), HHS may request a 

web-broker submit a number of artifacts 

or documents or complete certain 

testing processes to demonstrate the 

operational readiness of its nonExchange website. The required 

documentation may include operational 

data including licensure information, 

points of contact, and third-party 

relationships; security and privacy 

assessment documentation, including 

penetration testing results, security and 

privacy assessment reports, 

vulnerability scan results, plans of 

action and milestones, and system 

security and privacy plans; and an 

agreement between the web-broker and 

HHS documenting the requirements for 

participating in the applicable direct 

enrollment program. The required 

testing processes may include 

enrollment testing, prior to approval or 

at the time of renewal, and website 

reviews performed by HHS to evaluate 

prospective web-brokers’ compliance 

with applicable website display 

requirements prior to approval. To 

facilitate testing, prospective and 

approved web-brokers will have to 

maintain and provide access to testing 

environments that reflect their 

prospective or actual production 

environments. We are proposing these 

amendments to codify in regulation 

existing program requirements that 

apply to web-brokers that participate in 

the FFE direct enrollment program and 

are captured in the agreements executed 

with participating web-broker direct 

enrollment entities and related technical 

guidance.126 We are not proposing to 

78616 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

Health-Insurance-Marketplaces/Downloads/2020- 

WB-Program-Guidance-052120-Final.pdf. 

127As detailed in prior rulemaking, with some 

limited exceptions, stand-alone dental plans 

certified for sale on an Exchange are considered a 

type of QHP. See 77 FR 18315. CMS expects direct 

enrollment entities to follow the same requirements 

for stand-alone dental plan QHPs as for medical 

QHPs, including the applicable display and 

marketing requirements captured in §§ 155.220, 

155.221 and 156.1230, except as proposed at new 

§ 155.221(c)(2) in the context of off-Exchange standalone dental plan shopping. 

128See 84 FR 17523 and 17524. 

129See 84 FR 17523. 

130 Id. 

131 Id. 

132 Id. 

133See, for example, 45 CFR 155.220(j)(2)(i) and 

156.1230(a)(1)(iii). 

extend the same requirements to QHP 

issuers participating in the FFE direct 

enrollment program, because QHP 

issuers, as HIPAA-covered entities, are 

subject to longstanding federal 

requirements and oversight related to 

the protection of PII and PHI that are not 

necessarily applicable to web-brokers. 

With HIPAA privacy and security 

regulations and oversight in place and 

applicable to QHP issuers, HHS has 

adopted a risk acceptance approach for 

QHP issuers allowing them to 

participate in the FFE direct enrollment 

program, in some cases, without 

imposing certain requirements that are 

in place for web-brokers. In addition, 

QHP issuers are subject to more 

extensive oversight by state regulators 

than web-brokers. 

We seek comment on this proposal. 

5. Standards for Direct Enrollment 

Entities and for Third Parties To 

Perform Audits of Direct Enrollment 

Entities (§ 155.221) 

a. Direct Enrollment Entity Plan Display 

Requirements 

We propose to revise § 155.221(b)(1) 

to clarify the requirements that apply 

when direct enrollment entities want to 

display and market QHPs 127 and nonQHPs. We propose that in such 

circumstances, the web-broker or QHP 

issuer must display and market QHPs 

offered through the Exchange, 

individual health insurance coverage as 

defined in § 144.103 offered outside the 

Exchange (including QHPs and nonQHPs other than excepted benefits), and 

all other products, such as excepted 

benefits, on at least three separate 

website pages, with certain proposed 

exceptions described below. 

In the 2020 Payment Notice, we 

amended § 155.221(b)(1) to require 

direct enrollment entities to display and 

market QHPs and non-QHPs on separate 

website pages on their respective nonExchange websites.128 We explained 

that this proposal was intended to 

balance the goals of minimizing 

consumer confusion about distinct 

products with substantially different 

characteristics, and providing direct 

enrollment entities marketing flexibility 

and opportunities for innovation.129

Similarly, we amended paragraph (b)(3) 

to require direct enrollment entities to 

limit the marketing of non-QHPs during 

the Exchange eligibility application and 

QHP selection process in a manner that 

will minimize the likelihood that 

consumers will be confused as to what 

products are available through the 

Exchange and what products are not.130

Under the existing display standards 

captured at paragraphs (b)(1) and (3), 

direct enrollment entities are required to 

offer an Exchange eligibility application 

and QHP selection process that is free 

from advertisements or information 

about non-QHPs and sponsored links 

promoting health insurance related 

products. However, under the current 

framework, it is permissible for a direct 

enrollment entity to market or display 

non-QHP health plans and other offExchange products in a section of the 

entity’s website that is separate from the 

QHP web pages if the entity otherwise 

complies with the applicable 

requirements. We explained in the 2020 

Payment Notice that 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.131 We acknowledged at that 

time that we may need to update these 

standards 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 noted our belief 

that the convenience of being able to 

purchase additional products as part of 

a single shopping experience outweighs 

potential consumer confusion, if proper 

safeguards are in place.132

We propose to amend paragraph (b)(1) 

to refine the previously adopted policy, 

consistent with the original intent of 

minimizing consumer confusion about 

distinct products with substantially 

different characteristics, while 

providing direct enrollment entities 

with more marketing flexibility and 

opportunities for innovation. QHPs are 

required to be offered on- and offExchange under the guaranteed 

availability requirements at § 147.104. 

The current framework allows for direct 

enrollment entities to display on- and 

off-Exchange QHPs on the same website 

pages, as long as the direct enrollment 

entity’s website makes clear that APTC 

and CSRs are only available for QHPs 

offered through the Exchange.133 We 

have observed various attempts by 

direct enrollment entities to distinguish 

between on- and off-Exchange QHPs 

displayed on the same website pages, 

but believe that even good faith efforts 

to inform consumers about this 

distinction have the potential to cause 

confusion about which QHP a consumer 

should select if APTC-eligible when two 

instances of otherwise identical plans 

(that is, the on- and off-Exchange 

versions of the QHP) are displayed on 

a single website page, but only one is 

available with APTC. In addition, 

paragraph (b)(1) currently prohibits the 

display of off-Exchange QHPs on the 

same website pages as comparable nonQHP individual health insurance 

coverage. This creates a segmented offExchange plan shopping experience on 

direct enrollment entity websites that 

does not allow consumers to easily 

comparison shop among comparable 

major medical health insurance 

products. As described further below, 

the recent introduction of individual 

coverage HRAs increases the importance 

of individual health insurance coverage 

offered outside of the Exchange for 

employees whose employers offer such 

arrangements and also offer the 

opportunity to make salary reduction 

contributions through a cafeteria plan 

under section 125 of the Code, and this 

is part of the reason we are considering 

amending the current display 

requirements for direct enrollment 

entities. 

We propose to revise § 155.221(b)(1) 

to require that direct enrollment entities 

display and market QHPs offered 

through the Exchange, individual health 

insurance coverage as defined in 

§ 144.103 offered outside the Exchange 

(including QHPs and non-QHPs other 

than excepted benefits), and all other 

products, such as excepted benefits, on 

at least three separate website pages, 

with certain exceptions. Requiring that 

these three categories of products be 

displayed and marketed on separate 

website pages provides a more precise 

delineation between the three categories 

of products with substantially different 

characteristics, either in the way they 

can be purchased or the types of 

benefits they offer, while still allowing 

substantial flexibility in website design 

to facilitate the consumer’s shopping 

experience. We propose the first 

product category, QHPs offered through 

the Exchange, must be isolated from the 

other categories of products to 

distinguish for consumers the products 

for which APTC and CSRs are available 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78617 

134See Health Reimbursement Arrangements and 

Other Account-Based Group Health Plans; Final 

rule, 84 FR 28888 (June 20, 2019). 

(if eligible). We propose the second 

product category, individual health 

insurance coverage offered outside the 

Exchange (including QHPs and nonQHPs other than excepted benefits), 

must be similarly distinguished from 

other products, because those plans 

represent major medical coverage that is 

subject to the same PPACA market-wide 

requirements as QHPs offered through 

the Exchange, but that is not available 

with APTC and CSRs. Therefore, 

distinguishing between these two 

categories of products by requiring that 

they be displayed and marketed on 

separate website pages will allow 

consumers to more easily shop for 

comparable major medical insurance 

subject to PPACA market-wide rules 

while maintaining the clear distinction 

between plans for which APTC and 

CSRs are and are not available. We 

propose that the third product category, 

which encompasses types of products 

not in the first two categories, including 

excepted benefits, must be displayed 

and marketed on one or more website 

pages separate from the website pages 

used for displaying and marketing the 

first two categories of products to assist 

consumers in distinguishing them from 

major medical plans. The range of 

products in the third category are not 

subject to PPACA market-wide rules 

and APTC and CSRs are not available 

with such products, and therefore they 

are substantially different from the 

plans that fall into the first two 

categories. 

We also propose to amend 

§ 155.221(b)(3) to include clarifying 

edits and to include the same 

exceptions detailed below as we are 

proposing for paragraph (b)(1). We 

propose to revise paragraph (b)(3) to 

limit marketing of non-QHPs during the 

Exchange eligibility application and 

QHP selection process in a manner that 

minimizes the likelihood that 

consumers will be confused as to which 

products and plans are available 

through the Exchange and which 

products and plans are not, except as 

permitted under new proposed 

paragraph (c)(1). This proposal removes 

a redundant reference to ‘‘plan’’ that 

was included after ‘‘QHP,’’ and adds 

references to ‘‘plans’’ after the 

references to ‘‘products’’ to use 

consistent language throughout 

paragraphs (b)(1) and (3). We are 

proposing the same exceptions for 

paragraph (b)(3) to align with the 

proposed changes to paragraph (b)(1) to 

clarify that displaying QHPs and nonQHPs on the same website page, as 

would be permitted under the proposed 

exceptions in certain circumstances, 

would not constitute a violation of 

paragraphs (b)(1) or (3). 

We propose certain exceptions in new 

§ 155.221(c) to the proposed updates to 

paragraphs (b)(1) and (3), because we 

recognize that, in some limited 

scenarios, consumers may be best 

served by being able to directly and 

easily compare plans offered on- and 

off-Exchange. As of January 1, 2020, 

employers may offer employees an 

individual coverage HRA (health 

reimbursement arrangement) instead of 

offering traditional group health 

coverage.134 An individual coverage 

HRA may reimburse employees for 

medical expenses, including monthly 

health insurance premiums. To use the 

individual coverage HRA, an employee 

(and any eligible household members) 

must enroll in individual health 

insurance coverage, other than excepted 

benefits, or Medicare parts A and B or 

C. To satisfy this requirement, 

employees (and any eligible household 

members) can enroll in individual 

health insurance coverage through the 

Exchange or outside the Exchange. An 

employee and any household members 

offered an individual coverage HRA will 

be ineligible for APTC if the individual 

coverage HRA is affordable or if the 

employee and household members 

accept the individual coverage HRA 

even if it is unaffordable. If an employee 

and any household members offered an 

individual coverage HRA that is 

unaffordable decline the individual 

coverage HRA benefit, they may qualify 

for APTC (if otherwise eligible) if they 

enroll in a QHP through the Exchange. 

Some employees who are offered an 

individual coverage HRA may also be 

eligible, through a cafeteria plan under 

section 125 of the Code, to pay a portion 

of their health insurance premiums 

through tax-preferred salary reduction 

contributions. This type of cafeteria 

plan benefit may only be used in 

combination with off-Exchange 

individual health insurance coverage. 

Employers have flexibility to offer an 

employee both the individual coverage 

HRA and the cafeteria plan benefit 

instead of providing traditional taxpreferred group health coverage. 

However, employers may not offer 

employees a choice of an individual 

coverage HRA or traditional group 

health coverage. 

Consumers shopping and enrolling in 

coverage through direct enrollment 

entity websites may therefore wish to 

see and consider additional non-QHP 

individual health insurance coverage 

(other than excepted benefits) options 

that are only available off-Exchange. We 

also believe consumers may find it 

difficult to determine their best option, 

especially when they are part of a tax 

household with members that may have 

varying eligibility for APTC, CSRs, 

Medicaid, CHIP, individual coverage 

HRAs, and cafeteria plans. For this 

reason, we propose to provide an 

exception to the new proposed display 

standards in § 155.221(b)(1) and (b)(3) to 

support the development of innovative 

and consumer-friendly plan comparison 

tools by direct enrollment entities to 

assist consumers in making the best 

choices for themselves and their 

families in these complex situations. 

In proposed new paragraph (c)(1), we 

propose to allow direct enrollment 

entities to display and market QHPs 

offered through the Exchange and 

individual health insurance coverage 

offered outside the Exchange (including 

QHPs and non-QHPs other than 

excepted benefits) on the same website 

pages when assisting individuals who 

have communicated, within the website 

user interface or by communicating to 

an agent or broker assisting them, they 

have received an offer of an individual 

coverage HRA, as a standalone benefit 

or in addition to an offer of an 

arrangement under which the 

individual may pay the portion of the 

premium for individual health 

insurance coverage that is not covered 

by an individual coverage HRA using a 

salary reduction arrangement under a 

cafeteria plan, so long as certain 

conditions are met. As reflected in the 

new proposed § 155.221(c)(1), the 

conditions we propose to adopt include 

clearly distinguishing between the 

QHPs offered through the Exchange and 

the individual health insurance 

coverage offered outside the Exchange 

(including QHPs and non-QHPs other 

than excepted benefits), and 

prominently communicating that APTC 

and CSRs are available only for QHPs 

purchased through the Exchange, that 

APTC is not available to an individual 

who accepts an offer of an individual 

coverage HRA or who opts out of an 

affordable individual coverage HRA, 

and that a salary reduction arrangement 

under a cafeteria plan may only be used 

toward the cost of premiums for plans 

purchased outside the Exchange. 

In addition, we wish to reduce 

incentives that may lead to routing 

consumer households to off-Exchange 

plan shopping experiences based on 

overly simplistic factors such as a single 

member of a multi-member household 

having an individual coverage HRA and 

a cafeteria plan offer. Instead we seek to 

encourage direct enrollment entities to 

78618 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

135See 45 CFR 155.220(j)(2)(i), applicable to webbrokers, and 156.1230(b)(2), applicable to QHP 

issuers participating in direct enrollment. Also see 

‘‘Guidance Regarding website Display for Direct 

Enrollment (DE) Entities Assisting Consumers in 

States with Federally-facilitated Exchanges (FFEs) 

and State-based Exchanges on the Federal Platform 

(SBE–FPs).’’ Available at https://www.cms.gov/ 

CCIIO/Programs-and-Initiatives/Health-InsuranceMarketplaces/Downloads/DE-Entity-Standards-ofConduct-website-Display.pdf. 

develop blended plan selection user 

interfaces that incorporate on- and offExchange plan options when assisting 

consumers who have communicated 

receipt of an offer of an individual 

coverage HRA while incorporating the 

proposed conditions that are designed 

to minimize the chance for consumer 

confusion about the differences between 

the different coverage options. For 

example, a direct enrollment entity 

exercising the flexibility under the 

proposed exception in § 155.221(c)(1) 

could clearly distinguish between onand off-Exchange plan options by using 

frames, columns, different color 

schemes, prominent headings, icons, 

help text, and other visual aids to 

increase the chance that consumers are 

aware of the distinctions between the 

plan options. We emphasize the 

proposal’s intent is for distinguishing 

and clarifying user interface elements to 

be clear, prominent, and difficult to 

ignore, and therefore the use of an 

obscure disclaimer in small text at the 

bottom of the page or behind a link 

would not be sufficient, for example. 

We note that in addition to the 

safeguards proposed in this rule, direct 

enrollment entities in the FFEs are 

subject to standards of conduct that 

require they provide consumers with 

correct information, without omission of 

material fact, regarding QHPs and 

insurance affordability programs, and 

refrain from marketing or conduct that 

is misleading.135 We solicit comment on 

these proposals, as well as comments on 

alternative approaches through which 

direct enrollment entities may assist 

consumers with individual coverage 

enrollment when they have an offer of 

an individual coverage HRA. 

We propose an additional exception 

to § 155.221(b)(1) at proposed paragraph 

(c)(2) to allow direct enrollment entities 

to display and market stand-alone 

dental plans certified by an Exchange 

but offered outside the Exchange and 

non-certified stand-alone dental plans 

on the same off-Exchange dental plan 

shopping website pages. Stand-alone 

dental plans certified by an Exchange 

and non-certified stand-alone dental 

plans should be largely comparable 

products among which consumers 

looking for dental coverage off-Exchange 

may wish to comparison shop. Since the 

proposed change at paragraph (b)(1) to 

allow display of all individual health 

insurance coverage offered outside the 

Exchange on the same website pages 

(including QHPs and non-QHPs other 

than excepted benefits) excludes standalone dental plans (since stand-alone 

dental plans are excepted benefits), we 

propose this additional exception to 

allow direct enrollment entities to 

provide a consumer-friendly offExchange stand-alone dental plan 

shopping experience where consumers 

can compare the full range of standalone dental plans on a single website 

page. 

We propose conforming amendments 

to redesignate paragraphs (c) through (h) 

in § 155.221 as paragraphs (d) through 

(i) and related updates to internal cross 

references. As detailed below, we also 

propose certain amendments to the 

direct enrollment entity operational 

readiness review requirements in 

§ 155.221(b)(4). 

We request comment on these 

proposals. 

b. Direct Enrollment Entity Operational 

Readiness Review Requirements 

We propose to revise § 155.221(b)(4) 

to add additional detail on the 

operational readiness requirements for 

direct enrollment entities. Similar to the 

proposed web-broker operational 

readiness requirement at new proposed 

§ 155.220(c)(6), we are proposing these 

amendments to codify in § 155.221(b)(4) 

more details about the existing program 

requirements that apply to direct 

enrollment entities and are captured in 

the agreements executed with 

participating web-broker and QHP 

issuer direct enrollment entities. We 

note that these proposed requirements 

are in addition to the operational 

readiness requirements for web-brokers 

at new proposed § 155.220(c)(6), 

although web-brokers may not be 

required to submit the documentation 

required under this proposal to revise 

§ 155.221(b)(4) or they may be permitted 

to use the same documentation to satisfy 

the requirements of both operational 

readiness reviews depending on the 

specific circumstances of their 

participation in the direct enrollment 

program and the source and type of 

documentation. For example, a webbroker seeking to participate only in the 

Classic DE program would only be 

required to meet the operational 

readiness requirements at new proposed 

§ 155.220(c)(6), whereas a web-broker 

seeking to participate in the EDE 

program may be permitted to use its 

third-party security and privacy audit 

documentation for EDE to satisfy the 

security and privacy audit 

documentation requirements of 

§§ 155.220(c)(6) and 155.221(b)(4) 

assuming the Classic DE and EDE 

systems and functionality were hosted 

in the same environments subject to the 

third-party audit. 

In paragraph (b)(4), we propose to 

continue to require a direct enrollment 

entity to demonstrate operational 

readiness and compliance with 

applicable requirements prior to the 

direct enrollment entity’s website being 

used to complete an Exchange eligibility 

application or a QHP selection. We add 

new proposed paragraphs (b)(4)(i) 

through (v) to reflect that direct 

enrollment entities may need to submit 

or complete, in the form and manner 

specified by HHS, a number of artifacts, 

documentation, or various testing or 

training processes. The documentation 

may include business audit 

documentation, including: Notices of 

intent to participate including auditor 

information; documentation packages 

including privacy questionnaires, 

privacy policy statements, and terms of 

service; and business audit reports 

including testing results. The required 

documentation may also include 

security and privacy audit 

documentation including: 

Interconnection security agreements; 

security and privacy controls 

assessment test plans; security and 

privacy assessment reports; plans of 

action and milestones; privacy impact 

assessments; system security and 

privacy plans; incident response plans; 

and vulnerability scan results. 

Submission of agreements between the 

direct enrollment entity and HHS 

documenting the requirements for 

participating in the applicable direct 

enrollment program may also be 

required. Required testing may include 

eligibility application audits performed 

by HHS. The direct enrollment entity 

may also be required to complete online 

training modules developed by HHS 

related to the requirements to 

participate in the direct enrollment 

program. 

We request comment on this proposal. 

c. FFE, SBE–FP, and State Exchange 

Direct Enrollment Options 

While CMS has taken a number of 

actions to reduce the burden on states 

in establishing State Exchanges, CMS 

wishes to maximize flexibility for all 

states to oversee their own healthcare 

markets and to address unique market 

dynamics in each state. As explained in 

the Exchange Establishment Rule, we 

recognize that states are best equipped 

to adapt the minimum Exchange 

functions to their local markets and the 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78619 

136See, for example, 77 FR at 18313. 

137See, for example, 45 CFR 155.220(c)(3)(i)(A) 

(for web-brokers) and 156.1230(a)(1)(ii) (for QHP 

issuers). 138As detailed above there is a growing cohort of 

consumers who may be interested in off-Exchange 

coverage options. 

unique needs of their residents.136 In 

addition, CMS recognizes that for 

decades, issuers, licensed agents and 

brokers, and web brokers have been 

engaging directly with consumers in 

offering health insurance and assisting 

consumers in selecting, enrolling in, 

and managing their coverage. In light of 

the success of the FFEs’ classic direct 

enrollment and EDE pathways, which 

permit approved issuers and web 

brokers to facilitate enrollment in QHPs 

offered through the FFEs and SBE–FPs 

using non-Exchange websites, CMS is 

proposing to provide additional options 

for states that wish to promote more 

flexible and lower cost private-sector 

approaches for assisting consumers with 

shopping and enrolling in QHP coverage 

offered through Exchanges. We believe 

that this proposal also would allow 

states to continue to more effectively 

exercise their traditional oversight 

authority over health insurance markets, 

while enhancing the consumer 

experience, increasing competition, and 

lowering costs. 

To date, Exchange application and 

enrollment activities have been 

supported through Exchange-operated 

websites. One of the primary advantages 

of this design is that consumers can 

access one-stop shopping for all QHPs 

offered through an Exchange and can 

access relevant details on such plans in 

a standardized format. Before Exchanges 

existed, consumers shopping for 

individual market health insurance who 

tried to search for this information 

would have to contact multiple issuers 

or visit multiple websites, and the 

information would often be presented 

inconsistently, preventing true applesto-apples comparison shopping. 

Exchange-run application and 

enrollment websites also help to manage 

churn between private health insurance 

coverage and public programs such as 

Medicaid and CHIP by offering 

connections to those public programs 

for individuals who may qualify for 

participation. 

While Exchange-operated application 

and enrollment websites have 

undoubtedly helped many consumers 

shop for and compare plans, they also 

present some significant potential 

disadvantages given historical and 

current implementation. First, it can be 

costly and burdensome to create and 

operate Exchanges, including not only 

the cost of designing and maintaining a 

complex website, but also the burden of 

staffing and operation of call centers 

that must be scaled up during each 

annual Open Enrollment Period (OEP), 

and then scaled down during lowertraffic periods. Second, the design of 

Exchange-operated websites also tends 

to result in choke points when a large 

number of consumers use the same 

website at the same time to shop for and 

enroll in coverage. For example, on high 

traffic days near the end of the annual 

OEP, some consumers trying to access 

HealthCare.gov have been redirected to 

the FFE call center or told to come back 

to the website at a later time to complete 

their enrollment due to volume, 

resulting in missed enrollment 

opportunities for some consumers. We 

have experienced issues with consumer 

facing (front-end) functions inhibiting 

consumer access to enrollment on 

HealthCare.gov while consumers are 

still able to shop for coverage through 

EDE and DE partners that rely on federal 

supporting functions (back-end), such as 

the processing of data matching and 

special enrollment period verification 

documentation, casework, and 

eligibility appeals. Although we 

recognize that without robust 

competition among EDE and DE 

partners, an EDE or DE partner’s website 

may experience similar choke points 

due to high consumer traffic, state’s 

flexibility to partner with more than one 

DE or EDE entity mitigates this risk. 

Third, we believe it is inherently 

difficult for Exchanges to keep up with 

the rapid pace of innovation in ecommerce and the ever-evolving 

preferences of online shoppers, who are 

accustomed to shopping for the 

products they buy in a manner that is 

not only tailored to their specific needs, 

but is also aesthetically appealing and 

constantly refreshed. Federal 

contracting rules, for example, may 

limit the government’s ability to 

frequently refresh and update the 

consumer experience. Finally, we have 

heard criticisms from some stakeholders 

that the Exchange-operated application 

and enrollment website model competes 

directly with and may crowd out market 

players such as web brokers, licensed 

agents and brokers, and issuers, 

dampening commercial investments in 

outreach and marketing by these market 

players to reach new consumers. 

We believe that both the FFE’s classic 

direct enrollment and EDE pathways 

have promoted innovation and 

competition in states using the 

HealthCare.gov platform and have 

ultimately lead to better experiences for 

consumers in these states. Direct 

enrollment, which has been in operation 

since the launch of the Exchange in 

2013, and enhanced direct enrollment, 

which has been in operation since 2018, 

together are responsible for one-third of 

FFE enrollments. Today, the 

Healthcare.gov application and 

enrollment website and approved 

private sector non-Exchange websites 

operate side-by-side to enroll consumers 

in individual market QHPs offered 

through the FFEs and SBE–FPs. Like 

Exchange-operated websites, nonExchange websites operated by direct 

enrollment partners in these states are 

required to provide standardized 

comparative information to assist 

consumers shopping for coverage.137

Unlike FFE and SBE–FP application and 

enrollment websites, private sector 

entities, including those who participate 

in the FFE’s classic and EDE pathways, 

are also able to provide assistance with 

a broader array of plan options, 

including both on- and off-Exchange 

plan options and ancillary products. 

This is an important feature for many 

consumers who do not qualify for PTCs 

due to their income, employees with an 

offer of an affordable individual 

coverage HRA, as well as employees 

offered both an individual coverage 

HRA and a cafeteria plan because the 

Code specifically prohibits using salary 

reduction contributions under a 

cafeteria plan to purchase on-Exchange 

coverage.138 Finally, the FFE’s EDE 

pathway helps to reduce costs to the 

federal government by enrolling many 

consumers without touching the FFEs’ 

application intake and enrollment 

resources (for example, the Marketplace 

call center and the HealthCare.gov 

website). 

To build on the success of the FFE’s 

classic direct enrollment and EDE 

pathways for FFE and SBE–FP states 

that use HealthCare.gov, and to offer 

additional flexibility to all states, we are 

proposing a new opportunity for states 

to adapt the minimum Exchange 

functions to their local markets and 

leverage the benefits of direct 

enrollment to enhance the consumer 

experience through a private sectorfocused consumer engagement and 

enrollment strategy. We propose to add 

§ 155.221(j) to establish a process for 

states to elect a new Exchange Direct 

Enrollment (DE) option in which a state 

can request to allow private sector 

entities (including QHP issuers, webbrokers, agents and brokers) to operate 

enrollment pathways through which 

consumers can apply, receive an 

eligibility determination from the 

Exchange, and purchase an individual 

market QHP offered through the 

Exchange with APTC and CSRs, if 

otherwise eligible. 

78620 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

139Section 155.221(a) identifies QHP issuers and 

web-brokers as eligible direct enrollment entities. 

140Section 1401(a) of the PPACA added new 

section 36B to the Code, which provides for PTCs 

for eligible individuals, while section 1402 of the 

PPACA provides for CSRs for eligible individuals. 

For individuals to be eligible to receive PTCs, 

among other requirements, the PPACA requires that 

individuals be enrolled in a QHP through an 

Exchange. CMS has interpreted this statutory 

language to allow a QHP issuer to enroll an 

applicant who initiates enrollment directly with the 

QHP issuer. See § 156.1230, whereby individuals 

enrolling directly on the site of a QHP issuer are 

considered enrolled ‘‘through an Exchange’’ so long 

as the issuer meets applicable requirements. We 

adopted a similar approach to allow a web broker 

to enroll an applicant who seeks to enroll through 

the web broker’s website. See § 155.220(a)(2) and 

(c), whereby individuals enrolling directly through 

the site of a web broker are considered enrolled 

‘‘through an Exchange’’ so long as the web broker 

meets applicable requirements. 

141As detailed further below, states with an SBE– 

FP can request to pursue the DE option as an SBE– 

FP–DE. If a state that currently operates an SBE–FP 

is interested in transitioning to a full State 

Exchange that implements this DE option, it would 

need to update its Blueprint accordingly, and meet 

statutory and regulatory requirements to become a 

State Exchange implementing the DE option (an 

SBE–DE). Such requirements include operating its 

own eligibility and enrollment platform rather than 

relying on the federal platform. 

142Section 1311(d)(4)(F) requires Exchanges to 

inform individuals of eligibility requirements for 

Medicaid, CHIP, or any applicable State or local 

public programs and, if through screening of the 

application the Exchange determines such 

individuals are eligible for any such program and 

refer such individuals to the appropriate state 

Medicaid agency for enrollment in such program(s). 

143See 45 CFR 155.205(b). 

144See section 1311(d)(5)(D) of the PPACA and 45 

CFR 155.205(b). Also see sections 1311(c)(3) and 

(c)(4) of the PPACA and 45 CFR 155.1400 and 1405. 

As outlined in proposed § 155.221(j), 

subject to HHS approval, a state may 

elect for its Exchange to engage one or 

more entities described in paragraph 

(a) 139 to facilitate QHP enrollments 

through the Exchange. Under this 

option, similar to the current FFE direct 

enrollment program, the approved 

direct enrollment entities would enroll 

qualified individuals in a QHP in a 

manner that constitutes enrollment 

through the Exchange 140 and would 

also assist individuals in applying for 

and receiving eligibility determinations 

from the Exchange for APTC and costsharing for QHPs offered through the 

Exchange. New proposed § 155.221(j)(1) 

outlines proposed requirements that 

would apply to State Exchanges that do 

not rely on the federal eligibility and 

enrollment platform that want to pursue 

the SBE–DE option. New proposed 

paragraph (j)(2) outlines proposed 

requirements that would apply to states 

with an FFE or SBE–FP 141 that want to 

pursue the FFE–DE or SBE–FP–DE 

option. We propose that, subject to HHS 

approval, the SBE–DE option may be 

implemented in states with a State 

Exchange starting in plan year 2022. We 

propose that, subject to HHS approval, 

the FFE–DE and SBE–FP–DE option 

may be implemented in states with an 

FFE or SBE–FP starting in plan year 

2023. 

Under each of the Exchange DE 

options, states would be able to request 

to adopt a private sector-based 

enrollment approach as an alternative to 

the Exchanges’ consumer-facing 

enrollment website (for example, 

HealthCare.gov for the FFEs). This less 

centralized, private sector-focused 

approach for enrollment would 

transition to websites operated by 

approved partners to serve as the online 

platform(s) through which consumers 

apply for and enroll in individual 

market QHPs offered through the 

Exchange in their state, as well as apply 

for and receive determinations of APTC 

and CSR eligibility for QHP coverage 

offered through the Exchange. An 

Exchange would implement a direct 

enrollment pathway (or pathways) with 

secure connections between its backend eligibility system and the systems of 

approved issuers, web brokers, or agents 

and brokers that enable consumers to 

complete the single streamlined 

eligibility application as described in 

§ 155.405, receive an eligibility 

determination from the Exchange, select 

a plan and enroll in a QHP, with or 

without APTC and CSRs (if otherwise 

eligible). Exchanges would continue to 

be responsible for meeting, and ensuring 

its approved direct enrollment partners 

meet, all applicable statutory and 

regulatory requirements governing 

application for and enrollment in QHPs. 

Under these DE options, the Exchange 

would also remain the entity 

responsible for making eligibility 

determinations, conducting required 

verifications of consumer application 

information, and determining whether 

an applicant is eligible for QHPs, 

APTCs, and CSRs. The Exchange would 

also continue to be responsible for 

sharing this information with CMS, 

which will continue to issue the 

applicable APTC to carriers on behalf of 

qualified individuals, and to the IRS, 

which will continue to administer the 

reconciliation of APTC on individual 

tax returns. Consistent with section 

1311(d)(4)(F) of the PPACA and 45 CFR 

155.302, under these DE options the 

Exchange would also continue to be 

responsible for conducting assessments 

or determinations of eligibility for 

Medicaid and CHIP, and refer such 

individuals to the appropriate state 

Medicaid agency for enrollment in such 

program(s).142

In proposing these options for states, 

we note that the applicable statutory 

provisions do not require either the 

federal government or states to operate 

an enrollment website. Rather, the 

PPACA provides that an Exchange must, 

at a minimum, certify plans as QHPs 

and make QHPs available to consumers, 

and facilitate the purchase of QHPs. An 

Exchange can continue to meet these 

obligations and the minimum functions 

outlined in the statute without operating 

a singular consumer-facing enrollment 

website. In the context of operating an 

internet website, we interpret the 

statutory language at section 1311(c)(5) 

and (d)(4)(C) of PPACA to require the 

Exchange provide consumers with the 

ability to view comparative information 

on QHP options but that the Exchange 

may direct consumers to other entities 

or resources for purposes of submitting 

applications for and enrolling in QHPs, 

with APTC and CSRs, if otherwise 

eligible. Exchanges in states that elect to 

pursue this new option would be 

required to continue to grant exemption 

certifications under section 

1311(d)(4)(H) of the PPACA, as 

applicable; make available an electronic 

calculator consistent with section 

1311(d)(4)(G) of the PPACA; establish a 

Navigator program as required under 

section 1311(d)(4)(K) of the PPACA; and 

provide for the operation of a toll-free 

telephone hotline under section 

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

For the FFE–DE, SBE–FP–DE, and 

SBE–DE options, the Exchange would 

make available both a basic website 

listing basic QHP information for 

comparison and a listing, with links, to 

approved partner websites for consumer 

shopping, plan selection, and 

enrollment activities. Consistent with 

section 1311(d)(4)(E) of the PPACA, the 

comparative plan information presented 

on the Exchange website would need to 

continue to utilize a standardized 

format, including the use of the uniform 

summary of benefits and coverage 

outline of coverage established under 

section 2715 of the PHS Act.143 The 

standardized comparative information 

displayed on Exchange websites must 

also continue to include the quality 

ratings assigned to each QHP offered 

through the Exchange.144 Through 

private sector partners such as webbrokers and issuers, states may pursue 

alternatives to HealthCare.gov or other 

centralized, state-operated Exchange 

enrollment websites to enhance the 

consumer experience and provide 

additional incentives for insurers and 

licensed agents and brokers to conduct 

marketing and outreach to enroll more 

consumers in coverage. While states 

may consider creating enhanced 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78621 

145See Blueprint for Approval of State-based 

Health Insurance Exchanges for Coverage Years 

Beginning on or after 2019, available at https://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/Downloads/CMS-Blueprint-Application.pdf. 

146See, for example, 45 CFR 155.220(l) and 

155.221(h). 

147See 45 CFR 155.260, et. seq. 

148See 45 CFR 155.220, 155.221, and 156.1230. 

commission structures or providing 

other market-based incentives, we also 

recognize the inherent incentive to 

issuers, web brokers, and agents and 

brokers that will result from removing 

what some stakeholders view as a 

dominant public-sector competitor, 

making them the primary channels 

through which individuals shop for and 

enroll in individual market QHPs in that 

state. We further recognize that 

consumers who apply and enroll 

through a direct enrollment pathway 

will have the benefit of assistance from 

a state-licensed agent or broker if they 

so choose. These agents and brokers will 

have been recognized by the relevant 

state as possessing the specialized 

expertise necessary to help consumers 

choose between health insurance 

options. We propose three options for 

states to pursue the new Exchange DE 

option as described more fully below. 

We also note that the proposed new 

flexibilities in §§ 155.205(c)(2)(iv)(B) 

and (C), as well as in § 155.220(n), 

would need to be coordinated and 

considered as part of a state’s request to 

transition to the applicable Direct 

Enrollment option to determine to what 

extent these flexibilities may be made 

available to web-brokers approved to 

begin operating in an SBE–DE, FFE–DE, 

or SBE–FP–DE states, as proposed in 

§ 155.221(j). For example, per 

requirements imposed through the 

Exchange Blueprint,145 any State 

Exchange interested in pursuing this 

option would need to show that there 

would be at least one website available 

in the State that satisfies all accessibility 

requirements under § 155.205(c). Such 

website could be the State Exchange’s 

consumer-facing website, or a website 

operated by a State Exchange-approved 

direct enrollment entity. 

(1) Federally-Facilitated Exchange 

Direct Enrollment (FFE–DE) and State 

Exchange on the Federal Platform Direct 

Enrollment (SBE–FP–DE) Options 

We propose an option for any FFE or 

SBE–FP state to request the use of direct 

enrollment as the enrollment avenue 

through which individual market 

consumers and qualified individuals 

can shop for and purchase a QHP 

offered through the Exchange in the 

state and apply and receive 

determinations of eligibility for APTC 

and CSRs. While SBE–FP states have the 

authority and responsibility for 

certifying QHPs and performing 

consumer outreach and assistance 

activities, because they rely on the 

HealthCare.gov eligibility and 

enrollment platform and website, in this 

respect they are more similar to the 

FFE–DE model than the SBE–DE model. 

In addition, the current FFE direct 

enrollment program and accompanying 

requirements also apply in SBE–FP 

states.146

Under the proposed FFE–DE and 

SBE–FP–DE options, HealthCare.gov 

would continue to provide the same 

standardized comparative information 

on QHP options that is available today. 

CMS also would post and maintain an 

up-to-date list on HealthCare.gov of 

approved direct enrollment partners 

operating in the state. As such, 

consumers would still be able to view 

comparative information on 

HealthCare.gov for all QHP options 

available in their area and would also be 

able to access information to connect 

with approved direct enrollment 

partners in that state. Additionally, in 

the event that any approved direct 

enrollment partner does not have the 

technical capability to handle a 

consumer application, HealthCare.gov 

would process that application. 

By leveraging private sector entities 

and directing consumers to approved 

direct enrollment partners, the vast 

majority of consumer traffic would flow 

to direct enrollment partners, leaving 

the HealthCare.gov structure in place 

primarily to provide the supporting 

functions that it does today, like the 

processing of data matching and special 

enrollment period verification 

documentation, casework, and 

eligibility appeals. 

As noted above, the Exchange would 

remain the entity responsible for making 

eligibility determinations and validating 

if an applicant is eligible for QHPs, 

APTCs and CSRs. The Exchange would 

also continue to issue the applicable 

APTC to carriers on behalf of qualified 

individuals and would share the 

relevant information with the IRS to 

facilitate the IRS’ reconciliation of 

APTC on individual tax returns. Under 

this option, given that an FFE–DE state 

or SBE–FP–DE state would use one or 

more participating, federally-approved 

DE and EDE partners, at a minimum, the 

FFE privacy and security standards 147

and the FFE direct enrollment 

requirements 148 would continue to 

apply. 

As outlined in new proposed 

§ 155.221(j)(2), a state with an FFE or 

SBE–FP may request to pursue the FFE– 

DE or SBE–FP–DE option, as applicable. 

As outlined in this new proposed 

regulation, pursuant to a request from 

the state, HHS may partner with the 

requesting state to implement the direct 

enrollment option described in 

paragraph (j)(1). The FFE or SBE–FP 

must meet all applicable federal 

statutory and regulatory requirements 

for the operation of an Exchange, 

including maintaining the single, 

streamlined application required under 

§ 155.405. In order to obtain HHS 

approval to implement this option, the 

state must coordinate with HHS on an 

implementation plan and timeline that 

allows for a transition period, developed 

at the discretion of HHS in consultation 

with the state, necessary to 

operationalize the required changes to 

implement this option. We propose to 

codify these new requirements at 

paragraph (j)(2)(i). Additionally, we 

propose to codify requirements at 

paragraph (j)(2)(ii), whereby the state 

must execute a federal agreement with 

HHS that includes the terms and 

conditions for the arrangement and 

which defines the division of 

responsibilities between HHS and the 

state. Further, in order to obtain HHS 

approval to implement the FFE–DE or 

SBE–FP–DE option, the state must agree 

to procedures developed by HHS for the 

collection and remittance of the 

monthly user fee described in 

§ 156.50(c) in support of the 

responsibilities undertaken by the state 

and HHS. We propose to codify this 

new requirement at § 155.221(j)(2)(iii). 

Finally, we propose that the state would 

be required to perform and cooperate 

with activities established by HHS 

related to oversight and financial 

integrity requirements in accordance 

with section 1313 of the PPACA, 

including complying with reporting and 

compliance activities required by HHS 

and described in the Federal agreement 

entered into pursuant to paragraph 

(j)(2)(ii). We propose to codify this new 

requirement at paragraph (j)(2)(iv). 

We request comment on all aspects of 

this proposal, including any comments 

related to timing, governance, and any 

other considerations needed to 

effectively operationalize this proposed 

option. 

(2) State Exchange Direct Enrollment 

Option (SBE–DE) 

Under the SBE–DE option, a state 

with a State Exchange that does not rely 

on the federal eligibility and enrollment 

platform can also elect the Exchange 

Direct Enrollment option to engage 

approved private-sector entities as the 

pathway for consumers in their state to 

apply for, and enroll in, QHPs offered 

78622 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

149This approach is consistent with the 

framework established in prior rulemakings that 

require a state to notify HHS and receive written 

approval from HHS before significant changes are 

made to the Exchange Blueprint. See, for example, 

77 FR at 18316. Significant changes could include 

altering a key function of Exchange operations or 

other changes to the Exchange Blueprint that would 

have an impact on the operation of the Exchange. 

This includes, but is not limited to the process for 

enrollment in a QHP. See, for example, 76 FR at 

41871. 

150As detailed in § 155.105(e), HHS generally has 

60 days after receipt of a completed request to 

complete its review of a significant change to an 

Exchange Blueprint and, for good cause, may 

extend the review period by an additional 30 days 

up to a total of 90 days. 

151See generally CMS guidance for becoming a 

web-broker in the FFEs, available at: https://

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

HealthInsurance-Marketplaces/Downloads/ 

Processes-Becoming-Web-broker.pdf. 

152As noted above, the proposed new flexibilities 

in §§ 155.205(c)(2)(iv)(B) and (C), as well as in 

§ 155.220(n), would need to be coordinated and 

considered as part of a state’s request to transition 

to the applicable Direct Enrollment option. In 

addition to ensuring there is at least one website 

available in the State that satisfies all accessibility 

requirements under § 155.205(c), we propose there 

must also be at least one website available in the 

State through which consumers can view and enroll 

in all available QHPs in the state. 

through the Exchange. Under this 

proposed option, the State Exchange 

would remain responsible for 

continuing to operate its eligibility 

platform and make eligibility 

determinations for consumers applying 

for APTC, CSRs and enrollment in QHPs 

offered through the Exchange. However, 

this new option would permit multiple 

private entities, such as a combination 

of web-brokers and issuers, to provide 

the consumer-facing resources for 

consumers to apply for and enroll in 

individual market coverage offered 

through the Exchange. State Exchanges 

that pursue this option could thereby 

leverage direct enrollment technology 

and direct consumers to approved 

partner non-Exchange websites to apply 

for APTC and CSRs, as well as select 

and enroll in a QHP offered through the 

Exchange (if otherwise eligible). In the 

event that no direct enrollment partner 

in the state has the technical capability 

to handle any consumer’s application, 

the State Exchange would need to have 

the capability to process that 

application through its own consumerfacing website. 

As outlined in new proposed 

§ 155.221(j)(1), a state with a State 

Exchange that does not rely on the 

federal eligibility and enrollment 

platform may request approval to 

pursue the SBE–DE option and must 

submit a revised Exchange Blueprint in 

accordance with § 155.105(e) to do 

so.149 As outlined in this new proposed 

regulation, the State Exchange must 

meet all other applicable federal 

statutory and regulatory requirements 

for the operation of an Exchange, 

including maintaining the single, 

streamlined application as described in 

§ 155.405. Following submission of the 

revised Blueprint, HHS would have up 

to a total of 90 days 150 to review this 

revised submission and render a 

decision as to approval. We propose to 

codify the new requirement at 

§ 155.221(j)(2)(ii) that, in order to obtain 

HHS approval, the state would need to 

provide HHS an implementation plan 

and timeline that details the key 

activities, milestones, and 

communication and outreach strategy to 

support the transition of enrollment 

operations to direct enrollment entities. 

States that want to pursue the SBE–DE 

option should coordinate with HHS 

early in the development process and 

would be encouraged to provide the 

implementation plan, timeline and 

outreach strategy in advance of the 

formal submission of the state’s revised 

Exchange Blueprint. Additionally, in 

accordance with § 155.105(c)(2) and the 

new requirement proposed at 

§ 155.221(j)(1)(ii), a transitioning SBE– 

DE would need to demonstrate to HHS 

operational readiness for the State 

Exchange and its proposed direct 

enrollment entities to enroll qualified 

individuals in a QHP in a manner that 

constitutes enrollment through the 

Exchange and to enable individuals to 

apply for APTC and cost sharing for 

QHPs. 

While we propose that SBE–DEs 

would retain the flexibility to determine 

their own business controls, as well as 

to decide the state-specific requirements 

and mechanisms for approval and 

oversight of direct enrollment entities 

operating in the state, we would 

encourage SBE–DEs to generally review 

and adopt processes and standards 

similar to the existing federal direct 

enrollment and EDE framework, as laid 

out at 45 CFR 155.220, 155.221, 

156.1230, and in subregulatory 

guidance.151 Moreover, we propose to 

codify a new requirement at 

§ 155.221(j)(1)(iii) whereby SBE–DEs are 

obligated to ensure that a minimum of 

one approved direct enrollment entity 

approved by the state meets the 

minimum federal requirements for HHS 

approval to participate in the FFE 

federal direct enrollment programs, 

including requirements at 45 CFR 

155.220 and 155.221. In particular, it is 

critical that the SBE–DE ensure at least 

one approved web-broker direct 

enrollment partner or other approved 

direct enrollment entity meets 

requirements that align with the FFE 

standards under 45 CFR 

155.220(c)(3)(i)(A) and (D) 152 to ensure 

consumers have at least one option 

through which to view and access 

enrollment to all available QHPs in the 

state. It is also critical that the SBE–DE 

ensure at least one direct enrollment 

partner meets accessibility requirements 

under 45 CFR 155.205(c). If no direct 

enrollment in the SBE–DE states meets 

these requirements, the state would 

need to continue to operate its own 

Exchange website to ensure there is one 

enrollment pathway in the state that 

does. To assist states in meeting 

requirements for the SBE–DE option, we 

note that states would have the 

flexibility to partner with an existing, 

HHS-approved web-broker direct 

enrollment partner as a starting point to 

develop their own direct enrollment 

programs, as they are already fullycompliant with applicable federal 

requirements to participate in the FFE 

program. 

We request comment on all aspects of 

this proposal, including any comments 

related to timing, governance, and any 

other considerations needed to 

effectively operationalize this option. 

6. Certified Applications Counselors 

(§ 155.225) 

We propose to allow, but not require, 

certified application counselors to assist 

consumers with applying for eligibility 

for insurance affordability programs an 

QHP enrollment through web-broker 

websites under certain circumstances. 

For a discussion of the provisions of this 

proposal, please see the preamble for 

§ 155.220. 

7. Verification Process Related to 

Eligibility for Insurance Affordability 

Programs (§ 155.320) 

Strengthening program integrity with 

respect to subsidy payments in the 

individual market continues to be a top 

priority. Currently, Exchanges must 

verify whether an applicant is eligible 

for or enrolled in an eligible employer 

sponsored plan for the benefit year for 

which coverage and premium assistance 

(APTC or CSR) are requested using 

available data sources, if applicable, as 

described in § 155.320(d)(2). For any 

coverage year that an Exchange does not 

reasonably expect to obtain sufficient 

verification data as described in 

paragraph (d)(2)(i) through (iii), an 

alternate procedure applies. 

Specifically, Exchanges must select a 

statistically significant random sample 

of applicants and meet the requirements 

under paragraph (d)(4)(i). For benefit 

years 2016 through 2019, Exchanges 

also could use an alternative process 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78623 

153Section 1302(d) of the PPACA describes the 

various metal levels of coverage based on AV, and 

section 2707(a) of the PHS Act directs health 

insurance issuers that offer non-grandfathered 

health insurance coverage in the individual or small 

group market to ensure that such coverage includes 

the EHB package, which includes the requirement 

to offer coverage at the metal levels of coverage 

described in section 1302(d) of the PPACA. 

Consumer-facing HealthCare.gov content explains 

that metal levels serve as an indicator of ‘‘how you 

and your plan split the costs of your health care,’’ 

noting that lower levels such as bronze plans have 

lower monthly premiums but higher out of pocket 

costs, while higher levels such as gold plans have 

higher monthly premiums but lower out of pocket 

costs. See https://www.healthcare.gov/choose-aplan/plans-categories/. 

154 These limitations do not apply to enrollees 

who qualify for certain types of special enrollment 

periods, including those under § 155.420(d)(4), (8), 

(9), (10), (12), and (14). While special enrollment 

periods under paragraphs (d)(2)(i) and (d)(6)(i) and 

(ii) are excepted from § 155.420(a)(4)(iii), 

§ 155.420(a)(4)(i) and (ii) apply other plan category 

limitations to them. See also the proposals about 

applicability of plan category limitations to certain 

special enrollment periods in this section of this 

preamble. 

155Section 155.420(a)(4)(i), (a)(4)(iii)(B), and 

(a)(4)(iii)(C) also provide that alternatively, if the 

QHP’s business rules do not allow the dependent 

to enroll, the Exchange must allow the enrollee and 

his or her dependents to change to another QHP 

within the same level of coverage (or one metal 

level higher or lower, if no such QHP is available), 

as outlined in § 156.140(b). 

approved by HHS. We are continuing to 

explore a new alternative approach to 

replace the current procedures in 

paragraph (d)(4)(i), under which an 

Exchange may design its verification 

process to confirm that qualified 

individuals are not eligible for or 

enrolled in an eligible employer 

sponsored plan, disqualifying them 

from receiving APTC or CSRs. 

HHS’s experience conducting random 

sampling revealed that employer 

response rates to HHS’s request for 

information were low. The manual 

verification process described in 

§ 155.320(d)(4)(i) requires significant 

resources and government funds, and 

the value of the results ultimately does 

not appear to outweigh the costs of 

conducting the work because only a 

small percentage of sample enrollees 

have been determined by HHS to have 

received APTC or CSRs inappropriately. 

We believe an approach to verifying an 

applicant’s attestation regarding access 

to eligible employer sponsored coverage 

should be rigorous, while posing the 

least amount of burden on states, 

employers, consumers, and taxpayers. 

Based on our experiences with random 

sampling methodology under paragraph 

(d)(4)(i), HHS is of the view that this 

methodology may not be the best 

approach for all Exchanges to assess the 

associated risk for inappropriate 

payment of APTC and CSRs. As such, in 

2019, HHS conducted a study to (1) 

determine the unique characteristics of 

the population with offers of employersponsored coverage that meets 

minimum value and affordability 

standards, (2) compare premium and 

out-of-pocket costs for consumers 

enrolled in affordable employersponsored coverage to Exchange 

coverage, and (3) identify the incentives, 

if any, that drive consumers to enroll in 

Exchange coverage rather than coverage 

offered through their current employer. 

We are still evaluating the results of this 

study to ensure the best verification 

process to ensure that consumers with 

offers of affordable coverage that meets 

affordability and minimum value 

standards through their employer are 

identified and do not receive APTC or 

CSRs inappropriately. HHS will 

consider changes to the verification 

process outlined under paragraph (d)(4) 

as part of future rulemaking. 

As HHS continues to explore the best 

options for verification of employer 

sponsored coverage, we will continue to 

refrain from taking enforcement action 

against Exchanges that do not perform 

random sampling as required by 

paragraph (d)(4) and will extend this 

non-enforcement posture from plan year 

2021 through plan year 2022. 

8. Special Enrollment Periods 

(§ 155.420) 

a. Exchange Enrollees Newly Ineligible 

for APTC 

We are proposing to add new 

flexibility to allow current Exchange 

enrollees and their dependents to enroll 

in a new QHP of a lower metal level 153

if they qualify for a special enrollment 

period due to becoming newly ineligible 

for APTC. In 2017, the Marketplace 

Stabilization Rule addressed concerns 

that Exchange enrollees were utilizing 

special enrollment periods to change 

plan metal levels based on ongoing 

health needs during the coverage year, 

negatively affecting the individual 

market risk pool. The Market 

Stabilization Rule set forth requirements 

at § 155.420(a)(4) to limit Exchange 

enrollees’ ability to change to a QHP of 

a different metal level when they qualify 

for, or when a dependent(s) newly 

enrolls in Exchange coverage through, 

most types of special enrollment 

periods.154

Generally, § 155.420(a)(4) provides 

that enrollees who newly add a 

household member through most types 

of special enrollment periods may add 

the household member to their current 

QHP or enroll them in a separate 

QHP,155 and that if an enrollee qualifies 

for certain special enrollment periods, 

the Exchange must allow the enrollee 

and his or her dependents to change to 

another QHP within the same level of 

coverage (or one metal level higher or 

lower, if no such QHP is available), as 

outlined in § 156.140(b). However, these 

rules include certain flexibilities to 

permit enrollees to change metal levels 

through a special enrollment period 

related to a change in financial 

assistance for coverage through the 

Exchange. For example, 

§ 155.420(a)(4)(ii)(A) provides that if an 

enrollee and his or her dependents 

become newly eligible for CSRs in 

accordance with paragraph (d)(6)(i) or 

(ii) of this section and are not enrolled 

in a silver-level QHP, the Exchange 

must allow them to change to a silverlevel QHP if they elect to change their 

QHP enrollment to ensure that they can 

access this new benefit. 

We propose to add a new flexibility 

at § 155.420(a)(4)(ii)(C) to allow 

enrollees and their dependents who 

become newly ineligible for APTC in 

accordance with paragraph (d)(6)(i) or 

(ii) of this section to enroll in a QHP of 

a lower metal level. Under this 

proposal, these special enrollment 

periods in paragraph (d)(6)(i) and (ii) for 

becoming newly ineligible for APTC 

would be addressed in paragraph 

(a)(4)(ii)(C), and so they will no longer 

be subject to the separate rules in 

paragraph (a)(4)(iii). Therefore, we 

further propose to revise paragraph 

(a)(4)(iii) to include them in the list of 

triggering events excepted from the 

limitations at paragraph (a)(4)(iii). This 

proposal may help impacted enrollees’ 

ability to maintain continuous coverage 

for themselves and for their dependents 

in spite of a potentially significant 

change to their out of pocket costs. For 

example, an enrollee with a gold-level 

QHP who loses eligibility for APTC and 

sees an increase to his or her monthly 

premium payment could change to a 

bronze-level plan, or to catastrophic 

coverage if they are otherwise eligible. 

This proposed change is similar to 

other recent amendments that we have 

made to the regulations at 

§ 155.420(a)(4). For example, in 

response to concerns from HHS 

Navigators, other enrollment assisters, 

and agents and brokers based on their 

experiences with consumers who, upon 

losing eligibility for CSRs, could not 

afford cost sharing for their current 

silver-level QHP, In the May 14, 2020 

Federal Register (85 FR 29204), the 

2021 Payment Notice final rule 

amended paragraph (a)(4)(ii) to permit 

enrollees and their dependents who are 

enrolled in a silver-level QHP and who 

become newly ineligible for CSRs in 

accordance with paragraph (d)(6)(i) or 

(ii) to change to a QHP one metal level 

higher or lower than silver, beginning 

January 2022. 

78624 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

156 26 CFR 1.36B–2(b)(1) provides that to be 

eligible for a PTC, the taxpayer’s household income 

must be at least 100 percent but not more than 400 

percent of the FPL for the taxpayer’s family size for 

the taxable year. Per the HHS Poverty Guidelines 

for 2020, 400 percent of the FPL for 2020 for an 

individual in the contiguous 48 states and DC is 

$51,040. 

157These examples use 2020 FPL information to 

determine APTC eligibility for 2021 because, per 26 

CFR 1.36B–1(h), the FPL for computing the PTC for 

a taxable year is the FPL in effect on the first day 

of the initial or annual open enrollment period 

preceding that taxable year. For example, the 

Assistant Secretary for Planning and Evaluation 

(ASPE) released 2020 FPL information in January of 

2020, and so 2020 FPL information applies during 

the 2020 open enrollment period for 2021 coverage. 

158Calculated based on information in the ‘‘Plan 

Year 2020 Qualified Health Plan Choice and 

Premiums in HealthCare.gov States’’ report. 

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

Resources/Data-Resources/Downloads/ 

2020QHPPremiumsChoiceReport.pdf. 

We are proposing this new flexibility 

because in recent months, we have also 

heard concerns from agents and brokers 

that some consumers who qualify for 

the special enrollment period in 

accordance with § 155.420(d)(6)(i) or (ii) 

because they lose eligibility for APTC 

based on an income increase may lose 

a significant amount of financial 

assistance without having gained 

enough income to continue to afford the 

coverage they selected when APTC was 

available to them. For example, consider 

a qualified individual who estimates an 

annual household income of $49,000 

per year and enrolls in a gold plan 

during open enrollment with a $1,100 

per month ($13,200 per year) premium 

and monthly APTC of $600. This 

qualified individual could experience 

an income increase of less than $2,000, 

lose APTC based on an income of more 

than 400 percent FPL, and be required 

to pay over $7,000 more annually for 

their current plan.156 While this 

individual would qualify for a special 

enrollment period due to a loss of 

eligibility for APTC per paragraph 

(d)(6)(i), they would not be able to 

change from a gold plan to a silver or 

bronze plan (or to a catastrophic plan, 

if they were eligible) in order to pay a 

lower monthly premium, because 

paragraph (a)(4)(iii)(A) provides that 

these enrollees may only change to 

another QHP within their current plan’s 

metal level. 

Enrollees can also lose eligibility for 

APTC due to a change in household 

size, without experiencing any change 

in income. For example, assume a 

Virginia family of two parents and a 20- 

year old child, who has no income and 

is not a full-time student, applies during 

open enrollment in 2020 and qualifies 

for APTC based on a projected 2021 

household income of $75,000, an 

amount less than 400 percent of the FPL 

for a household of three ($86,880 in the 

contiguous 48 states and DC).157 During 

2021 the child becomes employed and 

by May 2021 has earned enough income 

so that the parents will not be permitted 

to claim the child as a tax dependent for 

2021. As a result, the family’s 

household size for 2021 will be two 

instead of three as projected during 

open enrollment, resulting in the 

family’s $75,000 household income 

falling above 400 percent of the FPL for 

a household of two ($68,960 in the 

contiguous 48 states and DC). Because 

those whose household income exceeds 

400 percent of the FPL are ineligible for 

APTC, the reduction in the parents’ 

household size due to not being 

permitted to claim their child as a tax 

dependent results in the parents’ loss of 

APTC eligibility mid-year, and outside 

the annual open enrollment period. 

Loss of APTC based on not being 

permitted to claim as a tax dependent 

an individual projected at open 

enrollment to be a tax dependent (loss 

of a projected tax dependent) is likely a 

less common challenge, because loss of 

a projected tax dependent who was 

previously enrolled in the same plan as 

other household members may also 

result in a lower premium for remaining 

household members. However, in some 

cases the decrease in premium may not 

be enough to make up for the loss of 

APTC. 

In many cases, individuals enrolling 

in Exchange coverage during open 

enrollment will not anticipate 

experiencing a situation in the middle 

of the plan year like those described 

above. Even if they are aware that they 

could have a small increase in 

household income or lose a projected 

tax dependent, they may not realize that 

these changes could make them newly 

ineligible for APTC. Furthermore, 

sometimes these changes are not 

foreseeable. Additionally, it is 

reasonable for individuals who 

complete an application and then shop 

for coverage on HealthCare.gov to select 

a QHP based on premiums that are 

reduced by the APTC amount for which 

they are eligible at the time of plan 

selection, particularly if they do not 

realize that their financial assistance 

could change based on loss of a 

projected tax dependent or a small 

household income change during the 

coming year. 

In addition to allowing enrollees to 

change to a plan with a lower premium 

based on losing a potentially significant 

amount of financial assistance due to a 

relatively small change in income or a 

change in household size, we also note 

that this proposal is necessary to protect 

consumers from gaps in coverage due to 

unaffordability because price 

differences between QHPs of different 

metal levels can be significant. For 

example, in states using the federal 

enrollment platform, on average silver 

plan premiums are 34 percent more 

expensive than bronze plan premiums, 

and gold plan premiums are 14 percent 

more expensive than silver plan 

premiums.158 Our analysis suggests 

similar differences in State Exchanges, 

but we invite comment on whether this 

is the case and how it impacts current 

Exchange enrollees. 

While this proposal is designed to 

provide Exchange enrollees who lose 

APTC with the chance to select lowercost coverage, we recognize that 

changing to a new QHP mid-plan year 

may cause enrollees to incur additional 

out of pocket costs as a new QHP 

selection typically resets the deductible 

and other accumulators. We believe that 

Exchange enrollees who lose APTC 

eligibility are best able to weigh the 

trade-off between reset accumulators or 

maintaining an affordable monthly 

premium. Enrollees who qualify to 

make a new plan selection for an 

applicable special enrollment period 

already must consider this question. 

However, we request comment on 

whether this proposal would increase 

the risk that consumers will change 

plans without taking into account 

potential disadvantages, and on 

strategies to help mitigate this risk, such 

as consumer education. 

Finally, we acknowledge that 

enrollees may lose APTC eligibility and 

qualify for a special enrollment period 

due to their APTC loss for a reason other 

than a change in household income or 

tax family size. For example, a 

currently-enrolled individual or 

household could lose APTC and qualify 

for the related special enrollment period 

due to an expired inconsistency 

regarding projected annual household 

income, or because the Exchange has 

information that they are eligible for or 

enrolled in other qualifying coverage 

that is considered MEC such as most 

Medicaid coverage, CHIP, or the Basic 

Health Program (BHP), through the 

periodic data matching process 

described in § 155.330(d), and therefore 

are ineligible for APTC. When 

consumers lose eligibility for APTC for 

these reasons, we encourage them to 

confirm whether the Exchange has 

correctly terminated their eligibility for 

APTC. If not, consumers’ best option 

may be to correct the Exchange’s records 

related to the issue that resulted in their 

APTC loss; for example, they could 

provide documentary evidence to the 

Exchange of their projected annual 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78625 

household income that they attested to 

on their application and upon which 

their APTC amount was based, or return 

to their application and attest that they 

do not have other qualifying coverage 

such as Medicare, Medicaid/CHIP, or 

the BHP, if applicable. While HHS 

performs extensive outreach to ensure 

that consumers understand and can act 

on these options, some enrollees in this 

situation may choose to use their special 

enrollment period due to APTC loss to 

enroll in a plan of a lower metal level 

either instead of or in addition to 

addressing the issue that caused them to 

lose APTC. We seek comment on 

whether stakeholders have concerns 

with this possibility, and on how HHS 

can help ensure that enrollees who lose 

eligibility for APTC because of failure to 

provide information to the Exchange to 

confirm their APTC eligibility can 

understand and take action on steps 

needed to do so, even if they also have 

the flexibility to change to a plan of a 

lower metal level. Relatedly, we seek 

comment on whether Exchanges should 

limit the flexibility proposed in this rule 

only to enrollees who qualify for a 

special enrollment period because they 

lost APTC eligibility due to a change in 

household income or tax family size, 

and continue to apply the current rule 

at 155.420(a)(4)(iii)(A) to enrollees who 

qualify for a special enrollment period 

because they lost APTC for any other 

reason. We also seek comment on 

whether such a policy would impose 

significant additional burdens on 

Exchanges. 

HHS believes that this proposal is 

unlikely to result in adverse selection, 

and may improve the risk pool by 

supporting continued health insurance 

enrollment by healthy individuals who 

would be forced to end coverage in 

response to an increase in premium. 

However, we request comment on 

whether there are concerns with 

permitting newly unsubsidized 

enrollees to change to any plan of a 

lower metal level to help them maintain 

coverage (for example, permitting an 

individual to change from a gold plan to 

a bronze plan), or whether we should 

instead only permit an enrollee to 

change to a plan one metal level lower 

than their current QHP. We also request 

comment from issuers on whether there 

are concerns about impacts such as 

experiencing a decrease in premium 

receipt from enrollees who opt to 

change to a lower-cost plan, or whether 

they view adverse selection as a 

possibility. We request comment from 

Exchanges, in particular, on 

implementation burden associated with 

this change to current plan category 

limitations rules, including on whether 

we should instead, in order to reduce 

this burden, permit current enrollees 

and currently enrolled dependents who 

qualify for this SEP to change to a plan 

of any metal level—that is, simply 

exempt the special enrollment periods 

at § 155.420(d)(6)(i) and (ii) due to 

becoming newly ineligible for APTC 

from plan category limitations 

altogether. We also request comment 

from all stakeholders, including those 

who have or represent individuals with 

preexisting conditions, on whether such 

a change would significantly increase 

risk for adverse selection. 

Finally, we also considered whether 

to propose additional flexibility to allow 

enrollees and their dependents who 

become newly eligible for APTC in 

accordance with paragraph (d)(6)(i) or 

(ii) to change to a QHP of a higher metal 

level. While we recognize becoming 

newly eligible for APTC may increase 

the affordability of higher metal level 

plans for some individuals, we believe 

including this flexibility would largely 

exempt the special enrollment periods 

at paragraph (d)(6)(i) and (ii) from the 

rules at 155.420(A)(4)(iii), imposing 

risks of adverse selection for Exchanges 

by permitting individuals to change 

coverage levels in response to health 

status changes. Furthermore, while we 

believe the proposed flexibilities for 

individuals who become newly 

ineligible for APTC are needed in order 

to promote continuous coverage for 

individuals who can no longer afford 

their original plan choice, no similar 

affordability and continuous coverage 

concerns exist for enrolled consumers 

who gain APTC during the coverage 

year. Accordingly, at this time we are 

not proposing additional plan flexibility 

for enrollees who become newly eligible 

for APTC. We invite comment on 

whether we should consider additional 

flexibilities for this population in the 

future and the anticipated impact of 

such a policy. 

We seek comment on these proposals. 

b. Special Enrollment Periods— 

Untimely Notice of Triggering Event 

We propose to allow a qualified 

individual, enrollee, or dependent who 

did not receive timely notice of a 

triggering event and was otherwise 

reasonably unaware that a triggering 

event occurred to select a new plan 

within 60 days of the date that he or she 

knew, or reasonably should have 

known, of the occurrence of the 

triggering event. We also propose to 

allow such persons to choose the 

earliest effective date that would have 

been available if he or she had received 

timely notice of the triggering event. 

Finally, we propose conforming 

amendments to § 147.104(b)(2)(ii) so 

that these proposals would also apply to 

off-Exchange individual market health 

coverage. 

In accordance with § 155.410(a)(2), an 

Exchange may only allow qualified 

individuals and enrollees to enroll in 

coverage during the annual open 

enrollment period as specified in 

§ 155.410(e), and during special 

enrollment periods as specified in 

§ 155.420. An Exchange must allow a 

qualified individual or enrollee to enroll 

in or change from one QHP to another 

if one of the triggering events described 

in § 155.420(d) occurs. Furthermore, 

under § 155.420(c)(1), a qualified 

individual or enrollee generally has 

until 60 days after the date of the 

triggering event to select a QHP. Section 

155.420(c)(2) and (3), provide 

exceptions to this general rule under 

which a qualified individual or enrollee 

may enroll prior to the date of a 

triggering event. Section 155.420(c)(4) 

provides a final exception under which 

a qualified individual or enrollee may 

have less than 60 days to enroll. 

Coverage effective dates are outlined in 

§ 155.420(b) and vary depending on the 

SEP triggering event, but in all cases are 

either on or after the date of the 

triggering event. 

Because the time period during which 

a qualified individual may enroll 

through a special enrollment period is 

determined by the triggering event, a 

qualified individual who does not know 

the triggering event has occurred may 

not have sufficient time to enroll in 

coverage. Generally, the triggering 

events described in § 155.420(d) and 

related plan selection timelines under 

§ 155.420(c) are premised on the 

assumption that an individual will 

become aware of a triggering event in 

time to make a plan selection within the 

time allotted under § 155.420(c). For 

example, the rules anticipate that 

qualified individuals or enrollees will 

receive timely notice of the day they 

will lose employer-sponsored coverage 

or the day they will gain a dependent 

such that 60 days is ample time for the 

individual to apply for enrollment 

through an applicable special 

enrollment period and select a plan. 

However, our experience operating the 

Federal Exchange has shown that there 

are circumstances in which an 

individual reasonably may not be aware 

of an event that triggers special 

enrollment period eligibility until after 

the triggering event has occurred. This 

proposal would allow a qualified 

individual, enrollee, or dependent who 

did not receive timely notice of a 

triggering event or was otherwise 

78626 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

159https://www.dol.gov/sites/dolgov/files/EBSA/ 

about-ebsa/our-activities/resource-center/faqs/ 

cobra-continuation-health-coverage-consumer.pdf. 

160 Individuals electing COBRA may also be 

required by their former employer to pay a 2 

percent administrative fee. See https://

www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/ 

our-activities/resource-center/faqs/cobracontinuation-health-coverage-consumer.pdf. 

161Because employers are not required to charge 

a 2 percent administrative fee to individuals who 

elect COBRA, we do not include this fee in the 

definition of ‘‘employer contributions.’’ For 

purposes of this section, if an individual enrolled 

in COBRA continuation coverage without employer 

contributions (so that the individual was 

responsible for 100 percent of the premiums) but 

was not required to pay a 2 percent administrative 

fee, this would not be considered an employer 

contribution for the purposes of the proposed 

special enrollment period. 

reasonably unaware that a triggering 

event occurred, to qualify for an 

applicable special enrollment period 

and select a new plan within 60 days of 

the date that he or she knew, or 

reasonably should have known, of the 

occurrence of the triggering event. This 

proposal will also allow the qualified 

individual, enrollee, or dependent to 

choose the earliest effective date that 

would have been available if he or she 

had received timely notice of the 

triggering event. 

For example, an employer fails to pay 

its share of premium for an insured 

employer-sponsored health plan and 

enters a grace period beginning April 

1st, which will expire on May 31st. 

Because the employer intends to satisfy 

its premium liability before the end of 

the grace period, the employer does not 

notify participants and beneficiaries in 

the plan of the non-payment or the risk 

of termination of its employersponsored coverage retroactive to April 

1st. The employer is unable to timely 

satisfy the premium debt, and the issuer 

of the employer-sponsored health 

coverage terminates coverage for the 

participants and beneficiaries 

retroactively to April 1st. Neither the 

employer nor the issuer of the 

employer-sponsored health plan notify 

the participants and beneficiaries of the 

beginning of the grace period or that 

coverage would be terminated as of 

April 1st. On July 10th, the participants 

and beneficiaries first receive notice 

from the issuer that their coverage 

terminated as of April 1st. In accordance 

with the circumstances described in 26 

CFR 54.9801–6(a)(3)(i), due to the 

employer’s failure to timely pay 

premiums, the participants and 

beneficiaries of the employer-sponsored 

health plan lost eligibility for the 

coverage and are eligible for the special 

enrollment period provided in 

§ 155.420(d)(1)(i). Per paragraph 

(d)(1)(i), the triggering event for special 

enrollment periods due to loss of MEC 

is the last day the consumer would have 

coverage under his or her previous plan 

or coverage. But in this scenario, 

affected participants and beneficiaries, 

through no fault of their own, were not 

aware of their loss of MEC until more 

than 60 days following the last day they 

had coverage. Thus, without the 

measure we propose here, the 

participants and beneficiaries in this 

example would not be able to use the 

special enrollment period at paragraph 

(d)(1)(i), because more than 60 days had 

passed since the relevant triggering 

event without their having selected a 

new plan. Some participants and 

beneficiaries of employer-sponsored 

health plans experienced similar 

circumstances during the COVID–19 

PHE and sought individual health 

insurance coverage through the FFEs, 

exposing a perceived gap in current 

special enrollment period rules. 

Another circumstance in which an 

individual may not be aware that a 

triggering event occurred involves 

technical errors that block an individual 

from enrolling in coverage through an 

Exchange. Section 155.420(d)(4) 

specifies that an individual is eligible 

for a special enrollment period if, 

among other things, their erroneous 

non-enrollment in a QHP was due to an 

error on the part of the Exchange or one 

of its agents. In this case, the error itself 

is the triggering event, and the date it 

occurs serves as the beginning of the 

special enrollment period. However, as 

in the case of the loss of employersponsored coverage discussed above, an 

individual may not be aware that an 

error has occurred. In some cases, the 

Exchange may not be aware that a 

technical error has occurred which 

prevented individuals from enrolling 

until a subsequent investigation is 

conducted. This process may take 

several weeks, during which time an 

impacted individual may not be aware 

that they were unable to enroll due to 

an error and therefore qualify for a 

special enrollment period. There may 

even be cases in which an Exchange 

does not identify the issue and the 

impacted population and notify them 

until more than 60 days after the 

triggering event occurred. 

We propose to amend § 155.420 by 

adding paragraph (c)(5) to specifically 

provide that if a qualified individual, 

enrollee, or dependent does not receive 

timely notice of an event that triggers 

eligibility for a special enrollment 

period under this section, and otherwise 

was reasonably unaware that a 

triggering event occurred, the Exchange 

must allow them to select a new plan 

within 60 days of the date that they 

knew, or reasonably should have 

known, of the occurrence of the 

triggering event. Additionally, we 

propose to add paragraph (b)(5) to 

clarify that when a qualified individual, 

enrollee, or dependent did not receive 

timely notice of an event that triggers 

eligibility for a special enrollment 

period, the Exchange must allow the 

such persons the option to choose the 

earliest coverage effective date for the 

triggering event under paragraph (b) that 

would have been available if they had 

received timely notice of the triggering 

event. In addition, we propose that the 

Exchange must also provide the 

qualified individual, enrollee or 

dependent the option to choose the 

effective date that would otherwise be 

available pursuant to the other 

provisions in paragraph (b). 

Lastly, we propose a conforming edit 

to § 147.104(b)(2) that would 

incorporate these amendments by 

reference in the regulations governing 

special enrollment periods for offExchange coverage, so that these 

proposed special enrollment rules 

would apply to issuers of nongrandfathered coverage in the 

individual market, both on- and offExchange. We also separately propose a 

change § 147.104(b)(2)(ii) to clarify how 

the special enrollment period in 

§ 155.420(d)(4) applies off-Exchange. 

This change is discussed in further 

detail in the preamble to part 147. 

We seek comment on these proposals. 

c. Cessation of Employer Contributions 

to COBRA as Special Enrollment Period 

Trigger 

The Consolidated Omnibus Budget 

Reconciliation Act of 1985 (COBRA) 159

(Pub. L. 99–272, April 7, 1986) provides 

for a temporary continuation of group 

health coverage following, among other 

circumstances, employees’ separation 

from an employer, for reasons other 

than gross misconduct, in instances 

where such separation would otherwise 

cause termination of coverage. Although 

employees who elect to receive COBRA 

continuation coverage may be required 

by their former employer to pay their 

former employer’s share of the 

premiums as well as their own,160 such 

employers will sometimes pay all or a 

portion of their former employee’s 

premium for part or all of the COBRA 

coverage period. 

In accordance with the policy 

currently in place on the Exchanges 

using the Federal platform, we propose 

to amend § 155.420(d)(1) to state that 

the complete cessation of employer 

contributions for COBRA continuation 

coverage serves as a triggering event for 

special enrollment period eligibility.161

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78627 

162https://www.kff.org/private-insurance/issuebrief/key-issues-related-to-cobra-subsidies/. 

163https://www.dol.gov/sites/dolgov/files/EBSA/ 

about-ebsa/our-activities/resource-center/faqs/ 

cobra-continuation-health-coverage-consumer.pdf. 

The triggering event would occur as of 

the last day of the period for which 

COBRA continuation coverage was paid 

for, in whole or in part, by the 

employer. Exchange regulations at 

paragraph (d)(1)(i) provide that when a 

qualified individual or his or her 

dependent loses MEC as defined by 

§ 155.20 they gain eligibility for a 

special enrollment period, during which 

they can enroll in a QHP. Paragraph (e) 

states that loss of MEC as described in 

paragraph (d)(1) includes the 

circumstances listed at 26 CFR 54.9801– 

6(a)(3)(i) through (iii). These provisions 

describe conditions under which 

someone may qualify for a special 

enrollment period for group health plan 

coverage, including paragraphs (a)(3)(i), 

‘‘Loss of eligibility for coverage,’’ and 

(a)(3)(iii), ‘‘exhaustion of COBRA 

continuation coverage.’’ 

In implementing special enrollment 

periods for Exchanges using the Federal 

platform, HHS has provided a loss of 

MEC special enrollment period under 

§ 155.420(d)(1)(i) for individuals whose 

COBRA costs change because their 

former employer completely ceases 

contributions and as a result they must 

pay the full cost of premiums. However, 

loss of coverage based on complete 

cessation of employer contributions for 

COBRA coverage might not have been 

treated as a triggering event by issuers 

of individual coverage off-Exchange or 

by State Exchanges. HHS believes it is 

important that individuals have access 

to a special enrollment period in the 

individual market when their former 

employer completely ceases 

contributions to COBRA continuation 

coverage, because the cost of COBRA 

continuation coverage premiums are 

substantial, rendering this type of 

coverage unaffordable for many people 

to whom it would be available.162

Ensuring that this special enrollment 

period is widely available would help 

promote continuity of coverage for those 

who could not maintain their COBRA 

continuation coverage without employer 

subsidies. HHS therefore seeks to make 

this special enrollment period available 

throughout the individual market. 

Therefore, we propose to amend 

§ 155.420 by adding paragraph (d)(1)(v) 

stating that a special enrollment period 

is triggered when a qualified individual 

or his or her dependent is enrolled in 

COBRA continuation coverage for 

which an employer is paying all or part 

of the premiums, and the employer 

completely ceases its contributions. 

Similar to the special enrollment period 

for termination of employer 

contributions to employer-sponsored 

coverage at 26 CFR 54.9801–6(a)(3)(ii), 

the triggering event would occur as of 

the last day of the period for which 

COBRA continuation coverage is paid 

for, in part or in full, by an employer. 

We also propose to make conforming 

changes to the preceding paragraphs to 

reflect the addition of this new 

paragraph. Furthermore, since complete 

cessation of employer contributions 

toward employer-sponsored 

continuation coverage under state miniCOBRA laws 163 serves as a special 

enrollment period triggering event 

under 26 CFR 54.9801–6(a)(3)(ii), which 

is incorporated by § 155.420(e), we 

propose to include in paragraph (v) a 

reference to this regulation for purposes 

of clarity. These changes would make 

explicit HHS’s current policy with 

regard to the Exchanges using the 

Federal platform, and would ensure that 

individual market policies sold offExchange and through State Exchanges 

align with it. In addition, amending 

paragraph (d)(1) to explicitly include 

complete cessation of employer 

contributions to COBRA continuation 

coverage as a special enrollment period 

triggering event would mitigate 

confusion among employers and 

employees, as well as other 

stakeholders, about their options 

regarding COBRA continuation coverage 

and special enrollment period 

eligibility. 

As with other special enrollment 

periods described in § 155.420(d)(1), in 

the Exchanges, this special enrollment 

period would be subject to the 

provisions in paragraph (a)(4)(iii)(B) and 

(C), which allow dependents and nondependent qualified individuals who 

qualify for a special enrollment period 

to be added to the QHP of a household 

member who is already enrolled in 

Exchange coverage, or to enroll 

separately in a plan of any metal level. 

We also propose that the Exchange must 

provide the qualified individual, 

enrollee, or dependent the effective date 

that would otherwise be available 

pursuant to the other provisions at 

paragraph (b)(2)(iv). In accordance with 

paragraph (c)(2), an individual eligible 

for this special enrollment period would 

have 60 days before or after the 

triggering event (in this case, the last 

day for which the qualified individual 

or dependent has COBRA continuation 

coverage to which an employer is 

contributing) to select a QHP. We 

propose that this special enrollment 

period, which would be incorporated by 

reference in the guaranteed availability 

regulations at § 147.104(b)(2), apply 

with respect to individual health 

insurance coverage offered through and 

outside of an Exchange. 

To help clarify the circumstances that 

would trigger the proposed special 

enrollment period, we include the 

following examples: 

Example 1: An individual is laid off 

from a job in June, and enrolls in 

COBRA continuation coverage for 

which the employer pays 100 percent of 

the premiums (the employer does not 

require payment of a 2 percent 

administrative fee). On September 3rd 

of that year, the employer informs the 

individual that it is completely 

terminating contributions to the 

individual’s COBRA continuation 

coverage as of September 30th, and 

beginning on October 1st, the individual 

will be responsible for 100 percent of 

the COBRA continuation coverage 

premiums. As a result, the individual 

decides to end COBRA coverage on 

October 1st. Because September 30th is 

the last day for which the individual 

had COBRA continuation coverage for 

which the employer was contributing, 

the individual has 60 days before and 

after this date (in this case, between 

August 1st and November 29th) to select 

an individual market plan through a 

special enrollment period. 

Example 2: Same scenario as in the 

first example, except that the employer 

was paying only 25 percent of the 

COBRA continuation coverage 

premiums before the employer 

completely terminated contributions. 

The individual decides to maintain 

COBRA continuation coverage despite 

the loss of employer contributions. Even 

though the individual retained COBRA 

continuation coverage, the individual is 

still eligible to select a QHP through a 

special enrollment period from August 

1st to November 29th, 60 days before or 

after the last day on which the 

individual had COBRA continuation 

coverage with employer contributions. 

In addition to this proposal, HHS is 

also considering addressing situations 

in which an employer reduces, but does 

not completely cease, its contributions 

for COBRA continuation coverage. In 

particular, we are considering adding to 

proposed paragraph § 155.420(d)(1)(v) a 

provision that a reduction of employer 

contributions for COBRA continuation 

coverage would also serve as a special 

enrollment period trigger. The triggering 

event would occur the last day on 

which an individual has COBRA 

continuation coverage that was 

subsidized at the higher amount. 

Reduction of employer contributions to 

COBRA continuation coverage has not 

78628 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

164 82 FR at 18356. 165 82 FR at 18356. 

previously been treated as a triggering 

event for purposes of the loss of MEC 

special enrollment period under 

paragraph (d)(1)(i). However, HHS 

believes it is important to address this 

scenario as a way of promoting 

continuity of coverage for those who 

would not be able to maintain their 

COBRA continuation coverage with a 

reduced employer contribution. A 

similar special enrollment period for 

reduction of employer contributions to 

employer-sponsored coverage is not 

currently provided for under the 

provisions at 26 CFR 54.9801–6(a)(3)(i) 

through (iii). However, HHS believes it 

is important to provide a special 

enrollment period for reductions in 

employer contributions toward COBRA 

coverage because there are differences 

between employer-sponsored coverage 

and COBRA, such as the fact that 

COBRA continuation coverage is not 

subject to an affordability test under 26 

CFR 1.36B–2(c)(3)(v) for purposes of 

determining potential eligibility for 

APTC and/or CSR, and the fact that 

individuals must generally pay more for 

COBRA continuation coverage than for 

employer-sponsored coverage. 

Because this situation is not 

addressed in regulation or by HHS 

policy, we seek comment on whether 

stakeholders believe it would be helpful 

to codify such a special enrollment 

period if an employer reduces, but does 

not completely cease, its contributions 

to COBRA continuation coverage. In 

addition, we seek comment on whether 

HHS should also adopt a threshold for 

the level of reduction of employer 

contributions for COBRA continuation 

coverage that should trigger a special 

enrollment period. 

We seek comment on this proposal. 

d. Special Enrollment Period 

Verification 

In 2017, the HHS Market Stabilization 

Rule preamble explained that HHS 

would implement pre-enrollment 

verification of eligibility for certain 

special enrollment periods in all FFEs 

and SBE–FPs and encouraged states to 

do the same in State Exchanges. Special 

enrollment period verification has 

addressed concerns that allowing 

individuals to enroll in coverage 

through a special enrollment period 

without electronic or document-based 

verification could negatively affect the 

individual market risk pool by allowing 

individuals to newly enroll in coverage 

based on health needs during the 

coverage year as opposed to enrolling 

during open enrollment and 

maintaining coverage for a full year.164

Since 2017, Exchanges using the 

federal platform have implemented preenrollment special enrollment period 

verification for special enrollment 

period types commonly used by 

consumers to enroll in coverage. 

Consumers who are not already enrolled 

through the Exchange and who apply 

for coverage through a special 

enrollment period type that requires 

pre-enrollment verification by the 

Exchange must have their eligibility 

electronically verified using available 

data sources, or they must submit 

supporting documentation to verify 

their eligibility for the special 

enrollment period before their 

enrollment can become effective. As 

stated in the HHS Marketplace 

Stabilization Rule, special enrollment 

period verification is only conducted for 

new enrollees due to the potential for 

additional burden on issuers and 

confusion for consumers if required for 

existing enrollees. 

In implementing pre-enrollment 

verifications for special enrollment 

periods in the Market Stabilization Rule, 

HHS did not establish a regulatory 

requirement that all Exchanges conduct 

special enrollment period verifications, 

in order to allow State Exchanges with 

flexibility to adopt policies that fit the 

needs of their state.165 Currently, all 

State Exchanges now conduct either 

pre- or post-enrollment verification of at 

least one special enrollment type, and 

most State Exchanges have 

implemented a process to verify the vast 

majority of special enrollment periods 

requested by consumers. 

Therefore, we propose to amend 

§ 155.420 to add paragraph (f) to require 

all Exchanges to conduct eligibility 

verification for special enrollment 

periods. Specifically, we propose to 

require that Exchanges conduct special 

enrollment period verification for at 

least 75 percent of new enrollments 

through special enrollment periods for 

consumers not already enrolled in 

coverage through the applicable 

Exchange. We are proposing that 

Exchanges must verify at least 75 

percent of new enrollments through 

special enrollment periods based on the 

current implementation of special 

enrollment period verification by 

Exchanges. If the Exchange is unable to 

verify the consumer’s eligibility for 

enrollment through the special 

enrollment period, then the consumer is 

not eligible for enrollment through the 

Exchange, and enrollment through the 

Exchange may be terminated in 

accordance with 45 CFR 

155.430(b)(2)(i). If an Exchange opts to 

pend a plan selection prior to 

enrollment, and the Exchange cannot 

verify eligibility for the special 

enrollment period, then the consumer 

will be found ineligible for the special 

enrollment period, and the plan 

selection will not result in an 

enrollment. The determination of how 

many enrollments would constitute 75 

percent would be required to be based 

on special enrollment period 

enrollment. This would provide 

Exchanges with implementation 

flexibility so they can continue to 

decide which special enrollment types 

to verify and the best way to conduct 

that verification. Exchanges will not be 

required to verify eligibility for all 

special enrollment periods, since the 

cost to verify eligibility for special 

enrollment period triggering events with 

very low volumes could be greater than 

the benefit of verifying eligibility for 

them. 

We also continue the flexibility that 

State Exchanges currently have to 

design eligibility verification processes 

that are appropriate for their market and 

Exchange consumers, such that State 

Exchanges may have such flexibility in 

their approaches for meeting the 

requirement proposed at § 155.420(f) to 

verify eligibility for a special enrollment 

period. Specifically, under § 155.315(h), 

State Exchanges have the flexibility to 

propose alternative methods for 

conducting required verifications to 

determine eligibility for enrollment in a 

QHP under subpart D, such that the 

alternative methods proposed reduce 

the administrative costs and burdens on 

individuals while maintaining accuracy 

and minimizing delay. We propose to 

use the existing authority at § 155.315(h) 

to allow State Exchanges to request HHS 

approval for use of alternative processes 

for verifying eligibility for special 

enrollment periods as part of 

determining eligibility for special 

enrollment periods under § 155.305(b). 

This would allow, for instance, the 

smaller State Exchanges that have 

administrative burden and cost 

concerns the option to coordinate with 

HHS to devise and agree upon the best 

approach for special enrollment period 

verification for their specific 

population. We recognize that State 

Exchanges may vary in their approach 

and technical capabilities relating to 

verification of special enrollment 

periods and may need additional time to 

implement this requirement. Therefore, 

we are proposing to allow Exchanges 

until plan year 2024 to implement 

special enrollment period verification. 

We seek comment on these proposals. 

With respect to Special Enrollment 

Period Verification, we seek comment 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78629 

166The 2013 and 2021 per capita personal income 

figures used for this calculation reflect the latest 

NHEA data, published on March 24, 2020. 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 2019–2028—Tables’’ link located 

in the Downloads section at http://www.cms.gov/ 

Research-Statistics-Data-and-Systems/StatisticsTrends-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/ 

ProjectionsMethodology.pdf. 

167U.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. 

from States about the 75 percent 

verification threshold and whether it 

should be based on past year or current 

year special enrollment period 

enrollments, understanding that 

unforeseen events may occur that may 

drive up or down enrollments from 

year-to-year. 

9. Required Contribution Percentage 

(§ 155.605(d)(2)) 

HHS calculates the required 

contribution percentage for each benefit 

year using the most recent projections 

and estimates of premium growth and 

income growth over the period from 

2013 to the preceding calendar year. 

Accordingly, we propose the required 

contribution percentage for the 2022 

benefit year, calculated using income 

and premium growth data for the 2013 

and 2021 calendar years. 

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 reduced the 

individual shared responsibility 

payment to $0 for months beginning 

after December 31, 2018, the required 

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 rule, 

we are proposing as the measure for 

premium growth the 2022 premium 

adjustment percentage of 1.4409174688 

(or an increase of about 44.1 percent 

over the period from 2013 to 2021). This 

reflects an increase of about 6.4 percent 

over the 2021 premium adjustment 

percentage 

(1.4409174688÷1.3542376277). 

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 Accounts (NHEA) 

data, the rate of income growth for 2021 

is the percentage (if any) by which the 

most recent projection of per capita PI 

for the preceding calendar year ($61,156 

for 2021) exceeds per capita PI for 2013 

($44,948), carried out to ten significant 

digits. The ratio of per capita PI for 2021 

over the per capita PI for 2013 is 

estimated to be 1.3605944647 (that is, 

per capita income growth of about 36.1 

percent).166 This rate of income growth 

between 2013 and 2021 reflects an 

increase of approximately 3.9 percent 

over the rate of income growth for 2013 

to 2020 (1.3605944647÷1.3094029651) 

that was used in the 2021 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.).167

Thus, using the 2022 premium 

adjustment percentage proposed in this 

rule, the excess of the rate of premium 

growth over the rate of income growth 

for 2013 to 2021 would be 1.4409174688 

÷1.3605944647, or 1.0590352278. This 

would result in a proposed required 

contribution percentage for 2021 of 

8.00×1.0590352278 or 8.47 percent, 

when rounded to the nearest onehundredth of one percent, an increase of 

0.20 percentage points from 2020 

(8.47228–8.27392). 

Finally, beginning with the 2023 

benefit year, we are proposing to 

publish the required contribution 

percentage, along with the premium 

adjustment percentage and the annual 

cost-sharing limitation parameters, in 

guidance separate from the annual 

notice of benefit and payment 

parameters. For a discussion of the 

provisions of this proposal, please see 

the preamble for Publication of the 

Premium Adjustment Percentage, 

Maximum Annual Limitation on Cost 

Sharing, Reduced Maximum Annual 

Limitation on Cost Sharing, and 

Required Contribution Percentage 

(§ 156.130). 

We seek comment on these proposals. 

10. Excluding the Special Enrollment 

Period Trigger in § 155.420(d)(1)(v) 

From Applying to SHOP Plans 

(§ 155.726) 

Special enrollment periods due to 

cessation of employer contributions to 

COBRA continuation coverage are 

generally not available in the group 

insurance market. Therefore, in order to 

maintain consistency between SHOP 

and the rest of the group insurance 

market, we propose to amend 

§ 155.726(c)(2)(i) to exclude the special 

enrollment period trigger in proposed 

paragraph § 155.420(d)(1)(v) from 

applying to SHOP plans. For a 

discussion of the provisions of this 

proposal, please see the preamble for 

§ 155.420. 

We seek comment on this proposal. 

E. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. User Fee Rates for the 2022 Benefit 

Year (§ 156.50) 

a. FFE and SBE–FP User Fee Rates for 

the 2022 Benefit Year (§ 156.50(c)) 

Section 1311(d)(5)(A) of the PPACA 

requires states to ensure that Exchanges 

are self-sustaining, which may include 

the state allowing an Exchange to charge 

assessments or user fees on participating 

health insurance issuers as a means of 

generating funding to support its 

operations. 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 specify 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 

78630 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

168See above for more information on the 

proposed direct enrollment option under 

§ 155.221(j). 

through an FFE or SBE–FP. In addition, 

OMB Circular No. A–25 establishes 

federal policy regarding the assessment 

of user charges under other statutes and 

applies to the extent permitted by law. 

Furthermore, OMB Circular A–25 

specifically provides 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 2021, 

issuers seeking to participate in an FFE 

in the 2022 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 2022 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). 

Activities through which FFE issuers 

receive a special benefit also include the 

Health Insurance and Oversight System 

(HIOS) and Multidimensional Insurance 

Data Analytics System (MIDAS) 

platforms, which are partially funded by 

Exchange user fees. Based on estimated 

costs, enrollment (including anticipated 

establishment of state Exchanges in 

certain states in which FFEs currently 

are operating), and premiums for the 

2021 plan year, we propose a 2022 user 

fee rate for all participating FFE issuers 

at 2.25 percent of total monthly 

premiums. This proposed user fee rate 

reflects our estimates for the 2022 

benefit year of costs for operating the 

Federal Exchanges, premiums, 

enrollment, and transitions in Exchange 

models (from the FFE and SBE–FP 

models to either the SBE–FP, FFE–DE or 

State Exchange models (state 

transitions). The proposed FFE user fee 

rates are lower than the 3.0 percent FFE 

user fee rate that we established for 

benefit years 2020 and 2021, and the 3.5 

percent FFE user fee rate that we 

established for benefit years 2014 

through 2019. After accounting for the 

impact of the lower user fee rate, we 

estimate that we would have sufficient 

funding available to fully fund user-fee 

eligible Exchange activities. We seek 

comment on this proposed 2022 FFE 

user fee rate. 

As previously discussed, OMB 

Circular No. A–25 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. 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 specify 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. 

The benefits provided to SBE–FP 

issuers by the federal government 

include use of the Federal Exchange 

information technology platform and 

call center infrastructure used to 

support eligibility determinations for 

enrollment in QHPs 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 1.75 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 2.5 percent user fee 

rate that we had established for benefit 

year 2021. The lower proposed user fee 

rate for SBE–FP issuers for the 2022 

benefit year reflects our estimates of 

costs for operating the Federal 

Exchanges, premiums, enrollment, as 

well as state Exchange transitions for 

the 2022 benefit year, and the costs 

associated with performing these 

services that benefit SBE–FP issuers. We 

seek comment on the proposed 2022 

SBE–FP user fee rate. 

b. FFE–DE and SBE–FP–DE User Fee 

Rates for the 2023 Benefit Year 

(§ 156.50(c)(3)) 

Elsewhere in this proposed rule, we 

propose to allow states served by an FFE 

or SBE–FP to implement the proposed 

direct enrollment option under 

§ 155.221(j) beginning with plan year 

2023, under which one or more private 

direct enrollment entities approved by 

the FFE would operate websites through 

which consumers may apply for and 

enroll in a QHP, with or without APTC 

or CSR (if otherwise eligible). Under the 

proposed FFE–DE or SBE–FP options, 

QHP issuers offering plans through the 

Exchange would receive some of the 

benefits of the Federal Exchange, 

however, some consumer outreach, 

education, and support activities would 

be provided by the state or through the 

Federal Exchange.168

As previously discussed, OMB 

Circular No. A–25 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. As such, we propose in 

new § 156.50(c)(3) to charge issuers 

offering QHPs through an FFE–DE or an 

SBE–FP–DE a user fee for the services 

and benefits provided to those issuers 

by HHS as the administrator of the 

Federal Exchange. We propose to charge 

issuers offering QHPs through an FFE– 

DE or SBE–FP–DE a user fee rate 

calculated based on the proportion of 

FFE user fee eligible costs incurred by 

HHS that are associated with 

implementation and operation of the 

FFE–DE or SBE–FP–DE. We assume that 

the use of Federal Exchange services 

will be less for FFE–DE and SBE–FP–DE 

states in 2023 and beyond than for FFE 

and SBE–FP states during the same time 

period. Therefore, to provide some 

certainty for states that consider a 

transition to a proposed FFE–DE or 

SBE–FP–DE, we propose a 2023 user fee 

rate of 1.5 percent of the monthly 

premium charged by the issuer for each 

policy under plans offered through an 

FFE–DE or SBE–FP–DE in plan year 

2023. Under the DE option, the 

Exchange would no longer be providing 

many of the consumer facing 

enrollment-related activities that are 

currently being performed through the 

Federal platform, or such activities 

would be substantially reduced. For 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78631 

169 78 FR 39870 (July 2, 2013); 80 FR 41318 (July 

14, 2015). 

170 81 FR 12203 at 12293 (March 8, 2016). 

171 ‘‘Early 2020 Effectuated Enrollment 

Snapshot,’’ July 23, 2020. Available at https://

www.cms.gov/CCIIO/Resources/Forms-Reports-andOther-Resources/Downloads/Early-2020-2019- 

Effectuated-Enrollment-Report.pdf. 

example, the use of the Marketplace call 

center and HealthCare.gov website will 

be substantially diminished. Because of 

the role of the state in operating SBE– 

FPs, the value to issuers and the 

associated costs of operating these 

functions in FFEs is typically higher. 

The reduction of these functions and 

costs therefore is reflected by a larger 

proposed reduction in the user fee rate 

for issuers in FFE–DEs from the rate 

applicable in FFEs (from 2.25 percent to 

1.5 percent) than the reduction in the 

user fee rate for issuers in SBE–FP–DEs 

from the rate applicable in SBE–FPs 

(from 1.75 percent to 1.5 percent), 

resulting in the same proposed user fee 

rate for these new Exchange options. We 

seek comment on the FFE–DE or SBE– 

FP–DE user fee rate, including whether 

the rate should be state-specific or 

higher or lower depending on whether 

the Exchange is a FFE–DE or SBE–FP– 

DE and the specific services HHS will 

provide, as outlined in the Federal 

agreement required under new proposed 

§ 155.221(j)(2)(ii). We will continue to 

examine costs, enrollment, premium, 

and state transition estimates for the 

issuers offering QHPs on the Exchanges 

using the Federal platform for the 2022 

benefit year as we finalize the FFE and 

SBE–FP user fee rates (including the 

proposed rates for the new proposed 

FFE–DE and SBE–FP–DE options for the 

2023 benefit year). We seek comment on 

these proposals. 

c. State User Fee Collection 

Administration (§ 156.50(c)(2)) 

We also propose to eliminate the state 

user fee collection flexibility that HHS 

had previously offered to states in the 

2017 Payment Notice. We propose that 

HHS would not collect an additional 

user fee, if a state so requests, from 

issuers at a rate specified by the state to 

cover costs incurred by the state for the 

functions the state retains. HHS 

previously provided this flexibility to 

states in order to help reduce the 

administrative burden on states of 

collecting additional user fees. 

However, our subsequent internal 

analysis demonstrated that the process 

of collecting the state portion of the user 

fee and remitting it to the state, would 

increase the operational burden and cost 

incurred by HHS. Therefore, we are 

amending § 156.50(c)(2) to remove this 

alternate user fee collection mechanism. 

We note that this proposal does not 

change the ability of an SBE–FP to 

request that HHS collect from the SBE– 

FP state regulatory entity the total 

amount that would result from the 

percent of monthly premiums charged 

for enrollment through the federal 

platform, instead of HHS collecting the 

fee directly from SBE–FP issuers. 

d. Eligibility for User Fee Adjustments 

for Issuers Participating Through SBE– 

FPs (§ 156.50(d)) 

We are proposing to amend 

§ 156.50(d) to clarify that issuers 

participating through SBE–FPs are 

eligible to receive adjustments to their 

federal user fee amounts that reflect the 

value of contraceptive claims they have 

reimbursed to third-party administrators 

(TPAs) that have provided contraceptive 

coverage on behalf of an eligible 

employer. In the final rules ‘‘Coverage of 

Certain Preventative Services Under the 

Affordable Care Act,’’ 169 these 

relationships were established as a 

method of both providing 

contraceptives for women and 

accommodating the religious beliefs of 

employers. In the 2017 Payment 

Notice,170 we allowed State Exchanges 

to enter into agreements to rely on the 

Federal platform for certain Exchange 

functions to enhance efficiency and 

coordination between the state and 

federal programs, and to leverage the 

systems established by the FFEs to 

perform certain Exchange functions. 

Although we recognized that issuers 

participating in these types of 

Exchanges were subject to a federal user 

fee, § 156.50(d) was not amended to 

reflect the SBE–FP Exchange model. As 

such, in this rule, we propose to amend 

§ 156.50(d) to explicitly include the 

issuers offering QHPs through SBE–FPs. 

We also propose to make conforming 

changes throughout the regulation text 

at § 156.50(d) to reflect the user fees 

applicable to FFEs and SBEs that adopt 

the DE option, as further discussed 

elsewhere in this rulemaking. 

We seek comment on these proposals. 

e. Request for Comments on 

Alternatives to Exchange User Fees 

(§ 156.50) 

In the 2021 Payment Notice proposed 

rule we solicited comment on whether 

to lower the user fee rates in the final 

rule and any information that might 

inform future changes to the user fee 

rate. One commenter questioned the 

basis of the user fee, stating that the 

Exchanges do not provide a special 

benefit to issuers. The commenter 

asserted that there is no competitive 

advantage to being on the Exchanges, 

the existence of the Exchanges are 

mandated by law, and the benefits 

associated with user fees all flow to 

consumers, and not the issuers who pay 

them. 

While the 2021 Payment Notice 

comment solicitation focused on the 

rate of the user fee, we appreciate the 

commenter’s concerns regarding the 

justification for the user fee. Even when 

government policies seem well 

established—HHS is in its seventh year 

applying the Exchange user fee to 

issuers—it is always helpful to 

periodically step back and reassess 

whether a particular policy is still an 

effective and proper approach, and 

whether there are better alternatives. 

We recognize the Exchanges serve a 

public purpose defined by the PPACA 

to facilitate the purchase of QHPs, 

determine eligibility for insurance 

affordability programs, and assist in 

enforcing the individual and employer 

shared responsibility provisions. The 

Exchanges also provide special benefits 

to issuers, including regulatory services 

and sales services similar to the services 

provided by agents and brokers. 

Whether or not the current balance of 

funding sources is appropriate based on 

the portion of activities that support a 

public purpose compared to a special 

benefit to issuers presents an important 

question. 

In addition, we recognize the 

application of the Exchange user fee 

raises important fairness questions 

regarding who ultimately pays the fee 

and how much they pay. Issuers directly 

pass Exchange user fees on to their 

enrollees in the form of higher 

premiums, which issuers specifically 

document in their rate filings to justify 

their rates. Therefore, the people who 

effectively pay the Exchange user fee are 

largely limited to (1) people who pay 

the full premium without the benefit of 

PTCs subsidies and (2) federal taxpayers 

who tend to fully fund the marginal 

increase in premiums due to the user fee 

for people who receive PTC subsidies. 

The fact that single risk pool regulations 

under 45 CFR 156.80(d)(1)(ii) require the 

index rate to be adjusted on a marketwide basis based on Exchange user fees 

means that enrollees who purchase 

coverage outside the Exchange from a 

QHP issuer must pay higher premiums 

to support the Exchange. In addition, we 

recognize average premiums vary 

substantially across states and rating 

regions—varying from a statewide 

average of $389 to $942 in 2019 171— 

which is largely due to variations in 

claims experience. As a result, the per 

enrollee user fee can vary substantially 

78632 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

based on factors that are not related to 

the cost of operating the Exchanges. 

Because the Exchange user fee is 

specifically included in premium as a 

component of the index rate under 45 

CFR 156.80(d)(1)(ii), we also recognize 

the fee raises important fairness 

questions regarding the treatment of 

commissions for agents and brokers in 

the MLR calculation. As noted 

previously, the Exchange provides sales 

services similar to the services provided 

by agents and brokers. Yet the cost of 

these services are treated completely 

differently within the MLR calculation. 

Exchange sales services are considered 

part of the premium, which helps the 

issuer meet the MLR requirement. 

Conversely, agent and broker 

commissions are treated as 

administrative costs, which counts 

against the issuer meeting the MLR 

requirement. As a result, the user fee 

combined with the method for 

calculating the MLR may give the 

Exchange a competitive advantage over 

agents and brokers. 

Recognizing these concerns with the 

Exchange user fee, we are considering 

and seek comment on both the 

appropriateness of an alternative 

revenue source and the type of an 

alternate revenue source to ensure 

Exchanges can cover the costs of the 

Exchange in an effective, appropriate, 

and fair manner. While these comments 

would not change the funding source of 

Exchange related functions in this rule, 

the comments submitted in response to 

this solicitation may be used for further 

proposals. 

2. State Selection of EHB-Benchmark 

Plan for Plan Years Beginning on or 

After January 1, 2020 (§ 156.111) 

a. Annual Reporting of State-Required 

Benefits 

In the 2021 Payment Notice, we 

amended § 156.111(d) and added 

paragraph (f) to require states to 

annually notify HHS in a form and 

manner specified by HHS, and by a date 

determined by HHS, of any staterequired benefits applicable to QHPs in 

the individual and/or small group 

market that are considered to be ‘‘in 

addition to EHB’’ in accordance with 

§ 155.170(a)(3). 

At § 156.111(f), we also required 

states to identify which state-required 

benefits are not in addition to EHB and 

do not require defrayal in accordance 

with § 155.170, and provide the basis for 

the state’s determination. Under this 

requirement, a state’s submission must 

describe all benefits requirements under 

state mandates applicable to QHPs in 

the individual or small group market 

that were imposed on or before 

December 31, 2011, and that were not 

withdrawn or otherwise no longer 

effective before December 31, 2011, as 

well as all benefits requirements under 

state mandates that were imposed any 

time after December 31, 2011, 

applicable to the individual or small 

group market. The state’s report is also 

required to describe whether any of the 

state benefit requirements in the report 

were amended or repealed after 

December 31, 2011. Information in the 

state’s report is required to be accurate 

as of the day that is at least 60 days prior 

to the annual reporting submission 

deadline set by HHS. 

We also finalized § 156.111(d)(2) to 

specify that if the state does not notify 

HHS of its required benefits considered 

to be in addition to EHB by the annual 

reporting submission deadline, or does 

not do so in the form and manner 

specified by HHS, HHS will identify 

which benefits are in addition to EHB 

for the state for the applicable plan year. 

HHS’s identification of which benefits 

are in addition to EHB will become part 

of the definition of EHB for the 

applicable state for the applicable plan 

year. 

In the 2021 Payment Notice, we 

finalized that the annual reporting of 

state-required benefits would begin in 

plan year 2021 and set a July 1, 2021 

deadline for states to submit to HHS 

their first complete reporting package. 

We now propose July 1, 2022 as the 

deadline for states to submit to HHS the 

complete reporting package for the 

second year of reporting. This would 

mean that states would notify HHS in 

the manner specified by HHS by July 1, 

2022, of any benefits in addition to EHB 

that QHPs are required to cover in plan 

year 2022 or after plan year 2022 by 

state action taken by May 2, 2022 (60 

days prior to the annual submission 

deadline). As part of this reporting, 

states must also identify which staterequired benefits are not in addition to 

EHB and do not require defrayal in 

accordance with § 155.170, and provide 

the basis for the state’s determination, 

by the July 1, 2022 reporting submission 

deadline. 

The first reporting cycle was intended 

to set the baseline list of state-required 

benefits applicable to QHPs in the 

individual and/or small group market. 

For each subsequent annual reporting 

cycle thereafter, the state is only 

required to update the content in its 

report to add any new benefit 

requirements and to indicate whether 

benefit requirements previously 

reported to HHS have been amended or 

repealed. If a state has not imposed, 

amended, or repealed any state benefit 

requirements since the prior year’s 

reporting deadline, the state is still 

required to report to HHS that there 

have been no changes to state-required 

benefits since the previous reporting 

cycle. In such a scenario, the state 

should submit the same reporting 

package as the previous reporting cycle 

and affirmatively indicate to HHS that 

there have been no changes. 

b. States’ EHB-Benchmark Plan Options 

In the 2019 Payment Notice, we stated 

that we believe states should have 

additional choices with respect to 

benefits and affordable coverage. 

Therefore, we finalized options for 

states to select new EHB-benchmark 

plans starting with the 2020 plan year. 

Under § 156.111(a), a state may modify 

its EHB-benchmark 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 EHBbenchmark plan. 

The 2019 Payment Notice stated that 

we would propose EHB-benchmark plan 

submission deadlines in the HHS 

annual Notice of Benefit and Payment 

Parameters. Accordingly, we propose 

May 6, 2022, as the deadline for states 

to submit the required documents for 

the state’s EHB-benchmark plan 

selection for the 2023 plan year. We 

emphasize that this deadline would be 

firm, and that states should optimally 

have one of their points of contact who 

has been predesignated to use the EHB 

Plan Management Community reach out 

to us using the EHB Plan Management 

Community well in advance of the 

deadline with any questions. Although 

not a requirement, we recommend states 

submit applications at least 30 days 

prior to the submission deadline to 

ensure completion of their documents 

by the proposed deadline. We also 

remind states that they must complete 

the required public comment period and 

submit a complete application by the 

deadline. We seek comment on the 

proposed deadline. 

In the 2019 Payment Notice, we also 

finalized flexibility through which 

states may opt to permit issuers to 

substitute benefits between EHB 

categories. In the preamble to that rule, 

we stated that the deadline applicable to 

state selection of a new benchmark plan 

would also apply to this state opt-in 

process. Therefore, we also propose May 

6, 2022, as the deadline for states to 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78633 

172 79 FR 13743. 

173 79 FR 30240. 

174 84 FR 17454. 

175See 85 FR 29228. 

176The 2013 and 2021 per enrollee premiums for 

private health insurance (excluding Medigap and 

property and casualty insurance) figures used for 

this calculation reflect the latest NHEA data. The 

series used in the determinations of the adjustment 

percentages can be found in Table 17 on the CMS 

website, which can be accessed by clicking the 

‘‘NHE Projections 2019–2028—Tables’’ link located 

in the Downloads section at http://www.cms.gov/ 

Research-Statistics-Data-and-Systems/StatisticsTrends-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/ 

ProjectionsMethodology.pdf. 

177See 78 FR 12847 through 12848. 

178See Revenue Procedure 2013–25, 2013–21 IRB 

1110. http://www.irs.gov/pub/irs-drop/rp-13-25.pdf. 

notify HHS that they wish to permit 

between-category substitution for the 

2023 plan year. States wishing to make 

such an election must do so via the EHB 

Plan Management Community. We seek 

comment on the proposed deadline. 

3. Premium Adjustment Percentage 

(§ 156.130)(e)) 

We propose the 2022 benefit year 

annual premium adjustment percentage 

using the most recent estimates and 

projections of per enrollee premiums for 

private health insurance (excluding 

Medigap and property and casualty 

insurance) from the NHEA, which are 

calculated by CMS’ Office of the 

Actuary. For the 2022 benefit year, the 

premium adjustment percentage will 

represent the percentage by which this 

measure for 2021 exceeds that for 2013. 

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 three other 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 final rule 172 and 2015 Market Standards Rule 173

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. The 2020 

Payment Notice final rule 174 established 

that we will calculate the average per 

capita premium as private health 

insurance premiums minus premiums 

paid for Medicare supplement 

(Medigap) insurance and property and 

casualty insurance, divided by the 

unrounded number of unique private 

health insurance enrollees, excluding all 

Medigap enrollees. Additionally, as 

finalized in the 2021 Payment Notice 

final rule,175 we will finalize the 

premium adjustment percentage and 

related parameters for the 2022 benefit 

year using the NHEA data available at 

the time of this proposed rule for the 

2022 benefit year. 

As such, we propose that the 

premium adjustment percentage for 

2022 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 

2021 ($7,036) exceeds the most recent 

NHEA estimate of per enrollee 

premiums for private health insurance 

(excluding Medigap and property and 

casualty insurance) for 2013 ($4,883).176

Using this formula, the proposed 

premium adjustment percentage for the 

2022 benefit year is 1.4409174688 

($7,036/$4,883), which represents an 

increase in private health insurance 

(excluding Medigap and property and 

casualty insurance) premiums of 

approximately 44.1 percent over the 

period from 2013 to 2021. 

Based on the proposed 2022 premium 

adjustment percentage, we propose the 

following cost-sharing parameters for 

benefit year 2022. 

a. Maximum Annual Limitation on Cost 

Sharing for Plan Year 2022 

We propose to increase the maximum 

annual limitation on cost sharing for the 

2022 benefit year based on the proposed 

value calculated for the premium 

adjustment percentage for the 2022 

benefit year. As finalized in the EHB 

final rule 177 at § 156.130(a)(2), for the 

2022 calendar year, cost sharing for selfonly 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 2022. For 

other than self-only 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 1.4409174688 for 2022 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, 2013,178

we propose that the 2022 benefit year 

maximum annual limitation on cost 

sharing would be $9,100 for self-only 

coverage and $18,200 for other than selfonly coverage. This represents an 

approximately 6.4 percent increase 

above the 2021 parameters of $8,550 for 

self-only coverage and $17,100 for other 

than self-only coverage. We seek 

comment on these proposals. 

b. Reduced Maximum Annual 

Limitation on Cost Sharing (§ 156.130) 

We propose for the 2022 benefit year 

and beyond, unless changed through 

notice-and-comment rulemaking, to use 

the reductions in the maximum annual 

limitation on cost sharing for costsharing plan variations determined by 

the methodology we established 

beginning with the 2014 benefit year, as 

further described later in this section of 

the preamble. 

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 CSRs. Specifically, in part 156 

subpart E, we specified that QHP issuers 

must provide CSRs 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) of the PPACA states 

that the Secretary may adjust the costsharing 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) of 

the PPACA (that is, 73 percent, 87 

78634 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

179Available at https://www.cms.gov/cciio/ 

resources/regulations-and-guidance/index. 

percent, or 94 percent, depending on the 

income of the enrollee). 

As we propose above, the 2022 

maximum annual limitation on cost 

sharing would be $9,100 for self-only 

coverage and $18,200 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 2022 plan 

year and our proposed results. 

Consistent with our analysis for the 

2014 through 2021 benefit years’ 

reduced maximum annual limitation on 

cost sharing, we developed three test 

silver level QHPs, and analyzed the 

impact on AV of the reductions 

described in the PPACA to the proposed 

estimated 2022 maximum annual 

limitation on cost sharing for self-only 

coverage ($9,100). The test plan designs 

are based on data collected for 2021 

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 2022, the test silver 

level QHPs included a PPO with typical 

cost-sharing structure ($9,100 annual 

limitation on cost sharing, $2,775 

deductible, and 20 percent in-network 

coinsurance rate); a PPO with a lower 

annual limitation on cost sharing 

($7,400 annual limitation on cost 

sharing, $3,050 deductible, and 20 

percent in-network coinsurance rate); 

and an HMO ($9,100 annual limitation 

on cost sharing, $4,800 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, $30 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 

a draft version of the 2022 benefit year 

AV Calculator 179 and observed how the 

reductions in the maximum annual 

limitation on cost sharing specified in 

the PPACA affected the AVs of the 

plans. As with prior years, 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). 

However, as with prior years, we 

continue to find that 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. Furthermore, as 

with prior years, for individuals with 

household incomes of 250 to 400 

percent of FPL, without any change in 

other forms of cost sharing, the statutory 

reductions in the maximum annual 

limitation on cost sharing would cause 

an increase in AV that exceeds the 

maximum 70 percent level in the 

statute. 

Beginning with the 2023 benefit year, 

we are proposing to publish the 

required contribution percentage, along 

with the premium adjustment 

percentage and the annual cost-sharing 

limitation parameters, in guidance. For 

additional discussion of the provisions 

of this proposal, please see the preamble 

for Publication of the Premium 

Adjustment Percentage, Maximum 

Annual Limitation on Cost Sharing, 

Reduced Maximum Annual Limitation 

on Cost Sharing, and Required 

Contribution Percentage (§ 156.130). 

The calculation of the reduced 

maximum annual limitation on cost 

sharing has remained consistent since 

the 2014 Payment Notice due to yearover-year consistency of the results of 

our analysis regarding the effects of the 

reduced maximum annual limitation on 

cost sharing on the AV of silver plan 

variations. Therefore, as a result of the 

apparent stability of those results, and 

consistent with prior Payment Notices, 

we propose to continue to use the 

maximum annual limitation on cost 

sharing reductions of 2⁄3 for enrollees 

with a household income between 100 

and 200 percent of FPL, 1⁄5 for enrollees 

with a household income between 200 

and 250 percent of FPL, and no 

reduction for individuals with 

household incomes of 250 to 400 

percent of FPL for the 2022 benefit year 

and beyond. We would continue to 

review the effects of these reductions 

annually, and should we determine that 

this approach should be changed to 

better reflect the statutorily specified 

AVs for silver plan variations, we would 

propose to change these reductions 

through notice and comment 

rulemaking. 

Specifically, we propose to continue 

to use the methodology described above 

for analyzing the effects of the reduced 

maximum annual limitation on cost 

sharing on the AV of silver plan 

variations to verify that the reductions 

do not result in unacceptably high AVs 

before we publish these values in 

guidance for a given benefit year. 

Subsequently, if a future analysis using 

this methodology supports a 

modification to the reduced maximum 

annual limitation for any of the 

household income bands for a future 

benefit year, we would propose those 

modifications to the reduced maximum 

annual limitations through notice-andcomment rulemaking, as appropriate. 

We 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 result in the 

AV of the QHP meeting the specified 

level. 

We seek comment on this analysis 

and the proposed reductions in the 

maximum annual limitation on cost 

sharing calculation methodology for the 

2022 benefit year and beyond. We also 

seek comment on the proposed reduced 

annual limitations on cost sharing for 

the 2022 benefit year (Table 9). 

We note that for 2022, as described in 

§ 156.135(d), states are permitted to 

request HHS’s approval for state-specific 

datasets for use as the standard 

population to calculate AV. No state 

submitted a dataset by the September 1, 

2020 deadline. 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78635 

180 78 FR 12834 through 12833. 181 78 FR 15409. 

TABLE 9—REDUCTIONS IN MAXIMUM ANNUAL LIMITATION ON COST SHARING FOR 2022 

Eligibility category 

Reduced maximum 

annual limitation 

on cost sharing 

for self-only 

coverage for 2020 

Reduced maximum 

annual limitation 

on cost sharing 

for other than 

self-only 

coverage for 2020 

Individuals eligible for CSRs under § 155.305(g)(2)(i) (100–150 percent of FPL) .............................. $3,000 $6,000 

Individuals eligible for CSRs under § 155.305(g)(2)(ii) (151–200 percent of FPL) ............................. 3,000 6,000 

Individuals eligible for CSRs under § 155.305(g)(2)(iii) (201–250 percent of FPL) ............................ 7,250 14,500 

c. Publication of the Premium 

Adjustment Percentage, Maximum 

Annual Limitation on Cost Sharing, 

Reduced Maximum Annual Limitation 

on Cost Sharing, and Required 

Contribution Percentage (§ 156.130) 

Since the 2014 benefit year, HHS has 

published the premium adjustment 

percentage, maximum annual limitation 

on cost sharing, reduced maximum 

annual limitation on cost sharing, and 

required contribution percentage 

parameters through notice-andcomment rulemaking. Beginning with 

the 2023 benefit year, we propose to 

publish these parameters in guidance by 

January of the year preceding the 

applicable benefit year, unless HHS is 

changing the methodology for 

calculating the parameters, in which 

case, we would do so through noticeand-comment rulemaking. We 

additionally propose to publish in 

guidance the premium adjustment 

percentage and related parameters using 

the most recent NHEA income and 

premium data that is available at the 

time these values are published in 

guidance or, if HHS is changing the 

methodology for calculating these 

parameters, at the time these values are 

proposed in notice-and-comment 

rulemaking. Publication of these 

parameters prior to the release of 

updates to the NHEA data, which 

typically (but not always) occurs in 

February or March, is consistent with 

the 2021 Payment Notice policy to 

finalize the premium adjustment 

percentage, maximum limitation on cost 

sharing, reduced maximum limitation 

on cost sharing, and required 

contribution percentage using NHEA 

data that would be available at the time 

that the proposed rule would have been 

published. 

In the EHB final rule,180 HHS 

established at § 156.130(e) that HHS will 

publish the annual premium adjustment 

percentage in the annual HHS notice of 

benefit and payment parameters. 

Additionally, in the 2014 Payment 

Notice final rule,181 HHS established at 

§ 156.420(a)(1)(i), (2)(i), and (3)(i), that 

the reduced annual limitations on cost 

sharing would be published in the 

applicable benefit year’s annual HHS 

notice of benefit and payment 

parameters. Due to the timing of 

publication of the annual HHS notice of 

benefit and payment parameters final 

rule in past years, stakeholders have 

suggested that when HHS is not 

changing the calculation methodology 

for these parameters, HHS should 

publish earlier the premium adjustment 

percentage, maximum limitation on cost 

sharing, reduced maximum limitation 

on cost sharing, and required 

contribution percentage. These 

stakeholders assert that an earlier 

publication would allow issuers to 

incorporate these parameters for rate 

setting and the submission of QHP 

benefit templates earlier than would be 

possible if the parameters were 

published in the applicable benefit 

year’s notice of benefit and payment 

parameters. 

In addition, because the 

methodologies used to calculate the 

premium adjustment percentage, 

required contribution percentage, and 

maximum annual limitation on cost 

sharing have been previously 

established through rulemaking, the 

calculation of these amounts is a 

function of entering the applicable 

figures into the established equations, 

and therefore, does not require 

rulemaking to establish. Additionally, 

the calculation of the reduced maximum 

annual limitation on cost sharing has 

remained consistent since the 2014 

Payment Notice final rule. Therefore, as 

discussed earlier in this proposed rule, 

we have proposed the reductions to the 

maximum annual limitation on cost 

sharing as well as the methodology for 

determining whether these reductions 

raise plan AVs above acceptable levels 

for the 2022 benefit year and beyond. 

With these methodologies in place, 

beginning with the 2023 benefit year, 

we propose to amend §§ 156.130(e) and 

156.420(a) to reflect that we would 

publish the premium adjustment 

percentage, along with the maximum 

annual limitation on cost sharing, the 

reduced maximum annual limitation on 

cost sharing, and the required 

contribution percentage in guidance by 

January of the year preceding the 

applicable benefit year (for example, the 

2023 premium adjustment percentage 

would be published in guidance no later 

than January 2022), unless HHS is 

amending the methodology to calculate 

these parameters, in which case HHS 

would amend the methodology and 

publish the parameters through noticeand-comment rulemaking. 

We believe that publishing the final 

premium adjustment percentage and 

associated final parameters in guidance 

annually instead of through notice-andcomment rulemaking is consistent with 

our efforts to provide information to 

stakeholders in a timely manner. 

We seek comment on these proposals. 

4. Network Adequacy Standards 

(§ 156.230) 

45 CFR 156.230, which implements 

section 1311(c)(1)(B) of the PPACA, 

describes the network adequacy 

standards for QHP issuers that use a 

provider network. We have received 

questions regarding whether the 

requirements at § 156.230 apply to a 

plan that does not use a provider 

network, such as an indemnity plan, 

and does not vary benefits based on 

whether enrollees receive services from 

an in-network or out-of-network 

provider. 

Nothing in the PPACA requires a QHP 

issuer to use a provider network. 

Accordingly, a QHP issuer may choose 

to design a QHP that does not use a 

provider network, and to provide equal 

benefits for covered services without 

regard to whether the issuer has a 

network participation agreement with 

the provider that furnishes the covered 

services. Section 156.230 does not 

impose any network adequacy 

certification requirement for QHPs that 

do not use a provider network, and has 

not since the inception of the 

Exchanges. To address any ambiguity in 

this section, we propose to codify this 

78636 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

182 ‘‘Enforcement Safe Harbor for Qualified Health 

Plan Termination Notices During the 2019 Benefit 

Year,’’ August 26, 2020. Available at https://

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

Health-Insurance-Marketplaces/Downloads/ 

Termination-Notices-Enforcement-Discretion.pdf. 

183This includes an FFE, as a Federal Exchange 

may be considered an Exchange established under 

section 1311 of the PPACA. King v. Burwell, 576 

U.S. 988 (2015). 

184This information is: The percentage of all 

prescriptions that were provided through retail 

pharmacies compared to mail order pharmacies, 

and the percentage of prescriptions for which a 

generic drug was available and dispensed (generic 

dispensing rate), by pharmacy type (which includes 

an independent pharmacy, chain pharmacy, 

supermarket pharmacy, or mass merchandiser 

pharmacy that is licensed as a pharmacy by the 

state and that dispenses medication to the general 

public), that is paid by the health benefits plan or 

PBM under the contract; the aggregate amount, and 

the type of rebates, discounts, or price concessions 

(excluding bona fide service fees, which include but 

are not limited to distribution service fees, 

inventory management fees, product stocking 

allowances, and fees associated with administrative 

services agreements and patient care programs 

(such as medication compliance programs and 

patient education programs)) that the PBM 

negotiates that are attributable to patient utilization 

under the plan, and the aggregate amount of the 

rebates, discounts, or price concessions that are 

passed through to the plan sponsor, and the total 

number of prescriptions that were dispensed; and, 

the aggregate amount of the difference between the 

amount the health benefits plan pays the PBM and 

the amount that the PBM pays retail pharmacies, 

and mail order pharmacies, and the total number 

of prescriptions that were dispensed. 

185The purposes are: As the Secretary determines 

to be necessary to carry out Section 1150A or part 

D of title XVIII; to permit the Comptroller General 

to review the information provided; to permit the 

Director of the Congressional Budget Office to 

review the information provided; and, to States to 

carry out section 1311 of the PPACA. 

longstanding interpretation at paragraph 

(f) to provide that a plan that does not 

vary benefits based on whether the 

issuer has a network participation 

agreement with the provider that 

furnishes the covered services toned not 

comply with the network adequacy 

standards at paragraphs (a) through (e) 

in order to be certified as a QHP. This 

proposal would simply clarify existing 

QHP requirements and would not 

change or add any additional QHP 

certification requirement. 

We invite comment on this proposal. 

5. Termination of Coverage or 

Enrollment for Qualified Individuals 

(§ 156.270) 

In the 2021 Payment Notice, CMS 

finalized a requirement that under 

§ 156.270(b)(1), QHP issuers must send 

termination notices with effective dates 

and reason for the termination to 

enrollees for all termination events. We 

finalized this as proposed, noting that 

all commenters who weighed in on this 

topic supported our proposal. This 

policy became effective July 13, 2020. 

We are not proposing any changes to 

paragraph (b)(1) beyond what we 

finalized in the 2021 Payment Notice for 

the reasons discussed below. 

In finalizing this rule, CMS 

inadvertently omitted discussion of two 

comments opposing the proposal. These 

comments raised concerns about 

unnecessary additional administrative 

costs and IT builds, and noted that a 

termination notice could be confusing 

in certain scenarios—for example, if the 

enrollee switches between QHPs offered 

by the same issuer, a termination notice 

from their issuer could cause confusion. 

These commenters proposed instead 

that Exchanges should be required to 

clearly convey the eligibility 

termination reason and effective date in 

the Exchange’s own eligibility notices, 

consistent with the data conveyed to 

issuers on 834 termination transactions. 

We are sensitive to commenters’ 

concerns that issuers need sufficient 

time to build IT systems to implement 

this policy. In response, CMS issued 

guidance allowing issuers using the 

federal platform enforcement discretion 

until February 1, 2021 to implement the 

new termination notice requirement.182

However, the comments in opposition 

of the proposal do not change CMS’s 

policy goals underlying our decision to 

finalize the rule as proposed. FFEs do 

not send termination notices for any 

termination scenario other than 

citizenship data-matching issue 

expirations and terminations associated 

with Medicare PDM when the enrollee 

has elected at plan selection to 

terminate Exchange coverage when 

found dually enrolled. The FFEs also do 

not send termination notices in 

enrollee-initiated terminations which 

must be requested at the Exchange. 

Similarly, the FFEs do not send 

termination notices when an enrollee 

switches QHPs within the same issuer. 

This is all appropriate, because the 

issuer is the primary communicator to 

the enrollee about their coverage. We 

still believe that termination notices 

would be helpful in these scenarios, 

even in plan selection changes, because 

an enrollee switching QHPs could have 

their premium, cost sharing, and 

provider network affected. As one of the 

comments in support of our proposal 

noted, it is important for the enrollee to 

have in writing the actual termination 

date for their records, in case of 

miscommunication with the issuers 

about the preferred date or to later 

dispute an inaccurate Form 1095–A. 

Another commenter agreed that issuers 

should send termination notices during 

voluntary terminations associated with 

Medicare PDM as it would help the 

enrollee confidently transition to 

Medicare. 

Complaints about terminations are 

one of the largest sources of casework. 

More consistent communication is part 

of the solution. We believe consumers 

should be notified of these changes, 

even if they initiated them so that 

enrollees have a record that the issuer 

completed the request. Issuers are the 

proper messenger of termination 

noticing for many reasons. For example, 

Exchange issuers historically are the 

senders of termination notices, and 

some issuers acknowledge in their 

comments that they already do send 

termination notices in all scenarios. 

Furthermore, the issuer has record of 

the termination date needed for the 

termination notice before the Exchange 

in some cases, such as some retroactive 

termination requests handled through 

casework, and State Exchange issuer 

terminations described in 

§ 155.430(d)(iv). Indeed, one reason we 

proposed regulating in this area is that 

we were receiving detailed questions 

from issuers about which termination 

scenarios required issuer notices; we 

believe requiring issuer termination 

notices for all scenarios in the long run 

makes the requirement simpler. 

Therefore, we are not proposing any 

changes to § 156.270(b)(1) beyond what 

we finalized in the 2021 Payment 

Notice. 

6. Prescription Drug Distribution and 

Cost Reporting by QHP Issuers 

(§ 156.295) 

Section 6005 of the PPACA added 

section 1150A(a)(2) of the Act to require 

a PBM under a contract with a Medicare 

Part D plan sponsor or Medicare 

Advantage plan that offers a Medicare 

Part D plan, or with a QHP offered 

through an Exchange established by a 

state under section 1311 of the 

PPACA 183 to provide certain 

prescription drug information to the 

Secretary, at such times, and in such 

form and manner, as the Secretary shall 

specify. Section 1150A(b) of the Act 

addresses the information that a QHP 

issuer or their PBM must report.184

Section 1150A(c) of the Act requires the 

information reported to be kept 

confidential and not to be disclosed by 

the Secretary or by a plan receiving the 

information, except that the Secretary 

may disclose the information in a form 

which does not disclose the identity of 

a specific PBM, plan, or prices charged 

for drugs for certain purposes.185

In the 2012 Exchange Final Rule, we 

codified the requirements contained in 

section 1150A of the Act with regard to 

QHPs at § 156.295. In that rule, we 

interpreted section 1150A of the Act to 

require QHP issuers to report the 

information described in section 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78637 

186 85 FR 4993 through 4994. 

187 85 FR 56227 through 56229. 

188Pharmacy Benefit Manager Transparency. 

CMS–10725. Available at https://www.cms.gov/ 

regulations-and-guidancelegislationpaperwork

reductionactof1995pra-listing/cms-10725. 

189Section 1150A(b)(1) requires the reporting of 

the percentage of all prescriptions that were 

provided through retail pharmacies compared to 

mail order pharmacies, and the percentage of 

prescriptions for which a generic drug was available 

and dispensed. 

190See 77 FR 22072 at 22093. 

191See 85 FR 4993 through 4994. 

192See 78 FR 65077 and 65078. 

193See the proposed Program Integrity Rule, 78 

FR 37058. Also see 78 FR at 65077 and 65078. 

194 Ibid. 

195See 78 FR 65078 and 65079. 

1150A(b) of the Act and did not specify 

the responsibilities of PBMs that 

contract with QHP issuers to report this 

information. On January 28, 2020 186

and on September 11, 2020,187 we 

published notices in the Federal 

Register and solicited public comment 

on collection of information 

requirements detailing the proposed 

collection envisioned by section 1150A 

of the Act to HHS.188

a. QHP Issuer Responsibilities 

Elsewhere in this rule, we propose to 

add new part 184 to address the 

responsibilities of PBMs under the 

PPACA and to add § 184.50 to codify in 

regulation the statutory requirement that 

PBMs that are under contract with an 

issuer of one or more QHPs report the 

data required by section 1150A of the 

Act. Accordingly, we propose to revise 

§ 156.295(a) to state that where a QHP 

issuer does not contract with a PBM to 

administer the prescription drug benefit 

for QHPs, the QHP issuer will report the 

data required by section 1150A of the 

Act to HHS. We propose corresponding 

revisions throughout § 156.295 to 

remove the applicability of the reporting 

requirement for PBMs under this section 

and propose revising the title to 

‘‘Prescription drug distribution and cost 

reporting by QHP issuers’’. 

As explained in the preamble at 

§ 184.50, we acknowledge that section 

1150A places responsibility on both the 

QHP issuer and their PBMs to report 

this prescription drug data. Generally, 

where a QHP issuer contracts with a 

PBM, the PBM is more likely to be the 

source of the data that must be reported. 

Therefore, to reduce overall burden, 

rather than requiring the QHP issuer to 

serve as a conduit between its PBM and 

HHS, or unnecessarily requiring both 

the PBM and the QHP issuer to submit 

duplicated data, we propose to 

implement section 1150A to make QHP 

issuers responsible for reporting this 

data directly to the Secretary only when 

the QHP issuer does not contract with 

a PBM to administer the prescription 

drug benefit for their QHPs. Where a 

QHP contracts with a PBM, the PBM is 

responsible for reporting data to the 

Secretary as required by § 184.50. 

Although we are unaware of any QHP 

issuer that does not currently utilize a 

PBM, we believe that, together, the 

proposals to revise § 156.295 and to add 

§ 184.50 would ensure the collection of 

data required by section 1150A of the 

Act in all circumstances, including 

when a QHP issuer does not use a PBM 

to administer its prescription drug 

benefit. Retaining the requirement for 

QHP issuers to report data at § 156.295 

when they do not contract with a PBM 

would ensure that the data is 

consistently collected every plan year. 

We also propose to remove 

§ 156.295(a)(3) to remove the 

requirement for QHP issuers to report 

spread pricing amounts when the QHP 

issuer does not contract with a PBM to 

administer the prescription drug benefit 

for their QHPs. Spread pricing amounts 

are only present where a PBM acts as an 

intermediary between the QHP issuer 

and a drug manufacturer. If a QHP 

issuer does not contract with a PBM, no 

such intermediary exists and it is not 

possible for QHP issuers to report this 

data. 

We seek comment on these proposals. 

b. Reporting of Data by Pharmacy Type 

Section 1150A(b)(1) of the Act 

requires the Secretary to collect certain 

QHP prescription drug data 189 by 

pharmacy type (which includes an 

independent pharmacy, chain 

pharmacy, supermarket pharmacy, or 

mass merchandiser pharmacy that is 

licensed as a pharmacy by the state and 

that dispenses medication to the general 

public). This requirement was 

previously codified at § 156.295(a)(1). In 

the Medicare Program; Changes to the 

Medicare Advantage and the Medicare 

Prescription Drug Benefit Programs for 

Contract Year 2013 and Other Changes 

final rule, we recognized that it is not 

currently possible to report such data by 

pharmacy type because pharmacy type 

is not a standard classification currently 

captured in industry databases or 

files.190 We understand that these types 

continue not to be standard 

classifications currently captured in 

industry databases or files, as indicated 

by comments submitted in response to 

the January 28, 2020 notice in the 

Federal Register soliciting public 

comment on the collection of 

information requirements of this 

collection.191 To reduce the burden of 

this collection, we propose to revise 

§ 156.295(a)(1) to remove the 

requirement to report the data described 

at section 1150A(b)(1) of the Act by 

pharmacy type. We intend to collect this 

information at a time when this 

requirement would impose reasonable 

burden. We seek comment on ways that 

we may collect the data by pharmacy 

type without creating unreasonable 

burden and any existing definitions that 

may exist that could be leveraged for 

this purpose. We also seek comment on 

the time and costs required for PBMs to 

begin reporting by pharmacy type, if 

definitions were finalized. 

7. Oversight of the Administration of the 

Advance Payments of the Premium Tax 

Credit, Cost-Sharing Reductions, and 

User Fee Programs (§ 156.480) 

a. Application of Requirements to 

Issuers in State Exchanges and SBE–FPs 

In the second Program Integrity Rule, 

we finalized general provisions related 

to the oversight of QHP issuers in 

relation to APTC and CSRs.192 We 

explained that since APTC and CSR 

payments are federal funds which pass 

from HHS directly to QHP issuers, it is 

necessary for HHS to oversee QHP 

issuer compliance in these areas, 

regardless of whether the QHP is offered 

through a State Exchange or an FFE. As 

such, to effectively oversee the payment 

of APTC and CSRs by QHP issuers, HHS 

established standards in part 156, 

subpart E for QHP issuers participating 

in FFEs and State Exchanges. We also 

noted that in states with State 

Exchanges, the state would have 

primary enforcement authority over 

QHP issuers participating in the state’s 

individual market exchange that were 

not in compliance with the standards 

set forth in part 156, subpart E.193

However, if the State Exchange does not 

enforce such standards, HHS would 

enforce compliance with these 

requirements, including the imposition 

of CMPs on QHP issuers participating in 

State Exchanges using the same 

standards and processes for QHP issuers 

participating in FFEs set forth in part 

156, subpart I.194 In the second Program 

Integrity Rule, we also finalized general 

provisions that require issuers offering 

QHPs in an FFE maintain all documents 

and records and other evidence of 

accounting procedures and practices, 

which are critical for HHS to conduct 

activities necessary to safeguard the 

financial and programmatic integrity of 

the FFEs.195 As finalized in 45 CFR 

156.705(a)(1), this includes the 

authority for HHS to include periodic 

auditing of the QHP issuer’s financial 

records related to the participation in an 

FFE. To date, we have leveraged this 

78638 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

196The applicable Federal standards for APTC 

and CSRs are found in part 156, subpart E, which 

apply to QHP issuers participating in all Exchanges 

types (FFEs, State Exchanges and SBE–FPs). The 

applicable Federal standards for user fees are found 

in 45 CFR 156.50, which apply to QHP issuers in 

FFEs and SBE–FPs. 

197 78 FR 65077 and 65078. 

198See 45 CFR 156.705(a)(1). Also see 78 FR 

65078 and 65079. 

199HHS does not intend to conduct user fee 

compliance reviews of QHP issuers participating in 

State Exchanges that do not rely on the Federal 

platform. Such reviews would be limited to QHP 

issuers participating in FFE and SBE–FP states. 

200See 78 FR 65100. 

authority to conduct user fee audits of 

QHP issuers participating in an FFE. 

In this rulemaking, we propose 

amendments to consolidate HHS audit 

authority regarding APTC, CSR, and 

user fee audits by expanding the audit 

authority under § 156.480(c) to also 

capture user fees audits by HHS, or its 

designee, of QHP issuers participating 

in an FFE. Additionally, as part of 

determining whether APTC and CSR 

amounts were properly paid to issuers, 

and whether user fee amounts were 

properly collected, HHS regularly 

identifies discrepancies in issuer 

records caused by issuer noncompliance with other applicable 

Exchange operational standards. 

Examples include failure to correctly 

effectuate or terminate coverage, or to 

correctly calculate premiums. In 

addition, we propose to apply the same 

framework to QHP issuers participating 

in SBE–FP states. As such, QHP issuers 

in SBE–FP states would be required to 

comply with HHS audits under 

§ 156.480(c) to confirm compliance with 

the applicable standards established in 

part 156, subpart E for APTC and CSRs 

and § 156.50 for user fees. 

We further propose that in situations 

where the state fails to substantially 

enforce such standards, HHS would 

enforce compliance, including imposing 

CMPs using the same standards set forth 

in part 156, subpart I. Based on our 

experience conducting audits of APTC, 

CSRs, and user fees, we also propose 

several amendments to § 156.480(c) to 

ensure we can effectively oversee the 

payment of these amounts by QHP 

issuers, regardless of Exchange type (for 

example, FFE, State Exchange, or SBE– 

FP). 

As detailed below, to further support 

our program integrity efforts in these 

areas, we propose to amend § 156.480(c) 

to codify additional details regarding 

HHS audits and to capture authority for 

HHS to conduct compliance reviews of 

QHP issuer compliance with the 

applicable Federal APTC, CSR, and user 

fee standards,196 including the 

consequences for the failure to comply 

with an audit. In addition, we propose 

amendments to §§ 156.800 and 156.805 

to set forth the framework for HHS 

enforcement of the applicable Federal 

APTC, CSR, and user fee standards in 

situations where state authorities fail to 

substantially enforce those standards 

with respect to the QHP issuers 

participating in State Exchanges and 

SBE–FPs. 

We seek comment on these proposals, 

including with respect to how HHS 

could coordinate with State Exchanges, 

SBE–FPs, and state authorities to 

address non-compliance by QHP issuers 

with applicable Federal APTC, CSRs, 

and user fee standards. We seek 

comment on ways to balance 

enforcement by State Exchanges and 

SBE–FPs and the protection and 

oversight of federal funds by HHS. 

b. Audits and Compliance Reviews of 

APTC, CSRs, and User Fees 

(§ 156.480(c)) 

In prior rulemaking, we codified 

authority for HHS to audit an issuer that 

offers a QHP in the individual market 

through an Exchange to assess 

compliance with the requirements of 

part 156, subpart E.197 We also 

previously codified general authority for 

HHS to periodically audit a QHP 

issuer’s financial records related to its 

participation in an FFE.198 Recently, 

HHS completed the audits for the 2014 

benefit year CSR payments. During 

these audits, HHS encountered 

challenges working with some issuers. 

Specifically, HHS experienced 

difficulties receiving requested audit 

data and materials in a timely fashion 

and receiving data in a format that is 

readily usable for purposes of 

conducting the audit. As such, similar 

to the proposals related to audits of 

issuers of reinsurance-eligible plans and 

risk adjustment covered plans discussed 

earlier in this proposed rule, we propose 

to amend § 156.480(c) to provide more 

clarity around the issuer requirements 

for APTC and CSR audits. The proposed 

amendments codify more details about 

the audit process and clarify issuer 

obligations with respect to these audits, 

including what it means to comply with 

an audit and the consequences for 

failing to comply with such 

requirements. Additionally, we propose 

to amend § 156.480(c) to also capture 

and clarify HHS’s ability to audit FFE 

and SBE–FP user fees. As such we 

proposed to rename § 156.480, 

‘‘Oversight of the Administration of the 

Advance Payments of the Premium Tax 

Credit, Cost-sharing Reductions, and 

User Fee Programs.’’ HHS currently 

reviews compliance with applicable 

Federal user fee standards when 

conducting APTC audits because the 

same data is used for both purposes; as 

such, there will be minimal increased 

burden as a result from this codification. 

We also propose several amendments 

to § 156.480(c) to expand the oversight 

tools available to HHS beyond 

traditional audits to also provide 

authority for HHS to conduct 

compliance reviews of QHP issuers to 

assess compliance with the applicable 

Federal APTC, CSR, and user fee 

standards. These proposed HHS 

compliance reviews would follow the 

standards set forth for compliance 

review of QHP issuers participating in 

FFEs established in 45 CFR 156.715. 

However, compliance reviews under 

this section would be conducted to 

confirm QHP issuer compliance with 

the APTC, CSR, and user fee standards 

in subpart E of part 156 and 45 CFR 

156.50 for user fees, as applicable, and 

they would generally extend to QHP 

issuers participating in all Exchanges.199

A compliance review may be targeted at 

a specific potential error and conducted 

on an ad hoc basis.200 For example, 

HHS may require an issuer to submit 

data pertaining to specific data 

submissions. We believe this flexibility 

is necessary and appropriate to provide 

HHS a mechanism to address situations 

in which a systematic error or issue is 

identified during the random and 

targeted auditing of a sample of QHP 

issuers, and HHS suspects similarly 

situated issuers may have experienced 

the same systematic error or issue but 

were not selected for audit in the year 

in question. We intend to continue our 

collaborative oversight approach and 

coordinate with State Exchanges and 

SBE–FPs to ensure QHP issuer 

compliance with the applicable 

standards in part 156, subpart E and 45 

CFR 156.50. 

First, we propose to rename 

§ 156.480(c) to ‘‘Audits and Compliance 

Reviews’’ in order to clarify that the 

authority described in this section 

would apply to audits and the proposed 

HHS compliance reviews to evaluate 

QHP issuer compliance with the 

applicable Federal APTC, CSR, and user 

fee standards. We similarly propose to 

update the introductory language in 

§ 156.480(c) to incorporate a reference to 

HHS compliance reviews. As amended, 

§ 156.480(c) would provide that HHS or 

its designee may audit and perform 

compliance reviews to assess whether 

an issuer that offers a QHP in the 

individual market through an Exchange 

is in compliance with the applicable 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78639 

requirements of subpart E, part 156, and 

45 CFR 156.50. We propose to capture 

in a new sentence in the amended 

§ 156.480(c) that HHS would conduct 

these compliance reviews consistent 

with the standards set forth in 45 CFR 

156.715. As detailed earlier in this 

preamble, these oversight tools would 

be available to HHS to evaluate 

compliance by QHP issuers 

participating in all Exchanges with the 

applicable Federal APTC, CSR, and user 

fee standards. 

Second, we propose to add new 

§ 156.480(c)(1) to establish notice and 

conference requirements for these 

audits. Proposed new paragraph (c)(1) 

states that HHS would provide at least 

15 calendar days advance notice of its 

intent to conduct an audit of an QHP 

issuer under § 156.480(c). Under 

proposed paragraph (c)(1)(i), HHS 

proposes to codify that all audits would 

include an entrance conference at which 

the scope of the audit would be 

presented and an exit conference at 

which the initial audit findings would 

be discussed. 

Third, HHS proposes to add new 

paragraph (c)(2) to capture the 

requirements issuers must meet to 

comply with an audit under this 

section. Under the proposed paragraph 

(c)(2)(i), we propose to require the issuer 

to ensure that its relevant employees, 

agents, contractors, subcontractors, 

downstream entities, and delegated 

entities cooperate with any audit or 

compliance review under this section. 

In new proposed paragraph (c)(2)(ii), we 

propose to require issuers to submit 

complete and accurate data to HHS or 

its designees that is necessary to 

complete the audit, in the format and 

manner specified by HHS, no later than 

30 calendar days after the initial 

deadline communicated and established 

by HHS at the entrance conference 

described in proposed paragraph 

(c)(1)(i). For example, for CSR audits, 

HHS may request that QHP issuers 

provide a re-adjudicated claims data 

extract for the selected sample of 

policies to verify accuracy of the readjudication process and reported 

amounts (this would include 

verification of all elements necessary to 

perform accurate re-adjudication) and 

data extract containing incurred claims 

for the selected sample of policies to 

verify accuracy of actual amount the 

enrollee(s) paid for EHBs via an 

Electronic File Transfer. As another 

example, for APTC audits, issuers may 

be asked to provide data to validate and 

support APTC payments received for 

the applicable benefit year. 

Fourth, under proposed 

§ 156.480(c)(2)(iii), HHS proposes to 

require that issuers respond to any audit 

notices, letters, and inquires, including 

requests for supplemental or supporting 

information, no later than 15 calendar 

days after the date of the notice, letter, 

request, or inquiry. We believe that the 

proposed requirements in paragraph 

(c)(2) are necessary and appropriate to 

ensure the timely completion of audits 

and to protect the integrity of the APTC, 

CSR, and user fee programs and the 

payments made thereunder. 

Fifth, recognizing that there may be 

situations that warrant an extension of 

the timeframes under paragraph 

(c)(2)(ii) or (iii), as applicable, we 

propose to also add a new paragraph 

(c)(2)(iv) to establish a process for an 

issuer to request an extension. To 

request an extension, we propose to 

require the issuer to submit a written 

request to HHS within the applicable 

timeframe established in paragraph 

(c)(2)(ii) or (iii). The written request 

would have to detail the reasons for the 

extension request and the good cause in 

support of the request. For example, 

good cause may include an inability to 

produce information in light of 

unforeseen emergencies, natural 

disasters, or a lack of resources due to 

a PHE. If the extension is granted, the 

issuer must respond within the 

timeframe specified in HHS’ notice 

granting the extension of time. 

Sixth, under § 156.480(c)(3), HHS 

proposes that it would share its 

preliminary audit findings with the 

issuer, and further proposes that the 

issuer would then have 30 calendar 

days to respond to such findings in the 

format and manner as specified by HHS. 

HHS would describe the process, 

format, and manner by which an issuer 

can dispute the preliminary audit 

findings in the preliminary audit report 

sent to the issuer. For example, if the 

issuer disagrees with the findings set 

forth in the preliminary audit report, 

HHS would require the issuer to 

respond to such findings by submitting 

written explanations that detail its 

dispute(s) or additional rebuttal 

information via Electronic File Transfer. 

HHS proposes under paragraph (c)(3)(i) 

that if the issuer does not dispute or 

otherwise respond to the preliminary 

findings within 30 calendar days, the 

audit findings would become final. In 

new proposed paragraph (c)(3)(ii), if the 

issuer timely responds and disputes the 

preliminary audit findings within 30 

calendar days, HHS would review and 

consider such response and finalize the 

audit findings after such review. HHS 

would provide contact and other 

information necessary for an issuer to 

respond to the preliminary audit 

findings in the preliminary audit report 

sent to the issuer. 

Seventh, HHS proposes to add a new 

section at § 156.480(c)(4) to capture the 

process and requirements related to 

final audit findings and reports. If an 

audit results in the inclusion of a 

finding in the final audit report, the 

issuer must comply with the actions set 

forth in the final audit report in the 

manner and timeframe established by 

HHS. We note that the actions set forth 

in the final audit report could require an 

issuer to return APTC or CSRs or make 

additional user fee payments. HHS 

further proposes that (1) the issuer must 

provide a written corrective action plan 

to HHS for approval within 30 calendar 

days of the issuance of the final audit 

report; (2) the issuer must implement 

the corrective action plan; and (3) the 

issuer must provide HHS with written 

documentation demonstrating the 

adoption and completion of the required 

corrective actions. 

If an issuer fails to comply with the 

audit requirements set forth in new 

proposed § 156.480(c), HHS proposes in 

paragraph (c)(5)(i) that HHS would 

notify the issuer of payments received 

that the issuer has not adequately 

substantiated, and in new proposed 

paragraph (c)(5)(ii), HHS would notify 

the issuer that HHS may recoup any 

payments identified as not adequately 

substantiated if the APTC, CSR, or user 

fee debt is not paid. Therefore, the 

continued failure to respond to or 

cooperate with an audit under 

paragraph (c) and provide the necessary 

information to substantiate the 

payments made could result in HHS 

recouping up to 100 percent of the 

APTC or CSR payments made to an 

issuer for the benefit year(s) that are the 

subject of the audit if the APTC,CSR, or 

user fee debt is not paid. 

APTC and CSR amounts recovered by 

HHS as a result of an audit under 

§ 156.480(c) would be paid to the U.S. 

Treasury. User fee amounts recovered 

by HHS as a result of an audit under 

paragraph (c) would be paid to the ACA 

Marketplace user fee program collection 

account. 

Lastly, HHS proposes to add a new 

paragraph (c)(6) to § 156.480 to codify 

HHS’ ability to enforce the applicable 

Federal APTC, CSR, and user fee 

standards if a State Exchange or SBE–FP 

is not enforcing or fails to substantially 

enforce one or more of these 

requirements. In instances where HHS 

enforces compliance with the applicable 

APTC, CSR, and user fee standards with 

respect to QHP issuers participating in 

State Exchanges or SBE–FPs, HHS 

would use the same standards and 

processes as outlined in §§ 156.805 and 

78640 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

201Exchange models include State Exchanges, 

SBE–FPs, and FFEs. HHS does not intend to use 

this authority to impose CMPs related to user fee 

standards applicable to QHP issuer participating in 

State Exchanges. 

202See the proposed Program Integrity Rule, 78 

FR 37058. Also see 78 FR 65077 and 65078. 

203 Ibid. 

204Section 1321(c)(2) of the PPACA provides that 

the enforcement framework established in section 

2736(b), which was renumbered 2723(b), of the PHS 

Act shall apply to the enforcement of requirements 

established in section 1321(a)(1). 

205As detailed earlier, when HHS is responsible 

for enforcement of these Exchange requirements, we 

also propose to extend authority for HHS to pursue 

a compliance review under §§ 156.480(c) and 

156.715 to evaluate compliance with federal APTC, 

CSR, and user fee requirements by a QHP issuer 

participating in a State Exchange or SBE–FP. 

156.806 for QHP issuers participating in 

an FFE with respect to the imposition of 

CMPs. This would include the proposed 

extension of the process outlined in 

§ 156.901, et seq. for the QHP issuer to 

appeal the imposition of CMPs. For a 

discussion of the framework and 

proposed accompanying penalties for 

non-compliance in situations where 

HHS is responsible for enforcement of 

these requirements, see the below 

discussion of proposed changes to 

§§ 156.800 and § 156.805. 

We seek comment on these proposals, 

including HHS’s clarification of its 

compliance review authority, the 

proposed timeframes and processes for 

issuers to respond to audit notices and 

requests for information and for issuers 

to request extensions of those 

timeframes, and the proposals related to 

HHS’s authority to enforce compliance 

with the above requirements if a State 

Exchange or SBE–FP is not enforcing or 

fails to substantially enforce one or 

more of these requirements. 

8. Subpart I—Enforcement Remedies in 

Federally-Facilitated Exchanges; 

Available Remedies Scope (§ 156.800) 

In this proposed rule, we propose to 

rename Subpart I to ‘‘Enforcement 

Remedies in the Exchanges,’’ and to 

make other amendments to clarify that 

HHS has the ability to impose CMPs 

when it is enforcing the applicable 

federal requirements in part 156, 

subpart E and 45 CFR 156.50 for user 

fees, regardless of whether the Exchange 

is established and operated by a state 

(including a regional Exchange or 

subsidiary exchange) or by HHS.201 As 

explained in prior rulemaking, in states 

where there is a State Exchange or SBE– 

FP, the State Exchange or SBE–FP has 

primary enforcement authority over 

QHP issuers participating in the 

Exchange and ensuring compliance with 

the applicable Federal APTC, CSR, and 

user fee standards.202 However, 

consistent with the framework 

established in section 1321(c)(2) of the 

PPACA, HHS has authority to step in to 

enforce requirements related to the 

operation of Exchanges and the offering 

of QHPs through Exchanges if a state 

fails to do so.203 204 As such, in the case 

of a determination by the Secretary that 

a State Exchange or SBE–FP has failed 

to enforce or substantially enforce a 

federal requirement (or requirements) 

related to QHP issuer participation in 

the individual market Exchange, HHS 

has authority to step in and enforce 

QHP issuer compliance with the 

requirement(s). 

Through its cross-reference to section 

2723(b) of PHS Act, section 1321(c)(2) of 

the PPACA authorizes the Secretary to 

impose CMPs for non-compliance with 

applicable federal Exchange 

requirements. In this proposed rule, we 

propose to codify HHS authority to 

impose CMPs for non-compliance by 

QHP issuers that participate or have 

participated in a State Exchange or 

SBE–FP in situations where HHS steps 

in to enforce certain requirements. 

Specifically, this proposal is focused on 

ensuring compliance with the standards 

for APTC, CSR payments, and user fees 

captured in part 156, subpart E and 45 

CFR 156.50. Under this proposal, we 

would apply the bases and follow the 

processes for imposing CMPs as set 

forth in § 156.805, would send a notice 

of non-compliance as set forth in 

§ 156.806, and would extend the 

administrative review and appeal 

process set forth in § 156.901, et seq. to 

provide a forum for QHP issuers in State 

Exchanges and SBE–FPs to appeal the 

imposition of CMPs by HHS. We are not 

proposing to extend the authority to 

decertify a QHP under § 156.800(a)(2) 

for non-compliance by QHP issuers in 

State Exchanges or SBE–FPs; QHP decertification in State Exchanges or SBE– 

FPs would remain an available 

enforcement tool for the applicable 

Exchange. This proposal is not intended 

to duplicate state enforcement efforts, as 

HHS generally depends on State 

Exchanges and SBE–FPs to enforce 

federal requirements applicable to QHPs 

and QHP issuers participating in the 

state’s individual market Exchange. The 

proposed amendments are instead 

intended to establish an enforcement 

framework to capture situations where 

HHS is responsible for enforcement if a 

State Exchange or SBE–FP fails to do so 

and is focused on the Federal APTC, 

CSR, and user fee requirements in order 

to protect federal funds. 

We expect that states that established 

a State Exchange or SBE–FP will enforce 

all applicable federal requirements 

applicable to QHPs and QHP issuers 

participating in Exchanges, including 

the applicable APTC, CSR, and user fee 

standards captured in part 156, subpart 

E and 45 CFR 156.50. However, to 

address situations where a State 

Exchange or SBE–FP fails to enforce 

these federal Exchange requirements, 

consistent with the framework 

established in section 2723(b) of the 

PHS Act, we propose that if HHS 

determines that a State Exchange or 

SBE–FP lacks authority or has otherwise 

failed to substantially enforce the 

requirements captured in part 156, 

subpart E or 45 CFR 156.50, HHS would 

step in to enforce these requirements 

with respect to QHP issuers 

participating in the State Exchange or 

SBE–FP. Once this determination is 

made, HHS would become responsible 

for enforcement and would take 

appropriate action to ensure QHP issuer 

compliance with the applicable 

requirement(s),205 and may impose 

CMPs, if appropriate. To more clearly 

capture HHS’s authority to impose 

CMPs in these situations, we proposed 

to amend the introductory sentence to 

§ 156.800(a) to replace the current 

references to the ‘‘Federally-facilitated 

Exchange’’ with references to ‘‘an 

Exchange.’’ We also propose to amend 

§ 156.800(b) to remove the word ‘‘only’’ 

from the sentence describing the scope 

of HHS sanctions with respect to QHP 

issuers participating in FFEs and to add 

a new second sentence that affirms HHS 

authority to impose CMPs for noncompliance with the applicable 

requirements in part 156, subpart E and 

45 CFR 156.50 by QHP issuers 

participating in State Exchanges and 

SBE–FPs. 

We intend to continue our 

collaborative enforcement approach and 

would coordinate our actions with state 

efforts to avoid duplication and to 

streamline oversight of the 

administration of APTC, CSRs, and user 

fees. We solicit comments for how HHS 

can collaborate with State Exchanges, 

SBE–FPs, and state authorities to 

proactively address non-compliance 

with applicable federal requirements 

and share compliance tools regarding 

CSRs, APTC and user fees. 

9. Bases and Process for Imposing Civil 

Money Penalties in Federally-Facilitated 

Exchanges (§ 156.805) 

We also propose to amend § 156.805 

to more clearly reflect HHS’s authority 

to impose CMPs due to non-compliance 

with respect to the applicable Federal 

APTC, CSR, and user fee standards 

against a QHP issuer participating in a 

State Exchange or SBE–FP. Under this 

proposal, we would use the same bases 

and process currently captured in 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78641 

206See, for example, 45 CFR 150.203. 

§ 156.805 for imposing CMPs on QHP 

issuers participating in an FFE. More 

specifically, in § 156.805, we propose 

renaming this section to ‘‘Bases and 

process for imposing CMPs in the 

Exchanges,’’ and also propose to amend 

the introductory language in 

§ 156.805(a) to use the words ‘‘an 

Exchange,’’ instead of ‘‘Federallyfacilitated Exchange,’’ to more clearly 

capture HHS’s authority to impose 

CMPs on QHP issuers participating in 

State Exchanges and SBE–FPs who fail 

to comply with the applicable 

requirements in part 156, subpart E or 

§ 156.50 in situations where HHS is 

responsible for enforcement. We 

similarly propose to modify 

§ 156.805(a)(5)(i) where the reference to 

‘‘HHS’’ currently appears to also 

incorporate a reference to ‘‘an 

Exchange’’ to clarify that all QHP 

issuers must avoid intentionally or 

recklessly misrepresenting or falsifying 

APTC, CSR, and user fee information to 

both HHS and Exchanges, regardless of 

whether HHS or a state operates the 

Exchange. We propose this amendment 

to clarify that HHS has authority to 

impose CMPs against QHP issuers 

participating in State Exchanges and 

SBE–FPs who misrepresent or falsify 

APTC, CSR, and user fee information 

provided to HHS in situations where 

HHS is responsible for enforcement of 

the requirements in part 156, subpart E 

or § 156.50, including when HHS is 

performing an audit or compliance 

review under § 156.480(c). If HHS seeks 

to use this authority to impose CMPs 

against a QHP issuer participating in a 

State Exchange or SBE–FP, we propose 

the issuer would have the opportunity 

to appeal the CMPs following the 

existing framework for administrative 

hearings in § 156.901, et seq. 

Finally, we propose to add a new 

paragraph (f) to § 156.805 to capture in 

this regulation details on the 

circumstances requiring HHS 

enforcement of the applicable 

requirements in part 156, subpart E and 

§ 156.50. Consistent with the framework 

established in section 2723 of the PHS 

Act and section 1321(c) of the PPACA, 

we propose in new § 156.805(f)(1) that 

HHS’s authority to enforce in these 

situations would be limited to situations 

where the State Exchange or SBE–FP 

notifies HHS that it is not enforcing 

these requirements or if HHS makes a 

determination using the process set 

forth at 45 CFR 150.201, et seq. that a 

State Exchange or SBE–FP is failing to 

substantially enforce these 

requirements.206 In new proposed 

§ 156.805(f)(2), we affirm that when 

HHS is responsible for enforcement in 

these circumstances, HHS may impose 

CMPs on an issuer in the State Exchange 

or SBE–FP, in accordance with the bases 

and process set forth in this section. As 

noted above, this includes the ability for 

a QHP issuer in a State Exchange or 

SBE–FP to appeal the imposition of 

CMPs by HHS following the existing 

framework for administrative hearings 

in § 156.901, et seq. 

We propose that HHS would apply 

the same process HHS uses to determine 

when a state is failing to substantially 

enforce PHS Act requirements in 

determining whether a State Exchange 

or SBE–FP is substantially enforcing the 

applicable Federal APTC, CSR, and user 

fee standards. More specifically, we 

propose that if an audit of a QHP issuer 

in a State Exchange or SBE–FP 

demonstrates the State Exchange or 

SBE–FP’s failure to enforce the 

applicable Federal APTC, CSR, and user 

fee standards, HHS would investigate 

the State Exchange or SBE–FP’s 

enforcement and follow the process set 

forth in 45 CFR 150.207 if necessary. We 

propose that if HHS receives or obtains 

information (including information 

discovered through an audit) that a State 

Exchange or SBE–FP may not be 

enforcing the applicable requirements in 

part 156, subpart E, or § 156.50, HHS 

may initiate the process described in 45 

CFR 150.207 to determine whether the 

State Exchange or SBE–FP is failing to 

substantially enforce these 

requirements. Mirroring the process set 

forth in 45 CFR 150.207 for making 

determinations regarding substantial 

enforcement of PHS Act requirements, 

HHS would follow the procedures in 

§§ 150.209 through 150.219 to 

determine if a State Exchange or SBE– 

FP is failing to enforce one or more of 

the applicable requirements in part 156, 

subpart E or 45 CFR 156.50. If HHS 

believes there is a reasonable question 

whether there has been a failure to 

enforce one or more of the applicable 

requirements in part 156, subpart E or 

45 CFR 156.50, HHS would send a 

notice, as described in 45 CFR 150.213, 

identifying the applicable 

requirement(s) that allegedly have not 

been substantially enforced to the 

proper State Exchange or SBE–FP 

officials using the process outlined in 45 

CFR 150.211. We propose that, 

following the process described in 45 

CFR 150.215, HHS may extend, for good 

cause, the time the State Exchange or 

SBE–FP has for responding to the 

notice, such as if there is an agreement 

between HHS and the State Exchange or 

SBE–FP that there should be a public 

hearing on the State Exchange or SBE– 

FP’s enforcement, or evidence that the 

State Exchange or SBE–FP is 

undertaking expedited enforcement 

activities. Using the process described 

in 45 CFR 150.217, if at the end of the 

extension period HHS determines that 

the State Exchange or SBE–FP has not 

established to HHS’s satisfaction that it 

is enforcing the applicable 

requirement(s), we propose that HHS 

would consult with the appropriate 

State Exchange or SBE–FP officials, 

notify the State Exchange or SBE–FP of 

its preliminary determination that the 

State Exchange or SBE–FP has failed to 

substantially enforce the requirement(s) 

and that the failure is continuing, and 

permit the State Exchange or SBE–FP a 

reasonable opportunity to show 

evidence of substantial enforcement. If, 

after providing notice and a reasonable 

opportunity for the State Exchange or 

SBE–FP to show that it has corrected 

any failure to substantially enforce, HHS 

finds that the failure to substantially 

enforce has not been corrected, HHS 

would notify the State Exchange or 

SBE–FP of its final determination using 

the process described in 45 CFR 

150.219. Therefore, we propose that 

after a determination that a State 

Exchange or SBE–FP is not or cannot 

substantially enforce the applicable 

requirements in part 156, subpart E or 

§ 156.50, HHS could impose CMPs on 

issuers in the State Exchange or SBE–FP 

if there is cause for such imposition. 

HHS would also provide a notice of 

non-compliance, consistent with 

§ 156.806, to QHP issuers in State 

Exchanges or SBE–FPs prior to 

imposing CMPs. 

We seek to work collaboratively with 

State Exchanges, SBE–FPs, and state 

authorities for any topics of mutual 

concern and oversight activities where 

possible. We also seek comment to this 

proposal and ways in which HHS and 

state authorities can efficiently and 

effectively enforce federal standards 

related to APTC, CSRs, and user fees. 

We also propose that if the changes 

made to the above § 156.800 and to 

§ 156.805 are finalized as proposed, we 

would also apply § 156.903 such that an 

administrative law judge’s authority 

also extends to CMPs imposed against 

QHP issuers in State Exchanges and 

SBE–FPs under § 156.805. Specifically, 

we propose to amend § 156.903(a) to 

extend the authority to State Exchanges 

and SBE–FPs so that the ALJ has the 

authority, including all the authority 

conferred by the Administrative 

Procedure Act, to adopt whatever 

procedures may be necessary or proper 

to carry out in an efficient and effective 

manner the ALJ’s duty to provide a fair 

and impartial hearing on the record and 

78642 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

207See 79 FR 30240 at 30352. Also see 45 CFR 

155.1400, 155.1405, 156.1120 and 156.1125. 

208Prior to the PY2020 nationwide display of 

quality rating information, states that displayed 

QHP quality rating information included California, 

Colorado, Connecticut, Maryland, Michigan, 

Montana, New Hampshire, New York, Rhode 

Island, Virginia, Washington, and Wisconsin. 

209 ‘‘CMS Bulletin on display of Quality Rating 

System (QRS) star ratings and Qualified Health Plan 

(QHP) Enrollee Survey results for QHPs offered 

through Exchanges (often called the Health 

Insurance Marketplace),’’ August 15, 2019. 

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

Regulations-and-Guidance/Downloads/Quality

RatingInformationBulletinforPlanYear2020.pdf. 

210See, for example, 78 FR 69418. 

211 ‘‘The Quality Rating System and Qualified 

Health Plan Enrollee Experience Survey: Technical 

Guidance for 2021,’’ September 2020. Available at 

https://www.cms.gov/files/document/quality-ratingsystem-and-qualified-health-plan-enrolleeexperience-survey-technical-guidance-2021.pdf. 

212 ‘‘Medicare 2019 Part C & D Star Rating 

Technical Notes,’’ October 10, 2019. Available at 

https://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovGenIn/Downloads/ 

Star-Ratings-Technical-Notes-Oct-10-2019.pdf. 

213CMS anticipates continuing to propose 

methodology refinements to the QRS and QHP 

Enrollee Survey through the Call Letter process. 

to issue an initial decision concerning 

the imposition of a CMP on a QHP 

offered in a FFE, State Exchange, or 

SBE–FP. 

10. Subpart J—Administrative Review of 

QHP Issuer Sanctions (§§ 156.901, 

156.927, 156.931, 156.947) 

We propose to change the title to 

subpart J, removing the reference to ‘‘in 

Federally-Facilitated Exchanges’’ to 

make clear it applies to QHPs 

participating in any Exchange type to 

align with accompanying proposed 

changes outlined above to §§ 156.800 

and 156.805. We also propose several 

procedural changes to provisions in 

subpart J of part 156 related to 

administrative hearings consistent with 

the amendments discussed in the 

preamble to part 150. These proposed 

changes are intended to align with the 

Departmental Appeals Board’s current 

practices for administrative hearings to 

appeal CMPs. Specifically, we propose 

changes that would remove 

requirements to file submissions in 

triplicate and instead require electronic 

filing. This change is reflected in the 

proposed amendments to the definition 

of ‘‘Filing date’’ in § 156.901, to the 

introductory text in § 156.927(a), and to 

the service of submission requirements 

captured in paragraph (b). We also 

propose to allow for the option of video 

conferencing as a form of administrative 

hearing by amending the definition of 

‘‘Hearing’’ in § 156.901 and to the 

requirements outlined in § 156.919(a) 

related to the forms for the hearing, 

§ 156.941(e) related to prehearing 

conferences, and § 156.947(a) related to 

the record of the hearing. Finally, we 

propose to update § 156.947 to allow the 

ALJ to communicate the next steps for 

a hearing in either the 

acknowledgement of a request for 

hearing or on a later date. We seek 

comment on these proposals. 

11. Quality Rating System (§ 156.1120) 

and Enrollee Satisfaction Survey System 

(§ 156.1125) 

Section 1311(c)(3) of the PPACA 

directs the Secretary of HHS to develop 

a quality rating for each QHP offered 

through an Exchange, based on quality 

and price. Section 1311(c)(4) of the 

PPACA directs the Secretary to establish 

an enrollee satisfaction survey that will 

assess enrollee satisfaction with each 

QHP offered through the Exchanges 

with more than 500 enrollees in the 

prior year. 

Based on this authority, HHS 

finalized rules in May 2014 to establish 

standards and requirements related to 

QHP issuer data collection and public 

reporting of quality rating information 

in every Exchange.207 To balance HHS’s 

strategic goals of empowering 

consumers through data, minimizing 

cost and burden on QHP issuers, and 

supporting state flexibility, HHS 

developed a phased-in approach to 

establishing quality standards for 

Exchanges and QHP issuers, collecting 

and reporting quality measure data, and 

displaying quality rating information 

across the Exchanges. Since 2015, we 

have collected clinical quality measure 

data and enrollee experience survey 

measure data and generated quality 

ratings to provide reliable, meaningful 

information about QHP quality 

performance data across Exchanges. In 

addition, since 2016, select states 208

with FFEs and State Exchanges have 

displayed QHP quality rating 

information as a tool for consumer 

decision-making while shopping for 

health insurance coverage in an 

Exchange. Beginning with the open 

enrollment period for plan year 2020, 

CMS displayed the QHP quality rating 

information for all Exchanges that used 

the HealthCare.gov platform, including 

the FFEs and SBE–FPs. State Exchanges 

that operated their own eligibility and 

enrollment platform were similarly 

required to display QHP quality ratings 

beginning with the open enrollment 

period for plan year 2020, but had some 

flexibility to customize the display of 

the QHP quality rating information.209

Through valuable feedback from the 

QRS and QHP Enrollee Survey Call 

Letter process and continued 

engagement with health plan issuer 

organizations, healthcare quality 

measurement experts, state 

representatives, consumer advocates 

and other stakeholders, we continue to 

learn about populations buying 

insurance coverage across the 

Exchanges and about areas of 

improvement for these programs. We 

also continue to assess potential 

refinements to the QRS rating 

methodology and the QHP Enrollee 

Survey to prioritize strategies to 

improve value for consumers and to 

reduce the burden of quality reporting. 

As part of the 2020 QRS and QHP 

Enrollee Survey Call Letter process, we 

received many comments requesting 

that we remove levels of the QRS 

hierarchy to help streamline and 

improve consumer understanding of the 

quality rating information. While we are 

not proposing amendments to the QRS 

or to the QHP Enrollee Survey as part 

of this rulemaking, we seek comment on 

the removal of one or more levels of the 

QRS hierarchy, which is a key element 

of the QRS framework that establishes 

how quality measures are organized for 

scoring, rating and reporting purposes. 

We previously described the general 

overall framework for the QRS, 

including details on the hierarchical 

structure of the measure set and the 

elements of the QRS rating 

methodology.210 Currently, the QRS 

measures are organized into composites, 

domains, and summary indicators that 

serve as a foundation for the rating 

methodology and scores are calculated 

at every level of the hierarchy using 

specific scoring and standardization 

rules, as described in the annual QRS 

and QHP Enrollee Survey Technical 

Guidance.211 We believe that a 

simplified QRS hierarchy will support 

alignment with other CMS quality 

reporting programs and help the overall 

quality score be more reflective of the 

performance of individual survey and 

clinical quality measures within the 

QRS. For example, the Medicare Star 

Ratings framework consists of measures, 

domains, summary ratings and an 

overall rating.212 In addition, we believe 

a simplified hierarchy, in combination 

with additional methodology 

modifications we are considering (for 

example, explicit weights at the 

measure level) will help stabilize ratings 

across years.213 We seek comment 

specifically on which level or levels of 

the QRS hierarchy should be removed 

(for example, the composite level or the 

domain level). 

In addition, to further support 

transparency of QHP quality data and to 

empower stakeholders including 

consumers, states, issuers and 

researchers with valuable information 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78643 

214A rating for Medical Care is the other 

component of the overall rating. 

215 79 FR at 30311. 

related to enrollee experience with 

QHPs, we propose to make the full QHP 

Enrollee Survey results publicly 

available in an annual Public Use File 

(PUF). Currently, we post on 

HealthCare.gov some enrollee 

experience results in the form of a 

quality rating for Member Experience 

and Plan Administration that make up 

part of the overall rating for QHPs.214

The Member Experience rating is based 

on a select number of survey measures 

from the QHP Enrollee Survey. The Plan 

Administration rating is based on a 

select number of survey measures and 

clinical quality measures. To promote 

transparency of data to the public, we 

already post QRS PUFs every year for 

QHP issuers operating in all Exchange 

types that were eligible to receive 

quality ratings. As we stated in the 

Exchange and Insurance Market 

Standards for 2015 and Beyond Final 

Rule, we have been considering 

different ways to make QHP quality 

data, including QHP Enrollee Survey 

results, publicly available and 

accessible to researchers, consumer 

groups, states and other entities.215

Similar to the QRS PUFs, we propose to 

post a QHP Enrollee Survey PUF 

annually, beginning with the 2021 QHP 

Enrollee Survey results and during the 

2022 open enrollment period, that 

would include the score and proportion 

of responses (for example, the 

percentage of respondents answering 

‘‘Never’’ or ‘‘Sometimes’’) for every 

survey question and composite as well 

as demographic information such as 

employment status, race and ethnicity, 

and age at the reporting unit and 

national level to facilitate data 

transparency. 

We solicit comment on this proposal. 

12. Dispute of HHS Payment and 

Collections Reports (§ 156.1210) 

In the 2014 Payment Notice, we 

established provisions related to the 

confirmation and dispute of payment 

and collection reports. These policies 

were finalized under the assumption 

that all issuers that receive APTCs 

would generally be able to provide these 

confirmations or disputes automatically 

to HHS. However, HHS has found that 

many issuers prefer to research payment 

errors and use enrollment reconciliation 

and disputes to update their enrollment 

and payment data, and may be unable 

to complete this research and provide 

confirmation or dispute of their 

payment and collection reports within 

15 days, the timeline established by the 

2014 Payment Notice. 

In the 2021 Payment Notice, we 

amended § 156.1210(a) to lengthen the 

time to report payment inaccuracies 

from 15 days to 90 days to allow all 

issuers who receive APTCs more time to 

research, report, and correct 

inaccuracies through other channels. 

The longer timeframe also allows for the 

processing of reconciliation updates, 

which may resolve potential disputes. 

Additionally, at § 156.1210, we removed 

the requirement at paragraph (a) that 

issuers actively confirm payment 

accuracy to HHS each month, as well as 

the language in paragraph (b) regarding 

late filed inaccuracies. Instead, we 

amended paragraph (b) to require an 

annual confirmation from issuers that 

the amounts identified in the most 

recent payment and collections report 

for the coverage year accurately reflect 

applicable payments owed by the issuer 

to the federal government and the 

payments owed to the issuer by the 

federal government, or that the issuer 

has disputed any identified 

inaccuracies, after the end of each 

payment year, in a form and manner 

specified by HHS. 

Since finalizing these changes, HHS’s 

experience has shown that some data 

inaccuracies reasonably will be 

identified after the 90-day reporting 

window. For example, issuers might 

receive notification of an Exchange 

Eligibility Appeals adjudication after 

the 90-day submission window. 

Additionally, some issuers are directed 

to update their enrollment and payment 

data after an HHS data review or audit 

which may occur after this 90-day 

window. In such instances it is in the 

interest of HHS, issuers, and enrollees to 

accept the late reporting of data 

inaccuracies. As such, we propose to 

amend § 156.1210 by redesignating 

current § 156.1210(b) to § 156.1210(d) 

and adding new § 156.1210(b) to 

establish a process for issuers to report 

enrollment or payment data changes in 

these situations. 

We clarify that this proposed 

flexibility does not reduce an issuer’s 

obligation to make a good faith effort to 

identify and promptly report 

discrepancies within the 90-day 

reporting window established under 

§ 156.1210(a). Issuers can demonstrate 

good faith by sending regular and 

accurate enrollment reconciliation files 

and timely enrollment disputes 

throughout the applicable enrollment 

calendar year, making timely and 

regular changes to enrollment 

reconciliation and dispute files to 

correct past errors, and by reaching out 

to HHS and responding timely to HHS 

outreach to address any issues 

identified. With respect to inaccuracies 

identified after the end of the applicable 

90-day period, we propose to work with 

the issuer to resolve the inaccuracy if 

the issuer promptly notifies HHS, in a 

form and manner specified by HHS, no 

later than 15 days after identifying the 

inaccuracy. The failure to identify the 

inaccuracy in a timely manner in these 

situations must not have been due to the 

issuer’s misconduct or negligence. For 

example, issuers must regularly submit 

quality monthly enrollment 

reconciliation files as required under 

§ 156.265(f), and should regularly 

review monthly enrollment 

reconciliation files so that disputes are 

submitted in the 90-day reporting 

window. Disputes submitted after the 

expiration of the reporting window as a 

result of an issuer’s failure to conduct 

these activities in a timely manner 

would not satisfy the good faith 

standard. We propose to codify these 

criteria at new proposed 

§ 156.1210(b)(1) and (2). 

Additionally, we propose to add 

paragraph (c) to allow the reporting of 

data inaccuracies after the 90-day period 

up to 3 years following the end of the 

plan year to which the inaccuracy 

relates or the date of the completion of 

the HHS audit process for such plan 

year, whichever is later. We believe this 

deadline will provide issuers with 

enough time to report any data 

inaccuracies discovered after the 90-day 

submission window, while providing a 

reasonable end date by which HHS, 

issuer and other stakeholders can 

consider the records for a particular 

benefit year closed. 

We note that, pursuant to section 

1313(a)(6) of the PPACA, ‘‘[p]ayments 

made by, through, or in connection with 

an Exchange are subject to the False 

Claims Act (31 U.S.C. 3729 et seq.) if 

those payments include any Federal 

funds.’’ As such if an issuer has an 

obligation to pay back APTCs, the issuer 

could be liable under the False Claims 

Act for knowingly and improperly 

avoiding the obligation to pay. We 

propose to codify in § 156.1210(c)(3), 

that, if a payment error is discovered 

after the 3-year or end of audit reporting 

deadline, the issuer is obligated to 

notify HHS and repay any overpayment. 

However, HHS will not pay the issuer 

after the 3-year or end of audit reporting 

deadline for any underpayments 

discovered. 

We further clarify that the 

requirements of § 156.1210 apply to all 

issuers who receive APTCs, including 

issuers in State Exchanges. We seek 

comment on all aspects of this proposal, 

including its impact on the State 

78644 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

216See 45 CFR 156.1220(a)(1)(vii). 217See 84 FR 28888. 

218Public Law 114–255 (Dec. 13, 2016). 

219 84 FR 28888 (June 20, 2019). 

220See 84 FR at 28950–51 (‘‘[E]mployer funds 

paid from an HRA go directly to a participant or a 

health insurance issuer because the economic 

substance of the transaction is the same—that is, the 

funds are being used to discharge an employee’s 

premium payment obligations.’’) 

Exchanges’ ability to resolve disputes 

and report payment adjustments to HHS 

in this timeframe. 

We solicit comment on these 

proposals. 

13. Payment and Collection Processes 

(§ 156.1215) 

In the 2015 Payment Notice, HHS 

established a monthly payment and 

collections cycle for insurance 

affordability programs, user fees, and 

premium stabilization programs. As 

discussed above, we propose to 

eliminate state user fee collection 

flexibility that HHS had previously 

offered to states in 2017 Payment 

Notice, and propose to conforming 

amendments to remove the reference to 

‘‘State’’ governments from paragraph (b). 

We seek comment on this proposal. 

14. Administrative Appeals (§ 156.1220) 

As detailed earlier in this preamble, 

we previously established a three-level 

administrative appeals process for 

issuers to seek reconsideration of 

amounts under certain PPACA 

programs, including the calculation of 

risk adjustment charges, payments and 

user fees. This process also applies to 

issuer disputes of the findings of a 

second validation audit (if applicable) 

as a result of HHS–RADV for the 2016 

benefit year and beyond.216 As 

explained in the 2020 Payment Notice, 

only those issuers who have insufficient 

pairwise agreement between the initial 

validation audit and second validation 

audit will receive a Second Validation 

Audit Findings Report and therefore 

have the right to appeal the second 

validation audit findings. In this rule, 

we propose to amend 

§ 156.1220(a)(1)(vii) to add ‘‘if 

applicable’’ when discussing an issuer’s 

ability to appeal the findings of the 

second validation audit to more clearly 

capture this limitation as part of the 

regulation, consistent with the existing 

language at § 153.630(d)(2) and the 

previously finalized policy. We propose 

a similar amendment in this rule to 

§ 153.630(d)(3). 

We also propose amendments to 

§ 156.1220(a)(3) to clarify that the 30- 

calendar day timeframe to file a request 

for reconsideration of second validation 

audit findings (if applicable) or the risk 

score error rate calculation would be 30 

calendar days from the applicable 

benefit year’s Summary Report of 

Benefit Year Risk Adjustment Data 

Validation Adjustments to Risk 

Adjustment Transfers. To capture this 

clarification, we propose to create a new 

proposed § 156.1220(a)(3)(ii) to specify 

the timeframe for filing a request for 

reconsideration for a risk adjustment 

payment or charge, including an 

assessment of risk adjustment user fees. 

This new proposed regulatory provision 

maintains the language that establishes 

a 30 calendar day window for these 

appeals that begin on the date of 

notification under § 153.310(e). We also 

propose to create a new proposed 

§ 156.1220(a)(3)(iii) to separately 

address the timeframe for filing a 

request for reconsideration of second 

validation audit findings or the risk 

score error rate calculation and to add 

the phrase ‘‘if applicable’’ to more 

clearly capture the limitation on the 

ability to appeal second validation audit 

findings. To accommodate these two 

new proposed paragraphs, we also 

propose to amend § 156.1220 to 

redesignate paragraphs (a)(3)(iii) 

through (vi) as (a)(3)(iv) through (vii), 

respectively. We seek comment on these 

proposals. 

15. Enrollment Process for Qualified 

Individuals (§ 156.1240) 

Under § 156.1240(a), QHP issuers are 

required to accept a variety of payment 

methods so that individuals without a 

bank account or a credit card will have 

readily available options for making 

monthly premium payments. 

Specifically, paragraph (a)(1) requires 

QHP issuers to follow the premium 

payment process established by an 

Exchange in accordance with § 155.240. 

Paragraph (a)(2) requires QHP issuers to 

accept for all payments in the 

individual market, at a minimum, paper 

checks, cashier’s checks, money orders, 

EFT, and all general-purpose pre-paid 

debit cards as methods of payment and 

present all payment method options 

equally for a consumer to select their 

preferred payment method. We propose 

to add new paragraph (a)(3) to require 

individual market QHP issuers to also 

accept payments on behalf of an 

enrollee from an individual coverage 

HRA or QSEHRA. 

We have received questions 

indicating that there is some confusion 

over whether issuers must accept 

payments on behalf of an enrollee from 

an individual coverage HRA or 

QSEHRA. Individual coverage HRAs are 

a new type of health reimbursement 

arrangement that employers may offer to 

employees as of January 1, 2020. 217 In 

general, employers may offer individual 

coverage HRAs to their employees as a 

means of providing tax-advantaged 

reimbursements for medical care 

expenses, including premiums for 

individual health insurance coverage 

that they purchase for themselves and 

their families. QSEHRAs are another 

new type of HRA, established by the 

21st Century Cures Act, enacted 

December 13, 2016, that qualified small 

employers can provide to their 

employees.218 As explained in the final 

rule that adopted implementing 

regulations for individual coverage 

HRAs, certain aspects of which apply to 

QSEHRAs (final HRA rule),219

reimbursement may include employeeinitiated payments made through use of 

financial instruments, such as pre-paid 

debit cards, as well as direct payments, 

individual or aggregate, by the 

employer, employee organization, or 

other plan sponsor to the health 

insurance issuer.220

Consistent with the final HRA rule, 

we propose to add a new 

§ 156.1240(a)(3) to require issuers 

offering individual market QHPs to 

accept payments of premiums that are 

received directly from an individual 

coverage HRA or QSEHRA that are 

made on behalf of an enrollee who is 

covered by the individual coverage HRA 

or QSEHRA. We propose that QHP 

issuers would be required to accept 

such payment when they are made 

using a method of payment described in 

§ 156.1240(a)(2). We recognize some 

individual coverage HRAs and 

QSEHRAs prefer to make aggregate 

payments on behalf of multiple 

employees to a QHP issuer. We 

encourage QHP issuers to work with 

employers and administrators of 

individual coverage HRAs and 

QSEHRAs to facilitate this method of 

payment, as we believe this approach 

can ease administration of individual 

coverage HRAs and QSEHRAs. 

However, we are not proposing to 

require QHP issuers to accept payments 

from individual coverage HRAs or 

QSEHRAs when made using a form of 

payment that is not described in 

§ 156.1240(a)(2). This proposal would 

help ensure that individual coverage 

HRAs or QSEHRAs operate as intended, 

and would address potential 

stakeholder confusion regarding 

whether QHP issuers must accept 

payments made from individual 

coverage HRAs or QSEHRAs. 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78645 

221The requirements of section 1150A with 

respect to QHP issuers are codified at § 156.295. In 

this proposed rule, we propose to amend that 

regulation and to codify the requirements with 

respect to PBMs at a new 45 CFR part 184. 

222 ‘‘Temporary Policy on 2020 Premium Credits 

Associated with the COVID–19 Public Health 

Emergency,’’ August 4, 2020. Available at https:// 

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

Health-Insurance-Marketplaces/Downloads/ 

Premium-Credit-Guidance.pdf. 

223 85 FR 54820 (Sept. 2, 2020). 

224The MLR reporting year means a calendar year 

during which group or individual health insurance 

coverage is provided by an issuer. See 45 CFR 

158.103. The 2021 MLR reporting year refers to the 

MLR reports that issuers must submit for the 2021 

benefit year by July 31, 2022. See 45 CFR 

158.110(b). 

225While this proposed rule, the interim final 

rule on COVID–19 and the August 4, 2020 guidance 

focus on the individual and small group markets, 

to remove the barriers in support of issuers offering 

these premium credits to enrollees impacted by a 

PHE declared by the Secretary of HHS, we note that 

issuers in the large group market may also, when 

consistent with state law, offer temporary premium 

credits and should similarly report the lower, 

adjusted amount that accounts for the premium 

credits for MLR purposes. 

F. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

1. Definitions (§ 158.103) 

To ensure program integrity, we 

propose to amend § 158.103 to establish 

the definition of prescription drug 

rebates and other price concessions that 

are deducted from incurred claims for 

MLR reporting and rebate calculation 

purposes. 

Section 2718(a) of the PHS Act 

requires health insurance issuers to, for 

MLR purposes, separately report the 

percentage of premium revenue (after 

certain adjustments) expended on 

reimbursement for clinical services 

provided to enrollees under such 

coverage, on activities that improve 

health care quality, and on non-claims 

(administrative) costs. Section 158.140 

sets forth the MLR reporting 

requirements related to the 

reimbursement for clinical services 

provided to enrollees, including a 

requirement that issuers must deduct 

from incurred claims prescription drug 

rebates received by the issuer. 

In the May 14, 2020 Federal Register 

(85 FR 29164), we finalized 

amendments to the MLR rules at 

§ 158.140(b)(1)(i) to require issuers to 

deduct from MLR incurred claims not 

only prescription drug rebates received 

by the issuer, but also any price 

concessions received and retained by 

the issuer and any prescription drug 

rebates and other price concessions 

received and retained by a PBM or other 

entity providing pharmacy benefit 

management services to the issuer. The 

applicability date for that amendment is 

the 2022 MLR reporting year (MLR 

reports filed in 2023). 

During the regulatory process, we 

received numerous comments 

requesting HHS to codify and align the 

definition of prescription drug rebates 

and other price concessions that are 

reported by issuers for MLR purposes 

with the definition in section 1150A of 

the Act, as added by the PPACA,221

which requires QHP issuers and PBMs 

to report certain prescription drug 

benefit information to HHS. The 

reference to rebates, discounts, and 

price concessions in section 1150A(b)(2) 

of the Act excludes bona fide service 

fees paid to PBMs by drug 

manufacturers or issuers. Under section 

1150A of the Act, bona fide service fees 

are fees negotiated by PBMs that include 

but are not limited to ‘‘distribution 

service fees, inventory management 

fees, product stocking allowances, and 

fees associated with administrative 

services agreements and patient care 

programs (such as medication 

compliance programs and patient 

education programs).’’ Section 156.295, 

implementing section 1150A of the Act, 

defines bona fide services fees as ‘‘fees 

paid by a manufacturer to an entity that 

represent fair market value for a bona 

fide, itemized service actually 

performed on behalf of the manufacturer 

that the manufacturer would otherwise 

perform (or contract for) in the absence 

of the service arrangement, and that are 

not passed on in whole or in part to a 

client or customer of an entity, whether 

or not the entity takes title to the drug.’’ 

In light of these comments and the 

delayed applicability date of the 

amendment to § 158.140(b)(1)(i), we did 

not finalize a definition of ‘‘prescription 

drug rebates’’ or ‘‘price concession’’ in 

that rulemaking. Rather, we indicated 

that we would consider codifying the 

definition of prescription drug rebates 

and other price concessions through 

separate rulemaking in advance of the 

applicability date for these new 

reporting requirements. 

We propose to amend § 158.103 to 

add a definition of prescription drug 

rebates and other price concessions that 

issuers must deduct from incurred 

claims for MLR reporting and rebate 

calculation purposes pursuant to 

§ 158.140(b)(1)(i). We believe that 

codifying and clarifying the definition 

of prescription drug rebates and other 

price concessions will allow issuers to 

more accurately report the costs 

associated with enrollees’ prescription 

drug utilization for purposes of the MLR 

calculation. This approach would also 

promote consistency in reporting across 

issuers. Therefore, we propose to amend 

the MLR rules to add the definition for 

prescription drug rebates and other 

price concessions to § 158.103 and to 

clarify that this term excludes bona fide 

service fees, consistent with how such 

fees are described in § 156.295. We 

propose that this provision become 

applicable beginning with the 2022 

MLR reporting year (MLR reports filed 

in 2023), which aligns with the 

applicability date of the amendment to 

§ 158.140(b)(1)(i) and should provide 

issuers with adequate time to adjust 

contracts with entities providing 

pharmacy benefit management services 

to provide transparency regarding 

prescription drug rebates and other 

price concessions they receive from 

drug manufacturers. 

We seek comment on this proposal. 

2. Premium Revenue (§ 158.130) 

Section 2718(a) of the PHS Act 

requires health insurance issuers to 

submit an annual report to the Secretary 

that details the percentage of premium 

revenue (after certain adjustments) 

expended on reimbursement for clinical 

services provided to enrollees under 

health insurance coverage and on 

activities that improve healthcare 

quality. Section 158.130 specifies the 

reporting requirements with regard to 

earned premium, which must include 

all monies paid by a policyholder or 

subscriber as a condition of receiving 

coverage from the issuer, with certain 

adjustments. 

In the August 4, 2020 guidance, 

Temporary Policy on 2020 Premium 

Credits Associated with the COVID–19 

PHE, CMS adopted a temporary policy 

of relaxed enforcement to allow issuers 

in the individual and small group 

markets the flexibility, when consistent 

with state law, to temporarily offer 

premium credits for 2020 coverage to 

support continuity of coverage for 

individuals, families and small 

employers who may struggle to pay 

premiums because of illness or loss of 

incomes or revenue resulting from the 

COVID–19 PHE.222 On September 2, 

2020, HHS issued an interim final rule 

on COVID–19 wherein we set forth MLR 

data reporting and rebate requirements 

for issuers offering temporary premium 

credits for 2020 coverage.223 For the 

2021 MLR reporting year 224 and 

beyond, we propose to adopt these MLR 

data reporting and rebate requirements 

for all health insurance issuers in the 

individual and small group markets 225

who elect to offer temporary premium 

credits during a PHE declared by the 

Secretary of HHS (declared PHE) in 

situations in which HHS issues 

guidance announcing its adoption of a 

78646 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

226The Secretary of HHS may, under section 319 

of the PHS Act, determine that: (a) A disease or 

disorder presents a public health emergency; or (b) 

that a public health emergency, including 

significant outbreaks of infectious disease or 

bioterrorist attacks, otherwise exists. 

227Available at https://www.cms.gov/cciio/ 

Resources/Forms-Reports-and-OtherResources/ 

index#Medical_Loss_Ratio. 

228MLR rebates provided in the form of premium 

credits are different than the temporary premium 

credits such as those outlined in the August 4, 2020 

guidance issued by CMS. When MLR rebates are 

provided in the form of premium credits, issuers 

must continue to report the full amount of earned 

premium and may not reduce it by the amount of 

MLR rebates provided in form of premium credits, 

as required by § 158.130(b)(3). 

229 ‘‘Temporary Period of Relaxed Enforcement 

for Submitting the 2019 MLR Annual Reporting 

Form and Issuing MLR Rebates in Response to the 

Coronavirus Disease 2019 (COVID–19) Public 

Health Emergency.’’ (June 12, 2020). Available at 

https://www.cms.gov/files/document/Issuing-2019- 

MLR-Rebates-in-Response-to-COVID-19.pdf. 230 45 CFR 158.240(e). 

similar temporary policy of relaxed 

enforcement to allow such issuers to 

offer temporary premium credits during 

the declared PHE.226

We propose that for purposes of 

§ 158.130, issuers must account for 

temporary premium credits provided to 

enrollees during a declared PHE as 

reductions in earned premium for the 

applicable MLR reporting years, 

consistent with any technical guidance 

set forth in the applicable year’s MLR 

Annual Reporting Form Instructions,227

when such credits are permitted by 

HHS. Specifically, as clarified in the 

interim final rule on COVID–19, we 

propose that the amount of temporary 

premium credits 228 would constitute 

neither collected premium nor due and 

unpaid premium described in the MLR 

Annual Reporting Form Instructions for 

purposes of reporting written premium 

(which is a component of earned 

premium). Consequently, under this 

proposal, issuers who offer temporary 

premium credits during a declared PHE 

would report as earned premium for 

MLR and rebate calculation purposes 

the actual, reduced premium paid when 

such credits are permitted by HHS. 

We request comment on this proposal. 

3. Rebating Premium if the Applicable 

Medical Loss Ratio Standard Is Not Met 

(§ 158.240) 

Section 2718(b) of the PHS Act, and 

the implementing regulations at 

§§ 158.210 and 158.240, require an 

issuer to provide an annual rebate to 

enrollees, on a pro rata basis, if the ratio 

of the amount of premium revenue 

expended by the issuer on 

reimbursement for clinical services 

provided to enrollees under the health 

insurance coverage and for activities 

that improve health care quality to the 

total amount of premium revenue 

(excluding federal and state taxes and 

licensing or regulatory fees) is less than 

80 percent in the individual and small 

group markets and 85 percent in the 

large group market. In order to 

determine whether its MLR met the 

applicable standard, § 158.110(b) 

requires an issuer to submit to CMS, by 

July 31 of the year following the end of 

the MLR reporting year, an MLR Annual 

Reporting Form concerning premium 

revenue and expenses related to the 

group and individual health insurance 

coverage that it issued. 

Section 158.241 permits an issuer to 

provide MLR rebates in the form of a 

premium credit, lump-sum check, or, if 

an enrollee paid the premium using a 

credit card or direct debit, by lump-sum 

reimbursement to the account used to 

pay the premium. Issuers that choose to 

provide a rebate via a lump-sum check 

or lump-sum reimbursement to the 

account used to pay the premium must 

issue the rebate no later than September 

30 following the end of the MLR 

reporting year pursuant to § 158.240(e). 

Issuers that elect to provide rebates in 

the form of a premium credit must 

apply the rebate to the first month’s 

premium that is due on or after 

September 30 following the MLR 

reporting year pursuant to 

§ 158.241(a)(2). This section also 

requires that when the rebate is 

provided in the form of a premium 

credit and the total amount of the rebate 

owed exceeds the premium due for 

October, any excess rebate amount must 

be applied to succeeding premium 

payments until the full amount of the 

rebate has been credited. Pursuant to 

§ 158.240(f), an issuer that fails to pay 

a rebate owed to an enrollee in 

accordance with the applicable 

timeframes established in §§ 158.240(e) 

and 158.241(a)(2) is required to pay the 

enrollee the required rebate plus 

interest, at ten percent annually, 

accruing from the date payment was 

due. 

On June 12, 2020, we announced a 

temporary policy of relaxed 

enforcement to allow issuers to prepay 

to enrollees a portion or all of the 

estimated MLR rebate for the 2019 MLR 

reporting year in the form of a premium 

credit, to the extent consistent with state 

law or other applicable state authority, 

in order to support continuity of 

coverage for enrollees who may struggle 

to pay premiums because of illness or 

loss of income resulting from the 

COVID–19 PHE.229 This temporary 

policy of relaxed enforcement was 

limited to issuers that choose to prepay 

a portion or all of their estimated 2019 

MLR rebate in the form of a premium 

credit, as the current rules do not 

prohibit issuers paying rebates in the 

form of a lump-sum check or lump-sum 

reimbursement to the account used to 

pay the premium from prepaying a 

portion or all of their rebates as long as 

the full rebate amount owed to an 

enrollee is paid to that enrollee no later 

than September 30 following the end of 

the MLR reporting year.230

Given the benefits experienced by 

enrollees in light of this temporary 

policy of relaxed enforcement during 

the COVID–19 PHE and our desire to 

continue to provide this flexibility for 

future years, we propose to amend 

§ 158.240 by adding paragraph (g), 

which would explicitly allow issuers to 

prepay a portion or all of their estimated 

rebates to enrollees for any MLR 

reporting year regardless of the form in 

which they are paid. We believe that 

enrollees would generally benefit from 

the ability to receive estimated rebates 

earlier than contemplated by the 

timelines currently codified in 

§§ 158.240(e) and 158.241(a)(2) and 

prior to issuers submitting their MLR 

Annual Reporting Forms pursuant to 

§ 158.110(b). We also propose to require 

that issuers that choose to prepay a 

portion or all of their estimated rebates 

do so for all eligible enrollees in a given 

state and market in a nondiscriminatory manner. 

In addition, under the current rules, 

an issuer that prepays a portion or all of 

its estimated rebate in the form of a 

lump-sum check, or if an enrollee paid 

the premium using a credit card or 

direct debit, by lump-sum 

reimbursement to the account used to 

pay the premium, and subsequently 

determines that such prepayment is less 

than the total rebate owed to an enrollee 

would have to incur the costs of 

disbursing rebates twice: First to 

disburse the prepaid rebate amount, and 

again to disburse the remaining rebate 

amount by the deadlines set forth in 

§§ 158.240(e) and 158.241(a)(2). To 

reduce the regulatory burden on issuers 

and incentivize issuers to deliver 

rebates to enrollees sooner, we propose 

to add to the proposed new § 158.240(g) 

a safe harbor under which an issuer that 

prepays at least 95 percent of the total 

rebate owed to enrollees in a given state 

and market for a given MLR reporting 

year by the MLR rebate payment 

deadlines set forth in §§ 158.240(e) and 

158.241(a)(2) may, without penalty or 

late payment interest under § 158.240(f), 

defer the payment of any remaining 

rebate owed to enrollees in that state 

and market until the MLR rebate 

payment deadlines set forth in 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78647 

231PBMs contract with a variety of health plans, 

including, but not limited to, individual and small 

group health plans, large group and self-insured 

plans, and Medicare Part D drug plans. In this 

section, we only reference PBMs that contract with 

a health insurance company to administer the 

prescription drug benefit for QHPs. 

232 ‘‘Pharmacy Benefit Managers,’’ Health Affairs 

Health Policy Brief, September 14, 2017. Available 

at https://www.healthaffairs.org/do/10.1377/ 

hpb20171409.000178/full/. 

233Elizabeth Seeley and Aaron S. Kesselheim. 

‘‘Pharmacy Benefit Managers: Practices, 

Controversies, and What Lies Ahead,’’ 

Commonwealth Fund, March 2019. Available at 

https://doi.org/10.26099/n60j-0886. 

234See ‘‘The Prescription Drug Landscape, 

Explored.’’ Available at https://www.pewtrusts.org/ 

-/media/assets/2019/03/the_prescription_drug_

landscape-explored.pdf. 

§§ 158.240(e) and 158.241(a)(2) for the 

following MLR reporting year. This 

would enable such an issuer to maintain 

a single rebate disbursement cycle per 

year. Furthermore, the issuer would be 

able to combine payment of rebates 

remaining after prepayment with the 

rebates for the following MLR reporting 

year for enrollees who are enrolled with 

the issuer during both years. Enrollees 

who are no longer enrolled with the 

issuer the following year would receive 

only the rebates remaining after 

prepayment, but the issuer would still 

benefit by disbursing these amounts as 

part of the issuer’s regular rebate 

disbursement process in the following 

year. At the same time, the proposed 

safe harbor would ensure that enrollees 

continue to receive most of the rebate 

within the regular timeframe, as issuers 

that prepay less than 95 percent of the 

total rebate owed to enrollees for a given 

MLR reporting year would continue to 

be required to provide the enrollees 

with the remaining portion of the rebate 

owed in accordance with the timeframes 

set forth in §§ 158.240(e) and 

158.241(a)(2) for the current MLR 

reporting year. To further ensure that 

enrollees do not regularly receive 

reduced rebates as a result of 

prepayments, we also propose that 

under this safe harbor, the rebate 

amount remaining after prepayment 

would not be treated as de minimis, 

regardless of how small the remaining 

amount is. That is, the de minimis 

provisions in § 158.243 continue to 

apply only if the total rebate (the sum 

of the prepaid amount and any amount 

remaining after prepayment) owed to an 

enrollee for a given MLR reporting year 

is below the applicable threshold. 

We note that § 158.250 requires 

issuers to provide a notice of rebates at 

the time any rebate is provided, which 

includes both rebate prepayments and 

payments of rebates remaining after 

prepayment. We intend to modify the 

ICRs approved under OMB Control 

Number 0938–1164 to add modified 

standard notices that can be used by 

issuers that elect to prepay rebates 

under the proposed new § 158.240(g). 

We also intend to revise the MLR 

Annual Reporting Form Instructions to 

clarify that an issuer that prepays a 

portion or all of its estimated rebate and 

subsequently determines that the 

amount of such prepayment is more 

than the total rebate owed to an enrollee 

for that MLR reporting year and that 

does not recoup the overpayment from 

the enrollee, may include the 

overpayment in its rebate payments 

reported for purposes of calculating the 

optional limit on the payable rebates 

under § 158.240(d). We additionally 

intend to revise the MLR Annual 

Reporting Form Instructions to clarify 

how issuers that prepay estimated 

rebates must report such prepayments. 

We propose that this amendment to 

create new § 158.240(g) would be 

applicable beginning with the 2020 

MLR reporting year (MLR reports filed 

in 2021). We seek comment on this 

proposal, including the proposed 

applicability date. 

4. Form of Rebate (§ 158.241) 

As discussed in the prior section of 

this preamble, § 158.241 permits an 

issuer to provide MLR rebates in the 

form of a premium credit, lump-sum 

check, or, if an enrollee paid the 

premium using a credit card or direct 

debit, by lump-sum reimbursement to 

the account used to pay the premium. 

Under § 158.240(e), issuers that choose 

to provide a rebate via a lump-sum 

check or lump-sum reimbursement to 

the account used to pay the premium 

must issue the rebate no later than 

September 30 following the end of the 

MLR reporting year. In contrast, 

§ 158.241(a)(2) provides that issuers that 

elect to provide rebates in the form of 

a premium credit must apply the rebate 

to the first month’s premium that is due 

on or after September 30 following the 

MLR reporting year, and that when the 

rebate is provided in the form of a 

premium credit and the total amount of 

the rebate owed exceeds the premium 

due in October, any excess rebate 

amount must be applied to succeeding 

premium payments until the full 

amount of the rebate has been credited. 

Given the proposed addition of 

§ 158.240(g) discussed in the prior 

section, the fact that an issuer may wish 

to provide rebates in the form of a 

premium credit earlier than October, 

and the desire to reduce the regulatory 

burden and enable enrollees to receive 

the benefit of rebates sooner, we 

propose to amend § 158.241(a)(2) to 

allow issuers to provide rebates in the 

form of a premium credit prior to the 

date that the rules currently provide. 

Specifically, we propose to amend 

§ 158.241(a)(2) to specify that when 

provided in the form of premium 

credits, rebates must be applied to 

premium that is due no later than 

October 30 following the MLR reporting 

year. We propose that this amendment 

would be applicable beginning with the 

2020 MLR reporting year (MLR reports 

due in 2021). 

We seek comment on this proposal, 

including on the proposed applicability 

date. 

G. Part 184—Pharmacy Benefit Manager 

Standards Under the Affordable Care 

Act 

1. Prescription Drug Distribution and 

Cost Reporting by Pharmacy Benefit 

Managers (§§ 184.10 and 184.50) 

PBMs are third-party administrators 

that manage the prescription drug 

benefit for a contracted entity.231 This 

administration typically involves 

processing claims, maintaining drug 

formularies, contracting with 

pharmacies for reimbursement for drugs 

dispensed, and negotiating prices with 

drug manufacturers.232

The role of PBMs in the prescription 

drug landscape, including any impact 

on the rising cost of prescription drugs, 

is not well understood.233 For example, 

PBMs generate revenue, in part, by 

retaining the difference between the 

amount paid by the health plan for 

prescription drugs and the amount the 

PBM reimburses pharmacies, a practice 

commonly referred to as ‘‘spread 

pricing.’’ While estimates report the 

increasing prevalence of spread pricing 

in private health insurance plans, 234

detailed data on the practice has 

generally not been collected by plans or 

by any state or federal regulatory body. 

We propose to add part 184 to 45 CFR 

subchapter E to codify in regulation the 

statutory requirement that PBMs under 

contract with QHP issuers report the 

data described at section 1150A(b) of 

the Act to the Secretary and to each 

QHP for which the PBM administers the 

prescription drug benefit. 

At proposed § 184.10(a)(1), we 

explain that new part 184 is based on 

section 1150A of the Act. At proposed 

§ 184.10(b), we propose that the scope of 

new part 184 establishes standards for 

PBMs that administer prescription drug 

benefits for health insurance issuers 

which offer QHPs with respect to the 

offering of such plans. We also propose 

definitions for part 184 at new § 184.20. 

Except for the definition of pharmacy 

78648 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

235This includes an FFE, as a Federal Exchange 

may be considered an Exchange established under 

section 1311 of the PPACA. King v. Burwell, 576 

U.S. 988 (2015). 

236As noted earlier in this preamble, the purposes 

are: As the Secretary determines to be necessary to 

carry out Section 1150A or part D of title XVIII; to 

permit the Comptroller General to review the 

information provided; to permit the Director of the 

Congressional Budget Office to review the 

information provided; and, to States to carry out 

section 1311 of the PPACA. 

237Section 1150A(a)(1) also authorizes the 

collection of data from PBMs that manage 

prescription drug coverage under contract with a 

Prescription Drug Plan sponsor of a prescription 

drug plan or a Medicare Advantage organization 

offering a Medicare Advantage prescription drug 

plan. 

238 85 FR 4993 through 4994. 

239 85 FR 56227 through 56229. 

240As stated above in the preamble for § 156.295, 

section 1150A(b)(1) requires the Secretary to collect 

data by pharmacy type. However, we are aware that 

it is not currently possible to report such data by 

pharmacy type because pharmacy type is a not 

standard classification currently captured in 

industry databases or files. To reduce burden, we 

are not proposing to collect data by pharmacy type 

at this time. We intend to collect this information 

at a time when the imposition of such a 

requirement would pose reasonable burden. We 

seek comment on ways that we may impose the 

collection of data by pharmacy type in the future 

without imposing unreasonable burden on the 

industry. 

241This definition of bona fide service fees was 

finalized at § 156.295 in the 2012 Exchange Final 

Rule at 77 FR 18432. There, we finalized this 

definition to align with the definition of bona fide 

service fees finalized in the Medicare Program; 

Changes to the Medicare Advantage and the 

Medicare Prescription Drug Benefit Programs for 

Contract Year 2013 and Other Changes final rule. 

See 77 FR 22072 at 22093. 

benefit manager, these proposed 

definitions would codify terms already 

in use in parts 144 and 155 of 

subchapter B of subtitle A of title 45 of 

the Code of Federal Regulations. 

As part of the PPACA, Congress 

passed section 6005, which added 

section 1150A to the Act, requiring a 

PBM under a contract with a QHP 

offered through an Exchange established 

by a state under section 1311 of the 

PPACA 235 to provide certain 

prescription drug information to the 

QHP and to Secretary at such times, and 

in such form and manner, as the 

Secretary shall specify. Section 

1150A(b) of the Act addresses the 

information that a QHP issuer and their 

PBM must report. Section 1150A(c) of 

the Act requires the Secretary to keep 

the information reported confidential 

and specifies that the information may 

not be disclosed by the Secretary or by 

a plan receiving the information, except 

that the Secretary may disclose the 

information in a form which does not 

disclose the identity of a specific PBM, 

plan, or prices charged for drugs for 

certain purposes.236

In the 2012 Exchange Final Rule, we 

codified the requirements of section 

1150A of the Act, as it applies to QHPs, 

at § 156.295.237 On January 1, 2020 238

and on September 11, 2020 239, we 

published Federal Register notices and 

solicited public comment on collection 

of information requirements detailing 

the proposed collection envisioned by 

section 1150A of the Act, as referenced 

earlier. As noted earlier in this 

preamble, we propose to revise 

§ 156.295 to state that where a QHP 

issuer does not contract with a PBM to 

administer the prescription drug benefit 

for QHPs, the QHP issuer will report the 

data required by section 1150A of the 

Act to HHS. 

We propose to add § 184.50(a) to state 

that where a PBM contracts with an 

issuer of QHPs to administer the 

prescription drug benefit for their QHPs, 

the PBM is required to report the data 

required by section 1150A(b) of the Act 

to the QHP and to the Secretary, at such 

times, and in such form and manner, as 

the Secretary shall specify. While we 

acknowledge that this section applies to 

both the QHP issuer and their PBMs to 

report this data, we propose to 

implement section 1150A to require 

PBMs to report this data directly to the 

Secretary, and only to require the QHP 

issuer to report the data only when the 

QHP issuer does not contract with a 

PBM to administer the prescription drug 

benefit for their QHPs, as further 

discussed in the preamble to § 156.295 

in this proposed rule. 

We propose to add § 184.50(a)(1) 

through (3) to require these PBMs to 

report the data described at section 

1150A(b) of the Act to the Secretary. 

The data proposed to be collected, as 

required by section 1150A, are: The 

percentage of all prescriptions that were 

provided through retail pharmacies 

compared to mail order pharmacies, and 

the percentage of prescriptions for 

which a generic drug was available and 

dispensed (generic dispensing rate), that 

is paid by the health benefits plan or 

PBM under the contract; 240 the 

aggregate amount, and the type of 

rebates, discounts, or price concessions 

(excluding bona fide service fees, which 

include but are not limited to 

distribution service fees, inventory 

management fees, product stocking 

allowances, and fees associated with 

administrative services agreements and 

patient care programs (such as 

medication compliance programs and 

patient education programs 241) that the 

PBM negotiates that are attributable to 

patient utilization under the plan, and 

the aggregate amount of the rebates, 

discounts, or price concessions that are 

passed through to the plan sponsor, and 

the total number of prescriptions that 

were dispensed; and the aggregate 

amount of the difference between the 

amount the health benefits plan pays 

the PBM and the amount that the PBM 

pays retail pharmacies (spread pricing), 

and mail order pharmacies, and the total 

number of prescriptions that were 

dispensed. 

At new § 184.50(b) and (c), we also 

propose to codify the confidentiality 

and penalty provisions that appear at 

§ 1150A(c) and (d) to PBMs which 

administer the prescription drug 

benefits for QHP issuers. 

We seek comment on these proposals. 

IV. Provisions of the Proposed Rule for 

State Innovation Waivers—Department 

of Health and Human Services and 

Department of the Treasury 

A. 31 CFR Part 33 and 45 CFR Part 

155—State Innovation Waivers 

1. Section 1332 Application Procedures 

(31 CFR 33.108 and 45 CFR 155.1308), 

Monitoring and Compliance (31 CFR 

33.120 and 45 CFR 155.1320), and 

Periodic Evaluation Requirements (31 

CFR 33.128 and 45 CFR 155.1328) 

Section 1332 of the PPACA permits 

states to apply for a State Innovation 

Waiver (also referred to as a section 

1332 waiver or State Relief and 

Empowerment Waiver) to pursue 

innovative strategies for providing their 

residents with access to higher value, 

more affordable health coverage. The 

overarching goal of section 1332 waivers 

is to give all Americans the opportunity 

to obtain high value and affordable 

health coverage regardless of income, 

geography, age, sex, or health status, 

while simultaneously empowering 

states to develop health coverage 

strategies that best meet the needs of 

their residents. In this proposed rule, 

the Departments seek to provide states 

with consistency and predictability by 

codifying the Departments’ longstanding policy published in the 

Federal Register in 2018, regarding how 

the Departments will apply section 1332 

of the PPACA to determine whether 

applications for section 1332 waivers 

will be approved. 

Under section 1332 of the PPACA, the 

Secretaries may exercise their discretion 

to approve a request for a section 1332 

waiver only if the Secretaries determine 

that the proposal for the section 1332 

waiver meets the following four 

requirements (referred to as the 

statutory guardrails): (1) The proposal 

will provide coverage that is at least as 

comprehensive as coverage defined in 

PPACA section 1302(b) and offered 

through Exchanges established by title I 

of PPACA, as certified by the Office of 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78649 

242 83 FR 53575 (Oct. 24, 2018). 

the Actuary of CMS, based on sufficient 

data from the state and from comparable 

states about their experience with 

programs created by the PPACA and the 

provisions of the PPACA that would be 

waived; (2) the proposal will provide 

coverage and cost-sharing protections 

against excessive out-of-pocket 

spending that are at least as affordable 

for the state’s residents as would be 

provided under title I of PPACA; (3) the 

proposal will provide coverage to at 

least a comparable number of the state’s 

residents as would be provided under 

title I of PPACA; and (4) the proposal 

will not increase the federal deficit. The 

Secretaries retain their discretionary 

authority under section 1332 to deny 

waivers when appropriate given 

consideration of the application as a 

whole, even if an application meets the 

four statutory guardrails. 

The Departments are also responsible 

under section 1332 of the PPACA for 

monitoring a waiver’s compliance with 

the statutory guardrails and for 

conducting evaluations to determine the 

impact of the waiver. Specifically, 

section 1332 of the PPACA requires that 

the Secretaries provide for and conduct 

periodic evaluations of approved 

section 1332 waivers. The Secretaries 

must also provide for a process under 

which states with approved waivers 

must submit periodic reports 

concerning the implementation of the 

state’s waiver program. 

In October 2018, the Departments 

issued the 2018 Guidance,242 which 

provides additional guidance for states 

that wish to submit section 1332 waiver 

proposals regarding the Secretaries’ 

application review procedures, passthrough funding determinations, certain 

analytical requirements, and operational 

considerations. The 2018 Guidance also 

includes information regarding how the 

Departments will apply the section 1332 

statutory guardrails to evaluate whether 

a waiver is approvable. Section 1332 of 

the PPACA and the 2018 Guidance 

empower states to address problems 

with their individual insurance markets 

and increase coverage options for their 

residents, and to encourage states to 

evaluate and adopt innovative strategies 

to reduce future overall health care 

spending. Together, the statutory 

guardrails and the 2018 Guidance 

provide states a reliable roadmap to 

follow in designing section 1332 waiver 

programs that will promote a stable 

health insurance market that offers more 

choice and affordability to state 

residents. 

In this proposed rule, the 

Departments seek to provide certainty to 

states that the requirements and 

expectations of the section 1332 

program will not change abruptly, or 

without notice to states and the public 

and an opportunity to comment, during 

a period in which states are doing the 

work to prepare a section 1332 waiver 

proposal that would satisfy the statutory 

guardrails or during a state’s approved 

waiver period. Specifically, the 

Departments propose to incorporate the 

2018 Guidance in full in the regulations 

governing section 1332 waiver 

application procedures, monitoring and 

compliance, and periodic evaluation 

requirements. The Departments are of 

the view that this proposal would give 

states greater certainty regarding how 

the Departments will apply section 

1332’s statutory guardrails when 

determining whether a state’s waiver 

proposal can receive approval by the 

Departments and remain in compliance. 

31 CFR 33.108 and 45 CFR 155.1308 

specify the application procedures a 

section 1332 waiver proposal must meet 

to be approved by the Secretaries. Under 

these regulations, an application for 

initial approval of a section 1332 waiver 

will not be considered complete unless 

the application complies with the 

application procedures under 31 CFR 

33.108(f) and 45 CFR 155.1308(f), 

including written evidence of the state’s 

compliance with the public notice 

requirements set forth in 31 CFR 33.112 

and 45 CFR 155.1312. Furthermore, an 

application must provide a 

comprehensive description of the 

enacted state legislation and program to 

implement a plan meeting the 

requirements for a waiver under section 

1332; a copy of the enacted state 

legislation authorizing such waiver 

request; a list of the provisions of law 

that the state seeks to waive including 

a brief description of the reason for the 

specific request; and the analyses, 

actuarial certifications, data, 

assumptions, targets and other 

information sufficient to provide the 

Secretaries with the necessary data to 

determine that the state’s proposed 

waiver meets the statutory guardrails. 

The 2018 Guidance provides 

supplementary information about the 

requirements that must be met for the 

approval of a State Innovation Waiver, 

the Secretaries’ application review 

procedures, the calculation of passthrough funding, certain analytical 

requirements, and operational 

considerations. The 2018 Guidance also 

describes ways in which a section 1332 

state plan may meet section 1332 

requirements in order to be eligible to be 

approved by the Secretaries, clarifying 

the adjustments the Secretaries may 

make to maintain federal deficit 

neutrality, and allowing for states to use 

existing legislative authority to 

authorize section 1332 waivers in 

certain scenarios. The Departments are 

of the view that using consistent 

application requirements will encourage 

more states to pursue waivers without 

the worry that some of the rules may 

change after they have submitted a 

waiver application. Furthermore, by 

referencing and incorporating the full 

guidance into regulations, this proposal 

would allow states to plan for future 

waiver applications. The Departments 

are of the view that this proposal will 

provide certainty to states as they invest 

significant state resources towards 

submission of a section 1332 waiver and 

implementation of a section 1332 

waiver, particularly waivers that require 

multiyear preparation. 

This proposed rule proposes to 

incorporate the 2018 Guidance in full in 

the Departments’ monitoring and 

compliance regulations at 31 CFR 

155.1320 and 45 CFR 155.1320. 

Specifically, under the current 

requirements the Secretaries reserve the 

right to suspend or terminate a waiver, 

in whole or in part, any time before the 

date of expiration, if the Secretaries 

determine that the state materially failed 

to comply with the terms and 

conditions of the waiver. The 

Departments will review and, when 

appropriate, investigate documented 

complaints that the state is failing to 

materially comply with requirements 

specified in the approved waiver and 

the specific terms and conditions (STCs) 

for the approval of the waiver signed by 

the Departments and the state. In 

addition, the Departments will promptly 

share with the state any complaint that 

they may receive and will notify the 

state of any applicable monitoring and 

compliance issues. Additionally, states 

with approved section 1332 waivers 

must comply with all applicable federal 

laws and regulations (unless specifically 

waived) and must come into compliance 

with any changes in federal law or 

regulations affecting section 1332 

waivers. The Departments are of the 

view that this proposal to incorporate 

the full 2018 Guidance in the 

monitoring and compliance 

requirements will provide certainty 

regarding how the Departments will 

evaluate and review section 1332 waiver 

programs, as states submit information 

concerning the implementation of the 

waiver program. 

This proposed rule also proposes to 

incorporate the 2018 Guidance in full in 

the periodic evaluation requirements 

regulations at 31 CFR 33.128 and 45 

CFR 155.1328. Under current 

78650 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

243See May 2019 Bureau of Labor Statistics, 

Occupational Employment Statistics, National 

Occupational Employment and Wage Estimates. Available at https://www.bls.gov/oes/current/oes_

stru.htm. 

requirements, the Departments are 

responsible for evaluating the waiver 

using federal data, information reported 

by states, and the waiver application 

itself to ensure that the Departments can 

exercise appropriate oversight of the 

approved waiver. Per 31 CFR 33.120(f) 

and 45 CFR 155.1320(f), the state must 

fully cooperate with the Departments or 

an independent evaluator selected by 

the Departments in consultation with 

the state, to undertake an independent 

evaluation of any component of the 

section 1332 waiver. As part of this 

required cooperation, the state must 

submit all requested data and 

information to the Departments or the 

independent evaluator. The state 

generally must meet the statutory 

requirements in each year that the 

waiver is in effect, as such the primary 

focus of the periodic evaluations will be 

the four statutory guardrails. However, 

the Departments will consider the 

longer-term impacts of a state’s 

proposal. The Departments are of the 

view that this proposal to incorporate 

the full 2018 Guidance in the periodic 

evaluation requirements will provide 

certainty regarding how the 

Departments will evaluate whether a 

section 1332 waiver may maintain its 

approval by the Departments. The 

Departments also believe that this 

proposal will also help states to 

anticipate the data that will be most 

relevant and helpful to the Departments’ 

analyses of a state’s compliance with the 

specific terms and conditions approved 

by the Departments. 

As such, the Departments specifically 

propose to revise the language in 31 

CFR 33.108(f)(3)(iv), 31 CFR 

33.120(a)(1), 31 CFR 33.128(a), 45 CFR 

155.1308(f)(3)(iv), 45 CFR 

155.1320(a)(1), and 45 CFR 155.1328(a) 

to incorporate the 2018 Guidance in 

full. The Departments are of the view 

that the increased certainty that would 

result from incorporating the full 2018 

Guidance as proposed into the section 

1332 implementing regulations will 

allow states to have greater confidence 

that the significant time and monetary 

investments necessary to plan for and 

submit a section 1332 waiver 

application will not result in wasted 

resources and taxpayer dollars. The 

Departments are also of the view that 

this proposed rule will help to increase 

state innovation, which could lead to 

more affordable health coverage for 

individuals and families in states that 

implement a section 1332 waiver 

program. The Departments seek 

comment on these proposals. 

V. 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 the Office of 

Management and Budget (OMB) for 

review and approval. This proposed 

rule contains information collection 

requirements (ICRs) that are subject to 

review by OMB. A description of these 

provisions is given in the following 

paragraphs with an estimate of the 

annual burden, summarized in Table 11. 

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. 

We are soliciting public comment on 

each of the required issues under 

section 3506(c)(2)(A) of the PRA for the 

following ICRs. 

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.243 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 

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.) 

Compliance Officer .......................................................................................... 13–1041 $35.03 $35.03 $70.06 

Pharmacy Technician ...................................................................................... 29–2052 16.95 16.95 33.90 

Secretaries and Administrative Assistants ...................................................... 43–6014 18.84 18.84 37.68 

Billing and Posting Clerks ................................................................................ 43–3021 19.53 19.53 39.06 

Chief Executives .............................................................................................. 11–1011 93.20 93.20 186.40 

Business Operations Specialist ....................................................................... 13–1198 38.57 38.57 77.14 

Computer System Analyst ............................................................................... 15–1121 46.23 46.23 92.46

Computer Programmer .................................................................................... 15–1251 44.53 44.53 89.06 

Computer and Information Systems Manager ................................................. 11–3021 75.19 75.19 150.38 

General and Operations Manager ................................................................... 11–1021 59.15 59.15 118.30 

Auditor .............................................................................................................. 13–2011 38.23 38.23 76.46 

B. ICRs Regarding State Flexibility for 

Risk Adjustment (§ 153.320) 

We are proposing to allow state 

regulators to request a reduction in the 

calculation of risk adjustment transfers 

under the state payment transfer 

formula under § 153.320(d) for up to 3 

years, beginning for the 2023 benefit 

year. HHS would require any state that 

intends to request multi-year flexibility 

to submit its request by August 1st of 

the calendar year that is 2 calendar 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78651 

years prior to the beginning of the first 

benefit year of its request. HHS would 

reserve the right to require states with 

approved multi-year reduction requests 

to submit supplemental evidence in any 

subsequent year of the request after its 

initial approval, in the timeframe, form, 

and manner specified by HHS, and 

would also reserve the right to terminate 

or modify an approved multi-year 

reduction request prior to its natural 

expiration. We propose to permit states 

with approved multi-year requests to 

withdraw their respective request before 

its natural expiration by notifying HHS 

of its requested withdrawal. We also 

propose to require states to inform 

impacted issuers of any early 

termination, modification, or 

withdrawal of a multi-year reduction 

request. We expect that fewer than 10 

states would make these requests 

annually. Therefore, we believe that this 

collection is exempt from the PRA 

under 44 U.S.C. 3502(3)(A)(i). 

C. ICRs Regarding Submission of 

Adjusted Premium Amounts for Risk 

Adjustment 

45 CFR 153.610 and 153.710 provide 

that issuers of a risk adjustment covered 

plan must provide HHS with access to 

risk adjustment data through a 

dedicated distributed data environment 

(EDGE server), in a manner and 

timeframe specified by HHS. We clarify 

that, for purposes of risk adjustment 

data submissions in the 2021 benefit 

year and beyond when a declared PHE 

is in effect and HHS permits these 

premium credits, issuers that choose to 

provide premium credits must submit 

the adjusted (that is, lower) plan 

premiums for those months, instead of 

the unadjusted plan premiums. HHS 

would require issuers to submit 

adjusted plan premiums to their EDGE 

servers for all enrollees whom the issuer 

has actually provided premium credits 

as a reduction to the corresponding 

benefit year premiums. We do not 

believe that issuers who elect to provide 

these premium credits will incur 

additional operational burden 

associated with EDGE server data 

submissions as a result of these 

requirements because we expect issuers’ 

premium reporting systems will already 

be configured to enable issuers to 

upload the billable premiums actually 

charged to enrollees for the applicable 

benefit year to the EDGE server. 

Additionally, the current EDGE server 

operational guidance for the risk 

adjustment program allows issuers to 

submit billable premium changes so 

there will be no changes to the data 

submission rules. The burden related to 

this information collection is currently 

approved under OMB control number 

0938–1155 (Standards Related to 

Reinsurance, Risk Corridors, Risk 

Adjustment, and Payment Appeals). The 

information collection request expires 

on February 23, 2021. 

D. ICRs Regarding Direct Enrollment 

(§§ 155.220 and 155.221) 

At § 155.220(c)(3)(iii), we are 

proposing to require web-brokers’ nonExchange 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 nonExchange website does not facilitate 

enrollment in all QHPs offered through 

the Exchange, before assisters would be 

permitted to use the web-broker nonExchange websites to assist consumers 

with applying for insurance 

affordability programs and QHP 

enrollment. The Exchange would 

provide the exact text for this disclaimer 

and the language would not need to be 

customized. 

At § 155.220(c)(6), we propose a webbroker must demonstrate operational 

readiness and compliance with 

applicable requirements prior to the 

web-broker’s non-Exchange website 

being used to complete an Exchange 

eligibility application or a QHP 

selection, which may include 

submission of a number of artifacts of 

documentation or completion of certain 

testing processes. The required 

documentation may include operational 

data including licensure information, 

points of contact, and third-party 

relationships; security and privacy 

assessment documentation, including 

penetration testing results, security and 

privacy assessment reports, 

vulnerability scan results, plans of 

action and milestones, and system 

security and privacy plans; and an 

agreement between the web-broker and 

HHS documenting the requirements for 

participating in the applicable direct 

enrollment program. We estimate that it 

would take up to 2 hours for a Business 

Operations Specialist (at an hourly cost 

of $77.14) to complete and submit the 

required operational data and webbroker agreement to HHS each year. We 

estimate that it would take up to 17 

hours for a Business Operations 

Specialist (at an hourly cost of $77.14) 

to complete and submit the required 

security and privacy assessment 

documentation to HHS. The total 

burden for each web-broker would be 

approximately 19 hours, with an 

equivalent cost of approximately $1,466. 

Based on current web-broker 

participation and potential market size, 

we estimate that 30 web-brokers would 

participate. We estimate that these data 

collections would have an annual 

burden of 570 hours with a cost of 

approximately $43,970. 

We propose to add additional detail to 

the operational readiness requirement in 

§ 155.221(b)(4) to incorporate 

requirements for direct enrollment 

entities seeking approval to use the EDE 

pathway. In proposed § 155.221(b)(4), 

we propose a direct enrollment entity 

must demonstrate operational readiness 

and compliance with applicable 

requirements prior to the direct 

enrollment entity’s website being used 

to complete an Exchange eligibility 

application or a QHP selection, which 

may include submission of a number of 

artifacts of documentation or 

completion of various testing or training 

processes. The required documentation 

could include business audit 

documentation including: Notices of 

intent to participate including auditor 

information; documentation packages 

including privacy questionnaires, 

privacy policy statements, and terms of 

service; and business audit reports 

including testing results. The required 

documentation could also include 

security and privacy audit 

documentation including: 

Interconnection security agreements; 

security and privacy controls 

assessment test plans; security and 

privacy assessment reports; plans of 

action and milestones; privacy impact 

assessments; system security and 

privacy plans; incident response plans; 

vulnerability scan results; and an 

agreement between the direct 

enrollment entity and HHS 

documenting the requirements for 

participating in the applicable direct 

enrollment program. We estimate that 

for each direct enrollment entity it 

would take up to 9 hours for a Business 

Operations Specialist (at an hourly cost 

of $77.14) to complete and submit a 

typical documentation package and 

related information to HHS each year. 

Based on current EDE participation and 

potential market size, we estimate that 

77 EDE entities would participate in a 

manner such that they would be 

required to submit this type of 

information, and therefore, this data 

collection would have an annual burden 

of 693 hours with an annual cost of 

approximately $53,458. In addition, we 

estimate that it would take up to 72 

hours for an Auditor (at an hourly cost 

of $76.46) to complete and submit a 

business requirements audit package for 

a direct enrollment entity, including 

audit report and testing results, to HHS. 

Based on current EDE participation and 

78652 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

244 85 FR 4993 through 4994. 

245 85 FR 56227 through 56229. 

potential market size, we estimate that 

four EDE entities would participate, and 

therefore this data collection would 

have an annual burden of 288 hours 

with a cost of approximately $22,020. 

We also estimate that it would take up 

to 122 hours for an Auditor (at an 

hourly cost of $76.46) to complete and 

submit a security and privacy audit 

package for a direct enrollment entity to 

HHS each year. Based on current EDE 

participation and potential market size, 

we estimate that 14 EDE entities would 

participate, and therefore this data 

collection would have an annual burden 

of 1,708 hours with a cost of 

approximately $130,594. 

E. ICRs Regarding Prescription Drug 

Distribution and Cost Reporting by QHP 

Issuers (§ 156.295) and PBMs (§ 184.50) 

We propose to revise § 156.295 and 

add § 184.50 to require QHP issuers or 

PBMs that contract with QHP issuers to 

report the data envisioned by section 

1150A. We have not previously 

collected this data; therefore, the burden 

associated with these proposals would 

reflect the imposition of the burden for 

a new collection, and not merely the 

burden created by changes to existing 

regulatory text. On January 1, 2020 244

and on September 11, 2020,245 we 

published notices in the Federal 

Register and solicited public comment 

on the burden related to these ICRs. 

Here, we replicate the discussion 

regarding burden from the information 

collection published in September 2020 

and solicit a third round of public 

comment on the burden associated with 

this collection. 

The burden associated with this 

collection is attributed to QHP issuers 

and PBMs, and the burden estimates 

were developed based on our previous 

experience with QHP information 

reporting activities. We are unaware of 

any QHP issuer that does not contract 

with a PBM to administer their 

prescription drug benefit. While we 

invite comment on whether any QHP 

issuer does not use a PBM, we do not 

currently estimate any burden for a QHP 

issuer to submit data directly. The 

following burden estimate reflects our 

expectation that all data would be 

submitted by PBMs. 

Across all 50 states and the District of 

Columbia, we estimate approximately 

40 PBMs would be subject to the 

reporting requirement. We further 

estimate that these PBMs, taken as a 

whole, annually contract with 

approximately 275 QHP issuers to 

administer the prescription drug benefit 

for their QHPs. We estimate that the 275 

QHP issuers offer 7,000 total QHPs 

annually or 25.4 QHPs per QHP issuer. 

Thus, we estimate that each of the 40 

PBMs would report data for 175 QHPs 

on average each year. We understand 

that some of these PBMs would contract 

with more QHP issuers than others, and 

as such, the reporting requirement 

would vary per PBM. We seek comment 

on the number of PBMs and the number 

of QHPs estimated. 

Each PBM that administers pharmacy 

benefits for a QHP issuer would be 

required to complete a web form and a 

data collection instrument. The web 

form would collect data aggregated at 

the QHP issuer level for all plans and 

products offered by the QHP issuer 

combined. The web form would also 

require the reporting of an allocation 

methodology that is selected by the 

PBM to allocate data, where necessary. 

We would expect submitters to maintain 

internal documentation of the allocation 

methodologies chosen, as CMS may 

need to follow-up with the submitter to 

better understand the methodology. 

PBMs would prepare and submit one 

data collection instrument per QHP 

issuer by Health Insurance Oversight 

System (HIOS) ID. Each data collection 

instrument would contain information 

regarding each plan the issuer offers. We 

estimate that an average PBM would 

report information for 5,200 NDCs for 

each QHP. The reports must include the 

data for all of the plans that the QHP 

issuer offered in their QHPs in the 

applicable plan year, even if they have 

no data to report for that plan year. 

Each submitter would also be 

required to complete an attestation 

which confirms the data submitted is 

accurate, complete, and truthful. 

We estimate that 40 PBMs would 

submit data for this reporting 

requirement, each submitting data for 

175 QHPs on average. For each PBM, we 

estimate that it would take compliance 

officers approximately 570 hours (for an 

annual cost of approximately $39,934 at 

a rate of $70.06 per hour), pharmacy 

technician 350 hours (for an annual cost 

of $11,865 at a rate of $33.90 per hour), 

secretaries and administrative assistants 

175 hours (for an annual cost of $6,594 

at a rate of $37.68 per hour), and billing 

and posting clerks 175 hours (for an 

annual cost of approximately $6,836 at 

a rate of $39.06 per hour) to prepare and 

submit the information and 8 hours for 

a chief executive (for an annual cost of 

approximately $1,491.20 at a rate of 

$186.40 per hour) to review the 

information and complete the 

attestation. In total, we estimate it will 

take a PBM approximately 1,278 hours 

to respond to this reporting requirement 

each year on average, for a total annual 

cost of approximately $66,719 per PBM 

to report data. This estimate will vary by 

PBM, since each PBM will report for a 

different number of plans, depending on 

the number of QHPs offered by a 

particular QHP issuer. Thus, we 

estimate the total annual burden for all 

40 PBMs combined to be approximately 

51,120 hours or $2,668,796. 

We estimate that PBMs would incur 

burden to complete a one-time technical 

build to implement the changes 

necessary for this collection, which 

would involve activities such as 

planning, assessment, budgeting, 

contracting, and reconfiguring systems 

to generate data extracts that conform to 

this collection’s requirements. We 

assume that this one-time burden would 

be incurred primarily in 2021. We 

estimate that, for each PBM, on average, 

it would take project management 

specialists and project management 

specialists and business operations 

specialists 500 hours (at $77.51 per 

hour), computer system analysts 1,300 

hours (at $92.46 per hour), computer 

programmers 2,080 hours (at $89.06 per 

hour), computer and information 

systems managers 40 hours (at $150.38 

per hour) and general and operations 

managers 50 hours (at $118.30 per hour) 

to complete this task. The total one-time 

burden for a PBM would be 

approximately 3,970 hours on average, 

with an equivalent cost of 

approximately $356,128. For all 40 

PBMs, the total one-time burden would 

be 158,800 hours for a total cost of 

approximately $14.2 million. For all 40 

PBMs, the average annual burden in 

2021–2023 incurred for implementation 

and reporting would be approximately 

87,013 hours with an average annual 

cost of approximately $6.5 million. 

We estimate that 275 QHP issuers 

would need to identify for the PBMs 

each year which plans are QHPs. For 

each QHP issuer, we estimate that it 

would take secretaries and 

administrative assistants 7 hours (for an 

annual burden of $263.76 at a rate of 

$37.68 per hour) to identify, on average, 

approximately 25 QHPs offered by a 

QHP issuer. This estimate will vary by 

QHP issuer, since each QHP issuer 

would identify a different number of 

QHPs, depending on the number of 

QHPs offered by a particular QHP 

issuer. Thus, we estimate the total 

annual burden for all 275 QHP issuers 

combined to be 1,925 hours or 

approximately $72,534. 

F. ICRs Regarding Medical Loss Ratio 

(§§ 158.103, 158.130, 158.240, 158.241) 

We propose to amend § 158.103 to 

establish the definition of prescription 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78653 

drug rebates and other price concessions 

that issuers must deduct from incurred 

claims for MLR reporting and rebate 

calculation purposes pursuant to 

§ 158.140(b)(1)(i). We propose that 

issuers that elect to provide temporary 

premium credits to consumers during a 

PHE declared by the Secretary of HHS 

in the 2021 benefit year and beyond 

must account for these credits as 

reductions to premium for the 

applicable months when reporting 

earned premium for the applicable MLR 

reporting year. We also propose to add 

a new § 158.240(g) to explicitly allow 

issuers to prepay a portion or all of their 

estimated MLR rebates to enrollees for 

a given MLR reporting year, and to 

establish a safe harbor allowing such 

issuers, under certain conditions, to 

defer the payment of rebates remaining 

after prepayment until the following 

MLR reporting year. In addition, we 

propose to amend § 158.241(a)(2) to 

allow issuers to provide MLR rebates in 

the form of a premium credit prior to 

the date that the rules currently provide. 

Finally, we propose to clarify MLR 

reporting and rebate requirements for 

issuers that choose to offer temporary 

premium credits during a PHE declared 

by the Secretary of HHS in the 2021 

benefit year and beyond when such 

credits are permitted by HHS. We 

anticipate that implementing these 

provisions would require minor changes 

to the MLR Annual Reporting Form, but 

would not significantly increase the 

associated burden. The burden related 

to this information collection is 

currently approved under OMB control 

number 0938–1164 (Medical Loss Ratio 

Annual Reports, MLR Notices, and 

Recordkeeping Requirements (CMS– 

10418)). The control number is 

currently set to expire on October 31, 

2020. A revised collection of 

information seeking OMB approval for 

an additional 3 years is currently under 

review by OMB. 

G. ICRs Regarding State Innovation 

Waivers (31 CFR 33.108, 45 CFR 

155.1308, 31 CFR 33.120, 45 CFR 

155.1320, 31 CFR 33.128 and 45 CFR 

155.1328 

In this proposed rule, the 

Departments propose to reference and 

incorporate the existing 2018 Guidance 

in full into the section 1332 waiver 

implementing regulations in order to 

give states certainty regarding the 

requirements to receive and maintain 

approval of a section 1332 waiver by the 

Departments. This rule does not propose 

to alter any of the requirements related 

to state innovation waiver applications, 

compliance and monitoring, or 

evaluation in a way that would create 

any additional costs or burdens for 

states seeking waiver approval or those 

states with approved waiver plans. The 

Departments anticipate that 

implementing these provisions would 

not significantly change the associated 

burden. The burden related to this 

information collection (Review and 

Approval Process for Waivers for State 

Innovation (CMS–10383)) is currently 

under review by OMB. 

H. ICRs Regarding Special Enrollment 

Period Verification (§ 155.420) 

State Exchanges provide periodic 

reporting of Exchange enrollment data 

to CMS, including enrollments through 

SEPs by type, under OMB 0938–1119. 

We anticipate this PRA would cover the 

collection of this information. We will 

separately notice updates to this PRA 

package, if any, associated with this 

proposal. 

I. Summary of Annual Burden Estimates 

for Proposed Requirements 

TABLE 11—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation section(s) OMB control number Number of 

respondents 

Number of 

responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Labor cost of 

reporting 

($) 

Total cost 

($) 

§ 155.220(c)(6) ...................... 0938–NEW ............................ 30 30 19 570 $43,970 $43,970 

§ 155.221(b)(4) ...................... 0938–NEW ............................ 77 77 9 693 53,458 53,458 

§ 155.221(b)(4)—Business 

Requirements Audit.

0938–NEW ............................ 4 4 72 288 22,020 22,020 

§ 155.221(b)(4)—Security and 

Privacy Audit.

0938–NEW ............................ 14 14 122 1,708 130,594 130,594 

156.295 & 184.50 (PBM Burden).0938–NEW ............................ 40 40 2,175 87,013 6,527,571 6,527,571 

156.295 & 184.50 (QHP 

Issuer Burden).

0938–NEW ............................ 275 275 7 1,925 72,534 72,534 

Total ............................... ................................................ 440 440 ........................ 92,197 6,850,147 6,850,147 

Note: There are no capital/maintenance costs associated with the ICRs contained in this rule; therefore, we have removed the associated column from Table 11. 

J. 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 ICRs. 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–9914–P), the 

ICR’s CFR citation, CMS ID number, and 

OMB control number. 

ICR-related comments are due 

February 2, 2021. 

VI. 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. 

VII. Regulatory Impact Analysis 

A. Statement of Need 

This rule proposes standards related 

to the risk adjustment program for the 

2022 benefit year and beyond. 

Additionally, this rule proposes the 

premium adjustment percentage and 

associated parameters and FFE and 

SBE–FP user fees for the 2022 benefit 

year. It also includes proposed changes 

related to special enrollment periods; 

Navigator program standards; direct 

enrollment entities; and the 

administrative appeals process with 

78654 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

246As noted earlier in this proposed rule, no state 

has elected to operate the risk adjustment program 

for the 2021 benefit year; therefore, HHS will operate the program for all 50 states and the District 

of Columbia. 

respect to health insurance issuers and 

non-federal governmental group health 

plans; and the medical loss ratio 

program. It also proposes changes to the 

regulation to require the reporting of 

certain prescription drug information 

for QHPs or their PBM. In addition, it 

proposes to create a new direct 

enrollment option for State Exchanges 

and FFE states. In addition, relating to 

State Innovation Waivers, it proposes to 

reference and incorporate sections of the 

2018 Guidance into the section 1332 

waiver implementing regulations in 

order to give states certainty regarding 

the requirements to receive and 

maintain approval of a section 1332 

waiver by the Departments. 

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 one 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 

one year, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

a serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. A RIA 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any one 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 one year, and therefore, 

meets the definition of ‘‘significant 

rule’’ under Executive Order 12866. 

Therefore, HHS has provided an 

assessment of the potential costs, 

benefits, and transfers associated with 

this rule. In accordance with the 

provisions of Executive Order 12866, 

this regulation was reviewed by OMB. 

The provisions in this proposed rule 

aim to ensure that consumers continue 

to have access to affordable coverage 

and health care, and that states have 

flexibility and control over their 

insurance markets. They would reduce 

regulatory burden, reduce 

administrative costs for issuers, webbrokers and direct enrollment entities, 

and states, ensure greater market 

stability, increase transparency and 

availability of QHP survey data, and 

increase transparency on the impact of 

PBMs on the cost of prescription drugs 

for QHPs. Through the reduction in 

financial uncertainty for issuers and 

increased affordability for consumers, 

these proposed provisions are expected 

to increase access to affordable health 

coverage. 

Affected entities, such as Exchanges, 

issuers and FFE Classic Direct 

Enrollment and Enhanced Direct 

Enrollment partners, would incur costs 

to implement new special enrollment 

period requirements; State Exchanges 

would incur costs to implement and 

operationalize special enrollment period 

verification; and web-brokers and direct 

enrollment entities would incur costs to 

comply with operational readiness 

demonstration requirements. QHP 

issuers and PBMs would incur costs to 

implement and operationalize drug data 

reporting. 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 12 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 allowing 

consumers to have continued access to 

coverage and health care, 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 12 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 annual monetized 

transfers described in Table 12 include 

changes to costs associated with the risk 

adjustment user fee paid to HHS by 

issuers. 

We are proposing the risk adjustment 

user fee of $0.25 PMPM for the 2022 

benefit year to operate the risk 

adjustment program on behalf of 

states,246 which we estimate to cost 

approximately $60 million in benefit 

year 2022. We expect risk adjustment 

user fee transfers from issuers to the 

federal government to remain steady at 

$60 million, the same as those estimated 

for the 2021 benefit year. 

For 2022, we are considering two 

additional proposals. First, we are 

proposing to reduce the FFE user fee 

rate from 3.0 percent of total premiums 

charged to 2.25 percent of total 

premiums charged, and we propose to 

reduce the SBE–FP user fee rate from 

2.5 percent of total premiums charged to 

1.75 percent of total premiums charged. 

For the 2023 benefit year, we propose 

FFE–DE and SBE–FP–DE user fee rate of 

1.5 percent of total premiums charged. 

While our current budget estimates may 

change in the future, we believe that it 

is important to keep the user fee in all 

markets at the lowest level possible to 

cover the costs of the Exchanges to keep 

premiums low for consumers and 

issuers. We expect transfers from the 

issuers to federal government to be 

reduced by approximately $270 million 

in 2022 and by approximately $400 

million in 2023 due to changes in user 

fee rates and state transitions; 

transitions from FFE or SBE–FP to State 

Exchange, SBE–FP, or FFE–DE are 

included in the reduction in user fee 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78655 

247Reinsurance collections ended in FY 2018 and 

outlays in subsequent years reflect remaining 

payments, refunds, and allowable activities. 

transfers from issuers to federal 

government. 

TABLE 12—ACCOUNTING STATEMENT

Benefits: 

Qualitative: 

• Continued access to coverage and heath care due to new special enrollment periods. 

• Greater market stability resulting from updates to the risk adjustment methodology. 

• Strengthened program integrity related to the proposal to require Exchanges to conduct special enrollment period verification. 

• Increased probability that consumers are able to maintain continuous coverage as a result of receiving MLR rebates sooner. 

• Increased transparency on the impact of PBMs on the cost of prescription drugs for QHPs. 

• Increased certainty for states regarding the application and ongoing approval process for section 1332 waiver applications, leading to increase in state innovation. 

Costs Estimate 

(million) 

Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

Annualized Monetized ($/year) ......................................................................................................... $7.02 

6.88 

2020 

2020 

7 

3 

2021–2025 

2021–2025 

Quantitative: 

• Costs incurred by web-brokers and direct enrollment entities to comply with requirements related to demonstration of operational readiness and compliance 

with applicable requirements; and by issuers and PBMs to implement and operationalize drug data reporting, as detailed in the Collection of Information Requirements section, estimated to be approximately $14.5 million in 2021 and approximately $3 million 2022 onwards. 

• Reduction in potential costs for states submitting multi-year state flexibility requests estimated to be approximately $22,000 over 3 years, starting with request 

submissions in 2021. 

• Costs incurred by issuers of risk adjustment covered plans for audits, audits of issuers of reinsurance eligible plans, and audits of APTC, CSR, and user fee 

programs, estimated to be approximately $2 million on average annually in 2021–2025. 

• Costs incurred by State Exchanges to implement and operationalize special enrollment period verification, estimated to be one-time costs of approximately 

$108 million incurred over 2021–23 and ongoing annual costs of approximately $1.4 million in 2024 and 2025. 

• Reduction in potential costs to Exchanges since they would not be required to conduct random sampling as a verification process for enrollment in or eligibility 

for employer-based insurance when the Exchange reasonably expects that it will not obtain sufficient verification data, estimated to be savings of $113 million 

in 2022. 

• Regulatory familiarization costs of approximately $27,000 in 2020. 

Qualitative: 

• Increased costs due to increases in providing medical services (if health insurance enrollment increases). 

Transfers Estimate 

(million) 

Year 

dollar 

Discount rate 

(percent) 

Period 

covered 

Annualized Monetized ($/year) ......................................................................................................... ¥$280.5 

¥287.8 

2020 

2020 

7 

3 

2021–2025 

2021–2025 

Quantitative: 

• Reduction in transfers from the issuers to federal government by approximately $270 million in 2022 and approximately $400 million 2023 onwards due to 

changes in user fee rates and state transitions, including the proposed availability of FFE–DE and SBE–FP DE options to issuers and states beginning with 

the 2023 benefit year. 

• Transfers to the federal government from FFE states that are transitioning to, or intend to transition to, being State Exchanges, for conducting special enrollment verification, estimated to be approximately $1.75 million annually in 2024 and 2025. 

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 

ends the transitional reinsurance 

program and temporary risk corridors 

program after the benefit year 2016. 

Therefore, the costs associated with 

those programs are not included in 

Table 12 or 13. Table 13 summarizes the 

effects of the risk adjustment program 

on the federal budget from fiscal years 

2022 through 2026, 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 premium 

stabilization programs that are described 

in Table 13. 

In addition to utilizing CBO 

projections, HHS conducted an internal 

analysis of the effects of its regulations 

on enrollment and premiums. These 

analyses exclude any potential effects 

from states electing to use the FFE–DE 

or SBE–FP–DE models. Based on these 

internal analyses, we anticipate that the 

quantitative effects of the provisions 

proposed in this rule are consistent with 

our previous estimates in the 2021 

Payment Notice for the impacts 

associated with the APTCs, the 

premium stabilization programs, and 

FFE user fee requirements. 

TABLE 13—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT AND REINSURANCE

PROGRAMS FROM FISCAL YEAR 2022–2026, IN BILLIONS OF DOLLARS 247

Year 2022 2023 2024 2025 2026 2022–2026 

Risk Adjustment and Reinsurance Program Payments .................................... 6 6 7 7 8 34 

78656 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

TABLE 13—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT AND REINSURANCE

PROGRAMS FROM FISCAL YEAR 2022–2026, IN BILLIONS OF DOLLARS 247—Continued 

Year 2022 2023 2024 2025 2026 2022–2026 

Risk Adjustment and Reinsurance Program Collections ................................... 6 6 7 7 8 34 

Note: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time. 

Source: Congressional Budget Office. Net Federal Subsidies Associated With Health Insurance Coverage, 2020 to 2030. March 6, 2020. Available at https://www.cbo.gov/system/files/2020-03/51298-2020-03-healthinsurance.pdf. 

1. Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

(§ 147.104) 

The proposed revision to 

§ 147.104(b)(4)(ii) would allow an 

individual or dependent who did not 

receive timely notice of a triggering 

event and otherwise was reasonably 

unaware that a triggering event occurred 

to use the date the individual knew, or 

reasonably should have known, of the 

occurrence of the triggering event as the 

date of the triggering event for a special 

enrollment period to enroll in 

individual market coverage through or 

outside of an Exchange. This would 

enable consumers to maintain 

continued access to coverage and health 

care. 

2. CMS Enforcement in Group and 

Individual Markets (Part 150) 

We propose to remove the 

requirement to file submissions to the 

Departmental Appeals Board in 

triplicate and instead require electronic 

filing. Based on our experience, such 

filings are infrequent, and this proposed 

change would not have a significant 

impact. An entity filing a submission 

would experience a small reduction in 

costs related to printing and mailing the 

submission. 

3. Risk Adjustment (Part 153) 

The risk adjustment program is a 

permanent program created by section 

1343 of the PPACA that collects charges 

from issuers with lower-than-average 

risk populations and uses those funds to 

make payments 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 part 153. If a state is 

not approved to operate, or chooses to 

forgo operating its own risk adjustment 

program, HHS will operate risk 

adjustment on its behalf. For the 2022 

benefit year, HHS will operate a risk 

adjustment program in every state and 

the District of Columbia. As described 

in the 2014 Payment Notice, HHS’s 

operation of risk adjustment on behalf of 

states is funded through a risk 

adjustment user fee. For the 2022 

benefit year, we have used the same 

methodology that we finalized in the 

2020 Payment Notice to estimate our 

administrative expenses to operate the 

program. Risk adjustment user fee costs 

for the 2022 benefit year are expected to 

remain steady from the prior 2021 

benefit year estimates of approximately 

$60 million. We estimate that the total 

cost for HHS to operate the risk 

adjustment program on behalf of states 

and the District of Columbia for 2022 

will be approximately $60 million, and 

the risk adjustment user fee will be 

$0.25 PMPM. Because of the increase in 

costs estimated for the 2022 benefit 

year, we expect the final risk adjustment 

user fee for the 2022 benefit year to 

neither increase or decrease transfers 

from issuers of risk adjustment covered 

plans to the federal government. 

Additionally, for the risk adjustment 

factors, we proposed to recalibrate the 

HHS risk adjustment models for the 

2022 benefit year by using the 2016, 

2017 and 2018 enrollee-level EDGE 

data, the same data used for the 2021 

benefit year. We adopted an approach of 

using the 3 most recent years of 

available enrollee-level EDGE data for 

recalibration of the risk adjustment 

models for the 2021 benefit year and 

beyond. We believe that the approach of 

blending (or averaging) 3 years of 

separately solved coefficients will 

provide stability within the risk 

adjustment program and minimize 

volatility in changes to risk scores from 

the 2021 benefit year to the 2022 benefit 

year. We also propose, for the 2022 

benefit year, to make model 

specification changes to the risk 

adjustment models to add a two-stage 

specification and interacted HCC counts 

factors to the adult and child risk 

adjustment models, to revise the 

enrollment duration factors for the 

adults models and to continue a pricing 

adjustment for Hepatitis C drugs for all 

three models (adult, child and infant). 

Overall, these proposed changes would 

make limited changes to the number 

and type of risk adjustment model 

factors; therefore, we do not expect 

these changes to impact issuer burden 

beyond the current burden for the risk 

adjustment program. 

We propose that issuers that choose to 

offer premium credits to consumers 

during a declared PHE, when HHS 

permits such credits, must report the 

adjusted plan premium amount, taking 

into account the credits provided to 

consumers as a reduction to premiums 

for the applicable months for risk 

adjustment data submissions for the 

2021 benefit year and beyond. We do 

not believe that the clarifications 

regarding risk adjustment reporting in 

this proposal would impose additional 

administrative burden on health 

insurance issuers beyond the effort 

already required to submit data to HHS 

for the purposes of operating risk 

adjustment, as previously estimated in 

the interim final rule on COVID–19 (85 

FR 54820). 

In the 2021 Payment Notice, HHS 

finalized the risk adjustment state 

payment transfer formula under the 

HHS risk adjustment methodology for 

the 2021 benefit year, and reaffirmed 

that HHS will continue to operate the 

risk adjustment program in a budget 

neutral manner. We propose to maintain 

the same methodology and continue to 

operate risk adjustment in a budget 

neutral manner for the 2022 benefit year 

and beyond, unless changed through 

notice with comment rulemaking. 

Therefore, there is no net aggregate 

financial impact on health insurance 

issuers or the federal government as a 

result of the risk adjustment provisions 

with respect to the premium credit 

related proposals. However, while risk 

adjustment transfers are net neutral in 

aggregate, we recognize that individual 

issuers may be financially impacted by 

reduced transfers (either lower risk 

adjustment payments or lower risk 

adjustment charges) if any issuer in the 

issuer’s state market risk pool provides 

premium credits to enrollees. The extent 

of this impact will vary based on the 

number of issuers in a state market risk 

pool that elect to provide the temporary 

premium credits during a declared PHE, 

the amount of these premium credits 

provided, as well as the market share of 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78657 

248To date, only one state (Alabama) has pursued 

this flexibility. 

the issuers that provide these premium 

credits. 

We do not believe that the impact of 

this proposal will vary from what was 

previously estimated in the interim final 

rule on COVID–19 (85 FR 54820). 

Similar to our analysis of regulatory 

impacts in the interim final rule on 

COVID–19, we recognize the potential 

for financial impacts for individual 

issuers as a result of the clarifications in 

this proposal. We believe that if HHS 

permitted issuers that provided 

premium credits to submit unadjusted 

premiums for the purposes of 

calculating risk adjustment, distortions 

could occur which could also 

financially impact individual issuers. 

For example, absent the requirement 

that issuers that offer premium credits 

report the adjusted, lower premium 

amount for risk adjustment purposes, an 

issuer with a large market share with 

higher-than-average risk enrollees that 

provides temporary premium credits 

would inflate the statewide average 

premium by submitting the higher, 

unadjusted premium amount, thereby 

increasing its risk adjustment payment. 

In such a scenario, a smaller issuer in 

the same state market risk pool that 

owes a risk adjustment charge, and also 

provides premium credits to enrollees, 

would pay a risk adjustment charge that 

is relatively higher than it would have 

been if it were calculated based on a 

statewide average that reflected the 

actual, reduced premium charged to 

enrollees by issuers in the state market 

risk pool. 

For all of these reasons, we believe 

that requiring issuers that offer 

temporary premium credits for 2021 and 

future benefit years’ coverage to 

accurately report to the EDGE server the 

adjusted, lower premium amounts 

actually charged to enrollees is most 

consistent with existing risk adjustment 

program requirements. We also believe 

this requirement would mitigate the 

distortions that would occur if issuers 

that offer these temporary premium 

credits did not report the actual 

amounts charged to enrollees, while 

avoiding additional financial burden on 

issuers, as compared to an approach that 

would permit issuers to report 

unadjusted premium amounts. 

Beginning for the 2023 benefit year, 

we are proposing to allow state 

regulators to request a reduction in the 

calculation of risk adjustment transfers 

under the state payment transfer 

formula for up to 3 years. HHS would 

reserve the right to require states with 

approved multi-year reduction requests 

to submit supplemental evidence in any 

subsequent year of the request after its 

initial approval, in the timeframe, form, 

and manner specified by HHS, and HHS 

would also reserve the right to terminate 

or modify an approved multi-year 

request prior to its natural expiration. 

We are also proposing to permit states 

with approved multi-year requests to 

withdraw their respective request before 

its natural expiration by notifying HHS 

of its requested withdrawal. HHS would 

require states to inform impacted issuers 

of any termination, modification, or 

withdrawal of an approved multi-year 

reduction request. 

Allowing multi-year state flexibility 

requests would lead to a reduction in 

burden associated with this requirement 

for states who elect to submit such 

requests. In the 2019 Payment Notice, 

we estimated that it would take a 

business operations specialist 32 hours 

to prepare an annual state flexibility 

request and 16 hours for a senior 

manager to review the request and 

transmit it electronically to HHS, for a 

total burden of 48 hours. The total 

burden over 3 years would be 144 

hours. For states submitting multi-year 

requests, we estimate that it would take 

a business operations specialist 64 

hours (at a rate of $77.14 per hour) to 

prepare the request and 32 hours for a 

senior manager (at a rate of $118.30 per 

hour) to review the request and transmit 

it electronically to HHS. We estimate 

that each state seeking a multi-year 

reduction request would incur a total 

burden of 96 hours at a cost of 

approximately $8,723 to comply with 

this reporting requirement (64 hours for 

the business operations specialist and 

32 hours for the senior manager). If HHS 

requests supplemental evidence from a 

state to support the continued 

application of its request, we estimate 

that the state would incur a cost of 

approximately $1,090 (8 hours for the 

business operations specialist at an 

hourly wage of $77.14 and 4 hour for 

the senior manager at an hourly wage of 

$118.30). We estimate that a state 

withdrawal of a previously submitted 

request would impose minimal 

additional cost of approximately $118 

on the state associated with a senior 

official from the State Department of 

Insurance submitting a withdrawal 

request to HHS and informing impacted 

issuers of the withdrawal (equivalent to 

1 hour for a senior manager at an hourly 

wage rate of $118.30). Each state that 

submits a multi-year request would 

experience a cost reduction of 

approximately $4,361 over a period of 3 

years (our estimate of a state’s cost 

savings would be reduced to 

approximately $3,271 if HHS requests 

supplemental evidence from the state 

one time over a period of 3 years). 

Although we are unable to precisely 

estimate the number of states that would 

make these requests, we expect that no 

more than 5 states would make these 

requests annually.248 For 5 states, the 

total reduction in burden would be 240 

hours with a cost reduction of 

approximately $21,806 (less if HHS 

requests supplemental evidence). We 

seek comment on this estimated burden 

reduction. 

We are proposing to provide more 

clarity regarding audits and compliance 

reviews of issuers of risk adjustment 

covered plans through proposed 

amendments to § 153.620(c). Issuers 

being audited under the risk adjustment 

program would be required to comply 

with audit requirements including 

participating in entrance and exit 

conferences, submitting complete and 

accurate data to HHS in a timely 

manner, and providing responses to 

additional requests for information from 

HHS and to preliminary audit reports in 

a timely manner. We are also proposing 

to codify our authority to recoup risk 

adjustment (including high-cost risk 

pool) payments if they are not 

adequately substantiated by the data 

and information submitted by issuers 

during the course of the audit. 

We anticipate that compliance with 

risk adjustment program (including 

high-cost risk pool) audits would take 

120 hours by a business operations 

specialist (at a rate of $77.14 per hour), 

40 hours by a computer systems analyst 

(at a rate of $92.46 per hour), and 20 

hours by a compliance officer (at a rate 

of $70.06 per hour) per issuer per 

benefit year. The cost per issuer would 

be approximately $14,356. While the 

number of issuers participating in the 

risk adjustment program varies per 

benefit year, (for example, there were 

751 issuers participating in the risk 

adjustment program for the 2016 benefit 

year), HHS only intends to audit a small 

percentage of these issuers, roughly 30– 

60 issuers per benefit year. Depending 

on the number of issuers audited each 

year, the total cost to issuers being 

audited would be between $430,692 and 

$861,384, with an average annual cost of 

approximately $646,038. 

We are proposing to increase the 

materiality threshold for EDGE 

discrepancies, beginning in the 2020 

benefit year, so that HHS may only take 

action if the amount in dispute is equal 

to or exceeds $100,000 or one percent of 

the total estimated transfer amount in 

the applicable state market risk pool, 

whichever is less. As a result of this 

proposal, some discrepant issuers 

78658 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

249See ‘‘Guidance and Population Data for 

Exchange, Qualified Health Plan Issuers, and WebBrokers to Ensure Meaningful Access by LimitedEnglish Proficient Speakers Under 45 CFR 

155.205(c) and 156.250,’’ March 30, 2016. Available 

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

Regulations-and-Guidance/Downloads/Languageaccess-guidance.pdf. 

would no longer be charged for their 

EDGE data error. In addition, issuers in 

the same state market risk pool as the 

discrepant issuer would not receive 

positive adjustments to their risk 

adjustment transfers. This is because 

HHS’s process for addressing material 

EDGE data discrepancies is to 

recalculate the dollar value of any 

difference in risk adjustment transfers, 

charge the discrepant issuer for the 

difference, and compensate the issuers 

who were harmed by the amount of that 

calculation in order or balance the 

market. Based on analysis of 

discrepancies from prior years’ data, 

payments to these issuers are 

occasionally as low as $1.00 and 

typically represent a fraction of one 

percent of the issuer’s overall transfers 

in the state market risk pool for the 

applicable benefit year. We anticipate 

that the proposal would have a minimal 

impact on regulatory burden. There 

might be a slight reduction in 

administrative burden to some issuers 

who currently report, and receive 

adjustments for, EDGE discrepancies 

that are less than a fraction of total state 

market risk pool transfers. 

4. Audits of Reinsurance-Eligible Plans 

(§ 153.410(d)) 

We are proposing to provide more 

clarity regarding audits and compliance 

reviews of reinsurance-eligible plans 

through proposed amendments to 

§ 153.410(d). Issuers being audited 

under the reinsurance program would 

be required to comply with audit 

requirements including participating in 

entrance and exit conferences, 

submitting complete and accurate data 

to HHS in a timely manner, and 

providing responses to additional 

requests for information from HHS and 

to preliminary audit reports in a timely 

manner. We are also proposing to codify 

our authority to recoup reinsurance 

payments if they are not adequately 

substantiated by the data and 

information submitted by issuers during 

the course of the audit. 

We anticipate that compliance with 

reinsurance program audits would take 

120 hours by a business operations 

specialist (at a rate of $77.14 per hour), 

40 hours by a computer systems analyst 

(at a rate of $92.46 per hour), and 20 

hours by a compliance officer (at a rate 

of $70.06 per hour) per issuer per 

benefit year. The cost per issuer would 

be approximately $14,356. There were 

557 issuers participating in the 

reinsurance program for the 2015 and 

496 issuers participating in the 

reinsurance program audits for the 2016 

benefit year; however, HHS would only 

audit a small percentage of these 

issuers, roughly 30–60 issuers per 

benefit year. Depending on the number 

of issuers audited each year, the total 

cost to issuers being audited would be 

between $430,692 and $861,384, with 

an average annual cost of approximately 

$646,038. 

5. Risk Adjustment Data Validation 

(§ 153.630(g)) 

In this proposed rule, we are 

proposing to codify two previouslyestablished exemptions from HHS– 

RADV under § 153.630(g). These 

exemptions apply when the issuer only 

has small group carryover coverage for 

the applicable benefit year or when an 

issuer is in the sole issuer in the state 

market risk pool for the applicable 

benefit year (and did not participate in 

another risk pool with other issuers for 

that benefit year). Under these 

exemptions, these issuers are not be 

required to complete HHS–RADV for 

the given benefit year, and therefore, 

they would have a decreased 

administrative burden. However, given 

that these exemptions are limited to 

issuers exiting all markets in a state and 

issuers who are sole issuers in all 

markets in a state, we estimate that 13 

issuers would be exempt from HHS– 

RADV for a given benefit year under 

these exemptions. We further note that 

these exemptions are not establishing 

new exemptions; instead, the proposed 

amendments to § 153.630(g) would 

simply further codify existing policies. 

We also propose to change the HHS– 

RADV collections timeline from the 

timeline finalized in the 2020 Payment 

Notice in response to stakeholder 

feedback. Under the proposed timeline, 

we would implement the collection of 

HHS–RADV charges and disbursement 

of payments in the calendar year in 

which HHS–RADV results are released. 

We do not believe this proposal would 

change the administrative burden 

previously estimated as we understand 

that the majority of states and issuers 

follow a timeline that aligns more 

closely with the one proposed in this 

rulemaking and few pursued the 

flexibility provided under the timeline 

finalized in the 2020 Payment Notice. 

6. Direct Enrollment (§§ 155.205, 

155.220, and 155.221) 

a. Enhanced Direct Enrollment Website 

Translations 

We propose to allow QHP issuers and 

web-brokers participating in the FFE 

EDE program additional time to come 

into compliance with the website 

content translation requirements in 

§§ 155.205(c)(2)(iv)(B) and (C) for the 

website content added to their websites 

to participate in the FFE EDE program. 

Specifically, we propose for a QHP 

issuer or web-broker participating in the 

FFE EDE program to have 12 months 

from the date the QHP issuer or webbroker begins operating its EDE website 

in the relevant state to translate website 

content added to their websites to 

participate in the FFE EDE program 

according to the requirements in 

§§ 155.205(c)(2)(iv)(B) and (C). This 

would not absolve QHP issuers and 

web-brokers from translating website 

content subject to the requirements in 

§§ 155.205(c)(2)(iv)(B) and (C) 249 that is 

unrelated to their participation in the 

FFE EDE program. For example, a QHP 

issuer’s or web-broker’s implementation 

of the Exchange eligibility application 

on its website for purposes of 

participation in the FFE EDE program 

would be considered content added to 

its website to participate in the FFE EDE 

program and would be afforded the 

additional time for translation into 

applicable languages. However, QHP 

issuer website content subject to the 

§ 155.205(c)(2)(iv)(C) requirements, such 

as Summaries of Benefits and Coverage 

or provider directories, would not be 

afforded additional time for translation 

into applicable languages. Similarly, 

website content related to a webbroker’s participation in Classic DE that 

is subject to the § 155.205(c)(2)(iv)(C) 

requirements, such as plan selection 

pages displaying QHPs, would not be 

afforded additional time for translation 

into applicable languages beyond the 

one year after the web-broker has been 

registered with the Exchange. We 

believe that providing QHP issuers and 

web-brokers participating in the EDE 

program with additional time to come 

into compliance with the website 

content translation requirement for the 

website content added to their websites 

to participate in the FFE EDE program 

would be warranted given the 

significant resources associated with 

obtaining approval to participate in the 

FFE EDE program generally. Given the 

significant cost of third-party EDE audit 

requirements, providing additional time 

to QHP issuers and web-brokers 

participating in the FFE EDE program to 

complete website translations of website 

content added to their websites to 

participate in the FFE EDE program 

would provide an incentive for such 

entities to enter markets where there is 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78659 

a significant number of LEP individuals, 

while also ensuring that website content 

would be accessible for individuals with 

LEP within a reasonable period of time. 

We are of the view that this flexibility 

would enable interested QHP issuers 

and web-brokers participating in the 

EDE program to test the market before 

incurring additional translation costs, 

which would enable smaller QHP 

issuers and web-broker entities to 

compete more effectively. Therefore, 

affording this additional time for 

translation of EDE-specific website 

content should reduce the burden on 

QHP issuers and web-brokers, at least 

for their first year of operations as an 

EDE entity in a state where the 

§§ 155.205(c)(2)(iv)(B) and (C) 

requirements apply. 

b. Navigator and Certified Application 

Counselor Use of Web-Broker Websites 

We propose to permit, but not require, 

assisters in FFEs and SBE–FPs to use 

web-broker non-Exchange websites to 

assist consumers with QHP selection 

and enrollment, provided the nonExchange website meets certain 

conditions and to the extent permitted 

by state law. Web-brokers have 

developed innovative tools to support 

consumers shopping for QHP coverage 

through their non-Exchange websites for 

both Classic DE and EDE that assisters 

and the consumers they assist may find 

helpful when shopping for and 

enrolling in QHPs offered through 

Exchanges. In addition, some webbrokers have expressed interest in 

leveraging assisters’ expertise in 

navigating more complex enrollment 

cases to provide additional support to 

the consumers they serve. At the same 

time, assisters have expressed a desire 

to obtain access to an improved 

consumer experience by leveraging 

innovative and unique consumer 

assistance tools and display features 

many web-brokers have developed for 

Classic DE and EDE. Additionally, some 

assisters have expressed a desire to have 

access to real-time information on the 

status of submitted applications and 

enrollments that is available through 

EDE to more effectively assist 

consumers. Although we are not 

proposing to require web-brokers 

develop assister portals for their nonExchange websites, we recognize that 

some web-brokers may consider 

developing such portals to enable 

assisters to gain easy access to real-time 

information for each of the consumers 

they assist using the web-broker’s nonExchange website, similar to portals 

some web-brokers have already 

developed for affiliated agents and 

brokers who have entered into 

arrangements to access the web-broker’s 

non-Exchange website. If the webbroker’s non-Exchange website meets 

applicable requirements, we want to 

encourage this type of innovation to 

improve the experience for assisters and 

the consumers they assist with shopping 

for and enrolling in QHPs offered 

through an Exchange. 

We are proposing several 

amendments to § 155.220 to capture 

new flexibility for assisters in FFE and 

SBE–FP states to use web-broker nonExchange websites to assist consumers 

with applying for insurance 

affordability programs and QHP 

enrollment under certain circumstances 

and to the extent permitted by state law. 

This proposed flexibility would extend 

to both Classic DE and EDE websites 

that web-brokers may offer to assist 

consumers in FFE and SBE–FP states. 

We propose new § 155.220(c)(3)(iii)(A) 

to require web-broker 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. We note that webbrokers 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 

API. For FFEs and SBE–FPs, we are 

considering adoption of an optional 

annual certification process for webbrokers 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 § 155.220(c)(3)(iii)(A). We 

propose to capture this optional annual 

certification process at new proposed 

§ 155.220(c)(3)(iii)(B). We are also 

considering maintaining a public list of 

certified web-brokers in FFEs or SBE– 

FPs, so that assisters would be able to 

more easily identify web-broker 

websites they might seek to use in FFEs 

and SBE–FPs, when such arrangements 

are permitted under state law. The 

proposed amendments to 

§ 155.220(c)(3)(iii)(A) would 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 in which the disclaimer should 

be displayed so that it would be 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. This proposal would not 

require a web-broker to modify its 

website unless it wishes for assisters to 

be able to use its website. If a webbroker chooses to leverage this 

flexibility, there may or may not be an 

associated burden. For example, some 

web-brokers are already displaying all 

QHP data provided by the Exchange, 

consistent with the requirements of 

§ 155.205(b)(1), and may already 

facilitate enrollment in all QHPs. For 

such web-brokers, there would be no 

website modifications required to add 

QHP information or to display a 

disclaimer and therefore assisters would 

be permitted to use those web-broker 

websites if this policy were finalized 

with no actions required by the webbroker. In other cases, web-brokers 

might need to update their websites to 

add QHP information consistent with 

the requirements of § 155.205(b)(1), or 

might need to add a disclaimer if the 

web-broker does not facilitate 

enrollment in all QHPs to identify to 

consumers the QHPs for which the webbroker website does not facilitate 

enrollment. In general, we expect this 

proposal would add little to no new 

burden for existing web-brokers, 

because the web-brokers most likely to 

take advantage of this flexibility are 

probably those that already have 

websites that meet the requirements 

proposed at new § 155.220(c)(3)(iii) or 

can meet those requirements with 

minimal updates to their websites. 

c. QHP Information Display on WebBroker Websites 

We propose to provide flexibility to 

web-brokers regarding the information 

they are required to display on their 

non-Exchange websites for QHPs in 

certain circumstances. In new proposed 

§ 155.220(n), we propose to establish an 

exception to the web-broker display 

requirements captured at 

§ 155.220(c)(3)(i)(A) and (c)(3)(i)(D). At 

new proposed § 155.220(n), we propose 

certain flexibilities regarding display of 

QHP information if a web-broker’s nonVerDate Sep<11>2014 19:36 Dec 03, 2020 Jkt 253001 PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 E:\FR\FM\04DEP2.SGM 04DEP2
78660 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

250See Section 5.3.2 of the ‘‘Federally-Facilitated 

Exchanges (FFEs) and Federally-Facilitated Small 

Business Health Options Program (FF–SHOP) 

Enrollment Manual.’’ Available at https://

www.regtap.info/uploads/library/ENR_FFEFFSHOP

EnrollmentManual2020_5CR_090220.pdf. 

251See, for example, ‘‘Updated Web-broker Direct 

Enrollment Program Participation Minimum 

Requirements,’’ May 21, 2020. Available at https:// 

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

Health-Insurance-Marketplaces/Downloads/2020- 

WB-Program-Guidance-052120-Final.pdf. 

Exchange website does not support 

enrollment in a QHP. This situation 

could occur if the web-broker does not 

have an appointment with a QHP issuer 

and therefore is not permitted under 

state law to enroll consumers in the 

coverage offered by that QHP issuer. In 

such circumstances, we propose that the 

web-broker’s non-Exchange website 

would not be required to provide all the 

information identified under 

§ 155.205(b)(1). Instead, web-brokers 

would be required to display the 

following limited, minimum 

information for such QHPs: Issuer 

marketing name, plan marketing name, 

plan type, metal level, and premium 

and cost-sharing information. To take 

advantage of this new proposed 

exception, we also propose that the 

web-broker’s non-Exchange website 

would be required to identify to 

consumers the QHPs, if any, for which 

the web-broker’s website does not 

facilitate enrollment by prominently 

displaying the plan detail disclaimer 

provided by the Exchange. The plan 

detail disclaimer explains that the 

consumer can get more information 

about such QHPs on the Exchange 

website, and includes a link to the 

Exchange website. To more closely align 

the plan detail disclaimer text 250 with 

the intent of this proposal, we would 

issue further guidance slightly revising 

the text of the disclaimer. For example, 

the current disclaimer text states, in 

relevant part, the web-broker ‘‘isn’t able 

to display all required plan information 

about this Qualified Health Plan at this 

time.’’ We would modify that text so 

that it states, in relevant part, the webbroker ‘‘doesn’t display all plan 

information about, and does not 

facilitate enrollment in, this Qualified 

Health Plan at this time.’’ We believe 

this proposal strikes an appropriate 

balance by recognizing that web-brokers 

may not be permitted to assist with 

enrollments in QHPs for which they do 

not have an appointment while still 

providing key information about all 

QHPs on web-broker non-Exchange 

websites to allow consumers to window 

shop and identify whether they may 

want to explore other QHP options. It 

also would minimize burdens for webbrokers by not requiring them to build 

functionality and processes to display 

all of the required comparative 

information listed in § 155.205(b)(1) for 

those QHPs for which they do not have 

an appointment to sell. We believe the 

burden associated with this proposal 

would be very limited as it would 

largely align with our historical 

enforcement approach and guidance. 

Web-brokers that are not displaying all 

the QHP information required under 

§ 155.205(b)(1) are already displaying 

the plan detail disclaimer, a link to the 

Exchange website, and the following 

limited details: Issuer marketing name, 

plan marketing name, plan type, and 

metal level. The one new requirement 

that this proposal would impose is the 

display of premium and cost-sharing 

information for all QHPs. However, 

premium and cost-sharing information 

is and has been available through the 

Exchange public use files and the 

Marketplace API for some time now, 

and web-brokers are familiar with those 

data sources to populate their websites 

with other QHP information. 

Furthermore, premium and cost-sharing 

information is data web-brokers already 

incorporate for at least some QHPs 

displayed on their websites. 

Incorporating premium and cost-sharing 

information for all QHPs displayed on 

their websites would require a minimal 

level of effort. 

d. Web-Broker and Direct Enrollment 

Entity Operational Readiness Review 

Requirements 

At § 155.220(c)(6), we propose a webbroker must demonstrate operational 

readiness and compliance with 

applicable requirements prior to the 

web-broker’s website being used to 

complete an Exchange eligibility 

application or a QHP selection. As 

reflected in proposed § 155.220(c)(6)(i) 

through (iv), HHS may request a webbroker submit a number of artifacts or 

documents or complete certain testing 

processes to demonstrate the 

operational readiness of its nonExchange website. The required 

documentation might include 

operational data including licensure 

information, points of contact, and 

third-party relationships; security and 

privacy assessment documentation, 

including penetration testing results, 

security and privacy assessment reports, 

vulnerability scan results, plans of 

action and milestones, and system 

security and privacy plans; and an 

agreement between the web-broker and 

HHS documenting the requirements for 

participating in the applicable direct 

enrollment program. The required 

testing processes might include 

enrollment testing, prior to approval or 

at the time of renewal, and website 

reviews performed by HHS to evaluate 

prospective web-brokers’ compliance 

with applicable website display 

requirements prior to approval. To 

facilitate testing, prospective and 

approved web-brokers will have to 

maintain and provide access to testing 

environments that reflect their 

prospective or actual production 

environments. We are proposing these 

amendments to codify in regulation 

existing program requirements that 

apply to web-brokers that participate in 

the FFE direct enrollment program and 

are captured in the agreements executed 

with participating web-broker direct 

enrollment entities and related technical 

guidance.251 Some of these 

requirements, such as the collection of 

operational data, have effectively 

existed for many years, and so they 

would impose little to no new burden. 

The collection of security and privacy 

assessment documentation would be a 

new requirement, although historically 

the web-broker agreement has required 

web-brokers to attest to the 

implementation and assessment of 

privacy and security controls. As a 

result, web-brokers should have 

historically completed any technical 

implementation of the controls and 

should be familiar with assessment of 

those controls. Completion of 

enrollment testing would also be a new 

requirement, but use of the direct 

enrollment pathway inherently requires 

a web-broker’s platform to be capable of 

processing enrollments. Therefore, the 

burden of testing that functionality 

would be very limited. Website reviews 

have been conducted historically and 

are performed by HHS, so there would 

be no burden to web-brokers associated 

with the completion of those reviews. 

The burden related to these proposed 

requirements is discussed in the 

Collection of Information Requirements 

section above. 

We propose to revise § 155.221(b)(4) 

to add additional detail on the 

operational readiness requirements for 

direct enrollment entities. Similar to the 

proposed web-broker operational 

readiness requirement at new proposed 

§ 155.220(c)(6), we are proposing these 

amendments to codify in § 155.221(b)(4) 

more details about the existing program 

requirements that apply to direct 

enrollment entities and are captured in 

the agreements executed with 

participating web-broker and QHP 

issuer direct enrollment entities. We 

note that these proposed requirements 

are in addition to the operational 

readiness requirements at new proposed 

§ 155.220(c)(6) for web-brokers, 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78661 

although web-brokers may not be 

required to submit the documentation 

required under this proposal to revise 

§ 155.221(b)(4) or they may be permitted 

to use the same documentation to satisfy 

the requirements of both operational 

readiness reviews depending on the 

specific circumstances of their 

participation in direct enrollment 

programs and the source and type of 

documentation. 

In paragraph (b)(4), we propose to 

continue to require a direct enrollment 

entity to demonstrate operational 

readiness and compliance with 

applicable requirements prior to the 

direct enrollment entity’s website being 

used to complete an Exchange eligibility 

application or a QHP selection. We add 

new proposed paragraphs (b)(4)(i) 

through (v) to reflect that direct 

enrollment entities may need to submit 

or complete, in the form and manner 

specified by HHS, a number of artifacts 

of documentation or various testing or 

training processes. The documentation 

may include business audit 

documentation including: Notices of 

intent to participate including auditor 

information; documentation packages 

including privacy questionnaires, 

privacy policy statements, and terms of 

service; and business audit reports 

including testing results. The required 

documentation may also include 

security and privacy audit 

documentation including: 

Interconnection security agreements; 

security and privacy controls 

assessment test plans; security and 

privacy assessment reports; plans of 

action and milestones; privacy impact 

assessments; system security and 

privacy plans; incident response plans; 

and vulnerability scan results. 

Submission of agreements between the 

direct enrollment entity and HHS 

documenting the requirements for 

participating in the applicable direct 

enrollment program may also be 

required. Required testing may include 

eligibility application audits performed 

by HHS. The direct enrollment entity 

may also be required to complete online 

training modules developed by HHS 

related to the requirements to 

participate in direct enrollment 

programs. We expect minimal new 

burden associated with this proposal as 

these requirements have historically 

been established through agreements 

EDE entities have executed with HHS, 

and therefore entities have completed 

these tasks in the past to be able to use 

the EDE pathway. The burden related to 

these proposed requirements is 

discussed in the Collection of 

Information Requirements section 

above. 

e. Direct Enrollment Entity Plan Display 

Requirements 

We also propose to revise 

§ 155.221(b)(1) to require that direct 

enrollment entities display and market 

QHPs offered through the Exchange, 

individual health insurance coverage as 

defined in § 144.103 offered outside the 

Exchange (including QHPs and nonQHPs other than excepted benefits), and 

all other products, such as excepted 

benefits, on at least three separate 

website pages, with certain exceptions. 

This proposal would constitute a 

revision of a policy adopted in 2019. We 

anticipate this policy would provide 

increased flexibility and believe many 

direct enrollment entity websites are 

already designed in a manner largely 

consistent with this proposal, and 

therefore the burden associated with it 

would be minimal. 

f. New Exchange Direct Enrollment (DE) 

Options 

We also propose to add § 155.221(j) 

establish a new Exchange direct 

enrollment (DE) option, beginning with 

PY 2022, in which states could use 

direct enrollment technology to 

transition to private sector-focused 

enrollment pathways operated by QHP 

issuers, web brokers, and agents and 

brokers instead of a centralized frontfacing eligibility and enrollment website 

operated by the Exchange. State 

Exchanges, as well as SBE–FP, and FFE 

states could elect to implement the DE 

option. The impact of the new Exchange 

DE option will depend on the specific 

Exchange model and the number of 

states that take advantage of the new 

option. The FFEs’ current direct 

enrollment program (classic and EDE) 

generally reduce operational costs to the 

federal government while alleviating 

certain burdens on consumers. 

This proposal may have varied 

impacts on consumers, and we are 

interested in public comments that 

would better help us to understand how 

the DE option, and an increase in the 

number of potential websites 

maintained by brokers through which 

consumers could shop for QHP 

coverage, might impact consumers and 

consumer behavior with respect to QHP 

enrollment. We also note that any 

operational cost increases or savings for 

implementation of the DE option could, 

in turn, affect an SBE’s user fee and 

consumer premium costs. 

Under the FFE–DE and SBE–FP–DE, 

CMS would be providing back end 

eligibility services, notice and tax form 

generation, the processing of data 

matching and special enrollment 

verification issues, eligibility appeals, 

casework, advanced customer service, 

enrollment reconciliation, IRS reporting, 

and an alternate/backup consumerfacing process (as we do today). In 

addition, the HealthCare.gov website 

would continue to provide standardized 

comparative information for QHPs 

offered on the Exchange. 

At this time, we do not anticipate that 

any of the 15 current SBEs would 

implement the DE option, as they have 

to date not implemented the same direct 

enrollment interfaces with web brokers 

or other direct enrollment entities as the 

FFE. However, current SBEs that elect to 

apply for approval to implement the DE 

option would be responsible for meeting 

certain requirements for approval, in 

particular revising their Exchange 

Blueprint (Blueprint) under new 

proposed § 155.221(j)(1). We believe 

that any costs of revising the Blueprint 

would be nominal, as this process 

involves logging electronically into a 

CMS web interface that serves as the 

repository for all states’ Blueprints to 

input additional information on 

updated processes and controls to 

manage the new DE program. However, 

we seek comment on the burden 

associated with this activity and note 

that the Blueprint is currently approved 

under the PRA under OMB Control 

Number 0938–1172. 

For states seeking to transition to a 

SBE for future plan years in order to 

utilize the new Exchange DE option, we 

anticipate that start-up costs would be 

similar to those associated with recent 

transitions to the SBE model, including 

any costs associated with the 

completion of the Blueprint. SBEs 

would complete the Blueprint in the 

same manner and would be required to 

meet all required minimum functions of 

an Exchange. In terms of 

implementation costs, these states could 

realize savings by virtue of not having 

to build the consumer-facing website to 

handle the consumer traffic that it 

would handle if it were the single point 

of enrollment, instead relying on direct 

enrollment entities to provide the 

majority or all of the enrollment 

functionality. However, those may be 

relatively lower costs than the costs 

associated with building the back-end 

Exchange eligibility platform to 

complete eligibility determinations, 

along with the applicable connections 

required to the Federal Data Services 

Hub for performing eligibility 

verifications, as well as connections to 

the respective state Medicaid agency for 

coordinating Medicaid and CHIP 

eligibility determinations. Based on 

recent state transitions to the SBE 

78662 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

model, the design, development, and 

implementation costs for an Exchange 

depend on a number of factors. Recent 

design, development, and 

implementation costs have ranged from 

$4 million for a smaller state, to almost 

$24 million for a larger state. As no SBE 

to date has implemented direct 

enrollment, however, we are not able to 

provide accurate cost estimates in this 

regard. States may also be able to use 

existing federal DE partners who are 

fully compliant with federal operational 

requirements to provide administrative 

savings. Any operational cost increases 

or savings could, in turn, affect an SBE’s 

user fee and premium costs. 

We do anticipate that an SBE electing 

the Exchange DE option would have 

increased operational costs for 

monitoring and oversight of the DE 

entities, as well as for maintaining and 

managing the individual interfaces and 

transactions with each DE entity. 

However, any savings achieved through 

a decrease in call center volume or other 

consumer supports due to DE partners 

assisting consumers with enrollment 

would offset any increased operational 

supports. Any operational savings 

could, in turn, affect an SBE’s user fee. 

We also anticipate that the DE option 

could have impacts on web-brokers and 

issuers. With respect to web brokers, 

costs may be incurred if there are new 

entrants to the DE market or if existing 

DE participants expand into new 

markets. We presume that web brokers 

will rationally only enter the market or 

expand into new markets if it the 

benefits exceed the costs. Web brokers 

may enter into fee-based arrangements 

with issuers, or possibly new economic 

or legal arrangements with states, that 

help to offset the costs of the DE 

services provided. Web brokers may 

also assume costs associated with the 

optional certification process. Issuers 

will be impacted by adjustments in user 

fees, and may have an incentive to 

promote direct enrollment if user fees 

are lower under the DE option, and 

those savings exceed the new costs of 

arrangements with web brokers. Issuers 

may also be impacted if the DE option 

leads to shifts in consumer enrollment 

patterns, such as movement from a QHP 

offered by one issuer to a QHP offered 

by another issuer. 

We also do not anticipate that HHS 

will have any increased costs associated 

with monitoring and oversight of the 

SBE–DEs. We note that changes in 

premiums may have downstream 

impacts on federal payments of PTCs. 

We seek comment on this proposal, 

including any additional consumer, 

state and SBE, HHS, issuer, web-broker, 

or other costs, benefits or transfers that 

should be considered. We also seek data 

and information that would help us to 

quantify the potential impacts 

associated with this proposal. 

7. Verification Process Related to 

Eligibility for Insurance Affordability 

Programs (§ 155.320) 

As discussed previously in the 

preamble, as for benefit years 2020 and 

2021, we will not take enforcement 

action against Exchanges that do not 

perform random sampling as required 

by § 155.320(d)(4) for benefit year 2022, 

and we propose to amend 

§ 155.320(d)(4) to reflect that the 

requirement will not be applied in plan 

years 2021 and 2022. HHS’s experience 

conducting random sampling revealed 

that employer response rates to HHS’s 

request for information were low. The 

manual verification process described in 

paragraph (d)(4)(i) requires significant 

resources and government funds, and 

the value of the results ultimately does 

not appear to outweigh the costs of 

conducting the work because only a 

small percentage of sample enrollees 

have been determined by HHS to have 

received APTC/CSRs inappropriately. 

We estimate the annual costs to conduct 

sampling on a statistically significant 

sample size of approximately 1 million 

cases to be approximately $6 million to 

$8 million for the Exchanges using the 

Federal platform and State Exchanges 

that operate their own eligibility and 

enrollment platforms. This estimate 

includes operational activities such as 

noticing, inbound and outbound calls to 

the Marketplace call center, and 

adjudicating consumer appeals. We 

estimate that the total annual cost for 

the Exchanges using the Federal 

platform and the 15 State Exchanges 

operating their own eligibility and 

enrollment platform in 2022 would be 

$113 million. Relieving Exchanges of 

the requirement to conduct sampling for 

benefit year 2022 would therefore result 

in total savings of approximately $113 

million. We seek comment on this 

estimate. 

8. Special Enrollment Periods 

(§ 155.420) 

a. Exchange Enrollees Newly Ineligible 

for APTC 

We propose to add a new paragraph 

at § 155.420(a)(4)(ii)(C) to allow 

Exchange enrollees and their 

dependents who become newly 

ineligible for APTC in accordance with 

paragraph (d)(6)(i) or (ii) of this section 

to enroll in a QHP of a lower metal 

level. We anticipate that this proposal 

would help impacted enrollees’ ability 

to maintain continuous coverage for 

themselves and for their dependents in 

spite of losing a potentially significant 

amount of financial assistance to help 

them purchase coverage. For example, 

an enrollee impacted by an increase to 

his or her monthly premium payment 

could change to a bronze-level plan, or 

to catastrophic coverage if they are 

otherwise eligible. Relatedly, this 

proposal may benefit the individual 

market risk pool by encouraging healthy 

individuals to maintain continuous 

coverage. Currently, an enrollee who 

loses APTC eligibility has only two 

choices: Paying the full premium or 

terminating his or her coverage. Healthy 

individuals who lose APTC may be 

more likely to terminate coverage due to 

increased premium liability, while 

enrollees who have one or more medical 

conditions will be incentivized to 

maintain coverage in spite of the 

additional expense. This proposal 

would serve to facilitate continuous 

coverage of healthy individuals by 

giving them the ability to enroll in a 

new plan with a lower premium, 

thereby supporting a healthier risk pool. 

Regardless, we believe that this 

change would not have a negative 

impact on the individual market risk 

pool, because most applicable enrollees 

would be seeking to change coverage 

based on financial rather than health 

needs. However, as discussed earlier in 

the preamble, we seek comment on 

whether there are concerns about 

adverse selection risk with permitting 

newly unsubsidized enrollees to change 

to any plan of a lower metal level to 

help them maintain coverage (for 

example, permitting an individual to 

change from a gold plan to a bronze 

plan), or whether this risk would be 

significantly lower if we only permit an 

enrollee to change to a plan one metal 

level lower than their current QHP. We 

also request comment from issuers on 

whether there are concerns about 

impacts such as experiencing a decrease 

in premium receipts from enrollees who 

opt to change to a lower-cost plan, or 

whether they view adverse selection as 

a possibility. As discussed in more 

detail earlier in the preamble, we also 

acknowledge that enrollees may lose 

APTC eligibility and qualify for a 

special enrollment period due to their 

APTC loss for a reason other than a 

change in household income or tax 

family size. We seek comment on 

whether stakeholders have concerns 

with this possibility, as well as on how 

HHS can help ensure that enrollees who 

lose APTC because of failure to provide 

information to the Exchange to confirm 

their APTC eligibility can understand 

and take action on steps needed to do 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78663 

so, even if they also have the flexibility 

to change to a plan of a lower metal 

level. 

We recognize, as further discussed in 

preamble, that changing to a new QHP 

mid-plan year may cause enrollees to 

incur additional out of pocket costs, as 

a new QHP selection typically resets the 

enrollee’s deductible and other 

accumulators. We believe that Exchange 

enrollees who lose APTC eligibility are 

best able to weigh the trade-off between 

reset accumulators and maintaining an 

affordable monthly premium, and losing 

coverage altogether. Enrollees who 

qualify to make a new plan selection for 

an applicable special enrollment period 

already must consider this question. 

However, we request comment on 

whether this proposal would increase 

the risk that consumers will change 

plans without taking into account 

potential disadvantages, and on 

strategies to help mitigate this risk, such 

as consumer education. 

Additionally, this proposal would 

impose a cost to Exchanges that have 

implemented plan category limitations, 

because it would require the use of 

financial and staff or contractor 

resources to make a change to 

application and plan selection system 

logic to permit applicable enrollees and 

dependents to change to a lower metal 

level plan after having previously 

restricted them to plans of their current 

metal level. Therefore, we solicit 

comments on the extent to which 

Exchanges would experience burden 

due to this proposed change, and we 

also seek comment on whether we 

should exempt the special enrollment 

periods at § 155.420(d)(6)(i) and (ii) due 

to becoming newly ineligible for APTC 

from plan category limitations 

altogether to help to mitigate this 

burden, or whether such a change 

would significantly increase risk for 

adverse selection. 

Finally, because it represents a change 

to current system logic, this proposal 

might impose some burden on FFE 

Direct Enrollment and Enhanced Direct 

Enrollment partners. We solicit 

comment on this matter, as well as more 

generally, on the impact this proposal. 

b. Special Enrollment Period—Untimely 

Notice of Triggering Event 

We anticipate that the proposed 

amendments related to qualified 

individuals who do not receive timely 

notice of a triggering event and 

otherwise are reasonably unaware that a 

triggering event occurred would provide 

certain consumers a pathway to 

maintain continuous coverage, which 

would have an overall positive impact 

on the risk pool and would benefit 

consumers. Consumers would benefit 

from being able to maintain continued 

access to coverage and health care. We 

recognize the possibility of some minor 

adverse selection risk given that 

consumers with known health issues 

may be more likely to request a 

retroactive effective date than healthy 

consumers. However, we expect this 

risk to be very limited as the proposal 

only permits individuals to request a 

retroactive effective date if they did not 

receive timely notice of a triggering 

event, and we do not expect this to 

happen very often. 

We expect that Exchanges and Direct 

Enrollment partners might incur minor 

costs to update consumer messaging and 

processes to administer this proposal. 

State Exchanges that currently do not 

have this policy and issuers offering offExchange plans would incur minor 

costs to implement this proposal. We 

seek comment on this proposal, 

including any costs, benefits or burdens 

associated with this proposal. 

c. Cessation of Employer Contributions 

to COBRA as Special Enrollment Period 

Trigger 

We anticipate that the proposed 

amendments regarding special 

enrollment period eligibility for 

qualified individuals whose employers 

completely cease payment of their 

portion of COBRA continuation 

coverage premiums would provide 

clarity regarding a policy that has been 

operationalized on HealthCare.gov. We 

believe that these amendments would 

benefit direct enrollment partners and 

employers by providing clarity 

regarding special enrollment period 

eligibility. In addition, consumers who 

would have otherwise lost coverage due 

to an increase in the cost of their 

COBRA continuation coverage would 

benefit from continuity of coverage and 

access to healthcare. 

Because this special enrollment 

period has already been available to 

individuals enrolling in a QHP on 

HealthCare.gov, we do not anticipate 

that these amendments would have any 

negative impact on the risk pool, nor 

would they increase costs for direct 

enrollment partners or HealthCare.gov. 

However, we do anticipate that State 

Exchanges that do not have this policy, 

as well as issuers who operate offExchange plans, would incur costs to 

implement this proposal. We seek 

comment on this proposal, including 

any associated costs, benefits or 

burdens. 

d. Special Enrollment Period 

Verification (§ 155.420) 

We do not anticipate that revisions to 

§ 155.420 would impose regulatory 

burden or costs on the Exchanges using 

the federal platform. We anticipate that 

this proposal would have a positive 

impact on program integrity by verifying 

eligibility for special enrollment 

periods. Increasing program integrity 

through this proposal could contribute 

to keeping premiums low and therefore, 

protect taxpayer dollars. However, FFE, 

SBE–FPs, and most State Exchanges 

already conduct special enrollment 

period verification in accordance with 

this proposal, so premium impact 

would likely be very minimal. 

We anticipate this proposal would 

moderately increase regulatory burden 

on existing State Exchanges, along with 

FFE and SBE–FP states currently 

transitioning to establishing State 

Exchanges, that do not currently 

conduct special enrollment period 

verification for at least 75 percent of 

enrollments for newly enrolling 

consumers enrolling through special 

enrollment periods. A majority of State 

Exchanges currently conduct SEP 

verification for the same SEP types for 

which the FFEs currently conduct SEP 

verifications, with some State 

Exchanges conducting SEP verifications 

for additional SEP types, while 4 State 

Exchanges currently conduct SEP 

verifications for only one type of SEP. 

Those 4 State Exchanges include those 

in the District of Columbia, Maryland, 

Rhode Island, and Vermont. State 

Exchanges bear the full cost of the SEP 

verification activities they conduct. All 

the State Exchanges that currently 

conduct SEP verifications in the same 

manner as the FFEs do are verifying 75 

percent or more of their respective SEP 

enrollments. This includes the State 

Exchanges with the highest SEP 

enrollment volume, such as the 

California and New York Exchanges. For 

the 4 State Exchanges that conduct SEP 

verifications for only one type of SEP, 

that SEP type consistently represents 

about 60 percent of all SEP enrollments 

across each of these four State 

Exchanges. 

Based on the implementation of preenrollment special enrollment period 

verification in the Exchanges using the 

federal platform, we estimate that the 

overall one-time cost of implementing 

pre- or post-enrollment SEP verification 

by an Exchange would be approximately 

$12 million. Therefore, we estimate that 

the total cost for the 4 existing State 

Exchanges that currently do not conduct 

special enrollment period verification 

for at least 75 percent of enrollments for 

78664 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

252This includes an FFE, as a Federal Exchange 

may be considered an Exchange established under 

section 1311 of the PPACA. King v. Burwell, 576 

U.S. 988 (2015). 

253The purposes are: As the Secretary determines 

to be necessary to carry out section 1150A or part 

newly enrolling consumers enrolling 

through special enrollment periods 

would be $48 million in order to 

comply with this new requirement for 

PY 2024. Additionally, there would be 

costs for at least 1 FFE state and 4 SBE– 

FP states that are transitioning to, or 

have notified us that they intend to 

transition to, establishing State 

Exchanges on or after the 2021 plan year 

to implement this new requirement. We 

estimate that total implementation costs 

for these 5 states would be $60 million. 

Including both categories of State 

Exchanges, total costs for State 

Exchanges to implement this new 

requirement are estimated to be $108 

million. We assume these costs will be 

incurred in the years 2021–2023. 

There also would be an increase in 

ongoing costs for 5 existing State 

Exchanges due to an increase in the 

number of special enrollment period 

enrollments for which they must 

conduct verification. We estimate that 

the total increase in ongoing costs for 

these 5 existing State Exchanges to 

comply with this requirement would be 

$2.8 million for 2024 and 2025. We 

estimate that the Exchanges using the 

federal platform would not incur any 

increase in costs to comply with this 

requirement. In addition, the 1 FFE state 

and 4 SBE–FP states that are 

transitioning to, or have informed us 

that they intend to transition to, 

establishing State Exchanges, would 

incur costs to comply with this 

requirement instead of the FFEs, 

estimated to be $3.5 million for 2024 

and 2025, which would result in a 

transfer from the State Exchanges to the 

FFEs. We do not anticipate this proposal 

would increase regulatory burden or 

costs on issuers. 

9. FFE and SBE–FP User Fees (§ 156.50) 

We are proposing a lower FFE user fee 

rate of 2.25 percent for the 2022 benefit 

year, which is lower than the 3.0 

percent FFE user fee rate finalized for 

2021 benefit year. We also propose to 

lower the SBE–FP user fee rate to 1.75 

percent for the 2022 benefit year from 

the 2.5 percent SBE–FP user fee rate we 

finalized for the 2021 benefit year. We 

are proposing a FFE–DE and SBE–FP– 

DE user fee rate of 1.5 percent for the 

2023 benefit year. Subject to HHS 

approval, states could elect to use the 

FFE–DE or SBE–FP–DE options. Based 

on our estimated costs, enrollment 

(including anticipated transitions of 

states from the FFE and SBE–FP models 

to either the SBE–FP or State Exchange 

models), premiums for the 2021 and 

2022 benefit years, and proposed user 

fee rates, we are estimating FFE and 

SBE–FP user fee transfers from issuers 

to the federal government would be 

lower by $270 million compared to 

those estimated for the prior benefit 

year. Costs could be shifted to approve 

direct enrollment partners (including 

QHP issuers) that states elect to use, so 

there may not actually be any cost 

savings on the part of issuers in states 

that elect the FFE–DE or SBE–FP–DE 

options. As such, there might not be an 

incentive for issuers in states that have 

elected the FFE–DE or SBE–FP DE 

option to adopt these models solely as 

a result of the lower user fee rate. While 

there would be reduced transfers to the 

federal government in states that elect 

the FFE–DE or SBE–FP–DE options, we 

expect that available user fee collections 

from current and prior years would be 

sufficient to fund Exchange operations 

through 2023 at the proposed 2023 

benefit year user fee rates. We expect 

that the proposed adoption of the FFE– 

DE and SBE–FP–DE user fee rates and 

the proposed decreases in the FFE and 

SBE–FP user fee rate would reduce 

transfers to the federal government by 

$400 million in 2023. 

10. Provisions Related to Cost Sharing 

(§ 156.130) 

The PPACA provides for the 

reduction or elimination of cost sharing 

for certain eligible individuals enrolled 

in QHPs offered through the Exchanges. 

This assistance is intended to help 

many low- and moderate-income 

individuals and families obtain health 

insurance. We set forth in this proposed 

rule the reductions in the maximum 

annual limitation on cost sharing for 

silver plan variations for the 2022 

benefit year. Consistent with our 

analysis in previous Payment Notices, 

we developed three model silver level 

QHPs and analyzed the impact on their 

AVs of the reductions described in the 

PPACA to the estimated 2022 maximum 

annual limitation on cost sharing for self 

only coverage of $9,100. We do not 

believe the proposed changes to the 

maximum annual limitation on cost 

sharing or the reductions in this 

parameter for silver plan variations 

would result in a significant economic 

impact. 

Furthermore, we propose the 

premium adjustment percentage for the 

2022 benefit year. Section 156.130(e) 

provides that the premium adjustment 

percentage is the percentage (if any) by 

which the average per capita premium 

for health insurance coverage for the 

preceding calendar year exceeds such 

average per capita premium for health 

insurance for 2013. The annual 

premium adjustment percentage sets the 

rate of increase for three parameters 

detailed in the PPACA: 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, and the assessable 

payments under sections 4980H(a) and 

4980H(b) of the Code. We believe that 

the premium adjustment percentage of 

1.4409174688 based on average per 

enrollee private health insurance 

premiums (excluding Medigap and 

property and casualty insurance) is well 

within the parameters used in the 

modeling of the PPACA, and we do not 

expect that these proposed updated 

values would alter CBO’s May 2020 

baseline projections. 

We also propose that beginning with 

the 2023 benefit year, we would publish 

the premium adjustment percentage, 

maximum annual limitation on cost 

sharing, reduced maximum annual 

limitations on cost sharing, and required 

contribution percentage in guidance in 

January of the calendar year preceding 

the benefit year to which the parameters 

are applicable, unless HHS is changing 

the methodology in which case we 

would do so through the applicable 

HHS notice of benefit and payment 

parameters. This proposal affects only 

the timing and method by which these 

parameters are released and would 

provide issuers with additional time for 

plan design and rate setting. 

11. Prescription Drug Distribution and 

Cost Reporting by QHP Issuers 

(§ 156.295) and PBMs (§ 184.50) 

As part of the PPACA, Congress 

passed section 6005, which added 

section 1150A to the Act, requiring a 

PBM under a contract with a QHP 

offered through an Exchange established 

by a state under section 1311 of the 

PPACA 252 to provide certain 

prescription drug information to the 

QHP and to Secretary at such times, and 

in such form and manner, as the 

Secretary shall specify. Section 

1150A(b) of the Act addresses the 

information that a QHP issuer and their 

PBM must report. Section 1150A(c) of 

the Act requires the Secretary to keep 

the information reported confidential 

and specifies that the information may 

not be disclosed by the Secretary or by 

a plan receiving the information, except 

that the Secretary may disclose the 

information in a form which does not 

disclose the identity of a specific PBM, 

plan, or prices charged for drugs for 

certain purposes.253

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78665 

D of title XVIII; to permit the Comptroller General 

to review the information provided; to permit the 

Director of the Congressional Budget Office to 

review the information provided; and, to States to 

carry out section 1311 of the PPACA. 

254 85 FR 4993 through 4994. 

255 85 FR 56227 through 56229. 

256Under this interpretation, QHP issuers would 

be required to report data directly to CMS only 

when the QHP issuer does not contract with a PBM 

to administer their drug benefit. As we explained 

in the notices in the Federal Register and in this 

proposed rule, we are not aware of any QHP issuer 

which does not contract with a PBM to administer 

its drug benefit. Thus, we believe that there is no 

associated burden or regulatory impact for QHP 

issuers that do not contract with a PBM. 

257Except for PBM spread amount aggregated to 

the plan benefit package level, section 1150A 

imposes no additional reporting requirements for 

entities subject to DIR reporting. See 77 FR 22094. 

On January 1, 2020 254 and on 

September 11, 2020,255 we published 

notices in the Federal Register and 

solicited public comment on the burden 

related to the collection of information 

required by section 1150A of the Act. In 

those information collections and in this 

proposed rule, we fulfill this statutory 

requirement with the goal of imposing 

the least amount of burden possible 

while collecting data that would be 

usable to ensure increased transparency 

on prescription drug coverage in QHPs. 

For example, to reduce overall 

burden, we seek to collect data directly 

from PBMs that contract with QHPs 

directly, rather than require QHP issuers 

to serve as a go-between their PBM and 

CMS.256 This approach would reduce 

overall burden on QHP issuers and 

would place the onus to report data on 

those entities that QHP issuers have 

already entrusted to oversee and manage 

their prescription drug line of business. 

These information collections also 

explained how we utilize the reporting 

paradigm currently used by CMS’ Direct 

and Indirect Remuneration (DIR) 

reporting requirement which collects, in 

part, the data required by section 

1150A(a)(1) of the Act from Prescription 

Drug Plan sponsors of a prescription 

drug plan and Medicare Advantage 

organizations offering a Medicare 

Advantage Prescription Drug Plan under 

part D of title XVII. We noted our 

intention to utilize the DIR reporting 

mechanisms only to the extent 

authorized solely by section 

1150A(a)(2), explaining our 

understanding that DIR reporting is not 

authorized by section 1150A alone.257

Usage of these existing CMS reporting 

paradigms ensures minimal impact of a 

new data collection on QHP issuers and 

PBMs, given the longstanding industry 

use of the DIR reporting mechanism. 

The payer community is familiar with 

fulfilling the DIR reporting requirement. 

Therefore, we believe replicating that 

collection to the greatest degree would 

enable reporters to implement this data 

collection with minimal relative burden. 

12. Audits of APTCs, CSRs, and User 

Fees (§ 156.480(c)) 

We are proposing to provide more 

clarity around the APTC, CSR, and user 

fee program audits and to establish 

authority for HHS to conduct 

compliance reviews to assess 

compliance with Federal APTC, CSR, 

and user fee standards through 

proposed amendments to § 156.480(c). 

Issuers being audited under the APTC, 

CSR, and user fee programs would be 

required to comply with audit 

requirements including participating in 

entrance and exit conferences, 

submitting complete and accurate data 

to HHS in a timely manner, and 

providing responses to additional 

requests for information from HHS and 

to preliminary audit reports in a timely 

manner. We are also proposing to codify 

our authority to recoup APTC, CSR 

payments, and user fee overpayments if 

they are not adequately substantiated by 

the data and information submitted by 

issuers during the course of the audit. 

We anticipate that compliance with 

APTC, CSR, and user fee program audits 

would take 120 hours by a business 

operations specialist (at a rate of $77.14 

per hour), 40 hours by a computer 

systems analyst (at a rate of $92.46 per 

hour), and 20 hours by a compliance 

officer (at a rate of $70.06 per hour) per 

issuer per benefit year. The cost per 

issuer would be approximately $14,356. 

While the number of QHP issuers 

participating in the APTC, CSR, and 

user fee programs vary per benefit year 

(for example, there were 561 QHP 

issuers participating in the programs for 

the 2019 benefit year), HHS only 

intends to audit a small percentage of 

these issuers, roughly 30–60 issuers per 

benefit year. Depending on the number 

of issuers audited each year, the total 

cost to issuers being audited would be 

between $430,692 and $861,384, with 

an average annual cost of approximately 

$646,038. 

13. Quality Rating System (§ 156.1120) 

and Enrollee Satisfaction Survey System 

(§ 156.1125) 

In this proposed rule, we seek 

comment on removing one or more 

levels of the QRS hierarchy, which is a 

key element of the QRS framework that 

establishes how quality measures are 

organized for scoring, rating and 

reporting purposes. We also propose to 

make the full QHP Enrollee Survey 

results publicly available in an annual 

PUF. We anticipate that both changes 

would benefit consumers and QHP 

issuers by increasing transparency and 

availability of QHP survey data through 

publication of a nationwide PUF, and 

simplifying the QRS scoring hierarchy 

to improve understanding of QRS 

quality rating information and 

alignment with other CMS quality 

reporting programs. Neither refinement 

would alter the data collection and 

reporting requirements for the QRS and 

QHP Enrollee Survey because QHP 

issuers are already required to report all 

data needed to support a QHP Enrollee 

Survey PUF and simplified QRS 

hierarchy. Therefore, these proposed 

refinements would create no additional 

cost or burden for QHP issuers. 

14. Medical Loss Ratio (§§ 158.103, 

158.130, 158.240, and 158.241) 

In this proposed rule, we propose to 

amend § 158.103 to establish the 

definition of prescription drug rebates 

and other price concessions that issuers 

must deduct from incurred claims for 

MLR reporting and rebate calculation 

purposes pursuant to § 158.140(b)(1)(i). 

We do not expect this proposed 

clarification to change the result of the 

regulatory impact analysis previously 

conducted for the HHS Notice of Benefit 

and Payment Parameters for 2021 with 

respect to the requirement that issuers 

deduct from MLR incurred claims not 

only prescription drug rebates received 

by the issuer, but also any price 

concessions received and retained by 

the issuer and any prescription drug 

rebates and other price concessions 

received and retained by a PBM or other 

entity providing pharmacy benefit 

management services to the issuer. 

We also propose that issuers that 

choose to provide temporary premium 

credits to consumers during a declared 

PHE in 2021 and beyond when 

permitted by HHS must account for 

these credits as reductions to premium 

for the applicable months when 

reporting earned premium for the 

applicable MLR reporting year. 

Although we do not know how many 

states will permit issuers to provide 

temporary credits to reduce premiums 

or how many issuers will elect to do so, 

for purposes of this analysis, we 

previously estimated in the interim final 

rule on COVID–19 (85 FR 54820) that 

approximately 40 percent of issuers 

offering individual, small group or 

merged market health insurance 

coverage will provide these premium 

credits to reduce the premiums charged 

to enrollees to support continuity of 

coverage during the PHE for COVID–19. 

We do not estimate a change to the cost 

or burden previously estimated in that 

final rule, and anticipate that that 

regulatory impact estimate would 

78666 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

258https://www.bls.gov/oes/current/oes_nat.htm. 

extend to 2021 and beyond, if the 

provisions in this proposed rule are 

adopted and there are declared PHEs in 

the future. Although we do not know 

the number of issuers that would 

provide these temporary credits or the 

amount of premium credits that issuers 

may elect to provide, for purposes of 

this estimate we assume that such 

premium credits would on average 

constitute approximately 8 percent of 

total annual premium (equivalent to one 

month of premium), as previously 

estimated in the final rule. Because the 

MLR calculation uses three consecutive 

years of data, there may be additional 

rebate decreases in subsequent years, 

although the impact on rebates might be 

smaller as issuers would likely account 

for the premium relief provided to 

enrollees through these premiums 

credits at the time they develop 

premium rates for the 2022 benefit year 

and other future benefit years. 

We also propose to add a new 

§ 158.240(g) to explicitly allow issuers 

to prepay a portion or all of their 

estimated MLR rebates to enrollees for 

a given MLR reporting year, and to 

establish a safe harbor allowing such 

issuers, under certain conditions, to 

defer the payment of rebates remaining 

after prepayment until the following 

MLR reporting year. We additionally 

propose to amend § 158.241(a) to allow 

issuers to provide rebates in form of a 

premium credit prior to the date that the 

rules currently provide. We do not 

expect these proposals to have a 

significant quantitative impact as they 

would not change the rebate amounts 

provided by issuers to enrollees. Since 

it is easiest and most cost-effective for 

issuers to conduct rebate disbursement 

activities all at once, the additional 

rebates would generally be paid during 

the following year’s disbursement 

cycle—that is, if 95 percent of rebates 

for 2020 was prepaid during Jan–July 

2021, the remainder would be paid no 

later than Sept. 2022 (possibly earlier in 

2022 if the issuer decides to prepay 

again). However, we note that there may 

be some increased administrative 

burden on issuers who owe rebates 

remaining after prepayment associated 

with good faith efforts to locate 

enrollees, if any, with whom they no 

longer have a direct economic 

relationship. 

15. State Innovation Waivers 

In this proposed rule, we propose to 

reference and incorporate the existing 

2018 Guidance in full into the section 

1332 waiver implementing regulations 

in order to give states certainty 

regarding the requirements to receive 

and maintain approval of a section 1332 

waiver by the Departments. This rule 

does not propose to alter any of the 

requirements related to state innovation 

waiver applications, compliance and 

monitoring, nor evaluation in a way that 

would create any additional cost or 

burden for states seeking waiver 

approval or those states with approved 

waiver plans. The Departments are of 

the view that the increased certainty 

regarding the application requirements 

would allow states to have greater 

confidence that the significant time and 

monetary investments necessary to plan 

for and submit a section 1332 waiver 

application would not result in wasted 

resources and taxpayer dollars. This 

could help to increase state innovation, 

which in turn could lead to more 

affordable health coverage for 

individuals and families in states that 

consider implementing a section 1332 

waiver program. 

16. 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 

$110.74 per hour, including overhead 

and fringe benefits.258 Assuming an 

average reading speed, we estimate that 

it would take approximately 1 hours for 

the staff to review the relevant portions 

of this proposed rule that causes 

unanticipated burden. We assume that 

245 entities will review this proposed 

rule. For each entity that reviews the 

rule, the estimated cost is approximately 

$110.74. Therefore, we estimate that the 

total cost of reviewing this regulation is 

approximately $27,131 ($110.74 × 245 

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. 

Under part 153 of this proposed rule, 

we propose to recalibrate the risk 

adjustment models for the 2022 benefit 

year using 2016, 2017, and 2018 

enrollee-level EDGE data. The purpose 

of using these data years is to ensure 

that the applicable benefit year’s risk 

adjustment model coefficients can 

always be included in the applicable 

proposed and final HHS notice of 

benefit and payment parameters. As part 

of our consideration of recalibration of 

the risk adjustment models for the 2022 

benefit year, we also considered 

proposing to recalibrate the risk 

adjustment models using the 2017, 

2018, and 2019 benefit year enrolleelevel EDGE data. If we had proposed 

that approach, we would not have been 

able to provide the proposed 

coefficients in this proposed rule and 

would have had to display draft 

coefficients only reflective of the 2017 

and 2018 benefit years of enrollee-level 

EDGE data. 

We also considered alternatives to the 

proposed model specification and 

revised enrollment duration factors to 

the risk adjustment models beginning 

with the 2022 benefit year. For example, 

we initially considered adding a nonlinear term or HCC counts terms for all 

enrollees to the adult and child risk 

adjustment models. As described earlier 

in this proposed rule, we had 

convergence issues with the non-linear 

model specifications and concerns that 

the HCC counts terms approach posed 

significant gaming concerns. 

In addition to the non-linear and HCC 

counts model specifications, we also 

considered alternatives to the two-stage 

specification and HCC interacted counts 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78667 

259Section 1311(d)(4)(C) of the PPACA requires 

only that ‘‘[a]n Exchange shall, at a minimum . . . 

maintain an internet website through which 

enrollees and prospective enrollees of qualified 

health plans may obtain standardized comparative 

information on such plans . . . .’’ 

260Section 1302(d) of the PPACA describes the 

various metal levels of coverage based on AV, and 

section 2707(a) of the PHS Act directs health 

insurance issuers that offer non-grandfathered 

health insurance coverage in the individual or small 

group market to ensure that such coverage includes 

the EHB package, which includes the requirement 

to offer coverage at the metal levels of coverage 

described in section 1302(d) of the PPACA. 

Consumer-facing HealthCare.gov content explains 

that metal levels serve as an indicator of ‘‘how you 

and your plan split the costs of your health care,’’ 

noting that lower levels like bronze plans have 

lower monthly premiums but higher out of pocket 

costs when consumers access care, while higher 

levels like gold have higher monthly premiums but 

lower out of pocket costs to access care—see 

https://www.healthcare.gov/choose-a-plan/planscategories/. 

model. Specifically, we tested various 

alternative caps for the weights based on 

the distribution of costs, but found the 

proposed caps resulted in better 

prediction on average. For the 

prediction weights, we tested various 

alternative forms of weights, including 

reciprocals of square root of prediction, 

log of prediction, and residuals from 

first step estimation, but the reciprocal 

of the capped predictions resulted in 

better predictive ratios for low-cost 

enrollees compared to any of the other 

weights. 

For the interacted HCC counts factors, 

we tested several HCCs and considered 

adding and removing certain HCCs from 

the proposed list in Table 3. We choose 

the list of HCCs in Table 3 because 

including these HCCs most improved 

prediction for enrollees with the highest 

costs, multiple HCCs, and with these 

specific HCCs. For the HCC interacted 

counts, we also considered various 

alternatives to structure the interacted 

HCC counts, such as applying 

individual interacted HCC counts 

factors (between 1–10 based on the 

number of HCCs an enrollee has) to each 

of the selected HCCs included in the 

models (instead of combining all of the 

selected HCCs into two severe and 

transplant indicator groups). We choose 

the proposed model specifications 

because it would add fewer additional 

factors to the models without sacrificing 

any significant predictive accuracy. 

For the enrollment duration factors in 

the adult risk adjustment models, we 

propose to replace the enrollment 

duration factors with monthly duration 

factors of up to 6 months for those with 

HCCs. The purpose of this proposed 

change is to address the 

underprediction of plan liability for 

adults with HCCs. As part of this 

assessment, we considered whether 

enrollment duration factors by market 

type may be warranted. However, we 

did not find a major distinction in 

market-specific incremental monthly 

enrollment duration factor risk scores 

after isolating the enrollment duration 

factors to enrollees with HCCs. 

We considered including a 

requirement for states to submit and be 

approved for a State Innovation Waiver 

under section 1332 of the PPACA as 

part of the proposed Exchange DE 

options. However, nothing under the 

plain terms of section 1311(d)(4) the 

PPACA governing the functions of an 

Exchange requires an Exchange to host 

a single, consumer-facing website to 

receive applications or support plan 

shopping and selection.259 Thus we 

concluded that there is no requirement 

in the PPACA that must be waived to 

allow a state to implement the DE 

option, and requiring states to expend 

taxpayer dollars to file a waiver 

application would be unnecessary and 

unduly burdensome. 

We considered taking no action 

regarding our proposal to add a new 

§ 155.420(a)(4)(iii)(C) in order to allow 

enrollees and their dependents to enroll 

in a new QHP of a lower metal level 260

if they qualify for a special enrollment 

period due to becoming newly ineligible 

for APTC. However, based on questions 

and concerns from agents and brokers, 

the current policy prevents some 

enrollees from maintaining continuous 

coverage because they lose a significant 

amount of financial assistance that 

would help them purchase coverage, 

and cannot enroll in a new, less costly 

QHP of a lower metal level. HHS 

believes this proposal is unlikely to 

result in adverse selection, and may 

improve the risk pool by supporting 

continued health insurance enrollment 

by healthy individuals who would be 

forced to end coverage in response to an 

increase in premium. 

We also considered whether to 

propose additional flexibility to allow 

enrollees and their dependents who 

become newly eligible for APTC in 

accordance with section 155.420(d)(6)(i) 

or (ii) to enroll in a QHP of a higher 

metal level, because we recognize 

becoming newly eligible for APTC may 

increase the affordability of higher metal 

level plans for some individuals. 

However, we believe including this 

flexibility would largely exempt the 

special enrollment periods at paragraph 

(d)(6)(i) and (ii) from the rules at 

155.420(a)(4)(iii), imposing risks of 

adverse selection by permitting 

individuals to change coverage levels in 

response to health status changes. 

Furthermore, while we believe the 

proposed flexibilities for individuals 

who become newly ineligible for APTC 

are needed in order to promote 

continuous coverage for individuals 

who can no longer afford their original 

plan choice, no similar affordability and 

continuous coverage concerns exist for 

enrolled consumers who gain APTC 

eligibility during the coverage year. 

Accordingly, at this time we are not 

proposing additional plan flexibility for 

enrollees who become newly eligible for 

APTC. 

We considered taking no action 

regarding our proposal to add a new 

§ 155.420(c)(5) to allow a qualified 

individual, dependent or enrollee that 

did not receive timely notice of a 

triggering event or was otherwise 

reasonably unaware that a triggering 

event described in § 155.420(d) 

occurred to select a new plan within 60 

days of the date he or she knew, or 

reasonably should have known, of the 

occurrence of the triggering event. 

However, in some circumstances this 

would result in consumers, through no 

fault of their own, being unable to 

access a special enrollment period for 

which they were eligible. Additionally, 

we considered not adding new 

§ 155.420(b)(5) to provide a qualified 

individual, dependent, or enrollee 

described in new § 155.420(c)(5) with 

the option for a retroactive effective 

date. Failing to provide the option for a 

retroactive effective date would 

necessarily result in a gap in coverage, 

and therefore hinder a consumer’s 

ability to maintain continuous coverage. 

We also considered limiting the 

applicability of the proposal to add a 

new § 155.420(c)(5) to a qualified 

individual, enrollee, or dependent who 

does not receive notice or become 

reasonably aware of the occurrence of a 

triggering event until more than 15 days 

after the triggering event. However, 

failing to apply the new § 155.420(c)(5) 

to qualified individuals, enrollees, or 

dependents who receive notice or 

become reasonably aware of the 

occurrence of a triggering event 15 days 

or less after the triggering event and 

eliminating the option for a retroactive 

effective date for those individuals 

would result in a gap in coverage for 

such individuals and hinder their 

ability to maintain continuous coverage. 

We considered taking no action 

regarding our proposal to add new 

paragraph (v) to § 155.420(d)(1) to 

specify that complete cessation of 

employer contributions to COBRA 

continuation coverage is a special 

enrollment period triggering event. 

However, codifying this policy in 

regulation provides transparency to a 

long-standing interpretation of the FFEs 

78668 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

261https://www.sba.gov/document/support-- 

table-size-standards. 

262Available at https://www.cms.gov/CCIIO/ 

Resources/Data-Resources/mlr.html. 

and SBE–FPs. Additionally, codifying 

this policy in regulation ensures 

alignment across all Exchanges and in 

the off-Exchange individual market. 

We considered several alternatives to 

requiring that all Exchanges conduct 

special enrollment period verification 

for at least 75 percent of new 

enrollments through special enrollment 

periods for consumers not already 

enrolled in coverage through the 

applicable Exchange, including 

designating specific special enrollment 

period types, like Loss of Minimum 

Essential Coverage, that must be 

verified. We concluded that designating 

a percentage of special enrollment 

period enrollments that must be verified 

would provide Exchanges with 

implementation flexibility to decide the 

best way to conduct special enrollment 

period verification based on Exchange 

type, population characteristics, and 

trends. We also considered the impact 

of not proposing the revision requiring 

special enrollment period verification, 

but concluded that the proposed 

revision would have an overall positive 

impact on program integrity by reducing 

the risk of ineligible consumers 

enrolling in Exchange coverage through 

a special enrollment period. 

For our proposals to revise § 156.295 

and add § 184.50 to require certain 

prescription drug reporting, we 

considered, but did not yet require, the 

reporting of data described in section 

1150A(b)(1) broken down by pharmacy 

type (which includes an independent 

pharmacy, chain pharmacy, 

supermarket pharmacy, or mass 

merchandiser pharmacy that is licensed 

as a pharmacy by the state and that 

dispenses medication to the general 

public). As mentioned above, we are 

aware that it is not currently possible to 

report such data by pharmacy type 

because pharmacy type is not a standard 

classification currently captured in 

industry databases or files. While we 

believe the imposition of this level of 

reporting would impose unreasonable 

burden at this time, we intend to begin 

collecting this information in the future. 

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 

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 

program, which are intended to stabilize 

premiums and reduce incentives for 

issuers to avoid higher-risk enrollees. 

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 $41.5 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 $35 million or less.261 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 262 submissions 

for the 2019 MLR reporting year, 

approximately 77 out of 479 issuers of 

health insurance coverage nationwide 

had total premium revenue of $41.5 

million or less. This estimate may 

overstate the actual number of small 

health insurance companies that may be 

affected, since over 67 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 $41.5 

million. Therefore, we do not expect the 

proposed provisions of this rule to affect 

a substantial number of small entities. 

In this proposed rule, we propose 

requiring certain QHP issuers or their 

PBMs to report certain prescription drug 

information to CMS. We are not aware 

of any QHP issuer or PBM that contracts 

with a QHP issuer to administer their 

prescription drug benefit which would 

be considered a ‘‘small entity’’ under 

the RFA. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule under title 

XVIII, title XIX, or part B of title 42 of 

the Act 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. While this rule is not subject to 

section 1102 of the Act, we have 

determined that this proposed rule 

would not affect small rural hospitals. 

Therefore, the Secretary has determined 

that this rule would 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 one 

year by a state, local, or Tribal 

governments, in the aggregate, or by the 

private sector, of $100 million in 1995 

dollars, updated annually for inflation. 

Currently, that threshold is 

approximately $156 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 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 potential 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. 

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 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78669 

and attending conferences of the NAIC, 

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, we 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, those states had 

the opportunity to use funds under 

Exchange Planning and Establishment 

Grants to fund the development of data. 

Accordingly, some of the initial cost of 

creating 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. A user fee is assessed on issuers 

under all existing Exchange models, 

including State Exchanges where the 

user fee is assessed by the state, SBE– 

FPs, and the FFEs. We have solicited 

comment on the proposed user fee rate 

of 1.5 percent of monthly premiums or 

issuers in Exchanges that adopt the 

newly proposed FFE–DE and SBE–FP– 

DE options. 

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. This 

proposed rule, if finalized as proposed, 

is expected to be a ‘‘major rule’’ as that 

term is defined in 5 U.S.C. 804(2), 

because it is likely to result in an annual 

effect on the economy of $100 million 

or more. 

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 

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. 

This proposed rule, if finalized as 

proposed, is expected to be E.O. 13771 

regulatory action. We estimate costs of 

approximately $52.45 million in 2021, 

cost savings of approximately $72.08 

million in 2022, costs of approximately 

$40.92 in 2023 and annual costs of 

approximately $6.32 million thereafter. 

Thus the annualized value of costs, as 

of 2016 and calculated over a perpetual 

time horizon with a 7 percent discount 

rate, would be $4.65 million. 

List of Subjects 

31 CFR Part 33 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, Waivers for State 

Innovation. 

45 CFR Part 147 

Age discrimination, Citizenship and 

naturalization, Civil rights, Health care, 

Health insurance, Individuals with 

disabilities, Intergovernmental relations, 

Reporting and recordkeeping 

requirements, Sex discrimination. 

45 CFR Part 150 

Administrative practice and 

procedure, Health care, Health 

insurance, 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, Age 

discrimination, Brokers, Civil rights, 

Citizenship and naturalization, Conflict 

of interests, Consumer protection, Grant 

programs-health, Grants administration, 

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, Sex 

discrimination, State and local 

governments, Technical assistance, 

Taxes, Women, Youth. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

committees, Age discrimination, Alaska, 

Brokers, Citizenship and naturalization, 

Civil rights, Conflict of interests, 

Consumer protection, Grant programshealth, Grants administration, Health 

care, Health insurance, Health 

maintenance organization (HMO), 

Health records, Hospitals, Indians, 

Individuals with disabilities, 

Intergovernmental relations, Loan 

programs-health, Medicaid, 

Organization and functions 

(Government agencies), Prescription 

drugs, Public assistance programs, 

Reporting and recordkeeping 

requirements, Sex discrimination, State 

and local governments, Sunshine Act, 

Technical assistance, Women, Youth. 

45 CFR Part 158 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Penalties, Reporting and 

recordkeeping requirements. 

45 CFR Part 184 

Administrative practice and 

procedure, Consumer protection, Health 

care, Health insurance, Health 

maintenance organization (HMO), 

Organization and functions 

(Government agencies), Prescription 

Drugs, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Department of the 

Treasury amends 31 CFR subtitle A as 

set forth below: 

PART 33—WAIVERS FOR STATE 

INNOVATION 

■ 1. The authority citation for part 33 

continues to read as follows: 

Authority: Sec. 1332, Pub. L. 111–148, 124 

Stat. 119. 

■ 2. Section 33.108 is amended by 

revising paragraph (f)(3)(iv) introductory 

text to read as follows: 

§ 33.108 Application procedures. 

* * * * * 

(f) * * * 

(3) * * * 

(iv) The analyses, actuarial 

certifications, data, assumptions, 

analysis, targets and other information 

set forth in paragraph (f)(4) of this 

section sufficient to provide the 

Secretary and the Secretary of Health 

and Human Services, as applicable, 

with the necessary data to determine 

78670 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

that the State’s proposed waiver satisfies 

the general requirements for approval 

under section 1332(b)(1) of the 

Affordable Care Act consistent with 

guidance published by the Secretary 

and the Secretary of Health and Human 

Services at 83 FR 53575 (Oct. 24, 2018): 

* * * * * 

■ 3. Section 33.120 is amended by 

revising paragraph (a)(1) to read as 

follows: 

§ 33.120 Monitoring and compliance. 

(a) * * * (1) Following the issuance 

of a final decision to approve a section 

1332 waiver by the Secretary and the 

Secretary of Health and Human 

Services, as applicable, a State must 

comply with all applicable Federal 

laws, regulations, and interpretive 

policy statements, as well as guidance 

published by the Secretary and the 

Secretary of Health and Human Services 

at 83 FR 53575 (Oct. 24, 2018), unless 

expressly waived. A State must, within 

the timeframes specified in law, 

regulation, policy or guidance, come 

into compliance with any changes in 

Federal law, regulation, or policy 

affecting section 1332 waivers, unless 

the provision being changed is expressly 

waived. 

* * * * * 

■ 4. Section 33.128 is amended by 

revising paragraph (a) to read as follows: 

§ 33.128 Periodic evaluation requirements. 

(a) The Secretary and the Secretary of 

Health and Human Services, as 

applicable, shall periodically evaluate 

the implementation of a program under 

a section 1332 waiver consistent with 

guidance published by the Secretary 

and the Secretary of Health and Human 

Services, including the State Relief and 

Empowerment Waivers guidance 

published on October 24, 2018, as 

applicable, and any terms and 

conditions governing the section 1332 

waiver. 

* * * * * 

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 subtitle A, subchapter B, as set 

forth below. 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL INSURANCE 

MARKETS 

■ 5. The authority citation for part 147 

continues to read as follows: 

Authority: 42 U.S.C. 300gg through 300gg– 

63, 300gg–91, and 300gg–92, as amended. 

■ 6. Section 147.104 is amended by 

revising paragraphs (b)(2)(ii) and (4)(ii) 

to read as follows: 

§ 147.104 Guaranteed availability of 

coverage. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) In applying this paragraph (b)(2), 

a reference in § 155.420 (other than in 

§§ 155.420(a)(5) and 155.420(d)(4)) of 

this subchapter to a ‘‘QHP’’ is deemed 

to refer to a plan, a reference to ‘‘the 

Exchange’’ is deemed to refer to the 

applicable State authority, and a 

reference to a ‘‘qualified individual’’ is 

deemed to refer to an individual in the 

individual market. For purposes of 

§ 155.420(d)(4) of this subchapter ‘‘the 

Exchange’’ is deemed to refer to the 

Exchange or the health plan, as 

applicable. 

* * * * * 

(4) * * * 

(ii) In the individual market, subject 

to § 155.420(c)(5) of this subchapter, 

individuals must be provided 60 

calendar days after the date of an event 

described in paragraph (b)(2) and (3) of 

this section to elect coverage, as well as 

60 calendar days before certain 

triggering events as provided for in 

§ 155.420(c)(2) of this subchapter. 

* * * * * 

PART 150—CMS ENFORCEMENT IN 

GROUP AND INDIVIDUAL INSURANCE 

MARKETS 

■ 7. The authority citation for part 150 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

§ 150.103 [Amended] 

■ 8. In § 150.103 amend the definition 

of ‘‘Complaint’’ by removing the word 

‘‘HIPAA’’ and adding in its place ‘‘PHS 

Act’’. 

§ 150.205 [Amended] 

■ 9. In § 150.205 amend paragraph (e)(2) 

by removing the word ‘‘HIPAA’’ and 

adding in its place ‘‘PHS Act’’. 

§ 150.213 [Amended] 

■ 10. In § 150.213 amend paragraph (b) 

by removing the word ‘‘HIPAA’’ and 

adding in its place ‘‘PHS Act’’. 

§ 150.303 [Amended] 

■ 11. In § 150.303 amend paragraph (a) 

introductory text by removing the word 

‘‘HIPAA’’ and adding in its place ‘‘PHS 

Act’’. 

§ 150.305 [Amended] 

■ 12. In § 150.305 amend paragraphs 

(a)(1), (a)(2), (b)(1), and (c)(1) by 

removing the word ‘‘HIPAA’’ each time 

it appears and adding in its place ‘‘PHS 

Act’’. 

§ 150.311 [Amended] 

■ 13. In § 150.311 amend paragraph (g) 

by removing the word ‘‘HIPAA’’ and 

adding in its place ‘‘PHS Act’’. 

§ 150.313 [Amended] 

■ 14. In § 150.313 amend paragraph (b) 

by removing the word ‘‘HIPAA’’ and 

adding in its place ‘‘PHS Act’’. 

■ 15. Amend § 150.401 by revising the 

definitions of ‘‘Filing date’’ and 

‘‘Hearing’’ to read as follows: 

§ 150.401 Definitions. 

* * * * * 

Filing date means the date filed 

electronically. 

Hearing includes a hearing on a 

written record as well as an in-person, 

telephone, or video teleconference 

hearing. 

* * * * * 

■ 16. Amend § 150.419 by revising 

paragraph (a) to read as follows: 

§ 150.419 Forms of hearing. 

(a) All hearings before an ALJ are on 

the record. The ALJ may receive 

argument or testimony in writing, in 

person, by telephone, or by video 

teleconference. The ALJ may receive 

testimony by telephone only if the ALJ 

determines that doing so is in the 

interest of justice and economy and that 

no party will be unduly prejudiced. The 

ALJ may require submission of a 

witness’ direct testimony in writing 

only if the witness is available for crossexamination. 

* * * * * 

■ 17. Amend § 150.427 by revising 

paragraph (a) introductory text and 

paragraph (b) to read as follows: 

§ 150.427 Form and service of 

submissions. 

(a) Every submission filed with the 

ALJ must be filed electronically and 

include: 

* * * * * 

(b) A party filing a submission with 

the ALJ must, at the time of filing, serve 

a copy of such submission on the 

opposing party. An intervenor filing a 

submission with the ALJ must, at the 

time of filing, serve a copy of the 

submission on all parties. If a party is 

represented by an attorney, service must 

be made on the attorney. An 

electronically filed submission is 

considered served on all parties using 

the electronic filing system. 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78671 

■ 18. Revise § 150.431 to read as 

follows: 

§ 150.431 Acknowledgment of request for 

hearing. 

After receipt of the request for 

hearing, the ALJ assigned to the case or 

someone acting on behalf of the ALJ will 

send a written notice to the parties that 

acknowledges receipt of the request for 

hearing, identifies the docket number 

assigned to the case, and provides 

instructions for filing submissions and 

other general information concerning 

procedures. The ALJ will set out the 

next steps in the case either as part of 

the acknowledgement or on a later date. 

■ 19. Amend § 150.441 by revising 

paragraph (e) to read as follows: 

§ 150.441 Prehearing conferences. 

* * * * * 

(e) Establishing a schedule for an inperson, telephone, or video 

teleconference hearing, including 

setting deadlines for the submission of 

written direct testimony or for the 

written reports of experts. 

* * * * * 

■ 20. Amend § 150.447 by revising 

paragraph (a) to read as follows: 

§ 150.447 The record. 

(a) Any testimony that is taken inperson, by telephone, or by video 

teleconference is recorded and 

transcribed. The ALJ may order that 

other proceedings in a case, such as a 

prehearing conference or oral argument 

of a motion, be recorded and 

transcribed. 

* * * * * 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS, 

AND RISK ADJUSTMENT UNDER THE 

AFFORDABLE CARE ACT 

■ 21. The authority citation for part 153 

continues to read as follows: 

Authority: 42 U.S.C. 18031, 18041, and 

18061 through 18063. 

■ 22. Section 153.320 is amended by— 

■ a. Revising paragraph (c); 

■ b. Redesignating paragraphs (d)(2) 

through (d)(4) as paragraphs (d)(3) 

through (d)(5), respectively; 

■ c. Adding new paragraph (d)(2); 

■ d. Revising newly designated 

paragraphs (d)(4) and (d)(5)(i); and 

■ e. Adding paragraphs (d)(5)(iii) 

through (v). 

The revisions and additions read as 

follows: 

§ 153.320 Federally certified risk 

adjustment methodology. 

* * * * * 

(c) Use of methodology for States that 

do not operate a risk adjustment 

program. HHS will specify in notice and 

comment rulemaking by HHS in 

advance of the applicable benefit year, 

the Federally certified risk adjustment 

methodology that will apply in States 

that do not operate a risk adjustment 

program. 

(d) * * * 

* * * * * 

(2) Beginning with the 2023 benefit 

year, States may request a reduction to 

otherwise applicable risk adjustment 

transfers calculated under the HHSoperated risk adjustment methodology 

for up to 3 years. 

(i) A State making a multi-year 

request must: 

(A) Submit evidence and analysis as 

set forth in paragraphs (d)(1)(i) through 

(iii) of this section, as applicable, for all 

years to which the request would apply. 

(B) Include with its request a 

confirmation that it does not anticipate 

any significant changes to the State 

market risk pool(s) impacted by its 

request for the duration for which it is 

requesting a reduction in risk 

adjustment transfers. 

(C) Respond to HHS requests for 

supplemental evidence under paragraph 

(d)(5)(iv) of this section, in the form, 

manner, and timeframe specified by 

HHS. 

(ii) A State may withdraw its multiyear state reduction request prior to the 

natural expiration of the request by 

notifying HHS of its intent to withdraw 

the request, in the form and manner 

specified by HHS, 60 calendar days 

prior to the applicable benefit year’s rate 

setting deadline. The State must also 

notify its impacted issuers of the 

withdrawal of its multi-year reduction 

request at least 45 calendar days prior 

to the applicable benefit year’s rate 

setting deadline. 

* * * * * 

(4) Publication of reduction requests. 

HHS will publish State reduction 

requests in the applicable benefit year’s 

HHS notice of benefit and payment 

parameters 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’ Freedom of Information 

regulations under 45 CFR 5.31(d). HHS 

will publish any approved or denied 

State reduction requests in the 

applicable benefit year’s HHS notice of 

benefit and payment parameters final 

rule. Beginning with the 2023 benefit 

year, all multi-year State reduction 

requests will be published in the annual 

HHS notice of benefit and payment 

parameters that correspond with the 

first year in which the multi-year 

flexibility was requested. 

(5) * * * 

(i) Subject to paragraphs (d)(5)(ii) and 

(iii) of this section, HHS will approve 

State reduction requests if HHS 

determines, based on the review of the 

information submitted as part of the 

State’s request, along with other 

relevant factors, including the premium 

impact of the transfer reduction for the 

State market risk pool, and other 

relevant public comments: 

* * * * * 

(iii) For multi-year requests, HHS may 

approve a duration that is shorter than 

what was requested by the State for a 

multi-year reduction request if HHS 

determines that the supporting evidence 

and analysis do not fully support the 

requested duration. 

(iv) HHS may request supplemental 

evidence from a State with an approved 

multi-year reduction request at any time 

after its initial approval, in the form and 

manner specified by HHS. 

(v) HHS retains the ability to 

terminate or modify a previously 

approved multi-year reduction request 

at any time after its initial approval if 

new additional data or information does 

not support the continuation of the 

State’s reduction request and the State 

has not provided sufficient 

supplemental evidence to rebut such 

data or information. If the request is 

terminated or modified by HHS, the 

State must notify its impacted issuers of 

the termination or modification of its 

multi-year reduction request within 15 

calendar days of the state’s receipt of 

HHS’s notice of termination or 

modification of its previously approved 

reduction request. 

■ 23. Amend § 153.410 by revising 

paragraph (d) to read as follows: 

§ 153.410 Requests for reinsurance 

payment. 

* * * * * 

(d) Audits and Compliance Reviews. 

HHS or its designee may audit or 

conduct a compliance review of an 

issuer of a reinsurance-eligible plan to 

assess its compliance with the 

applicable requirements of this subpart 

and subpart H of this part. Compliance 

reviews conducted under this section 

will follow the standards set forth in 

§ 156.715 of this subchapter. 

(1) Notice of Audit. HHS will provide 

at least 15 calendar days advance notice 

of its intent to conduct an audit of an 

issuer of a reinsurance-eligible plan. 

(i) Conferences. All audits will 

include an entrance conference at which 

the scope of the audit will be presented 

78672 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

and an exit conference at which the 

initial audit findings will be discussed. 

(ii) [Reserved] 

(2) Compliance with Audit Activities. 

To comply with an audit under this 

section, the issuer must: 

(i) Ensure that its relevant employees, 

agents, contractors, subcontractors, 

downstream entities, and delegated 

entities cooperate with any audit or 

compliance review under this section; 

(ii) Submit complete and accurate 

data to HHS or its designees that is 

necessary to complete the audit, in the 

format and manner specified by HHS, 

no later than 30 calendar days after the 

initial audit response deadline 

established by HHS at the entrance 

conference described in paragraph 

(d)(1)(i) of this section for the applicable 

benefit year; 

(iii) Respond to all audit notices, 

letters, and inquiries, including requests 

for supplemental or supporting 

information, as requested by HHS, no 

later than 15 calendar days after the date 

of the notice, letter, request, or inquiry; 

and 

(iv) In circumstances in which an 

issuer cannot provide the requested data 

or response to HHS within the 

timeframes under paragraph (d)(2)(ii) or 

(iii) of this section, as applicable, the 

issuer may make a written request for an 

extension to HHS. The extension 

request must be submitted within the 

timeframe established under paragraph 

(d)(2)(ii) or (iii) of this section, as 

applicable, and must detail the reason 

for the extension request and the good 

cause in support of the request. If the 

extension is granted, the issuer must 

respond within the timeframe specified 

in HHS’s notice granting the extension 

of time. 

(3) Preliminary Audit Findings. HHS 

will share its preliminary audit findings 

with the issuer, who will then have 30 

calendar days to respond to such 

findings in the format and manner 

specified by HHS. 

(i) If the issuer does not dispute or 

otherwise respond to the preliminary 

findings, the audit findings will become 

final. 

(ii) If the issuer responds and disputes 

the preliminary findings, HHS will 

review and consider such response and 

finalize the audit findings after such 

review. 

(4) Final Audit Findings. If an audit 

results in the inclusion of a finding in 

the final audit report, the issuer must 

comply with the actions set forth in the 

final audit report in the manner and 

timeframe established by HHS, and the 

issuer must complete all of the 

following: 

(i) Within 30 calendar days of the 

issuance of the final audit report, 

provide a written corrective action plan 

to HHS for approval. 

(ii) Implement that plan. 

(iii) Provide to HHS written 

documentation of the corrective actions 

once taken. 

(5) Failure to Comply with Audit 

Activities. If an issuer fails to comply 

with the audit activities set forth in this 

subsection in the manner and 

timeframes specified by HHS: 

(i) HHS will notify the issuer of 

reinsurance payments received that the 

issuer has not adequately substantiated; 

and 

(ii) HHS will notify the issuer that 

HHS may recoup any payments 

identified in paragraph (5)(i) of this 

section if the reinsurance debt is not 

paid. 

■ 24. Amend § 153.620 by revising 

paragraph (c) to read as follows: 

§ 153.620 Compliance with risk adjustment 

standards. 

* * * * * 

(c) Audits and Compliance Reviews. 

HHS or its designee may audit or 

conduct a compliance review of an 

issuer of a risk adjustment covered plan 

to assess its compliance with respect to 

the applicable requirements in this 

subpart and subpart H of this part. 

Compliance reviews conducted under 

this section will follow the standards set 

forth in § 156.715 of this subchapter. 

(1) Notice of Audit. HHS will provide 

at least 15 calendar days advance notice 

of its intent to conduct an audit of an 

issuer of a risk adjustment covered plan. 

(i) Conferences. All audits will 

include an entrance conference at which 

the scope of the audit will be presented 

and an exit conference at which the 

initial audit findings will be discussed. 

(ii) [Reserved] 

(2) Compliance with Audit Activities. 

To comply with an audit under this 

section, the issuer must: 

(i) Ensure that its relevant employees, 

agents, contractors, subcontractors, 

downstream entities, and delegated 

entities cooperate with any audit or 

compliance review under this section; 

(ii) Submit complete and accurate 

data to HHS or its designees that is 

necessary to complete the audit, in the 

format and manner specified by HHS, 

no later than 30 calendar days after the 

initial audit response deadline 

established by HHS at the audit 

entrance conference described in 

paragraph (c)(1)(i) of this section for the 

applicable benefit year; 

(iii) Respond to all audit notices, 

letters, and inquiries, including requests 

for supplemental or supporting 

information, as requested by HHS, no 

later than 15 calendar days after the date 

of the notice, letter, request, or inquiry; 

and 

(iv) In circumstances in which an 

issuer cannot provide the requested data 

or response to HHS within the 

timeframes under paragraphs (c)(2)(ii) or 

(iii) of this section, as applicable, the 

issuer may make a written request for an 

extension to HHS. The extension 

request must be submitted within the 

timeframe established under paragraphs 

(c)(2)(ii) or (iii) of this section, as 

applicable, and must detail the reason 

for the extension request and the good 

cause in support of the request. If the 

extension is granted, the issuer must 

respond within the timeframe specified 

in HHS’s notice granting the extension 

of time. 

(3) Preliminary Audit Findings. HHS 

will share its preliminary audit findings 

with the issuer, who will then have 30 

calendar days to respond to such 

findings in the format and manner 

specified by HHS. 

(i) If the issuer does not dispute or 

otherwise respond to the preliminary 

findings, the audit findings will become 

final. 

(ii) If the issuer responds and disputes 

the preliminary findings, HHS will 

review and consider such response and 

finalize the audit findings after such 

review. 

(4) Final Audit Findings. If an audit 

results in the inclusion of a finding in 

the final audit report, the issuer must 

comply with the actions set forth in the 

final audit report in the manner and 

timeframe established by HHS, and the 

issuer must complete all of the 

following: 

(i) Within 30 calendar days of the 

issuance of the final audit report, 

provide a written corrective action plan 

to HHS for approval. 

(ii) Implement that plan. 

(iii) Provide to HHS written 

documentation of the corrective actions 

once taken. 

(5) Failure to Comply with Audit 

Activities. If an issuer fails to comply 

with the audit activities set forth in this 

subsection in the manner and 

timeframes specified by HHS: 

(i) HHS will notify the issuer of the 

risk adjustment (including high-cost risk 

pool) payments that the issuer has not 

adequately substantiated; and 

(ii) HHS will notify the issuer that 

HHS may recoup any risk adjustment 

(including high-cost risk pool) payments 

identified in paragraph (c)(5)(i) of this 

section. 

■ 25. Section 153.630 is amended by— 

■ a. Revising paragraphs (d)(2) and (3); 

and 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78673 

■ b. Adding paragraphs (g)(4) and (5). 

The revisions read as follows: 

§ 153.630 Data validation requirements 

when HHS operates risk adjustment. 

* * * * * 

(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. 

(3) An issuer may appeal the findings 

of a second validation audit (if 

applicable) or the calculation of a risk 

score error rate as result of risk 

adjustment data validation, under the 

process set forth in § 156.1220 of this 

subchapter. 

* * * * * 

(g) * * * 

(4) The issuer only offered small 

group market carryover coverage during 

the benefit year that is being audited. 

(5) The issuer was the sole issuer in 

the state market risk pool during the 

benefit year that is being audited and 

did not participate in any other market 

risk pools in the State during the benefit 

year that is being audited. 

■ 26. Section 153.710 is amended— 

■ a. By redesignating paragraphs (e) 

through (g), as paragraphs (f) through 

(h), respectively; and 

■ b. By adding a new paragraph (e); and 

■ c. In newly redesignated paragraph (h) 

introductory text by removing the 

reference ‘‘paragraph (g)(3)’’ and adding 

in its place the reference ‘‘paragraph 

(h)(3)’’. 

The addition reads as follows: 

§ 153.710 Data requirements. 

* * * * * 

(e) Materiality Threshold. HHS will 

consider a discrepancy reported under 

paragraph (d)(2) of this section to be 

material if the amount in dispute is 

equal to or exceeds 1 percent of the 

applicable payment or charge payable to 

or due from the issuer for the benefit 

year, or $100,000, whichever is less. 

* * * * * 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 27. The authority citation for part 155 

continues to read as follows: 

Authority: 42 U.S.C. 18021–18024, 18031– 

18033, 18041–18042, 18051, 18054, 18071, 

and 18081–18083. 

■ 28. Section 155.20 is amended by— 

■ a. Adding the definitions of ‘‘Agent or 

broker direct enrollment technology 

provider’’ and ‘‘Qualified health plan 

issuer direct enrollment technology 

provider’’; 

■ b. Revising the definitions of ‘‘Webbroker’’. 

The additions and revision read as 

follows: 

§ 155.20 Definitions. 

* * * * * 

Agent or broker direct enrollment 

technology provider means a type of 

web-broker business entity that is not a 

licensed agent or broker 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. 

* * * * * 

Qualified health plan issuer direct 

enrollment technology provider means a 

business entity that provides technology 

services or provides access to an 

information technology platform to QHP 

issuers to facilitate participation in 

direct enrollment under §§ 155.221 or 

156.1230, including a web-broker that 

provides services as a direct enrollment 

technology provider to QHP issuers. A 

QHP issuer direct enrollment 

technology provider that provides 

technology services or provides access 

to an information technology platform 

to a QHP issuer will be a downstream 

or delegated entity of the QHP issuer 

that participates or applies to participate 

as a direct enrollment entity. 

* * * * * 

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 QHPs offered 

through the Exchange as described in 

§ 155.220(c)(3) or § 155.221. The term 

also includes an agent or broker direct 

enrollment technology provider. 

■ 29. Section 155.205 is amended by 

revising paragraphs (c)(2)(i)(B), 

(c)(2)(iii)(B), (c)(2)(iv) introductory text, 

(c)(2)(iv)(B) and (C) to read as follows: 

§ 155.205 Consumer assistance tools and 

programs of an Exchange. 

* * * * * 

(c) * * * 

(2) * * * 

(i) * * * 

(B) For a web-broker, beginning 

November 1, 2015, or when such entity 

has been registered with the Exchange 

for at least 1 year, whichever is later, 

this standard also includes telephonic 

interpreter services in at least 150 

languages. 

* * * * * 

(iii) * * * 

(B) For a web-broker, beginning when 

such entity has been registered with the 

Exchange for at least 1 year, this 

standard also includes taglines on 

website content and any document that 

is critical for obtaining health insurance 

coverage or access to health care 

services through a QHP for qualified 

individuals, applicants, qualified 

employers, qualified employees, or 

enrollees. Website content or documents 

are deemed to be critical for obtaining 

health insurance coverage or access to 

health care services through a QHP if 

they are required to be provided by law 

or regulation to a qualified individual, 

applicant, qualified employer, qualified 

employee, or enrollee. Such taglines 

must indicate the availability of 

language services in at least the top 15 

languages spoken by the limited English 

proficient population of the relevant 

State or States, as determined in 

guidance published by the Secretary. A 

web-broker that is licensed in and 

serving multiple States may aggregate 

the limited English populations in the 

States it serves to determine the top 15 

languages required for taglines. A webbroker may satisfy tagline requirements 

with respect to website content if it 

posts a Web link prominently on its 

home page that directs individuals to 

the full text of the taglines indicating 

how individuals may obtain language 

assistance services, and if it also 

includes taglines on any critical standalone document linked to or embedded 

in the website. 

(iv) For Exchanges, QHP issuers, and 

web-brokers, website translations. 

* * * * * 

(B) For a QHP issuer, beginning no 

later than the first day of the individual 

market open enrollment period for the 

2017 benefit year, or, in cases where a 

QHP issuer is participating in the 

enhanced direct enrollment program, 

twelve (12) months from the date the 

QHP issuer begins operating its 

enhanced direct enrollment website in 

the relevant state for the website content 

that must be added to its website as a 

78674 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

condition of participation in the FFE 

enhanced direct enrollment program. If 

the content of a website maintained by 

the QHP issuer is critical for obtaining 

health insurance coverage or access to 

health care services through a QHP 

within the meaning of § 156.250 of this 

subchapter, it must be translated into 

any non-English language that is spoken 

by a limited English proficient 

population that reaches 10 percent or 

more of the population of the relevant 

State, as determined in guidance 

published by the Secretary. 

(C) For a web-broker, beginning on the 

first day of the individual market open 

enrollment period for the 2017 benefit 

year, or when such entity has been 

registered with the Exchange for at least 

one year, whichever is later, or, in cases 

where a web-broker is participating in 

the enhanced direct enrollment 

program, twelve (12) months from the 

date the web-broker begins operating its 

enhanced direct enrollment website in 

the relevant state for the website content 

added to its website to participate in the 

FFE enhanced direct enrollment 

program, content that is intended for 

qualified individuals, applicants, 

qualified employers, qualified 

employees, or enrollees on a website 

that is maintained by the web-broker 

must be translated into any non-English 

language that is spoken by a limited 

English proficient population that 

comprises 10 percent or more of the 

population of the relevant State, as 

determined in guidance published by 

the Secretary, except that when a webbroker operates in a State using a direct 

enrollment model under § 155.221(j) of 

this subpart, the web-broker must 

translate website content consistent 

with this paragraph as soon as it begins 

operations in the State. 

* * * * * 

■ 30. Section 155.220 is amended by— 

■ a. Revising paragraphs (c)(3)(i)(A) and 

(D); 

■ b. Adding paragraph (c)(3)(iii); and 

■ c. Adding paragraphs (c)(6) and (n). 

The revisions and additions 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. 

* * * * * 

(c) * * * 

(3) * * * 

(i) * * * 

(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), except as permitted under 

paragraph (n) of this section; 

* * * * * 

(D) Display all QHP data provided by 

the Exchange, except as permitted under 

paragraph (n) of this section; 

* * * * * 

(iii)(A) Notwithstanding paragraph 

(n)(1) of this section, when permitted 

under State law, Navigators and 

certified application counselors may use 

the website of a web-broker to assist an 

applicant to enroll in a QHP offered 

through the Exchange, including to 

assist an applicant to complete the 

Exchange eligibility application, if the 

website displays all QHP data provided 

by the Exchange related to all QHPs 

offered through the Exchange consistent 

with the requirements of § 155.205(b)(1) 

and (c). Navigators and certified 

application counselors may use a webbroker website that does not facilitate 

enrollment in all QHPs offered through 

the Exchange, so long as the website 

identifies such QHPs to consumers by 

prominently displaying a standardized 

disclaimer provided by the Exchange, 

and in the 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. 

(B) A web-broker that makes its 

website available for use by Navigators 

and certified application counselors, 

consistent with the requirements in 

paragraph (c)(3)(iii)(A) of this section 

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)(iii)(A) of this section. 

* * * * * 

(6) In addition to applicable 

requirements under § 155.221(b)(4), a 

web-broker must demonstrate 

operational readiness and compliance 

with applicable requirements prior to 

the web-broker’s internet website being 

used to complete an Exchange eligibility 

application or a QHP selection, which 

may include submission or completion, 

in the form and manner specified by 

HHS, of the following: 

(i) Operational data including 

licensure information, points of contact, 

and third-party relationships; 

(ii) Enrollment testing, prior to 

approval or renewal; 

(iii) Website reviews performed by 

HHS; 

(iv) Security and privacy assessment 

documentation, including: 

(A) Penetration testing results; 

(B) Security and privacy assessment 

reports; 

(C) Vulnerability scan results; 

(D) Plans of action and milestones; 

and 

(E) System security and privacy plans. 

(v) Agreements between the webbroker and HHS. 

* * * * * 

(n) Exception. (1) Except in cases 

where the website of a web-broker is 

intended to be available for use by 

Navigators and certified application 

counselors consistent with paragraph 

(c)(3)(iii)(A) of this section, if the 

website of a web-broker does not 

support enrollment in a QHP offered 

through an Exchange, the web-broker is 

not required to provide all of the 

standardized comparative information 

required under § 155.205(b)(1) for that 

QHP, but the web-broker’s website must 

instead: 

(i) 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; 

(ii) Provide a Web link to the 

Exchange website; and 

(iii) Display the following minimum 

QHP information consistent with the 

requirements of § 155.205(c): Issuer 

marketing name, plan marketing name, 

plan type, metal level, and premium 

and cost-sharing information. 

(2) [Reserved] 

■ 31. Section 155.221 is amended— 

■ a. By revising paragraphs (b)(1), (3), 

and (4); 

■ b. By redesignating paragraphs (c) 

through (h) as paragraphs (d) through 

(i), respectively. 

■ c. By adding paragraphs (c) and (j); 

■ d. By revising newly redesignated 

paragraphs (g) introductory text, (g)(6), 

(g)(7), and (h) by removing the reference 

to ‘‘paragraph (e)’’ and adding in its 

place a reference to ‘‘paragraph (f)’’; and 

■ e. By adding paragraph (j). 

The additions and revisions read as 

follows: 

§ 155.221 Standards for direct enrollment 

entities and for third parties to perform 

audits of direct enrollment entities. 

* * * * * 

(b) * * * 

(1) Display and market QHPs offered 

through the Exchange, individual health 

insurance coverage as defined in 

§ 144.103 of this subchapter offered 

outside the Exchange (including QHPs 

and non-QHPs other than excepted 

benefits), and any other products, such 

as excepted benefits, on at least three 

separate website pages on its nonExchange website, except as permitted 

under paragraph (c) of this section; 

* * * * * 

(3) Limit marketing of non-QHPs 

during the Exchange eligibility 

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application and QHP selection process 

in a manner that minimizes the 

likelihood that consumers will be 

confused as to which products and 

plans are available through the 

Exchange and which products and plans 

are not, except as permitted under 

paragraph (c)(1) of this section; 

(4) Demonstrate operational readiness 

and compliance with applicable 

requirements prior to the direct 

enrollment entity’s internet website 

being used to complete an Exchange 

eligibility application or a QHP 

selection, which may include 

submission or completion, in the form 

and manner specified by HHS, of the 

following: 

(i) Business audit documentation 

including: 

(A) Notices of intent to participate 

including auditor information; 

(B) Documentation packages 

including privacy questionnaires, 

privacy policy statements, and terms of 

service; and 

(C) Business audit reports including 

testing results. 

(ii) Security and privacy audit 

documentation including: 

(A) Interconnection security 

agreements; 

(B) Security and privacy controls 

assessment test plans; 

(C) Security and privacy assessment 

reports; 

(D) Plans of action and milestones; 

(E) Privacy impact assessments; 

(F) System security and privacy plans; 

(G) Incident response plans; and 

(H) Vulnerability scan results. 

(iii) Eligibility application audits 

performed by HHS; 

(iv) Online training modules offered 

by HHS; and 

(v) Agreements between the direct 

enrollment entity and HHS. 

* * * * * 

(c) Exceptions to direct enrollment 

entity display and marketing 

requirement. For the Federallyfacilitated Exchanges, a direct 

enrollment entity may: 

(1) Display and market QHPs offered 

through the Exchange and individual 

health insurance coverage as defined in 

§ 144.103 of this subchapter offered 

outside the Exchange (including QHPs 

and non-QHPs other than excepted 

benefits) on the same website pages 

when assisting individuals who have 

communicated receipt of an offer of an 

individual coverage health 

reimbursement arrangement as 

described in § 146.123(c) of this 

subchapter, as a standalone benefit, or 

in addition to an offer of an arrangement 

under which the individual may pay the 

portion of the premium for individual 

health insurance coverage that is not 

covered by an individual coverage 

health reimbursement arrangement 

using a salary reduction arrangement 

pursuant to a cafeteria plan under 

section 125 of the Internal Revenue 

Code, but must clearly distinguish 

between the QHPs offered through the 

Exchange and individual health 

insurance coverage offered outside the 

Exchange (including QHPs and nonQHPs other than excepted benefits), and 

prominently communicate that advance 

payments of the premium tax credit and 

cost-sharing reductions are available 

only for QHPs purchased through the 

Exchange, that advance payments of the 

premium tax credit are not available to 

individuals who accept an offer of an 

individual coverage health 

reimbursement arrangement or who opt 

out of an individual coverage health 

reimbursement arrangement that is 

considered affordable, and that a salary 

reduction arrangement under a cafeteria 

plan may only be used toward the cost 

of premiums for plans purchased 

outside the Exchange; and 

(2) Display and market Exchangecertified stand-alone dental plans 

offered outside the Exchange and noncertified stand-alone dental plans on the 

same website pages. 

* * * * * 

(j) Process for States to elect the 

Exchange Direct Enrollment Option. 

Subject to HHS approval, and in 

addition to or in lieu of the Exchange in 

the State operating its own consumerfacing eligibility application and 

enrollment website, a State may elect for 

the State Exchange, State Exchange on 

the Federal platform, or Federallyfacilitated Exchange in the State to 

approve one or more enrollment entities 

described in paragraph (a) of this 

section to make available a nonExchange online website to enroll 

qualified individuals in a QHP offered 

through the Exchange in the State in a 

manner that constitutes enrollment 

through the Exchange, as specified in 

paragraphs (j)(1) or (2) of this section. 

Through these approved entities 

consumers in the State apply for 

coverage using an eligibility verification 

and enrollment application as described 

in § 155.405, and receive eligibility 

determinations from the Exchange for 

QHP enrollment, advance payments of 

the premium tax credit and cost-sharing 

reductions, as well as receive 

assessments or determinations from the 

Exchange for Medicaid and CHIP 

eligibility in accordance with §§ 155.302 

and 155.405. 

(1) Direct Enrollment Option for a 

State Exchange. A State may receive 

approval, under §§ 155.105(b) and 

155.106(a), to operate a State Exchange 

using the direct enrollment option 

described in paragraph (j) of this 

section. The State Exchange must meet 

all federal statutory and regulatory 

requirements for the operation of an 

Exchange. An approved State Exchange 

that wishes to implement this option 

must submit a revised Exchange 

Blueprint in accordance with 

§ 155.105(e). In order to obtain approval 

for the State Exchange to implement this 

option, the State must: 

(i) Demonstrate to HHS operational 

readiness for the State Exchange and its 

proposed direct enrollment entities to 

enroll qualified individuals in a QHP in 

a manner that constitutes enrollment 

through the Exchange and to enable 

individuals to apply for, and receive 

eligibility determinations for QHP 

enrollment, advance payments of the 

premium tax credit and cost-sharing 

reductions for QHPs from the Exchange, 

as well as receive assessments or 

determinations of Medicaid and CHIP 

eligibility from the Exchange as 

described in § 155.302, using the 

eligibility verification and enrollment 

application described in § 155.405; 

(ii) Provide HHS an implementation 

plan and timeline that details the key 

activities, milestones, and 

communication and outreach strategy to 

support the transition of enrollment 

operations to direct enrollment entities; 

and 

(iii) Ensure that a minimum of one 

direct enrollment entity approved by the 

State meets minimum federal 

requirements for HHS approval to 

participate in the Federally-facilitated 

Exchange direct enrollment program, 

including requirements at 45 CFR 

155.220 and 155.221, and is capable of 

enrolling all consumers in the State, 

including those who present complex 

eligibility scenarios. Where no direct 

enrollment entity approved by the State 

meets such minimum federal 

requirements or possesses the capability 

to enroll all consumers in the State, the 

State must offer a consumer-facing 

website that meets such requirements 

and possess such capability. 

(2) Direct enrollment option for a 

State with a Federally-facilitated 

Exchange or State Exchange on the 

Federal platform. Pursuant to a request 

from a State, the Federally-facilitated 

Exchange or a State Exchange on the 

Federal platform may partner with the 

requesting State to implement the direct 

enrollment option described in this 

paragraph (j). The Federally-facilitated 

Exchange or State-based Exchange on 

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the Federal platform must meet all 

federal statutory and regulatory 

requirements for the operation of an 

Exchange. In order to obtain approval 

for the Federally-facilitated Exchange or 

State Exchange on the Federal platform 

in a State to implement this option, a 

State must: 

(i) Coordinate with HHS on an 

implementation plan and timeline that 

allows for a transition period, developed 

at the discretion of HHS in consultation 

with the State, necessary for the 

Federally-facilitated Exchange to 

operationalize the necessary changes to 

implement this option; 

(ii) Execute a Federal agreement with 

HHS that includes the terms and 

conditions for the arrangement and 

which defines the division of 

responsibilities between HHS and the 

State; 

(iii) Agree to procedures developed by 

HHS for the collection and remittance of 

the monthly user fee described in 

§ 156.50(c) of this subchapter; and 

(iv) Perform and cooperate with 

activities established by HHS related to 

oversight and financial integrity 

requirements in accordance with section 

1313 of the Affordable Care Act, 

including complying with reporting and 

compliance activities required by HHS 

and described in the Federal agreement. 

■ 32. Section 155.420 is amended by— 

■ a. Revising paragraph (a)(4)(ii)(B); 

■ b. Adding paragraph (a)(4)(ii)(C); 

■ c. Revising paragraph (a)(4)(iii) 

introductory text; 

■ d. Adding paragraphs (b)(5) and (c)(5); 

■ e. Revising paragraphs (d)(1)(iii) and 

(iv); 

■ f. Adding paragraph (d)(1)(v); 

■ g. Adding paragraph (f). 

The revisions and additions read as 

follows: 

§ 155.420 Special enrollment periods. 

(a) * * * 

(4) * * * 

(ii) * * * 

(B) Beginning January 2022, if an 

enrollee and his or her dependents 

become newly ineligible for cost-sharing 

reductions in accordance with 

paragraph (d)(6)(i) or (ii) of this section 

and are enrolled in a silver-level QHP, 

the Exchange must allow the enrollee 

and his or her dependents to change to 

a QHP one metal level higher or lower, 

if they elect to change their QHP 

enrollment; or 

(C) If an enrollee and his or her 

dependents become newly ineligible for 

advance payments of the premium tax 

credit in accordance with paragraph 

(d)(6)(i) or (ii) of this section, the 

Exchange must allow the enrollee and 

his or her dependents to change to a 

QHP of a lower metal level, if they elect 

to change their QHP enrollment; 

(iii) For the other triggering events 

specified in paragraph (d) of this 

section, except for paragraphs (d)(2)(i), 

(d)(4), (d)(6)(i) and (ii) of this section for 

becoming newly eligible or ineligible for 

CSRs or newly ineligible for APTC, 

(d)(8), (9), (10) and (12) of this section: 

* * * * * 

(b) * * * 

(5) Option for earlier effective dates 

due to untimely notice of triggering 

event. At the option of a qualified 

individual, enrollee or dependent who 

is eligible to select a plan during a 

period provided for under paragraph 

(c)(5) of this section, the Exchange must 

provide the earliest effective date that 

would have been available under 

paragraph (b) of this section, based on 

the applicable triggering event under 

paragraph (d) of this section. 

(c) * * * 

(5) Availability for individuals who 

did not receive timely notice of 

triggering events. If a qualified 

individual, enrollee, or dependent did 

not receive timely notice of an event 

that triggers eligibility for a special 

enrollment period under this section, 

and otherwise was reasonably unaware 

that a triggering event described in 

paragraph (d) of this section occurred, 

the Exchange must allow the qualified 

individual, enrollee, or when 

applicable, his or her dependent to 

select a new plan within 60 days of the 

date that he or she knew, or reasonably 

should have known, of the occurrence 

of the triggering event. 

* * * * * 

(d) * * * 

(1) * * * 

(iii) Loses pregnancy-related coverage 

described under section 

1902(a)(10)(A)(i)(IV) and 

(a)(10)(A)(ii)(IX) of the Act (42 U.S.C. 

1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)) 

or loses access to health care services 

through coverage provided to a pregnant 

woman’s unborn child, based on the 

definition of a child in 42 CFR 457.10. 

The date of the loss of coverage is the 

last day the qualified individual would 

have pregnancy-related coverage or 

access to health care services through 

the unborn child coverage; 

(iv) Loses medically needy coverage 

as described under section 

1902(a)(10)(C) of the Act only once per 

calendar year. The date of the loss of 

coverage is the last day the consumer 

would have medically needy coverage; 

or 

(v) Is enrolled in COBRA continuation 

coverage for which an employer is 

paying all or part of the premiums and 

the employer completely ceases its 

contributions to the qualified 

individual’s or dependent’s COBRA 

continuation coverage. The triggering 

event is the last day of the period for 

which COBRA continuation coverage is 

paid for, in whole or in part, by an 

employer. (See 26 CFR 54.9801– 

6(a)(3)(ii) for rules regarding termination 

of employer contributions toward 

coverage other than COBRA 

continuation coverage, including 

coverage under a similar State program.) 

* * * * * 

(f) Special enrollment period 

verification. Unless a request for 

modification is granted in accordance 

with § 155.315(h), an Exchange must 

conduct verification of applicants’ 

eligibility for special enrollment periods 

under this section. An Exchange meets 

this requirement if it verifies eligibility 

for a number of individuals newly 

enrolling in Exchange coverage through 

special enrollment periods that equals at 

least 75 percent of all special enrollment 

periods for individuals newly enrolling 

in Exchange coverage. If the Exchange is 

unable to verify eligibility for 

individuals newly enrolling in 

Exchange coverage through a special 

enrollment period for which the 

Exchange requires verification, then the 

individuals are not eligible for 

enrollment through the Exchange. In 

accordance with § 155. 505b(iii), 

individuals have the right to appeal the 

eligibility determination. 

■ 33. Section 155.726 is amended by 

revising paragraph (c)(2)(i) to read as 

follows: 

§ 155.726 Enrollment periods under SHOP 

for plan years beginning on or after January 

1, 2018. 

* * * * * 

(c) * * * 

(2) * * * 

(i) Experiences an event described in 

§ 155.420(d)(1) (other than paragraphs 

(d)(1)(ii) and (v)), or experiences an 

event described in § 155.420(d)(2), (4), 

(5), (7), (8), (9), (10), (11), or (12); 

* * * * * 

■ 34. Section 155.1308 is amended by 

revising paragraph (f)(3)(iv) introductory 

text to read as follows: 

§ 155.1308 Application procedures. 

* * * * * 

(f) * * * 

(3) * * * 

(iv) The analyses, actuarial 

certifications, data, assumptions, 

analysis, targets and other information 

set forth in paragraph (f)(4) of this 

section sufficient to provide the 

Secretary and the Secretary of the 

Treasury, as applicable, with the 

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necessary data to determine that the 

State’s proposed waiver satisfies the 

general requirements for approval under 

section 1332(b)(1) of the Affordable Care 

Act consistent with guidance published 

by the Secretary and the Secretary of the 

Treasury at 83 FR 53575 (Oct. 24, 2018): 

* * * * * 

■ 35. Section 155.1320 is amended by 

revising paragraph (a)(1) to read as 

follows: 

§ 155.1320 Monitoring and compliance. 

(a) * * * (1) Following the issuance 

of a final decision to approve a section 

1332 waiver by the Secretary and the 

Secretary of the Treasury, as applicable, 

a State must comply with all applicable 

Federal laws, regulations, and 

interpretive policy statements, as well 

as guidance published by the Secretary 

and the Secretary of the Treasury at 83 

FR 53575 (Oct. 24, 2018), unless 

expressly waived. A State must, within 

the timeframes specified in law, 

regulation, policy or guidance, come 

into compliance with any changes in 

Federal law, regulation, or policy 

affecting section 1332 waivers, unless 

the provision being changed is expressly 

waived. 

* * * * * 

■ 36. Section 155.1328 is amended by 

revising paragraph (a) to read as follows: 

§ 155.1328 Periodic evaluation 

requirements. 

(a) The Secretary and the Secretary of 

the Treasury, as applicable, shall 

periodically evaluate the 

implementation of a program under a 

section 1332 waiver consistent with 

guidance published by the Secretary 

and the Secretary of the Treasury, 

including the guidance published at 83 

FR 53575 (Oct. 24, 2018), as applicable, 

and any terms and conditions governing 

the section 1332 waiver. 

* * * * * 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 37. The authority citation for part 156 

is revised to read as follows: 

Authority: 42 U.S.C. 18021–18024, 18031– 

18032, 18041–18042, 18044, 18054, 18061, 

18063, 18071, 18082, and 26 U.S.C. 36B. 

■ 38. Section 156.50 is amended by— 

■ a. Revising the heading for paragraph 

(c); 

■ b. Revising paragraph (c)(2); 

■ c. Adding paragraph (c)(3); 

■ d. Revising the heading for paragraph 

(d); and 

■ e. Revising paragraphs (d)(1) 

introductory text, (d)(2) introductory 

text, (d)(2)(i)(A), (B), (d)(2)(ii), 

(d)(2)(iii)(B), (d)(3) introductory text, 

(d)(4) through (6), and (d)(7) 

introductory text; 

The revisions and addition read as 

follows: 

§ 156.50 Financial support. 

* * * * * 

(c) Requirement for Exchange user 

fees. * * * 

(2) To support the functions of Statebased Exchanges on the Federal 

platform, unless the State-based 

Exchange and HHS agree on an 

alternative mechanism to collect the 

funds, a participating issuer offering a 

plan through a State-based Exchange on 

the Federal Exchange platform for 

certain Exchange functions described in 

§ 155.200 of this subchapter, as 

specified in a Federal platform 

agreement, must remit a user fee to 

HHS, in the timeframe and manner 

established by HHS, equal to the 

product of the sum of the monthly user 

fee rate specified in the annual HHS 

notice of benefit and payment 

parameters for State-Based Exchanges 

on the Federal platform for the 

applicable benefit year, multiplied by 

the monthly premium charged by the 

issuer for each policy under the plan 

where enrollment is through the Statebased Exchange on the Federal platform. 

(3) A participating issuer offering a 

plan through an State-based Exchange 

on the Federal platform that has 

adopted the Direct Enrollment option or 

Federally-facilitated Exchange that has 

adopted the direct enrollment option as 

described in § 155.221(j) of this 

subchapter, as specified in a Federal 

agreement with HHS, must remit a user 

fee to HHS each month, in the 

timeframe and manner established by 

HHS, equal to the product of the 

monthly user fee rate for the applicable 

benefit year specified in an annual HHS 

notice of benefit and payment 

parameters published in advance of the 

applicable benefit year and the monthly 

premium charged by the issuer for each 

policy under the plan where enrollment 

is through the State-based Exchange on 

the Federal platform that has adopted 

the Direct Enrollment option or 

Federally-facilitated Exchange that has 

adopted the direct enrollment option. 

(d) Adjustment of Exchange user fees. 

(1) A participating issuer offering a plan 

through a Federally-facilitated Exchange 

or State-based Exchange on the Federal 

platform may qualify for an adjustment 

of the Federally-facilitated Exchange 

user fee specified in paragraph (c)(1) of 

this section, the State-based Exchange 

on the Federal platform user fee 

specified in paragraph (c)(2) of this 

section, or the user fee specified in 

paragraph (c)(3) of this section, 

applicable to issuers participating in a 

State-based Exchange on the Federal 

platform or a Federally-facilitated 

Exchange that has adopted the direct 

enrollment option under § 155.221(j) of 

this subchapter, the extent that the 

participating issuer— 

* * * * * 

(2) For a participating issuer 

described in paragraph (d)(1) of this 

section to receive an adjustment of a 

user fee under this section— 

(i) * * * 

(A) Identifying information for the 

participating issuer and each third party 

administrator that received a copy of the 

self-certification referenced in 26 CFR 

54.9815–2713A(a)(4) or 29 CFR 

2590.715–2713A(a)(4) with respect to 

which the participating issuer seeks an 

adjustment of the user fee specified in 

paragraph (c)(1), (2), or (3) of this 

section, as applicable, whether or not 

the participating issuer was the entity 

that made the payments for 

contraceptive services; 

(B) Identifying information for each 

self-insured group health plan with 

respect to which a copy of the selfcertification referenced in 26 CFR 

54.9815–2713A(a)(4) or 29 CFR 

2590.715–2713A(a)(4) was received by a 

third party administrator and with 

respect to which the participating issuer 

seeks an adjustment of the user fee 

specified in paragraph (c)(1), (2), or (3) 

of this section, as applicable; and 

* * * * * 

(ii) Each third party administrator that 

intends to seek an adjustment on behalf 

of a participating issuer of the Federallyfacilitated Exchange user fee, the Statebased Exchange on the Federal platform 

user fee, or the user fee applicable to 

issuers participating in a State-based 

Exchange on the Federal platform or a 

Federally-facilitated Exchange that has 

adopted the direct enrollment option 

§ 155.221(j) of this subchapter based on 

payments for contraceptive services, 

must submit to HHS a notification of 

such intent, in a manner specified by 

HHS, by the 60th calendar day 

following the date on which the third 

party administrator receives the 

applicable copy of the self-certification 

referenced in 26 CFR 54.9815– 

2713A(a)(4) or 29 CFR 2590.715– 

2713A(a)(4). 

(iii) * * * 

(B) Identifying information for each 

self-insured group health plan with 

respect to which a copy of the selfcertification referenced in 26 CFR 

78678 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

54.9815–2713A(a)(4) or 29 CFR 

2590.715–2713A(a)(4) was received by 

the third party administrator and with 

respect to which the participating issuer 

seeks an adjustment of the user fee 

specified in paragraph (c)(1), (2), or (3) 

of this section, as applicable; 

* * * * * 

(3) If the requirements set forth in 

paragraph (d)(2) of this section are met, 

the participating issuer will be provided 

a reduction in its obligation to pay the 

user fee specified in paragraph (c)(1), 

(2), or (3) of this section, as applicable, 

equal in value to the sum of the 

following: 

* * * * * 

(4) If the amount of the adjustment 

under paragraph (d)(3) of this section is 

greater than the amount of the 

participating issuer’s obligation to pay 

the user fee specified in paragraph 

(c)(1), (2), or (3) of this section, as 

applicable, in a particular month, the 

participating issuer will be provided a 

credit in succeeding months in the 

amount of the excess. 

(5) Within 60 days of receipt of any 

adjustment of a user fee under this 

section, a participating issuer must pay 

each third party administrator with 

respect to which it received any portion 

of such adjustment an amount that is no 

less than the portion of the adjustment 

attributable to the total dollar amount of 

the payments for contraceptive services 

submitted by the third party 

administrator, as described in paragraph 

(d)(2)(iii)(D) of this section. No such 

payment is required with respect to the 

allowance for administrative costs and 

margin described in paragraph (d)(3)(ii) 

of this section. This paragraph does not 

apply if the participating issuer made 

the payments for contraceptive services 

on behalf of the third party 

administrator, as described in paragraph 

(d)(1)(i) of this section, or is in the same 

issuer group as the third party 

administrator. 

(6) A participating issuer that receives 

an adjustment in the user fee specified 

in paragraph (c)(1), (2), or (3) of this 

section for a particular calendar year 

must maintain for 10 years following 

that year, and make available upon 

request to HHS, the Office of the 

Inspector General, the Comptroller 

General, and their designees, 

documentation demonstrating that it 

timely paid each third party 

administrator with respect to which it 

received any such adjustment any 

amount required to be paid to the third 

party administrator under paragraph 

(d)(5) of this section. 

(7) A third party administrator of a 

plan with respect to which an 

adjustment of the user fee specified in 

paragraph (c)(1), (2), or (3) of this 

section is received under this section for 

a particular calendar year must maintain 

for 10 years following that year, and 

make available upon request to HHS, 

the Office of the Inspector General, the 

Comptroller General, and their 

designees, all of the following 

documentation: 

* * * * * 

■ 39. Section 156.130 is amended by 

revising paragraph (e) to read as follows: 

§ 156.130 Cost-sharing requirements. 

* * * * * 

(e) Premium adjustment percentage. 

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. HHS will publish the annual 

premium adjustment percentage in 

guidance in January of the calendar year 

preceding the benefit year for which the 

premium adjustment percentage is 

applicable, unless HHS proposes 

changes to the methodology, in which 

case, HHS will publish the annual 

premium adjustment percentage in an 

annual HHS notice of benefit and 

payment parameters or another 

appropriate rulemaking. 

* * * * * 

■ 40. Section 156.230 is amended by 

adding paragraph (f) to read as follows: 

§ 156.230 Network adequacy standards. 

* * * * * 

(f) Paragraphs (a) through (e) of this 

section do not apply to a plan for which 

an issuer seeks QHP certification or to 

any certified QHP that does not use a 

provider network, meaning that the plan 

or QHP does not condition or 

differentiate benefits based on whether 

the issuer has a network participation 

agreement with the provider that 

furnishes the covered services. 

■ 41. Section 156.295 is amended by— 

■ a. Revising the section heading and 

paragraphs (a) introductory text, (a)(1) 

and (a)(2) introductory text, 

■ b. Removing paragraph (a)(3); and 

■ c. Revising paragraph (b) introductory 

text. 

The revisions read as follows: 

§ 156.295 Prescription drug distribution 

and cost reporting by QHP issuers. 

(a) General requirement. In a form, 

manner, and at such times specified by 

HHS, a QHP issuer that administers a 

prescription drug benefit without the 

use of a pharmacy benefit manager must 

provide to HHS the following 

information: 

(1) The percentage of all prescriptions 

that were provided under the QHP 

through retail pharmacies compared to 

mail order pharmacies, and the 

percentage of prescriptions for which a 

generic drug was available and 

dispensed compared to all drugs 

dispensed; 

(2) The aggregate amount, and the 

type of rebates, discounts or price 

concessions (excluding bona fide 

service fees) that the QHP issuer 

negotiates that are attributable to patient 

utilization under the QHP, and the 

aggregate amount of the rebates, 

discounts, or price concessions that are 

passed through to the QHP issuer, and 

the total number of prescriptions that 

were dispensed. 

* * * * * 

(b) Limitation on disclosure. 

Information disclosed by a QHP issuer 

under this section shall not be disclosed 

by HHS, except that HHS may disclose 

the information in a form which does 

not disclose the identity of a specific 

QHP or prices charged for specific 

drugs, for the following purposes: 

* * * * * 

■ 42. Section 156.420 is amended by 

revising paragraphs (a)(1)(i), (a)(2)(i) and 

(a)(3)(i) to read as follows: 

§ 156.420 Plan variations. 

(a) * * * 

(1) * * * 

(i) An annual limitation on cost 

sharing no greater than the reduced 

maximum annual limitation on cost 

sharing specified in the annual HHS 

guidance or notice of benefit and 

payment parameters for such 

individuals, and 

* * * * * 

(2) * * * 

(i) An annual limitation on cost 

sharing no greater than the reduced 

maximum annual limitation on cost 

sharing specified in the annual HHS 

guidance or notice of benefit and 

payment parameters for such 

individuals, and 

* * * * * 

(3) * * * 

(i) An annual limitation on cost 

sharing no greater than the reduced 

maximum annual limitation on cost 

sharing specified in the annual HHS 

guidance or notice of benefit and 

payment parameters for such 

individuals, and 

* * * * * 

■ 43. Section 156.480 is amended by 

revising the section heading and 

paragraph (c) to read as follows: 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78679 

§ 156.480 Oversight of the administration 

of the advance payments of the premium 

tax credit, cost-sharing reductions, and 

user fee programs. 

* * * * * 

(c) Audits and Compliance Reviews. 

HHS or its designee may audit or 

conduct a compliance review of an 

issuer offering a QHP through an 

Exchange to assess its compliance with 

the applicable requirements of this 

subpart and 45 CFR 156.50. Compliance 

reviews conducted under this section 

will follow the standards set forth in 

§ 156.715. 

(1) Notice of Audit. HHS will provide 

at least 15 calendar days advance notice 

of its intent to conduct an audit of an 

issuer under this section. 

(i) Conferences. All audits will 

include an entrance conference at which 

the scope of the audit will be presented 

and an exit conference at which the 

initial audit findings will be discussed. 

(ii) [Reserved] 

(2) Compliance with Audit Activities. 

To comply with an audit under this 

section, the issuer must: 

(i) Ensure that its relevant employees, 

agents, contractors, subcontractors, 

downstream entities, and delegated 

entities cooperate with any audit or 

compliance review under this section; 

(ii) Submit complete and accurate 

data to HHS or its designees that is 

necessary to complete the audit, in the 

format and manner specified by HHS, 

no later than 30 calendar days after the 

initial audit response deadline 

established by HHS at the entrance 

conference described under paragraph 

(c)(1)(i) of this section for the applicable 

benefit year; 

(iii) Respond to all audit notices, 

letters, and inquiries, including requests 

for supplemental or supporting 

information, as requested by HHS, no 

later than 15 calendar days after the date 

of the notice, letter, request, or inquiry; 

and 

(iv) In circumstances in which an 

issuer cannot provide the requested data 

or response to HHS within the 

timeframes under paragraph (c)(2)(ii) or 

(iii), as applicable, the issuer may make 

a written request for an extension to 

HHS. The extension request must be 

submitted within the timeframe 

established under paragraph (c)(2)(ii) or 

(iii), as applicable, and must detail the 

reason for the extension request and the 

good cause in support of the request. If 

the extension is granted, the issuer must 

respond within the timeframe specified 

in HHS’s notice granting the extension 

of time. 

(3) Preliminary Audit Findings. HHS 

will share its preliminary audit findings 

with the issuer, who will then have 30 

calendar days to respond to such 

findings in the format and manner 

specified by HHS. 

(i) If the issuer does not dispute or 

otherwise respond to the preliminary 

findings, the audit findings will become 

final. 

(ii) If the issuer responds and disputes 

the preliminary findings, HHS will 

review and consider such response and 

finalize the audit findings after such 

review. 

(4) Final Audit Findings. If an audit 

results in the inclusion of a finding in 

the final audit report, the issuer must 

comply with the actions set forth in the 

final audit report in the manner and 

timeframe established by HHS, and the 

issuer must complete all of the 

following: 

(i) Within 30 calendar days of the 

issuance of the final audit or 

compliance review report, provide a 

written corrective action plan to HHS 

for approval. 

(ii) Implement that plan. 

(iii) Provide to HHS written 

documentation of the corrective actions 

once taken. 

(5) Failure to Comply with Audit 

Activities. If an issuer fails to comply 

with the audit activities set forth in this 

section in the manner and timeframes 

specified by HHS: 

(i) HHS will notify the issuer of 

payments received under this subpart 

that the issuer has not adequately 

substantiated; and 

(ii) HHS will notify the issuer that 

HHS may recoup any payments 

identified in paragraph (c)(5)(i) of this 

section if a premium tax credit, costsharing reductions, and user fee 

program debt is not paid. 

(6) Circumstances Requiring HHS 

Enforcement. If HHS determines that the 

State Exchange or State-based Exchange 

on the Federal platform is not enforcing 

or fails to substantially enforce the 

requirements of this subpart or 45 CFR 

156.50, then HHS may do so and may 

pursue the imposition of civil money 

penalties as specified in § 156.805 for 

non-compliance by QHP issuers 

participating in the State Exchange or 

State Exchange on the Federal platform. 

Subpart I—Enforcement Remedies in 

the Exchanges 

■ 44. Subpart I is amended by revising 

the heading as set forth above. 

■ 45. Section 156.800 is amended by 

revising paragraphs (a) introductory 

text, and (b) as follows: 

§ 156.800 Available remedies; Scope. 

(a) Kinds of sanctions. HHS may 

impose the following types of sanctions 

on QHP issuers in an Exchange that are 

not in compliance with Exchange 

standards applicable to issuers offering 

QHPs in an Exchange: 

* * * * * 

(b) Scope. Sanctions under subpart I 

are applicable for non-compliance with 

QHP issuer participation standards and 

other standards applicable to issuers 

offering QHPs in a Federally-facilitated 

Exchange. Sanctions under paragraph 

(a)(1) of this section are also applicable 

for non-compliance by QHP issuers 

participating in State Exchanges and 

State-based Exchanges on the Federal 

platform when HHS is responsible for 

enforcement of the requirements in 

subpart E of this part and 45 CFR 

156.50. 

* * * * * 

■ 46. Section 156.805 is amended by— 

■ a. Revising paragraphs (a) 

introductory text and (a)(5)(i); and 

■ b. Adding paragraph (f) to read. 

The revisions and addition read as 

follows: 

§ 156.805 Bases and process for imposing 

civil money penalties in Exchanges. 

(a) Grounds for imposing civil money 

penalties. Civil money penalties may be 

imposed on an issuer in an Exchange if, 

based on credible evidence, HHS has 

reasonably determined that the issuer 

has engaged in one or more of the 

following actions: 

* * * * * 

(5) * * * 

(i) To HHS or an Exchange; or 

* * * * * 

(f) Circumstances requiring HHS 

enforcement in State Exchanges and 

State-based Exchanges on the Federal 

platform. 

(1) HHS will enforce the requirements 

of subpart E of this part and 45 CFR 

156.50 if a State Exchange or Statebased Exchange on the Federal platform 

notifies HHS that it is not enforcing 

these requirements or if HHS makes a 

determination using the process set 

forth at 45 CFR 150.201 et seq. that a 

State Exchange or State-based Exchange 

on the Federal platform is failing to 

substantially enforce these 

requirements. 

(2) If HHS is responsible under 

paragraph (f)(1) of this section for 

enforcement of the requirements set 

forth in subpart E of this part or 45 CFR 

156.50, HHS may impose civil money 

penalties on an issuer in a State 

Exchange or State-based Exchange on 

the Federal platform, in accordance 

with the bases and process for imposing 

civil money penalties set forth in this 

section. 

78680 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

Subpart J—Administrative Review of 

QHP Issuer Sanctions 

■ 47. Amend Subpart J by revising the 

heading to read as set forth above. 

■ 48. Section 156.901 is amended by 

revising the definitions of ‘‘Filing date’’ 

and ‘‘Hearing’’ to read as follows. 

§ 156.901 Definitions. 

* * * * * 

Filing date means the date filed 

electronically. 

Hearing includes a hearing on a 

written record as well as an in-person, 

telephone, or video teleconference 

hearing. 

* * * * * 

■ 49. Section 156.903 is amended by 

revising paragraph (a) as follows: 

§ 156.903 Scope of Administrative Law 

Judge’s (ALJ) authority. 

(a) The ALJ has the authority, 

including all of the authority conferred 

by the Administrative Procedure Act (5 

U.S.C. 554a), to adopt whatever 

procedures may be necessary or proper 

to carry out in an efficient and effective 

manner the ALJ’s duty to provide a fair 

and impartial hearing on the record and 

to issue an initial decision concerning 

the imposition of a civil money penalty 

of a QHP offered in a Federallyfacilitated Exchange, State Exchange, 

and State-based Exchange on the 

Federal platform, or the decertification 

of a QHP offered in a Federallyfacilitated Exchange. 

* * * * * 

■ 50. Section 156.919 is amended by 

revising paragraph (a) to read as follows: 

§ 156.919 Forms of hearing. 

(a) All hearings before an ALJ are on 

the record. The ALJ may receive 

argument or testimony in writing, in 

person, by telephone, or by video 

teleconference. The ALJ may receive 

testimony by telephone only if the ALJ 

determines that doing so is in the 

interest of justice and economy and that 

no party will be unduly prejudiced. The 

ALJ may require submission of a 

witness’ direct testimony in writing 

only if the witness is available for crossexamination. 

* * * * * 

■ 51. Section 156.927 is amended by 

revising paragraphs (a) introductory text 

and (b) to read as follows: 

§ 156.927 Form and service of 

submissions. 

(a) Every submission filed with the 

ALJ must be filed electronically and 

include: 

* * * * * 

(b) A party filing a submission with 

the ALJ must, at the time of filing, serve 

a copy of such submission on the 

opposing party. An intervenor filing a 

submission with the ALJ must, at the 

time of filing, serve a copy of the 

submission on all parties. If a party is 

represented by an attorney, service must 

be made on the attorney. An 

electronically filed submission is 

considered served on all parties using 

the electronic filing system. 

■ 52. Section 156.931 is revised to read 

as follows: 

§ 156.931 Acknowledgement of request for 

hearing. 

After receipt of the request for 

hearing, the ALJ assigned to the case or 

someone acting on behalf of the ALJ will 

send a written notice to the parties that 

acknowledges receipt of the request for 

hearing, identifies the docket number 

assigned to the case, and provides 

instructions for filing submissions and 

other general information concerning 

procedures. The ALJ will set out the 

next steps in the case either as part of 

the acknowledgement or on a later date. 

■ 53. Section 156.941 is amended by 

revising paragraph (e) to read as follows: 

§ 156.941 Prehearing conferences. 

* * * * * 

(e) Establishing a schedule for an inperson, telephone, or video 

teleconference hearing, including 

setting deadlines for the submission of 

written direct testimony or for the 

written reports of experts. 

* * * * * 

■ 54. Section 156.947 is amended by 

revising paragraph (a) to read as follows: 

§ 156.947 The record. 

(a) Any testimony that is taken inperson, by telephone, or by video 

teleconference is recorded and 

transcribed. The ALJ may order that 

other proceedings in a case, such as a 

prehearing conference or oral argument 

of a motion, be recorded and 

transcribed. 

* * * * * 

■ 55. Section 156.1210 is amended by— 

■ a. Redesignating paragraph (b) as 

paragraph (d); and 

■ b. Adding new paragraphs (b) and (c). 

The additions read as follows: 

§ 156.1210 Dispute submission. 

* * * * * 

(b) Inaccuracies identified after 90- 

day period. With respect to an 

inaccuracy described under paragraph 

(a) of this section that is identified and 

submitted to HHS by the issuer after the 

end of the 90-day period described in 

such paragraph, HHS will consider and 

work with the issuer to resolve the 

inaccuracy so long as— 

(1) The issuer promptly notifies HHS 

upon identifying the inaccuracy, but in 

no case later than 15 calendar days after 

identifying the inaccuracy; and 

(2) The failure to identify the 

inaccuracy and submit it to HHS in a 

timely manner was not unreasonable or 

due to the issuer’s misconduct or 

negligence. 

(c) Deadline for describing 

inaccuracies. To be eligible for 

resolution under paragraph (b) of this 

section, an issuer must describe all 

inaccuracies identified in a payment 

and collections report before the later 

of— 

(1) The end of the 3-year period 

beginning at the end of the plan year to 

which the inaccuracy relates; or 

(2) The date by which HHS notifies 

issuers that the HHS audit process with 

respect to the plan year to which such 

inaccuracy relates has been completed. 

(3) If a payment error is discovered 

after the timeframes set forth in 

paragraph (c)(1) and (2) of this section, 

the issuer must notify HHS and repay 

any overpayments. 

* * * * * 

■ 56. Section 156.1215 is amended by 

revising paragraph (b) to read as follows: 

§ 156.1215 Payment and collections 

processes. 

* * * * * 

(b) Netting of payments and charges 

for later years. As part of its payment 

and collections process, HHS may net 

payments owed to issuers and their 

affiliates operating under the same tax 

identification number against amounts 

due to the Federal government from the 

issuers and their affiliates under the 

same taxpayer identification number for 

advance payments of the premium tax 

credit, advance payments of and 

reconciliation of cost-sharing 

reductions, payment of Federallyfacilitated Exchange user fees, payment 

of State-based Exchanges utilizing the 

Federal platform user fees, and risk 

adjustment, reinsurance, and risk 

corridors payments and charges. 

* * * * * 

■ 57. Section 156.1220 is amended by— 

■ a. Revising paragraphs (a)(1)(vii) and 

(a)(3)(ii); 

■ b. Redesignating paragraphs (a)(3)(iii) 

through (vi) as (a)(3)(iv) through (vii), 

respectively; and 

■ c. Adding new paragraph (a)(3)(iii). 

The revision and addition reads as 

follows: 

§ 156.1220 Administrative appeals. 

(a) * * * 

(1) * * * 

(vii) The findings of a second 

validation audit as a result of risk 

Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 78681 

adjustment data validation (if 

applicable) with respect to risk 

adjustment data for the 2016 benefit 

year and beyond; or 

* * * * * 

(3) * * * 

(ii) For a risk adjustment payment or 

charge, including an assessment of risk 

adjustment user fees, within 30 calendar 

days of the date of the notification 

under § 153.310(e) of this subchapter; 

(iii) For 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, within 30 calendar days of 

publication of the applicable benefit 

year’s Summary Report of Benefit Year 

Risk Adjustment Data Validation 

Adjustments to Risk Adjustment 

Transfers; 

* * * * * 

■ 58. Section 156.1240 is amended by 

adding paragraph (a)(3) to read as 

follows: 

§ 156.1240 Enrollment process for 

qualified individuals. 

(a) * * * 

(3) Issuers offering individual market 

QHPs must accept premium payments 

for a QHP on behalf of an enrollee that 

are made from the individual coverage 

HRA (as described in § 146.123(b) of 

this subchapter) or qualified small 

employer health reimbursement 

arrangement (as described in section 

9831(d)(2) of the Internal Revenue Code 

of 1986, as amended) in which the 

enrollee is enrolled. 

* * * * * 

PART 158—ISSUER USE OF PREMIUM 

REVENUE: REPORTING AND REBATE 

REQUIREMENTS 

■ 59. The authority citation for part 158 

continues to read as follows: 

Authority: 42 U.S.C. 300gg–18. 

■ 60. Section 158.103 is amended by 

adding the definition for ‘‘Prescription 

drug rebates and other price 

concessions’’ in alphabetical order to 

read as follows: 

§ 158.103 Definitions. 

* * * * * 

Prescription drug rebates and other 

price concessions means all direct and 

indirect remuneration received or 

receivable by an issuer and entities 

providing pharmacy benefit 

management services to the issuer, 

related to the provision of a prescription 

drug covered by the issuer, regardless 

from whom the remuneration is 

received (for example, pharmaceutical 

manufacturer, wholesaler, retail 

pharmacy, vendor). Direct and indirect 

remuneration includes discounts, 

charge backs or rebates, cash discounts, 

free goods contingent on a purchase 

agreement, up-front payments, coupons, 

goods in kind, free or reduced-price 

services, grants, or other price 

concessions or similar benefits offered 

to some or all purchasers, and excluding 

bona fide service fees. Bona fide service 

fees mean fees paid by a drug 

manufacturer to an entity providing 

pharmacy benefit management services 

to the issuer that represent fair market 

value for a bona fide, itemized service 

actually performed on behalf of the 

manufacturer that the manufacturer 

would otherwise perform (or contract 

for) in the absence of the service 

arrangement, and that are not passed on 

in whole or in part to a client or 

customer of an entity, whether or not 

the entity takes title to the drug. 

* * * * * 

■ 61. Section 158.240 is amended by 

adding paragraph (g) to read as follows: 

§ 158.240 Rebating premium if the 

applicable medical loss ratio standard is 

not met. 

* * * * * 

(g) Rebate prepayment and safe 

harbor. An issuer may choose to pay a 

portion or all of its estimated rebate 

amount for a given MLR reporting year 

to enrollees in any form specified in 

§ 158.241 prior to the rebate payment 

deadlines set forth in §§ 158.240(e) and 

158.241(a)(2) and in advance of 

submitting the MLR report required in 

§ 158.110 to the Secretary. Issuers that 

choose to prepay a portion or all of their 

rebates must do so for all eligible 

enrollees in a given state and market in 

a non-discriminatory manner. If, after 

submitting the MLR report required in 

§ 158.110, an issuer determines that its 

rebate prepayment amount in a given 

state and market is at least 95 percent, 

but less than 100 percent, of the total 

rebate amount owed for the applicable 

MLR reporting year to enrollees in that 

state and market, the issuer may, 

without penalty or late payment interest 

under paragraph (f) of this section, 

provide the remaining rebate amount to 

those enrollees no later than the rebate 

deadlines in §§ 158.240(e) and 

158.241(a)(2) applicable to the following 

MLR reporting year. If the total rebate 

owed to an enrollee for the MLR 

reporting year is above the de minimis 

threshold established in § 158.243(a), 

the issuer cannot treat the remaining 

rebate owed to an enrollee after 

prepayment as de minimis, even if the 

remaining rebate is below the de 

minimis threshold. 

■ 62. Section 158.241 is amended by 

revising paragraph (a)(2) to read as 

follows: 

§ 158.241 Form of rebate. 

(a) * * * 

(2) For each of the 2011, 2012, and 

2013 MLR reporting years, any rebate 

provided in the form of a premium 

credit must be provided by applying the 

full amount due to the first month’s 

premium that is due on or after August 

1 following the MLR reporting year. If 

the amount of the rebate exceeds the 

premium due for August, then any 

overage shall be applied to succeeding 

premium payments until the full 

amount of the rebate has been credited. 

Beginning with the 2014 MLR reporting 

year, any rebate provided in the form of 

a premium credit must be provided by 

applying the full amount due to the first 

month’s premium that is due on or after 

September 30 following the MLR 

reporting year. If the amount of the 

rebate exceeds the premium due for 

October, then any overage shall be 

applied to succeeding premium 

payments until the full amount of the 

rebate has been credited. Beginning 

with the 2020 MLR reporting year, any 

rebate provided in the form of a 

premium credit must be provided by 

applying the full amount due to the 

monthly premium that is due no later 

than October 30 following the MLR 

reporting year. If the amount of the 

rebate exceeds the monthly premium, 

then any overage shall be applied to 

succeeding premium payments until the 

full amount of the rebate has been 

credited. 

* * * * * 

■ 63. Subchapter E as added in final 

rule published on November 27, 2019 

(84 FR 65524) and effective on January 

1, 2021 is amended by adding part 184 

to read as follows: 

PART 184—PHARMACY BENEFIT 

MANAGER STANDARDS UNDER THE 

AFFORDABLE CARE ACT 

Sec. 

184.10 Basis and scope. 

184.20 Definitions. 

184.50 Prescription drug distribution and 

cost reporting by pharmacy benefit 

managers. 

Authority: 42 U.S.C. 1302, 1320b–23. 

§ 184.10 Basis and scope. 

(a) Basis. (1) This part implements 

section 1150A, Pharmacy Benefit 

Managers Transparency Requirements, 

of title XI of the Social Security Act. 

(2) [Reserved] 

(b) Scope. This part establishes 

standards for Pharmacy Benefit 

Managers that administer prescription 

78682 Federal Register / Vol. 85, No. 234 / Friday, December 4, 2020 / Proposed Rules 

drug benefits for health insurance 

issuers that offer Qualified Health Plans 

with respect to the offering of such 

plans. 

§ 184.20 Definitions. 

The following definitions apply to 

this part, unless the context indicates 

otherwise: 

Health insurance issuer has the 

meaning given to the term in § 144.103 

of this subtitle. 

Plan year has the meaning given to 

the term in § 156.20 of this subchapter. 

Qualified health plan has the meaning 

given to the term in § 156.20 of this 

subchapter. 

Qualified health plan issuer has the 

meaning given to the term in § 156.20 of 

this subchapter. 

§ 184.50 Prescription drug distribution and 

cost reporting by pharmacy benefit 

managers. 

(a) General requirement. In a form, 

manner, and at such times specified by 

HHS, any entity that provides pharmacy 

benefits management services on behalf 

of a qualified health plan (QHP) issuer 

must provide to HHS the following 

information: 

(1) The percentage of all prescriptions 

that were provided under the QHP 

through retail pharmacies compared to 

mail order pharmacies, and the 

percentage of prescriptions for which a 

generic drug was available and 

dispensed compared to all drugs 

dispensed; 

(2) The aggregate amount, and the 

type of rebates, discounts or price 

concessions (excluding bona fide 

service fees) that the pharmacy benefits 

manager (PBM) negotiates that are 

attributable to patient utilization under 

the QHP, and the aggregate amount of 

the rebates, discounts, or price 

concessions that are passed through to 

the QHP issuer, and the total number of 

prescriptions that were dispensed. 

(i) Bona fide service fees means fees 

paid by a manufacturer to an entity that 

represent fair market value for a bona 

fide, itemized service actually 

performed on behalf of the manufacturer 

that the manufacturer would otherwise 

perform (or contract for) in the absence 

of the service arrangement, and that are 

not passed on in whole or in part to a 

client or customer of an entity, whether 

or not the entity takes title to the drug. 

(ii) [Reserved] 

(3) The aggregate amount of the 

difference between the amount the QHP 

issuer pays its contracted PBM and the 

amounts that the PBM pays retail 

pharmacies, and mail order pharmacies, 

and the total number of prescriptions 

that were dispensed. 

(b) Limitations on disclosure. 

Information disclosed by a PBM under 

this section shall not be disclosed by 

HHS or by a QHP receiving the 

information, except that HHS may 

disclose the information in a form 

which does not disclose the identity of 

a specific PBM, QHP, or prices charged 

for drugs, for the following purposes: 

(1) As HHS determines to be 

necessary to carry out section 1150A or 

part D of title XVIII of the Act; 

(2) To permit the Comptroller General 

to review the information provided; 

(3) To permit the Director of the 

Congressional Budget Office to review 

the information provided; or 

(4) To States to carry out section 1311 

of the Affordable Care Act. 

(c) Penalties. A PBM that fails to 

report the information described in 

paragraph (a) of this section to HHS on 

a timely basis or knowingly provides 

false information will be subject to the 

provisions of section 1927(b)(3)(C) of 

the Act. 

Dated: November 18, 2020. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: November 23, 2020. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

Dated: November 25, 2020. 

David J. Kautter, 

Assistant Secretary (Tax Policy), Department 

of the Treasury. 

[FR Doc. 2020–26534 Filed 11–30–20; 5:30 pm] 

BILLING CODE 4120–01–P