[Federal Register Volume 85, Number 234 (Friday, December 4, 2020)]
[Proposed Rules]
[Pages 78572-78682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26534]



[[Page 78571]]

Vol. 85

Friday,

No. 234

December 4, 2020

Part IV





Department of the Treasury





-----------------------------------------------------------------------





31 CFR Part 33





Department of Health and Human Services





-----------------------------------------------------------------------

45 CFR Parts 147, 150, 153, et al.





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; Proposed Rule

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

[[Page 78572]]


-----------------------------------------------------------------------

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 cost-sharing 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 
Federally-facilitated 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

[[Page 78573]]

    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 off-Exchange.
---------------------------------------------------------------------------

    \1\ The 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''.
---------------------------------------------------------------------------

    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 HHS-operated risk adjustment methodology. We also propose 
changes to the risk adjustment models to include a two-stage 
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 Federally-facilitated 
Exchange (FFE) and State-based 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 out-of-
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 web-
brokers 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 web-broker'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

[[Page 78574]]

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 Sec.  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 
Sec. Sec.  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.
---------------------------------------------------------------------------

    \2\ The 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \3\ Before 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.
---------------------------------------------------------------------------

    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 cost-sharing limits 
described in section 1302(c) of the PPACA, and meeting the actuarial 
value (AV) levels established in section 1302(d) of the PPACA. Section 
2707(a) of the PHS Act, which is effective for plan or policy years 
beginning on or after January 1, 2014, extends the requirement to cover 
the EHB package to non-grandfathered individual and small group health 
insurance coverage, irrespective of whether such coverage is offered 
through an Exchange. In addition, section 2707(b) of the PHS Act 
directs

[[Page 78575]]

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\
---------------------------------------------------------------------------

    \4\ The 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \5\ The 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'').
---------------------------------------------------------------------------

    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 non-discriminatory 
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

[[Page 78576]]

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 
higher-than-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 low- and 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\
---------------------------------------------------------------------------

    \6\ The 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.
---------------------------------------------------------------------------

    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

[[Page 78577]]

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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-RA-Final-Rule-Resumption-RAOps.pdf.
---------------------------------------------------------------------------

    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.

[[Page 78578]]

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 
non-calendar 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 Sec.  156.111 to provide 
states with additional options from which to select an EHB-benchmark 
plan for plan years 2020 and beyond.
---------------------------------------------------------------------------

    \9\ ``Essential Health Benefits Bulletin,'' December 16, 2011. 
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
---------------------------------------------------------------------------

    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

[[Page 78579]]

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 Sec. Sec.  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\
---------------------------------------------------------------------------

    \10\ Patient 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-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
    \11\ See, 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-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
---------------------------------------------------------------------------

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, pass-through 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.
---------------------------------------------------------------------------

    \12\ https://www.govinfo.gov/content/pkg/FR-2011-03-14/pdf/2011-5583.pdf.
    \13\ https://www.govinfo.gov/content/pkg/FR-2012-02-27/pdf/2012-4395.pdf.
    \14\ https://www.govinfo.gov/content/pkg/FR-2018-10-24/pdf/2018-23182.pdf.
    \15\ https://www.govinfo.gov/content/pkg/FR-2015-12-16/pdf/2015-31563.pdf.
    \16\ https://www.federalregister.gov/documents/2020/11/06/2020-24332/additional-policy-and-regulatory-revisions-in-response-to-the-covid-19-public-health-emergency.
---------------------------------------------------------------------------

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[supreg] 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

[[Page 78580]]

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 Sec. Sec.  155.221 and 
156.1230, and make conforming amendments to the definition of web-
broker. We also propose changes to web-broker 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 Sec. Sec.  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 (Sec.  147.104)
    Section 147.104(b)(2) incorporates by reference certain Exchange 
special enrollment periods described in Sec.  155.420, making those 
special enrollment periods applicable to non-grandfathered coverage 
offered in the individual market through or outside of an Exchange. We 
propose amendments to Sec.  147.104(b)(2) to clarify that paragraph 
(b)(2)(ii) does not apply to references in Sec.  155.420(d)(4) 
(relating to errors of the Exchange), and to make a conforming 
amendment consistent with the proposal in Sec.  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

[[Page 78581]]

dependent if their enrollment or non-enrollment 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 
non-Exchange 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 
Sec.  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 Sec.  
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 Sec.  147.104(b)(2)(ii) does 
not apply to references in Sec.  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 Sec.  155.420(d)(4).
    In addition, we propose a conforming amendment to Sec.  
147.104(b)(4)(ii), consistent with the proposal in Sec.  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 Sec.  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 Sec. Sec.  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 Sec.  
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 Sec.  147.104(b)(3) in the amended Sec.  
147.104(b)(4)(ii) in order to retain alignment of the individual and 
group market special enrollment periods required under Sec.  
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 non-federal 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 Sec.  150.103; the introductory text to 
Sec.  150.303(a), as well as to Sec. Sec.  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 Sec.  150.401, to the introductory text in Sec.  150.427(a), 
and to the service of submission requirements captured in Sec.  
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 Sec.  150.401 and to the requirements 
outlined in Sec.  150.419(a) related to the forms for the hearing, 
Sec.  150.441(e) related to prehearing conferences, and Sec.  
150.447(a) related to the record of the hearing. Finally, we propose to 
update Sec.  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 higher-than-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 Sec.  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.
---------------------------------------------------------------------------

    \17\ 42 U.S.C. 18063.
    \18\ Also see 42 U.S.C. 18041(c)(1).
---------------------------------------------------------------------------

    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

[[Page 78582]]

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 (Sec.  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.
---------------------------------------------------------------------------

    \19\ For 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.
---------------------------------------------------------------------------

    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[supreg] 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 enrollee-
level 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.
---------------------------------------------------------------------------

    \20\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------

    Previously, we used the 3 most recent years of MarketScan[supreg] 
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[supreg] 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 Sec.  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\
---------------------------------------------------------------------------

    \21\ 85 FR 29173 through 29175.
    \22\ See, for example, the 2018 Payment Notice final rule, 81 FR 
94058; and the 2021 Payment Notice final rule, 85 FR 29173 through 
29175.
    \23\ See 85 FR 7097 through 7098 and 7104 through 7112.
    \24\ See 85 FR 29173 through 29175. Also see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
    \25\ See, for example, the 2018 Payment Notice rule, 81 FR 
94084. Also see https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------

    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

[[Page 78583]]

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 enrollee-level 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-to-year 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\
---------------------------------------------------------------------------

    \26\ See, for example, 81 FR 94084 through 94085.
    \27\ As 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.
---------------------------------------------------------------------------

    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 Sec.  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.
---------------------------------------------------------------------------

    \28\ See, 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-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \32\ 85 FR 7101 through 7104.
---------------------------------------------------------------------------

    For the two-stage specification, we explored calibrating the adult 
and child models in two stages: In the first-stage

[[Page 78584]]

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 age-sex 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.
---------------------------------------------------------------------------

    \33\ This 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 low-valued coefficients.
    \34\ We are proposing to modify the enrollment duration factors 
in the adult models, as described elsewhere in this proposed rule.
    \35\ Under 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \36\ For 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \37\ This 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.
---------------------------------------------------------------------------

    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 non-transplant HCCs and the HCC 34 
transplant HCC coefficient), (2) severity interacted HCC counts of 4 
coefficient, and (3) transplant interacted HCC

[[Page 78585]]

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.
---------------------------------------------------------------------------

    \38\ We 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.
    \39\ This is in addition to other risk adjustment factors that 
the enrollee has (such as demographic factors).
---------------------------------------------------------------------------

    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 enrollee-level 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

[[Page 78586]]

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.
---------------------------------------------------------------------------

    \40\ See 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.
---------------------------------------------------------------------------

    Since the publication of the 2021 Payment Notice, we have 
reassessed enrollment duration factors for adults using the 2018 
benefit year enrollee-level 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.
---------------------------------------------------------------------------

    \42\ As 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \43\ 84 FR 17463 through 17466.
    \44\ 85 FR 29185.
    \45\ The Hepatitis C drugs market pricing adjustment to plan 
liability is applied for all enrollees taking Hepatitis C drugs in 
the data used for recalibration.
---------------------------------------------------------------------------

e. List of Factors To Be Employed in the Risk Adjustment Models (Sec.  
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 enrollee-level 
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 high-cost 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.
---------------------------------------------------------------------------

    \46\ As 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.

                                       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

[[Page 78587]]

 
                                           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            9.748           9.526           9.394           9.265           9.261
                                            Inflammatory Response
                                            Syndrome/Shock.
HCC003...................................  Central Nervous System                  8.571           8.427           8.323           8.202           8.195
                                            Infections, Except Viral
                                            Meningitis.
HCC004...................................  Viral or Unspecified                    8.571           8.427           8.323           8.202           8.195
                                            Meningitis.
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          14.384          14.117          13.991          13.897          13.896
                                            Cancers, Including Pediatric
                                            Acute Lymphoid Leukemia.
HCC010...................................  Non-Hodgkin Lymphomas and               5.887           5.722           5.626           5.532           5.528
                                            Other Cancers and Tumors.
HCC011...................................  Colorectal, Breast (Age <50),           3.865           3.677           3.547           3.410           3.404
                                            Kidney, and Other Cancers.
HCC012...................................  Breast (Age 50+) and Prostate           2.559           2.414           2.305           2.185           2.180
                                            Cancer, Benign/Uncertain
                                            Brain Tumors, and Other
                                            Cancers and Tumors.
HCC013...................................  Thyroid Cancer, Melanoma,               1.134           1.018           0.893           0.744           0.735
                                            Neurofibromatosis, and Other
                                            Cancers and Tumors.
HCC018...................................  Pancreas Transplant Status...           0.875           0.813           0.806           1.044           1.021
HCC019...................................  Diabetes with Acute                     0.385           0.323           0.262           0.202           0.198
                                            Complications.
HCC020...................................  Diabetes with Chronic                   0.385           0.323           0.262           0.202           0.198
                                            Complications.
HCC021...................................  Diabetes without Complication           0.385           0.323           0.262           0.202           0.198
HCC022...................................  Type 1 Diabetes Mellitus, add-          0.311           0.276           0.242           0.173           0.169
                                            on to Diabetes HCCs 19-21.
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             7.531           7.405           7.319           7.244           7.242
                                            Other Metabolic Disorders.
HCC030...................................  Adrenal, Pituitary, and Other           1.328           1.224           1.125           1.007           1.001
                                            Significant Endocrine
                                            Disorders.
HCC034...................................  Liver Transplant Status/                8.038           7.973           7.884           7.864           7.853
                                            Complications.
HCC035_1 \47\............................  Acute Liver Failure/Disease,            7.063           6.914           6.849           6.800           6.798
                                            Including Neonatal Hepatitis.
HCC035_2.................................  Chronic Liver Failure/End-              2.906           2.734           2.630           2.520           2.516
                                            Stage Liver Disorders.
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               0.830           0.731           0.637           0.529           0.523
                                            Chronic Viral Hepatitis C.
HCC041...................................  Intestine Transplant Status/           23.291          23.157          23.033          22.817          22.812
                                            Complications.
HCC042...................................  Peritonitis/Gastrointestinal           11.657          11.449          11.339          11.253          11.250
                                            Perforation/Necrotizing
                                            Enterocolitis.
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/           4.708           4.536           4.467           4.432           4.432
                                            Necrosis.
HCC056...................................  Rheumatoid Arthritis and                1.340           1.230           1.121           1.001           0.994
                                            Specified Autoimmune
                                            Disorders.
HCC057...................................  Systemic Lupus Erythematosus            0.878           0.782           0.664           0.514           0.505
                                            and Other Autoimmune
                                            Disorders.
HCC061...................................  Osteogenesis Imperfecta and             2.463           2.304           2.185           2.051           2.044
                                            Other Osteodystrophies.
HCC062...................................  Congenital/Developmental                2.463           2.304           2.185           2.051           2.044
                                            Skeletal and Connective
                                            Tissue Disorders.
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          13.285          13.162          13.096          13.039          13.036
                                            Myelofibrosis.
HCC068...................................  Aplastic Anemia..............          13.285          13.162          13.096          13.039          13.036
HCC069...................................  Acquired Hemolytic Anemia,             13.285          13.162          13.096          13.039          13.036
                                            Including Hemolytic Disease
                                            of Newborn.
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               4.039           3.936           3.888           3.840           3.839
                                            Immunodeficiencies.
HCC074...................................  Disorders of the Immune                 4.039           3.936           3.888           3.840           3.839
                                            Mechanism.
HCC075...................................  Coagulation Defects and Other           1.763           1.672           1.594           1.499           1.495
                                            Specified Hematological
                                            Disorders.

[[Page 78588]]

 
HCC081...................................  Drug Use with Psychotic                 2.438           2.264           2.108           1.897           1.885
                                            Complications.
HCC082...................................  Drug Use Disorder, Moderate/            2.438           2.264           2.108           1.897           1.885
                                            Severe, or Drug Use with Non-
                                            Psychotic Complications.
HCC083...................................  Alcohol Use with Psychotic              1.296           1.171           1.057           0.911           0.903
                                            Complications.
HCC084...................................  Alcohol Use Disorder,                   1.296           1.171           1.057           0.911           0.903
                                            Moderate/Severe, or Alcohol
                                            Use with Specified Non-
                                            Psychotic Complications.
HCC087_1.................................  Schizophrenia................           2.445           2.260           2.121           1.961           1.954
HCC087_2.................................  Delusional and Other                    2.372           2.199           2.067           1.894           1.886
                                            Specified Psychotic
                                            Disorders, Unspecified
                                            Psychosis.
HCC088...................................  Major Depressive Disorder,              1.271           1.141           1.008           0.838           0.829
                                            Severe, and Bipolar
                                            Disorders.
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,           8.930           8.904           8.869           8.785           8.778
                                            and Autosomal Deletion
                                            Syndromes.
HCC097...................................  Down Syndrome, Fragile X,               1.051           0.965           0.880           0.783           0.777
                                            Other Chromosomal Anomalies,
                                            and Congenital Malformation
                                            Syndromes.
HCC102...................................  Autistic Disorder............           0.974           0.865           0.741           0.602           0.593
HCC103...................................  Pervasive Developmental                 0.856           0.742           0.606           0.446           0.435
                                            Disorders, Except Autistic
                                            Disorder.
HCC106...................................  Traumatic Complete Lesion              10.321          10.159          10.050           9.940           9.936
                                            Cervical Spinal Cord.
HCC107...................................  Quadriplegia.................          10.321          10.159          10.050           9.940           9.936
HCC108...................................  Traumatic Complete Lesion               7.300           7.190           7.148           7.079           7.076
                                            Dorsal Spinal Cord.
HCC109...................................  Paraplegia...................           7.300           7.190           7.148           7.079           7.076
HCC110...................................  Spinal Cord Disorders/                  5.109           4.928           4.832           4.737           4.734
                                            Injuries.
HCC111...................................  Amyotrophic Lateral Sclerosis           3.983           3.791           3.637           3.454           3.445
                                            and Other Anterior Horn Cell
                                            Disease.
HCC112...................................  Quadriplegic Cerebral Palsy..           2.457           2.306           2.196           2.073           2.070
HCC113...................................  Cerebral Palsy, Except                  0.911           0.825           0.739           0.628           0.621
                                            Quadriplegic.
HCC114...................................  Spina Bifida and Other Brain/           1.633           1.516           1.406           1.273           1.266
                                            Spinal/Nervous System
                                            Congenital Anomalies.
HCC115...................................  Myasthenia Gravis/Myoneural             5.117           5.042           5.019           4.999           4.999
                                            Disorders and Guillain-Barre
                                            Syndrome/Inflammatory and
                                            Toxic Neuropathy.
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,              1.717           1.593           1.473           1.307           1.298
                                            and Spinocerebellar Disease,
                                            and Other Neurodegenerative
                                            Disorders.
HCC120...................................  Seizure Disorders and                   1.262           1.142           1.028           0.887           0.879
                                            Convulsions.
HCC121...................................  Hydrocephalus................          10.147          10.050           9.987           9.914           9.910
HCC122...................................  Coma, Brain Compression/               10.005           9.852           9.745           9.624           9.618
                                            Anoxic Damage.
HCC123...................................  Narcolepsy and Cataplexy.....           5.856           5.690           5.554           5.405           5.397
HCC125...................................  Respirator Dependence/                 21.425          21.213          21.080          20.954          20.949
                                            Tracheostomy Status.
HCC126...................................  Respiratory Arrest...........           8.941           8.754           8.635           8.523           8.520
HCC127...................................  Cardio-Respiratory Failure              8.941           8.754           8.635           8.523           8.520
                                            and Shock, Including
                                            Respiratory Distress
                                            Syndromes.
HCC128...................................  Heart Assistive Device/                21.035          20.838          20.709          20.586          20.580
                                            Artificial Heart.
HCC129...................................  Heart Transplant Status/               21.035          20.838          20.709          20.586          20.580
                                            Complications.
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               4.704           4.470           4.361           4.250           4.250
                                            Acute Ischemic Heart Disease.
HCC135...................................  Heart Infection/Inflammation,           8.866           8.749           8.645           8.507           8.499
                                            Except Rheumatic.
HCC137...................................  Hypoplastic Left Heart                  1.910           1.809           1.715           1.613           1.608
                                            Syndrome and Other Severe
                                            Congenital Heart Disorders.
HCC138...................................  Major Congenital Heart/                 1.910           1.809           1.715           1.613           1.608
                                            Circulatory Disorders.
HCC139...................................  Atrial and Ventricular Septal           1.910           1.809           1.715           1.613           1.608
                                            Defects, Patent Ductus
                                            Arteriosus, and Other
                                            Congenital Heart/Circulatory
                                            Disorders.
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                 1.590           1.463           1.368           1.236           1.231
                                            Stroke.
HCC149...................................  Cerebral Aneurysm and                   2.570           2.429           2.321           2.184           2.178
                                            Arteriovenous Malformation.
HCC150...................................  Hemiplegia/Hemiparesis.......           3.409           3.301           3.271           3.263           3.266
HCC151...................................  Monoplegia, Other Paralytic             2.405           2.286           2.199           2.086           2.081
                                            Syndromes.
HCC153...................................  Atherosclerosis of the                  7.875           7.759           7.732           7.746           7.750
                                            Extremities with Ulceration
                                            or Gangrene.
HCC154...................................  Vascular Disease with                   5.620           5.504           5.463           5.427           5.427
                                            Complications.
HCC156...................................  Pulmonary Embolism and Deep             7.977           7.859           7.751           7.617           7.608
                                            Vein Thrombosis.
HCC158...................................  Lung Transplant Status/                12.435          12.247          12.124          12.008          11.999
                                            Complications.
HCC159...................................  Cystic Fibrosis..............           5.177           5.040           4.976           4.910           4.908
HCC160...................................  Chronic Obstructive Pulmonary           0.824           0.726           0.617           0.488           0.481
                                            Disease, Including
                                            Bronchiectasis.
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              1.742           1.631           1.532           1.403           1.396
                                            Lung Disorders.
HCC163...................................  Aspiration and Specified                7.455           7.417           7.378           7.350           7.349
                                            Bacterial Pneumonias and
                                            Other Severe Lung Infections.

[[Page 78589]]

 
HCC174...................................  Exudative Macular                       1.438           1.298           1.167           0.991           0.982
                                            Degeneration.
HCC183...................................  Kidney Transplant Status/               8.681           8.609           8.503           8.269           8.263
                                            Complications.
HCC184...................................  End Stage Renal Disease......          22.696          22.390          22.310          22.358          22.400
HCC187...................................  Chronic Kidney Disease, Stage           0.863           0.794           0.736           0.668           0.665
                                            5.
HCC188...................................  Chronic Kidney Disease,                 0.863           0.794           0.736           0.668           0.665
                                            Severe (Stage 4).
HCC203...................................  Ectopic and Molar Pregnancy..           2.155           1.952           1.753           1.433           1.416
HCC204...................................  Miscarriage with                        0.924           0.813           0.657           0.430           0.413
                                            Complications.
HCC205...................................  Miscarriage with No or Minor            0.924           0.813           0.657           0.430           0.413
                                            Complications.
HCC207...................................  Pregnancy with Delivery with            4.064           3.783           3.551           3.135           3.118
                                            Major Complications.
HCC208...................................  Pregnancy with Delivery with            4.064           3.783           3.551           3.135           3.118
                                            Complications.
HCC209...................................  Pregnancy with Delivery with            2.847           2.639           2.414           1.955           1.928
                                            No or Minor Complications.
HCC210...................................  (Ongoing) Pregnancy without             1.280           1.141           0.959           0.726           0.711
                                            Delivery with Major
                                            Complications.
HCC211...................................  (Ongoing) Pregnancy without             0.879           0.766           0.607           0.438           0.427
                                            Delivery with Complications.
HCC212...................................  (Ongoing) Pregnancy without             0.352           0.280           0.190           0.123           0.119
                                            Delivery with No or Minor
                                            Complications.
HCC217...................................  Chronic Ulcer of Skin, Except           1.533           1.420           1.330           1.220           1.215
                                            Pressure.
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             4.358           4.194           4.090           3.962           3.956
                                            Spinal Cord Injury.
HCC234...................................  Traumatic Amputations and               4.952           4.795           4.736           4.696           4.697
                                            Amputation Complications.
HCC251...................................  Stem Cell, Including Bone              22.648          22.602          22.510          22.387          22.377
                                            Marrow, Transplant Status/
                                            Complications.
HCC253...................................  Artificial Openings for                 6.513           6.413           6.376           6.352           6.352
                                            Feeding or Elimination.
HCC254...................................  Amputation Status, Upper Limb           1.806           1.671           1.574           1.456           1.451
                                            or Lower Limb.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Interacted HCC Counts Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Severe illness, 1 payment HCC          -6.091          -6.125          -6.181          -6.267          -6.271
                                           Severe illness, 2 payment              -5.758          -5.804          -5.824          -5.883          -5.886
                                            HCCs.
                                           Severe illness, 3 payment              -4.600          -4.607          -4.526          -4.404          -4.393
                                            HCCs.
                                           Severe illness, 4 payment              -3.648          -3.586          -3.415          -3.138          -3.118
                                            HCCs.
                                           Severe illness, 5 payment              -2.965          -2.815          -2.554          -2.137          -2.110
                                            HCCs.
                                           Severe illness, 6 payment              -2.718          -2.456          -2.103          -1.561          -1.528
                                            HCCs.
                                           Severe illness, 7 payment              -1.848          -1.445          -0.987          -0.319          -0.281
                                            HCCs.
                                           Severe illness, 8 payment              -1.328          -0.842          -0.328           0.405           0.446
                                            HCCs.
                                           Severe illness, 9 payment               0.191           0.836           1.458           2.310           2.355
                                            HCCs.
                                           Severe illness, 10 or more              8.579           9.578          10.431          11.526          11.579
                                            payment HCCs.
                                           Transplant severe illness, 4            3.559           3.502           3.483           3.483           3.487
                                            payment HCCs.
                                           Transplant severe illness, 5            7.420           7.365           7.353           7.363           7.368
                                            payment HCCs.
                                           Transplant severe illness, 6           12.674          12.625          12.622          12.645          12.652
                                            payment HCCs.
                                           Transplant severe illness, 7           18.766          18.696          18.688          18.707          18.715
                                            payment HCCs.
                                           Transplant severe illness, 8           33.796          33.788          33.829          33.905          33.916
                                            or more payment HCCs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Enrollment Duration Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Enrolled for 1 month, at                9.287           7.981           6.876           5.547           5.462
                                            least one payment HCC.
                                           Enrolled for 2 months, at               3.618           2.896           2.336           1.799           1.768
                                            least one payment HCC.
                                           Enrolled for 3 months, at               2.088           1.641           1.282           0.965           0.947
                                            least one payment HCC.
                                           Enrolled for 4 months, at               1.105           0.816           0.572           0.376           0.366
                                            least one payment HCC.
                                           Enrolled for 5 months, at               0.770           0.563           0.380           0.235           0.226
                                            least one payment HCC.
                                           Enrolled for 6 months, at               0.499           0.351           0.215           0.123           0.120
                                            least one payment HCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Prescription Drug Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
RXC 01...................................  Anti-HIV Agents..............           8.499           7.914           7.511           7.007           6.990
RXC 02...................................  Anti-Hepatitis C (HCV)                  6.593           6.146           5.958           5.830           5.835
                                            Agents, Direct Acting Agents.
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              1.519           1.374           1.206           0.941           0.924
                                            Agents.
RXC 06...................................  Insulin......................           1.227           1.005           0.762           0.500           0.483
RXC 07...................................  Anti-Diabetic Agents, Except            0.671           0.570           0.463           0.346           0.339
                                            Insulin and Metformin Only.
RXC 08...................................  Multiple Sclerosis Agents....          23.184          22.318          21.874          21.467          21.466
RXC 09...................................  Immune Suppressants and                12.774          12.347          12.139          11.992          11.988
                                            Immunomodulators.
RXC 10...................................  Cystic Fibrosis Agents.......          17.803          17.474          17.358          17.299          17.304
RXC 01 x HCC001..........................  Additional effect for                   2.316           2.503           2.790           3.284           3.310
                                            enrollees with RXC 01 and
                                            HCC 001.
RXC 02 x HCC 37_1, 36_035_s_34...........  Additional effect for                  -0.678          -0.555          -0.433          -0.264          -0.256
                                            enrollees with RXC 02 and
                                            (HCC 037_1 or 036 or 035_2
                                            or 035_1 or 034).
RXC_03_x_HCC142..........................  Additional effect for                   0.000           0.000           0.000           0.000           0.000
                                            enrollees with RXC 03 and
                                            HCC 142.
RXC_04_x_HCC184_183_187_188..............  Additional effect for                   0.000           0.000           0.000           0.000           0.000
                                            enrollees with RXC 04 and
                                            (HCC 184 or 183 or 187 or
                                            188).

[[Page 78590]]

 
RXC_05_x_HCC048_041......................  Additional effect for                  -0.381          -0.341          -0.282          -0.235          -0.231
                                            enrollees with RXC 05 and
                                            (HCC 048 or 041).
RXC_06_x_HCC018_019_020_021..............  Additional effect for                   0.560           0.647           0.761           0.781           0.784
                                            enrollees with RXC 06 and
                                            (HCC 018 or 019 or 020 or
                                            021).
RXC_07_x_HCC018_019_020_021..............  Additional effect for                  -0.204          -0.151          -0.117          -0.134          -0.136
                                            enrollees with RXC 07 and
                                            (HCC 018 or 019 or 020 or
                                            021).
RXC_08_x_HCC118..........................  Additional effect for                  -0.539          -0.056           0.316           0.813           0.827
                                            enrollees with RXC 08 and
                                            HCC 118.
RXC_09_x_HCC056_057_and_048_041..........  Additional effect for                   0.693           0.764           0.827           0.909           0.915
                                            enrollees with RXC 09 and
                                            (HCC 048 or 041) and (HCC
                                            056 or 057).
RXC_09_x_HCC056..........................  Additional effect for                   0.757           0.824           0.959           1.153           1.166
                                            enrollees with RXC 09 and
                                            HCC 056.
RXC_09_x_HCC057..........................  Additional effect for                  -0.878          -0.782          -0.664          -0.514          -0.505
                                            enrollees with RXC 09 and
                                            HCC 057.
RXC_09_x_HCC048_041......................  Additional effect for                   3.331           3.335           3.439           3.648           3.664
                                            enrollees with RXC 09 and
                                            (HCC 048 or 041).
RXC_10_x_HCC159_158......................  Additional effect for                  46.175          46.175          46.180          46.278          46.282
                                            enrollees with RXC 10 and
                                            (HCC 159 or 158).
--------------------------------------------------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \47\ HCC 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 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              16.453          16.237          16.111          15.962          15.955
 Inflammatory Response Syndrome/
 Shock..........................
Central Nervous System                    14.787          14.627          14.548          14.496          14.493
 Infections, Except Viral
 Meningitis.....................
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              9.363           9.131           8.985           8.839           8.833
 Cancers, Including Pediatric
 Acute Lymphoid Leukemia........
Non-Hodgkin Lymphomas and Other            7.171           6.961           6.817           6.657           6.649
 Cancers and Tumors.............
Colorectal, Breast (Age <50),              3.764           3.582           3.413           3.207           3.192
 Kidney, and Other Cancers......
Breast (Age 50+) and Prostate              3.764           3.582           3.413           3.207           3.192
 Cancer, Benign/Uncertain Brain
 Tumors, and Other Cancers and
 Tumors.........................
Thyroid Cancer, Melanoma,                  1.098           0.968           0.841           0.678           0.675
 Neurofibromatosis, and Other
 Cancers and Tumors.............
Pancreas Transplant Status......          14.723          14.594          14.579          14.489          14.535
Diabetes with Acute                        2.527           2.261           2.012           1.649           1.685
 Complications..................
Diabetes with Chronic                      2.527           2.261           2.012           1.649           1.685
 Complications..................
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,            5.406           5.282           5.186           5.086           5.081
 Not Elsewhere Classified.......
Amyloidosis, Porphyria, and                5.406           5.282           5.186           5.086           5.081
 Other Metabolic Disorders......
Adrenal, Pituitary, and Other              6.355           6.124           5.993           5.896           5.892
 Significant Endocrine Disorders
Liver Transplant Status/                  14.723          14.594          14.579          14.489          14.535
 Complications..................
Acute Liver Failure/Disease,              11.829          11.676          11.608          11.560          11.558
 Including Neonatal Hepatitis...
Chronic Liver Failure/End-Stage           11.044          10.886          10.801          10.710          10.707
 Liver Disorders................
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

[[Page 78591]]

 
Chronic Hepatitis, Except                  0.755           0.637           0.542           0.431           0.422
 Chronic Viral Hepatitis C......
Intestine Transplant Status/              16.105          16.018          15.984          15.983          15.990
 Complications..................
Peritonitis/Gastrointestinal              18.426          18.175          18.075          18.044          18.045
 Perforation/Necrotizing
 Enterocolitis..................
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/              3.086           2.881           2.730           2.580           2.572
 Necrosis.......................
Rheumatoid Arthritis and                   4.935           4.699           4.541           4.399           4.393
 Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and           1.271           1.141           1.004           0.853           0.841
 Other Autoimmune Disorders.....
Osteogenesis Imperfecta and                1.247           1.140           1.045           0.942           0.936
 Other Osteodystrophies.........
Congenital/Developmental                   1.247           1.140           1.045           0.942           0.936
 Skeletal and Connective Tissue
 Disorders......................
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             13.679          13.505          13.401          13.301          13.296
 Myelofibrosis..................
Aplastic Anemia.................          13.679          13.505          13.401          13.301          13.296
Acquired Hemolytic Anemia,                13.679          13.505          13.401          13.301          13.296
 Including Hemolytic Disease of
 Newborn........................
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                  4.311           4.157           4.042           3.914           3.904
 Immunodeficiencies.............
Disorders of the Immune                    4.311           4.157           4.042           3.914           3.904
 Mechanism......................
Coagulation Defects and Other              3.342           3.212           3.096           2.963           2.955
 Specified Hematological
 Disorders......................
Drug Use with Psychotic                    2.473           2.289           2.136           1.945           1.934
 Complications..................
Drug Use Disorder, Moderate/               2.473           2.289           2.136           1.945           1.934
 Severe, or Drug Use with Non-
 Psychotic Complications........
Alcohol Use with Psychotic                 1.387           1.245           1.107           0.925           0.913
 Complications..................
Alcohol Use Disorder, Moderate/            1.387           1.245           1.107           0.925           0.913
 Severe, or Alcohol Use with
 Specified Non-Psychotic
 Complications..................
Schizophrenia...................           4.545           4.264           4.068           3.841           3.830
Delusional and Other Specified             3.056           2.824           2.627           2.376           2.362
 Psychotic Disorders,
 Unspecified Psychosis..........
Major Depressive Disorder,                 2.587           2.379           2.188           1.947           1.935
 Severe, and Bipolar Disorders..
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,             12.839          12.760          12.707          12.664          12.658
 and Autosomal Deletion
 Syndromes......................
Down Syndrome, Fragile X, Other            1.547           1.401           1.266           1.082           1.063
 Chromosomal Anomalies, and
 Congenital Malformation
 Syndromes......................
Autistic Disorder...............           2.587           2.379           2.188           1.947           1.935
Pervasive Developmental                    0.612           0.515           0.404           0.304           0.299
 Disorders, Except Autistic
 Disorder.......................
Traumatic Complete Lesion                  9.556           9.348           9.228           9.121           9.119
 Cervical Spinal Cord...........
Quadriplegia....................           9.556           9.348           9.228           9.121           9.119
Traumatic Complete Lesion Dorsal           8.665           8.452           8.339           8.216           8.212
 Spinal Cord....................
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             32.864          32.642          32.500          32.372          32.367
 and Other Anterior Horn Cell
 Disease........................
Quadriplegic Cerebral Palsy.....           3.270           3.108           3.041           3.010           3.014
Cerebral Palsy, Except                     1.319           1.156           1.018           0.836           0.823
 Quadriplegic...................
Spina Bifida and Other Brain/              1.890           1.769           1.676           1.566           1.559
 Spinal/Nervous System
 Congenital Anomalies...........
Myasthenia Gravis/Myoneural                9.947           9.789           9.713           9.665           9.664
 Disorders and Guillain-Barre
 Syndrome/Inflammatory and Toxic
 Neuropathy.....................
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             4.361           4.165           3.981           3.767           3.751
 Spinocerebellar Disease, and
 Other Neurodegenerative
 Disorders......................
Seizure Disorders and                      1.619           1.477           1.313           1.130           1.119
 Convulsions....................
Hydrocephalus...................          12.782          12.747          12.714          12.712          12.717
Coma, Brain Compression/Anoxic            12.827          12.750          12.666          12.598          12.595
 Damage.........................
Narcolepsy and Cataplexy........           5.101           4.922           4.761           4.563           4.549
Respirator Dependence/                    30.364          30.125          30.016          29.935          29.930
 Tracheostomy Status............
Respiratory Arrest..............          15.552          15.311          15.186          15.055          15.047
Cardio-Respiratory Failure and            15.552          15.311          15.186          15.055          15.047
 Shock, Including Respiratory
 Distress Syndromes.............

[[Page 78592]]

 
Heart Assistive Device/                   16.105          16.018          15.984          15.983          15.990
 Artificial Heart...............
Heart Transplant Status/                  16.105          16.018          15.984          15.983          15.990
 Complications..................
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            1.745           1.578           1.435           1.332           1.336
 Ischemic Heart Disease.........
Heart Infection/Inflammation,             15.639          15.486          15.366          15.212          15.200
 Except Rheumatic...............
Hypoplastic Left Heart Syndrome            3.058           2.842           2.650           2.438           2.418
 and Other Severe Congenital
 Heart Disorders................
Major Congenital Heart/                    0.999           0.865           0.721           0.605           0.596
 Circulatory Disorders..........
Atrial and Ventricular Septal              0.747           0.646           0.546           0.467           0.461
 Defects, Patent Ductus
 Arteriosus, and Other
 Congenital Heart/Circulatory
 Disorders......................
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                      2.668           2.517           2.365           2.101           2.085
 Arteriovenous Malformation.....
Hemiplegia/Hemiparesis..........           4.576           4.442           4.359           4.245           4.236
Monoplegia, Other Paralytic                3.018           2.871           2.758           2.618           2.610
 Syndromes......................
Atherosclerosis of the                    11.183          10.985          10.861          10.737          10.734
 Extremities with Ulceration or
 Gangrene.......................
Vascular Disease with                      6.308           6.163           6.068           5.980           5.976
 Complications..................
Pulmonary Embolism and Deep Vein          20.304          20.162          20.087          20.027          20.021
 Thrombosis.....................
Lung Transplant Status/                   16.105          16.018          15.984          15.983          15.990
 Complications..................
Cystic Fibrosis.................          48.367          47.908          47.701          47.590          47.584
Chronic Obstructive Pulmonary              2.003           1.844           1.699           1.518           1.508
 Disease, Including
 Bronchiectasis.................
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            1.185           1.018           0.827           0.633           0.622
 Disorders......................
Aspiration and Specified                  12.351          12.306          12.275          12.298          12.298
 Bacterial Pneumonias and Other
 Severe Lung Infections.........
Kidney Transplant Status/                 14.723          14.594          14.579          14.489          14.535
 Complications..................
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             3.859           3.728           3.618           3.482           3.475
 (Stage 4)......................
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               0.912           0.778           0.597           0.346           0.329
 Complications..................
Pregnancy with Delivery with               3.751           3.463           3.195           2.691           2.661
 Major Complications............
Pregnancy with Delivery with               3.751           3.463           3.195           2.691           2.661
 Complications..................
Pregnancy with Delivery with No            2.650           2.428           2.165           1.661           1.624
 or Minor Complications.........
(Ongoing) Pregnancy without                0.977           0.822           0.619           0.388           0.374
 Delivery with Major
 Complications..................
(Ongoing) Pregnancy without                0.977           0.822           0.619           0.388           0.374
 Delivery with Complications....
(Ongoing) Pregnancy without                0.485           0.378           0.252           0.147           0.142
 Delivery with No or Minor
 Complications..................
Chronic Ulcer of Skin, Except              1.504           1.383           1.263           1.141           1.135
 Pressure.......................
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                3.353           3.148           2.963           2.739           2.726
 Spinal Cord Injury.............
Traumatic Amputations and                  3.936           3.723           3.565           3.352           3.338
 Amputation Complications.......
Stem Cell, Including Bone                 16.105          16.018          15.984          15.983          15.990
 Marrow, Transplant Status/
 Complications..................
Artificial Openings for Feeding            7.197           7.036           6.985           6.947           6.949
 or Elimination.................
Amputation Status, Upper Limb or           3.936           3.723           3.565           3.352           3.338
 Lower Limb.....................
----------------------------------------------------------------------------------------------------------------
                                          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            -1.583          -1.238          -0.827          -0.285          -0.249
 HCCs...........................
Severe illness, 8 or more                 18.271          19.100          19.861          20.772          20.830
 payment HCCs...................
Transplant severe illness, 4 or           17.085          17.121          17.096          17.068          17.040
 more payment HCCs..............
----------------------------------------------------------------------------------------------------------------


[[Page 78593]]


 Table 3--HCCs Selected for the Proposed HCC Interacted Counts Variables
   for the Adult and Child Models Beginning With the 2022 Benefit Year
------------------------------------------------------------------------
                                      Severity illness      Transplant
            Payment HCC                  indicator        indicator \48\
------------------------------------------------------------------------
HCC 2 Septicemia, Sepsis, Systemic                   X   ...............
 Inflammatory Response Syndrome/
 Shock............................
HCC 3 Central Nervous System                         X   ...............
 Infections, Except Viral
 Meningitis.......................
HCC 4 Viral or Unspecified                           X   ...............
 Meningitis.......................
HCC 6 Opportunistic Infections....                   X   ...............
HCC 23 Protein-Calorie                               X   ...............
 Malnutrition.....................
HCC 34 Liver Transplant Status/                      X                X
 Complications....................
HCC 41 Intestine Transplant Status/                  X                X
 Complications....................
HCC 42 Peritonitis/                                  X   ...............
 Gastrointestinal Perforation/
 Necrotizing Enterocolitis........
HCC 96 Prader-Willi, Patau,                          X   ...............
 Edwards, and Autosomal Deletion
 Syndromes........................
HCC 121 Hydrocephalus.............                   X   ...............
HCC 122 Coma, Brain Compression/                     X   ...............
 Anoxic Damage....................
HCC 125 Respirator Dependence/                       X   ...............
 Tracheostomy Status..............
HCC 135 Heart Infection/                             X   ...............
 Inflammation, Except Rheumatic...
HCC 145 Intracranial Hemorrhage...                   X   ...............
HCC 156 Pulmonary Embolism and                       X   ...............
 Deep Vein Thrombosis.............
HCC 158 Lung Transplant Status/                      X                X
 Complications....................
HCC 163 Aspiration and Specified                     X   ...............
 Bacterial Pneumonias and Other
 Severe Lung Infections...........
HCC 183 Kidney Transplant Status/                    X                X
 Complications....................
HCC 218 Extensive Third Degree                       X   ...............
 Burns............................
HCC 223 Severe Head Injury........                   X   ...............
HCC 251 Stem Cell, Including Bone                    X                X
 Marrow, Transplant Status/
 Complications....................
G13 (Includes HCC 126 Respiratory                    X   ...............
 Arrest and HCC 127 Cardio-
 Respiratory Failure and Shock,
 Including Respiratory Distress
 Syndromes).......................
G14 (Includes HCC 128 Heart                          X                X
 Assistive Device/Artificial Heart
 and HCC 129 Heart Transplant
 Status/Complications)............
------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \48\ We 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 4--Proposed Infant Risk Adjustment Model Factors for 2022 Benefit Year
----------------------------------------------------------------------------------------------------------------
              Group                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity            228.512         227.071         226.378         225.986         225.985
 Level 5 (Highest)..............
Extremely Immature * Severity            143.939         142.392         141.573         140.987         140.976
 Level 4........................
Extremely Immature * Severity             32.833          31.691          31.019          30.471          30.451
 Level 3........................
Extremely Immature * Severity             32.833          31.691          31.019          30.471          30.451
 Level 2........................
Extremely Immature * Severity             32.833          31.691          31.019          30.471          30.451
 Level 1 (Lowest)...............
Immature * Severity Level 5              132.085         130.648         129.935         129.486         129.480
 (Highest)......................
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               25.390          24.329          23.673          23.095          23.072
 (Lowest).......................
Premature/Multiples * Severity           109.526         108.295         107.661         107.236         107.227
 Level 5 (Highest)..............
Premature/Multiples * Severity            28.669          27.553          26.884          26.312          26.294
 Level 4........................
Premature/Multiples * Severity            14.196          13.345          12.721          12.054          12.022
 Level 3........................
Premature/Multiples * Severity             8.093           7.463           6.897           6.212           6.173
 Level 2........................
Premature/Multiples * Severity             5.774           5.254           4.759           4.243           4.214
 Level 1 (Lowest)...............
Term * Severity Level 5                   82.605          81.544          80.955          80.511          80.498
 (Highest)......................
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                  63.472          62.803          62.434          62.174          62.167
 (Highest)......................
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                   0.573           0.496           0.442           0.403           0.401
 (Lowest).......................
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
----------------------------------------------------------------------------------------------------------------


[[Page 78594]]


     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.

[[Page 78595]]

 
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.
---------------------------------------------------------------------------

    \49\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through 
17479; and 85 FR 29164 at 29190.

---------------------------------------------------------------------------

[[Page 78596]]

    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.
---------------------------------------------------------------------------

    \50\ See 81 FR 12203 at 12228.
---------------------------------------------------------------------------

    We seek comment on these proposals.

               Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
                                                              Induced
         Household income                  Plan AV          utilization
                                                              factor
------------------------------------------------------------------------
                     Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of Federal Poverty Line    Plan Variation 94%..            1.12
 (FPL).
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.
---------------------------------------------------------------------------

    \51\ Hileman, Geof and Spenser Steele. ``Accuracy of Claims-
Based Risk Scoring Models.'' Society of Actuaries. October 2016.

                      Table 8--R-Squared Statistic for Proposed HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
                                               R-Squared Statistic
-----------------------------------------------------------------------------------------------------------------
                                                                  2016 Enrollee-  2017 Enrollee-  2018 Enrollee-
                             Models                                 level EDGE      level EDGE      level EDGE
                                                                       data            data            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

[[Page 78597]]

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

h. Calculation of Plan Average Premium and State Average Premium 
Requirements for Extending Future Premium Credits (Sec.  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.
---------------------------------------------------------------------------

    \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-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \53\ 2014 Payment Notice final rule, 78 FR 15409. Also see the 
2020 Payment Notice final rule, 84 FR 17454.
    \54\ The 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.
---------------------------------------------------------------------------

    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 
Sec.  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 HHS-operated 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 (Sec.  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 high-cost 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 Sec.  153.320(c) to replace the current 
language that refers

[[Page 78598]]

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.
---------------------------------------------------------------------------

    \55\ 84 FR 17454 at 17480 and 17485; and 85 FR 29164 at 29191.
    \56\ Ibid.
---------------------------------------------------------------------------

    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 HHS-operated 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 cost-scaling factor in the 
state payment transfer formula under the HHS-operated risk adjustment 
methodology, rather than a different parameter, such as each plan's own 
premium, which would not have automatically achieved equality between 
risk adjustment payments and charges in each benefit year.\60\
---------------------------------------------------------------------------

    \57\ 77 FR 17220 at 17246.
    \58\ The 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 high-cost risk pool payment and charge terms that apply 
beginning with the 2018 benefit year.
    \59\ For 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 HHS-
Operated Permanent Risk Adjustment Program Under the Patient 
Protection and Affordable Care Act for the 2017 Benefit Year, Final 
Rule, 83 FR 36456 (July 30, 2018) and the Patient Protection and 
Affordable Care Act; 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).
    \60\ See 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.
---------------------------------------------------------------------------

    Risk adjustment transfers (total payments and charges, including 
high-cost risk pool payments and charges) are calculated after issuers 
have completed their risk adjustment EDGE data submissions for the 
applicable benefit year. 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:
[GRAPHIC] [TIFF OMITTED] TP04DE20.022

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.
---------------------------------------------------------------------------

    \61\ As detailed elsewhere in this proposed rule, catastrophic 
plans are considered part of the individual market for purposes of 
the national high-cost risk pool payment and charge calculations.
---------------------------------------------------------------------------

    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 = ([Sigma]i (si [middot] Pi)) * (1 - 0.14) = ([Sigma]i (si [middot] 
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.
---------------------------------------------------------------------------

    \62\ See 84 FR 17454 at 17486.
---------------------------------------------------------------------------

    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

[[Page 78599]]

and coinsurance rate of 60 percent for the 2022 benefit year.
---------------------------------------------------------------------------

    \63\ 84 FR 17466 through 17468.
---------------------------------------------------------------------------

    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 [middot] Mi) + HRPi - (HRPCm [middot] 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 (Sec.  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 non-catastrophic 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\
---------------------------------------------------------------------------

    \64\ 83 FR 16955 through 16960.
    \65\ 45 CFR 153.320(d)(3).
---------------------------------------------------------------------------

    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 
Sec.  153.320(d)(2), beginning with the 2020 benefit year, states must 
submit such requests with the supporting evidence and analysis outlined 
under Sec.  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\
---------------------------------------------------------------------------

    \66\ See 45 CFR 153.320(d)(3).
    \67\ See 84 FR 17484 through 17485 and 85 FR 29193 through 
29194.
---------------------------------------------------------------------------

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 HHS-operated 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 Sec.  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-and-Initiatives/Premium-Stabilization-Programs/index.html.
---------------------------------------------------------------------------

    \68\ Alabama'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.
---------------------------------------------------------------------------

b. Multi-Year State Flexibility Requests
    We propose several amendments to Sec.  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 Sec.  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 multi-year 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

[[Page 78600]]

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 Sec.  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 Sec.  
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 multi-year requests 
would be captured in new proposed Sec.  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 Sec.  
153.320(d)(2)(i)(B).
    As part of the new framework to permit multi-year requests, at 
Sec.  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 Sec.  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 multi-
year 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 Sec.  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.
---------------------------------------------------------------------------

    \70\ Terminations 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.
---------------------------------------------------------------------------

    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

[[Page 78601]]

Sec.  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.
---------------------------------------------------------------------------

    \71\ State withdrawals of 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.
---------------------------------------------------------------------------

    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 multi-year 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 
Sec.  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 multi-year 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 (Sec.  153.410(d)) and Audits and Compliance Reviews of Issuers 
of Risk Adjustment Covered Plans (Sec.  153.620(c))
a. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible 
Plans (Sec.  153.410(d))
    HHS recently completed the 2014 benefit year audits of a sample of 
issuers of PPACA transitional reinsurance-eligible 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 Sec.  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 Sec.  156.715, which is 
limited to QHP issuers participating in FFEs, the compliance review 
authority we propose to codify in the amendments to Sec.  153.410(d) 
would apply to all issuers of reinsurance-eligible 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.
---------------------------------------------------------------------------

    \72\ For further details, please see 78 FR 65100.
---------------------------------------------------------------------------

    Specifically, we propose to rename Sec.  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 Sec.  
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 Sec.  156.715.
    We also propose to amend the existing introductory language in 
Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 78602]]

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 reinsurance-eligible 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \73\ See 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).
---------------------------------------------------------------------------

    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 (Sec.  153.620(c))
    Although currently HHS primarily uses the HHS-RADV process to audit 
issuers of risk adjustment covered plans, Sec.  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

[[Page 78603]]

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 Sec.  156.715, which is 
limited to QHP issuers participating in FFEs, the compliance review 
authority we propose to codify in the amendments to Sec.  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 Sec.  153.620(c) on ensuring compliance with 
requirements applicable to the high-cost risk pool payments under the 
HHS risk adjustment methodology.
---------------------------------------------------------------------------

    \74\ For further details, please see 78 FR 65100.
---------------------------------------------------------------------------

    Specifically, we propose to rename Sec.  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 
Sec.  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 Sec.  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 high-cost 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 Sec.  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 Sec.  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

[[Page 78604]]

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 Sec.  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 high-cost 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 Sec.  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 Sec.  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 high-cost 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 Sec.  153.620(c).
---------------------------------------------------------------------------

    \75\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \76\ This is also known as the dedicated distributed data 
collection environment.
    \77\ These 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).
---------------------------------------------------------------------------

    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 Sec.  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

[[Page 78605]]

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\
---------------------------------------------------------------------------

    \78\ See, for example, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2019-QQ-Guidance.pdf. Also 
see 83 FR 16970 through 16971.
    \79\ HHS 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 Sec.  156.1220.
    \80\ We are not proposing any changes to the materiality 
threshold for reconsideration requests in Sec.  156.1220(a)(2).
    \81\ Consistent 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 Sec.  156.1220.
---------------------------------------------------------------------------

    We propose to amend Sec.  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.
---------------------------------------------------------------------------

    \82\ The 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.
---------------------------------------------------------------------------

    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 (Sec.  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.
---------------------------------------------------------------------------

    \83\ 78 FR 15416 through 15417.
---------------------------------------------------------------------------

    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) (Sec.  153.630)
    To ensure the integrity of the HHS-operated risk adjustment 
program, HHS conducts risk adjustment data validation (HHS-RADV) under 
Sec. Sec.  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-
than-average 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 Sec.  
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

[[Page 78606]]

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.
---------------------------------------------------------------------------

    \84\ 45 CFR 153.630(a) through (c).
---------------------------------------------------------------------------

a. Exemptions From HHS-RADV (Sec.  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 Sec.  153.630(g)(4). As we discussed in the 
2020 Payment Notice, under this policy, a small group market issuer 
with off-calendar 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\
---------------------------------------------------------------------------

    \85\ 84 FR 17503 through 17504.
    \86\ Ibid.
---------------------------------------------------------------------------

    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 Sec.  
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.
---------------------------------------------------------------------------

    \87\ 84 FR 17504.
    \88\ Ibid.
---------------------------------------------------------------------------

    These exemptions do not introduce new policies; instead, the 
proposed amendments to Sec.  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 (Sec.  153.630(b)(3))
    In accordance with Sec.  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.
---------------------------------------------------------------------------

    \89\ See 79 FR 13758.
    \90\ The 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.
---------------------------------------------------------------------------

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 Sec. Sec.  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 Sec.  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

[[Page 78607]]

second validation audit findings.\96\ We seek comment on these proposed 
amendments.
---------------------------------------------------------------------------

    \91\ 78 FR 13818 through 13820.
    \92\ 81 FR 94106.
    \93\ Ibid.
    \94\ See, 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.
    \95\ As 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).
    \96\ 84 FR 17495.
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    \97\ 84 FR 17506 through 17507.
    \98\ See 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-and-Guidance/Downloads/Key-Dates-Table-for-CY2019.pdf.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \99\ The 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.
    \100\ HHS-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-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \101\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/BY2017-HHSRADV-Adjustments-to-RA-Transfers-Summary-Report.pdf.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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

[[Page 78608]]

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.
---------------------------------------------------------------------------

    \103\ HHS-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-RADV-Postponement-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.
    \105\ See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------

e. Second Validation Audit and Error Rate Discrepancy Reporting Windows
    Under Sec.  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 Sec. Sec.  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.
---------------------------------------------------------------------------

    \106\ 84 FR 17495.
---------------------------------------------------------------------------

    We seek comment on the proposed shortened discrepancy windows under 
proposed Sec.  153.630(d)(2).
8. Risk Adjustment Data Reporting Requirements for Future Premium 
Credits (Sec.  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.
---------------------------------------------------------------------------

    \107\ See, 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/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
    \108\ The 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.
---------------------------------------------------------------------------

    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

[[Page 78609]]

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.
    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 (Sec.  155.20)
a. Definitions of QHP Issuer Direct Enrollment Technology Provider and 
Agent or Broker Direct Enrollment Technology Provider
    We propose to amend Sec.  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 Sec. Sec.  155.221 and 
156.1230. We also propose that this definition of QHP issuer direct 
enrollment technology provider explicitly acknowledge that a web-broker 
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 Sec.  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 Sec.  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 Sec. Sec.  
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 Sec. Sec.  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 web-broker 
requirements under Sec. Sec.  155.220 and 155.221, unless indicated 
otherwise.\110\
---------------------------------------------------------------------------

    \109\ See Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters; Final rule, 84 FR 17454 at 17562 
(April 25, 2019).
    \110\ For example, Sec.  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.
---------------------------------------------------------------------------

    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 
Sec.  155.221(e) for third-party auditors hired by QHP issuers or web-
brokers to perform operational readiness audits. By

[[Page 78610]]

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 non-Exchange 
website for a QHP issuer, the QHP issuer display requirements captured 
at Sec.  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 (Sec.  
155.205)
    To continue our efforts to standardize regulatory references to 
web-brokers, we propose to replace all references in Sec.  155.205(c) 
to ``an agent or broker subject to Sec.  155.220(c)(3)(i)'' with the 
term ``web-broker.'' In the 2020 Payment Notice, we amended Sec.  
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 Sec.  
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 Sec. Sec.  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 Sec.  
155.205(c) also contains several of these general references to agents 
and brokers subject to Sec.  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 Sec.  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 Sec.  155.205(c) to ``an agent or broker 
subject to Sec.  155.220(c)(3)(i)'' with the term ``web-broker.'' We 
seek comment on this proposal.
---------------------------------------------------------------------------

    \111\ See 84 FR 17563.
---------------------------------------------------------------------------

    In addition, we propose to revise a requirement related to website 
content translations for QHP issuers and web-brokers participating in 
the FFE EDE program that are subject to Sec. Sec.  155.205(c)(2)(iv)(B) 
and 155.205(c)(2)(iv)(C) respectively. Currently under Sec. Sec.  
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 Sec. Sec.  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 
web-broker has been registered with the Exchange.
---------------------------------------------------------------------------

    \112\ See also ``Guidance and Population Data for Exchange, 
Qualified Health Plan Issuers, and Web-Brokers to Ensure Meaningful 
Access by Limited-English Proficient Speakers Under 45 CFR 
155.205(c) and Sec.  156.250,'' March 30, 2016. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Language-access-guidance.pdf.
---------------------------------------------------------------------------

    This proposed change does not alter the additional accessibility 
requirements QHP issuers and web-brokers 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 
web-brokers would continue to protect individuals with LEP and assure 
that these entities are taking the necessary

[[Page 78611]]

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 Sec.  155.221(j) of 
this rule. Under this proposed rule, QHP issuers and web-brokers 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 Sec.  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 Sec.  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 web-broker 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 web-brokers 
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 web-
brokers 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 Sec.  155.220(c)(3)(iii) in 
this proposed rule when assisting members of the LEP community with 
Exchange enrollment.
3. Navigator Program Standards (Sec.  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 Sec. Sec.  155.210 (for all Exchanges) and 155.215 (for 
Navigators in FFEs). Certified Application Counselors (CACs) duties 
have been implemented through regulations at Sec.  155.225.
    We propose allowing, but not requiring, Navigators and CACs in FFEs 
and SBE-FPs to use web-broker non-Exchange 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 Sec.  155.220.
4. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  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 web-broker 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 non-Exchange websites by 
assisters to broaden the range of consumers these

[[Page 78612]]

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.
---------------------------------------------------------------------------

    \113\ See 84 FR 17515 through 17521.
---------------------------------------------------------------------------

    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 Sec. Sec.  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 Sec.  
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 web-brokers 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 
non-Exchange 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 non-Exchange 
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 Sec.  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 Sec.  155.225(c)(1). Under Sec.  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

[[Page 78613]]

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 
Sec. Sec.  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 
Sec.  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 Sec.  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 web-brokers are not required to provide fair, accurate, 
and impartial information, and are not prohibited from recommending 
specific products, including QHPs, to their clients. Therefore, we 
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 web-brokers 
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 
web-brokers) 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 web-
broker'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.
---------------------------------------------------------------------------

    \114\ See 79 FR 30239.
    \115\ 45 CFR 155.220(j)(2)(i) and (l).
    \116\ Id.
    \117\ See 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).
---------------------------------------------------------------------------

    We are proposing several amendments to Sec.  155.220 to capture the 
flexibility for assisters in FFE and SBE-FP states to use web-broker 
non-Exchange 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 Sec.  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 web-brokers may 
obtain all QHP information they would be required to display in FFEs 
and SBE-FPs for assisters to be permitted to use their websites by 
integrating with the FFEs' Marketplace 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 Sec.  155.220(c)(3)(iii)(A). We propose that the optional annual 
certification process would be integrated into the existing annual web-
broker 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 Sec.  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 Exchange-operated 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 non-Exchange 
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

[[Page 78614]]

that the web-broker may receive from QHP issuers. Consistent with the 
existing prohibition in Sec.  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 Sec. Sec.  155.220 and 155.221 that otherwise 
apply to web-broker non-Exchange 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 web-broker 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 
Sec.  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 Sec.  155.220(c)(3)(iii)(A) begins 
with ``[n]otwithstanding paragraph (n)(1) of this section.''
---------------------------------------------------------------------------

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

    We still believe that, for assisters to be permitted to use a web-
broker's non-Exchange 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 non-Exchange 
websites. In FFEs and SBE-FPs, web-brokers that offer their non-
Exchange 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 
non-Exchange 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 
Sec.  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 non-QHP, or on 
the parallel prohibition on CACs receiving any consideration directly 
or indirectly from any health insurance issuer or issuers of stop-loss 
insurance at Sec.  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 Web-Broker 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, Sec.  155.220(c)(3)(i)(A) 
requires that a web-broker non-Exchange website must disclose and 
display all QHP information provided by the Exchange or directly by QHP 
issuers consistent with the requirements of Sec.  155.205(b)(1) and 
(c). To the extent that not all information required under Sec.  
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 Sec.  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 Sec.  155.205(b)(1) requirements, such as premium 
information, due to confidentiality requirements, web-broker 
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 
web-broker's obligation to display QHP information on its non-Exchange 
website.
---------------------------------------------------------------------------

    \119\ See Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals; Final Rule, 78 
FR 54069 at 54134 (August 30, 2013).
---------------------------------------------------------------------------

    In new proposed Sec.  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 non-Exchange website to disclose and display all 
QHP information provided by the Exchange or directly by QHP issuers 
consistent with the requirements of Sec.  155.205(b)(1) and (c), except 
as permitted under Sec.  155.220(n). We propose a similar revision to 
Sec.  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 non-Exchange 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

[[Page 78615]]

flexibility at new proposed paragraph (n) would not be available. A 
web-broker's non-Exchange website may not support enrollment in a QHP 
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 Sec.  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 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 
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 web-brokers by not requiring them to build 
functionality and processes to display all of the required comparative 
information listed in Sec.  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 web-broker ``doesn't display all plan information about, and 
doesn't facilitate enrollment in, this Qualified Health Plan at this 
time.''
---------------------------------------------------------------------------

    \120\ The 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[supreg] 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.
---------------------------------------------------------------------------

    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 Sec.  155.205(b)(1) among the limited, minimum information, such 
as summaries of benefits and coverage.\121\
---------------------------------------------------------------------------

    \121\ Section 155.205(b)(1) references the following comparative 
QHP information: Premium and cost-sharing 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.
---------------------------------------------------------------------------

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 Sec.  
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 Sec. Sec.  155.220(c)(3)(i)(K) and 
156.1230(b)(2) into Sec.  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 Sec.  
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 web-broker 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 non-Exchange 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

[[Page 78616]]

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.
---------------------------------------------------------------------------

    \122\ See 81 FR 94176.
    \123\ See 81 FR 94120.
    \124\ See 81 FR 94152.
    \125\ See 84 FR 17524.
    \126\ See, 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.
---------------------------------------------------------------------------

    We seek comment on this proposal.
5. Standards for Direct Enrollment Entities and for Third Parties To 
Perform Audits of Direct Enrollment Entities (Sec.  155.221)
a. Direct Enrollment Entity Plan Display Requirements
    We propose to revise Sec.  155.221(b)(1) to clarify the 
requirements that apply when direct enrollment entities want to display 
and market QHPs \127\ and non-QHPs. 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 Sec.  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 proposed exceptions described below.
---------------------------------------------------------------------------

    \127\ As 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 Sec. Sec.  
155.220, 155.221 and 156.1230, except as proposed at new Sec.  
155.221(c)(2) in the context of off-Exchange stand-alone dental plan 
shopping.
---------------------------------------------------------------------------

    In the 2020 Payment Notice, we amended Sec.  155.221(b)(1) to 
require direct enrollment entities to display and market QHPs and non-
QHPs on separate website pages on their respective non-Exchange 
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 
off-Exchange 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\
---------------------------------------------------------------------------

    \128\ See 84 FR 17523 and 17524.
    \129\ See 84 FR 17523.
    \130\ Id.
    \131\ Id.
    \132\ Id.
---------------------------------------------------------------------------

    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 off-Exchange under the guaranteed 
availability requirements at Sec.  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 non-QHP 
individual health insurance coverage. This creates a segmented off-
Exchange 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.
---------------------------------------------------------------------------

    \133\ See, for example, 45 CFR 155.220(j)(2)(i) and 
156.1230(a)(1)(iii).
---------------------------------------------------------------------------

    We propose to revise Sec.  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 Sec.  
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

[[Page 78617]]

(if eligible). We propose the second product category, individual 
health insurance coverage offered outside the Exchange (including QHPs 
and non-QHPs 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 Sec.  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 non-QHPs 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 Sec.  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 tax-preferred group health coverage. However, employers may 
not offer employees a choice of an individual coverage HRA or 
traditional group health coverage.
---------------------------------------------------------------------------

    \134\ See Health Reimbursement Arrangements and Other Account-
Based Group Health Plans; Final rule, 84 FR 28888 (June 20, 2019).
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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

[[Page 78618]]

develop blended plan selection user interfaces that incorporate on- and 
off-Exchange 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 Sec.  
155.221(c)(1) could clearly distinguish between on- and 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.
---------------------------------------------------------------------------

    \135\ See 45 CFR 155.220(j)(2)(i), applicable to web-brokers, 
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-Insurance-Marketplaces/Downloads/DE-Entity-Standards-of-Conduct-website-Display.pdf.
---------------------------------------------------------------------------

    We propose an additional exception to Sec.  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 stand-alone 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 off-Exchange stand-alone dental plan shopping experience where 
consumers can compare the full range of stand-alone dental plans on a 
single website page.
    We propose conforming amendments to redesignate paragraphs (c) 
through (h) in Sec.  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 Sec.  155.221(b)(4).
    We request comment on these proposals.
b. Direct Enrollment Entity Operational Readiness Review Requirements
    We propose to revise Sec.  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 Sec.  155.220(c)(6), we are proposing these 
amendments to codify in Sec.  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 Sec.  155.220(c)(6), 
although web-brokers may not be required to submit the documentation 
required under this proposal to revise Sec.  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 web-broker 
seeking to participate only in the Classic DE program would only be 
required to meet the operational readiness requirements at new proposed 
Sec.  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 Sec. Sec.  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

[[Page 78619]]

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.
---------------------------------------------------------------------------

    \136\ See, for example, 77 FR at 18313.
---------------------------------------------------------------------------

    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 
apples-to-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 lower-traffic 
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 e-commerce 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, non-Exchange 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).
---------------------------------------------------------------------------

    \137\ See, for example, 45 CFR 155.220(c)(3)(i)(A) (for web-
brokers) and 156.1230(a)(1)(ii) (for QHP issuers).
    \138\ As detailed above there is a growing cohort of consumers 
who may be interested in off-Exchange coverage options.
---------------------------------------------------------------------------

    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 sector-focused consumer 
engagement and enrollment strategy. We propose to add Sec.  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, web-brokers, 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.

[[Page 78620]]

    As outlined in proposed Sec.  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 cost-sharing for QHPs offered through the 
Exchange. New proposed Sec.  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.
---------------------------------------------------------------------------

    \139\ Section 155.221(a) identifies QHP issuers and web-brokers 
as eligible direct enrollment entities.
    \140\ Section 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 Sec.  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 Sec.  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.
    \141\ As 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.
---------------------------------------------------------------------------

    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 
back-end 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 Sec.  
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\
---------------------------------------------------------------------------

    \142\ Section 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).
---------------------------------------------------------------------------

    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 web-
brokers 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

[[Page 78621]]

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 Sec. Sec.  155.205(c)(2)(iv)(B) and (C), as well as in 
Sec.  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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \143\ See 45 CFR 155.205(b).
    \144\ See 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.
    \145\ See 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-and-FAQs/Downloads/CMS-Blueprint-Application.pdf.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \146\ See, for example, 45 CFR 155.220(l) and 155.221(h).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \147\ See 45 CFR 155.260, et. seq.
    \148\ See 45 CFR 155.220, 155.221, and 156.1230.
---------------------------------------------------------------------------

    As outlined in new proposed Sec.  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 Sec.  
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 Sec.  156.50(c) in 
support of the responsibilities undertaken by the state and HHS. We 
propose to codify this new requirement at Sec.  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

[[Page 78622]]

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 
consumer-facing website.
    As outlined in new proposed Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 Sec.  155.105(c)(2) and the new 
requirement proposed at Sec.  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.
---------------------------------------------------------------------------

    \149\ This 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.
    \150\ As detailed in Sec.  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.
---------------------------------------------------------------------------

    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 
Sec.  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 
fully-compliant with applicable federal requirements to participate in 
the FFE program.
---------------------------------------------------------------------------

    \151\ See 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.
    \152\ As noted above, the proposed new flexibilities in 
Sec. Sec.  155.205(c)(2)(iv)(B) and (C), as well as in Sec.  
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 Sec.  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.
---------------------------------------------------------------------------

    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 (Sec.  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 Sec.  155.220.
7. Verification Process Related to Eligibility for Insurance 
Affordability Programs (Sec.  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 Sec.  
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

[[Page 78623]]

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 Sec.  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 employer-sponsored 
coverage that meets minimum value and affordability standards, (2) 
compare premium and out-of-pocket costs for consumers enrolled in 
affordable employer-sponsored 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 (Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \153\ Section 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-a-plan/plans-categories/.
    \154\ These limitations do not apply to enrollees who qualify 
for certain types of special enrollment periods, including those 
under Sec.  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 Sec.  155.420(a)(4)(iii), Sec.  
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.
---------------------------------------------------------------------------

    Generally, Sec.  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 Sec.  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, 
Sec.  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 silver-level QHP 
if they elect to change their QHP enrollment to ensure that they can 
access this new benefit.
---------------------------------------------------------------------------

    \155\ Section 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 Sec.  
156.140(b).
---------------------------------------------------------------------------

    We propose to add a new flexibility at Sec.  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 Sec.  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.

[[Page 78624]]

    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 Sec.  
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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \157\ These 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \158\ Calculated 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.
---------------------------------------------------------------------------

    While this proposal is designed to provide Exchange enrollees who 
lose APTC with the chance to select lower-cost 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 Sec.  
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

[[Page 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 Sec.  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 Sec.  147.104(b)(2)(ii) so that these proposals would 
also apply to off-Exchange individual market health coverage.
    In accordance with Sec.  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 Sec.  155.410(e), and 
during special enrollment periods as specified in Sec.  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 Sec.  155.420(d) occurs. Furthermore, under Sec.  
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 Sec.  
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 Sec.  
155.420(d) and related plan selection timelines under Sec.  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 Sec.  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

[[Page 78626]]

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 employer-sponsored 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 Sec.  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 employer-
sponsored 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 Sec.  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 Sec.  147.104(b)(2) that 
would incorporate these amendments by reference in the regulations 
governing special enrollment periods for off-Exchange coverage, so that 
these proposed special enrollment rules would apply to issuers of non-
grandfathered coverage in the individual market, both on- and off-
Exchange. We also separately propose a change Sec.  147.104(b)(2)(ii) 
to clarify how the special enrollment period in Sec.  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.
---------------------------------------------------------------------------

    \159\ https://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/cobra-continuation-health-coverage-consumer.pdf.
---------------------------------------------------------------------------

    In accordance with the policy currently in place on the Exchanges 
using the Federal platform, we propose to amend Sec.  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\

[[Page 78627]]

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 Sec.  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.''
---------------------------------------------------------------------------

    \161\ Because 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.
---------------------------------------------------------------------------

    In implementing special enrollment periods for Exchanges using the 
Federal platform, HHS has provided a loss of MEC special enrollment 
period under Sec.  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.
---------------------------------------------------------------------------

    \162\ https://www.kff.org/private-insurance/issue-brief/key-issues-related-to-cobra-subsidies/.
---------------------------------------------------------------------------

    Therefore, we propose to amend Sec.  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 mini-COBRA laws 
\163\ serves as a special enrollment period triggering event under 26 
CFR 54.9801-6(a)(3)(ii), which is incorporated by Sec.  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 off-Exchange 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.
---------------------------------------------------------------------------

    \163\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
---------------------------------------------------------------------------

    As with other special enrollment periods described in Sec.  
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 non-dependent 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 
Sec.  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 Sec.  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

[[Page 78628]]

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\
---------------------------------------------------------------------------

    \164\ 82 FR at 18356.
---------------------------------------------------------------------------

    Since 2017, Exchanges using the federal platform have implemented 
pre-enrollment 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.
---------------------------------------------------------------------------

    \165\ 82 FR at 18356.
---------------------------------------------------------------------------

    Therefore, we propose to amend Sec.  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 Sec.  155.420(f) to verify eligibility for a special 
enrollment period. Specifically, under Sec.  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 Sec.  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 Sec.  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

[[Page 78629]]

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 (Sec.  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 Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \166\ The 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/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the 
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
    \167\ U.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.
---------------------------------------------------------------------------

    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 8.00x1.0590352278 or 8.47 percent, when rounded 
to the nearest one-hundredth 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 (Sec.  156.130).
    We seek comment on these proposals.
10. Excluding the Special Enrollment Period Trigger in Sec.  
155.420(d)(1)(v) From Applying to SHOP Plans (Sec.  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 Sec.  155.726(c)(2)(i) to exclude the 
special enrollment period trigger in proposed paragraph Sec.  
155.420(d)(1)(v) from applying to SHOP plans. For a discussion of the 
provisions of this proposal, please see the preamble for Sec.  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 (Sec.  156.50)
a. FFE and SBE-FP User Fee Rates for the 2022 Benefit Year (Sec.  
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 Sec.  
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

[[Page 78630]]

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:
    <bullet> Provision of consumer assistance tools;
    <bullet> Consumer outreach and education;
    <bullet> Management of a Navigator program;
    <bullet> Regulation of agents and brokers;
    <bullet> Eligibility determinations;
    <bullet> Enrollment processes; and
    <bullet> 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 Sec.  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 Sec.  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 (Sec.  
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 Sec.  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\
---------------------------------------------------------------------------

    \168\ See above for more information on the proposed direct 
enrollment option under Sec.  155.221(j).
---------------------------------------------------------------------------

    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 Sec.  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

[[Page 78631]]

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 Sec.  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 (Sec.  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 Sec.  
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 (Sec.  156.50(d))
    We are proposing to amend Sec.  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, Sec.  
156.50(d) was not amended to reflect the SBE-FP Exchange model. As 
such, in this rule, we propose to amend Sec.  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 Sec.  
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.
---------------------------------------------------------------------------

    \169\ 78 FR 39870 (July 2, 2013); 80 FR 41318 (July 14, 2015).
    \170\ 81 FR 12203 at 12293 (March 8, 2016).
---------------------------------------------------------------------------

    We seek comment on these proposals.
e. Request for Comments on Alternatives to Exchange User Fees (Sec.  
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 market-wide 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

[[Page 78632]]

based on factors that are not related to the cost of operating the 
Exchanges.
---------------------------------------------------------------------------

    \171\ ``Early 2020 Effectuated Enrollment Snapshot,'' July 23, 
2020. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Early-2020-2019-Effectuated-Enrollment-Report.pdf.
---------------------------------------------------------------------------

    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 (Sec.  156.111)
a. Annual Reporting of State-Required Benefits
    In the 2021 Payment Notice, we amended Sec.  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 state-
required benefits applicable to QHPs in the individual and/or small 
group market that are considered to be ``in addition to EHB'' in 
accordance with Sec.  155.170(a)(3).
    At Sec.  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 Sec.  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 Sec.  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 state-required benefits are not in addition to EHB 
and do not require defrayal in accordance with Sec.  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 Sec.  
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 EHB-
benchmark plan used for the 2017 plan year with the same categories of 
benefits from another state's EHB-benchmark plan used for the 2017 plan 
year; or (3) otherwise selecting a set of benefits that would become 
the state's EHB-benchmark plan.
    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

[[Page 78633]]

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 (Sec.  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 Sec.  
156.130(a)); (2) the required contribution percentage used to determine 
eligibility for certain exemptions under section 5000A of the Code 
(defined at Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \172\ 79 FR 13743.
    \173\ 79 FR 30240.
    \174\ 84 FR 17454.
    \175\ See 85 FR 29228.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \176\ The 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/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A 
detailed description of the NHE projection methodology is available 
at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
---------------------------------------------------------------------------

    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 Sec.  156.130(a)(2), 
for the 2022 calendar year, cost sharing for self-only coverage may not 
exceed the dollar limit for calendar year 2014 increased by an amount 
equal to the product of that amount and the premium adjustment 
percentage for 2022. For other than self-only coverage, the limit is 
twice the dollar limit for self-only coverage. Under Sec.  156.130(d), 
these amounts must be rounded down to the next lowest multiple of $50.
---------------------------------------------------------------------------

    \177\ See 78 FR 12847 through 12848.
---------------------------------------------------------------------------

    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 self-only 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.
---------------------------------------------------------------------------

    \178\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

b. Reduced Maximum Annual Limitation on Cost Sharing (Sec.  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 cost-sharing 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 cost-sharing 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 Sec.  156.420(a), we detailed the structure of these 
plan variations and specified that QHP issuers must ensure that each 
silver-plan 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 cost-sharing limits to ensure that the resulting limits 
do not cause the AV of the health plans to exceed the levels specified 
in section 1402(c)(1)(B)(i) of the PPACA (that is, 73 percent, 87

[[Page 78634]]

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 self-only 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).
---------------------------------------------------------------------------

    \179\ Available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.
---------------------------------------------------------------------------

    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 
(Sec.  156.130).
    The calculation of the reduced maximum annual limitation on cost 
sharing has remained consistent since the 2014 Payment Notice due to 
year-over-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-and-comment 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 Sec.  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.

[[Page 78635]]



  Table 9--Reductions in Maximum Annual Limitation on Cost Sharing for
                                  2022
------------------------------------------------------------------------
                                                       Reduced maximum
                                  Reduced maximum     annual limitation
                                 annual limitation     on cost sharing
     Eligibility category         on cost sharing       for other than
                                   for self-only     self-only  coverage
                                 coverage for 2020         for 2020
------------------------------------------------------------------------
Individuals eligible for CSRs                $3,000               $6,000
 under Sec.   155.305(g)(2)(i)
 (100-150 percent of FPL).....
Individuals eligible for CSRs                 3,000                6,000
 under Sec.
 155.305(g)(2)(ii) (151-200
 percent of FPL)..............
Individuals eligible for CSRs                 7,250               14,500
 under Sec.
 155.305(g)(2)(iii) (201-250
 percent of FPL)..............
------------------------------------------------------------------------

c. Publication of the Premium Adjustment Percentage, Maximum Annual 
Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost 
Sharing, and Required Contribution Percentage (Sec.  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-and-comment 
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 
notice-and-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 Sec.  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 Sec.  
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.
---------------------------------------------------------------------------

    \180\ 78 FR 12834 through 12833.
    \181\ 78 FR 15409.
---------------------------------------------------------------------------

    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 Sec. Sec.  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 
notice-and-comment rulemaking.
    We believe that publishing the final premium adjustment percentage 
and associated final parameters in guidance annually instead of through 
notice-and-comment 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 (Sec.  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 Sec.  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

[[Page 78636]]

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 
(Sec.  156.270)
    In the 2021 Payment Notice, CMS finalized a requirement that under 
Sec.  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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 Sec.  
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 Sec.  156.270(b)(1) 
beyond what we finalized in the 2021 Payment Notice.
6. Prescription Drug Distribution and Cost Reporting by QHP Issuers 
(Sec.  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\
---------------------------------------------------------------------------

    \183\ This 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).
    \184\ This 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.
    \185\ 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.
---------------------------------------------------------------------------

    In the 2012 Exchange Final Rule, we codified the requirements 
contained in section 1150A of the Act with regard to QHPs at Sec.  
156.295. In that rule, we interpreted section 1150A of the Act to 
require QHP issuers to report the information described in section

[[Page 78637]]

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\
---------------------------------------------------------------------------

    \186\ 85 FR 4993 through 4994.
    \187\ 85 FR 56227 through 56229.
    \188\ Pharmacy Benefit Manager Transparency. CMS-10725. 
Available at https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-10725.
---------------------------------------------------------------------------

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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  
156.295 and to add Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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.
---------------------------------------------------------------------------

    \189\ Section 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.
    \190\ See 77 FR 22072 at 22093.
    \191\ See 85 FR 4993 through 4994.
---------------------------------------------------------------------------

7. Oversight of the Administration of the Advance Payments of the 
Premium Tax Credit, Cost-Sharing Reductions, and User Fee Programs 
(Sec.  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

[[Page 78638]]

authority to conduct user fee audits of QHP issuers participating in an 
FFE.
---------------------------------------------------------------------------

    \192\ See 78 FR 65077 and 65078.
    \193\ See the proposed Program Integrity Rule, 78 FR 37058. Also 
see 78 FR at 65077 and 65078.
    \194\ Ibid.
    \195\ See 78 FR 65078 and 65079.
---------------------------------------------------------------------------

    In this rulemaking, we propose amendments to consolidate HHS audit 
authority regarding APTC, CSR, and user fee audits by expanding the 
audit authority under Sec.  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 non-compliance 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 Sec.  156.480(c) to confirm compliance 
with the applicable standards established in part 156, subpart E for 
APTC and CSRs and Sec.  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 Sec.  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 Sec.  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 Sec. Sec.  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.
---------------------------------------------------------------------------

    \196\ The 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.
---------------------------------------------------------------------------

    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 (Sec.  
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 Sec.  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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \197\ 78 FR 65077 and 65078.
    \198\ See 45 CFR 156.705(a)(1). Also see 78 FR 65078 and 65079.
---------------------------------------------------------------------------

    We also propose several amendments to Sec.  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.
---------------------------------------------------------------------------

    \199\ HHS 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.
    \200\ See 78 FR 65100.
---------------------------------------------------------------------------

    First, we propose to rename Sec.  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 Sec.  156.480(c) to incorporate a reference to 
HHS compliance reviews. As amended, Sec.  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

[[Page 78639]]

requirements of subpart E, part 156, and 45 CFR 156.50. We propose to 
capture in a new sentence in the amended Sec.  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 Sec.  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 Sec.  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 re-adjudication 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec. Sec.  156.805 and

[[Page 78640]]

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 Sec.  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 Sec. Sec.  156.800 and Sec.  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 (Sec.  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.<SUP>203 204</SUP> 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).
---------------------------------------------------------------------------

    \201\ Exchange 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.
    \202\ See the proposed Program Integrity Rule, 78 FR 37058. Also 
see 78 FR 65077 and 65078.
    \203\ Ibid.
    \204\ Section 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).
---------------------------------------------------------------------------

    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 Sec.  156.805, would send a notice of 
non-compliance as set forth in Sec.  156.806, and would extend the 
administrative review and appeal process set forth in Sec.  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 Sec.  156.800(a)(2) for non-
compliance by QHP issuers in State Exchanges or SBE-FPs; QHP de-
certification 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 Sec.  156.800(a) to 
replace the current references to the ``Federally-facilitated 
Exchange'' with references to ``an Exchange.'' We also propose to amend 
Sec.  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 non-compliance with the applicable 
requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers 
participating in State Exchanges and SBE-FPs.
---------------------------------------------------------------------------

    \205\ As 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 
Sec. Sec.  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.
---------------------------------------------------------------------------

    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 (Sec.  156.805)
    We also propose to amend Sec.  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

[[Page 78641]]

Sec.  156.805 for imposing CMPs on QHP issuers participating in an FFE. 
More specifically, in Sec.  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 Sec.  156.805(a) to use 
the words ``an Exchange,'' instead of ``Federally-facilitated 
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 Sec.  
156.50 in situations where HHS is responsible for enforcement. We 
similarly propose to modify Sec.  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 Sec.  156.50, including when HHS is performing an audit or 
compliance review under Sec.  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 Sec.  156.901, et seq.
    Finally, we propose to add a new paragraph (f) to Sec.  156.805 to 
capture in this regulation details on the circumstances requiring HHS 
enforcement of the applicable requirements in part 156, subpart E and 
Sec.  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 
Sec.  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 Sec.  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 Sec.  
156.901, et seq.
---------------------------------------------------------------------------

    \206\ See, for example, 45 CFR 150.203.
---------------------------------------------------------------------------

    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 Sec.  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 Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  156.800 
and to Sec.  156.805 are finalized as proposed, we would also apply 
Sec.  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 Sec.  156.805. Specifically, we propose to amend Sec.  
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

[[Page 78642]]

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 
(Sec. Sec.  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 Sec. Sec.  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 Sec.  156.901, to the introductory text in Sec.  
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 Sec.  156.901 and to the requirements 
outlined in Sec.  156.919(a) related to the forms for the hearing, 
Sec.  156.941(e) related to prehearing conferences, and Sec.  
156.947(a) related to the record of the hearing. Finally, we propose to 
update Sec.  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 (Sec.  156.1120) and Enrollee Satisfaction 
Survey System (Sec.  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\
---------------------------------------------------------------------------

    \207\ See 79 FR 30240 at 30352. Also see 45 CFR 155.1400, 
155.1405, 156.1120 and 156.1125.
    \208\ Prior 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/QualityRatingInformationBulletinforPlanYear2020.pdf.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \210\ See, 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-rating-system-and-qualified-health-plan-enrollee-experience-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-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Star-Ratings-Technical-Notes-Oct-10-2019.pdf.
    \213\ CMS anticipates continuing to propose methodology 
refinements to the QRS and QHP Enrollee Survey through the Call 
Letter process.
---------------------------------------------------------------------------

    In addition, to further support transparency of QHP quality data 
and to empower stakeholders including consumers, states, issuers and 
researchers with valuable information

[[Page 78643]]

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.
---------------------------------------------------------------------------

    \214\ A rating for Medical Care is the other component of the 
overall rating.
    \215\ 79 FR at 30311.
---------------------------------------------------------------------------

    We solicit comment on this proposal.
12. Dispute of HHS Payment and Collections Reports (Sec.  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 Sec.  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 Sec.  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 Sec.  156.1210 by 
redesignating current Sec.  156.1210(b) to Sec.  156.1210(d) and adding 
new Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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

[[Page 78644]]

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 (Sec.  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 (Sec.  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 Sec.  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 Sec.  
153.630(d)(2) and the previously finalized policy. We propose a similar 
amendment in this rule to Sec.  153.630(d)(3).
---------------------------------------------------------------------------

    \216\ See 45 CFR 156.1220(a)(1)(vii).
---------------------------------------------------------------------------

    We also propose amendments to Sec.  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 Sec.  
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 
Sec.  153.310(e). We also propose to create a new proposed Sec.  
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 Sec.  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 (Sec.  156.1240)
    Under Sec.  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 Sec.  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 employee-initiated 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\
---------------------------------------------------------------------------

    \217\ See 84 FR 28888.
    \218\ Public Law 114-255 (Dec. 13, 2016).
    \219\ 84 FR 28888 (June 20, 2019).
    \220\ See 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.'')
---------------------------------------------------------------------------

    Consistent with the final HRA rule, we propose to add a new Sec.  
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 Sec.  
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 Sec.  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.

[[Page 78645]]

F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements

1. Definitions (Sec.  158.103)
    To ensure program integrity, we propose to amend Sec.  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 Sec.  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.''
---------------------------------------------------------------------------

    \221\ The requirements of section 1150A with respect to QHP 
issuers are codified at Sec.  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.
---------------------------------------------------------------------------

    In light of these comments and the delayed applicability date of 
the amendment to Sec.  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 Sec.  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 Sec.  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 Sec.  158.103 and to clarify that this term 
excludes bona fide service fees, consistent with how such fees are 
described in Sec.  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 Sec.  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 (Sec.  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

[[Page 78646]]

similar temporary policy of relaxed enforcement to allow such issuers 
to offer temporary premium credits during the declared PHE.\226\
---------------------------------------------------------------------------

    \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).
    \224\ The 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).
    \225\ While 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.
    \226\ The 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.
---------------------------------------------------------------------------

    We propose that for purposes of Sec.  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.
---------------------------------------------------------------------------

    \227\ Available at https://www.cms.gov/cciio/Resources/Forms-Reports-and-OtherResources/index#Medical_Loss_Ratio.
    \228\ MLR 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 Sec.  158.130(b)(3).
---------------------------------------------------------------------------

    We request comment on this proposal.
3. Rebating Premium if the Applicable Medical Loss Ratio Standard Is 
Not Met (Sec.  158.240)
    Section 2718(b) of the PHS Act, and the implementing regulations at 
Sec. Sec.  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, Sec.  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 Sec.  
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 Sec.  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 
Sec.  158.240(f), an issuer that fails to pay a rebate owed to an 
enrollee in accordance with the applicable timeframes established in 
Sec. Sec.  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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 Sec.  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 Sec. Sec.  
158.240(e) and 158.241(a)(2) and prior to issuers submitting their MLR 
Annual Reporting Forms pursuant to Sec.  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 non-discriminatory 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 
Sec. Sec.  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 Sec.  
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 Sec. Sec.  158.240(e) and 158.241(a)(2) may, 
without penalty or late payment interest under Sec.  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

[[Page 78647]]

Sec. Sec.  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 Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 (Sec.  158.241)
    As discussed in the prior section of this preamble, Sec.  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 Sec.  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, 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 (Sec. Sec.  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\
---------------------------------------------------------------------------

    \231\ PBMs 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/.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \233\ Elizabeth 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.
    \234\ See ``The Prescription Drug Landscape, Explored.'' 
Available at https://www.pewtrusts.org/-/media/assets/2019/03/the_prescription_drug_landscape-explored.pdf.
---------------------------------------------------------------------------

    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 Sec.  184.10(a)(1), we explain that new part 184 is 
based on section 1150A of the Act. At proposed Sec.  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 Sec.  184.20. Except for the 
definition of pharmacy

[[Page 78648]]

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\
---------------------------------------------------------------------------

    \235\ This 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).
    \236\ As 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.
---------------------------------------------------------------------------

    In the 2012 Exchange Final Rule, we codified the requirements of 
section 1150A of the Act, as it applies to QHPs, at Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \237\ Section 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.
---------------------------------------------------------------------------

    We propose to add Sec.  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 Sec.  
156.295 in this proposed rule.
    We propose to add Sec.  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.
---------------------------------------------------------------------------

    \240\ As stated above in the preamble for Sec.  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.
    \241\ This definition of bona fide service fees was finalized at 
Sec.  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.
---------------------------------------------------------------------------

    At new Sec.  184.50(b) and (c), we also propose to codify the 
confidentiality and penalty provisions that appear at Sec.  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' long-
standing 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

[[Page 78649]]

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, pass-through 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.
---------------------------------------------------------------------------

    \242\ 83 FR 53575 (Oct. 24, 2018).
---------------------------------------------------------------------------

    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 pass-through 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

[[Page 78650]]

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:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> 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.
---------------------------------------------------------------------------

    \243\ See 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.
---------------------------------------------------------------------------

    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
----------------------------------------------------------------------------------------------------------------
                                                                                      Fringe
                                                   Occupational     Mean hourly    benefits and      Adjusted
                Occupation title                       code        wage  ($/hr.)   overhead ($/   hourly wage ($/
                                                                                       hr.)            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 (Sec.  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 Sec.  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

[[Page 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 (Sec. Sec.  155.220 and 155.221)

    At Sec.  155.220(c)(3)(iii), we are proposing to require web-
brokers' non-Exchange websites to display all QHP data provided by the 
Exchange, consistent with the requirements of Sec.  155.205(b)(1) and 
(c), including a standardized disclaimer provided by the Exchange if 
the web-broker non-Exchange website does not facilitate enrollment in 
all QHPs offered through the Exchange, before assisters would be 
permitted to use the web-broker non-Exchange 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 Sec.  155.220(c)(6), we propose a web-broker 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 web-broker 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 Sec.  155.221(b)(4) to incorporate requirements for 
direct enrollment entities seeking approval to use the EDE pathway. In 
proposed Sec.  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

[[Page 78652]]

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 (Sec.  156.295) and PBMs (Sec.  184.50)

    We propose to revise Sec.  156.295 and add Sec.  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.
---------------------------------------------------------------------------

    \244\ 85 FR 4993 through 4994.
    \245\ 85 FR 56227 through 56229.
---------------------------------------------------------------------------

    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 (Sec. Sec.  158.103, 158.130, 
158.240, 158.241)

    We propose to amend Sec.  158.103 to establish the definition of 
prescription

[[Page 78653]]

drug rebates and other price concessions that issuers must deduct from 
incurred claims for MLR reporting and rebate calculation purposes 
pursuant to Sec.  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 Sec.  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 Sec.  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 (Sec.  
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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Burden per
       Regulation section(s)         OMB control number      Number of       Number of       response      Total annual    Labor cost of  Total cost ($)
                                                            respondents      responses        (hours)     burden (hours)   reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   155.220(c)(6)..............  0938-NEW............              30              30              19             570         $43,970         $43,970
Sec.   155.221(b)(4)..............  0938-NEW............              77              77               9             693          53,458          53,458
Sec.   155.221(b)(4)--Business      0938-NEW............               4               4              72             288          22,020          22,020
 Requirements Audit.
Sec.   155.221(b)(4)--Security and  0938-NEW............              14              14             122           1,708         130,594         130,594
 Privacy Audit.
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        0938-NEW............             275             275               7           1,925          72,534          72,534
 Burden).
                                                         -----------------------------------------------------------------------------------------------
    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

[[Page 78654]]

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, web-brokers 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.
---------------------------------------------------------------------------

    \246\ As 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.
---------------------------------------------------------------------------

    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

[[Page 78655]]

transfers from issuers to federal government.

                     Table 12--Accounting Statement
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Benefits:
------------------------------------------------------------------------
Qualitative:
    <bullet> Continued access to coverage and heath care due to new
     special enrollment periods.
    <bullet> Greater market stability resulting from updates to the risk
     adjustment methodology.
    <bullet> Strengthened program integrity related to the proposal to
     require Exchanges to conduct special enrollment period
     verification.
    <bullet> Increased probability that consumers are able to maintain
     continuous coverage as a result of receiving MLR rebates sooner.
    <bullet> Increased transparency on the impact of PBMs on the cost of
     prescription drugs for QHPs.
    <bullet> Increased certainty for states regarding the application
     and ongoing approval process for section 1332 waiver applications,
     leading to increase in state innovation.
------------------------------------------------------------------------


 
                                                     Estimate                      Discount rate      Period
                      Costs                          (million)     Year  dollar      (percent)        covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)...................           $7.02            2020               7       2021-2025
                                                            6.88            2020               3       2021-2025
----------------------------------------------------------------------------------------------------------------
Quantitative:
    <bullet> 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....................................................................................................
    <bullet> 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........................
    <bullet> 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................................................................
    <bullet> 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........................................
    <bullet> 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....................................................................................
    <bullet> Regulatory familiarization costs of approximately $27,000 in 2020..................................
----------------------------------------------------------------------------------------------------------------
Qualitative:
    <bullet> Increased costs due to increases in providing medical services (if health insurance enrollment
     increases).................................................................................................
----------------------------------------------------------------------------------------------------------------


 
                                                     Estimate                      Discount rate      Period
                    Transfers                        (million)     Year  dollar      (percent)        covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)...................         -$280.5            2020               7       2021-2025
                                                          -287.8            2020               3       2021-2025
----------------------------------------------------------------------------------------------------------------
Quantitative:
    <bullet> 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......................................................................................
    <bullet> 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.
---------------------------------------------------------------------------

    \247\ Reinsurance collections ended in FY 2018 and outlays in 
subsequent years reflect remaining payments, refunds, and allowable 
activities.

 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

[[Page 78656]]

 
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 (Sec.  147.104)
    The proposed revision to Sec.  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 higher-than-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

[[Page 78657]]

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.
---------------------------------------------------------------------------

    \248\ To date, only one state (Alabama) has pursued this 
flexibility.
---------------------------------------------------------------------------

    We are proposing to provide more clarity regarding audits and 
compliance reviews of issuers of risk adjustment covered plans through 
proposed amendments to Sec.  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

[[Page 78658]]

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 (Sec.  153.410(d))
    We are proposing to provide more clarity regarding audits and 
compliance reviews of reinsurance-eligible plans through proposed 
amendments to Sec.  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 (Sec.  153.630(g))
    In this proposed rule, we are proposing to codify two previously-
established exemptions from HHS-RADV under Sec.  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 Sec.  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 (Sec. Sec.  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 Sec. Sec.  
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 web-broker 
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 Sec. Sec.  
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 Sec. Sec.  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 Sec.  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 web-broker's participation in 
Classic DE that is subject to the Sec.  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

[[Page 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 
Sec. Sec.  155.205(c)(2)(iv)(B) and (C) requirements apply.
---------------------------------------------------------------------------

    \249\ See ``Guidance and Population Data for Exchange, Qualified 
Health Plan Issuers, and Web-Brokers to Ensure Meaningful Access by 
Limited-English 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/Language-access-guidance.pdf.
---------------------------------------------------------------------------

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 non-Exchange 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 web-brokers 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 
non-Exchange 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 non-Exchange 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 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.
    We are proposing several amendments to Sec.  155.220 to capture new 
flexibility for assisters in FFE and SBE-FP states to use web-broker 
non-Exchange 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 
Sec.  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 Sec.  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 
web-brokers may obtain all QHP information they would be required to 
display in FFEs and SBE-FPs for assisters to be permitted to use their 
websites by integrating with the FFEs' Marketplace API. For FFEs and 
SBE-FPs, we are considering adoption of an optional annual 
certification process for web-brokers that would be integrated into the 
existing annual web-broker registration process, or could occur during 
another time of year, during which a web-broker could be certified by 
the Exchange by attesting to its compliance with the requirements 
proposed in Sec.  155.220(c)(3)(iii)(A). We propose to capture this 
optional annual certification process at new proposed Sec.  
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 Sec.  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 web-broker 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 Sec.  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 web-broker. In other cases, web-brokers might need to update 
their websites to add QHP information consistent with the requirements 
of Sec.  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 web-broker 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 Sec.  
155.220(c)(3)(iii) or can meet those requirements with minimal updates 
to their websites.
c. QHP Information Display on Web-Broker 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 Sec.  155.220(n), we 
propose to establish an exception to the web-broker display 
requirements captured at Sec.  155.220(c)(3)(i)(A) and (c)(3)(i)(D). At 
new proposed Sec.  155.220(n), we propose certain flexibilities 
regarding display of QHP information if a web-broker's non-

[[Page 78660]]

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 
Sec.  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 web-broker ``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 web-brokers by not requiring them to build 
functionality and processes to display all of the required comparative 
information listed in Sec.  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 Sec.  
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.
---------------------------------------------------------------------------

    \250\ See 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.
---------------------------------------------------------------------------

d. Web-Broker and Direct Enrollment Entity Operational Readiness Review 
Requirements
    At Sec.  155.220(c)(6), we propose a web-broker 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 
Sec.  155.220(c)(6)(i) through (iv), 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 non-Exchange 
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.
---------------------------------------------------------------------------

    \251\ See, 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.
---------------------------------------------------------------------------

    We propose to revise Sec.  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 Sec.  155.220(c)(6), we are proposing these 
amendments to codify in Sec.  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 Sec.  155.220(c)(6) for web-brokers,

[[Page 78661]]

although web-brokers may not be required to submit the documentation 
required under this proposal to revise Sec.  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 Sec.  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 Sec.  
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. 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 Sec.  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 front-facing 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 consumer-facing 
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 Sec.  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

[[Page 78662]]

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 (Sec.  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 Sec.  155.320(d)(4) for 
benefit year 2022, and we propose to amend Sec.  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 (Sec.  155.420)
a. Exchange Enrollees Newly Ineligible for APTC
    We propose to add a new paragraph at Sec.  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

[[Page 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 
Sec.  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 off-Exchange 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 off-Exchange 
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 (Sec.  155.420)
    We do not anticipate that revisions to Sec.  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 pre-enrollment 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

[[Page 78664]]

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 (Sec.  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 (Sec.  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 Sec.  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 
(Sec.  156.295) and PBMs (Sec.  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\
---------------------------------------------------------------------------

    \252\ This 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).
    \253\ 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.

---------------------------------------------------------------------------

[[Page 78665]]

    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.
---------------------------------------------------------------------------

    \254\ 85 FR 4993 through 4994.
    \255\ 85 FR 56227 through 56229.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \256\ Under 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \257\ Except 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.
---------------------------------------------------------------------------

12. Audits of APTCs, CSRs, and User Fees (Sec.  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 Sec.  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 (Sec.  156.1120) and Enrollee Satisfaction 
Survey System (Sec.  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 (Sec. Sec.  158.103, 158.130, 158.240, and 
158.241)
    In this proposed rule, we propose to amend Sec.  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 Sec.  
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

[[Page 78666]]

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 Sec.  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 Sec.  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 x 245 reviewers).
---------------------------------------------------------------------------

    \258\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

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 enrollee-
level 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 non-linear 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

[[Page 78667]]

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.
---------------------------------------------------------------------------

    \259\ Section 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 . . . .''
---------------------------------------------------------------------------

    We considered taking no action regarding our proposal to add a new 
Sec.  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.
---------------------------------------------------------------------------

    \260\ Section 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/plans-categories/.
---------------------------------------------------------------------------

    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 
Sec.  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 
Sec.  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 Sec.  155.420(b)(5) to 
provide a qualified individual, dependent, or enrollee described in new 
Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 78668]]

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 Sec.  156.295 and add Sec.  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-for-profit organization that is not dominant in its field, or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses 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.
---------------------------------------------------------------------------

    \261\ https://www.sba.gov/document/support--table-size-standards.
    \262\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    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

[[Page 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 
Exchange-related 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 programs-health, 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

0
1. The authority citation for part 33 continues to read as follows:

    Authority: Sec. 1332, Pub. L. 111-148, 124 Stat. 119.

0
2. Section 33.108 is amended by revising paragraph (f)(3)(iv) 
introductory text to read as follows:


Sec.  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

[[Page 78670]]

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):
* * * * *
0
3. Section 33.120 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  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.
* * * * *
0
4. Section 33.128 is amended by revising paragraph (a) to read as 
follows:


Sec.  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

0
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.

0
6. Section 147.104 is amended by revising paragraphs (b)(2)(ii) and 
(4)(ii) to read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (2) * * *
    (ii) In applying this paragraph (b)(2), a reference in Sec.  
155.420 (other than in Sec. Sec.  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 Sec.  
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 Sec.  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 Sec.  155.420(c)(2) of this 
subchapter.
* * * * *

PART 150--CMS ENFORCEMENT IN GROUP AND INDIVIDUAL INSURANCE MARKETS

0
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.


Sec.  150.103  [Amended]

0
8. In Sec.  150.103 amend the definition of ``Complaint'' by removing 
the word ``HIPAA'' and adding in its place ``PHS Act''.


Sec.  150.205  [Amended]

0
9. In Sec.  150.205 amend paragraph (e)(2) by removing the word 
``HIPAA'' and adding in its place ``PHS Act''.


Sec.  150.213  [Amended]

0
10. In Sec.  150.213 amend paragraph (b) by removing the word ``HIPAA'' 
and adding in its place ``PHS Act''.


Sec.  150.303  [Amended]

0
11. In Sec.  150.303 amend paragraph (a) introductory text by removing 
the word ``HIPAA'' and adding in its place ``PHS Act''.


Sec.  150.305  [Amended]

0
12. In Sec.  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''.


Sec.  150.311  [Amended]

0
13. In Sec.  150.311 amend paragraph (g) by removing the word ``HIPAA'' 
and adding in its place ``PHS Act''.


Sec.  150.313  [Amended]

0
 14. In Sec.  150.313 amend paragraph (b) by removing the word 
``HIPAA'' and adding in its place ``PHS Act''.
0
 15. Amend Sec.  150.401 by revising the definitions of ``Filing date'' 
and ``Hearing'' to read as follows:


Sec.  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.
* * * * *
0
 16. Amend Sec.  150.419 by revising paragraph (a) to read as follows:


Sec.  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 cross-examination.
* * * * *
0
 17. Amend Sec.  150.427 by revising paragraph (a) introductory text 
and paragraph (b) to read as follows:


Sec.  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.

[[Page 78671]]

0
 18. Revise Sec.  150.431 to read as follows:


Sec.  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.
0
 19. Amend Sec.  150.441 by revising paragraph (e) to read as follows:


Sec.  150.441  Prehearing conferences.

* * * * *
    (e) Establishing a schedule for an in-person, telephone, or video 
teleconference hearing, including setting deadlines for the submission 
of written direct testimony or for the written reports of experts.
* * * * *
0
 20. Amend Sec.  150.447 by revising paragraph (a) to read as follows:


Sec.  150.447  The record.

    (a) Any testimony that is taken in-person, 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

0
 21. The authority citation for part 153 continues to read as follows:

    Authority:  42 U.S.C. 18031, 18041, and 18061 through 18063.

0
 22. Section 153.320 is amended by--
0
a. Revising paragraph (c);
0
 b. Redesignating paragraphs (d)(2) through (d)(4) as paragraphs (d)(3) 
through (d)(5), respectively;
0
 c. Adding new paragraph (d)(2);
0
 d. Revising newly designated paragraphs (d)(4) and (d)(5)(i); and
0
 e. Adding paragraphs (d)(5)(iii) through (v).
    The revisions and additions read as follows:


Sec.  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 HHS-operated 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 multi-year 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.
0
23. Amend Sec.  153.410 by revising paragraph (d) to read as follows:


Sec.  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 Sec.  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

[[Page 78672]]

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.
0
24. Amend Sec.  153.620 by revising paragraph (c) to read as follows:


Sec.  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 Sec.  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.
0
25. Section 153.630 is amended by--
0
a. Revising paragraphs (d)(2) and (3); and

[[Page 78673]]

0
b. Adding paragraphs (g)(4) and (5).
    The revisions read as follows:


Sec.  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 
Sec.  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.
0
26. Section 153.710 is amended--
0
a. By redesignating paragraphs (e) through (g), as paragraphs (f) 
through (h), respectively; and
0
b. By adding a new paragraph (e); and
0
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:


Sec.  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

0
 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.

0
 28. Section 155.20 is amended by--
0
a. Adding the definitions of ``Agent or broker direct enrollment 
technology provider'' and ``Qualified health plan issuer direct 
enrollment technology provider'';
0
b. Revising the definitions of ``Web-broker''.
    The additions and revision read as follows:


Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec.  
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 Sec.  
155.220(c)(3) or Sec.  155.221. The term also includes an agent or 
broker direct enrollment technology provider.
0
 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:


Sec.  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 web-broker 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 stand-alone 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

[[Page 78674]]

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 Sec.  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 web-broker operates in a State using a direct 
enrollment model under Sec.  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.
* * * * *
0
 30. Section 155.220 is amended by--
0
 a. Revising paragraphs (c)(3)(i)(A) and (D);
0
b. Adding paragraph (c)(3)(iii); and
0
c. Adding paragraphs (c)(6) and (n).
    The revisions and additions read as follows:


Sec.  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 
Sec.  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 
Sec.  155.205(b)(1) and (c). Navigators and certified application 
counselors may use a web-broker 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 Sec.  
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 web-broker 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 
Sec.  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 Sec.  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 Sec.  155.205(c): Issuer marketing name, plan 
marketing name, plan type, metal level, and premium and cost-sharing 
information.
    (2) [Reserved]
0
31. Section 155.221 is amended--
0
a. By revising paragraphs (b)(1), (3), and (4);
0
b. By redesignating paragraphs (c) through (h) as paragraphs (d) 
through (i), respectively.
0
c. By adding paragraphs (c) and (j);
0
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
0
e. By adding paragraph (j).
    The additions and revisions read as follows:


Sec.  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 Sec.  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 non-
Exchange website, except as permitted under paragraph (c) of this 
section;
* * * * *
    (3) Limit marketing of non-QHPs during the Exchange eligibility

[[Page 78675]]

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 Federally-facilitated Exchanges, a direct 
enrollment entity may:
    (1) Display and market QHPs offered through the Exchange and 
individual health insurance coverage as defined in Sec.  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 
Sec.  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 non-QHPs 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 Exchange-certified stand-alone dental plans 
offered outside the Exchange and non-certified 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 consumer-facing eligibility 
application and enrollment website, a State may elect for the State 
Exchange, State Exchange on the Federal platform, or Federally-
facilitated Exchange in the State to approve one or more enrollment 
entities described in paragraph (a) of this section to make available a 
non-Exchange 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 Sec.  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 Sec. Sec.  155.302 and 
155.405.
    (1) Direct Enrollment Option for a State Exchange. A State may 
receive approval, under Sec. Sec.  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 
Sec.  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 Sec.  155.302, 
using the eligibility verification and enrollment application described 
in Sec.  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

[[Page 78676]]

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 Sec.  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.
0
32. Section 155.420 is amended by--
0
a. Revising paragraph (a)(4)(ii)(B);
0
b. Adding paragraph (a)(4)(ii)(C);
0
c. Revising paragraph (a)(4)(iii) introductory text;
0
d. Adding paragraphs (b)(5) and (c)(5);
0
e. Revising paragraphs (d)(1)(iii) and (iv);
0
f. Adding paragraph (d)(1)(v);
0
g. Adding paragraph (f).
    The revisions and additions read as follows:


Sec.  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 Sec.  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 Sec.  155. 
505b(iii), individuals have the right to appeal the eligibility 
determination.
0
33. Section 155.726 is amended by revising paragraph (c)(2)(i) to read 
as follows:


Sec.  155.726  Enrollment periods under SHOP for plan years beginning 
on or after January 1, 2018.

* * * * *
    (c) * * *
    (2) * * *
    (i) Experiences an event described in Sec.  155.420(d)(1) (other 
than paragraphs (d)(1)(ii) and (v)), or experiences an event described 
in Sec.  155.420(d)(2), (4), (5), (7), (8), (9), (10), (11), or (12);
* * * * *
0
34. Section 155.1308 is amended by revising paragraph (f)(3)(iv) 
introductory text to read as follows:


Sec.  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

[[Page 78677]]

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):
* * * * *
0
35. Section 155.1320 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  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.
* * * * *
0
36. Section 155.1328 is amended by revising paragraph (a) to read as 
follows:


Sec.  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

0
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.

0
38. Section 156.50 is amended by--
0
a. Revising the heading for paragraph (c);
0
b. Revising paragraph (c)(2);
0
c. Adding paragraph (c)(3);
0
d. Revising the heading for paragraph (d); and
0
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:


Sec.  156.50  Financial support.

* * * * *
    (c) Requirement for Exchange user fees. * * *
    (2) To support the functions of State-based 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 Sec.  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 State-
based 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 Sec.  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 Sec.  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 self-certification 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 Federally-
facilitated Exchange user fee, the State-based 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 
Sec.  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 self-certification referenced in 26 
CFR

[[Page 78678]]

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:
* * * * *
0
39. Section 156.130 is amended by revising paragraph (e) to read as 
follows:


Sec.  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.
* * * * *
0
40. Section 156.230 is amended by adding paragraph (f) to read as 
follows:


Sec.  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.
0
41. Section 156.295 is amended by--
0
a. Revising the section heading and paragraphs (a) introductory text, 
(a)(1) and (a)(2) introductory text,
0
b. Removing paragraph (a)(3); and
0
c. Revising paragraph (b) introductory text.
    The revisions read as follows:


Sec.  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:
* * * * *
0
42. Section 156.420 is amended by revising paragraphs (a)(1)(i), 
(a)(2)(i) and (a)(3)(i) to read as follows:


Sec.  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
* * * * *
0
43. Section 156.480 is amended by revising the section heading and 
paragraph (c) to read as follows:

[[Page 78679]]

Sec.  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 Sec.  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, cost-sharing 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 Sec.  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

0
44. Subpart I is amended by revising the heading as set forth above.
0
45. Section 156.800 is amended by revising paragraphs (a) introductory 
text, and (b) as follows:


Sec.  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.
* * * * *
0
46. Section 156.805 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(5)(i); and
0
b. Adding paragraph (f) to read.
    The revisions and addition read as follows:


Sec.  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 State-based 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.

[[Page 78680]]

Subpart J--Administrative Review of QHP Issuer Sanctions

0
47. Amend Subpart J by revising the heading to read as set forth above.
0
48. Section 156.901 is amended by revising the definitions of ``Filing 
date'' and ``Hearing'' to read as follows.


Sec.  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.
* * * * *
0
49. Section 156.903 is amended by revising paragraph (a) as follows:


Sec.  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 Federally-facilitated Exchange, State Exchange, and State-based 
Exchange on the Federal platform, or the decertification of a QHP 
offered in a Federally-facilitated Exchange.
* * * * *
0
50. Section 156.919 is amended by revising paragraph (a) to read as 
follows:


Sec.  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 cross-examination.
* * * * *
0
51. Section 156.927 is amended by revising paragraphs (a) introductory 
text and (b) to read as follows:


Sec.  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.
0
52. Section 156.931 is revised to read as follows:


Sec.  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.
0
53. Section 156.941 is amended by revising paragraph (e) to read as 
follows:


Sec.  156.941  Prehearing conferences.

* * * * *
    (e) Establishing a schedule for an in-person, telephone, or video 
teleconference hearing, including setting deadlines for the submission 
of written direct testimony or for the written reports of experts.
* * * * *
0
54. Section 156.947 is amended by revising paragraph (a) to read as 
follows:


Sec.  156.947  The record.

    (a) Any testimony that is taken in-person, 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.
* * * * *
0
55. Section 156.1210 is amended by--
0
a. Redesignating paragraph (b) as paragraph (d); and
0
b. Adding new paragraphs (b) and (c).
    The additions read as follows:


Sec.  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.
* * * * *
0
56. Section 156.1215 is amended by revising paragraph (b) to read as 
follows:


Sec.  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 Federally-
facilitated Exchange user fees, payment of State-based Exchanges 
utilizing the Federal platform user fees, and risk adjustment, 
reinsurance, and risk corridors payments and charges.
* * * * *
0
57. Section 156.1220 is amended by--
0
a. Revising paragraphs (a)(1)(vii) and (a)(3)(ii);
0
b. Redesignating paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv) 
through (vii), respectively; and
0
c. Adding new paragraph (a)(3)(iii).
    The revision and addition reads as follows:


Sec.  156.1220  Administrative appeals.

    (a) * * *
    (1) * * *
    (vii) The findings of a second validation audit as a result of risk

[[Page 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 Sec.  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;
* * * * *
0
58. Section 156.1240 is amended by adding paragraph (a)(3) to read as 
follows:


Sec.  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 Sec.  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

0
59. The authority citation for part 158 continues to read as follows:

    Authority:  42 U.S.C. 300gg-18.

0
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:


Sec.  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.
* * * * *
0
61. Section 158.240 is amended by adding paragraph (g) to read as 
follows:


Sec.  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 Sec.  158.241 
prior to the rebate payment deadlines set forth in Sec. Sec.  
158.240(e) and 158.241(a)(2) and in advance of submitting the MLR 
report required in Sec.  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 Sec.  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 Sec. Sec.  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 Sec.  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.
0
62. Section 158.241 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  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.
* * * * *
0
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.


Sec.  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

[[Page 78682]]

drug benefits for health insurance issuers that offer Qualified Health 
Plans with respect to the offering of such plans.


Sec.  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 Sec.  
144.103 of this subtitle.
    Plan year has the meaning given to the term in Sec.  156.20 of this 
subchapter.
    Qualified health plan has the meaning given to the term in Sec.  
156.20 of this subchapter.
    Qualified health plan issuer has the meaning given to the term in 
Sec.  156.20 of this subchapter.


Sec.  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