Vol. 79 Wednesday, 

No. 228 November 26, 2014 

Part III 

Department of Health and Human Services 

45 CFR Parts 144, 146, 147, et al. 

Patient Protection and Affordable Care Act; HHS Notice of Benefit and 

Payment Parameters for 2016; Proposed Rule 

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70674 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 144, 146, 147, 148, 153, 

154, 155, 156 and 158 

[CMS–9944–P] 

RIN 0938–AS19 

Patient Protection and Affordable Care 

Act; HHS Notice of Benefit and 

Payment Parameters for 2016 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would set 

forth payment parameters and 

provisions related to the risk 

adjustment, reinsurance, and risk 

corridors programs; cost sharing 

parameters and cost-sharing reductions; 

and user fees for Federally-facilitated 

Exchanges. It would also provide 

additional standards for the annual 

open enrollment period for the 

individual market for benefit years 

beginning on or after January 1, 2016, 

essential health benefits, qualified 

health plans, network adequacy, quality 

improvement strategies, the Small 

Business Health Options Program, 

guaranteed availability, guaranteed 

renewability, minimum essential 

coverage, the rate review program, the 

medical loss ratio program, and other 

related topics. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on December 22, 2014. 

ADDRESSES: In commenting, please refer 

to file code CMS–9944–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS– 

9944–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– 

9944–P, Mail Stop C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: For 

general information: Laurie McWright, 

(301) 492–4311; or Jeff Wu, (301) 492– 

4305. For matters related to guaranteed 

availability, guaranteed renewability, 

rate review, and the U.S. territories: 

Jacob Ackerman, (301) 492–4179. 

For matters related to the risk 

adjustment program generally, the risk 

adjustment methodology, and the 

methodology for determining the 

reinsurance contribution rate and 

payment parameters: Kelly Horney, 

(410) 786–0558. 

For matters related to reinsurance 

generally, distributed data collection 

good faith compliance policy, and 

administrative appeals: Adrianne 

Glasgow, (410) 786–0686. 

For matters related to the definition of 

common ownership for reinsurance 

contribution purposes: Adam Shaw, 

(410) 786–1019. 

For matters related to risk corridors: 

Jaya Ghildiyal, (301) 492–5149. 

For matters related to the QHP good 

faith compliance policy: Cindy Yen, 

(301) 492–5142. 

For matters related to essential health 

benefits, network adequacy, essential 

community providers, and other 

standards for QHP issuers: Leigha 

Basini, (301) 492–4380. 

For matters related to the Small 

Business Health Options Program: 

Christelle Jang, (410) 786–8438. 

For matters related to the Federallyfacilitated Exchange user fee: Ruth 

Tabak, (301) 492–4220. 

For matters related to cost-sharing 

reductions and the premium adjustment 

percentage: Pat Meisol, (410) 786–1917. 

For matters related to re-enrollment, 

open enrollment periods, and 

exemptions from the shared 

responsibility payment under part 155: 

Christine Hammer, (301) 492–4431. 

For matters related to special 

enrollment periods under part 155: 

Spencer Manasse, (301) 492–5141. 

For matters related to minimum 

essential coverage: Cam Moultrie 

Clemmons, (206) 615–2338. 

For matters related to quality 

improvement strategies: Marsha Smith, 

(410) 786–6614. 

For matters related to the medical loss 

ratio program: Julie McCune, (301) 492– 

4196. 

For matters related to meaningful 

access to QHP information and 

consumer assistance tools and programs 

of an Exchange under part 155, and 

cost-sharing reduction notices under 

part 156: Tricia Beckmann, (301) 492– 

4328. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70675 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Executive Summary 

II. Background 

A. Legislative and Regulatory Overview 

B. Stakeholder Consultation and Input 

C. Structure of Proposed Rule 

III. Provisions of the Proposed HHS Notice of 

Benefit and Payment Parameters for 2016 

A. Part 144—Requirements Relating to 

Health Insurance Coverage 

1. Definitions (§ 144.103) 

a. Plan 

b. State 

B. Part 146—Requirements for the Group 

Health Insurance Market 

C. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability of Coverage 

(§ 147.104) 

2. Guaranteed Renewability of Coverage 

(§ 147.106) 

D. Part 148—Requirements for the 

Individual Health Insurance Market 

E. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

1. Provisions for the State Notice of Benefit 

and Payment Parameters (§ 153.100) 

2. Provisions and Parameters for the 

Permanent Risk Adjustment Program 

a. Risk Adjustment User Fee 

b. Overview of the HHS Risk Adjustment 

Model 

c. Proposed Updates to Risk Adjustment 

Model 

d. List of Factors To Be Employed in the 

Model 

e. Cost-Sharing Reductions Adjustments 

f. Model Performance Statistics 

g. Overview of the Payment Transfer 

Formula 

h. HHS Risk Adjustment Methodology 

Considerations 

3. Provisions and Parameters for the 

Transitional Reinsurance Program 

a. Common Ownership Clarification 

b. Self-Insured Expatriate Plans 

(§ 153.400(a)(1)(iii)) 

c. Determination of Debt (§ 153.400(c)) 

d. Reinsurance Contribution Submission 

Process 

e. Consistency in Counting Methods for 

Health Insurance Issuers (§ 153.405(d)) 

f. Snapshot Count and Snapshot Factor 

Counting Methods (§§ 153.405(d)(2) and 

(e)(2)) 

g. Uniform Reinsurance Contribution Rate 

for 2016 

h. Uniform Reinsurance Payment 

Parameters for 2016 

i. Uniform Reinsurance Payment 

Parameters for 2015 

j. Deducting Cost-Sharing Reduction 

Amounts From Reinsurance Payments 

4. Provisions for the Temporary Risk 

Corridors Program 

a. Application of the Transitional Policy 

Adjustment in Early Renewal States 

b. Risk Corridors Payments for 2016 

5. Distributed Data Collection for the HHSOperated Risk Adjustment and 

Reinsurance Programs 

a. Good Faith Safe Harbor (§ 153.740(a)) 

b. Default Risk Adjustment Charge 

(§ 153.740(b)) 

c. Information Sharing (§ 153.740(c)) 

F. Part 154—Health Insurance Issuer Rate 

Increases: Disclosure and Review 

Requirements 

1. General Provisions 

a. Definitions (§ 154.102) 

2. Disclosure and Review Provisions 

a. Rate Increases Subject to Review 

(§ 154.200) 

b. Submission of Rate Filing Justification 

(§ 154.215) 

c. Timing of Providing the Rate Filing 

Justification (§ 154.220) 

d. CMS’s Determinations of Effective Rate 

Review Programs (§ 154.301) 

G. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. General Provisions 

a. Definitions (§ 155.20) 

2. General Functions of an Exchange 

a. Consumer Assistance Tools and 

Programs of an Exchange (§ 155.205) 

b. Standards Applicable to Navigators and 

Non-Navigator Assistance Personnel 

Carrying Out Consumer Assistance 

Functions Under §§ 155.205(d) and (e) 

and 155.210 in a Federally-Facilitated 

Exchange and to Non-Navigator 

Assistance Personnel Funded Through 

an Exchange Establishment Grant 

(§ 155.215) 

c. Standards for HHS-Approved Vendors of 

Federally-Facilitated Exchange Training 

for Agents and Brokers (§ 155.222) 

3. Exchange Functions in the Individual 

Market: Eligibility Determinations for 

Exchange Participation and Insurance 

Affordability Programs 

a. Annual Eligibility Redetermination 

(§ 155.335) 

4. Exchange Functions in the Individual 

Market: Enrollment in Qualified Health 

Plans 

a. Enrollment of Qualified Individuals Into 

QHPs (§ 155.400) 

b. Annual Open Enrollment Period 

(§ 155.410) 

c. Special Enrollment Periods (§ 155.420) 

d. Termination of Coverage (§ 155.430) 

5. Exchange Functions in the Individual 

Market: Eligibility Determinations for 

Exemptions 

a. Eligibility Standards for Exemptions 

(§ 155.605) 

b. Required Contribution Percentage 

(§ 155.605) 

6. Exchange Functions: Small Business 

Health Options Program (SHOP) 

a. Standards for the Establishment of a 

SHOP (§ 155.700) 

b. Functions of a SHOP (§ 155.705) 

c. Eligibility Standards for SHOP 

(§ 155.710) 

d. Enrollment of Employees Into QHPs 

Under SHOP (§ 155.720 and § 156.285) 

e. Enrollment Periods Under SHOP 

(§ 155.725 and § 156.285) 

f. Termination of Coverage (§ 155.735 and 

§ 156.285) 

7. Exchange Functions: Certification of 

Qualified Health Plans 

a. Certification Standards for QHPs 

(§ 155.1000) 

H. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. General Provisions 

a. Definitions (§ 156.20) 

b. FFE User Fee for the 2016 Benefit Year 

(§ 156.50) 

2. Essential Health Benefits Package 

a. State Selection of Benchmark (§ 156.100) 

b. Provision of EHB (§ 156.115) 

c. Collection of Data to Define Essential 

Health Benefits (§ 156.120) 

d. Prescription Drug Benefits (§ 156.122) 

e. Prohibition on Discrimination 

(§ 156.125) 

f. Cost-Sharing Requirements (§ 156.130) 

g. Minimum Value (§ 156.145) 

3. Qualified Health Plan Minimum 

Certification Standards 

a. QHP Issuer Participation Standards 

(§ 156.200) 

b. Transparency in Coverage (§ 156.220) 

c. Network Adequacy Standards 

(§ 156.230) 

d. Essential Community Providers 

(§ 156.235) 

e. Health Plan Applications and Notices 

(§ 156.250) 

f. Enrollment Process for Qualified 

Individuals (§ 156.265) 

g. Segregation of Funds for Abortion 

Services (§ 156.280) 

4. Health Insurance Issuer Responsibility 

With Respect to Advance Payments of 

the Premium Tax Credit and CostSharing Reductions 

a. Premium Adjustment Percentage 

(§ 156.130) 

b. Reduced Maximum Annual Limitation 

on Cost Sharing (§ 156.130) 

c. Plan Variations (§ 156.420) 

d. Changes in Eligibility for Cost-Sharing 

Reductions (§ 156.425) 

e. Cost-Sharing Reductions Reconciliation 

(§ 156.430) 

5. Minimum Essential Coverage 

a. Other Coverage That Qualifies as 

Minimum Essential Coverage (§ 156.602) 

6. Enforcement Remedies in FederallyFacilitated Exchanges 

a. Available Remedies; Scope (§ 156.800) 

b. Plan Suppression (§ 156.815) 

7. Quality Standards 

a. Quality Improvement Strategy 

(§ 156.1130) 

8. Qualified Health Plan Issuer 

Responsibilities 

a. Administrative Appeals (§ 156.1220(c)) 

I. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

1. Treatment of Cost-Sharing Reductions in 

MLR Calculation 

2. Reporting of Federal and State Taxes 

3. Distribution of Rebates to Group 

Enrollees in Non-Federal Governmental 

Plans 

IV. Collection of Information Requirements 

V. Response to Comments 

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70676 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

VI. Regulatory Impact Analysis 

A. Statement of Need 

B. Overall Impact 

C. Impact Estimates of the Payment Notice 

Provisions 

D. Regulatory Alternatives Considered 

E. Regulatory Flexibility Act 

F. Unfunded Mandates 

G. Federalism 

H. Congressional Review Act 

Acronyms 

Affordable Care Act—The collective term for 

the Patient Protection and Affordable Care 

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

and Education Reconciliation Act of 2010 

(Pub. L. 111–152), as amended 

AHFS—American hospital formulary system 

AV—Actuarial value 

CFR—Code of Federal Regulations 

CMS—Centers for Medicare & Medicaid 

Services 

ECP—Essential community provider 

EHB—Essential health benefits 

ERISA—Employee Retirement Income 

Security Act of 1974 (Pub. L. 93–406) 

FFE—Federally-facilitated Exchange 

FF–SHOP—Federally-facilitated Small 

Business Health Options Program 

FPL—Federal poverty level 

FQHC—Federally qualified health center 

HCC—Hierarchical condition category 

HHS—United States Department of Health 

and Human Services 

HIPAA—Health Insurance Portability and 

Accountability Act of 1996 (Pub. L. 104– 

191) 

IRS—Internal Revenue Service 

MLR—Medical loss ratio 

NAIC—National Association of Insurance 

Commissioners 

OMB—Office of Management and Budget 

OPM—United States Office of Personnel 

Management 

PHS Act—Public Health Service Act 

PRA—Paperwork Reduction Act of 1995 

P&T committee—Pharmacy and therapeutics 

committee 

QHP—Qualified health plan 

QIS—Quality improvement strategy 

SHOP—Small Business Health Options 

Program 

The Code—Internal Revenue Code of 1986 

TPA—Third-party administrator 

URL—Uniform resource locator 

USP—United States Pharmacopeia 

I. Executive Summary 

Qualified individuals and qualified 

employers are now able to purchase 

private health insurance coverage 

through competitive marketplaces 

called Affordable Insurance Exchanges, 

or ‘‘Exchanges’’ (also called Health 

Insurance Marketplaces, or 

‘‘Marketplaces’’). Individuals who enroll 

in qualified health plans (QHPs) 

through individual market Exchanges 

may be eligible to receive the premium 

tax credit to make health insurance 

more affordable and reductions in costsharing payments to reduce out-ofpocket expenses for health care services. 

Additionally, in 2014, HHS began 

operationalizing the premium 

stabilization programs established by 

the Affordable Care Act. These 

programs—the risk adjustment, 

reinsurance, and risk corridors 

programs—are intended to mitigate the 

potential impact of adverse selection 

and stabilize the price of health 

insurance in the individual and small 

group markets. These programs, together 

with other reforms of the Affordable 

Care Act, are making high-quality health 

insurance affordable and accessible to 

millions of Americans. 

We have previously outlined the 

major provisions and parameters related 

to the advance payments of the 

premium tax credit, cost-sharing 

reductions, and premium stabilization 

programs. This rule proposes additional 

provisions and modifications related to 

the implementation of these premium 

stabilization programs, as well as key 

payment parameters for the 2016 benefit 

year. 

The HHS Notice of Benefit and 

Payment Parameters for 2014 (78 FR 

15410) (2014 Payment Notice) finalized 

the risk adjustment methodology that 

HHS will use when it operates risk 

adjustment on behalf of a State. Risk 

adjustment factors reflect enrollee 

health risk and the costs of a given 

disease relative to average spending. 

This proposed rule proposes to 

recalibrate the HHS risk adjustment 

models for 2016 by using 2010, 2011, 

and 2012 claims data from the Truven 

Health Analytics 2010 MarketScan®

Commercial Claims and Encounters 

database (MarketScan) to develop 

updated risk factors. We also propose 

that when 2013 MarketScan data 

become available, we may recalculate 

these factors for publication in the final 

rule. We also seek comment on whether 

the recalculated risk factors should 

apply for 2015. 

Using the methodology set forth in the 

2014 Payment Notice and the HHS 

Notice of Benefit and Payment 

Parameters for 2015 (79 FR 13744) (2015 

Payment Notice), we propose a 2016 

uniform reinsurance contribution rate of 

$27 annually per enrollee, and the 2016 

uniform reinsurance payment 

parameters—a $90,000 attachment 

point, a $250,000 reinsurance cap, and 

a 50 percent coinsurance rate. We also 

propose to decrease the attachment 

point for the 2015 benefit year from 

$70,000 to $45,000, while retaining the 

$250,000 reinsurance cap and a 50 

percent coinsurance rate. We include 

proposals regarding the definition of 

‘‘common ownership’’ for purposes of 

determining whether a contributing 

entity uses a third-party administrator 

for core administrative functions. In 

addition, this proposed rule discusses 

the reinsurance contribution payment 

schedule and accompanying 

notifications. 

We also propose a clarification and a 

modification to the risk corridors 

program. We clarify that the risk 

corridors transitional adjustment policy 

established in the 2015 Payment Notice 

does not adjust the risk corridors 

calculation based on enrollment in a socalled ‘‘early renewal plan’’ (a plan that 

renewed before January 1, 2014 and 

before the end of its 12-month term) 

unless and until the plan renews in 

2014 and becomes a transitional plan. 

Additionally, for the 2016 benefit year, 

we are proposing an approach for the 

treatment of risk corridors collections 

under the policy set forth in our April 

11, 2014 FAQ on Risk Corridors and 

Budget Neutrality, if risk corridors 

collections available in 2016 exceed risk 

corridors payment requests from QHP 

issuers. We reiterate our previous 

guidance that in the unlikely event of a 

shortfall in the 2016 benefit year, HHS 

will use other sources of funding, 

subject to availability of appropriations. 

We also propose to extend the good 

faith safe harbor for non-compliance 

with the HHS-operated risk adjustment 

and reinsurance data requirements 

through the 2015 calendar year. 

We also propose several provisions 

related to cost sharing. First, we propose 

the premium adjustment percentage for 

2016, which is used to set the rate of 

increase for several parameters detailed 

in the Affordable Care Act, including 

the maximum annual limitation on cost 

sharing for 2016. We propose the 

maximum annual limitations on cost 

sharing for the 2016 benefit year for 

cost-sharing reduction plan variations. 

For reconciliation of 2014 cost-sharing 

reductions, we propose to permit issuers 

whose plan variations meet certain 

criteria to estimate the portion of claims 

attributable to non-essential health 

benefits to calculate cost-sharing 

reductions provided. 

For 2016, we are proposing a 

Federally-facilitated Exchange (FFE) 

user fee rate of 3.5 percent of premium. 

This rule also proposes provisions to 

enhance the transparency and 

effectiveness of the rate review program. 

It also proposes standards related to 

minimum essential coverage, the 

individual market annual open 

enrollment period for benefit years 

beginning on or after January 1, 2016, 

and proposes minor amendments to a 

number of SHOP provisions to clarify 

how certain Exchange provisions apply 

to qualified employers and qualified 

employees. This rule proposes 

provisions relating to the treatment of 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70677 

1The implementing regulations in part 154 limit 

the scope of the requirements under section 2794 

of the PHS Act to health insurance issuers offering 

health insurance coverage in the individual market 

or small group market. See Rate Increase Disclosure 

and Review; Final Rule, 76 FR 29964, 29966 (May 

23, 2011). 

cost-sharing reductions and certain 

taxes in medical loss ratio (MLR) and 

rebate calculations, as well as the 

distribution of rebates by group health 

plans not subject to Employee 

Retirement Income Security Act of 1974 

(Pub. L. 93–406) (ERISA). The proposed 

rule would provide more specificity 

about the meaningful access 

requirements applicable to an Exchange 

and to QHP issuers related to access for 

individuals with disabilities and 

individuals with limited English 

proficiency. This proposed rule would 

require issuers to provide a summary of 

benefits and coverage (SBC) for each 

plan variation of the standard QHP and 

to provide adequate notice to enrollees 

of changes in cost-sharing reduction 

eligibility. This proposed rule also 

includes additional quality 

improvement strategy reporting 

provisions for QHP issuers. Finally, this 

proposed rule specifies the 

circumstances that may lead an 

Exchange to suppress a QHP from being 

offered to new enrollees through an 

Exchange, and would extend the good 

faith compliance policy for QHP issuers 

through the 2015 calendar year. 

We propose several provisions 

relating to essential health benefits 

(EHBs). This proposed rule proposes a 

definition of habilitative services, and 

provides examples of discriminatory 

plan designs. This proposed rule would 

also change existing EHB standards 

regarding coverage of prescription drugs 

by proposing that formularies be 

established by issuers’ pharmacy and 

therapeutics committees (P&T 

committees). In addition, this proposed 

rule would amend requirements for 

essential community providers and 

network adequacy. 

II. Background 

A. Legislative and Regulatory Overview 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148) was enacted 

on March 23, 2010. The Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152), which amended and 

revised several provisions of the Patient 

Protection and Affordable Care Act, was 

enacted on March 30, 2010. In this 

proposed rule, we refer to the two 

statutes collectively as the ‘‘Affordable 

Care Act.’’ 

Subtitles A and C of title I of the 

Affordable Care Act reorganized, 

amended, and added to the provisions 

of part A of title XXVII of the Public 

Health Service Act (PHS Act) relating to 

group health plans and health insurance 

issuers in the group and individual 

markets. 

Section 2701 of the PHS Act, as added 

by the Affordable Care Act, restricts the 

variation in premium rates charged by a 

health insurance issuer for nongrandfathered health insurance coverage 

in the individual or small group market 

to certain specified factors. The factors 

are: family size, rating area, and age and 

tobacco use (within specified limits). 

Section 2701 of the PHS Act operates 

in coordination with section 1312(c) of 

the Affordable Care Act. Section 1312(c) 

of the Affordable Care Act generally 

requires a health insurance issuer to 

consider all enrollees in all health plans 

(except for 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 market and small group 

market risk pools under section 

1312(c)(3) of the Affordable Care Act. 

Section 2702 of the PHS Act, as added 

by the Affordable Care Act, requires 

health insurance issuers that offer 

health insurance coverage in the group 

or individual market in a State to offer 

coverage to and accept every employer 

and individual in the State that applies 

for such coverage unless an exception 

applies. 

Section 2703 of the PHS Act, as added 

by the Affordable Care Act, and sections 

2712 and 2741 of the PHS Act, as added 

by the Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) and 

codified prior to the enactment of the 

Affordable Care Act, require health 

insurance issuers that offer health 

insurance coverage in the group or 

individual market to renew or continue 

in force such coverage at the option of 

the plan sponsor or individual unless an 

exception applies. 

Section 2718 of the PHS Act, as added 

by the Affordable Care Act, generally 

requires health insurance issuers to 

submit an annual MLR report to HHS 

and provide rebates to enrollees if they 

do not achieve specified MLR 

thresholds. 

Section 2794 of the PHS Act, as added 

by the Affordable Care Act, directs the 

Secretary of HHS (the Secretary), in 

conjunction with the States, to establish 

a process for the annual review of 

‘‘unreasonable increases in premiums 

for health insurance coverage.’’ 1 The 

law also requires health insurance 

issuers to submit to the Secretary and 

the applicable State justifications for 

unreasonable premium increases prior 

to the implementation of the increases. 

Section 2794(b)(2) further specifies that 

beginning with plan years beginning in 

2014, the Secretary, in conjunction with 

the States, will monitor premium 

increases of health insurance coverage 

offered through an Exchange and 

outside of an Exchange. 

Section 1302 of the Affordable Care 

Act provides for the establishment of an 

essential health benefits (EHB) package 

that includes coverage of EHB (as 

defined by the Secretary), cost-sharing 

limits, and actuarial value (AV) 

requirements. The law directs that EHBs 

be equal in scope to the benefits covered 

by 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. 

Sections 1302(b)(4)(A) through (D) 

establish that the Secretary must define 

EHB in a manner that: (1) Reflects 

appropriate balance among the 10 

categories; (2) is not designed in such a 

way as to discriminate based on age, 

disability, or expected length of life; (3) 

takes into account the health care needs 

of diverse segments of the population; 

and (4) does not allow denials of EHBs 

based on age, life expectancy, disability, 

degree of medical dependency, or 

quality of life. 

Section 1302(d) of the Affordable Care 

Act describes the various levels of 

coverage based on actuarial value (AV). 

Consistent with section 1302(d)(2)(A) of 

the Affordable Care Act, AV is 

calculated based on the provision of 

EHB to a standard population. Section 

1302(d)(3) of the Affordable Care Act 

directs the Secretary to develop 

guidelines that allow for de minimis 

variation in AV calculations. 

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

Affordable Care Act directs that the 

SHOP assist qualified small employers 

in facilitating the enrollment of their 

employees in QHPs offered in the small 

group market. Sections 1312(f)(1) and 

(2) of the Affordable Care Act define 

qualified individuals and qualified 

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

of the Affordable Care Act, beginning in 

2017, States will have the option to 

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70678 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

2 If a State elects this option, the rating rules in 

section 2701 of the PHS Act and its implementing 

regulations will apply to all coverage offered in 

such State’s large group market (except for selfinsured group health plans) pursuant to section 

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

allow issuers to offer QHPs in the large 

group market through the SHOP.2

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

Affordable Care Act requires the 

Secretary to establish minimum criteria 

for provider network adequacy that a 

health plan must meet to be certified as 

a QHP. Section 1311(c)(1)(E) of the 

Affordable Care Act specifies that, to be 

certified as a QHP participating in 

Exchanges, each health plan must 

implement a quality improvement 

strategy (QIS), which is described in 

section 1311(g)(1) of the Affordable Care 

Act. 

Section 1311(c)(5) of the Affordable 

Care Act requires the Secretary to 

continue to operate, maintain and 

update the Internet portal developed 

under section 1103 of the Affordable 

Care Act to provide information to 

consumers and small businesses on 

affordable health insurance coverage 

options. 

Section 1311(c)(6)(B) of the 

Affordable Care Act states that the 

Secretary is to set annual open 

enrollment periods for Exchanges for 

calendar years after the initial 

enrollment period. 

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

Affordable Care Act directs all issuers of 

QHPs to cover the EHB package 

described in section 1302(a) of the 

Affordable Care Act, including coverage 

of the services described in section 

1302(b) of the Affordable Care Act, to 

adhere to the cost-sharing limits 

described in section 1302(c) of the 

Affordable Care Act and to meet the AV 

levels established in section 1302(d) of 

the Affordable Care Act. Section 2707(a) 

of the PHS Act, which is effective for 

plan or policy years beginning on or 

after January 1, 2014, extends the 

coverage of the EHB package to nongrandfathered individual and small 

group coverage, irrespective of whether 

such coverage is offered through an 

Exchange. In addition, section 2707(b) 

of the PHS Act directs nongrandfathered group health plans to 

ensure that cost sharing under the plan 

does not exceed the limitations 

described in sections 1302(c)(1) and (2) 

of the Affordable Care Act. 

Sections 1313 and 1321 of the 

Affordable Care Act provide the 

Secretary with the authority to oversee 

the financial integrity of State 

Exchanges, their compliance with HHS 

standards, and the efficient and nondiscriminatory administration of State 

Exchange activities. Section 1321 of the 

Affordable Care Act provides for State 

flexibility in the operation and 

enforcement of Exchanges and related 

requirements. 

Section 1321(a) of the Affordable Care 

Act provides the Secretary with broad 

authority to establish standards and 

regulations to implement statutory 

requirements related to Exchanges, 

QHPs and other components of title I of 

the Affordable Care Act. Under the 

authority established in section 

1321(a)(1) of the Affordable Care Act, 

the Secretary promulgated the 

regulations at § 155.205(d) and (e). 

Section 155.205 authorizes Exchanges to 

perform certain consumer service 

functions, including the Navigator 

program described in § 155.210. Section 

155.205(d) provides that each Exchange 

must conduct consumer assistance 

activities, and § 155.205(e) provides that 

each Exchange must conduct outreach 

and education activities to inform 

consumers about the Exchange and 

insurance affordability programs to 

encourage participation. Section 

155.205(d) and (e) also allow for the 

establishment of a non-Navigator 

consumer assistance program. Section 

155.215 establishes standards for 

Navigators and non-Navigator assistance 

personnel in Federally-facilitated 

Exchanges and for non-Navigator 

assistance personnel that are funded 

with Exchange establishment grant 

funds under section 1311(a) of the 

Affordable Care Act. 

When operating an FFE under section 

1321(c)(1) of the Affordable Care Act, 

HHS has the authority under sections 

1321(c)(1) and 1311(d)(5)(A) of the 

Affordable Care Act to collect and spend 

user fees. In addition, 31 U.S.C. 9701 

permits a Federal agency to establish a 

charge for a service provided by the 

agency. Office of Management and 

Budget (OMB) Circular A–25 Revised 

establishes Federal policy regarding 

user fees and specifies that a user charge 

will be assessed against each 

identifiable recipient for special benefits 

derived from Federal activities beyond 

those received by the general public. 

Section 1321(c)(2) of the Affordable 

Care Act authorizes the Secretary to 

enforce the Exchange standards using 

civil money penalties (CMPs) on the 

same basis as detailed in section 2723(b) 

of the PHS Act. Section 2723(b) of the 

PHS Act authorizes the Secretary to 

impose CMPs as a means of enforcing 

the individual and group market 

reforms contained in Part A of title 

XXVII of the PHS Act when a State fails 

to substantially enforce these 

provisions. 

Section 1321(d) of the Affordable Care 

Act provides that nothing in title I of the 

Affordable Care Act should be 

construed to preempt any State law that 

does not prevent the application of title 

I of the Affordable Care Act. Section 

1311(k) of the Affordable Care Act 

specifies that Exchanges may not 

establish rules that conflict with or 

prevent the application of regulations 

issued by the Secretary. 

Section 1341 of the Affordable Care 

Act requires the establishment of a 

transitional reinsurance program in each 

State to help pay the cost of treating 

high-cost enrollees in the individual 

market in benefit years 2014 through 

2016. Section 1342 of the Affordable 

Care Act directs the Secretary to 

establish a temporary risk corridors 

program that protects against inaccurate 

rate setting from 2014 through 2016. 

Section 1343 of the Affordable Care Act 

establishes a permanent risk adjustment 

program that is intended to provide 

increased payments to health insurance 

issuers that attract higher-risk 

populations, such as those with chronic 

conditions, funded by payments from 

those that attract lower-risk populations, 

thereby reducing incentives for issuers 

to avoid higher-risk enrollees. 

Sections 1402 and 1412 of the 

Affordable Care Act provide for 

reductions in cost sharing for essential 

health benefits for qualified low- and 

moderate-income enrollees in silver 

level health plans offered through the 

individual market Exchanges. These 

sections also provide for reductions in 

cost sharing for Indians enrolled in 

QHPs at any metal level. 

Section 5000A of the Code, as added 

by section 1501(b) of the Affordable 

Care Act, requires all non-exempt 

individuals to maintain minimum 

essential coverage or make the 

individual shared responsibility 

payment. Section 5000A(f) of the Code 

defines minimum essential coverage as 

any of the following: (1) Coverage under 

a specified government sponsored 

program; (2) coverage under an eligible 

employer-sponsored plan; (3) coverage 

under a health plan offered in the 

individual market within a State; and 

(4) coverage under a grandfathered 

health plan. Section 5000A(f)(1)(E) of 

the Code authorizes the Secretary of 

HHS, in coordination with the Secretary 

of the Treasury, to designate other 

health benefits coverage as minimum 

essential coverage. 

1. Premium Stabilization Programs 

In the July 15, 2011 Federal Register 

(76 FR 41930), we published a proposed 

rule outlining the framework for the 

premium stabilization programs. We 

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implemented the premium stabilization 

programs in a final rule, published in 

the March 23, 2012 Federal Register (77 

FR 17220) (Premium Stabilization Rule). 

In the December 7, 2012 Federal 

Register (77 FR 73118), 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 

15410). 

In the December 2, 2013 Federal 

Register (78 FR 72322), 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 13744). 

2. Program Integrity 

In the June 19, 2013 Federal Register 

(78 FR 37032), 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 54070) 

and the ‘‘second Program Integrity 

Rule’’ published in the October 30, 2013 

Federal Register (78 FR 65046). 

3. Exchanges 

We published a request for comment 

relating to Exchanges in the August 3, 

2010 Federal Register (75 FR 45584). 

We issued initial guidance to States on 

Exchanges on November 18, 2010. We 

proposed a rule in the July 15, 2011 

Federal Register (76 FR 41866) to 

implement components of the 

Exchange, and a rule in the August 17, 

2011 Federal Register (76 FR 51202) 

regarding Exchange functions in the 

individual market, 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 18310) 

(Exchange Establishment Rule). 

We established standards for the 

administration and payment of costsharing reductions and the SHOP in the 

2014 Payment Notice and in the 

Amendments to the HHS Notice of 

Benefit and Payment Parameters for 

2014 interim final rule, published in the 

March 11, 2013 Federal Register (78 FR 

15541). The provisions established in 

the interim final rule were finalized in 

the second Program Integrity Rule. We 

also set forth standards related to 

Exchange user fees in the 2014 Payment 

Notice. We also 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 39870) 

(Preventive Services Rule). 

In a final rule published in the July 

17, 2013 Federal Register (78 FR 

42859), we established standards for 

Navigators and non-Navigator assistance 

personnel in Federally-facilitated 

Exchanges and for non-Navigator 

assistance personnel funded through an 

Exchange establishment grant. 

4. Essential Health Benefits, Actuarial 

Value 

We established requirements relating 

to EHBs and AVs 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 12834) (EHB Rule). 

5. Market Rules 

A proposed rule relating to the 2014 

health insurance market rules was 

published in the November 26, 2012 

Federal Register (77 FR 70584). A final 

rule implementing the market rules was 

published in the February 27, 2013 

Federal Register (78 FR 13406) (2014 

Market Rules). 

A proposed rule relating to Exchanges 

and Insurance Market Standards for 

2015 and Beyond was published in the 

March 21, 2014 Federal Register (79 FR 

15808) (2015 Market Standards 

Proposed Rule). A final rule 

implementing the Exchange and 

Insurance Market Standards for 2015 

and Beyond was published in the May 

27, 2014 Federal Register (79 FR 30240) 

(2015 Market Standards Rule). 

6. Rate Review 

A proposed rule to establish the rate 

review program was published in the 

December 23, 2010 Federal Register (75 

FR 81004). A final rule with comment 

period implementing the rate review 

program was published in the May 23, 

2011 Federal Register (76 FR 29964) 

(Rate Review Rule). The provisions of 

the Rate Review Rule were amended in 

a final rule published in the September 

6, 2011 Federal Register (76 FR 54969) 

and in the proposed and final 2014 

Market Rules. 

7. Medical Loss Ratio (MLR) 

We published a request for comment 

on PHS Act section 2718 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 74864). A final 

rule with a 30-day comment period was 

published in the December 7, 2011 

Federal Register (76 FR 76574). An 

interim final rule with a 60-day 

comment period was published in the 

December 7, 2011 Federal Register (76 

FR 76596). 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders 

on policies related to the operation of 

Exchanges, including the SHOP and the 

premium stabilization programs. HHS 

has held a number of listening sessions 

with consumers, providers, employers, 

health plans, the actuarial community, 

and State representatives to gather 

public input. HHS consulted with 

stakeholders through regular meetings 

with the National Association of 

Insurance Commissioners (NAIC), 

regular contact with States through the 

Exchange Establishment grant and 

Exchange Blueprint approval processes, 

and meetings with Tribal leaders and 

representatives, health insurance 

issuers, trade groups, consumer 

advocates, employers, and other 

interested parties. We considered all of 

the public input as we developed the 

policies in this proposed rule. 

C. Structure of Proposed Rule 

The regulations outlined in this 

proposed rule would be codified in 45 

CFR parts 144, 146, 147, 148, 153, 154, 

155, 156 and 158. The proposed 

regulations in parts 144 propose a 

revised definition of the term ‘‘plan’’ 

and amendments relating to the 

definition of ‘‘State’’ for purposes of the 

group and individual market reforms 

added by the Affordable Care Act. 

The proposed regulations in parts 

146, 147, and 148 would establish 

parallel provisions in the guaranteed 

renewability regulations that prohibit an 

issuer that is discontinuing a product 

from automatically enrolling plan 

sponsors or individuals into a product 

of another licensed health insurance 

issuer. 

The proposed regulations in part 153 

outline the 2016 uniform reinsurance 

contribution rate, the uniform 

reinsurance payment parameters for the 

2016 benefit year, and a modification to 

the attachment point for the 2015 

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3Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, SHOP, and Eligibility 

Appeals, 78 FR at 54074 (August 30, 2013). 

4 Id., at 78 FR 54073. 

benefit year. We propose an approach 

with respect to the transitional 

reinsurance program and the definition 

of ‘‘common ownership’’ for purposes of 

determining whether a contributing 

entity uses a third-party administrator 

for core administrative functions. The 

proposed regulations also propose the 

risk adjustment user fee for 2016 and 

outline certain modifications to the HHS 

risk adjustment methodology. We 

propose to clarify that the risk corridors 

transitional adjustment policy does not 

adjust the risk corridors calculation 

based on enrollment in early renewal 

plans (plans that renewed before 

January 1, 2014 and before the end of 

their 12-month term) unless and until 

the plan renews in late 2014 and 

becomes a transitional plan, and 

propose how to distribute any excess 

risk corridors funds at the end of the 3- 

year program. We also propose to 

extend the good faith safe harbor for 

non-compliance with the HHS-operated 

risk adjustment and reinsurance data 

requirements into the 2015 calendar 

year. 

The proposed regulations in part 154 

outline certain modifications to enhance 

the transparency and effectiveness of 

the rate review process. We propose to 

consider the impact of rate increases at 

the ‘‘plan’’ level as opposed to the 

‘‘product’’ level when determining 

whether a rate increase in the individual 

or small group market is subject to 

review. Part 154 also includes related 

revisions to the definition of ‘‘rate 

increase’’ and a new definition of 

‘‘plan.’’ We further propose an approach 

to ensure that all rate increases in the 

individual and small group market—for 

both QHPs and non-QHPs—are filed on 

a uniform timeline, and that States with 

Effective Rate Review Programs provide 

public access from their Web site to 

information about proposed and final 

rate increases in the individual and 

small group markets by consistent times 

for every relevant State market. 

The proposed regulations in part 155 

include a clarification related to the 

functions of an Exchange, and would 

establish the individual market open 

enrollment period for benefit years 

beginning on or after January 1, 2016. 

They also make certain proposals 

related to the SHOP Exchanges, which 

we discuss in greater detail below. We 

also propose to specify oral 

interpretation services standards for 

Exchanges and for QHP issuers offering 

coverage through Exchanges and certain 

agents and brokers. We propose to 

clarify the scope of the physical 

presence requirement at § 155.215(h) 

with regard to non-Navigator assistance 

personnel in State Exchanges that are 

funded with section 1311(a) Exchange 

Establishment grants. 

The proposed regulations in part 156 

set forth provisions related to cost 

sharing, including the premium 

adjustment percentage, the maximum 

annual limitation on cost sharing, and 

the reductions in the maximum annual 

limitation for cost-sharing plan 

variations for 2016. They describe a 

limited exception to the process issuers 

are required to use to estimate the 

portion of claims for non-essential 

health benefits when calculating 2014 

cost-sharing reductions provided. They 

also outline the 2016 FFE user fee rate, 

and include provisions related to the 

essential health benefits and the 

calculation of AV. 

In part 156, we also propose a 

clarification to the administrative 

appeals process applicable to the 

premium stabilization, cost-sharing 

reduction, advance payments of the 

premium tax credit, and FFE user fee 

programs. Part 156 also outlines health 

insurance issuer responsibilities, 

including consumer disclosure 

requirements in the summary of benefits 

and coverage (SBC) related to plan 

variations and changes in eligibility for 

cost-sharing reductions. Part 156 also 

includes proposals related to essential 

health benefits, including proposed 

collection of new benchmark plan 

information, clarification of habilitative 

services coverage, and examples of 

possible discriminatory plan designs. 

We also propose a change in the EHB 

prescription drug standard, 

amendments to network adequacy 

requirements, and amendments to 

essential community provider 

requirements. Part 156 also contains a 

proposal relating to the recognition of 

State high risk pool coverage as 

minimum essential coverage. 

The proposed regulations in part 158 

propose clarifications regarding the 

treatment of cost-sharing reductions in 

MLR calculations, and amendments 

regarding the treatment of payroll taxes 

in MLR and rebate calculations, and 

relating to the distribution of rebates to 

group enrollees in non-Federal 

governmental and other group health 

plans not subject to ERISA. 

III. Provisions of the Proposed HHS 

Notice of Benefit and Payment 

Parameters for 2016 

A. Part 144—Requirements Relating to 

Health Insurance Coverage 

1. Definitions (§ 144.103) 

a. Plan 

In the 2015 Market Standards Rule, 

we codified a definition of ‘‘plan’’ at 

§ 144.103. Under that definition, the 

term ‘‘plan’’ means, with respect to an 

issuer and a product, the pairing of the 

health insurance coverage benefits 

under the product with a metal tier level 

(as described in sections 1302(d) and (e) 

of the Affordable Care Act) and service 

area. The product comprises all plans 

offered within the product, and the 

combination of all plans offered within 

a product constitutes the total service 

area of the product. 

We propose to amend this definition 

to provide further specificity about the 

characteristics that distinguish a plan. 

Specifically, we propose that the term 

‘‘plan’’ mean, with respect to an issuer 

and a product, the pairing of the health 

insurance coverage benefits under the 

product with a particular cost-sharing 

structure, provider network, and service 

area. This definition would make clear 

that plans that differ in their costsharing requirements (such as 

copayments, coinsurance or 

deductibles), or that have different 

networks of contracted providers or 

different service areas, are considered to 

be different plans. This would be true 

even if the plans are offered at the same 

metal tier level. 

This definition is consistent with our 

approach for determining whether a 

plan offered outside the Exchange is the 

same plan as one that is certified as a 

QHP and offered through the Exchange.3

It is also consistent with the standards 

for determining whether a plan is the 

‘‘same’’ or ‘‘substantially the same’’ as a 

QHP under § 153.500 and will therefore 

participate in the risk corridors 

program.4 The proposed amendments 

would also better align the defining 

features of a plan with the permitted 

plan-level adjustments under the single 

risk pool provision at § 156.80. For these 

reasons, we are also proposing the same 

definition apply for purposes of part 

154, rate review program, and part 156, 

health insurance issuer standards. 

We recognize that an issuer may, at 

the time of coverage renewal, make 

uniform modifications to a product, 

including modifying the cost sharing, 

provider network, and service area of a 

plan. We seek comment on when a plan 

should be considered the same plan for 

purposes of review for unreasonable rate 

increases, plan identification in the 

Health Insurance Oversight System 

(HIOS), and other programs based on 

changes in these characteristics. For 

instance, we seek comment on whether 

to adopt standards, similar to the 

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5See for example, Letter to Virgin Islands on the 

Definition of State (July 16, 2014). Available at: 

http://www.cms.gov/CCIIO/Resources/Letters/

Downloads/letter-to-Francis.pdf. 

product-level standards for uniform 

modification of coverage at § 147.106(e), 

for identifying when plan-level 

modifications constitute the same or 

different plan, and the particular form 

such standards should take. 

b. State 

On July 16, 2014, we issued letters to 

the Insurance Commissioners of Puerto 

Rico, the Virgin Islands, Guam, 

American Samoa, and the Northern 

Mariana Islands clarifying the 

applicability of certain Affordable Care 

Act provisions to health insurance 

issuers in the U.S. territories.5 We had 

been informed by representatives of the 

territories that subjecting issuers in the 

territories to the new market reforms in 

the PHS Act was undermining the 

stability of the territories’ health 

insurance markets. Accordingly, the 

letters explained that, in HHS’s 

determination, the new provisions of 

the PHS Act enacted in title I of the 

Affordable Care Act are appropriately 

governed by the definition of ‘‘State’’ set 

forth in that title, and therefore do not 

apply to group and individual health 

insurance issuers in the territories. The 

portions of the PHS Act that will not 

apply to group or individual health 

insurance issuers in the U.S. territories 

are sections 2701 through 2719A and 

2794. As explained in the letters, this 

analysis applies only to health 

insurance that is governed by the PHS 

Act. It does not affect the PHS Act 

requirements that were enacted in the 

Affordable Care Act and incorporated 

into ERISA and the Internal Revenue 

Code (the Code) and apply to group 

health plans (whether insured or selfinsured), because such applicability 

does not rely upon the term ‘‘State’’ as 

it is defined in either the PHS Act or in 

the Affordable Care Act. Similarly, it 

also does not affect the PHS Act 

requirements that were enacted in the 

Affordable Care Act and apply to nonFederal governmental plans. As a 

practical matter, therefore, PHS Act, 

ERISA, and the Code requirements 

applicable to group health plans 

continue to apply to such coverage, and 

issuers selling policies to both private 

sector and public sector employers in 

the territories will want to make certain 

that their products comply with the 

relevant Affordable Care Act 

amendments to the PHS Act applicable 

to group health plans since their 

customers—the group health plans—are 

still subject to those provisions of the 

PHS Act that were enacted in the 

Affordable Care Act including the 

prohibition on lifetime and annual 

limits (PHS Act section 2711), the 

prohibition on rescissions (PHS Act 

section 2712), coverage of preventive 

health services (PHS Act section 2713), 

and the revised internal and external 

appeals process (PHS Act section 2719), 

among other provisions. 

We propose to codify this 

interpretation in § 144.103. The 

proposed amendments would provide 

that, for purposes of the Affordable Care 

Act requirements implemented in part 

147, the term ‘‘State’’ does not include 

the U.S. territories of Puerto Rico, the 

Virgin Islands, Guam, American Samoa, 

and the Northern Mariana Islands. The 

term ‘‘State’’ would continue to include 

the territories for purposes of parts 146, 

148, and 150. Furthermore, part 147 

requirements would continue to apply 

to non-Federal governmental plans, 

consistent with the analysis in the 

letters to the territories. In proposing 

this amendment, we are also proposing 

a minor modification to the definition of 

‘‘State’’ to replace the words ‘‘several 

States’’ with ‘‘50 States,’’ so that the 

definition of ‘‘State’’ will read, ‘‘State 

means each of the 50 States, the District 

of Columbia, Puerto Rico, the Virgin 

Islands, Guam, American Samoa, and 

the Northern Mariana Islands; except 

that for purposes of part 147, the term 

does not include Puerto Rico, the Virgin 

Islands, Guam, American Samoa, and 

the Northern Mariana Islands.’’ 

We also propose to amend the 

regulations regarding rate review 

(§ 154.102) and EHB (§ 156.100) to 

reflect this interpretation. For a 

discussion of those provisions, see 

sections III.F.1.a and III.H.2.a of this 

preamble. 

B. Part 146—Requirements for the 

Group Health Insurance Market 

For a discussion of the provisions of 

this proposed rule related to part 146, 

see section III.C.2 of this preamble. 

C. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability of Coverage 

(§ 147.104) 

Section 147.104(b)(2) incorporates 

certain triggering events for special 

enrollment periods described in the 

Exchange regulations at § 155.420(d), 

and applies them to health insurance 

issuers offering non-grandfathered 

coverage in the individual market 

through or outside the Exchange. 

Sections 147.104(b)(2) and 

155.420(d)(1)(ii) also establish a special 

enrollment period (also referred to as a 

limited open enrollment period) for 

individuals enrolled in non-calendar 

year individual health insurance 

policies when their policy year ends in 

2014. 

In this proposed rule, as described 

below, we propose to modify 

§ 155.420(d)(1)(ii) to extend the 

availability of the special enrollment 

period for a qualified individual and his 

or her dependent who, in any year, has 

coverage under a group health plan or 

individual health insurance coverage 

that is offered on a non-calendar year 

basis. Because the special enrollment 

period in § 155.420(d)(1)(ii) is crossreferenced in § 147.104(b)(2), the 

parallel regulation text in 

§ 147.104(b)(2) is no longer necessary, 

and we propose to remove it. 

We also propose to move the related 

regulation text in § 147.104(b)(2) that 

requires individual market and merged 

market plans to be offered on a calendar 

year basis. We propose to redesignate 

existing paragraphs (f) through (h) as 

paragraphs (g) through (i) and to codify 

the calendar-year requirement in new 

paragraph (f), with minor modifications 

for clarity. 

To further ensure consistency 

between plans offered through or 

outside the individual market Exchange, 

we also propose to amend 

§ 147.104(b)(4) by cross-referencing 

§ 155.420(c)(2). Section 147.104(b)(4) 

provides that an individual has 60 days 

from the date of a triggering event to 

select an individual market plan during 

a special enrollment period. This 

amendment would apply the advance 

availability provisions in § 155.420(c)(2) 

to the broader individual market, 

allowing an individual 60 days before 

and after certain triggering events to 

make a plan selection through or 

outside the individual market Exchange. 

Finally, we propose to update the 

cross-reference in § 147.104(b)(1)(i)(C) to 

refer to § 155.725 rather than 

§ 155.725(a)(2), to conform with 

proposed amendments in § 155.725 

described later in this preamble. 

2. Guaranteed Renewability of Coverage 

(§ 147.106) 

The guaranteed renewability 

provisions of title XXVII of the PHS Act 

provide that an issuer may discontinue 

a product offered in the group or 

individual market if the issuer offers to 

each plan sponsor or individual who is 

enrolled in that particular product the 

option to purchase all (or, in the case of 

the large group market, any) other 

health insurance coverage currently 

being offered by the issuer in that 

market, and complies with other 

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6See Insurance Standards Bulletin, Form and 

Manner of Notices When Discontinuing or 

Renewing a Product in the Group or Individual 

Market, section IV (September 2, 2014). Available 

at: http://www.cms.gov/CCIIO/Resources/

Regulations-and-Guidance/Downloads/RenewalNotices-9-3-14-FINAL.PDF. See also Patient 

Protection and Affordable Care Act; Annual 

Eligibility Redeterminations for Exchange 

Participation and Insurance Affordability Programs; 

Health Insurance Issuer Standards under the 

Affordable Care Act, Including Standards Related to 

Exchanges, 79 FR at 53000 (September 5, 2014). 

requirements of those sections, as well 

as with any applicable State law. 

In previous guidance outlining our 

current regulatory interpretation of the 

product discontinuation provisions, we 

explained that an issuer does not satisfy 

the requirement to offer other coverage 

currently being offered ‘‘by the issuer’’ 

in the applicable market if it 

automatically enrolls a plan sponsor or 

individual into a product of another 

issuer that is separately licensed to 

engage in the business of insurance in 

a State.6 We propose to codify that 

interpretation by amending the 

guaranteed renewability regulations at 

§ 146.152(c)(2), § 147.106(c)(2), and 

§ 148.122(d)(2). 

We note that this proposal would not 

prevent an issuer that decides to 

discontinue all health insurance 

coverage in a market (market 

withdrawal) from automatically 

enrolling plan sponsors or individuals 

into a product of another licensed 

issuer, to the extent permitted by 

applicable State law. However, if the 

issuer terminates all coverage in a 

market or markets, it is subject to certain 

requirements outlined in § 146.152(d), 

§ 147.106(d), and § 148.122(e), as 

applicable. In particular, the issuer must 

provide at least 180 days’ notice to the 

applicable State authority and to each 

plan sponsor or individual, as 

applicable, (and participants and 

beneficiaries covered under such 

coverage), and it is prohibited from 

issuing coverage in the market(s) or 

State involved for 5 years following the 

date of discontinuation. The issuer must 

also comply with any applicable State 

law. 

In instances when an issuer is not 

withdrawing from the market, we note 

that permitting the purchase and sale of 

products between issuers, whether 

through acquisitions of the product, 

statutory mergers of the issuers, or other 

corporate combinations, could create an 

opportunity for insurance holding 

companies to segment risk on the basis 

of health status between their subsidiary 

companies. However, we also do not 

want to impose undue constraints on 

standard corporate reorganization 

practices. Where an issuer may wish to 

transfer its product(s) to another issuer, 

it is not clear whether the purposes of 

the guaranteed renewability provisions 

are better served by requiring the ceding 

issuer to offer the consumer enrollment 

in a different product offered by that 

issuer, or by having the acquiring issuer 

automatically enroll the consumer in 

the transferred product, which may 

have the same benefits, cost sharing, 

and other plan features. 

We are considering how to interpret 

the guaranteed renewability provisions 

in the context of various corporate 

transactions involving a change of 

ownership, such as mergers, 

acquisitions, and similar business 

restructuring, as well as particular 

standards that may be necessary to 

ensure seamless coverage for enrollees 

and to facilitate the ongoing operational 

processes of HHS-administered 

programs. For example, we could allow 

for the retention of enrollees under a 

product that is being transferred to 

another issuer under certain types of 

transactions as permitted by applicable 

State law, but only if the same benefits, 

network, and other coverage features 

remain in place and the acquiring issuer 

agrees to accept liability for any 

payments and charges for the advance 

payments for the premium tax credit, 

cost-sharing reductions, the FFE user 

fee, and the HHS-operated risk 

adjustment, reinsurance, and risk 

corridors programs. We believe that this 

allocation of liability would accord with 

many parties’ expectations upon 

entering into such a transaction. We 

seek comment on such a standard, or 

what other allocation of liability should 

apply following such a transaction for 

each of these programs. 

In addition to interpretations of the 

guaranteed renewability provisions in 

this context, mid-year changes in 

ownership affect operational processes, 

in particular for the data and payment 

processes associated with the programs 

listed above. These programs utilize 

plan identification in the Health 

Insurance Oversight System (HIOS), and 

at this time, cannot easily accommodate 

changes in such identification that 

would result from certain mid-year 

changes in ownership. Therefore issuers 

subject to these programs must continue 

data and payment processes under the 

original HIOS identifying information 

for affected programs until operations 

for the coverage year are complete. 

Operational guidance addressing data 

submissions and payments and charges 

when an issuer participating in the 

programs listed above experiences a 

change of ownership will be 

forthcoming. 

To facilitate these operational 

processes, we propose to impose a 

notification requirement on issuers of a 

QHP, a plan otherwise subject to risk 

corridors, or a reinsurance-eligible plan 

or a risk adjustment covered plan, in 

cases of changes of ownership, as 

recognized by the State in which the 

issuer offers coverage. As an alternative, 

we also are considering defining a 

change of ownership for these purposes 

as a transaction that would cause a 

change in an issuer’s tax identification 

number, or any change in legal 

ownership of an issuer’s plan, for 

example through an asset sale or 

transfer or change in holding company 

ownership. We propose to require the 

post-transaction issuer to notify HHS of 

the transaction in the manner specified 

by HHS, by the later of the date the 

transaction is entered into or the 30th 

day prior to the effective date of the 

transaction. We anticipate that these 

timelines will not interfere with the 

negotiation and consummation of the 

transaction, but will permit the parties 

and HHS to clarify operational payment 

processes in a timely manner. 

We seek comment on how the 

guaranteed renewability provisions 

should be interpreted as related to the 

transfer of products or corporate 

transformations of issuers. In particular, 

we seek comment on what, if any, types 

of automatic enrollment practices 

should be permitted in connection with 

specific types of corporate transactions 

and whether the regulations should be 

amended to create an exception to the 

prohibition on auto-enrollment with a 

different issuer in certain situations 

involving changes of ownership; how 

common such transactions are and how 

they are typically structured; the extent 

to which State laws and regulations 

impose restrictions on such 

transactions, and how our interpretation 

of the guaranteed renewability 

provisions would best protect the 

interests of consumers. We also seek 

comment on how the timing of such 

transactions may interact with other 

applicable market reforms in the 

relevant market segment, such as the 

timing of index rate updates under the 

single risk pool provision at § 156.80. 

We additionally seek comment on 

whether particular disclosure or special 

enrollment period provisions are 

necessary to ensure consumers are 

timely notified of a transaction affecting 

their coverage and given options for 

electing other coverage. 

Finally, we seek comment on all 

aspects of proposed notification to HHS, 

including the identity of the notifying 

issuer, the timing of the proposed 

notification, types of transactions for 

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which notification should be required, 

operational guidance that should be 

offered, and which issuer should be 

liable for payments and charges for the 

advance payments for the premium tax 

credit, cost-sharing reductions, the 

Federally-facilitated Exchange user fees, 

and the HHS-operated risk adjustment, 

reinsurance, and risk corridors 

programs. We also seek comment on 

whether the notification requirement 

should apply to issuers of all plans 

subject to the guaranteed renewability 

requirements, including, for example, 

grandfathered health plans. 

D. Part 148—Requirements for the 

Individual Health Insurance Market 

For a discussion of the provisions of 

this proposed rule related to part 148, 

see section III.C.2 of this preamble. 

E. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

1. Provisions for the State Notice of 

Benefit and Payment Parameters 

(§ 153.100) 

In § 153.100(c), we established a 

deadline of March 1 of the calendar year 

prior to the applicable benefit year for 

a State to publish a State notice of 

benefit and payment parameters if the 

State is required to do so under 

§ 153.100(a) or (b)—that is, if the State 

is operating a risk adjustment program, 

or if the State is establishing a 

reinsurance program and wishes to 

modify the data requirements for issuers 

to receive reinsurance payments from 

those specified in the HHS notice of 

benefit and payment parameters for the 

benefit year, wishes to collect additional 

reinsurance contributions or use 

additional funds for reinsurance 

payments, or elects to use more than 

one applicable reinsurance entity. As of 

the date of publication of this proposed 

rulemaking, Connecticut is the only 

State that has elected to establish a 

transitional reinsurance program and 

Massachusetts is the only State that has 

elected to operate a risk-adjustment 

program. 

We have previously recognized in the 

2014 and 2015 Payment Notices that it 

may be difficult for States to publish 

such a notice by the required deadline 

if the final HHS notice of benefit and 

payment parameters for the applicable 

benefit year has not yet been published. 

Therefore, we propose to modify 

§ 153.100(c) so that the publication 

deadline for the State notice of benefit 

and payment parameters would be the 

later of March 1 of the calendar year 

prior to the applicable benefit year, or 

the 30th day following publication of 

the final HHS notice of benefit and 

payment parameters for that benefit 

year. This deadline corresponds to the 

extended deadlines we implemented for 

the 2014 and 2015 benefit years in the 

2014 and 2015 Payment Notices, 

respectively. We seek comment on this 

proposal. 

2. Provisions and Parameters for the 

Permanent Risk Adjustment Program 

The risk adjustment program is a 

permanent program created by section 

1343 of the Affordable Care Act that 

transfers funds from lower risk, nongrandfathered plans to higher risk, nongrandfathered plans in the individual 

and small group markets, inside and 

outside the Exchanges, to balance risk 

and maintain market stability. In 

subparts D and G of the Premium 

Stabilization Rule, we established 

standards for the administration of the 

risk adjustment program. 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. 

a. Risk Adjustment User Fee 

If a State is not approved to operate 

or chooses to forgo operating its own 

risk adjustment program, HHS will 

operate risk adjustment on the State’s 

behalf. 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. 

Section 153.610(f)(2) provides that an 

issuer of a risk adjustment covered plan 

must remit a user fee to HHS equal to 

the product of its monthly enrollment in 

the plan and the per-enrollee-per-month 

risk adjustment user fee specified in the 

annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year. 

OMB Circular No. A–25R 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. The risk 

adjustment program will provide special 

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

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

adjustment covered plans because it 

will mitigate the financial instability 

associated with potential adverse risk 

selection. The risk adjustment program 

also will contribute to consumer 

confidence in the health insurance 

industry by helping to stabilize 

premiums across the individual and 

small group health insurance markets. 

In the 2015 Payment Notice, we 

estimated Federal administrative 

expenses of operating the risk 

adjustment program to be $0.96 perenrollee-per-year, based on our 

estimated contract costs for risk 

adjustment operations. For the 2016 

benefit year, we propose to use the same 

methodology to estimate our 

administrative expenses to operate the 

program. These contracts 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, and 

operational support. To calculate the 

user fee, we would divide HHS’s 

projected total costs for administering 

the risk adjustment programs on behalf 

of States by the expected number of 

enrollees in risk adjustment covered 

plans (other than plans not subject to 

market reforms and student health 

plans, which are not subject to 

payments and charges under the risk 

adjustment methodology HHS uses 

when it operates risk adjustment on 

behalf of a State) in HHS-operated risk 

adjustment programs for the benefit 

year. 

We estimate that the total cost for 

HHS to operate the risk adjustment 

program on behalf of States for 2016 

will be approximately $50 million, and 

that the risk adjustment user fee would 

be $1.75 per enrollee per year. The 

increased risk adjustment user fee for 

2016 is the result of the increased 

contract costs to support the risk 

adjustment data validation process, 

which will be administered for the first 

time in 2016. We seek comment on this 

proposed risk adjustment user fee rate. 

b. Overview of the HHS Risk 

Adjustment Model 

The HHS risk adjustment model 

predicts plan liability for an average 

enrollee based on that person’s age, sex, 

and diagnoses (risk factors), producing a 

risk score. The HHS risk adjustment 

methodology utilizes separate models 

for adults, children, and infants to 

account for cost differences in each of 

these age groups. In each of the adult 

and child models, the relative costs 

assigned to an individual’s age, sex, and 

diagnoses are added together to produce 

a risk score. Infant risk scores are 

determined by inclusion in one of 25 

mutually exclusive groups based on the 

infant’s maturity and the severity of its 

diagnoses. If applicable, the risk score is 

multiplied by a cost-sharing reduction 

adjustment. 

The enrollment-weighted average risk 

score of all enrollees in a particular risk 

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7HHS-Developed Risk Adjustment Model 

Algorithm Software Instructions. June 2, 2014. 

http://www.cms.gov/CCIIO/Resources/Regulations- and-Guidance/Downloads/DIY-instructions-5-20- 

14.pdf. 

adjustment-covered plan, or the plan 

liability risk score, within a geographic 

rating area is one input into the 

payment transfer formula, which 

determines an issuer’s transfer (payment 

or charge) for that plan. Thus, the HHS 

risk adjustment model predicts 

individual-level risk scores, but is 

designed to predict average group costs 

to account for risk across plans, which, 

as we stated in the 2014 Payment 

Notice, accords with the Actuarial 

Standards Board’s Actuarial Standards 

of Practice for risk classification. 

c. Proposed Updates to Risk Adjustment 

Model 

We propose to continue to use the 

same risk adjustment methodology 

finalized in the 2014 Payment Notice, 

with changes to reflect more current 

data, as described here. As we stated 

above, in the adult and child models, 

enrollee health risks are estimated using 

the HHS risk adjustment model, which 

assigns a set of additive factors that 

reflect the relative costs of 

demographics and diagnoses. Risk 

adjustment factors are developed using 

claims data and reflect the costs of a 

given disease relative to average 

spending. The longer the lag in data 

used to develop the risk factors, the 

greater the potential that the costs of 

treating one disease versus another have 

changed in a manner not fully reflected 

in the risk factors. 

To provide risk adjustment factors 

that best reflect more recent treatment 

patterns and costs, we propose to 

recalibrate the HHS risk adjustment 

models for 2016 by using more recent 

claims data to develop updated risk 

factors. The risk factors published in the 

2014 Payment Notice for use in 2014 

and 2015 were developed using the 

Truven Health Analytics 2010 

MarketScan® Commercial Claims and 

Encounters database (MarketScan); we 

are proposing to update the risk factors 

in the HHS risk adjustment model using 

2010, 2011, and 2012 MarketScan data. 

We seek comment on this proposal. 

We propose to implement the 

recalibrated risk adjustment factors in 

2016 to provide sufficient time for 

issuers to account for risk adjustment 

model changes. However, we also seek 

comment on making the recalibrated 

HHS risk adjustment models effective 

beginning for the 2015 benefit year 

instead of the 2016 benefit year. 

We also propose that if 2013 

MarketScan data becomes available after 

the publication of this proposed rule, 

we would update the risk factors in the 

HHS risk adjustment model using the 3 

most recent years of data available— 

MarketScan 2011, 2012, and 2013 data. 

These updated risk factors would be 

published and finalized in this final 

rule. We seek comment on this 

approach, including whether we should 

update risk factors based on 2013 

MarketScan data when it becomes 

available after publication of this 

proposed rule, and whether the updated 

risk factors should be implemented for 

2015, or 2016. 

We believe that using multiple years 

of data will promote market stability 

and minimize volatility in coefficients 

for certain rare diagnoses. In using 

multiple years of data to recalibrate the 

risk adjustment model, we considered 

either pooling data from 3 sample years 

or blending coefficients from three 

separately estimated calibrations, based 

on the 2010, 2011, and 2012 data. We 

examined the effects of pooling data and 

blending separate calibrations, and did 

not find a significant difference between 

the resulting coefficients. However, we 

believe that blending coefficients offers 

the advantage of transparency and ease 

in future recalibrations. Blending 

coefficients using the 3 most recent 

years of separately estimated 

calibrations allows for most recent data 

to be incorporated into the model, while 

ensuring that coefficients remain 

relatively stable. We would publish the 

R-squared statistics of the 3 separatelyestimated sample years and the blended 

coefficient for each risk adjustment 

factor. We seek comment on this 

approach. 

We made minor refinements to the 

underlying MarketScan recalibration 

samples from which the risk adjustment 

factors are derived. In particular, we 

changed our treatment of Age 0 infants 

without birth hierarchical condition 

categories (HCCs). There may be cases 

in which there is no separate infant 

birth claim from which to gather 

diagnoses. For example, at an 

operational level, mother and infant 

claims may be bundled such that infant 

diagnoses appear on the mother’s 

record. Where newborn diagnoses 

appear on the mother’s claims, HHS has 

issued operational guidance on how 

best to associate those codes with the 

appropriate infant.7 This assumes that 

the mother and infant enrollment 

records exist and can be matched. 

However, we are proposing a change 

in how we categorize age 0 infants who 

do not have birth codes. We previously 

stated in the operational guidance 

referenced above that infants without 

birth codes would be assigned an ‘‘Age 

0, Term’’ factor in risk adjustment 

operations. We did so under the 

assumption that issuers paid the birth 

costs, yet the birth HCCs were missing 

(perhaps because claims were bundled 

with the mother’s, whose claims were 

excluded). Upon further analysis of age 

0 and age 1 claims, we found that age 

0 infants without birth HCCs had costs 

more similar to age 1 infants by severity 

level. We believe that these infants 

should be assigned to age 1 in situations 

where the issuer did not pay the birth 

costs during the plan year. For many age 

0 infants without birth HCCs, the birth 

could have occurred in the prior year or 

was paid by a different issuer. We are 

proposing that age 0 infants without 

birth HCCs be assigned to ‘‘Age 1’’ by 

severity level. We have made this 

change in the recalibration samples that 

we are using to calculate risk factors for 

proposed implementation in the 2016 

benefit year. We are also proposing to 

make this change in the operation of the 

risk adjustment methodology for the 

year in which we would implement the 

recalibrated risk adjustment factors. We 

seek comment on this approach. 

d. List of Factors To Be Employed in the 

Model 

The HHS risk adjustment models 

predict annualized plan liability 

expenditures using age and sex 

categories and the HHS HCCs included 

in the HHS risk adjustment model. 

Dollar coefficients were estimated for 

these factors using weighted least 

squares regression, where the weight 

was the fraction of the year enrolled. 

We are including the same HCCs that 

were included in the original risk 

adjustment calibration in the 2014 

Payment Notice. For each model, the 

factors are the statistical regression 

dollar values for each HCC in the model 

divided by a weighted average plan 

liability for the full modeling sample. 

The factors represent the predicted 

relative incremental expenditures for 

each HCC. The proposed factors 

resulting from the blended factors from 

the 2010, 2011, and 2012 separately 

solved models are shown in the tables 

below. For a given enrollee, the sums of 

the factors for the enrollee’s HCCs are 

the total relative predicted expenditures 

for that enrollee. Table 1 contains 

factors for each adult model, including 

the interactions. Table 3 contains the 

factors for each child model. Table 4 

contains the factors for each infant 

model. 

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TABLE 1—ADULT RISK ADJUSTMENT MODEL FACTORS

Factor Platinum Gold Silver Bronze Catastrophic 

Demographic Factors 

Age 21–24, Male .............................................................................................. 0.245 0.197 0.139 0.079 0.063 

Age 25–29, Male .............................................................................................. 0.259 0.207 0.144 0.079 0.062 

Age 30–34, Male .............................................................................................. 0.314 0.252 0.176 0.095 0.074 

Age 35–39, Male .............................................................................................. 0.379 0.307 0.220 0.125 0.099 

Age 40–44, Male .............................................................................................. 0.464 0.379 0.281 0.169 0.138 

Age 45–49, Male .............................................................................................. 0.553 0.456 0.347 0.219 0.183 

Age 50–54, Male .............................................................................................. 0.711 0.593 0.464 0.305 0.257 

Age 55–59, Male .............................................................................................. 0.834 0.698 0.556 0.379 0.325 

Age 60–64, Male .............................................................................................. 1.005 0.844 0.681 0.475 0.412 

Age 21–24, Female ......................................................................................... 0.408 0.327 0.216 0.102 0.072 

Age 25–29, Female ......................................................................................... 0.516 0.417 0.289 0.153 0.117 

Age 30–34, Female ......................................................................................... 0.635 0.521 0.387 0.240 0.201 

Age 35–39, Female ......................................................................................... 0.738 0.615 0.479 0.329 0.288 

Age 40–44, Female ......................................................................................... 0.824 0.691 0.545 0.381 0.335 

Age 45–49, Female ......................................................................................... 0.858 0.718 0.567 0.393 0.343 

Age 50–54, Female ......................................................................................... 0.983 0.828 0.667 0.467 0.407 

Age 55–59, Female ......................................................................................... 1.019 0.856 0.690 0.481 0.418 

Age 60–64, Female ......................................................................................... 1.126 0.945 0.766 0.538 0.468 

Diagnosis Factors 

HIV/AIDS .......................................................................................................... 5.788 5.291 4.962 4.962 4.971 

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock ...... 13.018 12.842 12.720 12.792 12.820 

Central Nervous System Infections, Except Viral Meningitis .......................... 7.352 7.230 7.147 7.178 7.190 

Viral or Unspecified Meningitis ........................................................................ 5.066 4.796 4.649 4.590 4.578 

Opportunistic Infections ................................................................................... 10.028 9.915 9.848 9.852 9.851 

Metastatic Cancer ............................................................................................ 25.642 25.144 24.784 24.890 24.924 

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ................................................................................................ 11.814 11.428 11.169 11.196 11.204 

Non-Hodgkin’s Lymphomas and Other Cancers and Tumors ........................ 6.522 6.247 6.069 6.030 6.015 

Colorectal, Breast (Age <50), Kidney, and Other Cancers ............................. 5.935 5.661 5.483 5.439 5.421 

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

and Other Cancers and Tumors .................................................................. 3.467 3.259 3.129 3.075 3.055 

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors .............................................................................................................. 1.693 1.516 1.407 1.296 1.258 

Pancreas Transplant Status/Complications ..................................................... 7.981 7.895 7.819 7.841 7.845 

Diabetes with Acute Complications ................................................................. 1.333 1.184 1.095 0.977 0.933

Diabetes with Chronic Complications .............................................................. 1.333 1.184 1.095 0.977 0.933 

Diabetes without Complication ........................................................................ 1.333 1.184 1.095 0.977 0.933 

Protein-Calorie Malnutrition ............................................................................. 14.895 14.913 14.901 14.977 15.000 

Mucopolysaccharidosis .................................................................................... 2.334 2.196 2.112 2.052 2.032 

Lipidoses and Glycogenosis ............................................................................ 2.334 2.196 2.112 2.052 2.032 

Amyloidosis, Porphyria, and Other Metabolic Disorders ................................. 2.334 2.196 2.112 2.052 2.032 

Adrenal, Pituitary, and Other Significant Endocrine Disorders ....................... 2.334 2.196 2.112 2.052 2.032 

Liver Transplant Status/Complications ............................................................ 17.442 17.225 17.090 17.131 17.150 

End-Stage Liver Disease ................................................................................. 6.311 6.031 5.853 5.879 5.890 

Cirrhosis of Liver .............................................................................................. 2.591 2.399 2.290 2.258 2.247 

Chronic Hepatitis .............................................................................................. 2.134 1.970 1.871 1.799 1.776 

Acute Liver Failure/Disease, Including Neonatal Hepatitis ............................. 4.501 4.322 4.209 4.201 4.202 

Intestine Transplant Status/Complications ...................................................... 53.540 53.545 53.543 53.563 53.571 

Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis ..................... 13.301 13.001 12.793 12.848 12.867 

Intestinal Obstruction ....................................................................................... 7.360 7.048 6.853 6.898 6.917 

Chronic Pancreatitis ......................................................................................... 6.620 6.343 6.171 6.209 6.227 

Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption 3.357 3.132 2.999 2.956 2.944 

Inflammatory Bowel Disease ........................................................................... 3.091 2.816 2.655 2.539 2.495 

Necrotizing Fasciitis ......................................................................................... 7.589 7.358 7.198 7.230 7.242 

Bone/Joint/Muscle Infections/Necrosis ............................................................ 7.589 7.358 7.198 7.230 7.242 

Rheumatoid Arthritis and Specified Autoimmune Disorders ........................... 3.565 3.292 3.116 3.094 3.089 

Systemic Lupus Erythematosus and Other Autoimmune Disorders ............... 1.289 1.138 1.050 0.952 0.917 

Osteogenesis Imperfecta and Other Osteodystrophies .................................. 3.519 3.299 3.151 3.092 3.071 

Congenital/Developmental Skeletal and Connective Tissue Disorders .......... 3.519 3.299 3.151 3.092 3.071 

Cleft Lip/Cleft Palate ........................................................................................ 1.728 1.545 1.437 1.349 1.322 

Hemophilia ....................................................................................................... 46.995 46.679 46.437 46.451 46.455 

Myelodysplastic Syndromes and Myelofibrosis ............................................... 14.398 14.258 14.158 14.185 14.194 

Aplastic Anemia ............................................................................................... 14.398 14.258 14.158 14.185 14.194 

Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn ......... 9.323 9.130 8.996 8.989 8.989 

Sickle Cell Anemia (Hb-SS) ............................................................................. 9.323 9.130 8.996 8.989 8.989 

Thalassemia Major ........................................................................................... 9.323 9.130 8.996 8.989 8.989 

Combined and Other Severe Immunodeficiencies .......................................... 5.539 5.361 5.242 5.258 5.263 

Disorders of the Immune Mechanism .............................................................. 5.539 5.361 5.242 5.258 5.263 

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TABLE 1—ADULT RISK ADJUSTMENT MODEL FACTORS—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Coagulation Defects and Other Specified Hematological Disorders ............... 3.167 3.053 2.976 2.952 2.943 

Drug Psychosis ................................................................................................ 3.735 3.469 3.306 3.209 3.176 

Drug Dependence ............................................................................................ 3.735 3.469 3.306 3.209 3.176 

Schizophrenia .................................................................................................. 3.199 2.922 2.760 2.675 2.649 

Major Depressive and Bipolar Disorders ......................................................... 1.857 1.674 1.561 1.439 1.397 

Reactive and Unspecified Psychosis, Delusional Disorders ........................... 1.857 1.674 1.561 1.439 1.397 

Personality Disorders ....................................................................................... 1.187 1.051 0.955 0.821 0.774 

Anorexia/Bulimia Nervosa ................................................................................ 2.779 2.599 2.483 2.406 2.378 

Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes ............... 3.815 3.668 3.574 3.532 3.516 

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes .................................................................. 1.384 1.280 1.203 1.120 1.090 

Autistic Disorder ............................................................................................... 1.187 1.051 0.955 0.821 0.774 

Pervasive Developmental Disorders, Except Autistic Disorder ....................... 1.187 1.051 0.955 0.821 0.774 

Traumatic Complete Lesion Cervical Spinal Cord .......................................... 13.467 13.285 13.155 13.164 13.167 

Quadriplegia ..................................................................................................... 13.467 13.285 13.155 13.164 13.167 

Traumatic Complete Lesion Dorsal Spinal Cord ............................................. 9.938 9.745 9.616 9.614 9.613 

Paraplegia ........................................................................................................ 9.938 9.745 9.616 9.614 9.613 

Spinal Cord Disorders/Injuries ......................................................................... 6.268 6.031 5.883 5.864 5.857 

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease ........... 4.060 3.784 3.618 3.579 3.571 

Quadriplegic Cerebral Palsy ............................................................................ 1.208 0.961 0.825 0.753 0.731 

Cerebral Palsy, Except Quadriplegic ............................................................... 0.372 0.280 0.220 0.167 0.148

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies 0.301 0.207 0.156 0.139 0.133 

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy ............................................................... 5.313 5.145 5.041 5.017 5.008 

Muscular Dystrophy ......................................................................................... 2.201 2.008 1.906 1.832 1.806 

Multiple Sclerosis ............................................................................................. 8.413 7.975 7.673 7.736 7.756 

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

Neurodegenerative Disorders ...................................................................... 2.201 2.008 1.906 1.832 1.806 

Seizure Disorders and Convulsions ................................................................ 1.578 1.403 1.296 1.207 1.177 

Hydrocephalus ................................................................................................. 7.868 7.733 7.636 7.623 7.615 

Non-Traumatic Coma, and Brain Compression/Anoxic Damage .................... 10.042 9.885 9.770 9.773 9.772 

Respirator Dependence/Tracheostomy Status ................................................ 39.643 39.644 39.620 39.697 39.721 

Respiratory Arrest ............................................................................................ 12.584 12.408 12.271 12.354 12.383 

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes .......................................................................................................... 12.584 12.408 12.271 12.354 12.383 

Heart Assistive Device/Artificial Heart ............................................................. 35.480 35.184 34.977 35.065 35.099 

Heart Transplant .............................................................................................. 35.480 35.184 34.977 35.065 35.099 

Congestive Heart Failure ................................................................................. 3.651 3.522 3.438 3.440 3.441 

Acute Myocardial Infarction ............................................................................. 11.824 11.431 11.143 11.303 11.358 

Unstable Angina and Other Acute Ischemic Heart Disease ........................... 6.167 5.830 5.628 5.667 5.686 

Heart Infection/Inflammation, Except Rheumatic ............................................ 7.052 6.895 6.793 6.780 6.775 

Specified Heart Arrhythmias ............................................................................ 3.369 3.197 3.091 3.039 3.020 

Intracranial Hemorrhage .................................................................................. 10.890 10.560 10.343 10.374 10.388 

Ischemic or Unspecified Stroke ....................................................................... 4.214 3.985 3.856 3.877 3.890 

Cerebral Aneurysm and Arteriovenous Malformation ..................................... 4.887 4.638 4.491 4.462 4.452 

Hemiplegia/Hemiparesis .................................................................................. 6.179 6.069 5.988 6.049 6.071 

Monoplegia, Other Paralytic Syndromes ......................................................... 3.942 3.789 3.697 3.675 3.668 

Atherosclerosis of the Extremities with Ulceration or Gangrene ..................... 12.276 12.162 12.073 12.166 12.198 

Vascular Disease with Complications .............................................................. 8.278 8.061 7.919 7.940 7.948 

Pulmonary Embolism and Deep Vein Thrombosis .......................................... 4.709 4.510 4.386 4.372 4.369 

Lung Transplant Status/Complications ............................................................ 34.373 34.131 33.949 34.046 34.078 

Cystic Fibrosis .................................................................................................. 11.033 10.684 10.430 10.438 10.440 

Chronic Obstructive Pulmonary Disease, Including Bronchiectasis ................ 1.101 0.970 0.884 0.791 0.759 

Asthma ............................................................................................................. 1.101 0.970 0.884 0.791 0.759 

Fibrosis of Lung and Other Lung Disorders .................................................... 2.568 2.426 2.343 2.310 2.299 

Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections ......................................................................................................... 8.848 8.747 8.678 8.703 8.713 

Kidney Transplant Status ................................................................................. 11.117 10.782 10.581 10.596 10.608 

End Stage Renal Disease ............................................................................... 40.465 40.171 39.935 40.097 40.149 

Chronic Kidney Disease, Stage 5 .................................................................... 2.400 2.272 2.200 2.193 2.194 

Chronic Kidney Disease, Severe (Stage 4) ..................................................... 2.400 2.272 2.200 2.193 2.194 

Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism ............................................................................................................... 1.430 1.234 1.123 0.918 0.831 

Miscarriage with Complications ....................................................................... 1.430 1.234 1.123 0.918 0.831 

Miscarriage with No or Minor Complications ................................................... 1.430 1.234 1.123 0.918 0.831 

Completed Pregnancy With Major Complications ........................................... 3.914 3.381 3.175 2.970 2.940 

Completed Pregnancy With Complications ..................................................... 3.914 3.381 3.175 2.970 2.940 

Completed Pregnancy with No or Minor Complications .................................. 3.914 3.381 3.175 2.970 2.940 

Chronic Ulcer of Skin, Except Pressure .......................................................... 2.554 2.413 2.332 2.320 2.318 

Hip Fractures and Pathological Vertebral or Humerus Fractures ................... 10.056 9.807 9.634 9.697 9.719 

Pathological Fractures, Except of Vertebrae, Hip, or Humerus ...................... 1.860 1.725 1.640 1.554 1.522 

Stem Cell, Including Bone Marrow, Transplant Status/Complications ............ 32.497 32.482 32.463 32.490 32.499 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70687 

TABLE 1—ADULT RISK ADJUSTMENT MODEL FACTORS—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Artificial Openings for Feeding or Elimination ................................................. 11.444 11.324 11.232 11.295 11.316 

Amputation Status, Lower Limb/Amputation Complications ............................ 6.152 5.974 5.855 5.894 5.910 

Interaction Factors 

Severe illness x Opportunistic Infections ......................................................... 12.052 12.304 12.437 12.542 12.573 

Severe illness x Metastatic Cancer ................................................................. 12.052 12.304 12.437 12.542 12.573 

Severe illness x Lung, Brain, and Other Severe Cancers, Including Pediatric 

Acute Lymphoid Leukemia ........................................................................... 12.052 12.304 12.437 12.542 12.573 

Severe illness x Non-Hodgkin‘s Lymphomas and Other Cancers and Tumors .............................................................................................................. 12.052 12.304 12.437 12.542 12.573 

Severe illness x Myasthenia Gravis/Myoneural Disorders and Guillain-Barre 

Syndrome/Inflammatory and Toxic Neuropathy ........................................... 12.052 12.304 12.437 12.542 12.573 

Severe illness x Heart Infection/Inflammation, Except Rheumatic .................. 12.052 12.304 12.437 12.542 12.573 

Severe illness x Intracranial Hemorrhage ....................................................... 12.052 12.304 12.437 12.542 12.573 

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

following HCCs in the blood disease category: 67, 68) .............................. 12.052 12.304 12.437 12.542 12.573 

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

following HCCs in the blood disease category: 73, 74) .............................. 12.052 12.304 12.437 12.542 12.573 

Severe illness x End-Stage Liver Disease ...................................................... 2.611 2.768 2.841 2.942 2.971 

Severe illness x Acute Liver Failure/Disease, Including Neonatal Hepatitis ... 2.611 2.768 2.841 2.942 2.971 

Severe illness x Atherosclerosis of the Extremities with Ulceration or Gangrene ............................................................................................................ 2.611 2.768 2.841 2.942 2.971 

Severe illness x Vascular Disease with Complications ................................... 2.611 2.768 2.841 2.942 2.971 

Severe illness x Aspiration and Specified Bacterial Pneumonias and Other 

Severe Lung Infections ................................................................................ 2.611 2.768 2.841 2.942 2.971 

Severe illness x Artificial Openings for Feeding or Elimination ...................... 2.611 2.768 2.841 2.942 2.971 

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

following HCCs in the musculoskeletal disease category: 54, 55) .............. 2.611 2.768 2.841 2.942 2.971 

TABLE 2—HHS HCCS IN THE SEVERITY ILLNESS INDICATOR VARIABLE

Description 

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock. 

Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis. 

Seizure Disorders and Convulsions. 

Non-Traumatic Coma, Brain Compression/Anoxic Damage. 

Respirator Dependence/Tracheostomy Status. 

Respiratory Arrest. 

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

Pulmonary Embolism and Deep Vein Thrombosis. 

TABLE 3—CHILD RISK ADJUSTMENT MODEL FACTORS

Factor Platinum Gold Silver Bronze Catastrophic 

Demographic Factors 

Age 2–4, Male .................................................................................................. 0.264 0.196 0.108 0.031 0.010 

Age 5–9, Male .................................................................................................. 0.179 0.130 0.065 0.003 0.000 

Age 10–14, Male .............................................................................................. 0.228 0.177 0.107 0.044 0.030 

Age 15–20, Male .............................................................................................. 0.306 0.247 0.174 0.100 0.080 

Age 2–4, Female ............................................................................................. 0.211 0.152 0.072 0.010 0.002 

Age 5–9, Female ............................................................................................. 0.142 0.100 0.044 0.001 0.000 

Age 10–14, Female ......................................................................................... 0.207 0.160 0.095 0.043 0.031 

Age 15–20, Female ......................................................................................... 0.358 0.285 0.191 0.096 0.072 

Diagnosis Factors 

HIV/AIDS .......................................................................................................... 3.508 3.108 2.862 2.709 2.665 

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock ...... 18.633 18.476 18.371 18.395 18.404 

Central Nervous System Infections, Except Viral Meningitis .......................... 12.297 12.095 11.951 11.964 11.969 

Viral or Unspecified Meningitis ........................................................................ 3.643 3.409 3.280 3.134 3.084 

Opportunistic Infections ................................................................................... 23.813 23.736 23.693 23.677 23.669 

Metastatic Cancer ............................................................................................ 38.610 38.324 38.101 38.102 38.101 

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ................................................................................................ 12.521 12.200 11.971 11.895 11.867 

Non-Hodgkin‘s Lymphomas and Other Cancers and Tumors ........................ 9.945 9.655 9.451 9.349 9.314 

Colorectal, Breast (Age < 50), Kidney, and Other Cancers ............................ 3.870 3.641 3.473 3.332 3.282 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

70688 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

TABLE 3—CHILD RISK ADJUSTMENT MODEL FACTORS—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

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

and Other Cancers and Tumors .................................................................. 3.276 3.046 2.896 2.764 2.715 

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors .............................................................................................................. 1.665 1.482 1.354 1.217 1.169 

Pancreas Transplant Status/Complications ..................................................... 33.090 32.913 32.794 32.834 32.845

Diabetes with Acute Complications ................................................................. 2.668 2.335 2.166 1.882 1.777

Diabetes with Chronic Complications .............................................................. 2.668 2.335 2.166 1.882 1.777 

Diabetes without Complication ........................................................................ 2.668 2.335 2.166 1.882 1.777 

Protein-Calorie Malnutrition ............................................................................. 15.118 15.003 14.912 14.952 14.964 

Mucopolysaccharidosis .................................................................................... 6.331 6.034 5.820 5.764 5.746 

Lipidoses and Glycogenosis ............................................................................ 6.331 6.034 5.820 5.764 5.746 

Congenital Metabolic Disorders, Not Elsewhere Classified ............................ 6.331 6.034 5.820 5.764 5.746 

Amyloidosis, Porphyria, and Other Metabolic Disorders ................................. 6.331 6.034 5.820 5.764 5.746 

Adrenal, Pituitary, and Other Significant Endocrine Disorders ....................... 6.331 6.034 5.820 5.764 5.746 

Liver Transplant Status/Complications ............................................................ 33.090 32.913 32.794 32.834 32.845 

End-Stage Liver Disease ................................................................................. 14.421 14.253 14.144 14.137 14.138 

Cirrhosis of Liver .............................................................................................. 5.357 5.183 5.063 5.006 4.989 

Chronic Hepatitis .............................................................................................. 0.950 0.790 0.664 0.562 0.533 

Acute Liver Failure/Disease, Including Neonatal Hepatitis ............................. 7.729 7.577 7.462 7.433 7.425 

Intestine Transplant Status/Complications ...................................................... 33.090 32.913 32.794 32.834 32.845 

Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis ..................... 17.127 16.729 16.447 16.473 16.483 

Intestinal Obstruction ....................................................................................... 6.086 5.815 5.635 5.538 5.504 

Chronic Pancreatitis ......................................................................................... 13.304 12.986 12.777 12.788 12.793 

Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption 3.572 3.410 3.300 3.189 3.148 

Inflammatory Bowel Disease ........................................................................... 5.553 5.157 4.899 4.761 4.714 

Necrotizing Fasciitis ......................................................................................... 5.393 5.116 4.925 4.851 4.829 

Bone/Joint/Muscle Infections/Necrosis ............................................................ 5.393 5.116 4.925 4.851 4.829 

Rheumatoid Arthritis and Specified Autoimmune Disorders ........................... 3.062 2.821 2.650 2.510 2.465 

Systemic Lupus Erythematosus and Other Autoimmune Disorders ............... 1.260 1.087 0.966 0.819 0.772 

Osteogenesis Imperfecta and Other Osteodystrophies .................................. 1.645 1.510 1.401 1.305 1.273 

Congenital/Developmental Skeletal and Connective Tissue Disorders .......... 1.645 1.510 1.401 1.305 1.273 

Cleft Lip/Cleft Palate ........................................................................................ 1.858 1.622 1.473 1.321 1.267 

Hemophilia ....................................................................................................... 54.299 53.777 53.390 53.377 53.370 

Myelodysplastic Syndromes and Myelofibrosis ............................................... 24.525 24.330 24.187 24.183 24.182 

Aplastic Anemia ............................................................................................... 24.525 24.330 24.187 24.183 24.182 

Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn ......... 8.038 7.730 7.520 7.441 7.414 

Sickle Cell Anemia (Hb-SS) ............................................................................. 8.038 7.730 7.520 7.441 7.414 

Thalassemia Major ........................................................................................... 8.038 7.730 7.520 7.441 7.414 

Combined and Other Severe Immunodeficiencies .......................................... 6.604 6.386 6.246 6.182 6.157 

Disorders of the Immune Mechanism .............................................................. 6.604 6.386 6.246 6.182 6.157 

Coagulation Defects and Other Specified Hematological Disorders ............... 4.878 4.716 4.596 4.498 4.464 

Drug Psychosis ................................................................................................ 4.456 4.181 4.016 3.931 3.905 

Drug Dependence ............................................................................................ 4.456 4.181 4.016 3.931 3.905 

Schizophrenia .................................................................................................. 5.488 5.073 4.812 4.681 4.640 

Major Depressive and Bipolar Disorders ......................................................... 1.856 1.641 1.494 1.301 1.236 

Reactive and Unspecified Psychosis, Delusional Disorders ........................... 1.856 1.641 1.494 1.301 1.236 

Personality Disorders ....................................................................................... 0.948 0.810 0.694 0.491 0.417 

Anorexia/Bulimia Nervosa ................................................................................ 2.504 2.293 2.144 2.047 2.014 

Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes ............... 3.328 3.078 2.933 2.900 2.887 

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes .................................................................. 2.003 1.795 1.668 1.558 1.518 

Autistic Disorder ............................................................................................... 1.824 1.614 1.470 1.278 1.213 

Pervasive Developmental Disorders, Except Autistic Disorder ....................... 0.961 0.818 0.696 0.491 0.417 

Traumatic Complete Lesion Cervical Spinal Cord .......................................... 15.854 15.746 15.662 15.736 15.762 

Quadriplegia ..................................................................................................... 15.854 15.746 15.662 15.736 15.762 

Traumatic Complete Lesion Dorsal Spinal Cord ............................................. 14.020 13.813 13.675 13.699 13.708 

Paraplegia ........................................................................................................ 14.020 13.813 13.675 13.699 13.708 

Spinal Cord Disorders/Injuries ......................................................................... 5.531 5.265 5.099 5.009 4.980 

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease ........... 11.987 11.687 11.485 11.444 11.427 

Quadriplegic Cerebral Palsy ............................................................................ 4.773 4.463 4.269 4.294 4.304 

Cerebral Palsy, Except Quadriplegic ............................................................... 1.400 1.172 1.037 0.931 0.896

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies 1.252 1.089 0.976 0.888 0.858 

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy ............................................................... 8.606 8.390 8.246 8.178 8.151 

Muscular Dystrophy ......................................................................................... 3.364 3.138 2.992 2.896 2.864 

Multiple Sclerosis ............................................................................................. 5.914 5.555 5.304 5.274 5.264 

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

Neurodegenerative Disorders ...................................................................... 3.364 3.138 2.992 2.896 2.864 

Seizure Disorders and Convulsions ................................................................ 2.314 2.115 1.976 1.803 1.744 

Hydrocephalus ................................................................................................. 6.470 6.320 6.219 6.207 6.203 

Non-Traumatic Coma, and Brain Compression/Anoxic Damage .................... 9.166 8.977 8.853 8.819 8.804 

Respirator Dependence/Tracheostomy Status ................................................ 40.570 40.448 40.351 40.512 40.563 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70689 

TABLE 3—CHILD RISK ADJUSTMENT MODEL FACTORS—Continued 

Factor Platinum Gold Silver Bronze Catastrophic 

Respiratory Arrest ............................................................................................ 14.474 14.256 14.114 14.125 14.126 

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes .......................................................................................................... 14.474 14.256 14.114 14.125 14.126 

Heart Assistive Device/Artificial Heart ............................................................. 33.090 32.913 32.794 32.834 32.845 

Heart Transplant .............................................................................................. 33.090 32.913 32.794 32.834 32.845 

Congestive Heart Failure ................................................................................. 6.832 6.704 6.609 6.562 6.545 

Acute Myocardial Infarction ............................................................................. 4.876 4.783 4.725 4.727 4.734 

Unstable Angina and Other Acute Ischemic Heart Disease ........................... 4.876 4.783 4.725 4.727 4.734 

Heart Infection/Inflammation, Except Rheumatic ............................................ 16.293 16.130 16.019 16.019 16.020 

Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders ........................................................................................................... 7.938 7.710 7.527 7.384 7.334 

Major Congenital Heart/Circulatory Disorders ................................................. 2.264 2.133 2.003 1.855 1.810 

Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other 

Congenital Heart/Circulatory Disorders ........................................................ 1.312 1.203 1.088 0.961 0.926 

Specified Heart Arrhythmias ............................................................................ 5.180 4.968 4.808 4.726 4.699 

Intracranial Hemorrhage .................................................................................. 20.007 19.725 19.533 19.542 19.545 

Ischemic or Unspecified Stroke ....................................................................... 7.836 7.690 7.592 7.643 7.657 

Cerebral Aneurysm and Arteriovenous Malformation ..................................... 4.674 4.421 4.264 4.194 4.161 

Hemiplegia/Hemiparesis .................................................................................. 6.060 5.920 5.837 5.815 5.807 

Monoplegia, Other Paralytic Syndromes ......................................................... 5.353 5.170 5.061 5.033 5.026 

Atherosclerosis of the Extremities with Ulceration or Gangrene ..................... 10.802 10.595 10.455 10.343 10.292 

Vascular Disease with Complications .............................................................. 15.629 15.437 15.310 15.322 15.331 

Pulmonary Embolism and Deep Vein Thrombosis .......................................... 14.822 14.613 14.473 14.504 14.515 

Lung Transplant Status/Complications ............................................................ 33.090 32.913 32.794 32.834 32.845 

Cystic Fibrosis .................................................................................................. 13.994 13.502 13.147 13.156 13.161 

Chronic Obstructive Pulmonary Disease, Including Bronchiectasis ................ 0.524 0.443 0.345 0.210 0.168 

Asthma ............................................................................................................. 0.524 0.443 0.345 0.210 0.168 

Fibrosis of Lung and Other Lung Disorders .................................................... 5.214 5.066 4.954 4.868 4.840 

Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections ......................................................................................................... 9.469 9.373 9.291 9.304 9.308 

Kidney Transplant Status ................................................................................. 17.992 17.577 17.297 17.316 17.326 

End Stage Renal Disease ............................................................................... 38.852 38.586 38.382 38.492 38.527 

Chronic Kidney Disease, Stage 5 .................................................................... 11.138 10.943 10.809 10.718 10.690 

Chronic Kidney Disease, Severe (Stage 4) ..................................................... 11.138 10.943 10.809 10.718 10.690

Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism ............................................................................................................... 1.276 1.084 0.957 0.719 0.629 

Miscarriage with Complications ....................................................................... 1.276 1.084 0.957 0.719 0.629 

Miscarriage with No or Minor Complications ................................................... 1.276 1.084 0.957 0.719 0.629 

Completed Pregnancy With Major Complications ........................................... 3.462 2.960 2.749 2.485 2.425 

Completed Pregnancy With Complications ..................................................... 3.462 2.960 2.749 2.485 2.425 

Completed Pregnancy with No or Minor Complications .................................. 3.462 2.960 2.749 2.485 2.425 

Chronic Ulcer of Skin, Except Pressure .......................................................... 1.579 1.481 1.390 1.310 1.284 

Hip Fractures and Pathological Vertebral or Humerus Fractures ................... 6.169 5.861 5.643 5.527 5.491 

Pathological Fractures, Except of Vertebrae, Hip, or Humerus ...................... 2.058 1.921 1.798 1.635 1.582 

Stem Cell, Including Bone Marrow, Transplant Status/Complications ............ 33.090 32.913 32.794 32.834 32.845 

Artificial Openings for Feeding or Elimination ................................................. 15.660 15.540 15.451 15.602 15.651 

Amputation Status, Lower Limb/Amputation Complications ............................ 10.245 9.973 9.802 9.701 9.658 

TABLE 4—INFANT RISK ADJUSTMENT MODELS FACTORS

Group Platinum Gold Silver Bronze Catastrophic 

Extremely Immature * Severity Level 5 (Highest) ........................................... 410.348 408.872 407.691 407.693 407.703 

Extremely Immature * Severity Level 4 ........................................................... 218.224 216.730 215.551 215.509 215.506 

Extremely Immature * Severity Level 3 ........................................................... 62.449 61.375 60.541 60.202 60.106 

Extremely Immature * Severity Level 2 ........................................................... 62.449 61.375 60.541 60.202 60.106 

Extremely Immature * Severity Level 1 (Lowest) ............................................ 62.449 61.375 60.541 60.202 60.106 

Immature * Severity Level 5 (Highest) ............................................................ 217.679 216.228 215.075 215.072 215.086 

Immature * Severity Level 4 ............................................................................ 93.597 92.104 90.918 90.899 90.906 

Immature * Severity Level 3 ............................................................................ 50.841 49.478 48.421 48.331 48.317 

Immature * Severity Level 2 ............................................................................ 33.561 32.279 31.304 31.068 31.006 

Immature * Severity Level 1 (Lowest) ............................................................. 33.561 32.279 31.304 31.068 31.006 

Premature/Multiples * Severity Level 5 (Highest) ............................................ 168.945 167.526 166.408 166.364 166.363 

Premature/Multiples * Severity Level 4 ........................................................... 34.579 33.195 32.161 31.973 31.939 

Premature/Multiples * Severity Level 3 ........................................................... 19.070 17.942 17.128 16.748 16.633 

Premature/Multiples * Severity Level 2 ........................................................... 10.224 9.307 8.652 8.095 7.907

Premature/Multiples * Severity Level 1 (Lowest) ............................................ 6.921 6.234 5.664 5.018 4.810 

Term * Severity Level 5 (Highest) ................................................................... 144.955 143.654 142.633 142.485 142.440 

Term * Severity Level 4 ................................................................................... 19.307 18.234 17.478 17.000 16.862 

Term * Severity Level 3 ................................................................................... 6.881 6.181 5.640 4.964 4.724 

Term * Severity Level 2 ................................................................................... 4.010 3.481 3.021 2.286 2.029 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

70690 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

TABLE 4—INFANT RISK ADJUSTMENT MODELS FACTORS—Continued 

Group Platinum Gold Silver Bronze Catastrophic 

Term * Severity Level 1 (Lowest) .................................................................... 1.718 1.442 1.026 0.349 0.176 

Age1 * Severity Level 5 (Highest) ................................................................... 63.225 62.492 61.921 61.814 61.786 

Age1 * Severity Level 4 ................................................................................... 10.493 9.956 9.554 9.291 9.218 

Age1 * Severity Level 3 ................................................................................... 3.645 3.281 2.973 2.642 2.549 

Age1 * Severity Level 2 ................................................................................... 2.286 2.001 1.735 1.383 1.281 

Age1 * Severity Level 1 (Lowest) .................................................................... 0.623 0.518 0.334 0.161 0.125 

Age 0 Male ....................................................................................................... 0.695 0.642 0.625 0.587 0.557 

Age 1 Male ....................................................................................................... 0.147 0.125 0.117 0.089 0.077 

TABLE 5—HHS HCCS INCLUDED IN INFANT MODEL MATURITY CATEGORIES

Maturity category HCC/description 

Extremely Immature ............. Extremely Immature Newborns, Birthweight <500 Grams. 

Extremely Immature ............. Extremely Immature Newborns, Including Birthweight 500–749 Grams. 

Extremely Immature ............. Extremely Immature Newborns, Including Birthweight 750–999 Grams. 

Immature .............................. Premature Newborns, Including Birthweight 1000–1499 Grams. 

Immature .............................. Premature Newborns, Including Birthweight 1500–1999 Grams. 

Premature/Multiples ............. Premature Newborns, Including Birthweight 2000–2499 Grams. 

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

Term ..................................... Term or Post-Term Singleton Newborn, Normal or High Birthweight. 

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

TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES

Severity category HCC 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Severity category HCC 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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70692 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

8Winkleman, Ross and Syed Mehmud. ‘‘A 

Comparative Analysis of Claims-Based Tools for 

Health Risk Assessment.’’ Society of Actuaries. 

April 2007. 

e. Cost-Sharing Reductions Adjustments 

We propose to continue to include an 

adjustment for the receipt of costsharing reductions in the model, and 

propose to continue not to adjust for 

receipt of reinsurance payments in the 

model. We have updated the 

adjustments to the HHS risk adjustment 

models for individuals who receive 

cost-sharing reductions to be consistent 

with the cost-sharing reductions 

advance payment formula finalized in 

the 2015 Payment Notice, for 

implementation in 2015 benefit year 

risk adjustment. We note that the silver 

plan variant and zero cost-sharing 

factors are unchanged from those 

finalized in the 2014 Payment Notice. 

The adjustment factors are set forth in 

Table 7. These adjustments are 

multiplied against the sum of the 

demographic, diagnosis, and interaction 

factors. We will continue to evaluate 

this adjustment as more data becomes 

available. We seek comment on this 

approach. 

TABLE 7—COST-SHARING REDUCTION ADJUSTMENT

Household income Plan AV 

Induced 

utilization 

factor 

Silver Plan Variant Recipients 

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

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

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

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

Zero Cost-Sharing Recipients 

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

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

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

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

Limited Cost-Sharing Recipients 

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

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

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

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

f. Model Performance Statistics 

To evaluate model performance, we 

examined its R-squared and predictive 

ratios. The R-squared statistic, which 

calculates the percentage of individual 

variation explained by a model, 

measures the predictive accuracy of the 

model overall. The predictive ratios 

measure the predictive accuracy of a 

model for different validation groups or 

subpopulations. The predictive ratio for 

each of the HHS risk adjustment models 

is the ratio of the weighted mean 

predicted plan liability for the model 

sample population to the weighted 

mean actual plan liability for the model 

sample population. The predictive ratio 

represents how well the model does on 

average at predicting plan liability for 

that subpopulation. A subpopulation 

that is predicted perfectly would have a 

predictive ratio of 1.0. For each of the 

HHS risk adjustment models, the Rsquared statistic and the predictive ratio 

are in the range of published estimates 

for concurrent risk adjustment models.8

Because we are proposing to blend the 

coefficients from separately solved 

models based on MarketScan 2010, 2011 

and 2012 data, we are publishing the Rsquared statistic for each model and 

year separately to verify their statistical 

validity. The R-squared statistic for each 

model is shown in Table 8. 

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

R-squared statistic 

Risk adjustment model 2010 2011 2012 

Platinum Adult .............................................................................................................................. 0.3619 0.3684 0.3937 

Platinum Child .............................................................................................................................. 0.3030 0.2835 0.2856 

Platinum Infant ............................................................................................................................. 0.2892 0.3371 0.2845 

Gold Adult .................................................................................................................................... 0.3572 0.3636 0.3896 

Gold Child .................................................................................................................................... 0.2985 0.2786 0.2805 

Gold Infant ................................................................................................................................... 0.2871 0.3351 0.2821 

Silver Adult ................................................................................................................................... 0.3537 0.3602 0.3865 

Silver Child ................................................................................................................................... 0.2949 0.2749 0.2767 

Silver Infant .................................................................................................................................. 0.2858 0.3339 0.2807 

Bronze Adult ................................................................................................................................ 0.3519 0.3582 0.3842 

Bronze Child ................................................................................................................................ 0.2919 0.2721 0.2737 

Bronze Infant ............................................................................................................................... 0.2859 0.3341 0.2808 

Catastrophic Adult ....................................................................................................................... 0.3511 0.3574 0.3833 

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

R-squared statistic 

Risk adjustment model 2010 2011 2012 

Catastrophic Child ....................................................................................................................... 0.2907 0.2710 0.2726 

Catastrophic Infant ....................................................................................................................... 0.2859 0.3340 0.2808 

g. Overview of the Payment Transfer 

Formula 

We do not propose to alter our 

payment transfer methodology. Plan 

average risk scores would be calculated 

as the member month-weighted average 

of individual enrollee risk scores. We 

defined the calculation of plan average 

actuarial risk and the calculation of 

payments and charges in the Premium 

Stabilization Rule. In the 2014 Payment 

Notice, we combined those concepts 

into a risk adjustment payment transfer 

formula. Risk adjustment transfers 

(payments and charges) would be 

calculated following the completion of 

issuer risk adjustment data reporting. 

The payment transfer formula includes 

a set of cost adjustment terms that 

require transfers to be calculated at the 

geographic rating area level for each 

plan (that is, HHS would calculate two 

separate transfer amounts for a plan that 

operates in two rating areas). 

The payment transfer formula is 

designed to provide a per member per 

month (PMPM) transfer amount. The 

PMPM transfer amount derived from the 

payment transfer formula would be 

multiplied by each plan’s total member 

months for the benefit year to determine 

the total payment due or charge owed 

by the issuer for that plan in a rating 

area. 

(1) Overview of the Payment Transfer 

Formula 

Though we do not propose to change 

the payment transfer formula from what 

was finalized in the 2014 Payment 

Notice (78 FR 15430–15434), we believe 

it would be useful to republish the 

formula in its entirety, since we are 

proposing to recalibrate the HHS risk 

adjustment model. Transfers (payments 

and charges) will be calculated as the 

difference between the plan premium 

estimate reflecting risk selection and the 

plan premium estimate not reflecting 

risk selection. As finalized in the 2014 

Payment Notice, the HHS risk 

adjustment payment transfer formula is: 

Where: 

PS = State 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; 

and the denominator is summed across all 

plans in the risk pool in the market in the 

State. 

The difference between the two 

premium estimates in the payment 

transfer formula determines whether a 

plan pays a risk transfer charge or 

receives a risk transfer payment. Note 

that 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 practices (as measured through 

the allowable rating factor) exceeds the 

plan’s predicted liability associated 

with risk selection. Risk adjustment 

transfers are calculated at the risk pool 

level and catastrophic plans are treated 

as a separate risk pool for purposes of 

risk adjustment. 

h. HHS Risk Adjustment Methodology 

Considerations 

In the 2014 Payment Notice, we 

finalized the methodology that HHS will 

use when operating a risk adjustment 

program on behalf of a State. In the 

second Program Integrity Rule (78 FR 

65046), we clarified the modification to 

the transfer formula to accommodate 

community rated States that utilize 

family tiering rating factors. We are 

further clarifying this formula to ensure 

that the allowable rating factor (ARF) is 

appropriately applied in the transfer 

formula in community rated States for 

2014 risk adjustment. In the second 

Program Integrity rule, we stated that 

the ARF formula should be modified so 

that the numerator is a summation over 

all subscribers of the product of the 

family tiering factor and the subscriber 

member months, and the denominator 

the sum of billable member months. 

However, we do not believe the formula 

accurately reflects that description, as it 

does not distinguish between subscriber 

months (months attributed to the sole 

subscriber) and billable member months 

(months attributed to all allowable 

members of the family factored into the 

community rating). The calculation of 

ARF for family tiering States that was 

published in the second Program 

Integrity rule that would be calculated 

at the level of the subscriber, was as 

follows: 

Where: 

ARFs is the rating factor for the subscriber(s) 

(based on family size/composition), and 

Ms is the number of billed personmonths that are counted in determining 

the premium(s) for the subscriber(s). 

While the preamble description in the 

second Program Integrity rule is correct, 

as we noted, the formula itself is 

incorrect in that it does not distinguish 

between billable member months and 

subscriber months by using the same 

variable for both. Therefore, we are 

proposing a technical change to the ARF 

calculation for family tiering States, as 

follows: 

Where: 

ARFi is the allowable rating factor for plan i, 

ARFs is the allowable rating factor—also 

known as the family rating tier—for 

subscriber (family) s in plan i, 

MSs is the number of subscriber months for 

subscriber s, and 

MBs is the number of billable member 

months for subscriber (family) s. 


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70694 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

9Available at: http://www.cms.gov/CCIIO/

Resources/Fact-Sheets-and-FAQs/aca_

implementation_faqs13.html. 

The numerator is summed over the 

product of the allowable rating factor 

and the number of subscriber months 

(that is, months of family subscription), 

and the denominator is the sum over all 

billable members. Each family unit 

covered under a single contract is 

considered a single ‘‘subscriber.’’ 

Therefore, a family of four that 

purchases coverage for a period from 

January through December will 

accumulate 12 subscriber months (MSs), 

although coverage is being provided for 

48 member months (both billable and 

non-billable). Billable members are 

individuals who are counted for 

purposes of placing the subscriber in a 

family tier. For example, in a 

community rated State that rates based 

on two adults and one or more children 

with one full year of enrollment, the 

family of four would have 36 billable 

member months (MBs), (12 billable 

member months for the subscriber, 12 

billable member months for the second 

adult, and 12 billable months for the 

first child). We seek comment on this 

proposed clarification. 

3. Provisions and Parameters for the 

Transitional Reinsurance Program 

The Affordable Care Act directs that 

a transitional reinsurance program be 

established in each State to help 

stabilize premiums for coverage in the 

individual market from 2014 through 

2016. In the 2014 Payment Notice, we 

expanded on the standards set forth in 

subparts C and E of the Premium 

Stabilization Rule and established the 

reinsurance payment parameters and 

uniform reinsurance contribution rate 

for the 2014 benefit year. In the 2015 

Payment Notice, we established the 

reinsurance payment parameters and 

uniform reinsurance contribution rate 

for the 2015 benefit year and certain 

oversight provisions related to the 

operation of the reinsurance program. 

a. Common Ownership Clarification 

The definition of a ‘‘contributing 

entity’’ at § 153.20 provides that for the 

2015 and 2016 benefit years, a 

contributing entity is (i) a health 

insurance issuer or (ii) a self-insured 

group health plan, including a group 

health plan that is partially self-insured 

and partially insured, where the health 

insurance coverage does not constitute 

major medical coverage, that uses a 

third party administrator (TPA) in 

connection with claims processing or 

adjudication, including the management 

of internal appeals, or plan enrollment 

for services other than for pharmacy 

benefits or excepted benefits within the 

meaning of section 2791(c) of the PHS 

Act. A self-insured group health plan 

will not be deemed to use a TPA for this 

purpose if it uses an unrelated third 

party: (a) To obtain a provider network 

and related claims repricing services; or 

(b) for up to 5 percent of claims 

processing or adjudication or plan 

enrollment, based on either the number 

of transactions processed by the third 

party, or the value of the claims 

processing and adjudication and plan 

enrollment services provided by the 

third party. 

The definition of a ‘‘contributing 

entity’’ does not include qualifying selfadministered, self-insured group health 

plans for the purpose of the requirement 

to make reinsurance contributions for 

the 2015 and 2016 benefit years. In the 

preamble to the 2015 Payment Notice, 

we indicated that we consider a TPA to 

be, with respect to a self-insured group 

health plan, an entity that is not under 

common ownership or control with the 

self-insured group health plan or its 

plan sponsor that provides the specified 

core administrative services (79 FR 

13773). 

We have received a number of 

inquiries seeking clarification on how to 

determine common ownership or 

control for purposes of the definition of 

a ‘‘contributing entity’’ in § 153.20. In 

response, we propose to clarify that 

principles similar to the controlled 

group rules of section 414(b) and (c) of 

the Code should be used to determine 

whether the TPA is under common 

ownership or control with the selfinsured group health plan or the plan 

sponsor. 

We believe that applying principles 

similar to the controlled group rules 

under the Code are appropriate for use 

in determining whether a TPA is under 

common ownership or control with the 

self-insured group health plan or plan 

sponsor for purposes of the definition of 

a ‘‘contributing entity’’ under § 153.20 

because they are familiar to many 

stakeholders. We also note that similar 

common ownership or control rules 

apply for other purposes under the 

Affordable Care Act, such as the shared 

responsibility payment for applicable 

large employers that do not offer fulltime employees and dependents the 

opportunity to enroll in minimum 

essential coverage. See, for example, 

section 4980H(c)(2)(C)(i) of the Code, 

which states that all persons treated as 

a single employer under section 414 are 

to be treated as one employer. 

Additionally, section 9010(c)(3) of the 

Affordable Act applies similar 

controlled group rules for purposes of 

the annual fee on health insurance 

issuers. 

We seek comment on this proposal 

and on alternative definitions that are 

based on existing standards that would 

be familiar to stakeholders for 

determining whether a TPA is under 

common ownership or control with the 

self-insured group health plan or its 

sponsor for purposes of the definition of 

‘‘contributing entity’’ at § 153.20. 

b. Self-Insured Expatriate Plans 

(§ 153.400(a)(1)(iii)) 

Section 1341(b)(3)(B) of the 

Affordable Care Act and the 

implementing regulations at 

§ 153.400(a)(1) require contributing 

entities to make reinsurance 

contributions for major medical 

coverage that is considered to be part of 

a commercial book of business. In the 

2014 Payment Notice (78 FR 15457), we 

stated that we interpret this language to 

exclude expatriate health coverage, as 

defined by the Secretary, and we 

codified this approach in regulatory text 

at § 153.400(a)(1)(iii). In the March 8, 

2013, FAQs about the Affordable Care 

Act Implementation Part XIII,9 an 

expatriate health plan is defined as an 

insured group health plan with respect 

to which enrollment is limited to 

primary insured who reside outside of 

their home country for at least 6 months 

of the plan year and any covered 

dependents, and its associated group 

health insurance coverage. Therefore, 

under our current regulation, selfinsured expatriate plans that would 

otherwise meet the conditions outlined 

in the March 2013 FAQ are required to 

make reinsurance contributions if these 

plans provide major medical coverage, 

unless another exemption in 

§ 153.400(a) applies, because the 

definition in the FAQ applies only to 

insured expatriate plans. 

We propose to amend 

§ 153.400(a)(1)(iii), which currently 

exempts expatriate health coverage, as 

defined by the Secretary, from 

reinsurance contributions, so that it also 

exempts, beginning for the 2015 benefit 

year, any self-insured group health plan 

with respect to which enrollment is 

limited to participants who reside 

outside of their home country for at 

least 6 months of the plan year, and any 

covered dependents. This approach and 

definition, applicable solely to this 

program, is consistent with FAQs 

discussed above for insured expatriate 

health plans and aligns the definition 

for this time-limited program. We seek 

comment on this proposed amendment. 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70695 

10Available at: http://www.cms.gov/CCIIO/

Resources/Fact-Sheets-and-FAQs/Downloads/

Reinsurance-contributions-process-FAQ-5-22- 

14.pdf. 

c. Determination of Debt (§ 153.400(c)) 

Consistent with the determination of 

debt provision set forth in § 156.1215(c), 

we propose to clarify in a new 

§ 153.400(c) that any amount owed to 

the Federal government by a selfinsured group health plan (including a 

group health plan that is partially selfinsured and partially insured, where the 

health insurance coverage does not 

constitute major medical coverage), 

including reinsurance contributions that 

are not remitted in full in a timely 

manner, would be a determination of a 

debt. We seek comment on this 

proposal. 

d. Reinsurance Contribution Submission 

Process 

On May 22, 2014, we released an FAQ 

about the reinsurance contribution 

submission process.10 As detailed in 

this FAQ, we have implemented a 

streamlined process for the collection of 

reinsurance contributions. A 

contributing entity, or a TPA or 

administrative services-only (ASO) 

contractor on behalf of the contributing 

entity, will complete all required steps 

for the reinsurance contribution 

submission process on www.pay.gov 

(Pay.gov). The ‘‘ACA Transitional 

Reinsurance Program Annual 

Enrollment and Contributions 

Submission Form’’ available on Pay.gov 

must be completed and submitted by a 

contributing entity or a TPA or ASO 

contractor on its behalf no later than 

November 15, 2014, 2015, or 2016, as 

applicable, under § 153.405(b). The form 

includes basic company and contact 

information, and the annual enrollment 

count for the applicable benefit year. 

The form will auto-calculate the 

contribution amounts owed. 

We propose to amend § 153.405(b), 

requiring a contributing entity to submit 

its annual enrollment count of the 

number of covered lives of reinsurance 

contribution enrollees for the applicable 

benefit year to HHS no later than 

November 15 of benefit year 2014, 2015, 

or 2016. When November 15 does not 

fall on a business day, we propose that 

a contributing entity submit its annual 

enrollment count of the number of 

covered lives of reinsurance 

contribution enrollees for the applicable 

benefit year to HHS no later than 

November 15, 2014, 2015, or 2016, or if 

such date is not a business day, the next 

business day. Similarly, because 

November 15, 2015 and January 15, 

2017 do not fall on a business day, we 

propose in § 153.405(c)(2) that a 

contributing entity must remit 

reinsurance contributions to HHS no 

later than January 15, 2015, 2016, or 

2017, as applicable, or, if such date is 

not a business day, the next applicable 

business day, if making a combined 

contribution or the first payment of the 

bifurcated contribution; and no later 

than November 15, 2015, 2016, or 2017, 

as applicable, or, if such date is not a 

business day, the next applicable 

business day, if making the second 

payment of the bifurcated contribution. 

Although we stated in the 2015 

Payment Notice (79 FR 13776) that, for 

operational reasons, HHS would not 

permit contributing entities to elect to 

make the entire benefit year’s 

reinsurance contribution by January 15, 

2015, 2016, or 2017, as applicable, we 

have resolved those operational 

difficulties, and will offer contributing 

entities the option to pay: (1) the entire 

2014, 2015, or 2016 benefit year 

contribution in one payment no later 

than January 15, 2015, 2016, or 2017, as 

applicable (or, if such date is not a 

business day, the next applicable 

business day), reflecting the entire 

uniform contribution rate applicable to 

each benefit year (that is, $63 per 

covered life for 2014, $44 per covered 

life for 2015, and a proposed $27 per 

covered life for 2016); or (2) in two 

separate payments for the 2014, 2015, or 

2016 benefit years, with the first 

remittance due by January 15, 2015, 

2016, and 2017, as applicable (or, if 

such date is not a business day, the next 

applicable business day), reflecting the 

first payment of the bifurcated 

contribution (that is, $52.50 per covered 

life for 2014, $33.00 per covered life for 

2015, and a proposed $21.60 per 

covered life for 2016); and the second 

remittance due by November 15, 2015, 

2016, or 2017, as applicable (or, if such 

date is not a business day, the next 

applicable business day) reflecting the 

second payment of the bifurcated 

contribution (that is, $10.50 reinsurance 

fee per covered life for 2014, $11.00 per 

covered life for 2015, and a proposed 

$5.40 per covered life for 2016). 

Under § 153.405(c)(1), HHS must 

notify the contributing entity of the 

reinsurance contribution amount 

allocated to reinsurance payments and 

administrative expenses to be paid for 

the applicable benefit year following 

submission of the annual enrollment 

count. We clarify that this notification 

will occur when the contributing entity 

enters the gross annual enrollment 

count into the Pay.gov form and the 

form auto-calculates the contribution 

amount owed. No separate notification 

or invoice will be sent to a contributing 

entity, unless a discrepancy in data or 

payment has been identified after the 

form is submitted. In addition, we 

propose to delete § 153.405(c)(2), to be 

consistent with HHS permitting 

flexibility for a contributing entity (or 

the TPA or ASO contractor on its behalf) 

to remit the entire contribution in one 

payment, rather than requiring a 

bifurcated payment. Notification of the 

reinsurance contribution amount related 

to the allocation for reinsurance 

payments, administrative expenses, and 

payments to the U.S. Treasury for the 

applicable benefit year will also be 

made through the automatic calculation 

of this amount when a contributing 

entity (or the TPA or ASO contractor on 

its behalf) completes the reinsurance 

contribution submission process and 

submits the Form through Pay.gov. 

We also propose to amend and 

redesignate § 153.405(c)(3) to (c)(2) to 

clarify that a contributing entity must 

remit its contribution payment for the 

applicable benefit year to occur no later 

than January 15, 2015, 2016, or 2017, as 

applicable (or, if such date is not a 

business day, the next applicable 

business day) if making a combined 

payment or the first payment of the 

bifurcated payment, and no later than 

November 15, 2015, 2016, or 2017, as 

applicable (or, if such date is not a 

business day, the next applicable 

business day) if making the second 

payment of the bifurcated payment. 

However, we note that the form must be 

completed and the reinsurance 

contribution payment(s) must be 

scheduled no later than November 15, 

2014, 2015, or 2016, as applicable, to 

successfully comply with the deadline 

set forth in § 153.405(b) and complete 

the reinsurance contribution submission 

process through Pay.gov. The 

reinsurance contribution payments must 

be scheduled by this deadline regardless 

of whether the contributing entity (or 

the TPA or ASO contractor on its behalf) 

is remitting a single combined payment 

or two payments under the bifurcated 

schedule. 

We note that under certain 

circumstances, if a contributing entity 

elects to follow the bifurcated schedule, 

then the contributing entity would be 

required to submit two separate forms 

through Pay.gov. However, in this 

circumstance, the annual enrollment 

count reported on both forms must be 

the same. This is consistent with 

§ 153.405(b) and previous guidance, 

which provide that no later than 

November 15 of benefit year 2014, 2015, 

or 2016, as applicable, a contributing 

entity must submit an annual 

enrollment count of the number of 

covered lives of reinsurance 

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11Available at: https://www.regtap.info/, FAQ 

#6037. 

contribution enrollees one time for the 

applicable benefit year to HHS. 

Finally, we propose to amend 

§ 153.405(g)(4)(1)(i) and (ii), which 

require a plan sponsor who maintains 

multiple group health plans to report to 

HHS the average number of covered 

lives calculated, the counting method 

used, and the names of the multiple 

plans being treated as a single group 

health plan as determined by the plan 

sponsor. A plan sponsor will continue 

to be required to determine this 

information, but will only need to report 

to HHS the average number of covered 

lives calculated and the other data 

elements required through the Pay.gov 

reinsurance contribution submission 

process. Under § 153.405(h), plan 

sponsors should retain this additional 

information (that is, the counting 

method used and the names of the 

multiple plans being treated as a single 

group health plan), as this information 

may be requested to assess the plan 

sponsor’s compliance with the 

reinsurance contribution requirements, 

if necessary. We seek comment on these 

proposals. 

e. Consistency in Counting Methods for 

Health Insurance Issuers (§ 153.405(d)) 

As noted in the 2014 Payment Notice 

(78 FR15462), the counting methods for 

the transitional reinsurance program are 

designed to align with the methods 

permitted for purposes of the fee to fund 

the Patient-Centered Outcomes Research 

Trust Fund (PCORTF). The PCORTF 

Final Rule (77 FR 72729) requires 

consistency in the use of counting 

methods for calculating covered lives 

for the duration of the year. In response 

to stakeholder questions, to promote 

administrative efficiencies, and to 

minimize the potential for strategic 

reporting of enrollment counts for 

reinsurance purposes, we propose to 

amend § 153.405(d) to similarly require 

a contributing entity that is a health 

insurance issuer to use the same 

counting method to calculate its annual 

enrollment count of covered lives of 

reinsurance contribution enrollees in a 

State (including both the individual and 

group markets) for a benefit year even if 

the fully insured major medical plans 

for which reinsurance contributions are 

required enroll different covered lives. If 

a health insurance issuer has multiple 

major medical plans covering different 

lives in different States, the issuer may 

use different counting methods for all 

major medical plans in each State 

(including both the individual and 

group markets). We note that this 

consistency requirement, if finalized as 

proposed, would be required for the 

2015 and 2016 benefit years. As noted 

in an FAQ issued on October 21, 2014,11

we also encourage this approach for the 

2014 benefit year. This proposal would 

not prevent an issuer from using 

different counting methods for different 

benefit years. We do not propose a 

similar requirement for self-insured 

group health plans because we believe 

in many instances, a plan sponsor’s 

multiple group health plans may be 

administered by different entities, 

making uniformity of counting method 

potentially more difficult. We seek 

comment on this proposal, including 

with respect to whether such uniformity 

of counting method is more difficult for 

self-insured group health plans. 

f. Snapshot Count and Snapshot Factor 

Counting Methods (§§ 153.405(d)(2) and 

(e)(2)) 

Under § 153.400(a)(1), reinsurance 

contributions are generally required for 

major medical coverage that is 

considered to be part of a commercial 

book of business, but contributions are 

not required to be paid more than once 

with respect to the same covered life. 

Reinsurance contributions are generally 

calculated based on the number of 

covered lives covered by a plan or 

coverage that provides major medical 

coverage. The reinsurance contribution 

required from a contributing entity is 

calculated by multiplying the number of 

covered lives (determined under a 

permitted counting method set forth in 

§ 153.405(d) through § 153.405(g)) 

during the applicable calendar year for 

all applicable plans and coverage of the 

contributing entity by the applicable 

contribution rate for the respective 

benefit year. 

We seek to clarify how two of the 

counting methods set forth in 

§§ 153.405(d)(2) and (e)(2) are to be used 

in those situations when a plan 

terminates or is established in the 

middle of a quarter to effectuate the 

principle that contributions are required 

to be paid once with respect to the same 

covered life. Under the snapshot count 

method, described at § 153.405(d)(2), to 

determine the number of covered lives 

for the purposes of reinsurance 

contributions, the issuer or self-insured 

group health plan must add the total 

number of lives covered on any date (or 

more dates, if an equal number of dates 

are used for each quarter) during the 

same corresponding month in each of 

the first 3 quarters of the benefit year, 

and divide that total by the number of 

dates on which a count was made. 

Under the snapshot factor method, 

described at § 153.405(e)(2), to 

determine the number of covered lives 

for the purposes of reinsurance 

contributions, the self-insured group 

health plan must add the total number 

of lives covered on any date (or more 

dates, if an equal number of dates are 

used for each quarter) during the same 

corresponding month in each of the first 

3 quarters of the benefit year (provided 

that the date used for the second and 

third quarters must fall within the same 

week of the quarter as the corresponding 

date used for the first quarter), and 

divide that total by the number of dates 

on which a count was made, except that 

the number of lives covered on a date 

is calculated by adding the number of 

participants with self-only coverage on 

the date to the product of the number of 

participants with coverage other than 

self-only coverage on the date and a 

factor of 2.35. For each of these counting 

methods, the same months must be used 

for each quarter (for example, January, 

April, July), and the date used for the 

second and third quarter must fall 

within the same week of the quarter as 

the corresponding date used for the first 

quarter. 

We understand that a health 

insurance plan or coverage may be 

established, terminated, or change 

funding mechanisms (that is, from fully 

insured to self-insured or self-insured to 

fully insured), in the middle of a 

quarter. In these circumstances, it is 

possible that the new plan or coverage 

would not have covered lives enrolled 

in the plan or coverage for the entire 

quarter. If this occurs, a contributing 

entity could, due to its selection of 

dates, be required to pay an amount 

significantly greater or lesser than the 

amount that would be due based on its 

average count of covered lives over the 

course of the 9-month counting period. 

To avoid this result, we clarify that, if 

the plan or coverage in question had 

enrollees on any day during a quarter 

and if the contributing entity elects to 

(and is permitted to) use either the 

snapshot count or snapshot factor 

method, it must choose a set of counting 

dates for the 9-month counting period 

such that the plan or coverage has 

enrollees on each of the dates, if 

possible. However, the enrollment count 

for a date during a quarter in which the 

plan or coverage was in existence for 

only part of the quarter can be reduced 

by a factor reflecting the amount of time 

during the quarter for which the plan or 

coverage was not in existence. This 

approach is intended to accurately 

capture the amount of time during the 

quarter for which major medical 

coverage that is part of a commercial 

book of business and subject to 

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12 79 FR 20557–59. 

reinsurance contributions was provided 

to enrollees, while not requiring 

contributions to be paid more than once 

with respect to the same covered life. 

For example, a contributing entity that 

has a plan that terminates on August 

31st (that is, 62 days into the third 

quarter) would not be permitted to use 

September 1st as the date for the third 

quarter under the snapshot count or 

snapshot factor methods because this 

would not properly reflect the number 

of covered lives of reinsurance 

contribution enrollees under the plan in 

the third quarter of the benefit year. 

However, it would be entitled to reduce 

its count of covered lives during that 

quarter by 30/92, the proportion of the 

quarter during which the plan had no 

enrollment. This reduction factor would 

only be applicable for the snapshot 

count and snapshot factor methods set 

forth in §§ 153.405(d)(2) and (e)(2), 

respectively, as all of the other 

permitted counting methods 

automatically account for partial year 

enrollment. 

g. Uniform Reinsurance Contribution 

Rate for 2016 

Section 153.220(c) provides that HHS 

is to publish in the annual HHS notice 

of benefit and payment parameters the 

uniform reinsurance contribution rate 

for the upcoming benefit year. Section 

1341(b)(3)(B)(iii) of the Affordable Care 

Act specifies that $10 billion for 

reinsurance contributions are to be 

collected from contributing entities in 

2014 (the reinsurance payment pool), $6 

billion in 2015, and $4 billion in 2016. 

Additionally, sections 1341(b)(3)(B)(iv) 

and 1341(b)(4) of the Affordable Care 

Act direct that $2 billion in funds are to 

be collected for contribution to the U.S. 

Treasury in 2014, $2 billion in 2015, 

and $1 billion in 2016. Finally, section 

1341(b)(3)(B)(ii) of the Affordable Care 

Act allows for the collection of 

additional amounts for administrative 

expenses. Taken together, these three 

components make up the total dollar 

amount to be collected from 

contributing entities for each of the 

2014, 2015, and 2016 benefit years 

under the uniform reinsurance 

contribution rate. 

As discussed in the 2014 and 2015 

Payment Notices, each year, the uniform 

reinsurance contribution rate will be 

calculated by dividing the sum of the 

three amounts (the reinsurance payment 

pool, the U.S. Treasury contribution, 

and administrative costs) by the 

estimated number of enrollees in plans 

that must make reinsurance 

contributions: 

As discussed in greater detail below, 

we are proposing to collect $32 million 

for administrative expenses for the 2016 

benefit year. Therefore, the total amount 

to be collected would be approximately 

$5.032 billion. Our estimate of the 

number of enrollees in plans that must 

make reinsurance contributions yields 

an annual per capita contribution rate of 

$27 for the 2016 benefit year. 

(1) Allocation of Uniform Reinsurance 

Contribution Rate 

Section 153.220(c) provides that HHS 

is to establish in the annual HHS notice 

of benefit and payment parameters for 

the applicable benefit year the 

proportion of contributions collected 

under the uniform reinsurance 

contribution rate to be allocated to 

reinsurance payments, payments to the 

U.S. Treasury, and administrative 

expenses. In the 2014 and 2015 Payment 

Notices, we stated that reinsurance 

contributions collected for the 2014 and 

2015 benefit years would be allocated 

pro rata to the reinsurance payment 

pool, administrative expenses, and the 

U.S. Treasury, up to $12.02 billion for 

2014 and up to $8.025 billion for 2015. 

However, we amended this approach in 

the 2015 Market Standards Rule,12 such 

that, if reinsurance collections fall short 

of our estimates for a particular benefit 

year, we will allocate reinsurance 

contributions collected first to the 

reinsurance payment pool, with any 

remaining amounts being then allocated 

to the U.S. Treasury and administrative 

expenses, on a pro rata basis. We 

propose to follow a similar approach for 

the 2016 benefit year, such that if 

reinsurance contributions fall short of 

our estimates, contributions collected 

will first be allocated to the reinsurance 

payment pool, with any remaining 

allocated on a pro rata basis to 

administrative expenses and payments 

to the U.S. Treasury. We note that 

consistent with the statement in the 

2015 Payment Notice (79 FR 13777), if 

we collect more than the statutorily 

required amount in the 2016 benefit 

year we propose to use any excess 

contributions for reinsurance payments 

for the current benefit year by increasing 

the coinsurance rate for the 2016 benefit 

year up to 100 percent before rolling 

over any remaining funds to the next 

year. Additionally, we anticipate 

expending all reinsurance contributions 

collected for the 2016 benefit year for 

2016 requests for reinsurance payments 

rather than reserving any of the excess 

funds rolled over or collected for the 

2016 benefit year in future years. 

However, because allowing excess funds 

to roll over for the 2017 benefit year 

could help stabilize 2017 premiums, we 

seek comment on rolling over any 

excess funds to the 2017 benefit year as 

an alternative to this approach. 

(2) Administrative Expenses 

In the 2015 Payment Notice, we 

estimated that the Federal 

administrative expenses of operating the 

reinsurance program would be $25.4 

million, based on our estimated contract 

and operational costs. We propose to 

use the same methodology to estimate 

the administrative expenses for the 2016 

benefit year. These estimated costs 

would cover the costs related to 

contracts for developing the uniform 

reinsurance payment parameters and 

the uniform reinsurance contribution 

rate, collecting reinsurance 

contributions, making reinsurance 

payments, and conducting account 

management, data collection, program 

integrity and audit functions, 

operational and fraud analytics, training 

for entities involved in the reinsurance 

program, and general operational 

support. To calculate our proposed 

reinsurance administrative expenses for 

2016, we divided HHS’s projected total 

costs for administering the reinsurance 

programs on behalf of States by the 

expected number of covered lives for 

which reinsurance contributions are to 

be made for 2016. 

We estimate this amount to be 

approximately $32 million for the 2016 

benefit year. This estimate increased for 

the 2016 benefit year due to increased 


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70698 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

13See the proposed 2014 Payment Notice (77 FR 

73160) and the proposed 2015 Payment Notice (78 

FR 72344) for more information on the ACAHIM 

methodology. 

audit and data validation contract costs. 

We believe that this amount reflects the 

Federal government’s significant 

economies of scale, which helps to 

decrease the costs associated with 

operating the reinsurance program. 

Based on our estimate of covered lives 

for which reinsurance contributions are 

to be made for 2016, we are proposing 

a uniform reinsurance contribution rate 

of $0.17 annually per capita for HHS 

administrative expenses. We provide 

details below on the methodology we 

used to develop the 2016 enrollment 

estimates. 

Similar to the allocation for 2015, for 

the 2016 benefit year, we allocated the 

administrative expenses equally 

between contribution and paymentrelated activities. Because we anticipate 

that our additional activities in the 2016 

benefit year, including our program 

integrity and audit activities, will also 

be divided approximately equally 

between contribution and paymentrelated activities, we again propose to 

allocate the total administrative 

expenses equally between these two 

functions. Therefore, as shown in Table 

9, we expect to apportion the annual per 

capita amount of $0.17 of administrative 

expenses as follows: (a) $0.085 of the 

total amount collected per capita for 

administrative expenses for the 

collection of contributions from 

contributing entities; and (b) $0.085 of 

the total amount collected per capita for 

administrative expenses for reinsurance 

payment activities, supporting the 

administration of payments to issuers of 

reinsurance-eligible plans. 

TABLE 9—BREAKDOWN OF ADMINISTRATIVE EXPENSES

[Annual, per capita] 

Activities Estimated 

expenses 

Collecting reinsurance contributions from health insurance issuers and certain self-insured group health plans ............................. $0 .085 

Calculation and disbursement of reinsurance payments .................................................................................................................... 0 .085 

Total annual per capita expenses for HHS to perform all reinsurance functions ........................................................................ 0 .17 

If HHS operates the reinsurance 

program on behalf of a State, HHS 

would retain the annual per capita fee 

to fund HHS’s performance of all 

reinsurance functions, which would be 

$0.17. If a State establishes its own 

reinsurance program, HHS would 

transfer $0.085 of the per capita 

administrative fee to the State for 

purposes of administrative expenses 

incurred in making reinsurance 

payments, and retain the remaining 

$0.085 to offset HHS’s costs of collecting 

contributions. We note that the 

administrative expenses for reinsurance 

payments will be distributed to those 

States that operate their own 

reinsurance program in proportion to 

the State-by-State total requests for 

reinsurance payments made under the 

uniform reinsurance payment 

parameters. 

h. Uniform Reinsurance Payment 

Parameters for 2016 

Our goal in setting the reinsurance 

payment parameters is to achieve the 

greatest impact on rate setting, and 

therefore premiums, through reductions 

in plan risk, while minimizing 

interference with the current 

commercial reinsurance market. Section 

1341(b)(2)(B) of the Affordable Care Act 

directs the Secretary, in establishing 

standards for the transitional 

reinsurance program, to include a 

formula for determining the amount of 

reinsurance payments to be made to 

issuers for high-risk individuals that 

provides for the equitable allocation of 

funds. In the Premium Stabilization 

Rule, we provided that reinsurance 

payments to eligible issuers will be 

made for a portion of an enrollee’s 

claims costs paid by the issuer (the 

coinsurance rate, meant to reimburse a 

proportion of claims while giving 

issuers an incentive to contain costs) 

that exceeds an attachment point (when 

reinsurance would begin), subject to a 

reinsurance cap (when the reinsurance 

program stops paying claims for a highcost individual). The coinsurance rate, 

attachment point, and reinsurance cap 

together constitute the uniform 

reinsurance payment parameters. 

Given the smaller pool of reinsurance 

contributions to be collected for the 

2016 benefit year, we are proposing that 

the uniform reinsurance payment 

parameters for the 2016 benefit year be 

established at an attachment point of 

$90,000, a reinsurance cap of $250,000, 

and a coinsurance rate of 50 percent. We 

estimate that these uniform reinsurance 

payment parameters will result in total 

requests for reinsurance payments of 

approximately $4 billion for the 2016 

benefit year. We believe setting the 

coinsurance rate at 50 percent and 

increasing the attachment point allows 

for the reinsurance program to help pay 

for nearly the same group of high-cost 

enrollees as was the case for the 2014 

and 2015 benefit years, while still 

encouraging issuers to contain costs. We 

believe that maintaining the reinsurance 

cap for the 2016 benefit year while 

ensuring that the coinsurance rate 

sufficiently compensates issuers for 

high-risk individuals will make it easier 

for issuers to estimate the effects of 

reinsurance. We believe that these 

uniform reinsurance payment 

parameters will support the reinsurance 

program’s goals of promoting 

nationwide premium stabilization and 

market stability while providing issuers 

incentives to continue to effectively 

manage enrollee costs. We seek 

comment on this proposal. 

As discussed in the 2014 and 2015 

Payment Notices, to assist with the 

development of the uniform reinsurance 

payment parameters and the premium 

adjustment percentage index, HHS 

developed the Affordable Care Act 

Health Insurance Model (ACAHIM). The 

ACAHIM generates a range of national 

and State-level outputs for 2016, using 

updated assumptions reflecting more 

recent data, but using the same 

methodology described in the 2014 and 

2015 Payment Notices.13

Specifically, the ACAHIM uses the 

Health Intelligence Company, LLC (HIC) 

database from calendar year 2010, with 

the claims data trended to 2016 to 

estimate total medical expenditures per 

enrollee by age, gender, and area of 

residence. The expenditure 

distributions are further adjusted to take 

into account plan benefit design, or 

‘‘metal’’ level (that is, ‘‘level of 

coverage,’’ as defined in § 156.20) and 

other characteristics of individual 

insurance coverage in an Exchange. To 

describe a State’s coverage market, the 

ACAHIM computes the pattern of 

enrollment using the model’s predicted 

number and composition of participants 

in a coverage market. These estimated 

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14 79 FR 30259. 

15Except for limited cost-sharing plan variations, 

for which we stated we would not reduce the QHP 

issuer’s plan paid amounts. 

16Letter to Insurance Commissioners, Center for 

Consumer Information and Insurance Oversight, 

November 14, 2013. Available at: http://www.cms.

gov/CCIIO/Resources/Letters/Downloads/

commissioner-letter-11-14-2013.PDF. 

17 Insurance Standards Bulletin Series— 

Extension of Transitional Policy through October 1, 

2016, Center for Consumer Information and 

Insurance Oversight, March 5, 2014. Available at: 

http://www.cms.gov/CCIIO/Resources/Letters/

Downloads/commissioner-letter-11-14-2013.PDF. 

18As stated in the 2015 Payment Notice, HHS 

will calculate the amount of the adjustment that 

applies to each State based on the State’s membermonth enrollment count for transitional plans and 

non-transitional plans in the individual and small 

group markets. 

19Title 45 Part 153, Section 530 of the Code of 

Federal Regulations (CFR) sets forth the data 

requirements for this information collection. A 

notice was published in the Federal Register on 

September 5, 2014, providing the public with a 60- 

Continued 

expenditure distributions were the basis 

for the uniform reinsurance payment 

parameters. 

i. Uniform Reinsurance Payment 

Parameters for 2015 

In the 2015 Market Standards Rule,14

we stated that we intended to propose 

to lower the 2015 attachment point from 

$70,000 to $45,000 for the 2015 benefit 

year. We believe that lowering the 

attachment point to $45,000 would 

allow the reinsurance program to make 

more payments for high-cost enrollees 

in individual market reinsuranceeligible plans without increasing the 

contribution rate. We do not propose to 

adjust the 2015 coinsurance rate of 50 

percent or reinsurance cap of $250,000. 

We seek comment on this proposal. 

j. Deducting Cost-Sharing Reduction 

Amounts From Reinsurance Payments 

We propose to modify the 

methodology finalized in the 2015 

Payment Notice (79 FR 13780) regarding 

the deduction of cost-sharing reduction 

amounts from reinsurance payments. 

Under § 156.410, if an individual is 

determined eligible to enroll in an 

individual market Exchange QHP and 

elects to do so, the QHP issuer must 

assign the individual to a standard plan 

or cost-sharing plan variation based on 

the enrollment and eligibility 

information submitted by the Exchange. 

Issuers of individual market Exchange 

QHPs will receive cost-sharing 

reduction payments for enrollees that 

have effectuated coverage in costsharing plan variations. To avoid double 

payment by the Federal government, we 

indicated in the 2014 Payment Notice 

(78 FR 15499) that the enrollee-level 

claims data submitted by an issuer of a 

reinsurance-eligible plan should be net 

of cost-sharing reductions provided 

through a cost-sharing plan variation 

(which are reimbursed by the Federal 

government). 

In the 2015 Payment Notice (79 FR 

13780), we explained the methodology 

HHS will use to deduct the amount of 

cost-sharing reductions paid on behalf 

of an enrollee enrolled in a QHP in an 

individual market through an Exchange. 

For each enrollee enrolled in a QHP 

plan variation,15 we will subtract from 

the QHP issuer’s total plan paid 

amounts for the enrollee in a 

reinsurance-eligible plan the difference 

between the annual limitation on cost 

sharing for the standard plan and the 

annual limitation on cost sharing for the 

plan variation. For policies with 

multiple enrollees, such as family 

policies, we stated we would allocate 

the difference in annual limitation in 

cost sharing across all enrollees covered 

by the family policy in proportion to the 

enrollees’ QHP issuer total plan paid 

amounts. 

We also stated that for an enrollee 

who is assigned to different plan 

variations during the benefit year, we 

would calculate the adjustment for costsharing reductions based on the annual 

limitation on cost sharing applicable to 

the plan variation in which the enrollee 

was last enrolled during the benefit 

year, because cost sharing accumulates 

over the benefit year across plan 

variations of the same standard plan. 

We are proposing to modify this 

policy; we propose that if an enrollee is 

assigned to different plan variations 

during the benefit year, we would 

calculate the adjustment for cost-sharing 

reductions based on the difference 

between the annual limitation on cost 

sharing for the standard plan and the 

average annual limitation on cost 

sharing in the plan variations (including 

any standard plan), weighted by the 

number of months the enrollee is 

enrolled in each plan variation during 

the benefit year. This approach will also 

permit us to allocate the difference in 

annual limitations in a family policy to 

individual family members when a 

member exits or enters the policy midyear, or if there are other changes in 

circumstances that impact the costsharing reductions provided to enrollees 

covered by the family policy. We are not 

proposing any changes to the approach 

finalized in the 2015 Payment Notice 

with respect to the QHP issuer’s plan 

paid amounts for purposes of 

calculating reinsurance payments for an 

Indian in a limited cost-sharing plan 

variation. We seek comment on this 

proposed modification, as well as 

alternative approaches to deducting CSR 

amounts from reinsurance payments. 

4. Provisions for the Temporary Risk 

Corridors Program 

a. Application of the Transitional Policy 

Adjustment in Early Renewal States 

On November 14, 2013, the Federal 

government announced a transitional 

policy under which it will not consider 

certain health insurance coverage in the 

individual or small group markets that 

is renewed for a policy year starting 

after January 1, 2014, under certain 

conditions to be out of compliance with 

specified 2014 market rules, and 

requested that States adopt a similar 

non-enforcement policy.16 HHS 

extended this transitional policy on 

March 5, 2014, permitting issuers to 

renew transitional policies through 

policy years beginning on or before 

October 1, 2016.17 In the 2015 Payment 

Notice, HHS implemented an 

adjustment to the risk corridors formula 

for the 2014 benefit year to help further 

mitigate any unexpected losses 

attributable to the effects of the 

transitional policy for QHP issuers in a 

State that adopts the transitional policy. 

Under § 153.500, we will effectuate this 

adjustment to the risk corridors formula 

for each of the individual and small 

group markets by increasing the profit 

margin floor (from 3 percent of after-tax 

profits) and the allowable 

administrative costs ceiling (from 20 

percent of after-tax profits) to help offset 

losses that might occur under the 

transitional policy as a result of 

increased claims costs not accounted for 

when setting 2014 premiums. Because 

we believe that the Statewide effect on 

this risk pool would increase with an 

increase in the percentage enrollment in 

transitional plans in the State, we stated 

that we would vary the State-specific 

percentage adjustment to the risk 

corridors formula with the percentage of 

member-months enrollment in these 

transitional plans in the State.18

In response to stakeholder questions, 

we propose to clarify that the 

transitional adjustment applies only 

with respect to plans under the 

transitional policy—that is, plans that 

renew after January 1, 2014 for which 

HHS and the applicable State are not 

enforcing market rules. We would 

further clarify that member-months of 

enrollees in early renewal plans will not 

be counted towards the risk corridors 

transitional policy adjustment (that is, 

unless and until the plan becomes a 

transitional plan in a transitional State 

upon renewal in 2014).19 We believe 

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70700 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

day period to submit written comments on the 

information collection requirement associated with 

the Transitional Adjustment Reporting form. 20The Centers for Medicare and Medicaid 

Services, Center for Consumer Information and 

Insurance Oversight. ‘‘Risk Corridors and Budget 

Neutrality’’. April 11, 2014. Available at: https://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/Downloads/faq-risk-corridors-04-11-2014.pdf. 

21 In our bulletin on ‘‘Risk Corridors and Budget 

Neutrality’’ dated April 11, 2014, we stated that if, 

in 2014 or 2015, requests for risk corridors 

payments exceed risk corridors collections, we 

would reduce risk corridors payments pro rata, but 

would make up those deficiencies to the extent 

collections exceed payment requests in later years. 

22Because of some differences in the MLR 

numerator and the definition of allowable costs that 

applies with respect to the risk corridors formula, 

in a small number of cases, an issuer with allowable 

costs that are at least 80 percent of after-tax 

premium, may be required to pay MLR rebates to 

consumers. 

that this approach for counting member 

months towards the risk corridors 

transitional adjustment is consistent 

with the intent of the transitional policy 

adjustment set forth in the 2015 

Payment Notice because issuers could 

have been able to account for the risk of 

early renewals in their 2014 rate setting. 

We request comment on this approach. 

b. Risk Corridors Payments for 2016 

To provide greater clarity on how risk 

corridors payments will be made, we 

issued a bulletin on April 11, 2014, 

titled ‘‘Risk Corridors and Budget 

Neutrality,’’ which described how we 

intend to administer risk corridors in a 

budget neutral way over the 3-year life 

of the program.20 Specifically, we stated 

that if risk corridors collections in the 

first or second year are insufficient to 

make risk corridors payments as 

prescribed by the regulations, risk 

corridors collections received for the 

next year will first be used to pay off the 

payment reductions issuers experienced 

in the previous year in a proportional 

manner, up to the point where issuers 

are reimbursed in full for the previous 

year, and remaining funds will then be 

used to fund current year payments. If 

any risk corridors funds remain after 

prior and current year payment 

obligations have been met, we stated 

that they will be held to offset potential 

insufficiencies in risk corridors 

collections in the next year. Our April 

11, 2014 bulletin stated that we would 

establish in future guidance how we 

would calculate risk corridors payments 

in the event that cumulative risk 

corridors collections do not equal 

cumulative risk corridors payment 

requests. 

We now propose that if, for the 2016 

benefit year, cumulative risk corridors 

collections exceed cumulative risk 

corridors payment requests, we would 

make an adjustment to our 

administrative expense definitions (that 

is, the profit margin floor and the ceiling 

for allowable administrative costs) to 

account for the excess funds. That is to 

say, if, when the risk corridors program 

concludes, cumulative risk corridors 

collections exceed both 2016 payment 

requests under the risk corridors 

formula and any unpaid risk corridors 

amounts from previous years,21 we 

would increase the administrative cost 

ceiling and the profit floor in the risk 

corridors formula by a percentage 

calculated to pay out all collections to 

QHP issuers. The administrative cost 

ceiling and the profit floor would be 

adjusted by the same percentage. 

We propose to determine the 

percentage adjustment to the 

administrative cost ceiling and profit 

margin floor by evaluating the amount 

of excess risk corridors collections (if 

any) available after risk corridors 

payments for benefit year 2016 have 

been calculated. As stated in our 

bulletin on risk corridors budget 

neutrality, after receiving charges from 

issuers for the 2016 benefit year, we 

would first prioritize payments to any 

unpaid risk corridors payments 

remaining from the 2015 benefit year. 

We would then calculate benefit year 

2016 risk corridors payments for eligible 

issuers based on the 3 percent profit 

floor and 20 percent allowable 

administrative cost ceiling, as required 

by regulation. If, after making 2015 

payments and calculating (but not 

paying) risk corridors payments for 

benefit year 2016, we determine that the 

aggregate amount of collections 

(including any amounts collected for 

2016 and any amounts remaining from 

benefit years 2014 and 2015) exceed 

what is needed to make 2016 risk 

corridors payments, we would 

implement an adjustment to the profit 

floor and administrative cost ceiling to 

increase risk corridors payments for 

eligible issuers for benefit year 2016. We 

would examine data that issuers have 

submitted for calculation of their 2016 

risk corridors ratios (that is, allowable 

costs and target amount) and determine, 

based on the amount of collections 

available, what percentage increase to 

the administrative cost ceiling and 

profit floor could be implemented for 

eligible issuers while maintaining 

budget neutrality for the program 

overall. Although all eligible issuers 

would receive the same percentage 

adjustment, the amount of additional 

payment made to each issuer would 

vary based on the issuer’s allowable 

costs and target amount. Once HHS has 

calculated the adjustment and applied it 

to eligible issuers’ risk corridors 

formulas, it would make a single risk 

corridors payment for benefit year 2016 

that would include any additional, 

adjusted payment amount. 

Because risk corridors collections are 

a user fee to be used to fund premium 

stabilization under risk corridors and 

because we intend to implement the risk 

corridors program in a budget neutral 

manner, we propose to limit this 

adjustment to excess amounts collected. 

We propose to apply this adjustment to 

allowable administrative costs and 

profits for the 2016 benefit year only to 

plans whose allowable costs (as defined 

at § 153.500) are at least 80 percent of 

their after-tax premiums, because 

issuers under this threshold would 

generally be required to pay out MLR 

rebates to consumers.22 In the past, we 

have sought to align the definitions we 

use for the risk corridors program, 

including those of ‘‘allowable 

administrative costs’’ and ‘‘profits,’’ 

with the manner in which these 

concepts are treated in the MLR 

program, to ensure that the programs are 

consistent in their effects. We note that 

for plans whose ratio of allowable costs 

to after-tax premium are below 80 

percent, the 3 percent risk corridors 

profit margin and 20 percent allowable 

administrative cost ceiling would 

continue to apply. Furthermore, we 

propose that, to the extent that applying 

the proposed adjustment to a plan could 

increase its risk corridors payment and 

affect its MLR calculation, the MLR 

calculation will ignore these 

adjustments. This is consistent with our 

previous policy with respect to the 

adjustments to these definitions for 

2014 and 2015 in the 2015 Payment 

Notice and the 2015 Market Standards 

Rule. We request comment on this 

approach. 

As previously stated, we anticipate 

that risk corridors collections will be 

sufficient to pay for all risk corridors 

payments. HHS recognizes that the 

Affordable Care Act requires the 

Secretary to make full payments to 

issuers. In the unlikely event that risk 

corridors collections, including any 

potential carryover from the prior years, 

are insufficient to make risk corridors 

payments for the 2016 program year, 

HHS will use other sources of funding 

for the risk corridors payments, subject 

to the availability of appropriations. 

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23Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, Premium Stabilization 

Programs and Market Standards, 78 FR 65046 

(October 30, 2013). 

24We note that HHS also clarified in a March 28, 

2014 FAQ that CMPs would not be imposed on an 

issuer for non-compliance during the 2014 calendar 

year, if the issuer made good efforts to comply with 

these requirements. See, FAQ 1212, published 

March 28, 2014. https://www.regtap.info/faq_viewu.

php?id=1212. 

25According to 45 CFR 153.740(b), ‘‘If an issuer 

of a risk adjustment covered plan fails to establish 

a dedicated distributed data environment or fails to 

provide HHS with access to the required data in 

such environment in accordance with § 153.610(a), 

§ 153.700, § 153.710, or § 153.730 such that HHS 

cannot apply the applicable Federally certified risk 

adjustment methodology to calculate the risk 

adjustment payment transfer amount for the risk 

adjustment covered plan in a timely fashion, HHS 

will assess a default risk adjustment charge.’’ 

26 79 FR 30240. 

5. Distributed Data Collection for the 

HHS-Operated Risk Adjustment and 

Reinsurance Programs 

a. Good Faith Safe Harbor (§ 153.740(a)) 

In the second Program Integrity rule,23

HHS finalized a good faith safe harbor 

policy which provided that civil money 

penalties (CMPs) will not be imposed 

for non-compliance with the HHSoperated risk adjustment and 

reinsurance data requirements during 

2014, if the issuer has made good faith 

efforts to comply with these 

requirements.24 That safe harbor 

parallels a similar safe harbor for QHP 

issuers in FFEs under § 156.800. 

We propose to amend § 153.740(a) to 

extend the safe harbor for noncompliance with the HHS-operated risk 

adjustment and reinsurance data 

requirements during the 2015 calendar 

year if the issuer has made good faith 

efforts to comply with these 

requirements. This proposal 

acknowledges that the distributed data 

collection requirements have been the 

subject of modifications through the 

2014 calendar year, including the 

introduction of cloud-based virtual 

options for the distributed data 

environments. We note that good faith 

efforts could include notifying, 

communicating with, and cooperating 

with HHS with respect to issues that 

arise with the establishment and 

provisioning of the issuers’ dedicated 

distributed data environment. 

The extension of this good faith safe 

harbor will not affect HHS’s ability to 

assess issuers of risk adjustment covered 

plans a default risk adjustment charge 

under § 153.740(b).25 Additionally, we 

note that the good faith safe harbor does 

not apply to non-compliance with 

dedicated distributed data environment 

standards applicable during 2016, even 

if the non-compliance in the 2016 

calendar year relates to data for the 2015 

benefit year. Issuers of risk adjustment 

covered plans and reinsurance-eligible 

plans must establish dedicated 

distributed data environments in 2014 

and begin loading data according to a 

quarterly schedule provided by HHS. 

The good faith safe harbor would apply, 

for example, to noncompliance with the 

2015 benefit year schedule for loading 

data to the dedicated distributed data 

environment during the 2015 calendar 

year. However, the data loading 

schedule applicable to the 2015 benefit 

year for risk adjustment and reinsurance 

data extends into the 2016 calendar year 

(the final loading deadline is April 30, 

2016, which will enable HHS to 

calculate risk adjustment payments and 

charges and reinsurance payments for 

the 2015 benefit year by June 30, 2016). 

The good faith safe harbor would not 

extend to non-compliance with any 

2016 calendar year obligations, even if 

those 2016 obligations apply for 2015 

benefit year data. We seek comment on 

this proposal. 

b. Default Risk Adjustment Charge 

(§ 153.740(b)) 

In the second Program Integrity Rule 

and the 2015 Payment Notice, HHS 

indicated that a default risk adjustment 

charge will be assessed if an issuer does 

not establish a dedicated distributed 

data environment or submits inadequate 

risk adjustment data. However, we did 

not establish how the money collected 

from the default charge will be allocated 

among risk adjustment covered plans. 

We are proposing to allocate collected 

per member per month default charge 

funds proportional to each plan’s 

relative revenue requirement, the 

product of PLRS*IDF*GCF (Plan 

Liability Risk Score * Induced Demand 

Factor * Geographic Cost Factor) 

relative to the market average of these 

products, across all risk adjustment 

covered plans in the market in the State. 

This approach would allocate funds 

proportionally to a plan’s enrollment, 

adjusted for factors such as health risk, 

actuarial value, and geographic cost 

differences. This approach would also 

allocate the default charge funds in 

accordance with plans’ expected 

revenue requirements as calculated in 

the transfer formula. By contrast, an 

approach that allocates risk adjustment 

default charge funds in accordance with 

enrollment or premiums, for example, 

would favor plans with lower metal 

levels, low risk selection, or lower 

geographic costs. 

This allocation would occur only in 

risk adjustment markets with at least 

one noncompliant plan, and these steps 

would be used to calculate each 

compliant plan’s allocation of the 

default charges collected from the 

noncompliant plan(s). We would 

calculate risk transfers among the 

compliant plans only and exclude all 

data from noncompliant plans. Using 

the same inputs of the compliant plans 

as used in the transfer formula, we 

would calculate the distribution of 

default charges paid by noncompliant 

plans among the compliant plans using 

the following formula: 

Where: 

DCi is the total amount of default charges 

allocated to plan i; 

‘‘Total default charges collected’’ is the sum, 

in dollars, collected from all 

noncompliant plans (aggregate dollars, 

that is, not on a per member per month 

basis); Other terms are as defined in the 

usual risk transfer calculations, and 

restricted to compliant plans only 

(si = plan i’s share of State enrollment; 

PLRSi = plan i’s plan liability risk score, 

IDFi= plan i’s induced demand factor, 

GCFi = plan i’s geographic cost factor); 

and 

i indexes compliant plans, and the 

summation in the denominator is over 

compliant plans only. 

We seek comment on this approach. 

c. Information Sharing (§ 153.740(c)) 

In § 153.740, we established the 

enforcement remedies available to HHS 

for an issuer of a risk adjustment 

covered plan or a reinsurance-eligible 

plan’s failure to comply with HHSoperated risk adjustment and 

reinsurance data requirements. 

Consistent with the policy set forth at 

§ 156.800(d), as finalized in the 2015 

Market Standards Rule,26 we propose 

adding paragraph (c) to clarify that HHS 

may consult and share information 

about issuers of a risk adjustment 


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70702 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

27See e.g., Letter to Virgin Islands on the 

Definition of State (July 16, 2014). Available at: 

http://www.cms.gov/CCIIO/Resources/Letters/

Downloads/letter-to-Francis.pdf. 

covered plan or a reinsurance-eligible 

plan with other Federal and State 

regulatory and enforcement entities to 

the extent that the consultation and 

information is necessary for HHS to 

determine whether an enforcement 

remedy against the issuer of the risk 

adjustment covered plan or reinsuranceeligible plan under § 153.740 is 

appropriate. For example, HHS may 

consult other Federal and State 

regulatory and enforcement entities to 

identify issuers within a State who have 

failed to establish a dedicated 

distributed data environment. No 

personally identifiable information 

would be transferred as part of such a 

consultation. We seek comment on this 

proposal. 

F. Part 154—Health Insurance Issuer 

Rate Increases: Disclosure and Review 

Requirements 

1. General Provisions 

This section includes proposals 

related to the rate review program under 

part 154. Unless otherwise specified, the 

amendments in this part would apply 

beginning with rates filed during the 

2015 calendar year for coverage effective 

on or after January 1, 2016. We seek 

comment on whether the proposal 

provides States and issuers sufficient 

time to transition to the new rate review 

timeframe. 

a. Definitions (§ 154.102) 

Section 154.102 sets forth definitions 

used for purposes of the rate review 

provisions in part 154. In this proposed 

rule, we propose to add a definition 

‘‘plan’’ and to amend the definitions of 

‘‘individual market,’’ ‘‘small group 

market,’’ ‘‘rate increase’’ and ‘‘State.’’ 

We propose that these definitions would 

become effective for rate filings 

submitted during the 2015 calendar year 

for coverage effective January 1, 2016. 

We propose that the term ‘‘plan’’ have 

the meaning given the term in § 144.103. 

For a discussion of the proposed 

amendments related to the term ‘‘plan,’’ 

see section III.A.1.a of this preamble. 

We propose amending the terms 

‘‘individual market’’ and ‘‘small group 

market’’ to also have the meaning given 

such terms in § 144.103. Under that 

section, the term ‘‘individual market’’ 

means the market for health insurance 

coverage offered to individuals other 

than in connection with a group health 

plan. The term ‘‘small group market’’ 

means the health insurance market 

under which individuals obtain health 

insurance coverage (directly or through 

any arrangement) on behalf of 

themselves (and their dependents) 

through a group health plan maintained 

by a small employer. By incorporating 

the definition of small group market in 

§ 144.103, we are also incorporating the 

definition of small employer in 

§ 144.103. We are also incorporating all 

aspects of the individual market and 

small group market definitions as 

described in § 144.102, including 

§ 144.102(c), with respect to coverage 

provided through associations. These 

proposed changes will more fully 

harmonize the applicability of the rate 

review provisions with the rating 

reforms under the Affordable Care Act, 

including the premium rating and single 

risk requirements. 

We propose amending the term ‘‘rate 

increase’’ to mean any increase of the 

rates for a specific product or plan 

within a product offered in the 

individual or small group market. This 

change is for consistency with our 

proposal in § 154.200, discussed below, 

to require the consideration of rate 

increases at the plan level as opposed to 

the product level when determining 

whether a rate increase is subject to 

review. 

We lastly propose amending the 

definition of ‘‘State’’ to exclude the U.S. 

territories of Puerto Rico, the Virgin 

Islands, Guam, American Samoa, and 

the Northern Mariana Islands. The 

change reflects HHS’s determination, 

described in more detail in section 

III.A.1.b of this preamble, that certain 

provisions of the PHS Act enacted in 

title I of the Affordable Care Act that 

apply to health insurance issuers are 

appropriately governed by the definition 

of ‘‘State’’ set forth in that title. This 

proposed amendment would codify the 

approach that the rate review provisions 

(section 2794 of the PHS Act) do not 

apply to health insurance issuers in the 

U.S. territories.27

2. Disclosure and Review Provisions 

a. Rate Increases Subject to Review 

(§ 154.200) 

In § 154.200, we propose to make 

technical corrections to the text of 

paragraphs (a)(1) and (2) to clarify that 

rate increases are applicable to a 12- 

month period that begins on January 1 

rather than September 1 as currently 

specified in those paragraphs. The 

proposed corrections are necessary to 

align the text of the rate review 

regulation with rate effective dates 

under § 156.80, which requires a single 

risk pool index rate to be established 

and effective for a State market by 

January 1 of each calendar year. 

In paragraph (c), we propose to 

modify the standard for determining 

whether a rate increase is subject to 

review. Under the current regulations, a 

rate increase in the individual or small 

group market is subject to review if the 

rate increase is 10 percent or more, or 

the increase meets or exceeds an 

applicable State-specific threshold 

established in accordance with 

§ 154.200. The percent increase is 

calculated as the average increase for all 

enrollees with coverage under the 

product weighted by premium volume. 

We propose to amend paragraph (c) to 

require the consideration of rate 

increases at the plan level (as that term 

is proposed to be defined in § 154.102) 

as opposed to the product level when 

determining whether the increase is 

subject to review. Under this approach, 

if an increase in the plan-adjusted index 

rate (as described in the single risk pool 

provision at § 156.80) for any plan 

within a product in the individual or 

small group market meets or exceeds the 

applicable threshold, the product 

(including all plans within the product) 

would be subject to review to determine 

whether the rate increase is 

unreasonable. The rate increase would 

trigger review even if the average 

increase for the product itself did not 

meet or exceed the applicable threshold. 

We believe considering the impact of 

rate increases at the plan level is the 

appropriate level of aggregation when 

determining whether an increase is 

subject to review, because consumers 

are affected by rate increases at the plan 

level. This approach would ensure that 

all rate increases at or above the 

specified threshold in the individual or 

small group market are reviewed by the 

applicable State or CMS to determine 

whether the rate increase is 

unreasonable. This will further help 

protect consumers against unreasonable 

rate increases, eliminating the 

possibility that a plan could experience 

a significant rate increase and still avoid 

review because the average increase for 

the product does not meet or exceed the 

applicable threshold. 

We seek comment on this proposal, 

including on the benefits and costs to 

States of carrying out the plan-level 

trigger for review. 

b. Submission of Rate Filing 

Justification (§ 154.215) 

Under § 154.215, health insurance 

issuers are required to submit a Rate 

Filing Justification for all products in 

the issuer’s single risk pool, on a form 

and in a manner prescribed by the 

Secretary, when any product in the 

individual or small group market is 

subject to a rate increase. This 

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28Pursuant to § 154.215(h)(2), CMS posts on its 

Web site the information contained in Parts I and 

III of each Rate Filing Justification that is not a trade 

secret or confidential commercial or financial 

information as defined in HHS’s Freedom of 

Information Act regulations, 45 CFR 5.65. 

requirement was finalized in the 2014 

Market Rules to carry out the Secretary’s 

responsibility, in conjunction with the 

States, under PHS Act section 

2794(b)(2)(A) to monitor premium 

increases of health insurance coverage 

offered through an Exchange and 

outside of an Exchange beginning in 

2014. 

We explained in the preamble to the 

2014 Market Rules this provision 

requires the completion of a Rate Filing 

Justification for all proposed rate 

increases, whether or not the rate 

increase meets or exceeds the subject to 

review threshold (78 FR 13420). To 

better reflect the intent of this 

requirement, we are proposing to 

modify the text of paragraph (a) of 

§ 154.215 to expressly state that ‘‘all’’ 

proposed rate increases includes a rate 

increase with respect to ‘‘any plan 

within a product’’ in the individual or 

small group market that is subject to a 

rate increase. This clarification would 

become effective with the effective date 

of the final rule. 

c. Timing of Providing the Rate Filing 

Justification (§ 154.220) 

Section 154.220 provides that if a 

State requires a proposed rate increase 

to be filed with the State prior to 

implementation of the increase, the 

health insurance issuer must send CMS 

and the applicable State the Rate Filing 

Justification on the date the issuer 

submits the proposed rate increase to 

the State. For all other States, the health 

insurance issuer must send CMS and 

the applicable State the Rate Filing 

Justification prior to the implementation 

of the rate increase. 

There is currently wide variation in 

State submission timelines and 

practices for reviewing proposed rate 

increases. Some States require that all 

rates must be filed at the same time. 

Others require rate filings after the date 

the QHP submissions are required to be 

made, creating a situation in which 

QHPs must file rates before non-QHPs. 

Some States have not adopted specific 

rate filing timeframes but instead rely 

on ‘‘file and use’’ laws, which provide 

that a rate (or rate increase) may go into 

effect as soon as it is filed with the State. 

Others prohibit posting of final rates 

until the date that the coverage begins. 

We propose to modify § 154.220 to 

establish a uniform timeline by which 

health insurance issuers must submit a 

completed Rate Filing Justification to 

CMS and, when applicable, to the State. 

We propose that a health insurance 

issuer must submit the Rate Filing 

Justification by the earlier of the 

following: (1) The date by which the 

State requires that a proposed rate 

increase be filed with the State; or (2) 

the date specified by the Secretary in 

guidance. We are considering specifying 

in future guidance a deadline to 

coincide with the end of the QHP 

application window for the FFE for 

issuers to complete and submit the Rate 

Filing Justification for proposed rate 

increases in the individual and small 

group markets for both QHPs and nonQHPs. We seek comments on this date. 

The proposed approach would assure 

that all rate increases in every relevant 

State market for both QHPs and nonQHPs are filed by a consistent time each 

year. This would improve predictability 

and transparency, reduce the 

opportunity for anti-competitive 

behavior, and establish a more 

meaningful opportunity for consumers 

and other stakeholders to comment on 

proposed rate increases before rates are 

finalized. It would also ensure that State 

and Federal regulators have adequate 

time for review prior to implementation 

of a rate increase. We note that States 

would have flexibility to impose earlier 

rate filing deadlines to meet their 

specific State needs. 

We seek comment on all aspects of 

this proposal. 

d. CMS’s Determinations of Effective 

Rate Review Programs (§ 154.301) 

Section 154.301 sets forth criteria for 

evaluating whether a State has an 

Effective Rate Review Program in the 

individual and small group markets. If 

a State meets the criteria to have an 

Effective Rate Review Program, CMS 

adopts the State’s determination as to 

whether a rate increase that is subject to 

review is unreasonable. If a State does 

not meet the criteria to have an Effective 

Rate Review Program, then CMS 

conducts the review and makes a 

determination about whether a rate 

increase is unreasonable. 

We propose to amend § 154.301(b) to 

specify the timeframe and manner for a 

State with an Effective Rate Review 

Program to provide public access to 

information about proposed and final 

rate increases if the State elects to make 

such information available to the public. 

In paragraph (b)(1)(i), we propose 

that, for proposed rate increases subject 

to review, the State must provide access 

from its Web site to at least the 

information contained in Parts I, II, and 

III of the Rate Filing Justification that 

CMS makes available on its Web site (or 

provide CMS’s web address for such 

information) and have a mechanism for 

receiving public comments on those 

proposed rate increases.28 If a State 

elects to post information about 

proposed rate increases on its Web site, 

the information would be required to be 

posted no later than the date specified 

by the Secretary in guidance. We are 

considering specifying in future 

guidance a deadline of 10 business days 

after receipt of all rate filings in the 

relevant State market for information to 

be posted about proposed rate increases 

that are subject to review. We seek 

comment on this proposed deadline. 

In paragraph (b)(1)(ii), we propose 

that, for all final rate increases, the State 

must provide access from its Web site to 

at least the information contained in 

Parts I, II, and III of the Rate Filing 

Justification that CMS makes available 

on its Web site (or provide CMS’s web 

address for such information). This 

would include information about rate 

increases that both meet or exceed the 

review threshold and those not subject 

to review. The information would be 

required to be posted no later than the 

first day of the annual open enrollment 

period. States could make additional 

information available to the public or 

make the information available earlier 

than this deadline at their option. We 

seek comment on this proposed 

deadline. 

In paragraph (b)(2), we propose that if 

a State intends to make the information 

about proposed rate increases in 

paragraph (b)(1)(i) available to the 

public prior to the date specified by the 

Secretary, or if it intends to make the 

information about final rate increases in 

paragraph (b)(1)(ii) available to the 

public prior to the first day of the 

annual open enrollment period, the 

State must notify CMS in writing, no 

later than 30 days prior to the date it 

intends to make the information public, 

of its intent to do so and the date it 

intends to make the information public. 

This information will enable CMS to 

better coordinate and manage public 

expectations regarding the availability 

of the rate information, increasing 

transparency nationally into the ratesetting process. 

Finally, we propose in paragraph 

(b)(3) that the State must ensure the 

information it posts on its Web site 

under proposed paragraphs (b)(1)(i) and 

(b)(1)(ii) (or in addition to the 

information required under those 

paragraphs) is made available to the 

public at a uniform time for all 

proposed or final rate increases, as 

applicable, in the relevant market 

segment and without regard to whether 

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coverage is offered through or outside 

an Exchange. These provisions would 

provide consumers with timely access 

to information about proposed and final 

rate increases in States that elect to 

make such information available to the 

public. They would also promote fair 

market competition between issuers in 

the Exchange and non-Exchange 

markets and further enhance 

transparency of the rate-setting process. 

We are considering establishing as a 

condition of an Effective Rate Review 

Program that the State post on its Web 

site information about proposed and 

final rate increases, rather than 

providing the option to simply provide 

CMS’s web address for such 

information. We seek comment on this 

proposal. We also seek comments on the 

timeframes for making proposed and 

final rate information available to the 

public, including how the timeframes 

may interact with current State rate 

review practices and might affect the 

State’s workload. 

G. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. General Provisions 

a. Definitions (§ 155.20) 

In § 155.20, we propose to amend the 

definitions of ‘‘applicant,’’ ‘‘enrollee,’’ 

and ‘‘qualified employee.’’ First, the 

proposed amendments to applicant, 

enrollee, and qualified employee would 

specify that a qualified employer could 

elect to offer coverage through a SHOP 

to its former employees that may 

include retirees, as well as former 

employees to whom an employer might 

be obligated to provide continuation 

coverage under applicable State or 

Federal law. Second, the proposed 

amendments specify that a qualified 

employer could also elect to offer 

coverage through the SHOP to 

dependents of employees or former 

employees. Third, the proposed 

amendments specify that business 

owners may enroll in SHOP coverage 

provided that at least one employee 

enrolls. We propose to amend these 

definitions to make it clear that SHOPs 

may allow small group enrollment 

practices that were in place before the 

Affordable Care Act to continue, to 

preserve continuity for issuers and 

employers, and to reduce the 

administrative complexity involved 

with transitioning to SHOP coverage for 

qualified employers. 

We propose to amend the definition 

of ‘‘applicant’’ with respect to the group 

market so that it would include not only 

an employer or employee seeking 

eligibility for enrollment in a QHP 

through the SHOP, but also a former 

employee seeking eligibility for 

enrollment in a QHP through the SHOP. 

We are also proposing to amend the 

definition of applicant so that it would 

reflect that an employer, employee, or 

former employee could seek eligibility 

to enroll his or her dependents in a QHP 

through the SHOP, if the qualified 

employer offers dependent coverage 

through the SHOP. 

We propose to define ‘‘qualified 

employee’’ as any employee or former 

employee of a qualified employer who 

has been offered health insurance 

coverage by such qualified employer 

through the SHOP for himself or herself 

and, if the qualified employer offers 

dependent coverage through the SHOP, 

for his or her dependents. 

We note that we would not consider 

dependents to be applicants or qualified 

employees—rather, dependents’ 

eligibility to participate in SHOP is 

linked to the eligibility of the qualified 

employee. Similarly, we would not 

consider business owners (including 

sole proprietors, owners of more than 2 

percent of an S corporation or of more 

than 5 percent of a C corporation, 

partners owning more than 5 percent of 

a partnership, or members owning more 

than 5 percent of a limited liability 

company (LLC), or working spouses, 

domestic partners, and other family 

members of these types of business 

owners) to be qualified employees. 

Consistent with current market practice, 

these types of business owners may, 

however, enroll in coverage through the 

SHOP if at least one employee has 

enrolled in such coverage through the 

SHOP. We also note that under our 

interpretation of the definition of 

employee at § 155.20, a qualified 

employer may not offer SHOP coverage 

exclusively to former employees. A 

qualified employer must have at least 

one employee who enrolls in order for 

the coverage to be issued through the 

SHOP to a former employee. 

We propose to amend the definition 

of ‘‘enrollee’’ so that the term would 

include not only qualified individuals 

and qualified employees (as that term 

would be amended as proposed in this 

rulemaking), but also dependents of 

qualified employees. The proposed 

amendments to enrollee would also 

establish that business owners and their 

dependents could also enroll in 

coverage through the SHOP, provided 

that at least one employee enrolls in 

coverage through the SHOP. Including 

these individuals in the definition of 

enrollee would mean that where these 

individuals are permitted to enroll in 

coverage through the SHOP, the SHOP 

and QHPs must provide them with the 

same rights and privileges as qualified 

employees who are enrollees, such as 

timely notice of changes in coverage as 

described in subpart H of part 155 and 

§ 156.285. We note that this has no 

impact on the tax treatment of 

premiums paid by the business owner 

for coverage for themselves and their 

dependents. 

While we have attempted to ensure 

that the modifications of these 

definitions are consistent with the 

intended usage of these terms 

throughout subpart H, we seek comment 

on all aspects of the proposed 

modifications to these definitions, 

including comments on any perceived 

unintended consequences resulting 

from the proposed modifications of 

these terms, and comments on whether 

other provisions of the Exchange rules 

in part 155 and 156 would also need to 

be amended to implement the changes 

proposed in these definitions. We note 

that these definitions apply only with 

respect to the provisions of 45 CFR, and 

should not be read as interpreting these 

terms for any purposes under Title I of 

ERISA. 

2. General Functions of an Exchange 

a. Consumer Assistance Tools and 

Programs of an Exchange (§ 155.205) 

Section 155.205(c) sets forth 

standards applicable to consumer 

assistance tools and programs of 

Exchanges for providing meaningful 

access to information for individuals 

with disabilities and individuals with 

limited English proficiency. Currently, 

these provisions also apply through 

§ 155.230(b) to applications, forms, and 

notices used or provided by the 

Exchange, and through a cross-reference 

to § 155.230(b) in § 156.250, to QHP 

issuer applications and notices. 

Information provided as part of any 

consumer assistance functions under 

§ 155.205(d) and (e), including the 

Navigator program described in 

§ 155.210, must meet the standards of 

§ 155.205(c). In addition, if an Internet 

Web site of an agent or broker (referred 

to in this section as a ‘‘web-broker’’) is 

used by a consumer to complete a QHP 

selection, that Web site must disclose 

and display all QHP information 

provided by the Exchange or directly by 

QHP issuers consistent with the 

requirements of § 155.205(c), under 

§ 155.220(c)(3)(i). We propose to amend 

§ 155.205(c) to specify the oral 

interpretation services that are required 

for certain entities subject to 

§ 155.205(c). Specifically, with respect 

to Exchanges, QHP issuers, and webbrokers only, we propose that the 

requirement to provide oral 

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interpretation services under 

§ 155.205(c)(2)(i) would include making 

available telephonic interpreters in at 

least 150 languages. We propose this 

specific standard so that in every 

Exchange consumers with limited 

English proficiency would have greater 

access to essential information provided 

by Exchanges, web-brokers, and QHP 

issuers when shopping for and 

accessing health coverage. In addition, 

this proposed standard would detail for 

Exchanges, web-brokers, and QHP 

issuers how they must provide 

meaningful access to information to 

individuals with limited English 

proficiency. We also propose 

amendments to § 156.250 that are 

discussed below, and that would require 

QHP issuers to provide all information 

that is critical for obtaining health 

insurance coverage or access to health 

care services through the QHP, 

including applications, forms, and 

notices, to qualified individuals, 

applicants, qualified employers, 

qualified employees, and enrollees in 

accordance with the standards 

described in § 155.205(c), including the 

provision of telephonic interpretive 

services in at least 150 languages. 

We are proposing to limit the 

applicability of the proposed 150 

languages standard to Exchanges, webbrokers, and QHP issuers. These groups, 

in many cases, already maintain a call 

center with language line capacity in 

150 or more languages, which we 

believe to be the industry standard for 

language line services. We do not 

propose that this standard would apply 

to Navigators and non-Navigator 

assistance personnel because the 

smaller non-profit organizations that 

frequently make up the bulk of these 

consumer assistance entities have 

limited resources. For example, small 

entities and individuals are encouraged 

to apply for Navigator grants in the 

FFEs, particularly by partnering with 

other entities or individuals to form a 

consortium, and these entities 

frequently lack the infrastructure to 

support telephonic interpreter services 

in multiple languages. 

We solicit comment on all aspects of 

this proposal. In particular, we seek 

specific comment on whether 

Navigators and non-Navigator assistance 

personnel should be required to meet 

the proposed standard, whether directly 

or through referral, such as through a 

referral to the Exchange call center. We 

also seek specific comment on whether 

requiring web-brokers to provide 

telephonic interpretive services in 150 

languages would have an adverse 

impact on them, as well as on whether 

there are alternative means that should 

be provided to web-brokers by which 

they can meet their existing obligations 

to provide oral interpretation services 

(such as through referral to the 

Exchange call center). 

We also solicit specific comments on 

whether we should consider more or 

different language accessibility 

standards in § 155.205(c). For instance, 

some stakeholders have suggested ideas 

such as requiring written translations in 

the languages spoken by the applicable 

State’s top ten Limited English 

Proficiency (LEP) groups or spoken by 

10,000 persons or greater, whichever 

yields the greater number of languages; 

oral interpretation in as many languages 

as are generally available by telephonic 

interpreter services (which we 

understand is at least 150 languages); 

taglines (short statements informing 

individuals of the availability of 

language access services)in the top 30 

non-English languages spoken 

nationwide on documents required by 

State or Federal law or containing 

information that is critical to obtaining 

health insurance coverage or access to 

health care services through a QHP; 

Web site content translated in each nonEnglish language spoken by an LEP 

population that reaches 10 percent of 

the State population; and a uniform 

requirement that written translations, 

taglines on notices and Web site 

content, and oral interpretation services 

must be provided in the top 15 

languages spoken by LEP individuals in 

the United States. We note that taglines 

in 15 languages are generally contained 

in all standard notices sent by the FFE. 

We solicit comments on these 

suggestions. 

We also solicit comment on whether 

we should require more specific 

accessibility standards under other 

requirements under § 155.205(c), such 

as the requirement to provide written 

translations for individuals with limited 

English proficiency, and auxiliary aids 

and services to individuals with 

disabilities, and taglines indicating the 

availability of language services or 

auxiliary aids and services. We remind 

relevant covered entities of the 

obligations they might have under other 

Federal laws to meet existing effective 

communication requirements for 

individuals with disabilities, as such 

obligations are independent of the 

responsibilities they may have under 

§ 155.205(c), § 155.230(b), § 156.200(e), 

and § 156.250. Finally, we solicit 

comment on whether this proposal 

would present implementation 

challenges for Exchanges, web-brokers, 

and QHP issuers if it becomes effective 

before the beginning of the open 

enrollment period in the individual 

market for the 2016 benefit year. 

b. Standards Applicable to Navigators 

and Non-Navigator Assistance 

Personnel Carrying Out Consumer 

Assistance Functions Under 

§§ 155.205(d) and (e) and 155.210 in a 

Federally-Facilitated Exchange and to 

Non-Navigator Assistance Personnel 

Funded Through an Exchange 

Establishment Grant (§ 155.215) 

In the 2015 Market Standards Rule, 

we added regulatory language at 

§ 155.215(h), which states in relevant 

part that ‘‘all non-Navigator assistance 

personnel funded through an Exchange 

Establishment Grant under section 

1311(a) of the Affordable Care Act must 

maintain a physical presence in the 

Exchange service area, so that face-toface assistance can be provided to 

applicants and enrollees.’’ We have 

since recognized that this wording 

could create confusion about whether 

the requirement applies to the nonNavigator entity receiving funding 

through an Exchange Establishment 

grant, or whether it applies to each 

individual providing non-Navigator 

assistance. CMS currently interprets the 

provision as applying only to nonNavigator assistance personnel entities, 

such that only the entity must maintain 

a physical presence in the Exchange 

service area, consistent with our 

application of the requirement to nonNavigator assistance personnel in an 

Exchange operated by HHS under its 

authority under § 155.105(f). To make 

this policy clear, we propose to amend 

§ 155.215(h) to limit it to entities, so it 

would read ‘‘all non-Navigator entities 

funded through an Exchange 

Establishment Grant under section 

1311(a) of the Affordable Care Act must 

maintain a physical presence in the 

Exchange service area, so that face-toface assistance can be provided to 

applicants and enrollees.’’ We believe 

that this amendment strikes an 

appropriate balance in allowing 

individuals providing non-Navigator 

assistance subject to § 155.215 to 

provide assistance via the telephone, 

Internet, or through other remote means, 

particularly in circumstances in which 

remote assistance would be more 

effective or practical than face-to-face 

assistance, while also ensuring that the 

organization with which they are 

affiliated is in a position to understand 

and meet the specific needs of the 

communities they serve and to facilitate 

consumer protection efforts, as 

applicable, in their State. If the nonNavigator is not affiliated with a larger 

entity, we would consider the 

individual to be the entity specified in 

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the amended language under proposed 

§ 155.215(h). We are also proposing to 

add the title ‘‘Physical presence’’ to 

paragraph (h) for improved clarity. 

c. Standards for HHS Approved Vendors 

of Federally-Facilitated Exchange 

Training for Agents and Brokers 

(§ 155.222) 

Section 1312(e) of the Affordable Care 

Act directs the Secretary of HHS to 

establish procedures under which a 

State may allow agents and brokers to 

enroll individuals and employers in any 

QHP in the individual or small group 

market offered through an Exchange, 

and to assist individuals in applying for 

advance payments of the premium tax 

credit and cost-sharing reductions for 

QHPs sold through an Exchange. Under 

§ 155.220, we established procedures to 

support the State’s ability to permit 

agents and brokers to assist individuals, 

employers or employees with 

enrollment in QHPs offered through an 

Exchange, subject to applicable Federal 

and State requirements. As described at 

§ 155.220(d), an agent or broker that 

enrolls qualified individuals through an 

Exchange, or assists individuals in 

applying for advance payments of the 

premium tax credit or cost-sharing 

reductions, must comply with the terms 

of the agreement between the agent or 

broker and the Exchange. Under the 

terms of this general agreement, agents 

and brokers must register with the 

Exchange, and must receive training in 

the range of QHP options and insurance 

affordability programs. In addition, all 

agents and brokers must execute the 

applicable privacy and security 

agreement(s) required by § 155.260(b). 

For plan years 2014 and 2015, the 

procedures established under section 

1312(e) of the Affordable Care Act 

involved HHS implementation of FFE 

training of agents and brokers. HHS also 

provided technical support and help 

desk services to agents and brokers with 

questions related to that training. In this 

rule, for 2016 and future plan years, we 

propose changing the procedures related 

to FFE agent and broker training so that 

the certain training and information 

verification functions could also be 

provided by HHS-approved vendors. 

Under this proposal, HHS would 

provide an additional avenue by which 

agents and brokers could complete the 

training requirements necessary to work 

with consumers seeking coverage 

through the FFE. HHS would recognize 

the successful completion of an 

Exchange training program from an 

HHS-approved vendor as sufficient to 

satisfy the requirement to receive 

training in the range of QHP options and 

the insurance affordability programs. 

We propose that to become an HHSapproved vendor, the organization must 

demonstrate that it meets the standards 

in § 155.222(b), under an approval 

process established by HHS. We further 

propose that no training program would 

be recognized unless it included an 

information verification component 

under which the vendor confirms the 

identity and applicable State licensure 

of the person who is credited with 

successful completion of the training 

program. Organizations interested in 

becoming HHS-approved vendors must 

have HHS approval by the applicable 

deadline. In our proposed standards for 

HHS-approved vendors of an alternative 

training and information verification 

process, we seek to make FFE training 

and registration process easier for agents 

and broker, and attract greater agent and 

broker participation in the FFEs through 

partnership with vendors. 

In § 155.222(a), we propose an 

application and approval process for 

vendors seeking recognition as HHSapproved vendors for FFE training and 

information verification for agents and 

brokers. As part of an approved training 

and information verification program, 

we propose that the vendor must require 

agents and brokers to complete identity 

proofing, provide identifying 

information, and successfully complete 

the required curriculum. We propose 

that only HHS-approved vendors that 

meet the designated standards will have 

their training and information 

verification programs recognized. We 

believe that under this approach, we 

will be able to leverage the experience, 

contacts, and networks of approved 

vendors while ensuring that the training 

and information verification programs 

adhere to uniform standards for content, 

format, and delivery. We propose that 

vendors be approved for one-year terms, 

and that vendors seeking to continue 

their recognition as HHS-approved 

vendors for FFE agent and broker 

training and information verification the 

following year must be re-approved 

through a process to be determined by 

HHS. If this proposal is finalized, we 

anticipate developing vendor 

application forms. We seek comment on 

the proposed approach outlined above. 

We also seek comment on what 

additional components a training 

program should include in order to 

qualify for HHS approval (for example, 

facilitating agent and broker creation of 

FFE accounts). 

In paragraph (b), we propose the 

standards that a vendor must meet to be 

approved by HHS to offer FFE training 

and information verification to agents 

and brokers. These standards are based 

on the approval criteria for Enrollee 

Satisfaction Survey vendors at 

§ 156.1105. We believe that the 

establishment of these standards will 

help ensure that vendors are approved 

using an objective methodology, and 

that approved vendors will successfully 

carry out the agent and broker FFE 

training and information verification 

and safeguard the data related to these 

functions. We seek comment on these 

proposals. 

In paragraph (b)(1) we propose that 

the vendor submit a complete and 

accurate application by the deadline 

established by HHS. We propose that, as 

part of the application, the vendor must 

demonstrate prior experience with 

successfully conducting online training 

and identity proofing, as well as 

providing technical support to a large 

customer base. HHS would only 

approve vendors with no current or past 

regulatory, enforcement, or legal actions 

taken against the vendor by a State or 

Federal regulator in the last 3 years, 

beginning from the application or 

renewal application deadline under this 

section. 

We propose in paragraph (b)(2) that 

the vendor be required to adhere to HHS 

specifications for content, format, and 

delivery of training and information 

verification. Training includes 

developing and hosting FFE courses, 

exams, and curriculums for agents and 

brokers. HHS would require vendors to 

have their training approved for 

continuing education units accepted by 

State regulatory entities. 

In paragraph (b)(3) we propose that 

vendors be required to collect, store, 

and share with HHS all data from agent 

and broker users of the vendor’s training 

and information verification in a 

manner specified by HHS, and protect 

the data in accordance with applicable 

privacy and security laws and 

regulations. HHS would expect vendors 

to be able to securely receive and 

transfer large data files in formats 

commonly used in the information 

technology industry. 

In paragraph (b)(4), we propose that 

the vendor be required to execute an 

agreement with HHS, in a form and 

manner to be determined by HHS, 

which requires the vendor to comply 

with HHS guidelines for interfacing 

with HHS data systems, the 

implementation of the training and 

information verification processes, and 

the use of all data collected. In addition 

to executing the agreement, vendors 

would be required to comply with all 

applicable State and Federal laws, 

including applicable privacy and 

security standards. HHS would require 

that the vendor adopt a fee structure 

that is generally consistent with the fee 

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structure for comparable trainings 

offered by the vendor to comparable 

audiences. 

In paragraph (b)(5), we propose that 

the vendor be required to permit any 

individual who holds a valid license or 

equivalent State authority to sell health 

insurance products to access the 

vendor’s training and information 

verification process. HHS is considering 

whether vendors should be permitted to 

offer the training to other members of 

the public who are interested in 

learning about the Exchanges. 

In paragraph (c), we propose that once 

HHS has completed the approval 

process for vendors for a given year, 

HHS would publish a list of approved 

entities on an HHS Web site. In 

paragraph (d), we propose that HHS 

may monitor and audit approved 

vendors and their records related to the 

FFE training and information 

verification functions to ensure the 

approved vendors’ ongoing compliance 

with the standards outlined in 

paragraph (b). We propose that if HHS 

determines that the approved vendor is 

no longer in compliance with standards 

under paragraph (b), HHS may remove 

the vendor from the list described in 

this section, and may direct the vendor 

to cease performing the training and 

information verification functions 

described in this subpart. We propose 

that the vendor may invoke the appeals 

process proposed in paragraph (e) if its 

approval has been revoked. We seek 

comment on this process. 

In paragraph (e), we propose an 

appeals process for a vendor whose 

application is denied, or whose 

approval to offer training and 

information verification is revoked. 

Specifically, we propose that such a 

vendor may appeal HHS’s decision by 

notifying HHS in writing within 15 days 

of receipt of the notification by HHS of 

not being approved or having its 

approval revoked, and submitting 

additional documentation 

demonstrating how the vendor meets 

the standards in paragraph (b) and (if 

applicable) the terms of their agreement 

with HHS. HHS will review the 

submitted documentation and make a 

final determination within 30 days from 

receipt of the submission of the 

additional documentation. A vendor 

that gains approval via the appeals 

process would be included in the 

approved list, described in paragraph 

(c). We seek comment on this proposed 

appeals process. 

3. Exchange Functions in the Individual 

Market: Eligibility Determinations for 

Exchange Participation and Insurance 

Affordability Programs 

a. Annual Eligibility Redetermination 

(§ 155.335) 

The current re-enrollment provisions 

codified at § 155.335(j) prioritize reenrollment with the same issuer in the 

same or a similar plan with the goal of 

maximizing continuity of coverage and 

care. However, because premiums may 

change significantly from one year to 

the next, the plans that are most 

competitively priced in one year may 

not continue to be the most 

competitively priced in subsequent 

years. For this reason, default 

enrollment in the same or similar plan 

may sometimes encourage consumers to 

remain in plans that are significantly 

more expensive than the lowest cost 

plans in the market. Because we believe 

that many consumers place a high value 

on low premiums when selecting a plan, 

we believe that consumers could benefit 

from alternative re-enrollment 

hierarchies. 

In particular, we are exploring 

implementing in the FFE an approach 

under which an enrollee, at the time of 

initial enrollment, would be offered a 

choice of re-enrollment hierarchies and 

could opt into being re-enrolled by 

default for the subsequent year into a 

low-cost plan (such as the QHP of the 

same metal level with the lowest 

premium in the enrollee’s service area, 

or one of the three such QHPs with the 

lowest premiums by random allocation), 

rather than his or her current plan or the 

plan specified in the current reenrollment hierarchy. This alternative 

enrollment hierarchy could be triggered 

if the enrollee’s current plan’s premium 

increased from the prior year, or 

increased relative to the premium of 

other similar plans (such as plans of the 

same metal tier), by more than a 

threshold amount, such as 5 percent or 

10 percent. As is the case under the 

existing approach, a consumer would 

retain the option to take action to enroll 

in a different plan during open 

enrollment if he or she wished to do so. 

We are considering applying an 

alternative hierarchy for the first time 

when re-enrolling consumers for the 

2017 coverage year. On this timeline, 

consumers could opt in to the 

alternative hierarchy during open 

enrollment in 2015 (or during special 

enrollment periods occurring during 

2016). 

We seek comment on such an 

approach, including with respect to how 

to ensure that consumers understand 

the risk of being default re-enrolled in 

a plan with a significantly different 

provider network, benefits, cost-sharing 

structure, or service area; what premium 

growth in the current plan (or what 

growth relative to other similar plans) 

would trigger re-enrollment into a lowcost plan, and how to determine which 

enrollees get assigned to which plans, if 

random enrollment into one of the three 

lowest cost QHPs of the metal level in 

the enrollee’s service area is 

implemented. We also seek comment on 

how these types of default re-enrollment 

procedures have functioned in other 

programs and settings, and what lessons 

can be drawn from those experiences. 

Finally, we seek comment on whether 

such approaches may influence issuers’ 

pricing decisions, such as by causing 

them to price more competitively in 

order to retain or attract enrollees who 

have opted to be re-enrolled into a lowcost plan. 

We are also considering providing 

this flexibility to State-based Exchanges 

to implement alternative re-enrollment 

hierarchies such as the one described 

above, beginning in 2016, at their 

option. We believe that providing this 

flexibility could offer an opportunity to 

gather valuable information about 

alternative re-enrollment structures and 

share lessons learned across Exchanges 

in hopes of improving the re-enrollment 

process and the consumer experience. 

We seek comment on whether to 

permit State-based Exchanges the 

flexibility to implement these 

alternative re-enrollment hierarchies 

beginning with 2016 open enrollment, 

whether to provide flexibility to SBEs to 

establish other hierarchies, and whether 

to adopt any such alternatives in the 

FFE for 2017 open enrollment. 

4. Exchange Functions in the Individual 

Market: Enrollment in Qualified Health 

Plans 

a. Enrollment of Qualified Individuals 

Into QHPs (§ 155.400) 

We propose to amend § 155.400(e) to 

explicitly provide for an Exchange to 

establish a standard policy for setting 

deadlines for payment of the first 

month’s premium. We recognize that 

decisions regarding payment of the first 

month’s premium have traditionally 

been business decisions made by 

issuers, subject to State rules. However, 

we believe that having uniform 

deadlines for all issuers for payment of 

a first month’s premium to effectuate 

enrollments could benefit issuers and 

consumers by ensuring a consistent 

operational procedure. 

In the Federally-facilitated Exchanges, 

we are considering payment deadlines 

tied to the coverage effective date for 

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regular effective dates (meaning 

coverage effective the first day of the 

following month for plan selections 

made between the first and fifteenth of 

the month, and coverage effective the 

first day of the second month following 

a plan selection made between the 16th 

and the end of the month). Some 

options we are considering would be to 

provide consumers until the coverage 

effective date, or the day before the 

coverage effective date, to make their 

first month premium payment. 

Alternatively, we could provide 

consumers additional time after the 

coverage effective date to make their 

premium payment. For example, we 

could provide 5 days, 10 days, or 30 

days after the coverage effective date, or 

something in between. We seek 

comment on the period of time 

following the coverage effective date an 

issuer could be required or permitted to 

accept a first month’s premium payment 

for that coverage. 

With respect to effective dates other 

than regular effective dates, meaning 

retroactive or accelerated coverage 

effective dates resulting from enrollment 

under certain special enrollment 

periods (including birth and marriage), 

resulting from the resolution of appeals, 

or resulting from amounts newly due for 

prior coverage based on issuer 

corrections of under-billing, we are 

considering a premium payment 

deadline of 10–15 business days from 

when the issuer receives the enrollment 

transaction. 

We seek comment on which proposed 

premium payment deadlines give 

issuers an acceptable amount of time to 

send an invoice and allow for timely 

payment by the consumer, and give 

consumers sufficient time to make the 

payment. It is our expectation that QHP 

issuers will send the consumer the bill 

within one to two business days after 

receiving the enrollment transaction to 

accomplish this goal. We also seek 

comment on how such a policy would 

likely affect issuer operations and 

consumers’ ability to obtain coverage. 

We note that because this rulemaking 

will likely not be finalized until after 

open enrollment for 2015, any such 

deadlines would not be applicable for 

that open enrollment period. We 

anticipate providing flexibility to 

issuers on premium payment deadlines 

for this open enrollment period to 

account for the timing of default reenrollments this year. 

b. Annual Open Enrollment Period 

(§ 155.410) 

In § 155.410, we propose to amend 

paragraph (e), which provides the dates 

for the annual open enrollment period 

in which qualified individuals and 

enrollees may apply for or change 

coverage in a QHP. We propose to 

restructure paragraph (e) by placing the 

current provision regarding the 2015 

benefit year in paragraph (e)(1) and the 

proposed requirement for all benefit 

years beginning on or after 2016 in 

paragraph (e)(2). Specifically, in 

paragraph (e)(2), we propose that for 

benefit years beginning on or after 

January 1, 2016, the annual open 

enrollment period begins on October 1 

and extends through December 15 of the 

calendar year preceding the benefit year. 

We also propose to redesignate the 

annual open enrollment coverage 

effective date provisions in paragraphs 

(f) and (f)(1) through (3) as (f)(1) and 

(f)(1)(i) through (iii), and to add a new 

(f)(2), which would specify that, for 

enrollments made under any annual 

open enrollment periods for benefit 

years beginning on or after January 1, 

2016, coverage would be effective on 

January 1 of the year following the open 

enrollment period. For example, for any 

enrollment completed under the open 

enrollment period between October 1 

and December 15, 2015, coverage would 

be effective on January 1, 2016. 

We propose this time period and 

coverage effective date for several 

reasons. First, because of increasing 

consumer familiarity with the Exchange, 

we believe that the proposed open 

enrollment period, which is shorter than 

prior open enrollment periods, will still 

provide consumers sufficient time to 

enroll or change coverage in a QHP. 

Second, the proposed open enrollment 

period does not cross calendar years, 

which we anticipate will reduce 

consumer confusion regarding effective 

dates for coverage because all coverage 

would be effective on January 1 of the 

following year. This will be less 

complicated for Exchanges and issuers 

to implement. Finally, we anticipate 

that the proposed open enrollment 

period will provide consumers with 

sufficient time to review changes to 

their current plans, take advantage of 

consumer assistance resources, and 

compare plans and complete plan 

selection as needed. We note the annual 

open enrollment period and coverage 

effective dates will also apply to nongrandfathered policies in the individual 

market outside the Exchange through 

the cross-reference at § 147.104(b)(1)(ii). 

We seek comment on this proposal, 

including whether the open enrollment 

period should end earlier in December 

to ensure sufficient time for issuers and 

Exchanges to accommodate current 

enrollees switching plans or being 

enrolled through the default reenrollment hierarchy for coverage 

effective January 1. 

c. Special Enrollment Periods 

(§ 155.420) 

In § 155.420, we make certain 

proposals relating to special enrollment 

periods. We propose to revise 

paragraphs (b)(2)(i), (b)(2)(ii), (b)(2)(iv), 

and add paragraphs (b)(2)(v), (b)(2)(vi), 

and (b)(2)(vii), which pertain to effective 

dates for special enrollment periods; to 

amend paragraphs (c)(2)(i) and (c)(2)(ii), 

which pertain to availability and length 

of special enrollment periods, and to 

revise paragraphs (d)(1)(ii), (d)(1)(v), 

(d)(2), (d)(4), and remove paragraph 

(d)(10), which pertain to specific types 

of special enrollment periods. We also 

propose to delete the option for 

consumers to choose a coverage 

effective date of the first of the month 

following the birth, adoption, placement 

for adoption, or placement in foster 

care. We seek comment on these 

proposed changes, including whether 

we should retain the ability for 

consumers to choose the first of the 

month following the birth, adoption, 

placement for adoption, or placement in 

foster care in addition to providing for 

regular coverage effective dates. 

In paragraph (b)(2)(i), we propose to 

change one of the options for coverage 

effective dates in the case of birth, 

adoption, placement for adoption, or 

placement in foster care. Currently, a 

consumer may choose between the date 

of the birth, adoption, placement for 

adoption, or placement in foster care; 

and, if permitted by the Exchange, the 

first of the month following the birth, 

adoption, placement for adoption, or 

placement in foster care. We continue to 

require the Exchange to allow for 

coverage to be effective for a qualified 

individual or enrollee on the date of 

birth, adoption, placement for adoption, 

or placement in foster care, but propose 

to permit the Exchange to allow a 

qualified individual or enrollee to elect 

a regular coverage effective date in 

accordance with paragraph (b)(1) of this 

section. We seek comment on this 

proposal. 

We propose to amend paragraphs 

(b)(2)(iv) and (c)(2). The proposed 

change to (c)(2) would become effective 

January 1, 2016, and would allow 

consumers advanced access to the 

special enrollment period where a 

qualified individual or enrollee, or his 

or her dependent, gains access to new 

QHPs due to a permanent move under 

(d)(7). Prior to January 1, 2016, 

consumers who gain access to new 

QHPs as described under (d)(7) would 

continue to select a QHP in accordance 

with paragraph (c)(1). The proposed 

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changes to (b)(2)(iv) also would allow 

these persons to have a coverage 

effective date of the first day of the 

month following the move if plan 

selection is made before or on the day 

of the loss of coverage. If plan selection 

is made after the loss of coverage, the 

Exchange must ensure that coverage is 

effective in accordance with the regular 

effective dates under paragraph (b)(1) or 

on the first day of the following month, 

at the option of the Exchange. Current 

regulations require consumers to 

complete their permanent move before 

they are granted a special enrollment 

period, creating potential gaps in 

coverage. This amendment would help 

prevent such gaps. We seek comment on 

this proposal. 

In addition, we propose to add new 

paragraphs (b)(2)(v) and (b)(2)(vi), 

which pertain to effective dates for 

coverage that must be obtained under 

court orders, including child support 

orders, and the death of an enrollee or 

his or her dependent. In paragraph 

(b)(2)(vi), we propose to require an 

Exchange to make coverage effective the 

first day the court order is effective to 

minimize any gap in coverage the 

individual may experience. We would 

allow Exchanges to provide consumers 

with a choice for regular effective dates 

under paragraph (b)(1) of this section to 

minimize duplicative coverage the child 

may have. We seek comment on this 

proposal, and other polices that would 

provide consumers who must obtain 

coverage for an individual under a court 

order the most protective effective date. 

In paragraph (b)(2)(vi), we propose to 

require that an Exchange ensure 

coverage is effective the first day of the 

month following a death of the enrollee 

or his or her dependent, and at the 

option of the Exchange and the 

consumer, allow for regular effective 

dates under paragraph (b)(1) of this 

section. The effective date of the 

coverage under this special enrollment 

period is intended to work in 

conjunction with the effective date for 

termination due to death provided in 

§ 155.430(d)(7). When a consumer dies 

in the middle of the month, and the 

enrollment group is no longer valid, our 

expectation is that issuers would 

continue coverage for the enrollment 

group through the end of the month. 

The alternative would be to align the 

effective date of coverage with the date 

of death which would require proration 

of premiums and advance payments of 

the premium tax credit. We seek 

comment on which proposal is most 

beneficial to the consumer. 

We propose to combine paragraphs 

(c)(2)(i) and (c)(2)(ii) to a new paragraph 

(c)(2) to simplify the regulatory text. In 

addition, we propose to allow 

consumers to report a permanent move 

60 days in advance of the move for the 

purposes of receiving special enrollment 

period to reduce the likelihood of a gap 

in coverage. We understand this 

requirement may not be operationally 

feasible for the 2015 benefit year and, as 

such, propose to not require Exchanges 

to meet this requirement prior to 

January 1, 2016. 

We seek comment on these proposed 

amendments. 

We propose to amend paragraph 

(d)(1)(ii) which provides a special 

enrollment period for individuals 

enrolled in non-calendar year 

individual health insurance coverage 

when their policy year ends in 2014. We 

propose that this special enrollment 

period be available with respect to a 

qualified individual or his or her 

dependent who, in any year, has 

coverage under a group health plan or 

an individual plan with a plan or policy 

year that is not offered on a calendar 

year basis. We recognize that group 

health plans as well as grandfathered 

and transitional individual market plans 

are not required to be offered on a 

calendar year basis and may, therefore, 

come up for renewal outside of the 

annual open enrollment period for the 

individual market. This special 

enrollment period would give 

individuals enrolled in such plans the 

opportunity to enroll in an individual 

market QHP through the Exchange 

when their plan renews without having 

to wait until the next available open 

enrollment period. We seek comments 

on this proposal. 

We propose to amend paragraph (d)(2) 

to include new paragraphs (i) and (ii). 

Paragraph (i) is changed from the 

original paragraph (d)(2) to include 

situations where a court order requires 

a qualified individual to cover a 

dependent or other person. We are 

adding this provision to allow for 

situations where a qualified individual 

is required to cover a dependent or 

other person who either was not 

previously covered under the qualified 

individual’s health plan, or where a 

dependent voluntarily terminates 

coverage, in order to be added to the 

qualified individual’s health plan and 

therefore, would not qualify for a 

special enrollment period under 

paragraph (d)(1)(i) of this section. We 

seek comment on this addition. 

We propose to amend paragraph (d)(2) 

to add a new paragraph (ii) to allow 

enrollees who experience a loss of a 

dependent or lose dependent status 

through legal separation, divorce, or 

death to be determined eligible for a 

special enrollment period. The special 

enrollment period will be available to 

all enrollees who lose a dependent or 

are no longer considered a dependent 

on the application. Currently, 

depending on the circumstances 

surrounding the divorce, legal 

separation, or death, the applicant may 

be determined eligible for a special 

enrollment period. This amendment 

would ensure that when an applicant 

experiences a life event that changes 

their familial structure such that their 

current plan no longer fits their needs, 

they are able to switch plans. We seek 

comment on the proposed amendments. 

We propose to amend paragraph 

(d)(4), which allows a special 

enrollment period where enrollment or 

non-enrollment in a QHP is 

unintentional, inadvertent, or 

erroneous, and is the result of the error, 

misrepresentation, or inaction of an 

officer, employee, or agent of the 

Exchange or HHS, or its 

instrumentalities as evaluated and 

determined by the Exchange, to also 

include situations where a nonExchange entity is providing enrollment 

assistance. Concurrently, we propose to 

strike paragraph (d)(10) which provides 

a separate special enrollment period for 

non-Exchange entity misconduct. We 

believe this modification, which would 

allow the Exchange to correct its own 

errors as well as errors of non-Exchange 

entities, will give the Exchange the 

authority to remedy these errors. For 

purposes of this section, non-Exchange 

entities include, all those entities listed 

at 78 FR 65064 as possible nonExchange entities in the final 

rulemaking for § 155.420(d)(10): Agents 

and brokers assisting consumers in an 

Exchange under § 155.220, certified 

application counselors, as described in 

§ 155.225, and navigators as described 

in § 155.210, issuer application assisters 

as described in § 155.415; a QHP as 

described in § 155.20, or non-Navigator 

assistance personnel as authorized by 

§§ 155.205(d) and (e) and 155.215. The 

current special enrollment period for 

misconduct of non-Exchange entities 

provided in paragraph (d)(10) of this 

section is limited to those situations 

where the consumer either: (1) Was not 

enrolled in a QHP; (2) was not enrolled 

in the QHP selected by the individual; 

or (3) is eligible for but is not receiving 

advance payments of the premium tax 

credit or cost-sharing reductions. During 

our first year of operations, we have 

learned that errors can arise involving 

non-Exchange entities that would be 

most sufficiently addressed by 

modifying paragraph (d)(4) of this 

section, as discussed above, to allow the 

Exchange to take appropriate action to 

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29The statutory exceptions to guaranteed 

availability include special rules for network plans, 

limited network capacity, and limited financial 

capacity. The statutory exceptions to guaranteed 

renewability include non-payment of premiums, 

fraud, violation of participation or contribution 

rules, termination of coverage, movement outside 

service area, association membership ceases. 

30See e.g., ‘‘Frequently Asked Questions on 

Health Insurance Market Reforms and Marketplace 

Standards,’’ May 16, 2014. Available at http://www.

cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/

Downloads/Final-Master-FAQs-5-16-14.pdf). See 

also ‘‘Frequently Asked Question on Qualified 

Health Plans and Guaranteed Availability 

Standards,’’ June 3, 2014. Available at: http://www.

cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/

Downloads/faq_on_qhps_and_guaranteed_

availability_6314.pdf. 

31We note that an exception to the requirement 

that QHP must be guaranteed available and 

renewable outside the Exchange arises from the 

statutory permission for QHPs offered through the 

Exchange or SHOP to omit coverage of the pediatric 

dental EHB where a stand-alone dental plan 

offering the pediatric dental EHB is offered through 

the Exchange or SHOP. This is not similarly 

permitted when the plan is offered outside the 

Exchange or SHOP. This results in certain QHPs 

only being legally available in the market when 

offered through the Exchange or SHOP. If the QHP 

omits coverage of the pediatric dental EHB, the 

issuer would not be required to offer, renew, or 

continue enrollment in the QHP outside the 

Exchange, but could do so, at the enrollee’s option, 

correct or eliminate the effects of 

misconduct or error on behalf of a nonExchange entity. We seek comment on 

this proposal. 

We propose to amend paragraph (d)(6) 

to create a special enrollment period for 

a qualified individual in a nonMedicaid expansion State who was 

previously ineligible for advance 

payments of the premium tax credit 

solely because the qualified individual 

had a household income below 100 

percent FPL, who was ineligible for 

Medicaid during that same timeframe, 

and experiences a change in household 

income that makes the individual newly 

eligible for advance payments of the 

premium tax credit. Prior to the change 

in household income, such an 

individual had no option for affordable 

health insurance coverage, and we 

believe it is appropriate to provide an 

opportunity for enrollment when 

changed circumstances make coverage 

accessible to them. We seek comments 

on this proposal. 

We also seek comments on other 

situations that may warrant a special 

enrollment period, particularly 

situations specific to the initial years in 

which consumers have an opportunity 

to purchase coverage through an 

Exchange. 

d. Termination of Coverage (§ 155.430) 

Under our current rules, 

§ 155.430(b)(1) requires an Exchange to 

permit an enrollee to terminate his or 

her coverage in a qualified health plan 

(QHP) following appropriate notice to 

the Exchange or the QHP. We propose 

to amend this paragraph by adding a 

sentence to clarify that, to the extent the 

enrollee has the right to cancel the 

coverage under applicable State laws, 

including ‘‘free look’’ cancellation 

laws—that is, laws permitting 

cancellation within a certain period of 

time, even following effectuation of the 

enrollment, the enrollee may do so, in 

accordance with the requirements of 

such laws. Furthermore, we propose to 

amend § 155.430(d)(2) to add a new 

paragraph (d)(2)(v) allowing a 

retroactive termination effective date 

when an enrollee initiates the 

termination, if specified by applicable 

State laws, such as ‘‘free look’’ 

provisions. 

We also invite comments on further 

standardization that may be needed 

with § 147.106. 

Additionally, we propose to amend 

§ 155.430(b)(1) by removing the 

language requiring the appropriate 

notice to the Exchange or QHP since the 

notice requirement is addressed in 

§ 155.430(d) and this would give greater 

flexibility for other enrollee initiated 

terminations where appropriate notice 

is not defined. For example, in the case 

of death, we state that the last day of 

coverage is the date of death, but we do 

not require a specific amount of notice 

of death to the Exchange or QHP. 

We also propose to explicitly state 

that the requirement for Exchanges to 

ensure appropriate actions are taken in 

connection with retroactive 

terminations, currently set forth in 

paragraph (d)(6) regarding special 

enrollment periods, applies to all 

retroactive terminations, including valid 

cancellations of coverage under a ‘‘free 

look’’ law. To do so, we propose to 

move the applicable language to a new 

paragraph (d)(8). We also propose to add 

reconciliation of Exchange user fees to 

the list of items Exchanges would need 

to address. Under that requirement, the 

Exchange will ensure that appropriate 

actions are taken to make necessary 

adjustments to advance payments of the 

premium tax credit, cost-sharing 

reductions, Exchange user fees, 

premiums, and claims, while to 

adhering to any State law. For example, 

this would mean that the QHP issuer 

would be required to return any 

premium paid by the enrollee, and to 

refund to HHS any advance payment of 

the premium tax credit or cost-sharing 

reductions paid for that enrollee for the 

period after the termination effective 

date (and the Exchange would refund 

any user fee paid on behalf of the 

enrollee for the period after the 

termination effective date). We note 

that, under our proposal, the enrollee 

would not become eligible to receive a 

special enrollment period as a direct 

result of the ‘‘free look’’ cancellation. 

We also propose to add a new 

paragraph (b)(1)(iii) which would 

require Exchanges to establish processes 

for a third party to report the death of 

a consumer. We propose that, as part of 

these processes, an Exchange must 

allow a third party, including a 

consumer’s authorized representative, to 

report the death of a consumer for 

purposes of initiating termination of the 

deceased consumer’s enrollment. To 

substantiate a report of the death of an 

enrollee, the Exchange may, but is not 

required to, request documentation. 

This process will provide more 

flexibility for consumers to initiate the 

termination of Exchange enrollment of 

an enrollee who has not selected an 

authorized representative. We seek 

comment on this proposal. 

Sections 2702 and 2703 of the PHS 

Act, as added by the Affordable Care 

Act, and their implementing regulations 

at §§ 147.104 and 147.106, generally 

require health insurance issuers offering 

non-grandfathered group or individual 

health insurance coverage to guarantee 

the availability and renewability of the 

coverage unless an exception applies. 

QHPs offered through the Exchange or 

SHOP are health insurance coverage in 

the individual and small group markets, 

respectively. Accordingly, QHPs are 

subject to market-wide requirements in 

title XXVII of the PHS Act, including 

guaranteed availability and guaranteed 

renewability. 

Under guaranteed availability 

requirements, an issuer may not refuse 

to accept individuals or employers who 

apply for such coverage unless an 

exception applies. Under guaranteed 

renewability requirements, an issuer 

must offer to renew or continue in force 

coverage at the option of the individual 

or employer and may not non-renew or 

discontinue the individual’s or 

employer’s coverage unless an 

exception applies. There are several 

exceptions to these requirements,29 but 

whether a consumer is determined to be 

a qualified individual or qualified 

employer for purposes of enrollment 

through the Exchange is not one of 

them. For these reasons, we have 

interpreted the guaranteed availability 

requirements to mean that a QHP 

offered through the Exchange generally 

must be available outside the 

Exchange.30 We have similarly 

interpreted the guaranteed renewability 

requirements to mean that a QHP 

offered through the Exchange generally 

must be renewable outside the 

Exchange.31

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if the issuer is ‘‘reasonably assured’’ that the 

enrollee has obtained such coverage through an 

Exchange-certified stand-alone dental plan. Patient 

Protection and Affordable Care Act; Standards 

Related to Essential Health Benefits, Actuarial 

Value, and Accreditation, 78 FR at 12834, 12853 

(February 25, 2013). 

32 45 CFR 155.430(b)(2); with respect to SHOP 

coverage see also 45 CFR 156.285, 156.270, 155.735. 

33 45 CFR 155.430(b)(2)(i) and part of (b)(2)(iv). 

We have identified certain aspects of 

the Exchange and SHOP regulations, 

particularly relating to termination of 

coverage, that could be interpreted as 

being inconsistent with the guaranteed 

availability right of consumers to 

purchase QHPs outside the Exchanges, 

and with the guaranteed renewability 

right of consumers to retain QHP 

coverage outside the Exchange. For 

example, the Exchange regulations list 

several circumstances under which the 

Exchange ‘‘may initiate termination of 

an enrollee’s coverage in a QHP, and 

must permit a QHP issuer to terminate 

such coverage.’’ 32 Among these listed 

circumstances are cases in which ‘‘[t]he 

enrollee is no longer eligible for 

coverage in a QHP through the 

Exchange,’’ and in which ‘‘[t]he QHP 

. . . is decertified.’’ 33 While these two 

situations would make the individual 

ineligible to enroll in a QHP through the 

Exchange, and therefore ineligible for 

the premium tax credit or cost-sharing 

reductions, issuers cannot necessarily 

terminate coverage under the 

guaranteed renewability provisions. 

To better align with market-wide 

guaranteed availability and guaranteed 

renewability requirements, we propose 

to amend the Exchange regulations in 

parts 155 and 156 that could be 

construed as limiting coverage in a QHP 

to coverage through the Exchange. For 

example, we intend to revise certain 

references to ‘‘termination of coverage,’’ 

so that they refer to termination of an 

individual’s enrollment status as a 

qualified individual receiving coverage 

‘‘through the Exchange,’’ not 

termination of the coverage altogether, 

where applicable. Specifically, we 

intend in the final rule to modify the 

following provisions that may be 

viewed as inconsistent with our 

interpretations of guaranteed 

availability and guaranteed 

renewability: §§ 155.430, 155.735, 

156.270, 156.285, and 156.290. We 

anticipate there may be other provisions 

of the Exchange and SHOP regulations 

for which conforming amendments may 

also be necessary. These amendments 

would become effective with the 

effective date of the final rule. 

We seek comment on these proposals. 

5. Exchange Functions in the Individual 

Market: Eligibility Determinations for 

Exemptions 

a. Eligibility Standards for Exemptions 

(§ 155.605) 

In § 155.605, we propose amendments 

to two hardship exemptions and a 

correction to a cross-reference. First, we 

propose to amend § 155.605(g)(3) to 

provide a hardship exemption to an 

individual who is not a dependent of 

another taxpayer and whose gross 

income is less than the individual’s 

minimum threshold for filing a Federal 

income tax return. We expect that the 

Internal Revenue Service (IRS) and the 

Department of the Treasury will publish 

guidance allowing individuals who are 

eligible for this exemption to claim it on 

their tax returns without obtaining a 

hardship exemption certificate number 

from the Exchange. It is further 

anticipated that the IRS and the 

Department of the Treasury will provide 

that individuals who are eligible for this 

exemption are not required to file 

Federal income tax returns to claim the 

exemption. We expect that the IRS and 

the Department of Treasury will finalize 

these policies in time for consumers 

filing 2014 Federal income taxes. We 

anticipate that this proposed change 

will affect a small group of people, and 

will greatly simplify the process for 

claiming this exemption on a Federal 

tax return. We seek comment on this 

proposal. 

Second, we propose amending 

§ 155.605(g)(6)(i) to correct the citation 

to 42 CFR 447.50 by changing it to 42 

CFR 447.51, which cross-references the 

Medicaid definition for Indian. 

Third, we propose new paragraph 

§ 155.605(g)(6)(iii) that will align the 

exemption process for members of 

Federally-recognized Tribes and those 

individuals who are eligible for services 

through the Indian Health Service (IHS), 

a Tribal health facility, or an Urban 

Indian organization (ITU). Under 

current regulations, members of 

Federally-recognized Tribes may apply 

for an exemption from the shared 

responsibility payment directly with the 

Exchange, or they may claim the 

exemption when they file their tax 

returns without applying for an 

exemption from the Exchange. However, 

those who are applying for a hardship 

exemption based on their eligibility to 

receive services from an ITU are 

required to submit an exemption 

application to the Exchange. These 

varying application requirements cause 

confusion for American Indian and 

Alaska Native families. The proposed 

amendment will provide individuals 

who are eligible for services through an 

ITU with the same exemption process 

available to tribal members by 

permitting them to claim the exemption 

on their Federal income tax returns 

without obtaining an exemption 

certificate number. We expect that the 

IRS and the Department of Treasury will 

finalize policies to accommodate this 

proposal for consumers filing 2014 

Federal income taxes. We seek comment 

on this proposal. 

b. Required Contribution Percentage 

(§ 155.605) 

Under section 5000A of the Code, an 

individual must have minimum 

essential coverage for each month, 

qualify for an exemption, or make a 

shared responsibility payment with his 

or her Federal income tax return. 

Section 5000A of the Code and section 

1311(d)(4)(H) of the Affordable Care Act 

authorizes the Secretary to determine 

individuals’ eligibility for exemptions, 

including the hardship exemption. 

Under section 5000A(e)(1) of the Code, 

an individual is exempt if the amount 

that he or she would be required to pay 

for minimum essential coverage 

(required contribution) exceeds a 

particular percentage (the required 

contribution percentage) of his or her 

actual household income for a taxable 

year. In addition, under § 155.605(g)(2) 

an individual is exempt if his or her 

required contribution exceeds the 

required contribution percentage of his 

or her projected household income for 

a year. Finally, under § 155.605(g)(5) 

certain employed individuals are 

exempt if, on an individual basis, the 

cost of self-only coverage is less than the 

required contribution percentage but the 

aggregate cost of self-only coverage 

through employers exceeds the required 

contribution percentage and no family 

coverage is available through an 

employer at a cost less than the required 

contribution percentage. 

The required contribution percentage 

for 2014 is 8 percent under section 

5000A(e)(1)(A) of the Code. Section 

5000A(e)(1)(D) of the Code and 26 CFR 

1.5000A–3(e)(2)(ii) provide that for plan 

years after 2014, the required 

contribution percentage is the 

percentage determined by the Secretary 

that reflects the excess of the rate of 

premium growth between the preceding 

calendar year and 2013, over the rate of 

income growth for that period. In the 

2015 Market Standards Rule, we 

established a method for determining 

the excess of the rate of premium 

growth over the rate of income growth 

each year, and published the 2015 rate. 

We stated that future adjustments would 

be published annually in the HHS 

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34We defined premium growth for this measure 

as the same annually adjusted measure of premium 

growth used below in this rule to establish the 

annual maximum and reduced maximum 

limitations on cost sharing for plan benefit designs. 

That is, the premium adjustment percentage. 

35Consolidated Omnibus Budget Reconciliation 

Act of 1985 (Pub. L. 99–272) (‘‘COBRA’’), or 

applicable State law. 

notice of benefit and payment 

parameters. 

Under the method previously 

established, the rate of premium growth 

over the rate of income growth for 2016 

is determined by (x) one plus the 

premium growth between the preceding 

year (in this case, 2015), and 2013, 

carried out to ten significant digits, 

divided by (y) one plus the rate of 

income growth between the preceding 

year (2015), and 2013, carried out to ten 

significant digits.34 The result of this 

calculation is carried out to ten 

significant digits and multiplied by the 

required contribution percentage 

specified in section 5000A(e)(1)(A) of 

the Code (8.00 percent). The result is 

then rounded to the nearest hundredth 

of a percent, to yield the required 

contribution percentage for 2016. 

Under the methodology described 

above, the total rate of premium growth 

for the two-year period from 2013–2015 

is 1.0831604752, or 8.3 percent. We 

describe the methodology for obtaining 

this number below in § 156.130(e). In 

the 2015 Market Standards rule, we also 

established a methodology for 

calculating the rate of income growth for 

the purpose of calculating the annual 

adjustment to the required contribution 

percentage. 

The measure of income growth is 

based on projections of per capita Gross 

Domestic Product (GDP) used for the 

National Health Expenditure Accounts 

(NHEA), which is calculated by the 

CMS Office of the Actuary. Accordingly, 

using the NHEA data, the rate of income 

growth for 2016 is the percentage (if 

any) by which the most recent 

projection of per capita GDP for the 

preceding calendar year ($56,660 for 

2015) exceeds the per capita GDP for 

2013, ($53,186), carried out to ten 

significant digits. The total rate of 

income growth for the two-year period 

from 2013–2015 is estimated to be 

1.0653179408 or 6.5 percent. We note 

that the 2013 per capita GDP used for 

this calculation has been updated to 

reflect the latest NHEA data. 

Thus, the excess of the rate of 

premium growth over the rate of income 

growth for 2013–2015 is 1.0831604752/ 

1.0653179408, or 1.0167485534, or 1.7 

percent. This results in a required 

contribution percentage for 2016 of 

8.00*1.0167485534, or 8.13 percent, 

when rounded to the nearest onehundredth of one percent. 

6. Exchange Functions: Small Business 

Health Options Program (SHOP) 

a. Standards for the Establishment of a 

SHOP (§ 155.700) 

We propose to amend § 155.700(b) 

such that the previous definition of 

‘‘group participation rule’’ would 

conform with the terminology we 

propose to use in § 155.705(b)(10). 

Specifically, we propose to modify the 

term to refer to a ‘‘group participation 

rate,’’ which is a minimum percentage 

of all eligible individuals or employees 

of an employer that must be enrolled. 

b. Functions of a SHOP (§ 155.705) 

Section 155.705 was amended in the 

2015 Market Standards Rule. In 

§ 155.705, we propose to redesignate 

paragraph (b)(4)(ii)(B) as new paragraph 

(b)(4)(ii)(C), redesignate paragraph 

(b)(4)(ii)(A) as new paragraph 

(b)(4)(ii)(B), add new paragraph 

(b)(4)(ii)(A), and amend paragraphs 

(b)(4)(i)(B), (b)(7), and (b)(10). 

In the proposed amendment to 

paragraph (b)(4)(i)(B) and proposed new 

(b)(4)(ii)(A), we propose to permit the 

SHOP to assist a qualified employer in 

the administration of continuation 

coverage in which former employees 

seek to enroll through the SHOP. The 

proposed amendment to paragraph 

(b)(4)(i)(B) would modify the 

requirement that the total amount of all 

premiums due from a given qualified 

employer must be collected from the 

qualified employer by the SHOP. This is 

because, at new paragraph (b)(4)(ii)(A), 

we propose that where a qualified 

employer is offering Federal or State 

continuation coverage 35 under 29 

U.S.C. 1161 et seq. or any applicable 

State law, and where a SHOP has 

entered into an agreement with a 

qualified employer to provide this 

service, the SHOP may assist the 

employer in administration of such 

coverage by billing for and collecting 

premiums for the continuation coverage 

directly from the former employee, 

rather than the employer, if the 

qualified employer elects to have the 

SHOP carry out this function. The 

SHOP would then remit the premium 

payments to the issuers offering the 

continuation coverage. We propose this 

policy to reduce the burden on small 

businesses related to the administration 

of continuation coverage in which 

former employees seek to enroll through 

the SHOP. A qualified employer may 

find it difficult to harmonize the 

timeline for the collection of 

continuation coverage premiums and 

the timeline for the collection of 

premiums in the SHOP. Permitting the 

SHOP to collect continuation coverage 

premiums directly from the former 

employee ensures that both the 

employer and the former employee may 

fully exercise their payment grace 

periods while reducing the likelihood of 

complex billing problems. We are not 

proposing that SHOPs, including the 

Federally-facilitated SHOP, take on 

other functions related to the 

administration of continuation coverage, 

such as administration of required 

notices. Additionally, in light of the 

administrative complexities associated 

with administering payments for Statemandated continuation coverage across 

all States with an FF–SHOP, we propose 

that an FF–SHOP may elect to limit this 

service to the billing and collection of 

premiums related to Federally 

mandated (‘‘COBRA’’) continuation 

coverage. 

We also note that the IRS has 

promulgated specific standards 

regarding payments for COBRA 

continuation coverage at 26 CFR 

54.4980B–8. We note that where such 

standards and any other applicable 

COBRA standards in 26 CFR part 54 are 

more protective than the standards the 

SHOP has established for administration 

of payment (such as, for example, grace 

periods) the IRS rules must apply. We 

seek comment on all aspects of this 

proposal, including the interaction of 

the FF–SHOP’s payment grace periods 

and termination policies at § 155.735 

with the COBRA rules IRS has codified 

in 26 CFR part 54. 

We are considering whether to permit 

the Federally-facilitated SHOP to accept 

premium payment using a credit card, 

and seek comment on whether to do so. 

Currently, qualified employers 

participating in the Federally-facilitated 

SHOP may only pay premiums to the 

Federally-facilitated SHOP using a 

check or bank draft. While HHS has 

received comments from stakeholders 

urging it to permit qualified employers 

to pay premiums using a credit card, we 

seek comment on the extent to which 

employers would utilize this option. 

These stakeholders stated, and we agree, 

that it may be more convenient for a 

small employer to pay by credit card 

than by check or bank draft. 

Additionally, we note that an employer 

that finances its premium payment with 

a credit card may be able to better align 

its premium payments with its monthly 

receipts. We seek comment on all 

aspects of this potential policy, 

including how many FF–SHOP 

employers expect to use credit cards for 

payment, whether they would use this 

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method of payment every month or only 

for their initial payment, and what 

credit and debit cards the FF–SHOP 

should consider accepting. 

We also propose to revise paragraph 

(b)(7) to align the SHOP regulations 

with the Protecting Access to Medicare 

Act of 2014 (Pub. L. 113–93), which 

repealed requirements related to 

deductible maximums for employersponsored coverage at section 1302(c)(2) 

of the Affordable Care Act. This 

proposal would remove the only 

reference in the SHOP regulations to the 

requirements of Affordable Care Act 

section 1302(c)(2). 

In paragraph (b)(10), we propose to 

modify the calculation of minimum 

participation rates in the SHOP. We 

propose that a SHOP (both a State-based 

and a Federally-facilitated SHOP) that 

elects to establish a minimum 

participation rate would be required to 

establish a single, uniform rate that 

applies to all groups and issuers in the 

SHOP, rather than establishing general 

rules about minimum participation rates 

or a threshold over which the minimum 

percentage may not be raised. Therefore, 

if the SHOP authorizes a minimum 

participation rate, such a rate would 

have to be based on the rate of employee 

participation in the SHOP and in 

coverage through another group health 

plan; governmental coverage such as 

Medicare, Medicaid, or TRICARE; 

coverage sold through the individual 

market; or in other minimum essential 

coverage, and not on the rate of 

employee participation in any particular 

QHP or QHPs of any particular issuer. 

If this proposal is finalized, State-based 

SHOPs would be expected to conform to 

it by its effective date. 

In section (b)(10)(i), we propose to 

amend existing language about 

employees ‘‘accepting coverage under 

the employer’s group health plan’’ to 

instead refer to employees ‘‘accepting 

coverage offered by a qualified 

employer’’ to better account for 

employee choice. 

We also propose to amend section 

(b)(10) regarding how the minimum 

participation rate would be calculated 

in the SHOP and how it would be 

calculated in the Federally-facilitated 

SHOP. In many States, when an issuer 

calculates the group’s minimum 

participation rate, the issuer includes 

employees who enroll in coverage 

through sources other than the group 

health plan being insured. Essentially, 

under this approach, ‘‘participation’’ is 

interpreted to refer to participation in 

health coverage, rather than 

participation in the specific coverage 

offered through the SHOP. For this 

reason, we propose to calculate the 

minimum participation rate as the 

number of full-time employees 

accepting coverage offered by the 

qualified employer through the SHOP 

plus the number of full-time employees 

who are enrolled in coverage through 

another group health plan, in 

governmental coverage (such as 

Medicare, Medicaid or TRICARE), in 

coverage sold through the individual 

market, or in other minimum essential 

coverage, divided by the number of fulltime employees offered coverage 

through the SHOP. Additionally, we 

believe that references to coverage 

offered ‘‘through another group health 

plan’’ would also include coverage 

offered in connection with an employee 

organization and joint board comprised 

of equal employer and employee 

representatives (multiemployer plan). 

Because minimum participation rates 

were designed to reduce the likelihood 

that a significant percentage of 

employees might wait to get coverage 

until they are sick, this policy objective 

would be met with respect to employees 

having any existing coverage, not just 

coverage under their employer’s group 

health plan. 

The effect of this approach to 

calculating minimum participation rates 

would be an increased likelihood the 

group would meet the issuer’s minimum 

participation rate even if a significant 

proportion of the group’s employees 

enroll in other coverage. While the 

Federally-facilitated SHOP’s minimum 

participation rate was established to 

accommodate the variety of minimum 

participation rates that exist across 

States, it relied upon a uniform 

definition of who was included in the 

rate’s calculation that did not include 

certain other forms of coverage in which 

an employee might enroll. Therefore, 

this proposal would align the Federallyfacilitated SHOP’s minimum 

participation rate methodology with the 

current practice of issuers in many 

States. We note that certain types of 

coverage, such as excepted benefits, 

were, and would continue to be, 

excluded from other permissible 

coverage used in the calculation of the 

minimum participation rate because the 

coverage provided through the purchase 

of an excepted benefit is not the type of 

coverage purchased through the SHOP 

and subject to the minimum 

participation requirement. We seek 

comment on whether this definition of 

which employees would be included in 

the calculation should be extended 

beyond the SHOP to the entire smallgroup market in order to create 

uniformity among issuer practices and 

prevent further gaming by issuers 

through their use of non-standard 

definitions for other acceptable 

coverage. 

c. Eligibility Standards for SHOP 

(§ 155.710) 

In § 155.710, we propose to amend 

paragraph (e) to specify that where an 

employer has offered dependent 

coverage, a qualified employee would 

be eligible to enroll his or her 

dependents in coverage through the 

SHOP. 

d. Enrollment of Employees Into QHPs 

Under SHOP (§ 155.720 and § 156.285) 

In § 155.720, we propose to amend the 

list structure of paragraph (b) by 

replacing the ‘‘; and’’ in (b)(6) with a 

period, and adding an ‘‘and’’ at the end 

of (b)(5). We also propose to remove 

paragraph (b)(7),which requires all 

SHOPs to establish effective dates for 

employee coverage in the SHOP. 

Current § 155.720(b)(7) would be 

redundant if the proposed requirements 

to establish effective dates under 

§ 155.725 are finalized as proposed. 

We propose to amend paragraph (e) to 

refer to enrollees and not qualified 

employees, and would also remove a 

reference in this section to § 156.260(b) 

in keeping with the proposed 

amendments to § 155.725 regarding 

coverage effective dates that are 

described below. We continue to believe 

that a QHP issuer’s notice to an enrollee 

of the coverage effective date provides 

important confirmation to the enrollee 

that his or her enrollment has been 

processed. This amendment would also 

establish that issuers must provide this 

notice to anyone who enrolled in 

coverage through the SHOP under the 

proposed amendments to the definitions 

of qualified employee and enrollee 

advanced in this rulemaking, if those 

amendments are finalized as proposed, 

including dependents (including a new 

dependent of the employee, when the 

dependent separately joins the plan), 

former employees of a qualified 

employer, and certain business owners. 

We note that the notices required under 

this proposal could be incorporated into 

existing notifications that QHPs provide 

to their new customers, for example in 

a welcome document. We also propose 

a conforming amendment to 

§ 156.285(c) to ensure that QHP issuers 

participating in the Federally-facilitated 

SHOP would provide notice to a new 

enrollee of the enrollee’s effective date 

of coverage. 

e. Enrollment Periods Under SHOP 

(§ 155.725 and § 156.285) 

We propose to amend paragraphs (a), 

(g), (h), and (j)(5) of § 155.725 and 

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§ 156.285(b)(1) and (b)(4) to provide 

clarity regarding the effective dates for 

coverage that all SHOP Exchanges must 

establish. We are continuing to evaluate 

whether other provisions of our 

regulations would require conforming 

amendments to reflect these proposals, 

and welcome comment on this topic as 

well as on these proposals generally. 

First, we propose to remove the 

reference at current § 155.725(a)(1) to 

the start of the initial open enrollment 

period for 2014 coverage, and the 

reference in current § 155.725(a)(2) to 

§ 156.260. The start of the initial open 

enrollment period for 2014 coverage 

occurred in the past and thus the 

reference to it is no longer relevant. We 

propose to remove the reference to 

effective dates under § 156.260 because 

we are proposing to specify effective 

dates in § 155.725 or to more directly 

cross-reference the appropriate effective 

date. 

Second, we propose to amend 

§ 155.725(h) so that SHOPs would need 

only to establish effective dates for 

employees enrolling in coverage during 

the initial group enrollment and the 

employee annual open enrollment 

period, rather than for special 

enrollment periods, because SHOPs 

must ensure that effective dates for 

employees enrolling during special 

enrollment periods are consistent with 

the effective dates specified in 

§ 155.420(b). We propose to provide this 

flexibility during the initial and annual 

open enrollment periods in order to 

provide SHOPs with the ability to 

encourage issuers to accommodate 

coverage effective dates for a group as 

soon as possible under local market 

conditions. However, we propose to 

continue to keep effective dates for 

special enrollment periods standardized 

to ensure a minimum standard for 

special enrollment periods and because 

there are existing mechanisms within 

§ 155.420(b) for a SHOP to achieve 

earlier effective dates for special 

enrollment periods. At proposed 

paragraph (h)(2), we would also codify 

the effective dates for coverage in the 

Federally-facilitated SHOP for 

enrollments during initial and annual 

open enrollment periods. Specifically, 

we are proposing to include language in 

the SHOP regulations specifying the 

same effective dates that were 

previously adopted for the Federallyfacilitated SHOP under our 

interpretation of the cross reference in 

§ 156.285(b)(4) to § 156.260, which in 

turn cross-references § 155.410(c). 

Former § 155.720(b)(7) conflicted with 

these cross references, such that while 

§ 155.720(b)(7) could have been 

interpreted to permit each SHOP to 

establish its own rules for effective dates 

for coverage, these cross references 

appeared to require the use of effective 

dates determined based on § 155.410(c). 

The effective dates proposed for the 

Federally-facilitated SHOP in this 

rulemaking are the effective dates HHS 

interpreted as applicable to the 

Federally-facilitated SHOP under the 

former rule. However, we note that the 

dates set forth in § 155.725(h)(2) would 

apply only to the Federally-facilitated 

SHOP and State-based SHOPs would be 

free to establish their own effective 

dates for initial and annual open 

enrollment. 

Third, we propose several 

amendments to paragraph § 155.725(g) 

regarding enrollment for newly 

qualified employees. A newly qualified 

employee is an employee who becomes 

eligible to participate in the employer’s 

group health plan outside of a qualified 

employer’s initial or annual enrollment 

period; for example, because he or she 

was hired outside of those periods. We 

are moving current paragraph (g) to 

proposed paragraph (g)(1), and are 

proposing amendments to the existing 

language to make explicit our 

interpretation of current paragraph (g), 

which is that a newly qualified 

employee becomes eligible for an 

enrollment period that begins on the 

first day of becoming a newly qualified 

employee regardless of whether the 

employee is subject to a waiting period. 

The current rule text could also be read 

to mean that a newly qualified 

employee’s coverage would begin on the 

first day of becoming a qualified 

employee, and this proposal will make 

it clear that this is not our interpretation 

of the provision. Thus, in the case of a 

newly hired employee offered coverage 

by an employer, the employee’s 

enrollment period would begin on the 

date of his or her hiring. Additionally, 

we propose that the duration of a newly 

qualified employee’s enrollment period 

be at least 30 days. We propose a 

minimum of 30 days because we believe 

that a shorter period would not provide 

an employee sufficient time to compare 

QHPs where employee choice is offered. 

Where the employee is subject to a 

waiting period in excess of 45 days, we 

propose that the duration of the 

employee’s enrollment period extend 

until 15 days before what would be the 

conclusion of the waiting period if the 

employee selected a plan on the first 

day of becoming eligible. We propose 

this to permit an employee in an 

extended waiting period more time to 

select a plan. We note that if an 

employee waits to choose a plan until 

the end of such an extended enrollment 

period, this could have the effect of 

further delaying the effective date of 

coverage, consistent with § 147.116(a). 

We also propose to add a new 

paragraph (g)(2) in § 155.725 to provide 

that the effective date for a newly hired 

employee would be determined using 

the same rule for initial and open 

enrollments that would be established 

by the SHOP under proposed 

§ 155.725(h). Thus, in the Federallyfacilitated SHOP, coverage effective 

dates for newly qualified employees 

would be established according to 

§ 155.725(h)(2): plan selections made 

between the first and the fifteenth day 

of any month would be effective the first 

day of the following month, and plan 

selections made between the 16th and 

the last day of any month would be 

effective the first day of the second 

following month. A newly qualified 

employee may also be subject to a 

waiting period under § 147.116, 

however, and in such cases the effective 

date may be on the first day of a month 

that is later than the month in which 

coverage would take effect under the 

usual rules established by the SHOP 

under § 155.725(h). However, in no case 

could the effective date fail to comply 

with the limitations on waiting period 

durations at § 147.116 of this 

subchapter. For example, in the case of 

an employee who was hired and offered 

coverage on March 1, where the 

employer has a waiting period of 60 

days, the earliest coverage effective date 

under proposed § 155.725(g)(2) would 

be May 1. If the newly qualified 

employee selects a plan on March 5, the 

coverage would be effective May 1. 

We seek comment on all aspects of 

this proposal, including on the 

interactions between a waiting period 

and the effective date, adverse selection 

concerns, and ease of administration. 

Fourth, we propose to amend 

paragraph § 155.725(j)(5) to make it 

more clear that the effective dates for 

special enrollment periods in the SHOP 

should be determined according to 

§ 155.420(b). 

Fifth, we propose to harmonize 

§ 156.285(b)(1) and (4) with the 

proposed amendments to effective dates 

described above, to specify that QHP 

issuers must abide by the effective dates 

established under § 155.725 and must 

enroll qualified employees in 

accordance with the qualified 

employer’s initial and annual 

enrollment periods in § 155.725. 

We also propose to amend 

§ 155.725(b) to harmonize rolling 

enrollment in the SHOP with the 

regulations applicable to guaranteed 

availability in States with merged 

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individual and small group markets. 

Section 147.104(b)(2) requires that all 

individual or small group health 

insurance coverage sold in a State with 

merged individual and small group risk 

pools be offered on a calendar year 

basis, meaning that it must end on 

December 31 of the year in which the 

policy was issued. Section 155.725(b), 

in contrast, requires that SHOPs permit 

qualified employers to purchase 

coverage for a small group at any point 

throughout the calendar year, and that 

SHOPs ensure that a participating 

group’s plan year lasts for 12 months 

beginning with the first effective date of 

coverage. Section 155.725(b) was 

intended to ensure that qualified 

employers can offer health insurance 

through the SHOP at any point during 

the year while receiving a guaranteed 

rate 12 months following the purchase 

of coverage, consistent with the current 

practice in the small group market. We 

now propose to harmonize these two 

provisions, by proposing that SHOP 

plans in a State with merged risk pools 

would terminate on December 31st of 

the year in which they were issued, 

even if certain qualified employers’ plan 

years would thus be shorter than 12 

months. This proposal would not affect 

a small employer’s ability to enroll in 

coverage at any point in the year. 

Instead, it would standardize the 

renewal date of such a plan in a State 

with merged risk pools at the beginning 

of each calendar year. 

We also propose to modify paragraph 

(i) to permit a SHOP to elect to renew 

a qualified employer’s offer of coverage 

where the employer has taken no action 

during its annual election period to 

modify or withdraw the prior year’s 

offer of coverage. The qualified 

employer’s offer would not be 

automatically renewed under this 

proposal if the employer is no longer 

eligible to participate in the SHOP—for 

example, because it no longer operates 

a business within the State served by 

the SHOP or no longer has at least one 

employee. Renewal would also not be 

automatic if the employer is offering a 

single QHP and that QHP will no longer 

be available through the SHOP. We are 

proposing this modification at the 

request of State-based SHOPs that desire 

to conform to existing small group 

market practice regarding automatic 

annual renewal of coverage for an 

employer group. A SHOP would not be 

required to implement this rule. 

Finally, we also propose to add 

paragraph (k) to make clear that SHOP 

coverage may not be effectuated if the 

policy may not be issued to the 

employer because the group fails to 

meet an applicable minimum 

participation rate. 

f. Termination of Coverage (§ 155.735 

and § 156.285) 

In § 155.735, we propose to amend 

paragraph (c)(2)(ii) to specify that in the 

Federally-facilitated SHOP, a 

termination of coverage due to nonpayment of premiums would be 

effective on the last day of the month for 

which the Federally-facilitated SHOP 

received full payment. Prior to this 

proposal, the effective date of such a 

termination was not specified in the 

rule. 

In paragraph (c)(2)(iii), we propose to 

specify that, in the Federally-facilitated 

SHOP, a qualified employer whose 

coverage was terminated for nonpayment of premiums could be 

reinstated in its prior coverage only 

once per calendar year. We propose that 

the number of reinstatements for a given 

qualified employer be counted on a 

calendar year basis, rather than on a 

plan year basis, for ease of 

administration. The purpose of this 

proposal is to discourage employers in 

the Federally-facilitated SHOP from 

repeatedly failing to make timely 

payments for health insurance coverage. 

We note that any employer whose 

group’s coverage is terminated under 

this proposal could reapply to the 

Federally-facilitated SHOP by 

submitting a new application. However, 

the enrollment based on the new 

application would be a new plan, not a 

reinstatement into the plan that was 

terminated based on non-payment, and 

therefore amounts paid toward the 

deductible and annual limitations on 

cost-sharing would not be carried over 

from the previous plan, and information 

submitted on the original application, 

including basic information about the 

employer group and the employee 

roster, would not carry over to the new 

application. 

In paragraphs (d)(1)(iii) and (g) of 

§ 155.735 and in § 156.285(d)(1)(ii), we 

propose to amend certain existing notice 

requirements by transferring them from 

QHP issuers to the SHOP. Under current 

§ 156.285(d)(1)(ii), a QHP issuer must 

notify an enrollee and a qualified 

employer if the enrollee or employer is 

terminated due to a loss of eligibility, 

due to a qualified employer’s nonpayment of premiums, due to a 

rescission of coverage for fraud or 

misrepresentation of material fact in 

accordance with § 147.128, or because 

the QHP issuer elects not to seek 

recertification with the Exchange for its 

QHP. We propose to transfer two of 

these notice requirements to the SHOP. 

At § 155.735(g)(1), we propose that the 

SHOP be required to provide notice to 

the enrollee if an enrollee is terminated 

due to non-payment of premium or a 

loss of eligibility for participation in the 

SHOP, including when an enrollee loses 

eligibility due to a qualified employer’s 

loss of eligibility. We also propose at 

§ 155.735(g)(2) that the SHOP be 

required to provide notice to qualified 

employers for termination due to 

nonpayment of premiums or where 

applicable, due to loss of the employer’s 

eligibility. This provision would 

generally apply to terminations for loss 

of an employer’s eligibility when the 

employer lost eligibility for a reason 

other than the employer reporting 

information to the SHOP that resulted in 

the loss of eligibility. For example, this 

provision would apply where the SHOP 

learned through an employee appeals 

process that the employer refused to 

provide coverage to all full-time 

employees, which is a condition of the 

qualified employer’s eligibility under 

§ 155.710(b)(2). Typically, we expect 

employers to lose eligibility voluntarily 

because they have informed the SHOP 

that they no longer intend to offer 

coverage to all full-time employees or 

because they no longer have a business 

location in the SHOP’s service area. 

Where the employer is actively 

informing the SHOP that it no longer 

meets the SHOP eligibility 

requirements, we believe providing 

notification to the employer of the loss 

of eligibility would be unnecessary. 

HHS is proposing to shift these notice 

requirements to the SHOP because HHS 

believes the SHOP would be in a better 

position to provide notices to enrollees 

and qualified employers with respect to 

terminations for loss of eligibility and 

nonpayment of premiums. The SHOP 

will have better information regarding 

the timing of non-payment and why an 

enrollee or employer lost his or her 

eligibility than a QHP issuer. 

Through the proposed amendments to 

the definition of ‘‘enrollee’’ discussed 

above, we also propose to expand the 

class of people who would receive 

notices under the proposed 

amendments to § 155.735 and 

§ 155.285(d)(1)(ii). Thus, for example, 

notice would be given by the SHOP 

under these amendments to a dependent 

of a qualified employee who is enrolled 

in coverage through the SHOP when the 

dependent loses coverage. 

Through proposed amendments to 

§ 156.285(d)(1)(ii) and 

§ 155.735(d)(1)(iii), we also propose that 

QHP issuers in the SHOP would 

continue to be required to provide 

notice to qualified employers and 

enrollees when an enrollee’s coverage is 

terminated due to a rescission in 

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70716 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

36As discussed in section III.G.7.d of this 

proposed rule, under amendments proposed in this 

rulemaking, SHOP plans in States that have merged 

their individual and small group markets would 

terminate on December 31st of the year in which 

they were issued, even if the plan year would thus 

be shorter than 12 months. 

accordance with § 147.128, and when an 

enrollee’s coverage is terminated due to 

an election by a QHP issuer not to seek 

recertification with the Exchange for its 

QHP. We are proposing to amend 

§ 155.735(d)(1)(iii), which currently 

refers to terminations of SHOP coverage 

due to a QHP’s termination or 

decertification, by adding a reference to 

terminations of SHOP coverage due to 

the non-renewal of a QHP’s 

certification. By proposing to include a 

cross-reference to § 155.735(d)(1)(iii) in 

§ 156.285(d)(1)(ii), we also propose to 

expand the notice a QHP issuer must 

provide regarding the discontinuation of 

a product in which a qualified employee 

is enrolled to include circumstances 

where the QHP is terminated or is 

decertified as described in § 155.1080. 

In HHS’s view, QHP issuers are best 

positioned to provide meaningful notice 

when coverage is terminated due to a 

rescission in accordance with § 147.128 

or when the QHP is terminated, 

decertified, or its certification is not 

renewed. 

We also propose that each notice 

required under § 155.735 (g) and the 

proposed amendments to 

§ 156.285(d)(1)(ii) would have to be 

provided by the SHOP or QHP issuer 

promptly and without undue delay. We 

propose this timeframe because we 

believe it provides flexibility to SHOPs 

and issuers when such notices may be 

sent either electronically or by mail. We 

would consider an electronic notice that 

was sent no more than 24 hours after the 

SHOP or QHP issuer determined 

coverage was to be terminated to have 

been provided ‘‘promptly and without 

undue delay.’’ In the case of paper 

notices, we would consider notices that 

were mailed no later than 48 hours after 

the SHOP determined coverage was to 

be terminated to have been provided 

‘‘promptly and without undue delay.’’ 

7. Exchange Functions: Certification of 

Qualified Health Plans 

a. Certification Standards for QHPs 

(§ 155.1000) 

In § 155.1000, we propose to add 

paragraph (d) to harmonize QHP 

certification with rolling enrollment in 

the SHOP. Under § 155.725(b), an 

employer may start participating in the 

SHOP at the beginning of any month in 

the calendar year. Such coverage lasts 

for 12 months, unless earlier 

terminated.36 This means that groups 

enrolled in the SHOP might have 

coverage that does not begin and end on 

a calendar year basis. A QHP that is 

certified on a calendar year basis is not, 

however certified to cover an employer 

group after the calendar year of its 

certification ends, even if the group’s 

plan year extends into the next calendar 

year. Therefore, we propose that if a 

SHOP certifies QHPs on a calendar year 

basis, the certification must be in effect 

for the duration of any employer’s plan 

year that began in the calendar year for 

which the plan was certified. Under this 

approach, the certification could be in 

effect beyond the end of the calendar 

year of the QHP’s certification if the 

plan year of an employer group enrolled 

in the QHP ended later than the end of 

that calendar year. In no case in which 

a SHOP certified QHPs on a calendar 

year basis would the certification be in 

effect after December of the year 

following the calendar year for which 

the plan was certified. 

H. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. General Provisions 

a. Definitions (§ 156.20) 

For the reasons described in section 

III.A.1 of this preamble, we propose to 

amend § 156.20 to add a definition of 

‘‘plan,’’ which would have the meaning 

given the term in § 144.103 as proposed 

to be amended in this rulemaking. 

b. FFE User Fee for the 2016 Benefit 

Year (§ 156.50) 

Section 1311(d)(5)(A) of the 

Affordable Care Act contemplates an 

Exchange charging assessments or user 

fees to participating health insurance 

issuers, or otherwise generating funding 

to support its operations. In addition, 31 

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

establish a charge for a service provided 

by the agency. If a State does not elect 

to operate an Exchange or does not have 

an approved Exchange, section 

1321(c)(1) of the Affordable Care Act 

directs HHS to operate an Exchange 

within the State. Accordingly, at 

§ 156.50(c), we specified that a 

participating issuer offering a plan 

through an FFE must remit a user fee to 

HHS each month that is equal to the 

product of the monthly user fee rate 

specified in the annual HHS notice of 

benefit and payment parameters for the 

applicable benefit year and the monthly 

premium charged by the issuer for each 

policy under the plan where enrollment 

is through an FFE. 

OMB Circular No. A–25R 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 in 

benefit years 2014 and 2015, issuers 

seeking to participate in an FFE in 

benefit year 2016 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. These special benefits are 

provided to participating issuers 

through the following Federal activities 

in connection with the operation of 

FFEs: 

• Provision of consumer assistance 

tools. 

• Consumer outreach and education. 

• Management of a Navigator 

program. 

• Regulation of agents and brokers. 

• Eligibility determinations. 

• Enrollment processes. 

• Certification processes for QHPs 

(including ongoing compliance 

verification, recertification and 

decertification). 

• Administration of a SHOP 

Exchange. 

OMB Circular No. A–25R further 

states that user charges should generally 

be set at a level so that they are 

sufficient to recover the full cost to the 

Federal government of providing the 

service when the government is acting 

in its capacity as sovereign (as is the 

case when HHS operates an FFE). 

Accordingly, we propose to set the 2016 

user fee rate for all participating FFE 

issuers at 3.5 percent. The user fee rate 

assessed on FFE issuers is the same as 

the 2015 user fee rate. In addition, we 

intend to seek an exception to OMB 

Circular No. A–25R, which requires that 

the user fee charge be sufficient to 

recover the full cost to the Federal 

government of providing the special 

benefit. We seek this exception to 

ensure that the FFE can support many 

of the goals of the Affordable Care Act, 

including improving the health of the 

population, reducing health care costs, 

and providing access to health coverage 

as advanced by § 156.50(d). We seek 

comments on this proposal. 

2. Essential Health Benefits Package 

a. State Selection of Benchmark 

(§ 156.100) 

We propose to amend paragraph (c) of 

§ 156.100 to delete the language 

regarding the default base-benchmark 

plan in the U.S. territories of Guam, the 

U.S. Virgin Islands, American Samoa, 

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37http://www.cms.gov/CCIIO/Resources/Files/

Downloads/uniform-glossary-final.pdf. 

and the Northern Mariana Islands. The 

change reflects HHS’s determination, 

described in more detail in section 

III.A.1.b of this proposed rule, that 

certain provisions of the PHS Act 

enacted in title I of the Affordable Care 

Act that apply to health insurance 

issuers are appropriately governed by 

the definition of ‘‘State’’ set forth in that 

title. Therefore, the rules regarding EHB 

(section 2707 of the PHS Act) do not 

apply to health insurance issuers in the 

U.S. territories. We are also proposing to 

make a technical change to this section 

by replacing ‘‘defined in § 156.100 of 

this section’’ with ‘‘described in this 

section.’’ We note that this has no effect 

on Medicaid and CHIP programs and 

that Alternative Benefit Plans will still 

have to comply with the essential health 

benefit requirements. We seek 

comments on these proposals. 

b. Provision of EHB (§ 156.115) 

Section 1302(b)(1) of the Affordable 

Care Act provides that the Secretary is 

to define the essential health benefits 

(EHB) that must be covered under 

section 1302(a)(1) by issuers under nongrandfathered small employer and 

individual market insurance plans. The 

Secretary’s definition must include 10 

enumerated benefit categories, and 

result in a benefit package with a 

‘‘scope’’ that is equal to that under a 

‘‘typical’’ employer plan ‘‘as determined 

by the Secretary.’’ In our initial 

regulations defining EHB, we adopted a 

benchmark plan approach, codified at 

§ 156.100 and § 156.110, under which 

each State can elect to base the EHB that 

must be covered in that State on one of 

several specified ‘‘benchmark’’ plans 

(for example the largest health plan by 

enrollment in any of the three largest 

small group insurance products). 

The benchmark plan selected by the 

State may be modified in certain ways 

permitted under the regulations, and 

must be modified to comply with 

requirements specified in the 

regulations. For example, we require 

under § 156.115(a)(3) that the benefit 

design of the plan must comply with the 

mental health parity requirements under 

the Mental Health Parity and Addiction 

Equity Act, even where those 

requirements would not otherwise 

apply. In this proposed rule, we are 

proposing certain new EHB 

requirements that would have to be met 

in order for an issuer to be considered 

to be offering EHB. 

One of the 10 categories of benefits 

that must, under section 1302(b)(1)(G) of 

the Act, be included under the 

Secretary’s definition of EHB is 

‘‘[r]ehabilitative and habilitative 

services and devices.’’ If a benchmark 

plan does not include habilitative 

services, § 156.110(c)(6) of the current 

EHB regulations requires the issuer to 

cover habilitative services as specified 

by the State under § 156.110(f) or, if the 

State does not specify, then the issuer 

must cover habilitative services in the 

manner specified in § 156.115(a)(5). 

Section 156.115(a)(5) states that a health 

plan may provide habilitative coverage 

by covering habilitative services benefits 

that are similar in scope, amount, and 

duration to benefits covered for 

rehabilitative services or otherwise 

determine which services are covered 

and report the determination to HHS. In 

some instances, those options have not 

resulted in comprehensive coverage for 

habilitative services. Therefore, we 

propose amending § 156.115(a)(5) to 

establish a uniform definition of 

habilitative services that may be used by 

States and issuers. In addition, we 

propose to remove § 156.110(c)(6) 

because that provision gives issuers the 

option to determine the scope of 

habilitative services. 

We believe that adopting a uniform 

definition of habilitative services would 

minimize the variability in benefits and 

lack of coverage for habilitative services 

versus rehabilitative services. Defining 

habilitation services clarifies the 

difference between habilitative and 

rehabilitation services. Habilitative 

services, including devices, are 

provided for a person to attain, maintain 

or prevent deterioration of a skill or 

function never learned or acquired due 

to a disabling condition. Rehabilitation 

services, including devices, on the other 

hand, are provided to help a person 

regain, maintain or prevent 

deterioration of a skill or function that 

has been acquired but then lost or 

impaired due to illness, injury, or 

disabling condition. 

We seek comment on whether we 

should maintain the current policy, 

define habilitative services as described 

below or permit the use of one or more 

other specified definitions. 

The proposed definition comes from 

the Glossary of Health Coverage and 

Medical Terms: 37 ‘‘health care services 

that help a person keep, learn, or 

improve skills and functioning for daily 

living. Examples include therapy for a 

child who is not walking or talking at 

the expected age. These services may 

include physical and occupational 

therapy, speech-language pathology and 

other services for people with 

disabilities in a variety of inpatient and/ 

or outpatient settings.’’ 

We considered and invite comment 

on whether we should require certain 

specified services to be included as 

habilitative services. 

We are not proposing any changes to 

§ 156.110(f). Several States have made 

such a determination following 

benchmark selection for the 2014 plan 

year, and we wish to continue to defer 

to States on this matter as long as the 

State definition complies with EHB 

policies including non-discrimination. 

Therefore, under the proposed 

amendments, if the base-benchmark 

plan does not include coverage of 

habilitative services, the State may 

determine which services are included 

in that category, as stated in 

§ 156.110(f). If the State does not 

supplement missing habilitative 

services or does not supplement in an 

EHB-compliant manner, issuers should 

cover habilitative services as defined in 

§ 156.115(a)(5)(i). 

We also propose to revise current 

§ 156.115(a)(5)(ii) to provide that plans 

required to provide EHB cannot impose 

limits on coverage of habilitative 

services that are less favorable than any 

such limits imposed on coverage of 

rehabilitative services. Since the 

statutory category includes both 

rehabilitative and habilitative services 

and devices, we interpret the statute to 

require coverage of each. Therefore, 

issuers that previously excluded 

habilitative services, but subsequently 

added them, would be required under 

our proposal to impose separate limits 

on each service rather than retaining the 

rehabilitative services visit limit and 

having habilitative services count 

toward the same visit limit. Because we 

are proposing to establish a uniform 

definition of habilitative services in new 

§ 156.115(a)(5)(i), we are also proposing 

to delete § 156.110(c)(6), which would 

remove the option for issuers to 

determine the scope of the habilitative 

services. In § 156.110 we make a 

technical change to amend the list 

structure of paragraph (c) by replacing 

the ‘‘and’’ in (c)(5) with a period and 

adding an ‘‘and’’ at the end of (c)(4). 

In the preamble of the EHB Rule, we 

stated that pediatric services should be 

provided until at least age 19 (78 FR 

12843). States, issuers, and stakeholders 

have requested clarification on this 

standard. To provide this clarification, 

we propose amending § 156.115(a) to 

add paragraph (a)(6), specifying that 

EHB coverage for pediatric services 

should continue until the end of the 

plan year in which the enrollee turns 19 

years of age. This is proposed as a 

minimum requirement. 

This age limit is consistent with 

section 1201 of the Affordable Care 

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70718 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

38Section 1201 of the Affordable Care Act added 

section 2704 of the PHS Act, which prohibited 

preexisting condition exclusions. Section 1255 of 

the Affordable Care Act states that the provisions 

of section 2704 of the PHS Act, as they apply to 

enrollees who are under 19 years of age, shall 

become effective for plan years beginning on after 

September 23, 2010. 

39Essential Health Benefits Bulletin (December 

16, 2011), available at: http://www.cms.gov/CCIIO/ 

Resources/Files/Downloads/essential_health_

benefits_bulletin.pdf. 

40Patient Protection and Affordable Care Act; 

Data Collection to Support Standards Related to 

Essential Health Benefits; Recognition of Entities for 

the Accreditation of Qualified Health Plans, 77 FR 

42658 (July 20, 2013) (codified at 45 CFR part 156). 

Act,38 which phased in the prohibition 

on preexisting conditions exclusions by 

first prohibiting them for children under 

age 19, as well as the age limit for 

eligibility to enroll in CHIP. In addition, 

as noted in the EHB Rule, this proposed 

policy aligns with Medicaid (78 FR 

12843), which requires States to cover 

children up to age 19 with family 

incomes up to 100 percent of the 

Federal Poverty Level (FPL) as a 

mandatory eligibility category. We 

propose the end of the plan year in 

which one attains age 19 is best for 

continuity of care. We seek comment on 

this proposed standard. 

c. Collection of Data To Define Essential 

Health Benefits (§ 156.120) 

In the Essential Health Benefits 

Bulletin,39 we first stated our intent to 

define EHB based on a benchmark plan. 

We outlined ten possible options, 

including four different plan benchmark 

types, from which a State could select 

its benchmark plan. We finalized this 

benchmark approach in the EHB Rule at 

§§ 156.100 and 156.110 of our 

regulations. 

In the Patient Protection and 

Affordable Care Act; Data Collection to 

Support Standards Related to Essential 

Health Benefits; Recognition of Entities 

for the Accreditation of Qualified Health 

Plans final rule (EHB Data Collection 

Rule),40 we required issuers in each 

State that offered the three largest health 

insurance products by enrollment as of 

March 31, 2012 to submit certain data 

to HHS by September 4, 2012. These 

data, gathered from 2012 plans, were 

used to determine, for each State, the 

benefits and limitations of the three 

largest small group products by 

enrollment, which were potential 

benchmark plans. 

The EHB Rule unintentionally deleted 

§ 156.120, which included the data 

submission requirement. We are 

proposing to allow each State to select 

a new base-benchmark plan for the 2017 

plan year. We would allow States to 

choose a 2014 plan that meets the 

requirements of § 156.110 as the new 

base-benchmark plan, so that issuers 

can design substantially equal EHBcompliant products for the 2017 plan 

year. We believe that this would 

ultimately create efficiencies for issuers 

in designing plans. Specifically, the use 

of updated base-benchmark plans 

should minimize confusion because 

most 2014 plans are compliant with 

§ 156.110 and the various market reform 

requirements that became applicable for 

plan and policy years beginning in 

2014. Those 2014 market reform 

requirements include removal of annual 

and lifetime dollar limits on EHBs and 

compliance with the Mental Health 

Parity and Addiction Equity Act of 

2008. 

If a category of base-benchmark plans 

under § 156.100(a)(1)–(4) does not 

include a plan that that meets the 

requirements of § 156.110, we are 

considering permitting the State to 

select a base-benchmark plan that does 

not meet the requirements of § 156.110 

in that category. However, States would 

still need to supplement their basebenchmark plan to ensure that all 10 

categories of benefits are covered in a 

benchmark plan. We seek comment on 

this issue, including alternate ways of 

addressing situations in which a State 

has few potential base-benchmark plans 

that meet the requirements of § 156.110 

from which to choose. 

We now propose to re-codify part of 

§ 156.120, in a manner similar to that 

which appeared in our regulations prior 

to the effective date of the EHB Rule. We 

propose to require a State that chooses 

a new benchmark plan in the State or, 

if a State does not choose a new 

benchmark plan, the issuer of the 

default benchmark plan must provide 

benchmark plan data as of a date 

specified by HHS. We anticipate 

collection of new benchmark plan data 

for the 2017 plan year and the data 

discussed in § 156.120(b), including 

administrative data and descriptive 

information pertaining to all health 

benefits in the plan, treatment 

limitations, drug coverage, and 

exclusions. We believe that this 

information is already included in the 

issuer’s form filing that the issuer 

submitted to the State regulator. The 

definitions previously adopted for the 

terms health benefits, health insurance 

product, health plan, small group 

market, State and treatment limitations 

are still applicable. We seek comment 

on this proposal. 

d. Prescription Drug Benefits (§ 156.122) 

Another category of benefits that must 

be covered under the Secretary’s 

definition of EHB is ‘‘prescription 

drugs’’ under section 1302(b)(1)(F). 

While we generally implemented this 

part of the definition by deferring to the 

scope of coverage under a benchmark 

plan, we imposed specific additional 

requirements under § 156.122. For 

example, under current § 156.122(a)(2), 

we require that an issuer’s drug list be 

submitted to the Exchange, the State, or 

United States Office of Personnel 

Management (OPM) as appropriate. 

Under this section, we are proposing 

several revisions to the EHB 

prescription drug benefit requirements. 

First, we are proposing to retain 

§ 156.122(a)(2) with one modification to 

change ‘‘drug list’’ to ‘‘formulary drug 

list’’ for uniformity purposes for this 

section. We are also proposing to 

renumber this paragraph from 

§ 156.122(a)(2) to § 156.122(a)(1). 

Under our current regulations at 

§ 156.122(a)(1) that we are proposing to 

replace, EHB plans are required to cover 

the greater of one drug per United States 

Pharmacopeia (USP) category or class or 

the same number of drugs in each USP 

category and class as the State’s EHB 

benchmark plan. To implement this 

requirement, we worked with issuers, 

States, the NAIC, and other stakeholders 

to facilitate the use of the USP 

classification system based on USP 

Model Guidelines Version 5.0. We also 

provided a tool for States and issuers to 

count clinically distinct drugs and 

categorize them into the USP system. 

The intention of § 156.122(a)(1) was to 

require comprehensive coverage and 

establish a common organizational tool 

for plans to report drug coverage. 

However, we have found that issuers 

have often had difficulty developing 

formularies that conform to the USP 

drug category and class system. Because 

the USP system was developed for the 

Medicare population, some drugs that 

are likely to be prescribed for the larger 

EHB population were not reflected. 

There were also many operational 

challenges associated with the drug 

count standard: Newly approved drugs 

were not counted; some drugs were 

counted in multiple USP classes; 

discontinued drugs had to be manually 

removed from the counting tool; and 

issuers had to submit justifications to 

explain their inability to meet the 

benchmark count due to system issues. 

We also found that the drug count 

review did not encourage the inclusion 

of newly-approved drugs and did not 

provide an incentive for issuers to cover 

innovative products or other products 

that would not be counted using this 

counting standard. For these reasons, 

we are proposing an alternative to the 

above drug count standard, which we 

discuss below. We are also seeking 

comment on a second alternative that 

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41Medicare Part D plans are required to maintain 

P&T committees by the Social Security Act 

§ 1860D–4(b)(3)(G) codified at 42 CFR § 423.120(b), 

42 CFR § 423.272(b)(2). NAIC has a Model Act 

entitled Health Carriers Prescription Drug Benefit 

Management Model Act (July 2003) that includes 

P&T Committee provisions at: http://www.naic.org/ 

store/free/MDL-22.pdf. 

42http://www.ahrq.gov/professionals/cliniciansproviders/guidelines-recommendations/index.html. 

could be adopted in lieu or in 

combination with our proposal below. 

We are proposing to replace the drug 

count standard with a requirement in 

§ 156.122(a)(2) that plans adopt a 

pharmacy and therapeutics (P&T) 

committee and use that committee to 

ensure that the plan’s formulary drug 

list covers a sufficient number and type 

of prescription drugs. We are proposing 

P&T committee standards that must be 

met for the prescription drug coverage 

to be considered EHB. We believe that 

the use of a P&T committee in 

conjunction with the other standards 

that we are proposing would help 

ensure that an issuer’s formulary drug 

list covers a broad array of prescription 

drugs. The Medicare Part D Prescription 

Drug Program (Medicare Part D), the 

NAIC and other stakeholders have 

defined standards by which a P&T 

committee should function.41 We are 

interested in comments regarding these 

standards and whether we should adopt 

them in lieu of or in addition to the 

standards we are proposing. If this 

proposal is finalized, plans that are 

required to cover EHB would cover 

drugs based on a qualitative rather than 

merely quantitative perspective, which 

we believe will provide enrollees with 

a more robust formulary drug list. 

We propose to specify P&T committee 

standards on membership, meetings, 

and establishment and development of 

a formulary drug list. For P&T 

committee membership, we propose 

requiring the P&T committee to include 

members from a sufficient number of 

clinical specialties to adequately 

represent the needs of enrollees. For 

instance, we would expect that the P&T 

committee members include experts in 

chronic diseases and in the care of 

individuals with disabilities. We 

propose that the majority of members be 

practicing physicians, practicing 

pharmacists and other practicing health 

care professionals. We also solicit 

comments on whether the types of other 

practicing health care professionals 

should be more narrowly defined to 

only include other practicing health 

care professionals who can prescribe 

drugs. Additionally, we propose to 

require that members of the P&T 

committee that have a conflict of 

interest with respect to the issuer or a 

pharmaceutical manufacturer would be 

permitted to sit on the P&T committee 

but would be prohibited from voting on 

matters for which the conflict exists. In 

addition to these requirements, we 

would also propose that at least 20 

percent of the P&T committee’s 

membership must have no conflict of 

interest with respect to either the issuer 

or to any pharmaceutical manufacturer. 

Under these standards, a member who 

holds more than one health care license, 

for example, as a nurse practitioner and 

a pharmacist, would only count as one 

person. We also solicit comments on the 

percentage of committee members that 

should have no conflict of interest, and 

the proposed requirement that the 

members of the P&T committee with 

conflicts of interest should be permitted 

to sit on the P&T committee but would 

be prohibited from voting on matters for 

which the conflict exists. We considered 

requiring a set number of participants to 

be independent and have no conflicts of 

interest, but we were concerned that 

absent a limitation on the total number 

committee members, requiring a specific 

number of committee members to be 

independent and not have a conflict of 

interest would have a variable impact, 

depending on the size of the P&T 

committee. We are also proposing that 

the P&T committee would be 

responsible for defining a reasonable 

definition of conflict of interest and for 

managing the conflicts of interest of its 

committee members. As part of this 

standard, the P&T committee would 

require its P&T committee members to 

sign a conflict of interest statement 

revealing economic or other 

relationships with entities, including 

the issuer and any pharmaceutical 

manufacturers, affected by drug 

coverage decisions that could influence 

committee decisions. We solicit 

comments on this proposed standard, 

including the implementation of this 

conflict of interest standard, whether 

there are additional conflict of interest 

standards that should apply and what 

would constitute a conflict of interest. 

In particular, we seek comments on 

what could be considered a permissible 

relationship with respect to the issuer or 

a pharmaceutical manufacturer. If this 

provision is finalized, we would 

consider providing further guidance 

regarding conflict of interest. 

We also propose that the P&T 

committee must meet at least quarterly, 

and maintain written documentation of 

all decisions regarding formulary drug 

list’s development and revision. With 

respect to formulary drug list 

establishment and management, we are 

proposing that the P&T committee must 

develop and document procedures to 

ensure appropriate drug review and 

inclusion on the formulary drug list, as 

well as make clinical decisions based on 

scientific evidence, such as peerreviewed medical literature, and 

standards of practice, such as wellestablished clinical practice guidelines. 

The P&T committee must consider the 

therapeutic advantages of prescription 

drugs in terms of safety and efficacy 

when selecting formulary drugs and 

making recommendations with respect 

to their formulary tier. The P&T 

committee must review both newly 

FDA-approved drugs and new uses for 

existing drugs. We also propose that a 

P&T committee must ensure that an 

issuer’s formulary drug list covers a 

range of drugs across a broad 

distribution of therapeutic categories 

and classes and recommended drug 

treatment regimens that treat all disease 

states and does not substantially 

discourage enrollment by any group of 

enrollees. 

Lastly, we propose to require that 

issuers’ formularies provide appropriate 

access to drugs that are included in 

broadly accepted treatment guidelines 

and which are indicative of and 

consistent with general best practice 

formularies in widespread use. Broadly 

accepted treatment guidelines and 

general best practices could be based on 

industry standards or other appropriate 

guidelines that are issued by expert 

organizations that are current at the 

time. For instance, broadly accepted 

treatment guidelines could include 

guidelines provided in the National 

Guideline Clearinghouse (NGC), which 

is a publicly available database of 

evidence-based clinical practice 

guidelines and related documents.42 As 

a result of this proposed policy, we 

would expect that a health plan’s 

formulary drug list would ensure that 

appropriate access is being afforded to 

drugs in widely accepted national 

treatment guidelines and which are 

indicative of general best practices at 

the time. Given our proposal to use 

broadly accepted treatment guidelines 

and best practices, we would also 

expect that plans’ formulary drug lists 

be similar to those formulary drug lists 

then currently in widespread use. We 

also note that States have primary 

responsibility for enforcing EHB 

requirements and if finalized, States 

would be responsible for the oversight 

and enforcement of the P&T committee 

standards. Currently, for QHPs, we have 

provided States with tools to review 

formulary drug lists and if these 

provisions are finalized, we could 

consider developing additional tools 

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70720 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

and resources to assist States in 

reviewing formulary drug lists. We seek 

comment on these proposed revisions to 

§ 156.122(a), including the oversight 

and enforcement of these standards, and 

whether other standards are needed for 

P&T committees. 

As an alternative to, or in 

combination with, the above-proposed 

P&T committee requirements, we are 

also considering whether to replace the 

USP standard with a standard based on 

the American Hospital Formulary 

Service (AHFS). AHFS is a widely used 

formulary reference system in the 

private insurance market and is often 

used for developing formularies for the 

population being covered by EHB. The 

AHFS system is a 4-tier hierarchical 

drug classification system that is 

updated and published annually by the 

American Society of Health-System 

Pharmacists. These tiers are grouped 

based on similar pharmacologic, 

therapeutic, and chemical 

characteristics. Compared to the USP 

system, the AHFS system is more 

gradual and has more classifications 

than the USP system. We believe that 

using the AHFS system that 

incorporates these additional 

classifications would better ensure that 

a broader distribution of drugs would be 

required to be covered to the meet the 

drug count standard than in the current 

USP system where there are fewer 

categories and classes. Because we 

believe that many issuers are already 

familiar with the AFHS system, we 

would expect that the impact from 

switching from the USP system would 

be minimal, and we have received 

comments from stakeholders 

recommending that we consider using 

AHFS as an alternative to USP. 

We seek comment on the proposed 

P&T committee standard and whether 

we should consider adopting AHFS or 

another drug classification system, as 

well as on any other standards that may 

be appropriate for this purpose. We are 

particularly interested in comments on 

how to use AHFS to develop a 

minimum standard for issuers to meet. 

For instance, for the AHFS system, we 

could switch the current minimum 

standard that requires coverage of at 

least the greater of one drug in every 

USP category and class or the same 

number of drugs in each USP category 

and class as the State’s EHB-benchmark 

plan to require at least the greater of one 

drug in each AHFS class and subclass 

or the same number of drugs in each 

AHFS class and subclass as the State’s 

EHB-benchmark plan. 

If we were to finalize a P&T 

committee process in combination with 

a drug count standard based on either 

the AHFS system or the USP system, we 

would expect the health plan would 

establish and maintain its formulary 

drug list in compliance with the P&T 

committee standards, and in addition, 

the resulting health plan’s formulary 

drug list would also need to comply 

with the drug count standard. However, 

we seek comment on how the drug 

count system could be used in 

combination with a P&T committee 

approach, such as specifying that the 

formulary drug list is generally being 

designed by the P&T committee, but that 

it must also include at least one drug in 

each AHFS class and subclass or USP 

category and class. 

We could also continue to use the 

existing USP drug count standard, and 

update the USP drug count system to 

use a more current version. States and 

issuers are now familiar with the USP 

drug count standard, having used it to 

develop formularies for the 2014 and 

2015 plan years. One of the advantages 

of the USP system is that it is publicly 

available, in comparison to the AHFS, 

which must be licensed. 

We also recognize that a requirement 

to transition to a P&T committee 

standard or another drug count standard 

will require lead time for States, issuers 

and pharmacy benefit managers to 

implement. Therefore, we are proposing 

to implement § 156.122(a)(2) starting 

with the 2017 plan year. We seek 

comments on this proposed timing of 

implementation. 

Section 156.122(c) currently requires 

issuers of EHB plans to have procedures 

in place that allow an enrollee to 

request and gain access to clinically 

appropriate drugs not covered by the 

plan. We believe this requirement is 

necessary to ensure that an issuer 

provides the level of drug coverage to 

cover the EHB category of prescription 

drugs. This requirement, commonly 

referred to as the ‘‘exceptions process,’’ 

applies to drugs that are not included on 

the plan’s formulary drug list, as 

opposed to the appeals process codified 

at § 147.136, which applies if an 

enrollee receives an adverse benefit 

determination for a drug that is 

included on the plan’s formulary drug 

list. Under current § 156.122(c)(1) 

(effective in 2015), such procedures 

must include a process that allows an 

enrollee, the enrollee’s designee, or the 

enrollee’s prescribing physician (or 

other prescriber) to request an expedited 

review based on exigent circumstances. 

Exigent circumstances exist when an 

enrollee is suffering from a serious 

health condition that may seriously 

jeopardize the enrollee’s life, health, or 

ability to regain maximum function or 

when an enrollee is undergoing a 

current course of treatment using a nonformulary drug. A health plan must 

make its coverage determination on an 

expedited review request based on 

exigent circumstances, and notify the 

enrollee or the enrollee’s designee and 

the prescribing physician (or other 

prescriber, as appropriate) of its 

coverage determination no later than 24 

hours after it receives the request. A 

health plan that grants an exception 

based on exigent circumstances must 

provide coverage of the non-formulary 

drug for the duration of the exigency. 

We recognize the importance of the 

procedures under § 156.122(c) for 

enrollees, especially for those with 

unique and complex health conditions. 

The intention of the exceptions process 

is to better ensure enrollee access to 

clinically appropriate, non-formulary 

drugs prescribed for them. However, we 

believe that enrollees who are trying to 

gain access to a drug through the 

exceptions process laid out in current 

§ 156.122(c) would benefit if we set 

clearer and more uniform standards for 

issuers that receive an exception 

request. We believe that these additional 

parameters are also needed to better 

ensure that enrollees can obtain drugs 

that we believe should be covered as 

prescription drugs under the definition 

of EHB. Specifically, we are proposing 

to build on the expedited exception 

process that we established for 2015 by 

proposing to also adopt similar 

requirements for the standard exception 

process. We are also proposing to adopt 

standards for a secondary external 

review process if the first exception 

request is denied by the plan (regardless 

of whether the exception is requested 

using the standard process or the 

expedited process). 

Under proposed § 156.122(c), a health 

plan providing EHB must have certain 

exception processes in place that allow 

an enrollee, the enrollee’s designee, or 

the enrollee’s prescribing physician (or 

other prescriber) to request and gain 

access to clinically appropriate drugs 

not otherwise covered by the health 

plan, and when an exception requested 

under one of these processes is granted, 

the plan must treat the excepted drug as 

EHB for all purposes, including accrual 

to the annual limitation on cost-sharing. 

Proposed § 156.122(c)(1) sets forth the 

standard exception process. Under this 

process, we are proposing that a health 

plan have a process for an enrollee, the 

enrollee’s designee, or the enrollee’s 

prescribing physician (or other 

prescriber) to request a standard review 

of a decision for a drug is not covered 

by the plan. We propose that the health 

plan must make its coverage 

determination on a standard exception 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70721 

43 2014 Letter to Issuers on Federally-facilitated 

and State Partnership Exchanges. http://www.cms.

gov/CCIIO/Resources/Regulations-and-Guidance/

Downloads/2014_letter_to_issuers_04052013.pdf. 

request and notify the enrollee or the 

enrollee’s designee and the prescribing 

physician (or other prescriber, as 

appropriate) of its coverage 

determination no later than 72 hours 

after it receives the request. We are 

proposing to require a health plan that 

grants an exception based on the 

standard review process to provide 

coverage of the non-formulary drug for 

the duration of the prescription, 

including refills and are clarifying that 

in such a case the excepted drug would 

be considered EHB for all purposes, 

including for purposes of counting 

towards the annual limitation on cost 

sharing. As stated in the EHB Rule (78 

FR 12845), plans are permitted to go 

beyond the number of drugs offered by 

the benchmark without exceeding EHB. 

Therefore, if the plan is covering drugs 

beyond the number of drugs covered by 

the benchmark, all of these drugs are 

EHB and must count towards the annual 

limitation on cost sharing. 

The expedited exception process 

currently appears in our regulations at 

§ 156.122(c)(1), and we are proposing to 

move that section to a new 

§ 156.122(c)(2) and to replace ‘‘Such 

procedures must include’’ with ‘‘A 

health plan must have’’ in current 

paragraph (c)(1) (proposed as a new 

paragraph (c)(2)(i)). 

In § 156.122(c)(3) we propose that if 

the health plan denies an exception 

request for a non-formulary drug, the 

issuer must have process for an enrollee, 

the enrollee’s designee, or the enrollee’s 

prescribing physician (or other 

prescriber, as appropriate) to request 

that an independent review organization 

review the exception request and the 

denial of that request by the plan. For 

this external exception review, we 

propose to apply the same timing that 

applied to the initial review. Thus, if the 

enrollee requested the drug under the 

proposed standard process and the 

request was denied, then the 

independent review organization would 

have to make its determination and the 

health plan would have to notify the 

enrollee or enrollee’s designee and the 

prescribing physician (or other 

prescriber, as appropriate) no later than 

72 hours after the time it receives the 

external exception review request. 

Likewise, if the initial exception request 

is for an expedited review and that 

request is denied by the plan, then the 

independent review organization must 

make its coverage determination and 

provide appropriate notification no later 

than 24 hours after the time it receives 

the external exception review request. 

We also propose that the independent 

review organization would have to be 

accredited by a nationally recognized 

private accrediting organization and the 

issuer could use the same independent 

review organization for the external 

review for the drug exception process 

that the plan may contract with under 

the final external review decision under 

§ 147.136. We seek comment on this 

proposal, including whether permitting 

issuers to use the same independent 

review organization that it may use to 

conduct external reviews under 

§ 147.136 would ensure consumers 

access to an independent review while 

minimizing the burden on States, plans, 

and issuers. 

As discussed in the 2015 Market 

Standards Rule, we received comments 

from stakeholders supporting these 

types of requirements for the exception 

process under § 156.122(c) and these 

parameters reflect our previous 

guidance on § 156.122(c) under 

Appendix C of the 2014 Letter to Issuers 

on Federally-facilitated and State 

Partnership Exchanges (2014 Letter to 

Issuers).43 We solicit comments on all of 

the proposed requirements, and whether 

any additional standards are needed for 

the exception process. Lastly, we are 

also proposing to apply the revised 

§ 156.122(c) to the 2016 plan year, and 

solicit comments on this proposed 

timing. 

Under § 156.122(d), we propose 

adding a requirement to the EHB 

prescription drug benefit that a health 

plan must publish an up-to-date, 

accurate, and complete list of all 

covered drugs on its formulary drug list, 

including any tiering structure that it 

has adopted and any restrictions on the 

manner in which a drug can be 

obtained, in a manner that is easily 

accessible to plan enrollees, prospective 

enrollees, the State, the Exchange, HHS, 

OPM, and the general public. We also 

solicit comment on whether the 

formulary tiering information should 

include cost sharing information, such 

as the enrollee’s applicable pharmacy 

deductible (for example, $100), 

copayment (for example, $20), or cost 

sharing percentage for the enrollee (for 

example, 20 percent). 

We are proposing that a formulary 

drug list is easily accessible when the 

general public is able to view the 

formulary drug list on the plan’s public 

Web site through a clearly identifiable 

link or tab and without creating or 

accessing an account or entering a 

policy number. The general public 

should be able to easily discern which 

formulary drug list applies to which 

plan if the issuer maintains multiple 

formularies, and the plan associated 

with each formulary drug list should be 

clearly identified on the plan’s Web site. 

We are proposing this requirement to 

better ensure transparency of the EHB 

prescription drug benefit and to help 

consumers make more informed choices 

about their health care coverage. 

As a result of this proposed 

requirement, we would expect the 

issuers’ formulary drug list URL link to 

be up-to-date and we interpret up-todate to mean that the formulary drug list 

URL must accurately list all of the 

health plan’s covered drugs at that time. 

We solicit comments on this timing. 

Also, the formulary drug list URL link 

under this section should be the same 

direct formulary drug list URL link for 

obtaining information on prescription 

drug coverage in the Summary of 

Benefits and Coverage, in accordance 

with § 147.200(a)(2)(i)(K). We propose 

that this requirement would be effective 

beginning with the 2016 plan year. We 

solicit comments on these proposed 

requirements, including whether we 

should require that additional types of 

information be included in the 

formulary drug list. 

As part of this proposed requirement 

that issuers’ formulary drug list must be 

made available to the general public, we 

are also considering requiring issuers to 

make this information publicly available 

on their Web sites in a machinereadable file and format specified by 

HHS. The purpose of establishing 

machine-readable files with the 

formulary drug list data would be to 

provide the opportunity for third parties 

to create resources that aggregate 

information on different plans. We 

believe this option would increase 

transparency by allowing software 

developers to access this information 

and create innovative and informative 

tools to help enrollees better understand 

plans’ formulary drug lists. As an 

alternative, we are also considering 

whether the formulary drug list 

information could be submitted to HHS 

though an HHS-designed standardized 

template, but we recognize that there 

may be challenges with keeping this 

type of template information updated. 

Thus, we specifically solicit comments 

on these options, including the 

technical requirements for developing a 

machine-readable file and format for a 

formulary drug list, as well as other 

technical considerations, such as 

processes and considerations that 

should be taken into account for the 

updating of this information under 

either of the options being considered. 

Currently, issuers are permitted to 

elect the method for providing covered 

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70722 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

44FDA requires a Risk Evaluation and Mitigation 

Strategies (REMS) for certain drugs to ensure that 

the benefits of a drug or biological product 

outweigh its risks. The following is FDA’s list of 

currently approved REMS at: http://www.fda.gov/

drugs/drugsafety/postmarketdrugsafetyinformation

forpatientsandproviders/ucm111350.htm. 

drugs to enrollees, and may use a mail 

order pharmacy to do so. While this 

generally is more cost-effective and 

more convenient for enrollees than 

requiring the enrollee to visit a retail 

pharmacy to obtain prescription drugs, 

there are circumstances under which 

obtaining drugs via mail order may not 

be viable. For example, obtaining 

prescription drugs through mail order 

may not be a viable option when an 

individual does not have a stable living 

environment and does not have a 

permanent address. In those cases, 

individuals may not always have the 

ability to keep a mail order pharmacy 

delivery confidential. There are also 

cases in which a drug needs to be 

provided immediately (for example, 

antibiotics or pain relievers). In such 

cases, we do not believe that making 

drugs available only by mail order 

constitutes fulfilling the obligation 

under 1302(b)(1)(F) of the Affordable 

Care Act to provide prescription drug 

coverage as part of EHB. We also believe 

that making drugs available only by 

mail order would discourage enrollment 

by, and thus discriminate against, 

transient individuals and certain 

individuals who have conditions that 

they wish to keep confidential. 

Accordingly, under § 156.122(e), we 

are proposing to add new requirements 

to the EHB prescription drug definition 

to require that enrollees be provided 

with the option to access their 

prescription drug benefit through retail 

(brick-and-mortar or non-mail order) 

pharmacies. If finalized, this 

requirement would mean that a health 

plan that is required to cover the EHB 

package cannot have a mail order only 

prescription drug benefit. This proposed 

requirement would still allow a health 

plan to charge a higher cost-sharing 

amount when obtaining the drug at an 

in-network retail pharmacy than he or 

she would pay for obtaining the same 

covered drug at a mail-order pharmacy. 

However, as a part of these 

requirements, we propose to clarify that 

this additional cost sharing for the 

covered drug would count towards the 

plan’s annual limitation on cost sharing 

under § 156.130 and would need to be 

taken into account when calculating the 

actuarial value of the health plan under 

§ 156.135. Additionally, issuers will still 

retain the flexibility under this 

proposed policy to charge a lower cost 

sharing amount when obtaining the 

drug at an in-network retail pharmacy 

too. While this proposal requires 

coverage of a drug at an in-network 

retail pharmacy, for plans that do not 

have a network, the enrollee should be 

able to go to any pharmacy to access 

their prescription drug benefit and those 

plans would, therefore, comply this 

proposed standard. 

We also recognize as part of this 

proposed requirement that certain drugs 

have limited access requirements and 

cannot always be accessed through innetwork retail pharmacies. For this 

reason, we are proposing that the health 

plan may restrict access to a particular 

drug when: (1) The FDA has restricted 

distribution of the drug to certain 

facilities or practitioners (including 

physicians); or (2) appropriate 

dispensing of the drug requires 

extraordinary special handling, provider 

coordination, or patient education that 

cannot be met by a retail pharmacy. For 

instance, certain drugs have a Risk 

Evaluation and Mitigation Strategies 

(REMS) that include Elements to Assure 

Safe Use that may require that 

pharmacies, practitioners or healthcare 

settings that dispense the drug to be 

specially certified and can limit access 

to the drugs to certain health care 

settings.44 We propose that additional 

education or counseling alone would 

not qualify a drug to be restricted to 

limited distribution to a non-retail 

pharmacy within the overall pharmacy 

network. If the health plan finds it 

necessary to restrict access to a drug for 

either of the two reasons listed above, it 

must indicate this restricted access on 

the formulary drug list that we are 

proposing plans must make publicly 

available under § 156.122(d). 

We are soliciting comments on these 

proposed requirements, including 

whether additional standards should be 

adopted to ensure enrollee access to the 

EHB prescription drug benefit, or 

whether additional exemptions to 

accessing drugs at in-network retail 

pharmacies should be permitted. We are 

proposing these requirements as marketwide standards to ensure the uniformity 

of the EHB prescription drug benefit and 

proposing to implement these 

requirements beginning with the 2017 

plan year. However, we are soliciting 

comments on this timing and whether it 

should be implemented in 2016. 

In addition to the proposed provisions 

above, we are also aware that new 

enrollees in plans that are required to 

cover EHB may be unfamiliar with what 

is covered on their new plan’s formulary 

drug list, and how to use the plan’s 

prescription drug exceptions process. 

Also, some enrollees whose drugs are 

covered by the plan’s formulary may 

need to obtain prior authorization or go 

through step therapy in order to have 

coverage for the drug. Since new 

enrollees may need more immediate 

coverage for drugs that they have been 

prescribed and are currently taking, we 

urge issuers to temporarily cover nonformulary drugs (including drugs that 

are on an issuer’s formulary but require 

prior authorization or step therapy) as if 

they were on formulary (or without 

imposing prior authorization or step 

therapy requirements) during the first 

30 days of coverage. We encourage 

plans to adopt this policy to 

accommodate the immediate needs of 

enrollees, while allowing the enrollee 

sufficient time to go through the prior 

authorization or drug exception 

processes. We are considering whether 

requirements may be needed in this 

area. 

e. Prohibition on Discrimination 

(§ 156.125) 

Section 1302(b)(4) of the Affordable 

Care Act directs the Secretary to address 

certain standards in defining EHB, 

including elements related to balance, 

discrimination, the needs of diverse 

sections of the population, and denial of 

benefits. We have interpreted this 

provision as a prohibition on 

discrimination by issuers providing 

EHB. Within § 156.125, which 

implements these provisions, we 

finalized in the EHB Rule that an issuer 

does not provide EHB if its benefit 

design, or the implementation of its 

benefit design, discriminates based on 

an individual’s age, expected length of 

life, present or predicted disability, 

degree of medical dependency, quality 

of life, or other health conditions. 

Since we finalized § 156.125, we have 

become aware of benefit designs that we 

believe would discourage enrollment by 

individuals based on age or based on 

health conditions, in effect making 

those plan designs discriminatory, thus 

violating this prohibition. Some issuers 

have maintained limits and exclusions 

that were included in the State EHBbenchmark plan. As we have previously 

stated in guidance, EHB-benchmark 

plans may not reflect all requirements 

effective for plan years starting on or 

after January 1, 2014. Therefore, when 

designing plans that are substantially 

equal to the EHB-benchmark plan, 

issuers should design plan benefits, 

including coverage and limitations, to 

comply with requirements and 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70723 

45 Guide to Reviewing EHB Benchmark Plans— 

http://www.cms.gov/CCIIO/Resources/DataResources/ehb.html#review benchmarks. 

46Letter to Issuers on Federally-facilitated and 

State Partnership Exchanges, April 5, 2013, page 15 

and 2015 Letter to Issuers in the Federallyfacilitated Marketplaces, March 14, 2014, page 29. 

47http://www.cms.gov/CCIIO/Resources/FactSheets-and-FAQs/aca_implementation_

faqs18.html. (January 8, 2014). 

limitations that apply to plans 

beginning in 2014.45

We caution both issuers and States 

that age limits are discriminatory when 

applied to services that have been found 

clinically effective at all ages. For 

example, it would be arbitrary to limit 

a hearing aid to enrollees who are 6 

years of age and younger since there 

may be some older enrollees for whom 

a hearing aid is medically necessary. 

Although we do not enumerate which 

benefits fall into each statutory EHB 

category, issuers should not attempt to 

circumvent coverage of medically 

necessary benefits by labeling the 

benefit as a ‘‘pediatric service’’, thereby 

excluding adults. 

We also caution issuers to avoid 

discouraging enrollment of individuals 

with chronic health needs. For example, 

if an issuer refuses to cover a singletablet drug regimen or extended-release 

product that is customarily prescribed 

and is just as effective as a multi-tablet 

regimen, we believe that, absent an 

appropriate reason for such refusal, 

such a plan design effectively 

discriminates against, or discourages 

enrollment by, individuals who would 

benefit from such innovative 

therapeutic options. As another 

example, if an issuer places most or all 

drugs that treat a specific condition on 

the highest cost tiers, we believe that 

such plan designs effectively 

discriminate against, or discourage 

enrollment by, individuals who have 

those chronic conditions. 

As we indicated in the 2014 Letter to 

Issuers, we will notify an issuer when 

we see an indication of a reduction in 

the generosity of a benefit in some 

manner for subsets of individuals that is 

not based on clinically indicated, 

reasonable medical management 

practices.46 We conduct this 

examination whenever an EHB plan 

reduces benefits for a particular group. 

Issuers are expected to impose 

limitations and exclusions based on 

clinical guidelines and medical 

evidence, and are expected to use 

reasonable medical management. Issuers 

may be asked to submit justification 

with supporting document to HHS or 

the State explaining how the plan 

design is not discriminatory. 

Other nondiscrimination and civil 

rights laws may apply, including the 

Americans with Disabilities Act, section 

1557 of the Affordable Care Act, Title VI 

of the Civil Rights Act of 1964, the Age 

Discrimination Act of 1975, section 504 

of the Rehabilitation Act of 1973 and 

State law. Compliance with § 156.125 is 

not determinative of compliance with 

any other applicable requirements and 

§ 156.125 does not apply to the 

Medicaid and CHIP programs, including 

EPSDT, and Alternative Benefit Plans. 

We also note that all nongrandfathered health insurance plans in 

the individual and small group market 

that are subject to the EHB requirements 

are also subject to the guaranteed 

renewability requirements under 

§ 147.106, which allow issuers to make 

uniform modifications to a product only 

at the time of coverage renewal. For 

example, an EHB plan may not change 

cost sharing for a particular benefit midyear. 

f. Cost-Sharing Requirements (§ 156.130) 

We propose to amend § 156.130 to 

clarify how the annual limitation on 

cost sharing applies to plans that 

operate on a non-calendar year, and to 

make a technical correction to the 

special rule for network plans. First, we 

propose to add a new § 156.130(b), 

which would provide that non-calendar 

year plans that are subject to the annual 

limitation on cost sharing in section 

1302(c)(1) must adhere to the annual 

limitation that is specific to the calendar 

year in which the plan begins. That 

annual limitation amount would serve 

as the maximum for the entire plan year. 

We propose this requirement to clarify 

that non-calendar plans subject to 

§ 156.130 are not permitted to reset the 

plan’s annual limitation on cost sharing 

at the end of the calendar year when the 

end of the calendar year is not the end 

of the plan year. The purpose of this 

proposed change is to ensure that the 

enrollee should only be required to 

accumulate cost sharing that applies to 

one annual limit per plan year. We 

believe that this requirement ensures an 

important consumer protection and we 

solicit comments on this proposal. 

Under section 1302(c)(3) of the 

Affordable Care Act, the term ‘‘costsharing’’ includes deductibles, 

coinsurance, copayments, or similar 

charges, and any other expenditure 

required of an individual that is a 

qualified medical expense (within the 

meaning of section 223(d)(2) of the 

Internal Revenue Code of 1986) for EHB 

covered under the plan. Expenditures 

that meet this definition of cost sharing 

must, under section 1302(c) of the 

Affordable Care Act, count toward the 

annual limitation on cost sharing 

incurred under a health plan that is 

required to cover EHB. The term ‘‘costsharing’’ does not include premiums, 

balance billing amounts for nonnetwork providers, or spending for noncovered services. This definition was 

codified in § 155.20. 

In this proposed rule, we propose to 

make a technical correction to the text 

of § 156.130(c) on the special rule for 

network plans to replace ‘‘shall not’’ 

with ‘‘is not required to.’’ This 

correction is in accordance with the 

Affordable Care Act Implementation 

FAQs (Set 18) that was prepared jointly 

by the Departments of Labor, Health and 

Human Services (HHS), and the 

Treasury.47 This proposed amendment 

is to clarify that issuers have the option 

to count the cost sharing for out-ofnetwork services towards the annual 

limitation on cost sharing, but are not 

required to do so. This out-of-network 

cost sharing would not count toward the 

calculation of actuarial value under 

§ 156.135(b)(4) or meeting a given level 

of coverage under § 156.140. 

In addition to the above proposed 

changes to § 156.130, we also propose 

clarifying that the annual limitation on 

cost sharing for self-only coverage 

applies to all individuals regardless of 

whether the individual is covered by a 

self-only plan or is covered by a plan 

that is other than self-only. In both of 

these cases, an individual’s cost sharing 

for the EHB may never exceed the selfonly annual limitation on cost sharing. 

For example, under the proposed 2016 

annual limitation on cost sharing, if an 

other than self-only plan has an annual 

limitation on cost sharing of $10,000 

and one individual in the family plan 

incurs $20,000 in expenses from a 

hospital stay, that particular individual 

would only be responsible for paying 

the cost sharing related to the costs of 

the hospital stay covered as EHB up to 

the annual limit on cost sharing for selfonly coverage that is proposed to be 

$6,850 for 2016. However, for a plan 

with other than self-only coverage, as 

long as the plan applies an annual 

limitation on cost sharing that is at or 

below the annual limitation for self-only 

coverage (proposed to be $6,850 for 

2016) for each individual in the plan 

and at or below the annual limitation for 

other than self-only coverage (which is 

proposed to be $13,700 for 2016), the 

issuer has flexibility on how to apply 

the plan’s annual limitation on cost 

sharing between the individuals in the 

plan. 

We seek comments on these 

requirements and clarifications. We also 

seek comments on whether other 

requirements and clarifications are 

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70724 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

needed regarding the annual limitation 

on cost sharing and its application. 

g. Minimum Value (§ 156.145) 

Section 1401(a) of the Affordable Care 

Act added a new section 36B to the 

Code, providing a premium tax credit 

for certain individuals with household 

incomes between 100 percent and 400 

percent of the Federal poverty level who 

enroll in, or who have one or more 

family members enroll in an individual 

market QHP through an Exchange, and 

who are not otherwise eligible for MEC. 

An employer-sponsored plan is MEC, 

but for purposes of the premium tax 

credit under Code section 

36B(c)(2)(C)(ii) an employee is generally 

treated as not eligible for MEC under an 

employer-sponsored plan unless the 

plan is affordable and provides 

minimum value (MV). An employersponsored plan provides MV only if the 

plan’s share of the total allowed costs of 

benefits provided under the plan is 

greater than or equal to 60 percent of the 

costs. An employee who is eligible for 

coverage under an employer-sponsored 

plan that is both affordable and provides 

MV to the employee may not a receive 

premium tax credit under Code section 

36B for coverage in a qualified health 

plan. If the employer coverage does not 

provide MV, the employee may be 

entitled to a premium tax credit even if 

the coverage is affordable. 

Section 1513 of the Affordable Care 

Act added a new section 4980H to the 

Code providing for shared responsibility 

for employers regarding health coverage. 

An applicable large employer that does 

not offer coverage that is affordable and 

provides MV may be liable for an 

employer shared responsibility payment 

under section 4980H of the Code if one 

or more of its full-time employees 

receives a premium tax credit. 

The MV standard of 60 percent of the 

total allowed costs of benefits provided 

under the plan is equivalent to the 

plan’s share of total allowed costs 

required for a bronze level qualified 

health plan offered on an Exchange. 

Section 1302(d)(2)(C) of the Affordable 

Care Act provides that regulations 

promulgated by the Secretary of HHS 

under section 1302(d)(2), addressing 

actuarial value, apply ‘‘in determining 

under this title, the Public Health 

Service Act, and the Internal Revenue 

Code . . . the percentage of the total 

allowed costs of benefits provided under 

a group health plan or health insurance 

coverage that are provided by such plan 

or coverage.’’ (Emphasis added.) 

Accordingly, HHS regulations under 

section 1302(d) implementing actuarial 

value requirements, which an insurer 

offering essential health benefits (EHB) 

must meet in order for a nongrandfathered individual market or 

small group health insurance plan to be 

considered a bronze plan under section 

1302(d)(1)(3) of the Affordable Care Act, 

also form the basis for determining the 

percentage of the total allowed costs of 

benefits provided for purposes of 

whether the value of coverage meets the 

MV standard under Code section 

36B(c)(2)(C)(ii). 

HHS published final regulations 

under section 1302(d)(2) on February 

25, 2013 (78 FR 12834). The regulations 

at § 156.20 define the percentage of the 

total allowed costs of benefits as (1) the 

anticipated covered medical spending 

for EHB coverage paid by a health plan 

for a standard population, (2) computed 

in accordance with the plan’s cost 

sharing, and (3) divided by the total 

anticipated allowed charges for EHB 

coverage provided to the standard 

population. HHS regulations at 

§ 156.145(b)(2) apply this definition in 

the context of MV by taking into 

account benefits a plan provides that are 

included in any one of the state EHB 

benchmarks. 

The IRS and Treasury Department 

published proposed regulations on May 

3, 2013 (78 FR 25909), applying the 

HHS regulations in defining MV for 

employer-sponsored plans. The 

proposed regulations provide that the 

MV percentage is determined by 

dividing a plan’s anticipated medical 

spending (based on the plan’s costsharing) for plan benefits that are EHB 

covered under a particular EHB 

benchmark plan for the MV standard 

population by the total allowed charges 

for EHB coverage for the standard 

population and converting the result to 

a percentage. Proposed 26 CFR 1.36B– 

6(c). Taxpayers may apply the proposed 

regulations for taxable years ending 

before January 1, 2015. 

The final HHS regulations and 

proposed Treasury regulations allow 

plans to determine the MV percentage 

by using the MV Calculator published 

by HHS. It has come to our attention 

that certain group health plan designs 

that provide no coverage of inpatient 

hospital services are being promoted, 

and that representations are being made, 

based on the MV Calculator, that these 

plan designs cover 60 percent of the 

total allowed costs of benefits provided 

under the plans and thus provide MV. 

We understand that these designs have 

been promoted as a way of both 

minimizing the cost of the plan to the 

employer (a consequence not only of 

excluding inpatient hospitalization 

benefits but also of making an offer of 

coverage that a substantial percentage of 

employees will not accept) and avoiding 

potential liability for employer shared 

responsibility payments. Employers 

adopting these plan designs seek, by 

offering coverage that is affordable to 

the employee and that purports to 

provide MV, to deny their employees 

the ability to obtain a premium tax 

credit that could result in the employer 

becoming subject to a section 4980H 

employer shared responsibility 

payment. 

In Notice 2014–69 (2014–48 IRB, 

November 24, 2014), released on 

November 4, 2014, HHS and Treasury 

advised that regulations would be 

proposed providing that plans that fail 

to provide substantial coverage of 

inpatient hospital or physician services 

do not provide MV. Allowing these 

designs to be treated as providing MV 

not only would allow an employer to 

avoid the shared responsibility payment 

that the statute imposes when an 

employer does not offer its full-time 

employees adequate health coverage, 

but would adversely affect employees 

(particularly those with significant 

health risks) who understandably find 

this coverage unacceptable, by denying 

them access to a premium tax credit for 

individual coverage purchased through 

an Exchange. Plans that omit critical 

benefits used disproportionately by 

individuals in poor health will enroll far 

fewer of these individuals, effectively 

driving down employer costs at the 

expense of those who because of their 

individual health status are discouraged 

from enrolling. 

That the MV standard may be 

interpreted to require that employersponsored plans cover critical benefits 

is evident in the structure of the 

Affordable Care Act, the context in 

which the grant of the authority to the 

Secretary to prescribe regulations under 

section 1302 was enacted, and the 

policy underlying the legislation. 

Section 1302(b) authorizes the Secretary 

of HHS to define the EHB to be offered 

by individual market and small group 

health insurance plans, provided that 

this definition ‘‘include at least’’ 10 

specified categories of benefits, and that 

the benefits be ‘‘equal to the scope of 

benefits provided under a typical 

employer plan.’’ To ‘‘inform this 

determination’’ as to the scope of a 

typical employer plan, section 

1302(b)(2)(A) provides that ‘‘the 

Secretary of Labor shall conduct a 

survey of employer sponsored coverage 

to determine the benefits typically 

covered by employers, including 

multiemployer plans, and provide a 

report on such survey to the Secretary 

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48See Department of Labor. Special Report: 

Selected Medical Benefits: A Report from the 

Department of Labor to the Department of Health 

and Human Services. http://www.bls.gov/ncs/ebs/

sp/selmedbensreport.pdf. 

49Affordable Care Act Implementation Set 15, 

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

Fact-Sheets-and-FAQs/aca_implementation_

faqs15.html. 

50The FAQ also states that because section 2715A 

of the PHS Act simply extends the transparency 

provisions set forth in section 1311(e)(3) of the 

Continued 

[of HHS].’’ 48 (Emphasis added.) These 

provisions suggest that, while detailed 

requirements for EHB in the individual 

and small group health insurance 

markets were deemed necessary, the 

benefits covered by typical employer 

plans providing primary coverage at the 

time the Affordable Care Act was 

enacted were seen as sufficient to satisfy 

the Act’s objectives with respect to the 

breadth of benefits needed for health 

plan coverage and, in fact, to serve as 

the basis for determining EHB. They 

also suggest that any meaningful 

standard of minimum coverage may 

require providing certain critical 

benefits. 

Employer-sponsored plans in the 

large group market and self-insured 

employers continue to have flexibility 

in designing their plans. They are not 

required to cover all EHB. Providing 

flexibility, however, does not mean that 

these plans should not be subject to 

minimum requirements. A plan that 

excludes substantial coverage for 

inpatient hospital and physician 

services is not a health plan in any 

meaningful sense and is contrary to the 

purpose of the MV requirement to 

ensure that an employer-sponsored 

plan, while not required to cover all 

EHB, nonetheless must offer coverage 

with minimum value at least roughly 

comparable to that of a bronze plan 

offered on an Exchange. 

For these reasons, the Secretary has 

concluded that the provisions of section 

1302(d)(2) of the Affordable Care Act— 

requiring that the regulations for 

determining the percentage of the total 

allowed costs of benefits that apply to 

plans that must cover all EHB also be 

applied as a basis for determining 

minimum value—reflect a statutory 

design to provide basic minimum 

standards for health benefits coverage 

through the MV requirement, without 

requiring large group market plans and 

self-insured plans to meet all EHB 

standards. Given the scope of benefits 

covered by typical employer plans, the 

MV requirement is properly viewed as 

a means of ensuring that employersponsored plans satisfy basic minimum 

standards while also accommodating 

flexibility in the design of those plans. 

Employers have been able to claim 

that plans without coverage of inpatient 

hospital services provide MV under the 

current quantitative MV test by 

designing a benefit package that, based 

on standardized actuarial assumptions 

used in the MV calculator, offsets the 

absence of actuarial value derived from 

spending on inpatient hospital coverage 

with increased spending on other 

benefits. Accordingly, some plan 

designs may pass the current 

quantitative test without offering a 

critical benefit universally understood 

to be included in any minimally 

acceptable employer health plan 

coverage, and which the Department of 

Labor study determined was included in 

all employer plans it surveyed. 

As noted previously, we have 

concluded that the quantitative test for 

MV is not exclusive. Accordingly, we 

propose to amend § 156.145 to require 

that, in order to provide minimum 

value, an employer-sponsored plan not 

only must meet the quantitative 

standard of the actuarial value of 

benefits, but also must provide a benefit 

package that meets a minimum standard 

of benefits. Specifically, we propose to 

revise § 156.145 to provide that, in order 

to satisfy MV, an employer plan must 

provide substantial coverage of both 

inpatient hospital services and 

physician services. 

We seek comment on ways to 

determine whether a plan has offered 

‘‘substantial’’ benefits for the purposes 

of this proposal. 

We are not proposing to require that 

large employer or self-insured employer 

group health plans provide all EHB as 

defined under section 1302 of the 

Affordable Care Act. Rather, we are 

proposing only to require that, in order 

to provide MV, employer-sponsored 

plans provide substantial coverage of 

the two types of benefits that we believe 

were envisioned for health plan 

coverage meeting the MV standard. We 

have concluded that plans that omit 

these types of coverage fail to meet 

universally accepted minimum 

standards of value expected from, and 

inherent in the nature of, any 

arrangement that can reasonably be 

called a health plan intended to provide 

the primary health coverage for 

employees. 

Consistent with Notice 2014–69, we 

propose that these changes to our 

regulations on MV will apply to 

employer-sponsored plans, including 

plans that are in the middle of a plan 

year, immediately on the effective date 

of the final regulations. However, 

because some employers adopted plans 

prior to publication of Notice 2014–69, 

we propose that the final regulations not 

apply before the end of the plan year (as 

in effect under the terms of the plan on 

November 3, 2014) to plans that before 

November 4, 2014, entered into a 

binding written commitment to adopt, 

or began enrolling employees into, the 

plan, so long as that plan year begins no 

later than March 1, 2015. For these 

purposes, a binding written 

commitment exists when an employer is 

contractually required to pay for an 

arrangement, and a plan begins 

enrolling employees when it begins 

accepting employee elections to 

participate in the plan. The Department 

of the Treasury and the IRS are expected 

to publish proposed regulations making 

clear that this delayed applicability date 

applies solely for purposes of Code 

section 4980H. At no time will any 

employee be required to treat a plan that 

fails to provide substantial coverage of 

inpatient hospital services or physician 

services as providing MV for purposes 

of eligibility for premium tax credit 

under Code section 36B. We seek 

comment on this proposed applicability 

date. 

3. Qualified Health Plan Minimum 

Certification Standards 

a. QHP Issuer Participation Standards 

(§ 156.200) 

We propose to revise § 156.200(b)(7), 

to require that a QHP issuer comply 

with the standards under 45 CFR part 

153 and not just the standards related to 

the risk adjustment program. This 

proposed revision would clarify that a 

QHP issuer maintains responsibility for 

its compliance and, under § 156.340, the 

compliance of any of its delegated or 

downstream entities with the standards 

set forth in 45 CFR part 153, not just 

those specifically pertaining to risk 

adjustment. We seek comment on this 

proposal. 

b. Transparency in Coverage (§ 156.220) 

The transparency in coverage 

standards established under section 

1311(e)(3) of the Affordable Care Act, as 

implemented at § 155.1040(a) and 

§ 156.220, require health insurance 

issuers that offer a QHP in accordance 

with a certification from an Exchange to 

provide specified information to HHS, 

the Exchange, and the State insurance 

commissioner and to make this 

information available to the public in 

‘‘plain language.’’ In a frequently asked 

question dated April 29, 2013,49 HHS 

clarified that, to comply with section 

1311(e)(3), issuers offering QHPs 

certified by an Exchange would be 

required to begin submitting this 

information only after QHPs have been 

certified for one benefit year.50 Because 

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70726 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

Affordable Care Act to group health plans and 

health insurance issuers offering group and 

individual health insurance coverage, the 

Departments clarified that the reporting 

requirements under section 2715A of the PHS Act 

will become applicable to group health plans and 

health insurance issuers offering group and 

individual health insurance coverage no sooner 

than when the reporting requirements under section 

1311(e)(3) of the Affordable Care Act become 

applicable. Nothing in these proposed regulations 

would apply any transparency reporting 

requirements related to section 2715A of the PHS 

Act, incorporated into section 715(a)(1) of ERISA 

and section 9815(a)(1) of the Code. 

51 2015 Letter to Issuers in the Federallyfacilitated Marketplaces, March 14, 2014, available 

at: http://www.cms.gov/CCIIO/Resources/

Regulations-and-Guidance/Downloads/2015-finalissuer-letter-3-14-2014.pdf. 

a full year of claims data will be 

available, we anticipate the collection 

and public display of the required 

information listed in § 156.220 from 

QHP issuers offering coverage through 

Exchanges beginning in 2016. We seek 

comment on the form and manner of 

data collection that will be most useful 

to consumers selecting a QHP in an 

Exchange. Specifically, we seek 

comment on how HHS should further 

specify, in guidance, the data elements 

to be collected, the format that should 

be used, and the timeframe or schedule 

for submission. We also seek comment 

on mechanisms that issuers could use to 

submit the information to HHS and how 

to minimize duplication with 

information that issuers must already 

submit to HHS, States or other entities 

(for example, accreditation 

organizations). We seek comment on the 

manner in which HHS, the Exchanges 

and QHPs should publicly display the 

collected information. We also request 

comment related to whether State-based 

Exchanges should display the same 

information and in the same format and 

manner as in an FFE. 

c. Network Adequacy Standards 

(§ 156.230) 

In § 156.230, we established the 

minimum network adequacy criteria 

that health and dental plans must meet 

to be certified as QHPs, under the 

Secretary’s authority in section 

1311(c)(1)(B) of the Affordable Care Act. 

We propose modifying § 156.230(a) to 

specify that this section only applies to 

QHPs that use a provider network and 

that a provider network includes only 

providers that are contracted as innetwork. This means that the general 

availability of out-of-network providers 

will not be counted for purposes of 

meeting network adequacy 

requirements. 

We believe that networks that provide 

sufficient access to benefits are a 

priority for issuers and consumers. HHS 

continues to take great interest in 

ensuring strong network access, 

particularly for QHPs that must meet the 

standards in § 156.230. HHS is aware 

that the NAIC has formed a workgroup 

that is drafting a model act relative to 

network adequacy and will await the 

results of this workgroup before 

proposing significant changes to 

network adequacy policy. For 2016, 

HHS expects to continue the reasonable 

access standard adopted in the 2015 

Letter to Issuers in the Federallyfacilitated Marketplaces (2015 Letter to 

Issuers) 51 and assess the provider 

networks information submitted as part 

of the QHP certification process. We 

urge State-based Exchanges to employ 

the same standard when examining 

network adequacy. 

In addition to the proposed provisions 

above, we are also cognizant that new 

enrollees in QHPs may need a transition 

period to switch to a provider that is innetwork in their new plan. We 

encourage QHP issuers that use a 

network of providers to offer new 

enrollees transitional care for an 

ongoing course of treatment. We suggest 

that this begin with the effective date of 

coverage of a new enrollee and last for 

at least 29 days thereafter (for a 

minimum of 30 days). These benefits 

would extend to health care services 

furnished by any provider to the new 

enrollee, regardless of whether the 

provider is in the plan’s network, as 

long as the enrollee received health 

services from that provider under an 

ongoing course of treatment in the 90 

days prior to the effective date of 

coverage. Because different plans may 

have different provider networks, when 

an individual enrolls in a new health 

plan, he or she may be undergoing a 

course of treatment with a provider that 

is not in the new issuer’s provider 

network. In such a case, it may take time 

for the new enrollee to select a new innetwork provider and to meet with the 

new provider to ensure that there is no 

disruption in treatment. We encourage 

issuers to adopt this policy to 

accommodate the immediate needs of 

enrollees, while allowing the enrollee 

sufficient time to go through the process 

of selecting an in-network provider in 

their new plan. We are considering 

whether requirements may be needed in 

this area. 

Under § 156.230(b), we propose 

changing the current text to read as 

(b)(1) and adding (b)(2) in order to 

strengthen the provider directory 

requirement. Specifically, we propose 

that a QHP issuer must publish an upto-date, accurate, and complete provider 

directory, including information on 

which providers are accepting new 

patients, the provider’s location, contact 

information, specialty, medical group, 

and any institutional affiliations, in a 

manner that is easily accessible to plan 

enrollees, prospective enrollees, the 

State, the Exchange, HHS and OPM. As 

part of this requirement, we propose 

that a QHP issuer must update the 

directory information at least once a 

month, and that a provider directory 

will be considered easily accessible 

when the general public is able to view 

all of the current providers for a plan on 

the plan’s public Web site through a 

clearly identifiable link or tab without 

having to create or access an account or 

enter a policy number. The general 

public should be able to easily discern 

which providers participate in which 

plan(s) and provider network(s) if the 

health plan issuer maintains multiple 

provider networks and the plan(s) and 

provider network(s) associated with 

each provider should be clearly 

identified on the Web site. We seek 

comment on this proposal, including 

with respect to how often updating 

should occur. 

We also are considering requiring 

issuers to make this information 

publicly available on their Web sites in 

a machine-readable file and format 

specified by HHS. The purpose of 

establishing machine-readable files with 

this data would be to provide the 

opportunity for third parties to create 

resources that aggregate information on 

different plans. We believe this would 

increase transparency by allowing 

software developers to access this 

information and create innovative and 

informative tools to help enrollees better 

understand the availability of providers 

in a specific plan. As an alternative, we 

could also require that this information 

be submitted to HHS though an HHSdesigned standardized template, but we 

recognize that there may be challenges 

with keeping this type of template 

information updated. Thus, we 

specifically solicit comments on these 

options, including the technical 

requirements for developing a machinereadable file and format for a provider 

directory, as well as other technical 

considerations, such as processes and 

considerations that should be taken into 

account for the updating of this 

information under either of the options 

being considered. 

We are proposing these requirements 

to enhance transparency of QHP 

provider directories and to help 

consumers make more informed 

decisions about their health care 

coverage. We solicit comments on these 

proposed requirements, as well as with 

respect to how frequently provider data 

should be updated, and whether 

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52For more information on FQHC ‘‘Look-Alike’’ 

Clinics, see http://bphc.hrsa.gov/about/lookalike/

index.html and section 1861(a)(4) and section 

1905(l)(2)(B) of the Social Security Act. 

53For more information on Title X ‘‘Look-Alike’’ 

Clinics, see section 1927(c)(1)(D)(i)(IV) of the Social 

Security Act. 

additional types of information should 

be required to be included in the 

provider directory. 

We also seek comment on the 

feasibility and merits of incorporating 

information on physical accessibility for 

individuals with disabilities, including 

accessibility information regarding 

facilities and equipment, or other 

information that would be important to 

enrollees and potential enrollees, as a 

part of network adequacy standards in 

the future. 

d. Essential Community Providers 

(§ 156.235) 

At § 156.235, we propose to 

strengthen the essential community 

provider (ECP) standard in accordance 

with section 1311(c)(1)(C) of the 

Affordable Care Act, which requires that 

a QHP’s network include ECPs, where 

available, that serve predominantly lowincome and medically-underserved 

populations. As established in section 

1311(c)(1)(C) of the Affordable Care Act, 

ECPs include entities defined in section 

340B(a)(4) of the PHS Act and providers 

described in section 1927(c)(1)(D)(i)(IV) 

of the Social Security Act as set forth by 

section 211 of Pub. L. 111–8. 

Additionally, we propose that ECPs may 

include not-for-profit or State-owned 

providers that would be entities 

described in section 340B of the PHS 

Act but do not receive Federal funding 

under the relevant section of law, as 

these providers satisfy the same 340B 

requirements and therefore meet the 

definition of ECPs by virtue of the 

following description in section 

1311(c)(1)(C) of the Affordable Care 

Act—‘‘such as health care providers 

defined in section 340B(a)(4) of the PHS 

Act and providers in section 

1927(c)(1)(D)(i)(IV) of the Act.’’ For the 

same reasons described above, we 

propose that such providers also 

include not-for-profit or governmental 

family planning service sites that do not 

receive a grant under Title X of the PHS 

Act. Other providers that provide health 

care to populations residing in lowincome zip codes or Health Professional 

Shortage Areas could also be considered 

ECPs. We propose that the above 

proposals apply to plan years 2016 and 

thereafter. 

While commercial health insurance 

issuers may have a limited history in 

working with ECPs, ECPs provide 

important access points in low-income 

and medically underserved 

communities. Based on our experience 

with QHP certification for 2014 and 

2015, we have determined that 

specifying a quantitative standard will 

assist issuers in ensuring that, in future 

QHP certification years, they are 

providing sufficient consumer access to 

ECPs to satisfy the requirement in 

section 1311(c)(1)(C) of the Affordable 

Care Act. Therefore, we propose in new 

paragraph (a)(2)(i) of this section that, 

for QHP certification cycles beginning 

with the 2016 benefit year, a health plan 

seeking certification to be offered 

through an FFE must satisfy the general 

ECP standard described in paragraph 

(a)(1) of this section by demonstrating in 

its applications for QHP certification a 

sufficient percentage, as determined 

annually by HHS and specified in HHS 

guidance, of available ECPs in the plan’s 

service area have a contractual 

agreement to participate in the plan’s 

provider network. For purposes of this 

general ECP standard, multiple 

providers at a single location will count 

as a single ECP toward the issuer’s 

satisfaction of the proposed ECP 

participation standard to ensure a 

sufficient number and geographic 

distribution of ECPs as required under 

§ 156.235(a). Any update to the general 

ECP inclusion standards would be based 

on HHS’s post-certification assessments 

of the adequacy of ECP participation 

and geographic distribution of such 

providers and evidence of contractual 

negotiation efforts provided by issuers 

in the ECP supplemental response 

forms. 

In addition, we propose in paragraph 

(a)(2)(ii) of this section that, to satisfy 

the general ECP standard, the issuer of 

the plan seeking certification as a QHP 

in an FFE would be required to offer 

contracts for participation in the plan 

for which a certification application is 

being submitted to the following: (1) All 

available Indian health providers in the 

service area, applying the special terms 

and conditions necessitated by Federal 

law and regulations as referenced in the 

recommended model QHP addendum 

for Indian health providers developed 

by HHS; and (2) at least one ECP in each 

ECP category (see Table 10) in each 

county in the service area, where an 

ECP in that category is available and 

provides medical or dental services that 

are covered by the issuer plan type. We 

expect that issuers will offer contracts in 

good faith. A good faith contract should 

offer the same rates and contract 

provisions as other contracts accepted 

by or offered to similarly situated 

providers that are not ECPs. 

TABLE 10—ECP CATEGORIES AND TYPES IN FFES

Major ECP category ECP provider types 

Federally Qualified Health Centers (FQHC).FQHC and FQHC ‘‘Look-Alike’’ Clinics,52 Outpatient health programs/facilities operated by tribes, tribal organizations, programs operated by Urban Indian Organizations. 

Ryan White Providers ................ Ryan White HIV/AIDS Providers. 

Family Planning Providers ......... Title X Family Planning Clinics and Title X ‘‘Look-Alike’’ Family Planning Clinics.53

Indian Health Providers ............. Tribes, Tribal Organization and Urban Indian Organization Providers, Indian Health Service Facilities. 

Hospitals .................................... Disproportionate Share Hospital (DSH) and DSH-eligible Hospitals, Children’s Hospitals, Rural Referral Centers, Sole Community Hospitals, Free-standing Cancer Centers, Critical Access Hospitals. 

Other ECP Providers ................. STD Clinics, TB Clinics, Hemophilia Treatment Centers, Black Lung Clinics, Community Mental Health Centers, Rural Health Clinics and other entities that serve predominantly low-income, medically underserved individuals. 

We propose to add paragraph (a)(3) to 

this section to specify that if an issuer’s 

QHP certification application to the FFE 

does not satisfy the ECP standard 

described in paragraph (a)(2) of this 

section, the issuer must include as part 

of its application a narrative 

justification describing how the 

provider network(s) of the plans for 

which certification applications have 

been submitted provides an adequate 

level of service for individuals residing 

in low-income zip codes or Health 

Professional Shortage Areas within the 

plan’s service area and how the plan’s 

provider network will be strengthened 

toward satisfaction of the ECP standard 

prior to the start of the benefit year. The 

narrative justification should include 

the following: The number of contracts 

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54More information on the supplemental 

response can be found on the CCIIO Web site at: 

http://www.cms.gov/cciio/programs-and-initiatives/

health-insurance-marketplaces/qhp.html. 

offered to ECPs for the benefit year; the 

number of additional contracts the 

issuer expects to offer for the benefit 

year and the timeframe of planned 

negotiations; the names of the ECP 

hospitals FQHCs, Ryan White providers, 

family planning providers, Indian 

health providers, and other ECPs to 

which the issuer has offered contracts, 

but with whom an agreement has not 

yet been reached; and contingency plans 

for how the issuer’s provider network(s), 

as currently designed, will provide 

adequate care to enrollees who might 

otherwise be cared for by relevant ECPs. 

Through HHS’s post-certification 

assessments, HHS may examine an 

issuer’s progress toward satisfying the 

applicable ECP standard to ensure that 

the issuer continues to qualify for 

offering its plan on the Exchange, while 

OPM would retain this responsibility for 

issuers of multi-State plans, acting in 

coordination with HHS as may be 

appropriate. 

We propose to redesignate current 

paragraph (a)(3) as paragraph (a)(4), in 

which we clarify that nothing in the 

requirements under paragraphs (a)(1) 

through (a)(3) of this section requires 

any QHP to provide coverage for any 

specific medical procedure provided by 

the ECP. We also propose to redesignate 

current paragraph (a)(2) as paragraph 

(a)(5). 

We propose in paragraph (b)(1) that 

the alternate ECP standard described in 

§ 156.235(a)(5) will apply to issuers that 

offer QHPs in any Exchange. 

Additionally, for plans seeking QHP 

certification in FFEs, we propose that a 

QHP issuer described in paragraph (a)(5) 

of this section be determined to have a 

sufficient number and geographic 

distribution of employed or contracted 

providers by demonstrating in its QHP 

application that the number of its 

providers in the following locations 

meets a percentage specified in HHS 

guidance, of the number of available 

ECPs in the service area: (i) Located 

within a Health Professional Shortage 

Areas; or (ii) located within five-digit 

zip codes in which 30 percent or more 

of the population falls below 200 

percent of the FPL. For purposes of this 

alternate ECP standard, multiple 

providers at a single location will count 

as one ECP toward the available ECPs in 

the plan’s service area and toward the 

issuer’s satisfaction of the proposed ECP 

participation standard to ensure a 

sufficient number and geographic 

distribution of ECPs as required under 

§ 156.235(a). Any modification to the 

alternate ECP inclusion standard would 

be based on HHS’s post-certification 

assessments of the adequacy of ECP 

participation and geographic 

distribution of such providers to ensure 

reasonable and timely access to such 

ECPs for low-income, medically 

underserved individuals. 

Furthermore, we propose in new 

paragraph (b)(3) of this section that if a 

QHP certification application of a plan 

for the FFE does not satisfy the alternate 

ECP standard described in paragraph 

(b)(2) of this section, the issuer must 

include as part of its QHP application a 

narrative justification describing how 

the issuer’s provider network(s) 

provides an adequate level of service for 

low-income and medically underserved 

enrollees. When assessing whether an 

issuer has provided a satisfactory 

narrative justification under either the 

general or alternate ECP standard, as 

applicable, HHS will take into account 

factors and circumstances identified in 

the ECP Supplemental Response 

Form,54 along with an explanation of 

how the issuer will provide access for 

individuals residing in low-income zip 

codes or Health Professional Shortage 

Areas within the plan’s service area and 

how the plan’s provider network will be 

strengthened toward satisfaction of the 

ECP standard prior to the start of the 

benefit year. Additionally, justifications 

that include verification of contracts 

offered in good faith, that include terms 

that a willing, similarly-situated, nonECP provider would accept or has 

accepted, would be considered toward 

satisfaction of the ECP standard. 

We propose in paragraph (c) of this 

section to remove the language defining 

ECPs as meeting the criteria on the 

initial date of the regulation’s 

publication. We propose this change in 

recognition of the fact that the universe 

of ECPs, as well as the databases we use 

to delineate this universe, may vary over 

time for many reasons, including 

demographic and provider 

characteristics. We request comment on 

this proposed change. 

We seek comment on these proposals. 

e. Health Plan Applications and Notices 

(§ 156.250) 

Existing § 156.250 establishes basic 

standards for the format of applications 

and notices provided by QHP issuers to 

enrollees. Specifically, QHP issuers 

must adhere to the readability and 

accessibility standards established for 

Exchange applications, forms, and 

notices in § 155.230(b). The referenced 

standard, in turn, requires QHP issuers 

to conform to the standards outlined in 

§ 155.205(c), which provide that 

information must be provided in plain 

language and in a manner that is 

accessible and timely to individuals 

living with disabilities and individuals 

who are limited English proficient, and 

that individuals must be informed of the 

availability of such accessibility 

services. To improve the readability of 

this referenced standard, we propose to 

amend § 156.250 to replace the crossreference to the Exchange application 

and notices provision at § 155.230(b) 

with a cross-reference to § 155.205(c). 

We also propose to change the title of 

the provision to ‘‘Meaningful access to 

qualified health plan information’’ for 

improved clarity. As discussed above, 

amendments to § 155.205(c) with 

respect to oral interpretation services 

are also being proposed. 

As participants in one or more 

Exchanges, QHP issuers interact with 

qualified individuals, qualified 

employers, qualified employees, and 

applicants, in addition to enrollees. 

QHP issuers provide these individuals 

with a wide range of information that 

assists these individuals with accessing 

and understanding health coverage. We 

propose to extend the requirements of 

§ 156.250 so that not only applications 

and notices to enrollees, but all 

information that is critical for obtaining 

health insurance coverage or access to 

health care services through the QHP to 

qualified individuals, applicants, 

qualified employers, qualified 

employees, and enrollees, is provided in 

a manner consistent with § 155.205(c). 

In addition, we propose that 

information would be deemed to be 

critical for obtaining health insurance 

coverage or access to health care 

services if the issuer is required by State 

or Federal law to provide the document 

to a qualified individual, applicant, 

qualified employer, qualified employee, 

or enrollee. For example, because the 

summary of benefits and coverage (SBC) 

disclosure is required to be provided by 

law under section 2715 of the Public 

Health Service Act and its 

implementing regulations at § 147.200, a 

QHP issuer would be required to 

provide the SBC in a manner consistent 

with § 155.205(c). In addition, based on 

our proposed standard, we would 

consider information that is critical for 

obtaining health coverage or access to 

health care services to include: 

Applications; consent, grievance, 

appeal, and complaint forms; notices 

pertaining to the denial, reduction, 

modification, or termination of services, 

benefits, non-payment, or coverage; a 

plan’s explanation of benefits or similar 

claim processing information; QHP 

ratings information; rebate notices; 

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correspondence containing information 

about eligibility and participation 

criteria; notices advising individuals of 

the availability of free language 

assistance; and letters or notices that 

require a signature or response from the 

qualified individual, applicant, 

qualified employer, qualified employee, 

or enrollee. We would not consider 

marketing materials that are available 

for advertising purposes only and not 

otherwise required by law to be critical 

for obtaining health insurance coverage 

or access to health care services through 

the QHP, and therefore an issuer would 

not be required to be make such 

materials accessible to individuals with 

disabilities or limited English 

proficiency. We seek comment on all 

aspects of this proposal, with a 

particular interest in whether the 

parameters set forth above are 

reasonable, whether there is other 

information that should be considered 

to be ‘‘critical’’ and thus subject to the 

requirements of § 155.205(c), and 

whether the term ‘‘critical’’ should be 

further defined in regulation text. 

Finally, we solicit comment on whether 

this proposal would present 

implementation challenges for QHP 

issuers if it becomes effective before the 

beginning of the open enrollment period 

in the individual market for the 2016 

benefit year. 

f. Enrollment Process for Qualified 

Individuals (§ 156.265) 

Sections 155.240 and 155.400 

explicitly authorize Exchanges to 

establish certain requirements related to 

premium payment for enrollment in 

QHPs through the Exchange. Section 

156.265 currently only cross-references 

§ 155.240. To clarify that both sets of 

requirements apply to QHPs, we 

propose that a QHP issuer must follow 

the premium payment process 

established by the Exchange in 

accordance with § 155.240 and the 

payment rules established in 

§ 155.400(e). 

g. Segregation of Funds for Abortion 

Services (§ 156.280) 

Section 1303 of the Affordable Care 

Act and § 156.280 specify accounting 

and other standards for issuers of QHPs 

through the Exchange in the individual 

market that cover abortion services for 

which public funding is prohibited (also 

referred to as non-excepted abortion 

services). The statute and regulations 

establish that unless otherwise 

prohibited by State law, a QHP issuer 

may elect to cover such services. If an 

issuer elects to cover such services 

under a QHP sold through the 

individual market Exchange, the issuer 

must take certain steps to ensure that no 

premium tax credit or cost-sharing 

reduction funds are used to pay claims 

for abortion services for which public 

funding may not be used. 

We are providing guidance on an 

individual market Exchange issuer’s 

responsibilities with respect to 

requirements related to QHP coverage of 

abortion services for which public 

funding is prohibited. HHS works with 

stakeholders, including States and 

issuers, to help them fully understand 

and follow the statutes and regulations 

governing the provision of health 

insurance coverage under a QHP 

through the Exchange. As is the case 

with many provisions in the Affordable 

Care Act, States and State insurance 

commissioners are the entities primarily 

responsible for implementing and 

enforcing the provisions in section 1303 

of the Affordable Care Act related to 

individual market QHP coverage of nonexcepted abortion services. OPM may 

issue guidance related to these 

provisions for multi-State plan issuers. 

Under section 1303(b)(2)(B) of the 

Affordable Care Act, as implemented in 

§ 156.280(e)(2)(i), individual market 

Exchange issuers must collect a separate 

payment from each enrollee, for an 

amount equal to the AV of the coverage 

for abortions for which public funding 

is prohibited. However, section 1303 of 

the Affordable Care Act and § 156.280 

do not specify the method an issuer 

must use to comply with the separate 

payment requirement. This provision 

may be satisfied in a number of ways. 

Several such ways include, but are not 

limited to: sending the enrollee a single 

monthly invoice or bill that separately 

itemizes the premium amount for nonexcepted abortion services; sending a 

separate monthly bill for these services; 

or sending the enrollee a notice at or 

soon after the time of enrollment that 

the monthly invoice or bill will include 

a separate charge for such services and 

specify the charge. Section 1303 of the 

Affordable Care Act permits, but does 

not require a QHP issuer to separately 

identify the premium for non-excepted 

abortion services on the monthly 

premium bill in order to comply with 

the separate payment requirement. A 

consumer may pay the premium for 

non-excepted abortion services and for 

all other services in a single transaction, 

with the issuer depositing the funds into 

the issuer’s separate allocation accounts 

as required by section 1301(b)(2)(C) of 

the Affordable Care Act, as 

implemented in § 156.280(e)(2)(ii) and 

156.280(e)(3). 

Section 1303(b)(2)(D) of the 

Affordable Care Act, as implemented in 

§ 156.280(e)(4), establishes requirements 

for individual market Exchange issuers 

with respect to how much they must 

charge each QHP enrollee for coverage 

of abortions for which public funding is 

prohibited. A QHP issuer must estimate 

the basic per enrollee, per month cost, 

determined on an average actuarial 

basis, for including coverage of nonexcepted abortion services. In making 

this estimate, a QHP issuer may not 

estimate the basic cost of coverage for 

non-excepted abortion services to be 

less than one dollar per enrollee, per 

month. This means that an issuer must 

charge each QHP enrollee a minimum 

premium of one dollar per month for 

coverage of non-excepted abortion 

services. 

4. Health Insurance Issuer 

Responsibility With Respect to Advance 

Payments of the Premium Tax Credit 

and Cost-Sharing Reductions 

a. Premium Adjustment Percentage 

(§ 156.130) 

Section 1302(c)(4) of the Affordable 

Care Act directs the Secretary to 

determine an annual premium 

adjustment percentage, which is used to 

set the rate of increase for three 

parameters detailed in the Affordable 

Care Act: the maximum annual 

limitation on cost sharing (defined at 

§ 156.130(a)), the required contribution 

percentage by individuals for minimum 

essential health coverage the Secretary 

may use to determine eligibility for 

hardship exemptions under section 

5000A of the Code, and the assessable 

payment amounts under section 

4980H(a) and (b) of the Code (finalized 

at 26 CFR 54.4980H in the ‘‘Shared 

Responsibility for Employers Regarding 

Health Coverage,’’ published in the 

February 12, 2014 Federal Register (79 

FR 8544)). Section 156.130(e) provides 

that the premium adjustment percentage 

is the percentage (if any) by which the 

average per capita premium for health 

insurance coverage for the preceding 

calendar year exceeds such average per 

capita premium for health insurance for 

2013, and that this percentage will be 

published annually in the HHS notice of 

benefit and payment parameters. 

We established a methodology for 

estimating average per capita premium 

for purposes of calculating the premium 

adjustment percentage in the 2015 

Payment Notice. 

Under that methodology, the 

premium adjustment percentage is 

calculated based on the projections of 

average per enrollee employersponsored insurance (ESI) premiums 

from the NHEA, which is calculated by 

the CMS Office of the Actuary. 

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55See http://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/

NationalHealthExpendData/Downloads/Projections

Methodology2012.pdf and Table 17 in http://www.

cms.gov/Research-Statistics-Data-and-Systems/

Statistics-Trends-and-Reports/NationalHealth

ExpendData/Downloads/Proj2012.pdf for 

additional information. 56See http://www.irs.gov/pub/irs-drop/rp-13- 

25.pdf. 

Accordingly, using the ESI data, the 

premium adjustment percentage for 

2016 is the percentage (if any) by which 

the most recent NHEA projection of per 

enrollee ESI premiums for 2015 ($5,744) 

exceeds the most recent NHEA 

projection of per enrollee ESI premiums 

for 2013 ($5,303).55 Therefore, the 

proposed premium adjustment 

percentage for 2016 is 8.316047520 

percent. We note that the 2013 premium 

used for this calculation has been 

updated to reflect the latest NHEA data. 

We are also proposing the following 

cost-sharing parameters for calendar 

year 2016, based on our proposed 

premium adjustment percentage for 

2016. 

Maximum Annual Limitation on Cost 

Sharing for Calendar Year 2016. Under 

§ 156.130(a)(2), for the 2016 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 2016, and for other than 

self-only coverage, the limit is twice the 

dollar limit for self-only coverage. 

Under § 156.130(d), these amounts must 

be rounded down to the next lowest 

multiple of 50. Using the premium 

adjustment percentage of 8.316047520 

for 2016 we established 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, 2013,56 we propose that 

the 2016 maximum annual limitation on 

cost sharing be $6,850 for self-only 

coverage and $13,700 for other than selfonly coverage. 

b. Reduced Maximum Annual 

Limitation on Cost Sharing (§ 156.130) 

Sections 1402(a) through (c) of the 

Affordable Care Act direct issuers to 

reduce cost sharing for EHBs for eligible 

individuals enrolled in a silver level 

QHP. In the 2014 Payment Notice, we 

established standards related to the 

provision of these cost-sharing 

reductions. Specifically, in 45 CFR part 

156 subpart E, we specified that QHP 

issuers must provide cost-sharing 

reductions by developing plan 

variations, which are separate costsharing structures for each eligibility 

category that change how the cost 

sharing required under the QHP is to be 

shared between the enrollee and the 

Federal government. At § 156.420(a), we 

detailed the structure of these plan 

variations and specified that QHP 

issuers must ensure that each 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 Affordable Care Act, 

section 1402(c)(1)(B)(ii) of the of the 

Affordable Care Act states that the 

Secretary may adjust the cost-sharing 

limits to ensure that the resulting limits 

do not cause the AVs of the health plans 

to exceed the levels specified in 

1402(c)(1)(B)(i) (that is, 73 percent, 87 

percent or 94 percent, depending on the 

income of the enrollee(s)). Accordingly, 

we propose to use a method we 

established in the 2014 Payment Notice 

for determining the appropriate 

reductions in the maximum annual 

limitation on cost sharing for costsharing plan variations. As we proposed 

above, the 2016 maximum annual 

limitation on cost sharing would be 

$6,850 for self-only coverage and 

$13,700 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 

2016 benefit year and our proposed 

results. 

Reduced Maximum Annual 

Limitation on Cost Sharing for Benefit 

Year 2016. Consistent with our analysis 

in the 2014 and 2015 Payment Notices, 

we developed three model silver level 

QHPs, and analyzed the impact on AV 

of the reductions described in the 

Affordable Care Act to the estimated 

2016 maximum annual limitation on 

cost sharing for self-only coverage 

($6,850). The model plan designs are 

based on data collected for 2015 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 

Exchange. For 2016, the model silver 

level QHPs included a PPO with typical 

cost-sharing structure ($6,850 annual 

limitation on cost sharing, $2,000 

deductible, and 20 percent in-network 

coinsurance rate), a PPO with a lower 

annual limitation on cost sharing 

($4,600 annual limitation on cost 

sharing, $2,550 deductible, and 20 

percent in-network coinsurance rate), 

and an HMO ($6,850 annual limitation 

on cost sharing, $2,700 deductible, 20 

percent in-network coinsurance rate, 

and the following services with copays 

that are not subject to the deductible or 

coinsurance: $500 inpatient stay per 

day, $350 emergency department visit, 

$25 primary care office visit, and $50 

specialist office visit). All three model 

QHPs meet the AV requirements for 

silver level health plans. 

We then entered these model plans 

into the proposed 2016 AV calculator 

developed by HHS and observed how 

the reductions in the maximum annual 

limitation on cost sharing specified in 

the Affordable Care Act affected the AVs 

of the plans. We found that the 

reduction in the maximum annual 

limitation on cost sharing specified in 

the Affordable Care Act for enrollees 

with a household income between 100 

and 150 percent of the Federal poverty 

line (FPL) (2⁄3 reduction in the 

maximum annual limitation on cost 

sharing), and 150 and 200 percent of the 

FPL (2⁄3 reduction), would not cause the 

AV of any of the model QHPs to exceed 

the statutorily specified AV level (94 

and 87 percent, respectively). In 

contrast, the reduction in the maximum 

annual limitation on cost sharing 

specified in the Affordable Care Act for 

enrollees with a household income 

between 200 and 250 percent of FPL 

(1⁄2 reduction), would cause the AVs of 

two of the model QHPs to exceed the 

specified AV level of 73 percent. As a 

result, we propose that the maximum 

annual limitation on cost sharing for 

enrollees in the 2016 benefit year with 

a household income between 200 and 

250 percent of FPL be reduced by 

approximately 1⁄5, rather than 1⁄2. We 

further propose that the maximum 

annual limitation on cost sharing for 

enrollees with a household income 

between 100 and 200 percent of the FPL 

be reduced by approximately 2⁄3, as 

specified in the statute, and as shown in 

Table 11. These proposed reductions in 

the maximum annual limitation on cost 

sharing should adequately account for 

unique plan designs that may not be 

captured by our three model QHPs. We 

also note that selecting a reduction for 

the maximum annual limitation on cost 

sharing that is less than the reduction 

specified in the statute would not 

reduce the benefit afforded to enrollees 

in aggregate because QHP issuers are 

required to further reduce their annual 

limitation on cost sharing, or reduce 

other types of cost sharing, if the 

required reduction does not cause the 

AV of the QHP to meet the specified 

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level. We welcome comment on this 

analysis and the proposed reductions in 

the maximum annual limitation on cost 

sharing for 2016. 

We note that for 2016, as described in 

§ 156.135(d), States are permitted to 

submit for approval by HHS Statespecific data sets for use as the standard 

population to calculate AV. No State 

submitted a data set by the September 

1 deadline. 

TABLE 11—REDUCTIONS IN MAXIMUM ANNUAL LIMITATION ON COST SHARING FOR 2016 

Eligibility category 

Reduced 

maximum annual 

limitation on cost 

sharing for selfonly coverage for 

2016 

Reduced 

maximum annual 

limitation on cost 

sharing for other 

than self-only 

coverage for 2016 

Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(i) (that is, 100–150 percent of 

FPL) .......................................................................................................................................................... $2,250 $4,500 

Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(ii) (that is, 150–200 percent of 

FPL) .......................................................................................................................................................... 2,250 4,500 

Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(iii) (that is, 200–250 percent of 

FPL) .......................................................................................................................................................... 5,450 10,900 

c. Plan Variations (§ 156.420) 

Sections 1402 and 1412 of the 

Affordable Care Act provide for 

reductions in cost sharing on essential 

health benefits for qualified low- and 

moderate-income enrollees in silver 

level health plans offered in the 

individual market through the 

Exchanges. Section 1402(d) of the 

Affordable Care Act also provides for 

Indians with household income below 

300 percent FPL to be enrolled in QHPs 

with zero cost sharing at any metal 

level. Implementing regulations, 

§ 156.400 et seq., set forth health 

insurance issuer responsibilities with 

respect to the administration of 

reductions in cost sharing for eligible 

individuals. In addition, section 2715 of 

the PHS Act and its implementing 

regulation, § 147.200, require group 

health plans and health insurance 

issuers offering group or individual 

health insurance coverage to provide a 

written summary of benefits and 

coverage (SBC) for each benefit package 

to all covered entities and individuals, 

including individuals in the individual 

market, applying for coverage. 

While individual health insurance 

issuers (including QHP issuers) must 

provide an SBC for each benefit 

package, current regulations do not 

specifically address an issuer’s 

responsibilities to provide an SBC 

reflecting a QHP with cost-sharing 

reductions applied, known as a plan 

variation of the QHP. Consequently, a 

consumer who is eligible for costsharing reductions may receive an SBC 

that does not accurately represent the 

cost sharing he or she will be 

responsible for when receiving essential 

health benefits. Under the authority 

stated above, we propose to amend 

§ 156.420 to add § 156.420(h) and 

require QHP issuers to provide SBCs 

that accurately represent plan variations 

in a manner consistent with the 

requirements set forth at § 147.200 to 

ensure that consumers have access to 

SBCs that accurately represent costsharing responsibilities for all coverage 

options, including plan variations, and 

are provided adequate notice of the plan 

variations. 

We propose that QHP issuers would 

be required to provide SBCs for plan 

variations no later than the first day of 

the next Exchange open enrollment 

period for the individual market for the 

2016 benefit year, in accordance with 

§ 155.410(e). We seek comments on 

whether the proposed applicability date 

would present implementation 

challenges for QHP issuers as well as on 

other aspects of this proposal. As 

discussed above, we note that QHP 

issuers would be required to provide the 

SBC in a manner that is consistent with 

the meaningful access requirements 

under § 155.205(c). 

d. Changes in Eligibility for CostSharing Reductions (§ 156.425) 

Under the authority in sections 1402 

and 1412 of the Affordable Care Act, 

which provide for reductions in cost 

sharing on essential health benefits for 

qualified low- and moderate-income 

enrollees in silver level health plans 

offered in the individual market on 

Exchanges, we propose to amend 

§ 156.425 to clarify when a QHP issuer 

would be required to provide an SBC if 

an individual’s assignment to a standard 

plan or plan variation of the QHP 

changes in accordance with 

§ 156.425(a). We propose that a QHP 

issuer must provide an SBC that 

accurately represents a new plan 

variation (or the standard plan 

variation) as soon as practicable after 

receiving notice from the Exchange of 

the individual’s change in eligibility, 

but in no case later than 7 business days 

following receipt of notice. We propose 

that QHP issuers would be required to 

provide SBCs in accordance with this 

proposed paragraph beginning on the 

first day of the benefit year that begins 

on January 1, 2016. We seek comments 

on this proposal. 

e. Cost-Sharing Reductions 

Reconciliation (§ 156.430) 

Sections 1402(a)–(c) of the Affordable 

Care Act provide for cost-sharing 

reductions for essential health benefits 

(EHB) provided by a qualified health 

plan. Cost-sharing reductions are 

advanced to issuers throughout the 

benefit year, and reconciled by HHS 

following the benefit year against actual 

cost-sharing amounts provided by 

issuers to enrollees. 

The reconciliation process requires 

QHP issuers to submit to HHS the total 

allowed costs for EHB charged for each 

plan variation policy, the amounts paid 

by the issuer, and the amounts paid by 

or on behalf of the enrollee (other than 

by the Federal government under 

section 1402 of the Affordable Care Act), 

as well as the amounts that would have 

been paid by the enrollee under the 

standard plan. Under the standard 

methodology described at 

§ 156.430(c)(2), costs paid by the issuer 

under the standard plan are calculated 

by applying actual cost-sharing 

requirements for the standard plan to 

the allowed costs for EHB under the 

enrollee’s policy for the benefit year. 

The difference is the amount of costsharing reductions provided. 

As stated above, HHS will not 

reimburse issuers for reductions in outof-pocket spending for benefits other 

than EHB. However, we understand that 

because of technology challenges in 

these early years of the cost-sharing 

reduction program, some issuers are 

presently unable to differentiate on a 

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57Percentage of the total allowed costs of benefits 

as defined at 45.CFR 156.20 means the anticipated 

covered medical spending for EHB coverage (as 

defined in § 156.110(a) of this subchapter) paid by 

a health plan for a standard population, computed 

in accordance with the plan’s cost-sharing, divided 

by the total anticipated allowed charges for EHB 

coverage provided to a standard population, and 

expressed as a percentage. 

58Shared Responsibility Payment for Not 

Maintaining Minimum Essential Coverage, 78 FR 

53646 (August 30, 2013). 

59Patient Protection and Affordable Care Act; 

Exchange Functions: Eligibility for Exemptions; 

Miscellaneous Minimum Essential Coverage 

Provisions, 78 FR 39494 (July 1, 2013). 

60See CCIIO Sub-Regulatory Guidance: Process 

for Obtaining Recognition as Minimum Essential 

Coverage (October 31, 2013). Available at: http://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/mec-guidance-10-31- 

2013.pdf. 

policy level between EHB claims and 

non-EHB claims, as required by HHS 

when applying the standard costsharing reduction reconciliation 

methodology. The difficulty occurs in 

plan designs that allow enrollee out-ofpocket spending for EHB and non-EHB 

claims alike to accumulate toward 

deductibles and the reduced annual 

limit on cost sharing. Such plan designs 

benefit enrollees by allowing them to 

reach their spending limits sooner. As a 

result, for the purpose of cost-sharing 

reduction reconciliation, we propose to 

allow QHP issuers to submit percentage 

estimates of the portion of claims 

attributable to non-EHB for the 2014 

benefit year, and to reduce the total 

claims amount by that percentage, to 

arrive at an estimated total EHB amount. 

The percentage estimate would be the 

estimate of expected non-EHB claims 

costs previously submitted for each plan 

variation on the Uniform Rate Review 

Template (URRT) 57 and which HHS 

used to calculate 2014 advance CSR 

payments. An issuer using this 

procedure would be required to do so 

for all plan variations for which the 

criteria below are met. 

As described in proposed 

§ 156.430(c)(2)(i), this exception to 

permit QHP issuers to use plan-specific 

URRT estimates of non-EHB claims 

would be limited to plan designs in 

which out-of-pocket expenses for nonEHB benefits accumulate toward the 

deductible and reduced annual 

limitation on cost sharing, but for which 

copayments and coinsurance rates for 

non-EHB are not reduced. This 

limitation helps assure that the 

estimated percentage, which is 

calculated based on the proportion of 

claims attributable to EHB, does not 

overstate the proportion of reduced outof-pocket spending associated with 

EHB. In addition, the exception would 

apply only when non-EHB estimated 

percentages account for less than 2 

percent of total claims, helping assure 

that any inaccuracies in the estimate are 

unlikely to result in significant 

inaccuracies in total cost-sharing 

reduction reimbursement. 

5. Minimum Essential Coverage 

a. Other Coverage That Qualifies as 

Minimum Essential Coverage 

(§ 156.602) 

Section 5000A of the Code, as added 

by section 1501(b) of the Affordable 

Care Act, requires all non-exempt 

applicable individuals to maintain 

minimum essential coverage or make 

the individual shared responsibility 

payment. Section 5000A(f) of the Code 

defines minimum essential coverage as 

any of the following: (1) Coverage under 

a specified government sponsored 

program; (2) coverage under an eligible 

employer-sponsored plan; (3) coverage 

under a health plan offered in the 

individual market within a State; and 

(4) coverage under a grandfathered 

health plan. In addition, section 

5000A(f)(1)(E) of the Code authorizes 

the Secretary of HHS, in coordination 

with the Secretary of the Treasury, to 

designate other health benefits coverage 

as minimum essential coverage. The 

Department of the Treasury and the IRS 

published final regulations under Code 

section 5000A on August 30, 2013 (78 

FR 53646), codified at 26 CFR 1.5000A– 

1 through –5.58

On July 1, 2013, HHS published final 

regulations implementing certain 

functions of an Exchange for 

determining eligibility for and granting 

certain exemptions from the individual 

shared responsibility payment (78 FR 

39494).59 The HHS final regulations also 

designate certain types of coverage as 

minimum essential coverage and outline 

substantive and procedural 

requirements for other types of coverage 

to apply for recognition as minimum 

essential coverage. In § 156.602 HHS 

designated the following types of health 

benefits coverage as minimum essential 

coverage: (1) Self-funded student health 

plans for plan or policy years beginning 

on or before December 31, 2014; (2) 

Refugee Medical Assistance supported 

by the Administration for Children and 

Families (45 CFR part 400 subpart G); 

(3) Medicare advantage plans; and (4) 

State high risk pools (as defined in 

section 2744 of the PHS Act) for plan or 

policy years beginning on or before 

December 31, 2014. In addition, 

§ 156.604 outlines the substantive and 

procedural requirements for other types 

of health benefit coverage, not 

statutorily specified in section 5000A of 

the Code and not designated as 

minimum essential coverage in 

§ 156.602, to apply to HHS for 

recognition as minimum essential 

coverage. On October 31, 2013, CMS 

published guidance explaining the 

administrative process by which such 

plans may apply for recognition as 

minimum essential coverage.60

In § 156.602(d), HHS applied a oneyear transitional period in 2014 to State 

high risk pool coverage in anticipation 

of States phasing-out State high risk 

pools. Some States, however, will still 

have high risk pools in 2015 because 

they did not enact legislation to 

terminate the program. Some of these 

State high risk pools will be closed to 

new enrollment. At least one high risk 

pool that will still be in existence in 

2015 primarily provides supplemental 

coverage to Medicare beneficiaries 

under age 65. 

We understand the difficulty of 

transitioning individuals from State 

high risk pool coverage into QHPs 

through the Exchanges or into another 

form of minimum essential coverage. 

High risk pools provide coverage to 

vulnerable populations of consumers. 

Accordingly, we propose to revise 

§ 156.602(d) by eliminating the one-year 

transition period for State high risk pool 

coverage and designating as minimum 

essential coverage any qualified high 

risk pool established in any State as 

defined by section 2744(c)(2) of the PHS 

Act that is currently in existence. We 

propose that this recognition will not be 

applied to State high risk pools that are 

formed after the publication date of this 

proposed rule. This should provide 

State legislators the opportunity to 

continue to evaluate the number of high 

risk pool enrollees, benefits and cost 

sharing associated with each State high 

risk pool. State legislatures may decide 

to eliminate high risk pool coverage 

once high risk pool enrollees no longer 

rely on State high risk pool coverage 

and have transitioned into QHPs 

through the Exchanges or into other 

forms of minimum essential coverage. 

We seek comments on this proposal. 

Specifically, we seek comments on 

whether State high risk pools should be 

permanently designated as minimum 

essential coverage or whether the 

designation should be time-limited (for 

example, for 2015 only). We also seek 

comments on the cut-off date for 

formation of State high risk pools that 

will qualify for recognition under this 

proposed rule. 

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6. Enforcement Remedies in FederallyFacilitated Exchanges 

a. Available Remedies; Scope 

(§ 156.800) 

In the first Program Integrity Rule, 

HHS finalized § 156.800(c), which 

established a good faith compliance 

policy for QHP issuers offering coverage 

through an FFE for the 2014 calendar 

year. Specifically, the first Program 

Integrity Rule provides that HHS will 

not impose sanctions under subpart I of 

45 CFR part 156 against a QHP issuer in 

an FFE if the QHP issuer has made good 

faith efforts to comply with applicable 

Exchange requirements. HHS adopted 

the good faith compliance policy to help 

QHP issuers become familiar with the 

standards unique to the FFEs during the 

initial stage of operations. 

We recognize that during 2014, CMS 

issued revised guidance on some 

Exchange processes and also 

implemented some new processes. To 

help QHP issuers adjust to these 

processes, HHS provided guidance and 

technical assistance through various 

forums. We are aware that despite 

HHS’s support and the QHP issuers’ 

good faith efforts, some QHP issuers 

offering coverage through an FFE 

nonetheless experienced difficulties 

adapting to these processes. However, 

we found that most QHP issuers were 

proactive in contacting their assigned 

HHS account managers to request 

technical assistance or clarifications to 

existing policies, standards and 

processes to ensure their own 

compliance with FFE standards. When 

potential issues were identified, the vast 

majority of QHP issuers demonstrated a 

willingness to cooperate with HHS to 

resolve these issues. 

HHS is committed to ensuring that 

QHP issuers have the opportunity to 

learn from their experiences in 2014 

without undue concern about being 

subject to formal enforcement actions 

when the QHP issuer has made 

reasonable efforts to comply with 

applicable standards. While immediate 

formal enforcement actions may be 

appropriate in some cases, we continue 

to prefer resolving most compliance 

issues by providing technical assistance. 

Accordingly, we propose extending the 

good faith compliance standard under 

§ 156.800(c) through the end of calendar 

year 2015. We believe this one-year 

extension will encourage QHP issuers to 

continue to self-report any potential 

compliance issues or other problems 

that may affect their ability to comply 

with applicable FFE standards in 2015 

and future years, and to continue 

making improvements to their processes 

and systems, including training their 

staff about FFE operations and 

applicable standards. Further, if HHS 

determines that an issuer is not acting 

in good faith, that issuer may be subject 

to enforcement remedies including civil 

monetary penalties and decertification, 

if applicable. 

Finally, we note that irrespective of 

the good faith compliance standard, 

QHP issuers are required to comply 

with all applicable FFE standards (and 

any applicable Federal or State laws 

including privacy, security and fraud) at 

the time of certification and on an 

ongoing basis. It should also be noted 

that QHP issuers have an independent 

obligation to comply with Federal civil 

rights laws and regulations to the extent 

they receive Federal financial 

assistance, and this proposed 

modification would not limit or 

otherwise restrict these laws and 

regulations. We expect our ongoing 

coordination with States and other 

regulatory entities to help streamline 

communications regarding potential 

compliance issues and avoid 

unnecessary duplication of oversight 

efforts. For issuers of multi-State plans, 

HHS will coordinate as appropriate with 

OPM to address compliance issues. We 

seek comment on this proposal. 

b. Plan Suppression (§ 156.815) 

In the Exchange Establishment Rule, 

HHS finalized § 155.205(b), which sets 

forth the required content and 

information to be included on an 

Exchange Web site. Among other things, 

this rule implemented the Secretary’s 

obligations under section 1311(c)(5) of 

the Affordable Care Act to continue to 

operate, maintain, and update the 

Internet portal developed under section 

1103 of the Affordable Care Act to 

provide information to consumers and 

small businesses on affordable health 

insurance coverage options. Under the 

rule, an Exchange Web site must 

provide information to consumers on 

each available QHP’s premiums, costsharing arrangements, summaries of 

benefits and coverage, coverage 

(‘‘metal’’) level, results of the enrollee 

satisfaction survey, quality ratings, 

medical loss ratio information, 

transparency in coverage information, 

and provider directory. The FFE Web 

site is located at www.HealthCare.gov 

and provides enrollees, consumers, and 

other stakeholders with access to QHP 

data to facilitate an informed plan 

selection when shopping for or 

enrolling in QHPs on an Exchange. The 

information provided on the FFE Web 

site is also presented to consumers 

enrolling through a HealthCare.gov call 

center representative, by direct 

enrollment through a QHP issuer’s Web 

site, or through the Web site of an agent 

or broker under § 155.220(c)(3). 

During the 2014 plan year, we 

identified situations that made it 

necessary for purposes of protecting 

consumers’ interests to suppress certain 

QHPs from each of the avenues of 

enrollment: enrollment through the 

HealthCare.gov Web site, enrollment by 

a HealthCare.gov call center 

representative, direct enrollment 

through a QHP issuer Web site, and 

enrollment through a Web site of an 

agent or broker. When a QHP is 

suppressed, the QHP temporarily will 

not be available for enrollment through 

the FFE. When all conditions that are 

grounds for suppression are resolved, 

the QHP will be unsuppressed. 

In § 156.815(a), we propose a 

definition of suppression which would 

mean that a suppressed QHP 

temporarily would not be available for 

enrollment through the FFE. 

In § 156.815(b), we list each of the 

proposed bases for suppression of a 

QHP in the FFE. Our first proposed 

basis for suppression, § 156.815(b)(1), is 

the issuer’s notifying HHS of its 

withdrawal of the QHP from the FFE 

when one of the exceptions to 

guaranteed renewability of coverage 

related to discontinuing a particular 

product or discontinuing all coverage 

under § 147.106(c) or (d) applies. The 

purpose of this proposed basis for 

suppression is to clarify the method that 

we will use to prevent consumers from 

enrolling in a plan through the FFE after 

the issuer has notified HHS of its intent 

to legally withdraw the QHP from the 

FFE. We note that, per § 156.290(a)(2), 

issuers withdrawing QHPs from a FFE 

will be expected to fulfill their 

obligations to cover benefits for 

enrollees through the end of the 

enrollees’ plan or benefit year and to 

comply with other applicable 

regulations. 

In § 156.815(b)(2), we propose to 

suppress a QHP when we determine 

that the FFE has incorrect data about the 

QHP. This basis for suppression is 

intended for situations where incorrect 

or incomplete QHP data have been 

submitted to the FFE by the QHP issuer 

but the issuer intends to continue 

offering the QHP on the FFE after the 

data issue is resolved. We believe that 

suppression of a QHP with incorrect or 

incomplete data until the correct or 

complete information is available is in 

the best interest of the consumers. The 

decision to suppress based on incorrect 

data will be based on the severity of the 

issue. For example, a QHP with 

incorrectly submitted rates generally 

would be suppressed until the rating 

data are corrected. 

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In § 156.815(b)(3), we propose to 

suppress a QHP that is in the process of 

decertification under § 156.810 or the 

appeal of a decertification under subpart 

J of part 156. We believe it is necessary 

to suspend further enrollment in plans 

on the FFE where it is likely that 

consumers will be substantially harmed 

if the QHP is decertified in the near 

future. When a QHP is decertified, a 

consumer enrolled in that QHP will no 

longer be eligible for advance payments 

of the premium tax credit under 

§ 155.305(f)(3) or cost-sharing 

reductions under § 155.305(g)(1) if they 

choose to remain enrolled in that plan 

after decertification. If a consumer 

enrolls in a new plan that is decertified 

shortly thereafter, the consumer will 

need to enroll in another QHP to retain 

access to advance payments of the 

premium tax credit and cost-sharing 

reductions. We believe the best way to 

bolster consumer confidence in the 

offerings on the FFE and to assist 

consumers in retaining their subsidies is 

to prevent further enrollment in a plan 

at risk of decertification until a 

determination on decertification is 

made. HHS will attempt to resolve 

decertification and appeal proceedings 

in as timely a manner as possible to 

minimize any adverse effect of 

suppression on QHP issuers. 

In § 156.815(b)(4), we propose to 

suppress a QHP when the QHP is the 

subject of a pending, ongoing, or final 

State regulatory or enforcement action 

that could affect the issuer’s ability to 

enroll consumers or otherwise relates to 

the issuer’s ability to offer QHPs in the 

FFE and would necessitate the removal 

of a QHP from the FFE until the 

condition triggering the State action has 

been resolved. This basis for 

suppression is intended to protect 

consumers from enrollment in plans 

that State insurance regulators have 

identified as possibly or actually in 

violation of applicable State or Federal 

laws and regulations. We recognize that, 

in the case of pending State regulatory 

or enforcement action, QHP issuers may 

ultimately be cleared of alleged 

wrongdoing. To mitigate the harmful 

effect of such a scenario, we will base 

our suppress decision in this instance 

on the specific details of the pending 

regulatory or enforcement action, such 

as, the scope and severity of the alleged 

violation and the recommendation of 

State insurance regulators. We are 

committed to working with State 

insurance regulators to inform decisions 

about QHP suppression under this 

proposal. 

In § 156.815(b)(5), we propose 

allowing suppression of a QHP when 

either the special rule for network plans 

under § 147.104(c) or the application of 

financial capacity limits provision 

under § 147.104(d) apply. For example, 

if an issuer demonstrates to its State 

department of insurance (DOI) that it 

does not have the financial reserves 

necessary to offer additional coverage 

and the DOI places an enrollment 

restriction on a QHP to prevent it from 

enrolling new consumers, commonly 

referred to as an enrollment cap, we 

may suppress the QHP until the State 

DOI has lifted the restriction. We intend 

to coordinate with States to the greatest 

extent possible in determining whether 

suppression under this section is 

appropriate. 

In § 156.815(c), we propose to 

suppress a QHP that is a multi-State 

plan upon notification by OPM. Under 

45 CFR 800.103, OPM may contract 

with health insurance issuers to provide 

at least two multi-State plans on 

Exchanges and SHOPs in each State. 

When OPM determines that a 

compliance violation under subpart E of 

45 CFR part 800 or one of the grounds 

for suppression in § 156.815(b) exists, 

the Exchange may suppress the multiState plan upon notification by OPM of 

the violation or other grounds for 

suppression. We will continue to 

coordinate efforts with OPM when 

multi-State plan compliance violations 

are found. 

We invite comments on these 

proposed regulations, including 

whether the proposed bases for 

suppression are appropriate and 

whether an appeals process should be 

available following suppression 

decisions. 

7. Quality Standards 

a. Quality Improvement Strategy 

(§ 156.1130) 

Section 1311(c)(1)(E) of the Affordable 

Care Act specifies that to be certified as 

a QHP for participation on an Exchange, 

each health plan must implement a 

quality improvement strategy (QIS), 

which is described in section 1311(g)(1) 

of the Affordable Care Act. Section 

1311(g)(1) of the Affordable Care Act 

describes this strategy as a payment 

structure that provides increased 

reimbursement or other incentives to 

improve the health outcomes of plan 

enrollees, prevent hospital 

readmissions, improve patient safety 

and reduce medical errors, implement 

wellness and health promotion 

activities, and reduce health and health 

care disparities. Section 1311(g)(2) of 

the Affordable Care Act requires the 

Secretary to develop guidelines 

associated with the QIS in consultation 

with health care quality experts and 

stakeholders, including periodic 

reporting of the activities that the plan 

has conducted to implement the QIS, to 

the applicable Exchange, as described in 

section 1311(g)(3) of the Affordable Care 

Act. We have already issued regulations 

in § 155.200(d) to direct Exchanges to 

evaluate quality improvement strategies, 

and at § 156.200(b), which directs QHP 

issuers to implement and report on a 

quality improvement strategy or 

strategies consistent with standards set 

forth in section 1311(g) of the 

Affordable Care Act as a QHP 

certification criteria for participation in 

an Exchange. This rule proposes 

standards and the associated timeframe 

for QHP issuers to submit the necessary 

information to implement QIS standards 

for QHPs offered through an Exchange 

under section 1311(g) of the Affordable 

Care Act beginning in calendar year 

2016. 

Many provisions in the Affordable 

Care Act build on related value-based 

purchasing concepts. HHS has already 

implemented several programs (for 

example, the Medicare Shared Savings 

Program, the Hospital Value-Based 

Purchasing Program, and the Physician 

Value-Based Payment Modifier) that 

focus on rewarding provider-level 

organizations that use innovative 

payment and service delivery models to 

lower costs and improve quality of 

health care for Medicare beneficiaries. 

Although these programs are providerfocused and relate to the Medicare 

program, their elements are closely 

aligned to the statutory requirements of 

a QIS for QHPs offered in an Exchange, 

including, rewarding quality and value 

through market-based incentives for 

improving health outcomes through care 

coordination activities, preventing 

hospital readmissions, and improving 

patient safety. We believe it is important 

to align with public and private 

payment and service delivery programs, 

as appropriate, to support the goals of 

better health outcomes and lower health 

care costs. The Center for Medicare and 

Medicaid Innovation has also 

recognized the importance of multipayer engagement in quality 

improvement, releasing models such as 

Pioneer Accountable Care Organizations 

and the Comprehensive Primary Care 

Initiative that require participating 

providers to work with both public and 

private payers on care redesign and 

efficiency. We encourage QHP issuers to 

consider diverse approaches to valuebased payment and enrollee incentives 

to reward quality and value in health 

care. 

The HHS National Strategy for 

Quality Improvement in Health Care 

(National Quality Strategy) defines 

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61The National Strategy for Quality Improvement 

in Health Care available at http://www.ahrq.gov/

workingforquality/nqs/nqs2011annlrpt.htm. 

62Patient Protection and Affordable Care Act; 

Exchanges and Qualified Health Plans, Quality 

Rating System (QRS) Framework, Measures and 

Methodology; Notice with Comment, 78 FR 69418 

(Nov. 19, 2013). 

63 Initiatives include, the Medicaid External 

Quality Review (EQR) program, the Medicare 

Advantage Quality Improvement Project and 

Chronic Care Improvement Program (QIP/CCIP) 

Program, the Accreditation Association for 

Ambulatory Health Care (AAAHC), National 

Committee for Quality Assurance (NCQA), URAC, 

Integrated Health Association (IHA) Value Based 

Pay for Performance (P4P) Program, National 

Business Coalition on Health eValue8 Request for 

Information. 

priorities that guide efforts to improve 

health and health care quality for 

individuals and communities. It also 

identifies policy levers, such as 

payment rewards or incentives for 

providers, and consumer incentives and 

benefit designs, which represent a 

business function, resource or action 

that stakeholders can use to align with 

the National Quality Strategy and drive 

quality improvement for better, more 

affordable health care.61 The CMS 

Quality Strategy is built on the 

foundation of the National Quality 

Strategy and operationalizes the 

priorities of the National Quality 

Strategy to improve health outcomes for 

all consumers, including those who seek 

coverage through the Exchange. We 

propose to establish QIS standards that 

use market-based incentives for QHPs 

offered through the Exchanges, and that 

align with the National Quality Strategy, 

the CMS Quality Strategy, and other 

Federal, State and private sector 

initiatives, as applicable. We 

acknowledge that there are numerous 

existing public and private industry 

standard initiatives that focus on health 

plan quality improvement strategies and 

activities. We believe that aligning QHP 

issuer standards for quality 

improvement strategies in Exchanges 

with existing initiatives would reinforce 

national health care quality priorities 

while reducing the burden on health 

plans and stakeholders to implement 

different and multiple program 

requirements. This approach is also 

consistent with the alignment of the 

quality rating system for QHPs offered 

through an Exchange under section 

1311(c)(3) of the Affordable Care Act to 

the National Quality Strategy.62

We believe that it is important that 

the proposed QIS standards leverage 

existing initiatives and quality 

improvement strategy tools for QHP 

issuers to help strengthen health care 

system-wide efforts to improve health 

outcomes and lower costs. We reviewed 

several existing initiatives in the public 

and private sectors 63 such as Federal 

health plan quality improvement 

evaluation programs, private 

accreditation programs, and other 

private sector programs to guide the 

development of the framework for the 

QIS for QHPs offered through the 

Exchanges and establish the proposed 

standards outlined in this rule. 

Based on our research, feedback from 

a QIS Technical Expert Panel (TEP), and 

discussions with stakeholders, we 

developed the following principles to 

guide the development, 

implementation, and evolution of the 

QIS standards: (1) The QHP issuer’s QIS 

will focus on one or more of the 

following topics outlined in section 

1311(g)(1) of the Affordable Care Act: 

Improving health outcomes, 

implementation of activities to prevent 

hospital readmissions, implementation 

of activities to improve patient safety 

and reduce medical errors, 

implementation of wellness and health 

promotion activities, and 

implementation of activities to reduce 

health and health care disparities; (2) 

HHS will seek to minimize 

administrative burdens through 

alignment of the QIS data collection and 

submission standards, where possible, 

with public and private quality 

improvement and public reporting 

programs; (3) The QIS standards will be 

flexible enough to encourage QHP issuer 

innovation and promote a culture of 

continuous quality improvement 

providing the QHP issuer’s strategy is 

relevant to the characteristics and needs 

of its enrollees and the Exchange; (4) 

The QIS standards will allow for 

flexibility for State Exchanges while still 

establishing minimum requirements, 

upon which States, if desired, can build 

additional reporting requirements in 

accordance with their needs; (5) The 

QIS standards will be developed in a 

public and transparent manner that will 

seek stakeholder feedback throughout 

its development and implementation. 

We believe that these guiding principles 

and general framework for the QIS 

standards will promote efficiency, 

flexibility, and transparency to best 

engage QHP issuers and serve 

consumers to improve health and health 

care quality in the Exchanges. 

In § 156.1130(a), we propose that a 

QHP issuer participating in an Exchange 

for at least 2 years must implement and 

report information regarding a quality 

improvement strategy which includes a 

payment structure to provide increased 

reimbursement or other market-based 

incentives in accordance with the health 

care topic areas in section 1311(g)(1) of 

the Affordable Care Act, for each QHP 

offered in an Exchange consistent with 

the guidelines developed by HHS under 

section 1311(g) of the Affordable Care 

Act. We note that the statutory QIS 

requirements, similar to the other 

Exchange quality standards, extend to 

all Exchange types, including a State 

Exchange and the FFE. For the QIS, we 

propose to provide State Exchanges 

flexibility to establish the timeline, 

format, validation, and other 

requirements related to the annual 

submission of QIS data by QHP issuers 

that participate in their respective 

Exchanges. Under this proposal, the 

establishment and implementation of 

such standards and other requirements 

by State Exchanges would support 

compliance with § 155.200(d), which 

requires the Exchange to evaluate and 

oversee implementation of the QIS 

(among other QHP issuer quality 

initiatives on coverage offered through 

Exchanges). We envision the standards 

that will be used for the FFE will 

provide the starting point for State 

Exchanges to build upon. 

We propose to phase in QIS 

implementation standards and reporting 

requirements to provide QHP issuers the 

necessary time to understand the 

populations enrolling in a QHP offered 

through the Exchange and to build 

quality performance data on its QHP 

enrollees. We believe that 

implementation of a QIS should be a 

continuous improvement process for 

which the QHP issuers are required to 

define the health outcome needs of their 

enrollees, set goals for improvement, 

and use increased reimbursement to 

their providers or other market-based 

incentives to stimulate achievement of 

those goals. We believe this proposed 

approach is consistent with other QHP 

issuer quality standards for coverage 

offered through an Exchange including 

implementation and reporting for the 

patient safety standards, Quality Rating 

System (QRS), and Enrollee Satisfaction 

Survey (ESS), outlined in subpart L of 

part 156. We further note that, 

consistent with existing regulations at 

§ 156.200(h), we anticipate that QHP 

issuers participating in Exchanges 

would be required to attest to 

compliance with QIS standards, along 

with the other QHP issuer quality 

initiatives for coverage offered through 

Exchanges established under subpart L 

of part 156, as part of the QHP 

application process. 

In paragraph (b), we propose to direct 

a QHP issuer to submit validated data in 

a form, manner and reporting frequency 

specified by the Exchange to support 

evaluation of quality improvement 

strategies in accordance with 

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70736 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

§ 155.200(d) and § 156.200(b)(5). We 

anticipate using the data collected as 

part of information used to evaluate and 

oversee compliance of QHP issuers in 

FFEs with the Exchange QIS standards 

and encourage State Exchanges to adopt 

a similar approach. We propose that 

beginning in 2016, a QHP issuer 

participating in the FFE for at least 2 

years would submit a QIS 

implementation plan to HHS and the 

applicable Exchange for each QHP 

offered in the Exchange, followed by 

annual progress updates. We anticipate 

that the implementation plan for a QHP 

issuer’s proposed QIS will reflect a 

payment structure that provides 

increased reimbursement or other 

market-based incentives for addressing 

at least one of the topics specified in 

section 1311(g)(1) of the Affordable Care 

Act. 

The QIS design should include 

elements such as: A rationale that 

describes its relevance to the QHP’s 

enrollee population; proposed 

performance measures and targets; 

description of activities to reduce health 

and health care disparities, as well as 

other chosen topics, goals, timeline, and 

information about barriers and 

mitigation planning. For example, we 

are considering requesting information 

from QHP issuers regarding the 

percentage of payments to providers 

that is adjusted based on quality and 

cost of health care services. We believe 

that QHP issuers measuring and 

reporting such information related to 

payment models that link quality and 

value of health care services is an 

important part of an issuer’s QIS. We 

also believe that information regarding 

provider payment models and marketbased incentives that link quality and 

value would promote transparency of 

such health plan quality data to 

Exchanges to help make better informed 

QHP certification decisions. We propose 

that one year after submitting the QIS 

implementation plan, the QHP issuer 

would submit information including, an 

annual update including a description 

of progress of QIS implementation 

activities, analysis of progress using 

proposed measures and targets, and any 

modifications to the QIS. Currently, we 

do not intend to require specific 

performance measures to be included in 

a QIS; however, we anticipate that 

health plan quality measures required 

for the QRS could be incorporated in a 

QHP issuer’s QIS. We believe that the 

proposed implementation and reporting 

for the QIS over time would provide 

meaningful QIS data from QHP issuers 

by minimizing administrative effort 

while also allowing for flexibility and 

innovation. We anticipate issuing 

technical guidance in the future that 

will provide operational details 

including data validation, other data 

submission processes, timeframes and 

potential minimum enrollment size 

threshold for coverage offered through 

the FFE. This guidance would be 

updated on an annual basis (or more 

frequently as may be necessary). We 

propose to allow State Exchanges to 

establish the data validation and 

submission requirements for QIS data 

from QHP issuers that participate in 

their respective Exchanges. 

In paragraph (c), we propose to direct 

a QHP issuer to submit data annually for 

activities that are conducted related to 

implementation of its QIS, in a manner 

and timeframe specified by the 

Exchange. For example, an issuer that 

participates in the FFE for two 

consecutive years for coverage 

beginning in January 2014 and January 

2015 would submit a QIS 

implementation plan to the FFE during 

the fall 2016 post-certification period, 

and in a format specified by HHS. A 

progress update on the QHP issuer’s QIS 

activities would be required the 

following year. Similarly, an issuer 

participating in the FFE for the first time 

during the 2015 open enrollment period 

for the 2016 coverage year would submit 

an implementation plan in the 2018 

post-certification period to align with 

our proposed approach of phasing in the 

QIS over time and allowing a QHP 

issuer 2 years to collect data and 

develop quality improvement strategies 

for its QHPs offered through an 

Exchange, before the submission of an 

implementation plan is required. A 

progress update on the QHP issuer’s QIS 

activities would be required the 

following year. We propose to allow 

State Exchanges to establish the specific 

timeline and format requirements for 

the annual submission of QIS data by 

QHP issuers that participate in their 

respective Exchanges. 

We seek comment on the proposed 

general requirement in paragraph (a) 

that describes the QIS and the 

applicability to QHP issuers that have 

been participating for at least 2 years in 

an Exchange. We seek comment on 

whether the proposed QIS standards 

should be applicable to all types of 

QHPs offered through the Exchange (for 

example, stand-alone dental plans, 

QHPs providing child-only coverage, 

and health savings accounts) or if 

different standards should be developed 

for the different types of QHPs offered 

through the Exchange. We also seek 

comment regarding whether certain 

types of QHPs offered through the 

Exchange should be excluded from the 

QIS certification requirement. 

We seek comment on the proposed 

data requirement in paragraph (b) and 

the proposed timeline in paragraph (c). 

We seek comment on the proposed 

approach of directing QHP issuers to 

provide information regarding an 

implementation plan followed by 

annual progress updates. We seek 

comment on whether there should be a 

minimum QHP enrollment size 

threshold to trigger the applicability of 

QIS standards proposed in § 155.1130. 

We also seek comment on what 

information is important to include for 

HHS and an Exchange to effectively 

monitor and evaluate a QIS. We seek 

comment on requiring information 

relating to provider payment models, 

such as an issuer’s minimum target or 

goal set with regards to the percentage 

of provider payments adjusted for 

quality and cost, to be submitted for 

compliance with QIS standards 

proposed in § 155.1130. We also seek 

comment on whether QIS data 

submitted and evaluated under section 

1311(g) should be collected in a uniform 

or standardized format or publically 

displayed to encourage transparency, 

support comparison of QHP issuer QIS 

activities, and align with other quality 

standards for QHP issuers. 

We note that multi-State plans, as 

defined in § 155.1000(a), are subject to 

reporting QIS data for evaluation, as 

described in paragraph (b). This 

rulemaking proposes to codify this 

general requirement at § 156.1130(d). 

We anticipate that OPM will provide 

guidance on QIS reporting to issuers 

with whom it holds multi-State plan 

contracts. 

8. Qualified Health Plan Issuer 

Responsibilities 

a. Administrative Appeals 

(§ 156.1220(c)) 

In the 2015 Payment Notice, we 

established an administrative appeals 

process designed to address unresolved 

discrepancies regarding advance 

payments of the premium tax credit, 

advance payments of cost-sharing 

reductions, FFE user fee payments, 

payments and charges for the premium 

stabilization programs, cost-sharing 

reduction reconciliation payments and 

charges, and assessments of default risk 

adjustment charges. We established a 

three-tier appeals process: a request for 

reconsideration under § 156.1220(a); a 

request for an informal hearing before a 

CMS hearing officer under 

§ 156.1220(b); and a request for review 

by the Administrator of CMS under 

§ 156.1220(c). 

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Under § 156.1220(a), we provided that 

an issuer may file a request for 

reconsideration of a processing error by 

HHS, HHS’s incorrect application of the 

relevant methodology, or HHS’s 

mathematical error only for advance 

payments of the premium tax credit, 

advance payments of cost-sharing 

reductions, FFE user fee payments, 

payments and charges for the premium 

stabilization programs, cost-sharing 

reduction reconciliation payments and 

charges, and assessments of default risk 

adjustment charges for a benefit year. In 

§ 156.1220(a)(6), we stated that a 

reconsideration decision would be final 

and binding for decisions regarding the 

advance payments of the premium tax 

credit, advance payments of costsharing reductions, and FFE user fees. A 

reconsideration decision with respect to 

other matters would be subject to the 

outcome of a request for informal 

hearing filed in accordance with 

§ 156.1220(b). 

Under § 156.1220(b), an issuer that 

elects to challenge the reconsideration 

decision may request an informal 

hearing before a CMS hearing officer. 

The CMS hearing officer’s decision 

would be final and binding, but subject 

to any Administrator’s review initiated 

in accordance with § 156.1220(c). 

We stated in § 156.1220(c)(1) that if 

the CMS hearing officer upholds the 

reconsideration decision, the issuer is 

permitted to request a review by the 

Administrator of CMS within 15 

calendar days of the date of the CMS 

hearing officer’s decision. We are 

proposing to modify this process to also 

permit CMS the opportunity to request 

review of the CMS hearing officer’s 

decision, and to permit the 

Administrator of CMS to decline to 

review the CMS hearing officer’s 

decision. Specifically, we propose to 

amend § 156.1220(c)(1) to permit either 

the issuer or CMS to request review by 

the Administrator of the CMS hearing 

officer’s decision. We propose to 

provide that any request for review of 

the hearing officer’s decision must be 

submitted to the Administrator of CMS 

within 15 calendar days of the date of 

the hearing officer’s decision, and must 

specify the findings or issues that the 

issuer or CMS challenges. We propose 

that the issuer or CMS be permitted to 

submit for review by the Administrator 

a statement supporting the decision of 

the CMS hearing officer. 

We also propose to amend 

§ 156.1220(c)(2) to provide the 

Administrator of CMS with the 

discretion to review or not review the 

decision of the CMS hearing officer after 

receiving a request for review under 

§ 156.1220(c)(1). We believe such 

discretion will permit the Administrator 

to focus resources on the priority 

matters, including disputes with 

implications for other issuers. In 

keeping with our current process set 

forth in § 156.1220(c), we propose that 

if the Administrator elects to review the 

CMS hearing officer’s decision, the 

Administrator will review the 

statements of the issuer and CMS, and 

any other information included in the 

record of the CMS hearing officer’s 

decision, and will determine whether to 

uphold, reverse, or modify the CMS 

hearing officer’s decision. We propose 

that the issuer or CMS be required to 

prove its case by clear and convincing 

evidence with respect to issues of fact, 

and that the Administrator will send the 

decision and the reasons for the 

decision to the issuer. As established in 

§ 156.1220(c)(3), the Administrator’s 

decision is final and binding. 

We note that this process is consistent 

with the Medicare Advantage risk 

adjustment data validation audit dispute 

and appeal processes set forth in 42 CFR 

422.311 and believe that this proposal 

will strengthen the administrative 

appeal process by providing CMS the 

opportunity to appeal inconsistencies 

from prior decisions and focus resources 

on disputes affecting many issuers. We 

seek comment on this proposal. 

I. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

1. Treatment of Cost-Sharing Reductions 

in MLR Calculation 

The Premium Stabilization rule (77 

FR 17220) aligned the definition of 

‘‘allowable costs’’ under the risk 

corridors program at § 153.500 with the 

definition of incurred claims under the 

MLR program at § 158.410 and 

expenditures for health care quality and 

health information technology under 

§ 158.150–§ 158.151. In the 2014 

Payment Notice, we additionally 

specified that allowable costs under risk 

corridors must be reduced by the 

amount of cost-sharing reduction 

payments received from HHS. While the 

MLR regulation describes a number of 

adjustments to an issuer’s incurred 

claims in the MLR calculation, it 

currently does not describe how 

incurred claims should be adjusted to 

reflect cost-sharing reduction receipts 

by the issuer. To align the calculations 

between the two programs, we propose 

to specify that cost-sharing reduction 

payments should be deducted from 

incurred claims under the MLR program 

just as they are deducted from allowable 

costs under the risk corridors program. 

As we previously stated in the 2014 

Payment Notice, it is our understanding 

that in most fee-for-service 

arrangements, cost-sharing reductions 

will be passed through to the fee-forservice provider, and therefore no 

adjustment to incurred claims for costsharing reduction payments is required 

to account for any retained payments. In 

contrast, in capitated arrangements, 

cost-sharing reduction payments should 

be accounted for as a reduction to 

incurred claims because capitation 

payments (which are reflected directly 

in an issuer’s incurred claims) will be 

raised to account for the reductions in 

providers’ cost-sharing income, and the 

issuer will retain the cost-sharing 

reduction payments. For these reasons, 

we propose to amend § 158.140(b)(1) to 

clarify that cost-sharing reduction 

payments received by the issuer, to the 

extent not reimbursed to the provider 

furnishing the item or service, must be 

deducted from incurred claims. 

2. Reporting of Federal and State Taxes 

The MLR December 1, 2010 interim 

final rule (75 FR 74864) directs issuers 

to report Federal and State taxes and 

assessments that are excluded from 

premium in the MLR and rebate 

calculations separately from Federal and 

State taxes and assessments not 

excluded from premium in MLR and 

rebate calculations. Specifically, the 

interim final rule notes that Federal 

taxes excluded from premium in the 

MLR include all Federal taxes and 

assessments allocated to health 

insurance coverage reported under 

section 2718 of the PHS Act. The 

Federal taxes not excluded from 

premium in the MLR under the interim 

final rule include Federal income taxes 

on investment income and capital gains. 

The State taxes excluded from premium 

in the MLR under the interim final rule 

include State income, excise, premium, 

and certain other taxes, and for certain 

issuers, community benefit 

expenditures. The State taxes not 

excluded from premium in the MLR 

under the interim final rule include 

State sales taxes and ceded premium 

taxes. While our technical guidance and 

the instructions for the MLR report 

required by section 2718 of the PHS Act 

provide some additional details 

regarding certain types of taxes that may 

or may not be excluded from premium, 

we believe that the current reference to 

all taxes and assessments allocated to 

health insurance coverage reported 

under section 2718 of the PHS Act 

would benefit from further clarification 

for future MLR reporting years. 

Specifically, employment taxes such as 

the employer and employee shares of 

the Federal Insurance Contributions Act 

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(FICA) and the Railroad Retirement Tax 

Act (RRTA) taxes, the Federal 

Unemployment Act (FUTA) and State 

unemployment taxes, and other similar 

taxes represent an administrative cost 

that is more directly related to an 

issuer’s overhead rather than to the 

characteristics of its health insurance 

business in a particular State and 

market. Therefore, in this rulemaking, 

we propose to amend the provisions for 

the reporting of Federal and State taxes 

in § 158.162(a)(2) and (b)(2) to provide 

that Federal and State employment 

taxes should not be excluded from 

premium in the MLR and rebate 

calculations. 

3. Distribution of Rebates to Group 

Enrollees in Non-Federal Governmental 

Plans 

The December 7, 2011 MLR Rebate 

Requirements for Non-Federal 

Governmental Plans interim final rule 

(76 FR 76596) directs issuers to 

distribute rebates to the group 

policyholders of non-Federal 

governmental plans. Under CMS’s direct 

enforcement authority over non-Federal 

governmental plans, the interim final 

rule further directs the group 

policyholders of such plans to use the 

portion of the rebate attributable to the 

amount of premium paid by subscribers 

of such plans for the benefit of 

subscribers in one of three prescribed 

ways. These provisions were put in 

place to ensure that rebates are used for 

the benefit of enrollees of non-Federal 

governmental plans, who do not receive 

the protections of Employee Retirement 

Income Security Act of 1974 (ERISA), as 

amended. Under ERISA and 

implementing regulations, most plan 

participants are assured that the rebate 

(when the rebate is determined to be a 

plan asset) is applied for their benefit 

within 3 months of receipt by the 

policyholder. Currently, no similar 

protection is afforded to subscribers of 

non-Federal governmental plans. 

In this proposed rule, we propose to 

amend the provisions for distribution of 

rebates in § 158.242(b) to require group 

policyholders of non-Federal 

governmental plans to use the 

subscribers’ portion of the rebate for the 

subscribers’ benefit within 3 months of 

receipt of the rebate by the group 

policyholder. Under this proposal, plans 

will continue to be able to use the rebate 

to reduce the subscribers’ portion of 

premium for the subsequent policy year 

(including by spreading it over the 12 

months of the policy year) as long as the 

subsequent policy year commences 

within 3 months of receipt of the rebate 

by the group policyholder. If the 

subsequent policy year commences 

outside this 3-month window, the group 

policyholder of a non-Federal 

governmental plan must distribute the 

subscribers’ portion of the rebate within 

3 months in the form of a cash refund 

or by applying a mid-policy year 

premium credit to the subscriber’s 

portion of premium. We note that, 

because under § 158.242(b)(3) group 

health plans that are not governmental 

plans and are not subject to ERISA (such 

as church plans) must follow the same 

rebate distribution rules in order to 

receive the rebate directly, the same 

distribution deadline will apply to such 

plans. Policyholders that are nonFederal governmental or other group 

health plans not subject to ERISA that 

do not apply or distribute rebates within 

3 months of receipt will be required to 

pay interest on the rebates, much the 

same as issuers are required to do if they 

do not disburse the rebate to the 

policyholder by the due date. This 

proposed policy will ensure that 

consumers enrolled in group health 

plans not subject to ERISA do not 

experience unnecessary delays in 

receiving the benefit of the rebates. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. This proposed rule contains 

information collection requirements 

(ICRs) that are 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 13. To fairly 

evaluate whether an information 

collection should be approved by OMB, 

section 3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this proposed rule that 

contain ICRs. We generally used data 

from the Bureau of Labor Statistics to 

derive average labor costs (including a 

35 percent increase for fringe benefits 

and overhead) for estimating the burden 

associated with the ICRs. 

A. ICRs Regarding Standards for 

Notification of Change of Ownership 

(§ 146.152(i), § 147.106(g), § 148.122(j)) 

When an issuer that offers a QHP, a 

plan otherwise subject to risk corridors, 

a risk adjustment covered plan, or a 

reinsurance eligible plan experiences a 

change in ownership, the issuer would 

be required to notify HHS of a change 

of ownership in a manner to be 

specified by HHS and provide the legal 

name, Health Insurance Oversight 

System (HIOS) plan identifier, and tax 

identification number of the original 

and post-transaction issuers and the 

effective date of the change of 

ownership. The information would have 

to be submitted by the latest of (1) the 

date the transaction is entered into; or 

(2) the 30th day prior to the effective 

date of the transaction. The burden 

associated with this proposed 

requirement would be the time and 

effort for the issuer to notify HHS of a 

change of ownership. We estimate that 

it would take an insurance operations 

analyst 30 minutes (at an hourly wage 

rate of $56.63) to prepare the data 

related to the change of ownership, and 

10 minutes for a senior manager (at an 

hourly wage rate of $103.95) to review 

the data and transmit it electronically to 

HHS. We estimate that it would cost an 

issuer $45.65 to comply with this 

reporting requirement. Although at this 

time we cannot precisely estimate the 

number of issuers that would be 

reporting changes of ownership, we 

expect that no more than 20 issuers 

would be subject to this reporting 

requirement annually, for a total burden 

of $913. 

B. ICRs Regarding Effective Rate Review 

Programs (§ 154.301) 

In § 154.301(b)(2), we propose that if 

a State intends to make the information 

contained in Parts I, II, and III of the 

Rate Filing Justification regarding 

proposed rate increases subject to 

review available to the public prior to 

the date specified in guidance by the 

Secretary, or if it intends to make the 

information contained in Parts I, II, and 

III of the Rate Filing Justification 

regarding final rate increases available 

to the public prior to the first day of the 

annual open enrollment period for the 

applicable calendar year, the State must 

notify CMS in writing of its intent to 

publish this information at least 30 days 

before it makes the information public 

and the date it intends to make the 

information public. We intend to seek 

OMB approval and solicit public 

comment on this information collection 

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requirement, in accordance with the 

Paperwork Reduction Act of 1995, at a 

future date. 

C. ICRs Regarding Standards for HHSApproved Vendors of FederallyFacilitated Exchange Training for 

Agents and Brokers (§ 155.222) 

In § 155.222, we describe the 

information collection and disclosure 

requirements that pertain to the 

approval of vendors’ FFE agent and 

broker training programs, including 

information verification and 

administration of identity proofing. The 

burden estimate associated with these 

disclosure requirements includes the 

time and effort required for vendors to 

develop, compile, and submit the 

application information and any 

documentation or agreement necessary 

to support oversight in the form and 

manner required by HHS. We estimate 

that HHS would receive applications 

from nine or fewer vendors, and that it 

will take each vendor approximately 10 

hours to complete an application and 

the agreement, at a cost of $24.10 per 

hour. Therefore, we estimate a total 

burden of approximately 90 hours and 

a cost of $2,169 as a result of this 

proposed requirement. HHS anticipates 

developing a model vendor application 

that will include data elements 

necessary for HHS review and approval. 

If the proposal is finalized, HHS would 

solicit public comment on the model 

application, estimate the burden on 

vendors for complying with this 

provision of the regulation, and submit 

the application for OMB approval in the 

future. We request comment on the 

burden for the application and review 

process for these entities. In addition, 

HHS will consider current training costs 

for State licensed agents and brokers for 

comparable training offered by the 

vendor to comparable audiences when 

reviewing vendor applications. 

In § 155.222(d), we propose a process 

through which HHS would monitor 

approved vendors for ongoing 

compliance. HHS may require 

additional information from approved 

vendors to be periodically submitted in 

order to ensure continued compliance 

related to the obligations described in 

this section. We estimate that HHS 

would receive applications from nine or 

fewer vendors. We estimate that it will 

take no longer than 10 hours (at a cost 

of $24.10 per hour) for each vendor to 

comply with any additional monitoring 

by HHS. Therefore, we estimate a total 

annual burden of 90 hours for all 

vendors for a total cost burden estimate 

of $2,169. In § 155.222(e) of this 

proposed rule, we propose to establish 

a process by which a vendor whose 

application is not approved or whose 

approval is revoked by HHS can appeal 

HHS’s determination. We discuss the 

costs associated with the proposed 

appeals process in the Regulatory 

Impact Analysis (RIA) section of this 

proposed rule. 

D. ICRs Regarding Collection of Data To 

Define Essential Health Benefits 

(§ 156.120) 

In § 156.120, we propose to give 

States an opportunity to select a new 

base-benchmark plan to serve as a 

reference plan to define EHB in that 

State for the 2017 plan year. The 

information collection associated with 

State selection and submission of a 

benchmark plan and associated benefits 

is currently approved under OMB 

Control Number 0938–1174. We expect 

to collect less information for the 2017 

plan year than we previously collected 

for this purpose, and therefore expect to 

revise our current burden estimate to 

reflect the reduced burden on issuers. 

We intend to seek OMB approval and 

solicit public comment on this 

information collection requirement, in 

accordance with the Paperwork 

Reduction Act of 1995, at a future date. 

E. ICRs Regarding Prescription Drug 

Benefits (§ 156.122) 

In § 156.122, we propose to require 

health plans that are required to comply 

with EHB to establish a P&T Committee 

according to the process and standards 

proposed in this rule. We expect that 

health plans have already established 

P&T Committees that meet these 

standards and follow these processes. 

We propose recordkeeping requirements 

for the P&T committee in this proposed 

rule. However, because we believe that 

issuers are already required to maintain 

such documentation, such as for 

accreditation purposes, and issuers tend 

to use the same formulary drug list for 

multiple plans, we believe that our 

propose recordkeeping requirement will 

only impose minimal additional burden 

on issuers. We, therefore, estimate that 

it will take a compliance officer 

approximately 8 hours (at an hourly 

wage rate of $43.34) to prepare for and 

attend meetings on a quarterly basis, 

and maintain the required 

documentation. Therefore, for 

approximately 2,400 plans in the 

individual and small group market that 

would be subject to this requirement, 

we estimate an aggregate annual burden 

of 76,800 hours ($3,328,512) associated 

with this proposed requirement. 

F. ICRs Regarding Termination Notices 

for SHOP (§ 156.285(d)(1)(ii)) and 

§ 155.735(d)(1)(iii) and (g)) 

We are proposing in 

§ 156.285(d)(1)(ii) and 

§ 155.735(d)(1)(iii) and (g) to require 

QHP issuers participating in the SHOP 

to provide notices to qualified 

employers and enrollees related to 

terminations due to rescission in 

accordance with § 147.128 and due to 

the QHP’s termination, decertification, 

or non-renewal of certification, while 

shifting the burden of notifying 

qualified employers and enrollees of 

terminations due to loss of eligibility or 

nonpayment of premiums to the SHOP. 

We note that, while our current rules 

require issuers to provide notice of 

terminations when coverage is 

rescinded in accordance with § 147.128, 

or when the issuer elects not to seek 

recertification for a QHP offered through 

the SHOP, this proposal would expand 

QHP issuers’ notice requirements to 

circumstances in which the QHP 

terminates or is decertified in 

accordance with § 155.1080. The 

proposed notices must inform the 

enrollee and qualified employer, 

promptly and without undue delay, of 

the termination effective date and the 

reason for the termination. The burden 

estimate associated with this 

requirement includes the time and effort 

needed to develop the notice and to 

distribute it through an automated 

process to qualified employer and the 

enrollee, as appropriate. We estimate 

that approximately 445 QHP issuers 

(including dental issuers) will 

participate on the SHOP. We estimate 

that it will take approximately 35 hours 

annually to develop and transmit this 

notice, including 4 hours for a health 

policy analyst (at an hourly wage rate of 

$58.05), 3 hours for an operations 

analyst (at an hourly wage rate of 

$56.63), 25 hours for a computer 

programmer (at an hourly wage rate of 

$48.61), 2 hours for a fulfillment 

manager (at an hourly wage rate of 

$27.00), and 1 hour for a senior manager 

(at an hourly wage rate of $103.95). 

Therefore, we estimate an aggregate 

burden of 15,575 hours across and 

$790,004 for QHP issuers participating 

in the SHOP as a result of this proposed 

requirement. 

Based on the above per-notice 

development rates and hours, we 

believe that each State-based SHOP 

would spend roughly 70 hours annually 

to prepare the 2 termination notices (35 

hours per notice), for a total cost of 

$3,550 to design and implement the 

notices proposed under § 155.725(g). We 

estimate that there will be 

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64Summary of Benefits and Coverage and 

Uniform Glossary Final Rule (‘‘SBC Final Rule’’), 77 

FR 8690 (Feb. 14, 2012). We have already received 

OMB approval under OMB control number 0938– 

1146 for the collection of information requirements 

related to the SBC provisions as finalized under 

current rules. 

65Under § 156.420(a), for each of its silver health 

plans that an issuer offers, the issuer must offer 

three variations of the standard silver plan that 

reflect, in addition to the applicable annual 

limitation on cost-sharing, the following: (1) A 

silver plan variation with cost-sharing reductions 

such that the actuarial value (AV) of the variation 

is 94 percent plus or minus the de minimis 

variation for a silver plan variation; (2) a silver plan 

variation with cost-sharing reductions such that the 

AV of the variation is 87 percent plus or minus the 

de minimis variation for a silver plan variation; and 

(3) a silver plan variation with cost-sharing 

reductions such that the AV of the variation is 73 

percent plus or minus the de minimis variation for 

a silver plan variation. Under § 156.420(b), for each 

QHP at any metal level that an issuer offers, the 

issuer must offer two variations to American 

Indians/Alaska Natives that reflect the following: 

(1) A variation of the QHP with all cost sharing 

eliminated; and (2) a variation of the QHP with no 

cost-sharing on any item or service that is an 

essential health benefit furnished directly by the 

Indian Health Service, an Indian Tribe, Tribal 

Organization, or Urban Indian Organization, or 

through referral under contract health services. 66SBC Final Rule, 77 FR 8691 (Feb. 14, 2012). 

approximately 18 State-based SHOPs, 

and that all State-based SHOPs would 

be subject to this requirement. 

Therefore, we estimate an aggregate 

burden of 1,260 hours and $63,900 for 

State-based SHOPs as a result of this 

proposed requirement. 

G. ICRs Regarding Plan Variation 

Notices and Changes in Eligibility for 

Cost-Sharing Reductions (§ 156.420 and 

§ 156.425) 

In § 156.420(h), we propose that an 

issuer must provide a summary of 

benefits and coverage (SBC) for each 

plan variation of a QHP it offers in 

accordance with the rules set forth 

under § 156.420 (referred to in this 

section as a ‘‘plan variation SBC’’), in a 

manner that is consistent with the 

standards set forth in § 147.200. In 

§ 156.425(c), we propose that if an 

individual’s assignment to a plan 

variation or standard plan without costsharing reductions changes in the 

course of a benefit year (in accordance 

with § 156.425(a)), an issuer must 

provide an SBC in a manner consistent 

with the standards set forth in 

§ 147.200, as soon as practicable after 

receiving notice from the Exchange of 

the individual’s change in eligibility 

and no later than 7 business days 

following receipt of notice. The burden 

associated with this proposed 

requirement would be the time and 

effort necessary for an issuer to create 

and provide plan variation SBCs to 

affected individuals under § 156.420. 

Nearly all issuers that would be 

affected by this proposal already 

incurred one-time start-up costs related 

to implementing the SBC requirements 

established under § 147.200, and are 

already providing SBCs that reflect the 

standard QHPs they offer.64 We estimate 

that QHP issuers would leverage 

existing processes to generate and 

distribute plan variation SBCs under 

proposed § 156.420(h). We estimate that 

issuers would incur additional burden 

to produce and distribute plan variation 

SBCs under the proposed §§ 156.420(h) 

and 156.425(c). The additional burden 

would be associated with three tasks: (1) 

Producing plan variation SBCs; (2) 

distributing plan variation SBCs; and (3) 

distributing a plan variation SBC (or 

standard QHP without cost-sharing 

reductions) after a change in eligibility 

in the course of a benefit year. We 

intend to revise the information 

collection approved under OMB Control 

Number 0938–1187 to reflect this 

additional burden. 

1. Producing Plan Variation SBCs 

Because stand-alone dental plans 

(SADPs) are not required to complete 

SBCs, we exclude these plans from the 

number of QHPs that we estimate would 

be required to comply with the 

proposed requirement. We estimate that 

approximately 575 issuers participate in 

the Exchange, and that each issuer offers 

one QHP per metal level, with four zero 

cost-sharing plan variations and four 

limited cost-sharing plan variations (two 

per metal level per QHP) and three 

silver plan variations.65 Therefore, we 

estimate that each issuer offers 11 plan 

variations, and would produce 11 SBCs 

to reflect each plan variation, for a total 

of 6,325 plan variation SBCs annually. 

We estimate that it will take up to one 

hour to produce each plan variation 

SBC, for an annual time burden of 11 

hours for each issuer. We estimate that 

it would take an information technology 

(IT) professional 5 hours (at an hourly 

wage rate of $54.39), a benefits/sales 

professional 5.5 hours (an hourly wage 

rate of $44.90) per hour, and an attorney 

30 minutes (at an hourly wage rate of 

$84.96) to comply with the proposed 

requirements. Therefore, we estimate a 

total annual cost burden of $561.44 per 

issuer, and $322,828 (6,325 hours) for 

all issuers affected by this proposed 

requirement. 

2. Distributing Plan Variation SBCs 

We are unable to estimate the number 

of CSR-eligible enrollees at this time 

and the related burden on issuers to 

provide for these disclosures. We expect 

that the vast majority (approximately 95 

percent) of the total number of plan 

variation SBCs provided in accordance 

with proposed § 156.420(h) would be 

sent prior to enrollment and 

electronically at minimal cost, under the 

timing and form requirements set forth 

in § 147.200(a)(1)(iv) and (a)(4)(iii). Of 

the remaining number of plan variation 

SBCs that would be provided, we 

estimate that approximately 4 percent of 

these disclosures would be sent in other 

instances, in accordance with the other 

timing requirements that may apply, 

including, requests for a plan variation 

SBC made by a consumer in the course 

of the benefit year. We expect that the 

vast majority of these disclosures would 

be provided electronically at minimal 

cost. We assume that there are costs for 

paper disclosures, but no costs for 

electronic disclosures.66 We expect that 

up to one percent of plan variation SBCs 

would be provided in paper form. We 

estimate that the labor costs associated 

with distributing each SBC would be 

$1.63 (3 minutes for an administrative 

assistant at an hourly wage rate of 

$32.59), and that printing, mailing, and 

supply costs would be $0.69 per SBC 

($0.05 to print each page and $0.49 for 

first class postage), for a total costs of 

$2.32 per SBC. We estimate an annual 

burden of $331 for each QHP issuer and 

an aggregate burden of $190,240 for all 

issuers that would be subject to the 

proposed requirement. 

3. Notice After Changes in Eligibility for 

Cost-Sharing Reductions 

In § 156.425(c), we propose to require 

an issuer to provide adequate notice to 

the individual about the availability of 

the SBC that accurately reflects the 

applicable plan variation of the QHP (or 

the standard QHP without CSRs) if an 

enrollee’s eligibility for CSRs changes in 

the course of a benefit year. Similarly, 

if an enrollee changes QHPs as the 

result of a special enrollment period in 

accordance with § 155.420(d)(6), the 

issuer of the new QHP would be 

required to provide the individual with 

an SBC that accurately reflects the new 

QHP. We are unable to estimate the 

number of CSR-eligible enrollees who 

would experience a change in eligibility 

for CSRs at this time and the related 

burden on issuers to provide for these 

disclosures. We expect that the vast 

majority (approximately 99 percent) of 

the total number of SBCs provided in 

accordance with proposed § 156.425(c) 

would be sent electronically at minimal 

cost. We estimate that the labor costs 

associated with producing each SBC 

would be approximately $1.63 (3 

minutes for an administrative assistant 

at an hourly wage rate of $32.59), and 

that printing, and mailing costs would 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70741 

be $0.69 ($0.05 to print each page and 

$0.49 for first class postage), for a total 

cost of $2.32 per SBC. We estimate a 

total annual cost of $165 for each QHP 

issuer and $95,120 for all QHP issuers 

that would be subject to this proposed 

requirement. 

H. ICRs Regarding the Collection and 

Reporting of Quality Improvement 

Strategies (§ 156.1130) 

In § 156.1130, we propose 

requirements for QHP issuers related to 

data collection and submission of 

information regarding a quality 

improvement strategy (QIS). QIS 

standards will establish the minimum 

requirements for the FFE, States with 

plan management functions and that 

State Exchanges must follow. State 

Exchanges can, if desired, build 

additional reporting requirements in 

accordance with their needs. Based on 

current agency estimates of the number 

of major medical QHPs and stand-alone 

dental plans (SADPs) being offered 

through the Exchange, we estimate that 

677 QHP issuers would collect and 

report QIS data annually. This estimate 

assumes 677 QHP issuers (all QHP 

issuers in all Marketplace types, 

including SADPs) and covers the annual 

costs for a QHP issuer over a 3-year 

period (2016–2018). The burden 

associated with submitting initial 

attestations as part of the QHP 

certification process is currently 

accounted for under OMB Control 

Number 0938–1187. We estimate that it 

would take each QHP issuer 48 hours (at 

a cost of $3,372) to collect this QIS data 

and to submit this information to the 

Exchange. Therefore, we estimate an 

aggregate burden of 32,496 hours and 

$2,282,844 as the total annual burden 

for the anticipated 677 QHP issuers 

associated with these proposed 

requirements. 

If SADPs are not included, the 

estimate assumes 575 QHP issuers (all 

issuers in all Marketplaces excluding 

SADPs) and covers the annual costs for 

a QHP issuer over a 3-year period 

(2016–2018). The burden associated 

with submitting initial attestations as 

part of the QHP certification process is 

currently accounted for under OMB 

Control Number 0938–1187. We 

estimate that it would take each QHP 

issuer 48 hours (at a cost of $3,372) to 

collect this QIS data and to submit this 

information to the Exchange. Therefore, 

we would estimate an aggregate burden 

of 27,600 hours and $1,938,900 as the 

total annual burden for the anticipated 

575 QHP issuers associated with these 

proposed requirements, if SADPs are 

not included. 

TABLE 12—ANNUAL REPORTING, RECORDKEEPING AND DISCLOSURE BURDEN

Regulation 

section(s) 

Number of 

respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting 

($) 

Total labor 

cost of 

reporting 

($) 

Total capital/ 

maintenance 

costs 

($) 

Total 

cost 

($) 

§ 155.222(a) ........ 9 9 10.00 90 24.10 2,169 0 2,169 

§ 155.222(d) ........ 9 9 10.00 90 24.10 2,169 0 2,169 

§ 155.725(g) ........ 18 36 35.00 1,260 50.71 63,900 0 63,900 

§ 156.122 ............ 2,400 2,400 32.00 76,800 43.34 3,328,512 0 3,328,512 

§ 156.285(d) ........ 445 445 35.00 15,575 50.72 790,004 0 790,004 

§ 156.420 ............ 575 6,325 1.00 6,325 51.04 322,828 0 322,828 

§ 156.420 ............ 575 81,000 0.05 4,050 32.59 131,990 58,250 190,240 

§ 156.425 ............ 575 41,000 0.05 2,025 32.59 65,995 29,125 95,120 

§ 156.1130 .......... 677 677 48 32,496 70.25 2,282,844 0 2,282,844 

Total ............. 2,400 ..................... ..................... 138,711 ..................... 6,990,411 87,375 7,007,786 

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 

requirements. These requirements are 

not effective until they have been 

approved by OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS’ Web site 

at http://www.cms.hhs.gov/Paperwork

ReductionActof1995; email your 

request, including your address, phone 

number, OMB control number, and CMS 

document identifier, to Paperwork@

cms.hhs.gov; or call the Reports 

Clearance Office at 410–786–1326. 

We invite public comments on these 

potential information collection 

requirements. If you comment on these 

information collection and 

recordkeeping requirements, please 

submit your comments electronically as 

specified in the ADDRESSES section of 

this proposed rule. Please include 

‘‘CMS–9944–P,’’ the ICR’s OMB control 

number, and the CMS document ID 

number in your comment. 

PRA-specific comments must be 

received by January 26, 2015. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this proposed rule, and, when we 

proceed with a subsequent document, 

we will respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Statement (or 

Analysis) 

A. Statement of Need 

This proposed rule proposes 

standards related to the premium 

stabilization programs (risk adjustment, 

reinsurance, and risk corridors) for the 

2016 benefit year, as well as certain 

modifications for the 2015 benefit year, 

that will protect issuers from the 

potential effects of adverse selection and 

protect consumers from increases in 

premiums due to issuer uncertainty. 

The Premium Stabilization Rule and the 

2014 and 2015 Payment Notices 

provided detail on the implementation 

of these programs, including the specific 

parameters for the 2014 and 2015 

benefit years applicable to these 

programs. This rule also proposes 

additional standards related to essential 

health benefits, meaningful access in the 

Exchange, consumer assistance tools 

and programs of an Exchange, nonNavigator assistance personnel, costsharing parameters and cost-sharing 

reduction notices, quality improvement 

strategy standards for issuers of 

qualified health plans participating in 

Exchanges, guaranteed availability and 

guaranteed renewability, minimum 

essential coverage, the medical loss ratio 

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70742 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

program, the Small Business Health 

Options Program, and FFE user fees. 

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), and the Congressional Review 

Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for rules with economically 

significant effects ($100 million or more 

in any 1 year). 

OMB has determined that this 

proposed rule is ‘‘economically 

significant’’ within the meaning of 

section 3(f)(1) of Executive Order 12866, 

because it is likely to have an annual 

effect of $100 million in any 1 year. 

Accordingly, we have prepared an RIA 

that presents the costs and benefits of 

this proposed rule. 

Although it is difficult to discuss the 

wide-ranging effects of these provisions 

in isolation, the overarching goal of the 

premium stabilization, market 

standards, and Exchange-related 

provisions and policies in the 

Affordable Care Act is to make 

affordable health insurance available to 

individuals who do not have access to 

affordable employer-sponsored 

coverage. The provisions within this 

proposed rule are integral to the goal of 

expanding coverage. For example, the 

premium stabilization programs help 

prevent risk selection and decrease the 

risk of financial loss that health 

insurance issuers might otherwise 

expect in 2016 and the advance 

payments of the premium tax credit and 

cost-sharing reduction programs assist 

low- and moderate-income consumers 

and American Indians/Alaska Natives in 

purchasing health insurance. The 

combined impacts of these provisions 

affect the private sector, issuers, and 

consumers, through increased access to 

health care services including 

preventive services, decreased 

uncompensated care, lower premiums, 

establishment of quality improvement 

strategy standards, and increased plan 

transparency. Through the reduction in 

financial uncertainty for issuers and 

increased affordability for consumers, 

these provisions are expected to 

increase access to affordable health 

coverage. 

HHS anticipates that the provisions of 

this proposed rule will help further the 

Department’s goal of ensuring that all 

consumers have access to quality and 

affordable health care and are able to 

make informed choices, that Exchanges 

operate smoothly, that premium 

stabilization programs work as 

intended, that SHOPs are provided 

flexibility, and that employers and 

consumers are protected from 

fraudulent and criminal activities. 

Affected entities such as QHP issuers 

would incur costs to comply with the 

proposed provisions, including 

administrative costs related to notices, 

quality improvement strategy 

requirements, training and 

recertification requirements, and 

establishing a larger provider network. 

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 13 below depicts an accounting 

statement summarizing HHS’s 

assessment of the benefits, costs, and 

transfers associated with this regulatory 

action. 

This proposed rule implements 

standards for programs that will have 

numerous effects, including providing 

consumers with affordable health 

insurance coverage, reducing the impact 

of adverse selection, and stabilizing 

premiums in the individual and small 

group health insurance markets and in 

an Exchange. We are unable to quantify 

certain benefits of this proposed rule— 

such as improved health outcomes and 

longevity due to continuous quality 

improvement and increased insurance 

enrollment—and certain costs—such as 

the cost of providing additional medical 

services to newly-enrolled individuals. 

The effects in Table 13 reflect 

qualitative impacts and estimated direct 

monetary costs and transfers resulting 

from the provisions of this proposed 

rule for reinsurance contributing entities 

and health insurance issuers. The 

annualized monetized costs described 

in Table 13 reflect direct administrative 

costs to these entities as a result of the 

proposed provisions, and include 

administrative costs related to notices, 

quality improvement strategy 

requirements, and training and 

recertification requirements that are 

estimated in the Collection of 

Information section of this proposed 

rule. The annual monetized transfers 

described in Table 13 include costs 

associated with the reinsurance 

contribution fee and the risk adjustment 

user fee paid to HHS by issuers, and 

additional MLR rebate payments from 

issuers to consumers. We note estimated 

transfers in Table 13 do not reflect any 

FFE user fees paid by insurance issuers 

because we cannot estimate those fee 

totals. We also note that, while we are 

proposing a 2016 reinsurance 

contribution rate that is lower than the 

2014 and 2015 reinsurance contribution 

rates, total reinsurance administrative 

expenses, included in the reinsurance 

contribution rate, will slightly increase 

from 2015 to 2016. In addition, as a 

result of HHS’s increased contract costs 

related to risk adjustment operations 

and risk adjustment data validation, we 

are proposing to collect a total of $50 

million in risk adjustment user fees or 

$1.75 per enrollee per year from risk 

adjustment issuers, which is greater 

than the $0.96 per-enrollee-per-year risk 

adjustment user fee amount established 

for benefit year 2015. This increase is 

due in large part to risk adjustment data 

validation costs that will occur in 2016. 

We are also including costs associated 

with administrative appeals under 

§ 156.1220 in the RIA of this proposed 

rule. 

TABLE 13—ACCOUNTING TABLE

Benefits: 

Qualitative: 

* Increased enrollment in the individual market leading to improved access to health care for the previously uninsured, especially individuals 

with medical conditions, which will result in improved health and protection from the risk of catastrophic medical expenditures. 

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TABLE 13—ACCOUNTING TABLE—Continued 

* Encourage continuous quality improvement among QHP issuers to improve health outcomes at lower costs. 

* Allow Exchanges to make informed QHP certification decisions. 

* Increasing coverage options for small businesses and part-time employees while mitigating the effect of adverse selection. 

* Ensure that consumers in group health plans not subject to ERISA receive the benefit of MLR rebates in a timely manner. 

Costs: Estimate Year dollar Discount rate Period covered 

Annualized Monetized ($/year) ................. 7.00 million ............................................... 2014 7% 2015–2018 

7.00 million ............................................... 2014 3% 2015–2018 

Quantitative: 

* Costs incurred by issuers and contributing entities to comply with provisions in the proposed rule. 

* Costs incurred by States for complying with audits of State-operated reinsurance programs. 

Transfers: Estimate Year dollar Discount rate Period covered 

Annualized Monetized ($/year) ................. 63.61 million ............................................. 2014 7% 2015–2018 

63.52 million ............................................. 2014 3% 2015–2018 

* Transfers reflect incremental cost increases from 2015–2016 for reinsurance administrative expenses and the risk adjustment user fee, which 

are transfers from contributing entities and health insurance issuers to the Federal government. Transfers also reflect annual transfer from 

shareholders or nonprofit stakeholders to enrollees of rebates paid by issuers for coverage in the individual and group markets, resulting from 

clarification regarding MLR methodology to account for Federal and State employment taxes. 

* Unquantified: Lower premium rates in the individual market due to the improved risk profile of the insured, competition, and pooling. 

This RIA expands upon the impact 

analyses of previous rules and utilizes 

the Congressional Budget Office’s (CBO) 

analysis of the Affordable Care Act’s 

impact on Federal spending, revenue 

collection, and insurance enrollment. 

Table 14 summarizes the effects of the 

risk adjustment and reinsurance 

programs on the Federal budget from 

fiscal years 2015 through 2018, with the 

additional, societal effects of this 

proposed rule discussed in this RIA. We 

do not expect the provisions of this 

proposed rule to significantly alter 

CBO’s estimates of the budget impact of 

the risk adjustment, reinsurance and 

risk corridors programs that are 

described in Table 14. For this RIA, we 

are shifting the estimates for the risk 

adjustment and reinsurance programs to 

reflect the 4-year period from fiscal 

years 2015 through 2018, because CBO’s 

scoring of the risk adjustment and 

reinsurance programs assumed that 

payments and charges would begin in 

2014, when in fact these payments and 

charges will begin in the 2015 calendar 

year for the 2014 benefit year. The CBO 

assumed that aggregate collections for 

the risk corridors program would offset 

payments made to other issuers. We 

note that transfers associated with the 

risk adjustment and reinsurance 

programs were previously estimated in 

the Premium Stabilization Rule; 

therefore, to avoid double-counting, we 

do not include them in the accounting 

statement for this proposed rule (Table 

13). 

In addition to utilizing CBO 

projections, HHS conducted an internal 

analysis of the effects of its regulations 

on enrollment and premiums. 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 2015 Payment Notice for the 

impacts associated with the cost-sharing 

reduction program, the advance 

payments of the premium tax credit 

program, the premium stabilization 

programs, and FFE user fee 

requirements. 

TABLE 14—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT, REINSURANCE, AND

RISK CORRIDORS PROGRAMS FROM FY 2014–2018, IN BILLIONS OF DOLLARS

Year 2014 2015 2016 2017 2018 2014–2018 

Risk Adjustment, Reinsurance, and Risk 

Corridors Program Payments ............... 0 18 19 22 15 74 

Risk Adjustment, Reinsurance, and Risk 

Corridors Program Collections * ........... 0 19 18 22 15 74 

* Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time. Source: Congressional 

Budget Office. Updated Estimates of the Insurance Coverage Provisions of the Affordable Care Act. 

1. Rate Review 

The proposed rule would trigger 

review of rate increases that meet or 

exceed the applicable review threshold 

when such increases happen at the 

‘‘plan’’ level rather than at the 

‘‘product’’ level. This would protect 

consumers against unreasonable rate 

increases for their plans, since, under 

current regulations, it is possible for a 

plan to experience a rate increase higher 

than the threshold and still avoid 

review because the average rate increase 

for the product does not meet or exceed 

the threshold. Issuers already submit 

this level of information under an 

existing information collection and are 

not likely to experience significant 

increase in costs related to their 

submissions. States may have to review 

more submissions and experience an 

increase in related costs. The proposal 

to establish a uniform timeframe by 

which issuers in every State must 

submit a completed Rate Filing 

Justification to CMS and the applicable 

State for all rate increases, including 

both QHPs and non-QHPs, would 

provide timely information to 

consumers and other stakeholders and 

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70744 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

ensure that State and Federal regulators 

have adequate time for review prior to 

implementation of a rate increase. This 

approach would also reduce the 

potential for anti-competitive behavior 

and promote fair market competition 

between issuers in the Exchange and 

non-Exchange markets. The proposed 

amendment to specify the timing for 

States to make proposed and final rate 

increase information available to the 

public would ensure that consumers 

have timely access to this information. 

2. Change of Ownership Notification 

Requirement 

We propose in § 147.106(g) that when 

an issuer of a QHP, a plan otherwise 

subject to risk corridors, a risk 

adjustment covered plan, or a 

reinsurance-eligible plan, experiences a 

change in ownership as recognized by 

the State in which the plan is offered, 

the issuer must notify HHS in a manner 

specified by HHS, by the later of (1) the 

date the transaction is entered into; or 

(2) the 30th day prior to the effective 

date of the transaction. We expect that 

upon notification, issuers may need to 

work with HHS to clarify operational 

processes related to the HHSadministered programs, and will follow 

forthcoming guidance related to such 

operational processes. We estimate the 

administrative costs associated with the 

proposed notification requirement in 

the Collection of Information section of 

this proposed rule. 

3. Appeals Process for HHS-Approved 

Vendors for FFE Training of Agents and 

Brokers 

In § 155.222, we propose information 

collection and disclosure requirements 

that pertain to the approval of vendors 

to have their FFE agent and broker 

training and information verification 

programs recognized for agents and 

brokers assisting with or facilitating 

enrollment in individual market or 

SHOP coverage through the FFE. We 

also establish a monitoring and appeals 

process for such HHS-approved 

vendors. We estimate that five vendors 

that apply may not have their 

application approved, and one vendor 

may have their approval revoked, and 

all of those vendors will appeal HHS’s 

determination and submit additional 

documentation to HHS. We estimate 

that filing an appeal with HHS will take 

no longer than one hour. Therefore, at 

an hourly wage rate of $24.10, we 

estimate a total cost of $144.60 as a 

result of this proposed appeals process. 

4. Risk Adjustment 

The risk adjustment program is a 

permanent program created by the 

Affordable Care Act that transfers funds 

from lower risk, non-grandfathered 

plans to higher risk, non-grandfathered 

plans in the individual and small group 

markets, inside and outside the 

Exchanges. We established standards for 

the administration of the risk 

adjustment program, in subparts D and 

G of part 45 of the CFR. 

A State approved or conditionally 

approved by the Secretary to operate an 

Exchange may establish a risk 

adjustment program, or have HHS do so 

on its behalf. As described in the 2014 

and 2015 Payment Notices, if HHS 

operates risk adjustment on behalf of a 

State, it will fund its risk adjustment 

program operations by assessing a risk 

adjustment user fee on issuers of risk 

adjustment covered plans. For the 2016 

benefit year, we estimate that the total 

cost for HHS to operate the risk 

adjustment program on behalf of States 

for 2016 will be approximately $50 

million, and that the risk adjustment 

user fee would be approximately $1.75 

per enrollee per year. The increased risk 

adjustment user fee for 2016 is the result 

of the increased contract costs to 

support the risk adjustment data 

validation process. 

5. Reinsurance 

The Affordable Care Act directs that 

a transitional reinsurance program be 

established in each State to help 

stabilize premiums for coverage in the 

individual market by helping to pay the 

cost of treating high-cost enrollees. In 

the 2014 and 2015 Payment Notices, we 

expanded upon the standards set forth 

in subparts C and E of the Premium 

Stabilization Rule and established the 

2014 and 2015 uniform reinsurance 

payment parameters and national 

contribution rate. In this proposed rule, 

we set forth the 2016 uniform 

reinsurance payment parameters and 

contribution rate and also propose a 

modification to the 2015 benefit year 

attachment point. 

Section 153.220(c) provides that HHS 

will publish the uniform per capita 

reinsurance contribution rate for the 

upcoming benefit year in the annual 

HHS notice of benefit and payment 

parameters. Section 1341(b)(3)(B)(iii) of 

the Affordable Care Act specifies that 

$10 billion for reinsurance contributions 

is to be collected from contributing 

entities in 2014 (the reinsurance 

payment pool), $6 billion in 2015, and 

$4 billion in 2016. Additionally, 

sections 1341(b)(3)(B)(iv) and 1341(b)(4) 

of the Affordable Care Act direct that $2 

billion in funds is to be collected for 

contribution to the U.S. Treasury in 

2014, $2 billion in 2015, and $1 billion 

in 2016. Finally, section 

1341(b)(3)(B)(ii) of the Affordable Care 

Act allows for the collection of 

additional amounts for administrative 

expenses. Taken together, these three 

components make up the total dollar 

amount to be collected from 

contributing entities for 2014, 2015 and 

2016 benefit years of the reinsurance 

program under the uniform per capita 

contribution rate. 

In the 2015 Payment Notice, we 

estimated that the Federal 

administrative expenses of operating the 

reinsurance program would be $25.4 

million, based on our estimated contract 

and operational costs. We propose to 

use the same methodology to estimate 

the administrative expenses for the 2016 

benefit year. We estimate this amount to 

be approximately $32 million for the 

2016 benefit year. This estimate 

increased for the 2016 benefit year due 

to increased audit and data validation 

contract costs. We believe that this 

figure reflects the Federal government’s 

significant economies of scale, which 

helps to decrease the costs associated 

with operating the reinsurance program. 

Based on our estimate of covered lives 

for which reinsurance contributions are 

to be made for 2016, we are proposing 

a uniform reinsurance contribution rate 

of $0.17 annually per capita for HHS 

administrative expenses. If a State 

establishes its own reinsurance 

program, HHS would transfer $0.085 of 

the per capita administrative fee to the 

State for purposes of administrative 

expenses incurred in making 

reinsurance payments, and retain the 

remaining $0.085 to offset the costs of 

collecting contributions. We note that 

the administrative expenses for 

reinsurance payments will be 

distributed to those States that operate 

their own reinsurance program in 

proportion to the State-by-State total 

requests for reinsurance payments made 

under the uniform reinsurance payment 

parameters. 

6. Risk Corridors 

The Affordable Care Act creates a 

temporary risk corridors program for the 

years 2014, 2015, and 2016 that applies 

to QHPs, as defined in § 153.500. 

Section 1342 of the Affordable Care Act 

directs the Secretary to establish a 

temporary risk corridors program that 

protects issuers against inaccurate rate 

setting from 2014 through 2016. The 

Affordable Care Act establishes the risk 

corridors program as a Federal program; 

consequently, HHS will operate the risk 

corridors program under Federal rules 

with no State variation. 

In this proposed rule, we are 

proposing a clarification to the risk 

corridors transitional adjustment for 

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Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 70745 

67Available at: http://cciio.cms.gov/resources/

files/Files2/03162012/hie3r-ria-032012.pdf. 

68Brook, Robert H., John E. Ware, William H. 

Rogers, Emmett B. Keeler, Allyson Ross Davies, 

Cathy D. Sherbourne, George A. Goldberg, Kathleen 

N. Lohr, Patricia Camp and Joseph P. Newhouse. 

The Effect of Coinsurance on the Health of Adults: 

Results from the RAND Health Insurance 

Experiment. Santa Monica, CA: RAND Corporation, 

1984. Available at: http://www.rand.org/pubs/

reports/R3055. 

benefit year 2014. We are proposing to 

clarify that we intend to implement the 

risk corridors transitional adjustment for 

transitional plans only, as stated in the 

2015 Payment Notice. This proposed 

clarification does not affect the impact 

of the risk corridors transitional 

adjustment. 

For benefit year 2016, we are also 

proposing the treatment of excess risk 

corridors collections that may remain 

after the 3-year duration of the program. 

We are proposing to adjust the 

allowable administrative cost ceiling 

and profit floor so that any excess risk 

corridors collections that remain in 

benefit year 2016 are paid out to eligible 

QHP issuers. We anticipate that 

collections will fully offset payments 

over the 3-year duration of the program. 

Consequently, we do not believe that 

this proposal will have a monetary 

impact on QHP issuers or the Federal 

government. 

7. SHOP 

The SHOP facilitates the enrollment 

of eligible employees of small 

businesses into small group health 

insurance plans. A qualitative analysis 

of the costs and benefits of establishing 

a SHOP was included in the RIA 

published in conjunction with the 

Exchange Establishment Rule.67

Please see the Collection of 

Information section of this proposed 

rule for the costs expected to be 

incurred by State-based SHOPs and 

QHP issuers participating in the SHOP 

related to the proposed notification 

requirements related to terminations of 

coverage. We believe this cost is 

justified because SHOPs are best 

positioned to provide meaningful notice 

regarding terminations due to loss of 

eligibility and nonpayment of premiums 

in a timely manner, while issuers are 

best positioned to provide meaningful 

notice when coverage is terminated due 

to a rescission in accordance with 

§ 147.128 or when the QHP is 

terminated, decertified, or its 

certification is not renewed. In this 

proposed rule, we also seek comment on 

whether to permit the Federallyfacilitated SHOP to accept premium 

payment using a credit card and the 

impact of this potential policy, 

including how many FF–SHOP 

employers expect to use credit cards for 

payment. 

8. User Fees 

To support the operation of FFEs, we 

require in § 156.50(c) that a 

participating issuer offering a plan 

through an FFE must remit a user fee to 

HHS each month equal to the product 

of the monthly user fee rate specified in 

the annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year and the monthly premium 

charged by the issuer for each policy 

under the plan where enrollment is 

through an FFE. For the 2016 benefit 

year, we propose a monthly user fee rate 

equal to 3.5 percent of the monthly 

premium. We do not have an aggregate 

estimate of the collections from the user 

fees at this time because we do not yet 

have a count of the number of States in 

which HHS will run an FFE or 

Federally-facilitated SHOP in 2016. For 

the user fee charge assessed on issuers 

in the FFE, we intend to seek an 

exception to OMB Circular No. A–25R, 

which requires that the user fee charge 

be sufficient to recover the full cost to 

the Federal government of providing the 

special benefit. We seek this exception 

to ensure that the FFE can support many 

of the goals of the Affordable Care Act, 

including improving the health of the 

population, reducing health care costs, 

and providing access to health coverage 

as advanced by § 156.50(d). 

9. Essential Health Benefits, Cost 

Sharing, and Actuarial Value 

Issuers may incur minor 

administrative costs associated with 

altering benefits, cost-sharing and/or AV 

parameters of their plan designs to 

ensure compliance with the EHB 

requirements under this proposed rule. 

For example, issuers that do not 

currently meet the standards for EHB 

prescription drug coverage will incur 

contracting and one-time administrative 

costs to bring their prescription drug 

benefits into compliance. HHS expects 

that the process for compliance with the 

proposed EHB requirements will not 

significantly add to existing compliance 

costs because issuers have extensive 

experience in offering products with 

various benefits and levels of cost 

sharing and these modifications are 

expected to be relatively minor for most 

issuers. 

In addition, we are proposing 

standards for a health plan’s formulary 

exception process that includes an 

external review. We believe that issuers 

that provide EHB already have 

formulary exceptions processes and 

procedures in place that allow an 

enrollee to request and gain access to 

clinically appropriate drugs not covered 

by the plan. We do not expect the 

proposed requirements to significantly 

increase the volume of reviews 

conducted under issuers’ contracts with 

Independent Review Organizations. 

Therefore, we do anticipate that this 

proposed requirement would result in 

any significant new cost for issuers. 

10. Network Adequacy 

Issuers may incur minor 

administrative costs associated with 

updating their provider directory to 

ensure compliance with the 

requirements under this proposed rule. 

Since issuers already maintain a 

directory and the expected modification 

is to re-locate that directory to a more 

user-friendly location on the issuer Web 

site, HHS expects that compliance will 

not demand any additional resources. 

11. Downstream Entities 

We propose to revise § 156.200(b)(7), 

to require that a QHP issuer comply 

with the standards under 45 CFR part 

153 and not just the standards related to 

the risk adjustment program. Under 

§ 156.340, notwithstanding any 

relationship(s) that a QHP issuer may 

have with delegated and downstream 

entities, a QHP issuer maintains 

responsibility for its compliance and the 

compliance of any of its delegated or 

downstream entities, as applicable, with 

all applicable standards, including the 

standards of subpart C of part 156 for 

each of its QHPs on an ongoing basis. 

Because we believe that QHP issuers 

have existing agreements with 

downstream entities that define 

responsibilities, we do not believe that 

this requirement will impose an 

additional burden on QHP issuers. 

12. Provisions Related to Cost Sharing 

The Affordable Care Act provides for 

the reduction or elimination of cost 

sharing for certain eligible individuals 

enrolled in QHPs offered through the 

Exchanges. This assistance will help 

many low- and moderate-income 

individuals and families obtain health 

insurance—for many people, cost 

sharing is a barrier to obtaining needed 

health care.68

To support the administration of the 

cost-sharing reduction program, we set 

forth in this proposed rule the 

reductions in the maximum annual 

limitation on cost sharing for silver plan 

variations. Consistent with our analysis 

in the 2014 and 2015 Payment Notices, 

we developed three model silver level 

QHPs and analyzed the impact on their 

AVs of the reductions described in the 

Affordable Care Act to the estimated 

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2016 maximum annual limitation on 

cost sharing for self-only coverage 

($6,850). We do not believe these 

changes will result in a significant 

economic impact. Therefore, we do not 

believe the provisions related to costsharing reductions in this proposed rule 

will have an impact on the program 

established by and described in the 

2015 Payment Notice. 

We also proposed the premium 

adjustment percentage for the 2016 

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 Affordable Care Act: The 

annual limitation on cost sharing 

(defined at § 156.130(a)), the required 

contribution percentage by individuals 

for minimum essential health coverage 

the Secretary may use to determine 

eligibility for hardship exemptions 

under Section 5000A of the Code, and 

the section 4980H(a) and section 

4980H(b) assessable payment amounts 

(finalized at 26 CFR 54.4980H in the 

‘‘Shared Responsibility for Employers 

Regarding Health Coverage,’’ published 

in the Federal Register on February 12, 

2014 (79 FR 8544). We believe that the 

proposed 2016 premium adjustment 

percentage of 8.316047520 percent is 

well within the parameters used in the 

modeling of the Affordable Care Act, 

and we do not expect that these 

proposed provisions will alter CBO’s 

April 2014 baseline estimates of the 

budget impact. 

The proposed rule would also replace 

the one-year period with ongoing 

recognition of State high risk pools as 

minimum essential coverage, which 

would facilitate transition of enrollees 

into QHPs through the Exchange or into 

other forms of minimum essential 

coverage, while ensuring continued 

access to coverage. 

13. Minimum Essential Coverage 

The proposed rule would replace the 

one-year temporary designation with 

ongoing recognition of State high risk 

pools as minimum essential coverage. 

This would facilitate the transition of 

State high risk pool enrollees into QHPs 

through the Exchange or into other 

forms of minimum essential coverage, 

while ensuring continued access to 

coverage. It would also help ensure that 

this vulnerable population will not be 

subject to the shared responsibility 

payment during this transition, and 

thereby avoid an increase in out-ofpocket costs. 

14. Quality Improvement Strategy 

The proposed standards requiring 

QHP issuers participating in Exchanges 

to establish and submit information 

regarding a quality improvement 

strategy would encourage continuous 

quality improvement among QHP 

issuers to help strengthen system-wide 

efforts to improve health outcomes at 

lower costs, promote provider payment 

models that link quality and value of 

services, allow for flexibility and 

innovation of diverse market-based 

incentive approaches, encourage 

meaningful improvements as well as 

provide regulators and stakeholders 

with information to use for monitoring 

and evaluation purposes. We discuss 

the administrative costs associated with 

submitting this information in the 

Collection of Information section of this 

proposed rule. 

15. Administrative Appeals 

In § 156.1220, we establish an 

administrative appeals process to 

address unresolved discrepancies for 

advance payment of the premium tax 

credit, advance payment and 

reconciliation of cost-sharing 

reductions, FFE user fees, and the 

premium stabilization programs, as well 

as any assessment of a default risk 

adjustment charge under § 153.740(b). 

We estimated the burden associated 

with the administrative appeals process 

in the 2015 Payment Notice, and in the 

Supporting Statement approved under 

OMB Control Number 0938–1155. We 

will revise the information collection 

currently approved OMB Control 

Number 0938–1155 with an October 31, 

2015 expiration date. We do not believe 

that the provisions in this proposed rule 

will alter the economic impact of this 

requirement that was estimated in the 

2015 Payment Notice. 

16. Medical Loss Ratio 

This proposed rule would clarify the 

treatment of cost-sharing reductions in 

the MLR calculations. This proposed 

rule would also ensure timely 

distribution of rebates for the benefit of 

subscribers of group health plans not 

subject to ERISA. Specifically, the 

proposed amendments to the MLR 

provisions governing the distribution of 

rebates to group enrollees in nonFederal governmental and other group 

health plans not subject to ERISA would 

ensure that group policyholders of such 

plans do not withhold the benefit of 

rebates from the enrollees for longer 

than 3 months. We do not anticipate 

that this proposed provision in this 

proposed rule will have any significant 

effect on MLR program estimates. This 

proposed rule would also amend the 

MLR regulations to provide that 

premium in MLR and rebate 

calculations should not be reduced by 

the amount of Federal and State 

employment taxes. Assuming that all 

issuers previously interpreted the MLR 

December 1, 2010 interim final rule to 

reduce premium by the amount of 

Federal and State employment taxes, 

based on MLR data for the 2013 MLR 

reporting year, the proposed 

clarification regarding the treatment of 

such taxes in the MLR and rebate 

calculations would result in additional 

rebate payments from issuers to 

consumers of approximately $35 

million. 

D. Regulatory Alternatives Considered 

In the preamble discussion of the 

2016 reinsurance payment parameters, 

we also considered, when setting forth 

the proposed 2016 reinsurance payment 

parameters, a set of uniform reinsurance 

payment parameters that would have 

substantially lowered the reinsurance 

cap, but believe those uniform 

reinsurance payment parameters would 

have raised the complexity of estimating 

the effects of reinsurance for issuers. 

We also considered expanding the 

risk corridors transitional adjustment to 

apply to early renewal plans. This 

approach would have increased the 

impact of the risk corridors adjustment 

and altered the impact analysis related 

to the risk corridors transitional 

adjustment that was published in the 

2015 Payment Notice. However, we 

decided not to propose this alternate 

policy. 

We considered ending the good faith 

compliance policy for QHP issuers. 

However we determined that subjecting 

QHP issuers to increased punitive 

actions in the early years of the 

Exchange would be less effective than 

working with issuers to address 

compliance issues. 

We considered not suppressing QHPs 

on the FFE, but this approach would 

have resulted in less flexibility for the 

FFE to address situations that could 

affect consumers’ interests. For 

example, this alternative would increase 

the burden for consumers who may 

have to select a new QHP mid-year if 

their QHP was decertified. 

We also considered not recognizing 

vendors for training and registration of 

agents and brokers in the FFE. However, 

we believe that recognizing vendors will 

make it easier for agents and brokers to 

identify appropriate vendors who meet 

HHS standards for training and 

registration. 

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Additionally, we considered not 

requiring QIS reporting for QHP issuers. 

However, we decided to propose the 

policy in this proposed rule because we 

believe that QIS reporting will result in 

higher quality QHPs being offered in the 

Exchange and make it easier for 

consumers to select a high quality QHP. 

E. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

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

agencies to prepare an initial regulatory 

flexibility analysis to describe the 

impact of the proposed rule on small 

entities, unless the head of the agency 

can certify that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The RFA generally defines a ‘‘small 

entity’’ as (1) A proprietary firm meeting 

the size standards of the Small Business 

Administration (SBA), (2) a not-forprofit organization that is not dominant 

in its field, or (3) a small government 

jurisdiction with a population of less 

than 50,000. States and individuals are 

not included in the definition of ‘‘small 

entity.’’ HHS uses a change in revenues 

of more than 3 to 5 percent as its 

measure of significant economic impact 

on a substantial number of small 

entities. 

In this proposed rule, we propose 

standards for the risk adjustment, 

reinsurance, and risk corridors 

programs, which are intended to 

stabilize premiums as insurance market 

reforms are implemented and Exchanges 

facilitate increased enrollment. Because 

we believe that insurance firms offering 

comprehensive health insurance 

policies generally exceed the size 

thresholds for ‘‘small entities’’ 

established by the SBA, we do not 

believe that an initial regulatory 

flexibility analysis is required for such 

firms. 

For purposes of the RFA, we expect 

the following types of entities to be 

affected by this proposed rule: 

• Health insurance issuers. 

• Group health plans. 

• Reinsurance entities. 

We believe that health insurance 

issuers and group health plans would be 

classified under the North American 

Industry Classification System (NAICS) 

code 524114 (Direct Health and Medical 

Insurance Carriers). According to SBA 

size standards, entities with average 

annual receipts of $35.5 million or less 

would be considered small entities for 

these NAICS codes. Issuers could 

possibly be classified in 621491 (HMO 

Medical Centers) and, if this is the case, 

the SBA size standard would be $32.5 

million or less. 

In this proposed rule, we proposed 

standards for employers that choose to 

participate in a SHOP Exchange. The 

SHOPs are limited by statute to 

employers with at least one but not 

more than 100 employees. For this 

reason, we expect that many employers 

who would be affected by the proposals 

would meet the SBA standard for small 

entities. We do not believe that the 

proposals impose requirements on 

employers offering health insurance 

through the SHOP that are more 

restrictive than the current requirements 

on small businesses offering employer 

sponsored insurance. We believe the 

processes that we have established 

constitute the minimum amount of 

requirements necessary to implement 

the SHOP program and accomplish our 

policy goals, and that no appropriate 

regulatory alternatives could be 

developed to further lessen the 

compliance burden. 

We believe that a substantial number 

of sponsors of self-insured group health 

plans could qualify as ‘‘small entities.’’ 

This proposed rule provides HHS with 

the authority to audit these entities. 

However, we do not believe that the 

burden of these audits is likely to reflect 

more than 3 to 5 percent of such an 

entity’s revenues. 

Based on data from MLR annual 

report submissions for the 2013 MLR 

reporting year, approximately 141 out of 

500 issuers of health insurance coverage 

nationwide had total premium revenue 

of $38.5 million or less. This estimate 

may overstate the actual number of 

small health insurance companies that 

would be affected, since 77 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 would 

result in their revenues exceeding $38.5 

million. Only 16 of these small entities 

owed a rebate for the 2013 reporting 

year, and none of these small entities 

are estimated to experience a rebate 

increase of more than 0.1 percent of 

total premium revenue under the 

proposed provisions. None of the small 

entities that did not previously owe 

rebates are expected to owe rebates as a 

result of the proposed provisions. Based 

on data from MLR annual report 

submissions for the 2013 MLR reporting 

year, approximately 286,750 out of 1.6 

million small group policyholders and 

13,500 out of 228,000 large group 

policyholders nationwide were owed 

rebates for the 2013 reporting year. It is 

uncertain how many of the group 

policyholders obtaining coverage from 

health insurance issuers subject to MLR 

are both (a) small entities that fall below 

the size thresholds set by the SBA for 

various industries, and (b) enrolled in 

group health plans not subject to ERISA, 

and would therefore be subject to the 

proposed provisions related to MLR. 

However, the proposed provisions only 

establish a deadline for the use of MLR 

rebates by certain policyholders similar 

to the deadline that is already followed 

by most group policyholders, and do not 

otherwise alter the requirements for 

rebate use by such policyholders. In 

addition, the proposed clarification 

regarding how health insurance issuers 

must treat cost-sharing reductions in 

their MLR calculations simply aligns the 

MLR regulatory language with the risk 

corridors program. 

F. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a proposed rule 

that includes any Federal mandate that 

may result in expenditures in any 1 year 

by a State, local, or Tribal governments, 

in the aggregate, or by the private sector, 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2014, that 

threshold is approximately $141 

million. Although we have not been 

able to quantify the user fees that will 

be associated with this proposed rule, 

the combined administrative cost and 

user fee impact on State, local, or Tribal 

governments and the private sector may 

be above the threshold. Earlier portions 

of this RIA constitute our UMRA 

analysis. 

G. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule that imposes substantial 

direct costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Because States have flexibility in 

designing their Exchange and Exchangerelated programs, State decisions will 

ultimately influence both administrative 

expenses and overall premiums. States 

are not required to establish an 

Exchange or risk adjustment or 

reinsurance program. For States electing 

to operate an Exchange, risk adjustment 

or reinsurance program, much of the 

initial cost of creating these programs 

will be funded by Exchange Planning 

and Establishment Grants. After 

establishment, Exchanges will be 

financially self-sustaining, with revenue 

sources at the discretion of the State. 

Current State Exchanges charge user 

fees to issuers. 

In HHS’s view, while this proposed 

rule would not impose substantial direct 

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70748 Federal Register / Vol. 79, No. 228 / Wednesday, November 26, 2014 / Proposed Rules 

requirement costs on State and local 

governments, this regulation has 

Federalism implications due to direct 

effects on the distribution of power and 

responsibilities among the State and 

Federal governments relating to 

determining standards relating to health 

insurance that is offered in the 

individual and small group markets. 

Each State electing to establish an 

Exchange must adopt the Federal 

standards contained in the Affordable 

Care Act and in this proposed rule, or 

have in effect a State law or regulation 

that implements these Federal 

standards. However, HHS anticipates 

that the Federalism implications (if any) 

are substantially mitigated because 

under the statute, States have choices 

regarding the structure and governance 

of their Exchanges and risk adjustment 

and reinsurance programs. Additionally, 

the Affordable Care Act does not require 

States to establish these programs; if a 

State elects not to establish any of these 

programs or is not approved to do so, 

HHS must establish and operate the 

programs in that State. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policy making discretion of the 

States, HHS has engaged in efforts to 

consult with and work cooperatively 

with affected States, including 

participating in conference calls with 

and attending conferences of the 

National Association of Insurance 

Commissioners, and consulting with 

State insurance officials on an 

individual basis. 

Throughout the process of developing 

this proposed rule, HHS has attempted 

to balance the States’ interests in 

regulating health insurance issuers, and 

Congress’ intent to provide access to 

Affordable Insurance Exchanges for 

consumers in every State. By doing so, 

it is HHS’s view that we have complied 

with the requirements of Executive 

Order 13132. 

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 Congress and the 

Comptroller General for review. 

List of Subjects 

45 CFR Part 144 

Health care, Health insurance, and 

Reporting and recordkeeping 

requirements. 

45 CFR Part 146 

Health care, Health insurance, and 

Reporting and recordkeeping 

requirements. 

45 CFR Part 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

45 CFR Part 148 

Administrative practice and 

procedure, Health care, Health 

insurance, Penalties, and Reporting and 

recordkeeping requirements. 

45 CFR Part 153 

Administrative practice and 

procedure, Adverse selection, Health 

care, Health insurance, Health records, 

Organization and functions 

(Government agencies), Premium 

stabilization, Reporting and 

recordkeeping requirements, 

Reinsurance, Risk adjustment, Risk 

corridors, Risk mitigation, State and 

local governments. 

45 CFR Part 154 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Health plans, Penalties, 

Reporting and recordkeeping 

requirements. 

45 CFR Part 155 

Administrative practice and 

procedure, Health care access, Health 

insurance, Reporting and recordkeeping 

requirements, State and local 

governments, Required Contribution 

Percentage, Cost-sharing reductions, 

Advance payments of the premium tax 

credit, Administration and calculation 

of advance payments of the premium 

tax credit, Plan variations, Actuarial 

value. 

45 CFR Part 156 

Administrative appeals, 

Administrative practice and procedure, 

Administration and calculation of 

advance payments of the premium tax 

credit, Advertising, Advisory 

Committees, Brokers, Conflict of 

interest, Consumer protection, Costsharing reductions, Grant programshealth, Grants administration, Health 

care, Health insurance, Health 

maintenance organization (HMO), 

Health records, Hospitals, American 

Indian/Alaska Natives, Individuals with 

disabilities, Loan programs-health, 

Organization and functions 

(Government agencies), Medicaid, 

Payment and collections reports, Public 

assistance programs, Reporting and 

recordkeeping requirements, State and 

local governments, Sunshine Act, 

Technical assistance, Women, and 

Youth. 

45 CFR Part 158 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Health plans, penalties, 

Reporting and recordkeeping 

requirements, Premium revenues, 

Medical loss ratio, Rebating. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR parts 144, 146, 147, 148, 153, 154, 

155, 156, and 158 as set forth below. 

PART 144—REQUIREMENTS 

RELATING TO HEALTH INSURANCE 

COVERAGE 

■ 1. The authority citation for part 144 

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. 

■ 2. Section 144.103 is amended by 

revising the definitions of ‘‘Plan’’ and 

‘‘State’’ to read as follows: 

§ 144.103 Definitions. 

* * * * * 

Plan means, with respect to an issuer 

and a product, the pairing of the health 

insurance coverage benefits under the 

product with a particular cost-sharing 

structure, provider network, and service 

area. The product comprises all plans 

offered with those characteristics and 

the combination of the service areas for 

all plans offered within a product 

constitutes the total service area of the 

product. 

* * * * * 

State means each of the 50 States, the 

District of Columbia, Puerto Rico, the 

Virgin Islands, Guam, American Samoa, 

and the Northern Mariana Islands; 

except that for purposes of part 147, the 

term does not include Puerto Rico, the 

Virgin Islands, Guam, American Samoa, 

and the Northern Mariana Islands. 

* * * * * 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 3. The authority citation for part 146 

continues to read as follows: 

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Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the PHS Act 

(42 U.S.C. 300gg–1 through 300gg–5, 300gg– 

11 through 300gg–23, 300gg–91, and 300gg– 

92). 

■ 4. Section 146.152 is amended by 

revising paragraph (c)(2) to read as 

follows: 

§ 146.152 Guaranteed renewability of 

coverage for employers in the group 

market. 

* * * * * 

(c) * * * 

(2) The issuer offers to each plan 

sponsor provided that particular 

product the option, on a guaranteed 

issue basis, to purchase all (or, in the 

case of the large group market, any) 

other health insurance coverage 

currently being offered by the issuer to 

a group health plan in that market. An 

issuer that automatically enrolls a plan 

sponsor into a product of another health 

insurance issuer does not satisfy the 

requirement of this paragraph (c)(2); and 

* * * * * 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 5. The authority citation for part 147 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

■ 6. Section 147.104 is amended by— 

■ A. Revising paragraphs (b)(1)(i)(C), 

(b)(2), and (b)(4). 

■ B. Redesignating paragraphs (f) 

through (h) as paragraphs (g) through (i). 

■ C. Adding new paragraph (f). 

The revisions and addition read as 

follows: 

§ 147.104 Guaranteed availability of 

coverage. 

* * * * * 

(b) * * * 

(1) * * * 

(i) * * * 

(C) With respect to coverage in the 

small group market, and in the large 

group market if such coverage is offered 

through a Small Business Health 

Options Program (SHOP) in a State, 

coverage must become effective 

consistent with the dates described in 

§ 155.725 of this subchapter, except as 

provided in paragraph (b)(1)(iii) of this 

section. 

* * * * * 

(2) Limited open enrollment periods. 

A health insurance issuer in the 

individual market must provide a 

limited open enrollment period for the 

events described in § 155.420(d) of this 

subchapter, excluding § 155.420(d)(3) 

(concerning citizenship status), 

§ 155.420(d)(8) (concerning Indians), 

and § 155.420(d)(9) (concerning 

exceptional circumstances). 

* * * * * 

(4) Length of enrollment periods. (i) In 

the group market, enrollees must be 

provided 30 calendar days after the date 

of the qualifying event described in 

paragraph (b)(3) of this section to elect 

coverage. 

(ii) In the individual market, enrollees 

must be provided 60 calendar days after 

the date of an event described in 

paragraph (b)(2) and (b)(3) of this 

section to elect coverage, as well as 60 

calendar days before certain triggering 

events as provided for in § 155.420(c)(2) 

of this subchapter. 

* * * * * 

(f) Calendar year plans. An issuer that 

offers coverage in the individual market, 

or in a merged market in a State that has 

elected to merge the individual market 

and small group market risk pools in 

accordance with section 1312(c)(3) of 

the Affordable Care Act, must ensure 

that such coverage is offered on a 

calendar year basis with a policy year 

ending on December 31 of each calendar 

year. 

* * * * * 

■ 7. Section 147.106 is amended by— 

■ A. Revising paragraph (c)(2). 

■ B. Redesignating paragraphs (g) 

through (j) as paragraphs (h) through (k). 

■ C. Adding new paragraph (g). 

The revision and addition read as 

follows: 

§ 147.106 Guaranteed renewability of 

coverage. 

* * * * * 

(c) * * * 

(2) The issuer offers to each plan 

sponsor or individual, as applicable, 

provided that particular product the 

option, on a guaranteed availability 

basis, to purchase all (or, in the case of 

the large group market, any) other 

health insurance coverage currently 

being offered by the issuer to a group 

health plan or individual health 

insurance coverage in that market. An 

issuer that automatically enrolls a plan 

sponsor or individual, as applicable, 

into a product of another health 

insurance issuer does not satisfy the 

requirement of this paragraph (c)(2). 

* * * * * 

(g) Notification of change of 

ownership. If an issuer of a QHP, a plan 

otherwise subject to risk corridors, a risk 

adjustment covered plan, or a 

reinsurance-eligible plan experiences a 

change of ownership, as recognized by 

the State in which the plan is offered, 

the issuer must notify HHS in a manner 

specified by HHS, by the later of— 

(1) The date the transaction is entered 

into; or 

(2) The 30th day prior to the effective 

date of the transaction. 

* * * * * 

PART 148—REQUIREMENTS FOR THE 

INDIVIDUAL HEALTH INSURANCE 

MARKET 

■ 8. The authority citation for part 148 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

■ 9. Section 148.122 is amended by 

revising paragraph (d)(2) to read as 

follows: 

§ 148.122 Guaranteed renewability of 

individual health insurance coverage. 

* * * * * 

(d) * * * 

(2) Offers to each covered individual, 

on a guaranteed issue basis, the option 

to purchase any other individual health 

insurance coverage currently being 

offered by the issuer for individuals in 

that market. An issuer that 

automatically enrolls an individual into 

a product of another health insurance 

issuer does not satisfy the requirement 

of this paragraph (d)(2). 

* * * * * 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS, 

AND RISK ADJUSTMENT UNDER THE 

AFFORDABLE CARE ACT 

■ 10. The authority citation for part 153 

continues to read as follows: 

Authority: Secs. 1311, 1321, 1341–1343, 

Pub. L. 111–148, 24 Stat. 119. 

■ 11. Section 153.100 is amended by 

revising paragraph (c) to read as follows: 

§ 153.100 State notice of benefit and 

payment parameters. 

* * * * * 

(c) State notice deadlines. If a State is 

required to publish an annual State 

notice of benefit and payment 

parameters for a particular benefit year, 

it must do so by the later of March 1 of 

the calendar year prior to the applicable 

benefit year, or by the 30th day 

following the publication of the final 

HHS notice of benefit and payment 

parameters for that benefit year. 

* * * * * 

■ 12. Section 153.400 is amended by 

revising paragraph (a)(1)(iii) and adding 

paragraph (c) to read as follows: 

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§ 153.400 Reinsurance contribution funds. 

(a) * * * 

(1) * * * 

(iii) Such plan or coverage is 

expatriate health coverage, as defined by 

the Secretary, or for the 2015 and 2016 

benefit years only, is a self-insured 

group health plan with respect to which 

enrollment is limited to participants 

who reside outside of their home 

country for at least 6 months of the plan 

year, and any covered dependents; or 

* * * * * 

(c) Determination of a debt. Any 

amount owed to the Federal government 

by a self-insured group health plan 

(including a group health plan that is 

partially self-insured and partially 

insured, where the health insurance 

coverage does not constitute major 

medical coverage) and its affiliates for 

reinsurance is a determination of a debt. 

■ 13. Section 153.405 is amended by— 

■ A. Revising paragraphs (b), (c)(1), (d) 

introductory text, (g)(4)(i) introductory 

text, and (g)(4)(ii) introductory text. 

■ B. Removing paragraph (c)(2). 

■ C. Redesignating paragraph (c)(3) as 

paragraph (c)(2). 

■ D. Revising newly designated 

paragraph (c)(2). 

The revisions read as follows: 

§ 153.405 Calculation of reinsurance 

contributions. 

* * * * * 

(b) Annual enrollment count. No later 

than November 15 of benefit year 2014, 

2015, or 2016, as applicable, or, if such 

date is not a business day, the next 

business day, a contributing entity must 

submit an annual enrollment count of 

the number of covered lives of 

reinsurance contribution enrollees for 

the applicable benefit year to HHS. The 

count must be determined as specified 

in paragraphs (d) through (g) of this 

section, as applicable. 

(c) * * * 

(1) Following submission of the 

annual enrollment count described in 

paragraph (b) of this section, HHS will 

notify the contributing entity of the 

reinsurance contribution amount 

allocated to reinsurance payments, 

administrative expenses and the U.S. 

Treasury to be paid for the applicable 

benefit year. 

(2) A contributing entity must remit 

reinsurance contributions to HHS no 

later than January 15, 2015, 2016, or 

2017, as applicable, or, if such date is 

not a business day, the next business 

day, if making a combined contribution 

or the first payment of the bifurcated 

contribution, and no later than 

November 15, 2015, 2016, or 2017, as 

applicable, or, if such date is not a 

business day, the next business day, if 

making the second payment of the 

bifurcated contribution. 

(d) Procedures for counting covered 

lives for health insurance issuers. A 

health insurance issuer must use the 

same method in a benefit year for all of 

its health insurance plans in the State 

(including both the individual and 

group markets) for which reinsurance 

contributions are required. To 

determine the number of covered lives 

of reinsurance contribution enrollees 

under all health insurance plans in a 

State for a benefit year, a health 

insurance issuer must use one of the 

following methods: 

* * * * * 

(g) * * * 

(4) * * * 

(i) Multiple group health plans 

including an insured plan. If at least one 

of the multiple plans is an insured plan, 

the average number of covered lives of 

reinsurance contribution enrollees must 

be calculated using one of the methods 

specified in either paragraph (d)(1) or 

paragraph (d)(2) of this section, applied 

across the multiple plans as a whole. 

The following information must be 

determined by the plan sponsor: 

* * * * * 

(ii) Multiple group health plans not 

including an insured plan. If each of the 

multiple plans is a self-insured group 

health plan, the average number of 

covered lives of reinsurance 

contribution enrollees must be 

calculated using one of the methods 

specified either in paragraph (e)(1) or 

paragraph (e)(2) of this section, applied 

across the multiple plans as a whole. 

The following information must be 

determined by the plan sponsor: 

* * * * * 

■ 14. Section 153.500 is amended by 

revising the definition of ‘‘Adjustment 

percentage’’ to read as follows: 

§ 153.500 Definitions. 

* * * * * 

Adjustment percentage means, with 

respect to a QHP: 

(1) For benefit year 2014— 

(i) For a QHP offered by a health 

insurance issuer with allowable costs of 

at least 80 percent of after-tax premium 

in a transitional State, the percentage 

specified by HHS for such QHPs in the 

transitional State; and otherwise 

(ii) Zero percent. 

(2) For benefit year 2015, for a QHP 

offered by a health insurance issuer in 

any State, 2 percent. 

(3) For benefit year 2016— 

(i) For a QHP offered by a health 

insurance issuer with allowable costs of 

at least 80 percent of after-tax premium, 

the percentage specified by HHS; and 

otherwise. 

(ii) Zero percent. 

* * * * * 

■ 15. Section 153.740 is amended by 

revising paragraph (a) and adding 

paragraph (c) to read as follows: 

§ 153.740 Failure to comply with HHSoperated risk adjustment and reinsurance 

data requirements. 

(a) Enforcement actions. If an issuer of 

a risk adjustment covered plan or 

reinsurance-eligible plan fails to 

establish a dedicated distributed data 

environment in a manner and timeframe 

specified by HHS; fails to provide HHS 

with access to the required data in such 

environment in accordance with 

§ 153.700(a) or otherwise fails to comply 

with the requirements of §§ 153.700 

through 153.730; fails to adhere to the 

reinsurance data submission 

requirements set forth in § 153.420; or 

fails to adhere to the risk adjustment 

data submission and data storage 

requirements set forth in §§ 153.610 

through 153.630, HHS may impose civil 

money penalties in accordance with the 

procedures set forth in § 156.805 of this 

subchapter. Civil monetary penalties 

will not be imposed for non-compliance 

with these requirements during the 2014 

or 2015 calendar year under this 

paragraph if the issuer has made good 

faith efforts to comply with these 

requirements. 

* * * * * 

(c) Information sharing. HHS may 

consult and share information about 

issuers of risk adjustment covered plans 

and reinsurance-eligible plans with 

other Federal and State regulatory and 

enforcement entities to the extent the 

consultation and information is 

necessary for purposes of State or 

Federal oversight and enforcement 

activities. 

PART 154—HEALTH INSURANCE 

ISSUER RATE INCREASES: 

DISCLOSURE AND REVIEW 

REQUIREMENTS 

■ 16. The authority citation for part 154 

continues to read as follows: 

Authority: Section 2794 of the Public 

Health Service Act (42 U.S.C. 300gg–94). 

■ 17. Section 154.102 is amended by— 

■ A. Revising the definitions of 

‘‘Individual market,’’ ‘‘Rate increase,’’ 

‘‘Small group market,’’ and ‘‘State.’’ 

■ B. Adding a definition of ‘‘Plan’’ in 

alphabetical order. 

The revisions and addition read as 

follows: 

§ 154.102 Definitions. 

* * * * * 

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Individual market has the meaning 

given the term in § 144.103 of this 

subchapter. 

* * * * * 

Plan has the meaning given the term 

in § 144.103 of this subchapter. 

* * * * * 

Rate increase means any increase of 

the rates for a specific product or plan 

within a product offered in the 

individual or small group market. 

* * * * * 

Small group market has the meaning 

given the term in § 144.103 of this 

subchapter. 

State means each of the 50 States and 

the District of Columbia. 

* * * * * 

■ 18. Section 154.200 is amended by 

revising paragraphs (a) and (c) to read as 

follows: 

§ 154.200 Rate increases subject to 

review. 

(a) A rate increase filed for coverage 

effective on or after January 1, 2016 is 

subject to review if: 

(1) The rate increase is 10 percent or 

more for any plan within the product 

applicable to a 12-month period that 

begins on January 1, as calculated under 

paragraph (c) of this section; or 

(2) The rate increase for any plan 

within the product meets or exceeds a 

State-specific threshold applicable to a 

12-month period that begins on January 

1, as calculated under paragraph (c) of 

this section, determined by the 

Secretary. A State-specific threshold 

shall be based on factors impacting rate 

increases in a State to the extent that the 

data relating to such State-specific 

factors is available by August 1. States 

interested in proposing a State-specific 

threshold for approval are required to 

submit a proposal to the Secretary by 

August 1. 

* * * * * 

(c) A rate increase meets or exceeds 

the applicable threshold set forth in 

paragraph (a) of this section if an 

increase in the plan-adjusted index rate 

(as described in § 156.80 of this 

subchapter) for any plan within the 

product meets or exceeds the applicable 

threshold. 

* * * * * 

■ 19. Section 154.215 is amended by 

revising paragraph (a) to read as follows: 

§ 154.215 Submission of rate filing 

justification. 

(a) If any plan within a product is 

subject to a rate increase, a health 

insurance issuer must submit a Rate 

Filing Justification for all products in 

the single risk pool, including new or 

discontinuing products, on a form and 

in a manner prescribed by the Secretary. 

* * * * * 

■ 20. Section 154.220 is revised to read 

as follows: 

§ 154.220 Timing of providing the rate 

filing justification. 

A health insurance issuer must 

submit to CMS and the applicable State 

a Rate Filing Justification for all rate 

increases that are filed for coverage 

effective on or after January 1, 2016, by 

the earlier of the following: 

(a) The date by which the State 

requires that a proposed rate increase be 

filed with the State; or 

(b) The date specified in guidance by 

the Secretary. 

■ 21. Section 154.301 is amended by 

revising paragraph (b) to read as follows: 

§ 154.301 CMS’s determinations of 

Effective Rate Review Programs. 

* * * * * 

(b) Public disclosure and input. (1) In 

addition to satisfying the provisions in 

paragraph (a) of this section, a State 

with an Effective Rate Review Program 

must provide: 

(i) For proposed rate increases subject 

to review, access from its Web site to at 

least the information contained in Parts 

I, II, and III of the Rate Filing 

Justification that CMS makes available 

on its Web site (or provide CMS’s Web 

address for such information), and have 

a mechanism for receiving public 

comments on those proposed rate 

increases, no later than the date 

specified in guidance by the Secretary. 

(ii) For all final rate increases 

(including those not subject to review), 

access from its Web site to at least the 

information contained in Parts I, II, and 

III of the Rate Filing Justification that 

CMS makes available on its Web site (or 

provide CMS’s Web address for such 

information), no later than the first day 

of the annual open enrollment period 

for the applicable calendar year. 

(2) If a State intends to make the 

information in paragraph (b)(1)(i) of this 

section available to the public prior to 

the date specified by the Secretary, or if 

it intends to make the information in 

paragraph (b)(1)(ii) of this section 

available to the public prior to the first 

day of the annual open enrollment 

period for the applicable calendar year, 

the State must notify CMS in writing, no 

later than 30 days prior to the date it 

intends to make the information public, 

of its intent to do so and the date it 

intends to make the information public. 

(3) A State with an Effective Rate 

Review Program must ensure the 

information in paragraphs (b)(1)(i) and 

(ii) of this section is made available to 

the public at a uniform time for all 

proposed and final rate increases, as 

applicable, in the relevant market 

segment and without regard to whether 

coverage is offered through or outside 

an Exchange. 

* * * * * 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 22. The authority citation for part 155 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301, 1302, 1303, 1304, 1311, 

1312, 1313, 1321, 1322, 1331, 1332, 1334, 

1402, 1411, 1412, 1413, Pub. L. 111–148, 124 

Stat. 119 (42 U.S.C. 18021–18024, 18031– 

18033, 18041–18042, 18051, 18054, 18071, 

and 18081–18083). 

■ 23. Section 155.20 is amended by— 

■ A. Revising paragraph (2) of the 

definition of ‘‘Applicant.’’ 

■ B. Revising the definitions of 

‘‘Enrollee’’ and ‘‘Qualified employee’’. 

The revisions read as follows: 

§ 155.20 Definitions. 

* * * * * 

Applicant * * * 

(2) An employer, employee, or former 

employee seeking eligibility for 

enrollment in a QHP through the SHOP 

for himself or herself, and, if the 

qualified employer offers dependent 

coverage through the SHOP, seeking 

eligibility to enroll his or her 

dependents in a QHP through the 

SHOP. 

* * * * * 

Enrollee means a qualified individual 

or qualified employee enrolled in a 

QHP. Enrollee also means the 

dependent of a qualified employee 

enrolled in a QHP through the SHOP. 

Provided that at least one employee 

enrolls in a QHP through the SHOP, 

enrollee also means a business owner 

enrolled in a QHP through the SHOP, or 

the dependent of a business owner 

enrolled in a QHP through the SHOP. 

* * * * * 

Qualified employee means any 

employee or former employee of a 

qualified employer who has been 

offered health insurance coverage by 

such qualified employer through the 

SHOP for himself or herself and, if the 

qualified employer offers dependent 

coverage through the SHOP, for his or 

her dependents. 

* * * * * 

■ 24. Section 155.205 is amended by 

revising paragraph (c)(2)(i) to read as 

follows: 

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§ 155.205 Consumer assistance tools and 

programs of an Exchange. 

* * * * * 

(c) * * * 

(2) * * * 

(i) Oral interpretation. For Exchanges, 

QHP issuers, and agents or brokers 

subject to § 155.220(c)(3)(i) only, this 

standard includes telephonic interpreter 

services in at least 150 languages; 

* * * * * 

■ 25. Section 155.215 is amended by 

revising paragraph (h) to read as 

follows: 

§ 155.215 Standards applicable to 

Navigators and Non-Navigator Assistance 

Personnel carrying out consumer 

assistance functions under §§ 155.205(d) 

and (e) and 155.210 in a Federally-facilitated 

Exchange and to Non-Navigator Assistance 

Personnel funded through an Exchange 

Establishment Grant. 

* * * * * 

(h) Physical presence. All nonNavigator entities carrying out 

consumer assistance functions under 

§ 155.205(d) and (e) in an Exchange 

operated by HHS during the exercise of 

its authority under § 155.105(f) and all 

non-Navigator entities funded through 

an Exchange Establishment Grant under 

section 1311(a) of the Affordable Care 

Act must maintain a physical presence 

in the Exchange service area, so that 

face-to-face assistance can be provided 

to applicants and enrollees. In a 

Federally-facilitated Exchange, no 

individual or entity shall be ineligible to 

operate as a non-Navigator entity or as 

non-Navigator assistance personnel 

solely because its principal place of 

business is outside of the Exchange 

service area. 

* * * * * 

■ 26. Section 155.222 is added to read 

as follows: 

§ 155.222 Standards for HHS-approved 

vendors of Federally-facilitated exchange 

training for agents and brokers. 

(a) Application for approval. A 

vendor must be approved by HHS, in a 

form and manner to be determined by 

HHS, in order to have its training and 

information verification program 

recognized for agents and brokers 

assisting with or facilitating enrollment 

in individual market or SHOP coverage 

through the Exchange consistent with 

§ 155.220. As part of the training 

program, the vendor must require agents 

and brokers to complete identity 

proofing, provide identifying 

information, and successfully complete 

the required curriculum. HHS will 

approve vendors on an annual basis for 

a given plan year, and each vendor must 

submit an application for each year that 

approval is sought. 

(b) Standards. To be approved by 

HHS and maintain its status as an 

approved vendor for plan year 2016 and 

future plan years, a vendor must meet 

each of the following standards: 

(1) Submit a complete and accurate 

application by the deadline established 

by HHS, which includes demonstration 

of prior experience with successfully 

conducting online training and identity 

proofing, as well as providing technical 

support to a large customer base. 

(2) Adhere to HHS specifications for 

content, format, and delivery of training 

and information verification. 

(3) Collect, store, and share with HHS 

all data from agent and broker users of 

the vendor’s training and information 

verification in a manner specified by 

HHS, and protect the data in accordance 

with applicable privacy and security 

laws and regulations. 

(4) Execute an agreement with HHS, 

in a form and manner to be determined 

by HHS, which requires the vendor to 

comply with HHS guidelines for 

interfacing with HHS data systems, the 

implementation of the training and 

information verification processes, and 

the use of all data collected. 

(5) Permit any individual who holds 

a valid State license or equivalent State 

authority to sell health insurance 

products to access the vendor’s training 

and information verification. 

(c) Approved list. A list of approved 

vendors will be published on an HHS 

Web site. 

(d) Monitoring. HHS may periodically 

monitor and audit vendors approved 

under this subpart, and their records 

related to the training and information 

verification functions described in this 

section, to ensure ongoing compliance 

with the standards in paragraph (b) of 

this section. If HHS determines that an 

HHS-approved vendor is not in 

compliance with the standards required 

in paragraph (b) of this section, the 

vendor may be removed from the 

approved list described in paragraph (c) 

of this section and may be required by 

HHS to cease performing the training 

and information verification functions 

described under this subpart. 

(e) Appeals. A vendor that is not 

approved by HHS after submitting the 

application described in paragraph (a) of 

this section, or an approved vendor 

whose agreement is revoked under 

paragraph (d) of this section, may 

appeal HHS’s decision by notifying HHS 

in writing within 15 days from receipt 

of the notification of not being approved 

and submitting additional 

documentation demonstrating how the 

vendor meets the standards in 

paragraph (b) of this section and (if 

applicable) the terms of their agreement 

with HHS. HHS will review the 

submitted documentation and make a 

final approval determination within 30 

days from receipt of the additional 

documentation. 

■ 27. Section 155.400 is amended by 

revising paragraph (e) to read as follows: 

§ 155.400 Enrollment of qualified 

individuals into QHPs. 

* * * * * 

(e) Premium payment. Exchanges 

may, and the Federally-facilitated 

Exchange will, require payment of the 

first month’s premium to effectuate an 

enrollment. An Exchange may establish 

a standard policy for setting premium 

payment deadlines. 

* * * * * 

■ 28. Section 155.410 is amended by 

revising paragraphs (e) and (f) to read as 

follows: 

§ 155.410 Initial and annual open 

enrollment periods. 

* * * * * 

(e) Annual open enrollment period. 

(1) For the benefit year beginning on 

January 1, 2015, the annual open 

enrollment period begins on November 

15, 2014, and extends through February 

15, 2015. 

(2) For benefit years beginning on or 

after January 1, 2016, the annual open 

enrollment period begins on October 1 

and extends through December 15 of the 

calendar year preceding the benefit year. 

(f) Effective date. (1) For the benefit 

year beginning on January 1, 2015, the 

Exchange must ensure coverage is 

effective— 

(i) January 1, 2015, for QHP selections 

received by the Exchange on or before 

December 15, 2014. 

(ii) February 1, 2015, for QHP 

selections received by the Exchange 

from December 16, 2014 through 

January 15, 2015. 

(iii) March 1, 2015, for QHP selections 

received by the Exchange from January 

16, 2015 through February 15, 2015. 

(2) For enrollments made under any 

annual open enrollment periods for 

benefit years beginning on or after 

January 1, 2016, the Exchange must 

ensure that coverage is effective as of 

January 1 of the year following the open 

enrollment period. 

* * * * * 

■ 29. Section 155.420 is amended by— 

■ A. Revising paragraphs (b)(2)(i), 

(b)(2)(iv), (c)(2), (d)(1)(ii), (d)(2), and 

(d)(4). 

■ B. Adding paragraphs (b)(2)(v), 

(b)(2)(vi), and (d)(6)(iv). 

■ C. Removing paragraph (d)(10). 

The revisions and additions read as 

follows: 

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§ 155.420 Special enrollment periods. 

* * * * * 

(b) * * * 

(2) * * * 

(i) In the case of birth, adoption, 

placement for adoption, or placement in 

foster care as described in paragraph 

(d)(2)(i) of this section, the Exchange 

must ensure that coverage is effective 

for a qualified individual or enrollee on 

the date of birth, adoption, placement 

for adoption, or placement in foster 

care, or it may permit the qualified 

individual or enrollee to elect a 

coverage effective date in accordance 

with paragraph (b)(1) of this section. If 

the Exchange permits the qualified 

individual or enrollee to elect a 

coverage effective date in accordance 

with paragraph (b)(1) of this section, the 

Exchange must ensure coverage is 

effective on the date duly selected by 

the qualified individual or enrollee. 

* * * * * 

(iv) If a consumer loses coverage as 

described in paragraph (d)(1), (d)(6)(iii), 

or gains access to a new QHP as 

described in paragraph (d)(7) of this 

section, if the plan selection is made 

before or on the day of the triggering 

event, the Exchange must ensure that 

the coverage effective date is on the first 

day of the month following the loss of 

coverage. If the plan selection is made 

after the triggering event, the Exchange 

must ensure that coverage is effective in 

accordance with paragraph (b)(1) of this 

section or on the first day of the 

following month, at the option of the 

Exchange. 

(v) In the case of a court order as 

described in paragraph (d)(2)(i) of this 

section, the Exchange must ensure that 

coverage is effective for a qualified 

individual or enrollee on the date the 

court order is effective, or it may permit 

the qualified individual or enrollee to 

elect a coverage effective date in 

accordance with paragraph (b)(1) of this 

section. If the Exchange permits the 

qualified individual or enrollee to elect 

a coverage effective date in accordance 

with paragraph (b)(1) of this section, the 

Exchange must ensure coverage is 

effective on the date duly elected by the 

qualified individual or enrollee. 

(vi) If an enrollee or his or her 

dependent dies as described in 

paragraph (d)(2)(iv) of this section, the 

Exchange must ensure that coverage is 

effective on the first day of the month 

following the death, or it may permit the 

enrollee or his or her dependent to elect 

a coverage effective date in accordance 

with paragraph (b)(1) of this section. If 

the Exchange permits the enrollee or his 

or her dependent to elect a coverage 

effective date in accordance with 

paragraph (b)(1) of this section, the 

Exchange must ensure coverage is 

effective on the date duly elected by the 

enrollee or his or her dependent. 

* * * * * 

(c) * * * 

(2) Advanced availability. A qualified 

individual or his or her dependent who 

is described in paragraph (d)(1), 

(d)(6)(iii) or, effective January 1, 2016, 

(d)(7), of this section, has 60 days before 

and after the triggering event to select a 

QHP. Prior to January 1, 2016, a 

qualified individual or his or her 

dependent who is described in 

paragraph (d)(7) of this section may 

select a QHP in accordance with 

paragraph (c)(1) of this section. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) Is enrolled in any non-calendar 

year group health plan or individual 

health insurance coverage, even if the 

qualified individual or his or her 

dependent has the option to renew such 

coverage. The date of the loss of 

coverage is the last day of the plan or 

policy year; 

* * * * * 

(2)(i) The qualified individual gains a 

dependent or becomes a dependent 

through marriage, birth, adoption, 

placement for adoption, or placement in 

foster care, or through a child support 

order or other court order. 

(ii) The enrollee loses a dependent or 

is no longer considered a dependent 

through divorce or legal separation as 

defined by State law in the State in 

which the divorce or legal separation 

occurs, or if the enrollee, or his or her 

dependent, dies. 

* * * * * 

(4) The qualified individual’s or his or 

her dependent’s, enrollment or nonenrollment in a QHP is unintentional, 

inadvertent, or erroneous and is the 

result of the error, misrepresentation, 

misconduct, or inaction of an officer, 

employee, or agent of the Exchange or 

HHS, its instrumentalities, or a nonExchange entity providing enrollment 

assistance or conducting enrollment 

activities. For purposes of this 

provision, misconduct includes the 

failure to comply with applicable 

standards under this part, part 156 of 

this subchapter, or other applicable 

Federal or State laws as determined by 

the Exchange. 

* * * * * 

(6) * * * 

(iv) A qualified individual in a nonMedicaid expansion State who was 

previously ineligible for advance 

payments of the premium tax credit 

solely because of a household income 

below 100 percent FPL, who was 

ineligible for Medicaid during that same 

timeframe, who has experienced a 

change in household income that makes 

the qualified individual newly eligible 

for advance payments of the premium 

tax credit. 

* * * * * 

■ 30. Section 155.430 is amended by 

revising paragraphs (b)(1)(i) and (d)(6), 

and adding paragraphs (b)(1)(iii), 

(d)(2)(v), and (d)(8) to read as follows: 

§ 155.430 Termination of coverage. 

* * * * * 

(b) * * * 

(1) * * * 

(i) The Exchange must permit an 

enrollee to terminate his or her coverage 

in a QHP, including as a result of the 

enrollee obtaining other minimum 

essential coverage. To the extent the 

enrollee has the right to cancel the 

coverage under applicable State laws, 

including ‘‘free look’’ cancellation laws, 

the enrollee may do so, in accordance 

with such laws. 

* * * * * 

(iii) The Exchange must establish 

process to permit individuals, including 

enrollees’ authorized representatives, to 

report the death of an enrollee for 

purposes of initiating termination of the 

enrollee’s Exchange enrollment. The 

Exchange may require the reporting 

party to submit documentation of the 

death. Any applicable premium refund, 

or premium due, must be processed by 

the deceased enrollee’s qualified health 

plan in accordance with State law. 

* * * * * 

(d) * * * 

(2) * * * 

(v) The retroactive termination date 

requested by the enrollee, if specified by 

applicable State laws. 

* * * * * 

(6) In the case of a termination in 

accordance with paragraph (b)(2)(v) of 

this section, the last day of coverage in 

an enrollee’s prior QHP is the day before 

the effective date of coverage in his or 

her new QHP, including any retroactive 

enrollments effectuated under 

§ 155.420(b)(2)(iii). 

* * * * * 

(8) In cases of retroactive terminations 

dates, the Exchange will ensure that 

appropriate actions are taken to make 

necessary adjustments to advance 

payments of the premium tax credit, 

cost-sharing reductions, premiums, 

claims, and user fees. 

* * * * * 

■ 31. Section 155.605 is amended by 

revising paragraphs (g)(3) and (g)(6)(i) 

and adding paragraph (g)(6)(iii) to read 

as follows: 

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§ 155.605 Eligibility standards for 

exemptions. 

* * * * * 

(g) * * * 

(3) Filing threshold. The IRS may 

allow an applicant to claim an 

exemption without obtaining an 

exemption certificate number from an 

Exchange for a taxable year if, for such 

year, the applicant could not be claimed 

as a dependent by another taxpayer and 

the applicant’s gross income was less 

than the applicant’s applicable return 

filing threshold described in section 

5000A(e)(2) of the Code; 

* * * * * 

(6) * * * 

(i) The Exchange must determine an 

applicant eligible for an exemption for 

any month if he or she is an Indian 

eligible for services through an Indian 

health care provider, as defined in 42 

CFR 447.51 and not otherwise eligible 

for an exemption under paragraph (f) of 

this section, or an individual eligible for 

services through the Indian Health 

Service in accordance with 25 U.S.C. 

1680c(a), (b), or (d)(3). 

* * * * * 

(iii) The IRS may allow an applicant 

to claim the exemption specified in 

paragraph (g)(6) of this section without 

obtaining an exemption certificate 

number from an Exchange. 

■ 32. Section 155.700(b) is amended by 

removing the definition of ‘‘Group 

participation rule’’ and by adding the 

definition of ‘‘Group participation rate’’ 

to read as follows: 

§ 155.700 Standards for the establishment 

of a SHOP. 

* * * * * 

(b) * * * 

Group participation rate means the 

minimum percentage of all eligible 

individuals or employees of an 

employer that must be enrolled. 

* * * * * 

■ 33. Section 155.705 is amended by— 

■ A. Revising paragraph (b)(4)(i)(B). 

■ B. Redesignating paragraphs 

(b)(4)(ii)(A) and (b)(4)(ii)(B) as 

paragraphs (b)(4)(ii)(B) and (b)(4)(ii)(C), 

respectively. 

■ C. Adding new paragraph (b)(4)(ii)(A). 

■ D. Revising paragraphs (b)(7), (b)(10) 

introductory text, and (b)(10)(i). 

The additions and revisions read as 

follows: 

§ 155.705 Functions of a SHOP. 

* * * * * 

(b) * * * 

(4) * * * 

(i) * * * 

(B) Collect from each employer the 

total amount due and make payments to 

QHP issuers in the SHOP for all 

enrollees except as provided for in 

paragraph (b)(4)(ii)(A) of this section; 

and 

* * * * * 

(ii) * * * 

(A) The SHOP may, upon an election 

by a qualified employer, enter into an 

agreement with a qualified employer to 

facilitate the administration of 

continuation coverage by collecting 

premiums for continuation coverage 

enrolled in through the SHOP directly 

from a qualified employee and remitting 

premium payments for this coverage to 

QHP issuers. A Federally-facilitated 

SHOP may elect to limit this service to 

the collection of premiums related to 

Federally mandated continuation 

coverage. 

* * * * * 

(7) QHP availability in merged 

markets. If a State merges the individual 

market and the small group market risk 

pools in accordance with section 

1312(c)(3) of the Affordable Care Act, 

the SHOP may permit a qualified 

employee to enroll in any QHP meeting 

level of coverage requirements 

described in section 1302(d) of the 

Affordable Care Act. 

* * * * * 

(10) Participation rules. Subject to 

§ 147.104 of this subchapter, the SHOP 

may authorize a uniform group 

participation rate for the offering of 

health insurance coverage in the SHOP, 

which must be a single, uniform rate 

that applies to all groups and issuers in 

the SHOP. If the SHOP authorizes a 

minimum participation rate, such rate 

must be based on the rate of employee 

participation in the SHOP and in 

coverage through another group health 

plan, governmental coverage (such as 

Medicare, Medicaid, or TRICARE), 

coverage sold through the individual 

market, or in other minimum essential 

coverage, not on the rate of employee 

participation in any particular QHP or 

QHPs of any particular issuer. 

(i) Subject to § 147.104 of this 

subchapter, a Federally-facilitated 

SHOP must use a minimum 

participation rate of 70 percent, 

calculated as the number of full-time 

employees accepting coverage offered 

by a qualified employer plus the 

number of full-time employees who, at 

the time the employer submits the 

SHOP group enrollment, are enrolled in 

coverage through another group health 

plan, governmental coverage (such as 

Medicare, Medicaid, or TRICARE), 

coverage sold through the individual 

market, or in other minimum essential 

coverage, divided by the number of fulltime employees offered coverage. 

* * * * * 

■ 34. Section 155.710 is amended by 

revising paragraph (e) to read as follows: 

§ 155.710 Eligibility standards for SHOP. 

* * * * * 

(e) Employee eligibility requirements. 

An employee is a qualified employee 

eligible to enroll in coverage through a 

SHOP if such employee receives an offer 

of coverage from a qualified employer. 

A qualified employee is eligible to 

enroll his or her dependents in coverage 

through a SHOP if the offer from the 

qualified employer includes an offer of 

dependent coverage. 

■ 35. Section 155.720 is amended by: 

■ A. Removing ‘‘;’’ from paragraph (b)(5) 

and adding ‘‘; and’’ it its place. 

■ B. Removing ‘‘; and’’ from paragraph 

(b)(6) and adding a period in its place. 

■ C. Removing paragraph (b)(7). 

■ D. Revising paragraph (e). 

The revisions read as follows: 

§ 155.720 Enrollment of employees into 

QHPs under SHOP. 

* * * * * 

(e) Notification of effective date. The 

SHOP must ensure that a QHP issuer 

notifies an enrollee enrolled in a QHP 

through the SHOP of the effective date 

of his or her coverage. 

* * * * * 

■ 36. Section 155.725 is amended by 

revising paragraphs (a), (b), (g), (h), (i), 

and (j)(5) and by adding paragraph (k) 

to read as follows: 

§ 155.725 Enrollment periods under SHOP. 

(a) General requirements. The SHOP 

must ensure that enrollment 

transactions are sent to QHP issuers and 

that such issuers adhere to coverage 

effective dates in accordance with this 

section. 

(b) Rolling enrollment in the SHOP. 

The SHOP must permit a qualified 

employer to purchase coverage for its 

small group at any point during the 

year. The employer’s plan year must 

consist of the 12-month period 

beginning with the qualified employer’s 

effective date of coverage, unless the 

plan is issued in a State that has elected 

to merge its individual and small group 

risk pools under section 1312(c)(3) of 

the Affordable Care Act, in which case 

the plan year will end on December 31 

of the calendar year in which coverage 

first became effective. 

* * * * * 

(g) Newly qualified employees. (1) The 

SHOP must provide an employee who 

becomes a qualified employee outside of 

the initial or annual open enrollment 

period an enrollment period beginning 

on the first day of becoming a qualified 

employee. A newly qualified employee 

must have at least 30 days from the 

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beginning of his or her enrollment 

period to select a QHP. The enrollment 

period must end no sooner than 15 days 

prior to the date that any applicable 

employee waiting period longer than 45 

days would end if the employee made 

a plan selection on the first day of 

becoming eligible. 

(2) The effective date of coverage for 

a QHP selection received by the SHOP 

from a newly qualified employee must 

always be the first day of a month, and 

must generally be determined in 

accordance with § 155.725(h), unless the 

employee is subject to a waiting period 

consistent with § 147.116 of this 

subchapter, in which case the effective 

date may be on the first day of a later 

month, but in no case may the effective 

date fail to comply with § 147.116 of 

this subchapter. 

(h) Initial and annual open 

enrollment effective dates. (1) The 

SHOP must establish effective dates of 

coverage for qualified employees 

enrolling in coverage for the first time, 

and for qualified employees enrolling 

during the annual open enrollment 

period described in paragraph (e) of this 

section. 

(2) For a QHP selection received by 

the Federally-facilitated SHOP from a 

qualified employee in his or her initial 

or annual open enrollment period: 

(i) Between the first and fifteenth day 

of any month, the Federally-facilitated 

SHOP must ensure a coverage effective 

date of the first day of the following 

month 

(ii) Between the 16th and last day of 

any month, the Federally-facilitated 

SHOP must ensure a coverage effective 

date of the first day of the second 

following month. 

(i) Renewal of coverage. (1) If a 

qualified employee enrolled in a QHP 

through the SHOP remains eligible for 

coverage, such employee will remain in 

the QHP selected the previous year 

unless— 

(i) The qualified employee terminates 

coverage from such QHP in accordance 

with standards identified in § 155.430; 

(ii) The qualified employee enrolls in 

another QHP if such option exists; or 

(iii) The QHP is no longer available to 

the qualified employee. 

(2) The SHOP may treat a qualified 

employer offering coverage through the 

SHOP as offering the same coverage 

under § 155.705(b)(3) at the same level 

of contribution under § 155.705(b)(11) 

unless: 

(i) The qualified employer is no 

longer eligible to offer such coverage 

through the SHOP; 

(ii) The qualified employer elects to 

offer different coverage or a different 

contribution through the SHOP; 

(iii) The qualified employer 

withdraws from the SHOP; or 

(iv) In the case of a qualified employer 

offering a single QHP, the single QHP is 

no longer available through the SHOP. 

(j) * * * 

(5) The effective dates of coverage for 

special enrollment periods are 

determined using the provisions of 

§ 155.420(b). 

* * * * * 

(k) Limitation. Qualified employees 

will not be able to enroll unless the 

employer group meets any applicable 

minimum participation rate 

implemented under § 155.705(b)(10). 

■ 37. Section 155.735 is amended by 

revising paragraphs (c)(2)(ii), (c)(2)(iii), 

and (d)(1)(iii) and adding paragraph (g) 

to read as follows: 

§ 155.735 Termination of coverage. 

* * * * * 

(c) * * * 

(2) * * * 

(ii) If premium payment is not 

received 31 days from the first of the 

coverage month, the Federallyfacilitated SHOP may terminate the 

qualified employer for lack of payment. 

The termination would take effect on 

the last day of the month for which the 

Federally-facilitated SHOP received full 

payment. 

(iii) If a qualified employer is 

terminated due to lack of premium 

payment, but within 30 days following 

its termination the qualified employer 

requests reinstatement, pays all 

premiums owed including any prior 

premiums owed for coverage during the 

grace period, and pays the premium for 

the next month’s coverage, the 

Federally-facilitated SHOP must 

reinstate the qualified employer in its 

previous coverage. A qualified employer 

may be reinstated in the Federallyfacilitated SHOP only once per calendar 

year. 

(d) * * * 

(1) * * * 

(iii) The QHP in which the enrollee is 

enrolled, terminates, is decertified as 

described in § 155.1080, or its 

certification as a QHP is not renewed; 

* * * * * 

(g) Notice of termination. (1) If any 

enrollee’s coverage through the SHOP is 

terminated due to non-payment of 

premiums or due to a loss of the 

enrollee’s eligibility to participate in the 

SHOP, including where an enrollee 

loses his or her eligibility because a 

qualified employer has lost its 

eligibility, the SHOP must, promptly 

and without undue delay, provide the 

enrollee with a notice of termination of 

coverage that includes the termination 

effective date and reason for 

termination. 

(2) If an employer group’s coverage 

through the SHOP is terminated due to 

non-payment of premiums or, where 

applicable, due to a loss of the qualified 

employer’s eligibility to offer coverage 

through the SHOP, the SHOP must, 

promptly and without undue delay, 

provide the employer with a notice of 

termination of coverage that includes 

the termination effective date and the 

reason for termination. 

■ 38. Section 155.1000 amended by 

adding paragraph (d) to read as follows: 

§ 155.1000 Certification standards for 

QHPs. 

* * * * * 

(d) Special rule for SHOP. In a SHOP 

that certifies QHPs on a calendar-year 

basis, the certification shall remain in 

effect for the duration of any plan year 

beginning in the calendar year for which 

the QHP was certified, even if the plan 

year ends after the calendar year for 

which the QHP was certified. 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 39. The authority citation for part 156 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301–1304, 1311–1313, 1321– 

1322, 1324, 1334, 1342–1343, 1401–1402, 

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

18021–18024, 18031–18032, 18041–18042, 

18044, 18054, 18061, 18063, 18071, 18082, 

26 U.S.C. 36B, and 31 U.S.C. 9701). 

■ 40. Section 156.20 is amended by 

adding a definition of ‘‘Plan’’ in 

alphabetical order to read as follows: 

§ 156.20 Definitions. 

* * * * * 

Plan has the meaning given the term 

in § 144.103 of this subchapter. 

* * * * * 

■ 41. Section 156.100 is amended by 

revising paragraph (c) to read as follows: 

§ 156.100 State selection of benchmark. 

* * * * * 

(c) Default base-benchmark plan. If a 

State does not make a selection using 

the process described in this section, the 

default base-benchmark plan will be the 

largest plan by enrollment in the largest 

product by enrollment in the State’s 

small group market. 

■ 42. Section 156.110 is amended by 

revising paragraphs (c)(4) and (c)(5) and 

removing paragraph (c)(6) to read as 

follows. 

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§ 156.110 EHB-benchmark plan standards. 

* * * * * 

(c) * * * 

(4) The plan described in paragraph 

(b)(2)(i) of the section with respect to 

pediatric oral care benefits; and 

(5) The plan described in paragraph 

(b)(3)(i) of this section with respect to 

pediatric vision care benefits. 

* * * * * 

■ 43. Section 156.115 is amended by 

revising paragraph (a)(5) and adding 

paragraph (a)(6) to read as follows: 

§ 156.115 Provision of EHB. 

(a) * * * 

(5) If the EHB-benchmark plan does 

not include coverage for habilitative 

services as described in § 156.110(f), the 

plan must: 

(i) Cover health care services that help 

a person keep, learn, or improve skills 

and functioning for daily living; and 

(ii) Provide coverage of habilitative 

services in a manner no less favorable 

than coverage of rehabilitative services. 

(6) For pediatric services that are 

required under § 156.110(a)(10), provide 

coverage for enrollees until at least the 

end of the plan year in which the 

enrollee turns 19 years of age. 

* * * * * 

■ 44. Section 156.120 is added to read 

as follows: 

§ 156.120 Collection of data to define 

essential health benefits. 

(a) Definitions. The following 

definitions apply to this section, unless 

the context indicates otherwise: 

Health benefits means benefits for 

medical care, as defined at § 144.103 of 

this subchapter, which may be delivered 

through the purchase of insurance or 

otherwise. 

Health insurance product has the 

meaning given to the term in § 159.110 

of this subchapter. 

Health plan has the meaning given to 

the term, ‘‘Portal Plan’’ in § 159.110 of 

this subchapter. 

Small group market has the meaning 

given to the term in § 155.20 of this 

subchapter. 

State has the meaning given to the 

term in § 155.20 of this subchapter. 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, or other similar limits on the 

scope or duration of treatment. 

Treatment limitations include only 

quantitative treatment limitations. A 

permanent exclusion of all benefits for 

a particular condition or disorder is not 

a treatment limitation. 

(b) Reporting requirement. A State 

that selects a base-benchmark plan or an 

issuer that offers a default basebenchmark plan in accordance with 

§ 156.100 must submit to HHS the 

following information in a form and 

manner, and by a date, determined by 

HHS: 

(1) Administrative data necessary to 

identify the health plan; 

(2) Data and descriptive information 

for each plan on the following items: 

(i) All health benefits in the plan; 

(ii) Treatment limitations; 

(iii) Drug coverage; and 

(iv) Exclusions. 

■ 45. Section 156.122 is amended by— 

■ A. Revising paragraphs (a)(1), (a)(2), 

and (c). 

■ B. Adding paragraphs (d) and (e). 

The revisions and additions read as 

follows: 

§ 156.122 Prescription drug benefits. 

(a) * * * 

(1) Submits its formulary drug list to 

the Exchange, the State or OPM. 

(2) Uses a pharmacy and therapeutic 

(P&T) committee that meets the 

following standards 

(i) Membership standards. The P&T 

committee must: 

(A) Have members that represent a 

sufficient number of clinical specialties 

to adequately meet the needs of 

enrollees. 

(B) Consist of a majority of 

individuals who are practicing 

physicians, practicing pharmacists and 

other practicing health care 

professionals. 

(C) Prohibit any member with a 

conflict of interest with respect to the 

issuer or a pharmaceutical manufacturer 

from voting on any matters for which 

the conflict exists. 

(D) Require at least 20 percent of its 

membership have no conflict of interest 

with respect to the issuer and any 

pharmaceutical manufacturer. 

(ii) Meeting standards. The P&T 

committee must: 

(A) Meet at least quarterly. 

(B) Maintain written documentation 

of the rationale for all decisions 

regarding formulary drug list 

development or revision. 

(iii) Formulary drug list establishment 

and management. The P&T committee 

must: 

(A) Develop and document 

procedures to ensure appropriate drug 

review and inclusion. 

(B) Make clinical decisions based on 

scientific evidence such as peer 

reviewed medical literature, standards 

of practice such as well-established 

clinical practice guidelines and other 

sources of appropriate information. 

(C) Consider the therapeutic 

advantages of drugs in terms of safety 

and efficacy when selecting formulary 

drugs and making recommendations on 

placing them on formulary tiers. 

(D) Review new FDA-approved drugs 

and new uses for existing drugs. 

(E) Ensure the issuer’s formulary drug 

list: 

(1) Covers a range of drugs across a 

broad distribution of therapeutic 

categories and classes and 

recommended drug treatment regimens 

that treat all disease states and does not 

substantially discourage enrollment by 

any group of enrollees; and 

(2) Provides appropriate access to 

drugs that are included in broadly 

accepted treatment guidelines and 

which are indicative of, and consistent 

with, general best practice formularies 

currently in widespread use. 

* * * * * 

(c) A health plan providing essential 

health benefits must have the following 

processes in place that allow an 

enrollee, the enrollee’s designee, or the 

enrollee’s prescribing physician (or 

other prescriber, as appropriate) to 

request and gain access to clinically 

appropriate drugs not otherwise covered 

by the health plan (a request for 

exception). In the event that an 

exception request is granted, the plan 

must treat the excepted drug(s) as an 

essential health benefit, including by 

counting any cost-sharing towards the 

plan’s annual limitation on cost-sharing 

under § 156.130 and when calculating 

the plan’s actuarial value under 

§ 156.135. 

(1) Standard exception request. (i) A 

health plan must have a process for an 

enrollee, the enrollee’s designee, or the 

enrollee’s prescribing physician (or 

other prescriber) to request a standard 

review of a decision that a drug is not 

covered by the plan. 

(ii) A health plan must make its 

determination on a standard exception 

and notify the enrollee or the enrollee’s 

designee and the prescribing physician 

(or other prescriber, as appropriate) of 

its coverage determination no later than 

72 hours following receipt of the 

request. 

(iii) A health plan that grants a 

standard exception request must 

provide coverage of the non-formulary 

drug for the duration of the prescription, 

including refills. 

(2) Expedited exception request. (i) A 

health plan must have a process for an 

enrollee, the enrollee’s designee, or the 

enrollee’s prescribing physician (or 

other prescriber) to request an expedited 

review based on exigent circumstances. 

(ii) Exigent circumstances exist when 

an enrollee is suffering from a health 

condition that may seriously jeopardize 

the enrollee’s life, health, or ability to 

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regain maximum function or when an 

enrollee is undergoing a current course 

of treatment using a non-formulary 

drug. 

(iii) A health plan must make its 

coverage determination on an expedited 

review request based on exigent 

circumstances and notify the enrollee or 

the enrollee’s designee and the 

prescribing physician (or other 

prescriber, as appropriate) of its 

coverage determination no later than 24 

hours following receipt of the request. 

(iv) A health plan that grants an 

exception based on exigent 

circumstances must provide coverage of 

the non-formulary drug for the duration 

of the exigency. 

(3) External exception request review. 

(i) If the health plan denies a request for 

a standard exception paragraph (c)(1) of 

this section or for an expedited 

exception under paragraph (c)(2) of this 

section, the health plan must have a 

process for the enrollee, the enrollee’s 

designee, or the enrollee’s prescribing 

physician (or other prescriber) to 

request an external exception review by 

an independent review organization to 

review the original exception request 

and subsequent denial of such request. 

(ii) A health plan must make its 

determination on the external exception 

request and notify the enrollee or the 

enrollee’s designee and the prescribing 

physician (or other prescriber, as 

appropriate) of its coverage 

determination no later than 72 hours 

following its receipt of the request, if the 

original request was a standard 

exception request under paragraph (c)(1) 

of this section, and no later than 24 

hours following its receipt of the 

request, if the original request was an 

expedited exception request under 

paragraph (c)(2) of this section. 

(d)(1) A health plan must publish an 

up-to-date, accurate, and complete list 

of all covered drugs on its formulary 

drug list, including any tiering structure 

that it has adopted and any restrictions 

on the manner in which a drug can be 

obtained, in a manner that is easily 

accessible to plan enrollees, prospective 

enrollees, the State, the Exchange, HHS, 

the U.S. Office of Personnel 

Management, and the general public. A 

formulary drug list is easily accessible 

when: 

(i) It can be viewed on the plan’s 

public Web site through a clearly 

identifiable link or tab without requiring 

an individual to create or access an 

account or enter a policy number; and 

(ii) If an issuer offers more than one 

plan, when an individual can easily 

discern which formulary drug list 

applies to which plan. 

(2) [Reserved] 

(e) A health plan must have the 

following access procedures: 

(1) A health plan must allow enrollees 

to access prescription drug benefits at 

in-network retail pharmacies, unless: 

(i) The drug is subject to restricted 

distribution by the U.S. Food and Drug 

Administration; or 

(ii) The drug requires special 

handling, provider coordination, or 

patient education that cannot be 

provided by a retail pharmacy. 

(2) If a health plan charges enrollees 

a higher cost-sharing amount for 

obtaining a covered drug at a retail 

pharmacy, the higher cost-sharing will 

count towards the plan’s annual 

limitation on cost-sharing under 

§ 156.130 and must be accounted for in 

the plan’s actuarial value calculated 

under § 156.135. 

■ 46. Section 156.130 is amended by 

adding paragraph (b) and revising 

paragraph (c) to read as follows: 

§ 156.130 Cost sharing requirements 

* * * * * 

(b) Non-calendar year plans. Noncalendar year plans subject to paragraph 

(a) of this section must adhere to the 

annual limitation on cost sharing 

beginning on the date the plan begins 

and ending one year later. 

(c) Special rule for network plans. In 

the case of a plan using a network of 

providers, cost sharing paid by, or on 

behalf of, an enrollee for benefits 

provided outside of such network is not 

required to count toward the annual 

limitation on cost sharing (as defined in 

paragraph (a) of this section). 

* * * * * 

■ 47. Section 156.145 is amended by 

revising paragraph (a) introductory text 

to read as follows: 

§ 156.145 Determination of minimum 

value. 

(a) Acceptable methods for 

determining MV. An employersponsored plan provides minimum 

value (MV) only if the percentage of the 

total allowed costs of benefits provided 

under the plan is greater than or equal 

to 60 percent, and the benefits under the 

plan include substantial coverage of 

inpatient hospital services and 

physician services. An employersponsored plan may use one of the 

following methods to determine 

whether the percentage of the total 

allowed costs of benefits provided 

under the plan is not less than 60 

percent. 

* * * * * 

■ 48. Section 156.200 is amended by 

revising paragraph (b)(7) to read as 

follows: 

§ 156.200 QHP issuer participation 

standards. 

* * * * * 

(b) * * * 

(7) Comply with the standards under 

45 CFR part 153. 

* * * * * 

■ 49. Section 156.230 is amended by 

revising paragraph (a) introductory text 

and (b) to read as follows: 

§ 156.230 Network adequacy standards. 

(a) General requirement. Each QHP 

issuer that uses a provider network must 

ensure that the provider network 

consisting of in-network providers, as 

available to all enrollees, meets the 

following standards— 

* * * * * 

(b) Access to provider directory. (1) A 

QHP issuer must make its provider 

directory for a QHP available to the 

Exchange for publication online in 

accordance with guidance from HHS 

and to potential enrollees in hard copy 

upon request. In the provider directory, 

a QHP issuer must identify providers 

that are not accepting new patients. 

(2) A QHP issuer must publish an upto-date, accurate, and complete provider 

directory, including information on 

which providers are accepting new 

patients, the provider’s location, contact 

information, specialty, medical group, 

and any institutional affiliations, in a 

manner that is easily accessible to plan 

enrollees, prospective enrollees, the 

State, the Exchange, HHS and OPM. A 

provider directory is easily accessible 

when— 

(i) The general public is able to view 

all of the current providers for a plan in 

the provider directory on the issuer’s 

public Web site through a clearly 

identifiable link or tab and without 

creating or accessing an account or 

entering a policy number; and 

(ii) If a health plan issuer maintains 

multiple provider networks, the general 

public is able to easily discern which 

providers participate in which plans 

and which provider networks. 

■ 50. Section 156.235 is revised to read 

as follows: 

§ 156.235 Essential community providers. 

(a) General ECP standard. (1) A QHP 

issuer that uses a provider network must 

include in its provider network a 

sufficient number and geographic 

distribution of essential community 

providers (ECPs), where available, to 

ensure reasonable and timely access to 

a broad range of such providers for lowincome individuals or individuals 

residing in Health Professional Shortage 

Areas within the QHP’s service area, in 

accordance with the Exchange’s 

network adequacy standards. 

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(2) A plan applying for QHP 

certification to be offered through an 

FFE has a sufficient number and 

geographic distribution of ECPs if it 

demonstrates in its QHP application 

that— 

(i) The network includes as 

participating providers at least a 

minimum percentage, as specified by 

HHS, of available ECPs in each plan’s 

service area with multiple providers at 

a single location counting as a single 

ECP toward both the available ECPs in 

the plan’s service area and the issuer’s 

satisfaction of the ECP participation 

standard; and 

(ii) The issuer of the plan offers 

contracts to— 

(A) All available Indian health 

providers in the service area, applying 

the special terms and conditions 

necessitated by federal law and 

regulations as referenced in the 

recommended model QHP addendum 

for Indian health providers developed 

by HHS; and 

(B) At least one ECP in each of the five 

ECP categories (Federally Qualified 

Health Centers, Ryan White Providers, 

Family Planning Providers, Indian 

Health Providers, Hospitals and other 

ECP providers) in each county in the 

service area, where an ECP in that 

category is available and provides 

medical or dental services that are 

covered by the issuer plan type. 

(3) If a plan applying for QHP 

certification to be offered through an 

FFE does not satisfy the ECP standard 

described in paragraph (a)(2) of this 

section, the issuer must include as part 

of its QHP application a narrative 

justification describing how the plan’s 

provider network provides an adequate 

level of service for low-income enrollees 

or individuals residing in Health 

Professional Shortage Areas within the 

plan’s service area and how the plan’s 

provider network will be strengthened 

toward satisfaction of the ECP standard 

prior to the start of the benefit year. 

(4) Nothing in paragraphs (a)(1) 

through (a)(3) of this section requires 

any QHP to provide coverage for any 

specific medical procedure provided by 

an ECP. 

(5) A plan that provides a majority of 

covered professional services through 

physicians employed by the issuer or 

through a single contracted medical 

group may instead comply with the 

alternate standard described in 

paragraph (b) of this section. 

(b) Alternate ECP standard. (1) A plan 

described in paragraph (a)(5) of this 

section must have a sufficient number 

and geographic distribution of 

employed providers and hospital 

facilities, or providers of its contracted 

medical group and hospital facilities, to 

ensure reasonable and timely access for 

low-income individuals or individuals 

residing in Health Professional Shortage 

Areas within the plan’s service area, in 

accordance with the Exchange’s 

network adequacy standards. 

(2) A plan described in paragraph 

(a)(5) of this section applying for QHP 

certification to be offered through an 

FFE has a sufficient number and 

geographic distribution of employed or 

contracted providers if it demonstrates 

in its QHP application that the number 

of its providers in the following 

locations satisfies a minimum 

percentage, specified by HHS, of 

available ECPs in the plan’s service area. 

Multiple providers at a single location 

count as a single ECP, if— 

(i) Located within Health Professional 

Shortage Areas; or 

(ii) Located within five-digit zip codes 

in which 30 percent or more of the 

population falls below 200 percent of 

the Federal Poverty Level. 

(3) If a plan does not satisfy the 

alternate ECP standard described in 

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

issuer must include as part of its QHP 

application a narrative justification 

describing how the plan’s provider 

networks provides an adequate level of 

service for low-income enrollees or 

individuals residing in Health 

Professional Shortage Areas within the 

plan’s service area and how the plan’s 

provider network will be strengthened 

toward satisfaction of the ECP standard 

prior to the start of the benefit year. 

(c) Definition. An essential 

community provider is a provider that 

serves predominantly low-income, 

medically underserved individuals, 

including a health care provider defined 

in section 340B(a)(4) of the PHS Act; or 

described in section 1927(c)(1)(D)(i)(IV) 

of the Act as set forth by section 221 of 

Public Law 111–8, unless the provider 

has lost its status under either of these 

sections, 340(B) of the PHS Act or 1927 

of the Act as a result of violating Federal 

law. 

(d) Payment rates. Nothing in 

paragraph (a) of this section must be 

construed to require a QHP issuer to 

contract with an ECP if such provider 

refuses to accept the generally 

applicable payment rates of such issuer. 

(e) Payment of Federally qualified 

health centers. If an item or service 

covered by a QHP is provided by a 

Federally-qualified health center (as 

defined in section 1905(l)(2)(B) of the 

Act) to an enrollee of a QHP, the QHP 

issuer must pay the Federally qualified 

health center for the item or service an 

amount that is not less than the amount 

of payment that would have been paid 

to the center under section 1902(bb) of 

the Act for such item or service. Nothing 

in this paragraph (e) precludes a QHP 

issuer and Federally-qualified health 

center from agreeing upon payment 

rates other than those that would have 

been paid to the center under section 

1902(bb) of the Act, as long as that rate 

is at least equal to the generally 

applicable payment rate of the issuer 

described in paragraph (d) of this 

section. 

■ 51. Section 156.250 is revised to read 

as follows: 

§ 156.250 Meaningful access to qualified 

health plan information. 

A QHP issuer must provide all 

information that is critical for obtaining 

health insurance coverage or access to 

health care services through the QHP, 

including applications, forms, and 

notices, to qualified individuals, 

applicants, qualified employers, 

qualified employees, and enrollees in 

accordance with the standards 

described in § 155.205(c) of this 

subchapter. Information is deemed to be 

critical for obtaining health insurance 

coverage or access to health care 

services if the issuer is required by law 

or regulation to provide the document to 

a qualified individual, applicant, 

qualified employer, qualified employee, 

or enrollee. 

■ 52. Section 156.265 is amended by 

revising paragraph (d) to read as 

follows: 

§ 156.265 Enrollment process for qualified 

individuals. 

* * * * * 

(d) Premium payment. A QHP issuer 

must follow the premium payment 

process established by the Exchange in 

accordance with § 155.240 of this 

subchapter and the payment rules 

established in § 155.400(e) of this 

subchapter. 

* * * * * 

■ 53. Section 156.285 is amended by— 

■ A. Revising paragraphs (b)(1), (b)(4) 

and (d)(1)(ii); 

■ B. Redesignating paragraph (c)(3), 

(c)(4), (c)(5), (c)(6), and (c)(7) as (c)(4), 

(c)(5), (c)(6), (c)(7), and (c)(8) 

respectively; and 

■ C. Adding new paragraph (c)(3). 

The revisions and addition read as 

follows: 

§ 156.285 Additional standards specific to 

SHOP. 

* * * * * 

(b) * * * 

(1) Enroll a qualified employee in 

accordance with the qualified 

employer’s initial and annual employee 

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open enrollment periods described in 

§ 155.725 of this subchapter; 

* * * * * 

(4) Adhere to effective dates of 

coverage established in accordance with 

§ 155.725 of this subchapter. 

* * * * * 

(c) * * * 

(3) Provide new enrollees with notice 

of their effective date of coverage 

consistent with § 155.720(e) of this 

subchapter. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) If a QHP issuer terminates an 

enrollee’s coverage in accordance with 

§ 155.735(d)(1)(iii) or (v) of this 

subchapter, the QHP issuer must, 

promptly and without undue delay, 

provide the qualified employer and the 

enrollee with a notice of termination of 

coverage that includes the termination 

effective date and reason for 

termination. 

* * * * * 

■ 54. Section 156.410 is amended by 

removing the second paragraph 

designated as paragraph (d)(4)(ii) and 

adding paragraph (d)(4)(iii) to read as 

follows: 

§ 156.410 Cost-sharing reductions for 

enrollees. 

* * * * * 

(d) * * * 

(4) * * * 

(iii) If the excess cost sharing was not 

paid by the provider, then, if the 

enrollee requests a refund, the refund 

must be provided to the enrollee within 

45 calendar days of the date of the 

request. 

■ 55. Section 156.420 is amended by 

adding paragraph (h) to read as follows: 

§ 156.420 Plan variations. 

* * * * * 

(h) Notice. No later than the first day 

of the Exchange open enrollment period 

for the 2016 benefit year, for each plan 

variation that an issuer offers in 

accordance with the rules of this 

section, an issuer must provide a 

summary of benefits and coverage that 

accurately represents each plan 

variation consistent with the 

requirements set forth in § 147.200 of 

this subchapter. 

■ 56. Section 156.425 is amended by 

adding paragraph (c) to read as follows: 

§ 156.425 Changes in eligibility for costsharing reductions. 

* * * * * 

(c) Notice upon assignment. 

Beginning on January 1, 2016, if an 

individual’s assignment to a standard 

plan or plan variation of the QHP 

changes in accordance with paragraph 

(a) of this section, the issuer must 

provide to that individual a summary of 

benefits and coverage that accurately 

reflects the new plan variation (or 

standard plan variation without costsharing reductions) in a manner 

consistent with § 147.200 of this 

subchapter as soon as practicable 

following receipt of notice from the 

Exchange, but not later than 7 business 

days following receipt of notice. 

■ 57. Section 156.430 is amended by 

adding paragraph (c)(2)(i) and by 

reserving paragraph (c)(2)(ii) to read as 

follows: 

§ 156.430 Payment for cost-sharing 

reductions. 

* * * * * 

(c) * * * 

(2) * * * 

(i) For reconciliation of cost-sharing 

reduction amounts advanced for the 

2014 benefit year, an issuer of a QHP 

may calculate claims amounts 

attributable to EHB, including cost 

sharing amounts attributable to EHB, by 

reducing total claims amounts by the 

plan-specific percentage estimate of 

non-essential health benefit claims 

submitted on the 2014 Uniform Rate 

Review Template, if the following 

conditions are met: 

(A) The non-essential health benefits 

percentage estimate is less than 2 

percent; and 

(B) Out-of-pocket expenses for nonEHB benefits are included in the 

calculation of amounts subject to a 

deductible or annual limitation on cost 

sharing, but copayments and 

coinsurance rates on non-EHB benefits 

are not reduced under the plan 

variation. 

(ii) [Reserved] 

* * * * * 

■ 58. Section 156.602 is amended by 

revising paragraph (d) to read as 

follows: 

§ 156.602 Other coverage that qualifies as 

minimum essential coverage. 

* * * * * 

(d) State high risk pool coverage. A 

qualified high risk pool established on 

or before November 26, 2014 in any 

State as defined by section 2744(c)(2) of 

the Public Health Service Act. 

* * * * * 

■ 59. Section 156.800 is amended by 

revising paragraph (c) to read as follows: 

§ 156.800 Available remedies; Scope. 

* * * * * 

(c) Compliance standard. For calendar 

years 2014 and 2015, sanctions under 

this subpart will not be imposed if the 

QHP issuer has made good faith efforts 

to comply with applicable requirements. 

* * * * * 

■ 60. Section 156.815 is added to 

subpart I to read as follows: 

§ 156.815 Plan suppression. 

(a) Suppression means temporarily 

making a QHP certified to be offered 

through the FFE unavailable for 

enrollment through the FFE. 

(b) Grounds for suppression. A QHP 

may be suppressed as described in 

paragraph (a) of this section on one or 

more of the following grounds: 

(1) The QHP issuer notifies HHS of its 

intent to withdraw the QHP from an 

FFE when one of the exceptions to 

guaranteed renewability of coverage 

related to discontinuing a particular 

product or discontinuing all coverage 

under § 147.106(c) or (d) of this 

subchapter applies; 

(2) Data submitted for the QHP is 

incomplete or inaccurate; 

(3) The QHP is in the process of being 

decertified as described in § 156.810(c) 

or § 156.810(d) or the QHP issuer is 

appealing a completed decertification as 

described in subpart J of this part; 

(4) The QHP issuer offering the QHP 

is the subject of a pending, ongoing, or 

final State regulatory or enforcement 

action or determination that could affect 

the issuer’s ability to enroll consumers 

or otherwise relates to the issuer 

offering QHPs in the FFE; or 

(5) One of the exceptions to 

guaranteed availability of coverage 

related to special rules for network 

plans or financial capacity limits under 

§ 147.104(c) or (d) of this subchapter 

applies. 

(c) A multi-State plan may be 

suppressed as described in paragraph (a) 

of this section if OPM notifies the 

Exchange that: 

(1) OPM has found a compliance 

violation within the multi-State plan, or 

(2) One of the grounds for suppression 

in paragraph (b) exists for the multiState plan. 

■ 61. Section 156.1130 is added to 

subpart L to read as follows: 

§ 156.1130 Quality improvement strategy. 

(a) General requirement. A QHP issuer 

participating in an Exchange for 2 or 

more consecutive years must implement 

and report on a quality improvement 

strategy including a payment structure 

that provides increased reimbursement 

or other market-based incentives in 

accordance with the health care topic 

areas in section 1311(g)(1) of the 

Affordable Care Act, for each QHP 

offered in an Exchange, consistent with 

the guidelines developed by HHS under 

section 1311(g) of the Affordable Care 

Act. 

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(b) Data requirement. A QHP issuer 

must submit data, that has been 

validated in a manner and timeframe 

specified by the Exchange to support the 

evaluation of quality improvement 

strategies in accordance with 

§ 155.200(d) of this subchapter. 

(c) Timeline. A QHP issuer must 

submit data annually to evaluate 

compliance with the standards for a 

quality improvement strategy in 

accordance with paragraph (a) of this 

section, in a manner and timeframe 

specified by the Exchange. 

(d) Multi-State plans. Issuers of multiState plans, as defined in § 155.1000(a) 

of this subchapter, must provide the 

data described in paragraph (b) of this 

section to the U.S. Office of Personnel 

Management, in the manner and 

timeframe specified by the U.S. Office of 

Personnel Management. 

■ 62. Section 156.1220 is amended by 

revising paragraph (c) to read as follows: 

§ 156.1220 Administrative appeals. 

* * * * * 

(c) Review by the Administrator. (1) 

Either the issuer or CMS may request 

review by the Administrator of CMS of 

the CMS hearing officer’s decision. A 

request for review of the CMS hearing 

officer’s decision must be submitted to 

the Administrator of CMS within 15 

calendar days of the date of the CMS 

hearing officer’s decision, and must 

specify the findings or issues that the 

issuer or CMS challenges. The issuer or 

CMS may submit for review by the 

Administrator a statement supporting 

the decision of the CMS hearing officer. 

(2) After receiving a request for 

review, the CMS Administrator has the 

discretion to elect to review the CMS 

hearing officer’s decision or to decline 

to review the CMS hearing officer’s 

decision. If the Administrator elects to 

review the CMS hearing officer’s 

decision, the Administrator will also 

review the statements of the issuer and 

CMS, and any other information 

included in the record of the CMS 

hearing officer’s decision, and will 

determine whether to uphold, reverse, 

or modify the CMS hearing officer’s 

decision. The issuer or CMS must prove 

its case by clear and convincing 

evidence with respect to issues of fact. 

The Administrator will send the 

decision and the reasons for the 

decision to the issuer. 

(3) The Administrator’s determination 

is final and binding. 

PART 158—ISSUER USE OF PREMIUM 

REVENUE: REPORTING AND REBATE 

REQUIREMENTS 

■ 63. The authority citation for part 158 

continues to read as follows: 

Authority: Section 2718 of the Public 

Health Service Act (42 U.S.C. 300gg–18), as 

amended. 

■ 64. Section 158.140 is amended by 

adding paragraph (b)(1)(iii) to read as 

follows: 

§ 158.140 Reimbursement for clinical 

services provided to enrollees. 

* * * * * 

(b) * * * 

(1) * * * 

(iii) Cost-sharing reduction payments 

received by the issuer to the extent not 

reimbursed to the provider furnishing 

the item or service. 

* * * * * 

■ 65. Section 158.162 is amended by 

revising paragraph (a)(2) and adding 

paragraph (b)(2)(iv) to read as follows: 

§ 158.162 Reporting of Federal and State 

taxes. 

(a) * * * 

(2) Federal taxes not excluded from 

premium under subpart B which 

include Federal income taxes on 

investment income and capital gains, as 

well as Federal employment taxes, as 

other non-claims costs. 

(b) * * * 

(2) * * * 

(iv) State employment and similar 

taxes and assessments. 

* * * * * 

■ 66. Section 158.242 is amended by 

adding paragraph (b)(1)(v) to read as 

follows: 

§ 158.242 Recipients of rebates. 

* * * * * 

(b) * * * 

(1) * * * 

(v) All rebate distributions made 

under paragraphs (b)(1)(i), (ii), or (iii) of 

this section must be made within 3 

months of the policyholder’s receipt of 

the rebate. Rebate distributions made 

after 3 months must include late 

payment interest at the current Federal 

Reserve Board lending rate or 10 percent 

annually, whichever is higher, on the 

total amount of the rebate, accruing 

from the date payment was due under 

this section. 

* * * * * 

Dated: November 14, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: November 19, 2014. 

Sylvia M. Burwell, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2014–27858 Filed 11–21–14; 4:15 pm] 

BILLING CODE 4120–01–P 

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