Vol. 78 Wednesday, 

No. 210 October 30, 2013 

Part II 

Department of Health and Human Services 

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

Patient Protection and Affordable Care Act; Program Integrity: Exchange, 

Premium Stabilization Programs, and Market Standards; Amendments to 

the HHS Notice of Benefit and Payment Parameters for 2014; Final Rule 


emcdonald on DSK67QTVN1PROD with RULES2
65046 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

1Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health 

Plans; Exchange Standards for Employers, 77 FR 

18310 (March 27, 2012). 

2Patient Protection and Affordable Care Act; 

Standards Related to Reinsurance, Risk Corridors 

and Risk Adjustment, 77 FR 17220 (March 23, 

2012). 

3Patient Protection and Affordable Care Act; 

Health Insurance Market Rules; Rate Review, 78 FR 

13406 (February 27, 2013). 

4Patient Protection and Affordable Care Act; HHS 

Notice of Benefit and Payment Parameters for 2014, 

78 FR 15410 (March 11, 2013). 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 144, 146, 147, 153, 155, 

and 156 

[CMS–9957–F2; CMS–9964–F3] 

RIN 0938–AR82; RIN 0938–AR74 

Patient Protection and Affordable Care 

Act; Program Integrity: Exchange, 

Premium Stabilization Programs, and 

Market Standards; Amendments to the 

HHS Notice of Benefit and Payment 

Parameters for 2014 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule implements 

provisions of the Patient Protection and 

Affordable Care Act and the Health Care 

and Education Reconciliation Act of 

2010 (collectively referred to as the 

Affordable Care Act). Specifically, this 

final rule outlines financial integrity 

and oversight standards with respect to 

Affordable Insurance Exchanges, 

qualified health plan (QHP) issuers in 

Federally-facilitated Exchanges (FFEs), 

and States with regard to the operation 

of risk adjustment and reinsurance 

programs. It also establishes additional 

standards for special enrollment 

periods, survey vendors that may 

conduct enrollee satisfaction surveys on 

behalf of QHP issuers, and issuer 

participation in an FFE, and makes 

certain amendments to definitions and 

standards related to the market reform 

rules. These standards, which include 

financial integrity provisions and 

protections against fraud and abuse, are 

consistent with Title I of the Affordable 

Care Act. This final rule also amends 

and adopts as final interim provisions 

set forth in the Amendments to the HHS 

Notice of Benefit and Payment 

Parameters for 2014 interim final rule, 

published in the Federal Register on 

March 11, 2013, related to risk corridors 

and cost-sharing reduction 

reconciliation. 

DATES: These regulations are effective 

on December 30, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Leigha Basini at (301) 492–4380 for 

general information. 

Jacob Ackerman at (301) 492–4179 for 

matters relating to Parts 144 and 147, 

single risk pool and catastrophic plans. 

Adam Shaw at (410) 786–1091 for 

matters relating to the oversight of risk 

adjustment and reinsurance. 

Jaya Ghildiyal at (301) 492–5149 for 

matters relating to risk corridors. 

Shelley Bain at (301) 492–4453 or 

Anne Pesto at (410) 786–3492 for 

matters relating to Part 155, Subpart M. 

Ariel Novick at (301) 492–4309 for 

matters relating to the oversight of costsharing reductions and advance 

payments of the premium tax credit. 

Johanna Lauer at (301) 492–4397 for 

matters relating to cost-sharing 

reduction reconciliation. 

Rebecca Zimmermann at (301) 492– 

4396 for matters relating to quality 

standards, Part 156, Subpart L. 

Cindy Yen at (301) 492–5142 for 

matters relating to Part 156 other than 

cost-sharing reductions, advance 

payments of the premium tax credit, 

and quality standards. 

Pat Meisol at (410) 786–1917 for 

matters relating to confirmation of HHS 

payment and collections reports. 

SUPPLEMENTARY INFORMATION: 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

Government Printing Office. This 

database can be accessed via the 

internet at http://www.gpo.gov/fdsys. 

Executive Summary 

Starting October 1, 2013, qualified 

individuals and qualified employees 

may purchase private health insurance 

coverage through competitive 

marketplaces called Affordable 

Insurance Exchanges, or ‘‘Exchanges’’ 

(also called Health Insurance 

Marketplaces). This final rule sets forth 

oversight and financial integrity 

standards with respect to Exchanges, 

Qualified Health Plan (QHP) issuers in 

Federally-facilitated Exchanges (FFEs), 

and States with regard to the operation 

of risk adjustment and reinsurance 

programs. It establishes additional 

standards for special enrollment 

periods, survey vendors that may 

conduct enrollee satisfaction surveys on 

behalf of QHP issuers in Exchanges, and 

issuer participation in an FFE, and 

makes certain amendments to 

definitions and standards related to the 

market reform rules. These standards 

were proposed in a proposed rule, titled 

‘‘Patient Protection and Affordable Care 

Act; Program Integrity: Exchange, 

SHOP, Premium Stabilization Programs, 

and Market Standards’’ (78 FR 37032), 

which was published in the Federal 

Register on June 19, 2013. Finally, this 

final rule amends standards and adopts 

as final interim provisions set forth in 

the Amendments to the HHS Notice of 

Benefit and Payment Parameters for 

2014 interim final rule, published in the 

Federal Register on March 11, 2013 (78 

FR 15541), related to risk corridors and 

cost-sharing reduction reconciliation. 

Although many of the provisions in 

this rule become effective by January 1, 

2014, we believe that affected parties 

will not have difficulty complying with 

the provisions by their effective dates, 

because most of the standards are based 

on existing standards currently in effect 

in the private market, were previously 

proposed through the Blueprint process, 

were discussed in agency-issued subregulatory guidance, or were discussed 

in the preambles to the Exchange 

Establishment Rule,1 Premium 

Stabilization Rule,2 Market Reform 

Rule,3 or the HHS Notice of Benefit and 

Payment Parameters for 2014 (2014 

Payment Notice).4 In addition to 

soliciting general comments on the 

substance of the proposed provisions, 

we sought input on ways to implement 

these policies to minimize burden. 

Table of Contents 

I. Background 

A. Legislative Overview 

B. Stakeholder Consultation and Input 

II. Provisions of the Final Regulation and 

Analysis of and Responses to Public 

Comments 

A. Part 144—Requirements Relating to 

Health Insurance Coverage 

1. Subpart A—General Provisions 

a. Scope and Applicability (§ 144.102(c)) 

b. Definitions (§ 144.103) 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability and 

Renewability of Coverage (§ 147.104 and 

§ 147.106) 

C. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

1. Subpart A—General Provisions 

a. Definitions (§ 153.20) 

2. Subpart C—State Standards Related to 

the Reinsurance Program 

a. Maintenance of Records (§ 153.240(c)) 

b. General Oversight Requirements for 

State-Operated Reinsurance Programs 

(§ 153.260) 

c. Restrictions on Use of Reinsurance 

Funds for Administrative Expenses 

(§ 153.265) 

3. Subpart D—State Standards Related to 

the Risk Adjustment Program 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65047 

a. Maintenance of Records (§ 153.310(c)(4)) 

b. Interim Report and State Summary 

Report (§ 153.310(d)) 

c. General Oversight Requirements for 

State-Operated Risk Adjustment 

Programs (§ 153.365) 

4. Risk Adjustment Methodology 

a. Modification to the Transfer Formula in 

the HHS Risk Adjustment Methodology 

5. Subpart E—Health Insurance Issuer and 

Group Health Plan Standards Related to 

the Reinsurance Program 

a. Reinsurance Contribution Funds 

(§ 153.400) 

b. Maintenance of Records (§ 153.405(h) 

and § 153.410(c)) 

6. Subpart F—Health Insurance Issuer 

Standards Related to the Risk Corridors 

Program 

a. Definitions (§ 153.500) 

b. Calculation of Allowable Costs, 

Attribution and Allocation of Revenue 

and Expense Items, and Risk Corridors 

Data Requirements (§ 153.500, § 153.520, 

and § 153.530) 

7. Subpart G—Health Insurance Issuer 

Standards Related to the Risk 

Adjustment Program 

8. Subpart H—Distributed Data Collection 

for HHS-Operated Programs 

a. Failure To Comply With HHS-Operated 

Risk Adjustment and Reinsurance Data 

Requirements (§ 153.740(a)) 

b. Default Risk Adjustment Charge 

(§ 153.740(b)) 

D. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart D—Exchange Functions in the 

Individual Market: Eligibility 

Determinations for Exchange 

Participation and Insurance Affordability 

Programs 

a. Administration of Advance Payments of 

the Premium Tax Credit and CostSharing Reductions (§ 155.340) 

2. Subpart E—Exchange Functions in the 

Individual Market: Enrollment in 

Qualified Health Plans 

a. Special Enrollment Periods (§ 155.420) 

3. Subpart H—Exchange Functions: Small 

Business Health Options Program 

(SHOP) 

a. Enrollment Periods Under SHOP 

(§ 155.725) 

4. Subpart M—Oversight and Program 

Integrity Standards for State Exchanges 

a. General Program Integrity and Oversight 

Requirements (§ 155.1200) 

b. Maintenance of Records (§ 155.1210) 

E. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. Subpart A—General Provisions 

a. Definitions (§ 156.20) 

b. Single Risk Pool (§ 156.80) 

2. Subpart B—Essential Health Benefits 

Package 

a. Enrollment in Catastrophic Plans 

(§ 156.155) 

3. Subpart D—Federally-Facilitated 

Exchange Qualified Health Plan Issuer 

Standards 

a. Changes of Ownership of Issuers of 

Qualified Health Plans in FederallyFacilitated Exchanges (§ 156.330) 

4. Subpart E—Health Insurance Issuer 

Responsibilities With Respect to 

Advance Payments of the Premium Tax 

Credit and Cost-Sharing Reductions 

a. Definitions (§ 156.400) 

b. Improper Plan Assignment and 

Application of Cost-Sharing Reductions 

(§ 156.410(c) Through (d)) 

c. Payment for Cost-Sharing Reductions 

(§ 156.430) 

d. Failure To Reduce an Enrollee’s 

Premium To Account for Advance 

Payments of the Premium Tax Credit 

(§ 156.460(c)) 

e. Oversight of the Administration of CostSharing Reductions and Advance 

Payments of the Premium Tax Credit 

Programs (§ 156.480) 

5. Subpart H—Oversight & Financial 

Integrity Requirements for Issuers of 

Qualified Health Plans in FederallyFacilitated Exchanges 

a. Maintenance of Records for FederallyFacilitated Exchanges (§ 156.705) 

b. Compliance Reviews of QHP Issuers in 

Federally-Facilitated Exchanges 

(§ 156.715) 

6. Subpart J—Administrative Review of 

QHP Issuer Sanctions in a FederallyFacilitated Exchange 

a. Administrative Review in a FederallyFacilitated Exchange (§§ 156.901 

Through 156.963) 

7. Subpart L—Quality Standards 

a. Establishment of Standards for HHSApproved Enrollee Satisfaction Survey 

Vendors for Use by QHP Issuers in 

Exchanges (§ 156.1105) 

8. Subpart M—Qualified Health Plan Issuer 

Responsibilities 

a. Confirmation of HHS Payment and 

Collections Reports (§ 156.1210) 

III. Collection of Information Requirements 

IV. Regulatory Impact Analysis 

V. Regulations Text 

Acronyms and Short Forms 

Because of the many organizations 

and terms to which we refer by acronym 

in this final rule, we are listing these 

acronyms and their corresponding terms 

in alphabetical order below: 

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)) 

ALJ Administrative Law Judge 

ARF Allowable Rating Factor 

AV Actuarial Value 

CAHPS® Consumer Assessment of 

Healthcare Providers and Systems 

CFR Code of Federal Regulations 

CMP Civil money penalty 

CMS Centers for Medicare & Medicaid 

Services 

DOI State Department of Insurance 

DOL U.S. Department of Labor 

EHB Essential Health Benefits 

FEHB Federal Employees Health Benefits 

FFE Federally-facilitated Exchange 

FF–SHOP Federally-facilitated Small 

Business Health Options Program 

GAAP Generally accepted accounting 

principles 

GAAS Generally accepted auditing 

standards 

GAGAS Generally accepted governmental 

auditing standards 

GAO U.S. Government Accountability 

Office 

HHS U.S. Department of Health and Human 

Services 

HIPAA Health Insurance Portability and 

Accountability Act of 1996 (Pub. L. 104– 

191) 

IRS Internal Revenue Service 

MAGI Modified Adjusted Gross Income 

MLR Medical Loss Ratio 

NCQA National Committee for Quality 

Assurance 

OIG Office of the Inspector General of the 

U.S. Department of Health and Human 

Services 

OMB Office of Management and Budget 

PHSAct Public Health Service Act 

PRA Paperwork Reduction Act 

QHP Qualified Health Plan 

SHOP Small Business Health Options 

Program 

The Code Internal Revenue Code of 1986 

TIN Taxpayer Identification Number 

I. Background 

A. Legislative 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 final 

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 Title XXVII of the Public Health 

Service Act (PHS Act) relating to health 

insurance issuers in the group and 

individual markets and to group health 

plans that are non-Federal governmental 

plans. As relevant here, section 2702 of 

the PHS Act (guaranteed availability of 

coverage) directs a health insurance 

issuer offering non-grandfathered health 

insurance coverage in the group or 

individual market in a State to accept 

every employer and individual in the 

State who applies for coverage, subject 

to certain exceptions. Section 2703 of 

the PHS Act (guaranteed renewability of 

coverage) requires a health insurance 

issuer offering non-grandfathered 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, subject 

to certain exceptions. 

As of October 2013 for coverage 

starting as soon as January 1, 2014, 

qualified individuals and qualified 

employers will be able to enroll in 

QHPs—private health insurance that has 


emcdonald on DSK67QTVN1PROD with RULES2
65048 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

been certified as meeting certain 

standards—through competitive 

marketplaces called ‘‘Exchanges’’ or 

‘‘Health Insurance Marketplaces.’’ The 

Departments of Health and Human 

Services, Labor, and the Treasury have 

been working in close coordination to 

release guidance related to QHPs and 

Exchanges in several phases. The word 

‘‘Exchanges’’ refers to both State 

Exchanges, also called State-based 

Exchanges, and FFEs. In this final rule, 

we use the terms ‘‘State Exchange’’ or 

‘‘FFE’’ when we are referring to a 

particular type of Exchange. When we 

refer to ‘‘FFEs,’’ we are also referring to 

State Partnership Exchanges, which are 

a form of FFE. 

In this final rule, we encourage State 

flexibility within the boundaries of the 

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

Affordable Care Act provide that each 

State has the opportunity to establish an 

Exchange. Section 1311(b)(1) gives each 

State the opportunity to establish an 

Exchange that both facilitates the 

purchase of QHPs and provides for the 

establishment of a Small Business 

Health Options Program (SHOP) that 

will help qualified employers enroll 

their employees in QHPs. 

Section 1302(e) of the Affordable Care 

Act outlines standards for offering 

catastrophic plans in the individual 

market for certain young adults and 

people who obtain certification of 

exemption from the requirement to 

maintain minimum essential coverage 

because they cannot afford health 

insurance or experience other hardship. 

Section 1311(c)(4) of the Affordable 

Care Act directs the Secretary to 

establish an enrollee satisfaction survey 

system that would evaluate the level of 

enrollee satisfaction with QHPs offered 

through an Exchange for each such QHP 

with more than 500 enrollees in the 

previous year. 

Section 1311(d)(4)(A) of the 

Affordable Care Act directs that each 

Exchange must implement procedures 

for the certification, recertification, and 

decertification of health plans as QHPs, 

consistent with guidelines developed by 

the Secretary. 

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

Affordable Care Act provides that 

States, when establishing Exchanges, 

must ensure that such Exchanges are 

self-sustaining beginning on January 1, 

2015, and permits Exchanges to charge 

assessments or user fees to participating 

health insurance issuers to generate 

funding to support their operations. 

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) to collect 

and spend such 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 

1311(d)(5)(B) contains a prohibition on 

the wasteful use of funds. 

Section 1312(c) of the Affordable Care 

Act directs a health insurance issuer to 

consider all enrollees in all health plans 

(other than grandfathered health plans) 

offered by such issuer to be members of 

a single risk pool for each of its 

individual and small group markets. 

Section 1312(c) of the Affordable Care 

Act gives States the option to merge the 

individual and small group markets 

within the State into a single risk pool 

(merged market). 

Section 1313 of the Affordable Care 

Act, combined with section 1321 of the 

Affordable Care Act, provides the 

Secretary with the authority to oversee 

financial integrity, compliance with 

HHS standards, and efficient and nondiscriminatory administration of State 

Exchange activities. Section 

1313(a)(6)(A) of the Affordable Care Act 

specifies that payments made by, 

through, or in connection with an 

Exchange are subject to the False Claims 

Act (31 U.S.C. 3729, et seq.) if those 

payments include any Federal funds. 

Section 1341 of the Affordable Care 

Act establishes a transitional 

reinsurance program that begins in 2014 

and is designed to provide issuers with 

greater stability as insurance market 

reforms are implemented and 

individuals begin to enroll in QHPs sold 

through Exchanges. Section 1342 of the 

Affordable Care Act establishes a 

temporary risk corridors program which 

permits the Federal government and 

QHPs to share in gains or losses 

resulting from inaccurate rate setting 

from 2014 through 2016. Section 1343 

of the Affordable Care Act establishes a 

permanent risk adjustment program 

which is intended to provide payments 

to health insurance issuers that attract 

higher-risk populations, such as those 

with chronic conditions, and eliminate 

incentives for issuers to avoid higherrisk enrollees. 

Section 1321(a)(1) of the Affordable 

Care Act provides general authority for 

the Secretary of Health and Human 

Services (referred to throughout this 

rule as the Secretary) to establish 

standards and regulations to implement 

the statutory requirements related to 

Exchanges, QHPs, and other 

components of Title I of the Affordable 

Care Act. 

Section 1401 of the Affordable Care 

Act amended the Internal Revenue Code 

(26 U.S.C.) to add section 36B, allowing 

a refundable premium tax credit to help 

individuals and families afford health 

insurance coverage. Under sections 

1401, 1411, and 1412 of the Affordable 

Care Act and 45 CFR part 155, subpart 

D, an Exchange will make a 

determination of advance payments of 

the premium tax credit for individuals 

who enroll in QHP coverage through an 

Exchange and seek financial assistance. 

Section 1402 of the Affordable Care Act 

provides for the reduction of cost 

sharing for certain individuals enrolled 

in a QHP through an Exchange, and 

section 1412 of the Affordable Care Act 

provides for the advance payment of 

these reductions to issuers. 

Under section 1411 of the Affordable 

Care Act, the Secretary is directed to 

establish a program for determining 

whether an individual meets the 

eligibility standards for Exchange 

participation, advance payments of the 

premium tax credit, cost-sharing 

reductions, and exemptions from the 

shared responsibility payment under 

section 5000A of the Code. 

Sections 1412 and 1413 of the 

Affordable Care Act and section 1943 of 

the Social Security Act (the Act), as 

added by section 2201 of the Affordable 

Care Act, contain additional provisions 

regarding eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions, as well as 

provisions regarding simplification and 

coordination of eligibility 

determinations and enrollment with 

other health programs. 

Unless otherwise specified, the 

provisions in this final rule related to 

the establishment of minimum 

functions of an Exchange are based on 

the general authority of the Secretary 

under section 1321(a)(1) of the 

Affordable Care Act. 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders 

on a number of polices related to the 

operation of Exchanges, including the 

SHOP and premium stabilization 

programs. HHS has held a number of 

listening sessions with consumers, 

providers, employers, health plans, and 

State representatives to gather public 

input. HHS consulted with stakeholders 

through regular meetings with the 

National Association of Insurance 

Commissioners; regular contact with 

States through the Exchange 

establishment grant process and the 

Exchange Blueprint approval process; 

and meetings with tribal leaders and 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65049 

5The Affordable Care Act redesignated section 

2721 as section 2722 of the PHS Act. 

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 the proposed rule, the 

interim final rule, and this final rule. 

II. Provisions of the Final Regulations 

and Analysis of and Responses to 

Public Comments 

A proposed rule, titled ‘‘Patient 

Protection and Affordable Care Act; 

Program Integrity: Exchange, SHOP, 

Premium Stabilization Programs, and 

Market Standards’’ (78 FR 37032), was 

published in the Federal Register on 

June 19, 2013 with a comment period 

ending on July 19, 2013. In total, we 

received approximately 99 public 

comments from various stakeholders 

including States, health insurance 

issuers, consumer groups, agents and 

brokers, provider groups, Members of 

Congress, tribal organizations, and other 

stakeholders. We received a few 

comments that were outside the scope 

of the proposed rule. A number of the 

provisions in the proposed rule were 

finalized in the final rule published in 

the Federal Register on August 30, 

2013, titled ‘‘Patient Protection and 

Affordable Care Act; Program Integrity: 

Exchange, SHOP, and Eligibility 

Appeals’’ (78 FR 54070), hereinafter 

referred to as the ‘‘first Program Integrity 

final rule.’’ We are finalizing the 

remaining provisions of the proposed 

rule here. 

The interim final rule, titled ‘‘Patient 

Protection and Affordable Care Act; 

Amendments to the HHS Notice of 

Benefit and Payment Parameters for 

2014’’ (78 FR 15541) was published in 

the Federal Register on March 11, 2013 

with a comment period that ended on 

April 30, 2013. Provisions of this rule 

align risk corridors calculations with the 

single risk pool provision, and finalize 

standards permitting issuers of QHPs 

the option of using an alternate 

methodology for calculating the value of 

cost-sharing reductions provided for the 

purpose of reconciliation of advance 

payments of cost-sharing reductions. We 

received seven comments on the interim 

final rule from issuers, advocacy 

organizations, and tribal organizations. 

We amend standards from the interim 

final rule and adopt interim provisions 

as final. 

In this final rule, we provide a 

summary of each proposed or interim 

provision, a summary of the public 

comments received and our responses to 

them, and the provisions we are 

finalizing. We note that nothing in these 

regulations would limit the authority of 

the Office of the Inspector General (OIG) 

as set forth by the Inspector General Act 

of 1978 or other applicable law. 

A. Part 144—Requirements Relating to 

Health Insurance Coverage 

1. Subpart A—General Provisions 

a. Scope and Applicability (§ 144.102(c)) 

In § 144.102(c), we proposed a 

technical amendment to clarify whether 

coverage sold through associations is 

group or individual coverage under the 

PHS Act. Specifically, we proposed to 

delete a reference to coverage offered in 

connection with a ‘‘group health plan 

that has fewer than two participants 

who are current employees on the first 

day of the plan year’’ (very small plans) 

as being individual health insurance 

coverage under title XXVII of the PHS 

Act. This correction aligns with the 

amendments made by the Affordable 

Care Act redefining a small employer to 

include groups consisting of only one 

common law employee. 

Comment: Commenters expressed 

support for the proposed clarification in 

§ 144.102(c). 

Response: We are finalizing the 

regulation as proposed. 

Summary of Regulatory Changes 

We are finalizing the amendments to 

§ 144.102(c) as proposed. 

b. Definitions (§ 144.103) 

Under § 144.103, we proposed to 

amend several definitions of terms that 

are used throughout parts 146 (group 

market requirements), 148 (individual 

market requirements), and 150 

(enforcement) of subchapter B of title 45 

of the Code of Federal Regulations 

(CFR), consistent with the Affordable 

Care Act. These included definitions of 

‘‘group market,’’ ‘‘individual market,’’ 

‘‘large employer,’’ ‘‘policy year,’’ and 

‘‘small employer.’’ Unless otherwise 

provided, the definitions in § 144.103 

also apply for purposes of part 147 

(group and individual market insurance 

reform requirements), and we make this 

explicit in this final rule. 

We noted that, although the 

Affordable Care Act made changes to 

the definition of ‘‘small employer’’ for 

purposes of the PHS Act, the Employee 

Retirement Income Security Act (ERISA) 

and the Internal Revenue Code (the 

Code) continue to define a ‘‘small 

employer’’ as having 2 to 50 employees. 

Similarly, we noted that the Affordable 

Care Act deleted the exception for very 

small plans in PHS Act section 2721,5

without removing parallel provisions in 

ERISA section 732(a) and Code section 

9831(a)(2). We requested comments on 

how to interpret the PHS Act, ERISA, 

and the Code to ensure that shared 

provisions of the Departments of HHS, 

Labor, and the Treasury are 

administered consistently. 

Comment: Several commenters were 

in favor of adopting a consistent 

definition of ‘‘small employer’’ for 

purposes of the PHS Act, ERISA, and 

the Code. Some commenters thought the 

upper limit of small employer size 

should be 50 employees consistent with 

ERISA and the Code, while others 

suggested an upper limit of 100 

employees consistent with the PHS Act 

and the Affordable Care Act. One 

commenter requested clarification that, 

although employers with one common 

law employee are now treated as small 

employer groups under the Affordable 

Care Act, retiree-only plans continue to 

be exempt from the group market 

reforms under the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) and the Affordable Care 

Act. 

Response: Consistent with section 

2791(e)(4) of the PHS Act and section 

1304(b) of the Affordable Care Act, in 

this final rule, we maintain the 

definition of ‘‘small employer,’’ for 

purposes of health coverage, as an 

employer who employed an average of 

at least one but not more than 100 

employees on business days during the 

preceding calendar year and who 

employs at least one employee on the 

first day of the plan year. Prior to 2016, 

States have discretion to set the upper 

limit of small employer size at 50 

employees. Additionally, we conform 

the definitions of ‘‘individual market’’ 

and ‘‘group market,’’ as proposed, by 

removing references to group health 

plans with fewer than two participants 

who are current employees from being 

treated as being in the individual market 

rather than the group market. In the 

proposed rule, we noted the change to 

the law and proposed to make 

conforming amendments to update our 

rules to reflect the law with the 

intention of doing so for all applicable 

rules. While we inadvertently omitted 

reference to the exception for certain 

small group plans in § 146.145(b), we 

note that we believe that our intention 

to conform our rules to the law 

amended by the Affordable Care Act 

was clear and, accordingly, we make 

this conforming amendment in this final 

rule. As we pointed out earlier, identical 

language exempting group health plans 

with fewer than two participants from 

certain provisions of the PHS Act that 

formerly was in PHS Act section 2721(a) 

was stricken by the Affordable Care Act. 

We note that nothing in this final rule 


emcdonald on DSK67QTVN1PROD with RULES2
65050 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

6 Group Health Plans and Health Insurance 

Coverage Relating to Status as a Grandfathered 

Health Plan Under the Patient Protection and 

Affordable Care Act, 75 FR at 34539–40 (June 17, 

2010). 

7For operations of a Federally-facilitated SHOP, 

the method set forth in section 4980H(c)(2) of the 

Code is effective for plan years beginning on or after 

January 1, 2014, including in connection with open 

enrollment activities beginning October 1, 2013. 

8These clarifications were consistent with the 

information we provided in ‘‘Frequently Asked 

Questions on Health Insurance Marketplaces’’ (May 

14, 2013). Available at: http://www.cms.gov/CCIIO/ 

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

marketplace-faq-5-14-2013.pdf. 

9HCFA Insurance Standards Bulletin Series No. 

99–03 (September 1999). Available at: https://

www.cms.gov/HealthInsReformforConsume/

downloads/HIPAA-99-03.pdf. 

should be construed as affecting the 

Departments’ position regarding retireeonly plans.6

Comment: Several commenters 

addressed the issue of how employees 

should be counted in determining 

employer size. Commenters noted that 

States use different methods to calculate 

employer group size and noted that 

there are also different Federal methods 

for determining employer size for 

different purposes. These commenters 

suggested that there are compelling 

practical and efficiency reasons to use a 

consistent counting method for all 

Affordable Care Act purposes and 

between Federal and State law. 

Response: HHS has previously set 

forth the method for determining 

employer size for purposes relating to 

the Exchange and SHOP regulations 

based on the full-time equivalent 

method used in section 4980H(c)(2) of 

the Code, generally effective for plan 

years beginning on or after January 1, 

2016.7 We expect to address the 

counting method for purposes of the 

PHS Act in future rulemaking or 

guidance. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 144.103 of the proposed 

rule with the following minor 

modifications for consistency and 

clarity. We state expressly that the 

definitions in this section which are 

based on PHS Act requirements enacted 

by HIPAA and other statutes 

(implemented in parts 146, 148, and 

150) are equally applicable to PHS Act 

requirements enacted by the Affordable 

Care Act (implemented in part 147). In 

the proposed definition of ‘‘policy 

year,’’ we replace the reference to 

January 1, 2015 with the phrase, ‘‘for 

coverage issued or renewed beginning 

January 1, 2014,’’ to clarify the 

definition’s applicability to calendar 

year plans, as discussed in connection 

with § 147.104(b)(2) of this final rule. 

Finally, we remove the exception for 

certain small group health plans in 

§ 146.145(b) to conform to the 

amendments in § 144.102 and § 144.103 

of this final rule. 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability and 

Renewability of Coverage (§ 147.104 and 

§ 147.106) 

In the proposed rule, we proposed to 

recognize the distinction of the large 

group and small group segments of the 

group market for purposes of sections 

2702 and 2703 of the PHS Act, as 

amended by the Affordable Care Act, 

and their implementing regulations at 

45 CFR 147.104 and 147.106, 

respectively. These proposed 

amendments would clarify that under 

the guaranteed availability provisions, 

an issuer is required to offer to an 

employer only those products that are 

approved for sale in the applicable 

market segment (large group or small 

group market) based on the employer’s 

group size (rather than all group market 

products). The proposed amendments 

would also clarify that under the 

guaranteed renewability provisions, an 

issuer could, in accordance with 

applicable State law and subject to the 

other requirements of § 147.106(d), elect 

to discontinue all products in one 

segment of the group market (for 

example, the large group market) 

without having to discontinue all 

products in the other segment of the 

group market (for example, small group 

market).8

We also proposed to clarify in 

§ 147.104(b)(2) that all nongrandfathered coverage in the 

individual or merged market must be 

offered on a calendar year basis as of 

January 1, 2015. We specified that, for 

purposes of new enrollment effective on 

any date other than January 1, the first 

policy year following such enrollment 

may comprise a prorated policy year 

ending on December 31. 

Comment: Commenters generally 

expressed support for the proposed 

revisions in § 147.104 and § 147.106. 

However, one commenter disagreed 

with proposed § 147.104(b)(2), in which 

all non-grandfathered individual or 

merged market plans would be offered 

on a calendar year basis. The 

commenter suggested that individuals 

with non-calendar year plans should be 

permitted to maintain their plans’ 

current renewal date. 

Response: We seek consistency 

between the Exchange and nonExchange markets to mitigate adverse 

selection, reduce consumer confusion, 

and ensure compliance with the single 

risk pool requirements. For these 

reasons, in the Market Reform Rule at 

§ 147.104(b), we aligned individual 

market open enrollment periods and 

coverage effective dates with those in 

the individual market Exchanges (which 

are based on a calendar policy year) 

and, to facilitate the transition to 

calendar policy years, established a onetime enrollment period allowing 

individuals with non-calendar year 

plans the opportunity to enroll in a 

calendar year plan upon renewal in 

2014. This final rule simply affirms the 

intent of the Market Reform Rule and 

does not represent a change in policy. 

We reiterate that, for purposes of new 

enrollment effective on any date other 

than January 1, the first policy year 

following such enrollment may 

comprise a prorated policy year ending 

on December 31 of that year. 

Comment: A few commenters sought 

clarification on whether an issuer is 

required to renew coverage purchased 

by an employer whose size shifts 

between the small and large group 

markets. 

Response: HHS has previously issued 

guidance on how the guaranteed 

renewability requirement applies to 

employers whose size shifts between the 

small and large group markets after 

purchasing coverage in one or the other 

of these markets.9 The general rule set 

forth in section 2703 of the PHS Act and 

its implementing regulations at 

§ 147.106 makes clear that a health 

insurance issuer must guarantee the 

renewal of coverage at the option of the 

plan sponsor. The exceptions to this 

rule do not include the situation in 

which the employer that sponsors the 

group health plan grows from a small 

employer to a large employer, or the 

reverse, between the time the policy is 

purchased and the time it comes up for 

renewal. Therefore, the law guarantees 

the employer the right to renew or 

continue in force the coverage it 

purchased in the small (or large) group 

market even though the employer ceases 

to be a small (or large) employer by 

reason of an increase (or decrease) in its 

number of employees. 

For example, an employer that 

originally purchased coverage in the 

small group market and that increases in 

size beyond the definition of a small 

employer has the option of keeping the 

product it purchased in the small group 

market. Furthermore, any changes to 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65051 

10Beginning in 2017, States will have the option 

to allow issuers to offer QHPs in the large group 

market through the SHOP. If a State elects this 

option, the rating rules under PHS Act section 2701 

will apply to all coverage offered in such State’s 

large group market (except for self-insured group 

health plans) pursuant to section 2701(a)(5) of the 

PHS Act and § 147.102(f). 

11However, pursuant to section 1304(b)(4)(D) of 

the Affordable Care Act, a qualified employer that 

is a small employer participating in the SHOP may 

continue to participate in the SHOP, and will 

continue to be treated as a small employer for 

purposes of subtitle D of the Affordable Care Act, 

even if the employer ceases to be a small employer 

by reason of an increase in its number of 

employees. Subtitle D includes the provisions 

governing SHOP Exchanges, EHB, the single risk 

pool, and the premium stabilization programs but 

not premium rating requirements under section 

2701 of the PHS Act. We intend to propose in future 

rulemaking how plans that are sold through the 

SHOP to employers that grow from small to large 

will be required to comply with single risk pool and 

premium rating requirements and how these plans, 

therefore, participate in the risk corridors programs. 

that product must satisfy the uniform 

modification of coverage requirements 

set forth in section 2703(d) of the PHS 

Act and § 147.106(e). Under these 

provisions, an issuer is permitted at the 

time of renewal to modify the coverage 

for that product, but only if the 

modification is consistent with State 

law and effective uniformly to all 

employers with that product. Thus, if 

other employers with that product were 

still participating in the small group 

market, the issuer could not modify the 

benefits or cost sharing for the product 

in a manner inconsistent with the rules 

that apply to small group coverage. We 

note that under this scenario, if the 

employer drops coverage it purchased 

in the small group market, it will not be 

able to purchase the same coverage 

again if it no longer meets the definition 

of a small employer. 

The requirements of guaranteed 

renewability do not change the 

underlying employer group’s size for 

other provisions of the PHS Act and the 

Affordable Care Act. For example, the 

premium rating rules (PHS Act section 

2701 and implementing regulations at 

§ 147.102) and the single risk pool 

provision (Affordable Care Act section 

1312(c) and implementing regulations at 

§ 156.80) apply to health insurance 

coverage in the individual and small 

group markets, but generally do not 

apply to health insurance coverage in 

the large group market.10 These 

provisions of Federal law generally 

would not therefore apply where an 

employer increases in size to become a 

large employer, even if the employer is 

renewing a product originally 

purchased in the small group market.11

Summary of Regulatory Changes 

We are finalizing these provisions 

with the following minor modification. 

In § 147.104(b)(2), we remove the 

reference to January 1, 2015 to avoid 

unwarranted confusion as to when nongrandfathered plans in the individual or 

merged market must be offered on a 

calendar year basis. Pursuant to 

§ 147.104(f), all non-grandfathered 

individual and merged market coverage 

issued or renewed on or after January 1, 

2014 must be offered on a calendar year 

basis, with a policy year ending on 

December 31 of each year and the next 

policy year beginning on January 1 of 

the following year. The proposed rule 

included January 1, 2015 as the latest 

date by which a non-calendar year plan 

renewing in 2014 (i.e., a plan renewing 

on December 31, 2014) would be subject 

to this requirement. We believe the 

proposed text may have been subject to 

unintended ambiguity and are finalizing 

revised text to eliminate that concern. 

C. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

In the proposed rule, we proposed 

certain provisions related to program 

integrity for State-operated risk 

adjustment and reinsurance programs, 

including provisions governing 

reporting requirements and restricting 

the use of reinsurance funds for 

administrative expenses. In addition, we 

proposed record retention standards for 

States operating risk adjustment, for 

contributing entities, and for 

reinsurance-eligible plans when HHS 

operates reinsurance on behalf of a 

State. We intend to propose additional 

standards related to the oversight of the 

premium stabilization programs in 

future regulations and guidance. 

We also note that, to alleviate the 

upfront burden of the reinsurance 

contributions, we intend to propose in 

future rulemaking to collect reinsurance 

contributions in two installments—the 

reinsurance contributions for 

reinsurance payments and 

administrative expenses would be 

collected at the beginning of the 

calendar year following the applicable 

benefit year, and the contributions for 

payments to the U.S. Treasury would be 

collected at the end of the calendar year 

following the applicable benefit year. 

We also intend to propose in future 

rulemaking to exempt certain selfinsured, self-administered plans from 

the requirement to make reinsurance 

contributions for the 2015 and 2016 

benefit years. 

1. Subpart A—General Provisions 

a. Definitions (§ 153.20) 

We proposed an amendment to the 

definition of a ‘‘contributing entity’’ to 

address a situation in which the 

healthcare coverage provided to a 

participant under a group health plan is 

partially insured and partially selfinsured—for example, if medical 

benefits are provided under a selfinsured arrangement but prescription 

drug benefits are provided under an 

insured arrangement. We proposed this 

amendment to clarify that, for purposes 

of determining whether an entity bears 

liability for reinsurance contributions, a 

self-insured group health plan includes 

a group health plan that is partially selfinsured and partially insured, but only 

where the insured coverage does not 

constitute major medical coverage 

(whether or not the self-insured 

coverage is major medical coverage). 

This amendment clarifies that if a group 

health plan is structured in such a 

manner, the group health plan would be 

liable for reinsurance contributions 

under the counting rules applicable to 

self-insured group health plans at 45 

CFR 153.405(f), but if the insured 

component of the group health plan is 

major medical coverage, the issuer 

remains liable for the contributions. 

We also sought comment on whether 

we should adopt a definition for ‘‘major 

medical coverage’’ that would provide 

additional clarity on when a 

contributing entity would have the 

responsibility to make reinsurance 

contributions. 

Comment: Several commenters 

supported the proposed amendment. 

One commenter sought clarification as 

to which party is liable for reinsurance 

contributions with respect to a group 

health plan that is partially self-insured 

and partially insured when both forms 

of coverage are major medical coverage. 

The commenter recommended that the 

issuer be liable for reinsurance 

contributions in a situation in which the 

in-network coverage is insured, because 

the insured in-network coverage would 

account for the majority of the total 

health coverage for the covered 

individuals. 

Response: We clarify that the 

amendment to the definition of 

‘‘contributing entity’’ does not alter the 

responsibility of the issuer for the 

reinsurance contributions under these 

facts. The amendment to the definition 

of ‘‘contributing entity’’ addresses a 

scenario in which a self-insured plan 

includes insured coverage that is not 

major medical coverage; however, the 

fact pattern described above concerns a 

self-insured plan that includes insured 


emcdonald on DSK67QTVN1PROD with RULES2
65052 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

major medical coverage. Under 

§ 153.400(a)(1)(i) and § 153.20, an issuer 

that offers major medical coverage to its 

covered lives is a ‘‘contributing entity,’’ 

and is responsible for reinsurance 

contributions for the covered lives, and 

under these facts the self-insured plan 

under this proposed amendment would 

not be a contributing entity because the 

insured component of the plan is major 

medical coverage. 

Comment: Certain commenters 

requested that HHS codify a definition 

of major medical coverage for purposes 

of reinsurance contributions. One 

commenter asked HHS to codify in 

regulation text the definition of major 

medical coverage set forth in the 

preamble to the 2014 Payment Notice 

(78 FR at 15456), while continuing to 

carefully examine this issue to 

determine if the definition should be 

revised, expanded, or made more 

specific in the future. One commenter 

asked HHS to include in a definition of 

‘‘major medical coverage’’ the set of 

health benefits defined in the American 

Academy of Pediatrics’ Scope of Health 

Care Benefits for Children from Birth 

through Age 26. 

Response: We agree that a more 

specific definition of ‘‘major medical 

coverage’’ for purposes of reinsurance 

contributions would add certainty for 

some contributing entities. We therefore 

intend to propose a specific definition 

in the HHS Notice of Benefit and 

Payment Parameters for 2015. 

Summary of Regulatory Changes 

We are finalizing the amendment to 

the definition of ‘‘contributing entity’’ as 

proposed. 

2. Subpart C—State Standards Related 

to the Reinsurance Program 

a. Maintenance of Records (§ 153.240(c)) 

We proposed to amend 45 CFR 

153.240(c) to be consistent with the 

maintenance of records requirement for 

State-operated risk adjustment programs 

proposed in § 153.310(c)(4). We 

proposed to amend § 153.240(c) such 

that a State establishing a reinsurance 

program would be directed to maintain 

documents and records relating to the 

reinsurance program, whether paper, 

electronic, or in other media, for each 

benefit year for at least 10 years, and 

make them available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees, to any such entity. 

The documents and records must be 

sufficient to enable HHS to evaluate 

whether the State-operated reinsurance 

program complies with Federal 

standards. States would also be directed 

to ensure that their contractors, 

subcontractors, and agents similarly 

maintain and make relevant documents 

and records available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees. 

Comment: Several commenters asked 

that HHS reduce the 10-year record 

retention standard, while other 

commenters supported the 10-year 

retention timeframe. One commenter 

suggested that a 10-year record retention 

standard is not needed for the False 

Claims Act. 

Response: We are finalizing the 

maintenance of records provisions as 

proposed, in alignment with the statute 

of limitations for the False Claims Act 

and existing related regulations. A civil 

action may be brought under the False 

Claims Act ‘‘no more than 10 years after 

the date on which the violation is 

committed.’’ Additionally, similar 10- 

year record retention standards were 

previously finalized in the Exchange 

Establishment Rule and the Premium 

Stabilization Rule. We believe that 

maintaining consistency in our record 

retention standards will help ensure 

that entities maintain records across 

programs in a consistent manner, 

allowing HHS and States to coordinate 

oversight efforts across those program 

areas and reduce the burden on 

stakeholders. We note that the 10-year 

obligation to retain records begins when 

the record is created. 

Comment: One commenter 

recommended that electronic 

maintenance of records should satisfy 

the maintenance of records standard. 

Response: An entity subject to the 

maintenance of records standard may 

satisfy the standard by maintaining the 

records electronically and ensuring that 

they are accessible if needed in the 

event of an investigation, audit, or other 

review. 

Comment: Several commenters asked 

HHS to provide details on the specific 

documents and records that States, 

contributing entities or issuers would be 

required to maintain for oversight 

purposes. In particular, one commenter 

suggested that issuers should not be 

required to retain medical records in 

connection with the risk adjustment 

program. 

Response: We will provide further 

details on the documents and records to 

be maintained in future guidance or 

rulemaking. Because risk adjustmenteligible claims, medical documents, and 

medical records will be subject to 

medical record review as part of the risk 

adjustment data validation process, 

issuers of risk adjustment covered plans 

must maintain these documents. We 

note that this record maintenance and 

medical record review is subject to 

applicable privacy law, including the 

protections of HIPAA. 

Comment: One commenter asked that 

HHS reserve the authority to use the 

documents and records maintained 

pursuant to these provisions to verify 

whether issuers are in compliance with 

certain other requirements under the 

Affordable Care Act. For example, these 

documents and records could be used to 

help determine whether issuers are in 

compliance with the single risk pool 

premium rating requirement. 

Response: We do not intend to use the 

documents and records maintained 

pursuant to these provisions for 

purposes other than monitoring 

compliance with the applicable statutes 

and regulations for those programs. In 

general, primary enforcement 

jurisdiction over the single risk pool 

premium rating requirement lies with 

the States. 

Summary of Regulatory Changes 

We are finalizing the maintenance of 

records provision set forth in 

§ 153.240(c) as proposed, as well as the 

maintenance of records provisions set 

forth in § 153.310(c)(4). We are also 

finalizing the maintenance of records 

provision set forth in § 153.405(h), 

§ 153.410(c) and § 153.620(b) with 

conforming technical corrections. In 

these provisions, to conform with our 

other record retention standards in this 

rule, we are clarifying that in each 

provision it is the ‘‘documents and 

records’’ that must be made available 

upon request. In § 153.620(b), we clarify 

that records must be maintained for 10 

years. Finally, we are making a 

conforming amendment to § 153.520(e) 

so that the risk corridors recordkeeping 

requirement is consistent with the 

foregoing provisions. Section 153.520(e) 

will read: ‘‘A QHP issuer must maintain 

documents and records whether paper, 

electronic, or in other media, sufficient 

to enable the evaluation of the issuer’s 

compliance with applicable risk 

corridors standards, for each benefit 

year for at least 10 years, and must make 

those documents and records available 

upon request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity, for purposes of 

verification, investigation, audit or other 

review.’’ 

b. General Oversight Requirements for 

State-Operated Reinsurance Programs 

(§ 153.260) 

HHS expects that States will operate 

the reinsurance program under section 

1341 of the Affordable Care Act in an 

effective and efficient manner and in 

accordance with the provisions of 

subparts B and C of 45 CFR part 153. 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65053 

12See, Government Auditing Standards (2011 

Revision), available at: http://www.gao.gov/

yellowbook. For public companies, the Public 

Company Accounting Oversight Board (PCAOB) 

sets audit standards. See, http://pcaobus.org/

Standards/Auditing/Pages/default.aspx. For nonpublic companies, the AICPA sets audit standards. 

See, http://www.aicpa.org/Research/Standards/

AuditAttest/Pages/SAS.aspx. 

Therefore, pursuant to our authority 

under sections 1321(a)(1) and 1341 of 

the Affordable Care Act, we proposed 

certain general oversight requirements 

for State-operated reinsurance programs. 

In § 153.260(a), we proposed that a State 

establishing the reinsurance program 

ensure that its applicable reinsurance 

entity keeps, for each benefit year, an 

accounting of the following: (1) All 

reinsurance contributions received from 

HHS for reinsurance payments and for 

administrative expenses; (2) all claims 

for reinsurance payments received from 

issuers of reinsurance-eligible plans; (3) 

all reinsurance payments made to 

issuers of reinsurance-eligible plans; 

and (4) all administrative expenses 

incurred for the State’s reinsurance 

program. We proposed to require that 

this accounting be kept in accordance 

with GAAP, consistently applied. 

In § 153.260(b), we proposed that a 

State that establishes the reinsurance 

program submit to HHS and make 

public a summary report on its 

reinsurance program operations for each 

benefit year. This report would include 

a summary of the accounting for the 

benefit year as set forth in proposed 

§ 153.260(a). 

In § 153.260(c), we proposed that a 

State that establishes the reinsurance 

program engage an independent 

qualified auditing entity to perform a 

financial and programmatic audit of the 

program for each benefit year in 

accordance with GAAS. Pursuant to 

§ 153.260(c)(2), the State would be 

directed to ensure that this audit 

addresses the prohibitions set forth in 

§ 153.265 (concerning improper use of 

reinsurance funds for administrative 

expenses). 

In paragraph (c)(1), we proposed that 

the State provide to HHS the results of 

the independent external audit for each 

benefit year, and in paragraph (c)(3), we 

proposed that the State identify to HHS 

any material weakness or significant 

deficiency identified in the audit (as 

these terms are defined in GAAS issued 

by the American Institute of Certified 

Public Accountants, and Government 

Auditing Standards issued by the 

Government Accountability Office 

(GAO) 12). We further proposed that the 

State address in writing to HHS how the 

State intends to correct any such 

material weakness or significant 

deficiency. To ensure transparency and 

accountability of a State-operated 

reinsurance program’s finances and 

activities, we proposed in paragraph 

(c)(4) that the State make public a 

summary of the results of the external 

audit, including any material weakness 

or significant deficiency. We believe 

that these measures are necessary to 

ensure the proper use of reinsurance 

contributions under the uniform 

contribution rate, which HHS will 

collect from all contributing entities 

pursuant to 45 CFR 153.220. We 

received several comments supporting 

these provisions. 

Summary of Regulatory Changes 

We are finalizing these provisions as 

proposed. We are finalizing these 

provisions with one modification. We 

are clarifying in paragraph (c)(4) that in 

making public any material weakness or 

significant deficiency from the external 

audit, the State must also make public 

how it intends to correct the material 

weakness or significant deficiency. 

Summary of Regulatory Changes 

We are finalizing these provisions 

with one modification. We are clarifying 

that when the State makes public a 

summary of the results of the external 

audit, including any material weakness 

or significant deficiency, it must also 

make public how it intends to correct 

the material weakness or significant 

deficiency, in the manner and 

timeframe to be specified by HHS. 

c. Restrictions on Use of Reinsurance 

Funds for Administrative Expenses 

(§ 153.265) 

To achieve the intended purpose of 

the reinsurance program, reinsurance 

contributions collected must be spent 

on reinsurance payments, payments to 

the U.S. Treasury, and on reasonable 

expenses to administer the reinsurance 

program. In § 153.260(a), we proposed 

that a State operating reinsurance would 

be directed to keep an accurate 

accounting of the reinsurance funds 

received from HHS for administrative 

expenses and all the administrative 

expenses incurred for the State-operated 

reinsurance program. If a State incurs 

fewer expenses in operating reinsurance 

for a benefit year than are allocated to 

it under the uniform reinsurance 

contribution rate the State would be 

directed to use those funds to operate 

reinsurance in subsequent benefit years. 

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

Affordable Care Act prohibits an 

Exchange from using any funds 

intended for the administrative and 

operational expenses of the Exchange 

for staff retreats, promotional giveaways, 

excessive executive compensation, or 

the promotion of Federal or State 

legislative and regulatory modifications. 

In § 153.265, we proposed to extend 

these prohibitions to State-operated 

reinsurance programs, so that a State 

establishing a reinsurance program 

would be directed to ensure that its 

applicable reinsurance entity did not 

use funds that were intended to support 

reinsurance program operations 

(including any reinsurance 

contributions collected under the 

national contribution rate for 

administrative expenses) for any 

purpose prohibited in section 

1311(d)(5)(B) of the Affordable Care Act. 

We received comments supporting this 

provision. 

Summary of Regulatory Changes 

We are finalizing this provision as 

proposed. 

3. Subpart D—State Standards Related 

to the Risk Adjustment Program 

In the first Program Integrity final rule 

(78 FR 54070), we revised the definition 

of ‘‘Exchange’’ in § 155.20 and amended 

various other provisions of Part 155 to 

permit a State to establish and operate 

only a State-based SHOP while the 

individual market Exchange for the 

State is established and operated as an 

FFE. Because § 153.310(a)(1) provides 

that a State that elects to operate an 

Exchange is eligible to establish a risk 

adjustment program, when proposing 

these amendments, we sought comment 

on whether a State that elects to 

establish and operate a SHOP but not an 

individual market Exchange should also 

be eligible to establish a risk adjustment 

program. Additionally, we sought 

comment on whether such a State 

would be eligible to establish a risk 

adjustment program only for the small 

group market or would be required to 

establish the program for both markets. 

All these amendments were finalized in 

the first Program Integrity final rule, and 

we are not re-proposing or finalizing 

any of them in this rulemaking. 

However, we elected to address the 

comments we received on the risk 

adjustment options for States electing to 

establish and operate only a SHOP in 

the preamble to this final rule, rather 

than in the preamble to the first Program 

Integrity final rule. 

Comment: Several commenters asked 

that HHS permit a State that is operating 

a SHOP-only Exchange to operate a risk 

adjustment program for both the small 

group market and the individual market. 

One commenter opposed permitting a 

State that elects to operate a SHOP-only 

Exchange to establish a risk adjustment 

program only in the small group market. 


emcdonald on DSK67QTVN1PROD with RULES2
65054 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

13 In the 2014 Payment Notice, we finalized a 

process for approving the operational aspects of a 

State’s risk adjustment program. This process is 

distinct from the previously established process 

through which a State may obtain Federal 

certification of an alternate risk adjustment 

methodology. In an attempt to clarify these two 

related but distinct concepts, we have made minor 

technical corrections to ensure that the terms 

‘‘approval’’ and ‘‘re-approval’’ refer to HHS’s 

evaluation of a State’s risk adjustment operations 

and the terms ‘‘certification’’ and ‘‘recertification’’ 

refer to our evaluation of a proposed alternate risk 

adjustment methodology. 

14See, Government Auditing Standards (2011 

Revision), available at: http://www.gao.gov/

yellowbook. For public companies, the Public 

Company Accounting Oversight Board (PCAOB) 

sets audit standards. See, http://pcaobus.org/

Standards/Auditing/Pages/default.aspx. For nonpublic companies, the AICPA sets audit standards. 

See, http://www.aicpa.org/Research/Standards/

AuditAttest/Pages/SAS.aspx. 

Several commenters stated that 

restricting a State’s ability to operate 

risk adjustment to the small group 

market could deprive the State of 

economies of scale, add compliance 

burdens to issuers who operate in both 

markets, and add complexity to 

operational requirements such as data 

collection and reporting. 

Response: For 2015 and later years, 

HHS will permit a State operating a 

SHOP-only Exchange to propose an 

alternate risk adjustment methodology 

that covers both the individual and 

small group markets, and to apply for 

approval to operate a risk adjustment 

program in both markets. HHS will 

evaluate the proposed alternate risk 

adjustment methodology using the same 

alternate risk adjustment methodology 

certification process set forth in the 

Premium Stabilization Rule and 2014 

Payment Notice, in accordance with the 

standards set forth in 45 CFR 

153.330(b), to ensure that it 

appropriately addresses risk selection in 

both markets, and will evaluate the 

State’s application to operate risk 

adjustment in accordance with the 

standards set forth in 45 CFR 153.310(d) 

to ensure the State is ready to operate 

risk adjustment in both markets. We 

emphasize that this policy does not alter 

the definition of ‘‘Exchange’’ or any of 

the other amendments to provide States 

with the option of establishing and 

operating only a SHOP Exchange that 

we finalized in the first Program 

Integrity final rule. 

a. Maintenance of Records 

(§ 153.310(c)(4)) 

In § 153.310(c)(4), we proposed that a 

State operating a risk adjustment 

program would be directed to maintain 

documents and records relating to the 

risk adjustment program, whether 

paper, electronic, or in other media, for 

each benefit year for at least 10 years, 

and make them available upon request 

from HHS, the OIG, the Comptroller 

General, or their designees, to any such 

entity. The documents and records must 

be sufficient to enable the evaluation of 

a State-operated risk adjustment 

program’s compliance with Federal 

standards. States would also be directed 

to ensure that their contractors, 

subcontractors, and agents maintain and 

make those documents and records 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees. We noted that a State may 

satisfy this standard by archiving these 

documents and records and ensuring 

that they are accessible if needed in the 

event of an investigation, audit, or other 

review. This provision is consistent 

with the requirements set forth in 

§ 153.240(c), which contains record 

retention standards for State-operated 

reinsurance programs. We note that the 

10-year obligation to retain records 

begins when the record is created. 

We addressed the comments received 

on the proposed maintenance of records 

provisions in the preamble discussion of 

§ 153.240(c) above. Below we address a 

comment specific to this provision. 

Comment: One commenter asked HHS 

to amend this standard to provide that 

these documents and records be made 

available to the State validation auditor 

as well as HHS, the OIG, the 

Comptroller General, or their designees. 

Response: We are not making this 

amendment because risk adjustment 

data validation validates the records of 

an issuer, not the records of the State 

entity operating risk adjustment. Thus, 

a State validation auditor should not 

need to review the State risk adjustment 

entity’s documents. 

Summary of Regulatory Changes 

We are finalizing this provision as 

proposed. 

b. Interim Report and State Summary 

Report (§ 153.310(d)) 

In § 153.310(d)(3), we proposed that, 

in addition to the requirements set forth 

in 45 CFR 153.310(d)(1) and (d)(2), a 

State would be directed to provide to 

HHS an interim report, in a manner 

specified by HHS, that includes a 

detailed summary of its risk adjustment 

activities in the first 10 months of the 

benefit year in order to obtain reapproval from HHS to operate risk 

adjustment for a third benefit year.13

This report would be due no later than 

December 31 of the first benefit year for 

which a State operates risk adjustment. 

We note that because the process for 

obtaining re-approval to operate risk 

adjustment begins more than one year 

before the beginning of the applicable 

benefit year, the first benefit year for 

which an interim report based on the 

first year’s operations could be used for 

approval purposes is the third benefit 

year. 

We proposed to amend 45 CFR 

153.310(f) and re-designate it as 

§ 153.310(d)(4). In § 153.310(d)(4), we 

proposed that in order to obtain reapproval from HHS to operate risk 

adjustment for each benefit year after 

the third benefit year for which it is 

approved, each State operating a risk 

adjustment program would be directed 

to submit to HHS and make public a 

detailed summary of risk adjustment 

program operations for the most recent 

benefit year for which risk adjustment 

operations have been completed, in the 

manner and timeframe specified by 

HHS. We proposed that the summary 

report must include the results of a 

programmatic and financial audit for the 

benefit year of the State-operated risk 

adjustment program conducted by an 

independent qualified auditing entity in 

accordance with GAAS. In 

§ 153.310(d)(4)(ii), we proposed that the 

summary report would identify to HHS 

any material weakness or significant 

deficiency (as these terms are defined in 

GAAS issued by the American Institute 

of Certified Public Accountants, and 

Government Auditing Standards issued 

by the GAO 14) identified in the 

independent external audit and address 

in writing to HHS how the State intends 

to correct any such material weakness or 

significant deficiency. 

We are finalizing these provisions 

with minor changes in paragraph 

(d)(4)(ii). We are deleting references in 

that paragraph to HHS to make clear 

that any material weakness or 

significant deficiency identified in the 

audit, including the methods the State 

intends to use to correct any such 

material weakness or significant 

deficiency, must be made public, and 

not only provided to HHS. 

Comment: One commenter asked HHS 

to clarify its expectations for the interim 

report and summary report, and the 

programmatic components HHS 

anticipates a State would report through 

audit findings. 

Response: The interim report will 

help HHS verify the ongoing 

implementation of the risk adjustment 

program and review concerns identified 

by HHS or stakeholders (for example, 

we may request more information on the 

State’s oversight plan). We will expect 

the State to report to HHS regarding the 

State’s implementation of the processes 

outlined in the State’s application for 

certification of its alternate risk 

adjustment methodology (or 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65055 

recertification), if applicable, and its 

application for approval of its 

operations. 

We expect that the summary report 

will include a review of the Stateoperated program’s operations over a 

benefit year, including the State’s 

implementation of the risk adjustment 

methodology over a full payment 

transfer cycle. A full year of risk 

adjustment operations will extend 

beyond a benefit year because payment 

transfers are not determined until the 

year following the applicable benefit 

year. Therefore, the State will not need 

to submit this summary report until 

after the end of the benefit year, upon 

completion of the full payment transfer 

cycle. We will provide further details on 

the risk adjustment interim and 

summary reports in future guidance. 

Comment: One commenter asked HHS 

to permit State flexibility in reporting, 

and asked that re-approval be based on 

an assessment of a State’s success in 

meeting the goals specific to its risk 

adjustment program. 

Response: We anticipate that we will 

require standardized reporting of certain 

metrics, but that a State will be able to 

focus on the specific characteristics of 

the State’s risk adjustment program 

within the report. 

Comment: One commenter asked 

whether the summary report in 

§ 153.310(d)(4) will also be required at 

the conclusion of the first benefit year 

and whether an interim report would be 

required at any time after the first 

benefit year. 

Response: As required by 

§ 153.310(d)(4), each State operating a 

risk adjustment program is required to 

submit to HHS an annual summary of 

risk adjustment program operations in 

the manner and timeframe specified by 

HHS. The summary report will be 

required after the conclusion of the first 

benefit year’s risk adjustment operations 

(and after the conclusion of each later 

benefit year’s risk adjustment 

operations), including the completion of 

the payment transfer cycle. However, an 

interim report will be required only for 

the first benefit year. 

Comment: One commenter asked 

whether the interim report must include 

an independent external audit. 

Response: An independent external 

audit will not be required for the 

interim report. 

Comment: One commenter asked how 

HHS will review a State-operated risk 

adjustment program’s operations in the 

second year of operation, including 

whether any additional information will 

be required during the second year of 

operation. 

Response: Only a summary report, as 

required by § 153.310(d)(4), will be 

required for the second year of 

operation. We are requiring an interim 

report for the first year of operations to 

inform HHS re-approval for a third 

benefit year of operation because we 

will not yet have access to any summary 

reports covering a full year at the time 

of re-approval. For example, a State 

operating risk adjustment in 2014 would 

submit an interim report no later than 

December 31, 2014. HHS would use the 

information provided in this interim 

report to determine if the State will be 

re-approved to operate risk adjustment 

for the 2016 benefit year. We would 

indicate this re-approval in the HHS 

Notice of Benefit and Payment 

Parameters for 2016, which is published 

in 2015. 

Comment: One commenter supported 

the requirement that a State-operated 

risk adjustment program submit 

summary reports, and recommended 

that the summary report include an 

analysis of coding intensity trends. 

Response: We will not require a State 

operating risk adjustment to include an 

analysis of coding intensity trends in 

the State’s summary report. However, a 

State may choose to review this 

information as part of the State’s 

oversight strategy. 

Summary of Regulatory Changes 

We are finalizing these provisions 

with minor changes. We are deleting 

references to HHS in paragraph (d)(4)(ii) 

to make clear that any material 

weakness or significant deficiency 

identified in the audit, including the 

methods the State intends to use to 

correct any such material weakness or 

significant deficiency, must be made 

public, and not only provided to HHS. 

We are also including minor conforming 

changes so that references to 

‘‘certification’’ and ‘‘recertification’’ in 

connection with the evaluation of a 

State’s operation of risk adjustment are 

changed to references to ‘‘approval’’ and 

‘‘re-approval.’’ 

c. General Oversight Requirements for 

State-Operated Risk Adjustment 

Programs (§ 153.365) 

To enable HHS to re-approve States to 

operate risk adjustment pursuant to 45 

CFR 153.310(d), HHS proposed in 

§ 153.365 that a State operating a risk 

adjustment program keep an accounting 

of all receipts and expenditures related 

to risk adjustment payments and 

charges and the administration of risk 

adjustment-related functions and 

activities for each benefit year. This 

accounting would be kept in accordance 

with GAAP, and would apply 

consistently to all risk adjustmentrelated activities. This standard is 

similar to the standard proposed at 

§ 153.260(a), which applies to the 

reinsurance program when operated by 

a State. We received no comment on 

this proposed provision. 

Summary of Regulatory Changes 

We are finalizing this provision as 

proposed. 

4. Risk Adjustment Methodology 

a. Modification to the Transfer Formula 

in the HHS Risk Adjustment 

Methodology (78 FR at 15430–34) 

In the 2014 Payment Notice (78 FR at 

15430–34), we noted our intent to 

modify the risk adjustment payment 

transfer formula in order to 

accommodate community rated States 

that utilize family tiering rating factors. 

In non-family tiering States, family 

policy premiums must be developed by 

adding up the applicable rates of each 

individual covered under the policy, as 

required under 45 CFR 147.102(c)(1). In 

the case of families with more than 

three children in non-family tiering 

States, only the applicable rates of the 

three oldest covered children under age 

21 are counted towards the family 

policy premium rate (for example, for a 

family with four children under age 21, 

only the applicable individual rates of 

the three oldest children would count 

towards the family policy premium). 

These family rating requirements do not 

apply to States that use family tiering 

rating factors. In family tiering States, 

family tiering rating factors are not 

required to yield premiums that are 

equal to the sum of the individual 

policy members’ applicable rates, nor 

must they be set in a way that counts 

only the rates of the oldest three 

children under age 21 within a family 

policy. For example, a family tiering 

State could establish a family tiering 

rating factor of 1.0 for an adult policy, 

1.8 for a policy covering one adult and 

one or more children, 2.0 for a policy 

covering two adults, and 2.8 for a policy 

covering two adults and one or more 

children. 

In order to account for the differences 

in family rating practices between 

family tiering States and non-family 

tiering States, we proposed two changes 

to the risk adjustment payment transfer 

formula that HHS will use when 

operating risk adjustment on behalf of a 

State. These changes would only apply 

to States that are using family tiering 

rating structures. In the 2014 Payment 

Notice, we stated that billable members 

exclude children who do not count 

towards family rates (that is, children 


emcdonald on DSK67QTVN1PROD with RULES2
65056 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

15We note that, after 2014, such arrangements 

generally would only be permissible in the large 

employer group context, because issuers of small 

employer group market insurance coverage are 

required to provide all EHB under any policy they 

offer that does not qualify as ‘‘excepted benefits.’’ 

who do not count toward family policy 

premiums are excluded) (78 FR at 

15432, 15434). We proposed to clarify 

that in the case of family tiering States, 

billable members would be based on the 

number of children that implicitly count 

towards the premium under a State’s 

family rating factors. For example, 

assume a State has the following four 

family tiers: One adult; one adult plus 

one or more children; two adults; and 

two adults plus one or more children. 

Under this tiering structure, only one 

child would be counted as a billable 

member in the payment transfer 

formula, because additional children 

covered under a family policy would 

not affect the policy’s premium. 

Additionally, we proposed a 

modification to the allowable rating 

factor (ARF) formula that would be used 

for family tiering States. In the 2014 

Payment Notice (78 FR at 15433), the 

ARF is calculated as the member month 

weighted average of the age factor 

applied to each billable enrollee. In nonfamily tiering States, the ARF is 

intended to measure the extent to which 

plans are increasing or decreasing their 

premiums based on allowable age rating 

factors. In the case of family tiering 

States, premium revenue will not vary 

by age-specific rating factors. Rather, 

policy level premiums will vary only 

based on the family tiering factors. In 

order to capture the impact of the family 

tiering factors on plans’ premium 

revenue we proposed that the ARF 

formula for family tiering States be 

based on the family tiering factors 

instead of age rating factors. 

Specifically, under our proposal, the 

ARF for family tiering States would be 

calculated at the level of the subscriber, 

as follows: 

Where: 

ARFs is the rating factor for the subscriber(s) 

(based on family size/composition), and 

Ms is the number of billed person-months 

that are counted in determining the 

subscriber(s) premium. 

We noted that, apart from the changes 

to the billable member months 

definition and the ARF formula 

discussed above, payment transfers in 

family tiering States will be calculated 

using the formulas provided in the 2014 

Payment Notice (78 FR at 15431–34). 

The changes to the billable member 

month definition and the ARF formula 

would not apply to States that do not 

implement family tiering rating factors. 

Comment: Several commenters 

supported the proposed modification to 

the payment transfer formula for a 

family tiering State, agreeing with the 

proposal to base billable members on 

the number of children that implicitly 

count towards the premium under the 

State’s family rating factors. These 

commenters also supported modifying 

the ARF formula to address rating 

limitations based on the family tiering 

factors instead of the age rating factors. 

However, these commenters asked that 

the ARF formula be modified to make 

the numerator 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. 

Response: We agree with the 

commenters 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. We are 

making this technical correction so that 

the ARF formula accurately reflects a 

member month weighted average of the 

family tiering factor, as described in the 

preamble to the proposed rule (78 FR at 

37039–040). Because of a typographical 

error, the formula did not align with this 

proposal. We are correcting the formula 

to align with our proposal, which we are 

finalizing in this final rule. Therefore, 

the ARF for family tiering States would 

be calculated at the level of the 

subscriber, as follows: 

Where: 

ARFs is the rating factor for the subscriber(s) 

(based on family size/composition), and 

Ms is the number of billed person-months 

that are counted in determining the 

premium(s) for the subscriber(s). 

Summary of Regulatory Changes 

We are finalizing the two proposed 

modifications to the risk adjustment 

payment transfer formula as proposed, 

with one technical correction. We are 

modifying the ARF formula by making 

the numerator 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. 

5. Subpart E—Health Insurance Issuer 

and Group Health Plan Standards 

Related to the Reinsurance Program 

a. Reinsurance Contribution Funds 

(§ 153.400) 

In some health coverage 

arrangements, an insured group health 

plan may provide benefits through more 

than one policy to the same covered 

lives, where each policy standing alone 

does not constitute major medical 

coverage, but the total benefits do.15 To 

clarify the application of the rules 

(solely for the purpose of reinsurance 

contributions), we proposed to amend 

paragraph (a)(1)(i) of 45 CFR 153.400(a) 

and add a new paragraph (a)(3) that 

would address liability for reinsurance 

contributions in the foregoing fact 

pattern. This paragraph (a)(3) would be 

an exception to the rule under 

paragraph (a)(1)(i), which provides that 

an issuer of health insurance coverage is 

not required to make reinsurance 

contributions for coverage to the extent 

the coverage is not major medical 

coverage. 

Under the proposed paragraph (a)(3), 

a health insurance issuer providing 

coverage under a group health plan 

would make reinsurance contributions 

for lives under its health insurance 

coverage even if the insurance coverage 

does not constitute major medical 

coverage, if: (i) The group health plan 

provides health insurance coverage for 

the same covered lives through more 

than one insurance policy that in 

combination constitute major medical 

coverage but individually do not; (ii) the 

lives are not covered by self-insured 

coverage of the group health plan 

(except for self-insured coverage limited 

to excepted benefits); and (iii) the health 

insurance coverage under the policy 

offered by the health insurance issuer 

represents a percentage of the total 

health insurance coverage offered in 

combination by the group health plan 

greater than the percentage offered 

under any of the other policies. We 

further proposed that for purposes of 

paragraph (a)(3), the percentage of 

coverage offered under various policies 

would be determined based on the 

average premium per covered life for 

these policies. In the event that the 

percentage of coverage is equal, the 

issuer of the policy that provides the 

greatest portion of in-network 

hospitalization benefits would be 

responsible for reinsurance 

contributions. 

Because an issuer of group health 

insurance coverage that does not, by 

itself, constitute major medical coverage 

may not be aware of the existence of, or 

premium for, other health insurance 

coverage obtained by a plan sponsor 

covering the same lives under a group 

health plan, we sought comment on 

whether and in what circumstances an 


emcdonald on DSK67QTVN1PROD with RULES2ER30OC13.000</GPH> ER30OC13.001</GPH>
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65057 

issuer should be entitled to rely upon 

representations from a plan sponsor 

regarding the relative percentage of 

coverage offered by the issuer. We also 

sought comment on what other means 

we should consider for ensuring that the 

relevant issuer knows of its obligation to 

make the reinsurance contributions, 

including any role that the employer 

should have in ensuring that issuers 

have the information necessary to 

determine which issuer is responsible 

for reinsurance contributions, as well as 

alternative approaches that should be 

considered for determining 

responsibility for reinsurance 

contributions in such circumstances. 

Finally, we addressed in the proposed 

rule certain inquiries as to how 

reinsurance contribution obligations 

would be allocated in the case of a 

group health plan under which some 

benefit options for employees are 

insured by an issuer, and some options 

offer benefits without the involvement 

of an issuer in insuring the benefits 

(because either the group health plan or 

some non-issuer entity assumes the risk 

for that coverage option). We proposed 

that in such a case, if a coverage option 

is insured by an issuer, the issuer would 

be responsible for the reinsurance 

contribution associated with that 

coverage option. If an employee 

coverage option under such a group 

health plan is not insured (because 

either the group health plan or other 

non-issuer assumes the risk), we 

proposed that the group health plan 

would be responsible for the 

reinsurance contribution associated 

with that coverage option. After 

considering the comments received, we 

are modifying the proposed provisions 

by amending the ‘‘percentage of 

benefits’’ provision to state that the 

issuer of the plan that provides the 

greatest portion of the inpatient 

hospitalization benefits would be 

responsible for reinsurance 

contributions. We also are making two 

minor revisions to the language in 

proposed paragraph (a)(3) to clarify its 

scope. 

Comment: Several commenters 

suggested that the ‘‘higher percentage of 

benefits’’ approach in proposed 

§ 153.400(a)(3) is administratively 

burdensome and presents significant 

operational problems. A number of 

commenters suggested an alternative 

approach that would require the issuer 

that covers hospitalizations to be 

responsible for reinsurance 

contributions. 

One commenter agreed with HHS’s 

statement in the preamble to the 

proposed rule that issuers may not 

know about other coverage purchased 

by a plan sponsor, so directing issuers 

to seek representations from plan 

sponsors concerning the relative 

percentage of coverage offered by the 

issuer was reasonable. The commenter 

suggested that issuers be able to rely on 

employer representations regarding 

other coverage, and that issuers be held 

harmless from compliance actions if 

they do not receive such information 

from employers, or if the information is 

inaccurate. However, another 

commenter stated that plans or plan 

sponsors should not be required to 

provide information to issuers and that 

a rule that ‘‘looks to the types of 

coverage provided’’ is appropriate. One 

commenter requested clarification on 

which entity would be liable for 

reinsurance contributions where a group 

health plan has two insured major 

medical components offered by different 

issuers. The commenter stated that some 

States prohibit HMOs from providing 

out-of-network coverage for nonemergency services. HMOs in those 

States package their in-network 

coverage with out-of-network coverage 

issued by a non-HMO health insurance 

issuer, so that enrollees in the HMO 

have simultaneous coverage under both 

products. The commenter suggested that 

the rule should provide the issuer of the 

in-network coverage (the HMO, which 

would be expected to account for the 

majority of the total health coverage 

under the group health plan) is 

responsible for reinsurance 

contributions. 

Response: We are revising proposed 

§ 153.400(a)(3) to state that the issuer of 

the plan that provides the greatest 

portion of inpatient hospitalization 

coverage will be responsible for 

reinsurance contributions, and note that 

the issuer should be the issuer that 

provides the majority of the dollar value 

of the benefits in most situations. We 

believe this option will mitigate the 

operational difficulties discussed by the 

commenters, and will significantly 

reduce the need for plan sponsors to 

provide information to issuers. Because 

we recognize that there may be 

circumstances in which an issuer is 

unsure whether its coverage provides 

the greatest portion of inpatient 

hospitalization benefits, we intend to 

hold an issuer harmless from noncompliance actions for failure to pay 

reinsurance contributions if the issuer 

relies in good faith upon a written 

representation by the plan sponsor that 

the issuer’s coverage does not provide 

the greatest portion of inpatient 

hospitalization benefits. 

Comment: One commenter asked HHS 

to clarify the type of group health plan 

coverage intended to be addressed by 

the proposed addition of paragraph 

(a)(3) to § 153.400. 

Response: Section 153.400(a)(3) 

applies to fully insured group health 

plans that offer health insurance 

coverage through more than one policy. 

For example, a fully insured group 

health plan with two insurance policies, 

one of which covers inpatient 

hospitalization and another that covers 

doctors’ office visits, prescriptions, 

vision and dental benefits, or other 

similar arrangements, would be covered 

by this paragraph. 

Comment: One commenter requested 

a clarification on the proposed approach 

to allocating responsibility for 

reinsurance contributions, in the case of 

a group health plan where some options 

offered under a plan are insured and 

some options offer benefits without the 

involvement of an issuer (because either 

the group health plan or a non-issuer 

entity assumes the risk for that coverage 

option). The commenter requested that 

HHS clarify that the reinsurance 

contribution will not be imposed with 

respect to the same covered life more 

than once. 

Response: Under the proposed 

approach, in such a group health plan, 

the issuer would be liable for 

reinsurance contributions with respect 

to an insured coverage option, and the 

group health plan would be liable for 

reinsurance contributions with respect 

to a coverage option that is not insured. 

Consequently, reinsurance contributions 

would not be required more than once 

for the same covered life. 

In general, it is our intent not to 

require payment of reinsurance 

contributions more than once for the 

same covered life. We recognize that 

certain complex group health plan 

arrangements can lead to situations in 

which lives are covered multiple 

arrangements and where it is unclear 

whether more than one health plan or 

issuer must make reinsurance 

contributions on the same covered life. 

To provide clarity on the matter, we 

intend to clarify in future rulemaking 

the principle that reinsurance 

contributions are required only once 

with respect to the same covered life. 

We also intend to propose that no 

reinsurance contributions are required 

under a group health plan where the 

group health plan coverage applies to 

lives that are also covered by individual 

market health insurance coverage for 

which reinsurance contributions are 

required, or where the coverage is 

supplemental or secondary to group 

health coverage for which reinsurance 

contributions must be made for the 

same covered lives. 


emcdonald on DSK67QTVN1PROD with RULES2
65058 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

16 In the preamble to the Exchange Establishment 

Rule, we note that each Exchange has the authority 

to require, as a condition of certification, 

comprehensive medical QHPs to offer and price the 

pediatric dental EHB (if covered) separately, if 

doing so would be in the best interest of consumers. 

For the 2014 benefit year, an FFE will not require 

comprehensive medical QHP issuers that provide 

pediatric dental coverage to do so. We have 

provided this guidance in Chapter 4 of the 2014 

Letter to Issuers on Federal and Partnership 

Marketplaces (April 5, 2013). 

Summary of Regulatory Changes 

We are finalizing the reinsurance 

contribution provision discussed above 

as proposed, with the following 

modifications. We are modifying the 

‘‘percentage of benefits’’ provision to 

state that the issuer of the plan that 

provides the greatest portion of the 

inpatient hospitalization benefits will be 

responsible for reinsurance 

contributions. We also are making two 

minor revisions to language in proposed 

paragraph (a)(3) to clarify its scope. 

b. Maintenance of Records (§ 153.405(h) 

and § 153.410(c)) 

To meet our obligation to safeguard 

Federal funds, we proposed to amend 

§ 153.405 by adding paragraph (h), 

which would require a contributing 

entity to maintain documents and 

records, whether paper, electronic, or in 

other media, that are sufficient to 

substantiate the enrollment count 

submitted under § 153.405 for at least 10 

years, and would direct the contributing 

entity to make that evidence available 

upon request from HHS, the OIG, the 

Comptroller General, or their designees, 

for the purpose of verifying reinsurance 

contribution amounts. We also proposed 

to amend § 153.410 by adding paragraph 

(c), which would direct an issuer of a 

reinsurance-eligible plan in a State 

where HHS operates reinsurance to 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

requests for reinsurance payments made 

pursuant to § 153.410 for at least 10 

years, and would require the issuer to 

make that evidence available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

(or, in a State where the State is 

operating reinsurance, the State or its 

designee) for the purpose of verifying 

reinsurance payment requests. We note 

that these standards could be satisfied if 

the contributing entity or issuer of a 

reinsurance-eligible plan archived the 

documents and records and ensured 

that they were accessible in the event of 

an investigation, audit, or other review. 

We note that the 10-year obligation to 

retain records begins when the record is 

created. 

We addressed the comments received 

on the proposed maintenance of records 

provisions in the preamble discussion 

related to § 153.240(c) above. 

Summary of Regulatory Changes 

We are finalizing these provisions as 

proposed, with one clarification in each 

provision to conform with the other 

record retention standards in this rule. 

We are clarifying that in each provision 

it is the ‘‘documents and records’’ that 

must be made available upon request. 

6. Subpart F—Health Insurance Issuer 

Standards Related to the Risk Corridors 

Program 

a. Definitions (§ 153.500 and § 153.510) 

Section 1342(a) of the Affordable Care 

Act provides that ‘‘a qualified health 

plan offered in the individual or small 

group market’’ is to participate in the 

risk corridors program. In the Exchange 

Establishment Rule, we stated that a 

stand-alone dental plan is ‘‘a type of 

qualified health plan.’’ However, we did 

not intend for all requirements 

applicable to a QHP to apply to standalone dental plans. For example, under 

45 CFR 155.1065(a)(3), certain QHP 

standards are not applicable to a standalone dental plan if they cannot be met, 

given the limited benefit package 

offered by the plan. We believe that it 

would not be appropriate to subject 

stand-alone dental plans to the risk 

corridors program because such plans 

are considered excepted benefits plans 

under section 2791(c) of the PHS Act, 

and are therefore not subject to the 

rating rules—that is, the Federal 

prohibition on underwriting premiums, 

the requirement to base premium rating 

using the single risk pool, and the fair 

health insurance premiums limitations. 

Thus, although States have the option to 

prohibit underwriting for excepted 

benefits plans, and issuers of standalone dental plans may voluntarily 

choose not to underwrite these plans, 

we believe that, in general, an issuer of 

a stand-alone dental plan will not be 

subject to the same rate-setting 

uncertainty in 2014 as the issuer of a 

major medical plan, and will not need 

the risk-sharing protections of risk 

corridors.16 In the proposed rule, we 

noted that stand-alone dental plans are 

similarly excluded from participation in 

the two other premium stabilization 

programs—reinsurance and risk 

adjustment. We also noted that, 

consistent with the exclusion of 

excepted benefits plans from the 

medical loss ratio (MLR) requirements, 

stand-alone dental claims would not be 

pooled along with an issuer’s other 

claims for the purposes of determining 

‘‘allowable costs’’ in the risk corridors 

calculation, as defined at 45 CFR 

153.500. We received several comments, 

all of which were supportive of this 

approach. 

Summary of Regulatory Changes 

We are finalizing this policy as 

proposed, and are adding a new 

paragraph (e) to § 153.510, which 

provides that a QHP issuer is not subject 

to the provisions under subpart F of part 

153 with respect to a stand-alone dental 

plan. 

b. Calculation of Allowable Costs, 

Attribution and Allocation of Revenue 

and Expense Items, and Risk Corridors 

Data Requirements (§ 153.500, 

§ 153.520, and § 153.530) 

In the interim final rule (78 FR 

15541), we noted that, consistent with 

the single risk pool provision at 45 CFR 

156.80, which directs an issuer to pool 

claims costs across all of its nongrandfathered health plans in a market 

within a State, a QHP issuer must pool 

allowable costs across all its nongrandfathered plans in the relevant 

market for the purposes of risk corridors 

calculation. We therefore amended the 

regulatory definition of ‘‘allowable 

costs’’ for purposes of the risk corridors 

program so that allowable costs for a 

QHP are equal to the pro rata portion of 

the QHP issuer’s incurred claims. We 

also modified the provision related to 

attribution and allocation of revenue 

and expense items in 45 CFR 153.520 to 

conform to the changes for the risk 

corridors calculation described above. 

We are finalizing the policy set forth 

in the interim final rule with respect to 

the definition of ‘‘allowable costs,’’ and 

are making a number of modifications to 

maintain consistency with this policy in 

response to comment, as described 

below. 

Comment: Several commenters 

recommended that we exclude the 

experience of non-QHPs from the risk 

corridors calculation, and include only 

the experience of an issuer’s QHPs in 

our definition of allowable costs. These 

commenters were concerned that tying 

allowable costs to the experience of all 

of a QHP issuer’s non-grandfathered 

health plans would have the effect of 

diluting the pricing protections afforded 

to QHPs through the risk corridors 

program. One commenter believed that 

it would be inconsistent to disconnect 

the premiums used for the risk corridors 

target amount from the claims used to 

develop the allowable costs, and 

suggested an alternate approach that 

would direct issuers to aggregate 

incurred claims for all QHPs and then 

allocate these incurred claims to each 

QHP pro rata based on the earned 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65059 

premium of each QHP as a percentage 

of total earned premium for all QHPs. 

The commenter believed that, while this 

proposal would not affect the risk 

corridors calculation, it would require 

issuers to separate QHP and non-QHP 

claims and risk adjustment payments 

and charges. 

Response: We are finalizing the 

definition of allowable costs as set forth 

in the interim final rule without change. 

As discussed in the preamble to the 

interim final rule, this approach is 

consistent with how issuers will 

determine premiums pursuant to the 

single risk pool requirement at 45 CFR 

156.80. As stated in the interim final 

rule, allowable costs will be calculated 

based on an issuer’s experience for all 

non-grandfathered plans in a State 

market, such that the actual risk 

corridors payment or charge will be 

calculated based on a QHP’s pro rata 

share (based on premiums) of the QHP 

issuer’s market-wide allowable costs 

and premiums. This approach ensures 

that the incurred claims used to develop 

the allowable costs in the numerator of 

the risk corridors calculation are 

consistent with the projected claims 

used to develop the premiums used to 

calculate the target amount in the 

denominator of the risk corridors 

calculation. We also note that this 

approach aligns with existing processes 

for the MLR program, and helps to 

maintain overall consistency between 

the MLR and risk corridors programs. 

We agree with the comment that it is 

inconsistent to disconnect the projected 

claims used to develop premiums used 

to calculate the risk corridor target 

amount from the incurred claims used 

to develop the allowable costs, and are 

therefore modifying our risk corridors 

expense allocation rules at 45 CFR 

153.520 to ensure that the numerator 

and the denominator of the risk 

corridors calculation are calculated in a 

fully consistent manner. We are revising 

the risk corridors allocation rules in 

§ 153.520 to clarify that administrative 

expenses in the target amount, like 

allowable costs, should be calculated 

based on expenses across all nongrandfathered health plans in the 

market, and allocated pro rata to a QHP 

based on the QHP’s premiums. Because 

certain administrative expenses, such as 

Exchange user fees are, like incurred 

claims costs, required to be spread 

across the relevant risk pool, their 

treatment should conform with the 

market-wide risk corridors calculation 

for allowable costs and premiums. Thus, 

we are clarifying that administrative 

expenses should be similarly allocated. 

We note that this change is consistent 

with our intention to align the risk 

corridors calculation with the single risk 

pool provision, will further align the 

calculations for the MLR and risk 

corridors programs, and will reduce the 

burden on issuers of allocating expenses 

on a plan-by-plan basis. 

Finally, we are also making 

conforming corrections to the risk 

corridors data requirements in 

§ 153.530(b) and (c) to specify that 

issuers must submit risk corridors data 

in a manner that is consistent with the 

calculation of allowable costs and 

allowable administrative costs, as 

defined at § 153.500. We provide that a 

QHP issuer must submit to HHS data on 

allowable costs and allowable 

administrative costs incurred for all of 

its non-grandfathered plans in a market 

within a State. Without these 

corrections, issuers would be required 

to make plan-specific allocations and 

submit plan-specific amounts that are 

not necessary for the risk corridors 

calculation, while not providing the 

QHP aggregate premium data required 

for the risk corridors calculation as 

amended. We believe that these 

corrections will alleviate potential 

confusion among issuers with regard to 

submission of pooled risk corridors 

data. 

Comment: One commenter noted that 

the risk corridors calculation compares 

allowable costs for QHPs and non-QHPs 

in the numerator of the calculation to 

target amounts for only QHPs in the 

denominator. The commenter 

recommended that the numerator of the 

calculation should only pool incurred 

claims across an issuer’s QHPs to ensure 

a consistent comparison. One 

commenter noted that the single risk 

pool provision at 45 CFR 156.80 permits 

specific plan level premium 

adjustments, such that QHP premiums 

would reflect certain factors that relate 

particularly to QHPs, in addition to 

market-wide factors. Consequently, the 

commenter believed that an approach 

that limited the risk corridors 

calculation to the experience of only an 

issuer’s QHPs would still be consistent 

with the single risk pool provision. 

However, another commenter supported 

the modification to the calculation of 

allowable costs that was set forth in the 

interim final rule, and believed that our 

policy was consistent with the single 

risk pool provision. 

Response: Because a QHP’s target 

amount is based on the QHP’s 

premiums, which are principally set 

based on the index rate for QHPs and 

non-QHPs in the relevant market, we 

believe it is more consistent to set 

allowable costs based on the pooled 

claims costs of both QHPs and nonQHPs. We believe the allocation of the 

allowable costs by plan premiums 

addresses the plan-specific premium 

variation. 

Comment: All commenters supported 

the modification to the risk corridors 

formula to calculate allowable costs 

based on incurred claims at an aggregate 

level, rather than using incurred claims 

specific to each QHP. 

Response: We are finalizing our 

definition of allowable costs to calculate 

allowable costs based on aggregate 

incurred claims as set forth in the 

interim final rule. 

Summary of Regulatory Changes 

We are finalizing the definition of 

‘‘allowable costs’’ in § 153.500 without 

change. We are modifying § 153.520(a) 

and (b) to provide that expenses in the 

target amount of the risk corridors 

calculation should be based on marketwide expenses, and must be allocated 

across a QHP issuer’s plans in 

proportion to the plans’ premiums. 

Finally, we are making conforming 

modifications to the risk corridors data 

requirements in § 153.530(b) and (c) to 

require a QHP issuer to submit data on 

allowable costs and allowable 

administrative costs for its nongrandfathered health plans in a market 

within a State. 

7. Subpart G—Health Insurance Issuer 

Standards Related to the Risk 

Adjustment Program 

We proposed to amend § 153.620(b) to 

add a standard that would direct an 

issuer that offers risk adjustment 

covered plans to maintain documents 

and records, whether paper, electronic, 

or in other media, sufficient to enable 

the evaluation of the issuer’s 

compliance with applicable risk 

adjustment standards, and to make that 

evidence available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees (or in a State where 

the State is operating risk adjustment, 

the State or its designee), to any such 

entity. This standard, which is 

consistent with other records 

maintenance standards in this rule, 

would direct an issuer of a risk 

adjustment covered plan to retain 

additional records—not only those 

pertaining to data validation—to 

substantiate its compliance with risk 

adjustment standards, whether risk 

adjustment is operated by HHS or a 

State. 

We addressed the comments received 

on the proposed maintenance of records 

provisions in the preamble discussion of 

§ 153.240(c) above. 

Comment: Several commenters asked 

HHS to clarify the record retention 

timeframe for this proposed provision. 


emcdonald on DSK67QTVN1PROD with RULES2
65060 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

Response: We are amending this 

proposed provision to specify the record 

retention timeframe for this proposed 

provision. We clarify that an issuer that 

offers risk adjustment covered plans 

must maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to enable the 

evaluation of the issuer’s compliance 

with applicable risk adjustment 

standards for each benefit year, for at 

least 10 years, and make those 

documents and records available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees 

(or in a State where the State is 

operating risk adjustment, the State or 

its designee), to any such entity. We 

note that the 10-year obligation to retain 

records begins when the record is 

created. 

Comment: One commenter 

encouraged HHS to prohibit QHP 

issuers from demanding documentation 

or paperwork from physician practices 

or independently auditing physician 

practices in order to comply with HHS’s 

proposed oversight requirements. 

Response: This regulation does not 

seek to regulate the relationships 

between issuers of risk adjustment 

covered plans and health care providers. 

Rather, we expect that risk adjustment 

covered plans will make appropriate 

arrangements with providers to ensure 

compliance with this regulation. 

Comment: One commenter asked HHS 

to amend this standard to provide that 

these documents and records be made 

available to the issuer’s data validation 

auditor as well as HHS, the OIG, the 

Comptroller General, or their designees. 

Response: We are not extending this 

provision to require an issuer of a risk 

adjustment covered plan to make 

available its documents and records to 

its data validation auditor. A data 

validation auditor’s authority to review 

an issuer’s relevant documents will be 

addressed under the risk adjustment 

data validation regulations in 45 CFR 

153.630. 

Summary of Regulatory Changes 

We are making two corrections to this 

provision, to conform with our other 

record retention provisions throughout 

this rule. We are clarifying that it is the 

‘‘documents and records’’ that must be 

made available upon request. We are 

also clarifying that documents and 

records must be maintained for each 

benefit year, for at least 10 years. 

8. Subpart H—Distributed Data 

Collection for HHS-Operated Programs 

a. Failure To Comply With HHSOperated Risk Adjustment and 

Reinsurance Data Requirements 

(§ 153.740(a)) 

In § 153.740(a), we proposed that HHS 

may pursue an enforcement action for 

CMPs against an issuer in a State where 

HHS operates the reinsurance or risk 

adjustment program, if the issuer fails 

to: (a) Establish a secure, dedicated 

distributed data environment pursuant 

to 45 CFR 153.700(a); (b) provide HHS 

with access to enrollee-level plan 

enrollment information, enrollee claims 

data, or enrollee encounter data through 

its dedicated distributed data 

environment pursuant to 45 CFR 

153.710(a); (c) otherwise comply with 

the requirements of 45 CFR 153.700 

through 153.730; (d) adhere to the 

reinsurance data submission 

requirements set forth in 45 CFR 

153.420; or (e) adhere to the risk 

adjustment data submission and data 

storage requirements set forth in 45 CFR 

153.610 through 153.630. As discussed 

above, under the data collection 

approach that we are implementing 

when we operate risk adjustment or 

reinsurance on behalf of a State, an 

issuer must use masked enrollee 

identification numbers when making 

data accessible through the dedicated 

distributed data environment. In 

addition, we will not store any 

personally identifiable enrollee 

information or individual claim-level 

information from the data that issuers 

make accessible to HHS through the 

dedicated distributed data environment 

except when conducting data validation 

or audits. 

Risk Adjustment: Risk adjustment 

covered plans must provide access to 

the risk adjustment enrollee-level plan 

enrollment information, enrollee claims 

data, or enrollee encounter data from 

the issuer by April 30 of the year 

following the applicable benefit year in 

order for HHS to calculate payment 

transfers based on claims experience 

and premiums as set forth in 45 CFR 

153.730. In order to enforce risk 

adjustment standards when operating 

risk adjustment on behalf of a State 

pursuant to our authority under section 

1321(c)(2) of the Affordable Care Act, 

we proposed establishing HHS authority 

to impose CMPs, and applying the 

related enforcement standards set forth 

in § 156.805 to non-compliant issuers. If 

a risk adjustment covered plan does not 

comply with the requirements set forth 

in 45 CFR 153.610 through 153.630 and 

45 CFR 153.700 through 153.730, we 

proposed to apply a sanction so that the 

level of the enforcement action would 

be proportional to the level of the 

violation. While we would reserve the 

right to impose penalties up to the 

maximum amounts set forth in 

§ 156.805(c), as a general principle, we 

stated our intent to work collaboratively 

with issuers to address problems in 

establishing dedicated distributed data 

environments in 2014. We noted that 

HHS would reserve the right to impose, 

or not impose, CMPs as appropriate. We 

proposed that in our application of 

CMPs, we would take into account the 

totality of the issuer’s circumstances, 

including such factors as an issuer’s 

previous record of non-compliance (if 

any), the frequency and level of the 

violation, and any aggravating or 

mitigating circumstances. Our intent is 

to encourage issuers to address noncompliance and not to severely affect 

their financial condition, especially 

where the issuer demonstrates good 

faith in monitoring compliance with 

applicable standards, identifies any 

suspected occurrences of noncompliance, and attempts to remedy any 

non-compliance. For instance, if an 

issuer of a risk adjustment covered plan 

did not establish a dedicated distributed 

data environment or provide access to 

the necessary risk adjustment data to 

permit HHS to timely calculate the 

applicable risk adjustment transfer 

amounts, HHS would assess a default 

risk adjustment charge as described 

below. HHS might also elect to impose 

CMPs in conjunction with the 

imposition of the default risk 

adjustment charge if an issuer failed to 

comply with applicable data security or 

privacy standards placing the interests 

of third-parties at risk. 

Reinsurance: We proposed that an 

issuer of a reinsurance-eligible plan may 

be subject to CMPs for failure to comply 

with 45 CFR 153.420, or 45 CFR 153.700 

through 153.730. Under this proposal, 

HHS would take into account the 

totality of the issuer’s circumstances, 

including such factors as an issuer’s 

previous record of non-compliance (if 

any), the frequency and level of the 

violation, and any aggravating or 

mitigating circumstances when 

determining how to apply CMPs. In the 

proposed rule, we indicated that we 

might not impose CMPs in certain cases. 

For example, HHS might not impose 

CMPs on an issuer of a reinsuranceeligible plan if it fails to set up a 

dedicated distributed data environment 

or meet certain data requirements stated 

above if, as a consequence, HHS simply 

does not have the necessary claims data 

from the dedicated distributed data 

environment to calculate or distribute 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65061 

17As described at 45 CFR 153.720(b), masked 

data means data associated with a unique identifier, 

where the unique identifier does not include the 

enrollee’s personally identifiable information. 

reinsurance payments for the 

reinsurance-eligible plan, and as a 

result, the reinsurance-eligible plan 

would forgo significant reinsurance 

payments that it otherwise might have 

received. Regardless, HHS reserves the 

right to impose CMPs irrespective of 

whether an issuer becomes ineligible for 

reinsurance payments as a result of 

failing to comply with 45 CFR 153.420, 

or 45 CFR 153.700 through 153.730. 

After considering the comments 

received, we are finalizing § 153.740(a) 

with one modification. We are including 

a compliance standard, parallel to that 

set forth in 45 CFR 156.800(c), 

providing that CMPs will not be 

imposed under this provision during the 

2014 calendar year, if the issuer has 

made good faith efforts to comply with 

the applicable requirements. 

Comment: Several commenters 

supported HHS’s proposed flexibility 

and cooperation with issuers when 

imposing CMPs on issuers that fail to 

establish a dedicated distributed data 

environment or provide HHS access to 

all necessary data. Commenters 

supported taking into account an 

issuer’s good faith attempts to comply 

with the data requirements. One 

commenter suggested that HHS provide 

standards that would allow issuers to 

demonstrate that they have complied 

with the data requirements. Another 

commenter asked HHS to adopt a ‘‘safe 

harbor’’ that would defer the imposition 

of any CMPs for two years, and to 

require only good faith compliance. One 

commenter specifically suggested that 

issuers be subject to CMPs if they are 

out of compliance with risk adjustment 

and reinsurance data requirements for 

two or more consecutive benefit years, 

or if they fail to correct significant 

deficiencies discovered during the risk 

adjustment initial and secondary 

validation audit processes that result in 

substantially inaccurate data or produce 

upcoding trends significantly greater 

than those found among other issuers in 

the State. 

Response: As we described in the 

proposed rule, HHS will take into 

account the totality of an issuer’s 

circumstances, including such factors as 

the issuer’s previous record of noncompliance (if any), the frequency and 

level of the violation, and any 

aggravating or mitigating circumstances, 

including the issuer’s good faith in 

monitoring compliance with applicable 

standards and attempts to remedy any 

non-compliance. In addition, consistent 

with our policy and standards with 

respect to sanctions for non-compliance 

with FFE standards set forth in 45 CFR 

156.800, 45 CFR 156.805, and 45 CFR 

156.810, we are clarifying that if HHS is 

able to determine that an issuer of a risk 

adjustment covered plan or reinsuranceeligible plan, as applicable, is making 

good faith efforts to comply with the 

standards set forth in § 153.740(a), we 

will not seek to impose CMPs for noncompliance with those standards during 

2014. Based on the comments received 

in connection with the proposed rule, in 

45 CFR 156.800(c), we provided that for 

2014, sanctions under that subpart will 

not be imposed if the QHP issuer has 

made good faith efforts to comply with 

applicable requirements. We are 

adopting a similar CMP enforcement 

strategy here. However, we note that 

nothing in this provision prohibits HHS 

from imposing CMPs in 2015 for noncompliance that occurred in 2014. At 

the appropriate time, we will consider 

extending this good faith compliance 

policy through 2015. We also note that 

this good faith compliance policy does 

not apply to the imposition of the 

default risk adjustment charge described 

in § 153.740(b), which is intended as an 

administrative measure to ensure that 

HHS may properly calculate risk 

adjustment payments and charges for 

the entire market. Finally, we note that 

HHS’s determination of good faith may 

require issuers of risk adjustment 

covered plans and reinsurance-eligible 

plans to allow HHS to conduct reviews 

of the issuer’s risk adjustment and 

reinsurance materials and to review the 

issuer’s good faith efforts to comply 

with corrective action plans. 

Comment: One commenter asked 

whether the enforcement authority 

proposed in § 153.740 will apply to 

issuers in States where HHS operates 

reinsurance but the State operates the 

risk adjustment program. 

Response: The enforcement actions 

set forth in § 153.740 apply to issuers 

that fail to comply with HHS-operated 

risk adjustment and reinsurance data 

requirements. As such, in States where 

HHS operates reinsurance but the State 

operates the risk adjustment program, 

the enforcement authority proposed in 

§ 153.740 would apply with respect to 

non-compliance with reinsurancerelated standards to issuers of 

reinsurance-eligible plans, but not to 

non-compliance with respect to risk 

adjustment-related standards to issuers 

of risk adjustment covered plans. 

Comment: One commenter asked that 

HHS permit issuers to appeal any HHS 

enforcement actions. 

Response: As noted in the proposed 

rule, HHS may impose CMPs in 

accordance with the procedures set 

forth in § 156.805 of this subchapter. 

Sections 156.805(d) and (e) provide a 

process for issuers that are assessed a 

CMP to request a hearing. We intend to 

propose an administrative process in the 

HHS Notice of Benefit and Payment 

Parameters for 2015 through which an 

issuer may appeal the assessment of a 

default risk adjustment charge. 

Summary of Regulatory Changes 

To clarify our 2014 policy of 

nonenforcement of CMPs for good faith, 

we are adding a new sentence to 

§ 153.740(a). 

b. Default Risk Adjustment Charge 

(§ 153.740(b)) 

As described in the Premium 

Stabilization Rule (77 FR 17220) and the 

2014 Payment Notice (78 FR 15410), 

HHS will employ a distributed data 

collection approach when it operates a 

risk adjustment program on behalf of a 

State. Under this approach, issuers in 

States where HHS operates a risk 

adjustment program will be required to 

establish dedicated, secure data 

environments, and provide HHS with 

access to ‘‘masked’’ 17 enrollee-level 

plan enrollment information, enrollee 

claims data, and enrollee encounter data 

pursuant to 45 CFR 153.710 and 45 CFR 

153.720. Pursuant to 45 CFR 153.730, 

issuers must provide access to required 

risk adjustment data by April 30 of the 

year following the applicable benefit 

year in order for HHS to calculate risk 

adjustment payment transfer amounts. 

As discussed above, under the data 

collection approach we are 

implementing when we operate risk 

adjustment or reinsurance on behalf of 

a State, we will not store any personally 

identifiable enrollee information or 

individual claim-level information from 

the data that issuers make accessible to 

HHS through the dedicated distributed 

data environment except for purposes of 

data validation and audit. 

As discussed in the proposed rule, if 

an issuer does not set up a dedicated 

distributed data environment or submits 

inadequate risk adjustment data, HHS 

would not have the required risk 

adjustment data from the issuer to 

calculate risk scores or payment 

transfers. This data is necessary to 

properly calculate risk adjustment 

payments and charges for the entire 

applicable market for the State. If HHS 

cannot perform this calculation for a 

particular issuer, risk adjustment 

payment transfers would be affected for 

all other issuers in the State market 

because payment transfers are 

determined within a market within a 

State such that they will net to zero. In 

the proposed rule, we invoked our 


emcdonald on DSK67QTVN1PROD with RULES2
65062 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

authority pursuant to section 1343(b) of 

the Affordable Care Act to develop and 

apply criteria and methods for carrying 

out risk adjustment activities to apply a 

default risk adjustment charge to issuers 

in the individual or small group market 

that fail to provide the risk adjustment 

data necessary for HHS to calculate 

payments and charges for the market in 

the State. 

In § 153.740(b), we proposed that 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 risk adjustment data 

in such environment by April 30 of the 

year following the applicable benefit 

year in accordance with §§ 153.610(a), 

153.700, 153.710, or 153.730, such that 

HHS cannot apply its Federally certified 

risk adjustment methodology to 

calculate the plan’s risk adjustment 

payment transfer amount in a timely 

fashion, HHS would assess a default risk 

adjustment charge. 

We proposed two different methods 

for determining the per member per 

month amount used to calculate the 

default risk adjustment charge. One 

option would be to use the highest per 

member per month charge among risk 

adjustment covered plans in a risk pool 

in the market in the plan’s geographic 

rating area. A second option would be 

to use a per member per month amount 

that is two standard deviations above 

the mean charge in the market in the 

plan’s geographic rating area. 

We noted in the proposed rule that in 

order to calculate a plan’s risk 

adjustment default charge, we must 

multiply the per member per month 

amount by an enrollment count. We 

proposed to base the default charge on 

the average enrollment in the State 

market. If enrollment data is provided, 

we proposed that the default charge 

would be based on average annual 

enrollment for the plan in a risk pool in 

the State market. We sought comment 

on these methods, other appropriate 

methods for calculating a default risk 

adjustment charge, and other sources of 

data HHS could use to determine 

enrollment data for the issuers in 

question. We also sought comment on 

whether to allocate an issuer’s default 

charge to other issuers in the market as 

part of payments and charges in the 

concurrent benefit year, during a 

subsequent benefit year, or sometime 

between annual payments and charges 

processes. 

We received a number of comments 

strongly supporting our proposal to 

impose a default risk adjustment charge 

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. We are finalizing that regulation 

text as proposed. 

Comment: Several commenters 

suggested that we tie the default charge 

to the issuer’s actual enrollment based 

on an appropriate public filing by the 

issuer, such as MLR or NAIC filings, or 

information supplied by a State 

Department of Insurance (DOI), rather 

than average enrollment in the State. 

Response: We agree with the 

comments, and are finalizing an 

approach based on the issuer’s actual 

enrollment. Because the total risk 

adjustment default charge is a function 

of both a per member per month amount 

as well as a total enrollment amount, we 

recognize that actual enrollment would 

better align the risk adjustment default 

charge with the overall goal of market 

stabilization. Thus, if an issuer of a risk 

adjustment covered plan does not 

provide access to required risk 

adjustment data by April 30 of the year 

following the applicable benefit year, 

then we will seek from the issuer an 

attestation of total billable member 

months, which we would use to 

calculate the total risk adjustment 

default charge. That attestation would 

be subject to later HHS validation 

processes, which we will describe in 

future rulemaking and guidance, along 

with compliance with other risk 

adjustment-related requirements. If an 

issuer does not submit enrollment data, 

HHS will seek enrollment data from the 

issuer’s MLR and risk corridors filings 

for the applicable benefit year, or, if 

unavailable, other reliable data sources, 

such as the State DOI. 

Comment: We received several 

comments suggesting that HHS allocate 

an issuer’s default charge to other 

issuers in the market as part of the 

payments and charges calculation in the 

concurrent benefit year. 

Response: We agree that the default 

risk adjustment charge should be part of 

the concurrent benefit year payment and 

charges calculation. However, our 

ability to apply that charge to the 

current year will depend upon when we 

are able to obtain the enrollment data 

for the plan in question. As discussed 

above, HHS will assess the risk 

adjustment default charge once HHS 

receives actual enrollment data. Once 

calculated, we would transfer the risk 

adjustment default charge on a per 

member per month basis to all 

compliant risk adjustment covered 

plans in the plan’s risk pool in the 

market in the State in the earliest 

possible payment and charges cycle. We 

further note that we would not include 

the non-compliant risk adjustment 

covered plan in the risk adjustment 

transfer formula calculations because of 

the complexity of doing so. We intend 

to establish a methodology for allocating 

the default risk adjustment charge 

among plans in the risk pool in future 

rulemaking. 

Comment: A number of commenters 

made suggestions on the specific 

methodology to be used to determine 

the per member per month amount for 

calculating the default risk adjustment 

charge. One commenter supported the 

second option for calculating the per 

member per month amount—assessing a 

per member per month amount two 

standard deviations above the mean per 

member per month charge. One 

commenter supported the use of the 

second option for calculating the per 

member per month amount for the first 

occurrence of non-compliance, but 

stated that setting a higher amount, such 

as the highest per member per month 

charge among risk adjustment covered 

plans in the market, would be 

appropriate for repeated violations. 

Other commenters asked that HHS 

adopt a third methodology for 

calculating the per member per month 

amount—specifically, a fixed percentage 

of State-wide average premium. They 

stated that this methodology could be 

more appropriate if a market has a 

limited number of issuers that submit 

risk adjustment data. 

Response: In light of the comments 

received, we will not finalize a 

methodology to calculate the per 

member per month amount used in the 

default risk adjustment charge. We 

intend to establish that methodology in 

future rulemaking. 

Summary of Regulatory Changes 

We are finalizing our regulation text 

providing the authority to impose a 

default risk adjustment charge as 

proposed. We are finalizing aspects of 

the methodology for calculating the 

default risk adjustment charge—our use 

of the plan’s actual enrollment and our 

application of the default risk charge to 

adjust payments to other plans in the 

market in the State on a per member per 

month basis in the earliest available 

payment and charges cycle. We are not 

finalizing our approach to determining 

the per member per month amount used 

to calculate the default risk charge at 

this time, and will propose that 

methodology in future rulemaking. 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65063 

D. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart D—Exchange Functions in 

the Individual Market: Eligibility 

Determinations for Exchange 

Participation and Insurance 

Affordability Programs 

a. Administration of Advance Payments 

of the Premium Tax Credit and CostSharing Reductions (§ 155.340) 

We proposed to amend § 155.340 by 

adding paragraph (h), which sets forth 

additional requirements applicable 

when an Exchange is facilitating the 

collection and payment of premiums to 

QHP issuers and stand-alone dental 

plans. Specifically, we proposed that if 

the Exchange did not reduce an 

enrollee’s premium by the amount of 

the advance payment of the premium 

tax credit in accordance with 45 CFR 

155.340(g), the Exchange would be 

required to refund to the enrollee any 

excess premium paid by or for the 

enrollee. The Exchange would also be 

required to notify the enrollee of the 

improper application of the advance 

payment of the premium tax credit no 

later than 30 calendar days after the 

Exchange discovers the error. We noted 

that an Exchange may provide the 

refund to the enrollee by reducing the 

enrollee’s portion of the premium in the 

following month, as long as the 

reduction is provided no later than 30 

calendar days after the Exchange 

discovers the improper application of 

the advance payment of the premium 

tax credit. We proposed that if the 

Exchange elects to provide the refund 

by reducing the enrollee’s portion of the 

premium for following month, and the 

refund exceeds the enrollee’s portion of 

the premium for the following month, 

then the Exchange would need to refund 

to the enrollee the excess, no later than 

30 calendar days after the Exchange 

discovers the improper application of 

the advance payment of the premium 

tax credit. These provisions are similar 

to the policy we proposed in § 156.460, 

when a QHP issuer is collecting 

premiums directly from enrollees. We 

also noted that we were considering 

requiring the Exchange to provide to 

HHS for each quarter, a report detailing 

the occurrence of any improper 

application of the advance payments of 

the premium tax credit beginning in the 

2015 benefit year. We sought comment 

on whether HHS should establish a 

minimum error rate or threshold before 

an Exchange is required to inform HHS 

of such improper applications of the 

advance payment of the premium tax 

credit in a quarterly report, as well as 

what an appropriate error rate or 

threshold should be. For example, we 

noted that we were considering 

requiring issuers to report the number of 

enrollees for whom the Exchange 

improperly applied the advance 

payment of the premium tax credit 

compared to the total number of 

enrollees in the Exchange receiving 

Federal premium subsidies. We also 

sought comment on whether such 

reports should be provided to HHS less 

frequently than quarterly. 

Comment: Several commenters 

supported the proposed policy and 

some commenters suggested that the 

enrollee should have the option of 

receiving the refund directly, especially 

upon termination of coverage. One 

commenter expressed concern that 

Exchanges would not have money to 

refund enrollees, since premiums and 

subsidies are paid to issuers, and asked 

HHS to clarify that plans are not 

responsible for sending the Exchange or 

consumers money to correct mistakes 

made by the Exchange. 

Response: In § 156.460 of the 

proposed rule we sought comment on 

the timeframe for QHP issuers to refund 

any excess premiums to enrollees. We 

also noted that the policy proposed in 

§ 155.340(h) is similar to the policy 

proposed in § 156.460(c), when a QHP 

issuer is collecting premiums directly 

from enrollees and fails to apply the 

advance payment of the premium tax 

credit to the enrollee’s portion of the 

premiums, and that these parallel 

requirements are designed to ensure that 

all enrollees, regardless of whether a 

QHP issuer or the Exchange is collecting 

premiums, are afforded the same level 

of protection. As discussed further in 

section II.E.4.d, we received a number of 

comments to the policy proposed in 

§ 156.460(c) requesting that the 

timeframe for QHP issuers to refund any 

excess premiums to enrollees be 

extended. In response to comments to 

the policies proposed in this section and 

§ 156.460(c), and in order to align with 

parallel modifications in this final rule 

in § 156.460(c), we are modifying the 

proposed policy. We are finalizing a 

policy such that if an Exchange 

discovers that it did not reduce an 

enrollee’s premium by the amount of 

the advance payment of the premium 

tax credit, then, if requested by or for 

the enrollee, the Exchange must refund 

any excess premium paid by or for the 

enrollee within 45 calendar days of the 

request. However, if the enrollee does 

not request a refund, the Exchange may 

refund the excess premium paid by 

applying the excess to the enrollee’s 

portion of the premium each month for 

the remainder of the period of 

enrollment or benefit year until the 

excess premium is fully refunded. Any 

excess amounts not refunded at the end 

of the period of enrollment or benefit 

year would have to be refunded within 

45 days of the end of such period. 

As a discussed above, this provision 

applies when an Exchange facilitates 

collection and payment of the premiums 

to QHP issuers and stand-alone dental 

plans on behalf of an enrollee and 

collects a greater premium from the 

enrollee than required by the issuer, 

taking into account the advance 

payment of the premium tax credit. As 

an intermediary in this process, if the 

Exchange collects excess premiums 

from the enrollee on behalf of the issuer, 

it should be responsible for recouping 

the overpayments from the issuer and 

returning the funds to the enrollee. This 

standard would not prevent an 

Exchange for recouping excess funds, in 

the event the Exchange reduced the 

enrollee’s portion of the premium by 

more than the advance payment of the 

premium tax credit. We also note that 

State Exchanges may not use funding for 

States establishing an Exchange 

provided under Section 1311 of the 

Affordable Care Act for such refunds. 

Comment: One commenter asked HHS 

to limit Exchange errors that must be 

refunded to the current tax year, since 

income tax reconciliation should 

resolve any errors from the previous tax 

year. Another commenter asked that the 

enrollee be able to reduce the advance 

payment of the premium tax credit 

portion of premium for the remainder of 

the year, if the refund would result in 

the enrollee owing $600 more than 

would otherwise be available to the 

enrollee in premium tax credits. 

Response: This provision is intended 

to remedy instances when an Exchange 

overbills an enrollee for his or her 

portion of the monthly premium based 

on the eligibility determination that was 

made by the Exchange. This standard 

does not address the reconciliation of 

the tax credit, eligibility 

redeterminations, or Exchange errors 

regarding eligibility and enrollment. 

Comment: Several commenters 

supported a requirement for quarterly 

reporting. One commenter suggested 

that such reports should be publicly 

available and required for all Exchanges, 

including an FFE, and that Exchanges 

should have the ability to refute and 

correct these reports. Another 

commenter asked HHS to set a 

minimum threshold for reporting errors, 

while another commenter opposed a 

minimum threshold. 

Response: We believe that it is 

important to monitor the appropriate 

application of these advance payments 


emcdonald on DSK67QTVN1PROD with RULES2
65064 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

of the premium tax credits, regardless of 

whether an Exchange or the QHP issuer 

is facilitating the collection and 

payment of premiums. However, 

following review of the comments, we 

are no longer considering a quarterly 

reporting requirement. In parallel with 

the standards being finalized under 

§ 156.480 of this final rule applicable to 

QHP issuers, when a State Exchange is 

facilitating the collection of premiums, 

the Exchange will be required to report 

on an annual basis if it did not reduce 

an enrollee’s premium by the amount of 

the advance payment of the premium 

tax credit in accordance with 45 CFR 

155.340(g)(1)–(2). We have modified 

§ 155.1200 to incorporate this provision 

because § 155.1200 includes other 

annual reporting requirements 

applicable to State Exchanges (see 

section II.D.1.a below). We note that 

since issuers in an FFE are responsible 

for collecting premiums directly from 

enrollees, such errors will be reported to 

HHS by the QHP issuers. 

Summary of Regulatory Changes 

We are finalizing the proposed 

provisions with the following 

modifications. We are increasing the 

time period for notifying the enrollee of 

the improper application of the advance 

payment of the premium tax credit and 

issuing refunds from 30 days to 45 days. 

We are also providing that the Exchange 

may issue the refund by applying the 

total excess premium paid by or for the 

enrollee to the enrollee’s portion of the 

premium each month for the remainder 

of the period of enrollment or benefit 

year until the excess premium is fully 

refunded, except that the Exchange 

must refund any remaining excess 

premium, within 45 days of a request by 

or for the enrollee for the refund or 

within 45 days of the end of the period 

of enrollment or benefit year. 

2. Subpart E—Exchange Functions in 

the Individual Market: Enrollment in 

Qualified Health Plans 

a. Special Enrollment Periods 

(§ 155.420) 

In § 155.420 we proposed to amend 

§ 155.420(d) to provide that a special 

enrollment period will be available 

when the Exchange determines that a 

consumer has been incorrectly or 

inappropriately enrolled in coverage 

due to misconduct on the part of a nonExchange entity. Specifically we 

proposed to add a new paragraph 

§ 155.420(d)(10) to create this new 

special enrollment period for qualified 

individuals. This amendment would 

extend a special enrollment period to a 

qualified individual when, in the 

determination of the Exchange, 

misconduct on the part of a nonExchange entity has caused the 

qualified individual to be enrolled 

incorrectly or inappropriately in 

coverage such that they are not enrolled 

in QHP coverage as desired, are not 

enrolled in their selected QHP, or have 

been determined eligible for but are not 

receiving advance payments of the 

premium tax credit or cost-sharing 

reductions. We proposed to limit this 

special enrollment opportunity to the 

individual market Exchange and not 

extend it to the SHOPs. 

We proposed that a non-Exchange 

entity providing enrollment assistance 

or conducting enrollment activities 

would include, but not be limited to, 

those individuals and entities that are 

authorized by the Exchange to assist 

with enrollment in QHP, such as a 

Navigator, as described in § 155.210; 

non-Navigator assistance personnel, as 

authorized by § 155.205(d) and (e); a 

certified application counselor, as 

described in § 155.225; an agent or 

broker assisting consumers in an 

Exchange under § 155.220; issuer 

application assisters under § 155.415; or 

a QHP conducting direct enrollment 

under § 156.1230. 

Comment: We received several 

comments supporting this proposed 

amendment to § 155.420(d) to ensure 

that consumers have an available 

remedy if misconduct on the part of a 

non-Exchange entity results in harm. 

Response: We are finalizing the rule 

as proposed to ensure that consumers 

will have a special enrollment period if 

harmed by misconduct on the part of 

non-Exchange entities. We further 

clarify here that for purposes of 

§ 155.420(d)(10) only, a non-Exchange 

entity includes an individual or entity 

fraudulently claiming to be an 

authorized entity approved by an 

Exchange, such as a Navigator, nonNavigator assister, or Exchangeapproved agent or broker. 

Comment: We received a comment 

recommending that the special 

enrollment period be available to 

consumers if a non-Exchange entity 

provides erroneous information to a 

consumer, regardless of whether the 

consumer can demonstrate harm. 

Response: We believe that creating a 

special enrollment period for consumers 

who have been harmed by nonExchange entity misconduct will help 

ensure that consumers have a remedy to 

address enrollment harms while 

limiting uncertainty for QHP issuers. 

We believe that this remedy is necessary 

for consumers who have been harmed, 

to allow them to mitigate the harm 

caused. However, we do not believe this 

remedy would be necessary for 

consumers who have not suffered any 

harm resulting from misconduct. In 

addition, as stated in the preamble to 

the proposed rule, a qualified individual 

may also seek to demonstrate the 

existence of exceptional circumstances 

to the Exchange under § 155.420(d)(9) if 

the qualified individual is harmed due 

to error or inaction on the part of a nonExchange entity. We intend to provide 

future guidance on the process for 

demonstrating harm as necessary. 

Comment: We received several 

comments recommending that this 

special enrollment period be extended 

to the SHOPs, stating that SHOP 

consumers may be exposed to the same 

risk as consumers purchasing coverage 

in an Exchange. 

Response: We believe that it is less 

likely for an employee enrolled in 

coverage through a SHOP to be harmed 

in the ways the new special enrollment 

period is intended to address than is the 

case for a qualified individual enrolled 

in coverage through the individual 

market Exchange. For example, advance 

payments of the premium tax credit and 

cost-sharing reductions are not available 

to employees enrolled in coverage 

through a SHOP, such that it would not 

be possible for them to be determined 

eligible for but not receive advance 

payments of the premium tax credit or 

cost-sharing reductions, one of the 

harms the special enrollment period 

was specifically designed to address. 

However, we are persuaded by the 

comments that some risk of harm does 

exist for employees enrolled in coverage 

through a SHOP, and are therefore 

extending the special enrollment period 

to SHOPs. We intend to monitor 

whether employees avail themselves of 

the special enrollment period and the 

circumstances surrounding each such 

election. We are making minor changes 

to the proposed rule text to clarify that 

the special enrollment period would be 

extended to employees enrolled in 

coverage through a SHOP and their 

dependents, and are also making a 

conforming change to 45 CFR 155.725(j) 

to clarify that this special enrollment 

period applies in the SHOPs. 

Comment: We received several 

comments recommending that 

misconduct on the part of a nonExchange entity should also result in a 

special enrollment period for 

enrollment into public programs the 

consumer may otherwise be eligible for, 

such as Medicaid or CHIP. 

Response: Medicaid and CHIP have 

year round enrollment, so individuals 

eligible for these programs do not need 

a special enrollment period to enroll in 

these programs if they have been 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65065 

incorrectly enrolled in private health 

insurance coverage. 

Comment: We received one comment 

requesting clarification about what 

actions might be considered 

misconduct. 

Response: As stated in the preamble 

of the proposed rule, misconduct 

includes the failure of a non-Exchange 

entity to comply with applicable 

requirements set forth in Exchange 

regulations, or other applicable Federal 

or State laws. For example, this might 

include a Navigator’s failure to comply 

with the requirements set forth in 45 

CFR 155.210. 

Comment: We received comments 

stating that the special enrollment 

period, as proposed, might result in 

adverse selection or gaming by 

consumers. One commenter requested 

that this provision not be codified to 

eliminate the risk of adverse selection 

and another commenter requested that 

the duration of this special enrollment 

period be limited to 30-days, rather than 

the 60-days from the date of the 

triggering event, as proposed. 

Response: We believe that any risk 

that this special enrollment period 

might result in adverse selection is 

mitigated by the fact that consumers 

will need to demonstrate to the 

Exchange that they have been harmed in 

order to receive this special enrollment 

period. We believe that this special 

enrollment period is important to 

protect consumers from certain kinds of 

misconduct on the part of non-Exchange 

entities. In addition, the 60-day time 

period for the new special enrollment 

period in the individual market 

Exchanges is consistent with special 

enrollment periods otherwise available 

to Exchange consumers in the 

individual market and we believe 

provides consumers with adequate time 

to review available plan options and 

make informed decisions to correct the 

harm. Consistent with other special 

enrollment periods available in the 

SHOPs, this special enrollment period 

will be for 30 days, not 60 days, in the 

SHOPs. 

Summary of Regulatory Changes 

We are finalizing the provision 

proposed in § 155.420(d)(10) with 

amendments reflecting our decision to 

extend the special enrollment period to 

SHOPs, and with a minor correction to 

remove ‘‘of this subchapter’’ following 

‘‘part 156’’ from the proposed regulation 

text. 

3. Subpart H—Exchange Functions: 

Small Business Health Options Program 

(SHOP) 

a. Enrollment Periods Under SHOP 

(§ 155.725) 

In section II.D.2 of this final rule, we 

describe our decision, made in response 

to comment, to extend to SHOPs the 

new special enrollment period that will 

be available when the Exchange 

determines that a consumer has been 

incorrectly or inappropriately enrolled 

in coverage due to misconduct on the 

part of a non-Exchange entity. 

Accordingly, we are making a 

conforming amendment to 

§ 155.725(j)(2)(i) to add a cross-reference 

to § 155.420(d)(10), the new special 

enrollment period. 

4. Subpart M—Oversight and Program 

Integrity Standards for State Exchanges 

a. General Program Integrity and 

Oversight Requirements (§ 155.1200) 

We proposed that the State Exchange 

maintain an accounting of all its 

receipts and expenditures, in 

accordance with GAAP. We also 

proposed that the State Exchange 

develop and implement a process for 

monitoring all Exchange-related 

activities for effectiveness, efficiency, 

integrity, transparency, and 

accountability. We stated our belief that 

these activities would help to ensure 

State Exchange compliance with Federal 

requirements as set forth in Part 155 and 

ensure the appropriate administration of 

Federal funds, including advance 

payment of the premium tax credit and 

cost-sharing reductions. 

In § 155.1200(b), we proposed that the 

State Exchange submit several types of 

reports to HHS. The State Exchange 

would submit at least annually a report 

to allow for transparency of State 

Exchange activities. The report must 

include a financial statement presented 

in accordance with GAAP. The report is 

due to HHS by April 1 of each year. 

Additionally, the State Exchange must 

submit reports in a form and manner to 

be specified by HHS regarding eligibility 

and enrollment. These reports will focus 

on eligibility determination errors, nondiscrimination safeguards, accessibility 

of information, and fraud and abuse 

incidences. The State Exchange must 

also submit performance monitoring 

data that includes financial 

sustainability, operational efficiency, 

and consumer satisfaction. We sought 

comments on our approach, including 

comments on the content, format, and 

timing of such reports. 

In § 155.1200(c) we proposed that the 

State Exchange engage an independent 

qualified auditing entity, whether 

governmental or private, which meets 

accepted professional and business 

standards and follows generally 

accepted governmental auditing 

standards (GAGAS) to perform an 

independent external financial and 

programmatic audit of the State 

Exchange. This entity should be 

selected to avoid any real or potential 

perception of conflict of interest, 

including being free from personal, 

external and organizational impairments 

to independence or the appearance of 

such impairments of independence. We 

stated that an external audit will help 

ensure the consistency and accuracy of 

State Exchange financial reporting and 

program activities. We proposed that 

this requirement may be satisfied 

through an audit by an independent 

State-government entity. We proposed 

that the State Exchange will submit to 

HHS, concurrent with the annual report, 

the results on the audit along with 

proposals on how it will remedy any 

material weakness or significant 

deficiency (the terms ‘‘material 

weakness’’ and ‘‘significant deficiency’’ 

are defined in OMB Circular A–133, 

Audits of States, Local Governments 

and Non-Profit Organizations). 

In § 155.1200(d) we proposed that 

independent audits address specific 

processes and activities of State 

Exchanges including financial and 

programmatic activities and those 

related to the verification and 

determination of applicants’ eligibility 

for enrollment in the State Exchanges 

and the subsequent enrollments. We 

also proposed that the external audit 

address whether the Exchange is 

complying with § 155.1200(a)(1) by 

keeping an accurate accounting of 

Exchange receipts and expenditures in 

accordance with generally accepted 

accounting principles (GAAP). We also 

proposed that external audits and 

annual reports required under 

paragraphs (b) and (c) address State 

Exchange processes and procedures to 

comply with the standards for 

Exchanges under Part 155 related to 

advance payments of the premium tax 

credits and cost-sharing reductions. 

These standards include the 

requirements under subpart D regarding 

eligibility determinations, including the 

requirements regarding the 

confidentiality, disclosure, 

maintenance, and use of information as 

set forth in 45 CFR 155.302(d)(3); 

subpart E regarding individual market 

enrollment in QHPs; and subpart K 

regarding QHP certification. We also 

proposed that such audits and annual 

reports assess whether a State Exchange 

has processes and procedures in place 


emcdonald on DSK67QTVN1PROD with RULES2
65066 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

to prevent improper eligibility 

determinations and enrollment 

transactions. We sought comment on the 

proposed annual audits, and other 

activities that State Exchanges should 

specifically be required to audit 

annually or on an interim basis. 

Comment: We received comments on 

the timing of the annual financial 

statement. We also received comments 

requesting additional reporting 

requirements including reporting for 

fraud and abuse incidences and 

suggesting that we specify in regulation 

text the types of reporting requirements 

we described in the preamble. 

Additionally, commenters suggested 

that we make reports publicly available. 

Response: We do not believe any 

additional reporting requirements are 

needed because the financial statement 

is intended to ensure the transparency 

of State Exchange activity and the 

eligibility and enrollment reporting is 

intended to ensure that processes and 

procedures are appropriately in place to 

ensure that Federal requirements are 

being met. 

The performance monitoring data 

provide insight into the performance 

and impact of State Exchanges, 

including the cost of insurance, the 

scope of coverage, and access issues. 

This limited set of standardized metrics 

also ensures basic transparency and 

allows consistent cross-state 

comparisons of the impacts of varying 

approaches to State Exchange 

implementation. We anticipate 

providing further guidance on the 

format and timing of the reports, as well 

as, whether the public will have access 

to them. 

Comment: One commenter suggested 

that we make these independent annual 

audits available to the public and 

increase the scope of the independent 

audit. 

Response: We accept the commenter’s 

suggestion regarding public availability 

and we will require the State to make 

public a summary of the results of the 

independent annual audit. Publicizing 

the audit summary will increase the 

transparency and accountability of State 

Exchange activities. We are finalizing 

our proposal that the independent audit 

address the elements in § 155.1200(d) as 

described above, as well as all subparts 

of Part 155. While we are not accepting 

the commenter’s suggestion that 

independent audits include incomplete 

applications or application questions 

most commonly left unanswered, we 

believe that the criteria in Part 155 and 

in § 155.1200(d) adequately address 

areas of compliance including eligibility 

denials and information to improve the 

eligibility process. We anticipate issuing 

further guidance on the elements of 

financial and programmatic activities 

that should be included in the external 

financial audit. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.1200 with the 

following modification. As discussed in 

II.D.1.a of this final rule, if the Exchange 

is collecting premiums under 45 CFR 

155.240, we are adding subparagraph 

(b)(4) to require the Exchange to 

annually report if it did not reduce an 

enrollee’s premium by the amount of 

the advance payment of the premium 

tax credit in accordance with 45 CFR 

155.340(g)(1)–(2). In paragraph (c) we 

are adding a requirement that the State 

make public a summary of the results of 

external financial audit. 

b. Maintenance of Records (§ 155.1210) 

We proposed that State Exchanges 

and its contractors, subcontractors, and 

agents maintain records for 10 years, 

including documents and records 

(whether paper, electronic, or other 

media) and other evidence of 

accounting procedures and practices of 

the State Exchanges to prepare for 

targeted audits. We stated that these 

records must be sufficient and 

appropriate to respond to any periodic 

auditing, inspection, or investigation of 

the State Exchange’s financial records or 

to enable HHS or its designee to 

appropriately evaluate the State 

Exchange’s compliance with Federal 

requirements. We anticipate that 

targeted audits will be conducted based 

on information from the external audit, 

annual report, prospective measurement 

programs of improper payments, 

consumer complaints, or other data 

sources. In addition, we proposed that 

the State Exchange must make all 

records of this section available to HHS, 

the OIG, the Comptroller General, or 

their designees, upon request. 

Comment: Commenters suggested that 

the proposed maintenance of records 

requirements for State Exchanges and 

their contractors, subcontractors, and 

agents should specifically outline 

additional records to be kept, which 

could include data related not only to 

appeals but to the outcome of the 

appeals. In addition, commenters 

suggested that the requirement apply 

only to those eligible entities contracted 

with the State Exchanges to carry out 

one or more responsibilities of the 

Exchange (see 45 CFR 155.110), and 

should not apply to QHP issuers. 

Response: The maintenance of records 

provision we are finalizing in 

§ 155.1210 (b) sufficiently addresses the 

minimum types of records that we 

would require State Exchanges to retain. 

The maintenance of records provision in 

§ 155.1210 only applies to entities that 

are carrying out one or more 

responsibilities of the Exchange in the 

capacity of a contractor, subcontractor, 

or agent, and does not apply to QHP 

issuers because these entities do not 

provide services or carry out one or 

more responsibilities of the Exchange. 

Furthermore, the oversight standards 

with respect to cost-sharing reductions 

and advance payments of the premium 

tax credit finalized in 45 CFR 156.480 

of this final rule ensure that CMS can 

sufficiently monitor compliance with 

federal standards with respect to the 

federal funds distributed to QHP issuers 

through these programs. Therefore, 

requiring QHP issuers to maintain 

records is not necessary. 

Comment: One commenter suggested 

that HHS articulate how consumers, 

advocates, Navigators, and other entities 

will be able to file complaints with HHS 

in a meaningful way such as triggering 

a targeted audit. 

Response: We expect that the 

consumer satisfaction section of the 

performance monitoring data will 

include reporting on consumer 

complaints that will be used in 

determining whether we will conduct a 

targeted audit. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.1210, and note that 

the 10 year record retention requirement 

begins when the record is created. 

E. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related To 

Exchanges 

1. Subpart A—General Provisions 

a. Definitions (§ 156.20) 

We proposed amending 45 CFR 

156.20 by adding the definition for 

‘‘Enrollee satisfaction survey vendor’’ 

and ‘‘Registered user of the enrollee 

satisfaction survey data warehouse.’’ 

We are making a technical correction 

to our regulation text, which 

inadvertently left out the word ‘‘that’’ 

from the definition. The definition for 

‘‘enrollee satisfaction survey vendor’’ 

should begin, ‘‘an organization that has 

. . .’’ 

We received no comments in regards 

to these definitions, and finalize these 

definitions as proposed, but with the 

technical corrections as mentioned 

above. 

Summary of Regulatory Changes 

We are finalizing this provision as 

proposed. 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65067 

b. Single Risk Pool (§ 156.80) 

To ensure consistency with rate 

setting schedules in the Exchanges and 

thus reduce the risk of adverse 

selection, we proposed in § 156.80 to 

add paragraph (d)(3) to clarify when 

issuers may establish and update 

premium rates under the single risk 

pool requirements. Specifically, in 

paragraph (d)(3)(i), we proposed that 

issuers in the individual market or in a 

market in which the individual and 

small group risk pools were merged by 

the State would be permitted to make 

changes to their market-wide adjusted 

index rate and plan-specific pricing on 

an annual basis. In paragraph (d)(3)(ii), 

we proposed that issuers in the small 

group market would be permitted to 

make such changes on a quarterly basis 

once the Federally-Facilitated Small 

Business Health Options Program’s (FF– 

SHOP) capability to process quarterly 

rate updates is established. Until that 

time, we proposed that issuers in the 

small group market may make changes 

to rates no more frequently than 

annually. 

Comment: Commenters generally 

acknowledged the reasons for the 

proposal to prohibit quarterly index rate 

and plan-level adjustments for issuers in 

FF–SHOPs until the issues are resolved, 

but asserted this policy should not 

apply in States with SHOPs that have 

the capability to accept quarterly rate 

adjustments, nor should they apply to 

issuers offering coverage in the small 

group market solely outside of the 

SHOPs. 

Response: HHS, in operating both the 

FF–SHOPs as well as the market-wide 

rate review program under section 2794 

of the PHS Act, cannot accept quarterly 

rate changes at this time. Accordingly, 

we are finalizing our proposal that 

issuers offering coverage in the small 

group market through the SHOPs or 

outside of the SHOPs must refrain from 

making index rate and plan-level 

adjustments more frequently than 

annually, until notified of the system 

capability to process quarterly rate 

changes. We expect to establish this 

capability by the third quarter of 2014. 

Comment: One commenter requested 

clarification as to whether States could 

require less frequent index rate and 

plan-level adjustments in the small 

group market than those specified in the 

regulation. 

Response: Nothing in this final rule 

prevents a State from requiring less 

frequent rate changes in the small group 

market than the quarterly changes 

permitted under this final rule. At a 

minimum, however, an issuer in small 

group or individual market must 

establish an index rate each calendar 

year with an effective date of January 1, 

and, in the small group market, ensure 

that any rate changes at other times 

during the year are effective only on 

April 1, July 1, or October 1, the only 

dates for which Federal systems will be 

in place for processing rate updates. We 

believe § 156.80(d)(1) already provides 

for the establishment of an index rate by 

January 1 of each calendar year, and that 

the proposed rule contemplates small 

group market rate changes that 

correspond to the calendar quarters. 

Nonetheless, for precision and clarity, 

we are revising the regulation text to 

include these clarifications. We note 

that any new rates set by an issuer 

would apply for new or renewing 

coverage on or after the rate effective 

date, and would apply for the entire the 

plan year. 

Comment: Some commenters sought 

assurance that the single risk pool 

requirements would not prevent issuers 

from filing new products for sale 

outside of Exchanges nor prevent 

issuers from entering a market until 

January 1 of each year. 

Response: As described above, under 

the guaranteed availability standard, all 

non-grandfathered plans in the 

individual or merged market must be 

offered on a calendar year basis starting 

January 1, 2014. Furthermore, under the 

single risk pool standard, an index rate 

must be established and adjusted only 

once annually in the individual and 

merged markets. The interaction of 

these provisions is such that an issuer 

cannot introduce new products 

throughout the year without affecting 

the pricing of all of the issuer’s other 

products in the risk pool, in violation of 

the single risk pool provision. We note 

that issuers will have greater flexibility 

to introduce new products in the small 

group market, where coverage may be 

issued on a rolling basis throughout the 

year and rates generally will be able to 

be updated on a quarterly basis. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 156.80 of the proposed 

rule with the following modifications. 

We are revising existing paragraph (d)(1) 

to provide that an index rate must be 

established and effective for a State 

market (individual, small group, or 

merged market) by January 1 of each 

calendar year. We are also restructuring 

proposed paragraph (d)(3) to clearly 

state that an issuer is prohibited for 

making index rate and plan-level 

adjustments on any basis other than 

annually, except in the small group 

market once quarterly rate changes are 

permitted. We also now clearly state the 

effective dates of quarterly rate updates 

in the small group market. 

2. Subpart B—Standards for Essential 

Health Benefits, Actuarial Value, and 

Cost Sharing 

a. Enrollment in Catastrophic Plans 

(§ 156.155) 

We are making a technical correction 

to our regulation text in § 156.155, 

which inadvertently omitted the 

statutory language in section 1302(e) of 

the Affordable Care Act indicating that 

a catastrophic plan provides ‘‘no 

benefits’’ for any plan year (except for 

providing coverage for at least 3 primary 

care visits and preventive health 

services in accordance with section 

2713 of the PHS Act) until the 

individual has incurred cost-sharing 

expenses in an amount equal to the 

annual limitation on cost sharing in 

effect under section 1302(c)(1) of the 

Affordable Care Act. Although this 

provision was not addressed in the 

proposed rule, it is part of the law 

governing benefits under catastrophic 

plans, and we believe it is appropriate 

to revise the regulation text in this final 

rule to reflect this fact. 

3. Subpart D—Qualified Health Plan 

Minimum Certification Standards 

a. Changes of Ownership of Issuers of 

Qualified Health Plans in FederallyFacilitated Exchanges (§ 156.330) 

In § 156.330, we proposed that when 

a QHP issuer in the FFE undergoes a 

change in ownership, it notify HHS of 

the change at least 30 days prior to the 

date of the change and provide the legal 

name and taxpayer identification 

number (TIN) of the new owner, as well 

as the effective date of the change. We 

also proposed that the new owner must 

agree to adhere to applicable statutes 

and regulations. 

Comment: One commenter expressed 

support for the proposed standard and 

urged HHS to examine any relevant 

compliance and other issues impacted 

by the change of ownership at the time 

notified, such as accreditation status. 

Response: HHS intends to examine 

possible compliance issues related to 

the change of ownership, including 

impact on accreditation status, as part of 

its overall oversight framework. 

Comment: One commenter urged 

flexibility in assessing what constitutes 

a change in ownership and expressed 

concern that the standard in § 156.330 

could be triggered when transferring 

blocks of business from one affiliated 

entity to another. 

Response: HHS believes that the 

notice requirement is minimally 

burdensome. Further, we believe that it 


emcdonald on DSK67QTVN1PROD with RULES2
65068 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

will be apparent to issuers when the 

standard is triggered—if recognized by 

the applicable State, then an issuer 

would need to comply with § 156.330. 

Comment: One commenter asked HHS 

to exempt changes of ownership within 

the same holding company from the 

notice provision and requested 

additional flexibility in implementing 

this provision for the 2014 plan year. 

Response: We believe that the 

standard, which would only require 

notification if the change of ownership 

is recognized at the State level, is clear. 

If a change of ownership within the 

same holding company is required by a 

State at the State level, then the issuer 

would need to report it pursuant to 

§ 156.330. We believe that the notice 

standard is the most minimally 

burdensome way for HHS to be aware of 

these important changes, particularly as 

compared to standards that may be 

required under State law. Therefore, we 

do not believe that a transition period is 

necessary. 

Summary of Regulatory Changes 

We are finalizing this section as 

proposed. 

4. Subpart E—Health Insurance Issuer 

Responsibilities With Respect to 

Advance Payments of the Premium Tax 

Credit and Cost-Sharing Reductions 

a. Definitions (§ 156.400) 

Section 156.400 of this subpart 

includes definitions of a ‘‘most 

generous,’’ and a ‘‘more generous,’’ plan 

variation. We proposed to supplement 

those definitions by clarifying that the 

definitions of a ‘‘least generous,’’ and a 

‘‘less generous,’’ plan variation have the 

opposite meanings of the existing 

definitions of a ‘‘most generous,’’ or a 

‘‘more generous’’ plan variation. 

Specifically, we proposed that, as 

between two plan variations (or a plan 

variation and a standard plan without 

cost-sharing reductions), the plan 

variation or standard plan without costsharing reductions designed for the 

category of individuals first listed in 45 

CFR 155.305(g)(3) would be deemed the 

less generous one. The term less 

generous was used in the proposed rule 

to address circumstances in which a 

QHP issuer would reassign an enrollee 

from a more generous plan variation to 

a less generous plan variation (or 

standard plan without cost-sharing 

reductions), as discussed in greater 

detail below. We also proposed a 

technical modification to change ‘‘QHP 

or plan variation’’ to ‘‘standard plan or 

plan variation’’ to clarify that a plan 

variation is not distinct from a QHP. We 

received no comments on these 

proposed provisions and are finalizing 

these provisions as proposed. 

b. Improper Plan Assignment and 

Application of Cost-Sharing Reductions 

(§ 156.410(c) Through (d)) 

In § 156.410, we proposed to add new 

paragraphs (c) and (d) to specify the 

actions a QHP issuer would take if it 

does not provide the appropriate costsharing reductions to an individual, or 

if it does not assign an individual to the 

appropriate plan variation (or standard 

plan without cost-sharing reductions) in 

accordance with § 156.410(a) through 

(b) or § 156.425(a) through (b) of this 

subpart. 

Specifically, in paragraph (c)(1), we 

proposed that if a QHP issuer fails to 

ensure that an individual assigned to a 

QHP plan variation receives the costsharing reductions required under the 

applicable plan variation (taking into 

account the requirement regarding cost 

sharing previously paid under other 

plan variations of the same QHP under 

§ 156.425(b) if applicable), the QHP 

would notify the enrollee of the 

improper application of the cost-sharing 

reductions and refund any excess cost 

sharing paid by or for the enrollee 

during such period no later than 30 

calendar days after discovery of the 

improper application of the cost-sharing 

reductions. This refund would be paid 

to the person or entity that paid the 

excess cost sharing, whether the 

enrollee or the provider. 

In paragraph (c)(2), we proposed that 

if a QHP issuer provides an enrollee 

assigned to a plan variation with greater 

cost-sharing reductions than required 

under the applicable plan variation 

(taking into account § 156.425(b) 

concerning continuity of deductibles 

and out-of-pocket amounts if applicable) 

then the QHP issuer will not be eligible 

for reimbursement of any excess costsharing reductions provided to the 

enrollee, and may not seek 

reimbursement from the enrollee or the 

provider for any of the excess costsharing reductions. Because the QHP 

issuer is responsible for ensuring the 

cost-sharing reduction is provided 

appropriately, we noted that we do not 

believe that the QHP issuer should be 

able to recoup overpayments of costsharing reductions that resulted from 

the QHP issuer’s own errors. 

In paragraph (d), we proposed that if 

a QHP issuer improperly assigns an 

enrollee to a plan variation (or standard 

plan without cost-sharing reductions), 

or does not change the enrollee’s 

assignment due to a change in eligibility 

in accordance with § 156.425(a), in each 

case, based on the eligibility and 

enrollment information or notification 

provided by the Exchange, then the 

QHP issuer would, no later than 30 

calendar days after discovery of the 

improper assignment, reassign the 

enrollee to the applicable plan variation 

(or standard plan without cost-sharing 

reductions) and notify the enrollee of 

the improper assignment. 

Conversely, paragraph (d)(2) proposed 

that, if a QHP issuer reassigns an 

enrollee from a less generous plan 

variation (or a standard plan without 

cost-sharing reductions) to a more 

generous plan variation of a QHP to 

correct an improper assignment on the 

part of the issuer, the QHP issuer would 

recalculate the individual’s liability for 

cost sharing paid between the effective 

date of eligibility required by the 

Exchange and the date on which the 

issuer effectuated the change. The QHP 

issuer would refund any excess cost 

sharing paid by or for the enrollee 

during such period, no later than 30 

calendar days after discovery of the 

incorrect assignment. This refund 

would be paid to the person or entity 

that paid the excess cost sharing, 

whether the enrollee or the provider. 

We sought comment on the proposed 

approach, including the 30-calendar-day 

timeframe for QHP issuers to reassign an 

individual to the correct plan variation 

and refund any excess cost sharing paid 

by or for the enrollee. We also sought 

comment on whether the timeframe 

should depend on the point in the 

month the issuer discovers the improper 

assignment, considering the amount of 

time issuers may require to effectuate 

the reassignment, as well as the impact 

on enrollees due to a delay in 

reassignment. We noted that the date of 

the reassignment would not affect the 

initial effective date of eligibility, and 

that the enrollee would still be refunded 

any excess cost sharing paid by or for 

the enrollee between the effective date 

of eligibility and the date of the 

reassignment. 

We also noted that we were 

considering requiring that, for each 

quarter, a QHP issuer provide to HHS 

and the Exchange a report beginning in 

the 2015 benefit year detailing the 

occurrence of any improper applications 

of cost-sharing reductions in violation of 

the standards finalized and proposed in 

§ 156.410(a) and (c) and § 156.425(b), as 

well as instances when it did not refund 

any excess cost sharing paid by or for 

an enrollee in accordance with 

proposed § 156.410(c)(1) and 

§ 156.410(d)(2), or was reimbursed for 

excess cost sharing provided in 

violation of proposed § 156.410(d)(1). 

Comment: Several commenters 

supported holding enrollees harmless 

for issuer mistakes. A number of 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65069 

commenters requested clarification that 

issuers will not be penalized for errors 

made by Exchanges or enrollee income 

misrepresentations, and asked HHS to 

institute policies or procedures that 

would make it easy for issuers to 

identify enrollment errors. One 

commenter suggested that restitution 

should only occur when the agencies 

can prove a pattern of willful 

misconduct, while another commenter 

suggested that HHS request 

compensation from an Exchange for 

errors by the Exchange. 

Response: We are clarifying that QHP 

issuers may rely on the validity of an 

eligibility determination sent to the 

QHP issuer by the Exchange, and are not 

responsible for providing refunds under 

this provision resulting from an 

Exchange or enrollee error. However, as 

noted in the proposed rule, because of 

the reliance interests of an enrollee in 

the application of cost-sharing 

reductions when purchasing particular 

services, we believe that the QHP issuer 

should not be able to recover excess 

funds resulting from issuer error with 

respect to the application of cost-sharing 

reductions. We note that this is a 

different standard from the one we are 

finalizing for misapplications of the 

advance payments of the premium tax 

credit because we believe that an 

enrollee has lesser reliance interest in 

miscalculated premiums because the 

enrollee would have been clearly 

notified of both the monthly premium 

and advance payment of the premium 

tax credit when they enroll in the plan. 

In contrast, an enrollee may not be 

aware of the cost-sharing amount for a 

specific service and might not be able to 

determine whether the cost-sharing 

reduction was correctly applied for that 

particular service at the point the cost 

sharing is collected. 

Comment: Several commenters noted 

that requiring issuers to provide refunds 

of cost-sharing reductions to enrollees is 

inconsistent with standard billing 

practices in which an issuer bills or 

credits the enrollee, noting that issuing 

refunds would require additional 

resources. Another commenter noted 

that consistent with current practices 

and procedures applicable to nonsubsidized enrollees, issuers should be 

able to reprocess claims under the 

correct plan variation and recoup any 

excess payment. 

Response: In consideration of 

standard issuer billing practices, the 

final rule provides that a QHP issuer 

may apply any excess cost sharing paid 

by or for an enrollee (except by a 

provider) to the enrollee’s portion of the 

premium for the remainder of the period 

of enrollment or benefit year until the 

excess is fully applied unless the 

enrollee requests the refund. (The issuer 

may also elect to directly refund the 

enrollee, regardless of whether the 

enrollee requests the refund.) However, 

if requested by the enrollee, the QHP 

issuer would be required to directly 

refund the enrollee any excess cost 

sharing paid by or for the enrollee 

within 45 calendar days of the request. 

The QHP issuer would refund the 

enrollee any remaining excess costsharing paid by the individual at the 

end of the period of enrollment or 

benefit year, and if the excess cost 

sharing amount was paid by the 

provider, the QHP issuer would refund 

to the provider any excess cost sharing 

paid by provider within 45 calendar 

days of discovery of the error. We 

believe that this standard will allow 

issuers to reimburse enrollees without 

incurring additional operational costs 

outside the standard billing practice, 

while still providing the option for 

direct refund to the enrollee. 

Comment: One commenter asked HHS 

to clarify that consumer protections also 

apply to enrollees who are not eligible 

for a cost-sharing reduction but who are 

mistakenly enrolled in a silver plan 

variation by the issuer. 

Response: We clarify that the 

standards in § 156.410(c) and (d) would 

apply when an enrollee should not be 

eligible for cost-sharing reductions but 

is erroneously assigned to a silver plan 

variation by the QHP issuer. 

Comment: One commenter suggested 

HHS set a threshold date such that, if a 

QHP issuer discovers an enrollee was 

assigned to an incorrect plan variation 

before the 15th of a month, the enrollee 

would be reassigned to the proper plan 

variation by the 1st day of the following 

month, and errors discovered afterwards 

would be corrected in the following 

month. Another recommended that 

consumers be provided advance notice 

of plan reassignment, and that plans 

ensure that enrollees have full access to 

services while the errors are being 

corrected. 

Response: In response to comments, 

we are modifying the proposed policy to 

align with existing Exchange regulations 

regarding the effective date of coverage 

with respect to special enrollment 

periods under 45 CFR 155.420(b)(i) and 

(ii). Section 156.410(d)(1) and (2) now 

provide that if the QHP issuer 

discovered the error between the first 

and fifteenth day of the month, the QHP 

must reassign the enrollee to the correct 

plan variation (or standard plan without 

cost-sharing reductions) by the first day 

of the following month. If the QHP 

issuer discovers the error between the 

sixteen and the last day of the month, 

the QHP issuer must reassign the 

individual to correct plan variation by 

the first day of the second following 

month. We note that as with 

reassignment, we expect issuers to 

notify enrollees prior to the effective 

date of the reassignment to prevent 

enrollee confusion. 

Comment: While some commenters 

supported the 30-day timeframe for 

refunds, a number of commenters felt 

that this timeframe is not feasible, given 

enrollment reconciliation and payment 

discrepancy processes. One commenter 

suggested that the final rule adopt a 45- 

day timeframe, in line with Medicare 

Part D. Other commenters 

recommended increasing the timeframe 

to 60 or 90 days. One commenter 

suggested that issuers in State 

Exchanges have the flexibility to work 

with the Exchange to establish 

appropriate timelines. 

Response: Because cost sharingreductions are Federal outlays, we 

believe that it is appropriate to set 

uniform timeframes for correcting errors 

related to the underpayment of costsharing reductions, regardless of 

whether the individual receives 

coverage through a QHP issuer 

participating in a State Exchange or an 

FFE. However, taking into consideration 

current industry practice and the 

monthly enrollment reconciliation 

process, as well as the refunds standards 

specified under 42 CFR 423.800(e) and 

42 CFR 423.466(a) with respect to the 

Medicare Part D low-income subsidy 

program, we are modifying the proposed 

policy and are requiring issuers to 

provide refunds to enrollees within 45 

days of the discovery of the error. We 

believe that this will permit issuers to 

rectify errors in a timely manner 

consistent with their current monthly 

operational cycles, without significantly 

delaying the reimbursement to the 

enrollee or provider as applicable. 

Comment: Some commenters 

suggested a de minimis threshold for 

required refunds, similar to the 

threshold for the medical loss ratio 

program. 

Response: Unlike the minimum 

threshold for medical loss ratio rebates 

under 45 CFR 158.243, the standards 

proposed under this section were 

intended to ensure that Federal funds 

are being used to appropriately 

subsidize enrollee cost sharing, so that 

individuals receive the full cost-sharing 

reductions for which they were 

determined eligible. Because these 

refund standards are designed protect 

low-income individuals from 

unforeseen costs, we do not believe 

there should be a de minimis threshold 

for refunds of cost-sharing reductions. 


emcdonald on DSK67QTVN1PROD with RULES2
65070 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

18We note that many of the errors that will be the 

subject of the first annual report and to our 2014 

policy of nonenforcement of CMPs for good faith, 

which we codified at 45 CFR 156.800(c). 

Comment: Several commenters 

supported a standard under which an 

issuer is not required to report on 

misapplication of cost-sharing 

reductions unless a minimum error rate 

occurs, while other commenters stated 

that all issuers should submit these 

reports without respect to such a 

threshold. Other commenters stated that 

a semi-annual or annual report should 

be required for the initial years. One 

commenter believed that such quarterly 

reports would duplicate the information 

provided via enrollment reconciliation 

and the payment discrepancy reporting 

process. The same commenter was also 

concerned about the implications of 

such self-reporting under Federal laws, 

and recommended a safe harbor from 

enforcement remedies for any good faith 

reporting. Another commenter 

suggested that HHS give State 

Exchanges flexibility to decide the 

timing of such reports. 

Response: In response to comments, 

we are not establishing a quarterly 

reporting standard with respect to the 

improper application of cost-sharing 

reductions or improper assignments to 

plan variations (or standard plans 

without cost-sharing reductions). 

However, we require this reporting as 

part of the annual reporting requirement 

set forth under § 156.480(b). We believe 

that annual reporting of these errors will 

allow HHS to track the occurrence of 

these errors and identify any problems 

that affect multiple issuers without 

duplicating any existing interim 

reporting requirements. We do not 

intend to create a safe harbor for 

misreported information, and expect 

that issuers will make a good faith effort 

to accurately report these errors.18

Comment: One commenter asked how 

claims submitted for premium 

stabilization programs would be affected 

by erroneous cost-sharing reduction 

amounts. 

Response: As noted in 45 CFR 

156.430(d), HHS will perform periodic 

reconciliations of any advance 

payments of cost-sharing reductions 

provided to the QHP issuer with the 

actual amount of cost-sharing 

reductions provided to enrollees and 

reimbursed to providers by the QHP 

issuers. This calculation is not required 

for the risk adjustment or reinsurance 

programs, and will be completed prior 

to the deadline for the risk corridors 

program. 

Summary of Regulatory Changes 

We are finalizing these provisions 

with the following modifications. We 

are amending paragraphs (c) and (d) to 

increase the time period for issuing 

refunds from 30 days to 45 days of 

discovery of the error. We are also 

modifying these paragraphs to provide 

that the QHP issuer may provide the 

refund by applying the total excess cost 

sharing paid by or for the enrollee to the 

enrollee’s portion of the premium for 

the remainder of the period of 

enrollment or benefit year until the 

excess is fully applied, except that the 

QHP issuer must refund the enrollee the 

excess cost sharing within 45 days of 

the enrollee’s request or the end of the 

period of enrollment or benefit year. 

(Any cost-sharing paid by the provider 

will still be refunded to the provider 

within 45 days of discovery of the 

error.) Additionally, we are redesignating subparagraphs (d)(1) and 

(d)(2) as (d)(3) and (4), and adding two 

new subparagraphs (d)(1) and (d)(2), 

which set forth a timeframe for 

effectuating a reassignment to the 

correct plan variation. 

c. Payment for Cost-Sharing Reductions 

(§ 156.430) 

In the 2014 Payment Notice, we 

established a payment approach under 

which monthly advance payments will 

be made to QHP issuers to cover 

projected cost-sharing reduction 

amounts, and then, after the close of the 

benefit year, the advance payments and 

the actual cost-sharing reduction 

amounts provided during the benefit 

year will be reconciled. In 45 CFR 

156.430(c)(1), we established standards 

for QHP issuers to submit data to HHS 

detailing the amount of cost sharing the 

enrollees in each plan variation paid, as 

well as the amount of cost sharing the 

enrollees would have paid under the 

standard plan. The value of the costsharing reductions provided is the 

difference of these two amounts. We 

also finalized at 45 CFR 156.430(c)(2) a 

methodology (referred to as the 

‘‘standard methodology’’) for calculating 

the amount of cost sharing that the 

enrollees would have paid under the 

standard plan, but for the cost-sharing 

reductions. Under the standard 

methodology, QHP issuers apply the 

cost-sharing requirements for the 

standard plan to the allowed costs for 

each plan variation policy; in effect, 

each claim would be processed twice: 

once using the cost-sharing structure 

that would have been in place if the 

individual were ineligible for costsharing reductions, and once using the 

reduced cost-sharing structure in the 

applicable plan variation for which the 

individual is eligible. 

In the Amendments to the HHS 

Notice of Benefit and Payment 

Parameters for 2014 interim final rule, 

we established in § 156.430(c)(4) an 

alternate methodology for calculating 

the amount of cost sharing that the 

enrollees would have paid under the 

standard plan for the purpose of 

reconciliation of the advance payments 

of the cost-sharing reductions. Under 

this alternate methodology (referred to 

as the ‘‘simplified methodology’’), QHP 

issuers calculate the amount of cost 

sharing that the enrollees would have 

paid under the standard plan by using 

formulas based on certain summary 

cost-sharing parameters of the standard 

plan, applied to the total allowed costs 

for each policy. With this approach, we 

sought to balance the need to safeguard 

Federal funds with the goal of lessening 

the administrative burden on QHP 

issuers. We stated that we anticipated 

that after an appropriate transition 

period, all QHP issuers would be 

required to use the standard 

methodology, and sought comments on 

how long the transition period should 

be. We also noted that in later years, we 

would consider alternative approaches 

for reimbursing QHP issuers. For 

example, once more data is available, 

we could change to a capitated payment 

system as permitted in section 

1402(c)(3)(B) of the Affordable Care Act. 

However, such a change would require 

access to data on the utilization and 

cost-sharing patterns of individuals 

eligible for cost-sharing reductions. 

In § 156.430(c)(3)(i) of the interim 

final rule, we provided that a QHP 

issuer must notify HHS prior to the start 

of each benefit year whether or not it is 

selecting the simplified methodology for 

the benefit year. In paragraph (c)(3)(ii), 

we specified that if the QHP issuer 

selects the simplified methodology, it 

must apply the simplified methodology 

to all plan variations it offers on the 

Exchange for a benefit year. Since the 

simplified methodology is intended for 

issuers whose systems are not yet 

capable of implementing the standard 

methodology, in paragraph (c)(3)(iii) we 

specified that the QHP issuer may not 

select the simplified methodology if it 

did not select the simplified 

methodology for the prior benefit year. 

We also set forth standards governing 

the selection of a methodology if a QHP 

issuer merges with or acquires another 

QHP issuer on the Exchange, or acquires 

a QHP offered on the Exchange from 

another issuer. In paragraph (c)(3)(iv), 

we provided that if each of the affected 

parties had selected a different 

methodology for the benefit year, then 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65071 

notwithstanding paragraphs (c)(3)(ii) 

and (iii), for the benefit year in which 

the merger or acquisition took place, the 

QHP issuer must continue to use the 

methodology selected prior to the start 

of the benefit year for each plan 

variation (whether or not the selection 

was made by that issuer), and for the 

next benefit year, the QHP issuer may 

select either methodology, subject to the 

requirement in paragraph (c)(3)(ii) that a 

QHP issuer select the same methodology 

for all plan variations it offers on the 

Exchange for the benefit year. 

In this final rule, we are generally 

finalizing the standards related to the 

simplified methodology as established 

in the interim final rule, with minor 

clarifying edits to paragraph (c)(3)(iii) 

and (iv), and we are modifying 

paragraph (c)(3) to specify that QHP 

issuers may only choose to use the 

simplified methodology for benefit years 

2014 through 2016. For the 2014 benefit 

year, HHS intends to contact each QHP 

offering individual market coverage 

through an Exchange in November, 

which will prompt the issuer to notify 

HHS prior to the start of the benefit year 

whether or not it selects the simplified 

methodology for the benefit year. We 

received a number of comments on the 

selection of the methodology and the 

transition period. 

Comment: The majority of 

commenters supported the simplified 

methodology. Many noted that the 

simplified methodology will likely 

reduce QHP issuers’ short-term costs 

and administrative burden. Two 

commenters argued that issuers should 

be permitted to choose between the 

simplified and standard methodologies 

indefinitely because of the many new 

functions that issuers will be performing 

in Exchanges and because the simplified 

methodology should produce results 

that are similar to the standard 

methodology. However, one commenter 

argued that the choice of methodologies 

could inflate Federal costs because QHP 

issuers will likely choose whichever 

methodology results in the largest 

payments. That commenter suggested 

that QHP issuers should only be 

permitted to choose between the 

simplified and standard methodologies 

for the first two years. Other 

commenters argued that the standards 

in § 156.430(c)(3) on selecting a 

methodology should adequately 

safeguard against potential gaming. In 

addition, commenters noted that it 

could take QHP issuers up to 18 months 

to develop the systems necessary to 

support the standard methodology, and 

that therefore HHS should provide at 

least one year’s notice before requiring 

a transition to the standard 

methodology. Several commenters also 

supported a shift to a capitated payment 

system in future years, though one 

noted that it will be important to require 

QHP issuers to use the standard 

methodology for at least two years so 

that adequate data can be collected on 

the value of the cost-sharing reductions, 

which may vary significantly between 

plan variations and enrollees. The same 

commenter suggested that HHS should 

ensure that QHP issuers are adequately 

compensated so that issuers provide 

cost-sharing reductions as required, 

including cost-sharing reductions for 

American Indians and Alaska Natives. 

Response: To allow QHP issuers 

adequate time to develop their systems 

to support the standard methodology, 

we are establishing a three-year 

transition period during which QHP 

issuers may use the simplified 

methodology, provided that they choose 

the simplified methodology prior to the 

start of benefit year 2014. We are 

modifying § 156.430(c)(3) to specify that 

the option to use the simplified 

methodology will extend only through 

benefit year 2016. As a result, all QHP 

issuers offering coverage through the 

individual market of an Exchange must 

use the standard methodology to submit 

the data described in 45 CFR 

156.430(c)(1) for cost-sharing reductions 

provided for benefit year 2017. We will 

continue to consider alternative 

approaches for reimbursing QHP issuers 

for the future, including a capitated 

payment system. We believe that both 

methods of calculating the value of costsharing reductions provided will be 

accurate so that QHP issuers are 

adequately compensated for providing 

cost-sharing reductions to all 

populations. 

In § 156.430(c)(4) of the interim final 

rule we set forth a simplified 

methodology for calculating the amount 

of cost sharing that enrollees would 

have paid under the standard plan 

without cost-sharing reductions. We 

established that a QHP issuer selecting 

the simplified methodology must 

calculate the amount that the enrollees 

would have paid under the standard 

plan by applying four summary, or 

‘‘effective cost-sharing parameters’’ for 

the standard plan—the effective 

deductible, the effective pre-deductible 

coinsurance rate, the effective postdeductible coinsurance rate, and the 

effective claims ceiling—to the total 

allowed costs paid for EHB under the 

policy (that is, the policy with costsharing reductions) for the benefit year. 

This simplified methodology allows 

QHP issuers to calculate enrollee 

liability under the standard plan using 

a standardized methodology that does 

not require complex readjudication of 

claims. Specifically, in 

§ 156.430(c)(4)(i), we detailed the 

process for calculating the amount that 

enrollees would have paid under the 

standard plan under the simplified 

methodology, depending on the 

utilization pattern under the policy. We 

described these calculations using 

Formulas A, B, and C, detailed in 

§ 156.430(c)(4)(i)(A), (B) and (C). In 

§ 156.430(c)(4)(ii) (renumbered as 

(c)(4)(iii) in this final rule), we defined 

the effective cost-sharing parameters for 

the standard plan, and established that 

these parameters must be calculated 

separately for self-only coverage and 

other than self-only coverage. We also 

noted that if a QHP issuer has entirely 

separate cost-sharing parameters for 

pharmaceutical and medical services, 

the QHP issuer may elect to develop 

separate sets of effective cost-sharing 

parameters for pharmaceutical and 

medical services. 

We sought comments on these 

effective cost-sharing parameters and 

formulas for calculating the amount that 

enrollees would have paid under the 

standard plan, and whether this 

methodology appropriately categorizes 

policies based on utilization patterns. 

We also sought suggestions for 

alternative methodologies that might 

provide more accurate estimates of the 

amount that enrollees would have paid 

under the standard plan, while 

preserving the administrative efficiency 

of the simplified methodology. In 

response to comments, we are generally 

finalizing the simplified methodology as 

established in the interim final rule, 

with some modifications to address 

unique benefit structures and to reduce 

potential biases in the formulas 

identified by commenters. We are also 

clarifying how QHP issuers should 

calculate the effective cost-sharing 

parameters for self-only coverage, other 

than self-only coverage, medical 

coverage, and pharmaceutical coverage. 

Lastly, we are clarifying how the 

simplified methodology should apply 

when an enrollee is assigned to a 

different plan variation or is assigned 

from a plan variation to the standard 

plan (or vice versa) during the course of 

the benefit year. 

Comment: In general, commenters 

supported the simplified methodology, 

and no commenters suggested any 

significantly different methodology. 

Some commenters stated that the 

simplified methodology will produce 

results that are not substantially 

different from the standard 

methodology, but others proposed 

certain modifications that they said 

would improve the accuracy of the 


emcdonald on DSK67QTVN1PROD with RULES2
65072 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

methodology, particularly when applied 

to certain types of plan designs. 

Specifically, three commenters noted 

that the effective deductible and 

effective claims ceiling parameters, as 

established in the interim final rule, 

may result in the overestimation or 

underestimation of enrollee liability 

under a standard plan with certain 

benefit structures. For example, because 

the effective deductible was defined as 

the weighted average of the deductibles 

for the standard plan, excluding services 

not subject to the deductible, Formula B 

(described in § 156.430(c)(4)(i)(B)) may 

overestimate the cost sharing under the 

standard plan for those enrollees who 

incur claims costs greater than the 

effective deductible, because they 

receive services that are not subject to 

the deductible. In addition, because the 

effective claims ceiling was calculated 

based on the annual limitation on cost 

sharing, which may only apply to innetwork benefits (as described in 45 

CFR 156.130(c)), Formula C (described 

in § 156.430(c)(4)(i)(C)) may 

underestimate cost sharing under the 

standard plan for enrollees who incur 

large out-of-network claims. In light of 

these potential biases, one commenter 

suggested that in-network cost sharing 

should be calculated separately from 

out-of-network cost sharing. Other 

commenters suggested that the QHP 

issuer’s actuary should be allowed 

greater flexibility in the calculation of 

an average deductible and an average 

claims ceiling, based on the actual 

claims experience of enrollees in the 

standard plan. One commenter 

suggested that the issuer’s actuary 

should be required to submit an 

actuarial memorandum with a 

justification of any modifications to the 

effective cost-sharing parameters, 

demonstrating that the modifications 

were necessary due to the benefit design 

and result in a more accurate replication 

of the standard plan’s cost sharing. 

We also received a comment asking 

how mid-year changes in enrollee 

eligibility for cost-sharing reductions 

would affect the application of the 

simplified methodology. 

Response: Overall, we believe the 

simplified methodology will yield 

results that are substantially similar to 

the results that would be produced 

using the standard methodology. In 

addition, we believe it is important that 

issuers choosing the simplified 

methodology use standard formulas and 

parameters to reduce the analytical 

burden on issuers, ensure the 

transparency of the calculations, and 

reduce the potential for gaming. 

Nevertheless, in response to these 

comments, we are finalizing several 

modifications to the simplified 

methodology to improve the accuracy of 

the calculations. 

First, we are making several minor 

edits to clarify the standards originally 

established. We are reordering some of 

the text in the definitions of the 

effective pre-deductible and effective 

post-deductible coinsurance rates to 

mirror the structure of the other 

definitions. Also, in response to the 

comment asking about mid-year changes 

in eligibility for cost-sharing reductions, 

we are clarifying in § 156.430(c)(4) that 

the effective cost-sharing parameters, or 

one minus the actuarial value of the 

standard plan, as appropriate, should be 

applied to the total allowed costs for 

EHB for the benefit year under each 

policy that was assigned to a plan 

variation for any portion of the benefit 

year. We note that a similar standard 

would apply to the standard 

methodology. This will ensure that QHP 

issuers are reimbursed for cost-sharing 

reductions provided to enrollees that are 

only assigned to a plan variation for a 

portion of the year. We are also 

clarifying in paragraphs (c)(4)(ii) and 

(iii) that the effective cost-sharing 

parameters should be calculated based 

on policies assigned to the standard 

plan without cost-sharing reductions for 

the entire benefit year. If a particular 

enrollee cancels his or her standard plan 

policy mid-year, or is re-assigned to a 

plan variation, the costs incurred by that 

enrollee should not be included in the 

calculation of the effective cost-sharing 

parameters for the standard plan 

because partial-year data could reduce 

the accuracy of the parameters. We also 

considered requiring QHP issuers to 

separate costs by month based on the 

assignment of an enrollee to a particular 

plan variation or standard plan, or 

requiring QHP issuers to annualize costs 

across the benefit year. However, these 

approaches would have significantly 

complicated the methodology and 

potentially reduced its accuracy. 

Second, in response to comments that 

Formula B (described in 

§ 156.430(c)(4)(i)(B)) may overestimate 

the cost sharing under the standard plan 

if the enrollees receive services that are 

not subject to a deductible, we are 

modifying several of the formulas and 

effective cost-sharing parameters to 

more accurately estimate cost sharing 

for services that are subject to a 

deductible and services that are not 

subject to a deductible. Specifically, in 

paragraph (c)(4)(iii)(A), we are defining 

the average deductible to be the 

weighted average deductible for the 

standard plan (weighted by allowed 

costs for EHB under the standard plan 

for the benefit year that are subject to 

each separate deductible, and excluding 

services that are not subject to any 

deductible). Conversely, in paragraph 

(c)(4)(iii)(B), we are defining effective 

non-deductible cost sharing to be 

calculated based only on standard plan 

policies with total allowed costs for 

EHB for the benefit year that are above 

the effective deductible but for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing, and equal to the average 

portion of total allowed costs for EHB 

that are not subject to any deductible for 

the standard plan for the benefit year 

incurred for standard plan enrollees and 

payable by the enrollees as cost sharing. 

We are also modifying the definition of 

effective deductible (which was initially 

set forth in paragraph (c)(4)(ii)(A), but 

has been renumbered in this final rule 

to be paragraph (c)(4)(iii)(C)), to be the 

sum of the average deductible and the 

average total allowed costs for EHB that 

are not subject to any deductible for the 

standard plan for the benefit year. The 

average total allowed costs for EHB that 

are not subject to any deductible for the 

standard plan for the benefit year must 

be calculated based only on standard 

plan policies with total allowed costs 

for EHB for the benefit year that are 

above the average deductible but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing. Lastly, we are making 

conforming modifications to the 

definition of effective claims ceiling 

(which was initially set forth in 

paragraph (c)(4)(ii)(D), but has been 

renumbered in this final rule to be 

paragraph (c)(4)(iii)(F)), to be calculated 

as follows: 

ECC = ED + ((AL ¥ AD ¥ NDCS)/

PostD) 

Where, 

ECC = the effective claims ceiling; 

ED = the effective deductible; 

AL = the annual limitation on cost sharing; 

AD = the average deductible; 

NDCS = the effective non-deductible cost 

sharing; and 

PostD = the effective post-deductible 

coinsurance rate. 

Building off of these new definitions, 

we are modifying the definition of 

effective post-deductible coinsurance 

rate (initially set forth in paragraph 

(c)(4)(ii)(C), but renumbered as 

paragraph (c)(4)(iii)(E)) to be calculated 

as follows: 

PostD = (CSDp)/(TACDp ¥ AD) 

Where, 

PostD = the effective post-deductible 

coinsurance rate; 

CSDp = the portion of average allowed costs 

for EHB subject to a deductible incurred 

for enrollees for the benefit year, and 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65073 

payable by the enrollees as cost sharing 

other than through a deductible; 

AD = the average deductible; and 

TACDp = the average total allowed costs for 

EHB subject to a deductible incurred for 

those enrollees for the benefit year (we 

distinguish TACDp from the TACDi; 

TACDp refers to average total allowed 

costs for EHB subject to a deductible for 

all the policies that are part of the 

calculation—which in this case, are 

standard plan policies with total allowed 

costs for EHB for the benefit year that are 

above the effective deductible but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing (that is, policies that do not incur 

enough cost sharing for the annual 

limitation on cost sharing to affect the 

cost sharing), while TACDi refers to the 

total allowed costs for EHB subject to a 

deductible for a particular policy). 

These terms are then used in a 

modified Formula B (described in 

§ 156.430(c)(4)(i)(B)), and detailed 

below, for plan variation policies with 

total allowed costs for EHB for the 

benefit year that are greater than the 

effective deductible but less than the 

effective claims ceiling, to calculate the 

amount that enrollees would have paid 

under the standard plan without costsharing reductions. 

Formula B: C = AD + NDCS + ((TACDi

¥ AD) * PostD) 

Where, 

C = the amount that the enrollees in a 

particular policy would have paid under 

the standard plan without cost-sharing 

reductions; 

AD = the average deductible; 

NDCS = the effective non-deductible cost 

sharing; 

TACDi = the total allowed costs under the 

policy for the benefit year for EHB that 

are subject to a deductible; 

PostD = the effective post-deductible 

coinsurance rate; and 

((TACDi ¥ AD) * PostD) is calculated only 

if positive. 

We believe this formula will more 

accurately capture cost sharing in plans 

that subject certain services to 

deductibles but exempt others (while 

imposing other forms of cost sharing). 

In addition, we note that the new 

definition of effective deductible will 

likely cause some plan variation 

policies that previously would have 

been subject to calculation under 

Formula B to become subject to Formula 

A, which we are finalizing as 

established in the interim final rule. As 

described in paragraph (c)(4)(i)(A), 

Formula A applies to plan variation 

policies with total allowed costs for 

EHB for the benefit year that are less 

than or equal to the effective deductible, 

and calculates the amount that the 

enrollees would have paid under the 

standard plan as the total allowed costs 

for EHB under the policy for the benefit 

year, multiplied by the effective predeductible coinsurance rate. 

We are also adding a paragraph to 

clarify how the simplified methodology 

should be applied to HMO-like plans (or 

plans with HMO-like characteristics in 

certain subgroups) with no costs or few 

costs that are subject to a deductible. 

Specifically, in paragraph (c)(4)(vi) we 

provide that if more than eighty percent 

of the total allowed costs for EHB for the 

benefit year under a standard plan for a 

subgroup that requires a separate set of 

effective cost-sharing parameters 

pursuant to paragraph (c)(4)(ii) are not 

subject to a deductible, then (i) The 

average deductible, the effective nondeductible cost sharing, and the 

effective deductible for the subgroup 

equal zero; (ii) the effective predeductible coinsurance rate for the 

subgroup is equal to the effective postdeductible coinsurance rate for the 

subgroup, which is determined based on 

all standard plan policies for the 

applicable subgroup for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing, and calculated for the 

applicable subgroup as the proportion of 

the total allowed costs for EHB under 

the standard plan for the benefit year 

incurred for standard plan enrollees and 

payable as cost sharing (including cost 

sharing payable through a deductible); 

and (iii) the amount that enrollees in the 

applicable subgroup in plan variation 

policies with total allowed costs for 

EHB for the benefit year that are less 

than the effective claims ceiling would 

have paid under the standard plan must 

be calculated using the formula in 

§ 156.430(c)(4)(i)(A). In effect, we are 

merging Formulas A and B for these 

plans (or these subgroups), and are 

removing the distinction between the 

calculation of cost sharing for costs 

incurred before the deductible is met 

versus the calculation after the 

deductible is met. This modification 

should simplify calculations for issuers 

of these plans (or these subgroups), and 

improve the accuracy of the simplified 

methodology we are finalizing here for 

these plans (or these subgroups). 

Lastly, in response to comments, we 

are modifying Formula C (described in 

§ 156.430(c)(4)(i)(C)), which applies to 

plan variation policies with total 

allowed costs for EHB for the benefit 

year that are greater than or equal to the 

effective claims ceiling, and is used to 

calculate the amount of cost sharing that 

those enrollees would have paid under 

the standard plan. First, we are 

simplifying the formula established in 

the interim final rule. Second, because 

the annual limitation on cost sharing 

may not apply to benefits provided outof-network (as allowed under 45 CFR 

156.130(c)), we are allowing issuers to 

elect to use, on a policy-by-policy basis, 

the standard methodology to calculate 

the amount of cost sharing that such 

enrollees would have paid under the 

standard plan. This modification will 

allow QHP issuers to capture the value 

of cost-sharing reductions for enrollees 

who incur large claim amounts for 

services from out-of-network providers. 

Comment: Commenters noted that 

due to statistical aberrations under the 

simplified methodology, it is possible— 

though unlikely—that the calculated 

amount of cost sharing that enrollees 

would have paid under the standard 

plan could be less than what they 

actually paid under the plan variation. 

The commenter suggested that the 

amount that the enrollees would have 

paid in cost sharing under the standard 

plan be set at no less than what they 

paid under the plan variation. 

Response: Although we acknowledge 

that in certain cases, the calculated 

amount of cost sharing that enrollees 

would have paid under the standard 

plan could be less than what the 

enrollees in a particular policy actually 

paid under the plan variation, any such 

results would likely be balanced by 

results for other policies that 

overestimate the cost sharing that the 

enrollees would have paid under the 

standard plan. As a result, we do not 

believe it is necessary to modify the 

simplified methodology. However, we 

note that we do not intend to charge a 

QHP issuer for cost-sharing reductions 

across all enrollees in a plan variation 

in the very unlikely event that the 

simplified methodology suggests that a 

negative amount of cost-sharing 

reductions were provided to all such 

enrollees in the aggregate during the 

benefit year. 

Comment: We received comments on 

§ 156.430(c)(4)(ii) of the interim final 

rule, which directs issuers to calculate 

the effective cost-sharing parameters 

separately for self-only coverage and 

other than self-only coverage, and 

provides the option to calculate separate 

parameters for pharmaceutical and 

medical services if the QHP has entirely 

separate cost-sharing parameters for 

each of these types of services. Two 

commenters suggested that issuers 

should be allowed to calculate a single 

set of effective cost-sharing parameters 

if the cost-sharing parameters of the 

other than self-only coverage are better 

replicated at the individual level (for 

example, for plan designs applying 

individual level deductibles first). The 

same commenters also suggested that 

issuers should be allowed to calculate 


emcdonald on DSK67QTVN1PROD with RULES2
65074 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

separate parameters for pharmaceutical 

and medical services even when the 

costs are not adjudicated by a separate 

vendor. Similarly, for QHPs in which a 

large portion of allowed charges are 

subject to co-pays but not deductibles, 

the commenters suggested that issuers 

should be allowed to calculate separate 

effective cost-sharing parameters for 

those services. Another commenter 

suggested that QHP issuers should 

calculate separate effective cost-sharing 

parameters for benefits provided innetwork versus benefits provided out-ofnetwork because enrollee liability often 

differs significantly for these benefits. 

The commenter also suggested that if 

the QHP issuer made no reductions in 

cost sharing for benefits provided outof-network (that is, the out-of-network 

cost-sharing parameters for the standard 

plan match the out-of-network costsharing parameters for the plan 

variation), the QHP issuer should be 

able to exclude costs for benefits 

provided out-of-network and the 

applicable cost-sharing parameters from 

the simplified methodology 

calculations. Similarly, the QHP issuer 

should be allowed to exclude costs for 

benefits paid in full by the issuer for 

both the standard plan and plan 

variations, with no enrollee liability, 

since there are no cost-sharing 

reductions for these benefits. Lastly, one 

commenter requested clarification on 

whether the effective cost-sharing 

parameters for a QHP should be 

calculated separately for each rating 

area, or across an entire State. 

Response: In response to comments, 

we are adding a new paragraph (c)(4)(ii) 

and making conforming edits to 

paragraphs (c)(4)(i) through (v) of this 

section to clarify which subgroups of 

costs require a unique set of effective 

cost-sharing parameters. In paragraph 

(c)(4)(ii)(A), we state that if the standard 

plan has separate cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, but does 

not have separate cost-sharing 

parameters for pharmaceutical and 

medical services, the QHP issuer must 

calculate and apply separate sets of 

effective cost-sharing parameters based 

on the costs of enrollees in the standard 

plan with self-only coverage, and the 

costs of enrollees in the standard plan 

with other than self-only coverage. We 

clarify that if the cost-sharing 

parameters for other than self-only 

coverage accumulate at the enrolleelevel and match the parameters for selfonly coverage, then the standard plan 

would not be subject to subparagraph 

(c)(4)(ii)(A) or (C). 

In paragraph (c)(4)(ii)(B), we clarify 

that if the standard plan has separate 

cost-sharing parameters for 

pharmaceutical and medical services, 

but does not have separate cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, the QHP 

issuer must calculate and apply separate 

sets of effective cost-sharing parameters 

based on the medical costs of the 

enrollees in the standard plan, and the 

pharmaceutical costs of the enrollees in 

the standard plan. This standard is not 

tied to whether or not the 

pharmaceutical costs are adjudicated 

separately by a vendor, but depends on 

whether or not the cost sharing 

accumulates to separate deductibles and 

annual limitations on cost sharing. 

Lastly, in paragraph (c)(4)(ii)(C), we 

state that if the standard plan has 

separate cost-sharing parameters for 

self-only coverage and other than selfonly coverage, and also has separate 

cost-sharing parameters for 

pharmaceutical and medical services, 

the QHP issuer must calculate and 

apply separate sets of effective costsharing parameters based on the 

medical costs of enrollees in the 

standard plan with self-only coverage, 

the pharmaceutical costs of enrollees in 

the standard plan with self-only 

coverage, the medical costs of enrollees 

in the standard plan with other than 

self-only coverage, and the 

pharmaceutical costs of enrollees in the 

standard plan with other than self-only 

coverage. While these new standards in 

paragraph (c)(4)(ii) may require 

additional calculations, enrollee 

liability can vary significantly between 

these subgroups, as noted by 

commenters, and as a result, we believe 

that separate effective cost-sharing 

parameters for each subgroup of costs 

will often lead to more accurate results. 

For example, if a QHP is subject to the 

standards in paragraph (c)(4)(ii)(C), the 

QHP issuer must create four sets of 

effective cost-sharing parameters. One of 

the sets of effective cost-sharing 

parameters would be calculated based 

on self-only coverage of medical 

services (for example, the average 

deductible would be the medical 

deductible for self-only coverage). The 

effective cost-sharing parameters for the 

subgroup would then be applied to the 

total allowed medical costs for EHB of 

enrollees with self-only coverage under 

a plan variation policy, as described in 

paragraph (c)(4)(i). To determine the 

total amount that enrollees in the plan 

variation policy with self-only coverage 

would have paid under the standard 

plan without cost-sharing reductions, 

the QHP issuer would add the amounts 

calculated pursuant to paragraph 

(c)(4)(i) for each subgroup of costs (selfonly medical costs and self-only 

pharmaceutical costs). 

In relation to in-network and out-ofnetwork costs, we clarify that although 

QHP issuers are not required to reduce 

out-of-network cost sharing to meet the 

actuarial value requirements for the 

silver plan variations, as described on 

page 15481 of the 2014 Payment Notice, 

if a QHP issuer chooses to reduce outof-network cost sharing, they will 

receive reimbursement for those 

reductions. In addition, QHP issuers 

must eliminate cost sharing for both innetwork and out-of-network covered 

EHB for the zero cost sharing plan 

variation, as well as for the limited cost 

sharing plan variation when the service 

is furnished by the Indian Health 

Service, an Indian Tribe, Tribal 

Organization, or Urban Indian 

Organization, or through referral under 

contract health services, as described in 

45 CFR 156.420(b). Nevertheless, we are 

not requiring, nor allowing, QHP issuers 

to calculate separate effective costsharing parameters for in-network and 

out-of-network costs. We believe that 

the modifications to Formula C should 

address much of the bias in the 

simplified methodology that could be 

caused by differences in cost-sharing 

parameters for in-network and out-ofnetwork services. In addition, we hope 

to limit the number of plans that do not 

meet the minimum credibility standard, 

which as described below and in 

paragraph (c)(4)(v), requires QHP issuers 

to use an actuarial value methodology to 

calculate the amount that enrollees 

would have paid under the standard 

plan, if a standard plan has enrollment 

of fewer than 12,000 member months for 

a particular subgroup. We believe that it 

is possible that a large number of 

standard plans would not have 12,000 

member months for enrollees with outof-network claims costs above the 

applicable effective deductible. 

Therefore, we will not provide for 

separate calculations for in-network and 

out-of-network costs. 

In response to the comments 

suggesting that QHP issuers should be 

allowed to exclude costs for benefits 

without cost-sharing reductions, we 

note that in many cases, these costs 

would accumulate towards certain costsharing parameters, such as a deductible 

or the annual limitation on cost sharing. 

Therefore, we are not finalizing any 

change permitting an issuer to exclude 

such claims. As discussed above, to 

address plans with cost-sharing 

structures where a large proportion of 

costs are not subject to a deductible, we 

have provided for a simplified, 

coinsurance-based calculation in 

paragraph (c)(4)(vi). Finally, we note 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65075 

that QHP issuers cannot create separate 

effective cost-sharing parameters for 

each rating area. 

In § 156.430(c)(4)(iii) of the interim 

final rule, we established reporting 

standards for QHP issuers that elect to 

use the simplified methodology. We 

specified that QHP issuers must submit 

to HHS, in the manner and timeframe 

established by HHS: The effective 

deductible; the effective pre-deductible 

coinsurance rate; the effective postdeductible coinsurance rate; the 

effective claims ceiling; and a 

memorandum developed by a member 

of the American Academy of Actuaries 

in accordance with generally accepted 

actuarial principles and methodologies 

that describes how the QHP issuer 

calculated the effective cost-sharing 

parameters for the standard plan. This 

information will allow HHS to ensure 

that QHP issuers are calculating the 

effective cost-sharing parameters 

correctly. We sought comments on 

whether HHS should require any other 

data submissions or establish any 

additional standards to oversee these 

provisions. 

Comment: One commenter 

recommended that HHS put in place 

robust processes to monitor QHP issuers 

using the simplified methodology to 

limit the potential for overpayments. 

The commenter suggested that HHS 

reserve the authority to review and 

approve all QHP issuer submissions for 

the simplified methodology and the 

resulting reconciliation amount— 

particularly if such amounts are 

substantially different from the advance 

payment amounts. Another commenter 

suggested that HHS collect detailed data 

on the payments made by QHP issuers 

to providers to ensure that providers are 

reimbursed, particularly providers 

associated with the Indian Health 

Service, an Indian Tribe, Tribal 

Organization, or Urban Indian 

Organization. 

Response: To ensure that QHP issuers 

using either the standard or simplified 

methodology submit accurate 

information for cost-sharing reduction 

payment reconciliation, we are 

finalizing cost-sharing reduction 

oversight standards in § 156.480 of this 

final rule. Specifically, § 156.480(c) 

provides HHS with the authority to 

audit an issuer to assess compliance 

with the cost-sharing reduction 

standards, including standards related 

to reconciliation and provider 

reimbursement, detailed in 45 CFR 

156.430(c). 

We are also clarifying in this final rule 

the standards for reporting information 

on the effective cost-sharing parameters. 

Specifically, we are renumbering the 

paragraph on reporting as paragraph 

(c)(4)(iv), and specifying that a QHP 

issuer using the simplified methodology 

must submit to HHS, in the manner and 

timeframe established by HHS, the 

effective cost-sharing parameters, 

calculated pursuant to paragraph 

(c)(4)(iii), for each standard plan offered 

by the QHP issuer in the individual 

market through the Exchange for each 

set of circumstances described in 

paragraph (c)(4)(ii). Therefore, if a QHP 

issuer must calculate multiple sets of 

effective cost-sharing parameters as 

described in paragraph (c)(4)(ii), the 

QHP issuer must submit each set of 

parameters to HHS. A QHP issuer may 

submit one actuarial memorandum as 

long as it describes how the QHP issuer 

calculated each set of effective costsharing parameters for each standard 

plan. We will provide guidance on the 

manner and timeframe of this 

submission in the future. 

As discussed in the interim final rule, 

we recognize that because the effective 

pre- and post-deductible coinsurance 

rates are calculated based on the average 

experience of the enrollees in the 

standard plan, low enrollment in the 

standard plan could lead to inaccurate 

effective coinsurance rates. Therefore, 

we provided additional standards 

related to the simplified methodology in 

§ 156.430(c)(4)(iv) to address credibility 

concerns that may result from low 

enrollment in the standard plan. We 

established that if a standard plan has 

an enrollment during the benefit year of 

fewer than 12,000 member months (that 

is, the sum of the months that each 

enrollee is covered by the plan) in any 

of four subgroups, and the QHP issuer 

has selected the simplified 

methodology, then the QHP issuer must 

calculate the amount that all enrollees 

in the plan variation (in all subgroups) 

would have paid under the standard 

plan by applying the standard plan’s 

actuarial value, as calculated under 

§ 156.135, to the allowed costs for EHB 

for the enrollees for the benefit year. 

The credibility standard of 12,000 

member months aligns with a similar 

standard used by the Medicare Part D 

program; however, we sought comments 

on the appropriate number of member 

months to achieve credible use of the 

simplified methodology. We also sought 

comments on whether the standard 

plan’s actuarial value applied to the 

allowed costs for EHB for enrollees for 

the benefit year would provide an 

appropriate estimate of the amount of 

cost sharing that enrollees would have 

paid under the standard plan without 

cost-sharing reductions, or whether an 

alternative approach would be more 

appropriate. Last, we requested 

comments on the composition of the 

subgroups, whether they appropriately 

divide enrollees based on their 

utilization patterns, whether any 

subgroups are required, and whether 

low enrollment in one subgroup should 

prompt the QHP issuer to use the 

actuarial value for enrollees in all 

subgroups or just the subgroup with low 

enrollment. 

Comment: We received one comment 

on this section, suggesting that the 

credibility standard should apply to 

both the standard plan and the plan 

variations because even if the effective 

cost-sharing parameters are based on at 

least 12,000 member months, applying 

them to a small number of plan 

variation policies could produce 

unusual results. The same commenter 

noted that because actuarial value is a 

measure of the issuer’s liability, one 

minus the actuarial value should be 

applied to the total allowed costs for 

EHB for each policy offered under the 

plan variation for the benefit year in 

order to determine the cost sharing that 

enrollees would have paid under the 

standard plan. 

Response: In response to these 

comments, we are correcting the 

instructions for calculating enrollee cost 

sharing based on actuarial value in the 

renumbered paragraph (c)(4)(v). We are 

not expanding the credibility standard 

to apply to enrollment in each plan 

variation since this would likely require 

many more QHP issuers to use the 

standard or actuarial value 

methodology, rather than the simplified 

methodology. However, we are adding a 

‘‘cap’’ to the actuarial methodology, 

such that QHP issuers whose standard 

plan does not meet the credibility 

standard must calculate the amount that 

enrollees would have paid under the 

standard plan as the lesser of the annual 

limitation on cost sharing for the 

standard plan or the amount derived 

through the actuarial value 

methodology. This approach will reduce 

the likelihood that plan variations with 

small enrollment will report amounts 

that are materially inaccurate. 

We are also modifying paragraph 

(c)(4)(v) to align with the standards 

established in paragraph (c)(4)(ii) and to 

clarify how the minimum credibility 

standard should be applied to each 

subgroup. In addition, we are removing 

the minimum credibility standard 

described in the interim final rule in 

subparagraphs (c)(4)(iv)(A) and (C), 

related to enrollees with total allowed 

costs for EHB for the benefit year that 

are less than or equal to the effective 

deductible. This change should simplify 

the credibility analysis, with little 


emcdonald on DSK67QTVN1PROD with RULES2
65076 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

impact on the ultimate credibility of the 

effective cost-sharing parameters 

because it is unlikely that a standard 

plan would have adequate enrollment 

with costs above the effective 

deductible, but low enrollment with 

costs below the effective deductible. As 

discussed in the interim final rule, a 

subgroup is not necessary for enrollees 

with cost sharing for EHB above the 

annual limitation on cost sharing 

because the experience of this 

population is not used to calculate the 

effective cost-sharing parameters. 

Therefore, in § 156.430(c)(4)(v) of this 

final rule, we establish that if a QHP 

issuer’s standard plan meets certain 

criteria, and the QHP issuer has selected 

the simplified methodology described in 

this paragraph (c)(4), then the QHP 

issuer must calculate the amount that 

enrollees in the plan variation would 

have paid under the standard plan 

without cost-sharing reductions as the 

lesser of the annual limitation on cost 

sharing for the standard plan or the 

amount equal to the product of, (x) one 

minus the standard plan’s actuarial 

value, as calculated under 45 CFR 

156.135, and (y) the total allowed costs 

for EHB for the benefit year under each 

policy that was assigned to a plan 

variation for any portion of the benefit 

year. 

In subparagraphs (A) through (D) of 

§ 156.430(c)(4)(v), we detail the 

minimum credibility criteria that 

prompt a QHP issuer to use the actuarial 

value methodology: 

(A) The standard plan has separate 

cost-sharing parameters for self-only 

coverage and other than self-only 

coverage, does not have separate costsharing parameters for pharmaceutical 

and medical services, and has an 

enrollment during the benefit year of 

fewer than 12,000 member months for 

coverage with total allowed costs for 

EHB for the benefit year that are greater 

than the effective deductible, but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing, in either of the following 

categories: (i) Self-only coverage, or (ii) 

other than self-only coverage. 

(B) The standard plan has separate 

cost-sharing parameters for 

pharmaceutical and medical services, 

does not have separate cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, and has 

an enrollment during the benefit year of 

fewer than 12,000 member months for 

coverage with total allowed costs for 

EHB for the benefit year that are greater 

than the effective deductible, but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing, in either of the following 

categories: (i) Coverage of medical 

services, or (ii) coverage of 

pharmaceutical services. 

(C) The standard plan has separate 

cost-sharing parameters for self-only 

coverage and other than self-only 

coverage, has separate cost-sharing 

parameters for pharmaceutical and 

medical services, and has an enrollment 

during the benefit year of fewer than 

12,000 member months for coverage 

with total allowed costs for EHB for the 

benefit year that are greater than the 

effective deductible, but for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing, in any of the following 

categories: (i) Self-only coverage of 

medical services, (ii) self-only coverage 

of pharmaceutical services, (iii) other 

than self-only coverage of medical 

services, or (iv) other than self-only 

coverage of pharmaceutical services. 

(D) The standard plan does not have 

separate cost-sharing parameters for 

pharmaceutical and medical services, 

does not have separate cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, and has 

an enrollment during the benefit year of 

fewer than 12,000 member months with 

total allowed costs for EHB for the 

benefit year that are greater than the 

effective deductible, but for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing. 

In the interim final rule, we noted the 

possibility that for a very small number 

of plans with unique cost-sharing 

structures, the amounts that enrollees 

would have been paid under the plan 

might not be fairly estimated using the 

simplified methodology. We considered 

a process in which a QHP issuer of such 

a plan may notify HHS if it believes that 

this is the case for one or more of its 

plans. We considered requiring such a 

notification within ninety days of the 

beginning of the applicable benefit year, 

and we considered requiring the QHP 

issuer to provide information on the 

unique plan design supporting the QHP 

issuer’s assessment. 

Under this approach, if HHS were to 

agree with the assessment, we 

considered requiring the QHP issuer to 

calculate the amount that enrollees 

would have paid under the standard 

plan without cost-sharing reductions by 

applying the standard plan’s actuarial 

value, as calculated pursuant to 45 

CFR156.135, to the allowed costs for 

EHB for the enrollees for the benefit 

year. If HHS were to disagree with the 

issuer’s assessment, the QHP issuer 

would calculate such amounts using the 

effective cost-sharing parameters under 

the approach described in paragraphs 

(4)(i) through (4)(iii) of the interim final 

rule (or paragraph (4)(iv), if applicable). 

We sought comments on whether we 

should adopt such an approach, and on 

the specifics outlined above. In 

particular, we sought comments on the 

types of plans, if any, for which it 

would be difficult to fairly calculate the 

amount that enrollees would have paid 

under the standard plan without costsharing reductions using the simplified 

methodology, and their prevalence. We 

sought comments on the standard that 

should apply for determining whether 

the plan will be exempted from using 

the simplified methodology, and how 

HHS should make that determination. 

Finally, we requested comments on 

what estimation methodology should be 

used if the plan is determined to be 

exempt, and if it is not. 

We did not receive any specific 

comments on this proposal, though as 

noted above, some commenters 

suggested that for certain plan designs, 

the simplified methodology may result 

in the overestimation or 

underestimation of enrollee liability, 

and as a result, the QHP issuer’s actuary 

should be allowed greater flexibility in 

the calculation of an average deductible 

and an average claims ceiling, as long as 

the calculations are justified in the 

actuarial memorandum. 

Because we did not receive any 

comments supporting this proposal, or 

any examples of plans for which the 

simplified methodology would not 

adequately approximate cost sharing, 

we are not finalizing this approach. 

Comment: We received a comment 

that relates generally to the 

reconciliation of cost-sharing reduction 

payments. The commenter asked 

whether a QHP issuer that is using the 

standard methodology must readjudicate the claims sequentially as if 

the enrollees were in the standard plan. 

Response: QHP issuers using the 

standard methodology should 

adjudicate the claims in a manner that 

will yield an accurate calculation of the 

amount of cost sharing that enrollees 

would have paid under the standard 

plan. If sequential adjudication of 

claims is not necessary to do so, the 

issuer is not required to engage in 

sequential adjudication. 

Summary of Regulatory Changes 

We are modifying § 156.430(c)(3) to 

specify that QHP issuers may only 

choose the simplified methodology for 

calculating the amounts that would 

have been paid under the standard plan 

without cost-sharing reductions for 

benefit years 2014 through 2016. We 

also are modifying § 156.430(c)(4) to 

address unique benefit structures and 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65077 

reduce potential biases in the formulas. 

We are clarifying how QHP issuers 

should calculate the effective costsharing parameters for self-only 

coverage, other than self-only coverage, 

medical services, and pharmaceutical 

services. 

d. Failure To Reduce an Enrollee’s 

Premium To Account for Advance 

Payments of the Premium Tax Credit 

(§ 156.460(c)) 

We also proposed to add new 

paragraph (c) to § 156.460, providing 

that if a QHP issuer discovers that it did 

not reduce the portion of the premium 

charged to or for the enrollee for the 

applicable month(s) by the amount of 

the advance payment of the premium 

tax credit as required in § 156.460(a)(1), 

the QHP issuer would be required to 

refund to the enrollee any excess 

premium paid by or for the enrollee and 

notify the enrollee of the improper 

application no later than 30 calendar 

days after the QHP issuer discovers the 

error. We noted that a QHP issuer may 

provide the refund to the enrollee by 

reducing the enrollee’s portion of the 

premium in the following month, as 

long as the reduction is provided no 

later than 30 calendar days after the 

QHP issuer discovers the improper 

reduction. If the QHP issuer elects to 

provide the refund by reducing the 

enrollee’s portion of the premium for 

the following month, and the refund 

exceeds the enrollee’s portion of the 

premium for the following month, then 

the QHP issuer would need to refund to 

the enrollee the excess no later than 30 

calendar days after the QHP issuer 

discovers the improper reduction. We 

also noted that we were also considering 

that for each quarter beginning in 2015, 

a QHP issuer would be required to 

provide a report to HHS and the 

Exchange, in a manner and timeframe 

specified by HHS, detailing the 

occurrence of instances of improper 

applications of the requirements of 

§ 156.460. 

Comment: Several commenters 

supported a 30-day timeframe for 

issuers to refund excess advance 

payment of the premium tax credit to 

enrollees, while other commenters 

stated that a 60-day timeframe is more 

realistic. Another recommended a 90- 

day timeframe given the challenges of 

enrollment reconciliation and resolution 

of discrepancies. One commenter noted 

that associated refunds are commonly 

performed through batch processing 

which could take more than 30 calendar 

days to correct, and suggested that HHS 

allow a longer timeframe to account for 

such administrative processes. 

Response: In consideration of the 

timeframes for enrollment reconciliation 

and resolution processes we are 

extending the timeframe for QHP issuers 

to provide refunds in such cases to 

within 45 days of discovery of the error. 

This timeframe aligns with the 

timeframe established under § 156.410 

with respect to misapplication of costsharing reductions. 

Comment: Several commenters 

suggested that issuers be allowed to 

apply such refundable amounts to the 

premium due in subsequent months 

through the end of the benefit year, and 

that a refund be provided only at the 

request of the enrollee. One commenter 

noted that issuing a partial refund and 

partial credit in a given month may be 

confusing to consumers, and does not 

align with standard practice today. 

Another commenter recommended that 

consumers should have the option of 

receiving a refund directly. 

Response: In response to comments, 

we are modifying the proposed policy in 

this final rule. In particular, if a QHP 

issuer discovers that it did not reduce 

an enrollee’s premium by the amount of 

the advance payment of the premium 

tax credit, then, upon request by or for 

the enrollee, the QHP issuer must 

refund to the enrollee any excess 

premium paid by or for the enrollee 

within 45 calendar days of discovery of 

the improper reduction. However, if a 

direct refund is not requested, the QHP 

issuer may apply the total remaining 

excess premium paid by or for the 

enrollee to the enrollee’s portion of the 

premium each month for the remainder 

of the period of enrollment or benefit 

year, until the excess is fully applied. If 

any excess premium paid by or for the 

enrollee remains at the end of the period 

of enrollment or benefit year, the QHP 

issuer would be required to refund the 

excess within 45 calendar days of 

discovery or the error. 

Additionally, we clarify that this 

provision would not prevent a QHP 

issuer from recouping excess funds from 

the enrollee, if the QHP reduced the 

enrollee’s portion of the premium by 

more than the advance payment of the 

premium tax credit. 

Comment: Two commenters 

supported a standard requiring quarterly 

error reports, although one suggested 

that such reports be delayed until 2016. 

One commenter recommended a semiannual report. Another commenter 

stated that such reports duplicate 

information in the monthly enrollment 

reconciliation reports. 

Response: Taking into consideration 

the comments received and to align 

with the policy finalized in § 156.410, 

we are not establishing a quarterly 

reporting standard. We require issuers 

to report if they did not reduce the 

portion of the premium charged to or for 

the enrollee for the applicable month(s) 

by the amount of the advance payment 

of the premium tax credit as part of the 

annual reporting requirements set forth 

in § 156.480(b) of this final rule. 

Summary of Regulatory Changes 

We are finalizing these provisions as 

proposed with the following 

modifications. We are increasing the 

time period for issuing refunds from 30 

to 45 days. We are also permitting the 

QHP issuer to apply the total excess 

premium paid by or for the enrollee to 

the enrollee’s portion of the premium 

each month for the remainder of the 

period of enrollment or benefit year, 

except that the QHP issuer must refund 

the excess premium within 45 days of 

a request for the refund by or for the 

enrollee or within 45 days following the 

end of the period of enrollment or 

benefit year. 

e. Oversight of the Administration of 

Cost-Sharing Reductions and Advance 

Payments of the Premium Tax Credit 

Programs (§ 156.480) 

In § 156.480, we proposed general 

provisions related to the oversight of 

QHP issuers in relation to cost-sharing 

reductions and advance payments of the 

premium tax credit. We proposed to 

apply certain standards proposed in Part 

156, subpart H for QHP issuers 

participating in FFEs to QHP issuers 

participating in the individual market 

on a State Exchange. In paragraph (a), 

we proposed to extend the standards set 

forth in proposed § 156.705 concerning 

maintenance of records to a QHP issuer 

in the individual market on a State 

Exchange in relation to cost-sharing 

reductions and advance payments of the 

premium tax credit. We also proposed 

that QHP issuers ensure that any 

delegated and downstream entities 

adhere to these requirements. We noted 

that a QHP issuer and its delegated and 

downstream entities may satisfy this 

standard by maintaining the relevant 

records for a period of 10 years and 

ensuring that they are accessible if 

needed in the event of an investigation 

or audit. 

We also proposed that QHP issuers 

participating in State Exchanges and 

FFEs be subject to reporting and 

oversight requirements. In particular, in 

paragraph (b), we proposed that an 

issuer that offers a QHP in the 

individual market through a State 

Exchange or an FFE report to HHS 

annually, in a timeframe and manner 

required by HHS, summary statistics 

with respect to administration of costVerDate Mar<15>2010 17:03 Oct 29, 2013 Jkt 232001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 E:\FR\FM\30OCR2.SGM 30OCR2

emcdonald on DSK67QTVN1PROD with RULES2
65078 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

sharing reductions and advance 

payments of the premium tax credit. 

Additionally, in paragraph (c) we 

proposed that HHS or its designee may 

audit an issuer that offers a QHP in the 

individual market through a State 

Exchange or an FFE to assess 

compliance with the requirements of 

this subpart and ensure appropriate use 

of Federal funds. 

Comment: In response to proposed 

§ 156.480(b), several commenters stated 

that the annual reports will be critical 

to protecting consumer rights, while 

others argued that this information will 

already be in HHS’s possession. Another 

commenter recommended that HHS rely 

on market conduct examinations to 

conduct oversight. One commenter 

asked for more information on the 

rationale for and content of these 

reports. 

Response: As discussed in the 

proposed rule, the annual reports will 

permit HHS to obtain summary 

information regarding cost-sharing 

reductions and advance payments of the 

premium tax credit across a broad range 

of issuers and identify any systemic 

issues and errors, without requiring 

annual audits. These reports will 

contain information not available to 

HHS through other channels, such as 

data on misapplications of cost-sharing 

reductions and advance payments of the 

premium tax credit. We believe that a 

consolidated report from all applicable 

issuers with respect to these programs 

will assist HHS in effectively targeting 

oversight activities and identifying 

problems that affect multiple issuers. 

Comment: One commenter asked HHS 

to clarify the meaning of ‘‘delegated 

entities’’ and ‘‘downstream entities’’ 

that are subject to the requirement, and 

noted that the requirement should only 

apply to entities responsible for keeping 

records associated with advance 

payments of the premium tax credit or 

cost-sharing reductions. 

Response: The terms ‘‘delegated 

entity’’ and ‘‘downstream entity’’ are 

defined at § 156.20. Furthermore, as 

noted in § 156.480(a), the maintenance 

of records standard applies to relevant 

delegated entities and downstream 

entities only in connection with costsharing reductions and advance 

payments of the premium tax credit. 

Comment: We received a comment 

asking for further guidance on how 

Navigators, consumers, and other 

entities can report instances of noncompliance to HHS. 

Response: We note that consumers, 

Navigators, and other entities can report 

issuer non-compliance to HHS through 

communication channels offered to 

consumers, such as the Health 

Insurance Marketplace Call Center, 

where such reports will be entered into 

the casework tracking system and 

addressed by CMS. 

Comment: One commenter asked HHS 

to clarify that any self-reported error 

rates will not be used as a basis for civil 

money penalties or decertification, since 

both penalties may be imposed for noncompliance with cost-sharing reduction 

and advance payment of the premium 

tax credit requirements. Another 

commenter asked HHS to provide 

guidance on how it will collect and 

respond to reports of non-compliance by 

QHP issuers and others. 

Response: HHS will collect 

information from QHP issuers on the 

administration of cost-sharing 

reductions and advance payments of the 

premium tax credit, including error 

rates, through the annual reports 

described in § 156.480(b). We anticipate 

that this information will be used to 

inform an oversight and audit strategy 

with respect to these programs, and will 

be provided to the State Exchanges and 

utilized by the FFE as applicable for 

oversight and enforcement activities 

such as decertification and CMPs. We 

note that the 2014 policy of 

nonenforcement of CMPs in instances of 

good faith established in § 156.800 

would apply in 2014 with respect to 

such errors. 

Comment: One commenter suggested 

limiting the record retention 

requirement to 6 years, while another 

supported the proposed timeframe. 

Response: As previously noted in this 

final rule, we are finalizing the 

maintenance of records provisions 

retention standard as proposed, in 

alignment with the statute of limitations 

for the False Claims Act and existing 

Exchange regulations. 

Comment: One commenter requested 

that HHS provide further information on 

the timeframe and procedure of 

proposed audits, suggested that audits 

should be limited to three years after the 

completion of a benefit year, and 

recommended that HHS specify a 

mechanism by which issuers can 

challenge the audit findings. 

Response: We intend to provide 

detailed guidance in the future and will 

seek comment on our audit process 

prior to finalization in order to ensure 

a transparent program and consistent 

audits. We are considering conducting 

audits in a manner that is coordinated 

across all programs and FFE compliance 

reviews to limit the number of potential 

audits that an organization would 

experience. 

Summary of Regulatory Changes 

We are finalizing these provisions and 

modifying paragraph (b) to specify that 

the annual reports must contain 

summary statistics with respect to the 

application of cost-sharing reductions 

and advance payments of the premium 

tax credit, including any failure to 

adhere to the standards set forth under 

§ 156.410(a) through (d), § 156.425(a) 

through (b), and § 156.460(a) through (c) 

of this Part. 

5. Subpart H—Oversight & Financial 

Integrity Requirements for Issuers of 

Qualified Health Plans in FederallyFacilitated Exchanges 

a. Maintenance of Records for FederallyFacilitated Exchanges (§ 156.705) 

We proposed in § 156.705(a) that 

issuers offering QHPs in an FFE 

maintain all documents and records 

(whether paper, electronic, or other 

media) and other evidence of 

accounting procedures and practices, 

which are critical for HHS to conduct 

activities necessary to safeguard the 

financial and programmatic integrity of 

the FFEs. We proposed that such 

activities include: (1) Periodic auditing 

of the QHP issuer’s financial records 

related to the QHP issuer’s participation 

in an FFE, and to evaluate the ability of 

the QHP issuer to bear the risk of 

potential financial losses; and (2) 

compliance reviews and other 

monitoring of a QHP issuer’s 

compliance with all Exchange standards 

applicable to issuers offering QHPs in 

the FFE listed in part 156. We proposed 

limiting the scope of this requirement to 

Exchange-specific records as applicable 

to the FFEs. In § 156.705(b), we 

proposed that the records described in 

proposed paragraph (a) of this section 

include the sources listed in proposed 

§ 155.1210(b)(2), (b)(3), and (b)(5) in 

order to align the record maintenance 

standards of the FFEs and State 

Exchanges to the extent possible. In 

§ 156.705(c), we proposed that issuers 

offering QHPs in an FFE must maintain 

the records described in this section, as 

well as records required by § 155.710 (to 

determine SHOP eligibility), for 10 

years. Proposed § 156.705(d) explained 

that the records referenced in paragraph 

(a) must be made available to HHS, the 

OIG, the Comptroller General, or their 

designees, upon request. We stated that 

the proposed standards pertain only to 

Exchange-specific areas of concern (for 

example, matters pertaining to advance 

payments of premium tax credits or 

cost-sharing reductions) within the 

FFEs, as HHS would expect the State 

DOI to oversee the maintenance of 

records pertaining to other aspects of 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65079 

QHP issuer operations as required under 

State law. 

Comment: Several commenters 

requested that HHS require maintenance 

and review of records related to 

particular standards in part 156, 

including QHP provider network 

adequacy, and the availability of 

essential community providers. 

Commenters also requested that HHS 

review documentation related to 

wellness programs, rating rules, 

essential health benefit requirements, 

and other applicable market reforms 

included in the Affordable Care Act, 

particularly in direct enforcement 

States. 

Response: Under § 156.715, which we 

are finalizing in this final rule, HHS will 

be conducting compliance reviews to 

ensure that issuers offering QHPs in the 

FFE comply with Exchange standards as 

applicable to them. These include the 

standards related to network adequacy 

under § 156.230 and the standards 

related to essential community 

providers under § 156.235. Section 

156.705 only applies to maintenance of 

records pertaining to FFEs, as we expect 

that QHP issuers will also have to 

comply with other aspects of issuer 

operations as required under state law. 

Comment: Several commenters 

recommended the 10-year record 

maintenance standards be reduced to 6 

or 7 years. 

Response: We are finalizing the 

maintenance of records provisions as 

proposed, in alignment with the statute 

of limitations for the False Claims Act 

and existing related regulations. A civil 

action may be brought under the False 

Claims Act ‘‘no more than 10 years after 

the date on which the violation is 

committed.’’ Additionally, similar 10- 

year record retention standards were 

previously finalized in the Exchange 

Establishment Rule and the Premium 

Stabilization Rule. We believe that 

maintaining consistency in our record 

retention standards will help ensure 

that entities maintain records across 

programs in a consistent manner, 

allowing HHS and States to coordinate 

oversight efforts across those program 

areas and reduce the burden on 

stakeholders. QHP issuers have the 

choice to maintain records in either 

paper or electronic format. We note that 

the 10-year obligation to retain records 

begins when the record is created. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 156.705 without 

modification. 

b. Compliance Reviews of QHP Issuers 

in Federally-Facilitated Exchanges 

(§ 156.715) 

In § 156.715 we proposed that QHP 

issuers will be subject to compliance 

review by HHS to ensure ongoing 

compliance with Exchange standards 

applicable to issuers offering QHPs in 

FFEs. We proposed the scope of the 

compliance reviews and the window of 

time that such compliance reviews 

could be conducted. 

Comment: We received comments 

supporting HHS’s authority to conduct 

compliance reviews of QHP issuers in 

the FFEs and no comments opposing 

this provision. 

Response: We are finalizing our 

policy as proposed. 

Summary of Regulatory Changes 

We are finalizing this provision with 

the correction of a typographical error in 

paragraph (c). 

6. Subpart J—Administrative Review of 

QHP Issuer Sanctions in a FederallyFacilitated Exchange 

a. Administrative Review in a FederallyFacilitated Exchange (§§ 156.901 

Through 156.963) 

In Subpart J, we proposed the 

administrative hearing process for 

issuers of QHPs in an FFE against which 

an enforcement action has been taken. 

The process is intended to provide the 

issuer an opportunity to submit 

evidence to be considered by the 

administrative law judge (ALJ) in 

determining whether a basis exists to 

assess a CMP against or decertify a QHP 

offered by the respondent, and whether 

the amount of the assessed CMP is 

reasonable, if applicable. Our proposed 

process is modeled after the appeals 

process for individuals and entities 

against which a CMP has been imposed 

in the individual and group health 

coverage markets. We did not receive 

any comments on our proposed 

regulations in this Subpart J. 

In § 156.805(d), we proposed that, if 

HHS proposes to assess a CMP under 

subpart I, HHS will send written notice 

of intent to issue a CMP to the QHP 

issuer concerned. Similarly, in 

§ 156.810(c) and (d), we proposed that, 

for standard and expedited 

decertifications, HHS will notify the 

QHP issuer, enrollees in the QHP, and 

the State DOI in the State in which the 

QHP is being decertified of HHS’s intent 

decertify a QHP offered by the issuer. 

We note that the notice under 45 CFR 

156.805(d) and 156.810(c) and (d) is 

different from, and in addition to, the 

notice required under 45 CFR 155.1080. 

In § 156.805 and § 156.810, we set forth 

the process by which QHP issuers will 

be notified formally of HHS’s intent to 

issue a CMP or decertify one or more of 

their QHPs, the grounds for the 

enforcement action, and other specified 

information, including information 

about the process for requesting an 

appeal. The 30-day clock for requesting 

an appeal under 45 CFR 156.905(a) 

starts on the date of issuance of HHS’s 

notice of intent to issue a CMP under 

§ 156.805 or notice of decertification of 

a QHP under § 156.810(c) or (d). By 

contrast, 45 CFR 155.1080 requires that 

notice be sent to the QHP issuer, 

enrollees in the QHP, and the State DOI 

when the decertification is final and no 

longer appealable. Furthermore, 45 CFR 

155.1080 does not apply in the case of 

a CMP. We are finalizing 45 CFR part 

156, subpart J as proposed, except for a 

minor change to § 156.963, described 

below. 

Summary of Regulatory Changes 

We are finalizing these provisions of 

45 CFR part 156, subpart J as proposed, 

with two exceptions. We are not 

finalizing § 156.949, and we are making 

a minor change to correct the reference 

to the ‘‘final order’’ in § 156.963. We are 

replacing ‘‘the final order described in 

§ 156.945’’ with ‘‘the final order 

imposing a civil money penalty.’’ 

7. Subpart L—Quality Standards 

a. Establishment of Standards for HHSApproved Enrollee Satisfaction Survey 

Vendors for Use by QHP Issuers in 

Exchanges (§ 156.1105) 

In § 156.1105, we proposed processes 

by which HHS would approve and 

oversee enrollee satisfaction survey 

vendors that will administer enrollee 

satisfaction surveys on behalf of QHP 

issuers. We proposed that enrollee 

satisfaction survey vendors be approved 

for one year terms and would be 

required to submit an annual 

application demonstrating that they 

meet all of the application and approval 

standards. We also proposed listing 

HHS-approved enrollee satisfaction 

survey vendors on an HHS Web site. We 

received several comments and our 

responses to § 156.1105 are set forth 

below. 

Comment: Commenters generally 

supported the proposal to establish an 

application and review process for 

enrollee satisfaction survey vendors. 

Commenters supported the proposed 

requirements that will ensure that 

enrollee satisfaction survey vendors 

abide by standards for integrity, 

including privacy and security 

standards. Commenters also supported 

establishing standards for QHP issuers 


emcdonald on DSK67QTVN1PROD with RULES2
65080 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

19Agency Information Collection Activities: 

Proposed Collection; Comment Request, 78 FR 

38986 (June 28, 2013). 

20Request for Domains, Instruments, and 

Measures for Development of a Standardized 

Instrument for Use in Public Reporting of Enrollee 

Satisfaction With Their Qualified Health Plan and 

Exchange 77 FR 37409 (June 21, 2012). 

to use only HHS-approved vendors to 

ensure consistency and integrity in 

enrollee satisfaction survey 

administration. 

Response: We are adopting the 

regulation as proposed to have HHS 

approve and oversee enrollee 

satisfaction survey vendors that meet 

certain standards. As stated in the 

proposed rule, we intend to promulgate 

future rulemaking requiring QHP issuers 

to contract with HHS-approved survey 

vendors to administer enrollee 

satisfaction surveys. By finalizing as 

proposed, we are ensuring that enrollee 

satisfaction survey vendors will be 

approved by mid-2014. We believe that 

this will allow QHP issuers adequate 

time to contract with these vendors by 

late 2014, prior to the implementation of 

any relevant quality reporting standards. 

Comment: Commenters suggested that 

HHS utilize one enrollee satisfaction 

survey vendor on behalf of all QHPs. 

Commenters also suggested that issuers 

have a role in the survey vendor 

application process. 

Response: We believe that allowing 

multiple enrollee satisfaction survey 

vendors the opportunity to apply for 

approval will encourage a competitive 

market of qualified enrollee satisfaction 

survey vendors. Therefore, HHS is 

finalizing the proposal to establish a 

standardized process to review and 

approve multiple enrollee satisfaction 

survey vendors. We intend for QHP 

issuers, along with the public, to have 

an opportunity to provide comments on 

other draft documents related to the 

enrollee satisfaction survey vendor 

application and approval process. 

Further, while QHP issuers will not 

have a direct role in HHS review and 

approval of enrollee satisfaction survey 

vendors, QHP issuers are expected to 

have a choice of enrollee satisfaction 

survey vendors with which to contract, 

including those with which the issuers 

may already have a business 

relationship, for example, to administer 

other surveys like the Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) survey on behalf of 

the issuer. Additionally, QHP issuers 

will have the opportunity to provide to 

HHS comment and feedback related to 

the work of approved enrollee 

satisfaction survey vendors. 

Comment: Commenters requested 

affirmation that enrollee satisfaction 

survey vendors would be required to 

adhere to non-discrimination standards. 

Response: Enrollee satisfaction survey 

vendors, as ‘‘delegated entities’’ of QHP 

issuers defined in 45 CFR 156.20 and set 

forth in 45 CFR 156.340, would be 

required to meet any non-discrimination 

standards required of QHP issuers, as 

specified in 45 CFR 156.200(e). 

Comment: Commenters requested that 

enrollee satisfaction survey vendors 

translate the enrollee satisfaction survey 

into different languages for populations 

representing a certain enrollment 

threshold, for example any language for 

which a QHP issuer’s enrollment meets 

a threshold of 5 percent or 1000 primary 

speakers. 

Response: Enrollee satisfaction survey 

vendors will not be responsible for 

translating the enrollee satisfaction 

survey. HHS is developing the enrollee 

satisfaction survey system as required 

by section 1311(c)(4) of the Affordable 

Care Act and will provide translated 

versions of the survey to ensure 

consistency across all surveys. HHS will 

provide enrollee satisfaction survey 

vendors with versions in English, 

Spanish, and Chinese, which align with 

current translation standards for the 

Medicare Advantage CAHPS® Health 

Plan surveys. 

Comment: Commenters supported the 

recommendation that HHS utilize the 

CAHPS® Health Plan survey as a model 

for the enrollee satisfaction survey to 

assess patient experience with QHP 

issuers. Another commenter suggested 

using the existing CAHPS® Health Plan 

survey without modification. 

Response: As stated in the proposed 

rule, we intend to establish in future 

rulemaking that the enrollee satisfaction 

survey will be modeled on the CAHPS®

5.0 Health Plan survey, which assesses 

patients’ satisfaction and experience 

with their health care, personal doctors, 

and health plans. In a Federal Register 

Notice published June 28, 2013,19 we 

sought public comment on the Enrollee 

Satisfaction Survey Data Collection, 

including the draft surveys. 

Commenters may wish to review the 

draft enrollee satisfaction surveys. 

Comment: Commenters requested that 

CMS articulate detailed implementation 

standards for the enrollee satisfaction 

survey. Commenters also requested that 

results of the survey be shared with 

State Exchanges. 

Response: As indicated in the 

proposed rule, we are planning to issue 

future regulations that will include 

detailed implementation standards for 

the enrollee satisfaction surveys as they 

relate to QHP issuers and Exchanges. 

Further, 45 CFR 155.205(a)(iv) requires 

Exchanges to display the enrollee 

satisfaction results on their Web sites. 

Comment: Several commenters made 

remarks about the content of the 

enrollee satisfaction survey, including 

requests that the survey assess: Provider 

satisfaction with QHP issuers and the 

experience of families and pediatricians 

that interact with the Exchange for their 

children’s coverage, and satisfaction 

with Exchanges overall, including the 

eligibility determination processes, plan 

selection, and in-person and telephonic 

assistance. Other commenters requested 

that HHS ensure experience of the 

Exchange is not attributed to QHP issuer 

performance. Finally, commenters cited 

their previously submitted comments in 

response to an HHS solicitation for 

comments on enrollee satisfaction 

measures and asked that their comments 

be considered.20

Response: Comments with regard to 

the content of the surveys are outside 

the scope of this final rule, which 

includes standards for the application 

and approval process for enrollee 

satisfaction survey vendors. However, as 

previously mentioned, commenters can 

review the draft surveys as part of the 

Enrollee Satisfaction Survey Data 

Collection, including the QHP Survey 

and the Marketplace Survey. Comments 

submitted in response to the June 21, 

2013 call for measures will be 

considered in the development of the 

enrollee satisfaction survey. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 156.1105 without 

modification. 

8. Subpart M—Qualified Health Plan 

Issuer Responsibilities 

a. Confirmation of HHS Payment and 

Collections Reports (§ 156.1210) 

We noted in the proposed rule that we 

anticipate sending each applicable 

issuer a monthly payment and 

collections report. This report will 

show, with respect to certain provisions 

under Title I of the Affordable Care Act, 

payments the Federal government owes 

to the issuer, as well as those the issuer 

owes the Federal government. For the 

2014 benefit year, we anticipate issuing 

a detailed monthly report, also known 

as the HIX 820, that will describe the 

advance payments of the premium tax 

credit and advance payments of costsharing reductions that the Federal 

government is paying to the issuer for 

each policy listed on the payment 

report, any amounts owed by the issuer 

for FFE user fees, as well as any 

adjustments from previous payments 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65081 

21We note that in order to provide issuers with 

more lead time to review the payment and 

collections report, HHS also anticipates providing 

an initial statement listing anticipated payments 

and charges. Issuers will not be under any 

obligation to respond to this initial statement. 

22BLS March 2013 Employer Costs for Employee 

Compensation Report (March 12, 2013). Available 

at: http://www.bls.gov/news.release/ecec.toc.htm. 

under those programs. The issuer will 

need to review this detailed payment 

and collections report against the 

payments it expects for each policy 

based on the eligibility and enrollment 

information transmitted by the 

Exchange, and any amounts it expects 

the Federal government to collect for 

FFE user fees.21 In § 156.1210 we 

proposed that, within 15 calendar days 

of the date of a payment and collections 

report, the issuer would either confirm 

to HHS that the payment and collections 

report accurately lists payments owed 

by and to the issuer for the timeframe 

specified in the payment and collections 

report, or would describe to HHS any 

inaccuracy it identifies in these amounts 

(including incorrect payment amounts, 

or extra or missing policies in the 

report). These notifications would be 

provided in a format specified by HHS. 

We stated that HHS will work with 

issuers to resolve any discrepancies 

between the amounts listed in the HIX 

820 payment and collections report and 

the amounts the issuer believes it 

should receive for the time period 

specified in the report. This proposed 

provision’s verification timeframe helps 

align enrollment and eligibility data 

transmitted by the Exchange, payments 

provided by and collected by the 

Federal government, and the issuer’s 

own records of payments due. This 

provision will also help ensure that the 

correct amounts of advance payments of 

the premium tax credit and cost-sharing 

reductions are paid to issuers on behalf 

of eligible individuals in a timely 

manner. The ability of HHS to identify 

and correct these errors promptly 

protects enrollees from unanticipated 

tax liability that could result if the 

advance payments of the premium tax 

credit they receive are greater than the 

amounts of premium tax credit 

authorized by the Exchange and 

accepted by the enrollee. 

Comment: We received several 

comments seeking further information 

about the HIX 820 payment and 

collections report. 

Response: In the fall of 2013, HHS 

intends to publish a Companion Guide 

to the HIX 820 payment and collections 

report. HHS offered related issuer 

training in September. 

Comment: Some commenters 

suggested that issuers would need at 

least 30 days to analyze and respond to 

the HIX 820 payment and collections 

report. Another commenter suggested 

that there should be at least a 60-day lag 

between the dates covered by the 

payment and collections report and the 

date it is sent to issuers. 

Response: We are aware that in some 

cases, particularly in this first year of 

operations, issuers may find it difficult 

to perform a full analysis of the payment 

and collections report and provide a 

response. However, it is largely due to 

the challenges of the first year of 

operations that we proposed a 15-day 

verification period—this short time lag 

will help HHS adjust any discrepancies 

as soon as possible. As we discuss 

below, if an issuer is unable to meet the 

15-day timeline, it will have later 

opportunities to note discrepancies. 

Comment: Several commenters 

expressed concern about the potential 

consequences of failing to report a 

discrepancy. Other commenters 

suggested that there should be a 

retroactive payment correction process, 

or an appeals process, to update 

eligibility and enrollment 

determinations based upon information 

received late. 

Response: We recognize that there are 

legitimate circumstances in which an 

issuer might not discover an inaccuracy 

within the 15-day timeline set forth in 

§ 156.1210, and we do not wish to 

penalize an issuer in such 

circumstances. Therefore, we are adding 

a new paragraph (b) to § 156.1210 

stating that HHS will work with issuers 

to resolve discrepancies reported by an 

issuer after the 15-day deadline, as long 

as the late discovery of the discrepancy 

was not due to misconduct on the part 

of the issuer. We are also considering 

establishing in future rulemaking a final 

deadline after which discrepancies 

cannot be reported, as well as an 

administrative appeals process that 

would be available to issuers that are 

not satisfied with the result of that 

process. 

Summary of Regulatory Changes 

We are finalizing § 156.1210, with the 

following modifications. We are 

redesignating paragraphs (a) and (b) as 

paragraphs (a)(1) and (a)(2) and are 

adding a new paragraph (b) to state that 

if an issuer reports a discrepancy in a 

payment and collections report later 

than 15 calendar days after the date of 

the report, HHS will work with the 

issuer to resolve the discrepancy as long 

the late reporting by the issuer was not 

due to misconduct on the part of the 

issuer. And because HHS’s payments 

will technically be made by the U.S. 

Treasury, we are modifying 

§ 155.1210(a)(1) to clarify that the 

payments owed by and to the issuer 

listed on the payment and collections 

report are payments to and from the 

Federal government. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

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. In order 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. 

The following sections of this 

document contain estimates of burden 

imposed by the associated information 

collection requirements (ICRs); 

however, not all of these estimates are 

subject to the ICRs under the PRA for 

the reasons noted. Estimated salaries for 

the positions cited were mainly taken 

from the Bureau of Labor Statistics 

(BLS) Web site (http://www.bls.gov/oco/ 

ooh_index.htm). The estimated salaries 

for the health policy analyst and the 

senior manager were taken from the 

Office of Personnel Management Web 

site. Fringe Benefits estimates were 

taken from the BLS March 2013 

Employer Costs for Employee 

Compensation Report.22

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

A. ICRs Regarding Program Integrity 

Provisions Related to State Operation of 

the Reinsurance Program (§ 153.260) 

In § 153.260, we direct a Stateoperated reinsurance program to: (1) 

Keep an accurate accounting of 

reinsurance contributions, payments, 

and administrative expenses; (2) submit 

to HHS and make public a summary 

report on program operations; and (3) 

engage an independent qualified 

auditing entity to perform a financial 


emcdonald on DSK67QTVN1PROD with RULES2
65082 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

23We use an estimate of self-insured entities 

published by the DOL in the March 2013 ‘‘Report 

to Congress: Annual Report of Self-insured Group 

Health Plans,’’ which reflects only those selfinsured health plans (including 19,800 self-insured 

plans and 4,000 plans that mixed self-insurance and 

insurance) that are required to file a Form 5500 

with the DOL. 

and programmatic audit for each benefit 

year, provide the audit results to HHS, 

and make public a summary of the audit 

results. Fewer than 10 States have 

informed HHS that they will operate 

reinsurance for the 2014 benefit year. 

While these reinsurance records 

requirements are subject to the PRA, we 

believe the associated burden is exempt 

under 5 CFR 1320.3(c)(4) and 44 U.S.C. 

3502(3)(A)(i), since fewer than 10 

entities would be affected. Therefore, 

we are not seeking approval from OMB 

for these information collection 

requirements. 

B. ICRs Regarding Program Integrity 

Provisions Related to State Operation of 

the Risk Adjustment Program 

(§ 153.310(c)(4) and § 153.310(d)(3)–(4), 

and § 153.365) 

In § 153.310(c)(4), § 153.310(d)(3)–(4), 

and § 153.365, we require a State 

operating risk adjustment to: (1) Retain 

records for a 10-year period; (2) submit 

an interim report in its first year of 

operation; (3) submit to HHS and make 

public a summary report on program 

operations for each benefit year; and (4) 

keep an accurate accounting for each 

benefit year of all receipts and 

expenditures related to risk adjustment 

payments, charges, and administrative 

expenses. Fewer than 10 States have 

informed HHS that they will operate 

risk adjustment for the 2014 benefit 

year. Since the burden associated with 

collections from fewer than 10 entities 

is exempt from the PRA under 5 CFR 

1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i), 

we are not seeking approval from OMB 

for the risk adjustment information 

collection requirements. However, if 

more than nine States elect to operate 

risk adjustment in the future, we will 

seek approval from OMB for these 

information collections. 

C. ICRs Regarding Maintenance of 

Records for Contributing Entities and 

Issuers of Reinsurance-Eligible Plans 

(§ 153.405(h) and § 153.410(c)) 

In § 153.405(h) and § 153.410(c), we 

included record retention standards for 

contributing entities and issuers of 

reinsurance-eligible plans. In 

§ 153.405(h), we require contributing 

entities to maintain documents and 

records, whether paper, electronic, or in 

other media, sufficient to substantiate 

the enrollment count submitted 

pursuant to § 153.405(b) for a period of 

at least 10 years, and to make those 

documents and records available upon 

request to HHS, the OIG, the 

Comptroller General, or their designees, 

for purposes of verification of 

reinsurance contribution amounts. This 

requirement may be satisfied if the 

contributing entity archives the 

documents and records and ensures that 

they are accessible if needed in the 

event of an investigation or audit. 

We estimate that 26,200 contributing 

entities will be subject to this 

requirement, based on the Department 

of Labor’s (DOL) estimated count of selfinsured plans and the number of fully 

insured issuers that we estimate will 

make reinsurance contributions.23 We 

believe that most of these contributing 

entities will already have the systems in 

place for record maintenance, and that 

the additional burden associated with 

this requirement is the time, effort, and 

additional labor cost required to 

maintain the records. On average, we 

estimate that it will take each 

contributing entity approximately 5 

hours annually to maintain records. We 

estimate that it will take an insurance 

operations analyst 5 hours (at $38.49 per 

hour) to meet the requirements in 

§ 153.405(h). On average, the cost for 

each contributing entity would be 

approximately $192.45 annually. 

Therefore, for 26,200 contributing 

entities, we estimate an aggregate 

burden of $5,042,190.00 and 131,000 

hours as a result of this requirement. 

In § 153.410(c), we require issuers of 

reinsurance-eligible plans to maintain 

documents and records, whether paper, 

electronic, or in other media, sufficient 

to substantiate the requests for 

reinsurance payments made pursuant to 

§ 153.410(a) for a period of at least 10 

years, and must make that evidence 

available upon request to HHS, the OIG, 

the Comptroller General, or their 

designees, (or, in the case of a State 

operating reinsurance, the State or its 

designees), for purposes of verification 

of reinsurance payment requests. We 

estimate that 1,900 issuers of 

reinsurance-eligible plans will be 

subject to this requirement, based on 

HHS’s most recent estimate of the 

number of fully insured issuers that will 

submit requests for reinsurance 

payments. On average, we estimate that 

it will take each issuer of a reinsuranceeligible plan approximately 10 hours 

annually to maintain the records. We 

estimate that it will take an insurance 

operations analyst 10 hours (at $38.49 

per hour) to meet these requirements. 

On average, the cost estimate for each 

issuer is approximately $384.90 

annually. Therefore, for 1,900 issuers, 

we estimate an aggregate burden of 

$731,310.00 and 19,000 hours as a result 

of this requirement. 

The burden estimates for these two 

recordkeeping requirements are broad 

estimates that include not only the 

maintenance of data, but all records and 

documents that may be necessary to 

substantiate the enrollment count and 

requests for reinsurance payments made 

pursuant to 45 CFR 153.405 and 

153.410, respectively. Because the scope 

of these requirements is substantially 

narrower than the scope of the 

recordkeeping requirement applicable to 

a State operating reinsurance, these 

estimates are lower than those that were 

set forth for the State-operated 

reinsurance programs record 

maintenance requirement (45 CFR 

153.240(c)) in the Premium Stabilization 

Rule published March 23, 2012 (77 FR 

17220), and the associated information 

collection request approved under OMB 

Control Number 0938–1155. We note 

that we will account for the additional 

burden associated with submitting this 

information to HHS in a future 

information collection request that will 

go through the requisite notice and 

comment period and subsequent OMB 

review and approval process. 

D. ICRs Related to Oversight and 

Financial Integrity Standards for State 

Exchanges (§ 155.1200 to § 155.1210) 

In subpart M of part 155, we describe 

the information collection and thirdparty disclosure standards related to the 

oversight and financial integrity of State 

Exchanges. 

Section 155.1200(a)(1) through (3) 

requires the State Exchange to follow 

GAAP and to monitor and report to HHS 

all Exchange-related activities. This 

includes keeping an accurate accounting 

of all Exchange receipts and 

expenditures. The burden associated 

with this reporting requirement is the 

time and effort needed to develop and 

submit reports of Exchange-related 

activities to HHS. The State Exchanges 

will electronically maintain the 

information as a result of normal 

business practices; therefore, the burden 

does not include the time and effort 

needed to maintain the Exchangerelated activity information. State 

Exchanges most likely will already have 

accounting systems in place to store 

accounting information. The burden 

associated with this requirement 

includes a computer programmer taking 

8 hours (at $48.61 an hour) to modify 

the system to maintain and monitor the 

information required under 

§ 155.1200(a)(1) through (3), an analyst 

taking 8 hours (at $58.05 an hour) to 

pull the necessary data under 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65083 

§ 155.1200(a)(1) through (3) in the State 

Exchange accounting system, and a 

senior manager taking 2 hours (at $77.00 

an hour) to oversee the development 

and transmission of the reported data. 

We estimate that it will take 18 total 

hours at a cost of $1,007.28 for each 

State Exchange. Therefore, for the 18 

State Exchanges, we estimate an 

aggregate burden of $18,131.04 and 324 

hours as a result of this requirement. 

Section 155.1200(b)(1) requires the 

State Exchange to submit a financial 

statement, in accordance with GAAP to 

HHS. The information under 

§ 155.1200(b) must be submitted at least 

annually by April 1 to HHS and must 

also be publicly displayed. The burden 

associated with this reporting 

requirement is the time and effort 

needed to develop and submit the 

financial statement to HHS. The State 

Exchanges will electronically submit the 

information. Therefore, the burden is 

the time and effort needed to develop 

and publically display the financial 

statement. The State Exchanges will 

electronically maintain the information 

as a result of normal business practices, 

therefore the burden does not include 

the time and effort needed to develop 

and maintain the financial information. 

The burden associated with this 

requirement includes a computer 

programmer taking 40 hours (at $48.61 

an hour) to design the financial 

statement report, an analyst taking 8 

hours (at $58.05 an hour) pulling the 

necessary data and inputting it into the 

financial statement report, and a senior 

manager taking 2 hours (at $77.00 an 

hour) overseeing the development and 

transmission of the reported data. We 

estimate a burden of 50 total hours for 

each State Exchange at a cost of 

$2,562.80. Therefore, for the 18 State 

Exchanges, we estimate an aggregate 

burden of $45,410.40 and 900 hours as 

a result of this requirement. 

Section 155.1200(b)(2) requires the 

State Exchange to submit eligibility and 

enrollment reports to HHS. The State 

Exchanges will electronically maintain 

the information as a result of normal 

business practices, therefore the burden 

does not include the time and effort 

required to develop and maintain the 

source information. The burden 

associated with this reporting 

requirement includes the time and effort 

necessary for a computer programmer 

taking 40 hours (at $48.61 an hour) to 

design the report template, an analyst 

taking 8 hours (at $58.05 an hour) to 

compile the statistics for the report for 

submission to HHS, a privacy officer 

taking 8 hours (at $64.98 an hour) and 

senior manager taking 2 hours (at $77.00 

an hour) overseeing the development 

and submission of the reported data. 

The burden also includes the time and 

effort necessary to post the data on the 

State Exchange Web site. We estimate 

an initial year burden of 58 hours at a 

cost of $3,082.64 to each State 

Exchange. Therefore, for the 18 State 

Exchanges, we estimate an aggregate 

burden of $55,487.52 and 1,044 hours as 

a result of this requirement. 

As discussed in § 155.1200(b)(3), the 

State Exchange will report performance 

monitoring data to HHS. The 

performance monitoring data includes 

information on financial sustainability, 

operational efficiency, and consumer 

satisfaction which will be reported on 

an annual basis. The State Exchanges 

will electronically maintain the 

information as a result of normal 

business practices developed under 

Establishment Grants from HHS for this 

purpose. Therefore the burden does not 

include the time and effort needed to 

develop and maintain the performance 

data. The burden associated with 

meeting the reporting requirement 

includes the time and effort necessary 

for a computer programmer taking 40 

hours (at $48.61 an hour) to design the 

report, for an analyst taking 12 hours (at 

$58.05 an hour) to pull data into the 

report and prepare for submission to 

HHS and for a senior manager taking 2 

hours (at $77.00 an hour) to oversee the 

development and transmission of the 

reported data. Section 155.1200(b) 

requires the State Exchange to submit to 

HHS and to display publicly financial, 

eligibility and enrollment reports and 

performance data at least annually. For 

those measures reported annually, we 

estimate that in the initial year a burden 

of 54 hours at a cost of $2,795.00 for 

each State Exchange. Therefore, for the 

18 State Exchanges, we estimate an 

aggregate burden of $50,031.00 and 972 

hours as a result of this requirement. For 

subsequent years, when the 

Establishment Grant project period ends 

we estimate an additional burden of 208 

hours necessary for the computer 

programmer (at $48.61 an hour) to 

maintain the performance data. For the 

first year, the burden for maintaining 

the data was already accounted for in 

the PRA package for the Exchange 

Establishment Grants (OMB Control 

Number 0938–1119); therefore, we are 

only including subsequent years in the 

ICR. We estimate that the total burden 

from year 1 will decrease to $25,016.00 

assuming a decreased effort and an 

additional burden of $18,1996.00 for 

maintaining the data, yielding a total 

burden of $44,012.00 for subsequent 

years. 

Section 155.1200(b)(4) requires the 

State Exchange to make public a 

summary of the results of the external 

financial audit. The burden associated 

with this requirement is the time and 

effort for a computer programmer taking 

1 hour (at $48.61 an hour) to design the 

summary and for an analyst to take 1 

hour (at $58.05 an hour) to pull data 

into the summary and prepare for public 

display. For this requirement we 

estimate in the initial year a burden of 

2 hours for the State Exchanges at a cost 

of $107.00 each and a total burden of 

$1926.00. Therefore, for the 18 State 

Exchanges, we estimate an aggregate 

burden of $1926.00 and 36 hours as a 

result of this requirement. 

Section 155.1200(c)(1) through (3) 

directs the State Exchange to engage an 

independent audit/review organization 

to perform an external financial and 

programmatic audit of the State 

Exchange. The State Exchange must 

provide the results of the audit and 

identify any material weakness or 

significant deficiency and any intended 

corrective action. The State Exchange 

must also make public a summary of the 

audit results. The burden associated 

with meeting this third party disclosure 

requirement includes the burden for an 

analyst level employee taking 3 hours 

(at $48.61 an hour) to pull data into a 

report, the time and effort necessary for 

a health policy analyst taking 2 hours (at 

$58.05 an hour) to prepare the report of 

the audit results, and the time for senior 

management taking 1 hour (at $77.00 an 

hour) to review and submit to HHS. We 

estimate a burden of 6 hours at a cost 

of $338.93 for each State Exchange. 

Therefore, for the 18 State Exchanges, 

we estimate an aggregate burden of 

$6,100.74 and 108 hours as a result of 

this requirement. 

As stated in § 155.1210(a), the State 

Exchange and its contractors, 

subcontractors, and agents must 

maintain for 10 years, books, records, 

documents, and other evidence of 

accounting procedures and practices. 

Section 155.1210(b) specifies that the 

records include information concerning 

management and operation of the State 

Exchange’s financial and other record 

keeping systems. The records must also 

include financial statements, including 

cash flow statements, and accounts 

receivable and matters pertaining to the 

costs of operation. Additionally, the 

records must contain any financial 

report filed with other Federal programs 

or State authorities. Finally, the records 

must contain data and records relating 

to the State Exchange’s eligibility 

verifications and determinations, 

enrollment transactions, appeals, plan 

variation certifications, QHP contracting 

data, consumer outreach, and Navigator 

grant oversight information. State 


emcdonald on DSK67QTVN1PROD with RULES2
65084 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

24HHS relied on the Bureau of Labor Statistics, 

U.S. Department of Labor, National Compensation 

Survey Occupational Earnings in the United States, 

2011, for estimates of job descriptions and wages. 

Exchanges most likely already have 

systems in place to store records. The 

burden associated with this record 

keeping requirement includes the time 

and effort necessary for a network 

administrator taking 16 hours (at $46.86 

an hour) to modify the State systems to 

maintain the information required 

under § 155.1210(b), for a health policy 

analyst taking 8 hours (at $58.05 an 

hour) to enter the data under 

§ 155.1210(b) into the State Exchange 

record retention system, and for senior 

management taking 2 hours (at $77.00 

an hour) to oversee record collection 

and retention. We estimate that it will 

take 26 hours at a cost of $1,368.16 for 

each State Exchange. Therefore, for the 

18 State Exchanges, we estimate an 

aggregate burden of $24,626.88 and 468 

hours as a result of this requirement. 

E. ICRs Related to Change of Ownership 

(§ 156.330) 

The QHP issuer must notify HHS of 

the change in a manner to be specified 

by HHS and provide the legal name and 

tax identification number of the new 

owner of the QHP and the effective date 

of the change of ownership. The 

information must be submitted at least 

30 days prior to the effective date of the 

change of ownership. We estimate fewer 

than 10 QHP issuers will report changes 

of ownership. While this reporting 

requirement is subject to the PRA, we 

believe the associated burden is exempt 

under 5 CFR 1320.3(c)(4) and 44 U.S.C. 

3502(3)(A)(i), since fewer than 10 

entities would be affected. Therefore, 

we are not seeking approval from OMB 

for these information collection 

requirements. 

F. ICRs Related to Payment for CostSharing Reductions (§ 156.430) 

Several of the provisions established 

in the interim final rule and finalized in 

this final rule require the collection of 

information. 

First, under paragraph (c)(3)(i) as 

established in the interim final rule, and 

finalized in this rule, a QHP issuer must 

notify HHS prior to the start of each 

benefit year whether or not it selects the 

simplified methodology for the benefit 

year. Pursuant to the Paperwork 

Reduction Act of 1995, we detailed this 

information collection in a notice 

requesting comment in the Federal 

Register (78 FR 38983), and estimated 

the total burden of this request to be 

$3,600,000 for 2014 through 2016. 

In § 156.430(c)(4) of the interim final 

rule, we established a simplified 

methodology for calculating the value of 

the amount that the enrollees would 

have paid under the standard plan 

without cost-sharing reductions. To 

estimate the incremental effect of the 

simplified methodology, we compared 

the burden of the standard methodology 

to the simplified methodology for those 

issuers that we assumed would select 

the simplified methodology. As 

discussed in the Collection of 

Information section in the 2014 

Payment Notice, we estimated that 

1,200 issuers will participate in an 

Exchange nationally and will incur total 

costs of approximately $138 million 

using the standard methodology. In 

contrast, in the interim final rule, we 

estimated that each issuer using the 

simplified methodology would incur 

labor costs of 40 hours of work by an 

actuary (at a wage rate of $56.89) and 20 

hours of work by an insurance manager 

(at a wage rate of $67.44) to develop the 

effective cost-sharing parameters and 

actuarial memorandum, and calculate 

the amount of cost-sharing reductions 

provided, resulting in a cost of 

approximately $3,624 per issuer.24

Because we have modified the 

simplified methodology in this final 

rule, we are updating this estimate to 

require 42 hours of work by an actuary 

and 22 hours of work by an insurance 

manager, resulting in a cost of 

approximately $3,873 per issuer. 

Although we cannot predict the precise 

number of issuers that will select either 

the standard or simplified methodology, 

we estimate that approximately half of 

QHP issuers (600 issuers) will 

implement the simplified methodology. 

Therefore, we estimate that the 

provisions of this rule will result in an 

incremental savings of approximately 

$57,676,164 ($60 million that would 

have been incurred by these issuers 

under the standard methodology, minus 

600 multiplied by $3,873) by reducing 

the overall administrative costs that 

issuers incur. 

The information collections 

associated with these provisions are 

subject to the Paperwork Reduction Act; 

however, the information collection 

process and instruments are currently 

under development. We will seek OMB 

approval and solicit public comments 

upon their completion. 

G. ICRs Related to Oversight of CostSharing Reductions and Advance 

Payments of the Premium Tax Credit 

(§ 155.340, § 156.410, § 156.460 and 

§ 156.480) 

Section 156.460 requires a QHP issuer 

to notify the enrollee within 45 calendar 

days of the QHP issuer’s discovery of 

the error, when the QHP issuer 

improperly reduces the premium by the 

amount of the advance payment of the 

premium tax. A parallel provision is 

established under § 155.340 when the 

Exchange is facilitating the collection of 

premiums. Additionally, in § 156.410(c) 

and (d) a QHP issuer must notify the 

enrollee within 45 calendar days of the 

QHP issuer’s discovery of the error of a 

misapplication of the cost-sharing 

reduction or the improper assignment to 

a plan variation (or standard plan 

without cost-sharing reductions) and 

subsequent reassignment. We believe 

that these notifications will be 

effectuated as part of standard billing 

practices and therefore will not create 

an additional burden on the Exchange 

or QHP issuers. Therefore, we do not 

estimate a burden for this notification. 

In § 156.480(a), we extend the 

standards set forth in proposed 

§ 156.705 concerning maintenance of 

records to a QHP issuer in the 

individual market on State Exchange 

with respect to cost-sharing reductions 

and advance payments of the premium 

tax credit. We believe that the burden of 

maintaining records related to costsharing reductions and advance 

payments of the premium tax credit for 

QHP issuers in an FFE is already 

accounted for in the burden for finalized 

§ 156.705, described elsewhere in the 

Collection of Information section of this 

final rule. In § 156.480(b), we establish 

that, for each benefit year, an issuer that 

offers a QHP in the individual market 

through a State Exchange or an FFE 

report to HHS annually, in a timeframe 

and manner required by HHS, summary 

statistics with respect to cost-sharing 

reductions and advance payments of the 

premium tax credit. In the proposed 

rule we stated that we believed that 

QHP issuers would already have the 

information and data systems in place 

necessary to generate a summary report, 

and that there would only be a small 

additional burden as a result of this 

submission requirement. We estimated 

that it would take an insurance 

operations analyst 16 hours (at $38.49 

an hour) annually and one senior 

manager 2 hours (at $77.00 an hour) to 

gather summary information and 

prepare a report for submission to HHS. 

Therefore, we estimated an additional 

burden of 21,600 hours and total costs 

of approximately $923,808 for 1,200 

QHP issuers ($769.84, on average, for 

each QHP issuer) as a result of this 

requirement. However, in this final rule, 

we are adding a requirement that these 

summary reports include information 

on misapplication of cost-sharing 

reductions and advance payments of the 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65085 

premium tax credit. We estimate that 

will take an insurance operations 

analyst 3 hours (at $38.49 an hour) 

annually and one senior manager 1 

hours (at $77.00 an hour) to gather and 

prepare this additional information for 

the summary report, resulting in an 

additional burden of 4,800 hours and 

total costs of approximately $230,964 

for 1,200 QHP issuers ($192.84, on 

average, for each issuer). This would 

increase the total burden for the 

summary reports to 26,400 hours and 

total costs to approximately $1,154,772. 

H. ICRs Related to Oversight and 

Financial Integrity Standards for Issuers 

of Qualified Health Plans in Federallyfacilitated Exchanges (§ 156.705 to 

§ 156.715) 

The burden estimates for the 

collections of information in Part 156, 

Subpart H, of the regulation reflect the 

assumption that the FFEs will include 

475 QHP issuers. We update the number 

of issuers in the FFEs from the 

estimated number in the proposed rule 

to reflect more current information on 

the number of issuers expected to 

participate in the FFEs. The labor 

categories and salary estimates used to 

calculate the cost burden of these 

collections on issuers are derived from 

the Bureau of Labor Statistics’ (BLS) 

May 2012 Occupational Employment 

Statistics data for selected occupations. 

These burden estimates generally reflect 

burden for the first year. 

Section 156.705 provides that issuers 

offering QHPs in an FFE must maintain 

all documents and records (whether 

paper, electronic or other media), and 

other evidence of accounting procedures 

and practices necessary for HHS to 

conduct activities necessary to 

safeguard the financial and 

programmatic integrity of the FFEs. 

Such activities include: (1) periodic 

auditing of the QHP issuer’s financial 

records, including data related to the 

QHP issuer’s ability to bear the risk of 

potential financial losses; and (2) 

compliance reviews and other 

monitoring of a QHP issuer’s 

compliance with all Exchange standards 

applicable to issuers offering QHPs in 

the FFEs listed in part 156. These 

standards are limited to Exchangespecific records as applicable to the 

FFEs, and are not enforced by States as 

primary regulators. This standard 

mirrors the maintenance of records 

standard applicable to State Exchanges 

and set forth in § 155.1210. The burden 

includes utilizing existing technology 

and systems to process and maintain 

this information. This reflects 60 hours 

of work by an actuary (at $56.89 an 

hour), 15 hours by a network 

administrator (at $46.86 an hour), 15 

hours by a compliance officer (at $53.75 

an hour), and 10 hours for a senior 

manager to review (at $77.00 an hour). 

We estimate that it will take 100 hours 

total at a cost of $5,693.00 for a QHP 

issuer to maintain these records for an 

aggregate burden of 47,500 hours and 

$2,704,175 for all 475 QHP issuers. 

Section 156.705(d) provides that QHP 

issuers must make all records described 

in paragraph (a) of this section available 

to HHS, the OIG, the Comptroller 

General, or their designees, upon 

request. In estimating the annual hour 

and cost burden on QHP issuers of 

making these records available to such 

authorities upon request, we assumed 

that such requests would normally be 

made in connection with a formal audit 

or compliance review or a similar 

process. Our burden estimates for this 

section address the hour and cost 

burden of making records available to 

HHS, the OIG, the Comptroller General, 

or their designees, for audit. Our 

estimates reflect our assumptions that 

about 47 QHP issuers would be subject 

to a formal audit in a given year and that 

the burden on issuers of making the 

records available would include the 

time, effort, and associated cost of 

compiling the information, reviewing it 

for completeness, submitting it to the 

auditor(s), and participating in 

telephone or in-person interviews. We 

anticipate using a risk-based approach 

to selection of the majority of QHP 

issuers for compliance review so that 

burdens to the issuer community would 

generally be linked to the QHP issuers’ 

risk. This reflects 75 hours of work by 

an actuary (at $56.89 an hour), 10 hours 

by a compliance officer (at $53.75 an 

hour), and 5 hours for a senior manager 

to review (at $77.00 an hour).We 

estimate it will take 90 hours at a cost 

of $5,189.25 for an issuer to make its 

records available for an audit for a total 

of 4,230 hours and $243,894.75 across 

all QHP issuers subject to this 

requirement, which we estimate at an 

upper end as 100 issuers. 

Section 156.715 establishes the 

general standard that QHP issuers are 

subject to compliance reviews. Our 

burden estimates for § 156.715 address 

the estimated annual hour and cost 

burden on QHP issuers of complying 

with the records disclosure 

requirements associated with 

compliance reviews conducted by an 

FFE. 

Section 156.715 provides standards 

for compliance reviews in the FFEs, 

stating that QHP issuers offering QHPs 

in the FFEs may be subject to 

compliance reviews. This section also 

describes the categories of records and 

information issuers must make available 

to an FFE in conducting such reviews. 

Compliance reviews evaluate a QHP 

issuer’s compliance with the Affordable 

Care Act and applicable regulations. 

Compliance reviews will target high-risk 

QHP issuers and not every issuer will be 

reviewed each year. The results of 

compliance reviews will also provide 

insight into trends across the 

compliance statuses of QHP issuers, 

enabling HHS to prioritize areas of 

oversight and technical assistance. 

We assume that HHS will conduct 

desk reviews of 31 QHP issuers each 

year. For each QHP issuer desk review 

we estimate an average of 40 hours of 

administrative work to assemble the 

requested information by a health policy 

analyst (at $58.05 an hour), 19.5 hours 

to review the information for 

completeness and an additional 30 

minutes for a compliance officer to 

submit the information to HHS (at 

$53.75 an hour). There will also be an 

additional 10 hours to spend on phone 

interviews conducted by the compliance 

reviewer and 2 hours to spend speaking 

through processes with the compliance 

reviewer (at $53.75 an hour). We 

estimate it will take 72 hours at a cost 

of $4,042.00 for an issuer to make 

information available to HHS for a desk 

review for a total of 2,232 hours and 

$125,302.00 across all issuers that may 

be subject to this information collection 

requirement. 

We assume that HHS will conduct 

onsite reviews of 16 QHP issuers each 

year. For each onsite review we estimate 

it will take an average of 40 hours for 

a health policy analyst (at $58.05 an 

hour) to assemble the requested 

information, and 19.5 hours for a 

compliance officer (at $53.75 an hour) to 

review the information for completeness 

and 30 minutes to submit the 

information to HHS in preparation for 

an onsite review. An onsite review 

requires an additional 2 hours to 

schedule the onsite activities with the 

compliance officer (at $53.75 an hour), 

4 hours for introductory meeting, 8 

hours to tour reviewers onsite, 10 hours 

of interview time, 2 hours to walk 

through processes with the reviewer, 

and 4 hours for concluding meetings. 

This is a total of approximately 60 hours 

of preparation time and an additional 30 

hours for onsite time for each QHP. We 

estimate it will take 90 hours at a cost 

of $5,009.50 for an issuer to make 

information available to HHS for an 

onsite review. We estimate that the 

burden for all respondents that may be 

subject to this information collection 

will be 1,440 hours at a cost of 

$80,152.00 


emcdonald on DSK67QTVN1PROD with RULES2
65086 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

In cases in which HHS could 

potentially require clarification around 

submitted information, HHS may need 

to contact QHP issuers within 30 days 

of information submission. This would 

be the case for approximately 20 issuers. 

We estimate it will take an issuer 2 

hours (at $53.75 an hour) to respond to 

questions for a total of 40 hours and 

$1,075.00. 

I. ICRs Regarding Administrative Review 

of QHP Issuer Sanctions in a Federallyfacilitated Exchange (§ 156.901 to 

§ 156.963) 

Subpart J of Part 156 sets forth the 

administrative process for issuers 

subject to a CMP or decertification of a 

QHP offered by the issuer to appeal the 

enforcement action. In this process, an 

ALJ decides whether there is a basis for 

HHS to assess a CMP against the issuer 

and whether the amount of an assessed 

penalty is reasonable, or whether there 

is a basis for decertifying a QHP offered 

by the issuer, as applicable. Section 

156.905 (intended to parallel 45 CFR 

150.405) provides that a party has a 

right to a hearing before an ALJ if it files 

a valid request for a hearing within 30 

days after the date of issuance of HHS’s 

notice of proposed assessment or 

decertification. An issuer’s request for a 

hearing must include the information 

listed in § 156.907. Under § 156.907, the 

request for a hearing must identify any 

factual or legal bases for the assessment 

or decertification with which the issuer 

disagrees. It must also describe with 

reasonable specificity the basis for the 

disagreement, including any affirmative 

facts or legal arguments on which the 

respondent is relying. The request must 

also identify the relevant notice of 

assessment or decertification by date 

and attach a copy of the notice. 

The burden associated with this 

request includes the time and effort 

needed by the issuer to create the 

written request and submit it to the 

appropriate entity. The associated costs 

are labor costs for gathering the 

necessary background information 

described under § 156.907 and then 

preparing and submitting the written 

statement. 

We base our burden estimate on the 

assumptions that one issuer will be 

subject to a CMP and that one issuer 

will have a QHP that it offers in an FFE 

decertified. We assume that the issuer in 

each case will choose to exercise its 

right to a hearing and will submit a 

valid request for hearing. The hours 

involved in preparing this request may 

vary; for the purpose of this burden 

estimate we estimate an average of 24 

hours will be needed: 10 hours for the 

compliance officer to gather and 

assemble the necessary background 

materials described under § 156.907, 

and prepare the written request (at 

$53.75 an hour), 12 hours for an 

attorney (at $90.14 an hour) to review 

the background materials and written 

request and provide recommendations 

to the senior manager, and 2 hours for 

the senior manager (at $77.00 an hour) 

to discuss and act upon the attorney’s 

recommendations and submit the 

written request. We estimate that it will 

take 24 hours at a cost of $1,773.18 for 

an issuer to prepare and submit a 

request for a hearing for a total of 48 

hours and $3546.36 for each issuer 

subject to an enforcement action under 

this scenario. This estimate includes 

any statement of good cause under 

§ 156.805(e)(3) or request for extension 

under § 156.905(b), if applicable. 

Because we only estimate that one 

issuer per year would appeal a CMP and 

one issuer will have its QHP offered in 

an FFE decertified, we do not include 

this burden estimate in our overall 

calculation of burden for this rule. 

J. ICRs Related to Quality Standards 

(§ 156.1105) 

In subpart L of part 156, we describe 

the information collection and 

disclosure requirements that pertain to 

the approval of enrollee satisfaction 

survey vendors. The burden estimate 

associated with these disclosure 

requirements includes the time and 

effort required for enrollee satisfaction 

survey vendors to develop, compile, and 

submit the application information and 

any documentation necessary to support 

oversight in the form and manner 

required by HHS. HHS is developing a 

model enrollee satisfaction survey 

vendor application that will include 

data elements necessary for HHS review 

and approval. In the near future, HHS 

will publish the model application and 

will solicit public comment. At that 

time, and per the requirements outlined 

in the PRA, we will estimate the burden 

on survey vendors for complying with 

this provision of the regulation. We 

solicit comment on the burden for the 

application and review process for these 

entities. 

K. ICRs Related to Confirmation of 

Payment and Collection Reports 

(§ 156.1210) 

In § 156.1210, we establish that, 

within 15 calendar days of the date of 

a HIX 820 payment and collections 

report from HHS, the issuer must, in a 

format specified by HHS, either confirm 

to HHS that the HIX 820 payment and 

collections report accurately lists, for 

the timeframe specified in the report, 

applicable payments owed by the 

Federal government and the issuer; or 

describe to HHS any inaccuracy it 

identifies in the payment and 

collections report. We believe that 

issuers will generally be able to perform 

this confirmation automatically, and 

that there will only be a small 

additional burden as a result of this 

requirement. We estimate that it will 

take an insurance operations analyst 1 

hour (at $38.49 an hour) monthly to 

make the comparison and note any 

discrepancies to HHS (approximately 

$461.88 for each issuer annually). Based 

on our most recent estimates, we believe 

that 2,400 issuers will be affected by 

this requirement, resulting in aggregate 

burden of approximately $1,108,512. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this rule; or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

[CMS–9957–F2], Fax: (202) 395–6974; 

or Email: OIRA_submission@

omb.eop.gov. 

IV. Regulatory Impact Analysis 

In accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the OMB. 

A. Summary 

This final rule sets financial integrity 

and oversight standards with respect to 

Exchanges; QHP issuers in an FFE; and 

States in regards to the operation of the 

risk adjustment and reinsurance 

programs. It also provides additional 

standards for special enrollment 

periods; survey vendors that may 

conduct enrollee satisfaction surveys on 

behalf of QHP issuers in Exchanges; and 

issuer participation in an FFE. In 

addition, this final rule amends and 

adopts as final interim provisions 

related to risk corridors and cost-sharing 

reduction reconciliation. Finally, it 

provides additional standards for 

guaranteed availability and renewability 

and makes certain amendments to the 

definitions and standards related to the 

market reform rules. 

HHS has crafted this final rule to 

implement the protections intended by 

Congress in an economically efficient 

manner. We have examined the effects 

of this final rule as required by 

Executive Order 12866 (58 FR 51735, 

September 1993, Regulatory Planning 

and Review), the Regulatory Flexibility 

Act (RFA) (September 19, 1980, Pub. L. 

96–354), section 1102(b) of the Social 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65087 

Security Act, the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4), 

Executive Order 13132 on Federalism, 

and the Congressional Review Act (5 

U.S.C. 804(2)). In accordance with OMB 

Circular A–4, HHS has quantified the 

benefits and costs where possible, and 

has also provided a qualitative 

discussion of some of the benefits and 

costs that may stem from this final rule. 

B. Executive Orders 13563 and 12866 

Executive Order 12866 (58 FR 51735) 

directs 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 (76 FR 

3821, January 21, 2011) is supplemental 

to and reaffirms the principles, 

structures, and definitions governing 

regulatory review as established in 

Executive Order 12866. 

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

final rule—(1) Having an annual effect 

on the economy of $100 million or more 

in any one year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year), and a 

‘‘significant’’ regulatory action is subject 

to review by the OMB. OMB has 

designated this final rule as a 

‘‘significant regulatory action.’’ Even 

though it is not certain whether it will 

have economic impacts of $100 million 

or more in any one year, HHS has 

provided an assessment of the potential 

costs and benefits associated with this 

final regulation. 

1. Need for Regulatory Action 

Starting in 2014, qualified individuals 

and qualified employers will be able to 

use coverage provided by QHPs— 

private health insurance that has been 

certified as meeting certain standards— 

through Exchanges. The premium 

stabilization programs—the reinsurance, 

risk corridors and risk adjustment 

programs—will be in place to ensure 

premium stability for health insurance 

issuers as enrollment increases and 

issuers enroll high-risk individuals. 

This final rule establishes general 

oversight requirements for Stateoperated reinsurance and risk 

adjustment programs; establishes 

oversight of issuers inside and outside 

of the Exchange when HHS operates risk 

adjustment or reinsurance on behalf of 

a State; and establishes oversight and 

monitoring of State Exchanges, FFEs, 

SHOPs (both State Exchanges and FFEs) 

and issuers of QHPs, specifically with 

respect to financial integrity, and 

maintenance of records. This final rule 

also restricts the use of funds for 

administrative expenses generated for 

State Exchanges and State-operated 

reinsurance programs; specifies 

procedures for oversight of advance 

payments of the premium tax credit and 

cost-sharing reductions; provides 

procedures to ensure the accuracy of 

data collection, calculations, and 

submissions; establishes requirements 

for enrollee satisfaction survey vendors; 

establishes standards related to risk 

corridors and cost-sharing reduction 

reconciliation; and provides additional 

standards for special enrollment 

periods. 

2. Summary of Impacts 

In accordance with OMB Circular A– 

4, Table IV.1 below depicts an 

accounting statement summarizing 

HHS’s assessment of the benefits and 

costs associated with this regulatory 

action. The period covered by the RIA 

is 2014–2017. 

HHS anticipates that the provisions of 

this final rule will ensure smooth 

operation of Exchanges, integrity of the 

reinsurance, risk adjustment and risk 

corridors programs, safeguard the use of 

Federal funds, prevent fraud and abuse, 

and increase access to healthcare 

coverage. Affected entities such as 

States and QHP issuers will incur costs 

to maintain records, submit reports to 

HHS and Exchanges, and provide 

records for compliance reviews. In 

addition, QHP issuers that adopt the 

simplified methodology for calculating 

cost sharing reductions will incur lower 

administrative costs during a 

transitional period. In accordance with 

Executive Order 12866, HHS believes 

that the benefits of this regulatory action 

justify the costs. 

TABLE IV.1—ACCOUNTING TABLE

Benefits: 

Qualitative: 

* Ensure integrity of the reinsurance and risk adjustment programs, smooth functioning of State Exchanges and FFEs 

* Prevent fraud and abuse 

* Ensure prompt refund of any excess premium or cost-sharing paid 

* Safeguard the use of Federal funds provided as cost-sharing reductions and advance payments of the premium tax credit and provide 

value for taxpayers’ dollars 

Costs: Estimate Year dollar Discount rate 

percent 

Period 

covered 

Annualized Monetized ($/year) ....................... $15.4 million 1 ................................................. 2013 7 2014–2017 

$15.3 million 1 ................................................. 2013 3 2014–2017 

Annual costs related to financial oversight, maintenance of records and reporting requirements for State Exchanges and State-operated reinsurance and risk-adjustment programs; record retention requirements for contributing entities and issuers of reinsurance-eligible plans; audit 

costs for State Exchanges and State-operated risk adjustment and reinsurance programs; costs for QHP issuers related to reporting requirements, record maintenance, audits, and training for customer service representatives. 

Qualitative: 

* Costs incurred by enrollee satisfaction survey vendors related to annual application and meeting HHS standards 


emcdonald on DSK67QTVN1PROD with RULES2
65088 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

25 ‘‘Effects on Health Insurance and the Federal 

Budget for the Insurance Coverage Provisions in the 

Affordable Care Act—May 2013 Baseline,’’ 

Congressional Budget Office, May 14, 2013. 

TABLE IV.1—ACCOUNTING TABLE—Continued 

* Reduce administrative costs for QHP issuers by allowing the use of a simplified methodology to calculate cost-sharing reductions during 

a transitional period 

* Reduce compliance costs for issuers by allowing a State operating a SHOP-only Exchange to establish and operate risk adjustment programs for both the small group and individual markets 

Note: 1. Approximately $2.7 million of these costs are estimated below in the RIA, including the audit costs in Table IV.2 and the rest of these 

costs are estimated in section III. 

3. Anticipated Benefits and Costs 

Starting in 2014, individuals and 

small businesses will be able to use 

health insurance coverage purchased 

through Exchanges. The Congressional 

Budget Office estimated that the number 

of people enrolled in coverage through 

Exchanges will increase from 7 million 

in 2014 to 24 million in 2017.25

Exchanges will create competitive 

marketplaces where qualified 

individuals and qualified employers can 

shop for insurance coverage, and are 

expected to reduce the unit price of 

quality insurance for the average 

consumer by pooling risk and 

promoting competition. 

The final rule specifies the standards 

and processes for the oversight and 

accountability of entities responsible for 

operations of the Exchanges and 

reinsurance and risk adjustment 

programs. Affected entities include 

States that establish and operate 

Exchanges and administer reinsurance 

and risk adjustment programs; FFEs; 

issuers of QHPs; health insurance 

issuers offering coverage both through 

and outside of an Exchange when HHS 

operates risk adjustment or reinsurance 

on behalf of the State; and contractors 

of these organizations. 

a. Benefits 

This final rule implements oversight, 

record maintenance, and enforcement 

provisions that will ensure integrity of 

the reinsurance and risk adjustment 

programs, State Exchanges and FFE 

functions, and prevent fraud and abuse. 

This final rule includes provisions 

that will create a system of oversight, 

financial integrity and program integrity 

in the Exchanges and the premium 

stabilization programs. The oversight 

requirements for the reinsurance and 

risk-adjustment programs will ensure 

that these programs are effective and 

efficient, and use program funds 

appropriately. The provisions of this 

final rule will also ensure that Federal 

funds are used appropriately by State 

Exchanges. By monitoring financial 

reports and overseeing State Exchange 

activities, HHS will safeguard the use of 

Federal funds provided as cost-sharing 

reductions and advance payments of the 

premium tax credit, and provide value 

for taxpayers’ dollars. 

The provisions of this final rule also 

ensure that enrollees are promptly 

refunded any excess premium paid or 

any excess cost sharing they should not 

have paid. Individuals harmed by 

misconduct on the part of non-Exchange 

entities will also be eligible for a special 

enrollment period. A QHP is also 

required to promptly reassign an 

enrollee improperly assigned to a plan 

variation (or standard plan without costsharing reductions), minimizing 

consumer harm. 

The annual application requirement 

for enrollee satisfaction survey vendors 

allows HHS to ensure that these entities 

participate in relevant training and posttraining certification, follow protocols 

related to quality assurance and the use 

of HHS data, and adhere to privacy and 

security standards when handling data. 

This will help to ensure that ultimately 

the enrollee satisfaction survey data are 

reliable and valid and that the 

information is sufficiently protected. 

b. Costs 

Affected entities will incur costs to 

comply with the provisions of this final 

rule. Costs related to information 

collection requirements subject to PRA 

are discussed in detail in section III and 

include administrative costs incurred by 

States and issuers related to record 

maintenance and reporting 

requirements; and oversight and 

financial integrity standards. In this 

section we discuss other costs related to 

the provisions in this final rule. 

States operating reinsurance programs 

are required to keep an accurate 

accounting for each benefit year, of all 

reinsurance funds received from HHS 

for reinsurance payments and for 

administrative expenses, as well as all 

claims for reinsurance payments from 

issuers of reinsurance-eligible plans, all 

payments made to those issuers, and all 

administrative expenses incurred. Stateoperated reinsurance programs will 

already have a system in place to track 

reinsurance funds received from HHS, 

claims from and payments to issuers, 

and expenses incurred to operate the 

reinsurance program. The cost for States 

operating reinsurance programs to 

maintain any records associated with 

the reinsurance program was previously 

estimated in the RIA of the 2014 

Payment Notice as being part of State 

administrative costs associated with 

operating the reinsurance program and 

are not included in this RIA. 

State-operated reinsurance programs 

will submit to HHS annually and make 

public a summary report of their 

program operations, which will include 

a summary of the accounting kept 

pursuant to § 153.260(a). We assume 

that the data already collected and used 

to report to issuers and HHS will be the 

same used to prepare this annual report. 

Therefore, the cost associated with this 

requirement is the incremental time and 

cost to prepare an annual report to HHS 

and the public on program operations. 

We estimate it will take an insurance 

management analyst 16 hours (at $51 

per hour) and a senior manager 2 hours 

(at $77 per hour) to prepare the report. 

Therefore, we estimate it will cost each 

State that operates reinsurance 

approximately $970 to submit this 

report to HHS. Because two States will 

operate reinsurance programs in the 

2014 benefit year, we estimate that an 

aggregate cost of $1,940 as a result of 

this requirement in the first year. We 

note that HHS will provide a portion of 

the reinsurance contributions it collects 

to States operating reinsurance 

programs to support State 

administration of reinsurance payments, 

which will likely cover the costs 

associated with this requirement. 

A State operating a risk adjustment 

program is required to maintain 

documents and records relating to the 

risk adjustment program, whether 

paper, electronic or in other media, for 

each benefit year for at least 10 years, 

and make them available upon request 

from HHS, the OIG, the Comptroller 

General, or their designees, to any such 

entity. The documents and records must 

be sufficient to enable the evaluation of 

a State-operated risk adjustment 

program’s compliance with Federal 

standards. States are also directed to 

ensure that their contractors, 

subcontractors, and agents maintain and 

make those documents and records 

available upon request from HHS, the 

OIG, the Comptroller General, or their 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65089 

26These cost savings have not been accounted for 

in the RIA since they are mostly due to a 

postponement of IT implementation necessary for 

using the standard methodology. QHP issuers will 

incur those costs at the end of the transitional 

period. 

designees. States operating risk 

adjustment programs should already 

have the documents and records of 

accounting procedures needed for 

periodic audits. Therefore, we estimate 

that the additional burden associated 

with this requirement is the time, effort, 

and additional labor cost required to 

maintain and archive the records. We 

assume that it will take an insurance 

operations analyst 10 hours (at $38.49 

an hour) to maintain records. Therefore, 

the average cost for each State will be 

approximately $385. Because one State 

will operate risk adjustment for the 2014 

benefit year, we estimate an aggregate 

cost of $385 to comply with this 

requirement in the first year. 

A State operating a risk adjustment 

program is required to submit by 

December 31st of the first benefit year 

of operation an interim summary report 

on the first 10 months of risk adjustment 

activities, in order to obtain recertification for the third benefit year. 

The cost of complying with this 

provision is the time and effort to write 

the interim report and submit it to HHS. 

We estimate it will take an insurance 

management analyst 16 hours (at $51 

per hour) and a senior manager 2 hours 

(at $77 per hour) to prepare the interim 

summary report. Therefore, we estimate 

that it will cost each State operating risk 

adjustment $970 to submit this report to 

HHS (an aggregate cost of $970 in the 

2014 benefit year). A State operating a 

risk adjustment program will submit 

and make public, a summary report of 

its risk adjustment program operations 

for each benefit year after the first 

benefit year for which the State operates 

the program. This summary report will 

include the results of a programmatic 

and financial audit for each benefit year 

conducted by an independent qualified 

auditing entity. We believe the cost of 

this annual report will be the same as 

the cost of producing the interim firstyear report described above, except for 

the cost of independent external audits 

required in subsequent years. The costs 

related to the annual external audit are 

estimated later in this RIA. These 

estimates also include the 

administrative costs related to the 

requirement for State-operated risk 

adjustment programs to keep accurate 

accounting for each benefit year of all 

receipts and expenditures related to risk 

adjustment payments, charges, and 

administration of the program. 

States face a variety of costs due to the 

monitoring requirements in this final 

rule. Conducting oversight of the 

Exchanges, State-operated risk 

adjustment and reinsurance programs, 

administration of the advance payments 

of the premium tax credit or costsharing reductions, and other activities 

require independent external audits, 

investigations, rectification of errors, 

and the development of summary 

reports which will be submitted to HHS. 

The estimated total costs for 

independent external audits for Stateoperated reinsurance, risk adjustment 

and Exchange programs are presented in 

Table IV.2. It is expected that 18 States 

will establish State Exchanges in 2014 

and, without further information; we 

assume that number will stay the same 

during the period covered by the RIA. 

We also assume that each State will 

conduct a financial audit and a 

programmatic audit annually, which 

will encompass the reinsurance and risk 

adjustment programs if the State 

operates these programs. Financial audit 

costs are estimated based on prices 

among the big four audit firms for 

governmental entities of similar size to 

those of the anticipated State Exchanges 

for a financial statement audit and 

Yellowbook Report (report on internal 

controls) that reflects different levels of 

cost for small, medium, and large 

entities, for entities with low, medium, 

and high risk. Programmatic audit 

estimates reflect the experience of 

Federal entitlement programs similar to 

Medicaid, audited under an A–133 

program compliance supplement, and 

vary only by the size of the program 

(small, medium and large). For example, 

a small Exchange judged to have low 

risk is estimated to have a combined 

financial and programmatic audit cost of 

$90,000; a large Exchange, in a State 

that also administers a reinsurance 

program (which implies a more 

complex, high risk operation) is 

estimated to have combined financial 

and programmatic audit costs of 

$360,000. Audit prices are based on 

2012 pricing and reflect an annual 

increase of 3 percent each year, based 

on recent industry experience. It is 

expected that there will be four small 

State Exchanges, 12 medium size State 

Exchanges and two large State 

Exchanges. The lower bound of the 

range in Table IV.2 below assumes that 

all State Exchanges have low risk and 

the upper bound is calculated assuming 

that all State Exchanges have high risk. 

TABLE IV.2—ESTIMATED AUDIT COSTS FOR STATE PROGRAMS: EXCHANGES, RISK ADJUSTMENT AND REINSURANCE

2014 2015 2016 2017 

Mid-range point estimate $2,572,000 $2,649,160 $2,728,635 $2,810,494 

Range .............................. $2,320,000–$2,820,000 $2,389,600–$2,904,600 $2,461,288–$2,991,738 $2,535,127–$3,081,490 

A State operating a SHOP-only 

Exchange will be able to establish and 

operate a risk adjustment program for 

both the small group and individual 

markets starting in 2015, which will 

allow it to minimize costs by achieving 

economies of scale and reduce 

compliance costs for issuers. The 

approach to allowable costs will be 

operationally simpler for issuers to 

implement and thus minimize related 

costs. 

The final rule permits QHP issuers to 

use the simplified methodology to 

calculate cost-sharing reductions during 

a transitional period and postpone a 

more costly IT implementation that 

would be required for the standard 

methodology. The costs related to the 

administration of cost-sharing 

reductions using the standard 

methodology are accounted for in the 

2014 Payment Notice and are not 

included here. However, as explained in 

section III, the provisions of this final 

rule allowing the use of a simplified 

methodology during the transitional 

period are likely to result in a reduction 

in costs estimated to be approximately 

$57.7 million.26

The final rule requires the enrollee 

satisfaction survey vendors engaged by 

issuers to meet HHS standards. Survey 

vendors will apply for approval 

annually in order to administer enrollee 

satisfaction surveys to QHP enrollees on 

behalf of a QHP issuer. Survey vendors 

will incur costs to submit the annual 

applications to HHS and to meet the 

requirements necessary to meet 

approval. 

C. Regulatory Alternatives 

Under the Executive Order, HHS is 

required to consider alternatives to 


emcdonald on DSK67QTVN1PROD with RULES2
65090 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

27 ‘‘Table of Small Business Size Standards 

Matched To North American Industry Classification 

System Codes,’’ effective July 23, 2013, U.S. Small 

Business Administration, available at http://

www.sba.gov. 

issuing rules and alternative regulatory 

approaches. HHS considered the 

following alternatives while developing 

this final rule: 

1. Increased Uniformity of FFE and 

State Exchange Standards 

Under this alternative, HHS would 

have required a single standard for 

Exchanges across the nation regardless 

of whether the Exchange was 

established and operated by a State or 

was Federally-facilitated. The final rule 

defers to State discretion in oversight of 

QHPs. This element of State flexibility 

would have been precluded if greater 

uniformity in operations and standards 

were to be imposed. Greater 

standardization would have had an 

uncertain impact on Federal oversight 

activities but would have likely 

imposed greater costs of compliance on 

State operations and issuers of QHPs in 

those States. 

2. Place More Responsibility on the 

States To Oversee Standards, Including 

Those for FFEs 

Under this alternative, HHS would 

have placed more responsibility on 

States and State Exchanges to interpret 

and meet statutory requirements. This 

approach could have created a number 

of problems. If every State developed its 

own monitoring standards, oversight of 

different Exchanges could be quite 

uneven, as States across the country 

have varying levels of fiscal resources 

with which to monitor activities. States 

currently have certain levels of 

responsibility under the Affordable Care 

Act to oversee standards for Exchanges, 

QHPs, and other programs. State 

Exchanges also have latitude in the 

number, type, and standardization of 

plans they certify and accept into the 

Exchange as QHPs. 

There are a number of provisions in 

the Affordable Care Act that devolve 

responsibilities from the Federal 

government to States. Increased 

devolution could have decreased the 

need of Federal oversight, while 

granting States increased flexibility to 

regulate Exchanges within their borders. 

There would also have been a decrease 

in oversight-related activities for the 

Federal government such as HHS 

investigations or audits. On the other 

hand, States would have likely faced an 

increase in their own oversight activities 

and related costs. 

3. Require QHP Issuers To Use the 

Standard Methodology To Reconcile 

Cost-Sharing Reductions. 

HHS considered not promulgating the 

simplified methodology during a 

transition period. However, doing so 

could have imposed costly IT system 

build requirements on many issuers at 

a time when QHP issuers are required 

to make many significant IT and 

operational changes. 

HHS believes that the options adopted 

in this final rule strike the best balance 

of ensuring efficient operation and 

integrity of Exchanges and the premium 

stabilization programs while providing 

flexibility to the States and minimizing 

the burden on States. 

D. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires agencies that issue a rule to 

analyze options for regulatory relief of 

small businesses if a rule has a 

significant 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 nonprofit 

organization that is not dominant in its 

field, or (3) a small government 

jurisdiction with a population of less 

than 50,000 (States and individuals are 

not included in the definition of ‘‘small 

entity’’). HHS uses as its measure of 

significant economic impact on a 

substantial number of small entities a 

change in revenues of more than 3 

percent to 5 percent. HHS anticipates 

that this final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

As discussed in the Web Portal 

interim final rule with comment period 

published on May 5, 2010 (75 FR 

24481), HHS examined the health 

insurance industry in depth in the RIA 

we prepared for the proposed rule on 

the establishment of the Medicare 

Advantage program (69 FR 46866, 

August 3, 2004). In that analysis it was 

determined that there were few, if any, 

insurance firms underwriting 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) that fell below the 

size thresholds for ‘‘small’’ business 

established by the SBA (currently $35.5 

million in annual receipts for health 

insurance issuers).27 In addition, HHS 

used the data from Medical Loss Ratio 

(MLR) annual report submissions for the 

2012 MLR reporting year to develop an 

estimate of the number of small entities 

that offer comprehensive major medical 

coverage. These estimates may overstate 

the actual number of small health 

insurance issuers that will be affected, 

since they do not include receipts from 

these companies’ other lines of 

business. It is estimated that out of 510 

issuers nationwide, there are 58 small 

entities each with less than $35.5 

million in earned premiums that offer 

individual or group health insurance 

coverage and will therefore be subject to 

the requirements of this final regulation. 

Forty three percent of these small 

issuers belong to larger holding groups, 

and many if not all of these small 

issuers are likely to have other lines of 

business that will result in their 

revenues exceeding $35.5 million. It is 

uncertain how many of these 510 

issuers will offer QHPs and be subject 

to the provisions of this final rule. Based 

on this analysis, however, HHS expects 

that this final rule will not affect small 

issuers. 

E. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act (UMRA) of 1995 

requires that agencies assess anticipated 

costs and benefits before issuing any 

final rule that includes a Federal 

mandate that could result in 

expenditure in any one year by State, 

local or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2013, that 

threshold level is approximately $141 

million. 

UMRA does not address the total cost 

of a final rule. Rather, it focuses on 

certain categories of cost, mainly those 

‘‘Federal mandate’’ costs resulting 

from—(1) imposing enforceable duties 

on State, local, or tribal governments, or 

on the private sector; or (2) increasing 

the stringency of conditions in, or 

decreasing the funding of, State, local, 

or tribal governments under entitlement 

programs. 

The final rule directs States to 

undertake oversight activities for State 

Exchanges, State-operated reinsurance 

and risk adjustment programs. The costs 

related to oversight activities, 

recordkeeping, reporting and audits are 

estimated to be approximately $2.8 

million in 2014. There are no mandates 

on local or tribal governments. The 

private sector, for example, QHP issuers 

and agents and brokers, will incur costs 

to comply with the record maintenance 

and reporting requirements set forth in 

this final rule. The related costs are 

estimated to be approximately $14.2 

million in 2014. However, QHP issuers 

are also expected to experience a cost 

savings of approximately $57.7 million 

by adopting the simplified methodology 

to calculate cost sharing reductions 

during a transitional period and 

postponing costly IT implementation. 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65091 

Consistent with the policy embodied in 

UMRA, this final rule has been designed 

to be a low-burden alternative for State, 

local and tribal governments, and the 

private sector while achieving the 

objectives of the Affordable Care Act. 

F. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

States are the primary regulators of 

health insurance coverage. States will 

continue to apply State laws regarding 

health insurance coverage. However, if 

any State law or requirement prevents 

the application of a Federal standard, 

then that particular State law or 

requirement would be preempted. State 

requirements that are more stringent 

than the Federal requirements would be 

not be preempted by this final rule. 

Accordingly, States have significant 

latitude to impose requirements with 

respect to health insurance coverage 

that are more restrictive than the 

Federal law. 

The State Exchange oversight program 

builds on State oversight efforts, where 

possible, by coordinating with State 

authorities to address compliance issues 

and concerns. Because QHPs are one of 

several commercial market insurance 

products operating in State markets, 

HHS will not seek to inappropriately 

duplicate or interfere with the 

traditional regulatory roles played by 

the State DOIs. HHS will generally 

confine its QHP oversight to Exchangespecific requirements and attributes. 

HHS will also seek to work 

collaboratively with State DOIs on 

topics of mutual concern, in the interest 

of efficiently deploying oversight 

resources and avoiding needlessly 

duplicative regulatory roles. QHP 

issuers are expected to comply with 

standards established by State law and 

regulation for cases forwarded to an 

issuer by a State in which it offers 

QHPs. 

The requirements specified in this 

final rule will impose direct costs on 

State and local governments and HHS 

has attempted to minimize those costs. 

State Exchanges and State-operated 

reinsurance and risk adjustment 

programs are required to undertake 

oversight, record maintenance and 

reporting activities. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policymaking discretion of the 

States, HHS has engaged in efforts to 

consult with and work cooperatively 

with affected States. Throughout the 

process of developing this final rule, 

HHS has attempted to balance the 

States’ interests in regulating health 

insurance issuers, and the Congress’ 

intent to provide uniform protections to 

consumers in every State. By doing so, 

it is HHS’s view that it has complied 

with the requirements of Executive 

Order 13132. Under the requirements 

set forth in section 8(a) of Executive 

Order 13132, and by the signatures 

affixed to this rule, HHS certifies that 

the CMS Center for Consumer 

Information and Insurance Oversight 

has complied with the requirements of 

Executive Order 13132 for the attached 

final rule in a meaningful and timely 

manner. 

G. Congressional Review Act 

This final rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.), which specifies that 

before a rule can take effect, the Federal 

agency promulgating the rule shall 

submit to each House of the Congress 

and to the Comptroller General a report 

containing a copy of the rule along with 

other specified information, and has 

been transmitted to the Congress and 

the Comptroller General for review. 

List of Subjects 

45 CFR Part 144 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements. 

45 CFR Part 146 

Health care, Health insurance, 

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 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 155 

Administrative practice and 

procedure, Health care access, Health 

insurance, Reporting and recordkeeping 

requirements, State and local 

governments, Cost-sharing reductions, 

Advance payments of premium tax 

credit, Administration and calculation 

of advance payments of the premium 

tax credit, Plan variations, Actuarial 

value. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

Committees, Brokers, Conflict of 

interest, Consumer protection, Costsharing reductions, Cost-sharing 

reduction reconciliation, 

Administration and calculation of 

advance payments of the premium tax 

credit, Payment and Collection Reports, 

Grant programs—health, Grants 

administration, Health care, Health 

insurance, Health maintenance 

organization (HMO), Health records, 

Hospitals, American Indian/Alaska 

Natives, Individuals with disabilities, 

Loan programs—health, Organization 

and functions (Government agencies), 

Medicaid, Public assistance programs, 

Reporting and recordkeeping 

requirements, State and local 

governments, Sunshine Act, Technical 

assistance, Women, and Youth. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR parts 

144, 146, 147, 153, 155, and 156 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 144.102 is amended by 

revising the second sentence of 

paragraph (c) to read as follows: 

§ 144.102 Scope and applicability. 

* * * * * 

(c) * * * If the coverage is offered to 

an association member other than in 

connection with a group health plan, 

the coverage is considered individual 

health insurance coverage for purposes 

of 45 CFR parts 144 through 148. 

* * * * * 

■ 3. Section 144.103 is amended by 

revising the introductory text and the 

definitions of ‘‘Group market,’’ 

‘‘Individual market,’’ ‘‘Large employer,’’ 

‘‘Policy year,’’ and ‘‘Small employer’’ to 

read as follows: 


emcdonald on DSK67QTVN1PROD with RULES2
65092 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

§ 144.103 Definitions. 

For purposes of parts 146 (group 

market), 147 (group and individual 

market), 148 (individual market), and 

150 (enforcement) of this subchapter, 

the following definitions apply unless 

otherwise provided: 

* * * * * 

Group market means the market for 

health insurance coverage offered in 

connection with a group health plan. 

* * * * * 

Individual market means the market 

for health insurance coverage offered to 

individuals other than in connection 

with a group health plan. 

* * * * * 

Large employer means, in connection 

with a group health plan with respect to 

a calendar year and a plan year, an 

employer who employed an average of 

at least 101 employees on business days 

during the preceding calendar year and 

who employs at least 1 employee on the 

first day of the plan year. In the case of 

plan years beginning before January 1, 

2016, a State may elect to define large 

employer by substituting ‘‘51 

employees’’ for ‘‘101 employees.’’ 

* * * * * 

Policy year means, with respect to— 

(1) A grandfathered health plan 

offered in the individual health 

insurance market, the 12-month period 

that is designated as the policy year in 

the policy documents of the individual 

health insurance coverage. If there is no 

designation of a policy year in the 

policy document (or no such policy 

document is available), then the policy 

year is the deductible or limit year used 

under the coverage. If deductibles or 

other limits are not imposed on a yearly 

basis, the policy year is the calendar 

year. 

(2) A non-grandfathered health plan 

offered in the individual health 

insurance market, or in a market in 

which the State has merged the 

individual and small group risk pools, 

for coverage issued or renewed 

beginning January 1, 2014, a calendar 

year for which health insurance 

coverage provides coverage for health 

benefits. 

* * * * * 

Small employer means, in connection 

with a group health plan with respect to 

a calendar year and a plan year, an 

employer who employed an average of 

at least 1 but not more than 100 

employees on business days during the 

preceding calendar year and who 

employs at least 1 employee on the first 

day of the plan year. In the case of plan 

years beginning before January 1, 2016, 

a State may elect to define small 

employer by substituting ‘‘50 

employees’’ for ‘‘100 employees.’’ 

* * * * * 

PART 146—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 4. The authority citation for part 146 

continues to read as follows: 

Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the Public 

Health Service Act (42 U.S.C. 300gg–1 

through 300gg–5, 300gg–11 through 300gg– 

23, 200gg–91, and 300gg–92) (1996). 

Section 146.145 also issued under 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 (2010). 

§ 146.145 [Amended] 

■ 5. Section 146.145 is amended by— 

■ A. Removing paragraph (b). 

■ B. Redesignating paragraphs (c) 

through (e) as paragraphs (b) through 

(d). 

■ C. In redesignated paragraph (b), 

removing references to ‘‘paragraph (c)’’ 

and adding in their place ‘‘paragraph 

(b)’’ wherever they appear in the 

following places: 

■ i. Paragraph (b)(1). 

■ ii. Paragraph (b)(3)(i). 

■ iii. Paragraph (b)(3)(ii). 

■ iv. Paragraph (b)(4)(i). 

■ v. Paragraph (b)(4)(ii). 

■ vi. Paragraph (b)(4)(iii) and 

Conclusion. 

■ vii. Paragraph (b)(5)(ii) and 

Conclusion. 

■ D. In redesignated paragraph (c), 

removing references to ‘‘paragraph (d)’’ 

and adding in their place ‘‘paragraph 

(c)’’ wherever they appear in the 

following places: 

■ i. Paragraph (c)(1). 

■ ii. Paragraph (c)(3). 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 6. 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. 

■ 7. Section 147.104 is amended by 

revising paragraph (a), adding a 

sentence at the end of paragraph (b)(2), 

and revising paragraphs (c)(2), (d)(1)(ii), 

and (d)(2) introductory text to read as 

follows: 

§ 147.104 Guaranteed availability of 

coverage. 

(a) Guaranteed availability of 

coverage in the individual and group 

market. Subject to paragraphs (b) 

through (d) of this section, a health 

insurance issuer that offers health 

insurance coverage in the individual, 

small group, or large group market in a 

State must offer to any individual or 

employer in the State all products that 

are approved for sale in the applicable 

market, and must accept any individual 

or employer that applies for any of those 

products. 

* * * * * 

(b) * * * 

(2) * * * Health insurance coverage 

in the individual market or in a market 

in which the State has merged the 

individual and small group risk pools 

must be offered on a calendar year basis. 

* * * * * 

(c) * * * 

(2) An issuer that denies health 

insurance coverage to an individual or 

an employer in any service area, in 

accordance with paragraph (c)(1)(ii) of 

this section, may not offer coverage in 

the individual, small group, or large 

group market, as applicable, for a period 

of 180 calendar days after the date the 

coverage is denied. This paragraph (c)(2) 

does not limit the issuer’s ability to 

renew coverage already in force or 

relieve the issuer of the responsibility to 

renew that coverage. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) It is applying this paragraph (d)(1) 

uniformly to all employers or individual 

in the large group, small group, or 

individual market, as applicable, in the 

State consistent with applicable State 

law and without regard to the claims 

experience of those individuals, 

employers and their employees (and 

their dependents) or any health statusrelated factor relating to such 

individuals, employees, and 

dependents. 

(2) An issuer that denies health 

insurance coverage to any employer or 

individual in a state under paragraph 

(d)(1) of this section may not offer 

coverage in the large group, small group, 

or individual market, as applicable, in 

the State before the later of either of the 

following dates: 

* * * * * 

■ 8. Section 147.106 is amended by 

revising paragraphs (a) and (d)(1) 

introductory text to read as follows: 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65093 

§ 147.106 Guaranteed renewability of 

coverage. 

(a) General rule. Subject to paragraphs 

(b) through (d) of this section, a health 

insurance issuer offering health 

insurance coverage in the individual, 

small group, or large group market is 

required to renew or continue in force 

the coverage at the option of the plan 

sponsor or the individual, as applicable. 

* * * * * 

(d) * * * 

(1) An issuer may elect to discontinue 

offering all health insurance coverage in 

the individual, small group, or large 

group market, or all markets, in a State 

in accordance with applicable State law 

only if— 

* * * * * 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS, 

AND RISK ADJUSTMENT UNDER THE 

AFFORDABLE CARE ACT 

■ 9. The authority citation for part 153 

is revised to read as follows: 

Authority: Secs. 1311, 1321, 1341–1343, 

Pub. L. 111–148, 24 Stat. 119. 

■ 10. Section 153.20 is amended by 

revising the definition of ‘‘contributing 

entity’’ to read as follows: 

§ 153.20 Definitions. 

* * * * * 

Contributing entity means a health 

insurance issuer or 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). A self-insured 

group health plan is responsible for the 

reinsurance contributions, although it 

may elect to use a third party 

administrator or administrative servicesonly contractor for transfer of the 

reinsurance contributions. 

* * * * * 

■ 11. Section 153.240 is amended by 

revising paragraph (c) to read as follows: 

§ 153.240 Disbursement of reinsurance 

payments. 

* * * * * 

(c) Maintenance of records. If a State 

establishes a reinsurance program, the 

State must maintain documents and 

records relating to the reinsurance 

program, whether paper, electronic, or 

in other media, for each benefit year for 

at least 10 years, and make them 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees, to any such entity. The 

documents and records must be 

sufficient to enable the evaluation of the 

State-operated reinsurance program’s 

compliance with Federal standards. The 

State must also ensure that its 

contractors, subcontractors, and agents 

similarly maintain and make relevant 

documents and records available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity. 

* * * * * 

■ 12. Section 153.260 is added to 

subpart C to read as follows: 

§ 153.260 General oversight requirements 

for State-operated reinsurance programs. 

(a) Accounting requirements. A State 

that establishes a reinsurance program 

must ensure that its applicable 

reinsurance entity keeps an accounting 

for each benefit year of: 

(1) All reinsurance contributions 

received from HHS for reinsurance 

payments and for administrative 

expenses; 

(2) All claims for reinsurance 

payments received from issuers of 

reinsurance-eligible plans; 

(3) All reinsurance payments made to 

issuers of reinsurance-eligible plans; 

and 

(4) All administrative expenses 

incurred for the reinsurance program. 

(b) State summary report. A State that 

establishes a reinsurance program must 

submit to HHS and make public a report 

on its reinsurance program operations 

for each benefit year in the manner and 

timeframe specified by HHS. The report 

must summarize the accounting for the 

benefit year kept pursuant to paragraph 

(a) of this section. 

(c) Independent external audit. A 

State that establishes a reinsurance 

program must engage an independent 

qualified auditing entity to perform a 

financial and programmatic audit for 

each benefit year of its State-operated 

reinsurance program in accordance with 

generally accepted auditing standards 

(GAAS). The State must: 

(1) Provide to HHS the results of the 

audit, in the manner and timeframe to 

be specified by HHS; 

(2) Ensure that the audit addresses the 

prohibitions set forth in § 153.265; 

(3) Identify to HHS any material 

weakness or significant deficiency 

identified in the audit, and address in 

writing to HHS how the State intends to 

correct any such material weakness or 

significant deficiency; and 

(4) Make public a summary of the 

results of the audit, including any 

material weakness or significant 

deficiency and how the State intends to 

correct the material weakness or 

significant deficiency, in the manner 

and timeframe to be specified by HHS. 

■ 13. Section 153.265 is added to 

subpart C to read as follows: 

§ 153.265 Restrictions on use of 

reinsurance funds for administrative 

expenses. 

A State that establishes a reinsurance 

program must ensure that its applicable 

reinsurance entity does not use any 

funds for the support of reinsurance 

operations, including any reinsurance 

contributions provided under the 

national contribution rate for 

administrative expenses, for any of the 

following purposes: 

(a) Staff retreats; 

(b) Promotional giveaways; 

(c) Excessive executive compensation; 

or 

(d) Promotion of Federal or State 

legislative or regulatory modifications. 

■ 14. Section 153.310 is amended by: 

A. Adding paragraph (c)(4). 

B. Revising the paragraph (d) subject 

heading and adding paragraphs (d)(3) 

and (4). 

C. Removing paragraph (f). 

The additions and revision read as 

follows: 

§ 153.310 Risk adjustment administration. 

* * * * * 

(c) * * * 

(4) Maintenance of records. A State 

operating a risk adjustment program 

must maintain documents and records 

relating to the risk adjustment program, 

whether paper, electronic, or in other 

media, for each benefit year for at least 

10 years, and make them available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity. The documents and 

records must be sufficient to enable the 

evaluation of the State-operated risk 

adjustment program’s compliance with 

Federal standards. A State operating a 

risk adjustment program must also 

ensure that its contractors, 

subcontractors, and agents similarly 

maintain and make relevant documents 

and records available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees, to any such entity. 

(d) Approval for a State to operate 

risk adjustment. * * * 

(3) In addition to requirements set 

forth in paragraphs (d)(1) and (2) of this 

section, to obtain re-approval from HHS 

to operate risk adjustment for a third 

benefit year, the State must, in the first 

benefit year for which it operates risk 

adjustment, provide to HHS an interim 

report, in a manner specified by HHS, 

including a detailed summary of its risk 

adjustment activities in the first 10 

months of the benefit year, no later than 

December 31 of the applicable benefit 

year. 

(4) To obtain re-approval from HHS to 

operate risk adjustment for each benefit 

year after the third benefit year, each 


emcdonald on DSK67QTVN1PROD with RULES2
65094 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

State operating a risk adjustment 

program must submit to HHS and make 

public a detailed summary of its risk 

adjustment program operations for the 

most recent benefit year for which risk 

adjustment operations have been 

completed, in the manner and 

timeframe specified by HHS. 

(i) The summary must include the 

results of a programmatic and financial 

audit for each benefit year of the Stateoperated risk adjustment program 

conducted by an independent qualified 

auditing entity in accordance with 

generally accepted auditing standards 

(GAAS). 

(ii) The summary must identify any 

material weakness or significant 

deficiency identified in the audit and 

address how the State intends to correct 

any such material weakness or 

significant deficiency. 

■ 15. Section 153.365 is added to 

subpart D to read as follows: 

§ 153.365 General oversight requirements 

for State-operated risk adjustment 

programs. 

If a State is operating a risk 

adjustment program, it must keep an 

accounting of all receipts and 

expenditures related to risk adjustment 

payments and charges and the 

administration of risk adjustmentrelated functions and activities for each 

benefit year. 

■ 16. Section 153.400 is amended by 

revising paragraph (a)(1)(i) and adding 

paragraph (a)(3) to read as follows: 

§ 153.400 Reinsurance contribution funds. 

(a) * * * 

(1) * * * 

(i) Such plan or coverage is not major 

medical coverage, subject to paragraph 

(a)(3) of this section. 

* * * * * 

(3) Notwithstanding paragraph 

(a)(1)(i) of this section, a health 

insurance issuer must make reinsurance 

contributions for lives covered by its 

group health insurance coverage 

whether or not the insurance coverage 

constitutes major medical coverage, if— 

(i) The group health plan provides 

health insurance coverage for those 

covered lives through more than one 

insurance policy that in combination 

constitute major medical coverage; 

(ii) The lives are not covered by selfinsured coverage of the group health 

plan (except for self-insured coverage 

limited to excepted benefits); and 

(iii) The health insurance coverage 

under the policy offered by the health 

insurance issuer constitutes the greatest 

portion of inpatient hospitalization 

benefits under the group health plan. 

* * * * * 

■ 17. Section 153.405 is amended by 

adding paragraph (h) to read as follows: 

§ 153.405 Calculation of reinsurance 

contributions. 

* * * * * 

(h) Maintenance of records. A 

contributing entity must maintain 

documents and records, whether paper, 

electronic, or in other media, sufficient 

to substantiate the enrollment count 

submitted pursuant to this section for a 

period of at least 10 years, and must 

make those documents and records 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees, to any such entity, for 

purposes of verification, investigation, 

audit, or other review of reinsurance 

contribution amounts. 

■ 18. Section 153.410 is amended by 

adding paragraph (c) to read as follows: 

§ 153.410 Requests for reinsurance 

payment. 

* * * * * 

(c) Maintenance of records. An issuer 

of a reinsurance-eligible plan must 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

requests for reinsurance payments made 

pursuant to this section for a period of 

at least 10 years, and must make those 

documents and records available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

or, in a State where the State is 

operating reinsurance, the State or its 

designee, to any such entity, for 

purposes of verification, investigation, 

audit, or other review of reinsurance 

payment requests. 

■ 19. Section 153.510 is amended by 

adding paragraph (e) 

§ 153.510 Risk corridors establishment 

and payment methodology 

* * * * * 

(e) A QHP issuer is not subject to the 

provisions of this subpart with respect 

to a stand-alone dental plan. 

■ 20. Section 153.520 is amended by 

revising paragraphs (a), (b), and (e) to 

read as follows: 

§ 153.520 Attribution and allocation of 

revenue and expense items. 

(a) Attribution to plans. Each item of 

expense in the target amount with 

respect to a QHP must be reasonably 

attributable to the operation of the QHP 

issuer’s non-grandfathered health plans 

in a market within a State, with the 

attribution based on a generally 

accepted accounting method, 

consistently applied. To the extent that 

a QHP issuer utilizes a specific method 

for allocating expenses for purposes of 

§ 158.170 of this subchapter, the method 

used for purposes of this paragraph 

must be consistent. 

(b) Allocation across plans. Each item 

of expense in the target amount must 

reflect an amount equal to the pro rata 

portion of the aggregate amount of such 

expense across all of the QHP issuer’s 

non-grandfathered health plans in a 

market within a State, allocated to the 

QHP based on premiums earned. 

* * * * * 

(e) Maintenance of records. A QHP 

issuer must maintain documents and 

records, whether paper, electronic, or in 

other media, sufficient to enable the 

evaluation of the issuer’s compliance 

with applicable risk corridors standards, 

for each benefit year for at least 10 

years, and must make those documents 

and records available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees, to any such entity, 

for purposes of verification, 

investigation, audit or other review. 

■ 21. Section 153.530 is amended by 

revising paragraphs (b) and (c) to read 

as follows: 

§ 153.530 Risk corridors data 

requirements. 

* * * * * 

(b) Allowable costs. A QHP issuer 

must submit to HHS data on the 

allowable costs incurred with respect to 

the QHP issuer’s non-grandfathered 

health plans in a market within a State 

in a manner specified by HHS. For 

purposes of this subpart, allowable costs 

must be — 

(1) Increased by any risk adjustment 

charges paid by the issuer for the nongrandfathered health plans under the 

risk adjustment program established 

under subpart D of this part. 

(i) Any risk adjustment charges paid 

by the issuer for the non-grandfathered 

health plans under the risk adjustment 

program established pursuant to subpart 

D of this part; and 

(ii) Any reinsurance contributions 

made by the issuer for the nongrandfathered health plans under the 

transitional reinsurance program 

established pursuant to subpart C of this 

part. 

(2) Reduced by — 

(i) Any risk adjustment payments 

received by the issuer for the nongrandfathered health plans under the 

risk adjustment program established 

pursuant to subpart D of this part; 

(ii) Any reinsurance payments 

received by the issuer for the nongrandfathered health plans under the 

transitional reinsurance program 

established pursuant to subpart C of this 

part; and 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65095 

(iii) Any cost-sharing reduction 

payments received by the issuer for the 

QHP issuer’s QHPs in a market within 

a State to the extent not reimbursed to 

the provider furnishing the item or 

service. 

(c) Allowable administrative costs. A 

QHP issuer must submit to HHS data on 

the allowable administrative costs 

incurred with respect to the QHP 

issuer’s non-grandfathered health plans 

in a market within a State in a manner 

specified by HHS. 

* * * * * 

■ 22. Section 153.620 is amended by 

revising paragraph (b) to read as follows: 

§ 153.620 Compliance with risk adjustment 

standards. 

* * * * * 

(b) Issuer records maintenance 

requirements. An issuer that offers risk 

adjustment covered plans must also 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to enable the 

evaluation of the issuer’s compliance 

with applicable risk adjustment 

standards, for each benefit year for at 

least 10 years, and must make those 

documents and records available upon 

request to HHS, the OIG, the 

Comptroller General, or their designees, 

or in a State where the State is operating 

risk adjustment, the State or its designee 

to any such entity, for purposes of 

verification, investigation, audit or other 

review. 

■ 23. Section 153.740 is added to 

subpart H 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 2014 

pursuant to this paragraph (a) if the 

issuer has made good faith efforts to 

comply with these requirements. 

(b) Default risk adjustment charge. 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. 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 24. The authority citation for part 155 

is revised 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). 

■ 25. Section 155.340 is amended by 

adding paragraph (h) to read as follows: 

§ 155.340 Administration of advance 

payments of the premium tax credit and 

cost-sharing reductions. 

* * * * * 

(h) Failure to reduce enrollee’s 

premiums to account for advance 

payments of the premium tax credit. If 

the Exchange discovers that it did not 

reduce an enrollee’s premium by the 

amount of the advance payment of the 

premium tax credit, then the Exchange 

must notify the enrollee of the improper 

reduction within 45 calendar days of 

discovery of the improper reduction and 

refund the enrollee any excess premium 

paid by or for the enrollee as follows: 

(1) Unless a refund is requested by or 

for the enrollee, the Exchange must, 

within 45 calendar days of discovery of 

the error, apply the excess premium 

paid by or for the enrollee to the 

enrollee’s portion of the premium (or 

refund the amount directly). If any 

excess premium remains, the Exchange 

must then apply the excess premium to 

the enrollee’s portion of the premium 

for each subsequent month for the 

remainder of the period of enrollment or 

benefit year until the excess premium is 

fully refunded (or refund the remaining 

amount directly). If any excess premium 

remains at the end of the period of 

enrollment or benefit year, the Exchange 

must refund any excess premium within 

45 calendar days of the end of the 

period of enrollment or benefit year, 

whichever comes first. 

(2) If a refund is requested by or for 

the enrollee, the refund must be 

provided within 45 calendar days of the 

date of the request. 

■ 26. Section 155.420 is amended by 

adding paragraph (d)(10) to read as 

follows: 

§ 155.420 Special enrollment periods. 

* * * * * 

(d) * * * 

(10) It has been determined by the 

Exchange that a qualified individual or 

enrollee, or his or her dependents, was 

not enrolled in QHP coverage; was not 

enrolled in the QHP selected by the 

qualified individual or enrollee; or is 

eligible for but is not receiving advance 

payments of the premium tax credit or 

cost-sharing reductions as a result of 

misconduct on the part of a nonExchange entity providing enrollment 

assistance or conducting enrollment 

activities. For purposes of this 

provision, misconduct includes, but is 

not limited to, the failure of the nonExchange entity 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. 

* * * * * 

§ 155.725 [Amended] 

■ 27. Section 155.725(j)(2)(i) is revised 

to read as follows: 

* * * * * 

(j) * * * 

(2) * * * 

(i) Experiences an event described in 

§ 155.420(d)(1), (2), (4), (5), (7), (8), (9), 

or (10); 

* * * * * 

■ 28. Subpart M is added to read as 

follows: 

Subpart M—Oversight and Program 

Integrity Standards for State Exchanges 

Sec. 

155.1200 General program integrity and 

oversight requirements. 

155.1210 Maintenance of records. 

Subpart M—Oversight and Program 

Integrity Standards for State 

Exchanges 

§ 155.1200 General program integrity and 

oversight requirements. 

(a) General requirement. A State 

Exchange must: 

(1) Keep an accurate accounting of 

Exchange receipts and expenditures in 

accordance with generally accepted 

accounting principles (GAAP). 

(2) Monitor and report to HHS on 

Exchange related activities. 


emcdonald on DSK67QTVN1PROD with RULES2
65096 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

(3) Collect and report to HHS 

performance monitoring data. 

(b) Reporting. The State Exchange 

must, at least annually, provide to HHS, 

in a manner specified by HHS, the 

following data and information: 

(1) A financial statement presented in 

accordance with GAAP by April 1 of 

each year, 

(2) Eligibility and enrollment reports, 

(3) Performance monitoring data, and 

(4) If the Exchange is collecting 

premiums under § 155.240, a report on 

instances in which it did not reduce an 

enrollee’s premium by the amount of 

the advance payment of the premium 

tax credit in accordance with 

§ 155.340(g)(1) and (2). 

(c) External audits. The State 

Exchange must engage an independent 

qualified auditing entity which follows 

generally accepted governmental 

auditing standards (GAGAS) to perform 

an annual independent external 

financial and programmatic audit and 

must make such information available 

to HHS for review. The State must: 

(1) Provide to HHS the results of the 

annual external audit; and 

(2)) Inform HHS of any material 

weakness or significant deficiency 

identified in the audit and must develop 

and inform HHS of a corrective action 

plan for such material weakness or 

significant deficiency; 

(3) Make public a summary of the 

results of the external audit. 

(d) External audit standard. The State 

Exchange must ensure that independent 

audits of State Exchange financial 

statements and program activities in 

paragraph (c) of this section address: 

(1) Compliance with paragraph (a)(1) 

of this section; 

(2) Compliance with requirements 

under this part; 

(3) Processes and procedures designed 

to prevent improper eligibility 

determinations and enrollment 

transactions; and 

(4) Identification of errors that have 

resulted in incorrect eligibility 

determinations. 

§ 155.1210 Maintenance of records. 

(a) General. The State Exchange must 

maintain and must ensure its 

contractors, subcontractors, and agents 

maintain for 10 years, documents and 

records (whether paper, electronic, or 

other media) and other evidence of 

accounting procedures and practices, 

which are sufficient to do the following: 

(1) Accommodate periodic auditing of 

the State Exchange’s financial records; 

and 

(2) Enable HHS or its designee(s) to 

inspect facilities, or otherwise evaluate 

the State- Exchange’s compliance with 

Federal standards. 

(b) Records. The State Exchange and 

its contractors, subcontractors, and 

agents must ensure that the records 

specified in paragraph (a) of this section 

include, at a minimum, the following: 

(1) Information concerning 

management and operation of the State 

Exchange’s financial and other record 

keeping systems; 

(2) Financial statements, including 

cash flow statements, and accounts 

receivable and matters pertaining to the 

costs of operations; 

(3) Any financial reports filed with 

other Federal programs or State 

authorities; 

(4) Data and records relating to the 

State Exchange’s eligibility verifications 

and determinations, enrollment 

transactions, appeals, and plan variation 

certifications; and 

(5) Qualified health plan contracting 

(including benefit review) data and 

consumer outreach and Navigator grant 

oversight information. 

(c) Availability. A State Exchange 

must make all records and must ensure 

its contractors, subcontractors, and 

agents must make all records in 

paragraph (a) of this section available to 

HHS, the OIG, the Comptroller General, 

or their designees, upon request. 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 29. 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). 

■ 30. Section 156.20 is amended by 

adding definitions in alphabetical order 

for ‘‘Enrollee satisfaction survey 

vendor’’ and ‘‘Registered user of the 

enrollee satisfaction survey data 

warehouse’’ to read as follows: 

§ 156.20 Definitions 

* * * * * 

Enrollee satisfaction survey vendor 

means an organization that has relevant 

survey administration experience (for 

example, CAHPS® surveys), 

organizational survey capacity, and 

quality control procedures for survey 

administration. 

* * * * * 

Registered user of the enrollee 

satisfaction survey data warehouse 

means enrollee satisfaction survey 

vendors, QHP issuers, and Exchanges 

authorized to access CMS’s secure data 

warehouse to submit survey data and to 

preview survey results prior to public 

reporting. 

■ 31. Section 156.80 is amended by 

revising the first sentence of paragraph 

(d)(1) and adding paragraph (d)(3) to 

read as follows: 

§ 156.80 Single risk pool. 

* * * * * 

(d) * * * 

(1) In general. A health insurance 

issuer must establish an index rate that 

is effective January 1 of each calendar 

year for a state market described in 

paragraphs (a) through (c) of this section 

based on the total combined claims 

costs for providing essential health 

benefits within the single risk pool of 

that state market. * * * 

* * * * * 

(3) Frequency of index rate and planlevel adjustments. (i) A health insurance 

issuer may not establish an index rate 

and make the market-wide adjustments 

pursuant to paragraph (d)(1) of this 

section, or make the plan-level 

adjustments pursuant to paragraph 

(d)(2) of this section, more or less 

frequently than annually, except as 

provided in paragraph (d)(3)(ii) of this 

section. 

(ii) Beginning the quarter after HHS 

issues notification that the FF–SHOP 

can process quarterly rate updates, a 

health insurance issuer in the small 

group market (not including a merged 

market) may establish index rates and 

make the market-wide adjustments 

pursuant to paragraph (d)(1) of this 

section, and make the plan-level 

adjustments pursuant to paragraph 

(d)(2) of this section, no more frequently 

than quarterly, provided that any 

changes to rates must have effective 

dates of January 1, April 1, July 1, or 

October 1. 

* * * * * 

■ 32. Section 156.155 is amended by 

revising paragraph (a)(3) to read as 

follows: 

§ 156.155 Enrollment in catastrophic 

plans. 

(a) * * * 

(3) Provides coverage of the essential 

health benefits under section 1302(b) of 

the Affordable Care Act, except that the 

plan provides no benefits for any plan 

year (except as provided in paragraphs 

(a)(4) and (b) of this section) until the 

annual limitation on cost sharing in 

section 1302(c)(1) of the act is reached. 

* * * * * 

■ 33. Section 156.330 is added to 

subpart D to read follows: 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65097 

§ 156.330 Changes of Ownership of 

Issuers of Qualified Health Plans in 

Federally-facilitated Exchanges. 

When a QHP issuer that offers one or 

more QHPs in a Federally-facilitated 

Exchange undergoes a change of 

ownership as recognized by the State in 

which the issuer offers the QHP, the 

QHP issuer must notify HHS of the 

change in a manner to be specified by 

HHS, and provide the legal name and 

Taxpayer Identification Number (TIN) of 

the new owner and the effective date of 

the change at least 30 days prior to the 

effective date of the change of 

ownership. The new owner must agree 

to adhere to all applicable statutes and 

regulations. 

■ 34. Section 156.400 is amended by 

revising the definition of ‘‘Most 

generous or more generous’’ to read as 

follows: 

§ 156.400 Definitions. 

* * * * * 

Most generous or more generous 

means, as between a QHP (including a 

standard silver plan) or plan variation 

and one or more other plan variations of 

the same QHP, the standard plan or plan 

variation designed for the category of 

individuals last listed in § 155.305(g)(3) 

of this subchapter. Least generous or 

less generous has the opposite meaning. 

* * * * * 

■ 35. Section 156.410 is amended by 

adding paragraphs (c) and (d) to read as 

follows: 

§ 156.410 Cost-sharing reductions for 

enrollees. 

* * * * * 

(c) Improper cost-sharing reductions. 

(1) If a QHP issuer fails to ensure that 

an individual assigned to a plan 

variation receives the cost-sharing 

reductions required under the 

applicable plan variation, taking into 

account § 156.425(b) concerning 

continuity of deductibles and out-ofpocket amounts (if applicable), then the 

QHP issuer must notify the enrollee of 

the improper application of any costsharing reduction within 45 calendar 

days of discovery of such improper 

application, and refund any resulting 

excess cost sharing paid by or for the 

enrollee as follows: 

(i) If the excess cost sharing was paid 

by the provider, the QHP issuer must 

refund the excess cost sharing to the 

provider within 45 calendar days of 

discovery of the improper application. 

(ii) If the excess cost sharing was not 

paid by the provider and is not 

requested by the enrollee as a refund, 

the QHP issuer must, within 45 calendar 

days of discovery of the error, apply the 

excess cost sharing paid by or for the 

enrollee to the enrollee’s portion of the 

premium (or refund the amount 

directly). If any excess premium 

remains, the QHP issuer must apply the 

excess premium to the enrollee’s 

portion of the premium for each 

subsequent month for the remainder of 

the period of enrollment or benefit year 

until the excess is fully applied (or 

refund any remaining amount directly). 

If any excess premium remains at the 

end of the period of enrollment or 

benefit year, the QHP issuer must 

refund the enrollee any remaining 

excess cost sharing paid by or for the 

enrollee within 45 calendar days of the 

end of the period of enrollment or 

benefit year, whichever comes first. 

(iii) If the excess cost sharing was not 

paid by the provider, and if a refund is 

requested by the enrollee, the refund 

must be provided to the enrollee within 

45 calendar days of the date of the 

request. 

(2) If a QHP issuer provides an 

individual assigned to a plan variation 

greater cost-sharing reductions than 

required under the applicable plan 

variation, taking into account 

§ 156.425(b) concerning continuity of 

deductibles and out-of-pocket amounts 

(if applicable), then the QHP issuer will 

not be eligible for reimbursement of any 

excess cost-sharing reductions provided 

to the enrollee, and may not seek 

reimbursement from the enrollee or the 

applicable provider for any of the excess 

cost-sharing reductions. 

(d) Improper assignment. If a QHP 

issuer does not assign an individual to 

the applicable plan variation (or 

standard plan without cost-sharing 

reductions) in accordance with 

§ 156.410(b) and § 156.425(a) based on 

the eligibility and enrollment 

information or notification provided by 

the Exchange, then the QHP issuer must 

reassign the enrollee to the applicable 

plan variation (or standard plan without 

cost-sharing reductions) and notify the 

enrollee of the improper assignment 

such that: 

(1) If the QHP issuer discovers the 

improper assignment between the first 

and fifteenth day of the month, the QHP 

issuer must reassign the enrollee to the 

correct plan variation (or standard plan 

without cost-sharing reductions) by the 

first day of the following month. 

(2) If the QHP issuer discovers the 

improper assignment between the 

sixteen and the last day of the month, 

the QHP issuer must reassign the 

individual to the correct plan variation 

(or standard plan without cost-sharing 

reductions) by the first day of the 

second following month. 

(3) If, pursuant to a reassignment 

under this paragraph (d), a QHP issuer 

reassigns an enrollee from a more 

generous plan variation to a less 

generous plan variation of a QHP (or a 

standard plan without cost-sharing 

reductions), the QHP issuer will not be 

eligible for reimbursement for any of the 

excess cost-sharing reductions provided 

to the enrollee following the effective 

date of eligibility required by the 

Exchange, and may not seek 

reimbursement from the enrollee or the 

applicable provider for any of the excess 

cost-sharing reductions. 

(4) If, pursuant to a reassignment 

under this paragraph (d), a QHP issuer 

reassigns an enrollee from a less 

generous plan variation (or a standard 

plan without cost-sharing reductions) to 

a more generous plan variation of a 

QHP, the QHP issuer must recalculate 

the enrollee’s liability for cost sharing 

paid between the effective date of 

eligibility required by the Exchange and 

the date on which the issuer effectuated 

the change, and must refund any excess 

cost sharing paid by or for the enrollee 

during such period as follows: 

(i) If the excess cost sharing was paid 

by the provider, the QHP issuer must 

refund the excess cost sharing to the 

provider within 45 calendar days of 

discovery of the improper assignment. 

(ii) If the excess cost sharing was not 

paid by the provider and is not 

requested by the enrollee as a refund, 

the QHP issuer must, within 45 calendar 

days of discovery of the improper 

assignment, apply the excess cost 

sharing paid by or for the enrollee to the 

enrollee’s portion of the premium (or 

refund the amount directly). If any 

excess premium remains, the QHP 

issuer must apply the excess premium 

to the enrollee’s portion of the premium 

for each subsequent month for the 

remainder of the period of enrollment or 

benefit year until the excess is fully 

applied (or refund the remaining 

amount directly). If any excess premium 

remains at the end of the period of 

enrollment or benefit year, the QHP 

issuer must refund the enrollee any 

remaining excess cost sharing paid by or 

for the enrollee within 45 calendar days 

of the end of the period of enrollment 

or benefit year, whichever comes first. 

(ii) 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. 

■ 36. Section 156.430 is amended by 

revising paragraphs (c)(3) introductory 

text, (c)(3)(iii) through (iv), and (c)(4) to 

read as follows: 


emcdonald on DSK67QTVN1PROD with RULES2
65098 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

§ 156.430 Payment for cost-sharing 

reductions. 

* * * * * 

(c) * * * 

(3) Selection of methodology. For 

benefit years 2014 through 2016, 

notwithstanding paragraph (c)(2) of this 

section, a QHP issuer may choose to 

calculate the amounts that would have 

been paid under the standard plan 

without cost-sharing reductions using 

the simplified methodology described in 

paragraph (c)(4) of this section. 

* * * * * 

(iii) The QHP issuer may not select 

the simplified methodology for a benefit 

year if the QHP issuer did not select the 

simplified methodology for the prior 

benefit year. 

(iv) Notwithstanding paragraphs 

(c)(3)(ii) and (iii) of this section, if a 

QHP issuer merges with or acquires 

another issuer of a QHP on the 

Exchange, or acquires a QHP offered on 

the Exchange from another QHP issuer, 

and if one, but not all, of the merging, 

acquiring, or acquired parties had 

selected the simplified methodology for 

the benefit year, then for the benefit year 

in which the merger or acquisition took 

place, the QHP issuer must calculate the 

amounts that would have been paid 

using the methodology (whether the 

standard methodology described in 

paragraph (c)(2) of this section or the 

simplified methodology described in 

paragraph (c)(4) of this section) selected 

with respect to the plan variation prior 

to the start of the benefit year (even if 

the selection was not made by that QHP 

issuer). For the next benefit year (if such 

benefit year is 2015 or 2016), the QHP 

issuer may select the simplified 

methodology (subject to paragraph 

(c)(3)(ii) of this section but, for that 

benefit year, not paragraph (c)(3)(iii) of 

this section) or the standard 

methodology. 

(4) Simplified methodology. Subject to 

paragraph (c)(4)(v) of this section, a 

QHP issuer that selects the simplified 

methodology described in this 

paragraph (c)(4) must calculate the 

amount that the enrollees would have 

paid under the standard plan without 

cost-sharing reductions for each policy 

that was assigned to a plan variation for 

any portion of the benefit year by 

applying each set of the standard plan’s 

effective cost-sharing parameters (as 

calculated under paragraphs (c)(3)(ii) 

and (iii) of this section) to the 

corresponding subgroup of total allowed 

costs for EHB for the policy (as 

described in paragraph (c)(4)(i) of this 

section). 

(i) For plan variation policies with 

total allowed costs for EHB for the 

benefit year that are: 

(A) Less than or equal to the effective 

deductible, the amount that the 

enrollees would have paid under the 

standard plan is equal to the total 

allowed costs for EHB under the policy 

for the benefit year multiplied by the 

effective pre-deductible coinsurance 

rate. 

(B) Greater than the effective 

deductible but less than the effective 

claims ceiling, the amount that the 

enrollees would have paid under the 

standard plan is equal to the sum of (x) 

the average deductible, plus (y) the 

effective non-deductible cost sharing, 

plus (z) the difference, if positive, 

between the total allowed costs under 

the policy for the benefit year for EHB 

that are subject to a deductible and the 

average deductible, multiplied by the 

effective post-deductible coinsurance 

rate. 

(C) Greater than or equal to the 

effective claims ceiling, the amount that 

the enrollees would have paid under the 

standard plan is equal to the annual 

limitation on cost sharing for the 

standard plan (as defined at 45 CFR 

156.400), or, at the QHP issuer’s election 

on a policy-by-policy basis, the amount 

calculated pursuant to the standard 

methodology described in paragraph 

(c)(2) of this section, 

(ii) The QHP issuer must calculate 

one or more sets of effective cost-sharing 

parameters, as described in paragraph 

(c)(4)(iii) of this section, based on 

policies assigned to the standard plan 

without cost-sharing reductions for the 

entire benefit year and must separately 

apply each set of effective cost-sharing 

parameters to the corresponding 

subgroup of total allowed costs for EHB 

for each plan variation policy, as 

described in paragraph (c)(4)(i) of this 

section, as follows: 

(A) If the standard plan has separate 

cost-sharing parameters for self-only 

coverage and other than self-only 

coverage, but does not have separate 

cost-sharing parameters for 

pharmaceutical and medical services, 

the QHP issuer must calculate and 

apply separate sets of effective costsharing parameters based on the costs of 

enrollees in the standard plan with selfonly coverage, and based on the costs of 

enrollees in the standard plan with 

other than self-only coverage. 

(B) If the standard plan has separate 

cost-sharing parameters for 

pharmaceutical and medical services, 

but does not have separate cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, the QHP 

issuer must calculate and apply separate 

sets of effective cost-sharing parameters 

based on the medical costs of the 

enrollees in the standard plan, and 

based on the pharmaceutical costs of the 

enrollees in the standard plan. 

(C) If the standard plan has separate 

cost-sharing parameters for self-only 

coverage and other than self-only 

coverage, and also has separate costsharing parameters for pharmaceutical 

and medical services, the QHP issuer 

must calculate and apply separate sets 

of effective cost-sharing parameters 

based on the medical costs of enrollees 

in the standard plan with self-only 

coverage, based on the pharmaceutical 

costs of enrollees in the standard plan 

with self-only coverage, based on the 

medical costs of enrollees in the 

standard plan with other than self-only 

coverage, and based on the 

pharmaceutical costs of enrollees in the 

standard plan with other than self-only 

coverage. 

(iii) The effective cost-sharing 

parameters for the standard plan 

without cost-sharing reductions must be 

calculated based on policies assigned to 

the standard plan for the entire benefit 

year for each of the required subgroups 

under paragraph (c)(4)(ii) of this section 

as follows: 

(A) If the standard plan has only one 

deductible (for the applicable 

subgroup), the average deductible of the 

standard plan is that deductible amount. 

If the standard plan has more than one 

deductible (for the applicable 

subgroup), the average deductible is the 

weighted average of the deductibles, 

weighted by allowed costs for EHB 

under the standard plan for the benefit 

year that are subject to each separate 

deductible. Services that are not subject 

to any deductible (including services 

subject to copayments or coinsurance 

but not any deductible) are not to be 

incorporated into the calculation of the 

average deductible. 

(B) The effective non-deductible cost 

sharing for the applicable subgroup is 

the average portion of total allowed 

costs for EHB that are not subject to any 

deductible for the standard plan for the 

benefit year incurred for standard plan 

enrollees and payable by the enrollees 

as cost sharing. The effective nondeductible cost sharing must be 

calculated based only on standard plan 

policies with total allowed costs for 

EHB for the benefit year that are above 

the effective deductible but for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing. 

(C) The effective deductible for the 

applicable subgroup is equal to the sum 

of the average deductible and the 

average total allowed costs for EHB that 

are not subject to any deductible for the 

standard plan for the benefit year. The 

average total allowed costs for EHB that 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65099 

are not subject to any deductible for the 

standard plan for the benefit year must 

be calculated based only on standard 

plan policies with total allowed costs 

for EHB for the benefit year that are 

above the average deductible but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing. 

(D) The effective pre-deductible 

coinsurance rate for the applicable 

subgroup is the proportion of the total 

allowed costs for EHB under the 

standard plan for the benefit year 

incurred for standard plan enrollees and 

payable as cost sharing. The effective 

pre-deductible coinsurance rate must be 

calculated based only on standard plan 

policies with total allowed costs for 

EHB for the benefit year that are less 

than or equal to the effective deductible. 

(E) The effective post-deductible 

coinsurance rate for the applicable 

subgroup is the quotient of (x) the 

portion of average allowed costs for EHB 

subject to a deductible incurred for 

enrollees for the benefit year, and 

payable by the enrollees as cost sharing 

other than through a deductible, over 

the difference of (y) the average allowed 

costs for EHB subject to a deductible 

incurred for enrollees for the benefit 

year, and (z) the average deductible. The 

effective post-deductible coinsurance 

rate must be calculated based only on 

standard plan policies with total 

allowed costs for EHB for the benefit 

year that are above the effective 

deductible but for which associated cost 

sharing for EHB is less than the annual 

limitation on cost sharing. 

(F) The effective claims ceiling for the 

applicable subgroup is calculated as the 

effective deductible plus the quotient of 

(x) the difference between the annual 

limitation on cost sharing and the sum 

of the average deductible and the 

effective non-deductible cost sharing, 

divided by (y) the effective postdeductible coinsurance rate. 

(iv) If a QHP issuer uses the 

simplified methodology described in 

this paragraph (c)(4), and the QHP 

issuer’s standard plan does not meet any 

of the criteria in paragraphs (c)(4)(v)(A) 

through (D) of this section, the QHP 

issuer must also submit to HHS, in the 

manner and timeframe established by 

HHS, the following information for each 

standard plan offered by the QHP issuer 

in the individual market through the 

Exchange for each of the required 

subgroups described in paragraph 

(c)(4)(ii) of this section: 

(A) The average deductible for each 

applicable subgroup; 

(B) The effective deductible for each 

applicable subgroup; 

(C) The effective non-deductible cost 

sharing amount for each applicable 

subgroup; 

(D) The effective pre-deductible 

coinsurance rate for each applicable 

subgroup; 

(E) The effective post-deductible 

coinsurance rate for each applicable 

subgroup; 

(F) The effective claims ceiling for 

each applicable subgroup; and 

(G) A memorandum developed by a 

member of the American Academy of 

Actuaries in accordance with generally 

accepted actuarial principles and 

methodologies that describes how the 

QHP issuer calculated the effective costsharing parameters for each applicable 

subgroup for the standard plan. 

(v) Notwithstanding paragraphs 

(c)(4)(i) through (iii) of this section, if a 

QHP issuer’s standard plan meets the 

criteria in any of the following 

subparagraphs, and the QHP issuer has 

selected the simplified methodology 

described in this paragraph (c)(4), then 

the QHP issuer must calculate the 

amount that the enrollees in the plan 

variation would have paid under the 

standard plan without cost-sharing 

reductions as the lesser of the annual 

limitation on cost sharing for the 

standard plan or the amount equal to 

the product of, (x) one minus the 

standard plan’s actuarial value, as 

calculated under 45 CFR 156.135, and 

(y) the total allowed costs for EHB for 

the benefit year under each policy that 

was assigned to a plan variation for any 

portion of the benefit year. 

(A) The standard plan has separate 

cost-sharing parameters for self-only 

coverage and other than self-only 

coverage, does not have separate costsharing parameters for pharmaceutical 

and medical services, and has an 

enrollment during the benefit year of 

fewer than 12,000 member months for 

coverage with total allowed costs for 

EHB for the benefit year that are greater 

than the effective deductible, but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing, in either of the following 

categories – 

(1) Self-only coverage; or 

(2) Other than self-only coverage. 

(B) The standard plan has separate 

cost-sharing parameters for 

pharmaceutical and medical services, 

does not have separate cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, and has 

an enrollment during the benefit year of 

fewer than 12,000 member months for 

coverage with total allowed costs for 

EHB for the benefit year that are greater 

than the effective deductible, but for 

which associated cost sharing for EHB is 

less than the annual limitation on cost 

sharing, in either of the following 

categories: 

(1) Coverage of medical services; or 

(2) Coverage of pharmaceutical 

services. 

(C) The standard plan has separate 

cost-sharing parameters for self-only 

coverage and other than self-only 

coverage and for pharmaceutical and 

medical services, and has an enrollment 

during the benefit year of fewer than 

12,000 member months for coverage 

with total allowed costs for EHB for the 

benefit year that are greater than the 

effective deductible, but for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing, in any of the following 

categories: 

(1) Self-only coverage of medical 

services; 

(2) Self-only coverage of 

pharmaceutical services; 

(3) Other than self-only coverage of 

medical services; or 

(4) Other than self-only coverage of 

pharmaceutical services. 

(D) The standard plan does not have 

separate cost-sharing parameters for 

pharmaceutical and medical services, or 

for self-only coverage and other than 

self-only coverage, and has an 

enrollment during the benefit year of 

fewer than 12,000 member months with 

total allowed costs for EHB for the 

benefit year that are greater than the 

effective deductible, but for which 

associated cost sharing for EHB is less 

than the annual limitation on cost 

sharing. 

(vi) Notwithstanding paragraphs 

(c)(4)(i)(A) and (B) of this section, and 

paragraphs (c)(4)(iii)(A) through (E) of 

this section, if more than eighty percent 

of the total allowed costs for EHB for the 

benefit year under a standard plan for a 

subgroup that requires a separate set of 

effective cost-sharing parameters 

pursuant to paragraph (c)(4)(ii) are not 

subject to a deductible, then: 

(A) The average deductible, the 

effective non-deductible cost sharing, 

and the effective deductible for the 

subgroup equal zero; 

(B) The effective pre-deductible 

coinsurance rate for the subgroup is 

equal to the effective post-deductible 

coinsurance rate for the subgroup, 

which is determined based on all 

standard plan policies for the applicable 

subgroup for which associated cost 

sharing for EHB is less than the annual 

limitation on cost sharing, and 

calculated for the applicable subgroup 

as the proportion of the total allowed 

costs for EHB under the standard plan 

for the benefit year incurred for 

standard plan enrollees and payable as 


emcdonald on DSK67QTVN1PROD with RULES2
65100 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

cost sharing (including cost sharing 

payable through a deductible); and 

(C) The amount that enrollees in the 

applicable subgroup in plan variation 

policies with total allowed costs for 

EHB for the benefit year that are less 

than the effective claims ceiling would 

have paid under the standard plan must 

be calculated using the formula in 

paragraph (c)(4)(i)(A). 

* * * * * 

■ 37. Section 156.460 is amended by 

adding paragraph (c) to read as follows: 

§ 156.460 Reduction of enrollee’s share of 

premium to account for advance payments 

of the premium tax credit. 

* * * * * 

(c) Refunds to enrollees for improper 

reduction of enrollee’s share of 

premium to account for advance 

payments of the premium tax credit. If 

a QHP issuer discovers that it did not 

reduce the portion of the premium 

charged to or for an enrollee for the 

applicable month(s) by the amount of 

the advance payment of the premium 

tax credit in accordance with paragraph 

(a)(1) of this section, the QHP issuer 

must notify the enrollee of the improper 

reduction within 45 calendar days of the 

QHP issuer’s discovery of the improper 

reduction and refund any excess 

premium paid by or for the enrollee, as 

follows: 

(1) Unless a refund is requested by or 

for the enrollee, the QHP issuer must, 

within 45 calendar days of discovery of 

the error, apply the excess premium 

paid by or for the enrollee to the 

enrollee’s portion of the premium (or 

refund the amount directly). If any 

excess premium remains, the QHP 

issuer must apply the excess premium 

to the enrollee’s portion of the premium 

for each subsequent month for the 

remainder of the period of enrollment or 

benefit year until the excess is fully 

applied (or refund the remaining 

amount directly). If any excess premium 

remains at the end of the period of 

enrollment or benefit year, the QHP 

issuer must refund any excess premium 

within 45 calendar days of the end of 

the period of enrollment or benefit year, 

whichever comes first. 

(2) If a refund is requested by or for 

the enrollee, the refund must be 

provided within 45 calendar days of the 

date of the request. 

■ 38. Section 156.480 is added to 

subpart E to read as follows: 

§ 156.480 Oversight of the administration 

of the cost-sharing reductions and advance 

payments of the premium tax credit 

programs. 

(a) Maintenance of records. An issuer 

that offers a QHP in the individual 

market through a State Exchange must 

adhere to, and ensure that any relevant 

delegated entities and downstream 

entities adhere to, the standards set 

forth in § 156.705 concerning 

maintenance of documents and records, 

whether paper, electronic, or in other 

media, by issuers offering QHPs in a 

Federally-facilitated Exchange, in 

connection with cost-sharing reductions 

and advance payments of the premium 

tax credit. 

(b) Annual reporting requirements. 

For each benefit year, an issuer that 

offers a QHP in the individual market 

through an Exchange must report to 

HHS, in the manner and timeframe 

required by HHS, summary statistics 

specified by HHS with respect to 

administration of cost-sharing reduction 

and advance payments of the premium 

tax credit programs, including any 

failure to adhere to the standards set 

forth under § 156.410(a) through (d), 

§ 156.425(a) through (b), and 

§ 156.460(a) through (c) of this Part. 

(c) Audits. HHS or its designee may 

audit an issuer that offers a QHP in the 

individual market through an Exchange 

to assess compliance with the 

requirements of this subpart. 

■ 39. Subpart H is added to read as 

follows: 

Subpart H—Oversight and Financial 

Integrity Standards for Issuers of Qualified 

Health Plans in Federally-Facilitated 

Exchanges 

Sec. 

156.705 Maintenance of records for 

Federally-facilitated Exchange. 

156.715 Investigations and compliance 

reviews in Federally-facilitated 

Exchanges. 

Subpart H—Oversight and Financial 

Integrity Standards for Issuers of 

Qualified Health Plans in FederallyFacilitated Exchanges 

§ 156.705 Maintenance of records for 

Federally-facilitated Exchanges. 

(a) General standard. Issuers offering 

QHPs in a Federally-facilitated 

Exchange must maintain all documents 

and records (whether paper, electronic, 

or other media) and other evidence of 

accounting procedures and practices, 

necessary for HHS to do the following: 

(1) Periodically audit financial 

records related to QHP issuers’ 

participation in a Federally-facilitated 

Exchange, and evaluate the ability of 

QHP issuers to bear the risk of potential 

financial losses; and 

(2) Conduct compliance reviews or 

otherwise monitor QHP issuers’ 

compliance with all Exchange standards 

applicable to issuers offering QHPs in a 

federally-facilitated Exchange as listed 

in this part. 

(b) Records. The records described in 

paragraph (a) of this section include the 

sources listed in § 155.1210(b)(2), (3), 

and (5) of this subchapter. 

(c) Record retention timeframe. 

Issuers offering QHPs in a Federallyfacilitated Exchange must maintain all 

records referenced in paragraph (a) of 

this section for 10 years. 

(d) Record availability. Issuers 

offering QHPs in a Federally-facilitated 

Exchange must make all records in 

paragraph (a) of this section available to 

HHS, the OIG, the Comptroller General, 

or their designees, upon request. 

§ 156.715 Compliance Reviews of QHP 

Issuers in Federally-facilitated Exchanges. 

(a) General standard. Issuers offering 

QHPs in a Federally-facilitated 

Exchange may be subject to compliance 

reviews to ensure ongoing compliance 

with Exchange standards applicable to 

issuers offering QHPs in a Federallyfacilitated Exchange. 

(b) Records. In preparation for or in 

the course of the compliance review, a 

QHP issuer must make available for 

HHS to review the records of the QHP 

issuer that pertain to its activities within 

a Federally-facilitated Exchange. Such 

records may include, but are not limited 

to the following: 

(1) The QHP issuer’s books and 

contracts, including the QHP issuer’s 

policy manuals and other QHP plan 

benefit information provided to the QHP 

issuer’s enrollees; 

(2) The QHP issuer’s policies and 

procedures, protocols, standard 

operating procedures, or other similar 

manuals related to the QHP issuer’s 

activities in a Federally-facilitated 

Exchange; 

(3) Any other information reasonably 

necessary for HHS to— 

(i) Evaluate the QHP issuer’s 

compliance with QHP certification 

standards and other Exchange standards 

applicable to issuers offering QHPs in a 

Federally-facilitated Exchange; 

(ii) Evaluate the QHP’s performance, 

including its adherence to an effective 

compliance plan, within a Federallyfacilitated Exchange; 

(iii) Verify that the QHP issuer has 

performed the duties attested to as part 

of the QHP certification process; and 

(iv) Assess the likelihood of fraud or 

abuse. 

(c) Interest of Qualified Individuals 

and Qualified Employers. HHS’s 

findings from the compliance reviews 

under this section may be in 

conjunction with other findings related 

to the QHP issuers’ compliance with 

certification standards, used to confirm 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65101 

that permitting the issuer’s QHPs to be 

available through a Federally-facilitated 

Exchange is in the interest of the 

qualified individuals and qualified 

employers as provided under 

§ 155.1000(c)(2) of this subchapter. 

(d) Onsite and desk reviews. The QHP 

issuer will make available, for the 

purposes listed in paragraph (c) of this 

section, its premises, physical facilities 

and equipment (including computer and 

other electronic systems), for HHS to 

conduct a compliance review as 

provided under this section. 

(1) A compliance review under this 

section will be carried out as an onsite 

or desk review based on the specific 

circumstances. 

(2) Unless otherwise specified, 

nothing in this section is intended to 

preempt Federal laws and regulations 

related to information privacy and 

security. 

(e) Compliance review timeframe. A 

QHP issuer may be subject to a 

compliance review up to 10 years from 

the last day of that plan benefit year, or 

10 years from the last day that the QHP 

certification is effective if the QHP is no 

longer available through a Federallyfacilitated Exchange; provided, 

however, that if the 10 year review 

period falls during an ongoing 

compliance review, the review period 

would be extended until the compliance 

review is completed. 

■ 40. Subpart J is added to read as 

follows: 

Subpart J—Administrative Review of QHP 

Issuer Sanctions in Federally-Facilitated 

Exchanges 

Sec. 

156.901 Definitions. 

156.903 Scope of Administrative Law 

Judge’s (ALJ) authority. 

156.905 Filing of request for hearing. 

156.907 Form and content of request for 

hearing. 

156.909 Amendment of notice of 

assessment or decertification request for 

hearing. 

156.911 Dismissal of request for hearing. 

156.913 Settlement. 

156.915 Intervention. 

156.917 Issues to be heard and decided by 

ALJ. 

156.919 Forms of hearing. 

156.921 Appearance of counsel. 

156.923 Communications with the ALJ. 

156.925 Motions. 

156.927 Form and service of submissions. 

156.929 Computation of time and 

extensions of time. 

156.929 Computation of time and 

extensions of time. 

156.931 Acknowledgment of request for 

hearing. 

156.935 Discovery. 

156.937 Submission of briefs and proposed 

hearing exhibits. 

156.939 Effect of submission of proposed 

hearing exhibits. 

156.941 Prehearing conferences. 

156.943 Standard of proof. 

156.945 Evidence. 

156.947 The record. 

156.951 Posthearing briefs. 

156.953 ALJ decision. 

156.955 Sanctions. 

156.957 Review by Administrator. 

156.959 Judicial review. 

156.961 Failure to pay assessment. 

156.963 Final order not subject to review. 

Subpart J—Administrative Review of 

QHP Issuer Sanctions in FederallyFacilitated Exchanges 

§ 156.901 Definitions. 

In this subpart, unless the context 

indicates otherwise: 

ALJ means administrative law judge 

of the Departmental Appeals Board of 

HHS. 

Filing date means the date 

postmarked by the U.S. Postal Service, 

deposited with a carrier for commercial 

delivery, or hand delivered. 

Hearing includes a hearing on a 

written record as well as an in-person or 

telephone hearing. 

Party means HHS or the respondent. 

Receipt date means five days after the 

date of a document, unless there is a 

showing that it was in fact received 

later. 

Respondent means an entity that 

received a notice of proposed 

assessment of a civil money penalty 

issued pursuant to § 156.805 or a notice 

of decertification pursuant to 

§ 156.810(c) or (d). 

§ 156.903 Scope of Administrative Law 

Judge’s (ALJ) authority. 

(a) The ALJ has the authority, 

including all of the authority conferred 

by the Administrative Procedure Act (5 

U.S.C. 554a), to adopt whatever 

procedures may be necessary or proper 

to carry out in an efficient and effective 

manner the ALJ’s duty to provide a fair 

and impartial hearing on the record and 

to issue an initial decision concerning 

the imposition of a civil money penalty 

or the decertification of a QHP offered 

in a Federally-facilitated Exchange. 

(b) The ALJ’s authority includes the 

authority to modify, consistent with the 

Administrative Procedures Act (5 U.S.C. 

552a), any hearing procedures set out in 

this subpart. 

(c) The ALJ does not have the 

authority to find invalid or refuse to 

follow Federal statutes or regulations. 

§ 156.905 Filing of request for hearing. 

(a) A respondent has a right to a 

hearing before an ALJ if it files a request 

for hearing that complies with 

§ 156.907(a), within 30 days after the 

date of issuance of either HHS’ notice of 

proposed assessment under § 156.805, 

notice of decertification of a QHP under 

§ 156.810(c) or § 156.810(d). The request 

for hearing should be addressed as 

instructed in the notice of proposed 

determination. ‘‘date of issuance’’ is five 

(5) days after the filing date, unless 

there is a showing that the document 

was received earlier. 

(b) The ALJ may extend the time for 

filing a request for hearing only if the 

ALJ finds that the respondent was 

prevented by events or circumstances 

beyond its control from filing its request 

within the time specified above. Any 

request for an extension of time must be 

made promptly by written motion. 

§ 156.907 Form and content of request for 

hearing. 

(a) The request for hearing must do 

the following: 

(1) Identify any factual or legal bases 

for the assessment or decertifications 

with which the respondent disagrees. 

(2) Describe with reasonable 

specificity the basis for the 

disagreement, including any affirmative 

facts or legal arguments on which the 

respondent is relying. 

(b) Identify the relevant notice of 

assessment or decertification by date 

and attach a copy of the notice. 

§ 156.909 Amendment of notice of 

assessment or decertification request for 

hearing. 

The ALJ may permit CMS to amend 

its notice of assessment or 

decertification, or permit the respondent 

to amend a request for hearing that 

complies with § 156.907(a), if the ALJ 

finds that no undue prejudice to either 

party will result. 

§ 156.911 Dismissal of request for hearing. 

An ALJ will order a request for 

hearing dismissed if the ALJ determines 

that: 

(a) The request for hearing was not 

filed within 30 days as specified by 

§ 156.905(a) or any extension of time 

granted by the ALJ pursuant to 

§ 156.905(b). 

(b) The request for hearing fails to 

meet the requirements of § 156.907. 

(c) The entity that filed the request for 

hearing is not a respondent under 

§ 156.901. 

(d) The respondent has abandoned its 

request. 

(e) The respondent withdraws its 

request for hearing. 

§ 156.913 Settlement. 

HHS has exclusive authority to settle 

any issue or any case, without the 

consent of the ALJ at any time before or 

after the ALJ’s decision. 


emcdonald on DSK67QTVN1PROD with RULES2
65102 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

§ 156.915 Intervention. 

(a) The ALJ may grant the request of 

an entity, other than the respondent, to 

intervene if all of the following occur: 

(1) The entity has a significant interest 

relating to the subject matter of the case. 

(2) Disposition of the case will, as a 

practical matter, likely impair or impede 

the entity’s ability to protect that 

interest. 

(3) The entity’s interest is not 

adequately represented by the existing 

parties. 

(4) The intervention will not unduly 

delay or prejudice the adjudication of 

the rights of the existing parties. 

(b) A request for intervention must 

specify the grounds for intervention and 

the manner in which the entity seeks to 

participate in the proceedings. Any 

participation by an intervenor must be 

in the manner and by any deadline set 

by the ALJ. 

(c) The Department of Labor (DOL) or 

the Internal Revenue Service (IRS) may 

intervene without regard to paragraphs 

(a)(1) through (3) of this section. 

§ 156.917 Issues to be heard and decided 

by ALJ. 

(a) The ALJ has the authority to hear 

and decide the following issues: 

(1) Whether a basis exists to assess a 

civil money penalty against the 

respondent. 

(2) Whether the amount of the 

assessed civil money penalty is 

reasonable. 

(3) Whether a basis exists to decertify 

a QHP offered by the respondent in a 

Federally-facilitated Exchange. 

(b) In deciding whether the amount of 

a civil money penalty is reasonable, the 

ALJ— 

(1) Will apply the factors that are 

identified in § 156.805 for civil money 

penalties. 

(2) May consider evidence of record 

relating to any factor that HHS did not 

apply in making its initial 

determination, so long as that factor is 

identified in this subpart. 

(c) If the ALJ finds that a basis exists 

to assess a civil money penalty, the ALJ 

may sustain, reduce, or increase the 

penalty that HHS assessed. 

§ 156.919 Forms of hearing. 

(a) All hearings before an ALJ are on 

the record. The ALJ may receive 

argument or testimony in writing, in 

person, or by telephone. The ALJ may 

receive testimony by telephone only if 

the ALJ determines that doing so is in 

the interest of justice and economy and 

that no party will be unduly prejudiced. 

The ALJ may require submission of a 

witness’ direct testimony in writing 

only if the witness is available for crossexamination. 

(b) The ALJ may decide a case based 

solely on the written record where there 

is no disputed issue of material fact the 

resolution of which requires the receipt 

of oral testimony. 

§ 156.921 Appearance of counsel. 

Any attorney who is to appear on 

behalf of a party must promptly file, 

with the ALJ, a notice of appearance. 

§ 156.923 Communications with the ALJ. 

No party or person (except employees 

of the ALJ’s office) may communicate in 

any way with the ALJ on any matter at 

issue in a case, unless on notice and 

opportunity for both parties to 

participate. This provision does not 

prohibit a party or person from 

inquiring about the status of a case or 

asking routine questions concerning 

administrative functions or procedures. 

§ 156.925 Motions. 

(a) Any request to the ALJ for an order 

or ruling must be by motion, stating the 

relief sought, the authority relied upon, 

and the facts alleged. All motions must 

be in writing, with a copy served on the 

opposing party, except in either of the 

following situations: 

(1) The motion is presented during an 

oral proceeding before an ALJ at which 

both parties have the opportunity to be 

present. 

(2) An extension of time is being 

requested by agreement of the parties or 

with waiver of objections by the 

opposing party. 

(b) Unless otherwise specified in this 

subpart, any response or opposition to 

a motion must be filed within 20 days 

of the party’s receipt of the motion. The 

ALJ does not rule on a motion before the 

time for filing a response to the motion 

has expired except where the response 

is filed at an earlier date, where the 

opposing party consents to the motion 

being granted, or where the ALJ 

determines that the motion should be 

denied. 

§ 156.927 Form and service of 

submissions. 

(a) Every submission filed with the 

ALJ must be filed in triplicate, including 

one original of any signed documents, 

and include: 

(1) A caption on the first page, setting 

forth the title of the case, the docket 

number (if known), and a description of 

the submission (such as ‘‘Motion for 

Discovery’’). 

(2) The signatory’s name, address, and 

telephone number. 

(3) A signed certificate of service, 

specifying each address to which a copy 

of the submission is sent, the date on 

which it is sent, and the method of 

service. 

(b) A party filing a submission with 

the ALJ must, at the time of filing, serve 

a copy of such submission on the 

opposing party. An intervenor filing a 

submission with the ALJ must, at the 

time of filing, serve a copy of the 

submission on all parties. Service must 

be made by mailing or hand delivering 

a copy of the submission to the 

opposing party. If a party is represented 

by an attorney, service must be made on 

the attorney. 

§ 156.929 Computation of time and 

extensions of time. 

(a) For purposes of this subpart, in 

computing any period of time, the time 

begins with the day following the act, 

event, or default and includes the last 

day of the period unless it is a Saturday, 

Sunday, or legal holiday observed by 

the Federal government, in which event 

it includes the next business day. When 

the period of time allowed is less than 

seven days, intermediate Saturdays, 

Sundays, and legal holidays observed by 

the Federal government are excluded 

from the computation. 

(b) The period of time for filing any 

responsive pleading or papers is 

determined by the date of receipt (as 

defined in § 156.901) of the submission 

to which a response is being made. 

(c) The ALJ may grant extensions of 

the filing deadlines specified in these 

regulations or set by the ALJ for good 

cause shown (except that requests for 

extensions of time to file a request for 

hearing may be granted only on the 

grounds specified in § 156.905(b)). 

§ 156.931 Acknowledgment of request for 

hearing. 

After receipt of the request for 

hearing, the ALJ assigned to the case or 

someone acting on behalf of the ALJ will 

send a letter to the parties that 

acknowledges receipt of the request for 

hearing, identifies the docket number 

assigned to the case, provides 

instructions for filing submissions and 

other general information concerning 

procedures, and sets out the next steps 

in the case. 

§ 156.935 Discovery. 

(a) The parties must identify any need 

for discovery from the opposing party as 

soon as possible, but no later than the 

time for the reply specified in 

§ 156.937(c). Upon request of a party, 

the ALJ may stay proceedings for a 

reasonable period pending completion 

of discovery if the ALJ determines that 

a party would not be able to make the 

submissions required by § 156.937 

without discovery. The parties should 

attempt to resolve any discovery issues 

informally before seeking an order from 

the ALJ. 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65103 

(b) Discovery devices may include 

requests for production of documents, 

requests for admission, interrogatories, 

depositions, and stipulations. The ALJ 

orders interrogatories or depositions 

only if these are the only means to 

develop the record adequately on an 

issue that the ALJ must resolve to 

decide the case. 

(c) Each discovery request must be 

responded to within 30 days of receipt, 

unless that period of time is extended 

for good cause by the ALJ. 

(d) A party to whom a discovery 

request is directed may object in writing 

for any of the following reasons: 

(1) Compliance with the request is 

unduly burdensome or expensive. 

(2) Compliance with the request will 

unduly delay the proceedings. 

(3) The request seeks information that 

is wholly outside of any matter in 

dispute. 

(4) The request seeks privileged 

information. Any party asserting a claim 

of privilege must sufficiently describe 

the information or document being 

withheld to show that the privilege 

applies. If an asserted privilege applies 

to only part of a document, a party 

withholding the entire document must 

state why the nonprivileged part is not 

segregable. 

(5) The disclosure of information 

responsive to the discovery request is 

prohibited by law. 

(e) Any motion to compel discovery 

must be filed within 10 days after 

receipt of objections to the party’s 

discovery request, within 10 days after 

the time for response to the discovery 

request has elapsed if no response is 

received, or within 10 days after receipt 

of an incomplete response to the 

discovery request. The motion must be 

reasonably specific as to the information 

or document sought and must state its 

relevance to the issues in the case. 

§ 156.937 Submission of briefs and 

proposed hearing exhibits. 

(a) Within 60 days of its receipt of the 

acknowledgment provided for in 

§ 156.931, the respondent must file the 

following with the ALJ: 

(1) A statement of its arguments 

concerning CMS’s notice of assessment 

or decertification (respondent’s brief), 

including citations to the respondent’s 

hearing exhibits provided in accordance 

with paragraph (a)(2) of this section. 

The brief may not address factual or 

legal bases for the assessment or 

decertification that the respondent did 

not identify as disputed in its request 

for hearing or in an amendment to that 

request permitted by the ALJ. 

(2) All documents (including any 

affidavits) supporting its arguments, 

tabbed and organized chronologically 

and accompanied by an indexed list 

identifying each document. 

(3) A statement regarding whether 

there is a need for an in-person hearing 

and, if so, a list of proposed witnesses 

and a summary of their expected 

testimony that refers to any factual 

dispute to which the testimony will 

relate. 

(4) Any stipulations or admissions. 

(b) Within 30 days of its receipt of the 

respondent’s submission required by 

paragraph (a) of this section, CMS will 

file the following with the ALJ: 

(1) A statement responding to the 

respondent’s brief, including the 

respondent’s proposed hearing exhibits, 

if appropriate. The statement may 

include citations to CMS’s proposed 

hearing exhibits submitted in 

accordance with paragraph (b)(2) of this 

section. 

(2) Any documents supporting CMS’s 

response not already submitted as part 

of the respondent’s proposed hearing 

exhibits, organized and indexed as 

indicated in paragraph (a)(2) of this 

section (CMS’s proposed hearing 

exhibits). 

(3) A statement regarding whether 

there is a need for an in-person hearing 

and, if so, a list of proposed witnesses 

and a summary of their expected 

testimony that refers to any factual 

dispute to which the testimony will 

relate. 

(4) Any admissions or stipulations. 

(c) Within 15 days of its receipt of 

CMS’s submission required by 

paragraph (b) of this section, the 

respondent may file with the ALJ a 

reply to CMS’s submission. 

§ 156.939 Effect of submission of 

proposed hearing exhibits. 

(a) Any proposed hearing exhibit 

submitted by a party in accordance with 

§ 156.937 is deemed part of the record 

unless the opposing party raises an 

objection to that exhibit and the ALJ 

rules to exclude it from the record. An 

objection must be raised either in 

writing prior to the prehearing 

conference provided for in § 156.941 or 

at the prehearing conference. The ALJ 

may require a party to submit the 

original hearing exhibit on his or her 

own motion or in response to a 

challenge to the authenticity of a 

proposed hearing exhibit. 

(b) A party may introduce a proposed 

hearing exhibit following the times for 

submission specified in § 156.937 only 

if the party establishes to the 

satisfaction of the ALJ that it could not 

have produced the exhibit earlier and 

that the opposing party will not be 

prejudiced. 

§ 156.941 Prehearing conferences. 

An ALJ may schedule one or more 

prehearing conferences (generally 

conducted by telephone) on the ALJ’s 

own motion or at the request of either 

party for the purpose of any of the 

following: 

(a) Hearing argument on any 

outstanding discovery request. 

(b) Establishing a schedule for any 

supplements to the submissions 

required by § 156.937 because of 

information obtained through discovery. 

(c) Hearing argument on a motion. 

(d) Discussing whether the parties can 

agree to submission of the case on a 

stipulated record. 

(e) Establishing a schedule for an inperson hearing, including setting 

deadlines for the submission of written 

direct testimony or for the written 

reports of experts. 

(f) Discussing whether the issues for 

a hearing can be simplified or narrowed. 

(g) Discussing potential settlement of 

the case. 

(h) Discussing any other procedural or 

substantive issues. 

§ 156.943 Standard of proof. 

(a) In all cases before an ALJ— 

(1) CMS has the burden of coming 

forward with evidence sufficient to 

establish a prima facie case; 

(2) The respondent has the burden of 

coming forward with evidence in 

response, once CMS has established a 

prima facie case; and 

(3) CMS has the burden of persuasion 

regarding facts material to the 

assessment or decertification; and 

(4) The respondent has the burden of 

persuasion regarding facts relating to an 

affirmative defense. 

(b) The preponderance of the 

evidence standard applies to all cases 

before the ALJ. 

§ 156.945 Evidence. 

(a) The ALJ will determine the 

admissibility of evidence. 

(b) Except as provided in this part, the 

ALJ will not be bound by the Federal 

Rules of Evidence. However, the ALJ 

may apply the Federal Rules of 

Evidence where appropriate; for 

example, to exclude unreliable 

evidence. 

(c) The ALJ excludes irrelevant or 

immaterial evidence. 

(d) Although relevant, evidence may 

be excluded if its probative value is 

substantially outweighed by the danger 

of unfair prejudice, confusion of the 

issues, or by considerations of undue 

delay or needless presentation of 

cumulative evidence. 

(e) Although relevant, evidence is 

excluded if it is privileged under 

Federal law. 


emcdonald on DSK67QTVN1PROD with RULES2
65104 Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 

(f) Evidence concerning offers of 

compromise or settlement made in this 

action will be inadmissible to the extent 

provided in the Federal Rules of 

Evidence. 

(g) Evidence of acts other than those 

at issue in the instant case is admissible 

in determining the amount of any civil 

money penalty if those acts are used 

under § 156.805 of this part to consider 

the entity’s prior record of compliance, 

or to show motive, opportunity, intent, 

knowledge, preparation, identity, or 

lack of mistake. This evidence is 

admissible regardless of whether the 

acts occurred during the statute of 

limitations period applicable to the acts 

that constitute the basis for liability in 

the case and regardless of whether HHS’ 

notice sent in accordance with § 156.805 

referred to them. 

(h) The ALJ will permit the parties to 

introduce rebuttal witnesses and 

evidence. 

(i) All documents and other evidence 

offered or taken for the record will be 

open to examination by all parties, 

unless the ALJ orders otherwise for good 

cause shown. 

(j) The ALJ may not consider evidence 

regarding the willingness and ability to 

enter into and successfully complete a 

corrective action plan when that 

evidence pertains to matters occurring 

after HHS’ notice under § 156.805(d) or 

§ 156.810(c) or § 156.810(d). 

§ 156.947 The record. 

(a) Any testimony that is taken inperson or by telephone is recorded and 

transcribed. The ALJ may order that 

other proceedings in a case, such as a 

prehearing conference or oral argument 

of a motion, be recorded and 

transcribed. 

(b) The transcript of any testimony, 

exhibits and other evidence that is 

admitted, and all pleadings and other 

documents that are filed in the case 

constitute the record for purposes of an 

ALJ decision. 

(c) For good cause, the ALJ may order 

appropriate redactions made to the 

record. 

§ 156.951 Posthearing briefs. 

Each party is entitled to file proposed 

findings and conclusions, and 

supporting reasons, in a posthearing 

brief. The ALJ will establish the 

schedule by which such briefs must be 

filed. The ALJ may direct the parties to 

brief specific questions in a case and 

may impose page limits on posthearing 

briefs. Additionally, the ALJ may allow 

the parties to file posthearing reply 

briefs. 

§ 156.953 ALJ decision. 

The ALJ will issue an initial agency 

decision based only on the record and 

on applicable law; the decision will 

contain findings of fact and conclusions 

of law. The ALJ’s decision is final and 

appealable after 30 days unless it is 

modified or vacated under § 156.957. 

§ 156.955 Sanctions. 

(a) The ALJ may sanction a party or 

an attorney for failing to comply with an 

order or other directive or with a 

requirement of a regulation, for 

abandonment of a case, or for other 

actions that interfere with the speedy, 

orderly or fair conduct of the hearing. 

Any sanction that is imposed will relate 

reasonably to the severity and nature of 

the failure or action. 

(b) A sanction may include any of the 

following actions: 

(1) In the case of failure or refusal to 

provide or permit discovery, drawing 

negative fact inferences or treating such 

failure or refusal as an admission by 

deeming the matter, or certain facts, to 

be established. 

(2) Prohibiting a party from 

introducing certain evidence or 

otherwise advocating a particular claim 

or defense. 

(3) Striking pleadings, in whole or in 

part. 

(4) Staying the case. 

(5) Dismissing the case. 

(6) Entering a decision by default. 

(7) Refusing to consider any motion or 

other document that is not filed in a 

timely manner. 

(8) Taking other appropriate action. 

§ 156.957 Review by Administrator. 

(a) The Administrator of CMS (which 

for purposes of this section may include 

his or her delegate), at his or her 

discretion, may review in whole or in 

part any initial agency decision issued 

under § 156.953. 

(b) The Administrator may decide to 

review an initial agency decision if it 

appears from a preliminary review of 

the decision (or from a preliminary 

review of the record on which the initial 

agency decision was based, if available 

at the time) that: 

(1) The ALJ made an erroneous 

interpretation of law or regulation. 

(2) The initial agency decision is not 

supported by substantial evidence. 

(3) The ALJ has incorrectly assumed 

or denied jurisdiction or extended his or 

her authority to a degree not provided 

for by statute or regulation. 

(4) The ALJ decision requires 

clarification, amplification, or an 

alternative legal basis for the decision. 

(5) The ALJ decision otherwise 

requires modification, reversal, or 

remand. 

(c) Within 30 days of the date of the 

initial agency decision, the 

Administrator will mail a notice 

advising the respondent of any intent to 

review the decision in whole or in part. 

(d) Within 30 days of receipt of a 

notice that the Administrator intends to 

review an initial agency decision, the 

respondent may submit, in writing, to 

the Administrator any arguments in 

support of, or exceptions to, the initial 

agency decision. 

(e) This submission of the information 

indicated in paragraph (d) of this 

section must be limited to issues the 

Administrator has identified in his or 

her notice of intent to review, if the 

Administrator has given notice of an 

intent to review the initial agency 

decision only in part. A copy of this 

submission must be sent to the other 

party. 

(f) After receipt of any submissions 

made pursuant to paragraph (d) of this 

section and any additional submissions 

for which the Administrator may 

provide, the Administrator will affirm, 

reverse, modify, or remand the initial 

agency decision. The Administrator will 

mail a copy of his or her decision to the 

respondent. 

(g) The Administrator’s decision will 

be based on the record on which the 

initial agency decision was based (as 

forwarded by the ALJ to the 

Administrator) and any materials 

submitted pursuant to paragraphs (b), 

(d), and (f) of this section. 

(h) The Administrator’s decision may 

rely on decisions of any courts and 

other applicable law, whether or not 

cited in the initial agency decision. 

§ 156.959 Judicial review. 

(a) Filing of an action for review. Any 

responsible entity against whom a final 

order imposing a civil money penalty or 

decertification of a QHP is entered may 

obtain review in the United States 

District Court for any district in which 

the entity is located or in the United 

States District Court for the District of 

Columbia by doing the following: 

(1) Filing a notice of appeal in that 

court within 30 days from the date of a 

final order. 

(2) Simultaneously sending a copy of 

the notice of appeal by registered mail 

to HHS. 

(b) Certification of administrative 

record. HHS promptly certifies and files 

with the court the record upon which 

the penalty was assessed. 

(c) Standard of review. The findings 

of HHS and the ALJ may not be set aside 

unless they are found to be unsupported 

by substantial evidence, as provided by 

5 U.S.C. 706(2)(E). 


emcdonald on DSK67QTVN1PROD with RULES2
Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Rules and Regulations 65105 

§ 156.961 Failure to pay assessment. 

If any entity fails to pay an assessment 

after it becomes a final order, or after the 

court has entered final judgment in 

favor of CMS, CMS refers the matter to 

the Attorney General, who brings an 

action against the entity in the 

appropriate United States district court 

to recover the amount assessed. 

§ 156.963 Final order not subject to review. 

In an action brought under § 156.961, 

the validity and appropriateness of the 

final order imposing a civil money 

penalty is not subject to review. 

■ 41. Subpart L is added to read as 

follows: 

Subpart L—Quality Standards 

§ 156.1105 Establishment of standards for 

HHS-approved enrollee satisfaction survey 

vendors for use by QHP issuers in 

Exchanges. 

(a) Application for approval. An 

enrollee satisfaction survey vendor must 

be approved by HHS, in a form and 

manner to be determined by HHS, to 

administer, on behalf of a QHP issuer, 

enrollee satisfaction surveys to QHP 

enrollees. HHS will approve enrollee 

satisfaction survey vendors on an 

annual basis, and each enrollee 

satisfaction survey vendor must submit 

an application for each year that 

approval is sought. 

(b) Standards. To be approved by 

HHS, an enrollee satisfaction survey 

vendor must meet each of the following 

standards: 

(1) Sign and submit an application 

form for approval in accordance with 

paragraph (a) of this section; 

(2) Ensure, on an annual basis, that 

appropriate staff participate in enrollee 

satisfaction survey vendor training and 

successfully complete a post-training 

certification exercise as established by 

HHS; 

(3) Ensure the accuracy of their data 

collection, calculation and submission 

processes and attest to HHS the veracity 

of the data and these processes; 

(4) Sign and execute a standard HHS 

data use agreement, in a form and 

manner to be determined by HHS, that 

establishes protocols related to the 

disclosure, use, and reuse of HHS data; 

(5) Adhere to the enrollee satisfaction 

survey protocols and technical 

specifications in a manner and form 

required by HHS; 

(6) Develop and submit to HHS a 

quality assurance plan and any 

supporting documentation as 

determined to be relevant by HHS. The 

plan must describe in adequate detail 

the implementation of and compliance 

with all required protocols and 

technical specifications described in 

paragraph (b)(5) of this section; 

(7) Adhere to privacy and security 

standards established and implemented 

under § 155.260 of this subchapter by 

the Exchange with which they are 

associated; 

(8) Comply with all applicable State 

and Federal laws; 

(9) Become a registered user of the 

enrollee satisfaction survey data 

warehouse to submit files to HHS on 

behalf of its authorized QHP contracts; 

(10) Participate in and cooperate with 

HHS oversight for quality-related 

activities, including, but not limited to: 

review of the enrollee satisfaction 

survey vendor’s quality assurance plan 

and other supporting documentation; 

analysis of the vendor’s submitted data 

and sampling procedures; and site visits 

and conference calls; and, 

(11) Comply with minimum business 

criteria as established by HHS. 

(c) Approved list. A list of approved 

enrollee satisfaction survey vendors will 

be published on an HHS Web site. 

■ 42. Section 156.1210 is added to 

subpart M to read as follows: 

§ 156.1210 Confirmation of HHS payment 

and collections reports. 

(a) Responses to reports. Within 15 

calendar days of the date of a payment 

and collections report from HHS, the 

issuer must, in a format specified by 

HHS, either: 

(1) Confirm to HHS that the amounts 

identified in the payment and 

collections report for the timeframe 

specified in the report accurately reflect 

applicable payments owed by the issuer 

to the Federal government and the 

payments owed to the issuer by the 

Federal government; or 

(2) Describe to HHS any inaccuracy it 

identifies in the payment and 

collections report. 

(b) Late discovery of a discrepancy. If 

an issuer reports a discrepancy in a 

payment and collections report later 

than 15 calendar days after the date of 

the report, HHS will work with the 

issuer to resolve the discrepancy as long 

as the late reporting was not due to 

misconduct on the part of the issuer. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: September 27, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: Approved: October 18, 2013 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–25326 Filed 10–24–13; 4:15 pm] 

BILLING CODE 4120–01–P 


emcdonald on DSK67QTVN1PROD with RULES2