Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 54969 

(D) Inability to electronically 

prescribe due to local, State or Federal 

law or regulation. 

(E) Limited prescribing activity. 

(F) Insufficient opportunities to report 

the eRx measure due to limitations of 

the measure’s denominator. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: August 25, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: August 26, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–22629 Filed 8–31–11; 11:15 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 154 

[CMS–9999–F] 

RIN 0938–AR26 

Rate Increase Disclosure and Review: 

Definitions of ‘‘Individual Market’’ and 

‘‘Small Group Market’’ 

AGENCY: Center for Consumer 

Information and Insurance Oversight, 

Centers for Medicare & Medicaid 

Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule amends a May 

23, 2011, final rule entitled ‘‘Rate 

Increase Disclosure and Review’’. The 

final rule provided that, for purposes of 

rate review only, definitions of 

‘‘individual market’’ and ‘‘small group 

market’’ under State rate filing laws 

would govern even if those definitions 

departed from the definitions that 

otherwise apply under title XXVII of the 

Public Health Service Act (PHS Act). 

The preamble to the final rule requested 

comments on whether this policy 

should apply in cases in which State 

rate filing law definitions of ‘‘individual 

market’’ and ‘‘small group market’’ 

exclude association insurance policies 

that would be included in these 

definitions for other purposes under the 

PHS Act. In response to comments, this 

final rule amends the definitions of 

‘‘individual market’’ and ‘‘small group 

market’’ that apply for rate review 

purposes to include coverage sold to 

individuals and small groups through 

associations even if the State does not 

include such coverage in its definitions 

of individual and small group market. 

This final rule also updates standards 

for health insurance issuers regarding 

disclosure and review of unreasonable 

premium increases under section 2794 

of the Public Health Service Act. 

DATES: Effective date. This rule is 

effective on November 1, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Sally McCarty, (301) 492–4489 (or by 

e-mail: ratereview@hhs.gov). 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Patient Protection and Affordable 

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

on March 23, 2010; the Health Care and 

Education Reconciliation Act (Pub. L. 

111–152) was enacted on March 30, 

2010. In this preamble, we refer to the 

two statutes collectively as the 

Affordable Care Act. The Affordable 

Care Act reorganizes, amends, and adds 

to the provisions of part A of title XXVII 

of the Public Health Service Act (PHS 

Act) relating to group health plans and 

health insurance issuers in the group 

and individual markets. 

Section 1003 of the Affordable Care 

Act adds a new section 2794 of the PHS 

Act, which directs the Secretary of the 

Department of Health and Human 

Services (the Secretary), in conjunction 

with the States, to establish a process for 

the annual review of ‘‘unreasonable 

increases in premiums for health 

insurance coverage.’’ The statute 

provides that health insurance issuers 

must submit to the Secretary and the 

applicable State justifications for 

unreasonable premium increases prior 

to the implementation of the increases. 

Section 2794 of the PHS Act does not 

apply to grandfathered health insurance 

coverage, nor does it apply to selffunded plans. 

On December 23, 2010, we published 

a Notice of Proposed Rulemaking to 

implement section 2794. Among other 

things, because of unique characteristics 

of State rate review and for purposes of 

administrative efficiency, we proposed 

to adopt definitions of the individual 

and small group markets that would 

defer to definitions set forth in State rate 

filing laws. We did not discuss in the 

proposed rule, or anticipate, how 

association policies would be treated 

under the proposal. Regardless, we 

received a number of comments 

objecting to the definitions as they 

would apply to association plans. On 

May 23, 2011, we published a final rule 

with comment period (76 FR 29964), in 

which we specifically solicited further 

comments on amending the definitions 

of ‘‘individual market’’ and ‘‘small 

group market’’ in § 154.102 to include 

coverage sold to individuals and small 

groups through associations in all cases. 

We received 30 comments in the 

comment period. Commenters included 

the National Association of Insurance 

Commissioners (NAIC); a State 

insurance regulator; many consumer 

and public interest organizations; 

associations sponsoring insurance plans 

for their individual and employer 

members; health care providers; health 

insurance issuers and related trade 

associations (collectively, ‘‘industry’’); 

and others. After consideration of the 

comments, we are amending the May 

23, 2011 final rule to provide that 

individual and small employer policies 

sold through associations will be 

included in the rate review process, 

even if a State otherwise excludes such 

coverage from its definitions of 

individual and small group market 

coverage. 

II. Provisions of the May 23, 2011 Final 

Rule With Comment and Responses to 

Comments 

In the May 23, 2011 final rule, we 

solicited comments regarding whether 

to amend the definitions of ‘‘individual 

market’’ and ‘‘small group market’’ in 

§ 154.102 to include coverage sold to 

individuals and small groups through 

associations in the rate review process, 

even if the State excludes such coverage 

from its definitions of individual and 

small group market coverage. 

Additionally, we solicited comments to 

address the following questions: 

1. Do States currently review rate 

increases for association and out-ofState trust coverage sold to individuals 

and small groups, regardless of whether 

the policies are sitused in or outside of 

their States? 

2. How many rate filings do States 

receive for association and out-of-State 

trust coverage? 

3. How prevalent are association and 

out-of-State trust coverage 

arrangements? What percentage of 

individual market and small group 

market business is sold through 

associations and out-of-State trusts? 

4. In which States is association and 

out-of-State trust coverage commonly 

purchased by individuals and small 

groups? Where are out-of-State trusts 

typically situated? 

5. Why do some individuals and 

small employers purchase coverage 

through associations and out-of-State 

trusts rather than through the traditional 

markets? Are there particular groups of 

individuals or types of small employers 

that typically purchase coverage 

through associations and out-of-State 

mstockstill on DSK4VPTVN1PROD with RULES_2

54970 Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 

1Mila Kofman, Kevin Lucia, Eliza Banget, Karen 

Politz, ‘‘Association Health Plans: What’s All the 

Fuss About?’’ Health Affairs, Vol. 25, No. 6, 2006. 

trusts? What organizations (other than 

issuers) typically sponsor, endorse, or 

market association and out-of-State trust 

arrangements? 

6. How do rate increases for 

association and out-of-State trust 

coverage sold to individuals and small 

groups compare to rate increases in the 

traditional market? What explains the 

differences (if any) between rate 

increases for association and out-ofState trust coverage and traditional 

market coverage? 

Comment: Most commenters, 

including State regulators, consumer 

advocates, the insurance industry 

representatives, and three affected 

associations, supported including 

individual and small group association 

coverage in the definitions of 

‘‘individual market’’ and ‘‘small group 

market’’ in § 154.102, even where such 

coverage was not included in those 

definitions under State rate filing laws, 

so that more individuals and small 

employers would benefit from rate 

review. According to comments from 

consumer advocates and some of the 

affected associations, if association 

coverage was not included in the rate 

review rule, the association coverage 

market would be treated differently 

from traditional markets in some States, 

and consumers in these plans would not 

benefit from the Affordable Care Act’s 

rate review process. State regulators and 

consumer advocates noted that, in the 

past, State law exceptions for 

association health plans had allowed 

them to avoid market reforms such as 

guaranteed issue and community rating 

and permitted them to ‘‘cherry pick’’ 

individuals and groups with favorable 

risk profiles. A State regulator also 

noted that exempting coverage sold 

through the associations from the 

regulatory process leads to a 

concentration of poorer risk in nonassociation coverage in community 

rating States. Based on past State 

experience with association coverage 

exceptions, the NAIC advised against 

allowing exceptions for association 

coverage under the market definitions of 

§ 154.102. Moreover, consumer 

advocates and one issuer emphasized 

the importance of having consistent 

standards across association health 

plans and the rest of the market to 

ensure that issuers competed on a level 

playing field. 

Many comments also discussed the 

importance of encouraging States to 

regulate association plans in the same 

way as the traditional market. Several 

consumer advocates and State insurance 

officials cited a study 1 concluding that 

two-thirds of the States regulate 

associations differently from other plans 

in the same market and about one-half 

of the States entirely or partially exempt 

national associations from State 

regulation. In States where associations 

are not regulated, this differential 

treatment gives residents little recourse 

if their association health plan changes 

its terms of coverage, denies claims, or 

completely ceases operation. One 

consumer advocate further highlighted 

that individuals and small businesses 

often buy health plans through 

associations with little knowledge of the 

protections that they do or do not have 

in these plans. In addition, the 

consumer noted that many States cede 

the regulatory and oversight roles to 

other States when an association is 

headquartered elsewhere, allowing 

association health plans to operate 

without as much oversight as plans in 

the traditional market. This can result in 

different consumers in the same State 

being subject to different levels of 

protections depending on whether the 

coverage is sold through an association 

and also on where the association is 

sitused. 

While most comments were in favor 

of including association coverage in the 

rate review process even where State 

rate filing laws did not include such 

coverage in definitions of individual 

market and small group market, CMS 

received five comments that opposed 

changing the current policy under 

§ 154.102. Four of these comments came 

from associations, and one comment 

came from an association professional 

membership organization. Three 

associations discussed the history of 

associations in their State and indicated 

that their State treats association health 

plans as large group plans not subject to 

individual or small group requirements 

for all purposes, not just rate review. 

These associations expressed concern 

about potential logistical and 

administrative burdens for association 

plans were they to be regulated as small 

group market coverage at the State and 

Federal levels. (We note that even if we 

were not making this amendment to the 

final rate review rule, this State practice 

would differ from longstanding 

guidance on the treatment of association 

coverage for all other purposes under 

title XXVII of the PHS Act.) In addition, 

all five commenters asserted that, 

because association health plans have a 

larger insurance pool, they should not 

be regulated the same as plans and 

policies in individual and small group 

markets. However, a regulator from the 

same State as three of the associations 

opined that successful implementation 

of the Affordable Care Act depended on 

having a stable health insurance market, 

which could be jeopardized if issuers 

could avoid the various individual and 

small group market requirements by 

offering coverage through associations. 

Response: In light of these comments, 

we are amending the definitions of 

‘‘individual market’’ and ‘‘small group 

market’’ in this final rule to include 

individual and small group coverage 

sold through associations in the rate 

review process. This amendment 

applies to rates for association coverage 

that are filed, or are effective in States 

without filing requirements, on or after 

November 1, 2011. The majority of 

commenters supported extending the 

rate review rule to include such 

association coverage; no commenter 

offered a persuasive reason why 

associations should be treated 

differently in connection with the 

review of rate increases than they are 

treated generally under the PHS Act. To 

the extent that issuers set premiums for 

members within an association 

differently based on their own health 

status or other factors, these association 

members are essentially purchasing 

individual or small group coverage and 

should not be treated differently than 

other individuals or small groups not 

buying coverage through an association. 

Further, excluding individual and small 

group coverage sold through 

associations from the rate review 

process creates an unlevel playing field 

between issuers that sell coverage 

through associations and those that do 

not. Lastly, excluding association 

coverage from the rate review process 

raises the risk of creating incentives that 

could lead to adverse selection. We note 

that nothing in this amended rule 

prevents individuals and employers 

from enjoying the benefits of belonging 

to an association and obtaining health 

insurance coverage as a benefit of their 

association membership. 

All other requirements in title XXVII 

of the PHS Act (for example, section 

2718’s medical loss ratio requirements) 

are governed by the individual and 

small group market definitions in 

section 2791 of the PHS Act. Under 

section 2791’s definitions, individuals 

and employers who purchase health 

insurance coverage through associations 

generally have been and continue to be 

entitled to the same rights and 

protections as those who purchase 

coverage in the individual and group 

markets. CMS Insurance Standards 

Bulletin 02–02 (August 2002) stated that 

mstockstill on DSK4VPTVN1PROD with RULES_2

Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 54971 

2As noted above, there is a long, consistent 

history of how associations have been treated with 

respect to the requirements added by the Health 

Insurance Portability and Accountability Act of 

1996 (HIPAA). However, prior to enactment of the 

Affordable Care Act, none of those requirements 

related to rate review, and for HIPAA purposes it 

was irrelevant how a State defined its markets for 

rate review purposes. Therefore we were not 

familiar with the possible ramifications for 

associations. 

‘‘the test for determining whether health 

insurance coverage offered through an 

association is group market coverage or 

individual market coverage, for 

purposes of [PHS Act] title XXVII, is the 

same test as that applied to health 

insurance offered directly to employers 

or individuals.’’ 

The decision to propose somewhat 

different definitions of individual and 

small group market for the purposes of 

rate review was based on the discretion 

under section 2794 of the PHS Act to 

specify which markets are subject to this 

rate review rule, and our desire to 

minimize disruption for the States and 

enable as many of them as possible to 

have Effective Rate Review Programs. In 

proposing to follow State filing law 

definitions, we did not take into account 

the substantial difference this could 

make with respect to association 

coverage in States with filing law 

definitions of individual market and 

small group market that exclude 

association coverage.2 However, we are 

amending the regulation to make clear 

that for purposes of rate review, the 

treatment of association coverage is 

identical to how it is treated for other 

title XXVII requirements, so that 

individuals and small employers who 

purchase coverage through an 

association have the same set of 

protections they would receive if they 

had purchased coverage outside of an 

association. We note that in amending 

these definitions, we do not change the 

role offered to States to conduct 

Effective Rate Review Programs under 

the final rule which aims to minimize 

disruption of State rate review 

processes. 

Comment: A trade association noted 

that section 3(5) of the Employee 

Retirement Income Security Act (ERISA) 

defines the term ‘‘employer’’ so that an 

association of employers could be 

deemed an ‘‘employer’’ sponsoring a 

group health plan under some 

circumstances. In such a case, the 

commenter recommended that the 

association coverage should be treated 

as one group health plan for purposes of 

the rate review process. 

Response: As indicated by the 

commenter, the market definitions in 

section 2791 of the PHS Act are derived 

from definitions of employer and 

employee welfare benefit plan in ERISA 

section 3. While the proposed rule and 

current final rule adopt a different 

policy for rate review purposes with 

respect to association coverage than 

would apply under the PHS Act for 

other purposes, we are amending the 

final rule to apply the general PHS Act 

policy on association coverage under 

the rate review regulation, as an 

exception to the general rule that State 

definitions govern. Accordingly, if an 

association is, in fact, sponsoring a 

group health plan subject to ERISA, the 

association coverage should be 

considered to be one group health plan 

and the number of employees covered 

by the association would determine the 

group size for purposes of determining 

whether the group health plan is 

sponsored by a small employer and 

subject to the rate review process. 

In most situations involving 

association coverage, the group health 

plan will exist at the individual 

employer level and not at the 

association level, in which case the size 

of the individual employers in the 

association will determine whether the 

association coverage is subject to the 

rate review process. The Department of 

Labor (DOL) has jurisdiction over ERISA 

group health plans and, for private 

sector entities, the determination of 

whether the group health plan exists at 

the association level or the employer 

level is made under ERISA. DOL has 

prepared a booklet in an effort to 

address questions that have been raised 

under ERISA concerning ‘‘multiple 

employer welfare arrangements.’’ This 

booklet may assist stakeholders in 

identifying situations where an ERISA 

group health plan may exist at the 

association level. See DOL MEWA 

Guide (http://www.dol.gov/ebsa/ 

Publications/mewas.html). Several DOL 

Advisory Opinions may also be helpful. 

See DOL Advisory Opinions 2001–04A 

(http://www.dol.gov/ebsa/regs/aos/ 

ao2001-04a.html); 2008-07A (http:// 

www.dol.gov/ebsa/regs/aos/ao2008- 

07a.html) and 2003-13A (http:// 

www.dol.gov/ebsa/regs/aos/ao2003- 

13a.html). For example, in DOL 

Advisory Opinion 2008–07A, DOL 

stated: 

‘‘A determination whether there is a 

bona fide employer group or association 

for this ERISA purpose must be made on 

the basis of all the facts and 

circumstances involved. Among the 

factors considered are the following: 

how members are solicited; who is 

entitled to participate and who actually 

participates in the association; the 

process by which the association was 

formed, the purposes for which it was 

formed, and what, if any, were the 

preexisting relationships of its members; 

the powers, rights, and privileges of 

employer members that exist by reason 

of their status as employers; and who 

actually controls and directs the 

activities and operations of the benefit 

program. The employers that participate 

in a benefit program must, directly or 

indirectly, exercise control over the 

program, both in form and in substance, 

in order to act as a bona fide employer 

group or association with respect to the 

program. 

The definition of ‘employee welfare 

benefit plan’ in ERISA is grounded on 

the premise that the person or group 

that maintains the plan is tied to the 

employers and employees that 

participate in the plan by some common 

economic or representation interest or 

genuine organizational relationship 

unrelated to the provision of benefits.’’ 

For more information, State regulators 

and other stakeholders can contact the 

Department of Labor’s Employee 

Benefits Security Administration. 

Comment: An association advised that 

a group policy for an association is 

issued to a trust in the State where the 

trust is domiciled and certificates are 

issued to insured parties who may 

reside in other States. In such a case, the 

association indicated that if the State 

where the trust is domiciled has a rate 

review process, that State should be 

responsible for the rate review of the 

entire program and should apply the 

same rating principles to the entire 

association, thus making it easier for 

compliance. Consumer advocates and a 

health insurance issuer, on the other 

hand, advised that rate increases of all 

individual and small group coverage 

sold in a State should be reviewed by 

that State, regardless of where the 

association is domiciled, to ensure that 

the individuals and employers in the 

State are protected by their local 

insurance department. 

Response: A State’s ability to review 

rate increases of coverage sold through 

associations domiciled in another State 

is dependent solely upon State law. 

Accordingly, it will be up to each 

individual State to determine whether 

its laws provide the authority to review 

proposed rate increases of individual 

and small group health insurance 

coverage sold through associations 

domiciled in another State. It should be 

noted that the rate review process set 

forth in the May 23, 2011 final rule sets 

standards so that the reporting and 

review process is similar in all States 

which should decrease the burden of 

having to file a rate increase in multiple 

States. 

Comment: One insurance issuer 

commented that CMS should keep bona 

mstockstill on DSK4VPTVN1PROD with RULES_2

54972 Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 

3Bona fide association means, with respect to 

health insurance coverage offered in a State, an 

association that meets the following conditions: (1) 

Has been actively in existence for at least 5 years. 

(2) Has been formed and maintained in good faith 

for purposes other than obtaining insurance. (3) 

Does not condition membership in the association 

on any health status-related factor relating to an 

individual (including an employee of an employer 

or a dependent of any employee). (4) Makes health 

insurance coverage offered through the association 

available to all members regardless of any health 

status-related factor relating to the members (or 

individuals eligible for coverage through a 

member). (5) Does not make health insurance 

coverage offered through the association available 

other than in connection with a member of the 

association. (6) Meets any additional requirements 

that may be imposed under State law. 

fide associations out of the rate review 

process because the bona fide 

association marketplace operates much 

like the large group market, in that 

trustees of associations are sophisticated 

purchasers who exercise their fiduciary 

responsibility to their members. This 

commenter therefore felt that, to prevent 

an undue burden on the rate review 

process, bona fide associations should 

be regulated differently from non-bona 

fide associations. An association 

indicated that, if bona fide association 

individual and small group coverage 

were included in the rate review 

process, it would subject the affected 

insurance premiums to review by as 

many as 40 different States. 

Response: Although the PHS Act 

recognizes bona fide associations as 

defined by section 2791(d)(3) 3 of the 

PHS Act and currently exempts them 

from guaranteed renewability of 

coverage and guaranteed availability of 

coverage, individual and small group 

coverage provided through bona fide 

associations are subject to every other 

provision and protection of title XXVII 

of the PHS Act without exception. 

Therefore, the rate review process 

applies to individual and small group 

coverage provided through bona fide 

associations and non-bona fide 

associations. It should be noted that the 

rate review process set forth in the May 

23, 2011 rule sets standards so that the 

reporting and review process is similar 

in all States which should decrease the 

burden of having to file a rate increase 

in multiple States. 

Comments: Consumer advocates 

commented that States should be 

required to review an issuer’s premiumrate increases on individuals and small 

groups purchasing insurance through an 

association or out-of-State trust as a 

condition of having an Effective Rate 

Review Program. These commenters 

also suggested that, to the extent 

possible, adequate regulation of 

associations should be a factor in 

awarding Cycle II grants of the Health 

Insurance Rate Review Program. 

Response: A State that meets the 

criteria for an Effective Rate Review 

Program, as outlined in § 154.301 will 

be determined to have Effective Rate 

Review Programs; with this amendment, 

this review will apply to rate increases 

of association coverage sold directly to 

individuals and small groups in that 

State. A State’s status as an Effective 

Rate Review Program State in other 

market segments will not be affected by 

its status as it relates to the effective 

review of association coverage rate 

increases. For purposes of this 

determination, we will not take into 

account whether the State where an 

association plan has its situs reviews the 

rates. In order to be an Effective Rate 

Review Program State for association 

coverage, a State will have to meet the 

criteria specified in § 154.301(a) and (b) 

for review of rate filings in its State for 

association coverage. If a State fails to 

meet the criteria for association 

coverage, CMS will review the rate 

filings above the threshold for the 

association coverage in that State. 

The Cycle II funding opportunity 

announcement (FOA) was posted in 

February of this year and applications 

were due August 15, 2011. In order to 

be eligible for an award under Cycle II, 

for either Phase I or II awards, a State 

must be able to demonstrate at the time 

of application that it already meets the 

criteria for an Effective Rate Review 

Program, or that with the funding 

resources from the grant it can achieve 

an Effective Rate Review Program. 

To the extent that association 

coverage is one product type in which 

a State can be effective or not, it is a 

consideration, but effective review of 

association coverage is not a 

requirement for a Cycle II grant. 

III. Provisions of This Final Rule 

This final rule amends the definition 

of ‘‘individual market’’ and ‘‘small 

group market’’ in § 154.102 as follows: 

We amended the definition of 

‘‘individual market’’ to include coverage 

that would be regulated as individual 

market coverage (as defined in section 

2791(e)(1)(A)) if it were not sold through 

an association. We also amended the 

definition of ‘‘small group market’’ to 

include coverage that would be 

regulated as small group market 

coverage (as defined in section 

2791(e)(5)) if it were not sold through an 

association. This approach follows the 

definition that applies for other PHS Act 

purposes (under which an association 

itself will only be considered to be a 

group health plan if it complies with 

and is regulated under ERISA). 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. 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 Collection of Information 

Requirements associated with the May 

23, 2011 final rule were approved under 

OMB control number 0938–1141, with 

an expiration date of August 31, 2014. 

In the May 23, 2011 final rule, we 

solicited comments on whether 

individual and small group coverage 

sold through associations should be 

included in the rate review process. At 

that time, we did not include an 

estimate of the number of rate review 

filings of association coverage for the 

burden estimates in the PRA section of 

the final rule. We are now amending the 

burden estimates in the PRA section to 

reflect the additional number of filings 

resulting from amending this final rule. 

As indicated in RIA section below, we 

estimate that 229 additional rate filings 

will be subject to the rate review process 

as a result of including individual and 

small group coverage sold through 

associations in the process. This 

increases the total number of filings 

subject to review from 974 to 1,203. All 

other estimates, including number of 

respondents and burden per response, 

have not changed from the final rule. 

Accordingly, the language from the PRA 

section of the May 2011 final rule is 

incorporated in this final rule and the 

changes in the estimates are reflected in 

the Revised Table A, with revised 

numbers highlighted in bold. 

mstockstill on DSK4VPTVN1PROD with RULES_2

Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 54973 

V. Response to Comments 

Because of the large number of public 

comments we receive on Federal 

Register documents, we are not able to 

acknowledge or respond to them 

individually. A discussion of the 

comments we received is included in 

the preamble of this document. 

VI. Regulatory Impact Analysis 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

A. Summary 

In the regulatory impact analysis 

(RIA) for the May 23, 2011 final rule, we 

discussed the proposal to amend the 

definitions of individual and small 

group markets in order for individual 

and small group coverage sold through 

associations to be subject to rate review. 

Although we did not include the burden 

of including coverage sold through 

associations in the final numbers for the 

PRA package or the RIA, an estimate 

was provided in the RIA for the purpose 

of soliciting comments on the potential 

burden of including individual and 

small group coverage sold through 

associations in the rate review process. 

We reviewed data submitted by health 

insurance issuers to the NAIC and 

estimated that there would be 986 

filings annually that would have to be 

submitted for individual or small group 

coverage sold through associations. We 

in turn applied the factors for nongrandfathered coverage (0.42) and 

filings above the 10 percent threshold 

(0.45), which resulted in a total of 186 

additional filings that would be subject 

to rate review. We further estimated that 

34 percent of these filings would occur 

in States that require prior approval 

before a rate increase can be 

implemented, in which case the rate 

filings are already subject to review by 

a State. This resulted in a final estimate 

of 123 additional filings above the 10 

percent threshold occurring if coverage 

sold through associations were subject 

to the rate review process. 

In response to our solicitation of 

comments on the association issue, we 

received from the NAIC a survey of 

State regulators in which the following 

question was asked: ‘‘How many such 

rate filings does your State receive for 

association and out-of-State trust 

coverage?’’ Thirty-two States responded 

to the survey and 14 States provided 

estimates that totaled 440 rate filings for 

association coverage on an annual basis. 

Most of these estimates did not 

distinguish between the individual and 

small group markets. One State 

indicated that no rate filings were 

received from associations, and the 

other 17 indicated that they did not 

track association rate filings. This data 

was provided by State regulators who 

review rate filings, as opposed to the 

prior data that was provided by health 

insurance issuers. Since State regulators 

are positioned to review the rate filings 

of all the issuers in their States, we 

chose to use the State data for the 

purpose of updating the burden 

estimates in this RIA. Extrapolating the 

440 number from 14 States to 50 States 

provides an estimate of 1,570 rate filings 

annually for association coverage in the 

individual and small group markets. 

Using the percentages from the final 

rule numbers (76% small group market, 

24 percent individual market), this 

breaks out to 377 additional filings in 

the individual market and 1,193 filings 


mstockstill on DSK4VPTVN1PROD with RULES_2ER06SE.024</GPH>
54974 Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 

in the small group market. Applying the 

factors for non-grandfathered coverage 

and filings above the 10 percent 

threshold results in a mid range 

estimate of 229 additional filings being 

subject to rate review. 

Since this final rule directs that 

individual and small group coverage 

sold through associations be included in 

the rate review process, we are 

amending the burden estimates in the 

RIA to reflect the additional number of 

filings. The estimated number of 

affected entities, the burden estimates 

for the start-up costs and the amount of 

time to review each rate filing do not 

change from what was estimated in the 

RIA for the May 23, 2011 final rule. 

Accordingly, the RIA from the May 23, 

2011 final rule is incorporated into this 

final rule with the only the changes 

being the additional number of filings 

discussed here and in the Federalism 

Statement in section D. All ranges of 

filing estimates were increased by 1,570, 

the estimated number of rate filings for 

association coverage, as explained 

above. This results in the number of 

2011 filings in Table 3 for the low range 

estimate being increased from 6,121 to 

7,691; the mid range was increased from 

6,733 to 8,303; and the high range from 

7,343 to 8,913. In the tables, the 

amended numbers are highlighted in 

bold. 

B. Estimated Number of Rate Filings 

This section of the regulatory impact 

assessment provides estimates of the 

number of filings that would be subject 

to review under this final rule. Below 

we are revising Table 3, Table 4, and 

Table 5 of the May 23, 2011 final rule 

(see 76 FR 29980 through 29982) to read 

as follows: 

C. Estimated Administrative Costs 

Related to Rate Review Provisions 


mstockstill on DSK4VPTVN1PROD with RULES_2ER06SE.025</GPH>
Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 54975 


mstockstill on DSK4VPTVN1PROD with RULES_2ER06SE.026</GPH> ER06SE.027</GPH>
54976 Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 

1. Estimated Costs to States 

CMS recognizes that States have 

significant experience reviewing rate 

increases. As discussed earlier in this 

preamble, most States have existing 

Effective Rate Review Programs that will 

meet the requirements of this regulation. 

Rate review grants provided by CMS are 

expected to increase the effectiveness of 

State rate review processes, but they are 

not a direct measure of the cost of this 

regulation. 

CMS estimates that the cost impact on 

States will be small because most States 

currently conduct rate review. For these 

States, the incremental costs and 

requirements of this regulation will be 

minimal. Some States do not already 

have a rate review process or have a 

process that applies to only a portion of 

the individual and small group markets 

that this regulation addresses. In these 

States, the implementation costs to 

develop Effective Rate Review Processes 

at the State level can be offset by the rate 

review grants provided by CMS. For 

States not currently conducting effective 

rate review, HHS will conduct the 

review. 

States with Effective Rate Review 

Programs will be required to report on 

their rate review activities to the 

Secretary. CMS believes that this 

reporting requirement will involve 

minimal cost. CMS estimates that 

reporting information from the State to 

CMS will require approximately 20 

minutes per filing. Based on an 

actuary’s fee of $200 per hour, CMS 

estimates an average cost per filing of 

$66. Including association coverage, the 

estimated cost of reporting the twothirds of filings meeting or exceeding 

the 10 percent threshold (801), which 

are reviewed by States, is $52,866. 

D. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

In CMS’ view, while the requirements 

proposed in this final rule would not 

impose substantial direct costs on State 

and local governments, this final rule 

has federalism implications due to 

direct effects on the distribution of 

power and responsibilities among the 

State and Federal governments relating 

to determining the reasonableness of 

rate increases for coverage that Statelicensed health insurance issuers offer 

in the individual and small group 

markets. 

CMS recognizes that there are 

federalism implications with regard to 

CMS’ evaluation of Effective Rate 

Review Programs and its subsequent 

review of rate increases. Under Subpart 

C of this final rule, CMS outlines those 

criteria that States would have to meet 

in order to be deemed to have an 

Effective Rate Review Program. If CMS 

determines that a State does not meet 

those criteria, then CMS would review 

a rate increase subject to review to 

determine whether it is unreasonable. If 

a State does meet the criteria, then CMS 

would adopt that State’s determination 

of whether a rate increase is 

unreasonable. 

As indicated earlier in this preamble, 

we received comments from consumer 

advocates and State insurance officials 

citing a study concluding that twothirds of the States regulate associations 

differently from other plans in the 

individual and small group market and 

about one-half of the States entirely or 

partially exempt coverage sold through 

national associations from State 

regulation. In States where individual 

and small group coverage sold through 

associations is not subject to the rate 

review process, we indicate in this 

preamble that CMS will review the rate 

filings for such coverage that meet the 

threshold. We also state that the fact 

that a State may not review rate filings 

of association coverage will not be 

considered in determining whether that 

State has an effective rate review 

program. 

States would continue to apply State 

law requirements regarding rate and 

policy filings. State rate review 

processes that are similar to the Federal 

requirements likely would be deemed 

effective and satisfy the requirements 

under this final rule. Accordingly, 

States have latitude to impose 

requirements with respect to health 

insurance issuers that are more 

restrictive than the Federal law. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, CMS has engaged in efforts to 

consult with and work cooperatively 

with affected States, including 

participating in conference calls with 

and attending conferences of the 

National Association of Insurance 

Commissioners (NAIC), participating in 

a NAIC workgroup on rate reviews and 

consulting with State insurance officials 

on an individual basis. 

Throughout the process of developing 

this final rule, CMS has attempted to 

balance the States’ interests in 

regulating health insurance issuers, and 

Congress’ intent to provide uniform 

protections to consumers in every State. 

By doing so, it is CMS’ 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 regulation, 

CMS certifies that the 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. 

List of Subjects in 45 CFR Part 154 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Health plans, Penalties, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR 

Subtitle A, Subchapter B, by amending 

part 154 as follows: 

PART 154—HEALTH INSURANCE 

ISSUER RATE INCREASES: 

DISCLOSURE AND REVIEW 

REQUIREMENTS 

■ 1. The authority citation for part 154 

continues to read as follows: 

Authority: Section 2794 of the Public 

Health Service Act (42 U.S.C. 300gg–94). 

Subpart A—General Provisions 

■ 2. In § 154.102, revise the definitions 

of ‘‘individual market’’ and ‘‘small 

group market’’ to read as follows: 

§ 154.102 Definitions. 

* * * * * 

Individual market has the meaning 

given the term under the applicable 

State’s rate filing laws, except that: 

(1) Where State law does not define 

the term, it has the meaning given in 

section 2791(e)(1)(A) of the PHS Act; 

and 

(2) Coverage that would be regulated 

as individual market coverage (as 

defined in section 2791(e)(1)(A)) if it 

were not sold through an association is 

subject to rate review as individual 

market coverage. 

* * * * * 

Small group market has the meaning 

given under the applicable State’s rate 

filing laws, except that: 

(1) Where State law does not define 

the term, it has the meaning given in 

section 2791(e)(5) of the PHS Act; 

provided, however, that for the purpose 

of this definition, ‘‘50’’ employees 

applies in place of ‘‘100’’ employees in 

mstockstill on DSK4VPTVN1PROD with RULES_2

Federal Register / Vol. 76, No. 172 / Tuesday, September 6, 2011 / Rules and Regulations 54977 

the definition of ‘‘small employer’’ 

under section 2791(e)(4); and 

(2) Coverage that would be regulated 

as small group market coverage (as 

defined in section 2791(e)(5)) if it were 

not sold through an association is 

subject to rate review as small group 

market coverage. 

* * * * * 

Dated: August 16, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: August 29, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–22663 Filed 9–1–11; 11:15 am] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 90 

[PS Docket 06–229; WT Docket 06–150; WP 

Docket 07–100; FCC 11–6] 

Implementing a Nationwide, 

Broadband, Interoperable Public 

Safety Network in the 700 MHz Band 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rules; announcement of 

effective date. 

SUMMARY: In this document, the 

Commission announces that the Office 

of Management and Budget (OMB) has 

approved, for a period of three years, the 

information collection requirements 

contained in the Third Report and 

Order in PS Docket 06–229, FCC 11–6. 

The information collection requirements 

were approved on August 18, 2011 by 

OMB. 

DATES: The information collections 

contained in 47 CFR 90.1407(f), 

published at 76 FR 51271, August 18, 

2011, are effective on September 6, 

2011. 

FOR FURTHER INFORMATION CONTACT: For 

additional information contact Cathy 

Williams on (202) 418–2918 or via 

e-mail to: cathy.williams@fcc.gov. 

SUPPLEMENTARY INFORMATION: This 

document announces that, on August 

18, 2011, OMB approved, for a period of 

three years, the information collection 

requirements contained in 47 CFR 

90.1407(f). The Commission publishes 

this document to announce the effective 

date of this rule section. See, 

Implementing a Nationwide, 

Broadband, Interoperable Public Safety 

Network in the 700 MHz Band, PS 

Docket 06–229; WT Docket 06–150; WP 

Docket 07–100; FCC 11–6, 76 FR 51271, 

August 18, 2011. 

Synopsis 

As required by the Paperwork 

Reduction Act of 1995, (44 U.S.C. 3507), 

the Commission is notifying the public 

that it received OMB approval on 

August 18, 2011, for the information 

collection requirement contained in 47 

CFR 90.1407(f). Under 5 CFR part 1320, 

an agency may not conduct or sponsor 

a collection of information unless it 

displays a current, valid OMB Control 

Number. 

No person shall be subject to any 

penalty for failing to comply with a 

collection of information subject to the 

Paperwork Reduction Act that does not 

display a valid OMB Control Number. 

The OMB Control Number is 3060– 

1152 and the total annual reporting 

burdens for respondents for this 

information collection are as follows: 

Title: Implementing a Nationwide, 

Broadband, Interoperable Public Safety 

Network in the 700 MHz Band (Third 

Report and Order, PS Docket 06–229, 

FCC 11–6). 

Form Number: Not applicable. 

Type of Review: New collection. 

OMB Control Number: 3060–1152. 

OMB Approval Date: 08/18/2011. 

OMB Expiration Date: 06/30/2014. 

Respondents: Not-for-profit 

institutions; state, local and tribal 

governments. 

Number of Respondents: 100 

respondents; 100 responses. 

Estimated Time per Response: 5 

hours. 

Frequency of Response: One-time 

reporting requirement. 

Obligation to Respond: Required to 

obtain or retain benefits. Statutory 

authority for this information collection 

is contained in 47 U.S.C. 4(i), 201, 303, 

309, and 332 of the Communications 

Act of 1934, as amended. 

Total Annual Burden: 500 hours. 

Annual Cost Burden: None. 

Privacy Act Impact Assessment: N/A. 

Nature and Extent of Confidentiality: 

There is no need for confidentiality with 

this information collection. 

Needs and Uses: The Third Report 

and Order in PS Docket 06–229, 

adopted by the Commission on January 

25, 2011 and released on January 26, 

2011, codifies, as 47 CFR 90.1407(f), the 

requirement that public safety 

broadband network operators to certify 

to the Public Safety and Homeland 

Security Bureau before deployment that 

their networks will support required 

interfaces in compliance with Release 8 

or higher of 3GPP standards prior to the 

date their networks achieve service 

availability. This certification 

requirement will enable the Bureau to 

ensure that public safety broadband 

networks support all of the interfaces 

necessary to achieve interoperability 

from day one of service operation. 

Federal Communications Commission. 

Bulah P. Wheeler, 

Deputy Manager, Office of the Secretary, 

Office of Managing Director. 

[FR Doc. 2011–22617 Filed 9–2–11; 8:45 am] 

BILLING CODE 6712–01–P 

mstockstill on DSK4VPTVN1PROD with RULES_2