```

[Federal Register Volume 79, Number 48 (Wednesday, March 12, 2014)]
[Rules and Regulations]
[Pages 14111-14151]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05299]

[[Page 14111]]

Vol. 79

Wednesday,

No. 48

March 12, 2014

Part II

Department of Health and Human Services

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

Centers for Medicare & Medicaid Services

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

42 CFR Part 600

45 CFR Part 144

 Basic Health Program: State Administration of Basic Health Programs; 
Eligibility and Enrollment in Standard Health Plans; Essential Health 
Benefits in Standard Health Plans; Performance Standards for Basic 
Health Programs; Premium and Cost Sharing for Basic Health Programs; 
Federal Funding Process; Trust Fund and Financial Integrity; Final Rule

Federal Register / Vol. 79 , No. 48 / Wednesday, March 12, 2014 / 
Rules and Regulations

[[Page 14112]]

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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 600

Office of the Secretary

45 CFR Part 144

[CMS-2380-F]
RIN 0938-AR93

Basic Health Program: State Administration of Basic Health 
Programs; Eligibility and Enrollment in Standard Health Plans; 
Essential Health Benefits in Standard Health Plans; Performance 
Standards for Basic Health Programs; Premium and Cost Sharing for Basic 
Health Programs; Federal Funding Process; Trust Fund and Financial 
Integrity

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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

SUMMARY: This final rule establishes the Basic Health Program (BHP), as 
required by section 1331 of the Affordable Care Act. The BHP provides 
states the flexibility to establish a health benefits coverage program 
for low-income individuals who would otherwise be eligible to purchase 
coverage through the Affordable Insurance Exchange (Exchange, also 
called Health Insurance Marketplace). The BHP complements and 
coordinates with enrollment in a QHP through the Exchange, as well as 
with enrollment in Medicaid and the Children's Health Insurance Program 
(CHIP). This final rule also sets forth a framework for BHP eligibility 
and enrollment, benefits, delivery of health care services, transfer of 
funds to participating states, and federal oversight. Additionally, 
this final rule amends another rule issued by the Secretary of the 
Department of Health and Human Services (Secretary) in order to clarify 
the applicability of that rule to the BHP.

DATES: Effective Date: These regulations are effective on January 1, 
2015.

FOR FURTHER INFORMATION CONTACT: Jessica Schubel (410) 786-3032; or 
Carey Appold (410) 786-2117.

SUPPLEMENTARY INFORMATION:

 Table of Contents

    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents.

I. Executive Summary
II. Background
III. Summary of Proposed Provisions and Analysis of the Responses to 
Public Comments
    A. General Provisions and Definitions
    B. Establishment of the Basic Health Program
    C. Federal Program Administration
    D. Eligibility and Enrollment
    E. Standard Health Plan
    F. Enrollee Financial Responsibilities
    G. Payment to States
    H. BHP Trust Fund
IV. Provisions of the Final Regulations
    A. General Provisions and Definitions
    B. Establishment and Certification of State Basic Health 
Programs
    C. Federal Program Administration
    D. Eligibility and Enrollment
    E. Standard Health Plan
    F. Enrollee Financial Responsibilities
    G. Payments to States
    H. BHP Trust Fund
V. Collection of Information Requirements
VI. Regulatory Impact Statement
    A. Overall Impact
    B. Unfunded Mandates Reform Act
    C. Regulatory Flexibility Act
    D. Federalism
    Regulation Text

Acronyms

    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:

[the] Act Social Security Act
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))
APTC Advance Payments of the Premium Tax Credit
BHP Basic Health Program
CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
[the] Code Internal Revenue Code of 1986
EHBs Essential Health Benefits
FEHBP Federal Employees Health Benefits Program (5 U.S.C. 8901, et 
seq.)
FPL Federal poverty line
HCERA Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111-152, enacted March 30, 2010)
HHS [U.S. Department of] Health and Human Services
IHS Indian Health Service
MEC Minimum Essential Coverage
MAGI Modified adjusted gross income
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1995
QHP Qualified Health Plan
SHOP Small Business Health Options Program

I. Executive Summary

    This final rule implements section 1331 of the Patient Protection 
and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010) 
and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111.152, enacted on March 30, 2010), which are collectively referred to 
as the Affordable Care Act. Section 1331 of the Affordable Care Act 
directs the Secretary to establish the Basic Health Program (BHP). In 
addition, this final rule amends certain other federal regulations, 
clarifying their applicability to the new program.
    For coverage effective beginning on January 1, 2014, qualified 
individuals and small businesses will be able to purchase private 
health insurance coverage through competitive marketplaces, also termed 
``Exchanges'' (or the Health Insurance Exchange). The premium tax 
credit and cost-sharing reductions are available to help lower income 
qualified individuals purchase and secure coverage and services through 
the plans operating on the Exchange. At the same time, states provide 
coverage under Medicaid for low-income individuals and other 
individuals, including certain individuals with significant medical 
needs. New administrative procedures discussed in prior rulemaking 
establish a system for coordinating coverage across all insurance 
affordability programs (IAP) which includes coverage obtained through 
an Exchange with the associated premium tax credit and cost-sharing 
reductions, Medicaid, and the Children's Health Insurance Program. 
Beginning January 1, 2015, under this final rule, states will have an 
additional option to establish a BHP to provide coverage for certain 
individuals who are not eligible for Medicaid and would otherwise be 
eligible to obtain coverage through the Exchange.
    This final rule establishes: (1) The requirements for certification 
of state submitted BHP Blueprints, and state administration of the BHP 
consistent with that Blueprint; (2) eligibility and enrollment 
requirements for standard health plan coverage offered through the BHP; 
(3) the minimum requirements for the benefits covered by such standard 
health plans; (4) the availability of federal funding of certified 
state BHPs; (5) the purposes for which states can use such federal 
funding; (6) the parameters for enrollee financial participation; and 
(7) the requirements for state and federal administration and oversight 
of BHP funds. The specific methods for calculating and providing 
payment to states, consistent with this rule, will be issued separately 
in a final payment notice.

II. Background

    Section 1331 of the Affordable Care Act provides states with a new 
coverage option, the Basic Health Program (BHP),

[[Page 14113]]

for specified individuals who do not qualify for Medicaid but whose 
income does not exceed 200 percent of the federal poverty level (FPL). 
This final rule also implements statutory provisions of the BHP and 
other provisions necessary to ensure coordination with the other 
coverage options that, along with BHP, are collectively referred to as 
insurance affordability programs. Coordination is necessary to ensure 
that consumers are determined eligible for the appropriate program 
through a streamlined and seamless process and are enrolled in 
appropriate coverage without unnecessary paperwork or delay. This final 
rule describes standards for state administration and federal oversight 
of the BHP.
    In the September 25, 2013 Federal Register (78 FR 59122), we 
published a proposed rule to provide states the opportunity to 
establish a BHP in coordination with other insurance affordability 
programs. Rather than establish new and different rules for the BHP, 
when possible, we align BHP rules with existing rules governing 
coverage through the Exchange, Medicaid, or CHIP. This approach is 
supported by the statutory linkage between the minimum benefit 
coverage, maximum cost sharing, and overall funding for the BHP with 
the Exchange. Where necessary to accommodate unique features of the 
BHP, we adapted existing regulations or established specific rules for 
the new program. Recognizing that states may choose different ways to 
structure their BHP, when possible, we offer states flexibility in 
choosing to administer the program in accordance with Exchange rules or 
those governing Medicaid or CHIP. In those sections in which we offer 
states the choice, states must adopt all of the standards in the 
referenced Medicaid or Exchange regulations.
    For a detailed description of the background of this rule, please 
refer to ``Basic Health Program: State Administration of Basic Health 
Programs; Eligibility and Enrollment in Standard Health Plans; 
Essential Health Benefits in Standard Health Plans; Performance 
Standards for Basic Health Programs; Premium and Cost Sharing for Basic 
Health Programs; Federal Funding Process; Trust Fund and Financial 
Integrity'' proposed rule published in the September 25, 2013 Federal 
Register (78 FR 59122).

III. Summary of Proposed Provisions and Analysis of the Responses to 
Public Comments

    For a complete and full description of the BHP proposed provisions 
as required by the statute, see the September 25, 2013 proposed rule 
(78 FR 59122).
    We received a total of 132 timely comments from state agencies, 
groups advocating on behalf of consumers, health care providers, 
employers, health insurers, health care associations, Tribes, tribal 
organizations, and the general public. In addition, we held an all-
state/advocate consultation session on November 6, 2013 as well as a 
tribal consultation session on November 7, 2013 to provide an overview 
of the BHP proposed rule where interested parties were afforded an 
opportunity to ask questions and make comments. We continued to meet 
during this time with interested states through the ``learning 
collaborative'' that was established prior to the publication of the 
proposed rule to solicit input related to program operations and 
coordination between all insurance affordability programs. At the 
consultation and learning collaborative sessions, participating parties 
were reminded to submit written comments before the close of the public 
comment period that was specified in the BHP proposed rule.
    The following sections, arranged by subject area, include a summary 
of the public comments that we received, and our responses.

A. General Provisions and Definitions

    In the September 25, 2013 proposed rule, we proposed in Sec.  600.1 
the general authority for the BHP regulation as specified in section 
1331 of the Affordable Care Act. The statute specifies that a state 
electing to implement a BHP must enter into contracts for the provision 
of standard health plan coverage, which must, at a minimum include the 
essential health benefits (EHB). A state implementing BHP will receive 
federal funding based on the amount of premium tax credit and cost-
sharing reductions that would have otherwise been available to 
enrollees had they obtained coverage in the Exchange. We did not 
receive specific comments on this section and are finalizing the 
provision as proposed.
    In Sec.  600.5, we proposed the definitions and use of terms that 
apply to BHP. For specific definitions, please see the September 25, 
2013 proposed rule (78 FR 59142).
    We received several public comments for this section, which we 
discuss below. In addition to changes resulting from comments on this 
section, we have added a definition of ``interim certification'' in 
conformance with a change made to Sec.  600.110. Interim certification 
is an approval status for the initial design of a state's BHP. It does 
not confer any permission to begin enrollment or authority to seek 
funding from the federal government for BHP expenditures.
    Comment: Several commenters requested that the BHP use the Medicaid 
definition of Indian that is set forth in 42 CFR 447.51 for purposes of 
Medicaid premium and cost sharing reductions. The Affordable Care Act 
defines Indians for purposes of premium and cost sharing reductions in 
Exchange plans using the definition set out in section 4(d) of the 
Indian Self-Determination Act and Education Assistance Act, (25 U.S.C. 
450b(d)). The referenced Medicaid regulatory definition of Indian is 
broader.
    Response: We appreciate the commenters' recommendation; however, 
because a BHP is required by statute only to provide that premium and 
cost sharing liability will not exceed such liability under Exchange 
coverage, the regulation adopts the Exchange definition.
    Comment: One commenter recommended that HHS define the term 
``network of providers.''
    Response: We have revised the list of definitions to include a 
definition of ``network of healthcare providers.''

B. Establishment of the Basic Health Program

    In Sec.  600.100 to Sec.  600.170, we proposed the administrative 
structure for BHP. Within this structure, we proposed that the BHP 
Blueprint would be the vehicle for BHP certification and specified the 
operational principles required to implement a BHP.
    In Sec.  600.110(a), we proposed that the BHP Blueprint would be 
the comprehensive document submitted by states to the Secretary to 
receive certification of proposed BHP programs. For specific 
discussions on the proposed content of the Blueprint, refer to the 
September 25, 2013 proposed rule (78 FR 59142).
    In Sec.  600.110(b), we proposed that the BHP Blueprint be 
accompanied by a funding plan that provides enrollment and cost 
projections for the first 12 months of operation as well as additional 
funding sources if the state expects to use any non-federal funding. 
The funding plan must demonstrate that the federal funds will only be 
used to reduce premiums or cost-sharing or to provide additional 
benefits. In Sec.  600.110(c), we proposed that HHS post the state's 
BHP Blueprint on-line.
    The following sections, arranged by subject area, include a summary 
of the public comments that we received, and our responses.

[[Page 14114]]

1. General
    Comment: We received a variety of supportive comments. One 
commenter supported the adoption of the Exchange approach of a 
Blueprint as opposed to utilizing a vehicle similar to a Medicaid state 
plan. A couple of commenters expressed support for the provision 
requiring Secretarial certification prior to implementation. We 
received several comments supporting the requirement that HHS post the 
Blueprint submitted by the state on-line.
    Response: We are finalizing the proposed provisions with some 
modifications.
    We are clarifying that HHS will post on line the Blueprint 
submitted by the state, and will update it to reflect subsequent 
amendments by the state (including amendments made to ensure 
certification by HHS).
    Comment: Several commenters shared concerns related to the timing 
of the Blueprint requirements, and provided several suggestions in how 
to address this issue. One suggestion was to permit an abridged 
Blueprint in the first year of implementation, to permit greater 
flexibility in establishing contracts for standard health plans and 
making administrative arrangements. The abridged Blueprint would be 
required to include a few key areas in the Blueprint, such as its 
eligibility and enrollment processes as well as the standard health 
plan benefit package. Another suggestion included the use of an 
``interim certification'' to outline basic program parameters until the 
contracting process concluded. One final suggestion was to permit a 
state to include contingencies in its Blueprint.
    Response: We have carefully considered the commenters' concern that 
we were requiring too much detail and certainty in the initial 
Blueprint submission, because that level of detail would not be 
operationally feasible. In response to these comments, we are modifying 
the certification process to include an interim certification level, 
which we have defined in the definitions section. We expect that states 
will be able to provide their basic program design choices and we will 
be able to approve the structure of the program through the interim 
certification process, which will involve the submission of a limited 
set of Blueprint elements. We anticipate that interim certification 
will give states more certainty as they seek legislative and budget 
authority for their programs, with the understanding that full 
certification would be granted only when the Blueprint was fleshed out 
with additional detail. Full certification would still be required 
before states enroll individuals in a BHP.
    Comment: We received several comments expressing concern regarding 
the required content of the Blueprint. Several commenters, for example, 
requested that we make clear that we would not require exact premium 
amounts in the Blueprint (information that would not be available until 
later in implementation), but would only require a description of the 
process the state would use to establish premiums (information that 
would be available earlier.)
    Response: In our proposed rule we created some inconsistency which 
has now been corrected, at Sec. Sec.  600.110(a)(6) and 600.505. Now 
both are consistent, requiring that the Blueprint contain only 
assurances that the premiums would be calculated in such a way that BHP 
enrollees would not pay more than they would have been required to pay 
if they had been enrolled in the applicable benchmark plan, taking into 
account any premium tax credit that would have been available.
    Comment: On later sections of the regulation, we received many 
comments suggesting that we need to allow greater flexibility for 
states around the start-up and establishment of the program. As with 
other aspects of program operations, this flexibility would need to be 
addressed in the Blueprint.
    Response: We appreciate the commenters' interest in ensuring smooth 
and efficient BHP implementation, and as such, we have included a 15th 
content area for the Blueprint in Sec.  600.110(a). We will require a 
transition plan if a state requests to phase in enrollment, which would 
include information about coordination of such a transition with the 
Exchange operating in the state. This additional Blueprint requirement 
corresponds to modifications made to Sec.  600.145.
2. Development and Submission of the BHP Blueprint (Sec.  600.115)
    In Sec.  600.115(a), we proposed that the Blueprint must be 
submitted by the Governor or the Governor's designee, and in Sec.  
600.115(b) we proposed that the state must identify the agency and 
officials, by position or title, responsible for program 
administration, operations, and financial oversight.
    In Sec.  600.115(c), we proposed that the state must seek public 
comment on the BHP Blueprint content before submission to the Secretary 
for certification, and ensure the comment process included federally 
recognized tribes located in the state. Additionally, we proposed that 
the state must seek comment on significant revisions which are those 
that alter core program operations required by Sec.  600.145(e).
    In Sec.  600.115(d), we proposed that states may not implement BHP 
prior to receiving full certification. The date of implementation for 
this purpose is proposed as the first day that enrollees would receive 
coverage under BHP.
    Comment: We received many comments on the public comment process. 
One commenter supported the flexibility that is afforded to states by 
not having a federally prescribed list of required public notice 
participants in the public notice standard. Another commenter expressed 
the opposite view and would like HHS to require a specific list of 
stakeholders that must be included in the public comment process, 
including consumer, health care and safety net advocacy groups. Another 
commenter suggested that the prescribed list of stakeholders should be 
the same as the Exchange.
    Response: We recognize that BHP will have a significant impact on 
consumers, providers, plans and other stakeholders, and we appreciate 
the commenters' interest in ensuring the public is afforded the 
opportunity to provide meaningful comment. While ensuring appropriate 
public participation in the comment process is important, we are not 
mandating the participation of certain stakeholders because the 
circumstances in different states in serving low income populations are 
not the same. Moreover, such a requirement could be viewed as giving 
particular weight to those stakeholders over others. But we do not 
preclude any state from adopting such a procedure based on the 
circumstances in that state. Nor do we specify a calendar a state must 
use when soliciting public comment; the opportunity to comment, 
however, must be meaningful. We believe states will build on existing 
programs and approaches currently in place, and we want to provide the 
flexibility for them to do so.
    Comment: Some commenters specifically recommended that we should 
borrow the section 1115 Medicaid demonstration transparency 
requirements under title XIX of the Act and apply those standards to 
BHP. The commenters expressed the sentiment that the level of rigor in 
the 1115 standards would be appropriate for BHP.
    Response: Section 1115 transparency requirements are specified in 
statute in detail. Moreover, section 1115 demonstration authority is 
used when states are requesting permission to depart from otherwise 
applicable federal law but nevertheless achieving the

[[Page 14115]]

objectives of federal law, and public input is essential to informing 
the federal decision whether to approve the demonstration request. In 
that circumstance, it is particularly important to have a full 
opportunity for public comment to determine if there would be any 
unforeseen or adverse impact. In contrast, there is no statutory public 
input requirement for the development of a BHP. Moreover, when 
developing a BHP Blueprint, the need and purpose for public comment is 
different. A state is not departing from federal law but rather 
engaging the public in the state's political process to assist in 
choices the state is making in establishing or modifying a program 
within a set of options. The opportunity for public input will help to 
ensure that the state has fully considered whether its BHP approach 
will meet all statutory requirements and has given due consideration to 
the required factors in its processes to contract with standard health 
plans. Interested parties typically are already involved in those 
processes, and do not need formal notice and comment periods to provide 
input to states on these choices. It may be appropriate for states to 
adjust public input processes to reflect these circumstances. For these 
reasons, we are not accepting the commenters' recommendation to provide 
a rigid structure for the public input process for a BHP Blueprint and 
Blueprint amendments.
    Comment: We received several comments recommending that HHS 
strengthen the definition of ``significant revisions'' in Sec.  
600.115(c)(1) beyond the proposed reference to those that alter ``core 
program operations required by Sec.  600.145(e).''
    Response: We thank the commenters for their recommendation and we 
are modifying the regulatory text to reflect this definition change and 
clarify when an amendment to a BHP Blueprint is necessary.
    Comment: Several commenters expressed concern that the timeline for 
BHP Blueprint submission and certification should be constructed to 
give sufficient notice to Qualified Health Plans (QHP) prior to the 
submission of Exchange premiums, QHP applications and the annual 
contract review process.
    Response: We appreciate that there are many timing decisions to 
make with regard to the submission and certification of a BHP Blueprint 
that will impact, and be impacted, by many variables in any given 
state. States must synchronize legislative and funding authority with 
contracting timelines and federal approval. Given the legislative and 
contracting calendar differences between states, we do not believe it 
would be appropriate to mandate a specific timetable, or calendar for 
the public notice process. However, we expect states to take the QHP 
issuer bidding timeframe into account and to work with issuers to avoid 
unnecessary disruption and uncertainty in the individual market, 
particularly as issuers look to set rates for the next year.
    With these considerations in mind, we are finalizing the provisions 
in this section as proposed except that in Sec.  600.115(c)(1). We are 
adding to the definition of ``significant revisions'' which will 
therefore, require an opportunity for public comment to ``those that 
alter core program operations required by Sec.  600.145(f), as well as 
changes that alter the BHP benefit package, enrollment, disenrollment 
and verification policies.''
3. Certification of a BHP Blueprint (Sec.  600.120)
    In, Sec.  600.120(a), we proposed to establish the effective date 
of certification of the BHP Blueprint as the date of signature by the 
Secretary.
    In Sec.  600.120(b), we proposed that the certification date is 
established as the first date for which any payments may be transmitted 
to the state for BHP operations.
    Under Sec.  600.120(c), we proposed the period in which a certified 
Blueprint remains in effect. For specific discussions on this time 
period, refer to the September 25, 2013 proposed rule (78 FR 59143).
    Under Sec.  600.120(d), we proposed Blueprint standards for 
certification. For specific discussions on the standards, refer to the 
September 25, 2013 proposed rule (78 FR 59143).
    Comment: One commenter was concerned with our proposed Blueprint 
standard in Sec.  600.120(d)(3) specifying that the Blueprint be free 
of contingencies or reserved decisions on operational features. The 
commenter noted that, at times, contingencies are appropriate and 
contribute to operational success.
    Response: We agree with the commenter regarding the need for 
contingencies and we will strive to develop a Blueprint template 
permissive of appropriate contingencies. We are deleting the word 
``contingencies'' from paragraph (d). However, as the Blueprint will 
only collect information necessary for approval and oversight, we do 
not foresee being able to allow reserved decisions.
    Comment: We received one comment requesting state flexibility in 
program development through 2016, particularly with respect to 
transitioning of populations.
    Response: We have responded in other sections (Sec. Sec.  600.110 
and 600.145) regarding the need for flexibility around transitioning 
populations giving states with the shortest planning window, those that 
start in 2015, greater flexibility in planning for enrollment and 
service delivery needs.
4. Revisions to a Certified BHP Blueprint (Sec.  600.125)
    In Sec.  600.125(a), we proposed that a state seeking to make 
changes to its BHP Blueprint must submit those changes, if altering 
core program operations, to the Secretary for review and certification.
    In Sec.  600.125(b), we proposed that the state must continue to 
operate under the existing certification unless and until a revised 
Blueprint is certified.
5. Withdrawal of a BHP Blueprint Prior to Implementation (Sec.  
600.130)
    In Sec.  600.130, we proposed a process for a state deciding to 
terminate a BHP before enrolling participants. For specific 
discussions, refer to the September 25, 2013 proposed rule (78 FR 
59143).
    Comment: We received several comments expressing concern regarding 
the broad state authority to terminate its BHP at any time.
    Response: We appreciate the commenters' concerns regarding this 
state authority; however, because BHP is an alternative health coverage 
program available at the state's option, we do not believe we can 
prohibit a state from electing to terminate its program.
    Comment: Several commenters suggested that states be required to 
provide advance notification to standard health plan offerors and QHPs 
when they voluntarily withdraw Blueprints, to enable these entities the 
opportunity to adjust their offerings. Other commenters recommended 
Blueprint submission timelines to be specifically aligned with Exchange 
timeframes to enable the most accurate pricing of products.
    Response: We agree that states should make decisions about BHP 
operations in a timely manner, to allow orderly transitions for 
beneficiaries and ensure proper coordination with the Exchange, 
including the ability of QHPs to price their products properly. 
However, the standard that the commenter is suggesting is very 
significant in that it would have to be lengthy notice in advance of 
the annual QHP pricing process. Given that BHP is a voluntary program, 
we do not believe we can force continued participation on the part of

[[Page 14116]]

the state beyond that required for orderly shutdown.
6. Notice and Timing of HHS Action on BHP Blueprint (Sec.  600.135)
    In Sec.  600.135, we proposed that HHS respond to submissions in a 
timely manner and identify in writing impediments to certification if 
they exist.
    Comment: We received comments recommending that Blueprints should 
be deemed certified and states should be able to proceed if they have 
not been acted upon within 60 days of state submission. Other 
commenters requested an expedited review process in the first year. A 
further request was that we institute a conditional approval and make 
retrospective payment available to states. We also received comments 
that we should have an administrative review process to resolve 
disputes over certification or potential decertification.
    Response: We have carefully considered these comments and we are 
finalizing this section with the addition of a state option to request 
a reconsideration of an adverse certification decision. We believe this 
change, coupled with the addition of interim certification status 
discussed earlier and the requirement for HHS to respond timely to 
state submissions, will be sufficient to ensure responsiveness and 
opportunity for states to work effectively with HHS to secure necessary 
approvals to proceed with their programs. We have not included the 
request for a 60 day ``clock'' because we wish to allow for maximum 
flexibility in working with states to achieve certification of 
Blueprints for this new program.
7. State Termination of a BHP (Sec.  600.140)
    In Sec.  600.140, we proposed a process for states to terminate a 
BHP program with active enrollees. The state must submit written notice 
to the Secretary 120 days in advance along with a transition plan to 
assist enrollees switching to other coverage, submit written notice to 
participating standard health plan offerors and enrollees 90 days in 
advance, and transmit all information provided as part of an 
application to other state agencies administering insurance 
affordability programs. Additionally, the state must fulfill 
contractual obligations to standard health plans, fulfill data 
reporting to HHS, complete the annual financial reconciliation process, 
and refund the remaining balance in the BHP trust fund.
    Comment: We received several comments requesting that the 
notification requirement for standard health plans be the same as it is 
for the Secretary (120 days). We also received a comment recommending 
that we require notification be sent to providers contracting with 
standard health plans.
    Response: We are finalizing this section as proposed, because we 
believe there is value in a Secretarial review of the state's 
transition plan before others are notified. We also anticipate that the 
state's transition plan will include specifications about plan and 
provider notification.
8. HHS Withdrawal of Certification and Termination of a BHP (Sec.  
600.142)
    In Sec.  600.142, we proposed the process by which HHS would 
withdraw certification of a BHP Blueprint based on findings of non-
compliance or significant beneficiary harm, financial malfeasance or 
fraud. This process is only invoked after notice to the state and a 
reasonable period (at least 120 days) for the state to address 
findings.
    Comment: We received one comment requesting an appeal process for 
disagreement over findings of non-compliance or significant beneficiary 
harm, financial malfeasance or fraud.
    Response: Similar to Sec.  600.135, we have decided to finalize 
this section as proposed with the addition of the right of the state to 
a reconsideration of the decision to withdraw certification if there is 
disagreement over findings that form the basis for that decision.
9. State Program Administration and Operation (Sec.  600.145)
    In Sec.  600.145, we proposed that a state must operate a BHP 
according to the certified Blueprint and all applicable law and 
regulations. This section also contains our proposed core operational 
features of a BHP beginning in paragraph (b) through (d). For 
additional discussions on the core operational features of a BHP, refer 
to the September 25, 2013 proposed rule (78 FR 59144).
    Comment: We received many comments on this section in support of 
the establishment of BHP without the limitations characteristic of more 
limited programs such as waivers or demonstrations. Similarly, we 
received a comment commending the Department for including 
nondiscrimination provisions assuring equal access to services through 
BHP.
    Response: We appreciate the support for the content of this 
section.
    Comment: Several commenters questioned the operational reality of 
being able to implement a program for every eligible individual on day-
one of operations.
    Response: We understand the concern raised by the commenters 
regarding day-one operations, particularly in 2015, the first 
operational year, for which states have a limited amount of time to 
coordinate with their Exchange and Medicaid programs. To address this 
comment, we are adding paragraph (e) providing states implementing in 
2015 the option to identify a transition period during initial 
implementation. These states will be required to submit a transition 
plan as part of their Blueprint describing their proposed alternative 
enrollment strategies.
10. Enrollment Assistance and Information Requirements (Sec.  600.150)
    In Sec.  600.150, we proposed that states make information 
available to potential applicants and enrollees about the BHP coverage 
option, including benefits and coverage, in a manner that is consistent 
with the requirements of the Exchange. Additionally, states must 
require standard health plans to provide information on premiums and 
covered services, including any limitations, cost-sharing, as well as 
other information conforming to the requirements of the Exchange. 
Finally, states must require participating standard health plans to 
provide current and complete information on the names and locations of 
participating providers.
    Comment: One commenter suggested a requirement that we have 
application materials designed with individuals who have limited 
English proficiency in mind and that we should encourage marketing to 
younger individuals. Other commenters want states to be required to 
conduct outreach highlighting BHP availability to non-citizens or for 
individuals with limited English proficiency. Several of these 
commenters request applying Medicaid managed care requirements (42 CFR 
438.10(c)) around enrollees with limited English proficiency to BHP.
    Response: We agree with the commenters' request for application 
materials that serve individuals with limited English proficiency. We 
further clarify that states must satisfy rules concerning accessibility 
requirements for persons with disabilities. We also agree that Medicaid 
standards are appropriate to address these populations and have applied 
them in Sec.  600.310.
    Comment: Other commenters supported the requirement to make 
provider lists available to enrollees. One commenter specifically 
requested the inclusion of facility providers such as clinics and 
health centers, another

[[Page 14117]]

commenter wants the requirement to be strengthened by including a 
quarterly update standard because of churn between QHPs and Standard 
Health Plans.
    Response: We also agree that information requirements are only 
valuable if kept current so we have added ``at least quarterly'' to the 
requirement in paragraph (a)(5) that states must require participating 
plans to publicize and keep current their participating providers. 
Because this requirement is not limited to any classes or types of 
providers, we believe it is inclusive as written for all providers.
11. Tribal Consultation (Sec.  600.155)
    In Sec.  600.155, we proposed that states are required to consult 
with Indian tribes located in the state on the development and 
execution of the BHP Blueprint using the state or federal tribal 
consultation policy approved by the state or federal Exchange as 
applicable.
    Comment: We received a comment recommending the removal of the word 
``federal'' from the requirement to follow the approved state or 
federal tribal consultation policy. Also the commenter urges CMS to use 
the Washington State Exchange tribal consultation policy as the model.
    Response: We agree that it is not necessary to identify in this 
rule whether the state exchange was established by the state or federal 
government, or whether the tribal consultation policy was based on a 
state or federal policy. It is only necessary to make clear that the 
BHP should comply with the state Exchange's tribal consultation policy. 
Therefore we will remove ``State or Federal'' as descriptors of the 
tribal consultation policy. We appreciate the reference to Washington 
State's Exchange tribal consultation policy but because each state has 
a different tribal makeup and relationship, it is important to maintain 
state flexibility in determining an appropriate consultation policy. 
Thus, we are not specifying adoption of any specific state's policy.
12. Protections for American Indians and Alaska Natives (Sec.  600.160)
    In Sec.  600.160, we proposed specific protections for American 
Indians and Alaska Natives. Specifically, we required the extension of 
the special enrollment status applicable in the Exchange, we require 
states to permit Indian tribes and tribal organizations to pay premiums 
on behalf of BHP enrolled individuals, cost-sharing is prohibited, and 
we require standard health plans to pay primary to health programs 
operated by the Indian Health Service or tribal organizations for 
services covered under the standard health plan. Because we realized 
that the proposed policy with respect to premium payment should not be 
limited to tribes, tribal organizations and urban Indian organizations, 
we are broadening that requirement and moving it into Sec.  600.520 as 
discussed below.
    Comment: We received a comment requesting that we further protect 
Indian health providers operating within standard health plans by 
prohibiting the offerors from reducing the payments to providers by the 
amount of any cost-sharing that would be due from Indians but for the 
prohibition on cost-sharing. This prohibition is equivalent to that 
extended to Indian health providers providing services to Indians 
enrolled in a QHP in the individual market through an Exchange at 45 
CFR 156.430(g).
    Response: We agree with the commenter that, if the cost of 
protecting Indians from cost sharing was placed on providers, it would 
have the result of reducing access to care and would frustrate the 
purpose of the cost sharing protection. Therefore, we have added this 
protection as paragraph (c).
13. Nondiscrimination Standards (Sec.  600.165)
    We proposed, in Sec.  600.165 that the state and standard health 
plans must comply with all applicable civil rights statutes which are 
delineated in the proposed rule (78 FR 59145) as well as the non-
discrimination provision applicable to the Exchange.
    Comment: One commenter specifically appreciated that the standards 
in this section clarify that BHP falls under protections of both 
Affordable Care Act and the Civil Rights Act bolstering the ability of 
the HHS Office for Civil Rights and individuals to hold states and 
contractors accountable.
    Response: We are finalizing the language as proposed without 
change.
14. Annual Report Content and Timing (Sec.  600.170)
    In Sec.  600.170, we proposed specific requirements for the content 
and timing of the BHP annual report. The report must include content 
establishing compliance with statutory requirements including 
eligibility verification, limitations on the use of federal funds, and 
quality and performance measures from participating standard health 
plans. Additionally, states are required to submit any evidence of 
fraud, waste, or abuse known to the state and any follow up that had 
been specified in findings from a federal review or audit.
    Comment: Several commenters made specific reference to the 
requirement to report quality and performance measures and requested 
the ability to align with reporting for other insurance affordability 
programs. A commenter further recommended the use of NCQA, HEDIS and 
CAHPs standards. Two commenters made specific suggestions for measures 
or offered assistance in the development of measures that would be 
appropriate for this purpose. Several commenters offered that 2 full 
years of data should be available before quality measures are 
collected. A commenter requested that we limit the use of measures 
based on patient surveys.
    Response: We agree that this standard warrants attention and that 
the Department should take into account the desirability of aligning 
measures across insurance affordability programs. As indicated in the 
preamble of the proposed rule, we intend to issue future subregulatory 
guidance on the quality and performance standards taking into account 
these comments.
    Comment: Several commenters questioned the timing of the annual 
report, pointing out that the data available to the state 60 days 
before the end of the operational year would be limited and perhaps of 
poor quality.
    Response: We agree that the timing of the annual report as proposed 
will prove problematic for states in that it will not enable the 
submission of complete data. In response to this concern, we are 
changing the timing to 60 days following the end of the operational 
year. With this change, we are reserving the right to request 
information in advance specifically needed to substantiate the release 
of funds. Otherwise, the section is being finalized as proposed.

C. Federal Program Administration

1. Federal Program Reviews and Audits (Sec.  600.200)
    In Sec.  600.200(a), we proposed that HHS review each state BHP as 
needed, but no less frequently than annually, to determine state 
compliance with federal requirements and provisions of its BHP 
Blueprint. For additional discussions on specific reports and other 
documentation, refer to the September 25, 2013 proposed rule (78 FR 
59126). We did not receive specific comments on this section and are 
finalizing the provision as proposed.
    In Sec.  600.200(b), we proposed the types of action items that may 
result from such review. For specific discussions on the action items, 
see the September 25, 2013 proposed rule (78 FR 59126). We

[[Page 14118]]

received specific comments on this section which are discussed below.
    In Sec.  600.200(c), we proposed the HHS Office of Inspector 
General (OIG) may periodically audit state operations and standard 
health plan practices. For specific discussions on the periodically 
conducted OIG audit, see the September 25, 2013 proposed rule (78 FR 
59126). We did not receive specific comments on this section and are 
finalizing the provision as proposed.
    We received the following comments as they relate to federal 
program reviews and audits:
    Comment: One commenter recommended that the section title be 
renamed to ``Federal program compliance reviews and audits.'' In 
addition, the commenter noted that Sec.  600.200(b)(3) may be missing 
an ``and.''
    Response: We appreciate the commenter's recommended changes, which 
reflect the underlying intent of the provision. The final rule has been 
revised to include these changes.
    Comment: One commenter expressed concern regarding the provision 
that permits HHS to withhold approval of Blueprint revisions in the 
event that the state has not resolved action items in which the state 
appears to be out of compliance. Specifically, the commenter expressed 
that withholding approval of Blueprint revisions that otherwise comply 
with federal requirements is inappropriate and potentially arbitrary 
given that the action to deny or disapprove a Blueprint revision should 
be directly related to the subject matter of that revision; therefore, 
the commenter recommended that we should delete paragraph (b)(3) under 
this section.
    Response: We believe that maintaining this provision in the final 
rule is appropriate as it provides a compliance remedy that permits the 
state the opportunity and necessary time to resolve compliance issues 
while maintaining its BHP certification. Removing this provision would 
result in having only one compliance remedy--the withdrawal of a 
state's BHP certification--in the event that identified action items 
were not immediately resolved. We believe that this alternative is not 
in the best interest of the state, or in the best interest of the BHP 
enrollees, as it would result in program termination as well as 
coverage disruptions for BHP enrollees.
    Comment: We received a request to define the standard of review, 
especially as it relates to the use of BHP trust funds.
    Response: The standard of review for federal program reviews and 
audits is defined in Sec.  600.200(a). Specifically, this standard of 
review includes all applicable laws, regulation, and interpretive 
guidance as it relates to federal BHP requirements as well as the 
provisions of the state's certified BHP Blueprint. The standard of 
review with respect to the use of BHP trust funds includes all 
applicable laws, regulation, and interpretive guidance as it relates to 
BHP trust funds, with a focus on the requirements specified in Sec.  
600.705. We have modified the language in Sec.  600.200(b)(4) to 
clarify this standard.

D. Eligibility and Enrollment

    The proposed content of Subpart D includes all eligibility and 
application, screening and enrollment standards and procedures.
1. Basis, Scope and Applicability (Sec.  600.300)
    In proposed Sec.  600.300 we provided the citation for the 
statutory basis for subpart D of this rule as section 1331(e) of the 
Affordable Care Act, which sets forth eligibility standards for the BHP 
and prohibits eligible individuals from being treated as qualified 
individuals for purposes of enrolling in QHPs through the Exchange. We 
did not receive specific comments on proposed Sec.  600.300 and are 
finalizing the provision as proposed.
2. Eligible Individuals (Sec.  600.305)
    In Sec.  600.305(a), we proposed that an individual is eligible for 
BHP if the individual:
     Resides in the state offering the BHP, and is not eligible 
for coverage under the state's Medicaid program that includes at least 
the essential health benefits (EHB) described in 45 CFR Part 156;
     Has household income that exceeds 133 percent of the 
federal poverty level (FPL) and does not exceed 200 percent of the FPL 
for the applicable family size, or for a lawfully present non-citizen 
ineligible for Medicaid due to citizenship status, with household 
income not exceeding 200 percent of the FPL; and
     Is not eligible to enroll in minimum essential coverage 
(MEC), including Medicaid coverage that covers the EHBs described above 
(individuals enrolled in Medicaid or CHIP that does not constitute MEC, 
or individuals eligible only for unaffordable employer sponsored 
insurance as determined under section 5000A(e)(1) of the Internal 
Revenue Code would meet this criterion);
     Is under age 65;
     Is a citizen, or lawfully present non-citizen; and
     Is not incarcerated (other than during a period pending 
disposition of charges).
    In Sec.  600.305(b), we proposed that a state may not impose 
limitations on eligibility through the imposition of waiting lists, 
caps on enrollment, restrictions based on geographic area or any other 
conditions.
    We are finalizing the provisions of this section as proposed but 
have made some changes in response to the comments described below. In 
addition, we have made several revisions for clarity.
    In Sec.  600.305(a)(1) we have modified the standard to read ``are 
residents of the state.'' In Sec.  600.305(a)(2), we changed the term 
``non-citizen'' to ``immigration'' status clarifying that it is 
immigration status that is a determinant for eligibility. Additionally 
we clarified that this same immigration status may apply to CHIP as 
well as Medicaid. In the proposed Sec.  600.305(a)(1), the standard 
also referenced not being eligible for Medicaid consisting of at least 
the EHBs. Because this requirement is entirely subsumed under Sec.  
600.305(a)(3) requiring ineligibility for MEC, we have deleted it from 
this section; this does not change the meaning of the regulations but 
rather makes the regulation more clear. Additionally, in Sec.  
600.305(a)(3) we have removed the word ``affordable'' to more closely 
reflect the underlying statutory language that connects affordability 
to employer sponsored insurance. In addition, we have also deleted the 
reference to CHIP in Sec.  600.305(a)(3)(i), and have limited the 
reference to ``such other programs'' only to Medicaid, because the 
Department of Treasury's final rule on MEC (78 FR 53646) now clarifies 
that all CHIP coverage is MEC (in contrast to Medicaid, which for some 
individuals may be limited and therefore not MEC).
    Comment: We received many comments supporting the proposed 
eligibility standards for BHP, including the provision permitting 
individuals in limited-benefit Medicaid programs to remain in such 
programs while also being determined eligible for BHP. Commenters 
expressed the importance of this provision as it relates to family 
planning, pregnancy related services, and HIV treatments.
    Response: We are finalizing the proposed provisions.
    Comment: We received one comment requesting that HHS provide an 
exception to the eligibility standards in states that do not expand 
Medicaid coverage citing the gap in coverage in those states that do 
not cover low

[[Page 14119]]

income adults under 133 percent of the FPL.
    Response: We share the commenter's concern regarding the gap in 
coverage in states that have not elected to expand Medicaid to cover 
low income adults under 133 percent FPL; however, we have no authority 
to provide an exception as requested by the commenter given that the 
statute specifies the household income standard in BHP (that is, 
individuals with household income that exceeds 133 percent of the FPL 
and does not exceed 200 percent of the FPL).
    Comment: Several commenters requested clarification that legally 
married same-sex couples will be recognized as married for purposes of 
BHP eligibility, in line with the Department's policy in the Exchanges.
    Response: Marriage recognition is not a policy subject to federal 
regulation under either the Exchange or Medicaid, but it is necessary 
for the determination of household composition, which is a key element 
of calculating household income using the modified adjusted gross 
income (MAGI) methodology. Under section 1331(h) of the Affordable Care 
Act, BHP terms such as income, including the element of household 
composition, are required to have the same meaning as such terms have 
under section 36B of the Internal Revenue Code. Pursuant to September 
2013 guidance on this issue from the IRS in Revenue Ruling 2013-17, a 
marriage of same-sex individuals validly entered into is recognized for 
purposes of the Internal Revenue Code even if the state in which the 
individuals are domiciled does not recognize the validity of same sex 
marriages. Because BHP is required to use the same definitions as are 
applicable under the Internal Revenue Code and because it would promote 
consistency across federal programs, we agree that this same policy is 
applicable to BHP. We intend to address this issue in subregulatory 
interpretive guidance similar to the guidance issued under the Exchange 
and Medicaid on BHP implications of United States v. Windsor, 570 U.S. 
-------- (2013). Using interpretive guidance will allow a more specific 
and nuanced consideration of the issues raised.
    Comment: Several commenters requested flexibility in BHP to provide 
coverage for spouses affected by the affordability test for employer 
based insurance. Some spouses are not eligible for a premium tax credit 
because they would be considered eligible for affordable employer based 
insurance. Some commenters suggested that CMS provide a state option to 
cover such spouses but not to require such coverage, so as not to force 
states to cover individuals for whom there would be no federal 
reimbursement. The commenters urged CMS to revise the regulation to 
permit states the option for such spouses to enroll in BHP and for 
states to have as much flexibility in funding as possible.
    Response: To explain the changes made to the regulation in response 
to these comments, it is necessary to point out that there is a 
statutory error in section 1331 of the Affordable Care Act, which as 
part of the eligibility standards, sets the BHP standard of 
affordability of employer sponsored insurance by referencing section 
5000A(e)(2) of the Internal Revenue Code. Section 5000A(e)(2) is not an 
affordability test. Compounding the error, we cited the affordability 
test in the proposed rule as section 5000A(e)(1) which is not the 
statutory reference, but is an affordability test. Resolving this 
double error, we are clarifying that the affordability test that should 
have been cited in BHP is to the premium tax credit standard at section 
36B(c)(2)(C) of the Code. As the commenters correctly point out, 
including the affordability test at 5000A(e)(1) creates a difference in 
eligibility between BHP and the PTC which does not seem to be supported 
by other sections of the statute and amounts to an unfunded mandate.
    These comments refer to statutory provisions concerning eligibility 
for the premium tax credit. Under current IRS rules, spouses are not 
eligible for the premium tax credit if the worker's offer of individual 
coverage requires a contribution less than a certain percentage of 
household income, because they would be considered eligible for 
affordable coverage. Since we are applying the same affordability test 
for BHP eligibility that applies for the premium tax credit, the same 
policies concerning spousal eligibility would apply. The statutory 
definition of an eligible individual for purposes of BHP expressly 
excludes individuals who are eligible for affordable coverage.
    Comment: We received a comment recommending that HHS revise 
language regarding standards for non-citizens' BHP eligibility to be 
more clear about the applicable income standard.
    Response: We have clarified the BHP eligibility standards for 
lawfully-present non-citizens ineligible for Medicaid by specifying the 
full income range (that is, lawfully present non-citizens who have 
household incomes from 0 to 200 percent of the FPL).
    Comment: A few commenters supported, but wanted further clarity, 
regarding the provision in the proposed rule that a state must 
determine an individual eligible for BHP when they are enrolled in 
Medicaid or CHIP coverage that does not provide MEC. In particular, one 
commenter would like verification that pregnancy-related services 
provided through Medicaid, whether comprehensive or not, continue to be 
excluded under Department of Treasury rules regarding MEC and would not 
preclude eligibility for BHP.
    Response: The definition of MEC is outside the scope of this rule. 
Section 1331(e) of the Affordable Care Act sets out two standards that 
are relevant to determining if individuals with household incomes from 
133 up through 200 percent of the FPL, who are eligible for Medicaid, 
can enroll in BHP. First, such an individual may not be eligible for 
Medicaid benefits that consist of EHBs (as described in section 1302(b) 
of the Affordable Care Act). In addition, to be eligible for BHP, 
individuals may not be eligible for MEC. MEC is defined in the Internal 
Revenue Code and implementing regulations. In general, Medicaid 
coverage is considered to be MEC and Medicaid coverage consisting of 
the EHBs would be MEC. A recent rule issued by the Department of 
Treasury (78 FR 53646), however, now provides that some limited-
benefits categories of coverage under title XIX are not MEC. 
Additionally, HHS has miscellaneous MEC authority to determine Medicaid 
programs to be MEC on an individual basis.
    Comment: Another commenter wanted clarity that an individual may be 
eligible to enroll in a standard health plan through BHP if the 
individual has access to employer sponsored coverage that fails to meet 
the minimum value standards.
    Response: As noted above, the standard for eligibility for BHP is 
based on statutory language in section 1331(e)(1) of the Affordable 
Care Act, which specifies that only individuals ineligible for MEC or 
individuals eligible for an employer-sponsored plan that is not 
affordable coverage are eligible for BHP. Minimum value is not a 
standard authorized by the statute.
    Comment: We received two comments requesting greater flexibility in 
states that implement a BHP for individuals who wish to remain in QHPs. 
The commenters expressed interest in providing such individuals with 
the choice to enroll in BHP, or remain enrolled in the Exchange with 
their premium tax credit and cost-sharing reductions.
    Response: We appreciate the commenters' interest in providing 
flexibility to individuals eligible for BHP who wish to continue to 
receive

[[Page 14120]]

coverage through QHPs. Such individuals may continue to receive 
coverage through QHPs; however, the statute specifies that individuals 
eligible for BHP are not eligible to receive the premium tax credit or 
cost-sharing reductions. If an individual elects to remain enrolled in 
QHP coverage, and is determined to be eligible for the state's BHP, no 
federal subsidies will be available to purchase the QHP coverage.
    Comment: One commenter expressed concern about Medicaid serving as 
a secondary payer to BHP, because the commenter believed Medicaid will 
likely be the better payer. The commenter recommended that HHS ensure 
that individuals have easy access to comparison information between 
Medicaid and BHP to help facilitate choice.
    Response: If a person has eligibility for both Medicaid that is not 
MEC and for BHP, the Medicaid statute at section 1902(a)(25) of the 
Social Security Act and implementing Medicaid regulations require that 
Medicaid pay secondary to BHP. The provider is required to bill BHP 
primary to Medicaid; the individual is not given choice about who is 
the primary payer.
    Comment: A commenter requested clarification on whether a state 
implementing a BHP between open enrollment periods in the Exchange can 
allow any QHP enrollees with the premium tax credit to be transitioned 
to the BHP at the next open enrollment with no impact on the enrollees' 
advance payments of the premium tax credits (APTCs).
    Response: We are finalizing Sec.  600.305(b) as proposed except 
that we have added language to conform with a change made in subpart B 
of this rule permitting states implementing BHP in 2015 to seek 
approval for a transition plan enabling the state to propose 
alternative initial enrollment strategies for eligible individuals. 
This would address the commenters concern if the state implements BHP 
in 2015. After 2015, we are requiring alignment of BHP with open 
enrollment in the Exchange at Sec.  600.115(d). Following the 2015 
initial implementation year, a state implementing a BHP must coordinate 
implementation with open enrollment of the state's Exchange.
3. Application (Sec.  600.310)
    In Sec.  600.310, we proposed that any state operating a BHP must 
use the single streamlined application or the state's approved 
alternative. Additionally, we proposed that application assistance be 
made available to individuals applying for BHP equal to that which is 
available in Medicaid. We also proposed that if a state uses authorized 
representatives, it would follow the standards of either Medicaid or 
the Exchange. We noted in the preamble that call centers required by 
the Exchange at 45 CFR 155.205(a) are encouraged under those 
regulations to provide information on all insurance affordability 
programs including BHP.
    Comment: Several commenters requested that we require that 
application assistance be conducted in a manner accessible to those 
with limited English proficiency or individuals with disabilities. A 
commenter suggested requiring call center staff to refer consumers in 
real time to community resources if they are unable to answer questions 
about BHP. Another commenter wanted call centers to be required to 
provide information on BHP rather than encouraged to do so.
    Response: After consideration of the comments received, we are 
finalizing this section as proposed. We have required application 
assistance for BHP equal to that provided in the Medicaid program, 
which requires accommodation for individuals with limited English 
proficiency and for persons with disabilities. Additionally, the call 
center requirements set forth at 45 CFR 155.205(a) are outside of the 
scope of this rule-making; therefore, we cannot make the suggestions 
proposed by the commenters. While we are unable to include specific 
call center requirements in this final rule, we expect that, in 
accordance with Sec.  600.330, the state will enter into an agreement 
with the state Exchange to ensure coordination of BHP and Exchange 
application and enrollment mechanisms. Since call centers are part of 
those mechanisms, we expect that the agreement will require that 
coordination will include call center activities. We expect that call 
centers will support all insurance affordability programs, including 
BHP.
4. Certified Application Counselors (Sec.  600.315)
    In Sec.  600.315, we proposed that if, a state chooses to use 
certified application counselors (CACs), the state must apply either 
the certification standards and processes of Medicaid or the Exchange.
    Comment: One commenter requested clarification on whether a state 
must use certified application counselors.
    Response: We are not mandating the use of certified application 
counselors.
    Comment: We received several comments requesting clarification on 
who can serve as certified application counselor. Specifically, 
commenters recommended that HHS permit health plans to serve as 
certified application counselors. The commenters noted that it would be 
desirable to have plans assist as ``issuer customer service 
representatives.''
    Response: Certified application counselors are individuals who meet 
certain qualifications, not entities. To the extent that employees of 
health plans or any other entities meet the applicable qualifications, 
they would not be precluded from serving as CACs. These qualifications 
would be based on the certification standards of either Medicaid at 42 
CFR 435.908 or the Exchange at 45 CFR 155.225 (at state option). We 
note that employees of health plans acting as CACs would need to be 
able to maintain confidential records, and would need to ensure that 
they will not operate with a conflict of interest (for example, they 
could not receive bonuses based on how many new enrollees sign up for 
the employing health plan).
    Comment: We also received a comment that the certification process 
should include specific training components on how to provide 
accessible services to individuals with disabilities and culturally and 
linguistically appropriate services. Commenters suggested that training 
should include components on how to access and work with interpreters 
as well as how to access and use augmentative and assistive 
communication devices. The commenter recommended that application 
counselors have access to population level data to assist in 
determining the needs of the population being served. A commenter 
recommended the inclusion of language directing assistance in the form 
of pre-enrollment outreach and education.
    Response: We share the commenter's interest in ensuring that 
certified application counselors have sufficient training to assist 
individuals seeking health insurance coverage; however, we believe that 
the content of such training is best determined at the state-level 
given the state-specific needs and unique market features within the 
state. We anticipate that states will use a variety of application 
assistance techniques relying heavily on the strength of current 
operations in each state. Such state training still must be in 
accordance with 45 CFR 155.225 (accessibility requirements for persons 
with disabilities), or 42 CFR 435.908 (accessibility requirements for 
persons with disabilities and for individuals with limited English 
proficiency.)

[[Page 14121]]

5. Determination of Eligibility for and Enrollment in a BHP (Sec.  
600.320)
    In Sec.  600.320, we proposed that determining eligibility for BHP 
is a governmental function that must be done by a state or local 
governmental entity, including at state choice, an Exchange that is a 
government entity. Further, we proposed that the timeliness standards 
for making modified adjusted gross income (MAGI) based eligibility 
determinations under Medicaid apply equally to BHP. Regarding 
establishment of the effective date of eligibility, we proposed that 
states must establish a uniform method of determining the effective 
date for purposes of enrollment in standard health plans using either 
the Exchange standards or Medicaid rules. Likewise, we proposed that 
the state must offer either the enrollment and special enrollment 
periods of the Exchange or the state may choose to follow the 
continuous open enrollment standard of Medicaid.
    We received several comments on this section, which we have 
carefully considered and we offer a variety of modifications, as 
described below.
    Comment: One commenter offered endorsement of the policy of having 
eligibility determinations made by governmental agencies. With regard 
to enrollment, we also received general support for offering the choice 
between the enrollment policies of the Exchange or Medicaid; however, 
some commenters suggested we narrow the Medicaid option to be exclusive 
of Sec.  435.915(a), which establishes retroactive coverage.
    Response: In Sec.  600.320(c) we have removed applicability of 
Sec.  435.915(a) to eliminate retroactive coverage from the Medicaid 
enrollment policies that would be required if the state elects the 
Medicaid model; states can still provide retroactive eligibility in BHP 
following the Medicaid rules if they so choose but it is not required.
    Comment: A few commenters requested clarification on whether tax 
filing is required for enrollment.
    Response: Tax filing is not an eligibility standard for BHP; the 
eligibility standards for BHP eligible individuals are set forth in 
Sec.  600.305. This section's focus is on the processes, not the 
standards, for determining eligibility and enrollment. These processes 
should be used to determine eligibility against the standards given in 
Sec.  600.305(a). In Sec.  600.305(b) we have made it clear that states 
may not add to the list of eligibility standards. Therefore, we have 
not altered the regulation text.
    Comment: A commenter suggested that we permit presumptive 
eligibility in BHP and that we permit hospitals to delegate authority 
to another entity, such as an eligibility service vendor.
    Response: There is no statutory provision that authorizes 
presumptive eligibility under BHP. As discussed above, states may elect 
to provide for retroactive effective dates for eligibility. This option 
may ensure that coverage is not delayed because of the eligibility and 
enrollment process.
    Comment: We received a comment advising us to state the goal of 
real-time eligibility determinations.
    Response: We agree with the commenters' position that insurance 
affordability programs, including BHP, should be moving towards real-
time eligibility determinations. Achieving this goal is dependent on 
the development and maintenance of effective systems and procedures, 
which may take a substantial investment and time.
    Comment: One commenter suggested that we not use the term 
``continuous eligibility'', which the commenter noted could be confused 
with other eligibility policies. The commenter encouraged us to 
describe enrollment as continuing on a rolling basis throughout the 
year.
    Response: In response to the comment we have added the phrase 
``continuous open enrollment throughout the year'' to Sec.  600.320(d) 
to clarify the Medicaid choice of enrollment.
    Comment: Several commenters raised concern that the Exchange 
standard does not include a special enrollment period for pregnancy and 
asked that we specifically address that in BHP.
    Response: We have modified the text to clarify that states choosing 
the Exchange enrollment policy must establish enrollment periods no 
more restrictive than those permitted by the Exchange, enabling states 
to add special enrollment periods based on pregnancy as suggested.
6. Coordination With Other Insurance Affordability Programs (Sec.  
600.330)
    In Sec.  600.330, we proposed carrying over several of the 
coordination provisions from the Exchange and Medicaid regulations to 
BHP, including having agreements delineating lines of authority for 
making coordinated eligibility determinations. We have proposed that 
individuals applying to any insurance affordability program not be 
required to duplicate information already provided for purposes of 
applying for BHP, and that the state accomplish this through 
electronically transferring accounts between the BHP and other agencies 
as well as accepting determinations and assessments made by other 
insurance affordability programs and enrolling eligible individuals 
into coverage without delay. When accounts are transferred to the BHP 
from other agencies, we proposed a requirement that the BHP agency must 
notify the referring agency of any final determination. Also, we 
proposed that every application for BHP will result in a final 
determination of eligibility or ineligibility and that notices to 
applicants be coordinated with other insurance affordability programs.
    Comment: We received many comments supporting coordination between 
IAPs, some of the comments particularly pointed out the importance of 
having agreements between IAPs. No comments requesting change were 
received on this section.
    Response: We are finalizing this section as proposed.
7. Appeals (Sec.  600.335)
    Section 1331 of the Affordable Care Act does not confer a federal 
level appeal for the BHP program. Therefore, we proposed in Sec.  
600.335 that states follow the Medicaid appeals rules and processes. 
Under these processes, there would be no direct appeal to the 
Department of Health and Human Services. Further, we proposed that 
eligibility determinations must include notice of the right to appeal 
and instructions for how to engage the appeals process. We proposed 
that this process must be conducted in a manner accessible to 
individuals with limited English proficiency and persons with 
disabilities.
    Comment: While we received a few comments commending the decision 
to use the Medicaid appeals process, we received several comments 
expressing concern about this section. Commenters favored the ability 
to choose the Marketplace (Exchange) appeals process to decrease 
variability within a given state. One commenter acknowledged that 
notices would have to specify that there is no federal level appeal for 
BHP.
    Response: We understand the commenters' desire to have the Exchange 
appeals rules and processes available to BHP, decreasing variability in 
states with state-based Exchanges. (We note the Federally Facilitated 
Exchange will only have a federal process, and we do not anticipate 
that this federal process will be available for BHP.) Therefore, as in 
many other areas of the regulation, we are changing this provision to 
give states the choice of using the appeals rules of Medicaid or the 
Exchange.

[[Page 14122]]

8. Periodic Renewal of BHP Eligibility (Sec.  600.340)
    In Sec.  600.340(a), we proposed a 12-month period of eligibility 
unless redetermination is warranted based on new information. 
Additionally, we proposed that states require individuals to report 
changes in circumstances at least equivalent to that which is required 
by the Exchange. In Sec.  600.340(b), we proposed that enrollees who 
remain eligible be given notice of a reasonable opportunity to change 
plans. Further, we proposed that enrollees will remain in the plans 
selected for the previous year if they choose not to take action on 
such notices and such plans remain available. In paragraphs (c) and 
(d), we proposed that states apply the redetermination procedures of 
either the Exchange or Medicaid and that states are required to verify 
information in accordance with Sec.  600.345. Finally, in Sec.  
600.340(e) we require states to provide an enrollee with an annual 
notice of redetermination of eligibility which includes all current 
information used as the basis of the individual's eligibility. The 
enrollee is required to report changes within 30 days and the state 
must verify the information.
    Comment: Many comments were received on this section, with the vast 
majority urging us to allow 12 month continuous eligibility. Commenters 
frequently cited that half the individuals in the eligible income 
bracket for BHP are expected to experience changes in income within a 
12 month period that would cause them to shift from BHP to Medicaid or 
the Exchange. Many commenters were concerned with the administrative 
burden this would place on a state.
    Response: We have carefully considered the comments received and we 
are sympathetic to the request for 12 month continuous eligibility 
because we share the concern of the commenters both with regard to the 
shifts between different insurance affordability programs that could be 
experienced by the BHP enrollees and the administrative burden on 
states. Therefore, we are extending to states the option of only 
redetermining eligibility every 12 months, regardless of any changes in 
income or other circumstances, as long as the enrollee is under age 65, 
is not otherwise enrolled in MEC, and remains a resident of the state. 
We have singled out those exceptions because they are situations in 
which BHP coverage would either be duplicative or outside its overall 
scope. However, enrollees must report changes impacting eligibility 
within 30 days regardless. Additionally, to clarify the relationship 
between this new provision and the 12 month periodic review of 
eligibility (provision (a)) we have replaced the language that an 
individual is ``determined eligible for a period of'' with ``subject to 
periodic review of eligibility every'' 12 months in provision (a). 
States will not receive additional funding to account for any higher 
BHP enrollment under this state option.
    Comment: One comment requested clarification that enrollees must 
report all changes within 30 days.
    Response: The 30 day standard specified in 45 CFR 155.330(b) is 
applied by reference.
9. Eligibility Verification (Sec.  600.345) and Privacy and Security of 
Information (Sec.  600.350)
    In Sec.  600.345, we proposed that states verify the eligibility of 
an applicant or enrollee in BHP using either the standards and 
procedures of Medicaid or the Exchange. In Sec.  600.350 we proposed 
that states are required to comply with standards and procedures 
protecting the privacy and security of eligibility information set 
forth by the Exchange. We did not receive specific comments on these 
sections and are finalizing the provisions as proposed.

E. Standard Health Plan

1. Basis, Scope and Applicability (Sec.  600.400)
    Proposed Sec.  600.400 under subpart E specified the general 
statutory authority for, and the scope of, standards proposed in this 
subpart, which sets forth the minimum coverage standards under BHP and 
delivery of such coverage, including the competitive contracting 
process required for the provision of standard health plans. For 
specific discussions, see the September 25, 2013 proposed BHP rule (78 
FR 59128 and 59129). We did not receive specific comments on this 
section and are finalizing the provision as proposed.
2. Standard Health Plan Coverage (Sec.  600.405)
    In Sec.  600.405(a), we proposed that standard health plan coverage 
must include, at a minimum, the EHBs as determined and specified under 
45 CFR 156.110, and 45 CFR 156.122 regarding prescription drugs. We 
also proposed that states be able to select more than one base 
benchmark option from the reference plans specified at 45 CFR 156.100 
when establishing EHBs for standard health plans. Additionally, we 
proposed that states comply with 45 CFR 156.122(a)(2) by requiring 
participating standard health plans to submit a list of covered 
prescription drugs under the plan to the state.
    In proposed Sec.  600.405(b), the state is required to adopt the 
determination of the Exchange at 45 CFR 155.170(a)(3) in determining 
which benefits subject to state insurance mandates enacted after 
December 31, 2011 are in addition to the EHBs.
    In proposed Sec.  600.405(c) and (d), we required EHBs to include 
changes made through periodic review and prohibited discrimination in 
benefit design.
    Proposed Sec.  600.405(e) is the prohibition on federal funding for 
abortion prescribed in section 1303 of the Affordable Care Act that 
applies in the same manner to BHP and standard health plans as it does 
to QHPs.
    Comment: We received several comments in support of requiring 
coverage for preventive services without cost-sharing.
    Response: We are finalizing the proposed provisions.
    Comment: We received several commenters requesting that states have 
the ability to use the alternative benefit plan in Medicaid as the 
reference or base-benchmark plan for BHP in order to incorporate EPSDT 
and other child specific benefits in the event that CHIP does not 
continue beyond 2019. Another group of commenters request that we 
require the state to use the same base-benchmark or reference plan that 
the state uses for either the Exchange or the Medicaid benchmark.
    Response: Sections 1331(a)(2)(B) and 1331(b)(2) of the Affordable 
Care Act provide that the benefits offered through BHP must contain at 
least EHBs, which is determined by a comparison to a base benchmark 
plan set forth at 45 CFR 156.100 using the processes set forth in 45 
CFR 156.110 and 45 CFR 156.122. The statute does not require benefits 
equivalent to a Medicaid alternative benefit plan. That said, states 
have the ability to negotiate for additional benefits through the 
competitive procurement process required by section 1331(c)(1) of the 
Affordable Care Act and can also provide additional benefits for BHP 
enrollees in addition to the standard health plan benefits, using BHP 
trust funds.
    Comment: Other commenters recommend additional benefits outside of 
the EHBs in the standard health plan. They also expressed concern that 
requiring the state to offer at least the EHBs ``at a minimum'' is 
insufficient to mean the state, at its option, may provide additional 
benefits to the standard health plan.
    Response: We have carefully considered the comments for this

[[Page 14123]]

section and we are finalizing without change. We believe that this 
regulation is explicit in establishing that states must provide EHBs as 
a minimum level of benefits, can negotiate with standard health plans 
in the competitive procurement process for more benefits, and can 
supplement those benefits with additional benefits for BHP enrollees, 
using BHP trust fund dollars.
    Comment: We received one comment requesting that HHS provide 
examples of additional benefits a state could provide. Another 
commenter requested clarification that a state must provide coverage of 
plasma protein therapies.
    Response: We hesitate to provide examples in this area where states 
are extended complete latitude because examples are often viewed as 
recommendations. For benefits coverage policy, we are requiring the 
statutory floor of the EHBs, and each state is free to add to the 
benefits as the state decides is appropriate. We are leaving this 
provision unchanged.
    Comment: Several commenters expressed concern that the preamble 
language concerning the abortion services standard appeared to be 
misleading in that it may be read to mean that states out of compliance 
with this requirement would not receive any federal funding for BHP, 
rather than just federal funding for abortion.
    Response: The regulation text requires compliance with the rules on 
abortion coverage applicable to Exchanges at 45 CFR 156.280. The 
preamble explained that, consistent with that regulation, any abortion 
coverage for which public funding is prohibited could only be provided 
using segregated non-federal funding. If a state or standard health 
plan does not segregate funding for such abortion coverage, the state 
would be out of compliance with BHP requirements, and could lose 
program certification. Or the state could face disallowance of 
improperly spent funds.
    Comment: Another commenter requested the inclusion of additional 
guidance on substitution and supplementation of benefits.
    Response: Supplementation and substitution are policies that were 
developed for use by plans in the individual and group markets, and 
were adopted with some minor variations by Medicaid, for alternative 
benefit plans. In general, these policies are part of the determination 
of the scope of EHBs. Section 1302 of the Affordable Care Act sets 
forth 10 required EHBs, and then indicates that the full scope of EHBs 
should be based on the scope of benefits provided by a typical employer 
plan. To implement this requirement, under applicable regulations at 45 
CFR 156.100 et seq., states must select a base benchmark plan from 
among several options. While the state selects one base benchmark for 
individual and group plans, the state may select different and multiple 
base benchmarks for Medicaid. Supplementation allows a plan offeror to 
add to the base benchmark a required EHB that is missing, and 
substitution allows a plan offeror to substitute an actuarially 
equivalent essential health benefit into a reference plan. (In 
Medicaid, because the state acts as the plan offeror, it determines the 
supplementation and substitution procedures.) These flexibilities were 
created to make the definition of EHBs possible from existing 
commercial products. For BHP, we propose the same process to define 
EHBs, except that the state could select different and multiple base 
benchmarks for BHP. Any subregulatory guidance put forward by the 
Exchange will be made equally available under BHP.
    Comment: One commenter requested that HHS ensure payment for out-
of-network providers for emergency services and the extension of 
protections in section 1932(b)(2) of the Act, the prudent laypersons 
standard for emergency care, to BHP.
    Response: With respect to the provider rates, we do not believe 
that statute provides the authority to establish rate-setting standards 
in BHP. States are free to contract with standard health plan offerors 
to provide coverage which may take many forms including networks, fee-
for-service or other models. States may impose additional requirements 
including mandatory benefits, rate structures, or delivery system 
limitations through law or contract.
    Regarding the prudent layperson standard for emergency services, 
EHBs are required by statute to be offered in BHP. Emergency services 
is an EHB, to which the prudent layperson standard is applied at 45 CFR 
147.138(b)(4). Therefore, any base benchmark plan will necessarily 
include emergency services based on the prudent layperson standard.
    Comment: We received one comment expressing concern that the United 
States Phamacopeia (USP) classification system as specified in 45 CFR 
156.122 is not designed to be used with plans requiring EHBs, and are 
inadequate in providing for women's health care needs.
    Response: This issue is not within the scope of this regulation.
3. Competitive Contracting Process (Sec.  600.410)
    Under Sec.  600.410(a), we propose that a state must assure in its 
BHP Blueprint that it meets the requirements of this section.
    We propose in Sec.  600.410(b) elements required in the competitive 
contracting process for the provision of standard health plans. For the 
specific elements, see the September 25, 2013 proposed rule (78 FR 
59147).
    In Sec.  600.410(c), we proposed an exception to the competitive 
contracting process for program year 2015. For specific requirements 
associated with this exception, see the September 25, 2013 proposed 
rule (78 FR 59130).
    We proposed in Sec.  600.410(d) the specific negotiation criteria 
that the state must assure is included in its competitive contracting 
process. For the specific criteria, see the September 25, 2013 proposed 
rule (78 FR 59147).
    In Sec.  600.410(e), we proposed additional considerations 
specified in statute that a state must include in its competitive 
contracting process for the provision of standard health plans. For 
specific discussions, see the September 25, 2013 proposed rule (78 FR 
59147). We received the following comments on the competitive 
contracting process:
    Comment: We received several comments supporting the proposed 
competitive contracting process.
    Response: We are finalizing the competitive contracting process 
provisions with some modifications as discussed further below.
    Comment: We received several comments requesting clarification on 
whether a state could use its Medicaid, or QHP, contracting process for 
BHP if that process was competitive in nature. Two commenters 
specifically asked whether Medicaid managed care organizations 
currently under contract could provide standard health plans to allow 
the alignment of BHP with existing benefits offered to Medicaid 
beneficiaries, or would the state need to begin a new procurement 
process for BHP. Another commenter requested that CMS waive the 
competitive contracting process if the state's Medicaid or Exchange-
based contracting process aligns with the BHP requirements.
    Response: With respect to how the state executes its procurements 
(that is, the manner in which the state solicits for bids and 
effectuates a contract award), a state may use an already established 
competitive contracting process, such as the Medicaid or QHP process, 
to enter into contracts with standard health plan offerors as long as 
the process provides for negotiation and

[[Page 14124]]

consideration of each of the statutorily required factors for BHP 
procurement. This may require some adjustment to those established 
processes, since, for example, a Medicaid managed care procurement 
would not necessarily include negotiation or consideration of those 
required elements. Although the procurement process might have many 
standard elements, the state would have to adjust its solicitation of 
bids to reflect the differing requirements of each separate program, 
and contractors would likely need to adjust their offerings to meet the 
requirements of each separate program. In addition, the procurement 
process would have to ensure that there was no cross-subsidization 
between programs. Except for program year 2015, in which a state may 
request an exception to the competitive contracting process, the 
procurement process used to contract for the provision of standard 
health plans, whether it is a joint or standalone procurement, must 
include and comply with all of the statutorily required elements of 
competitive bidding for BHP standard health plans codified in Sec.  
600.410.
    We understand the commenters' interest in ensuring rapid and 
efficient implementation of BHP and, as a result, we have provided a 
state implementing BHP in program year 2015 with the option to request 
an exception to the competitive process. As specified in Sec.  
600.410(c), the state must include a justification as to why it cannot 
meet this requirement and describe the process it will use to enter 
into contracts for the provision of standard health plans in 2015. This 
process can include, but is not limited to, amending existing Medicaid 
or Exchange-based contracts for the purpose of promoting coordination 
and efficiency in procurements. After the exception period has expired 
(that is, beginning for coverage effective in program year 2016), 
simply amending an existing contract to include BHP, after the 
competition process is complete, is not permissible. The statute 
requires the use of a competitive contracting process, and we do not 
believe we have the authority to exempt states from the process beyond 
the startup year for the program.
    Comment: Several commenters requested clarification regarding the 
procurement bidding process. Specifically, commenters asked if a state 
is required to open the bidding to all interested parties, or whether 
the state has the ability to impose criteria that limits the number of 
eligible bidders. Another commenter suggested that the bidding process 
ensure the participation of local health plans.
    Response: The statute specifies that a state must establish a 
competitive contracting process for the provision of standard health 
plans. In order to meet this statutory requirement, we proposed that a 
state may establish such a process under state procedures that are 
consistent with the standards set out in section 45 CFR 92.36(b) 
through (i). These standards provide states considerable flexibility in 
the solicitation and evaluation of bids as well as in the awarding of 
contracts; therefore, to the extent that the state's solicitation 
complies with such standards as well as ensures that the qualified 
bidders can provide standard health plan coverage in all contexts, the 
state has the flexibility to determine the criteria for eligible 
standard health plan bidders, including the participation of local 
health plans.
    Comment: We received many comments encouraging HHS to ensure the 
participation of Administrative Service Organizations (ASOs) in the 
competitive contracting process. They felt that permitting ASO 
participation would enable more states to implement BHP as it would 
allow interested states to build off of their existing Medicaid 
programs thereby reducing the administrative burden associated with 
implementing a new program.
    Response: The statute requires states to contract for the provision 
of standard health plans under BHP. Neither the statute, nor our 
regulations, specifically prescribe or restrict the participation of 
certain kinds of entities as standard health plan offerors. Rather, 
standard health plan offerors must meet the requirements delineated out 
in Sec.  600.415(a). ASOs may participate in the competitive 
contracting process to the extent that they can meet the criteria of a 
standard health plan offeror in Sec.  600.415(a). ASOs (who 
traditionally only offer administrative support) may expand their 
capabilities and practices to meet those requirements, or partner with 
other entities who do so.
    Comment: While we received several comments supporting the 
competitive contracting process exception for program year 2015, many 
commenters recommended that HHS extend this exception through 2016, or 
alternatively, provide this exception to states during their first year 
of implementation even if that occurs after 2015.
    Response: We are finalizing the proposed provisions providing an 
exception only for 2015. Given the short time period in which states 
have to establish a BHP in time for the January 1, 2015 effective date, 
we believe that the one year exception will not only help states 
quickly and efficiently implement BHP by leveraging existing contracts 
that may not have been procured consistent with the finalized 
regulation, but also promote coordination and continuity of care during 
the initial implementation of BHP in 2015. For states that elect to 
implement BHP after 2015, we believe that these states will have 
sufficient time between the issuance of these final rules and a post-
2015 implementation to establish a competitive contracting process for 
the procurement of standard health plans. The statute requires such a 
process and we do not believe we have the authority to exempt states 
from the process beyond the startup year for the program.
    Comment: We received many comments recommending that we allow 
states to utilize a primary care case management (PCCM) delivery of 
care model under BHP. Many commenters expressed that the PCCM model not 
only meets the statutory requirement to use a process with as many 
attributes of managed care as possible, but that it would also 
encourage BHP implementation as it would allow interested states to 
build off of their existing Medicaid programs.
    Response: The statute requires states to contract for the provision 
of standard health plans under BHP. Neither the statute, nor our 
regulations, specifically prescribe or restrict the participation of 
certain kinds of entities as standard health offerors. Rather, standard 
health offerors must meet the requirements delineated in 600.415(a). 
Standard health plan offerors have the discretion to determine and 
utilize a delivery of care model, such as the PCCM model, of their 
choice. As such, standard health plan offerors electing to operate a 
PCCM delivery of care model may participate in the competitive 
contracting process to the extent that they can meet the criteria of a 
standard health plan offeror in Sec.  600.415(a). Entities that 
traditionally only provide some of the services delineated in section 
600.410(c) and (d) may expand their capabilities and practices to meet 
those requirements, or partner with other entities who do so. While we 
appreciate commenters' suggested language changes throughout Sec.  
600.410 to include the use of PCCM, we are not including those 
suggested language changes into the final regulation.
    Comment: One commenter requested that CMS consider broadening the 
definition of what constitutes competitive contracting to permit fewer 
than two standard health plans to serve

[[Page 14125]]

a local health care market. The commenter believes this would encourage 
the development of innovative models of care delivery that coordinates 
care throughout a locality, without a division between standard health 
plan offerors. Specifically, the commenter recommended that providing 
additional flexibility in competitive contracting would encourage 
states interested in establishing local community-based coordinated 
care models to pursue such models.
    Response: We have considered the commenter's request, but we 
believe that, as proposed, the regulation already affords a state with 
considerable flexibility and opportunity for state innovation as it 
establishes its competitive contracting process. The standards set 
forth simply require the state to be consistent with those found in 45 
CFR 92.36(b) which provide a basic framework to the required 
procurement process. We believe that standard health plan offerors also 
have considerable flexibility in developing innovative models of care 
delivery, and encourage states to promote innovations in delivery 
system and payment reforms during the contracting process. Given that 
innovations in care coordination, utilization of preventive care 
services and patient-centered health decision making are specified in 
statute, we hope that states will make such innovations a high-ranking 
criterion in the solicitation process. A state interested in pursuing 
innovations that extend beyond the parameters of BHP and into other 
insurance affordability programs has the option, beginning in 2017, to 
request a waiver for state innovation as specified in section 1332 of 
the Affordable Care Act. Finally, as described below, we are clarifying 
the provision of the proposed regulation which requires availability of 
at least two standard health plan offerors; we do not believe that this 
provision will limit innovation. We view the choice of standard health 
plan offerors as an essential enrollee protection that is consistent 
with the requirement in section 1331(c)(3) to provide multiple plans to 
the maximum extent feasible.
    Comment: We received many comments recommending that the final 
regulation strengthen the network adequacy requirements in the 
competitive contracting process. Specifically, many commenters 
suggested that the standard health plan offerors be required to 
demonstrate that their provider networks not only have a sufficient 
number of providers, especially specialty providers, but also have a 
sufficient geographic distribution such that enrollees in rural areas, 
for example, have sufficient access to providers. In addition, to 
strengthen the overall network adequacy requirements, many commenters 
also recommended that states ensure the standard health plan offerors 
include essential community providers; federally qualified health 
centers (FQHCs), pediatric primary care providers and other specialists 
in their networks.
    Response: We appreciate and share the commenters' interest in 
ensuring that BHP enrollees have sufficient access to providers; 
therefore, we have revised the language in Sec.  600.410(e)(2) 
regarding access to providers. States will have some flexibility to 
determine the specific nature of the standards; however, we believe 
that at a minimum, the state should ensure that the standard health 
plan offerors maintain a network of providers that is sufficient in 
number, mix, and geographic distribution to meet the needs of the 
anticipated number of enrollees in the service area to the same extent 
that would be required under the standards applicable either to managed 
care providers in Medicaid under 42 CFR Part 438, Subpart D or to 
coverage offered through the Exchange under 45 CFR 156.230 and 156.235. 
With respect to requiring states to ensure that standard health plan 
offerors contract with certain provider types, the strengthened 
language requiring that states ensure that standard health plans comply 
with either Medicaid or Exchange access standards should address this 
issue. While these access standards do not require that plans contract 
with any particular essential community providers, they address the 
inclusion of essential community providers in provider networks to 
ensure access to care. As a result of these stronger network adequacy 
standards, we anticipate that standard health plan offerors will need 
to include other providers, such as I/T/Us, FQHCs, OB/GYNs, pediatric 
primary care providers and other specialists in their networks to 
ensure that there is a sufficient number, mix and geographic 
distribution of providers for BHP enrollees to access. Finally, we 
would also like to note that the consideration of access concerns for 
states that have Indian populations should include consideration of 
access to providers that serve such populations.
    Comment: Several commenters recommended that the final regulation 
require that as a condition of participating in BHP, a standard health 
plan offeror participate in either the state's Medicaid program or in 
the state's Exchange. Commenters offering this recommendation believe 
that participating in BHP, Medicaid and/or the Exchange would help 
mitigate any disruptions in care in the event that a BHP enrollee 
transitions from BHP into Medicaid or the Exchange as the individual 
could potentially stay with the same health plan during the transition 
out of BHP.
    Response: We share the commenters' interest in having strategies in 
place between states and standard health plan offerors to promote 
continuity of care for BHP enrollees transitioning into, or out of, the 
program. States have the discretion to include standards and criteria 
in their competitive procurement process to further the goals of 
continuity of care that the commenters are expressing. We do not 
believe, however, that limiting competition to plan offerors who 
participate in other IAPs is the only method to assure continuity of 
care, and in fact, could prevent BHP enrollees from having access to a 
range of qualified standard health plan offerors and their networks of 
providers. The commenters' concerns are addressed in part by the 
requirement specified in Sec.  600.425 that states must coordinate the 
continuity of care for enrollees across the insurance affordability 
programs, and describe in their Blueprints how they will do so. We 
anticipate that these descriptions will address how the state will 
ensure minimal disruptions in care for those who transition between 
insurance affordability programs.
    Comment: Many commenters expressed concern that the provisions 
regarding the negotiation of benefits, premiums and cost sharing in the 
proposed rule precluded a state from developing a standard benefit 
package, premium amount, and/or cost-sharing amount and including such 
a standard in its solicitation. One commenter asked if it was 
permissible for a state to establish a standard benefit package as well 
as standard premium and cost-sharing amounts and accept any willing 
providers that agree to meet such standards issued in the solicitation. 
Many commenters felt that the final regulation should clarify that such 
an approach (that is, establishing standard benefits, premiums and cost 
sharing) would satisfy the ``negotiation of'' requirement specified in 
statute.
    Response: While the statute specifies that there must be a 
negotiation of benefits, premiums and cost sharing during the 
competitive contracting process, nothing precludes a state from 
establishing standards that will serve as the starting point for 
negotiations with standard health plans offerors. Such negotiations 
around benefits, premiums,

[[Page 14126]]

cost sharing and other required elements specified in statute may 
include, but are not limited to price, the provision of benefits in 
addition to those specified in the state's solicitation, lower premium 
and cost-sharing amounts than those specified in the state's 
solicitation, or any other aspects of the state's program that were 
included in its solicitation. While the state may propose a 
``standard'' set of benefits, premiums and cost sharing, the state, at 
a minimum, must permit some level of negotiation, such as on price, or 
on additional benefits for enrollees, with the standard health plan 
offeror.
    Comment: Many commenters requested that HHS include additional 
negotiation criteria in Sec.  600.410(d) and (e) that a state must 
include in its competitive contracting process. Recommendations 
included: (1) Requiring states to consider similarities between BHP 
enrollees, Medicaid beneficiaries, and Exchange consumers; (2) 
requiring the inclusion of specific quality and performance measures; 
(3) specifying that standard health plan offerors provide documentation 
that they can bear risk and meet the state's financial solvency 
requirements; (4) including the negotiation of provider reimbursement 
rates; and (5) require standard health plan offerors to provide proof 
that they meet all of the negotiation criteria and other considerations 
specified in Sec.  600.410(d) and (e) as well as all of the contract 
requirements specified in Sec.  600.415(b).
    Response: We appreciate the commenters' recommendations; however, 
we believe that the statute specifies the minimum requirements that a 
state must assure are included in its competitive contracting and 
leaves considerable flexibility for states to include additional 
negotiation criteria. Therefore, the requirements specified in Sec.  
600.410(d) and (e) are the minimum federal requirements that the state 
must assure are included in its competitive contracting process. A 
state can, at its option, include additional criteria, such as those 
recommended by the commenters, to establish sound negotiating standards 
and criteria to ensure the ability of offerors to provide standard 
health plans in such a manner that promotes affordable, high quality 
health care coverage to BHP enrollees.
4. Contracting Qualifications and Requirements (Sec.  600.415)
    We proposed in Sec.  600.415(a) the entities that a state may 
contract with for the administration and provision of standard health 
plans. For specific discussions, see the September 25, 2013 proposed 
rule (78 FR 59130).
    In Sec.  600.415(b), we proposed the general contract requirements 
that must be included in the state's standard health plan contracts. 
For specific discussions on these requirements as well as the proposed 
``safe harbor'' approach, see the September 25, 2013 proposed rule (78 
FR 59130 and 59131).
    We proposed in Sec.  600.415(c) that a state must include in its 
BHP Blueprint the standard set of contract requirements it will include 
in its standard health plan contracts.
    We received the following comments on contract qualifications 
requirements:
    Comment: We received several comments in support of the proposed 
``safe harbor'' approach enabling states to select either Medicaid or 
Exchange contracting provisions for their standard health plan 
contracts.
    Response: We thank the commenters for their support and we are 
finalizing the provisions as proposed.
    Comment: We received several comments in support of our proposed 
rule permitting states to contract with non-licensed health maintenance 
organizations participating in Medicaid and/or CHIP.
    Response: We thank the commenters for their support and we are 
finalizing the provisions as proposed.
    Comment: Several commenters recommended that HHS apply a standard 
set of qualification standards, specifically the QHP certification and 
licensure standards, to standard health plan offerors.
    Response: We appreciate the commenters' recommendations; however, 
we are not requiring such an approach, in part because it may undermine 
the state's efforts to encourage Medicaid managed care organizations 
and other health insurance issuers to participate in BHP. This, in 
turn, could undermine state efforts to promote coordination between all 
the insurance affordability programs. As commenters rightly pointed 
out, there are different standards applied to Medicaid managed care 
organizations relative to the standards applied to QHPs (for example, 
licensure and accreditation standards). In order to ensure that a state 
has the ability to contract with health maintenance organizations that 
operate in Medicaid and the Exchange, we believe that it is appropriate 
to impose a minimum standard at the federal level and permit state 
flexibility in determining whether the application of additional 
qualification standards are appropriate and in the best interest of the 
state's goals and objectives.
    Comment: We received several comments requesting that HHS consider 
including safety net health plans, as defined in section 9010(c)(2)(C) 
of the Affordable Care Act, in the list of eligible standard health 
plan offerors.
    Response: We appreciate the commenter's concern, and have modified 
the language in Sec.  600.415(a) to clarify that states are not limited 
to contracting with the entities specified in this section for the 
provision of standard health plans. A state has the flexibility to 
establish the criteria included in its BHP solicitation, including 
specific qualifications of the standard health plan offeror. Assuming a 
safety net health plan, or another entity, meets both the federal 
requirements, as well as those specified in a state's BHP solicitation, 
the state may enter into contracts with such entities for the provision 
of standard health plans.
    Comment: Several commenters requested that HHS require that a state 
include specific requirements in its standard health plan contracts. 
Specific recommendations include: (1) Requiring that payment rates to 
standard health plan offerors are actuarially sound; (2) inclusion of 
specific providers; (3) specific provider reimbursements, such as the 
prospective payment system rate used for payment to FQHCs; (4) specific 
provider performance and quality measures; and (5) prohibition on the 
inclusion of ``all-products'' clauses in physician contracts.
    Response: We appreciate the commenters' recommendations; however, 
we believe that federal standard health plan contract requirements 
should reflect the competitive contracting requirements specified in 
statute rather than specific requirements that are not specified in the 
statute. We believe this approach promotes maximum flexibility for 
states that may wish to pursue different contracting approaches in BHP, 
or to blend elements from Medicaid and the Exchange. We are finalizing 
the proposed provision at Sec.  600.415(b), which sets forth the 
minimum contract requirements that must be included in a state's 
standard health plan contract. Because these are the minimum 
requirements and a state has the flexibility to include additional 
requirements based on its negotiation criteria, a state must assure and 
include in its BHP Blueprint the standard set of contract provisions 
that it intends to incorporate into its contracts. A state can, at its 
option, include additional contract requirements, such as those 
recommended by the commenters, to promote affordable, high quality 
health care coverage to BHP enrollees.
    Comment: We received several comments recommending that HHS

[[Page 14127]]

apply the 85 percent medical loss ratio requirement to all standard 
health plan offerors, and not just those that qualify as health 
insurance issuers.
    Response: We appreciate the commenters' recommendation; however, we 
are finalizing the proposed provisions. The statute specifies the 
application of the medical loss ratio (MLR) requirement only to 
standard health plan offerors that are also health insurance issuers. 
As discussed above, this standard is the minimum standard that a state 
must adhere to. A state has the discretion to apply this MLR 
requirement to all standard health plan offerors if it determines that 
such a requirement furthers the objectives and goals of its program. 
However, we do not believe we have the authority to require the 
application of this standard to entities beyond those described by 
statute.
    Comment: One commenter requested clarification about ongoing 
eligibility to offer a standard health plan in the event that a 
standard health plan offeror does not comply with the MLR requirement. 
The commenter also asked what standard, or calculation methodology, 
would be used in determining whether the standard health plan offeror 
met the MLR requirement.
    Response: A standard health plan offeror that is also a health 
insurance issuer would not qualify for a contract award if that offeror 
was not able to comply with the MLR requirement. The statute as 
specified in section 1331(b)(3) of the Affordable Care requires that 
standard health plan offerors that are also health insurance issuers 
comply with the 85 percent MLR requirement. As described above, to the 
extent that the standard health plan offeror is, for example, a 
Medicaid managed care organization or a network of providers, the 
offeror would not need to meet the 85 percent MLR requirement as a 
condition for contract award unless a state chose to impose that 
requirement. With respect to the MLR calculation, the same calculation 
used in the individual and small group market will be used in BHP.
5. Enhanced Availability of Standard Health Plans (Sec.  600.420)
    We proposed in Sec.  600.420(a) that a state must assure that at 
least two standard health plans are offered under BHP.
    In Sec.  600.420(b), we proposed standards for a state entering 
into a joint procurement, or regional compact, with another state for 
the provision of standard health plans. For specific discussions on the 
regional compact, see the September 25, 2013 proposed rule (78 FR 
59131).
    We received the following comments on enhancing the availability of 
standard health plans:
    Comment: While we received several comments in support of ensuring 
choice of standard health plans, the majority of the comments we 
received on this provision requested that HHS clarify whether states 
must ensure the availability of at least two standard health plans, or 
the availability of at least two standard health plan offerors.
    Response: After carefully considering this issue, we are adding 
clarifying language to require that states assure the availability of 
at least two standard health plan offerors. This standard is consistent 
with the Medicaid requirement set forth in 42 CFR 438.52(a), which 
requires states to give Medicaid managed care beneficiaries a choice of 
at least two ``entities.'' We believe that requiring a state to 
contract with at least two standard health plan offerors will afford 
BHP applicants and enrollees the opportunity to compare and select 
their health coverage in a manner comparable to selecting health 
coverage from different health insurance issuers in the Exchange. In 
addition, we believe that requiring at least two standard health plan 
offerors to participate in BHP will lead to more robust competition, 
which could lead to better offered standard health plans and lower 
costs. BHP enrollees will also have the assurance that standard health 
plan coverage will always be available in the event that the 
participation of one of the two standard health plan offerors in the 
program is affected (that is, if one of the two offerors stopped 
participating in BHP).
    We believe that, in certain circumstances, the availability of two 
standard health plan offerors may not be feasible. For example, after 
completing its competitive contracting process, a state may only have 
one eligible standard health plan offeror qualified to award a standard 
health plan contract, or there may be an area within a state that only 
one standard health plan offeror provides coverage. As such, we have 
added an exception to the choice of standard health plan offerors in 
Sec.  600.420(a)(2). In its exception request, the state must include a 
justification as to why it cannot assure choice of standard health plan 
offeror as well as demonstrate that it has reviewed all its contract 
requirements and qualifications to determine whether they are required 
under the federal framework for BHP, determined whether additional 
negotiating flexibility would be consistent with the minimum statutory 
requirements and available BHP funding, and reviewed the information 
provided to bidders was sufficient to encourage participation in the 
BHP competitive contracting process.
    Comment: One commenter requested that states entering a regional 
compact ensure that certified registered nurse anesthetists (CRNAs) are 
used to their full scope of practice.
    Response: We appreciate the commenter's interest in ensuring the 
issue of full scope of practice is addressed in regional compacts; 
however, we believe states entering into the regional compact have 
discretion in addressing this issue through the competitive contracting 
process. States entering into a regional compact must ensure that the 
standard health plans offered through the compact meet all of the 
required negotiation criteria set forth in Sec.  600.415(d) and (e), 
including ensuring the sufficient number, mix and geographic 
distribution of providers that is sufficient to ensure the proper 
provision of standard health plan coverage.
6. Coordination With Other Insurance Affordability Programs (Sec.  
600.425)
    In Sec.  600.425, we proposed that a state must ensure the 
coordination of health care services to promote continuity of care 
between Medicaid, CHIP, Exchange and other state-administered health 
insurance programs. The state must include in its BHP Blueprint a 
description of how it will assure such coordination. We received the 
following comments on insurance affordability program coordination:
    Comment: We received several comments expressing support for the 
requirement that a state in its Blueprint describe how it will 
coordinate the provision of services to ensure continuity of care 
between insurance affordability programs.
    Response: We thank the commenters for their support and are 
finalizing the provisions as proposed.
    Comment: Several commenters recommended that states submit detailed 
coordination plans to ensure continuity of care as well as require 
states to specifically include ``churn'' mitigation strategies for 
pregnant women and children.
    Response: We appreciate the commenters' concerns regarding the 
scope and level of detail of the coordination descriptions; however, we 
believe that the language as proposed sufficiently addresses and 
incorporates the commenters concern. These descriptions will be 
reviewed and considered during the certification approval process 
thereby permitting

[[Page 14128]]

HHS to ask additional questions as needed to ensure the state has 
addressed this requirement and reflected it in its Blueprint.
    Comment: One commenter recommended that HHS include stronger 
continuity of care requirements under this section.
    Response: We share the commenter's interest in ensuring continuity 
of care between the insurance affordability programs. We are not, 
however, revising the regulation because we believe that states have 
several strategies available to them to promote continuity of care and 
reduce disruptions in care. As such, we believe that the state should 
have the discretion to select the strategies that best fit within the 
confines of its program. Examples of how states can ensure coordination 
across the insurance affordability programs were included in the 
September 25, 2013 proposed rule (78 FR 59131).

F. Enrollee Financial Responsibilities

1. Basis, Scope and Applicability (Sec.  600.500)
    Proposed Sec.  600.500 under subpart F specified the general 
statutory authority for and scope of standards proposed in this 
subpart, which sets forth the calculation and imposition of monthly 
premiums and cost sharing for BHP enrollees. For specific discussions, 
see the September 25, 2013 proposed rule (78 FR 59131 and 59132). We 
did not receive specific comments on this section and are finalizing 
the provision as proposed.
2. Premiums (Sec.  600.505)
    In Sec.  600.505(a), we proposed that a state must assure that the 
monthly premiums imposed on BHP enrollees do not exceed what they would 
have been required to pay had he or she enrolled in the Exchange. The 
state must include this assurance along with several other premium 
requirements in its BHP Blueprint. For specific discussions on monthly 
BHP premiums, see the September 25, 2013 proposed rule (78 FR 59132).
    We received the following comment on BHP monthly premiums:
    Comment: Several commenters recommended that HHS ensure that the 
American Indian and Alaska Native (AI/AN) population is not at a 
disadvantage with respect to premiums. In the Exchange, this population 
receives 100 percent of the cost-sharing reduction subsidy regardless 
of the metal level of the QHP that the individual enrolls in. 
Consequently, many commenters believe that premiums, and not cost 
sharing, will be the primary factor when selecting QHP coverage, which 
may result in many individuals in this population selecting bronze-
level QHP coverage as these QHPs will have the lowest premiums. As 
such, commenters recommended that HHS require that states set premium 
levels for this population in BHP such that they do not exceed the 
lowest cost bronze plan premium in the state. If HHS is not able to 
afford this protection to the American Indian and Alaska Native 
population, many of the commenters requested that this population have 
the ability to opt out of BHP.
    Response: We appreciate and understand the commenters' point 
regarding the premium levels for the American Indian and Alaska Native 
population. However, the statute does not support requiring the bronze 
plan premiums as a minimum standard nor does such a premium protection 
exist in the Exchange. We have, however, applied the Exchange's cost-
sharing protections afforded to this population to BHP. We would also 
note that states have the flexibility to use BHP trust funds (or state 
funds) to lower premiums for individuals eligible for BHP, and we 
encourage the commenters to work with their respective states on this 
issue.
    With respect to the commenter's second recommendation that HHS 
permit this population to opt out of BHP, if individuals opt out of 
BHP, they would not be eligible to receive federal subsidies to 
purchase coverage in the Exchange. The statute specifies that 
individuals eligible for BHP are ineligible to receive the premium tax 
credit and cost-sharing reductions. As noted, states may lower premiums 
for BHP enrollees or decide not to charge premiums.
3. Cost Sharing (Sec.  600.510)
    In Sec.  600.510(a), we proposed that a state must assure 
compliance with the cost-sharing standards specified in Sec.  
600.520(c). The state must include this assurance, along with a 
description of several elements as they relate to cost sharing in BHP, 
in the state's BHP Blueprint. For specific discussions on BHP cost 
sharing, see the September 25, 2013 proposed rule (78 FR 59132).
    We proposed in Sec.  600.510(b) that a state may not impose cost 
sharing on preventive health services or items as defined in 45 CFR 
147.130. We received the following comments on cost sharing in BHP:
    Comment: We received comments in support of the identification of 
BHP enrollees subject to cost sharing.
    Response: We thank the commenters for their support, and are 
finalizing the provisions as proposed.
    Comment: We received several comments recommending that HHS 
establish BHP cost-sharing amounts for specific services. In 
particular, one commenter suggested that cost sharing for dental 
services should not exceed levels imposed in CHIP for children and 
pregnant women. Another commenter opposed higher cost-sharing amounts 
for non-emergency use of the emergency department.
    Response: We appreciate the commenters' interest in BHP cost-
sharing amounts; however, we do not believe it is advisable to mandate 
the cost-sharing amounts for specific services in BHP. But we note that 
these regulations apply to BHP the Exchange's cost-sharing protections, 
including the prohibition of cost sharing for preventive health 
services, as specified in Sec. Sec.  600.510(b) and 600.520. 
Furthermore, providing states with discretion subject to these 
protections when establishing the cost-sharing levels for particular 
services; may encourage competition and could ultimately lower costs 
for BHP enrollees.
    Comment: One commenter expressed concern that permitting standard 
health plans to include varying cost-sharing amounts for prescription 
drugs (that is, through the use of drug tiers) would negatively affect 
access to such drugs.
    Response: We appreciate the commenter's concern regarding the 
variation in cost-sharing amounts for prescription drugs and the 
potential effect this may have on their availability; however, we 
believe that such variation in benefit design and cost sharing is 
consistent with the practices of QHPs offering coverage in the 
Exchange. Specifically, we believe that the Exchange's benefit and 
cost-sharing standards, which we apply to BHP as specified in Sec.  
600.405(a) and Sec.  600.520(c), afford BHP enrollees the same 
protections that they would have otherwise received in the Exchange. 
These protections serve as the minimum benefit and cost-sharing 
standards for states when establishing their program. In addition, 
states have the option to set additional limits on cost sharing not 
included in the final regulation.
4. Public Schedule of Enrollee Premium and Cost Sharing (Sec.  600.515)
    We proposed in Sec.  600.515(a) that the state must ensure that 
applicants and BHP enrollees have access to information related to 
premiums and cost sharing under BHP. For specific discussions, see the 
September 25, 2013

[[Page 14129]]

proposed rule (78 FR 59132). We did not receive specific comments on 
this section and are finalizing the provision as proposed.
5. General Cost-Sharing Protections (Sec.  600.520)
    In Sec.  600.520(a), we proposed that a state may vary premiums and 
cost sharing based on income only in a manner that does not favor 
enrollees with higher income over enrollees with lower income. We did 
not receive specific comments on this section and are finalizing the 
provision as proposed.
    We proposed in Sec.  600.520(b) that the state must ensure standard 
health plans meet the cost-sharing standards applicable to Indians in 
accordance with 45 CFR 156.420(b)(1) and (d). We did not receive 
specific comments on this section and are finalizing the provision as 
proposed.
    In Sec.  600.520(c), we proposed to apply the Exchange cost-sharing 
standards in BHP. For specific discussions, see the September 25, 2013 
proposed rule (78 FR 59132 and 59133).
    We also proposed in 600.160(b) that states must permit payment of 
premiums for Indians by Indian tribes, tribal organizations and urban 
Indian organizations. In our further consideration of that provision, 
we determined that this protection should be more broadly extended to 
all premiums and cost-sharing for all beneficiaries of state and 
federal programs. This will ensure coordination of benefits between 
these programs and BHP. As such, this protection is more logically 
located in the regulatory section governing general cost-sharing 
protections. Thus, in this final rule, we are including in 600.520(d) 
that states must permit payment of premiums and cost sharing by such 
programs for individuals by Indian tribes, tribal organizations, urban 
Indian organizations, Ryan White HIV/AIDS programs under title XXVI of 
the Public Health Service Act and other federal and state programs.
    We received the following comments related to cost-sharing 
protections:
    Comment: While we received many comments supporting our proposed 
provision to apply the Exchange's cost-sharing standards (which 
establish the maximum annual limitation on cost sharing, among other 
provisions) to BHP, we also received several comments expressing 
concern that the Exchange standards would result in high BHP cost-
sharing amounts making BHP unaffordable to its enrollees.
    Response: We thank the commenters that submitted comments in 
support of the proposed cost-sharing standards, and are finalizing the 
proposed provisions. With respect to the other commenters' concern that 
BHP cost-sharing amounts will be high, we believe that the application 
of the Exchange's cost-sharing standards, as specified in Sec.  
600.520(c), to BHP will help prevent such an occurrence. These 
standards afford BHP enrollees the same cost-sharing protections that 
they would have otherwise received had they enrolled in QHP coverage in 
the Exchange. Furthermore, while these protections set the minimum 
standards for permissible cost-sharing amounts, states have the 
discretion to include additional standards when contracting with 
standard health plan offerors and the negotiation process with standard 
health plan offerors may further reduce cost-sharing amounts for BHP 
enrollees.
    Comment: We received one comment expressing opposition to the 
application of the Exchange's cost-sharing standards as the commenter 
felt that this should be left to the discretion of the state. Approval 
of the state's approach to its BHP design is already subject to 
Secretarial approval, and as such, the commenter believes that HHS does 
not need to impose minimum requirements.
    Response: We appreciate the commenter's concern; however, statute 
requires that, at a minimum, the same protections individuals would 
have otherwise received had they enrolled in a QHP in the Exchange 
apply to BHP.
    Comment: Several commenters recommended that BHP enrollees should 
not be required to pre-pay the full amount of cost sharing, including 
the value of the cost-sharing reduction subsidy, and seek reimbursement 
for the subsidy at a later date. Commenters suggested that this process 
be ``invisible'' to the enrollee.
    Response: The standard health plan offered to BHP enrollees will 
account for the value of the cost-sharing subsidy, which will be 
represented by the actuarial value of the standard health plan. 
Specifically, standard health plans offered to individuals with 
household income below 150 percent of the FPL must have an actuarial 
value of 94 percent, which, consistent with the Exchange's standard, is 
subject to a de minimis standard of 1 percent. For BHP enrollees with 
income above 150 percent of the FPL, the actuarial value must be 87 
percent which, consistent with the Exchange's standard, is subject to a 
de minimis standard of 1 percent. In this manner, the application of 
the cost-sharing reduction subsidy will be ``invisible'' to the BHP 
enrollee as it will be accounted for in the design of the standard 
health plan that is offered to them. Any cost-sharing amounts that the 
enrollees would be required to pay would already include the 
consideration of the subsidy and any further negotiation between the 
state and the standard health plan offeror.
6. Disenrollment Procedures and Consequences for Nonpayment of Premiums 
(Sec.  600.525)
    In Sec.  600.525(a), we proposed the disenrollment procedures for 
nonpayment of premiums. For specific discussions, see the September 25, 
2013 proposed rule (78 FR 59133).
    In Sec.  600.525(b), we proposed the consequences of nonpayment of 
premiums and reenrollment into BHP. For specific discussions, see the 
September 25, 2013 proposed rule (78 FR 59133).
    We received the following comments on the disenrollment procedures 
and consequences for nonpayment of premiums:
    Comment: Several commenters expressed concern that providers will 
incur uncompensated care costs during the second and third months of 
the 3-month grace period as standard health plan offerors are not 
required to pay claims for services rendered during the last two months 
of the grace period.
    Response: We understand that pended claims increase uncertainty for 
providers and can potentially increase the amount of uncompensated 
care, and we share the concerns of the commenters regarding claims 
incurred during the grace period that are not ultimately paid. In 
accordance with 45 CFR 156.270(d)(3), standard health plan offerors 
must notify providers of the possibility for denied claims for services 
incurred during months two and three of the grace period for enrollees 
who owe past due premiums. Similar to our expectation with issuers 
operating in the Exchange, we expect that standard health plan offerors 
will provide this notice within the first month of the grace period and 
throughout months two and three.
    Comment: We received several comments expressing concern that 
individuals would be disenrolled from BHP who failed to pay a de 
minimis amount of their premium, and suggested that the final 
regulation protect individuals from being disenrolled in such an 
instance.
    Response: We do not believe that the statute provides authority for 
CMS to require this type of protection in BHP. As with many other 
programmatic designs, states have the discretion to establish 
disenrollment policies that further the goals and objectives of their 
programs which may include not

[[Page 14130]]

terminating individuals for failure to pay de minimis amounts.
    Comment: Several commenters also offered an alternative to the 30-
day premium grace period. Specifically, they recommended that HHS 
consider permitting a reinstatement period in which an individual is 
able to reinstate BHP coverage without a break in such coverage by 
paying the premium arrears by the 20th business day.
    Response: We appreciate the commenters' alternative to the 30-day 
premium grace period; however, in keeping with our policy to adopt 
policies existing in other insurance affordability programs to ensure 
program consistencies, we are finalizing the proposed provision. As 
noted elsewhere, states have the discretion to establish additional 
standards that best fit the designs of their programs.
    Comment: We received one comment recommending that HHS only permit 
a 90-day premium grace period rather than give states the option to 
select the grace period that most closely aligns with their enrollment 
policies.
    Response: We believe that providing states with the option to 
select the grace period that most closely aligns with their enrollment 
policies ensures program consistency and can help consumers understand 
program rules.

G. Payment to States

1. Basis, Scope and Applicability (Sec.  600.600)
    Proposed Sec.  600.600 under subpart G specified the general 
statutory authority for and scope of standards proposed in this 
subpart, which sets forth provisions relating to the methodology used 
to calculate the federal BHP payment to a state in a given fiscal year 
and the process and procedures by which the Secretary establishes such 
amount for each state operating a BHP. For specific discussions, see 
the September 25, 2013 proposed BHP rule (78 FR 59133). We did not 
receive specific comments on this section and are finalizing the 
provision as proposed.
2. BHP Payment Methodology (Sec.  600.605)
    We proposed in Sec.  600.605(a) the two components that comprise 
the BHP payment methodology--the premium tax component and the cost-
sharing reduction component. For specific discussions, see the 
September 25, 2013 proposed rule (78 FR 59133).
    In Sec.  600.605(b), we proposed the factors specified in statute 
that the Secretary must consider when determining the federal BHP 
payment methodology. For specific discussions, see the September 25, 
2013 proposed rule (78 FR 59133 and 59134).
    We proposed in Sec.  600.605(c) that the Secretary will adjust the 
payment methodology on a prospective basis.
    We received the following comments regarding the BHP payment 
methodology:
    Comment: We received a comment supporting the relevant factors 
included in the BHP payment methodology as specified in Sec.  
600.605(b).
    Response: We thank the commenter for their support, and are 
finalizing the proposed provisions.
    Comment: One commenter expressed concern that the information 
regarding the BHP payment methodology in the proposed rule did not 
address how a state's BHP could be financially self-sustainable, such 
as the authority to asses an administrative charge on standard health 
plan offerors.
    Response: We appreciate the commenter's concern; however, we 
believe that the state has considerable flexibility to ensure the 
sustainability of its program through program design and market 
competition. In addition to the federal BHP deposits, the state has the 
option to also supplement its program with non-federal funding sources.
    Comment: We received many comments requesting that HHS reconsider 
applying 100 percent of the cost-sharing reduction that would have been 
available in the Exchange to the BHP payment methodology, as opposed to 
95 percent. Many commenters argued that the statute provides for this 
interpretation given the placement of the comma in section 
1331(d)(3)(i) of the Affordable Care Act.
    Response: We appreciate the commenters' concern regarding this 
issue, and we have carefully considered and reviewed the commenters' 
arguments. We have interpreted the 95 percent specified in statute to 
refer to both the premium tax credit and the cost-sharing reduction 
component of the BHP payment methodology. We believe that applying the 
95 percent to both components of the methodology represents the best 
reading of the statute and the intent of the drafters, and we are 
therefore finalizing the proposed provision.
    Comment: We received a comment recommending that the premium tax 
credit component of the methodology use an overall average for the 
state so that all geographic variations are accounted for in the 
calculation rather than over-weighting geographic areas with fewer 
individuals receiving the premium tax credit.
    Response: We appreciate the commenter's suggestion; however, 
geographic variations are accounted for in the proposed payment 
methodology as we are proposing to use the second lowest cost silver 
plan premium, which may vary in amount by county, as the basis for the 
calculation of the premium tax credit component. Please refer to the 
final 2015 BHP Federal Funding Methodology for additional information 
on how we propose to calculate the premium tax credit component for 
program year 2015.
    Comment: One commenter expressed concern that the BHP payment 
methodology will result in narrower provider networks as states will 
only receive 95 percent of both the premium tax credit and cost-sharing 
reduction that an individual would have otherwise received had he or 
she enrolled in a QHP in the Exchange.
    Response: We appreciate the commenter's concern, although we do not 
agree that this is necessarily the result. States, for example, that 
combine their contracting for BHP with Medicaid and/or CHIP will have 
significant market power to drive efficiencies. In any event, network 
adequacy is essential, and we have required, as specified in Sec.  
600.410(e)(2), that network adequacy must be considered during the 
state's competitive contracting process. States must ensure that 
standard health plan offerors have a network of providers sufficient in 
number, mix, and geographic distribution to meet the needs of the 
anticipated number of enrollees in the service area of the standard 
health plan, at least consistent with the access standards under 
Medicaid or the Exchange.
    Comment: We received comments asserting that, to the extent that 
BHP eligibility exceeds the scope of eligibility for a PTC because the 
affordability test applied under BHP is less stringent than the 
affordability test for PTCs, there could be an unfunded mandate. These 
commenters explained that because federal BHP payment is limited to 95 
percent of the amount of the PTCs and cost sharing reductions that 
would be paid if the individual was enrolled in coverage through the 
Exchange, there would be no federal BHP payment with respect to 
individuals eligible for BHP but not eligible for a PTC. One commenter 
suggested that, in light of the absence of funding, states should be 
given the option to restrict eligibility.
    Response: We understand the possibility raised by the commenters; 
however, as discussed in the eligibility section above, we believe this 
possibility was created through a statutory error which we are 
correcting

[[Page 14131]]

in this rule. We believe congressional intent was to align BHP 
eligibility seamlessly with premium tax credit eligibility, which 
eliminates the possibility of an unfunded mandate. The payment 
methodology has been aligned with this interpretation.
    Comment: We received several comments requesting that HHS ensure 
that BHP payment methodology adequately address the issue of risk 
adjustment.
    Response: Please refer to the final 2015 BHP Federal Funding 
Methodology for additional discussions related to the population health 
factor in the BHP payment methodology for program year 2015, as well as 
the optional risk adjustment reconciliation process as both sections in 
the Funding Methodology address the issue of risk adjustment.
    Comment: One commenter requested that we include the relevant 
factors, their weight and applicability in the proposed payment notice.
    Response: We have included additional detail on the relevant 
factors, including their values and data sources, in the final 2015 BHP 
Federal Funding Methodology.
    Comment: Several commenters recommended that the BHP payment 
methodology include state-specific market factors to account for issues 
such as low premiums offered in the Exchange.
    Response: Please refer to the final 2015 BHP Federal Funding 
Methodology for additional details on the option we are providing to 
states to use either 2014 premium data (trended forward) or actual 2015 
premium data as the basis for calculating their 2015 federal BHP 
payment rates.
    Comment: One commenter noted that the methodology specifies the use 
of factors much like those for adjusted community rating, but requested 
clarification whether that standard health plan offeror must also use 
adjusted community rating, or any other particular form of rating.
    Response: We believe that this is an issue to be determined, and 
resolved, through the competitive contracting process between the state 
and the standard health plan offeror. There are minimum negotiation 
criteria and other considerations specified in statute that the state 
must include in its process; however, the state has the discretion to 
add additional qualifications and standards to its solicitation that 
would further the objectives of its program.
    Comment: While we received several comments in support of the 
proposed provision to exclude BHP from the individual market's risk 
pool, other commenters requested that HHS consider providing states 
with the option to include BHP in its individual market's risk pool. 
Commenters also requested the HHS permit states to have the ability to 
apply aspects of the individual market's reinsurance and risk 
adjustment programs to BHP.
    Response: We have carefully considered this issue and have 
determined that BHP should be excluded from the individual market 
because the market reform rules under the Public Health Service Act 
that were added by Title I, Subtitles A and B of the Affordable Care 
Act, such as the requirements for guaranteed issue, and premium rating 
do not apply to standard health plans participating in BHP. Moreover, 
in accordance with 45 CFR 153.234 and 45 CFR 153.20, standard health 
plans operating under a BHP are not eligible to participate in the 
reinsurance program and the federally-operated risk adjustment program. 
With respect to the risk corridor program, the statute, under section 
1342 of the Affordable Care Act, precludes standard health plans from 
participation. To the extent that a state operating a BHP determines 
that, because of the risk-profile of its BHP population, standard 
health plans should be included in mechanisms that share risk, the 
state would need to use other methods for achieving this goal. But we 
are providing an opportunity in 2015 for states to elect to include in 
the BHP federal payment methodology a retroactive adjustment to reflect 
the effect of the different health status of the BHP population on PTC 
and CSRs if the BHP population had been enrolled in coverage through 
the Exchange, and we will consider in future years whether data 
supports a prospective adjustment.
    Comment: Several commenters requested clarification regarding a 
state's ability to implement a risk corridor-like mechanism in BHP.
    Response: We appreciate the commenters' interest in the 
implementation of risk corridors in BHP; to the extent that a state 
operating a BHP determines that, because of the risk-profile of its BHP 
population, standard health plans should be included in mechanisms that 
share risk, the state would need to establish state-specific methods 
for achieving this goal. Because section 1342 of the Affordable Care 
Act specifically limits the risk corridor program to QHPs, standard 
health plans operating under BHP are not eligible to participate.
3. Secretarial Determination of BHP Payment Amount (Sec.  600.610)
    We proposed in Sec.  600.610(a) that each year in October the 
Secretary will publish the BHP payment methodology for the upcoming 
program year in a proposed payment notice in the Federal Register. We 
did not receive specific comments on this section and are finalizing 
the provision as proposed.
    In Sec.  600.610(b), we proposed that the Secretary will publish 
the final BHP payment methodology and BHP payment amounts annually in 
February in a Federal Register notice. We did not receive specific 
comments on this section and are finalizing the provision as proposed.
    We proposed in Sec.  600.610(c) that states will receive a 
prospective aggregate BHP payment amount on a quarterly basis. For 
specific discussion, see the September 25, 2013 proposed rule (78 FR 
59135).
    We received the following questions related to the quarterly 
prospective BHP payment deposits:
    Comment: We received several comments expressing support for the 
proposed provision to make quarterly prospective deposits into a 
state's BHP trust fund and for not making any retrospective adjustments 
that could cause a state to have to return federal BHP funding.
    Response: We thank commenters for their support. We generally do 
not anticipate making any retrospective adjustments in the certified 
per enrollee payment methodology that would cause a state to return 
federal BHP funding. But we would provide for retrospective adjustments 
to ensure that this methodology is applied based on actual enrollment. 
To the extent that actual enrollment is lower than the state's 
projected enrollment, CMS will reduce the state's next quarterly BHP 
deposit by the difference amount. Another instance in which a 
retrospective adjustment may occur is if a mathematical ``error'' was 
made during the calculation process. For specific discussions on what 
constitutes a mathematical ``error,'' please refer to the September 25, 
2013 proposed notice (78 FR 59134). Finally, to the extent that the 
prevailing BHP funding methodology for a given program year permits 
adjustments to a state's BHP payment amount due to insufficient data 
that is necessary for the Secretary to prospectively determine the 
relevant factors specified in the payment notice, retrospective 
adjustments to the state's BHP payment amount may occur. For example, 
in light of the absence of any data in 2015 to prospectively take into 
account

[[Page 14132]]

variance of the BHP population health status from the Exchange 
population, in the accompanying final payment methodology for 2015, we 
permit a state to elect to develop a protocol to support a 
retrospective adjustment for this factor.
    Comment: We received several comments requesting clarification on 
the timing of the deposits, as well as when any necessary adjustments 
in payment are to be made based on differences between actual and 
projected enrollment numbers. Some commenters also expressed concern 
that data used to determine some of the factors included in the payment 
methodology would negatively affect payment to states.
    Response: We anticipate providing future guidance on the specific 
timeframes for deposits made to state BHP trust funds; however, we 
anticipate that deposits will be made at the beginning of each fiscal 
year quarter assuming the state has submitted its projected enrollment 
data at least 60 days prior to the beginning of each fiscal year 
quarter. For example, the deposit for fiscal year quarter one would 
occur on October 1st using enrollment data submitted by the state by 
July 31st. As stated in Sec.  600.620(c)(2)(i), a retrospective 
adjustment will be made 60 days after the end of each fiscal year 
quarter to account for any differences between projected and actual 
enrollment.
    With respect to the commenters' concerns regarding the potential 
effect on the timing of payment and the release of data needed to 
calculate the factors included in the BHP payment methodology, we are 
generally not making any retrospective adjustment to the BHP payment 
methodology in a given year unless the payment notice specifies the 
availability of a retrospective adjustment due to the lack of 
sufficient data necessary for the Secretary to prospectively determine 
one or more relevant factors in the BHP funding methodology. We 
anticipate using new data, or adjustments to previously released data, 
to refine future prospective BHP funding methodologies, which will be 
published annually through a proposed notice process.
    Comment: We received several comments recommending that after the 
first or second year of BHP implementation, HHS adjust the aggregate 
federal BHP payment amounts upward should actual experience support 
such an adjustment. Commenters felt that such an adjustment would be 
similar to a risk corridor approach.
    Response: We appreciate the commenter's concern, and have addressed 
the issue raised by the commenters in further detail in the Final BHP 
Federal Funding Methodology for Program Year 2015. As described in 
greater depth in the final methodology, we are providing states with 
the option to propose, and implement, a retrospective adjustment 
protocol to the extent that such a protocol is approved as part of the 
certified payment methodology by the CMS Chief Actuary
    Comment: We received several comments requesting clarification on 
the proposed retrospective adjustments. One commenter recommended that 
HHS revise language in the regulation text to clarify that HHS will not 
make retrospective adjustments to a state's quarterly deposit based on 
enrollee income changes.
    Response: As explained elsewhere, HHS will not make any 
retrospective adjustments to a state's quarterly deposit except for in 
three instances. The first instance in which HHS will adjust the 
payment is in the event that a mathematical error occurred during the 
calculation of the payment amount. For example, if HHS multiplied the 
payment rate to the incorrect number of enrollees associated with that 
payment rate, HHS would then make a retrospective adjustment to correct 
the mathematical error. The second instance occurs when there is a 
difference in projected and actual enrollment for a given fiscal year 
quarter. For example, if the state projected that there would be 10,000 
enrollees in payment rate cell A, but enrollment in payment rate cell A 
was actually 12,000, HHS would add the additional federal funds to the 
state's upcoming quarterly deposit to account for the difference 
between the projected and actual enrollment. Finally, the third 
instance occurs only when the prevailing payment notice in a given 
program year permits retrospective adjustment to a state's BHP federal 
payment amount to the extent that data necessary for the Secretary to 
prospectively determine the relevant factors included in the BHP 
funding methodology was not available. We believe that the regulation 
text at Sec.  600.605(c) and revised Sec.  600.610(c)(2) sufficiently 
describes this policy.
4. Deposit of Federal BHP Payment (Sec.  600.615)
    In Sec.  600.615, we proposed that HHS will make a quarterly 
deposit into a state's trust fund based on the aggregate quarterly 
payment amount described in Sec.  600.610(c). We did not receive 
specific comments on this section and are finalizing the provision as 
proposed.

H. BHP Trust Fund

1. Basis, Scope and Applicability (Sec.  600.700)
    Proposed Sec.  600.700 under subpart G specified the general 
statutory authority for and scope of standards proposed in this 
subpart, which sets forth a framework for BHP trust funds and 
accounting, establishing sound fiscal policies and accountability 
standard and procedures for the restitution of unallowable BHP trust 
fund expenditures. For specific discussions, see the September 25, 2013 
proposed rule (78 FR 59135). We did not receive specific comments on 
this section and are finalizing the provision as proposed.
2. BHP Trust Fund (Sec.  600.705)
    In Sec.  600.705(a), we proposed requirements for the BHP trust 
fund, including where to establish the trust fund and the 
identification of trustees and their authorities.
    We proposed in Sec.  600.705(b) that states may deposit non-federal 
funds into its BHP trust fund; however, once deposited, those funds 
must meet the standards described in paragraphs (c) and (d) of this 
section.
    In Sec.  600.705(c), we proposed that trust funds may only be used 
to reduce premiums and cost sharing and/or provide additional benefits 
to individuals eligible for BHP.
    We proposed in Sec.  600.705(d) the limitations in expending BHP 
trust funds. For the specific limitations, see the September 25, 2013 
proposed rule (78 FR 59150).
    In Sec.  600.705(e), we proposed that a state may maintain a 
surplus of funds in its trust through the carryover of unexpended funds 
from year-to-year. We received a comment supporting this provision, and 
are subsequently finalizing the provision as proposed. We received the 
following comments related to the BHP trust fund:
    Comment: We received several comments in general support of using 
BHP trust funds, as specified in Sec.  600.705(c), to further reduce 
premiums and cost sharing and to provide additional benefits to 
individuals eligible for BHP.
    Response: We thank the commenters for their support, and are 
finalizing the provision as proposed.
    Comment: One commenter requested clarification on the establishment 
of the state's BHP trust fund. Specifically, the commenter requested 
that the BHP trust fund be established at either an independent entity 
or in a segregated

[[Page 14133]]

account within a state's fund structure rather than in a subset account 
to the state's general fund. The commenter indicated that there are 
sufficient legal boundaries through various state laws with respect to 
the integrity of federal funding streams.
    Response: We appreciate the commenter's suggestion, and have 
clarified the language in the final rule to reflect the suggested 
language change.
    Comment: We received a comment requesting that HHS further clarify 
the role of BHP trustees.
    Response: There are two fundamental activities required of the BHP 
trustees. One is to provide trust fund oversight to ensure that trust 
fund expenditures are made in an allowable manner, and the second is to 
specify individuals with the authority to make withdrawals from the 
fund to make allowable expenditures. The state, as specified in Sec.  
600.110(a)(12), must describe any additional responsibilities, outside 
of these two activities, that the trustees may have. Specifically, 
Sec.  600.110(a)(12) requires the state to describe the process by 
which the trustees will be appointed, the qualifications used to 
determine trustee appointment, and any arrangements used to insure or 
indemnify such trustees against claims for breaches of their fiduciary 
responsibilities.
    Comment: One commenter requested clarification that BHP trust funds 
are available to reduce premiums for American Indians and Alaska 
Natives.
    Response: Yes. The state has the option to further reduce premiums 
for eligible BHP enrollees that are American Indian and Alaska Natives 
with its trust funds. This is a permissible expenditure.
    Comment: Several commenters expressed support for the limitations 
on BHP trust fund expenditures; however, some emphasized that it was 
important to ensure that the limitations are applied consistently 
across functions and organizations.
    Response: We appreciate the commenters' support, and are finalizing 
the proposed provisions.
    Comment: We received many comments expressing concern regarding the 
limitations on the use of BHP trust funds. Specifically, commenters 
requested that HHS permit trust funds to pay for program implementation 
and start-up costs as well as for administrative costs. Commenters 
argued that without the authority to use trust funds to pay for 
implementation and administrative costs, states would not be able to 
implement BHP. We received one comment requesting that HHS provide 
states with options for paying administrative costs, including some of 
the user-fee assessments built into the Exchange carrier rates. Another 
commenter suggested that HHS develop a funding formula similar to 
Medicaid, or set a ``flat fee'' to pay for administrative costs.
    In addition, several other commenters also expressed concern that 
these limitations do not permit states to finance consumer assistance 
programs with BHP trust funds, or promote payment innovations, quality 
improvement activities or pay-for-performance incentives under BHP.
    Response: We understand the concerns that the commenters have 
raised with respect to the use of trust funds to cover administrative 
costs; however, the statute prohibits the expenditure of BHP trust 
funds for any activities except for lowering premiums and cost sharing 
and providing additional benefits to individuals eligible for BHP. 
Through its competitive contracting process, a state can establish 
parameters for quality improvement projects and delivery system and 
payment reform innovations that it believes will further the objectives 
of its BHP. The state can then evaluate the innovation proposals 
submitted by standard health plan offerors in their BHP bids thereby 
including the negotiated projects into the contract awards.
    While the statute has limited the use of federal trust funds to 
lowering premiums and cost sharing as well as for the provision of 
additional benefits, states have the option to establish sources of 
non-federal funding to help offset administrative costs associated with 
BHP. Non-federal resources can include assessments imposed on BHP 
participating plans. A state with a state-based Exchange has the 
ability to apply a portion of the fee assessed to QHPs in its Exchange 
to BHP; however, this ability does not extend to states in which the 
Federally-Facilitated Exchange is operating. In accordance with OMB 
Circular No. A-25 Revised (Circular No. A-25R), which establishes 
federal policy regarding user fees, the Federally-Facilitated Exchange 
user fee is collected from issuers to recover the cost to the federal 
government of providing special benefits to QHP issuers participating 
in a Federally-Facilitated Exchange; those funds are not available to 
fund BHP as it is not a special benefit provided to issuers by the 
federal government. Non-federal resources can either remain outside of 
the BHP trust fund, such as in a state's General Fund, or be deposited 
into the BHP trust fund. Should the state deposit these non-federal 
funds into the state's BHP trust fund, all standards applied to federal 
sources of funding will also apply to the non-federal funds. While we 
are finalizing our proposed provision, we will continue to review this 
issue and publish additional guidance upon concluding our review.
    Comment: One commenter requested that we clarify whether enrollee 
premiums collected outside of the trust fund are subject to the 
limitations in Sec.  600.705(d).
    Response: If enrollee premiums are not deposited into the state's 
trust fund, then they are not considered to be BHP trust funds and are 
therefore not subject to the limitations specified in Sec.  600.705(d).
3. Fiscal Policies and Accountability (Sec.  600.710)
    We proposed in Sec.  600.710(a) that the state maintain an 
accounting system and supporting fiscal records to assure the proper 
use of BHP trust funds. We did not receive specific comments on this 
section and are finalizing the provision as proposed.
    In Sec.  600.710(b), we proposed that the state obtain an annual 
certification certifying the proper expenditure and maintenance of BHP 
trust funds. For the specific certification elements, see the September 
25, 2013 proposed rule (78 FR 59150).
    We proposed in Sec.  600.710(c) that the state conduct an 
independent audit of BHP trust funds over a 3-year period to determine 
whether the expenditures during this period were allowable. For 
specific standards of this audit, see the September 25, 2013 proposed 
rule (78 FR 59150). We did not receive specific comments on this 
section and are finalizing the provision as proposed.
    In Sec.  600.710(d), we proposed that the state publish an annual 
report on the use of funds. We did not receive specific comments on 
this section and are finalizing the provision as proposed.
    We proposed in Sec.  600.710(e) that the state establish and 
maintain BHP trust fund restitution procedures. We did not receive 
specific comments on this section and are finalizing the provision as 
proposed.
    In Sec.  600.710(f) we proposed that the state maintain records for 
3 years from the date of submitting its final expenditure report. We 
did not receive specific comments on this section and are finalizing 
the provision as proposed.
    We proposed in Sec.  600.710(g) that the state retain all records 
beyond the 3-year retention period in the event litigation begins prior 
to the expiration of the retention period. We did not receive specific 
comments on this section and are finalizing the provision as proposed.

[[Page 14134]]

    We received the following comment regarding the annual 
certification process in Sec.  600.710(b):
    Comment: We received several comments requesting that HHS require 
that the annual certification include a certification that the payment 
rates made to the standard health plan offerors are actuarially sound.
    Response: As noted in the contract requirements section, the 
statutory actuarial soundness requirement found in Medicaid does not 
apply in BHP; therefore, we are not requiring that a state certify that 
its standard health plan offeror rates are actuarially sound. We 
anticipate that the competitive contracting process will help to ensure 
that the rates paid to the standard health plan offerors are reflective 
of the costs associated in the provision of standard health plans.
4. Corrective Action, Restitution, and Disallowance of Questioned BHP 
Transactions (Sec.  600.715)
    In Sec.  600.715(a), we proposed that a state review and develop 
written responses to questions identified concerning the authority for 
BHP trust fund expenditures. To the extent necessary, the state shall 
implement changes to fiscal procedures to ensure proper use of BHP 
trust funds. We did not receive specific comments on this section and 
are finalizing the provision as proposed.
    We proposed in Sec.  600.715(b) that state must ensure restitution 
to its BHP trust fund such funds that have not been properly spent. We 
did not receive specific comments on this section and are finalizing 
the provision as proposed.
    In Sec.  600.715(c), we proposed that the restitution period may 
not exceed a 2-year period, and that restitution may occur in a lump 
sum amount, or in equal installment amounts. We did not receive 
specific comments on this section and are finalizing the provision as 
proposed.
    We proposed in Sec.  600.715(d) that HHS may disallow the improper 
BHP trust fund expenditures in the event that no restitution has been 
made back to the state's trust fund. For specific discussions on the 
disallowance procedures, see the September 25, 2013 proposed rule (78 
FR 59151). We did not receive specific comments on this section and are 
finalizing the provision as proposed.
    In Sec.  600.715(e), we proposed the administrative reconsideration 
procedures in the event of a disallowance. For specific discussions on 
such procedures, see the September 25, 2013 proposed rule (78 FR 
59151).
    We proposed in Sec.  600.715(f) that disallowed federal BHP funding 
must be returned to HHS within 60 days after the disallowance notice, 
or the final administrative reconsideration upholding the disallowance. 
Such repayment cannot be made from BHP trust funds. We did not receive 
specific comments on this section and are finalizing the provision as 
proposed.
    We received the following comments on the administrative procedures 
in the event of a disallowance of questioned BHP transactions:
    Comment: We received a comment requesting clarification on the 
administrative process for reconsideration. The commenter suggested 
that HHS consider using either the Medicaid procedures found in 42 CFR 
430.42(f) for disallowances, or the procedures at 42 CFR 430.38 which 
provides for judicial review without further administrative process.
    Response: We appreciate the commenter's suggestions; however, given 
the numerous processes available to the state prior to the corrective 
action stage, we believe that requiring the additional administrative 
reconsideration procedures found in 42 CFR 430.42(f) or in 42 CFR 
430.38 is unnecessary. Therefore, we are finalizing the proposed 
provisions.
    Comment: We received several comments in general support of the 
proposed provisions as they relate to benefits, premiums, cost sharing 
and expanding coverage to low-income individuals.
    Response: We thank the commenters for their support, and are 
finalizing the proposed provisions.
    Comment: Several commenters expressed support for the various 
market reforms authorized under the Affordable Care Act, such as the 
ability to remain on a parent's health insurance policy and the 
expansion of health insurance coverage to all those that are uninsured.
    Response: While we appreciate the support for these important 
reforms, this comment is beyond the scope of this rulemaking.
    Comment: We received one comment requesting more information on BHP 
in order for states to decide whether to implement the program.
    Response: We hope that the clarifications provided in this 
rulemaking as well as the BHP Final Federal Funding Methodology for 
program year 2015 have provided sufficient information for states 
during their decision making process. We also anticipate continuing to 
work closely with states as they contemplate their options and 
responding in writing to questions posed about implementation.
    Comment: We received several comments on how, and when, individuals 
can enroll in BHP.
    Response: States that elect to implement a BHP will determine the 
effective date for their programs, which will be no earlier than 
January 1, 2015. As indicated in Sec.  600.145, initial implementation 
in 2015 may involve an alternate enrollment strategy as a transition to 
BHP operation. In order to enroll, individuals must complete the single 
streamlined application and be determined eligible for a state BHP. As 
discussed elsewhere in these regulations, states have the option to use 
a limited open enrollment period approach or to allow applications to 
be submitted throughout the year.
    Comment: One commenter requested that HHS delay the implementation 
of BHP until January 1, 2017 in order to provide the Exchange 
sufficient time to ensure efficient and effective operability before 
additional coverage programs are launched.
    Response: We appreciate the commenter's interest in ensuring the 
operability of the Exchange. We are committed to ensuring the 
availability of this insurance affordability coverage option to states 
effective January 1, 2015. To comply with BHP requirements, however, 
states will need to coordinate the BHP with Exchange, Medicaid and 
CHIP. As the commenter noted, in determining an implementation date, 
states need to consider the time and resources needed to achieve such 
coordination by January 1, 2015.
    Comment: Several commenters expressed interest in how BHP will 
affect costs associated with emergency department care. Specifically, 
commenters hoped that BHP would reduce such costs.
    Response: We share the commenters' interest in lowering the costs 
associated with emergency department care. Although this comment is 
beyond the scope of this rulemaking, we will be interested to observe 
the impact of BHP over time.
    Comment: One commenter recommended that HHS design BHP in such a 
fashion as to ensure appropriate coverage for children who may lose 
CHIP coverage in the event that CHIP is not authorized in 2019.
    Response: We appreciate the commenter's recommendation. We believe 
that the BHP statute provides states with a vehicle to provide such 
coverage without any change in design or administrative requirements.

[[Page 14135]]

    Comment: We received several comments expressing concern that the 
implementation of BHP will increase the temporary shifting of low-
income individuals from one insurance affordability program to another 
(``churn'').
    Response: While BHP does introduce an additional insurance 
affordability program, the amount of churn is not clear at this time. 
It is our understanding that many states and other observers believe 
that BHP will reduce churn between BHP and Medicaid. Regardless of how 
a state might establish its BHP, as specified in Sec.  600.425, states 
are required describe how they will ensure coordination for the 
provision of health care services to promote enrollee continuity of 
care among the insurance affordability programs. In addition, and as 
described further above, another feature in BHP that can promote 
continuity of coverage and care is the provision specified in Sec.  
600.340 permitting states to adopt a policy of limited redeterminations 
during a 12 month period, reducing churn based on fluctuations in 
income.
    Comment: Several commenters expressed concern regarding the effect 
of BHP on Exchange enrollment as well as the risk profile of those 
enrolled in Exchange coverage.
    Response: Because the BHP population is the lower income range of 
the population that would otherwise be enrolled in coverage through the 
Exchange, states that elect to implement BHP will experience somewhat 
lower enrollment in coverage through the Exchange. We do not believe 
the reduction will impair the Exchange's ability to operate 
effectively. With respect to the commenters' concerns on the Exchange's 
risk profile, it is unclear at this time the effect BHP will have (that 
is, whether healthier, or sicker, individuals will enroll in BHP 
relative to those enrolled in the Exchange). We anticipate that this 
will be the subject of research once all of the programs are 
operational.
    Comment: We received one comment requesting that standard health 
plan offerors be subject to the annual insurer fee.
    Response: The annual insurer fee is administered by the Department 
of the Treasury and its applicability is beyond the scope of this 
rulemaking.

IV. Provisions of the Final Regulations

    For the most part, this final rule incorporates the provisions of 
the proposed rule. Those provisions of this final rule that differ from 
the proposed rule are as follows:

A. General Provisions and Definitions

    We have amended Sec.  600.5 to add two new definitions: interim 
certification and network of providers to reflect clarifications made 
in subsequent sections of this final rule.
    We have clarified, in this section, the definition of Essential 
Health Benefits to include the citation to the implementing 
regulations.
    We have clarified in the reference plan definition that 
``reference'' is synonymous to ``base'' benchmark by adding the word 
``base.''

B. Establishment and Certification of State Basic Health Programs

    We are amending Sec.  600.110(a)(6) to clarify the BHP Blueprint 
content to align with the premium standards specified in Sec.  600.505.
    We are adding Sec.  600.110(a)(15) to conform with a later change 
to Sec.  600.145. The change adds a requirement for the inclusion of a 
transition plan as a required element of the Blueprint if a state 
participating in 2015 plans to propose an alternative enrollment 
strategy. Additionally, the transition plan must include a plan for the 
coordination of any proposed implementation strategies with the 
Exchange operating in the state.
    We amended Sec.  600.110(c) to include the requirement that HHS 
post revisions to Blueprints on line.
    We amended Sec. Sec.  600.115(c)(1) and 600.125(a) clarifying that 
significant change includes changes that alter the BHP benefit package, 
enrollment, disenrollment and verification policies.
    To conform the addition of an interim certification level, we 
amended Sec.  600.115(a) and (d) as well as Sec.  600.120(a) and (b). 
To Sec.  600.115(a) we added the sentence, ``A State may choose to 
submit its BHP Blueprint in two parts: the first limited submission to 
secure interim certification and the second full submission to secure 
full certification.'' To Sec.  600.115(d) we added the word ``full'' to 
indicate that states must receive full certification to implement a 
program. To Sec.  600.120(a) we clarified that the effective date of 
interim certification is also the date of signature of the Secretary, 
and to Sec.  600.120(b) we clarified that full certification is needed 
before payments may be made.
    We further amended Sec.  600.115(d) to require states implementing 
after 2015 to coordinate with open enrollment of the state's Exchange.
    We amended Sec.  600.120(d) by deleting the word ``contingencies''.
    We added Sec.  600.135(c) to require HHS to accept a state request 
for reconsideration and to provide an impartial review against the 
certification standards if requested. We also extended the state's 
ability to request reconsideration for termination decisions made by 
the Secretary in Sec.  600.142.
    We added Sec.  600.145(e) providing states implementing BHP in 2015 
the opportunity to create a transition plan for approval delineating 
any proposed alternative enrollment strategies.
    We amended Sec.  600.150(a)(5) to include a minimum timeliness 
standard of at least quarterly regarding standard health plans 
provision of updated provider lists.
    We amended Sec.  600.155 to remove the qualifying language ``State 
or Federal'' describing the tribal consultation policy.
    We amended Sec.  600.160 to include a new paragraph (c) prohibiting 
BHP offerors from reducing the payments to providers by the amount of 
cost-sharing that would be due from Indians if it was not prohibited. 
Additionally, we are amending Sec.  600.520 to add paragraph (d) 
incorporating and broadening the protection set forth in the proposed 
rule at Sec.  600.160(b), to require that states permit payment of 
premiums and cost-sharing for individuals in Indian tribes, tribal 
organizations, urban Indian organizations, Ryan White HIV/AIDS 
programs, and other federal and states programs. We have renamed the 
proposed paragraphs to reflect these changes.
    We have amended the timeliness standard in Sec.  600.170(b) to be 
60 days after the end of each operational year for the submission of 
the state's required annual report.

C. Federal Program Administration

    We amended the section title to ``Federal program compliance review 
and audits'' to better represent the nature of this section.
    In Sec.  600.200(b)(3) we made an editorial revision to add the 
word ``add'' to the paragraph.
    We amended Sec.  600.200(b)(4) by clarifying that the standards of 
review during federal program reviews and audits for the improper use 
of BHP trust funds are the provisions specified in Sec.  600.705.
    We amended Sec.  600.200(c) to clarify that all paragraphs, and not 
only paragraph (a), under Sec.  430.33 apply. We have also clarified 
the language in this paragraph to clarify the timing of the final 
report and state opportunity for correction.

D. Eligibility and Enrollment

    We amended Sec.  600.305(a)(1) to limit it to requiring residency.

[[Page 14136]]

    We amended Sec.  600.305(a)(2) to clarify that lawfully present 
non-citizens, ineligible for Medicaid, must have household income 
between zero and 200 percent of the FPL. We further clarified this 
standard by changing ``non-citizen'' status to ``immigration'' status 
to increase technical accuracy and we clarified that a person may also 
be ineligible for CHIP due to immigration status.
    We amended Sec.  600.305(a)(3) by removing the word ``affordable'' 
to more closely reflect the underlying statutory language connecting 
affordability to employer sponsored insurance. We also added a 
parenthetical to conform to our definition of MEC, clarifying that an 
individual may not have access to MEC other than a standard health 
plan.
    We deleted the reference to CHIP in Sec.  600.305(a)(3)(i) and have 
limited the proposed reference to ``such other programs'' only to 
Medicaid to conform with Department of Treasury rules on MEC.
    We changed the parenthetical in Sec.  600.305(a)(3)(ii) to tie the 
definition of affordable employer sponsored insurance to section 
36B(c)(2)(C) of the Internal Revenue Code.
    We amended Sec.  600.305(b) to provide a conforming exception for a 
change made in Sec.  600.145 permitting states to submit a transition 
plan in certain circumstances.
    We amended Sec.  600.310(b) to include the requirements of Sec.  
435.907(g) of this chapter regarding accessibility of written 
applications in addition to the other standards of accessibility for 
individuals with limited English proficiency and individuals with 
disabilities.
    We amended Sec.  600.320(a) to clarify that states permitting local 
government entities to make eligibility determinations do so through 
delegation.
    We amended Sec.  600.320(c) to be exclusive of Sec.  435.915(a).
    We amended Sec.  600.320(d) to clarify the Medicaid choice of 
enrollment as being ``continuous open enrollment throughout a year'' 
and the Exchange choice of enrollment policy as being no ``more'' 
restrictive than that used by the Exchange.
    We have amended Sec.  600.335(b) to give the states the choice of 
following the appeals process or either Medicaid or the Exchange.
    We amended Sec.  600.340(a) to remove the reporting requirement 
exception clause ``Except as provided in paragraph (d)'' because 
paragraph (d) did not include reporting requirements.
    We added language to Sec.  600.340(b) to clarify that the 
opportunity to change plans must be offered ``at least annually,'' and 
that enrollees in plans that are no longer available will be given a 
reasonable opportunity to select a new plan.
    Finally, we have added Sec.  600.340(f) to offer states the option 
of not redetermining eligibility for a 12-month period as long as 
enrollees are under age 65, are not otherwise enrolled in MEC and 
remain residents of the state. Additionally, we have further amended 
Sec.  600.340(a) to draw the distinction between it and the new 
paragraph (f). We have replaced the proposed language that an 
individual is ``determined eligible for a period of'' with ``subject to 
periodic review of eligibility every'' 12 months.

E. Standard Health Plan

    We are amending Sec.  600.415(a) to clarify that a state can 
contract with an entity for one standard health plan rather than 
contracting with at least two or more standard health plans. This 
clarification is needed to conform to the changes made in Sec.  600.420 
regarding choice of standard health plan offeror. Ensuring choice of 
standard health plan offeror is a beneficiary protection not a 
contracting issue, and not related to the eligibility of the offeror; 
therefore, we have removed the reference to choice in this paragraph.
    We are amending Sec.  600.415(e)(2) to clarify that a state must 
consider the local availability and access to providers to ensure a 
sufficient number, mix and geographic distribution to meet the needs of 
enrollees in a service area, including but not limited to services 
provided by essential community providers as defined in 45 CFR 156.235 
so that access to services is least be sufficient to meet the access 
standards applicable under 42 CFR Part 438, Subpart D, or 45 CFR 
156.230 and 156.235.
    We are amending Sec.  600.420(a)(1) to clarify that a state must 
ensure choice of at least two standard health plan offerors. We are 
also amending this section to clarify that the state must assure to 
choice of standard health plan offeror and that this assurance be 
reflected in the state's BHP Blueprint along with a description of how 
it will further enrollee choice of standard health plans.
    We are also adding a new paragraph to Sec.  600.420(a) to provide 
an exception to the choice of standard health plan offeror requirement 
set forth in paragraph (a)(1). This new paragraph provides the 
procedural steps for a state to submit a request for such an exception.
    We are adding a new paragraph to Sec.  600.420(b) to clarify that a 
state entering into a regional compact with another state for the 
provision of a geographically specific standard health plan must assure 
that enrollees, regardless of residency within the state, continue to 
have choice of at least two standard health plans. This new requirement 
is specified in Sec.  600.420(b)(2).
    We are amending Sec.  600.420(b)(3)(ii)(A) to clarify that a state 
entering into a regional compact for the provision of a geographically 
specific standard health plan, must continue to assure that enrollees, 
regardless of location, continue to have choice of at least two 
standard health plan offerors.
    In Sec.  600.425, we have revised the regulatory text to clarify 
that the state must ensure coordination between all other insurance 
affordability programs. We are also clarifying that the state's BHP 
Blueprint must describe how it will ensure such coordination.

F. Enrollee Financial Responsibilities

    We are amending Sec.  600.505(a) to clarify the premium 
requirements that the state must assure to and that such an assurance 
must be included in the state's BHP Blueprint along with the other 
requirements specified in Sec.  600.505(a)(2).
    In Sec.  600.510(a), we are clarifying the cost-sharing 
requirements that the state must assure to and that such an assurance 
must be included in the state's BHP Blueprint along with the other 
requirements specified in Sec.  600.510(a)(2).
    We have added Sec.  600.520(d) to broaden the protection in the 
proposed rule under Sec.  600.160(b) as described above and we have 
modified Sec.  600.510(a)(ii) to reflect the inclusion of the new 
paragraph (d).
    We are amending Sec.  600.525(a) to clarify that the state must 
assure that it is in compliance with the disenrollment procedures 
described in 45 CFR 155.430. We are also clarifying that this assurance 
is reflected in the state's BHP Blueprint.

G. Payments to States

    We are amending Sec.  600.605(c) to clarify the Secretary will 
adjust the payment methodology on a prospective basis to adjust for any 
changes in the calculation of the premium tax credit and cost-sharing 
reduction components that to the extent that necessary data is 
available for the Secretary to prospectively determine all relevant 
factors, as specified in paragraph (b) of this section.

[[Page 14137]]

    We are adding new paragraph Sec.  600.610(c)(2)(iii) to reflect 
that to the extent that the final payment notice permits retrospective 
adjustments to the state's BHP payment amount (due to the lack of 
necessary data for the Secretary to prospectively determine the 
relevant factors comprising the premium tax credit and cost-sharing 
reductions components of the BHP funding methodology), the Secretary 
will recalculate the state's BHP payment amount and make any necessary 
adjustments in accordance with paragraph (c)(2)(iv) of this section, 
which was previously (c)(2)(iii).

H. BHP Trust Fund

    In Sec.  600.705(a), we have amended this provision by deleting the 
option for the state to establish its BHP trust fund in a subset 
account within its General Fund and replaced it with the option to 
establish it in a segregated account within the state's fund structure 
to provide states with the opportunity to utilize state financial 
management services while maintaining accountability. The option to 
establish the trust fund at an independent entity remains. We believe 
this change will provide states with more flexibility given the unique 
features each state may have in its accounting and fiscal structures.
    We are amending Sec.  600.710 to clarify that the state must assure 
to the fiscal policies and accountability standards set forth in that 
section. We are also clarifying that this assurance must be reflected 
in the state's BHP Blueprint.

V. Collection of Information Requirements

    The information collection requirements/burden that were set out in 
the September 25, 2013, proposed rule estimated one respondent per 
year. Based on comments received, we continue to estimate one 
respondent in this final rule. Since we estimate fewer than the 
Paperwork Reduction Act's 10 respondent per year threshold, the 
information collection requirements/burden that are associated with 
this final rule are not subject to the requirements of the Paperwork 
Reduction Act (5 CFR 1320.3(c)).

VI. Regulatory Impact Statement

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) having an 
annual effect on the economy of $100 million or more in any 1 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). The Basic Health Program provides states the flexibility to 
establish an alternative coverage program for low-income individuals 
who would otherwise be eligible to purchase coverage through Exchange. 
The effects of this rulemaking will be ``economically significant'' as 
measured by the $100 million threshold, and hence a major rule under 
the Congressional Review Act. We did not receive any public comments on 
the impact analysis section of the proposed rule. We received a variety 
of comments from six states on other sections of the rule. These 
comments did not provide further information that would contribute to 
the assessment of economic impact. We have received a solid commitment 
of participation from one state and we expect that a mid-range 
participation estimate over the first 5 years would be 3 states. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    The aggregate economic impact of this rule of this final rule is 
estimated to be -$900 million from CY 2015 to 2019 (measured in real 
2015 dollars). The federal government is expected to reduce its overall 
expenditures, as the payments to the states for BHP are anticipated to 
be less than the payments that would have been made to qualified health 
plans (QHPs) for PTCs and CSR, if persons had been enrolled in those 
plans instead of in BHP. In general, we expect that federal payments to 
states for BHP would be 5 percent less than the federal payments for 
PTCs and CSR to QHPs if persons had been enrolled in those plans 
through the exchange.
    CMS' Office of the Actuary (OACT) developed estimates for the 
impact of this section of the Affordable Care Act, which were initially 
published in April 2010, (https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf ). These estimates are consistent with 
the assumptions and projections in the President's FY 2014 Budget. In 
particular, these estimates rely on many of the same data and 
assumptions used to project the federal costs related to the health 
insurance Exchanges. (The original estimates that appeared in the April 
2010 estimates were based off of the President's Fiscal Year 2010 
Budget Mid-Session Review.)
    To determine the impact of BHP on federal expenditures, OACT 
developed estimates of the number of persons who would enroll in BHP if 
the program were implemented in all states. In general, this estimate 
was based on projections of the number of people who would be eligible 
for BHP based on their household income and other eligibility criteria, 
and the number of people who would enroll in BHP. The percentage of 
people who would enroll in BHP among those eligible is affected by 
estimates of the likelihood of persons having other forms of health 
insurance (in particular, for persons who have employer sponsored 
insurance) and the estimated participation rate of those without other 
forms of coverage. The participation rate may be affected by a number 
of factors, which include the health status and expected health care 
costs of eligible persons (in general, persons with higher expected 
health care costs are assumed to be more likely to enroll), the cost to 
the enrollee for participating (in general, lower premiums and fewer 
cost sharing requirements are assumed to lead to greater 
participation), and the effectiveness of enrollment systems and 
outreach efforts. These assumptions are consistent with those used to 
estimate

[[Page 14138]]

the number of people that would enroll in QHPs through the Exchanges.
    OACT also developed estimates of health care costs and the amounts 
of PTCs and CSR that the federal government would pay for persons who 
would enroll in BHP. These estimates relied on historical health care 
cost expenditure data for eligible persons, adjusted for the effect 
that having health insurance would have on health care costs. (For 
persons who were previously uninsured, their costs were adjusted to 
reflect that having health insurance is expected to lead to greater 
utilization of health care services than compared to not having 
insurance. In addition, for persons who were previously uninsured or 
had different forms of health insurance, their costs were adjusted to 
reflect differences in cost sharing requirements on health care 
expenditures, and differences in provider payment rates between types 
of insurance.
    To determine the impact of BHP, OACT has developed estimates 
compared to those of the impacts of the Exchanges (CMS-9989-F). As the 
implementation of BHP would result in a decrease in the number of 
persons enrolled through the Exchange, and thus the amount of PTCs and 
CSR that would be paid by the federal government, we believe it is 
appropriate to develop the impact analysis using the net effects of BHP 
relative to the previously estimated impacts of the Exchanges.
    For the purpose of this analysis, OACT has assumed that 3 states 
would implement BHP between 2015 and 2019. This assumption is based off 
of information on states' preliminary interest in BHP; however, in 
actuality more or fewer states may decide to implement BHP, and may 
decide to implement BHP after 2015. Accordingly, more or fewer states 
implementing BHP would increase or decrease the impact of the program, 
and the particular number of enrollees and the costs of the BHP may 
vary state to state. These estimates are not specific to any 3 
particular states.
    OACT has also assumed that persons would be enrolled in BHP plans 
at the same participation rate as they would have been expected to 
enroll in QHPs through the Exchanges. The participation rate may depend 
on a number of factors (including the amount of premium and cost 
sharing a person would be required to pay in BHP, the choice of BHP 
plans, and the benefits offered in BHP), and in actuality could vary 
from the participation rate of persons eligible for QHPs. OACT has 
assumed that BHP plans would have similar premium and cost-sharing 
requirements as QHPs on the Exchange (net of the effects of PTCs and 
CSR) and would offer similar benefits to QHPs. Thus, the effects of 
implementing BHP on enrollees would be no different than the effects of 
the Exchanges; however, to the extent that BHP plans offer additional 
benefits or further reduce the amount of costs enrollees would pay for 
their health care, enrollees may experience some additional benefit. 
Lastly, OACT has assumed that states would not contribute any other 
state funds to BHP and that federal BHP payments and enrollees' 
premiums and cost sharing would be sufficient to pay for the required 
benefits under BHP. To the extent that a state contributes additional 
funds (possibly to provide additional benefits or reduce enrollees' 
premiums or cost sharing), the state would experience an increase in 
expenditures.
    The estimated effects of BHP on federal government are shown in 
Table 1.

                         Table 1--Estimated Federal Impacts for the Basic Health Program
                                           [Millions of 2015 dollars]
----------------------------------------------------------------------------------------------------------------
                                        2015         2016         2017         2018         2019        Total
----------------------------------------------------------------------------------------------------------------
BHP Expenditures..................       $2,610       $3,000       $3,410       $4,000       $4,170      $17,190
PTC and CSR Expenditures..........      -$2,750      -$3,160      -$3,590      -$4,210      -$4,390     -$18,100
Net Federal Impact................        -$140        -$160        -$180        -$210        -$220        -$900
----------------------------------------------------------------------------------------------------------------

    The estimated number of BHP enrollees is shown in Table 2.

                           Table 2--Estimated Number of Basic Health Program Enrollees
----------------------------------------------------------------------------------------------------------------
                                                2015          2016          2017          2018          2019
----------------------------------------------------------------------------------------------------------------
BHP Enrollment............................      460,000       550,000       710,000       970,000     1,020,000
----------------------------------------------------------------------------------------------------------------

B. Accounting Statement and Table

    As required by OMB's Circular A-4 (available at http://www.whitehouse.gov/omb//circulars_a004_a-4/), in Table 3 we have 
prepared an accounting statement illustrating the classification of the 
federal and state expenditures associated with this final rule.

Table 3--Accounting Statement: Classification of Estimated Expenditures for Basic Health Program During Calendar
                                             Years 2015 Through 2019
                                           [Millions of 2015 dollars]
----------------------------------------------------------------------------------------------------------------
               Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
                                                     Discount rate
    Annualized monetized transfers     ----------------------------------------          Period covered
                                                7%                  3%
----------------------------------------------------------------------------------------------------------------
Primary Estimate......................              $3,561              $3,594  CYs 2015-2019
                                       -------------------------------------------------------------------------

[[Page 14139]]

 
From/To...............................                Qualified Health Plans to Federal Government
----------------------------------------------------------------------------------------------------------------
Primary Estimate......................              $3,382              $3,414  CYs 2015-2019
                                       -------------------------------------------------------------------------
From/To...............................                   Federal Government to State Governments
----------------------------------------------------------------------------------------------------------------

1. Need for the Rule
    Section 1331 of the Affordable Care Act (codified at 42 U.S.C. 
18051) requires the Secretary to establish a Basic Health Program. This 
final rule implements that section.
2. Benefits
    We anticipate that the Basic Health Program will provide benefits 
to both consumers and states.
a. Benefits to Consumers
    The Basic Health Program (BHP) targets low-income individuals who 
would be eligible for premium and cost-sharing reductions, if they 
purchased health insurance through an Exchange. These individuals may 
have variable income that causes them to move between insurance 
programs. For example, if their income drops, they may be eligible for 
Medicaid, and when their income rises, they would be eligible to 
purchase insurance (with premium and cost-sharing reductions) on an 
Exchange. This phenomenon is known as ``churning.'' Because Medicaid 
health plans and health plans offered on Exchanges vary in terms of 
benefits, provider networks, cost-sharing, and administration, churn 
can be disruptive. Researchers have estimated that the Basic Health 
Program will significantly reduce the number of individuals that churn 
between Medicaid and Exchanges \1\. We have modified the rule to 
include the option of 12 month continuous eligibility. This option will 
further reduce churn in states that adopt it, by enabling those 
enrolled to remain eligible for a full 12 months regardless of income 
fluctuation. However, we are not adjusting the payment methodology and 
have clarified in the response to comment that states will bear the 
associated financial burden to the extent there is one.
---------------------------------------------------------------------------

    \1\ Hwang, A., S. Rosenbaum, and B. D. Sommers. ``Creation Of 
State Basic Health Programs Would Lead To 4 Percent Fewer People 
Churning Between Medicaid And Exchanges.'' Health Affairs 31.6 
(2012): 1314-1320.
    Buettgens, M., A. Nichols, and S. Dorn. ``Churning Under the ACA 
and State Policy Options for Mitigation: Timely Analysis of 
Immediate Health Policy Issues.'' Urban Institute (2012). Available 
at http://www.urban.org/UploadedPDF/412587-Churning-Under-the-ACA-and-State-Policy-Options-for-Mitigation.pdf.
---------------------------------------------------------------------------

b. Benefits to States
    Several states currently operate health insurance programs for low-
income adults with income above Medicaid eligibility levels. These 
states believe that the programs confer benefit to their residents 
beyond what those individuals could obtain by purchasing health 
insurance on an Exchange. The Basic Health Program established by this 
rule will give states the option to maintain these programs rather than 
having those individuals purchase insurance through the Exchange.
3. Costs
    The provisions of this rule were designed to minimize regulatory 
costs. It minimizes new administrative structures, because the Basic 
Health Program does not include administrative funding and because of 
the need for states to coordinate with other insurance affordability 
programs. To the extent possible, we borrowed structures from existing 
programs. In finalizing the rule, we further extended the use of 
existing administrative infrastructure by permitting the use of the 
Exchange appeals process for BHP. Additionally, we created an interim 
certification level to mitigate the risk associated with state 
expenditure of start- up funding prior to receiving any conceptual 
approval for the program.
4. Transfers
    The provisions of this rule are designed to transfer funds that 
will be available to individuals for premium and cost-sharing 
reductions for coverage purchased on an Exchange to states to offer 
coverage through a Basic Health Program. In states that choose to 
implement a Basic Health Program, eligible individuals will not be able 
to purchase health insurance through the Exchange. As a result, fewer 
individuals will use the Exchange to purchase health insurance. 
Depending on the profile of the people in BHP, this may result in 
adjustments to the risk profile of the Exchange.
5. Regulatory Alternatives
    Many of the structures of the Basic Health Program are set out in 
statute, and therefore we were limited in the alternatives we could 
consider. When we had options, we attempted to limit the number of new 
regulatory structures we created. To make the program easier for states 
to implement, we adopt or adapt regulations from existing programs--
Medicaid, the Children's Health Insurance Program, and the Exchanges--
whenever possible, rather than create new structures. Two areas in 
which we had choices are reporting compliance with federal rules and 
contracting with standard health plans.
a. Reporting Compliance With Federal Rules to HHS
    We followed the paradigm of adopting or adapting existing 
structures when creating a process for reporting state compliance with 
federal rules. Two existing structures we considered were the Exchange 
model of Blueprints and the Medicaid model of state plans. We chose to 
use the Blueprint model, which we believe will be less burdensome to 
states than the state plan model. Additionally, we indicated in the 
final rule that we would be accepting a limited set of data elements 
from the Blueprint to establish and interim level of certification 
giving states design approval before further investment.
b. Contracting Requirements
    Similarly when choosing how to regulate state contracts with 
standard health plans, we looked to models in the Exchange and Medicaid 
rather than creating new regulatory schemes. We have adopted, where 
possible, existing

[[Page 14140]]

procurement requirements in order to minimize the burden on states. In 
addition, we have allowed states the option to seek an exemption from 
competitive contracting requirements for program year 2015 if they are 
unable to meet the requirements in the first year of the program.

C. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation, by state, 
local, or tribal governments, in the aggregate, or by the private 
sector. In 2014, that threshold is approximately $141 million. States 
have the option, but are not required, to establish a BHP. Thus, this 
final rules does not mandate expenditures by state governments, local 
governments, or tribal governments

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the final rule on small entities, unless the 
head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Act generally defines a ``small entity'' as (1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA); 
(2) a not-for-profit organization that is not dominant in its field; or 
(3) a small government jurisdiction with a population of less than 
50,000. Individuals and states are not included in the definition of a 
small entity.
    We have clarified in the final rule that we do not have statutory 
authority to mandate the inclusion or exclusion of particular 
providers. This final rule is focused on eligibility and enrollment in 
public programs, and it sets out broad contracting standards but it 
does not contain provisions that would have a significant direct impact 
on hospitals, and other health care providers that are designated as 
small entities under the RFA. However, the provisions in this final 
rule may have a substantial, positive indirect effect on hospitals and 
other health care providers due to the substantial increase in the 
prevalence of health coverage among populations who are currently 
unable to pay for needed health care, leading to lower rates of 
uncompensated care at hospitals. The Department determines that this 
final rule will not have a significant economic impact on a substantial 
number of small entities.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a proposed rule may have a significant economic 
impact on the operations of a substantial number of small rural 
hospitals. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
metropolitan statistical area and has fewer than 100 beds. As indicated 
in the preceding discussion, there may be indirect positive effects 
from reductions in uncompensated care, but we have concluded that there 
is not a direct economic impact of these facilities.

E. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct effects on States, preempts State law, or otherwise 
has Federalism implications. The BHP is entirely optional for states, 
and if implemented in a state, provides access to a pool of funding 
that would not otherwise be available to the state.
    We conclude that there is not an impact on Federalism by this 
voluntary state program.

List of Subjects

42 CFR Part 600

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, and Reporting and recordkeeping requirements, 
State and local governments.

45 CFR Part 144

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, under the authority at 
section 1331(a)(1) of the Affordable Care Act, the Centers for Medicare 
& Medicaid Services and the Office of the Secretary amends 42 CFR 
chapter IV and 45 CFR subtitle A, respectively, as set forth below:

Title 42--Public Health

0
1. Subchapter I, consisting of part 600, is added to chapter IV to read 
as follows:

Subchapter I-- Basic Health Program

PART 600--ADMINISTRATION, ELIGIBILITY, ESSENTIAL HEALTH BENEFITS, 
PERFORMANCE STANDARDS, SERVICE DELIVERY REQUIREMENTS, PREMIUM AND 
COST SHARING, ALLOTMENTS, AND RECONCILATION

Subpart A--General Provisions and Definitions
Sec.
600.1 Scope.
600.5 Definitions and use of terms.
Subpart B--Establishment and Certification of State Basic Health 
Programs
600.100 Program description.
600.105 Basis, scope, and applicability of subpart B.
600.110 BHP Blueprint.
600.115 Development and submission of the BHP Blueprint.
600.120 Certification of a BHP Blueprint.
600.125 Revisions to a certified BHP Blueprint.
600.130 Withdrawal of a BHP Blueprint prior to implementation.
600.135 Notice and timing of HHS action on a BHP Blueprint.
600.140 State termination of a BHP.
600.142 HHS withdrawal of certification and termination of a BHP.
600.145 State program administration and operation.
600.150 Enrollment assistance and information requirements.
600.155 Tribal consultation.
600.160 Protections for American Indian and Alaska Natives.
600.165 Nondiscrimination standards.
600.170 Annual report content and timing.
Subpart C--Federal Program Administration
600.200 Federal program compliance reviews and audits.
Subpart D--Eligibility and Enrollment
600.300 Basis, scope, and applicability.
600.305 Eligible individuals.
600.310 Application.
600.315 Certified application counselors.
600.320 Determination of eligibility for and enrollment in a 
standard health plan.
600.330 Coordination with other insurance affordability programs.
600.335 Appeals.
600.340 Periodic determination and renewal of BHP eligibility.
600.345 Eligibility verification.
600.350 Privacy and security of information.
Subpart E--Standard Health Plan
600.400 Basis, scope, and applicability.
600.405 Standard health plan coverage.
600.410 Competitive contracting process.
600.415 Contracting qualifications and requirements.
600.420 Enhanced availability of standard health plans.
600.425 Coordination with other insurance affordability programs.

[[Page 14141]]

Subpart F--Enrollee Financial Responsibilities
600.500 Basis, scope, and applicability.
600.505 Premiums.
600.510 Cost-sharing.
600.515 Public schedule of enrollee premium and cost sharing.
600.520 General cost-sharing protections.
600.525 Disenrollment procedures and consequences for nonpayment of 
premiums.
Subpart G--Payment to States
600.600 Basis, scope, and applicability.
600.605 BHP payment methodology.
600.610 Secretarial determination of BHP payment amount.
600.615 Deposit of Federal BHP payment.
Subpart H--BHP Trust Fund
600.700 Basis, scope, and applicability.
600.705 BHP trust fund.
600.710 Fiscal policies and accountability.
600.715 Corrective action, restitution, and disallowance of 
questioned BHP transactions.

    Authority:  Section 1331 of the Patient Protection and 
Affordable Care Act of 2010 (Pub. L. 111-148, 124 Stat. 119), as 
amended by the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111-152, 124 Stat 1029).

Subpart A--General Provisions and Definitions

Sec.  600.1  Scope.

    Section 1331 of the Affordable Care Act, provides for the 
establishment of the Basic Health Program (BHP) under which a State may 
enter into contracts for standard health plans providing at least 
essential health benefits to eligible individuals in lieu of offering 
such individuals the opportunity to enroll in coverage through an 
Affordable Insurance Exchange. States that elect to operate a BHP will 
receive federal funding based on the amount of the premium tax credit 
and cost-sharing reductions that would have been available if enrollees 
had obtained coverage through the Exchange.

Sec.  600.5  Definitions and use of terms.

    For purposes of this part, the following definitions apply:
    Advance payments of the premium tax credit means payment of the tax 
credit authorized by 26 U.S.C. 36B and its implementing regulations, 
which are provided on an advance basis to an eligible individual 
enrolled in a QHP through an Exchange in accordance with sections 1402 
and 1412 of the Affordable Care Act.
    Affordable Care Act is the Patient Protection and Affordable Care 
Act of 2010 (Pub. L. 111-148) as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152).
    Basic Health Program (BHP) Blueprint is the operational plan that a 
State must submit to the Secretary of Health and Human Services (HHS) 
for certification to operate a BHP.
    Certification means authority to operate the program which is 
required for program operations but it does not create an obligation on 
the part of the State to implement a BHP.
    Code means the Internal Revenue Code of 1986.
    Cost sharing means any expenditure required by or on behalf of an 
enrollee with respect to covered health benefits; such term includes 
deductibles, coinsurance, copayments, or similar charges, but excludes 
premiums, balance billing amounts for non-network providers and 
spending for non-covered services.
    Enrollee means an eligible individual who is enrolled in a standard 
health plan contracted to operate as part of a BHP.
    Essential health benefits means the benefits described under 
section 1302(b) of the Affordable Care Act, as determined in accordance 
with implementing regulations at 45 CFR 156.100 through 156.110 and 
156.122 regarding prescription drugs.
    Family and family size is as defined at 26 CFR 1.36B-1(d).
    Federal fiscal year means the time period beginning October 1st and 
ending September 30th.
    Federal poverty level or FPL means the most recently published 
Federal poverty level, updated periodically in the Federal Register by 
the secretary of Health and Human Services under the authority of 42 
U.S.C. 9902(2).
    Household income is as defined in 26 CFR 1.36B-1(e)(1) and is 
determined in the same way as it is for purposes of eligibility for 
coverage through the Exchange.
    Indian means any individual as defined in section 4 (d) of the 
Indian Self-Determination and Education Assistance Act (Pub. L 93-638).
    Interim certification is an approval status for the initial design 
of a state's Basic Health Program. It does not confer any permission to 
begin enrollment or seek federal funding.
    Lawfully present has the meaning given in 45 CFR 152.2.
    Minimum essential coverage has the meaning set forth at 26 CFR 
1.5000A-2, including coverage recognized by the Secretary as minimum 
essential coverage pursuant to 26 CFR 1.5000A-2(f). Under that 
authority, the Secretary recognizes coverage through a BHP standard 
health plan as minimum essential coverage.
    Modified adjusted gross income is as defined in 26 CFR 1-36B-
1(e)(2).
    Network of health care providers means an entity capable of meeting 
the provision and administration of standard health plan coverage, 
including but not limited to, the provision of benefits, administration 
of premiums and applicable cost sharing and execution of innovative 
features, such as care coordination and care management, and other 
requirements as specified under the Basic Health Program. Such entities 
may include but are not limited to: Accountable Care Organizations, 
Independent Physician Associations, or a large health system.
    Premium means any enrollment fee, premium, or other similar charge 
paid to the standard health plan offeror.
    Preventive health services and items includes those services and 
items specified in 45 CFR 147.130(a).
    Program year means a calendar year for which a standard health plan 
provides coverage for eligible BHP enrollees.
    Qualified health plan or QHP means a health plan that has in effect 
a certification that it meets the standards described in subpart C of 
45 CFR part 156 issued or recognized by each Exchange through which 
such plan is offered in accordance with the process described in 
subpart K of 45 CFR part 156, except that such term must not include a 
qualified health plan which is a catastrophic plan described in 45 CFR 
155.20.
    Reference plan is a synonym for the EHB base benchmark plan and is 
defined at 45 CFR 156.100.
    Regional compact means an agreement between two or more States to 
jointly procure and enter into contracts with standard health plan 
offeror(s) for the administration and provision of a standard health 
plan under the BHP to eligible individuals in such States.
    Residency is determined in accordance with 45 CFR 155.305(a)(3).
    Single streamlined application has the same meaning as application 
defined at 42 CFR 431.907(b)(1) of this chapter and 45 CFR 155.405(a) 
and (b).
    Standard health plan means a health benefits package, or product, 
that is provided by the standard health plan offeror.
    Standard health plan offeror means an entity that is eligible to 
enter into contracts with the State for the administration and 
provision of a standard health plan under the BHP.
    State means each of the 50 states and the District of Columbia as 
defined by section 1304 of the Act.

[[Page 14142]]

Subpart B--Establishment and Certification of State Basic Health 
Programs

Sec.  600.100  Program description.

    A State Basic Health Program (BHP) is operated consistent with a 
BHP Blueprint that has been certified by the Secretary to meet the 
requirements of this part. The BHP Blueprint is developed by the State 
for certification by the Secretary in accordance with the processes 
described in this subpart.

Sec.  600.105  Basis, scope, and applicability of subpart B.

    (a) Statutory basis. This subpart implements the following sections 
of the Act:
    (1) Section 1331(a)(1) which defines a Basic Health Program.
    (2) Section 1331(a)(2) which requires the Secretary to certify a 
Basic Health Program before it may become operational.
    (3) Section 1331(f) which requires Secretarial oversight through 
annual reviews.
    (b) Scope and applicability. (1) This subpart sets forth provisions 
governing the administration of the BHP, the general requirements for 
development of a BHP Blueprint required for certification, for program 
operations and for voluntary program termination.
    (2) This subpart applies to all States that submit a BHP Blueprint 
and request certification to operate a BHP.

Sec.  600.110  BHP Blueprint.

    The BHP Blueprint is a comprehensive written document submitted by 
the State to the Secretary for certification of a BHP in the form and 
manner specified by HHS which will include an opportunity for states to 
submit a limited set of elements necessary for interim certification at 
the state option. The program must be administered in accordance with 
all aspects of section 1331 of the Affordable Care Act and other 
applicable law, this chapter, and the certified BHP Blueprint.
    (a) Content of a Blueprint. The Blueprint will establish compliance 
with applicable requirements by including a description, or if 
applicable, an assurance of the following:
    (1) The minimum benefits offered under a standard health plan that 
assures inclusion of essential health benefits as described in section 
1302(b) of the Affordable Care Act, in accordance with Sec.  600.405.
    (2) The competitive process, consistent with Sec.  600.410, that 
the State will undertake to contract for the provision of standard 
health plans.
    (3) The standard contract requirements, consistent with Sec.  
600.415, that the State will incorporate in its standard health plan 
contracts.
    (4) The methods by which the State will enhance the availability of 
standard health plan coverage as described in Sec.  600.420.
    (5) The methods by which the State will ensure and promote 
coordination with other insurance affordability programs as described 
in Sec.  600.425.
    (6) The premium standards set forth in Sec.  600.505.
    (7) The cost sharing imposed under the BHP, consistent with the 
standards described in Sec.  600.510.
    (8) The disenrollment procedures and consequences for nonpayment of 
premiums consistent with Sec.  600.525, respectively.
    (9) The standards, consistent with Sec.  600.305 used to determine 
eligibility for the program.
    (10) The State's policies regarding enrollment, disenrollment and 
verification consistent with Sec. Sec.  600.320 and 600.345, along with 
a plan to ensure coordination with and eliminate gaps in coverage for 
individuals transitioning to other insurance affordability programs.
    (11) The fiscal policies and accountability procedures, consistent 
with Sec.  600.710.
    (12) The process by which BHP trust fund trustees shall be 
appointed, the qualifications and responsibilities of such trustees, 
and any arrangements to insure or indemnify such trustees against 
claims for breaches of their fiduciary responsibilities.
    (13) A description of how the State will ensure program integrity, 
including how it will address potential fraud, waste, and abuse and 
ensure consumer protections.
    (14) An operational assessment establishing operating agency 
readiness.
    (15) A transition plan if a state participating in 2015 plans to 
propose an alternative enrollment strategy for initial implementation 
consistent with Sec.  600.145. Such a transition plan must include a 
plan for coordination of this initial implementation strategy with the 
Exchange operating in the state, and if beneficiaries will be 
transitioning from Medicaid, with the Medicaid agency.
    (b) Funding plan. (1) The BHP Blueprint must be accompanied by a 
funding plan that describes the enrollment and cost projections for the 
first 12 months of operation and the funding sources, if any, beyond 
the BHP trust fund.
    (2) The funding plan must demonstrate that Federal funds will only 
be used to reduce premiums and cost-sharing or to provide additional 
benefits.
    (c) Transparency. HHS shall make a State's BHP Blueprint available 
on line after it is submitted for certification, and will update the 
posted Blueprint to the extent that it is later revised by the state.

Sec.  600.115  Development and submission of the BHP Blueprint.

    (a) State authority to submit the State Blueprint. A State BHP 
Blueprint must be signed by the State's Governor or by the official 
with delegated authority from the Governor to sign it. A State may 
choose to submit its BHP Blueprint in two parts: The first limited 
submission to secure interim certification and the second full 
submission to secure full certification.
    (b) State Basic Health Program officials. The State must identify 
in the BHP Blueprint the agency and officials within that agency, by 
position or title, who are responsible for program administration, 
operations, and financial oversight.
    (c) Opportunity for public comment. The State must provide an 
opportunity for public comment on the BHP Blueprint content described 
in Sec.  600.110 before submission to the Secretary for certification.
    (1) The State must seek public comment on any significant 
subsequent revisions prior to submission of those revisions to the 
Secretary for certification. Significant revisions are those that alter 
core program operations required by Sec.  600.145(f), as well as 
changes that alter the BHP standard health plan benefit package, or 
enrollment, disenrollment and verification policies.
    (2) The process of seeking public comment must include Federally 
recognized tribes as defined in the Federally Recognized Indian Tribe 
List Act of 1994, 25 U.S.C. 479a, located in the State.
    (d) Submission and timing. The BHP Blueprint must be submitted in a 
manner and format specified by HHS. States may not implement the BHP 
prior to receiving full certification. The date of implementation for 
this purpose is the first day enrollees would receive coverage under 
the BHP. Following the 2015 initial implementation year, a state 
implementing a BHP must coordinate implementation with open enrollment 
of the state's exchange.

Sec.  600.120  Certification of a BHP Blueprint.

    (a) Effective date of certification. The effective date of either 
interim or full certification is the date of signature by the 
Secretary.
    (b) Payments for periods prior to certification. No payment may be 
made

[[Page 14143]]

under this part for periods of BHP operation prior to the date of full 
certification.
    (c) Period in which a certified Blueprint remains in effect. The 
certified Blueprint remains in effect until:
    (1) The Blueprint is replaced by Secretarial certification of 
updated Blueprint containing revisions submitted by the State.
    (2) The State terminates the program consistent with Sec.  600.140.
    (3) The Secretary makes a finding that the BHP Blueprint no longer 
meets the standards for certification based on findings in the annual 
review, or reports significant evidence of beneficiary harm, financial 
malfeasance, fraud, waste or abuse by the BHP agency or the State 
consistent with Sec.  600.142.
    (d) Blueprint approval standards for certification. The Secretary 
will certify a BHP Blueprint provided it meets all of the following 
standards:
    (1) The Blueprint contains sufficient information for the Secretary 
to determine that the BHP will comply with the requirements of section 
1331 of the Affordable Care Act and this Part.
    (2) The BHP Blueprint demonstrates adequate planning for the 
integration of BHP with other insurance affordability programs in a 
manner that will permit a seamless, coordinated experience for a 
potentially eligible individual.
    (3) The Blueprint is a complete and comprehensive description of 
the BHP and its operations, demonstrating thorough planning and a 
concrete program design, without reserved decisions on operational 
features.

Sec.  600.125  Revisions to a certified BHP Blueprint.

    (a) Submission of revisions. In the event that a State seeks to 
make significant change(s) that alter program operations the BHP 
benefit package, enrollment, disenrollment and verification policies 
described in the certified BHP Blueprint, the State must submit a 
revised Blueprint to the Secretary for review and certification.
    (b) Continued operation. The State is responsible for continuing to 
operate under the terms of the existing certified Blueprint until and 
unless a revised Blueprint is certified.

Sec.  600.130  Withdrawal of a BHP Blueprint prior to implementation.

    To the extent that a State has not enrolled eligible individuals 
into the BHP:
    (a) The State may submit a written request to stop any further 
consideration of a previously submitted BHP Blueprint, whether 
certified or not.
    (b) The written request must be signed by the governor, or the 
State official delegated to sign the BHP Blueprint by the governor.
    (c) HHS will respond with a written confirmation that the State has 
withdrawn the Blueprint.

Sec.  600.135  Notice and timing of HHS action on a BHP Blueprint.

    (a) Timely response. HHS will act on all certification and revision 
requests in a timely manner.
    (b) Issues preventing certification. HHS will notify the State in 
writing of any impediments to certification that arise in reviewing a 
proposed BHP Blueprint.
    (c) Reconsideration of decision. HHS will accept a State request 
for reconsideration of a certification decision and provide an 
impartial review against the standards for certification if requested.

Sec.  600.140  State termination of a BHP.

    (a) If a State decides to terminate its BHP, the State must 
complete all of the following prior to the effective date of the 
termination or the indicated dates:
    (1) Submit written notice to the Secretary no later than 120 days 
prior to the proposed termination date accompanied by a proposed 
transition plan that describes procedures to assist consumers with 
transitioning to other insurance affordability programs.
    (2) Resolve concerns expressed by the Secretary and obtain approval 
by the Secretary of the transition plan.
    (3) Submit written notice to all participating standard health plan 
offerors, and enrollees that it intends to terminate the program at 
least 90 days prior to the termination date. The notices to enrollees 
must include information regarding the State's assessment of their 
eligibility for all other insurance affordability programs in the 
State. Notices must meet the accessibility and readability standards at 
45 CFR 155.230(b).
    (4) Transmit all information provided as part of an application, 
and any information obtained or verified by the State or other agencies 
administering insurance affordability programs via secure electronic 
interface, promptly and without undue delay to the agency administering 
the Exchange and the Medicaid agency as appropriate.
    (5) Fulfill its contractual obligations to participating standard 
health plan offerors including the payment of all negotiated rates for 
participants, as well as plan oversight ensuring that participating 
standard health plan offerors fulfill their obligation to cover 
benefits for each enrollee.
    (6) Fulfill data reporting requirements to HHS.
    (7) Complete the annual financial reconciliation process with HHS 
to ensure full compliance with Federal financial obligations.
    (8) Refund any remaining balance in the BHP trust fund.
    (b) [Reserved]

Sec.  600.142  HHS withdrawal of certification and termination of a 
BHP.

    (a) The Secretary may withdraw certification for a BHP Blueprint 
based on a finding that the BHP Blueprint no longer meets the standards 
for certification based on findings in the annual review, findings from 
a program review conducted in accordance with Sec.  600.200 or from 
significant evidence of beneficiary harm, financial malfeasance, fraud, 
waste or abuse.
    (b) Withdrawal of certification for a BHP Blueprint shall occur 
only after the Secretary provides the State with notice of the proposed 
finding that the standards for certification are not met or evidence of 
harm or misconduct in program operations, a reasonable period for the 
State to address the finding (either by substantiating compliance with 
the standards for certification or submitting revisions to the 
Blueprint, or securing HHS approval of a corrective action plan), and 
an opportunity for a hearing before issuing a final finding.
    (c) The Secretary shall make every reasonable effort to resolve 
proposed findings without requiring withdrawal of BHP certification and 
in the event of a decision to withdraw certification, will accept a 
request from the State for reconsideration.
    (d) The effective date of an HHS determination withdrawing BHP 
certification shall not be earlier than 120 days following a final 
finding of noncompliance with the standards for certification.
    (e) Within 30 days following a final finding of noncompliance with 
the standards for certification, the State shall submit a transition 
plan that describes procedures to assist consumers with transitioning 
to other insurance affordability programs, and shall comply with the 
procedures described in Sec.  600.140(a)(2) through (8).

Sec.  600.145  State program administration and operation.

    (a) Program operation. The State must implement its BHP in 
accordance with the approved and fully certified State BHP Blueprint, 
any approved modifications to the State BHP Blueprint and the 
requirements of this chapter and applicable law.
    (b) Eligibility. All persons have a right to apply for a 
determination of

[[Page 14144]]

eligibility and, if eligible, to be enrolled into coverage that 
conforms to the regulations in this part.
    (c) Statewide program operation. A state choosing to operate a BHP 
must operate it statewide.
    (d) No caps on program enrollment. A State implementing a BHP must 
not be permitted to limit enrollment by setting an income level below 
the income standard prescribed in section 1331 of the Affordable Care 
Act, having a fixed enrollment cap or imposing waiting lists.
    (e) Transition plan. States implementing in 2015 may identify a 
transition period following initial implementation during which the 
state may propose alternative enrollment strategies for approval. The 
transition plan is required to be submitted as part of the state's BHP 
Blueprint consistent with Sec.  600.110.
    (f) Core operations. A State operating a BHP must perform all of 
the following core operating functions:
    (1) Eligibility determinations as specified in Sec.  600.320.
    (2) Eligibility appeals as specified in Sec.  600.335.
    (3) Contracting with standard health plan offerors as specified in 
Sec.  600.410.
    (4) Oversight and financial integrity including, but not limited 
to, operation of the Trust Fund specified at Sec. Sec.  600.705 and 
600.710, compliance with annual reporting at Sec.  600.170, and 
providing data required by Sec.  600.610 for Federal funding and 
reconciliation processes.
    (5) Consumer assistance as required in Sec.  600.150.
    (6) Extending protections to American Indian/Alaska Natives 
specified at Sec.  600.160, as well as comply with the Civil Rights and 
nondiscrimination provisions specified at Sec.  600.165.
    (7) Data collection and reporting as necessary for efficient and 
effective operation of the program and as specified by HHS to support 
program oversight.
    (8) If necessary, program termination procedures at Sec.  600.145.

Sec.  600.150  Enrollment assistance and information requirements.

    (a) Information disclosure. (1) The State must make accurate, 
easily understood information available to potential applicants and 
enrollees about the BHP coverage option along with information about 
other insurance affordability programs.
    (2) The State must provide accessible information on coverage, 
including additional benefits that may be provided outside of the 
standard health plan coverage, any tiers of coverage it has built into 
the BHP, including who is eligible for each tier.
    (3) The State must require participating standard health plans to 
provide clear information on premiums; covered services including any 
limits on amount, duration and scope of those services; applicable 
cost-sharing using a standard format supplied by the State, and other 
data specified in, and in accordance with, 45 CFR 156.220.
    (4) The State must provide information in a manner consistent with 
45 CFR 155.205(c).
    (5) The State must require participating standard health plans to 
make publicly available, and keep up to date (at least quarterly), the 
names and locations of currently participating providers.
    (b) [Reserved]

Sec.  600.155  Tribal consultation.

    The State must consult with Indian tribes located in the State on 
the development and execution of the BHP Blueprint using the tribal 
consultation policy approved by the State Exchange.

Sec.  600.160  Protections for American Indian and Alaska Natives.

    (a) Enrollment. Indians must be extended the same special 
enrollment status in BHP standard health plans as applicable to 
enrollment in a QHP through the Exchange under 45 CFR 155.420(d)(8). 
Indians will be allowed to enroll in, or change enrollment in, standard 
health plans one time per month.
    (b) Cost sharing. No cost sharing may be imposed on Indians under 
the standard health plan.
    (c) Payments to providers. Equal to the protection extended to 
Indian health providers providing services to Indians enrolled in a QHP 
in the individual market through an Exchange at 45 CFR 156.430(g), BHP 
offerors may not reduce the payment for services to Indian health 
providers by the amount of any cost-sharing that would be due from the 
Indian but for the prohibition in paragraph (b) of this section.
    (d) Requirement. Standard health plans must pay primary to health 
programs operated by the Indian Health Service, Indian tribes, tribal 
organizations, and urban Indian organizations for services that are 
covered by a standard health plan.

Sec.  600.165  Nondiscrimination standards.

    (a) The State and standard health plans, must comply with all 
applicable civil rights statutes and requirements, including Title VI 
of the Civil Rights Act of 1964, Title II of the Americans with 
Disabilities Act of 1990, Section 504 of the Rehabilitation Act of 
1973, the Age Discrimination Act of 1975, Section 1557 of the 
Affordable Care Act, and 45 CFR part 80, part 84, and part 91 and 28 
CFR part 35.
    (b) The State must comply with the nondiscrimination provision at 
45 CFR 155.120(c)(2).

Sec.  600.170  Annual report content and timing.

    (a) Content. The State must submit an annual report that includes 
any evidence of fraud, waste, or abuse on the part of participating 
providers, plans, or the State BHP agency known to the State, and a 
detailed data-driven review of compliance with the following:
    (1) Eligibility verification requirements for program participation 
as specified in Sec.  600.345.
    (2) Limitations on the use of Federal funds received by the BHP as 
specified in Sec.  600.705.
    (3) Requirements to collect quality and performance measures from 
all participating standard health plans focusing on quality of care and 
improved health outcomes as specified in sections 1311(c)(3) and (4) of 
the Affordable Care Act and as further described in Sec.  600.415.
    (4) Requirements specified by the Secretary at least 120 days prior 
to the date of the annual report as requiring further study to assess 
continued State compliance with Federal law, regulations and the terms 
of the State's certified Blueprint, based on a Federal review of the 
BHP pursuant to Sec.  600.200, and/or a list of any outstanding 
recommendations from any audit or evaluation conducted by the HHS 
Office of Inspector General that have not been fully implemented, 
including a statement describing the status of implementation and why 
implementation is not complete.
    (b) Timing. The annual reports, in the format specified by the 
Secretary, are due 60 days after the end of each operational year. 
Information that may be required to secure the release of funding for 
the subsequent year may be requested in advance.

Subpart C--Federal Program Administration

Sec.  600.200  Federal program compliance reviews and audits.

    (a) Federal compliance review of the State BHP. To determine 
whether the State is complying with the Federal requirements and the 
provisions of its BHP Blueprint, HHS may review, as needed, but no less 
frequently than annually, the compliance of the State

[[Page 14145]]

BHP with applicable laws, regulations and interpretive guidance. This 
review may be based on the State's annual report submitted under Sec.  
600.170, or may be based on direct Federal review of State 
administration of the BHP Blueprint through analysis of the State's 
policies and procedures, reviews of agency operation, examination of 
samples of individual case records, and additional reports and/or data 
as determined by the Secretary.
    (b) Action on compliance review findings. The compliance review 
will identify the following action items:
    (1) Requirements that need further study or data to assess 
continued State compliance with Federal law, regulations and the terms 
of the State's certified Blueprint. Such findings must be addressed in 
the next State annual report due no more than 120 days after the date 
of the issuance of the Federal compliance review.
    (2) Requirements with which the State BHP does not appear to be in 
compliance that could be the basis for withdrawal of BHP certification. 
Such findings must be resolved by the State (either by substantiating 
compliance with the standards for certification or submitting revisions 
to the Blueprint). If not resolved, such action items can be the basis 
for a proposed finding for withdrawal of BHP certification.
    (3) Requirements with which the State BHP does not appear to be in 
compliance and are not a basis for withdrawal of BHP certification but 
require revision to the Blueprint must be resolved by the State. If not 
resolved, such action items can be the basis for denial of other 
Blueprint revisions.
    (4) Improper use of BHP trust fund resources. The State and the BHP 
trustees shall be given an opportunity to review and resolve concerns 
regarding improper use of BHP trust funds, including failure to use 
these funds as specified in Sec.  600.705. As indicated in Sec.  
600.715(a) through (c), the state may do this either by substantiating 
the proper use of trust fund resources as specified in Sec.  600.705(c) 
or by taking corrective action, which include changes to procedures to 
ensure proper use of trust fund resources, and restitution of 
improperly used resources to the trust fund.
    (c) The HHS Office of Inspector General (OIG) may periodically 
audit State operations and standard health plan practices as described 
in Sec.  430.33 of this chapter. Final reports on those audits shall be 
transmitted to both the State and the Secretary for actions on 
findings. The State and the BHP trustees shall be given an opportunity 
to resolve concerns about improper use of BHP trust funds as indicated 
in Sec.  600.715(a) through (c): either by substantiating the proper 
use of trust fund, or by taking corrective action that includes changes 
to procedures to ensure proper use of trust fund resources, and 
restitution of improperly used resources to the trust fund.

Subpart D--Eligibility and Enrollment

Sec.  600.300  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements section 
1331(e) of the Affordable Care Act, which sets forth eligibility 
standards for the BHP and prohibits eligible individuals from being 
treated as qualified individuals under section 1312 of the Affordable 
Care Act and enrolling in qualified health plans offered through the 
Exchange.
    (b) Scope and applicability. This subpart sets forth the 
requirements for all BHPs established under section 1331 of the 
Affordable Care Act regarding eligibility standards and application 
screening and enrollment procedures.

Sec.  600.305  Eligible individuals.

    (a) Eligibility standards The State must determine individuals 
eligible to enroll in a standard health plan if they:
    (1) Are residents of the State.
    (2) Have household income which exceeds 133 percent but does not 
exceed 200 percent of the FPL for the applicable family size, or, in 
the case of an individual who is a lawfully present non-citizen, 
ineligible for Medicaid or CHIP due to such immigration status, whose 
household income is between zero and 200 percent of the FPL for the 
applicable family size.
    (3) Are not eligible to enroll in minimum essential coverage (other 
than a standard health plan). If an individual meets all other 
eligibility standards, and--
    (i) Is eligible for, or enrolled in, coverage that does not meet 
the definition of minimum essential coverage, including Medicaid that 
is not minimum essential coverage, the individual is eligible to enroll 
in a standard health plan without regard to eligibility or enrollment 
in Medicaid; or
    (ii) Is eligible for Employer Sponsored Insurance (ESI) that is 
unaffordable (as determined under section 36B(c)(2)(C) of the Internal 
Revenue Code), the individual is eligible to enroll in a standard 
health plan.
    (4) Are 64 years of age or younger.
    (5) Are either a citizen or lawfully present non-citizen.
    (6) Are not incarcerated, other than during a period pending 
disposition of charges.
    (b) Eligibility restrictions. With the exception of during an 
approved implementation period specified in a transition plan in 
accordance with Sec.  600.145, the State may not impose conditions of 
eligibility other than those identified in this section, including, but 
not limited to, restrictions on eligibility based on geographic 
location or imposition of an enrollment cap or a waiting period for 
individuals previously eligible for or enrolled in other coverage.

Sec.  600.310  Application.

    (a) Single streamlined application. The State must use the single 
streamlined application used by the State in accordance with Sec.  
435.907(b) of this chapter and 45 CFR 155.405(a) and (b).
    (b) Opportunity to apply and assistance with application. The terms 
of Sec. Sec.  435.906, 435.907(g) and 435.908 of this chapter, 
requiring the State to provide individuals the opportunity to apply and 
receive assistance with an application in the Medicaid program, apply 
in the same manner to States in the administration of the BHP.
    (c) Authorized representatives. The State may choose to permit the 
use of an authorized representative designated by an applicant or 
beneficiary to assist with the individual's application, eligibility 
renewal and other ongoing communication with the BHP. If the State 
chooses this option, the State must follow the standards set forth at 
either 45 CFR 155.227 or 42 CFR 435.923.

Sec.  600.315  Certified application counselors.

    The State may have a program to certify application counselors to 
assist individuals to apply for enrollment in the BHP and other 
insurance affordability programs. If the State chooses this option, the 
State must follow the procedures and standards for such a program set 
forth in the regulations at either 45 CFR 155.225 or 42 CFR 435.908.

Sec.  600.320  Determination of eligibility for and enrollment in a 
standard health plan.

    (a) Determining eligibility to enroll in a standard health plan may 
be performed by a State or through delegation to a local governmental 
entity, including a governmental entity that determines eligibility for 
Medicaid or CHIP, and may be delegated by the State to an Exchange that 
is a government agency.
    (b) Timely determinations. The terms of 42 CFR 435.912 (relating to 
timely determinations of eligibility under the Medicaid program) apply 
to eligibility determinations for enrollment in a

[[Page 14146]]

standard health plan exclusive of Sec.  435.912(c)(3)(i). The standards 
established by the State must be included in the BHP Blueprint.
    (c) Effective date of eligibility. The State must establish a 
uniform method of determining the effective date of eligibility for 
enrollment in a standard health plan following either the Exchange 
standards at 45 CFR 155.420(b)(1) or the Medicaid process at 42 CFR 
435.915 exclusive of Sec.  435.915(a).
    (d) Enrollment periods. The State must either offer enrollment and 
special enrollment periods no more restrictive than those required for 
an Exchange at 45 CFR 155.410 and 155.420 or follow the Medicaid 
process permitting continuous open enrollment throughout the year.

Sec.  600.330  Coordination with other insurance affordability 
programs.

    (a) Coordination. The State must establish eligibility and 
enrollment mechanisms and procedures to maximize coordination with the 
Exchange, Medicaid and CHIP. The terms of 45 CFR 155.345(a) regarding 
the agreements between insurance affordability programs apply to a BHP. 
The State BHP agency must fulfill the requirements of 42 CFR 
435.1200(d) and (e) and, if applicable, paragraph (c) for BHP eligible 
individuals.
    (b) Coordinated determinations of eligibility. The agency 
administering BHP must establish and maintain processes to make income 
eligibility determinations using modified adjusted gross income, and to 
ensure that applications received by the agency, to the extent 
warranted and permitted under delegations from other agencies 
administering insurance affordability programs, also result in 
eligibility assessments or determinations for those other programs. The 
BHP must also accept applications transferred from other agencies 
administering insurance affordability programs, and ensure that 
individuals assessed or determined eligible for BHP by such other 
agencies are afforded the opportunity to enroll in a standard health 
plan without undue delay. Individuals submitting applications to any of 
the aforementioned agencies must not be required to duplicate the 
submission of information.
    (c) Account transfers. The agency administering the BHP must 
participate in the secure exchange of information with agencies 
administering other insurance affordability programs, using the 
standards set forth under 45 CFR 155.345(h) regarding electronic 
account transfers.
    (d) Notification to referring agency. The terms in Sec.  
435.1200(d)(5) regarding the notification to other programs of the 
final determination of eligibility apply equally to States 
administering a BHP.
    (e) Notice of decision concerning eligibility. Every application 
for BHP shall result in a determination of eligibility or 
ineligibility, unless the application has been withdrawn, the applicant 
has died, or the applicant cannot be located. Written notices of 
eligibility determinations shall be provided and shall be coordinated 
with other insurance affordability programs and Medicaid. Electronic 
notices shall be provided to the extent consistent with Sec.  
435.918(b).

Sec.  600.335  Appeals.

    (a) Notice of eligibility appeal rights. Eligibility determinations 
must include a notice of the right to appeal the determination, and 
instructions regarding how to file an appeal.
    (b) Appeals process. Individuals must be given the opportunity to 
appeal BHP eligibility determinations through the appeals rules of the 
state's Medicaid program or the Exchange. However, this process may not 
include an appeal to the federal Department of Health and Human 
Services.
    (c) Accessibility. Notices must be provided and the appeals process 
must be conducted in a manner accessible to individuals with limited 
English proficiency and persons with disabilities.

Sec.  600.340  Periodic redetermination and renewal of BHP eligibility.

    (a) Periodic review of eligibility. An individual is subject to 
periodic review of eligibility every 12 months unless the eligibility 
is redetermined sooner based on new information received and verified 
from enrollee reports or data sources. The State must require enrollees 
to report changes in circumstances, at least to the extent that they 
would be required to report such changes if enrolled in coverage 
through the Exchange, consistent with 45 CFR 155.330(b).
    (b) Renewal of coverage. If an enrollee remains eligible for 
coverage in the BHP, the enrollee will be afforded notice of a 
reasonable opportunity at least annually to change plans to the extent 
the BHP offers a choice of plans, and shall remain in the plan selected 
for the previous year unless such enrollee terminates coverage from the 
plan by selecting a new plan or withdrawing from a plan, or the plan is 
no longer available as a standard health plan in BHP. Enrollees in 
plans that are no longer available will be given a reasonable 
opportunity to select a new plan, and if they do not select a new plan 
will be enrolled in another plan pursuant to a methodology set forth in 
the State's Blueprint.
    (c) Procedures. The State shall choose to apply equally all the 
redetermination procedures described in either 45 CFR 155.335 or 42 CFR 
435.916(a) in administering a BHP.
    (d) Verification. The State must verify information needed to 
redetermine and renew eligibility in accordance with Sec.  600.345 and 
comply with the requirements set forth in Sec.  600.330 relating to 
screening individuals for other insurance affordability programs and 
transmitting such individuals' electronic accounts and other relevant 
information to the other program, as appropriate.
    (e) Notice to enrollee. The State must provide an enrollee with an 
annual notice of redetermination of eligibility. The annual notice 
should include all current information used for the most recent 
eligibility determination. The enrollee is required to report any 
changes with respect to information listed within the notice within 30 
days of the date of the notice. The State must verify information in 
accordance with Sec.  600.345.
    (f) Continuous eligibility. The state is not required to 
redetermine eligibility of BHP enrollees more frequently than every 12 
months, regardless of changes of circumstances, as long as the 
enrollees are under age 65, are not otherwise enrolled in minimum 
essential coverage and remain residents of the State.

Sec.  600.345  Eligibility verification.

    (a) The State must verify the eligibility of an applicant or 
beneficiary for BHP consistent either with the standards and procedures 
set forth in--
    (1) Medicaid regulations at Sec. Sec.  435.945 through 435.956 of 
this chapter; or
    (2) Exchange regulations at 45 CFR 155.315 and 155.320.
    (b) [Reserved]

Sec.  600.350  Privacy and security of information.

    The State must comply with the standards and procedures set forth 
in 45 CFR 155.260(b) and (c) as are applicable to the operation of the 
BHP.

Subpart E--Standard Health Plan

Sec.  600.400  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements sections 1331(b), (c), 
and (g) of the Affordable Care Act, which set forth provisions 
regarding the minimum coverage standards under BHP, as well as the 
delivery of such coverage,

[[Page 14147]]

including the contracting process for standard health plan offerors 
participating in the BHP.
    (b) Scope and applicability. This subpart consists of provisions 
relating to all BHPs for the delivery of, at a minimum, the ten 
essential health benefits as described in section 1302(b) of the 
Affordable Care Act, the contracting process by which States must 
contract for the provision of standard health plans, the minimum 
requirements States must include in their standard health plan 
contracts, the minimum coverage standards provided by the standard 
health plan offeror, and other applicable requirements to enhance the 
coordination of the provision of standard health plan coverage.

Sec.  600.405  Standard health plan coverage.

    (a) Essential Health Benefits (EHB). Standard health plan coverage 
must include, at a minimum, the essential health benefits as determined 
and specified under 45 CFR 156.110, and 45 CFR 156.122 regarding 
prescription drugs, except that States may select more than one base 
benchmark option from those codified at 45 CFR 156.100 for establishing 
essential health benefits for standard health plans. Additionally, 
States must comply with 45 CFR 156.122(a)(2) by requiring participating 
plans to submit their drug list to the State.
    (b) Additional required benefits. Where the standard health plan 
for BHP is subject to State insurance mandates, the State shall adopt 
the determination of the Exchange at 45 CFR 155.170(a)(3) in 
determining which benefits enacted after December 31, 2011 are in 
addition to EHB.
    (c) Periodic review. Essential health benefits must include any 
changes resulting from periodic reviews required by section 
1302(b)(4)(G) of the Affordable Care Act. The provision of such 
essential health benefits must meet all the requirements of 45 CFR 
156.115.
    (d) Non-discrimination in benefit design. The terms of 45 CFR 
156.125 applies to standard health plans offered under the BHP.
    (e) Compliance. The State and standard health plans must comply 
with prohibitions on federal funding for abortion services at 45 CFR 
156.280.

Sec.  600.410  Competitive contracting process.

    (a) General requirement. In order to receive initial HHS 
certification as described in Sec.  600.120, the State must assure in 
its BHP Blueprint that it complies with the requirements set forth in 
this section.
    (b) Contracting process. The State must:
    (1) Conduct the contracting process in a manner providing full and 
open competition consistent with the standards of 45 CFR 92.36(b) 
through (i);
    (2) Include a negotiation of the elements described in paragraph 
(d) of this section on a fair and adequate basis; and
    (3) Consider the additional elements described in paragraph (e) of 
this section.
    (c) Initial implementation exceptions. (1) If a State is not able 
to implement a competitive contracting process described in paragraph 
(b) of this section for program year 2015, the State must include a 
justification as to why it cannot meet the conditions in paragraph (b), 
as well as a description of the process it will use to enter into 
contracts for the provision of standard health plans under BHP.
    (2) The State must include a proposed timeline that implements a 
competitive contracting process, as described in paragraph (b) of this 
section, for program year 2016.
    (3) Initial implementation exceptions are subject to HHS approval 
consistent with the BHP Blueprint review process established in Sec.  
600.120, and may only be in effect for benefit year 2015.
    (d) Negotiation criteria. The State must assure that its 
competitive contracting process includes the negotiation of:
    (1) Premiums and cost sharing, consistent with the requirements at 
Sec. Sec.  600.505 and 600.510(e);
    (2) Benefits, consistent with the requirements at Sec.  600.405;
    (3) Inclusion of innovative features, such as:
    (i) Care coordination and care management for enrollees, with a 
particular focus on enrollees with chronic health conditions;
    (ii) Incentives for the use of preventive services; and
    (iii) Establishment of provider-patient relationships that maximize 
patient involvement in their health care decision-making, including the 
use of incentives for appropriate health care utilization and patient 
choice of provider.
    (e) Other considerations: The State shall also include in its 
competitive process criteria to ensure:
    (1) Consideration of health care needs of enrollees;
    (2) Local availability of, and access, to health care providers to 
ensure the appropriate number, mix and geographic distribution to meet 
the needs of the anticipated number of enrollees in the service area 
(including but not limited to services provided by essential community 
providers, as defined in 45 CFR 156.235) so that access to services is 
at least sufficient to meet the access standards applicable under 42 
CFR Part 438, Subpart D, or 45 CFR 156.230 and 156.235;
    (3) Use of a managed care process, or a similar process to improve 
the quality, accessibility, appropriate utilization, and efficiency of 
services provided to enrollees;
    (4) Performance measures and standards focused on quality of care 
and improved health outcomes as specified in Sec.  600.415;
    (5) Coordination between other health insurance affordability 
programs to ensure enrollee continuity of care as described in Sec.  
600.425; and
    (6) Measures to prevent, identify, and address fraud, waste and 
abuse and ensure consumer protections.
    (f) Discrimination. Nothing in the competitive process shall permit 
or encourage discrimination in enrollment based on pre-existing 
conditions or other health status-related factors.

Sec.  600.415  Contracting qualifications and requirements.

    (a) Eligible offerors for standard health plan contracts. A State 
may enter into contracts for the administration and provision of 
standard health plans under the BHP with, but not limited to, the 
following entities:
    (1) Licensed health maintenance organization.
    (2) Licensed health insurance insurer.
    (3) Network of health care providers demonstrating capacity to meet 
the criteria set forth in Sec.  600.410(d).
    (4) Non-licensed health maintenance organizations participating in 
Medicaid and/or CHIP.
    (b) General contract requirements. (1) A State contracting with 
eligible standard health plan offerors described in paragraph (a) of 
this section must include contract provisions addressing network 
adequacy, service provision and authorization, quality and performance, 
enrollment procedures, disenrollment procedures, noticing and appeals, 
provisions protecting the privacy and security of personally 
identifiable information, and other applicable contract requirements as 
determined by the Secretary to the extent that the service delivery 
model furthers the objectives of the program.
    (2) All contracts under this part must include provisions that 
define a sound and complete procurement contract, as required by 45 CFR 
92.36(i).
    (3) To the extent that the standard health plan is health insurance 
coverage offered by a health insurance issuer, the

[[Page 14148]]

contract must provide that the medical loss ratio is at least 85 
percent.
    (c) Notification of State election. To receive HHS certification, 
the State must include in its BHP Blueprint the standard set of 
contract requirements described in paragraph (b) of this section that 
will be incorporated into its standard health plan contracts.

Sec.  600.420  Enhanced availability of standard health plans.

    (a) Choice of standard health plans offerors. (1) The State must 
assure that standard health plans from at least two offerors are 
available to enrollees under BHP. This assurance shall be reflected in 
the BHP Blueprint, which if applicable, shall also include a 
description of how it will further ensure enrollee choice of standard 
health plans.
    (2) If a State is not able to assure choice of standard health plan 
offerors, the State may request an exception to the requirement set 
forth in paragraph (a)(1) of this section, which must include a 
justification as to why it cannot assure choice of standard health plan 
offeror as well as demonstrate that the State has reviewed its 
competitive contracting process to determine the following:
    (i) Whether all contract requirements and qualifications are 
required under the federal framework for BHP;
    (ii) Whether additional negotiating flexibility would be consistent 
with the minimum statutory requirements and available BHP funding: and
    (iii) Whether potential bidders have received sufficient 
information to encourage participation in the BHP competitive 
contracting process.
    (b) Use of regional compacts. (1) A State may enter into a joint 
procurement with other States to negotiate and contract with standard 
health plan offerors to administer and provide standard health plans 
statewide, or in geographically specific areas within the States, to 
BHP enrollees residing in the participating regional compact States.
    (2) A State electing the option described in paragraph (b)(1) of 
this section that also contracts for the provision of a geographically 
specific standard health plan must assure that enrollees, regardless of 
residency within the State, continue to have choice of at least two 
standard health plans.
    (3) A State electing the option described in paragraph (b)(1) of 
this section must include in its BHP Blueprint all of the following:
    (i) The other State(s) entering into the regional compact.
    (ii) The specific areas within the participating States that the 
standard health plans will operate, if applicable.
    (A) If the State contracts for the provision of a geographically 
specific standard health plan, the State must describe in its BHP 
Blueprint how it will assure that enrollees, regardless of location 
within the State, continue to have choice of at least two standard 
health plan offerors.
    (B) [Reserved]
    (iii) An assurance that the competitive contracting process used in 
the joint procurement of the standard health plans complies with the 
requirements set forth in Sec.  600.410.
    (iv) Any variations that may occur as a result of regional 
differences between the participating states with respect to benefit 
packages, premiums and cost sharing, contracting requirements and other 
applicable elements as determined by HHS.

Sec.  600.425  Coordination with other insurance affordability 
programs.

    A State must ensure coordination for the provision of health care 
services to promote enrollee continuity of care between Medicaid, CHIP, 
Exchange and any other state-administered health insurance programs. 
The State's BHP Blueprint must describe how it will ensure such 
coordination.

Subpart F--Enrollee Financial Responsibilities

Sec.  600.500  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements section 1331(a) of the 
Affordable Care Act, which sets forth provisions regarding the 
establishment of the BHP and requirements regarding monthly premiums 
and cost sharing for enrollees.
    (b) Scope and applicability. This subpart consists of provisions 
relating to the imposition of monthly premiums and cost-sharing under 
all state BHPs.

Sec.  600.505  Premiums.

    (a) Premium requirements. (1) For premiums imposed on enrollees, 
the State must assure that the monthly premium imposed on any enrollee 
does not exceed the monthly premium that the enrollee would have been 
required to pay had he or she enrolled in a plan with a premium equal 
to the premium of the applicable benchmark plan, as defined in 26 CFR 
1.36B-3(f). The State must assure that when determining the amount of 
the enrollee's monthly premium, the State took into account reductions 
in the premium resulting from the premium tax credit that would have 
been paid on the enrollee's behalf.
    (2) This assurance must be reflected in the BHP Blueprint, which 
shall also include:
    (i) The group or groups of enrollees subject to premiums.
    (ii) The collection method and procedure for the payment of an 
enrollee's premium.
    (iii) The consequences for an enrollee or applicant who does not 
pay a premium.
    (b) [Reserved]

Sec.  600.510  Cost-sharing.

    (a) Cost-sharing requirements. (1) For cost sharing imposed on 
enrollees, the State must assure the following:
    (i) The cost sharing imposed on enrollees meet the standards 
detailed in Sec.  600.520(c).
    (ii) The establishment of an effective system to monitor and track 
the cost-sharing standards consistent with Sec.  600.520(b) through 
(d).
    (2) This assurance must be reflected in the BHP Blueprint, which 
shall also include the group or groups of enrollees subject to the cost 
sharing.
    (b) Cost sharing for preventive health services. A State may not 
impose cost sharing with respect to the preventive health services or 
items, as defined in, and in accordance with 45 CFR 147.130.

Sec.  600.515  Public schedule of enrollee premium and cost sharing.

    (a) The State must ensure that applicants and enrollees have access 
to information about all of the following, either upon request or 
through an Internet Web site:
    (1) The amount of and types of enrollee premiums and cost sharing 
for each standard health plan that would apply for individuals at 
different income levels.
    (2) The consequences for an applicant or an enrollee who does not 
pay a premium.
    (b) The information described in paragraph (a) of this section must 
be made available to applicants for standard health plan coverage and 
enrollees in such coverage, at the time of enrollment and reenrollment, 
after a redetermination of eligibility, when premiums, cost sharing, 
and annual limitations on cost sharing are revised, and upon request by 
the individual.

Sec.  600.520  General cost-sharing protections.

    (a) Cost-sharing protections for lower income enrollees. The State 
may vary premiums and cost sharing based on household income only in a 
manner that does not favor enrollees with higher income over enrollees 
with lower income.
    (b) Cost-sharing protections to ensure enrollment of Indians. A 
State must ensure that standard health plans meet

[[Page 14149]]

the standards in accordance with 45 CFR 156.420(b)(1) and (d).
    (c) Cost-sharing standards. A State must ensure that standard 
health plans meet:
    (1) The standards in accordance with 45 CFR 156.420(c) and (e); and
    (2) The cost-sharing reduction standards in accordance with 45 CFR 
156.420(a)(1) for an enrollee with household income at or below 150 
percent of the FPL, and 45 CFR 156.420(a)(2) for an enrollee with 
household income above 150 percent of the FPL.
    (3) The State must establish an effective system to monitor 
compliance with the cost-sharing reduction standards in paragraph (c) 
of this section, and the cost-sharing protections to ensure enrollment 
of Indians in paragraph (b) of this section to ensure that enrollees 
are not held responsible for such monitoring activity.
    (d) Acceptance of certain third party payments. States must ensure 
that standard health plans must accept premium and cost-sharing 
payments from the following third party entities on behalf of plan 
enrollees:
    (1) Ryan White HIV/AIDS Programs under title XXVI of the Public 
Health Service Act;
    (2) Indian tribes, tribal organizations or urban Indian 
organizations; and
    (3) State and federal government programs.

Sec.  600.525  Disenrollment procedures and consequences for nonpayment 
of premiums.

    (a) Disenrollment procedures due to nonpayment of premium. (1) A 
State must assure that it is in compliance with the disenrollment 
procedures described in 45 CFR 155.430. This assurance must be 
reflected in the state's BHP Blueprint.
    (2) A State electing to enroll eligible individuals in accordance 
with 45 CFR 155.410 and 155.420 must comply with the premium grace 
period standards set forth in 45 CFR 156.270 for required premium 
payment prior to disenrollment.
    (3) A State electing to enroll eligible individuals throughout the 
year must provide an enrollee a 30-day grace period to pay any required 
premium prior to disenrollment.
    (b) Consequences of nonpayment of premium. (1) A State electing to 
enroll eligible individuals in accordance with 45 CFR 155.410 and 
155.420 may not restrict reenrollment to BHP beyond the next open 
enrollment period.
    (2) A State electing to enroll eligible individuals throughout the 
year must comply with the reenrollment standards set forth in Sec.  
457.570(c) of this chapter. If applicable, the State must define the 
length of its premium lockout period in its BHP Blueprint.

Subpart G--Payment to States

Sec.  600.600  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements section 1331(d)(1) and 
(3) of the Affordable Care Act regarding the transfer of Federal funds 
to a State's BHP trust fund and the Federal payment amount to a State 
for the provision of BHP.
    (b) Scope and applicability. This subpart consists of provisions 
relating to the methodology used to calculate the amount of payment to 
a state in a given Federal fiscal year for the provision of BHP and the 
process and procedures by which the Secretary establishes a State's BHP 
payment amount.

Sec.  600.605  BHP payment methodology.

    (a) General calculation. The Federal payment for an eligible 
individual in a given Federal fiscal year is the sum of the premium tax 
credit component, as described in paragraph (a)(1) of this section, and 
the cost-sharing reduction component, as described in paragraph (a)(2) 
of this section.
    (1) Premium tax credit component. The premium tax credit component 
equals 95 percent of the premium tax credit for which the eligible 
individual would have qualified had he or she been enrolled in a 
qualified health plan through an Exchange in a given calendar year, 
adjusted by the relevant factors described in paragraph (b) of this 
section.
    (2) Cost-sharing reduction component. The cost-sharing reduction 
component equals 95 percent of the cost of the cost-sharing reductions 
for which the eligible individual would have qualified had he or she 
been enrolled in a qualified health plan through an Exchange in a given 
calendar year adjusted by the relevant factors described in paragraph 
(b) of this section.
    (b) Relevant factors in the payment methodology. In determining the 
premium tax credit and cost-sharing reduction components described in 
paragraph (a) of this section, the Secretary will consider the 
following factors to determine applicable adjustments:
    (1) Age of the enrollee;
    (2) Income of the enrollee;
    (3) Self-only or family coverage;
    (4) Geographic differences in average spending for health care 
across rating areas;
    (5) Health status of the enrollee for purposes of determining risk 
adjustment payments and reinsurance payments had the enrollee been 
enrolled in a qualified health plan through an Exchange;
    (6) Reconciliation of the premium tax credit or cost-sharing 
reductions had such reconciliation occurred if an enrollee had been 
enrolled in a qualified health plan through an Exchange;
    (7) Marketplace experience in other states with respect to Exchange 
participation and the effect of the premium tax credit and cost-sharing 
reductions provided to residents, particularly those residents with 
income below 200 percent of the FPL; and
    (8) Other factors affecting the development of the methodology as 
determined by the Secretary.
    (c) Annual adjustments to payment methodology. The Secretary will 
adjust the payment methodology on a prospective basis to adjust for any 
changes in the calculation of the premium tax credit and cost-sharing 
reduction components to the extent that necessary data is available for 
the Secretary to prospectively determine all relevant factors, as 
specified in paragraph (b) of this section.

Sec.  600.610  Secretarial determination of BHP payment amount.

    (a) Proposed payment notice. (1) Beginning in FY 2015 and each 
subsequent year thereafter, the Secretary will determine and publish in 
a Federal Register document the next fiscal year's BHP payment 
methodology. The Secretary will publish this document annually in 
October upon receiving certification from the Chief Actuary of CMS.
    (2) A State may be required to submit data in accordance with the 
published proposed payment document in order for the Secretary to 
determine the State's payment rate as described in paragraph (b) of 
this section.
    (b) Final payment notice. (1) The Secretary will determine and 
publish the final BHP payment methodology and BHP payment amounts 
annually in February in a Federal Register document.
    (2) Calculation of payment rates. State payment rates are 
determined by the Secretary using the final BHP payment methodology, 
data requested in the proposed payment notice described in paragraph 
(a) of this section, and, if needed, other applicable data as 
determined by the Secretary.
    (c) State specific aggregate BHP payment amounts. (1) Prospective 
aggregate payment amount. The Secretary will determine, on a quarterly 
basis, the prospective aggregate BHP payment amount by multiplying the

[[Page 14150]]

payment rates described in paragraph (b) of this section by the 
projected number of enrollees. This calculation would be made for each 
category of enrollees based on enrollee characteristics and the other 
relevant factors considered when determining the payment methodology. 
The prospective aggregate BHP payment amount would be the sum of the 
payments determined for each category of enrollees for a State.
    (2) Retrospective adjustment to state specific aggregate payment 
amount for enrollment and errors. (i) Sixty days after the end of each 
fiscal year quarter, the Secretary will calculate a retrospective 
adjustment to the previous quarter's specific aggregate payment amount 
by multiplying the payment rates described in paragraph (b) of this 
section by actual enrollment for the respective quarter. This 
calculation would be made for each category of enrollees based on 
enrollee characteristics and the other relevant factors considered when 
determining the payment methodology. The adjusted BHP payment amount 
would be the sum of the payments determined for each category of 
enrollees for a State.
    (ii) Upon determination that a mathematical error occurred during 
the application of the BHP funding methodology, the Secretary will 
recalculate the state's BHP payment amount and make any necessary 
adjustments in accordance with paragraph (c)(2)(iv) of this section.
    (iii) To the extent that the final payment notice described in 
paragraph (b) of this section permits retrospective adjustments to the 
state's BHP payment amount (due to the lack of necessary data for the 
Secretary to prospectively determine the relevant factors comprising 
the premium tax credit and cost-sharing reductions components of the 
BHP funding methodology), the Secretary will recalculate the state's 
BHP payment amount and make any necessary adjustments in accordance 
with paragraph (c)(2)(iv) of this section.
    (iv) Any difference in the adjusted payment and the prospective 
aggregate payment amount will result in either:
    (A) A deposit of the difference amount into the State's BHP trust 
fund; or
    (B) A reduction in the upcoming quarter's prospective aggregate 
payment as described in paragraph (c)(1) of this section by the 
difference amount.

Sec.  600.615  Deposit of Federal BHP payment.

    HHS will make quarterly deposits into the state's BHP trust fund 
based on the aggregate quarterly payment amounts described in Sec.  
600.610(c).

Subpart H--BHP Trust Fund

Sec.  600.700  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements section 1331(d)(2) of 
the Affordable Care Act, which set forth provisions regarding BHP trust 
fund expenditures, fiscal policies and accountability standards and 
restitution to the BHP trust fund for unallowable expenditures.
    (b) Scope and applicability. This subpart sets forth a framework 
for BHP trust funds and accounting, establishing sound fiscal policies 
and accountability standards and procedures for the restitution of 
unallowable BHP trust fund expenditures.

Sec.  600.705  BHP trust fund.

    (a) Establishment of BHP trust fund. (1) The State must establish a 
BHP trust fund with an independent entity, or in a segregated account 
within the State's fund structure.
    (2) The State must identify trustees responsible for oversight of 
the BHP trust fund.
    (3) Trustees must specify individuals with the power to authorize 
withdrawal of funds for allowable trust fund expenditures.
    (b) Non-Federal deposits. The State may deposit non-Federal funds, 
including such funds from enrollees, providers or other third parties 
for standard health plan coverage, into its BHP trust fund. Upon 
deposit, such funds will be considered BHP trust funds, must remain in 
the BHP trust fund and meet the standards described in paragraphs (c) 
and (d) of this section.
    (c) Allowable trust fund expenditures. BHP trust funds may only be 
used to:
    (1) Reduce premiums and cost sharing for eligible individuals 
enrolled in standard health plans under BHP; or
    (2) Provide additional benefits for eligible individuals enrolled 
in standard health plans as determined by the State.
    (d) Limitations. BHP trust funds may not be expended for any 
purpose other than those specified in paragraph (c) of this section. In 
addition, BHP trust funds may not be used for other purposes including 
but not limited to:
    (1) Determining the amount of non-Federal funds for the purposes of 
meeting matching or expenditure requirements for Federal funding;
    (2) Program administration of BHP or any other program;
    (3) Payment to providers not associated with BHP services or 
requirements; or
    (4) Coverage for individuals not eligible for BHP.
    (e) Year-to-year carryover of trust funds. A State may maintain a 
surplus, or reserve, of funds in its trust through the carryover of 
unexpended funds from year-to-year. Expenditures from this surplus must 
be made in accordance with paragraphs (b) and (c) of this section.

Sec.  600.710  Fiscal policies and accountability.

    The BHP administering agency must assure the fiscal policies and 
accountability set forth in paragraphs (a) through (g) of this section. 
This assurance must be reflected in the BHP Blueprint.
    (a) Accounting records. Maintain an accounting system and 
supporting fiscal records to assure that the BHP trust funds are 
maintained and expended in accord with applicable Federal requirements, 
such as OMB Circulars A-87 and A-133.
    (b) Annual certification. Obtain an annual certification from the 
BHP trustees, the State's chief financial officer, or designee, 
certifying all of the following:
    (1) The State's BHP trust fund financial statements for the fiscal 
year.
    (2) The BHP trust funds are not being used as the non-Federal share 
for purposes of meeting any matching or expenditure requirement of any 
Federally-funded program.
    (3) The use of BHP trust funds is in accordance with Federal 
requirements consistent with those specified for the administration and 
provision of the program.
    (c) Independent audit. Conduct an independent audit of BHP trust 
fund expenditures, consistent with the standards set forth in chapter 3 
of the Government Accountability Office's Government Auditing 
Standards, over a 3-year period to determine that the expenditures made 
during the 3-year period were allowable as described in Sec.  
600.705(b) and in accord with other applicable Federal requirements. 
The independent audit may be conducted as a sub-audit of the single 
state audit conducted in accordance with OMB Circular A-133, and must 
follow the cost accounting principles in OMB Circular A-87.
    (d) Annual reports. Publish annual reports on the use of funds, 
including a separate line item that tracks the use of funds described 
in Sec.  600.705(e) to further reduce premiums and cost sharing, or for 
the provision of additional benefits within 10 days of approval by the 
trustees. If applicable for the reporting year, the annual report must 
also contain the findings for the

[[Page 14151]]

audit conducted in accordance with paragraph (c) of this section.
    (e) Restitution. Establish and maintain BHP trust fund restitution 
procedures.
    (f) Record retention. Retain records for 3 years from date of 
submission of a final expenditure report.
    (g) Record retention related to audit findings. If any litigation, 
claim, financial management review, or audit is started before the 
expiration of the 3-year period, the records shall be retained until 
all litigation, claims or audit findings involving the records have 
been resolved and final action taken.

Sec.  600.715  Corrective action, restitution, and disallowance of 
questioned BHP transactions.

    (a) Corrective action. When a question has been raised concerning 
the authority for BHP trust fund expenditures in an OIG report, other 
HHS compliance review, State audit or otherwise, the BHP trustees and 
the State shall review the issues and develop a written response no 
later than 60 days upon receipt of such a report, unless otherwise 
specified in the report, review or audit. To the extent determined 
necessary in that review, the BHP trustees and State shall implement 
changes to fiscal procedures to ensure proper use of trust fund 
resources.
    (b) Restitution. To the extent that the State and BHP trustees 
determine that BHP trust funds may not have been properly spent, they 
must ensure restitution to the BHP trust fund of the funds in question. 
Restitution may be made directly by the BHP trustees, by the State, or 
by a liable third party. The State or the BHP trustees may enter into 
indemnification agreements assigning liability for restitution of funds 
to the BHP trust fund.
    (c) Timing of restitution. Restitution to the BHP trust fund for 
any unallowable expenditure may occur in a lump sum amount, or in equal 
installment amounts. Restitution to the BHP trust fund cannot exceed a 
2-year period from the date of the written response in accordance with 
paragraph (a) of this section.
    (d) HHS disallowance of improper BHP trust fund expenditures. The 
State shall return to HHS the amount of federal BHP funding that HHS 
has determined was expended for unauthorized purposes, when no 
provision has been made to restore the funding to the BHP trust fund in 
accordance with paragraph (b) of this section (unless the restitution 
does not comply with the timing conditions described in paragraphs (c) 
of this section). When HHS determines that federal BHP funding is not 
allowable, HHS will provide written notice to the state and BHP 
Trustees containing:
    (1) The date or dates of the improper expenditures from the BHP 
trust fund;
    (2) A brief written explanation of the basis for the determination 
that the expenditures were improper; and
    (3) Procedures for administrative reconsideration of the 
disallowance based on a final determination.
    (e) Administrative reconsideration of BHP trust fund disallowances. 
(1) BHP Trustees or the State may request reconsideration of a 
disallowance within 60 days after receipt of the disallowance notice 
described in paragraph (d)(1) of this section by submitting a written 
request for review, along with any relevant evidence, documentation, or 
explanation, to HHS.
    (2) After receipt of a reconsideration request, if the Secretary 
(or a designated hearing officer) determines that further proceedings 
would be warranted, the Secretary may issue a request for further 
information by a specific date, or may schedule a hearing to obtain 
further evidence or argument.
    (3) The Secretary, or designee, shall issue a final decision within 
90 days after the later of the date of receipt of the reconsideration 
request or date of the last scheduled proceeding or submission.
    (f) Return of disallowed BHP funding. Disallowed federal BHP 
funding must be returned to HHS within 60 days after the later of the 
date of the disallowance notice or the final administrative 
reconsideration upholding the disallowance. Such repayment cannot be 
made from BHP trust funds, but must be made with other, non-Federal 
funds.

Title 45--Public Welfare

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
2. 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.

0
3. Section 144.103 is amended by revising the definition of 
``individual market'' to read as follows:

Sec.  144.103  Definitions.

* * * * *
    Individual market means the market for health insurance coverage 
offered to individuals other than in connection with a group health 
plan, or other than coverage offered pursuant to a contract between the 
health insurance issuer with the Medicaid, Children's Health Insurance 
Program, or Basic Health programs.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: February 19, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: February 21, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-05299 Filed 3-7-14; 4:15 pm]
BILLING CODE 4120-01-P
```