Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 15541 

applied to succeeding premium 

payments until the full amount of the 

rebate has been credited. 

* * * * * 

Dated: February 25, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: February 27, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–04902 Filed 3–1–13; 11:15 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 153 and 156 

[CMS–9964–IFC] 

RIN 0938–AR74 

Patient Protection and Affordable Care 

Act; Amendments to the HHS Notice of 

Benefit and Payment Parameters for 

2014 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Interim final rule with 

comment. 

SUMMARY: This interim final rule with 

comment builds upon standards set 

forth in the HHS Notice of Benefit and 

Payment Parameters for 2014, published 

elsewhere in this issue of the Federal 

Register. This document will adjust risk 

corridors calculations that would align 

the calculations with the single risk 

pool provision, and set standards 

permitting issuers of qualified health 

plans the option of using an alternate 

methodology for calculating the value of 

cost-sharing reductions provided for the 

purpose of reconciliation of advance 

payments of cost-sharing reductions. 

DATES: Effective date: These regulations 

are effective on April 30, 2013. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

April 30, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–9964–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed) 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–9964–IFC, P.O. Box 8016, 

Baltimore, MD 21244–8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–9964–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments only to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Sharon Arnold, (301) 492–4286; Laurie 

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

(301) 492–4305, for general information. 

Jaya Ghildiyal, (301) 492–5149 for 

matters relating to risk corridors. 

Johanna Lauer, (301) 492–4397 for 

matters relating to cost-sharing 

reductions. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All comments 

received before the close of the 

comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will be 

also available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Executive Summary 

A. Purpose 

B. Summary of Provisions 

C. Costs and Benefits 

II. Background 

III. Provisions of the Interim Final Rule 

A. Calculation of Allowable Costs for the 

Risk Corridors Program 

B. Submission of Actual Amounts of CostSharing Reductions 

IV. Waiver of Proposed Rulemaking 

V. Collection of Information Requirements 

VI. Response to Comments 

VII. Regulatory Impact Analysis 

I. Executive Summary 

A. Purpose 

Beginning in 2014, individuals and 

small businesses will be able to 

purchase private health insurance— 

qualified health plans—through 

competitive marketplaces, called 

Affordable Insurance Exchanges, 

‘‘Exchanges,’’ or ‘‘Marketplaces.’’ 

Section 1342 of the Affordable Care Act 

provides for a temporary risk corridors 

program. The program, which is 

Federally administered and in effect 

from 2014 through 2016, is intended to 

protect against uncertainty in rate 

setting for qualified health plans (QHPs) 

by limiting the extent of issuer losses 

and gains. In the rule entitled 

‘‘Standards Related to Reinsurance, Risk 

Adjustment and Risk Corridors’’ (77 FR 

17220) (Premium Stabilization Rule), we 

set forth a regulatory framework for this 

program. In the HHS Notice of Benefit 

and Payment Parameters for 2014 (2014 

Payment Notice) published elsewhere in 

this issue of the Federal Register, we 

expanded upon these standards, and 

stated that we are publishing this 

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15542 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 

1Available at: http://cciio.cms.gov/resources/ 

files/Files2/02242012/Av-csr-bulletin.pdf. 

interim final rule with comment. In this 

interim final rule with comment, we 

will amend the requirements governing 

the risk corridors program to better align 

it with the single risk pool requirement 

we established in the rule entitled 

‘‘Health Insurance Market Reforms; Rate 

Review,’’ which was made available for 

public inspection at the Office of the 

Federal Register on February 22, 2013. 

The Market Reform Rule sets forth 

standards at § 156.80 to implement 

section 1312(c) of the Affordable Care 

Act, which directs an issuer to use a 

single risk pool for a market (the 

individual market, small group market, 

or merged individual and small group 

market) when developing rates and 

premiums for coverage effective 

beginning in 2014. Under the single risk 

pool provision, an issuer will develop a 

market-wide index rate (average rate) 

based on the total combined essential 

health benefits (EHB) claims experience 

of all enrollees in all non-grandfathered 

plans in the market. After setting the 

index rate, the issuer will make a 

market-wide adjustment based on the 

expected aggregated payments and 

charges under the risk adjustment and 

reinsurance programs in a State. The 

premium rate for any given plan may 

not vary from the resulting adjusted 

market-wide index rate, except for plan 

specific adjustments specified under 

§ 156.80. To address a potential 

incongruity between the current risk 

corridors calculation methodology and 

the single risk pool requirement in 

section 1312(c) of the Affordable Care 

Act, we are modifying our interpretation 

of the definition of ‘‘allowable costs’’ 

found in section 1342(c)(1)(A) of the 

Affordable Care Act and are changing 

the corresponding regulatory definition 

accordingly. We are also making certain 

conforming changes to the risk corridors 

attribution and allocation rules in 

§ 153.520. 

This interim final rule with comment 

establishes alternate standards for the 

administration and payment to issuers 

of the value of cost-sharing reductions 

provided to eligible individuals. Section 

1402 of the Affordable Care Act 

provides for reductions in cost sharing 

for certain individuals enrolled in QHPs 

purchased on the Exchanges, and 

section 1412(c) of the Affordable Care 

Act provides for the advance payment of 

these reductions to issuers. This 

assistance will help eligible low- and 

moderate-income qualified individuals 

and families afford the out-of-pocket 

spending associated with health care 

services provided through Exchangebased QHP coverage. The Affordable 

Care Act directs issuers to reduce cost 

sharing for EHB for low- and moderateincome individuals who are enrolled in 

a silver level QHP through an individual 

market Exchange and are eligible for 

advance payments of the premium tax 

credit under Section 36B of the Internal 

Revenue Code. The statute also directs 

issuers to eliminate cost sharing for 

Indians (as defined in Section 4(d) of 

the Indian Self-Determination and 

Education Assistance Act) with a 

household income at or below 300 

percent of the Federal poverty level 

(FPL) who are enrolled in a QHP of any 

‘‘metal’’ level (that is, bronze, silver, 

gold, or platinum) through the 

individual market in the Exchange, and 

does not allow issuers of QHPs to 

require cost sharing for Indians, 

regardless of household income, for 

items or services furnished directly by 

the Indian Health Service, an Indian 

Tribe, a Tribal Organization, or an 

Urban Indian Organization, or through 

referral under contract health services. 

To implement these cost-sharing 

reductions, we published a rule entitled 

‘‘Establishment of Exchanges and 

Qualified Health Plans; Exchange 

Standards for Employers’’ (77 FR 18310) 

(Exchange Establishment Rule), which 

established eligibility standards for 

these cost-sharing reductions. We 

published a bulletin outlining an 

intended regulatory approach to 

calculating actuarial value and 

implementing cost-sharing reductions 

on February 24, 2012 (the AV/CSR 

Bulletin).1 The AV/CSR Bulletin 

specifically outlined an intended 

regulatory approach for de minimis 

variation standards, silver plan 

variations for individuals eligible for 

cost-sharing reductions, and advance 

payments of cost-sharing reductions to 

issuers, among other topics. The HHS 

Notice of Benefit and Payment 

Parameters for 2014 (the 2014 Payment 

Notice), published concurrently with 

this interim final rule with comment, 

establishes standards governing the 

administration of cost-sharing 

reductions and provided specific 

payment parameters for the program. In 

this interim final rule with comment, 

we establish an alternate, optional 

methodology for calculating the value of 

cost-sharing reductions provided for the 

purpose of reconciliation of advance 

payments of cost-sharing reductions. 

B. Summary of Provisions 

This interim final rule with comment 

amends the standards established by the 

Premium Stabilization Rule and the 

2014 Payment Notice for the risk 

corridors and cost-sharing reductions 

programs. 

Risk Corridors: The temporary risk 

corridors program provides for the 

Federal government to share a QHP’s 

profits or losses resulting from 

inaccurate rate setting from 2014 to 

2016. In this interim final rule with 

comment, we are modifying our 

interpretation of the definition of 

‘‘allowable costs’’ in section 

1342(c)(1)(A) of the Affordable Care Act, 

as reflected in § 153.500, so that a QHP’s 

allowable costs are determined on the 

basis of its pro-rata share of a pooled 

claims cost amount. This approach is 

consistent with the single risk pool 

provision established in § 156.80, which 

directs each issuer to develop its 

premiums based on its pooled claim 

experience for all of its nongrandfathered health plans in a market 

within a State. 

Cost-Sharing Reductions: Section 

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

directs a QHP issuer to notify the 

Secretary of HHS of cost-sharing 

reductions made under the statute for 

qualified individuals, and directs the 

Secretary to make periodic and timely 

payments to the QHP issuer equal to the 

value of those reductions. Section 

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

also permits the Secretary to establish a 

capitated payment system to carry out 

these payments. Similarly, section 

1402(d)(3) of the Affordable Care Act 

requires the Secretary to pay the QHP 

issuer an amount necessary to reflect the 

increase in actuarial value of the plan 

due to the reduction in cost sharing 

provided to Indians. Further, section 

1412(c)(3) of the Affordable Care Act 

permits advance payments of costsharing reduction amounts to QHP 

issuers based upon amounts specified 

by the Secretary. 

Under these authorities, the 2014 

Payment Notice finalizes a payment 

approach under which we will make 

monthly advance payments to QHP 

issuers to cover projected cost-sharing 

reduction amounts, and then reconcile 

those advance payments to the actual 

cost-sharing reduction amounts 

provided during the benefit year. In the 

2014 Payment Notice, we explained that 

the reconciliation will happen after the 

close of the 2014 benefit year. As part 

of the notice and comment process for 

the 2014 Payment Notice, we received 

comments suggesting alternatives for the 

reconciliation and identifying 

drawbacks to the use of actual costsharing reduction amounts. Those 

comments led us to finalize here 

additional subparagraphs in § 156.430(c) 

to include an alternate methodology for 

calculating the amounts of cost-sharing 

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Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 15543 

2Michelle M. Doty et al., Failure to Protect: Why 

the Individual Insurance Market Is Not a Viable 

Option for Most U.S. Families: Findings from the 

Commonwealth Fund Biennial Health Insurance 

Survey, 2007, The Commonwealth Fund, July 2009; 

Sara R. Collins, Invited Testimony: Premium Tax 

Credits Under The Affordable Care Act: How They 

Will Help Millions Of Uninsured And 

Underinsured Americans Gain Affordable, 

Comprehensive Health Insurance, The 

Commonwealth Fund, October 27, 2011. 

3Brook, Robert H., John E. Ware, William H. 

Rogers, Emmett B. Keeler, Allyson Ross Davies, 

Cathy D. Sherbourne, George A. Goldberg, Kathleen 

N. Lohr, Patricia Camp and Joseph P. Newhouse. 

The Effect of Coinsurance on the Health of Adults: 

Results from the RAND Health Insurance 

Experiment. Santa Monica, CA: RAND Corporation, 

1984. Available at: http://www.rand.org/pubs/ 

reports/R3055. 

reductions provided, against which the 

advanced payments to QHP issuers will 

be reconciled. We believe that this 

alternate methodology will provide QHP 

issuers with additional flexibility, and 

reduce the administrative burden for 

some issuers of participating in the costsharing reductions program. Under this 

regulation, issuers of QHPs will be 

permitted to choose one of two 

methodologies for calculating the 

amount of cost-sharing reductions 

provided. The first methodology 

(referred to as the ‘‘standard 

methodology’’) was finalized in the 

2014 Payment Notice. Under the 

standard methodology, QHP issuers 

calculate the cost sharing that an 

enrollee would have paid under the 

standard plan without cost-sharing 

reductions by applying the cost-sharing 

requirements for the standard plan to 

the allowed costs for each policy; in 

effect, each claim would be processed 

twice: Using the cost-sharing structure 

that would have been in place if the 

individual were not eligible for costsharing reductions, and using the 

reduced cost-sharing structure in the 

applicable plan variation for which the 

individual is eligible. Under the second 

methodology established here (referred 

to as the ‘‘simplified methodology’’), 

QHP issuers calculate the value of the 

cost-sharing reductions provided by 

using a formula based on certain 

summary cost-sharing parameters of the 

standard plan, applied to the total 

allowed costs for each policy. 

C. Costs and Benefits 

The provisions of this interim final 

rule with comment, combined with 

other provisions in the Affordable Care 

Act and related rules, will make health 

insurance more affordable and 

accessible to millions of Americans who 

currently do not have affordable options 

available to them. The shortcomings of 

the individual market today have been 

widely documented.2

We believe that this interim final rule 

with comment, combined with other 

provisions of the Affordable Care Act, 

will improve the functioning of both the 

individual and the small group markets 

while stabilizing premiums. The risk 

corridors program is intended to protect 

QHP issuers in the individual and small 

group markets against inaccurate rate 

setting, and to permit issuers to offer 

lower rates by not adding a risk 

premium to account for perceived 

uncertainties in the 2014 through 2016 

markets. 

Provisions addressing cost-sharing 

reductions will help provide for the 

reduction or elimination of cost sharing 

for certain individuals enrolled in 

individual market QHPs offered through 

the Exchanges. This assistance is 

expected to help many low- and 

moderate-income individuals and 

families, as well as Indians, obtain 

health care. For many people, cost 

sharing is a barrier to obtaining needed 

health care.3

II. Background 

The Patient Protection and Affordable 

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

on March 23, 2010. The Health Care and 

Education Reconciliation Act (Pub. L. 

111–152) was enacted on March 30, 

2010. We refer to the two statutes 

collectively as the Affordable Care Act 

in this interim final rule with comment. 

Premium Stabilization: The Premium 

Stabilization Rule, (77 FR 17220), which 

implemented the health insurance 

premium stabilization programs (that is, 

risk adjustment, reinsurance, and risk 

corridors), was published in the Federal 

Register on March 23, 2012. 

Cost-Sharing Reductions and 

Actuarial Value: The AV/CSR Bulletin, 

published on February 24, 2012, 

outlined an intended regulatory 

approach for the design of plan 

variations for individuals eligible for 

cost-sharing reductions and advance 

payments and reimbursement of costsharing reductions to issuers, among 

other issues. A notice of proposed 

rulemaking relating to EHB and 

actuarial value was published in a 

November 26, 2012 Federal Register 

proposed rule entitled ‘‘Standards 

Related to Essential Health Benefits, 

Actuarial Value, and Accreditation’’ (77 

FR 70644). The final version of that rule 

was published by the Office of the 

Federal Register on February 25, 2013 

(78 FR 12834). A notice of proposed 

rulemaking relating to parameters and 

provisions governing the risk 

adjustment, reinsurance, and risk 

corridors programs; cost-sharing 

reductions; user fees for Federallyfacilitated Exchanges; advance 

payments of the premium tax credit; 

and the medical loss ratio program was 

published in a December 7, 2012 

Federal Register proposed rule entitled 

‘‘HHS Notice of Benefit and Payment 

Parameters for 2014’’ (77 FR 73118). The 

final version of that rule is published 

elsewhere in this issue of the Federal 

Register. 

Market Reform Rules: A notice of 

proposed rulemaking relating to market 

reforms and effective rate review was 

published in a November 26, 2012 

Federal Register proposed rule entitled 

‘‘Health Insurance Market Reforms; Rate 

Review’’ (78 FR 70584). The final 

version of that rule was made available 

for public inspection at the Office of the 

Federal Register on February 22, 2013. 

Tribal Consultations: This interim 

final rule with comment may be of 

interest to, and affect, American 

Indians/Alaska natives. Therefore, we 

plan to consult with Tribes during the 

comment period and prior to adopting 

the final rule. 

III. Provisions of the Interim Final Rule 

A. Calculation of Allowable Costs for 

the Risk Corridors Program 

The Affordable Care Act established 

the temporary risk corridors program to 

help stabilize premiums in the early 

years of the Exchanges and the market 

reform rules. The risk corridors program 

compares a plan’s allowable costs 

(claims costs with certain adjustments) 

against a plan’s target amount (total 

premiums reduced by administrative 

costs), and is designed to share the risk 

of inaccurate rate-setting between QHP 

issuers and the Federal government. 

Issuers must establish their premiums 

based on the single risk pool 

requirement set forth at § 156.80, which 

directs each issuer to develop its 

premiums based on its pooled claim 

experience for all of its nongrandfathered health plans in a market 

(that is, the individual market, the small 

group market, or the merged market) 

within a State, as adjusted for the 

pooled amount of net risk adjustment 

transfers and reinsurance payments it 

expects. Therefore, under the current 

risk corridors and single risk pool 

regulations, risk corridors would 

compare plan-specific allowable costs 

based on plan-specific claims costs 

against a target amount that reflects the 

issuer’s market-wide premiums. 

We received a number of comments to 

our draft 2014 Payment Notice noting 

the discrepancy. One commenter 

indicated that the current policy of 

calculating risk corridors at the plan 

level was inconsistent with the single 

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15544 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 

risk pool requirement because, as noted 

above, it would require a comparison of 

plan-specific claims costs to marketwide premiums. We agree that a risk 

corridors calculation based on unpooled 

claims costs may create an incongruity 

with the single risk pool requirement 

that could lessen the premium 

stabilizing effect of the risk corridors 

program. We recognize that in the 

Premium Stabilization Rule (77 FR 

17220), in response to a comment 

similarly recommending that risk 

corridors be calculated at the issuer 

level, we stated that the statute did not 

afford the necessary flexibility. 

However, in light of the comments we 

have received on this issue, we have 

concluded that section 1342 of the 

Affordable Care Act provides the 

flexibility to calculate risk corridors 

payments and charges based on pooled 

claims and premiums. 

We believe the approach to the risk 

corridors calculation that we describe 

here is consistent with section 1342(a) 

of the Affordable Care Act, which 

requires QHPs to ‘‘participate in a 

payment adjustment system based on 

the ratio of the allowable costs of the 

plan to the plan’s aggregate premiums.’’ 

We further believe that we can interpret 

the statutory definition of ‘‘allowable 

costs,’’ which refers to total costs other 

than administrative costs ‘‘of the plan’’ 

in providing benefits ‘‘under the plan,’’ 

to mean the plan’s proportional share of 

total claims costs. 

As a result of our proposed 

modification of our interpretation of the 

statute, we are amending the regulatory 

definition of allowable costs so that 

allowable costs for a QHP are equal to 

the pro rata portion of the QHP issuer’s 

incurred claims (subject to adjustments 

for any direct or indirect remuneration 

as described in § 158.40, costs related to 

improving health care quality set forth 

in § 158.150, health information 

technology expenditures set forth in 

§ 158.151, and other applicable 

adjustments consistent with 

§ 153.530(b)) for all of its nongrandfathered health plans in a market 

within a State, allocated to the QHP 

based on premiums earned by the issuer 

in the applicable market. We are 

retaining the adjustments and costs 

described in § 158.40, § 158.150, 

§ 158.151, and § 153.530(b) within the 

regulatory definition of allowable costs 

in order to maintain consistency with 

the MLR formula. 

Below, we describe an example of the 

manner in which we will allocate 

allowable costs to and among an issuer’s 

QHPs in proportion to the amount of the 

QHP’s premiums. Assume that Issuer I 

has three plans in the individual market 

within the State, QHP A and QHP B 

which are QHPs, and Plan X which is 

a non-grandfathered health plan. QHP A 

earns 50 percent of the issuer’s 

premiums in the market, QHP B earns 

20 percent, and Plan X earns 30 percent. 

Assume total allowable costs across all 

three of I’s plans of $10 million. On 

these facts, $5 million of allowable costs 

would be allocated to QHP A, $2 

million to QHP B, and $3 million to 

Plan X. The risk corridors calculation 

would compare those allowable costs to 

the QHPs’ target amounts. 

Finally, we are modifying the rule 

related to attribution and allocation of 

revenue and expense items in § 153.520 

to conform to the changes above for the 

risk corridors calculation. We are 

clarifying that these rules, which require 

that each item of revenue and expense 

in the risk corridors calculation be 

reasonably attributable to the operation 

of the QHP based on a generally 

accepted accounting method, will apply 

to the target amount (and therefore 

allowable administrative expenses), but 

not to allowable costs. This 

modification aligns with the approach 

described above, which requires a QHP 

issuer to pool allowable costs across all 

its plans and allocate these costs to each 

QHP based on the QHP’s premiums 

earned as a share of the premiums 

earned of all non-grandfathered plans in 

the relevant market. A number of 

commenters to the proposed 2014 

Payment Notice requested that risk 

corridors be conducted at the issuer 

level. We note that under the approach 

implemented in this interim final rule 

with comments an issuer may 

reasonably allocate, in accordance with 

§ 153.520, allowable administrative 

costs across its business pro rata by 

premiums earned, leading to an issuerlevel risk corridors calculation for its 

QHP business. 

As noted above, we believe the 

approach to the risk corridors 

calculation that we describe here is 

consistent with section 1342(a) of the 

Affordable Care Act and implements the 

statutory intent of the risk corridors 

program. In addition, we believe it is 

comprehensible to stakeholders, and is 

administratively straightforward to 

implement. We seek comments on this 

approach. 

B. Submission of Actual Amounts of 

Cost-Sharing Reductions 

As described in the 2014 Payment 

Notice, HHS will make monthly 

advance payments to QHP issuers to 

cover projected cost-sharing reduction 

amounts, and then reconcile those 

advance payments after the end of the 

benefit year to the cost-sharing 

reductions provided. This approach is 

similar to the one employed for the lowincome subsidy under Medicare Part D. 

To implement this payment approach, 

§ 156.430(c) directs QHP issuers to 

report to HHS the amount of costsharing reductions provided during the 

benefit year. This submission must be 

made on the timeframe and in the 

manner identified by HHS. We 

anticipate collecting this information 

after the end of the benefit year. 

In response to the proposed 2014 

Payment Notice, we received a number 

of comments suggesting that the 

reporting requirements for QHP issuers 

under the proposed § 156.430(c) would 

be operationally challenging, in large 

part due to the short timeframe for 

implementation and other information 

technology challenges facing issuers in 

2013 and 2014. Commenters noted that 

although the reporting and 

reconciliation process is appropriate for 

the Medicare Part D Low-Income 

Subsidy Program, medical benefits are 

more complex than pharmaceutical 

benefits and often have a longer time lag 

between submission and adjudication. 

Commenters stated that to meet the 

reporting requirements under proposed 

§ 156.430(c), QHP issuers could need to 

re-adjudicate each claim for enrollees 

receiving cost-sharing reductions in 

order to determine the difference in cost 

sharing between the applicable plan 

variation and standard plan. This 

process could require the development 

of new information systems in a short 

period of time. 

As an alternative, several commenters 

suggested that HHS should allow QHP 

issuers to estimate the value of the costsharing reductions provided using a 

formula similar to that used for the 

advance payments, but based on the 

actual claims experience of the 

enrollees. These calculated amounts 

could be used as part of cost-sharing 

reduction reconciliation, lessening the 

administrative burden on issuers. 

Considering those comments, we 

modified § 156.430(c) in the 2014 

Payment Notice, and establish 

additional standards in this interim 

final rule with comment to allow QHP 

issuers greater flexibility in the manner 

in which cost-sharing reduction 

amounts are calculated. With this 

policy, we seek to balance the need to 

safeguard Federal funds with the goal of 

lessening the administrative burden on 

QHP issuers. 

Under § 156.430(c)(1) and (2), 

finalized in the 2014 Payment Notice, a 

QHP issuer must submit to HHS, for 

each policy of each plan variation 

offered on an Exchange, the total 

allowed costs for EHB charged for the 

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Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 15545 

policy for the benefit year, broken down 

by: (i) The amount the issuer paid; (ii) 

the amount the enrollee(s) paid; and (iii) 

the amount the enrollee(s) would have 

paid under the standard plan without 

cost-sharing reductions, which must be 

calculated using the standard 

methodology, by applying the actual 

cost-sharing requirements for the 

standard plan to the allowed costs for 

essential health benefits under the 

enrollee’s policy for the benefit year. 

HHS will use this information to 

calculate the difference between the 

amount the enrollee(s) paid and the 

amount that the enrollee(s) would have 

paid under the standard plan without 

cost-sharing reductions, and reconcile 

this amount against the advance 

payments provided to the QHP issuer 

pursuant to § 156.430(a) and (b). We 

noted in the 2014 Payment Notice, that 

we anticipate that QHP issuers will 

submit this information several months 

after the close of the benefit year. We 

also clarified that the amount the 

enrollee paid should include any cost 

sharing paid by a third party, including 

a State, on behalf of the enrollee. 

In this interim final rule with 

comment, we build on the standards 

finalized in the 2014 Payment Notice 

and add paragraphs (c)(3) and (4). In 

§ 156.430(c)(3), we establish new 

standards to permit QHP issuers greater 

flexibility in the manner in which costsharing reduction amounts are 

calculated. We specify that QHP issuers 

may choose to calculate the amounts 

that would have been paid under the 

standard plan without cost-sharing 

reductions using a simplified 

methodology, as an alternative to the 

standard methodology. We anticipate 

that after an appropriate transition 

period, all QHP issuers will be required 

to use the standard methodology. We 

seek comment on the appropriate length 

of a transition period permitting the use 

of the simplified methodology for 

consideration when we finalize this 

rule. 

In paragraph (3)(i), we provide that 

the QHP issuer must notify HHS prior 

to the start of each benefit year whether 

or not it selects the simplified 

methodology for the benefit year. We 

will provide guidance in the future on 

the manner and timeframe for this 

submission. In paragraph (3)(ii), we 

specify that if the QHP issuer selects the 

simplified methodology, it must apply 

the simplified methodology to all plan 

variations it offers on the Exchange for 

a benefit year. Since the simplified 

methodology is intended to be used by 

issuers whose systems are not yet 

capable of implementing the standard 

methodology, in paragraph (3)(iii) we 

specify that the QHP issuer may not 

select the simplified methodology if it 

did not select the simplified 

methodology for the prior benefit year. 

We also set forth standards for selecting 

a methodology if a QHP issuer merges 

with or acquires another issuer of QHPs 

on the Exchange, or acquires a QHP 

offered on the Exchange from another 

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

provide that if each of the affected 

parties had selected a different 

methodology for the benefit year, then 

notwithstanding paragraphs (3)(ii) and 

(3)(iii), for the benefit year in which the 

merger or acquisition took place, the 

QHP issuer must continue to use the 

methodology selected prior to the start 

of the benefit year for each plan 

variation (whether or not the selection 

was made by that issuer), and for the 

next benefit year, the QHP issuer may 

select either methodology subject to the 

requirement in paragraph (3)(ii) that a 

QHP issuer select the same methodology 

for all plan variations it offers on the 

Exchange for the benefit year. We seek 

comment on these provisions, and in 

particular, the administrative 

implications for QHP issuers. 

We believe that the approach 

described above will allow QHP issuers 

to choose the methodology that best 

aligns with their operational practices, 

which should reduce the administrative 

burden on issuers in the initial years of 

the Exchanges and provide additional 

time for systems implementation. In 

later years, we will consider alternative 

approaches for reimbursing QHP 

issuers. For example, once more data is 

available, we could change to a 

capitated payment system as permitted 

in section 1402(c)(3)(B) of the 

Affordable Care Act. However, such a 

change would require access to data on 

the utilization and cost-sharing patterns 

of individuals eligible for cost-sharing 

reductions. We believe that providing a 

transition period on an interim basis 

now addresses issuers’ operational 

needs and will permit us to explore a 

capitated payment approach for future 

implementation. We will provide QHP 

issuers with sufficient notice and seek 

comment prior to proposing any such 

changes. 

In § 156.430(c)(4), we set forth a 

methodology for calculating the value of 

the amount that the enrollee(s) would 

have paid under the standard plan 

without cost-sharing reductions. We 

believe this methodology will reduce 

the administrative burden for certain 

QHP issuers, yet continue to provide a 

relatively accurate accounting of the 

cost-sharing reductions provided. 

Specifically, § 156.430(c)(4) provides, 

subject to § 156.430(c)(4)(iv) as 

described below, that a QHP issuer 

selecting the simplified methodology 

will calculates the amount that the 

enrollee(s) would have paid under the 

standard plan by applying certain 

summary, or ‘‘effective,’’ cost-sharing 

parameters for the standard plan—the 

effective deductible, the effective predeductible coinsurance rate, the 

effective post-deductible coinsurance 

rate, and the effective claims ceiling—to 

the total allowed costs paid for EHB 

under the policy (that is, the policy with 

cost-sharing reductions) for the benefit 

year. In § 156.430(c)(4)(i), we detail the 

process for calculating the amount that 

the enrollee(s) would have paid under 

the standard plan under the simplified 

methodology, depending on the 

utilization pattern under the policy. We 

describe these calculations here using 

Formulas A, B, and C, which build upon 

each other and use common terms. In 

§ 156.430(c)(4)(ii) we define the 

effective cost-sharing parameters for the 

standard plan, which must be calculated 

separately for both self-only coverage 

and other than self-only coverage. 

Below we provide instructions for 

determining these effective parameters. 

Under the simplified methodology, 

QHP issuers will calculate the amount 

that the enrollee(s) would have paid 

under the standard plan for policies 

with total allowed costs for EHB for the 

benefit year that are less than or equal 

to the effective deductible in accordance 

with paragraph (c)(4)(i)(A), and 

illustrated below with Formula A. The 

definitions for all of the terms used in 

the formula are defined below. 

Formula A: C = TACi * PreD 

Where, 

C = the amount that the enrollee(s) in a 

particular policy would have paid under 

the standard plan without cost-sharing 

reductions; 

TACi = the total allowed costs for EHB under 

the policy with cost-sharing reductions 

for the benefit year; and 

PreD = the effective pre-deductible 

coinsurance rate. 

Secondly, QHP issuers must calculate 

the amount that the enrollee(s) would 

have paid under the standard plan for 

policies with cost-sharing reductions 

with total allowed costs for EHB for the 

benefit year that are greater than the 

effective deductible but less than the 

effective claims ceiling (that is, the 

estimated amount of total allowed 

claims for a policy that results in 

enrollee cost sharing that meets the 

annual limitation on cost sharing) in 

accordance with paragraph (c)(4)(i)(B), 

and illustrated below with Formula B. 

The method for calculating the effective 

claims ceiling is described below. 

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15546 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 

Formula B: C = D + ((TACi¥D) * PostD) 

Where, 

D = the effective deductible; and 

PostD = the effective post-deductible 

coinsurance rate. 

Lastly, QHP issuers must calculate the 

amount that the enrollee(s) would have 

paid under the standard plan for 

policies with cost-sharing reductions 

with total allowed costs for EHB for the 

benefit year that are greater than the 

effective claims ceiling in accordance 

with paragraph (c)(4)(i)(C), and 

illustrated below with Formula C. 

Formula C: C = D + ((EC¥D) * PostD) 

Where, 

EC = the effective claims ceiling. 

We request comment on these 

formulas for calculating the amount that 

the enrollee(s) would have paid under 

the standard plan, and whether this 

methodology appropriately divides 

policies based on utilization patterns. 

We welcome suggestions for alternative 

methodologies, which may provide a 

more accurate approach to estimating 

the amount that the enrollee(s) would 

have paid under the standard plan, 

while balancing the administrative 

burden on QHP issuers. 

In § 156.430(c)(4)(ii), we set forth 

instructions for determining the 

effective cost-sharing parameters for the 

standard plan. These parameters are 

similar to the actual cost-sharing 

requirements for the standard plan, but 

are simplified and adjusted based on the 

utilization of the enrollees in the 

standard plan. This adjustment allows 

QHP issuers to calculate enrollee 

liability under the standard plan in a 

simple, standardized format. We also 

specify that QHP issuers must develop 

separate effective cost-sharing 

parameters for self-only coverage and 

other than self-only coverage, though we 

group together coverage for different 

size families under the category ‘‘other 

than self-only coverage.’’ However, we 

seek comment on whether utilization 

patterns differ for self-only coverage and 

other than self-only coverage such that 

separate effective cost-sharing 

parameters would yield more accurate 

calculations, and whether different 

family sizes should also be analyzed 

separately. We also note that if a QHP 

issuer has entirely separate cost-sharing 

parameters for pharmaceutical and 

medical services, the QHP issuer may 

elect to develop separate sets of effective 

cost-sharing parameters for 

pharmaceutical and medical services. 

Effective Deductible: In 

§ 156.430(c)(4)(ii)(A), we provide 

instructions for determining the 

effective deductible for the standard 

plan. If the standard plan has no 

deductible (and only copays or 

coinsurance), the effective deductible is 

zero. If the standard plan has only one 

deductible, the effective deductible is 

that deductible. If the standard plan has 

more than one deductible (for example, 

one deductible for certain or all innetwork services, and another 

deductible for certain or all out-ofnetwork services), the effective 

deductible is the weighted average 

deductible, weighted by allowed claims 

for EHB for either self-only or other than 

self-only coverage, as appropriate, under 

the plan for the benefit year that fall 

within each deductible category. For 

example, if a standard plan has a $500 

deductible for certain in-network 

services and a $1,000 deductible for 

certain out-of-network services, and 65 

percent of allowed costs under the 

standard plan were for the certain innetwork services subject to the innetwork deductible and 30 percent were 

for the certain out-of-network services 

subject to the out-of-network deductible, 

the weighted average deductible would 

be equal to approximately $658 (that is, 

(0.65*500+0.3*1000)/0.95). 

We note that services that are not 

subject to any deductible (including 

services subject to copays or 

coinsurance but not subject to the 

deductible) should not be incorporated 

into the weighted average calculation of 

the effective deductible. The estimated 

cost sharing liability for such services is 

captured in the effective pre-deductible 

coinsurance rate, discussed below. 

Similarly, services that are subject to the 

deductible only to a limited extent, for 

example a service for which the first 

three instances are subject to a copay 

instead of the deductible, but for which 

the fourth and each instance thereafter 

are subject to the deductible, should be 

incorporated into the weighted average 

calculation of the effective deductible to 

the extent the service is subject to the 

deductible (that is, the fourth and each 

later instance should be so 

incorporated), and should be 

incorporated into the calculation of the 

pre-deductible coinsurance rate (as 

calculated as described below) to the 

extent the service is not (that is, the first 

three instances should be so 

incorporated). 

Effective Pre-Deductible Coinsurance 

Rate: In § 156.430(c)(4)(ii)(B), we 

provide instructions for determining the 

effective pre-deductible coinsurance 

rate for the standard plan. We specify 

that the effective pre-deductible 

coinsurance rate must be calculated 

using the cost data from those standard 

plan policies that have total allowed 

costs for EHB for the benefit year that 

are less than or equal to the effective 

deductible. The effective pre-deductible 

coinsurance rate would be calculated as 

the proportion of the total allowed costs 

for EHB under the standard plan for the 

benefit year incurred for those standard 

plan enrollees and payable as cost 

sharing (including as copays or 

coinsurance on services with such cost 

sharing but not subject to the 

deductible, as discussed above). The 

effective pre-deductible coinsurance 

rate for the standard plan without costsharing reductions must be calculated 

separately for both self-only coverage 

and other than self-only coverage. We 

note that although the pre-deductible 

coinsurance rate may be high, it will 

likely not be 100 percent as certain 

services, including those preventative 

services described in § 147.130, will 

have no cost-sharing requirements. The 

higher the utilization is for these 

services, the lower the effective predeductible coinsurance rate. 

Effective Post-Deductible Coinsurance 

Rate: In § 156.430(c)(4)(ii)(C), we 

provide instructions for determining the 

effective post-deductible coinsurance 

rate for the standard plan. We specify 

that the effective post-deductible 

coinsurance rate must be calculated 

using the cost data from those standard 

plan policies that have total allowed 

costs for EHB for the benefit year that 

are above the effective deductible, but 

for which associated cost sharing is less 

than the annual limitation on cost 

sharing. The effective post-deductible 

coinsurance rate for the standard plan 

without cost-sharing reductions must be 

calculated separately for both self-only 

coverage and other than self-only 

coverage. The effective post-deductible 

coinsurance rate will then be calculated 

using the following formula: 

PostD = (CSp)/(TACp¥D) 

Where, 

PostD = the effective post-deductible 

coinsurance rate; 

CSp = the average allowed costs for EHB for 

the benefit year incurred for those 

enrollee(s) on the policies and payable as 

cost sharing other than through a 

deductible (for example, coinsurance 

and copayments on services not subject 

to a deductible or for services after the 

applicable deductible has been met); 

D = the effective deductible; and 

TACp = the average total allowed costs for 

EHB for the policies of the standard plan 

for the benefit year (we distinguish TACp

from the TACi; TACp refers to the average 

of total allowed costs for EHB for all the 

policies in the population that is part of 

the calculation—which in this case, are 

the standard plan policies with total 

allowed costs for EHB for the benefit 

year that are above the effective 

deductible, but for which associated cost 

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Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 15547 

sharing is less than the annual limitation 

on cost sharing—while TACi refers to the 

total allowed costs for EHB for a 

particular policy). 

For example, a standard plan has one 

deductible of $1,000, and therefore, an 

effective deductible of $1,000. The 

average total allowed costs for EHB for 

the policies included in this calculation 

(that is, standard plan policies, for 

either self-only or other than self-only 

coverage, as appropriate, with total 

allowed costs for EHB for the benefit 

year that are above the effective 

deductible but for which associated cost 

sharing is less than the annual 

limitation on cost sharing) is $2,000, 

and the average total allowed cost 

payable by the enrollees as cost sharing 

other than through a deductible is $290. 

Therefore, the effective post-deductible 

coinsurance rate is equal to 

approximately 29 percent (that is, (290)/ 

(2,000¥1,000)). 

Effective Claims Ceiling: In 

§ 156.430(c)(4)(ii)(D), we provide 

instructions for determining the 

effective claims ceiling for the standard 

plan (that is, the estimated amount of 

total allowed claims for a policy that 

results in enrollee cost sharing that 

meets the annual limitation on cost 

sharing). We specify that the effective 

claims ceiling is to be calculated using 

the following formula: 

EC = D + ((AL¥D)/PostD) 

Where, 

EC = the effective claims ceiling; 

AL = the standard plan’s annual limitation 

on cost sharing; 

PostD = the effective post-deductible 

coinsurance rate; and 

D = the effective deductible. 

Therefore, continuing the example 

from above, where a standard plan has 

an effective deductible of $1,000 and an 

effective post-deductible coinsurance 

rate of 29 percent, assume the standard 

plan also has an annual limitation on 

cost sharing of $6,000. The effective 

claims ceiling would be $18,241 (that is, 

1,000 + ((6,000 ¥ 1,000)/0.29)). 

We request comment on these 

instructions for determining the 

effective cost-sharing parameters of a 

standard plan, including their ability to 

accurately characterize the experience 

of an enrollee in the standard plan, and 

the potential administrative burden 

associated with the calculations. We 

also welcome comment on alternative 

methods for estimating the cost sharing 

required under the standard plan. For 

example, we also considered whether 

simply using the proportion of total 

allowed costs that were payable as cost 

sharing under the standard plan would 

be an appropriate estimate of the 

amount the enrollee(s) would have paid 

under the standard plan. We seek 

comment on this alternative approach, 

as well as other alternatives. 

In § 156.430(c)(4)(iii), we establish 

additional standards for QHP issuers 

that elect to use the simplified 

methodology. These provisions will 

allow HHS to ensure that QHP issuers 

are appropriately developing the 

effective cost-sharing parameters based 

on the actual experience of the enrollees 

in the standard plan. Specifically, we 

specify that QHP issuers submit to HHS, 

in the manner and timeframe 

established by HHS, the following 

information for each standard plan, for 

both self-only coverage and other than 

self-only coverage offered by the QHP 

issuer in the individual market through 

the Exchange: the effective deductible; 

the effective pre-deductible coinsurance 

rate; the effective post-deductible 

coinsurance rate; the effective claims 

ceiling; and a memorandum developed 

by a member of the American Academy 

of Actuaries in accordance with 

generally accepted actuarial principles 

and methodologies that describes how 

the QHP issuer calculated the effective 

cost-sharing parameters for the standard 

plan. We seek comment on whether 

HHS should require any other data 

submissions or establish any additional 

standards to oversee these provisions. 

We recognize that because the 

effective pre- and post-deductible 

coinsurance rates are calculated based 

on the average experience of the 

enrollees in the standard plan, low 

enrollment in the standard plan could 

lead to inaccurate effective coinsurance 

rates. Therefore, we provide additional 

standards related to the simplified 

methodology in § 156.430(c)(4)(iv) to 

address credibility concerns that may 

result from low enrollment in the 

standard plan. We establish that if a 

standard plan has an enrollment during 

the benefit year of fewer than 12,000 

member months (that is, the sum of the 

months that each enrollee is covered by 

the plan) in any of the four subgroups 

delineated below, and the QHP issuer 

has selected the simplified 

methodology, then the QHP issuer must 

calculate the amount that the enrollee(s) 

would have paid under the standard 

plan for enrollees in all subgroups by 

applying the standard plan’s actuarial 

value, as calculated under § 156.135, to 

the allowed costs for EHB for the 

enrollee(s) for the benefit year. We 

establish four subgroups to align with 

the policy implemented in 

§ 156.430(c)(4)(iii), which requires that 

the effective cost-sharing parameters be 

calculated separately for self-only and 

other than self-only coverage. The 

subgroups are enrollees in the standard 

plan with: (1) Self-only coverage with 

total allowed costs for EHB for the 

benefit year that are less than or equal 

to the effective deductible; (2) other 

than self-only coverage with total 

allowed costs for EHB for the benefit 

year that are less than or equal to the 

effective deductible; (3) self-only 

coverage with total allowed costs for 

EHB for the benefit year that are greater 

than the effective deductible, but below 

the effective claims ceiling; and (4) 

other than self-only coverage with total 

allowed costs for EHB for the benefit 

year that are greater than the effective 

deductible, but below the effective 

claims ceiling. A subgroup is not 

necessary for the enrollees with total 

allowed costs for EHB for the benefit 

year that are greater than the effective 

claims ceiling because the experience of 

this population is not used to calculate 

the effective cost-sharing parameters. 

The credibility standard of 12,000 

member months aligns with a similar 

standard used by the Medicare Part D 

program; however, we seek comment on 

the appropriate amount of member 

months to achieve credible use of the 

simplified methodology. We believe that 

a population with member months 

below this standard would not provide 

adequate data on which to base the 

effective cost-sharing parameters. If a 

QHP issuer does not have adequate 

enrollment in any of the four subgroups, 

we believe the standard plan’s actuarial 

value will provide an adequate 

substitute for the effective cost-sharing 

parameters if applied to all policies in 

all four subgroups. We seek comment on 

the credibility standard of 12,000 

member months, and whether the 

standard plan’s actuarial value applied 

to the allowed costs for EHB for the 

enrollee(s) for the benefit year will 

provide an appropriate estimate of the 

amount of cost sharing that the 

enrollee(s) would have paid under the 

standard plan without cost-sharing 

reductions. We seek comment on 

alternative approaches for QHP issuers 

with low enrollment for estimating the 

amount of cost sharing that the 

enrollee(s) would have paid under the 

standard plan. We also seek comment 

on the composition of these subgroups 

and whether they appropriately divide 

enrollees based on their utilization 

patterns, or whether any subgroups are 

required at all. We seek comment on 

whether low enrollment in one 

subgroup should prompt the QHP issuer 

to use the actuarial value for enrollees 

in all subgroups or just the subgroup 

with low enrollment. 

We appreciate the possibility that, for 

a very small number of plans with 

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15548 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 

unique cost-sharing structures, the 

amounts that enrollees would have been 

paid under the plan cannot fairly be 

estimated using the simplified 

methodology described in paragraph (c). 

We are considering a process in which 

a QHP issuer of such a plan may notify 

HHS if it believes that such is the case 

for one or more of its plans. We are 

considering requiring such a 

notification within ninety days of the 

beginning of the applicable benefit year, 

and we are considering requiring the 

QHP issuer to provide information on 

the unique plan design supporting the 

QHP issuer’s assessment. 

Under this approach, if HHS were to 

agree with the assessment, we are 

considering requiring that the QHP 

issuer calculate the amount that the 

enrollee(s) would have paid under the 

standard plan without cost-sharing 

reductions by applying the standard 

plan’s actuarial value, as calculated 

pursuant to § 156.135, to the allowed 

costs for essential health benefits for the 

enrollee(s) for the benefit year. If HHS 

were to disagree with the issuer’s 

assessment, the QHP issuer would 

calculate such amounts using the 

effective cost-sharing parameters under 

the approach described in paragraphs 

(4)(i) through (4)(iii) or (4)(iv), if 

applicable, of § 156.430. 

We seek comment on whether we 

should adopt such an approach, and on 

the specifics outlined above. In 

particular, we seek comment on the 

types of plans, if any, for which it will 

be difficult to fairly calculate the 

amount that the enrollee(s) would have 

paid under the standard plan without 

cost-sharing reductions using the 

simplified methodology, and their 

prevalence. We seek comment on the 

standard that should apply for 

determining whether the plan will be 

exempted from using the simplified 

methodology, and how HHS should 

make that determination. Finally, we 

seek comment on what estimation 

methodology should be used if the plan 

is determined to be exempt, and if it is 

not. Section 156.430(c)(5), finalized in 

the 2014 Payment Notice, provides that 

in the case of a benefit for which the 

QHP issuer compensates an applicable 

provider in whole or in part on a feefor-service basis, allowed costs 

associated with the benefit may be 

included in the calculation of the 

amount that an enrollee(s) would have 

paid under the standard plan without 

cost-sharing reductions only to the 

extent the amount was either payable by 

the enrollee(s) as cost sharing under the 

plan variation or was reimbursed to the 

provider by the QHP issuer. We note 

that this provision applies to 

calculations using either the standard 

methodology or the simplified 

methodology. 

IV. Waiver of Proposed Rulemaking 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register and invite public comment on 

the proposed rule. The notice of 

proposed rulemaking includes a 

reference to the legal authority under 

which the rule is proposed, and the 

terms and substances of the proposed 

rule or a description of the subjects and 

issues involved. However, under section 

553(b) of the Administrative Procedure 

Act (APA) (5 U.S.C. 551 et seq.), a 

general notice of proposed rulemaking 

is not required when an agency, for 

good cause, finds that notice and public 

comment thereon are impracticable, 

unnecessary, or contrary to the public 

interest, and incorporates a statement of 

the finding and its reasons in the rule 

issued. The Secretary has determined 

that it would be impracticable to delay 

finalizing the provisions of this 

regulation until a public notice and 

comment process is complete. 

Section 1321(b) of the Affordable Care 

Act directs that Exchanges be 

operational by January 1, 2014, and 

section 1311(b)(6) of the Affordable Care 

Act directs that the Exchanges permit 

individuals to apply for coverage during 

annual open enrollment periods. 

Accordingly, § 155.410(b) establishes 

that Exchanges must be available to 

enroll individuals in QHPs beginning 

October 1, 2013. In order to meet this 

enrollment deadline and offer QHPs on 

the Exchange, QHP issuers must 

develop premium rates and plan 

offerings for QHPs to be offered on the 

Exchanges. Issuers must then seek and 

obtain approval of their rates and plan 

offerings from the applicable State 

Departments of Insurance, and submit 

their rates and plan offerings to the 

Exchange beginning April 1, 2013. In 

order to meet these statutorily driven 

deadlines, final rulemaking relating to 

the risk corridors program and the costsharing reduction program must be in 

effect so that QHP issuers can take these 

programs appropriately into account 

when developing their rates. The 

temporary risk corridors program will 

protect against uncertainty in rates for 

QHPs by limiting the extent of issuer 

losses and gains and will permit issuers 

to offer lower rates by not adding a risk 

premium to account for perceived 

uncertainties in the 2014 through 2016 

markets. If the provisions of this 

regulation were proposed under a 

standard 60-day notice and comment 

process, QHP issuers would not have 

the information needed to develop rates 

and products for the Exchanges and 

meet the October 1, 2013 deadline for 

open enrollment. 

Additionally, because the cost-sharing 

reduction provisions implemented in 

this regulation provide issuers with 

information that will affect how they 

prepare their information systems to 

process cost-sharing reductions, any 

delay in the effective date of those 

provisions would adversely affect 

issuers’ operational readiness. For the 

reasons described above, we believe that 

issuing this regulation on an interim 

final basis is necessary in order to avoid 

regulatory confusion for the affected 

industry and to ensure effective 

compliance with existing regulations. 

HHS solicited public comment on the 

risk corridors program in the proposed 

Premium Stabilization Rule and the 

proposed Payment Notice. HHS 

solicited public comment on the costsharing reductions program in the AV/ 

CSR Bulletin, and in the proposed 

Payment Notice. Comments in response 

to these documents were considered in 

the development of this regulation. In 

light of these comments and based on 

the Secretary’s determination that a 

delay of these rules would be 

impracticable, the Secretary finds good 

cause to waive the notice of proposed 

rulemaking and to issue this final rule 

on an interim basis. As a result of the 

timing constraints, we are providing a 

60-day public comment period, and 

intend to address comments received. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a control number 

assigned by OMB. 

This interim final rule with comment 

modifies some of the information 

collections listed in the 2014 Payment 

Notice, and adds one additional 

information collection. We plan to seek 

OMB approval at a later date for these 

information collections. HHS will issue 

future Federal Register notices to seek 

comments on those information 

collections, as required by 3506(c)(2)(A) 

of the Paperwork Reduction Act. 

Included among such information 

collections for which HHS plans to seek 

later approval are those described 

below. 

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Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 15549 

4HHS relied on the Bureau of Labor Statistics, 

U.S. Department of Labor, National Compensation 

Survey Occupational Earnings in the United States, 

2011, for estimates of job descriptions and wages. 

The amendments we make for the risk 

corridors program in this interim final 

rule with comment will not increase the 

information collection burden of the 

program established by and described in 

the Premium Stabilization Rule and the 

HHS Notice of Benefit and Payment 

Parameters for 2014. This interim final 

rule with comment modifies the 

calculation of allowable costs in the risk 

corridors calculation, but does not 

establish any information collection 

requirements beyond those already 

established in § 153.530. The 

information collection process and 

instruments associated with the risk 

corridors program data submission 

requirements under § 153.530 are 

currently under development. We will 

seek OMB approval and solicit public 

comments upon their completion. 

In this interim final rule with 

comment, we build on the standards 

finalized in the 2014 Payment Notice 

related to the administration of costsharing reductions and add provisions 

to paragraphs (c)(3) and (4) of § 156.430. 

We provide standards to permit QHP 

issuers greater flexibility in the manner 

in which the value of cost-sharing 

reduction amounts are calculated. In 

paragraph (c)(3), we specify that QHP 

issuers may choose to calculate the 

amounts that would have been paid 

under the standard plan without costsharing reductions using a simplified 

methodology, as an alternative to the 

standard methodology described in the 

2014 Payment Notice final rule at 

§ 156.430(c)(2). In addition, we establish 

a new information collection 

requirement in paragraph (3)(i), under 

which a QHP issuer must notify HHS 

prior to the start of each benefit year 

whether or not it selects the simplified 

methodology for the benefit year. While 

this information collection requirement 

is subject to the Paperwork Reduction 

Act, the information collection process 

and instruments associated with this 

requirement are currently under 

development. We will seek OMB 

approval and solicit public comments 

upon their completion. We estimate that 

the burden associated with the 

information collection requirement will 

be no more than one million dollars 

(assuming 1,200 issuers participate in 

an Exchange nationally, and each issuer 

has a reporting burden of approximately 

$700, which primarily represents the 

cost of the analysis performed by the 

QHP issuer to determine whether or not 

to use the simplified methodology). 

In § 156.430(c)(4) we set forth a 

simplified methodology for calculating 

the value of the amount that the 

enrollee(s) would have paid under the 

standard plan without cost-sharing 

reductions. We believe this 

methodology will reduce the 

administrative burden for certain QHP 

issuers, yet continue to provide a 

relatively accurate accounting of the 

cost-sharing reductions provided. If a 

QHP issuer uses the simplified 

methodology, the QHP issuer must also 

submit estimated cost-sharing 

parameters and an actuarial 

memorandum, as described in 

§ 156.430(c)(4)(iii); however, we expect 

this information collection to require a 

limited amount of analysis by a QHP 

issuer’s actuaries. These information 

collections associated with these 

provisions are subject to the Paperwork 

Reduction Act; however, the 

information collection process and 

instruments associated with this 

requirement are currently under 

development. We will seek OMB 

approval and solicit public comments 

upon their completion. Below we 

provide an initial estimate of the 

incremental burden associated with the 

provisions in § 156.430(c)(4). Under the 

provisions finalized in the 2014 

Payment Notice, all QHP issuers must 

use the standard methodology; however, 

the provisions in this interim final rule 

with comment provide a choice of 

methodologies. To estimate the 

incremental effect of the simplified 

methodology, we compare the burden of 

the standard methodology to the 

simplified methodology for those 

issuers that we assume select the 

simplified methodology. 

As discussed in the Collection of 

Information section in the 2014 

Payment Notice, we estimate that 1,200 

issuers will participate in an Exchange 

nationally and will incur total costs of 

approximately $138 million using the 

standard methodology. In contrast, we 

estimate that each issuer using the 

simplified methodology set forth in this 

interim final rule with comment will 

incur labor costs of 40 hours of work by 

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

and 20 hours of work by an insurance 

manager (at a wage rate of $67.44) to 

develop the effective cost-sharing 

parameters and actuarial memorandum, 

and calculate the amount of cost-sharing 

reductions provided, resulting in a cost 

of approximately $3,624 per issuer.4

Although we cannot predict the precise 

number of issuers that will select either 

the standard or simplified methodology, 

we estimate that approximately half of 

QHP issuers (600 issuers) will 

implement the simplified methodology. 

Therefore, we estimate that the 

provisions of this rule will result in an 

incremental savings of approximately 

$57,825,600 ($60 million that would 

have been incurred by these issuers 

under the standard methodology, minus 

600 multiplied by $3,624) by reducing 

the overall administrative costs that 

issuers incur. 

VI. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VII. Regulatory Impact Analysis 

This interim final rule with comment 

implements amendments to the 

calculation of allowable costs under the 

risk corridors program and to the 

methodology for calculating the 

amounts of cost-sharing reductions 

provided. The amendments to the risk 

corridors program are needed to align 

that program with the single risk pool 

requirements at § 156.80 so that both 

allowable costs and the target amount in 

that calculation are calculated based on 

a QHP’s share of total amounts pooled 

across an issuer’s non-grandfathered 

plans in a market. This change will 

permit the program to have its intended 

effect—to share in profits or losses 

resulting from inaccurate rate setting 

from 2014 to 2016. Without these 

changes, pooled premiums would be 

compared against unpooled claims 

costs, which we believe was not the 

intent of the statute because it would 

lessen the effect of the risk corridors 

program on stabilizing premiums. The 

amendments to the cost-sharing 

reduction standards are needed to 

lessen the burden of participating in 

that program for QHP issuers who 

cannot easily alter their information 

technology systems to calculate the 

amount of cost-sharing reductions 

provided according to the methodology 

specified in the 2014 Payment Notice. 

We have examined the impact 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 

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15550 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 

(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). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any one year). 

As discussed in the Collection of 

Information Requirements section, we 

believe that § 156.430(c)(3) will add 

approximately $1 million in reporting 

burden. We also believe that the 

addition of paragraph (c)(4) to § 156.430 

will reduce the administrative burden 

associated with complying with 

§ 156.430(c)(1) in the specified 

timeframe, particularly for smaller 

issuers, by approximately $66,825,600. 

In addition, although this interim 

final rule with comment amends 

§ 153.500 to modify the manner in 

which QHP issuers will calculate 

allowable costs for the purposes of the 

risk corridors calculation, we do not 

believe that this change to the risk 

corridors calculation method will have 

a significant effect on the aggregate 

amount of risk corridors payments made 

in any one year. Additionally, we do not 

believe that these amendments will 

substantially alter the analysis provided 

in previous impact analyses of the risk 

corridors program in the Premium 

Stabilization Rule and the 2014 

Payment Notice. 

We conclude that this interim final 

rule with comment does not reach the 

economic threshold and thus is not 

considered a major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7 million to $35.5 million in any one 

year. Individuals and States are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined, and the Secretary certifies, 

that this interim final rule with 

comment would not have a significant 

economic impact on a substantial 

number of small entities. 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) requires 

agencies to prepare a final 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 RFA generally defines a ‘‘small 

entity’’ as (1) a proprietary firm meeting 

the size standards of the Small Business 

Administration (SBA), (2) a not-forprofit organization that is not dominant 

in its field, or (3) a small government 

jurisdiction with a population of less 

than 50,000. States and individuals are 

not included in the definition of ‘‘small 

entity.’’ HHS uses a change in revenues 

of more than three to five percent as its 

measure of significant economic impact 

on a substantial number of small 

entities. 

This final rule contains rules for 

health plan issuers regarding the 

temporary risk corridors program and 

the cost-sharing reduction program. We 

believe that health insurance issuers 

and plan sponsors would be classified 

under the North American Industry 

Classification System (NAICS) code 

524114. According to SBA size 

standards, an entity with average annual 

receipts of $7 million or less would be 

considered small entities for this NAICS 

code. We believe that few insurance 

firms offering comprehensive health 

insurance policies fall below this size 

threshold for ‘‘small entities’’ 

established by the SBA. Therefore, we 

are not preparing a regulatory flexibility 

analysis because we have determined, 

and the Secretary certifies, that this 

interim final rule with comment will 

not have a significant impact on the 

operations of a substantial number of 

small entities. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any one year by 

State, local, or Tribal governments, or by 

the private sector, of $100 million in 

1995 dollars, updated annually for 

inflation. In 2013, that threshold is 

approximately $141 million. Since the 

impact on State, local, and Tribal 

governments, and the private sector is 

below this threshold, no analysis under 

UMRA is required. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a rule 

that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This interim final rule with comment 

does not impose any costs on State or 

local governments and does not preempt 

State law. The amendments to the costsharing reduction program set forth in 

this rule have no Federalism 

implications, but the amendments to the 

risk corridors program have the effect of 

complementing a State’s authority to 

regulate and enforce the single risk pool 

requirement. Thus, we believe this 

interim final rule with comment has 

positive Federalism implications. 

This interim final rule with comment 

is subject to the Congressional Review 

Act provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.), which 

specifies that before a rule can take 

effect, the Federal agency promulgating 

the rule shall submit to each House of 

the Congress and to the Comptroller 

General a report containing a copy of 

the rule along with other specified 

information, and has been transmitted 

to Congress and the Comptroller General 

for review. 

List of Subjects 

45 CFR Part 153 

Administrative practice and 

procedure, Adverse selection, Health 

care, Health insurance, Health records, 

Organization and functions 

(Government agencies), Premium 

stabilization, Reporting and 

recordkeeping requirements, 

Reinsurance, Risk adjustment, Risk 

corridors, Risk mitigation, State and 

local governments. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

Committees, Brokers, Conflict of 

interest, Consumer protection, Grant 

programs-health, Grants administration, 

Health care, Health insurance, Health 

maintenance organization (HMO), 

Health records, Hospitals, American 

Indian/Alaska Natives, Individuals with 

disabilities, Loan programs-health, 

Organization and functions 

(Government agencies), Medicaid, 

Public assistance programs, Reporting 

and recordkeeping requirements, State 

and local governments, Sunshine Act, 

Technical assistance, Women, and 

Youth. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR parts 

153 and 156 as set forth below: 

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Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 15551 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS, 

AND RISK ADJUSTMENT UNDER THE 

AFFORDABLE CARE ACT 

■ 1. The authority citation for part 153 

continues to read as follows: 

Authority: Secs. 1321, 1341–1343, Pub. L. 

111–148, 24 Stat. 119. 

■ 2. Section 153.500 is amended by 

revising the definition of ‘‘Allowable 

costs’’ to read as follows: 

§ 153.500 Definitions. 

* * * * * 

Allowable costs means, with respect 

to a QHP, an amount equal to the pro 

rata portion of the sum of incurred 

claims within the meaning of § 158.140 

of this subchapter (including 

adjustments for any direct and indirect 

remuneration), expenditures by the QHP 

issuer for the QHP for activities that 

improve health care quality as set forth 

in § 158.150 of this subchapter, 

expenditures by the QHP issuer for the 

QHP related to health information 

technology and meaningful use 

requirements as set forth in § 158.151 of 

this subchapter, and the adjustments set 

forth in § 153.530(b); in each case for all 

of the QHP issuer’s non-grandfathered 

health plans in a market within a State, 

allocated to the QHP based on 

premiums earned. 

* * * * * 

■ 3. Section 153.520 is amended by 

revising paragraphs (a) and (b) to read 

as follows: 

§ 153.520 Attribution and allocation of 

revenue and expense items. 

(a) Attribution to QHP. Each item of 

revenue or expense in the target amount 

with respect to a QHP must be 

reasonably attributable to the operation 

of the QHP, with the attribution based 

on a generally accepted accounting 

method, consistently applied. To the 

extent that an issuer utilizes a specific 

method for allocating expenses for 

purposes of § 158.170 of this 

subchapter, the method used for 

purposes of this paragraph must be 

consistent. 

(b) Allocation across plans. Each item 

of revenue or expense in the target 

amount must be reasonably allocated 

across a QHP issuer’s plans, with the 

allocation based on a generally accepted 

accounting method, consistently 

applied. To the extent that an issuer 

utilizes a specific method for allocating 

expenses for purposes of § 158.170 of 

this subchapter, the method used for 

purposes of this paragraph must be 

consistent. 

* * * * * 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 4. The authority citation for part 156 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301–1304, 1311–1312, 1321– 

1322, 1324, 1334, 1342–1343, 1401–1402, 

and 1412, Pub. L. 111–148, 124 Stat. 119 (42 

U.S.C. 18021–18024, 18031–18032, 18041– 

18042, 18044, 18054, 18061, 18063, 18071, 

18082, 26 U.S.C. 36B, and 31 U.S.C. 9701). 

■ 5. Section 156.430 is amended by 

adding paragraphs (c)(3) and (c)(4) to 

read as follows: 

§ 156.430 Payment for cost-sharing 

reductions. 

* * * * * 

(c) * * * 

(3) Selection of methodology. 

Notwithstanding paragraph (c)(2) of this 

section, a QHP issuer may choose to 

calculate the amounts that would have 

been paid under the standard plan 

without cost-sharing reductions using a 

simplified methodology specified in 

paragraph (c)(4) of this section. 

(i) The QHP issuer must notify HHS 

prior to the start of each benefit year, in 

the manner and timeframe established 

by HHS, whether or not it selects the 

simplified methodology for the benefit 

year. 

(ii) If the QHP issuer selects the 

simplified methodology, it must apply 

the simplified methodology to all plan 

variations it offers on the Exchange for 

a benefit year. 

(iii) The QHP issuer may not select 

the simplified methodology described in 

paragraph (c)(4) of this section for a 

benefit year if the QHP issuer did not 

select the simplified methodology for 

the prior benefit year. 

(iv) Notwithstanding paragraphs 

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

a QHP issuer merges with or acquires 

another issuer of QHPs on the Exchange, 

or acquires a QHP offered on the 

Exchange from another QHP issuer, and 

if one, but not all, of the merging, 

acquiring, or acquired parties had 

selected the simplified methodology for 

the benefit year, then for the benefit year 

in which the merger or acquisition took 

place, the QHP issuer must calculate the 

amounts that would have been paid 

using the standard methodology 

described in paragraph (c)(2) of this 

section, or as calculated under the 

simplified methodology, as applicable, 

if selected prior to the start of the 

benefit year for each plan variation 

(even if the selection was not made by 

that QHP issuer). For the next benefit 

year, the QHP issuer may select the 

simplified methodology (subject to 

paragraph (c)(3)(ii) of this section but, 

for that benefit year, not paragraph 

(c)(3)(iii) of this section) or the 

methodology specified in paragraph 

(c)(2) of this section. 

(4) Simplified methodology. Subject to 

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

QHP issuer that selects the simplified 

methodology described in this 

paragraph (c)(4) must calculate the 

amount that the enrollee(s) would have 

paid under the standard plan without 

cost-sharing reductions by applying the 

standard plan’s effective cost-sharing 

parameters (as calculated under 

paragraph (c)(4)(ii) of this section) to the 

total allowed costs for essential health 

benefits under each policy for the 

benefit year (as described in paragraph 

(c)(4)(i) of this section). 

(i) For policies with total allowed 

costs for essential health benefits for the 

benefit year that are— 

(A) Less than or equal to the effective 

deductible, the amount that the 

enrollee(s) would have paid under the 

standard plan is equal to the total 

allowed costs for essential health 

benefits under the policy for the benefit 

year multiplied by the effective predeductible coinsurance rate. 

(B) Greater than the effective 

deductible but less than the effective 

claims ceiling, the amount that the 

enrollee(s) would have paid under the 

standard plan is equal to the sum of (x) 

the effective deductible, plus (y) the 

product of the allowed costs for 

essential health benefits under the 

policy for the benefit year above the 

effective deductible, multiplied by the 

effective post-deductible coinsurance 

rate. 

(C) Greater than the effective claims 

ceiling, the amount that the enrollee(s) 

would have paid under the standard 

plan is equal to the sum of (x) the 

effective deductible, plus (y) the 

product of the allowed costs for 

essential health benefits between the 

effective deductible and the effective 

claims ceiling, multiplied by the 

effective post-deductible coinsurance 

rate. 

(ii) The effective cost-sharing 

parameters for the standard plan 

without cost-sharing reductions must be 

calculated separately for both self-only 

coverage and other than self-only 

coverage as follows— 

(A) If the standard plan has no 

deductible, the effective deductible of 

the standard plan is zero. If the standard 

plan has only one deductible, the 

effective deductible of the standard plan 

is that deductible amount. If the 

standard plan has more than one 

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15552 Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / Rules and Regulations 

deductible, the effective deductible is 

the weighted average deductible, 

weighted by allowed claims for essential 

health benefits under the plan for the 

benefit year that are subject to each 

separate deductible. Services that are 

not subject to any deductible (including 

services subject to copays or 

coinsurance but not subject to the 

deductible) are not to be incorporated 

into the weighted average calculation of 

the effective deductible. 

(B) The effective pre-deductible 

coinsurance rate is based on standard 

plan policies with total allowed costs 

for essential health benefits for the 

benefit year that are less than or equal 

to the effective deductible, and 

calculated as the proportion of the total 

allowed costs for essential health 

benefits under the standard plan for the 

benefit year incurred for those standard 

plan enrollees and payable as cost 

sharing. 

(C) The effective post-deductible 

coinsurance rate is based on standard 

plan policies with total allowed costs 

for essential health benefits for the 

benefit year that are above the effective 

deductible but for which associated cost 

sharing is less than the annual 

limitation on cost sharing, and 

calculated as the quotient of (x) the 

portion of average allowed costs for 

essential health benefits for the benefit 

year incurred for those enrollee(s) and 

payable by the enrollees as cost sharing 

other than through a deductible, divided 

by (y) the average allowed costs for 

essential health benefits for the benefit 

year above the effective deductible. 

(D) The effective claims ceiling is 

calculated as the effective deductible 

plus the quotient of (x) the difference 

between the annual limitation on cost 

sharing and the effective deductible, 

divided by (y) the effective postdeductible coinsurance rate. 

(iii) Submission of effective costsharing parameters. If a QHP issuer uses 

the simplified methodology described in 

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

must also submit to HHS, in the manner 

and timeframe established by HHS, the 

following information for each standard 

plan, for both self-only coverage and 

other than self-only coverage, offered by 

the QHP issuer in the individual market 

through the Exchange— 

(A) The effective deductible. 

(B) The effective pre-deductible 

coinsurance rate. 

(C) The effective post-deductible 

coinsurance rate. 

(D) The effective claims ceiling. 

(E) A memorandum developed by a 

member of the American Academy of 

Actuaries in accordance with generally 

accepted actuarial principles and 

methodologies that describes how the 

QHP issuer calculated the effective costsharing parameters for the standard 

plan. 

(iv) Minimum credibility. 

Notwithstanding paragraphs (c)(4)(i) 

through (c)(4)(iii) of this section, if the 

standard plan without cost-sharing 

reductions has an enrollment during the 

benefit year of fewer than 12,000 

member months in any of the following 

four subgroups, and the QHP issuer has 

selected the simplified methodology 

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

the QHP issuer must calculate the 

amount that the enrollee(s) would have 

paid under the standard plan without 

cost-sharing reductions for all 

subgroups by applying the standard 

plan’s actuarial value, as calculated 

under § 156.135, to the allowed costs for 

essential health benefits for the 

enrollee(s) for the benefit year. For 

purposes of this paragraph (c)(4)(iv), the 

four subgroups are: 

(A) Enrollees in the standard plan 

with self-only coverage with total 

allowed costs for essential health 

benefits for the benefit year that are less 

than or equal to the effective deductible. 

(B) Enrollees in the standard plan 

with other than self-only coverage with 

total allowed costs for essential health 

benefits for the benefit year that are less 

than or equal to the effective deductible. 

(C) Enrollees in the standard plan 

with self-only coverage with total 

allowed costs for essential health 

benefits for the benefit year that are 

greater than the effective deductible, but 

below the effective claims ceiling. 

(D) Enrollees in the standard plan 

with other than self-only coverage with 

total allowed costs for essential health 

benefits for the benefit year that are 

greater than the effective deductible, but 

below the effective claims ceiling. 

* * * * * 

Dated: February 25, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: February 27, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–04904 Filed 3–1–13; 11:15 am] 

BILLING CODE P 

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