41232 Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 

(i) Sunset. This section does not apply 

to benefits for services furnished after 

December 31, 2007. 

Dated: March 15, 2007. 

Leslie V. Norwalk, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Dated: April 11, 2007. 

Michael O. Leavitt, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. E7–14097 Filed 7–26–07; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 148 

[CMS–2260–IFC] 

RIN 0938–A046 

High Risk Pools 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period will amend our 

regulations regarding grants to States for 

operation of qualified high risk pools to 

conform to provisions of the Deficit 

Reduction Act of 2005 and the State 

High Risk Pool Funding Extension Act 

of 2006. Those provisions extended 

funding for seed and operational grants 

for State High Risk Pools and amended 

section 2745 of the Public Health 

Service Act. 

DATES: Effective date: These regulations 

are effective on August 27, 2007. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

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

August 27, 2007. 

ADDRESSES: In commenting, please refer 

to file code CMS–2260–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http:// 

www.cms.hhs.gov/eRulemaking. Click 

on the link ‘‘Submit electronic 

comments on CMS regulations with an 

open comment period.’’ (Attachments 

should be in Microsoft Word, 

WordPerfect, or Excel; however, we 

prefer Microsoft Word.) 

2. By regular mail. You may mail 

written comments (one original and two 

copies) to the following address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–2260–

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 (one 

original and two copies) to the following 

address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–2260–

IFC, Mail Stop C4–26–05,00, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

7195 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH 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.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by mailing 

your comments to the addresses 

provided at the end of the ‘‘Collection 

of Information Requirements’’ section in 

this document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: Paul 

Youket, (410) 786–7528, or John Young, 

(410) 786–0505. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–2260–IFC 

and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

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.cms.hhs.gov/ 

eRulemaking. Click on the link 

‘‘Electronic Comments on CMS 

Regulations’’ on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

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. 

I. Background 

The Trade Adjustment Assistance 

Reform Act of 2002 (Pub. L. 107–210) 

added section 2745 of the Public Health 

Service Act (PHS Act) to provide for two 

types of grants to States for the 

promotion of ‘‘qualified high risk 

pools.’’ These pools provide health 

coverage to high-risk individuals who 

may find private health insurance 

unavailable or unaffordable. Under this 

provision, a pool could meet the 

definition of a ‘‘qualified’’ high risk pool 

for purposes of section 2745 only if it 

met the definition of a qualified high 

risk pool in section 2744(c)(2) of the 

PHS Act. Section 2744 deals with how 

States can satisfy the requirement of 

section 2741 of the PHS Act to 

guarantee access to health coverage for 

individuals who meet the definition of 

an ‘‘eligible individual’’ under section 

2741, as added by the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA). These individuals are 

commonly referred to as ‘‘HIPAAeligible’’ individuals. 

Under section 2744(c)(2) of the PHS 

Act, a qualified high risk pool must 

provide health coverage without a preexisting condition exclusion to ‘‘all’’

HIPAA-eligible individuals. This meant 

that State high risk pools that did not 

allow all HIPAA-eligible individuals 

into the pool without a pre-existing 

condition exclusion could not meet the 

definition of a ‘‘qualified’’ risk pool. 

mstockstill on PROD1PC66 with RULES

Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 41233 

The two types of grants authorized by 

the legislation were ‘‘seed grants’’ for 

States that had not yet created a high 

risk pool, and ‘‘operational’’ grants to 

offset losses incurred by States that 

operate a qualified high risk pool. Under 

the prior law, in order for a risk pool to 

qualify for an operational grant, it could 

not charge premiums that exceeded 150 

percent of the premium for applicable 

standard risk rates. Moreover, the 

amount of the grants was limited to 50 

percent of the losses incurred by a State. 

Section 6202 of the Deficit Reduction 

Act of 2005 (Pub. L. 109–171) (DRA) 

and the State High Risk Pool Funding 

Extension Act of 2006 (Pub. L. 109–172) 

(Extension Act) extended funding for 

seed and operational grants for State 

High Risk Pools and amended section 

2745 of the PHS Act. 

The Extension Act made the following 

changes: 

1. Expanded the definition of a 

‘‘qualified high risk pool.’’ As noted 

above, section 2745(d) of the PHS Act 

previously defined the term to have the 

same meaning as in section 2744(c)(2) of 

the PHS Act, which required that the 

risk pool provide coverage to ‘‘all’’

HIPAA-eligible individuals (as defined 

in § 148.103), without any pre-existing 

condition exclusion. The revised 

definition specifies that, for purposes of 

grants under section 2745, a risk pool 

can be qualified even if the State uses 

other mechanisms beyond the risk pool 

to ensure that health coverage is 

provided to all HIPAA-eligibles. 

2. Expanded the definition of ‘‘State.’’

Section 2745 of the PHS Act previously 

defined this term to include only the 50 

States and the District of Columbia, but 

has now been amended to include U.S. 

Territories. 

3. Increased the amount of premiums 

that a risk pool can charge and still 

qualify for an operational grant. Section 

2745 of the PHS Act previously required 

that the premiums charged under the 

pool not exceed 150 percent of the 

premium for applicable standard risk 

rates. As amended, it permits grants to 

States with premiums of up to 200 

percent of the standard risk rates, as 

long as States with premiums greater 

than 150 percent of the standard rate 

use at least half of the grant funds to 

reduce high risk pool premiums for 

enrollees. 

4. Removed the limitation that a 

State’s grant not exceed 50 percent of its 

operating losses. 

5. Changed the funding allotment 

formula. Previously, the grant funds 

were to be allotted to States under a 

relatively simple formula based on the 

number of uninsured individuals in the 

State. Under the new legislation, the 

allotment formula is more complex. Of 

the total appropriation for a given 

year—if money is appropriated—twothirds would be available for grants to 

cover operational losses. Of these funds, 

40 percent is to be equally divided 

among any of the 50 States and the 

District of Columbia that apply. Another 

30 percent of that amount is allotted 

among all States that apply for grants 

based on the ratio of uninsured 

individuals in the State to uninsured 

individuals in all States that apply. The 

final 30 percent is to be allotted based 

on the ratio of the number of 

individuals enrolled in a State’s risk 

pool to the number enrolled through the 

risk pools of all the qualifying States 

that apply. (Territories are eligible for 

the proportional allotments, but only up 

to a total of $1 million for all Territories 

combined.) 

6. Provided authority for ‘‘bonus 

grants’’ to States (not including 

Territories) that qualify for operational 

grants. One-third of a total yearly 

appropriation will be used to provide 

grants to enable States to provide 

specified supplemental consumer 

benefits to enrollees or potential 

enrollees of the qualified high risk pool. 

(A bonus grant is not to exceed 10 

percent of the total for any one State.) 

This interim final rule with comment 

period updates our regulations at 45 

CFR part 148, subpart E, Grants to States 

for Operation of Qualified High Risk 

Pools, to implement the changes made 

by the Deficit Reduction Act of 2005 

and the State High Risk Pool Funding 

Extension Act of 2006. 

II. Provisions of This Interim Final Rule 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘Provisions of this Interim Final 

Rule’’ at the beginning of your 

comments.] 

We are revising the regulation text in 

45 CFR part 148 to conform with the 

State High Risk Pool Funding Extension 

Act of 2006 and the DRA. These 

revisions are discussed in detail below. 

A. Definitions (§ 148.308) 

We are amending § 148.308 

(Definitions) to 

• Add a definition of ‘‘bonus grants.’’

• Revise the definition of ‘‘qualified 

high risk pool;’’ and 

• Revise the definition of ‘‘State.’’

1. Bonus Grant 

We are adding the following 

definition for Bonus Grants—Funds that 

the Secretary provides from the 

appropriated grant funds to be used to 

provide supplemental consumer 

benefits to enrollees or potential 

enrollees in qualified high risk pools. 

2. Qualified High Risk Pool 

We are amending the definition at 

§ 148.308 to reflect the exception added 

by the Extension Act in section 

2745(g)(1)(A) of the PHS Act. 

Specifically, a State may elect to meet 

the definition of a qualified high risk 

pool under § 148.128(a)(2)(ii)(A) by 

providing for enrollment of eligible 

individuals through an acceptable 

alternative mechanism (as defined for 

purposes of section 2744 of the PHS) 

that includes a high risk pool as a 

component. 

3. State 

In accordance with the Extension Act, 

we are amending the definition to 

include any of the 50 States and the 

District of Columbia, and the U.S. 

Territories of Puerto Rico, the Virgin 

Islands, Guam, American Samoa and the 

Northern Mariana Islands. 

B. Grants for Operational Losses 

(§ 148.310) 

1. Eligibility Requirements for an 

Operational Grant 

This section specifies the eligibility 

requirements for operational grants. A 

State must meet all of the following 

requirements to be eligible for a grant: 

a. Maximum premium. We are 

amending § 148.310 to reflect that the 

statute has increased the maximum 

premium that a risk pool can charge and 

still qualify for a grant. The maximum 

has been changed from 150 percent to 

200 percent of the premium for 

applicable standard risk rates for the 

State. 

b. Continued funding. The statute 

previously required that the pool have 

in effect a mechanism reasonably 

designed to ensure continued funding of 

losses incurred by the State after the end 

of fiscal year 2004, which was the last 

year that grants were authorized under 

the prior appropriation. The statute, as 

revised by the Extension Act, now 

requires that a risk pool have such a 

mechanism to ensure funding after the 

end of the last fiscal year for which a 

grant is provided. We interpret this to 

mean that the pool has capacity or 

mechanisms in place that can 

reasonably be expected to ensure that it 

may operate in the future without the 

benefit of Federal funding. 

In the case of a qualified high risk 

pool of a State that charges premiums 

that exceed 150 percent of the premium 

for applicable standard risks, the State 

must use at least 50 percent of the 

amount of the grant provided to the 

mstockstill on PROD1PC66 with RULES

41234 Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 

State to reduce premiums for enrollees. 

The application should demonstrate/ 

attest that the funds will be used this 

way. 

2. Amount of Grant Payment (§ 148.312) 

Two-thirds of any amounts 

appropriated are made available for 

operational grants. An eligible State may 

receive a grant to fund up to 100 percent 

of the losses incurred in the operation 

of its qualified high risk pool during the 

fiscal year for which it is applying. The 

grant may be less than 100 percent after 

the allotment limits are applied, but in 

no case will it be more than 100 percent. 

Funds will be allocated in accordance 

with § 148.312 to each State that meets 

the eligibility requirements of § 148.310 

and files an application in accordance 

with § 148.316. Specifically: 

• Forty percent of funds made 

available under that section will be 

equally divided among any of the 50 

States and the District of Columbia that 

meet the eligibility criteria for an 

operational grant; 

• Thirty percent of funds made 

available will be divided among States 

(including territories) based on the 

number of uninsured residents in the 

State during the specified year as 

compared to the total number of 

uninsured residents in all States that 

apply for grants; 

• Thirty percent will be divided 

among States (including territories) 

based on the number of people in State 

high risk pools during the specified year 

as compared to all States that apply. 

In accordance with the statute, in no 

case will the aggregate amount allotted 

and made available to the U.S. 

Territories for a fiscal year exceed $1 

million. 

We will calculate the number of 

uninsured individuals for each eligible 

State by taking a 3-year average of the 

number of uninsured individuals in that 

State in the Current Population Survey 

(CPS) of the Census Bureau. The 3-year 

average will be calculated using 

numbers available as of March 1 of each 

year for the preceding 3-year period. 

C. Bonus Grants 

One-third of the total appropriation 

will be available for the bonus grants. 

These grants will be available to any one 

of the 50 States and the District of 

Columbia that receives an operational 

grant under § 148.310. The grants must 

be used to provide one or more of the 

following benefits: 

(1) Low income premium subsidies; 

(2) Reduction in premium trends, 

actual premium or other cost-sharing 

requirements; 

(3) An expansion or broadening of the 

pool of individuals eligible for coverage, 

such as through eliminating waiting 

lists, increasing enrollment caps, or 

providing flexibility in enrollment rules; 

(4) Less stringent rules or additional 

waiver authority with respect to 

coverage of pre-existing conditions; 

(5) Increased benefits; and 

(6) The establishment of disease 

management programs. In no case will 

a State receive bonus grants that exceed 

10 percent of the total funds allotted for 

bonus grants in that fiscal year. 

D. Periods During Which Eligible States 

May Apply for a Grant (§ 148.314) 

Funds are currently appropriated for 

Federal fiscal year 2006 and authorized 

for fiscal years 2007 through 2010. 

Funding for FY 2007 through 2010 

under Pub. L. 109–172 requires 

subsequent enactment of appropriations 

authority. States will be unable to apply 

for grants unless and until such funding 

becomes available. A State that meets 

the eligibility requirements in § 148.310 

may apply for a grant to fund losses that 

were incurred during the State’s or 

pool’s fiscal year ending prior to or 

during any federal fiscal year, 2007 

through 2010 for which authorized 

funds are appropriated, in connection 

with the operation of its qualified high 

risk pool. Grant funding is administered 

on a retrospective basis (for example, 

pools with losses incurred in 2005 may 

apply for Federal Fiscal Year 2006 grant 

funds). If a State becomes eligible for a 

grant in the middle of its fiscal year, a 

State may apply for losses incurred in 

a partial fiscal year if a partial year audit 

is done. Only losses that are incurred 

after it is established that a pool is 

eligible (i.e., that it is a qualified high 

risk pool as defined by 

§ 148.128(a)(2)(ii)) will qualify for a 

grant. An eligible State must apply for 

a grant no later than June 30 following 

the end of the State fiscal year during 

which it incurred losses. Each State may 

only be awarded one grant per fiscal 

year. A grant for a partial fiscal year 

counts as a full grant. 

States that meet all of the eligibility 

requirements in § 148.310 and submit 

timely requests in accordance with 

paragraph (c) of § 148.314 will receive 

distribution of grant funds using the 

following methodology: 

• Grant applications for losses will be 

on a retrospective basis. For example, 

grant applications for 2006 funds are 

based on the State’s fiscal year 2005 

incurred losses. 

• Grant allocations for each fiscal 

year will be determined by taking all 

grant applications received by June 30 

of the Federal fiscal year and allocating 

grant funds in accordance with 

§ 148.312. In no case will a State receive 

funds greater than 100 percent of its 

losses. 

If any excess funds remain after the 

initial calculation, these excess funds 

will be proportionately redistributed to 

the States whose allocations have not 

exceeded 100 percent of their losses. 

This process will occur at the time of 

the initial calculation and there will be 

one annual allocation and distribution 

by September 30 of each year. 

Grant Application Instructions 

(§ 148.316) 

We are amending § 148.316 to reflect 

the addition of application requirements 

for bonus grants. We are changing the 

heading of § 148.316(a), ‘‘Application 

package,’’ to ‘‘Application for 

operational losses.’’ We are inserting a 

bonus grants section by redesignating 

§ 148.316(a)(3) as § 148.316(a)(4) and 

adding new paragraph (a)(3), the bonus 

grants requirements. The individual 

State applying for a bonus grant must 

provide: 

(i) A narrative description with 

detailed information about each one of 

the following supplemental consumer 

benefits to be provided to enrollees and/ 

or potential enrollees in the high risk 

pool: 

(A) Low income premium subsidies; 

(B) Reduction in premium trends, 

actual premium or other cost-sharing 

requirements; 

(C) An expansion or broadening of the 

pool of individuals eligible for coverage, 

such as through eliminating waiting 

lists, increasing enrollment caps, or 

providing flexibility in enrollment; 

(D) Less stringent rules, or additional 

waiver authority with respect to 

coverage of pre-existing conditions; 

(E) Increased benefits; and 

(F) The establishment of disease 

management programs. 

(ii) A description of the population or 

subset population that will be eligible 

for the supplemental consumer benefits. 

(iii) A projected budget for the use of 

bonus grant funds using the SF 424 and 

SF 424 A. 

We are revising the ‘‘Standard forms 

application kit’’ in § 148.316(b). We are 

eliminating the text ‘‘Additional 

Assurances’’ in ‘‘Standard forms 

application kit,’’ paragraph (b)(1)(i). 

We are also changing the Web site 

URL address for the ‘‘Standard forms 

kit’’ download at paragraph (b)(1)(ii) to 

http://www.grants.gov. 

There are no other changes to the 

content of the ‘‘Standard forms 

application kit.’’

In § 148.316(c), ‘‘Submission of 

application package,’’ we are deleting 

mstockstill on PROD1PC66 with RULES

Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 41235 

paragraphs (c)(1) and (c)(2) and 

replacing with text that will read: All 

applications should be submitted 

electronically via http:// 

www.grants.gov. 

In § 148.316(d), ‘‘Application 

deadlines,’’ we are changing the 

applications deadlines text to read: The 

deadline for States to submit an 

application for losses incurred in a State 

fiscal year is June 30 of the next Federal 

fiscal year that begins after the end of 

the State fiscal year. 

In § 148.316(e), ‘‘Where to submit an 

application,’’ we are changing the text to 

read: Applications must be submitted to 

http://www.grants.gov. 

Funding Mechanism (§ 148.318) 

We are amending § 148.318, dealing 

with continued funding of a risk pool. 

The State must outline funding sources, 

such as assessments and State general 

revenues, which can cover the projected 

costs and are reasonably designed to 

ensure continued funding of losses a 

State incurs in connection with the 

operation of the qualified high risk pool 

after the last fiscal year for which it is 

applying for grant funds. 

Grant Awards (§ 148.320) 

We are amending this section to 

specify that the grantee will be required 

to submit quarterly progress and 

financial reports under part 92 of this 

title and in accordance with section 

2745(f) of the Public Health Service Act, 

requiring the Secretary to make an 

annual report to Congress that includes 

information on the use of these grant 

funds by the States. 

III. Collection of Information 

Requirement 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

Section 148.316 Grant Application 

Instructions 

Section 148.316(a) requires each State 

to compile an application package that 

documents that it has met the 

requirements for a grant. If a risk pool 

entity applies on behalf of a State, it 

must provide documentation that it has 

been delegated appropriate authority by 

the State. 

The burden associated with this 

requirement is subject to the PRA; 

however, the structure of the 

application collection and grant 

monitoring reporting requirements of 

the grants has not been changed from 

the original grants program and is 

currently approved under OMB control 

number 0938–0887 ‘‘Matching Grants to 

States for the Operation of High Risk 

Pools and Supporting Regulations at 42 

CFR 148.316, 148.318, and 148.320’’

with a current expiration date of 01/31/ 

2010. We are, however, revising this 

package to include the additional 

request under 148.316(a)(3) for (1) 

description of Type of Consumer 

Benefits; (2) Description of the Eligible 

Population for the consumer benefits; 

and, (3) Projected Budget for the use of 

Bonus Grants. We believe the burden 

associated with the additional 

information is already captured in the 

currently approved OMB package 

(#0938–0887). 

Section 148.320 Grant Awards 

Section 148.320(a)(2)(iii) states that a 

grantee is required to submit quarterly 

progress and financial reports under 

part 92 of this title and in accordance 

with section 2745(f) of the Public Health 

Service Act, requiring the Secretary to 

make an annual report to Congress that 

includes information on the use of these 

grant funds by States. 

The burden associated with this 

requirement is the time it would take for 

a grantee to submit quarterly progress 

and financial reports. We estimate it 

will take one grantee 1 hour per quarter 

to comply with this requirement. 

If you comment on these information 

collection and record keeping 

requirements, please mail copies 

directly to the following: 

Centers for Medicare & Medicaid 

Services, Office of Strategic Operations 

and Regulatory Affairs Division of 

Regulations Development, Attn.: 

Melissa Musotto, CMS–2260–IFC, Room 

C5–14–03, 7500 Security Boulevard, 

Baltimore, MD 21244–1850. 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503, 

Attn: Katherine Astrich, CMS Desk 

Officer, CMS–2260–IFC, 

katherine_astrich@omb.eop.gov. Fax 

(202) 395–6974. 

IV. 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. 

V. Waiver of Notice of Proposed 

Rulemaking and the 60-Day Delay in 

the Effective Date 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘Waiver of Notice of Proposed 

Rulemaking and the 60-Day Delay in the 

Effective Date’’ at the beginning of your 

comments.] 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register and invite public comment on 

the proposed rule in accordance with 5 

U.S.C. section 553(b) of the 

Administrative Procedure Act (APA). 

The notice of proposed rulemaking 

includes a reference to the legal 

authority under which the rule is 

proposed, and the terms and substance 

of the proposed rule or a description of 

the subjects and issues involved. This 

procedure can be waived, however, if an 

agency finds good cause that a noticeand-comment procedure is 

impracticable, unnecessary, or contrary 

to the public interest and incorporates a 

statement of the finding and its reasons 

in the rule issued. 

In this case, we believe that a noticeand-comment procedure is unnecessary 

because the regulation is only being 

amended to conform directly to the 

provisions of the Deficit Reduction Act 

of 2005 and the State High Risk Pool 

Funding Extension Act of 2006. The 

statutory effective date was the date of 

enactment, February 10, 2006. The law 

amends section 2745 of the Public 

Health Service Act, and the rule updates 

45 CFR Subchapter B, Part 148, Subpart 

E—Grants to States for Operation of 

Qualified High Risk Pools to conform to 

the new and changed provisions of the 

law. 

In addition, we ordinarily provide a 

30-day delay in the effective date of the 

provisions of an interim final rule. 

mstockstill on PROD1PC66 with RULES

41236 Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 

Section 553(d) of the APA (5 U.S.C. 

section 553(d)) ordinarily requires a 30- 

day delay in the effective date of final 

rules after the date of their publication 

in the Federal Register. This 30-day 

delay in effective date can be waived, 

however, if an agency finds for good 

cause that the delay is impracticable, 

unnecessary, or contrary to the public 

interest, and the agency incorporates a 

statement of the finding and its reasons 

in the rule issued. 

All revisions are to update the current 

sections of the regulation. The only new 

section added is § 148.316(a)(3), bonus 

grants for supplement consumer 

benefits, which is a new provision of the 

Extension Act. Other revisions include 

an expanded definition of ‘‘qualified 

high risk pool,’’ an updated definition of 

‘‘States’’ to include U.S. Territories, and 

changes to the funding formula and 

updating dates to reflect new census 

measure periods and application 

deadlines. Although the grant 

solicitation clearly conforms to the 

provisions of the law and a grant cycle 

has already been completed under the 

provisions of this law, we believe that 

this action will better accommodate the 

implementation of the statute before the 

end of the second funding cycle. 

VI. Regulatory Impact Statement 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘Regulatory Impact Statement’’

at the beginning of your comments.] 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), and Executive Order 13132. 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule 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 

businesses. 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 $6 million to $29 million in any 1 

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 that this rule will not have 

a significant economic impact on a 

substantial number of small entities. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

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. 

That threshold level is currently 

approximately $120 million. This rule 

will have no consequential effect on 

State, local, or tribal governments or on 

the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of E.O. 13132 are not 

applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 45 CFR Part 148 

Administrative practice and 

procedure, Health care, Health 

insurance, Penalties, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 45 CFR 

chapter IV as set forth below: 

PART 148—REQUIREMENTS FOR THE 

INDIVIDUAL HEALTH INSURANCE 

MARKET 

■ 1. The authority citation for part 148 

continues to read as follows: 

Authority: Secs. 2741 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg–41 through 300gg–63, 300gg–

91, and 300gg–92). 

Subpart E—Grants to States for 

Operation of Qualified High Risk Pools 

■ 2. Section 148.306 is revised to read 

as follows: 

§ 148.306 Basis and scope. 

This subpart implements section 2745 

of the Public Health Service Act (PHS 

Act). It extends grants to States that 

have qualified high risk pools that meet 

the specific requirements described in 

§ 148.310. It also provides specific 

instructions on how to apply for the 

grants and outlines the grant review and 

grant award processes. 

■ 3. Section 148.308 is amended by—

■ A. Adding the definition for ‘‘bonus 

grants.’’

■ B. Revising the definition of 

‘‘qualified high risk pool.’’

■ C. Revising the definition of ‘‘State.’’

The addition and revisions read as 

follows: 

§ 148.308 Definitions. 

* * * * * 

Bonus grants means funds that the 

Secretary provides from the 

appropriated grant funds to be used to 

provide supplemental consumer 

benefits to enrollees or potential 

enrollees in qualified high risk pools. 

* * * * * 

Qualified high risk pool as defined in 

sections 2744(c)(2) and 2745(g) of the 

PHS Act means a risk pool that—

(1) Provides to all eligible individuals 

health insurance coverage (or 

comparable coverage) that does not 

impose any preexisting condition 

exclusion with respect to such coverage 

for all eligible individuals, except that it 

may provide for enrollment of eligible 

individuals through an acceptable 

alternative mechanism (as defined for 

purposes of section 2744 of the PHS 

Act) that includes a high risk pool as a 

component; and 

(2) Provides for premium rates and 

covered benefits for such coverage 

consistent with standards included in 

the NAIC Model Health Plan for 

Uninsurable Individuals Act that was in 

effect at the time of the enactment of the 

Health Insurance Portability and 

Accountability Act of 1996 (August 21, 

1996) but only if the model has been 

revised in State regulations to meet all 

of the requirements of this part and title 

27 of the PHS Act. 

* * * * * 

State means any of the 50 States and 

the District of Columbia and includes 

the U.S. Territories of Puerto Rico, the 

Virgin Islands, Guam, American Samoa 

and the Northern Mariana Islands. 

* * * * * 

■ 4. Section 148.310 is amended by—

■ A. Republishing the introductory text 

to the section. 

■ B. Revising paragraph (b). 

■ C. Revising paragraph (d). 

■ D. Adding paragraphs (f), (g), and (h). 

The republication, revisions, and 

additions read as follows: 

mstockstill on PROD1PC66 with RULES

Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 41237 

§ 148.310 Eligibility requirements for a 

grant. 

A State must meet all of the following 

requirements to be eligible for a grant: 

* * * * * 

(b) The pool restricts premiums 

charged under the pool to no more than 

200 percent of the premium for 

applicable standard risk rates for the 

State. 

* * * * * 

(d) The pool has in effect a 

mechanism reasonably designed to 

ensure continued funding of losses 

incurred by the State after the end of 

each fiscal year for which the State 

applies for Federal Funding in fiscal 

years 2005–2010 in connection with the 

operation of the pool. 

* * * * * 

(f) In the case of a qualified high risk 

pool in a State that charges premiums 

that exceed 150 percent of the premium 

for applicable standard risks, the State 

will use at least 50 percent of the 

amount of the grant provided to the 

State to reduce premiums for enrollees. 

(g) In no case will the aggregate 

amount allotted and made available to 

the U.S. Territories for a fiscal year 

exceed $1,000,000 in total. 

(h) Bonus grant funding must be used 

for one or more of the following 

benefits: 

(1) Low income premium subsidies; 

(2) Reduction in premium trends, 

actual premium or other cost-sharing 

requirements; 

(3) An expansion or broadening of the 

pool of individuals eligible for coverage, 

such as through eliminating waiting 

lists, increasing enrollment caps, or 

providing flexibility in enrolment rules; 

(4) Less stringent rules or additional 

waiver authority with respect to 

coverage of pre-existing conditions; 

(5) Increased benefits; and 

(6) The establishment of disease 

management programs. 

■ 5. Section 148.312 is amended by—

■ A. Revising paragraph (a). 

■ B. Revising paragraph (b). 

■ C. Adding a new paragraph (d). 

The revisions and addition read as 

follows: 

§ 148.312 Amount of grant payment. 

(a) An eligible State may receive a 

grant to fund up to 100 percent of the 

losses incurred in the operation of its 

qualified high risk pool during the 

period for which it is applying or a 

lesser amount based on the limits of the 

allotment under the formula. 

(b) Funds will be allocated in 

accordance with this paragraph to each 

State that meets the eligibility 

requirements of § 148.310 and files an 

application in accordance with 

§ 148.316. The amount will be divided 

among the States that apply and are 

awarded grants according to the 

allotment rules that generally provide 

that: 40 percent will be equally divided 

among those States; 30 percent will be 

divided among States and territories 

based on their number of uninsured 

residents in the State during the 

specified year as compared to all States 

that apply; and 30 percent will be 

divided among States and territories 

based on the number of people in State 

high risk pools during the specified year 

as compared to all States that apply. For 

the purposes of this paragraph: 

(1) The number of uninsured 

individuals is calculated for each 

eligible State by taking a 3-year average 

of the number of uninsured individuals 

in that State in the Current Population 

Survey (CPS) of the Census Bureau 

during the period for which it is 

applying. The 3-year average will be 

calculated using numbers available as of 

March 1 of each year. 

(2) The number of individuals 

enrolled in health care coverage through 

the qualified high risk pool of the State 

will be determined by attestation by the 

State in its grant application and 

verified for reasonability by the 

Secretary through acceptable industry 

data sources. 

* * * * * 

(d) One-third of the total 

appropriation will be available for the 

bonus grants. In no case will a State for 

a fiscal year receive bonus grants that 

exceed 10 percent of the total allotted 

funds for bonus grants. 

■ 6. Section 148.314 is revised to read 

as follows: 

§ 148.314 Periods during which eligible 

States may apply for a grant. 

(a) General rule. A State that meets 

the eligibility requirements in § 148.310 

may apply for a grant to fund losses that 

were incurred during the State’s fiscal 

year 2005, 2006, 2007, 2008 and 2009 in 

connection with the operation of its 

qualified high risk pool. Funding for FY 

2007 through 2010 under Pub. L. 109–

172 requires subsequent enactment of 

appropriations authority. States will be 

unable to apply for grants unless and 

until such funding becomes available. 

Grants funding is on a retrospective 

basis and applies to the States previous 

fiscal year. If a State becomes eligible for 

a grant in the middle of its fiscal year, 

a State may apply for losses incurred in 

a partial fiscal year if a partial year audit 

is done. Only losses that are incurred 

after eligibility is established will 

qualify for a grant. 

(b) Maximum number of grants. An 

eligible State may only be awarded a 

maximum of five grants, with one grant 

per fiscal year. A grant for a partial 

fiscal year counts as a full grant. 

(c) Deadline for submitting grant 

applications. The deadlines for 

submitting grant applications are stated 

in § 148.316(d). 

(d) Distribution of grant funds. States 

that meet all of the eligibility 

requirements in § 148.310 and submit 

timely requests in accordance with 

paragraph (c) of this section will receive 

an initial distribution of grant funds 

using the following methodology: Grant 

applications for losses will be on a 

retrospective basis. For example, grant 

applications for 2006 funds are based on 

the State’s fiscal year 2005 incurred 

losses. Grant funding is appropriated for 

Federal fiscal year 2006 and authorized 

to be appropriated for Federal fiscal 

years 2007 through 2010. 

(e) Grant allocations. Grant 

allocations for each fiscal year will be 

determined by taking all grant 

applications during the period for 

which States are applying and allocating 

the funds in accordance with § 148.312. 

(1) In no case will a State receive 

funds greater than 100 percent of their 

losses. 

(2) If any excess funds remain after 

the initial calculation, these excess 

funds will be proportionately 

redistributed to the States whose 

allocations have not exceeded 100 

percent of their losses. 

■ 7. Section 148.316 is amended by—

■ A. Adding new introductory text to 

the section. 

■ B. Amending paragraph (a) 

introductory text by revising the 

heading. 

■ C. Redesignating paragraph (a)(3) as 

paragraph (a)(4). 

■ D. Adding a new paragraph (a)(3). 

■ E. Revising paragraph (b). 

■ F. Revising paragraph (c). 

■ G. Revising paragraph (d). 

■ H. Revising paragraph (e). 

The republication, revisions, and 

addition read as follows: 

§ 148.316 Grant application instructions. 

Funding for FY 2007 through FY 2010 

under Pub. L. 109–172 requires the 

subsequent enactment of 

appropriations. States will be unable to 

apply for grants unless and until such 

funding becomes available. 

(a) Application for operational 

losses. * * * 

* * * * * 

(3) Bonus grants for supplemental 

consumer benefits. Provide detailed 

information about the following 

mstockstill on PROD1PC66 with RULES

41238 Federal Register / Vol. 72, No. 144 / Friday, July 27, 2007 / Rules and Regulations 

supplemental consumer benefits for 

which the entity is applying: 

(i) A narrative description of one or 

more of the following of the 

supplemental consumer benefits to be 

provided to enrollees and/or potential 

enrollees in the high risk pool: 

(A) Low income premium subsidies; 

(B) Reduction in premium trends, 

actual premium or other cost-sharing 

requirements; 

(C) An expansion or broadening of the 

pool of individuals eligible for coverage, 

such as through eliminating waiting 

lists, increasing enrollment caps, or 

providing flexibility in enrollment; 

(D) Less stringent rules, or additional 

waiver authority with respect to 

coverage of pre-existing conditions; 

(E) Increased benefits; and 

(F) The establishment of disease 

management programs. 

(ii) A description of the population or 

subset population that will be eligible 

for the supplemental consumer benefits. 

(iii) A projected budget for the use of 

bonus grant funds using the SF 424 A. 

* * * * * 

(b) Standard form application kit—(1) 

Forms. (i) The following standard forms 

must be completed with an original 

signature and enclosed as part of the 

application package: 

SF–424 Application for Federal 

Assistance. 

SF–424A Budget Information. 

SF–424B Assurances NonConstruction Program. 

SF–LLL Disclosure of Lobbying 

Activities Biographical Sketch. 

(ii) These forms can be accessed from 

the following Web site: http:// 

www.grants.gov. 

(2) Other narrative. All other narrative 

in the application must be submitted on 

81⁄2 x 11 inch white paper. 

(c) Application submission. 

Submission of application package is 

through http://www.grants.gov. 

Submissions by facsimile (fax) 

transmissions will not be accepted. 

(d) Application deadlines. (1) The 

deadline for States to submit an 

application for losses incurred in a State 

fiscal year is June 30 of the next Federal 

fiscal year that begins after the end of 

the State fiscal year. Funding for FY 

2007 through 2010 under Pub. L. 109– 

172 requires subsequent enactment of 

appropriations authority. States will be 

unable to apply for grants unless and 

until such funding becomes available. 

(2) Deadline for States to submit an 

application for losses incurred in their 

fiscal year 2005. States had to submit an 

application to CMS no later than June 

30, 2006. 

(3) Deadline for States to submit an 

application for losses incurred in their 

fiscal year 2006. States must submit an 

application to CMS by no later than 

June 30, 2007. 

(4) Deadline for States to submit an 

application for losses incurred in their 

fiscal year 2007. States must submit an 

application to CMS by no later than 

June 30, 2008. 

(5) Deadline for States to submit an 

application for losses incurred in their 

fiscal year 2008. States must submit an 

application to CMS by no later than 

June 30, 2009. 

(6) Deadline for States to submit an 

application for losses incurred in their 

fiscal year 2009. States must submit an 

application to CMS by no later than 

June 30, 2010. 

(e) Where to submit an application. 

Applications must be submitted to 

http://www.grants.gov. Submissions by 

facsimile (fax) transmissions will not be 

accepted. 

■ 8. Section 148.318 is amended by 

revising paragraph (d)(2) to read as 

follows: 

§ 148.318 Grant application review. 

* * * * * 

(d) * * * 

(2) Funding mechanism. The State has 

outlined funding sources, such as 

assessments and State general revenues, 

which can cover the projected costs and 

are reasonably designed to ensure 

continued funding of losses a State 

incurs in connection with the operation 

of the qualified high risk pool after each 

fiscal year for which it is applying for 

grant funds. 

■ 9. Section 148.320 is amended by 

revising paragraph (a)(2)(iii) to read as 

follows: 

§ 148.320 Grant awards. 

(a) * * * 

(2) * * * 

(iii) The grantee will be required to 

submit quarterly progress and financial 

reports under part 92 of this title and in 

accordance with section 2745(f) of the 

Public Health Service Act, requiring the 

Secretary to make an annual report to 

Congress that includes information on 

the use of these grant funds by States. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: March 22, 2007. 

Leslie V. Norwalk, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: April 17, 2007. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. E7–14361 Filed 7–26–07; 8:45 am] 

BILLING CODE 4120–01–P 

mstockstill on PROD1PC66 with RULES