Vol. 78 Monday, 

No. 135 July 15, 2013 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 431, 435, 436, et al. 

Office of the Secretary 

45 CFR Parts 155 and 156 

Medicaid and Children’s Health Insurance Programs: Essential Health 

Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing and 

Appeal Processes, and Premiums and Cost Sharing; Exchanges: Eligibility 

and Enrollment; Final Rule 


tkelley on DSK3SPTVN1PROD with RULES2
42160 Federal Register / Vol. 78, No. 135 / Monday, July 15, 2013 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 431, 435, 436, 438, 440, 

447, and 457 

Office of the Secretary 

45 CFR Parts 155 and 156 

[CMS–2334–F] 

RIN 0938–AR04 

Medicaid and Children’s Health 

Insurance Programs: Essential Health 

Benefits in Alternative Benefit Plans, 

Eligibility Notices, Fair Hearing and 

Appeal Processes, and Premiums and 

Cost Sharing; Exchanges: Eligibility 

and Enrollment 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule implements 

provisions of the Patient Protection and 

Affordable Care Act and the Health Care 

and Education Reconciliation Act of 

2010 (collectively referred to as the 

Affordable Care Act. This final rule 

finalizes new Medicaid eligibility 

provisions; finalizes changes related to 

electronic Medicaid and the Children’s 

Health Insurance Program (CHIP) 

eligibility notices and delegation of 

appeals; modernizes and streamlines 

existing Medicaid eligibility rules; 

revises CHIP rules relating to the 

substitution of coverage to improve the 

coordination of CHIP coverage with 

other coverage; and amends 

requirements for benchmark and 

benchmark-equivalent benefit packages 

consistent with sections 1937 of the 

Social Security Act (which we refer to 

as ‘‘alternative benefit plans’’) to ensure 

that these benefit packages include 

essential health benefits and meet 

certain other minimum standards. This 

rule also implements specific provisions 

including those related to authorized 

representatives, notices, and verification 

of eligibility for qualifying coverage in 

an eligible employer-sponsored plan for 

Affordable Insurance Exchanges. This 

rule also updates and simplifies the 

complex Medicaid premium and cost 

sharing requirements, to promote the 

most effective use of services, and to 

assist states in identifying cost sharing 

flexibilities. It includes transition 

policies for 2014 as applicable. 

DATES: The effective date for the 

additions of 42 CFR 435.118, 435.603, 

435.911, 435.949, 435.956, 435.1200, 

457.315, 457.330 and 457.348; 

amendments to 42 CFR 431.10, 431.11, 

435.110, 435.116, 435.119, 435.907, 

435.916, 435.940, 435.945, 435.948, 

435.952, 457.340 and 457.350; the 

removal of 42 CFR 435.953 and 435.955; 

and the redesignation of 42 CFR 435.911 

through 435.914 as 42 CFR 435.912 

through 435.915 in CMS–2349 (FR Doc. 

2012–6560) published on March 23, 

2012, which were to become effective in 

January 1, 2014 are now effective 

October 1, 2013. 

Other provisions of this final rule that 

are codified in title 42 of the Code of 

Federal Regulations are effective 

January 1, 2014 with the exception of 

amendments to the following which are 

effective on October 1, 2013: 42 CFR 

431.10, 431.11, 431.201, 431.205, 

431.206, 431.211, 431.213, 431.230, 

431.231, 431.240, 435.119, 435.603, 

435.907, 435.918, 435.1200, 457.110, 

457.348, and 457.350; and the addition 

of 42 CFR 435.1205 and 457.370, which 

are effective on October 1, 2013. 

Regulations in this final rule that are 

codified in title 45 of Code of Federal 

Regulations are effective on September 

13, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Sarah deLone, (410) 786–0615, or 

Stephanie Kaminsky, (410) 786–4653, 

for provisions related to revisions to 

eligibility notice and fair hearing 

appeal processes and additional 

eligibility changes for Medicaid and 

CHIP. 

Melissa Harris, (410) 786–3397, for 

provisions related to essential health 

benefits. 

Leigha Basini, (301) 492–4307, for 

provisions related to Affordable 

Insurance Exchanges. 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

This final rule implements provisions 

of the Patient Protection and Affordable 

Care Act and the Health Care and 

Education Reconciliation Act of 2010 

(collectively referred to as the 

Affordable Care Act). This rule reflects 

new statutory eligibility provisions, 

implements changes related to Medicaid 

and the Children’s Health Insurance 

Program (CHIP) eligibility notices, 

delegation of appeals, and other related 

administrative procedures with similar 

procedures used by other health 

coverage programs authorized under the 

Affordable Care Act. This final rule also 

modernizes and streamlines existing 

rules. 

This final rule amends the 

requirements applicable to Medicaid 

benefit packages that provide 

benchmark or benchmark-equivalent 

coverage, to include requirements to 

meet new minimum standards, 

including the provision of essential 

health benefits, as required by the 

Affordable Care Act. In an effort to bring 

consistency and clarity to part 440, we 

are removing the terms ‘‘benchmark and 

benchmark-equivalent plan’’ where they 

appear together and are replacing these 

terms with ‘‘Alternative Benefit Plan’’ 

(ABP). 

Beginning in calendar year 2014, 

individuals and small businesses will be 

able to purchase private health 

insurance through competitive 

marketplaces called Affordable 

Insurance Exchanges, or ‘‘Exchanges.’’ 

This final rule: (1) Specifies standards 

related to authorized representatives, (2) 

outlines criteria related to the 

verification of enrollment in and 

eligibility for minimum essential 

coverage through an eligible employersponsored plan, and (3) further specifies 

or amends other eligibility and 

enrollment provisions. This final rule 

does not address proposed provisions 

regarding Exchange eligibility appeals, 

to provide additional time for the 

careful development of standards that 

can be effectively implemented, 

particularly for those regarding 

coordination with Medicaid and CHIP. 

Additionally, this final rule does not 

address proposed provisions regarding 

the Children’s Health Insurance 

Program Reauthorization Act of 2009 

(CHIPRA), certified application 

counselors in an Exchange and SHOP 

coordination with individual market 

Exchanges. We intend to address these 

provisions in a future issuance. The 

intent of this final rule is to afford each 

state substantial discretion in the design 

and operation of the Exchange 

established by the state, with greater 

standardization provided where 

directed by the statute or where there 

are compelling practical, efficiency or 

consumer protection reasons. 

This final rule also updates and 

simplifies the complex Medicaid 

premium and cost sharing requirements 

to promote the most effective use of 

services and to assist states in 

identifying cost sharing flexibilities. 

Finally, this final rule provides notice 

that we are considering, for purposes of 

the initial open enrollment period for 

enrollment in a Qualified Health Plan 

through the Exchange, whether various 

provisions of the Medicaid and CHIP 

regulations should be effective October 

1, 2013, or whether a later effective date 

is appropriate. 

In this final rule, we do not address 

all of the proposed regulatory changes to 

42 CFR parts 431, 435 and 457. We are 

focusing on those changes that are most 


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needed to implement the changes made 

by the Affordable Care Act starting in 

2014. We intend to address certain of 

the other provisions in future 

rulemaking. 

Table of Contents 

To assist readers in referencing 

sections contained in this document, we 

are providing the following table of 

contents. 

Executive Summary 

I. Background 

A. Medicaid Eligibility Final Rule Part II 

B. Essential Health Benefits in Alternative 

Benefit Plans 

C. Exchanges: Eligibility and Enrollment 

D. Medicaid Premiums and Cost Sharing 

II. Provisions of the Proposed Regulations 

and Analysis of and Responses to Public 

Comments 

A. Medicaid Eligibility Expansion Part II 

1. Responses to General Comments 

2. Appeals—Delegation of Authority To 

Conduct Medicaid Fair Hearings 

3. Notices 

4. Medicaid Enrollment Changes Under the 

Affordable Care Act Needed to Achieve 

Coordination with the Exchange 

5. Medicaid Eligibility Requirements and 

Coverage Options Established by Other 

Federal Statutes 

6. Coordinated Medicaid/CHIP Open 

Enrollment Process 

7. Children’s Health Insurance Program 

Changes 

8. Premium Assistance 

9. Changes to Modified Adjusted Gross 

Income and MAGI Screen 

10. Single State Agency—Delegation of 

Eligibility Determinations to Exchanges 

11. Conversion of Federal Minimum 

Income Standards for Section 1931 of the 

Act 

B. Essential Health Benefits in Alternative 

Benefit Plans 

1. General Comments 

2. Alignment With Essential Health 

Benefits Provisions 

3. Modifications in Applying the 

Provisions of This Final Rule to 

Medicaid 

4. All Other Title XIX Provisions Apply 

5. Preventive Services as an EHB 

6. Other Changes To Simplify, Modernize, 

and Clarify Medicaid Benchmark 

Requirements and Coverage 

Requirements 

7. Summary 

C. Exchanges: Eligibility and Enrollment 

1. Definitions 

2. Approval of a State Exchange 

3. Functions of an Exchange 

4. Authorized Representatives 

5. General Standards for Exchange Notices 

6. Definitions and General Standards for 

Eligibility Determinations 

7. Options for Conducting Eligibility 

Determinations 

8. Eligibility Standards 

9. Eligibility Process 

10. Verification Process Related to 

Eligibility for Enrollment in a QHP 

Through the Exchange 

11. Verifications Related to Eligibility for 

Insurance Affordability Programs 

12. Eligibility Redetermination During a 

Benefit Year 

13. Annual Eligibility Redetermination 

14. Administration of Advance Payments 

of the Premium Tax Credit and CostSharing Reductions 

15. Coordination With Medicaid, CHIP, the 

Basic Health Program, and the PreExisting Condition Insurance Plan 

16. Special Eligibility Standards and 

Process for Indians 

17. Enrollment of Qualified Individuals 

Into QHP’s 

18. Special Enrollment Periods 

19. Termination of Coverage 

D. Medicaid Premiums and Cost Sharing 

1. Responses to General Comments 

2. Definitions 

3. Update to Maximum Nominal Cost 

Sharing 

4. Higher Cost Sharing Permitted for 

Individuals With Incomes Above 100 

Percent of the FPL 

5. Cost Sharing for Drugs 

6. Cost Sharing for Emergency Department 

(ED) Services 

7. Premiums 

8. Limitations on Premiums and Cost 

Sharing 

9. Beneficiary and Public Notice 

Requirements 

III. Provisions of the Final Regulations 

IV. Collection of Information Requirements 

V. Regulatory Impact Analysis 

Regulations Text 

Acronyms and Terms 

Because of the many organizations 

and terms to which we refer by acronym 

in this final rule, we are listing these 

acronyms and their corresponding terms 

in alphabetical order below: 

[the] Act Social Security Act 

Affordable Care Act The Affordable Care 

Act of 2010 (which is the collective term for 

the Patient Protection and Affordable Care 

Act (Pub. L. 111–148) and the Health Care 

and Education Reconciliation Act (Pub. L. 

111–152)) 

AFDC Aid to Families with Dependent 

Children 

BBA Balanced Budget Act of 1997 

BHP Basic Health Program 

CHIP Children’s Health Insurance Program 

CHIPRA Children’s Health Insurance 

Program Reauthorization Act of 2009 

CMS Centers for Medicare & Medicaid 

Services 

[the]Code Internal Revenue Code of 1986 

DHS Department of Homeland Security 

DOL U.S. Department of Labor 

DRA Deficit Reduction Act of 2005 

EITC Earned Income Tax Credit 

EPSDT Early and periodic screening, 

diagnosis, and treatment 

FEHBP Federal Employees Health Benefits 

Program (5 U.S.C. 8901, et seq.) 

FFE Federally-facilitated Exchange 

FFP Federal financial participation 

FMAP Federal medical assistance 

percentage 

FPL Federal poverty level 

HCERA Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted March 30, 2010) 

HHS [U.S. Department of] Health and 

Human Services 

IHS Indian Health Service 

INA Immigration and Nationality Act 

IRA Individual Retirement Account 

IRC Internal Revenue Code of 1986 

IRS Internal Revenue Service 

MAGI Modified adjusted gross income 

MEC Minimum Essential Coverage 

MMEA Medicare & Medicaid Extenders Act 

of 2010 (Pub. L. 111–309, enacted 

December 15, 2010) 

OMB Office of Management and Budget 

OPM U.S. Office of Personnel Management 

PHS Act Public Health Service Act 

PRA Paperwork Reduction Act of 1995 

PRWORA Personal Responsibility and 

Work Opportunity Reconciliation Act of 

1996 

QHP Qualified Health Plan 

Secretary Secretary of HHS 

SEP Special enrollment period 

SHOP Small Business Health Options 

Program 

SMD State Medicaid Director 

SNAP Supplemental Nutrition Assistance 

Program 

SPA State Plan Amendment 

SSA Social Security Administration 

SSI Supplemental Security Income 

SSN Social Security number 

TANF Temporary Assistance for Needy 

Families 

I. Background 

A. Medicaid Eligibility Final Rule Part II 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148, enacted on 

March 23, 2010), was amended by the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted on March 30, 2010). These 

laws are collectively referred to as the 

Affordable Care Act. In addition, section 

205 of the Medicare & Medicaid 

Extenders Act of 2010 (Pub. L. 111–309, 

enacted December 15, 2010) (MMEA) 

and the Middle Class Tax Relief and Job 

Creation Act of 2012 (Pub. L. 112–96, 

enacted February 22, 2012) made 

additional amendments to the Social 

Security Act (the Act) provisions 

affected by the Affordable Care Act. 

The Affordable Care Act extends and 

simplifies Medicaid eligibility, and on 

March 23, 2012, we issued a final rule 

(referred to as the ‘‘Medicaid Eligibility 

final rule’’) addressing certain key 

Medicaid and CHIP eligibility, 

enrollment, and renewal issues. 

This final rule provides states with 

additional flexibility and guidance for 

delegation of appeals and 

implementation of electronic notices, 

and modernizes administrative 

procedures to further promote 

coordination across multiple health 

coverage programs, including 

enrollment in a qualified health plan 


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1For more information on status as a 

grandfathered health plans under the Affordable 

Care Act, please see Interim Final Rule, ‘‘Group 

Health Plans and Health Insurance Coverage 

Relating to Status as a Grandfathered Health Plan 

Under the Patient Protection and Affordable Care 

Act.’’ Available at http://cciio.cms.gov/resources/ 

regulations/index.html#gp. 

through the Exchange with advance 

payments of the premium tax credits 

and cost-sharing reductions, as 

authorized by the Affordable Care Act, 

Medicaid and the Children’s Health 

Insurance Program (CHIP). These 

coverage programs are collectively 

referred to as ‘‘insurance affordability 

programs.’’ For more information on the 

legislative overview, please refer to the 

Medicaid, CHIP, and Exchanges 

proposed rule (78 FR 4594). 

B. Essential Health Benefits in 

Alternative Benefit Plans 

For plan, policy, or coverage years (as 

applicable) beginning in 2014, most 

health insurance coverage 1 in the 

individual and small group markets, 

Medicaid benchmark and benchmarkequivalent plans (now also known as 

Alternative Benefit Plans (ABPs)), and 

Basic Health Programs (if applicable) 

will be required to cover essential 

health benefits (EHBs), consistent with 

the definition under section 1302 of the 

Affordable Care Act and implementing 

regulations at 45 CFR Parts 147, 155, 

and 156, Patient Protection and 

Affordable Care Act; Standards Related 

to Essential Health Benefits, Actuarial 

Value, and Accreditation; Final Rule. 

Under that definition, EHBs include 

items and services in 10 statutory 

benefit categories, such as 

hospitalization, prescription drugs, and 

maternity and newborn care, and are 

equal in scope of benefits to a typical 

employer plan, which will constitute 

minimum coverage in an ABP. 

C. Exchanges: Eligibility and Enrollment 

1. Legislative Overview 

Section 1311(b) and section 1321(b) of 

the Affordable Care Act provide that 

each state has the opportunity to 

establish an Exchange that: (1) 

Facilitates the purchase of insurance 

coverage by qualified individuals 

through qualified health plans (QHPs); 

(2) assists qualified employers with the 

enrollment of their employees in QHPs; 

and (3) meets other standards specified 

in the Affordable Care Act. Section 

1311(k) of the Affordable Care Act 

specifies that Exchanges may not 

establish rules that conflict with or 

prevent the application of regulations 

promulgated by the Secretary under 

subtitle D of title I of the Affordable 

Care Act. Section 1311(d) of the 

Affordable Care Act describes the 

minimum functions of an Exchange, 

including the certification of QHPs. 

Section 1321 of the Affordable Care 

Act discusses state flexibility in the 

operation and enforcement of Exchanges 

and related requirements. Section 

1321(c)(1) directs the Secretary to 

establish and operate an Exchange 

within each state that either: (1) does 

not elect to establish an Exchange, or (2) 

as determined by the Secretary on or 

before January 1, 2013, will not have an 

Exchange operational by January 1, 

2014. Section 1321(a) also provides 

broad authority for the Secretary to 

issue regulations setting standards to 

implement the statutory requirements 

related to Exchanges, QHPs, and other 

standards under title I of the Affordable 

Care Act. 

Section 1401 of the Affordable Care 

Act creates new section 36B of the 

Internal Revenue Code of 1986 (the 

Code), which provides for a premium 

tax credit for eligible individuals who 

enroll in a QHP through an Exchange. 

Section 1402 of the Affordable Care Act 

establishes requirements for reducing 

the cost-sharing obligations of eligible 

individuals who enroll in a QHP 

through an Exchange, including special 

cost-sharing rules for certain Indians. 

Under section 1411 of the Affordable 

Care Act, the Secretary is directed to 

establish a program for determining 

whether an individual meets the 

eligibility standards for enrollment in 

QHPs through the Exchange, advance 

payments of the premium tax credit, 

cost-sharing reductions, and exemptions 

from the shared responsibility payment 

under section 5000A of the Code. 

Sections 1412 and 1413 of the 

Affordable Care Act and section 1943 of 

the Social Security Act (the Act), as 

added by section 2201 of the Affordable 

Care Act, contain additional provisions 

regarding eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions, as well as 

provisions regarding simplification and 

coordination of eligibility 

determinations and enrollment with 

other insurance affordability programs. 

This final rule supplements and 

amends provisions originally published 

as the March 27, 2012 rule titled 

‘‘Patient Protection and Affordable Care 

Act; Establishment of Exchanges and 

Qualified Health Plans; Exchange 

Standards for Employers’’ (hereafter 

referred to as ‘‘Exchange Final Rule’’) 

(77 FR 18310) which encompasses key 

functions of Exchanges related to 

eligibility and enrollment. 

Unless otherwise specified, the 

provisions in this final rule related to 

the establishment of minimum 

functions of an Exchange are based on 

the general authority of the Secretary 

under section 1321(a)(1) of the 

Affordable Care Act. 

2. Stakeholder Consultation and Input 

HHS has consulted with interested 

stakeholders on policies related to the 

eligibility provisions and Exchange 

functions. HHS held a number of 

listening sessions with consumers, 

providers, employers, health plans, and 

state representatives to gather public 

input, and released several documents 

for public review and comment. HHS 

also released a bulletin that outlined our 

intended regulatory approach to 

verifying access to employer-sponsored 

coverage and sought public comment on 

the specific approaches. 

Finally, HHS consulted with 

stakeholders through regular meetings 

with the National Association of 

Insurance Commissioners (NAIC), 

regular contact with states through the 

Exchange grant process, consultation 

with Medicaid directors, and meetings 

with tribal leaders and representatives, 

health insurance issuers, trade groups, 

consumer advocates, employers, and 

other interested parties. 

We considered input from these 

stakeholder meetings and in response to 

the bulletin on verifying access to 

employer-sponsored coverage, as well as 

comments provided in response to the 

proposed rule as we developed the 

policies in this final rule. 

3. Structure of the Final Rule 

The regulations related to Exchanges 

and QHPs outlined in this final rule are 

codified at 45 CFR parts 155 and 156. 

Part 155 outlines the standards related 

to eligibility for insurance affordability 

programs to facilitate a streamlined 

process for eligibility for enrollment in 

a QHP through the Exchange and in 

insurance affordability programs. Part 

156 outlines the standards for health 

insurance issuers for participation in an 

Exchange. This final rule: 

• Revises existing definitions and 

finalizes new definitions to 45 CFR part 

155 subpart A. 

• Provides a technical correction to 

45 CFR part 155 subpart B. 

• Finalizes standards related to 

authorized representatives under 45 

CFR part 155 subpart C. 

• Finalizes standards related to 

eligibility determinations for enrollment 

in a QHP and for insurance affordability 

programs under 45 CFR part 155 subpart 

D. 

• Finalizes standards related to 

enrollment-related transactions, special 

enrollment periods, and terminations 

under 45 CFR part 155 subpart E. 


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• Finalizes standards related to 

termination of coverage under 45 CFR 

part 156 subpart C. 

4. Alignment With Related Rules and 

Published Information 

As noted above, on March 27, 2012, 

we published the Exchange final rule. 

This final rule revises and supplements 

the Exchange final rule, including by 

finalizing Exchange and Medicaid 

provisions associated with the eligibility 

changes under the Affordable Care Act 

of 2010. 

D. Medicaid Premiums and Cost 

Sharing 

Section 1916 of the Act describes 

long-standing limitations and 

requirements applicable in states that 

elect to provide for premiums and other 

cost sharing under Medicaid. Under 

section 1916 of the Act, certain 

individuals are protected from 

premiums and cost sharing, and cost 

sharing cannot be imposed on certain 

services. Permissible cost sharing under 

section 1916 of the Act is limited to 

‘‘nominal’’ amounts (except in some 

circumstances for non-emergency use of 

a hospital emergency room). Section 

1916 of the Act also establishes 

authority for states to impose premiums 

on medically needy beneficiaries and 

specific groups of individuals with 

family incomes above 150 percent of the 

federal poverty level (FPL). The Deficit 

Reduction Act of 2005 (DRA) 

established a new section 1916A of the 

Act, which gives states additional 

flexibility, allowing for alternative 

premiums and cost sharing beyond what 

is permitted under section 1916 of the 

Act for somewhat higher income 

beneficiaries. Such alternative costsharing approaches may be targeted to 

specific groups of individuals and 

payment may be required as a condition 

of providing services. All premiums and 

cost sharing imposed under sections 

1916 and 1916A of the Act cannot 

exceed 5 percent of a family’s income. 

For more background information on 

the streamlined and expanded 

flexibility regarding premiums and cost 

sharing, please refer to (78 FR 4657 and 

78 FR 4658). 

We initially implemented the DRA 

authorities through regulations that 

mirrored the dual statutory provisions 

by adding a set of additional regulations 

on alternative cost sharing under section 

1916A of the Act to existing regulations 

setting forth the framework for cost 

sharing under section 1916 of the Act. 

We believe states found this duality 

confusing and, in this final rule, we 

have integrated the two statutory 

authorities for premiums and cost 

sharing (sections 1916 and 1916A of the 

Act) into a unified framework. 

II. Provisions of the Proposed Rule and 

Analysis of and Responses to Public 

Comments 

A. Medicaid Eligibility Part II Final Rule 

In the January 22, 2013 Federal 

Register (78 FR 4594), we published the 

proposed rule entitled ‘‘Essential Health 

Benefits in Alternative Benefit Plans, 

Eligibility Notices, Fair Hearing and 

Appeal Processes for Medicaid and 

Exchange Eligibility Appeals and Other 

Provisions Related to Eligibility and 

Enrollment for Exchanges, Medicaid 

and CHIP, and Medicaid Premiums and 

Cost Sharing.’’ 

We received a total of 741 timely 

comments from individuals, state 

Medicaid and CHIP agencies, advocacy 

groups, tribes and tribal organizations, 

policy and research organizations, 

health care providers, employers, 

insurers, and health care associations. 

The comments ranged from general 

support or opposition to the proposed 

provisions to very specific questions or 

comments regarding the proposed 

changes. 

In this final rule, we are only 

addressing some of the provisions of the 

proposed rule. We are reserving action 

on other provisions and intend to 

address those provisions in a 

subsequent final rule. We discuss below 

only those public comments associated 

with provisions addressed in this final 

rule. 

We have revised some of the proposed 

regulations after careful consideration of 

the comments received. Some 

comments were outside the scope of the 

proposed rule, and therefore, are not 

addressed in this final rule. In some 

instances, commenters raised policy or 

operational issues that will be addressed 

through forthcoming regulatory and 

subregulatory guidance to be provided 

subsequent to this final rule; therefore, 

some, but not all comments are 

addressed in the preamble to this final 

rule. 

Brief summaries of the proposed 

provisions that are being finalized in 

this rule, a summary of the public 

comments we received on those 

provisions (except specific comments 

on the paperwork burden or the 

economic impact analysis), and our 

responses to the comments are as 

follows. Comments related to the 

paperwork burden and the impact 

analyses are addressed in the 

‘‘Collection of Information 

Requirements’’ and ‘‘Regulatory Impact 

Analysis’’ sections in this final rule. 

The following sections summarize 

comments about the rule in general, as 

well as specific comments about certain 

policies. It should be noted that the 

summarized comments are structured to 

explain the provisions being finalized 

and do not necessarily follow the order 

of the regulation text: 

1. Responses to General Comments 

Generally, commenters were 

supportive of the policies in the 

proposed rule to continue the process of 

streamlining Medicaid and CHIP 

eligibility rules, policies and 

procedures; to support a consumer 

friendly approach, and provide 

increased flexibility for states. 

Comment: Several commenters were 

concerned about the complexity of the 

proposed rules and the significance of 

the changes that need to be made to 

fully implement the provisions of the 

Affordable Care Act. Many commenters 

were concerned about the short 

timeframes for implementation and 

about states’ ability to make needed 

changes to policy, operations, and 

information technology systems. 

Response: We recognize that the 

timing of this final rule may result in 

implementation challenges, especially 

from a systems perspective. As such, we 

have evaluated the provisions of the 

January proposed rule and are finalizing 

in this rule only those provisions that 

we believe states are already in the 

process of implementing or must be 

finalized to meet statutory deadlines. 

The remaining provisions of the 

proposed rule will be addressed at a 

later date. 

We will continue to work with states 

to support their implementation efforts, 

ensure successful partnerships between 

states and the federal government. We 

will also continue to offer intensive 

technical assistance and support to 

states, and facilitate sharing of 

experience and knowledge across states. 

Consistent with one commenter’s 

recommendation, we will also utilize 

other tools, including subregulatory 

guidance and the State Operations and 

Technical Assistance (SOTA) initiative 

to address additional state questions 

that arise. 

2. Appeals—Delegation of Authority To 

Conduct Medicaid Fair Hearings 

We proposed to implement sections 

1413 and 2201 of the Affordable Care 

Act in part through procedures to 

coordinate Medicaid fair hearings under 

section 1902(a)(3) of the Act concerning 

eligibility for populations whose income 

is determined using modified adjusted 

gross income (MAGI)-based 

methodologies of the Act with appeals 


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42164 Federal Register / Vol. 78, No. 135 / Monday, July 15, 2013 / Rules and Regulations 

of eligibility determinations that are 

made using MAGI-based methodologies 

by Exchanges for advance payment of 

premium tax credits and cost-sharing 

reductions under section 1411(f) of the 

Affordable Care Act. Consistent with the 

requirements to streamline and 

coordinate eligibility determinations, 

under section 1943(b)(3) of the Act, as 

added by section 2201 of the Affordable 

Care Act, we proposed to provide states 

with an option to delegate the authority 

to conduct appeals to an Exchange or 

Exchange appeals entity. The option is 

similar to the option states have to 

delegate Medicaid eligibility 

determinations to an Exchange under 

§ 431.10. We also proposed changes to 

existing regulations at part 431 subpart 

E to support further modernization and 

streamlining of the Medicaid fair 

hearing process. 

In this final rule, we are finalizing the 

provisions of our proposed rule related 

to delegation of authority to conduct 

Medicaid fair hearings to an Exchange 

and an Exchange appeals entity at 

sections §§ 431.10, 431.205(b), 

431.206(d) and (e), 431.240 and the 

proposed rule related to reinstatement 

of an application at §§ 435.907(h) and 

457.340(a). As discussed in section 

II.A.3. of this final rule (relating to 

notices), we also are adopting proposed 

revisions to the current regulations at 

sections §§ 431.211, 431.213, 431.230, 

and 431.231, related to modernizing the 

process of providing notices to 

applicants and beneficiaries of their fair 

hearing rights and decisions. In addition 

to providing substantive comments on 

the proposed regulations related to 

coordination of appeals across the 

Exchange, Medicaid and CHIP, a 

number of commenters requested 

delayed implementation of those 

provisions. To provide states with 

additional time to consider and 

effectuate implementation of such 

coordination, as well as to provide us 

with additional time to consider the 

comments received, we are not 

addressing proposed provisions at 

§§ 431.200, 431, 201, 431.205(e), 

431.206(b), (c)(2), (e) as it relates to 

accessibility under § 435.905(b), 

431.210, 431.220, 431.221, 431.224, 

431.232, 431.241, 431.242, or 431.244. 

Further, we are not addressing the 

definitions related to appeals proposed 

in 435.4, nor the provisions related to 

coordination of appeals in § 435.1200. 

We expect to address these proposed 

provisions in a subsequent rulemaking. 

Until final regulations are released, 

current rules in part 431, subpart E 

continue to apply. We note that while 

we are not finalizing our proposed rules 

relating to accessibility in the fair 

hearing process or as it relates appeals 

and notices at § 431.205(e) and 

§ 431.206(e) at this time, fair hearing 

processes and notices must continue to 

be provided in an accessible manner in 

accordance with relevant federal 

statutes, including the Americans with 

Disabilities Act and Title VI of the Civil 

Rights Act of 1964, as well as any 

applicable state laws. 

We received the following comments 

regarding the proposed regulations 

related to delegation of fair hearings and 

reinstatement of applications in certain 

circumstances, which we are addressing 

in this rulemaking: 

Comment: Many commenters 

supported our approach to permit 

delegation of fair hearings to an 

Exchange or Exchange appeals entity so 

that an integrated hearing could be 

conducted to address Medicaid and 

Exchange-related eligibility issues 

together. We also received comments 

supporting the proposals to streamline 

and simplify our current fair hearings 

rules. While not providing specific 

recommendations, the commenters 

asked that we consider additional 

measures to coordinate Medicaid and 

Exchange eligibility appeals even more 

effectively. A few commenters requested 

that the final rule maintain state 

flexibility for states to retain the 

Medicaid appeals function within the 

Medicaid agency. 

Several commenters were concerned 

that our proposed rules require 

duplicative processes because states 

must maintain the infrastructure and 

capacity to hear MAGI-based appeals, 

even if the state delegates the authority 

to conduct fair hearings to an Exchange. 

One commenter requested that we 

eliminate the requirement at proposed 

§ 431.10(c)(1)(ii) and § 431.205(b)(1)(ii) 

that an individual be provided an 

opportunity to request a fair hearing 

before the Medicaid agency when the 

state has otherwise delegated authority 

to conduct the individual’s fair hearing 

to the Exchange, and instead make this 

provision a state option. The commenter 

believed that this requirement would 

undermine the efficiencies achieved 

through delegation. Another commenter 

recommended that only one hearing 

opportunity be made available to 

individuals, instead of requiring a 

hearing if determined ineligible for 

Medicaid and a hearing related to the 

eligibility for advance payment of 

premium tax credits and cost-sharing 

reductions. 

Response: We appreciate the support 

for the proposal to permit states to 

delegate MAGI-based eligibility appeals 

to an Exchange or Exchange appeals 

entity. We note that such delegation is 

at state option. States are not required 

to delegate such authority, but may 

continue to have the Medicaid agency 

conduct all Medicaid fair hearings. 

We understand commenters’ concern 

about duplication of effort in requiring 

that Medicaid agencies retain an 

infrastructure independent of the 

Exchange appeals process to conduct 

MAGI-based Medicaid eligibility 

appeals when the state has delegated 

authority for MAGI-based eligibility 

appeals to an Exchange. There are two 

key reasons why the Medicaid agency 

must maintain its own appeals 

infrastructure. First, an individual 

whose application for Medicaid is 

denied or not acted upon with 

reasonable promptness has a right under 

section 1902(a)(3) of the Act to an 

opportunity for a fair hearing before the 

Medicaid agency. We do not anticipate 

that individuals will necessarily prefer 

to have their appeal heard by the 

Medicaid agency, but the statute 

requires that the option be provided in 

such delegation through our regulations. 

Second, in a state where the Federallyfacilitated Exchange (FFE) is operating, 

the HHS appeals entity will only 

conduct appeals related to MAGI-based 

eligibility determinations made by the 

FFE. Thus, in states where the FFE is 

operating, the Medicaid agency will 

need to conduct all Medicaid fair 

hearings related to MAGI-based 

eligibility determinations made by the 

Medicaid agency. For these reasons, we 

are finalizing the requirement as 

proposed. 

States have options to streamline the 

appeals infrastructure and reduce the 

number of appeals that will come before 

the Medicaid agency, in addition to the 

options to delegate Medicaid appeals 

authority under this final rule as 

discussed above. In a state that has 

established a state-based Exchange, the 

state Medicaid agency may delegate 

authority to conduct fair hearings of 

MAGI-based determinations to the statebased Exchange by requesting a waiver 

under the Intergovernmental 

Cooperation Act of 1968 (ICA), as long 

as the state-based Exchange is a state 

agency and the state can assure 

sufficient oversight of the delegated fair 

hearing process. As we noted in the 

preamble to the proposed rule, when a 

state has an ICA waiver permitting 

delegation of fair hearings to another 

state agency, the state is not required to 

offer individuals an option to have their 

hearing conducted by the Medicaid 

agency. 

In states where the FFE is operating, 

a state Medicaid agency that allows the 

FFE to make a Medicaid eligibility 


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determination delegating such authority 

under § 431.10(c)(1)(i) has appeal 

delegation options not available to a 

State that proceeds with the assessment 

model. If the Medicaid agency 

authorizes the FFE to make MAGI-based 

eligibility determinations, the agency 

may also delegate authority to the HHS 

appeals entity to conduct fair hearings 

related to determinations of Medicaid 

ineligibility made by the FFE, 

establishing an integrated appeals 

process with simultaneous appeals 

related to a determination of advance 

payments of the premium tax credits or 

cost-sharing reductions. The Medicaid 

agency would still need to maintain the 

ability to conduct fair hearings for 

eligibility determinations and denials 

made by the Medicaid agency, as well 

as when delegations are made under 

these regulations for individuals who 

opt out of a coordinated appeal before 

the Exchange or Exchange appeals 

entity, and specifically request a hearing 

before the Medicaid agency. States will 

also need to continue to conduct fair 

hearings related to non-MAGI based 

eligibility determinations, as well as fair 

hearings related to termination, 

suspension, or reduction of covered 

benefits and other adverse 

determinations. 

Finally, with respect to the 

recommendation that a right to only one 

hearing be made available, we note that 

there are two separate statutory 

authorities for appeals related to 

Medicaid and enrollment in a QHP and 

eligibility for APTC and cost sharing 

reductions, at section 1902(a)(3) of the 

Act and section 1411(f) of the 

Affordable Care Act, respectively. While 

we permit states to integrate these 

hearings and processes as much as 

possible, both state Medicaid agencies 

and the Exchange have distinct 

responsibilities to provide for such 

hearings, and we do not have authority 

to eliminate individuals’ statutory 

rights, or a Medicaid agency’s or 

Exchange’s statutory responsibility. We 

note that we are not addressing in this 

final rule the proposed requirements 

relating to coordination of notices. 

Those proposed rules will be addressed 

in future rulemaking. 

Comment: Several commenters 

requested clarification of our proposals 

on delegation of Medicaid appeals to the 

FFE, a state-based Exchange, or a state 

with a partnership with the FFE. In 

addition, commenters sought 

clarification regarding when an 

individual’s appeals rights are triggered 

in states which have delegated authority 

to make Medicaid eligibility 

determinations to the Exchange versus 

states in which the Exchange will make 

only an assessment of potential 

Medicaid eligibility. A few commenters 

requested clarification about whether a 

delegation of authority to conduct 

Medicaid fair hearings to a state-based 

Exchange would extend to an appeal to 

the HHS appeals entity. The 

commenters were concerned that 

appeals could not be coordinated at the 

HHS appeals entity, rendering 

meaningless any efforts to achieve 

coordination at the state level. 

Response: States may choose to 

delegate authority to conduct Medicaid 

fair hearings for MAGI-based eligibility 

determinations to the Exchange 

operating in the state regardless of 

whether the Exchange is the FFE, the 

state-based Exchange or a partnership 

between the state and the FFE in 

accordance with the final rules at 

§ 431.10(c) and (d). There is no 

difference in the delegation authority 

under the regulations, as proposed or as 

finalized, based on the type of 

Exchange. In accordance with such 

delegation, the Exchange or Exchange 

appeals entity may provide a fair 

hearing on Medicaid issues, but 

individuals must have the option to 

have their Medicaid fair hearing heard 

directly before the single state agency. 

As discussed below, states with statebased Exchanges that are state 

governmental agencies also have an 

additional way to coordinate appeals, 

beyond delegation under our rules, 

through a waiver granted under the 

Intergovernmental Cooperation Act. 

Under such a waiver, individuals would 

not have a right to have their Medicaid 

appeal heard by the single state agency. 

In a state that has delegated authority 

to the Exchange to make Medicaid 

eligibility determinations based on 

MAGI, individuals have the right to 

request a fair hearing when the 

Exchange has determined the individual 

ineligible for Medicaid based on MAGI. 

Thus, the determination of ineligibility 

by the Exchange will trigger the 

individual’s appeal rights. If the state 

has delegated authority to the Exchange 

to conduct fair hearings under these 

regulations, such an individual found 

ineligible for Medicaid by the Exchange 

could request a fair hearing at the 

Exchange or Exchange appeals entity so 

that there would be one integrated 

hearing conducting the Exchangerelated and Medicaid appeals at the 

same time, or the individual may 

instead request his or her Medicaid 

issue be heard at the Medicaid agency. 

If, an individual who is found by the 

Exchange to be not eligible for Medicaid 

based on MAGI seeks a determination 

based on non-MAGI criteria, the 

individual’s electronic account is 

transferred to the Medicaid agency for a 

full evaluation by the agency in 

accordance with § 155.345(b) or (c) of 

the March 2012 Exchange eligibility 

final rule. If the Medicaid agency still 

determines the individual ineligible, he 

or she would be able to appeal that 

decision using the Medicaid agency’s 

fair hearing process. 

In states in which the Exchange will 

make an assessment of Medicaid 

eligibility, and will not make final 

Medicaid eligibility determinations or 

denials, an assessment of ineligibility 

for Medicaid based on MAGI will not 

trigger Medicaid appeal rights. This is 

because an assessment is not a final 

Medicaid eligibility determination. As 

indicated in § 155.302(b)(4) of the 

March 2012 Exchange rule, as revised in 

this rulemaking, applicants assessed by 

the Exchange as not potentially eligible 

for Medicaid based on MAGI but as 

potentially eligible for Medicaid on 

another basis will be transferred to the 

Medicaid agency for a full Medicaid 

determination; for these applicants, 

Medicaid appeal rights will be triggered 

when the Medicaid agency makes a final 

eligibility determination. Under 

§ 155.302(b)(4), applicants assessed as 

not potentially eligible for Medicaid on 

any basis will have a choice whether to 

withdraw their Medicaid application or 

obtain a full determination by the 

Medicaid agency. If the applicant 

withdraws his or her Medicaid 

application, a final determination or 

denial of Medicaid will not be made, 

and therefore no appeal rights arise at 

that point. (The applicant will have the 

ability to reinstate their Medicaid 

application in certain circumstances, 

discussed more fully below). When an 

applicant obtains a formal 

determination by the Medicaid agency, 

the Medicaid agency’s determination 

will trigger appeal rights, if applicable. 

Finally, if a state agency delegates 

authority to conduct MAGI-based 

eligibility appeals to an Exchange, 

including a state-based Exchange, in 

accordance with § 431.10(c) and (d) of 

this final rule, such a delegation would 

extend to any government agency 

adjudicating an Exchange appeal, 

including the HHS appeals entity. We 

note, however, that if a state delegates 

authority to conduct fair hearings 

through an ICA waiver to another state 

agency, including a state-based 

Exchange or state-based Exchange 

appeals entity, Medicaid decisions 

made by that entity could not be 

appealed to the HHS appeals entity. The 

ICA waiver is a waiver of single state 

agency requirements that permits 

alternative arrangements of state agency 

functions to another state agency. Once 


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such an agency has issued a decision 

after a Medicaid fair hearing, that 

Medicaid decision would be the final 

decision of the Medicaid agency and 

thus no further right of appeal would be 

available to the individual. If the 

individual decided to appeal his or her 

advance payment of premium tax credit, 

cost-sharing reduction or Exchange 

eligibility decision to the HHS appeals 

entity, that entity would need to adhere 

to the Medicaid appeals entity decision 

under § 155.302(b)(5), as revised in this 

final rule, and § 155.345(h) which will 

prevent inconsistent decisions between 

the HHS appeals entity and the statebased Exchange or Exchange appeals 

entity. 

Comment: Many commenters 

requested clarification on the scope of 

fair hearings that may be delegated from 

a Medicaid agency to an Exchange or 

Exchange appeals entity. Commenters 

specifically requested clarification 

regarding whether fair hearings of 

eligibility determinations on bases other 

than MAGI may be delegated to an 

Exchange or Exchange appeals entity, 

and whether findings other than MAGIbased income determinations may be 

delegated to an Exchange or Exchange 

appeals entity. 

Response: The term ‘‘MAGI-based 

determinations’’ is used to refer to 

determinations in which financial 

eligibility is determined using the 

MAGI-based methods described in 

§ 435.603 of the March 2012 final 

Medicaid eligibility rule. However, in 

accordance with § 435.911(c) of the 

March 2012 final Medicaid eligibility 

rule, a determination of eligibility based 

on MAGI also entails a determination 

that an individual meets the nonfinancial conditions of eligibility, 

including state residency and 

citizenship or satisfactory immigration 

status, and the denial of eligibility for an 

individual considered for coverage 

under a MAGI-based eligibility group 

may be based on failure to meet any of 

the financial or non-financial conditions 

of eligibility. A delegation of fair 

hearing authority under 

§ 431.10(c)(1)(ii) to an Exchange or 

Exchange appeals entity regarding a 

denial of MAGI-based eligibility will 

need to address any or all of the bases 

of denial, just as a fair hearing 

conducted by the Medicaid agency 

would. We note that we have made 

some technical modifications to the 

regulation text at § 431.10(c)(1)(ii) to 

help clarify this point. As also noted in 

the preamble to the proposed rule, we 

remind states that while all appeals for 

an individual with a MAGI-based 

eligibility determination may be 

delegated to an Exchange or Exchange 

appeals entity under the regulation at 

§ 431.10(c)(1)(ii), the FFE will only 

accept a delegation of appeals involving 

determinations rendered by the FFE. 

The permissible scope of delegation 

under § 431.10(c)(1)(ii) to an Exchange 

or Exchange appeals entity is limited to 

appeals of MAGI-based eligibility 

determinations. Appeals related to 

denials of eligibility for individuals 

excepted from application of MAGIbased methodologies (for example, 

eligibility based on disability) may not 

be delegated under the regulation. As 

discussed above, states may delegate 

such appeals to another state agency, 

including a state-based Exchange, by 

requesting an ICA waiver. 

Comment: One commenter asked 

whether there is a timeframe under 

which the individual must request a fair 

hearing before the Medicaid agency to 

effectuate the requirement under 

§ 431.10(c)(1)(ii) that the state agency 

must provide an individual an option to 

have his or her Medicaid appeal 

conducted at the Medicaid agency when 

delegating authority to conduct fair 

hearings to an Exchange or Exchange 

appeals entity. 

Response: An individual must be 

provided the opportunity to opt to have 

his or her Medicaid appeal adjudicated 

at a hearing conducted at the Medicaid 

agency, instead of having his or her 

appeal for both enrollment in a QHP 

and eligibility for APTC and CSR and 

eligibility for Medicaid addressed at an 

integrated hearing at the Exchange or 

Exchange appeals entity. Section 

431.206(d) specifies that the individual 

must be informed of how to exercise 

this right. We note that we clarify our 

proposed regulation at § 431.206(d) to 

require that individuals must be 

informed of this option in writing. We 

are revising the regulation text at 

§ 431.10(c)(1)(ii) to clarify that the 

request for a hearing before the 

Medicaid agency would need to be 

requested instead of the Exchange 

hearing. While we are not specifying a 

specific timeframe, we would expect 

that if an individual was opting for a 

hearing before the Medicaid agency, that 

request would be made at the time that 

the individual is requesting a hearing. 

Thus, we finalize these proposed 

regulations with these minor 

modifications. 

Comment: Many commenters believed 

that delegation of fair hearing authority 

under the regulation should be 

permitted. Some of the commenters 

emphasized the need to permit 

delegation only in the simplest manner 

reducing burden to the consumer, and 

without any duplication of appeals 

processes. A few commenters suggested 

we permit delegation under the 

regulation only to an independent state 

agency employing Administrative Law 

Judges, and that delegation to any other 

state agency still require an ICA waiver 

to ensure transparency and opportunity 

for stakeholder input. A few 

commenters asked for clarification of 

the conditions and process required 

when requesting an ICA waiver. One 

commenter opposed delegation of 

authority to conduct fair hearings to any 

other state or Exchange entity stating 

that any delegation is duplicative, as 

state agencies still will be required to 

conduct Medicaid MAGI-based 

hearings. 

Response: Under proposed 

§ 431.10(c)(1)(ii), states would be able to 

delegate authority to conduct MAGIbased fair hearings to an Exchange or 

Exchange appeals entity, but to delegate 

Medicaid fair hearings to another state 

agency, states would need to request an 

ICA waiver. We sought comment on 

whether states also should be permitted 

to delegate authority to conduct fair 

hearings to another state agency under 

the regulation. 

The purpose of the proposed rule is 

to promote coordination of appeals and 

simplification of the appeals process by 

permitting delegation of Medicaid 

appeals to the Exchange or Exchange 

appeals entity. Because coordination 

between insurance affordability 

programs is a key goal of the Affordable 

Care Act, we are finalizing, with minor 

modifications, the proposed regulations 

at § 431.10(c)(1)(ii) and at 

§ 431.205(b)(1)(ii) to permit delegation 

of authority to conduct Medicaid fair 

hearings for denials of MAGI-based 

eligibility to the Exchange or Exchange 

appeals entity, including the FFE, statebased Exchange or HHS or state-based 

Exchange appeals entity, provided these 

entities are government agencies or 

public authorities that maintain 

personnel standards on a merit basis. 

After consideration of the comments, we 

have determined not to extend authority 

to delegate Medicaid fair hearings to 

state agencies other than a state-based 

Exchange or an Exchange appeals entity 

under the regulations because it is 

already allowed through an ICA waiver. 

We note that the main goal and 

justification for the delegation of fair 

hearings under the regulation is to 

achieve coordination across insurance 

affordability programs, something 

which would not be served by 

delegation to another state agency. 

Furthermore, Medicaid agencies already 

can delegate conduct of fair hearings to 

other state agencies through an ICA 

waiver, and there is nothing additional 

that states would be able to accomplish 


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through delegation under the regulation 

as opposed to an ICA waiver. Indeed, 

the flexibility available to states under 

an ICA waiver is greater than that which 

is available under the regulation since 

delegation of fair hearings under an ICA 

waiver does not require that states 

provide individuals a right to opt for a 

hearing before the Medicaid agency, nor 

would the delegation be limited to 

MAGI-related appeals. 

We have and will continue to apply 

similar conditions to the delegation of 

fair hearings under an ICA waiver as 

those we require under § 431.10(c) and 

(d). As explained in the proposed rule, 

an ICA waiver may be requested 

through a straightforward process using 

a state plan amendment (SPA), and CMS 

staff is available to provide technical 

assistance to states in completing that 

process. We note that our rules relating 

to hearing officers do not require that 

hearing officers be Administrative Law 

Judges or set any particular 

qualifications for hearing officers other 

than impartiality. States have flexibility 

to set such requirements in 

implementing fair hearings as they see 

appropriate. Thus, we do not set 

standards regarding the qualifications of 

hearing officers for states that delegate 

authority to conduct fair hearings or 

specify rules if the state agency employs 

Administrative Law Judges in this final 

rule. 

Comment: One commenter expressed 

concern that the proposal to remove 

§ 431.10(e)(2) and (e)(3) weakens the 

single state agency authority when 

delegating authority to conduct appeals 

to another agency. Other commenters 

supported the removal of those 

paragraphs because they are 

inconsistent with the goals of delegation 

of authority of appeals. 

Response: We are finalizing our 

proposal to remove paragraphs 

§ 431.10(e)(2) and (e)(3) as they are 

inconsistent with the option to delegate 

the authority to conduct fair hearings to 

an Exchange. We believe that the 

proposed language in § 431.10(e), which 

we are finalizing without modification, 

clearly provides that only the Medicaid 

agency may develop and issue rules and 

policy related to the Medicaid program. 

Comment: Several commenters 

requested clarification of the kinds of 

conclusions of law that could be subject 

to review by the agency under 

§ 431.10(c)(3)(iii). They also asked how 

the agency review process a state may 

establish to decisions made by an 

Exchange or Exchange appeals entity 

conducting Medicaid fair hearings 

under this provision relates to the 

‘‘trumping rule’’ at § 155.302(b)(5), 

which provides that if an appeals 

decision rendered by the Exchange or 

Exchange appeals entity conflicts with a 

fair hearing decision concerning the 

same individual rendered by the 

Medicaid agency, the Exchange must 

adhere to the Medicaid fair hearing 

decision. A number of commenters 

supported the limitation of the agency 

review process to conclusions of law. 

One commenter requested that the 

option be extended to findings of fact. 

Others recommend that the option be 

eliminated altogether. These 

commenters discussed that any review 

by the state agency of a hearing officer’s 

legal or factual conclusions would 

violate the due process protections 

afforded under Goldberg v. Kelly to have 

the appeal decided by a neutral arbiter. 

One commenter suggested that the 

regulation at § 431.10(c) specify the 

timeframe in which the Exchange or 

Exchange appeals entity be required to 

issue a decision for the state agency to 

complete its review within the time 

limits set forth in § 431.244. 

Response: We are finalizing this 

provision as proposed with minor 

revisions to clarify the scope of the 

review process. We note the provision at 

§ 431.10(c)(3)(iii) is a state option for 

Medicaid agencies to establish a process 

that permits a limited review of the 

decisions made by the Exchange or 

Exchange appeals entity to ensure 

Medicaid fair hearings are made with 

the proper application of federal and 

state Medicaid law and regulations, 

including subregulatory guidance and 

written interpretive policies. The 

proposed regulation text is being revised 

to clarify the scope of what the agency 

may review would be limited to the 

legal conclusions made during the fair 

hearing to ensure that they 

appropriately apply federal and state 

Medicaid law and regulations, including 

subregulatory guidance and written 

interpretive policies properly and that 

the review process be conducted by an 

impartial official who was not directly 

involved in the initial determination. 

By way of example, suppose that the 

Exchange hearing officer finds that an 

individual has $800 in wages and $200 

in child support income each month 

and, based on these amounts, concludes 

that the individual’s MAGI-based 

household income is $1,000 per month. 

Suppose also that the applicable income 

standard for the applicable household 

size for this individual is $900 per 

month, and that the hearing officer 

upholds the initial denial of eligibility. 

The findings of $800 in wages and $200 

of child support per month would be 

factual findings, which the Medicaid 

agency could not review under the 

option provided at § 431.10(c)(3)(iii). 

However, the hearing officer’s inclusion 

of the wages and child support income 

in total MAGI-based household income 

involves an application of MAGI-based 

methodologies, described in § 435.603 

of the March 2012 Medicaid eligibility 

final rule, as implemented by the state, 

which would be reviewable as a 

conclusion of law. In this case, the 

inclusion of wages would be correct, but 

the inclusion of child support income 

would be incorrect, and the agency 

upon finding such an erroneous 

application of state or federal rules 

could reverse the hearing officer’s 

decision to conclude that, based on 

household income of $800, the 

individual is Medicaid eligible. 

Because of the important role that an 

impartial hearing officer plays in 

evaluating evidence and weighing 

credibility in making findings of fact, 

we are not extending the option at 

§ 431.10(c)(3)(iii) to include agency 

review of findings of fact. We note that 

fair hearings conducted under a 

delegation of authority in accordance 

with § 431.10(c)(1)(ii) must be 

conducted in accordance with 

§ 431.10(d)(1), which requires that the 

delegation agreement between the 

agency and the Exchange or Exchange 

appeals entity must set forth the 

responsibilities of each party to 

effectuate the provisions of part 431 

subpart E of the regulations. Section 

431.205(d) provides that the fair hearing 

process under subpart E must meet the 

due process standards set forth in 

Goldberg v. Kelly, 397 U.S. 254 (1970), 

which requires that any review process 

be conducted by an impartial official, 

and be based solely on the information 

and evidence in the record. We have 

made a minor modification to 

§ 431.205(b)(1)(ii) to clarify that the 

hearing process provided through 

delegation of authority to conduct a fair 

hearing to an Exchange or Exchange 

appeals entity would include the review 

by the agency of the Exchange or 

Exchange appeal entity’s application of 

federal and state Medicaid law and 

regulations, if such review is elected by 

the state under § 431.10(c)(3)(iii) and 

conducted by an impartial official who 

was not directly involved in the initial 

determination. We note also that the 

state’s election under § 435.10(c)(3)(iii) 

to conduct this limited review does not 

create a right for the individual to 

request or receive a de novo hearing 

before the agency. 

The review process that can be 

established under § 431.10(c)(3)(iii) 

functions completely independently 

from the ‘‘trumping rule’’ at 

§ 155.302(b)(5) of the Exchange 

proposed rule. The former comes into 


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play when an individual’s fair hearing 

has been delegated to, and is heard by, 

the Exchange or Exchange appeals 

entity. The ‘‘trumping rule’’ at 

§ 155.302(b)(5) as modified by this 

rulemaking and at § 155.345(h) is 

invoked when the Medicaid agency has 

conducted the Medicaid fair hearing 

relating to the appeal of a denial of 

Medicaid eligibility and the Exchange or 

Exchange appeals entity also has 

conducted a hearing related to an appeal 

of an award of advance payments of 

premium tax credits. Similar to the 

‘‘trumping rule’’ at § 155.302(b)(5) of the 

March 2012 Exchange final rule relating 

to initial eligibility determinations, if 

the Medicaid agency’s fair hearing 

decision conflicts with the Exchange 

appeals decision, the Exchange must 

adhere to the Medicaid agency or fair 

hearing decision for Medicaid eligibility 

under § 155.302(b)(5) and § 155.345(h). 

Finally, we do not believe it is 

necessary to require in the Medicaid 

regulations specified timeframes within 

which an Exchange, in conducting a 

delegated fair hearing, must transmit a 

decision to the Medicaid agency. 

Instead, as part of the agreement 

required under § 431.10(d), in 

delegating the fair hearing authority to 

the Exchange or Exchange appeals 

entity, the parties will need to stipulate 

each party’s responsibilities to ensure 

that the time frames established under 

§ 431.244(f) are met. 

Comment: One commenter sought 

clarification of whether the review 

process of appeal decisions made by the 

Exchange which the commenter 

expressed as ‘‘required’’ at 

§ 431.10(c)(3)(iii) is considered in the 

agency’s quality assurance Payment 

Error Rate Measurement (PERM) 

sampling. 

Response: The regulation at 

§ 431.10(c)(3)(iii) does not set a 

requirement, but provides states an 

option to establish a review process of 

appeal decisions as a part of its 

oversight of the delegation of authority 

to conduct fair hearings to an Exchange 

or Exchange appeals entity. We note the 

agency has other means to oversee its 

delegation of authority to conduct 

hearings. Implications for PERM are 

beyond the scope of this regulation; we 

intend to issue additional guidance on 

PERM. 

Comment: Many commenters 

supported the reinstatement of an 

individual’s Medicaid application at 

§ 435.907(h) when the individual had 

withdrawn his or her application after 

an assessment of Medicaid ineligibility 

by the Exchange, appealed the level of 

APTC and CSR awarded by the 

Exchange, and the Exchange or 

Exchange appeals entity reversed the 

initial assessment and found the 

individual to be potentially eligible for 

Medicaid. A few commenters sought 

clarification regarding the retroactive 

nature of the reinstatement effective as 

of the date the individual submitted the 

application to the Exchange. Another 

commenter asked how this provision 

relates to the timeliness requirements 

for Medicaid agencies to process an 

application under § 435.912 of the 

March 2012 Medicaid eligibility final 

rule. A few commenters raised a 

concern that if an Exchange appeals 

entity hearing officer upholds the 

finding of eligibility for advance 

payment for premium tax credit, the 

reinstatement would not take effect. 

These commenters recommended that 

the Medicaid application be reinstated 

whenever an individual files an appeal 

with the Exchange or Exchange appeals 

entity to capture a broader set of 

individuals who may be eligible for 

Medicaid or CHIP. 

Response: We appreciate the support 

for the provision at § 435.907(h) to 

reinstate the Medicaid application of an 

individual who has withdrawn his or 

her Medicaid application upon initial 

assessment of Medicaid ineligibility by 

the Exchange, but who is subsequently 

assessed as potentially Medicaid eligible 

following an appeal related to an award 

of advance payments of the premium 

tax credits or cost sharing reductions. 

We are finalizing this provision as 

proposed, except to clarify that the 45- 

day or 90-day timeliness standards do 

not apply to these reinstated 

applications. By the time the Exchange 

appeal decision is rendered, 45 or 90 

days from the date of application may 

already have elapsed, making 

compliance by the Medicaid agency 

unrealistic. Instead we clarify that the 

timeliness standards required under 

§ 435.912 of the March 2012 Medicaid 

eligibility final rule apply based on the 

date the application is reinstated. 

However, we note that the 45 and 90 

days prescribed in the regulation 

represent the outer limit for all 

applications. In the case of a reinstated 

application which has been the subject 

of an Exchange appeal, we would expect 

that the individual’s electronic account 

would be comprehensive, and that 

considerably less time would be needed 

for the Medicaid agency to act on the 

case. We would expect states to take this 

into account in establishing timeliness 

standards for prompt determinations on 

reinstated applications under 

§ 435.911(c) and § 435.912 of the March 

2012 Medicaid eligibility final rule. The 

reinstated application must be made 

effective retroactive to the date the 

individual submitted his or her 

application to the Exchange (not the 

date the application is reinstated) to 

protect the effective date of coverage 

required under § 435.914 of the current 

regulations (redesignated at § 435.915 in 

the March 2012 Medicaid eligibility 

final rule). We also proposed a similar 

application reinstatement provision for 

CHIP at § 457.340(a), which we are 

finalizing as proposed with a minor 

modification to remove the reference to 

§ 435.909 which was inadvertently 

inserted in the proposed rule and has no 

relationship to CHIP. We note that states 

also will need to develop reasonable 

timeliness standards for such reinstated 

applications in accordance with 

§ 457.340(d) of the March 2012 

Medicaid eligibility final rule. 

We have not modified the proposed 

regulation text to reinstate the Medicaid 

or CHIP application of every individual 

who has withdrawn his or her Medicaid 

or CHIP application in accordance with 

§ 155.302(b)(4) of the March 2012 

Exchange final eligibility rule and who 

then subsequently appeals the 

determination of eligibility for advance 

payments of the premium tax credits or 

cost-sharing reductions at § 435.907(h) 

and § 457.340(a). We believe that the 

interests of individuals filing an 

Exchange appeal who should have been 

assessed as potentially Medicaid eligible 

by the Exchange, but who nonetheless 

withdrew their Medicaid application 

following the Exchange’s assessment, 

will be protected through the Exchange 

appeals process because the Medicaid 

application for those assessed 

potentially Medicaid eligible will be 

reinstated, and their account transferred 

to the Medicaid agency for a full 

determination. On the other hand, to 

reinstate the Medicaid application of 

every applicant for whom the Exchange 

appeals processes ultimately confirms 

the initial assessment of Medicaid 

ineligibility made by the Exchange— 

regardless of how high above the 

Medicaid income standard the 

individual’s income may be—would 

create confusion for individuals and 

impose, we believe, unnecessary 

administrative burden on state Medicaid 

agencies. We expect to work closely 

with Exchanges to ensure accurate 

assessments of Medicaid and CHIP 

eligibility in accordance with federal 

regulations. 

Comment: One commenter sought 

clarification of when Medicaid agencies 

will have to decide whether or not to 

delegate eligibility determinations or 

fair hearings to the Exchange, and 

whether there will be additional 


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requirements if the agency chooses not 

to delegate such responsibility. 

Response: There is no deadline to 

elect to delegate eligibility 

determinations or appeals to an 

Exchange or Exchange appeals entity. 

As discussed in section II.A.6. of 

preamble, the regulation permitting 

delegation of eligibility and fair hearings 

goes into effect on October 1, 2013. 

Once a state decides to delegate 

authority to conduct eligibility or 

appeals, it must indicate such an 

election through the state plan, establish 

a written agreement with the Exchange 

or Exchange appeals entity, and 

otherwise comply with the provisions 

set forth in the regulation. A state may 

revoke its delegation at a later time 

through the same process. Whether or 

not a state chooses to delegate authority, 

it must comply with the provisions of 

§ 435.1200, § 457.348 and § 457.350, 

issued in the March 2012 Medicaid 

eligibility final rule, to ensure 

coordination across all insurance 

affordability programs and a seamless 

consumer experience. We proposed 

revisions to these provisions in the 

January 2013 proposed rule to address 

the agencies’ responsibilities to 

coordinate notices and appeals, but are 

not finalizing them in this final rule. 

Comment: One commenter questioned 

whether a state might be able to obtain 

the enhanced matching funds for 

systems enhancement at a 90/10 match 

for enhancement of their appeals 

systems. Another commenter asked for 

clarification as to whether federal 

financial participation (FFP) would be 

available for appeals delegated to an 

Exchange. 

Response: The enhanced FFP match 

rate of 90/10 for the design, 

development, and installation of 

eligibility systems is available only for 

components of the Medicaid 

Management Information System 

(MMIS), including eligibility and 

enrollment systems through the end of 

2015, subject to meeting the seven 

conditions and standards outlined in 

the April 19, 2011 final rule at 74 FR 

21950. A 75/25 match rate is available 

for operations and maintenance of these 

systems. Appeals systems do not qualify 

for enhanced funding under these rules. 

Instead, FFP at a 50/50 rate is available. 

For more details on 75/25 match rate 

discussion, see http:// 

www.medicaid.gov/State-ResourceCenter/FAQ-Medicaid-and-CHIPAffordable-Care-Act-ACAImplementation/Downloads/AffordableCare-Act_-Newest-Version.pdf. The 

availability of FFP and responsibility for 

funding subject to cost allocation rules 

applies to administration of fair 

hearings in the same manner as any 

other context and is not affected by the 

state’s delegation decision. 

Comment: A few commenters 

suggested that we revise § 431.240 to 

require that hearing officers who 

adjudicate Medicaid fair hearings abide 

by specific ethical standards, either the 

National Association of Hearing 

Officials’ Model Code of Ethics or the 

National Association of Administrative 

Law Judiciary’s Model Code of Judicial 

Conduct for State Administrative Law 

Judges. We did not receive any 

comments related to our proposed 

modification of § 431.240 related to 

access to information. 

Response: As discussed above, 

existing regulation at § 431.240 require 

hearing officers to be impartial. 

Additionally, existing regulations at 

§ 431.205 require hearing systems to 

comport with due process standards of 

Goldberg v. Kelly, 397 U.S. 254 (1970). 

Current regulations do not require 

hearing officers to belong to a particular 

profession, and we did not propose to 

modify this policy in the proposed rule. 

Therefore, we are not making any 

changes to § 431.240 in response to this 

comment. However, as noted above, we 

are addressing this comment, in part, by 

including that an impartial decisionmaker must be used if a state is electing 

to establish a review process of legal 

conclusions made by hearing officers 

operating under delegated fair hearing 

authority. We also encourage states to 

examine this issue further and to ensure 

that the requirement to utilize impartial 

hearing officers at § 431.240 are adhered 

to when conducting fair hearings. We 

finalize § 431.240(c) without 

modification. 

3. Notices 

a. Electronic Notices (§ 435.918) 

Current notice regulations require 

paper-based, written notices. To 

establish a more timely and effective 

notification process, proposed § 435.918 

would direct states to provide 

individuals with the option to receive 

notices through a secure, electronic 

format in lieu of written notice by 

regular mail. Consumer safeguards were 

proposed to ensure that individuals 

make a conscious choice to receive 

notices in electronic format, and would 

be able to opt-in and opt-out of their 

election. We solicited comments 

regarding the proposed consumer 

safeguards. In addition, we requested 

comments on whether other types of 

communications, in addition to 

eligibility notices, should be offered in 

electronic format. We are finalizing 

§ 431.206(e), to permit beneficiaries to 

receive notices regarding fair hearings 

electronically, consistent with proposed 

§ 435.918. We note that we are not 

addressing in this final rule comments 

related to accessibility of fair hearing 

notices. We will consider these 

comments and this portion of 

§ 431.206(e) when we finalize our rules 

related to accessibility for individuals 

who are limited English proficient and 

individuals with disabilities in a future 

rulemaking. We also proposed 

modifications to §§ 431.211, 431.213, 

431.230, and 431.231 to update and 

modernize the language in the 

regulation to remove the term ‘‘mail’’ 

and instead use ‘‘send,’’ to reflect the 

option for beneficiaries to receive 

notices electronically, consistent with 

the consumer protections in proposed 

§ 435.918. We proposed in 

§ 457.110(a)(1) the same consumer 

option and protections for electronic 

notices in CHIP, and we are making 

technical changes in the final rule to 

better align the provisions. A 

modification was also proposed to 

paragraph (a) in § 457.110 regarding the 

accessibility of information for 

individuals who are limited English 

proficient and individuals with 

disabilities. However, we will finalize 

this provision in future rulemaking. 

We received many comments 

regarding the requirement to provide 

individuals with the option to receive 

notices electronically, the majority of 

which supported this option as an 

important part of modernizing the 

notification process provided that strong 

consumer protections are in place. 

Comment: We received many 

comments regarding proposed 

§ 435.918(a)(1), which would require the 

agency to confirm by regular mail the 

individual’s election to receive notices 

electronically. Some commenters 

recommended, instead, allowing 

electronic confirmation for individuals 

applying on-line. One commenter 

suggested that in states with a FFE, the 

FFE should be responsible for issuing 

all mailed confirmations. Also, several 

commenters were concerned that the 

proposed written confirmation actually 

required individuals to choose receipt of 

electronic notices twice, and that this 

would be confusing and burdensome for 

the agency and these consumers. Many 

other commenters encouraged CMS to 

maintain the requirement to confirm an 

individual’s election through regular 

mail to ensure that individuals have 

made an informed decision, and to 

provide them with an opportunity to 

change their election. One commenter 

suggested that the mailed confirmation 

include a list of the types of notices that 


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the agency will send in electronic 

format. 

Response: Proposed section 

§ 435.918(a)(1), redesignated 

§ 435.918(b)(1) in our final rule, requires 

the agency to send, via regular mail, 

written confirmation that an individual 

has elected to receive electronic notices 

and that forthcoming notices will be 

delivered electronically. This 

communication must also instruct the 

individual on how to change this 

election if the individual made the 

initial choice inadvertently or wishes to 

change his or her mind. The purpose of 

the mailed communication is to affirm 

the individual’s choice and allow the 

individual an early opportunity to optout of receiving notices in electronic 

format. The individual does not have to 

respond to this written notice to 

complete his or her election to receive 

electronic notices; he or she need only 

respond if he or she wanted to change 

the initial election. Therefore, there will 

not be any need for individuals to 

request electronic notices twice, as some 

commenters thought. We are clarifying 

at § 435.918(b)(1) of the final regulation 

that it is the agency’s responsibility to 

ensure that the individual’s election to 

receive notices electronically is 

confirmed by regular mail, since the 

individual will receive all future 

communication from the Medicaid 

agency including information on how to 

establish an electronic account with the 

state, if he or she has not already done 

so. If a different arrangement makes 

more sense in a given state, the 

Medicaid agency and Exchange can 

delegate this responsibility to the other 

agency in the agreement entered into 

under § 435.1200(b)(3). We are not 

requiring that this communication 

specify which types of notices will be 

delivered in electronic format, but 

suggest that states take this under 

consideration as it would enable 

individuals to better anticipate the type 

of notices that will be posted to an 

electronic account. We anticipate, based 

on one state’s experience piloting 

electronic notices, few individuals will 

revert back to paper notices. However, 

given that electronic notification will be 

a new approach for many individuals, 

we believe this is an important 

consumer protection to ensure that 

individuals make a deliberate choice 

regarding the format in which they 

receive information. In future years, 

when electronic notices are more 

prevalent, we will revisit whether 

written confirmation of the individuals 

choice to receive notices in electronic 

format is still a relevant consumer 

protection. 

Comment: Several commenters 

requested that electronic notices be the 

default method for notice delivery such 

that if an individual fails to indicate 

whether he or she prefers an electronic 

or paper format for notices, notices 

would automatically be provided 

electronically. One commenter 

suggested that electronic notices should 

be the default for specific populations, 

such as those individuals determined 

eligible through an Exchange Web site. 

Response: We maintain that electronic 

notices should be provided only if the 

individual affirmatively opts for such 

notices. The default approach makes an 

assumption that the individual has the 

technology to regularly retrieve notices 

posted to his or her electronic account. 

Even if an individual applies through an 

Exchange Web site, the individual may 

not have regular access to technology to 

enable ongoing retrieval of electronic 

notices. Consequently, we do not 

believe this change is appropriate at this 

time as it could pose a barrier to 

applicants and beneficiaries with 

limited access to technology. 

Comment: Several commenters 

recommended that Medicaid and CHIP 

eligibility notices be provided in both 

electronic and in paper format until an 

individual indicates in writing that they 

no longer wish to receive such notices 

by regular mail. Some commenters also 

recommended that all notices regarding 

adverse actions always be sent in paper 

format via regular mail to allow for 

additional protection against delivery 

error. One commenter recommended 

that hearing scheduling notices should 

always be sent via regular mail to ensure 

adequate hearing slot availability. 

Response: We are concerned that 

requiring agencies to provide dual 

electronic and paper notices may pose 

an administrative burden for some 

states. While we require that agencies 

provide individuals with a choice to 

receive notices in electronic format in 

lieu of paper format, at state option, all 

notices or a subset of notices, such as 

those relating to adverse actions, could 

be provided in dual formats. We 

appreciate the concern expressed for 

ensuring consumer protections against 

delivery error. In § 435.918(a)(4), the 

agency is required to send an email or 

other electronic communication alerting 

the individual that a notice has been 

posted to his or her account. To guard 

against delivery error, if the required 

alert is returned as undeliverable, the 

agency must send such notice by regular 

mail within three business days of the 

date of the failed electronic 

communication. This requirement has 

been further clarified by a revision to 

§ 435.918(a)(5). We believe that 

electronic notices are likely to increase 

receipt of important eligibility 

information, as individuals will have 

greater flexibility to access notices 

regardless of changes to their postal 

address. 

Comment: We received a few 

comments that recommended we amend 

§ 435.918 to include specific language 

noting the importance of ensuring that 

the notice must be accessible to persons 

who are limited English proficient and 

individuals with disabilities. 

Response: We agree that all eligibility 

notices must be accessible to persons 

who are limited English proficient and 

individuals with disabilities, and we 

will be addressing such rules in future 

rulemaking. 

Comment: One commenter requested 

clarification on what constitutes an 

‘‘undeliverable’’ communication in 

§ 435.918(a)(5). 

Response: ‘‘Non-delivery reports’’ are 

system messages that report the delivery 

status to the sender. We expect that if 

the agency receives a non-delivery 

report, this constitutes an undeliverable 

communication. 

Comment: One commenter requested 

clarification regarding how to date a 

paper version of an electronic notice. 

When an electronic communication is 

undeliverable, indicating an individual 

may not be aware of an electronic notice 

posted to his or her account, 

§ 435.918(a)(5) requires that the agency 

send a paper version of the electronic 

notice within three business days. The 

commenter, noting the ability to send 

the paper version of the electronic 

notice within 24 hours, supported 

maintaining the same date on both 

notices. 

Response: It is important for the date 

of the paper notice to reflect the date it 

is sent, not the date of the undelivered 

electronic notice. We anticipate that 

while some states may be able to issue 

a paper version of the electronic notice 

within 24 hours, other states may take 

up to the required limit of 3 days. 

Individuals are given a limited time to 

take action, such as requesting a date for 

a hearing, and this is based on the date 

the notice is sent to the individual. 

Comment: One commenter requested 

clarification as to whether agencies are 

required to monitor an individual’s 

account to determine if a notice was 

accessed. 

Response: We are not requiring that 

agencies monitor accounts to determine 

whether notices are accessed. If the 

electronic alert is not undeliverable, the 

agency should assume an individual is 

able to access his or her notice. 

Comment: One commenter 

recommended that we include a 


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requirement that allows the agency to 

limit the number of times an individual 

can request that an electronic notice be 

provided in paper format. 

Response: We believe that it is an 

important consumer protection to allow 

individuals to request notices in a paper 

format. Some individuals may not have 

the technology available to readily print 

notices from an electronic account. 

Comment: A number of commenters 

supported offering additional types of 

communications through an electronic 

format. In addition to eligibility notices 

and information specified in subpart E 

of part 431, there are other 

communications that occur between an 

individual and the Medicaid or CHIP 

agency. Some of these communications 

include requests for additional 

information, annual renewal forms and 

reminders, premium payment 

information, and information on 

covered services. 

Response: We do not believe it is 

necessary to amend § 435.918(a) to 

include other types of communications. 

In § 435.918(a), we specify that 

eligibility notices and information in 

part 435, and notices and information 

required under subpart E of part 431, be 

provided in electronic format. For 

example, information on covered 

services must be available electronically 

in addition to paper format, as required 

by § 435.905(a). Annual renewal forms 

must also be offered in electronic format 

in accordance with § 435.916. We do not 

think it is appropriate or operationally 

feasible to require other types of 

communications to be provided 

electronically. We encourage states with 

the capacity to provide additional 

communications electronically, and 

with beneficiaries preferring that mode 

of communication, to do so, as long as 

in compliance with any existing 

regulations that govern the type of 

communication. 

Comment: One commenter asked 

whether proposed § 435.918(b), which 

asserts that the agency may only provide 

electronic notices if the individual 

elected to receive electronic notices and 

must be permitted to change such 

election at any time, is duplicative of 

paragraph § 435.918(a). 

Response: We agree with the 

commenter, and the provision has been 

amended by removing redundant 

language in § 435.918(b)(1) and 

§ 435.918(b)(2). 

Comment: A number of commenters 

requested a later effective date for 

implementing electronic notices. 

Response: We recognize that states are 

at different places in the development of 

their eligibility and enrollment systems, 

and that the technology needs to be in 

place to offer beneficiaries and 

applicants the option to receive notices 

electronically. We have amended 

§ 435.918(a) to delay the requirement to 

provide notices electronically until 

January 1, 2015, but permit states to 

implement October 1, 2013 if their 

systems are ready. 

Comment: One commenter suggested 

that we clarify whether ‘‘send’’ in 

§ 431.230 means send by mail or in 

electronic format consistent with 

§ 435.918. 

Response: Under proposed 

§ 431.206(e), all information required 

under subpart E of part 431 must be 

provided in electronic format in 

accordance with § 435.918, if an 

individual elects to receive such 

information in electronic format. To 

further clarify, we have added to 

§ 431.201, that the definition of ‘‘send’’ 

means deliver by mail or in electronic 

format consistent with § 435.918. 

Comment: One commenter requested 

clarification regarding § 431.231(c)(2), 

which provides beneficiaries 10 days to 

request a hearing from receipt of the 

notice of action. The date on which the 

notice is received is considered to be 5 

days after the date on the notice, unless 

the beneficiary shows that he or she did 

not receive the notice within the 5-day 

period. The commenter specifically 

requested clarification regarding how an 

individual might show proof that they 

did not receive an electronic notice 

within the 5-day time period. 

Response: We understand the concern 

expressed by the commenter, but do not 

believe that this issue is specific to the 

receipt of electronic notices, but receipt 

of notices in general. It is challenging 

for an individual to provide proof of a 

negative, however, it is important to 

provide individuals with the 

opportunity to demonstrate that they 

did not receive notices. One example of 

how an individual might demonstrate 

that he did not receive an electronic 

eligibility notice is by providing 

documentation that he closed the email 

account on record with the agency. If an 

individual cannot receive the emailed 

alert that a notice is posted to the 

electronic account, the individual is not 

in receipt of the notice. 

Comment: A few commenters 

requested that we define whether the ‘‘5 

days’’ § 431.231(c)(2) refers to calendar 

days or business days. 

Response: We are not defining 

whether the ‘‘5 days’’ refers to calendar 

days or business days, but allow states 

the flexibility to define this in their 

operating procedures. 

b. Coordinated Notices (§ 435.1200) 

For individuals whose electronic 

account is transferred to the Medicaid 

agency for a determination of eligibility 

from another insurance affordability 

program, § 435.1200(d)(6) of the March 

2012 Medicaid eligibility final rule 

directs that the Medicaid agency notify 

such other program of its final 

determination of eligibility or 

ineligibility only for individuals who 

have enrolled in the other program 

pending completion of the agency’s 

final determination. We proposed to 

redesignate and modify this requirement 

at § 435.1200(d)(5) to require that the 

Medicaid agency notify the other 

program of the final determination of 

Medicaid eligibility or ineligibility for 

all individuals whose electronic account 

was transferred from another insurance 

affordability program. The same 

requirement was proposed for CHIP at 

§ 457.348(d)(5). No comments were 

received regarding these specific 

provisions. We also proposed a number 

of other changes to § 435.1200 and 

§ 457.348 relating to coordination of 

notices and appeals. In this final rule, 

we are codifying § 435.1200(d)(5) of the 

proposed rule at paragraph 

§ 435.1200(d)(6). Other proposed 

changes to § 435.1200 of the March 2012 

Medicaid final eligibility rule, including 

the redesignation of paragraph (d)(6), as 

appropriate, will be addressed in 

subsequent rulemaking. We are also 

finalizing proposed § 457.348(d)(5) as 

§ 457.348(c)(6), but other proposed 

changes to § 457.348 will be addressed 

in subsequent rulemaking. 

4. Medicaid Enrollment Changes Under 

the Affordable Care Act Needed To 

Achieve Coordination With the 

Exchange 

a. Certified Application Counselors 

(§ 435.908 and § 457.340) 

Many state Medicaid and CHIP 

agencies have a long history of 

supporting providers and other 

organizations to assist individuals in 

applying for and maintaining coverage. 

Commonly referred to as ‘‘application 

assisters’’ and referred to in this 

rulemaking as ‘‘certified application 

counselors,’’ these organizations and 

individuals provide direct assistance to 

individuals seeking coverage, and can 

play a key role in promoting enrollment 

among low-income individuals. The 

proposed regulations at § 435.908(c) 

sought to ensure that certified 

application counselors, whom we 

expect to continue to play an important 

role in facilitating enrollment in the 

expanded coverage options available 

under the Affordable Care Act, will have 


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the training and skills necessary to 

provide reliable, effective assistance to 

consumers. We proposed basic 

standards for states to certify 

application counselors, which we 

believe are consistent with the practice 

in many states today. These standards 

include proposed procedures to ensure 

that these trained certified application 

counselors have clear authority to 

access and protect confidential 

information about individuals they 

serve, and with that authority have a 

special relationship with the Medicaid 

agency that enables the counselors to 

track and monitor applications. The 

proposed regulations at § 435.908(c), as 

finalized in this rulemaking, are 

applicable to CHIP, as well under 

§ 457.340(a) of the March 2012 

Medicaid eligibility final rule; no 

revisions are needed or made to 

§ 457.340(a). We received the following 

comments concerning the proposed 

certified application counselor 

provisions: 

Comment: We received a few 

comments expressing support for the 

proposed requirement that states have a 

designated web portal for use by 

certified application counselors that has 

a secure mechanism for granting rights 

for only those activities the certified 

application counselor is certified to 

perform. Commenters stated that such a 

portal will increase the proportion of 

applications that are submitted 

electronically, thereby providing more 

applicants with access to electronic 

verification and real-time eligibility 

while increasing the state’s 

administrative efficiency. Other 

commenters also recommended a 

clarification that states may use the 

same portal for Navigators and nonNavigator assistance personnel 

authorized under 45 CFR 155.205(d) 

and (e) with proper assignment of rights 

and functionality. 

Response: We appreciate the support 

for the establishment of a designated 

web portal for use only by properly 

trained and certified application 

counselors. However, given the systems 

challenges states face in preparing for 

the initial open enrollment period and 

starting up the new system of insurance 

affordability programs, we are 

concerned that requiring such a portal 

could disrupt well-functioning 

application counselor programs that 

exist today. Therefore, while we 

encourage states to consider such 

portals as an effective vehicle for 

administering and overseeing certified 

application counselor programs, we are 

removing from the final rule the 

requirement that such portals be 

established as proposed at 

§ 435.908(c)(3)(i). Although not 

required, states may elect to develop 

these portals to support the work of 

certified application counselors. 

Comment: One commenter requested 

that we issue guidance on the 

availability of federal funding to help 

support grants or payments to certified 

application counselors—in particular 

information about how Medicaid 

administrative claiming can be used to 

match community-based investments in 

application assistance. 

Response: FFP is available for state 

expenditures to certify and support 

certified application counselors, but, 

since community-based application 

counselors are not state or local 

employees, FFP is not available for 

salaries or other direct costs of certified 

application counselors. 

Comment: Many commenters 

requested that we require that certified 

application counselors be trained to 

provide culturally and linguistically 

competent services. They believed that 

it is not sufficient to remind Medicaid 

and CHIP agencies of their 

responsibility to ensure access to 

individuals with limited English 

proficiency and those living with 

disabilities, and urged us to provide 

states with specific guidance and 

examples of how to fulfill this 

responsibility. Some commenters 

recommended that to be certified, 

application counselors must be trained 

in providing culturally and 

linguistically appropriate services. 

Some commenters recommended that 

we require training for application 

counselors include accommodating the 

health care needs of specific 

populations, such as children. 

Response: Consistent with title VI of 

the Civil Rights Act of 1964, the 

Americans with Disabilities Act, and 

other civil rights laws, state Medicaid 

and CHIP agencies must ensure that 

their programs are accessible to 

individuals with limited English 

proficiency and individuals with 

disabilities. This responsibility is 

codified, in part, at § 435.905(b), 

§ 435.907(g), § 435.908(a), and § 457.330 

(incorporating by reference the 

requirements of § 435.907) of the March 

2012 Medicaid eligibility final rule, and 

is also contained in non-Medicaid 

specific regulations implementing the 

Americans with Disabilities Act and 

other civil rights laws. Note that 

clarifying changes were proposed in the 

January 2013 proposed rule to the 

accessibility standard in § 435.905(b); 

those proposed changes are not 

addressed in this final rule, but we 

intend to address them in subsequent 

rulemaking. State agencies can use 

certified application counselors as a tool 

in meeting their responsibilities to make 

their programs accessible to individuals 

with limited English proficiency and 

individuals with disabilities. But, while 

some organizations providing 

application assistance to individuals 

applying for coverage under an 

insurance affordability program may be 

subject to civil rights laws independent 

of the fact that they are serving as a 

certified application assistor (for 

example, as a condition of accepting 

federal funding), we do not believe it 

appropriate to hold them responsible for 

meeting the accessibility standards 

established for state Medicaid and CHIP 

agencies under our regulations. 

Moreover, to require a community 

organization or provider with a mission 

to provide targeted assistance to one 

segment of the population to also be 

able to provide assistance to all others, 

would threaten the participation of 

valuable state partners in maximizing 

enrollment across the state’s entire 

population. 

Comment: Some commenters 

supported the option provided to states 

to certify application counselors. These 

commenters pointed to existing 

programs in which states work with 

community organizations to expand 

enrollment, and that state flexibility to 

continue current, successful programs is 

important. Other commenters 

recommended that certification of 

application counselors be required for 

all Medicaid and CHIP agencies. These 

commenters discussed that there will be 

organizations providing application 

assistance in every state, that these 

organizations need to be trained, and 

that consumers need to know who is 

available to provide competent 

assistance. 

Response: We agree that a network of 

application counselors can be a valuable 

asset and can support states’ outreach 

and enrollment efforts. We urge all 

states to consider working with 

interested organizations and providers 

in creating an application counselor 

program. However, we believe states are 

best able to determine the need for such 

a program, and we do not believe it is 

necessary to require that state Medicaid 

programs create such programs. 

Comment: We received a number of 

comments on certified application 

counselors and requirements related to 

conflicts of interest. Some commenters 

stated that in addition to receiving 

training on conflict of interests, certified 

application counselors should be 

contractually required to serve in the 

best interests of clients and to disclose 

any existing relationships with qualified 

health plans or insurance affordability 


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programs to consumers. Some 

commenters recommended that health 

insurance issuers, their subsidiaries and 

licensed insurance brokers and agents 

be explicitly excluded from being 

certified as certified application 

counselors given their inherent financial 

conflict of interest. 

Response: We are clarifying the 

language in § 435.908(c)(1)(iii) to make 

clear that certified application 

counselors must adhere to all rules 

prohibiting conflicts of interest. States 

may not certify any organization or 

individual who does not meet this 

standard, or who may be motivated to 

act in a manner contrary to best interest 

of the individual being helped. Thus, 

any organization that the state finds to 

have an inherent conflict could not, 

under the proposed regulation, be 

certified as an application counselor. 

We do not believe it necessary or 

appropriate to identify specific types of 

organizations as categorically barred 

from serving as application counselors 

and are finalizing this regulation as 

proposed. 

Comment: A few commenters 

requested that we require states to 

maintain a current list of certified 

application counselors on the agency 

Web site, and the list should include 

any limitations on services that they are 

certified to provide. Commenters 

suggested that it will be important for 

consumers to not only be informed of 

the functions and responsibilities of 

certified application assisters, as 

required in § 435.908(c)(3)(i), but to also 

know who is certified and whether there 

are any limitations on the services each 

certified application counselor is 

certified to provide. 

Response: We encourage states to 

adopt the practice recommended by the 

commenter, as an effective mechanism 

to connect consumers with needed 

assistance. However, utilization of 

certified application counselors is at 

state option, and while we believe such 

a mechanism will enhance consumers’ 

ability to identify resources available to 

help with applications we do not think 

it appropriate to require states to post a 

current list of counselors on their Web 

site. We note that such a requirement 

could deter some states from creating or 

expanding their application counselor 

program if they do not have the 

resources to create and maintain such a 

list. 

Comment: A commenter asked CMS 

to clarify that states can meet their 

outstationing requirements under 

§ 435.904 with application counselors at 

the appropriate locations. They 

suggested that given the overlap of 

functions described it would seem 

inefficient to maintain separate systems 

of assistance. 

Response: States may be able to use 

certified application counselors to help 

meet the outstationing requirements set 

forth in current regulations at § 435.904, 

under which state Medicaid agencies 

are required to provide pregnant women 

and children an opportunity to apply for 

coverage at designated ‘‘outstation 

locations.’’ Section 435.904(e) requires 

that, except for outstation locations that 

are infrequently used by the pregnant 

women and children targeted under the 

regulation, the state agency must have 

staff available at each outstation 

location. Under paragraph (e)(3) of that 

section, properly trained provider or 

contractor staff or volunteers—which 

could include organizations, staff and 

volunteers certified as application 

counselors—may be used in lieu of, or 

as a supplement to, agency staff to meet 

this requirement, subject to certain 

conditions set forth in the regulation. 

Comment: Commenters asked for 

clarification on the overlap of functions 

and certification requirements between 

certified application counselors in 

Medicaid and application counselors as 

proposed for the Exchange at § 155.225. 

Response: Although the exact 

language of the Exchange application 

counselor regulation at proposed 45 

CFR 155.225 (which is not being 

finalized in this rulemaking) and that of 

the Medicaid regulation at § 435.908(c) 

differ, the policies reflected are 

consistent. The main substantive 

difference is that the Exchange 

regulation at proposed 45 CFR 155.225 

would not permit certified application 

counselors to limit the activities that 

they agree to perform, but instead would 

require them to perform all assistance 

activities identified in the regulation, 

whereas states can permit Medicaid and 

CHIP application counselors to elect to 

limit the activities which they will 

perform for applicants. 

As noted in the preamble to the 

proposed rule, we remind the 

commenters that state Medicaid and 

CHIP agencies and the Exchange are 

charged under § 435.1200 and § 457.348 

of the Medicaid eligibility final rule and 

proposed § 155.345 of the Exchange rule 

to enter into agreements with each other 

to create a seamless and coordinated 

application and enrollment process 

across all insurance affordability 

programs, and the state agencies and the 

Exchange should consider such 

coordination in developing their 

application counselor programs. States 

could elect, for example, to create a 

single certification process for all 

insurance affordability programs, or 

each program could accept application 

counselors certified by another program. 

To the extent to which an application 

counselor is certified by one program 

but not the other, the counselor would 

assist the individual in submitting the 

single streamlined application for all 

insurance affordability programs to the 

entity by which they are certified. It is 

important to note that regardless of the 

entity to which the application 

counselor submits the application, the 

application will be evaluated for 

eligibility in QHPs and all insurance 

affordability programs. 

Comment: One commenter requested 

more information about the 

development and review of training 

materials for certified application 

counselors. This commenter stated that 

although the regulations provide that 

any individual providing customer 

service must be trained in a host of areas 

related to the insurance affordability 

programs, no specificity is provided 

about the development and review of 

the materials, and they requested 

clarification on whether states will have 

the opportunity to review and comment 

on materials prior to their use. We also 

received comments that recommended 

we require certified application 

counselors to apply for recertification 

annually or biannually to ensure that 

they are qualified and up to date on 

changes in policy and procedures. 

Response: Under § 435.908(c)(1)(ii) 

and (iii), states must ensure that 

application counselors are properly 

trained prior to certification, and we 

expect states will need to develop 

training and any training materials to be 

used to satisfy this requirement. We 

note that materials will be developed by 

HHS for use by certified application 

counselors registered with an FFE, 

including State Partnership Exchanges, 

and state Medicaid and CHIP agencies 

may adapt such materials to support 

their training efforts. FFP is available for 

costs to the state of conducting training 

or testing of certified application 

counselors, including any costs to the 

state for preparation and assembly of 

training materials. Being effectively 

trained in the rules and regulations of 

the different insurance affordability 

programs in accordance with 

§ 435.908(c)(1)(ii) necessarily requires 

keeping abreast of any pertinent changes 

in those rules, and under these 

regulations states will need to ensure 

that application counselors are kept upto-date. However, there are different 

ways to accomplish this goal—annual or 

periodic recertification is one-way, 

refresher trainings or written 

communications may be another—and 

we believe states should have flexibility 


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in determining the process that best 

works in each state. 

Comment: A few commenters 

recommended that applicants and 

enrollees be able to opt to designate 

their certified application counselor to 

receive copies of notices, or to access 

electronic notices in the client account. 

Response: As discussed in the 

preamble of the proposed rule, the 

certified application counselor program 

is not designed to provide the level of 

personal assistance to applicants and 

beneficiaries that is provided by an 

authorized representative, discussed in 

the next section in the preamble. 

However, there is nothing to prevent an 

applicant or beneficiary from 

designating a certified application 

counselor to also serve as his or her 

authorized representative, and for such 

counselor to assume that function, in 

accordance with § 435.923, as finalized 

in this rulemaking. 

Comment: One commenter suggested 

that regulations governing application 

assistance are not necessary. The 

commenter believed that, absent any 

evidence that application counselors 

currently working in states to help 

individuals apply for Medicaid do not 

have the training and skills necessary to 

provide reliable, effective assistance to 

consumers, or would not meet 

confidentiality requirements, there is no 

reason to regulate state practices in this 

area. 

Response: We recognize the 

successful development of application 

assistor, or application counselor, 

programs by many states without the 

existence of federal regulations, and 

have aimed to develop regulations that 

will not disrupt existing, successful 

programs and practice. However, given 

the significant changes to the 

availability of and access to affordable 

health coverage created under the 

Affordable Care Act—including the 

advent of coverage in a QHP through the 

Exchange, with premium tax credits and 

cost sharing reductions available to 

qualifying individuals, the coordinated 

eligibility and enrollment process 

required across all insurance 

affordability programs, and the 

expansion in use of online applications, 

with the possibility confidential 

information being returned to 

consumers in real time through an 

electronic interface—we believe that 

establishment of baseline federal 

standards, to be applied consistently 

across states and programs, is important 

to safeguarding consumer interests and 

ensuring the integrity of the assistance 

provided. 

b. Authorized Representatives 

(§ 435.923) 

We proposed regulations intended to 

be consistent with current state policy 

and practice, regarding the definition, 

designation, and responsibilities of 

‘‘authorized representatives’’ to act on 

behalf of applicants and beneficiaries in 

applying for and maintaining coverage. 

Authorized representatives have 

historically provided valuable support 

to individuals needing help navigating 

the application and enrollment process, 

as well as ongoing communications 

with the agency, particularly to seniors 

and individuals with disabilities, and 

we expect their role to continue. We 

proposed to define the term ‘‘authorized 

representative’’ as an individual or 

organization that acts responsibly on 

behalf of an applicant or beneficiary in 

assisting with the individual’s 

application and renewal of eligibility 

and other ongoing communications with 

the Medicaid or CHIP agency. Under 

current regulations at § 435.907, 

retained in the March 2012 Medicaid 

eligibility final rule, states must accept 

applications from authorized 

representatives acting on behalf of an 

applicant. We received the following 

comments concerning proposed 

provisions relating to authorized 

representatives: 

Comment: One commenter requested 

clarification on whether states may 

enforce additional requirements not 

specifically listed in the federal 

regulations on authorized 

representatives. An example of this 

would be state specific regulations 

governing who may serve as an 

authorized representative for 

individuals who are not medically or 

legally competent. 

Response: Under proposed 

§ 435.923(a), legal documentation of 

authority to act on behalf of an 

applicant or beneficiary under state law, 

such as a court order establishing legal 

guardianship or power of attorney may 

serve in place of a written designation 

from the applicant or beneficiary, signed 

and submitted in accordance with 

§ 435.923(f). Under the regulation, 

however, states may not limit 

authorized representatives to 

individuals identified in such a legal 

document or granted authorization 

under operation of state law or 

otherwise impose requirements other 

than those listed in § 435.923 on other 

individuals whom an applicant or 

beneficiary wishes to have serve as his 

or her authorized representative. We 

have separated the regulation text as 

proposed at § 435.923(a) at 

§ 435.923(a)(1) and § 435.923(a)(2). 

Comment: We received a number of 

comments regarding who may serve as 

an authorized representative. One 

commenter recommended that 

organizations should not be permitted to 

be designated as authorized 

representatives. Another commenter 

recommended that we allow states to 

decide whether to permit organizations 

to be authorized representatives. The 

commenter suggested that by permitting 

only individuals to serve as authorized 

representatives, states will be better able 

to ensure transparency and 

accountability of the authorized 

representative. Another commenter 

recommended that we add a definition 

of organization to § 435.923(e) to clarify 

what types of organizations may act as 

authorized representatives, for example, 

only non-profit organizations. 

Response: We believe that there are 

situations in which an individual may 

need an organization to serve as his or 

her authorized representative and it is 

appropriate for an organization to serve 

in this capacity, such as for individuals 

residing in a nursing home who do not 

have family available to assist them. We 

are finalizing the regulation as proposed 

in this regard. Protections at proposed 

§ 435.923(e), finalized in this 

rulemaking, are designed to ensure that 

organizations serving as an authorized 

representative adhere to laws and 

regulations relating to conflicts of 

interest and act in the best interest of 

the individual. 

Comment: We received a number of 

comments related to the timeframe for 

designation of authorized 

representatives. One commenter 

recommended that states be given 

options or flexibility in this area, 

explaining that states may wish to make 

the designation of the authorized 

representative last for 12 months by 

default, for example, unless the 

applicant or beneficiary designates 

otherwise. Another commenter 

recommended that we add that the 

authorization is valid until the 

application is denied or benefits are 

terminated and the appeal process is 

completed. 

Response: Our regulations clearly 

state that applicants and beneficiaries 

are able to change authorized 

representatives at any time. States may 

not make a designation automatically 

expire such that an individual would 

need to redesignate an authorized 

representative after a given period of 

time. However, they are allowed to 

provide beneficiaries with the 

opportunity to change their authorized 

representative at the renewal point. For 

example, states can indicate that a 

beneficiary has an authorized 


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representative and remind the 

individual that they may keep or change 

the representative on the renewal 

document. 

Comment: One commenter asked for 

clarification on whether the scope of the 

authorization is defined by the 

beneficiary or applicant, or whether, 

once invoked, the representative 

assumes all of the duties named in the 

regulations, including ‘‘all other 

matters’’ with either agency. 

Response: We clarify that the scope of 

the authorization is defined by the 

Medicaid applicant or beneficiary. 

Comment: We received a number of 

comments on § 435.923(c), specifically 

related to the fact that the designation 

of an authorized representative can only 

be revoked in writing. Commenters 

suggested that it would be more 

appropriate and efficient to allow the 

designation to be revoked by all of the 

modalities by which it can be made in 

the first place. 

Response: We agree with the 

commenter’s suggestion and have 

revised the regulation text accordingly. 

Comment: One commenter requested 

clarification on whether the permissions 

given the authorized representative may 

be granted in part, for example in tiers, 

if an applicant so chooses. The 

commenter suggested that an applicant 

may wish to authorize someone to sign 

his or her application, but not to receive 

his or her notices, for example. 

Response: We are clarifying that the 

permissions given to the authorized 

representative may be granted in part. 

The proposed regulation allows 

applicants and beneficiaries to designate 

an individual or organization to act on 

their behalf and that the scope of 

authorization is defined by the 

applicant or beneficiary. 

Comment: One commenter asked us 

to confirm that the definition provided 

for authorized representatives is the 

same definition that the Social Security 

Administration uses. 

Response: We clarify that the 

definition is not the same. 

Comment: A few commenters 

requested additional clarification 

regarding situations in which an 

individual is unable to personally elect 

an authorized representative due to 

medical incapacity. One commenter 

agreed that written designation by the 

individual or legal documentation 

should be obtained in most instances, 

but the proposed rule may be overly 

restrictive in that it could result in 

unreasonable delay in determining some 

individuals’ eligibility for Medicaid. 

The commenter recommends that states 

be given the authority to waive this 

regulation in instances when obtaining 

legal documentation to allow 

individuals or organizations to act as 

authorized representatives would be 

difficult. Another commenter suggested 

that legal documentation of authority to 

act on behalf of an application or 

beneficiary under state law, such as 

court order establishing legal 

guardianship or a power of attorney, 

should serve in place of written 

authorizations by the applicant or 

beneficiary. 

Response: Under section § 435.923(a), 

legal documentation of authority to act 

on behalf of an applicant or beneficiary 

under state law, such as a court order 

establishing legal guardianship or power 

of attorney may serve in place of the 

applicant or beneficiary’s designation. 

The option to submit such 

documentation is intended to enable 

applicants who do not have the capacity 

to provide a signature to authorize 

representation. 

5. Medicaid Eligibility Requirements 

and Coverage Options Established by 

Other Federal Statutes 

a. Presumptive Eligibility for Children 

(§ 435.1102) 

We proposed to revise existing 

regulations to align with the adoption of 

MAGI-based methodologies. 

Comment: One commenter suggested 

that presumptive eligibility could be 

better streamlined by using only a gross 

income standard for eligibility 

determinations. 

Response: Current regulations allow 

states to use either gross income or to 

have qualified entities make a closer 

approximation of the countable family 

income, which would be used for a 

regular determination by the state 

agency, by applying simple disregards. 

We believe it is appropriate to retain 

this flexibility for states once MAGIbased methodologies are in place. 

Therefore, we are codifying the 

flexibility of states in § 435.1102(a), as 

proposed, to direct qualified entities to 

use either gross income or to apply 

simplified methods, as prescribed by the 

state, to better approximate MAGI-based 

household income, as defined in 

§ 435.603 of the March 2012 final rule. 

Comment: Many commenters objected 

to the state option to obtain an 

attestation of citizenship or satisfactory 

immigration status, or state residency as 

part of a presumptive eligibility 

determination. They suggested that 

requiring an attestation of immigration 

status would likely deter some 

potentially eligible individuals who 

often need urgent access to health care 

services from receiving care. Further the 

commenters suggested that the rules on 

immigration status are detailed and 

complex, and qualified entities cannot 

reasonably be expected to understand or 

explain them to individuals being asked 

to attest their status. Some commenters 

stated that states should have the option 

to request self-attestation of citizenship. 

Response: We clarify that our 

proposed rule gave states the option to 

require qualified entities or qualified 

hospitals to request this information but 

did not require it. We believe that this 

option is important in the context of 

extending the ability to conduct 

presumptive eligibility determinations 

to hospitals because it limits the 

possibility that individuals who are not 

citizens or qualified immigrants or 

residents of the state are found eligible 

on a presumptive basis, receive 

expensive services, only ultimately to be 

determined ineligible for Medicaid. 

Therefore, we are retaining the language 

as proposed and maintain this provision 

as a state option. 

Comment: One commenter requested 

that we add current foster care children 

as a presumptive eligibility group in our 

final regulation. 

Response: We clarify that former 

foster children are already a population 

that is eligible to be determined 

presumptively eligible. We do not 

currently have the authority to add 

current foster care children as a 

presumptive eligibility group, but this is 

unnecessary because current foster 

children are automatically eligible for 

Medicaid and do not need to be 

determined presumptively eligible. 

b. Presumptive Eligibility for Other 

Individuals (§ 435.1103) 

Comment: Some commenters stated 

that states should have the option to 

elect how many presumptive eligibility 

periods should be allowed for each 

pregnancy. Others supported our 

proposed rule to permit only one 

presumptive eligibility period per 

pregnancy. 

Response: We believe that providing 

pregnant women with one presumptive 

eligibility period per pregnancy is 

reasonable in accordance with section 

1920 of the Act, under which pregnant 

women may receive ambulatory 

prenatal care during a presumptive 

eligibility period, defined as continuing 

through the date a full Medicaid 

determination is made under the State 

plan, or, if a woman does not submit a 

regular application through the end of 

the month following the month during 

which the presumptive eligibility 

determination was made. Therefore, we 

are finalizing the regulation as proposed 

to provide one presumptive eligibility 


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period for pregnant women per 

pregnancy. 

c. Presumptive Eligibility Determined 

by Hospitals (§ 435.1110) 

We proposed to add § 435.1110 to 

implement section 1902(a)(47)(B) of the 

Act, added by the Affordable Care Act, 

to give hospitals the option to determine 

presumptive eligibility for Medicaid. 

The statute provides hospitals 

participating in Medicaid with this 

option whether or not the state has 

elected to permit qualified entities of 

the state’s selection to make 

presumptive eligibility determinations 

for children, pregnant women or other 

specific populations under other 

sections of the statute. 

We received the following comments 

concerning the hospital presumptive 

eligibility provisions: 

Comment: We received many 

comments related to the establishment 

of standards under proposed 

§ 435.1110(d)(1) for hospitals that opt to 

make presumptive eligibility 

determinations. Some commenters 

encouraged CMS to provide states with 

maximum flexibility to implement 

presumptive eligibility standards for 

hospitals, while other commenters 

stated that the Secretary should 

establish federal standards applicable to 

hospitals making presumptive eligibility 

determinations in all states. Other 

commenters supported the flexibility 

given to state agencies to establish 

standards, and some stated that states 

should have even broader authority to 

establish clear criteria and qualifications 

which hospitals would have to meet to 

make presumptive eligibility 

determinations. Some believe that the 

Secretary should establish minimum 

federal standards and qualifications, 

with the state option to impose 

additional standards. Commenters 

generally requested additional guidance 

to states on how they must work with 

hospitals that elect to make presumptive 

eligibility determinations. Finally, some 

commenters stated that the Secretary 

should establish federal standards for 

hospitals that opt to make presumptive 

eligibility determinations under 

§ 435.1110 of the regulations, related to 

the proportion of individuals 

determined presumptively eligible by 

the hospital that submits a regular 

application and the percent of such 

individuals who are ultimately 

determined eligible by the agency. 

Commenters suggested that states 

should use the federal standards to 

determine which hospitals are capable 

of making presumptive eligibility 

determinations. 

Response: We are finalizing 

§ 435.1110(d)(1) as proposed. Oversight 

of qualified entities making presumptive 

eligibility determinations, including 

qualified hospitals under § 435.1110, is 

a state responsibility. Under 

§ 435.1110(d)(1), states may establish 

state-specific standards for qualified 

hospitals that conduct presumptive 

eligibility determinations related to the 

success of assisting individuals 

determined presumptively eligible who 

submit a regular application and/or are 

approved for eligibility by the agency. 

We believe this is an area more 

appropriate for state flexibility, than for 

imposition of a uniform federal standard 

for all participating hospitals across all 

states. Therefore, we are finalizing 

§ 435.1110(d), as proposed. We will 

monitor implementation and consider 

whether further guidance is warranted. 

Per § 435.1110(d)(2), which we also 

are finalizing as proposed, state agencies 

are required to take appropriate 

correction action for any hospital that 

does not meet the standards established 

by the state or which the state otherwise 

determines is not making, or is not 

capable or making, presumptive 

eligibility determinations in accordance 

with state policies and procedures. In 

fulfilling their responsibility under 

§ 435.1110(d)(2), states may develop 

other proficiency standards, training 

and audits, with which hospitals would 

need to comply, to be authorized to 

make presumptive eligibility 

determinations in the state. 

Comment: We received many 

comments on the populations for which 

hospitals can make presumptive 

eligibility determinations. Some 

commenters stated that hospitals should 

be allowed to make presumptive 

eligibility determinations for all of the 

patient populations they serve. Some 

commenters recommended that states be 

given the option to elect and limit the 

populations that may be determined 

presumptively eligible by hospitals. 

Some commenters stated that the 

preamble did not align with the 

regulation text relating to this issue in 

the proposed rule. Many commenters 

requested additional clarification on the 

populations for which hospitals may 

make presumptive eligibility 

determinations. 

Response: We intended to propose 

that qualified hospitals must be 

permitted to make presumptive 

eligibility determinations based on 

income for all of the populations for 

which presumptive eligibility may be 

available in accordance with § 435.1102 

and § 435.1103. The specific reference 

to children, pregnant women, parents 

and caretaker relatives, and other adults 

in proposed § 435.1110(c)(1) was not 

intended to eliminate presumptive 

eligibility determinations by hospitals 

for other populations included in 

§ 435.1103 (that is, former foster care 

recipients or women with breast or 

cervical cancer or individuals seeking 

coverage of family planning services). 

We are revising the regulation text at 

§ 435.1110(c)(1) to clarify that states 

electing to limit the presumptive 

eligibility determinations which 

hospitals can make must permit the 

hospitals to make presumptive 

eligibility determinations based on 

income for all of the populations 

included in § 435.1102 and § 435.1103. 

Under § 435.1110(c)(2), which we 

finalize as proposed in this rulemaking, 

states may also permit hospitals to make 

presumptive eligibility determinations 

for populations for which income is not 

the only factor of eligibility (for 

example, for individuals who may be 

eligible under an eligibility group based 

on disability, or individuals eligible 

under a demonstration project approved 

under section 1115 of the Act). 

Comment: A commenter expressed 

that hospitals wishing to make 

presumptive eligibility determinations 

should be required to attend training on 

policies and procedures established by 

the states. The commenter suggested 

that this was important to maximize the 

likelihood that eligible individuals 

complete the full Medicaid eligibility 

process. They supported the proposed 

rule that states may require hospitals 

electing to make presumptive eligibility 

determinations to assist individuals in 

completing and submitting the full 

application and understanding any 

documentation requirements. 

Response: In accordance with 

§ 435.1110(a) of the proposed rule, 

finalized as proposed in this 

rulemaking, states are required to 

provide Medicaid during a presumptive 

eligibility period, to individuals who are 

determined to be presumptively eligible 

by a qualified hospital, subject to the 

same requirements as apply to the State 

options under §§ 435.1102 and 435.1103 

regardless of whether the state 

otherwise has opted to provide 

Medicaid during a presumptive 

eligibility period under either of those 

sections. While not necessarily 

requiring establishment of a formal 

training program, current regulations at 

§ 435.1102(b) require states to provide 

qualified entities with information on 

relevant state policies and procedures 

and how to fulfill their responsibilities 

in making presumptive eligibility 

determinations. This requirement is 

unchanged in this rulemaking and will 

apply in the case of hospitals electing to 


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be a qualified hospital under § 435.1110. 

If a hospital does not follow state 

policies and procedures, or is not 

successful in helping individuals to 

submit regular applications in 

accordance with standards established 

by the state, proposed § 435.1110(d)(2) 

would require states to institute 

appropriate corrective action, including 

(but not requiring) termination of the 

hospital as a qualified hospital. We are 

revising proposed § 435.1110(d) by 

adding paragraph (d)(3) to provide that 

the agency may disqualify a hospital as 

a qualified hospital only after it has first 

provided the hospital with additional 

training or taken other reasonable 

corrective action measures. 

Comment: A few commenters 

requested that states should be able to 

receive 100 percent FMAP for any 

recoupments or disallowances CMS may 

seek related to an improper eligibility 

determination by a hospital. One 

commenter questioned whether a state 

can make a qualified hospital liable 

when a presumptive eligibility 

determination results in a denial for a 

full Medicaid category. 

Response: Under existing regulations, 

there is no recoupment for Medicaid 

provided during a presumptive 

eligibility period resulting from 

erroneous determinations made by 

qualified entities. Payment for services 

is guaranteed during a presumptive 

eligibility period; without such a 

guarantee, providers could not rely on 

the determination. Under this provision, 

states will not be permitted to recoup 

money from the hospital (and CMS will 

not recoup FFP from the state). 

However, under § 425.1110(d)(2), a state 

may disqualify a hospital from 

conducting presumptive eligibility 

determinations if the state finds that the 

hospital is not making, or is not capable 

of making, accurate presumptive 

eligibility determinations in accordance 

with applicable state policies and 

procedures. Such a disqualification is 

permitted only after the state has 

provided additional training or taken 

reasonable corrective action measures to 

address the issue. Finally, we clarify 

that states may not make a qualified 

hospital liable when an individual who 

was found presumptively eligible by the 

hospital submits a full application and 

is subsequently denied Medicaid 

eligibility. 

Comment: Some commenters 

requested that for individuals 

determined presumptively eligible by a 

hospital for the adult group under 

§ 435.119 of the March 2012 Medicaid 

final eligibility rule, a state should 

receive 100 percent federal funding for 

services provided unless and until the 

individual completes the eligibility 

process and is determined not ‘‘newly 

eligible’’ or eligible for coverage under 

the adult group. Commenters suggested 

that enhanced federal funding is 

necessary because there will not be 

sufficient information available to 

determine whether the presumptively 

eligible individual should be claimed at 

100 percent federal funding or the 

state’s regular FMAP at the time of the 

initial presumptive eligibility 

determination. 

Response: While we understand the 

commenters’ concerns, there is no basis 

to provide the 100 percent FMAP during 

a presumptive eligibility period. The 

state would receive the increased FMAP 

provided under the Affordable Care Act 

only for individuals who the state 

determines actually (not presumptively) 

qualify for Medicaid under the adult 

group and are determined to be ‘‘newly 

eligible.’’ The methodology for such 

claims is set forth in the final FMAP 

regulation (78 FR 19918). However, 

states may retroactively adjust claiming 

to receive the enhanced matching rate 

for individuals determined 

presumptively eligible who 

subsequently complete a regular 

application, are determined by the state 

to be eligible for Medicaid under the 

adult group and are found to be ‘‘newly 

eligible.’’ Such retroactive adjustment 

may extend back to the first month of 

the month in which the regular 

application was filed or up to 3 months 

prior to the month of application in 

accordance with § 435.914 of the 

regulations (redesignated at § 435.915 in 

the March 2012 Medicaid final 

eligibility rule). 

Comment: One commenter requested 

that we confirm that § 435.1110(b)(2) of 

the proposed rule gives states the option 

to require that to participate as a 

qualified hospital, a hospital must assist 

individuals in completing and 

submitting the full application and help 

individuals understand any 

documentation requirements. The 

commenter suggested that this function 

is the same as that of an application 

counselor and requests clarification on 

whether a state could also require that 

a hospital that performs presumptive 

eligibility determinations must follow 

regulations in § 435.908 relating to 

certified application counselors. 

Response: Although we are not 

requiring hospitals that perform 

presumptive eligibility determinations 

to also furnish services of certified 

application counselors, states may 

impose specific requirements on 

hospitals to ensure that they fulfill their 

role in assisting individuals with 

completing and submitting the full 

application. At a minimum, states have 

a responsibility to ensure that an 

individual determined presumptively 

eligible by qualified hospitals is 

informed about how to apply and can 

obtain an application. 

Comment: We received several 

comments on the viability of 

presumptive eligibility determinations 

with the advent of real-time eligibility 

determinations. One commenter 

recommended that states should have 

the latitude to require hospitals to use 

the state’s online application system 

and determine presumptive eligibility 

only if a real-time full eligibility 

determination cannot be made. Another 

commenter suggested that if eligibility 

can be determined in real-time, then 

there is no need for presumptive 

eligibility, and asked us to clarify 

whether the state could terminate use of 

presumptive eligibility without 

violating the Affordable Care Act’s 

Maintenance of Medicaid Eligibility 

requirements, as added by section 

2001(b) of the Affordable Care Act 

(codified at sections 1902(a)(74) and 

1902(gg) of the Social Security Act (the 

Act). 

Response: We agree that the promise 

of real-time eligibility determinations 

makes the role of presumptive eligibility 

different than it has been in the past. In 

situations in which the individual files 

a regular application right away, the 

presumptive eligibility period would 

likely be considerably shorter—and 

eliminated altogether, as a practical 

matter, if a real-time determination is 

made. However, even with the most 

modernized systems, there inevitably 

will be individuals for whom a real-time 

eligibility determination will not be 

possible. There also will be individuals 

who will not be comfortable with the 

online application, and will instead opt 

to use the paper application. In such 

situations and for such individuals, 

presumptive eligibility remains a useful 

tool to facilitate prompt coverage and 

enrollment in the program. States have 

flexibility to minimize the length of 

presumptive eligibility periods by 

requiring that hospitals and other 

qualified entities assist individuals in 

submitting the single streamlined 

application online. States may not 

terminate use of presumptive eligibility 

for pregnant women or individuals with 

breast or cervical cancer prior to 2014 or 

for children prior to October 1, 2019 

without violating maintenance of effort. 

Comment: One commenter requested 

clarification on how hospital 

presumptive eligibility will interact 

with eligibility in breast and cervical 

cancer groups. 


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Response: If a state has elected to 

provide presumptive eligibility for 

individuals with breast or cervical 

cancer under § 435.1103(c)(2), it can 

limit qualified entities under that 

section to providers which conduct 

screenings for breast and cervical cancer 

under the state’s Centers for Disease 

Control and Prevention (CDC) breast 

and cervical cancer early detection 

program (BCCEDP), and if it has done 

so, the state may limit hospitals which 

may determine presumptive eligibility 

for individuals with breast or cervical 

cancer on that basis to hospitals that 

conduct screenings under the state’s 

BCCEDP. In states that do not opt to 

provide presumptive eligibility for 

individuals with Breast or Cervical 

Cancer under § 435.1103(c), states 

similarly may limit hospitals’ ability to 

determine presumptive eligibility for 

individuals with breast or cervical 

cancer under § 435.1110 to those that 

conduct screenings under the state’s 

BCCEDP. 

6. Coordinated Medicaid/CHIP Open 

Enrollment Process (§ 435.1205 and 

§ 457.370) 

We proposed to implement section 

1943 of the Act and section 1413 of the 

Affordable Care Act to require that 

Medicaid and CHIP agencies begin 

accepting the single streamlined 

application during the initial open 

enrollment period to ensure a 

coordinated transition to new coverage 

that will become available in Medicaid 

and through the Exchange in 2014. Our 

proposed rule seeks to ensure that no 

matter where applicants submit the 

single, streamlined application during 

the initial open enrollment period, they 

will receive an eligibility determination 

for all insurance affordability programs 

and be able to enroll in appropriate 

coverage for 2014, if eligible, without 

delay. 

Comment: Many commenters 

supported the proposal in 

§ 435.1205(c)(1) that Medicaid and CHIP 

agencies to begin accepting the single 

streamlined application and MAGI 

determinations from the Exchange and 

to process MAGI eligibility starting in 

October 2013. Commenters believe this 

is necessary to ensure coordination with 

the Exchange, and to facilitate a 

seamless transition to the new coverage 

that will become available in Medicaid 

and through the Exchanges in 2014. 

Many commenters acknowledged that 

the public will be hearing about new 

coverage options throughout the 

summer and fall of 2013, and expressed 

concern that it would result in 

confusion if, when people went to apply 

for coverage and were found eligible for 

Medicaid (or their children eligible for 

Medicaid or CHIP), they were told to 

return several months later and submit 

a new application. 

Response: We agree with the 

commenters that acceptance of the 

single streamlined application by state 

Medicaid and CHIP agencies starting in 

October 2013 is needed to ensure 

coordination with the Exchange, and in 

facilitating new coverage that will be 

available to Medicaid-eligible eligible 

individuals in January 2014. Therefore, 

we are finalizing the rule as proposed 

and confirm that individuals may not be 

required to return in January to reapply. 

Comment: Some commenters 

expressed concern that it is 

unreasonable to require states to comply 

with the prescribed time frames for 

coordinated enrollment with the 

Exchange in the proposed rule. They 

noted that states must make major 

policy, operations, and systems changes 

to implement federal requirements, 

which will impact agency eligibility 

staff, vendors, clients, and other 

stakeholders. Pending final and 

complete federal guidance, it is a 

significant challenge for states to 

develop policies, design efficient 

business processes, build systems and 

new interfaces, and effectively 

communicate changes to clients and 

stakeholders by the proposed federal 

implementation dates. One commenter 

noted that its state legacy system cannot 

process or transfer electronic accounts, 

which means that the proposed rule has 

effectively shortened the timeframe to 

implement its new eligibility system by 

3 months. Another commenter noted 

that Medicaid eligibility systems, 

policies and staff are not structured to 

operate in a time-limited open 

enrollment environment or to apply 

competing eligibility criteria 

concurrently, and cannot be changed to 

do so with only a few months’ notice. 

Commenters recommended that 

Medicaid agencies not be required to 

begin accepting streamlined 

applications or determinations from the 

Exchange prior to January 1, 2014. 

Instead, during the initial open 

enrollment from October 1, 2013 to 

December 31, 2013, commenters 

requested that at state option, 

individuals may be required to apply 

separately to the Medicaid agency and 

to the Exchange and to have their 

eligibility determined by the 

corresponding agency. One state 

suggested, as an alternative, the 

information exchanged will be limited 

to only the Medicaid-specific 

information that is included in the 

single streamlined application. 

Response: We appreciate the 

operational challenges states face in 

preparing for implementation of the 

Affordable Care Act, but we believe that 

these effective dates are central to the 

success of open enrollment and we have 

consistently targeted the October 1 date 

as we have worked with states to 

finance and develop their IT systems. 

We have identified a set of seven critical 

success factors that states must meet by 

October 1 in an attempt to prioritize 

what must be accomplished within this 

timeframe. We have regularly shared 

these with states via webinars, on the 

CALT at https://calt.cms.gov/sf/go/ 

doc16369?nav=1, through State 

Operational Technical Assistance 

(SOTA) calls and in IT gate reviews. 

These include the following: (1) Ability 

to accept application data, (2) MAGI 

rules engine in eligibility system, (3) 

MAGI Conversion, (4) Submission of 

state income thresholds and flexibilities, 

(5) Connection to Federally Facilitated 

Exchange (or establishment of State 

Based Exchange), (6) Connection to 

Federal Data Services Hub, and (7) 

Ability to confirm Minimum Essential 

Coverage. 

We recognize the efforts that states are 

making across a broad range of areas, 

and have released regulations, 

information technology (IT) guidance, 

funding opportunities, business process 

models and other tools to assist states as 

they design, develop, implement, and 

operate new systems. We will continue 

to help states fully comply with all 

relevant eligibility and enrollment 

changes, as well as achieve the 

necessary degree of interoperability 

between IT components in the federal 

and state entities that work together to 

provide health insurance coverage 

through Medicaid and CHIP, and 

Exchanges. We are finalizing the 

regulation as proposed. 

Comment: Several commenters 

expressed concern that, in the states 

which are relying on the FFE and will 

not be ready to implement the single, 

streamlined application by October 

2013, there is a significant risk that 

people who apply for coverage through 

the FFE will be told that they are likely 

eligible for Medicaid or CHIP, and be 

sent away without any real opportunity 

to enroll in coverage or complete the 

application process. These commenters 

recommended that HHS strengthen this 

provision by setting forth a specific 

timeframe and set of procedures that 

states must follow to ensure that they 

are ready to implement the single, 

streamlined application when open 

enrollment begins in October 2013. 

Specifically, they recommended 

modifying the final rule to require states 


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relying on the FFE to submit 

information, by September 1, 2013, on 

whether they intend to: (1) accept the 

FFE’s determinations of Medicaid/CHIP 

eligibility; or (2) to treat the FFE’s 

finding as an assessment and complete 

the eligibility determination themselves. 

In addition, they recommend including 

a provision to clearly outline that before 

a state can elect the option to treat the 

FFE’s findings as an assessment, the 

state must demonstrate that it is (or will 

be by October 2013) capable of acting 

upon such assessments in full 

accordance with federal law. 

Response: We have a process in place 

for working with states on 

implementation, including the adoption 

of mitigation strategies where necessary. 

We do not believe that a change in the 

regulations is needed to effectuate these 

strategies. 

Comment: Many commenters believe 

that it would be time-consuming and 

impractical to require states to evaluate 

all cases for eligibility effective in 2013, 

but that there is a subset of cases that 

states should be required to evaluate. 

Specifically, parents whose MAGI-based 

income falls very close to the state’s 

current income eligibility threshold for 

parents should be evaluated based on 

2013 eligibility rules. Commenters 

suggested HHS provide guidance to 

states on the appropriate MAGI income 

threshold to use for determining 

whether an individual appears to be 

potentially eligibility under 2013 rules 

and should be assessed for eligibility 

using those rules. Some commenters 

also believe that states should be 

required to inform people when it 

appears that their children qualify for 

coverage under 2013 Medicaid and 

CHIP rules because families are more 

likely to pursue applications if they 

believe that their children will be found 

eligible for coverage. Finally, a few 

commenters believed states should be 

given the option to notify a subset of 

applicants about the process to apply for 

coverage with an effective date in 2013 

(for example, only those applicants who 

appear to be potentially eligible under 

2013 rules based on the available 

information provided on the single 

streamlined application). 

Some commenters stated that they are 

already planning for an October 2013 

implementation date of MAGI eligibility 

and requested that states be given this 

option without need for a waiver. These 

commenters recommend states have 

flexibility in handling applications 

based on 2013 rules for assessing 2014 

coverage. States should be allowed to 

request applicants submit supplemental 

form that includes additional 

information to make MAGI 

determination, or to redirect applicants 

to new application; or, states should 

have flexibility to process applications 

using 2013 rules and determine 

eligibility based on MAGI proxy when 

possible. 

Response: We recognize the challenge 

of appropriately evaluating all 

applications submitted during the open 

enrollment period under both the 

MAGI-based rules effective January 1, 

2014 and under rule in effect in 2013. 

However, all applicants must have the 

opportunity to have their Medicaid 

eligibility assessed based on existing 

Medicaid rules for 2013 as well as for 

prospective enrollment effective January 

2014. At a minimum under the 

regulation at § 435.1205(c)(4)(ii), states 

must inform individuals who submit the 

single streamlined application during 

October–December 2013 that coverage 

may be available in 2013, but that a 

different application will need to be 

completed for consideration of such 

coverage, and how the individual can 

obtain and submit such application. 

Alternatively, under § 435.1205(c)(4)(i), 

states can use the information on the 

single streamlined application 

submitted to make a determination of 

eligibility effective in 2013, based on 

2013 rules, following up with the 

individual to obtain additional 

information if needed through 

additional questions or use of a 

supplemental form, if needed. States 

also can pursue a combination of these 

strategies—using the process outlined in 

§ 435.1205(c)(4)(i) for targeted 

individuals more likely to be found 

eligible under 2013 rules (for example, 

parents and caretaker relatives with 

MAGI-based income within a threshold 

margin of the applicable income 

standard and individuals indicating 

potential disability on the single 

streamlined application), while 

directing those not seen as likelyeligible under the 2013 rules to submit 

a separate application in accordance 

§ 435.1205(c)(4)(ii). 

States may wish to avoid having to 

operate two sets of rules for children, 

parents and caretaker relatives, pregnant 

women and other non-disabled, nonelderly adults that may be eligible for 

Medicaid enrollment during this period. 

To address this, we are offering states 

the opportunity to begin using the new 

MAGI-based methodology for these 

populations effective October 1, 2013, to 

coincide with the start of the open 

enrollment period. See State Health 

Official Letter #13–003: Facilitating 

Medicaid and CHIP Enrollment and 

Renewal in 2014 at http:// 

www.medicaid.gov/Federal-PolicyGuidance/Downloads/SHO-13-003.pdf. 

Comment: One commenter stated that 

requiring post-eligibility data matching 

to ensure continued eligibility as of 

January 1, 2014 for individuals 

determined not eligible in OctoberDecember but eligible in January, 

creates an enormous burden during a 

time when new systems are being 

implemented and states will be 

experiencing the largest influx of newly 

eligible individuals into their system. 

The commenter noted this would create 

duplication of efforts when an 

individual who was determined eligible 

prior to January is already notified of 

their reporting requirements and states 

should be allowed to rely on recipients 

reporting rather than handling the same 

cases twice in a 3–4 month timeframe. 

Response: Post-eligibility data 

matching is an option for states to 

ensure continued eligibility as of 

January 1, 2014 and/or through the first 

regularly-scheduled renewal. It is not 

required. The agency also has the option 

to schedule the first renewal for 

individuals who apply during the open 

enrollment period, and determined 

eligible effective January 1, 2014, to 

occur anytime between 12 months from 

the date of application and January 1, 

2015. Consistent with § 435.916, 

beneficiaries are required to report any 

change in circumstances that may 

impact their eligibility. In the absence of 

any reported change that could affect 

eligibility, no post-eligibility data 

matching is required. 

Comment: One commenter requested 

that CMS clarify § 435.1205(c)(3)(ii) that 

this state option [to schedule the first 

renewal under § 435.916 to occur 

anytime between 12 months from the 

date of application and January 1, 2015] 

authorizes less than annual periods of 

coverage/eligibility before renewal in 

instances where renewal date is set 

before January 1, 2015. 

Response: This option does allow for 

less than 1 year of coverage for a limited 

time. For example, if someone applies 

on November 1, 2013, and is determined 

eligible for coverage to begin January 1, 

the state may schedule renewal on 

November 1, 2014. This would result in 

less than a year of coverage. This onetime option is intended to provide for 

ease of administration in the renewal of 

coverage for a large number of 

individuals whose coverage begins on 

January 1, 2014 and would otherwise 

need to be renewed at the same time. 

Comment: We sought comments in 

the proposed rule on which sections of 

both this rulemaking as well as the 

March 2012 Medicaid eligibility final 

regulation need to be effective October 

1, 2013 (as opposed to January 1, 2014) 

to enable states to meet their 


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responsibilities under § 435.1205 and 

§ 457.370 of this rulemaking. We 

received no comments in response to 

this request. 

Response: In the absence of any 

comments regarding this question, we 

have determined that the following 

provisions of the March 2012 Medicaid 

eligibility final rule are effective October 

1, 2013 for purposes of effectuating 

§ 435.1205 and § 457.370 of this final 

regulation during the initial open 

enrollment period beginning October 1, 

2013: 

• Sections 435.603, 435.911, 

435.1200, 457.315, 457.330 and 457.348; 

• Amendments to §§ 431.10, 431.11, 

435.110, 435.116, 435.119, 435.907, 

435.916, 435.940–435.956, 457.340 and 

457.350, and the redesignation of 

§ 435.911 through § 435.914 as § 435.912 

through § 435.915. 

In addition, the following provisions 

of this final rule are effective October 1, 

2013: §§ 435.918, 435.1205, 457.370, 

and revisions to §§ 431.10, 431.11, 

431.201, 431.205, 431.206, 431.211, 

431.213, 431.230, 431.231, 431.240, 

435.119, 435.603, 435.907, 435.1200, 

457.110(a)(1), 457.348, and 457.350. 

Although effective for purposes of 

codification in the Code of Federal 

Regulations October 1, 2013 for 

application during the initial October 1– 

December 31 open enrollment period, 

absent a waiver under § 1115 of the 

Social Security Act approved by the 

Secretary, financial eligibility based on 

MAGI-based methodologies codified at 

§ 435.603 and § 457.315 and eligibility 

for adults under § 435.119 are not 

effective under the Affordable Care Act 

until January 1, 2014. Technical 

revisions to § 435.119 to retain the 

applicability date of January 1, 2014, 

even as the effective date of that section 

is moved to October 1, 2013, are made 

in this rulemaking. No revisions to 

§ 435.603 or § 457.315 are required, as 

those sections, as published in the 

March 2012 Medicaid final eligibility 

rule, already provide for the January 1 

applicability date. 

7. Children’s Health Insurance Program 

Changes 

a. CHIP Waiting Periods (§ 457.340, 

§ 457.350, § 457.805 and § 457.810) 

We proposed revisions to existing 

regulations regarding prevention of 

substitution of coverage at § 457.805 to 

limit the use of CHIP waiting periods to 

a maximum of 90 days. This policy 

aligns with section 1201 of the 

Affordable Care Act, which amended 

section 2708 of the Public Health 

Service Act to prohibit waiting periods 

exceeding 90 days for health plans and 

health insurance issuers offering group 

or individual coverage. This standard, 

though not directly applicable to CHIP, 

is currently exceeded in roughly half of 

the states that impose CHIP waiting 

periods today. We also proposed to 

require several exemptions to waiting 

periods, consistent with policies that 

many states have in place today, such as 

for individuals working for employers 

that stopped offering coverage of 

dependents. We received the following 

comments on our proposed waiting 

period policy as described below. 

Comment: Many commenters urged 

CMS to eliminate waiting periods on 

January 1, 2014, rather than permit 

states to continue to impose waiting 

periods of any length of time for 

children. A few commenters encouraged 

CMS to retain its current policy of 

providing states with the discretion to 

maintain waiting periods and establish 

their own procedures to minimize 

displacement of private insurance, and 

some states expressed their intent to 

eliminate waiting periods in their CHIP 

programs in 2014. One commenter 

suggested that waiting periods be 

applied only to children with family 

incomes above 200 percent of the FPL. 

Commenters’ concerns with the 

proposed 90-day waiting period were 

related to the administrative burden of 

waiting periods for state CHIP agencies 

and Exchanges, potential hindrances to 

streamlined and coordinated 

enrollment, disruptions in continuity of 

care for children and a lack of evidence 

of substitution. 

Response: While we acknowledge the 

commenters’ concerns related to the 

continuation of waiting periods for 

children in 2014, we also see a need to 

permit states flexibility to determine an 

appropriate substitution prevention 

strategy, with a full range of options 

from monitoring to imposition of 

waiting periods up to 90 days. Some 

states have already eliminated their 

CHIP waiting periods and we encourage 

other states to consider taking this step. 

Nothing in this final rule precludes a 

state from doing so. States may also 

elect to eliminate waiting periods 

specifically for children at lower income 

levels and/or identify additional 

exemptions to the waiting period 

beyond those required in this rule. 

Therefore, to maintain states’ flexibility 

in identifying substitution strategies 

while also limiting the period of time a 

child may not be eligible for CHIP due 

to a waiting period, we are finalizing the 

provisions at § 457.350, § 457.805 and 

§ 457.810 as proposed to permit states to 

impose a waiting period of no more than 

90 days, with certain specified 

exemptions. We note that this policy is 

consistent with the 90-day maximum 

waiting period described in Section 

1201 of the Affordable Care Act. 

Comment: Many commenters were 

concerned that the proposed policy for 

a maximum 90-day waiting period 

would require states and Exchanges to 

set up administratively complicated 

processes to temporarily enroll children 

in QHPs and to receive APTCs and CSRs 

while awaiting CHIP eligibility during 

the waiting period. Several commenters 

expressed concerns with the 

administrative complexity of the 

interactions that must occur between 

the Exchange and the CHIP agency if a 

waiting period is in place, including the 

requirement at § 457.350 for the CHIP 

agency to send the electronic record 

back to the Exchange for enrollment in 

a QHP if the child is determined not 

eligible for CHIP. These commenters 

also expressed concern that these 

potential complications do not align 

with the streamlined eligibility and 

enrollment process envisioned by the 

Affordable Care Act. Many commenters 

stated that requiring the change to a 90- 

day maximum waiting period policy 

would be administratively burdensome 

and costly to states at a time when 

information technology systems are 

already overburdened in preparation for 

significant eligibility changes in 2014. 

Some commenters highlighted that it is 

likely that some state systems will not 

have the capacity to track children who 

are locked out of CHIP during a waiting 

period and others expressed concern as 

to whether states or the Federal 

government have the capacity to 

smoothly implement waiting periods in 

the manner suggested in the proposed 

rule without a disruption in coverage for 

children. Some commenters also 

indicated that if waiting periods were to 

exist in 2014, state CHIP agencies would 

need to both track when these children 

would become eligible for CHIP and 

also initiate action to enroll children in 

the program. 

Response: For states that opt to apply 

a waiting period in 2014, we agree that 

transitioning a child from one insurance 

affordability program to another upon 

the conclusion of a 90-day waiting 

period may present operational 

challenges. States must take into 

consideration their system capabilities 

and weigh the perceived benefits of 

opting to have a waiting period against 

any additional administrative or system 

requirements needed to effectuate a 

seamless transition of such children 

from coverage in the Exchange and 

APTC to the state’s CHIP at the 

conclusion of the 90-day period. We 

agree that CHIP agencies will need to 

track when these children become 


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eligible for CHIP as required at 

§ 457.350. In addition, we have further 

clarified at § 457.340(d)(4), that without 

requiring new applications or 

information previously provided, CHIP 

agencies must implement processes to 

ensure a smooth transition for children 

from coverage through the Exchange to 

CHIP at the end of a waiting period, as 

well as facilitate the enrollment of 

otherwise CHIP-eligible children who 

have satisfied the waiting period, but 

who were not covered in the Exchange. 

For example, a state could automatically 

enroll a previously determined CHIPeligible child at the end of the waiting 

period without requesting any 

additional information from the family. 

Another option would be for a state to 

suspend applications for all children 

subject to a waiting period. Once these 

children have completed the waiting 

period, the state would then reactivate 

the application and determine whether 

the child is eligible for CHIP based on 

the information previously provided on 

the application. There is nothing in the 

above options that precludes a state 

from checking data sources for updated 

information or processing a change in 

circumstances reported by the family. 

Comment: Many commenters stressed 

that waiting periods of any length could 

negatively impact children’s access to 

continuous and coordinated health 

coverage. For example, commenters 

expressed concern that the proposed 

rule permitting CHIP-eligible children to 

enroll in qualified health plans (QHPs) 

in the Exchange during a waiting 

period, and subsequently enroll in CHIP 

at the end of a waiting period, will 

stimulate churning between QHPs and 

CHIP. These commenters emphasized 

that disruptions in coverage will impact 

the health status of children who are left 

uninsured and/or may have to change 

plans or providers. Some commenters 

stated that movement between plans 

and programs will inhibit the QHPs’ 

ability to measure the quality of care 

provided to children, and makes it 

difficult to hold plans accountable for 

improvements in quality outcomes for 

children over time. 

Response: We acknowledge that the 

use of waiting periods may create delays 

in eligibility for CHIP and increase the 

likelihood of churning between the 

Exchange and CHIP, which could result 

in disruptions in coverage that could 

negatively impact the health status of 

children. Therefore, this final rule 

confirms states’ ability to eliminate 

waiting periods to accommodate these 

concerns. In addition, the final rule 

codifies the limitation of waiting 

periods to a maximum of 90 days, to be 

consistent with waiting periods under 

section 1201 of the Affordable Care Act. 

We encourage states to examine the 

costs and benefits of imposing a waiting 

period in the context of the Affordable 

Care Act. To make the transition from 

Exchange coverage to CHIP as smooth as 

possible for children, states that do 

choose to maintain waiting periods will 

need to meet the requirements at 

§ 457.350(i), including providing 

notification to the appropriate insurance 

affordability program (for example, the 

Exchange) promptly and without undue 

delay of the date on which the waiting 

period will end and the child will be 

eligible to enroll in CHIP. We will 

provide states with technical assistance 

in this area. 

Comment: Several commenters 

indicated that while there were initial 

concerns upon implementation of CHIP 

in the late 1990s that the incentives for 

substitution of public coverage for 

private coverage would be significant, 

states and researchers have had ample 

opportunity to examine this issue over 

the last 15 years. These commenters 

stated that numerous studies have 

shown that substitution is difficult to 

measure, there continues to be much 

conjecture regarding the degree to 

which substitution occurs, and that 

there is no evidence that procedures like 

waiting periods actually prevent 

substitution. These commenters also 

noted that there is evidence that 

uninsured children, including children 

in waiting periods, frequently forego 

medical services due to high out-ofpocket costs. 

One state reported that during an 

almost 15-year period, there has been no 

evidence that crowd out is a concern, 

including for children at higher income 

levels. The commenter reported that the 

percentage of children in families who 

dropped their employer sponsored 

coverage and substituted it for CHIP has 

been consistently below 2 percent since 

the inception of CHIP. This commenter 

recommended that we permit 

monitoring of crowd out at all income 

levels rather than continuing to require 

a substitution strategy, such as a waiting 

period, for higher income children. 

Another commenter stated that in their 

experience in operating CHIP, nearly all 

families with former employersponsored insurance meet at least one of 

the exemptions to waiting periods 

included in its CHIP state plan. 

Response: We recognize that there is 

a robust but inconclusive evidence base 

in the literature calling into question the 

prevalence of substitution. And, we are 

therefore, revising our existing 

regulations to provide states with 

flexibility to determine how best to 

operate their CHIP programs. The 

preamble of the existing regulation (66 

FR 2490, January 11, 2001) required that 

states that provide CHIP coverage to 

children at or below 200 percent of the 

Federal poverty level (FPL) must have 

procedures for monitoring the rate of 

substitution of coverage, between 200 

and 250 percent of the FPL must 

monitor substitution and identify 

specific strategies to limit substitution if 

levels become unacceptable, and for 

coverage above 250 percent of the FPL 

states must describe how substitution is 

monitored and implement specific 

strategies to prevent substitution. We 

clarify in this final rule that effective 

January 1, 2014, monitoring of 

substitution is a sufficient approach for 

addressing substitution at all income 

levels. We expect that if this monitoring 

demonstrates a high rate of substitution, 

a state will consider strategies such as 

improving public outreach about the 

range of health coverage options that are 

available in that state. 

Comment: Some commenters 

requested that CMS provide clarity 

regarding the criteria for specific 

exemptions (for example, children with 

special health care needs), and 

suggested additional types of mandatory 

exemptions at the Federal level (for 

example, employees that have 

employers that have changed health 

plans or products). Some commenters 

noted that states have previously 

implemented many of the proposed 

required exemptions and that the 

majority of applicants already qualify 

for state-identified exemptions to the 

waiting period. 

Response: As noted by some 

commenters, many of the mandatory 

exemptions in the proposed rule have 

previously been instituted by states on 

a voluntary basis and have been 

effective. Therefore, we are adopting in 

our final rule the proposed exemptions 

at § 457.805. In addition, and as 

discussed in the preamble of our 

proposed rule, we are adding an 

affordability exemption at 

§ 457.805(a)(i) for cases when a child’s 

parent is determined eligible for APTC 

for enrollment in a QHP through the 

Exchange because the employersponsored insurance (ESI) in which the 

family was enrolled is determined 

unaffordable in accordance with 26 CFR 

1.36B–2(c)(3)(v). We consider this 

exemption to be essential to preventing 

families from having to choose between 

continuing ESI that has been 

determined to be unaffordable for the 

parent, and thereby forgoing premium 

tax credits and cost-sharing reductions 

for enrollment in an QHP, or dropping 

the ESI and allowing their child to go 

without coverage for a period of time to 


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qualify for CHIP. We note that states 

continue to have the flexibility to 

provide additional exemptions beyond 

those specified in this final rule, but 

other than the affordability exemption at 

§ 457.805(a)(i), there will be no 

additional exemptions added in this 

final rule. We note that we intend to 

issue further sub-regulatory guidance 

related to criteria for required waiting 

period exemptions. 

Comment: One commenter requested 

that CMS delay the effective date of this 

provision to give states adequate time to 

make the necessary changes related to 

its waiting period policy, such as a 

change in state law and/or budget. 

Response: This provision will be 

effective on January 1, 2014 unless a 

change in state law is needed for a state 

to comply with this provision. 

Specifically, for states with annual 

legislative sessions, the effective date for 

the application of the 90-day maximum 

waiting period and required exemptions 

must be no later than the first day of the 

next fiscal year beginning after the close 

of the first regular session of the 2014 

state legislature. For states that have a 

2-year legislative session, each year of 

the session is considered a separate 

regular session for this purpose. 

b. Limiting CHIP Premium Lock-Out 

Periods (§ 457.570) 

We proposed to define a CHIP 

premium lock-out as a period not 

exceeding 90 days when, at state option, 

a CHIP eligible child may not be 

permitted to reenroll in coverage if they 

have unpaid premiums or enrollment 

fees. Following a premium lock-out 

period, we proposed that the child must 

be permitted to enroll without regard to 

past due premiums. We proposed at 

§ 457.570 to permit states to impose 

premium lock-out periods only for 

families that have not paid outstanding 

premiums or enrollment fees, and only 

up to a 90-day period. We also specified 

that a premium lock-out period must 

end once a family has paid the premium 

or enrollment fee. We also invited 

comments on any alternative late 

payment policies to encourage families 

to make their CHIP premium payments 

in a timely manner to avoid gaps in 

coverage. We received the following 

comments concerning the proposed 

lock-out period provision. 

Comment: The majority of 

commenters supported the proposed 

rule requiring reasonable notice of nonpayment, limiting the use of lock-outs 

only for non-payment of premiums (and 

only as long as the non-payment 

continues, and subject to a 90-day 

maximum), and disallowing states from 

requiring payment of outstanding 

premiums at the end of the lock-out 

period before re-enrollment. In 

particular, commenters strongly 

supported that the CHIP agency must 

review the family’s circumstances 

(§ 435.570(b)) to determine if their 

income has declined, making the child 

eligible for Medicaid or a lower costsharing category. Some commenters also 

strongly opposed the imposition of lockout periods for any length of time for a 

CHIP child, and urged CMS to modify 

§ 457.570 to ban lock-out periods. These 

commenters indicated that lock-outs are 

contrary to the goals of a reformed 

health system, as well as the health of 

children. Some commenters stressed 

that a quarter of a year without health 

insurance can have a significant impact 

on a child’s healthy development, a 

child should not be subject to penalties 

for a failure to pay by another family 

member, and the Affordable Care Act 

recognizes that children should connect 

with their medical home eight times in 

the first year of life alone. One 

commenter also stated that lock-out 

periods in CHIP create disruptions in 

care, burdens on families, unnecessarily 

increase administrative costs, and that 

the elimination of lock-out periods is an 

important consumer protection. 

A few commenters asked whether the 

process of premium collection and debt 

forgiveness will be aligned with the 

premium collection regulations for the 

Exchange. 

Response: In response to the support 

of our proposed rule by the majority of 

commenters, and comments received by 

states related to the need to continue to 

have non-payment of premium policies 

in place to manage program costs (as 

described below), we are adopting in 

our final rule the proposed provisions 

that authorized states to institute a 

maximum 90-day lock-out period for 

non-payment of premiums. Lock-outs 

are permitted for non-payment of 

premiums, but only as long as the nonpayment continues and subject to a 90- 

day maximum. We also want to clarify 

that requirements related to reasonable 

notice of nonpayment, and review of the 

family’s circumstances to determine if 

their income has declined (for example, 

making the child eligible for Medicaid 

or a lower cost-sharing category), are 

existing regulatory provisions that we 

have not modified by this rulemaking. 

We appreciate the concerns expressed 

by some commenters with regard to the 

potential impact of any lock-out period 

on children, and for these reasons, we 

also adopted in the final rule the 

proposed restriction that lock-out 

periods may only apply to families who 

have not paid their premiums, and must 

end if a family pays its past due 

premium. We have also maintained the 

requirement that children must be 

permitted to enroll in CHIP subsequent 

to a 90-day lock-out period regardless of 

whether the family continues to owe 

past due premiums. In addition, we are 

also including requirements for nonpayment of premium that are intended 

to align CHIP policies with policies 

applicable in the Exchange, to the extent 

possible. In CHIP and for those 

individuals with APTC in the Exchange, 

individuals are provided with a 

premium payment grace period, may be 

disenrolled for non-payment of 

premiums, and will not be required to 

pay past due premiums to reenroll in 

coverage. Exchange eligible individuals 

will have a longer grace period (90 days 

as opposed to 30 days) than CHIP, but 

will not be permitted to enroll in 

coverage until the next open enrollment 

period. Therefore, the amount of time an 

individual may have to wait before 

reenrollment in a Qualified Health Plan 

will vary, depending on when the 

premiums are missed in relation to the 

next scheduled open enrollment period, 

but will be no longer than 90 days for 

a child in CHIP. 

We note that neither CHIP nor the 

Exchange have explicit rules governing 

debt forgiveness policies. More 

information on the Exchange rules 

related to non-payment of premiums is 

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

pkg/FR-2012-03-27/pdf/2012-6125.pdf. 

Comment: A few commenters 

requested clarification on policies 

governing non-payment of premiums. 

They requested clarification on policies 

related to ‘‘forgiving’’ past due 

premiums and enrollment fees, as well 

as whether a state can continue to try to 

obtain the outstanding premium amount 

without affecting eligibility. One 

commenter indicated that funds should 

be recoverable using a debt collection 

process. The same commenter also 

asked how many cycles of premium 

forgiveness would be allowed for an 

individual. Another commenter asked 

CMS to generally clarify what steps 

states and health plans would be 

permitted to take in situations in which 

a CHIP enrollee re-enrolls after a lockout period and again does not pay 

premiums. 

Response: We believe that 

disenrolling a child from coverage and 

potentially requiring a child to go 

without coverage up to 90 days 

(assuming the family has not paid the 

premium or enrollment fee), is a 

significant deterrence to prevent a 

family from establishing a pattern of 

non-payment of premiums and reenrollment. Therefore, this rule does not 

place a limit/cap on the number of times 


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an individual may be re-enrolled after 

non-payment of their premiums. 

Nothing in this rule precludes a state 

from electing to establish policies for 

collecting debt from families that have 

not made their premium payments. Nor 

does this rule preclude states and health 

plans from offering incentives to 

encourage timely payment of premiums. 

Comment: Some commenters 

recommended that states only be 

permitted to terminate coverage during 

a continuous eligibility period for 

failure to pay premiums as proposed at 

§ 457.342(b) after complying with the 

disenrollment protections at § 457.570. 

Several commenters stressed that the 

proposed rule should be strengthened to 

capture the intent noted in the preamble 

that ‘‘prohibiting a child from 

enrollment after the family pays the 

unpaid premium or enrollment fee is 

counter to promoting enrollment in and 

continual coverage.’’ Some commenters 

also recommended that the final rule 

specify that if a family pays its 

outstanding premium between the end 

of their payment grace period and before 

the end of the lock-out period, the child 

be reinstated back to the effective end 

date with no gap in coverage and no loss 

of 12-month continuous eligibility (if 

applicable). 

Response: We agree that coverage 

terminations occurring during a 

continuous eligibility period for failure 

to pay premiums can be implemented 

only after complying with the 

disenrollment protections at § 457.570, 

and we have modified § 457.342(b) to 

clarify this requirement. In addition to 

the preamble language describing that 

families that pay their premiums or 

enrollment fees prior to the end of a 

lock-out period must be re-enrolled in 

CHIP, we have also specified this 

requirement at § 457.570(c)(2) under 

this final rule. Section 2103(e)(3) of the 

Act describes a statutory premium grace 

period during which CHIP enrollees 

may pay their monthly premiums before 

being disenrolled. This provision 

requires States to grant individuals 

enrolled in separate child health 

programs a 30-day grace period, from 

the beginning of a new coverage period, 

to pay any required premium before 

enrollment may be terminated. The new 

coverage period begins the month 

following the last period for which a 

premium was paid. Aside from these 

requirements, states have, and will 

continue to have, flexibility to 

determine when coverage can be 

reinstated. As specified in our proposed 

rule at § 457.342(b), continuous 

eligibility may be terminated for failure 

to pay required premiums or enrollment 

fees. 

Comment: Some commenters 

expressed concerns for potential 

unintended consequences of the 

proposed policies. One commenter 

stated that the proposed rule creates an 

incentive for individuals who are 

otherwise able to pay their premium to 

cycle through CHIP eligibility every 

other three month period and 

encourages gaps in access to medical 

services for children, who may 

subsequently present to the CHIP with 

higher acuity levels and higher cost 

needs. The commenter also stated that 

the proposed rule increases costs for 

states and the federal government, and 

diminishes health outcomes for 

children. The commenter encouraged 

CMS to continue to require member 

accountability in the CHIP program by 

allowing the collection of outstanding 

premiums in the presence of a 90-day 

grace period. Another commenter 

objected to the proposed rule to limit 

lock-out periods to 90 days and allow an 

individual to re-enroll upon payment of 

past due premiums, regardless of 

whether the lock-out period has 

expired. The commenter stated that this 

approach creates adverse selection, in 

that families may stop paying their 

premium when they may not have 

immediate health care needs, and then 

again pay their premiums only when 

they are in need of health care. 

Additionally, this commenter stated 

individuals should be required to pay 

any past due premiums as a condition 

of retaining eligibility for CHIP, even 

after a lock-out period has been 

satisfied. This commenter also stated 

that the proposed rule discards the plain 

statutory authority of title XXI that 

delegates this policy to states. Another 

commenter noted that CHIP is a 

‘‘stepping stone’’ between Medicaid and 

employer-sponsored insurance or 

Exchange coverage, and that premiums 

in its current CHIP are minimal in 

comparison to employer-based coverage 

and private coverage. The commenter 

requested that premiums not be waived 

in states with requirement to repay 

outstanding premiums and no lock-out 

period. The commenter stated that 

waiving premiums does not promote 

responsibility, intrinsic value, or the 

effective management of program costs 

for states. 

Response: The goal of allowing 

coverage for families that make current 

payments must be balanced with the 

concern that families will game the 

system to try to obtain coverage without 

paying premiums. We agree that there 

may be situations where families either 

elect, or are unable to pay their 

premiums multiple times during a given 

year. However, we are not aware of any 

evidence that these situations represent 

a significant number of cases. And, as 

stated in our response to the comment 

above, as long as states adhere to 

regulations at § 457.570, nothing in this 

rule precludes a state from continuing to 

establish policies for collecting debt 

from families that have not made their 

premium payments. We also encourage 

states to continue implementing 

approaches for simplifying premium 

payment arrangements and coping with 

administrative concerns families may 

have, and we continue to encourage 

states in this area to minimize the 

number of families that are disenrolled 

for non-payment of premiums. 

Comment: One commenter stated that 

if CHIP lock-out periods are allowed in 

2014, CMS should prohibit states that 

use this option from requiring children 

subject to a lock-out period to reapply 

for coverage and that a child returning 

to coverage following a lock-out period 

should be handled in the same manner 

as a renewal. The commenter believes 

that because such children were eligible 

for CHIP apart from non-payment of 

premiums or enrollment fees, the state 

agency should be able to reassess 

eligibility based on available electronic 

data sources and families should only 

be asked for additional information if 

what has already been provided and 

currently available electronic data are 

not sufficient to establish eligibility. 

Response: While we encourage states 

to consider the potential administrative 

cost savings and reduced burden on 

families that could result from assigning 

a pending eligibility status to a child for 

non-payment of premiums rather than 

requiring a new application, we will 

continue to permit states to have the 

flexibility to make this decision. 

Comment: One commenter requested 

clarification on whether a child can 

receive APTC or CSR during a premium 

lock-out period. 

Response: We anticipate that this 

issue will be addressed in further 

guidance from the Department of 

Treasury. 

Comment: The preamble to our 

proposed rule specified that a state may 

not require the collection of past due 

premiums or enrollment fees as a 

condition of eligibility for reenrollment 

once the lock-out period has expired, 

regardless of the length of the lock-out 

period. One commenter recommended 

that this policy also be specified in 

§ 457.570(c)(2). 

Response: Section 457.570(c)(2) 

clearly specifies that ‘‘a state may not 

require the collection of past due 

premiums or enrollment fees as a 

condition of eligibility for reenrollment 


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once the State-defined lock out period 

has expired, regardless of the length of 

the lock-out period.’’ We have not made 

any modifications to this section. 

Comment: Some commenters 

indicated that providing multiple ways 

to pay premiums and sending multiple, 

non-threatening payment due reminders 

are helpful in encouraging payment. 

These commenters suggested that CMS 

consider future sub-regulatory guidance 

to states to promote best practices in 

premium payments. 

Response: Most CHIPs report efforts to 

facilitate payment of premiums and 

enrollment fees, easing the process for 

families, and the majority of states also 

send multiple payment due reminders 

and allow a variety of payment methods 

(such as allowing families to make 

payments at multiple locations). We 

will consider issuing further subregulatory guidance in this area. 

8. Premium Assistance (§ 435.1015) 

We proposed to codify the last 

sentence of section 1905(a) of the Act 

that authorizes payment of ‘‘other 

insurance premiums for medical or any 

other type of remedial care or the cost 

thereof’’ to support enrollment of 

individuals eligible for Medicaid in 

plans in the individual market, 

including enrollment in QHPs doing 

business on the Exchange. Premium 

assistance is one mechanism for 

facilitating the coordinated system of 

coverage between Medicaid, CHIP, and 

the Exchange in 2014. It provides an 

option for states to assist families who 

wish to enroll in the same health plan 

when some family members are eligible 

for either Medicaid or CHIP while other 

family members obtain coverage in the 

Exchange with advance payments of the 

premium tax credit, and it can provide 

a way to minimize the extent to which 

individuals have to change plans when 

their circumstances change such that 

their eligibility for an affordable health 

insurance plan changes. The proposed 

rule reflected longstanding statutory 

provisions in light of the new coverage 

options available in 2014. We received 

the following comments to proposed 

premium assistance provisions: 

Comment: Many commenters were 

supportive of states’ ability to use 

premium assistance authority to 

purchase private insurance coverage for 

health plans in the individual market, 

including QHPs doing business on the 

Exchange. At the same time, however, 

they emphasized the importance of 

ensuring that Medicaid and CHIPeligible individuals receive the full 

scope of services to which they are 

guaranteed in Medicaid and CHIP, such 

as the full range of pediatric services 

provided in Medicaid and CHIP. 

Commenters urged CMS to take steps to 

ensure that states provide families and 

individuals with all of the information 

they need regarding the benefits to 

which they are entitled. They noted that 

the information states track to ensure 

cost-effectiveness should also be used to 

assess whether children and adults are 

receiving the full package of Medicaid 

or CHIP services. One commenter 

suggested that states should be required 

to ensure that beneficiaries experience a 

seamless enrollment process and that 

they have a single insurance card and 

point of contact for all benefits. 

Response: Under all premium 

assistance arrangements, Medicaid and 

CHIP-eligible individuals remain 

Medicaid or CHIP beneficiaries and 

continue to be entitled to all Medicaid/ 

CHIP benefits and cost sharing 

protections. Thus, we require at 

§ 435.1015(a)(2) and (a)(3) that the state 

agency furnish all benefits covered 

under the state plan that are not 

available through the individual health 

plan and also that the individual does 

not incur any cost sharing in excess of 

that allowed in Medicaid. We expect 

states to have mechanisms in place to 

ensure that beneficiaries understand 

their available choices of either direct 

state plan coverage or coverage through 

premium assistance for an individual 

health plan, including a QHP in the 

Exchange, under the premium 

assistance option, as well as how to 

access any additional benefits or cost 

sharing assistance. Therefore, we have 

revised § 435.1015(b) to include 

provisions requiring informed choice 

and information on the process for 

accessing additional benefits and help 

with cost sharing, if the individual 

elects to receive coverage through the 

premium assistance option. We do not 

believe, however, that it is appropriate 

to direct through rulemaking the 

specific procedures states must employ 

to provide any necessary ‘‘wraparound’’ 

benefits or cost sharing; under the state 

plan option, states have the flexibility to 

determine how best to meet these cost 

sharing and benefit responsibilities. We 

have also clarified in § 435.1015(b) that 

states must require that individuals who 

have elected to receive premium 

assistance must obtain covered items 

and services through the individual 

health plan to the extent that the insurer 

is contractually or otherwise responsible 

to pay for such benefits. 

Comment: Some commenters 

expressed specific concerns about cost 

sharing policies and urged CMS to 

consider putting additional beneficiary 

protections in place specific to premium 

assistance to ensure that people 

understand the cost sharing differences 

between Medicaid and CHIP and QHPs. 

They recommended that we create 

requirements for coordination between 

Medicaid and the QHP issuer to ensure 

that people do not exceed permissible 

cost sharing and asked CMS to provide 

guidance on how to monitor cost 

sharing. 

Response: We expect states to have 

mechanisms in place to provide benefits 

that wrap around health plan coverage 

to the extent that the health plan offers 

fewer benefits, or has greater cost 

sharing requirements than in Medicaid 

or CHIP. These mechanisms will need to 

be coordinated with the health plan to 

successfully implement a premium 

assistance program. As noted above, we 

are requiring at § 435.1015(b) that states 

inform individuals how to access 

additional benefits not provided by the 

insurer, and also inform individuals 

how to receive cost sharing assistance. 

We are not proposing any specific 

requirements about the way in which 

such coordination can be effectuated, 

however, because we believe that states 

should have flexibility to develop 

effective coordination procedures 

consistent with state systems and 

procedures, including variation in state 

health care delivery systems. 

Comment: Many commenters 

requested clarification of the costeffectiveness test for premium 

assistance. They stressed the importance 

of a strong cost-effectiveness test to 

ensure that taxpayer dollars are spent 

wisely and also that beneficiaries do not 

lose important benefits and cost sharing 

protections. They were concerned that 

the proposed rule could be interpreted 

to include only the cost of premiums to 

purchase coverage and not to include in 

the test the costs associated with paying 

copayments, deductibles, and other cost 

sharing requirements. They believe that 

this should be clarified in the final rule 

to explicitly include cost sharing. Other 

commenters stated that this costeffective analysis should be performed 

on an annual basis to ensure that the 

premium assistance program remains 

cost-effective even if Medicaid and the 

individual market experience different 

rates of cost growth. 

Response: Consistent with our 

approach to cost-effectiveness in all 

premium assistance authorities, we 

intend for states to consider the cost 

sharing requirements of the private 

health plan (and therefore the cost of 

providing the cost sharing protections) 

when determining whether premium 

assistance is a cost-effective option, and 

we agree that this should be clarified. 

Therefore, we are revising 

§ 435.1015(a)(4) accordingly. States 


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implementing premium assistance must 

describe their cost-effectiveness 

methodology, and to the extent that 

such a methodology relies on annual per 

person costs, we would expect states to 

be re-running the analysis at least 

annually, as new cost data is available. 

Comment: Many commenters 

requested additional detail on how the 

option would be operationalized by 

state Medicaid agencies, Exchanges, and 

QHPs. One noted that successful 

premium assistance programs require 

robust data sharing, data mining, 

automated calculations using costeffective algorithms, and strong 

relationships with private insurers. 

Some commenters requested that CMS 

provide states with a template or other 

tools to simplify the implementation of 

premium assistance. 

Response: We will continue to 

provide technical assistance to states on 

the operational aspects of pursuing this 

premium assistance approach, relying 

on the experience states have had over 

the years implementing premium 

assistance. 

Comment: Some commenters stated 

that families should have the choice of 

either premium assistance or direct 

Medicaid state plan coverage, even 

when premium assistance is costeffective for the state, and they 

supported the proposed rule’s provision 

that states may not require enrollment 

in premium assistance as a condition of 

Medicaid eligibility. Other commenters 

requested that CMS remove the 

voluntary participation requirement 

either entirely, or if this requirement is 

retained, they asked that states be 

allowed to make participation in 

premium assistance mandatory for 

certain Medicaid enrollees, such as 

adults up to 138 percent of the FPL who 

would be part of the state’s Medicaid 

expansion population, or for pregnant 

women with incomes above 133 percent 

of the FPL. 

Response: Consistent with the statute, 

we are retaining the provision at 

§ 435.1015(b) that states may not require 

a Medicaid-eligible individual, as a 

condition of receiving Medicaid 

benefits, to enroll in a health plan in the 

individual market through a premium 

assistance arrangement. Enrollment in 

individual market coverage is not a 

statutory condition for eligibility. We 

are also clarifying in § 435.1015(b) that 

states must require that individuals who 

have elected to receive premium 

assistance must obtain covered items 

and services through the individual 

health plan to the extent that the insurer 

is contractually or otherwise responsible 

to pay for such benefits. This is 

consistent with the provision in section 

1902(a)(17) of the Act that, in 

determining the amount of medical 

assistance, states may consider available 

resources, and the provision in section 

1902(a)(25) of the Act that requires that 

states ensure that liable third parties pay 

primary to Medicaid. We address the 

issue of requiring enrollment in 

premium assistance for certain 

populations in the last response in this 

section. 

Comment: Several commenters 

expressed concern that permitting state 

Medicaid programs to establish 

premium assistance programs could 

affect premiums in the Exchange. Some 

commenters recommended that CMS 

revise the proposed § 435.1015(a)(4) to 

require that premium assistance not 

increase federal costs and not increase 

premiums in the individual market. 

Response: Medicaid beneficiaries 

enrolled in a QHP would be included in 

the individual market single risk pool of 

the health insurance issuer of the plan 

in which they are enrolled, just as any 

other individual obtaining coverage 

through such plans. § 435.1015(a)(4) 

requires the cost of premium assistance 

to be ‘‘comparable’’ to the cost of 

providing direct coverage under the 

state plan. We do not use a more 

restrictive word to allow flexibility 

because the amount, duration, and 

scope of the QHP coverage, or the nature 

of the QHP service delivery system, 

might be different from direct coverage 

under the state plan. 

Comment: Some commenters stated 

that CMS must take additional steps to 

ensure that states do not steer family 

members of Medicaid-eligible 

individuals into less expensive plans to 

accommodate a premium assistance 

model and also to ensure that any 

enrollees who will be using premium 

tax credits have sufficient choice in 

QHPs. The commenters stated that 

regulations should require states to 

remain impartial in providing all 

available information on all QHPs so the 

family can choose the best plan or plans 

for the entire family, and also that 

Navigators, application assisters, and 

application counselors must be trained 

on the premium assistance program and 

provide impartial assistance to families. 

Response: As noted above (and at 

§ 435.1015(b)), when a state implements 

the state plan premium assistance 

option, the beneficiary’s participation 

must be voluntary. We also expect states 

to ensure that application assisters and 

certified application counselors comply 

with the requirements in § 435.908 of 

this part and § 457.340 under subpart C 

of part 457, which include requirements 

that they be effectively trained in the 

eligibility and benefits rules and 

regulations governing enrollment in a 

QHP through the Exchange and all 

insurance affordability programs 

operated in the state. In addition, the 

Exchange regulations at 45 CFR 155.210 

require that Exchange Navigators 

provide impartial information and 

assistance. A Medicaid or CHIP enrollee 

who is receiving benefits in whole or in 

part through a premium assistance 

arrangement with a QHP will not be 

eligible for a premium tax credit under 

section 36B of the Internal Revenue 

Code because such credits are not 

available to individuals who, for the 

coverage month, are eligible for 

minimum essential coverage through 

Medicaid or CHIP. 

Comment: A few commenters 

questioned whether section 1905(a)(29) 

of the Act creates the authority for 

premium assistance in the individual 

market. Many commenters 

recommended that CMS eliminate the 

proposed policy to allow premium 

assistance for plans in the individual 

market, or otherwise tightly 

circumscribe it, citing cost concerns, as 

well as concerns about the operational 

complexity and potential consumer 

confusion for consumers created by the 

‘‘wrap’’ requirement. 

Response: As we stated in the 

preamble of the proposed rule (78 FR 

4624 and 4625), in section 1905(a)(29) 

of the Act, ‘‘medical assistance’’ is 

defined to include payment of part or all 

of the cost of ‘‘other insurance 

premiums for medical or any other type 

of remedial care or the cost thereof.’’ We 

have interpreted this provision to 

permit payment of FFP for premiums for 

health plans for Medicaid-eligible 

individuals, provided the state 

determines it cost-effective to do so. 

CMS has approved state premium 

assistance programs under this authority 

prior to the enactment of the Affordable 

Care Act. The Affordable Care Act 

provided for new rules regulating the 

operation of the individual and small 

group insurance markets, and expanded 

access to insurance coverage through 

QHPs participating in the Exchange. 

This results in new opportunities for 

states to deliver Medicaid coverage 

through the purchase of private health 

insurance in the individual market. Our 

goal is to work with states to ensure that 

their premium assistance approaches 

result in a cost-effective, seamless, and 

coordinated system of health care for 

beneficiaries. 

Comment: Several commenters 

recommended delaying implementation 

of premium assistance until rates are 

determined for QHPs in the Exchange, 

and the individual market has settled 

from the changes it will experience in 


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2014, and states have experience 

implementing the Medicaid expansion. 

Response: As we noted above, 

premium assistance is an option 

available under current law. Some states 

have already expressed interest in using 

the premium assistance model to deliver 

benefits to their Medicaid expansion 

beneficiaries through QHPs doing 

business on the Exchange. In addition, 

beginning in 2014, some low-income 

children will be covered by Medicaid or 

CHIP while their parents obtain 

coverage in the Exchange with advance 

payments of the premium tax credit, 

and premium assistance provides an 

opportunity for state Medicaid and 

CHIP programs to offer coverage to such 

families through the same plan, even if 

supported by different payers. It also 

provides opportunities for continuity of 

care by increasing the likelihood that 

individuals could remain in the same 

health plan when moving back and forth 

between Medicaid and Exchange 

coverage due to fluctuations in income 

or other changes in circumstances. We 

are not establishing new authority but 

rather ensuring that the existing 

authority reflects the new coverage 

options in the individual and small 

group markets established by the 

Affordable Care Act. 

Comment: Many commenters 

supported the retention of the proposed 

regulation text that makes FFP available 

for payment of health plan premiums 

for ‘‘individuals’’ eligible for Medicaid. 

They believe that this language supports 

the enrollment of Medicaid-eligible 

individuals in individual market plans, 

including plans offering family 

coverage, while not incorporating 

limiting definitions of ‘‘family’’ that 

would unnecessarily limit the benefits 

of the rule to individuals in families that 

do not comprise a taxpayer household. 

One commenter asked for CMS to clarify 

the meaning of ‘‘family’’ as used in the 

premium assistance section of the 

preamble of the proposed rule. The 

commenter also questioned whether this 

option is limited to Medicaid and CHIPeligible individuals who have family 

members enrolled in an individual 

health plan, and if so, asked if we 

proposed to limit this option to 

members of the same tax household, 

MAGI assistance group, or to immediate 

family members. 

Response: We have not proposed a 

definition of ‘‘family’’ that is unique to 

premium assistance. Regulations at 

§ 435.603 of this part (and at § 457.301 

and § 457.315 under subpart C of part 

457 for CHIP) contain definitions and 

requirements related to family size, 

household, and MAGI-based income for 

the purposes of Medicaid and CHIP 

eligibility determinations. 

The premium assistance option 

permits Medicaid or CHIP funds to be 

used to deliver coverage to Medicaid or 

CHIP-eligible individuals through the 

purchase of private health insurance, 

and it is not limited to Medicaid or 

CHIP-eligible individuals who have 

family members enrolled in a QHP. In 

some cases, the Medicaid or CHIP 

beneficiary could be enrolled in a health 

plan that provides individual coverage 

only, while in other situations, the 

Medicaid or CHIP beneficiary would be 

enrolled in a health plan that provides 

family coverage, depending on the 

categories of family coverage offered in 

the Exchange. 

Comment: Some commenters, who 

were in favor of the continued 

authorization of premium assistance 

programs, stated that states should be 

allowed to determine how to make the 

concept work and urged CMS to allow 

complete state flexibility in designing 

and implementing benefit structures 

and cost sharing requirements. 

Response: Individuals receiving 

coverage through premium assistance 

are Medicaid beneficiaries and are 

entitled to the full range of protections, 

including benefits and cost sharing, 

available under the law. States have 

flexibility under the state plan option to 

design how they will effectuate the 

coverage that is required while meeting 

applicable statutory and regulatory 

requirements. To the extent a state 

needs additional flexibility, the state 

may wish to explore demonstration 

options under section 1115 of the Act. 

Comment: Several commenters 

recommended that premium assistance 

programs might require, or best be 

operated under, a Medicaid section 

1115 demonstration. 

Response: States have the flexibility 

to adopt premium assistance as an 

option under the state plan if it is 

voluntary for beneficiaries and adheres 

to all applicable statutory and regulatory 

provisions. Enrollment in individual 

market coverage is not a statutory 

condition of eligibility. Some states 

have expressed interest in submitting 

proposals for section 1115 

demonstrations to require enrollment in 

premium assistance and to allow for 

consideration of a broader range of 

factors when cost-effectiveness is 

assessed. In response to these inquiries, 

we will consider approving a limited 

number of premium assistance 

demonstrations that are determined to 

further the objectives of the Medicaid 

program and which will test these new 

arrangements and inform policy. For 

states that implement premium 

assistance through a section 1115 

demonstration, which could include 

mandatory enrollment into premium 

assistance, we will only consider 

demonstrations under which states 

make arrangements with the health plan 

to provide wraparound benefits and cost 

sharing assistance. For further 

information on the section 1115 option, 

including guidelines for proposals, 

please refer to Premium Assistance 

Frequently Asked Questions (FAQs) that 

CMS issued on March 29, 2013, 

available at http://medicaid.gov/StateResource-Center/FAQ-Medicaid-andCHIP-Affordable-Care-Act-ACAImplementation/Downloads/FAQ-03-29- 

13-Premium-Assistance.pdf 

9. Changes to Modified Adjusted Gross 

Income and MAGI Screen 

We proposed to implement sections 

1902(e)(14) and 1943 of the Act, and 

section 1413 of the Affordable Care Act 

as they pertain to the definition of 

‘‘modified adjusted gross income’’ 

(MAGI) and ‘‘household income’’ in 

section 36B(d)(2) of the Internal 

Revenue Code of 1986 (‘‘36B 

definitions’’). We also proposed a 

modification to previously issued 

regulations implementing section 

1902(e)(14)(I) of the Act. The proposed 

rule applied the 5 percent disregard 

established by the Act for purposes of 

determining the income eligibility of an 

individual for medical assistance whose 

eligibility is determined based on 

MAGI, provided the determination was 

for the eligibility group with the highest 

income standard under which the 

individual could be determined eligible 

using MAGI-based methodologies. The 

proposed changes are discussed in more 

detail in the January 22, 2013 Medicaid 

Eligibility proposed rule (78 FR 4625 

through 4627). We received the 

following comments concerning the 

proposed changes to MAGI provisions: 

Comment: Some commenters 

supported the proposal to apply the 5 

percent disregard only to the highest 

income threshold under a MAGI-group 

available for the individual and the 

related impact on the number of 

individuals for whom states will be able 

to claim the ‘‘newly eligible’’ enhanced 

match rate. 

Response: The Affordable Care Act 

established a 5 percentage point of the 

FPL disregard ‘‘for the purposes of 

determining income eligibility’’ for 

individuals whose eligibility is based on 

MAGI. The objective of the proposal is 

to balance giving beneficiaries the 

benefit of the disregard for eligibility 

purposes, with the intent to give states 

the opportunity to claim enhanced 

match for all newly eligible individuals 


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if the state chooses to extend coverage 

to the new adult group. We propose 

doing so by ensuring that the disregard 

is applied to the income calculation of 

individuals for whom the disregard 

matters for a determination of eligibility 

for Medicaid under MAGI-based rules— 

that is, those for whom the application 

of the disregard means the difference 

between being eligible for Medicaid and 

being ineligible. These individuals are 

those whose income is within 5 FPL 

percentage points of the highest net 

income standard for which they can 

obtain Medicaid eligibility under MAGIbased income rules. The disregard 

would not be applied for a 

determination of eligibility for a 

particular eligibility group, but rather 

for eligibility for Medicaid. 

Comment: One commenter questioned 

whether the proposed policy is 

consistent with federal law, which the 

commenter views as entitling all 

applicants to the 5 percent disregard. 

The commenter stated that our proposed 

policy could affect beneficiaries’ cost 

sharing or benefits because it could 

result in a change in their eligibility 

groups. Some commenters noted that, 

for example, some parents could receive 

ABP coverage instead of the traditional 

Medicaid benefit package. The 

commenters noted, however, that this 

concern should be minimal since newly 

eligible adults who are medically frail 

and likely to need additional services 

covered under the regular Medicaid 

benefit package would have a choice of 

benefit package, between what is offered 

through an ABP that is based on section 

1937 requirements, inclusive of EHB’s, 

and ABP coverage that is not subject to 

section 1937 requirements, and includes 

the services approved in the state’s 

Medicaid plan. Other commenters cited 

concerns about pregnant women and 

categories that offer only limited 

pregnancy-related services. 

Response: The proposal to apply the 

5 percent disregard to determine 

Medicaid eligibility rather than 

eligibility for a particular category is 

consistent with section 1902(e)(14)(I) of 

the Act. It is not necessarily the case 

that not applying the 5 percent 

disregard for purposes of determining 

eligibility category would result in 

moving individuals into a different 

eligibility group with different benefit 

and possibly cost-sharing rules because 

if the 5 percent disregard were applied 

as a general disregard, states would set 

income eligibility standards at levels 

that would compensate for that impact. 

For example, if the 5 percent disregard 

was applied generally, states might set 

the income eligibility standard for 

parents at a level 5 percent less than 

they would otherwise. Moreover, any 

adverse impact of a shift of beneficiaries 

from the parent group to the new adult 

group with coverage through an ABP 

will be minimized by the medically frail 

exception to benchmark coverage 

limitations. For pregnant women with 

income at the border between full 

benefits and pregnancy-related benefits, 

although the absence of the disregard 

may result in a pregnancy-related 

benefit package instead of full benefits, 

our March 2012 rule revised 

§ 435.116(d)(3) to clarify that a State’s 

coverage of pregnancy-related services 

must be consistent with § 440.210(a)(2) 

and § 440.250(p), which allows States to 

provide additional services related to 

pregnancy to pregnant women (see 77 

FR 17149). 

Comment: Several commenters 

recommended that CMS not revise the 

MAGI disregard rules. They raised 

concerns that there is too little time for 

states to make the systems and business 

process updates required to comply 

with the October 1, 2013 open 

enrollment period. They noted that the 

proposed rule requires more complex 

programming compared to simply 

adding 5 percent to all MAGI-based 

categories and that this policy could 

impact a state’s ability to implement the 

MAGI requirements timely. In addition, 

they noted that although the 90/10 

matching funds are available to make 

such systems-related changes, states 

must still finance 10 percent of the cost 

of these changes despite experiencing 

severe budgetary issues. 

Response: We understand that many 

states relied upon the March 2012 final 

eligibility rule when planning their 

eligibility system builds for 2014. We 

appreciate that it may be difficult at this 

point in time to make programming 

changes for eligibility systems and have 

those changes take effect by January 1, 

2014. In light of this challenge, we are 

finalizing our proposal, but we will not 

take any compliance actions for states 

whose systems cannot accommodate 

this eligibility determination 

requirement. We will approve eligibility 

determination systems even if as of 

January 1, 2014, the system applies the 

5 percent disregard across the board to 

all individuals whose eligibility is 

determined using MAGI-based rules, 

based on a state’s assurance that by 

January 1, 2015 the state will update the 

system to apply the disregard only for 

a determination of eligibility for 

Medicaid under MAGI-based rules. 

Comment: Some commenters 

requested that states that are not 

expanding to cover the new adult 

group—and thus not claiming enhanced 

FMAP—should have the option to use 

the new calculation and continue to 

apply the 5 percent across- the-board 

disregard. Others requested that all 

states be given the option to apply the 

5 percent disregard only to the highest 

income threshold under MAGI as 

proposed in our proposed rule. 

Response: We believe that applying 

the 5 percent FPL disregard to 

determine eligibility based on overall 

eligibility rather than eligibility group is 

the best interpretation of section 

1902(e)(14)(I) of the Act. Therefore, we 

are adopting our proposed policy as 

final, subject to the flexibility in 

implementation schedules discussed 

above. 

Comment: One commenter asked 

whether the 5 percent MAGI income 

disregard would be applicable to only 

eligibility for the coverage group or 

whether it would also be applicable to 

cost-sharing or premium determinations 

—within the coverage group. 

Response: Under this final rule, the 5 

percent disregard under section 

1902(e)(14)(I) of the Act applies to 

income determinations relative to 

Medicaid eligibility. It does not apply to 

determine into which eligibility group 

an individual should be placed. Nor is 

it intended to be applied to determine 

income for premium or cost-sharing 

payments. 

Comment: One commenter requested 

clarification about whether, in a state 

that implements the eligibility 

expansion under section 2001 of the 

Affordable Care Act (that is, adopts the 

adult group), the state would need to 

apply the 5 percent disregard to a parent 

or caretaker relative age 65 or older that 

was not eligible for the expansion 

group. 

Response: The 5 percent disregard is 

not applied based on an eligibility 

group, but based on whether the 

disregard would affect MAGI-based 

income eligibility for Medicaid as stated 

above. In the case of a parent or 

caretaker relative age 65 or older, the 5 

percent disregard would be applied in 

determining MAGI-based income if the 

individual would otherwise be 

ineligible based on income. For 

example, if the parent/caretaker 

eligibility standard in a state was 80 

percent of FPL and the individual’s 

income before application of the 

disregard put them over the 80 percent 

standard, the 5 percent disregard would 

be applied and the individual would be 

eligible if the disregard brought their 

countable income below 80 percent of 

the FPL. 

Comment: Another commenter asked 

for clarification of whether the 5 percent 

is only applied when an individual 

would not be eligible in another group 


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or if it would apply to all individuals 

being determined for eligibility in the 

group. The commenter specifically 

asked about whether the 5 percent 

disregard would be applied to keep 

family coverage in the Transitional 

Medical Assistance (TMA) group. 

Response: TMA is beyond the scope 

of this rulemaking. TMA will be 

addressed in future guidance. 

Comment: Several commenters 

questioned whether applying the 5 

percent disregard to the MAGI income 

standards equivalent being produced 

through the process generally referred to 

as ‘MAGI conversion’ creates a double 

counting of the disregard. Other 

commenters asked whether states are 

being required to expand their income 

levels for pregnant women and children 

by 5 percent due to application of the 

disregard. 

Response: We considered carefully 

the requirements in section 

1902(e)(14)(A) of the Act in our 

December 2012 guidance to states on the 

establishment of converted MAGI-based 

income standards equivalent to levels 

used at the enactment of the Affordable 

Care Act (‘‘MAGI conversion’’). See 

http://www.medicaid.gov/FederalPolicy-Guidance/downloads/ 

SHO12003.pdf. Under this guidance, 

converted MAGI-based income 

standards are set without regard to the 

5 percent disregard, since the MAGI 

income conversion requirements in 

section 1902(e)(14)(A) of the Act are 

independent of the 5 percent disregard 

at section 1902(e)(14)(I) of the Act. 

MAGI-equivalent income standards are 

established taking into account 

disregards that are currently in effect 

but which will no longer be in effect 

under MAGI. As a result, there is no 

double-counting of the 5 percent 

disregard. The 5 percent disregard 

would apply once when calculating an 

individual’s MAGI-based income if the 

individual would otherwise be 

ineligible. 

Comment: Several commenters 

requested clarification regarding how 

the 5 percent disregard under MAGI 

applies to applicants under a separate 

CHIP program. Similarly, commenters 

asked how the 5 percent disregard is 

applied to individuals at the boundary 

between Medicaid and CHIP eligibility. 

Response: The 5 percent disregard 

should be applied to individuals who 

may be eligible for the highest income 

standard under the applicable Title of 

the Act (for example, Title XIX or Title 

XXI) for which the individual may be 

determined eligible using MAGI-based 

methodologies. Therefore, in states that 

have separate CHIP programs, the 

income disregard should be applied 

both for the highest Title XIX eligibility 

group available to the child, as well as 

to the separate CHIP program to cover 

similarly situated children at a higher 

income standard. The result would be 

that children with a MAGI in the 5 

percent band above the Medicaid 

income standard at issue would be 

determined eligible for Medicaid. To 

clarify, we are modifying the language 

in the final rule at § 435.603(d)(4) to 

specify that the 5 percent disregard 

should be applied to the highest income 

standard in the applicable Title of the 

Act under which the individual may be 

determined eligible using MAGI-based 

methodologies. We do not believe this 

will impact the children for whom the 

state can claim enhanced match, 

because the state can claim enhanced 

match for any child whose income is 

greater than the upper income threshold 

under Medicaid on March 31, 1997, 

whether that child is covered under 

Title XIX or Title XXI. 

Comment: One commenter asked 

whether there is any reason it would not 

be permissible for a state to program its 

eligibility system to build in the 5 

percent disregard and effectively set the 

income limit at 5 percent higher than 

the state’s established limit for MAGI 

related eligibility groups. 

Response: Because the disregard is 

applied at the individual level, 

increasing the eligibility income 

standard for a group would not be the 

best way to program an eligibility 

system. Furthermore, doing so would be 

inconsistent with the statutory purpose 

of developing a uniform income 

determination methodology applicable 

in all states, which could be applied by 

the Exchange as well as the State 

Medicaid or CHIP agency. Therefore, 

this would not be permissible. Instead if 

the eligibility system cascades 

sequentially through possible eligibility 

options, it should apply the 5 percent as 

one last eligibility step, only when the 

system has returned a determination of 

ineligibility because the individual is 

over scale for income. 

10. Single State Agency—Delegation of 

Eligibility Determinations to Exchanges 

(§ 431.10 and § 431.11) 

We proposed to revert to the policy 

proposed in the Medicaid eligibility 

proposed rule published on August 17, 

2011 (76 FR 51148), that single state 

Medicaid agencies will be limited to 

delegating eligibility determinations to 

Exchanges that are government agencies 

maintaining personnel standards on a 

merit basis. We retained many of the 

provisions strengthening the control and 

oversight responsibilities of the single 

state agency including the authority to 

issue policies, rules and regulations on 

program matters and to exercise 

discretion in the administration or 

supervision of the plan. We also 

proposed to make changes to § 431.11 

regarding state organization. We 

received the following comments 

concerning the proposed changes to the 

single state agency provisions: 

Comment: The majority of 

commenters strongly support the 

decision to revert to the policy 

originally proposed in the August 2011 

Medicaid eligibility rule that delegation 

of the authority to determine eligibility 

for Medicaid is limited to Exchanges 

that are government agencies 

maintaining personnel standards on a 

merit basis. One state specifically 

commented that it supports this change 

as it allows states to maintain program 

integrity. Several other commenters 

noted that this construct has been a 

consistent legal interpretation for many 

decades. Other commenters noted that 

many state Medicaid employees are 

trained social workers who have the 

knowledge and experience to help our 

country’s most vulnerable citizens, 

ensuring consistency and accessibility 

to benefits. 

Response: We appreciate commenters 

support for our proposed policy, and 

therefore, we are adopting in this final 

rule the policy that delegation of the 

authority to determine eligibility for 

Medicaid is limited to Exchanges that 

are government agencies maintaining 

personnel standards on a merit basis. 

This is the policy that we originally 

proposed in our August 2011 proposed 

rule and that was re-proposed in the 

January 2013 proposed rule. We believe 

that under the best read of the statute, 

determining Medicaid eligibility is an 

inherently governmental function that 

must be performed by governmental 

agencies. 

For purposes of delegation, we are 

treating a quasi-governmental entity or 

public authority running an Exchange 

and employing merit system protection 

principles as a government agency such 

that delegation to it would be permitted. 

Although we were explicit in the 

proposed regulation at 

§ 431.10(c)(1)(i)(B), § 431.10(c)(2) and 

§ 431.10(c)(3)(i) regarding authority to 

delegate to public authorities, we are 

deleting these references to public 

authorities in the final rule to conform 

with the Exchange regulation which 

only explicitly requires at § 155.20 that 

Exchanges be governmental agencies or 

non-profit entities established by a state. 

Comment: Some commenters wrote 

that they especially appreciate the 

recognition that Medicaid agencies 

would not be parties to contractual 


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relationships between the Exchange and 

an entity engaged by the Exchange to 

determine eligibility, which would 

make it impossible for the Medicaid 

agency to provide appropriate oversight. 

They support maintaining the 

requirement that the Medicaid agency 

provide oversight when responsibility 

for the eligibility determination is 

delegated to another agency, because 

monitoring and oversight is necessary 

regardless of whether the delegation is 

to a government or non-government 

agency. They recommended that such 

oversight should include review of a 

sample of eligibility decisions made by 

the Exchange, scrutiny of the ‘‘logic’’ 

used in information technology systems 

to ensure that Medicaid policy is being 

applied in an accurate manner, regular 

observations of the processes used by 

the Exchange in making eligibility 

determinations, participation by 

Medicaid agency staff in training of 

Exchange staff, and monitoring of 

complaints and appeals. Many 

commenters suggested more specific 

requirements in regulation that should 

be added to § 431.10(d), specifying the 

oversight and monitoring required in 

the agreement between the Medicaid 

agency and Exchange or Exchange 

appeals entity include training for the 

Exchange or Exchange appeals entity, as 

well as monitoring of the systems being 

built. 

Response: We agree that the single 

state agency should be required to 

provide oversight when responsibility 

for the eligibility determination is 

delegated to another agency and are 

finalizing our proposal requiring this. 

We appreciate the commenter’s various 

suggestions regarding quality control 

and oversight by the Medicaid agency 

and believe they are within the ambit of 

what is intended by § 431.10(c)(3)(ii), 

requiring the Medicaid agency to 

exercise appropriate oversight over the 

eligibility determinations and appeals 

decisions made by such agencies to 

ensure compliance with paragraphs 

(c)(2) and (c)(3)(i) of this section and 

institute corrective action as needed. We 

believe § 431.10(c)(3)(ii) can be 

exercised in various ways including 

those suggested by the commenters. We 

also agree that participation by 

Medicaid agency staff in training of 

Exchange staff would be valuable. We 

believe that the requirements in 

§ 431.10(d) which specify the 

requirements for the agreement between 

the Medicaid agency and the Exchange 

or Exchange appeals entity include the 

requisite quality control and oversight 

language. 

Comment: Many commenters 

recommended ways to ensure a 

coordinated system by engaging nonprofits and private contractors in the 

process of supporting the Medicaid and 

CHIP eligibility determination, while 

not allowing them to determine 

eligibility. Recommendations included 

providing assistance to consumers with 

the application and enrollment process 

as certified application counselors and 

operating call centers, providing basic 

information to potential applicants. One 

commenter suggested that any contract 

over the amount of $1 million entered 

into by the State for services which 

support eligibility determination, such 

as data-matching or application/ 

eligibility screening, be submitted to the 

Department of Health and Human 

Services for review. 

Response: We agree that certified 

application counselors and call center 

administration are ways to engage nonprofits and private contractors in the 

Medicaid eligibility process while 

assuring all final eligibility 

determinations are made by 

governmental entities. However, we do 

not believe it necessary to subject state 

contracts for support services related to 

eligibility determinations to special 

oversight rules. We believe that the 

single state agency’s responsibility for 

determining and/or overseeing 

eligibility determinations includes 

oversight of such support functions. 

Comment: One commenter noted that, 

while there is value in continuing the 

role of public employees in Medicaid 

eligibility determinations, this decision 

can be expected to have the inadvertent 

effect of requiring ‘‘hand offs’’ in some 

states between privatized Exchanges 

and Medicaid agencies. Specifically, in 

states operating a privatized Exchange, 

the Exchange will now be unable to 

conduct a full Medicaid determination, 

which means that an individual who 

applies for coverage via an Exchange 

and is found likely eligible for Medicaid 

will be ‘‘bounced’’ to the Medicaid 

agency for a final determination. 

Families with children, in particular, 

are likely to be ‘‘bounced’’ because they 

are eligible for Medicaid or CHIP at far 

higher income levels than adults in all 

states. As a result the commenter 

recommended that § 435.1200(d) 

include a new subpart requiring states 

to report to HHS and to make publicly 

available data on the share of applicants 

who are determined potentially eligible 

for Medicaid or CHIP by an Exchange 

who are eventually enrolled. Moreover, 

they recommended that procedures 

should be outlined for HHS to evaluate 

the data and take corrective action if 

data revealed that significant numbers 

of people are ‘‘falling through the 

cracks’’ because they must navigate 

multiple agencies when trying to secure 

coverage for themselves or their 

children. 

Response: States will be required to 

establish performance standards in their 

state plans in accordance with 

§ 435.912. To further this work, earlier 

this year, we issued a request for 

information (RFI) regarding performance 

indicators for Medicaid and CHIP 

business functions. The RFI explained 

that CMS intends to begin collecting 

and reporting on information including 

data regarding individual (applicant and 

beneficiary) experience with eligibility 

and enrollment. One of the indicators 

proposed under the eligibility and 

enrollment domain was ‘‘accurate 

eligibility determinations,’’ including a 

proposed ‘‘accurate transfer rate’’. The 

accurate transfer rate would be 

measured by the percent of individuals 

transferred to Medicaid, CHIP, or the 

Exchange, as applicable, who are 

determined eligible by that agency. We 

are currently reviewing the comments 

received and finalizing our proposal for 

implementation of performance 

reporting. For further information about 

the RFI, see our Web site at http:// 

www.medicaid.gov/Medicaid-CHIPProgram-Information/By-Topics/Dataand-Systems/Downloads/RFIPerformance-Indicators-1-24-13.pdf. 

Comment: One commenter requested 

that we provide public access to 

agreements between the Medicaid 

agency and other entities conducting 

determinations. Some commenters also 

requested that we require public posting 

of the agreements on internet Web sites. 

Response: We have provided in 

§ 431.10(d) that agreements with federal, 

state or local entities making eligibility 

determinations or appeals decisions be 

available to the Secretary upon request. 

To the extent that the Secretary requests 

and obtains a copy of an agreement 

under § 431.10(d), the public can 

request a copy of the agreement through 

the Freedom of Information Act, 5 

U.S.C. 552. These agreements may also 

be obtained at the state level under state 

freedom of information act laws. 

Comment: Some commenters opposed 

this policy reversal from the previous 

Medicaid eligibility rule, and noted that, 

since that rule was issued, several states 

have relied on it to inform their 

decisions on establishing a State-Based 

Exchange, as well as to plan for 

Exchange and Medicaid systems and 

operations in future years. They believe 

these decisions and activities cannot 

easily be amended or changed in a short 

timeframe, and this policy change could 

have a major impact on the work states 

have completed, as well as their future 


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plans. They requested that CMS revoke 

the proposed change. 

Response: We appreciate the 

challenges facing states, which is why 

we signaled nearly a year ago on May 

16, 2012, in guidance titled ‘‘General 

Guidance on Federally-facilitated 

Exchanges’’ our intent, in light of public 

comments received on the final 

Medicaid and Exchange eligibility 

regulations, to propose further comment 

regarding ways that States could ensure 

coordinated systems when engaging 

non-profits and private contractors in 

the process of making Medicaid 

eligibility evaluations, while having 

government agencies make eligibility 

determinations. See http:// 

cciio.cms.gov/resources/files/ 

ffe_guidance_final_version_051612.pdf. 

We have also shared our intent to 

propose revised rules in webinars with 

states on the eligibility rules and in 

individual state meetings. 

11. Conversion of Federal Minimum 

Income Standards for Section 1931 of 

the Act (§ 435.110 and § 435.116) 

We proposed to require conversion of 

the federal minimum income standard 

for section 1931 of the Act to comport 

with the new rules regarding modified 

adjusted gross income (MAGI) that will 

take effect on January 1, 2014. Sections 

1902(e)(14)(A) and (E) of the Act ensure 

that, in the aggregate, individuals who 

would have been eligible under 

Medicaid rules in effect prior to the 

Affordable Care Act remain eligible 

once the new MAGI-based 

methodologies go into effect. Our 

proposal to direct conversion of the 

federal minimum standard for section 

1931 implements the conversion 

requirements in the statute more 

consistently, which is particularly 

important in light of the Supreme 

Court’s decision in National Federation 

of Independent Business v. Sebelius, 

ll U.S. ll; 132 S. Ct. 2566; 183 

L.Ed. 2d 450 (2012). The proposed 

changes are discussed in more detail in 

the January 22, 2013 proposed rule (78 

FR 4628 and 4629). 

We received no comments on our 

proposed policy to convert the federal 

minimum standard for section 1931 of 

the Act, and therefore, are finalizing our 

proposal in § 435.110. This policy 

relates to the coverage levels for parents 

and caretaker relatives in states that do 

not implement the eligibility expansion 

in section 2001 of the Affordable Care 

Act to provide coverage for the lowincome adult group. In addition, 

because pregnancy benefits for pregnant 

women under § 435.116(d)(4)(i) are tied 

to the same May 1, 1988 AFDC income 

standard for the applicable family size, 

we are finalizing our proposal in 

§ 435.116 that this income limit should 

also be converted. 

B. Essential Health Benefits in 

Alternative Benefit Plans 

Section 1937 of the Act provides 

states with the flexibility to amend their 

Medicaid state plans to provide for the 

use of benefit packages other than the 

standard Medicaid state plan benefit 

package offered in that state, for certain 

populations defined by the state. These 

ABPs are based on benchmark or 

benchmark-equivalent packages. There 

are four benchmark packages described 

in section 1937 of the Act: 

• The benefit package provided by 

the Federal Employees Health Benefit 

plan (FEHB) Standard Blue Cross/Blue 

Shield Preferred Provider Option; 

• State employee health coverage that 

is offered and generally available to 

state employees; 

• The health insurance plan offered 

through the Health Maintenance 

Organization (HMO) with the largest 

insured commercial non-Medicaid 

enrollment in the state; and 

• Secretary-approved coverage, 

which is a benefit package the Secretary 

has determined to provide coverage 

appropriate to meet the needs of the 

population provided that coverage. 

Benchmark-equivalent coverage is 

provided when the aggregate actuarial 

value of the proposed benefit package is 

at least actuarially equivalent to the 

coverage provided by one of the benefit 

packages described above, for the 

identified Medicaid population to 

which it will be offered. Section 1937 of 

the Act further provides that certain 

categories of benefits must be provided 

in any benchmark-equivalent plan, and 

other categories of benefits must include 

‘‘substantial actuarial value’’ compared 

to the benchmark package. 

That said, we appreciate that it may 

be difficult at this point to make 

changes to the ABP that take effect by 

January 1, 2014. In light of this 

challenge, we will partner with states to 

work as quickly as possible to come into 

full compliance with these provisions. 

We do not intend to pursue compliance 

actions on these issues to the extent that 

states are working toward but have not 

completed a transition to the new ABPs 

on January 1, 2014. 

Conforming Changes to Medicaid To 

Align With Essential Health Benefits 

We proposed to implement section 

2001(c) of the Affordable Care Act that 

modifies the benefit provisions of 

section 1937 of the Act. Specifically, 

section 2001(c) of the Affordable Care 

Act added mental health benefits and 

prescription drug coverage to the list of 

benefits that must be included in 

benchmark-equivalent coverage; 

required the provision of Essential 

Health Benefits (EHBs) beginning in 

2014; and directed that section 1937 

benefit plans that include medical/ 

surgical benefits and mental health and/ 

or substance use disorder benefits 

comply with the Paul Wellstone and 

Pete Domenici Mental Health Parity and 

Addiction Equity Act of 2008 

(MHPAEA). 

In addition, we proposed to 

implement section 1902(k)(1) of the Act, 

which requires that medical assistance 

for, the new eligibility adult group for 

low-income adults under section 

1902(a)(10)(A)(i)(VIII) of the Act must 

receive medical assistance provided 

through an ABP (which must include 

coverage of EHBs as of the same date). 

We also proposed to implement 

section 1937(a)(2)(B)(viii) of the Act, 

which provides that individuals in the 

new mandatory eligibility group for 

former foster care children under age 26 

are exempt from mandatory enrollment 

in an ABP. 

We proposed to implement section 

1937(b)(7) of the Act, which provides 

that medical assistance to individuals 

described in section 1905(a)(4)(C) of the 

Act (individuals of child bearing age) 

through enrollment in an ABP shall 

include family planning services and 

supplies. 

We proposed to codify in § 440.345(e) 

the process to determine how often 

states would need to update ABPs after 

December 31, 2015. 

We also proposed to add a new 

§ 440.347 to incorporate section 

2001(c)(5) of the Affordable Care Act. 

Furthermore, anti-discrimination 

provisions found at section 1302(b)(4) of 

the Affordable Care Act were proposed 

to be codified § 440.347(e). 

1. General Comments 

Comment: One commenter stated they 

support the structure for implementing 

EHBs as proposed. 

Response: CMS appreciates the 

support. 

2. Alignment With Essential Health 

Benefits Provisions 

a. Scope of Alternative Benefit Plans 

(§ 440.305) 

We proposed to add the new adult 

eligibility group as an eligibility group 

that must receive benefits consistent 

with section 1937 of the Act. We also 

proposed that groups provided ABP 

coverage under section 1937 of the Act 

may be identified based on individual 

characteristics and not by the amount or 

level of FMAP funding. 


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Comment: Many commenters 

commended the addition of language 

prohibiting states from targeting 

Medicaid expansion populations solely 

on the basis of applicable matching rate. 

In addition, many commenters 

applauded language proposing to codify 

the flexibility HHS has given to states to 

use the Secretary-approved option in 

section 1937 of the Act to extend 

comprehensive Medicaid coverage to 

the newly-eligible expansion 

population. The commenters further 

urged CMS to partner with states to 

ensure that this population’s full range 

of mental health and substance use 

needs and other health needs will be 

met. 

Response: We thank the commenters 

for their support. 

Comment: One commenter questioned 

the inclusion of the sentence which 

states, ‘‘Enrollment in ABPs must be 

based on the characteristics of the 

individual rather than the amount or 

level of federal matching funds.’’ The 

commenter stated this to be an 

unnecessary statement since eligibility 

for FMAP is based on eligibility 

category. It is unclear why enrollment in 

a benchmark plan would impact FMAP. 

Response: People who qualify for 

eligibility under the new adult 

eligibility group will be determined to 

be either newly eligible or already 

eligible. For Medicaid coverage 

provided to the newly eligible 

population, the state will receive 100 

percent FMAP in 2014 and for those 

who are determined to be eligible under 

December 2009 state rules, the state will 

receive its otherwise applicable FMAP. 

We included this language to clarify that 

states may not design different benefit 

packages based on the level of FFP they 

will receive, but rather the benefit 

package should be designed based on 

the medical needs of the population 

being served. 

Comment: One commenter believed 

that the use of ABPs will assist states 

with expanding coverage in a 

meaningful way. However, the new 

adult population may have unique 

health care needs, including a high 

incidence of behavioral health and 

social issues. The commenter believed 

that the use of the ABPs would be most 

beneficial if they are used to tailor the 

scope of services and alignment of 

benefits to ensure adequate delivery 

systems for high need populations. 

Response: Section 1937 of the Act 

offers flexibility for states to provide 

medical assistance by designing 

different benefit packages plan for 

different groups of eligible individuals. 

We agree with the commenter that ABPs 

can be successfully designed to meet the 

needs of the new adult population, 

including those with varying health care 

needs. As long as each benefit package 

contains all of the EHBs, much 

flexibility exists for states to meet the 

needs of beneficiaries. 

Comment: One commenter was 

concerned that individuals age 50 to 64 

may not be provided EHBs that are at 

least equal to those available to highincome individuals who purchase 

coverage on the commercial markets. 

Response: We understand that there 

could be some variation in EHBs as 

defined for the individual market and 

for Medicaid based on the selection of 

different benchmark plans to define 

EHBs. But the flexibility to select 

different benchmark plans to define 

EHBs for Medicaid ABPs will allow 

states to address the unique needs of 

each circumstance and promote 

administrative simplicity, while still 

providing a floor for coverage. As long 

as that floor is met, Medicaid 

beneficiaries in the new adult group can 

also receive benefits from the selected 

coverage options under section 1937 of 

the Act or through substitution of 

benefits. 

Comment: One commenter stated it is 

important that all individuals obtaining 

Medicaid coverage under the Affordable 

Care Act receive health coverage 

appropriate for their needs, including 

strong coverage for mental health and 

substance use disorders. The commenter 

also wrote it is important that 

traditionally Medicaid eligible 

populations that may be enrolled in 

ABPs are guaranteed adequate coverage. 

Response: ABP flexibility is an option 

that states can choose to use in 

redesigning their current Medicaid 

benefit program. The requirement that 

ABPs include EHBs and comply with 

mental health parity requirements 

ensures a minimum level of sufficiency 

of the coverage. 

Comment: One commenter requested 

that HHS require or give states the 

option to provide EPSDT coverage to 19- 

and 20-year olds who qualify for the 

new adult group. 

Response: The existing provisions of 

§ 440.345 require states to make 

available EPSDT services as defined in 

section 1905(r) of the Act that are 

medically necessary for those 

individuals under age 21 who are 

covered under the State plan. We did 

not propose to change this requirement. 

To the extent that any medically 

necessary EPSDT services are not 

covered through the ABP plan, states 

must supplement the ABP plan to 

ensure access to these services. EPSDT 

provisions apply to 19- and 20-year olds 

who qualify for the new adult group. 

Comment: One commenter believed 

that the Affordable Care Act provided 

an unprecedented opportunity to 

improve access to somatic and 

behavioral health treatment for the ‘‘jailinvolved’’ population. The commenter 

noted that up to 6 million incarcerated 

individuals have income below 133 

percent which would make them newly 

eligible for Medicaid under the 

Affordable Care Act. These individuals 

could represent up to 1⁄3 of the newly 

eligible population, underscoring the 

importance of considering the particular 

circumstances of incarcerated 

individuals in implementation of the 

Affordable Care Act. 

Response: Paragraph (A) following 

section 1905(a)(29) of the Act and 

implementing regulations at § 435.1009, 

specify that Medicaid is prohibited from 

making payments for care or services for 

any individual who is an inmate of a 

public institution, except as an inpatient 

in a medical institution. We read this 

prohibition to apply generally to 

medical assistance, whether provided 

through the regular coverage plan or 

through an ABP. Regular coverage or 

regular Medicaid benefit package is 

defined as Medicaid state plan services 

including services defined in section 

1905(a), 1915(i), 1915(j) and 1945 

authorities. Thus, while we agree with 

the commenter that incarcerated 

individuals may be eligible for 

Medicaid, they would not be entitled to 

ABP benefits inconsistent with the 

payment exclusion. We note that this is 

consistent with the exclusion of 

incarcerated individuals from eligibility 

to enroll in coverage through the 

Exchanges. It is also consistent with the 

responsibility under the Eighth 

Amendment of the United States 

Constitution of governmental entities to 

provide necessary medical care to 

individuals who they are holding as 

inmates, which effectively creates a 

liable third party for such care. 

States should suspend, rather than 

terminate, the Medicaid eligibility of 

individuals who are enrolled in 

Medicaid when entering a public 

institution, so as to ensure ease of 

reinstitution of coverage post-release. 

Additionally, if an individual is not 

already enrolled in Medicaid, states can 

enroll eligible individuals prior to their 

release so that the individual can 

receive Medicaid covered services in a 

timely manner upon discharge. 

Comment: One commenter believed 

that the new eligibility category is likely 

to attract younger and healthier 

populations than traditional Medicaid. 

The commenter believed that a 

percentage of those who are newly 

eligible will acquire a condition or 


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disability after they are enrolled in an 

ABP. The commenter recommended 

that HHS standardize an effective 

process for ensuring that beneficiaries 

whose health status changes have the 

opportunity to access in a timely 

manner other ABP or traditional state 

Medicaid plans which meet their needs. 

The following standards were suggested: 

A process for participants to request and 

receive clinically appropriate benefits 

not routinely covered by the plan; a 

process for participants to request and 

receive coverage for benefits beyond the 

limits set by the plan where 

extraordinary circumstances exist; and a 

process for participants to request and 

receive coverage of specialty care not 

routinely coverage by the plan when 

medically necessary and appropriate. 

Response: As noted, states have the 

flexibility to define different benefit 

packages to meet the needs of disparate 

populations. In addition, individuals in 

the new adult group meeting the 

exemption criterion found in section 

1937 of the Act have the ability to 

choose between ABP benchmark 

coverage designed by the state using the 

rules of section 1937 of the Act 

including EHBs as a minimum level of 

coverage, or ABP benchmark coverage 

defined as the state’s approved regular 

state plan benefit package, which is not 

subject to the requirements of section 

1937 of the Act. 

Comment: One commenter supported 

providing states with flexibility to add 

state plan benefits and services found in 

base-benchmark plans to benchmarkequivalent benefits. The commenter also 

believed it would helpful to clarify that 

adding such benefits would be possible 

and appropriate for individuals in the 

Medicaid expansion group. 

Response: We appreciate the 

commenter’s support, and clarify here 

that individuals in the new adult group 

can receive benchmark-equivalent 

coverage or Secretary-approved 

coverage which can include a broader 

range of services than in public 

employee or commercial benchmark 

coverage options. 

Comment: One commenter 

interpreted the proposed rule to say that 

individuals who are newly eligible 

adults—and not deemed medically 

frail—do not qualify for additional 

services above and beyond what is 

required under section 1937 of the Act 

and the EHB. Based on that 

interpretation, if a state wanted to 

provide wrap around services for a 

particular population, in which some of 

the newly eligible would fall under, it 

would not be allowable unless the state 

created a Secretary-approved plan that 

incorporates the benefits into the 

underlying plan. The commenter 

requested that CMS clarify and/or 

confirm the interpretation of this 

provision. 

Response: We confirm that the 

individual’s interpretation is correct. 

Section 1902(k)(1) of the Act provides 

that individuals in the new adult group 

receive benchmark or benchmarkequivalent coverage subject to the 

requirements of section 1937 of the Act 

(except that individuals who would 

otherwise be exempt may choose to 

receive benchmark or benchmarkequivalent coverage that is not limited 

by section 1937 of the Act, and thus 

have the option of benchmark or 

benchmark-equivalent coverage that is 

equal to the Medicaid benefit package 

otherwise available). Such coverage can 

be in the form of Secretary-approved 

coverage, which may, at state option, 

include a broader range of services than 

public employee or commercial 

benchmark options. 

Comment: Many commenters 

requested CMS clarify that the federal 

matching rate is based on the individual 

and not the services provided. A few 

commenters requested clarification that 

services provided through the Secretaryapproved ABP process for Medicaid 

expansion individuals will be covered 

at the enhanced rate and that Medicaid 

expansion individuals who are 

exempted into traditional Medicaid 

coverage will also be covered at the 

enhanced rate. 

Response: We clarify that the 

enhanced FMAP rate for newly eligible 

individuals is available for all services 

they receive. The matching rate is based 

on the individual, not on the services 

provided to them. 

Comment: One commenter urged HHS 

to clarify the flexibility that states will 

have to design multiple ABPs targeting 

specific populations. The commenter 

understands this provision will allow 

states to put in place ABPs for subpopulations within the newly eligible 

group (that is, people living with 

chronic viral hepatitis or other chronic 

conditions) and urges CMS to clarify 

that this is an appropriate use of the 

ABP flexibility. 

Response: Section 1937 of the Act 

provides states with significant 

flexibility to design Medicaid benefit 

coverage under the State plan. There are 

many options in selecting an ABP, and 

states may offer different ABPs to 

different targeted populations (except 

that, as discussed elsewhere, targeting 

cannot be based on the amount or level 

of federal matching funding). Section 

1937 of the Act provides states with the 

statutory construct to provide an ABP 

without regard to requirements at 

sections 1902(a)(1) (related to statewideness) and 1902(a)(10)(B) (related to 

comparability) of the Act. This 

flexibility is provided at § 440.376 and 

§ 440.380, respectively. 

Comment: One commenter was 

unclear why the term ABP is being 

used. The Affordable Care Act 

references ABPs specifically for 

evaluation of the ABPs as required 

under the Class Independence Advisory 

Council. Other sections reference 

alternative benefits or programs 

specifically under section 1937 of the 

Act or the establishment of Basic Health 

Plans. The commenter believed the use 

of the term is confusing and 

unnecessary since benchmark plans are 

not alternative plans or programs as 

originally identified in the law. Another 

commenter found § 440.305 confusing 

as paragraph (a) refers to ‘‘benchmark 

and benchmark-equivalent’’ however 

paragraph (b) refers to ABP. The 

commenter suggested revising 

paragraph (a) by replacing benchmark 

and benchmark-equivalent with ABP. 

Response: The Deficit Reduction Act 

of 2005 amended the Act by adding a 

new section 1937 of the Act to provide 

for the use of benefit packages other 

than the standard benefit package, 

namely benchmark and benchmarkequivalent packages. The Affordable 

Care Act made statutory changes to 

section 1937 of the Act, one of which is 

the requirement that section 1937 

coverage packages include EHBs. We 

issued regulations outlining how the 

precise parameters of EHBs will be 

established in the non-grandfathered 

plans in the individual and small group 

markets and, to some degree, how they 

will be implemented in section 1937 

coverage plans. In that regulation, the 

term ‘‘base-benchmark’’ was used to 

refer to the base plan used by states to 

determine EHBs for coverage plans in 

the non-grandfathered plans in the 

individual and small group markets. 

That base-benchmark plan becomes the 

EHB-benchmark plan after it is 

supplemented with any missing 

categories of EHBs. In an effort to 

prevent confusion between the term 

‘‘benchmark’’ used for the nongrandfathered plans in the individual 

and small group markets, and the use of 

‘‘benchmark’’ by section 1937 coverage 

plans, we chose from the statutory 

construct of section 1937 of the Act the 

term ‘‘Alternative Benefit Plan’’ (ABP) 

to hereafter refer to Medicaid 

benchmark and benchmark-equivalent 

plans as ABP. 

Comment: One commenter indicated 

that there was no adult group under 

section 1902(a)(10)(A)(i)(VIII) of the Act 

on or before February 8, 2006 so the 


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exception in subsection (b) does not 

appear to fit. 

Response: Section 6044 of the Deficit 

Reduction Act of 2005 amended Title 

XIX by adding a new section 1937 of the 

Act that allows States to amend their 

Medicaid State plan to provide for ABPs 

and limits application of this provision 

to individuals whose eligibility is based 

on an eligibility category under section 

1905(a) of the Act that could have been 

covered under the State’s plan on or 

before February 8, 2006. In 2010, section 

2001(a)(1) of the Affordable Care Act 

amended Title XIX to establish a new 

optional adult eligibility group for lowincome adults age 19 to 64. Effective 

January 1, 2014, States that implement 

this new eligibility group must provide 

medical assistance for that group 

through an ABP. As specified, all 

provisions of section 1937 of the Act 

apply to the new adult eligibility group 

except that those individuals in the new 

adult group who meet the exemption 

criteria will have a choice between ABP 

benchmark benefits as defined by the 

state under the rules of section 1937 of 

the Act and ABP benchmark benefits 

defined as the state’s approved 

Medicaid state plan, without regards to 

the rules of section 1937 of the Act. 

Comment: A few commenters 

believed the final rule should clarify 

that an ABP designed for individuals 

within the new adult eligibility group 

can align with traditional Medicaid 

coverage through the process of 

designing of a Secretary-approved plan. 

Response: We understand the 

importance of this issue, and reiterate 

guidance here. Secretary-approved 

coverage, which can include the full 

regular Medicaid state plan benefit 

package, is one of the four statutorily 

specified coverage benchmarks available 

under section 1937 of the Act. States 

can choose to use Secretary-approved 

coverage to significantly align the 

benefits offered to the new adult 

eligibility group with the regular state 

Medicaid package. Like with the other 

three statutorily specified coverage 

benchmarks, the Secretary-approved 

coverage must include EHBs as 

described in section 1302(b) of the 

Affordable Care Act and applicable 

regulations. In all cases, EHBs are first 

defined as the benefits from the base 

benchmark plan and supplemented with 

benefits from other base benchmark 

plans as necessary. CMS is clarifying in 

this rule that substitution of benefits as 

defined at § 156.115(b) is applicable to 

EHBs in ABPs. We believe that states 

will appreciate this added flexibility. 

Substitution of benefits can occur 

benefit by benefit. The benefits must fit 

into the same EHB category and the 

benefits being interchanged must be 

actuarially equivalent. Benefits do not 

have to be similar in nature, they must 

only be in the same EHB category and 

actuarially equivalent. Furthermore, 

states may substitute more than one 

benefit that when combined are 

actuarially equivalent to a single benefit. 

States may use their Medicaid state plan 

benefits for substitution if the state plan 

benefit is actuarially equivalent and in 

the same EHB category of benefit that 

will be replaced. 

Comment: Consistent with the 

provisions of sections 1902(k)(1) and 

1903(i)(36) of the Act, the commenter 

requested that CMS confirm that the 

coverage for individuals eligible only 

through section 1902(a)(10)(A)(i)(VIII) of 

the Act is limited to benchmark or 

benchmark-equivalent coverage. 

Response: That is correct. This still 

leaves states with significant flexibility 

to design coverage using the options of 

benchmark coverage, which includes 

Secretary-approved coverage, and 

benchmark equivalent coverage. Section 

1937 of the Act must also provide EHBs, 

which through selection of a basebenchmark plan, supplementation and 

substitution, will be used to define the 

EHBs. EHBs are then incorporated with 

the section 1937 benchmark coverage to 

lead to a complete benefit package. 

Comment: Several commenters stated 

that the option to offer specialized 

benefit packages, in the form of more 

than one ABP, to different target 

populations creates an administrative 

burden and confusion for families. The 

option to offer specialized benefit 

packages might require more than one 

design process and public notice; 

additional actuarial analyses of the 

different benefit packages for rate 

setting; an extra process for tracking 

individuals; and a state’s contracted 

MCOs would have to manages different 

benefit packages. 

Response: The flexibility to provide 

specialized benefit packages to one or 

more targeted populations is at the 

option of the state. Each state will 

determine whether it is appropriate or 

administratively feasible to design and 

offer different benefit packages for 

different groups of beneficiaries. 

Comment: One commenter was 

concerned with the disparities in 

coverage that the proposed EHB policy 

would create. That is, the guidance 

suggests that the policy only 

mandatorily applies to the newly 

eligible category of adults. In states that 

wish to take up the new expansion 

option this creates a situation in which 

the higher income expansion population 

will receive a more generous benefit 

package than the existing population 

would receive. 

Response: We understand the 

commenter’s concern, and it is true that 

the benefit package may be different 

because of the requirement that ABPs 

provide EHBs. However, it is not clear 

that the ABP benefit package provided 

to the new adult eligibility group will be 

more generous than the existing 

Medicaid benefit package. In addition, 

we remind readers that the EHB 

requirements apply to all individuals 

receiving services through an ABP, not 

just those in the new adult group. 

Summary: We did not make any 

changes to proposed regulation text as a 

result of comments in this section. 

b. Exempt Individuals (Former Foster 

Care Children) (§ 440.315) 

We proposed to implement section 

1937(a)(2)(B)(viii) of the Act, added by 

section 2004 of the Affordable Care Act, 

as amended by section 10201(a) of the 

Affordable Care Act, by providing that 

individuals eligible under section 

1902(a)(10)(A)(i)(IX) of the Act will be 

exempt from mandatory enrollment in 

an ABP. 

Comment: Many commenters 

commended HHS for confirming that 

the new former foster care children 

group is exempt from mandatory 

enrollment. Many other commenters 

expressed support for affirming at 

§ 440.315(h) that former foster care 

children are statutorily exempt from 

mandatory enrollment in an ABP, and 

therefore, can access the full Medicaid 

benefit, including EPSDT services, up to 

age 21. 

Response: We appreciate commenter 

support. Individuals under age 21 

receive EPSDT either through the ABP 

or as additional coverage that 

supplements the ABP. 

Comment: One commenter wrote that 

while the proposed rule clarifies that 

former foster care youth up to age 26 are 

eligible for full Medicaid benefits, may 

not be mandated into an ABP, and will 

have access to full EPSDT services up to 

age 21, after age 21, former foster care 

youth will no longer have access to 

EPSDT benefits and requested 

clarification as to the meaning of ‘‘full 

Medicaid benefits.’’ According to the 

commenter, the American Academy of 

Pediatrics recently reported that 

children in foster care experience 

significantly higher rates of medical and 

mental health challenges, and therefore, 

believes that youth aging out of foster 

care require comprehensive health 

coverage that recognizes their unique 

needs. Once a youth turns 21 they lose 

EPSDT coverage but continue to have 

the same health needs. The commenter 


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therefore requested that CMS define 

‘‘full Medicaid benefits’’ to include 

benefits akin to EPSDT, including 

dental coverage, mental health services 

and physical health care. 

One commenter stated she appreciates 

the clarification that former foster care 

children are exempt from mandatory 

enrollment in an ABP and that they will 

receive full Medicaid benefits. However, 

it is not clear whether this means they 

can receive EPSDT. The commenter 

urged CMS to consider mandating, or at 

a minimum, allowing states to provide 

EPSDT benefits for this at risk 

population because in a majority of 

states oral health is not part of the adult 

Medicaid benefit package and evidence 

suggests that roughly 35 percent of 

children in foster care have significant 

oral health problems. Making sure oral 

health issues are addressed as former 

foster care youth move into adulthood 

will have a significant impact. 

Response: We acknowledge that 

children in foster care generally 

experience significantly higher rates of 

medical and mental health challenges 

and that these health challenges often 

continue after aging out of foster care. 

For this reason, Congress provided 

statutory protection for an individual 

who receives aid or assistance under 

part B of title IV of the Act for children 

in foster care or an individual for whom 

adoption or for whom foster care 

assistance is made available under part 

E of title IV of the Act, without regard 

to age, by exempting these individuals 

from mandatory enrollment in an ABP. 

Under the existing provisions of 

§ 440.345, States must make available 

EPSDT services, as defined in section 

1905(r) of the Act, for those individuals 

under age 21 who are enrolled in an 

ABP. To the extent that medically 

necessary EPSDT services are not 

otherwise covered through the ABP for 

individuals under 21, states are required 

to supplement the ABP to ensure access 

to these services. However, there is no 

statutory authority to require states to 

provide EPSDT services beyond age 21. 

We note that states have the flexibility 

to design an ABP targeted to former 

foster care children that provides a more 

comprehensive array of health coverage 

than is provided through the regular 

state plan and to offer voluntary 

enrollment in such a plan. Through the 

ABP option, states can provide this 

population with oral health and other 

services not otherwise available to 

adults through State plan coverage. 

Summary: We have not changed 

proposed regulation text as a result of 

comments received in this section. 

c. Benchmark-Equivalent Health 

Benefits Coverage (Prescription Drugs 

and Mental Health Benefits) (§ 440.335) 

We proposed to implement section 

2001(c) of the Affordable Care Act that 

added mental health benefits and 

prescription drug coverage to the list of 

benefits that must be included in 

benchmark-equivalent coverage. 

Comment: Many commenters were 

supportive of paragraphs (b)(7) and 

(b)(8) implementing the statutory 

requirements for benchmark-equivalent 

coverage to include prescription drugs 

and mental health benefits. A few 

commenters commended the broad list 

of services included in the proposed 

rule. 

Response: We agree that the inclusion 

of prescription drugs and mental health 

benefits as defined within ABPs are 

important and necessary and we 

appreciate the support of commenters 

regarding the coverage of the 

benchmark-equivalent health benefits. 

Comment: A few commenters were 

pleased that HHS listed services that 

can be vital to people with disabilities 

and chronic health conditions as 

allowable in benchmark-equivalent and 

Secretary-approved coverage. 

Response: We acknowledge the 

special medical needs of individuals 

with chronic health conditions. The 

final rule provides a clear path to 

coverage for chronic disease 

management under § 440.347. 

Comment: A number of commenters 

requested that CMS clarify paragraph 

(c)(1). The commenters believed that 

CMS is suggesting it will use a similar 

policy for benchmark-equivalent 

coverage as it does for Secretaryapproved coverage and, thus, allow 

addition of benefits through the 

benchmark-equivalent coverage process. 

The commenters believed there is no 

legal impediment to this approach and 

supported it. The commenters urged 

CMS to confirm this interpretation. 

Response: We confirm this 

interpretation. The rule provides states 

the flexibility to include coverage for 

benefits beyond the required coverage 

and allows for states to create 

benchmark-equivalent coverage that can 

include benefits not available through 

the benchmark options. 

Comment: Numerous commenters 

were confused by the language in 

§ 440.335(c)(1) allowing addition of 

services available in ‘‘2 or more’’ 

benchmark options, as opposed to the 

language of ‘‘1 or more’’ which appears 

in § 440.330 and in current regulation. 

The commenters believed this may be a 

clerical error and recommended the ‘‘1 

or more’’ language to maximize state 

flexibility. 

Response: A clerical error was made 

in § 440.335(c)(1). The regulation has 

been corrected to read, ‘‘. . . for any 

additional benefits of the type which are 

covered in 1 or more of the standard 

benchmark . . .’’ 

Comment: One commenter was 

concerned that only provision 

§ 440.335(c)(1) was being amended 

leaving (c)(2) and (c)(3) intact. The 

commenter believed this will result in 

conflict with newly added 

§ 440.335(b)(7) and (8) as these 

provisions provided that four benefits 

(prescription drugs, mental health, 

vision and hearing services) must 

represent 75 percent of the actuarial 

value and are not required to be 

covered. 

Response: We disagree that the 

existing provision § 440.335(c)(2) will 

conflict with § 440.335(b)(7) and (b)(8). 

The actuarial value of the coverage for 

prescription drugs, mental health 

services; vision services; and hearing 

services must still be at least 75 percent 

of the actuarial value of the coverage for 

that category of service in the 

benchmark plan used for comparison by 

the state. 

However, provision § 440.335(c)(3) is 

in conflict with § 440.335(b)(7) and 

(b)(8). The state will, by default, meet 

the conditions of (c)(3) because 

prescription drugs and mental health 

services are now required benchmarkequivalent coverage and states will not 

have an option to provide such coverage 

as regulation currently allows. States 

also have the ability to add vision and 

hearing services through new 

requirements for additional coverage at 

§ 440.335(c), for individuals not in the 

new adult group. Individuals in the new 

adult group can receive these vision and 

hearing services, at state option, through 

the use of Secretary-approved coverage. 

Therefore, we have stricken 

§ 440.335(c)(3) from the final rule. 

Summary: As a result of comments 

received in response to the proposed 

regulation, CMS has deleted 

§ 440.335(c)(3) from the final rule. 

Additionally, an error was made in 

§ 440.335(c)(1). The regulation has been 

corrected to read, ‘‘. . . for any 

additional benefits of the type which are 

covered in 1 or more of the standard 

benchmark coverage packages described 

in § 440.330(a) through (c) of this part or 

State plan benefits . . .’’ Otherwise, 

CMS has not made any changes to this 

section. 

d. EPSDT and Other Required Benefits 

(Family Planning Services and 

Supplies) (§ 440.345) 

We proposed to codify section 2303(c) 

of the Affordable Care Act by adding 


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paragraph (b) to § 440.345 to provide 

that ABP coverage provided to 

individuals described in section 

1905(a)(4)(C) of the Act (individuals of 

child bearing age), include family 

planning services and supplies. 

Comment: Many commenters thanked 

CMS for codifying the important 

provision requiring that ABP coverage 

provided to individuals of child-bearing 

age include family planning services 

and supplies. This will help insure that 

Medicaid beneficiaries can access 

essential family planning services and 

supplies regardless of the type of 

Medicaid plan in which they are 

enrolled. 

Response: We thank the commenters 

for their support. 

Comment: One commenter requested 

further clarification as to the specific 

services and supplies that fall into this 

category. Clarification was also 

requested on which services are covered 

for individuals of child bearing age, 

including minors who can be 

considered to be sexually active, who 

are eligible under the state plan, and 

who want such services required under 

section 1905(a)(4)(C) of the Act. Because 

family planning services are not clearly 

defined in federal law or regulation, the 

commenter urged CMS to clarify in this 

rule that family planning services and 

supplies include but are not be limited 

to: examination and treatment by 

medical professionals; medically 

appropriate laboratory examinations 

and tests; counseling services and 

patient education; medically approved 

methods; procedures, pharmaceutical 

supplies; and devices to prevent 

contraception and infertility services, 

including sterilization reversal. 

Several recommended HHS clarify 

family planning to specify coverage of 

section 1905(a)(4)(C) of the Act services 

and supplies and require states to assure 

compliance with section 1902(a)(23) of 

the Act freedom of choice for family 

planning services and supplies, since it 

is likely that many states will contract 

with managed care organizations, some 

of which may have no Medicaid 

experience. They believe that explicitly 

requiring freedom of choice will 

increase the likelihood that all plans 

will comply with the freedom of choice 

requirement. 

Response: Family planning services 

and supplies are described in section 

1905(a)(4)(C) of the Act. We have 

chosen not to use this rule as the vehicle 

for issuing additional guidance on 

family planning services, as such 

guidance would need to have broader 

implications than this rule provides. In 

addition, we do not believe it is 

necessary to address issues relating to 

beneficiary choice of family planning 

provider in this provision, since this 

provision deals only with coverage 

issues under an ABP, and not with 

issues such as freedom of choice of 

provider. That issue is separately 

addressed in our regulations at § 431.51 

and § 441.20. 

Comment: One commenter addressed 

section 2(B)(1) of the preamble, 

specifically the statement ‘‘Consistent 

with the current law, states have the 

flexibility within those statutory and 

regulatory constructs to adopt prior 

authorization and other utilization 

control measures, as well as policies 

that promote the use of generic drugs.’’ 

The commenter is concerned that the 

interpretation of this statement could 

provide too much flexibility for states in 

the use of utilization control measures, 

creating a barrier to necessary family 

planning supplies for Medicaid 

enrollees, as women need access to the 

full range of contraceptive methods to 

utilize the method most effective for 

them. The commenter requested HHS to 

issue sub-regulatory guidance that 

prohibits barriers to the full range of 

FDA-approved contraceptive methods 

guaranteed under the Affordable Care 

Act. 

Response: Prior authorization and 

utilization control measures are 

common practices used within regular 

Medicaid, public employee, and 

commercial insurance products. Benefit 

packages designed within ABPs also 

have this flexibility. These approaches 

should not be used as a barrier to 

needed services. This proposed rule and 

final rule added the Affordable Care Act 

requirement that all ABPs must include 

coverage of family planning services 

and supplies. Nothing in the final rule 

authorizes deviation from the protection 

of beneficiary free choice of family 

planning provider, consistent with 

section 1902(a)(23) of the Act and 

§ 431.51, or an exception to the 

requirement at § 441.20 that the state 

plan provide that beneficiaries are 

protected from coercion or mental 

pressure and are free to choose the 

method of family planning to be used. 

Comment: One commenter wrote that 

discrimination in benefit plan design is 

a persistent practice in the insurance 

industry and the exclusion of treatment 

for infertility is one example. Infertility 

affects an estimated 12 percent of 

women of child bearing age and 

infertility treatments are more 

commonly prescribed for women than 

for men. Another commenter 

recommended that the list of required 

categories of services for benchmarkequivalent coverage incorporate each of 

the benefits including family planning 

services and supplies required under 

EHB as specified in § 440.347(a) for 

consistency and clarity and to ensure 

consumer protections. 

Response: Coverage of infertility 

services is generally at the option of the 

state. However, coverage of infertility 

services becomes part of the ABP benefit 

package either: (1) if the state selects a 

coverage plan under section 1937 of the 

Act that includes such coverage or 

chooses to include such coverage as part 

of a benchmark-equivalent coverage 

plan; or, (2) if the base-benchmark plan 

chosen by the State to define EHBs 

covers infertility treatment in an EHB 

category, unless the state elects the 

option set forth in 45 CFR 156.115(b) to 

substitute actuarially equivalent benefits 

in defining EHBs. We are reiterating 

here that CMS is clarifying in this rule 

that substitution of benefits as defined 

at 45 CFR 156.115(b) is applicable to 

EHBs in ABPs. We believe that states 

will appreciate this added flexibility. 

Under 45 CFR 156.115(b)(1), 

substitution of benefits can occur 

benefit by benefit. The benefits must fit 

into the same EHB category and the 

benefits being interchanged must be 

actuarially equivalent. Furthermore, 

states may substitute more than one 

benefit that when combined are 

actuarially equivalent to a single benefit. 

States may use their Medicaid state plan 

benefits for substitution if the state plan 

benefit is actuarially equivalent and in 

the same category of benefit that will be 

replaced. We do believe it is necessary 

to explicitly list the EHB categories in 

the regulation text for benchmarkequivalent coverage, as section 1937 of 

the Act was amended to require both 

benchmark and benchmark-equivalent 

coverage to include all EHBs. States will 

identify substituted benefits in the ABP 

SPA when submitted to CMS. 

Summary: We will not be making 

changes to proposed regulation text as a 

result of comments received. 

e. EPSDT and Other Required Benefits 

(Mental Health Parity) (§ 440.345) 

Section 2001(c) of the Affordable Care 

Act directed that benefit plans under 

section 1937 of the Act that include 

medical and surgical benefits and 

mental health and/or substance use 

disorder benefits comply with MHPAEA 

and we codified this at § 440.345(c) in 

the proposed rule. 

Comment: Almost all commenters 

expressed support for the requirement 

in § 440.345(c) requiring that mental 

health or substance abuse benefits must 

be provided by ABPs and must comply 

with MHPAEA. Many also commended 

CMS for clarifying that ABPs must 

include mental health parity as this will 


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lead to the provision of necessary 

services to millions of individuals. A 

number of commenters wrote about how 

extremely important it is that all 

individuals gaining Medicaid eligibility 

under the Affordable Care Act receive 

coverage appropriate for their needs 

including strong coverage of mental 

health and substance use disorders. 

Many expressed their appreciation for 

CMS’s strong support for this provision. 

Many stated that they appreciated the 

proposed rule’s explicit recognition of 

the Affordable Care Act requirement 

that ABPs must provide the EHBs, 

including mental health and substance 

use disorder (MH/SUD) services. 

Response: CMS thanks the 

commenters for their support on the 

language in the regulation. 

Comment: Some commenters asked 

CMS to provide additional detail on 

how the requirements of MHPAEA 

apply to ABPs including details on how 

to supplement benchmark or 

benchmark-equivalent coverage to bring 

it into compliance with parity and how 

to identify violations in parity 

compliance. Commenters requested 

clarification that MHPAEA requires 

ABPs to offer the same scope of MH/ 

SUD services as medical services, 

including adequate prescription drug 

coverage. 

Response: On January 16, 2013, CMS 

released a State Health Official Letter 

regarding the application of MHPAEA to 

Medicaid MCOs, CHIP, and ABPs. This 

guidance specifically states that all 

Medicaid ABPs (including Secretaryapproved coverage) must meet the 

parity requirements, regardless of 

whether services are delivered in 

managed care or non-managed care 

arrangements. This includes ABPs for 

individuals in the new low-income 

Medicaid expansion group, effective 

January 1, 2014. 

Comment: Many commenters wrote 

that more than just requiring 

compliance was needed in this final 

rule because of the documented 

disparity between coverage of medical 

surgical benefits and coverage of MH/ 

SUD services in commercial and 

employer health coverage. With about 

one quarter of adults suffering from a 

diagnosed mental health disorder, 

disparity in services and cost sharing 

has wide ranging impact. Some stated 

that studies and literature indicate 

deficits in employer coverage of mental 

health benefits and that limits on MH/ 

SUD services were lower than those for 

medical surgical benefits. Some 

commenters stated that in clarifying the 

application of mental health parity CMS 

should make clear that if psychiatric 

rehabilitation services are provided, so 

must psychiatric habilitation be 

required, and that CMS should assure 

that a robust package of mental health 

coverage is part of ABPs. Commenters 

indicated that supplementation, 

substitution, parity and other 

protections are the best approaches for 

EHBs to meet the complex health needs 

of the low-income adults who will gain 

Medicaid eligibility under expansion. 

The commenters encouraged CMS to do 

whatever is within its authority to 

encourage all plans to expand their 

mental health and substance use 

disorder treatment to provide better care 

by providing the full range of MH/SUD 

services and to ultimately reduce costs 

and unnecessary loss of productivity 

and life. 

Response: States must offer services 

in all ten EHB categories, including MH/ 

SUD services, and must provide such 

MH/SUD services in a manner that 

complies with the parity requirements 

of MHPAEA. We do not intend to 

require or request states to include 

specific services within EHB categories 

offered by their ABP. As states 

determine their ABP service package, 

states must use all of the EHB services 

from the base-benchmark plan selected 

by the state to define EHBs for 

Medicaid, substituting or 

supplementing as necessary. We believe 

this will allay concerns expressed by 

commenters, as commercial plans must 

also adhere to mental health parity 

requirements. 

Comment: One commenter wrote that 

final MHPAEA regulations are not yet 

released, and therefore, CMS should 

provide a detailed framework for 

determining and enforcing parity 

compliance in this final rule. The 

commenter recommended that HHS 

establish a clear process for how states 

can modify a plan to ensure parity 

compliance if it is not compliant; clarify 

that the term ‘‘treatment limitation’’ 

includes both quantitative and nonquantitative treatment limitations and 

includes limits on scope of service and 

duration of treatment; require full 

disclosure of benefit and medical 

management criteria from states and 

plans to ensure MHPAEA compliance in 

ABPs; ensure that ABPs may not apply 

a financial requirement or treatment 

limitation, as specified in MHPAEA; 

include examples of parity violations 

and detailed information on how to 

supplement coverage that falls short of 

the parity requirements; and review all 

ABPs to ensure compliance with 

MHPAEA. 

Response: The January 16, 2013 CMS 

State Health Officials Letter provided a 

framework for States to apply MHPAEA 

to ABPs. Since the release of this State 

Health Officials Letter, we have also 

provided technical assistance to states 

regarding the application of MHPAEA to 

ABPs prior to submission of the ABP 

state plan amendments. 

Comment: A commenter requested 

that we clarify the applicability of 

mental health parity to Medicaid 

managed care organizations that provide 

benchmark or benchmark-equivalent 

coverage. The commenter wanted to 

know if states would be required to 

provide services (for example; 

rehabilitation, habilitation, substance 

abuse services, etc.) that are optional 

services for Medicaid programs if they 

are not currently covered. 

Response: The January 16, 2013 State 

Health Official Letter specifically states 

that all Medicaid ABPs (including 

Secretary-approved coverage) must meet 

the parity requirements, regardless of 

whether services are delivered in 

managed care or non-managed care 

arrangements. In addition, under 

§ 440.347, ABPs must include MH/SUD 

services regardless of whether they are 

currently covered in the state’s 

Medicaid plan. 

Comment: One commenter requested 

that CMS clarify the guidelines 

concerning ABP benefit substitutions 

that involve mental health benefits. One 

wrote that substitutions should not be 

allowed if they would diminish the 

value of the mental health coverage 

provided by the EHB-benchmark plan 

on which ABP benefits are based. The 

commenter recommended that this issue 

be carefully monitored; if possible, CMS 

should develop an easily applied, 

objective test to evaluate whether a 

proposed benefit substitution would 

reduce the value of mental health 

coverage compared to the mental health 

coverage provided by the EHB 

benchmark plan. Additionally, some 

commenters stated there still is 

confusion about how to apply the parity 

requirements. Commenters encouraged 

CMS to issue explicit guidance on 

whether benchmark plans will be 

evaluated for compliance with parity 

requirements as necessary before they 

are approved by CMS as ABPs. 

Response: As discussed above and 

below in the summary, substitution will 

be allowed according to provisions at 45 

CFR 156.115(b) except that states will 

perform substitution rather than issuers. 

We will review all ABP state plan 

amendment requests from states against 

applicable federal laws and regulations, 

including MHPAEA. 

Comment: Some commenters wrote 

that because they are not specifically 

enumerated in MHPAEA, inpatient 

mental health substance abuse disorder 

(MH/SUD) services are often not 


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covered. Many commenters stated that 

the definition of ‘‘inpatient’’ in the 

Interim Final Rules implementing 

MHPAEA leaves the definition up to the 

state and insurance companies. This is 

important and unfortunate because it 

allows for avoidance of MHPAEA and 

invites litigation. A number of 

commenters stated that HHS can easily 

rectify this deficiency by explicitly 

mandating residential coverage as an 

‘‘inpatient service which must be 

offered on par with medical/surgical 

coverage.’’ Some urged CMS to 

explicitly restate the requirement that 

all Medicaid ABPs must cover MH/SUD 

services. A number of comments stated 

that inpatient services must be defined 

as including residential services, 

including Institutions for Mental 

Diseases (IMDs). HHS can improve the 

interpretation of relevant definitions by 

incorporating by reference those 

definitions as set forth by the American 

Psychiatric Association in its Diagnostic 

and Statistical Manual of Mental 

Disorders. By offering a federal floor of 

required services states can take comfort 

that they have met the mandated 

requirement. One commenter wrote that 

IMD restrictions present an access 

barrier for the expansion population and 

the Affordable Care Act is clear that 

ABPs should include the EHB 

hospitalization and mental health 

services that are included in commercial 

coverage that must cover EHB. Another 

commenter wrote that HHS should 

prohibit ABPs from including mental 

health benefits that are subject to higher 

limitations on amount, scope, and 

duration than benefits intended for 

physical/medical conditions, or 

narrowly specifying that mental health 

services cannot be a component of other 

EHB categories, such as the mental 

health rehabilitation needs that are 

required following a traumatic medical 

event. 

Response: States must offer services 

in all ABPs that reflect the ten EHB 

categories, including MH/SUD services. 

We do not intend to require states to 

include specific services within EHB 

categories offered through an ABP. Nor 

are we specifically requiring coverage of 

any particular residential mental health 

services as part of ‘‘inpatient services,’’ 

provided that the coverage complies 

with MHPAEA. States may, however, be 

required to provide residential mental 

health services that are included in the 

section 1937 coverage plan that is the 

basis for the ABP, or that is included in 

the base-benchmark plan selected by 

states to define EHBs for Medicaid. 

We clarify, however, that the IMD 

payment exclusion does apply to all 

medical assistance, even medical 

assistance furnished through an ABP. 

This means that FFP is not available for 

any services, including services 

provided through an ABP, furnished to 

an individual under age 65 who resides 

in an IMD, except for inpatient 

psychiatric hospital services furnished 

to individuals under age 21. Finally, we 

clarify that the requirement that all 

ABPs comply with MHPAEA includes 

compliance with MHPAEA 

requirements regarding treatment limits. 

Comment: A commenter wrote that 

under the traditional Medicaid program, 

the term ‘‘medical assistance’’ does not 

include care or services for any 

individual who is a patient in an 

institution for mental disease, but 

benchmark coverage does not have an 

express exclusion of care and services 

for such individuals. The commenter 

asserted that for benchmark coverage, 

which includes coverage for EHBs, 

exclusion of these same services for 

patients residing in an IMD would 

directly conflict with the plain language 

of the law because section 1937 of the 

Act provides for no exception for 

individuals between ages of 21 and 65 

residing in an IMD, but does contain an 

exemption from other provisions of 

Title XIX (to which the IMD exclusion 

applies). The commenter states that just 

as an ABP is exempt from complying 

with the requirements related to statewideness and comparability in the 

Medicaid statute because they conflict 

with the benchmark authority, so too is 

the plan exempt from complying with 

the IMD exclusion which cannot be 

applied in a consistent manner with the 

EHB requirements. The commenter also 

added that, just as application of the 

IMD exclusion to an ABP would be 

‘‘directly contrary’’ to a state’s ability to 

offer EHBs, the exclusion is also 

contrary to any of the benchmark/ 

benchmark-equivalent coverage 

described in the statute. Another 

commenter argued the same points and 

also stated that the IMD exclusion is not 

consistent with the definition of an ABP 

to include, among a selection of plans, 

the health insurance plan offered 

through the HMO that has the largest 

insured commercial non-Medicaid 

enrollment in the state. As such 

coverage would necessarily be available 

on par to individuals residing inside 

and outside of an IMD, the commenter 

asserted that Congress never intended 

the IMD exclusion to apply to Medicaid 

beneficiaries enrolled in an ABP. 

Response: We do not agree with the 

commenters’ statements that the IMD 

exclusion does not apply to medical 

assistance furnished through an ABP. 

The IMD exclusion is not a service or 

benefit exclusion. It is a payment 

exclusion that applies to all Medicaid 

services provided to an individual 

residing in an IMD, not solely a 

payment exclusion for services provided 

in or by an IMD. The statute excludes 

services furnished to residents of an 

IMD from the term ‘‘medical 

assistance,’’ and we read this exclusion 

to apply whether medical assistance is 

furnished through regular coverage or 

through an ABP. (Above we clarify that 

we have a parallel reading of the similar 

payment exclusion for inmates of a 

public institution.) Thus, we clarify that 

the IMD payment exclusion applies to 

coverage offered through ABPs. Benefits 

furnished through ABPs can be 

structured so that individuals have 

inpatient options for mental health 

treatment outside of IMDs, but to the 

extent that an individual resides in an 

IMD, the IMD exclusion would apply. 

We are not aware of any contrary 

congressional intent, and this position is 

consistent with the express statutory 

exclusion from the definition of medical 

assistance. 

Comment: A few commenters stated 

that MH/SUD services are sometimes 

provided in facilities that are considered 

an institution of mental disease for 

which FFP is excluded and requested 

that CMS reconcile the requirement that 

these services must be provided as an 

EHB. 

Response: For the reasons discussed 

above, we are clarifying that the IMD 

payment exclusion does apply to 

medical assistance furnished through 

ABPs. We expect that ABPs will ensure 

that coverage for MH/SUD services is 

available consistent with MHPAEA and 

the final regulations that govern EHBs 

under Medicaid. There may be options 

for inpatient services other than 

inpatient services in IMDs that states 

may wish to consider to meet MHPAEA 

obligations under ABPs. 

Comment: One commenter stated that 

exclusions for otherwise-covered 

benefits such as mental health services 

that treat eating disorders and gender 

disorders should not be permitted, as 

these exclusions carve out coverage 

explicitly on the basis of health 

condition and are discriminatory. 

Response: We will review ABP state 

plan amendments to ensure their 

compliance with applicable federal 

statutes and regulations, including 

MHPAEA, and EHB anti-discrimination 

provisions. 

Comment: One commenter stated that 

healthcare providers who provide MH/ 

SUD treatment services were 

encouraged by the passage of MHPAEA 

but many states and insurance 

companies are ‘‘stonewalling’’ 

implementation and inclusion of MH/ 


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SUD treatment as a mandate. EHB 

requirements will not correct this 

problem unless HHS rules provide 

better clarity regarding implementation 

of parity, in particular inclusion of 

inpatient services. 

Response: MHPAEA does not require 

the provision of specific MH/SUD 

services. Rather, it requires these 

services to be provided in parity with 

medical/surgical services, when benefit 

packages include both sets of services. 

The release of the January 13, 2013 State 

Health Official Letter has provided 

initial guidance to states and managed 

care plans regarding the application of 

MHPAEA to the Medicaid program. We 

believe that guidance provides useful 

information to states regarding their 

efforts to apply MHPAEA to their 

Medicaid ABPs. In addition, CMS is 

reminding commenters that inpatient 

hospitalization is a required EHB for 

ABPs. 

Comment: One commenter stated that 

Medicaid regulations should employ the 

same disorder carve-outs for the 

expansion population as used for 

existing populations and remain in 

compliance with federal parity laws. 

Further, states should not be required to 

provide different or additional MH/SUD 

benefits to the expansion populations 

than what is furnished to existing 

beneficiaries. 

Response: This regulation does not 

prohibit states from using their current 

delivery systems or designing new 

delivery systems to offer EHBs, 

including MH/SUD services. States are 

required to offer MH/SUD services 

consistent with the process set forth in 

this regulation regarding the 

development of ABPs and MHPAEA. 

Because of the need to select a public 

employee or commercial plan to define 

EHBs for Medicaid, there could be 

differences between the ABP benefit 

package and the services otherwise 

offered in the regular Medicaid coverage 

package. 

Comment: Many commenters strongly 

urged CMS to release final MHPAEA 

regulations as soon as possible and to 

include how to apply parity to EHBs 

and ABPs and to give examples of 

violations. A commenter stated that 

without the final rule on MHPAEA, 

effective compliance will not be 

possible. Another commenter requested 

prompt release of additional guidance 

referenced in the January 13, 2013 State 

Health Official Letter, concerning any 

requirements to apply parity principles 

across multiple managed care delivery 

systems and urged a flexible approach 

to measuring parity in carve-out setting 

in promotion of continuity for existing 

arrangements and authorities. 

Response: A response on the timing of 

a final MHPAEA regulation is beyond 

the scope of this regulation. 

Comment: One commenter wrote that 

insurance companies have sought to 

avoid implementation of MHPAEA and 

states that do not currently require 

mental health parity may be concerned 

that compliance will result in the state 

incurring the costs associated with the 

expansion of state mandates. Two 

commenters stated that there are 

lingering concerns with some of the 

parity language in the proposed 

regulation, which states in § 440.345 

that ABPs that provide both medical 

and surgical benefits, and mental health 

or substance use disorder benefits, must 

comply with MHPAEA. CMS should 

revise this language to make it clearer 

and more accurate. The commenters 

asserted that MHPAEA does not apply 

to coverage under section 1937 of the 

Act that is delivered in a non-managed 

care arrangement; rather the Affordable 

Care Act extended the protections of 

MHPAEA to this coverage without 

amending MHPAEA. Specifically, 

regarding coverage under section 1937 

of the Act, the Affordable Care Act 

requires that ‘‘the financial 

requirements and treatment limitations 

applicable to such mental health or 

substance use disorder benefits comply 

with the requirements of section 2705(a) 

of the PHS Act (MHPAEA) in the same 

manner as such requirements apply to a 

group health plan’’ and the final rule 

should include similar language. 

Response: It is unclear exactly what 

the commenter is asking, in terms of 

incurring expenses associated with state 

benefit requirements. Therefore, we will 

not be able to respond to this comment 

at this time. We disagree with the 

commenters’ assertion that mental 

health parity requirements do not apply 

to ABPs using non-managed care 

delivery systems. Parity requirements 

apply to all ABPs, regardless of the use 

of managed care. 

Comment: One commenter wrote that 

because of changes in the income 

eligibility standards we expect Medicaid 

expansion is more likely to enroll 

individuals who are working but have 

no insurance and who need this 

coverage to access treatment to maintain 

employment. People with addictions 

enter treatment at different phases and 

will use different parts of the 

continuum, and elimination of any part 

of the continuum would violate 

MHPAEA and cost human lives. The 

commenter urged CMS to adopt the 

same standards set forth in the proposed 

rule for the Affordable Care Act 

standards related to EHB, Actuarial 

Value, and Accreditation for purposes of 

Medicaid ABPs. Additionally, the 

commenter stated that MHPAEA holds 

out the promise that everyone will be 

able to get help but strong enforcement 

of MHPAEA is necessary. 

Response: It is unclear exactly what 

the commenter is asking. Therefore, we 

will not be able to respond to this 

comment at this time. 

Comment: A commenter wrote that 

this rule as proposed rule fails to link 

MHPAEA compliance to adherence to 

the Interim Final Rule which 

operationalizes MHPAEA. The 

previously issued Proposed Rule for 

Standards Related to Essential Health 

Benefits, which addressed the design of 

EHBs for commercial market insurance 

beneficiaries, made specific reference to 

the Interim Final Rule effectuating 

MHPAEA. The proposed rule simply 

says the EHBs of ABPs must comply 

with MHPAEA. The commenter 

questioned whether this lack of direct 

reference to the existing law mean 

Medicaid ABPS need not comply with 

all provisions of the Interim Rule. The 

commenter strongly urges CMS to 

clarify whether or not these ABPs must 

comply with all provisions of the 

Interim Final Rule and what if any law, 

in whole, or in part, it will use to assess 

ABP compliance with MHPAEA. 

Response: On January 16, 2013, CMS 

released a State Health Official Letter 

regarding the application of MHPAEA to 

Medicaid MCOs, CHIP, and ABPs. This 

guidance specifically states that all 

Medicaid ABPs, including Secretaryapproved coverage, must meet the parity 

requirements, regardless of whether 

services are delivered in managed care 

or non-managed care arrangements. 

Comment: Several commenters wrote 

that exclusions of mental health, 

substance use disorders and behavioral 

health treatments that fail to meet the 

parity standards required by MHPAEA 

are discriminatory. Despite existing 

parity requirements state 

implementation and enforcement of 

MHPAEA has varied widely and 

patients seeking metal health services 

are frequently subjected to excessive 

and inappropriate non-quantitative 

limitations. Another commenter stated 

that CMS should identify a standard to 

determine whether the coverage 

provided complies with nondiscrimination provisions of the 

Affordable Care Act. 

Response: As stated in the January 

13th State Health Official Letter, ABPs 

must comply with MHPAEA. 

Comment: One commenter suggested 

that the goal of Affordable Care Act 

coverage was to include the 10 EHBs 

including mental health and substance 

use disorder services. 


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Response: We agree with the 

commenter that one goal of Affordable 

Care Act coverage was to include 

coverage of the 10 EHB categories, 

including mental health and substance 

use disorder services in ABPs. We 

support providing a floor of coverage to 

Medicaid beneficiaries. As mental 

health parity also applies, this will lead 

to parity among mental health and 

substance use services and other 

medical and surgical services. 

Summary: We will not be making 

changes to proposed regulation text as a 

result of these comments. However, we 

are clarifying that the payment 

exclusion for services provided to 

individuals residing in an institute of 

mental disease (IMD) continues to apply 

to all individuals participating in ABPs. 

This is important because many 

commercial products offer coverage of 

residential services in settings that for 

Medicaid purposes are considered 

IMDs, and federal matching funds will 

not be available for medical assistance 

for individuals who reside in such 

settings. 

f. EPSDT and Other Required Benefits 

(ABPs Include EHBs and All Updates 

and Modifications) (§ 440.345) 

We proposed at § 440.345(d) the 

requirement that ABPs provide EHBs 

and include all updates and 

modifications thereafter by the Secretary 

to the definition of EHBs. 

Comment: Several commenters wrote 

that the revisions make Federally 

Qualified Health Center (FQHC) 

requirements within ABPs less clear. 

The EHBs are the floor of ABP coverage 

and that the requirement to provide 

EHBs within ABP does not circumvent 

existing requirements within section 

1937 of the Act, which includes 

coverage of FQHCs. The commenter 

stated to identify that the regulation as 

drafted is confusing as subsections (a) 

describing the requirement that at least 

the ten categories of EHBs be included 

in section 1937 of the Act and (b) 

describing the requirements to include 

the benefits covered in one of the state 

selected benchmark plans and 

subsection (a) does not indicate that it 

is a floor. The commenters requested 

that CMS reiterate or clarify revisions to 

the regulation to reaffirm this. 

Response: There are several benefits 

specified by section 1937 of the Act that 

are required in addition to EHBs. We 

did not change § 440.365, which reflects 

section 1937(b)(4) of the Act, providing 

that states must assure access to these 

services through the benchmark or 

benchmark-equivalent coverage or 

otherwise, to rural health clinic services 

and FQHC services, even if the state 

does not contract with an FQHC or rural 

health clinic and that payment for these 

services must be made in accordance 

with the payment provisions of section 

1902(bb) of the Act. The inclusion of 

EHBs within section 1937 of the Act 

establishes a minimum level for 

benefits, to which other benefits 

required as part of section 1937 of the 

Act are added. 

Comment: Many commenters were 

supportive of the Affordable Care Act’s 

application of EHB requirements to 

ABPs and providing a floor of benefits. 

Some commenters also supported 

inclusion of updates and modifications 

made thereafter. Some commenters 

went further to support the inclusion of 

mental health and substance use 

disorder benefits as consistent with the 

MHPAEA. 

One commenter generally supported 

implementing EHBs in ABPs to provide 

a stable set of core services for people 

receiving benefits in the ABP, and to 

help align the rules for patients and 

providers to ensure continuity of care. 

This is important for people who will 

churn between Medicaid, the 

commercial markets and potentially a 

state basic health plan. 

Response: CMS appreciates the 

support of commenters. 

Comment: A few commenters 

identified that EHB definitions will 

affect how individuals maintain access 

to health care, services and drugs and 

biologicals that they need. 

Response: We agree with these 

commenters. The new coverage will 

likely be different from the coverage that 

beneficiaries receive today. States will 

have discretion regarding how to define 

EHBs using the process outlined in this 

regulation, namely selecting the basebenchmark plan to define EHBs. For 

Medicaid, we remind readers that EHBs 

are only the floor for coverage, and 

states have options for offering coverage 

that exceeds this floor. States can also 

add additional coverage for beneficiaries 

receiving ABPs who are not eligible for 

the new adult group. 

Comment: One commenter suggested 

that home care services should be 

included in the Medicaid ABP to the 

same extent that they are included in 

the existing regular Medicaid program. 

Response: The rules for establishing 

coverage are different between the 

regular state Medicaid program and 

flexibility provided within section 1937 

of the Act. States must provide home 

health services as a mandatory benefit 

in the regular Medicaid state plan. This 

is not a minimum requirement for 

coverage under of section 1937 of the 

Act and is not required as an element of 

EHBs. 

Comment: One commenter requested 

clarification that the Affordable Care 

Act established a floor of coverage using 

EHBs. Benefits should not be limited 

solely to EHBs as no ceiling was 

established. The Affordable Care Act 

only restricts costs for state mandated 

benefits from being passed onto the 

federal government via the EHBs. 

Response: Yes, EHBs are considered a 

minimum level of coverage. ABPs are 

not limited solely to EHB benefits; ABPs 

are constructed based on the coverage 

plan under section 1937 of the Act 

selected by the state, including EHBs 

based on the state selected base 

benchmark plan, supplemented as 

necessary and subject to substitution of 

actuarially equivalent benefits as 

permitted under 45 CFR 156.115(b). The 

section 1937 coverage plan selected by 

the state can include a Secretaryapproved coverage plan that may 

include benefits that are not available 

under other section 1937 coverage 

options. Furthermore, ABPs are required 

to cover certain benefits including rural 

health clinics, FQHCs, and family 

planning services and supplies. EPSDT 

services for individuals below age 21 

also apply within section 1937 of the 

Act. MHPAEA also applies to the 

provision of MH/SUD services. 

Comment: One commenter requested 

that CMS consider adding an EHB 

requirement for hospitals and 

pediatricians to conduct risk 

assessments of all newborns for severe 

respiratory syncytial virus (RSV) 

disease. 

Response: These services can be 

covered if states select coverage options 

that cover such services. Furthermore, 

children must receive all EPSDT 

services as part of the ABP, and states 

may consider such risk assessments to 

be part of the required EPSDT screening 

services. For the new adult group, only 

19- and 20-year olds will be covered by 

EPSDT. There are both requirements 

and flexibility for states in both 

selecting plans and constructing EHBs 

and section 1937 coverage options. 

Please refer to the summary at the end 

of this section for further discussion of 

these steps and flexibilities. 

Summary: We have not made any 

changes to regulation text, based on 

public comments received. 

g. EPSDT and Other Required Benefits 

(Process for Updating EHBs) (§ 440.345) 

In § 440.345(e), we proposed that the 

ABPs that include EHBs will remain 

effective through December 31, 2015 

without a need for updating. We also 

proposed that we will consult with 

states and stakeholders and evaluate the 


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process to determine updates to the 

ABPs after that date. 

Comment: Several commenters 

offered support of the intent of our 

proposed policy concerning the 

updating of ABPs that have been 

determined to include EHBs as of 

January 1, 2014. One commenter 

supported the Department’s intent to 

issue future guidance for updating EHB 

benefits for 2016 and subsequent years. 

Similarly, another commenter indicated 

support of the alignment of the 

transition period for updating ABPs 

with the transition period designated for 

updating EHBs in 45 CFR Part 156. 

Response: We appreciate the support. 

Comment: A few commenters 

indicated concern that imposing a 

requirement to update section 1937 

benchmark plans would add significant 

new workload for states. One 

commenter believed that there is 

currently no statutory requirement to 

make updates to section 1937 plans, and 

suggested that the Secretary allow for 

grandfathering of currently offered 

section 1937 benchmark benefit plans. 

Many commenters also recommended 

that HHS reserve some authority to 

resolve significant problems with the 

benefits package during this time period 

by revising the proposed provision to 

add that states with approved ABPs as 

of January 1, 2014 do not have to update 

benefits until December 31, 2015, 

‘‘unless the Secretary determines that 

there are exceptional circumstances to 

update a plan.’’ Several commenters 

urged the Department to set up a formal 

mechanism to ensure that adequate data 

is collected for ABPs in 2014 and 2015 

to inform updating benefits in 2016 

through a transparent process in which 

consumers help guide any necessary 

changes. Similarly, several other 

commenters urged the Department to 

consider a more robust stakeholder 

engagement in all aspects of processes 

used to assess the current EHB approach 

and whether to adopt a new approach 

in 2016. 

Response: CMS has been working 

with states to submit state plan 

amendments using a standardized 

template that includes the information 

needed for approval from CMS. The 

CMS review process allows for 

resolution of issues identified within 

the ABP prior to approval. We aligned 

the timeframes with CMS policy to 

allow for implementation efficiencies. 

As we develop the process, we will take 

into account balancing potential 

workload of the state and CMS and the 

need for information to keep the ABP 

current with changing commercial 

market products. It is important for 

ABPs to stay current with changes in the 

base-benchmark as well as with public 

employee or commercial plans that may 

have been selected as section 1937 

coverage options. Commercial plans are 

usually updated annually. All ABP 

SPAs are required to have public notice 

and approved SPAs will be placed on a 

CMS Web site. We are also updating the 

Medicaid Statistical Information System 

(MSIS) to improve the quality, accuracy, 

and timeliness of data submitted to CMS 

by states. That said, we appreciate that 

it may be difficult at this point to make 

changes to the ABP that take effect by 

January 1, 2014. In light of this 

challenge, we will partner with states to 

work as quickly as possible to come into 

full compliance with these provisions. 

We do not intend to pursue compliance 

actions on these issues to the extent that 

states are working toward but have not 

completed a transition to the new ABPs 

on January 1, 2014. 

Comment: One commenter indicated 

that the applicability of the proposed 

provision was unclear when applied to 

states that choose not to expand 

coverage as of January 1, 2014, but 

might choose to offer a benchmark 

benefit plan prior to December 31, 2015. 

Response: These provisions apply to 

all existing and new ABPs that have an 

effective date of January 1, 2014 or later. 

Summary: We will not be making 

changes to proposed regulation text as a 

result of comments received. 

h. Essential Health Benefits (§ 440.347) 

We proposed to add EHBs within 

section 1937 of the Act and that 

individuals in the new adult group who 

meet the criteria for exemption from 

mandatory enrollment will receive a 

choice of benchmark coverage defined 

as the benefit package using section 

1937 rules or the state’s approved 

Medicaid state plan that is not subject 

to the section 1937 rules. We proposed 

a process for establishing EHBs within 

an ABP that is consistent with the 

general provisions for established EHBs 

in the individual and small group 

market, but reflects the particular 

circumstances of Medicaid. In 

particular, the process reflects the fact 

that the state establishes coverage rather 

than an insurance issuer, and that the 

coverage is consistent with the 

requirements of section 1937 of the Act. 

We also proposed that, while EHBs will 

be defined by the state using a selected 

base benchmark from the list of those 

plans that can be chosen to define EHBs 

in the individual and small group 

market, the base benchmark plan for 

defining EHBs for Medicaid can be 

different than the base benchmark plan 

chosen for the commercial market. We 

further proposed that there could be 

more than one base benchmark plan for 

defining EHBs for Medicaid ABPs. 

Comment: One commenter stated they 

support the structure for implementing 

Essential Health Benefits as proposed. 

Response: CMS appreciates the 

support. 

Comment: One commenter supported 

§ 440.347, which allows states to have 

more than one ABP to reflect the health 

care needs of a targeted population and 

use a different base benchmark plan for 

each ABP. A few commenters supported 

HHS implementing the statutory 

requirements to at a minimum include 

EHBs. One commenter supported the 

general approach to coverage of EHBs. 

Another commenter supported states 

having broad flexibility to choose a 

benchmark plan, including the same 

options available in the commercial 

market and the ability to use a different 

plan from the one that was selected for 

the state’s commercial plans. This 

commenter also recommended that the 

state’s Medicaid State Plan be 

considered for Secretary-approved 

coverage for the ABPs. They requested 

clarification of the timeframe for 

approval of Secretary-approved plans. 

Response: We appreciate the support 

of our policy to allow states the 

flexibility to use different base 

benchmarks in Medicaid from those 

used for the non-grandfathered plans in 

the individual and small group markets. 

We confirm that Secretary-approved 

coverage is part of the ABP template, 

and can include the full coverage 

otherwise available under the approved 

state plan, as long as all requirements of 

this regulation are met. The entire 

template is considered a state plan 

amendment to be completed and 

submitted by the state to CMS for 

approval. The timing of action on state 

plan amendments is addressed in our 

regulations at § 430.16, which include 

one 90-day review period, the option for 

CMS to request additional information, 

and an additional 90-day review period. 

Comment: One commenter requested 

that HHS clarify that states can design 

ABPs for subpopulations within the 

newly eligible group. 

Response: We confirm that states can 

offer different ABPs to subpopulations 

within the newly eligible group. Under 

section 1937(a)(1)(A) of the Act, 

coverage through an ABP can be offered 

to ‘‘groups specified by the State’’ 

without regard to the comparability or 

statewideness requirements at section 

1902(a)(10)(B) of the Act and § 440.240. 

(Other requirements, such as civil rights 

protections, still apply and may affect 

the nature of the groups that a state may 

specify.) As a result, states may offer 

ABPs that are appropriate for the unique 


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characteristics of subgroups of the new 

adult group; for example, states may 

offer different ABPs to individuals in 

different geographic regions, or to 

individuals who have particular 

medical, service or support needs. 

Comment: The flexibility for states to 

select EHBs at § 440.347(b) and (c) to 

achieve targeting of populations causes 

more harm than good according to some 

commenters. The commenters believe 

that states already have significant 

flexibility to target ABPs through the 

Secretary-approved process and the 

targeting flexibility adds little but 

creates confusion. CMS would be better 

served in terms of administrative 

simplicity, oversight, and consumer 

understanding if one EHB standard was 

applicable in the commercial markets 

and ABPs. These commenters 

recommend that HHS require states to 

use the state-selected base benchmark 

plan that applies for the commercial 

markets for ABPs as well. Another 

commenter believes that EHBs should 

establish a minimum floor of coverage 

and that all plans should be required to 

use the state-selected base-benchmark 

plan that applies for the commercial 

markets for purposes of section 1937 of 

the Act as well. This will reduce 

administrative burden and better align 

standards between EHB in the 

commercial markets and in Medicaid. 

Response: The flexibility provided at 

§ 440.347(b) and (c) permits states to 

design different benefit packages that at 

a minimum include EHBs. 

Alternatively, one benefit package could 

be used for multiple populations. States 

also have the choice to use the same 

base benchmark in ABPs and the 

commercial markets, which would 

result in aligning standards for EHB in 

coverage under ABPs and the 

commercial markets. We have adopted 

policies that would maximize state 

flexibility while ensuring sufficient 

coverage for beneficiaries. 

Comment: One commenter is seeking 

clarification of the phrase set forth in 

§ 440.347 ‘‘consistent with the 

requirements set forth in 45 CFR [part] 

156’’, particularly if it adds obligations 

to the requirement to select a 

benchmark plan that includes benefits 

in each of the ten EHB categories. A few 

commenters request clarification of the 

specific provisions of 45 CFR Part 156 

related to EHB that apply. 

Response: This regulation is 

consistent with the EHB requirements 

under 45 CFR Part 156, but specifically 

addresses the application of those 

requirements for purposes of 

compliance with section 1937 of the Act 

as amended by section 2001(c) of the 

Affordable Care Act. The basebenchmark plans for defining EHBs 

include the same choices in both 

Medicaid and the non-grandfathered 

plans in the individual and small group 

markets. States may choose a different 

base benchmark plan for Medicaid than 

for the individual and small group 

markets. But, recognizing that Medicaid 

coverage is provided in a different 

context than coverage in the individual 

and small group markets, we provide 

that states may choose a different base 

benchmark plan for Medicaid than the 

individual and small group markets, 

and may choose more than one base 

benchmark plan for Medicaid. We also 

provide that states exercise the options 

available in the individual and small 

group market to insurance issuers. This 

regulation identifies those aspects of 45 

CFR part 156 that are modified within 

Medicaid under the section of the 

preamble entitled ‘‘Modifications in 

Applying the Provisions of This 

Proposed Rule to Medicaid.’’ 

Comment: Several commenters 

suggested that the list of required 

categories of services for benchmarkequivalent coverage include the EHBs as 

specified in § 440.347(a) for consistency 

and clarity as ABP coverage must 

include at least the EHBs. Another 

commenter suggested that CMS should 

pursue parity between Medicaid state 

plan benefits and the new ABP for 

newly eligible adults to assist with 

‘‘churn’’ between Medicaid and the 

commercial markets. 

Response: Section 1302 of the 

Affordable Care Act establishes EHBs 

that must be provided as part of 

benchmark benefit coverage. A 

benchmark-equivalent benefit package 

must be actuarially equivalent to the 

benchmark plan that is chosen. We do 

not believe it is necessary to specifically 

add the EHB categories to benchmarkequivalent coverage because we are 

instead setting out procedures to ensure 

that coverage includes EHBs that govern 

both benchmark and benchmarkequivalent coverage. 

Comment: Section 440.347(c) allows 

states to select more than one EHB 

option for ABPs. A few commenters 

urged CMS to limit states to choosing a 

single EHB option for Medicaid to 

provide a floor of benefits. They 

asserted that Congress intended 

consistency among ABPs by applying 

EHB requirements to them. Some 

commenters asserted that allowing for 

selection of multiple options will create 

unnecessary administrative burdens on 

state Medicaid programs and this 

commenter suggests that there should be 

only one EHB benchmark option for 

ABPs. But other commenters agreed 

with our proposed rule that, because 

ABPs serve a different population than 

private health plans, the single EHB 

benchmark does not need to be the same 

as the one chosen for the state’s 

individual and small group market. 

Another commenter asked that CMS 

clarify that states do not have the 

flexibility to vary amount, duration, and 

scope of benefits within populations on 

a plan-by-plan basis as currently 

allowed, which would only increase 

complexity. This commenter also 

requested clarification related to 

whether the limited authority provided 

through the DRA and now expanded 

through this rule can be superseded by 

section 1115 authority. This commenter 

also responded that a state may try to 

combine flexibilities for EHB, ABP, 

premium assistance, and amount, 

duration, and scope to shift to a model 

that has not been adequately explored 

for unintended consequences. 

Response: While it is true that 

coverage of EHBs will be required for 

non-grandfathered plans offered in both 

the individual and small group markets 

and Medicaid, we think it is important 

to provide states flexibility to define 

EHBs as appropriate in each context. In 

the non-grandfathered plans offered in 

the individual and small group markets, 

states have some flexibility to define 

EHBs through selection of a base 

benchmark plan. For Medicaid 

coverage, we believe that additional 

flexibility will enable states to tailor 

coverage to the needs of the Medicaid 

population. While states can, for 

simplicity, choose one standard to 

determine EHB in both the individual 

and group markets and in Medicaid, 

they are not required to do so. We are 

permitting states flexibility to choose a 

single standard or multiple standards 

for EHB in Medicaid to ensure a full 

range of coverage options. States must 

determine whether multiple standards 

would result in administrative burdens. 

We are reminding states that the floor of 

coverage is EHBs defined by the 

benefits, including limitations on 

amount, duration, and scope, from the 

selected base benchmark plan (but states 

may be required to, or may have options 

to, cover benefits above that floor 

consistent with section 1937 of the Act). 

Please refer to the summary at the end 

of this section for further discussion of 

these steps and flexibilities. 

Comment: Several commenters 

recommend that the Department ensure 

that Secretary-approved coverage is 

actuarially equivalent to the other 

benchmark coverage options. These 

commenters support the clarification 

that Secretary-approved coverage must 

provide robust benefits. However, these 

commenters indicate that it is important 


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for Secretary-approved coverage to 

provide the same level of coverage as 

other benchmark plan options to 

prevent newly eligible people from 

receiving lesser coverage. 

Response: This rule is not intended to 

change the assessment of Secretaryapproved coverage, except to the extent 

that it must include EHBs. The standard 

that we apply for assuring the 

sufficiency of the benefit package 

established using Secretary-approved 

coverage is whether the benefits are 

appropriate to meet the needs of the 

population provided that coverage, as 

outlined in § 440.330(d). EHBs establish 

a floor of benefits for ABP populations 

and must be provided with Secretaryapproved coverage as with any ABP. 

Secretary-approved coverage permits 

states flexibility to design a benefit plan 

that might differ from the other options 

available under section 1937 of the Act. 

As mentioned previously, in all cases a 

state must first select a base benchmark 

to define EHBs. The EHBs in the base 

benchmark plan serve as the minimum 

floor of coverage that is supplemented 

for any missing EHBs. Using 

substitution, states may achieve a 

benefit package that includes benefits 

from the regular state plan. 

Comment: One commenter believed 

that extending full Medicaid benefits to 

the newly-eligible expansion 

population, supplemented as needed to 

comply with the EHB, parity, and other 

protections in the law, is the best 

approach for meeting the complex 

health needs of low-income adults who 

will gain Medicaid eligibility under the 

expansion. The commenter urged CMS 

to work with States to ensure that this 

population’s full range of substance use 

disorders and mental health needs and 

other health needs will be met. The 

commenter further suggested that CMS 

include language in the final rule that 

explicitly restates the requirement that 

all Medicaid ABPs must cover mental 

health services and substance use 

disorder services for all enrollees. 

Response: States have much 

flexibility, but are not required to use 

benefits from their regular Medicaid 

benefit package for the new adult 

coverage group, as long as EHBs are 

assured. The statute and regulation 

direct that mental health parity 

requirements and EHB requirements, 

including the provision of mental health 

and substance use services, be met. In 

some circumstances, we anticipate that 

the coverage furnished to the new adult 

coverage group may include certain 

benefits, such as certain substance abuse 

treatment services, that the state has 

elected not to cover under the state’s 

regular Medicaid benefit package. 

Comment: The commenter stated 

general agreement with the approach 

that CMS has recommended for the ABP 

to be offered to certain populations 

under the expansion of Medicaid. The 

commenter requested clarification that 

the state would choose an ABP from 

four benchmark packages and would 

compare that choice to the private 

market EHB, supplementing coverage of 

the ABP if necessary to ensure that all 

EHB categories are included. 

Response: There are both 

requirements and flexibility for states in 

constructing EHBs and section 1937 

coverage options. Please refer to the 

summary at the end of this section for 

further discussion of these steps and 

flexibilities. 

Comment: One commenter would like 

to underscore the importance of 

promoting seamless coverage among 

low-income individuals. Many of the 

individuals newly eligible for Medicaid 

in 2014 are likely to have fluctuations 

in income, and therefore are likely to 

‘‘churn’’ between Medicaid and 

subsidized Exchange insurance 

coverage. This churn could result in 

treatment disruptions among patients 

and create administrative complexity for 

Exchanges, plans, and providers. Thus, 

promoting seamless coverage for this 

population and ensuring coordination of 

care during coverage transitions will be 

critical. 

Response: We appreciate the 

circumstances that the commenter 

identified for individuals that may have 

fluctuations in income. States have 

options for minimizing treatment 

disruptions and CMS will work with 

states to promote continuity of care. 

Comment: One commenter urges CMS 

to consider revising certain sections of 

the proposed rule to allow states the 

greatest opportunity to develop ABPs 

that are reflective of the population that 

they serve and ensure the long-term 

financial sustainability of this category 

of eligibility. This commenter believes 

that the proposed regulations create a 

cumbersome and confusing process and 

appear to strongly incentivize states to 

essentially mirror state plan benefits. 

This commenter wants maximum 

creativity to define the benefit package 

that will be provided to the newly 

eligible population, and encourages 

CMS to use this opportunity to allow for 

greater innovation at the state level by 

allowing design of benefit packages that 

simply take pieces of both Medicaid and 

the commercial market while also 

covering all EHBs. This approach will 

lead states to compare Medicaid to 

private and commercial market benefits 

and potentially add benefits to the 

Medicaid state plan. 

Response: We believe that the 

regulations offer significant flexibility 

for states to create benefit packages for 

all or for different groups of its newly 

eligible population. Appropriate benefit 

package design for the population’s 

needs may contribute to long-term 

financial stability. 

Comment: A few commenters were 

concerned with disparities in coverage 

as the guidance suggests that the policy 

only mandatorily applies to the newly 

eligible category of adults. In states that 

expand their Medicaid programs to 

include these new categories of 

eligibility, they note that a higher 

income expansion population will 

receive a more generous package than 

existing populations. This will create a 

churn in Medicaid where states will 

likely have to expand coverage for all 

adult populations within Medicaid to 

prevent churn. They assert that this 

would result in significant financial cost 

to states to expand benefits to all adults 

as new benefits for the existing 

population are ineligible for the 

enhanced match offered under the 

Affordable Care Act for the newly 

eligible expansion population. 

Response: The Medicaid statute 

provides that coverage may be different 

for those people who receive coverage 

through an ABP established under 

section 1937 and those who receive 

regular Medicaid coverage. People in 

the new adult group must receive 

benchmark or benchmark-equivalent 

benefits, including EHBs. Consistent 

with the statute, the rules promulgated 

in this regulation will apply to all ABPs, 

not just for those people in the new 

adult group. As long as ABP (including 

EHB) requirements are met, states have 

significant flexibility in designing 

benefit package options that 

approximate regular state plan benefits. 

Comment: Many commenters 

recommended that ABPs provide 

appropriate coverage to meet the needs 

of the population in all ten EHB 

categories as per the general 

requirements of § 440.330. These 

commenters suggest that the lack of a 

minimum standard in each of the ten 

categories is a flaw in the Exchange EHB 

standard that gets further magnified in 

Medicaid. For women’s health, this is 

particularly important in terms of 

preventive services, prescription drugs, 

and maternity care. Several commenters 

support the EHB requirement as a strong 

floor for ABPs and indicate that states 

should have ample flexibility to add to 

the floor. These commenters also 

provided recommended regulatory 

language for § 440.347(a) through (c). 

Response: EHBs are a floor to 

coverage and states have flexibility to 


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design an ABP that includes coverage 

above the minimum level of EHBs. 

Section 1302(b)(2) of the Affordable 

Care Act directs the Secretary to 

determine EHBs by reference to benefits 

typically offered in the group market, 

which is the same standard that we are 

applying in Medicaid by requiring that 

states determine EHBs by selecting a 

base benchmark from among the 

regulatory options described in 

§ 156.100. All benefits within the base 

benchmark that defines EHBs will need 

to be incorporated into the ABP, 

supplemented as necessary and subject 

to substitution of actuarially equivalent 

benefits as permitted under 45 CFR 

156.115(b). But the ABP can include 

other benefits based on the state choice 

of coverage option. 

For groups other than those in the 

new adult group, states can also offer 

additional benefits to supplement the 

benchmark or benchmark equivalent 

coverage that includes EHB and other 

required services. Sections 1902(k)(1) 

and 1903(i)(26) clarify that individuals 

in the new adult group receive 

benchmark or benchmark-equivalent 

coverage (that includes EHB and other 

required services and, as we explain 

below, for individuals who would 

otherwise be exempt from enrollment in 

an ABP, the option to receive an ABP 

that consists of regular Medicaid 

coverage). We intend to issue an ABP 

state plan amendment template and 

corresponding implementation guides 

for the states to use when submitting 

ABP state plan amendments. 

Comment: One commenter supports 

requiring coverage of all ten EHBs, as 

this will go a long way toward ensuring 

that Medicaid participants have 

adequate health care coverage. They 

request that HHS define the scope and 

services within each of the ten benefit 

categories to ensure that the covered 

services are at a minimum the same and 

provide a level of guaranteed coverage. 

This is necessary to ensure that there is 

adequate coverage within categories and 

balance between categories, and 

necessary to determine if ABPs are 

equivalent to the EHB package and 

comply with Affordable Care Act. 

Response: We thank the commenter 

for the support. 

Comment: One commenter indicated 

that ABPs should include an array of 

home care services that exist in 

traditional Medicaid benefit programs to 

comply with the American with 

Disabilities Act and Supreme Court 

Olmstead decision. To the extent that 

EHBs include institutional care or 

inpatient settings, a state must offer a 

choice of ‘‘the least restrictive 

environment.’’ Similarly, states that 

choose to provide services to 

individuals enrolled in ABPs that 

involve care in an institution should be 

required to include home and 

community-based care as well. 

Response: Section 1902(k)(1) of the 

Act provides that medical assistance for 

the new adult eligibility group is limited 

to benchmark and benchmarkequivalent coverage. Section 1902(k)(1) 

of the Act also provides an exception to 

the requirements of section 1937 of the 

Act for individuals who would be 

described in the exemptions at section 

1937(a)(2) of the Act. This means that 

individuals in the new adult eligibility 

group that otherwise meet the 

exemption criteria are required to be 

enrolled in benchmark or benchmarkequivalent coverage, but their 

benchmark or benchmark-equivalent 

coverage is not limited by the 

requirements of section 1937 of the Act. 

Therefore, these individuals must have 

a choice to receive ABP benefits as 

defined by the state applying the 

requirements of section 1937 of the Act 

using benchmark or benchmarkequivalent coverage (including EHBs 

and other required coverage) or ABP 

benefits defined without regard to the 

requirements of section 1937 of the Act, 

which consists of regular Medicaid 

coverage under the state plan. Home 

care is not a standardized term in 

Medicaid, so clarification would be 

needed to determine which Medicaid 

benefit category is actually applicable. 

We agree that states are obligated to 

comply with the Americans with 

Disabilities Act and the Olmstead 

decision. 

Comment: One commenter requests 

that crisis services be included in the 

mental health and substance abuse 

services category in the EHB package. 

This commenter requests that it be 

offered by qualified health plans and in 

new Medicaid expansion benefits in 

each state. These are important services 

to the safety net and for 24/7 crisis care, 

suicide prevention and access to 

emergency health care services, 

especially in communities where 

emergency mental health clinics or 

mobile health services are unavailable. 

Response: CMS is not requiring 

specific services to be included in any 

of the EHB categories, but all ABPs must 

include all EHBs defined through the 

process described in our regulations. 

Comment: Several commenters 

suggest that EHBs should comply with 

a consistent standard across ABPs as 

they are concerned that the proposed 

rule allows for states to select more than 

one option for establishing EHB to 

implement multiple ABPs for targeted 

populations. These commenters also 

recognize the need for states to target 

populations to address specific health 

care needs. 

Response: We are providing flexibility 

for states to select base benchmark plans 

in Medicaid that are different than the 

one selected for the individual and 

small group market, and to select 

multiple base benchmark plans, to 

maximize the ability for states to define 

ABPs that serve the unique needs of 

Medicaid populations and 

subpopulations. 

Comment: One commenter requested 

CMS include autism coverage in the 

EHB package to correct the omission. 

Lack of coverage can create significant 

financial burden on families and 

discourages autism professionals from 

practice. Families also may decide to 

not pursue treatment. 

Response: States have choices in 

determining in the benefit package that 

will be covered in their state within 

federal guidelines, but all ABPs must 

provide for coverage of EPSDT services 

for individuals under the age of 21. We 

expect that services to treat autism may 

be covered through a variety of coverage 

categories and many would be included 

in a state’s ABP either because the 

services are within the section 1937 

coverage option or included as part of 

EHBs. 

Comment: One commenter applauds 

HHS for including coverage of the full 

package of EHBs, as it includes coverage 

of screening and brief counseling for 

domestic and interpersonal violence, in 

the Medicaid ABPs. 

Response: We thank the commenter 

for the support. While it is not certain 

that every ABP will include counseling 

for domestic and interpersonal violence, 

such services will be provided if they 

are part of the EHBs. 

Comment: One commenter believes 

that strong and comprehensive oversight 

and enforcement of EHBs and 

nondiscrimination standards at the state 

and federal level will help ensure 

consistent coverage of transplant 

benefits and eliminate discriminatory 

insurance practices. Therefore, the 

commenter asserted, ABPs must cover 

all EHB categories without 

discrimination for people who have or 

will acquire health conditions that lead 

to end stage organ failure. The 

commenter stated that a wide range of 

medical services are required during the 

transplant process and fall under the 

categories of ambulatory services, 

hospitalization, chronic disease 

management, mental health services, 

rehabilitative services, and prescription 

drugs. The commenter urged that all of 

these treatments must be covered under 

ABPs. 


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Response: If transplant services are 

covered as part of the coverage option 

chosen by the state, or the benefits 

under the selected base benchmark 

plan, as supplemented (and subject to 

permissible substitution of benefits), 

then they will be covered as part of the 

ABP. 

Comment: According to one 

commenter, the Affordable Care Act 

specifies that entities covered under 

section 340B(a)(4) of the Public Health 

Services Act, which includes federally 

recognized Hemophilia Treatment 

Centers, be designated as essential 

community providers and that 

designation requires that qualified 

health plan networks to include 

Hemophilia Treatment Centers. This 

commenter requests that state Medicaid 

programs be encouraged or required to 

include essential community providers 

in their networks. 

Response: Coverage through an ABP 

remains subject to requirements under 

the state plan to provide for beneficiary 

free choice of provider, and provider 

payment rates that are consistent with 

efficiency, economy, and quality of care 

and assure sufficient access to services. 

States have options to limit free choice 

of provider in some circumstances, for 

example, managed care service delivery 

consistent with section 1932 of the Act, 

or through selective contracting 

arrangements authorized under a waiver 

under either section 1915 of the Act or 

section 1115(a) of the Act. In any of 

these cases, states must assure sufficient 

beneficiary access to services. 

Comment: Several commenters 

suggested that the review of EHB, in the 

private insurance market and Medicaid, 

consider whether limits in coverage and 

changes in medical evidence or 

scientific advancement affect whether 

enrollees have difficulty accessing 

services. The EHB should be based on 

the most recent and reliable clinical 

evidence available and a process should 

be developed to inform and shape EHBs 

based on these factors over time. If not 

available, there should be an allowance 

for some physician discretion. 

Response: Consistent with the 

provisions of section 1302(b) of the 

Affordable Care Act, CMS has in the 

regulations at 45 CFR part 156 defined 

EHBs by reference to coverage plans 

available in the commercial market. 

Comment: Several commenters also 

requested that review of EHBs be 

disaggregated to include demographic 

categories. HHS should require states to 

report enrollees’ race, ethnicity, 

language, sex, and disability status data 

uniformly, as well as data on other 

demographic areas such as sexual 

orientation and gender identity, as 

described in section 4302 of the 

Affordable Care Act. 

Response: This information does not 

appear to be related to the review of 

EHBs. We note, however, that we are 

developing a Transformed Medicaid 

Statistical Information System that will 

include expanded data elements 

regarding beneficiaries, claims and 

providers per Affordable Care Act. 

Comment: One commenter supports 

inclusion of all ten EHB to reflect 

appropriate balance in each category 

and requested that anesthesia and pain 

management services be included in the 

ten categories of benefits covered by the 

ABPs. This commenter also requested 

that CRNAs and other non-physician 

providers who bill for Medicare Part B 

be included in Medicaid ABPs. 

Response: The coverage of particular 

services will depend upon the coverage 

option selected by the state, and the 

EHBs that are determined based on the 

state-selected base benchmark plan, as 

supplemented (and subject to 

substitution of actuarially equivalent 

benefits) consistent with the process 

described in 45 CFR part 156. This rule 

will not affect the ability of states to set 

provider qualifications for covered 

services. 

Comment: One commenter requested 

that dollar limits on a specific category 

of benefits and targeted use of 

utilization management techniques be 

prohibited. 

Response: Annual dollar limits are 

prohibited in the public employee or 

commercial plans that are the basis for 

coverage options and the base 

benchmark options according to section 

2711 of the Public Health Service Act. 

Utilization management techniques are 

common practice for benefit 

management and will continue to be 

allowed in Medicaid. We expect that 

these practices will be nondiscriminatory and not impede access to 

needed, covered services. 

Comment: One commenter indicated 

that HHS should specify in the final rule 

that to meet the health care needs of 

diverse segments of the population, an 

ABP must provide a process for 

participants to request and receive: 

clinically appropriate benefits not 

routinely covered by the plan, 

especially when the ABP is less costly 

than the covered benefit; coverage for 

benefits beyond limits set by the plan; 

coverage of specialty care not routinely 

covered by the plan when medically 

necessary and appropriate. 

Response: We are specifying in the 

final rule that, if an individual in the 

new adult group meets the criteria for 

exemption from mandatory enrollment 

in an ABP that would otherwise be 

applicable, then the individual would 

have a choice of an ABP that includes 

at least the EHBs, and is subject to the 

requirements of section 1937 of the Act, 

or benchmark or benchmark-equivalent 

coverage that is not subject to the 

requirements of section 1937 of the Act, 

and thus, includes all regular Medicaid 

state plan benefits. Other individuals do 

not have that choice but this rule does 

not affect their right to appeal denials of 

coverage through the state’s fair hearing 

system. 

Comment: Commenters requested 

clarification and further guidance on the 

supplementation process established in 

both the proposed rule for the EHBs in 

the commercial market and the 

proposed rule for EHBs in Medicaid 

ABPs. Many commenters requested that 

CMS clarify what benefits would 

constitute coverage in each category and 

identify a threshold to trigger 

supplementation of a benefit category. It 

appears that a single service could be 

determined to be sufficient to define an 

EHB in Medicaid and therefore would 

not achieve MHPAEA compliance. A 

few commenters also stated that a single 

service would not meet nondiscrimination requirements in addition 

to the balance requirement, which 

requires a much stronger minimum set 

of benefits in each category. One 

commenter requested clarification of the 

Medicaid EHB supplementation process 

including the extent to which the scope 

of services in one EHB category must be 

consistent with services offered other 

health service categories. Several 

commenters believe that additional 

provisions need to be added to ensure 

that the level of benefits in each EHB 

category are meaningful and adequate to 

meet the needs of the population. 

Several commenters also requested that 

CMS clarify what benefits would 

constitute coverage in each category and 

explain how CMS would enforce the 

non-discrimination and balance 

requirements. 

Response: Supplementation occurs 

when a base-benchmark plan does not 

include items or services within one or 

more of the categories of EHB. Benefits 

from the base benchmark that are 

determined to be EHBs must be 

included as an EHB, unless substituted 

by the state. While the rules at 

§ 156.115(b) indicates that the ‘‘issuer’’ 

may substitute benefits, in Medicaid, 

the state functions as the issuer and we 

thus provide that the state can exercise 

the option to substitute benefits. We 

indicated that requirements at § 156.110 

apply unless we specifically modified 

the approach in Medicaid. Section 

156.110(e) that specifies balance 

requirements also apply to EHBs 


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established in Medicaid. All benefits 

within the section 1937 coverage option 

must also be provided. CMS will 

conduct a review of all ABP SPAs to 

determine appropriateness for approval. 

There are both requirements and 

flexibility for states in constructing 

EHBs and section 1937 coverage 

options. Please refer to the summary at 

the end of this section for further 

discussion of these steps and 

flexibilities. 

Comment: The HHS February 17, 

2012 Bulletin allows for substitution of 

services within the rehabilitative and 

habilitative benefit, allowing the plan to 

facilitate substitution of services at the 

provider level based on patient need not 

predetermined by the issuer, according 

to one commenter. The November 20, 

2012 Patient Protection and Affordable 

Care Act; Standards related to Essential 

Health Benefits, Actuarial Value, and 

Accreditation proposed rule indicated 

that the issuer would create a 

substituted benefit plan, which would 

leave providers with no choice but to 

provide services in the benefit package 

and potentially lead to an individual 

choosing a plan that does not cover the 

services that they need. 

Response: States, not issuers, define 

benefits within section 1937 of the Act. 

Section 156.115(b) outlines the 

substitution policy that will also be 

applicable to Medicaid except that, in 

Medicaid, states have the role of issuers 

and will indicate the substituted 

benefits. Substitution requires that 

benefits be in the same EHB category 

and that they are actuarially equivalent. 

This means that a state for example, 

could substitute a personal care benefit 

for an in vitro fertilization benefit in the 

EHB Ambulatory Services category, as 

long as they were actuarially equivalent. 

Within the rehabilitative and 

habilitative services and devices EHB, 

benefits can be substituted as long as the 

resulting benefits still provide for 

coverage of both rehabilitative and 

habilitative services. We expect that the 

benefit design will result in clinically 

appropriate services based on medical 

necessity. The resulting ABP, which 

includes EHBs that have been 

supplemented if necessary, individual 

benefits that have at state option been 

substituted, and benefits from the 

section 1937 coverage option, must be 

approved by CMS. Once approved, a 

description of the benefits included in 

the final ABP should be publicly 

available so that beneficiaries are 

knowledgeable of the benefits to which 

they are entitled. That said, we 

appreciate that it may be difficult at this 

point to make changes to the ABP that 

take effect by January 1, 2014. In light 

of this challenge, we will partner with 

states to work as quickly as possible to 

come into full compliance with these 

provisions. We do not intend to pursue 

compliance actions on these issues to 

the extent that states are working toward 

but have not completed a transition to 

the new ABPs on January 1, 2014. 

Comment: Many commenters are 

concerned that there is no requirement 

regarding adequacy of benefits. These 

commenters specifically requested that 

HHS provide a cross-reference to 

§ 440.230(b) and state explicitly that the 

requirement that every service offered 

through the Medicaid state plan ‘‘be 

sufficient in amount, duration, and 

scope to reasonably achieve its 

purpose’’ also applies to EHBs in the 

ABPs. A few commenters recommended 

that the regulations be revised to require 

states to supplement the benefits in a 

benchmark plan if any service in the 

EHB category is not sufficient in 

amount, duration, or scope to 

reasonably achieve its purpose. 

Response: Under section 1937of the 

Act, states are authorized to offer ABPs 

that include benefits derived from 

public employee or commercial market 

products, essential health benefits and 

certain other required benefits. 

Sufficiency standards applicable to the 

traditional Medicaid benefit package 

generally do not apply to ABPs. If 

Secretary-approved coverage is chosen 

as the section 1937 coverage option, 

however, then we would require that 

the benefit package must ‘‘provide 

appropriate coverage to meet the needs 

of the population provided that 

coverage’’ under § 440.330(d). 

Sufficiency standards at § 440.230 will 

be applied in our review of proposed 

Secretary-approved coverage. 

Comment: Many commenters 

requested that CMS reconsider the 

proposed approach and define 

comprehensive federal EHBs for section 

1937 coverage that all states would be 

required to use to supplement their 

chosen benchmark or benchmarkequivalent coverage. They urged that 

CMS should go further and require 

states to cover comprehensive benefits 

in each of the EHB categories and work 

with states to ensure that minimum 

coverage is met. One commenter went 

further to suggest that CMS and HHS 

adopt a comprehensive, national EHB in 

2016, when the trial period for the 

current approach is complete. 

Response: EHBs in Medicaid will 

generally be defined in the same fashion 

as they are defined in the individual 

and small group market, except for 

certain EHB categories discussed in the 

proposed rule and this final rule. This 

approach allows the public employee or 

commercial market plan selected by the 

state to define EHBs for Medicaid to set 

the floor for EHB coverage (with 

supplementation as needed and 

substituted as desired). States then have 

the authority to offer other services 

(including through Secretary-approved 

coverage for the new adult group). 

Comment: One commenter requested 

that HHS clarify that the requirement for 

balance among EHB categories ensures 

robust coverage in each category and 

cannot be used to lower other categories 

if one or more categories lacks robust 

coverage. 

Response: Consistent with the 

requirements of 45 CFR 156.110, EHB 

categories must be appropriately 

balanced to ensure that benefits are not 

unduly weighted toward any category. 

Any benefits that are determined to be 

EHBs from the base benchmark plan 

must be provided. Section 1937 of the 

Act also has an ‘‘equal to’’ standard that 

indicates that all benefits from a section 

1937 coverage option must be provided. 

When Secretary-approved coverage is 

used, benefits must meet Medicaid 

sufficiency standards as well as the 

requirement that the benefit package be 

appropriate to meet the needs of the 

population. 

Comment: Many commenters 

reiterated concerns regarding the EHB 

proposed rule and EHB benchmark plan 

standards. This concern remains for 

ABPs as the Department does not 

sufficiently define the scope of coverage 

in any statutorily required category 

specifically maternity care. The base 

benchmark plans may include coverage 

of maternity services, but the plan 

documents do not specify which 

services define maternity coverage or 

provide details on coverage including 

limits. The lack of clear definitions 

further complicates the substitution and 

supplementation methodology. Several 

commenters want the Department to 

establish clear standards for what must 

be covered as required by sections 

1302(b)(1) and 1302(b)(4)(C) of the 

Affordable Care Act to ensure a 

comprehensive standard. The adoption 

of coverage should not result in a 

discriminatory benchmark. 

One commenter expressed concerns 

related to the ambiguously defined EHB 

categories and encouraged HHS to 

definitively confirm the extent to which 

cost effective, clinically effective 

nutrition care services such as medical 

nutrition therapy are included as EHBs 

within Medicaid benchmark and 

benchmark-equivalent plans. This 

commenter requests adequate federal 

oversight and approval of benchmark 

plan selection by HHS to reflect the vital 

and unique role that nutrition plays in 


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improving and maintaining health for 

all Americans, but also recognizes the 

need to define EHBs flexibly. This 

commenter seeks clarification in the 

final rule on the metrics and bases upon 

which HHS will determine whether a 

benchmark or benchmark-equivalent 

plan meets the EHBs mandated by 

Affordable Care Act. 

Response: Section 1937 of the Act 

permits states to offer coverage through 

an ABP without regard to sufficiency 

requirements that are applicable to 

regular state plan benefits, except that 

we would apply sufficiency standards 

in our review of proposed Secretaryapproved coverage as the section 1937 

coverage option. Substitution is allowed 

in section 1937 of the Act using 

requirements found at 45 CFR 

156.115(b) except that the state will be 

exercising the option for substitution 

rather than an individual market issuer. 

Comment: Commenters requested that 

CMS provide clear regulatory guidance 

to states to ensure that the process for 

supplementing coverage to meet the 

additional requirements of Affordable 

Care Act is clear. This is especially 

important given that EHBs are not 

universally covered well by state 

Medicaid programs such as mental 

health and substance use services. 

Furthermore, for states that choose to 

use benchmark-equivalent coverage, this 

commenter requests that CMS establish 

clear limits on states’ ability to use 

benchmark-equivalent coverage to 

undermine the EHB protections as it 

appears that under the proposed rule 

that they can reduce the value of EHBs 

under the benchmark-equivalent option 

to anything short of elimination. These 

commenters request that CMS ensure 

the comprehensiveness of the benefits 

for all beneficiaries covered by section 

1937 of the Act regardless of the ABP 

chosen by the state. 

Response: Benchmark-equivalent 

benefit packages must be at least 

actuarially equivalent to one of the 

section 1937 benchmark coverage 

options and must include benefits 

within certain categories of basic 

services. In addition, the Affordable 

Care Act amended section 1937 of the 

Act to require the provision of EHBs in 

benchmark equivalent coverage, so we 

do not believe that use of this section 

1937 coverage authority will undermine 

the EHB protections. The process for 

supplementation is found at 45 CFR 

156.110(b)(1) through (4) and 

substitution requirements are at 

§ 156.110(b). All benchmark-equivalent 

coverage packages must adhere to 

section 1937 requirements, and must 

not violate the EHB anti-discrimination 

principles. 

Comment: One commenter 

recommended that HHS specify in the 

final rule that ABPs must include 

benefits routinely covered by the 

benchmark plan, regardless of whether 

those benefits are listed in the data 

collection template used to report base 

benchmark benefits to HHS. 

Furthermore, all benefits within 

categories of care that list more than one 

benefit must be covered. For example, 

an ABP should be required to cover as 

three distinct benefits rehabilitative 

services, habilitative services, and 

rehabilitative and habilitative devices as 

opposed to only covering one of them. 

Response: We intend to develop a 

template for states to use to define the 

ABP in Medicaid that will result in the 

submission of a state plan amendment. 

This is a different process than the one 

used for states to submit the base 

benchmark benefits for the individual 

and small group market. A state can 

select a different base benchmark plan 

for the individual and small group 

market than it does for Medicaid 

purposes. We anticipate issuing further 

guidance on these operational issues. 

Comment: One commenter strongly 

encourages CMS to provide further 

guidance on alignment issues during the 

plan comparison and supplementation 

process. This commenter encourages 

CMS to clarify that during 

supplementation, states must create the 

most comprehensive benefit package 

possible, drawing from services covered 

in either the section 1937 coverage 

option or the comparison base 

benchmark plan, which could include 

drawing across categories if necessary to 

create a robust set of services that will 

result in adequate coverage of EHBs. 

Response: To clarify, the ABP must 

include as a floor the EHBs covered by 

the base benchmark plan selected by the 

state to define EHBs for Medicaid, 

supplemented as necessary and subject 

to substitution of actuarially equivalent 

benefits as permitted under 45 CFR 

156.115(b). Balance requirements of 45 

CFR 156.110(e) also apply. In addition, 

the ABP must include any benefits from 

the section 1937 coverage option that 

are not in the base benchmark plan, 

whether they are EHBs or not. If the 

section 1937 coverage option that is one 

of the three public employee or 

commercial products provides a service 

in a greater amount, duration, or scope 

than the EHB provided in the base 

benchmark plan, the state must utilize 

that section 1937 standard for that 

service. If the section 1937 coverage 

option is Secretary-approved coverage, 

then the state may choose which benefit 

to use. 

Comment: One commenter requests 

that HHS specify that appropriate 

balance of EHB coverage includes 

coverage of benefits across the care 

continuum, prohibits substitution 

between categories of EHB (for example, 

prohibit coverage of rehab therapy but 

include drug coverage) and between 

benefits (cover wheelchairs instead of 

rehabilitative hospital care to restore a 

person’s ability to walk), cover all EHBs 

within the settings and by specialists 

which provide the current standard of 

care, and protect patients’ access to 

appropriate and medically necessary 

care as provided by skilled medical 

professionals. 

Response: Substitution of benefits can 

be achieved when defining the EHBs 

according to 45 CFR 156.115(b). Benefits 

must be in the same EHB category and 

actuarially equivalent. Balance 

requirements at 45 CFR 156.110(e) 

apply, as CMS did not indicate that they 

do not apply in Medicaid. CMS will be 

reviewing each state plan submission. 

As with all Medicaid services, states 

will establish medical necessity criteria 

for the receipt of ABP services. 

Comment: A commenter indicated 

understanding that benefit substitution 

among EHB categories would be 

prohibited for ABPs as it is prohibited 

for Exchange plans. However, this 

commenter believes that substitution 

even within benefit categories could be 

extremely problematic for children’s 

and pregnant women’s access to needed 

services. Commenters urged HHS to 

prohibit substitutions or at a minimum 

give states the flexibility to disallow 

substitutions. If benefit substitution 

within categories is retained, this 

commenter recommends that a more 

restrictive standard than an actuarial 

equivalence test on the value of the 

benefits compared to the EHB 

benchmark plan be implemented. 

Response: Substitution of benefits 

within EHB categories will be at state 

option, according to parameters 

described in 45 CFR 156.115(b). This 

process will be the same for Exchange 

plans and ABPs, except that states will 

be in the role of the health insurance 

issuer for purposes of substitution. 

Comment: Commenters note that in 

some states the EHB benchmark covers 

services beyond those included in the 

Medicaid state plan. They argue that 

requiring states to supplement coverage 

to make it comparable to the EHB 

benchmark is not a workable solution 

for states, particularly for states that 

wish to expand in 2014. They further 

assert that some of the immediate 

operational challenges include the need 

to enroll new providers, set 

reimbursement rates, design claims and 


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payment rules, and incorporate those 

rules into systems, and if managed care 

is used, new capitation rates will need 

to be designed, which will result in a 

large administrative burden. 

Response: It is true that ABPs under 

section 1937 of the Act will contain 

different benefits than those offered in 

regular Medicaid, based on the coverage 

options and EHBs that a state elects. 

These differences are inherent in the 

statutory design. While EHBs will 

establish a minimum level of benefits, 

that level may result in greater or lesser 

benefits than are available under regular 

Medicaid. ABPs require that benefits 

that are based on commercial insurance 

products include the benefit, the benefit 

description and limitations on amount, 

duration, and scope as the minimum 

standard. States have been working with 

CMS toward defining EHBs and ABPs 

and as part of that process states may 

need to undertake contracting activities 

and system changes to offer and 

administer the ABP. 

Comment: In the proposed rule 

concerning EHBs, requirements could 

be different in different states according 

to one commenter. Since two of the four 

benchmarks are tied to what is available 

to state employees in the state and what 

is available from the largest HMO in the 

state, employers may have confusion 

about the requirements in a particular 

state. This commenter requests 

identification of who oversees an 

employer that has employees with a 

principle place of employment in 

multiple states, and wonders whether it 

would be the Department of Labor. 

Response: The standards discussed in 

this regulation relate to the 

implementation of EHBs for Medicaid. 

Employers do not offer Medicaid as part 

of their offerings to employees and 

therefore, this question is outside the 

scope of this regulation. 

Comment: One commenter asked if, 

given the requirement that states must 

supplement the benchmark package if 

EHBs are not covered, states would be 

required to add these benefits to the 

state plan under the Secretary-approved 

coverage option that is based on state 

plan coverage. The commenter asserted 

that it is unclear if the state must 

supplement services that are covered in 

the base-benchmark selection for the 

Exchange, and that it is unclear if 

supplementation is only for the 

benchmark plans provided to newly 

eligible individuals or if states that are 

seeking to provide a Secretary-approved 

benchmark plan to newly eligible 

individuals will be required to amend 

the state plan to add the new EHB 

services not otherwise covered. The 

commenter also asked whether states 

would now be required to add services 

that are not currently covered and 

categorized as optional, and also 

wondered if EHB supplementation only 

applies to benefits for newly eligible 

people or must the state meet this 

requirement for all benchmarks offered 

regardless of population. 

Response: States are required as part 

of the ABP to cover all EHBs. While 

most of the EHBs are also included 

under regular Medicaid coverage, there 

may be exceptions. For example, 

substance abuse services and 

habilitative services may not be part of 

a State’s regular Medicaid benefit. The 

EHB requirement applies to any ABP 

offered by the state, including those 

based on Secretary-approved coverage. 

Comment: One commenter indicated 

that the regulatory language fails to 

specify that states must supplement 

missing categories. This commenter 

recommends that the Department clarify 

that states must follow the process 

established in 45 CFR part 156 to ensure 

that any missing categories are 

supplemented in the final rule. The 

Department should also ensure that 

benefit design in ABPs does not result 

in less comprehensive benefits than the 

private insurance market, and therefore, 

ABPs should be required to include 

benefits at least as robust as those in the 

state’s full EHB package. 

Response: EHBs establish a floor of 

benefits for ABPs offered under section 

1937 of the Act and are based on 

commercial market products, which 

means at a minimum EHBs will include 

benefits at least as robust as those in the 

base benchmark chosen by the state. 

The supplementation process in section 

1937 of the Act will follow 45 CFR 

156.110(b). 

Comment: Several commenters 

generally supported the proposed 

process to designing the Medicaid ABP. 

However, HHS must establish 

transparent, minimum standards for 

states using ‘‘Secretary-approved’’ 

coverage. It will be critical to ensure 

that the state cannot develop an ABP 

based on the weakest benefit level 

available at each step of the process. 

The commenters expressed concern that 

the rule offers very little guidance about 

what the ABP must cover to meet the 

ten categories of EHBs required by 

Affordable Care Act and the scope of 

required coverage. They indicated that 

this lack of clarity may lead to people 

in the Medicaid expansion group not 

receiving the full range of services 

available to people at higher income 

levels accessing private market or 

Exchange coverage in their state. An 

additional commenter expressed that 

the youngest and most vulnerable 

citizens, the birth to three population, 

need to have access to all necessary high 

quality, comprehensive physical, 

developmental, mental health and 

medical care to ensure positive growth 

and development. 

Response: Current and proposed 

regulation at § 440.335(d) states that 

Secretary-approved coverage must be 

appropriate to meet the needs of the 

population being served. CMS will 

review proposed Secretary-approved 

coverage against that standard. And 

CMS will apply the sufficiency 

standards of § 440.230 in evaluating 

benefits included in Secretary-approved 

coverage. In addition, all ABPs, 

including Secretary-approved, must 

include the full range of EPSDT services 

for individuals under age 21, which 

ensures that they will have access to 

comprehensive screening and necessary 

medical care. 

Comment: Several commenters 

expressed concern regarding the process 

proposed by CMS to demonstrate 

compliance with EHB, saying it is too 

burdensome and applying the EHB 

definition that was created for small 

group health plans for commercial 

products in the private market 

needlessly complicates section 1937 of 

the Act. They asserted that requiring 

that states begin by using one of the ten 

commercial benchmark plans as the 

EHB base is not useful for states that 

want to use the full Medicaid benefit set 

under Secretary-approved coverage. 

They argued that using the full 

Medicaid benefit set allows all Medicaid 

clients to receive the same benefit set 

and states would not have to 

operationalize a post-eligibility review 

process to screen people for opting out 

of the ABP for the traditional state plan. 

Their position was that, given the 

number of changes that states must 

implement in 2014, maintaining a single 

benefit set reduces administrative 

burden and confusion for clients and 

minimizes the number of required 

system changes. According to one 

commenter, it is essential that the new 

adult group have the same benefit set as 

the full state Medicaid benefit set. 

Furthermore, the commenter asserted 

that the mandatory Medicaid benefit set 

should be an option to serve as the basis 

for demonstrating EHB compliance 

under the Secretary-approved option 

without supplementation. A few 

commenters recommend that HHS 

create a second definition of EHB 

compliance that would be based on the 

Medicaid mandatory benefit set, limit 

that definition to the ABP in Medicaid 

programs, and allow states to use this 

benefit set as the basis to build a 


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coverage option for Secretary-approved 

coverage. 

Response: Section 2001(c) inserted 

new paragraph (b)(5) into section 1937 

of the Act. This amendment requires 

that benchmark and benchmarkequivalent benefit packages must 

provide EHBs described in section 

1302(b) of the Affordable Care Act, 

beginning January 1, 2014. The same 

process to define EHBs applies to both 

commercial plans and Medicaid, with 

adjustments only to reflect the unique 

nature of Medicaid. Thus, EHBs must be 

established within section 1937 using 

one of the state options for base 

benchmark plans as set forth in 45 CFR 

part 156. States may still elect to offer 

Medicaid state plan benefits in their 

section 1937 coverage option using 

Secretary-approved coverage, as long as 

all requirements of this regulation are 

met. 

Comment: Many commenters 

indicated that states electing state plan 

benefits using the Secretary-approved 

option should not be required to 

supplement with additional EHB 

services. Although they acknowledged 

that section 1937 of the Act requires 

inclusion of EHBs as defined under 

section 1302(b) of the Affordably Care 

Act, they asserted that this does not 

mandate importation of entire segments 

of coverage from private plans nor does 

it require a wholesale matching of these 

offerings in Medicaid. They asserted 

that implementing EHBs in section 1937 

of the Act in this way is onerous and 

could result in the relatively less 

vulnerable, higher income expansion 

group as compared with Medicaid 

beneficiaries receiving more generous 

benefits such as substance use disorder 

services. They further asserted that 

Congress certainly could not have 

intended for the new enrollees to end 

up receiving more robust coverage than 

the categorically needy base. They 

stated that this also creates 

administrative complexity for states and 

a situation where incoming beneficiaries 

who may be disabled must choose 

between disparate benefit schedules. 

The commenters believed that the only 

way to mitigate disparate benefit 

schedules is for states to expand all 

benefits for existing and new eligible 

beneficiaries, something states are not in 

a fiscal position to do. They further 

asserted that the Affordable Care Act 

did not authorize a departure from long 

standing state discretion under Title 

XIX to develop appropriately balanced 

benefits and suggested that, if states 

must expand all benefits for existing 

and newly eligible beneficiaries, then 

states must receive 100 percent FFP for 

these benefits. 

Response: We believe that our 

response to the question above also 

responds to this question; the statute 

requires that all ABPs, even Secretaryapproved coverage, include EHBs. There 

are both requirements and flexibilities 

for states in constructing EHBs and 

section 1937 coverage options. The 

process for defining and including EHBs 

is the process used under section 

1302(b) of the Affordable Care Act, 

adapted to the unique circumstances of 

the Medicaid program. 

Comment: One commenter indicated 

that the intersection of § 440.345(d) and 

§ 440.347(a) is confusing, and 

recommends that CMS clarify in 

regulation that EHBs form a floor for the 

ABPs and do not supplant any 

preexisting requirements under section 

1937 of the Act and 42 CFR part 440, 

subpart C. Regulations would be clearer 

if § 440.347 were worded as a definition 

of EHB rather than a restatement of the 

mandate to include EHB in an ABP and 

for clarity should simply reference 

relevant provisions in 45 CFR part 156. 

Response: Section 440.345(d) is 

intended to establish the universe of 

benefits required within the ABPs. In 

addition, state must assure access to 

RHC and FQHC services and 

transportation to and from medically 

necessary services as set forth at 

§ 440.365 and § 440.390 respectively. 

Section 440.347 is intended to specify 

the categories of EHBs and the process 

by which those EHBs are established 

within the ABP. Both sections should be 

read in conjunction to the other. 

Summary: We are adopting the 

following approach for treatment of 

individuals in the new adult group who 

meet the exemption criteria from 

mandatory enrollment in benchmark or 

benchmark-equivalent coverage in the 

final rule. If an individual in the new 

adult population meets the criteria for 

exemption, then they have a choice of 

the ABP based on benchmark or 

benchmark-equivalent coverage 

including at least the EHBs, or an ABP 

with coverage defined as the state’s 

approved Medicaid traditional state 

plan, which is not subject to any other 

requirement of section 1937 of the Act, 

including EHB requirements. We are not 

making any changes as a result of these 

comments. 

i. Essential Health Benefits (NonDiscrimination Policy) (§ 440.347) 

Section 1302(b)(4) of the Affordable 

Care Act provides that benefit design 

cannot discriminate and CMS codified 

this section of the Affordable Care Act 

at § 440.347(e). Benefit design 

discrimination policies do not prevent 

states from using targeting criteria to 

group people together to receive specific 

benefit packages. 

Comment: One commenter expressed 

support for the inclusion of the new 

provision clarifying that individuals 

cannot be discriminated against based 

on their ‘‘age, expected length of life, or 

an individual’s present or predicted 

disability, degree of medical 

dependency, or quality of life or other 

health conditions.’’ The commenter 

seeks age-appropriate care and benefits 

for children, whether through family or 

child-only coverage. 

Response: We appreciate the support. 

Comment: Several commenters 

indicated that while they understand 

that section 1937 of the Act allows 

states the flexibility to amend Medicaid 

state plans to provide certain 

populations (as defined by the state) 

with benefits packages other than those 

offered in the standard Medicaid state 

plan, HHS must closely monitor this 

and ensure there is no discrimination in 

benefit design for certain populations. 

Response: Benefit design should not 

discriminate against individuals who 

receive a benefit package under section 

1937 of the Act based on age, disability, 

life expectancy or condition but may 

include benefits designed to meet the 

special medical needs of segments of the 

covered population. Benefit packages 

designed in section 1937 of the Act 

include the same oversight as the 

regular Medicaid state plan. Aside from 

the EHB anti-discrimination 

requirements, § 440.230(c) indicates that 

state Medicaid agencies cannot 

arbitrarily deny or reduce the amount, 

duration, or scope of a required service 

to an otherwise eligible recipient based 

solely on diagnosis, type of illness or 

condition. 

Comment: Several commenters 

expressed support of the requirement 

that EHB benefit design cannot 

discriminate on the basis of an 

individual’s age, expected length of life, 

or an individual’s present or predicted 

disability, degree of medical 

dependency, or quality of life or other 

health conditions. The commenters 

believe these non-discrimination 

provisions will require vigorous 

monitoring and strong enforcement. 

Response: We thank the commenters 

for their support. We expect states to 

comply with these provisions and 

implement benefit packages that do not 

discriminate. ABPs will be subject to the 

same monitoring process as currently 

used in the Medicaid state plan. 

Comment: Many commenters 

expressed support for the inclusion of a 

non-discrimination provision in 

§ 440.347(e). But some commenters 

pointed out that, while the proposed 


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rule recognized the importance of nondiscriminatory plan design § 440.347(e) 

fails to state the full range of 

nondiscrimination protections 

applicable to the EHB. Many 

commenters expressed concern that the 

preamble only references section 

1302(b)(4) of the Act and the 

requirements proposed in § 440.347(e) 

state only the protections under that 

statutory provision. Therefore the 

commenters believe that the 

requirements in § 440.347(e) reflect an 

incomplete and insufficient standard. 

The commenters believe that the 

protections under section 1557 of the 

Affordable Care Act also apply, and the 

final rule must expressly state a 

comprehensive and consistent 

nondiscrimination standard, explicitly 

requiring EHB benefit design to comply 

with section 1557 of the Affordable Care 

Act. The commenters recommend the 

final rule be revised to include the 

language used in the nondiscrimination 

standard set out in the proposed EHB 

rule. The commenters believe that 

without the additional requirements the 

benefits of both section 1557 and the 

Affordable Care Act as a whole in 

ensuring comprehensive coverage for all 

individuals will be undermined. Lastly, 

the commenters also requested the 

regulation prohibit ABPs from including 

all of the following: 

• Participant cost-sharing designs that 

are more burdensome on some benefits 

than others. 

• Unreasonable and arbitrary visit 

and dollar limits on a specific category 

of benefits, so as to discourage 

participation by individuals with brain 

injury. 

• Targeted use of utilization 

management techniques for some 

benefits, and not to others. 

• Defining the benefits in such a way 

to exclude coverage for those services 

based upon age, disability, expected 

length of life, or the willingness or 

capacity to participate in wellness 

programs or behavioral incentive 

programs. 

Response: Some of the protections 

sought by commenters are already 

contained in laws applicable to state 

Medicaid programs. Section 430.2, an 

existing regulation, identifies other 

regulations applicable to state Medicaid 

programs including 45 CFR part 80, 

which requires that programs receiving 

federal assistance, through the 

Department of Health and Human 

Services, include effectuation of Title VI 

of the Civil Rights Act of 1964 and 45 

CFR part 84, which implements Section 

504 of the Rehabilitation Act of 1973, 

prohibiting disability discrimination. In 

addition, state Medicaid programs are 

subject to the Age Discrimination Act of 

1975. Therefore, these protections are 

already applicable to Medicaid. 

We appreciate commenters pointing 

out deficiencies in § 440.347(e) and 

have revised it to align with the 

regulation implementing EHBs in the 

Exchanges. 

Comment: A few commenters 

indicated appreciation of CMS’s work to 

revise current Medicaid rules such that 

they incorporate statutory nondiscrimination provisions from section 

1302(b)(4). The commenters strongly 

encourage CMS to also codify all 

statutory non-discrimination provisions 

applicable to issuers of QHPs that meet 

EHB requirements. CMS should specify 

that § 156.200 and § 156.225 also apply 

to ABPs. Section 156.200 specifically 

prohibits discrimination based on 

factors including but not limited to race, 

disability, and age. Section 156.225 

codifies section 1311(c)(1)(A) of the 

Affordable Care Act which prohibits 

marketing practices and benefit designs 

that result in discrimination against 

individuals with significant or high cost 

health care needs. The commenters 

believe that all Affordable Care Act nondiscrimination provisions applicable to 

QHPs issuers and EHB standards must 

similarly apply to ABPs in Medicaid to 

ensure consistency of standards across 

all forms of all health care coverage. 

Response: The requirements in 45 

CFR part 156 apply to QHP issuers and 

not Medicaid managed care plans. 

However, there are similar protections 

in place in the regulations governing 

Medicaid managed care plans. If ABPs 

are delivered through a Medicaid 

managed care plan, those protections, 

including marketing, appeals and 

grievances, beneficiary information, and 

non-discrimination based on health 

status will apply to the Medicaid 

managed care plans providing ABP 

benefits. There are similar protections 

on many of these issues for Medicaid fee 

for service delivery systems, requiring 

fair hearing, free choice of provider, and 

beneficiary information. 

We take this opportunity to clarify 

that States have the flexibility to use 

managed care to deliver ABP benefits 

without regard to statewideness and 

comparability of services. Further, 

freedom of choice of provider may also 

be disregarded to the extent the State 

can demonstrate that freedom of choice 

would be contrary to the effective and 

efficient implementation of an ABP. 

Comment: Many commenters also 

recommended § 440.347(e) be amended 

as follows: EHBs cannot be based on a 

benefit design or implementation of a 

benefit design that discriminated on the 

basis of an individual’s race, color, 

national origin, sex, sexual orientation, 

gender identity, age expected length of 

life, or of an individual’s present or 

predicted disability, degree of medical 

dependency, or quality of life or other 

health conditions. Other commenters 

recommended § 440.347(e) be amended 

as follows: (e) EHBs cannot be based on 

a benefit design or implementation of a 

benefit design that discriminates on the 

basis of an individual’s age, expected 

length of life, an individual’s present or 

predicted disability, degree of medical 

dependency, or quality of life or other 

health conditions, race, color, national 

origin, language, sex, sexual orientation 

or gender identity. 

Response: The suggested change to 

§ 440.347(e) is unnecessary because the 

protections described are already 

reflected in existing Medicaid 

regulations. 

Comment: Many commenters 

expressed concern about the lack of 

guidance under the proposed rule for 

monitoring and enforcement of the 

proposed nondiscrimination provisions, 

and believe that the final rule must 

better define how individual states will 

assess, monitor, and enforce the law’s 

nondiscrimination provisions. 

Moreover, the commenters do not 

believe it is sufficient to delegate all 

monitoring and enforcement to states. 

The commenters recommend the final 

rule define how CMS will take 

enforcement action when states are not 

ensuring compliance with the 

nondiscrimination standards 

established under the Affordable Care 

Act. The commenters also recommend 

that CMS develop a clear standard for 

what constitutes a discriminatory 

benefit design. This standard must 

address both individual cases of 

intentional discrimination and benefit 

designs that are facially neutral but that 

have the effect of systematically 

disadvantaging members of protected 

classes. Ultimately, this standard must 

make clear that the determination of 

whether a coverage limitation or 

exclusion is discriminatory should turn 

on the degree to which the benefit 

design is based on sound standards of 

clinical appropriateness rather than on 

arbitrary distinctions between health 

conditions or personal characteristics. 

To assist federal and state regulators in 

rectifying discrimination in benefit 

design, CMS should follow up on the 

final rule with sub-regulatory guidance 

explaining how to evaluate products for 

impermissible discrimination and 

providing examples of discriminatory 

benefit designs such as those listed 

above. In addition, CMS should require 

trained evaluators in each state to 

regularly and transparently review 


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coverage available through ABPs for 

discriminatory benefit designs and to 

ensure identified instances of 

discrimination are remedied in an 

expedient manner. Where CMS 

determines that a state Medicaid agency 

is not fulfilling its responsibilities in 

this area, CMS should establish a review 

procedure to focus on ensuring that all 

services deemed part of the EHBs are 

available to all eligible individuals for 

whom they are medically necessary, 

without arbitrary discrimination on the 

basis of any protected personal 

characteristic. 

Response: ABPs are Medicaid state 

plan amendments and are subject to the 

same monitoring and oversight that 

occurs in the Medicaid state plan. 

Under this process, states review 

applicable requirements and design 

their program, including ABPs. The 

proposed design is submitted to CMS 

for approval, and CMS reviews the 

proposal for compliance with federal 

requirements. If approved, CMS may 

also review state implementation for 

compliance with federal requirements. 

In addition, issues can be raised by 

beneficiaries through the fair hearing 

process if services are denied. As with 

any Medicaid service, we recognize the 

important role that all stakeholders play 

in making CMS aware of any perceived 

ABP noncompliance. We will consider 

issuing further guidance on this topic. 

Comment: One commenter is 

concerned that the proposed rule does 

not establish sufficiently robust 

oversight or enforcement framework to 

provide states with essential guidance to 

implement such a program. The 

regulatory text does not expressly 

require the Exchanges, states or OPM to 

monitor plans for compliance with the 

prohibition on discrimination. This 

commenter urges CMS to adopt an 

express requirement in the regulatory 

text of the rule that the Exchanges, 

states and OPM monitor for nondiscrimination. 

Response: Medicaid is a federal and 

state partnership and as such, states 

have the first line of responsibility to 

design and implement their program in 

compliance with federal requirements, 

including the non-discrimination 

requirements. Federal oversight is 

implemented using the existing state 

plan process, as well as ongoing 

monitoring of program operations. 

Comment: Several commenters 

expressed concern that applying the 

EHB standard to prescription drug 

coverage in Medicaid would not provide 

appropriate protections for people with 

chronic conditions like cancer, diabetes, 

Parkinson’s, HIV/AIDS, schizophrenia, 

epilepsy, obesity and organ transplant 

recipients. The commenters believe that 

focusing on a number of drugs covered, 

as opposed to ensuring a breadth of 

drugs are covered, could result in a 

selection of drugs that meets the 

minimum requirement but 

discriminates against potential 

enrollees. 

Response: While we understand the 

commenters’ concerns, the statute 

permits states a certain amount of 

flexibility in determining and 

structuring ABPs that meet the needs of 

enrollees and are consistent with overall 

state objectives. We must clarify a 

statement in the preamble to the 

proposed rule, indicating that 

requirements under section 1927 of the 

Act are applicable to ABPs under 

section 1937 of the Act. Section 1927 of 

the Act does not affect the flexibility of 

states to define ABP benefit packages 

consistent with a coverage benchmark 

and including EHBs. The amount, 

duration, and scope of prescription drug 

coverage would thus be governed by the 

requirements of section 1937 of the Act. 

To the extent that a prescription drug is 

within the scope of the ABP benefit as 

a covered outpatient drug, section 1927 

of the Act is then applicable. For such 

covered outpatient drugs, since payment 

is available under the state plan, all 

drug rebate obligations under the rebate 

agreement are required for drug 

manufacturers under 1927(b) of the Act. 

To explain in more detail, the 

amount, duration, and scope of coverage 

for an ABP is determined under section 

1937 of the Act, which authorizes 

benchmark or benchmark-equivalent 

coverage ‘‘notwithstanding any other 

provision that would be directly 

contrary.’’ But, the drug rebate 

obligation applies under section 1927 of 

the Act when payment is made under 

the Medicaid state plan for covered 

outpatient drugs as part of the ABP. In 

addition, to the extent that covered 

outpatient drugs are within the scope of 

ABP coverage, the protections and 

limitations for such coverage under 

section 1927 of the Act apply. So, for 

example, to the extent that coverage 

under an ABP includes a class of 

covered outpatient drugs, a state could 

impose limitations on that coverage 

only consistent with the provisions of 

section 1927(d) of the Act. In general the 

requirements for prescription drug 

coverage under section 1937 of the Act, 

through the requirement for coverage of 

EHBs, will mean that ABPs will meet 

existing section 1927 requirements for 

Medicaid payment of covered outpatient 

drugs, which we believe will address 

the commenters’ concerns. We discuss 

the interaction between the 

requirements for prescription drug 

coverage under section 1937 of the Act 

with the requirements for covered 

outpatient drugs under section 1927 of 

the Act in further detail later in this 

final rule. 

Comment: Some of the commenters 

are concerned that CMS allows states to 

place limitations on amount, duration, 

and scope and adopt prior authorization 

and other utilization control measures, 

as well as policies that promote the use 

of generic drugs. The commenters 

believe that for people living with 

chronic conditions, use of utilization 

management techniques can have a 

detrimental impact and inhibit people 

from accessing needed treatments. The 

commenters also believe that these 

limitations can violate the nondiscrimination requirements in the law. 

In particular, commenters indicated 

that it is imperative that nondiscrimination protections found in 

§ 440.347 are strictly and clearly applied 

to the ABP prescription drug benefit. 

HIV care and treatment standards 

maintained by Federal agencies 

recommend a combination of 

medications for effective management of 

HIV disease (see http:// 

www.aidsinfo.nih.gov). Quantitative 

limits on the number of drugs covered 

per month are discriminatory against 

people with HIV and others whose 

quality of life and health depend on 

access to a specific regimen of multiple 

prescription drugs to treat both HIV and 

co-occurring conditions as 

recommended by their medical 

provider. The application of the nondiscrimination provisions should 

prohibit states from applying 

quantitative limits on monthly drug 

coverage for the expansion population, 

and the commenters urged that this 

standard also be applied to the 

traditional Medicaid population. If 

monthly drug limits are considered, 

there must be provisions to allow for a 

timely override process that does not 

delay immediate and uninterrupted 

access to the medications when 

recommended by a medical provider. 

Commenters also requested that CMS 

adopt a more robust standard for 

evaluating limitations on amount, 

duration, and scope and prior 

authorization and utilization control 

measures that may be discriminatory by 

design. These evaluations should be 

specific to the population and based on 

sound medical evidence regarding the 

prescription drugs necessary to provide 

adequate coverage. Restrictions to 

prescription drug coverage in Medicaid, 

such as monthly drug limits, could 

leave some Medicaid beneficiaries with 

less comprehensive coverage than that 

offered to individuals covered in the 


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Exchange because of limitations that are 

discriminatory based on health care 

need. 

A few commenters also expressed 

concern that the proposed rule does not 

discuss the circumstances in which a 

limitation on drug coverage could 

violate the non-discrimination 

requirement. CMS should provide 

additional guidance about its 

interpretation of the nondiscrimination 

rule and its enforcement strategies, 

particularly for prescription drugs. The 

commenters believe that this should 

include oversight functions to actively 

monitor and test for discriminatory plan 

design and implementation, and to 

report such activities to CMS. For 

instance, the implications of plan 

substitutions within a category of EHBs 

or prescription drug cost-sharing 

designs for high risk enrollees should be 

considered. 

Response: States have considerable 

flexibility in implementing the 

provision of Medicaid services through 

ABPs. While this flexibility permits 

states in some instances to limit 

prescription drug coverage based on the 

coverage offered under other public 

employee or commercial plans, it also 

includes the ability to exceed the 

amount, duration, and scope of 

prescription drugs covered by those 

plans, as long as the services provided 

are consistent with the Medicaid 

requirements. 

The non-discrimination provisions 

adopted in this final rule at § 440.347 

require that states will need to assess 

whether their ABP benefits, including 

any limitations placed on the amount, 

duration and scope of any benefit, 

discriminate on the basis of the 

individual’s age, expected length of life 

or any individual’s present or predicted 

disability, degree of medical 

dependency, or quality of life or other 

health conditions. We will consider 

whether additional sub-regulatory 

guidance on these matters is needed. 

Comment: One commenter stated that 

private market carriers argue that 

exclusions for services or drugs 

commonly provided for the treatment of 

conditions such as HIV/AIDS are not 

discriminatory because they apply to all 

plan enrollees, regardless of their 

specific negative effect on people with 

these conditions. 

Response: Under the law, states must 

assess whether their ABP benefit 

designs, including service or drug 

exclusions that are applied to all 

beneficiaries, discriminate based on an 

individual’s age, expected length of life, 

or an individual’s present or predicted 

disability, degree of medical 

dependency, or quality of life or other 

health condition contrary to the nondiscrimination provisions being adopted 

in this final rule at § 440.347. 

Comment: One commenter suggested 

that in developing an analysis 

framework to aid in testing for 

discriminatory plan benefits, CMS must 

ensure that ABPs refrain from using 

benefit designs that treat patients in a 

disparate manner based on age. For 

example, where FDA approves a drug or 

biologic for use in patients within a 

certain population, such as pediatrics, 

the commenter argued that ABPs should 

not be permitted to restrict coverage or 

employ varying utilization techniques 

for children of different age ranges 

within that pediatric population. The 

commenter requested CMS’ vigilant 

oversight to protect children from being 

subject to age-based discrimination in 

accessing FDA-approved products. 

Response: The non-discrimination 

provisions adopted in this final rule at 

§ 440.347 require that states will need to 

assess whether their ABP benefits, 

including any limitations placed on the 

amount, duration and scope of any 

benefit, discriminate on the basis of the 

individual’s age, expected length of life 

or any individual’s present or predicted 

disability, degree of medical 

dependency, or quality of life or other 

health conditions. A limitation on 

medically necessary care provided to 

pediatric patients would violate the 

requirement under section 1937 of the 

Act that ABPs include the full range of 

medically necessary EPSDT screening 

and treatment services. Thus, the issue 

would not be one of benefit design but 

of compliance in providing a covered 

benefit. 

Comment: A few commenters stated 

that CMS should adopt similar guidance 

and review processes as required under 

Medicare Part D program in the 

Medicaid EHB final rule. These proven 

non-discrimination policies and 

processes have been critically important 

in assuring that all Medicare 

beneficiaries—from the healthiest 

beneficiaries to the most vulnerable 

beneficiaries with serious and chronic 

illnesses—can obtain affordable Part D 

coverage that meets their individual 

needs. Additionally, CMS’ experience 

assessing Medicare Advantage plans’ 

cost-sharing and benefit designs for 

discriminatory effects may help point 

the way. 

Response: We appreciate the 

comments regarding the use of Part D 

non-discrimination standards and will 

consider those standards as we evaluate 

these issues and the need for further 

guidance. 

Comment: Several commenters 

indicated that meaningful nondiscrimination protections will require a 

thoughtful and thorough review of 

preferred drug lists (PDLs). They stated 

that the following approaches could 

help ensure meaningful access: (1) PDLs 

should only be permitted to categorize 

a drug as non-preferred when there are 

genuine therapeutic alternatives 

classified as preferred; (2) PDLs should 

allow for appropriate access to drugs or 

drug classes needed for adherence to 

widely accepted treatment guidelines; 

(3) The most commonly used 

medications (or therapeutically similar 

medications) for conditions with high 

prevalence in the Medicaid population 

should be categorized as preferred 

drugs; and (4) Most importantly, 

medications used by particularly 

vulnerable Medicaid beneficiaries, such 

as those living with HIV/AIDS, cancer 

or serious mental illness, should be 

largely available as preferred drugs, 

given the importance of avoiding 

medical complications and 

interruptions in therapy for individuals 

with those conditions. 

Response: For covered outpatient 

drugs, a PDL is permitted under section 

1927 of the Act, as long as it is under 

a prior authorization program that meets 

the requirements of section 1927(d)(5) of 

the Act. Furthermore, as we discuss in 

the cost sharing sections of this final 

rule, a PDL may also be established for 

cost sharing purposes. 

Comment: Many commenters 

expressed concern that the regulation 

did not provide examples of what 

would be considered discriminatory 

benefit design. The commenters request 

CMS identify a clear standard to 

determine whether the coverage 

provided complies with the nondiscrimination provisions of the 

Affordable Care Act. Additionally, the 

commenters believe that CMS should 

provide examples to States of what 

would constitute violations, monitor 

ABP coverage for compliance with the 

non-discrimination requirements, and 

enforce these provisions of the law. 

Many other commenters added that the 

rule also did not establish a process to 

bring discriminatory benefit design or 

practice into compliance. CMS should 

consider developing more detail in the 

final regulation defining these 

protections. This should include a 

process for bringing a State’s chosen 

benchmark or benchmark-equivalent 

option into compliance with the law. 

Response: States will submit 

Medicaid state plan amendments for 

federal approval to implement ABPs 

and receive FFP. The state will assure 

in that submission that they will comply 

with non-discriminatory requirements 

as set forth in § 440.347(e). If issues are 


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detected with adherence to these 

requirements, we will pursue 

appropriate action with the state to 

rectify the issues. As always, we 

appreciate the ongoing input of 

stakeholders to help inform states and 

CMS of concerns relating to these 

matters. 

Comment: One commenter indicated 

that it is unclear how the requirement 

that EHBs cannot be based on a benefit 

design or implementation of a benefit 

design that discriminates on the basis of 

an individual’s age, expected length of 

life, or of an individual’s present or 

predicted disability, degree of medical 

dependency, or quality of life or other 

health condition will be evaluated in 

the context of benchmark plans for 

specified population. It is unclear 

whether targeting permitted under other 

sections such as section 1915(i) of the 

Act would be permitted. The 

commenter wondered whether it would 

preclude the establishment of specialty 

plans based on diagnosis. 

Response: Section 1937 of the Act 

does allow for a waiver of comparability 

at § 440.230(c); thus permitting states to 

identify groups of people, populations, 

based on certain characteristics such as 

presence of a chronic condition. States 

can then design benefit packages that 

are suitable for the population, but this 

activity does not permit benefit designs 

that are inherently discriminatory. 

Comment: A few commenters 

expressed concern that neither earlier 

rules on EHB nor this proposed rule 

specifically define ‘‘discrimination’’ in 

the context of discriminatory benefit 

design. The commenters urge HHS to 

develop and promulgate a definition of 

‘‘discrimination’’ that will allow states 

to evaluate health plans uniformly. The 

proposed rule delegates entirely to 

states the task of evaluating EHB for 

discriminatory design or intent with no 

further guidance at all. The absence of 

a definition of discrimination will 

inevitably lead to a 50-state patchwork 

of definitions. The commenters strongly 

believe that the definition of 

discriminatory benefit design should 

not vary among states. 

Response: Medicaid is a federal and 

state partnership that allows states to 

design state-specific programs within 

broad federal guidelines and, more 

generally, that allocates responsibilities 

to both states and the federal 

government. By identifying states as 

accountable for determining that benefit 

design is not discriminatory, we 

recognize their important role in 

assuring compliance with this important 

statutory directive. Such accountability 

does not negate federal responsibility. 

As noted, we will consider whether 

further guidance on discrimination 

benefit design would be useful. 

Comment: One commenter pointed to 

the Affordable Care Act’s provision 

barring discrimination in EHB as 

prohibiting disability-based 

discrimination in making decisions 

about coverage, reimbursement rates, 

establishing incentive programs, and 

designing benefits, and the commenters 

believe those requirements should apply 

to Medicaid ABPs. The commenter 

recommends the Department provide 

additional guidance concerning 

applications of the Affordable Care Act 

EHB non-discrimination mandate to 

ABPs. The commenter believes the 

Department should also identify a 

minimum scope of services that plans 

must cover to comply with the 

Affordable Care Act’s parity and 

nondiscrimination requirements and the 

requirement that EHB take into account 

the ‘‘needs of diverse segments of the 

population, including . . . persons with 

disabilities.’’ 

Response: The United State Supreme 

Court decision in Olmstead v. L.C. 

rendered on June 22, 1999 held that 

unjustified segregation of people with 

disabilities constitutes discrimination in 

violation of Title II of the ADA. Public 

agencies must provide services to 

people in the community when services 

are appropriate, people do not oppose 

services in the community, and the 

community-based services can be 

reasonably accommodated, taking into 

account the resources available to the 

entity and the needs of others who are 

receiving disability services from the 

entity. Medicaid beneficiaries must 

receive services in the most integrated 

setting appropriate. We agree with the 

commenter that benefit design, 

including rate structures, should not 

create a pathway to institutionalization 

or segregation. Setting is not an 

appropriate targeting criterion, because 

it is potentially discriminatory as 

different benefits could be designed 

based on where individuals live and 

therefore, it would not be acceptable as 

a waiver of comparability. 

Comment: Many commenters 

recommend CMS use the following data 

to determine compliance with the nondiscrimination requirements: 

• Medical necessity requirements for 

Medicaid must be evaluated and 

standardized, and HHS should monitor 

state implementation of medical 

necessity to ensure that people living 

with HIV, chronic disabilities and other 

chronic and complex conditions have 

unimpeded access to essential care and 

treatment. 

• Utilization management techniques, 

exclusions, and service limits must be 

closely monitored to ensure that plans 

have not put in place barriers to services 

or excluded or limited certain items or 

services solely to deny access to care for 

people with chronic and complex health 

conditions. The commenters urge HHS 

to develop a list of practices that 

amount to discrimination to help guide 

monitoring and enforcement activities. 

For instance, requiring step therapy for 

HIV treatment without a medical 

override provision is a discriminatory 

utilization management technique that 

should be barred. Similarly, a monthly 

limit on prescription drugs (for 

example, several states have monthly 

limits of three or four prescription 

drugs) is also per-se discriminatory, as 

applied to people living with HIV and 

other chronic conditions. 

• Physician network size and 

composition must be evaluated to 

ensure that Medicaid managed care plan 

networks include providers that are able 

to deliver quality care for people living 

with HIV and other chronic and 

complex conditions. A plan network 

that excludes HIV providers violates 

network adequacy standards outlined in 

qualified health plan standards and is a 

discriminatory plan design practice that 

forecloses access to EHB services. In 

addition, patient protections (for 

example, standing out-of-network 

referrals) will be necessary to ensure a 

smooth transition to coverage and to 

support continuity in care. The 

commenters strongly urge CMS to 

require Medicaid managed care plans to 

contract with Essential Community 

Providers, including Ryan White 

medical providers. 

• For chronic and complex 

conditions, where the standard of care 

is rapidly evolving, reference to clinical 

guidelines is particularly important to 

ensure that coverage decisions are based 

on established medically accepted 

guidelines. 

Response: Thank you for your 

suggestions. We agree that Medicaid 

managed care provider networks need to 

be adequate to provide services to all of 

their members. It is at state discretion to 

include (or not) standards for managed 

care providers in the contracts that the 

state holds with the managed care 

organizations in the state. Managed care 

entities can contract with any provider 

operating within the scope of their 

license to provide services. 

Comment: A few commenters 

recommend ongoing procedures for 

states to monitor and share data on how 

they are meeting their benefit design 

and anti-discrimination obligations over 

time, and make this information 

transparent and readily available in at 


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least an aggregate fashion to HHS, the 

public, and to health advocates. 

Response: We appreciate the 

comments. We are currently redesigning 

data collection procedures and 

standards and will consider these 

comments. 

Comment: One commenter is 

requesting that any coverage under the 

Affordable Care Act, including 

Medicaid Programs, adequately cover 

therapies that cancer patients absolutely 

must take whether or not there is an 

actuarial equivalent at a lower cost. 

Coverage of drugs and services related 

to cancer care should not create cost 

barriers to patients through cost-sharing 

schemes such as burdensome co-pays 

and co-insurance. To do so would be 

unfairly discriminatory, and could 

impact a patient’s ability to access their 

care, particularly low-income patients 

enrolled in Medicaid. The commenter 

would like to see strong protections and 

oversight established to prevent 

discrimination. 

Response: We agree that a patient’s 

ability to pay cost sharing imposed for 

a service can affect a patient’s access to 

care and that low-income patients are 

particularly sensitive to such costs. 

Medicaid cost sharing rules at § 447.52 

generally and § 447.53 for drugs apply 

to ABPs. States design cost sharing for 

therapies and drugs using those rules, 

and cost sharing rules may not be 

implemented in a manner that would be 

discriminatory. Annual dollar limits on 

services will not be allowed on benefits 

in the public employee or commercial 

plans that are the basis for the base 

benchmark options used to define EHBs 

per section 2711 of the Affordable Care 

Act. 

Comment: A few commenters believe 

that § 440.347(e) sets out a strong nondiscrimination requirement. However, 

the commenters also believe that there 

will be times when individuals are 

going to need access to legal advocacy 

to seek redress from discrimination and 

enforce these due process protections. 

The commenters recommend that the 

states be required to assist individuals 

to use the due process and appeals 

processes, this would include: (1) 

Information and assistance in pursuing 

complaints and appeals; (2) negotiation 

and mediation; (3) case advocacy 

assistance in interpreting relevant law; 

(4) reporting on patterns of noncompliance by plans as appropriate; and 

(5) individual case advocacy in 

administrative hearings and court 

proceedings relating to program 

benefits. 

Response: We appreciate these 

suggestions; however, they are outside 

the scope of this regulation. 

Comment: Many commenters 

representing the Lesbian Gay Bi-Sexual 

and Transgender (LGBT) community 

stated that the final rules must also 

address gaps in enforcement of this 

prohibition on discriminatory 

exclusions by providing clear guidance 

to state Medicaid agencies on 

implementation of these 

nondiscrimination standards. 

Enforcement is a major concern for 

these commenters in two areas: (i) 

instances of discrimination against 

individual enrollees, and (ii) 

discriminatory benefit design. The 

former is very important for LGBT 

enrollees, and they encourage CMS to 

work with state Medicaid Directors to 

ensure that robust and transparent 

appeals procedures are equally available 

to all individuals who need them. With 

regard to discriminatory benefits design, 

they are particularly concerned about 

enforcement in the context of potential 

disagreement as to what kinds of benefit 

limitations and exclusions constitute 

impermissible discrimination in benefit 

design. 

Response: We appreciate the concerns 

expressed by these commenters. We 

intend to work with states on these 

matters as well as consider ways in 

which discrimination for LGBT 

enrollees may be rooted in benefit 

limitations and exclusions as well as in 

appeals processes. 

Comment: Several commenters stated 

that the proposed rule requires that a 

Medicaid benchmark plan’s benefit 

design cannot be discriminatory, and 

the final regulation must ensure 

adequate protections against 

discrimination. The commenters 

recommend the regulation require the 

following non-discrimination standards: 

• Processes for review of plan 

benefits design to avoid discrimination 

caused by unfair utilization 

management techniques or other plan 

design elements. 

• Requirements for plans to disclose 

to all prospective and current members 

all utilization management techniques 

as well as all limits on services. 

• Final authority at the federal level 

to approve any state non-discrimination 

review processes to ensure appropriate 

measures are in place to guarantee that 

plans are meeting the requirements of 

this section. 

• Federal monitoring programs to 

ensure appropriate checks are in place 

to guarantee that plans are meeting 

federal requirements. 

In addition, the commenters urge 

CMS to clarify that Medicaid costsharing limits apply to the managed care 

organizations participating in the 

Medicaid program. For more details on 

non-discrimination standards, the 

commenters refer CMS to its proposed 

regulatory language for a comprehensive 

set of patient protections. 

Response: In Medicaid, utilization 

management processes are at state 

discretion. States have flexibility to 

design and implement the Medicaid 

program in the state according to state 

policies and procedures. States will 

assure in the state plan amendment 

submission that anti-discrimination 

practices at § 440.347(e) are met. We 

clarify here that Medicaid cost sharing 

parameters apply to services provided 

in a managed care delivery system. 

Furthermore, we have oversight 

responsibility of state programs to 

insure that federal rules and 

requirements are being followed. 

Comment: One commenter pointed 

out that § 440.347 deals exclusively 

with patient non-discrimination. The 

commenter indicated that there is also 

provider discrimination within health 

plans, where sometimes entire classes of 

healthcare professionals are excluded 

from providing services under the 

benefit solely based on their licensure or 

certification. The commenter believes 

such discrimination can limit or deny 

patient choice and access to a range of 

beneficial, safe and cost-efficient 

healthcare professionals, impairing 

competition, patient access to care, and 

optimal healthcare delivery. The 

commenter recommends the rule 

require ABPs offering EHBs to align 

payment systems to adhere to existing 

state provider non-discrimination laws 

as applicable, and to the federal 

provider non-discrimination provision 

in the Patient Protection and Affordable 

Care Act (Sec. 1201, Subpart 1, creating 

a new Public Health Service Act Sec. 

2706, ‘‘Non-Discrimination in Health 

Care’’, 42 U.S.C. 300gg–5) slated to take 

effect January 1, 2014. 

Response: We require that all 

providers are operating within the scope 

of their licensure or certification when 

providing services to Medicaid 

beneficiaries. 

Summary: We appreciate the 

comments and suggestions and may 

consider further guidance. No change in 

the substance of the regulatory text is 

needed. However, CMS made 

grammatical changes to the regulation 

text at § 440.347(e) as a result of 

comments received in this section. 

3. Modifications in Applying the 

Provisions of This Final Rule to 

Medicaid 

We proposed in the implementation 

of section 1937 of the Act and the 

provisions in the Affordable Care Act 

relating to EHBs, a process in Medicaid 


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for designing ABPs. The Affordable Care 

Act modified section 1937 of the Act to 

implement two standards for minimum 

coverage provision; not only must EHBs, 

as defined by the Secretary, be 

provided, but all requirements of 

section 1937 of the Act continue to 

apply. Furthermore, we outlined 

expectations for specific EHBs as they 

are implemented in Medicaid including: 

habilitative services; pediatric or and 

vision services; prescription drugs; 

preventive services as an EHB; and the 

fact that all other Title XIX provisions 

apply. 

a. Essential Health Benefits 

(Rehabilitative and Habilitative Services 

and Devices) (§ 440.347) 

The proposed rule requested 

comment on an approach for defining 

habilitative services in Medicaid and we 

reserved regulatory text to do so. We 

received varied comments, and are 

adopting in this final rule the 

requirement that services covered by the 

base benchmark are the floor of EHB 

coverage, substituted as desired by the 

state. Under 45 CFR 156.110(f), if no 

habilitative services and devices are 

included in the base benchmark, states 

have the option to determine generally 

the required EHB services that are in the 

category of habilitative services and 

devices. If the state has done so, the 

base benchmark, and coverage under the 

ABP, must reflect that determination. If 

the state has not made a general 

determination of the habilitative 

services that are required for this EHB 

category, the state must exercise the 

option set forth in 45 CFR 156.115(a)(5) 

to determine EHB for the specific ABP. 

Under that option, habilitative services 

and devices must be included as EHBs 

either in an amount, duration, and 

scope no more restrictive in terms of 

treatment and benefit limitations than 

rehabilitative services and devices, or 

otherwise to an extent determined by 

the state and reported to HHS. In other 

words, if the base benchmark does not 

include habilitative services and 

devices, ABP coverage must, at a 

minimum, be based on the general state 

determination of habilitative services 

and devices that are included in EHBs, 

or on a Medicaid-specific determination 

for the particular ABP. 

While we are not prescribing a 

specific definition of habilitative 

services and devices for purposes of 

ABP coverage of EHB, we clarify here 

that states may choose to adopt service 

definitions similar to those issued by 

the National Association of Insurance 

Commissioners (NAIC), as follows: 

rehabilitative services and devices are 

defined as services and devices 

provided to assist a person to prevent 

deterioration and regain or maintain a 

skill or function acquired and then lost 

or impaired due to illness, injury or 

disabling conditions. The NAIC also 

defines habilitative services and devices 

as services and devices provided for a 

person to prevent deterioration or attain 

or maintain a skill or function never 

learned or acquired due to a disabling 

condition. CMS will consider the need 

for future guidance, once experience is 

gained in implementing these EHB 

services and devices. We also note that 

while there is a definition of habilitative 

services under existing sections 1915(c) 

and 1915(i) of the Act, this definition is 

not necessarily applicable and may in 

fact not be appropriate for the 

population covered under ABPs. 

Comment: A number of commenters 

believed that by requiring coverage of 

habilitative services in the ten 

mandatory EHB categories, Congress 

clearly indicated its intent to meet the 

health needs of individuals with 

functional limitations following illness, 

injury, disability or due to a chronic 

condition. The commenters 

recommended that HHS develop an 

objective minimum national standard 

for habilitative services based on 

‘‘appropriate coverage to meet the needs 

of the population,’’ and allow states 

flexibility to add to this minimum for 

purposes of innovation. 

A few commenters recommended 

HHS better define this category of 

services including providing clarity as 

to how plan definitions and scope of 

coverage will be assessed to ensure 

compliance with non-discrimination 

provisions. A number of commenters 

requested HHS cover habilitation at 

parity with rehabilitation, with some 

comments suggesting this standard also 

require habilitative services under 

Medicaid to be at least as generously 

defined as in the private market. 

Many commenters requested that 

HHS require coverage of habilitative 

devices without arbitrary restrictions 

and caps that limit the effectiveness of 

the benefit. 

Several commenters recommended 

HHS include a set of habilitative 

services specifying the minimum type of 

services to be provided and specify that 

these services are a floor. 

Many commenters recommended that 

habilitation be covered separate and 

distinct from rehabilitation. For 

example, the plan cannot substitute 

rehabilitation for habilitation or apply 

only a single visit limit to both benefits. 

Each benefit must have separate and 

distinct limits which are applied based 

on medical necessity, not an arbitrary 

cap. 

One commenter requested that HHS 

recognize that habilitative services are 

similar in type and scope to 

rehabilitative services (for example, 

physical therapy, occupational therapy, 

speech-language pathology). One 

commenter believed that habilitation 

should be covered in the same setting 

and include the same type of providers 

and specialists as covered in the 

rehabilitation benefit. 

A number of commenters believed 

that setting clear, comprehensive, and 

uniform standards for habilitative 

services will prevent non-aligned 

localized definitions that could create 

serious problems across programs and 

states. A few commenters requested 

formal guidance on what the minimal 

expectation is for habilitative services. 

A few commenters believed that when 

states adopt the habilitative benefit for 

ABP, HHS require that they do not 

impose financial requirements, 

quantitative treatment limitations, or 

financial limitations that are more 

restrictive than the predominant 

requirements or limitations that apply to 

all other benefit categories. 

Response: We believe the provision of 

habilitative services is in addition to 

rehabilitative services and devices as an 

EHB. As EHBs are based on commercial 

market products, we are interpreting 

rehabilitative services as an EHB to 

more closely align with commercial 

market definitions, rather than the 

broader definition of rehabilitation in 

Medicaid. We therefore, are establishing 

that the commercial market definition of 

EHBs is the floor of coverage, subject to 

substitution flexibilities. If the 

commercial market coverage is not 

adequate, states, not issuers, define the 

benefit. At state discretion, as indicated 

above, states may offer coverage of 

habilitative services and devices that is 

no more restrictive in terms of amount, 

duration, and scope than rehabilitative 

services and devices. We expect that the 

services will be clinically appropriate to 

meet the needs of individuals based on 

medical necessity. We have added this 

flexibility for states to define a 

minimum standard of coverage if the 

commercial market benefits are not 

adequate. We are suggesting, but not 

requiring, definitions of rehabilitative 

and habilitative services and devices, as 

indicated above, and will consider 

needs for future guidance. We are 

reiterating that the benefit flexibility 

under an ABP allows states considerable 

latitude to define the benefit package for 

each population and there may be 

services that are covered in some 

settings but not in other settings, or that 

are covered when furnished by some 

practitioners but not others. This is 


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flexibility that exists currently in the 

commercial marketplace, and is 

extended to state Medicaid programs 

under section 1937 of the Act. 

Comment: One commenter 

recommended that the coverage and 

medical necessity determinations for 

habilitative services and devices should 

be based on clinical judgment of the 

effectiveness of the therapy, service, or 

device to address the deficit. In 

addition, HHS should make clear that 

such benefits are to cover maintenance 

of function not just improvements, to 

assure that individuals in need have 

access to care that prevents 

deterioration of their conditions. 

One commenter requested that HHS 

inform states that habilitative services 

need to be medically necessary and 

plans must be clear on how they define 

and determine medical necessity. 

Response: States may require that all 

services covered under Medicaid be 

medically necessary. Determining the 

specific coverage of habilitative services 

and devices will be done by the state, 

based on services found in the base 

benchmark plan selected by the state to 

define EHBs for Medicaid, and 

substituted as desired. If a base 

benchmark plan does not include 

habilitative services, consistent with 45 

CFR 156.110(f) and 156.115(f), States 

will determine which services are 

included as EHB in the habilitative 

services and devices category. We agree 

with the commenter that habilitative 

services, generally speaking, cover 

acquisition and maintenance of skills, 

while rehabilitative services cover 

restoration of previously acquired skills, 

but we are not setting forth a specific 

definition of these terms at this time. 

Comment: One commenter 

recommended that HHS look to state 

Medicaid programs as a guide for 

defining what habilitation services 

should be covered under the EHB. A 

number of commenters requested that 

HHS require states and plans to adopt 

the definition of habilitative services 

put forth by the NAIC, which was 

included in the Department’s proposed 

rule defining medical and insurance 

terminology. Many commenters 

recommend that if the NAIC definition 

is not used, an alternate definition to 

consider is provided in Medicaid law 

under section 1915(c)(5)(A) of the Act. 

Response: We appreciate these 

suggestions and find the definitions of 

rehabilitative services and devices and 

habilitative services and devices 

extremely useful. Habilitative services 

and devices as described in the base 

benchmark plan is the floor of coverage, 

subject to substitution flexibility. If a 

base benchmark plan does not include 

habilitative services, consistent with 45 

CFR 156.110(f) and 156.115(f), States 

will determine which services are 

included as EHB in the habilitative 

services and devices category. States 

may choose to offer habilitative services 

and devices in no more restrictive in 

terms of amount, duration, and scope of 

treatment than is applied for 

rehabilitative services and devices. 

Comment: One commenter requested 

the state-defined habilitative benefit 

definition, as applied to section 1937 

ABP in Medicaid, should not be 

extended to QHPs on the Exchange. 

This commenter indicated that in many 

states, Medicaid takes an expansive 

view of habilitative services, and there 

is a risk that if applied to the 

commercial market, this could raise 

costs on QHPs in the Exchange. States 

should have the option to either 

separately define habilitative services 

for Medicaid or apply the state-defined 

habilitative definition for the Exchange 

to the Medicaid programs, but not apply 

a broad Medicaid habilitative service 

definition to QHPs in the Exchange. 

Response: This regulation is focused 

on the parameters of the habilitative 

services and devices that are EHBs for 

purposes of section 1937 ABPs under 

the Medicaid program and, this 

regulation does not apply to QHPs. 

Comment: Many commenters 

recommended that states should be 

allowed to define habilitative services 

for their Medicaid program. 

Response: We are adopting the 

position in this final rule that states will 

have the ability to define habilitative 

services and devices. If the base 

benchmark plan selected by the state to 

define EHBs, does not include 

habilitative services and devices, states 

will define the habilitative services and 

devices that will be regarded as this 

EHB category and must be covered in 

the ABP. In so doing, states can choose 

to offer habilitative services and devices 

that are at a minimum no more 

restrictive in terms of amount, duration, 

and scope than rehabilitative services 

and devices. 

Comment: One commenter requested 

that HHS continue to allow states and 

issuers the flexibility to define 

habilitative services for the individual 

and small group markets as proposed in 

the EHB proposed rule and not be 

required to follow Medicaid definitions. 

Response: We reiterate that this 

regulation applies only to the Medicaid 

program, and has no bearing on the 

provision of habilitative services in the 

individual and small group markets. 

Comment: One commenter requested 

HHS clarify that states will be deemed 

to cover habilitation if they provide ABP 

enrollees with such services through a 

section 1915(c) waiver program. 

Response: The new adult eligibility 

group is not eligible for enrollment in 

section 1915(c) waivers. However, states 

may also add section 1915(i) services to 

the ABP using Secretary-approved 

coverage, which may include some 

habilitative services and devices. But we 

do not see a reason to ‘‘deem’’ 

compliance with the habilitative 

services and devices EHB requirements 

just because a state may include some 

habilitative services and devices in 

those ways. The state must still 

determine habilitative services and 

devices that are EHBs in accordance 

with this regulation. 

Comment: A few commenters 

recommended that if HHS does not use 

a national standard for Medicaid 

habilitative service benefits, then states 

should be required to base their 

definitions on documented and 

evidence-based criteria, such as those 

endorsed by a relevant national 

academy of providers or national 

disease group; and states should not 

automatically be allowed to use their 

Exchange habilitative services 

definitions unless it independently 

meets the criteria stated above. 

Response: We expect that states will 

consider the efficacy of services, 

evidence-based criteria, and the needs 

of the populations being served as they 

are designing habilitative services, 

based on the services found in the base 

benchmark selected by the state to 

define EHBs for Medicaid, and 

supplemented and substituted as 

necessary and desired. 

Comment: Many commenters 

recommended that the state-defined 

habilitative services for Exchanges 

should not apply to Medicaid. Instead, 

some commenters indicated that states 

should be required to define habilitative 

services through a public process that 

establishes minimum standards for 

coverage, while taking into account 

unique circumstances of the Medicaid 

population, including the impact of a 

restrictive definition on access to 

critical services in early intervention 

and special education. One commenter 

believed that states should have the 

option to offer parity. 

Response: In terms of complying with 

EHB requirements, the same basic 

framework applies to both ABPs and 

plans in the individual and small group 

markets. But that basic framework 

includes considerable flexibility that 

states can exercise in the Medicaid 

context. While states will ultimately 

determine coverage of habilitative 

services we encourage states to do so in 

recognition of the unique needs of the 


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Medicaid population. As states work to 

identify coverable habilitative services, 

they are expected to consider input from 

the public in making the decisions. 

ABPs are subject to public notice 

requirements in § 440.386. 

Comment: One commenter requested 

that the final rule ensure that the state’s 

Medicaid definition of habilitation is at 

least as generous as the definition used 

for Exchange plans. 

Response: While we believe that the 

procedures we are adopting to 

determine habilitative services included 

in EHB for Medicaid will generally be 

at least as generous as the parallel 

procedures for the individual and group 

market, we are not requiring that result. 

We believe that the procedures for 

Medicaid will lead to appropriate 

coverage for Medicaid beneficiaries 

while recognizing the state’s role in 

designing Medicaid coverage. 

Comment: Many commenters 

recommended against HHS allowing 

any of the potential flexibility, 

authorized in the Exchange, for issuers 

to define the habilitative benefit. 

Commenters were concerned that 

issuers would limit the range of services 

too narrowly. 

Response: States will retain flexibility 

to design services covered within the 

rehabilitative and habilitative services 

and devices EHB consistent with the 

procedures set forth in this final 

regulation. 

Comment: A few commenters 

recommended HHS require states to 

establish the same definition of 

habilitative services for ABP, QHPs, and 

Exchange, due to the significant amount 

of churn associated with the population 

being served. One commenter believed 

that habilitative services should have a 

common definition, but that definition 

should not necessarily determine what 

is covered by the Exchange or Medicaid. 

Those habilitative services that are to be 

covered should be separately 

established by the Exchange and by 

Medicaid, since this is a question of 

affordability and comprehensiveness. 

Response: We recognize the 

possibility for churn between Medicaid 

and the individual and small group 

markets. We believe the flexibility 

reflected in this regulation provides the 

basis for continuity between the 

commercial market and Medicaid. We 

are also allowing states to use provider 

qualifications from the commercial 

market plans to help minimize the 

possibility for provider changes if a 

person’s plan changes. 

Comment: One commenter indicated 

that currently under Medicaid, 

habilitation services are defined in 

statute and provided as an alternative to 

institutional services such as nursing 

home care. As noted in the regulation, 

employers do not cover the service 

consistent with Medicaid requirements. 

As a result, if parity is required without 

consideration of the scope of 

habilitation services offered, the result 

could be states exceeding the EHB 

standard. States should be provided the 

flexibility to define and provide 

coverage of habilitation services. 

Response: Habilitative services and 

devices are coverable services under the 

section 1915(c) waiver program and the 

waiver program does provide a 

suggested definition. Section 1915(i) 

also allows coverage of habilitative 

services and devices where states define 

the service. We are giving states 

flexibility to define habilitative services 

and devices within the standards 

finalized in this regulation. In addition, 

states may offer either habilitative or 

rehabilitative services in excess of these 

standards. 

Comment: Numerous commenters 

believed that states should not be 

allowed to define habilitative services 

through parity with rehabilitative 

services since the two service sets have 

totally distinct purposes and impact 

different sets of individuals. They 

asserted that parity is a poor standard 

because there is no certainty that the 

rehabilitative services level is itself 

adequate to begin with. 

Response: We appreciate the 

commenters’ concerns. We are 

establishing that the state may 

determine the ABP-covered benefit 

beyond the benefits included in the base 

benchmark plan,. To the extent that the 

base benchmark has no habilitative 

services, the state may elect to include 

as the EHB category habilitative services 

and devices coverage that is no more 

restrictive in amount, duration, and 

scope than the coverage of rehabilitative 

services and devices. We acknowledge 

that this standard does not guarantee 

provision of any particular habilitative 

or rehabilitative service. This will be in 

large part determined by the services 

offered in the plan selected by the state 

to define EHBs for Medicaid. 

Comment: One commenter requested 

HHS, at a minimum, afford flexibility to 

issuers allowing them to either provide 

parity by covering habilitative services 

in the same manner as rehabilitative 

services or report the services it decides 

to cover to HHS. 

Response: The procedures we have 

adopted recognize that states have the 

role that issuers have in the individual 

and small group market. Federal 

Medicaid works directly with state 

governments and not issuers. Therefore, 

we believe that having states define the 

habilitative services benefit instead of 

issuers, using the procedures finalized 

here, is the most appropriate approach. 

Comment: One commenter believed 

that habilitative services complement 

rehabilitative services and are integral to 

ensuring that the beneficiary receives 

comprehensive care that restores him/ 

her to maximum functional levels. This 

commenter stated that both substitution 

among and parity between these 

services could be problematic if the 

beneficiary’s medical condition requires 

significantly more rehabilitative services 

than habilitative services and vice versa. 

Response: States may implement 

utilization management processes that 

allow for individuals who need 

additional services beyond the limits 

established in the ABP to receive such 

services based on medical necessity. 

States could substitute rehabilitative 

services for rehabilitative services and 

habilitative services for habilitative 

services. 

Comment: A number of commenters 

recommended that HHS remove the 

requirement that state Medicaid 

programs cover habilitative services, as 

this is not a separate mandated category 

of EHB services. Instead, a Section 1937 

plan that covers either rehabilitative or 

habilitative services should be deemed 

to cover items and services within the 

general EHB category for rehabilitativehabilitative services. 

Alternatively, a few commenters 

recommended that HHS clarify that 

ABPs must cover all of the benefits 

within categories of care that list more 

than one benefit, as is the case for 

rehabilitative and habilitative services 

and devices. In particular, a plan should 

not be considered to meet the 

requirement of covering all EHBs unless 

it covers, as three distinct benefits, 

rehabilitative services, habilitative 

services, and rehabilitative and 

habilitative devices, as opposed to 

covering only one of the many benefits 

included in this category. 

Response: Habilitative services are 

listed as a required benefit category of 

EHB at section 1302(b)(1)(G) of the 

Affordable Care Act. It is part of a 

category of EHBs, but is distinct from 

rehabilitative services and devices. Both 

rehabilitative and habilitative services 

and devices must be offered in all ABPs. 

Comment: A number of commenters 

supported access to habilitative services 

and devices including autism services, 

durable medical equipment, orthotics, 

prosthetics, low vision aides, hearing 

aids, augmentative communication 

devices that aid in speech and hearing, 

and other assistive technology and 

supplies that are often critical to ensure 


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individuals are able to function 

independently in the community. 

Response: We appreciate the 

comment and agree that these types of 

services could assist people with living 

in the community. We are not requiring 

any specific services to be offered 

within this EHB category. 

Comment: A number of commenters 

requested that HHS require coverage of 

services without age restrictions. They 

indicated that a pediatric-only 

habilitative benefit is inadequate, 

especially as the new eligibility category 

is for adults only. 

Response: EHBs including 

rehabilitative and habilitative services 

and devices apply to all individuals 

who receive a benefit package in ABPs, 

regardless of age. For the new adult 

group, only individuals who are ages 19 

and 20 will qualify for EPSDT services. 

Comment: A few commenters 

requested HHS prohibit the exclusion of 

specific conditions or diagnoses from 

accessing the benefit. 

Response: ABPs allow for 

comparability to be waived, which 

results in allowing for targeting of 

individuals to specific benefit packages. 

However, all individuals in the new 

adult group and other individuals the 

state either mandates or offers voluntary 

enrollment into an ABP must receive all 

EHBs, including habilitative and 

rehabilitative services and devices. 

Comment: A few commenters 

recommended that states should define 

habilitation using EPSDT criteria. 

Response: Section 1905(a) of the Act 

does not include a service category for 

‘‘habilitation services’’ so it is not useful 

to look to EPSDT coverage for guidance 

and EPSDT criteria do not apply under 

law to adults. For children, however, 

the EPSDT benefit must provide eligible 

individuals with any medically 

necessary service that is coverable 

under a section 1905(a) service category. 

Consistent with the law, these 

regulations extend the EPSDT benefit, 

which also includes children covered in 

an ABP. Therefore, children in an ABP 

should receive any covered section 

1905(a) benefits that they require based 

on medical necessity. 

Comment: A few commenters 

requested that HHS cover habilitation 

services, which maintain an 

individual’s functional status, as 

defined by the HHS Summary of 

Benefits and Coverage regulations. 

Response: The HHS Summary of 

Benefits and Coverage regulations apply 

to private insurance markets, which do 

not include Medicaid. 

Comment: A few commenters 

cautioned against restricting services in 

EHB plans without allowing for an 

exception process. 

Response: States do have the 

flexibility to allow for exception 

processes for utilization management of 

the benefit; such exceptions must be 

based on medical need. 

Comment: One commenter 

recommended that the habilitative 

benefit cover the full array of health and 

ancillary service needs of children with 

special health care needs. The 

commenter believed that this is 

especially important for children aging 

out of foster care, as these children are 

at greater risk of having a chronic 

condition requiring habilitative services. 

A few commenters indicated that it is 

inappropriate for any one service to 

satisfy the requirement for a benchmark 

plan covering habilitative services. For 

example, providing only Applied 

Behavioral Analysis to children under 

the benchmark plan is inadequate to 

satisfy the full requirement of coverage 

of habilitative services. These 

commenters requested that the 

benchmark plan utilized be as 

comprehensive in its coverage as 

feasible. One commenter recommended 

defining habilitation and contrasting it 

with rehabilitation to help clarify the 

distinction between the two benefits. 

Response: We remind readers that 

states must not only comply with the 

standards finalized in this regulation, 

but must also include all habilitative 

services covered in the public employee 

or commercial plan selected by the state 

to define EHBs for Medicaid, 

supplemented and substituted as 

necessary and permitted. 

Comment: One commenter believed 

there should be no exclusion for 

services that may be educationallyrelevant, as is the current policy in 

Medicaid. 

Response: Payment for Medicaid 

services must be for services that are 

medical or remedial in nature as 

specified by the particular authority 

from which the service is derived. 

Comment: One commenter requested 

HHS provide states a description of 

maintenance programs and clarify at 

what point services are no longer 

covered. 

Response: The level at which services 

no longer have clinical value is 

determined by the state through medical 

necessity criteria. 

Comments: One commenter requested 

that HHS clarify the clinical settings in 

which habilitative services may be 

covered and ensure that there is a 

prohibition against ‘‘school’’ exclusions. 

Response: Settings in which services 

are furnished are largely determined by 

the providers authorized by the state to 

deliver services. Practitioners within 

schools can become Medicaid providers 

if they meet the provider qualifications 

as established by the state. In ABPs, 

states may use provider qualifications 

for the benefit as defined for the 

commercial market, Medicaid provider 

qualification rules for the benefit, or a 

combination of both. 

Comment: A few commenters 

requested information related to the cost 

of adding habilitative services. 

Response: Habilitative services are not 

included in the benefit package 

typically included in the Medicaid state 

plan, and our limited experience does 

not allow for extrapolation for a 

nationally required service. States will 

initially receive 100 percent FMAP 

starting January 1, 2014 to cover the cost 

of providing services to individuals who 

are considered newly eligible in the new 

adult group, and that funding will 

decline to 90 percent FMAP in 2020. 

For individuals who are considered not 

newly eligible in the new adult group 

and those who are not in the new adult 

group, FMAP will be provided at the 

state’s regular FMAP rate. 

Comment: Many commenters 

recommended that HHS prohibit the use 

of cost-sharing requirements or 

utilization management tools which 

target the habilitation benefit and are 

not applied to other EHB benefits. 

Response: We are not accepting this 

comment because states have the 

flexibility to impose cost sharing 

consistent with the exemptions and 

beneficiary protections set forth in 

sections 1916 and 1916A of the Act, 

which we address separately in this 

final rule. There is no exemption under 

those provisions for habilitation 

services. In determining how to exercise 

the flexibility to impose cost sharing, 

however, we recognize that states must 

consider their obligations under the 

Americans with Disabilities Act and 

must not implement a discriminatory 

benefit design. 

Comment: A few commenters were 

disappointed that HHS has chosen not 

to provide states any guidance regarding 

the habilitation benefit in ABP. 

Response: In the proposed rule, we 

solicited public comments on the EHB 

requirements for rehabilitative and 

habilitative services, including devices. 

We received considerable numbers of 

comments, and considered those 

comments carefully. We weighed 

concerns about burden and cost of 

expansive coverage against the benefits 

of wider access for beneficiaries to 

needed care. We also considered the 

treatment of these benefits in the 

commercial market. Based on this 

consideration, we are issuing in this 


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final regulation the policy for coverage 

of rehabilitative and habilitative 

services, including devices. We hope 

that these policies provide the guidance 

requested by commenters. 

Comment: Many commenters 

requested HHS stipulate in the final 

regulation an ongoing process for data 

collection and evaluation related to ABP 

and Exchange coverage of habilitative 

services and devices. If this data were 

compared to the model definition of 

habilitation, that would give parameters 

for determining the adequacy of 

coverage for the first year of ABP and 

exchange operation. 

Response: CMS collects data from 

states in a variety of ways. The data will 

be available to help states, CMS and 

others determine what services are 

actually being provided, and it will help 

to inform us for future coverage 

decisions. 

Comment: One commenter indicated 

that states should be able to include as 

Medicaid state plan services any 

habilitative services included in either 

its Exchange EHB benchmark or ABP. 

Response: Habilitative services are 

only required in the Medicaid program 

for individuals in an ABP. Many states 

cover habilitative services under their 

section 1915(c) waivers. States 

interested offering habilitative services 

in other contexts should initiate 

conversations with CMS. 

Comment: One commenter believed 

the habilitative benefit proposed to be 

defined in the November 20, 2012 EHB 

proposed regulation is wholly 

inadequate and urged HHS to pursue 

promulgation of a strong, uniform 

definition of habilitative services for 

ABPs, as well as those offered through 

the Exchange. 

Response: The scope of this regulation 

is related to the definition of 

habilitation services as EHBs for 

purposes of Medicaid ABPs under 

section 1937 of the Act. This regulation 

does not extend to the definition of 

habilitation services as EHBs for 

purposes of the individual and small 

group markets. 

Comment: One commenter 

recommended that HHS have the 

authority to amend state defined 

coverage of habilitative services should 

evidence show that they provide 

insufficient coverage for users. 

Response: We anticipate that states 

will provide appropriate coverage of 

this service but section 1937 of the Act 

gives states a certain amount of 

flexibility to define ABPs that include 

the minimum coverage defined as EHBs. 

Comment: One commenter believed 

that by requiring section 1937 plans to 

cover habilitative services, CMS is 

creating a disconnect between the scope 

of services offered under the state plan 

and section 1937 coverage, in essence 

making the section 1937 plans more 

generous than current Medicaid state 

plans (which goes against congressional 

intent). 

Response: The Affordable Care Act 

established habilitative services as part 

of the EHB category ‘‘Rehabilitative and 

Habilitative Services and Devices.’’ 

EHBs are required to be offered as part 

of ABPs and are not required in other 

Medicaid state plan benefits for adults. 

ABP benefit packages will be different 

from those defined as the Medicaid state 

plan. 

Comment: One commenter believed 

that requiring habilitative coverage does 

little to ensure that appropriate services 

are available to individuals, as those 

requiring habilitative services are likely 

to be considered ‘‘medically frail’’, 

exempting them from mandatory 

enrollment in the benchmark package. 

Response: Individuals in the new 

adult group who meet the criteria to 

otherwise be determined to be exempt 

for medical frailty, will have a choice 

between ABP coverage that is defined in 

accordance with the requirements of 

section 1937 of the Act, including the 

EHB requirements, or ABP coverage that 

is defined as the coverage available 

under the state’s approved Medicaid 

state plan. People who are not in the 

new adult group and are eligible for 

voluntary enrollment may be given a 

choice by the state between the benefit 

package defined using the ABP or the 

state’s approved Medicaid state plan. 

An individual who has such an election 

may obtain needed habilitation services 

if the state has elected to provide such 

coverage under the state plan under 

section 1915(i) of the Act. If not, such 

individuals who need habilitative 

services may wish to voluntarily enroll 

in an ABP defined under section 1937 

of the Act, if the EHB benefit package, 

inclusive of habilitative services, meets 

their needs. 

Summary: We solicited public 

comments related to this provision in 

the proposed rule. We clarify in 

regulation text that the state will define 

rehabilitative and habilitative services. 

Services covered by the base benchmark 

are the floor of EHB coverage, 

substituted as desired by the state. 

Under 45 CFR 156.110(f), if no 

habilitative services and devices are 

included in the base benchmark, states 

have the option to determine generally 

the required EHB services that are in the 

category of habilitative services and 

devices. If the state has done so, the 

base benchmark, and coverage under the 

ABP, must reflect that determination. If 

the state has not made a general 

determination of the habilitative 

services that are required as this EHB 

category, the state must exercise the 

option set forth in 45 CFR 156.115(a)(5) 

to determine EHB for the specific ABP. 

Under that option, habilitative services 

and devices must be included as EHBs 

either in an amount, duration, and 

scope no more restrictive in terms of 

treatment and benefit limitations than 

rehabilitative services and devices, or 

otherwise to an extent determined by 

the state and reported to HHS. In other 

words, if the base benchmark does not 

include habilitative services and 

devices, ABP coverage must, at a 

minimum, be based on the general state 

determination of habilitative services 

and devices that are included in EHBs, 

or on a Medicaid-specific determination 

for the particular ABP. 

b. Pediatric Oral and Vision and EPSDT 

Services 

For Medicaid, medically necessary 

services, including pediatric oral and 

vision services, must be provided to 

eligible individuals under the age of 21 

according to requirements of the EPSDT 

benefit. We clarified in the proposed 

rule that any limitations relating to 

pediatric services that may apply in the 

individual or small group market does 

not apply to Medicaid. In this final rule, 

we made no change from the proposed 

rule. 

Comment: Several commenters 

expressed appreciation for and support 

of the clarifying language in the 

preamble that confirmed that medically 

necessary services provided to eligible 

beneficiaries under the age of 21 must 

be provided under the EPSDT program, 

and that any limitation relating to 

pediatric services based on benchmarks 

would not apply to Medicaid for 

children enrolled in ABPs. 

One commenter added that the 

EPSDT benefit ensures that Medicaid 

eligible children have access to a 

complete range of medically necessary 

services, concluding that this will prove 

especially important for children with 

chronic conditions. 

A separate commenter believed that 

the pediatric services category for 

benchmark plans for all populations 

must include a comprehensive pediatric 

services benefit modeled after EPSDT. 

Response: We generally agree with 

these commenters, that the EPSDT 

benefit is important in offering 

increased access and a comprehensive 

range of medically necessary services 

for children under the age of 21. For 

children enrolled in Medicaid, all 

medically necessary services in general, 

including pediatric oral and vision 


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services, are covered under the 

Medicaid EPSDT benefit, which applies 

to every section 1937 ABP. As a result, 

EHB supplementation for pediatric 

services is not necessary in Medicaid. 

When assuring access to EPSDT 

services, a state has the option to offer 

medically necessary services to eligible 

children through either benchmark and 

benchmark-equivalent plan benefits 

without limitation or, alternatively, a 

state may meet the ESPDT requirement 

by providing services in combination 

with an eligible individual’s benchmark 

or benchmark-equivalent plan as 

additional benefits. The state Medicaid 

program must assure that eligible 

individuals enrolled in ABP coverage 

receive EPSDT services that can be 

accessed in the most beneficial and 

seamless manner for the population 

being served. 

Comment: One commenter believed 

that subjecting ABP benefit categories to 

EPSDT requirement, such as 

preliminary screening, would water 

down ABP benefit packages and serve as 

an artificial barrier to care that children 

need. The commenter believed that a 

robust pediatric vision services benefit, 

as envisioned by Congress in the 

Affordable Care Act, based on coverage 

typical in the commercial market, 

should not be interrupted by imposing 

a harmful screening requirement. 

Response: We disagree. The 

commenter may have a 

misunderstanding of the EPSDT 

screening requirements. States are 

required to adopt EPSDT screenings 

(that is, preventive visits) for well-child, 

vision, hearing, and dental services. 

States may also adopt a national 

periodicity schedule such as Bright 

Futures (the Guidelines for health of the 

American Academy of Pediatrics). 

Services are provided based on these 

periodicity schedules and at other 

intervals as determined medically 

necessary. The inclusion of screening 

requirements as part of the EPSDT 

mandate should not in any way ‘‘water 

down’’ benefits provided under ABPs to 

individuals under the age of 21. It 

should serve to ensure that children 

receive the necessary screenings and 

any additional services and treatments 

according to appropriate standards of 

care. 

Summary: No changes were made. 

CMS clarified in regulation text that 

EPSDT applies to pediatric services 

including oral and vision care as a result 

of comments received in this section. 

c. Essential Health Benefits 

(Prescription Drugs) (§ 440.347) 

In the proposed rule, we proposed to 

add a new paragraph (b)(7) to include 

benchmark-equivalent health benefits 

coverage for prescription drugs. We also 

indicated in the preamble that section 

1927 of the Act requirements for 

covered outpatient drugs also apply to 

such prescription drug benefits as an 

EHB. As we previously discussed, we 

are clarifying in this final rule that this 

statement may have been over-inclusive, 

since section 1927 requirements do not 

apply to ABPs to the extent that they 

conflict with the flexibility under 

section 1937 of the Act for states to 

define the amount, duration, and scope 

of the benefit for covered outpatient 

drugs. We received the following 

comments: 

Comment: A few commenters 

expressed support of paragraph (b)(7) of 

§ 440.335, which implements the 

statutory requirements for benchmark 

equivalent coverage of prescription 

drugs. 

Response: We appreciate the 

commenters’ support for the coverage of 

prescription drugs as required under 

section 1937 of the Act. 

Comment: A few commenters 

indicated that in the current Medicaid 

program, states limit the number of 

drugs and include other utilization 

control measures that are harmful to 

patients and deny them the therapies 

that meet their health needs as 

prescribed by their physician. Some 

state Medicaid programs limit patients 

to two to four brand name drugs per 

month. Such limitations clearly do not 

meet patients’ needs and the commenter 

urges CMS not to allow states to adopt 

them for the expansion population. 

Patients should be able to access the 

medications that they need as 

prescribed by their physicians. If they 

are not able to access appropriate 

medications, patients may become ill, 

impacting healthcare spending in the 

long run. 

The commenters further seek 

clarification on what is being proposed 

in the rule’s recommendation regarding 

prescription drug limits. While the rule 

proposes that the ABP has to meet the 

benefits in the state-selected EHB for the 

private market, the rule separately 

appears to replace the ABPs EHB drug 

benefit category with that described in 

section 1927 of the Act. In the final rule, 

the commenters ask for clarification on 

this matter and specifically on whether 

the ABP drug benefit is trumped by 

what is outlined in section 1927 of the 

Act, including with respect to any 

limitations. Furthermore, they are 

greatly concerned by the seemingly 

open ended ability of states to impose 

limits, and recommend that quantity 

limitations not apply to the ABP. 

Another commenter states that CMS’ 

final rule must clearly specify all the 

drug access protections that apply to 

Medicaid ABPs. The commenter 

believes that these protections are 

essential in the Medicaid context 

because Medicaid beneficiaries 

represent a vulnerable population that 

tends to have lower health status and 

fewer resources to obtain needed care. 

Response: States have considerable 

flexibility in designing benefit packages 

for ABPs, including in the process of 

ensuring coverage of EHBs. While this 

flexibility permits states in some 

instances to limit prescription drug 

coverage based on the coverage offered 

under other public employee or 

commercial plans, it also includes the 

ability to exceed the amount, duration, 

and scope of prescription drugs covered 

under those plans. We also clarify that 

nothing in the commercial market 

implementation of EHBs, including 

prescription drugs, directly prohibits 

the utilization of monthly quantity 

limits. In developing ABPs, states must 

include prescription drug coverage to at 

least reflect the EHB-benchmark plan 

standards, including the requirement to 

have procedures in place that allow an 

enrollee to request and gain access to 

clinically appropriate drugs not 

otherwise covered. We believe these 

requirements will result in coverage that 

is similar to the coverage otherwise 

required under regular Medicaid state 

plan coverage. 

Comment: A few commenters stated 

that they support the rules governing 

coverage of prescription drugs under 

Medicaid (section 1927 of the Act) 

applying to the ABP requiring coverage 

of nearly all of the drugs produced by 

manufacturers who participate in the 

Medicaid drug rebate program. The 

breadth of coverage offered by the 

Medicaid drug benefit is important to 

meet the medication needs of people 

with HIV who rely on a complex and 

unique drug regimen to treat HIV 

infection and manage serious cooccurring conditions, such as heart 

disease, serious mental illnesses and 

hepatitis B or C. However, they have 

serious concerns regarding the 

flexibility afforded to states to apply 

quantitative limits on drug coverage, 

particularly given that these limits are 

not common practice in the private 

insurance market. Allowing these types 

of limits in ABPs threatens access to 

lifesaving care and treatment and 

undermines the letter and spirit of the 

Affordable Care Act’s EHB requirements 

for newly eligible Medicaid 

beneficiaries. It will also have the effect 

of undermining the adequacy of 

prescription drug coverage for those 


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with chronic health needs. The 

commenters recommend that HHS 

apply the section 1927 requirement for 

the range of covered medications, but 

prohibit additional authority for 

quantitative limits or other limits except 

as legally applicable based on the 

underlying ABP and EHB benchmarks. 

The commenters further recommend 

that § 440.347 be amended to read: 

‘‘(e)Prescription drugs. Prescription 

drugs will be offered at a minimum in 

accordance with the requirements of 

section 1927 of the Act and 

implementing regulations.’’ 

Response: While drug rebate 

obligations under section 1927(b) of the 

Act are applicable to payment for 

covered outpatient drugs covered 

through an ABP, the amount, duration 

and scope of coverage for an ABP is 

determined under section 1937 of the 

Act, which authorizes benchmark or 

benchmark-equivalent coverage 

‘‘notwithstanding any other provisions 

that would be directly contrary.’’ This 

being the case, we do not have the 

authority to require states, when 

establishing its benefits under its ABP, 

to meet the coverage requirements of 

section 1927 of the Act. Doing so would 

be directly contrary to flexibility with 

respect to the amount, duration, and 

scope of coverage provided under 

section 1937 of the Act. As for the 

commenters’ concerns with the limits 

provided under section 1927 of the Act 

as they apply to the Medicaid 

population, especially on disease 

specific or chronic care populations, we 

note that states have considerable 

discretion in the provision of Medicaid 

services including the ability to define 

the amount, duration, and scope of 

prescription drugs covered under ABPs. 

We also clarify that nothing in the 

commercial market implementation of 

EHBs, including prescription drugs, 

prohibits the utilization of monthly 

quantity limits. 

Comment: One commenter stated that 

in 2014, the Affordable Care Act 

requires that ABPs cover at ‘‘least 

essential health benefits, as described in 

section 1302(b) of Affordable Care Act’’. 

The commenter continues that while 

CMS proposes that the EHB 

requirements described in its November 

2012 EHB proposed rule apply to ABPs, 

the Medicaid EHB proposed rule does 

not spell out the minimum prescription 

drug coverage requirements that will 

govern ABPs. 

The commenter requests CMS clarify 

that Medicaid ABPs must cover at least 

the same number of drugs in a particular 

United States Pharmacopeia (USP) class 

that the state-selected benchmark plan 

pertinent to the ABP covers, consistent 

with the ‘‘Standards Related to Essential 

Health Benefits, Actuarial Value, and 

Accreditation’’ proposed rule. The 

commenter also requests that CMS 

consider identifying classes of drugs in 

which broad access to different drugs 

within the class is essential to assure 

that vulnerable patients have prompt 

access to the right medicine for a serious 

illness, and bolster the drug coverage 

requirements for those drug classes 

accordingly. 

Response: As indicated above, states 

have considerable discretion in the 

provision of Medicaid services 

including the ability to define the 

amount, duration, and scope of 

prescription drug coverage under an 

ABP. In developing ABPs, states must 

include prescription drug coverage 

consistent with the EHB-benchmark 

plan standards. These standards are set 

forth at 45 CFR 156.122 and include the 

requirement that health plans have 

procedures in place that allow an 

enrollee to request and gain access to 

clinically appropriate drugs not covered 

by the health plan. We believe such 

requirements will result in coverage that 

is similar to the coverage otherwise 

required under regular Medicaid state 

plan coverage. 

Comment: One commenter is 

concerned with the adequacy of the 

EHB prescription drug benefit, which 

will apply to Medicaid beneficiaries 

enrolled in ABPs effective January 1, 

2014. Medicaid beneficiaries in ABPs 

including those low-income adults who 

are newly eligible for Medicaid under 

Affordable Care Act are entitled to 

coverage for EHB. The proposed rule 

codifies this requirement and 

incorporates the definitions and 

standards that were specified for EHB 

coverage in the individual and small 

group market in the EHB proposed rule 

that CMS published on November 26, 

2012, including CMS’ proposed 

formulary standard for the prescription 

drug benefit. While the final rule states 

that USP will be used at least through 

‘‘the years 2014 and 2015 during the 

transitional EHB policy’’ and thus it 

applies to the Medicaid ABPs during 

that time, the commenter urges CMS 

reconsider the use of the USP system as 

it is currently structured after 2015 

given that many significant concerns 

remain. The commenter lists the 

following concerns regarding the EHB 

prescription drug benefit: 

• The inadequacy of the USP to 

represent the full range of categories and 

classes of drugs needed by the 

populations covered by the EHB, 

including Medicaid beneficiaries 

enrolled in ABPs, because the USP was 

created as a classification system to be 

used by Medicare Part D plans; 

• The need to incorporate specific 

protections for vulnerable populations 

to ensure appropriate access to vital 

medications; 

• The need to expand the USP 

categories and classes and include more 

detail to adequately represent the drugs 

needed by enrollees in plans subject to 

EHB; 

• The inability of USP categories and 

classes to capture all medical benefit 

drugs, including physicianadministered drugs, and the need for 

CMS to specify that plans must offer 

robust coverage of drugs that are 

included as part of a comprehensive 

medical benefit, including a wider range 

of therapies, and should not rely on the 

USP categories and classes when 

determining coverage for physicianadministered therapies; 

• A requirement that new therapies 

be reviewed and added to plan 

formularies within 90 to 180 days 

through a process that mirrors the 

review process performed by 

independent Pharmacy and Therapeutic 

Committees in Medicare Part D to 

support timely access to new and 

innovative medications; 

• A requirement for specific appeals 

and exceptions procedures to ensure 

that patients have access to needed 

treatments, and the application of these 

procedures also apply to drugs that are 

covered as part of a comprehensive 

medical benefit; and, 

• The need for CMS to provide 

specific guidance about Medicaid ABPs 

regarding acceptable and unacceptable 

utilization management techniques, 

without which there is a real risk that 

plans could apply utilization 

management tools in a way that 

discriminates against individuals with 

more significant health care needs. 

Response: We appreciate the 

comments submitted regarding the 

application of the EHB requirements to 

ABPs, including the commenter’s 

concerns with the use of the USP 

classification system. As stated above, 

states have considerable discretion in 

the provision of Medicaid services 

including the ability to define the 

amount, duration, and scope of coverage 

under an ABP. We also clarify that 

nothing in the commercial market 

implementation of EHBs, including 

prescription drugs, prohibits the use of 

utilization management tools. In 

developing ABPs, states must include 

prescription drug coverage to reflect the 

EHB-benchmark plan standards, 

including the requirements at section 45 

CFR 156.122. We believe these 

requirements will result in coverage that 


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is similar to the coverage otherwise 

required under regular state plan 

coverage. 

Comment: A few commenters 

indicated that the preamble to the 

proposed rule says that all drugs of the 

companies that participate in the drug 

rebate program should be included in 

the ABP; however that language is not 

included in the language of the 

proposed regulation. The commenters 

recommended that the regulatory 

language be amended to correct that 

omission. Additionally, commenters 

agreed with HHS’ legal conclusion, 

stated at 78 FR 4631, that section 1927 

of the Act applies to ABPs and believe 

that this is a critical protection requiring 

coverage of a range of drugs necessary 

to meet the needs of the Medicaid 

population. The commenter 

recommends that HHS’ explicitly state 

this requirement in the regulation. 

Response: As noted earlier, we must 

clarify a statement in the preamble to 

the proposed rule, indicating that 

coverage requirements under section 

1927 of the Act are applicable to ABPs 

under section 1937 of the Act. While 

drug rebate obligations under the rebate 

agreement are required for drug 

manufacturers under section 1927(b) of 

the Act, the amount, duration and scope 

of drug coverage under an ABP is 

determined under section 1937 of the 

Act. The drug rebate obligation applies 

because payment is made under the 

Medicaid state plan for covered 

outpatient drugs as part of the ABP. The 

amount, duration, and scope of coverage 

for an ABP are determined under 

section 1937 of the Act, which 

authorizes benchmark or benchmarkequivalent coverage ‘‘notwithstanding 

any other provision that would be 

directly contrary.’’ That said, to the 

extent that covered outpatient drugs are 

within the scope of coverage, the noncoverage provisions under section 

1927(d) of the Act would apply. For 

example, states will continue to be 

permitted to apply certain permissible 

restrictions such as prior authorization. 

However, when establishing such 

programs, states must continue to 

adhere to the requirements that states 

must respond within 24 hours for preauthorization requests, except for 

excluded drugs listed at section 

1927(d)(2) of the Act, and that at least 

a 72-hour supply of a covered outpatient 

prescription drug must be dispensed in 

an emergency situation. Further, we are 

revising § 440.345 to add a new 

paragraph (f) that states that when states 

pay for covered outpatient drugs under 

their ABP’s prescription drug coverage, 

they must comply with the 

requirements of section 1927 of the Act. 

Comment: A few commenters 

believed that ABPs are required by 

statute to include all outpatient drugs in 

the Medicaid drug rebate program, as 

well as meet the requirements for 

prescription drugs as proposed in the 

EHB proposed rule for the commercial 

market. These commenters also believe 

that in the absence of prescription drug 

coverage in a particular category or 

class, the ABP benefit must include at 

least one drug. They also recommend 

that the final rule clarify that 

prescription drug coverage within ABPs 

must provide the greater of the 

statutorily required coverage described 

in section 1927 of the Act, or the 

required EHB coverage described in the 

proposed rule issued November 26, 

2012. Another commenter 

recommended that CMS require each 

ABP’s coverage of prescription drugs to 

be consistent with the state’s EHB 

standard. 

Response: As indicated above, states 

have considerable flexibility in 

implementing the provision of Medicaid 

services through ABPs. In developing 

ABPs, states must include prescription 

drug coverage to reflect the EHBbenchmark plan standards at section 45 

CFR 156.122 for prescription drug 

coverage. We believe these requirements 

will result in coverage that is similar to 

the coverage otherwise required under 

regular state plan coverage. 

Comment: A few commenters 

indicated that the regulatory text is 

correct at part 440, but the preamble is 

not, in that the rebate statute section 

1927 of the Act does not apply to ABPs. 

They reasoned that the benefits under 

section 1937 of the Act are mandatory 

benefits, and they explicitly refer to the 

prescription drugs of the essential 

health benefits and not to the covered 

outpatient drugs of the voluntary 

Medicaid benefit to which section 1927 

of the Act applies. Thus, the EHB’s 

prescription drug coverage, which 

requires the greater of one drug in a 

class or the number of drugs in the class 

in the benchmark plan, should apply to 

ABPs. If it is determined that section 

1927 of the Act applies, then all the 

requirements and protections of section 

1927 of the Act should apply to ABPs. 

A commenter stated that the rebate 

statute applies exclusively to covered 

outpatient drugs; it requires 

manufacturers to pay rebates on covered 

outpatient drugs (when they are paid for 

under a state Medicaid plan); and it 

limits the restrictions that states can 

place on access to covered outpatient 

drugs. The statute defines a ‘‘covered 

outpatient drug’’ in terms of what is 

included in the definition and what is 

excluded. This commenter believes the 

term ‘‘covered outpatient drug’’ is a well 

understood term of art meaning those 

drugs to which the Medicaid rebate 

statute applies. If Congress had intended 

the Medicaid rebate statute to apply to 

Medicaid ABPs, then Congress would 

have stated this explicitly and described 

the drugs covered under an ABP as 

‘‘covered outpatient drugs.’’ When 

Congress decided to apply the rebate 

statute to Medicaid managed care 

organizations, Congress made its 

decision clear and took the steps 

necessary to make its decision workable. 

For example, Congress explicitly revised 

the rebate statute to provide that 

covered outpatient drugs for which 

payment was made under the state 

Medicaid plan includes ‘‘such drugs as 

dispensed to individuals enrolled with 

a Medicaid managed care organization if 

the organization is responsible for 

coverage of such drugs,’’ among other 

changes. 

By contrast, the commenters assert 

that Congress took an entirely different 

approach with Medicaid ABPs. Unlike 

in the Medicaid MCO case, Congress 

never mentioned Medicaid rebates in 

the statutory provision authorizing 

ABPs, never mentioned ABPs in the 

Medicaid rebate statute, never 

established any mechanism for ABPs to 

report drug utilization data to states and 

for states to include this data in 

manufacturers’ rebate invoices, and 

never provided that state payments to 

ABPs would be premised on the 

understanding that states would collect 

Medicaid rebates. 

Similarly, the commenters indicate 

that section 1937 of the Act makes no 

mention of covered outpatient drugs. 

Instead, the drug-related provisions in 

section 1937 of the Act provide only 

that (1) benchmark-equivalent coverage 

must include ‘‘prescriptions drugs’’ 

(among other basic services required in 

benchmark-equivalent plans) and (2) 

starting in 2014, all ABPs must provide 

‘‘at least essential health benefits as 

described in section 1302(b) of 

Affordable Care Act, which benefits 

include prescription drugs.’’ Thus in 

both of the statutory provisions 

referencing ABPs’ drug coverage, 

Congress omitted the term denoting 

those drugs that are subject to the 

Medicaid rebate statute and instead 

incorporated different terms with no 

connection to the rebate statute. And 

Congress’ decision to omit ‘‘covered 

outpatient drug’’ terminology is 

consistent with its decisions: (1) not to 

require to authorize reporting of ABP 

drug utilization data to states and 

manufacturers; and (2) not to address 

any implications of state rebate 

collection on ABP payments. Congress’ 


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decision not to apply the rebate statute 

also is consistent with the purpose of 

section 1937 of the Act, which is to give 

State Medicaid programs more 

flexibility and allow them to operate 

more like commercial payers. 

Another commenter stated that the 

prescription drug benefit to be provided 

to Medicaid beneficiaries under section 

1937 of the Act is not the same benefit 

as the ‘‘prescribed drugs’’ provided 

under a State plan under section 

1905(a)(12) of the Act. Indeed, the 

coverage for prescription drugs made 

available to the Medicaid expansion 

population is derived from a different 

statutory authority than the traditional 

Medicaid option to provide coverage for 

‘‘prescribed drugs.’’ The benefit under 

section 1905(a)(12) of the Act is optional 

for a State, while the prescription drug 

provided by an ABP is mandatory in 

accord with EHB requirements 

established by Affordable Care Act. 

Therefore, the commenter contends, and 

urges CMS to clarify in the final rule, 

that there is no statutory basis to apply 

section 1927 of the Act to these ABPs. 

In short, the commenters believe the 

statutory evidence demonstrates that 

Congress decided not to apply the 

Medicaid rebate statute to ABPs. When 

a word or phrase has become a term of 

art with a specialized meaning, that 

specialized meaning governs. Likewise, 

when Congress uses a term of art in one 

statutory provision but omits it in 

another (like section 1937 of the Act), 

then Congress intends a different 

meaning; ‘‘where Congress includes 

particular language in one section of a 

statute but omits it in another . . ., it is 

generally presumed that Congress acts 

intentionally and purposefully in 

disparate inclusion or exclusion.’’ 

Accordingly, applying the rebate statute 

to ABPs would be directly contrary to 

section 1937 of the Act and thus 

prohibited. 

Response: Drug rebate obligations are 

required for drug manufacturers under 

1927(b) of the Act when payment occurs 

for covered outpatient drugs covered 

through an ABP. However, the amount, 

duration, and scope of drug coverage 

under an ABP are determined under 

section 1937 of the Act. That is, the drug 

rebate obligation applies because 

payment is made under the Medicaid 

state plan for covered outpatient drugs 

provided as part of the ABP prescription 

drug benefit. The amount, duration, and 

scope of coverage for an ABP are 

determined under section 1937 of the 

Act, which authorizes benchmark or 

benchmark-equivalent coverage 

‘‘notwithstanding any other provision 

that would be directly contrary.’’ That 

said, to the extent that covered 

outpatient drugs are within the scope of 

coverage, the non-coverage provisions of 

section 1927 of the Act would apply. 

Comment: A commenter indicated 

that they anticipate that requiring ABPs 

to satisfy the requirements of both 

section 1927 of the Act and the EHB 

formulary standard may present 

significant practical challenges for the 

ABPs. The proposed rule does not 

explain how these two sets of 

requirements will fit together or 

whether and when the requirements of 

section 1927 of the Act will take 

precedence over the EHB formulary 

standard. For example, section 1927 of 

the Act requires manufacturers and the 

Secretary to enter into an agreement 

under which manufacturers must pay 

rebates to state Medicaid agencies for 

utilization of the manufacturer’s 

covered outpatient drugs, in return for 

the state coverage of such drugs, which 

may be restricted only within the set 

confines of section 1927(d) of the Act. 

The proposed EHB prescription drug 

benefit, by contrast, requires coverage of 

at least the greater of (1) one drug in 

every USP category and class; or (2) the 

same number of drugs in each category 

and class as the EHB benchmark plan. 

Response: As we stated earlier, there 

is no authority to require states to meet 

requirements of section 1927 of the Act 

related to the amount, duration and 

scope of covered outpatient drugs under 

an ABP. States have some discretion in 

the provision of Medicaid services 

including the ability to define the 

amount, duration, and scope of coverage 

under an ABP. In developing ABPs, 

states must include prescription drug 

coverage to reflect the standards used to 

define EHBs for Medicaid. As stated 

earlier, we believe these requirements at 

45 CFR 156.122 will result in coverage 

that is similar to the coverage otherwise 

required under regular Medicaid state 

plan coverage. 

Comment: A few commenters 

indicated that to the extent that CMS 

nonetheless decides to apply section 

1927 to ABPs, it is of the utmost 

importance that CMS apply and 

stringently enforce both the coverage 

and access requirements of that section. 

CMS should explicitly indicate that the 

section 1927 safeguards on coverage and 

exclusions apply, in addition to the 

prescription drug benefit requirements 

of the EHB proposed rule. Any 

requirements for payment of rebates 

under section 1927 of the Act without 

adherence to the coverage and exclusion 

limitations violates the intent and spirit 

of that section. 

Another commenter indicated that the 

Medicaid rebate statute requires states 

that provide payment for drugs to cover 

all ‘‘covered outpatient drugs’’ of 

manufacturers that sign a Medicaid 

rebate agreement, subject to certain 

limitations on coverage that the statute 

describes very specifically. The rebate 

statute explicitly lists the limited 

circumstances in which a State 

Medicaid program may exclude or 

otherwise restrict coverage of a drug 

manufactured by a company with a 

Medicaid rebate agreement. 

Response: While drug rebate 

obligations under the rebate agreement 

with drug manufacturers under section 

1927(b) of the Act are applicable to 

covered outpatient drugs covered 

through an ABP, the amount, duration, 

and scope of drug coverage under an 

ABP are determined under section 1937 

of the Act alone. The drug rebate 

obligation applies when payment is 

made for covered outpatient drugs in 

accordance under the Medicaid state 

plan, including a state’s ABP. The 

amount, duration, and scope of coverage 

for an ABP is determined under section 

1937 of the Act, which authorizes 

benchmark or benchmark-equivalent 

coverage ‘‘notwithstanding any other 

provision that would be directly 

contrary.’’ 

Comment: One commenter 

recommended that the prescription drug 

benefit under ABPs should include all 

over-the-counter and prescription 

medications approved by the FDA to 

treat tobacco cessation. The commenter 

continues that tobacco cessation 

medications are currently on the list of 

‘‘drugs subject to restriction’’ in section 

1927(d) of the Act, and therefore, states 

are allowed to exclude coverage of these 

drugs. 

Response: Effective January 1, 2014, 

section 1927(d) of the Act requires states 

to provide coverage of non-prescription 

and prescription covered outpatient 

drugs used to treat tobacco cessation for 

all Medicaid beneficiaries. 

Notwithstanding that requirement, we 

note that there is no authority to require 

states to meet requirements of section 

1927 of the Act related to the amount, 

duration, and scope of covered 

outpatient drugs under an ABP. States 

have considerable discretion in the 

provision of Medicaid services 

including the ability to define the 

amount, duration, and scope of coverage 

under an ABP. In developing ABPs, 

states must include prescription drug 

coverage to reflect the standards for 

defining EHBs in Medicaid. As stated 

earlier, we believe these requirements at 

45 CFR 156.122 will result in coverage 

that is similar to the coverage otherwise 

required under regular Medicaid state 

plan coverage. 


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Comment: A few commenters 

indicated that the agency says that the 

states have the flexibility to ‘‘adopt prior 

authorization and other utilization 

control measures, as well as policies 

that promote use of generic drugs.’’ The 

commenters believe there is potential 

for conflict between the prescription 

drug coverage of an ABP supplemented 

by the states’ essential health benefit 

standard, and a drug benefit that is 

consistent with the State’s Medicaid 

program. The commenter urged 

clarification of the coverage standard 

accompanied by protections to ensure 

that patients can appeal utilization 

controls that might prevent them from 

receiving necessary medications. 

One commenter recommended that 

CMS monitor the implementation of 

traditional Medicaid and ABP PDLs and 

utilization management techniques, and 

act to stop burdensome limitations that 

reduce access to care and could impact 

patient health because of limited access 

to needed drugs. The commenter also 

recommends requiring that decisions 

regarding PDLs take into account 

evidence-based clinical practice 

guidelines, and not just of drugs; and 

that CMS require that states only be 

permitted to classify a drug as nonpreferred when there are genuine 

therapeutic alternatives classified as 

preferred. 

Response: Prescription drug coverage 

under an ABP is still subject to the 

provisions related to drug rebates, as 

well as the non-coverage provisions 

under section 1927(d) of the Act. 

Therefore, states will continue to be 

permitted to apply certain permissible 

restrictions such as prior authorization. 

However, when establishing such 

programs, states must continue to 

adhere to the requirements that states 

must respond within 24 hours for preauthorization requests, except for 

excluded drugs listed at section 

1927(d)(2) of the Act, and that at least 

a 72-hour supply of a covered outpatient 

prescription drug must be dispensed in 

an emergency situation. 

Furthermore, a state Medicaid 

agency’s Pharmacy and Therapeutics 

(P&T) Committee typically makes 

decisions on inclusion of preferred 

drugs in a therapeutic class when 

establishing a state’s PDL. Specifically, 

the P&T Committee reviews evidencebased information, along with review of 

comparative clinical trials to make such 

decisions regarding a state’s PDL. A PDL 

is permitted under section 1927 of the 

Act, as long as it is under a prior 

authorization program that meets the 

requirements of section 1927(d)(5) of the 

Act. 

Comment: One commenter 

recommends that individuals have 

access to the full range of available 

clotting factors without limitation 

through restrictive drug formularies, 

which negatively impacts patient care. 

Patients and physicians should make 

the choice of which therapy is 

appropriate. The commenter also noted 

that hemophilia patients should have 

access to a range of specialty pharmacy 

providers. Several commenters 

recommend that CMS require states to 

implement beneficiary protections 

consistent with Medicare Part D, 

including consideration of specific 

drugs, tiering, and utilization 

management strategies used in each 

formulary. 

Response: As we stated earlier, there 

is no authority to require states to meet 

requirements of section 1927 of the Act 

related to the amount, duration and 

scope of covered outpatient drugs under 

an ABP. States have considerable 

discretion in the provision of Medicaid 

services including the ability to define 

the amount, duration, and scope of 

coverage under an ABP. In developing 

ABPs, states must include prescription 

drug coverage to reflect the standards 

for defining EHBs in Medicaid. As we 

have noted in prior responses, we 

believe these requirements will result in 

coverage that is similar to the coverage 

otherwise required under regular 

Medicaid state plan coverage. 

Comment: One commenter stated that 

section 2001(c) of Affordable Care Act 

modified the benefit provisions of 

section 1937 of the Act. Among other 

things, section 2001(c) of the Affordable 

Care Act added mental health benefits 

and prescription drug coverage to the 

list of benefits that must be included in 

benchmark equivalent coverage; and 

directed that ABPs that include 

medical/surgical benefits and mental 

health and/or substance use disorder 

benefits comply with the Mental Health 

Parity and Addiction Equity Act of 

2008. 

This being the case, the commenter 

encourages CMS to clarify and 

strengthen the guidance on drug 

formularies in the current parity 

regulations which make it difficult to 

determine whether a formulary satisfies 

the law’s parity standards. 

Response: While we appreciate the 

commenter’s concern, the Interim Final 

Regulation regarding the Mental Health 

Parity and Addiction Equity Act of 2008 

is not the subject of this final rule. 

Comment: One commenter suggested 

that CMS provide guidance to states on 

medication assisted treatment of 

substance abuse disorder. Specifically, 

states should be required to cover 

Methadone, Buprenorphine, Vivitrol, 

etc., in the EHB and that where needed 

states should expand the formulary to 

include all FDA approved medications 

for the treatment of substance use 

disorders. 

Response: CMS is not providing 

guidance regarding specific services 

offered in each of the ten essential 

health benefits in this final rule. 

Comment: One commenter requests 

that CMS encourage state Medicaid 

programs to utilize the 340B drug 

purchasing program provided by 

hemophilia treatment centers or HTCs 

so that individuals with hemophilia can 

receive their pharmacy services from 

their HTC. HTCs with 340B programs 

integrate clinical and pharmacy services 

to provide comprehensive high-quality 

care to patients and closely monitor 

drug utilization, allowing for more 

immediate changes in treatment and 

better management of treatment costs. 

Patients benefit from lower cost 

prescriptions that reduce out-of-pocket 

spending and accumulation of costs 

towards caps on health insurance 

expenditures and ongoing education 

and support to ensure that they 

appropriately assess their treatment 

needs. Medicaid programs will benefit 

from better management of overall 

treatment costs through close 

monitoring of bleeds and factor use to 

reduce complications. 

Response: We appreciate the 

comments regarding the 340B program 

and coverage of drugs for hemophilia; 

however, the State’s utilization of the 

340B drug purchasing program is 

outside the scope of this rule. 

Comment: CMS should establish clear 

requirements to assure that utilization 

data for populations eligible to receive 

Medicaid rebates is maintained 

separately from data from other lines of 

business. That is, the final regulation 

must provide clear rules to assure that 

plans maintain data on prescription 

drug claims appropriately and do not 

mix data from populations eligible for 

Medicaid rebates with data for other 

enrollees not eligible for Medicaid 

rebates. Because many plans may offer 

products in the exchanges as well as 

participate in Medicaid managed care 

(under either section 1903(m) of the Act, 

as well as Medicaid ABPs) the potential 

for confusion is high and clear rules are 

needed to assure that utilization for 

rebate-eligible patients is maintained 

separately from data for other lines of 

business. 

Response: If the state administers its 

ABP via a Medicaid MCO, the state will 

need to ensure the MCO distinguishes 

these claims from its other lines of 

business for the purpose of claiming 


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Medicaid rebates consistent with the 

current requirement for such claims 

under section 1927 of the Act. CMS 

expects to issue subregulatory guidance 

on collecting manufacturer rebates for 

ABPs. Manufacturers are not required 

under section 1927 of the Act to pay 

rebates absent a Medicaid payment for 

the drugs, which would not be present 

in the case of drugs dispensed to 

Medicaid beneficiaries that are enrolled 

in qualified health plans where the only 

Medicaid payment was premium 

assistance for the beneficiary. 

Summary: Based upon the comments 

requesting clarification as to whether or 

not section 1927 of the Act applies to 

prescription drug coverage provided 

under a state’s ABP, we will be adding 

paragraph (f) to § 440.345 to require that 

when states pay for covered outpatient 

drugs under their ABP’s prescription 

drug coverage, states must comply with 

the requirements under section 1927 of 

the Act. 

4. All Other Title XIX Provisions Apply 

We clarified in the proposed rule that 

all other Title XIX of the Act provisions 

apply unless, as spelled out in section 

1937 of the Act, a state can satisfactorily 

demonstrate that implementing such 

other provisions would be directly 

contrary to their ability to implement 

ABPs under section 1937 of the Act. 

Comment: We received one comment 

requesting that CMS elaborate on what 

is meant by the preamble language that 

all other provisions under title XIX of 

the Act apply, and whether states are 

required to cover the current mandatory 

Medicaid benefits, and ensure nonemergency transportation, when using 

an ABP for the new adult expansion 

group. 

Response: The Medicaid benchmark 

and benchmark-equivalent coverage was 

first authorized by the DRA, which 

included language stating that 

‘‘notwithstanding any other provision of 

title XIX’’ states can offer medical 

assistance to certain Medicaid 

beneficiaries through benchmark or 

benchmark-equivalent benefit packages. 

As a result of CHIPRA changes to the 

DRA, CMS regulations were revised to 

implement this change in law. CHIPRA 

language provides clearly that a state’s 

benchmark or benchmark-equivalent 

programs may vary only from statutory 

requirements explicitly waived in 

section 1937 of the Act (statewideness 

and comparability), unless states can 

demonstrate that other provisions not 

identified in section 1937 of the Act 

would be directly contrary to their 

ability to implement ABP. As such, in 

the proposed rule, we offered clarifying 

language in the preamble to reiterate 

that this current policy continues to 

apply. Due to statutory requirements, 

states may not disregard any provisions 

of title XIX and are therefore required to 

assure that all populations receiving 

ABPs, including the new adult 

expansion group, have access to 

transportation necessary to obtain 

Medicaid covered services. 

Summary: No changes will be made to 

the proposed regulation as a result of 

comments received in this section. 

5. Preventive Services as an EHB 

The EHB Final rule specified that, to 

provide EHB, a plan must provide 

coverage of preventive services. This 

requires plans to cover a broad range of 

preventive services including ‘‘A’’ or 

‘‘B’’ services recommended by the 

United States Preventive Services Task 

Force; Advisory Committee for 

Immunization Practices recommended 

vaccines; preventive care and screening 

of infants, children and adults 

recommend by HRSA’s Bright Futures 

program, and additional preventive 

services for women recommended by 

the Institute of Medicine. We proposed 

that Title XIX premium and cost sharing 

provisions apply to preventive services 

for adults, but not for children. 

Comment: Many commenters 

commended HHS for including in ABPs 

the full range of preventive services 

required in the EHB, including all of the 

services specified in section 2713 of the 

PHS Act. The commenters believed this 

is a critical provision for vulnerable 

populations and will help achieve the 

Affordable Care Act objective of shifting 

health care emphasis from expensive 

interventions to cost-effective 

prevention. The commenters requested 

that HHS explicitly state this 

requirement (currently in the preamble 

at 78 FR 4631) in the regulation itself. 

Response: The language in the 

preamble to the proposed rule, 

originating in section 2713 of the PHS 

Act, was included as a reference to the 

requirement to cover preventive services 

as part of providing EHB, which has 

been implemented by regulation 

codified at 45 CFR 147.130. We do not 

believe this requires further clarification 

in this final rule. 

Comment: A number of commenters 

asked CMS to clarify its preamble 

language, ‘‘Title XIX premium and cost 

sharing provisions apply to preventive 

services.’’ Specifically, CMS should 

clarify whether it intends this to apply 

to the ABPs for the new expansion 

population and/or to current state 

Medicaid plan services. 

Response: We agree that this issue 

needs to be clarified, particularly in 

light of the issuance of the final rules 

implementing EHB requirements for the 

individual and small group markets. In 

the final regulations issued February 25, 

2013 at 78 FR 12835, the provision of 

EHB was defined at 45 CFR 

156.115(a)(4) to ‘‘include preventive 

health services described in [45 CFR] 

§ 147.130’’. That cross referenced 

provision describes the requirement for 

coverage of preventive services without 

cost sharing. As explained in the 

preamble to the proposed regulations, at 

77 FR 70644, 70651 (Nov. 26, 2012), the 

intent was to include in the EHB 

coverage obligation the prohibition on 

cost sharing for preventive health 

services. Thus, while Medicaid cost 

sharing provisions at sections 1916 and 

1916A of the Act apply generally to 

preventive services provided in ABPs, 

cost sharing may not be applied to 

preventive services that are within the 

definition of EHBs (described in 45 CFR 

147.130). An ABP may include 

preventive services beyond the floor of 

coverage required as EHBs, and cost 

sharing may be applied to such 

preventive services at state option to the 

extent permissible under sections 1916 

and 1916A of the Act. 

Comment: One commenter requested 

clarification on whether the full range of 

United States Preventive Services Task 

Force (USPSTF) ‘‘A’’ and ‘‘B’’ services is 

specific to benchmark benefits offered to 

individuals that are newly eligible. 

Response: These services, along with 

IOM-recommended women’s preventive 

services, ACIP-recommended vaccines, 

and HRSA’s Bright Futures 

recommendations, comprise the 

preventive services EHB category that 

will be provided to all individuals in an 

ABP, including those in the new adult 

group. In addition, coverage of USPSTF 

‘‘A’’ and ‘‘B’’ preventive services under 

section 4106 of the Affordable Care Act 

applies, at state option, to preventive 

services furnished under the regular 

state plan. States implementing the 

preventive services EHB in their ABP 

without cost sharing will be eligible for 

the additional 1 percentage point of 

FMAP (for newly eligible individuals, 

this increased FMAP will be available 

once Federal reimbursement of services 

drops below 100 percent). 

Comment: A few commenters were 

concerned that other preventive 

screenings recommended by the CDC 

are not included in the proposed rule. 

The commenters recommended the 

inclusion of all CDC hepatitis B and C 

screening recommendations as required 

components of Medicaid’s ABPs. 

Response: CMS recognizes the 

importance of CDC recommendations 

related to preventive services. The 

proposed rule was not meant to be an 


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exhaustive list of all recommendations 

made by government agencies such as 

the USPSTF. States have the option to 

adopt CDC recommendations as long as 

they are in line with EHB preventive 

service statutory and regulatory 

guidance. 

Comment: A few commenters 

requested that HHS clearly define which 

tobacco cessation treatments are 

required to be covered as a preventive 

service under EHB. The commenters 

believed this definition should be 

comprehensive, and include—and 

require—all tobacco cessation 

medications approved by the FDA as 

well as individual, group and phone 

counseling. The commenters believed it 

should be based on and reference the 

most recent version of the Public Health 

Service Guideline Treating Tobacco Use 

and Dependence, to ensure that when 

and if the guideline is updated the 

benefit will be revised as appropriate. 

Response: We appreciate the 

commenter’s recommendations. 

Tobacco cessation programs are 

important preventive services. However, 

states have been given latitude on how 

to furnish this service within the 

bounds of statute, regulation, and subregulatory guidance. Tobacco cessation 

for pregnant women is defined in 

section 4107 of Affordable Care Act and 

is located at section 1905(a)(4)(D) of the 

Act. We also issued a letter to State 

Medicaid Directors dated June 24, 2011 

that clarified policy related to this 

provision. The only tobacco cessation 

services required to be furnished in the 

EHB package are those recommended by 

the entities designated in section 2713 

of the Public Health Service Act. 

Comment: Many commenters 

requested greater definition of the 

preventive services that states are 

required to cover to meet the EHB 

requirement. The commenters found it 

difficult to determine what preventive 

health services are covered and what the 

scope and limits of the coverage may be. 

Response: The definition of 

preventive services as an EHB includes 

a broad range of preventive services 

including: ‘‘A’’ or ‘‘B’’ services 

recommended by the United States 

Preventive Services Task Force; 

Advisory Committee for Immunization 

Practices (ACIP) recommended 

vaccines; preventive care and screening 

for infants, children and adults 

recommended by HRSA’s Bright Futures 

program/project; and additional 

preventive services for women 

recommended by Institute of Medicine 

(IOM). Further definition was not 

provided as these standards were 

established by experts in the field of 

prevention. 

Comment: A few commenters 

requested that HHS provide the 

following guidance: 

• Clarify in the language of the final 

rule that Medicaid ABP must cover all 

section 2713 services. 

• Clarify that section 2713 coverage 

requirements apply even where there is 

overlap with EHB categories. 

• Create standards to ensure that 

section 2713 preventive service 

coverage offers meaningful incentives to 

providers. 

• Encourage states to align traditional 

Medicaid coverage with the section 

2713 preventive services requirement. 

Response: We appreciate the 

commenters’ request to include further 

descriptions within the final rule. The 

rule, as written, requires states to 

provide a robust set of preventive 

services that align with § 147.130. The 

Affordable Care Act established § 4106 

effective January 1, 2013 within regular 

Medicaid coverage, which includes a 

subset of the services implemented in 

§ 2713 of the Public Health Service Act 

(PHSA). A State Medicaid Director 

Letter on § 4106 was released on 

February 1, 2013 (http:// 

www.medicaid.gov/Federal-PolicyGuidance/downloads/SMD-13-002.pdf). 

Comment: One commenter requested 

clarification regarding the interval after 

which a preventive service rated with 

an A or B by the USPSTF must be 

included in EHBs for Medicaid plans. 

The commenter encouraged HHS to 

establish an interval of no later than the 

1-year minimum specified in section 

2713(b)(1) of the Public Health Service 

Act, irrespective of any other timetable 

HHS choose for updating the EHBs more 

broadly over time. 

Response: Section 2713(b)(1) and (2) 

of the Public Health Service Act set 

forth the interval between the date on 

which a recommendation described in 

subsection (a)(1) or (a)(2) or a guideline 

under subsection (a)(3) is issued and the 

plan year for which of the requirements 

described in subsection (a) is effective 

for the service described in such 

recommendation or guideline. We 

believe that such an interval is 

appropriate for applicable preventive 

services included in the ABP. 

Comment: One commenter requested 

specificity around the process by which 

USPSTF recommendations will be 

incorporated into EHBs over time and 

the process for determining the 

frequency and intensity of USPSTFrecommended behavioral interventions. 

Response: A broad range of preventive 

services including all ‘‘A’’ or ‘‘B’’ 

services recommended by the United 

States Preventive Services Task Force 

must be incorporated in the EHB and 

are required to be implemented 

according to the effective date of the 

submitted SPA. If states want an 

effective date of January 1, 2014 for the 

entire ABP including these preventive 

services, then a SPA will need to be 

submitted by the end of the first 

calendar quarter of 2014. States are 

expected to keep abreast of changes to 

the USPSTF-recommended services to 

ensure provision of a current array of 

services. 

Comment: One commenter indicated 

that, to the extent that HHS does not 

specify the number of covered visits to 

registered dietician specialists for 

medical nutrition therapy, national 

practice guidelines should determine 

appropriate coverage. 

Response: We encourage states to 

consult and rely on national practice 

guidelines, as they design their benefit 

packages. 

Comment: One commenter requested 

that while HHS may be reluctant to 

explicitly require coverage of obesity 

treatment, HHS should clarify whether 

management of obesity and metabolic 

disorders are chronic disease 

management services and are therefore 

covered services under the ‘‘Preventive 

and Wellness Services and Chronic 

Disease Management’’ category of the 

EHB package. One commenter believed 

that beneficiaries affected by severe 

obesity should have access to bariatric 

surgery with comprehensive pre- and 

post-surgery nutrition evaluation and 

counseling to ensure the efficacy and 

cost effectiveness of the bariatric surgery 

benefit over the long term. 

Response: ‘‘A’’ or ‘‘B’’ services 

recommended by the United States 

Preventive Services Task Force must be 

incorporated in the EHB. Current 

USPSTF guidelines provide for the 

screening and counseling for obesity in 

both children and adults. Aside from 

the services specified at section 2713 of 

the Public Health Service Act, we are 

not mandating the provision of specific 

services through the EHB package. We 

agree that bariatric surgery, complete 

with appropriate counseling, can be a 

valuable service, and it will covered in 

the ABP if it is included in EHB 

definitions of the public employee or 

commercial plan selected by the state to 

define EHBs for Medicaid, 

supplemented and substituted as 

necessary and permitted. States may 

also choose to add this service to their 

ABP. 

Comment: One commenter asked HHS 

to clarify whether a state that chooses to 

use its current state plan as the ABP 

would need to add services to the state 

plan for ABP recipients if not all 

preventive services are included. The 


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commenter also asked whether states 

would need to amend the state plan and 

provide these services for all Medicaid 

recipients of the state plan services. 

Response: The regular state plan does 

not need to be amended to reflect the 

breadth and depth of required 

preventive service coverage in an ABP. 

States will have to comply with the 

definition of preventive services for the 

EHB category within the ABP. States 

using Secretary-approved coverage to 

implement a benefit package similar to 

their Medicaid state plan would need to 

ensure provision of all EHB preventive 

services through the ABP, even if such 

services are not available under the state 

plan. A state plan amendment will be 

required to implement an ABP for the 

new adult group and for any other 

categorically needy eligibility groups 

that a state may wish to enroll in an 

ABP. 

Comment: A number of commenters 

recommended that HHS apply the PHS 

Act 2713 cost-sharing prohibition for 

preventive services under section 2713 

of the PHS Act to the same preventive 

services covered by ABPs. The 

commenters believed these protections 

are essential to provide meaningful 

coverage to vulnerable population and 

avoid the unfair outcome of greater costsharing for poorer individuals. The 

commenters believed cost sharing on 

preventive services should be 

prohibited based on the authority of 

section 2713 of the PHS Act. One 

commenter believed that cost-sharing 

for preventive services is prohibited 

under the definition of EHB in 

regulations at 45 CFR 156.115, which 

state that the EHB include ‘‘preventive 

health services described in [45 CFR] 

§ 147.30.’’ The commenter explained 

that this section lists the services 

included in the definition of preventive 

health services and states that insurers 

‘‘may not impose any cost-sharing 

requirements (such as copayment, 

coinsurance, or deductible) for those 

items or services.’’ The commenter 

believed the definition of preventive 

services in the EHB is unique in that it 

incorporated a prohibition on costsharing in the definition of the benefit. 

The commenter believed that by 

requiring EHB in ABPs, Congress 

intended to carry that prohibition on 

cost-sharing into Medicaid’s ABPs. A 

number of commenters believed that 

prohibiting cost sharing for preventive 

services is consistent with the provision 

giving states a percentage point increase 

in their FMAP under section 4106 of the 

Affordable Care Act. 

Response: We appreciate the concerns 

commenters raised regarding cost 

sharing for preventive services and we 

are adopting their suggested policies in 

light of the provisions of the recently 

issued EHB regulations for the 

individual and group markets at 45 CFR 

156.115(a)(4). As stated above, states 

may not impose cost sharing for 

preventive services included in ABPs 

that are within the scope of EHBs, as 

defined at 45 CFR 147.130, but may 

impose cost sharing consistent with 

sections 1916 and 1916A of the Act on 

preventive services that go beyond that 

scope. This is because the definition of 

preventive services for purposes of the 

EHBs precludes cost sharing, and 

Medicaid ABPs must include EHBs. We 

clarify that the broader prohibitions on 

cost sharing for preventive services at 

section 2713 of the PHS Act apply only 

to group health plans and health 

insurance issuers providing group or 

individual health insurance coverage, 

and do not apply to Medicaid. For 

preventive health services beyond the 

scope of EHBs, we note that cost sharing 

is not allowed for preventive services 

provided to children under sections 

1916 and 1916A(b)(ii) of the Act. We 

agree with commenters that this 

preclusion of cost sharing for preventive 

service EHBs is consistent with the 

policies set forth in section 4106 of the 

Affordable Care Act, which added 

section 1905(b)(5) to the Act, giving 

states an increase in the federal medical 

assistance percentage for preventive 

services if the state did not impose cost 

sharing on such services. 

Comment: A number of commenters 

believe that cost sharing should not be 

applied to the EPSDT population. 

Response: While we discuss cost 

sharing issues at greater length in 

discussing the streamlined cost sharing 

regulations being issued in this final 

rule, for EPSDT for individuals enrolled 

in ABPs, we note that sections 1916 and 

1916A(b)(ii) of the Act preclude cost 

sharing for individuals under age 18 

who are mandatorily eligible, and 

preclude cost sharing for preventive 

services (such as well baby and well 

child care and immunizations) provided 

to children under 18 years of age 

regardless of family income. Section 

1916(b)(2)(a) of the Act further states 

that cost sharing cannot be imposed 

under the plan for services furnished to 

individuals under 18 years of age (and, 

at the option of the State, individuals 

under 21, 20, or 19 years of age, or any 

reasonable category of individuals 18 

years of age or over). These provisions 

also apply to ABPs. 

Summary: No changes will be made to 

the proposed regulation as a result of 

comments received in this section. 

6. Other Changes To Simplify, 

Modernize, and Clarify Medicaid 

Benchmark Requirements and Coverage 

Requirements 

We proposed to make certain changes 

to the regulations to promote 

simplification and clarification where 

needed, and provide some additional 

flexibilities to states regarding benefit 

options. We received the following 

comments: 

a. Diagnostic, Screening, Preventive, 

and Rehabilitative Services (Preventive 

Services) (§ 440.130) 

We proposed to conform our 

regulatory definition of preventive 

services at § 440.130(c) with the statute 

relating to the issue of who can be 

providers of preventive services. Our 

current regulation states that preventive 

services must be provided by a 

physician or other licensed practitioner. 

This is not in alignment with the 

statutory provision at section 

1905(a)(13) of the Act that defines 

‘‘services . . . recommended by a 

physician or other licensed practitioner 

of healing arts within the scope of their 

practice under state law.’’ We proposed 

to change the rule to make clear that 

physicians or other licensed 

practitioners may recommend these 

services. In our proposed rule, we 

inadvertently used punctuation that 

would have had the effect of eliminating 

the other three prongs of the preventive 

services definition, and we are restoring 

those prongs in this final rule. 

Comment: Many commenters 

commended HHS for conforming the 

regulatory definition relating to who can 

provide preventive services at section 

1905(a)(13) of the Act that defines 

‘‘services . . . recommended by a 

physician or other licensed practitioner 

of healing arts within the scope of their 

practice under State law.’’ Many 

commenters believed this change will 

improve access to preventive services, 

expand access to evidence based 

practices, and provide greater 

partnership between providers and 

advocates. The commenters urged CMS 

to preserve this important provision in 

the final rule. 

Response: We agree that the amended 

regulatory definition of who can provide 

preventive services will result in 

improved access to preventive services 

and facilitate partnership between 

providers and advocates. This provision 

has been codified in the final rule. 

Comment: A number of commenters 

believed that the amended regulatory 

definition will be especially important 

to low-income people who 

disproportionately access care through 


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community-based and support services 

and may experience significant stigma 

and lower trust levels with other 

providers. 

One commenter believed current 

Medicaid regulations surrounding 

§ 440.130(c) have significantly limited 

the available care and treatment for 

Medicaid and CHIP-enrolled children 

who suffer from chronic diseases. 

Response: The amended definition 

may result in greater access for 

individuals who suffer from chronic 

disease as the pool of providers could 

increase significantly. 

Comment: A few commenters 

commended HHS for making reference 

to this regulatory change in a February 

1, 2013 letter to State Medicaid Director. 

The letter stated that if the proposed 

regulatory change is finalized, then 

preventive services recommended by 

USPSTF or ACIP, and provided by 

practitioners other than physicians or 

other licensed practitioners, are eligible 

for the 1 percentage point FMAP 

increase established under the 

Affordable Care Act. 

Response: We attempt to provide as 

much notice as possible related to rule 

making and appreciate the commenter’s 

support. 

Comment: One commenter believed 

the proposed language, ‘‘(c) Preventive 

services means services recommended 

by a physician or other licensed 

practitioner of the healing arts acting 

within the scope of authorized practice 

under state law’’, was overly broad. 

Response: The regulation is consistent 

with statutory language in section 

1905(a)(13) of the Act. The final rule 

increases the number of providers able 

to furnish services. We are not changing 

regulation text at § 440.130(c)(1) through 

(c)(3). 

Comment: One commenter believed 

that the proposed new definition in the 

rule represents a far broader view of the 

term ‘‘preventive services’’ than 

Congress contemplated in Affordable 

Care Act. For purposes of describing 

what services are included in EHB, 

‘‘preventive services’’ are already 

extensively described at § 147.130. The 

proposed revision in the definition of 

‘‘preventive services’’ at § 440.130 

would not primarily affect the scope of 

preventive services required to be 

offered as EHB in the state benchmark 

plans. Rather, the amendment would 

greatly expand the scope of the 

preventive services benefit that may be 

offered as an optional service under 

standard state MA plans. 

Response: This change is not based on 

an interpretation of ‘‘preventive 

services’’ as it is used in the Affordable 

Care Act for purposes of EHB, but an 

interpretation of the coverage of 

preventive services under regular 

Medicaid under section 1905(a)(13) of 

the Act. This regulatory change will 

primarily impact the provision of 

preventive services under the regular 

state Medicaid plan. Section 4106 of the 

Affordable Care Act, ‘Improving Access 

to Preventive Services for Eligible 

Adults in Medicaid,’ broadens the 

section 1905(a)(13) preventive services 

benefit by providing a 1 percentage 

point FMAP increase on clinical 

preventive services that are assigned a 

grade of A or B by the USPSTF. 

Comment: A number of commenters 

believed the new definition could have 

a significant fiscal impact on states’ 

Medicaid programs because, as a part of 

EPSDT, the expanded scope of services 

must be offered to recipients under age 

of 21. 

Response: While we acknowledge that 

this change will result in additional 

providers being authorized to provide 

preventive services, it accurately reflects 

the statutory language for the preventive 

services benefit. In addition, broadening 

the scope of providers who can provide 

preventive services in the Medicaid 

program may reduce, rather than 

increase, program expenditures by 

making available services in the most 

efficient and effective settings. 

Providing broader access to these types 

of providers and benefits may assist 

individuals with improved health. 

Comment: A number of commenters 

requested clarification on preventive 

services. The commenters believed that 

the definition provided (§ 440.130) is 

broad and will be difficult for states to 

operationalize without more detail. The 

commenters requested a more precise 

definition that includes the current 

procedural terminology codes for each 

preventive service and that HHS work 

with states to develop preventive 

definitions. Without such guidance 

states and the federal government could 

end up inappropriately paying for air 

conditioners, ineffective weight loss 

programs, or similar services which are 

simply not appropriate. 

Response: States still have the ability 

to restrict preventive services to direct 

patient care that is medically necessary 

and is for the purpose of preventing 

disease, disability and other health 

conditions or their progression, 

prolonging life and promoting physical 

and mental health and efficiency. The 

commenters may have been confused 

because we inadvertently proposed to 

eliminate these other prongs of the 

preventive services definition, which 

we preserve in this final rule. States also 

have some options in determining 

coverage of preventive services, and can 

specify the options, and specific billing 

codes, for covered preventive services 

using the state plan amendment process. 

Comment: One commenter urged HHS 

to retain the current regulatory 

definition which established that the 

allowable providers of preventive 

services are physicians or other licensed 

practitioners. The commenter disagreed 

that the provider requirements for 

preventive services under the 

Affordable Care Act should be aligned 

with Medicaid provider requirements 

for the optional benefit category as 

established under section 1905(a)(13) of 

the Act. The commenter stated that the 

benefits are distinctly different and have 

different purposes, particularly for 

children up to the age 21. 

Response: We disagree with this 

position. Both section 1905(a)(13) of the 

Act and Affordable Care Act provide for 

a more robust set of preventive services 

than the current regulations, in allowing 

a broader pool of providers to deliver 

such services. In making this change in 

the final rule, we are aligning our 

regulation with the statutory coverage 

provision. States will continue to have 

some flexibility to determine the scope 

of covered preventive services in their 

state by submitting a SPA to do so. 

Comment: Many commenters were 

concerned that this broad language 

would allow for unlimited services as 

recommended by health care providers 

and other providers of the healing arts. 

These commenters requested that this 

be clarified to impose reasonable limits 

on services. 

Response: Under existing rules, states 

can establish limitations on amount, 

duration, and scope, on the optional 

preventive services provided the 

resulting benefit is sufficient to meet the 

purpose of the benefit. CMS reviews 

each state plan amendment submitted 

by states to determine the sufficiency of 

the benefit. 

Comment: One commenter 

recommended closer integration of 

community prevention and lifestyle 

changes into the Medicare and Medicaid 

programs, as an important opportunity 

to both effectively and often less 

expensively treat and prevent chronic 

disease, such as heart disease and 

diabetes. 

Response: We agree that greater 

coordination between Medicare and 

Medicaid will provide efficiencies and 

health outcomes for individuals with 

chronic disease as well as other 

conditions. Medicaid continues to build 

closer and more integrated community 

preventive services with Medicare. 

Comment: One commenter believed 

that Registered Dieticians should be 

designated as the recognized providers 


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of nutrition services, including medical 

nutrition therapy and nutrition 

counseling because of RD’s 

demonstrated competency and 

effectiveness. This commenter stated 

that nutrition counseling is medically 

necessary for chronic disease states in 

which dietary adjustment has a 

therapeutic role, when it is prescribed 

by a physician and furnished by 

qualified provider. 

Response: We believe that Registered 

Dieticians have an important role in 

furnishing nutrition services. All 

preventive services should be furnished 

by qualified providers within their 

scope of practice. 

Comment: One commenter urged HHS 

to clarify that § 440.130 of the proposed 

regulation does not dictate who can 

provide preventive services; it merely 

dictates what providers can recommend 

them, consistent with the totality of the 

statute. 

Response: The proposed regulation 

does not dictate who can provide 

preventive services; it defines who can 

recommend such services. States will 

have discretion to determine which 

providers will provide the service using 

the state plan amendment process. 

Summary: No changes to the 

proposed regulation will be made as a 

result of comments received in this 

section. 

b. Public Notice (§ 440.386) 

The proposed rule added a new 

provision to allow states greater 

flexibility when required to publish 

public notice associated with an ABP 

state plan amendment (SPA). We 

proposed modifying the public notice 

requirement for ABPs to require that 

such notice be given prior to 

implementing a SPA when the new ABP 

provides individuals with a benefit 

package equal to or enhanced beyond 

the state’s approved state plan, or adds 

additional services to an existing ABP. 

We proposed the requirement to publish 

public notice no less than two weeks 

prior to submitting a SPA that 

establishes an ABP that provides 

coverage that is less than the coverage 

by a state’s approved state plan or 

includes cost sharing of any type. Based 

on public comment, we are negating 

what we proposed, as we do not believe 

that 2 weeks is a sufficient time period. 

We will be reverting back to our existing 

policy of requiring the states to provide 

‘‘a reasonable opportunity to comment’’ 

on all ABP SPAs prior to their 

submission to CMS. 

Comment: Many commenters 

supported requiring states to give public 

notice before implementation of a SPA 

that established an ABP. The 

commenters also commended HHS for 

requiring states to provide public notice 

regarding how they must comply with 

the requirement that children have 

access to EPSDT. 

Many commenters believed that the 

proposed public notice requirements at 

§ 440.386 are problematic and HHS 

should not use them as a model for all 

SPAs. Some commenters believed 

proposed § 440.386 repeats the language 

of § 440.305(d) requiring a ‘‘reasonable 

opportunity’’ for public comment, but 

then limits the public comment period 

to just two weeks for certain ABPs 

which the state Medicaid agency 

determines provide less coverage or 

higher cost sharing than existing 

benchmark plans, and other 

commenters believed that two weeks is 

an inadequate amount of time for 

meaningful stakeholder consideration 

and input. 

Many commenters believed HHS 

should require an advance notice and 

comment period of no less than 30 days 

as this aligns with other comment 

periods (such as the state comment 

period for section 1115 waivers) and is 

particularly important because of the 

time and effort required to conduct the 

benefit-by-benefit comparisons between 

non-aligned Medicaid state plans, ABP 

proposals and EHBs which will be 

necessary to provide meaningful input. 

Response: We have considered all of 

the comments concerning the 

requirement for public notice and agree 

with the commenters that two weeks is 

not sufficient to allow for a meaningful 

timeframe in which public comments 

can be solicited and considered. We are 

therefore revising § 440.386 to revert to 

our existing ABP public notice policy 

currently found at § 440.305(d). We 

would also like to clarify that the public 

notice requirements at § 440.386 are 

applicable only to section 1937 ABPs. 

Comment: A number of commenters 

requested HHS require a mandatory 15- 

day period (sometimes referred to as a 

‘‘cool down’’ period) for states to review 

comments received and incorporate 

suggestions into the final ABP 

submission. 

A few commenters believed that 

§ 440.386 creates a two tiered process 

whereby the state’s own evaluation of 

an ABP determines whether it is subject 

to public notice and comment. The 

commenters believed this kind of 

agency determination defeats the very 

purpose of transparency and 

stakeholder input. 

Many commenters believed that there 

is no compliance provision to help 

ensure meaningful participation by the 

public, unlike the reporting requirement 

of § 431.412(viii) for section 1115 

demonstrations. The commenters 

requested that any SPAs, including 

those establishing ABPs, should be 

subject to the same transparency and 

public input procedures and reporting 

requirement modeled upon those 

governing section 1115 demonstrations 

to help ensure meaningful participation 

by the public, and that HHS 

understands the issues raised at the 

state level when making the SPA 

approval decision. 

Response: In revising § 440.386 to 

revert to our existing policy, we believe 

that we have provided a minimum floor 

that allows sufficient time for 

stakeholder feedback and state review. 

Comment: Numerous commenters 

requested that at a minimum, SPAs that 

materially change a state Medicaid 

program should be subject to increased 

transparency and stakeholder input 

requirements. 

Response: States will be required to 

follow existing public notice 

requirements, which requires that the 

state must have provided the public 

with advance notice of the State plan 

amendment and reasonable opportunity 

to comment prior to the submission of 

the SPA. 

Comment: A few commenters 

recommended that states should be 

required to provide detailed information 

on the ABP options under 

consideration. 

Response: The state is required to 

provide information regarding the ABP 

through the public notice process. 

Comment: A number of commenters 

requested that HHS include specific 

requirements for adequate public 

posting of the proposal, including that 

it be posted on an internet Web site, as 

well as a clear description of the process 

and timeline for comment submission. 

Response: We believe that states 

should have the flexibility to determine 

how best to provide public notice to the 

populations in their state. 

Comment: One commenter believed 

that notice and stakeholder engagement 

requirements should explicitly include 

HIV/AIDS programs within health 

departments. 

Response: We believe that all 

stakeholder groups, including HIV/ 

AIDS, will be served by the public 

notice policy. 

Comment: One commenter noted that 

there were a number of different sources 

of information for public notice 

(including 59 FR 49249 (September 27, 

1994); § 447.205; and new transparency 

requirements for waiver and waiver 

renewals (see State Health Official 

(SHO) Letter #12–001)) and HHS could 

achieve efficiencies by streamlining 

notice requirements. 


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Response: While there are various 

methods for providing public notice 

across programs, we believe that each 

serves its own purpose for that program. 

The public notice regulations under 

§ 440.386 provide the most efficient and 

effective policy for ABPs. 

Comment: One commenter proposed 

that HHS further define ‘‘substantial’’, 

which triggers the ‘‘notice and 

comment’’ requirement. The commenter 

requested that HHS adopt a universal 

definition of ‘‘substantial’’ so that there 

is no confusion of the word’s meaning. 

Response: ‘‘Substantial’’ is used in the 

ABP public notice requirements. It 

means that eligibility, enrollment, 

benefits, cost sharing, payment 

methodologies, or delivery systems have 

changed significantly to affect 

beneficiaries. 

Comment: One commenter believed 

that requiring public notice for a SPA 

when an ABP provides a benefit 

package equal to or enhanced beyond a 

state’s approved state plan was 

puzzling. The commenter believed it 

added yet another public notice 

requirement with questionable return, 

particularly when this occurs prior to 

implementation. The commenter agreed 

that prior public notice should be 

required when providing a lesser benefit 

package than the approved State Plan, 

adding cost sharing or reducing benefits. 

Response: We believe, for the purpose 

of transparency, ABPs should be 

disseminated to the public. We believe 

it is important that all beneficiaries are 

made aware of changes being made to 

ABPs. 

Comment: One commenter requested 

that when a SPA is submitted providing 

less coverage the public should have at 

least 30 days to submit comments and 

the agency should provide a summary of 

the comments it receives and how the 

comments were addressed when it 

submits the SPA to CMS for approval. 

Response: Based on comments related 

to this section of the regulation, we will 

be continuing with the existing ABP 

public notice requirements. Requiring 

the state to provide a summary of the 

comments it receives and how the 

comments were addressed when it 

submits the SPA to CMS for approval 

could be too onerous to operationalize 

depending on the magnitude of 

comments received. CMS reserves the 

right to request, when appropriate, 

specific information on public 

comments. 

Comment: A few commenters 

requested that HHS publically release 

all ABPs selected and allow an 

opportunity for public comment to 

ensure plan adequacy. 

Response: All approved SPAs are 

public documents. If the commenter 

would like to comment on a particular 

SPA they may contact their specific 

state. 

Comment: Many commenters 

recommended HHS amend § 430.12 by 

adding new paragraph (d) or deleting 

§ 440.386 (a) and (b) and replacing them 

with language that would require a 30 

day public comment period and a 15 

day review period for the state and 

outlined the detail to be included in the 

public notice. These commenters also 

included requirements for publication 

of public notice and information to be 

included in the SPA. 

Response: We appreciate the 

commenters’ thorough language 

recommendations. However, we believe 

that the current public notice policy 

sufficiently balances the need for 

transparency while preventing the 

impediment of the approval of SPAs in 

a timely manner. 

Comment: One commenter requested 

that HHS monitor the public 

information on Medicaid programs and 

State-Based Exchange, provide and 

consider issuing guidance on how to 

communicate benefit packages to 

enrollees and plan members in a clear 

and effective way, incorporating low 

literacy-level principles. The 

commenter suggested that HHS should 

consider requiring states to undergo a 

public stakeholder review process for 

these materials. 

Response: We thank the commenter 

for these recommendations and will 

take them under further review however 

they are beyond the scope of this 

regulation. 

Comment: One commenter requested 

that HHS require all state plan 

amendments be made public and 

subject to comment. 

Response: While we agree it is a good 

practice for states to place SPAs online; 

requiring states to do so is beyond the 

scope of this regulation. 

Comment: One commenter asked if 

HHS was going to require additional 

public notice requirements on anything 

that is related to cost-sharing. 

Response: Cost sharing of any type 

requires public notice per § 440.386. 

Comment: One commenter believed 

there was a technical error made in the 

Part 440-services. The commenter noted 

that the general provisions section 

§ 440.305 to § 440.386 is not mentioned 

in the description of the changes to 

either § 440.305 or § 440.386. 

Response: CMS will take this 

opportunity to delete § 440.305(d) as a 

new § 440.386 has been added for 

public notice. 

Summary: CMS will delete 

§ 440.305(d), which was the section 

describing public notice requirements, 

as a new § 440.386 has been added for 

public notice. We have reverted to our 

existing public notice requirements 

based on public comment on this 

section of the rule. 

c. Exempt Individuals (Modifying 

Definition of Medically Frail) 

(§ 440.315) 

The proposed rule updated the 

definition of the ‘‘medically frail’’ 

category of individuals exempted from 

mandatory enrollment, and solicited 

comment about whether to add SUD to 

the definition. The final rule adds 

individuals with chronic SUDs to the 

definition of ‘‘medically frail’’, based on 

the overwhelming support in public 

comments. 

Comment: Many commenters strongly 

supported CMS’s definition of exempt 

individuals and clarification of 

medically frail. In supporting the 

definition of medically, many 

commenters also thanked the Secretary 

for including in the definition of 

medically frail, individuals with serious 

or disabling mental illness, (including 

children with serious emotional 

disturbances), and individuals with 

physical, intellectual or developmental 

disabilities that significantly impair 

their ability to perform one or more 

activities of daily living; many 

commenters agreed that individuals 

with a disability determination based on 

Social Security criteria should be 

exempted from mandatory enrollment 

in an ABP. 

One commenter stated that medically 

frail are an identifiable population with 

unique care and cost characteristics and 

this definition provides an opportunity 

for these individuals through practices 

that may not be included in the 

products offered through state 

exchanges. 

Response: We are pleased with the 

overwhelming support for the clarified 

definition of ‘‘medically frail’’ displayed 

in the majority of comments. 

Comment: Many of the commenters 

urged CMS to include individuals with 

substance use disorders in the definition 

of medically frail because individuals 

with substance use disorders (SUD) 

have similar health needs as those with 

the other complex conditions included 

in the definition, and ABP coverage may 

be less likely to provide needed services 

and supports typically provided by 

Medicaid. 

Many commenters also pointed out 

that individuals with SUD cannot be 

considered disabled under Social 

Security law if SUD is a contributing 


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factor material to the determination that 

the individual is disabled, regardless of 

the severity of the SUD. Particular 

concern was raised about benchmark 

coverage in states that may choose the 

weakest available benchmark plan 

option in an effort to limit perceived 

financial risk for the state, or to avoid 

political risk. Concern was also raised 

that beneficiaries living in states 

offering fewer benefits ‘‘suffer’’ from 

placement in clinically inappropriate 

levels of care resulting in poor outcomes 

and higher federal costs. 

One commenter wrote that SUD 

should be included in the definition of 

medically frail because scientific 

research indicates that addiction is a 

chronic brain disorder with intrinsic 

behavioral and social components, 

similar to other forms of mental illness. 

In supporting clarification of the 

definition of medically frail, a 

commenter wrote that the definition 

should include all those with disabling 

conditions because the reference plans 

that may serve as the model for benefits 

in ABPs are employer-sponsored 

insurance plans and may not be 

adequate to serve the needs of those 

who are too medically frail to work. 

Another commenter wrote that it 

supported clarifying the definition of 

medically frail by including all those 

with disabling conditions. Medicaid 

should provide more comprehensive 

benefits for individuals and this 

language will allow it to do so since 

employer sponsored plans often 

inadequately cover substance use 

disorders, therefore the commenter 

supports adding SUD to the definition 

of medically frail. 

Alternatively, a few commenters 

recommended that CMS not require that 

individuals with SUD be considered 

exempt from mandatory ABP 

enrollment. This commenter wrote that 

because states must design their ABPs to 

include a comprehensive array of 

mental and behavioral health services, 

inclusive of substance use treatment at 

parity with physical health services, it 

seems unnecessary and overly 

prescriptive to mandate the exemption 

of individuals with SUDs. 

Response: Since publication, in 2010, 

of the Final Rule: State Flexibility for 

Medicaid Benefit Packages, numerous 

stakeholders have raised concern that 

individuals with SUD may not be 

appropriate for enrollment in an ABP 

because ABPs may not provide the same 

level of care provided by the standard 

Medicaid State plan. Individuals with a 

substance use disorder may have 

chronic health conditions and need an 

expanded array of behavioral health and 

possibly long term services and 

supports. 

Considering the overwhelming 

support for including SUD in the 

definition of medically frail, we have 

modified § 440.315(f) to include as 

medically frail, individuals with 

chronic SUD. While we recognize that 

substance use is among the EHBs, we 

believe that individuals with this 

condition could be medically frail and 

should have the choice to elect 

voluntary enrollment in an ABP or 

receive full state plan benefits (for 

individuals in the new adult group, 

through an ABP that consists of full 

state plan benefits). 

Comment: One commenter wrote that 

while the definition of ‘‘medically frail’’ 

appropriately clarifies that individuals 

with serious mental illnesses and 

children with serious emotional 

disturbances are included among 

‘‘individuals with disabling mental 

disorders’’ it inappropriately excludes 

people with psychiatric disabilities from 

another listed group—‘‘individuals with 

a physical, intellectual or 

developmental disability that 

significantly impairs their ability to 

perform one or more activities of daily 

living.’’ People with psychiatric 

disabilities should continue to be 

included in that group. Particularly due 

to the lack of clarity about what may 

count as a ‘‘serious mental illness,’’ it is 

important to ensure that people with 

mental illness have the same 

opportunity as people with other 

disabilities to qualify for exemption on 

the grounds that their disability 

significantly impairs their ability to 

perform one or more daily living 

activities. 

Response: We acknowledge that 

individuals with serious mental illness 

tend to have significant co-morbid 

conditions that are going to require a 

different array of mental health and 

medical services, and long term services 

and supports that may not be available 

through an ABP. However, we do not 

believe it is necessary to explicitly 

specify that individuals with psychiatric 

disorders also qualify for ‘‘medically 

frail’’ due to deficiencies in activities of 

daily living. Individuals only need to 

meet one criterion within this definition 

to qualify for the exemption to 

mandatory enrollment. Section 

440.315(f) provides states with a 

minimum standard for identifying 

individuals who are medically frail and 

states have the flexibility to expand this 

definition. 

Comment: A commenter wrote that 

the term medically frail should be 

replaced with individuals with 

disabilities. 

Response: We are retaining the term 

medically frail in our regulations 

because that term is specified in section 

1937 of the Act and we believe it would 

be confusing to use a different term for 

the exemption. 

Comment: One commenter stated that 

CMS should avoid defining any new 

categories of medically frail as the 

concept of medically frail as outlined in 

the proposed rule is incomplete and 

unworkable, and more time and thought 

needs to be put into this before moving 

forward with final rules. The 

commenter believes there are both 

operational and implementation 

challenges to the new concept of 

medically frail contained in the 

proposed rule and since there is no clear 

definition of medically frail, or guidance 

on how a state would go about making 

that determination, if the rules were 

implemented as written, the likely 

result would be a significant disruption 

of the eligibility process and a large 

number of appeals. 

Response: Section 440.315 provides 

states with a minimum standard for 

exempting specified categories of 

individuals from mandatory enrollment 

in an ABP. We do not expect these 

exemptions to mandatory enrollment to 

be disruptive to the eligibility process as 

eligibility determination occurs first as 

a separate process. States will not need 

to determine whether a beneficiary 

qualifies as medically frail upfront but 

will need to have a process for 

identifying individuals who cannot be 

mandatorily enrolled into an ABP. 

Comment: We received many 

comments requesting that CMS provide 

further clarification regarding the 

operationalization and coverage 

implications of the proposed revision to 

the definition of medically frail, as well 

as clarifying how the revised definition 

will impact implementation. 

One commenter indicated that states 

have limited experience with ABP 

coverage under section 1937 of the Act, 

and it is unclear how exemption from 

mandatory enrollment in an ABP for 

individuals defined as medically frail 

(and other categories of exempt 

individuals) would be operationalized 

on a broader scale. Further, it may be 

operationally challenging to identify the 

range of individuals included in the 

proposed definition as medically frail, 

prior to eligibility determination and 

plan enrollment, particularly for 

individuals with SUDs. 

Several commenters requested CMS to 

provide clear, objective standards for 

defining medically frail, such as the 

criteria used to determine eligibility for 

Supplemental Security Income. One 

comment also expressed concern that 


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any approach to identifying individuals 

who could be exempt from mandatory 

enrollment in an ABP not stigmatize 

individuals or create unintended 

barriers to seeking treatment. Several 

commenters wrote that the definition of 

medically frail is vague and will be 

difficult for states to operationalize. 

Another wrote that the impact of the 

medically frail definition will be 

significantly mitigated if CMS clarifies 

that a state’s existing Medicaid benefit 

package will be deemed to meet the 

ABP standards under the Secretaryapproved coverage option. 

One commenter expressed concern 

that the definition of medically frail is 

so broad that there could be confusion, 

inconsistency, and costly implications 

to having such a broad set of individuals 

eligible for exemption and 

recommended that CMS should clearly 

and carefully define the set of 

individuals who would be exempt and 

not include individuals with chemical 

dependency in the definition. 

A number of commenters encouraged 

HHS to develop a systemic plan for how 

the medically frail that are enrolled into 

an ABP, based on the streamlined 

application collecting minimal 

information about disability or function, 

will be identified for exemption and 

stated HHS must develop requirements 

and supports for states to identify 

exemption eligibility. 

Several commenters expressed 

concern that the process of ensuring that 

all exempt individuals are identified 

and enrolled in the benefit plan that 

best service their health care needs 

(either an ABP or traditional Medicaid) 

will be very burdensome or difficult for 

states and asked that CMS provide 

further guidance on how this can be 

accomplished. Several of these 

commenters stated that ABPs are not 

well aligned with traditional Medicaid 

and urged CMS to provide further 

guidance to states on methods and 

strategies for identifying exempted 

individuals through the streamlined 

application process and enrolling them 

in the appropriate coverage. 

Another commenter envisioned 

situations where it may be beneficial for 

a medically frail individual to have 

access to an ABP rather than traditional 

Medicaid and urged CMS to design 

processes that ensure that individuals 

have the ability to make an informed 

choice about their Medicaid benefit 

options. 

Another commenter voiced concern 

that the proposed rule does not require 

a process to ensure that individuals are 

appropriately identified as potentially 

exempt when they apply for coverage. 

This commenter pointed out that 

individuals with serious mental 

illnesses and disabilities may not realize 

that they may qualify as exempt if they 

do not receive clear notification 

concerning (1) The possibility that they 

may be exempt, (2) the process for 

determining whether they are exempt, 

and (3) how to opt out of enrollment in 

an ABP if they are exempt. The final 

rule should require this type of notice 

and process. 

Response: CMS acknowledges that 

many states will not have prior 

experience with implementation of an 

ABP, or with identifying individuals 

who are exempt from mandatory 

enrollment or who meet the criteria for 

exemption. We anticipate that for 

existing eligible individuals the state, if 

it chooses, will be able to screen 

beneficiaries it intends to enroll to 

identify exempt individuals by 

eligibility category and through the use 

of historic medical encounter data. 

For newly enrolled individuals, who 

are eligible based on income rather than 

disability, the state will not initially 

have information concerning their 

current health status or historic 

encounter data. Therefore, the 

enrollment process could be important 

to identifying if an individual meets the 

criteria of the statutory exemptions. One 

appropriate screening option includes 

beneficiaries identifying themselves as 

meeting the exemption criteria. We 

encourage states to implement a process 

to screen for exempt individuals using 

this minimum standard for identifying 

individuals who are medically frail. 

Proposed regulations that were not 

finalized as part of this rule at 

§ 435.917(b) and (c) set forth the 

information that must be provided to an 

individual regarding benefits and 

services and provide that the 

information must be sufficient to enable 

the individual to make an informed 

choice. Sample beneficiary notices will 

be provided to the states by CMS, 

incorporating questions posed to 

beneficiaries to aide in the selfidentification process. While the 

individual is being provided with this 

information through options counseling, 

the individual could be initially 

enrolled in benchmark or benchmarkequivalent coverage that is subject to 

section 1937 requirements. 

Comment: One commenter wrote that 

the phrase ‘‘disabling mental disorders’’ 

relies on non-measurable terms. The 

commenter believes that specific 

disorders, including SUDs, should be 

added if they meet a defined disability 

test. CMS should provide states with the 

flexibility to define medically frail or 

provide states with general guidelines 

that an individual would have to meet 

to qualify and allow states to set defined 

criteria. 

Response: To ensure appropriate 

service protection for individuals with 

disabilities and special medical needs, 

we have included a basic definition of 

medically frail that we anticipate will 

ensure that vulnerable individuals with 

special medical needs are not 

mandatorily enrolled in an ABP that 

may not provide appropriate medical 

treatment for their individual medical 

condition. Section 440.315(f) provides 

states with a minimum standard for 

defining medically frail populations. 

Comment: Several commenters stated 

that the underlying goal of the 

exemption from mandatory enrollment 

of vulnerable populations is to protect 

access to needed services. There may be 

instances where amount, duration and 

scope limitations are more restrictive 

under the Medicaid state plan rather 

than under the ABP, highlighting the 

need for beneficiaries to receive easily 

understandable information that allows 

them to compare coverage options. 

Response: CMS thanks the 

commenters’ for acknowledging the 

underlying purpose for exempting 

certain populations from mandatory 

enrollment in an ABP and concurs with 

this comment. Beneficiaries need to 

make individualized determinations of 

the benefit package (either the ABP or 

the regular state plan) that best meets 

their needs. 

Comment: Several commenters 

requested CMS provide further guidance 

on the enrollment and selection process 

for medically frail beneficiaries as this 

will be critical for those who qualify to 

be able to select the benefit plan that 

best meets their health care needs. The 

commenter wants to assure that, 

depending on the circumstances, 

medically frail individuals will not be 

forced into a plan that provides fewer 

benefits than the traditional Medicaid 

plan or the ABP. 

Response: The purpose of the criteria 

for the exempt categories is to assure 

that individuals with special medical 

needs will be enrolled in a coverage 

plan that best provides necessary 

services. The design and 

implementation of a process to 

determine medical frailty will likely be 

specific to each state. However, states 

will have to follow proposed regulations 

that were not finalized as part of this 

rule at § 435.917(b) and (c) in that 

sufficient information must be provided 

to an individual about benefits and 

services to enable the individual to 

make an informed choice. 

Comment: One commenter requested 

that CMS allow states to define the 


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exempt medically frail population using 

objective measurable criteria. 

Response: Section 440.315 provides 

states with a minimum set of criteria for 

exempting specified categories of 

individuals from mandatory enrollment 

in an ABP or for individuals in the new 

adult group, a choice between 

benchmark coverage that is either 

coverage defined in the ABP or 

benchmark coverage that is the state’s 

regular approved Medicaid state plan. 

Comment: One commenter 

recommended that the definition of 

‘‘medically frail’’ include individuals 

that meet the Medicaid Health Home 

eligibility requirements in section 2703 

of the Affordable Care Act. 

Response: We believe that many 

enrollees in health homes, as they are 

individuals with chronic conditions that 

are serious and complex, will be 

covered by the existing definition of 

medically frail. But not all health home 

enrollees have that level of medical 

need, and we have determined that the 

suggested revision would not serve the 

limited purposes of the exemption. 

Comment: One commenter requested 

that the definition of medically frail 

include all people with disabilities, 

because this definition is one of the 

most essential provisions among all of 

the proposed rules, and because persons 

with disabilities would be imperiled as 

a result of mandatory enrollment in an 

ABP modeled after a commercial plan. 

One commenter stated that inclusion 

of individuals with SSI appears to 

broaden the definition of medically 

fragile for which there is currently no 

standard definition and historically 

states have been able to define. As a 

result, determinations for SSI will likely 

differ as other considerations are 

included in the determination. 

Response: In defining medically frail, 

§ 440.315 (f) covers a wide range of 

populations that will be determined to 

be eligible for voluntary enrollment, or 

in the case of individuals determined 

eligible for the new adult group, eligible 

to choose to receive benchmark benefits 

as defined in the ABP or benchmark 

benefits that are the state’s approved 

Medicaid state plan, assuring that these 

individuals will receive care that is 

appropriate to their medical needs. As 

proposed, § 440.315(f) specifically 

includes individuals with disabling 

mental disorders (including children 

with serious emotional disturbances and 

adults with serious mental illness), 

individuals with serious and complex 

medical conditions, individuals with a 

physical, intellectual or developmental 

disability that significantly impairs their 

ability to perform one or more activities 

of daily living, and individuals with a 

disability determination, based on 

Social Security criteria, or in states that 

apply more restrictive criteria than the 

Supplemental Security Income (SSI) 

program, as the state plan criteria. 

Sufficient information must be provided 

to an individual about benefits and 

services to enable the individual to 

make an informed choice according to 

proposed regulations that were not 

finalized as part of this rule at 

§ 435.917(b) and (c). 

Section 440.315(f) provides states 

with a minimum standard for 

identifying individuals who are 

medically frail and states have the 

flexibility to expand this definition. 

Comment: One commenter wrote that, 

by including in the final rule such a 

broad description of medically frail, 

CMS could substantially increase the 

number of individuals who would be 

exempt from mandatory enrollment in 

section 1937 benefit plans. The 

commenter asserted that this would 

allow the states less flexibility in 

creating plans to best meet the needs of 

these individuals. The commenter wrote 

that this is particularly true if 

individuals with SUDs were to be 

included in the definition and strongly 

recommended not including people 

with SUD in the medically frail category 

as mental health and SUD services are 

required benefits under the EHB 

benefits package. The commenter also 

questioned the reasoning behind 

including people with SUD in the 

definition of medically frail. 

Response: We do not agree that the 

definition of medically frail is too 

expansive and will unduly limit state 

flexibility. Nor do we think that 

inclusion of individuals with SUDs will 

be problematic. We recognize that a 

broader definition of medically frail 

individuals will mean that such 

individuals will only elect to enroll in 

an ABP if the benefits are designed to 

meet their needs at least as well as 

regular state plan coverage. 

Comment: One commenter wrote that 

if newly eligible individuals meet the 

criteria for exemption and are exempt 

from section 1937 of the Act, the 

Federal government needs to clarify if 

the enhanced funding for this group 

would be available for all services 

provided to those individuals. 

Response: Yes, enhanced FMAP is 

available for all services provided to a 

newly eligible individual, whether that 

person chooses the ABP based on a 

benchmark or benchmark equivalent 

package that includes the EHBs in 

compliance with section 1937 of the 

Act, or chooses an ABP equal to the 

state’s approved regular state plan. 

Comment: A number of commenters 

expressed concern how individuals who 

are exempt will be identified and 

requested further guidance on 

enrollment and selection process for 

medically frail so that those exempt can 

select the plan that best meets their 

needs. Several commenters 

recommended adding a requirement 

that the notice provided to individuals 

who have been found eligible for the 

expansion group include detailed 

information regarding how one can 

qualify for an exemption and the 

services and supports that would be 

available to a person who is exempt 

from mandatory enrollment in an ABP, 

and should include information 

regarding how to request and receive an 

exemption. A commenter suggested that 

this requirement should be added to 

§ 435.917. Another stated that those 

who may be exempt will need clear, 

consumer friendly information and 

decision support to help them 

understand their choices. 

Another commenter voiced concern 

that the proposed rule does not require 

a process to ensure that individuals are 

appropriately identified as potentially 

exempt when they apply for coverage. 

Individuals with serious mental 

illnesses and disabilities may not realize 

that they may qualify as exempt if they 

do not receive clear notification 

concerning (1) The possibility that they 

may be exempt, (2) the process for 

determining whether they are exempt, 

and (3) how to opt out of enrollment in 

an ABP if they are exempt. The final 

rule should require this type of notice 

and process. 

A commenter expressed concern that 

the proposed rule does not issue 

requirements outlining the process 

states should use to identify people who 

are exempt and this is particularly 

pertinent given the ongoing confusion 

about whether or not states will be able 

to claim enhanced federal match for 

Medicaid expansions individuals who 

are exempt from ABP enrollment. The 

commenter fears states will incur high 

administrative costs managing different 

federal match rates for different 

Medicaid expansion individuals, 

creating an incentive to develop 

processes that implicitly or explicitly 

discourage exempt individuals from 

taking advantage of their right to enroll 

in traditional Medicaid. 

One commenter voiced concern that 

including in the definition of medically 

frail individuals with disabling mental 

disorders, individuals with serious and 

complex medical conditions, 

individuals with physical and 

intellectual or developmental 

disabilities that significantly impair 


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their ability to perform one or more 

activities of daily living, or individuals 

with a disability determination based on 

Social Security criteria does not appear 

to be couched entirely within SSA 

disability criteria and that some 

individuals with substance use 

disorders who are not otherwise 

considered ‘‘disabled’’ under Medicaid 

may be viewed as medically frail and 

exempt for ABP. Therefore, individuals 

with SUDs would be included in a 

higher-level, comprehensive Medicaid 

benefit package, thereby increasing costs 

to the state without the benefit of the 

higher federal match under the 

Medicaid expansion to newly eligible 

adults. 

Response: We intend that, as 

amended, § 440.315 may expand the 

number of individuals who will qualify 

as exempt beyond the scope of those 

who are otherwise considered disabled 

to include other individuals whose 

medical needs mean that they are 

medically frail. We also agree that 

exempt individuals will need clear, 

consumer friendly information and 

decision support to help them 

understand their choices. For Medicaid 

beneficiaries who are not in the new 

adult group, existing requirements at 

§ 440.320 requires the state to provide 

each individual considering voluntary 

enrollment in an ABP a comparison of 

the ABP option versus the State plan 

option before the individual chooses to 

enroll. The comparison must also 

include information on the cost-sharing 

obligations of beneficiaries. CMS has 

proposed requirements that were not 

finalized as part of this rule at 

§ 435.917(b) and (c) that an individual 

must receive information based on 

eligibility regarding benefits and 

services that are available to them. 

Information must be sufficient for the 

individual to make an informed choice. 

Proposed regulations that were not 

finalized as part of this rule at 

§ 435.917(b) and (c) will apply to all 

Medicaid beneficiaries including adults 

in the new eligibility group. Individuals 

in the new adult group who otherwise 

meet criteria for exemption from 

mandatory enrollment may be enrolled 

in benchmark or benchmark-equivalent 

coverage subject to section 1937 

requirements during the options 

counseling period to insure coverage 

during this time. 

Comment: Several commenters stated 

that CMS should further clarify which 

medical conditions are considered 

‘‘serious and complex’’ and urged CMS 

to specify that chronic conditions such 

as HIV/AIDS and viral hepatitis, which 

may have co-morbidities, are serious 

and complex and individuals with 

serious and complex conditions should 

be exempted from mandatory 

enrollment in an ABP. Many 

commenters strongly recommended that 

HHS also include in the definition of 

medically frail or special medical needs, 

individuals with chronic health 

conditions because individuals with 

chronic illness should not be forced into 

an ABP package that will not meet their 

predictable needs, as this may lead to 

higher long term costs associated with 

poorly managed chronic conditions. 

One commenter indicated it was 

assumed that chronic kidney disease 

and end stage renal disease were 

considered to be chronic diseases and 

another commenter indicated that 

individuals with Cystic Fibrosis fall 

squarely within the medically frail 

definition. 

Another commenter wrote that it was 

assumed that long term cancer survivors 

managing complex treatment or a 

complicated set of late and long-term 

effects would fit the description of 

complex medical conditions and 

therefore could choose the most 

appropriate benefit plan. 

Some commenters also stated that 

being forced into a health plan that does 

not meet the needs of a person with 

chronic illness may lead to higher longterm costs associated with poorly 

managed chronic conditions. 

One of the commenters urged CMS to 

specifically include in the definition of 

medically frail individuals with chronic 

viral hepatitis. 

Response: The exemption categories 

established by statute and the proposed 

clarification in § 440.315 are intended to 

provide states with a minimum standard 

for exempting vulnerable populations. 

We agree with the commenters that 

illnesses such as HIV/AIDS, viral 

hepatitis, cancer and end stage renal 

disease are all serious chronic medical 

conditions. It would not be possible for 

CMS to include an exhaustive list of 

conditions that should qualify as 

medically frail, but we believe that the 

criteria as currently drafted is broad 

enough to include individuals for whom 

a choice of service package is most 

appropriate. 

Comment: Several commenters 

suggested that benchmark exempt 

populations are vulnerable and best 

serviced by traditional Medicaid. 

Response: We expect the exemptions 

process or the process designed for 

individuals in the new adult group will 

provide these individuals with an 

informed choice of the benefit package 

that best meets their needs. 

Comment: A commenter wrote that 

the current exemption definition would 

create the need for a new frailty 

determination process for all newly 

eligible adults for states that implement 

an ABP that is different from the 

standard benefit. This is a concern for 

one state as it becomes an 

administration burden for the consumer 

and the state system with considerable 

fiscal implications and proposes a 

common benefit for adult populations in 

Medicaid that would avoid the frailty 

determination and exemption process. 

Response: We acknowledge the 

writer’s concerns, and are not requiring 

any specific processes for implementing 

the exemptions criteria for the new 

adult group. We provided a minimum 

standard for identification of 

individuals who are medically frail and 

proposed regulations that were not 

finalized as part of this rule at 

§ 435.917(b) and (c) regarding benefits 

option counseling should be followed. 

Individuals may receive benchmark or 

benchmark-equivalent coverage subject 

to 1937 requirements during the options 

counseling period to insure coverage 

during this time. 

Comment: Two commenters wrote 

that some states have Medicaid and 

other public health care programs that 

have developed special initiatives 

designed to meet the needs of enrollees 

who have substance use disorders. They 

indicated that these initiatives may 

include provision of care management 

series, discouraging drug-seeking 

behavior by requiring care to be provide 

by a specified doctor and hospital, etc. 

The commenters asserted that 

exempting these individuals from 

mandatory ABP enrollment would make 

it far more difficult for Medicaid 

Programs to meet these individuals’ 

health care needs. While the writers 

agree with the characterization of a 

substance use disorder as ‘‘medically 

frail’’, and thereby exempting them from 

mandatory enrollment in an ABP, it 

would make it more difficult for 

Medicaid Programs to meet these 

individuals’ care needs. 

Response: We appreciate the 

commenters’ concern but do not agree 

that exempting individuals with chronic 

SUD from mandatory ABP enrollment 

would make it more difficult for 

Medicaid programs to meet the 

individuals’ health care needs. Section 

1937 of the Act provides states with the 

flexibility to redesign current Medicaid 

benefit coverage to provide unique 

programs for targeted populations and 

encourages states to be creative in the 

design of its coverage packages. The 

exemption of individuals with chronic 

SUD is not an impediment to providing 

quality care that meets the specific 

needs of this population. Conversely, 

the flexibility provided by ABPs 


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encourages states to design 

comprehensive benefit packages that 

would encourage voluntary enrollment. 

Comment: One commenter wrote that 

states should be able to employ 

traditional Medicaid disability 

assessments in evaluating medically 

frail exemption and limit receipt of long 

term care services and supports to those 

undergoing asset testing. To ensure long 

term stability and a fiscally sound 

expansion, the commenter requested 

sufficient flexibility to limit receipt of 

non-EHB services including long term 

care services, to the non-expansion 

population via state plan amendment or 

section 1915(c) waiver and 

recommended revision to the medically 

frail exemption to align with the 

disability assessments already in use 

within Medicaid. 

Response: We disagree with this 

commenter. We believe the current 

construct of the medically frail 

exemption category is in keeping with 

legislative construct 

Comment: A commenter wrote that 

the proposed revision to the definition 

of medically frail seems to run against 

the Affordable Care Act’s benefit design 

for the expansion population, that is, 

coverage tied to section 1937 of the Act 

and incorporation of an EHB standard 

from the individual and small group 

markets, which excludes coverage from 

long-term care and supports. The 

commenter asserted that Affordable 

Care Act congressional goals to contain 

the costs of the Medicaid expansion 

may be jeopardized if states are faced 

with widespread eligibility for long term 

care services without the traditional 

program integrity tools used to filter 

such services based on objective need. 

The commenter further asserted that 

existing ABP rules already exempt a 

broad range of vulnerable individuals as 

compared to traditional disability 

assessment and that within what is 

likely to be a large exempted class, these 

beneficiaries will access benefits 

otherwise excluded from the EHB 

standard, namely institutional or long 

term care through the state plan, at 

sizable cost to states and the federal 

government. Of particular concern to 

the commenter is the application of 

personal care services to a large exempt 

segment of the new adult group and 

these long-term care benefits would be 

accessed in the streamlined MAGI 

enrollment where asset evaluation 

would be prohibited. 

Response: The Affordable Care Act 

did not change the categories of 

individuals exempted from mandatory 

enrollment, and added the provision at 

section 1902(k)(1) of the Act, which 

contemplates that individuals who meet 

the conditions for exemption would 

receive ABP coverage that is not subject 

to the requirements of section 1937 of 

the Act. There is nothing in the 

Affordable Care Act that would 

preclude us from clarifying and 

amplifying the term ‘‘medically frail’’ to 

include populations that have high 

medical needs resulting from disabling 

mental disorders, substance use 

disorders, serious and complex medical 

conditions, or disabilities. We are 

clarifying in this final rule that the 

exemptions to benchmark or 

benchmark-equivalent coverage do not 

directly apply to the new adult 

population, but if an individual in the 

new adult population meets the criteria 

for exemption, then that individual has 

a choice of an ABP based on benchmark 

or benchmark-equivalent coverage 

including EHBs, or an ABP defined as 

the state’s approved Medicaid regular 

state plan, which is not subject to EHB 

requirements. Please see more detailed 

response above for additional 

information related to this provision. 

Summary: We changed the proposed 

regulation language at § 440.315(f) by 

adding ‘‘chronic substance use 

disorders’’ to the definition of the 

medically frail exemption category. 

d. Benchmark Health Benefits Coverage 

(Adding Benefits to Secretary-Approved 

Coverage) (§ 440.330) 

In the proposed rule, we amended 

§ 440.330(d) by broadening the benefits 

available as Secretary-approved 

coverage from section 1905(a) benefits 

to benefits of the type that are available 

under 1 or more of the standard 

benchmark coverage packages or state 

plan benefits described in sections 

1905(a), 1915(i), 1915(j), 1915(k) or 1945 

of the Act, or any other Medicaid state 

plan benefits enacted under Title XIX, 

or benefits available under base 

benchmark plans described in 

§ 156.100. 

e. Secretary-Approved Health Benefits 

Coverage and § 440.330(d) and State 

Plan Requirements for Providing 

Additional Services (Adding Benefits to 

Additional Coverage) (§ 440.335) 

Comment: Many commenters offered 

general support for the flexibility 

allowed in the proposed rule to include 

a broader range of selected benefits 

through a Secretary-approved coverage 

package. 

Some commenters noted that the 

ability of states to select coverage 

corresponding to their full traditional 

Medicaid benefit as their ABP, which 

would be presented under the Secretaryapproved coverage option, offers a clear 

distinction between the section 1937 

benchmark options and the EHB 

benchmark options set forth in 45 CFR 

part 156. 

Many commenters believed that the 

proposed language correctly offered 

states the option to use the Secretaryapproved option in section 1937 of the 

Act to extend comprehensive Medicaid 

coverage to the new adult expansion 

group and that extending full Medicaid 

benefits to this population, 

supplemented as needed to comply with 

the EHBs, mental health parity and 

other protections in the law, is the best 

approach for meeting the complex 

health needs of the low-income adults 

who will gain Medicaid eligibility under 

the expansion. 

Response: The proposed provisions 

for defining Secretary-approved 

coverage sought to balance statutory 

requirements for establishing a 

minimum coverage standard through 

ABP with the flexibility that states may 

need when considering the appropriate 

range of ABP coverage relative to the 

medical needs of the population being 

served. States may also substitute 

benefits using the state’s approved 

Medicaid state plan benefits as long as 

the benefits are in the same EHB 

category and they are actuarially 

equivalent. We appreciate the 

commenters’ support. 

Comment: Some commenters were 

not clear on which state plan benefits 

may be included and, thus, urged HHS 

to clarify that state plan benefits enacted 

under Title XIX are available for 

inclusion through the Secretaryapproved process irrespective of 

whether they have otherwise been 

implemented in a particular state 

Medicaid program. As an example, 

those commenters noted that a state that 

may conceivably want to design a 

Medicaid benchmark targeting 

vulnerable populations, such as 

individuals with dementia, and include 

a particularly relevant home support 

service that is not an otherwise available 

service in the state’s Medicaid program. 

Response: We wish to clarify for 

commenters that any benefits described 

in sections 1905(a), 1915(i), 1915(j), 

1915(j) or 1945 of the Act, and any 

benefits included in a selected 

benchmark coverage option may be 

included in an ABP whether or not 

those benefits are offered through a 

particular Medicaid program. 

Comment: Many commenters 

requested that, in addition to the 

provisions that Secretary-approved 

coverage must meet the needs of the 

target population, HHS revise language 

to require that the final Secretaryapproved benefits package be at least 

actuarially equivalent to one of the first 


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three benchmark options, indicating 

that this would ensure that states use 

the Secretary-approved option to 

provide a benefit that is innovative and 

comprehensive, and not solely to 

provide a benefit that is lesser. 

Many of the same commenters 

recommend amending § 440.330(d) to 

read as follows: Any other health 

benefits coverage that the Secretary 

determines, upon application by a State, 

provides appropriate coverage to meet 

the needs of the population provided 

that coverage, and is at least actuarially 

equivalent to one of the benchmark 

options in paragraphs (a), (b), or (c). 

Secretarial coverage may include 

benefits of the type that are available 

under 1 or more of the standard 

benchmark coverage packages defined 

in § 440.330(a) through (c) of this 

chapter, State plan benefits described in 

sections 1905(a), 1915(i), 1915(j), 

1915(k), and 1945 of the Act (whether 

actually covered in the state plan or 

not), any other Medicaid State plan 

benefits enacted under title XIX, or 

benefits available under base benchmark 

plans described in § 156.100. 

Response: For commenters requesting 

that we require an actuarial equivalence 

study for Secretary-approved coverage 

against one of the three benchmark 

options at § 440.330(a) through (c), the 

statute defines Secretary-approved 

coverage as one of the minimum 

standards for benchmark coverage, and 

as such, the benchmark options in 

§ 440.330(a) through (d) should serve as 

a reference for states considering the 

benchmark-equivalent coverage option 

offered in other regulatory provisions at 

§ 440.335. Section 1937 of the Act does 

not expressly mandate an actuarial 

study of Secretary-approved coverage 

Therefore, we are adopting § 440.330(d) 

as proposed, and we believe that our 

clarification here will serve to clarify 

that a state plan benefit need not be 

offered through the regular state 

Medicaid program for its inclusion in 

benchmark coverage, or benchmarkequivalent coverage. 

Comment: Many commenters 

indicated support of the intent to revise 

§ 440.335(c)(1) to similarly align policy 

for benchmark-equivalent coverage as it 

does for Secretary-approved coverage 

and, thus, allow addition of benefits 

through the benchmark-equivalent 

coverage process. Commenters believed 

that there are no legal impediments to 

this approach and urged HHS to finalize 

the revision. 

Similarly, other commenters 

commended the Secretary for 

continuing to allow states the option for 

coverage of additional benefits in excess 

of the minimum required coverage for 

benchmark-equivalent plans and for 

revising the language to include home 

and community-based services available 

under state plan options among these 

potential additional benefits. 

Many other commenters applauded 

HHS’s inclusion of various options for 

LTSS and care coordination support. 

Commenters generally offered strong 

support and commended the decision to 

enable states the flexibility necessary to 

align ABPs with state-plan options for 

home and community-based services, 

self-directed personal assistance 

services and attendant services, and 

other state Medicaid plan benefits 

described in section 1915(i), (j), (k) and 

section 1945 of the Act. 

One commenter indicated that the 

flexibility to offer such services may 

provide states further opportunity to 

offer home and community-based 

services to particular populations since 

the proposed rule retains the section 

1937 waiver of comparability that 

allows states to choose target 

populations for receipt of specialized 

benefit packages. The commenter 

offered an example of a state that could 

design benefit packages that help 

support community living, including 

employment for persons with 

disabilities. 

One commenter was concerned that 

states may not take advantage of this 

flexibility, and suggested that CMS 

consider issuing additional guidance to 

states regarding the ability to cover 

services critical to chronic care 

management for the new adult 

eligibility group, such as the new health 

home benefit. 

Similarly, another commenter 

requested that CMS clarify how 

authorities at sections 1915(i) and 1945 

will be used given that individuals that 

would most likely benefit from these 

authorities will be exempt from 

enrollment: 

Response: CMS is providing states 

with additional options to craft benefit 

packages that most appropriately meet 

the needs of the population being 

served. Benefits that can now be 

included as Secretary-approved 

coverage may in fact assist people who 

do not yet qualify as medically frail. For 

instance, if someone needs assistance 

with medication administration, they 

may not yet meet the definition of 

medically frail, but they may benefit 

significantly from the service and in fact 

avoid progression toward that 

exemption group or meeting the 

associated criteria. We are in support of 

melding regular medical/surgical 

benefits with home- and communitybased services that support people 

living the community and potentially 

avoiding or delaying hospitalization or 

institutionalization. 

Comment: One commenter indicated 

recognition that section 1915(i) of the 

Act has proven to be a particularly 

critical tool available to states to expand 

home and community based services 

and supports to cover a broad array of 

services that enable individuals with 

mental illnesses to succeed in their own 

homes. 

Response: We are in agreement with 

the commenter that section 1915(i) of 

the Act can serve as a critical tool 

available to states to expand an array of 

services that enable individuals with 

chronic condition to succeed 

independently. For this reason, we will 

finalize regulations to include section 

1915(i) of the Act as a viable state plan 

option that states may consider for 

inclusion when selecting an ABP. 

Comment: A few commenters 

requested clarification from CMS that 

states may include section 1915(c) of the 

Act and other waiver-based services in 

their ABPs. Commenters stated concern 

that states may need flexibility to 

include additional services, such as 

personal care and other services that 

enable Medicaid beneficiaries to remain 

in their homes to their ABPs because 

section 1915(c) of the Act was not 

referenced in § 440.360. 

Similarly, many state Medicaid 

agencies stated that the regulatory 

sections should expressly specify that 

states may provide ABP enrollees with 

access to section 1915(c) programs. The 

commenters indicated belief that section 

1915(c) services are ‘‘state plan benefits 

enacted under Title XIX’’ given that 

section 1915(c) is found in Title XIX 

and offers services that a state plan may 

include as ‘‘medical assistance under 

such a plan.’’ The commenters also 

requested that CMS confirm their 

reading of §§ 440.330, 440.360, allowing 

states the option to provide enrollees 

with section 1915(c) waiver services 

either as part of Secretary-approved 

ABP or as ‘‘additional services’’ 

available to non-expansion enrollees. 

Response: Section 1915(c) of the Act 

is not a state plan benefit, and therefore, 

is not consistent with our general 

principle that Secretary-approved or 

additional coverage consists of coverage 

under one of the benchmark coverage 

options or regular state plan benefits. 

Because the same services provided 

under section 1915(c) of the Act may be 

provided under section 1915(i) of the 

Act, which can be offered in an ABP, we 

do not see any reason to add section 

1915(c) benefits as an exception to this 

general principle. 


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Summary: No changes to the 

proposed regulation were made as a 

result of these comments. 

f. Benchmark-Equivalent Health 

Benefits Coverage and § 440.360 State 

Plan Requirements for Providing 

Additional Services (Adding Benefits to 

Additional Coverage) (§ 440.335) 

In the proposed rule, we amended 

§ 440.335(c) and § 440.360 by 

broadening the benefits available as 

additional coverage from section 1905(a) 

benefits to benefits of the type that are 

available under 1 or more of the 

standard benchmark coverage packages 

or state plan benefits described in 

sections 1905(a), 1915(i), 1915(j), 

1915(k) or 1945 of the Act, or any other 

Medicaid state plan benefits enacted 

under Title XIX, or benefits available 

under base benchmark plans described 

in § 156.100. 

Comment: Many commenters believed 

that the proposed rule would prohibit 

states from providing wrap-around or 

other additional benefits to newlyeligible adults, but would allow states to 

provide additional benefits for other 

populations in ABPs. 

Many commenters shared the belief 

that the Affordable Care Act does not 

appear to prohibit states from providing 

additional services to the newly-eligible 

populations and that CMS should allow 

states flexibility to provide additional 

services to the newly eligible population 

without having to go through the 

additional process required for 

Secretary-approved coverage. Those 

commenters believed that if CMS 

determines that the law prohibits states 

from providing additional benefits to 

the newly-eligible population, it should 

allow states the ability to simply add 

these benefits using a streamlined 

process under the Secretary-approved 

option or through another mechanism. 

Several commenters urged CMS to 

clarify through the final rule that states 

may provide additional benefits to ABPs 

for those eligible through section 

1902(a)(10)(A)(i)(VIII) of the Act through 

the Secretary-approved coverage option, 

so as to not implicate the restriction on 

additional coverage for the new adult 

group contained through § 440.360. 

Those commenters believed that the 

proposed language is misleading and 

could be interpreted that the expansion 

population is not able to receive 

additional benefits in any 

circumstances, noting that the intent of 

the proposed rule is that the expansion 

group is limited to benchmark ABP 

coverage. 

A number of commenters requested 

that CMS allow states the flexibility to 

provide additional benefits beyond what 

is minimally required in the benchmark 

to any or all populations in ABPs, 

including the expansion population. 

Similarly, another commenter urged 

CMS to allow states to be as expansive 

as they want to be in offering health care 

services to all beneficiaries of ABPs, 

including the newly eligible Medicaid 

expansion population, beyond what is 

minimally required within each state’s 

ABP. 

Other commenters noted that states 

may identify deficiencies and gaps in 

the commercial benchmark plan options 

that fall outside parity, nondiscrimination, EHB and other 

requirements. In this situation, 

commenters believed that a state should 

be able to add benefits easily for its 

expansion population and CMS should 

provide states with all available 

flexibility to do so. 

Response: Section 1902(k)(1) of the 

Act is very clear that individuals 

eligible through the new adult 

expansion group are limited to 

benchmark or benchmark-equivalent 

coverage. In addition, there is a payment 

exclusion under section 1903(i)(26) of 

the Act for FFP in any additional 

coverage. ‘‘Additional services’’ 

authorized under section 1937 fall 

outside benchmark and benchmarkequivalent coverage. But we are 

addressing this concern by allowing 

states increased flexibility under this 

final rule to include broader benefits 

and services that are appropriate for the 

population being covered and that are 

similar to the benefit types listed in 

§ 440.360, through Secretary-approved 

coverage or benchmark-equivalent 

coverage. 

Comment: Many commenters 

indicated strong support for HHS’ 

proposed policy and commended the 

Department for clarifying the authority 

for states to provide a wide range of 

benefits in developing Secretaryapproved coverage. In continuing, those 

commenters noted that many consumer 

stakeholders have misunderstood the 

allowance for inclusion of benefits 

under Secretary-approved coverage due 

to the general prohibition on adding 

services to Medicaid benchmarks and 

requested that the Department clarify 

that benefits can be added, but only 

through the Secretary-approved process. 

Other commenters urged CMS to 

consolidate these sections and clarify 

that, despite the prohibition on adding 

services to Medicaid benchmarks, states 

have the flexibility to offer additional 

and richer benefits to all those enrolled 

in ABPs, including the expansion group, 

by choosing the Secretary-approved 

coverage option. Those commenters also 

requested clarification that the federal 

match otherwise available for these 

populations is available for the 

additional benefits when they are 

approved by the Secretary. 

Similarly, other commenters 

requested that CMS clarify and confirm 

that the interpretation of this provision 

within the proposed rule is that if a state 

wanted to provide wrap-around services 

for a particular population that some of 

the ‘‘newly eligible’’ population may fall 

under, it does not appear that would be 

allowed unless the state creates a 

Secretary-approved plan that 

incorporates the benefits into the 

underlying plan itself. 

One commenter indicated that it 

would be helpful for CMS to clarify that 

adding additional benefits is possible 

for individuals in the newly eligible 

group, and that the prohibition on 

additional coverage for the expansion 

group at § 440.360 only applies to 

benefits that have not been included in 

the benchmark package selected by the 

state. The commenter also suggested 

that both benchmark-equivalent 

coverage and Secretary-approved 

coverage provide the state flexibility to 

include benefits that can be covered 

through a Medicaid state plan or a base 

benchmark option available to the state. 

Response: We reassert the statutory 

construct that does not allow the new 

adult group to received ‘‘additional’’ 

services. However, the broadening of 

Secretary-approved coverage to include 

the same options for services 

accomplishes the goal of allowing 

individuals in the new adult group 

access to that same robust benefit 

package. We reiterate that services 

provided under an ABP do not have to 

be offered under the regular state plan. 

Comment: Several commenters 

recognized that the Secretary’s 

clarification that additional benefits 

may include those available under base 

benchmark plans (described in 

§ 156.100), in additional to standard 

benchmark coverage packages or 

standard state plan benefits. Those 

commenters were concerned about 

flexibility for states to model ABPs after 

any base benchmark, noting that not 

every base benchmark plan option may 

provide appropriate benefit levels for 

the Medicaid population. 

One commenter familiar with the 

needs of underserved and poor 

populations with chronic conditions 

was appreciative that the EHB rules 

builds upon protections already offered 

through existing rules that allow states 

to enroll certain populations in 

Medicaid benchmark plans, and grants 

states significant flexibility through 

regulations at § 440.360 to develop a 

more comprehensive benefits package 


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that will better meet the needs of people 

with HIV and others with chronic 

conditions. 

Response: As mentioned in previous 

responses, we believe the statute 

requires states to balance the 

appropriateness of the ABP package 

when considering the population being 

covered. Therefore, we believe our 

regulations encourage states to consider 

other options if their analysis reveals 

that the base benchmark options elected 

do not provide an appropriate level of 

benefits relative to the population being 

covered. 

Comment: A few commenters wished 

to emphasize that section 1937 of the 

Act requires states to provide FQHC 

services to beneficiaries who receive 

ABP coverage in the same manner as 

CMS previously stated and conveyed in 

the agency’s April 30, 2010 final rule. 

The commenters emphasized that for 

situations where no FQHCs are available 

to section 1902(a)(10)(A)(i)(VII) of the 

Act enrollees under their managed care 

plan, then the state must provide the 

beneficiary enrolled in ABP coverage 

with FQHC services on a per-visit basis 

as required by section 1902(bb) of the 

Act. Alternatively, if a managed care 

entity is able to provide FQHC services 

to any beneficiary receiving ABP 

coverage, payments for such services 

must be made on a cost-related 

prospective payment system basis, with 

state supplemental payments provided 

where the PPS payment would exceed 

the amount provided under the 

managed care contract. 

Commenters indicated concern that 

because § 440.360 is silent on states’ 

obligation to provide FQHC and RHC 

services as part of benchmark or 

benchmark-equivalent coverage, the 

proposed regulation fails to distinguish 

clearly between required and 

‘‘additional benefits’’ for the section 

1937 package and that the omission of 

FQHC services from the list creates the 

impression that these services are not a 

required benefit within section 1937 

coverage. 

Several commenters recommended 

that CMS clarify the FQHC services 

requirement by: (a) Consolidating 

§ 440.365 into § 440.345; or (b) 

independently reference § 440.365 in 

§ 440.360 by having the first sentence of 

regulatory provision § 440.360 read, ‘‘In 

addition to the requirements of 

§ 440.345 and § 440.365.’’ 

Response: We agree with the 

commenters that regulations at 

§ 440.365 continue to require that the 

state must provide that individuals 

enrolled in an ABP have access, through 

that coverage or otherwise, to rural 

health clinic services and FQHC 

services. Such required services are 

required as part of § 440.365 and a state 

must assure to CMS that they are 

providing these services, which is 

different than adding additional services 

described at § 440.360. FQHCs are 

considered Essential Community 

Providers in the commercial market, 

and we anticipate these entities playing 

a critical role in Medicaid ABPs as well. 

When these providers are part of the 

ABP provider network, reimbursement 

to them must adhere to statutory 

requirements. 

Summary: Minor grammatical edits to 

the proposed regulation were made as a 

result of these comments. 

g. Other Comments Received 

We received various other comments 

that did not relate specifically to 

provisions proposed in the proposed 

rule. 

Comment: One commenter stated that 

to realize the opportunity presented by 

the Affordable Care Act, it is essential 

that individuals who are admitted to jail 

and are eligible for Medicaid be enrolled 

in Medicaid either during incarceration 

or immediately upon release to the 

community. By law federal Medicaid 

matching funds are not available for the 

costs of needed items and services for 

individuals who are enrolled in 

Medicaid while they are inmates, unless 

they are admitted to a medical 

institution for treatment during the 

period of incarceration. Nonetheless, the 

suspension of benefits does not affect 

the Medicaid eligibility of inmates or 

their ability to enroll in the program if 

eligible. 

Response: Paragraph (A) following 

section 1905(a)(29) of the Act and 

implementing regulations at § 435.1009, 

exclude from the definition of medical 

assistance care or services for any 

individual who is an inmate of a public 

institution, except as an inpatient in a 

medical institution. We read this 

exclusion to apply generally to medical 

assistance, whether provided through 

the regular coverage plan or through an 

ABP. Thus, while we agree with the 

commenter that incarcerated 

individuals may be eligible for 

Medicaid, they would not be entitled to 

benefits inconsistent with the exclusion. 

We note that this is consistent with the 

exclusion of incarcerated individuals 

from eligibility to enroll in coverage 

through the Exchange. It is also 

consistent with the responsibility under 

the Eighth Amendment of the United 

States Constitution of governmental 

entities to provide necessary medical 

care to individuals who they are holding 

as inmates, which effectively creates a 

liable third party for such care. 

Individuals who are enrolled in 

Medicaid when entering a public 

institution should have their eligibility 

suspended, rather than terminated, as 

they remain eligible. This also ensures 

ease of reinstitution of coverage postrelease. Additionally, if an individual is 

not already enrolled in Medicaid, states 

are encouraged to enroll eligible 

individuals prior to their release so that 

the individual can receive Medicaid 

covered services in a timely manner 

upon discharge. 

Comment: A commenter requested 

additional guidance as to what type of 

information CMS will need to approve 

an ABP state plan amendment and how 

CMS will determine if mental health 

parity has been met. 

Response: We will be issuing a 

template for states to use to submit 

ABPs as a state plan amendment. At this 

time, mental health parity will be 

determined to be met with an assurance 

by the state. We will be developing 

more specific policy related to this topic 

in the near future. 

Comment: One commenter requested 

CMS clarify what Medicaid category the 

EHBs are applicable. The commenter 

wondered whether EHBs only apply to 

the expansion population and ABPs or 

does it also apply to individuals who 

are currently eligible for Medicaid. The 

commenter questioned whether, for 

example, current Medicaid benefits 

would need to be adjusted to include 

habilitative services. 

Response: EHBs apply only to section 

1937 of the Act and were not extended 

into regular Medicaid. Therefore, 

regular Medicaid state plan benefits will 

not include the EHBs. 

Summary: No changes to the 

proposed regulation were made as a 

result of these comments. 

7. Summary 

ABPs are intended to offer states 

flexibility in designing benefit packages 

for the Medicaid population that are 

benchmarked to public employee or 

commercial plans. To ensure coverage 

of the kinds of services that will also be 

assured for those purchasing coverage in 

the individual and small group market, 

the law also requires that ABPs cover 

the ten EHBs specified by law. 

Recognizing that states face 

challenges in administering both their 

state plan benefits and ABPs, we have 

sought to provide as much flexibility in 

aligning those packages as possible. 

That said, we appreciate that it may be 

difficult at this point to make changes 

to the ABP that take effect by January 1, 

2014. In light of this challenge, we will 

partner with states to work as quickly as 

possible to come into full compliance 


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with these provisions. We do not intend 

to pursue compliance actions on these 

issues to the extent that states are 

working toward but have not completed 

a transition to the new ABPs on January 

1, 2014. To establish its base benchmark 

for EHBs for Medicaid, the state can 

select the same or a different plan than 

the base benchmark used for the 

Exchanges. Once having selected the 

base benchmark plan for EHBs, the state 

maps the benefits to EHB categories, and 

then can engage in supplementation 

and/or substitution: 

• Through supplementation at 45 

CFR 156.110, the state must add EHBs 

to a base benchmark plan that is missing 

a required category of EHBs. States can 

supply the missing EHBs from other 

base benchmark plans. 

• Through substitution at 45 CFR 

156.115(b), the state can replace one or 

more of the benefits within each 

category of EHB, as long as it maps 

appropriately to the category and the 

services are actuarially equivalent to the 

services that are being substituted. State 

Medicaid programs can use this process 

to substitute Medicaid state plan 

benefits for public employee or 

commercial plan benefits, for example, 

as long as applicable requirements are 

met. States must provide notification to 

CMS that they have engaged in 

substitution and have an actuarial 

certification and analysis available for 

inspection. 

States must assure, as they evaluate 

their base benchmark for EHBs and take 

these steps that they also properly 

account for special Medicaid 

considerations discussed in this rule. 

When states pay for covered outpatient 

drugs under the ABP prescription drug 

benefit, they must comply with the 

requirements under section 1927 of the 

Act. Habilitative services and devices 

are defined by what is in the state 

selected base benchmark plan, 

substituted as desired. If not defined in 

the base benchmark, the state will 

define the benefit. For example, states 

may offer coverage of habilitative 

services and devices that is no more 

restrictive in terms of amount, duration, 

and scope than the rehabilitative 

services and devices covered under the 

applicable benchmark plan. We expect 

that the services will be clinically 

appropriate to meet the needs of 

individuals based on medical necessity. 

Pediatric oral and vision care must 

follow requirements of the EPSDT 

benefit. 

The final base benchmark plan for 

EHBs for Medicaid, after completion of 

these steps, provides the floor for 

Medicaid coverage to individuals in the 

ABP. 

States also select a section 1937 

coverage option. If the section 1937 

coverage option and the plan initially 

selected as the base benchmark for EHBs 

are the same, the state will meet all 

requirements by specifying as the final 

ABP the final base benchmark, as 

supplemented and subject to 

permissible substitution, and further 

supplemented to the extent necessary to 

ensure coverage required under section 

1937 of the Act, including EPSDT 

services, family planning services, and 

FQHC and RHC services. 

If the section 1937 coverage option 

and the selected base benchmark plan 

are different (including when the state 

elects Secretary approved coverage 

option or benchmark equivalent 

coverage), states have to take the 

following steps to construct their final 

ABP: 

• If any other benefits are available in 

the section 1937 coverage option, add 

that benefit. 

• For any benefits in common from 

the section 1937 public employee or 

commercial market plan options, but 

with one having more robust qualities 

related to amount, duration, or scope, 

the benefit with the more robust 

coverage. 

• For any benefits in common from 

the section 1937 Secretary-approved 

coverage option, but with one having 

more robust qualities related to amount, 

duration, or scope, determine whether 

to apply the benefit with the more 

robust coverage. 

Alternatively, a state can first 

determine their ultimate goal in creating 

their benefit package (for example, 

wanting to create an ABP that mirrors 

the state’s regular Medicaid state plan 

benefit package as much as possible), 

and develop their ABP starting first with 

the selection of their 1937 coverage 

option. This would entail comparing the 

state plan benefit package with the base 

benchmark benefit package, 

supplementing the state plan benefit 

with EHBs as necessary, and applying 

permissible substitution of benefits 

consistent with 45 CFR 156.115(b) to 

better align with state plan benefits. 

C. Exchanges: Eligibility and Enrollment 

Throughout this proposed rule, we 

proposed technical corrections to 

regulation sections in part 155 to 

replace references to section 36B of the 

Code with the corresponding sections to 

the Department of Treasury’s final rule, 

Health Insurance Premium Tax Credit 

(26 CFR 1.36B–0 et seq.), published in 

the May 23, 2012 Federal Register (77 

FR 30377). We are finalizing these 

technical corrections as proposed. 

1. Definitions (§ 155.20) 

In § 155.20, we proposed technical 

corrections to the definitions of 

‘‘advance payments of the premium tax 

credit’’ and ‘‘application filer,’’ and 

added a definition of ‘‘catastrophic 

plan’’ by referencing the appropriate 

statutory provision within the 

Affordable Care Act. We did not receive 

specific comments on these technical 

corrections, and are thus finalizing them 

as proposed. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.20 of the proposed 

rule with a technical correction to the 

definition of advance payments of the 

premium tax credit, which we clarify 

refers to the payment of the tax credit 

authorized by 26 U.S.C. 36B and its 

implementing regulations. 

2. Approval of a State Exchange 

(§ 155.105) 

In § 155.105, we proposed a technical 

correction to replace the reference to 

section 36B of the Code to the 

applicable Treasury regulation. We did 

not receive specific comments on this 

section, and are thus finalizing the 

provision as proposed. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.105 of the proposed 

rule without modification. 

3. Functions of an Exchange (§ 155.200) 

In § 155.200, we proposed to clarify 

that the Exchange must also perform the 

minimum functions described in 

subpart F concerning appeals. The only 

comments we received supported this 

clarification. 

Summary of Regulatory Changes 

We intend to finalize the clarification 

to paragraph (a) at a future date when 

subpart F is finalized, and so thus 

maintain the previous language from the 

Exchange final rule. 

4. Authorized Representatives 

(§ 155.227) 

We proposed to add § 155.227, 

establishing minimum requirements for 

the designation of authorized 

representatives who may act on an 

applicant’s or enrollee’s behalf in the 

individual and small group markets. We 

noted in the preamble that the proposed 

rule for authorized representatives for 

Exchanges closely tracks the proposed 

rule for authorized representatives for 

Medicaid. 

In paragraph (a), we proposed that the 

Exchange must permit applicants and 

enrollees in the individual and small 


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group markets to designate an 

individual person or organization to act 

on that applicant or enrollee’s behalf. 

We also proposed that an applicant or 

enrollee may have such a representative 

through operation of state law, subject 

to applicable privacy and security 

requirements. We also proposed that the 

Exchange must not restrict the option to 

designate an authorized representative 

to only certain groups of applicants or 

enrollees. We noted that the Exchange 

should ensure that the authorized 

representative agrees to maintain, or be 

legally bound to maintain, the 

confidentiality of any information 

regarding the applicant or enrollee 

provided by the Exchange, and that 

authorized representatives should 

adhere to applicable authentication and 

data security standards. Additionally, 

we proposed that the Exchange should 

ensure that the authorized 

representative is responsible for 

fulfilling all responsibilities 

encompassed within the scope of the 

authorized representation, as described 

in this section, to the same extent as the 

person he or she represents. 

In paragraph (b), we proposed the 

situations when the Exchange must 

permit an applicant or enrollee to 

designate an authorized representative. 

We also proposed that the single, 

streamlined application described in 

§ 155.405 will provide applicants the 

opportunity to designate an authorized 

representative and will collect the 

information necessary for such 

representative to enter into any 

associated agreements with the 

Exchange as part of the application 

process. We noted that applicants and 

enrollees who do not designate an 

authorized representative on their 

applications will subsequently be able 

to do so through electronic, paper 

formats, and other modalities, as 

described in § 155.405(c)(2). We also 

noted that legal documentation of 

authority to act on behalf of an 

applicant or enrollee under state law, 

such as a court order establishing legal 

guardianship or a power of attorney, 

may serve in the place of the applicant 

or enrollee’s designation. 

In paragraph (c), we proposed that the 

Exchange must permit an applicant or 

enrollee to authorize a representative 

to—(1) Sign the application on the 

individual’s behalf; (2) submit an 

update or respond to a redetermination 

for the individual; (3) receive copies of 

the individual’s notices and other 

communications from the Exchange; 

and (4) act on behalf of the individual 

in all other matters with the Exchange. 

In paragraph (d), we proposed that the 

Exchange must permit an applicant or 

enrollee to change or withdraw an 

authorization at any time. We also noted 

the authorized representative also may 

withdraw his or her representation by 

notifying the Exchange and the 

applicant or enrollee. 

In paragraph (e), we proposed that an 

authorized representative acting as 

either a staff member or volunteer of an 

organization and the organization itself 

must sign an agreement meeting the 

requirements proposed in regards to 

Exchange certified application 

counselors. We noted that while the 

protections afforded by such an 

agreement are important when an 

authorized representative is a member 

or volunteer of an organization, we 

believe that they are not logical in cases 

where an authorized representative is 

not acting on behalf of an organization. 

We sought comments on applying the 

protections in paragraph (e) to 

authorized representatives more 

broadly. 

In paragraph (f), we proposed that the 

Exchange require authorized 

representatives to comply with any 

applicable state and federal laws 

concerning conflicts of interest and 

confidentiality of information. 

In paragraph (g), we proposed that the 

designation of an authorized 

representative must be in writing, 

including a signature, or through 

another legally binding format, and be 

accepted through all of the modalities 

described in § 155.405(c) of this part. 

We received the following comments 

concerning the proposed authorized 

representative provisions. 

Comment: Several commenters 

recommended that the Exchange be 

required to make clear the powers and 

duties authorized representatives may 

have with respect to the Exchange, as 

well as all other requirements of 

§ 155.227, in a manner that is easily 

understandable by both the authorized 

representative and applicant or enrollee. 

Response: In the final rule, we added 

a provision to paragraph (a) specifying 

that the Exchange must provide 

information regarding the powers and 

duties that an authorized representative 

may have with respect to Exchange 

activities to both the applicant or 

enrollee and the authorized 

representative. 

Comment: Several commenters 

suggested that an authorized 

representative should have an 

affirmative duty to notify the Exchange 

and the applicant or enrollee on whose 

behalf he or she is acting of any 

revocation or material change in the 

authorized representative’s legal 

authority to act on behalf of the 

applicant or enrollee. These 

commenters also suggested that such a 

material change or revocation should 

result in revocation of the authorized 

representative’s authority to act on 

behalf of the consumer for Exchange 

purposes. 

Response: We have clarified in 

§ 155.227(d)(2) of the final rule that an 

authorized representative must notify 

the Exchange and the applicant or 

enrollee on whose behalf he or she is 

acting when the authorized 

representative no longer has legal 

authority to act on behalf of the 

applicant or enrollee. 

Comment: Several commenters asked 

HHS to clarify which legal 

documentation may serve in the place of 

an affirmative representation to 

designate an authorized representative. 

Other commenters recommended 

clarifying that a power of attorney may 

be used for such a purpose only if it 

authorizes the holder to act in the types 

of activities permitted under 

§ 155.227(c). One commenter 

recommended that legal documentation 

to act as an authorized representative be 

required, as opposed to optional, to 

protect vulnerable applicants or 

enrollees. Another commenter 

recommended adding language that 

authorizes the Exchange to dictate the 

form or manner of the authorization. A 

few commenters also expressed 

concerns about the proposed 

requirement that the designation of an 

authorized representative be in writing 

including a signature or other legally 

binding format. 

Response: In paragraph (a)(2), we 

outline the form and manner of how an 

applicant or enrollee may designate 

another person as his or her authorized 

representative, specifying that this 

designation should be in a legally 

binding format. We also provide 

examples of legal documentation that 

could be used to designate an 

authorized representative in lieu of a 

signed document, including, but not 

limited to, a court order establishing 

legal guardianship or a power of 

attorney. While we do not require that 

legal documentation be provided before 

the Exchange may recognize an 

individual as an authorized 

representative, we anticipate that 

Exchanges will have procedures in 

place to ensure that applicants and 

enrollees have control over whom they 

designate as an authorized 

representative. For example, Exchanges 

have flexibility to require that the 

designation should occur through a 

signed agreement or legally binding 

document. In general, an Exchange 

could accept any document that is valid 

for designating an authorized 


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2Standard Companion Guide Transaction 

Information, (March 22, 2013). Available at: 

http://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/companion-guide-for-ffeenrollment-transaction-v15.pdf. 

representative in the state, and that 

permits the holder to perform the 

activities specified in § 155.227(c), in 

place of an affirmative representation to 

designate an authorized representative. 

We emphasize that to be used in this 

manner, documentation has to give the 

authority needed to be an authorized 

representative for the activities specified 

in § 155.227(c). 

Comment: A few commenters 

inquired about the relationship between 

an authorized representative designated 

through the Exchange and a QHP issuer, 

and recommended that an applicant or 

enrollee be required to complete a 

separate authorization form to designate 

a representative to act on his or her 

behalf in interactions with the QHP 

issuer. Commenters expressed an 

understanding that QHP issuers would 

be responsible for developing and 

executing the authorized representative 

forms that govern interactions between 

the enrollee and the issuer. 

Response: Subject to applicable law, 

we believe that the authorized 

representative designated by an 

applicant or enrollee through the 

Exchange process should also be able to 

serve in the same capacity with the QHP 

issuer, and that streamlining this 

process is important to minimize the 

burden on applicants or enrollees who 

need authorized representation. 

Therefore, we would urge QHP issuers 

to allow an Exchange authorized 

representative to serve in the same 

capacity with the QHP issuer. We note 

that the companion guide 2 that will be 

used by all Exchanges for sending 

enrollment data to QHP issuers has 

fields that may accommodate this 

information. 

Comment: Some commenters 

suggested that HHS develop some 

conflict of interest standards to ensure 

that consumers are protected when 

interacting with entities that may 

benefit from becoming an authorized 

representative. Other commenters 

suggested banning all organizations 

from becoming authorized 

representatives, because some entities 

may benefit from becoming an 

authorized representative. 

Response: We appreciate the 

comments and plan to monitor 

organizations acting as authorized 

representatives over time to determine 

whether more specificity is needed. 

Additionally, § 155.227(e) of the final 

rule clarifies that authorized 

representatives must comply with 

applicable state and federal laws 

regarding conflicts of interest. 

Comment: Several commenters 

recommended that an applicant or 

enrollee should be able to authorize 

their representative to engage in fewer 

than all of the activities described in the 

proposed rule. 

Response: In the final rule, we 

maintain language specifying that an 

Exchange must allow applicants and 

enrollees to authorize a representative to 

perform the full range of activities listed 

in the rule. We also add language to 

§ 155.227(c) clarifying that the Exchange 

may (but need not) permit consumers to 

authorize fewer than all of the listed 

activities, so long as the Exchange is 

able to track the specific permissions for 

each authorized representative. We note 

that for plan years beginning before 

January 1, 2015, the FFE will not have 

the operational capacity to support the 

authorization of representatives to 

perform less than the full range of 

activities listed in the rule. 

Comment: Several commenters urged 

that the provision in proposed 

§ 155.227(d) that the applicant or 

enrollee notify both the Exchange and 

the representative that the 

representative is no longer authorized to 

act on his or her behalf be removed. 

Other commenters suggested that the 

applicant or enrollee should notify only 

the Exchange. 

Response: In the final rule, we clarify 

that the responsibility for notifying a 

representative whose authorization has 

been discontinued by an applicant or 

enrollee falls only on the Exchange. 

Comment: One commenter expressed 

support for a policy that would permit 

the Exchange to terminate a designation 

after a given period of time to be 

determined by the Exchange. This 

commenter noted that this aligns with 

the 5-year limit on authorizations from 

enrollees to allow Exchanges to request 

tax information for conducting annual 

redeterminations in accordance with 

§ 155.335(k). 

Response: In the final rule, we have 

added a provision specifying that 

authorized representatives will notify 

the Exchange if they are no longer 

authorized to act in that capacity. As 

long as a person has the authority to act 

as an authorized representative, there is 

no need to terminate or reauthorize that 

relationship after a set amount of time. 

An applicant or enrollee may also 

modify the authorization at any time. 

Comment: A commenter suggested 

that compliance agreements for 

authorized representatives should be 

available directly from HHS, instead of 

Exchanges, for entities such as multiemployer plans that are subject to 

federal regulation under ERISA, the 

Code, and the Taft-Hartley Act, but not 

to state insurance regulation. The 

commenter noted that the relationships 

between plans and plan participants 

and beneficiaries established under the 

Taft-Hartley Act should continue to be 

recognized in regulations implementing 

the Affordable Care Act. 

Response: We expect that authorized 

representatives will be used primarily 

by applicants and enrollees who are 

unable to represent themselves or who 

are seriously challenged in representing 

themselves in their relationship with 

the Exchange. Accordingly, authorized 

representatives’ agreements are between 

an applicant or enrollee and his or her 

authorized representative regarding 

representation before the Exchange. 

Comment: One commenter sought 

clarification on whether staff or 

volunteers of organizations must be 

trained and certified as Exchange 

certified application counselors under 

proposed § 155.225(b) to serve as 

authorized representatives. 

Response: The rule does not require 

authorized representatives to be trained 

and certified as certified application 

counselors. The role of an authorized 

representative is distinct from the role 

of a certified application counselor. 

Specifically, certified application 

counselors, for which standards will be 

finalized in a future regulation, provide 

guidance and assistance to applicants 

and enrollees who will interact with the 

Exchange on their own behalf, while 

authorized representatives are 

commonly used by applicants or 

enrollees who are unable to represent 

themselves, and have the legal authority 

to actually sign for an applicant or 

enrollee and make other decisions on 

his or her behalf. 

Comment: Several commenters 

suggested that requiring organizations to 

enter into agreements and follow a set 

of standards as proposed in § 155.227(e) 

will lead to disruptions in the 

availability of assistance and lead to real 

harm to persons who need assistance. 

Other commenters expressed concerns 

that every authorized representative 

would have to be certified. 

Response: In light of the commenters’ 

concerns, and the protections for 

consumers that already apply to all 

Exchange authorized representatives, 

we have not finalized the proposed 

requirement that organizations and staff 

and volunteers of organizations sign a 

separate agreement. We recognize that 

authorized representatives are given 

significant authority, and accordingly, 

we need to ensure that the privacy and 

security of applicants’ and enrollees’ 

personal data are protected. We note 


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that all authorized representatives, not 

just organizations and those working for 

organizations, will be subject to the 

privacy and security standards 

established and implemented by the 

Exchange consistent with 45 CFR 

155.260 through agreements, as is 

required by 45 CFR 155.260(b)(2). This 

will be further clarified in subregulatory 

guidance. Since all authorized 

representatives will be subject to 

privacy and security standards, in this 

final rule, we removed the requirement 

for organizations and staff and 

volunteers of organizations to sign a 

separate agreement. 

We have also not finalized the 

provision in the proposed rule that 

would have subjected authorized 

representatives who are staff and 

volunteers of organizations, and their 

organizations, to the proposed standards 

for Exchange certified application 

counselors. This proposal was 

motivated in large part by a concern that 

staff and volunteers of such 

organizations might be likely to have 

conflicts of interest. This concern, 

however, is addressed by § 155.227(e), 

which clarifies that authorized 

representatives must comply with 

applicable state and federal laws 

regarding conflicts of interest. 

Comment: One commenter suggested 

requiring legal documentation when an 

applicant or enrollee changes or 

withdraws his or her authorization. 

Response: Applicants and enrollees 

will not always have legal documents to 

substantiate discontinuing an 

authorization. When an applicant or 

enrollee appoints a new authorized 

representative, including to replace an 

existing authorized representative, he or 

she should follow the same process as 

an applicant or enrollee who appoints 

an authorized representative for the first 

time. 

Comment: Another commenter 

recommended that an enrollee should 

not be able to designate an authorized 

representative if he or she failed to do 

so during the application process. 

Response: We see no need to limit an 

applicant or enrollee’s ability to 

designate an authorized representative 

solely to the application process, 

particularly as some enrollees may 

develop a need for an authorized 

representative after submitting an 

application, choosing a plan, and 

maintaining coverage for many years. 

Comment: Several commenters sought 

clarification about whether an applicant 

or enrollee who applies through the 

Exchange with the assistance of an 

authorized representative and is 

subsequently transferred to the state 

Medicaid agency would need to 

redesignate his or her authorized 

representative. 

Response: If the application is 

transferred to the state Medicaid agency, 

the authorized representative 

designation would be transferred as 

well. 

Comment: One commenter inquired 

about whether the Exchange will be 

deemed liable for any breaches of 

confidentiality that are beyond the 

control of the Exchange. A commenter 

also requested that HHS modify 

language to make it clear that it is the 

legal duty of the authorized 

representative to maintain 

confidentiality in daily practice. 

Response: We appreciate this 

comment and recognize that this issue 

applies more broadly. There are 

potentially some instances in which a 

person that provides application 

assistance, including an authorized 

representative, could negligently 

disclose an applicant’s or enrollee’s 

information under circumstances that 

the Exchange could not have prevented. 

We note that authorized representatives 

will need to comply with the same 

privacy and security standards that the 

Exchange adopts consistent with 

§ 155.260, or with more stringent 

standards, pursuant to § 155.260(b). 

Additionally, paragraph (e) of the final 

rule requires authorized representatives 

to comply with applicable state and 

federal laws concerning conflicts of 

interest and confidentiality of 

information. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.227 of the proposed 

rule, with a few modifications. For 

clarity and consistency with the 

terminology defined in § 155.20, and to 

make it clear that we intend authorized 

representatives to provide assistance 

both in the SHOP Exchanges and in the 

individual market Exchanges, we 

replaced the terms ‘‘individual’’ and/or 

‘‘employee’’ with the terms ‘‘applicant’’ 

and/or ‘‘enrollee’’ to describe the people 

helped by authorized representatives. 

To further indicate that we intend 

authorized representatives to provide 

assistance both in the SHOP and in the 

individual market Exchanges, we clarify 

in § 155.227(a) that an applicant or 

enrollee can designate an authorized 

representative in the individual or small 

group market Exchange and have added 

‘‘subpart H’’ to the regulation text to 

account for the functions that an 

authorized representative may perform 

in a SHOP. To avoid confusion with the 

defined term ‘‘qualified individual,’’ we 

use the term ‘‘person’’ instead of 

‘‘individual’’ in the final rule when 

describing individual persons acting as 

an authorized representative. 

We added paragraph (a)(5) to specify 

that the Exchange must provide 

information about the powers and 

duties of an authorized representative 

both to the applicant or enrollee and to 

the authorized representative. We 

redesignated proposed paragraphs (c)(1) 

through (c)(4) as (c)(1)(i) through 

(c)(1)(iv), and added a new paragraph 

(c)(2), which allows an Exchange to 

permit an applicant or enrollee to 

authorize a representative to perform 

fewer than all of the activities described 

in paragraph (c)(1) of this section, 

provided that the Exchange tracks the 

specific permissions of each authorized 

representative. Additionally, we 

removed paragraph (d)(1), and 

redesignated proposed paragraphs (d)(2) 

and (d)(3) as paragraphs (d)(1) and 

(d)(2). We modified the language in 

redesignated paragraph (d)(1) to explain 

that the Exchange, not the applicant or 

enrollee, will notify the authorized 

representative when an applicant or 

enrollee notifies the Exchange that he or 

she is no longer represented by his or 

her previously authorized 

representative. We further modified 

redesignated paragraph (d)(2) to clarify 

that an authorized representative will 

notify the Exchange and the applicant or 

enrollee on whose behalf he or she is 

acting when the authorized 

representative no longer has legal 

authority to act on behalf of the 

applicant or enrollee. We also deleted 

paragraph (e) and redesignated 

paragraphs (f) and (g) as (e) and (f), 

respectively. We also made the 

following technical corrections. We 

made a technical correction in 

paragraph (a)(1) to specify that 

authorized representatives are permitted 

to assist individuals apply for eligibility 

determinations or redeterminations for 

exemptions from the shared 

responsibility payment under subpart G 

of this part. We made technical 

corrections in paragraphs (a)(2) and (g) 

to clarify that the designation of an 

authorized representative must be in a 

written document signed by the 

applicant or enrollee instead of saying it 

must be in writing, including a 

signature. We also added the word 

‘‘must’’ to paragraphs (a)(3), (a)(4), and 

(f) to clarify that the activities described 

in those paragraphs are required 

Exchange functions. We made a 

technical correction in paragraph (d) to 

move the words ‘‘the applicant or 

enrollee notifies’’ to the paragraph they 

modify. Finally, we made a technical 

correction in paragraph (f), to clarify 

what is meant by legally binding format 


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by adding ‘‘as described in 

§ 155.227(a)(2).’’ 

5. General Standards for Exchange 

Notices (§ 155.230) 

In § 155.230, we proposed to make a 

technical correction in paragraph (a) to 

clarify that the general standards for 

notices apply to all notices sent by the 

Exchange to individuals or employers. 

We also proposed to revise paragraph 

(a) by redesignating paragraph (a)(1) as 

paragraph (a)(4) and redesignating 

paragraph (a)(2) as paragraph (a)(5). We 

proposed to revise redesignated (a)(2) to 

change ‘‘; and’’ to ‘‘.’’ We proposed to 

add new paragraph (a)(1) to indicate 

that any notice required to be sent by 

the Exchange to individuals or 

employers must be written and include 

an explanation of the action that is 

reflected in the notice, including the 

effective date of the action, and we 

proposed to add new paragraph (a)(2) to 

require the notice to include any factual 

findings relevant to the action. We 

proposed to revise paragraph (a)(3) to 

clarify that the notice must include the 

citation to, or identification of, the 

relevant regulations that support the 

action. We note that the contents of 

notices are subject to privacy and 

security provisions in § 155.260, 

including the limitations on disclosure 

of information. 

Furthermore, we proposed to add 

paragraph (d) to allow the Exchange to 

provide notices either through standard 

mail, or if an individual or employer 

elects, electronically, provided that 

standards for use of electronic notices 

are met as set forth in § 435.918, which 

contains a parallel provision. We did 

not propose that the standards 

specifically described under proposed 

paragraph (d) would apply to the SHOP, 

and sought comment regarding this 

issue. We received the following 

comments concerning the proposed 

provisions for standards for Exchange 

notices: 

Comment: Several commenters 

supported our proposal to clarify that 

the general standards for notices under 

§ 155.230 apply to notices sent by the 

Exchange to both individuals and 

employers, and they supported the 

changes and additions proposed under 

paragraph (a). Many commenters 

indicated that the Exchange should be 

required to include contact information 

for both customer service and consumer 

assistance resources in notices, and 

commenters indicated that HHS should 

make copies of the applicable statute or 

regulation available upon request by 

consumers. One commenter stated the 

notice needs to include a clear 

explanation of any next steps and the 

timeframe by which action needs to be 

taken, while another commenter 

emphasized that notices should contain 

information about where individualized 

and unbiased counseling is available for 

the individual. Lastly, a few 

commenters suggested that we add 

‘‘laws or regulations’’ to § 155.230(a)(3). 

Response: In response to comments 

received, we clarify that while the 

standards under § 155.230 generally do 

apply to notices sent by the individual 

market Exchange to both individuals 

and employers, HHS does not expect 

that the Exchange will have the 

information necessary to provide an 

employer with a choice to receive the 

notice specified in § 155.310(h) 

regarding eligibility for advance 

payments of the premium tax credit 

electronically, as we do not expect that 

individuals will provide email 

information for employers on the 

application. Accordingly, we expect that 

notices sent from the Exchange to 

employers will likely be provided by 

standard mail, at least in the early years 

of program implementation. We will 

continue to work with employers 

regarding how best to implement 

notices from the Exchange to employers 

in an efficient manner. 

We intend to consider the suggestions 

regarding notice content in the 

development of model notices, and 

encourage Exchanges to do the same in 

developing notices they will use. We 

expect that notices will include clear 

information about next steps and 

timeframe by which action needs to be 

taken. We acknowledge the value of 

including contact information for both 

customer service and consumer 

assistance resources in notices. We 

recognize that including a list of all 

available consumer assistance resources 

will make the notice longer, and so note 

that this is an area in which Exchanges 

have flexibility. We also note that 

applicable federal regulations are and 

will remain available through public 

Web sites. 

Comment: Several commenters 

reinforced their support for the use of 

plain language to help notify enrollees 

of their rights and to properly explain 

health coverage options that may be 

available to consumers. One commenter 

recommended the notice include clear 

information about how to get help if the 

individual does not understand the 

notice, as well as clear information that 

an individual does not have to take the 

premium tax credit in advance. 

Response: All notices specified under 

45 CFR parts 155 and 156 are required 

to meet the accessibility standards 

described under § 155.205(c), which 

specify that information must be 

provided in plain language and in a 

manner accessible to limited English 

proficient individuals. We expect 

Exchanges to make consumers aware of 

the reconciliation process applicable to 

advance payments of the premium tax 

credit as a part of the initial Exchange 

educational materials, as well as at the 

time that an individual selects a QHP. 

HHS is working with states to identify 

all key messages that should be 

communicated to individuals through 

notices and other Exchange processes, 

and will take these comments into 

consideration for implementation. 

Comment: Commenters generally 

expressed support for the electronic 

notice standards proposed under 

§ 155.230(d), while some expressed 

concerns or suggestions related to the 

proposed standards. Commenters raised 

a variety of concerns about how 

consumers who elect to receive 

electronic notices may not actually 

receive them, including as a result of 

not checking email regularly. One 

commenter urged that Exchanges should 

be required to change the enrollee’s 

delivery method for notices if the 

Exchange finds that electronic notices 

are not being opened. One commenter 

suggested that written notifications 

should cease only after clear and 

unambiguous expression from an 

enrollee that they no longer wish to 

receive paper notifications, and that the 

Exchange should be required to track 

whether electronic notices are delivered 

and opened by an enrollee. Another 

commenter recommended that 

individuals be allowed to decide which 

notices they receive electronically or by 

mail. One commenter suggested that 

electronic notices should be in addition 

to, rather than replace, mailed paper 

notices. Lastly, one commenter 

recommended modifying the notice 

provision so that if an individual elects 

to receive electronic notices, the 

Exchange also always would send a 

mailed notice in addition to the 

electronic notice when the Exchange is 

taking an adverse action or when the 

consumer is required to take an 

additional action to maintain his or her 

eligibility for enrollment in a QHP, 

advance payments of the premium tax 

credit, or cost-sharing reductions. 

Response: We do not expect that the 

Exchange will track and monitor when 

an individual opens emails and 

electronic notices. As described in the 

electronic notice standards under 

§ 435.918, which are incorporated by 

reference under § 155.230(d), applicants 

will receive paper notices by mail until 

they affirmatively elect to receive 

electronic notices. We expect Exchanges 

to remain consistent in their overall 


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approach to distributing notices, as 

required under § 155.230(d). Individuals 

will be able to control how they receive 

notices. Additionally, under 

§ 435.918(b)(6), an individual will be 

able to request any notice posted in the 

individual’s electronic account to be 

sent through regular mail. Furthermore, 

nothing precludes the Exchange from 

providing an individual with the choice 

to receive some types of notices 

electronically and others through 

regular mail (for example, notices 

concerning adverse actions). 

Accordingly, we are finalizing this 

provision as proposed, with one 

modification to allow the individual 

market Exchange to choose to delay the 

implementation of the process described 

in 42 CFR 435.918(b)(1) regarding 

sending a mailed confirmation of the 

choice to receive electronic notices, 

given the time available for 

implementation. 

Comment: Some commenters 

supported the exclusion of the SHOP 

Exchange from the electronic notice 

standards under § 155.230(d), while 

others expressed support for the SHOP 

being able to send all notices 

electronically. Many commenters urged 

that employers in the SHOP should 

have a choice regarding to how they 

receive notices, and some expressed 

concern about employers not having a 

choice. One commenter recommended 

that the SHOP be allowed to choose 

between offering both written and 

electronic notices, to allow qualified 

employers and employees to select 

which method they prefer; or to only 

offer paper notices. The commenter 

noted that allowing states to adopt an 

electronic-only approach for notice 

delivery might be problematic for some 

employers. Another commenter 

indicated that the proposed rule is not 

clear about what the default format 

would be for notices sent by the SHOP. 

Response: Based on the comments 

received and because we believe it is 

important for employers to be able to 

choose how they receive notices, we are 

modifying the proposed rule to allow an 

employer or employee in any SHOP to 

elect to receive electronic notices, 

provided that the standards for 

electronic notices in § 435.918(b)(2), 

(b)(3), (b)(4), and (b)(5) are met for the 

employer or employee. Accordingly, the 

SHOP must: (1) Permit the employer or 

employee to change such election, at 

any time, and inform the employer or 

employee of this right; (2) Post notices 

to the employer or employee’s 

electronic account within one business 

day of notice generation; (3) Send an 

email or other electronic 

communication alerting the employer or 

employee when a notice has been 

posted; and (4) If an electronic 

communication is undeliverable, send 

the notice by regular mail within three 

business days of the date of the failed 

electronic communication. 

Comment: Several commenters asked 

for clarification regarding how 

electronic notice standards apply to 

QHP issuers, and they suggested that 

QHP issuers also be allowed to offer 

enrollees the option of receiving 

electronic notices. Some commenters 

recommended that the Exchange adopt 

electronic notice standards for QHP 

issuers similar to those applicable to the 

individual market Exchange. One 

commenter recommended that the 

single, streamlined application include 

an option for applicants to elect to 

receive notices from the QHP issuer 

electronically, in addition to the 

election to receive notices from the 

Exchange electronically. One 

commenter requested that a provision 

be added permitting managed care 

organizations to provide electronic 

notices. 

Response: The provisions related to 

electronic notice standards under part 

155 of the proposed rule apply to the 

individual market and SHOP Exchange. 

We acknowledge the importance of QHP 

issuers being able to send, and enrollees 

being able to choose to receive, 

electronic notices, and we clarify that 

nothing in this regulation precludes 

QHP issuers from offering their 

enrollees the option to receive notices 

electronically. We understand that most 

QHP issuers already make electronic 

notices available as an option to their 

current enrollees, and we are supportive 

of QHP issuers continuing to make this 

option available to enrollees when they 

are participating in the Exchange. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.230 of the proposed 

rule with a few modifications. We 

renumber proposed paragraph (d) as 

paragraph (d)(1) and modify it to specify 

the electronic notice standards for an 

individual market Exchange, while also 

adding paragraph (d)(2) to establish the 

electronic notice standards for a SHOP. 

We also add language to allow the 

individual market Exchange to choose 

to delay the implementation of the 

process described in 42 CFR 

435.918(b)(1) regarding sending a 

mailed confirmation of the choice to 

receive electronic notices. We provide 

in paragraph (d)(2) that an employer or 

employee in any SHOP may elect to 

receive electronic notices, provided that 

the requirements for electronic notices 

in § 435.918(b)(2), (b)(3), (b)(4), and 

(b)(5) are met for the employer or 

employee. 

6. Definitions and General Standards for 

Eligibility Determinations (§ 155.300) 

In § 155.300, we proposed technical 

corrections in paragraph (a) to the 

definitions of ‘‘minimum value,’’ 

‘‘modified adjusted gross income,’’ and 

‘‘qualifying coverage in an eligible 

employer-sponsored plan,’’ and also 

removed the definition of ‘‘adoption 

taxpayer identification number.’’ We are 

finalizing the technical corrections as 

proposed, with an additional technical 

correction to specify the appropriate 

definition of minimum value. 

Comment: Several commenters 

recommended that HHS should not 

cross-reference in § 155.300 to the 

affordability standard for eligible 

employer-sponsored coverage in the 

Department of the Treasury’s premium 

tax credit regulation, 26 CFR 1.36B–0 et 

seq., as the Department of the Treasury 

regulation is based on individual rather 

than family coverage. 

Response: The Department of the 

Treasury maintains the legal authority 

to interpret and implement the 

eligibility standards for the premium tax 

credit, including those related to 

affordability and minimum value of 

coverage in an eligible employersponsored plan, because those are based 

on provisions of the Code. The proposed 

technical corrections do not revise the 

policy regarding the Exchange’s 

determination of the affordability of 

eligible employer-sponsored coverage, 

but simply update the cross-reference to 

align with the Department of the 

Treasury’s implementing regulation. As 

such, we are finalizing the technical 

corrections as proposed. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.300 of the proposed 

rule with a technical correction to 

specify the appropriate definition of 

minimum value. 

7. Options for Conducting Eligibility 

Determinations (§ 155.302(a) and (b), 

and (d)) 

In § 155.302, we promulgated 

provisions as interim final with request 

for comments in the Exchange final rule 

(77 FR 18310, at 18451–52). We 

proposed to modify some of the 

provisions in § 155.302 in the proposed 

rule (78 FR 4594, 4635). 

In paragraph (a) of the interim final 

rule, we provided that the Exchange 

may fulfill its minimum functions under 

this subpart by either executing all 

eligibility functions, directly or through 

contracting arrangements described in 


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§ 155.110(a), or through a combination 

of this approach and one or both of the 

approaches identified in paragraphs (b) 

and (c), which apply when other entities 

make eligibility determinations for 

insurance affordability programs. We 

proposed a revision to the interim final 

rule in paragraph (a)(1) to specify that 

Medicaid and CHIP eligibility 

determinations made by the Exchange 

may only be made by a government 

agency that maintains personnel 

standards on a merit basis. 

In paragraph (b) of the interim final 

rule, we provided that the Exchange 

may conduct an assessment of eligibility 

for Medicaid and CHIP rather than an 

eligibility determination for Medicaid 

and CHIP, provided that the Exchange 

make such an assessment based on the 

applicable Medicaid and CHIP MAGIbased income standards and citizenship 

and immigration status, using 

verification rules and procedures 

consistent with Medicaid and CHIP 

regulations, without regard to how such 

standards are implemented by the state 

Medicaid and CHIP agencies. 

In paragraph (b)(2) of the interim final 

rule, we provided that notices and other 

activities that must be conducted in 

connection with an eligibility 

determination for Medicaid or CHIP 

would be conducted by the Exchange 

consistent with the standards identified 

in this subpart or by the applicable state 

Medicaid or state CHIP agency 

consistent with applicable law. 

In paragraph (b)(3) of the interim final 

rule, we provided that if the Exchange 

assesses an applicant potentially eligible 

for Medicaid or CHIP, the Exchange 

would transmit such the applicant’s 

information to the State Medicaid or 

CHIP agency for a formal determination 

of eligibility for such insurance 

affordability program. We explained in 

the preamble to the interim final rule 

that the Exchange would consider the 

applicant ineligible for Medicaid or 

CHIP for purposes of eligibility for 

advance payments of the premium tax 

credit and cost-sharing reductions until 

the state Medicaid or CHIP agency 

notified the Exchange that the applicant 

was eligible for Medicaid or CHIP. 

In paragraph (b)(4) of the interim final 

rule, we proposed that if the Exchange 

assesses an applicant not potentially 

eligible for Medicaid or CHIP based on 

the applicable Medicaid and CHIP 

MAGI-based income standards, the 

Exchange must consider such an 

applicant as ineligible for Medicaid or 

CHIP for purposes of determining 

eligibility for advance payments of the 

premium tax credit and cost-sharing 

reductions, and notify the applicant and 

provide him or her with the opportunity 

to withdraw his or her application for 

Medicaid and CHIP or request a full 

determination of eligibility for Medicaid 

and CHIP from the applicable state 

agencies. To the extent that an applicant 

withdraws his or her application for 

Medicaid and CHIP, the applicant 

would not receive a formal approval or 

denial for Medicaid and CHIP. 

We proposed a revision to the interim 

final rule in paragraph (b)(4)(i)(A) to 

specify that, if an applicant who is not 

assessed as potentially eligible for 

Medicaid or CHIP by the Exchange 

withdraws his or her application for 

Medicaid or CHIP, and then appeals his 

or her eligibility determination for 

advance payments of the premium tax 

credit or cost-sharing reductions and is 

found potentially eligible for Medicaid 

or CHIP, the Medicaid or CHIP 

application is not considered 

withdrawn. The purpose of this revision 

is to reinstate the Medicaid and CHIP 

application date, which is used in 

determining the effective date of 

coverage under Medicaid and CHIP. 

We provided in paragraph (b)(4)(i)(B) 

that the Exchange must notify and 

provide an applicant who is assessed as 

not potentially eligible for Medicaid and 

CHIP with the opportunity to request a 

full determination of eligibility for 

Medicaid and CHIP by the applicable 

state Medicaid and CHIP agencies. For 

an applicant who requests a full 

Medicaid and CHIP determination, we 

provided that the Exchange must 

transmit all information provided as 

part of the application, update, or 

renewal that initiated the assessment, 

and any information obtained or 

verified by the Exchange to the state 

Medicaid and CHIP agency. We 

provided that the Exchange must 

consider such an applicant as ineligible 

for Medicaid or CHIP for purposes of 

determining eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions until the state 

Medicaid or CHIP agency notifies the 

Exchange that the applicant has been 

determined eligible for Medicaid or 

CHIP. 

We provided in paragraph (b)(5) that, 

under an assessment model discussed 

above, the Exchange must adhere to the 

eligibility determination for Medicaid or 

CHIP made by the Medicaid or CHIP 

agency. We provided in paragraph (b)(6) 

that the Exchange and the applicable 

state Medicaid and CHIP agencies must 

enter into an agreement specifying their 

respective responsibilities in connection 

with eligibility determinations for 

Medicaid and CHIP, which requirement 

complements the standards in 

§ 435.1200(d). In accordance with these 

standards, when the Exchange performs 

an assessment and transmitted it to the 

state Medicaid or CHIP agency, and the 

Exchange is providing advance 

payments of premium tax credits 

pending an eligibility determination for 

Medicaid and CHIP, the Exchange will 

receive a notification of the final 

determination of eligibility for Medicaid 

and CHIP made by the receiving agency. 

This approach helps avoid duplicative 

requests for information from applicants 

and verification of information. 

We proposed a revision to the interim 

final rule in paragraph (b)(5) to specify 

that the Exchange also will adhere to the 

appeals decision for Medicaid or CHIP 

eligibility determinations made by the 

state Medicaid or CHIP agency or 

appeals entity for such agency. 

In paragraph (d) of the interim final 

rule, we provided the standards to 

which the Exchange must adhere when 

assessments of eligibility for Medicaid 

and CHIP based on MAGI and eligibility 

determinations for advance payments of 

the premium tax credit and cost-sharing 

reductions are made in accordance with 

paragraphs (b) and (c); such standards 

include that all eligibility processes are 

streamlined and coordinated across 

applicable agencies, that such 

arrangement does not increase 

administrative costs and burden on 

applicants, enrollees, beneficiaries, or 

application filers, or increase delay, and 

that applicable requirements under part 

155 and section 6103 of the Code are 

met. 

Comment: Several commenters raised 

concerns regarding § 155.302(a) as 

promulgated in the interim final rule, as 

they believed it could permit non-public 

agencies to conduct eligibility 

determinations for Medicaid and CHIP, 

which they worried would have a 

negative impact on consumer assistance, 

timeliness, accuracy, and the potential 

for conflicts of interest. Some 

commenters wanted to ensure that 

agreements between state Medicaid 

agencies and private entities related to 

the eligibility determination process 

would be relayed to HHS for 

appropriate review. Several commenters 

recommended clear language to specify 

that a private Exchange is not permitted 

to make final determinations regarding 

an applicant’s eligibility for Medicaid 

and CHIP. One commenter wanted HHS 

to strengthen the conflict of interest 

language and specify that the Exchange 

may not contract out eligibility 

determinations for advance payments of 

the premium tax credit and cost-sharing 

reductions due to such determinations 

being inherently governmental. 

Response: We appreciate these 

comments regarding the interim final 

rule, as well as comments received 


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Federal Register / Vol. 78, No. 135 / Monday, July 15, 2013 / Rules and Regulations 42245 

regarding the proposed revisions to 

paragraph (a)(1) of the interim final rule 

that would specify that any contracting 

arrangement for eligibility 

determinations for Medicaid and CHIP 

is subject to the standards in 42 CFR 

431.10(c)(2). In response to these 

comments, we are finalizing 

§ 155.302(a) with the proposed revision 

to paragraph (a)(1), with a minor 

clarification to specify that the reference 

to 42 CFR 431.10(c)(2) is specific to 

contracting arrangements for eligibility 

determinations for Medicaid and CHIP. 

Specifically, this means that an 

Exchange contractor may make 

eligibility determinations for Medicaid 

and CHIP if it is a government agency 

or public authority that maintains 

personnel standards on a merit basis. 

We note that 42 CFR 431.10(d) specifies 

that agreements regarding the delegation 

of eligibility determinations by state 

Medicaid agencies must be available to 

the Secretary, upon request. Exchanges 

are permitted to contract eligibility 

determinations for advance payments of 

the premium tax credit and cost-sharing 

reductions in accordance with 

§ 155.110(a). 

Comment: Many commenters 

expressed concerns about the potential 

bifurcation of the eligibility process 

under § 155.302(b) for Medicaid, CHIP, 

and advance payments of the premium 

tax credit and cost-sharing reductions in 

terms of its impact on various 

stakeholders. Commenters urged that 

HHS maintain the ‘‘no wrong door’’ 

approach envisioned by the Affordable 

Care Act to ensure that an individual is 

appropriately screened for all relevant 

insurance affordability programs. As 

such, some commenters requested that 

by 2016, HHS revisit the decision to 

allow states to implement eligibility 

systems in the manner as described in 

the interim final rule, while also 

evaluating whether more Exchanges 

move from making assessments to 

determinations during the intervening 

time period. Commenters recommended 

that, if HHS retains this provision, HHS 

should specify that states must 

demonstrate they have the capacity to 

manage electronic accounts and 

applicant information in so as not to 

increase the burden on individuals and 

families by requesting duplicate 

information or increase the 

administrative costs for state Medicaid 

and CHIP agencies related to file 

transfers or unnecessarily duplicative 

verification processes. Some 

commenters wanted HHS to require the 

Exchange to notify the transferring 

program that it had received the 

electronic account and report its final 

eligibility determination, to protect 

applicants. Furthermore, commenters 

urged HHS to establish a process for 

monitoring and enforcing the standards, 

as well as educating the public, 

regarding the division of eligibility 

responsibilities between the Exchange 

and relevant Medicaid and CHIP 

agencies. Commenters stated that if such 

monitoring uncovers noncompliance 

with performance standards or other 

requirements, HHS should require the 

Exchanges and state Medicaid and CHIP 

agencies to submit corrective action 

plans. 

Response: We appreciate the 

suggestions from commenters, and note 

that many of these recommendations are 

already included in the interim final 

rule. We intend to monitor the 

efficiency of how states implement 

assessment or determination models to 

determine whether to propose revisions 

in future years. We believe that the 

existing language in § 155.302(b) is 

augmented by § 155.345(g) and 42 CFR 

435.1200, which specify that the 

Exchange and the state Medicaid and 

CHIP agencies must have the capacity to 

manage electronic accounts, and also 

that the Exchange will notify the 

transferring Medicaid or CHIP agency 

regarding the receipt of an electronic 

account as well as of its final eligibility 

determination. Accordingly, we do not 

modify this provision further to address 

these comments. Although we do not 

establish a formal process for 

monitoring and taking enforcement 

action for noncompliance with these 

standards in the regulation text, HHS 

will continue to evaluate the need for 

such processes during the 

implementation of these regulations. 

Comment: Several commenters 

suggested that states should adopt 

procedures that would allow Exchanges 

to assess eligibility for Medicaid based 

on factors other than MAGI, and 

potentially also allowing the Exchange 

to assess eligibility for other programs, 

including the Supplemental Nutritional 

Assistance Program. Some commenters 

urged HHS to require Exchanges to 

develop appropriate screening standards 

to identify vulnerable populations that 

might be eligible for certain programs on 

a basis other than MAGI. 

Response: This comment is outside 

the scope of § 155.302(b) of the interim 

final rule, as this provision only 

concerns the use of MAGI 

determinations, while § 155.345(b) 

concerns the duties of the Exchange for 

Medicaid eligibility based on factors 

other than MAGI. We note that 

Exchanges are not precluded from 

entering into agreements with Medicaid 

and CHIP agencies to make eligibility 

determinations for Medicaid based on 

factors other than MAGI. 

Comment: Some commenters 

requested that HHS provide greater 

specificity throughout § 155.302(b) to 

indicate that contracting agreements, 

verifications rules and standards, 

notices, and other activities discussed 

must adhere to the specific standards of 

§§ 155.302(d) and 155.345(g), and 42 

CFR part 431, subpart E. 

Response: As noted earlier, 

§ 155.302(b) only applies in place of the 

standards elsewhere in subpart D that 

specify that the Exchange will make 

eligibility determinations for Medicaid 

and CHIP based on MAGI, rather than 

assessments; it does not conflict with 

standards provided elsewhere in 

subpart D that address other 

components of the eligibility process 

that are unaffected by whether the 

Exchange is making assessments or 

determinations of eligibility for 

Medicaid and CHIP. As such, Exchanges 

are still guided by other provisions in 

subpart D, such as § 155.345(g). 

Provisions in 42 CFR part 431 concern 

standards for Medicaid agencies, which 

continue to apply to Medicaid agencies 

in accordance with that part 

notwithstanding the role of the 

Exchange for Medicaid eligibility. 

Finally, § 155.302(a)(2) already 

specifically states that use of the option 

in § 155.302(b) is subject to § 155.302(d), 

so we do not believe that it is necessary 

to add further references to § 155.302(d). 

Comment: Some commenters 

supported the increased level of 

flexibility for the Exchange to make 

assessments of eligibility for Medicaid 

and CHIP based on MAGI, rather than 

determinations. However, these 

commenters expressed concerns about 

relying on applicants who are not 

assessed as potentially eligible for 

Medicaid or CHIP based on MAGI to 

self-identify as potentially eligible based 

on non-MAGI standards or proactively 

request a full determination from the 

state Medicaid and CHIP agencies, as 

opposed to placing greater burden on 

the Exchange to take additional steps to 

proactively identify applicants who 

might be Medicaid eligible based on 

non-MAGI standards. One commenter 

also asked HHS to clarify that in cases 

where an Exchange conducts an 

assessment of Medicaid eligibility; the 

assessment must include an assessment 

of Medicaid eligibility on bases other 

than MAGI. These commenters 

suggested that HHS encourage states to 

utilize a process whereby individuals 

who enroll in a QHP, but are 

subsequently determined eligible for 

Medicaid, are able to transition into the 

same carrier’s Medicaid product if the 


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QHP also operates a Medicaid health 

plan. 

Response: We appreciate the concerns 

regarding how to create a streamlined 

process that is minimally burdensome 

on individuals and families, and results 

in accurate eligibility determinations. 

Under § 155.345(b) and (c), the 

Exchange will evaluate applications for 

applicants who are not eligible for 

Medicaid based on MAGI for possible 

Medicaid eligibility based on factors 

other than MAGI, and must provide an 

opportunity for applicants and enrollees 

to request a full determination of 

Medicaid eligibility based on factors 

other than MAGI. If the Exchange 

evaluates an applicant as potentially 

eligible for Medicaid based on factors 

other than MAGI, or the applicant or 

enrollee requests a full determination of 

Medicaid eligibility, § 155.345(d) 

specifies that the Exchange will transmit 

the applicant’s information to the state 

Medicaid agency for a full 

determination. The Exchange has the 

same responsibilities regarding 

eligibility for Medicaid based on factors 

other than MAGI under the assessment 

and the determination models, which 

we believe is appropriate because the 

single, streamlined application that will 

be used by the Exchange does not 

request all the information necessary to 

conduct a full determination of 

Medicaid eligibility based on factors 

other than MAGI. Rather, it includes an 

opportunity for an application filer to 

indicate that an applicant has 

limitations in daily activities or lives in 

a medical facility or nursing home, 

which are factors that are considered in 

determining eligibility for Medicaid 

based on factors other than MAGI. If 

answered affirmatively, the Exchange 

will trigger a referral to the applicable 

state Medicaid agency such that the 

state Medicaid agency can determine 

the applicant’s eligibility for Medicaid, 

including based on factors other than 

MAGI. Further, we note that the 

assessment of eligibility for Medicaid 

based on MAGI is designed to be a 

robust evaluation, and we expect that 

the number of applicants who will 

receive an assessment that is 

inconsistent with the final 

determination will be limited. We note 

that while comments related to HHS 

encouraging a process to help 

individuals transition between QHPs 

and Medicaid products of the same 

carrier is outside the scope of this 

regulation, Exchanges maintain the 

flexibility to pursue such an option. 

Comment: Some commenters noted 

the need for high levels of coordination 

between the Exchange and state 

Medicaid and CHIP agencies. A few 

commenters also wanted HHS to 

provide guidance with a view toward 

minimizing the situations in which an 

individual will enroll in a QHP through 

the Exchange pending the outcome of a 

Medicaid or CHIP eligibility 

determination and then be subsequently 

determined eligible for Medicaid or 

CHIP. 

Response: We agree that a high degree 

of coordination is needed to manage an 

assessment model, and believe that the 

language in § 155.302(b) and (d), as well 

as § 155.345, prescribes an appropriate 

set of standards. We recognize the 

challenges that may occur related to 

individuals who enroll in a QHP 

pending the outcome of a Medicaid or 

CHIP eligibility determination, but we 

believe that these are outweighed by the 

benefits associated with providing 

eligible individuals with health 

coverage pending the completion of an 

eligibility determination for Medicaid or 

CHIP, and we note that enrolling in a 

QHP through the Exchange during such 

a period is the individual’s choice. With 

that, we expect that as states implement 

their Exchanges and as eligibility 

systems for the Exchange, Medicaid, 

and CHIP mature, the need for multiple 

entities to take part in processing an 

application will lessen, and the time 

needed to complete the entire eligibility 

process will also decrease, which will 

reduce the need for interim coverage. 

Comment: One commenter worried 

that the remainder of subpart D 

concerning the eligibility process was 

not updated to reflect § 155.302(b). 

Response: We note that § 155.302(b) 

provides that the Exchange may conduct 

an assessment of MAGI-based eligibility 

for Medicaid and CHIP, rather than a 

determination of eligibility for Medicaid 

and CHIP, in accordance with the 

specified standards, ‘‘[n]otwithstanding 

the requirements of this subpart[.]’’ In 

view of this language, we did not update 

other provisions in subpart D to reflect 

§ 155.302(b). We note that § 155.302(b) 

does not supersede other provisions, 

such as those in § 155.345, that set 

additional standards for Exchanges in 

coordinating with Medicaid and CHIP 

agencies. 

Comment: Some commenters worried 

that the Exchange assessment provision 

would allow the Exchange the assess 

eligibility without applying Medicaid 

rules and procedures. Commenters 

recommended that, under an assessment 

model, the Exchange should provide 

presumptive eligibility for Medicaid, 

which they believed was particularly 

important for children and pregnant 

women, while the application is 

transferred to the Medicaid and CHIP 

agencies and a determination is made. 

One commenter suggested HHS develop 

a universal model for tracking children 

as they move from one coverage type to 

another, which Exchanges should be 

required to implement. 

Response: Section 155.302(b)(1) 

specifies that an assessment will be 

made based on, ‘‘the applicable 

Medicaid and CHIP MAGI-based income 

standards and citizenship and 

immigration status, using verification 

rules consistent with 42 CFR parts 435 

and 457, without regard to how such 

standards are implemented by the State 

Medicaid and CHIP agencies.’’ We 

maintain this language in this final rule, 

which ensures that the Exchange will 

use standard Medicaid rules and 

procedures in making an eligibility 

assessment. We appreciate the 

commenter’s recommendations related 

to presumptive eligibility, but note that 

HHS’ approach in establishing an 

assessment model was premised on 

having the Medicaid or CHIP agency 

make all eligibility determinations that 

result in the provision of benefits under 

Medicaid or CHIP. Accordingly, we do 

not specify that the Exchange will make 

presumptive determinations under an 

assessment model. HHS will continue to 

work with Exchanges and Medicaid and 

CHIP agencies to ensure that vulnerable 

populations, such as children and 

pregnant women, receive the correct 

eligibility determinations for insurance 

affordability programs in a timely 

fashion. 

Comment: Some commenters 

recommended that the interim final rule 

be amended to eliminate or strictly limit 

differences between the procedures 

used by Exchanges in assessing 

eligibility for Medicaid and CHIP, and 

those used by state Medicaid and CHIP 

agencies in determining eligibility, with 

HHS permitting Federally-facilitated 

Exchanges and State Partnership 

Exchanges to have slightly more 

flexibility for differences than Statebased Exchanges. 

Response: We agree that the 

differences between the procedures 

used by Exchanges and their partner 

Medicaid and CHIP agencies in 

conducting eligibility determinations 

should be limited, and believe that 

§ 155.302(b)(1) already accomplishes 

this to a significant extent. We reiterate 

that an assessment under § 155.302(b) 

will be robust and will involve the 

execution of detailed MAGI-based 

eligibility rules and verification 

procedures. Further, we believe that 

there is little reason for the use of an 

assessment model in a state that 

operates a state-based Exchange, given 

the availability of shared information 

technology services and the status of the 


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state-based Exchange as a state, rather 

than a federal, entity. We intend to 

continue to work closely with states to 

ensure that systems and processes are 

appropriately integrated, with the goal 

of reducing administrative costs, burden 

on consumers, and the time needed to 

complete the eligibility process. 

Comment: Several commenters 

recommended that HHS set a specific 

timeliness standard regarding the 

electronic transmission of the 

application along with all relevant 

information collected from either the 

application or available electronic data 

sources from the Exchange to the state 

Medicaid or CHIP agency to ensure that 

eligibility determinations are provided 

without undue delay. Some commenters 

requested that HHS specify that an 

Exchange must complete an eligibility 

determination in no more than 30 days 

(with up to 60 days for evaluations 

based on factors other than MAGI under 

§ 155.345(b)) and complete the transfer 

of an individual’s electronic file, where 

required, within one business day; some 

commenters also urged greater 

alignment between Exchange and 

Medicaid timeliness and other 

performance standards. 

Response: In § 155.302(b)(3) and 

(b)(4)(ii)(A), we specify that information 

will be transferred promptly, and 

without undue delay. Further, in 

§ 155.310(e)(1), we specify that the 

Exchange will make an eligibility 

determination promptly, and without 

undue delay. We believe that this is an 

appropriate approach to initial 

timeliness standards, given the fact that 

this is an entirely new program, and we 

intend to work closely with states to 

monitor and improve the timeliness of 

all aspects of the eligibility and 

enrollment process. Further, we note 

that we agree with the commenter’s 

suggestion regarding the alignment of 

performance standards, and intend to 

issue future guidance on this topic. 

Comment: Several commenters 

suggested that HHS modify 

§ 155.302(b)(6) related to the standards 

for agreements entered into between the 

Exchange and state Medicaid and CHIP 

agencies to provide greater specificity 

regarding eligibility determinations, 

transfer procedures, notice and appeals 

processes, and consumer assistance. 

Additionally, these commenters asked 

that the agreements be made readily 

available to the public in addition to 

HHS, while also providing a period for 

public review and comments on the 

agreements prior to their approval by 

HHS. 

Response: We finalize § 155.302(b)(6) 

from the interim final rule with a 

clarification that, like the agreements 

specified in § 155.345(a), the agreement 

under § 155.302(b)(6) will be made 

available to HHS upon request. To the 

extent that the Secretary requests and 

obtains a copy of an agreement under 

§ 155.302(b)(6), the public can request 

the agreement through the Freedom of 

Information Act, 5 U.S.C. 552. The 

public may also obtain copies of these 

agreements under applicable state 

freedom of information laws. We believe 

that there are ample opportunities for 

public input for Exchange operations, 

particularly given that the standards 

that will govern the content of these 

agreements are specified in this 

regulation. We also note again that 

§ 155.302(b) does not supersede other 

provisions, such as those in § 155.345, 

that set additional standards for 

Exchanges in coordinating with 

Medicaid and CHIP agencies. 

Comment: One commenter wanted to 

ensure that HHS would review and 

approve all state Medicaid verification 

plans. 

Response: This comment is outside of 

the scope of this regulation. We note, 

however, that as described in 42 CFR 

435.945(j), state Medicaid verification 

plans must be available to the Secretary 

of HHS upon request, thereby enabling 

appropriate oversight of verification 

standards. 

Comment: One commenter sought 

clarification as to whether an Exchange 

could choose to perform neither an 

assessment nor a determination for 

Medicaid and CHIP. 

Response: We clarify that the 

Exchange must make either 

determinations or assessments for 

Medicaid and CHIP based on MAGI for 

applications that include a request for 

an eligibility determination for 

insurance affordability programs. 

However, we note that the Exchange is 

permitted to contract with an eligible 

contracting entity, including the state 

Medicaid agency, to conduct eligibility 

determinations for Medicaid and CHIP, 

consistent with § 155.302(a). 

Comment: Several commenters 

recommended that an applicant who 

appears to be eligible for Medicaid 

based on factors other than MAGI be 

flagged by the Exchange early in the 

process, and if the Exchange does not 

assess such an applicant as potentially 

eligible for Medicaid or CHIP based on 

MAGI, the applicant should not have to 

request a full eligibility determination 

from the state agency under 

§ 155.302(b)(4)(i)(B) to receive an 

eligibility determination for Medicaid 

based on factors other than MAGI. 

Response: As noted above, 

§ 155.302(b) does not supersede 

§ 155.345(b), which specifies that the 

Exchange will assess information 

provided on an application by an 

applicant who is not eligible for 

Medicaid based on MAGI to determine 

whether he or she is potentially eligible 

for Medicaid based on factors other than 

MAGI. We clarify that this provision 

applies in an Exchange that is 

implementing the option under 

§ 155.302(b), such that if the Exchange 

does not assess an applicant as 

potentially eligible for Medicaid based 

on MAGI, it will then examine the 

application to determine whether to 

transfer the applicant to the state 

Medicaid agency for consideration of 

Medicaid eligibility based on other 

factors. 

Comment: Commenters recommended 

that the provision at 

§ 155.302(b)(4)(i)(A), allowing an 

individual the opportunity to withdraw 

his or her Medicaid and CHIP 

application, be eliminated or modified 

to allow only individuals above a 

certain income threshold to withdraw 

their Medicaid and CHIP applications. 

Others commenters were concerned that 

language notifying an individual of his 

or her opportunity to withdraw would 

be confusing and lead to individuals 

being dissuaded from pursuing a 

Medicaid or CHIP eligibility 

determination. 

Response: When an applicant requests 

an eligibility determination for 

insurance affordability programs, the 

single, streamlined application is an 

application for Medicaid and CHIP (as 

well as for eligibility for enrollment in 

a QHP through the Exchange, and 

related insurance affordability 

programs), so it needs to end in either 

a final determination of eligibility for 

Medicaid or CHIP (approval or denial), 

or a withdrawal of the application as it 

relates to Medicaid and CHIP. When a 

state Medicaid or CHIP agency elects to 

have the Exchange make assessments of 

Medicaid or CHIP eligibility, rather than 

determinations, the Exchange is unable 

to provide a final determination of 

Medicaid or CHIP eligibility, including 

a denial of Medicaid or CHIP eligibility. 

Accordingly, withdrawal allows the 

assessment model to function such that 

an applicant does not require a formal, 

final denial of Medicaid and CHIP from 

the state Medicaid or CHIP agency to 

gain eligibility for advance payments of 

the premium tax credit and cost-sharing 

reductions, if otherwise eligible. This 

approach provides significant 

efficiencies for consumers by not 

requiring multiple eligibility 

determinations, as well as for Exchanges 

and Medicaid and CHIP agencies. Given 

that the proposed approach preserves 

the application date for purposes of 


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Medicaid and CHIP in the event of an 

appeal, we note that the only 

implication of withdrawing an 

application in this context is that the 

applicant can no longer request a 

determination from the state Medicaid 

or CHIP agency based on the withdrawn 

application, and would instead need to 

submit another application to be 

considered for those programs (other 

than on appeal). 

We acknowledge commenters’ 

concerns regarding the potential for 

confusion when an applicant is given 

the opportunity to withdraw his or her 

Medicaid and CHIP application. To 

reduce the potential for consumer 

confusion and administrative burden on 

the consumer and the Exchange 

associated with this requirement, we 

offer the following option in 

implementing this provision. Upon 

notifying an applicant that the Exchange 

has assessed him or her as not 

potentially eligible for Medicaid or 

CHIP, the Exchange will provide an 

opportunity for the applicant to request 

a determination of Medicaid or CHIP 

eligibility from the state Medicaid or 

CHIP agency. Rather than expressly 

asking the applicant if he or she wants 

to withdraw the application for 

purposes of Medicaid or CHIP eligibility 

(instead of requesting a determination 

from the state agencies), the Exchange 

may consider the application 

withdrawn for purposes of Medicaid 

and CHIP eligibility if the applicant 

does not affirmatively request a 

determination from the state Medicaid 

or CHIP agency within a time period 

specified in the notice to the applicant, 

provided that the notice that 

communicates the opportunity to 

request a determination from the state 

Medicaid or CHIP agency and the time 

limit for doing so also specifies that the 

Exchange will take this approach to 

withdrawal. This will allow an 

appropriate disposition for each 

application, as it relates to Medicaid 

and CHIP, and will help alleviate any 

confusion associated with the 

opportunity to expressly withdraw an 

application, without creating any 

adverse impacts for consumers. 

Comment: A few commenters 

requested language that explicitly 

preserves the date of application when 

an applicant withdraws his or her 

Medicaid or CHIP application. 

Response: Provisions related to 

preserving the date of the Medicaid or 

CHIP application are contained in this 

final rule at 42 CFR 435.907(h). 

Comment: Commenters supported the 

inclusion of language that requires the 

application to not be considered 

withdrawn if, upon appeal, the 

applicant is found potentially eligible 

for Medicaid or CHIP. A few 

commenters requested that any 

subsequent review finding potential 

eligibility for Medicaid or CHIP be 

sufficient to nullify the withdrawal. 

Response: We are finalizing proposed 

language requiring the application to 

not be considered withdrawn if, upon 

appeal, the applicant is found 

potentially eligible for Medicaid or 

CHIP. The additional suggestions to 

amend this provision would expand the 

scope of the provision beyond its 

intended scope. Further, it would be 

impossible to administer the 

commenters’ suggestion to nullify a 

withdrawal when any future review 

finds potential eligibility for Medicaid 

or CHIP eligibility, beyond the 

parameters established in this rule, 

since subsequent eligibility 

determinations and redeterminations 

will not necessarily be connected to the 

withdrawn application. 

Comment: Commenters supported the 

additional proposed language in 

§ 155.302(b)(5) requiring the Exchange 

to adhere to State Medicaid or CHIP 

agency appeals decisions. 

Response: We are finalizing the 

proposed language with a modification 

such that the Exchange appeals entity, 

in addition to the Exchange, will adhere 

to the eligibility determination or 

appeals decision for Medicaid or CHIP 

made by the Medicaid or CHIP agency, 

or the appeals entity for such agency. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.302(a) with one 

clarification that any contracting 

arrangement for eligibility 

determinations for Medicaid and CHIP 

is subject to the standards in 

§ 431.10(c)(2). We are finalizing the 

provision proposed in § 155.302(b)(5) 

with a slight technical modification to 

add ‘‘Exchange appeals entity.’’ We are 

finalizing § 155.302(b)(6) of the interim 

final rule issued at 77 FR 18310, 18451– 

52 with a modification to specify that 

the agreement under § 155.302(b)(6) 

must be made available to HHS upon 

request. We are finalizing the provisions 

proposed in paragraph (d) of the 

proposed rule without modification. We 

are otherwise finalizing the other 

provisions of the interim final rule with 

the exception of § 155.302(c), which we 

are not finalizing at this time. We are 

leaving the text of § 155.302(c) as an 

interim final rule as published at 77 FR 

18310, 18451–52. 

8. Eligibility Standards (§ 155.305) 

In § 155.305, we proposed to add 

paragraph (a)(3)(v) regarding residency 

standards for eligibility for enrollment 

in a QHP when an individual attests to 

being temporarily absent from the 

service area of the Exchange but intends 

to return to the service area of the 

Exchange and otherwise meets the 

residency standards, unless another 

Exchange verifies that the individual 

meets the residency standard in that 

Exchange. We also proposed technical 

corrections within paragraph (f) to 

replace the references to section 36B of 

the Code to the application Treasury 

regulations. 

We proposed to amend paragraph 

(f)(3) to clarify the availability of 

advance payments of the premium tax 

credit and cost-sharing reductions to 

applicants enrolled in a QHP, that is not 

a catastrophic plan, through the 

Exchange. We did not receive specific 

comments on this amendment, and we 

are thus finalizing the provision as 

proposed. 

We also proposed to add paragraph 

(h) to codify the eligibility standards for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan, which 

are based on age or having in effect a 

certificate of exemption from the shared 

responsibility payment under section 

5000A of the Code in specific categories. 

We proposed that all Exchanges must 

conduct eligibility determinations for a 

QHP that is a catastrophic plan within 

the Exchange. 

Comment: Commenters generally 

offered support for the provision at 

§ 155.305(a)(3)(v) specifying that the 

Exchange not deny or terminate an 

individual’s eligibility for enrollment in 

a QHP through the Exchange if he or she 

meets the residency standards described 

in paragraph (a)(3) but for a temporary 

absence from the service area of the 

Exchange. A few commenters 

recommended deleting the phrase that 

allowed the Exchange to deny or 

terminate eligibility if another Exchange 

verifies that the individual meets the 

residency standard of such Exchange; 

others suggested rephrasing the 

provision to allow an individual to 

maintain residency in the Exchange 

service area unless he or she is enrolled 

in another Exchange. Commenters 

recommending revisions disagreed with 

how this language would limit an 

applicant’s ability to establish 

residency, under the rules described in 

§ 155.305(a)(3), in more than one 

Exchange. 

Response: We are finalizing the 

provision without the proposed clause 

‘‘unless another Exchange verifies that 

the individual meets the residency 

standard of such Exchange.’’ As 

commenters pointed out, under some 

circumstances, certain individuals may 


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establish residency for purposes of 

Exchange enrollment in multiple 

Exchange service areas simultaneously 

(for example, under 

§ 155.305(a)(3)(iv)(B), if a parent expects 

to claim a child who lives in another 

state on the parent’s tax return, the child 

may enroll in a QHP through the 

Exchange either in the child’s state of 

residence, or the parent’s state of 

residence). Accordingly, while 

generally, applicants will establish 

residency in the Exchange service area 

in which they intend to reside, since 

there are exceptions to this general 

principle, this clause limiting residency 

to one Exchange service area is 

unnecessary. 

Comment: In response to the 

provision proposed at § 155.305(a)(3)(v), 

some commenters expressed concern 

about operational challenges specific to 

providing and coordinating coverage 

while individuals are temporarily 

residing outside the Exchange service 

area. A few commenters asked that we 

further define the term ‘‘temporary’’ to 

ensure that the term is used consistently 

across Exchanges, and to help reduce 

consumer confusion and administrative 

inefficiencies. 

Response: We acknowledge that 

coordinating care for applicants while 

they are temporarily absent from the 

service area of the Exchange through 

which they enroll in a QHP may present 

challenges for QHP issuers. However, 

we believe this challenge is outweighed 

by the importance of maintaining 

continuity of coverage while an 

individual is temporarily absent from a 

particular Exchange service area. 

Additionally, in paragraph (a)(3)(v), we 

specify that ‘‘temporarily absent’’ means 

the applicant must intend to return to 

the Exchange service area when the 

purpose of the absence has been 

accomplished, so we do not believe that 

further definition is required in 

regulation. To ensure that applicants 

understand the implications of applying 

for coverage through a particular 

Exchange, we encourage Exchanges to 

notify applicants that they may want to 

apply for coverage through the 

Exchange where they meet the 

residency requirements and wish to 

most frequently access benefits. 

Furthermore, this provision should 

not be construed to impose any 

additional requirements on QHP issuers 

related to maintaining networks outside 

the Exchange service area or 

coordinating care for applicants 

temporarily absent from the Exchange 

service area. 

Comment: Commenters were divided 

regarding the Exchange’s role in 

determining eligibility for catastrophic 

plans inside and outside the Exchange, 

as some expressed support for what they 

interpreted as HHS limiting enrollment 

for catastrophic coverage to enrollment 

through the Exchange in QHPs that are 

catastrophic plans and urged flexibility 

for an Exchange to decide not to 

conduct eligibility determinations for 

catastrophic plans, while other 

commenters requested that the 

Exchange conduct eligibility 

determinations for QHPs that are 

catastrophic plans for enrollment both 

through and not through the Exchange. 

Commenters also urged HHS to clarify 

that an applicant still must be 

determined eligible for a QHP to enroll 

in a catastrophic plan through the 

Exchange. Commenters wanted to 

ensure that the Exchange would provide 

clear information to applicants 

considering purchasing different QHPs, 

including by describing the significance 

of enrolling in a catastrophic plan for 

applicants who are also determined 

eligible for advance payments of the 

premium tax credit. 

Response: We note that paragraph (h) 

only concerns eligibility for enrollment 

through the Exchange in a QHP that is 

a catastrophic plan. The Exchange will 

not be conducting eligibility 

determinations for enrollment outside 

the Exchange, including in a 

catastrophic plan. In finalizing this 

provision, we are modifying the 

provision from its proposed form to 

clarify that an individual must be 

determined eligible for enrollment in a 

QHP through the Exchange in 

accordance with § 155.305(a) in 

addition to meeting the specific 

eligibility standards for enrollment in a 

catastrophic QHP through the Exchange. 

We believe that maintaining the 

provision specifying that the Exchange 

will determine eligibility for a QHP that 

is a catastrophic plan through the 

Exchange preserves flexibility for young 

adults and people for whom coverage 

would otherwise be unaffordable to 

have access to health coverage, and thus 

confirm that Exchanges will conduct 

determinations of eligibility for 

enrollment in a QHP that is a 

catastrophic plan through the Exchange. 

We expect that Exchanges will fully 

inform qualified individuals regarding 

the implications of enrolling in a QHP 

that is a catastrophic plan through the 

Exchange as they consider various 

health coverage options, particularly as 

it affects their eligibility for insurance 

affordability programs. 

Comment: Some commenters wanted 

us to clarify that Exchanges would grant 

certificates of exemption to all 

applicants eligible for enrollment in a 

catastrophic plan, which applicants 

could use to enroll in catastrophic plans 

outside the Exchange (at least 

temporarily), and suggested that issuers 

of catastrophic plans outside the 

Exchange should be permitted to rely 

solely on an attestation by the applicant 

that he or she is eligible to enroll in a 

catastrophic plan. 

Response: This provision does not 

concern catastrophic plans offered 

outside of the Exchange. As discussed 

in the Market Reforms final rule at 78 

FR 13423, the statutory provisions 

related to eligibility for catastrophic 

plans apply to such coverage offered 

both inside and outside an Exchange. 

We maintain that approach and clarify 

that nothing in this proposal modifies 

the Market Reforms final rule related to 

the eligibility standards for a 

catastrophic plan. Similarly, the 

eligibility standards for catastrophic 

plans generally are specified at 

§ 156.155(a)(5), which provides that a 

catastrophic plan can only cover an 

individual who has either not attained 

the age of 30 prior to the first day of the 

plan or policy year, or has received a 

certificate of exemption in specified 

categories. While we specify that the 

Exchange will only conduct 

determinations of eligibility for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan, in HHS’ 

Exemptions and Miscellaneous 

Minimum Essential Coverage proposed 

rule, at 78 FR 7368, we propose that the 

Exchange will determine eligibility for 

exemptions from the shared 

responsibility payment, and will 

provide a notice and an exemption 

certificate number to any individual 

determined eligible for such an 

exemption. If that provision is finalized 

as proposed, an issuer of a catastrophic 

plan offered outside the Exchange could 

request a copy of this notice from an 

applicant to validate his or her 

eligibility for enrollment in the 

catastrophic plan. 

Comment: Some commenters 

requested that the Exchange’s eligibility 

standards for enrollment through the 

Exchange in a QHP that is a catastrophic 

plan align with preamble language in 

the Market Reforms proposed rule at 77 

FR 70601 such that an enrollee who 

turns 30 in the middle of a coverage 

year would remain enrolled in the 

catastrophic plan for the duration of the 

plan year. One commenter also sought 

clarification that for coverage obtained 

through the Exchange, the first day of 

the plan year will always be the first of 

the year. 

Response: The eligibility standards 

related to age described in this 

provision follow the approach discussed 

within the Market Reforms proposed 


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rule at 77 FR 70601. As such, we clarify 

that an enrollee turning 30 in the 

middle of a coverage year could remain 

enrolled in a QHP that is a catastrophic 

plan through the Exchange for that 

particular coverage year as long as he or 

she was not 30 prior to beginning of the 

plan year. We note that 

§ 147.104(b)(1)(ii) clarifies that in the 

individual market, the coverage 

effective dates must align with § 155.410 

regarding initial open enrollment, and 

as such, for coverage obtained in the 

individual market through the 

Exchange, the first day of the plan year 

will always be the first day of the 

calendar year. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.305 of the proposed 

rule with two slight modifications: to 

remove the clause ‘‘unless another 

Exchange verifies that the individual 

meets the residency standard of such 

Exchange’’ in paragraph (a)(3)(v), and to 

revise paragraph (h)(1) to clarify an 

applicant must be eligible for 

enrollment in a QHP through the 

Exchange to be determined eligible for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan. 

9. Eligibility Process (§ 155.310) 

In § 155.310, we proposed to add 

paragraph (i) regarding a certification 

program under the Secretary’s program 

for determining eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions in accordance 

with section 1411(a) of the Affordable 

Care Act. We noted that this 

certification program would be distinct 

from the notice to employers required 

by section 1411(e)(4)(B)(iii) of the 

Affordable Care Act and paragraph (h) 

of § 155.310. We proposed that the 

certification to the employer would 

consist of methods adopted by the 

Secretary of Treasury as part of the 

determination of potential employer 

liability under section 4980H of the 

Code. We clarified that the certification 

program would address not only 

individuals on whose behalf advance 

payments of the premium tax credit and 

cost-sharing reductions are provided, 

but also individuals claiming the 

premium tax credit only on their tax 

returns. We solicited comments on this 

proposal. 

We proposed to amend previous 

language from paragraphs (i) and (i)(1), 

and combine those paragraphs in new 

paragraph (j), to align with proposed 

revisions in § 155.335, which specified 

that the Exchange will redetermine 

eligibility on an annual basis for all 

qualified individuals, not only 

enrollees. We proposed to remove the 

previous paragraph (i)(2), which 

addressed situations in which a 

qualified individual did not select a 

plan before the date on which his or her 

eligibility would have been 

redetermined as a part of the annual 

redetermination process. Due to the 

proposed change to § 155.335(a), this 

paragraph would no longer be 

necessary. We received the following 

comments concerning the proposed 

provisions: 

Comment: One commenter expressed 

support for the proposal to implement a 

certification process consisting of 

methods adopted by the Secretary of 

Treasury as part of the determination of 

potential employer liability under 

section 4980H of the Code, as described 

in proposed § 155.310(i). In addition, 

several commenters expressed concern 

over the disclosure of applicant 

information to the employer for use in 

the certification process. Commenters 

were concerned that disclosing names 

in this context could have a chilling 

effect on employees who wish to seek 

Exchange coverage, making it less likely 

that individuals would enroll. 

Response: For purposes of the 

certification program proposed and 

finalized in § 155.310(i), we believe that 

only the minimum personally 

identifiable information necessary 

should be released to an employer. 

Additional information regarding the 

certification program is found in the 

regulations associated with § 4980H of 

the Code. 

Comment: Commenters recommended 

removing the provision specifying that 

the Exchange will have an applicant 

attest to the accuracy of the information 

on file for him or her when he or she 

was previously determined eligible for 

enrollment in a QHP through the 

Exchange, did not select a QHP during 

his or her enrollment period, or was 

ineligible for an enrollment period, and 

then seeks a new enrollment period 

prior to his or her annual 

redetermination. Commenters 

characterized this as an undue burden 

on qualified individuals, since enrollees 

are not required to make the same 

attestation about their eligibility criteria 

remaining constant. 

Response: This provision was largely 

carried over from the Exchange final 

rule, with modifications to address 

changes proposed in § 155.335. It is 

important for the Exchanges to ensure 

all eligibility criteria are satisfied with 

accurate information, before 

determining eligibility for benefits, 

some of which the enrollee could be 

liable to repay if eligibility information 

is not accurate at the time of enrollment. 

Moreover, enrollees are required to 

report changes that may affect their 

eligibility based on the standards in 

§ 155.305 throughout the year, and thus 

no additional burden is being placed on 

qualified individuals. Lastly, one 

alternative to this proposal would be to 

require qualified individuals who do 

not enroll in coverage when initially 

determined eligible to file a new 

application, which would be more 

burdensome than the approach in 

§ 155.310(j). Accordingly, we are 

finalizing § 155.310(j) as proposed, with 

a slight technical correction for clarity 

to note that this paragraph only refers to 

an applicant who is determined eligible 

for enrollment in a QHP through the 

Exchange. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.310 of the proposed 

rule with a technical correction to 

specify that paragraph (j) only refers to 

an applicant who is determined eligible 

for enrollment in a QHP through the 

Exchange . 

10. Verification Process Related to 

Eligibility for Enrollment in a QHP 

Through the Exchange (§ 155.315) 

In § 155.315, we proposed a technical 

correction in paragraph (b)(2) to clarify 

the procedures for an Exchange when 

the Social Security Administration 

indicates an individual is deceased. 

We proposed to clarify the 

circumstances that trigger the 

inconsistency process described in 

paragraph (f)(1) and (2), such as when 

required electronic data is not contained 

within the electronic data source, and 

when sources of required data are not 

reasonably expected to be available 

within two days of the initial attempt to 

reach the data source. We also proposed 

to amend paragraph (f)(4) to clarify that 

during the clerical error resolution 

period provided in paragraph (f)(1), as 

well as during the period provided in 

paragraph (f)(2)(ii), the Exchange 

proceeds with the eligibility 

determination and provides eligibility 

for enrollment in a QHP and advance 

payments of the premium tax credit and 

cost-sharing reductions, as applicable, 

during such period, to the extent the 

applicant is otherwise qualified and 

meets the standards specified in 

paragraph (f)(4). 

We proposed to add paragraph (j) 

concerning the verification process 

related to eligibility for enrollment 

through the Exchange in a QHP that is 

a catastrophic plan. We proposed that 

the Exchange may either accept the 

applicant’s attestation of age without 

further verification or examine available 


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electronic data sources that have been 

approved by HHS for this purpose. To 

verify an applicant’s exemption from 

the shared responsibility payment, we 

proposed that this would be 

accomplished either through use of the 

Exchange’s records, or through 

verification of paper documentation if 

the certificate was issued by a different 

Exchange. In terms of the inconsistency 

process described in paragraph (f) of 

this section, we noted that applicant 

would not be determined eligible for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan until 

verification of necessary information 

can be completed. We received 

comments that addressed both the 

eligibility standards and verification 

process related to QHPs that are 

catastrophic plans offered through the 

Exchange, and have addressed those 

comments above the preamble to 

§ 155.305(h). As such, we are finalizing 

this paragraph as proposed. 

Comment: Several commenters 

supported our proposed technical 

correction in paragraph (b)(2) regarding 

situations in which the Social Security 

Administration indicates that an 

individual is deceased. Others 

recommended allowing additional time, 

and many commenters suggested 

providing an additional 90 days when 

an applicant has demonstrated a good 

faith effort to resolve the issue. Some 

commenters sought clarification on the 

availability of appeal rights regarding 

inconsistencies with Social Security 

Administration data, specifically, 

whether individuals had the right to 

appeal during the 90-day period or 

whether they must wait until after a 

final determination has been made. 

Response: As noted in § 155.315(f)(3), 

the Exchange has the authority to 

extend the inconsistency period within 

§ 155.315(f)(2)(ii) based on a good faith 

effort on the part of the applicant. We 

note that an applicant will not be able 

to appeal an eligibility decision until he 

or she receives a notice containing an 

approval or denial of eligibility. Further 

details regarding appeals will be 

provided in subsequent rulemaking. We 

continue to work with the Social 

Security Administration and other 

federal agencies to determine the role of 

other federal agencies in the appeals 

process. Accordingly, we are finalizing 

the provision as proposed. 

Comment: Some commenters 

disagreed with the proposal at 

§ 155.315(f) that specifies that the 

Exchange must trigger the inconsistency 

period when electronic data is required 

but it is not reasonably expected that 

data sources will be available within 2 

days of the initial request to the data 

source. Commenters recommended that 

if verification cannot occur promptly, or 

in ‘‘real time,’’ the inconsistency period 

should be triggered immediately, along 

with the provision of eligibility based 

on an applicant’s attestation. Some 

commenters mentioned specifically that 

an inability to verify citizenship and 

immigration status through electronic 

data should lead to the immediate 

trigger of the inconsistency period, to 

align with Medicaid regulations. 

Commenters supported timelines 

according to which the Exchange should 

be required to contact the application 

filer for documentation or additional 

information when data sources are 

unavailable. Some commenters 

supported the requirement of a 2-day 

period prior to requesting information 

from the application filer, and some 

recommended extending it to 5 days. 

Commenters also recommended that the 

Exchange continue to attempt data 

matches after notifying the application 

filer so the entire burden is not 

immediately shifted to the application 

filer. 

Response: Since the publication of the 

proposed rule, we have confirmed that 

data from IRS, SSA, and DHS should be 

available every day. Accordingly, we are 

modifying the proposed provision to 

finalize the rule to reduce the waiting 

period reduced from 2 days to 1 day. 

Further, we also add new paragraph 

(f)(6) to clarify the applicability of 

§ 155.315(f). 

First, in paragraph (f)(6), we specify 

that that the Exchange will not apply 

such a waiting period when electronic 

data to support the verifications 

specified in § 155.315(d) (residency), or 

§ 155.320(b) (minimum essential 

coverage, other than minimum essential 

coverage in an eligible employersponsored plan) is required but it is not 

reasonably expected that electronic data 

sources will be available within 1 day 

of the initial request to the data source; 

instead, the Exchange will accept the 

applicant’s attestation regarding the 

factor of eligibility for which the 

unavailable data source is relevant. 

While the data matching described in 

this subpart for these factors of 

eligibility is important, we do not 

believe that it should hold up an 

eligibility determination or cause the 

eligibility process to default to paper 

documentation when electronic data 

sources are unavailable. We also note 

that the use of electronic data as a 

primary method of verification of 

residency is an option for Exchanges. In 

addition, we clarify that 

§ 155.320(d)(3)(iii) specifies that when 

the Exchange does not have information 

from data sources for the verifications 

related to enrollment in an eligible 

employer-sponsored plan and eligibility 

for qualifying coverage in an eligible 

employer-sponsored plan, the Exchange 

will move forward with a sampling 

process. 

Second, we clarify that § 155.320(c)(3) 

(family size and income for purposes of 

eligibility for advance payments of the 

premium tax credit and cost-sharing 

reductions) already specifies procedures 

to address situations in which electronic 

data sources with information about 

current, MAGI-based income are 

unavailable. We believe that these 

procedures should continue to govern 

these situations. 

We acknowledge commenters’ 

concerns about providing eligibility 

determinations in a timely fashion when 

electronic data sources are delayed in 

responding or do not respond. The 

proposed language at § 155.315(f) 

minimizes the administrative and 

consumer burden associated with 

requesting documentation and 

providing coverage for a short period of 

time (when electronic data sources may 

quickly become available and indicate 

eligibility for a different insurance 

affordability program), with the need to 

provide prompt eligibility 

determinations. Accordingly, when 

electronic data from IRS, SSA, or DHS 

is necessary but unavailable, and it is 

reasonably expected that the necessary 

electronic data source will be available 

within 1 day, the Exchange will wait 1 

day before making an eligibility 

determination, so as to not generate an 

eligibility determination that may be 

shown to be invalid less than 24 hours 

later. This approach also avoids the 

need to request documentation when an 

electronic data match will make the 

documentation request unnecessary less 

than 24 hours later. If it is not 

reasonably expected that the necessary 

electronic data source will be available 

within 1 day, or it is reasonably 

expected that the necessary electronic 

data source will be available within 1 

day, but this expectation proves 

incorrect, then the Exchange will 

determine the applicant’s eligibility 

using his or her attestation regarding the 

factor of eligibility for which the 

electronic data source is unavailable, 

and will follow the remaining 

procedures in § 155.315(f) to attempt to 

complete the verification. We believe 

this approach is responsive to 

commenters’ concerns and satisfies the 

need to reduce administrative burden 

and the burden on application filers 

while still ensuring accurate eligibility 

determinations. We also note that the 

Exchange has the flexibility to continue 

checking whether such data sources 


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have become available leading up to the 

triggering of the inconsistency period 

and during such inconsistency period. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.315 of the proposed 

rule, with a few modifications. We are 

modifying paragraph (f) to provide that 

if key electronic data sources are 

unavailable and not reasonably 

expected to be available within 1 day, 

the Exchange will make an eligibility 

determination based on an applicant’s 

attestation and trigger the inconsistency 

period in paragraph (f). The proposed 

language specified a 2-day period. We 

also added a new paragraph (f)(6) to 

clarify that the Exchange will accept an 

applicant’s attestation regarding three 

specific factors of eligibility when 

electronic data is required but it is not 

reasonably expected that data sources 

will be available within 1 day of the 

initial request to the data source. We are 

also modifying paragraph(f)(5) of this 

section by deleting paragraph (f)(5)(ii) 

and combining paragraph (f)(5)(i) with 

paragraph (f)(5), because the language 

that previously appeared in paragraph 

(f)(5)(ii) regarding effective dates 

conflicted with the requirements under 

§ 155.330(f). Lastly, we modify the 

language in paragraph (j) related to the 

verification of eligibility for enrollment 

through the Exchange in a QHP that is 

a catastrophic plan for purposes of 

clarity. 

11. Verifications Related to Eligibility 

for Insurance Affordability Programs 

(§ 155.320) 

In § 155.320, we proposed to amend 

and make technical corrections in 

paragraph (c)(1), in accordance with the 

legislative change made by Public Law 

112–56 concerning the treatment of 

Social Security benefits related to 

MAGI, to incorporate Social Security 

benefits when verifying projected 

annual household income. We also 

proposed to remove language 

concerning an adoption taxpayer 

identification number, and to replace 

references to section 36B of the Code 

with the applicable Treasury regulation. 

We received comments supporting these 

revisions without further suggestions, 

and are thus finalizing the amendments 

and technical corrections as proposed. 

We proposed to amend and make 

technical corrections in paragraph (c)(3) 

to specify that the Exchange verify that 

neither advance payments of the 

premium tax credit nor cost-sharing 

reductions are already provided on 

behalf of an individual, and align with 

the revised policy that the Exchange 

incorporate Social Security benefits 

when verifying projected annual 

household income. We did not receive 

specific comments regarding the 

proposed changes to paragraph (c)(3), 

and are thus finalizing the changes as 

proposed. 

We proposed to clarify when 

additional verification is necessary as 

part of the process to verify an expected 

increase in projected annual household 

income when compared to annual 

income data. We proposed to add 

language regarding the circumstances 

under which annualized current income 

data will be sufficient to support an 

expected decrease in projected annual 

household income. We also proposed to 

replace references to section 36B of the 

Code with references to the applicable 

Treasury regulation. 

We proposed to consolidate 

paragraphs (d) and (e), currently entitled 

‘‘Verification related to enrollment in an 

eligible employer-sponsored plan’’ and 

‘‘Verification related to eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan,’’ respectively, 

into new paragraph (d). The standards 

proposed in paragraph (d) set forth the 

rules for verifying enrollment in an 

eligible employer-sponsored plan and 

eligibility for qualifying coverage in an 

eligible employer-sponsored plan. We 

proposed that the Exchange must verify 

whether an applicant reasonably 

expects to be enrolled in an eligible 

employer-sponsored plan or is eligible 

for qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested. As 

a result of the proposed consolidation of 

paragraphs (d) and (e), we proposed to 

redesignate paragraph (f) as paragraph 

(e). 

In paragraph (d)(2), we proposed the 

data sources the Exchange will use to 

verify access to employer-sponsored 

coverage, which include (1) Data about 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan from any 

electronic data sources that are available 

to the Exchange and which have been 

approved by HHS for this purpose based 

on evidence showing that such data 

sources are sufficiently current, 

accurate, and minimize administrative 

burden; (2) data regarding enrollment in 

an eligible employer-sponsored plan or 

eligibility for qualifying coverage in an 

eligible employer-sponsored plan based 

on federal employment obtained by 

transmitting identifying information 

specified by HHS to HHS; (3) data from 

the SHOP that operates in the state in 

which the Exchange is operating; and 

(4) any available data regarding the 

employment of an applicant and the 

members of his or her household, as 

defined in 26 CFR 1.36B–1(d), from any 

electronic data sources that are available 

to the Exchange and have been 

approved by HHS for this purpose, 

based on evidence showing that such 

data sources are sufficiently current, 

accurate, and minimize administrative 

burden. 

We proposed that data regarding 

employment would not be used to 

identify inconsistencies that need to be 

resolved to maintain eligibility, and 

would instead only be used to 

determine whether an individual should 

be part of the pool of individuals from 

which a sample is taken for review. We 

solicited comment on whether data 

regarding employment should only be 

used as a point of information for 

applicants to help prompt accurate 

attestations, and not as a point of 

comparison for the purposes of 

identifying inconsistencies as part of the 

verification described in this paragraph, 

since these data sources do not directly 

address enrollment in an eligible 

employer-sponsored plan or eligibility 

for qualifying coverage in an eligible 

employer-sponsored plan. We also 

solicited comment on the feasibility of 

making the necessary systems 

connections by October 1, 2013, and 

whether alternative approaches should 

be considered for the first year of 

operations. 

To verify enrollment in an eligible 

employer-sponsored plan and eligibility 

for qualifying coverage in an eligible 

employer-sponsored plan, we proposed 

that the Exchange follow the 

inconsistency process specified in 

§ 155.315(f) if an applicant’s attestation 

is not reasonably compatible with 

information from a data source 

authorized by HHS, data regarding 

federal employment, data from SHOP, 

or other information provided by the 

application filer or in the records of the 

Exchange. Further, if the Exchange does 

not have any of the information from a 

data source authorized by HHS, from 

data regarding federal employment, or 

from data from the SHOP for an 

applicant, and either does not have any 

available electronic data regarding the 

employment of an applicant and the 

members of his or her household or an 

applicant’s attestation is not reasonably 

compatible with any available data 

regarding the employment of an 

applicant and the members of his or her 

household, we proposed that the 

Exchange would place the applicant 

into a pool of applicants from which it 

would select a statistically-significant 

sample of applicants, from whose 

employers the Exchange would request 

information regarding enrollment in an 


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eligible employer-sponsored plan and 

eligibility for qualifying coverage in an 

eligible employer-sponsored plan. 

We solicited comments on whether 

handling inconsistencies with any 

available data regarding the 

employment of an applicant and the 

members of his or her household 

through the sampling process, rather 

than through the procedures specified 

in § 155.315(f), is a suitable approach. 

We requested comments on a 

methodology by which an Exchange 

could generate a statistically significant 

sample of applicants and whether there 

are ways to focus the sample on 

individuals who are most likely to have 

access to affordable, minimum value 

coverage. 

In clause (d)(3)(iii)(A), we proposed 

that the Exchange would provide notice 

to an applicant who is selected as part 

of the sample indicating that the 

Exchange would be contacting any 

employer identified on the application 

for the applicant and the members of his 

or her household, as defined in 26 CFR 

1.36B–1(d), to verify whether the 

applicant is enrolled in an eligible 

employer-sponsored plan or is eligible 

for qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested. 

We sought comment on ways the 

Exchange may communicate this 

sampling process to consumers with the 

intention of minimizing confusion. 

We proposed that the Exchange 

would proceed with all other elements 

of the eligibility determination using the 

applicant’s attestation while the samplebased review is occurring, and provide 

eligibility for enrollment in a QHP 

through the Exchange to the extent that 

an applicant is otherwise qualified. 

Consistent with § 155.315(f), we 

proposed that during the sample-based 

review, the Exchange would ensure that 

advance payments of the premium tax 

credit and cost-sharing reductions are 

provided on behalf of an applicant who 

is otherwise qualified for such payments 

and reductions, as described in under 

§ 155.305 of this subpart, if the tax filer 

attests to the Exchange that he or she 

understands that any advance payments 

of the premium tax credit paid on his or 

her behalf are subject to reconciliation. 

When an applicant is selected for the 

sample-based review, we proposed in 

clause (d)(3)(iii)(D) that the Exchange 

make reasonable attempts to contact any 

employer identified on the application 

for the applicant and the members of his 

or her household, as defined in 26 CFR 

1.36B–1(d), to verify whether the 

applicant is enrolled in an eligible 

employer-sponsored plan or is eligible 

for qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested. 

We discussed one alternative 

approach, under which the Exchange 

would request documentation from 

consumers who were selected as part of 

the sample, instead of attempting to 

contact their employers. We chose not 

to propose this approach since the 

application will already solicit all 

necessary information from consumers, 

so it is unclear what would be gained 

through a second information request to 

consumers. We solicited comment on 

this alternative and other alternatives to 

implement this process while 

minimizing burden on consumers, 

employers, and Exchanges. We also 

sought comment on ways the Exchange 

can most efficiently interact with 

employers, including other entities that 

employers may rely upon to support 

this process, such as third-party 

administrators. 

In clause (d)(3)(iii)(E), we proposed 

that if the Exchange receives any 

information from an employer relevant 

to the applicant’s enrollment in an 

eligible employer-sponsored plan or 

eligibility for qualifying coverage in an 

eligible employer-sponsored plan as a 

result of the sample-based review, the 

Exchange would determine the 

applicant’s eligibility based on such 

information and in accordance with the 

effective dates specified in § 155.330(f) 

of this subpart and, if such information 

changes the applicant’s eligibility 

determination, notify the applicant and 

his or her employer or employers of 

such determination in accordance with 

the notice requirements specified in 

§ 155.310(g) and (h) of this part. 

We also proposed that if, after a 

period of 90 days from the date on 

which the notice specified in clause 

(d)(3)(iii)(A) is sent to the applicant, the 

Exchange is unable to obtain the 

necessary information from an 

employer, the Exchange will determine 

the applicant’s eligibility based on his 

or her attestation regarding that 

employer. We solicited comment on this 

proposal to not provide an additional 

notice to the applicant and his or her 

employer when the applicant’s 

eligibility does not change as a result of 

the sample-based review and whether it 

is preferable to include an additional 

notice to the applicant and employer at 

the end of the 90-day period. 

In clause (d)(3)(iii)(G), we proposed 

that to carry out the sampling process 

described above, the Exchange must 

only disclose an individual’s 

information to an employer to the extent 

necessary for the employer to identify 

the employee. We solicited comments 

on this proposed approach and whether 

there are ways these procedures can 

further minimize burden on the 

Exchange, employers, and consumers. 

We also highlighted steps we are 

taking to help consumers with 

providing information related to access 

to employer-sponsored coverage on the 

application. We suggested the use of a 

voluntary pre-enrollment template to 

assist applicants in gathering the 

information about access to coverage 

through an eligible employer-sponsored 

plan as required by the Exchange to 

determine eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions. We sought 

comments on the use of this preenrollment template and ways it could 

be used to assist consumers with 

providing the necessary information to 

complete the verification described in 

paragraph (d) while minimizing burden 

on employers. 

Lastly, in paragraph (d)(4), we also 

proposed that the Exchange may rely on 

HHS to conduct this verification. We 

proposed that under this option, the 

Exchange would send applicant 

information to HHS; HHS would take on 

all verification activities specified in 

regulation, including data matching 

with the Office of Personnel 

Management (OPM), SHOP, available 

employment data, and the sample-based 

review; and the Exchange would 

integrate the result into its eligibility 

process and send the individual and 

employer notices described in 

§ 155.310(g) and (h) of this part. Further, 

we proposed that under such an 

arrangement, the Exchange and HHS 

would enter into an agreement 

specifying their respective 

responsibilities in connection with the 

verifications described in paragraph (d); 

other activities required in connection 

with the verifications described are 

performed by the Exchange in 

accordance with the standards 

identified in this subpart or by HHS in 

accordance with the agreement; and the 

Exchange provides all relevant 

application information to HHS through 

a secure, electronic interface, promptly 

and without undue delay. We solicited 

comments on this proposed option. 

Comment: In reference to the 

proposed language at 

§ 155.320(c)(3)(vi)(C), which specifies 

that the Exchange will request 

additional information regarding 

projected annual household income 

when an application filer’s attestation is 

in excess of annual income data, but 

below annualized current income data 

by a ‘‘significant amount,’’ commenters 

recommended that the phrase 

‘‘significant amount’’ be replaced with a 

percent threshold. Some commenters 


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recommended a threshold of 20 percent, 

specifically. 

Response: To preserve the Exchange’s 

flexibility to determine what may 

constitute a significant amount, we are 

finalizing this provision as proposed. 

Comment: Commenters recommended 

replacing the standard ‘‘not reasonably 

compatible’’ with the term 

‘‘significantly and materially 

incompatible,’’ defined further by 

commenters as ‘‘making an important 

change to the outcome.’’ Such 

commenters suggested only using the 

process described in § 155.315(f) if an 

attestation is significantly and 

materially incompatible with other 

information. Further, commenters 

suggested easing verification rules for 

individuals who comply with 

information requests, including 

attestations, and for whom required data 

is not available. 

Response: In § 155.300(d) of the 

Exchange final rule, we include in the 

definition of ‘‘reasonably compatible’’ 

that the ‘‘difference or discrepancy does 

not impact the eligibility of the 

applicant, including the amount of 

advance payments of the premium tax 

credits or category of cost-sharing.’’ This 

definition allows for Exchange 

flexibility in verifying application 

information, and where appropriate, the 

final rule provides for a more 

prescriptive reasonable compatibility 

standard, in reference to specific 

verifications. We believe it is an ideal 

approach to provide flexibility in the 

case of many verifications, but for areas 

in which the outcome of the eligibility 

determination is sensitive to small 

changes, provide a more specific 

approach. Therefore, we finalize the 

reasonable compatibility standards used 

in § 155.320(c), with some changes 

described herein, and without changing 

the overall definition of ‘‘reasonable 

compatibility,’’ defined in § 155.300(d), 

which is used throughout Exchange and 

Medicaid regulations. 

For income verification, for the first 

year of operations, we are providing 

Exchanges with temporarily expanded 

discretion to accept an attestation of 

projected annual household income 

without further verification, as 

described below. Under current 

regulations, when data described in 

paragraph (c)(1)(i) of this section is 

available for the tax household but the 

attested annual household income is 

more than 10 percent below the annual 

income computed in accordance with 

clause (c)(3)(ii)(A) of this section, the 

Exchange must use annualized data 

from the MAGI-based income sources, 

specified in paragraph (c)(1)(ii), to the 

extent it is available, to verify the 

attestation of annual household income. 

If such data is not available or does not 

support the attestation, clause 

(c)(3)(vi)(C) specifies that the Exchange 

must follow the procedures specified in 

§ 155.315(f)(1) through (4), which 

includes requesting documentation to 

verify the attestation of project annual 

household income. The attestation is 

not supported by the data when the 

attestation is more than 10 percent 

below the annual income as computed 

using data sources. For the first year of 

operations, we will exercise 

enforcement discretion under this 

provision such that each Exchange will 

have the option, only when the 

attestation under (c)(3)(ii)(B) is greater 

than ten percent below the annual 

household income computed in 

accordance with clause (c)(3)(ii)(A) and 

MAGI-based income data from the 

sources specified in paragraph (c)(1)(ii) 

is unavailable to request a reasonable 

explanation for the discrepancy from 

the applicant, and if such explanation is 

insufficient, follow the procedures 

specified in § 155.315(f)(1) through (4) 

for a statistically significant sample of 

the population that would otherwise be 

subject to such procedures under clause 

(c)(3)(vi)(D). For those individuals who 

are not part of this sample, the Exchange 

may accept the attestation of projected 

annual household income without 

further verification for purposes of the 

Exchange’s eligibility determination. We 

expect that any Exchange that exercises 

this option will monitor the process 

closely and adjust the targeting and size 

of the sampled population as needed to 

ensure an effective verification process. 

We note that we believe this exercise of 

enforcement discretion concerning the 

Exchange’s obligations to verify income 

information in these specific 

circumstances is made in the context of 

all information—including the actual 

household income amounts for 2014— 

being available at the end of the year for 

the reconciliation performed under 

section 36B(f) of the Code. 

Comment: We received comments 

that asked if, following the 90-day 

inconsistency period under § 155.315(f), 

when invoked under clause (c)(3)(vi)(C) 

of this section, the applicant has not 

responded and data sources indicate 

that the applicant is eligible for 

Medicaid or CHIP, the Exchange should 

notify the applicant and offer to enroll 

him or her in Medicaid or CHIP, in 

states where the Exchange can make 

that determination, or transmit the file 

to the Medicaid or CHIP agency if the 

Exchange cannot make that 

determination. 

Response: This recommendation is 

not specific to § 155.320(c)(3). However, 

we note that, under § 155.320(c)(3)(iii), 

an attestation that reflects an increase 

compared to the tax data would 

generally be accepted without further 

verification (for purposes of eligibility 

for advance payments of the premium 

tax credit and cost-sharing reductions); 

therefore, if an applicant attests to a 

projected annual household income that 

would qualify him or her for advance 

payments of the premium tax credit or 

cost-sharing reductions but MAGI-based 

income sources indicate that income is 

lower than the applicant’s attestation, 

even if such data indicates Medicaid or 

CHIP eligibility, the attestation would 

be accepted without further verification. 

We note that this scenario assumes that 

the applicant has not attested to 

projected annual household income that 

would be consistent with eligibility for 

Medicaid or CHIP under the applicable 

MAGI standard. 

Comment: One commenter expressed 

support for continuing to examine ways 

in which employer reporting under the 

Affordable Care Act can be streamlined 

both in timeframe and in the number of 

elements to prevent inefficient or 

duplicative reporting. 

Response: We agree with the 

commenter. As stated in the proposed 

rule, the Administration will continue 

to consider ways to streamline reporting 

under the Affordable Care Act. 

Comment: One commenter 

recommended that applicants should 

first attest to whether or not they have 

any offer of coverage. The commenter 

suggested it is unnecessary to verify 

enrollment in or eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan for everyone 

who applies for insurance affordability 

programs. Another commenter 

recommended that the Exchange only 

ask for general information about 

employee contributions to the 

employer-sponsored plan, eligibility for 

the plan, and whether the plan provides 

minimum value rather than specifically 

identifying to the employer the 

particular employee who has requested 

premium tax credits. 

Response: We appreciate the 

commenter’s suggestion regarding ways 

to expedite the application process, and 

are working to consider similar 

suggestions received based on the 

public comment period for the single, 

streamlined application. To this end, we 

have designed the employer-sponsored 

coverage section of the single, 

streamlined application to ask a 

threshold question of whether the 

individual has an offer of coverage 

through a job, including an offer 

through a spouse or parent’s job and 

then if the answer is ‘‘no,’’ allow the 


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individual to skip the remaining 

employer-sponsored coverage questions 

on the application. We will also collect 

employer contact information as 

necessary to send the employer notice 

described in § 155.310(h). The paper 

application for enrollment in a QHP 

through the Exchange and insurance 

affordability programs can be found at: 

http://www.cciio.cms.gov/resources/ 

other/Files/AttachmentC_042913.pdf. 

Comment: We received several 

comments regarding available data 

sources proposed in § 155.320(d)(2). 

Some commenters suggested that HHS 

work on developing an employersponsored coverage data source that 

would be available to states at a 

significantly reduced cost. 

One commenter specifically 

recommended that data sources that 

reflect information regarding 

employment be used as a point of 

information for applicants only, and not 

as a basis for identifying an 

inconsistency that must be resolved to 

maintain eligibility. The commenter 

suggested that relying on employment 

data to support the verification of 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan may create a 

barrier to coverage and unduly delay 

enrollment of eligible applicants. 

One commenter requested that data 

regarding federal employment as 

specified in § 155.320(d)(2)(ii) be made 

available through the federal data 

services hub and requested that HHS 

release a technical description of the 

service as soon as possible. 

Response: As one commenter noted, 

HHS conducted an extensive search of 

available data sources and found that no 

comprehensive data source will be 

available by October 1, 2013. Current 

legislative and operational barriers 

prohibit HHS from requiring employers 

to report information directly to 

Exchanges or requiring Exchanges to 

obtain employer data from the Internal 

Revenue Service. The proposed rule 

included an interim solution to support 

this verification until a more robust 

verification process can be developed. 

We remain committed to working with 

any interested parties on solutions that 

make employer reporting more efficient. 

We agree with the comment above 

suggesting that employment data not be 

used as the basis for generating 

inconsistencies or identifying 

individuals for inclusion in the samplebased review, since it is not specific to 

employer-sponsored coverage. 

Accordingly, we do not believe that it is 

necessary to specify the use of 

employment data, and so are removing 

paragraph (d)(2)(iv) and modifying 

paragraph (d)(3)(iii) to remove the 

provision specifying that the Exchange 

will obtain employment data. We clarify 

that notwithstanding this deletion, 

Exchanges may use employment data as 

a tool to assist consumers in providing 

accurate attestations to the Exchange 

regarding employer-sponsored coverage. 

Lastly, we are currently working with 

our federal partners at the Office of 

Personnel Management to develop a 

service through the hub to verify data 

regarding federal employment as is 

necessary to implement proposed 

155.320(d)(2)(ii). We expect to release a 

detailed technical description of this 

service in the near future. 

Comment: We received several 

comments on the pre-enrollment 

template developed to assist consumers 

with collecting information related to 

eligibility for qualifying coverage in an 

eligible employer-sponsored plan. Many 

commenters expressed support for the 

voluntary template and efforts to 

facilitate employers reporting such 

information to Exchanges. One 

commenter suggested that employers 

pre-populate the form and distribute it 

online to employees without being 

specifically requested to do so by 

individual employees. Another 

commenter expressed concern over 

asking employees to gather information 

from employers, suggesting that it could 

pose problems and force employees not 

to seek Exchange coverage. 

A few commenters suggested ways to 

implement the template including 

providing the template on the date of 

hire or in conjunction with other 

information about employer-sponsored 

coverage provided by the employer to 

employees. One commenter suggested 

large employers have an incentive to 

report this information to employees to 

avoid having employees request 

information from them on an individual 

basis. Another commenter suggested 

that the template would need to allow 

employers to report multiple premium 

contributions and/or plan actuarial 

values. 

Response: We developed the preenrollment template, which is a tool to 

help an individual complete the 

questions related to employer-sponsored 

coverage on the single, streamlined 

application, based on extensive input 

from employers and other stakeholders. 

While the use of the template is 

voluntary, we believe it will facilitate 

the collection of related employersponsored coverage information from 

employers, and in doing so, streamline 

the application process, and increase 

the accuracy of eligibility 

determinations. To this end, we also 

note that employers have the option of 

combining the employer coverage tool 

with the notice specified under section 

18B of the Fair Labor Standards Act, as 

added by section 1512 of the Affordable 

Care Act found at this link, http:// 

www.dol.gov/ebsa/pdf/ 

FLSAwithplans.pdf. As noted in the 

proposed rule, we also anticipate that 

employers will find additional ways to 

provide this information to their 

employees, including posting this prepopulated tool on a company Web site, 

or making this information available 

during benefit fairs, and we are 

supportive of additional efforts by 

employers to disseminate this 

information efficiently. The employer 

coverage tool can be found at: http:// 

cciio.cms.gov/resources/other/Files/ 

AttachmentC_042913.pdf. 

Comment: Several commenters 

generally supported the sampling 

approach proposed in 

§ 155.320(d)(3)(iii) and noted that 

contacting the employer directly is the 

most accurate and efficient way to verify 

information regarding access to 

qualifying employer-sponsored 

coverage. One commenter specifically 

supported the proposed approach to 

rely on the Exchange to reach out to 

employers for information about 

employer-sponsored coverage rather 

than relying on individuals to get the 

information from their employer. 

Some commenters expressed concern 

over the sampling approach, suggesting 

the process was burdensome for 

employers and Exchanges. Commenters 

urged HHS to develop sampling 

procedures that are as unobtrusive as 

possible and do not create confusion for 

an individual or an individual’s 

employer. One commenter urged the 

Administration to encourage States to 

use uniform processes in conjunction 

with HHS. One commenter 

recommended that final regulations 

specify timelines and specific 

information required for employer 

responses under § 155.320(d)(3)(iii). 

Another commenter also recommended 

that final regulations permit employers 

to designate third-party administrators 

to respond and act on their behalf for 

the sample-based review. 

Some noted that contacts to 

employers create risks for employees 

who may have a very weak position or 

status with employers. Some 

commenters suggested that employees 

should be able to opt out of having the 

Exchange contact their employer. One 

commenter suggested that any 

verification process adopted by HHS 

should not invite retaliation against 

employees in any way. Another 

commenter suggested that the notice to 


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employers in § 155.310(h) communicate 

that employers are explicitly prohibited 

from retaliating against employees and 

provide accessible information about 

how employees may pursue a complaint 

or seek redress, including the time limit 

for filing a complaint. 

Response: We believe the sampling 

approach proposed in 

§ 155.320(d)(3)(iii) is the best interim 

approach for effectively completing this 

verification while minimizing burden 

on Exchanges and employers. As noted 

in the proposed rule, we believe that 

employers are in the best position to 

provide information regarding the 

employer-sponsored coverage that they 

offer to their employees. We maintain 

the approach of relying on Exchanges to 

reach out to a select number of 

employers to verify applicant 

information with some minor 

clarifications. 

We also appreciate the concerns 

raised related to burden on Exchanges 

and employers. We intend for 

Exchanges to contact employers in a 

standardized manner and only ask for 

information that is necessary for 

verifying access to qualifying employersponsored coverage. We do not include 

a timing standard for employers to 

respond to Exchange inquiries; however 

we expect that employers will respond 

to Exchange inquiries in a timely 

manner. With that stated, as proposed 

and finalized in § 155.320(d)(3)(iii)(F), 

after a period of 90 days, the Exchange 

will conclude the sample-based review. 

Regarding the recommendation that 

final regulations permit employers to 

designate third-party administrators to 

respond and act on their behalf for this 

verification, we note that this rule 

finalizes standards related to Exchanges 

and therefore standards regarding 

activities of employers are outside the 

scope of this regulation. However, we 

believe that this would be a feasible 

approach, as long as it is consistent with 

any other authorities that may govern 

the delegation of employer 

responsibilities to other entities. 

We also acknowledge the comment 

expressing the concern that contacting 

employers might create risks for 

employees who may have a very weak 

position or status with employers. 

Section 18C of the Fair Labor Standards 

Act, as added by section 1558 of the 

Affordable Care Act, provides 

protections for employees that prohibit 

discrimination because the employee 

has received advance payments of the 

premium tax credit or cost-sharing 

reductions, and for other specified 

reasons. 

Allowing an individual to opt out of 

the sampling process under 

§ 155.320(d)(3)(iii) would prevent the 

Exchange from receiving accurate 

information for some individuals and 

increase the potential for a tax liability 

for the tax filer at tax filing. The opt-out 

process would also compromise the 

randomness, and potentially the 

statistical validity of the sample. 

Accordingly, we do not adopt this 

suggestion. 

Comment: We received several 

comments strongly supporting the 

approach in § 155.320(d)(3)(iii)(C), 

reflecting the statutory requirement in 

section 1411(e)(4) of the Affordable Care 

Act, allowing an individual to receive 

advance payments of the premium tax 

credits and cost-sharing reductions 

during the 90-day sampling period if the 

individual is otherwise qualified. One 

commenter supported the recognition 

that applicants should be made aware 

that any advance payments of the 

premium tax credit could be subject to 

reconciliation. We also received 

comments in support of the provision in 

§ 155.320(d)(3)(iii)(F) allowing the 

Exchange to use an applicant’s 

attestation if no information is received 

from the employer. Another commenter 

noted that the burden of resolving 

inconsistencies should fall first on the 

Exchanges and only reach individuals 

when the Exchanges have exhausted all 

available means to resolve the 

inconsistency. 

Response: We believe it is important 

for the eligibility determination process 

to be consistent in how and when the 

Exchange requests supporting 

documentation throughout the 

eligibility determination process and to 

avoid unnecessary delay in eligibility 

determinations. We agree with 

commenters regarding the importance of 

collecting an attestation from a tax filer 

regarding his or her understanding of 

reconciliation prior to making advance 

payments of the premium tax credit, 

and therefore maintain this in the final 

rule. Additionally, we are finalizing our 

proposal to rely on an applicant’s 

attestation if the Exchange is unable to 

obtain the necessary information from 

an employer. 

Comment: One commenter was 

concerned that the timeframe for 

employers to provide information 

(within 90 days of notice regarding the 

Exchange’s intent to verify the 

applicant’s enrollment in an eligible 

employer-sponsored plan or eligibility 

for qualifying coverage through an 

eligible employer-sponsored plan) is too 

long and recommended shortening this 

period to 30 days. 

Response: In proposed section 

§ 155.320(d)(3)(iii), which we maintain 

in the final rule, we provide that an 

Exchange will proceed with an 

applicant’s eligibility determination 

during the sampling process and ensure 

that advance payments of the premium 

tax credit and cost-sharing reductions 

are provided on behalf of an applicant 

who is otherwise qualified for such 

payments and reductions. This process 

is intended to ensure that eligibility 

determinations are not delayed due to 

the Exchange not being able to contact 

an employer. Under our authority under 

section 1411(a) and (d) of the Affordable 

Care Act and after consideration of a 

shorter timeframe, we came to the 

conclusion that 90 days is consistent 

with other similar processes, such as the 

inconsistency period specified in 

§ 155.315(f), and will also allow an 

appropriate opportunity for receiving a 

response from employers. 

Comment: Commenters supported the 

option to allow an Exchange to fulfill 

the requirements of this verification by 

relying on HHS to perform it. One 

commenter noted that this option is 

particularly helpful as no acceptable 

data sources will be available in their 

state by October 1, 2013. One 

commenter was pleased with this 

provision, noting that it welcomed 

efforts to reduce administrative and cost 

burdens involved with Exchange 

eligibility determination processes. One 

commenter expressed the need for more 

information from HHS specifying the 

steps it will take to complete this 

verification, and detail on the particular 

information HHS anticipates it will 

need. One commenter suggested a 

provision be included in the agreement 

between HHS and the Exchange to hold 

applicants harmless if a glitch in 

communication occurs. The commenter 

also suggested that consumers should 

not be required to submit duplicative 

information. One commenter asked that 

HHS consider expanding its employersponsored plan enrollment and 

eligibility verification process to include 

the sending of notices to individuals 

and employers described in § 155.310(g) 

and (h), which occurs after an eligibility 

determination is made. 

Response: After reviewing and 

considering the appropriate public 

comments and completing a technical 

analysis, we have concluded that the 

service described in the proposed rule is 

not feasible for implementation for the 

first year of operations. This service 

would involve a large amount of 

systems development on both the state 

and federal side, which cannot occur in 

time for October 1, 2013. As such, in the 

final rule, we maintain the proposed 

language, with a clarification that the 

option to rely on HHS to perform this 

verification is effective for eligibility 


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determinations that are effective on or 

after January 1, 2015—meaning that the 

Exchange will be able to rely on HHS to 

perform this function as part of the 

eligibility determination system under 

section 1411 of the Affordable Care Act 

beginning with open enrollment for the 

2015 plan year. 

To provide relief to state-based 

Exchanges that were planning to rely on 

this service, we note that we are also 

delaying the date by which an Exchange 

must implement the sample-based 

review. For eligibility determinations 

for insurance affordability programs that 

are effective before January 1, 2015, we 

added paragraph (d)(3)(iv) to specify 

that if the Exchange does not have any 

of the information specified in 

§ 155.320(d)(2)(i) through (d)(2)(iii) for 

an applicant, the Exchange may accept 

the applicant’s attestation regarding 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested 

without further verification, instead of 

following the procedure in 

§ 155.320(d)(3)(iii). 

While we believe it is important for 

Exchanges to implement the procedure 

in § 155.320(d)(3)(iii) to support 

program integrity and minimize 

financial risks on behalf of the tax filer 

at reconciliation, we acknowledge that 

some Exchanges may not have the 

resources and operational capability to 

conduct the sampling process in the 

first year. We note that the FFE will 

implement the verification process as 

specified in § 155.320(d). 

For October 1, 2013, we expect that 

Exchanges will use OPM data provided 

by HHS and available through the hub 

and SHOP data available through the 

SHOP that corresponds to the 

individual market Exchange to identify 

inconsistencies with attested 

information, and follow the process 

established in § 155.315(f) to resolve any 

such inconsistencies. We plan to 

continue working closely with 

Exchanges, and may propose regulatory 

amendments as necessary, to implement 

an increasingly effective verification 

process over time. 

We also note that we considered 

whether the distribution of notices 

could be part of a future service 

performed by HHS. The eligibility 

notices cited by the commenter involve 

information beyond what is involved 

with this verification service, including 

individual eligibility results, and the 

commenter’s proposal therefore would 

add significant complexity to an 

already-complex service. Accordingly, 

we are finalizing this provision as 

proposed. 

Comment: We solicited comment 

regarding the feasibility of making the 

necessary systems connections to 

support the verification of enrollment in 

an eligible employer-sponsored plan 

and eligibility for qualifying coverage in 

an eligible employer-sponsored plan by 

October 1, 2013, and whether 

alternative approaches should be 

considered for the first year of 

operations. Several commenters 

expressed general support of the 

approach to verifying access to 

qualifying employer-sponsored 

coverage. However, one commenter 

expressed concern over the complexity 

of the verification procedures and 

questioned whether Exchanges will be 

able to implement these processes 

consistently by October 1, 2013. A small 

number of commenters recommended 

that HHS consider limiting verification 

to those situations in which it is 

essential to comply with the Affordable 

Care Act. One commenter agreed with 

the recommendation that the proposed 

strategy for verification should be 

temporary and that it should be 

revisited in 2016 when more data 

become available. 

Response: We appreciate feedback 

from commenters on the proposed 

approach. We acknowledge the timing 

concerns with implementing the 

policies in the proposed rule for October 

1, 2013 and will continue to work with 

Exchanges to develop interim solutions 

within the general construct of these 

regulations and related guidance. We 

believe that the proposed approach is 

minimally burdensome, particularly 

based on the approval of use of a 

sample-based review provided in 

§ 155.320(d)(3)(iii) instead of an 

inconsistency process, and another 

approach would necessitate manual 

review for a larger number of 

individuals. Accordingly, in the final 

rule, we maintain the provisions 

proposed in § 155.320(d) with 

continued anticipation that the strategy 

will evolve as additional data and data 

sources become available and as more 

information is gained when the samplebased review is implemented. 

Comment: One commenter 

recommended that HHS allow 

Exchanges the flexibility to define the 

factors that would trigger the samplebased review and how to conduct the 

necessary investigations. Another 

commenter proposed that Exchanges 

should have flexibility to use whatever 

information they have at their disposal 

to identify individuals who are likely to 

have employer-sponsored coverage and 

to conduct a minimum number of 

follow up reviews. 

Response: We recognize that some 

Exchanges may have access to 

additional data sources that could be 

useful for these purposes. We note that 

proposed § 155.320(d)(2)(i), which we 

are finalizing as proposed, allows the 

use of electronic data sources that are 

approved by HHS, which could include 

state-based or state-developed data 

sources. We encourage states to work 

with HHS to incorporate these data 

sources and other existing processes 

into the Exchange verification process. 

Comment: We received several 

comments on standards related to 

notices proposed throughout § 155.320. 

Commenters suggested that any notices 

be clearly written in plain language at 

an appropriate reading level for 

employees with limited education and 

LEP individuals. One commenter 

recommended that notice of applicants’ 

appeal rights be provided to applicants 

if information from an employer results 

in a change to their eligibility status. 

Specifically regarding the notice 

described in § 155.320(d)(3)(iii), one 

commenter suggested the notice clearly 

specify that the employee was selected 

as part of a purely random sample, 

rather than due to any indication of 

misinformation or inappropriate action 

on the part of the employee. 

Additionally, one commenter supported 

HHS developing notices and otherwise 

educating employers to help employers 

understand their potential tax liabilities. 

Finally, one commenter urged Exchange 

personnel, Navigators, certified 

application counselors and all consumer 

assistance personnel to be trained on 

these verification procedures. 

Response: All notices described in 

this part are subject to the general 

notices standards under § 155.230, 

which include standards related content 

provided in the notice, including notice 

of appeal rights, and that the notices 

must conform to accessibility and 

readability standards. We agree that 

information regarding this verification 

will be important for Navigators and 

other entities helping consumers apply 

for coverage and intend to include 

information about this verification 

process related in training materials and 

other guidance documents produced by 

HHS. 

Comment: One commenter raised 

concerns over the potential for 

confusion that could result from 

unnecessary notifications to employers 

by Exchanges, for example, when 

employers receive the notice specified 

in § 155.310(h) regarding potential tax 

liability under § 4980H of the Code even 


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though the employer may not in fact 

have any tax liability. 

Response: The proposed rule did not 

modify the requirements related to the 

employer notice as described in 

§ 155.310(h) and therefore the comment 

is outside of the scope of this rule. 

Comment: One commenter 

recommended that the verification 

process and information supplied 

should be considered confidential, and 

recommended that the final rule include 

language clarifying this and prohibiting 

the sharing of this information with 

anyone not directly required to verify 

the information. The commenter 

specified that the employer 

representative verifying the information 

at request of the Exchange should be 

prohibited from sharing the Exchange’s 

request for the information with any 

person not directly responsible for 

providing the information. 

Response: We agree with the 

suggestion that information supplied 

during the verification process 

described in § 155.320(d)(3)(iii) should 

be protected and not disclosed to 

unauthorized parties. When an 

Exchange reaches out to an employer to 

confirm whether an applicant is 

enrolled in an eligible employersponsored plan or eligible for qualifying 

coverage in an eligible employersponsored plan, we do not intend for 

the Exchange staff to disclose the 

employee’s household income or any 

other taxpayer information, except the 

employee’s name or other identifying 

information. The employer would need 

to identify the employee to provide the 

Exchange with information about the 

plan options available to the employee. 

The Exchange would rely on 

information provided by the employee 

or employer when communicating with 

the employer, so that only the 

appropriate employer representatives 

are consulted during the sample-based 

review. We also note that like all 

information created, collected, used, or 

disclosed by the Exchange, information 

regarding employer-sponsored coverage 

is subject to the privacy and security 

protections established in § 155.260. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.320(c) without 

modification. We are finalizing the 

provisions proposed in § 155.320(d), 

with a few modifications. In paragraph 

(d)(2)(iii), we clarify that the Exchange 

must obtain any available data from the 

SHOP that corresponds to the state in 

which the Exchange is operating. In 

paragraph (d)(3)(iii), we modify 

language to specify that the Exchange 

must select a statistically significant 

random sample of applicants for whom 

the Exchange does not have any of the 

information specified in paragraphs 

(d)(2)(i) through (d)(2)(iii). Based on 

comments suggesting that employment 

data only be used to prompt applicants 

to encourage accurate attestations, we 

removed paragraph (d)(2)(iv). 

Additionally, we clarified paragraph 

(d)(4) to specify that the ability for the 

Exchange to satisfy the provisions of 

paragraph (d) by relying on HHS is 

effective for eligibility determinations 

for advance payments of the premium 

tax credit and cost-sharing reductions 

that are effective on or after January 1, 

2015, and to clarify that the division of 

responsibilities under this option is 

subject to guidance issued by the 

Secretary. To accommodate this change, 

we added paragraph (d)(3)(iv) to clarify 

that for eligibility determinations for 

advance payments of the premium tax 

credit and cost-sharing reductions that 

are effective before January 1, 2015, if 

the Exchange does not have any of the 

information specified in paragraphs 

(d)(2)(i) through (d)(2)(iii) for an 

applicant, the Exchange may accept an 

applicant’s attestation regarding 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested, 

without further verification under 

paragraph (d)(3)(iii) of this section. 

Additionally, we deleted paragraph 

(d)(4)(iv) to remove the agreement 

associated with having HHS conduct 

this verification. Finally, we removed 

paragraph (e) and redesignated 

paragraph (f) as paragraph (e). As a 

result of the consolidation of former 

paragraphs (d) and (e) in paragraph (d) 

of this final rule, we also make a 

technical correction to § 155.615(f)(2)(i) 

to modify the cross-reference in that 

provision to reference § 155.320(d). 

12. Eligibility Redetermination During a 

Benefit Year (§ 155.330) 

In § 155.330, we proposed to amend 

paragraph (d)(1) to clarify that the 

Exchange would only conduct periodic 

examination of data sources to identify 

eligibility determinations for Medicare, 

Medicaid, CHIP, or the BHP, for 

enrollees on whose behalf advance 

payments of the premium tax credit or 

cost-sharing reductions are being 

provided. We also proposed revising 

paragraph (e) to specify how the 

Exchange would proceed when data 

matching indicates that an individual is 

deceased, such that the Exchange would 

modify eligibility status to account for 

the data after 30 days without a 

response to the notice sent. In situations 

where the Exchange identifies updated 

information regarding income, family 

size, or family composition, except 

information regarding death, we 

clarified that the enrollee-reported 

information would be subject to 

verification. 

We also solicited comments about 

adding a provision to specify that 

Exchanges would include language in 

the eligibility determination notice after 

a redetermination resulting in a change 

in an enrollee’s level of cost-sharing 

reductions to also describe the specific 

changes to an enrollee’s deductible, copays, coinsurance, and other forms of 

cost-sharing reductions if they remained 

enrolled in the same QHP. 

We proposed to amend paragraph (f) 

to incorporate changes as a result of 

eligibility appeals decisions, as well as 

changes that affect only enrollment or 

premiums, but do not affect eligibility. 

The proposed changes to paragraph (f) 

were designed to align eligibility 

effective dates and enrollment effective 

dates with one another, and to 

accommodate the limited situations in 

which retroactive eligibility may be 

necessary. 

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

changes resulting from a 

redetermination, from an appeal 

decision, or affecting enrollment or 

premiums only, be implemented on the 

first day of the month following notice 

of the change. In paragraph (f)(2), we 

proposed that the Exchange may 

determine a reasonable point in a 

month, no earlier than the 15th, after 

which a change will not be effective 

until the first day of the month after the 

month specified in paragraph (f)(1). 

In paragraph (f)(3), we proposed that 

the Exchange must implement changes 

resulting in a decreased amount of 

advance payments of the premium tax 

credit or cost-sharing reductions that 

occur after the 15th of the month, on the 

first day of the month after the month 

specified in paragraph (f)(1). In 

paragraph (f)(4), we proposed that the 

Exchange must implement changes that 

result in an increased level of costsharing reductions that occur after the 

15th of the month, on the first day of the 

month after the month specified in 

paragraph (f)(1). Changes that result in 

an increased amount of advance 

payments of the premium tax credit 

would be implemented under 

paragraphs (f)(1) and (f)(2). 

In paragraph (f)(5), we proposed that 

the Exchange implement a change 

associated with birth, adoption, 

placement for adoption, marriage, or 

loss of minimum essential coverage, on 

the coverage effective dates described in 

§ 155.420(b)(2)(i) and (ii). In paragraph 


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(f)(6), we proposed that the Exchange 

may implement a change associated 

with the events described in 

§ 155.420(d)(4), (d)(5), and (d)(9) on an 

effective date that is based on the 

specific circumstances of each situation. 

In redesignated paragraph (f)(7), we 

proposed to maintain the existing 

language of what was originally 

paragraph (f)(3). 

Comment: Commenters expressed 

general support for HHS’ proposal 

regarding when the Exchange 

determines through periodic data 

matching that an individual is deceased. 

One commenter sought clarification 

about whether the Exchange could 

terminate coverage retroactively to the 

date of death to align with non-group 

market standards. 

Response: In response to comments, 

we clarify in finalizing § 155.430(d) that 

the Exchange will terminate coverage 

retroactively to the date of death. This 

revision is discussed in more detail in 

the response to comments regarding that 

provision below. 

Comment: Multiple commenters 

expressed strong support for including a 

provision in the final rule such that 

Exchange would include language 

regarding a change in an enrollee’s level 

of cost-sharing reductions as a result of 

a redetermination in the eligibility 

determination notice sent to the 

enrollee. Several commenters requested 

that the notice also include information 

about the enrollee’s eligibility for a 

special enrollment period as well as the 

deadline to make a decision to select a 

new plan if they so desired. 

Commenters also recommended that the 

notice include the potentially negative 

financial impact of changing QHPs. One 

commenter requested additional 

guidance regarding the implementation 

of cost-sharing reductions generally, and 

another stated that it could not comply 

with such a proposed change in 

Exchange design at this stage. 

Response: We clarify that 

§ 155.230(a)(1) specifies that the 

Exchange will provide language in the 

eligibility determination notice to the 

enrollee explaining the action reflected 

in the notice, which in this case 

includes the fact that an enrollee has 

been determined eligible for a new costsharing reduction level, his or her 

eligibility for a special enrollment 

period, the requisite deadlines, and the 

possible ramifications if an enrollee 

decides to change QHPs (for example, 

deductible resetting, whereby an 

individual who had accrued expenses 

towards the deductible cap for his or her 

previous QHP would have to start again 

from $0 in making cost-sharing 

payments towards the deductible and 

out-of-pocket limit). Since regulations 

do not specify that the Exchange will 

provide detailed, plan-specific 

information on cost-sharing reductions 

after initial plan selection, we will not 

require that it be provided by the 

Exchange when a change occurs. Rather, 

we expect that QHPs will make this 

information available. We will also not 

specify that the Exchange will describe 

the specific changes that could occur in 

different plans, which could require as 

many variations as there are plans. 

Exchanges maintain the flexibility to 

provide more detail. HHS provided 

general guidance regarding the 

implementation of cost-sharing 

reductions in subpart E of the final 

Payment Notice at 78 FR 15410, 15474 

et. seq. 

Comment: Commenters generally 

supported the effective dates we 

proposed in § 155.330(f). Several 

commenters urged HHS to prioritize 

continuity of coverage in defining 

effective dates. Other commenters 

cautioned against requiring eligibility 

effective dates that would necessitate 

the return or repayment of claims, 

premiums, advance payments of the 

premium tax credit, or cost-sharing 

reduction payments. 

Response: We appreciate the 

importance of continuity of coverage, as 

well as the importance of clarity for 

consumers. As such, we are finalizing 

the provisions proposed in § 155.330(f), 

with two modifications for clarity. First, 

we consolidate the provisions formerly 

proposed in § 155.330(f)(3) and 

§ 155.330(f)(4) into a single provision 

covering decreases in advance payments 

of the premium tax credit and changes 

in cost-sharing reductions. Second, we 

remove the requirement formerly 

proposed in § 155.330(f)(7), because the 

termination of coverage requirement in 

§ 155.430(d)(3) renders § 155.330(f)(7) 

duplicative. 

Comment: Commenters requested that 

HHS require transparency and plain 

language in communicating effective 

dates to consumers, given the 

complexity of changing benefits, 

programs, and coverage. 

Response: We agree that transparency 

and plain language are of the upmost 

importance, and urge states and QHP 

issuers to share successful 

communication strategies among one 

another. We note that § 155.230(b) 

specifies that all notices will be in plain 

language. HHS will also share model 

notice language for Exchanges to adapt 

to their specific needs. 

Comment: Some commenters 

questioned why advance payments of 

the premium tax credit and cost-sharing 

reductions could not always be 

implemented as of the first of the 

following month. 

Response: The 15th-of-the-month 

cutoff specified in § 155.330(f)(3) 

concerning changes that result in a 

decreased amount of advance payments 

of the premium tax credit and changes 

in levels of eligibility for cost-sharing 

reductions aims to prevent consumers 

from incurring financial liabilities that 

may result from such changes in 

eligibility, which could also be very 

problematic for QHP issuers to 

implement. However, as noted above, 

Exchanges have flexibility to set a 

reasonable cut-off date for implementing 

changes that result in an increased level 

of advance payments of the premium 

tax credit, such that they could always 

be implemented on the first day of the 

following month, Accordingly, we are 

finalizing this provision as proposed. 

Comment: Some commenters sought 

reassurance that Exchanges would 

remain the system of record—the final 

authority on applicants’ and enrollees’ 

eligibility for enrollment through the 

Exchange and receipt of advance 

payments of the premium tax credit and 

cost-sharing reductions—and that all 

changes would be communicated to 

QHP issuers. Some commenters also 

requested flexibility for issuers to 

communicate changes to enrollees, 

consistent with current practices. 

Response: Exchanges are intended to 

be the final authority on applicants’ and 

enrollees’ eligibility for enrollment in a 

QHP through the Exchange, advance 

payments of the premium tax credit, 

and cost-sharing reductions (subject to 

applicable appeals). As specified in 

§ 155.310(g) and § 155.400(b)(1), 

Exchanges will communicate 

information about all eligibility and 

enrollment changes to both enrollees 

and their health insurance issuers in a 

timely fashion. We also encourage QHP 

issuers to communicate transparently 

with enrollees regarding changes to 

their coverage, including how changes 

in an enrollee’s eligibility for costsharing reductions may affect the 

enrollee’s out-of-pocked costs related to 

coverage, provided that such 

communications are not confusing for 

consumers. 

Comment: Commenters supported our 

proposal in paragraph (f)(4) of this 

section to align enrollment effective 

dates with eligibility effective dates, but 

sought clarification on eligibility 

effective dates for individuals who opt 

not to select a new plan upon 

experiencing one of the special 

enrollment period triggering events 

described in § 155.420(b)(2). 

Response: We clarify that the 

eligibility effective dates in 


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§ 155.330(f)(4) apply only in situations 

in which an individual uses the special 

enrollment period to select a plan upon 

experiencing one of the triggering events 

described in § 155.420(b)(2). Eligibility 

for individuals who experience a change 

related to marriage, birth, adoption, 

placement in foster care, or loss of 

minimum essential coverage, and who 

opt to maintain their existing QHP, 

follows the effective dates otherwise 

specified within § 155.330(f). 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.330, with some 

modifications. First, we clarified that 

the effective dates in paragraph (f)(1)(ii) 

are based on the date specified in the 

appeal decision, and removed crossreferences to appeals provisions in 

paragraph (f)(1)(ii), as we are not 

finalizing provisions related to 

eligibility appeals at this time. However, 

we maintain the substance of the 

provision, and intend to replace the 

cross-references when we finalize 

subpart F. Second, we consolidated the 

provisions formerly proposed in 

§ 155.330(f)(3) and § 155.330(f)(4) into a 

single requirement in paragraph (f)(3) 

for decreases in advance payments of 

the premium tax credit and changes in 

cost-sharing reductions. Third, we 

modified newly designated (f)(4) to 

clarify that the Exchange will 

implement a change associated with the 

events described in § 155.420(b)(2)(i) 

and (ii) of this part on the effective dates 

described in § 155.420(b)(2)(i) and (ii) of 

this part respectively, instead of on the 

first day of the following month. Fourth, 

we removed the requirement formerly 

proposed in § 155.330(f)(7), because the 

termination of coverage requirement in 

§ 155.430(d)(3) renders § 155.330(f)(7) 

duplicative. 

13. Annual Eligibility Redetermination 

(§ 155.335) 

In § 155.335, we proposed to amend 

paragraphs (a), (b), (c), (e), (f), (g), (h), 

(k), and (l) of this section to specify that 

subject to the limitations specified in 

paragraph (l) and new paragraph (m), 

the Exchange will conduct an annual 

eligibility redetermination for all 

qualified individuals, not only those 

who are enrolled in a QHP. Our 

proposal was to replace the word 

‘‘enrollee’’ with the term ‘‘qualified 

individual’’ in these paragraphs. 

We proposed to amend paragraph (b) 

to include data regarding Social 

Security benefits as defined under 26 

CFR 1.36B–1(e)(2)(ii). This reflects the 

revision we proposed to make in 

§ 155.320(c)(1)(i)(A). 

We proposed to make technical 

corrections to paragraph (l) to specify 

that, if the Exchange does not have 

authorization to use a qualified 

individual’s tax information, the 

Exchange will redetermine the qualified 

individual’s eligibility only for 

enrollment in a QHP through the 

Exchange. 

We proposed to add new paragraph 

(m), which would provide that, if a 

qualified individual does not select a 

QHP before the redetermination 

described in this section, and is not 

enrolled in a QHP through the Exchange 

at any time during the benefit year for 

which such redetermination is made, 

the Exchange must not automatically 

conduct a subsequent redetermination 

of his or her eligibility for a future 

benefit year. 

Comment: Commenters supported 

HHS’ proposal to allow all qualified 

individuals to be redetermined for 

eligibility for enrollment in a QHP 

through the Exchange, regardless of 

whether they have enrolled in a QHP 

through the Exchange during the 

coverage year. Several commenters 

recommended omitting § 155.335(m), 

the special rule, to allow states to 

continue redeterminations for nonenrolled qualified individuals, for at 

least 3 more years. 

Response: We continue to believe that 

one redetermination for a qualified 

individual who does not select a QHP 

represents an appropriate balance 

between providing consumers with a 

streamlined ability to obtain coverage 

and the burden on the Exchange 

associated with redeterminations and on 

consumers who are not interested in 

enrolling. We intend to monitor take-up 

rates within the FFE and encourage 

state-based Exchanges to do the same, as 

this data will inform whether changes to 

this policy might be appropriate in the 

future. Accordingly, we are finalizing 

this provision as proposed. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.335 of the proposed 

rule without modification, except we 

reserve paragraphs (c)(1) and (c)(2) as 

we continue to evaluate the appropriate 

information that will be included in the 

annual redetermination notice, and 

modify paragraph (c)(3) such that the 

previous reference to paragraph (c)(1), 

which is now reserved, instead refers to 

paragraph (b), which accurately refers to 

the updated information being retrieved 

by the Exchange. 

14. Administration of Advance 

Payments of the Premium Tax Credit 

and Cost-Sharing Reductions (§ 155.340) 

In § 155.340, we proposed technical 

corrections in paragraphs (b) and (c) to 

replace the reference to section 36B of 

the Code to the applicable Treasury 

regulation. We did not receive specific 

comments on this section, and are thus 

finalizing the provision as proposed. 

Summary of Regulatory Changes 

We are finalizing the technical 

corrections proposed in § 155.340 of the 

proposed rule to specify the appropriate 

definition of minimum value. 

15. Coordination With Medicaid, CHIP, 

the Basic Health Program, and the Preexisting Condition Insurance Plan 

(§ 155.345) 

In § 155.345, we proposed to make a 

technical correction to paragraph (a) to 

clarify that the agreements that the 

Exchange enters into with the agencies 

administering Medicaid, CHIP, and the 

BHP, if applicable, must include a clear 

delineation of the responsibilities of 

each ‘‘agency’’ as opposed to each 

‘‘program.’’ We proposed to amend 

paragraph (a)(2) to specify that the 

agreement the Exchange enters into with 

other agencies administering insurance 

affordability programs addresses the 

responsibilities of each agency to ensure 

prompt determinations of eligibility and 

enrollment in the appropriate program 

without undue delay, based on the date 

the application is submitted to, or 

redetermination is initiated by, the 

Exchange or another agency 

administering an insurance affordability 

program. We proposed to change the 

ordering of agencies listed for purposes 

of clarity. We also proposed to 

redesignate paragraph (a)(3) as 

paragraph (a)(4), and add a new 

paragraph (a)(3) to ensure that, as of 

January 1, 2015, the agreement 

delineates responsibilities for the 

provision of a combined eligibility 

notice, as defined in § 435.4, to 

individuals and members of the same 

household, to the extent feasible, for 

enrollment in a QHP through the 

Exchange and for all insurance 

affordability programs. Section 

155.345(a)(3)(i) proposed that prior to 

January 1, 2015, the notice include 

coordinated content, as defined in 

§ 435.4, while § 155.345(a)(3)(ii) and 

(g)(7) addressed the implementation of a 

combined eligibility notice requirement 

as of January 1, 2015. 

We proposed a phased-in approach 

for the provision of a combined 

eligibility notice in cases where the 

Exchange is performing assessments of 


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eligibility for Medicaid and CHIP based 

on MAGI. 

We noted that, based on the 

operational readiness of the Exchange 

and other agencies administering 

insurance affordability programs, 

combined eligibility notices may be 

implemented earlier that January 1, 

2015, but that in states where the FFE 

is conducting assessments rather than 

final determinations of eligibility, the 

FFE will only be able to provide an 

eligibility notice that includes 

coordinated content prior to January 1, 

2015 (and not combined eligibility 

notices) for eligibility determinations 

made by the FFE. 

We proposed to make a technical 

correction in paragraph (f) to cite to the 

applicable Treasury regulation instead 

of Section 36B of the Code. 

We proposed a series of technical 

corrections throughout paragraphs (f) 

and (g) to clarify various provisions and 

to redesignate paragraphs as necessary 

to accommodate the changes described 

in the proposed rule. We proposed to 

add paragraph (g)(7) to require 

combined eligibility notices effective 

January 1, 2015. 

Comment: We received comments 

recommending that notices be 

consolidated and coordinated for all 

family members applying together even 

when individuals are eligible for 

different programs, at the very least for 

the initial eligibility determination 

notice. Commenters suggested that all 

notices need to clearly state by name all 

individuals to whom the notice applies, 

especially when notices are regarding 

termination. Some commenters 

indicated that the notice with 

coordinated content should clearly 

inform an individual what he or she is 

or may be eligible for, and should never 

begin with the ineligibility information. 

Commenters suggested that all 

agreements between the Exchange and 

the agencies administering Medicaid 

and CHIP be approved by HHS and be 

made publicly available, including on a 

public Web site. Some commenters 

stated that the public should be given an 

opportunity to provide input on the 

agreements and any changes that are 

made to the agreements. 

Response: We are finalizing this 

section as proposed, with minor 

modifications to reserve two provisions 

for finalization at a future date. We 

anticipate that initial eligibility 

determination notices will be 

consolidated for family members who 

apply together. Additionally, we expect 

that information about the program for 

which an individual is eligible, if any, 

will be displayed in notices before 

information about programs for which 

the individual is not eligible. We are 

reserving paragraphs (a)(3) and (g)(7), 

regarding coordinated content and 

combined notices, respectively, which 

we intend to finalize at a later date with 

the parallel Medicaid provisions. The 

Federally-facilitated Exchange will 

provide coordinated content in notices 

for October 1, 2013. We will take these 

recommendations into consideration as 

we develop model eligibility 

determination notices. We are not 

specifying that agreements between 

Medicaid and CHIP agencies and 

Exchanges be approved by HHS, as we 

think that the standards included in 

regulation represent an appropriate 

level of federal oversight at this time. 

However, we will work with Exchanges 

to monitor operations over time, and 

reevaluate this decision as needed. 

Comment: Many commenters 

expressed support for combined 

eligibility notices. Some commenters 

expressed general support of the phased 

in approach for combined eligibility 

notices, but strongly recommended 

minimizing the delay in the 

implementation of combined notices so 

that it only affects the initial annual 

open enrollment period. Commenters 

suggested that the requirement for a 

combined eligibility notice should be 

effective for redetermination notices and 

eligibility notices for the open 

enrollment period beginning on October 

15, 2014. Some commenters were 

supportive of the January 1, 2015 

implementation date of combined 

eligibility notices, while others 

recommended a January 1, 2016 

implementation date. One commenter 

recommended that the effective date be 

set as January 1, 2014, and that HHS 

allow those states that cannot update 

their technology in time for January 

2014 to seek approval from HHS for 

delaying implementation, rather than a 

nationwide delay in implementation. 

Many commenters asked HHS to 

reiterate that the phased-in approach 

does not diminish the principles of the 

Affordable Care Act to promote 

coordination between the Exchange, 

Medicaid, and CHIP, beginning in 

October 2013. 

Response: We appreciate commenters’ 

suggestions. We intend to finalize this 

provision at a future date with the 

parallel Medicaid provision, and so 

have reserved paragraph (g)(7) for the 

purposes of this rule. The Federallyfacilitated Exchange will provide 

coordinated content in notices for 

October 1, 2013. 

Comment: Several commenters noted 

that state flexibility is important in 

determining when to issue combined or 

separate, coordinated eligibility notices. 

One commenter opposed the 

requirement for agencies administering 

insurance affordability programs to 

provide coordinated content in notices 

before January 1, 2014, and specifically 

recommended that at initial annual 

open enrollment each agency should be 

responsible for issuing its own 

eligibility determination notice based on 

the eligibility determination completed 

for the program or programs that agency 

administers, without regard for the other 

insurance affordability programs. Many 

other commenters, however, expressed 

support for a coordinated eligibility 

notice prior to the implementation of a 

combined eligibility notice. Another 

commenter believed that the state is best 

suited to determine which agency 

should provide the notice of eligibility 

determination, and opposed to the 

requirement under § 155.345(a)(3)(ii) 

that the combined eligibility notice be 

provided by the agency that makes the 

last determination of eligibility. One 

commenter noted that HHS should 

consider additional situations where a 

combined eligibility notice is feasible, 

but not beneficial to the applicant(s). 

Another commenter suggested that HHS 

consider additional flexibility for 

notices to be sent immediately for 

consumers who receive a final eligibility 

determination, and include an 

explanation in the notice about the 

status of any other determinations that 

are in progress for other applicants in 

the household. 

Many commenters stated that HHS 

should ensure that the combined 

eligibility notice includes complete 

information about Medicaid appeal 

rights. Other commenters stated that the 

combined eligibility notice should 

include a statement that the individual 

might be eligible for additional benefits 

and more affordable coverage through 

Medicaid, and specify how the 

individual can be screened for Medicaid 

eligibility. 

Response: In the proposed rule, HHS 

noted two situations in which the 

combined eligibility notice would not 

be advantageous for consumers, and 

HHS sought comment on additional 

situations in which the combined 

eligibility notice would not be 

advantageous. As one commenter 

suggested, HHS explained one situation 

in which a combined eligibility notice is 

not appropriate is where multiple 

family members apply together, and 

some members receive a final eligibility 

determination while other members 

need to be transferred to a different 

agency for a final determination to be 

made for other insurance affordability 

programs. We will work closely with 

states to determine when the issuance of 


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a combined eligibility notice is not 

appropriate, including situations in 

which it is not advantageous for the last 

agency that makes a determination of 

eligibility based on MAGI to issue a 

combined eligibility notice. 

Furthermore, we clarify that while the 

Exchange will make determinations or 

assessments of MAGI-based eligibility 

for Medicaid and CHIP in accordance 

with § 155.305(c) and (d), and 

§ 155.302(b), the Exchange is not 

required to complete the Medicaid and 

CHIP enrollment process for eligible 

individuals. 

We expect that combined eligibility 

notices will include a description of 

appeal rights in accordance with 

§ 155.230(a)(5), including Medicaid 

appeal rights, as well as information 

about how an individual can request a 

full eligibility determination from the 

state Medicaid or CHIP agency. And, as 

noted above, we intend to finalize 

paragraphs (a)(3) and (g)(7) at a future 

date alongside parallel Medicaid 

provisions, and we are reserving these 

paragraphs for the purposes of this final 

rule. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.345 of the proposed 

rule with a few minor modifications. We 

reserve §§ 155.345(a)(3) and (g)(7) for 

finalization at a later date. Pursuant to 

the discussion in the preamble 

associated with 42 CFR 431.10(c) and 

(d), we add new paragraph (h) to clarify 

that the Exchange and the Exchange 

appeals entity must adhere to the 

eligibility determination or appeals 

decision for Medicaid or CHIP made by 

the State Medicaid or CHIP agency, or 

the appeals entity for such agency, 

which is consistent regardless of 

whether the Exchange is making 

eligibility determinations or 

assessments for Medicaid and CHIP. 

Accordingly, we redesignate previous 

paragraphs (h) and (i) as paragraphs (i) 

and (j). 

16. Special Eligibility Standards and 

Process for Indians (§ 155.350) 

In § 155.350, we proposed to make a 

technical correction in paragraph (a)(1) 

to replace the reference to section 36B 

of the Code with a reference to the 

applicable Treasury regulation. We did 

not receive specific comments on this 

section, and are thus finalizing the 

provision as proposed. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.350 of the proposed 

rule without modification. 

17. Enrollment of Qualified Individuals 

Into QHP’s (§ 155.400) 

In § 155.400, we proposed to add 

paragraph (b)(3) to clarify the 

requirement that the Exchange send 

updated eligibility and enrollment 

information for all enrollment-related 

transactions to HHS promptly and 

without undue delay. This added 

further specificity to the existing 

requirement that the Exchange send 

eligibility and enrollment information to 

HHS under paragraph (b)(1) of this 

section. After considering several 

comments in response to this proposal, 

we are finalizing the provision as 

proposed. 

Comment: Commenters were 

supportive of the proposal that the 

Exchange would send updated 

information for all enrollment-related 

transactions to HHS promptly and 

without undue delay. One commenter 

sought clarification about cancellations, 

and wanted to ensure that QHP issuers 

did not violate the Affordable Care Act’s 

ban on discrimination in coverage of 

benefits related to preexisting 

conditions. Another commenter 

inquired about whether the specific 

issuer reporting requirements associated 

with this provision may vary according 

to the different Exchange models. 

Response: We note that the 

cancellations by QHP issuers referred to 

in the preamble to this provision in the 

proposed rule could occur for various 

reasons, such as when an individual 

voluntarily cancels his or her health 

insurance selection before the coverage 

effective date. In terms of issuer 

reporting requirements, each Exchange 

maintains flexibility to determine its 

own issuer reporting requirements 

relative to enrollment transactions, 

consistent with the law and applicable 

regulations. This provision specifically 

addresses only the requirement that the 

Exchanges report updated eligibility and 

enrollment information to HHS. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.400 of the proposed 

rule without modification. 

18. Special Enrollment Periods 

(§ 155.420) 

In § 155.420, we proposed to clarify 

the scope of the special enrollment 

periods throughout this section and add 

paragraph (a)(2) clarifying that our usage 

of ‘‘dependent’’ refers to any individual 

who is or who may become eligible for 

coverage under the terms of a QHP 

because of a relationship to a qualified 

individual enrollee. 

We proposed to amend paragraph (b) 

to specify that the effective dates 

described therein apply both to 

qualified individuals first enrolling in a 

QHP through the Exchange through a 

special enrollment period, as well as to 

current enrollees. As the effective dates 

regarding advance payments of the 

premium tax credit and cost-sharing 

reductions are now addressed in 

§ 155.330(f), we proposed removing 

such language in paragraph (b)(2)(i). We 

also solicited comments as to whether 

we should expand the special effective 

dates in paragraph (b)(2)(i) concerning 

birth, adoption, or placement of 

adoption to cover children placed in 

foster care as well, which would also 

necessitate a corresponding change to 

the triggering events described within 

paragraph (d)(2) that specifically 

address that special enrollment period. 

We proposed to add paragraph 

(b)(2)(iii) regarding the effective dates 

for a special enrollment period under 

paragraphs (d)(4), (d)(5), and (d)(9) to 

align with a similar provision proposed 

in § 155.330(f). This would ensure that 

the Exchange could tailor an effective 

date based on the circumstances 

surrounding an error by the Exchange, 

a contract violation by the QHP issuer, 

or other ‘‘exceptional circumstances’’. 

To align the effective dates under this 

section with the effective dates for 

eligibility as proposed in § 155.330(f), 

we proposed to add paragraph (b)(4) to 

ensure that the Exchange adhere the 

modified effective dates related to 

advance payments of the premium tax 

credit and cost-sharing reductions 

proposed in § 155.330(f). As such, we 

proposed to remove language in 

paragraphs (b)(2) and (b)(3) that 

previously addressed this issue. 

We also proposed to amend paragraph 

(d) to specify which triggering events 

will allow a qualified individual or 

enrollee, or his or her dependent to 

qualify for a special enrollment period. 

This was designed to permit all 

members of a household, in certain 

situations, to enroll in or change QHP’s 

together in response to an event 

experienced by one member of the 

household, and we proposed technical 

corrections throughout paragraph (d) to 

ensure that the revised language allows 

for the dependent to qualify for a special 

enrollment period as well, subject to 

whether the QHP covers the dependent. 

While we did not modify the scope of 

each triggering event described within 

paragraph (d), we solicited comments 

regarding whether we should permit 

such movement of related individuals 

for other special enrollment periods. 

We proposed to add language 

specifying that the triggering event in 

the case of a QHP decertification is the 

date of the notice of decertification, 


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whereas the triggering event in all other 

cases associated with a qualified 

individual or his or her dependent 

losing minimum essential coverage is 

the date the individual or dependent 

loses eligibility for minimum essential 

coverage. 

We also proposed to amend 

paragraphs (d)(6)(i) and (ii) to specify 

that the Exchange will provide a special 

enrollment period for an enrollee or his 

or her dependent enrolled in the same 

QHP who is determined newly eligible 

or newly ineligible for advance 

payments of the premium tax credit or 

who experiences a change in eligibility 

for cost-sharing reductions. We also 

modified the language within paragraph 

(d)(6)(iii) to allow a qualified individual 

or his or her dependent who is enrolled 

in qualifying coverage in an eligible 

employer-sponsored plan and who are 

determined newly eligible for advance 

payments of the premium tax credit to 

qualify for this special enrollment 

period prior to when he or she will 

cease to be eligible for qualifying 

coverage in an eligible employersponsored plan, provided that eligibility 

for advance payments of the premium 

tax credit and cost-sharing reductions 

are not available for an individual who 

is enrolled in an eligible employersponsored plan. Allowing these 

qualified individuals or dependents to 

be determined eligible for this special 

enrollment period up to 60 days prior to 

the end of his or her employersponsored coverage protects them from 

potential gaps in coverage. 

Finally, we proposed to add a new 

paragraph (d)(10) to provide a special 

enrollment period for a qualified 

individual or his or her dependent that 

is enrolled in an eligible employersponsored plan that does not provide 

qualifying coverage, and is allowed to 

terminate his or her existing coverage. 

The Exchange would allow such an 

individual to access this special 

enrollment period up to 60 days prior to 

the end of his or her coverage in an 

eligible employer-sponsored plan, to 

protect them from potential gaps in 

coverage. 

Comment: Several commenters 

supported our clarification in paragraph 

(a) aligning the definition of 

‘‘dependent’’ to refer to those family 

members that would be eligible to enroll 

in coverage under a QHP, and 

commended HHS for allowing 

dependents to change QHPs or enroll in 

a new QHP together with their family 

members for certain special enrollment 

periods when eligible. Some 

commenters wanted to ensure that 

family members would be adequately 

informed about the benefits of enrolling 

in plans together as well as the potential 

drawbacks of failing to do so. However, 

several comments also raised concerns 

that this proposed definition was too 

plan-specific and would ultimately lead 

to greater confusion among families in 

terms of eligibility for special 

enrollment periods. Other commenters 

sought flexibility for the definition of 

‘‘dependent’’ to correspond with state 

law, as opposed to a potentially 

narrower definition set by a QHP issuer. 

Response: We believe that clarifying 

that the meaning of ‘‘dependent’’ aligns 

with 26 CFR 54.9801–2, the regulation 

implementing section 9801(f) of the 

Code, throughout this section, including 

for the special enrollment periods not 

specified in section 9801(f) of the Code, 

helps to promote efficient operations 

and uniform standards to guide QHP 

issuers and Exchanges. Furthermore, 

this will ensure that state laws regarding 

the definition of ‘‘dependent’’ will be 

maintained within the Exchange, as this 

does not contradict state laws, but rather 

corresponds with state laws that already 

require issuers cover certain 

dependents. We intend to provide the 

appropriate information through the 

eligibility determination notice to an 

individual and their family members to 

adequately inform them of all of their 

options when determined eligible for a 

special enrollment period. 

Comment: Some commenters 

supported our proposal to expand 

certain special enrollment periods to 

dependents to allow family members to 

enroll in a new QHP together in 

response to an event experience by one 

member of the tax household, while 

others sought clarification or an 

expansion of this approach to other 

triggering events. Commenters requested 

clarification as to whether the proposed 

rules sought to limit the applicability of 

special enrollment periods to 

dependents enrolled in the same QHP 

with an enrollee, or to members of the 

tax household who may be receiving a 

portion of the advance payments of the 

premium tax credit, as well as if 

paragraph (d)(2) limited the special 

enrollment period to only the qualified 

individual and the ‘‘new’’ dependent. 

Other commenters recommended that 

the special enrollment period in 

paragraph (d)(3) related to citizenship or 

immigration status should apply both to 

the individual who is newly qualified 

along with eligible dependents. 

Response: As noted above regarding 

the definition of ‘‘dependent’’, family 

members eligible to enroll in a QHP are 

determined eligible for a special 

enrollment period when specified in 

paragraph (d) of this section. This is not 

limited to only those members of a tax 

household on whose behalf advance 

payments of the premium tax credit are 

provided or who are enrolled in the 

same QHP. When a family member who 

experiences any of the triggering events 

in paragraph (d) of this section, that 

includes dependents in addition to 

qualified individuals or enrollees, 

selects a QHP as part of a special 

enrollment period, the Exchange will 

permit all members of the tax household 

to enroll together assuming they are all 

eligible to enroll in the particular QHP. 

If a specific family member experiences 

a triggering event, but fails to select a 

QHP within the relevant special 

enrollment period, his or her dependent 

does not have the ability to choose a 

different QHP during this period 

separately. Furthermore, in response to 

comments, we clarify that the special 

enrollment period in paragraph (d)(3) of 

this section, related to citizenship or 

immigration status, will apply to both 

the individual who is newly qualified as 

well as his or her dependents, if eligible 

for coverage under a QHP. We note that 

the special enrollment period described 

in paragraph (d)(3) only applies to an 

individual who was not previously a 

citizen, national, or lawfully present, as 

opposed to an individual switching 

between one of these statuses. 

Comment: In response to HHS’ 

solicitation for comments regarding 

modifying the special effective dates in 

paragraph (b)(2), which correspond 

directly to the triggering events 

described within paragraph (d)(2), many 

commenters urged HHS to include the 

placement of a foster child as a 

triggering event within the special 

enrollment period. Several commenters 

also raised concerns about our proposed 

modifications to the triggering event for 

the special enrollment period described 

in paragraph (d)(6), related to being 

newly eligible or ineligible for advance 

payments of the premium tax credit, or 

a change in eligibility for cost-sharing 

reductions. Some commenters opposed 

our proposal that only enrollees would 

be eligible for this special enrollment 

period if newly eligible or ineligible for 

advance payments of the premium tax 

credit instead of qualified individuals at 

any point during the coverage year, and 

recommended that we not finalize this 

proposal in favor of retaining the 

language adopted in the Exchange final 

rule. 

Response: We appreciate the 

comments regarding placement in foster 

care as it related to special effective 

dates, and will add language in 

paragraph (b)(2) to include the 

placement of a foster child as one of the 

triggering events listed therein, as well 

as make the corresponding change 


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regarding the special enrollment period 

in paragraph (d)(2). We note, however, 

that due to the availability of Medicaid 

to foster children, it is unclear how 

frequently this special enrollment 

period will be used. Due to ongoing 

considerations regarding the risk pool, 

we are finalizing our proposed 

modifications to paragraph (d)(6) to 

specify that this special enrollment 

period only applies to those individuals 

who are already enrolled in a QHP 

through the Exchange. 

Comment: Multiple commenters 

expressed general support for the 

modifications we proposed to special 

enrollment periods throughout 

paragraph (d), including our proposal to 

allow a prospective special enrollment 

period for qualified individuals enrolled 

in eligible employer-sponsored coverage 

to prevent gaps in coverage. In regards 

to the proposed revision to paragraph 

(d)(6)(iii) related to employer-sponsored 

coverage, some commenters suggested 

that the triggering event should not be 

limited to when an individual is 

enrolled in employer-sponsored 

coverage, but should also cover nonenrolled individuals whose offer of 

employer-sponsored coverage does not 

meet the affordability or minimum 

value standards. Other commenters 

wanted HHS to allow a qualified 

individual to be determined eligible for 

advance payments of the premium tax 

credit within the window of their 

special enrollment period, but prior to 

when their employer-sponsored 

coverage ended. 

Response: We believe that individuals 

with an affordable offer of employersponsored coverage that meets 

minimum value should be encouraged 

to enroll in a plan with their employer. 

If after enrolling, their lowest-cost selfonly plan option changes during the 

coverage year such that it no longer 

meets the affordability and minimum 

value standards, and an individual 

reports this to the Exchange, the 

Exchange will accordingly determine 

them eligible for a special enrollment 

period under paragraph (d)(6). As such, 

this provision creates incentives for 

individuals to enroll in affordable 

employer-sponsored coverage, while 

also minimizing potential gaps in 

coverage if a change in coverage occurs 

during the year such that an applicant 

would be newly eligible for advance 

payments of the premium tax credit if 

their employer terminates coverage or 

changes their plan options. In addition, 

we are consolidating proposed 

paragraph (d)(10), which provided a 

special enrollment period to an 

individual who was enrolled in nonqualifying coverage in an eligible 

employer-sponsored plan, into 

paragraph (d)(6) and modifying it to 

clarify that consistent with the 

eligibility standards for advance 

payments of the premium tax credit, the 

special enrollment period is available 

for an individual who is enrolled in any 

eligible employer-sponsored plan, and 

is not eligible for qualifying coverage in 

an eligible employer-sponsored plan. 

For example, this modification ensures 

that an individual who is enrolled in 

family coverage but for whom the 

lowest-cost self-only plan is 

unaffordable in accordance with the 

Code can access this special enrollment 

period, as intended in the proposed 

regulation. We will maintain the 

prospective ability for an enrollee to 

select a QHP up to 60 days before their 

eligible employer-sponsored coverage 

ends or their employer allows him or 

her to drop coverage if the lowest-cost 

self-only plan offer is non-qualifying. 

We note that the Exchange cannot 

provide an individual with advance 

payments of the premium tax credit 

while he or she is enrolled in eligible 

employer-sponsored coverage, as 

specified in 26 CFR 1.36B–2(a)(2). 

Comment: A few commenters raised 

concerns regarding the notice that 

individuals would receive if determined 

eligible for a special enrollment period, 

and wanted to ensure that the notice 

would prevent confusion by providing 

clear guidance to individuals by helping 

them understand the premiums they 

would be responsible for, and to help 

them enroll in a QHP in a timely 

fashion. 

Response: The Exchange will not have 

information regarding actual premiums 

at the time of an initial eligibility 

determination notice, since an 

individual will not have selected a plan 

at that point. HHS also developed model 

notices, released alongside this final 

rule, that reflect how an Exchange 

should clearly communicate an 

individual’s eligibility for an SEP and 

the instructions for how he or she can 

enroll in a QHP. 

Comment: Several commenters also 

urged HHS to specify additional 

triggering events for special enrollment 

periods. Some commenters 

recommended additional triggering 

events described in Medicare Part D, 

unaffordable rate increases, and 

misinformation provided to an 

individual regarding minimum essential 

coverage or advance payments of the 

premium tax credit or cost-sharing 

reductions. One commenter wanted 

HHS to include any change in family 

size as a triggering event, raising 

particular concerns about pregnancy to 

allow a woman enrolled in a 

catastrophic plan to change QHPs prior 

to the birth of a newborn. Several 

commenters requested that HHS clarify 

that certain triggering events would 

qualify as a special enrollment period 

under ‘‘exceptional circumstances’’ 

described in paragraph (d)(9) of this 

section, such as provider religious 

objections to covering certain health 

services to women. 

Response: We believe that the current 

special enrollment periods previously 

proposed appropriately account for 

changes in circumstances that 

necessitate when individuals would 

need to select a new or different QHP 

and balance these needs with 

considerations regarding the risk pool. 

In addition, we note that § 147.104(b)(2) 

specifies that in 2014, an Exchange must 

provide a special enrollment period for 

individuals enrolled in non-calendar 

year individual health insurance 

policies beginning on the date that is 30 

days prior to the date the policy year 

ends in 2014. 

Furthermore, a state may establish 

additional special enrollment periods to 

supplement those described in this 

section as long as they are more 

consumer protective than those 

contained in this section and otherwise 

comply with applicable laws and 

regulations. 

HHS intends to issue further guidance 

related to how Exchanges will 

determine the triggering events that 

constitute ‘‘exceptional circumstances’’ 

under paragraph (d)(9) of this section. 

For the issue raised regarding provider 

religious objections, we believe that 

there are other remedies available to 

consumers who encounter such 

situations. 

Comment: One commenter sought 

clarification that the special enrollment 

periods only apply to the individual 

market as opposed to the small group 

market. 

Response: We confirm that the 

language in § 155.420 regarding special 

enrollment periods only applies in its 

entirety to the individual market. 

Separate provisions pertain to the small 

group market as discussed at 

§ 155.725(a)(3), which excludes 

§ 155.420(d)(3) and (d)(6). 

Comment: Some commenters raised 

concerns regarding our proposals within 

this section that pertain to effective 

dates. Commenters requested 

clarification on whether the effective 

dates related to errors by the Exchange 

or contract violations by QHP issuers 

would involve setting retroactive 

enrollment dates. Some commenters 

suggested that the Exchange provide 

flexibility to individuals related to 

retroactivity for errors as some 


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individuals may not want the Exchange 

to implement an earlier effective date. If 

allowing for retroactivity, commenters 

urged that the Exchange’s flexibility 

related to errors or contract violations 

should only be provided to correct the 

unfair outcome. Commenters asked that 

the effective date be set for the 

individual on what it would have been 

without the error, and requested that the 

Exchange only set the effective date 

according to paragraph (b)(1) of this 

section if the date on which the 

determination would have been 

effective without the error cannot be 

ascertained. Several commenters also 

raised concerns about HHS’ proposal to 

remove the language about effective 

dates for advance payments of the 

premium tax credit and cost-sharing 

reductions within this section. Some 

commenters worried about an Exchange 

instituting earlier effective dates under 

paragraph (b)(3) of this section, 

particularly the FFE in 2014. 

Response: Outside of a technical 

correction within paragraph (b)(3) of 

this section, we did not propose any 

changes to the provision related to the 

Exchange instituting earlier effective 

dates if all participating QHP issuers 

agree to effectuate coverage in a shorter 

timeframe. We believe that there are 

sufficient regulatory safeguards for QHP 

issuers in 2014 if they inform the 

Exchange that they are not prepared to 

institute earlier effective dates. In terms 

of the Exchange’s flexibility related to 

retroactive eligibility and enrollment in 

cases of errors or contract violations, we 

note that the outcome is still contingent 

on an individual selecting a QHP when 

determined eligible for a special 

enrollment period. This preserves the 

ability for an individual to choose to 

enroll on a particular date, or to choose 

not to enroll. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.420 of the proposed 

rule with the following modifications. 

First, in paragraphs (b)(2)(i) and (d)(2), 

we expand the special enrollment 

period and special effective dates for 

birth, adoption, and placement for 

adoption to also include placement in 

foster care. Second, in paragraph (d)(3), 

we clarify that the special enrollment 

period for an individual who was not a 

citizen, national, or lawfully present 

non-citizen and gains such status also 

applies to his or her dependents, if 

eligible under the Exchange eligibility 

rules. Third, we modify paragraph (d)(6) 

to incorporate the special enrollment 

period proposed in paragraph (d)(10), 

with modifications to reflect that it 

accommodates individuals who are 

enrolled in an eligible employersponsored plan, but are not eligible for 

qualifying coverage in an eligible 

employer-sponsored plan. Accordingly, 

we delete paragraph (d)(10). 

19. Termination of Coverage (§ 155.430) 

In § 155.430, we proposed to amend 

paragraph (b)(1) to clarify that it 

specifically refers to enrollee-initiated 

terminations. We proposed to add 

paragraph (b)(1)(i) to account for 

circumstances in which, through 

periodic data matching, an Exchange 

finds an enrollee eligible for other 

minimum essential coverage, thus 

resulting in the enrollee’s ineligibility 

for advance payments of the premium 

tax credit. We also proposed in 

paragraph (b)(1)(ii), that at the time of 

plan selection, the Exchange would 

provide a qualified individual with the 

opportunity to choose to remain 

enrolled in a QHP if the Exchange 

identifies that he or she has become 

eligible for other minimum essential 

coverage, and the enrollee does not 

request a termination in accordance 

with paragraph (b)(1)(i). 

We proposed to amend paragraph 

(d)(1) to specify that changes in advance 

payments of the premium tax credit and 

cost-sharing reductions, including 

terminations, adhere to the effective 

dates specified in § 155.330(f). 

Comment: Several commenters 

cautioned against requiring retroactive 

termination effective dates that would 

necessitate the return or repayment of 

claims, premiums, advance payments of 

the premium tax credit, or cost-sharing 

reduction payments. However, other 

commenters urged HHS to modify 

termination effective dates in 

§ 155.430(d) such that for qualified 

individuals who gained, or were going 

to gain other coverage, the termination 

effective dates would be the day before 

the other coverage begins, regardless of 

when the enrollee notifies the Exchange 

of his or her other coverage. 

Response: We appreciate the 

comments concerning this provision, 

and have modified the termination 

effective date at § 155.430(d)(2)(iii) for 

enrollee-requested terminations such 

that QHP issuers and Exchanges may 

only terminate coverage effective on or 

after the date on which the enrollee 

requests termination, and not 

retroactively. We have also clarified in 

§ 155.430(d)(2)(iv) that the last day of 

coverage in a QHP for an enrollee who 

is determined eligible for Medicaid, 

CHIP or the BHP is the day before the 

individual is determined eligible for 

such coverage, rather than retroactive to 

the Medicaid or CHIP eligibility 

effective date. 

Comment: One commenter 

recommended amending § 155.430(d) to 

specify that changes in eligibility, 

including terminations, must adhere to 

the effective dates specified in 

§ 155.330(f), to ensure alignment of 

processes. 

Response: We agree with the 

commenter, and have modified the 

termination effective dates in 

§ 155.430(d)(3) to cross-reference 

§ 155.330(f). 

Comment: Commenters sought 

clarification of why an enrollee who is 

eligible for other minimum essential 

coverage would elect to remain enrolled 

in a QHP without advance payments of 

the premium tax credit. 

Response: While 26 CFR 1.36B–2 

specifies that premium tax credits are 

not available to support enrollment in a 

QHP through the Exchange for an 

individual who is eligible for other 

minimum essential coverage, such an 

individual is free to remain enrolled in 

a QHP through the Exchange, without 

advance payments of the premium tax 

credit and cost-sharing reductions, if he 

or she remains eligible for enrollment in 

a QHP through the Exchange. It is 

possible that an individual would want 

to maintain enrollment without advance 

payments of the premium tax credit and 

cost-sharing reductions for continuity of 

coverage reasons. As we proposed in 

155.430(b)(2)(ii), the Exchange must 

provide an opportunity at the time of 

QHP selection for an individual to 

choose to remain enrolled in a QHP if 

he or she has become eligible for other 

minimum essential coverage. If the 

individual does not choose to remain 

enrolled in a QHP upon such a change, 

the Exchange would initiate termination 

upon completion of the redetermination 

process specified in § 155.330. 

Comment: Commenters recommended 

that in addition to the opportunity at 

plan selection, enrollees should be 

given a second opportunity to elect to 

remain enrolled in a QHP without 

advance payments of the premium tax 

credit and cost-sharing reductions when 

the Exchange finds the enrollee is 

eligible for other minimum essential 

coverage through a periodic data match. 

Response: Exchanges are free to 

provide additional opportunities for 

individuals to request termination, or to 

request to remain enrolled in a QHP 

without advance payments of the 

premium tax credit or cost-sharing 

reductions, upon losing eligibility for 

such benefits. In paragraph (b)(1)(ii), we 

have clarified that the opportunity 

provided at the time of plan selection is 

effective both in cases of periodic data 

matching as well as when an enrollee 

reports gaining eligibility for other 


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minimum essential coverage that would 

make him or her ineligible for advance 

payments of the premium tax credit and 

cost-sharing reductions. 

Comment: A commenter raised a 

concern that the proposed revision to 

the termination provision in 

§ 155.430(b)(2) broadly permits an 

individual whose coverage was already 

effectuated during the initial open 

enrollment period to notify the 

Exchange or QHP issuer of his or her 

termination of coverage, and switch 

QHPs. 

Response: Individuals are free to 

terminate enrollment in a QHP through 

the Exchange at any time. Individuals 

who wish to begin other coverage in a 

QHP through the Exchange must be 

within an open or special enrollment 

period to do so. Each Exchange has the 

flexibility to decide whether to allow 

enrollees for whom coverage has been 

effectuated to change QHPs during any 

remaining time in an open or special 

enrollment period. For October 1, 2013, 

the FFE will not permit an enrollee to 

change QHPs in such a situation. As 

noted above, such an individual may 

qualify for a new special enrollment 

period as specified in 45 CFR 155.420. 

Comment: One commenter noticed 

that the proposed provisions did not 

clarify whether the Exchange would be 

permitted to terminate coverage 

retroactively to the date of death. The 

commenter recommended that the 

Exchanges have the flexibility to align 

with non-group market standards, and 

allow for retroactive terminations when 

the Exchange obtains updated 

information regarding a death. 

Response: We agree with the 

commenter, and have added paragraph 

§ 155.430(d)(7) to clarify that in the case 

of termination due to death, the last day 

of coverage is the date of death, which 

means that coverage could be 

terminated retroactively. 

Comment: A commenter noticed that 

there were conflicting provisions 

regarding terminations at § 155.430 and 

§ 156.270(b). Section 156.270(b) 

specifies that QHP issuers must notify 

both the Exchange and enrollees of the 

effective date and reason for termination 

at least 30 days prior to the last day of 

coverage, and § 155.430(d) specifies that 

in some cases, QHP issuers may 

effectuate termination in fewer than 30 

days. 

Response: We have modified 

§ 156.270(b) in this final rule to align 

the coverage termination standards for 

Exchanges and QHP issuers. We have 

also clarified that QHP issuers will 

promptly notify both enrollees and the 

Exchange of the termination reason and 

termination effective date when the 

QHP initiates a termination. 

Summary of Regulatory Changes 

We are finalizing the provisions 

proposed in § 155.430 of the proposed 

rule, with the following modifications: 

We modified paragraph (b)(1)(ii) to 

specify that the opportunity provided by 

the Exchange at the time of plan 

selection for an individual to choose to 

remain enrolled in a QHP if he or she 

becomes eligible for other minimum 

essential coverage applies both to 

situations in which eligibility for other 

minimum essential coverage is 

identified via a periodic data match, as 

well as situations in which the 

individual reports the change to the 

Exchange. We modified the termination 

effective date provision at paragraph 

(d)(2)(iii), for enrollee-requested 

terminations, such that QHP issuers and 

Exchanges may only terminate 

prospectively, not retroactively. We 

modified paragraph (d)(2)(iv), which 

concerns terminations for enrollees who 

are determined eligible for Medicaid, 

CHIP or the BHP, such that the last day 

of coverage is the day before the 

individual is determined eligible for 

such coverage, rather than retroactive to 

the Medicaid or CHIP eligibility 

effective date. We also modified the 

termination effective dates in paragraph 

(d)(3) to cross-reference § 155.330(f). We 

added paragraph (d)(7) to clarify that in 

the case of termination due to death, the 

last day of coverage is the date of death. 

In addition, we are finalizing an 

amendment to § 156.270(b) to align the 

coverage termination requirements for 

Exchanges and QHP issuers. 

D. Medicaid Premiums and Cost 

Sharing 

1. Responses to General Comments 

(§ 447.51 through § 447.57) 

Comment: Many commenters 

supported the streamlined and 

consolidated approach to the revised 

cost sharing rules. One commenter 

believed that removing the distinction 

between the requirements of 

sections1916 and 1916A of the Act was 

confusing and lost some of the 

differences in the statutory provisions. 

The commenter was also concerned that 

under the revised rules, states will no 

longer have to explicitly invoke the use 

of alternative (section 1916A of the Act) 

cost sharing through the state plan 

amendment process. One commenter 

stated that CMS should not provide 

more specific requirements in the 

regulations to give states more 

flexibility. 

Response: We maintain the 

streamlined and consolidated structure 

in the final regulation, which we believe 

is consistent with the flexibilities and 

limitations provided in both sections 

1916 and 1916A of the Act. We believe 

that consolidation will simplify the 

rules for beneficiaries, providers, and 

states, and will also simplify the state 

plan amendment (SPA) process. States 

will continue to be required to submit 

a SPA to impose new or revised cost 

sharing or premiums, and CMS will 

review such SPAs to ensure compliance 

with the regulations and statute. 

Comment: Two commenters 

recommended that rather than remove 

current § 447.58 and reserve it, this 

provision should be used to implement 

the long-standing statutory provision 

that the cost sharing provisions of 

sections 1916 and 1916A of the Act 

cannot be waived unless a state meets 

the criteria required under section 

1916(f) of the Act. 

Response: The terms of section 

1916(f) of the Act, relating to the 

requirements states must meet for the 

Secretary to approve a waiver of the cost 

sharing provisions of sections 1916 and 

1916A of the Act are clear. We do not 

believe it is necessary at this time to 

issue regulations setting forth the 

Secretary’s substantive authority under 

section 1115 of the Act, and such an 

action would be outside of the scope of 

this rulemaking. We note that we issued 

procedural regulations at 77 FR 11678 

(Feb. 27, 2012) governing demonstration 

applications in accordance with section 

1115(d) of the Act (as added by section 

10201(i) of the Affordable Care Act). 

Comment: One commenter stated that 

given the statutory constraints 

implemented in the regulations, states 

should be given additional flexibility 

through the use of a standard waiver 

template applicable to newly eligible 

adults. One commenter stated that for 

MAGI-based eligibility groups, states 

should be able to impose premiums and 

cost sharing on individuals with income 

over 100 percent of the FPL that is 

equivalent to what those individuals 

would be subject to if they were 

enrolled in the Exchange. 

Response: Section 1916A of the Act 

and these regulations provide 

considerable flexibility for states to 

impose cost sharing on individuals with 

income over 100 percent of the FPL, 

including the ability to target cost 

sharing, charge higher amounts, and 

make the cost sharing enforceable. But 

the statute provides for cost sharing 

protections for the Medicaid population 

that are not the same as the protections 

for individuals enrolled in coverage 

through the Exchange. To waive the 


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Medicaid cost sharing requirements and 

go beyond the flexibilities provided in 

section 1916A of the Act for individuals 

covered under the state plan, the 

Secretary must find that the 

requirements of section 1916(f) of the 

Act have been met. We do not believe 

that a template for waiving the cost 

sharing requirements in accordance 

with section 1916(f) of the Act is needed 

at this time. Except for certain specified 

eligibility groups, sections 1916 and 

1916A of the Act limit premiums 

imposed under the state plan on those 

with income over 150 percent of the 

FPL. 

Comment: One commenter noted that 

it appears we left in place §§ 447.66 

through 447.82 of the current 

regulations and suggested that CMS 

remove these sections. 

Response: This was a drafting error 

and we have removed those sections in 

the final rule. Those sections reflected 

alternative premiums and cost sharing 

requirements under section 1916A of 

the Act that have been integrated into 

new streamlined cost sharing 

regulations that reflect both sections 

1916 and 1916A of the Act. 

2. Definitions (§ 447.51) 

We proposed to add a definition for 

premiums, which includes enrollment 

fees and other similar charges. We also 

proposed to add a definition for cost 

sharing to encompass deductibles, 

copayments, coinsurance, and other 

similar charges. Because each of these 

charges would be included within cost 

sharing, we proposed to remove 

separate requirements related to 

deductibles, copayments, and 

coinsurance; instead all cost sharing 

would be subject to a single set of rules. 

We also proposed new definitions for 

purposes of the premium and cost 

sharing regulations for preferred drugs, 

emergency and non-emergency services, 

and alternative non-emergency service 

providers, since the cost sharing rules 

vary for these items and services. We 

received the following comments 

concerning the proposed definitions: 

Comment: Several commenters 

recommended that we revise the 

definition of alternative non-emergency 

service provider at § 447.54 to mean ‘‘a 

Medicaid-participating provider, such 

as a physician’s office, health care 

clinic, community health center, 

hospital outpatient department, or 

similar provider that is actually 

available and accessible and can 

provide clinically appropriate services 

for the diagnosis or treatment of a nonemergency condition in a timely 

manner.’’ 

Response: We are finalizing the 

definition as proposed in § 447.51. The 

revisions suggested by the commenters 

regarding the alternative non-emergency 

provider being available and accessible 

and being able to provide for the 

diagnosis or treatment of a nonemergency condition are implicit in the 

requirements that must be met at 

§ 447.54(d) before the imposition of cost 

sharing for non-emergency use of the 

ED. However, we have revised the 

definition of non-emergency services for 

clarity; this revision is not a substantive 

change. 

Comment: Several commenters 

recommended that we remove the term 

‘‘coinsurance’’ from the definition of 

cost sharing at § 447.51, since few states 

charge coinsurance and the statute does 

not use the term. They discussed that 

eliminating the term ‘‘coinsurance’’ 

would further the goal of simplification. 

Response: We agree that very few 

states elect the option to charge 

coinsurance, but it is still an option 

available to states under the statute, 

which allows for other ‘‘similar 

charges.’’ Therefore we are maintaining 

the term ‘‘coinsurance’’ in the definition 

of cost sharing in the final rule. With the 

streamlining of the regulations in this 

final rule, states that do elect to charge 

coinsurance must ensure it does not 

exceed the limits defined in § 447.52– 

54. 

Comment: We solicited comments on 

whether we should add definitions of 

‘‘inpatient stay’’ and ‘‘outpatient 

services’’ to take into account situations 

in which an individual is discharged 

and soon thereafter returns to an 

inpatient facility for continued 

treatment of the same condition. One 

commenter supported the inclusion of a 

definition of ‘‘inpatient stay’’ and 

recommended that we adopt the 

approach taken in Medicare to define a 

‘‘benefit period’’ and prohibit a second 

copay for any inpatient stay within the 

same benefit period. Some commenters 

also supported the addition of a 

definition of ‘‘outpatient services’’ 

giving states broad flexibility to 

determine which services may be 

subject to cost sharing. No commenters 

opposed adding definitions of these 

terms. 

Response: We are adding a definition 

of ‘‘inpatient stay’’ in the final rule at 

§ 447.51 to mean the services received 

during a continuous period of inpatient 

days in either a single medical 

institution or multiple medical 

institutions, and also to include a return 

to an inpatient institution after a brief 

period when the return is for treatment 

of a condition that was present in the 

initial period. We also add that the 

definition of ‘‘inpatient’’ has the same 

meaning as in § 440.2. We believe this 

is in the best interest of beneficiaries 

with chronic conditions who may have 

frequent visits to the hospital or other 

institution for treatment of the same 

condition, and is consistent with the 

limitations on cost sharing established 

in the statute. We also add a definition 

of ‘‘outpatient services’’ for purposes of 

cost sharing to mean any service or 

supply not meeting the definition of an 

inpatient stay. This definition will 

include cost sharing for any services 

outside an institutional setting, not 

otherwise exempt by statute or 

regulations, excluding drugs and nonemergency use of the hospital 

emergency department which are 

defined separately. We note that these 

definitions are applicable only to cost 

sharing and do not constitute any 

change in definition specific to the 

provision of benefits or services. 

Comment: One commenter requested 

CMS provide additional information to 

states regarding how the proposed 

definition of cost sharing will affect the 

offset to expenses that states can report 

for Medicaid FFP (§ 447.51). 

Response: Nothing in the definition of 

‘‘cost sharing’’ at § 447.51 changes the 

rule related to FFP. Per § 447.56(e), 

which is unchanged from current rules, 

no FFP is available for any premiums or 

cost sharing that should have been paid 

by the beneficiary, except for amounts 

that the agency pays as bad debts of 

providers who are paid in accordance 

with Medicare reasonable cost 

principles. 

Comment: One commenter 

recommended revising the definition of 

a premium at § 447.51 to exclude 

enrollment fees because premiums are 

generally applied on an annual or 

periodic basis whereas enrollment fees 

are generally a onetime payment. The 

commenter recommends that states 

should have the flexibility to require an 

enrollment fee in addition to premiums. 

Response: The statute defines a 

premium to include any enrollment fee 

or similar charge, and therefore the 

limitations on total premium charges 

include both premiums and enrollment 

fees. As the Secretary does not have the 

authority to change this requirement, we 

are finalizing the definition of 

premiums as proposed. States do have 

the flexibility to impose both a monthly 

premium and an initial enrollment fee 

within the limitations for premiums 

described in this rule. 

3. Update to Maximum Nominal Cost 

Sharing (§ 447.52) 

We proposed to implement sections 

1916(a)(3) and (b)(3) of the Act relating 


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to nominal cost sharing, and to revise 

the maximum amount of nominal cost 

sharing for outpatient services. For 

beneficiaries with incomes at or below 

100 percent of the FPL, cost sharing for 

outpatient services may not exceed 

nominal. For those with income above 

100 percent of the FPL, cost sharing can 

either be limited to nominal or may 

extend up to 10 or 20 percent of the cost 

of the service, depending on the income 

of the beneficiary. Currently, maximum 

allowable nominal cost sharing is tied to 

what the agency pays for the service, not 

to exceed $3.90 for services for which 

the state pays more than $50. Because 

this can be confusing and burdensome 

for states, providers, and beneficiaries, 

we proposed to allow instead a flat $4 

maximum allowable charge for 

outpatient services. This is a modest 

$0.10 increase from the current 

maximum, and as we noted as a basis 

for the proposed rule, the majority of 

state services are reimbursed at more 

than $50. The proposed changes are 

discussed in more detail in the January 

22, 2013 Medicaid Eligibility Expansion 

proposed rule (78 FR 4658 and 4659). 

We received the following comments 

concerning the proposed update to the 

maximum nominal cost sharing 

provisions: 

Comment: Many commenters wanted 

CMS to eliminate cost sharing for 

Medicaid beneficiaries altogether 

because of the extensive research 

showing that cost sharing on lowincome populations creates barriers to 

accessing needed care, with particular 

consequence for those with special 

health care needs. One commenter 

recommended that CMS revise the cost 

sharing regulations to align with the 

lowest eligibility threshold for Medicaid 

based on modified adjusted gross 

income created by the Affordable Care 

Act (for example, 133 percent of the 

FPL) and create two tiers of cost 

sharing—one for those with income at 

or below 133 percent of the FPL and one 

for those with income above 133 percent 

of the FPL. One other commenter 

recommended that individuals with 

income below 133 percent of the FPL 

should be exempt from cost sharing. 

Response: We recognize the studies 

indicating that cost sharing may impact 

beneficiaries’ access to needed and 

prescribed services, given the low 

incomes of most of those who are 

enrolled in Medicaid. However, the 

statute authorizes states to impose cost 

sharing, subject to certain limitations. 

Additionally, the Affordable Care Act 

did not modify the cost sharing 

provisions of sections 1916 and 1916A 

of the Act. Section 1916A of the Act 

distinguishes between individuals with 

income at or below 100 percent of the 

FPL, those with income above 100 and 

at or below 150 percent of the FPL, and 

those with income above 150 percent of 

the FPL. We do not have the authority 

to revise the income thresholds set out 

in statute or to preclude states from 

imposing cost sharing on individuals 

with income under 133 percent of the 

FPL consistent with the limitations in 

sections 1916 and 1916A of the Act, as 

implemented in these regulations. States 

do not, of course, have to implement 

cost sharing to the extent authorized by 

the statute, and most do not do so. We 

note that in § 447.51 of the final rule we 

add a definition of Federal poverty level 

(FPL) to use the acronym throughout the 

regulation. No substantive change is 

intended. 

Comment: Several commenters stated 

that cost sharing is unnecessary in the 

context of managed care because the 

point of managed care is to manage 

utilization and ensure care is provided 

in the most appropriate settings. The 

commenters argue that managed care 

already achieves the goals that states are 

attempting to achieve through cost 

sharing and that cost sharing interferes 

with the medical management 

effectuated through managed care 

programs. Another commenter believed 

the rules did not provide enough 

flexibility in the managed care context. 

One commenter requested that CMS 

clarify that Medicaid agencies can 

permit managed care organizations to 

not impose cost sharing on enrollees. 

Response: While managed care can 

play a role in ensuring more appropriate 

utilization of health care services, the 

statute does not limit the imposition of 

cost sharing to fee-for-service delivery 

systems. In general, states may not 

establish different cost sharing 

requirements for beneficiaries served by 

a fee-for-service versus a managed care 

delivery system unless all beneficiaries 

have the same opportunity to participate 

in fee-for-service versus managed care 

and to enjoy the benefits of lower cost 

sharing imposed under one service 

delivery mechanism versus the other. 

Section 4708(b) of the Balanced Budget 

Act of 1997 specifically removed the 

statutory cost sharing exemption for 

enrollees in managed care organizations. 

Managed care organizations may choose 

not to impose state plan cost sharing on 

their members, but the state must still 

consider the amount of cost sharing 

under the state plan in determining the 

actuarial soundness of the capitated 

payment to the managed care 

organization. Section 1916A of the Act 

allows states to target cost sharing to 

specified eligibility groups, as described 

at § 447.52(d) of this final rule, and 

states may target cost sharing 

specifically to those eligibility groups 

who may be enrolled in managed care, 

but the targeting must be based on the 

eligibility group and not solely on the 

basis of enrollment in managed care. 

However, states may charge different copays to incentivize the use of certain 

care models—for example lower co-pays 

to encourage use of primary care 

medical homes or other patient-centered 

coordinated care models—to the extent 

that those models provide a different 

service from those offered at a more 

traditional medical provider, and the 

particular model of care is broadly 

available to beneficiaries. This is 

permissible because the state is 

differentiating co-payments based on 

the service provided, and because all 

individuals have the choice to receive 

such services, comparability is met. 

Comment: Some commenters 

recommended that CMS should restore 

the use of the term ‘‘nominal,’’ as that 

term is used in the existing regulations. 

They argue that the Act specifically 

limits cost sharing to ‘‘nominal’’ 

amounts and directs the Secretary to 

determine what constitutes a ‘‘nominal’’ 

amount each year to ensure that cost 

sharing amounts are not onerous for 

beneficiaries. 

Response: The streamlining proposed 

does not negate the requirements at 

section 1916 of the Act that cost sharing 

for certain populations be nominal in 

amount. Section 1916 of the Act gives 

the Secretary authority to define 

nominal cost sharing, which we do at 

proposed §§ 447.52, 447.53 and 447.54. 

The amounts described in these sections 

are the maximum that can be imposed 

on individuals with income at or below 

100 percent of the FPL, since these 

individuals may not be subject to the 

higher cost sharing allowable under 

section 1916A of the Act. The proposed 

amounts will be updated annually based 

on the CPI–U, starting October 1, 2015. 

As mentioned, in streamlining the 

regulations implementing sections 1916 

and 1916A of the Act, we did not use 

the term ‘‘nominal’’ in the regulatory 

text, but the amounts permitted were set 

based on the determination that they 

were nominal amounts. 

Comment: Many commenters agreed 

with severing the tie between maximum 

cost sharing amounts and what the 

agency pays for the service but believed 

that a flat $4 maximum amount 

proposed at § 447.52 was too 

burdensome for Medicaid beneficiaries 

with income at or below 100 percent of 

the FPL. Many commenters 

recommended that CMS should set 

maximum cost sharing amounts based 

on the income and health status of the 


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beneficiaries and recommended using 

Medicare as a model, which establishes 

two tiers for Part D copayments for 

individuals with income at or below 100 

percent of the FPL and individuals with 

incomes over 100 percent of the FPL, 

and recommend the Medicaid cost 

sharing maximum should be limited to 

$2.10 for those at or below 100 percent 

of the FPL which is the approximate 

average of the FY 2013 maximum 

copayment amounts. 

Response: Sections 1916 and 1916A 

of the Act allow for different levels of 

cost sharing for individuals with income 

at or below 100 percent of the FPL 

versus those with income over 100 

percent of the FPL, similar to the twotiered structure established for Medicare 

Part D which the commenters 

recommend. Section 1916A of the Act 

further differentiates maximum cost 

sharing levels for those with income 

above 100 or at or below 150 percent of 

the FPL and those with income over 150 

percent of the FPL. Current regulations 

already allow states to charge all nonexempt beneficiaries up to $3.90 for 

many services, and as described 

previously, we believe the $4 maximum 

charge is comparable, particularly given 

that the next update to this nominal 

amount has been postponed under this 

rule until October 1, 2015. We also note 

that while this is the maximum level at 

which states may set their cost sharing 

obligations, they may establish lower 

levels of cost sharing. 

We note that under current 

regulations at § 447.56, states have the 

option to establish different cost sharing 

charges for individuals at different 

income levels. We inadvertently omitted 

this section from the proposed rule and 

are restoring this option in the final rule 

at § 447.52(g). We specify in the final 

rule that if the state imposes cost 

sharing charges that vary by income, it 

must ensure that lower income 

individuals have lesser cost sharing 

than higher income individuals. 

Comment: One commenter expressed 

concern that the simplified $4 

maximum for individuals with income 

at or below 100 percent of the FPL 

would create a disparity with the 

percentage-based maximum cost sharing 

for individuals with income above 100 

percent of the FPL. 

Response: It was not our intent to 

establish a cost sharing system under 

which lower income beneficiaries could 

be subjected to higher cost sharing than 

their higher income counterparts. Our 

intent was to define maximum nominal 

cost sharing, as described under 

sections 1916(a)(3) and (b)(3) of the Act, 

as $4 for outpatient services. If a state 

seeks to use the authority provided 

under section 1916 of the Act to impose 

nominal cost sharing on individuals 

with income at or below 100 percent of 

the FPL, such cost sharing must also be 

applied to individuals with income 

above 100 percent of the FPL. Section 

1916 of the Act does not allow for 

targeted cost sharing on different groups 

of individuals, so any cost sharing 

established under this authority is 

applicable to all non-exempt 

individuals. The 10 and 20 percent 

maximums established for individuals 

with income over 100 percent of the 

FPL are specific to cost sharing 

established under the authority of 

section 1916A of the Act. This authority 

specifically allows for cost sharing of up 

to 10 percent of the cost of the service 

for individuals above 100 and at or 

below 150 percent of the FPL and 20 

percent for individuals with income 

above 150 percent of the FPL, with 

slightly different maximums for drugs 

and non-emergency use of the 

emergency department. For a specific 

outpatient service, a state may establish 

nominal cost sharing under the 

authority of section 1916 of the Act for 

all non-exempt individuals covered 

under the state plan in an amount not 

to exceed $4 (as adjusted for inflation), 

and the state may also establish targeted 

cost sharing for specified individuals 

under section 1916A of the Act for that 

same outpatient service, in an amount 

not to exceed 10 percent of the cost of 

the service. In such a case, the cost 

sharing imposed under the section 1916 

authority may not exceed 10 percent of 

the cost of the service if that amount is 

less than the maximum nominal amount 

allowed for individuals with income 

under 100 percent of the FPL, because 

the state must ensure that lower income 

individuals are charged less than 

individuals with higher income, as 

described at § 447.52(g). 

Comment: We solicited comments on 

the best approach to cost sharing for an 

inpatient stay for individuals with 

income at or below 100 percent of the 

FPL. We indicated we were considering 

a maximum cost sharing amount less 

than what is allowed in current 

regulation. Most commenters believed 

that the current regulations allowing 

cost sharing of up to 50 percent of what 

the agency pays for the first day of 

inpatient care was too great a burden for 

individuals at this income level. A few 

commenters recommended a maximum 

copayment of $10, one commenter 

recommended $100, and many 

recommended that the cost sharing for 

inpatient care should be the same as for 

outpatient services and be limited to $4. 

Response: We are revising the 

regulations to limit maximum cost 

sharing charges for an inpatient stay, for 

individuals with income at or below 100 

percent the FPL, to $75. This $75 limit 

will encompass most hospital cost 

sharing established by state Medicaid 

programs today and will align with the 

ratio of cost sharing for inpatient versus 

outpatient services with similar charges 

provided under private insurance plans. 

To provide a transition period for the 

small number of states with existing 

inpatient cost sharing exceeding $75, we 

are adding a new paragraph at 

§ 447.52(b)(2). Under paragraph (b)(2), 

states with inpatient cost sharing that 

exceeds $75, as of July 15, 2013, must 

submit a plan to CMS that provides for 

reducing inpatient cost sharing to $75 

by July 1, 2017. We redesignate the 

succeeding paragraphs, accordingly. 

Comment: We solicited comments on 

whether we should define nominal cost 

sharing differently for community-based 

long term services and supports (LTSS) 

due to the frequency with which these 

services are provided and utilized by 

beneficiaries. Many commenters 

supported a separate approach to LTSS 

because they are concerned about the 

financial burden that an individual 

needing these services could face if a 

state were allowed to charge up to $4 for 

each service and most recommended 

that such services be exempted from 

cost sharing. Commenters were also 

concerned that allowing cost sharing for 

LTSS would discourage individuals 

from utilizing LTSS and leave many to 

opt for institutional care, which is more 

costly for states in the long run. Some 

commenters recommended that 

consideration be given to limiting the 

number of copayments permitted per 

week, month, or other specified 

timeframe for those with significant 

service needs, including adults with 

serious mental illness. One commenter 

opposed establishing different limits for 

community-based long term services 

and supports as it would be 

administratively burdensome for states. 

This commenter also pointed out that 

no specific mention is made in the 

regulations to long-term care 

community-based services provided 

under sections 1915(c), 1915(d), 1915(i), 

or 1915(k) of the Act. The commenter 

suggested that perhaps these defined 

packages are the more appropriate 

starting place if separate cost-sharing 

rules for these services are considered, 

but we need to take into account the fact 

that some individuals already contribute 

to the cost of these services in 

accordance with the post-eligibility 

treatment of income rules under part 

435 subpart H. 

Response: We agree with commenters 

that additional protections for nonVerDate Mar<15>2010 18:54 Jul 12, 2013 Jkt 229001 PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 E:\FR\FM\15JYR2.SGM 15JYR2

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exempt individuals receiving 

community-based LTSS are appropriate 

to ensure that receiving care in the 

community, rather than in an 

institution, remains a financially viable 

option for such individuals, but the 

statute does not authorize the Secretary 

to require an exemption. We note that 

few states now impose cost sharing on 

LTSS. We encourage all states to 

consider the significant consequences of 

imposing cost sharing on such services, 

and remind states that they are required 

to comply with the Americans with 

Disabilities Act and Section 504 of the 

Rehabilitation Act as interpreted in the 

Olmstead v. L.C. and E.W (‘‘Olmstead’’) 

to ensure they are not placing 

individuals at risk of 

institutionalization. While we are not 

directing an exemption for LTSS, we 

agree with commenters that additional 

protections are necessary for individuals 

with high service needs, and we are 

revising the proposed aggregate limit for 

premiums and cost sharing to protect all 

beneficiaries with high medical needs. 

As discussed further under § 447.56, the 

5 percent aggregate limit applies to all 

individuals regardless of income. In 

addition, if premiums and cost sharing 

could exceed 5 percent of family 

income, states are required to have a 

mechanism to track such premiums and 

cost sharing in a manner that does not 

rely on beneficiaries. To provide 

protections to individuals with high 

service needs and ensure their cost 

sharing does not exceed the aggregate 

limit, we encourage states to consider 

prospectively ending a beneficiary’s cost 

sharing obligation at a specified time of 

the applicable month or quarter given 

the frequency of utilization and the 

predictability of services provided 

under an approved plan of care, for 

example. We note that such an approach 

must take into account the cost sharing 

for items or services that may be 

received outside the plan of care, such 

as drugs for example, which would also 

contribute to the 5 percent aggregate 

limit. 

We considered different options for a 

separate definition of nominal cost 

sharing specific to LTSS but have 

determined the most effective way to 

ensure ongoing affordability of care for 

beneficiaries who are frequent and 

regular consumers of care, including but 

not limited to those who need LTSS, is 

to ensure that there is an effective 

aggregate cap on cost sharing. Aggregate 

out of pocket limits are a common 

practice in the commercial market and 

we believe the extension of the 

aggregate limit is consistent with 

industry practice and will provide the 

greatest protections for beneficiaries, 

consistent with statutory provisions, 

while still maintaining states’ flexibility 

to establish appropriate cost sharing 

mechanisms for their programs. 

Comment: One commenter believed 

that proposed § 447.52(b)(2), which 

relates to maximum allowable cost 

sharing when the state does not have 

fee-for-service payment rates, is 

confusing and could be read to only 

apply to those with income at or below 

100 percent of the FPL. 

Response: We agree and have revised 

the paragraph, redesignated in this final 

rule as § 447.52(b)(3), to be clear that, 

‘‘in states that do not have fee-forservice payment rates, any cost sharing 

imposed on individuals at any income 

level may not exceed the maximum 

amount established for individuals with 

income at or below 100 percent of the 

FPL.’’ The same clarification to the 

regulation text is made at § 447.53(c). 

Comment: Some commenters 

recommended that the Secretary 

provide states the flexibility to 

determine the cost sharing methodology 

that best aligns with their delivery 

system and provider categories, for 

example allowing flat co-payments and 

premiums, co-payments based on a 

percentage of what the agency pays for 

the service, or premiums calculated as 

a percentage of family income. 

Response: The regulations at 

proposed §§ 447.52, 447.53 and 447.54 

establish maximum limits on the cost 

sharing that states can impose. While 

we are no longer requiring that the 

maximum cost sharing amounts be 

based on what the agency pays for the 

service, nothing in the regulations 

preclude states from setting their cost 

sharing amounts on such basis provided 

that the amounts charged do not exceed 

maximum permissible levels. Similarly, 

provided that the specific limits set out 

in the statute and codified in the 

regulations—including the aggregate 

limit not to exceed 5 percent of family 

income—are respected, states have the 

flexibility under § 447.55 to structure 

premiums in the manner suggested, 

although, as noted, statutory authority 

to impose premiums is limited. 

Comment: We received several 

comments suggesting we clarify that 

states can apply different levels of cost 

sharing for their current Medicaid 

populations as compared to adults who 

will become eligible under the adult 

group. 

Response: In general, any cost sharing 

established under the state plan must 

apply to all beneficiaries who are not 

specifically exempted per the 

requirements at § 447.56(a) to ensure 

comparability. There are two exceptions 

to this requirement, as follows. First, 

states may vary the cost sharing 

obligation by income level, reflected at 

§ 447.52(g) of the final rule, such that 

individuals with family income below a 

certain threshold could be subject to 

lower cost sharing than those at higher 

income levels. A state could, for 

example, decide not to impose cost 

sharing on individuals with incomes 

below 50 percent of the FPL, and to 

impose a $1 copayment on individuals 

with income above 50 percent of the 

FPL. We note that states should have 

adequate processes in place to ensure 

providers and beneficiaries are aware of 

who can be charged what cost sharing 

so it is appropriately applied. Second, 

reflected at § 447.52(d), as redesignated 

in the final rule, states may establish 

different levels of cost sharing for 

targeted groups of individuals with 

income above 100 percent of the FPL. In 

this final rule, we clarify that for cost 

sharing imposed for non-preferred drugs 

and non-emergency services furnished 

in an ED, states may target to specified 

individuals with income below 100 

percent of the FPL as well as those 

above, as discussed below. Thus, states 

could impose different cost sharing on 

individuals eligible in the new Adult 

group, or any other eligibility group, 

with income greater than 100 percent of 

the FPL than that imposed on other 

beneficiaries. 

Comment: One commenter stated that 

proposed § 447.52(f), which lists the 

information that must be included in 

the state plan for each cost sharing 

charge imposed, is revised from the 

current regulations at§ 447.53(d) but 

that we did not provide a rationale for 

the revisions. 

Response: We consolidated the state 

plan requirements currently contained 

in §§ 447.53(d) and 447.68 into one new 

section, redesignated as § 447.52(i) in 

the final regulation. The state plan 

requirements for tracking beneficiary 

cost sharing related to the aggregate 

limit are contained in § 447.56(f)(2) of 

this final rule. In consolidating the state 

plan requirements for cost sharing 

under the authority of both sections 

1916 and 1916A of the Act, we sought 

generally to maintain the current 

requirements, while removing any 

unnecessary regulatory provisions. For 

example, we removed the requirement 

that states describe the basis for 

determining the charge, because these 

regulations no longer require states to 

base their cost sharing charges on what 

the agency pays for the service and this 

provision was no longer necessary. We 

note that we are making minor technical 

changes to paragraph § 447.52(i)(4) to 

improve the structure of the paragraph 


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and delete extraneous language. No 

substantive changes are intended. 

Comment: One commenter 

recommended that CMS require that 

state plans identify whether a cost 

sharing charge is being imposed under 

the authority of section 1916 or section 

1916A of the Act. 

Response: With the streamlining of 

the regulations we do not believe it is 

necessary for states to specify what 

authority they are relying on to impose 

cost sharing. In their state plan, the 

states seeking to impose or continue 

cost sharing will need to detail who will 

be subject to cost sharing, for what 

service, how much, and whether 

providers may deny services for lack of 

payment. We will review state plan 

amendments to ensure compliance with 

sections 1916 and 1916A of the Act and 

these regulations. 

Comment: One commenter requested 

that we clarify that the regulation 

authorizes states to allow providers to 

deny services for nonpayment of cost 

sharing, but does not confer authority 

on states to require providers to do so. 

One commenter recommended that we 

include a provision that providers are 

not prevented from reducing or waiving 

the application of a cost sharing 

requirement on a case-by-case basis. 

Response: The requirements at 

§§ 447.52(e)(1) and (e)(2), as 

redesignated in this final rule, are clear 

that, while states may allow providers to 

deny services to individuals with 

income above 100 percent of the FPL 

who have failed to pay cost sharing 

charges, states are not required to permit 

providers to do so (and providers may 

only deny services if the state opts to 

permit them to do so). Further, 

§ 447.52(e)(3) is clear that even if the 

state exercises this option, providers are 

not prohibited from nonetheless electing 

to provide the service to individuals 

who do not pay their cost sharing 

obligations. This is not at state option— 

it is a provider option—and we do not 

believe it is necessary to be included in 

the state plan. 

Comment: A few commenters 

suggested that the regulations authorize 

states to allow providers to deny 

services for non-payment of cost sharing 

charges in more situations, including for 

those with income at or below 100 

percent of the FPL. The commenters 

believe that such provider enforcement, 

particularly in the context of 

nonemergency use of the emergency 

room, would be appropriate. 

Response: We are unable to extend 

the scope of the regulations beyond the 

statutory authority provided in sections 

1916 and 1916A of the Act, both of 

which only allow states to impose 

provider-enforceable cost sharing to 

non-exempt individuals with income 

over 100 percent of the FPL and thereby 

assure the provision of services to lower 

income individuals who may not be 

able to afford the charge. These 

provisions of sections 1916 and 1916A 

of the Act cannot be waived unless the 

state meets the requirements of section 

1916(f) of the Act. 

Comment: One commenter 

recommended that the table at 

§ 447.52(b) be clarified to clearly specify 

that the amounts are maximum amounts 

to correspond with the language in 

§ 447.52(b). 

Response: We agree with the 

commenter and have made the revision 

to §§ 447.52(b), 447.53(b) and 447.54(b). 

Comment: One commenter asked if 

cost sharing must be imposed or if it is 

an allowable activity. 

Response: States are not required to 

impose cost sharing, it is an option. 

Some states do not impose cost sharing. 

Furthermore, if a state does impose cost 

sharing, it has the option to charge less 

than the maximum amounts. Many 

states do so today. 

Comment: One commenter requested 

clarification as to whether § 447.52(e) 

(relating to the prohibition against 

multiple charges) includes premiums. 

Response: § 447.52(e) has been 

redesignated as § 447.52(f) in this final 

rule and pertains to cost sharing only, 

which is defined in § 447.51 to include 

any copayment, coinsurance, deductible 

or similar charge. Premiums are not 

encompassed in this definition, and 

states may impose both a premium and 

cost sharing on a given individual 

subject to the applicable conditions on 

such charges. 

Comment: One commenter 

recommended revising the rule to allow 

states to waive or reduce cost-sharing 

for outpatient services delivered by 

designated high-value providers or in 

high-value care settings, even if those 

services may otherwise be subject to 

cost-sharing. One commenter requested 

clarification that the cost sharing rules 

may not be applied to different types of 

practitioners based on their licensure 

and that cost sharing within a category 

of services is not used to discriminate 

against health care practitioners acting 

within their state-defined licensure. 

Response: Nothing in the regulations 

prevents a state from determining which 

services are subject to cost sharing and 

the amount charged, or by what type of 

provider the service is delivered. As 

suggested by the commenter, states 

could differentiate cost sharing for 

services provided by a designated high 

value provider as long as the state 

ensures that all beneficiaries have 

access to such providers. 

Comment: One commenter 

recommended that we include in the 

final rule, language currently at § 447.60 

that was omitted from the proposed 

rule, which requires that any cost 

sharing charges imposed by managed 

care organization on Medicaid enrollees 

be in accordance with the requirements 

set forth in the regulations. 

Response: We agree with the 

commenter. The omission of this 

provision was not intentional and we 

have included this requirement in the 

final rule at § 447.52(h). 

Comment: One commenter believed 

that if deductibles are an option for a 

state, they should be administered at an 

individual level on an annual basis 

because the commenter believes 

monthly and/or family-level deductibles 

are complex, confusing, and not the 

standard generally used by health plans 

especially when combined with other 

cost sharing. 

Response: Deductibles are permitted 

at an individual level under the statute 

and these regulations. Any deductible 

imposed by a state must be within the 

maximum amounts established in 

§§ 447.52–54, and subject to the 

aggregate limit described in § 447.56(f) 

of this final rule. 

4. Higher Cost Sharing Permitted for 

Individuals With Incomes Above 100 

Percent of the FPL (§ 447.52) 

We proposed to consolidate the 

current multiple cost sharing rules 

implementing sections 1916 and 1916A 

of the Act, respectively, into one set of 

streamlined cost sharing regulations for 

both statutory authorities at proposed 

§ 447.52. Under section 1916 of the Act, 

states may impose nominal cost sharing 

on individuals not exempted by the 

statute. Under section 1916A of the Act, 

statute states may impose cost sharing at 

higher than nominal levels for 

nonexempt individuals with incomes 

above 100 percent of the FPL. For 

individuals with income above 100 and 

at or below 150 percent of the FPL, 

section 1916A of the Act permits cost 

sharing for nonexempt services up to 10 

percent of the cost paid by the state for 

such services. (Different rules, discussed 

below, pertain to cost sharing for drugs 

and emergency department services). 

For individuals with income above 150 

percent of the FPL, such cost sharing 

may not exceed 20 percent of the cost 

paid by the state. We received the 

following comments concerning the 

proposed provision for higher cost 

sharing permitted for individuals with 

incomes above 100 percent of the FPL: 


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Comment: A few commenters were 

concerned that we proposed to permit 

cost sharing for children. 

Response: We did not propose new 

policy in the proposed rule related to 

cost sharing for children. Section 1916A 

of the Act permits states to impose cost 

sharing on certain children by 

exempting children covered under 

mandatory eligibility categories. This 

statutory option, implemented at 

§ 447.70 of the current regulations, is 

retained in this rulemaking at 

§ 447.56(a)(1)(i) through (VI). We 

revised the description of children who 

are exempt from premiums and cost 

sharing at § 447.56(a)(1)(i)(iii) to reflect 

the consolidation of different statutory 

eligibility groups for children under a 

single regulatory section at § 435.118 of 

the March 2012 final rule. We also made 

a technical change to the description of 

children exempt from premiums and 

cost sharing under § 447.56(a)(1)(i)(iv) to 

reflect the changes in the types of 

assistance available under Title IV–E of 

the Act. These are not substantive 

changes and are intended solely to assist 

states in appropriately identifying those 

children who may be charged premiums 

and cost sharing and exempting those 

who may not, as described in the 

statute. 

Comment: One commenter 

recommended that CMS specify health 

centers’ statutory responsibility related 

to the grants provided under section 330 

of the Public Health Services Act 

(PHSA) to provide services regardless of 

ability to pay and clarify that states may 

not impose on health centers any 

obligations that conflict with these 

requirements. The same commenter also 

recommended that CMS add an 

exception at § 447.56(c)(3), entitling 

FQHCs to full Medicaid payment in 

situations in which they are required to 

collect cost sharing that would directly 

conflict with the section 330 

requirements to waive a portion of the 

Medicaid cost sharing, and at 

§ 447.56(e)(1) to authorize FFP for cost 

sharing amounts waived by an FQHC. 

At a minimum, the commenter 

recommends that CMS and HRSA issue 

joint guidance to minimize the tension 

between the Medicaid and section 330 

of the PHSA regulations concerning 

patient payment obligations for services 

provided by FQHCs. 

Response: The obligations of FQHCs 

related to their section 330 grants, as 

well as reimbursement to FQHCs, are 

beyond the scope of this regulation. 

This regulation does not require that 

FQHCs bill patients for cost sharing, but 

it does require that the payment to the 

provider take into account the cost 

sharing obligation. This requirement 

that states deduct a beneficiary’s cost 

sharing obligation from the payment to 

providers is not new policy. It is 

contained in current regulations at 

§§ 447.57 and 447.82, redesignated at 

§ 447.56(c) in this final rule. FQHC 

services are not specified as exempt 

from cost sharing under sections 1916 or 

1916A of the Act and we do not believe 

that the Secretary has authority to 

mandate that states nonetheless exempt 

such services from cost sharing based on 

FQHCs’ section 330 obligations. States, 

however, do have the flexibility to 

exempt particular services (including 

FQHC services) from cost sharing and/ 

or to adjust the amount of cost sharing 

imposed, consistent with the 

regulations. 

Comment: Some commenters 

recommended permitting flat-dollar 

copayments for all income groups, 

which they think would be easiest for 

enrollees and providers to understand 

and for Medicaid plans to administer. 

One commenter requested that we 

clarify how a limit based on 10 percent 

of the cost the agency pays for the 

service for individuals with family 

income above 100 percent but at or 

below 150 percent of the FPL and 20 

percent of the cost the agency pays for 

the service for individuals with income 

over 150 percent of the FPL, would 

apply to FQHC services reimbursed 

under the prospective payment system 

(PPS). The commenter is concerned that 

because the amount of reimbursement 

under the PPS varies by health center, 

the maximum allowable cost sharing 

obligation for a particular service or 

visit would differ from health center to 

health center, and that this would be 

administratively burdensome for states, 

managed care plans, and providers; 

inequitable for beneficiaries; and could 

impede access to FQHC services. The 

commenter recommends that we revise 

the rule to provide that the maximum 

cost sharing for all individuals for 

FQHC services reimbursed under the 

PPS rate be the same as the maximum 

rate for individuals with income at or 

below 100 percent of the FPL. 

Response: Section 1916A of the Act 

sets the maximum allowable cost 

sharing for individuals with income 

over 100 percent and at or below 150 

percent of the FPL at 10 percent of what 

the agency pays for the service and for 

individuals with income over 150 

percent of the FPL, at 20 percent of what 

the agency pays. We do not have the 

authority to change the maximum 

amount to a flat fee. We note that these 

percentages represent the maximum 

allowable charges. States have the 

flexibility to establish lesser cost sharing 

amounts for any service, and they may 

use a flat fee as long as it does not 

exceed the maximum level permitted. In 

determining the cost sharing for a 

particular service, states also can use the 

average payment made for the service 

across providers or units of the service 

to develop a consistent cost sharing 

amount within the maximum amount 

allowed by statute and regulation. 

Comment: One commenter asked for 

clarification regarding the definitions of 

income that states should use in setting 

cost sharing charges, other than to say 

that the definitions of household 

income in § 435.603 should be used in 

determining the aggregate limit on costsharing. The commenter sought further 

clarification on the meaning of ‘‘family 

income’’ and suggested that states be 

required to describe their methodology 

in their state plan for approval by the 

Secretary as reasonable. 

Response: In the interest of 

streamlining the requirements and 

reducing administrative burden, we are 

not requiring states to include, in their 

state plans, the methodology for 

determining income specific to 

premiums and cost sharing. For 

individuals whose financial eligibility is 

determined based on modified adjusted 

gross income (MAGI), ‘‘family income’’ 

for the purposes of imposing premiums 

or cost sharing or for defining the 

aggregate limit means ‘‘household 

income’’ using MAGI-based methods, as 

set forth in § 435.603. For individuals 

who are exempt from MAGI under 

section 1902(e)(14)(D) of the Act, 

implemented at § 435.603(j) of the 

regulations, we are still examining 

options related to income 

determinations. 

Comment: One commenter stated that 

we do not have the authority to allow 

targeted cost sharing because it would 

violate comparability and recommended 

that we delete proposed § 447.52(c), 

relating to ‘‘targeted cost sharing.’’ 

Another commenter stated that 

additional targeting and variation of cost 

sharing within groups would add 

unnecessary complexity and should not 

be used. 

Response: We are retaining the option 

for states to target cost sharing to 

specified groups of individuals. 

Comparability is required for cost 

sharing imposed under section 1916 of 

the Act. However, section 1916A(a)(1) of 

the Act provides that, ‘‘a State, at its 

option and through a state plan 

amendment, may impose premiums and 

cost sharing for any group of individuals 

(as specified by the State) and for any 

type of services . . . and may vary such 

premiums and cost sharing among such 

groups or types, consistent with the 

limitations established under this 


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section.’’ This provision is codified in 

current regulations at § 447.62(a). 

Therefore, at redesignated § 447.52(d) of 

the final rule states may apply targeted 

cost sharing on specified groups of 

individuals; such cost sharing is limited 

to individuals with income over 100 

percent of the FPL, per the requirements 

of section 1916A of the Act. We have 

revised § 447.52(d), adding paragraphs 

(1) and (2) to clarify that for cost sharing 

imposed for non-preferred drugs and 

non-emergency services furnished in an 

ED, the state may target to individuals 

below 100 percent of the FPL as well as 

those above, as allowed by section 

1916A of the Act. 

Comment: We solicited comments on 

whether the regulations should specify 

ways in which states may target 

different defined groups of individuals 

(with income over 100 percent of the 

FPL) for differential cost sharing under 

proposed § 447.52(c). One commenter 

suggested that the regulation should 

make it clear that targeting must be 

reasonable, that individuals with lower 

incomes may not be charged more than 

those with higher incomes, and that 

targeting may not discriminate based on 

gender, physical or mental disability, 

age, race, ethnicity, or any other 

protected classification. Another 

commenter requested that the Secretary 

include criteria that must be considered 

by states in targeting cost sharing to 

particular types of beneficiaries. 

Response: Section 1916A of the Act 

gives states authority to target premiums 

and cost sharing to any group of 

individuals with income above 100 

percent of the FPL (for cost sharing 

imposed for non-preferred drugs or nonemergency use of the emergency 

department, states can target to 

individuals at all income levels as 

discussed above), and to vary such 

premiums and cost sharing among the 

groups. In examining all the possible 

ways in which targeting could be 

applied, we believe targeting based on 

eligibility group or income level are the 

only targeting methods consistent with 

section 1916A of the Act, which will not 

lead to discriminatory practices. Thus, 

states can choose to impose premiums 

or cost sharing on individuals with 

income above 100 percent of the FPL in 

particular eligibility groups and to vary 

them by income level within the group. 

States may not target solely on the basis 

of delivery system—managed care, feefor-service, and primary care case 

management—but may target eligibility 

groups covered through a specific 

service delivery system like managed 

care. States may not target based on 

disease-type or chronic condition. We 

note that states can impose cost sharing 

on whichever non-exempt service they 

choose for individuals at any income 

level subject to limitations in the 

regulations, and are not required to 

impose cost sharing on all non-exempt 

services in the state plan. For the 

recommendation regarding lower 

income versus higher income 

individuals, as noted above, we added 

§ 447.52(g) to specify that if a state 

imposes income-related charges, it may 

not impose a higher charge for lowerincome individuals than is charged for 

higher-income individuals. 

5. Cost Sharing for Drugs (§ 447.53) 

We proposed to establish a single 

provision governing cost sharing for 

drugs which would apply to nonexempt 

individuals at all income levels. To 

provide additional flexibility to states, 

and to further encourage the use of 

preferred drugs, we proposed to define 

‘‘nominal cost sharing’’ as no more than 

$8 for non-preferred drugs and $4 for 

preferred drugs for individuals with 

income at or below 150 percent of the 

FPL. For individuals with family 

income above 150 percent of the FPL, 

per section 1916A(c) of the Act, a higher 

cost sharing charge may be established 

for non-preferred drugs, not to exceed 

20 percent of the cost the agency pays 

for the drug. While states may not 

impose cost sharing on exempt 

individuals for preferred drugs, states 

may elect to impose cost sharing for 

non-preferred drugs on individuals who 

are otherwise exempt up to the nominal 

cost sharing amount. Cost sharing for a 

non-preferred drug must be limited to 

the amount imposed for a preferred drug 

if the individual’s prescribing provider 

determines that the preferred drug for 

treatment of the same condition either 

will be less effective for the individual 

or will have adverse effects for the 

individual or both. Under the proposed 

rule, states would have the flexibility to 

apply differential cost sharing for 

preferred versus non-preferred drugs. 

For example, a state may charge $1 for 

preferred and $5 for non-preferred drugs 

or $0 for preferred and $8 for nonpreferred drugs. We received the 

following comments concerning the 

proposed cost sharing for drugs 

provisions: 

Comment: A few commenters 

suggested we take an approach that 

distinguishes between formulary generic 

and formulary brand drugs (instead of 

preferred and non-preferred). One 

commenter noted that this approach 

may be more helpful in the managed 

care context. One commenter requested 

clarification as to whether the 

requirement that all drugs be considered 

preferred for cost sharing purposes if the 

agency does not differentiate between 

preferred and non-preferred, is a de 

facto preferred status. The commenter 

was concerned that this could result in 

lower cost sharing for more expensive 

brand name drugs that are not identified 

by the state as non-preferred. One 

commenter was opposed to the 

definition of preferred drugs at 

proposed § 447.51 to include all drugs if 

the agency does not differentiate 

between preferred and non-preferred 

drugs. 

Response: Section 1916A of the Act 

allows states to have different cost 

sharing levels for preferred and nonpreferred drugs, but does not speak to 

generic versus brand name drugs. States 

may use a variety of methods to 

determine preferred and non-preferred 

drugs including whether the drug is a 

brand or generic. States also maintain 

other cost control measures, such as 

mandatory generic substitution policies. 

The definition of preferred drugs, which 

includes all drugs if the agency does not 

differentiate between preferred and nonpreferred drugs, is consistent with 

section 1916A(c) of the Act and current 

regulations at § 447.70(a). 

Comment: Several commenters 

disagreed with the proposed policy to 

allow cost sharing for up to $4 for 

preferred drugs and $8 for non-preferred 

drugs. They described research showing 

that even low prescription drug 

copayments may cause very low income 

people to defer filling prescriptions. The 

commenters argue that Medicaid 

beneficiaries cannot be incentivized to 

select a preferred drug, as is 

accomplished with some success among 

middle class consumers; instead, with 

such high cost sharing differentials, 

Medicaid enrollees will go without the 

‘‘non-preferred’’ drug even if it is 

medically necessary and would work far 

more effectively than a preferred drug. 

These commenters recommend that 

CMS define nominal drug cost sharing 

in relation to the income and health 

status of the Medicaid population and 

amend the table at § 447.53(b) to 

establish maximum cost sharing as 

follows: individuals with family income 

at or below 150 percent of the FPL— 

Preferred drugs: $1.10, Non-preferred 

drugs: $3.30; individuals with family 

income exceeding 150 percent of the 

FPL—Preferred drugs: $1.10; Nonpreferred drugs: $4.20. Two other 

commenters expressed concern with the 

$8 copay for non-preferred drugs if 

states have latitude to classify most or 

all of the brand-name drugs in a 

therapeutic class as non-preferred. One 

commenter stated the proposed increase 

in cost sharing is unnecessary because 

states already have many tools to 


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control prescription drug costs and have 

high utilization of generic drugs. Other 

commenters appreciated the flexibility 

proposed for cost sharing. One 

commenter welcomed the increased 

maximum cost sharing, and one 

commenter stated that allowing states to 

charge higher cost sharing for nonpreferred drugs, when effective, lowercost alternatives are available, is a 

reasonable policy. 

Response: We agree that cost sharing 

is just one of many tools that states may 

use to manage drug utilization, and 

states may determine that higher cost 

sharing does not enhance their efforts to 

promote the use of preferred drugs. 

However, we also agree that it is a tool 

permitted under the statute. In the final 

rule we are maintaining the option for 

states to impose cost sharing of up to $4 

for preferred drugs and $8 for nonpreferred drugs for all individuals, 

including those with income at or below 

150 percent of the FPL, and for those 

with income above 150 percent of the 

FPL, to continue to establish higher 

non-preferred drug cost sharing of up to 

20 percent of the cost of the drug. As 

described at § 447.53(e), as revised in 

the final rule, if a prescriber finds that 

the non-preferred drug is medically 

necessary, the state must have a process 

in place to limit cost sharing for that 

drug to the amount for preferred drugs. 

Comment: One commenter suggested 

that the final rule require a cap on cost 

sharing for non-preferred drugs as a 

necessary protection for this vulnerable 

population. 

Response: The 5 percent aggregate 

limit on cost sharing in the current 

regulation and included in this final 

regulation at § 447.56(f) applies to all 

cost sharing, including that for nonpreferred drugs. States have the option 

to establish additional cost sharing 

limits for particular services, such as 

drugs at § 447.56(f)(5) of the final rule, 

but we do not have the authority to 

mandate a cost sharing cap specific to 

non-preferred drugs. 

Comment: A few commenters stated 

that CMS was circumventing the 

statutory requirements of section 1916A 

of the Act by setting two different 

maximum ‘‘nominal’’ amounts for 

preferred and non-preferred drugs 

because the Act requires that cost 

sharing for all drugs imposed on 

individuals with income under 150 

percent of the FPL must not exceed the 

‘‘nominal’’ cost sharing as otherwise 

determined under section 1916 of the 

Act. Additionally, the commenter notes 

that section 1916A of the Act explicitly 

allows states to charge up to twice the 

nominal amount for non-emergency care 

furnished in an emergency department, 

so if Congress intended to allow the 

same for non-preferred drugs, Congress 

would have provided such an option in 

the statute. 

Response: Section 1916 of the Act 

gives the Secretary the authority to 

define nominal cost sharing. There is 

nothing in the statute which requires a 

single definition of what is considered 

to be nominal. Moreover, the general 

cost differential between preferred and 

non-preferred drugs merits a different 

nominal maximum for each type, 

therefore we believe it is appropriate to 

establish a $4 nominal maximum for 

preferred drugs and an $8 nominal 

maximum for non-preferred drugs. 

Comment: One commenter expressed 

concern for vulnerable populations that 

require certain classes of drugs, such as 

HIV antiretroviral drugs, and 

recommended they be available at the 

‘‘preferred’’ drug cost-sharing level. 

Response: States have the discretion 

to designate which covered drugs 

within each class of drugs will be 

considered preferred or non-preferred. 

Beneficiaries must always have access 

to necessary drugs at the preferred drug 

rate because a given drug cannot be 

considered non-preferred unless the 

state has an equivalent drug available at 

the preferred rate. In addition, 

§ 447.53(e), as revised in this final rule, 

requires states to provide a nonpreferred drug at the preferred drug cost 

sharing level, if the prescribing provider 

determines that the preferred drug 

would be less effective or have adverse 

effects on the individual. 

Comment: A few commenters 

recommended that we convert the nonpreferred prescription drug copayment 

to a flat dollar amount for individuals 

with incomes over 150 percent of the 

FPL instead of basing cost sharing on 

what the agency pays for the drug. 

Response: As discussed above, section 

1916A of the Act sets the maximum 

allowable non-preferred drug cost 

sharing level for individuals with 

income over 150 percent of the FPL at 

20 percent of what the agency pays for 

the drug. CMS does not have the 

authority to change the maximum 

amount allowed to a flat fee, but states 

may construct their charges as flat fees 

as long as such fees are within the 

maximums established by law. 

Comment: One commenter supported 

the proposed increase of allowable cost 

sharing for non-preferred drugs when 

Medicaid recipients and not Medicaid 

pharmacy providers bear responsibility 

for the higher cost sharing. The 

commenter requested that, when 

enhanced cost sharing for prescription 

drugs is implemented, we mandate 

states to condition services on the 

payment of such cost sharing. 

Alternatively, the commenter requested 

that CMS mandate states to develop a 

mechanism whereby participating 

pharmacies can submit unpaid cost 

sharing amount to the state for payment. 

One commenter recommended that HHS 

require states to implement cost sharing 

provisions for prescription drugs and to 

permit providers to withhold 

medication (whether preferred or nonpreferred) from beneficiaries for failure 

to pay cost sharing. 

Response: The imposition of 

premiums or cost sharing is an option 

permitted states under sections 1916 

and 1919A of the Act and cannot be 

mandated by the Secretary. The statute 

stipulates that providers, including 

pharmacies, may not deny services to 

individuals with income at or below 100 

percent of the FPL due to inability to 

pay their cost sharing obligation. States 

have the option to allow providers to 

deny services to individuals with 

income over 100 percent of the FPL if 

they do not pay required cost sharing. 

If a state opts to allow providers to deny 

services if the individual does not pay 

the cost sharing, this must be indicated 

in their state plan. Regardless of 

whether an individual pays the cost 

sharing, states must deduct the payment 

made to the provider by the amount of 

the individual’s cost sharing obligation 

in accordance with § 447.56(c) of this 

final rule. We do not have the statutory 

authority to alter these requirements in 

the manner being suggested by the 

commenters. 

Comment: One commenter requested 

clarification as to whether states have 

the option to impose cost sharing for 

non-preferred drugs on individuals 

otherwise exempt from cost sharing. 

One commenter recommended that 

states should have the option to impose 

cost sharing on exempt individuals for 

certain classes of prescription drugs that 

the state identifies as elective or 

controversial, such as narcotics. 

Response: Section 1916A of the Act 

allows states to impose cost sharing for 

non-preferred drugs on otherwise 

exempt individuals, provided that such 

cost sharing does not exceed a nominal 

amount. At § 447.53(b) of the final rule, 

we have defined nominal cost sharing 

for preferred drugs as no more than $4 

and for non-preferred drugs at no more 

than $8. We are revising § 447.53(d) in 

the final rule to clarify that cost sharing 

for non-preferred drugs imposed on 

otherwise exempt populations cannot 

exceed the nominal amount defined in 

§ 447.53(b) in accordance with section 

1916A(c) of the Act. While states may 

impose cost sharing on some drugs and 

not other drugs, all cost sharing must be 


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consistent with the requirements of 

§ 447.53(b) and, if there are no drugs 

identified as non-preferred drugs in a 

class, cost sharing for drugs in that class 

cannot exceed the nominal amounts for 

preferred drugs. Identification of 

‘‘elective’’ or ‘‘controversial’’ drugs is 

beyond the scope of this regulation. 

Comment: A few commenters stated 

that the proposed cost-effectiveness 

standard for determining which drugs 

are non-preferred is inappropriate and 

does not include the anti-discrimination 

protections contained in the Affordable 

Care Act. The commenter believed that 

this standard would threaten access to 

needed treatment and would result in 

broad, one-size-fits-all policies that do 

not reflect important differences in 

individual beneficiary needs and 

circumstances. One commenter 

recommended that the definition of 

preferred drugs not be restricted to lowcost or exclusively generic agents, and 

should encourage the inclusion of highvalue brand agents, especially when a 

generic equivalent is not available. The 

commenter believed that preferred and 

non-preferred drugs should be chosen 

based on clinical value, not solely on 

the basis of acquisition price. One 

commenter recommended that the 

definition of preferred and nonpreferred drugs be determined based on 

clinical assessment of the individual. 

One commenter recommended that the 

definition of preferred drugs be 

expanded to include the generic 

equivalent of brand named drugs. 

Response: The definition of preferred 

drugs for cost sharing purposes at 

§ 447.51 does not prescribe the type of 

drugs that the state designates as 

preferred or non-preferred, and 

requiring the inclusion of certain drugs 

on a state’s preferred drug list is beyond 

the scope of this regulation. However 

we do not believe that preferred drug 

programs limit individuals’ access to 

necessary drugs. These regulations 

require that states establish a process 

through which a beneficiary can access 

a non-preferred drug, which his or her 

provider has determined to be medically 

necessary for the beneficiary, with cost 

sharing limited to the amount 

applicable to preferred drugs. We 

believe that this policy would not 

violate any non-discrimination 

standards since all beneficiaries are 

subject to the Medicaid requirements of 

the preferred drug list, which direct that 

it be developed in a manner that does 

not discriminate against any particular 

class of individual, or type of disability 

or disease. In addition, as previously 

noted in guidance (SMDL #04–006, 

September 9, 2004), states need to 

assure that patients continue to have 

access to needed medications so in 

addition to cost considerations, a 

preferred drug list should be based on 

clinical criteria that considers the 

efficacy of the drug to others in that 

class. 

Comment: Several commenters were 

concerned that allowing states to 

impose cost sharing of up to 20 percent 

of what the agency pays for a nonpreferred drug, for individuals with 

income over 150 percent of the FPL, 

would be overly burdensome for 

individuals with chronic conditions. 

Response: Section 1916A(2)(B) of the 

Act provides for the flexibility to 

impose cost sharing at these levels for 

individuals with incomes above 150 

percent of the FPL. We did not propose 

to change this flexibility, which is 

codified at § 447.74 of the current 

regulations, and is moved to § 447.53 in 

this final rule. The Secretary does not 

have the authority to change or reduce 

the percentage of the cost of the item or 

service that is the maximum allowable 

cost sharing because the statute is clear. 

We note that such cost sharing is subject 

to the aggregate limit codified at 

§ 447.56(f) of this final rule. 

Comment: Several commenters 

suggested that we revise § 447.53(e) to 

provide more detailed requirements for 

the process states must have in place to 

allow for cost sharing at the preferred 

drug level, in the case of a non-preferred 

drug that the prescribing provider has 

determined would be less effective or 

may adversely affect the individual. The 

commenters stated that any process 

should take into account the electronic 

claims processing used by pharmacies 

and pharmacists and should be easy for 

the prescriber to invoke. Several 

commenters also recommended that 

states be required to describe their 

process in the state plan and provider 

manuals. One commenter believed that 

this requirement undermined the intent 

of the regulations to encourage the use 

of less expensive preferred drugs 

because for a state to actually cover a 

non-preferred drug, the prescriber 

already has to receive priorauthorization, meaning most, if not all 

non-preferred drugs would have to be 

provided at the lower cost sharing 

amount. 

Response: States must have a process 

in place for providing prior 

authorization of medically necessary 

drugs that meets the existing 

requirements at section 1927(d)(5) of the 

Act, therefore we are not prescribing 

additional requirements in this 

regulation or requiring states to describe 

the process in their state plan. However, 

we are revising the final rule to add the 

word ‘‘timely’’ to the process states 

must use to allow for cost sharing at the 

preferred drug level in accordance with 

the section 1927 of the Act. We will 

monitor state implementation and 

determine whether additional guidance 

is necessary. 

6. Cost Sharing for Emergency 

Department (ED) Services (§ 447.54) 

Sections 1916(a)(3) and 1916(b)(3) of 

the Act, allow states to obtain a waiver 

to impose cost sharing for nonemergency use of the ED that does not 

exceed twice the nominal amount for 

other outpatient services. Section 

1916A(e)(2)(A) of the Act also allows 

cost sharing for individuals with income 

above 100 percent of the FPL and at or 

below 150 percent the FPL in an amount 

not to exceed twice the nominal amount 

as determined by the Secretary. We 

proposed to consolidate current 

regulations at § 447.54(b) and § 447.72 

related to non-emergency use of the ED 

into proposed § 447.54. To facilitate 

states’ ability to utilize flexibility 

provided in existing regulations, for all 

individuals with income at or below 150 

percent of the FPL, we proposed to 

allow cost sharing of no more than $8, 

which represents twice nominal, for 

non-emergency use of the ED without 

requiring a waiver. The proposed 

changes are discussed in more detail in 

the January 22, 2013 Medicaid 

Eligibility Expansion proposed rule (78 

FR 4659 and 4660). We received the 

following comments concerning the 

proposed provision for cost sharing 

specific to non-emergency use of the ED: 

Comment: Many commenters opposed 

the policy to allow up to $8 for nonemergency use of the ED because it 

might cause individuals with incomes at 

or below 150 percent of the FPL to 

forego necessary services, including 

potentially lifesaving services, and 

because many Medicaid beneficiaries go 

to the ED because they lack access to 

regular sources of primary care. 

Foregoing necessary services may result 

in adverse health outcomes requiring 

more expensive care later. Many 

commenters recommended that the 

maximum allowable cost sharing should 

be set at $3.30 for individuals with 

family income at or below 100 percent 

of the FPL, $6.30 for individuals with 

family income from 101–150 percent of 

the FPL and $12.00 for individuals with 

family income above 150 percent of the 

FPL. Several other commenters 

recommended that the maximum 

allowable cost sharing amount for nonemergency use of the ED be limited to 

$4 to align with what is proposed for 

other services. Several commenters 

recommended that CMS allow states the 

flexibility to impose cost sharing for 


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non-emergency use of the ED that 

exceeds $8, to decrease inappropriate 

use of the ED. One commenter 

recommended that up to three times the 

outpatient services copayment (rather 

than two) should be allowed in states 

that are working to expand access to 

alternative options for care. Many 

commenters recommended that for 

individuals with family income at or 

below 100 percent of the FPL, we revise 

the regulations to allow cost sharing for 

non-emergency use of the ED, only 

when no cost sharing (rather than lesser 

cost sharing) is imposed to receive such 

care through an outpatient department 

or other alternative health care provider 

in the geographic area of the hospital ED 

involved. 

Response: We believe it is important 

for states to have options to incentivize 

care in the most appropriate settings 

and to encourage individuals to develop 

a regular source of care, to the extent 

that beneficiaries are assured timely 

access to needed care. One option to 

achieve this is through cost sharing 

initiatives, therefore, we are finalizing 

§ 447.54(b) as proposed, however we 

note that we have made some minor 

technical changes in the final rule to 

spell out the term emergency 

department instead of using the 

acronym ED and to refer to nonemergency services instead of treatment. 

The technical changes are for 

clarification only and are not intended 

to be substantive. The $8 maximum for 

non-emergency use of the ED is twice 

the nominal amount for outpatient 

services, which is the maximum 

allowable cost sharing permitted under 

sections 1916 and 1916A of the Act for 

individuals with income at or below 150 

percent of the FPL. The statute does not 

limit the amount states can impose for 

non-emergency use of the ED on 

individuals with income over 150 

percent of the FPL (other than through 

the aggregate cap of 5 percent of family 

income), and we do not have the 

authority to limit such cost sharing 

through regulation. Section 1916 of the 

Act requires that there be an accessible 

alternative provider to provide the 

services, but does not require that there 

be no cost sharing for such services and 

section 1916A of the Act requires there 

be lesser cost sharing for services 

provided by the alternative provider, or 

no cost sharing if the cost sharing is 

being applied to an otherwise exempt 

individual. To streamline the 

requirements to make it 

administratively feasible for states to 

meet this requirement, we are 

maintaining the proposed policy in the 

final rule that services provided by an 

alternative provider must be available 

with lesser cost sharing or no cost 

sharing only if the individual is 

otherwise exempt from cost sharing. We 

note that for individuals with income at 

or below 100 percent of the FPL the 

state may not allow a provider— 

including a hospital ED—to deny 

services in the event that an individual 

is unable to pay the cost sharing. 

We note that in the final rule we are 

deleting § 431.57 of this subchapter 

relating to the waiver of cost sharing 

requirements for states to impose cost 

sharing for non-emergency services 

furnished in an ED. This language is 

redundant with § 447.54(b) of the final 

rule, which allows states may impose 

cost sharing up to twice the nominal 

amount for such services through the 

state plan. In addition to this technical 

change, we updated the citations to the 

cost sharing regulations at §§ 435.121, 

435.831, 436.831, 438.108, 440.250, 

447.15, 447.20, and 457.540. 

Comment: One commenter 

recommended that CMS make public 

the amount of documented Medicaid 

savings in states that have imposed cost 

sharing for non-emergency use of the 

ED. 

Response: We are not revising the rule 

to require states to document savings. 

However, we will examine available 

options for sharing best practices and 

other data available from states with 

successful ED diversion programs. 

Comment: Several commenters noted 

a drafting error at § 447.54(c), which 

they believe should be revised to read: 

‘‘. . . not to exceed the maximum 

amount established in paragraph (b) of 

this section. . .’’ The commenters also 

believed we made an error in 

§ 447.54(d), which they think should 

read ‘‘. . . to impose cost sharing under 

paragraph (a), (b) or (c) of this section 

of non-emergency. . . .’’ 

Response: We agree that there was a 

drafting error in paragraph (c) and have 

corrected the provision in this final rule. 

However, paragraph (d) was written as 

intended, and is finalized as proposed. 

Paragraphs (a) and (c) provide the 

authority to impose cost sharing, while 

paragraph (b) describes the maximum 

allowable amounts. 

Comment: One commenter 

recommended that cost sharing for nonemergency use of the ED should be 

permitted for any visit to the ED that 

does not result an inpatient stay. 

Response: Sections 1916 and 1916A 

of the Act prohibit cost sharing for 

emergency services. As there are many 

emergency conditions and services that 

do not result in an inpatient stay, the 

commenters’ suggested policy would 

violate the statute. 

Comment: Many commenters 

recommended that states that impose 

cost sharing for non-emergency services 

provided in an ED be required to permit 

newly-enrolled individuals to make at 

least one non-emergency ED visit before 

requiring them to pay this cost-sharing 

obligation. 

Response: States have the option to 

establish such a policy under current 

regulations and the new rule as 

finalized, but we do not think it 

appropriate to require it. 

Comment: Some commenters 

suggested that we designate 

underserved areas and/or certain 

periods of time in which insufficient 

access warrants exemption from cost 

sharing for non-emergency use of the 

ED. 

Response: Per § 447.54(d), before 

imposing cost sharing for nonemergency use of the ED, the hospital 

must provide the individual with a 

name of and location of an available and 

accessible provider and provide a 

referral to coordinate scheduling. If 

geographical or other circumstances 

prevent the hospital from meeting this 

requirement, the cost sharing may not 

be imposed. 

Comment: Several commenters asked 

that we refrain from adding more 

specificity or requirements in the 

regulation itself, for example imposing 

further requirements or pre-conditions 

on a state’s authority to impose cost 

sharing for non-emergency services 

provided in an ED, which they believed 

would limit the ability of states to 

account for variation across states. A 

few commenters were concerned that 

we had added a new requirement in 

stipulating that hospitals ensure that an 

alternative provider is available to 

provide needed services with lesser or 

no cost sharing. They were concerned 

the use of the term ‘‘ensure’’ in 

proposed § 447.54(d)(2)(ii) would 

require hospitals to ‘‘ensure’’ something 

beyond their control, presenting 

unnecessary administrative burden for 

state administrators and hospitals. Many 

commenters stated that CMS should 

remove the requirements at proposed 

§ 447.54(d)(2)(iii) that ED staff provide a 

referral and coordinate scheduling with 

an available and accessible alternative 

non-emergency services provider, 

because it is administratively 

burdensome and takes time and 

resources away from patient care. In 

addition, they argue that compliance is 

infeasible given hospitals’ limited 

access to current, accurate information 

on the availability of appointments with 

other providers. The commenters 

believed that these requirements will 

make it difficult for states to take up the 


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option afforded under the statute and 

that it would be less costly for an ED to 

provide treatment for the nonemergency conditions than to 

coordinate a referral. One commenter 

stated that the requirement to provide a 

referral is unnecessary because in many 

state managed care programs, every 

enrollee has a primary care provider and 

24-hour call-in lines are available, 

enabling hospitals providing the care to 

contact either the enrollee’s primary 

care provider or the 24-hour call-in line 

as an alternative to following the steps 

listed in § 447.54(d). Another 

commenter stated that the language in 

proposed § 447.54(d)(2)(iii) differs from 

the requirement at current 

§ 447.80(b)(2)(iii), and that the revised 

language would impose additional 

burdens on states’ ability to effectively 

implement cost sharing. The commenter 

noted that current § 447.80(b)(2)(iii) 

requires hospitals to provide ‘‘a referral 

to coordinate scheduling of treatment by 

an available and accessible alternative 

non-emergency services provider,’’ 

while proposed § 447.54(d)(2)(iii) 

requires hospitals to ‘‘coordinate 

scheduling and provide a referral for 

treatment by this provider.’’ 

Response: We did not intend to add 

additional requirements for hospitals 

related to cost sharing for nonemergency use of the ED. Rather, our 

intent was to clarify the existing 

language. To eliminate any confusion, 

we are replacing the word ‘‘ensure’’ 

with ‘‘determine’’ in § 447.54(d)(2)(iii), 

as redesignated in the final regulation. 

This is consistent with the statutory 

requirement that before collecting cost 

sharing for non-emergency use of the 

ED, hospitals must provide individuals 

with the name and location of an 

available and accessible provider that 

can provide the service with lesser or no 

cost sharing. States share in this 

responsibility, of course, and will need 

to work with hospitals to ensure that 

hospitals are able to determine whether 

such care is available and accessible. 

The goal underlying the policy is to 

ensure that the right care is provided at 

the right time in an appropriate setting. 

The language in proposed 

§ 447.54(d)(2)(iii), redesignated at 

§ 447.54(d)(2)(iv) of this final rule, was 

intended to clarify the referral 

requirement, which is in current 

regulation at § 447.80(b)(2), and which 

reflects statutory language. We did not 

intend to change the substance of the 

rule. However, to avoid any confusion 

we are revising § 447.54(d)(2)(iv) to 

reinstate the language from the current 

rule that hospitals must provide a 

referral to coordinate scheduling for 

treatment by an alternative provider. To 

confirm that the alternative nonemergency services provider is ‘‘actually 

available and accessible’’ as required by 

statute, it is important that scheduling 

be done onsite, with the beneficiary 

present, to the maximum extent 

possible. We recognize that this may not 

be possible during certain hours of the 

night, in which case follow-up 

scheduling may be necessary. Hospitals 

can and should take advantage of the 

existence of a call line and assigned 

primary care providers in satisfying the 

coordination requirements in the statute 

and regulations, and states should 

assure, before imposing such cost 

sharing, that procedures are in place 

that can facilitate hospitals’ ability to 

carry out these responsibilities, 

including outside of regular business 

hours. 

Comment: One commenter requested 

clarification of the referral requirement, 

including whether a patient should have 

a scheduled appointment, or just the 

information necessary to make an 

appointment, with an alternative 

provider when he or she leaves the 

hospital; whether community clinics or 

FQHCs may serve as alternative, nonemergency providers for referral from 

the ED; and the appropriate process for 

completing a referral when physician 

offices are closed. One commenter 

requested that we define ‘‘timely 

manner’’ in proposed § 447.54(d)(2)(ii). 

Response: The regulations are not 

prescriptive on the exact process to be 

used by hospitals. States have flexibility 

to establish processes to meet the 

coordination goals in the statute and 

regulations in a manner that best 

accommodates their systems and 

provider networks. The extent to which 

a state relies on managed care or 

establishes patient centered medical 

homes, for example, may impact how a 

state would meet the requirements in 

the regulation. As noted above, 

whenever possible, hospitals should 

attempt to schedule the appointment 

while the patient is present, but if that 

is not feasible, the hospital would need 

to follow up to ensure that an 

alternative provider is ‘‘actually 

available and accessible’’ in a timely 

manner, as required by statute. 

Section 1916A (e)(4)(B) of the Act 

describes an alternative non-emergency 

services provider as one ‘‘that can 

provide clinically appropriate services 

for the diagnosis or treatment of a 

condition contemporaneously with the 

provision of the non-emergency services 

that would be provided in an emergency 

department.’’ Any Medicaid 

participating providers, including 

clinics that can do so, are acceptable. 

Because we do not think that there is a 

uniform definition of timeliness that is 

appropriate for all situations, we are not 

defining ‘‘timely manner’’ in the 

regulation. In meeting a general 

timeliness standard, however, states 

should direct hospitals to consider the 

medical needs of the individual to 

assess (1) whether care is needed right 

away or if a short delay in treatment 

would be sufficient, and (2) any 

particular challenges the person may 

face in accessing follow-up care, such as 

leave from employment, child care, or 

ability to receive language assistance 

services or accessible care for people 

with disabilities. States will need to 

work with the hospitals, non-emergency 

providers, and managed care 

organizations participating in their 

Medicaid programs to design a referral 

network and system that fulfills the 

statutory requirements prior to imposing 

cost sharing amounts for non-emergency 

services provided by a hospital ED. The 

intent of this provision is to provide an 

additional tool to ensure that care is 

provided in a timely and appropriate 

manner to drive better quality at lower 

costs. It is not to be implemented in a 

way that results in people not getting 

the care they need. 

Comment: One commenter believed 

that we omitted from proposed 

§ 447.54(d) some of the statutory 

requirements that hospitals must meet 

before collecting cost sharing for nonemergency use of the ED, including the 

obligation to inform the recipient that 

he or she does not have an emergency 

medical condition and the requirement 

to notify the recipient of the applicable 

cost sharing for treatment of a nonemergency condition in the ED. 

Response: We did not omit any of the 

statutory requirements in the proposed 

rule. The requirement that the hospital 

inform individuals whether or not they 

need emergency services, and of the cost 

sharing obligation to receive services in 

the ED is implicit in the requirements 

that the assessment be performed and 

that the hospital provide the individual 

with the name and location of an 

available and accessible alternative 

provider that can provide services with 

lesser or no cost sharing. We do not see 

a need to state as much explicitly in the 

text of the regulation. However, for 

clarity, we have added a new paragraph 

(i) at § 447.54(d)(2) requiring hospitals 

to ‘‘inform the individual of the amount 

of his or her cost sharing obligation for 

non-emergency services provided in the 

emergency department.’’ Proposed 

§§ 447.54(d)(2)(i) through (iii) are 

redesignated in this final rule as 

§§ 447.54(d)(2)(ii) through (iv), 

respectively. 


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Comment: A few commenters 

recommended that the Secretary ensure 

that the safeguards at § 447.54(d) are 

observed by states that impose cost 

sharing for non-emergency use of the 

ED. 

Response: We will ensure through the 

state plan amendment process that the 

requirements of § 447.54(d) are met, and 

expect to oversee implementation to the 

extent feasible. 

Comment: One commenter 

recommended that the final rule include 

requirements for oversight and reporting 

to ensure that higher cost-sharing is not 

imposed without verification of the 

availability of alternative providers able 

to furnish non-emergency care. In 

addition, the commenter recommended 

enhanced requirements for verification 

in rural and other areas with a shortage 

of primary care physicians and 

specialists that will see Medicaid 

patients that there is available and 

accessible care by an alternative 

provider. A few commenters 

recommended that, at a minimum, the 

ED should be required to specify what 

the particular patient’s cost-sharing 

obligation will be, including in the case 

of a patient with income above 150 

percent of the FPL, that the patient may 

be responsible for 100 percent of the 

charges. The commenter also believed 

that, prior to an emergency room 

providing non-emergency care to a 

Medicaid beneficiary the hospital 

should be required to obtain written 

consent from the individual to receive 

the non-emergency care in the ED and 

to take responsibility for any costsharing obligation for such care. 

Response: The statute, codified at 

§ 447.54(d) in this rulemaking, sets forth 

clear requirements that states must 

effectuate to establish cost sharing for 

non-emergency use of the ED, including 

a requirement that hospitals provide 

information on available and accessible 

providers who can provide the needed 

non-emergency services with lesser or 

no cost sharing. States must ensure that 

hospitals are able to meet these 

requirements, whether in a rural, 

suburban, or urban setting. We ensure 

that states are in compliance with the 

statute and regulations through the state 

plan amendment process and will 

consider whether further reporting is 

necessary for oversight purposes. For 

cost sharing for individuals with income 

above 150 percent of the FPL, we note 

that the statute does not require states 

to make such patients responsible for 

100 percent of the charges for nonemergency use of the ED, but also does 

not limit the cost sharing that states can 

impose on individuals in this income 

bracket for non-emergency use of the 

ED. At proposed § 447.52(b)(3), finalized 

in this rulemaking at § 447.52(c), any 

cost sharing imposed for any service 

may not equal or exceed the amount the 

agency pays for the service; such cost 

sharing is also limited by the 5 percent 

aggregate limit described at § 447.56(f). 

Comment: Several commenters stated 

that the rule does not provide a clear 

methodology for determining ‘‘nonemergency’’ status. One commenter 

highlighted the preamble discussion in 

the proposed regulation about the 

difficulty in determining whether a 

service is needed to address an 

emergency situation based on Current 

Procedural Terminology (CPT) codes 

alone, and the lack of guidance on other 

standards that could be used, and 

requested that CMS more clearly define 

‘‘non-emergency’’ or provide states 

latitude to define as needed. Another 

commenter shared our concerns about 

CPT codes and noted that, while the 

imposition of non-emergency ED cost 

sharing is not administratively feasible 

without some type list, any protocols 

must also avoid violation of the 

emergency screening requirements 

under the Emergency Medical 

Treatment and Active Labor Act 

(EMTALA). One commenter stated that 

the EMTALA requirements are 

sufficient to determine which 

individuals should be subject to cost 

sharing for non-emergency use of the 

ED, and that states should not have to 

describe the processes in the state plan. 

Another commenter expressed concern 

about beneficiaries’ general ability to 

distinguish between ‘‘emergency’’ and 

‘‘non-emergency’’ symptoms. The 

commenter was concerned that 

adequate protections be in place to 

ensure that beneficiaries are not 

punished for seeking emergency care 

when doing so is appropriate under a 

prudent layperson standard. Another 

commenter agreed that in distinguishing 

between ‘‘emergency’’ and ‘‘nonemergency’’ conditions, hospitals must 

use the prudent layperson definition, 

not a discharge diagnosis. One 

commenter stated clinical reviews of ER 

claims to look at presenting conditions 

such as chest pain seem would be 

administratively burdensome, and could 

delay treatment, referral, or payment to 

providers. Other commenters requested 

that we either clearly define ‘‘nonemergency’’ services or provide states 

with the latitude to define them as 

needed, and several commenters asked 

us to maintain the maximum level of 

flexibility in the rule to facilitate 

appropriate and feasible 

implementation of non-emergency ED 

cost sharing. 

Response: ‘‘Non-emergency’’ services 

are defined at § 447.51, which cross 

references to the current definition of 

emergency services at § 438.114. This 

definition relies on a prudent layperson 

standard, in that a medical condition 

manifests itself by acute symptoms of 

sufficient severity that a prudent 

layperson that possesses an average 

knowledge of health and medicine 

could deduce that they need emergency 

medical attention. We agree that it is 

difficult to implement a system to 

differentiate non-emergency from 

emergency services for cost sharing 

purposes in a way that ensures 

beneficiary protections consistent with 

the prudent layperson standard. We 

continue to believe that the use of 

diagnosis and procedure codes alone is 

not an appropriate process for 

determining non-emergency services, as 

doing so would not adequately protect 

beneficiaries legitimately seeking ED 

services based on the prudent layperson 

standard, for whom a CPT code assigned 

after care is provided may indicate a 

non-emergency condition. We sought 

comments on feasible methodologies for 

states and hospitals to use to make this 

distinction, but did not receive any 

recommendations. Therefore, we are not 

making any revisions in the final rule to 

prescribe how states can and should 

distinguish between ‘‘emergency’’ and 

‘‘non-emergency’’ conditions for cost 

sharing purposes. We remain open to 

states’ proposals for distinguishing 

between ‘‘emergency’’ and ‘‘nonemergency’’ conditions and will review 

such proposals through the state plan 

amendment process. As successful 

models emerge we will develop further 

guidance. 

Comment: One commenter asked if 

would be reasonable to have the 

Medicaid agency reimburse hospitals for 

the medical screening that they must 

conduct. Another commenter asked if a 

hospital could be reimbursed for 

providing a referral and giving advice 

on other appropriate providers. 

Response: To the extent the provider 

properly bills the Medicaid agency for 

an assessment or evaluation conducted 

on a Medicaid beneficiary, the provider 

would be entitled to payment for the 

service as provided for in the state’s 

Medicaid State plan. States may also 

establish payment specifically for the 

medical screening exam required by 

EMTALA and/or for coordination of 

referrals to alternative non-emergency 

services providers. 

Comment: One commenter suggested 

that CMS allow hospitals to charge the 

maximum allowable cost-sharing 

amount for non-emergent care, and then 

refund the beneficiary if needed. The 


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commenter expressed concern that 

hospitals will not be able to impose cost 

sharing on beneficiaries after they have 

left the ED. 

Response: The statute requires that 

before providing and imposing cost 

sharing for non-emergency services in 

an ED, the hospital must inform the 

beneficiary of the cost sharing obligation 

tied to those services and provide the 

name and location of an available, 

accessible, alternative provider that can 

provide the services with no or lesser 

cost sharing. This allows the beneficiary 

to forgo treatment in the ED if they do 

not have the ability to pay the cost 

sharing. If the individual decides to stay 

and receive the services at the ED, the 

hospital can impose the cost sharing 

while the person is still present. 

Comment: One commenter stated that 

for hospitals, the collection of Medicaid 

cost-sharing amounts for non-emergency 

care in ED settings can prove difficult, 

leading to lack of payment and increases 

in bad debt. 

Response: The statute allows states to 

impose cost sharing for non-emergency 

care in an ED and sets out the 

requirements that hospitals must meet 

to collect such cost sharing. We do not 

have the authority to take away this 

option or ignore the statutory 

requirements and will work with states 

and the hospital community to share 

best practices and potentially issue 

further guidance. 

Comment: One commenter requested 

clarification as to whether urgent care 

centers are subject to the guidelines for 

cost sharing for non-emergency use of 

the ED. 

Response: No, this rule only pertains 

to non-emergency services furnished in 

an ED. 

Comment: A few commenters 

supported what they believed was a 

new option regarding cost sharing for 

non-emergency services provided in the 

ED to beneficiaries who are otherwise 

exempt from cost sharing. 

Response: This is not a new option. 

This is a statutory option described at 

section 1916A(e)(2)(B) of the Act and 

codified in current regulations at 

§ 447.70(b). 

Comment: One commenter stated that 

instead of focusing on cost sharing, 

which could result in harm to patients, 

we should focus on best practices for 

medically sound ways of reducing 

unnecessary emergency department 

visits, such as electronic exchange of 

patient information, care coordination, 

patient education on appropriate use of 

the ED, and guidelines for prescribing 

narcotics. One commenter was 

concerned that focusing on cost sharing 

does not address why patients seek care 

in an ED, and that hospitals trying to 

decrease non-emergency ED use will 

inadvertently run afoul of either 

EMTALA or their state’s emergency 

access rules. The commenter 

recommended that some form of safe 

harbor be established for hospitals 

trying, in good faith, to encourage the 

most appropriate use of resources for 

non-emergency care. 

Response: We agree that there are 

many strategies which states can and 

have implemented to address the 

problem of non-emergency use of 

hospital EDs. However, whether or not 

cost sharing is the most effective way to 

address non-emergency use of the ED, it 

is an option provided to states in the 

statute. We are available to work with 

all states in exploring the full range of 

options to reduce non-emergency use of 

the ED, and to share best practices 

which emerge. 

7. Premiums (§ 447.55) 

We proposed one simplified, 

consolidated section of the regulations 

to implement the options authorized 

under sections 1916 and 1916A of the 

Act relating to the imposition of 

premiums on individuals with family 

income above 150 percent of the FPL, 

and describe the options to impose 

premiums for specific populations. The 

proposed changes are discussed in more 

detail in the January 22, 2013 Medicaid 

Eligibility Expansion proposed rule (78 

FR 4660). We received the following 

comments concerning the proposed 

premiums provisions: 

Comment: Several commenters 

recommended that we revise proposed 

§ 447.55(a)(2) to clarify that states are 

allowed to impose premiums on 

qualified disabled and working 

individuals if the individual’s income 

exceeds 150 percent of FPL. The 

commenters also noted that proposed 

§ 447.55(c) does not reflect statutory 

requirements in section 1916 of the Act 

that limit aggregate premium expenses 

for individuals provided medical 

assistance under section 

1902(a)(10)(A)(ii)(XV) or 

1902(a)(10)(A)(ii)(XVI) of the Act and 

the Ticket to Work and Work Incentives 

Improvement Act of 1999 (TWWIIA), to 

no more than 7.5 percent of the 

individual’s family income for those 

whose annual income does not exceed 

450 percent of the FPL. 

Response: We agree with the 

commenters. Due to a drafting error, the 

allowable premiums and limitations 

described at proposed § 447.55 were not 

clear. We have revised paragraph (a) and 

paragraph (c) (redesignated as paragraph 

(b) for clarity), of § 447.55 to address 

this error. Paragraph (b)(1) describes the 

limitations on prepayment; paragraph 

(b)(2) describes the options for 

terminating an individual for failure to 

pay, paragraph (b)(3) describes the 

statutory requirements noted by the 

commenter for individuals receiving 

medical assistance under TWWIIA, and 

paragraph (b)(4) describes the state’s 

option to waive premiums for any 

individual or family. In addition to 

these clarifications, we revised the 

description of pregnant women who 

may be charged premiums at 

§ 447.55(a)(1) to reflect the 

consolidation of different statutory 

eligibility groups for pregnant women 

under a single regulatory section at 

§ 435.116 of the March 2012 final rule. 

This is not a substantive change and is 

intended solely to assist states in 

appropriately identifying those 

beneficiaries who may be charged 

premiums, as described in the statute. 

As noted above, we made a similar 

revision to the description of children 

who are exempt from premiums and 

cost sharing at § 447.56(a)(1)(i) through 

(iii) of this final rule. 

Comment: Several commenters 

recommended that § 447.55 be revised 

to clarify that premiums can only be 

imposed on medically needy 

individuals after their spend-down 

amount is met and they are receiving 

Medicaid; they cannot be included as 

part of the spend down. 

Response: An individual cannot be 

subject to a premium unless he or she 

is eligible for Medicaid. States may not 

impose a premium until the month in 

which the individual has met his or her 

spend-down and becomes eligible. 

Comment: Several commenters 

recommended that the regulations 

require a process for waiving premiums 

in cases of undue hardship; and that the 

process adopted by a state should be set 

forth in the state plan and reflected in 

state law and other public documents. 

One commenter asked for CMS to 

provide examples of ‘‘hardship.’’ 

Response: The decision to waive 

premiums due to hardship is a matter of 

state policy. Such policies do not 

require prior authorization from the 

Secretary. Therefore we are not revising 

the regulations as suggested. 

Comment: One commenter stated that 

‘‘sliding scale’’ premiums imposed on 

the medically needy under § 457.55 

must actually ‘‘slide’’ so that there is a 

lowest-income group of individuals for 

whom there is no premium and that 

premiums for higher income individuals 

increase linearly or quasi-linearly up to 

$20 for those at or near 150 percent of 

the FPL. One commenter stated the $20 

allowable premium should be removed 

from the regulation. 


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Response: Section 1916 of the Act 

expressly permits states to impose 

premiums on medically needy 

individuals on a sliding scale, but does 

not require that the lowest income 

medically needy individuals are 

charged $0 premiums. Current 

regulations at § 447.52 allow for 

premiums on a sliding-scale basis up to 

$19, and we are finalizing the proposal 

to increase that amount to $20. We have 

revised the regulations at § 447.55(a)(5) 

to clarify that, if premiums are imposed 

on medically needy individuals on a 

sliding scale, the agency must impose 

an appropriately higher premium for 

individuals at higher levels of income, 

with $20 being the maximum allowable 

premium at the highest income level. 

States may choose to set their highest 

premium at a level below $20. 

Comment: One commenter asked for 

clarification of the consequences for 

‘‘non-payment’’ that are described at 

proposed § 447.55(c)(1)(ii) and (2)(ii). 

The commenter recommends that 

termination be allowed for failure to 

make full payment, and that partial 

payment is not adequate to prevent 

termination from the program. 

Response: As noted previously, due to 

a drafting error, we have revised 

§ 447.55(c) (redesignated as paragraph 

(b) of the final rule) to clarify the 

consequences for non-payment for all 

individuals subject to premiums. As 

described in paragraph (2), except for 

medically needy individuals, states 

have the option to terminate any 

individual who has failed to pay all or 

part of his or her premium obligation. 

The state may not terminate an 

individual prior to 60 days after the 

failure to pay the premium. The state 

may not terminate an individual who, 

during that time period, has paid the 

premium due in full. To reiterate 

current policy, we also added a new 

paragraph (5) to § 447.56(b) to indicate 

that no further consequences can be 

applied for non-payment of Medicaid 

premiums, including ‘‘lock-out’’ 

periods. We note that we redesignated 

paragraph (c) as paragraph (b) in the 

final rule to move the state plan 

requirements after the section related to 

consequences for non-payment. This 

change is to improve the flow of the 

regulation and is not intended to be 

substantive. 

Comment: One commenter was 

concerned that proposed § 447.55(c) 

would permit states to terminate 

Medicaid coverage for failure to pay 

premiums for as little as 60 days. While 

the commenter calls this an 

improvement over the current 

regulation, which they believe does not 

establish any minimum grace period, 

the commenter believed that states 

should be encouraged to work with 

beneficiaries on a payment schedule to 

avoid a termination. 

Response: Proposed § 447.55(c), 

redesignated as § 447.55(b) in the final 

rule, does not represent new policy. 

This option, established under both 

sections 1916 and 1916A of the Act, is 

currently codified at § 447.80 for 

individuals with income over 150 

percent of the FPL who are subject to 

premiums under section 1916A of the 

Act. In this final rule, we are simply 

codifying the requirements as they 

relate to premiums imposed under the 

authority of section 1916(c) of the Act. 

8. Limitations on Premiums and Cost 

Sharing (§ 447.56) 

We proposed a single streamlined 

approach to implement the limitations 

on premium and cost sharing 

established under sections 1916 and 

1916A of the Act wherever the policies 

align. Sections 1916(a), (b), and (j), and 

1916A(b)(3) of the Act specify certain 

groups of individuals as exempt from 

premiums and/or cost sharing, 

including certain children, pregnant 

women, certain American Indians and 

Alaska Natives (AI/ANs), certain 

individuals residing in an institution, 

individuals receiving hospice care and 

individuals eligible under the optional 

eligibility group for individuals with 

breast and cervical cancer under 

§ 435.213 of this part. The proposed 

changes are discussed in more detail in 

the January 22, 2013 Medicaid 

Eligibility Expansion proposed rule (78 

FR 4660 and 4661). We received the 

following comments concerning the 

proposed limitations on premiums and 

cost sharing provisions: 

Comment: Two commenters 

recommended that proposed § 447.54(c), 

which permits states to impose cost 

sharing for non-emergency use of the ED 

on individuals otherwise exempt from 

cost sharing, should not apply to AI/AN 

beneficiaries who are exempt from cost 

sharing. 

Response: We are finalizing the 

regulation as proposed. Sections 

1916A(c)(2)(B) and 1916A(e)(2)(B) of the 

Act permit states to charge nominal cost 

sharing to individuals otherwise exempt 

from cost sharing under section 

1916A(b)(3)(B) of the Act for nonpreferred drugs and non-emergency use 

of an ED. There is no differential 

treatment under the statute for AI/ANs 

as compared to other individuals who 

are otherwise exempt from cost sharing. 

However, such cost sharing must be 

limited to the nominal and neither a 

pharmacy nor a hospital ED may deny 

services if the individual does not pay 

the cost sharing. 

Comment: We solicited comments 

about requiring states to periodically 

renew an AI/AN’s cost sharing 

exemption based on current or previous 

use of a service from an Indian health 

care provider or through referral under 

contract health services. A number of 

commenters supported proposed 

§ 447.56(a)(1)(vii) to exempt AI/ANs 

who are currently receiving, or have 

ever received a service from an Indian 

health care provider or through referral 

under contract health services from any 

cost sharing. Several commenters were 

concerned that requiring renewal of 

status for the exemption would be 

administratively burdensome for both 

AI/AN individuals and state Medicaid 

agencies and could lead to exempt 

individuals being subject to 

impermissible cost sharing. A few 

commenters recommended that if 

renewal of the AI/AN exemption status 

is required, that such renewal be limited 

to no more than once every three years, 

which is the period of time used by IHS 

for determining ‘‘active users’’ in an IHS 

or tribal service unit. No commenters 

supported a renewal policy for AI/AN 

exemption. 

Response: We are adopting the AI/AN 

exemption as proposed because we do 

not see any particular utility in 

requiring renewal of status, since the 

underlying eligibility for IHS or tribal 

health services is unlikely to change, 

and we agree that renewal of status can 

be burdensome for both the beneficiary 

and the provider. Once the exemption 

for an individual at § 447.56(a)(1)(x), as 

redesignated in this final rule, is 

established, a renewal of such 

exemption will not be necessary. We 

note that we added a definition of 

contract health service at § 447.51 for 

clarity and made a technical correction 

under the definition of Indian to reflect 

revised citations to 25 U.S.C due to 

changes made by the Affordable Care 

Act. We do not intend these to be 

substantive changes to the regulations. 

Comment: One commenter 

recommended we permit states to 

implement specific processes to track 

separate cost sharing for AI/ANs related 

to the 5 percent aggregate limit as 

permitted by current regulation. 

Response: We do not see a need for 

states to separately track cost sharing for 

AI/AN beneficiaries, the majority of 

whom are exempt from cost sharing 

under the regulations. For any 

individuals permissibly subject to cost 

sharing, the same 5 percent aggregate 

limit applied to other beneficiaries, and 

the same requirement to track cost 

sharing charges, would apply. 


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Comment: A few commenters 

suggested states should have broad 

latitude in applying verification 

procedures to exempt AI/ANs who are 

eligible for or currently or have ever 

received a service from an Indian 

provider or through referral under 

contract health services (CHS) from 

premiums and cost sharing respectively, 

and that procedures that create the least 

burden on individuals, including 

electronic processes, be employed by 

states. They recommended that selfattestation of status for the AI/AN cost 

sharing exemption be permitted, that if 

verification is required that electronic 

data matching should be used to the 

maximum extent possible, and that we 

provide a list of possible documents 

which states could use when electronic 

verification is not available. 

Response: There are no specific 

federal requirements regarding the 

process for verifying premiums and cost 

sharing exemptions for AI/ANs. States 

have flexibility to establish their own 

processes for verifying who is eligible to 

receive or has ever received a service 

from an Indian provider or through 

referral under CHS, including the use of 

self-attestation, electronic data matches 

or reasonable paper documentation, as 

long as the process is not unduly 

burdensome on AI/ANs. 

Comment: One commenter requested 

that CMS clarify that family planning 

supplies are exempt from differential 

cost-sharing for non-preferred drugs. 

Another commenter recommended that 

CMS clarify that the limitations on 

premiums and cost sharing also apply to 

family planning-related services, 

including office visits. Commenters 

believed that this clarification is 

particularly important for coverage of 

family planning under the state plan, 

permitted under section 

1902(a)(10)(A)(ii)(XXI) of the Act, as 

added by section 2303 of the Affordable 

Care Act, which defines ‘‘medical 

assistance’’ covered under this option to 

include both family planning and family 

planning-related services. 

Response: Under sections 1916 and 

1916A of the Act and § 447.53 and 

§ 447.70 of the current regulation, 

family planning services and supplies, 

including contraceptives and 

pharmaceuticals for which the state 

properly claims or could claim at an 

enhanced federal match, are exempt 

from cost sharing. We did not propose 

any changes to this exemption, which is 

codified at § 447.56(a)(2)(ii) of this final 

rule. We do not have the statutory 

authority to require states to exempt 

‘‘family planning-related services,’’ 

which are a separate category of 

services, but states have the option to do 

so. 

Comment: One commenter requested 

that we clarify that pregnant women 

receiving services during a period of 

presumptive eligibility are also exempt 

from premiums and cost sharing. 

Response: Individuals who are 

receiving benefits during a presumptive 

eligibility period, but who have not yet 

been determined Medicaid eligible by 

the agency, based on a regular 

application, including pregnant women, 

may not be subjected to the premiums. 

In addition, all pregnancy-related 

services are exempt from cost sharing, 

including during a period of 

presumptive eligibility. As described in 

the March 2012 final eligibility rule, 

‘‘Pregnancy related services’’ is 

presumed to include all services 

otherwise covered under the state plan 

unless the state has justified 

classification of a service as not 

pregnancy-related in its state plan. 

Comment: Many commenters 

supported the provision in proposed 

§ 447.56(a)(1)(v) to give states the option 

to exempt individuals from cost sharing 

if they are receiving long term services 

and supports in a home or communitybased setting and are required to 

contribute to the cost of care in a 

manner similar to the post-eligibility 

treatment of income for institutionalized 

individuals under part 435 subpart H of 

the regulations. Many commenters 

recommended that we require states to 

exempt such individuals because 

imposing cost sharing could push 

individuals into more restrictive settings 

in violation of the requirements of the 

Americans with Disabilities Act (ADA), 

as applied by the Supreme Court in the 

Olmstead decision. A few commenters 

recommended that we require states to 

exempt all individuals receiving 

services in a home and communitybased setting regardless of whether they 

are required to contribute to the cost of 

their care. Finally, one commenter 

asked that we clarify that we are not 

proposing to extend the same posteligibility treatment of income rules 

used for institutional services to 

individuals receiving services in a home 

and community-based setting who, in 

addition to any contribution for the cost 

of their care, also generally have to 

cover other basic living expenses, such 

as for housing and food, and would not 

be able to cover such expenses if they 

were required to contribute all but a 

nominal amount of their income to 

cover the cost of the services received, 

as is the case for institutionalized 

individuals. 

Response: As noted above, we do not 

see a statutory basis to require this 

exemption, therefore in the final rule, at 

§ 447.56(a)(1)(viii), as redesignated, we 

maintain the option for states to exempt 

individuals receiving services in a home 

and community-based setting, whose 

medical assistance is reduced by 

amounts reflecting available income 

other than required for personal needs. 

This option is consistent with state 

authority under section 1916A of the 

Act to target cost sharing to specified 

groups. In addition, states may target 

cost sharing at particular types of 

services, and could determine not to 

impose cost sharing on home and 

community-based services. We also note 

that if an individual has his or her 

medical assistance reduced to account 

for available income, the individual 

would be able to deduct any premiums 

or cost sharing from the calculation of 

available income used to determine the 

level of medical assistance provided. 

There would be no modification of 

current regulations relating to posteligibility treatment of income or shareof-cost. Again, we remind states of their 

obligations under Olmstead. 

Comment: One commenter 

recommended that former foster care 

children covered under § 435.150 

should be exempt from premiums and 

cost sharing. Several commenters 

recommended that states be given the 

express option to exclude medically 

frail individuals from cost sharing. 

Response: While we understand that 

these are populations upon which states 

may not wish to impose cost sharing, we 

do not see a clear basis to support a 

federally-mandated exemption. States 

are free to use targeted cost sharing, in 

accordance with § 447.52(d), to limit the 

impact of cost sharing as needed to 

address issues of non-exempt 

populations that the state determines 

are particularly vulnerable. 

Comment: One commenter requested 

clarification on the provision at 

§ 447.56(c)(3), which is specific to 

providers that the agency reimburses 

under Medicare reasonable cost 

reimbursement principles. The 

commenter asked whether the policy 

that an agency may increase its payment 

to offset uncollected deductible, 

coinsurance, copayment, or similar 

charges that are bad debts of such 

providers was a change or consistent 

with current law. 

Response: This policy is contained in 

the current regulations at § 447.57(b). 

However, consistent with the new 

definition of cost sharing included at 

§ 447.51 of this final rule, we are 

replacing the reference to ‘‘deductible, 

coinsurance, copayment, or similar’’ 

with ‘‘cost sharing’’ in the final rule. 


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Comment: Many commenters 

recommended that we amend sections 

1916 and 1916A of the Act to clarify 

that the preventive services included in 

the EHBs are exempt from cost sharing, 

because low income individuals 

enrolled in Medicaid ABPs may be 

responsible for cost sharing for some of 

the preventive services that are available 

to higher income individuals in the 

private market with no cost sharing. 

Response: Section 1916A of the Act 

and the final rule at § 447.56(a)(2)(iii) do 

require exemption of preventive 

services for children under age 18. At a 

minimum such services must include 

those specified at § 457.520, which 

reflect the well-baby and well child care 

and immunizations in the Bright 

Futures guidelines issued by the 

American Academy of Pediatrics. We do 

not see a basis to broaden this statutory 

exemption under the Medicaid program 

to extend to preventive services for 

older individuals. States have the 

flexibility to exempt additional services 

from cost sharing and could determine 

to exempt preventive services for all 

beneficiaries. 

Comment: Many commenters 

recommended that we exempt services 

associated with ‘‘never events’’ from 

cost sharing. 

Response: We agree with commenters 

that services associated with ‘‘never 

events’’ should not be subject to cost 

sharing. In accordance with 

§ 447.26(c)(1), ‘‘no medical assistance 

will be paid for ‘‘provider preventable 

conditions’’ as defined in this section. 

We interpret medical assistance in this 

context to include any state plan 

imposed cost sharing, and providers, 

who are not permitted to claim 

reimbursement from the agency for 

these services, also are not entitled to 

charge the beneficiary any cost sharing 

amount. To clarify this requirement, we 

have included provider-preventable 

services, also known as ‘‘never events,’’ 

among the list of exempted services at 

§ 447.56(a)(2)(v). 

Comment: One commenter 

recommended that we revise 

§ 447.56(a)(2)(iv) to require that all 

services provided to pregnant women be 

considered as pregnancy-related, except 

those services specifically identified in 

the state plan as not being related to the 

pregnancy, only if the state is able to 

justify and the Secretary concurs, that 

the service is not pregnancy-related. 

Response: States have the discretion 

to determine pregnancy-related services 

within the parameters of § 440.210(a)(2). 

We are seeking to align the standard 

related to cost sharing with what is 

required for the provision of pregnancyrelated services, and maintain in the 

final rule that all services provided to 

pregnant women will be considered 

pregnancy related unless the state has 

justified classification of a service as not 

pregnancy-related in its state plan. 

Comment: One commenter asked that 

we clarify what is meant by 

‘‘nonexempt’’ and ‘‘otherwise exempt 

populations,’’ per the reference to 

allowing states to impose cost-sharing at 

higher than nominal levels for 

nonexempt individuals and applying 

cost sharing to otherwise exempt 

populations at § 447.56. 

Response: Exempt populations are 

defined at sections 1916(a), (b) and (j) 

and 1916A(b) of the Act and at § 447.53 

and § 447.70 of the current regulations. 

These populations are exempt from cost 

sharing under section 1916 and 

1916A(a) of the Act, respectively, but 

are not exempt from cost sharing under 

section 1916A(c) or (e) of the Act, which 

pertain to alternative cost sharing for 

non-preferred drugs and non-emergency 

use of the ED. These exemptions were 

consolidated at § 447.56(a) of the 

proposed rule and maintained in the 

final rule. When using the term 

‘‘nonexempt’’ we are referring to 

beneficiaries who do not fall into one of 

the groups exempted under § 447.56(a) 

of the final rule and therefore may be 

subject to cost sharing. ‘‘Otherwise 

exempt populations’’ refers to those 

populations that are generally required 

to be exempted from cost sharing but are 

not exempt from cost sharing under 

section 1916A(c) or (e) of the Act. 

Section 1916A of the Act allows states 

to impose cost sharing for drugs and 

non-emergency use of the ED on 

‘‘otherwise exempt populations,’’ 

meaning that such cost sharing may be 

imposed on beneficiaries who are 

exempted from all other cost sharing per 

§ 447.56(a). 

Comment: Many commenters were 

concerned that the aggregate limit 

described in proposed § 447.56(f) does 

not apply to individuals with income at 

or below 100 percent of the FPL. 

Another commenter was concerned that 

these rules created a new requirement 

for states to apply the aggregate limit to 

cost sharing imposed under section 

1916 of the Act. A few commenters 

urged the Secretary to lower the 

aggregate limit to something less than 5 

percent. 

Response: Under sections 1916 and 

1916A of the Act, aggregate premiums 

and cost sharing imposed may not 

exceed 5 percent of an individual’s 

income. This is a statutory limit and we 

do not have the authority to require 

states to apply a lower cap. However, 

we are revising the final regulation at 

§ 447.56(f)(1), and redesignating the 

succeeding paragraphs accordingly, to 

provide that the aggregate limit applies 

to all premiums and cost sharing 

incurred by all individuals in the 

Medicaid household, at all income 

levels. At § 447.56(f)(2) of the final rule, 

we maintain the requirement in current 

regulation that states must track all 

incurred Medicaid premiums and cost 

sharing for all members of the Medicaid 

household, if such premiums and cost 

sharing could place any family member 

at risk of reaching the aggregate limit. 

Comment: Many commenters 

recommended we revise proposed 

§ 447.56(f)(3) to require states to inform 

beneficiaries, at risk of reaching the 

aggregate limit, of the automated 

process used to track premiums and cost 

sharing, and how they can obtain 

ongoing information about how far they 

are from reaching the limit. 

Response: Section 447.56(f)(2), as 

redesignated in this final rule, requires 

that if a state imposes cost sharing that 

could result in individuals reaching the 

aggregate limit, the state must describe 

their process for tracking the premiums 

and cost sharing in their state plan. 

Current regulations at § 447.64(d)(2), 

redesignated at§ 447.56(f)(3) in this final 

rule, do require the state to notify 

beneficiaries and providers when the 

beneficiary reaches the cap. We are 

revising this paragraph to restore 

language currently in § 447.68(d) that 

was inadvertently removed in the 

proposed rule indicating that the state 

must inform beneficiaries and providers 

of the beneficiaries’ aggregate limit. 

States must also have a process in place 

for beneficiaries to request a 

reassessment of their aggregate limit. We 

believe these rules provide the best 

balance between minimizing 

administrative burden on states and 

modernizing the Medicaid program to 

ensure beneficiaries are not charged 

amounts in excess of the aggregate. We 

do not believe these rules prevent states 

from establishing processes by which 

beneficiaries can regularly check their 

status regarding the aggregate limit. To 

allow states flexibility, we are not 

specifying the mechanisms by which 

such notifications must occur. 

Comment: One commenter 

recommended that the regulation 

should use a single, annual (not 

monthly) cost sharing maximum, such 

as that used for the Part D low-income 

subsidy, since renewals are completed 

on an annual basis, and therefore costsharing maximums are most effectively 

implemented on a well-established 

calendar-year basis. 

Response: Section 1916A of the Act 

requires that the aggregate limit be 

applied on a monthly or quarterly basis 


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as determined by the state; an annual 

limit is not permitted under the statute. 

Comment: One commenter requested 

that we clarify what is meant by 

‘‘premiums or cost sharing rules that 

could place beneficiaries at risk of 

reaching the aggregate family limit’’ in 

proposed § 447.56(f)(3). 

Response: If a state imposes 

premiums and/or cost sharing at a level 

that could result in cumulative 

premiums and cost sharing exceeding 5 

percent of a beneficiary’s family income 

(for all family members on Medicaid, 

over the course of a month or quarter as 

determined by the state), the state must 

implement an effective tracking 

mechanism to ensure the cap is not 

exceeded. For example, a state may 

establish a prescription drug copayment 

targeted to individuals with family 

income above 150 percent of the FPL, 

and set the copay at $1 for preferred 

drugs and $2 for non-preferred drugs. If 

this is the only cost sharing to which 

these individuals are subject, and they 

do not pay a premium, then it is 

unlikely that any beneficiary would 

accumulate cost sharing charges in 

excess of 5 percent of his or her family 

income, and the state would not have to 

establish a tracking mechanism. 

However, if these same beneficiaries 

were also assessed a premium of 4 

percent of family income, beneficiaries 

may be at risk of reaching the aggregate 

limit and the state would need to 

establish a tracking mechanism. Anyone 

with income under 100 percent of the 

FPL, who is subject to any cost sharing 

would likely be at risk of reaching the 

aggregate limit and a tracking 

mechanism would likely be required. 

We will work with states to determine 

their need for a tracking mechanism 

through the state plan amendment 

process. 

We note that if more than one 

Medicaid beneficiary resides in a 

household, then the premiums or 

copayments of each beneficiary in the 

household would count toward the 

aggregate limit. We do not specifically 

define when cost sharing may place 

beneficiaries at risk of reaching the 

aggregate limit, because of the many 

different combinations of cost sharing 

and premium charges which it would be 

possible for states to impose. We will 

monitor state compliance through the 

state plan amendment process. 

Comment: One commenter requested 

further guidance on ways to track cost 

sharing for beneficiaries who change 

plans during the year. 

Response: For individuals who 

change plan mid-year, the state must 

establish a mechanism to continue 

tracking through the transition to ensure 

that they do not exceed the cap. 

Alternatively, a state could suspend any 

additional cost sharing until the next 

monthly or quarterly period begins. We 

have in the past encouraged, and 

continue to encourage, states to track 

cost sharing through their Medicaid 

Management Information System 

(MMIS). As we review state plan 

amendments and conduct audits, we 

will share best practices that emerge 

among states to promote effective and 

efficient tracking systems. 

Comment: Many commenters 

recommended that we remove the 

requirement at proposed § 447.56(f)(3) 

that states have an automated 

mechanism for tracking each family’s 

incurred premiums and cost sharing 

because it is costly and presents a 

substantial administrative and 

operational burden on state Medicaid 

agencies, their contractors, and 

providers. Instead, the commenters 

recommended that the state should have 

an opportunity to develop its own 

mechanism for tracking a Medicaid 

enrollee’s premium and cost sharing 

spending. A few commenters also 

recommended that states should have 

the option of having the enrollees track 

their own information. One commenter 

asked that we clarify that a state that 

delegates responsibility for the 

administration of cost sharing to 

managed care organizations must ensure 

the availability of complete and timely 

information necessary for performing 

this role. 

Response: We have revised 

§ 447.56(f)(2) in this final rule to remove 

the word ‘‘automated’’ and replace it 

with ‘‘effective.’’ CMS will review state 

proposals through the state plan 

amendment process to ensure that 

tracking mechanisms employed by 

states are effective in ensuring that 

incurred premiums and cost sharing do 

not exceed the aggregate limit and that 

the tracking mechanism does not rely on 

beneficiaries. We note that under 

current regulations states must account 

for cost sharing amounts in their MMIS 

to ensure appropriate provider payment 

and must calculate each family’s 

aggregate limit—from data in the state’s 

eligibility system—and provide that 

information to the beneficiary. States 

may claim federal matching funds to 

update their MMIS and eligibility 

systems as necessary to implement a 

tracking system that uses the data 

already available in their systems to 

implement the aggregate limit. States 

have the flexibility to develop any 

effective process that does not rely on 

beneficiaries, and contains timely and 

accurate information so that 

beneficiaries do not exceed their 

aggregate limits. In addition, a state may 

delegate this responsibility, as 

appropriate, to their managed care 

organizations although we are not 

requiring that they do so. Tracking of 

premiums and cost sharing is standard 

industry practice among health plans, 

including those that participate in the 

Medicaid program, and is consistent 

with implementing the requirements of 

the Affordable Care Act out-of-pocket 

limits for all Americans, which will 

require tracking by all private health 

insurance plans. 

Comment: One commenter stated that 

the flexibilities provided in the 

proposed rule, including the higher cost 

sharing limits, are negated by the 

continued application of the aggregate 

limit. The commenter argues that the 

high cost sharing limits effectively will 

serve as a provider rate cut, which will 

trigger further decrease in access to 

health care for Medicaid beneficiaries. 

The commenter recommends that we 

allow exceptions to the 5 percent 

aggregate limit and the automated 

tracking requirements, allowing states to 

propose in their state plan reasonable 

assumptions and methodologies to limit 

maximum out-of-pocket costs at an 

individual or family level. The 

commenter believed such an approach, 

coupled with provisions for exceptions 

and an appeals process involving clear 

timelines to preserve access to care, 

would be consistent with the spirit of 

the statute. 

Response: We do not understand the 

connection that the commenter is 

making between the aggregate limit and 

effective provider reimbursement rates. 

Once the limit is reached, the 

beneficiary may not be charged any cost 

sharing amounts, and providers will be 

paid the full reimbursement rate by the 

state. Regardless, the application of an 

aggregate limit, which is common 

practice in commercial insurance as 

well, is required by section 1916A of the 

Act, as added by the Deficit Reduction 

Act of 2005; we do not have authority 

to eliminate this requirement through 

regulation. 

9. Beneficiary and Public Notice 

Requirements (§ 447.57) 

We proposed to codify existing policy 

to ensure that beneficiaries, providers, 

and the general public all have access to 

effective notice of Medicaid premium 

and cost sharing charges. Appropriate 

vehicles for providing notice might 

include the agency Web site, 

newspapers with wide circulation, web, 

and print media reaching racial, ethnic, 

and linguistic minorities, stakeholder 

meetings, and formal notice and 

comment in accordance with the state’s 


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administrative procedures. We received 

the following comments concerning the 

proposed provisions for beneficiary and 

public notice requirements: 

Comment: One commenter asked for 

clarification on what constitutes a 

method to which applicants, 

beneficiaries, and providers are ‘‘likely 

to have access,’’ and whether 

publication on a state Web site would be 

an acceptable method. One commenter 

strongly disagreed that state legislative 

hearings do not provide sufficient 

public, beneficiary and provider notice 

and recommended that such hearings be 

included as one of the options for 

providing sufficient notice. 

Response: To allow flexibility for 

different state processes while ensuring 

provision of meaningful notice, we are 

not prescribing the particular method or 

format that states must use to provide 

the required notice, but instead 

proposed parameters at § 447.57, 

finalized with one revision (discussed 

below) in this rulemaking, regarding 

what constitutes sufficient notice. We 

provided examples of acceptable 

methods in the preamble to the 

proposed rule, including notice on the 

state agency’s Web site. As stated in the 

preamble to the proposed rule, we do 

not believe that legislation discussed at 

a hearing or posted on a Web site is 

adequate, since state legislation and 

legislative hearings often are not 

accessible or understandable to many 

beneficiaries, providers or other 

interested members of the public. 

Comment: Many commenters 

supported the proposal to require that 

states provide additional public notice if 

proposed cost sharing is substantially 

modified during the state plan 

amendment (SPA) approval process. 

Many of these same commenters also 

recommended that we require states to 

provide at least a 30-day comment 

period on any revisions to a SPA 

involving premiums or cost sharing 

charges. A few commenters were 

concerned that the proposed rule would 

be too burdensome on states and 

recommended that no additional public 

notice requirements be imposed on 

states. 

Response: We have revised the 

regulations at § 447.57(c) to require 

states to provide additional public 

notice if proposed cost sharing is 

substantially modified during the SPA 

approval process. We are also applying 

this rule to premiums that are 

substantially modified during the SPA 

process. We are not, however, accepting 

the recommendation that states should 

have to provide a second 30 day 

comment period for any revisions made 

to the state’s cost sharing policy during 

the SPA approval process, as we believe 

this would be overly burdensome on 

states and significantly delay the SPA 

process. 

III. Provisions of the Final Regulations 

For the most part, this final rule 

incorporates the provisions of the 

proposed rule. We received many 

comments about the complexity of the 

proposed rules and the significance of 

the changes that need to be made to 

fully implement the provisions of the 

Affordable Care Act. Many commenters 

were concerned about the short 

timeframes for implementation and 

about states’ ability to make needed 

changes to policy, operations, and 

information technology systems. We 

recognize that the timing of this rule 

may result in implementation 

challenges, especially from a systems 

perspective. Therefore, we have 

evaluated the provisions of the January 

proposed rule that are necessary to meet 

the deadlines and are finalizing in this 

rule only those provisions that we 

believe states will be reasonably able to 

(or have already been planning to) 

implement by January 1, 2014. 

Remaining provisions will be finalized 

in future rulemaking. Those provisions, 

included in this final rule, that differ 

from the proposed rule are as follows: 

Change to § 431.10 

• Clarified responsibilities of single 

state agency related to delegation of fair 

hearings. 

Change to § 431.201 

• Added the definition of ‘‘send.’’ 

Change to § 431.205 

• Clarified language in § 431.205(b). 

Change to § 431.206 

• Clarified in § 431.206(d) that an 

individual has a right to a hearing before 

the Medicaid agency instead of the 

Exchange or Exchange appeals entity. 

Change to § 435.603 

• Specified in § 435.603(d)(4) that the 

5 percent disregard should be applied to 

the highest income standard in the 

applicable Title of the Act under which 

the individual may be determined 

eligible using MAGI-based 

methodologies. 

Change to § 435.908 

• Deleted paragraph 

§ 435.908(c)(3)(i). 

Change to § 435.918 

• Allowed for delayed 

implementation of electronic notices 

and required that the Agency ensure 

that an individual’s election to receive 

notices electronically is confirmed by 

regular mail and that the individual is 

informed of his or her right to change 

such election. 

Change to § 435.923 

• Clarified in § 435.923(a) that any 

authorization granted under operation 

of state law may serve in place of 

written authorization by the applicant 

or beneficiary. 

Change to § 435.1015 

• Clarified that states are required to 

consider the cost sharing requirements 

of the private health plan when 

determining whether premium 

assistance is a cost-effective option. 

Changes to § 435.1110 

• Revised § 435.1110(c)(1) to make 

clear that states electing to limit the 

presumptive eligibility determinations 

which hospitals can make must permit 

the hospitals to make presumptive 

eligibility determinations based on 

income for all of the populations 

included in § 435.1102 and § 435.1103. 

• Adding paragraph (d)(3) to provide 

that the agency may disqualify a 

hospital as a qualified hospital only 

after it has first provided the hospital 

with additional training or taken other 

reasonable corrective action measures. 

Change to § 435.1200 

• Codified § 435.1200(d)(5) of 

proposed rule at § 435.1200(d)(6). 

Changes to § 447.51 

• Added definition of ‘‘inpatient 

stay’’ and ‘‘outpatient services.’’ 

• Added definition of Federal poverty 

level (FPL) to use the acronym 

throughout the regulation. No 

substantive change is intended. 

• Added a definition of contract 

health service, for clarity (not a 

substantive change to the regulations). 

Changes to § 447.52 

• Revised the maximum cost sharing 

allowed for an inpatient stay to $75 and 

added a new paragraph at (b)(2), to 

require states with inpatient cost 

sharing that exceeds the amount in the 

final rule, as of July 15, 2013, to submit 

a plan to CMS that provides for 

reducing inpatient cost sharing to $75 

on or before July 1, 2017. 

• Revised paragraph (b)(3) to be clear 

that, ‘‘in states that do not have fee-forservice payment rates, any cost sharing 

imposed on individuals at any income 

level may not exceed the maximum 

amount established for individuals with 

income at or below 100 percent of the 

FPL. 


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• Revised § 447.52(d), adding 

paragraphs (1) and (2) to clarify that for 

cost sharing imposed for non-preferred 

drugs and for non-emergency services 

provided in a hospital emergency 

department under, the agency may 

target to a specified group of individuals 

regardless of income. 

• Added and amended paragraph (g) 

to restore the option to establish 

different cost sharing charges for 

individuals at different income levels. 

• Added paragraph (h) to restore 

requirement that any cost sharing 

charges imposed by managed care 

organization on Medicaid enrollees be 

in accordance with the requirements set 

forth in the regulations. 

• Added paragraph (i) to consolidate 

the state plan requirements currently 

contained in § 447.53(d) and § 447.68. 

Changes to § 447.53 

• Revised paragraph (d) to clarify that 

cost sharing for non-preferred drugs 

imposed on otherwise exempt 

populations cannot exceed the nominal 

amount defined in § 447.53(b) in 

accordance with section 1916A(c) of the 

Act. 

• Revised paragraph (e) to require 

that states must have a timely process to 

allow for cost sharing at the preferred 

drug level if the prescribing provider 

determines that the preferred drug 

would be less effective or have adverse 

effects on the individual to ensure that 

access to necessary drugs is not delayed. 

Changes to § 447.54 

• Amended paragraph (d)(2)(iii) to 

replace the word ‘‘ensure’’ with 

‘‘determine.’’ 

• Added new paragraph (i) at 

§ 447.54(d)(2) requiring hospitals to 

inform the individual of the amount of 

his or her cost sharing obligation for 

non-emergency services provided in the 

ED. 

Changes to § 447.55 

• Due to a drafting error we revised 

this section to accurate reflect who can 

be charged premiums and what 

consequences for non-payment exist for 

specified groups. 

• Revised at paragraph (a)(1) the 

description of pregnant women who can 

be charged premiums to reflect the 

consolidation of different statutory 

eligibility groups for pregnant women 

under a single regulatory section at 

§ 435.116 of the March 2012 final rule. 

This is not a substantive change and is 

intended solely to assist states in 

appropriately identifying those pregnant 

women who may be charged as 

described in the statute. 

• Revised paragraph (a)(5) to clarify 

that, if premiums are imposed on a 

sliding scale, the agency must impose 

an appropriately higher premium for 

individuals at higher levels of income, 

with $20 being the maximum allowable 

premium at the highest income level. 

• Added a new paragraph (5) to 

§ 447.55(b) to indicate that no further 

consequences can be applied for nonpayment of Medicaid premiums, 

including ‘‘lock-out’’ periods. 

Changes to § 447.56 

• Revised at paragraph (a)(1)(i) the 

description of children who are exempt 

from premiums and cost sharing at 

§ 447.56(a)(1)(i) through (iii) and (iv) to 

reflect the consolidation of different 

statutory eligibility groups for children 

under a single regulatory section at 

§ 435.118 of the March 2012 final rule, 

and to reflect the changes in the types 

of assistance available under Title IV–E 

of the Act. These are not substantive 

changes and are intended solely to assist 

states in appropriately identifying those 

children who may be charged premiums 

and cost sharing and exempting those 

who may not, as described in the 

statute. 

• Amended paragraph (a)(2)(v) to 

include provider-preventable services, 

also known as ‘‘never events,’’ among 

the list of exempted services. 

• Revised paragraph (f)(2) to restore 

language currently in § 447.68(d) that 

was inadvertently removed in the 

proposed rule indicating that the state 

must inform beneficiaries and providers 

of the beneficiaries’ aggregate limit. 

Changes to § 447.57 

• Revised language at paragraph (c) to 

require states to provide additional 

public notice if proposed cost sharing is 

substantially modified during the SPA 

approval process. 

Change to § 457.110 

• Required that states provide 

individuals with a choice to receive 

notices and information required under 

this subpart and subpart K of this part, 

in electronic format or by regular mail. 

Change to § 457.570 

• Adding paragraph (c)(2). 

Change to § 457.810 

• Added language requiring 

protections against substitution of 

coverage in states that operate premium 

assistance programs. 

Changes to § 155.20 

• Clarifies the definition of advance 

payments of the premium tax credit. 

Changes to § 155.200 

• Removes the reference to subpart F, 

as it will be finalized in a future rule. 

Changes to § 155.227 

• Clarifies that for the purpose of 

§ 155.227, the terms ‘‘applicant’’ and 

‘‘enrollee’’ describe people on whose 

behalf authorized representatives are 

acting, and that the term ‘‘person’’ 

describes an individual acting as an 

authorized representative. 

• Clarifies that authorized 

representatives are permitted to provide 

assistance in the individual and SHOP 

Exchanges, as well as for individuals 

seeking an exemption from the shared 

responsibility payment. 

• Adds language ensuring that the 

Exchange provides information to both 

the applicant or enrollee and the 

authorized representative regarding the 

powers and duties of an authorized 

representative. 

• Adds language allowing an 

Exchange to permit an applicant or 

enrollee to authorize their 

representative to perform fewer than all 

of the activities described in this 

section, provided that the Exchange 

tracks the specific permissions of each 

authorized representative. 

• Clarifies that an authorized 

representative will notify the Exchange 

and the applicant or enrollee on whose 

behalf he or she is acting when the 

authorized representative no longer has 

legal authority to act on behalf of the 

applicant or enrollee. 

• Clarifies that the Exchange, not the 

applicant or enrollee, will notify the 

authorized representative when an 

applicant or enrollee notifies the 

Exchange that an authorized 

representative is no longer acting on his 

or her behalf. 

• Removes the provision that 

organizations as well as staff and 

volunteers of organizations must enter 

an agreement with the Exchange. 

Changes to § 155.230 

• Clarifies electronic notice standards 

for an individual market Exchange, and 

specifies that the individual market 

Exchange may choose to delay the 

implementation of the process described 

in § 435.918(b)(1) regarding sending a 

mailed confirmation of the choice to 

receive electronic notices. 

• Adds standards to distinguish 

notice standards for a SHOP and adds 

language to allow an employer or 

employee in any SHOP to elect to 

receive electronic notices. 


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Changes to § 155.300 

• Clarifies the appropriate crossreference for the definition of minimum 

value. 

Changes to § 155.302 

• Clarifies that any contracting 

arrangement for eligibility 

determinations for Medicaid and CHIP 

is subject to the standards in 

§ 431.10(c)(2). 

• Clarifies that the Exchange appeals 

entity, in addition to the Exchange, 

must adhere to the eligibility 

determination or appeals decision for 

Medicaid or CHIP made by the 

Medicaid or CHIP agency, or the appeals 

entity for such agency. 

• Specifies that the agreement under 

§ 155.302(b)(6) will be made available to 

HHS upon request. 

Changes to § 155.305 

• Removes the clause ‘‘unless another 

Exchange verifies that the individual 

meets the residency standard of such 

Exchange’’ related to temporary 

residence. 

• Clarifies that an applicant must be 

eligible for enrollment in a QHP through 

the Exchange to be determined eligible 

for enrollment through the Exchange in 

a QHP that is a catastrophic plan. 

Changes to § 155.310 

• Clarifies that the provision 

regarding duration of eligibility 

determinations without enrollment only 

refers to an applicant who is determined 

eligible for enrollment in a QHP through 

the Exchange. 

Changes to § 155.315 

• Modifies procedures for situations 

in which key data sources are 

unavailable and not reasonably 

expected to be available within 1 day, 

such that the Exchange will make an 

eligibility determination based on an 

applicant’s attestation and trigger the 

inconsistency period in paragraph (f). 

• Clarifies that the Exchange will 

accept an applicant’s attestation 

regarding three specific factors of 

eligibility when electronic data is 

required but it is not reasonably 

expected that data sources will be 

available within 1 day of the initial 

request to the data source, and that for 

purposes of eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions, other sections 

in this subpart already address 

situations in which data regarding 

MAGI-based income is unavailable. 

• Clarifies that paragraph (f)(5)(i) of 

this section will follow the effective 

dates specified in § 155.330(f). 

• Modifies the language concerning 

the verification related to eligibility for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan for the 

purpose of clarity. 

Changes to § 155.320 

• Clarifies that the Exchange must 

obtain any available data from the SHOP 

that corresponds to the State in which 

the Exchange is operating. 

• Modifies language to specify that 

the Exchange must select a statistically 

significant random sample of applicants 

for whom the Exchange does not have 

any of the information specified in 

paragraphs (d)(2)(i) through (d)(2)(iii). 

• Removes language specifying that 

the Exchange must use any available 

data regarding employment of an 

applicant and members of his or her 

household. 

• Specifies that for eligibility for 

enrollment in a QHP through the 

Exchange that is effective before January 

1, 2015, if the Exchange does not have 

any of the information specified in 

paragraphs (d)(2)(i) through (d)(2)(iii) 

for an applicant, the Exchange may 

accept an applicant’s attestation 

regarding enrollment in an eligible 

employer-sponsored plan and eligibility 

for qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested 

without further verification, instead of 

following sampling procedures. 

• Clarifies that the ability for the 

Exchange to satisfy the provisions of 

paragraph (d) of this section by relying 

on HHS is effective for eligibility for 

enrollment in a QHP through the 

Exchange that is effective on or after 

January 1, 2015, and clarifies that the 

division of responsibilities under this 

option is subject to guidance issued by 

the Secretary. 

• Removes language concerning the 

agreement associated with having HHS 

conduct this verification. 

Changes to § 155.330 

• Removes cross-references to appeals 

provisions, and clarifies that an 

Exchange must implement changes 

resulting from an appeal decision on the 

date specified in the appeal decision. 

• Consolidates standards for 

decreases in advance payments of the 

premium tax credit and changes in costsharing reductions. 

• Specifies that a change associated 

with birth, adoption, placement for 

adoption and placement in foster care 

must be implemented on the coverage 

effective date described in 

§ 155.420(b)(2)(i) and (ii). 

• Removes duplicative crossreferences regarding termination of 

coverage. 

Changes to § 155.340 

• Clarifies the appropriate crossreference for the minimum value 

standard. 

Changes to § 155.345 

• Reserves paragraphs (a)(3) and (g)(7) 

for future finalization. 

• Clarifies that the Exchange and 

Exchange appeals entity will adhere to 

the eligibility determination or appeals 

decision relating to an individual’s 

eligibility for Medicaid or CHIP made by 

the state’s Medicaid or CHIP agency or 

the appeals entity for such agency. 

Changes to § 155.420 

• Clarifies that the special effective 

dates for birth, adoption, and placement 

for adoption also apply to placement in 

foster care. 

• Expands special enrollment period 

for birth, adoption, and placement for 

adoption to also include placement in 

foster care. 

• Clarifies that the special enrollment 

period for an individual who was not a 

citizen, national, or lawfully present 

non-citizen and gains such status also 

applies to his or her dependents, if 

eligible for coverage through the 

Exchange. 

• Modifies the special enrollment 

period for enrollees newly eligible or 

ineligible for advance payments of the 

premium tax credit or who experience 

a change in eligibility for cost-sharing 

reductions to reflect that the special 

enrollment period accommodates 

individuals enrolled in an eligible 

employer-sponsored plan, but not 

eligible for qualifying coverage in an 

eligible employer-sponsored plan. 

Changes to § 155.430 

• Modifies language to allow 

applicants and enrollees to request 

termination from their QHP, in the 

event they report access to other 

minimum essential coverage and 

become ineligible for advance payments 

of the premium tax credit and costsharing reductions. 

• Modifies standards for enrolleerequested termination effective dates, 

such that QHP issuers and Exchanges 

may only terminate prospectively, and 

not retroactively. 

• Clarifies that terminations for 

enrollees who are determined eligible 

for Medicaid, CHIP or the BHP, such 

that the last day of coverage is the day 

before the individual is determined 

eligible for such coverage, rather than 


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retroactive to the Medicaid or CHIP 

eligibility effective date. 

• Aligns termination effective dates to 

appropriately cross-reference with 

eligibility effective dates. 

• Adds language to clarify that in the 

case of termination due to death, the last 

day of coverage is the date of death. 

Changes to § 156.270 

• Modifies coverage termination 

requirements such that standards for 

QHP issuers align with those for 

Exchanges. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. 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. 

In the January 22, 2013 (78 FR 4593) 

proposed rule, we requested public 

comment on each of the rule’s 

information collection requirements 

(ICRs). The comments and our response 

are discussed below. 

Background 

This final rule continues to 

implement key provisions of the 

Affordable Care Act including the 

completion of the streamlining of 

eligibility for children, pregnant 

women, and adults that were initiated 

in the Medicaid eligibility final rule 

published on March 23, 2012 (77 FR 

17144). This rule also modifies CHIP 

rules relating to substitution of coverage 

and premium lock-out periods, which 

are important to a coordinated system of 

coverage across programs. Finally, this 

rule includes provisions related to 

authorized representatives, the 

procedures for verifying access to 

qualifying employer-sponsored 

coverage, catastrophic coverage and 

other provisions related to eligibility 

and enrollment. 

The policies in this rule will result in 

a reduction in burden for individuals 

applying for and renewing coverage, as 

well as for states. The Medicaid program 

and CHIP will be made easier for states 

to administer and for individuals to 

navigate by streamlining Medicaid 

eligibility and simplifying Medicaid and 

CHIP eligibility rules for most 

individuals. Even though there are 

short-term burdens associated with the 

implementation of the final rule, the 

Medicaid program and CHIP will be 

easier for states to administer over time 

due to the streamlined eligibility and 

coordinated efforts for Medicaid, CHIP, 

and the new affordable insurance 

exchanges. 

The final rule also continues to 

implement provisions related to the 

establishment of Exchanges. This final 

rule: (1) Specifies standards related to 

authorized representatives, (2) outlines 

criteria related to the verification of 

enrollment in and eligibility for 

minimum essential coverage through an 

eligible employer-sponsored plan, and 

(3) further specifies or amend standards 

related to other eligibility and 

enrollment provisions. The description 

of the burden estimates associated with 

these provisions is included in the 

information collection requirements 

outlined in section D. 

Section A outlines the information 

collection requirements that involve 

Medicaid and CHIP eligibility and 

enrollment. Section B outlines the 

information collection requirements that 

involve Exchange eligibility and 

enrollment. 

We used data from the Bureau of 

Labor Statistics to derive average costs 

for all estimates of salary in establishing 

the information collection requirements. 

Salary estimates include the cost of 

fringe benefits, calculated at 35 percent 

of salary, which is based on the June 

2012 Employer Costs for Employee 

Compensation report by the U.S. Bureau 

of Labor Statistics. 

A. Medicaid and CHIP Information 

Collection Requirements (ICRs) To Be 

Addressed Through Separate Notices 

and Comment Process Under the 

Paperwork Reduction Act 

1. ICRs Regarding State Plan 

Amendments 

1a. Sections 431.10, 431.11, 431.206, 

431.211, 431.213, 431.230, 431.231, 

431.240, 435.110, 435.116, 435.603, 

435.907, 435.908, 435.918, 435.1101, 

435.1102, 435.1103, 435.1110, 435.1200, 

435.1205, 440.130, 440.210, 440.220, 

440.305, 440.315, 440.330, 440.335, 

440.345, 447.52–54, 457.110, 457.340, 

457.350, 457.351, 457.355, 457.570, and 

457.805 

These amendments to the Medicaid 

and CHIP state plans are necessary to 

reflect changes in statute and federal 

policy. While we are aware of the need 

to estimate the PRA burden associated 

with the submission of state plan 

amendments related to the provisions 

identified above, those amendments 

will be addressed as part of the 

electronic state plan filing process being 

developed by CMS (the MACPro 

system) and submitted to OMB for 

approval under OCN 0938–1188 (CMS– 

10434). 

1b. Sections 435.113, 435.114, 435.223, 

and 435.510 

Since we are eliminating the 

provisions in §§ 435.113, 435.114, 

435.223, and 435.510, states will no 

longer be required to submit state plan 

amendments related to those provisions. 

The provisions have been approved by 

OMB under OCN 0938–1147). 

B. Medicaid Eligibility and Enrollment 

1. ICRs Regarding Delegation of 

Eligibility Determinations and Appeals 

(§§ 431.10(c), 431.11. and 457.1120) 

In § 431.10(c), a state may delegate 

authority to make eligibility 

determinations and to conduct fair 

hearings. States generally have written 

agreements with various entities for 

similar purposes. Under this final rule, 

agreements may need to be modified or 

new agreements established. However, 

states that use the same agency to 

administer more than one program (for 

example, Medicaid and the Exchange) 

will not need an agreement for the 

determination of eligibility by that 

agency. 

Delegation of eligibility 

determinations was approved under 

OMB control number 0938–1147. This 

rule sets out changes in the existing 

requirement related to the type of 

agencies that can make Medicaid and 

CHIP eligibility determinations. These 

amendments do not change the burden 

associated with the requirement. 

Medicaid and CHIP agencies will need 

to establish new agreements to delegate 

authority to conduct eligibility appeals. 

The burden associated with the 

delegation of appeals is the time and 

effort necessary for the Medicaid and 

CHIP agencies to create and execute the 

agreements with the organization to 

which they are delegating authority. 

There are 53 Medicaid agencies (the 

50 states, the District of Columbia, 

Northern Mariana Islands, and 

American Samoa) and 43 CHIP agencies, 

for a total of 96 agencies. For the 


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purpose of developing the cost, we 

estimate that half of these agencies will 

establish an agreement with an 

organization to conduct fair hearings. 

We estimate a one-time burden of 50 

hours to develop an agreement that can 

be used with the organization. It will 

take an additional 10 hours for 

Medicaid and 10 hours for a separate 

CHIP agency to negotiate and execute 

the agreement with the organization for 

a total time burden of 2,880 hours [(53 

+ 43)/2 × (50 + 10)] across all 

agreements. For the purpose of the cost, 

we estimate it will take a health policy 

analyst 40 hours at $49.35 an hour and 

a senior manager 10 hours at $79.08 an 

hour to complete the model agreement 

(for a total of $2,764.80) plus 10 

additional hours ($49.35) for a health 

policy analyst to execute a completed 

agreement with each organization. The 

estimated cost for each agreement is 

$3,258.30 for a total cost of $156,398.40. 

2. ICRs Regarding Fair Hearing 

Processes (§§ 431.205(e), and 431.206(d) 

and (e)) 

In §§ 431.205(e) and 431.206(e), the 

hearing system and information must be 

accessible to persons who are limited 

English proficient and to persons with 

disabilities. While states are required to 

make the hearing system accessible, we 

believe the associated burden is exempt 

from the PRA (see 5 CFR 1320.3(b)(2)) 

since we believe that the time, effort, 

and financial resources necessary to 

comply with this requirement will be 

incurred by persons during the normal 

course of their activities and should, 

therefore, be considered as a usual and 

customary business practice. 

In § 431.206(d), states are required to 

inform individuals that they may have 

their hearing before the agency (instead 

of the Exchange or the Exchange appeals 

entity) and the method by which the 

individual may make such election. 

There are 53 Medicaid agencies (the 50 

states, the District of Columbia, 

Northern Mariana Islands, and 

American Samoa) and 43 CHIP agencies 

for a total of 96 agencies that will be 

subject to this requirement. The burden 

associated with providing this choice is 

developing the process and workflow to 

enable the choice and sending the 

request for the fair hearing to the 

appropriate agency. We estimate it will 

take each agency an average of 70 hours 

to create the process and workflow 

required in providing the choice. For 

the purpose of the cost, we estimate it 

will take a health policy analyst 40 

hours at $49.35 an hour, a senior 

manager 10 hours at $79.08 an hour, 

and a computer programmer 20 hours at 

$52.50 to complete the process and 

workflow. The estimated cost for each 

agency is $3814.80. The total estimated 

cost is $366,220.80. 

3. ICRs Regarding Application 

Counselors (§ 435.908(c)) 

In § 435.908(c), states have the option 

to authorize certain staff and volunteers 

of organizations to act as certified 

application counselors. The burden 

associated with the requirements to 

assist individuals with the application 

process is the time and effort necessary 

for the state to create agreements with 

these organizations, to create a 

registration process for assistors, and to 

train staff on the eligibility and 

confidentiality rules and requirements 

and how to assist applicants with the 

completing the application. 

We estimate the 50 states, the District 

of Columbia, Northern Mariana Islands, 

and American Samoa will establish 

agreements with on average 20 

organizations in their state or territory 

for a total of 1,060 agreements related to 

application assistance. As part of this 

estimate, we assumed that state 

Medicaid and CHIP agencies will be 

party to the same agreements and, 

therefore, will not establish separate 

agreements. 

The first burden associated with this 

provision is the time and effort 

necessary for the state Medicaid and 

CHIP agencies to establish an 

agreement. To develop an agreement, 

we estimate that it will take each of the 

53 states and territories 50 hours to 

develop a model agreement. For the 

purpose of the cost, we estimate it will 

take a health policy analyst 40 hours at 

$49.35 an hour and a senior manager 10 

hours at $79.08 to develop an 

agreement. The estimated cost is 

$2,764.80 (per state) or $146,534.40 

(total) while the total annual hour 

burden is 2,650 hours. 

To negotiate and complete the 

agreement, we estimate that each of the 

53 states/territories will execute 20 

agreements. For the purpose of the cost, 

we estimate it will take a health policy 

analyst 10 hours at $49.35 an hour to 

execute each agreement. The estimated 

cost is $9,870 (per state) or $523,110 

(total) while the total annual hour 

burden is 10,600 hours. 

To develop and execute the model 

agreements, the total cost is $669,644.40 

for 13,250 hours of labor. 

The next burden associated with this 

provision is the time and effort 

necessary for the 53 states and 

territories to establish the registration 

process and workflow for the 

application counselors. We estimate it 

will take each state or territory an 

average of 70 hours (3,710 total hours) 

to create the registration process and 

workflow for the application counselors. 

For the purpose of the cost, we estimate 

it will take a health policy analyst 40 

hours, at $49.35 an hour, a senior 

manager 10 hours, at $79.08 an hour, 

and a computer programmer 20 hours at 

$52.50 to complete the registration 

process and workflow. The estimated 

cost for each state or territory is 

$3,814.80. The total estimated cost is 

$202,184.40. 

The next burden associated with this 

provision is the time and effort 

necessary for the 53 state Medicaid and 

CHIP agencies to provide training to the 

application counselors. For the purpose 

of the cost, we estimate it will take a 

training specialist 40 hours at $26.64 an 

hour and a training and development 

manager 10 hours at $64.43 an hour to 

develop training materials for the 

application counselors, for a total time 

burden of 2,650 hours. The estimated 

cost for each state or territory is 

$1,709.90. The total estimated cost is 

$90,624.70. 

Lastly, we estimate that each state or 

territory will offer 50 hours of training 

sessions to train individuals to assist 

applicants with Medicaid and CHIP 

applications for a total time burden of 

2650 hours. For the purpose of the cost, 

we estimate it will take a training 

specialist 50 hours at $26.64 an hour to 

train the application counselors. The 

estimated cost for each agency is $1,332. 

The total estimated cost is $70,596. 

4. ICRs Regarding Eligibility 

Determination Notices (§ 435.918, 

§ 457.110) 

In § 435.918 and § 457.110, states 

must electronically provide notices to 

individuals when elected. 

The burden associated with the 

requirements to deliver notices is the 

time necessary for the state staff to: (1) 

Familiarize themselves with the 

requirements related to notices; (2) 

develop the language for approval, 

denial, termination, suspension, and 

change of benefits notices; and (3) 

program the language in the Medicaid 

and CHIP notice systems so that the 

notice can be populated and generated 

based on the outcome of the eligibility 

determination and be delivered in an 

electronic format. 

We estimate 53 state Medicaid 

agencies (the 50 states, the District of 

Columbia, Northern Mariana Islands, 

and American Samoa) and 43 CHIP 

agencies (in states that have a separate 

or combination CHIP), totaling 96 

agencies, will be subject to this 

requirement. We estimate that it will 

take each Medicaid and CHIP agency 

194 hours annually to develop, 


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automate, and distribute the notice of 

eligibility determination. For the 

purpose of the cost burden, we estimate 

it will take a health policy analyst 138 

hours at $49.35 an hour, a senior 

manager 4 hours at $79.08, an attorney 

20 hours at $90.14, and a computer 

programmer 32 hours at $52.50 to 

complete the notices. The estimated cost 

burden for each agency is $10,609.42. 

The total estimated cost burden is 

$1,018,504.30, and the total annual hour 

burden is 18,624 hours. 

5. ICRs Regarding Authorized 

Representatives (§ 435.923(a)) 

Section 435.923(a) sets out minimum 

requirements for the designation of 

authorized representatives. We are also 

applying these provisions to state CHIP 

agencies through the addition of a cross 

reference in § 457.340. 

We are aware of the need to estimate 

the PRA burden associated with the 

collection of information related to 

authorizing an individual to act as a 

representative of an applicant, to permit 

self-attestation for individuals who do 

not have access to documentation, and 

the citizenship and immigration 

verification requirements. These 

requirements were addressed as part of 

the single, streamlined application 

under OCN 0938–1191 (CMS–10440). 

6. ICRs Regarding Presumptive 

Eligibility Determined by Hospitals 

(§ 435.1110) 

Under § 435.1110(d)(1), states may 

establish state-specific standards for 

qualified hospitals that conduct 

presumptive eligibility determinations 

related to the success of assisting 

individuals determined presumptively 

eligible who submit a regular 

application and/or are approved for 

eligibility by the agency. States also 

have a great deal of flexibility in 

determining and implementing the 

standards appropriate for their programs 

as well as appropriate corrective action 

measures for hospitals which do not 

meet the state standards. 

This change is necessary to reflect 

changes in federal policy. A state’s 

election of state-specific standards will 

affect their Medicaid state plan. While 

we are aware of the need to estimate the 

burden associated with the submission 

of the state plan amendment, that 

amendment will be addressed under the 

electronic state plan filing process being 

developed by CMS (the MACPro 

system) and submitted to OMB for 

approval under OCN 0938–1188 (CMS– 

10434). The amendment and its 

estimated burden will also be made 

available for public comment through 

the PRA process. 

In §§ 435.1101(b) and 457.355 (by 

reference to § 435.1101), states are 

required to provide qualified entities 

with training in all applicable policies 

and procedures related to presumptive 

eligibility. The burden associated with 

this provision is the time and effort 

necessary for the states and territories to 

provide training to the hospitals. We 

estimate 50 states, the District of 

Columbia, Northern Mariana Islands, 

and American Samoa will be subject to 

this requirement. As part of this 

estimate, we assumed that state 

Medicaid agencies and CHIP agencies, 

where there are separate agencies, will 

develop and use the same training. 

For the purpose of the cost, we 

estimate it will take a training specialist 

40 hours at $26.64 an hour and a 

training and development manager 10 

hours at $64.43 an hour to develop 

training materials for the qualified 

entities, for a total time burden of 2,650 

hours. The estimated cost for each state 

or territory is $1,709.90. The total 

estimated cost is $90,624.70. 

We also estimate that each state or 

territory will offer 50 hours of training 

sessions to qualified entities, for a total 

time burden of 2,650 hours. For the 

purpose of the cost, we estimate it will 

take a training specialist 50 hours at 

$26.64 an hour to train the qualified 

entities. The estimated cost for each 

agency is $1,332. The total estimated 

cost is $70,596. 

7. ICRs Regarding ABP SPA-Related 

Requirements (§§ 440.305, 440.315, 

440.330, 440.335, 440.345, 440.347, 

440.360, and 440.386) 

In the proposed rule, CMS requested 

comment on habilitative services 

(§ 440.347(d)) and on the ‘‘medically 

frail’’ definition (§ 440.315(f)). 

Comments and CMS’ response can be 

found in section B.3.a of this preamble. 

We also requested comment on essential 

health benefits (rehabilitative and 

habilitative services and devices) 

(§ 440.347). See section II.B. of this 

preamble for the comments and our 

response. Additional comments were 

solicited for exempt individuals 

(modifying definition of ‘‘medically 

frail’’) (§ 440.315). Comments and CMS’ 

response can be found in the ABP 

portion of this preamble. 

CMS also received many comments 

on the proposed changes to: (1) The 

public notice requirement in § 440.386 

(see section II.B.7.b. of this preamble for 

the comment and our response); (2) 

public notice in § 440.386 and 

prescription drug coverage in 

§ 440.345(f) (see section II.B.3.i. of this 

preamble for the comment and our 

response); (3) essential health benefits 

(non-discrimination policy) under 

§ 440.347 (see section II.B.2.d of this 

preamble); and (4) EPSDT and other 

required benefits (family planning 

services and supplies) under § 440.345 

(see the comments and responses 

section of the ABP portion of this 

preamble). As a result of comments 

received, CMS is finalizing the public 

notice requirements in this final rule 

without change. 

We also received a number of 

comments requesting clarification to our 

statement in the preamble that the 

section 1927 requirements apply to the 

ABP prescription drug benefit. 

Specifically, commenters requested 

clarification, as part of this final rule, as 

to how section 1927 of the Act applies 

to prescription drug coverage under the 

ABP since ABP requirements for 

prescription drug coverage must meet 

the minimum EHB prescription drug 

requirements at section 1937 of the Act. 

Based upon those comments, we have 

clarified in the regulation that when 

states pay for covered outpatient drugs 

under a state’s ABP, the section 1927 

requirements apply. There is no 

additional information collection 

burden associated with this 

clarification. 

While this rule has finalized policy 

related to these provisions, these 

policies do not result in any additional 

information collection requirements. 

Rather, the policy clarifications are 

interpretations of information that is 

already being collected. 

The information collection 

requirements and burden estimates 

associated with §§ 440.305, 440.315, 

440.330, 440.335, 440.345, 440.347, 

440.360, and 440.386 have been 

approved by OMB through March 31, 

2016, under OCN 0938–1188 (CMS– 

10434). This rule will not impose any 

new or revised SPA-related reporting, 

recordkeeping, or third party disclosure 

requirements and, therefore, does not 

require additional OMB review under 

the authority of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). 

8. ICRs Regarding Cost Sharing and 

Premiums (§§ 447.52, 447.53, 447.54, 

447.55 and 447.56) 

The Deficit Reduction Act of 2005 

(DRA) established a new section 1916A 

of the Act, which gives states additional 

flexibility, allowing for alternative 

premiums and cost sharing, beyond 

what is allowed under section 1916 of 

the Act, for somewhat higher income 

beneficiaries. Such alternative cost 

sharing may be targeted to specific 

groups of beneficiaries and payment 

may be required as a condition of 


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providing services. Thus, in accordance 

with the DRA we reviewed and made 

changes to the current cost sharing and 

premiums regulations under §§ 447.52 

through 447.56. 

In a review of these sections we found 

that 45 states including the District of 

Columbia impose cost-sharing and 40 

states impose premiums on 

beneficiaries. While these provisions are 

subject to the PRA, we believe that any 

changes a state makes to its current state 

plan under any of these sections is a 

usual and customary practice under 5 

CFR 1320.3(b)(2) and, as such, the 

burden associated with it is exempt 

from the PRA. 

For those states electing to impose 

cost-sharing or premiums for the first 

time will only need to submit a state 

plan amendment one time for review. 

We estimate it will take each agency in 

this circumstance an average of 2 hours 

to fill out the state plan pre-print for 

either cost-sharing or premiums and 

submit it for approval. Thus we 

anticipate six states may impose costsharing and 11 states and the District of 

Columbia may impose premiums on 

beneficiaries. For the purpose of the cost 

burden, we estimate it will take a health 

policy analyst 1 hour at $49.35 an hour 

and a senior manager 1 hour at $79.08 

an hour to complete the process and 

submission of each new state plan 

amendment. The estimated cost burden 

for each agency is $128.43. The total 

estimated cost burden is $2,183.31. 

9. ICRs Regarding Beneficiary and 

Public Notice Requirements (§ 447.57) 

In § 447.57(a), 53 Medicaid agencies 

will be required to make available a 

public schedule describing current 

premiums and cost sharing 

requirements containing the information 

in paragraphs (a)(1) through (6). In 

§ 447.57(b), agencies are required to 

make the public schedule available to 

those identified in paragraphs (b)(1) 

through (4). 

Prior to submitting a SPA for 

Secretary approval to establish or 

modify existing premiums or cost 

sharing or change the consequences for 

non-payment, § 447.57(c) requires that 

the state: (1) Provide the public with 

advance notice of the SPA (specifying 

the amount of premiums or cost sharing 

and who is subject to the charges); (2) 

provide a reasonable opportunity to 

comment on SPAs that propose to 

substantially modify premiums and cost 

sharing; (3) submit documentation to 

demonstrate that these requirements 

were met; and (4) provide additional 

public notice if cost sharing is modified 

during the SPA approval process. 

In § 447.57(d), the information must 

be provided in a manner that ensures 

that affected beneficiaries and providers 

are likely to have access to the notice 

and are able to provide comments on 

proposed state plan amendments. 

We estimate it will take each 

Medicaid agency an average of 6 hours 

to create the process and workflow 

required in providing the schedule and 

notice. For the purpose of the cost 

burden, we estimate it will take a health 

policy analyst 4 hours at $49.35 an hour 

and a senior manager 2 hours at $79.08 

an hour to complete the process and 

workflow. The estimated cost burden for 

each agency is $355.56. The total 

estimated cost burden is $18,844.68. 

C. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

For purposes of presenting an 

estimate of paperwork burden, we 

reflect the participation of 18 StateBased Exchanges. It is important to note 

that the Exchange provisions found in 

part 155, subparts D and E discussed 

below involve several information 

collections that will occur through the 

single, streamlined application for 

enrollment in a QHP and for insurance 

affordability programs described in 

§ 155.405. We have accounted for the 

burden associated with these collections 

in the Supporting Statement for Data 

Collection to Support Eligibility 

Determinations for Insurance 

Affordability Programs and Enrollment 

through Health Benefits Exchanges, 

Medicaid, and Children’s Health 

Insurance Program Agencies (CMS– 

10440; OCN 0938–1191). 

We also highlight that the Supporting 

Statement includes several information 

collections from regulatory provisions 

finalized in the Exchange final rule (77 

FR 18310). We have included these 

information collections in this PRA 

package to address PRA requirements 

related to those provisions as they were 

not included in the information 

collection section of the Exchange final 

rule. 

Lastly, we have not included 

information regarding information 

collections associated with certified 

application counselors, eligibility 

appeals, and SHOP coordination with 

individual market Exchanges, which we 

will finalize at a future date with the 

corresponding regulatory provisions. 

1. ICRs Regarding Authorized 

Representatives (§ 155.227) 

Section 155.227(a) provides that an 

applicant or enrollee, subject to 

applicable privacy and security 

requirements, may designate an 

individual person or organization as his 

or her authorized representative. One 

method for designating an authorized 

representative is by submitting legal 

documentation of the representative’s 

authority. Exchanges have the option to 

make available an ‘‘Appointment of 

Authorized Representative Form’’ at the 

time of application or anytime thereafter 

for an individual to designate an 

authorized representative. Such a form 

would collect identifying and contact 

information about the applicant, 

enrollee, and requested authorized 

representative. Requested data elements 

would include the following for both 

the applicant or enrollee and the 

requested representative: name, address, 

phone number, email address, date of 

birth, and relationship. The applicant, 

enrollee, or authorized representative 

could obtain the form from the 

Exchange Web site or from an assister 

(such as a Navigator, non-Navigator inperson assister, etc.), and could submit 

it to the Exchange by mail or online at 

any time. We expect that the Exchange 

would use this information to authorize 

the authorized representative to act on 

behalf of the applicant or enrollee. An 

authorized representative could also 

submit this form if the applicant or 

enrollee is unable to do so. 

HHS is currently developing a model 

Appointment of Authorized 

Representative Form to be used by the 

Federally-facilitated Exchanges and will 

make that form available to State-based 

Exchanges, which would also decrease 

the burden on State-based Exchanges to 

develop such a form. If a state opts not 

to use the form provided by HHS, we 

estimate the burden associated for the 

time and effort necessary for a Statebased Exchange to develop the 

Appointment of Authorized 

Representative Form to be 30 hours. 

This includes a 10 hours from a midlevel health policy analyst at an hourly 

cost of $49.35 and 10 hours from an 

operations analyst at an hourly cost of 

$54.45 for drafting the form with 4 

hours of managerial oversight at an 

hourly cost of $79.08 and 6 hours of 

legal review at an hourly cost of $90.14. 

The estimated cost per State-based 

Exchange is $1,895, for a total cost of 

$34, 113 for 18 State-based Exchanges. 

For an applicant, enrollee, or 

prospective authorized representative, 

we estimate that it will take up to 5 

minutes to review instructions and 

complete an Appointment of 

Authorized Representative Form. While 

we expect most applicants, enrollees, or 

prospective authorized representatives 

to complete the Authorized 

Representative Form, an applicant, 

enrollee, or prospective authorized 


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representative may also comply with 

this provision by providing the 

necessary information online, by phone, 

by mail, or in-person. We expect a 

similar burden on the applicant, 

enrollee, or authorized representative to 

comply with this provision through 

such means. If the applicant, enrollee, 

or authorized representative chooses to 

submit an ‘‘Appointment of Authorized 

Representative Form,’’ the burden for a 

State-based Exchange to process the 

submitted information will be 

approximately 10 minutes at a cost of 

$3.39 per submission. We anticipate 

that an eligibility support staff person 

will scan, digitize, and link the form to 

an applicant’s or enrollee’s account, 

review the submitted information, and 

update the authorized representative’s 

and applicant’s or enrollee’s account, if 

applicable. 

2. ICRs Regarding Notices (§§ 155.302, 

155.310, 155.315, 155.320, 155.330, 

155.335, 155.345, 155.355, 155.410, 

155.715, 155.720, 155.725, and 

155.1080) 

Several provisions in subparts D and 

E outline specific scenarios in which the 

Exchange will send a notice to 

individuals and employers throughout 

the eligibility and enrollment process. 

HHS is currently developing model 

eligibility determination notices and 

several other models for notices 

described in 45 CFR parts 155, 156, and 

157 which will decrease the burden on 

Exchanges to establish such notices. For 

some notices, the Exchange will include 

specific notice text in another notice, 

such as the eligibility determination 

notice, rather than send an entirely 

separate notice (effectively, two notices 

are combined into one). The purpose of 

these notices is to alert the individuals 

and employers who receive the notice of 

actions taken by the Exchange. When 

possible, we anticipate that the 

Exchange will consolidate notices when 

multiple members of a household are 

applying together and receive an 

eligibility determination at the same 

time. The notice may be in paper or 

electronic format but must be in writing 

and sent after an eligibility 

determination has been made by the 

Exchange. We anticipate that a large 

volume of enrollees will request 

electronic notification while others will 

opt to receive the notice by mail. As a 

result of certain enrollees opting to 

receiving the notice by mail in some 

instances, we estimated the associated 

mailing costs for the time and effort 

needed to mail notices in bulk to 

enrollees as appropriate. 

We expect that the electronic 

eligibility determination notice will be 

dynamic and include information 

tailored to all possible outcomes of an 

application throughout the eligibility 

determination process. To develop the 

paper and electronic notices, Exchange 

staff will need to learn eligibility rules 

and draft notice text for various decision 

points, follow up, referrals, and appeals 

procedures. A health policy analyst, 

senior manager, and legal counsel will 

review the notice. The Exchange will 

then engage in review and editing to 

incorporate changes from the 

consultation and user testing including 

review to ensure compliance with plain 

writing, translation, and readability 

standards. We intend that Exchanges 

will work closely with the state 

Medicaid or CHIP agency to develop 

coordinated notices. Finally, a 

developer will program the template 

notice into the eligibility system so that 

the notice may be populated and 

generated in the correct format 

according to an individual’s preference 

to receive notices, via paper or 

electronically, as the applicant moves 

through the eligibility process. 

If a state opts not to use the model 

notices provided by HHS, we estimate 

that the Exchange effort related to the 

development and implementation of the 

eligibility notice will necessitate 44 

hours from a health policy analyst at an 

hourly cost of $49.35 to learn eligibility 

rules and draft notice text; 20 hours 

from an attorney at an hourly cost of 

$90.14 and 4 hours from a senior 

manager at an hourly cost of $79.08 to 

review the notice; and 32 hours from a 

computer programmer at an hourly cost 

of $52.50 to conduct the necessary 

development. In total, we estimate that 

this will take a total of 100 hours for 

each Exchange, at a cost of 

approximately $5,971 per Exchange and 

a total cost of $107,478 for 18 StateBased Exchanges. We expect that the 

burden on the Exchange to maintain this 

notice will be significantly lower than to 

develop it. 

Section 155.310(h) specifies that the 

Exchange will notify an employer that 

an individual in an employee’s tax 

household has been determined eligible 

for advance payments of the premium 

tax credit and/or cost-sharing reductions 

based in part on the employer not 

offering minimum essential coverage or 

not offering qualifying coverage in an 

eligible employer-sponsored plan. Upon 

making such an eligibility 

determination, the Exchange will send a 

notice to the employer with information 

identifying the employee, along with a 

notification that the employer may be 

liable for the payment under section 

4980H of the Code, and that the 

employer has a right to appeal this 

determination. Because this notice will 

be sent to an employer at the address as 

provided by an application filer on the 

application, we anticipate all of these 

notices will be sent by mail. As a result, 

we estimated the associated mailing 

costs for the time and effort needed to 

mail notices in bulk to employers. Like 

the eligibility notice, the employer 

notice above will be developed and 

programmed into the eligibility system. 

However, unlike the eligibility notice, 

we expect the information on the 

employer notice to be minimal in 

comparison to the eligibility notice and 

therefore the burden on the Exchange to 

develop the notice to be substantially 

less. Further, as with the individual 

eligibility notice, HHS will provide 

model notice text for Exchanges to use 

in developing this notice. 

3. ICRs Regarding Verification of 

Enrollment in an Eligible EmployerSponsored Plan and Eligibility for 

Qualifying Coverage in an Eligible 

Employer-Sponsored Plan (§ 155.320) 

Section 155.320(d) proposes the 

process for the verification of 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan. Paragraph 

(d)(2) specifies that the Exchange will 

obtain relevant data from any electronic 

data source available to the Exchange 

which has been approved by HHS, as 

well as data from certain specified 

electronic data sources. This will 

involve the development and execution 

of data sharing agreements; however, 

this burden is already captured in the 

data sharing agreements described in 

§ 155.315. As these verification 

activities will all be electronic, we do 

not expect for there to be any additional 

burden than that which is required to 

design the overall eligibility and 

enrollment system. 

Paragraph (d)(3)(iii)(A) proposes that 

the Exchange provide notice to certain 

applicants indicating that the Exchange 

will be contacting any employer 

identified on the application to verify 

whether the applicant is enrolled in an 

eligible employer-sponsored plan or is 

eligible for qualifying coverage in an 

eligible employer-sponsored plan for the 

benefit year for which coverage is 

requested. The burden associated with 

this notice to certain applicants is 

addressed in 155.310(g) as this will not 

be a separate notice, but incorporated 

into the eligibility determination notice 

described in the above paragraph. 

In paragraph (d)(3)(iii)(D), we propose 

that the Exchange make reasonable 

attempts to contact any employer to 

which the applicant attested 


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employment to verify whether the 

applicant is enrolled in an eligible 

employer-sponsored plan or is eligible 

for qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested. 

We note that the flexibility we provide 

to State-Based Exchanges for the first 

year of operations will significantly 

reduce the burden of this information 

collection in the first year. 

It is difficult to estimate the burden 

associated with this information 

collection as the calculation involves 

identifying the number of individuals 

for whom employer-sponsored coverage 

information will be unavailable. As 

such, below, we estimate the time and 

cost associated with the Exchange 

making a reasonable attempt to contact 

one employer. We estimate the time 

associated with this information 

collection to be a total of 2.2 hours per 

employer at a total cost of $34. 

4. ICRs Regarding Electronic 

Transmissions (§§ 155.310, 155.315, 

155.320, and 155.340) 

Sections 155.310, 155.315, 155.320, 

155.330, and 155.340 involve the 

electronic transmission of data to 

determine eligibility for enrollment in a 

QHP and for insurance affordability 

programs. Section 155.310(d)(3) 

specifies that the Exchange must notify 

the state Medicaid or CHIP agency and 

transmit all information from the 

records of the Exchange for an applicant 

determined eligible for Medicaid or 

CHIP to the Medicaid or CHIP agency to 

ensure that the Medicaid or CHIP 

agency can provide the applicant with 

coverage promptly and without undue 

delay. This applicant information will 

be transmitted electronically from the 

Exchange to the agency administering 

Medicaid or CHIP once a determination 

has been made that the applicant is 

eligible for such program. The purpose 

of this data transmission is to notify the 

agency administering Medicaid or CHIP 

that an individual is newly eligible and 

thus the agency should facilitate 

enrollment in a plan or delivery system. 

Data will be transmitted through a 

secure electronic interface. 

Sections 155.315 and 155.320 include 

transactions necessary to verify 

applicant information. We expect there 

to be no transactional burden associated 

with the electronic transactions needed 

to implement §§ 155.315 and 155.320. 

As these transmission functions will all 

be electronic, we do not expect for there 

to be any additional burden than that 

which is required to design the overall 

eligibility and enrollment system. 

In § 155.340, the Exchange must 

provide the relevant information, such 

as the dollar amount of the advance 

payment and the cost-sharing 

reductions eligibility category, to enable 

advance payments of the premium tax 

credit and cost-sharing reductions, 

reconciliation of the advance payments 

of the premium tax credit, and 

administration of the employer 

responsibility requirements. As we 

anticipate that these transmissions of 

information will all be electronic, we do 

not expect for there to be any additional 

burden than that which is required to 

design the overall eligibility and 

enrollment system. 

5. ICRs Regarding Reporting Changes 

(§§ 155.315, 155.330, and 155.335) 

Section 155.315(f) outlines the 

process for resolving inconsistencies 

identified through the verification 

process. In § 155.330(c)(1), we state that 

the Exchange will verify any 

information reported by an enrollee in 

accordance with the processes specified 

in §§ 155.315 and 155.320 prior to using 

such information in an eligibility 

redetermination. Section 155.335(e) 

provides that the Exchange will require 

a qualified individual to report any 

changes for the information listed in the 

notice described in § 155.335(c) of this 

section within 30 days from the date of 

the notice. It is not possible at this time 

to provide estimates for the number of 

applicants for whom a reported change 

will necessitate the adjudication of 

documentation, but we anticipate that 

this number will decrease as applicants 

become more familiar with the 

eligibility process and as more data 

become available. As such, for now, we 

note that the burden associated with 

this provision is one hour for an 

individual to collect and submit 

documentation, and 12 minutes (or 0.2 

hours) for eligibility support staff at an 

hourly cost of $28.66 to review the 

documentation. 

6. ICRs Regarding Enrollment and 

Termination (§§ 155.400, 155.405, and 

155.430) 

In part 155, subpart E, we describe the 

requirements for Exchanges in 

connection with enrollment and 

disenrollment of qualified individuals 

through the Exchange. These 

information collections are associated 

with sending eligibility and enrollment 

information to QHP issuers and to HHS, 

maintaining records of all enrollments 

in QHPs through the Exchange, 

reconciling enrollment information with 

QHP issuers and HHS, and retaining 

and tracking coverage termination 

information. The burden estimates 

associated with these provisions include 

the time and cost to meet these record 

requirements. We estimate that it will 

take 142 hours annually for an Exchange 

to meet these recordkeeping 

requirements for a total of 2,556 hours 

for 18 State-Based Exchanges. 

In the case of the requirement related 

to termination standards, the burden 

includes estimates related to the 

maintenance and transmission of 

coverage termination information, as 

well as the time and effort needed to 

develop the system to collect and store 

the information. We estimate that it will 

take 30 hours of a health policy analyst 

at an hourly rate of $58.05, 20 hours for 

a computer programmer at an hourly 

rate of $52.50, and 20 hours for an 

operations analyst at an hourly rate of 

$54.45 for a total of 70 hours annually 

per Exchange and a total of 1,260 hours 

for 18 Exchanges, for the time and effort 

to meet this standard. We estimate a 

cost of $3,881 for one Exchange and a 

total cost of 69,858 for 18 State-Based 

Exchanges. 

7. ICRs Regarding Agreements 

(§§ 155.302 and 155.345) 

Section 155.345(a) specifies that an 

Exchange and the corresponding state 

Medicaid and CHIP agencies will enter 

in to an agreement regarding the 

coordination of eligibility 

determinations, and § 155.302(b)(6) 

specifies that to the extent that an 

Exchange is making assessments of 

eligibility for Medicaid and CHIP, rather 

than determinations, the Exchange will 

enter into an agreement with the state 

Medicaid and CHIP agencies regarding 

this arrangement. These agreements are 

necessary to minimize burden on 

individuals, ensure prompt 

determinations of eligibility and 

enrollment in the appropriate program 

without undue delay and to provide 

standards for transferring an application 

between the Exchange and other entities 

administering insurance affordability 

programs. The specific number of 

agreements needed may vary depending 

on how states choose to divide 

responsibilities regarding eligibility 

determinations; where the Exchange is 

making assessments, we expect that the 

agreement described in § 155.302(b)(6) 

will be combined with the agreement in 

§ 155.345(a). 

The burden associated with this 

provision is the time and effort 

necessary for the Exchange to establish 

or modify an agreement for eligibility 

determinations and coordination of 

eligibility and enrollment functions. If 

an Exchange chooses to draft separate 

agreements for each insurance 

affordability program, then the estimate 

will likely increase. 


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In either case, we estimate it will take 

each Exchange an average of 105 hours 

to create a new agreement, although we 

assume that such agreements will be 

largely standardized across states, and 

that HHS will provide model 

agreements for state Medicaid and CHIP 

agencies and the Exchange to use. This 

includes a mid-level health policy 

analyst and an operations analyst 

reviewing the agreement with 

managerial oversight and 

comprehensive review of the agreement 

by operations analyst. We estimate a 

cost of $6,733 per Exchange. 

8. ICRs Regarding Notices From QHP 

Issuers (§§ 156.260, 156.265, 156.270, 

and 156.290) 

First, § 156.260(b) provides that QHP 

issuers will notify a qualified individual 

of his or her effective date of coverage, 

in accordance with the effective dates of 

coverage established by the Exchange in 

accordance with § 155.410(c) and (f). 

Second, under § 156.270(b), QHP issuers 

will send a notice of termination of 

coverage to an enrollee if the enrollee’s 

coverage in the QHP is being terminated 

in accordance with § 155.430(b)(1)(i), 

(b)(2)(ii) or (b)(2)(iii). Third, § 156.270(f) 

provides that QHP issuers will provide 

enrollees with a notice about the grace 

period for non-payment of premiums. 

QHP issuers will send this notice to 

enrollees who are delinquent on 

premium payments. Fourth, § 156.265(e) 

provides that QHP issuers will provide 

new enrollees with an enrollment 

information package, which we 

anticipate that issuers may combine 

with the notification of coverage 

effective date described in § 156.260(b). 

Lastly, under § 156.290(b), QHP issuers 

will provide a notice to enrollees if the 

issuer elects not to seek recertification 

of a QHP. 

We anticipate that some of the above 

QHP issuer required notices are similar 

in nature to the notices that issuers 

currently send to enrollees. For 

example, it is standard practice for 

issuers to provide new enrollees with 

information about their enrollment in a 

plan, their effective date of coverage, 

and if and when their coverage is 

terminating. Accordingly, we anticipate 

that QHP issuers will review, update, 

and revise notice templates that they 

utilize currently as they work to address 

the notice requirements described below 

and to ensure that the notices include 

the appropriate information. Similar to 

notices that will be issued by the 

Exchange, we expect that for QHPissued notices, an analyst will develop 

text, and a peer analyst, manager, and 

legal counsel for the issuer will review 

the notices, including a review to ensure 

compliance with plain writing, language 

access, and readability standards as 

required under § 156.250(c). Finally, a 

developer will need to incorporate 

programming changes into the issuer’s 

noticing system to account for the 

changes and updates that will be 

necessary to ensure that the QHP issuer 

is in compliance with the notice 

standards set forth in this rule and to 

ensure the notice can be populated and 

generated according to an individual’s 

preference to receive notices. We 

estimate that the burden related to the 

development and implementation of 

this notice will necessitate 44 hours 

from a health policy analyst at an hourly 

cost of $49.35 to learn appeals rules and 

draft notice text; 20 hours from an 

attorney at an hourly cost of $90.14 and 

four hours from a senior manager at an 

hourly cost of $79.08 to review the 

notice; and 32 hours from a computer 

programmer at an hourly cost of $52.50 

to conduct the necessary development. 

In total, we estimate that this will take 

a total of 100 hours for each QHP issuer, 

at a cost of approximately $5,971 per 

issuer. We expect that the burden on 

QHP issuers to maintain this notice will 

be significantly lower than to develop it. 

However, we believe that the burden 

estimate described under § 155.310(g) 

likely represents an upper bound 

estimate of the burden on issuers to 

develop each of these notices as in some 

cases the notice described under 

§ 155.310(g) will be somewhat more 

dynamic to address the additional 

information we expect to be included in 

that notice. 

Since the above estimate applies to 

one notice, and we described 5 notices 

under part 156, the total burden 

estimate is $40,710. Due to uncertainty 

regarding the number of individuals 

who will choose to receive paper 

notices, as well as some uncertainty 

regarding the frequency of 

circumstances that will trigger notices 

in accordance with this part, we have 

only included an estimate of the 

printing and mailing costs for a QHP 

issuer to send one notice to a qualified 

individual or enrollee. 

9. ICRs Regarding Notices and ThirdParty Disclosures in the SHOP 

(§§ 157.205(e) and (f)) 

45 CFR part 157 includes several 

instances in which qualified employers 

participating in the SHOP Exchange will 

need to provide information to 

employees or to the SHOP Exchange. 

We include the data elements for these 

notifications in appendix A of this PRA 

package. For the individual market 

Exchange, we anticipate that a large 

share of enrollees will elect to receive 

electronic notices while the rest will 

receive notices by mail. We do not make 

this assumption for notices described 

here as we expect that qualified 

employers would provide notices to 

employees in whatever format the 

qualified employer usually provides 

notices to employees; in paper, 

electronically, or in a combination of 

both formats. We estimate that the 

associated printing costs for paper 

notices will be approximately $0.10 per 

notice. We do not take mailing costs 

into consideration for notices provided 

by qualified employers, as we expect 

that if qualified employers provide 

notices in paper format, the employer 

may provide the employee with the 

notice in person, instead of mailing the 

notice. We do not have a reasonable way 

to estimate total printing costs for 

notices provided by qualified employers 

in the SHOP Exchange due to 

uncertainty regarding the number of 

employees who will choose to receive 

paper notices, as well as some 

uncertainty regarding the frequency of 

circumstances that will trigger notices 

in accordance with this part. 

First, § 157.205(e) specifies that a 

qualified employer provide an employee 

with information about the enrollment 

process. A qualified employer will 

inform each employee that he or she has 

an offer of coverage through the SHOP 

Exchange, and instructions for how the 

employee can apply for and enroll in 

coverage. We anticipate that the 

qualified employer will also provide 

information about the acceptable 

formats in which an employee may 

submit an application; online, on paper, 

or by phone, as described under 

§ 157.205(c). If the employee being 

offered coverage was hired outside an 

initial or annual enrollment period, the 

notice will also inform the employee if 

he or she is qualified for a special 

enrollment period. Second, in 

§ 157.205(f) we provide that a qualified 

employer will notify the SHOP 

Exchange regarding an employee’s 

change in eligibility for enrollment in a 

QHP through the SHOP Exchange, 

including when a dependent or 

employee is newly eligible, or is no 

longer eligible. 

We expect that the information that 

qualified employers will provide to 

employees and the SHOP Exchange, as 

described above, will be somewhat 

standardized. Additionally, we 

anticipate that qualified employers will 

generate notices using a manual process. 

We expect that for a qualified employer 

to establish a notice, the qualified 

employer will need 20 hours from a 

human resources specialist at an hourly 

cost of $40.68 to develop the text; and 


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four hours from a human resources 

manager at an hourly cost of $75.01 and 

ten hours from an attorney at an hourly 

cost of $90.14 to review the notices. We 

do not anticipate that a developer will 

be needed to develop the notices 

described in this part since we expect 

that in most cases, these notices will be 

manually generated on demand. 

Accordingly, we expect that the burden 

hours for developing each of the notices 

will be approximately 34 hours, for a 

total of 68 hours per qualified employer, 

at a total cost of $4,030. We expect that 

the burden on the qualified employer to 

maintain the notices will be 

significantly lower than to develop the 

notices. 

D. Summary of Annual Burden 

Estimates 

TABLE 1—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation section(s) OMB & CMS ID 

#s Respondents Responses (total) 

Burden per response (hours) Total annual 

burden (hours) 

Labor cost of 

reporting ($) Total cost ($) 

42 CFR 431.10, 

431.11, and 

457.1120.

OCN 0938–New; 

CMS–10456.

48 48 60 2,880 3,258 (per respondent).156,398 

§§ 435.917, 

435.918, 

457.110, and 

457.340.

OCN 0938–New; 

CMS–10456.

96 96 194 18,624 10,609 (per respondent).1,018,504 

§§ 435.923 and 

457.340 (develop and execute agreements).

OCN 0938–New; 

CMS–10456.

53 1060 12.5 13,250 12,635 (per respondent).669,644 

§§ 435.923 and 

457.340 (create 

registration 

process and 

work flow).

OCN 0938–New; 

CMS–10456.

53 53 70 3,710 3,815 (per respondent).202,184 

§§ 435.923 and 

457.340 (develop training 

materials).

OCN 0938–New; 

CMS–10456.

53 53 50 2,650 1,710 (per respondent).90,625 

§§ 435.923 and 

457.340 (train 

application 

assistors).

OCN 0938–New; 

CMS–10456.

53 53 50 2,650 1,332 (per respondent).70,596 

§§ 435.1101(b) 

and 457.355.

OCN 0938–New; 

CMS–10456.

53 53 50 2,650 1,710 (per respondent).90,625 

§ 447.57 ............... 0938–New; CMS– 

10456.

53 53 6 318 210 (per respondent).11,130 

§ 155.227 (ICRs 

Regarding Authorized Representatives).

OCN 0938–New; 

CMS–10400.

18 18 30 540 1,895 (per respondent).34,113 

§§ 155.302, 

155.310, 

155.315, 

155.320, 

155.330, 

155.335, 

155.345, 

155.410, 

155.715, 

155.720, 

155.725, and 

155.1080 (ICRs 

Regarding Notices).

OCN 0938–New; 

CMS–10400.

18 18 100 1,800 5,971 (per respondent).107,478 

§ 155.320 (ICRs 

Regarding 

Verification of 

Enrollment in an 

Eligible Employer-Sponsored Plan and 

Eligibility for 

Qualifying Coverage in an Eligible EmployerSponsored 

Plan).

OCN 0938–New; 

CMS–10400.

1 ........................ 2.2 ........................ 34 (for one respondent).........................


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TABLE 1—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS—Continued 

Regulation section(s) OMB & CMS ID 

#s Respondents Responses (total) 

Burden per response (hours) Total annual 

burden (hours) 

Labor cost of 

reporting ($) Total cost ($) 

§§ 155.315, 155. 

330, 155.335 

(ICRs Regarding Reporting 

Changes).

OCN 0938–New; 

CMS–10400.

18 18 .2 ........................ 29 (for one respondent).5.73 

§§ 155.400 and 

405 (ICRs Regarding Enrollment).

OCN 0938–New; 

CMS–10400.

18 18 142 2,556 7,254 (per respondent).136,314 

§ 155.430 (ICRs 

Regarding Termination).

OCN 0938–New; 

CMS–10400.

18 18 70 1,260 3,881 (per respondent).69,858 

§§ 155.302, 

155.345 (ICRs 

Regarding 

Agreements).

OCN 0938–New; 

CMS–10400.

18 18 105 1,890 6,733 (per respondent).121,194 

§§ 156.260, 

156.265, 

156.270, and 

156.290 (ICRs 

Regarding Notices from QHP 

Issuers).

OCN 0938–New; 

CMS–10400.

18 18 100 1,800 5,971 (per respondent).107,478 

§ 157.205(e) and 

(f) (ICRs Regarding Notices 

and Third Party 

Disclosures in 

the SHOP).

OCN 0938–New; 

CMS–10400.

........................ ........................ 68 ........................ 4,030 (per respondent).........................

Total ............. ............................. ........................ ........................ ........................ 55,578 ........................... 2,886,146.73 

E. Submission of PRA-Related 

Comments 

We have submitted a copy of this final 

rule to OMB for its review of the rule’s 

information collection and 

recordkeeping requirements. These 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access the CMS Web 

site at http://www.cms.gov/Regulationsand-Guidance/Legislation/ 

PaperworkReductionActof1995/PRAListing.html, or call the Reports 

Clearance Office at 410–786–1326. 

We invite public comments on these 

potential information collection 

requirements. If you comment on these 

information collection and 

recordkeeping requirements, please do 

either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this final rule; or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

(CMS–2334–P) Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

PRA-specific comments must be 

received by August 5, 2013. 

V. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993) and 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011). 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 rules with 

economically significant effects ($100 

million or more in any 1 year). The 

Office of Management and Budget has 

determined that this rulemaking is 

‘‘economically significant’’ within the 

meaning of section 3(f)(1) of Executive 

Order 12866, because it is likely to have 

an annual effect of $100 million in any 

one year. Accordingly, we have 

prepared a Regulatory Impact Analysis 

that presents the costs and benefits of 

this rulemaking. The RIA published 

with the March 2012 Medicaid 

eligibility final rule detailed the impact 

of the Medicaid eligibility changes 

related to implementation of the 

Affordable Care Act. The majority of 

Medicaid eligibility provisions included 

in this final rule were described in that 

detailed RIA and do not need to be 

repeated here. In the April 30, 2010 

final rule on State Flexibility for 

Medicaid Benefit Packages, the 

assumptions utilized in modeling the 

estimated economic impact of the 

associated provisions took into 

perspective the costs of the benefit 

package for the new adult group. 

Coverage of these benefits was already 

accounted for in the April 30, 2010 final 

rule, and therefore, does not need to be 

repeated here. 

For coverage beginning on or after 

January 1, 2014, individuals and small 

businesses will be able to purchase 

private health insurance—known as 

qualified health plans—through 

competitive marketplaces called 

Affordable Insurance Exchanges, or 

‘‘Exchanges.’’ This final rule: (1) 

outlines criteria related to the 

verification of enrollment in an eligible 

employer-sponsored plan and eligibility 

for qualifying coverage in an eligible 


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3For example, CMS has awarded a number of 

Early Innovator grants to develop efficient and 

replicable IT systems that can provide the 

foundation for other states’ work in this area. These 

amounts vary from $6 million to $48 million per 

state. 

4Medicaid Program; Federal Funding for 

Medicaid Eligibility Determination and Enrollment 

Activities, Final rule, 75 FR 21950 (April 19, 2011). 

employer-sponsored plan in connection 

with advance payments of the premium 

tax credit and cost-sharing reductions; 

and (2) further specifies or amends other 

eligibility and enrollment provisions to 

provide detail necessary for state 

implementation. This rule continues to 

afford states substantial discretion in the 

design and operation of the Exchange 

established by a state, with greater 

standardization provided where 

directed by the statute or where there 

are compelling practical, efficiency or 

consumer protection reasons. 

B. Estimated Impact of the Medicaid 

Premium and Cost Sharing Provisions 

The provisions in this final rule 

related to Medicaid premiums and cost 

sharing clarify and update existing 

flexibilities and provide new flexibility 

for states for cost sharing for outpatient 

services, drugs, and non-emergency use 

of the emergency department. As states 

contemplate the changes required under 

the Affordable Care Act, more states 

may consider utilizing these flexibilities 

to either establish or expand cost 

sharing. We believe these proposed 

policies will encourage less costly care 

and decreased use of unnecessary 

services, which will reduce state and 

federal costs for the specified services. 

The following chart summarizes our 

estimate of the anticipated effects of this 

final rule. 

TABLE 2—ESTIMATED TOTAL IMPACT OF CHANGES IN MAXIMUM MEDICAID COST SHARING, FY 2014–2018 

[In millions of dollars] 

Year 2014 2015 2016 2017 2018 2014–2018 

Federal ............................. ¥25 ¥45 ¥70 ¥70 ¥70 ¥280 

State ................................. ¥15 ¥30 ¥45 ¥45 ¥50 ¥185 

Total .......................... ¥40 ¥75 ¥115 ¥115 ¥120 ¥465 

Source: CMS’ Office of the Actuary 

We estimate that this final rule will 

result in total savings of $465 million 

over 5 years, including $280 million in 

cost savings to the federal government 

and $185 million in savings to states. 

These savings may be attributed 

primarily to the increased maximum 

allowable cost sharing for outpatient 

services, drugs, and non-emergency use 

of the emergency department. Such 

savings are offset only nominally by the 

decreased maximum allowable cost 

sharing for an inpatient stay. In addition 

to direct savings from increased cost 

sharing, we assume some declines in 

utilization as enrollees subject to new 

cost sharing requirements choose to 

decrease their use of services. 

C. Estimated Impact of Exchange 

Provisions 

The provisions in this final rule 

amend select provisions of the Exchange 

Establishment final rule (77 FR 18319, 

March 27, 2012). Our approach in this 

regulatory impact analysis was to build 

off of the analysis presented in the 

Exchange Establishment final rule, 

available at http://cciio.cms.gov/ 

resources/files/Files2/03162012/hie3rria-032012.pdf. We do not believe the 

provisions in this final rule significantly 

alter our prior estimates of the impact of 

Exchanges on the budget or on 

enrollment in health insurance, and 

therefore, this final rule does not 

significantly alter the regulatory impact 

analysis drafted as part of such 

rulemaking. This section summarizes 

benefits and costs of the Exchange 

provisions presented in this final rule. 

1. Methods of Analysis 

The estimates in this analysis reflect 

estimates from the FY 2014 President’s 

Budget for State Planning and 

Establishment Grants, which 

incorporate the costs associated with 

state implementation of the provisions 

proposed in this rule. 

2. Benefits of the Proposed Regulation 

The provisions included in this final 

rule amend provisions of the Exchange 

Establishment final rule. We do not 

believe the modifications made 

significantly alter the benefits associated 

with these provisions. Therefore, we 

refer to the benefits discussion included 

in the regulatory impact analysis 

associated with the Exchange 

Establishment final rule for a full 

analysis. The Exchange Establishment 

final rule regulatory impact analysis can 

be found at http://cciio.cms.gov/ 

resources/files/Files2/03162012/hie3rria-032012.pdf. 

3. Costs of the Proposed Regulation 

The Affordable Care Act and the 

implementing regulations found in 

subpart D of this final rule and the 

Exchange Establishment final rule 

provide for a streamlined system based 

on simplified eligibility rules, and an 

expedited process that will facilitate 

enrollment of eligible individuals and 

minimize costs to states, Exchanges and 

to the federal government. To support 

this new eligibility structure, states 

seeking to operate Exchanges are 

expected to build new or modify 

existing information technology (IT) 

systems. We believe that how each state 

builds and assembles the components 

necessary to support its Exchange and 

Medicaid infrastructure will vary and 

depend on the level of maturity of 

current systems, current governance and 

business models, size, and other factors. 

It is important to note that, although 

states have the option to establish and 

operate an Exchange, there is no federal 

requirement that each state establish an 

Exchange. We believe the proposed 

provisions provide options and 

flexibility to states that minimize costs 

and burden on Exchanges, consumers, 

employers and other entities. We also 

believe that overall administrative costs 

may increase in the short term as states 

build IT systems; however, in the long 

term, states may see savings through the 

use of more efficient systems. 

Any administrative costs incurred in 

the development of IT infrastructure to 

support the Exchange may be funded 

through Exchange Planning and 

Establishment Grants to states. The 

federal government expects that these 

grants will fund the development of IT 

systems that can be used by many states 

who either develop their own 

Exchanges or who partner with the 

federal government to provide a subset 

of Exchange services.3 Costs for IT 

infrastructure that will also support 

Medicaid must be allocated to 

Medicaid, but are eligible for a 90 

percent federal matching rate to assist in 

development.4


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5Finkelstein, A. et al., (2011). The Oregon Health 

Insurance Experiment: Evidence from the First 

Year,’’ National Bureau of Economic Research 

Working Paper Series, 17190. 

In general, as noted in our discussion 

of benefits, we anticipate that the final 

rule will increase take-up of health 

insurance; therefore, one type of ruleinduced cost will be associated with 

providing additional medical services to 

newly-enrolled individuals. A recent 

study found that insured individuals 

received more hospital care and more 

outpatient care than their uninsured 

counterparts.5

Below we include estimated federal 

government payments related to grants 

for Exchange startup. States’ initial costs 

due to the creation of Exchanges will be 

funded by these grants. Performing 

eligibility determinations is a minimum 

function of the Exchange; therefore the 

Exchange costs to develop the 

infrastructure for the provisions 

included in this final rule are covered 

by these grant outlays. 

TABLE 3—ESTIMATED FEDERAL GOVERNMENT OUTLAYS FOR THE AFFORDABLE INSURANCE EXCHANGES FY 2013– 

FY2017 

[In billions of dollars] 

Year 2013 2014 2015 2016 2017 2013–2017 

Grant Authority for Exchange Start up a .......................... 1.5 2.1 1.7 0.8 0.2 6.2 

aFY 2014 President’s Budget. 

D. Alternatives Considered 

We considered two alternatives to the 

Exchange provisions. 

• Alternative #1: Require paper 

documentation to verify access to 

employer-sponsored coverage. 

Section 155.320(d) of the final rule 

provides a process for verification 

related to enrollment in an eligible 

employer-sponsored plan and eligibility 

for qualifying coverage in an eligible 

employer-sponsored plan. The proposed 

process relies on available electronic 

data sources, with the use of paper 

documentation in situations in which 

information submitted by an applicant 

is not reasonably compatible with 

information in electronic data sources, 

along with a sample-based review for 

situations in which no data is available. 

The alternative model we considered 

would require the Exchange to require 

individuals to submit paper 

documentation to verify this 

information in all circumstances. This 

may increase the burden on individuals 

to submit this documentation to the 

Exchange, which may not be readily 

available to the applicant, but on 

employers, who will have to produce 

this information at the request of 

applicants, and will also require 

additional time and resources for 

Exchanges to accept and process the 

paper documentation needed for an 

eligibility determination. In addition, it 

could ultimately increase the amount of 

time it will take for an individual to 

receive health coverage through the 

Exchange or an insurance affordability 

program, could reduce the number of 

states likely to operate an Exchange due 

to increased administrative costs, and 

could dissuade individuals from seeking 

coverage through the Exchange. 

• Alternative #2: Require Paper 

Notices from the Exchange 

In § 155.230(d), we provide that the 

Exchange will provide the option to an 

individual or employer to receive 

notices electronically. We anticipate 

that this will be accommodated by the 

Exchange generating electronic notices, 

storing them on a secure Web site, and 

notifying individuals and employers 

through a generic email or text message 

communication that a notice is available 

for review. 

The alternative model would require 

the Exchange to send all notices in 

paper form via US mail. This would 

significantly increase administrative 

costs for printing and mailing, and also 

generate significant volumes of 

undeliverable mail which would be 

returned to the Exchange. 

Summary of Costs for Each Alternative 

The paper-driven process outlined 

under alternatives 1 and 2 would 

ultimately increase the amount of time 

it would take for an individual to 

receive health coverage through the 

Exchange or an insurance affordability 

program, would increase administrative 

costs, and would dissuade individuals 

from seeking coverage through the 

Exchange. 

E. Limitations of the Analysis 

A number of challenges face 

estimators in projecting the Exchange, 

Medicaid, and CHIP benefits and costs 

under the Affordable Care Act and its 

implementing regulations, including 

this final rule. Health care cost growth 

is difficult to project, especially for 

people who are currently not in the 

health care system—the population 

targeted for the Medicaid eligibility 

changes and new insurance affordability 

programs. Such individuals could have 

pent-up demand and thus have costs 

that may be initially higher than other 

enrollees in health coverage, while they 

might also have better health status than 

those who have found a way (for 

example, ‘‘spent down’’) to enroll in 

Medicaid. 

For the Exchange provisions, we use 

the President’s Fiscal Year 2014 Budget 

as an estimate of the costs associated 

with the Exchange provisions. It is 

difficult to isolate the effects associated 

with these particular provisions of the 

Affordable Care Act, and therefore, in 

this analysis, we discuss the evidence 

relating to the provisions of this final 

rule in combination with related 

provisions of the Affordable Care Act. 

Further, with limited previous data and 

experiences, there is even greater 

uncertainty than in estimating the 

implications of modifying a previously 

existing program. Accordingly, we 

supplement the regulatory impact 

analysis with a qualitative discussion on 

the specific provisions of this rule. 

F. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/ 

circulars_a004_a-4/), in Table X we 

have prepared an accounting statement 

table showing the classification of the 

impacts associated with implementation 

of this final rule. 


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TABLE 4—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED NET COSTS AND TRANSFERS

[In millions] 

Category Estimates 

Units 

Year dollar Discount rate Period covered 

Benefits 

Annualized Monetized ($million/year) ................ Not Estimated ................................. 2012 7% 2013–2017 

Not Estimated ................................. 2012 3% 2013–2017 

Qualitative ........................................................... The Exchanges, combined with other actions being taken to implement the Affordable Care 

Act, will improve access to health insurance, with numerous positive effects, including reduced morbidity and fewer medical bankruptcies. The Exchange will also serve as a distribution channel for insurance reducing administrative costs as a part of premiums and providing 

comparable information on health plans to allow for a more efficient shopping experience. 

Costs* 

Annualized Monetized ($million/year) ................ 1,311 ............................................... 2012 7% 2013–2017 

1,283 ............................................... 2012 3% 2013–2017 

Qualitative ........................................................... Unquantified costs include State implementation costs above the amount covered by Federal 

grants; and increased medical costs associated with more widespread enrollment in health 

insurance. 

Transfers 

Annualized Monetized ($million/year) ................ 54.4 ................................................. 2013 7% 2014–2018 

55.3 ................................................. 2013 3% 2014–2018 

From Whom to Whom ........................................ Beneficiaries to Federal Government 

Annualized Monetized ($million/year) ................ 35.8 ................................................. 2013 7% 2014–2018 

36.5 ................................................. 2013 3% 2014–2018 

From Whom to Whom ........................................ Beneficiaries to State Governments 

* These costs include grant outlays to States to establish Exchanges; most of these Exchange-establishment costs been included in the accounting statement for the Exchange final rule. 

G. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (5 

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

agencies to prepare an initial regulatory 

flexibility analysis to describe the 

impact of the final rule on small 

entities, unless the head of the agency 

can certify that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

The Act generally defines a ‘‘small 

entity’’ as (1) a proprietary firm meeting 

the size standards of the Small Business 

Administration (SBA); (2) a not-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 as its measure of 

significant economic impact on a 

substantial number of small entities a 

change in revenues of more than 3 to 5 

percent. 

As discussed above, this final rule is 

necessary to implement certain 

standards related to the establishment 

and operation of Exchanges as 

authorized by the Affordable Care Act. 

Specifically, this final rule: (1) provides 

criteria related to the verification of 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan; and (2) 

further specifies or amends standards 

related to other eligibility and 

enrollment provisions to provide detail 

necessary for state implementation. 

The intent of this rule is to continue 

to afford states substantial discretion in 

the design and operation of an 

Exchange, with greater standardization 

provided where directed by the statute 

or where there are compelling practical, 

efficiency or consumer protection 

reasons. 

For the purposes of the regulatory 

flexibility analysis, we expect the 

following types of entities to be affected 

by this final rule—(1) QHP issuers; and 

(2) employers. We believe that health 

insurers will be classified under the 

North American Industry Classification 

System (NAICS) Code 524114 (Direct 

Health and CMS–9989–P 166 Medical 

Insurance Carriers). According to SBA 

size standards, entities with average 

annual receipts of $7 million or less will 

be considered small entities this NAICS 

code. Health issuers could also possibly 

be classified in 621491 (HMO Medical 

Centers) and, if this is the case, the SBA 

size standard will be $30 million or less. 

1. QHP Issuers 

This rule proposes standards for 

Exchanges that affect eligibility 

determinations for enrollment in a QHP 

through the Exchange, advance 

payments of the premium tax credit, 

cost-sharing reductions, Medicaid, and 

CHIP. Although these standards are for 

Exchanges, they also affect health plan 

issuers that choose to participate in an 

Exchange. QHP issuers receive 

information from an Exchange about an 

enrollee to enable the QHP issuer to 

process the correct level of advance 

payments of the premium tax credit and 

cost-sharing reductions. The issuer of 

the QHP will adjust an enrollee’s net 

premium to reflect the advance 

payments of the premium tax credit, as 

well as make any changes required to 

ensure that cost-sharing reflects the 

appropriate level of reductions. QHP 

issuers benefit significantly from 

advance payments of the premium tax 

credit and cost-sharing reductions, but 


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6Table of Size Standards Matched To North 

American Industry Classification System Codes,’’ 

effective November 5, 2010, U.S. Small Business 

Administration, available at http://www.sba.gov. 

may face some administrative costs 

relating to receiving enrollee 

information from an Exchange. 

As discussed in the Web Portal 

interim final rule (75 FR 24470, 24481 

(May 5, 2010), HHS examined the health 

insurance industry in depth in the 

Regulatory Impact Analysis we prepared 

for the final rule on establishment of the 

Medicare Advantage program published 

on August 3, 2004 (69 FR 46866). In that 

analysis we determined that there were 

few, if any, insurance firms 

underwriting comprehensive health 

insurance policies (in contrast, for 

example, to travel insurance policies or 

dental discount policies) that fell below 

the size thresholds for ‘‘small’’ business 

established by the SBA (currently $7 

million in annual receipts for health 

insurers, based on North American 

Industry Classification System Code 

524114).6

Additionally, as discussed in the 

Medical Loss Ratio interim final rule (75 

FR 74918), the Department used a data 

set created from 2009 National 

Association of Insurance Commissioners 

(NAIC) Health and Life Blank annual 

financial statement data to develop an 

updated estimate of the number of small 

entities that offer comprehensive major 

medical coverage in the individual and 

group markets. For purposes of that 

analysis, the Department used total 

Accident and Health (A&H) earned 

premiums as a proxy for annual 

receipts. The Department estimated that 

there were 28 small entities with less 

than $7 million in accident and health 

earned premiums offering individual or 

group comprehensive major medical 

coverage; however, this estimate may 

overstate the actual number of small 

health insurance issuers offering such 

coverage, because it does not include 

receipts from these companies’ other 

lines of business. 

2. Employers 

The establishment of SHOP in 

conjunction with tax incentives for 

eligible employers will provide new 

opportunities for employers to offer 

affordable health insurance to their 

employees. A detailed discussion of the 

impact on employers related to the 

establishment of the SHOP is found in 

the RIA for the Exchange final rule, 77 

FR 18010 (March 23, 2012) and 

available at http://cciio.cms.gov/ 

resources/files/Files2/03162012/hie3rria-032012.pdf. 

Except in the Exchange provisions, 

few of the entities that meet the 

definition of a small entity as that term 

is used in the RFA (for example, small 

businesses, nonprofit organization, and 

small governmental jurisdictions with a 

population of less than 50,000) will be 

impacted directly by this final rule. 

Individuals and states are not included 

in the definition of a small entity. In 

addition, the impact of the majority of 

this rule was addressed in the RIA 

accompanying the March 2012 

Medicaid eligibility rule (77 FR 17144, 

March 23, 2012). Therefore, the 

Secretary has determined that this final 

rule will not have a significant 

economic impact on a substantial 

number of small entities, and we have 

not prepared a regulatory flexibility 

analysis. 

Additionally, section 1102(b) of the 

Act requires us to prepare a regulatory 

impact analysis if a final rule may have 

a significant economic impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 604 

of the RFA. For purposes of section 

1102(b) of the Act, we define a small 

rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. We are not preparing an analysis 

for section 1102(b) of the Act because 

the Secretary has determined that this 

final rule will not have a direct 

economic impact on the operations of a 

substantial number of small rural 

hospitals. 

H. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation, 

by state, local, or tribal governments, in 

the aggregate, or by the private sector. In 

2013, that threshold is approximately 

$141 million. This final rule does not 

mandate expenditures by state 

governments, local governments, tribal 

governments, in the aggregate, or the 

private sector, of $140 million. The 

majority of state, local, and private 

sector costs related to implementation of 

the Affordable Care Act were described 

in the RIA accompanying the March 

2012 Medicaid eligibility rule (77 FR 

17144, March 23, 2012). Furthermore, 

the final rule does not set any mandate 

on states to set up an Exchange. 

I. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

effects on states, preempts state law, or 

otherwise has federalism implications. 

We wish to note again that the impact 

of changes related to implementation of 

the Affordable Care Act were described 

in the RIA of the March 2012 Medicaid 

eligibility rule (77 FR 17144, March 23, 

2012). As discussed in the March 2012 

RIA, we have consulted with states to 

receive input on how the various 

Affordable Care Act provisions codified 

in this final rule will affect states. We 

continue to engage in ongoing 

consultations with Medicaid and CHIP 

Technical Advisory Groups (TAGs), 

which have been in place for many 

years and serve as a staff level policy 

and technical exchange of information 

between CMS and the states. Through 

consultations with these TAGs, we have 

been able to get input from states 

specific to issues surrounding the 

changes in eligibility groups and rules 

that will become effective in 2014. 

Because states have flexibility in 

deciding whether to implement an 

Exchange and, if a State opts to, in the 

design of its Exchange, state decisions 

will ultimately influence both 

administrative expenses and overall 

premiums. However, because states are 

not required to create an Exchange, 

these costs are not mandatory. For states 

electing to create an Exchange, the 

initial costs of the creation of the 

Exchange will be funded by Exchange 

Planning and Establishment Grants. 

After this time, Exchanges will be 

financially self-sustaining with revenue 

sources left to the discretion of the state. 

In the Department’s view, while this 

final rule does not impose substantial 

direct effects on state and local 

governments, it has federalism 

implications due to direct effects on the 

distribution of power and 

responsibilities among the state and 

federal governments relating to 

determining standards relating to health 

insurance coverage (that is, for QHPs) 

that is offered in the individual and 

small group markets. Each state electing 

to establish a State-Based Exchange 

must adopt federal standards contained 

in the Affordable Care Act and in this 

final rule, or have in effect a state law 

or regulation that implements these 

federal standards. However, the 

Department anticipates that the 

federalism implications (if any) are 

substantially mitigated because states 

have choices regarding the structure and 

governance of their Exchanges. 

Additionally, the Affordable Care Act 

does not require states to establish an 

Exchange; but if a state elects not to 

establish an Exchange or the state’s 

Exchange is not approved, HHS will 


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establish and operate an Exchange in 

that state. Additionally, states will have 

the opportunity to participate in state 

Partnership Exchanges that will allow 

states to leverage work done by other 

states and the federal government. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

states, the Department has engaged in 

efforts to consult with and work 

cooperatively with affected states, 

including participating in conference 

calls with and attending conferences of 

the National Association of Insurance 

Commissioners and consulting with 

state officials on an individual basis. 

In accordance to the requirements set 

forth in section 8(a) of Executive Order 

13132, and by the signatures affixed to 

this regulation, the Department certifies 

that CMS has complied with the 

requirements of Executive Order 13132 

for the attached proposed regulation in 

a meaningful and timely manner. 

J. Congressional Review Act 

This final rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

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

before a rule can take effect, the federal 

agency promulgating the rule shall 

submit to each House of the Congress 

and to the Comptroller General a report 

containing a copy of the rule along with 

other specified information, this final 

rule, and has been transmitted to 

Congress and the Comptroller General 

for review. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 431 

Grant programs—health, Health 

facilities, Medicaid, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 435 

Aid to Families with Dependent 

Children, Grant programs-health, 

Medicaid, Reporting and recordkeeping 

requirements, Supplemental Security 

Income (SSI), Wages. 

42 CFR Part 436 

Aid to Families with Dependent 

Children, Grant programs—health, 

Guam, Medicaid, Puerto Rico, 

Supplemental Security Income (SSI), 

and Virgin Islands. 

42 CFR Part 438 

Grant programs—health, Medicaid, 

and Reporting and recordkeeping 

requirements. 

42 CFR Part 440 

Grant programs—health, Medicaid. 

42 CFR Part 447 

Accounting, Administrative practice 

and procedure, Drugs, Grant programs— 

health, Health facilities, Health 

professions, Medicaid, Reporting and 

recordkeeping requirements, Rural 

areas. 

42 CFR Part 457 

Administrative practice and 

procedure, Grant programs—health, 

Health insurance, Reporting and 

recordkeeping requirements. 

45 CFR Part 155 

Administrative practice and 

procedure, Advertising, Brokers, 

Conflict of interest, Consumer 

protection, Grant programs—health, 

Grants administration, Health care, 

Health insurance, Health maintenance 

organization (HMO), Health records, 

Hospitals, Indians, Individuals with 

disabilities, Loan programs—health, 

Organization and functions 

(Government agencies), Medicaid, 

Public assistance programs, Reporting 

and recordkeeping requirements, Safety, 

state and local governments, Technical 

assistance, Women, and Youth. 

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, Indians, Individuals with 

disabilities, Loan programs—health, 

Organization and functions 

(Government agencies), Medicaid, 

Public assistance programs, Reporting 

and recordkeeping requirements, Safety, 

State and local governments, Sunshine 

Act, Technical Assistance, Women, and 

Youth. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act, (42 U.S.C. 1302). 

■ 2. Section 431.10 is amended by 

revising paragraph (a), adding paragraph 

(b)(3), and revising paragraphs (c), (d), 

and (e) to read as follows: 

§ 431.10 Single State agency. 

(a) Basis, purpose, and definitions. (1) 

This section implements section 

1902(a)(4) and (5) of the Act. 

(2) For purposes of this part— 

Appeals decision means a decision 

made by a hearing officer adjudicating 

a fair hearing under subpart E of this 

part. 

Exchange has the meaning given to 

the term in 45 CFR 155.20. 

Exchange appeals entity has the 

meaning given to the term ‘‘appeals 

entity,’’ as defined in 45 CFR 155.500. 

Medicaid agency is the single State 

agency for the Medicaid program. 

(b) * * * 

(3) The single State agency is 

responsible for determining eligibility 

for all individuals applying for or 

receiving benefits in accordance with 

regulations in part 435 of this chapter 

and for fair hearings filed in accordance 

with subpart E of this part. 

(c) Delegations. (1) Subject to the 

requirement in paragraph (c)(2) of this 

section, the Medicaid agency— 

(i)(A) May, in the approved state plan, 

delegate authority to determine 

eligibility for all or a defined subset of 

individuals to— 

(1) The single State agency for the 

financial assistance program under title 

IV–A (in the 50 States or the District of 

Columbia), or under title I or XVI 

(AABD), in Guam, Puerto Rico, or the 

Virgin Islands; 

(2) The Federal agency administering 

the supplemental security income 

program under title XVI of the Act; or 

(3) The Exchange. 

(B) Must in the approved state plan 

specify to which agency, and the 

individuals for which, authority to 

determine eligibility is delegated. 

(ii) Delegate authority to conduct fair 

hearings under subpart E of this part for 

denials of eligibility for individuals 

whose income eligibility is determined 

based on the applicable modified 

adjusted gross income standard 

described in § 435.911(c) of this chapter, 

to an Exchange or Exchange appeals 

entity, provided that individuals who 

have requested a fair hearing of such a 

denial are given a choice to have their 

fair hearing instead conducted by the 

Medicaid agency. 

(2) The Medicaid agency may delegate 

authority to make eligibility 

determinations or to conduct fair 

hearings under this section only to a 

government agency which maintains 

personnel standards on a merit basis. 


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(3) The Medicaid agency— 

(i) Must ensure that any agency to 

which eligibility determinations or 

appeals decisions are delegated— 

(A) Complies with all relevant Federal 

and State law, regulations and policies, 

including, but not limited to, those 

related to the eligibility criteria applied 

by the agency under part 435 of this 

chapter; prohibitions against conflicts of 

interest and improper incentives; and 

safeguarding confidentiality, including 

regulations set forth at subpart F of this 

part. 

(B) Informs applicants and 

beneficiaries how they can directly 

contact and obtain information from the 

agency; and 

(ii) Must exercise appropriate 

oversight over the eligibility 

determinations and appeals decisions 

made by such agencies to ensure 

compliance with paragraphs (c)(2) and 

(c)(3)(i) of this section and institute 

corrective action as needed, including, 

but not limited to, rescission of the 

authority delegated under this section. 

(iii) If authority to conduct fair 

hearings is delegated to the Exchange or 

Exchange appeals entity under 

paragraph (c)(1)(ii) of this section, the 

agency may establish a review process 

whereby the agency may review fair 

hearing decisions made under that 

delegation, but that review will be 

limited to the proper application of 

federal and state Medicaid law and 

regulations, including sub-regulatory 

guidance and written interpretive 

policies, and must be conducted by an 

impartial official not directly involved 

in the initial determination. 

(d) Agreement with Federal, State or 

local entities making eligibility 

determinations or appeals decisions. 

The plan must provide for written 

agreements between the Medicaid 

agency and the Exchange or any other 

State or local agency that has been 

delegated authority under paragraph 

(c)(1)(i) of this section to determine 

Medicaid eligibility and for written 

agreements between the agency and the 

Exchange or Exchange appeals entity 

that has been delegated authority to 

conduct Medicaid fair hearings under 

paragraph (c)(1)(ii) of this section. Such 

agreements must be available to the 

Secretary upon request and must 

include provisions for: 

(1) The relationships and respective 

responsibilities of the parties, including 

but not limited to the respective 

responsibilities to effectuate the fair 

hearing rules in subpart E of this part; 

(2) Quality control and oversight by 

the Medicaid agency, including any 

reporting requirements needed to 

facilitate such control and oversight; 

(3) Assurances that the entity to 

which authority to determine eligibility 

or conduct fair hearings will comply 

with the provisions set forth in 

paragraph (c)(3) of this section. 

(4) For appeals, procedures to ensure 

that individuals have notice and a full 

opportunity to have their fair hearing 

conducted by either the Exchange or 

Exchange appeals entity or the Medicaid 

agency. 

(e) Authority of the single State 

agency. The Medicaid agency may not 

delegate, to other than its own officials, 

the authority to supervise the plan or to 

develop or issue policies, rules, and 

regulations on program matters. 

■ 3. Section 431.11 is amended by— 

■ A. Removing paragraph (b). 

■ B. Redesignating paragraphs (c) and 

(d), as paragraphs (b) and (c), 

respectively. 

■ C. Revising newly redesignated 

paragraphs (b) and (c). 

The revisions read as follows: 

§ 431.11 Organization for administration. 

* * * * * 

(b) Description of organization. (1) 

The plan must include a description of 

the organization and functions of the 

Medicaid agency. 

(2) When submitting a state plan 

amendment related to the designation, 

authority, organization or functions of 

the Medicaid agency, the Medicaid 

agency must provide an organizational 

chart reflecting the key components of 

the Medicaid agency and the functions 

each performs. 

(c) Eligibility determined or fair 

hearings decided by other entities. If 

eligibility is determined or fair hearings 

decided by Federal or State entities 

other than the Medicaid agency or by 

local agencies under the supervision of 

other State agencies, the plan must 

include a description of the staff 

designated by those other entities and 

the functions they perform in carrying 

out their responsibilities. 

§ 431.57 [Removed] 

■ 4. Section 431.57 is removed. 

■ 5. Section 431.201 is amended by 

adding the definition of ‘‘send’’ in 

alphabetical order to read as follows: 

§ 431.201 Definitions. 

* * * * * 

Send means deliver by mail or in 

electronic format consistent with 

§ 435.918 of this chapter. 

* * * * * 

■ 6. Section 431.205 is amended by 

revising paragraphs (b)(1) and (2) to read 

as follows: 

§ 431.205 Provision of hearing system. 

* * * * * 

(b) * * * 

(1) A hearing before— 

(i) The Medicaid agency; or 

(ii) For the denial of eligibility for 

individuals whose income eligibility is 

determined based on the applicable 

modified adjusted gross income 

standard described in§ 435.911(c) of this 

chapter, the Exchange or Exchange 

appeals entity to which authority to 

conduct fair hearings has been delegated 

under § 431.10(c)(1)(ii), provided that 

individuals who have requested a fair 

hearing are given the choice to have 

their fair hearing conducted instead by 

the Medicaid agency; at state option the 

Exchange or Exchange appeals entity 

decision may be subject to review by the 

Medicaid agency in accordance with 

§ 431.10(c)(3)(iii); or 

(2) An evidentiary hearing at the local 

level, with a right of appeal to the 

Medicaid agency. 

* * * * * 

■ 7. Section 431.206 is amended by 

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

follows: 

§ 431.206 Informing applicants and 

beneficiaries. 

* * * * * 

(d) If, in accordance with 

§ 431.10(c)(1)(ii), the agency has 

delegated authority to the Exchange or 

Exchange appeals entity to conduct the 

fair hearing, the agency must inform the 

individual in writing that— 

(1) He or she has the right to have his 

or her hearing before the agency, instead 

of the Exchange or the Exchange appeals 

entity; and 

(2) The method by which the 

individual may make such election; 

(e) The information required under 

this section may be provided in 

electronic format in accordance with 

§ 435.918 of this chapter. 

■ 8. Section 431.211 is revised to read 

as follows: 

§ 431.211 Advance notice. 

The State or local agency must send 

a notice at least 10 days before the date 

of action, except as permitted under 

§§ 431.213 and 431.214. 

■ 9. Section 431.213 is amended by 

revising the introductory text to read as 

follows: 

§ 431.213 Exceptions from advance notice. 

The agency may send a notice not 

later than the date of action if— 

* * * * * 


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§ 431.230 [Amended] 

■ 10. In § 431.230, amend paragraph (a) 

introductory text by removing the term 

‘‘mails’’ and adding in its place the term 

‘‘sends’’. 

■ 11. Section 431.231 is amended by 

revising the section heading and 

paragraph (c)(2) to read as follows: 

§ 431.231 Reinstating services. 

* * * * * 

(c) * * * 

(2) The beneficiary requests a hearing 

within 10 days from the date that the 

individual receives the notice of action. 

The date on which the notice is received 

is considered to be 5 days after the date 

on the notice, unless the beneficiary 

shows that he or she did not receive the 

notice within the 5-day period; and 

* * * * * 

■ 12. Section 431.240 is amended by 

adding paragraph (c) to read as follows. 

§ 431.240 Conducting the hearing. 

* * * * * 

(c) A hearing officer must have access 

to agency information necessary to issue 

a proper hearing decision, including 

information concerning State policies 

and regulations. 

PART 435—ELIGIBILITY IN THE 

STATES, DISTRICT OF COLUMBIA, 

THE NORTHERN MARIANA ISLANDS, 

AND AMERICAN SAMOA 

■ 13. The authority citation for part 435 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

■ 14. Section 435.110 is amended by 

eepublishing paragraph (c) introductory 

text and revising paragraph (c)(1) to read 

as follows: 

§ 435.110 Parents and other caretaker 

relatives. 

* * * * * 

(c) Income standard. The agency must 

establish in its State plan the income 

standard as follows: 

(1) The minimum income standard is 

a State’s AFDC income standard in 

effect as of May 1, 1988 for the 

applicable family size converted to a 

MAGI-equivalent standard in 

accordance with guidance issued by the 

Secretary under section 1902(e)(14)(A) 

and (E) of the Act. 

* * * * * 

■ 15. Section 435.116 is amended by 

republishing paragraph (d)(4) 

introductory text and revising paragraph 

(d)(4)(i) to read as follows: 

§ 435.116 Pregnant women. 

* * * * * 

(d) * * * 

(4) Applicable income limit for full 

Medicaid coverage of pregnant women. 

For purposes of paragraph (d)(1) of this 

section— 

(i) The minimum applicable income 

limit is the State’s AFDC income 

standard in effect as of May 1, 1988 for 

the applicable family size converted to 

a MAGI-equivalent standard in 

accordance with guidance issued by the 

Secretary under section 1902(e)(14)(A) 

and (E) of the Act. 

* * * * * 

■ 16. Section 435.119 is amended by 

revising the introductory text in 

paragraph (b) to read as follows: 

§ 435.119 Coverage for individuals age 19 

or older and under age 65 at or below 133 

percent FPL. 

* * * * * 

(b) Eligibility. Effective January 1, 

2014, the agency must provide Medicaid 

to individuals who: 

* * * * * 

§ 435.121 [Amended] 

■ 17. In § 435.121, amend paragraph 

(f)(1)(iii) by removing the reference 

‘‘§ 447.52 or § 447.53’’ and by adding in 

its place the reference ‘‘§ 447.52, 

§ 447.53, or § 447.54’’. 

■ 18. Section 435.603 is amended by— 

■ A. In paragraph (b), adding the 

definitions of ‘‘Child,’’ ‘‘Parent,’’ and 

‘‘Sibling’’ in alphabetical order. 

■ B. Revising paragraphs (c) and (d)(1). 

■ C. Adding paragraph (d)(4). 

The revisions and additions read as 

follows: 

§ 435.603 Application of modified adjusted 

gross income (MAGI). 

* * * * * 

(b) * * * 

Child means a natural or biological, 

adopted or step child. 

* * * * * 

Parent means a natural or biological, 

adopted or step parent. 

Sibling means natural or biological, 

adopted, half, or step sibling. 

* * * * * 

(c) Basic rule. Except as specified in 

paragraph (i), (j), and (k) of this section, 

the agency must determine financial 

eligibility for Medicaid based on 

‘‘household income’’ as defined in 

paragraph (d) of this section. 

(d) * * * 

(1) General rule. Except as provided 

in paragraphs (d)(2) through (d)(4) of 

this section, household income is the 

sum of the MAGI-based income, as 

defined in paragraph (e) of this section, 

of every individual included in the 

individual’s household. 

* * * * * 

(4) Effective January 1, 2014, in 

determining the eligibility of an 

individual using MAGI-based income, a 

state must subtract an amount 

equivalent to 5 percentage points of the 

Federal poverty level for the applicable 

family size only to determine the 

eligibility of an individual for medical 

assistance under the eligibility group 

with the highest income standard using 

MAGI-based methodologies in the 

applicable Title of the Act, but not to 

determine eligibility for a particular 

eligibility group. 

* * * * * 

■ 19. Section 435.907 is amended by 

adding paragraph (h) to read as follows. 

§ 435.907 Application. 

* * * * * 

(h) Reinstatement of withdrawn 

applications. (1) In the case of 

individuals described in paragraph 

(h)(2) of this section, the agency must 

reinstate the application submitted by 

the individual, effective as of the date 

the application was first received by the 

Exchange. 

(2) Individuals described in this 

paragraph are individuals who— 

(i) Submitted an application described 

in paragraph (b) of this section to the 

Exchange; 

(ii) Withdrew their application for 

Medicaid in accordance with 45 CFR 

155.302(b)(4)(A); 

(iii) Are assessed as potentially 

eligible for Medicaid by the Exchange 

appeals entity. 

■ 20. Section 435.908 is amended by 

adding paragraph (c) to read as follows: 

§ 435.908 Assistance with application and 

renewal. 

* * * * * 

(c) Certified Application Counselors. 

(1) At State option, the agency may 

certify staff and volunteers of Statedesignated organizations to act as 

application assisters, authorized to 

provide assistance to applicants and 

beneficiaries with the application 

process and during renewal of 

eligibility. To be certified, application 

assisters must be— 

(i) Authorized and registered by the 

agency to provide assistance at 

application and renewal; 

(ii) Effectively trained in the 

eligibility and benefits rules and 

regulations governing enrollment in a 

QHP through the Exchange and all 

insurance affordability programs 

operated in the State, as implemented in 

the State; and 

(iii) Trained in and adhere to all rules 

regulations relating to the safeguarding 

and confidentiality of information and 

prohibiting conflict of interest, 


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including regulations set forth at part 

431, subpart F of this chapter, and at 45 

CFR 155.260(f), regulations relating to 

the prohibition against reassignment of 

provider claims specified in § 447.10 of 

this chapter, and all other State and 

Federal laws concerning conflicts of 

interest and confidentiality of 

information. 

(2) For purposes of this section, 

assistance includes providing 

information on insurance affordability 

programs and coverage options, helping 

individuals complete an application or 

renewal, working with the individual to 

provide required documentation, 

submitting applications and renewals to 

the agency, interacting with the agency 

on the status of such applications and 

renewals, assisting individuals with 

responding to any requests from the 

agency, and managing their case 

between the eligibility determination 

and regularly scheduled renewals. 

Application assisters may be certified by 

the agency to act on behalf of applicants 

and beneficiaries for one, some or all of 

the permitted assistance activities. 

(3) If the agency elects to certify 

application assisters, it must establish 

procedures to ensure that— 

(i) Applicants and beneficiaries are 

informed of the functions and 

responsibilities of certified application 

assisters; 

(ii) Individuals are able to authorize 

application assisters to receive 

confidential information about the 

individual related to the individual’s 

application for or renewal of Medicaid; 

and 

(iii) The agency does not disclose 

confidential applicant or beneficiary 

information to an application assister 

unless the applicant or beneficiary has 

authorized the application assister to 

receive such information. 

(4) Application assisters may not 

impose, accept or receive payment or 

compensation in any form from 

applicants or beneficiaries for 

application assistance. 

■ 21. Section 435.918 is added to read 

as follows: 

§ 435.918 Use of electronic notices. 

(a) Effective no earlier than October 1, 

2013 and no later than January 1, 2015, 

the agency must provide individuals 

with a choice to receive notices and 

information required under this part or 

subpart E of part 431 of this chapter in 

electronic format or by regular mail and 

must be permitted to change such 

election. 

(b) If the individual elects to receive 

communications from the agency 

electronically, the agency must— 

(1) Ensure that the individual’s 

election to receive notices electronically 

is confirmed by regular mail. 

(2) Ensure that the individual is 

informed of his or her right to change 

such election to receive notices through 

regular mail. 

(3) Post notices to the individual’s 

electronic account within 1 business 

day of notice generation. 

(4) Send an email or other electronic 

communication alerting the individual 

that a notice has been posted to his or 

her account. The agency may not 

include confidential information in the 

email or electronic alert. 

(5) Send a notice by regular mail 

within three business days of the date 

of a failed electronic communication if 

an electronic communication is 

undeliverable. 

(6) At the individual’s request, 

provide through regular mail any notice 

posted to the individual’s electronic 

account. 

■ 22. Section 435.923 is added to read 

as follows: 

§ 435.923 Authorized Representatives. 

(a)(1) The agency must permit 

applicants and beneficiaries to designate 

an individual or organization to act 

responsibly on their behalf in assisting 

with the individual’s application and 

renewal of eligibility and other ongoing 

communications with the agency. Such 

a designation must be in accordance 

with paragraph (f) of this section, 

including the applicant’s signature, and 

must be permitted at the time of 

application and at other times. 

(2) Authority for an individual or 

entity to act on behalf of an applicant or 

beneficiary accorded under state law, 

including but not limited to, a court 

order establishing legal guardianship or 

a power of attorney, must be treated as 

a written designation by the applicant or 

beneficiary of authorized representation. 

(b) Applicants and beneficiaries may 

authorize their representatives to— 

(1) Sign an application on the 

applicant’s behalf; 

(2) Complete and submit a renewal 

form; 

(3) Receive copies of the applicant or 

beneficiary’s notices and other 

communications from the agency; 

(4) Act on behalf of the applicant or 

beneficiary in all other matters with the 

agency. 

(c) The power to act as an authorized 

representative is valid until the 

applicant or beneficiary modifies the 

authorization or notifies the agency that 

the representative is no longer 

authorized to act on his or her behalf, 

or the authorized representative informs 

the agency that he or she no longer is 

acting in such capacity, or there is a 

change in the legal authority upon 

which the individual or organization’s 

authority was based. Such notice must 

be in accordance with paragraph (f) of 

this section and should include the 

applicant or authorized representative’s 

signature as appropriate. 

(d) The authorized representative— 

(1) Is responsible for fulfilling all 

responsibilities encompassed within the 

scope of the authorized representation, 

as described in paragraph (b)(2) of this 

section, to the same extent as the 

individual he or she represents; 

(2) Must agree to maintain, or be 

legally bound to maintain, the 

confidentiality of any information 

regarding the applicant or beneficiary 

provided by the agency. 

(e) The agency must require that, as a 

condition of serving as an authorized 

representative, a provider or staff 

member or volunteer of an organization 

must affirm that he or she will adhere 

to the regulations in part 431, subpart F 

of this chapter and at 45 CFR 155.260(f) 

(relating to confidentiality of 

information), § 447.10 of this chapter 

(relating to the prohibition against 

reassignment of provider claims as 

appropriate for a facility or an 

organization acting on the facility’s 

behalf), as well as other relevant State 

and Federal laws concerning conflicts of 

interest and confidentiality of 

information. 

(f) For purposes of this section, the 

agency must accept electronic, 

including telephonically recorded, 

signatures and handwritten signatures 

transmitted by facsimile or other 

electronic transmission. Designations of 

authorized representatives must be 

accepted through all of the modalities 

described in § 435.907(a). 

■ 23. Add an undesignated center 

heading and 435.1015 to read as 

follows: 

FFP for Premium Assistance 

§ 435.1015 FFP for premium assistance for 

plans in the individual market. 

(a) FFP is available for payment of the 

costs of insurance premiums on behalf 

of an eligible individual for a health 

plan offered in the individual market 

that provides the individual with 

benefits for which the individual is 

covered under the State plan, subject to 

the following conditions: 

(1) The insurer is obligated to pay 

primary to Medicaid for all health care 

items and services for which the insurer 

is legally and contractually responsible 

under the individual health plan, as 

required under part 433 subpart D of 

this chapter; 


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(2) The agency furnishes all benefits 

for which the individual is covered 

under the State plan that are not 

available through the individual health 

plan; 

(3) The individual does not incur any 

cost sharing charges in excess of any 

amounts imposed by the agency under 

subpart A of part 447; and 

(4) The total cost of purchasing such 

coverage, including administrative 

expenditures, the costs of paying all cost 

sharing charges in excess of the amounts 

imposed by the agency under subpart A 

of part 447, and the costs of providing 

benefits as required by (a)(2) of this 

section, must be comparable to the cost 

of providing direct coverage under the 

State plan. 

(b) A State may not require an 

individual to receive benefits through 

premium assistance under this section, 

and a State must inform an individual 

that it is the individual’s choice to 

receive either direct coverage under the 

Medicaid State plan or coverage through 

premium assistance for an individual 

health plan. A State must require that an 

individual who elects premium 

assistance obtain through the insurance 

coverage all benefits for which the 

insurer is responsible and must provide 

the individual with information on how 

to access any additional benefits and 

cost sharing assistance not provided by 

the insurer. 

Subpart L—Options for Coverage of 

Special Groups under Presumptive 

Eligibility 

■ 24. The heading for subpart L is 

revised as set forth above. 

■ 25. Section 435.1102 is amended by— 

■ A. Revising the section heading. 

■ B. Revising paragraph (a). 

■ C. Removing ‘‘and’’ at the end of 

paragraph (b)(2)(iv)(B) and adding 

‘‘and’’ at the end of paragraph 

(b)(2)(v)(B); 

■ D. Adding paragraph (b)(2)(vi). 

■ E. Revising paragraph (b)(3). 

■ F. Removing paragraph (b)(4). 

■ G. Adding paragraphs (d) and (e). 

■ The revisions and additions read as 

follows: 

§ 435.1102 Children covered under 

presumptive eligibility. 

(a) The agency may elect to provide 

Medicaid services for children under 

age 19 or a younger age specified by the 

State during a presumptive eligibility 

period following a determination by a 

qualified entity, on the basis of 

preliminary information, that the 

individual has gross income (or, at state 

option, a reasonable estimate of 

household income, as defined in 

§ 435.603 of this part, determined using 

simplified methods prescribed by the 

agency) at or below the income standard 

established by the State for the age of 

the child under § 435.118(c) or under 

§ 435.229 if applicable and higher. 

(b) * * * 

(2) * * * 

(vi) Do not delegate the authority to 

determine presumptive eligibility to 

another entity. 

(3) Establish oversight mechanisms to 

ensure that presumptive eligibility 

determinations are being made 

consistent with the statute and 

regulations. 

* * * * * 

(d) The agency— 

(1) May require, for purposes of 

making a presumptive eligibility 

determination under this section, that 

the individual has attested to being, or 

another person who attests to having 

reasonable knowledge of the 

individual’s status has attested to the 

individual being, a— 

(i) Citizen or national of the United 

States or in satisfactory immigration 

status; or 

(ii) Resident of the State; and 

(2) May not— 

(i) Impose other conditions for 

presumptive eligibility not specified in 

this section; or 

(ii) Require verification of the 

conditions for presumptive eligibility. 

(e) Notice and fair hearing regulations 

in subpart E of part 431 of this chapter 

do not apply to determinations of 

presumptive eligibility under this 

section. 

■ 26 Section 435.1103 is added to 

Subpart L read as follows: 

§ 435.1103 Presumptive eligibility for other 

individuals. 

(a) The terms of § 435.1101 and 

§ 435.1102 apply to pregnant women 

such that the agency may provide 

Medicaid to pregnant women during a 

presumptive eligibility period following 

a determination by a qualified entity 

that the pregnant woman has income at 

or below the income standard 

established by the State under 

§ 435.116(c), except that coverage of 

services provided to such women is 

limited to ambulatory prenatal care and 

the number of presumptive eligibility 

periods that may be authorized for 

pregnant women is one per pregnancy. 

(b) If the agency provides Medicaid 

during a presumptive eligibility period 

to children under § 435.1102 or to 

pregnant women under paragraph (a) of 

this section, the agency may also apply 

the terms of §§ 435.1101 and 435.1102 

to the individuals described in one or 

more of the following sections of this 

part, based on the income standard 

established by the state for such 

individuals and providing the benefits 

covered under that section: §§ 435.110 

(parents and caretaker relatives), 

435.119 (individuals aged 19 or older 

and under age 65), 435.150 (former 

foster care children), and 435.218 

(individuals under age 65 with income 

above 133 percent FPL). 

(c)(1) The terms of §§ 435.1101 and 

435.1102 apply to individuals who may 

be eligible under § 435.213 of this part 

(relating to individuals with breast or 

cervical cancer) or § 435.214 of this part 

(relating to eligibility for limited family 

planning benefits) such that the agency 

may provide Medicaid during a 

presumptive eligibility period following 

a determination by a qualified entity 

described in paragraph (c)(2) of this 

section that— 

(i) The individual meets the eligibility 

requirements of § 435.213; or 

(ii) The individual meets the 

eligibility requirements of § 435.214, 

except that coverage provided during a 

presumptive eligibility period to such 

individuals is limited to the services 

described in § 435.214(d). 

(2) Qualified entities described in this 

paragraph include qualified entities 

which participate as providers under 

the State plan and which the agency 

determines are capable of making 

presumptive eligibility determinations. 

■ 27. Section 435.1110 is added to 

Subpart L to read as follows: 

§ 435.1110 Presumptive eligibility 

determined by hospitals. 

(a) Basic rule. The agency must 

provide Medicaid during a presumptive 

eligibility period to individuals who are 

determined by a qualified hospital, on 

the basis of preliminary information, to 

be presumptively eligible subject to the 

same requirements as apply to the State 

options under §§ 435.1102 and 

435.1103, but regardless of whether the 

agency provides Medicaid during a 

presumptive eligibility period under 

such sections. 

(b) Qualified hospitals. A qualified 

hospital is a hospital that— 

(1) Participates as a provider under 

the State plan or a demonstration under 

section 1115 of the Act, notifies the 

agency of its election to make 

presumptive eligibility determinations 

under this section, and agrees to make 

presumptive eligibility determinations 

consistent with State policies and 

procedures; 

(2) At State option, assists individuals 

in completing and submitting the full 

application and understanding any 

documentation requirements; and 


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(3) Has not been disqualified by the 

agency in accordance with paragraph (d) 

of this section. 

(c) State options for bases of 

presumptive eligibility. The agency 

may— 

(1) Limit the determinations of 

presumptive eligibility which hospitals 

may elect to make under this section to 

determinations based on income for all 

of the populations described in 

§ 435.1102 and § 435.1103; or 

(2) Permit hospitals to elect to make 

presumptive eligibility determinations 

on additional bases approved under the 

State plan or an 1115 demonstration. 

(d) Disqualification of hospitals. (1) 

The agency may establish standards for 

qualified hospitals related to the 

proportion of individuals determined 

presumptively eligible for Medicaid by 

the hospital who: 

(i) Submit a regular application, as 

described in § 435.907, before the end of 

the presumptive eligibility period; or 

(ii) Are determined eligible for 

Medicaid by the agency based on such 

application. 

(2) The agency must take action, 

including, but not limited to, 

disqualification of a hospital as a 

qualified hospital under this section, if 

the agency determines that the hospital 

is not— 

(i) Making, or is not capable of 

making, presumptive eligibility 

determinations in accordance with 

applicable state policies and 

procedures; or 

(ii) Meeting the standard or standards 

established by the agency under 

paragraph (d)(1) of this section. 

(3) The agency may disqualify a 

hospital as a qualified hospital under 

this paragraph only after it has provided 

the hospital with additional training or 

taken other reasonable corrective action 

measures to address the issue. 

■ 28. Section 435.1200 is amended by 

revising paragraph (d)(6) to read as 

follows: 

§ 435.1200 Medicaid Agency 

responsibilities for a coordinated eligibility 

and enrollment process with other 

insurance affordability programs 

* * * * * 

(d) * * * 

(6) Notify such program of the final 

determination of the individual’s 

eligibility or ineligibility for Medicaid. 

* * * * * 

■ 29. Section 435.1205 is added to read 

as follows: 

§ 435.1205 Alignment with exchange initial 

open enrollment period. 

(a) Definitions. For purposes of this 

section— 

Eligibility based on MAGI means 

Medicaid eligibility based on the 

eligibility requirements which will be 

effective under the State plan, or waiver 

of such plan, as of January 1, 2014, 

consistent with §§ 435.110 through 

435.119, 435.218 and 435.603. 

(b) Medicaid agency responsibilities to 

achieve coordinated open enrollment. 

For the period beginning October 1, 

2013 through December 31, 2013, the 

agency must 

(1) Accept all of the following: 

(i) The single streamlined application 

described in § 435.907. 

(ii) Via secure electronic interface, an 

electronic account transferred from 

another insurance affordability program. 

(2) For eligibility based on MAGI, 

comply with the terms of § 435.1200 of 

this part, such that— 

(i) For each electronic account 

transferred to the agency under 

paragraph (c)(1)(ii) of this section, the 

agency consistent with either of the 

following: 

(A) Section 435.1200(c), accepts a 

determination of Medicaid eligibility 

based on MAGI, made by another 

insurance affordability program. 

(B) Section 435.1200(d), determines 

eligibility for Medicaid based on MAGI. 

(ii) Consistent with § 435.1200(e), for 

each single streamlined application 

submitted directly to the agency under 

paragraph (b)(1)(i) of this section— 

(A) Determine eligibility based on 

MAGI; and 

(B) For each individual determined 

not Medicaid eligible based on MAGI, 

determine potential eligibility for other 

insurance affordability programs, based 

on the requirements which will be 

effective for each program, and transfer 

the individual’s electronic account to 

such program via secure electronic 

interface. 

(iii) Provide notice and fair hearing 

rights, in accordance with § 435.917 of 

this part, part 431 subpart E of this 

chapter, and § 435.1200 for those 

determined ineligible for Medicaid. 

(3) For each individual determined 

eligible based on MAGI in accordance 

with paragraph (c)(2) of this section— 

(i) Provide notice, including the 

effective date of eligibility, to such 

individual, consistent with § 435.917 of 

this part, and furnish Medicaid. 

(ii) Apply the terms of § 435.916 

(relating to beneficiary responsibility to 

inform the agency of any changes in 

circumstances that may affect eligibility) 

and § 435.952 (regarding use of 

information received by the agency). 

The first renewal under § 435.916 of this 

part may, at State option, be scheduled 

to occur anytime between 12 months 

from the date of application and 12 

months from January 1, 2014. 

(4) For eligibility effective in 2013, for 

all applicants— 

(i) Consistent with the requirements 

of subpart J of this part, and applying 

the eligibility requirements in effect 

under the State plan, or waiver of such 

plan, as of the date the individual 

submits an application to any insurance 

affordability program— 

(A) Determine the individual’s 

eligibility based on the information 

provided on the application or in the 

electronic account; or 

(B) Request additional information 

from the individual needed by the 

agency to determine eligibility based on 

the eligibility requirements in effect on 

such date, including on a basis excepted 

from application of MAGI-based 

methods, as described in § 435.603, and 

determine such eligibility if such 

information is provided; and 

(C) Furnish Medicaid to individuals 

determined eligible under this clause or 

provide notice and fair hearing rights in 

accordance with part 431 subpart E of 

this part if eligibility effective in 2013 

is denied; or 

(ii) Notify the individual of the 

opportunity to submit a separate 

application for coverage effective in 

2013 and information on how to obtain 

and submit such application. 

PART 436—ELIGIBILITY IN GUAM, 

PUERTO RICO, AND THE VIRGIN 

ISLANDS 

■ 30. The authority citation for part 436 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

§ 436.831 [Amended] 

■ 31. In § 436.831, amend paragraph 

(e)(1) by removing the reference 

‘‘§ 447.51 or § 447.53’’ and by adding in 

its place the reference ‘‘§ 447.52,, 

§ 447.53, or § 447.54’’. 

PART 438—MANAGED CARE 

■ 32. The authority citation for part 483 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

§ 438.108 [Amended] 

■ 33. Section 438.108 is amended by 

removing the reference ‘‘§§ 447.50 

through 447.60’’ and by adding in its 

place the reference ‘‘§§ 447.50 through 

447.57’’. 


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PART 440—SERVICES: GENERAL 

PROVISIONS 

■ 34. The authority citation for part 440 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

■ 35. Section 440.130 is amended by 

revising paragraph (c) to read as follows: 

§ 440.130 Diagnostic, screening, 

preventive, and rehabilitative services. 

* * * * * 

(c) Preventive services means services 

recommended by a physician or other 

licensed practitioner of the healing arts 

acting within the scope of authorized 

practice under State law to— 

(1) Prevent disease, disability, and 

other health conditions or their 

progression; 

(2) Prolong life; and 

(3) Promote physical and mental 

health and efficiency. 

* * * * * 

■ 36. Section 440.305 is amended by 

revising paragraphs (a) and (b) and 

removing paragraph (d). 

The revisions read as follows: 

§ 440.305 Scope. 

(a) General. This subpart sets out 

requirements for States that elect to 

provide medical assistance to certain 

Medicaid eligible individuals within 

one or more groups of individuals 

specified by the State, through 

enrollment of the individuals in 

coverage, identified as ‘‘benchmark’’ or 

‘‘benchmark-equivalent.’’ Groups must 

be identified by characteristics of 

individuals rather than the amount or 

level of FMAP. 

(b) Limitations. A State may only 

apply the option in paragraph (a) of this 

section for an individual whose 

eligibility is based on an eligibility 

category under section 1905(a) of the 

Act that could have been covered under 

the State’s plan on or before February 8, 

2006, except that individuals who are 

eligible under section 

1902(a)(10)(A)(i)(VIII) of the Act must 

enroll in an Alternative Benefit Plan to 

receive medical assistance. 

* * * * * 

■ 37. Section 440.315 is amended by 

revising the introductory text and 

paragraphs (f) and (h) to read as follows: 

§ 440.315 Exempt individuals. 

Individuals within one (or more) of 

the following categories are exempt 

from mandatory enrollment in an 

Alternative Benefit Plan, unless the 

individuals are eligible under section 

1902(a)(10)(A)(i)(VIII) of the Act. 

Individuals in that eligibility group who 

meet the conditions for exemption must 

be given the option of an Alternative 

Benefit Plan that includes all benefits 

available under the approved State plan. 

* * * * * 

(f) The individual is medically frail or 

otherwise an individual with special 

medical needs. For these purposes, the 

State’s definition of individuals who are 

medically frail or otherwise have special 

medical needs must at least include 

those individuals described in 

§ 438.50(d)(3) of this chapter, 

individuals with disabling mental 

disorders (including children with 

serious emotional disturbances and 

adults with serious mental illness), 

individuals with chronic substance use 

disorders, individuals with serious and 

complex medical conditions, 

individuals with a physical, intellectual 

or developmental disability that 

significantly impairs their ability to 

perform 1 or more activities of daily 

living, or individuals with a disability 

determination based on Social Security 

criteria or in States that apply more 

restrictive criteria than the 

Supplemental Security Income program, 

the State plan criteria. 

* * * * * 

(h) The individual is eligible and 

enrolled for Medicaid under § 435.145 

of this chapter based on current 

eligibility for assistance under title IV– 

E of the Act or under § 435.150 of this 

chapter based on current status as a 

former foster care child. 

* * * * * 

■ 38. Section 440.330 is amended by 

revising paragraph (d) to read as 

follows: 

§ 440.330 Benchmark health benefits 

coverage. 

* * * * * 

(d) Secretary-approved coverage. Any 

other health benefits coverage that the 

Secretary determines, upon application 

by a State, provides appropriate 

coverage to meet the needs of the 

population provided that coverage. 

Secretarial coverage may include 

benefits of the type that are available 

under 1 or more of the standard 

benchmark coverage packages defined 

in paragraphs (a) through (c) of this 

section, State plan benefits described in 

section 1905(a), 1915(i), 1915(j), 1915(k) 

or section 1945 of the Act, any other 

Medicaid State plan benefits enacted 

under title XIX, or benefits available 

under base benchmark plans described 

in 45 CFR 156.100. 

(1) States wishing to elect Secretaryapproved coverage should submit a full 

description of the proposed coverage 

(including a benefit-by-benefit 

comparison of the proposed plan to one 

or more of the three other benchmark 

plans specified above or to the State’s 

standard full Medicaid coverage 

package), and of the population to 

which coverage will be offered. In 

addition, the State should submit any 

other information that will be relevant 

to a determination that the proposed 

health benefits coverage will be 

appropriate for the proposed 

population. 

(2) [Reserved] 

■ 39. Section 440.335 is amended by— 

■ A. Adding paragraphs (b)(7)and (8). 

■ B. Revising paragraph (c)(1). 

■ C. Removing paragraph (c)(3). 

The revisions and additions read as 

follows: 

§ 440.335 Benchmark-equivalent health 

benefits coverage. 

* * * * * 

(b) * * * 

(7) Prescription drugs. 

(8) Mental health benefits. 

(c) * * * 

(1) In addition to the types of benefits 

of this section, benchmark-equivalent 

coverage may include coverage for any 

additional benefits of the type which are 

covered in 1 or more of the standard 

benchmark coverage packages described 

in § 440.330(a) through (c) or State plan 

benefits, described in section 1905(a), 

1915(i), 1915(j), 1915(k) and 1945 of the 

Act, any other Medicaid State plan 

benefits enacted under title XIX, or 

benefits available under basebenchmark plans described in 45 CFR 

156.100. 

* * * * * 

■ 40. Section 440.345 is amended by 

revising the section heading and adding 

paragraphs (b) through (f) to read as 

follows: 

§ 440.345 EPSDT and other required 

benefits. 

* * * * * 

(b) Family planning. Alternative 

Benefit Plans must include coverage for 

family planning services and supplies. 

(c) Mental health parity. Alternative 

Benefit Plans that provide both medical 

and surgical benefits, and mental health 

or substance use disorder benefits, must 

comply with the Mental Health Parity 

and Addiction Equity Act. 

(d) Essential health benefits. 

Alternative Benefit Plans must include 

at least the essential health benefits 

described in § 440.347, and include all 

updates or modifications made 

thereafter by the Secretary to the 

definition of essential health benefits. 

(e) Updating of benefits. States are not 

required to update Alternative Benefit 

Plans that have been determined to 


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include essential health benefits as of 

January 1, 2014, until December 31, 

2015. States will adhere to future 

guidance for updating benefits beyond 

that date, as described by the Secretary. 

(f) Covered outpatient drugs. To the 

extent states pay for covered outpatient 

drugs under their Alternative Benefit 

Plan’s prescription drug coverage, states 

must comply with the requirements 

under section 1927 of the Act. 

■ 41. Section 440.347 is added to read 

as follows: 

§ 440.347 Essential health benefits. 

(a) Alternative Benefit Plans must 

contain essential health benefits 

coverage, including benefits in each of 

the following ten categories, consistent 

with the applicable requirements set 

forth in 45 CFR part 156: 

(1) Ambulatory patient services; 

(2) Emergency services; 

(3) Hospitalization; 

(4) Maternity and newborn care; 

(5) Mental health and substance use 

disorders, including behavioral health 

treatment; 

(6) Prescription drugs; 

(7) Rehabilitative and habilitative 

services and devices, except that such 

coverage shall be in accordance with 

§ 440.347(d); 

(8) Laboratory services; 

(9) Preventive and wellness services 

and chronic disease management; and 

(10) Pediatric services, including oral 

and vision care, in accordance with 

section 1905(r) of the Act. 

(b) Alternative Benefit Plans must 

include essential health benefits in one 

of the state options for establishing 

essential health benefits described in 45 

CFR 156.100, subject to 

supplementation under 45 CFR 

156.110(b) and substitution as permitted 

under 45 CFR 156.115(b). 

(c) States may select more than one 

base benchmark option for establishing 

essential health benefits in keeping with 

the flexibility for States to implement 

more than one Alternative Benefit Plan 

for targeted populations. 

(d) To comply with paragraph (a) of 

this section, Alternative Benefit Plan 

coverage of habilitative services and 

devices will be based on the habilitative 

services and devices that are in the 

applicable base benchmark plan. If 

habilitative services and devices are not 

in the applicable base benchmark plan, 

the state will define habilitative services 

and devices required as essential health 

benefits using the methodology set forth 

in 45 CFR 156.115(a)(5). 

(e) Essential health benefits cannot be 

based on a benefit design or 

implementation of a benefit design that 

discriminates based on an individual’s 

age, expected length of life, present or 

predicted disability, degree of medical 

dependency, quality of life or other 

health conditions. 

42. Section 440.360 is revised to read 

as follows: 

§ 440.360 State plan requirements for 

providing additional services. 

In addition to the requirements of 

§ 440.345, the State may elect to provide 

additional coverage to individuals 

enrolled in Alternative Benefit Plans, 

except that the coverage for individuals 

eligible only through section 

1902(a)(10)(A)(i)(VIII) of the Act is 

limited to benchmark or benchmarkequivalent coverage. The State must 

describe the populations covered and 

the payment methodology for these 

benefits. Additional benefits must be 

benefits of the type, which are covered 

in 1 or more of the standard benchmark 

coverage packages described in 

§ 440.330(a) through (c) or State plan 

benefits including those described in 

sections 1905(a), 1915(i), 1915(j), 

1915(k) and 1945 of the Act and any 

other Medicaid State plan benefits 

enacted under title XIX, or benefits 

available under base benchmark plans 

described in 45 CFR 156.100. 

■ 43. Section 440.386 is added to read 

as follows: 

§ 440.386 Public notice. 

Prior to submitting to the Centers for 

Medicare and Medicaid Services for 

approval of a State plan amendment to 

establish an Alternative Benefit Plan or 

an amendment to substantially modify 

an existing Alternative Benefit Plan, a 

state must have provided the public 

with advance notice of the amendment 

and reasonable opportunity to comment 

for such amendment, and have included 

in the notice a description of the 

method for assuring compliance with 

§ 440.345 related to full access to EPSDT 

services, and the method for complying 

with the provisions of section 5006(e) of 

the American Recovery and 

Reinvestment Act of 2009. 

PART 447—PAYMENTS FOR 

SERVICES 

■ 44. The authority citation for part 447 

continues to read as follows: 

Authority: Section 1102 of the Social 

Security Act (42 U.S.C. 1302). 

■ 45. Section 447.15 is revised to read 

as follows: 

§ 447.15 Acceptance of State payment as 

payment in full. 

A State plan must provide that the 

Medicaid agency must limit 

participation in the Medicaid program 

to providers who accept, as payment in 

full, the amounts paid by the agency 

plus any deductible, coinsurance or 

copayment required by the plan to be 

paid by the individual. The provider 

may only deny services to any eligible 

individual on account of the 

individual’s inability to pay the cost 

sharing amount imposed by the plan in 

accordance with § 447.52(e). The 

previous sentence does not apply to an 

individual who is able to pay. An 

individual’s inability to pay does not 

eliminate his or her liability for the cost 

sharing charge. 

§ 447.20 [Amended] 

■ 46. In § 447.20, amend paragraphs 

(a)(1) and (2) by removing the reference 

‘‘§§ 447.53 through 447.56’’ wherever it 

occurs and adding in its place the 

reference ‘‘§§ 447.52 through 447.54’’. 

■ 47a. Remove the undesignated center 

headings which appear above §§ 447.50, 

447.51, 447.53, 447.59, and 447.62. 

■ 47b. Add a new undesignated center 

above revised §§ 447.50 through 447.57 

to read as follows: 

Medicaid Premiums and Cost Sharing 

Sec. 

447.50 Premiums and cost sharing: Basis 

and purpose. 

447.51 Definitions. 

447.52 Cost sharing. 

447.53 Cost sharing for drugs. 

447.54 Cost sharing for services furnished 

in a hospital emergency department. 

447.55 Premiums. 

447.56 Limitations on premiums and cost 

sharing. 

447.57 Beneficiary and public notice 

requirements. 

Medicaid Premiums and Cost Sharing 

§ 447.50 Premiums and cost sharing: 

Basis and purpose. 

Sections 1902(a)(14), 1916 and 1916A 

of the Act permit states to require 

certain beneficiaries to share in the costs 

of providing medical assistance through 

premiums and cost sharing. Sections 

447.52 through 447.56 specify the 

standards and conditions under which 

states may impose such premiums and 

or cost sharing. 

§ 447.51 Definitions 

As used in this part— 

Alternative non-emergency services 

provider means a Medicaid provider, 

such as a physician’s office, health care 

clinic, community health center, 

hospital outpatient department, or 

similar provider that can provide 

clinically appropriate services in a 

timely manner. 

Contract health service means any 

health service that is: 


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(1) Delivered based on a referral by, or 

at the expense of, an Indian health 

program; and 

(2) Provided by a public or private 

medical provider or hospital that is not 

a provider or hospital of the IHS or any 

other Indian health program 

Cost sharing means any copayment, 

coinsurance, deductible, or other similar 

charge. 

Emergency services has the same 

meaning as in § 438.114 of this chapter. 

Federal poverty level (FPL) means the 

Federal poverty level updated 

periodically in the Federal Register by 

the Secretary of Health and Human 

Services under the authority of 42 

U.S.C. 9902(2). 

Indian means any individual defined 

at 25 U.S.C. 1603(13), 1603(28), or 

1679(a), or who has been determined 

eligible as an Indian, under 42 CFR 

136.12. This means the individual: 

(1) Is a member of a Federallyrecognized Indian tribe; 

(2) Resides in an urban center and 

meets one or more of the following four 

criteria: 

(i) Is a member of a tribe, band, or 

other organized group of Indians, 

including those tribes, bands, or groups 

terminated since 1940 and those 

recognized now or in the future by the 

State in which they reside, or who is a 

descendant, in the first or second 

degree, of any such member; 

(ii) Is an Eskimo or Aleut or other 

Alaska Native; 

(iii) Is considered by the Secretary of 

the Interior to be an Indian for any 

purpose; or 

(iv) Is determined to be an Indian 

under regulations promulgated by the 

Secretary; 

(3) Is considered by the Secretary of 

the Interior to be an Indian for any 

purpose; or 

(4) Is considered by the Secretary of 

Health and Human Services to be an 

Indian for purposes of eligibility for 

Indian health care services, including as 

a California Indian, Eskimo, Aleut, or 

other Alaska Native. 

Indian health care provider means a 

health care program operated by the 

Indian Health Service (IHS) or by an 

Indian Tribe, Tribal Organization, or 

Urban Indian Organization (otherwise 

known as an I/T/U) as those terms are 

defined in section 4 of the Indian Health 

Care Improvement Act (25 U.S.C. 1603). 

Inpatient stay means the services 

received during a continuous period of 

inpatient days in either a single medical 

institution or multiple medical 

institutions, and also includes a return 

to an inpatient medical institution after 

a brief period when the return is for 

treatment of a condition that was 

present in the initial period. Inpatient 

has the same meaning as in § 440.2 of 

this chapter. 

Non-emergency services means any 

care or services that are not considered 

emergency services as defined in this 

section. This does not include any 

services furnished in a hospital 

emergency department that are required 

to be provided as an appropriate 

medical screening examination or 

stabilizing examination and treatment 

under section 1867 of the Act. 

Outpatient services for purposes of 

imposing cost sharing means any 

service or supply not meeting the 

definition of an inpatient stay. 

Preferred drugs means drugs that the 

state has identified on a publicly 

available schedule as being determined 

by a pharmacy and therapeutics 

committee for clinical efficacy as the 

most cost effective drugs within each 

therapeutically equivalent or 

therapeutically similar class of drugs, or 

all drugs within such a class if the 

agency does not differentiate between 

preferred and non-preferred drugs. 

Premium means any enrollment fee, 

premium, or other similar charge. 

§ 447.52 Cost sharing. 

(a) Applicability. Except as provided 

in § 447.56(a) (exemptions), the agency 

may impose cost sharing for any service 

under the state plan. 

(b) Maximum Allowable Cost Sharing. 

(1) At State option, cost sharing 

imposed for any service (other than for 

drugs and non-emergency services 

furnished in an emergency department, 

as described in §§ 447.53 and 447.54 

respectively) may be established at or 

below the amounts shown in the 

following table (except that the 

maximum allowable cost sharing for 

individuals with family income at or 

below 100 percent of the FPL shall be 

increased each year, beginning October 

1, 2015, by the percentage increase in 

the medical care component of the CPI– 

U for the period of September to 

September of the preceding calendar 

year, rounded to the next higher 5-cent 

increment): 

Services 

Maximum allowable cost sharing 

Individuals with 

family income 

≤100% of the FPL 

Individuals with family income 

101–150% of the FPL 

Individuals with family income 

>150% of the FPL 

Outpatient Services (physician visit, 

physical therapy, etc.).

$4 10% of cost the agency pays ............... 20% of cost the agency pays. 

Inpatient Stay ......................................... 75 10% of total cost the agency pays for 

the entire stay.

20% of total cost the agency pays for 

the entire stay. 

(2) States with cost sharing for an 

inpatient stay that exceeds $75, as of 

July 15, 2013, must submit a plan to 

CMS that provides for reducing 

inpatient cost sharing to $75 on or 

before July 1, 2017. 

(3) In states that do not have fee-forservice payment rates, any cost sharing 

imposed on individuals at any income 

level may not exceed the maximum 

amount established, for individuals 

with income at or below 100 percent of 

the FPL described in paragraph (b)(1) of 

this section. 

(c) Maximum cost sharing. In no case 

shall the maximum cost sharing 

established by the agency be equal to or 

exceed the amount the agency pays for 

the service. 

(d) Targeted cost sharing. (1) Except 

as provided in paragraph (d)(2) of this 

section, the agency may target cost 

sharing to specified groups of 

individuals with family income above 

100 percent of the FPL. 

(2) For cost sharing imposed for nonpreferred drugs under § 447.53 and for 

non-emergency services provided in a 

hospital emergency department under 

§ 447.54, the agency may target cost 

sharing to specified groups of 

individuals regardless of income. 

(e) Denial of service for nonpayment. 

(1) The agency may permit a provider, 

including a pharmacy or hospital, to 

require an individual to pay cost sharing 

as a condition for receiving the item or 

service if— 

(i) The individual has family income 

above 100 percent of the FPL, 

(ii) The individual is not part of an 

exempted group under § 447.56(a), and 


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(iii) For cost sharing imposed for nonemergency services furnished in an 

emergency department, the conditions 

under § 447.54(d) of this part have been 

satisfied. 

(2) Except as provided under 

paragraph (e)(1) of this section, the state 

plan must specify that no provider may 

deny services to an eligible individual 

on account of the individual’s inability 

to pay the cost sharing. 

(3) Nothing in this section shall be 

construed as prohibiting a provider from 

choosing to reduce or waive such cost 

sharing on a case-by-case basis. 

(f) Prohibition against multiple 

charges. For any service, the agency 

may not impose more than one type of 

cost sharing. 

(g) Income-related charges. Subject to 

the maximum allowable charges 

specified in §§ 447.52(b), 447.53(b) and 

447.54(b), the plan may establish 

different cost sharing charges for 

individuals at different income levels. If 

the agency imposes such income-related 

charges, it must ensure that lower 

income individuals are charged less 

than individuals with higher income. 

(h) Services furnished by a managed 

care organization (MCO). Contracts with 

MCOs must provide that any costsharing charges the MCO imposes on 

Medicaid enrollees are in accordance 

with the cost sharing specified in the 

state plan and the requirements set forth 

in §§ 447.50 through 447.57. 

(i) State Plan Specifications. For each 

cost sharing charge imposed under this 

part, the state plan must specify— 

(1) The service for which the charge 

is made; 

(2) The group or groups of individuals 

that may be subject to the charge; 

(3)The amount of the charge; 

(4) The process used by the state to— 

(i) Ensure individuals exempt from 

cost sharing are not charged, 

(ii) Identify for providers whether cost 

sharing for a specific item or service 

may be imposed on an individual and 

whether the provider may require the 

individual, as a condition for receiving 

the item or service, to pay the cost 

sharing charge; and 

(5) If the agency imposes cost sharing 

under § 447.54, the process by which 

hospital emergency room services are 

identified as non-emergency service. 

§ 447.53 Cost sharing for drugs. 

(a) The agency may establish 

differential cost sharing for preferred 

and non-preferred drugs. The provisions 

in § 447.56(a) shall apply except as the 

agency exercises the option under 

paragraph (d) of this section. All drugs 

will be considered preferred drugs if so 

identified or if the agency does not 

differentiate between preferred and nonpreferred drugs. 

(b) At state option, cost sharing for 

drugs may be established at or below the 

amounts shown in the following table 

(except that the maximum allowable 

cost sharing shall be increased each 

year, beginning October 1, 2015, by the 

percentage increase in the medical care 

component of the CPI–U for the period 

of September to September of the 

preceding calendar year, rounded to the 

next higher 5-cent increment. Such 

increase shall not be applied to any cost 

sharing that is based on the amount the 

agency pays for the service): 

Services 

Maximum allowable cost sharing 

Individuals with 

family income 

≤150% of the FPL 

Individuals with family income >150% of 

the FPL 

Preferred Drugs ...................................................................................................... $4 $4. 

Non-Preferred Drugs .............................................................................................. 8 20% of the cost the agency pays. 

(c) In states that do not have fee-forservice payment rates, cost sharing for 

prescription drugs imposed on 

individuals at any income level may not 

exceed the maximum amount 

established for individuals with income 

at or below 150 percent of the FPL in 

paragraph (b) of this section. 

(d) For individuals otherwise exempt 

from cost sharing under § 447.56(a), the 

agency may impose cost sharing for 

non-preferred drugs, not to exceed the 

maximum amount established in 

paragraph (b) of this section. 

(e) In the case of a drug that is 

identified by the agency as a nonpreferred drug within a therapeutically 

equivalent or therapeutically similar 

class of drugs, the agency must have a 

timely process in place so that cost 

sharing is limited to the amount 

imposed for a preferred drug if the 

individual’s prescribing provider 

determines that a preferred drug for 

treatment of the same condition either 

will be less effective for the individual, 

will have adverse effects for the 

individual, or both. In such cases the 

agency must ensure that reimbursement 

to the pharmacy is based on the 

appropriate cost sharing amount. 

§ 447.54 Cost sharing for services 

furnished in a hospital emergency 

department. 

(a) The agency may impose cost 

sharing for non-emergency services 

provided in a hospital emergency 

department. The provisions in 

§ 447.56(a) shall apply except as the 

agency exercises the option under 

paragraph (c) of this section. 

(b) At state option, cost sharing for 

non-emergency services provided in an 

emergency department may be 

established at or below the amounts 

shown in the following table (except 

that the maximum allowable cost 

sharing identified for individuals with 

family income at or below 150 percent 

of the FPL shall be increased each year, 

beginning October 1, 2015, by the 

percentage increase in the medical care 

component of the CPI–U for the period 

of September to September of the 

preceding calendar year, rounded to the 

next higher 5-cent increment): 

Services 

Maximum allowable cost sharing 

Individuals with 

family income 

≤150% of the 

FPL 

Individuals with 

family income 

>150% of the 

FPL 

Non-emergency Use of the Emergency Department ........................................................................................ $8 ..................... No Limit. 


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(c) For individuals otherwise exempt 

from cost sharing under § 447.56(a), the 

agency may impose cost sharing for 

non-emergency use of the emergency 

department, not to exceed the maximum 

amount established in paragraph (b) of 

this section for individuals with income 

at or below 150 percent of the FPL. 

(d) For the agency to impose cost 

sharing under paragraph (a) or (c) of this 

section for non-emergency use of the 

emergency department, the hospital 

providing the care must— 

(1) Conduct an appropriate medical 

screening under § 489.24 subpart G to 

determine that the individual does not 

need emergency services. 

(2) Before providing non-emergency 

services and imposing cost sharing for 

such services: 

(i) Inform the individual of the 

amount of his or her cost sharing 

obligation for non-emergency services 

provided in the emergency department; 

(ii) Provide the individual with the 

name and location of an available and 

accessible alternative non-emergency 

services provider; 

(iii) Determine that the alternative 

provider can provide services to the 

individual in a timely manner with the 

imposition of a lesser cost sharing 

amount or no cost sharing if the 

individual is otherwise exempt from 

cost sharing; and 

(iv) Provide a referral to coordinate 

scheduling for treatment by the 

alternative provider. 

(e) Nothing in this section shall be 

construed to: 

(1) Limit a hospital’s obligations for 

screening and stabilizing treatment of an 

emergency medical condition under 

section 1867 of the Act; or 

(2) Modify any obligations under 

either state or federal standards relating 

to the application of a prudentlayperson standard for payment or 

coverage of emergency medical services 

by any managed care organization. 

§ 447.55 Premiums. 

(a) The agency may impose premiums 

upon individuals whose income 

exceeds 150 percent of the FPL, subject 

to the exemptions set forth in 

§ 447.56(a) and the aggregate limitations 

set forth in § 447.56(f) of this part, 

except that: 

(1) Pregnant women described in 

described in paragraph (a)(1)(ii) of this 

section may be charged premiums that 

do not exceed 10 percent of the amount 

by which their family income exceeds 

150 percent of the FPL after deducting 

expenses for care of a dependent child. 

(i) The agency may use state or local 

funds available under other programs 

for payment of a premium for such 

pregnant women. Such funds shall not 

be counted as income to the individual 

for whom such payment is made. 

(ii) Pregnant women described in this 

clause include pregnant women eligible 

for Medicaid under § 435.116 of this 

chapter whose income exceeds the 

higher of – 

(A) 150 percent FPL; and 

(B) If applicable, the percent FPL 

described in section 1902(l)(2)(A)(iv) of 

the Act up to 185 percent FPL. 

(2) Individuals provided medical 

assistance only under sections 

1902(a)(10)(A)(ii)(XV) or 

1902(a)(10)(A)(ii)(XVI) of the Act and 

the Ticket to Work and Work Incentives 

Improvement Act of 1999 (TWWIIA), 

may be charged premiums on a sliding 

scale based on income. 

(3) Disabled children provided 

medical assistance under section 

1902(a)(10)(A)(ii)(XIX) of the Act in 

accordance with the Family 

Opportunity Act, may be charged 

premiums on a sliding scale based on 

income. The aggregate amount of the 

child’s premium imposed under this 

paragraph and any premium that the 

parent is required to pay for family 

coverage under section 1902(cc)(2)(A)(i) 

of the Act, and other cost sharing 

charges may not exceed: 

(i) 5 percent of the family’s income if 

the family’s income is no more than 200 

percent of the FPL. 

(ii) 7.5 percent of the family’s income 

if the family’s income exceeds 200 

percent of the FPL but does not exceed 

300 percent of the FPL. 

(4) Qualified disabled and working 

individuals described in section 1905(s) 

of the Act, whose income exceeds 150 

percent of the FPL, may be charged 

premiums on a sliding scale based on 

income, expressed as a percentage of 

Medicare cost sharing described at 

section 1905(p)(3)(A)(i) of the Act. 

(5) Medically needy individuals, as 

defined in §§ 435.4 and 436.3 of this 

chapter, may be charged on a sliding 

scale. The agency must impose an 

appropriately higher charge for each 

higher level of family income, not to 

exceed $20 per month for the highest 

level of family income. 

(b) Consequences for non-payment. 

(1) For premiums imposed under 

paragraphs (a)(1), (a)(2), (a)(3) and (a)(4) 

of this section, the agency may not 

require a group or groups of individuals 

to prepay. 

(2) Except for premiums imposed 

under paragraph (a)(5) of this section, 

the agency may terminate an individual 

from medical assistance on the basis of 

failure to pay for 60 days or more. 

(3) For premiums imposed under 

paragraph (a)(2) of this section— 

(i) For individuals with annual 

income exceeding 250 percent of the 

FPL, the agency may require payment of 

100 percent of the premiums imposed 

under this paragraph for a year, such 

that payment is only required up to 7.5 

percent of annual income for 

individuals whose annual income does 

not exceed 450 percent of the FPL. 

(ii) For individuals whose annual 

adjusted gross income (as defined in 

section 62 of the Internal Revenue Code 

of 1986) exceeds $75,000, increased by 

inflation each calendar year after 2000, 

the agency must require payment of 100 

percent of the premiums for a year, 

except that the agency may choose to 

subsidize the premiums using state 

funds which may not be federally 

matched by Medicaid. 

(4) For any premiums imposed under 

this section, the agency may waive 

payment of a premium in any case 

where the agency determines that 

requiring the payment will create an 

undue hardship for the individual or 

family. 

(5) The agency may not apply further 

consequences or penalties for nonpayment other than those listed in this 

section. 

(c) State plan specifications. For each 

premium, enrollment fee, or similar 

charge imposed under paragraph (a) of 

this section, subject to the requirements 

of paragraph (b) of this section, the plan 

must specify— 

(1) The group or groups of individuals 

that may be subject to the charge; 

(2) The amount and frequency of the 

charge; 

(3) The process used by the state to 

identify which beneficiaries are subject 

to premiums and to ensure individuals 

exempt from premiums are not charged; 

and 

(4) The consequences for an 

individual or family who does not pay. 

§ 447.56 Limitations on premiums and 

cost sharing. 

(a) Exemptions. (1) The agency may 

not impose premiums or cost sharing 

upon the following groups of 

individuals: 

(i) Individuals ages 1 and older and 

under age 18 eligible under § 435.118 of 

this chapter. 

(ii) Infants under age 1 eligible under 

§ 435.118 of this chapter whose income 

does not exceed the higher of— 

(A) 150 percent FPL (for premiums) or 

133 percent FPL (for cost sharing); and 

(B) If applicable, the percent FPL 

described in section 1902(l)(2)(A)(iv) of 

the Act up to 185 percent FPL. 

(iii) Individuals under age 18 eligible 

under § 435.120–§ 435.122 or § 435.130 

of this chapter. 


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(iv) Children for whom child welfare 

services are made available under Part 

B of title IV of the Act on the basis of 

being a child in foster care and 

individuals receiving benefits under 

Part E of that title, without regard to age. 

(v) At state option, individuals under 

age 19, 20 or age 21, eligible under 

§ 435.222 of this chapter. 

(vi) Disabled children, except as 

provided at § 447.55(a)(4) (premiums), 

who are receiving medical assistance by 

virtue of the application of the Family 

Opportunity Act in accordance with 

sections 1902(a)(10)(A)(ii)(XIX) and 

1902(cc) of the Act. 

(vii) Pregnant women, except for 

premiums allowed under § 447.55(a)(1) 

and cost sharing for services specified in 

the state plan as not pregnancy-related, 

during the pregnancy and through the 

postpartum period which begins on the 

last day of pregnancy and extends 

through the end of the month in which 

the 60-day period following termination 

of pregnancy ends. 

(viii) Any individual whose medical 

assistance for services furnished in an 

institution, or at state option in a home 

and community-based setting, is 

reduced by amounts reflecting available 

income other than required for personal 

needs. 

(ix) An individual receiving hospice 

care, as defined in section 1905(o) of the 

Act. 

(x) An Indian who is eligible to 

receive or has received an item or 

service furnished by an Indian health 

care provider or through referral under 

contract health services is exempt from 

premiums. Indians who are currently 

receiving or have ever received an item 

or service furnished by an Indian health 

care provider or through referral under 

contract health services are exempt from 

all cost sharing. 

(xi) Individuals who are receiving 

Medicaid because of the state’s election 

to extend coverage as authorized by 

§ 435.213 of this chapter (Breast and 

Cervical Cancer). 

(2) The agency may not impose cost 

sharing for the following services: 

(i) Emergency services as defined at 

section 1932(b)(2) of the Act and 

§ 438.114(a) of this chapter; 

(ii) Family planning services and 

supplies described in section 

1905(a)(4)(C) of the Act, including 

contraceptives and pharmaceuticals for 

which the State claims or could claim 

Federal match at the enhanced rate 

under section 1903(a)(5) of the Act for 

family planning services and supplies; 

(iii) Preventive services, at a 

minimum the services specified at 

§ 457.520 of chapter D, provided to 

children under 18 years of age 

regardless of family income, which 

reflect the well-baby and well child care 

and immunizations in the Bright 

Futures guidelines issued by the 

American Academy of Pediatrics; and 

(iv) Pregnancy-related services, 

including those defined at 

§§ 440.210(a)(2) and 440.250(p) of this 

chapter, and counseling and drugs for 

cessation of tobacco use All services 

provided to pregnant women will be 

considered as pregnancy-related, except 

those services specifically identified in 

the state plan as not being related to the 

pregnancy. 

(v) Provider-preventable services as 

defined in § 447.26(b). 

(b) Applicability. Except as permitted 

under § 447.52(d) (targeted cost 

sharing), the agency may not exempt 

additional individuals from cost sharing 

obligations that apply generally to the 

population at issue. 

(c) Payments to providers. (1) Except 

as provided under paragraphs (c)(2) and 

(c)(3) of this section, the agency must 

reduce the payment it makes to a 

provider by the amount of a 

beneficiary’s cost sharing obligation, 

regardless of whether the provider has 

collected the payment or waived the 

cost sharing. 

(2) For items and services provided to 

Indians who are exempt from cost 

sharing under paragraph (a)(1)(x) of this 

section, the agency may not reduce the 

payment it makes to a provider, 

including an Indian health care 

provider, by the amount of cost sharing 

that will otherwise be due from the 

Indian. 

(3) For those providers that the agency 

reimburses under Medicare reasonable 

cost reimbursement principles, in 

accordance with subpart B of this part, 

an agency may increase its payment to 

offset uncollected cost sharing charges 

that are bad debts of providers. 

(d) Payments to managed care 

organizations. If the agency contracts 

with a managed care organization, the 

agency must calculate its payments to 

the organization to include cost sharing 

established under the state plan, for 

beneficiaries not exempt from cost 

sharing under paragraph (a) of this 

section, regardless of whether the 

organization imposes the cost sharing 

on its recipient members or the cost 

sharing is collected. 

(e) Payments to states. No FFP in the 

state’s expenditures for services is 

available for— 

(1) Any premiums or cost sharing 

amounts that recipients should have 

paid under §§ 447.52 through 447.55 

(except for amounts that the agency 

pays as bad debts of providers under 

paragraph (c)(3) of this section; and 

(2) Any amounts paid by the agency 

on behalf of ineligible individuals, 

whether or not the individual had paid 

any required premium, except for 

amounts for premium assistance to 

obtain coverage for eligible individuals 

through family coverage that may 

include ineligible individuals when 

authorized in the approved state plan. 

(f) Aggregate limits. (1) Medicaid 

premiums and cost sharing incurred by 

all individuals in the Medicaid 

household may not exceed an aggregate 

limit of 5 percent of the family’s income 

applied on either a quarterly or monthly 

basis, as specified by the agency. 

(2) If the state adopts premiums or 

cost sharing rules that could place 

beneficiaries at risk of reaching the 

aggregate family limit, the state plan 

must indicate a process to track each 

family’s incurred premiums and cost 

sharing through an effective mechanism 

that does not rely on beneficiary 

documentation. 

(3) The agency must inform 

beneficiaries and providers of the 

beneficiaries aggregate limit and notify 

beneficiaries and providers when a 

beneficiary has incurred out-of-pocket 

expenses up to the aggregate family 

limit and individual family members are 

no longer subject to cost sharing for the 

remainder of the family’s current 

monthly or quarterly cap period. 

(4) The agency must have a process in 

place for beneficiaries to request a 

reassessment of their family aggregate 

limit if they have a change in 

circumstances or if they are being 

terminated for failure to pay a premium. 

(5) Nothing in paragraph (f) shall 

preclude the agency from establishing 

additional aggregate limits, including 

but not limited to a monthly limit on 

cost sharing charges for a particular 

service. 

§ 447.57 Beneficiary and public notice 

requirements. 

(a) The agency must make available a 

public schedule describing current 

premiums and cost sharing 

requirements containing the following 

information: 

(1) The group or groups of individuals 

who are subject to premiums and/or 

cost sharing and the current amounts; 

(2) Mechanisms for making payments 

for required premiums and cost sharing 

charges; 

(3) The consequences for an applicant 

or recipient who does not pay a 

premium or cost sharing charge; 

(4) A list of hospitals charging cost 

sharing for non-emergency use of the 

emergency department; and 


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(5) A list of preferred drugs or a 

mechanism to access such a list, 

including the agency Web site. 

(b) The agency must make the public 

schedule available to the following in a 

manner that ensures that affected 

applicants, beneficiaries, and providers 

are likely to have access to the notice: 

(1) Beneficiaries, at the time of their 

enrollment and reenrollment after a 

redetermination of eligibility, and when 

premiums, cost sharing charges, or 

aggregate limits are revised, notice to 

beneficiaries must be in accordance 

with § 435.905(b) of this chapter; 

(2) Applicants, at the time of 

application; 

(3) All participating providers; and 

(4) The general public. 

(c) Prior to submitting to the Centers 

for Medicare & Medicaid Services for 

approval a state plan amendment (SPA) 

to establish or substantially modify 

existing premiums or cost sharing, or 

change the consequences for nonpayment, the agency must provide the 

public with advance notice of the SPA, 

specifying the amount of premiums or 

cost sharing and who is subject to the 

charges. The agency must provide a 

reasonable opportunity to comment on 

such SPAs. The agency must submit 

documentation with the SPA to 

demonstrate that these requirements 

were met. If premiums or cost sharing 

is substantially modified during the 

SPA approval process, the agency must 

provide additional public notice. 

§§ 445.58 through 447.82 [Removed] 

■ 47c. Remove §§ 445.58 through 

447.82. 

PART 457—ALLOTMENTS AND 

GRANTS TO STATES 

■ 48. The authority citation for part 457 

continues to read as follows: 

Authority: Section 1102 of the Social 

Security Act (42 U.S.C. 1302). 

■ 49. Section 457.10 is amended by 

adding the definitions of ‘‘Exchange 

appeals entity,’’ and ‘‘Premium Lock 

Out’’ to read as follows: 

§ 457.10 Definitions and use of terms. 

* * * * * 

Exchange appeals entity has the 

meaning given to the term ‘‘appeals 

entity,’’ as defined in 45 CFR 155.500. 

* * * * * 

Premium Lock-Out is defined as a 

State-specified period of time not to 

exceed 90 days that a CHIP eligible 

child who has an unpaid premium or 

enrollment fee (as applicable) will not 

be permitted to reenroll for coverage in 

CHIP. Premium lock-out periods are not 

applicable to children who have paid 

outstanding premiums or enrollment 

fees. 

* * * * * 

■ 50. Section 457.110 is amended by 

adding paragraph (a)(1) and a reserved 

paragraph (a)(2) to read as follows: 

§ 457.110 Enrollment assistance and 

information requirements. 

(a) * * * 

(1) The State may provide individuals 

with a choice to receive notices and 

information required under this subpart 

and Subpart K of this part, in electronic 

format or by regular mail, provided that 

the State establish safeguards in 

accordance with § 435.918 of this 

chapter. 

(2) [Reserved] 

* * * * * 

■ 51. Section § 457.340 is amended by 

revising paragraph (a) and adding 

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

§ 457.340 Application for and enrollment in 

CHIP. 

(a) Application and renewal 

assistance, availability of program 

information, and Internet Web site. The 

terms of § 435.905, § 435.906, 

§ 435.907(h), § 435.908, and 

§ 435.1200(f) of this chapter apply 

equally to the State in administering a 

separate CHIP. 

* * * * * 

(d) * * * 

(3) In the case of individuals subject 

to a period of uninsurance under this 

part, the state must identify and 

implement processes to facilitate 

enrollment of CHIP-eligible children 

who have satisfied a period of 

uninsurance (as described under 

§ 457.805). To minimize burden on 

individuals, a state may not require a 

new application or information already 

provided by a family immediately 

preceding the beginning of a waiting 

period. States must also ensure that the 

proper safeguards are in place to 

prevent a disruption in coverage for 

children transitioning from coverage 

under another insurance affordability 

program after the completion of a period 

of uninsurance. 

* * * * * 

■ 52. Section 457.348 is amended by 

adding paragraph (c)(6) to read as 

follows: 

§ 457.348 Determinations of Children’s 

Health Insurance Program eligibility by 

other insurance affordability programs. 

* * * * * 

(c) * * * 

(6) Notify such program of the final 

determination of the individual’s 

eligibility or ineligibility for CHIP. 

* * * * * 

■ 53. Section 457.350 is amended by 

revising paragraphs paragraph (i) to read 

as follows: 

§ 457.350 Eligibility screening and 

enrollment in other insurance affordability 

programs. 

* * * * * 

(i) Applicants found potentially 

eligible for other insurance affordability 

programs. For individuals identified in 

paragraph (b)(3) of this section, 

including during a period of 

uninsurance imposed by the state under 

§ 457.805, the state must— 

(1) Promptly and without undue 

delay, consistent with the timeliness 

standards established under 

§ 457.340(d), transfer the electronic 

account to the applicable program via a 

secure electronic interfaces. 

(2) [Reserved.] 

(3) In the case of individuals subject 

to a period of uninsurance under this 

part, the state must notify such program 

of the date on which such period ends 

and the individual is eligible to enroll 

in CHIP. 

* * * * * 

■ 54. Section 457.370 is added to read 

as follows: 

§ 457.370 Alignment with Exchange initial 

open enrollment period. 

The terms of § 435.1205 apply equally 

to the State in administering a separate 

CHIP, except that the State shall make 

available and accept the application 

described in § 457.330, shall accept 

electronic accounts as described in 

§ 457.348, and furnish coverage in 

accordance with § 457.340. 

§ 457.540 [Amended] 

■ 55. In § 457.540, amend paragraph (a) 

by removing the reference ‘‘§ 447.52’’ 

and by adding in its place the reference 

‘‘§ 447.52, § 447.53, or § 447.54’’. 

■ 56. Section 457.570 is amended by 

revising paragraph (c) and adding 

paragraph (d) to read as follows: 

§ 457.570 Disenrollment protections. 

* * * * * 

(c) The State must ensure that 

disenrollment policies, such as policies 

related to non-payment of premiums, do 

not present barriers to the timely 

determination of eligibility and 

enrollment in coverage of an eligible 

child in the appropriate insurance 

affordability program. A State may not— 

(1) Establish a premium lock-out 

period that exceeds 90-days in 

accordance with § 457.10 of this part. 


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(2) Continue to impose a premium 

lock-out period after a child’s past due 

premiums have been paid. 

(3) Require the collection of past due 

premiums or enrollment fees as a 

condition of eligibility for reenrollment 

once the State-defined lock out period 

has expired, regardless of the length of 

the lock-out period. 

(d) The State must provide the 

enrollee with an opportunity for an 

impartial review to address 

disenrollment from the program in 

accordance with § 457.1130(a)(3). 

■ 57. Section 457.805 is revised to read 

as follows: 

§ 457.805 State plan requirement: 

Procedures to address substitution under 

group health plans. 

(a) State plan requirements. The state 

plan must include a description of 

reasonable procedures to ensure that 

health benefits coverage provided under 

the State plan does not substitute for 

coverage provided under group health 

plans as defined at § 457.10. 

(b) Limitations. (1) A state may not, 

under this section, impose a period of 

uninsurance which exceeds 90 days 

from the date a child otherwise eligible 

for CHIP is disenrolled from coverage 

under a group health plan. 

(2) A waiting period may not be 

applied to a child following the loss of 

eligibility for and enrollment in 

Medicaid or another insurance 

affordability program. 

(3) If a state elects to impose a period 

of uninsurance following the loss of 

coverage under a group health plan 

under this section, such period may not 

be imposed in the case of any child if: 

(i) The premium paid by the family 

for coverage of the child under the 

group health plan exceeded 5 percent of 

household income; 

(ii) The child’s parent is determined 

eligible for advance payment of the 

premium tax credit for enrollment in a 

QHP through the Exchange because the 

ESI in which the family was enrolled is 

determined unaffordable in accordance 

with 26 CFR 1.36B–2(c)(3)(v). 

(iii) The cost of family coverage that 

includes the child exceeds 9.5 percent 

of the household income. 

(iv) The employer stopped offering 

coverage of dependents (or any 

coverage) under an employer-sponsored 

health insurance plan; 

(v) A change in employment, 

including involuntary separation, 

resulted in the child’s loss of employersponsored insurance (other than 

through full payment of the premium by 

the parent under COBRA); 

(vi) The child has special health care 

needs; and 

(vii) The child lost coverage due to 

the death or divorce of a parent. 

■ 58. Section 457.810 is amended by 

revising paragraph (a) to read as follows: 

§ 457.810 Premium assistance programs: 

Required protections against substitution. 

* * * * * 

(a) Period without coverage under a 

group health plan. For health benefits 

coverage provided through premium 

assistance for group health plans, the 

following rules apply: 

(1) Any waiting period imposed under 

the state child health plan prior to the 

provision of child health assistance to a 

targeted low-income child under the 

state plan shall apply to the same extent 

to the provision of a premium assistance 

subsidy for the child and shall not 

exceed 90 days. 

(2) States must permit the same 

exemptions to the required waiting 

period for premium assistance as 

specified under the state plan at 

§ 457.805(a)(2), and § 457.805(a)(3) for 

the provision of child health assistance 

to a targeted low-income child. 

* * * * * 

Title 45 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR subtitle 

A, subchapter B, as set forth below: 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 59. The authority citation for part 155 

is revised to read as follows: 

Authority: Sections 1301, 1302, 1303, 

1304, 1311, 1312, 1313, 1321, 1322, 1331, 

1332, 1334, 1402, 1413, 1321, 1322, 1331, 

1332, 1334, 1402, 1411, 1412, 1413 of the 

Affordable Care Act, Pub. L 111–148, 124 

Stat 199. 

■ 60. Section 155.20 is amended by 

revising the definitions of ‘‘Advance 

payments of the premium tax credit,’’ 

and adding a definition of ‘‘Catastrophic 

plan’’ to read as follows: 

§ 155.20 Definitions. 

* * * * * 

Advance payments of the premium 

tax credit means payment of the tax 

credit authorized by 26 U.S.C. 36B and 

its implementing regulations, which are 

provided on an advance basis to an 

eligible individual enrolled in a QHP 

through an Exchange in accordance 

with section 1412 of the Affordable Care 

Act. 

* * * * * 

Catastrophic plan means a health 

plan described in section 1302(e) of the 

Affordable Care Act. 

* * * * * 

■ 61. Section 155.105 is amended by 

revising paragraph (b)(2) to read as 

follows: 

§ 155.105 Approval of a State Exchange. 

* * * * * 

(b) * * * 

(2) The Exchange is capable of 

carrying out the information reporting 

requirements of 26 CFR 1.36B–5; 

* * * * * 

■ 62. Section 155.227 is added to read 

as follows: 

§ 155.227 Authorized representatives. 

(a) General rule. (1) The Exchange 

must permit an applicant or enrollee in 

the individual or small group market, 

subject to applicable privacy and 

security requirements, to designate an 

individual person or organization to act 

on his or her behalf in applying for an 

eligibility determination or 

redetermination, under subpart D, G, or 

H of this part, and in carrying out other 

ongoing communications with the 

Exchange. 

(2) Designation of an authorized 

representative must be in a written 

document signed by the applicant or 

enrollee, or through another legally 

binding format subject to applicable 

authentication and data security 

standards. If submitted, legal 

documentation of authority to act on 

behalf of an applicant or enrollee under 

State law, such as a court order 

establishing legal guardianship or a 

power of attorney, shall serve in the 

place of the applicant’s or enrollee’s 

signature. 

(3) The Exchange must ensure that the 

authorized representative agrees to 

maintain, or be legally bound to 

maintain, the confidentiality of any 

information regarding the applicant or 

enrollee provided by the Exchange. 

(4) The Exchange must ensure that the 

authorized representative is responsible 

for fulfilling all responsibilities 

encompassed within the scope of the 

authorized representation, as described 

in this section, to the same extent as the 

applicant or enrollee he or she 

represents. 

(5) The Exchange must provide 

information both to the applicant or 

enrollee, and to the authorized 

representative, regarding the powers 

and duties of authorized 

representatives. 

(b) Timing of designation. The 

Exchange must permit an applicant or 

enrollee to designate an authorized 

representative: 


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(1) At the time of application; and 

(2) At other times and through 

methods as described in § 155.405(c)(2). 

(c) Duties. (1) The Exchange must 

permit an applicant or enrollee to 

authorize his or her representative to: 

(i) Sign an application on the 

applicant or enrollee’s behalf; 

(ii) Submit an update or respond to a 

redetermination for the applicant or 

enrollee in accordance with § 155.330 or 

§ 155.335; 

(iii) Receive copies of the applicant’s 

or enrollee’s notices and other 

communications from the Exchange; 

and 

(iv) Act on behalf of the applicant or 

enrollee in all other matters with the 

Exchange. 

(2) The Exchange may permit an 

applicant or enrollee to authorize a 

representative to perform fewer than all 

of the activities described in paragraph 

(c)(1) of this section, provided that the 

Exchange tracks the specific 

permissions for each authorized 

representative. 

(d) Duration. The Exchange must 

consider the designation of an 

authorized representative valid until: 

(1) The applicant or enrollee notifies 

the Exchange that the representative is 

no longer authorized to act on his or her 

behalf using one of the methods 

available for the submission of an 

application, as described in 

§ 155.405(c). The Exchange must notify 

the authorized representative of such 

change; or 

(2) The authorized representative 

informs the Exchange and the applicant 

or enrollee that he or she no longer is 

acting in such capacity. An authorized 

representative must notify the Exchange 

and the applicant or enrollee on whose 

behalf he or she is acting when the 

authorized representative no longer has 

legal authority to act on behalf of the 

applicant or enrollee. 

(e) Compliance with State and Federal 

law. The Exchange must require an 

authorized representative to comply 

with applicable state and federal laws 

concerning conflicts of interest and 

confidentiality of information. 

(f) Signature. For purposes of this 

section, designation of an authorized 

representative must be through a written 

document signed by the applicant or 

enrollee, or through another legally 

binding format, as described in 

§ 155.227(a)(2), and must be accepted 

through all of the modalities described 

in § 155.405(c). 

■ 63. Section 155.230 is amended by 

revising paragraph (a) and adding 

paragraph (d) to read as follows: 

§ 155.230 General standards for Exchange 

notices. 

(a) General requirement. Any notice 

required to be sent by the Exchange to 

individuals or employers must be 

written and include: 

(1) An explanation of the action 

reflected in the notice, including the 

effective date of the action. 

(2) Any factual findings relevant to 

the action. 

(3) Citations to, or identification of, 

the relevant regulations supporting the 

action. 

(4) Contact information for available 

customer service resources. 

(5) An explanation of appeal rights, if 

applicable. 

* * * * * 

(d) Electronic notices. (1) The 

individual market Exchange must 

provide required notices either through 

standard mail, or if an individual or 

employer elects, electronically, 

provided that the requirements for 

electronic notices in 42 CFR 435.918 are 

met, except that the individual market 

Exchange is not required to implement 

the process specified in 42 CFR 

435.918(b)(1) for eligibility 

determinations for enrollment in a QHP 

through the Exchange and insurance 

affordability programs that are effective 

before January 1, 2015. 

(2) The SHOP must provide required 

notices either through standard mail, or 

if an employer or employee elects, 

electronically, provided that the 

requirements for electronic notices in 42 

CFR 435.918(b)(2) through (5) are met 

for the employer or employee. 

■ 64. Section 155.300(a) is amended by 

removing the definition of ‘‘Adoption 

taxpayer identification number’’ and 

revising the definitions of ‘‘Minimum 

value,’’ ‘‘Modified Adjusted Gross 

Income (MAGI),’’ and ‘‘Qualifying 

coverage in an eligible employersponsored plan’’ to read as follows: 

§ 155.300 Definitions and general 

standards for eligibility determinations. 

(a) * * * 

Minimum value when used to 

describe coverage in an eligible 

employer-sponsored plan, means that 

the employer-sponsored plan meets the 

standards for coverage of the total 

allowed costs of benefits set forth in 

§ 156.145. 

Modified Adjusted Gross Income 

(MAGI) has the same meaning as it does 

in 26 CFR 1.36B–1(e)(2). 

* * * * * 

Qualifying coverage in an eligible 

employer-sponsored plan means 

coverage in an eligible employersponsored plan that meets the 

affordability and minimum value 

standards specified in 26 CFR 1.36B– 

2(c)(3). 

* * * * * 

■ 65. Section 155.302 is amended by 

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

read as follows: 

§ 155.302 Options for conducting eligibility 

determinations. 

(a) Options for conducting eligibility 

determinations. The Exchange may 

satisfy the requirements of this 

subpart— 

(1) Directly or through contracting 

arrangements in accordance with 

§ 155.110(a), provided that any 

contracting arrangement for eligibility 

determinations for Medicaid and CHIP 

is subject to the standards in 42 CFR 

431.10(c)(2); or 

(2) Through a combination of the 

approach described in paragraph (a)(1) 

of this section and one or both of the 

options described in paragraph (b) or (c) 

of this section, subject to the standards 

in paragraph (d) of this section. 

(b) Medicaid and CHIP. 

Notwithstanding the requirements of 

this subpart, the Exchange may conduct 

an assessment of eligibility for Medicaid 

and CHIP, rather than an eligibility 

determination for Medicaid and CHIP, 

provided that— 

(1) The Exchange makes such an 

assessment based on the applicable 

Medicaid and CHIP MAGI-based income 

standards and citizenship and 

immigration status, using verification 

rules and procedures consistent with 42 

CFR parts 435 and 457, without regard 

to how such standards are implemented 

by the State Medicaid and CHIP 

agencies. 

(2) Notices and other activities 

required in connection with an 

eligibility determination for Medicaid or 

CHIP are performed by the Exchange 

consistent with the standards identified 

in this subpart or the State Medicaid or 

CHIP agency consistent with applicable 

law. 

(3) Applicants found potentially 

eligible for Medicaid or CHIP. When the 

Exchange assesses an applicant as 

potentially eligible for Medicaid or 

CHIP consistent with the standards in 

paragraph (b)(1) of this section, the 

Exchange transmits all information 

provided as a part of the application, 

update, or renewal that initiated the 

assessment, and any information 

obtained or verified by the Exchange to 

the State Medicaid agency or CHIP 

agency via secure electronic interface, 

promptly and without undue delay. 

(4) Applicants not found potentially 

eligible for Medicaid and CHIP. (i) If the 

Exchange conducts an assessment in 


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accordance with paragraph (b) of this 

section and finds that an applicant is 

not potentially eligible for Medicaid or 

CHIP based on the applicable Medicaid 

and CHIP MAGI-based income 

standards, the Exchange must consider 

the applicant as ineligible for Medicaid 

and CHIP for purposes of determining 

eligibility for advance payments of the 

premium tax credit and cost-sharing 

reductions and must notify such 

applicant, and provide him or her with 

the opportunity to— 

(A) Withdraw his or her application 

for Medicaid and CHIP, unless the 

Exchange has assessed the applicant as 

potentially eligible for Medicaid based 

on factors not otherwise considered in 

this subpart, in accordance with 

§ 155.345(b), and provided that the 

application will not be considered 

withdrawn if he or she appeals his or 

her eligibility determination for advance 

payments of the premium tax credit or 

cost-sharing reductions and the appeals 

entity described in § 155.500(a) finds 

that the individual is potentially eligible 

for Medicaid or CHIP; or 

(B) Request a full determination of 

eligibility for Medicaid and CHIP by the 

applicable State Medicaid and CHIP 

agencies. 

(ii) To the extent that an applicant 

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

section requests a full determination of 

eligibility for Medicaid and CHIP, the 

Exchange must— 

(A) Transmit all information provided 

as a part of the application, update, or 

renewal that initiated the assessment, 

and any information obtained or 

verified by the Exchange to the State 

Medicaid agency and CHIP agency via 

secure electronic interface, promptly 

and without undue delay; and 

(B) Consider such an applicant as 

ineligible for Medicaid and CHIP for 

purposes of determining eligibility for 

advance payments of the premium tax 

credit and cost-sharing reductions until 

the State Medicaid or CHIP agency 

notifies the Exchange that the applicant 

is eligible for Medicaid or CHIP. 

(5) The Exchange and the Exchange 

appeals entity adheres to the eligibility 

determination or appeals decision for 

Medicaid or CHIP made by the State 

Medicaid or CHIP agency, or the appeals 

entity for such agency. 

(6) The Exchange and the State 

Medicaid and CHIP agencies enter into 

an agreement specifying their respective 

responsibilities in connection with 

eligibility determinations for Medicaid 

and CHIP, and provide a copy of such 

agreement to HHS upon request. 

* * * * * 

(d) Standards. To the extent that 

assessments of eligibility for Medicaid 

and CHIP based on MAGI or eligibility 

determinations for advance payments of 

the premium tax credit and cost-sharing 

reductions are made in accordance with 

paragraphs (b) or (c) of this section, the 

Exchange must ensure that— 

(1) Eligibility processes for all 

insurance affordability programs are 

streamlined and coordinated across 

HHS, the Exchange, the State Medicaid 

agency, and the State CHIP agency, as 

applicable; 

(2) Such arrangement does not 

increase administrative costs and 

burdens on applicants, enrollees, 

beneficiaries, or application filers, or 

increase delay; and 

(3) Applicable requirements under 45 

CFR 155.260, 155.270, and 155.315(i), 

and section 6103 of the Code for the 

confidentiality, disclosure, 

maintenance, and use of information are 

met. 

■ 66. Section 155.305 is amended by— 

■ A. Revising paragraphs (f)(1)(i), 

(f)(1)(ii)(B), (f)(2)(ii), (f)(2)(iii), (f)(3), and 

(f)(5). 

■ B. Adding paragraphs (a)(3)(v), and 

(h). 

The revisions and additions read as 

follows: 

§ 155.305 Eligibility standards. 

(a) * * * 

(3) * * * 

(v) Temporary absence. The Exchange 

may not deny or terminate an 

individual’s eligibility for enrollment in 

a QHP through the Exchange if the 

individual meets the standards in 

paragraph (a)(3) of this section but for a 

temporary absence from the service area 

of the Exchange and intends to return 

when the purpose of the absence has 

been accomplished. 

* * * * * 

(f) * * * 

(1) * * * 

(i) He or she is expected to have a 

household income, as defined in 26 CFR 

1.36B–1(e), of greater than or equal to 

100 percent but not more than 400 

percent of the FPL for the benefit year 

for which coverage is requested; and 

(ii) * * * 

(B) Is not eligible for minimum 

essential coverage, with the exception of 

coverage in the individual market, in 

accordance with section 26 CFR 1.36B– 

2(a)(2) and (c). 

(2) * * * 

(ii) He or she is expected to have a 

household income, as defined in 26 CFR 

1.36B–1(e) of less than 100 percent of 

the FPL for the benefit year for which 

coverage is requested; and 

(iii) One or more applicants for whom 

the tax filer expects to claim a personal 

exemption deduction on his or her tax 

return for the benefit year, including the 

tax filer and his or her spouse, is a noncitizen who is lawfully present and 

ineligible for Medicaid by reason of 

immigration status, in accordance with 

26 CFR 1.36B–2(b)(5). 

(3) Enrollment required. The 

Exchange may provide advance 

payments of the premium tax credit on 

behalf of a tax filer only if one or more 

applicants for whom the tax filer attests 

that he or she expects to claim a 

personal exemption deduction for the 

benefit year, including the tax filer and 

his or her spouse, is enrolled in a QHP 

that is not a catastrophic plan, through 

the Exchange. 

* * * * * 

(5) Calculation of advance payments 

of the premium tax credit. The 

Exchange must calculate advance 

payments of the premium tax credit in 

accordance with 26 CFR 1.36B–3. 

* * * * * 

(h) Eligibility for enrollment through 

the Exchange in a QHP that is a 

catastrophic plan. The Exchange must 

determine an applicant eligible for 

enrollment in a QHP through the 

Exchange in a QHP that is a catastrophic 

plan as defined by section 1302(e) of the 

Affordable Care Act, if he or she has met 

the requirements for eligibility for 

enrollment in a QHP through the 

Exchange, in accordance with 

§ 155.305(a), and either— 

(1) Has not attained the age of 30 

before the beginning of the plan year; or 

(2) Has a certification in effect for any 

plan year that he or she is exempt from 

the requirement to maintain minimum 

essential coverage under section 5000A 

of the Code by reason of— 

(i) Section 5000A(e)(1) of the Code 

(relating to individuals without 

affordable coverage); or 

(ii) Section 5000A(e)(5) of the Code 

(relating to individuals with hardships). 

■ 67. Section 155.310 is amended by— 

■ A. Redesignating paragraph (i) as 

paragraph (j). 

■ B. Adding new paragraph (i). 

■ C. Revising newly redesignated 

paragraph (j). 

The addition and revision read as 

follows: 

§ 155.310 Eligibility process. 

* * * * * 

(i) Certification program for 

employers. As part of its determination 

of whether an employer has a liability 

under section 4980H of the Code, the 

Internal Revenue Service will adopt 

methods to certify to an employer that 

one or more employees has enrolled for 

one or more months during a year in a 


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QHP for which a premium tax credit or 

cost-sharing reduction is allowed or 

paid. 

(j) Duration of eligibility 

determinations without enrollment. To 

the extent that an applicant who is 

determined eligible for enrollment in a 

QHP through the Exchange does not 

select a QHP within his or her 

enrollment period, or is not eligible for 

an enrollment period, in accordance 

with subpart E, and seeks a new 

enrollment period prior to the date on 

which his or her eligibility is 

redetermined in accordance with 

§ 155.335, the Exchange must require 

the applicant to attest as to whether 

information affecting his or her 

eligibility has changed since his or her 

most recent eligibility determination 

before determining his or her eligibility 

for a special enrollment period, and 

must process any changes reported in 

accordance with the procedures 

specified in § 155.330. 

■ 68. Section 155.315 is amended by 

revising paragraphs (b)(2), (f) 

introductory text, (f)(4) introductory 

text, and (f)(5) and by adding paragraphs 

(f)(6) and (j) to read as follows: 

§ 155.315 Verification process related to 

eligibility for enrollment in a QHP through 

the Exchange. 

* * * * * 

(b) * * * 

(2) To the extent that the Exchange is 

unable to validate an individual’s Social 

Security number through the Social 

Security Administration, or the Social 

Security Administration indicates that 

the individual is deceased, the 

Exchange must follow the procedures 

specified in paragraph (f) of this section, 

except that the Exchange must provide 

the individual with a period of 90 days 

from the date on which the notice 

described in paragraph (f)(2)(i) of this 

section is received for the applicant to 

provide satisfactory documentary 

evidence or resolve the inconsistency 

with the Social Security Administration. 

The date on which the notice is received 

means 5 days after the date on the 

notice, unless the individual 

demonstrates that he or she did not 

receive the notice within the 5 day 

period. 

* * * * * 

(f) Inconsistencies. Except as 

otherwise specified in this subpart, for 

an applicant for whom the Exchange 

cannot verify information required to 

determine eligibility for enrollment in a 

QHP through the Exchange, advance 

payments of the premium tax credit, 

and cost-sharing reductions, including 

when electronic data is required in 

accordance with this subpart but data 

for individuals relevant to the eligibility 

determination are not included in such 

data sources or when electronic data 

from IRS, DHS, or SSA is required but 

it is not reasonably expected that data 

sources will be available within 1 day 

of the initial request to the data source, 

the Exchange: 

* * * * * 

(4) During the periods described in 

paragraphs (f)(1) and (f)(2)(ii) of this 

section, must: 

* * * * * 

(5) If, after the period described in 

paragraph (f)(2)(ii) of this section, the 

Exchange remains unable to verify the 

attestation, the Exchange must 

determine the applicant’s eligibility 

based on the information available from 

the data sources specified in this 

subpart, unless such applicant qualifies 

for the exception provided under 

paragraph (g) of this section, and notify 

the applicant of such determination in 

accordance with the notice 

requirements specified in § 155.310(g), 

including notice that the Exchange is 

unable to verify the attestation. 

(6) When electronic data to support 

the verifications specified in 

§ 155.315(d) or § 155.320(b) is required 

but it is not reasonably expected that 

data sources will be available within 1 

day of the initial request to the data 

source, the Exchange must accept the 

applicant’s attestation regarding the 

factor of eligibility for which the 

unavailable data source is relevant. 

* * * * * 

(j) Verification related to eligibility for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan. The 

Exchange must verify an applicant’s 

attestation that he or she meets the 

requirements of § 155.305(h) by— 

(1) Verifying the applicant’s 

attestation of age as follows— 

(i) Except as provided in paragraph 

(j)(1)(iii) of this section, accepting his or 

her attestation without further 

verification; or 

(ii) Examining electronic data sources 

that are available to the Exchange and 

which have been approved by HHS for 

this purpose, based on evidence 

showing that such data sources are 

sufficiently current and accurate, and 

minimize administrative costs and 

burdens. 

(iii) If information regarding age is not 

reasonably compatible with other 

information provided by the individual 

or in the records of the Exchange, the 

Exchange must examine information in 

data sources that are available to the 

Exchange and which have been 

approved by HHS for this purpose based 

on evidence showing that such data 

sources are sufficiently current and 

accurate. 

(2) Verifying that an applicant has a 

certification of exemption in effect as 

described in § 155.305(h)(2). 

(3) To the extent that the Exchange is 

unable to verify the information 

required to determine eligibility for 

enrollment through the Exchange in a 

QHP that is a catastrophic plan as 

described in paragraphs (j)(1) and (2) of 

this section, the Exchange must follow 

the procedures specified in § 155.315(f), 

except for § 155.315(f)(4). 

■ 69. Section 155.320 is amended by— 

■ A. Revising paragraphs (c)(1)(i) 

heading, (c)(1)(i)(A), (c)(1)(ii), 

(c)(3)(i)(D), (c)(3)(ii)(A), (c)(3)(iii)(A) and 

(B), (c)(3)(vi), (c)(3)(vii), (c)(3)(viii), and 

(d). 

■ B. Adding paragraphs (c)(3)(i)(E) and 

(c)(3)(iii)(C). 

■ C. Removing paragraph (e). 

■ D. Redesignating paragraph (f) as 

paragraph (e). 

The revisions and additions read as 

follows: 

§ 155.320 Verification process related to 

eligibility for insurance affordability 

programs. 

* * * * * 

(c) * * * 

(1) * * * 

(i) Data regarding annual household 

income. (A) For all individuals whose 

income is counted in calculating a tax 

filer’s household income, as defined in 

26 CFR 1.36B–1(e), or an applicant’s 

household income, calculated in 

accordance with 42 CFR 435.603(d), and 

for whom the Exchange has a Social 

Security number, the Exchange must 

request tax return data regarding MAGI 

and family size from the Secretary of the 

Treasury and data regarding Social 

security benefits described in 26 CFR 

1.36B–1(e)(2)(iii) from the 

Commissioner of Social Security by 

transmitting identifying information 

specified by HHS to HHS. 

* * * * * 

(ii) Data regarding MAGI-based 

income. For all individuals whose 

income is counted in calculating a tax 

filer’s household income, as defined in 

26 CFR 1.36B–1(e), or an applicant’s 

household income, calculated in 

accordance with 42 CFR 435.603(d), the 

Exchange must request data regarding 

MAGI-based income in accordance with 

42 CFR 435.948(a). 

* * * * * 

(3) * * * 

(i) * * * 

(D) If the Exchange finds that an 

applicant’s attestation of a tax filer’s 

family size is not reasonably compatible 


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with other information provided by the 

application filer for the family or in the 

records of the Exchange, with the 

exception of the data described in 

paragraph (c)(1)(i) of this section, the 

Exchange must utilize data obtained 

through other electronic data sources to 

verify the attestation. If such data 

sources are unavailable or information 

in such data sources is not reasonably 

compatible with the applicant’s 

attestation, the Exchange must request 

additional documentation to support the 

attestation within the procedures 

specified in § 155.315(f). 

(E) The Exchange must verify that 

neither advance payments of the 

premium tax credit nor cost-sharing 

reductions are being provided on behalf 

of an individual using information 

obtained by transmitting identifying 

information specified by HHS to HHS. 

* * * * * 

(ii) * * * 

(A) The Exchange must compute 

annual household income for the family 

described in paragraph (c)(3)(i)(A) of 

this section based on the data described 

in paragraph (c)(1)(i) of this section; 

* * * * * 

(iii) * * * 

(A) Except as specified in paragraph 

(c)(3)(iii)(B) and (C) of this section, if an 

applicant’s attestation, in accordance 

with paragraph (c)(3)(ii)(B) of this 

section, indicates that a tax filer’s 

annual household income has increased 

or is reasonably expected to increase 

from the data described in paragraph 

(c)(3)(ii)(A) of this section for the benefit 

year for which the applicant(s) in the 

tax filer’s family are requesting coverage 

and the Exchange has not verified the 

applicant’s MAGI-based income through 

the process specified in paragraph 

(c)(2)(ii) of this section to be within the 

applicable Medicaid or CHIP MAGIbased income standard, the Exchange 

must accept the applicant’s attestation 

regarding a tax filer’s annual household 

income without further verification. 

(B) If data available to the Exchange 

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

of this section indicate that a tax filer’s 

projected annual household income is 

in excess of his or her attestation by a 

significant amount, the Exchange must 

proceed in accordance with 

§ 155.315(f)(1) through (4). 

(C) If other information provided by 

the application filer indicates that a tax 

filer’s projected annual household 

income is in excess of his or her 

attestation by a significant amount, the 

Exchange must utilize data available to 

the Exchange in accordance with 

paragraph (c)(1)(ii) of this section to 

verify the attestation. If such data is 

unavailable or are not reasonably 

compatible with the applicant’s 

attestation, the Exchange must proceed 

in accordance with § 155.315(f)(1) 

through (4). 

* * * * * 

(vi) Alternate verification process for 

decreases in annual household income 

and situations in which tax return data 

is unavailable. If a tax filer qualifies for 

an alternate verification process based 

on the requirements specified in 

paragraph (c)(3)(iv) of this section and 

the applicant’s attestation to projected 

annual household income, as described 

in paragraph (c)(3)(ii)(B) of this section, 

is greater than ten percent below the 

annual household income computed in 

accordance with paragraph (c)(3)(ii)(A) 

of this section, or if data described in 

paragraph (c)(1)(i) of this section is 

unavailable, the Exchange must attempt 

to verify the applicant’s attestation of 

the tax filer’s projected annual 

household income by following the 

procedures specified in paragraph 

(c)(3)(vi)(A) through (G) of this section. 

(A) Data. The Exchange must 

annualize data from the MAGI-based 

income sources specified in paragraph 

(c)(1)(ii) of this section, and obtain any 

data available from other electronic data 

sources that have been approved by 

HHS, based on evidence showing that 

such data sources are sufficiently 

accurate and offer less administrative 

complexity than paper verification. 

(B) Eligibility. To the extent that the 

applicant’s attestation indicates that the 

information described in paragraph 

(c)(3)(vi)(A) of this section represents an 

accurate projection of the tax filer’s 

household income for the benefit year 

for which coverage is requested, the 

Exchange must determine the tax filer’s 

eligibility for advance payments of the 

premium tax credit and cost-sharing 

reductions based on the household 

income data in paragraph (c)(3)(vi)(A) of 

this section. 

(C) Increases in annual household 

income. If an applicant’s attestation, in 

accordance with paragraph (c)(3)(ii)(B) 

of this section, indicates that a tax filer’s 

annual household income has increased 

or is reasonably expected to increase 

from the data described in paragraph 

(c)(3)(vi)(A) of this section to the benefit 

year for which the applicant(s) in the 

tax filer’s family are requesting coverage 

and the Exchange has not verified the 

applicant’s MAGI-based income through 

the process specified in paragraph 

(c)(2)(ii) of this section to be within the 

applicable Medicaid or CHIP MAGIbased income standard, the Exchange 

must accept the applicant’s attestation 

for the tax filer’s family without further 

verification, unless the Exchange finds 

that an applicant’s attestation of a tax 

filer’s annual household income is not 

reasonably compatible with other 

information provided by the application 

filer or available to the Exchange in 

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

this section, in which case the Exchange 

must request additional documentation 

using the procedures specified in 

§ 155.315(f). 

(D) Decreases in annual household 

income and situations in which 

electronic data is unavailable. If 

electronic data are unavailable or an 

applicant’s attestation to projected 

annual household income, as described 

in paragraph (c)(3)(ii)(B) of this section, 

is more than ten percent below the 

annual household income as computed 

using data sources described in 

paragraphs (c)(3)(vi)(A) of this section, 

the Exchange must follow the 

procedures specified in § 155.315(f)(1) 

through (4). 

(E) If, following the 90-day period 

described in paragraph (c)(3)(vi)(D) of 

this section, an applicant has not 

responded to a request for additional 

information from the Exchange and the 

data sources specified in paragraph 

(c)(1) of this section indicate that an 

applicant in the tax filer’s family is 

eligible for Medicaid or CHIP, the 

Exchange must not provide the 

applicant with eligibility for advance 

payments of the premium tax credit, 

cost-sharing reductions, Medicaid, CHIP 

or the BHP, if a BHP is operating in the 

service area of the Exchange. 

(F) If, at the conclusion of the period 

specified in paragraph (c)(3)(vi)(D) of 

this section, the Exchange remains 

unable to verify the applicant’s 

attestation, the Exchange must 

determine the applicant’s eligibility 

based on the information described in 

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

notify the applicant of such 

determination in accordance with the 

notice requirements specified in 

§ 155.310(g), and implement such 

determination in accordance with the 

effective dates specified in § 155.330(f). 

(G) If, at the conclusion of the period 

specified in paragraph (c)(3)(vi)(D) of 

this section, the Exchange remains 

unable to verify the applicant’s 

attestation for the tax filer and the 

information described in paragraph 

(c)(3)(ii)(A) of this section is 

unavailable, the Exchange must 

determine the tax filer ineligible for 

advance payments of the premium tax 

credit and cost-sharing reductions, 

notify the applicant of such 

determination in accordance with the 

notice requirement specified in 

§ 155.310(g), and discontinue any 


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advance payments of the premium tax 

credit and cost-sharing reductions in 

accordance with the effective dates 

specified in § 155.330(f). 

(vii) For the purposes of paragraph 

(c)(3) of this section, ‘‘household 

income’’ means household income as 

specified in 26 CFR 1.36B–1(e). 

(viii) For the purposes of paragraph 

(c)(3) of this section, ‘‘family size’’ 

means family size as specified in 26 

CFR 1.36B–1(d). 

* * * * * 

(d) Verification related to enrollment 

in an eligible employer-sponsored plan 

and eligibility for qualifying coverage in 

an eligible employer-sponsored plan. (1) 

General requirement. The Exchange 

must verify whether an applicant 

reasonably expects to be enrolled in an 

eligible employer-sponsored plan or is 

eligible for qualifying coverage in an 

eligible employer-sponsored plan for the 

benefit year for which coverage is 

requested. 

(2) Data. The Exchange must— 

(i) Obtain data about enrollment in 

and eligibility for an eligible employersponsored plan from any electronic data 

sources that are available to the 

Exchange and which have been 

approved by HHS, based on evidence 

showing that such data sources are 

sufficiently current, accurate, and 

minimize administrative burden. 

(ii) Obtain any available data 

regarding enrollment in employersponsored coverage or eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan based on 

federal employment by transmitting 

identifying information specified by 

HHS to HHS for HHS to provide the 

necessary verification using data 

obtained by HHS. 

(iii) Obtain any available data from 

the SHOP that corresponds to the State 

in which the Exchange is operating. 

(3) Verification procedures. (i) Except 

as specified in paragraphs (d)(3)(ii) or 

(iii) of this section, the Exchange must 

accept an applicant’s attestation 

regarding the verification specified in 

paragraph (d) of this section without 

further verification. 

(ii) If an applicant’s attestation is not 

reasonably compatible with the 

information obtained by the Exchange 

as specified in paragraphs (d)(2)(i) 

through (iii) of this section, other 

information provided by the application 

filer, or other information in the records 

of the Exchange, the Exchange must 

follow the procedures specified in 

§ 155.315(f). 

(iii) Except as specified in paragraph 

(d)(3)(iv) of this section, if the Exchange 

does not have any of the information 

specified in paragraphs (d)(2)(i) through 

(iii) of this section for an applicant, the 

Exchange must select a statistically 

significant random sample of such 

applicants and— 

(A) Provide notice to the applicant 

indicating that the Exchange will be 

contacting any employer identified on 

the application for the applicant and the 

members of his or her household, as 

defined in 26 CFR 1.36B–1(d), to verify 

whether the applicant is enrolled in an 

eligible employer-sponsored plan or is 

eligible for qualifying coverage in an 

eligible employer-sponsored plan for the 

benefit year for which coverage is 

requested; 

(B) Proceed with all other elements of 

the eligibility determination using the 

applicant’s attestation, and provide 

eligibility for enrollment in a QHP to the 

extent that an applicant is otherwise 

qualified; 

(C) Ensure that advance payments of 

the premium tax credit and cost-sharing 

reductions are provided on behalf of an 

applicant who is otherwise qualified for 

such payments and reductions, as 

described in § 155.305, if the tax filer 

attests to the Exchange that he or she 

understands that any advance payments 

of the premium tax credit paid on his or 

her behalf are subject to reconciliation; 

(D) Make reasonable attempts to 

contact any employer identified on the 

application for the applicant and the 

members of his or her household, as 

defined in 26 CFR 1.36B–1(d), to verify 

whether the applicant is enrolled in an 

eligible employer-sponsored plan or is 

eligible for qualifying coverage in an 

eligible employer-sponsored plan for the 

benefit year for which coverage is 

requested; 

(E) If the Exchange receives any 

information from an employer relevant 

to the applicant’s enrollment in an 

eligible employer-sponsored plan or 

eligibility for qualifying coverage in an 

eligible employer-sponsored plan, the 

Exchange must determine the 

applicant’s eligibility based on such 

information and in accordance with the 

effective dates specified in § 155.330(f), 

and if such information changes his or 

her eligibility determination, notify the 

applicant and his or her employer or 

employers of such determination in 

accordance with the notice 

requirements specified in § 155.310(g) 

and (h); 

(F) If, after a period of 90 days from 

the date on which the notice described 

in paragraph (d)(3)(iii)(A) of this section 

is sent to the applicant, the Exchange is 

unable to obtain the necessary 

information from an employer, the 

Exchange must determine the 

applicant’s eligibility based on his or 

her attestation(s) regarding coverage 

provided by that employer. 

(G) To carry out the process described 

in paragraph (d)(3)(iii) of this section, 

the Exchange must only disclose an 

individual’s information to an employer 

to the extent necessary for the employer 

to identify the employee. 

(iv) For eligibility determinations for 

advance payments of the premium tax 

credit and cost-sharing reductions that 

are effective before January 1, 2015, if 

the Exchange does not have any of the 

information specified in paragraphs 

(d)(2)(i) through (iii) of this section for 

an applicant, the Exchange may accept 

an applicant’s attestation regarding 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan for the benefit 

year for which coverage is requested 

without further verification, instead of 

following the procedure in paragraph 

(d)(3)(iii) of this section. 

(4) Option to rely on verification 

performed by HHS. For eligibility 

determinations for advance payments of 

the premium tax credit and cost-sharing 

reductions that are effective on or after 

January 1, 2015, the Exchange may 

satisfy the provisions of paragraph (d) of 

this section by relying on a verification 

process performed by HHS, provided 

that— 

(i) The Exchange sends the notices 

described in § 155.310(g) and (h); 

(ii) Other activities required in 

connection with the verifications 

described in this paragraph are 

performed by the Exchange in 

accordance with the standards 

identified in this subpart or in 

accordance with guidance issued by the 

Secretary; and 

(iii) The Exchange provides all 

relevant application information to HHS 

through a secure, electronic interface, 

promptly and without undue delay. 

* * * * * 

■ 70. Section 155.330 is amended by 

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

(f), and by removing paragraph (e)(3). 

The revisions read as follows: 

§ 155.330 Eligibility redetermination during 

a benefit year. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) For an enrollee on whose behalf 

advance payments of the premium tax 

credit or cost-sharing reductions are 

being provided, eligibility 

determinations for Medicare, Medicaid, 

CHIP, or the BHP, if a BHP is operating 

in the service area of the Exchange. 

* * * * * 


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(e) * * * 

(2) Data matching. (i) If the Exchange 

identifies updated information 

regarding death, in accordance with 

paragraph (d)(1)(i) of this section, or 

regarding any factor of eligibility not 

regarding income, family size, or family 

composition, the Exchange must— 

(A) Notify the enrollee regarding the 

updated information, as well as the 

enrollee’s projected eligibility 

determination after considering such 

information. 

(B) Allow an enrollee 30 days from 

the date of the notice to notify the 

Exchange that such information is 

inaccurate. 

(C) If the enrollee responds contesting 

the updated information, proceed in 

accordance with § 155.315(f) of this 

part. 

(D) If the enrollee does not respond 

within the 30-day period specified in 

paragraph (e)(2)(i)(B), proceed in 

accordance with paragraphs (e)(1)(i) and 

(ii) of this section. 

(ii) If the Exchange identifies updated 

information regarding income, family 

size, or family composition, with the 

exception of information regarding 

death, the Exchange must— 

(A) Follow procedures described in 

paragraph (e)(2)(i)(A) and (B) of this 

section; and 

(B) If the enrollee responds 

confirming the updated information, 

proceed in accordance with paragraphs 

(e)(1)(i) and (ii) of this section. 

(C) If the enrollee does not respond 

within the 30-day period specified in 

paragraph (e)(2)(i)(B) of this section, 

maintain the enrollee’s existing 

eligibility determination without 

considering the updated information. 

(D) If the enrollee provides more upto-date information, proceed in 

accordance with paragraph (c)(1) of this 

section. 

* * * * * 

(f) Effective dates. (1) Except as 

specified in paragraphs (f)(2) through 

(f)(5) of this section, the Exchange must 

implement changes— 

(i) Resulting from a redetermination 

under this section on the first day of the 

month following the date of the notice 

described in paragraph (e)(1)(ii) of this 

section; or 

(ii) Resulting from an appeal decision, 

on the date specified in the appeal 

decision; or 

(iii) Affecting enrollment or premiums 

only, on the first day of the month 

following the date on which the 

Exchange is notified of the change; 

(2) Except as specified in paragraphs 

(f)(3) through (5) of this section, the 

Exchange may determine a reasonable 

point in a month after which a change 

described in paragraph (f)(1) of this 

section will not be effective until the 

first day of the month after the month 

specified in paragraph (f)(1) of this 

section. Such reasonable point in a 

month must be no earlier than the 15th 

of the month. 

(3) Except as specified in paragraphs 

(f)(4) and (5) of this section, the 

Exchange must implement a change 

described in paragraph (f)(1) of this 

section that results in a decreased 

amount of advance payments of the 

premium tax credit, or a change in the 

level of cost-sharing reductions, and for 

which the date of the notices described 

in paragraphs (f)(1)(i) and (ii) of this 

section, or the date on which the 

Exchange is notified in accordance with 

paragraph (f)(1)(iii) of this section is 

after the 15th of the month, on the first 

day of the month after the month 

specified in paragraph (f)(1) of this 

section. 

(4) The Exchange must implement a 

change associated with the events 

described in § 155.420(b)(2)(i) and (ii) 

on the coverage effective dates 

described in § 155.420(b)(2)(i) and (ii), 

respectively. 

(5) Notwithstanding paragraphs (f)(1) 

through (f)(4) of this section, the 

Exchange may provide the effective date 

of a change associated with the events 

described in § 155.420(d)(4), (d)(5), and 

(d)(9) based on the specific 

circumstances of each situation. 

■ 71. Section 155.335 is amended by 

revising paragraphs (a), (b), (c), (e), (f), 

(g), (h), (k)(1), and (l), and adding 

paragraph (m) to read as follows: 

§ 155.335 Annual eligibility 

redetermination. 

(a) General requirement. Except as 

specified in paragraphs (l) and (m) of 

this section, the Exchange must 

redetermine the eligibility of a qualified 

individual on an annual basis. 

(b) Updated income and family size 

information. In the case of a qualified 

individual who requested an eligibility 

determination for insurance 

affordability programs in accordance 

with § 155.310(b) of this part, the 

Exchange must request updated tax 

return information, if the qualified 

individual has authorized the request of 

such tax return information, data 

regarding Social Security benefits, and 

data regarding MAGI-based income as 

described in § 155.320(c)(1) of this part 

for use in the qualified individual’s 

eligibility redetermination. 

(c) Notice to qualified individual. The 

Exchange must provide a qualified 

individual with an annual 

redetermination notice including the 

following: 

(1) [Reserved] 

(2) [Reserved] 

(3) The qualified individual’s 

projected eligibility determination for 

the following year, after considering any 

updated information described in 

paragraph (b) of this section, including, 

if applicable, the amount of any advance 

payments of the premium tax credit and 

the level of any cost-sharing reductions 

or eligibility for Medicaid, CHIP or BHP. 

* * * * * 

(e) Changes reported by qualified 

individuals. (1) The Exchange must 

require a qualified individual to report 

any changes for the information listed in 

the notice described in paragraph (c) of 

this section within 30 days from the 

date of the notice. 

(2) The Exchange must allow a 

qualified individual, or an application 

filer, on behalf of the qualified 

individual, to report changes via the 

channels available for the submission of 

an application, as described in 

§ 155.405(c)(2). 

(f) Verification of reported changes. 

The Exchange must verify any 

information reported by a qualified 

individual under paragraph (e) of this 

section using the processes specified in 

§ 155.315 and § 155.320, including the 

relevant provisions in those sections 

regarding inconsistencies, prior to using 

such information to determine 

eligibility. 

(g) Response to redetermination 

notice. (1) The Exchange must require a 

qualified individual, or an application 

filer, on behalf of the qualified 

individual, to sign and return the notice 

described in paragraph (c) of this 

section. 

(2) To the extent that a qualified 

individual does not sign and return the 

notice described in paragraph (c) of this 

section within the 30-day period 

specified in paragraph (e) of this 

section, the Exchange must proceed in 

accordance with the procedures 

specified in paragraph (h)(1) of this 

section. 

(h) Redetermination and notification 

of eligibility. (1) After the 30-day period 

specified in paragraph (e) of this section 

has elapsed, the Exchange must— 

(i) Redetermine the qualified 

individual’s eligibility in accordance 

with the standards specified in 

§ 155.305 using the information 

provided to the qualified individual in 

the notice specified in paragraph (c) of 

this section, as supplemented with any 

information reported by the qualified 

individual and verified by the Exchange 

in accordance with paragraphs (e) and 

(f) of this section. 


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(ii) Notify the qualified individual in 

accordance with the requirements 

specified in § 155.310(g). 

(iii) If applicable, notify the qualified 

individual employer, in accordance 

with the requirements specified in 

§ 155.310(h). 

(2) If a qualified individual reports a 

change for the information provided in 

the notice specified in paragraph (c) of 

this section that the Exchange has not 

verified as of the end of the 30-day 

period specified in paragraph (e) of this 

section, the Exchange must redetermine 

the qualified individual’s eligibility 

after completing verification, as 

specified in paragraph (f) of this section. 

* * * * * 

(k) * * * 

(1) The Exchange must have 

authorization from a qualified 

individual to obtain updated tax return 

information described in paragraph (b) 

of this section for purposes of 

conducting an annual redetermination. 

* * * * * 

(l) Limitation on redetermination. To 

the extent that a qualified individual 

has requested an eligibility 

determination for insurance 

affordability programs in accordance 

with § 155.310(b) and the Exchange 

does not have an active authorization to 

obtain tax data as a part of the annual 

redetermination process, the Exchange 

must redetermine the qualified 

individual’s eligibility only for 

enrollment in a QHP and notify the 

enrollee in accordance with the timing 

described in paragraph (d) of this 

section. The Exchange may not proceed 

with a redetermination for insurance 

affordability programs until such 

authorization has been obtained or the 

qualified individual continues his or her 

request for an eligibility determination 

for insurance affordability programs in 

accordance with § 155.310(b). 

(m) Special rule. The Exchange must 

not redetermine a qualified individual’s 

eligibility in accordance with this 

section if the qualified individual’s 

eligibility was redetermined under this 

section during the prior year, and the 

qualified individual was not enrolled in 

a QHP through the Exchange at the time 

of such redetermination, and has not 

enrolled in a QHP through the Exchange 

since such redetermination. 

■ 72. Section 155.340 is amended by 

revising paragraphs (b) heading, (b)(1), 

and (c) to read as follows: 

§ 155.340 Administration of advance 

payments of the premium tax credit and 

cost-sharing reductions. 

* * * * * 

(b) Requirement to provide 

information related to employer 

responsibility. (1) In the event that the 

Exchange determines that an individual 

is eligible for advance payments of the 

premium tax credit or cost-sharing 

reductions based in part on a finding 

that an individual’s employer does not 

provide minimum essential coverage, or 

provides minimum essential coverage 

that is unaffordable, within the standard 

of 26 CFR 1.36B–2(c)(3)(v), or provide 

minimum essential coverage that does 

not meet the minimum value standard 

of § 156.145, the Exchange must 

transmit the individual’s name and 

taxpayer identification number to HHS. 

* * * * * 

(c) Requirement to provide 

information related to reconciliation of 

advance payments of the premium tax 

credit. The Exchange must comply with 

the requirements of 26 CFR 1.36B–5 

regarding reporting to the IRS and to 

taxpayers. 

* * * * * 

■ 73. Section 155.345 is amended by— 

■ A. Revising paragraphs (a) 

introductory text and (a)(2). 

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

paragraph (a)(4). 

■ C. Adding reserved paragraph (a)(3). 

■ D. Revising paragraphs (f) 

introductory text, (g) introductory text, 

and (g)(2) through (5). 

■ E. Adding paragraph (g)(6). 

■ F. Redesignating paragraphs (h) and 

(i) as paragraphs (i) and (j). 

■ G. Adding new paragraph (h). 

The revisions and addition read as 

follows: 

§ 155.345 Coordination with Medicaid, 

CHIP, the Basic Health Program, and the 

Pre-existing Condition Insurance Plan. 

(a) Agreements. The Exchange must 

enter into agreements with agencies 

administering Medicaid, CHIP, and the 

BHP, if a BHP is operating in the service 

area of the Exchange, as are necessary to 

fulfill the requirements of this subpart 

and provide copies of any such 

agreements to HHS upon request. Such 

agreements must include a clear 

delineation of the responsibilities of 

each agency to— 

* * * * * 

(2) Ensure prompt determinations of 

eligibility and enrollment in the 

appropriate program without undue 

delay, based on the date the application 

is submitted to or redetermination is 

initiated by the Exchange or the agency 

administering Medicaid, CHIP, or the 

BHP; 

(3) [Reserved] 

(4) Ensure compliance with 

paragraphs (c), (d), (e), and (g) of this 

section. 

* * * * * 

(f) Special rule. If the Exchange 

verifies that a tax filer’s household 

income, as defined in 26 CFR 1.36B– 

1(e), is less than 100 percent of the FPL 

for the benefit year for which coverage 

is requested, determines that the tax 

filer is not eligible for advance 

payments of the premium tax credit 

based on § 155.305(f)(2), and one or 

more applicants in the tax filer’s 

household has been determined 

ineligible for Medicaid and CHIP based 

on income, the Exchange must— 

* * * * * 

(g) Determination of eligibility for 

individuals submitting applications 

directly to an agency administering 

Medicaid, CHIP, or the BHP. The 

Exchange, in consultation with the 

agency or agencies administering 

Medicaid, CHIP, and the BHP if a BHP 

is operating in the service area of the 

Exchange, must establish procedures to 

ensure that an eligibility determination 

for enrollment in a QHP, advance 

payments of the premium tax credit, 

and cost-sharing reductions is 

performed when an application is 

submitted directly to an agency 

administering Medicaid, CHIP, or the 

BHP if a BHP is operating in the service 

area of the Exchange. Under such 

procedures, the Exchange must— 

* * * * * 

(2) Notify such agency of the receipt 

of the information described in 

paragraph (g)(1) of this section and final 

eligibility determination for enrollment 

in a QHP, advance payments of the 

premium tax credit, and cost-sharing 

reductions. 

(3) Not duplicate any eligibility and 

verification findings already made by 

the transmitting agency, to the extent 

such findings are made in accordance 

with this part. 

(4) Not request information or 

documentation from the individual 

already provided to another agency 

administering an insurance affordability 

program and included in the 

transmission of information provided on 

the application or other information 

transmitted from the other agency. 

(5) Determine the individual’s 

eligibility for enrollment in a QHP, 

advance payments of the premium tax 

credit, and cost-sharing reductions, 

promptly and without undue delay, and 

in accordance with this subpart. 

(6) Follow a streamlined process for 

eligibility determinations regardless of 

the agency that initially received an 

application. 

(h) Adherence to state decision 

regarding Medicaid and CHIP. The 

Exchange and the Exchange appeals 

entity must adhere to the eligibility 


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determination or appeals decision for 

Medicaid or CHIP made by the State 

Medicaid or CHIP agency, or the appeals 

entity for such agency. 

* * * * * 

■ 74. Section 155.350 is amended by 

revising paragraph (a)(1)(ii) to read as 

follows: 

§ 155.350 Special eligibility standards and 

process for Indians. 

(a) * * * 

(1) * * * 

(ii) Is expected to have a household 

income, as defined in 26 CFR 1.36B–1(e) 

that does not exceed 300 percent of the 

FPL for the benefit year for which 

coverage is requested. 

* * * * * 

■ 75. Section 155.400 is amended by 

adding paragraph (b)(3) to read as 

follows: 

§ 155.400 Enrollment of qualified 

individuals into QHPs. 

* * * * * 

(b) * * * 

(3) Send updated eligibility and 

enrollment information to HHS 

promptly and without undue delay, in 

a manner and timeframe as specified by 

HHS. 

* * * * * 

■ 76. Section 155.420 is amended by 

revising paragraphs (a), (b)(2), (b)(3), 

adding paragraph (b)(4), and revising 

paragraph (d) to read as follows: 

§ 155.420 Special enrollment periods. 

(a) General requirements. (1) The 

Exchange must provide special 

enrollment periods consistent with this 

section, during which qualified 

individuals may enroll in QHPs and 

enrollees may change QHPs. 

(2) For the purpose of this section, 

‘‘dependent’’, has the same meaning as 

it does in 26 CFR 54.9801–2, referring 

to any individual who is or who may 

become eligible for coverage under the 

terms of a QHP because of a relationship 

to a qualified individual or enrollee. 

(b) * * * 

(2) Special effective dates. (i) In the 

case of birth, adoption, placement for 

adoption, or placement in foster care, 

the Exchange must ensure that coverage 

is effective for a qualified individual or 

enrollee on the date of birth, adoption, 

placement for adoption, or placement in 

foster care. 

(ii) In the case of marriage, or in the 

case where a qualified individual loses 

minimum essential coverage, as 

described in paragraph (d)(1) of this 

section, the Exchange must ensure that 

coverage is effective for a qualified 

individual or enrollee on the first day of 

the following month. 

(iii) In the case of a qualified 

individual or enrollee eligible for a 

special enrollment period as described 

in paragraphs (d)(4), (d)(5), or (d)(9) of 

this section, the Exchange must ensure 

that coverage is effective on an 

appropriate date based on the 

circumstances of the special enrollment 

period, in accordance with guidelines 

issued by HHS. Such date much be 

either— 

(A) The date of the event that 

triggered the special enrollment period 

under (d)(4), (d)(5), or (d)(9) of this 

section; or 

(B) In accordance with the regular 

effective dates specified in paragraph 

(b)(1) of this section. 

(3) Option for earlier effective dates. 

Subject to the Exchange demonstrating 

to HHS that all of its participating QHP 

issuers agree to effectuate coverage in a 

timeframe shorter than discussed in 

paragraph (b)(1) or (b)(2)(ii) of this 

section, the Exchange may do one or 

both of the following for all applicable 

individuals: 

(i) For a QHP selection received by 

the Exchange from a qualified 

individual in accordance with the dates 

specified in paragraph (b)(1) or (b)(2)(ii) 

of this section, the Exchange may 

provide a coverage effective date for a 

qualified individual earlier than 

specified in such paragraphs. 

(ii) For a QHP selection received by 

the Exchange from a qualified 

individual on a date set by the Exchange 

after the fifteenth of the month, the 

Exchange may provide a coverage 

effective date of the first of the following 

month. 

(4) Advance payments of the premium 

tax credit and cost-sharing reductions. 

Notwithstanding the standards of this 

section, the Exchange must ensure that 

advance payments of the premium tax 

credit and cost-sharing reductions 

adhere to the effective dates specified in 

§ 155.330(f). 

* * * * * 

(d) The Exchange must allow a 

qualified individual or enrollee, and, 

when specified below, his or her 

dependent, to enroll in or change from 

one QHP to another if one of the 

following triggering events occur: 

(1) The qualified individual or his or 

her dependent loses minimum essential 

coverage: 

(i) In the case of a QHP 

decertification, the triggering event is 

the date of the notice of decertification 

as described in § 155.1080(e)(2); or 

(ii) In all other cases, the triggering 

event is the date the individual or 

dependent loses eligibility for minimum 

essential coverage; 

(2) The qualified individual gains a 

dependent or becomes a dependent 

through marriage, birth, adoption, 

placement for adoption, or placement in 

foster care. 

(3) The qualified individual, or his or 

her dependent, which was not 

previously a citizen, national, or 

lawfully present individual gains such 

status; 

(4) The qualified individual’s or his or 

her dependent’s, enrollment or nonenrollment in a QHP is unintentional, 

inadvertent, or erroneous and is the 

result of the error, misrepresentation, or 

inaction of an officer, employee, or 

agent of the Exchange or HHS, or its 

instrumentalities as evaluated and 

determined by the Exchange. In such 

cases, the Exchange may take such 

action as may be necessary to correct or 

eliminate the effects of such error, 

misrepresentation, or inaction; 

(5) The enrollee or, his or her 

dependent adequately demonstrates to 

the Exchange that the QHP in which he 

or she is enrolled substantially violated 

a material provision of its contract in 

relation to the enrollee; 

(6) Newly eligible or ineligible for 

advance payments of the premium tax 

credit, or change in eligibility for costsharing reductions. (i) The enrollee is 

determined newly eligible or newly 

ineligible for advance payments of the 

premium tax credit or has a change in 

eligibility for cost-sharing reductions; 

(ii) The enrollee’s dependent enrolled 

in the same QHP is determined newly 

eligible or newly ineligible for advance 

payments of the premium tax credit or 

has a change in eligibility for costsharing reductions; or 

(iii) A qualified individual or his or 

her dependent who is enrolled in an 

eligible employer-sponsored plan is 

determined newly eligible for advance 

payments of the premium tax credit 

based in part on a finding that such 

individual is ineligible for qualifying 

coverage in an eligible-employer 

sponsored plan in accordance with 26 

CFR 1.36B–2(c)(3), including as a result 

of his or her employer discontinuing or 

changing available coverage within the 

next 60 days, provided that such 

individual is allowed to terminate 

existing coverage. The Exchange must 

permit an individual who is enrolled in 

an eligible employer-sponsored plan 

and will lose eligibility for qualifying 

coverage in an eligible employersponsored plan within the next 60 days 

to access this special enrollment period 

prior to the end of his or her existing 

coverage, although he or she is not 

eligible for advance payments of the 

premium tax credit until the end of his 


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42322 Federal Register / Vol. 78, No. 135 / Monday, July 15, 2013 / Rules and Regulations 

or her coverage in an eligible employersponsored plan; 

(7) The qualified individual or 

enrollee, or his or her dependent, gains 

access to new QHPs as a result of a 

permanent move; 

(8) The qualified individual who is an 

Indian, as defined by section 4 of the 

Indian Health Care Improvement Act, 

may enroll in a QHP or change from one 

QHP to another one time per month; 

(9) The qualified individual or 

enrollee, or his or her dependent, 

demonstrates to the Exchange, in 

accordance with guidelines issued by 

HHS, that the individual meets other 

exceptional circumstances as the 

Exchange may provide; 

* * * * * 

■ 77. Section 155.430 is amended by 

revising paragraphs (b)(1), (d)(1), 

(d)(2)(iii), (d)(2)(iv), (d)(3), and by 

adding paragraph (d)(7) to read as 

follows: 

§ 155.430 Termination of coverage. 

* * * * * 

(b) * * * 

(1) Enrollee-initiated terminations. (i) 

The Exchange must permit an enrollee 

to terminate his or her coverage in a 

QHP, including as a result of the 

enrollee obtaining other minimum 

essential coverage, with appropriate 

notice to the Exchange or the QHP. 

(ii) The Exchange must provide an 

opportunity at the time of plan selection 

for an enrollee to choose to remain 

enrolled in a QHP if he or she becomes 

eligible for other minimum essential 

coverage and the enrollee does not 

request termination in accordance with 

paragraph (b)(1)(i) of this section. If an 

enrollee does not choose to remain 

enrolled in a QHP in such a situation, 

the Exchange must initiate termination 

of his or her coverage upon completion 

of the redetermination process specified 

in § 155.330. 

* * * * * 

(d) * * * 

(1) For purposes of this section— 

(i) Reasonable notice is defined as at 

least fourteen days before the requested 

effective date of termination; and 

(ii) Changes in eligibility for advance 

payments of the premium tax credit and 

cost sharing reductions, including 

terminations, must adhere to the 

effective dates specified in § 155.330(f). 

(2) * * * 

(iii) On a date on or after the date on 

which the termination is requested by 

the enrollee, subject to the 

determination of the enrollee’s QHP 

issuer, if the enrollee’s QHP issuer 

agrees to effectuate termination in fewer 

than fourteen days, and the enrollee 

requests an earlier termination effective 

date. 

(iv) If the enrollee is newly eligible for 

Medicaid, CHIP, or the BHP, if a BHP 

is operating in the service area of the 

Exchange, the last day of QHP coverage 

is the day before the individual is 

determined eligible for Medicaid, CHIP, 

or the BHP. 

(3) In the case of a termination in 

accordance with paragraph (b)(2)(i) of 

this section, the last day of QHP 

coverage is the last day of eligibility, as 

described in § 155.330(f), unless the 

individual requests an earlier 

termination effective date per paragraph 

(b)(1) of this section. 

* * * * * 

(7) In the case of a termination due to 

death, the last day of coverage is the 

date of death. 

* * * * * 

■ 78. Section 155.615 is amended by 

revising paragraph (f)(2)(i) to read as 

follows: 

§ 155.615 Verification process related to 

eligibility for exemptions. 

* * * * * 

(f) * * * 

(2) * * * 

(i) For any applicant who requests an 

exemption based on the hardship 

described in § 155.605(g)(2), the 

Exchange must verify the unavailability 

of affordable coverage through the 

procedures used to determine eligibility 

for advance payments of the premium 

tax credit, as specified in subpart D of 

this part, including the procedures 

described in § 155.315(c)(1), and the 

procedures used to verify eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan, as specified 

in § 155.320(d), except as specified in 

§ 155.615(f)(2)(ii). 

* * * * * 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 79. The authority citation for part 156 

continues to read as follows: 

Authority: Sections 1301, 1302, 1303, 

1304, 1311, 1312, 1313, 1321, 1322, 1324, 

1334, 1341, 1342, 1343, 1402, 1413, 1321, 

1322, 1331, 1332, 1334, 1341, 1342, 1343, 

1401, and 1402 of the Affordable Care Act, 

Pub. L 111–148, 124 Stat 199. 

■ 80. Section 156.270 is amended by 

revising paragraph (b) to read as follows: 

§ 156.270 Termination of coverage for 

qualified individuals. 

* * * * * 

(b) Termination of coverage notice 

requirement. If a QHP issuer terminates 

an enrollee’s coverage in accordance 

with § 155.430(b)(1)(i), (ii), or (iii), the 

QHP issuer must, promptly and without 

undue delay: 

(1) Provide the enrollee with a notice 

of termination of coverage that includes 

the termination effective date and 

reason for termination. 

(2) [Reserved] 

* * * * * 

Dated: May 28, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: May 31, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–16271 Filed 7–5–13; 11:15 am] 

BILLING CODE 4120–01–P 


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