Vol. 79 Friday, 

No. 55 March 21, 2014 

Part II 

Department of Health and Human Services 

45 CFR Parts 146, 147, 148, et al. 

Patient Protection and Affordable Care Act; Exchange and Insurance 

Market Standards for 2015 and Beyond; Proposed Rule 


sroberts on DSK5SPTVN1PROD with PROPOSALS
15808 Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 146, 147, 148, 153, 155, 

156, and 158 

[CMS–9949–P] 

RIN 0938–AS02 

Patient Protection and Affordable Care 

Act; Exchange and Insurance Market 

Standards for 2015 and Beyond 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Proposed rule. 

SUMMARY: This proposed rule addresses 

various requirements applicable to 

health insurance issuers, Affordable 

Insurance Exchanges (‘‘Exchanges’’), 

Navigators, non-Navigator assistance 

personnel, and other entities under 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). 

Specifically, the rule proposes standards 

related to product discontinuation and 

renewal, quality reporting, nondiscrimination standards, minimum 

certification standards and 

responsibilities of qualified health plan 

(QHP) issuers, the Small Business 

Health Options Program, and 

enforcement remedies in Federallyfacilitated Exchanges. It also proposes: 

A modification of HHS’s allocation of 

reinsurance contributions collected if 

those contributions do not meet our 

projections; certain changes to the 

ceiling on allowable administrative 

expenses in the risk corridors 

calculation; modifications to the way we 

calculate certain cost-sharing 

parameters so that we round those 

parameters down to the nearest $50 

increment; certain approaches we are 

considering to index the required 

contribution used to determine 

eligibility for an exemption from the 

shared responsibility payment under 

section 5000A of the Internal Revenue 

Code; grounds for imposing civil money 

penalties on persons who provide false 

or fraudulent information to the 

Exchange and on persons who 

improperly use or disclose information; 

updated standards for the consumer 

assistance programs; standards related 

to the opt-out provisions for self-funded, 

non-Federal governmental plans and the 

individual market provisions under the 

Health Insurance Portability and 

Accountability Act of 1996; standards 

for recognition of certain types of 

foreign group health coverage as 

minimum essential coverage; 

amendments to Exchange appeals 

standards and coverage enrollment and 

termination standards; and time-limited 

adjustments to the standards relating to 

the medical loss ratio program. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below no later 

than 5 p.m. on April 21, 2014. 

ADDRESSES: In commenting, please refer 

to file code CMS–9949–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–9949–P, P.O. Box 8016, Baltimore, 

MD 21244–8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–9949–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–9994 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: For 

general matters and matters related to 

Parts 146 through 148: Jacob Ackerman, 

(301) 492–4179. 

For matters related to reinsurance, 

under Part 153: Adrianne Glasgow, 

(410) 786–0686. 

For matters related to risk corridors, 

under Part 153: Jaya Ghildiyal, (301) 

492–5149. 

For matters related to noninterference with Federal law and nondiscrimination standards, and 

Navigator, non-Navigator assistance 

personnel, and certified application 

counselor program standards, under 

Part 155, subparts B and C: Joan 

Matlack, (301) 492–4223. 

For matters related to civil money 

penalties and consumer authorization 

forms, under Part 155, subpart C: Emily 

Ames, (301) 492–4246. 

For matters related to civil money 

penalties for false or fraudulent 

information or improper use of 

information, under Part 155, subpart C: 

Julia Cassidy, (301) 492–4412. 

For matters related to enrollment of a 

qualified individual, under Part 155, 

subpart E: Jack Lavelle, (410) 786–0639. 

For matters related to special 

enrollment periods and exemptions 

under Part 155, subparts D and G, and 

matters related to eligibility appeals, 

under Part 155, subparts F and H: 

Christine Hammer, (301) 492–4431. 

For matters related to the Small 

Business Health Options Program, 

under Part 155, subpart H: Christelle 

Jang, (410) 786–8438. 

For matters related to the required 

contribution percentage for affordability 

exemptions, under Part 155, subpart G: 

Ariel Novick, (301) 492–4309. 

For matters related to cost sharing, 

under Part 156, subpart B: Pat Meisol, 

(410) 786–1917. 

For matters related to quality 

standards, under Parts 155 and 156: 

Nidhi Singh Shah, (301) 492–5110. 

For matters related to minimum 

essential coverage, under Part 156, 

subpart G: Cam Clemmons, (410) 786– 

1565. 

For all other matters related to Parts 

155 and 156: Leigha Basini, (301) 492– 

4380. 


sroberts on DSK5SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 15809 

For matters related to the medical loss 

ratio program, under Part 158: Julie 

McCune, (301) 492–4196. 

SUPPLEMENTARY INFORMATION: 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

Government Printing Office. This 

database can be accessed via the 

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

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Executive Summary 

II. Background 

A. Legislative Overview 

B. Stakeholder Consultation and Input 

C. Structure of Proposed Rule 

III. Provisions of the Proposed Rule 

A. Part 146—Requirements for the Group 

Health Insurance Market 

1. HIPAA Opt-Out Provisions for Plan 

Sponsors of Self-Funded, Non-Federal 

Governmental Plans (§ 146.180) 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability and Guaranteed 

Renewability of Coverage (§§ 147.104 

and 147.106) 

a. No Effect on Other Laws 

b. Product Withdrawal and Uniform 

Modification of Coverage Exceptions to 

Guaranteed Renewability Requirements 

C. Part 148—Requirements for the 

Individual Health Insurance Market 

1. Conforming Changes to Individual 

Market Regulations (§§ 148.101 Through 

148.128) 

2. Fixed Indemnity Insurance in the 

Individual Health Insurance Market 

(§ 148.220) 

D. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment Under the Affordable Care 

Act 

1. Provisions and Parameters for the 

Transitional Reinsurance Program 

(§ 153.405) 

2. Provisions for the Temporary Risk 

Corridors Program (§ 153.500) 

E. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart B—General Standards Related to 

the Establishment of the Exchange 

a. Non-Interference With Federal Law and 

Non-Discrimination Standards 

(§ 155.120) 

2. Subpart C—General Functions of an 

Exchange 

a. Civil Money Penalties for Violations of 

Applicable Exchange Standards by 

Consumer Assistance Entities in 

Federally-Facilitated Exchanges 

(§ 155.206) 

b. Navigator, Non-Navigator Assistance 

Personnel, and Certified Application 

Counselor Program Standards 

(§§ 155.210, 155.215, and 155.225) 

c. Certified Application Counselors 

(§ 155.225) 

d. Payment of Premiums (§ 155.240) 

e. Privacy and Security of Personally 

Identifiable Information (§ 155.260) 

f. Bases and Process for Imposing Civil 

Money Penalties for Provision of False or 

Fraudulent Information to an Exchange 

or Improper Use or Disclosure of 

Information (§ 155.285) 

3. Subpart D—Exchange Functions in the 

Individual Market: Eligibility 

Determinations for Exchange 

Participation and Insurance Affordability 

Programs 

a. Verification of Eligibility for Minimum 

Essential Coverage Other Than Through 

an Eligible Employer-Sponsored Plan 

(§ 155.320) 

b. Eligibility Redetermination During a 

Benefit Year (§ 155.330) 

4. Subpart E—Exchange Functions in the 

Individual Market: Enrollment in 

Qualified Health Plans 

a. Enrollment of Qualified Individuals in a 

QHP (§ 155.400) 

b. Initial and Annual Open Enrollment 

Periods (§ 155.410) 

c. Special Enrollment Periods (§ 155.420) 

d. Termination of Coverage (§ 155.430) 

5. Subpart F—Appeals of Eligibility 

Determinations for Exchange 

Participation and Insurance Affordability 

Programs 

a. General Eligibility Appeals 

Requirements (§ 155.505) 

b. Dismissals (§ 155.530) 

c. Employer Appeals Process (§ 155.555) 

6. Subpart G—Exchange Functions in the 

Individual Market: Eligibility 

Determinations for Exemptions 

a. Required Contribution Percentage 

b. Options for Conducting Eligibility 

Determinations for Exemptions 

(§ 155.625) 

7. Subpart H—Exchange Functions: Small 

Business Health Options Program 

a. Functions of a SHOP (§ 155.705) 

b. Enrollment Periods Under SHOP 

(§ 155.725) 

c. SHOP Employer and Employee 

Eligibility Appeals Requirements 

(§ 155.740) 

8. Subpart O—Quality Standards for 

Exchanges 

a. Quality Rating System (§ 155.1400) 

b. Enrollee Satisfaction Survey System 

(§ 155.1405) 

F. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. Subpart B—Essential Health Benefits 

Package 

a. Prescription Drug Benefits (§ 156.122) 

b. Cost-Sharing Requirements (§ 156.130) 

2. Subpart C—General Functions of an 

Exchange 

a. QHP Issuer Participation Standards 

(§ 156.200) 

3. Subpart G—Minimum Essential 

Coverage 

a. Other Coverage That Qualifies as 

Minimum Essential Coverage (§ 156.602) 

b. Requirements for Recognition as 

Minimum Essential Coverage for Types 

of Coverage Not Otherwise Designated 

Minimum Essential Coverage in the 

Statute or This Subpart (§ 156.604) 

4. Subpart I—Enforcement Remedies in 

Federally-Facilitated Exchanges 

a. Available Remedies; Scope (§ 156.800) 

b. Bases and Process for Imposing Civil 

Money Penalties in Federally-Facilitated 

Exchanges (§ 156.805) 

c. Bases and Process for Decertification of 

a QHP Offered by an Issuer Through a 

Federally-Facilitated Exchange 

(§ 156.810) 

5. Subpart L—Quality Standards 

a. Establishment of Standards for HHSApproved Enrollee Satisfaction Survey 

Vendors for Use by QHP Issuers in 

Exchanges (§ 156.1105) 

b. Quality Rating System (§ 156.1120) 

c. Enrollee Satisfaction Survey (§ 156.1125) 

G. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

1. Subpart A—Disclosure and Reporting 

a. ICD–10 Conversion Expenses (§ 158.150) 

2. Subpart B—Calculating and Providing 

the Rebate 

a. MLR and Rebate Calculations in States 

With Merged Individual and Small 

Group Markets (§§ 158.211, 158.220, 

158.231) 

b. Accounting for Special Circumstances 

(§ 158.221) 

c. Distribution of de Minimis Rebates 

(§ 158.243) 

IV. Collection of Information Requirements 

A. ICRs Regarding Recertification for 

Certified Application Counselors 

(§ 155.225) 

B. ICRs Regarding Consumer Authorization 

(§§ 155.210 and 155.215) 

C. ICRs Regarding Enrollee Satisfaction & 

Marketplace Surveys (§§ 155.1200, 

156.1105, and 156.1125) 

D. ICR Regarding Quality Rating System 

(§ 156.1120) 

E. ICRs Regarding Quality Standards for 

Exchanges (§§ 155.1400 and 155.1405) 

F. ICR Regarding Medical Loss Ratio 

Requirements (§§ 158.150, 158.211, 

158.220, 158.221, 158.231, and 158.243) 


sroberts on DSK5SPTVN1PROD with PROPOSALS
15810 Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 

1The word ‘‘Exchanges’’ refers to both State 

Exchanges, also called State-based Exchanges, and 

Federally-facilitated Exchanges (FFEs). In this 

proposed rule, we use the terms ‘‘State Exchange’’ 

or ‘‘FFE’’ when we are referring to a particular type 

of Exchange. When we refer to ‘‘FFEs,’’ we are also 

referring to State Partnership Exchanges, which are 

a form of FFEs. 

2Patient Protection and Affordable Care Act; HHS 

Notice of Benefit and Payment Parameters for 2015, 

79 FR 13744 (March 11, 2014). 

G. ICRs Regarding Civil Money Penalties 

(§§ 155.206 and 155.285) 

H. ICRs regarding Fixed Indemnity Plans, 

Minimum Essential Coverage, 

Certifications of Creditable Coverage and 

HIPAA Opt-Out Election Notice, Notice 

of Discontinuation, Notice of Renewal 

(§§ 146.152, 146.180, 147.106, 148.122, 

148.220, and 156.602) 

V. Regulatory Impact Analysis 

A. Summary 

B. Executive Orders 13563 and 12866 

1. Need for Regulatory Action 

2. Summary of Impacts 

3. Anticipated Benefits, Costs and 

Transfers 

C. Regulatory Alternatives 

1. Collecting ESS Data at the Product Level 

Instead of Each Product per Metal Tier 

2. Using Medicaid CAHPS as Is Instead of 

Adding Additional and New Questions 

to the ESS 

3. Collecting QRS Data for Each Product 

per Metal Tier Instead of at the Product 

Level 

4. Using the Medicare Advantage (MA) 

CAHPS Instrument and Star System 

D. Regulatory Flexibility Act 

E. Unfunded Mandates Reform Act 

F. Federalism 

G. Congressional Review Act 

VI. Regulations Text 

Abbreviations 

Affordable Care Act The collective term for 

the Patient Protection and Affordable Care 

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

and Education Reconciliation Act of 2010 

(Pub. L. 111–152) 

AV Actuarial Value 

CAC Certified Application Counselor 

CAHPS® Consumer Assessment of 

Healthcare Providers and Systems 

CFR Code of Federal Regulations 

CMP Civil Money Penalty 

CMS Centers for Medicare & Medicaid 

Services 

CSR Cost-Sharing Reductions 

DSH Disproportionate Share Hospital 

EHB Essential Health Benefits 

ERISA Employee Retirement Income 

Security Act of 1974 (Pub. L. 93–406) 

ESS Enrollee Satisfaction Survey 

FFE Federally-facilitated Exchange 

FF–SHOP Federally-facilitated Small 

Business Health Options Program 

FQHC Federally Qualified Health Center 

HHS United States Department of Health 

and Human Services 

HIPAA Health Insurance Portability and 

Accountability Act of 1996 (Pub. L. 104– 

191) 

IRS Internal Revenue Service 

MLR Medical Loss Ratio 

NAIC National Association of Insurance 

Commissioners 

OMB Office of Management and Budget 

OPM United States Office of Personnel 

Management 

PHS Act Public Health Service Act 

PRA Paperwork Reduction Act of 1995 

PSO Patient Safety Organization 

QHP Qualified health plan 

QRS Quality Rating System 

SHOP Small Business Health Options 

Program 

The Code Internal Revenue Code of 1986 

URL Uniform Resource Locator 

I. Executive Summary 

Since January 1, 2014, qualified 

individuals and small employers have 

been able to obtain private health 

insurance through Affordable Insurance 

Exchanges, or ‘‘Exchanges’’ (also known 

as Health Insurance Marketplaces, or 

‘‘Marketplaces’’).1 The Exchanges 

provide competitive marketplaces 

where individuals and small employers 

can compare available private health 

insurance options on the basis of price, 

quality, and other factors. The 

Exchanges help enhance competition in 

the health insurance market, improve 

choice of affordable health insurance, 

and give small businesses the same 

purchasing power as large businesses. 

Individuals who enroll in qualified 

health plans (QHPs) through individual 

market Exchanges may be eligible to 

receive premium tax credits to make 

health insurance purchased through an 

Exchange more affordable and costsharing reductions that lower out-ofpocket expenses for health care services. 

The premium tax credits, combined 

with the new insurance reforms, will 

significantly increase the number of 

individuals with health insurance 

coverage. Premium stabilization 

programs—risk adjustment, reinsurance, 

and risk corridors—protect against 

adverse selection in the newly enrolled 

population. These programs, in 

combination with the medical loss ratio 

program and market reforms extending 

guaranteed availability (also known as 

guaranteed issue) protections, 

prohibiting the use of factors such as 

health status, medical history, gender, 

and industry of employment to set 

premium rates, will help to ensure that 

every American has access to high 

quality, affordable health insurance. 

This proposed rule would address 

various requirements applicable to 

health insurance issuers, Exchanges, 

Navigators, non-Navigator assistance 

personnel, and other entities under the 

Affordable Care Act. Specifically, the 

rule proposes standards related to 

product discontinuation and renewal, 

quality reporting, non-discrimination 

standards, minimum certification 

standards and responsibilities of 

qualified health plan (QHP) issuers, the 

Small Business Health Options Program, 

and enforcement remedies in Federallyfacilitated Exchanges. It also proposes: 

A modification of HHS’s allocation of 

reinsurance contributions collected if 

those contributions do not meet our 

projections; certain changes to the 

ceiling on allowable administrative 

expenses in the risk corridors 

calculation; modifications to the way we 

calculate certain cost-sharing 

parameters so that we round those 

parameters down to the nearest $50 

increment; certain approaches we are 

considering to index the required 

contribution used to determine 

eligibility for an exemption from the 

shared responsibility payment under 

section 5000A of the Internal Revenue 

Code; grounds for imposing civil money 

penalties on persons who provide false 

or fraudulent information to the 

Exchange and on persons who 

improperly use or disclose information; 

updated standards for the consumer 

assistance programs; standards related 

to the opt-out provisions for self-funded, 

non-Federal governmental plans and the 

individual market provisions under the 

Health Insurance Portability and 

Accountability Act of 1996; standards 

for recognition of certain types of 

foreign group health coverage as 

minimum essential coverage; 

amendments to Exchange appeals 

standards and coverage enrollment and 

termination standards; and time-limited 

adjustments to the standards relating to 

the medical loss ratio program. Nearly 

all of these proposed policies were 

described in the preamble to the final 

rule titled, HHS Notice of Benefit and 

Payment Parameters for 2015, published 

on March 11, 2014 (79 FR 13744) (2015 

Payment Notice).2

Product Withdrawal and Uniform 

Modification of Coverage Exceptions to 

Guaranteed Renewability Requirements: 

Under sections 2702 and 2703 of the 

Public Health Service Act (PHS Act), as 

added by the Affordable Care Act, 

health insurance issuers in the group 

and individual markets must guarantee 

the availability and renewability of 

coverage unless an exception applies. In 

this proposed rule, we propose criteria 

for determining when modifications 

made by an issuer to the health 

insurance coverage for a product would 

and would not constitute the 

discontinuation of an existing product 

and the creation of a new product. We 

also propose that issuers use standard 

consumer notices in a format designated 

by the Secretary when discontinuing or 

renewing a product in the group or 


sroberts on DSK5SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 15811 

3FAQs about Affordable Care Act 

Implementation (Part XVIII) and Mental Health 

Parity Implementation, Q11 (January 9, 2014). 

Available at: http://www.cms.gov/CCIIO/Resources/ 

Fact-Sheets-and-FAQs/aca_implementation_

faqs18.html and http://www.dol.gov/ebsa/faqs/faqaca18.html. 

4Amendments to the HIPAA opt-out provision 

(formerly section 2721(b)(2) of the Public Health 

Service Act) made by the Affordable Care Act 

(September 21, 2010). Available at: http://

www.cms.gov/CCIIO/Resources/Files/Downloads/

opt_out_memo.pdf. 

individual market. Additionally, we 

propose to clarify that the guaranteed 

availability and renewability 

requirements should not be construed to 

supersede other provisions of Federal 

law in certain circumstances. 

Conforming Changes to Individual 

Market Provisions: Sections 2741 

through 2744 of the PHS Act were 

added by HIPAA to improve the 

portability and continuity of coverage in 

the individual health insurance market. 

These provisions are implemented 

through regulations in 45 CFR Part 148. 

In this proposed rule, we propose to 

amend the individual market provisions 

in Part 148 to reflect the amendments 

made by the Affordable Care Act. These 

amendments are for clarity only. 

Fixed Indemnity Insurance in the 

Individual Market: Consistent with 

previously released guidance, we 

propose to amend the criteria for fixed 

indemnity insurance to be treated as an 

excepted benefit in the individual 

health insurance market.3 The proposed 

amendments would eliminate the 

requirement that individual fixed 

indemnity insurance must pay on a perperiod basis (as opposed to a per-service 

basis), and instead require, among other 

things, that it be sold only as secondary 

to other health coverage that is 

minimum essential coverage to be 

considered an excepted benefit. 

HIPAA Opt-Out for Self-Funded, NonFederal Governmental Plans: Prior to 

enactment of the Affordable Care Act, 

sponsors of self-funded, non-Federal 

governmental plans were permitted to 

elect to exempt those plans from (‘‘opt 

out of’’) certain provisions of title XXVII 

of the PHS Act. Consistent with 

previously released guidance, we 

propose amendments to the non-Federal 

governmental plan regulations (45 CFR 

146.180) to reflect the amendments 

made by the Affordable Care Act to 

these provisions.4

Premium Stabilization Programs: The 

Affordable Care Act establishes three 

premium stabilization programs—risk 

adjustment, reinsurance, and risk 

corridors—to protect against adverse 

selection. The goal of the permanent 

risk adjustment program is to mitigate 

the impacts of possible adverse 

selection and stabilize the premiums in 

the individual and small group markets 

as and after insurance market reforms 

are implemented. The Affordable Care 

Act also directs that a transitional 

reinsurance program be established in 

each State to help stabilize premiums 

for coverage by helping to pay the cost 

of treating high-cost enrollees in the 

individual market from 2014 through 

2016. 

Both the reinsurance and risk 

adjustment programs are subject to the 

fiscal year 2015 sequestration. The risk 

adjustment and reinsurance programs 

will be sequestered at a rate of 7.3 

percent in fiscal year 2015. The Federal 

government’s 2015 fiscal year begins on 

October 1, 2014. HHS, in coordination 

with the OMB, has determined that, 

pursuant to section 256(k)(6) of the 

Balanced Budget and Emergency Deficit 

Control Act of 1985 as amended, and 

the underlying authority for these 

programs, funds that are sequestered in 

fiscal year 2015 from the reinsurance 

and risk adjustment programs will 

become available for payment to issuers 

in fiscal year 2016 without further 

Congressional action. HHS is still 

working through operational questions 

regarding the structure and timing of 

these payments, but aims to make 

payments of sequestered fiscal year 

2015 funding for the reinsurance and 

risk adjustment programs, which would 

have otherwise been paid in the summer 

of 2015, as soon as practicably possible 

in fiscal year 2016, which begins on 

October 1, 2015. Should Congress fail to 

enact deficit reduction that replaces the 

Joint Committee reductions, these 

programs would be sequestered in 

future fiscal years, and any sequestered 

funding would become available in the 

fiscal year following that in which it 

was sequestered. 

In this proposed rule, we solicit 

feedback on potential revisions to the 

allocation of reinsurance contributions 

collected and we suggest an approach 

such that the contributions collected 

under that program are allocated first to 

the reinsurance pool and administrative 

expenses, and second to the U.S. 

Treasury. In addition, we invite 

comment on alternative allocation 

approaches to maximize the premium 

stabilization benefits of the program. 

We also propose changing the limit on 

allowable administrative costs to 22 

percent and the limit on profits to 5 

percent in the risk corridors calculation, 

in recognition of the ongoing 

uncertainty and changes in the market 

in 2015; we expect to implement this 

change in a budget neutral way. 

Exchange Establishment and QHP 

Issuer Standards: The rule proposes 

amending oversight standards regarding 

QHP decertification and CMPs. It also 

proposes that QHP issuers provide 

enrollees with an annual notice of 

coverage changes. This rule proposes a 

process for survey vendors to appeal an 

HHS decision not to approve its 

application to become an enrollee 

satisfaction survey (ESS) vendor, as well 

as standards for revoking HHS-approval 

of ESS vendors. Finally, it proposes 

standards for the ESS and quality rating 

system (QRS) related to the display of 

such information by Exchanges and the 

submission of validated data by QHP 

issuers. 

We propose to align the start of 

annual employer election periods in all 

SHOPs for plan years beginning in 2015 

with the start of open enrollment in the 

corresponding individual market 

Exchange for the 2015 benefit year and 

to eliminate the 30-day minimum time 

frames for the employer and employee 

annual election periods. We also 

propose to allow State departments of 

insurance to recommend that, in 2015, 

a SHOP not provide employers with the 

option of selecting a level of coverage as 

described in section 1302(d)(1) of the 

Affordable Care Act, and making all 

QHPs at that level of coverage available 

to their employees if making that option 

available would result in significant 

adverse selection in the State’s small 

group market resulting in market 

disruptions that could not be addressed 

by the premium stabilization programs 

or single risk pool, or if there would be 

insufficient issuers of qualified health 

plans or qualified stand-alone dental 

plans to allow for meaningful choice 

among plans. We propose to allow the 

opportunity for a person appealing a 

determination of SHOP eligibility to 

withdraw an appeal by telephone, if the 

appeals entity is capable of accepting 

telephonic signatures. 

Civil Money Penalties for False 

Information or Improper Use of 

Information: The proposed rule 

specifies the grounds for imposing civil 

money penalties on persons who 

provide false or fraudulent information 

to the Exchange and on persons who use 

or disclose information in violation of 

section 1411(g) of the Affordable Care 

Act. The grounds for imposing a penalty 

include: negligent failure to provide 

correct information, knowing and 

willful provision of false or fraudulent 

information, and knowing and willful 

use or disclosure of information in 

violation of section 1411(g). This section 

proposes the factors used to determine 

the amount of the CMP to be imposed 

against a person. The section also 

provides for the requirements for 

notices which must be provided to a 


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5See CCIIO Sub-Regulatory Guidance: Process for 

Obtaining Recognition as Minimum Essential 

Coverage (October 31, 2013). Available at: http://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/mec-guidance-10-31- 

2013.pdf. 

person if HHS proposes to impose a 

CMP, and the processes a person may 

follow should the person wish to 

challenge HHS’ determination that a 

CMP should be imposed, including a 

process pursuant to which a person may 

request a hearing before an 

administrative law judge. We also 

propose to amend current privacy and 

security regulations at 45 CFR 155.260 

to reference the new CMP provisions 

associated with knowingly and willfully 

using or disclosing information in 

violation of section 1411(g) of the 

Affordable Care Act. 

Civil Money Penalties for Consumer 

Assistance Entities: The proposed rule 

would provide that HHS may impose 

CMPs against Navigators, non-Navigator 

assistance personnel, certified 

application counselor designated 

organizations, and certified application 

counselors in FFEs, if these entities and/ 

or individuals violate Federal 

requirements applicable to their 

activities. 

Navigator, Non-Navigator Assistance 

Personnel, and Certified Application 

Counselor Program Standards: In this 

proposed rule, we propose to specify 

certain types of State laws applicable to 

Navigators, non-Navigator assistance 

personnel, and certified application 

counselors that HHS considers to 

conflict with or prevent the application 

of the provisions of title I of the 

Affordable Care Act within the meaning 

of section 1321(d) of the Affordable Care 

Act. We would also make several 

changes to update the standards 

applicable to these consumer assistance 

entities and individuals, such as 

prohibiting them from specified 

marketing or solicitation activities. We 

propose to require Navigators and nonNavigator assistance personnel to obtain 

authorization before accessing a 

consumer’s personally identifiable 

information and to prohibit them from 

charging consumers for their services. 

We also propose to require that certified 

application counselors be recertified on 

at least an annual basis, and propose to 

prohibit certified application counselors 

and certified application counselor 

designated organizations from receiving 

consideration, directly or indirectly, 

from health insurance issuers or stop 

loss insurance issuers in connection 

with the enrollment of consumers in 

QHPs or non-QHPs. We further propose 

that, in specific circumstances, certified 

application counselor designated 

organizations can serve targeted 

populations without violating the broad 

non-discrimination requirement related 

to Exchange functions. 

Indexing of Cost-Sharing 

Requirements: Under § 156.130(a), the 

annual limitation on cost sharing and 

the annual limitation on deductibles in 

the small group market for years after 

2014 are to be indexed by the premium 

adjustment percentage. We established 

our methodology for calculating the 

premium adjustment percentage in the 

2015 Payment Notice. In this rule, we 

propose calculating these limitations 

based on the premium adjustment 

percentage by rounding down to the 

nearest $50 increment. 

Required Contribution Percentage: 

Under section 5000A of the Code, an 

applicable individual must maintain 

minimum essential coverage for each 

month, qualify for an exemption, or 

make a shared responsibility payment. 

An individual may qualify for an 

exemption from the shared 

responsibility payment if the amount 

that he or she would be required to pay 

towards minimum essential coverage 

(required contribution) exceeds a 

particular percentage (the required 

contribution percentage) of his or her 

household income. Under section 

5000A of the Code, the required 

contribution percentage for 2014 is 8 

percent, and for each plan year 

beginning in a calendar year after 2014, 

the percentage, as determined by the 

Secretary of Health and Human Services 

(the Secretary), that reflects the excess 

of the rate of premium growth between 

the preceding calendar year and 2013 

over the rate of income growth for the 

same period. In this preamble to this 

proposed rule, we describe issues 

related to possible methodologies for 

determining the percentage reflecting 

the excess of the rate of premium 

growth over the rate of income growth 

for plan years after 2014. 

Eligibility Appeals: This rule proposes 

to amend standards related to eligibility 

appeals provisions in subparts F and H 

of Part 155. To facilitate the efficient 

conclusion of an appeal at the request 

of the appellant, we propose to amend 

the withdrawal procedure to permit 

withdrawals made via telephonic 

signature. 

Minimum Essential Coverage: On 

October 31, 2013, we published 

guidance indicating that certain types of 

foreign group health coverage are 

recognized as minimum essential 

coverage.5 In this proposed rule, we 

propose amendments codifying the 

treatment of foreign group coverage as 

described in the October 31, 2013 

guidance. We also clarify that entities 

other than plan sponsors (for example, 

issuers) can apply for their coverage to 

be recognized as minimum essential 

coverage, pursuant to the process 

outlined in 45 CFR 156.604 and 

guidance thereunder. 

Medical Loss Ratio: The MLR program 

created pursuant to the Affordable Care 

Act generally requires issuers to rebate 

a portion of premiums if their MLR fails 

to meet the applicable MLR standard in 

a State and market for the applicable 

reporting year. An issuer’s MLR is the 

ratio of claims plus quality 

improvement activities to premium 

revenue, with the premium adjusted by 

the amounts paid for taxes, licensing 

and regulatory fees, and the premium 

stabilization programs. On December 1, 

2010, we published an interim final rule 

entitled ‘‘Health Insurance Issuers 

Implementing Medical Loss Ratio (MLR) 

Requirements under the Patient 

Protection and Affordable Care Act’’ (75 

FR 74864), which established standards 

for the MLR program. Since then, we 

have made several revisions and 

technical corrections to those rules. In 

this proposed rule, we propose to 

modify the timeframe for which issuers 

can include their ICD–10 conversion 

costs in their MLR calculation. We also 

propose to modify the regulation to 

clarify how issuers would calculate 

MLRs and rebates in States that require 

the individual and small group markets 

to be merged. We note that the 

standards for ICD–10 conversion costs 

and merged markets would also apply to 

the risk corridors program. Further, we 

propose to modify the regulation to 

account for the special circumstances of 

the issuers affected by the CMS 

November 2013 transitional policy and 

the issuers impacted by systems 

challenges during the implementation of 

the Exchanges. We also propose to 

amend the requirements for distribution 

of de minimis rebates. 

II. Background 

A. Legislative Overview 

The Patient Protection and Affordable 

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

on March 23, 2010. The Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152), which amended and 

revised several provisions of the Patient 

Protection and Affordable Care Act, was 

enacted on March 30, 2010. In this 

proposed rule, we refer to the two 

statutes collectively as the ‘‘Affordable 

Care Act.’’ 

The Affordable Care Act reorganizes, 

amends, and adds to the provisions of 

title XXVII of the PHS Act relating to 

group health plans and health insurance 


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6Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health 

Plans; Exchange Standards for Employers; Final 

Rule, 77 FR 18310 (Mar. 27, 2012) (to be codified 

at 45 CFR parts 155, 156, & 157). 

7Section 1321(c) of the Affordable Care Act 

erroneously cites to section 2736(b) of the PHS Act 

instead of 2723(b) of the PHS Act. This was clearly 

a typographical error, and we have interpreted 

section 1321(c) of the Affordable Care Act to 

incorporate section 2723(b) of the PHS Act. 

issuers in the group and individual 

markets. 

Section 1201 of the Affordable Care 

Act added sections 2702 and 2703 of the 

PHS Act. Section 2702 of the PHS Act 

generally requires an issuer that offers 

health insurance coverage in the 

individual or group market in a State to 

offer coverage to and accept every 

individual or employer in the State that 

applies for such coverage. Section 2703 

of the PHS Act generally requires an 

issuer to renew or continue in force 

coverage in the group or individual 

market at the option of the plan sponsor 

or the individual. 

Prior to enactment of the Affordable 

Care Act, HIPAA amended the PHS Act 

to improve access to individual health 

insurance coverage for certain eligible 

individuals who previously had group 

coverage, and to guarantee the 

renewability of all coverage in the 

individual market. These reforms were 

added as sections 2741 through 2744 of 

the PHS Act. 

HIPAA also added PHS Act 

provisions permitting sponsors of selffunded, non-Federal governmental 

plans to elect to exempt those plans 

from (‘‘opt out of’’) certain provisions of 

title XXVII of the PHS Act. This election 

was authorized under section 2721(b)(2) 

of the PHS Act, which is now 

designated as section 2722(a)(2) of the 

PHS Act by the Affordable Care Act. 

Section 2718 of the PHS Act, as added 

by the Affordable Care Act, generally 

requires health insurance issuers to 

submit an annual MLR report to HHS 

and provide rebates to consumers if they 

do not achieve specified MLRs. 

Sections 2722 and 2763 of the PHS 

Act, as implemented in 45 CFR 

146.145(b) and 148.220, provide that the 

requirements of parts A and B of title 

XXVII of the PHS Act shall not apply to 

any individual coverage or any group 

health plan (or group health insurance 

coverage) in relation to its provision of 

excepted benefits. Excepted benefits are 

described in section 2791(c) of the PHS 

Act. One category of excepted benefits, 

called ‘‘noncoordinated excepted 

benefits,’’ includes coverage for only a 

specified disease or illness, and hospital 

indemnity or other fixed indemnity 

insurance. Benefits in this category are 

excepted only if they meet certain 

conditions specified in the statute and 

regulations. 

Section 1302(c) of the Affordable Care 

Act establishes an annual limitation on 

cost sharing and an annual limitation on 

deductibles in the small group market 

for 2014, and provides that those 

limitations are to be increased for each 

year after 2014 by the percentage by 

which the average per capita premium 

for health insurance coverage in the 

United States for the preceding year 

exceeds the average per capita premium 

for 2013. Under section 1302(c), those 

limitations are to be rounded to the next 

lowest multiple of $50. 

Section 1311(b) of the Affordable Care 

Act provides that each State has the 

opportunity to establish an Exchange 

that: (1) Facilitates the purchase of 

insurance coverage by qualified 

individuals through QHPs; (2) provides 

for the establishment of a SHOP 

designed to assist qualified employers 

in the enrollment of their qualified 

employees in QHPs; and (3) meets other 

requirements specified in the Affordable 

Care Act. 

Section 1311(c)(3) of the Affordable 

Care Act requires the Secretary to 

develop a rating system to rate QHPs 

offered through an Exchange on the 

basis of quality and price. Section 

1311(c)(4) of the Affordable Care Act 

directs the Secretary to establish an ESS 

system that would evaluate the level of 

enrollee satisfaction of members in 

QHPs offered through an Exchange, for 

each QHP with more than 500 enrollees 

in the previous year. Sections 1311(c)(3) 

and 1311(c)(4) of the Affordable Care 

Act further require an Exchange to 

provide information to individuals and 

employers from the rating and ESS 

systems on the Exchange’s Web site. We 

have already promulgated regulations in 

45 CFR 155.200(d) that direct Exchanges 

to oversee implementation of ESSs and 

ratings of health care quality and 

outcomes, and 45 CFR 156.200(b)(5) 6

that directs QHP issuers that participate 

in Exchanges to report health care 

quality and outcomes information and 

to implement an ESS consistent with 

the Affordable Care Act. 

Sections 1311(d)(4)(K) and 1311(i) of 

the Affordable Care Act direct all 

Exchanges to establish a Navigator 

program. 

Section 1321(a) of the Affordable Care 

Act provides broad authority for the 

Secretary to establish standards and 

regulations to implement the statutory 

requirements related to Exchanges, 

QHPs and other components of title I of 

the Affordable Care Act. Section 

1321(a)(1) directs the Secretary to issue 

regulations that set standards for 

meeting the requirements of title I of the 

Affordable Care Act with respect to, 

among other things, the establishment 

and operation of Exchanges. Section 

1321(a)(2) requires the Secretary to 

engage in consultation to ensure 

balanced representation among 

interested parties. 

Section 1321 of the Affordable Care 

Act provides for State flexibility in the 

operation and enforcement of Exchanges 

and related requirements. Section 

1321(d) provides that nothing in title I 

of the Affordable Care Act shall be 

construed to preempt any State law that 

does not prevent the application of title 

I of the Affordable Care Act. Section 

1311(k) specifies that Exchanges may 

not establish rules that conflict with or 

prevent the application of regulations 

promulgated by the Secretary. 

Section 1321(c)(1) requires the 

Secretary of HHS (referred to throughout 

this rule as the Secretary) to establish 

and operate an FFE within States that 

either: (1) Did not elect to establish an 

Exchange; or (2) as determined by the 

Secretary, did not have any required 

Exchange operational by January 1, 

2014. 

Section 1321(c)(2) of the Affordable 

Care Act provides that the provisions of 

section 2723(b) of the PHS Act 7 shall 

apply to the enforcement under section 

1321(c)(1) of requirements of section 

1321(a)(1), without regard to any 

limitation on the application of those 

provisions to group health plans. 

Section 2723(b) of the PHS Act 

authorizes the Secretary to impose 

CMPs as a means of enforcing the 

individual and group market reforms 

contained in Part A of title XXVII of the 

PHS Act when, in the Secretary’s 

determination, a State fails to 

substantially enforce these provisions. 

Section 1341 of the Affordable Care 

Act requires the establishment of a 

transitional reinsurance program in each 

State to help pay the cost of treating 

high-cost enrollees in the individual 

market from 2014 through 2016. Section 

1342 of the Affordable Care Act directs 

the Secretary to establish a temporary 

risk corridors program that provides for 

the sharing in gains or losses resulting 

from inaccurate rate setting from 2014 

through 2016 between the Federal 

government and certain participating 

health plans. 

Section 1411(f)(1) of the Affordable 

Care Act provides that the Secretary, in 

consultation with the Secretary of the 

Treasury, the Secretary of Homeland 

Security, and the Commissioner of 

Social Security, shall establish 

procedures by which the Secretary or 

one of such other Federal officers hears 

and makes decisions with respect to 


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8Request for Information Regarding Health Care 

Quality for Exchanges: http://www.gpo.gov/fdsys/

pkg/FR-2012-11-27/pdf/2012-28473.pdf. 

9Request for Domains, Instruments, and 

Measures for Development of a Standardized 

Instrument for Use in Public Reporting of Enrollee 

Satisfaction With Their Qualified Health Plan and 

Exchange: http://www.gpo.gov/fdsys/pkg/FR-2012- 

06-21/html/2012-15162.htm. 

10Patient Protection and Affordable Care Act; 

Exchanges and Qualified Health Plans, Quality 

Rating System (QRS) Framework, Measures and 

Methodology; Notice with Comment, 78 FR 69418 

(Nov. 19, 2013). 

appeals of any determination under 

subsection (e) and redetermines 

eligibility on a periodic basis in 

appropriate circumstances. Section 

1411(f)(2) of the Affordable Care Act 

provides that the Secretary shall 

establish a separate appeals process for 

employers who are notified under 

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

Care Act that the employer may be 

liable for a tax imposed by section 

4980H of the Internal Revenue Code of 

1986 (the Code) with respect to an 

employee because of a determination 

that the employer does not provide 

minimum essential coverage through an 

employer-sponsored plan or that the 

employer does provide that coverage but 

it is not affordable coverage with respect 

to an employee. 

Section 1411(h) of the Affordable Care 

Act sets forth CMPs to which any 

person may be subject if that person 

provides inaccurate information as part 

of an Exchange application or 

improperly uses or discloses an 

applicant’s information. 

Section 1501(b) of the Affordable Care 

Act added section 5000A to the Code. 

That section, as amended by the 

TRICARE Affirmation Act of 2010 (Pub. 

L. 111–159, 124 Stat. 1123) and Public 

Law 111–173 (124 Stat. 1215), requires 

nonexempt individuals to either 

maintain minimum essential coverage 

or make a shared responsibility payment 

for each month beginning in 2014. It 

also describes categories of individuals 

who may qualify for an exemption from 

the individual shared responsibility 

payment. Section 1311(d)(4)(H) of the 

Affordable Care Act specifies that the 

Exchange will, subject to section 1411 of 

the Affordable Care Act, grant 

certifications of exemption from the 

individual shared responsibility 

payment specified in section 5000A of 

the Code. Standards relating to these 

provisions were established in IRS 

regulations titled, Shared Responsibility 

Payment for Not Maintaining Minimum 

Essential Coverage Final Rule published 

in the August 30, 2013 Federal Register 

(78 FR 53646) (IRS Minimum Essential 

Coverage Final Rule) and HHS 

regulations titled, Exchange Functions: 

Eligibility for Exemptions; 

Miscellaneous Minimum Essential 

Coverage Provisions Final Rule 

published in the July 1, 2013 Federal 

Register (78 FR 39494) (HHS Minimum 

Essential Coverage Final Rule). 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders 

on policies related to the operation of 

Exchanges, including the SHOP and the 

premium stabilization programs. HHS 

has held a number of listening sessions 

with consumers, providers, employers, 

health plans, the actuarial community, 

and State representatives to gather 

public input. HHS consulted with 

stakeholders through regular meetings 

with the National Association of 

Insurance Commissioners (NAIC), 

regular contact with States through the 

Exchange Establishment grant and 

Exchange Blueprint approval processes, 

technical health care quality 

measurement experts, health care 

survey development experts, and 

meetings with Tribal leaders and 

representatives, health insurance 

issuers, trade groups, consumer 

advocates, employers, and other 

interested parties. In addition, HHS 

received public comment on various 

notices published in the Federal 

Register relating to health care quality 

in the Exchanges,8 enrollee experience 

measures and domains,9 and the quality 

rating system, which provided valuable 

feedback on quality reporting and 

quality rating requirements.10 We 

considered all of the public input as we 

developed the policies in this proposed 

rule. 

C. Structure of Proposed Rule 

The regulations outlined in this 

proposed rule would be codified in 45 

CFR parts 146, 147, 148, 153, 155, 156, 

and 158. Part 146 outlines the group 

health insurance market requirements of 

the PHS Act added by HIPAA and other 

laws, including guaranteed renewability 

standards and opt-out provisions for 

sponsors of self-funded, non-Federal 

governmental plans. Part 147 outlines 

health insurance reform requirements 

for the group and individual markets 

added by the Affordable Care Act, 

including standards related to 

guaranteed availability and guaranteed 

renewability of coverage. Part 148 

outlines the individual health insurance 

market requirements of the PHS Act 

added by HIPAA and other laws, 

including standards related to 

guaranteed availability with respect to 

certain eligible individuals and 

guaranteed renewability for all 

individuals. Part 153 outlines standards 

related to reinsurance program and risk 

corridors programs. Part 155 outlines 

standards related to the operations and 

functions of an Exchange, including 

standards related to non-discrimination, 

accessibility, and enforcement remedies; 

standards applicable to the consumer 

assistance functions performed by 

Navigators, non-Navigator assistance 

personnel, and certified application 

counselors; standards related to 

eligibility appeals; standards related to 

exemptions; standards related to quality 

reporting; and standards related to 

SHOP. Part 156 outlines health 

insurance issuer responsibilities, 

including the methodology for 

calculating the annual limit on costsharing and deductibles for years after 

2014; minimum certification standards; 

standards for recognition of certain 

types of foreign group health coverage 

as minimum essential coverage; quality 

standards for QHPs; and other QHP 

issuer responsibilities. Part 158 outlines 

standards related to the medical loss 

ratio program, including standards 

related to treatment of ICD–10 

conversion costs, standards related to 

adjustments for issuers affected by the 

November 2013 CMS transitional policy 

and issuers that incurred costs due to 

the technical problems during the 

implementation of the Exchanges, 

standards related to MLR reporting and 

rebate calculations in States with 

merged individual and small group 

markets, and standards related to 

distribution of de minimis rebates. 

III. Provisions of the Proposed Rule 

A. Part 146—Requirements for the 

Group Health Insurance Market 

1. HIPAA Opt-Out Provisions for Plan 

Sponsors of Self-Funded, Non-Federal 

Governmental Plans (§ 146.180) 

Prior to enactment of the Affordable 

Care Act, sponsors of self-funded, nonFederal governmental plans were 

permitted to elect to exempt those plans 

from (‘‘opt out of’’) certain provisions of 

title XXVII of the PHS Act. This election 

was authorized under section 2721(b)(2) 

of the PHS Act. Sponsors of those plans 

could elect to opt out of all or any of the 

following title XXVII requirement 

categories: 

1. Limitations on preexisting 

condition exclusion periods under 

section 2701 of the PHS Act 

(redesignated as section 2704 by the 

Affordable Care Act). 

2. Requirements for special 

enrollment periods under section 2701 

of the PHS Act (redesignated as section 

2704 by the Affordable Care Act). 

3. Prohibitions against discriminating 

against individual participants and 

beneficiaries based on health status (but 


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11Amendments to the HIPAA opt-out provision 

(formerly section 2721(b)(2) of the Public Health 

Service Act) made by the Affordable Care Act 

(September 21, 2010). Available at: http://

www.cms.gov/CCIIO/Resources/Files/Downloads/

opt_out_memo.pdf. 

12See List of HIPAA Opt-Out Elections for SelfFunded Non-Federal Governmental Plans. 

Available at: http://www.cms.gov/CCIIO/Resources/ 

Files/Downloads/hipaa-nfgp-list-7-9-2013.pdf. 

13 ‘‘Continue in force’’ means that the issuer 

maintains the same policy form that the plan 

sponsor or individual purchased. 

not including provisions added by the 

Genetic Information Nondiscrimination 

Act of 2008) under 2702 of the PHS Act 

(redesignated as section 2705 by the 

Affordable Care Act). 

4. Standards relating to benefits for 

newborns and mothers under section 

2704 of the PHS Act (redesignated as 

section 2725 by the Affordable Care 

Act). 

5. Parity in the application of certain 

limits to mental health and substance 

use disorder benefits (including 

requirements of the Mental Health 

Parity and Addiction Equity Act of 

2008) under section 2705 of the PHS Act 

(redesignated as section 2726 by the 

Affordable Care Act). 

6. Required coverage for 

reconstructive surgery following 

mastectomies under section 2706 of the 

PHS Act (redesignated as section 2727 

of the PHS Act). 

7. Coverage of dependent students on 

a medically necessary leave of absence 

under section 2707 of the PHS Act 

(redesignated as section 2728 by the 

Affordable Care Act). 

The Affordable Care Act made a 

number of changes, with the result that 

sponsors of self-funded, non-Federal 

governmental plans can no longer opt 

out of as many requirements of title 

XXVII. First, PHS Act section 2721 was 

redesignated as section 2722. The new 

section 2722(a)(2) no longer allows a 

sponsor of a self-funded, non-Federal 

governmental plan to exempt that plan 

from the first 3 requirement categories 

listed above, but may continue to 

exempt the plan from requirement 

categories 4 through 7. 

In response to the Affordable Care Act 

amendments, HHS issued guidance on 

September 21, 2010 indicating that, for 

plan years beginning on or after 

September 23, 2010, plan sponsors of 

non-collectively bargained plans can 

only elect to be exempt from provisions 

4–7 and that provisions 1–3 are no 

longer available for exemption.11 Group 

health plans maintained pursuant to a 

collective bargaining agreement that was 

ratified before March 23, 2010, and that 

has been exempted from any of the first 

3 requirement categories listed above, 

would not have to come into 

compliance with those provisions until 

the commencement of the first plan year 

following the expiration of the last plan 

year governed by the collective 

bargaining agreement. Because of the 

timing of the guidance, HHS elected not 

to take any enforcement actions with 

respect to opt-out elections for plan 

years beginning prior to April 1, 2011 

on the provisions 1–3. 

We propose to revise the provisions of 

§ 146.180 to reflect the amendments of 

the Affordable Care Act and the 

September 21, 2010 guidance. While the 

proposed rule restates the current rule 

in the procedures for filing an opt-out 

election with CMS, the following 

revisions are being proposed primarily 

to reflect the Affordable Care Act 

amendments: identification of PHS Act 

provisions subject to the opt-out 

election as noted above; deletion of 

references to the notice of creditable 

coverage requirement since that 

requirement has been superseded; and 

the deletion of examples referencing 

provisions that are no longer available 

for opt-out elections. 

Additionally, we propose to replace 

the address for submitting the election 

documents with language indicating 

that opt-out elections must be submitted 

in an electronic format as specified by 

the Secretary in guidance. We believe 

that electronic submissions will be 

easier and more efficient for both the 

plan sponsors and for CMS to track the 

submissions. We welcome comments on 

improving the election process in order 

for elections to be submitted 

electronically. Until the issuance of 

final regulations, elections will be 

accepted via U.S. Mail or facsimile. The 

current address for the submission, as 

noted on the CMS/CCIIO Web site, is 

Centers for Medicare & Medicaid 

Services (CMS), Center for Consumer 

Information and Insurance Oversight 

(CCIIO), Attn: HIPAA Opt-Out, 200 

Independence Avenue SW., Room 

733H–02, Washington, DC 20201. 

Elections can also be submitted via 

facsimile at 301–492–4462. Questions 

regarding the opt-out process can be 

submitted to CMS at HIPAAOptOut@

cms.hhs.gov. CMS makes publicly 

available on its Web site a list of selffunded, non-Federal governmental 

plans that have submitted an opt-out 

election and the PHS Act provisions 

subject to the election.12

The proposed rule would clarify that 

plan sponsors of self-funded, nonFederal governmental plans offering 

health coverage subject to a collectively 

bargained agreement that was ratified 

before March 23, 2010 can continue to 

be exempt from any of the 7 original 

provisions for which a timely election 

was filed with CMS until the expiration 

of the last plan year subject to the 

agreement. 

These proposed amendments would 

generally become applicable upon the 

effective date of the final rule. 

Comments are welcome on the proposed 

revisions and on any aspect of the 

proposed rule, including the provisions 

unchanged from the current regulation. 

Finally, we note that some plan 

administrators have been submitting 

one opt-out election to CMS for multiple 

group health plans. While this is 

permitted for plans subject to the same 

collective bargaining agreement, single 

elections have been received for 

multiple plans not under a collective 

bargaining agreement. The current 

regulations expressly require a separate 

election for each group health plan not 

subject to collective bargaining. We 

request comments on whether the 

regulation should be modified to allow 

a single opt-out submission for multiple 

group health plans not subject to 

collective bargaining. We are also 

considering requiring, as part of the optout election document, that sponsors of 

plans subject to a collective bargaining 

agreement be required to list all plans 

subject to the agreement. We welcome 

comments on this proposal. 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Guaranteed Availability and 

Guaranteed Renewability of Coverage 

(§§ 147.104 and 147.106) 

a. No Effect on Other Laws 

Section 2702 of the PHS Act generally 

requires a health insurance issuer that 

offers health insurance coverage in the 

individual or group market in a State to 

offer coverage to and accept every 

individual or employer in the State that 

applies for coverage. Section 2703 of the 

PHS Act generally requires a health 

insurance issuer to renew or continue in 

force 13 coverage in the group or 

individual market at the option of the 

plan sponsor or the individual. These 

sections are implemented by regulations 

at 45 CFR 147.104 and 147.106, 

respectively. They apply to health plans 

offered both through and outside of an 

Exchange. 

There are several exceptions to these 

requirements. In addition to statutorily 

specified exceptions set forth in sections 

2702 and 2703 of the PHS Act, other 

Federal laws restrict the products that 

are available to certain individuals. For 

example, section 1882(d) of the Social 


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14Although the Affordable Care Act creates a 

limited exception to the guaranteed availability 

requirements for qualified individuals purchasing 

coverage through an Exchange, if an individual 

declines or is ineligible to enroll through an 

Exchange and seeks enrollment directly with the 

issuer, issuers of coverage subject to the guaranteed 

availability requirements of section 2702 of the PHS 

Act must accept every individual in the State that 

applies for such coverage unless an exception 

applies. 

15See Fourco Glass Co. v. Transmirra Products 

Corp., 353 U.S. 222, 228 (1957) (citations omitted) 

(providing that, ‘‘However inclusive may be the 

general language of a statute, it will not be held to 

apply to a matter specifically dealt with in another 

part of the same enactment.’’ The same principle is 

used to resolve conflict between two statutes. See 

also, e.g., United States v. Estate of Romani, 523 

U.S. 517, 532 (1998) (later, more specific statute 

governs). See also Morton v. Mancari, 417 U.S. 535, 

550–51 (1974) (a general statute will not be held to 

have repealed by implication a more specific one 

unless there is ‘‘clear intention otherwise’’). 

16See PHS Act sections 2703 (applicable to nongrandfathered health plans in the group and 

individual markets), section 2712 as codified prior 

to enactment of the Affordable Care Act (applicable 

to grandfathered health plans in the group market), 

and section 2742 (applicable to both grandfathered 

and non-grandfathered health plans in the 

individual market), as implemented in 45 CFR 

146.152, 147.106, and 148.122. 

17While the Affordable Care Act amended section 

2703 of the PHS Act to generally apply to health 

insurance issuers in the group and individual 

markets, the uniform modification of coverage 

exception in section 2703(d) of the PHS Act 

addresses only the large and small group markets. 

Section 2742 of the PHS Act and the regulations at 

§ 148.122(g) contain parallel provisions allowing for 

the uniform modification of coverage in the 

individual market. For ease of reference and to 

facilitate compliance, we propose to add a 

provision in § 147.106(e)(1) reiterating the uniform 

modification of coverage exception for nongrandfathered coverage in the individual market. 

Security Act establishes an antiduplication provision that makes it 

unlawful for an issuer to knowingly sell 

to an individual entitled to benefits 

under Medicare part A or enrolled 

under Medicare part B an individual 

health insurance policy that duplicates 

Medicare benefits; sections 1311(d)(2) 

and 1312(f) of the Affordable Care Act 

limit access of an individual market 

QHP offered through an Exchange to 

citizens and lawful residents; 14 and 

section 1302(e) of the Affordable Care 

Act provides that only individuals 

under age 30, and individuals who are 

certified as exempt from the 

requirement to maintain minimum 

essential coverage based on lack of 

affordable coverage or hardship, are 

eligible to enroll in catastrophic plans. 

Consistent with the canons of statutory 

construction, which provide that 

specific statutory language ordinarily 

trumps conflicting general language,15

the guaranteed availability and 

renewability requirements are 

subordinated to these and other Federal 

law requirements limiting access to 

coverage. As a result, issuers of coverage 

subject to specific Federal statutes that 

conflict with PHS Act sections 2702 and 

2703 could deny enrollment or 

reenrollment in coverage where doing 

otherwise is contrary to law. 

We propose to amend the guaranteed 

availability and renewability regulations 

to codify this interpretation in 

regulation text. We propose to add new 

paragraph (h) in § 147.104 providing 

that nothing in the guaranteed 

availability requirements should be 

construed to require an issuer to offer 

coverage where other Federal laws 

operate to prohibit the issuance of such 

coverage. Similarly, we propose to 

redesignate paragraphs (g) and (h) as (h) 

and (i), and add new paragraph (g) in 

§ 147.106 providing that nothing in the 

guaranteed renewability requirements 

should be construed to require an issuer 

to renew or continue in force coverage 

for which continued eligibility would 

otherwise be prohibited under 

applicable Federal law. We believe that 

these regulatory changes are consistent 

with current market practice and will 

cause no disruption in the health 

insurance market. We solicit comment 

on these and other clarifications that 

may be helpful. We note that only 

Federal laws, not State laws, can create 

exceptions to the Federal guaranteed 

availability and renewability 

requirements. 

We also note that, due to a formatting 

error in the interim final rule with 

comment period titled, Patient 

Protection and Affordable Care Act; 

Maximizing January 1, 2014 Coverage 

Opportunities (78 FR 76212), the 

regulation text at § 147.104(b)(1)(i) 

contains a duplicate reference to the 

SHOP regulation at § 155.725. We 

propose to correct the duplicate 

reference in this proposed rule, and to 

make other minor regulatory revisions 

in this paragraph for clarity. 

b. Product Withdrawal and Uniform 

Modification of Coverage Exceptions to 

Guaranteed Renewability Requirements 

The PHS Act provisions enacted by 

HIPAA and the Affordable Care Act 

require health insurance issuers to 

guarantee the renewal of coverage 

unless at least one of several listed 

exceptions applies.16 One exception to 

the guaranteed renewability 

requirements permits an issuer to cease 

offering a particular product in a market 

and to discontinuing existing blocks of 

business with respect to that product 

(product withdrawal). This may be 

done, in accordance with State law, 

provided certain other requirements are 

met. The PHS Act also provides for 

issuers, only at the time of coverage 

renewal, to modify the health insurance 

coverage for a product offered to a group 

health plan or an individual in the 

individual market, if the modification is 

consistent with State law and effective 

uniformly for all group health plans or 

individuals with that product (uniform 

modification of coverage). The law 

contemplates that a uniform 

modification does not alter a 

policyholder’s right to renewability, and 

that such modifications do not in effect 

result in the termination of the existing 

policy under the product withdrawal 

rules. 

In this proposed rule, we propose 

standards defining whether certain 

modifications to a policy would 

constitute ‘‘uniform modifications’’ 

within the meaning of the PHS Act, or 

would constitute the withdrawal of the 

existing product and the creation of a 

new product. These provisions would 

be codified in each of the guaranteed 

renewability regulations at 45 CFR 

146.152, 147.106, and 148.122, and 

would therefore apply to both 

grandfathered and non-grandfathered 

coverage in the group and individual 

markets.17

Definition of Uniform Modification of 

Coverage 

We propose that a modification made 

solely pursuant to applicable Federal or 

State law would be considered a 

modification of coverage rather than a 

product withdrawal. These 

modifications could include changes 

required to comply with Affordable Care 

Act standards (such as elimination of a 

prohibited annual limit) and changes 

permitted based on updated standards 

(such as increasing an annual limitation 

on cost sharing based on the annual 

increase in the limit permitted as a 

result of the application of the premium 

adjustment percentage). Additionally, 

we propose that if an issuer makes 

changes to the health insurance 

coverage for a product that are not 

pursuant to applicable Federal or State 

law, the modifications would constitute 

a uniform modification of coverage for 

purposes of the guaranteed renewability 

requirements under the PHS Act if the 

product that has been modified meets 

all of the following criteria: 

• The product is offered by the same 

health insurance issuer (within the 

meaning of section 2791(b)(2) of the 

PHS Act); 

• The product is offered as the same 

product type (e.g., preferred provider 

organization (PPO) or health 

maintenance organization (HMO)); 

• The product covers a majority of the 

same counties in its service area; 


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18Whether an issuer is considered to offer the 

same product for purposes of this proposal is 

unrelated to and would not determine whether a 

plan maintains status as a grandfathered health plan 

under section 1251 of the Affordable Care Act and 

its implementing regulations. 26 CFR 54.9815– 

1251T, 29 CFR 2590.715–1251, and 45 CFR 

147.140. 

19Patient Protection and Affordable Care Act; 

Health Insurance Market Rules; Rate Review, 78 FR 

13406 (February 27, 2013). 

20Standard Notices When Discontinuing or 

Renewing a Particular Product in the Group or 

Individual Market (March 14, 2014). Available at: 

http://www.cms.gov/CCIIO/Resources/Files/

Downloads/draft-notice-renewal-discontinuationbulletin-3-14-2014.pdf. 

• The product has the same costsharing structure, except for variation in 

cost sharing solely related to changes in 

cost and utilization of medical care, or 

to maintain the same level of coverage 

described in sections 1302(d) and (e) of 

the Affordable Care Act (e.g., bronze, 

silver, gold, platinum or catastrophic); 

and 

• The product provides the same 

covered benefits, except for changes in 

benefits that cumulatively impact the 

rate for the product by no more than 2 

percent (not including changes required 

by applicable Federal or State law). 

Under this proposal, if an issuer 

modifies the coverage for a product and 

the resulting product is consistent with 

the above criteria, the issuer would be 

considered under the PHS Act to have 

made a uniform modification of 

coverage and therefore not to have 

withdrawn the product from that 

market. Conversely, if an issuer 

modifies the coverage for a product in 

a manner that results in a product that 

differs from the above criteria, the issuer 

would be considered to have changed 

the coverage to such extent that the 

issuer has withdrawn the existing 

product and created a new product.18

These criteria, if finalized, would 

establish minimum Federal standards 

determining whether coverage 

modifications constitute the 

continuance of an existing product in a 

market within a State for products 

offered both through and outside of an 

Exchange. We believe these proposed 

standards will minimize unnecessary 

terminations of coverage, ensuring 

predictability and continuity for 

consumers, while reasonably providing 

issuers the flexibility to make necessary 

adjustments to coverage. 

We recognize that some States may 

have different definitions of what 

changes to a health insurance product 

constitute modifications and what 

changes constitute withdrawals and refilings of new products. The definitions 

proposed here would preempt any 

conflicting State definitions. We 

acknowledge that the guaranteed 

renewability sections of the PHS Act 

provide that a uniform modification of 

coverage must, among other things, be 

‘‘consistent with State law.’’ We 

interpret this statutory language as 

governing the extent or type of 

modifications that may legally be made 

under State law. As discussed in the 

preamble to the final rule published on 

February 27, 2013 under section 2703 of 

the PHS Act (78 FR 13419), State laws 

that prevent issuers from uniformly 

modifying coverage to comply with 

Federal law requirements would, in 

effect, prevent the application of such 

requirements and therefore be 

preempted.19 Accordingly, under the 

approach we are proposing, States 

would have the flexibility to apply 

additional criteria that broaden the 

scope of what would be considered a 

uniform modification, but not narrow its 

scope. 

We request comment on all aspects of 

this proposal. 

Standard Consumer Notices When 

Discontinuing or Renewing a Product in 

the Group or Individual Market 

To reduce confusion and ensure 

consumers receive clear, accurate, and 

consistent information about their 

coverage options, we are also proposing 

standard notice requirements when 

issuers discontinue or renew coverage 

in the group and individual markets. 

First, under the current regulations, 

issuers electing to discontinue offering a 

particular product in a market must 

provide to each plan sponsor or 

individual provided that product (and 

to all participants and beneficiaries 

covered under such coverage) at least 90 

calendar days’ notice of the 

discontinuation in writing. We propose 

that, to satisfy this requirement, the 

issuer must provide notice ‘‘in a form 

and manner specified by the Secretary.’’ 

Second, we propose to establish a 

new notice requirement when issuers 

provide the option to renew coverage, 

including a renewal of coverage with 

modifications. We propose the issuer in 

this situation must provide written 

notice of the renewal to each plan 

sponsor in the small or large group 

market and to each individual 

policyholder in the individual market 

(as applicable). We propose this notice 

must also be provided in a form and 

manner specified by the Secretary. 

We request comment on these 

proposals. Concurrently with the 

issuance of this proposed rule, we are 

publishing four draft notices in 

guidance that would be required to be 

used when issuers elect to discontinue 

or renew a product, consistent with the 

above discussion.20 We solicit 

comments on the draft notices as 

described in the guidance. 

Rate Review 

Section 2794 of the PHS Act, and 

regulations at 45 CFR Part 154, establish 

a process whereby CMS or the 

applicable State will review rate 

increases of health insurance coverage 

that meet or exceed specified thresholds 

to determine if the rate increases are 

unreasonable. It has come to our 

attention, however, that some issuers 

may attempt to avoid review of rate 

increases by withdrawing a product(s) 

offered in the individual or small group 

market in a State and re-filing the 

product(s) as a ‘‘new’’ product(s) the 

following year. Under § 154.102, a ‘‘rate 

increase’’ is defined as ‘‘any increase of 

the rates for a specific product offered 

in the individual or small group 

market,’’ and a ‘‘product’’ is defined as 

‘‘a package of health insurance coverage 

benefits with a discrete set of rating and 

pricing methodologies that a health 

insurance issuer offers in a State.’’ 

CMS intends to apply the criteria 

outlined above regarding product 

discontinuation and renewal to 

determine whether the rate filing is 

subject to review under 45 CFR Part 

154. Specifically, if an issuer withdraws 

a product in a market in a State and, 

within a 12-month period, reintroduces 

a product in that market with 

modifications of the discontinued 

product that do not differ from the 

above criteria, we would consider the 

issuer to be continuing to offer the same 

‘‘product’’ within the meaning of that 

term under § 154.102. As such, the rate 

filing for the product would be subject 

to the annual review of rate increases of 

health insurance coverage should it 

meet or exceed the specified thresholds 

to determine if the rate increase is 

unreasonable. CMS will consider 

compliance with the proposed criteria 

to constitute compliance with PHS Act 

section 2794 until this rulemaking is 

finalized. 

We request comment on whether this 

clarification, or a cross-reference to the 

proposed definition of a uniform 

modification of coverage in § 147.106 of 

this proposed rule, should be added to 

Part 154. 

C. Part 148—Requirements for the 

Individual Health Insurance Market 

1. Conforming Changes to Individual 

Market Regulations (§§ 148.101 through 

148.128) 

The Health Insurance Portability and 

Accountability Act of 1996 (HIPAA), 


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21The Affordable Care Act adds section 715(a)(1) 

of ERISA and section 9815(a)(1) of the Code to 

incorporate the provisions of part A of title XXVII 

of the PHS Act, including section 2704 of the PHS 

Act, into ERISA and the Code, and to make them 

applicable to group health plans and health 

insurance issuers providing health insurance 

coverage in connection with group health plans. 

22PHS Act section 2704 applies to grandfathered 

and non-grandfathered group health plans and 

group health insurance coverage, and nongrandfathered individual health insurance coverage. 

It does not apply to grandfathered individual health 

insurance coverage. For more information on 

grandfathered health plans, see section 1251 of the 

Affordable Care Act and its implementing 

regulations at 26 CFR 54.9815–1251T, 29 CFR 

2590.715–1251, and 45 CFR 147.140. 

23See Ninety-Day Waiting Period Limitation and 

Technical Amendments to Certain Health Coverage 

Requirements Under the Affordable Care Act, 78 FR 

10296 (February 24, 2014). 

24See Questions and Answers Related to Health 

Insurance Market Rules, Q2. Available at: http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/qa_hmr.html. 

25See FAQs about Affordable Care Act 

Implementation (Part XI), Q7, available at http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs11.html and http://

www.dol.gov/ebsa/faqs/faq-aca11.html. 

Public Law 104–191, was enacted in 

1996 to provide for, among other things, 

improved portability and continuity of 

coverage in both the group and 

individual health insurance markets. 

Section 111 of HIPAA added sections 

2741 through 2744 of the PHS Act to 

improve availability and renewability in 

the individual market. HIPAA also 

added provisions of the Code, the 

Employee Retirement Income Security 

Act of 1974 (ERISA), and the PHS Act 

governing the group health insurance 

market and group health plan coverage 

provided in connection with 

employment. These provisions 

permitted limited exclusions of 

coverage under certain circumstances 

based on preexisting conditions. 

The individual health insurance 

market provisions of HIPAA are 

implemented in 45 CFR Part 148. These 

provisions guarantee the availability of 

individual health insurance coverage 

without preexisting condition 

exclusions for certain eligible 

individuals who lose group health 

insurance coverage; require issuance of 

certificates of creditable coverage; 

guarantee the renewability of individual 

health insurance coverage for all 

individuals; and set forth procedures for 

States that choose to implement an 

alternative mechanism under State law 

with respect to guaranteed availability 

for eligible individuals. 

The Affordable Care Act added a new 

section 2704 of the PHS Act, which 

renumbered and amended the HIPAA 

requirements relating to preexisting 

condition exclusions.21 In general, the 

new PHS Act section 2704 provides that 

a group health plan and a health 

insurance issuer offering group or 

individual health insurance coverage 

may not impose any preexisting 

condition exclusions. Section 2704 and 

the regulations under that section are 

generally effective for plan years (in the 

individual market, policy years) 

beginning on or after January 1, 2014, 

but for enrollees under the age of 19, the 

prohibition became effective for plan 

years (in the individual market, policy 

years) beginning on or after September 

23, 2010.22

This proposed rule would make 

conforming amendments to the 

individual market provisions contained 

in Part 148 by removing provisions 

concerning preexisting condition 

exclusions that are superseded by new 

section 2704 of the PHS Act. These 

amendments would generally become 

applicable upon the effective date of the 

final rule. However, the proposed 

amendment to eliminate the 

requirement to issue certificates of 

creditable coverage is proposed to apply 

December 31, 2014, so that individuals 

needing to offset a preexisting condition 

exclusion under a group health plan 

that will become subject to the 

prohibition on preexisting condition 

exclusions starting with a plan year 

beginning on December 31, 2014, would 

still have access to the certificate for 

proof of coverage until that time. These 

proposed amendments are consistent 

with rulemaking amending the group 

market regulations under HIPAA 23 and 

with previously released guidance 

addressing the maintenance of State 

alternative mechanisms.24

We solicit comment on this proposal. 

2. Fixed Indemnity Insurance in the 

Individual Health Insurance Market 

(§ 148.220) 

Pursuant to PHS Act sections 

2722(c)(2), 2763(b) and 2791(c)(3)(B), 

insurance that pays a fixed amount 

under specified conditions without 

regard to other insurance (‘‘fixed 

indemnity insurance’’) is considered to 

be an excepted benefit, exempt from 

many of the provisions of title XXVII of 

the PHS Act for the group and 

individual markets, if it meets all of the 

following conditions: (1) The benefits 

are be provided under a separate policy, 

certificate or contract of insurance; (2) 

there is no coordination between the 

provision of such benefits and any 

exclusion of benefits under any group 

health plan maintained by the same 

plan sponsor; and (3) such benefits are 

paid with respect to an event without 

regard to whether benefits are provided 

with respect to such event under any 

group health plan maintained by the 

same plan sponsor. 

These statutory requirements are 

reflected in regulations at 45 CFR 

146.145(b)(4) and 148.220(b)(3). In 

addition, under § 146.145(b)(4), 

incorporated through § 148.220(b)(3), 

benefits of fixed indemnity insurance in 

the group and individual markets must 

be paid on a fixed amount basis without 

regard to the cost of the item or service 

and can only be paid on a per-period 

basis as opposed to on a per-service 

basis in order to be treated as an 

excepted benefit. 

The primary reason fixed indemnity 

insurance is considered to be an 

excepted benefit if it meets the statutory 

and regulatory criteria is that its primary 

purpose is not to provide major medical 

coverage but to provide a cashreplacement benefit for those 

individuals with other health coverage. 

Since the issuance of the regulations, 

however, various situations have come 

to the attention of HHS, the Department 

of Labor, and the Department of the 

Treasury (the Departments) where a 

health insurance policy is advertised as 

fixed indemnity coverage but pays a 

fixed amount based not on a period of 

time, but if a particular service is 

received. For example, the fixed 

indemnity coverage pays a fixed $50 per 

visit for doctors’ visits, or $100 for a day 

of hospitalization, different fixed dollar 

amounts for other various surgical 

procedures, and/or a fixed $15 per 

prescription without regard to cost. In 

all cases, these fixed amounts are paid 

under these policies without regard to 

costs, and without regard to other 

insurance payments that may cover the 

same services. In such circumstances, 

the fixed payments for doctors’ visits, 

surgery, and prescription drugs are not 

made not on a per-period basis, but 

instead based on the type of procedure 

or item, such as the surgery or doctor 

visit actually performed or the drug 

prescribed, and the amount of payment 

varies widely based on the type of 

surgery or the cost of the drug. Because 

these payments are not based on a 

‘‘fixed dollar amount per day (or per 

other period),’’ such a policy is not an 

excepted benefit under the current 

regulations. 

The Departments issued a frequently 

asked question (FAQ) on January 24, 

2013 affirming that under the current 

regulations, for fixed indemnity 

insurance to be an excepted benefit, 

payment based on an event must be 

paid on a per-period basis as opposed to 

on a per-service basis.25 While the FAQ 

only addressed fixed indemnity 

insurance sold in the group health 


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26Fixed indemnity plans paying fixed amounts 

per service that meet these requirements to be 

excepted benefits do not qualify as permitted 

insurance that can be provided in addition to a 

High Deductible Health plan to an eligible 

individual under section 223(c)(3) of the Code. The 

statutory language for permitted hospitalization 

insurance specifically refers to ‘‘insurance paying a 

fixed amount per day (or other period) of 

hospitalization’’ rather than ‘‘hospital indemnity or 

other fixed indemnity insurance.’’ 

27FAQs about Affordable Care Act 

Implementation (Part XVIII) and Mental Health 

Parity Implementation, Q11 (January 9, 2014). 

Available at: http://www.cms.gov/CCIIO/Resources/ 

Fact-Sheets-and-FAQs/aca_

implementation_faqs18.html and http:// 

www.dol.gov/ebsa/faqs/faq-aca18.html. 

28See CMS Insurance Standards Bulletin 08–01 

(available at http://www.cms.gov/CCIIO/Resources/ 

Files/Downloads/hipaa_08_01_508.pdf); the 

Department of Labor’s Employee Benefits Security 

Administration’s Field Assistance Bulletin No. 

2007–04 (available at http://www.dol.gov/ebsa/pdf/ 

fab2007-4.pdf); and Internal Revenue Service 

Notice 2008–23 (available at http://www.irs.gov/irb/ 

2008-07_IRB/ar09.html). 

insurance market, the same analysis also 

applies to fixed indemnity insurance 

sold in the individual health insurance 

market, as noted above. 

Since the issuance of the January 24, 

2013 FAQ, however, stakeholders have 

expressed concerns over the distinction 

made under the current regulations 

between payment on a per-period basis 

(which is permitted) and payment on a 

per-service basis (which is not 

permitted). State insurance regulators 

indicated that they have for years been 

approving policies as fixed indemnity 

insurance that pay on a per-service basis 

and treating such coverage as an 

excepted benefit. In an August 27, 2013 

letter to the Secretaries of the 

Departments on behalf of the National 

Association of Insurance Commissioners 

(NAIC), it was stated that ‘‘state 

regulators believe hospital and other 

fixed indemnity coverage with variable 

fixed amounts based on service types 

could provide important options for 

consumers as supplemental coverage. 

Consumers who purchase major medical 

coverage that meets the definition of 

‘minimum essential coverage’ may still 

want to buy fixed indemnity coverage to 

help meet out-of-pocket medical and 

other costs.’’ Industry groups 

representing health insurance issuers 

have also expressed similar concerns. 

Based on the feedback from 

stakeholders and the fact that, starting 

in 2014, most individuals are required 

to have minimum essential coverage in 

order to satisfy the individual shared 

responsibility requirement under 

section 5000A of the Code, CMS agrees 

that it is appropriate to revise the 

current regulatory criteria for individual 

market fixed indemnity coverage to be 

treated as an excepted benefit by (1) 

eliminating the current requirement that 

payment be made on a per-period basis 

and not on a per-service basis, and (2) 

among other things, imposing a new 

requirement that fixed indemnity 

insurance be sold only as secondary to 

other health coverage that meets the 

definition of minimum essential 

coverage.26

On January 9, 2014, the Departments 

published an FAQ stating that, ‘‘HHS 

intends to propose amendments to 45 

CFR 148.220(b)(3) that would allow 

fixed indemnity coverage sold in the 

individual health insurance market to 

be considered to be an excepted benefit 

if it meets the following conditions: (1) 

It is sold only to individuals who have 

other health coverage that is minimum 

essential coverage within the meaning 

of section 5000A(f) of the Code; (2) there 

is no coordination between the 

provision of benefits and an exclusion 

of benefits under any other health 

coverage; (3) the benefits are paid in a 

fixed dollar amount regardless of the 

amount of expenses incurred and 

without regard to the amount of benefits 

provided with respect to an event or 

service under any other health coverage; 

and (4) a notice is displayed 

prominently in the plan materials 

informing policyholders that the 

coverage does not meet the definition of 

minimum essential coverage and will 

not satisfy the individual responsibility 

requirements of section 5000A of the 

Code.’’ 27 The FAQ further provided 

that, ‘‘Until HHS finalizes this 

rulemaking related to these proposed 

amendments, HHS will treat fixed 

indemnity coverage in the individual 

market as excepted benefits for 

enforcement purposes if it meets the 

conditions above in States where HHS 

has direct enforcement authority. For 

States with primary enforcement 

authority, HHS encourages those States 

to also treat this coverage as an excepted 

benefit and will not consider that a State 

is not substantially enforcing the 

individual market requirements merely 

because it does so.’’ 

Consistent with the January 9, 2014 

FAQ, we are proposing the following 

revised criteria for fixed indemnity 

insurance to be treated as an excepted 

benefit in the individual health 

insurance market: (1) The benefits are 

provided only to individuals who have 

other health coverage that is minimum 

essential coverage within the meaning 

of section 5000A(f) of the Code; (2) there 

is no coordination between the 

provision of benefits and an exclusion 

of benefits under any other health 

coverage; (3) the benefits are paid in a 

fixed dollar amount per day of 

hospitalization or illness or per service 

(for example, $100/day or $50/visit) 

regardless of the amount of expenses 

incurred and without regard to the 

amount of benefits provided with 

respect to the event or service under any 

other health coverage; and (4) a notice 

is displayed prominently in the plan 

materials in at least 14 point type that 

has the following language: ‘‘THIS IS A 

SUPPLEMENT TO HEALTH 

INSURANCE AND IS NOT A 

SUBSTITUTE FOR MAJOR MEDICAL 

COVERAGE. LACK OF MAJOR 

MEDICAL COVERAGE (OR OTHER 

MINIMUM ESSENTIAL COVERAGE) 

MAY RESULT IN AN ADDITIONAL 

PAYMENT WITH YOUR TAXES.’’ 

CMS is aware of at least one State law 

that requires fixed indemnity insurance 

to be sold as secondary to major medical 

insurance in order to be treated as an 

excepted benefit. We welcome 

comments on this approach including 

the language in the required notice. We 

also solicit comments on whether the 

requirement for individuals to have 

other minimum essential coverage in 

order to be sold fixed indemnity 

insurance is sufficient protection, 

especially given the fact that a group 

health plan that provides minimum 

benefits can be minimum essential 

coverage. For example, we solicit 

comment on whether to require that 

fixed indemnity insurance must only be 

sold to individuals with other health 

coverage that meets the EHB 

requirements. To meet the standard that 

fixed indemnity insurance must be sold 

on a secondary basis, an issuer of fixed 

indemnity insurance would have to be 

reasonably assured that an individual 

has obtained other health coverage that 

is minimum essential coverage. We seek 

comments on the extent of verification 

issuers should require from applicants 

to be reasonably assured that they have 

minimum essential coverage, including 

whether an attestation included in the 

application is sufficient. 

The current regulation requires fixed 

indemnity insurance to be sold under a 

separate policy, certificate or contract of 

insurance but does not require that it be 

provided by an issuer other than the 

issuer providing the major medical 

coverage to the enrollees of the fixed 

indemnity insurance. The Departments 

previously released guidance 

establishing a safe harbor under which 

supplemental health insurance coverage 

will be considered to be an excepted 

benefit.28 In the guidance, one of the 

criteria for the safe harbor is that the 

supplemental coverage has to be issued 

by an entity that does not provide the 

primary coverage under the plan in 


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order for the supplemental coverage to 

be an excepted benefit. This prevents an 

issuer from carving out certain benefits 

from its major medical coverage and 

packaging those benefits with the major 

medical coverage as a supplemental 

excepted benefit. We are considering 

adding the same protection for fixed 

indemnity insurance sold in the 

individual market and welcome 

comments on this approach. 

This proposal only addresses fixed 

indemnity insurance sold in the 

individual market. For fixed indemnity 

insurance sold in the group health 

insurance market, see the FAQ 

published by the Departments on 

January 9, 2014. 

We believe that most fixed indemnity 

products in the individual market today 

will largely satisfy these criteria and we 

welcome comment on how this proposal 

would affect existing market 

arrangements. If these proposals are 

finalized, they would apply for policy 

years beginning on or after January 1, 

2015. We welcome comments on 

whether this would provide a sufficient 

transition period. We also solicit 

comments on whether the existing 

regulatory criteria for fixed indemnity 

insurance to be an excepted benefit (as 

interpreted in our January 24, 2013 

FAQ) should instead remain in place on 

a permanent basis or at least on a 

temporary basis to ensure a sufficient 

transition that avoids market disruption. 

D. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment under the Affordable Care 

Act 

1. Provisions and Parameters for the 

Transitional Reinsurance Program 

(§ 153.405) 

The Affordable Care Act directs that 

a transitional reinsurance program be 

established in each State to help 

stabilize premiums for coverage in the 

individual market from 2014 through 

2016. In the 2014 Payment Notice and 

the 2015 Payment Notice, we expanded 

on the standards set forth in subparts C 

and E of the Premium Stabilization 

Rule, and established the reinsurance 

payment parameters and uniform 

reinsurance contribution rate for the 

2014 and 2015 benefit years. In this 

proposed rule, we solicit feedback on a 

potential revision to the allocation of 

reinsurance contributions collected for 

all benefit years such that reinsurance 

contributions collected are allocated 

first to the reinsurance payment pool 

and administrative expenses and second 

to payments to the U.S. Treasury. 

Section 1341(b)(3)(B)(iii) of the 

Affordable Care Act specifies the total 

contribution amounts to be collected 

from contributing entities for the 

reinsurance payment pool as $10 billion 

for 2014, $6 billion for 2015, and $4 

billion for 2016. Sections 

1341(b)(3)(B)(iv) and 1341(b)(4) of the 

Affordable Care Act direct the collection 

of funds for contribution to the U.S. 

Treasury in the amounts of $2 billion for 

2014, $2 billion for 2015, and $1 billion 

for 2016. Section 1341(b)(3)(B)(ii) of the 

Affordable Care Act allows for the 

collection of additional amounts for 

administrative expenses. Taken 

together, these three components make 

up the total dollar amount to be 

collected from contributing entities for 

each of the three years of the 

reinsurance program under a national 

per capita contribution rate. For 2014, to 

collect $12.02 billion, HHS set a per 

capita contribution rate of $63; for 2015, 

to collect $8.025 billion, HHS set a per 

capita contribution rate of $44. 

In the 2014 and 2015 Payment 

Notices, we provided that if total 

contributions collected for 2014 and 

2015 exceed $12.02 billion and $8.025 

billion, respectively, we would allocate 

$2 billion to the U.S. Treasury, $20.3 or 

$25.4 million, as applicable, to 

administrative expenses, and would 

allocate all remaining contributions for 

reinsurance payments, thus prioritizing 

excess contributions towards 

reinsurance contributions. Due to the 

uncertainty in our estimates of 

reinsurance contributions to be 

collected, and to help assure that the 

reinsurance payment pool is sufficient 

to provide the premium stabilization 

benefits intended by the statute, we 

propose to revise our allocation of 

reinsurance contributions collected and 

adopt a similar prioritization in the 

event that reinsurance collections fall 

short of our estimates. Specifically, if 

collections fall short of our estimates for 

a particular benefit year, we propose to 

alter the allocation so that the 

reinsurance contributions that are 

collected are allocated first to the 

reinsurance pool and administrative 

expenses, and are allocated to the U.S. 

Treasury once the targets for 

reinsurance payments and 

administrative expenses are met. For 

example, as Table 1 provides, in 2014, 

reinsurance contributions would go first 

to the reinsurance payment pool and 

administrative expenses, up to $10.02 

billion, and any additional 

contributions collected would be 

allocated to the U.S. Treasury, up to the 

total $12.02 billion. 

TABLE 1—PROPORTION OF REINSURANCE CONTRIBUTIONS COLLECTED UNDER THE UNIFORM REINSURANCE CONTRIBUTION RATE FOR THE 2014 BENEFIT YEAR FOR REINSURANCE PAYMENTS, PAYMENTS TO THE U.S. TREASURY, AND

ADMINISTRATIVE EXPENSES

Proportion or 

amount for: 

If total contribution collections under 

the 2014 uniform reinsurance contribution rate are less than or equal to 

$10.02 billion 

If total contribution collections under 

the 2014 uniform reinsurance contribution rate are more than $10.02 billion, 

but less than or equal to $12.02 billion 

If total contribution collections under 

the 2014 uniform reinsurance contribution rate are more than $12.02 billion 

Reinsurance payments.99.9 percent ($10 billion/$10.02 billion) $10 billion ............................................. Total collections less $2.02 billion 

(U.S. Treasury and administrative 

expenses). 

Payments to the 

U.S. Treasury.

0 percent .............................................. Total collections less $10.02 billion ..... $2 billion. 

Administrative expenses.0.1 percent ($20.3 million/$10.02 billion).$20.3 million ......................................... $20.3 million. 

Therefore, if we collect $11 billion 

instead of $12.02 billion for 2014, we 

propose to fully fund the reinsurance 

payment pool and administrative 

expenses, and to pay to the U.S. 

Treasury $0.98 billion. 

Similarly, for 2015, reinsurance 

contributions would go first to the 

reinsurance payment pool and 


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administrative expenses, up to $6.025 

billion, and any additional 

contributions collected would be 

allocated to the U.S. Treasury, up to the 

total $8.025 billion. 

TABLE 2—PROPORTION OF REINSURANCE CONTRIBUTIONS COLLECTED UNDER THE UNIFORM REINSURANCE CONTRIBUTION RATE FOR THE 2015 BENEFIT YEAR FOR REINSURANCE PAYMENTS, PAYMENTS TO THE U.S. TREASURY, AND

ADMINISTRATIVE EXPENSES

Proportion or 

amount for: 

If total contribution collections under 

the 2015 uniform reinsurance contribution rate are less than or equal to 

$6.025 billion 

If total contribution collections under 

the 2015 uniform reinsurance contribution rate are more than $6.025 billion, 

but less than or equal to $8.025 billion 

If total contribution collections under 

the 2015 uniform reinsurance contribution rate are more than $8.025 billion 

Reinsurance payments.99.9 percent ($6 billion/$6.025 billion) $6 billion ............................................... Total collections less $2.025 billion 

(U.S. Treasury and administrative 

expenses). 

Payments to the 

U.S. Treasury.

0 percent .............................................. Total collections less $6.025 billion ..... $2 billion. 

Administrative expenses.0.1 percent ($25.4 million/$6.025 billion).$25.4 million ......................................... $25.4 million. 

Therefore, if we collect $7 billion 

instead of $8.025 billion in 2015, we 

propose to fully fund the reinsurance 

payment pool and administrative 

expenses, and to pay to the U.S. 

Treasury $0.975 billion. 

We note that in the 2015 Payment 

Notice, we amended 45 CFR 153.405(c) 

to provide a bifurcated contribution 

collection schedule, under which 

contributing entities would submit 

reinsurance contributions via two 

payments. The first payment would 

cover the contribution amount allocated 

to reinsurance payments and 

administrative expenses; the second 

payment would cover the contribution 

amount allocated to payments to the 

U.S. Treasury for the applicable benefit 

year. In light of our proposed allocation 

policy, we note that contributions 

collected in the second collection would 

be allocated for reinsurance payments 

and administrative expenses if the first 

collection does not fully provide for the 

target reinsurance pool and 

administrative expenses. Therefore, for 

2014, if the first collection resulted in a 

total collection of $9 billion, any 

contribution collected via the second 

collection up to $1.02 billion would be 

allocated for reinsurance payments and 

administrative expenses. 

We seek comment on this allocation 

proposal, including on the legal 

authority to implement a prioritization 

of reinsurance contributions to 

reinsurance payments over payments to 

the U.S. Treasury. We also seek 

comment on the appropriate and 

permissible prioritization of reinsurance 

administrative expenses, and whether 

those expenses should have the same or 

different priority as reinsurance 

payments or payments to the U.S. 

Treasury. In addition, we seek comment 

on alternative allocation approaches to 

provide the premium stabilization 

benefits of the reinsurance program, as 

intended by the statute. 

2. Provisions for the Temporary Risk 

Corridors Program (§ 153.500) 

In the 2015 Payment Notice, we 

indicated that we would consider 

additional adjustments to the risk 

corridors program for benefit year 2015. 

We did so recognizing that issuers of 

QHPs may face additional 

administrative costs, risk pool effects, 

and uncertainty for that benefit year 

related to State extensions of renewals 

of plans that do not comply with 2014 

market reforms, including the rating 

rules, the additional time it will take to 

fully assess the risk profile of 2014 

enrollees given the six-month initial 

open enrollment period, protracted 

phase-outs of high-risk pools, and the 

scheduled decline in the reinsurance 

program payments. We also recognize 

that issuers of QHPs may face additional 

costs from other transitions to the 2014 

market rules, including the 

infrastructure requirements around 

Exchanges, and the distributed data 

collection methodology for risk 

adjustment and reinsurance. We note 

that these uncertainties will continue 

through the summer of 2014, while 

issuers are in the process of setting their 

rates for the 2015 benefit year. 

Therefore, for the 2015 benefit year, we 

are considering further adjustments to 

the risk corridors formula that would 

help to mitigate these additional 

administrative costs and uncertainties 

around operations and the risk pool, 

and to stabilize the market as it 

continues to transition to full 

compliance with Affordable Care Act 

provisions. 

We propose to implement an 

adjustment to the risk corridors formula 

set forth in subpart F of part 153 for 

each of the individual and small group 

markets by increasing the ceiling on 

allowable administrative costs 

(currently set at 20 percent, plus the 

adjustment percentage, of after-tax 

premiums). Such an adjustment could 

increase a QHP issuer’s risk corridors 

ratio if administrative expenses are 

unexpectedly high or claims costs are 

unexpectedly low, thereby increasing 

risk corridors payments or decreasing 

risk corridors charges. We propose to 

raise the administrative cost ceiling by 

2 percentage points, from 20 percent to 

22 percent. We also propose to increase 

the profit margin floor in the risk 

corridors formula (currently set at 3 

percent, plus the adjustment percentage, 

of after-tax premiums). Such an 

adjustment could increase a QHP 

issuer’s risk corridors ratio if claims 

costs are unexpectedly high, thereby 

increasing risk corridors payments or 

decreasing risk corridors charges. We 

propose to raise the profit margin floor 

by 2 percentage points, from 3 percent 

to 5 percent. 

We are proposing to implement this 

proposed increase to the administrative 

cost ceiling and profit floor in a manner 

similar to the risk corridors adjustment 

percentage set forth in the 2015 

Payment Notice. In the 2015 Payment 

Notice, we provided for an adjustment 

that would increase the administrative 

cost ceiling and profit floor in the risk 

corridors formula for QHP issuers in 

transitional States, in order to account 

for the effects of the transitional policy. 

In this proposed rule, we are proposing 

to increase the administrative cost and 

profit floor for 2015 for QHP issuers in 

every State for the reasons described 

below. 

We note that, because the risk 

corridors program applies only to 

certain plans defined to be qualified 

health plans at 45 CFR 153.500, the 

extent to which an issuer may receive 


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the full effect of this adjustment would 

depend upon the portion of an issuer’s 

individual and small group enrollees in 

plans subject to risk corridors. We 

intend to implement this program in a 

budget neutral manner, and may make 

future adjustments to program 

parameters, upwards or downwards, as 

necessary to achieve this goal. 

We are proposing that these 

adjustments apply on a national basis 

for the 2015 benefit year because we 

believe that these additional transitional 

costs and uncertainties will be faced by 

issuers in all States, not just States 

adopting the transitional policy. 

Because many of these costs and 

uncertainties are difficult to measure, 

we believe it would be difficult to 

estimate them on an issuer-by-issuer or 

State-by-State basis. Additionally, we 

believe that a national adjustment 

would be administratively simple for 

issuers. 

For example, issuers will continue to 

face administrative expenses in seeking 

to measure the extent to which issuers 

will extend renewals of plans through 

the 2015 rate-setting period. They will 

continue to accrue additional expenses 

monitoring the risk profile of 2014 

enrollees during this period, 

particularly with the protracted phaseouts of high-risk pools. And they will 

continue to face uncertainty and 

administrative costs in measuring likely 

payouts from the reinsurance program. 

These costs were not anticipated when 

we established the 20 percent ceiling on 

administrative expenses; and we believe 

that these uncertainties will be difficult 

to accommodate as part of 2015 rate 

setting. 

Although the adjustments that we are 

considering would affect each issuer 

differently, depending on its particular 

experience and administrative cost rate, 

we believe that, on average, the 

adjustment could suitably offset some of 

these increased costs. 

We also propose that the medical loss 

ratio formula not take into account any 

additional risk corridors payments 

resulting from this adjustment, under 

our authority under section 2718(c) of 

the PHS Act to ‘‘take into account the 

special circumstances of smaller plans, 

different types of plans, and newer 

plans.’’ This proposed approach is 

similar to the policy established forth in 

the 2015 Payment Notice, which 

removes the effect of the risk corridors 

adjustment percentage from an issuer’s 

MLR calculation. 

We request comment on all aspects of 

this proposal. In particular, we request 

comment on the specific administrative 

costs associated with each of these 

policies, and other types of additional 

administrative or other expenses that 

will be incurred by issuers of QHP in 

2015. We seek comment on the 

magnitude of these expenses, and 

whether these expenses could have been 

fairly estimated and included in 

premium rating. We seek comment on 

whether the administrative ceiling or 

the profit floor should be raised (or 

both), and in each case, by how much, 

to account for these costs and 

uncertainties. We also seek comment on 

alternate ways of implementing 

adjustments to the risk corridors 

program, including whether raising the 

administrative cost ceiling or raising the 

profit floor would alone be sufficient to 

help offset issuer’s unexpected 

administrative expenses. Finally, we 

seek comment on whether certain 

limitations or conditions should be 

placed on the adjustment, and whether 

the adjustment should be limited to 

certain types of plans or should apply 

only in certain States. 

E. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart B—General Standards 

Related to the Establishment of the 

Exchange 

a. Non-Interference with Federal Law 

and Non-Discrimination Standards 

(§ 155.120) 

In section 45 CFR 155.120(c), we 

established the requirement that the 

State and the Exchange, when carrying 

out the requirements of Part 155, must 

comply with any applicable nondiscrimination statutes, and must not 

discriminate on the basis of race, color, 

national origin, disability, age, sex, 

gender identity or sexual orientation. 

We stated that the non-discrimination 

provisions of § 155.120(c) apply not just 

to the Exchanges themselves, but to 

Exchange contractors and all Exchange 

activities (including but not limited to 

marketing, outreach and enrollment), 

Navigators, non-Navigator assistance 

personnel, certified application 

counselors, and organizations 

designated to certify their staff and 

volunteers as certified application 

counselors (78 FR 42829). We also 

established in 45 CFR 155.105(f) that 

this non-discrimination requirement 

applies to the Federally-facilitated 

Exchanges. 

We now propose to re-designate the 

introductory language in existing 

§ 155.120(c) as a new section 

§ 155.120(c)(1), re-designate existing 

§ 155.120(c)(1) as a new 

§ 155.120(c)(1)(i), and re-designate 

existing § 155.120(c)(2) as a new 

§ 155.120(c)(1)(ii). We are proposing to 

make these technical changes to existing 

§ 155.120(c) so that we can add a new 

paragraph (c)(2) to § 155.120 that creates 

a limited exception to the nondiscrimination provisions in existing 

§ 155.120(c)(1) and (c)(2). Under this 

proposed exception, an organization 

receiving Federal funds to provide 

services to a defined population under 

the terms of Federal legal authorities 

(for example, a Ryan White HIV/AIDS 

Program or an Indian health provider) 

that participates in the certified 

application counselor program under 45 

CFR 155.225 may limit its provision of 

certified application counselor services 

to the same defined population without 

violating the non-discrimination 

provisions in existing § 155.120(c). We 

are proposing to adopt this exception to 

the non-discrimination provisions in 

order to allow such organizations to 

provide certified application counselor 

services and assist their defined 

populations in enrolling in health 

coverage offered through the Exchanges 

consistent with the Federal legal 

authorities under which such 

organizations operate. 

To the extent that one of these 

organizations decides to take advantage 

of this exception, but is approached for 

certified application counselor services 

by an individual who is not included in 

the defined population that the 

organization serves, we propose that the 

organization must refer the individual to 

other Exchange-approved resources, 

such as the toll-free Exchange call 

center, a Navigator, non-Navigator 

assistance personnel, or another 

designated certified application 

counselor organization, that are able to 

provide assistance to the individual. 

However, to the extent that one of 

these organizations decides that it will 

not take advantage of this proposed 

exception, we propose that the nondiscrimination provisions in existing 

§ 155.120(c) would continue to apply. 

That is, if an organization decides that 

it will provide certified application 

counselor services to individuals that 

are not included in the defined 

population that it serves, it must 

provide those services to all individuals 

consistent with the non-discrimination 

provisions in existing § 155.120(c). 

2. Subpart C—General Functions of an 

Exchange 

a. Civil Money Penalties for Violations 

of Applicable Exchange Standards by 

Consumer Assistance Entities in 

Federally-Facilitated Exchanges 

(§ 155.206) 

In a new § 155.206, as part of HHS’s 

enforcement authority under section 


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29Section 1321(c)(2) of the Affordable Care Act 

erroneously cites to section 2736(b) of the PHS Act 

instead of 2723(b) of the PHS Act. This was clearly 

a typographical error, and we have therefore 

interpreted section 1321(c)(2) of the Affordable Care 

Act to incorporate section 2723(b) of the PHS Act. 

1321(c)(2) of the Affordable Care Act, 

we propose to provide for the 

imposition of civil money penalties 

(CMPs) on Navigators, non-Navigator 

assistance personnel, and certified 

application counselors and certified 

application counselor designated 

organizations in FFEs and State 

Partnership Exchanges that do not 

comply with applicable Federal 

requirements. This proposal is designed 

to deter these entities and individuals 

from failing to comply with the Federal 

requirements that apply to them, and to 

ensure that consumers interacting with 

the Exchange receive high-quality 

assistance and robust consumer 

protection. As a general principle, while 

HHS proposes to establish authority to 

assess CMPs when appropriate, 

consistent with this proposed rule, we 

note that we also intend to continue to 

work collaboratively with consumer 

assistance entities and personnel to 

prevent noncompliance issues and 

address any that may arise before they 

might rise to the level where CMP 

would be assessed. 

The Secretary, under the authority of 

sections 1311(i) and 1321(a)(1) of the 

Affordable Care Act, has previously 

established a range of consumer 

assistance programs to help consumers 

apply for and enroll in QHPs and 

insurance affordability programs 

through the Exchange. These consumer 

assistance programs include the 

Navigator program described at section 

1311(i) of the Affordable Care Act and 

45 CFR 155.210; the consumer 

assistance, outreach, and education 

functions authorized by section 

1321(a)(1) of the Affordable Care Act 

and established at 45 CFR 155.205(d) 

and (e), which can include a nonNavigator assistance personnel program; 

and the certified application counselor 

program authorized by section 

1321(a)(1) of the Affordable Care Act 

and set forth at 45 CFR 155.225. Under 

these authorities and the authority 

granted to the Secretary by section 

1321(c)(1) of the Affordable Care Act, 

the FFE has implemented a Navigator 

and certified application counselor 

program in all States that did not elect 

to establish an Exchange, and has 

implemented a non-Navigator assistance 

program in some of those States, 

through an enrollment assistance 

contract. 

Under section 1321(c)(2) of the 

Affordable Care Act, the provisions of 

section 2723(b) of the PHS Act 29 apply 

to the Secretary’s enforcement, under 

section 1321(c)(1) of the Affordable Care 

Act, of the standards established by the 

Secretary under section 1321(a)(1) of the 

Affordable Care Act for meeting the 

requirements under title I of the 

Affordable Care Act, including the 

establishment and operation of 

Exchanges, without regard to any 

limitation on the application of the 

provisions of section 2723(b) of the PHS 

Act to group health plans. Section 

2723(b) of the PHS Act provides the 

Secretary with authority to assess CMPs 

against health insurance issuers that fail 

to meet certain Federal requirements set 

forth in the PHS Act that apply to group 

health plans, in circumstances where, in 

the Secretary’s determination, the State 

that regulates the issuer has failed to 

‘‘substantially enforce’’ those 

requirements. We interpret the crossreference to section 2723(b) of the PHS 

Act in section 1321(c)(2) of the 

Affordable Care Act as providing the 

Secretary with authority to assess CMPs 

to enforce requirements established 

under section 1321(a)(1) of the 

Affordable Care Act against any entity 

subject to those requirements, under 

circumstances where the Secretary is 

exercising her authority under 

1321(c)(1) of the Affordable Care Act. 

For purposes of this proposal, we would 

consider that any State that has not 

elected to establish an Exchange, and in 

which the Secretary has therefore had to 

establish and operate an Exchange 

under section 1321(c)(1), is not 

‘‘substantially enforcing’’ the 

requirements related to Exchanges that 

the Secretary has established under 

section 1321(a)(1). 

Accordingly, HHS has the authority 

under section 1321(c)(2) of the 

Affordable Care Act to assess CMPs 

against Navigators, non-Navigator 

assistance personnel, and certified 

application counselors and certified 

application counselor designated 

organizations in FFEs, including State 

Partnership Exchanges, for violations of 

the requirements of the Navigator, nonNavigator, and certified application 

counselor programs that the Secretary 

established under section 1321(a)(1) of 

the Affordable Care Act. This proposal 

sets forth the circumstances under 

which the Secretary would exercise this 

authority. It is based on the enforcement 

scheme laid out in section 2723(b) of the 

PHS Act, and the implementing 

regulations at 45 CFR 150.301 et seq., 

but it does not follow that enforcement 

scheme exactly, in light of the 

differences between the circumstances 

in which the Secretary would exercise 

her authority under PHS Act 2723(b) 

versus those under which she would 

exercise her authority under section 

1321(c)(2) of the Affordable Care Act. 

Proposed § 155.206(a) would establish 

the scope and purpose of the proposed 

CMP provisions and explains when and 

against whom HHS would assess a CMP 

under this proposal. At § 155.206(a)(2), 

we propose that HHS could permit an 

entity or individual to whom it has 

issued a notice of assessment of CMP to 

enter into a corrective action plan 

instead of paying the CMP. We specify 

that permitting an entity to enter into a 

corrective action plan would not limit 

HHS’s authority to require payment of 

the assessed CMP if the corrective 

action plan is not followed. Under this 

proposal, the determination of whether 

HHS would enter into a corrective 

action plan in place of imposing a CMP 

would depend upon the factors 

proposed in § 155.206(h). We believe 

this approach would allow us not only 

to penalize violations if necessary, but 

also to prioritize working 

collaboratively with consumer 

assistance entities to ensure that 

improvements are made and future 

violations are prevented. We also 

believe this approach is consistent with 

the limitation on imposing CMPs that is 

set forth at PHS Act section 

2723(b)(2)(C)(iii)(II), under which no 

CMP may be assessed for violations due 

to reasonable cause and not due to 

willful neglect, if the violation is 

corrected during the 30-day period 

beginning on the first day any of the 

entities against whom the penalty 

would be assessed knew, or exercising 

reasonable diligence would have 

known, that such failure existed. 

We are considering whether to 

provide for an expedited process 

through which HHS may assess and 

impose CMPs, if extenuating 

circumstances exist or if necessary to 

protect the public. We believe HHS’s 

ability to take swift action might be 

particularly useful in cases where HHS 

permits an entity to enter into a 

corrective action plan in lieu of a CMP, 

so that the entity would promptly begin 

remedial efforts under the corrective 

action plan without undue delay. We 

are considering an expedited process 

through which HHS would provide the 

consumer assistance entity less than the 

30-day period provided for under 

proposed paragraph (e) to respond to the 

notice of investigation under proposed 

paragraph (e)(1), or possibly omit that 

period altogether. In all cases where an 

expedited process would apply, we 

anticipate that the entity against which 

a CMP is assessed would have an 


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opportunity to appeal the imposition of 

the penalty after it has been assessed. 

We seek comment on whether HHS 

should provide for such an expedited 

process and on all aspects of how it 

should be structured, including 

comments on how such an expedited 

process could provide sufficient 

protection to the public, comments on 

how such an expedited process could be 

sufficiently protective of the rights of 

entities and individuals that might be 

assessed a CMP, and comments on other 

ways through which the process for 

imposing CMPs under this proposal 

could be expedited if necessary to 

protect the public. 

We are also considering implementing 

an approach that would give the HHS 

Office of Inspector General (OIG) 

concurrent authority with CMS to 

enforce violations under this section. 

Given OIG’s expertise in investigating 

waste, fraud, and abuse in the Medicare 

and Medicaid programs, we are 

considering whether certain violations 

of an Exchange consumer assistance 

entity’s program requirements might be 

most effectively investigated by OIG, or 

whether a more streamlined approach 

with a single enforcement authority 

would be preferable. In considering 

whether OIG should have concurrent 

enforcement authority under this 

proposed section, we are considering 

whether both CMS and OIG should use 

the procedures laid out in proposed 

§ 155.206 for investigating potential 

violations and conducting 

administrative appeals, or whether and 

to what extent OIG should rely on its 

own enforcement procedures under 42 

CFR, chapter V, subchapter B for either 

the investigative process or the 

administrative appeals process, or both, 

and whether some of the procedures 

outlined in OIG’s enforcement 

procedures under those regulations 

should be incorporated into this section. 

We note that because our enforcement 

authority under section 1321(c)(2) of the 

Affordable Care Act requires 

compliance with the provisions of 

section 2723(b) of the PHS Act, any 

process used by OIG would have to 

comply with the requirements in those 

statutory provisions. We seek comment 

on whether OIG should have concurrent 

authority to enforce these proposed 

CMP provisions. In addition, we seek 

comment on what procedures we 

should use to determine which cases 

should fall under CMS or OIG 

enforcement authority, in the event OIG 

has concurrent authority. For example, 

we are considering providing that OIG 

would enforce only consumer assistance 

personnel or entity noncompliance 

involving systemic fraud or gross 

misconduct, rather than isolated 

incidents. We invite comment on this 

issue, and how those determinations 

would be made, as well as comments on 

any other aspects of a concurrent 

authority scheme that we should 

consider. 

In proposed § 155.206(b), we specify 

the individuals and entities that could 

be subject to HHS’ enforcement 

authority under this proposal. These 

individuals and entities would include 

Navigators, non-Navigator assistance 

personnel (also referred to as in-person 

assistance personnel) authorized under 

§ 155.205(d) and (e), and certified 

application counselors and 

organizations designated as certified 

application counselor organizations in 

FFEs, including in State Partnership 

Exchanges. We refer to these individuals 

and entities in the proposed rule as 

‘‘consumer assistance entities,’’ but 

these proposed CMPs could be assessed 

against both entities and individuals. 

We seek comment on whether all of the 

individuals and entities listed in 

proposed § 155.205(b) should be subject 

to CMPs, and on whether other entities 

and individuals should be added to that 

list. 

In § 155.206(c), we propose the 

grounds on which HHS could impose 

CMPs on the entities and individuals 

specified in § 155.206(b). Section 

1321(c)(2) of the Affordable Care Act 

authorizes the Secretary to enforce the 

requirements of section 1321(a)(1) of the 

Affordable Care Act, which include the 

requirements established by the 

Secretary regarding Exchange consumer 

assistance functions. Under our 

proposal, this statutory provision would 

authorize HHS to assess a CMP or, in 

lieu of a CMP, a corrective action plan 

against Navigators, non-Navigator 

assistance personnel, certified 

application counselors, and certified 

application counselor organizations in 

FFEs if HHS determines that these 

individuals or entities are not in 

compliance with the Exchange 

standards applicable to them. These 

Exchange standards would include any 

applicable regulations implemented 

under title I of the Affordable Care Act, 

as interpreted through applicable HHS 

guidance, such as the regulations 

governing consumer assistance tools 

and programs of an Exchange at 

§ 155.205; those governing Navigators at 

§ 155.210 and Navigators in FFEs at 

§ 155.215; those governing certified 

application counselors at § 155.225; and 

those under § 155.215 governing nonNavigator assistance personnel in FFEs. 

These standards would also include any 

applicable HHS guidance interpreting 

an existing regulatory or statutory 

provision. 

For example, § 155.215(b)(1)(i) 

requires FFE Navigators to obtain 

certification by the Exchange prior to 

carrying out any consumer assistance 

functions under § 155.210. Under this 

proposal, a Navigator who facilitates the 

selection of a QHP (a Navigator duty 

under § 155.210(e)(3)) prior to obtaining 

his or her Exchange certification might, 

depending on the circumstances, be 

subject to CMPs under § 155.206. 

As another example, § 155.210(e)(2) 

requires Navigators to provide 

information and services in a fair, 

accurate, and impartial manner, and 

§ 155.215(a)(2)(i) extends this duty to 

non-Navigator assistance personnel in 

FFEs. Any FFE Navigator or FFE nonNavigator assistance personnel who, 

while carrying out Exchange-related 

activities, furnishes information that he 

or she knew or should have known is 

false or fraudulent to consumers, the 

Exchange, or to HHS, would have 

violated these provisions and might, 

depending upon the circumstances, be 

subject to CMPs under proposed 

§ 155.206. If a Navigator or any nonNavigator assistance personnel in a FFE 

encourages an applicant or enrollee to 

submit false information on an 

application for coverage though the 

Exchange, we would also consider that 

to be a violation of his or her duty to 

provide information in a fair, accurate, 

and impartial manner; and this violation 

might, depending on the circumstances, 

also subject the individual or entity to 

the proposed CMPs. Such a Navigator or 

non-Navigator assistance personnel 

would not be providing fair or accurate 

information to consumers, because in 

light of the penalties at section 1411(h) 

of the Affordable Care Act for providing 

false information on an Exchange 

application, it is not fair or accurate to 

state or imply that a consumer would be 

permitted to falsify application 

information. 

As a final example, a certified 

application counselor in an FFE who 

steers consumers toward one particular 

QHP would not be acting in the best 

interest of consumers, as required by 

§ 155.225(d)(4), and would not be giving 

consumers information about the full 

range of QHP options and insurance 

affordability programs for which they 

are eligible, as required by 

§ 155.225(c)(1). Such a certified 

application counselor might, depending 

on the circumstances, be subject to 

CMPs under our proposed § 155.206. 

We note that § 155.285 of this 

proposed rule would extend CMPs to 

consumer assistance entities who 

misuse or impermissibly disclose 


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personally identifiable information in 

violation of section 1411 of the 

Affordable Care Act. Therefore, we have 

not addressed penalties for those actions 

here. Some conduct by consumer 

assistance entities may warrant CMPs 

under either § 155.285 or § 155.206, and 

in such cases we believe HHS has 

discretion to determine whether to 

impose a CMP under this regulation or 

under § 155.285 of this subpart. 

However, we specify in proposed 

§ 155.206(c) that HHS would not assess 

a CMP under this section if a CMP has 

already been assessed for the same 

conduct under § 155.285. Additionally, 

CMPs are not the only enforcement 

remedy that would apply to the entities 

and individuals who would be subject 

to proposed § 155.206. For instance, 

HHS could take other enforcement 

actions against FFE Navigators, which 

are Federal grantees, under the 

regulations governing HHS grants. 

Furthermore, some of the actions 

described above may subject consumer 

assistance entities to criminal liability 

under Federal or State law. 

In § 155.206(d), we propose the basis 

for initiating an investigation of a 

potential violation. We propose that 

HHS could initiate an investigation 

based on any information it receives 

indicating that a consumer assistance 

entity might be in noncompliance with 

applicable Exchange standards. Such 

information could include consumer 

complaints, reports from State insurance 

departments and other Federal and State 

agencies, and any other information 

indicating such a violation. We also 

propose that any entity or individual 

could file such a complaint with HHS. 

In § 155.206(e), (f) and (g), we propose 

to outline the process that HHS would 

follow to investigate potential violations 

in order to determine whether the 

consumer assistance entity has engaged 

in noncompliance of applicable 

Exchange standards. Under proposed 

§ 155.206(e), if HHS learns of a potential 

violation through the means described 

in paragraph (d) in this section and 

determines that further investigation is 

warranted, HHS would provide written 

notice of its investigation to the 

consumer assistance entity. Such notice 

would describe the potential violation, 

provide 30 days from the date of the 

notice for the consumer assistance 

entity to respond and provide HHS with 

information and documents, including 

information and documents to refute an 

alleged violation, and would state that 

a CMP might be assessed if the 

consumer assistance entity fails to refute 

the allegations in HHS’ determination. 

In § 155.206(f), we propose a process 

for a consumer assistance entity to 

request an extension from HHS when 

the entity cannot prepare a response to 

HHS’s notice of investigation within the 

30 days provided in the notice. Under 

our proposal, if HHS grants the 

extension, the responsible entity would 

be required to respond to the notice of 

investigation within the time frame 

specified in HHS’s letter granting the 

extension of time, and failure to respond 

within 30 days, or within the extended 

time frame, could result in HHS’s 

imposition of the CMP that would apply 

based upon HHS’s initial determination 

of a potential violation as set forth in the 

notice of investigation under 

§ 155.206(e). 

In § 155.206(g), we propose that HHS 

could review and consider documents 

or information received or collected in 

accordance with paragraph (d)(1) of this 

section or provided by the consumer 

assistance entity in response to 

receiving a notice in accordance with 

paragraph (e)(2) of this section. We also 

propose that HHS may conduct an 

independent investigation into the 

alleged violation, which may include 

site visits and interviews, if applicable, 

and may consider the results of this 

investigation in its determination. The 

purpose of these proposed provisions is 

to ensure that HHS would follow 

reasonable procedures when 

investigating a potential violation, and 

to allow a consumer assistance entity a 

reasonable timeframe to provide 

evidence refuting the allegation or other 

information regarding the alleged 

violation, including its severity or 

mitigating circumstances. 

In § 155.206(h), we propose the 

factors that HHS would use to 

determine the appropriate CMP amount, 

and to determine whether it would be 

appropriate to offer the entity or 

individual an opportunity to enter into 

a corrective action plan in place of the 

CMP. We intend that the CMP amount, 

and opportunity to enter into a 

corrective action plan, would vary based 

on our assessment of the consumer 

assistance entity’s previous or ongoing 

record of compliance; the gravity of the 

violation, as determined in part by the 

frequency of the violation and the 

financial harm incurred by a consumer; 

and the culpability of the consumer 

assistance entity, as determined, in part, 

by whether the entity received payment 

for committing the violation. We believe 

these factors would allow us to tailor 

enforcement actions to specific 

violations, while maintaining robust 

enforcement authority in the interest of 

protecting consumers. 

Section 2723(b)(2)(C) of the PHS Act 

limits the amount of CMPs authorized 

under section 1321(c)(2) of the 

Affordable Care Act to $100 for each day 

for each individual directly affected. 

Therefore in § 155.206(i), we propose 

that the maximum daily amount of 

penalty assessed for each violation 

would be $100 for each day, for each 

consumer assistance entity, for each 

individual directly affected by the 

entity’s non-compliance. Similar to our 

rules on the maximum penalty for 

noncompliant QHP issuers in 45 CFR 

156.805(c), we anticipate that there 

might be situations where HHS cannot 

determine the number of individuals 

directly affected. Therefore, we propose, 

consistent with the approach under 

existing rules at 45 CFR 156.805(c), that 

in such situations HHS may reasonably 

estimate this number, based on available 

information, such as data from a Federal 

Navigator grantee’s quarterly or weekly 

report concerning the number of 

consumers assisted. We also clarify that 

imposing $100 for each day an 

individual is directly affected would 

mean that we would look at the entirety 

of time the consumer was affected by 

the noncompliance of the assistance 

entity. For example, if a certified 

application counselor in an FFE is 

found to be steering consumers into a 

specific plan without regard to the 

consumers’ best interests in violation of 

§ 155.225(d)(4), we might assess CMPs 

based on our reasonable estimate of the 

number of consumers affected by the 

conduct, as well as the entire time the 

conduct took place, including the time 

during which each consumer is enrolled 

in the plan to which he or she was 

improperly steered. Although we have 

proposed a maximum per day penalty, 

we have not proposed a cap on the total 

penalty that could be assessed by HHS, 

and we seek comment on whether we 

should propose such a cap. 

In proposed § 155.206(j), we propose 

to clarify that nothing in this section 

limits HHS’s authority to settle any 

issue or case described in the notice 

furnished in accordance with paragraph 

(e), or to compromise on any CMP 

provided for in this section. This 

provision is based on a similar 

provision in the HIPAA enforcement 

scheme at 45 CFR 150.325. 

Section 2723(b)(2)(C) of the PHS Act 

places certain limitations on CMPs 

authorized under section 1321(c)(2) of 

the Affordable Care Act, including the 

limitation that HHS will not assess a 

CMP where the entity did not know, or 

exercising reasonable diligence would 

not have known, of the violation. We 

propose to implement these limitations 

in § 155.206(k). We believe these 

limitations would help balance the 

interests of HHS, the Exchange, and 

consumers to have consumer assistance 


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30Patient Protection and Affordable Care Act; 

Exchange Functions: Standards for Navigators and 

Non-Navigator Assistance Personnel; Consumer 

Assistance Tools and Programs of an Exchange and 

Certified Application Counselors, 78 FR 42845 

(finalized July 17, 2013). 

31The U.S. District Court for the Western District 

of Missouri recently granted the plaintiff’s motion 

for a preliminary injunction in litigation 

challenging a Missouri law regulating Navigators 

and other Exchange consumer assistance personnel 

on the grounds, inter alia, that certain provisions 

of the Missouri law are preempted by Federal law. 

The court concluded that ‘‘state laws that make 

operation of the [Federally-facilitated Exchange] 

more difficult or onerous run afoul of the 

Affordable Care Act’s purpose and are subject to 

preemption.’’ St. Louis Effort for AIDS, et al. v. 

Huff, No. 13–4246–CV–C–ODS, 2014 WL 273201, at 

*5 (W.D. Mo. Jan. 23, 2014) (order granting 

preliminary injunction). This decision is currently 

under appeal before the United States Court of 

Appeals for the Eighth Circuit, St. Louis Effort for 

AIDS v. Huff, No. 14–1520 (8th Cir. appeal docketed 

Mar. 6, 2014). 

entities exercise reasonable diligence in 

understanding and executing their 

obligations, while not unnecessarily 

penalizing consumer assistance entities 

who are acting in good faith. We also 

propose, based on the HIPAA 

enforcement structure at 45 CFR 

150.341, that the burden is on the 

consumer assistance entity to establish 

that the circumstances triggering these 

limitations existed. 

In § 155.206(l), we propose standards 

for notifying consumer assistance 

entities of the intent to assess a CMP, 

which notice would include an 

explanation of the entity’s right to an 

appeal pursuant to the process set forth 

at 45 CFR Part 150, Subpart D, as 

provided in proposed § 155.206(m). We 

seek comment on whether all aspects of 

that process should be applicable to 

appeals of these CMPs. Finally, in 

§ 155.205(n), we propose that HHS may 

require payment of the proposed CMP if 

the consumer assistance entity does not 

timely request a hearing. 

We seek comment on all aspects of 

these proposals, including but not 

limited to whether other provisions of 

45 CFR Part 150 should be adopted and 

made applicable to this proposed 

enforcement scheme, whether a specific 

limitations period should apply, and if 

so, what limitations period would be 

appropriate for violations of applicable 

Exchange standards by consumer 

assistance entities in FFEs. 

b. Navigator, Non-Navigator Assistance 

Personnel, and Certified Application 

Counselor Program Standards 

(§§ 155.210, 155.215, and 155.225) 

Sections 1311(d)(4)(K) and 1311(i) of 

the Affordable Care Act direct all 

Exchanges to establish a Navigator 

program. Section 1321(a)(1) of the 

Affordable Care Act directs the 

Secretary to issue regulations that set 

standards for meeting the requirements 

of title I of the Affordable Care Act, with 

respect to, among other things, the 

establishment and operation of 

Exchanges. Pursuant to the authority 

established in section 1321(a)(1), the 

Secretary issued 45 CFR 155.205(d) and 

(e), which authorize Exchanges to 

perform certain consumer service 

functions in addition to the Navigator 

program. 45 CFR 155.205(d) provides 

that each Exchange must conduct 

consumer assistance activities, and 

§ 155.205(e) provides that each 

Exchange must conduct outreach and 

education activities to inform 

consumers about the Exchange and 

insurance affordability programs, to 

encourage participation. 

The consumer assistance function 

authorized by § 155.205(d) includes the 

Navigator grant program established 

under section 1311(i) of the Affordable 

Care Act. Section 155.205(d) and (e) also 

allow for the establishment of a nonNavigator consumer assistance program. 

45 CFR 155.215 establishes standards 

for non-Navigator assistance personnel 

in FFEs, including State Partnership 

Exchanges, and for non-Navigator 

assistance personnel in State Exchanges 

if they are funded with section 1311(a) 

Exchange Establishment grant funds. 

Also pursuant to the authority 

established in section 1321(a)(1), the 

Secretary issued 45 CFR 155.225, which 

establishes the certified application 

counselor program as a consumer 

assistance function of the Exchange, 

separate from and in addition to the 

functions described in §§ 155.205(d) 

and (e), 155.210, and 155.215. 

Navigator duties and requirements for 

all Exchanges are set forth in section 

1311(i) of the Affordable Care Act and 

45 CFR 155.210. Additional duties and 

requirements for Navigators in 

Federally-facilitated and State 

Partnership Exchanges are set forth at 45 

CFR 155.215. Section 155.215 also sets 

forth duties and requirements for nonNavigator assistance personnel in 

Federally-facilitated and State 

Partnership Exchanges, and for nonNavigator assistance personnel in State 

Exchanges if those personnel are funded 

with section 1311(a) Exchange 

Establishment grant funds. Certified 

application counselor duties and 

requirements for all Exchanges are set 

forth in 45 CFR 155.225. 

In accordance with sections 1311(i)(4) 

and 1321(d) of the Affordable Care Act, 

we previously established in 45 CFR 

155.210(c)(1)(iii) that Navigators ‘‘must 

meet any licensing, certification or other 

standards prescribed by the State or 

Exchange, if applicable, so long as such 

standards do not prevent the application 

of the provisions of title I of the 

Affordable Care Act.’’ We have not 

established a similar requirement for the 

non-Navigator assistance personnel that 

are subject to 45 CFR 155.215. Nor did 

we finalize a proposed requirement that 

would have required certified 

application counselors to comply with 

State law as a condition of certification. 

However, we noted in the preamble to 

the rulemaking establishing the certified 

application counselor program that 

section 1321(d) of the Affordable Care 

Act provides that State laws that do not 

prevent the application of the 

provisions of title I of the Affordable 

Care Act are not preempted.30 These 

preemption principles apply to all of the 

Federal standards and duties that apply 

to Navigators, non-Navigator assistance 

personnel and certified application 

counselors, since these have been 

authorized and established under title I 

of the Affordable Care Act. 

We now propose to specify certain 

non-Federal requirements that would 

prevent the application of provisions of 

title I of the Affordable Care Act with 

respect to the Navigator, non-Navigator 

assistance personnel, and certified 

application counselor programs, within 

the meaning of section 1321(d) of the 

Affordable Care Act. This proposal does 

not purport to capture the complete 

universe of State requirements that 

might be preempted in this context, and 

we therefore recognize that a Federal 

court may also find other non-Federal 

requirements that we do not expressly 

mention in this proposed rule to be 

preempted.31

We propose amending 

§ 155.210(c)(1)(iii) by adding new 

paragraphs (A) through (F) to specify 

certain non-Federal requirements that 

would prevent the application of the 

provisions of title I of the Affordable 

Care Act, within the meaning of section 

1321(d) of the Affordable Care Act, with 

respect to the Navigator program. We 

also propose to amend § 155.215(f) to 

make clear that we would consider the 

same types of non-Federal requirements 

listed in § 155.210(c)(1)(iii)(A) through 

(F) (except for 155.210(c)(1)(iii)(D)) to 

prevent the application of the 

provisions of title I of the Affordable 

Care Act within the meaning of section 

1321(d) of the Affordable Care Act, 

when applied to non-Navigator 

assistance personnel subject to 

§ 155.215. Similarly, with respect to the 

certified application counselor program, 

we propose amending § 155.225(d) by 

adding a new paragraph (d)(8) to specify 

that certified application counselors 

must meet any licensing, certification or 


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other standards prescribed by the State 

or Exchange, if applicable, so long as 

such standards do not prevent the 

application of the provisions of title I of 

the Affordable Care Act within the 

meaning of section 1321(d) of the 

Affordable Care Act. New 

§ 155.225(d)(8) would also make clear 

that we would consider non-Federal 

requirements similar to those listed in 

§ 155.210(c)(1)(iii)(A) through (F) 

(except for 155.210(c)(1)(iii)(D)) to 

prevent the application of the 

provisions of title I of the Affordable 

Care Act within the meaning of section 

1321(d) of the Affordable Care Act, 

when applied to certified application 

counselors. 

As we discuss in greater detail below, 

these proposed amendments are 

directed at non-Federal requirements 

that conflict with Federal statutory or 

regulatory standards and that either, on 

their face, prevent assisters from 

performing their Federally required 

duties, or that would conflict with 

Federal standards in specific factual 

circumstances. 

The purpose of these proposed 

provisions is to specify a nonexhaustive list of circumstances under 

which HHS would consider a nonFederal requirement applicable to 

Navigators, non-Navigator assistance 

personnel, or certified application 

counselors to prevent the application of 

provisions of title I of the Affordable 

Care Act, within the meaning of section 

1321(d) of the Affordable Care Act. As 

a general principle, if a non-Federal 

requirement would, on its face, prevent 

Navigators, non-Navigator assistance 

personnel subject to § 155.215, or 

certified application counselors from 

carrying out Federally mandated duties 

or from otherwise meeting Federal 

standards that apply to them, or if a 

non-Federal requirement would make it 

impossible for an Exchange to 

implement those consumer assistance 

programs consistent with the Federal 

statutes and regulations governing those 

programs, then, in HHS’s view, such a 

requirement would prevent the 

application of the provisions of title I of 

the Affordable Care Act. 

These proposed preemption standards 

would not preclude a State from 

establishing or implementing additional 

State law protections for its consumers, 

so long as such laws do not prevent the 

application of Federal requirements for 

these consumer assistance programs. 

For example, a State may require these 

types of Exchange-approved assisters to 

undergo fingerprinting or background 

checks before they can operate in a 

State, so long as a State’s 

implementation of these additional 

requirements does not prevent the 

Exchange from implementing these 

consumer assistance programs in the 

State consistent with Federal standards 

or make it impossible for the assisters to 

perform their Federally required duties. 

We propose to make some, but not all, 

of the proposed provisions applicable to 

Navigators, non-Navigator assistance 

personnel subject to 45 CFR 155.215, 

and certified application counselors (or 

certified application counselor 

designated organizations) that are 

operating in State Exchanges. NonFederal requirements that would 

prevent these individuals or entities 

from carrying out their Federally 

mandated duties or from otherwise 

meeting applicable Federal statutory 

and regulatory standards and 

requirements would prevent the 

application of title I of the Affordable 

Care Act. Generally, for the reasons 

addressed below, proposed 

§ 155.210(c)(1)(iii)(A) through (D) would 

apply to Navigators in State Exchanges; 

through the cross reference to 

§ 155.210(c)(1)(iii), proposed 

§ 155.215(f) would apply provisions 

§ 155.210(c)(1)(iii)(A) through (C) to 

non-Navigator assistance entities or 

individuals in State Exchanges that are 

funded through an Exchange 

Establishment Grant under section 

1311(a) of the Affordable Care Act; and 

proposed § 155.225(d)(8)(i) through (iii) 

would apply to certified application 

counselors and/or designated certified 

application counselor organizations in 

State Exchanges. In general, we believe 

that the provisions listed above should 

apply in a State Exchange because these 

provisions address requirements that, in 

HHS’ view, would facially conflict with 

Federal requirements or standards 

established under Federal law, while 

the provisions that we propose would 

not apply in State Exchanges relate to 

how the State interacts with an FFE or 

implements State requirements for the 

relevant consumer assistance personnel. 

Based on our observations, a State 

Exchange has an enhanced ability to 

work with the State to establish its own 

standards and coordinate the 

implementation of State law applicable 

to assisters in a manner that does not 

conflict with Federal standards or 

prevent the State Exchange from 

implementing consumer assistance 

programs consistent with Federal 

requirements. We solicit comments on 

whether all the proposed provisions 

should apply in State Exchanges. We 

also seek comments on whether there 

are other types of non-Federal 

requirements for these types of assisters 

in a State Exchange that might prevent 

the application of Federal law within 

the meaning of section 1321(d) of the 

Affordable Care Act. 

In our proposal, we first propose that 

non-Federal laws or regulations which 

require Navigators, non-Navigator 

assistance personnel subject to 

§ 155.215, and certified application 

counselors to refer consumers to agents 

or brokers, or to any other sources not 

required to provide them with impartial 

advice, would prevent the application of 

the provisions of title I of the Affordable 

Care Act. Non-Federal laws or 

regulations that require referrals to 

sources that are not required to provide 

impartial advice would, on their face, 

make it impossible for these assisters to 

comply with existing Federal statutory 

and regulatory duties and standards. 

Navigators are required to ‘‘distribute 

fair and impartial information 

concerning enrollment in qualified 

health plans, and the availability of 

premium tax credits . . . and costsharing reductions . . .,’’ under section 

1311(i)(3)(B) of the Affordable Care Act. 

Additionally, section 1311(i)(5) of the 

Affordable Care Act requires the 

Secretary, in collaboration with States, 

to ‘‘develop standards to ensure that 

information made available by 

[N]avigators is fair, accurate, and 

impartial.’’ Accordingly, HHS 

regulations at § 155.210(e)(2) require 

Navigators in all Exchanges to provide 

‘‘information and services in a fair, 

accurate and impartial manner’’ and 

HHS regulations at § 155.215(a)(1)(iii) 

require Navigators in Federallyfacilitated and State Partnership 

Exchanges to ‘‘provide information to 

consumers about the full range of QHP 

options and insurance affordability 

programs for which they are eligible.’’ 

HHS regulations at § 155.215(a)(2)(i) and 

(iv) impose the same requirements upon 

non-Navigator assistance personnel in 

Federally-facilitated and State 

Partnership Exchanges. Similarly, 

§ 155.225(c)(1) requires certified 

application counselors to provide 

‘‘information to individuals and 

employees about the full range of QHP 

options and insurance affordability 

programs for which they are eligible’’ 

and § 155.225(d)(4) requires certified 

application counselors to act in the best 

interest of the applicants assisted. If a 

non-Federal law or regulation requires 

Navigators or non-Navigator assistance 

personnel subject to § 155.215 to refer 

consumers to third parties that do not 

have a duty to provide consumers with 

information that is fair, accurate, and 

impartial or requires a certified 

application counselor to refer 

consumers to third parties that do not 


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have a duty to act in the consumer’s best 

interest, that non-Federal law would 

prevent Navigators, non-Navigator 

assistance personnel, or certified 

application counselors from meeting the 

above-mentioned Federal requirements. 

This proposal would apply in all 

Exchanges, with the following limited 

exception for certain Navigators. Where 

a State has elected to establish and 

operate only a SHOP Exchange pursuant 

to 45 CFR 155.100(a)(2), and has opted 

under 45 CFR 155.705(d) to permit 

Navigator duties at § 155.210(e)(3) and 

(4) in the SHOP-only State Exchange to 

be fulfilled through referrals to agents 

and brokers, we would not consider 

State laws or regulations that permit the 

State to take the option at § 155.705(d) 

to prevent the application of the 

provisions of title I of the Affordable 

Care Act, since that option is authorized 

under Federal law. 

We solicit comment on whether nonFederal requirements that obligate 

Navigators, non-Navigator assistance 

personnel subject to § 155.215, and 

certified application counselors to refer 

employers and employees in the small 

group market to agents and brokers 

should not be considered to prevent the 

application of the provisions of title I of 

the Affordable Care Act within the 

meaning of section 1321(d) of the 

Affordable Care Act. 

Second, we propose that non-Federal 

laws or regulations that prevent 

Navigators, non-Navigator assistance 

personnel subject to § 155.215, and 

certified application counselors from 

providing services to all persons to 

whom they are required to provide 

assistance would also, on their face, 

prevent the application of the 

provisions of title I of the Affordable 

Care Act within the meaning of section 

1321(d) of the Affordable Care Act. For 

example, if a non-Federal requirement 

prohibited Navigators and nonNavigator assistance personnel subject 

to § 155.215 from assisting an employer 

or employee regarding SHOP coverage 

or from acting as an intermediary 

between that employer and an issuer 

without being a licensed insurance 

agent or broker, then such a prohibition 

would prevent Navigators from 

performing their Federally required 

duties and would therefore prevent the 

application of the provisions of title I of 

the Affordable Care Act within the 

meaning of section 1321(d) of the 

Affordable Care Act. Specifically, such 

non-Federal requirements would 

prevent Navigators from providing 

‘‘information and services in a fair, 

accurate and impartial manner’’ as 

required by 45 CFR 155.210(e)(2). They 

would also prevent non-Navigator 

assistance personnel subject to 155.215 

from complying with the same 

requirement, as is required by 

§ 155.215(a)(2)(i). We interpret the 

requirement that Navigators and nonNavigator assistance personnel subject 

to § 155.215 provide information and 

services fairly and impartially as a 

requirement that these assisters provide 

their services to all consumers seeking 

assistance. As we have mentioned in 

prior rulemaking, Navigators and nonNavigator assistance personnel should 

have the ability to help any individual 

who presents him or herself for 

assistance (see 78 FR 42830). Further, 

these requirements would prevent 

Navigators and non-Navigator assistance 

personnel subject to § 155.215 from 

being prepared to serve both the 

individual Exchange and SHOP, as 

required by § 155.215(b)(1)(v). Similarly, 

with respect to certified application 

counselors and certified application 

counselor organizations, if a nonFederal requirement barred these 

individuals or entities from assisting an 

employee with SHOP coverage, then 

such a requirement would prevent them 

from performing their Federally 

required duty to provide information to 

employees about the full range of QHP 

options for which they are eligible and 

assist employees to apply for coverage 

in a QHP through the Exchange and for 

insurance affordability programs, as set 

forth under § 155.225(c)(1) and (2). 

As another example, with respect to 

Navigators, non-Navigator assistance 

personnel subject to § 155.215, and 

certified application counselors and 

organizations, if a non-Federal law 

required these individuals or entities to 

either cease assisting a consumer or to 

discourage the consumer from seeking 

assistance from the assister whenever a 

consumer disclosed that he or she was 

currently insured or had previously 

purchased health insurance with the aid 

of an agent or broker (even if that 

consumer expresses to the assister that 

he or she does not want to be assisted 

by an agent or broker), then such a nonFederal requirement would prevent the 

application of the provisions of title I of 

the Affordable Care Act within the 

meaning of section 1321(d) of the 

Affordable Care Act. Specifically, these 

types of requirements would prevent 

Navigators from providing ‘‘information 

and services in a fair, accurate and 

impartial manner’’ as required by 45 

CFR 155.210(e)(2). They would also 

prevent non-Navigator assistance 

personnel subject to 155.215 from 

complying with the same requirement, 

as is required by § 155.215(a)(2)(i). We 

interpret the requirement that 

Navigators and non-Navigator assistance 

personnel subject to § 155.215 provide 

information and services fairly and 

impartially as a requirement that these 

assisters serve any consumer who 

presents him or herself for assistance, 

without regard to whether the consumer 

has existing health insurance coverage 

or previously had such coverage. Such 

a non-Federal requirement would also 

keep these assisters from performing 

their Federally required duty to be 

prepared to serve both the individual 

Exchange and SHOP, as required by 

§ 155.215(b)(1)(v). With respect to 

certified application counselors, these 

types of requirements would prevent 

them from carrying out required duties 

under § 155.225(c)(1) and (2), which 

require that certified application 

counselors provide information to 

employees about the full range of QHP 

options for which they are eligible and 

assist employees to apply for coverage 

in a QHP through the Exchange. 

Requirements of this type would also 

potentially prevent certified application 

counselors from acting in the best 

interests of the applicants assisted, as 

required by § 155.225(d)(4), especially 

in circumstances where a consumer 

expresses a desire to not consult an 

agent or broker. 

Where a State has elected to establish 

and operate only a SHOP Exchange 

pursuant to 45 CFR 155.100(a)(2), and 

has opted under 45 CFR 155.705(d) to 

permit Navigator duties at 

§ 155.210(e)(3) and (4) in the SHOP-only 

State Exchange to be fulfilled through 

referrals to agents and brokers, we 

would not consider State laws or 

regulations that permit the State to take 

the option at § 155.705(d) to prevent the 

application of the provisions of title I of 

the Affordable Care Act, since that 

option is authorized under Federal law. 

Third, we propose that non-Federal 

laws that prevent Navigators, nonNavigator assistance personnel subject 

to § 155.215, and certified application 

counselors from discussing the terms of 

coverage of any particular policy or 

plan, or from providing advice regarding 

substantive benefits or comparative 

benefits of different health plans, would 

also, on their face, prevent the 

application of the provisions of title I of 

the Affordable Care Act within the 

meaning of section 1321(d) of the 

Affordable Care Act. Such non-Federal 

requirements would prevent Navigators 

from fulfilling their statutory and 

regulatory duties under section 

1311(i)(3) of the Affordable Care Act 

and 45 CFR 155.210(e)(2) and (3) to 

distribute fair and impartial information 

concerning enrollment in qualified 

health plans and to facilitate enrollment 


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32For Navigators and non-Navigator assistance 

personnel subject to 155.215, we have clarified in 

Federal guidance the scope of these conflict of 

interest standards. Specifically, conflict of interest 

standards do not apply to consideration received by 

a provider to support specific activities, such as the 

provision of medical services, if the consideration 

is not connected to the enrollment of individuals 

or employees in QHPs (78 FR 42831). In addition, 

Federal regulations do not inherently prohibit 

Navigators from receiving grants and other 

consideration from health insurance issuers for 

activities unrelated to enrollment into health plans 

(77 FR 18332); For example, entities such as 

chambers of commerce, that include as a 

constituent member an association that has 

members of or lobbies on behalf of the insurance 

industry, are not prohibited from serving as 

Navigator grantees (78 FR 42835). 

33We have clarified in guidance that no conflict 

of interest should bar an otherwise eligible 

individual from serving as a certified application 

counselor, provided that they disclose any conflicts 

of interest, including but not limited to, any 

relationships with QHPs or insurance affordability 

programs, such as Medicaid plans and Medicaid 

managed care organizations (78 FR 42842). 

in qualified health plans. Such nonFederal requirements would also 

prevent non-Navigator assistance 

personnel subject to § 155.215 from 

carrying out their required duties under 

§ 155.215(a)(2)(i), which requires that 

they comply with § 155.210(e)(2). 

Finally, such non-Federal requirements 

would also prevent certified application 

counselors and organizations from 

fulfilling regulatory duties established 

under § 155.225(c) to provide 

information to individuals and 

employees about the full range of QHP 

options and insurance affordability 

programs for which they are eligible, 

assist individuals and employees to 

apply for coverage in a QHP through the 

Exchange and for insurance affordability 

programs, and help to facilitate 

enrollment of eligible individuals in 

QHPs and insurance affordability 

programs. CMS interprets these 

statutory and regulatory provisions to 

require Navigators, non-Navigator 

assistance personnel subject to 

§ 155.215, and certified application 

counselors to be prepared to discuss the 

terms and features of any coverage for 

which a consumer is or might be 

eligible, consistent with each 

consumer’s expressed interests and 

needs, including, for example, plan 

features such as deductibles, 

coinsurance and copayments, coverage 

limitations or exclusions, and/or 

whether a particular provider or 

hospital is included within a plan’s 

network. CMS has always interpreted 

the statute and regulations to prohibit 

Navigators, non-Navigators, and 

certified application counselors from 

steering a consumer toward a particular 

plan or plans. However, under 45 CFR 

155.210(e)(3) and 155.215(a)(2)(i), 

Navigators and non-Navigator assistance 

personnel subject to § 155.215 have a 

duty to ‘‘facilitate selection of a QHP,’’ 

and that duty includes providing 

information to consumers about the 

substantive benefits or particular 

features of a health plan. Similarly, 

certified application counselors are 

required to provide this same type of 

information to consumers, since they 

have a duty under 45 CFR 155.225(c)(3) 

to help to facilitate enrollment of 

eligible individuals in QHPs and 

insurance affordability programs. We 

therefore propose that non-Federal 

requirements that prevent assisters from 

describing or providing information 

about the substantive benefits or 

particular features of a health plan, 

including comparative information to 

facilitate a consumer’s selection of a 

plan, would prevent the application of 

the provisions of title I of the Affordable 

Care Act within the meaning of section 

1321(d) of the Affordable Care Act. 

Fourth, we propose to put into 

regulatory text a position we previously 

expressed in preamble, that a State or an 

Exchange must not require that all 

Navigators be agents or brokers or carry 

errors and omissions coverage. Section 

1311(i)(2)(B) of the Affordable Care Act 

provides that various types of entities 

may serve as Navigators, and through 

§ 155.210(c)(2), we established the 

requirement that in all Exchanges, at 

least two types of entities, including one 

community and consumer-focused 

nonprofit group, must serve as 

Navigators. Requiring that each 

Navigator be a licensed agent or broker 

or carry errors and omissions coverage 

(which is typically held only by 

licensed professionals such as agents 

and brokers) would mean that all 

Navigators would fall under only one 

type of entity listed in 155.210(c)(2), 

specifically, agents and brokers, and 

would therefore prevent the application 

of § 155.210(c)(2)(i). In other words, 

these types of non-Federal requirements 

would make it impossible for the 

Exchange in such States to fulfill the 

Federal requirement that at least two 

types of entities listed at 155.210(c)(2), 

including one community and 

consumer-focused nonprofit group, 

serve as Navigators. HHS has previously 

advised (see 77 FR 18310, 18331–32) 

that such requirements would prevent 

the application of § 155.210(c)(2) within 

the meaning of section 1321(d) of the 

Affordable Care Act; this proposal 

makes this policy explicit in regulation 

text. 

Fifth, we propose to specify that, in 

States with an FFE, non-Federal 

requirements may not, in effect, render 

ineligible any individuals or entities 

that the FFE would deem eligible under 

applicable Federal standards. Such nonFederal requirements would prevent the 

FFE from implementing the consumer 

assistance programs that they are 

required (or authorized) to implement 

under section 1311(i) of the Affordable 

Care Act, and 45 CFR 155.205, 155.210, 

155.215, and 155.225, consistent with 

Federal requirements established for 

those programs. 

For example, non-Federal 

requirements that prohibit Navigators, 

non-Navigator assistance personnel, or 

certified application counselors or 

organizations in an FFE from receiving 

any consideration, directly or indirectly, 

from a health insurance issuer offering 

health insurance coverage in or outside 

of an Exchange, even if not in 

connection with the enrollment of 

individuals into a QHP, go beyond 

Federal conflict of interest standards set 

forth in section 1311(i)(4)(A)(i) and (ii) 

of the Affordable Care Act and 

§§ 155.210(d)(4), 155.215(a) and 

155.225(d)(2) and (4), as interpreted in 

Federal guidance, and would also go 

beyond the parallel conflict of interest 

standards proposed for certified 

application counselors in our proposed 

§ 155.225(g)(2). For Navigators, section 

1311(i)(4)(A)(i) and (ii) of the Affordable 

Care Act and 45 CFR 155.210(d)(4) 

together provide that a Navigator shall 

not be a health insurance or stop loss 

insurance issuer or receive any 

consideration directly or indirectly from 

a health insurance issuer or issuer of 

stop loss insurance in connection with 

the enrollment of any qualified 

individuals or employees of a qualified 

employer in a qualified health plan or 

a non-qualified health plan. Under 45 

CFR 155.215(a)(2), a set of parallel 

conflict of interest standards apply in 

FFEs (including State Partnership 

Exchanges) to non-Navigator assistance 

personnel carrying out consumer 

assistance functions under 155.205(d) 

and (e), and to non-Navigator assistance 

personnel in a State Exchange funded 

through Federal Exchange 

Establishment grants.32 For certified 

application counselors, conflict of 

interest standards in § 155.225(d)(2) 

require that each staff member or 

volunteer seeking certification disclose 

to the organization, or to the Exchange 

if directly certified by an Exchange, and 

to potential applicants, any 

relationships the certified application 

counselor or sponsoring agency has 

with QHPs or insurance affordability 

programs, or other potential conflicts of 

interest.33

A non-Federal requirement that 

prohibits consumer assistance entities 

and individuals from receiving any 


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34Specifically, section 1311(i)(2)(B) and 

§ 155.210(c)(2) provide that Navigator entities may 

consideration, directly or indirectly, 

from a health insurance issuer offering 

health insurance coverage in or outside 

of an Exchange, even if not in 

connection with the enrollment of 

individuals into a QHP, would prevent 

an FFE from approving as Navigators, 

non-Navigator assistance personnel, or 

certified application counselors and 

organizations certain entities, including 

hospitals and community health care 

clinics, that would otherwise be eligible 

to serve in those capacities. Further, 

with respect to the Navigator program, 

we further note that such a requirement 

could bar the FFE from awarding a grant 

to the most qualified applicants as 

required and therefore might prevent 

HHS from allocating Federal money in 

the most appropriate manner. 

As another example, if a State with an 

FFE effectively prohibits an individual 

or organization from serving as a 

Navigator, non-Navigator assistance 

personnel or certified application 

counselor in the FFE merely because the 

individual or entity does not maintain 

its principal place of business in that 

State, that State could render ineligible 

individuals or entities that the FFE 

would deem eligible under applicable 

Federal standards. Such a standard 

would therefore prevent the FFE from 

implementing the consumer assistance 

programs that it is required (or 

authorized) to implement, within the 

meaning of section 1321(d) of the 

Affordable Care Act. We mean to 

address here only non-Federal 

requirements that would interpret 

‘‘principal place of business’’ as 

meaning that a business could have only 

one principal place of business 

nationwide, in a single State (similar to 

the legal concept that may be used in 

determining corporate citizenship for 

purposes of establishing diversity 

jurisdiction in Federal court, as required 

under 28 U.S.C. 1332(c)). States may 

however, require organizations to 

register with or be incorporated in the 

State, which will allow States and 

Exchanges to work with these 

organizations to ensure that they are 

meeting the needs of their consumers. 

Sixth and last, we propose to specify 

that in the FFEs, States may not impose 

requirements that, as applied or as 

implemented in the State, prevent the 

application of Federal standards 

applicable to Exchanges, Navigators, 

non-Navigator assistance personnel 

subject to § 155.215, and certified 

application counselors and designated 

organizations. For example, with respect 

to the Navigator program, if a State with 

an FFE implemented a requirement that 

prevented the only Navigator entity 

operating in the State from continuing 

to perform its Federally required duties, 

then such a provision, as applied, 

would prevent the Exchange from 

operating a Navigator program in that 

State as section 1311(i)(1) of the 

Affordable Care Act and § 155.210(a) 

require. As another example, a State 

might impose requirements as 

mandatory conditions for continuing to 

perform any applicable Federally 

required duties, such as additional 

training or fingerprinting or background 

checks, which, on their face, we 

consider as generally permissible, but 

might also set a deadline for compliance 

that made it impossible for any of 

individual or entity approved by the 

FFE to comply on a timely basis, despite 

good faith efforts to comply. Under such 

circumstances these entities and 

individuals could not fulfill any of their 

Federally required duties, and the FFE 

could not operate the consumer 

assistance programs that it is required 

(or authorized) to implement under 

section 1311(i) of the Affordable Care 

Act, and 45 CFR 155.205, 155.210, 

155.215, and 155.225. 

We believe these proposals will 

provide additional clarity regarding 

HHS’s position with respect to whether 

a non-exhaustive list of specific nonFederal requirements would prevent the 

application of Federal requirements 

applicable to Navigators, non-Navigator 

assistance personnel, and certified 

application counselors and Exchanges’ 

operation of such programs, within the 

meaning of section 1321(d) of the 

Affordable Care Act. In advancing these 

proposals, HHS’s intent is to accord all 

States the comity that they are due 

under section 1321(d) of the Affordable 

Care Act, while preserving the ability of 

Exchanges, and the individuals and 

entities approved by Exchanges, to carry 

out such programs. HHS proposes these 

provisions to ensure that it can establish 

and operate the consumer assistance 

functions of an FFE consistent with the 

Federal requirements set forth in section 

1311(i) of the Affordable Care Act and 

45 CFR 155.205, 155.210, 155.215, and 

155.225. We solicit comments on all 

aspects of these proposals. 

This proposed rule would also amend 

some of the current regulatory 

prohibitions on Navigator conduct. If 

these proposals are finalized, we expect 

that they would be effective on the date 

the final regulations are effective. 

Section 155.210(d), among other 

things, currently prohibits Navigators 

from being health insurance issuers or 

stop-loss issuers. We propose to amend 

section 155.210(d) by adding a 

provision that would provide that 

Navigators may not charge consumers 

for performing any Navigator duties. 

Our proposal would prohibit Navigators 

from requesting any form of 

remuneration from consumers for 

Navigator duties, such as charging fees, 

asking for favors in exchange for 

services provided, or requesting 

compensation from consumers for 

Navigator duties. As we previously 

explained in preamble when existing 

rules establishing a prohibition on 

charging fees by certified application 

counselors were finalized, HHS does not 

believe that it would be consistent with 

the purpose of the Navigator program or 

the consumer assistance, education, and 

outreach functions under § 155.205(d) 

and (e), for Navigators to charge 

consumers for their services. (78 FR 

42829) The goal of the Navigator 

program is to provide consumers with 

information about and assistance with 

enrollment in coverage through the 

Exchange, without cost to the consumer. 

That is why the Affordable Care Act, at 

section 1311(i)(1), makes clear that 

Navigator duties must be funded by the 

Exchange through grants. We believe 

that having free assistance available to 

consumers helps further both the goals 

of the Navigator program and the 

Exchanges generally by supporting 

access for low-income individuals who 

might previously have been priced out 

of the health insurance market. We now 

propose to make this an express 

prohibition in our regulations, through 

the addition of a new provision at 

§ 155.210(d)(5). If finalized, this 

prohibition would also apply to nonNavigator assistance personnel carrying 

out consumer assistance functions 

under §§ 155.205(d) and (e) in an FFE 

and to non-Navigator assistance 

personnel funded through an Exchange 

Establishment Grant, since existing 

rules at § 155.215(a)(2)(i) require that 

these entities must comply with the 

prohibitions on Navigator conduct set 

forth at § 155.210(d). We think the same 

rationale for the prohibition generally 

applies in the case of non-Navigator 

personnel. This proposal would also 

align the Navigator and non-Navigator 

assistance personnel provisions with the 

similar provision applicable to certified 

application counselors in existing 

§ 155.225(g). 

Our proposal would not prevent 

Navigators from charging for other, nonNavigator-related services the 

organization may offer, given that 

section 1311(i)(2) of the Affordable Care 

Act and implementing regulations at 

§ 155.210(c)(2) allow for various 

commercial entities or associations to 

become Navigators.34 We do not intend 


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include, among others, trade, industry, and 

professional associations; commercial fishing 

industry organizations; ranching and farming 

organizations; community and consumer-focused 

nonprofit groups; chambers of commerce; unions, 

resource partners of the Small Business 

Administration; and licensed agents and brokers. 

to prevent a Navigator entity or 

individual Navigators from pursuing the 

normal course of their non-Navigatorrelated business or established nonNavigator-related programs. However, 

Navigators would not be permitted to 

solicit customers for their other, nonNavigator-related services in connection 

with their Navigator duties. For 

example, a hospital conducting outreach 

and education events as a Navigator 

would not be permitted to use these 

events as opportunities to solicit new 

patients. 

We also propose to amend 

§ 155.210(d) to provide that Navigator 

organizations would be prohibited from 

compensating individual Navigators on 

a per-application, per-person assisted, 

or per-enrollment basis. We believe that 

such practices create adverse incentives 

that may result in enrollment errors or 

even improper conduct on the part of 

the Navigator, such as favoring 

consumers who take less time to assist 

than other consumers, or pressuring 

consumers to make quick decisions 

about their health coverage, rather than 

ensuring that they are fully informed 

about the full range of their options. 

Additionally, such a compensation 

methodology is inconsistent with the 

statutory and regulatory scheme for 

Navigators. We request comment on 

whether this proposal would negatively 

affect existing Navigator programs, 

including whether it would present 

implementation challenges for these 

programs if it becomes effective before 

November 15, 2014. 

The duties of a Navigator under 

section 1311(i)(3) of the Affordable Care 

Act and § 155.210(e) are not limited to 

facilitating selection of a QHP. 

Navigators’ duties also include 

conducting public education activities; 

distributing fair and impartial 

information about qualified health plans 

and advance payments of the premium 

tax credit and cost-sharing reductions; 

providing appropriate referrals for 

consumers with complaints, questions, 

or grievances about their health plan, 

coverage, or a determination under such 

plan or coverage; and providing 

information in a manner that is 

culturally and linguistically appropriate 

and accessible to people with 

disabilities. We believe that 

compensating Navigators based on the 

number of successful applications or 

enrollments may create disincentives to 

perform the full spectrum of required 

duties. To discourage improper conduct 

and ensure that Navigators fully perform 

each of their required duties, we 

propose to prohibit such compensation 

arrangements. Under the proposal, 

Navigators would be permitted to pay 

employees on a salaried basis, on a perhour basis, or any other way that is not 

tied to the numbers of consumers who 

apply or enroll successfully with the 

Navigator’s assistance. Because 

§ 155.210 applies to all Navigators, 

including those in States with State 

Exchanges, this prohibition would 

apply to Navigators in all States. We 

seek comment on this proposal and 

alternatives that build in rewards for 

performance without the unintended 

consequences previously described. 

As with Navigators, we believe it is 

important that non-Navigator assistance 

personnel authorized under § 155.205(d) 

and (e) in FFEs and in State Exchanges 

if funded through section 1311(a) 

Exchange Establishment grants focus on 

providing full and accurate information 

rather than on meeting quotas. Because 

§ 155.215(a)(2) applies the prohibitions 

on certain conduct established for 

Navigators in § 155.210(d) to nonNavigator assistance personnel in FFEs, 

State Partnership Exchanges, and in 

State Exchanges if funded with section 

1311(a) Exchange Establishment grants, 

these prohibitions on Navigator conduct 

would also apply to these non-Navigator 

assistance personnel, and would help 

decrease the risk of creating adverse 

incentives that could potentially lead to 

improper conduct. 

In § 155.210(d)(7), we propose that 

Navigators be prohibited from providing 

gifts to applicants or potential enrollees 

as an inducement for application 

assistance or enrollment, including gift 

cards or cash, unless they are of 

nominal value. We propose to define 

nominal value as a cash value of $15 of 

less, or an item worth $15 or less, based 

on the retail purchase price of the item 

regardless of the actual cost. This 

definition would be consistent with the 

definition used for nominal value in 

connection with prohibitions applicable 

to the marketing of Medicare Advantage 

and Medicare Part D plans. (See 73 FR 

54236) CMS proposes that it would 

update the definition of nominal value 

in guidance as necessary to account for 

inflation and other relevant factors. We 

seek comment on how nominal value 

should be defined in this context. 

We also propose in § 155.210(d)(7) to 

prohibit Navigators from providing any 

applicant or potential enrollee with 

promotional items, that is, items that 

market or promote the products or 

services of a third party. There are 

several reasons we are proposing these 

prohibitions. First, providing cash or 

gifts, other than those of nominal value, 

would not be an appropriate use of 

Navigator grant funds, which are 

intended to be used to support a 

Navigator’s outreach, education, and 

application assistance activities. In 

addition, section 1311(d)(5)(B) of the 

Affordable Care Act prohibits an 

Exchange from utilizing any funds 

intended for the administrative and 

operational expenses of the Exchange, 

which would include the funds used to 

pay for the Exchange’s grants to 

Navigators, to pay for promotional 

giveaways. Second, the provision of 

cash or gifts to potential applicants or 

enrollees may shift the focus of a 

Navigator’s interaction with a potential 

applicant or enrollee away from its 

duties to provide information and 

services in a fair, accurate, and impartial 

manner and to facilitate selection of a 

QHP, in appropriate circumstances. 

Offering cash or gifts to potential 

applicants or enrollees could also cause 

some consumers to approach Navigators 

for reasons other than the receipt of 

information and Exchange application 

assistance. Third, providing to 

applicants or potential enrollees any 

promotional items that market or 

promote the products or services of a 

third party would be in conflict with the 

Navigator’s duty to be fair and impartial 

in its dealings with consumers, since it 

introduces a third party’s interests and 

marketing goals into the relationship 

between a Navigator and the consumers 

they serve. We believe that the duty of 

a Navigator to provide information and 

services in a fair, accurate and impartial 

manner make it inappropriate for a 

Navigator to engage in activities that 

give the appearance of promoting or 

marketing the products or services of 

third party business interests when it is 

performing Navigator activities and 

services. 

We are also proposing in 

§ 155.210(d)(8) and (9) new standards 

for Navigators with respect to their 

contacts and interaction with 

consumers, and the outreach and 

marketing practices they use when 

offering their services. In 

§ 155.210(d)(8), we propose to prohibit 

Navigators from going door-to-door or 

using other unsolicited means of direct 

contact to help consumers fill out 

applications or enroll in health 

coverage, although these proposed rules 

would not prohibit a Navigator from 

going door-to-door to provide 

consumers with educational or outreach 

materials. This would include making 

cold calls to a consumer to provide 


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application or enrollment assistance, 

without the consumer initiating the 

contact. In § 155.210(d)(9), we propose 

to prohibit Navigators from making 

robocalls, or calls that use an automatic 

telephone dialing system or an artificial 

or prerecorded voice, when initiating 

contact with consumers. We believe that 

these standards will ensure that 

Navigator practices are protective of the 

privacy and security interests of the 

consumers they serve, and will also 

provide important guidance and peace 

of mind to consumers, when they are 

faced with questions or concerns about 

what to expect in their interactions with 

individuals offering Exchange 

assistance. We seek comment about 

whether any of the activities and 

strategies that we propose to prohibit for 

Navigators are appropriate and 

consistent with section 1311(i) of the 

Affordable Care Act. 

For the same reasons, the proposed 

standards established in § 155.210(d)(7), 

(8) and (9) would also apply to nonNavigator assistance personnel in FFEs, 

State Partnership Exchanges, and in 

State Exchanges if funded with section 

1311(a) Exchange Establishment grants, 

through the reference in § 155.215(a)(2), 

which applies the prohibitions on 

conduct established for Navigators in 

§ 155.210(d) to these types of nonNavigator assistance personnel. 

In addition, we propose to amend 

paragraph (e), which describes the 

duties of a Navigator, by adding a new 

paragraph (e)(6) that would require 

Navigators to provide applicants and 

enrollees seeking their assistance with 

notice of the functions and 

responsibilities of Navigators, to obtain 

written authorization from those they 

are assisting, in a form determined by 

the Secretary, and to retain these 

authorization forms. We propose that 

Exchanges must establish a reasonable 

retention period for maintaining this 

authorization, and that in FFEs the 

retention period would be three years, 

unless a different retention period has 

already been provided in the 

administrative requirements for CMS 

grant and cooperative agreement 

recipients at 45 CFR 92.42 and 45 CFR 

74.53 or in other applicable Federal law. 

We have considered specifying a 

retention period for all Exchanges, 

including specifying either a minimum 

retention period or a specified retention 

period ranging from three to five years, 

and solicit comments on the best 

approach. We also propose that 

consumers would be able to revoke this 

authorization at any time. These 

provisions would ensure that all 

consumers receive adequate notice of 

the role and duties of a Navigator and 

that all consumers give their informed 

consent before sharing any personally 

identifiable information with the 

Navigator. 

For the same reasons, we also propose 

to add a new § 155.215(g) applying these 

authorization provisions to nonNavigator assistance personnel 

authorized under § 155.205(d) and (e) in 

FFEs, State Partnership Exchanges, and 

in State Exchanges if funded through 

section 1311(a) Exchange Establishment 

grants. 

Finally, we propose to add a new 

§ 155.210(e)(7), requiring Navigators to 

maintain a physical presence in their 

Exchange service area, so that face-toface assistance can be provided to 

applicants and enrollees. Under this 

proposal, a Navigator would not be 

required to have its principal place of 

business in the State in which Navigator 

services are being provided. For the 

same reasons, we also propose to add a 

new § 155.215(g), to make the same 

provisions proposed for Navigators 

under § 155.205(e)(7), as outlined above, 

also applicable to non-Navigator 

assistance personnel subject to 

§ 155.215. 

We solicit comments on all aspects of 

these proposals. 

c. Certified Application Counselors 

(§ 155.225) 

Section 1321(a)(1) of the Affordable 

Care Act directs and authorizes the 

Secretary to issue regulations setting 

standards for meeting the requirements 

under title I of the Affordable Care Act, 

with respect to, among other things, the 

establishment and operation of 

Exchanges. Pursuant to this authority, 

the Secretary issued § 155.225, which 

establishes the certified application 

counselor program as a consumer 

assistance function of the Exchange 

separate from and in addition to the 

functions described in §§ 155.205(d) 

and (e), 155.210, and 155.215. 

Section 155.225(b) establishes 

standards for the designation of a 

certified application counselor 

organization by an Exchange. We 

propose to add to these designation 

standards a new § 155.225(b)(iii) which 

would establish the requirement that 

certified application counselor 

organizations maintain a physical 

presence in the Exchange service area, 

so that face-to-face assistance would be 

provided to applicants and enrollees. 

This proposed requirement would also 

facilitate consumer protection efforts by 

a State. We note that, under this 

proposal, an entity designated as a 

certified application counselor 

organization would not be required to 

have its principal place of business in 

the State in which certified application 

counselor services are being provided 

by the organization. 

Section 155.225(d) currently sets forth 

CAC certification standards, including 

the successful completion of Exchangeapproved training. We propose to 

amend 45 CFR 155.225(d) to propose, in 

a new paragraph (d)(7), that individual 

certified application counselors would 

also be required to successfully 

complete Exchange-approved 

recertification training and be recertified 

on at least an annual basis. This 

proposal would ensure that certified 

application counselors keep up to date 

with current Exchange requirements 

and that they remain appropriately 

trained in order to best serve consumers. 

Under this proposal, each Exchange 

would establish its own recertification 

standards consistent with these 

requirements. 

Existing § 155.225(f)(2) provides that 

certified application counselor 

organizations, or, if applicable, an 

Exchange that certifies staff members or 

volunteers of organizations directly, 

must establish procedures to ensure that 

consumers provide authorization before 

a certified application counselor has 

access to the consumer’s personally 

identifiable information, and that the 

organization or application counselor 

must maintain a record of the 

authorization. We propose to revise this 

paragraph to clarify the retention period 

of the authorization form. We propose 

that Exchanges would be required to 

establish a reasonable retention period 

for maintaining this authorization, and 

specify that in FFEs, the retention 

period would be three years. We based 

this period on the retention period in 

the current administrative requirements 

for CMS grant and cooperative 

agreement recipients at 45 CFR 92.42 

and 45 CFR 74.53. Because certified 

application counselors perform similar 

duties to Navigators and are subject to 

similar privacy and security 

requirements, we believe a similar 

retention period should apply, even 

though certified application counselors 

would not necessarily be HHS grantees. 

We have considered specifying a 

retention period for all Exchanges, 

including specifying either a minimum 

retention period or a specified retention 

period ranging from three to five years, 

and solicit comments on the best 

approach. 

Under existing regulations at 45 CFR 

155.225(g), certified application 

counselors ‘‘may not impose any charge 

on applicants for application or other 

assistance related to the Exchange.’’ 

This was intended as a strict prohibition 

on the imposition of charges or fees by 


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certified application counselors. We 

now propose to amend § 155.225(g) to 

substitute ‘‘must not’’ for ‘‘may not,’’ so 

that there can be no doubt about the 

intent of this requirement. 

We also propose to amend 45 CFR 

155.225(g) to reorganize and renumber 

this section and to propose several 

additional standards for certified 

application counselors. We propose that 

what is now § 155.225(g) should be 

renamed as a section establishing 

standards related to ‘‘fees, 

consideration, solicitation and 

marketing.’’ We propose to redesignate 

amended § 155.225(g) as § 155.225(g)(1) 

and add the new prohibitions in this 

amended section to new 

§§ 155.225(g)(2) through (6). 

In § 155.225(g)(2), we propose to 

expressly prohibit certified application 

counselors from receiving 

consideration, directly or indirectly, 

from health insurance issuers or stop 

loss issuers in connection with the 

enrollment of consumers in qualified 

health plans (QHPs) or non-QHPs. This 

proposed new requirement would align 

with the same standards of conduct 

applicable to Navigators and certain 

non-Navigator assistance personnel 

under 45 CFR 155.210(d)(4) and 

155.215(a)(2)(ii), and would apply to 

individual certified application 

counselors as well as to the 

organizations that have been designated 

as certified application counselor 

organizations. The reason for this 

proposal is that, in our view, receiving 

commissions or other consideration for 

enrollment in QHPs or non-QHPs is not 

consistent with the purpose and scope 

of certified application counselor 

program activities. Under § 155.225(c), 

certified application counselors must 

act in the best interest of consumers 

they assist, inform consumers about the 

full range of health coverage options 

and affordability programs for which 

they are eligible, and help to facilitate 

enrollment of eligible individuals in 

QHPs and insurance affordability 

programs. As such, neither an 

individual certified application 

counselor nor his or her designated 

organization should have any personal 

financial incentive to recommend a 

particular health coverage option. 

Under this proposed amendment, 

while an Exchange could certify 

individuals as certified application 

counselors who are agents or brokers, 

and a designated certified application 

counselor organization similarly could 

certify staff or volunteers as certified 

application counselors who are agents 

or brokers, those individuals and the 

certified application counselor 

organization itself would not be 

permitted to receive compensation from 

health insurance or stop loss insurance 

issuers for enrolling individuals in 

QHPs or non-QHPs. Under this 

proposed amendment, in other words, 

certified application counselors and the 

certified application counselor 

designated organizations with which 

they are affiliated would not be strictly 

prohibited from being agents and 

brokers, as long as they do not receive 

any consideration in connection with 

enrollment of a consumer in a QHP or 

non-QHP. Therefore, agents and brokers 

who sell lines of insurance other than 

health insurance or stop loss insurance 

(for example, auto, life, and 

homeowners’ policies) would not be 

prohibited from receiving consideration 

from the sale of those other lines of 

insurance while serving as a certified 

application counselor, provided they 

disclose the relationship to the 

consumer receiving assistance. We note 

that § 155.225(d)(2) requires a certified 

application counselor to disclose any 

relationship he or she or the sponsoring 

certified application counselor agency 

has with QHPs or insurance 

affordability programs, ‘‘or other 

potential conflicts of interest,’’ to the 

appropriate parties outlined in that 

provision. Consistent with the 

interpretation we advanced with respect 

to the Navigator program, we interpret 

‘‘other potential conflicts of interest’’ in 

this context to include any private or 

personal interest sufficient to influence, 

or appear to influence, the objective 

exercise of a certified application 

counselor’s or certified application 

counselor organization’s official duties 

(see 77 FR 18330–31). In an FFE, we 

interpret ‘‘other potential conflicts of 

interest’’ to encompass any relationship 

with a certified application counselor 

which may have an influence on the 

information or scope of assistance being 

provided to the consumer during the 

course of the certified application 

counselor’s assistance or any 

relationship that would confer benefits 

or indirect financial gain that could 

potentially compromise a certified 

application counselor’s ability to act in 

the best interests of the consumer. 

We also propose to add a new 

§ 155.225(g)(3), which would prohibit 

individual certified application 

counselors from being compensated on 

a per-application, per-individualassisted, or per-enrollment basis. As 

with Navigators and non-Navigator 

assistance personnel, we believe that in 

order for application and enrollment 

assistance to be effective and 

appropriate for each consumer, perenrollment or per-application incentives 

that might encourage certified 

application counselors to rush through 

sessions with consumers, or not to 

provide them with complete 

information or enough time to make 

complex and important health coverage 

decisions, should not be permitted. 

Such incentives would impede a 

certified application counselor’s ability 

to act in the best in the best interests of 

consumers, as they are required to do 

under § 155.225(d)(4). This proposal 

would also help streamline 

requirements for these three types of 

assistance personnel. We seek comment 

on this proposal and alternatives that 

build in rewards for performance 

without the unintended consequences 

previously described. 

We also propose to add a new 

paragraph (g)(4) to prohibit certified 

application counselors from providing 

applicants or potential enrollees any 

gifts, including gift cards or cash, unless 

they are of nominal value. As we also 

proposed in our earlier discussion with 

respect to Navigators, we propose to 

define nominal value consistent with 

the definition used for nominal value in 

connection with prohibitions applicable 

to the marketing of Medicare Advantage 

and Medicare Part D plans. (See 73 FR 

54236) Specifically, nominal value 

would be defined as a cash value of $15 

of less, or an item worth $15 or less, 

based on the retail purchase price of the 

item regardless of the actual cost. CMS 

proposes that it would update the 

definition of nominal value in guidance 

as necessary to account for inflation and 

other relevant factors. We seek comment 

on how nominal value should be 

defined in this context. We also propose 

in this section to prohibit certified 

application counselors from providing 

applicants and potential enrollees with 

promotional items that market or 

promote the products or services of a 

third party, in connection with, or as an 

inducement for application assistance or 

enrollment. We are proposing this 

prohibition for certified application 

counselors for similar reasons to those 

expressed above in connection with the 

prohibition in the Navigator and nonNavigator assistance programs. We are 

concerned that the provision of cash or 

gifts to potential applicants or enrollees 

might interfere with the duties of the 

individual providing assistance to that 

applicant or potential enrollee; and in 

the case of a certified application 

counselor, might shift the focus of a 

certified application counselor’s 

interaction with a potential applicant or 

enrollee away from the certified 

application counselor’s duties to act in 

the consumer’s best interest and to 


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35We note that certified application counselors 

are not required to perform outreach activities. (see 

78 FR 42826). 

facilitate selection of a QHP. In 

addition, if a certified application 

counselor provides promotional items 

that market or promote the products or 

services of a third party, this too would 

conflict with the duty of a certified 

application counselor to act in the best 

interest of the consumer, since it 

introduces a third party’s interests and 

marketing goals into the relationship 

between the certified application 

counselor and the consumer they are 

assisting and may also cause consumers 

to approach certified application 

counselors for reasons unrelated to the 

receipt of information and Exchange 

application assistance. 

In proposed section § 155.225(g)(5), 

we would establish a standard for 

certified application counselors that 

would prohibit them from soliciting 

consumers for application or enrollment 

assistance by going door-to-door to 

provide this assistance, or to use other 

unsolicited means of direct contact, 

including calling a consumer, to provide 

application or enrollment assistance 

without the consumer initiating the 

contact. We also propose in a new 

§ 155.225(g)(6) to prohibit certified 

application counselors from making 

robocalls to consumers, such as those 

that are initiated to a consumer using an 

automatic telephone dialing system or 

an artificial or prerecorded voice. As we 

explained earlier in this preamble in 

relation to the parallel proposed 

standard for Navigators and nonNavigator assistance personnel, we 

believe restrictions on door-to-door 

solicitation and cold-calling would 

ensure that certified application 

counselors use practices that are 

protective of the privacy and security 

interests of the consumers they serve, 

and give those consumers the greatest 

peace of mind. We also believe that 

these standards would provide 

important guidance to consumers about 

what to expect in their interactions with 

certified application counselors. As 

with the parallel proposal for Navigators 

and non-Navigator assistance personnel, 

we clarify that this proposal would not 

prohibit a certified application 

counselor from going door-to-door to 

provide consumers with information 

about the availability of application 

assistance services, or other educational 

or outreach materials,35 We seek 

comment about whether any of the 

activities and strategies that we propose 

to prohibit are appropriate and 

consistent with Federal requirements. 

We solicit public comments on all 

aspects of these proposals. 

d. Payment of Premiums (§ 155.240) 

There are a limited number of 

circumstances in which an individual 

will be enrolled in a qualified health 

plan through the Exchange for less than 

a full month. In particular, these include 

situations in which a child is born, 

adopted, placed for adoption, or placed 

for foster care, or when an individual 

voluntarily terminates enrollment. 

Currently, there are no Federal 

standards for how premiums are 

prorated in these limited situations. In 

order to provide flexibility for 

Exchanges to establish a standardized 

methodology for partial month 

premiums or rely on issuers to prorate 

premiums in accordance with State law 

and issuer policies, we propose in 

§ 155.240(e) that the Exchange may 

establish one or more standard 

processes for premium calculation. 

Further, consistent with the 

methodology finalized for the FF–SHOP 

at § 155.705(b)(4)(ii)(B) in the 2015 

Payment Notice, in paragraph (e)(1), we 

propose that for the Federally-facilitated 

Exchange, the premium for coverage 

lasting less than one month must equal 

the product of the premium for one 

month of coverage divided by the 

number of days in the month and the 

number of days for which coverage is 

being provided in the month described 

in paragraph (e)(1)(i) of this section. 

Adopting this policy for the Federallyfacilitated Exchange will address 

situations in which enrollees have midmonth changes in enrollment. For 

example, the proposed policy will also 

address mid-month births or adoptions 

and prevent these enrollees from paying 

for coverage on days they were not 

enrolled in coverage. In addition, the 

proposed policy will eliminate issues 

where consumers who transition to 

Medicaid are charged premiums for 

days on which they are enrolled in 

Medicaid. Although it is not a new 

occurrence for consumers to transition 

from private health insurance to 

Medicaid without the benefit of 

premiums that are prorated precisely to 

the last day of private health insurance 

and the first day of Medicaid coverage, 

we anticipate that the expansion of 

private health insurance through the 

Exchange will increase the number of 

individuals who will be able to move 

between coverage types. We believe that 

the proposed policy will benefit this 

broadening group. This policy will also 

be consistent with proposed 26 CFR 

1.36B–3(d)(2), which specifies that 

when coverage is terminated before the 

last day of the month, and the issuer 

reduces or refunds a portion of the 

monthly premium, the premium tax 

credit is adjusted using the same 

methodology described in this 

regulation for the FF–SHOP. Aligning 

with the premium tax credit calculation 

will provide a cohesive policy across 

the Federally-facilitated Exchange for 

handling mid-month changes in 

enrollment, and will simplify the 

calculation of net premiums. Finally, 

the proposed Federally-facilitated 

Exchange policy will protect consumers 

and prevent them from paying 

premiums for days in which they are 

not enrolled in coverage. We intend to 

work closely with QHP issuers to 

implement this provision in the 

Federally-facilitated Exchange as soon 

as is reasonably possible. 

We seek comment on this proposed 

amendment. 

e. Privacy and Security of Personally 

Identifiable Information (§ 155.260) 

We propose amending § 155.260(g) to 

add a reference to § 155.285, which is 

being proposed as part of this proposed 

rule. Section 155.285 proposes to 

specify the grounds for imposing civil 

money penalties, the notice required to 

be given to a person when a civil money 

penalty is assessed, and factors to be 

used to determine the amount of civil 

money penalties assessed, as well as 

some aspects of the process for 

imposing civil money penalties. We 

propose this addition to § 155.260(g) to 

clearly link these two regulatory 

provisions and to ensure that readers 

fully understand how civil money 

penalties will be assessed for any 

improper use or disclosure of 

information. 

f. Bases and Process for Imposing Civil 

Money Penalties for Provision of False 

or Fraudulent Information to an 

Exchange or Improper Use or Disclosure 

of Information (§ 155.285) 

Section 1411 of the Affordable Care 

Act sets forth the procedures for 

determining eligibility for Exchange 

participation, premium tax credits and 

reduced cost-sharing, and the individual 

responsibility exemptions. Section 

1411(b) specifies minimum information 

required to be provided by an applicant, 

including name, address, date of birth, 

social security number (if applicable, 

based on the applicant’s citizenship or 

immigration status), and immigration 

status. For applicants seeking eligibility 

for advance payment of the premium tax 

credit or cost sharing reductions, section 

1411(b) also specifies that the applicant 

must provide information regarding 

income and family size, and information 

regarding employer sponsored coverage. 


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For applicants for an exemption from 

the shared responsibility payment for 

failure to maintain minimum essential 

coverage, section 1411(b) also requires 

submission of information relevant to 

the specific exemption sought by the 

applicant. In addition, section 1411(g) of 

the Affordable Care Act also requires 

that any person who receives 

information provided by an applicant 

under section 1411(b), whether directly 

from the applicant, by another person at 

the request of the applicant, or from a 

Federal agency may use the information 

only for the purposes of, and to the 

extent necessary in, ensuring the 

efficient operation of the Exchange. 

Finally, section 1411(h) specifies the 

civil money penalties which can be 

imposed for the provision of false or 

fraudulent information as well as for the 

improper use and disclosure of 

information. In § 155.285, we propose to 

regulate on this statutory authority to 

impose civil money penalties for the 

provision of false and fraudulent 

information in violation of section 

1411(h)(1) of the Affordable Care Act 

and the improper use and disclosure of 

information in violation of section 

1411(g) of the Affordable Care Act. 

In § 155.285(a), in accordance with 

the grounds on which penalties may be 

imposed as specified in section 1411(h) 

of the Affordable Care Act, we propose 

the circumstances in which HHS may 

impose civil money penalties (CMPs) on 

a person if HHS determines that the 

person has provided false or fraudulent 

information as prohibited by section 

1411(h)(1) or improperly used or 

disclosed information in violation of 

section 1411(g). We want to ensure that 

any person who does not comply with 

relevant statutory and regulatory 

provisions, which limit the ways in 

which information provided by an 

applicant or from a Federal agency can 

be used, may be appropriately 

penalized. HHS may impose CMPs for 

three specific types of actions related to 

the provision of false or fraudulent 

information and the improper use of 

information. HHS intends to work in 

collaboration with States to oversee, 

monitor, and enforce compliance with 

§ 155.285 in order to protect consumers, 

avoid duplication of efforts, and provide 

consistent enforcement practices. 

Section 1411(b) specifies the 

information that is required to be 

provided by an applicant for enrollment 

in a QHP offered through an Exchange 

in the individual market, for premium 

tax credits or cost sharing reductions, or 

for an exemption from the individual 

shared responsibility payment based on 

the individual’s status as a member of 

an exempt religious sect or division, as 

an Indian, or as an individual eligible 

for a hardship exemption, or based on 

the individual’s lack of affordable 

coverage or the individual’s status as a 

taxpayer with household income less 

than 100 percent of the poverty line. In 

§ 155.285(a)(1)(i), we propose that if any 

person (as defined at proposed 

§ 155.285(a)(2)) fails to provide correct 

information under section 1411(b) of the 

Affordable Care Act and such failure is 

attributable to negligence or disregard of 

any regulations of the Secretary, the 

person may be subject to a CMP. For 

purposes of this subsection, the terms 

‘‘negligence’’ and ‘‘disregard’’ have the 

same meaning as those in section 6662 

of the Code. Thus, we propose that 

‘‘negligence’’ includes any failure to 

make a reasonable attempt to provide 

accurate, complete, and comprehensive 

information, and the term ‘‘disregard’’ 

includes any careless, reckless, or 

intentional disregard for any rules or 

regulations of the Secretary. Under 

proposed § 155.285(a)(1)(i), if a person 

fails to make a reasonable attempt to 

provide accurate, complete and 

comprehensive information and as a 

result provides incorrect information, 

the person may be subject to a CMP. 

Second, in § 155.285(a)(1)(ii), we 

propose that if a person knowingly and 

willfully provides false or fraudulent 

information under section 1411(b) of the 

Affordable Care Act, the person may be 

subject to a CMP. Here, HHS must find 

that a person provided false or 

fraudulent information ‘‘knowingly and 

willfully.’’ This provision aims to 

ensure that any person who 

intentionally provides information 

required under section 1411(b) of the 

Affordable Care Act that the person 

knew to be false could be subject to a 

CMP. In addition, if consumer 

assistance personnel such as an agent, 

broker, Navigator, certified application 

counselor, or non-Navigator assistance 

personnel, were to in some manner 

directly provide false or incorrect 

information required under section 

1411(b), they may also be subject to a 

CMP. If consumer assistance personnel 

subject to § 155.206 of this subpart were 

to engage in this type of behavior, we 

propose that it should be left to HHS’ 

discretion to determine whether it was 

appropriate to impose a CMP under this 

regulation, or under § 155.206 of this 

subpart, if applicable. We note that 

§ 155.206 would only apply to 

Navigators, certified application 

counselors, and non-Navigator 

assistance personnel in a Federallyfacilitated Exchange and that violations 

of § 155.285 may not necessarily also 

constitute violations of § 155.206. In 

such instances where consumer 

assistance personnel may be subject to 

a CMP under both §§ 155.206 and 

155.285, we have considered specifying 

that HHS may only impose a CMP under 

§ 155.285. However, we propose that it 

should be left to HHS’ discretion to 

determine whether it would be 

appropriate to impose a CMP under 

§ 155.206 or § 155.285. We seek 

comment on this proposal and whether 

any alternative approaches should be 

used. 

Third, in § 155.285(a)(1)(iii), we 

propose that if a person knowingly and 

willfully uses or discloses information 

in violation of Affordable Care Act 

section 1411(g), the person may be 

subject to a CMP. Section 1411(g) of the 

Affordable Care Act specifies that any 

person who receives information 

required to be provided by an applicant, 

whether the person receives the 

information directly or by another 

person at the request of the applicant, or 

receives information from a Federal 

agency that has been verified as being 

consistent or inconsistent with the 

records of that Federal agency, may use 

the information only for the purposes of, 

and to the extent necessary in, ensuring 

the efficient operation of the Exchange. 

We will refer to the personally 

identifiable information (PII) described 

in the previous sentence as ‘‘Exchange 

PII’’ for the purposes of this section. 

Section 1411(g) of the Affordable Care 

Act also specifies that any person who 

receives Exchange PII may not disclose 

the information to any other person 

except as provided in section 1411 of 

the Affordable Care Act. Section 

155.260(a)(1) and (2) implement section 

1411(g) of the Affordable Care Act by 

specifying that an Exchange may only 

use or disclose Exchange PII to carry out 

the functions described at § 155.200 or 

to carry out additional functions which 

the Secretary has determined ensure the 

efficient operation of the Exchange and 

for which the individual has provided 

consent for his or her information to be 

so used or disclosed. 

In § 155.285(a)(1)(iii)(A) through (C), 

we propose types of activities that 

would be in violation of section 1411(g) 

of the Affordable Care Act. Because 

§ 155.260 further describes the 

limitations on the use and disclosure of 

Exchange PII, we propose that any use 

or disclosure of Exchange PII that 

violates relevant privacy and security 

standards established by the Exchange 

pursuant to § 155.260 of this subpart 

may constitute a violation of section 

1411(g) of the Affordable Care Act. We 

also propose that any other use or 

disclosure that has not been determined 

by the Secretary to ensure the efficient 


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operation of the Exchange be compliant 

with section 1411(g)(2)(A) of the 

Affordable Care Act pursuant to 

§ 155.260(a), and which is not necessary 

to carry out a function described in a 

contract with a non-Exchange entity 

executed pursuant to § 155.260(b)(2) of 

this subpart, may constitute a violation 

of section 1411(g) Affordable Care Act. 

More specific examples of activities that 

would violate section 1411(g) 

Affordable Care Act include a person 

selling lists of Exchange PII belonging to 

individuals who apply for enrollment or 

enroll in an Exchange qualified health 

plan, or a non-Exchange entity using the 

PII of individuals who sought 

enrollment in an Exchange qualified 

health plan to market products or 

services to those individuals. We note 

that without the express, specific 

consent of the consumer for their PII to 

be used for marketing purposes, use of 

Exchange PII for marketing purposes is 

prohibited by section 1411(g). In 

addition, we note that any person who 

obtains specific consent from an 

applicant or enrollee to use PII for 

marketing purposes must clearly inform 

the applicant or enrollee that the 

marketing activities have no 

relationship to or bearing on an 

eligibility determination for or 

enrollment in the Exchange. To the 

extent any person plans to obtain such 

consent to market products to Exchange 

applicants and enrollees, the person 

should be prepared to provide proof of 

consent upon request by the agency 

during the course of the agency’s normal 

oversight activities. 

In § 155.285(a)(2), we propose a 

definition of the term ‘‘person.’’ We 

propose that for purposes of this 

regulation, the term ‘‘person’’ should be 

defined to include, but should not be 

limited to, all individuals; corporations; 

Exchanges; Medicaid and CHIP 

agencies; other entities gaining access to 

PII submitted to an Exchange to carry 

out additional functions which the 

Secretary has determined ensure the 

efficient operation of the Exchange 

pursuant to 155.260(a)(1); and nonExchange entities as defined in 

§ 155.260(b) of this subsection, which 

includes agents, brokers, Web-brokers, 

QHP issuers, Navigators, certified 

application counselors, in-person 

assistors, and other third party 

contractors. The term ‘‘person’’ would 

also include the employees of the 

aforementioned entities. We propose to 

define the term very broadly because 

there are several different types of 

individuals and entities that could 

engage in the actions enumerated in 

§ 155.285(a)(1), and we hope to ensure 

that all such individuals and entities are 

aware of the penalties they could incur. 

We seek comment on these proposals. 

In § 155.285(b), we propose the factors 

that HHS may take into consideration 

when determining the amount of CMPs 

to impose. We propose in 

§ 155.285(b)(1) that HHS may take into 

account factors that include, but are not 

limited to, the following factors: the 

nature and circumstances of the conduct 

including the number of individual 

violations; the severity of the violations; 

the person’s history with the Exchange, 

including any prior violations that 

would indicate whether the violation is 

an isolated occurrence or represents a 

pattern of behavior; the length of time 

during which the violation(s) occurred; 

the number of individuals affected or 

potentially affected; and the extent to 

which the person received 

compensation or other consideration 

associated with the violation. We also 

propose in § 155.285(b)(2) that HHS take 

into account the nature and extent of the 

harm resulting from the action, 

including the number of individuals 

affected; whether the violation resulted 

in financial harm; whether there was 

harm to an individual’s reputation; 

whether the violation hindered or could 

have hindered an individual’s ability to 

obtain health care coverage; the actual 

or potential impact of the provision of 

false or fraudulent information or of the 

improper use or disclosure of 

information; and whether any person 

received a more favorable eligibility 

determination for enrollment in a QHP 

or insurance affordability program, such 

as greater advance payment of the 

premium tax credits or cost-sharing 

reduction than he or she would be 

eligible for if the correct information 

had been provided. 

In § 155.285(b)(3), we implement the 

reasonable cause exception of section 

1411(h)(1)(A)(ii) of the Affordable Care 

Act pursuant to which no penalty will 

be imposed under § 155.285(a)(1)(i) if 

HHS determines that there was a 

reasonable cause for the failure to 

provide correct information required on 

an Exchange application and that the 

person acted in good faith. We feel that 

this reasonable cause exception is very 

important to ensure that no CMP may be 

imposed for a situation in which a 

person was acting in good faith. 

In § 155.285(c), we propose maximum 

penalties for each different type of 

violation, in accordance with the 

statutory limitations set forth in section 

1411(h) of the Affordable Care Act. 

Section 155.285(c)(1) addresses 

maximum penalties for provision of 

incorrect information, where such 

failure is attributable to negligence or 

disregard of any rules or regulations of 

the Secretary, and for knowing and 

willful provision of false or fraudulent 

information in violation of section 

1411(h) of the Affordable Care Act. We 

propose that the maximum penalty may 

be imposed on a per application basis, 

as defined at proposed 

§ 155.285(c)(1)(iii), during a single ‘‘plan 

year.’’ We propose to use the definition 

for ‘‘plan year’’ at § 155.20, where a 

‘‘plan year’’ means a consecutive 12 

month period during which a health 

plan provides coverage for health 

benefits and which may be a calendar 

year or otherwise. In § 155.285(c)(1)(i), 

we propose that any person who fails to 

provide correct information as specified 

in § 155.285(a)(1)(i) may be subject to a 

maximum CMP, as specified in section 

1411(h)(1)(A)(i) of the Affordable Care 

Act, for each ‘‘application’’ on which 

the person fails to provide correct 

information. In § 155.285(c)(1)(ii), we 

propose that any person who knowingly 

and willfully provides false information 

as specified in § 155.285(a)(1)(ii) may be 

subject to a maximum CMP, as specified 

in section 1411(h)(1)(A)(i) of the 

Affordable Care Act, for each 

application on which the person 

knowingly and willfully provides false 

information. Since we are proposing 

that we would impose a penalty on a 

plan year basis, if a person were to elect 

to use the same information which he or 

she entered on an initial application for 

the subsequent plan year, and the 

person had knowingly and willfully 

entered false information on an 

application as described in 

§ 155.285(c)(1)(ii), the person may be 

subject to two CMPs, each up to the 

maximum CMP specified in section 

1411(h)(1)(A)(i) of the Affordable Care 

Act, based on the provision of false 

information for two plan years. 

In § 155.285(c)(1)(iii), we propose that 

for the purposes of this subsection, an 

‘‘application’’ is defined as a submission 

of information whether submitted 

through an online portal, over the 

telephone through a call center, or 

through a paper submission process. 

This submission of information is 

provided in relation to any of the 

following: An eligibility determination; 

an eligibility redetermination based on 

a change in an individual’s 

circumstances; or an annual eligibility 

redetermination for either enrollment in 

a qualified health plan, for premium tax 

credits or cost sharing reductions, or for 

an exemption from the individual 

shared responsibility payment. By 

proposing this definition of application, 

we intend for each submission of 

information, regardless of the means of 


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submission, to be considered a distinct 

application. For example, where a 

person submits an initial application for 

enrollment in a QHP, and later updates 

his or her information to reflect a 

change in circumstance, we propose 

that this person would have submitted 

two applications. We anticipate that 

there may be situations where a person 

submits a false piece of information on 

an initial application for coverage, and 

this false information could be seen as 

re-submitted on a second application in 

the same plan year. We propose to 

provide HHS flexibility in such 

situations as that described above so 

that HHS may, in its discretion, and 

depending on the particular facts of the 

case, determine the number of incorrect 

pieces of information submitted, and 

therefore determine the appropriate 

penalty for this situation. We solicit 

comment on this proposal as well as on 

alternate methods through which HHS 

could determine the appropriate amount 

of penalties to impose. 

In § 155.285(c)(2), we propose that 

any person who knowingly or willfully 

uses or discloses information as 

specified in § 155.285(a)(1)(iii) may be 

subject to a CMP. We propose in 

§ 155.285(c)(2)(i) that a person may be 

subject to a maximum CMP, as specified 

in section 1411(h)(2) of the Affordable 

Care Act, for each use or disclosure 

described in paragraph (a)(1)(iii) of this 

section, per use or disclosure. We also 

propose to define, in § 155.285(d)(2)(ii) 

that a use or disclosure includes one 

separate use or disclosure of a single 

individual’s PII that the person against 

whom a civil money penalty may be 

imposed has made. For example, if an 

agent were to sell a list of 100 

consumers’ names and other identifiable 

information to another entity, the 

proposed definition of a use or 

disclosure would mean that HHS could 

impose a total of 100 CMPs, each with 

a maximum penalty of the amount 

specified in section1411(h)(2) of the 

Affordable Care Act because the agent 

had disclosed the PII of 100 individuals. 

In § 155.285(c)(3), we also propose that 

these penalties may be imposed in 

addition to any other penalties that may 

be prescribed by law. 

In § 155.285(d), we propose standards 

for a notice of intent to issue a CMP that 

HHS must send to the person against 

whom the CMP is being imposed. We 

propose that the written notice will be 

either hand delivered, sent by certified 

mail, return receipt requested, or sent by 

overnight delivery service with 

signature upon delivery required. In 

§ 155.285(d)(1)(i)–(viii), we propose 

eight elements that must be included in 

the notice. The elements which must be 

included are as follows: (1) A 

description of the findings of fact 

regarding the violations with respect to 

which the CMP is proposed; (2) the 

basis and reasons why the findings of 

fact subject the person to a penalty; (3) 

any circumstances described in 

§ 155.285(c) that were considered in 

determining the amount of the proposed 

penalty; (4) the amount of the proposed 

penalty; (5) an explanation of the 

person’s right to a hearing under any 

applicable administrative hearing 

process; (6) a statement that the failure 

to request a hearing within 60 calendar 

days after the date of the notice permits 

the assessment of the proposed penalty; 

and (7) information explaining how to 

file a request for a hearing and the 

address to which the hearing request 

must be sent. We propose that the 

person may request a hearing before an 

ALJ on the proposed penalty by filing a 

request pursuant to the procedure that 

will be outlined in the notice of intent 

to issue a penalty that the person 

receives. 

In § 155.285(e), we propose the 

consequences for a person who fails to 

request a hearing in a timely manner. 

We propose that HHS may assess the 

proposed CMP 60 calendar days after 

the date of issuance printed on the 

notice of intent to issue a CMP. In 

§ 155.285(e)(1), we propose that HHS 

will notify the person in writing of any 

penalty that has been imposed, the 

means by which the person can satisfy 

the penalty, and the date on which the 

penalty is due. We propose in 

§ 155.285(e)(2) that a person has no right 

to appeal a penalty with respect to 

which the person has not timely 

requested a hearing. We believe 60 days 

is a sufficient period for a person to 

request a hearing. We seek comment on 

these proposals. 

In § 155.285(f), we propose to use the 

existing appeals framework in 

regulation at 45 CFR Part 150, Subpart 

D. We propose to exclude §§ 150.461, 

150.463, and 150.465 based on their 

lack of applicability to § 155.285. In 

§ 155.285(g), we propose that CMS and 

OIG will share enforcement authority to 

impose the CMPs in § 155.285. In 

§ 155.285(g)(1), we propose that CMS 

may impose CMPs for any of the 

violations at § 155.285(a). In 

§ 155.285(g)(2), we propose that OIG 

may impose CMPs for violations 

specified at § 155.285(a)(1)(ii) and (iii) 

in place of imposition of penalties by 

CMS. We believe OIG has the 

investigative capabilities which would 

be necessary to determine whether a 

person performed an action knowingly 

and willfully, a finding which would be 

required before imposing a CMP for the 

violations specified at § 155.285(a)(1)(ii) 

and (iii). In light of our proposal to 

allow OIG to impose CMPs for 

violations specified at § 155.285(a)(1)(ii) 

and (iii), we anticipate that OIG would 

amend its regulations at part 1003 of 

Chapter V of title 42 to encompass the 

standards set forth in this section. We 

seek comment on the proposed use of 

the regulatory framework for appeals at 

45 CFR Part 150, Subpart D and on the 

question of whether any other 

regulatory framework used by HHS for 

appeals presents a more appropriate 

framework. 

In § 155.285(h), we propose a 

settlement authority provision to ensure 

CMS is able to settle any issue or case 

described in § 155.285(a) if necessary. 

Finally, in § 155.285(i), we propose a six 

year statute of limitations, beginning 

from the date on which the violation 

occurred, within which HHS may 

impose a CMP against a person. We seek 

comment on the proposed 6 year statute 

of limitations. 

3. Subpart D—Exchange Functions in 

the Individual Market: Eligibility 

Determinations for Exchange 

Participation and Insurance 

Affordability Programs 

a. Verification of Eligibility for 

Minimum Essential Coverage Other 

Than Through an Eligible EmployerSponsored Plan (§ 155.320) 

In § 155.320(d)(4), we established an 

option under which a State Exchange 

could rely on HHS to conduct 

verifications of enrollment in an eligible 

employer-sponsored plan and eligibility 

for qualifying coverage in an eligible 

employer-sponsored plan for purposes 

of eligibility for advance payments of 

the premium tax credit. This option was 

made available for eligibility 

determinations that are effective on or 

after January 1, 2015. Under this option, 

a State Exchange would need to develop 

an interface through which to transfer 

information to HHS, HHS would need to 

develop a way to receive and process 

the information, check data sources, 

potentially communicate with 

consumers, and then return information 

to the State Exchange, and the State 

Exchange would need to modify 

systems to integrate this response into 

what should otherwise be a near-realtime eligibility process. Responsibilities 

for customer service would likely be 

split across the State Exchange and 

HHS, which would be difficult to 

coordinate and increase administrative 

costs. 

Accordingly, we have determined that 

the benefit gained by having HHS 

provide this function is far outweighed 


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by the information technology 

development and administrative and 

consumer complexity that would be 

introduced for a State through this 

approach. As such, we propose to strike 

paragraph (d)(4). We remain committed 

to working with State Exchanges to 

develop effective solutions for verifying 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan, and will 

work to make any additional electronic 

data sources that are accessible to HHS 

equally available to State Exchanges. We 

note that this proposed modification 

does not change the substantive rules 

regarding the verification of enrollment 

in an eligible employer-sponsored plan 

and eligibility for qualifying coverage in 

an eligible employer-sponsored plan. 

Therefore, the change does not affect 

program integrity. 

b. Eligibility Redetermination During a 

Benefit Year (§ 155.330) 

We propose a technical correction in 

paragraph (d)(2)(ii) to remove the 

reference to paragraph (e)(3) of this 

section. In the final rule titled, 

‘‘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’’, 78 FR 32319, we 

previously removed paragraph (e)(3) 

from this section. As such, we now 

clarify that paragraph (d)(2)(ii) should 

only refer to the standards specified in 

paragraph (e)(2) of this section. 

4. Subpart E—Exchange Functions in 

the Individual Market: Enrollment in 

Qualified Health Plans 

a. Enrollment of Qualified Individuals 

in a QHP (§ 155.400) 

In § 155.400, we propose to add 

paragraph (e). In this paragraph, we 

propose to establish that the Exchange 

would provide instructions to issuers 

regarding payment of the first month’s 

premium for enrollments. Additionally, 

in § 156.265 we propose to establish a 

requirement for issuers in the Federallyfacilitated Exchanges regarding payment 

due dates to collect premiums no later 

than the day before the coverage 

effective date. Our intention is to give 

the Exchange the flexibility to establish 

policy and process rules regarding 

premium payment. 

We also propose to add paragraph (f), 

which would authorize Exchanges to 

provide requirements to QHP issuers 

regarding the instructions for processing 

electronic enrollment-related 

transactions. 

b. Initial and Annual Open Enrollment 

Periods (§ 155.410) 

In 45 CFR 155.410(d), we specify that 

starting in 2014, the Exchange must 

provide a written annual open 

enrollment notification to each enrollee 

no earlier than September 1, and no 

later than September 30. In 45 CFR 

155.335(d), we specify that notice of 

annual redetermination for coverage 

effective January 1, 2015 be provided as 

a single, consolidated notice with the 

notice specified in 45 CFR 155.410(d). 

In the 2015 Payment Notice, we 

amended 45 CFR 155.410(e) to specify 

that for the benefit year beginning on 

January 1, 2015, the annual open 

enrollment period begins on November 

15, 2014. Accordingly, we believe that 

it is appropriate to modify the timing of 

the notice of annual open enrollment 

and annual redetermination. Two 

options we could consider for this 

notice include, but are not limited to: (1) 

Shifting the period during which the 

notice would be sent by a month, so that 

the notice would be sent no earlier than 

October 1, and no later than October 31; 

and (2) shifting the period during which 

the notice would be sent by a month 

and lengthening this period so that the 

notice would be sent no earlier than 

October 1, and no later than November 

15, provided that electronic notices are 

available for any consumer who 

contacts the Exchange on November 15. 

We solicit comment on which of these 

options we should implement, or if we 

should implement another option. 

c. Special Enrollment Periods 

(§ 155.420) 

In 45 CFR 155.420, we set forth 

provisions for special enrollment 

periods. We now propose amending 

§ 155.420(b)(2)(ii), (d)(1), (d)(6)(iii) and 

(e), which pertain to the special 

enrollment period for loss of coverage; 

§ 155.420(b)(2)(i) and (iii), which 

pertain to effective dates for certain 

special enrollment periods; and 

§ 155.420(c), to address the length of the 

special enrollment periods. 

In paragraph (b)(2)(i), we propose to 

provide flexibility for coverage effective 

dates in the case of birth, adoption, 

placement for adoption, or placement in 

foster care. We continue to require the 

Exchange to 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, but we allow Exchanges to 

permit the qualified individual or 

enrollee to elect a later coverage 

effective date. If the Exchange permits 

the qualified individual or enrollee to 

elect a later coverage effective date, the 

Exchange must ensure coverage is 

effective on the date elected by the 

qualified individual or enrollee. We are 

considering establishing parameters for 

the dates that may be chosen by the 

qualified individual or enrollee. 

In § 147.104(b)(2), we specified that, 

‘‘a health insurance issuer in the 

individual market must provide, with 

respect to individuals enrolled in noncalendar year individual health 

insurance policies, a limited open 

enrollment period . . .’’ Accordingly, in 

order to align Exchange regulations with 

those of the broader insurance market, 

in paragraph (d)(1), we propose that the 

Exchange permit qualified individuals 

and their dependents to enroll in or 

change from one QHP to another if they 

are enrolled in a non-calendar year 

individual health insurance policy in 

2014 described in § 147.104(b)(2), even 

if such non-calendar year policies are 

renewing. Thus, consumers whose 

individual health insurance policies 

that renew outside the Exchange open 

enrollment period have an opportunity 

to enroll in an Exchange, just as they 

would if their policies renewed during 

the Exchange open enrollment period. 

Without this addition, consumers with 

individual health insurance policies 

renewing outside the Exchange open 

enrollment period would be required to 

renew such policies, and wait to 

terminate the policies during the 

Exchange open enrollment period, 

should they wish to enroll in the 

Exchange, thus disadvantaging these 

consumers as compared to consumers 

enrolled in calendar year individual 

market policies. 

In 26 CFR 1.5000A–2(b)(1)(ii)(C), the 

Secretary of the Treasury specified that 

coverage of pregnancy-related services 

under section 1902(a)(10)(A)(i)(IV) and 

(a)(10)(A)(ii)(IX) of the Social Security 

Act (42 U.S.C. 1396a(a)(10)(A)(i)(IV), 

(a)(10)(A)(ii)(IX)) was not minimum 

essential coverage. In order to ensure 

that women losing eligibility for 

coverage of pregnancy-related services 

as described above are not left without 

an option to enroll in a QHP after the 

conclusion of Medicaid eligibility, in 

paragraph (d)(1), we propose that the 

Exchange permit qualified individuals 

and their dependents to enroll in a new 

QHP if they lose eligibility for such 

pregnancy-related services. We note that 

HHS may designate certain specific 

pregnancy-related programs to be 

minimum essential coverage under 

section 5000A(f)(1)(E) of the Affordable 

Care Act, though we propose to require 

this special enrollment period, 

regardless. We solicit comments 


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regarding whether there are other 

situations in which an individual loses 

coverage that is not defined as 

minimum essential coverage, such as 

AmeriCorps coverage, and should be 

provided with a special enrollment 

period. 

We propose to add to paragraph (c) to 

specify that the Exchange must permit 

qualified individuals and their 

dependents to access the special 

enrollment periods described in 

paragraph (d)(1) for up to 60 days prior 

to the end of the qualified individual’s 

or his or her dependent’s existing 

coverage. This is consistent with 

existing regulations in paragraph 

(d)(6)(iii) that are specific to an 

individual who is enrolled in an eligible 

employer-sponsored plan who 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 employersponsored plan. To improve the clarity 

and structure of this rule, we propose to 

move the language in paragraph 

(d)(6)(iii) regarding the 60 days prior 

access to the SEP to paragraph (c). The 

proposed change, to paragraph (d)(1) 

that would expand the ability to report 

a change in advance to all individuals 

who are described in paragraph (d)(1) is 

designed to allow an individual who is 

losing eligibility for coverage outside 

the Exchange to transition to coverage 

offered through an Exchange without a 

gap in coverage, but with protections to 

ensure that advance payments of the 

premium tax credit are not provided in 

advance of the loss of eligibility for 

minimum essential coverage outside the 

Exchange. Accordingly, we note that 

individuals are not eligible for advance 

payments of the premium tax credit 

until they are no longer enrolled in 

minimum essential coverage outside the 

Exchange. Lastly, we propose to make 

conforming changes to paragraphs 

(b)(2)(ii) and (e) to align with the 

changes in terminology proposed in 

paragraph (d)(1). 

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

(d)(10), we provide special enrollment 

periods for errors, contract violations, 

exceptional circumstances and 

misconduct. Existing paragraph 

(b)(2)(iii) specifies that for a plan 

selection made during one of the special 

enrollment periods under paragraphs 

(d)(4), (d)(5), and (d)(9), coverage must 

be effective on an appropriate date 

based on the circumstances of the 

special enrollment period, in 

accordance with guidelines issued by 

HHS, and provides two options for that 

effective date. We propose to add 

special enrollment periods triggered 

under paragraph (d)(10) to those special 

enrollment periods for which these 

special coverage effective dates are 

available. In order to ensure that the 

Exchange has sufficient flexibility with 

which to address the types of scenarios 

that may trigger these special 

enrollment periods, we propose to 

amend paragraph (b)(2)(iii) to remove 

the restriction to these two options. The 

resulting regulatory text would allow 

the Exchange to set an effective date 

based on what is appropriate to the 

circumstances, in accordance with any 

guidelines issued by HHS. Similarly, in 

order to ensure that the Exchange sets 

the length of these same special 

enrollment periods to be appropriate to 

the circumstances of the specific 

enrollment period, we propose to 

modify paragraph (c) to specify that the 

Exchange may define the length of these 

special enrollment periods as 

appropriate based on the circumstances 

of the special enrollment period, in 

accordance with any guidelines issued 

by HHS. We believe that this flexibility 

is important to ensure that the special 

enrollment periods can be implemented 

as intended. 

Section 155.420(e) clarifies what 

qualifies as loss of coverage for purposes 

of the special enrollment period 

described in paragraph (d)(1). We 

propose to modify this paragraph to 

clarify that voluntary termination does 

not qualify as loss of coverage for 

purposes of a special enrollment period, 

since the intent of this special 

enrollment period is to ensure that an 

individual who is losing coverage can 

transition to the Exchange without 

interruption, and not to allow an 

individual to switch from another form 

of coverage to the Exchange during the 

year when the other form of coverage 

remains available and he or she does not 

qualify for another special enrollment 

period described in this section. We 

solicit comments regarding this 

clarification. 

d. Termination of Coverage (§ 155.430) 

We propose to add paragraph (e) to 

§ 155.430 to establish the difference 

between a termination and a 

cancellation and establish the 

significance of a reinstatement action in 

the context of QHP coverage offered 

through an Exchange. Specifically, we 

propose to specify that a cancellation is 

a specific type of termination action 

taken either prior to or after the effective 

date of coverage that ends a qualified 

individual’s coverage on or before the 

effective date, thus rendering coverage 

as never effective. In contrast, a 

termination is an action taken after the 

effective date of coverage that ends an 

enrollee’s coverage effective on a date 

after the coverage effective date. In a 

cancellation, the effect of the QHP’s 

action would be that a qualified 

individual never receives coverage from 

the QHP, whereas in a termination the 

QHP covers the enrollee for some period 

of time and would be liable for covered 

services that the enrollee received 

during the time period between the 

coverage effective date and the 

termination date, under the terms of the 

coverage. A reinstatement action is a 

correction of an erroneous termination 

or cancellation action resulting in 

restoration of an enrollment with no 

break in coverage. 

In addition to establishing the 

difference between cancellations and 

terminations, we also propose that an 

Exchange may establish operational 

standards for QHP issuers for 

implementing terminations, 

cancellations, and reinstatements. 

Enrollment systems for both SBEs and 

the FFE continue to evolve, and we 

believe that the Exchange’s ability to 

issue operational instructions will 

enable both the Exchange and the issuer 

community to respond more effectively 

to changing systems and changing 

processes. We believe the effectiveness 

of this approach has been demonstrated 

in other programs administered by CMS, 

specifically the Medicare Advantage 

and Medicare Part D programs. 

Further, we are proposing to clarify in 

paragraph (d)(6) that the termination 

effective date being the day before the 

effective date of coverage in the new 

QHP would also apply in cases of 

retroactive enrollments. This could 

occur when a consumer is granted a 

special enrollment period to change 

QHPs with a retroactive coverage 

effective date under 155.420(b)(2)(iii). 

For coverage that is terminated 

retroactively, CMS will adjust any 

applicable payments to the original QHP 

issuer based on the retroactive 

termination date, in order to recoup any 

advance payments of the premium tax 

credit and cost-sharing reductions made 

to the former issuer for the enrollee. The 

Exchange would be required to ensure 

that the former issuer refunds or credits 

any premium paid to the issuer by the 

enrollee, reversing claim payments, and 

ensuring the provision of refunds for 

out-of-pocket payments made by or for 

the enrollee for covered benefits and 

services incurred, during the retroactive 

coverage period. We seek comment on 

whether to add a specific requirement to 

this effect on issuers in Part 156. 

Conversely, in the case of a retroactive 

coverage date, CMS will provide the 

gaining issuer any applicable advance 

payments of the premium tax credit and 


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cost-sharing reductions based on the 

retroactive coverage effective date. Costsharing reduction reconciliation will 

occur for all cost-sharing reductions 

provided beginning with the retroactive 

coverage date. The gaining issuer would 

collect the enrollee’s portion of the 

premium for all months of coverage and 

will be required to adjudicate the 

enrollee’s claims incurred during the 

retroactive period, and provide any 

applicable cost-sharing reductions. 

5. Subpart F—Appeals of Eligibility 

Determinations for Exchange 

Participation and Insurance 

Affordability Programs 

a. General Eligibility Appeals 

Requirements (§ 155.505) 

In § 155.505, we propose a technical 

correction to paragraph (b)(4) by 

removing ‘‘; and’’ at the end of the 

paragraph and adding a period in its 

place. 

b. Dismissals (§ 155.530) 

In § 155.530, we propose to amend 

paragraph (a)(1) to provide an additional 

method for appellants to withdraw 

appeal requests. The existing provision 

requires an appellant who wishes to 

withdraw his or her appeal request to do 

so in writing (hard copy or electronic). 

We are proposing to include the 

alternative for an appellant to withdraw 

his or her appeal by telephone, if the 

appeals entity is capable of accepting 

telephonic withdrawals. In paragraphs 

(a)(1)(i)(A) and (B), we propose the 

requirements for providing a telephonic 

withdrawal process. Specifically, we 

propose that the appeals entity must 

record in full the appellant’s statement 

and telephonic signature made under 

penalty of perjury, and provide a 

written (in hard copy or electronically) 

confirmation to the appellant 

documenting the telephonic interaction. 

This written confirmation can be 

captured in the dismissal notice 

required in the case of a withdrawal 

under § 155.530(b). We note that a 

telephonic signature is a verbal 

acknowledgement in place of a written 

signature. 

The intent of this proposed 

amendment is to provide a more 

efficient and convenient method for 

appellants and appeals entities to 

conclude an appeal at the request of the 

appellant. For example, under the 

current rules, an appeals entity must 

keep an appeal open and proceed to 

hearing following an informal resolution 

in every case where the appellant has 

not communicated his or her wish to 

withdraw the appeal in writing, even if 

the appellant is satisfied with the 

informal resolution decision. Because 

we anticipate that many appellants will 

not take the step of withdrawing their 

appeal requests in writing in this 

scenario, we believe the proposed 

amendment will provide appellants an 

easier process through which they can 

indicate their wish to end the appeals 

process. In addition, we believe the 

proposed amendment will also benefit 

appeals entities by reducing 

administrative burden, such as the 

requirement to convene unnecessary 

hearings described in the example 

above. The telephonic signature process 

provides a verifiable record of the 

appellant’s intention to withdraw the 

appeal and end the appeals process, 

including where the appellant is 

satisfied with a result he or she has 

obtained without fully exhausting the 

appeals process. 

We request comments on this 

proposed amendment, including the 

proposed requirements for accepting 

telephonic withdrawals. We also note 

that, although the proposed 

amendments to this provision will put 

the Exchange rules for withdrawal of an 

appeal request out of alignment with the 

Medicaid fair hearing rules, and we seek 

comment specifically on the impacts of 

this proposed change. Finally, we note 

that this proposed amendment also 

impacts withdrawal procedures for an 

employer appeal through the crossreference in § 155.555(f)(1), which 

currently requires withdrawals in 

writing. 

c. Employer Appeals Process (§ 155.555) 

We propose to amend § 155.555 by 

redesignating paragraphs (d)(1) through 

(d)(4) to more clearly delineate between 

the requirements associated with valid 

appeal requests versus invalid appeal 

requests. We note that under this 

proposed redesignation, paragraph 

(d)(4) would become new paragraph 

(d)(2), stating that upon receipt of an 

invalid appeal request, the appeals 

entity must promptly and without 

undue delay send written notice to the 

employer that the appeal request is not 

valid because it fails to meet the 

requirements of this section. New 

paragraph (d)(2) would also provide 

introductory language for the 

requirements provided in paragraphs 

(d)(2)(i) through (iv). The result of this 

proposed revisions would be to separate 

the requirements for valid appeal 

requests in redesignated paragraph 

(d)(1) and the requirements for invalid 

appeal requests in new paragraph (d)(2). 

6. Subpart G—Exchange Functions in 

the Individual Market: Eligibility 

Determinations for Exemptions 

a. Required Contribution Percentage 

Under section 5000A of the Code, an 

individual must maintain minimum 

essential coverage for each month, 

qualify for an exemption, or make a 

shared responsibility payment. Sections 

5000A(d) and (e) provide for nine 

categories of exemptions, and authorize 

the Secretary to determine individuals’ 

eligibility for some of the exemptions, 

including the hardship exemption. 

Sections 1.5000A–3(a) through (h) of 26 

CFR enumerate the circumstances in 

which an individual may be exempt 

from the shared responsibility payment. 

These grounds for exemption include: 

(1) Under 26 CFR 1.5000A–3(e), the 

individual lacks affordable coverage 

because the individual’s annualized 

required contribution for minimum 

essential coverage for the month 

exceeds the required contribution 

percentage of the individual’s 

household income; (2) the individual 

has in effect a hardship exemption 

certification described in 26 CFR 

1.5000A–3(h) and issued by an 

Exchange, as described in 26 CFR 

1.5000A–3(h) and, based on the 

individual’s projected household 

income, will have no affordable 

coverage; and (3) the individual and one 

or more employed members of his or her 

family has been determined eligible for 

affordable self-only employer-sponsored 

coverage through their respective 

employers, but the aggregate cost of 

employer-sponsored coverage for all the 

employed members of the family 

exceeds 8 percent of household income 

for that calendar year, as described in 45 

CFR 155.605(g)(5). Determining 

eligibility for these exemptions requires 

comparison between the individual’s 

share of the costs for obtaining 

minimum essential coverage and a 

certain percentage of the individual’s 

household income, actual or projected, 

for the taxable year. Under section 

5000A(e)(1)(A) of the Code, the 

percentage of the individual’s 

household income is 8 percent. Section 

5000A(e)(1)(D) of the Code and 26 CFR 

1.5000A–3(e)(2)(ii) further provide that, 

for plan years beginning in any calendar 

year after 2014, the percentage is 

determined by the Secretary to reflect 

the excess of the rate of premium 

growth between the preceding calendar 

year and 2013 over the rate of income 

growth for the period. 

Below, we outline and request 

comments on issues related to various 

methodologies we are considering for 

determining the excess of the rate of 


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36See Table 1 in http://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/

Proj2012.pdf. 

premium growth over the rate of income 

growth. We are considering publishing 

the excess of the rate of premium 

growth over the rate of income growth 

for calendar years after 2015 in the 

annual HHS notice of benefit and 

payment parameters. We are also 

considering modifying § 155.605(g)(5), 

which currently sets the required 

contribution percentage at 8 percent, so 

that the required contribution 

percentage for this exemption in future 

years reflects the required contribution 

percentage for the applicable calendar 

year. 

Methodology for Determining the Excess 

of Rate of Premium Growth Over Rate of 

Income Growth 

As one possibility, we are considering 

establishing the rate of premium growth 

over the rate of income growth for a 

particular calendar year as the quotient 

of (x) one plus the rate of premium 

growth between the preceding calendar 

year and 2013, carried out to ten 

significant digits, over (y) one plus the 

rate of income growth between the 

preceding calendar year and 2013, 

carried out to ten significant digits. (To 

avoid magnifying rounding errors, any 

ratio of this sort would also be carried 

out to ten significant digits.) This would 

be multiplied by the required 

contribution percentage for 2014, for 

ease of application, and the result 

would be rounded to the nearest 

hundredth of a percent to yield the 

required contribution percentage for the 

calendar year. We note that this 

methodology would lead to a reduction 

in the required contribution percentage 

if the ratio of premium growth to 

income growth is less than one. 

Allowing for such a possibility would 

help ensure that changes in the required 

contribution standard are proportional 

to changes in the ratio of premiums over 

income observed in the private market 

as a whole. In contrast, we are also 

considering constraining this ratio, the 

excess of premium growth over income 

growth, to be greater than or equal to 

one. In addition, as discussed in further 

detail below, we are considering 

constraining the rate of premium growth 

and/or the rate of income growth to be 

equal to or greater than zero in any 

given year, and seek comment of the 

impact of these constraints on the 

excess of the rate of premium growth 

over the rate of income growth. We 

welcome comment on approaches for 

determining the excess of the rate of 

premium growth over the rate of income 

growth. In particular, we seek comment 

on whether the excess of the rate of 

premium growth over income growth 

should be calculated based on the 

difference between the growth rates, the 

ratio of the growth rates, or through 

other methods, and whether the result 

should be subject to other adjustments. 

Premium Growth: We are considering 

setting the rate of premium growth for 

a calendar year to be the premium 

adjustment percentage for the year. We 

provided in the 2015 Payment Notice 

that the premium adjustment 

percentage, described at 45 CFR 

156.130(e), will be published each year 

in the HHS notice of benefit and 

payment parameters, and will be used to 

adjust certain cost-sharing parameters 

established by the Affordable Care Act. 

As discussed in the 2015 Payment 

Notice, the premium adjustment 

percentage is calculated based on 

projections of average per enrollee 

employer-sponsored insurance 

premiums from the National Health 

Expenditure Accounts (NHEA), which 

are calculated by the CMS Office of the 

Actuary. After the initial years of 

implementation of market reforms, once 

the premium trend is more stable, we 

may propose to change the methodology 

for calculating the premium adjustment 

percentage. For 2015, the premium 

adjustment percentage is 4.213431463 

percent. We note that incorporating the 

premium adjustment percentage into the 

methodology for determining the 

required contribution percentage will 

ensure that adjustments for premium 

growth are made in a consistent manner 

across programs established by the 

Affordable Care Act. We welcome 

comment on whether we should use the 

premium adjustment percentage as a 

measure of premium growth for the 

purpose of calculating the contribution 

percentage index. We also seek 

comment on whether adjustments, such 

as ceilings or floors, should be made to 

that index. For example, we are also 

considering constraining the rate of 

premium growth to be equal to or 

greater than zero in any given year. We 

note the language of section 

5000A(e)(1)(D) of the Code could be 

read to support such an interpretation. 

That section uses the term ‘‘premium 

growth,’’ which could be read to mean 

that the statute envisions an adjustment 

of the required contribution percentage 

to only incorporate an increase in 

premiums. However, for purposes of 

this calculation, we seek comment on 

whether growth should be interpreted to 

refer to both positive and negative 

growth. We also seek comment on 

whether other data sources or methods 

should be used, such as alternative 

NHEA data sources, premium data from 

the Federal Employee Health Benefits 

Program, or any of the data sources 

discussed in connection with our 

proposal for the premium adjustment 

percentage index in the proposed 2015 

Payment Notice. 

Income Growth: We are contemplating 

calculating the rate of income growth for 

a calendar year as the percentage by 

which the per capita GDP for the 

preceding calendar year exceeds the per 

capita GDP for 2013, carried out to ten 

significant digits. In alignment with the 

premium adjustment percentage, we are 

considering using the projections of per 

capita GDP used for the NHEA.36 If we 

were to use the projection of per capita 

GDP used for the NHEA as a measure of 

income growth, the rate of income 

growth for 2015 would be 3.608458790 

percent. We note that GDP is a 

commonly used measure of income 

growth, but we are also considering 

other measures of income, such as 

indices of wages and salaries, and 

measures of personal income. We 

welcome comment on our proposed 

method for calculating the rate of 

income growth as well as alternative 

sources of income data that we should 

consider. In particular, we request 

comment on whether adjustments 

should be made to our data source or 

methodology, such as ceilings or floors. 

For example, similar to our discussion 

of ‘‘premium growth’’ above, we note 

that section 5000A(e)(1)(D) of the Code 

refers to ‘‘the rate of income growth.’’ 

Again, seek comment on whether 

growth should be interpreted to refer to 

both positive and negative growth. We 

also seek comment on whether we 

should seek to measure growth in GDP 

per person under the age of 65 or per 

worker, or growth in some other form of 

income index only for persons under 

the age of 65 or per worker, which may 

align more closely with certain 

measures of premium growth. 

We seek comment on all aspects of 

these potential approaches. 

b. Options for Conducting Eligibility 

Determinations for Exemptions 

(§ 155.625) 

In § 155.625, we established an option 

under which a State Exchange could 

adopt an eligibility determination for an 

exemption from the shared 

responsibility payment that was made 

by HHS, provided that certain 

conditions were met. Section 

1311(d)(4)(H) of the Affordable Care Act 

specifies that one of the minimum 

functions of an Exchange is to, ‘‘. . . 

grant a certification attesting that . . . 


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an individual is exempt . . .’’ 

Accordingly, § 155.625(b)(2) specified 

that under this option, effective October 

15, 2014, the Exchange would need to 

accept the exemption application, 

transmit it securely to HHS, receive the 

result, and notify the consumer. This 

process introduces significant 

information technology development 

and administrative burden into a 

process that could otherwise be 

executed at a single entity. In particular, 

such an arrangement would require a 

split of customer service 

responsibilities, which could make it 

very difficult for consumers to navigate 

the process. It also creates challenges for 

exemptions that involve information 

that can only be obtained through the 

eligibility process for insurance 

affordability programs, like the cost of 

the lowest-cost bronze plan net of 

advance payments of the premium tax 

credit, which is a component of one of 

the hardship exemptions described in 

this subpart, and is only available 

through a State Exchange. 

Accordingly, we propose to revise 

§ 155.625 to remove the option for a 

State Exchange to adopt an eligibility 

determination for an exemption from 

the shared responsibility payment made 

by HHS for applications submitted on or 

after November 15, 2014 and, for 

applications submitted before November 

15, 2014, to retain the conditions 

currently imposed for adopting an 

eligibility determination for an 

exemption from the shared 

responsibility payment that was made 

by HHS under paragraph (b)(1). Under 

this proposal, HHS would continue to 

provide support in this area for 

applications up until that date. HHS has 

developed and released a set of model 

paper applications that can be adopted 

by State Exchanges, and is committed to 

providing technical assistance to assist 

State Exchanges in developing the 

capability to handle the minimum 

function of granting certificates of 

exemption. 

7. Subpart H—Exchange Functions: 

Small Business Health Options Program 

a. Functions of a SHOP (§ 155.705) 

Section 155.705(b)(2) and (3) currently 

provide that, for plan years beginning 

on or after January 1, 2015, all SHOPs 

must make available to qualified 

employers the option of selecting an 

actuarial value level of coverage as 

described in section 1302(d)(1) of the 

Affordable Care Act and making all 

qualified health plans at that level 

available to qualified employees 

(‘‘employee choice’’). Based on 

communications with issuers and State 

insurance commissioners, HHS has 

become concerned that, in some 

circumstances, implementing employee 

choice in 2015 might significantly 

disrupt some small group markets, and 

might therefore have a negative effect on 

the ability of small business owners to 

access coverage. HHS is specifically 

concerned that in certain circumstances, 

employee choice might lead to sicker 

people enrolling in disproportionate 

numbers in certain plans, which could 

have the effect of discouraging issuers 

from participating in the SHOP or 

causing adverse selection in the market 

that cannot be fully addressed by the 

single risk pool provisions of the statute 

or the premium stabilization programs. 

We have also heard concerns from 

issuers and State insurance 

commissioners that requiring employee 

choice might reduce issuer 

participation, leading to minimal value 

to consumers when there is not broad 

participation among issuers in the 

SHOP. At the same time, HHS does not 

anticipate that these conditions will 

apply in most markets, and HHS is 

continuing to work toward 

implementing employee choice in all 

SHOPs, because in the long run 

employee choice will bring significant 

benefits to small business owners and 

their employees. Not implementing 

employee choice may also disrupt the 

implementation efforts that issuers, 

States, Exchanges, and other 

stakeholders have already undertaken. 

To address these concerns, we 

propose to amend § 155.705(b)(2) and 

(3) to provide for a one year transition 

policy under which a SHOP would be 

permitted to not implement employee 

choice in 2015 under specific 

circumstances: (1) If employee choice 

would result in significant adverse 

selection in the State’s small group 

market that could not be fully 

remediated by the single risk pool or 

premium stabilization programs; or (2) if 

there is an insufficient number of 

issuers offering qualified health plans or 

qualified stand-alone dental plans to 

allow for meaningful plan choice among 

qualified health plans or qualified 

stand-alone dental plans for all actuarial 

value levels in the State’s SHOP. We 

believe that meaningful choice means 

sufficient competition in the market to 

allow for participation in the SHOP 

from multiple issuers throughout the 

State. Meaningful choice provides 

affordable, quality plan options 

throughout the State’s SHOP for all 

actuarial value levels. 

Under this proposal, a State 

regulatory agency, such as the State 

department of insurance, would submit 

a recommendation to the SHOP (or in 

the case of an FF–SHOP, to the 

Secretary) in support of either 

circumstance for plan years beginning 

in 2015. We are considering whether 

such a recommendation by the State 

regulatory agency should include a 

mitigation plan describing the process 

the State regulatory agency will take to 

ensure that full implementation of 

employee choice in 2016 would not 

result in the occurrence of either 

aforementioned circumstance, and seek 

comment on whether such a plan 

should be included with the 

recommendation. We expect that the 

State would be required to provide in 

the recommendation to the SHOP 

concrete evidence that employee choice 

would result in significant adverse 

selection in the State’s small group 

market that cannot be remediated 

through the premium stabilization 

programs or the single risk pool, or that 

there would not be a meaningful choice 

of QHPs and/or stand-alone dental plans 

in the State’s SHOP. The SHOP would 

then evaluate the State’s 

recommendation and request and 

determine whether the State’s small 

group market would be significantly 

adversely affected by the 

implementation of employee choice. In 

the FF–SHOPs, CMS would seek public 

comment on the State’s request 

regarding employee choice before 

making this determination. We seek 

comment on all aspects of the process 

SHOPs should follow in making this 

determination. 

We seek comment on all aspects of 

this proposal, including, but not limited 

to: (1) The effect of such a policy on all 

SHOPs; (2) the effect of such a policy on 

each State’s small group market; (3) the 

effect of such a policy on small 

employers and their employees and 

dependents; (4) the information the 

State regulatory agency should provide 

in support of any recommendation; (5) 

the criteria the SHOP (including, in the 

case of an FF–SHOP, the Secretary) 

should use in assessing a State 

regulatory agency recommendation; (6) 

whether all SHOPs should seek public 

comment on the State’s request 

regarding employee choice; (7) whether 

employee choice would have to exist for 

both medical QHPs and stand-alone 

dental plans, or for neither; and (8) 

whether other provisions of the HHS 

regulations applicable to SHOPs should 

also be subject to a transition in SHOPs 

that exercise the proposed option. In 

particular, we seek comments on what 

should qualify as a significant risk of 

adverse selection, what should qualify 

as a lack of meaningful plan choice, and 

how both these conditions should be 

measured. 


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37 2015 Letter to Issuers in the Federallyfacilitated Marketplaces (March 14, 2014). Available 

at: http://www.cms.gov/CCIIO/Resources/

Regulations-and-Guidance/Downloads/2015-finalissuer-letter-3-14-2014.pdf. 

We also recognize the importance of 

the timing of a State regulatory agency’s 

recommendation and the SHOP’s 

decision regarding employee choice 

under this proposal. Whether or not 

employee choice is available in a SHOP 

may be relevant information for issuers 

to consider as they make QHP 

submissions, but State regulatory 

agencies also need time to evaluate 

market dynamics before they can make 

a recommendation about whether the 

SHOP should not implement employee 

choice in 2015. We are considering 

establishing a deadline for the State 

regulatory agency’s recommendation to 

the SHOP. One option we are 

considering is that State regulatory 

agencies would make recommendations 

prior to the close of the initial QHP 

application window, with sufficient 

time for issuers to decide whether or not 

to participate in SHOP for the following 

plan year. Another option would be as 

follows: (1) All issuers interested in 

participating in SHOP would apply 

during the initial application window; 

(2) state regulatory agencies then would 

have a specific window of time within 

which to make a recommendation 

regarding whether to not implement 

employee choice in 2015 based on the 

applications received; (3) the SHOP 

would then have a specific window of 

time within which to make a decision 

about not implementing employee 

choice in 2015 based on that 

recommendation; (4) issuers could, 

based upon the SHOP’s decision, decide 

whether to maintain, modify, or 

withdraw their QHP applications. In the 

FF–SHOPs, under this second scenario, 

we do not anticipate that issuers would 

be able to submit applications after the 

initial deadline to apply for QHP 

certification had passed. We solicit 

comment on these two options for 

timing the State regulatory agency’s 

recommendation and the SHOP’s 

decision, and also solicit additional, 

alternative suggestions for how best to 

operationalize this proposal. Generally, 

we request comment on the appropriate 

time for State regulatory agencies to 

submit a request to the Exchange 

regarding employee choice, on the 

appropriate time for the Exchange to 

make a decision on those requests, and 

on the effect of the timing of the 

decision making process on the QHP 

certification timeline as described in 

HHS regulations and guidance 

(including in the 2015 Annual Issuer 

Letter).37 In any event, we expect that 

SHOPs would reach a decision about 

employee choice no later than early Fall 

2014. We also seek comment on 

whether adverse selection could be 

avoided by allowing an employer to 

provide employee choice under the 

following circumstances: (1) Within a 

single issuer’s plan offerings within an 

actuarial value level; (2) for all plans 

from a single issuer across two 

contiguous actuarial value levels; and 

(3) for all plans, all actuarial value 

levels, from a single issuer. These 

circumstances are transitional policies 

and do not reflect the full 

implementation of employee choice; we 

seek comment on how the proposed 

provisions would apply in these 

circumstances. 

b. Enrollment Periods Under SHOP 

(§ 155.725) 

We propose amendments to 

§ 155.725(c) and (e) to amend the dates 

for the annual open enrollment periods 

for qualified employers and qualified 

employees in all SHOPs, both Statebased or Federally-facilitated. In 

proposed §§ 155.725(c)(1), we propose 

to align the start of annual employer 

election periods in all SHOPs for plan 

years beginning in 2015 with the start of 

open enrollment in the corresponding 

individual market Exchange for the 

2015 benefit year, as amended in the 

2015 Payment Notice. In accordance 

with this proposal, we propose to 

modify paragraph (e) of this section to 

remove the reference to a period of no 

less than 30 days for the annual 

employee open enrollment period. 

Under this proposal, the annual 

employer and employee election 

periods would begin no sooner than 

November 15, 2014 with employers 

making selections first, followed by 

employees. The employer’s annual 

election period will end when the 

employer makes relevant decisions 

about the coming year’s participation. 

Qualified employers and qualified 

employees would still have adequate 

time to perform plan selection for plan 

years beginning in 2015 under this 

proposal. SHOPs would benefit from 

having the same amount of time to 

complete the QHP certification process 

for the SHOP as they have to complete 

this process for the individual 

Exchange. Notification standards 

described in paragraph (d) and (f) of this 

section would still apply, as the 

standards merely require the SHOP to 

notify qualified employers of annual 

employer election periods and to notify 

qualified employees of the annual 

employee open enrollment periods in 

advance of such periods. 

The lack of alignment of the start of 

annual employer election periods in the 

SHOP for plan years beginning in 2015 

with the start of open enrollment in the 

individual market Exchange for 2015 

would place a burden on SHOPs and 

QHP issuers. Many Exchanges rely on 

the same technology solutions for plan 

management and other minimum 

functions of Exchanges in both the 

individual and small group markets. 

Aligning the start dates for the employer 

election period with the start of 

individual market Exchange open 

enrollment for 2015 would provide 

Exchanges with a uniform timeline for 

improving and launching Exchange 

services for 2015. Additionally, a 

uniform QHP filing and review timeline 

for both markets for 2015 would reduce 

confusion and provide efficiencies to 

scale in review, providing potential 

resource savings to Exchanges and QHP 

issuers. These efficiencies would still 

exist even if the SHOP and individual 

market Exchange were operated by 

different entities (such where a State has 

exercised the option at § 155.100(a)(2) to 

establish and operate only a SHOP, as 

many QHP issuers seek QHP 

certification in both markets. 

We note that pursuant to 

§ 147.104(b)(1)(i), group coverage 

purchased in the SHOP between 

November 15 and December 15 of each 

year is not subject to employer 

contribution or group participation rules 

as defined in § 147.106(b)(3). FF–SHOPs 

do not enforce minimum participation 

requirements between November 15 and 

December 15 of each year, but they are 

enforced upon initial enrollment 

outside of this window and at renewal. 

Aligning the annual employer election 

period to the start of the individual 

market Exchange to begin no sooner 

than November 15, 2014 will provide 

qualified employers and employees 

with a period of time to enroll for 2015 

coverage when the FF–SHOP minimum 

participation provisions are not 

enforced. 

We request comments on whether the 

proposed policy concerning aligning the 

timing of the SHOP employer election 

period for 2015 with the individual 

market annual open enrollment period 

would pose challenges for State-Based 

SHOPs as well as comments on any 

special circumstances that they would 

face in implementing the proposed 

policy. If implementing the proposed 

policy would disrupt the operations of 

State-Based SHOPs, we request 

comments on what flexibilities or 

adjustments to the proposed policy may 

be necessary to address these concerns. 


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38Patient Protection and Affordable Care Act; 

Exchanges and Qualified Health Plans, Quality 

Rating System (QRS) Framework, Measures and 

Methodology; Notice with Comment, 78 FR 69418 

(Nov. 19, 2013). 

For example, a State-based SHOP might 

have a 2015 small group market QHP 

certification process under which QHPs 

for 2015 coverage would be available 

sooner than November 15, 2014, such 

that the State-based SHOP’s annual 

employer election period could start 

earlier than that date. 

In §§ 155.725(c)(2) and 155.725(e), we 

propose to remove the required 

minimum lengths of both the employer 

election period and the employee open 

enrollment period to provide additional 

flexibility to SHOPs and qualified 

employers. The existing minimum 

standards may make it difficult for 

groups participating in the SHOP to 

renew coverage in a timely manner, as 

under the current regulations, the entire 

process could take as many as 75 days 

or longer to complete: up to 30 days for 

the employer’s election, 30 days for the 

employees to enroll, and, depending on 

when in a given month that enrollment 

occurs, 15 or more days before coverage 

becomes effective. Further, this 

timeframe is not feasible in light of the 

proposal above to align the earliest date 

that an employer election period could 

begin in all SHOPs for plan years 

beginning in 2015 with the start of open 

enrollment in the corresponding 

individual market Exchange for the 

2015 benefit year. 

This proposal to remove the existing 

minimum timeframes for qualified 

employer and qualified employee 

enrollment decisions will permit SHOPs 

and qualified employers to act more 

quickly to renew coverage. 

Additionally, the existing minimum 

lengths for the employer election and 

employee open enrollment periods 

further complicate the renewal process 

for qualified employers renewing 

throughout the calendar year in SHOPs 

that permit the quarterly update of rates 

for QHPs. In many States, the updated 

rate may be published fewer than 45 

days prior to the rate taking effect. 

Therefore, under the existing minimum 

standard, a qualified employer might 

not be able to consider the most up-todate rate information for the coverage it 

intends to offer. Instead, such rate 

information might only become 

available during the employee open 

enrollment period, in which case the 

qualified employer may need to reopen 

either the employer election period or 

the employee open enrollment period to 

determine whether the selected QHPs 

still meet their needs under the new 

rates. This proposal will ameliorate this 

concern by permitting SHOPs to 

complete the entire election and 

enrollment processes in fewer than 45 

days. 

We seek comment on all aspects of 

these proposals. 

c. SHOP Employer and Employee 

Eligibility Appeals Requirements 

(§ 155.740) 

We propose to amend § 155.740(g) by 

redesignating paragraphs (g)(1) through 

(g)(3) to more clearly delineate between 

the requirements associated with valid 

appeals and those associated with 

invalid appeals. 

In § 155.740(i)(1)(i), we propose to 

amend the provision by crossreferencing the withdrawal standards 

proposed in the individual market at 

§ 155.530(a)(1). Under current rules, an 

appellant who wishes to withdraw his 

or her appeal request must do so in 

writing (hard copy or electronic). The 

amended provision would allow an 

appellant to withdraw his or her appeal 

request in writing or by telephone, if the 

appeals entity is capable of accepting 

telephonic withdrawals. As noted above 

in the preamble to § 155.530(a), appeals 

entities that wish to provide telephonic 

withdrawals must record, in full, the 

appellant’s statement and telephonic 

signature made under penalty of perjury 

and provide a written (in hard copy or 

electronically) confirmation to the 

appellant documenting the telephonic 

interaction. Written confirmation can be 

captured in the dismissal notice 

required in the case of a withdrawal 

under § 155.740(i)(2). Like the proposal 

in the individual market, this 

amendment is intended to provide 

greater efficiency and convenience for 

an appellant and appeals entity to close 

an appeal in accordance with the 

appellant’s wishes. We seek comment 

on this proposal. 

8. Subpart O—Quality Reporting 

Standards for Exchanges 

a. Quality Rating System (§ 155.1400) 

To implement section 1311(c)(3) of 

the Affordable Care Act, we propose 

standards for data collection by QHP 

issuers and the public reporting by 

Exchanges of quality rating information. 

We intend to have a beta testing period 

in 2015 to provide early feedback to 

Exchanges and QHP issuers and begin 

public reporting of quality rating 

information and enrollee satisfaction 

survey information in 2016. We believe 

that it is important that the QRS provide 

QHP ratings that are based on health 

care quality, health outcomes, consumer 

experience, accessibility of care and 

affordability of care, which is 

information that is essential to inform 

consumer choices and to perform 

certain required functions of an 

Exchange. As outlined in the November 

19, 2013 Federal Register Notice with 

Comment 38 on the QRS framework 

(QRS Notice), in the initial years, HHS 

aims to align the measures included in 

the QRS, to the extent possible, with 

measures health plans currently report 

in the commercial markets and public 

programs. The general functions of an 

Exchange outlined in 45 CFR 155.200(d) 

already include a requirement for an 

Exchange to oversee implementation of 

quality activities, including the ESS and 

QRS, and to ensure the reporting of data 

for these quality activities. 

In § 155.1400, we propose that the 

Exchange must prominently display on 

its Web site, in accordance with 45 CFR 

155.205(b)(1)(v), quality rating 

information assigned for each QHP 

under the QRS, as calculated by HHS 

and in a form and manner specified by 

HHS, starting in 2016. The standards for 

QHP issuers regarding the collection 

and submission of validated quality 

measures data for the QRS are described 

in Part 156, Subpart L of this proposed 

rule. The list of proposed individual 

quality measures and the proposed 

organization of the QRS measure sets 

are described in the QRS Notice. In 

addition, we intend to release the 

proposed methodology for calculating 

quality ratings as well as details 

regarding measure specifications and 

data validation processes in technical 

guidance in 2014. 

We believe that the proposed 

approach where each Exchange displays 

quality ratings calculated by HHS based 

on a standard scoring methodology 

allows for reliable, uniform, and 

comparable QHP ratings across 

Exchanges. Therefore, HHS intends to 

calculate the quality ratings and provide 

the ratings to Exchanges for prominent 

display of quality rating information for 

each QHP offered in the Exchange. We 

encourage State Exchanges to have a 

plan review period, similar to what we 

intend to offer QHP issuers that 

participate in the Federally-facilitated 

Exchange, to allow issuers to review 

their QHPs’ quality rating information 

before the data become public and to 

identify any discrepancies or errors with 

the data submitted, as appropriate. We 

have not incorporated specific criteria 

for public display by the Exchanges of 

the QHP quality rating information in 

proposed § 155.1400. However, we 

intend to do so in future technical 

guidance and are considering modeling 

the display of QHP quality ratings in a 

consistent manner with existing CMS 


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Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 15845 

39Peters EM, Dieckmann N, Dixon A, Hibbard JH, 

Mertz CK. Less is more in presenting quality 

information to consumers. Med Care Res Rev. 

2007;64 (2):169–90; Hibbard JH, Peters EM. 

Supporting informed consumer health care 

decisions: data presentation approaches that 

facilitate the use of information in choice. Annual 

Review of Public Health. 2003; 24:413–33. 

40The standards for QHP issuers regarding the 

collection and submission of data for the ESS, 

including the proposed timeline for public 

reporting of such data, are described below in Part 

156, Subpart L of this proposed rule. Also see 

Agency Information Collection Activities: Health 

Insurance Marketplace Consumer Experience 

Surveys: Enrollee Satisfaction Survey and 

Marketplace Survey Data Collection; Notice, 78 FR 

65658 (Nov. 1, 2013). 

41See Appendix C of the 2014 Letter to Issuers 

on Federally-facilitated and State Partnership 

Exchanges (April 5, 2013). Available at: http://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/2014_letter_to_issuers_

04052013.pdf. 

programs. As outlined in the QRS 

Notice, we intend to implement a 

methodology that would assign a quality 

rating to a QHP using a five star scale. 

The star ratings would be displayed in 

a similar style and format to that of 

Medicare Advantage and Prescription 

Drug Plan ratings. We believe that the 

five star quality rating display of 

Medicare Advantage health plans offers 

reliable data that is understandable for 

consumers. HHS anticipates providing 

the calculated rating information, as 

proposed in § 155.1400, for display on 

an Exchange Web site on an annual 

basis for the open enrollment period. 

We seek comment on the display of 

quality ratings of QHPs offered in an 

Exchange for consumers and employers, 

which aids comprehension of QHP 

quality information and which 

facilitates plan selection. 

HHS recognizes that some States 

already have requirements for and 

publicly report health plan quality and 

outcomes data, and we want to 

encourage State flexibility and 

innovation, consistent with the 

Affordable Care Act. In addition to 

prominently displaying quality rating 

information for each QHP, as calculated 

by HHS in accordance with the QRS, a 

State Exchange may display additional 

QHP quality-related information, as 

appropriate, to enhance the consumer 

experience and help consumers 

compare QHPs being offered in an 

Exchange. We believe this proposed 

approach ensures that standardized 

information on the quality of health care 

will be collected and displayed across 

Exchanges but also provides flexibility 

for State Exchanges to incorporate 

additional information on their Web 

sites to support the plan comparison 

and selection process by consumers. We 

also are considering allowing State 

Exchanges the flexibility to display the 

QRS rating information, and satisfy the 

obligation under 45 CFR 

155.205(b)(1)(v), by prominently 

displaying a link to the Federallyfacilitated Exchange Web site that 

would present the Federal quality rating 

information. We seek comment on this 

approach including effective ways to 

display quality rating information to 

help consumers compare and select 

QHPs offered in an Exchange. 

b. Enrollee Satisfaction Survey System 

(§ 155.1405) 

Similar to the display requirement for 

the QRS, we propose a display 

requirement for the Exchange in 

§ 155.1405 relating to the Enrollee 

Satisfaction Survey (ESS) to implement 

section 1311(c)(4) of the Affordable Care 

Act. We propose that the Exchange 

would prominently display results from 

the ESS on its Web site, in accordance 

with § 155.205(b)(1)(iv), as calculated by 

HHS, and in a form and manner 

specified by HHS, starting in 2016. The 

standards for QHP issuers regarding the 

collection and submission of validated 

data for the ESS are described in Part 

156, Subpart L of this proposed rule. 

Because we believe that information 

regarding enrollee experience with the 

QHP is a fundamental aspect of the 

overall quality rating, HHS intends to 

incorporate enrollee experience data 

from the results of the ESS into the 

quality rating for each QHP. Research39

has shown that synthesizing and 

simplifying health plan quality 

information presented to consumers 

eases consumer comprehension; 

therefore, we have developed a 

methodology to incorporate enrollee 

experience data as part of the quality 

rating information. We intend for the 

display of quality ratings, including the 

member experience data from the ESS, 

to be capable of drilling down to the 

results for individual quality measures 

if consumers should choose to access 

more detail of the data underlying the 

synthesized global quality rating. We 

therefore believe that by displaying 

quality rating information as described 

in § 155.1400 of this proposed rule 

(which would incorporate member 

experience data from the ESS), an 

Exchange would meet the requirement 

of displaying ESS information to 

consumers and employers for the 

purposes of plan comparison and satisfy 

the standard outlined in 45 CFR 

155.205(b)(1)(iv). HHS anticipates 

providing results to the full ESS survey 

to an Exchange on an annual basis. An 

Exchange may choose to display on its 

Web site all ESS results, including those 

scores not used as part of the QRS. We 

seek comment on this proposed 

approach for displaying ESS 

information on an Exchange Web site. 

Similar to our approach with the QRS, 

we also want to encourage State 

flexibility and innovation, consistent 

with the Affordable Care Act, with 

respect to enrollee satisfaction 

information. We therefore seek 

comment on whether State Exchanges 

should have flexibility to display the 

ESS 2015 beta test results prior to the 

scheduled public display of the Federal 

ESS in 2016.40 Specifically, we solicit 

feedback on effective ways State 

Exchanges may share enrollee 

satisfaction information to help 

consumers compare and select QHPs 

offered in an Exchange prior to the 

availability of the Federal ESS data for 

the 2017 open enrollment period. 

F. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. Subpart B—Essential Health Benefits 

Package 

a. Prescription Drug Benefits (§ 156.122) 

Section 156.122(c) requires issuers 

that provide EHB to have procedures in 

place that allow an enrollee to request 

and gain access to clinically appropriate 

drugs not covered by the plan. We are 

concerned that some enrollees, 

particularly those with certain complex 

medical conditions, are having trouble 

accessing in a timely fashion clinically 

appropriate prescription drugs, such as 

prescription drugs that are combination 

drugs not covered by their plans’ 

formularies. Accordingly, we are 

considering amending the formulary 

exceptions standards under § 156.122(c) 

to require that these processes can be 

expedited when necessary based on 

exigent circumstances, such as when an 

enrollee is suffering from a serious 

health condition or an enrollee is in a 

current course of treatment using a nonformulary drug. For example, we could 

specify that an issuer render decisions 

regarding formulary exceptions requests 

within 24 hours following the issuers’ 

receipt of the exceptions requests. This 

is currently suggested in the 2014 Letter 

to Issuers.41 As clarification, the 

prescription drug standard in 

§ 156.122(a)(1) was not intended to 

discourage issuers from offering 

clinically appropriate drugs to enrollees, 

including combination drugs. 

We seek comment on what specific 

standards would be appropriate for 

defining this expedited exceptions 

process, and on all other aspects of this 

proposal. 


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42See 26 CFR 1.45R–2(f)(1). 

43See http://www.irs.gov/pub/irs-drop/rp-13- 

25.pdf. 

44See CCIIO Sub-Regulatory Guidance: Process 

for Obtaining Recognition as Minimum Essential 

Coverage (October 31, 2013. Available at: http://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/mec-guidance-10-31- 

2013.pdf. 

b. Cost-Sharing Requirements 

(§ 156.130) 

Under § 156.130(a), cost sharing for 

2014 for self-only coverage may not 

exceed the annual dollar limit described 

in section 223(c)(2)(A)(ii)(I) of the Code. 

Under § 156.130(b), for a plan year 

beginning in calendar year 2014, the 

annual deductible for a health plan in 

the small group market for self-only 

coverage may not exceed $2,000. For 

2015 and later years, these limitations 

are to be increased by an amount equal 

to the products of these amounts and 

the premium adjustment percentage 

established pursuant to paragraph (e) of 

that section. (The limitations for other 

than self-only coverage are twice the 

limitations for self-only coverage.) 

Under § 156.130(d), any increase in 

these annual limits that does not result 

in a multiple of $50 is to be rounded to 

the next lowest multiple of 50 dollars. 

Section 156.130(e) provides that the 

premium adjustment percentage is the 

percentage (if any) by which the average 

per capita premium for health insurance 

coverage for the preceding calendar year 

exceeds such average per capita 

premium for health insurance for 2013, 

and that this percentage will be 

published annually in the HHS notice of 

benefit and payment parameters. The 

2015 Payment Notice established our 

methodology for calculating the 

premium adjustment percentage. 

In calculating the proposed 

limitations on cost sharing and small 

group deductible in the proposed 2015 

Payment Notice, we rounded these 

limitations up to the next lowest 

multiple of $50. However, we 

subsequently learned that the IRS 

convention for interpreting similar 

language for a number of longstanding 

tax parameters—such as indexing 

methodologies for the alternative 

minimum tax and the standard 

deduction—is to round down to the 

nearest applicable multiple. For 

example, the Department of the 

Treasury, in a rule on how employers 

should calculate average annual fulltime-equivalent wages for purposes of 

the small employer health insurance tax 

credit, provides that if the result is not 

a multiple of $1,000, employers should 

round the result to the next lowest 

multiple of $1,000.42

As a result, to align our rounding 

rules with those used by the Department 

of the Treasury and the Internal 

Revenue Service, we propose to amend 

§ 156.130(d) to specify that when 

indexing the annual limitation on cost 

sharing and the annual limitation on 

small group deductibles for years after 

2014, we will round to the multiple of 

50 dollars that is lower than the number 

calculated by the formula. 

Under this proposed amendment to 

§ 156.130(d), using the premium 

adjustment percentage of 4.213431463 

percent for 2015 we established in the 

2015 Payment Notice and the 2014 

maximum annual limitation on cost 

sharing of $6,350 for self-only coverage, 

which was published by the IRS on May 

2, 2013,43 the 2015 maximum annual 

limitation on cost sharing would be 

$6,600 for self-only coverage and 

$13,200 for other than self-only 

coverage. 

Similarly, under the proposed 

amendment to § 156.130(d), using the 

premium adjustment percentage for 

2015 of 4.213431463 percent and the 

2014 maximum annual limitation on 

deductibles of $2,000 for self-only 

coverage, as specified in 

§ 156.130(b)(1)(i), the 2015 maximum 

annual limitation on deductibles would 

be $2,050 for self-only coverage and 

$4,100 for other than self-only coverage. 

We seek comment on our proposed 

amendment and its application for 2015. 

2. Subpart C—General Functions of an 

Exchange 

a. QHP Issuer Participation Standards 

(§ 156.200) 

In § 156.200(b)(5), we propose 

technical amendments to clarify that 

implementing and reporting for the QRS 

and implementing a quality 

improvement strategy are conditions of 

participation in an Exchange. 

Specifically, we propose to include a 

reference to sections 1311(c)(3) and 

(c)(1)(E) of the Affordable Care Act to 

correctly align with other quality 

standards listed as part of QHP 

certification standards, including the 

ESS. 

We also propose to amend § 156.200 

to add paragraph (h) to require that, in 

order to receive QHP certification, the 

offering issuer attest that, subsequent to 

receiving such certification, it will 

comply with all operational 

requirements contained in Part 156, 

Subparts D, E, H, K, L, and M. We are 

proposing to add paragraph (h), 

however, to ensure that issuers seeking 

QHP certification understand and have 

fully committed to compliance with all 

operational requirements. 

3. Subpart G—Minimum Essential 

Coverage 

a. Other Coverage That Qualifies as 

Minimum Essential Coverage 

(§ 156.602) 

In the final rule published on July 1, 

2013 (78 FR 39494), we designated 

certain types of coverage as minimum 

essential coverage, including selffunded student health coverage (for plan 

or policy years beginning on or before 

December 31, 2014), Refugee Medical 

Assistance supported by the 

Administration for Children and 

Families, Medicare advantage plans, 

State-high risk pool coverage (for plan 

or policy years beginning on or before 

December 31, 2014) and other coverage 

that qualifies pursuant to the minimum 

essential coverage application process 

in 45 CFR 156.604. We also established 

a process by which sponsors of other 

coverage not designated as minimum 

essential coverage could apply with 

HHS to be recognized as minimum 

essential coverage. 

In guidance published on October 31, 

2013, we further indicated that coverage 

under a group health plan provided 

through insurance regulated by a foreign 

government (and not regulated by a 

State) is recognized as minimum 

essential coverage for a month with 

respect to an individual who, for such 

month, is physically absent from the 

United States for at least one day of the 

month. In addition, coverage under a 

group health plan provided through 

insurance regulated by a foreign 

government (and not regulated by a 

State) will also be recognized as 

minimum essential coverage with 

respect to an individual who is 

physically present in the United States 

for an entire month if the coverage 

provides health benefits within the 

United States while the individual is an 

expatriate.44 The rationale behind this 

policy was that insurance that is 

regulated by a foreign government and 

not subject to regulation by a State does 

not meet the definition of health 

insurance coverage under the PHS Act, 

and thus should not be considered for 

purposes of a PHS Act analysis. The 

effect of this policy is to place group 

health coverage provided through 

foreign insurance on the same footing as 

self-insured group health coverage with 

respect to being deemed minimal 


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45See FAQs about Affordable Care Act 

Implementation (Part XVIII) and Mental Health 

Parity Implementation (January 9, 2014). Available 

at: http://www.cms.gov/CCIIO/Resources/FactSheets-and-FAQs/aca_implementation_faqs18.html 

and http://www.dol.gov/ebsa/faqs/faq-aca18.html. 

46See Black’s Law Dictionary Free (2d ed. 2014). 

Available at: http://thelawdictionary.org/expatriate. 

47Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, SHOP, and Eligibility 

Appeals, 78 FR 54070 (August 30, 2013) (to be 

codified at 45 CFR parts 147, 153, 155, and 156). 

essential coverage without having to go 

through the application process. 

We now propose to add new 

paragraph (e) to § 156.602 codifying the 

treatment of foreign group health 

coverage as stated in the October 31, 

2013 guidance. We propose to designate 

foreign group health coverage for 

expatriates as minimum essential 

coverage if the coverage is self-insured, 

or is insured by an entity that is not 

subject to regulation by a State. 

Specifically, we propose to clarify in the 

regulations that foreign group health 

coverage is group health coverage that 

(1) is not insured by an issuer regulated 

by a State and (2) is for expatriates who 

are citizens or nationals of the United 

States residing abroad, or is for 

expatriates who are not citizens or 

nationals of the United States residing 

in the United States. We propose that if 

coverage for expatriates who are citizens 

or nationals of the United States who 

reside abroad is provided by a selfinsured group health plan, or is 

provided by group health insurance not 

regulated by a State or group health 

coverage provided by a foreign national 

health plan, the coverage is designated 

as minimum essential coverage for any 

month that the citizen or national of the 

United States is physically absent from 

the United States for at least one day of 

the month. 

For purposes of this section, we 

propose to define an ‘‘expatriate’’ as an 

individual for whom there is a good 

faith expectation that such individual 

will reside outside of their home 

country for at least six months of a 12- 

month period, including any covered 

dependents. This definition was 

adopted from the January 9, 2014 

Affordable Care Act Implementation 

FAQs.45 Another option is that we 

define ‘‘expatriate’’ more broadly to 

apply to individuals that are living 

outside of their home country for less 

than six months. For example, the 

Black’s Law Dictionary defines 

‘‘expatriate’’ as a citizen of country A 

living in country B where the 

classification of this citizen occurs 

regardless of if the citizen has a short 

stay or an extended or lifetime stay in 

country B.46 We solicit comments on 

either definition of expatriate discussed 

above or another definition that would 

be appropriate for this section. 

If an expatriate is a citizen or national 

of the United States and is physically 

present in the United States for an entire 

month, we propose that their foreign 

group health coverage is designated as 

minimum essential coverage if the 

coverage provides health benefits within 

the United States, and is provided by a 

self-insured group health plan, group 

health insurance regulated by a foreign 

government (and not by a State), or 

group health coverage provided by a 

foreign national health plan. We 

propose this time period so that 

expatriates who are citizens or nationals 

of the United States working abroad 

may visit the United States for a short 

period of time without their foreign 

group health coverage losing its 

designation as minimum essential 

coverage. We propose that the coverage 

must provide health benefits within the 

United States to ensure that the 

coverage is not limited to providing 

health benefits while an individual is 

absent from the United States. We 

solicit comments on the time period that 

expatriates who are citizens or nationals 

of the United States working abroad can 

remain in the United States without 

their foreign group health coverage 

losing its designation as minimum 

essential coverage. 

In 45 CFR 156.602(e), we propose that 

if the foreign group health coverage is 

for expatriates residing in the United 

States who are not citizens or nationals 

of the United States, the coverage is 

designated as minimum essential 

coverage if the coverage provides health 

benefits within the United States, and is 

provided by a self-insured group health 

plan, group health insurance regulated 

by a foreign government (and not 

regulated by a State), or group health 

coverage provided by a foreign national 

health plan. We propose that the 

coverage must provide health benefits 

within the United States so as to ensure 

that the coverage provides health 

insurance benefits in the United States 

while an individual is living in the 

United States. 

To ensure that expatriates enrolled in 

foreign group health coverage are aware 

that their coverage has been designated 

as minimum essential coverage and that 

foreign group health coverage complies 

with the same reporting requirements as 

other types of minimum essential 

coverage, we propose to require that the 

sponsor, issuer, or plan administrator, 

as applicable, of any foreign group 

health coverage must provide notice to 

enrollees who are citizens or nationals 

of the United States of its minimum 

essential coverage status and comply 

with the information and reporting 

requirements of section 6055 of the 

Code and implementing regulations 

with respect to those enrollees. We 

welcome comments on any aspect of 

these proposals. 

b. Requirements for Recognition as 

Minimum Essential Coverage for Types 

of Coverage Not Otherwise Designated 

Minimum Essential Coverage in the 

Statute or This Subpart (§ 156.604) 

Section 45 CFR 156.604 outlined a 

process by which types of coverage not 

statutorily specified and not designated 

by regulation as minimum essential 

coverage may seek to be recognized as 

minimum essential coverage. We 

established the requirement that the 

application must be submitted to HHS 

on behalf of the plan or policy by the 

sponsor of the coverage or government 

agency. 

We now propose to clarify that the 

application may also be submitted to 

HHS on behalf of the plan or policy by 

a health insurance issuer or a plan 

administrator because the health 

insurance issuer or plan administrator 

may be the more appropriate party to 

submit the application. For example, a 

health insurance issuer may more 

efficiently provide the information 

required for an application on behalf of 

a foreign health insurance plan sold in 

the individual market to expatriates 

living abroad. We welcome comments 

on all aspects of these proposals. 

4. Subpart I—Enforcement Remedies in 

Federally-Facilitated Exchanges 

a. Available Remedies; Scope 

(§ 156.800) 

In subpart I of 45 CFR part 156, 

finalized on August 30, 2013 in the rule 

Patient Protection and Affordable Care 

Act; Program Integrity: Exchange, 

SHOP, and Eligibility Appeals (Program 

Integrity Rule),47 we established the 

enforcement remedies available to HHS 

for enforcing standards applicable to 

issuers offering QHPs in the FFEs. Since 

the publication of that rule and in the 

course of our routine monitoring of QHP 

issuers for compliance with applicable 

FFE standards, we have received 

multiple inquiries from QHP issuers and 

States about whether HHS will be 

coordinating and sharing information 

about QHP issuers with State regulatory 

entities as part of its oversight activities. 

We propose adding paragraph (d) to 

clarify that HHS may consult and share 

information about QHP issuers with 

other Federal and State regulatory and 

enforcement entities to the extent that 


sroberts on DSK5SPTVN1PROD with PROPOSALS
15848 Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 

48Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, SHOP, Premium 

Stabilization Programs, and Market Standards; 

Proposed Rule, 78 FR 37032 (June 19, 2013). 

49Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, Premium Stabilization 

Programs, and Market Standards; Amendments to 

the HHS Notice of Benefit and Payment Parameters 

for 2014, 78 FR 65046 (Oct. 30, 2013) (to be codified 

at 45 CFR parts 144, 146, 147, 153, 155, and 156). 

this information is necessary for HHS to 

determine whether an enforcement 

remedy under subpart I is appropriate. 

We believe this is consistent with our 

intent to coordinate with States in 

enforcement actions as described in the 

proposed Program Integrity Rule.48

b. Bases and Process for Imposing Civil 

Money Penalties in Federally-Facilitated 

Exchanges (§ 156.805) 

In the Program Integrity Rules, we 

established the bases for HHS to impose 

CMPs against QHP issuers for violations 

of certain standards applicable to 

issuers offering QHPs in the FFEs. In 

§ 156.805(d) we set forth the general 

process for notifying the QHP issuer 

against which the CMP is being 

imposed. The general process did not 

address how prior to the imposition of 

the CMP, the QHP issuer would be 

notified of the alleged violation which 

forms the basis for the imposition of 

CMP. We propose adding § 156.806 to 

explain that HHS will provide a written 

notice to the issuer, to include a 

description of the potential violation, a 

30-day period for the QHP issuer to 

respond and to provide additional 

information to refute an alleged 

violation. 

If HHS determines that a CMP will be 

imposed, HHS will notify the QHP 

issuer as required under § 156.805(d). 

We note that § 156.805(d) does not 

specify the method of delivery of such 

notice. We believe it is important to 

ensure that such notices are 

appropriately delivered to the QHP 

issuer to provide the QHP issuer with 

proper notice. We propose adding 

§ 156.805(d)(3) to require that delivery 

of the notice required in paragraph (d) 

will be either hand delivered, sent by 

certified mail, return receipt requested, 

or sent by overnight delivery service 

with signature upon delivery required. 

This requirement is identical to the 

requirement under § 158.613 which 

applies to the delivery of notice of civil 

penalties under 45 CFR Part 158, with 

which we believe QHP issuers will 

generally be familiar. We believe this 

proposed requirement will ensure that 

QHP issuers have proper notice of 

HHS’s intent to impose CMPs. Finally, 

we also note that paragraph (e)(2) 

requires HHS to notify the QHP issuer 

of any penalty that has been assessed 

and of the means by which the 

responsible entity may satisfy the 

judgment. We propose rewording the 

regulatory text to clarify that the 

responsible entity refers to the QHP 

issuer against whom a CMP is being 

imposed or another entity responsible 

for satisfying the CMP assessment and 

that the judgment refers to the CMP 

assessed under of this subpart. 

c. Bases and Process for Decertification 

of a QHP Offered by an Issuer Through 

a Federally-Facilitated Exchange 

(§ 156.810) 

In subpart I of 45 CFR part 156, 

finalized in the Program Integrity Rule, 

we established the bases for HHS to 

decertify QHPs for violations of certain 

standards applicable to issuers offering 

QHPs in the Federally-facilitated 

Exchanges. Under § 156.810(a) we set 

forth the bases for decertification. Since 

the publication of this final rule, we 

believe that certain paragraphs should 

be clarified. For example, paragraph 

(a)(6) should be reworded to clarify that 

the certification criteria means the 

standards under subpart C of this part. 

In paragraph (a)(9), it was unclear which 

laws were intended and we proposing 

clarifying that violation of State or 

Federal law relating to internal claims 

and appeals and external review 

processes are bases for decertification 

under this paragraph. We propose 

aligning the standards set forth under 

subparts K and M with the bases for 

decertification. We propose adding a 

paragraph (12) to reflect that HHS may 

decertify a QHP if the QHP issuer 

substantially fails to meet the 

requirements related to the cases 

forwarded to QHP issuers under Subpart 

K, and adding a paragraph (13) to reflect 

that HHS may decertify a QHP if the 

QHP issuer substantially fails to meet 

the requirements in Subpart M. Finally, 

in the preamble to the proposed 

Program Integrity Rule, we explained 

that when the basis for a decertification 

is one in which the QHP enrollees’ 

ability to access necessary medical 

items or services is at risk or the 

integrity of an FFE is substantially 

compromised, HHS would have the 

authority to pursue an expedited 

decertification (78 FR 37062). Because 

QHP issuers are required to demonstrate 

compliance with the minimum 

certification standards in subpart C of 

part 156 and Exchanges are required 

under section 155.1010(a)(2) to monitor 

QHP issuers for demonstration of 

ongoing compliance with the 

certification requirements, we believe 

that it is appropriate for the FFEs to be 

able to pursue an expedited 

decertification when HHS has 

determined that the QHP no longer 

meets applicable certification standards. 

Accordingly, we propose amending 

§ 156.810(d) to reflect this change. 

5. Subpart L—Quality Standards 

a. Establishment of Standards for HHSApproved Enrollee Satisfaction Survey 

Vendors for Use by QHP Issuers in 

Exchanges (§ 156.1105) 

In the rule Patient Protection and 

Affordable Care Act; Program Integrity: 

Exchange, Premium Stabilization 

Programs, and Market Standards; 

Amendments to the HHS Notice of 

Benefit and Payment Parameters for 

2014 (Second Program Integrity Rule) 49

at 45 CFR 156.1105, we established 

processes for HHS to approve and 

oversee ESS vendors that will 

administer the ESS on behalf of QHP 

issuers. We outlined a process by which 

enrollee satisfaction survey vendors 

would submit an annual application 

demonstrating that they meet all of the 

application and approval standards in 

paragraphs (a) and (b). Lastly, we noted 

that HHS would publish a list of 

approved enrollee satisfaction survey 

vendors on an HHS Web site. 

We propose to amend § 156.1105 to 

also include monitoring and appeals 

processes that would apply for plan 

years beginning 2015. In paragraph (d), 

we propose that HHS will monitor HHSapproved enrollee satisfaction survey 

vendors to ensure ongoing compliance 

with the application and approval 

standards. Further, we propose that if 

HHS determines that an approved 

vendor is non-compliant with the 

standards outlined in paragraph (b), 

they may be removed from the approved 

list described in paragraph (c) and/or 

the submitted survey results may be 

ineligible to be included for ESS results. 

We propose to establish a monitoring 

process to prepare for situations when 

an HHS-approved enrollee satisfaction 

survey vendor is no longer in 

compliance with the standards outlined 

in § 156.1105. It is possible that once the 

enrollee satisfaction survey vendor is 

approved and contracts with a QHP 

issuer to provide survey administration 

services, the HHS-approved vendor may 

stop participating in or complying with 

required activities described in 

paragraph (b)(1) (for example, the 

vendor does not participate in site visits 

or conferences calls or fails to become 

a registered user for the ESS data 

warehouse). We propose that in the 

event that HHS determines, through its 

oversight activities, that the HHSapproved survey vendor is noncompliant, a process would already be 


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in place to take appropriate remedial 

action as well as notify QHP issuers and 

the public of any changes to the 

approved list of vendors. We propose 

that, in addition to other existing 

remedies, HHS would have the ability to 

remove a survey vendor from the 

approved list and/or determine that the 

submitted survey results are ineligible 

to be included for ESS results, as the 

validity of the results may be impacted. 

HHS would also update the published 

list of approved vendors to reflect any 

changes. We seek comment to inform 

future guidance on the factors that 

should be considered, as well as the 

conditions that may lead to the removal 

of an approved survey vendor from the 

HHS approved list and/or a 

determination that the submitted survey 

results are ineligible to be included for 

ESS results. 

In paragraph (e), we propose an 

appeals process for an ESS vendor that 

submits an application to HHS for 

approval, as described in paragraph (a), 

and is not approved. Specifically, we 

propose that an enrollee satisfaction 

survey vendor may appeal HHS’s 

decision by notifying HHS in writing 

within 15 days of the notification of not 

being approved by HHS and submitting 

additional documentation 

demonstrating how the vendor meets 

the standards in paragraph (b). HHS will 

review the submitted documentation 

and make a final approval 

determination within 30 days from 

receipt of the additional documentation. 

An enrollee satisfaction survey vendor 

that becomes approved via the appeals 

process would be included in the 

approved list, described in paragraph 

(c). We seek comment on the proposed 

approach to implementing an appeals 

process for survey vendors that are not 

approved by HHS after submission of an 

application for approval. 

b. Quality Rating System (§ 156.1120) 

In addition to proposing standards for 

Exchanges to oversee the QRS and 

display quality rating information on 

Exchange Web sites as set forth in 

§ 155.1400 of this proposed rule, we 

also propose standards for QHP issuers 

to collect and report the necessary 

information to implement the QRS 

pursuant to section 1311(c)(3) of the 

Affordable Care Act. While the QRS 

Notice describes areas such as the 

overarching goals, framework, measure 

selection process and individual 

measures of the QRS, this proposed rule 

outlines the QRS implementation and 

reporting standards for QHP issuers. 

In the QRS Notice, we proposed a 

QRS measure set that applies to QHPs 

that provide family and adult self-only 

coverage and we proposed a separate 

Child-only QRS measure set applying to 

QHPs that provide child-only coverage. 

CMS continues to monitor the number 

of child-only QHP offerings on the 

Exchanges. A limited number of childonly QHPs and enrollees may prohibit 

reliable child-only QHP rating 

calculations. As mentioned in the QRS 

Notice, we will also consider the 

development of a quality rating system 

applicable to other Exchange offerings, 

such as stand-alone dental plans, 

catastrophic plans, and health savings 

accounts. After considering public 

comment as well as the review by the 

Measures Application Partnership’s 

Health Insurance Exchange Taskforce 

convened by the National Quality 

Forum, we intend to finalize the quality 

measures outlined in the QRS Notice 

and provide measure specifications in 

future technical guidance. Our goal is to 

publish this future technical guidance 

on a HHS Web site in 2014 to provide 

time for QHP issuers to collect and 

submit the relevant validated data for 

the 2015 beta test. 

QRS Implementation and Reporting 

At § 156.1120(a), we propose data 

submission requirements for a QHP 

issuer for the information necessary to 

calculate the quality ratings under the 

QRS, and in § 156.1120(b), we propose 

to direct a QHP issuer to annually 

submit data necessary to calculate the 

QHP’s quality ratings to HHS and the 

Exchange, on a timeline and in a 

standardized form and manner specified 

by HHS. In paragraph (a)(1), we propose 

that a QHP issuer must submit data to 

calculate quality ratings for each QHP 

that has been offered in an Exchange for 

at least one year. HHS proposes to phase 

in implementation of the QRS over time 

in recognition of the fact that QHP 

issuers would need time to collect, 

ensure the reliability of, and report 

quality measure data. In addition, 

certain quality measures require one or 

two year reference periods, and QHP 

issuers would need time for data 

collection, validation and submission. 

Therefore, we propose that for the first 

year that a QHP is offered in an 

Exchange, the QHP issuer would 

prepare to submit the required validated 

data elements for QRS beta testing in the 

second year that the QHP is offered in 

an Exchange. The QHP issuer would 

then submit the required validated data 

elements for QRS public reporting in the 

third year that the QHP offers coverage 

(reflecting second year data). For 

example, an issuer that offers a QHP in 

the Exchange during the 2013 open 

enrollment period for coverage 

beginning in January 2014 would 

submit the required validated data for a 

QRS beta testing period beginning in 

mid-2015 (coverage year two), which 

would not be publicly reported by the 

Federally-facilitated Exchange. The 

issuer would next be required to submit 

the required validated data for the QHP 

offered in the Exchange to calculate 

quality rating information for QRS 

public reporting during the 2016 open 

enrollment period for the 2017 coverage 

year (coverage year four). Specifically, 

we intend for the QRS data reporting 

period to begin the first month of a 

calendar year through the middle of the 

sixth month of the calendar year. For 

example, a QHP issuer submitting data 

for the 2015 QRS beta testing period 

would submit data on or around June 

15, 2015 and would submit data for its 

first QRS public reporting on or around 

June 15, 2016. We intend for the QRS 

to include data from all eligible QHP 

enrollees covered during the 

measurement year which would be the 

previous calendar year(s) and based on 

measure specifications for that year’s 

collection. We intend to provide details 

of the QRS rating methodology, measure 

specifications, criteria for quality rating 

display, and information regarding QRS 

data validation in technical guidance 

that would be periodically updated. 

In paragraph (a)(2), we propose to 

direct a QHP issuer to submit data that 

has been validated in a form and 

manner specified by HHS. We believe 

that the submission of validated data by 

QHP issuers is necessary to ensure the 

integrity and reliability of the QRS to 

allow consumers objective and 

meaningful comparisons of the QHPs’ 

quality data. We believe that review of 

quality measures data by an 

independent third party entity will 

ensure that only valid and appropriate 

data are used to calculate the quality 

rating information for QRS public 

reporting. In the initial years, HHS 

intends to direct QHP issuers to follow 

the process specified by the quality 

measure steward for validation of its 

quality measures that are incorporated 

into the QRS. For example, for any 

Healthcare Effectiveness Data and 

Information Set (HEDIS)® measure in 

the QRS, the measure should be 

validated through the HEDIS®

Compliance Audit process using a 

certified auditor, as defined by the 

National Committee for Quality 

Assurance (NCQA). We have drawn 

from our experience with the Medicare 

program which also ensures that clinical 

quality HEDIS® data submitted and 

reported on behalf of the Medicare 

Advantage and Prescription Drug 

Programs are valid and reliable by 


sroberts on DSK5SPTVN1PROD with PROPOSALS
15850 Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 

50Patient Protection and Affordable Care Act; 

Exchanges and Qualified Health Plans, Quality 

Rating System (QRS) Framework, Measures and 

Methodology; Notice with Comment, 78 FR 69418 

(Nov. 19, 2013). 

51Patient Protection and Affordable Care Act; 

Program Integrity: Exchange, SHOP, and Eligibility 

Appeals; Final rule, 78 FR 54070 (Aug 30, 2013). 

52Agency Information Collection Activities: 

Health Insurance Marketplace Consumer 

Experience Surveys: Enrollee Satisfaction Survey 

and Marketplace Survey Data Collection; Notice, 78 

FR 65658 (Nov. 1, 2013). 

requiring data to be validated through 

the NCQA HEDIS® Compliance Audit 

process before being provided to CMS 

for public reporting. HHS would specify 

in technical guidance a validation 

process for any measures for which the 

measure steward has not defined a 

validation process. In the future and as 

the QRS evolves, HHS is considering 

establishing an application and 

approval process for independent third 

party data validators to allow QHP 

issuers to contract with validators that 

would be approved and monitored by 

HHS. 

In paragraph (a)(3), we propose that a 

QHP issuer must include information in 

its data submission only for those QHP 

enrollees at the reporting level specified 

by HHS that is necessary to calculate the 

quality ratings. As we stated in the QRS 

Notice, HHS intends to specify that for 

the initial years of QRS implementation, 

a QHP issuer must collect and submit 

data for enrollees in each product type 

offered by a QHP issuer in each State for 

which the QHP operates (for example, 

Health Maintenance Organization 

(HMO), Point of Service (POS), and 

Preferred Provider Organization 

(PPO)).50 While we understand that 

there may be value in reporting quality 

rating information at more granular QHP 

levels, such as the QHP product metal 

level, we believe that a QHP’s 

enrollment size at the product metal 

level will be too small to ensure reliable 

QRS results across the measure domains 

in the beginning years of the Exchange. 

We intend to revisit the level of QHP 

issuer reporting for the QRS as 

Exchanges mature and enrollment sizes 

increase. We also recognize that a QHP 

issuer may offer a QHP outside an 

Exchange that would be considered the 

same plan as one that is certified as a 

QHP and offered through the Exchange, 

if the benefits package, provider 

network, service areas and cost-sharing 

structure of the two offerings are 

identical as outlined in the Program 

Integrity Final Rule.51 We intend to 

allow a QHP issuer to collect data for 

the QRS based on enrollees of QHPs 

offered through and outside of the 

Exchange as long as they are considered 

the same plan. If this approach is 

finalized, we intend to clarify the 

operational details of this approach in 

future technical guidance. 

We seek comment on the data 

submission requirements proposed in 

paragraph (a) including comment 

regarding the reporting timeframes and 

any additional criteria for the 

submission or reporting of quality data 

for QRS purposes. We seek comment on 

the proposed approach, for the initial 

years of QRS implementation, of 

product level reporting and allowing the 

incorporation of quality measure data 

from QHPs offered outside the 

Exchange, if they are considered the 

same plan as the QHP offered through 

the Exchange. We also solicit comment 

to inform future rulemaking regarding 

the potential requirement for QHP 

issuers to use independent third party 

data validators that would be approved 

and monitored by HHS for QRS 

purposes. 

As described in 45 CFR 156.275, QHP 

issuers are required to be accredited on 

the basis of local performance of a QHP 

by an accreditation entity recognized by 

HHS, and to submit to such entity 

clinical quality measures, such as 

HEDIS®. We are seeking comment to 

inform future rulemaking on how best to 

align QRS measures reporting 

requirements with the accreditation 

standards for QHP issuers. 

We note that multi-State plans, as 

defined in § 155.1000(a), are subject to 

reporting QRS data for calculation of 

quality ratings by HHS, as described in 

paragraph (a). The U.S. Office of 

Personnel Management (OPM) will 

provide guidance on quality reporting to 

issuers with whom it holds multi-State 

plan contracts. 

Marketing Materials 

In paragraph (c), we propose that an 

issuer may reference its QHP’s quality 

rating information in its marketing 

materials, in a manner specified by 

HHS. In the subsequent section 

156.1125 regarding the ESS, we propose 

a similar marketing standard in 

§ 156.1125(c) that a QHP issuer may 

reference the ESS results for its QHPs in 

its marketing materials, in a manner 

specified by HHS. 

A QHP issuer has the option to use 

quality rating information and ESS 

results in its marketing materials; 

however, an issuer that elects to use the 

information must do so in a manner that 

does not mislead consumers into 

enrolling in a QHP based on inaccurate 

information. We intend to provide 

details regarding display of rating 

information and ESS results in 

marketing materials in technical 

guidance that we anticipate releasing in 

2015. We seek comment regarding the 

proposed allowance for issuers to 

include its QHPs’ quality rating 

information and ESS results in its 

marketing materials in paragraphs (c) of 

156.1120 and 156.1125 and ways to 

prevent the use of the information in a 

misleading manner when being 

presented to consumers. 

c. Enrollee Satisfaction Survey 

(§ 156.1125) 

Section 1311(c)(4) of the Affordable 

Care Act directs the Secretary to 

establish an enrollee satisfaction survey 

(ESS) system that would evaluate the 

level of enrollee satisfaction of members 

in each QHP with more than 500 

enrollees in the previous year that is 

offered through an Exchange. It also 

directs Exchanges to display enrollee 

satisfaction information on their Web 

sites to allow individuals to readily 

compare enrollee satisfaction data 

between QHPs. To implement this 

provision, HHS is developing the ESS as 

described in the Federal Register Notice 

dated Nov. 1, 2013 (ESS Notice).52 We 

outline standards in this proposed rule 

for a QHP issuer to collect and submit 

validated enrollee experience data from 

QHPs offered through an Exchange. 

We believe it is important that QHPs 

offered through Exchanges be assessed 

using a reliable and valid survey, 

administered and scored according to 

standards developed and monitored by 

independent organizations. We based 

the ESS on the Consumer Assessment of 

Health Providers and Systems 

(CAHPS®) Health Plan 5.0 Medicaid 

survey to assure consumers and 

stakeholders that the ESS survey data 

submitted meet the validity and 

reliability standards reported by the 

CAHPS® program and are comparable to 

data from other quality comparison 

tools. We used existing CAHPS®

supplemental item sets or other 

CAHPS® surveys, when available and 

appropriate, to identify any additional 

items for the ESS. 

ESS Administration 

At § 156.1125(a), we propose to direct 

QHP issuers to contract with an HHSapproved ESS vendor, as identified by 

§ 156.1105, to administer the ESS of the 

QHP’s enrollees. We also propose to 

direct a QHP issuer to authorize its 

contracted ESS vendor to report survey 

results to HHS and the Exchange on the 

issuer’s behalf. We believe this 

proposed approach aligns with the 

Medicare program, which uses a similar 

process by having approved survey 

vendors administer the CAHPS® survey 


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to an issuer’s Medicare Advantage and 

Prescription Drug Program enrollees. 

Similar to the proposed general 

requirement for the QRS in 

§ 156.1120(a), which directs a QHP 

issuer to submit data to HHS and the 

Exchange, QHPs must ensure that their 

contracted ESS vendors submit the data 

collected from the ESS survey to HHS 

and the Exchange so that HHS can 

calculate the ESS scores and 

benchmarks based on a standard scoring 

methodology that will allow for reliable, 

uniform, and comparable scoring across 

Exchanges. HHS intends to send 

calculated ESS scores to the Exchanges 

for their respective QHPs and also 

intends to use a subset of scores from 

the ESS as part of the quality rating for 

QHPs as described in § 156.1120. We 

intend for the ESS to be administered 

from January through April of each 

calendar year beginning in 2015. 

HHS is considering the development 

of an ESS child-only survey to assess 

the experience of children enrolled in 

child-only plans. Similar to the 

implementation of the QRS child-only 

measure set, CMS is currently assessing 

the feasibility of a child-only ESS based 

upon the number of child-only QHPs 

and enrollees in Exchanges. 

In paragraph (b), we propose several 

data requirements to clarify the 

standards for collection and submission 

of ESS data. At § 156.1125(b)(1), we 

propose to direct a QHP issuer to collect 

data of eligible enrollees for each QHP 

with more than 500 enrollees in the 

previous year that has been offered in an 

Exchange for at least one year following 

a survey sampling methodology 

provided by HHS. We propose that 

eligible enrollees would be those 

individuals enrolled for at least six 

months during the year prior to the 

administration of the survey and solicit 

comment on this approach. 

In paragraph (b)(2), we propose to 

direct a QHP issuer to submit data, 

necessary to conduct the ESS, that has 

been validated in a form and manner 

specified by HHS. We propose that the 

data for the sample of eligible enrollees 

that a QHP issuer provides to their 

contracted ESS vendor be validated in a 

consistent way as data validated for the 

QRS. For example, if a QHP issuer 

submits data collected for a quality 

measure that is validated through the 

HEDIS® Compliance Audit process 

using a NCQA certified auditor, we 

expect the data that the QHP issuer 

provides to its HHS-approved ESS 

vendor for the ESS sample be included 

in that validation process. We solicit 

comment on this approach for 

validation of the data for the ESS 

sample of eligible enrollees. 

In paragraph (b)(3), we propose to 

direct a QHP issuer to include only 

those QHP enrollees at the reporting 

level specified by HHS, for data 

submitted for the ESS. We believe that 

the QHP metal level (i.e., HMO Silver, 

HMO Bronze, PPO Silver, PPO Bronze) 

for each of the issuer’s products is the 

appropriate level (if enrollment is 

sufficient to ensure credibility) to assess 

enrollee experience and would provide 

information regarding experience with 

plans charging differing premiums. We 

intend to aggregate the ESS data from 

the QHP metal level to the QHP product 

level (for example, a QHP issuer’s HMO 

silver and HMO bronze would be 

aggregated into one HMO level score) 

for public reporting purposes to provide 

consistency with the product-level data 

that would be submitted for the QRS 

and align with the QRS methodology in 

the initial years of implementation of 

these proposed quality standards for 

QHPs. 

We recognize that a QHP issuer may 

offer a plan outside an Exchange that 

would be considered the same plan as 

one that is certified as a QHP and 

offered through the Exchange, as 

defined in § 153.500. Similar to our 

proposed approach with the QRS, we 

are considering in the initial years to 

allow a QHP issuer to include enrollees 

of QHPs offered through and outside of 

the Exchange, to ensure a reliable ESS 

sample size, as long as they are 

considered the same plan as established 

in § 153.500. We intend to clarify the 

operational details of this approach in 

future technical guidance. OPM will 

issue technical guidance regarding the 

sampling methodology for multi-State 

plans, as defined in 45 CFR 155.1000(a). 

We envision that the sampling 

methodology for multi-State plans will 

align with that of QHPs. 

In paragraph (d), we propose to direct 

a QHP issuer to submit data necessary 

to conduct the survey to its contracted 

ESS vendor on a timeline and in a form 

and manner specified by HHS. We 

intend to align the timeframes of the 

proposed reporting requirements for the 

ESS and the QRS. In future technical 

guidance, we also intend to specify the 

timeframes for a QHP issuer to submit 

the sampling data to its contracted ESS 

vendor and for the vendor to submit to 

HHS and the Exchange, data from the 

administration of the survey. 

ESS Implementation and Reporting 

HHS proposes to phase in 

implementation of the ESS over time 

which is consistent with the proposed 

implementation of the QRS. We believe 

this will allow for appropriate 

development and testing of the ESS and 

the survey methodology; time for QHP 

issuers to prepare for data collection, 

validation and submission; and time for 

QHP enrollees to build experience with 

the QHP and their providers to 

adequately assess their experience and 

to ensure reliable survey results. 

Therefore, we propose that for QHPs 

offered in the Exchange during the 2014 

open enrollment period, the QHP issuer 

would submit the required data 

elements for ESS beta testing in 2015. 

The QHP Issuer would then submit the 

required data elements in 2016 for ESS 

public reporting during the 2017 open 

enrollment period. Specifically, we 

intend for QHP issuers to provide data 

necessary to conduct the survey to their 

contracted HHS-approved ESS vendors, 

as described in paragraph (a), during the 

first month of the calendar year and to 

ensure that survey results are submitted 

to HHS or its’ designee, by the fifth 

month of the calendar year. For 

example, a QHP issuer reporting data for 

the 2015 ESS beta test would provide 

sample frame data necessary to conduct 

the ESS for eligible enrollees who 

would be surveyed, to their contracted 

survey vendor in January 2015, allowing 

adequate time for the vendor to draw 

the sample in time to begin fielding the 

survey on February 1. Then, a QHP 

issuer would ensure that the ESS survey 

results are submitted to HHS on or 

around May 31, 2015. For the first year 

of ESS public reporting, a QHP issuer 

would provide sample frame data 

necessary to conduct the ESS in January 

2016 and ensure that results are 

submitted to HHS or its’ designee on or 

around May 31, 2016. We intend for the 

ESS sample to include all eligible QHP 

enrollees covered during the 

measurement year which would be the 

previous calendar year and based on 

sampling specifications. We intend to 

provide details of the ESS sampling 

methodology in technical guidance that 

would be periodically updated and 

which will be published in draft form 

on an HHS Web site to obtain feedback 

from stakeholders. 

We seek comment on the proposed 

requirement in paragraph (a) to direct a 

QHP issuer to contract with an HHSapproved enrollee satisfaction survey 

vendor and to authorize its contracted 

vendor to submit data to HHS and the 

Exchange. Specifically, request feedback 

on our proposed approaches for data 

collection from eligible enrollees for 

each QHP with more than 500 enrollees 

in the previous year that has been 

offered in an Exchange for at least one 

year, to require validation consistent 

with the process for QRS measure data 

and to provide data for eligible enrollees 


sroberts on DSK5SPTVN1PROD with PROPOSALS
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53Agency Information Collection Activities: 

Health Insurance Marketplace Consumer 

Experience Surveys: Enrollee Satisfaction Survey 

and Marketplace Survey Data Collection; Notice, 78 

FR 65658 (Nov. 1, 2013). 

54Letter to Insurance Commissioners, Center for 

Consumer Information and Insurance Oversight, 

November 14, 2013. Available at: http://

www.cms.gov/CCIIO/Resources/Letters/Downloads/

commissioner-letter-11-14-2013.pdf. 

at the QHP metal level for each of the 

issuer’s products offered on the 

Exchange. We also seek comment on the 

proposed annual data submission 

requirements in paragraph (b) and (d). 

We note that Multi-State Plans, as 

defined in 45 CFR 155.1000(a), are 

subject to providing the data described 

in paragraph (b). The OPM will provide 

guidance on ESS reporting to issuers 

with whom it holds Multi-State Plan 

contracts. 

Marketplace Survey 

Sections 1313 and 1321(a) of the 

Affordable Care Act provide the 

Secretary with general authority to 

establish standards and regulations 

related to Exchanges, QHPs, and other 

components of title I of the Affordable 

Care Act. In § 155.1200(b)(3), we direct 

State Exchanges to submit performance 

monitoring data on an annual basis, 

which would include information on 

consumer satisfaction. Pursuant to this 

legal authority, HHS has proposed a 

consumer experience survey, or the 

Marketplace survey, to assess consumer 

experience with the Exchange.53 Similar 

to the ESS, the Marketplace survey has 

been developed based on the core set of 

CAHPS® principles and the format and 

language of the survey drew from 

existing CAHPS® items, to the extent 

possible. However since the CAHPS®

program does not have a comparable 

survey to assess entities similar to 

Exchanges, the Marketplace survey 

items are new and were developed 

based on research and feedback from 

public comment, technical experts and 

focus groups. We believe it is important 

to assess experience of consumers 

interacting with an Exchange including 

obtaining information regarding aspects 

such as the application and eligibility 

determination process for Medicaid/

Children’s Health Insurance Program 

(CHIP) coverage and the Insurance 

Affordability Programs. We anticipate 

that results from the Marketplace survey 

would drive quality improvement in 

Exchanges and provide regulators and 

stakeholders with information to use for 

monitoring and oversight purposes. 

We intend to use a single contracted 

survey vendor to administer the annual 

Marketplace survey for each Exchange. 

We are currently in the survey 

developmental testing period for the 

Marketplace survey in the States in the 

Federally-facilitated Exchange and we 

anticipate the survey beta test to be 

conducted in early 2015 in all States. 

We intend to provide each Exchange 

with its respective Marketplace survey 

results, beginning in 2015, to be able to 

make improvements for upcoming open 

enrollment periods. 

We seek further comment to inform 

future rulemaking regarding data 

provided by State Exchanges to conduct 

the Marketplace survey. We are 

considering directing a State Exchange 

to provide sampling data for four types 

of consumers in an Exchange including: 

(1) Potential applicants (individuals 

who provided contact information but 

did not submit an application); (2) 

potential enrollees (individuals who 

successfully applied and were given 

eligibility and plan information but did 

not enroll); (3) enrollees (individuals 

successfully enrolled); and (4) 

effectuated enrollees (individuals who 

have made their first premium 

payment). We are also considering 

directing a State Exchange to submit 

sampling data for the Marketplace 

survey based on language preference 

and disability status across each 

Exchange and we seek comment on the 

feasibility for a State Exchange to 

provide such data. 

G. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

1. Subpart A—Disclosure and Reporting 

a. ICD–10 Conversion Expenses 

(§ 158.150) 

In September 2012, the Secretary 

changed the date on which issuers are 

required to adopt ICD–10 as the 

standard medical code set from October 

1, 2013 to October 1, 2014. Because 

HHS cannot accept claims using the 

ICD–10 code sets prior to that date, 

issuers may incur conversion costs in 

2014 that would otherwise have been 

incurred only in 2012 and 2013. In the 

2012 and 2013 MLR reporting years, 

issuers were allowed to report their 

ICD–10 conversion costs as 

expenditures for activities that improve 

health care quality (QIA), up to 0.3 

percent of an issuer’s earned premium 

in the relevant State and market (MLR 

Final Rule, 76 FR 76574). Because the 

ICD–10 implementation date has been 

postponed to 2014, we propose that 

issuers be allowed to report their 2014 

ICD–10 conversion costs as QIA in the 

2014 reporting year, up to 0.3 percent of 

an issuer’s earned premium in the 

relevant State and market. Although 

there are no plans to further postpone 

the ICD–10 implementation date, in 

recognition of this possibility and to 

avoid the need for additional regulatory 

changes, the regulatory change proposed 

herein permits issuers to include their 

ICD–10 conversion costs as QIA through 

the MLR reporting year in which ICD– 

10 implementation is required by the 

Secretary. 

2. Subpart B—Calculating and Providing 

the Rebate 

a. MLR and Rebate Calculations in 

States With Merged Individual and 

Small Group Markets (§§ 158.211, 

158.220, 158.231) 

Our previous rulemakings concerning 

PHS Act section 2718 permitted issuers 

to aggregate individual and small group 

market data for MLR purposes in States 

that require these two markets to be 

merged pursuant to section 1312(c)(3) of 

the Affordable Care Act. This proposed 

rule would modify the requirements for 

data aggregation in § 158.220(a) and 

§ 158.231(a) to specify that the 

individual and small group market data 

must always be aggregated if a State 

requires these two markets to be 

merged. In addition, this proposed rule 

would modify the requirements 

regarding a higher State MLR standard 

in § 158.211 to clarify that if a State 

establishes a higher MLR standard for 

the merged market, this higher standard 

must be used to calculate any rebates for 

the merged market. These modifications 

would align the MLR methodology in 

the Federal MLR rule with the MLR 

methodologies applied by the affected 

States. 

b. Accounting for Special Circumstances 

(§ 158.221) 

On November 14, 2013, the Federal 

government announced a policy under 

which, if certain conditions were met, it 

would decline to enforce certain 

specified 2014 market reforms against 

certain non-grandfathered health 

insurance coverage in the individual or 

small group market renewed between 

January 1, 2014 and October 1, 2014, 

and requested that States adopt a similar 

non-enforcement policy.54 CMS noted 

in the Proposed 2015 Payment Notice 

(78 FR 72322) that this transitional 

policy would not have been anticipated 

by issuers in setting rates for 2014 and 

stated that we were exploring 

modifications to different programs to 

help mitigate the impact of this policy. 

Issuers that provided transitional 

coverage may have incurred additional 

administrative costs, such as expenses 

related to developing and sending 

required consumers notices, and 

creating and submitting new policy and 


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55 75 CFR 74871. 

rate filings. We also recognize that 

issuers of QHPs in the individual and 

small group markets may have incurred 

costs due to technical problems during 

the launch of the State and Federal 

Exchanges. 

Pursuant to the direction under PHS 

Act 2718(c), our development of the 

standardized methodologies for 

calculating an issuer’s MLR must be 

designed to ‘‘take into account the 

special circumstances of smaller plans, 

different types of plans, and newer 

plans.’’ In the MLR Interim Final Rule 

(75 FR 74864), HHS exercised this 

authority by making adjustments to the 

formula for calculating an issuer’s MLR 

with respect to ‘‘expatriate plans’’ (i.e., 

policies that provide coverage to 

employees outside their country of 

citizenship, employees outside their 

country of citizenship and outside their 

employer’s country of domicile, and 

non-U.S. citizens working in their home 

country) and ‘‘mini-med’’ plans (i.e., 

plans with a total annual benefit 

maximum of $250,000 or less). 

In its discussion of the ‘‘special 

circumstances’’ that applied to 

expatriate plans, the Interim Final Rule 

noted that ‘‘their unique nature results 

in a higher percentage of administrative 

costs in relation to premiums than plans 

that provide coverage primarily within 

the United States.’’ 55 Examples of the 

higher administrative costs for these 

plans include: Identifying and 

credentialing providers worldwide in 

countries with different licensing and 

other requirements from those found in 

the United States, processing claims 

submitted in various languages that 

follow various billing procedures and 

standards, providing translation and 

other services to enrollees, and helping 

subscribers locate qualified providers in 

different countries. The Interim Final 

Rule also recognized the ‘‘special 

circumstances’’ that applied to minimed plans. In this latter case, it was not 

higher administrative costs, but lower 

claims costs relative to administrative 

costs, due to the very low annual dollar 

limits of mini-med plans. In both cases, 

adjustments were made to the MLR 

methodology as applied to such plans so 

that they would not be required to pay 

rebates based on their plan design, even 

if they were relatively as efficient as 

other plans that are able to meet the 

MLR standard under the standard 

methodology. 

Consistent with this approach, we are 

proposing to exercise our authority to 

account for the special circumstances of 

plans affected by the transitional policy 

or the technical problems during the 

launch of the State and Federal 

Exchanges. These adjustments would 

only extend to issuers in the individual 

and small group markets that offered 

transitional coverage or participated in 

the State and Federal Exchanges, and 

only for the 2014 reporting year. A 

transitional policy cost adjustment to 

the formula for calculating an issuer’s 

MLR would not apply in States that did 

not implement the transitional policy, 

or in States that did, to issuers that did 

not elect to implement it. 

With respect to the adjustment for 

issuers offering transitional coverage, 

we are proposing that the MLR 

calculation methodology for the 

individual and small group markets 

would be changed to allow these issuers 

to multiply the incurred claims and 

expenses for quality improving 

activities incurred in 2014 in the MLR 

numerator by 1.0001. This adjustment 

takes into account the fact that the 

multiplier would be applied to the 

issuer’s entire experience in 2014, 

which may also include experience for 

plans other than transitional coverage in 

that State and market. In developing this 

adjustment, we considered the 

following costs as they relate to the 

transitional policy: (1) Developing and 

sending required notices; (2) actuarial 

work, including that with respect to 

premium stabilization programs; (3) 

regulatory and rate filings; and (4) 

activities related to re-contracting. 

With respect to the adjustment for 

issuers offering coverage through the 

State and Federal Exchanges, we are 

proposing that the MLR calculation 

methodology for the individual and 

small group markets would be changed 

to allow issuers participating in the 

Exchanges to multiply the incurred 

claims and expenses for quality 

improving activities incurred in 2014 in 

the MLR numerator by 1.0004. This 

adjustment takes into account the fact 

that the multiplier would be applied to 

the issuer’s entire experience in 2014, 

which may also include experience for 

plans offered off the Exchange in that 

State and market. In developing this 

adjustment, we considered the 

following costs as they relate to the 

technical issues during the launch of the 

State and Federal Exchanges: (1) 

Information technology (IT) 

development and testing; (2) IT system 

modifications and re-programming; (3) 

providing feedback to CMS or a State on 

functionality and data transmission; (4) 

assistance to enrollees (e.g., enhanced 

call center activity); (5) engaging in pilot 

projects relating to direct enrollment; (6) 

developing technical ‘‘tickets’’ for the 

CMS or a State help desk; (7) work with 

the Exchange(s) to resolve these 

technical problems; (8) manual 

processing of enrollment data, including 

but not limited to enrollment and 

payment data template creation, 

monthly submission of data reports, and 

monthly submission of data accuracy 

certification forms; and (9) development 

of other manual workarounds. 

HHS believes that these adjustments 

would appropriately account for the 

special circumstances related to 

implementation of the transitional 

policy and the rollout of the Exchanges, 

while still requiring issuers to comply 

with the statutory MLR requirement. 

In addition to seeking comment on 

the above proposed approach, we also 

invite comment on other options for 

making an appropriate adjustment to the 

MLR formula to account for the 

unanticipated costs related to the 

transitional policy and the Exchange 

implementation. 

c. Distribution of De Minimis Rebates 

(§ 158.243) 

The MLR December 7, 2011 final rule 

defines the threshold amounts below 

which rebates are considered to be de 

minimis and sets forth the provisions for 

distribution of such rebates. In this 

proposed rule, we propose to amend the 

provisions for de minimis rebates in 

§ 158.243 to clarify how issuers must 

distribute rebates where (1) all of an 

issuer’s rebates are de minimis, or (2) 

distribution of de minimis rebates to 

enrollee(s) whose rebates are not de 

minimis would result in an enrollee 

receiving a rebate that exceeds the 

enrollee’s annual premium. We propose 

that in these two situations, the issuer 

must distribute de minimis rebates to 

enrollees in the policies that generated 

the de minimis rebates. The current de 

minimis rebate provisions allow issuers 

not to distribute de minimis rebates to 

enrollees in the policies that generated 

those rebates, but instead to aggregate 

such rebates and distribute them to 

other enrollees whose rebates are not de 

minimis. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

(PRA) 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. This proposed 

rule contains information collection 

requirements (ICRs) that are subject to 

review by OMB. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

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


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56We estimate 18 State Exchanges (which 

includes Utah) will develop their own processes for 

recertification. HHS will establish a single process 

in all FFEs. 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues, which contain 

ICRs. 

A. ICRs Regarding Recertification for 

Certified Application Counselors 

(§ 155.225) 

Under proposed § 155.225(d)(7), 

certified application counselors would 

be required to be recertified on at least 

an annual basis after successfully 

completing recertification training as 

required by the Exchange. Each 

Exchange would be required to establish 

its own recertification process and 

standards consistent with these 

requirements. We expect that 

establishing a process for recertification 

would include creating a recertification 

request form (or similar document) in 

Exchanges that directly certify certified 

application counselors. We estimate that 

up to 18 State Exchanges would develop 

their own recertification request form.56

We estimate that the development of a 

recertification request form, as may be 

applicable for Exchanges that directly 

certify certified application counselors 

would take a health policy analyst (at 

$49.35 labor cost per hour) up to 1 hour 

to create, a senior manager (at $79.08 

cost per hour) up to .5 hours (30 

minutes) for review, and an attorney up 

to .5 hours (at $90.15 labor cost per 

hour) for legal review. We estimate that 

the one-time cost burden would be two 

hours with a cost burden of $134 for 

each Exchange, and the total burden for 

18 State Exchanges would be 36 hours 

with a cost burden of $2,412. 

There are recordkeeping requirements 

associated with developing and 

maintaining a request form. We estimate 

that the time burden associated with 

maintaining a copy of the request form 

would be .016 hours (1 minute); we 

assume a mid-level health policy 

analyst would maintain the form 

through electronic copies at minimal 

cost, which we estimate as $0.79 as a 

one-time requirement for the Exchange. 

The total burden for 18 Exchanges 

would be 1.08 hours and the total cost 

burden would be $14.22. 

There would also be third-party 

disclosure requirements for 18 State 

Exchanges associated with reviewing 

each certified application counselor’s 

recertification request, which would 

require the Exchange to notify the 

individual of the result of its review and 

issue a new certificate for each 

individual who successfully completes 

recertification. This notice requirement 

would apply to the Exchange on an 

annual basis. We estimate that it would 

take a mid-level health policy analyst in 

the Exchange up to .08 hours (5 

minutes) to notify an individual. The 

estimated cost burden is $4.11 for each 

individual notice, including the 

certificate. For purposes of this analysis, 

we estimate that there would be 

approximately 30,000 certified 

application counselors nationwide, or 

approximately 10,600 application 

counselors in 18 State Exchanges. The 

total cost burden would be 

approximately $2,422 for each State 

Exchange. The total burden for 18 State 

Exchanges would be approximately 883 

hours and the total cost burden would 

be $43,593. There would be 

recordkeeping requirements associated 

with issuing each individual notice. We 

estimate that the time burden associated 

with maintaining a copy of the notice 

and certificate would be .016 hours (1 

minute); we assume a mid-level health 

policy analyst, with a labor cost of 

$49.35 an hour, would maintain the 

form through electronic copies at 

minimal cost, which we estimate as 

$0.79 per notice for each individual 

certified application counselor. The 

total recordkeeping burden for 10,600 

certified application counselors in 18 

State Exchanges would be 170 hours 

and the total cost burden would be 

$8,374, or $265 per Exchange. 

For Exchanges that designate 

organizations to directly certify certified 

application counselors under 

§ 155.225(b)(1), there would be 

requirements associated with 

implementing a recertification process 

under the applicable Exchange’s 

standards. We expect that this process 

would include creating and issuing a 

recertification request form (or similar 

document) for an organization’s 

certified application counselors to 

submit to indicate their intention to be 

recertified and provide an updated 

conflicts of interest disclosure or other 

attestations as may be required. We 

estimate that up to 5,000 designated 

organizations would develop their own 

recertification request form. We estimate 

that the development of a recertification 

request form would take a health policy 

analyst (at $49.35 labor cost per hour) 

up to 1 hour to create, a senior manager 

(at $79.08 labor cost per hour) up to .5 

hours (30 minutes) for review, and an 

attorney (at $90.15 labor cost per hour) 

up to .5 hours (30 minutes) for legal 

review. We estimate that the one-time 

cost burden would be $134 for each 

organization. The total one-time burden 

for 5,000 organizations nationwide 

would be 10,000 hours and the total cost 

burden would be $670,000. 

There would be recordkeeping 

requirements associated with 

developing and maintaining a request 

form. We estimate that the time burden 

associated with maintaining a copy of 

the request form would be .016 hours (1 

minute); we assume a mid-level health 

policy analyst with a labor cost of 

$49.35 an hour would maintain the form 

through electronic copies at minimal 

cost, which we estimate as $0.79 as a 

one-time requirement for each 

organization. The total one-time burden 

for 5,000 organizations nationwide 

would be 80 hours and the total cost 

burden would be $3,950. 

There would also be third-party 

disclosure requirements for designated 

organizations associated with reviewing 

each certified application counselor’s 

recertification request, which would 

require the organization to notify the 

individual of the result of its review and 

issue a new certificate as appropriate. 

This notice requirement would apply to 

the organization on an annual basis. For 

purposes of estimating the burden on 

designated organizations, we assume 

that of the estimated 30,000 certified 

application counselors nationwide, 

approximately 19,400 would be directly 

certified by designated organizations, or 

four certified applications counselors on 

average per designated organization. We 

estimate that it would take a mid-level 

health policy analyst up to .08 hours (5 

minutes) to notify an individual and 

issue a new certificate. The estimated 

cost burden is $4.11 for each individual 

notice. For an estimated 19,400 certified 

application counselors nationwide, or 

approximately four certified application 

counselors on average in each 

organization, the total cost burden 

would be approximately $16.44 for each 

organization. The total burden for 5,000 

designated organizations nationwide 

would be approximately 1,617 hours 

and the total cost burden would be 

approximately $79,734. 

There would be recordkeeping 

requirements associated with issuing a 

certificate. We estimate that the time 

burden associated with maintaining a 

copy of each certificate issued at 

recertification would be .016 hours (1 


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minute); we assume a mid-level health 

policy analyst with a labor cost of 

$49.35 an hour would maintain the form 

through electronic copies at minimal 

cost, which we estimate as $0.79 as a 

per certificate for each organization. The 

total recordkeeping cost per 

organization would be $3.16. The total 

burden for 5,000 organizations 

nationwide would be 323 hours and the 

total cost burden would be 

approximately $15,326. 

There would be third-party disclosure 

requirements for individual certified 

application counselors associated with 

completing the requirements for 

recertification, whether done directly 

through the Exchange or through an 

Exchange-designated certified 

application counselor organization. 

Such recertification requirements would 

include completing Exchange required 

training and might also include 

satisfying other requirements consistent 

with the Exchange-established 

processes, such as providing conflicts of 

interest disclosures, other attestations 

and submitting a recertification request 

form (or similar document) and other 

attestations. These requirements would 

apply to certified application counselors 

on an annual basis. Although nothing 

prohibits individual certified 

application counselors or organizations 

from being funded through sources such 

as applicable private, State, or Federal 

programs, we expect that certified 

application counselors would not be 

guaranteed any specific funding. We 

estimate the professional wage of 

certified application counselors for this 

type of work as equivalent to that of an 

eligibility interviewer for assistance 

from government programs and agency 

resources. We estimate that it would 

take a certified application counselor 

with a labor cost of $26.65 an hour up 

to 0.17 hours (10 minutes) to complete 

and submit the recertification request to 

the organization or Exchange, as 

applicable. The estimated cost burden 

would be $4.53 for each individual 

seeking recertification. We estimate that 

there would be approximately 30,000 

recertification requests provided, for a 

total burden of 5,000 hours and a total 

cost burden of $135,915 for all certified 

application counselors nationwide. 

There would be third-party disclosure 

requirements associated with taking 

recertification training. We expect that 

an individual certified application 

counselor would provide proof to the 

organization or Exchange that he or she 

has successfully completed the 

recertification training, in accordance 

with the Exchange’s process. We 

estimate that it would take a certified 

application counselor with a labor cost 

of $26.65 an hour up to .03 hours (2 

minutes) to provide the training 

certificate to the organization or 

Exchange, as may be required. The total 

estimated cost burden is $0.80 for each 

individual seeking recertification. We 

estimate that there would be 

approximately 30,000 training 

certificates provided, and the total 

burden would be 1,000 hours, with a 

total cost burden of $24,000 for all 

certified application counselors 

nationwide. 

In addition, there would be 

recordkeeping requirements associated 

with the training certification. We 

expect each person who receives 

training would obtain and maintain a 

record of training certification. We 

estimate that the time burden associated 

with maintaining proof of training 

certification is .016 hours (1 minute), 

since we assume this proof would be 

maintained through electronic copies, at 

minimal cost. The total cost estimated 

for each individual to maintain proof of 

training certification would be $0.43. 

The total burden would be 500 hours 

and the total cost burden would be 

$12,900 for all certified application 

counselors nationwide. 

B. ICRs Regarding Consumer 

Authorization (§§ 155.210 and 155.215) 

For purposes of the ICRs associated 

with this proposal, we use the same 

labor cost estimates that were used in 

the final Navigator and non-Navigator 

assistance personnel standards rule 

(Patient Protection and Affordable Care 

Act; Exchange Functions: Standards for 

Navigators and Non-Navigator 

Assistance Personnel, July 17, 2013, 78 

FR 42842). Navigator personnel and 

non-Navigator assistance personnel to 

which § 155.215 applies are estimated to 

have a labor cost of $20 per hour. 

Navigator and non-Navigator assistance 

project leads to which § 155.215 applies 

are estimated to have a labor cost of $29 

per hour. Navigator and non-Navigator 

senior executives to which § 155.215 

applies are estimated to have a labor 

cost of $48 per hour. These are estimates 

commonly used for estimating 

paperwork burden and do not represent 

a recommendation or a requirement of 

how much Navigator and non-Navigator 

personnel to which § 155.215 applies 

are to be paid. There is nothing in the 

proposed regulations that would require 

any of these workers to be paid any 

specific amount. 

In the ICR currently approved under 

OMB control number (OCN) 0938–1220, 

we noted that there were 105 Navigator 

grantee organizations at that time in 

FFEs, including SPEs, and we estimated 

that there were 3,000 individuals 

working as Navigators. We estimated the 

number of non-Navigator assistance 

project leads to be 300 and 1,800 for 

personnel and we use those estimates 

here as well. 

In accordance with proposed 

§ 155.210(e)(6) and § 155.215(g), 

Navigators, as well as those nonNavigator personnel to whom § 155.215 

applies, would be required to maintain 

procedures to inform consumers of the 

functions and responsibilities of 

Navigators and non-Navigator assistance 

personnel (as applicable), and to obtain 

authorization for the disclosure of 

consumer information to the Navigator 

or non-Navigator assistance personnel 

(as applicable). This would be a onetime requirement for the organization. 

We estimate that it would take a 

Navigator or non-Navigator assistance 

personnel project lead up to 2 hours to 

create the form for providing 

authorization to applicants, and a 

Navigator or non-Navigator senior 

executive up to 1 hour to review the 

procedure, for a total time burden of up 

to 3 hours. We estimate the cost burden 

associated with creating this procedure 

would be $106 per organization. The 

total cost for all 105 Navigator grantee 

organizations is estimated to be $11,130. 

The total cost for all 300 non-Navigator 

assistance personnel organizations is 

estimated to be $31,800. 

There are also recordkeeping 

requirements associated with 

developing and maintaining a model 

agreement and authorization form. Each 

organization is expected to maintain a 

copy of the executed forms. We estimate 

that the time burden associated with 

maintaining a copy of executed 

agreement and authorization forms for 

each consumer would be 0.016 hours (1 

minute); we assume these would be 

maintained through electronic copies 

with minimal cost. 

In addition, there would be burdens 

on individual Navigators, as well as 

those non-Navigator assistance 

personnel to whom § 155.215 applies. 

Under § 155.210(e)(6) and § 155.215(g), 

respectively, Navigators and nonNavigator assistance personnel would 

be required to inform consumers of the 

functions and responsibilities of 

Navigators and non-Navigator assistance 

personnel and obtain authorization for 

the disclosure of consumer information 

to a Navigator or non-Navigator 

assistance personnel prior to obtaining 

the consumer’s personally identifiable 

information. In the final rule on 

certified application counselors (78 FR 

42824, 42854–42855), we estimated that 

it would take a certified application 

counselor 0.25 hours (15 minutes) to 

provide consumers with information 


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about the functions and responsibilities 

of a certified application counselor, 

obtain their authorizations, and provide 

any applicable conflict of interest 

disclosures. Because here we are only 

estimating the time required to provide 

consumers with information about the 

functions and responsibilities of a 

Navigator or non-Navigator assistance 

personnel and obtain their 

authorization, we estimate that it would 

take a Navigator or non-Navigator 

assistance personnel 0.1667 hours (10 

minutes) to perform this task. The total 

cost estimate for the consumer 

authorization process for Navigators and 

non-Navigator assistance personnel 

therefore would be $3.33. The total time 

burden on all 3,000 Navigators is 

estimated to be approximately 500 

hours, and the total cost burden on all 

3,000 Navigators is estimated to be 

$9,990. The total time burden on all 

1,800 non-Navigator assistance 

personnel is estimated to be 300 hours, 

and the total cost burden on all 1,800 

non-Navigator assistance personnel is 

estimated to be $5,994. 

C. ICRs Regarding Enrollee Satisfaction 

& Marketplace Surveys (§§ 155.1200, 

156.1105 and 156.1125) 

In § 156.1105 of this proposed rule, 

we would establish a monitoring and 

appeals process for HHS-approved 

enrollee satisfaction survey vendors. 

Specifically, in § 156.1105(d), we would 

establish a process in which HHS would 

monitor approved vendors for ongoing 

compliance. HHS might require 

additional information from approved 

vendors to be periodically submitted in 

order to ensure continued compliance. 

We estimate that HHS would approve 

approximately 40 ESS vendors. We 

estimate that it would take no longer 

than one hour for each vendor (at a cost 

of $24.10 per hour) to comply with any 

additional monitoring by HHS. 

Therefore, we estimate a total annual 

burden of 40 hours for all vendors for 

a total cost burden estimate of $964.00. 

In § 156.1105(e) of this proposed rule, 

we propose a process by which an 

enrollee satisfaction survey vendor that 

is not approved by HHS could appeal 

HHS’s determination. It is estimated 

that filing an appeal with HHS would 

take no longer than one hour. We 

estimate that five survey vendors that 

apply would not be approved and all of 

those vendors would appeal HHS’s 

determination and submit additional 

documentation to HHS. Therefore, we 

estimate five responses, for a total of 

five burden hours, for a total cost of 

$120.50. 

The burden estimate associated with 

quality standards for QHP issuers 

related to the ESS outlined in 

§ 156.1125 would include the time and 

effort required for QHP issuers to 

collect, submit and validate ESS data on 

an annual basis. The burden and cost 

related to the survey respondents and 

ESS vendors associated with the ESS 

has been approved under OCN 0938– 

1221. In addition, we estimate that each 

QHP would need an average of 54 hours 

or $1,349.60 for the ESS to be 

administered by mail, phone and/or by 

web for its QHPs. Assuming a total of 

575 QHP issuers, we estimate that the 

annual burden would be 31,050 hours 

or $776,020. 

The burden with the Marketplace 

survey under § 155.1200(b)(3) would 

include the time, cost and effort related 

to survey respondents and has been 

approved under OCN 0938–1221. In 

addition, we will revise the information 

collection currently approved under 

OCN 0938–1119 to account for any 

additional burden for an Exchange if 

sampling data is needed from State 

Exchanges for CMS to administer the 

Marketplace survey. 

D. ICR Regarding Quality Rating System 

(§ 156.1120) 

The burden and cost estimates 

associated with quality standards for 

QHP issuers related to the QRS outlined 

in § 156.1120 would include estimates 

for QRS measure data collection, 

validation, and submission to CMS. We 

estimate that a total of 575 QHP issuers 

would be collecting and reporting QRS 

measure data, by product type, using 

administrative data sources and medical 

records. Using the BLS labor category 

estimates for a general operations 

manager, computer programmer, 

business operations specialist, 

registered nurse, and medical records 

and health information analyst, the 

estimated annual cost and hourly 

burden for a QHP issuer would be 

$117,424 and 1650 hours, for an issuer 

who has performance measures data 

collection experience. We estimate that 

approximately eighty percent of all 

issuers, or 460 issuers, have such 

experience. We anticipate additional 

software purchases to generate measure 

data and rates and increased third-party 

data validation fees for issuers that do 

not have the experience in data 

collection and reporting for the QRS as 

proposed in § 156.1120. Therefore, we 

estimate that the additional cost burden 

for each of the remaining 115 issuers 

would be approximately $102,500 in the 

initial year as they develop their data 

collection systems and processes, for a 

total of approximately $11,787,500. We 

estimate $67,518,800 and 948,750 hours 

as the total annual burden for the 

anticipated 575 QHP issuers to collect 

and report QRS data. 

E. ICRs Regarding Quality Standards for 

Exchanges (§§ 155.1400 and 155.1405) 

In § 155.1400 and § 155.1405, we 

propose that each Exchange must 

display, on its Web site, quality rating 

and enrollee satisfaction survey result 

information for QHPs offered on the 

Exchange. We estimate 18 State 

Exchanges and the FFE would collect 

the relevant QRS and ESS information 

for display. The burden estimate 

associated with these standards would 

include collection of the necessary data 

by each Exchange to display on its Web 

site. This burden and cost for Exchanges 

are currently approved under ONC 

0938–1156 in the total Web site site that 

provides information including ESS and 

quality ratings, on available QHPs. The 

provisions of this proposed rule would 

not affect the burden. 

F. ICR Regarding Medical Loss Ratio 

Requirements (§§ 158.150, 158.211, 

158.220, 158.221, 158.231 and 158.243) 

This proposed rule would amend the 

MLR provisions regarding the treatment 

of ICD–10 conversion costs. This 

proposed rule further proposes MLR 

calculation adjustments for issuers 

affected by the transitional policy 

announced in the CMS letter dated 

November 14, 2013 and for issuers 

participating in the State and Federal 

Exchanges. This proposed rule would 

also clarify how issuers are to calculate 

their MLRs in States that require the 

small group market and individual 

market to be merged. In addition, this 

proposed rule would clarify how issuers 

must distribute de minimis rebates. Both 

MLRs and rebates are reported on the 

MLR annual reporting form. 

The burden for the existing 

information collection requirement is 

approved under OCN 0938–1164. This 

includes the annual reporting form and 

instructions that are currently used by 

issuers to submit MLR information to 

HHS. The MLR annual reporting form 

collects information on all distributed 

and owed rebate amounts, regardless of 

whether they are de minimis. Prior to 

the July 31, 2015 deadline for the 

submission of the annual MLR report for 

the 2014 MLR reporting year, and in 

accordance with the PRA, HHS plans to 

solicit public comment and seek OMB 

approval for an updated MLR annual 

form that would reflect the changes in 

MLR calculations. In addition, although 

HHS is seeking OMB approval for 

updates to the MLR annual form that 

reflect changes in MLR calculations in 

States that require the small group 

market and individual market to be 


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merged, and changes that would allow 

issuers to separately report transitional 

coverage, these changes are not 

considered new reporting requirements 

as they utilize information that is a 

subset of information that issuers 

already submit to HHS. We do not 

anticipate that the proposed changes 

would increase the burden on issuers. 

G. ICRs Regarding Civil Money Penalties 

(§§ 155.206 and 155.285) 

Section 155.206 describes the bases 

and processes HHS proposes to use to 

impose CMPs on noncompliant 

consumer assistance personnel and 

organizations. Section 155.285 describes 

the bases and processes HHS proposes 

to use to impose CMPs on persons who 

provide false or fraudulent information 

required under section 1411(b) of the 

Affordable Care Act or who knowingly 

and willfully use or disclose 

information in violation of section 

1411(g) of the Affordable Care Act. The 

ICRs proposed in these provisions are 

exempt from PRA requirements in 

accordance with 5 CFR 1320.4(a)(2) 

because this information would be 

collected during the conduct of an 

administrative action or investigation 

involving an agency against specific 

individuals or entities. 

H. ICRs Regarding Fixed Indemnity 

Insurance, Minimum Essential 

Coverage, Certifications of Creditable 

Coverage and HIPAA Opt-Out Election 

Notice, Notice of Discontinuation, 

Notice of Renewal (§§ 146.152, 146.180, 

147.106, 148.122, 148.124, 148.220, and 

156.602) 

In § 148.220 of this proposed rule, we 

propose that issuers of individual 

market fixed indemnity insurance 

include a notice in plan materials 

stating that the coverage is not a 

substitute for major medical coverage 

and that lack of minimum essential 

coverage may result in an additional 

payment with one’s taxes. The notice 

requirement could be satisfied by 

inserting a statement into existing plan 

documents. HHS would provide the 

exact text of the notice and it would not 

need to be customized. In addition, 

under proposed § 156.602, issuers of 

foreign group health coverage would be 

required to provide notice to enrollees 

who are citizens or nationals of the 

United States of its minimum essential 

coverage status. Plan documents are 

usually reviewed and updated annually 

before a new plan year begins. Issuers 

would be able to insert the statements 

in their plan documents at that time at 

minimal cost. Once the notice is 

included in the plan documents the first 

year, no additional cost would be 

incurred in future years. Sections 

146.152, 147.106 and 148.122 of this 

proposed rule provide that issuers that 

discontinue a product in the group or 

individual market, or that provide the 

option to renew coverage, would also be 

required to provide written notices to 

enrollees in a form and manner 

specified by the Secretary. HHS would 

provide the exact text of the notices and 

they would not need to be customized. 

The burden associated with these 

notices would not be subject to the 

Paperwork Reduction Act of 1995 in 

accordance with 5 CFR 1320.3(c)(2). 

Certifications of creditable coverage 

under § 148.124 would no longer be 

required to be provided starting 

December 31, 2014. The burden is 

currently approved under OCN 0938– 

0702. In the individual market, the 

anticipated reduction in annual burden 

hours would be 835,517, with an 

anticipated reduction in cost of 

$25,625,306. The burden for HIPAA 

Opt-out Election notices under 

§ 146.180 is currently approved under 

OCN 0938–0702 as well. Electronic 

submission of opt-out election notice 

will also reduce costs for plans by 

eliminating the need for mailing paper 

forms. 

If you comment on these information 

collection requirements, please do 

either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–9949–P. Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

V. Regulatory Impact Analysis 

A. Summary 

This proposed rule addresses various 

requirements applicable to health 

insurance issuers, Exchanges, 

Navigators, non-Navigator assistance 

personnel, and other entities under the 

Affordable Care Act. It also proposes a 

number of amendments relating to the 

premium stabilization programs, the 

medical loss ratio program, certified 

application counselor programs, 

affordability exemptions, guaranteed 

availability and renewability of 

coverage, and quality reporting 

requirements. Additionally, it proposes 

the grounds for imposing CMPs on 

persons who provide false or fraudulent 

information to the Exchange and on 

persons improperly using or disclosing 

information; to modify standards related 

to opt-out provisions for self-funded 

non-Federal governmental plans and 

individual market provisions under the 

Health Insurance Portability and 

Accountability Act of 1996; and 

standards for recognition of certain 

types of foreign group coverage as 

minimum essential coverage. 

CMS has crafted this rule to 

implement the protections intended by 

Congress in an economically efficient 

manner. We have examined the effects 

of this rule as required by Executive 

Order 12866 (58 FR 51735, September 

1993, Regulatory Planning and Review), 

the Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, the Unfunded Mandates Reform 

Act of 1995 (Pub. L. 104–4), Executive 

Order 13132 on Federalism, and the 

Congressional Review Act (5 U.S.C. 

804(2)). In accordance with OMB 

Circular A–4, CMS has quantified the 

benefits, costs and transfers where 

possible, and has also provided a 

qualitative discussion of some of the 

benefits, costs and transfers that may 

stem from this proposed rule. 

B. Executive Orders 13563 and 12866 

Executive Order 12866 (58 FR 51735) 

directs agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects; distributive impacts; and 

equity). Executive Order 13563 (76 FR 

3821, January 21, 2011) is supplemental 

to and reaffirms the principles, 

structures, and definitions governing 

regulatory review as established in 

Executive Order 12866. 


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Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

proposed rule—(1) having an annual 

effect on the economy of $100 million 

or more in any one year, or adversely 

and materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year), and a 

‘‘significant’’ regulatory action is subject 

to review by the OMB. HHS has 

concluded that this rule is likely to have 

economic impacts of $100 million or 

more in any one year, and therefore 

meets the definition of ‘‘significant 

rule’’ under Executive Order 12866. 

Therefore, HHS has provided an 

assessment of the potential costs, 

benefits, and transfers associated with 

this proposed regulation. 

1. Need for Regulatory Action 

Starting in 2014, qualified individuals 

and qualified employers are able to 

obtain coverage provided through 

Exchanges. The proposed provisions, 

amendments and clarifications in this 

proposed rule would address 

stakeholder concerns and inquiries and 

ensure smooth functioning of health 

insurance markets and Exchanges and 

ensure that individuals have access to 

high quality and affordable health 

insurance coverage. In addition, this 

proposed rule would establish 

methodologies for calculating the MLR 

to address ICD–10 conversion costs, 

MLR and rebate calculations in States 

that require the individual and small 

group markets to be merged, the 

distribution of de minimis rebates, and 

to accommodate the special 

circumstances of issuers affected by the 

transitional policy announced in the 

CMS letter dated November 14, 2013, 

and issuers participating in the State 

and Federal Exchanges. 

2. Summary of Impacts 

In accordance with OMB Circular A– 

4, Table V.1 below depicts an 

accounting statement summarizing 

CMS’s assessment of the benefits, costs, 

and transfers associated with this 

regulatory action. The period covered by 

the RIA is 2014–2018. 

HHS anticipates that the provisions of 

this proposed rule will ensure that all 

consumers have access to quality and 

affordable health care and are able to 

make informed choices, ensure smooth 

operation of Exchanges, ensure that 

premium stabilization programs work as 

intended, provide flexibility to SHOPs 

and employers, and protect consumers 

from fraudulent and criminal activities. 

Affected entities such as QHP issuers, 

Navigators and non-Navigator assistance 

personnel, designated certified 

application counselor organizations, 

survey vendors, and States, would incur 

costs to comply with the proposed 

provisions, including administrative 

costs related to notices, surveys, 

training, and recertification 

requirements. In accordance with 

Executive Order 12866, HHS believes 

that the benefits of this regulatory action 

justify the costs. 

TABLE V.1—ACCOUNTING TABLE

Benefits: 

Qualitative: 

* Ensure access to affordable and quality health insurance coverage for all individuals. 

* Allow consumers to make informed choices. 

* Lower out-of-pocket costs for individuals who purchase fixed indemnity insurance. 

* Possible reduction in cost sharing due to adjustment in methodology for calculating annual limitations on cost-sharing and small group 

deductibles. 

* Ensure sufficiency of funds in the reinsurance payment pool. 

* Ensure consumer protection and privacy and security of PII. 

* Discourage fraudulent or criminal activity by consumer assistance personnel and entities. 

* Provide additional flexibility to SHOPs and employers and allow employers to select plans with updated rate information. 

* Improve consistency of MLR calculations among issuers in States with merged individual and small group markets and improve accuracy 

of rebate payments. 

Costs: Estimate Year dollar Discount Period 

rate percent covered 

Annualized Monetized ($millions/year) ........... $48.78 million 1 ...............................................

$49.52 million 1 ...............................................

2013 

2013 

7 

3 

2014–2018 

2014–2018 

Net annual costs to enrollees related to ESS and Marketplace survey; recertification of certified application counselors by States; administrative 

costs incurred by survey vendors to appeal application denials; administrative costs to QHP issuers related to data submissions for QRS and 

ESS administration; costs related to notice and disclosure requirements for certified application counselor recertification; consumer authorization for Navigators and non-Navigator personnel; and a reduction in costs for issuers in the individual market due to discontinuation of certification of creditable coverage. 

Qualitative: 

* Costs to certified application counselors to obtain required training for recertification. 

* Reduction in costs to consumers due to ability to make requests to dismiss appeals by telephone. 

* Possible increase in premiums due to adjustments in methodology for calculating annual limitations on cost-sharing and small group 

deductibles. 


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TABLE V.1—ACCOUNTING TABLE - CONTINUED

Transfers: Estimate Year dollar Discount Period 

rate percent covered 

Annualized Monetized ($millions/year) ........... $2.93 million ...................................................

$2.99 million ...................................................

2013 

2013 

7 

3 

2014–2018 

2014–2018 

Net annual transfer of rebate dollars to enrollees from shareholders or nonprofit stakeholders, resulting from adjustment in MLR methodology for 

issuers in States with merged individual and small group markets. 

Qualitative: 

* Possible reduction in rebates paid by issuers to enrollees due to adjustment in MLR methodology for issuers affected by the November 

2013 transitional policy and unexpected costs during the implementation of the Exchanges, and to account for ICD–10 conversion costs. 

* Possible transfer of transitional reinsurance program funds from the Federal government to non-grandfathered reinsurance-eligible plans 

in the individual market. 

* Possible increase in total risk corridors payment amounts made by the Federal government and decrease in total risk corridors receipts, 

although the Federal government intends to implement the risk corridors program in a budget neutral manner. 

1. Note: Approximately $13 million in costs are estimated in the RIA below and the remaining costs related to ICRs are estimated in section IV 

above. 

3. Anticipated Benefits, Costs and 

Transfers 

The impacts of the existing 

regulations that are being amended and 

clarified in this proposed rule have 

already been addressed in RIAs 

included in previous rulemaking. This 

RIA only includes the impacts of new 

provisions and any changes to previous 

estimates as a result of amendments to 

existing provisions. 

Benefits 

Provisions of this proposed rule 

would ensure that all individuals have 

access to affordable and quality health 

insurance coverage and the necessary 

information to make informed choices. 

Making quality rating and enrollee 

satisfaction survey information available 

to consumers would allow them to make 

informed choices and provide issuers 

with an incentive to improve quality of 

care and consumer experience. The 

results from the Marketplace survey 

would drive quality improvement in 

Exchanges and provide regulators and 

stakeholders with information to use for 

monitoring and oversight purposes. The 

proposed amendments to special 

enrollment periods would ensure that 

individuals who experience loss of 

coverage or exceptional circumstances 

have continued access to healthcare. 

The proposal to designate foreign group 

health coverage for individuals on 

expatriate status as minimum essential 

coverage would ensure that such 

individuals have appropriate coverage 

while abroad or visiting the United 

States. 

The proposed amendments for fixed 

indemnity insurance would allow such 

plans to be sold as secondary to other 

health insurance coverage that meets the 

definition of minimum essential 

coverage. This would allow individuals 

that buy such coverage to lower their 

out-of-pocket costs. 

The proposed adjustments to the 

transitional reinsurance program would 

ensure that the reinsurance pool is 

sufficient to provide the premium 

stabilization benefits intended by 

statute. The proposed adjustments to the 

risk corridors formula for the 2015 

benefit year would help to mitigate 

issuers’ unexpected administrative costs 

and uncertainties around operations and 

the risk pool, and to stabilize the market 

as it continues to transition to full 

compliance with Affordable Care Act 

requirements. 

The proposed regulations would 

clarify some of the standards for 

Navigator and certified application 

counselor conduct that would ensure 

consumer protection and ensure that 

Navigators provide information and 

services concerning enrollment in QHPs 

in a fair and impartial manner and that 

certified application counselors act in 

consumers’ best interests. The proposed 

rule would also provide HHS with the 

authority to impose CMPs on 

Navigators, non-Navigator assistance 

personnel, certified application 

counselors, and certified application 

counselor organizations in the FFE who 

violate the Exchange standards 

applicable to them. This would ensure 

that consumers interacting with the 

Exchange receive high-quality 

assistance and robust consumer 

protection. The proposed provisions to 

impose CMPs for provision of false or 

fraudulent information, and improper 

use or disclosure of information would 

also ensure privacy and security of 

consumers’ PII. 

The proposed amendments to the 

annual employer and employee 

enrollment periods in the SHOP would 

benefit SHOPs by providing issuers with 

the same amount of time to complete 

the SHOP QHP certification process as 

that available for the individual 

Exchange. Aligning the start dates for 

the employer election period with the 

start of individual market Exchange 

open enrollment for 2015 would 

provide Exchanges with a uniform 

timeline for improving and launching 

Exchange services for 2015. 

Additionally, a uniform QHP filing and 

review timeline for both markets for 

2015 would reduce confusion and 

provide efficiencies to scale in review, 

providing potential resource savings to 

Exchanges and QHP issuers. Removing 

the required minimum lengths of both 

the employer election period and the 

employee open enrollment period 

would provide additional flexibility to 

SHOPs and employers and allow 

employers to select plans with the most 

up-to-date rate information. 

The proposed amendment to provide 

for a one year transition policy under 

which a SHOP would be permitted to 

not implement employee choice in 2015 

would alleviate concerns that HHS has 

with specific circumstances where 

employee choice would result in 

significant adverse selection in the 

State’s small group market that cannot 

be remediated through the premium 

stabilization programs or the single risk 

pool, or that there would not be a 

meaningful choice of QHPs and/or 

stand-alone dental plans in the State’s 

SHOP. Allowing for this transitional 

policy in 2015 will provide minimal 

disruption to small group markets. 

The proposed amendment to our 

methodology for calculating the annual 

limitation on cost sharing and the 

annual limitation on small group 

deductibles could reduce cost sharing 

paid by some enrollees in the individual 

and group markets. 

The proposed amendments to the 

MLR methodology in States that require 

the small group market and individual 

market to be merged would improve the 


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57 Detailed burden estimates can be found in the 

Supporting Statement for the Health Insurance 

Marketplace Consumer Experience Surveys: 

Enrollee Satisfaction Survey and Marketplace 

Survey Data Collection, found at https://

www.cms.gov/Regulations-and-Guidance/

Legislation/PaperworkReductionActof1995/PRAListing.html. 

58 Detailed burden estimates can be found in the 

Supporting Statement for the Health Insurance 

Marketplace Consumer Experience Surveys: 

Enrollee Satisfaction Survey and Marketplace 

Survey Data Collection, found at https://

www.cms.gov/Regulations-and-Guidance/

Legislation/PaperworkReductionActof1995/PRAListing.html. 

consistency of MLR calculations among 

issuers in those States and improve the 

accuracy of rebate payments. 

The approaches we are considering to 

define the required contribution 

percentage would provide that 

determinations of affordability 

exemptions would take into account the 

rate of premium growth over the rate of 

income growth. We do not anticipate 

that these approaches would 

significantly alter the number of 

individuals who would be expected to 

enroll in health insurance plans or make 

shared responsibility payments. 

Costs 

Affected entities would incur costs to 

comply with the provisions of this 

proposed rule. Costs related to ICRs 

subject to PRA are discussed in detail in 

section IV and include administrative 

costs incurred by survey vendors to 

appeal application denials; costs to QHP 

issuers related to data submissions for 

QRS, ESS administration; costs related 

to notice and disclosure requirements 

for certified application counselor 

recertification, consumer authorization 

for Navigators and non-Navigator 

assistance personnel; and a reduction in 

costs for issuers in the individual due to 

discontinuation of certification of 

creditable coverage. In this section, we 

discuss other costs related to the 

proposed provisions. 

Each Exchange must establish its own 

recertification process for certified 

application counselors and designated 

certified application counselor 

organizations. We expect that 

establishing a process for recertification 

would include updating recertification 

training materials in all Exchanges. We 

estimate that up to 18 State Exchanges 

will develop their own training 

materials. We expect that an Exchange 

would develop training materials for 

recertification on an annual basis. We 

assume that it would take a mid-level 

health insurance analyst (with an hourly 

labor cost of $49.35) 8 hours to update 

the training, 4 hours for a computer 

programmer (at $52.50 per hour) to 

update the online training module and 

1 hour by a senior manager (at $79.08 

per hour) to review. The total cost for 

each State Exchange is estimated to be 

approximately $680, and the total cost 

for 18 State Exchanges would be 

approximately $12,240. 

The proposed requirement for appeals 

entities to dismiss an appeal if the 

request is received via telephonic 

signature (if the appeals entity is 

capable of accepting telephonic 

withdrawals) would make the process 

more efficient and may reduce costs to 

the appellant. 

The enrollee satisfaction survey 

would impact enrollees responding to 

the survey, survey vendors and QHP 

issuers. In 2014, a psychometric test of 

the survey would be carried out, while 

in 2015 a beta test would be performed. 

The cost to issuers is addressed in 

section IV. We anticipate that in 2014, 

4,200 enrollees would participate in the 

psychometric test and in 2015 onwards, 

6,000,040 enrollees would complete the 

survey. The total cost in 2014 of 

administering the survey to enrollees is 

estimated to be approximately $45,549 

and the total cost to enrollees and 

survey vendors is estimated to be 

approximately $6,507,964 in 2015 and 

future years. In 2014, only one survey 

vendor would conduct the psychometric 

test and in the following years, about 40 

vendors are expected to conduct the 

survey.57 In addition, each QHP issuer 

would have to contract with an ESS 

vendor. We estimate approximately 

$16,000 as the annual cost for a QHP 

issuer to contract with an ESS vendor, 

for a total annual cost of $9.2 million for 

575 QHP issuers. 

The Marketplace survey would be 

administered by a survey vendor under 

contract with HHS. A psychometric test 

would be conducted in 2014 with a beta 

test in 2015. Consumers would incur 

burden to respond to the survey. We 

estimate that each response would take 

0.4 hours for a total of 3,150 responses 

requiring 1,260 hours in 2014 and a 

total of 61,200 responses requiring 

24,480 hours in 2015 onwards. Total 

costs would be approximately $30,366 

in 2014 and $589,968 in following 

years.58

The proposed amendment to our 

methodology for calculating the annual 

limitation on cost sharing and the 

annual limitation on small group 

deductibles could lead some issuers to 

increase premiums slightly, potentially 

resulting in higher premiums for 

consumers. 

Transfers 

Currently, the MLR regulation permits 

inclusion of ICD–10 conversion costs in 

quality improving activity expenses 

only through the 2013 MLR reporting 

year. However, the Secretary has 

changed the date by which issuers are 

required to adopt ICD–10 as the 

standard medical code set from October 

1, 2013 to October 1, 2014. Therefore, 

this proposed rule proposes to permit 

issuers to include their ICD–10 

conversion costs through the MLR 

reporting year in which the Secretary 

requires conversion to be completed, 

which is currently expected to be 2014. 

Based on the 2012 MLR data, we 

estimate that the current ICD–10 

provision reduced total rebates for 2012 

by less than 2 percent. To the extent 

issuers may have completed a 

substantial portion of ICD–10 

conversion prior to 2014, we expect that 

the impact of the proposed change on 

the 2014 rebates would be even smaller. 

This proposed rule also proposes to 

account for the special circumstances of 

issuers affected by the CMS November 

2013 transitional policy by allowing 

those issuers to multiply the incurred 

claims and expenses for quality 

improving activities incurred in 2014 in 

the MLR numerator by 1.0001. This 

adjustment would be limited to issuers 

that provided transitional coverage in 

the individual or small group markets in 

States that adopted the transitional 

policy. In addition, this proposed rule 

proposes to account for the special 

circumstances of the issuers that 

provided coverage through the State and 

Federal Exchanges by allowing those 

issuers to multiply the incurred claims 

and expenses for quality improving 

activities incurred in 2014 in the 

numerator by 1.0004. This adjustment 

would be limited to issuers offering 

coverage in the individual or small 

group markets through the Exchanges. 

Based on the 2012 MLR data, we 

estimate that the proposed adjustment 

for issuers affected by the transitional 

policy and for issuers affected by the 

Exchanges rollout might reduce the total 

rebates by 0.5 percent for 2014. 

In addition, this proposed rule 

proposes to amend the MLR 

methodology to clarify how issuers must 

calculate MLRs in States that require the 

small group market and individual 

market to be merged for MLR 

calculation purposes. This would 

improve the consistency of MLR 

calculations among issuers in those 

States and improve the accuracy of 

rebate payments. Currently, only 

Massachusetts, Vermont, and the 

District of Columbia require the small 

group market and individual market to 

be merged (the Vermont and the District 

of Columbia requirements take effect in 

2014). If an issuer met the respective 

MLR standards in the separate markets, 


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then this provision would not have any 

impact on rebates. However, if an issuer 

met the MLR standards only in one 

market and merging the two markets 

would result in the issuer meeting (or 

being unable to meet) the MLR 

standards in the merged market, the 

issuer might have to pay lower (or 

higher) rebates and there would be a 

transfer from enrollees to issuers (or 

from issuers to enrollees). Based on the 

2012 MLR data, we anticipate that the 

proposed change might result in issuers 

paying an additional $3.8 million in 

rebates. 

This proposed rule also proposes that 

issuers must distribute rebates directly 

to enrollees where (1) all of an issuer’s 

rebates are de minimis, or (2) 

distribution of de minimis rebates to 

enrollee(s) whose rebates are not de 

minimis would result in an enrollee 

receiving a rebate that exceeds the 

enrollee’s annual premium. The current 

de minimis rebate provisions allow 

issuers not to distribute de minimis 

rebates to enrollees, but instead to 

aggregate such rebates and distribute 

them to enrollees whose rebates are not 

de minimis. With respect to the first 

proposed de minimis provision, the 

current de minimis rebate provisions do 

not account for a situation where all of 

an issuer’s rebates are de minimis. It is 

presumed that in such a circumstance, 

issuers would distribute the de minimis 

rebates to all enrollees whose rebates are 

de minimis since these issuers would 

not have any enrollees with non-de 

minimis rebates; therefore, we do not 

consider the proposed clarification to 

create any additional burden. We are 

currently aware of one issuer that was 

in this situation, but more issuers may 

benefit from this clarification as they 

begin to come closer to meeting the 

MLR standard in future years. With 

respect to the second proposed de 

minimis provision, we are not currently 

aware of any issuers that experienced 

this circumstance. Further, there should 

not be any impact to the total amount 

of rebates disbursed because the 

changes proposed here only impact the 

recipient of rebates and not the total 

amount paid. 

In this proposed rule, we propose to 

revise our allocation of reinsurance 

contributions collected for the 2014 and 

2015 benefit years so that reinsurance 

contributions collected are allocated 

first to the reinsurance pool and 

administrative expenses and second to 

payments to the U.S. Treasury. We 

expect that this proposal would not 

have a significant effect on transfers, 

because we estimate that we will collect 

the full amount of reinsurance 

contributions. This proposal could 

lower premiums by reducing the 

uncertainty associated with reinsurance 

payments to non-grandfathered plans in 

the individual market that are eligible 

for such payments under 45 CFR 

153.234. 

The Affordable Care Act creates a 

temporary risk corridors program for the 

years 2014, 2015, and 2016 that applies 

to QHPs, as defined in § 153.500. The 

risk corridors program creates a 

mechanism for sharing risk for 

allowable costs between the Federal 

government and QHP issuers. The 

Affordable Care Act establishes the risk 

corridors program as a Federal program; 

consequently, HHS will operate the risk 

corridors program under Federal rules 

with no State variation. The risk 

corridors program will help protect 

against inaccurate rate setting in the 

early years of the Exchanges by limiting 

the extent of issuer losses and gains. For 

the 2015 benefit year, we are proposing 

an adjustment to the risk corridors 

formula that would help mitigate 

potential QHP issuers’ unexpected 

administrative costs. Although our 

initial modeling suggests that this 

adjustment could increase the total risk 

corridors payment amount made by the 

Federal government and decrease risk 

corridors receipts, we estimate that, 

even with this change, the program can 

be implemented in a budget neutral 

manner. 

C. Regulatory Alternatives 

Under the Executive Order, CMS is 

required to consider alternatives to 

issuing rules and alternative regulatory 

approaches. CMS considered the 

regulatory alternatives below: 

1. Collecting ESS Data at the Product 

Level Instead of Each Product per Metal 

Tier 

Under this alternative, HHS would 

require QHPs to collect ESS data from 

a single sample for each product (versus 

each product in each metal tier). This 

option would reduce the cost for issuers 

who offer the same product in multiple 

tiers. However, collecting data at the 

product level would prevent consumers 

from understanding differences in 

enrollee satisfaction at the individual 

product per tier level, which may vary 

with differences in cost sharing. This 

would reduce the benefits that 

consumers derive from ESS data. 

2. Using Medicaid CAHPS as Is Instead 

of Adding Additional and New 

Questions to the ESS 

Under this alternative, HHS would 

require QHPs to collect enrollee 

satisfaction information using the 

Medicaid CAHPS instrument without 

further enhancement. The ESS will 

include more questions than the 

Medicaid CAHPS—including detailed 

questions about the patient’s costs—that 

are particularly appropriate to Exchange 

enrollees. Eliminating these questions 

would reduce the cost to issuers, but 

also reduce benefits that consumers 

derive from the ESS data. 

3. Collecting QRS Data for Each Product 

per Metal Tier Instead of at the Product 

Level 

Under this alternative, HHS would 

require QHPs to collect the QRS data at 

the same level (individual product per 

metal tier) as they collect ESS 

information. Assuming that QHPs offer 

each product in two metal tiers this 

option would double the cost to QHPs 

of collecting QRS data. However, it 

might not appreciably increase 

consumer information about QHPs in 

the early years of the Exchanges if the 

quality of care in the same product does 

not differ significantly within tiers (i.e., 

the variation should only be by the 

configuration of cost sharing within a 

limited range of actuarial value). 

Further, a QHP’s enrollment size at the 

product metal level may be too small in 

the early years of Exchange 

implementation to ensure reliable 

results. 

4. Using the Medicare Advantage (MA) 

CAHPS Instrument and Star System 

Under this alternative, HHS would 

require QHPs to collect enrollee 

satisfaction information from Exchange 

enrollees using the MA CAHPS 

instrument. The ESS presently includes 

29 more questions, than MA CAHPS. 

Use of the MA CAHPS would reduce the 

cost to consumers and also the QHP cost 

of data entry. However, the MA CAHPS 

instrument and Star ratings are designed 

for a different population and are not 

necessarily suitable to measure 

experience among Exchange enrollees. It 

also would have limited applicability 

for use by consumers for QHP 

comparison and selection purposes. 

CMS believes that the options 

adopted for this proposed rule would be 

more efficient ways to extend the 

protections of the Affordable Care Act to 

enrollees without imposing significant 

burden on issuers and States. 

D. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires agencies that issue a rule to 

analyze options for regulatory relief of 

small businesses if a rule has a 

significant impact on a substantial 

number of small entities. The RFA 

generally defines a ‘‘small entity’’ as— 

(1) a proprietary firm meeting the size 


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59These data can be accessed at http://

www.cms.gov/CCIIO/Resources/Data-Resources/

mlr.html. 

60The size threshold for ‘‘small’’ business 

established by the SBA is currently $35.5 million 

in annual receipts for health insurance issuers. See 

‘‘Table of Small Business Size Standards Matched 

To North American Industry Classification System 

Codes,’’ effective July 23, 2013, U.S. Small Business 

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

standards of the Small Business 

Administration (SBA), (2) a nonprofit 

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’’). CMS uses as its measure of 

significant economic impact on a 

substantial number of small entities a 

change in revenues of more than 3 

percent to 5 percent. 

As discussed in the Web Portal 

interim final rule with comment period 

published on May 5, 2010 (75 FR 

24481), CMS examined the health 

insurance industry in depth in the RIA 

we prepared for the proposed rule on 

establishment of the Medicare 

Advantage program (69 FR 46866, 

August 3, 2004). In that analysis it was 

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 entity’’ 

established by the SBA. Based on data 

from MLR annual report submissions for 

the 2012 MLR reporting year,59 out of 

510 companies offering comprehensive 

health insurance policies nationwide, 

there are 58 small entities, each with 

less than $35.5 million in earned 

premiums, that offer individual or group 

health insurance coverage and would 

therefore be subject to the provisions of 

this proposed rule.60 Forty-three percent 

of these small entities belong to holding 

groups, and many if not all of these 

small entities are likely to have other 

lines of business (e.g., insurance 

business other than health insurance, 

and business other than insurance) that 

would result in their revenues 

exceeding $35.5 million. Based on this 

analysis, HHS expects that the proposed 

provisions would not affect a substantial 

number of small issuers. 

The proposed amendments to the 

annual employer and employee election 

periods in the SHOP, including 

removing the required minimum lengths 

of both the employer election period 

and the employee open enrollment 

period would benefit SHOPs and 

employers. HHS does not anticipate that 

this will impose any costs on small 

employers. 

Some of the entities that voluntarily 

act as Navigators and non-Navigator 

assistance personnel subject to 

§ 155.215, or as designated certified 

application counselor organizations, 

might be small entities and would incur 

costs to comply with the provisions of 

this proposed rule. It should be noted 

that HHS, in its role as the operator of 

the FFEs, does not impose any fees on 

these entities for participating in their 

respective programs, nor are there fees 

for taking the Federally required 

training or completing continuing 

education or recertification in FFEs. 

Further, the cost burden related to 

continuing education and 

recertification, and recordkeeping 

would generally be considered an 

allowed cost that would be covered by 

the Navigator grants for the FFEs, and 

these grant funds may be drawn down 

as the grantee incurs such costs. The 

costs associated with these proposals 

might also be covered by other 

compensation provided by an Exchange, 

such as payments through contracts to 

non-Navigator assistance personnel. 

Though it is very likely that all costs 

associated with these proposals would 

be largely covered by affected entities’ 

and individuals’ funding sources, HHS 

cannot guarantee that all such costs 

would be covered because of the 

possibility of budget limitations 

applicable to the FFE in any given 

period, and because there may be 

variations in how State Exchanges 

provide funding for these programs. To 

the extent that all such costs would not 

covered by these funding sources, other 

outside sources may also be available to 

cover unfunded costs that remain. Costs 

incurred by designated certified 

application counselor organizations 

related to continuing education and 

recertification and recordkeeping are 

expected to be low. In some 

circumstances funds from sources 

outside of the Exchange, including 

Federal funds such as Health Resources 

and Services Administration (HRSA) 

grants to health centers, or private or 

State funds might be available to cover 

certified application counselor costs. 

E. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act (UMRA) of 1995 

requires that agencies assess anticipated 

costs and benefits before issuing any 

proposed rule that includes a Federal 

mandate that could result in 

expenditure in any one year by State, 

local or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2014, that 

threshold level is approximately $141 

million. 

UMRA does not address the total cost 

of a proposed rule. Rather, it focuses on 

certain categories of cost, mainly those 

‘‘Federal mandate’’ costs resulting 

from—(1) imposing enforceable duties 

on State, local, or tribal governments, or 

on the private sector; or (2) increasing 

the stringency of conditions in, or 

decreasing the funding of, State, local, 

or tribal governments under entitlement 

programs. 

This proposed rule includes mandates 

on State, local, or tribal governments. 

Issuers, certified application counselors 

and Exchanges are expected to incur 

costs of approximately $13 million in 

2014 and approximately $85 million in 

2015 onwards to comply with the 

provisions of this proposed rule. 

However, beginning in 2015, issuers in 

the individual market would experience 

a reduction in costs of approximately 

$26 million due to the discontinuation 

of the certification of creditable 

coverage. Consistent with policy 

embodied in UMRA, this proposed rule 

has been designed to be the least 

burdensome alternative for State, local 

and tribal governments, and the private 

sector while achieving the objectives of 

the Affordable Care Act. 

F. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule that imposes substantial 

direct requirement costs on State and 

local governments, preempts State law, 

or otherwise has Federalism 

implications. 

States are the primary regulators of 

health insurance coverage. States will 

continue to apply State laws regarding 

health insurance coverage. However, if 

any State law or requirement prevents 

the application of a Federal standard, 

then that particular State law or 

requirement would be preempted. State 

requirements that are more stringent 

than the Federal requirements would be 

not be preempted by this proposed rule, 

unless they conflict with or prevent 

application of the provisions of title I of 

the Affordable Care Act within the 

meaning of section 1321(d) of the 

Affordable Care Act. Accordingly, States 

have significant latitude to impose 

requirements with respect to health 

insurance coverage that are more 

restrictive than the Federal law 

requirements. 

The proposed amendment to 

§ 155.225(d) would clarify that certified 

application counselors must meet any 

licensing, certification or other 


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standards prescribed by the State so 

long as such standards do not prevent 

the application of the provisions of title 

I of the Affordable Care Act, within the 

meaning of section 1321(d) of the 

Affordable Care Act. The proposed 

provisions also specify State 

requirements applicable to Navigators, 

non-Navigator assistance personnel, or 

certified application counselors that 

would prevent the application of the 

provisions of title I of the Affordable 

Care Act, within the meaning of section 

1321(d) of the Affordable Care Act. They 

include requirements that require 

referrals to entities or individuals not 

required to provide impartial 

information or act in a consumer’s best 

interest, or prevent Navigators, nonNavigator assistance personnel, or 

certified application counselors from 

providing services to all individuals 

seeking assistance, or providing advice 

regarding substantive benefits or 

comparative benefits of different health 

plans; in FFEs conflict with Federal 

standards or make it impossible to fulfill 

required duties, as such requirements 

are applied or implemented in the State; 

in FFEs, render ineligible otherwise 

eligible individuals or entities from 

participating as Navigators, nonNavigator assistance personnel subject 

to § 155.215 or certified application 

counselors under standards applicable 

to an FFE; and requiring that Navigators 

hold an agent or broker license or carry 

errors or omissions insurance. 

Some States already have 

requirements for and publicly report 

health plan quality and outcomes data, 

and we want to encourage State 

flexibility and innovation, consistent 

with the Affordable Care Act. In 

addition to prominently displaying 

quality rating information for each QHP, 

as calculated by HHS in accordance 

with the QRS, a State Exchange may 

display additional QHP quality-related 

information, as appropriate. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policymaking discretion of the 

States, HHS has engaged in efforts to 

consult with and work cooperatively 

with affected States. HHS has consulted 

with stakeholders on policies related to 

the operation of Exchanges, including 

the SHOP and the premium stabilization 

programs. HHS has held a number of 

listening sessions with State 

representatives to gather public input. 

HHS consulted with State 

representatives through regular 

meetings with the National Association 

of Insurance Commissioners (NAIC) and 

regular contact with States through the 

Exchange Establishment grant and 

Exchange Blueprint approval processes. 

Throughout the process of developing 

this proposed rule, CMS has attempted 

to balance the States’ interests in 

regulating health insurance issuers. By 

doing so, it is CMS’ view that it has 

complied with the requirements of 

Executive Order 13132. Under the 

requirements set forth in section 8(a) of 

Executive Order 13132, and by the 

signatures affixed to this rule, HHS 

certifies that the CMS Center for 

Consumer Information and Insurance 

Oversight has complied with the 

requirements of Executive Order 13132 

for the attached proposed rule in a 

meaningful and timely manner. 

G. Congressional Review Act 

This proposed 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, and has 

been transmitted to Congress and the 

Comptroller General for review. 

List of Subjects 

45 CFR Part 146 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements. 

45 CFR Part 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, State regulation of health 

insurance. 

45 CFR Part 148 

Administrative practice and 

procedure, Health care, Health 

insurance, Penalties, Reporting and 

recordkeeping requirements. 

45 CFR Part 153 

Administrative practice and 

procedure, Adverse selection, Health 

care, Health insurance, Health records, 

Organization and functions 

(Government agencies), Premium 

stabilization, Reporting and 

recordkeeping requirements, 

Reinsurance, Risk adjustment, Risk 

corridors, Risk mitigation, State and 

local governments. 

45 CFR Part 155 

Administrative practice and 

procedure, Health care access, Health 

insurance, Reporting and recordkeeping 

requirements, State and local 

governments, Cost-sharing reductions, 

Advance payments of premium tax 

credit, Administration and calculation 

of advance payments of the premium 

tax credit, Plan variations, Actuarial 

value. 

45 CFR Part 156 

Administrative appeals, 

Administrative practice and procedure, 

Administration and calculation of 

advance payments of premium tax 

credit, Advertising, Advisory 

committees, Brokers, Conflict of 

interest, Consumer protection, Costsharing reductions, Grant programs— 

health, Grants administration, Health 

care, Health insurance, Health 

maintenance organization (HMO), 

Health records, Hospitals, American 

Indian/Alaska Natives, Individuals with 

disabilities, Loan programs—health, 

Organization and functions 

(Government agencies), Medicaid, 

Payment and collections reports, Public 

assistance programs, Reporting and 

recordkeeping requirements, State and 

local governments, Sunshine Act, 

Technical assistance, Women, and 

Youth. 

45 CFR Part 158 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Health plans, Penalties, 

Reporting and recordkeeping 

requirements, Premium revenues, 

Medical loss ratio, Rebating. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR parts 146, 147, 148, 153, 155, 156, 

and 158 as set forth below: 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 1. The authority citation for part 146 

continues to read as follows: 

Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the PHS Act 

(42 U.S.C. 300gg–1 through 300gg–5, 300gg– 

11 through 300gg–23, 300gg–91, and 300gg– 

92). 

■ 2. Section 146.152 is amended by— 

■ A. Revising paragraphs (c)(1) and (f). 

■ B. Redesignating paragraph (g) as 

paragraph (h). 

■ C. Adding new paragraph (g). 

The revision and addition reads as 

follows: 

§ 146.152 Guaranteed renewability of 

coverage for employers in the group 

market. 

* * * * * 

(c) * * * 

(1) The issuer provides notice in 

writing, in a form and manner specified 


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15864 Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 

by the Secretary, to each plan sponsor 

provided that particular product in that 

market (and to all participants and 

beneficiaries covered under such 

coverage) of the discontinuation at least 

90 days before the date the coverage will 

be discontinued; 

* * * * * 

(f) Exception for uniform modification 

of coverage. (1) Only at the time of 

coverage renewal may issuers modify 

the health insurance coverage for a 

product offered to a group health plan 

in the following— 

(i) Large group market; and 

(ii) Small group market if, for 

coverage available in this market (other 

than only through one or more bona fide 

associations), the modification is 

consistent with State law and is 

effective uniformly among group health 

plans with that product. 

(2) For purposes of this paragraph (f), 

modifications made solely pursuant to 

applicable Federal or State law are 

considered a uniform modification of 

coverage. Other types of modifications 

are considered a uniform modification 

of coverage if the product that has been 

modified meets all of the following 

criteria: 

(i) The product is offered by the same 

health insurance issuer (within the 

meaning of section 2791(b)(2) of the 

PHS Act). 

(ii) The product is offered as the same 

product type (e.g., preferred provider 

organization (PPO) or health 

maintenance organization (HMO)). 

(iii) The product covers a majority of 

the same counties in its service area; 

(iv) The product has the same costsharing structure, except for variation in 

cost sharing solely related to changes in 

cost and utilization of medical care, or 

to maintain the same level of coverage 

described in sections 1302(d) and (e) of 

the Affordable Care Act. 

(v) The product provides the same 

covered benefits, except for changes in 

benefits that cumulatively impact the 

rate for the product by no more than 2 

percent (not including changes required 

by applicable Federal or State law). 

(3) A State may establish criteria that 

broaden, but not restrict, the definition 

of a uniform modification of coverage 

under paragraph (f)(2) of this section. 

(g) Notice of renewal of coverage. If an 

issuer is renewing coverage as described 

in paragraph (a) of this section, or 

uniformly modifying coverage as 

described in paragraph (f) of this 

section, the issuer must provide to each 

plan sponsor written notice of the 

renewal in a form and manner specified 

by the Secretary. 

* * * * * 

■ 3. Section 146.180 is revised to read 

as follows: 

§ 146.180 Treatment of non-Federal 

governmental plans. 

(a) Opt-out election for self-funded 

non-Federal governmental plans—(1) 

Requirements subject to exemption. The 

PHS Act requirements described in this 

paragraph are the following: 

(i) Limitations on preexisting 

condition exclusion periods in 

accordance with section 2701 of the 

PHS Act as codified before enactment of 

the Affordable Care Act. 

(ii) Special enrollment periods for 

individuals and dependents described 

under section 2704(f) of the PHS Act. 

(iii) Prohibitions against 

discriminating against individual 

participants and beneficiaries based on 

health status under section 2705 of the 

PHS Act, except that the sponsor of a 

self-funded non-Federal governmental 

plan cannot elect to exempt its plan 

from requirements under section 

2705(a)(6) and 2705(c) through (f) that 

prohibit discrimination with respect to 

genetic information. 

(iv) Standards relating to benefits for 

mothers and newborns under section 

2725 of the PHS Act. 

(v) Parity in mental health and 

substance use disorder benefits under 

section 2726 of the PHS Act. 

(vi) Required coverage for 

reconstructive surgery following 

mastectomies under section 2727 of the 

PHS Act. 

(vii) Coverage of dependent students 

on a medically necessary leave of 

absence under section 2728 of the PHS 

Act. 

(2) General rule. For plan years 

beginning on or after September 23, 

2010, a sponsor of a non-Federal 

governmental plan may elect to exempt 

its plan, to the extent the plan is not 

provided through health insurance 

coverage (that is, it is self-funded), from 

one or more of the requirements 

described in paragraphs (a)(1)(iv) 

through (vii) of this section. 

(3) Special rule for certain collectively 

bargained plans. In the case of a plan 

that is maintained pursuant to a 

collective bargaining agreement that was 

ratified before March 23, 2010, and 

whose sponsor made an election to 

exempt its plan from any of the 

requirements described in paragraphs 

(a)(1)(i) through (iii) of this section, the 

provisions of paragraph (a)(2) of this 

section apply for plan years beginning 

after the expiration of the term of the 

agreement. 

(4) Examples—(i) Example 1. A nonFederal governmental employer has 

elected to exempt its self-funded group 

health plan from all of the requirements 

described in paragraph (a)(1) of this 

section. The plan year commences 

September 1 of each year. The plan is 

not subject to the provisions of 

paragraph (a)(1)(ii) of this section until 

the plan year that commences on 

September 1, 2011. Accordingly, for that 

plan year and any subsequent plan 

years, the plan sponsor may elect to 

exempt its plan only from the 

requirements described in paragraphs 

(a)(1)(iv) through (vii) of this section. 

(ii) Example 2. A non-Federal 

governmental employer has elected to 

exempt its collectively bargained selffunded plan from all of the 

requirements described in paragraph 

(a)(1) of this section. The collective 

bargaining agreement applies to five 

plan years, October 1, 2009 through 

September 30, 2014. For the plan year 

that begins on October 1, 2014, the plan 

sponsor is no longer permitted to elect 

to exempt its plan from the 

requirements described in paragraph 

(a)(1) of this section. Accordingly, for 

that plan year and any subsequent plan 

years, the plan sponsor may elect to 

exempt its plan only from the 

requirements described in paragraphs 

(a)(1)(iv) through (vii) of this section. 

(5) Limitations. (i) An election under 

this section cannot circumvent a 

requirement of the PHS Act to the extent 

the requirement applied to the plan 

before the effective date of the election. 

Example 1. A plan is subject to 

requirements of section 2727 of the PHS 

Act, under which a plan that covers 

medical and surgical benefits with 

respect to a mastectomy must cover 

reconstructive surgery and certain other 

services following a mastectomy. An 

enrollee who has had a mastectomy 

receives reconstructive surgery on 

August 24. Claims with respect to the 

surgery are submitted to and processed 

by the plan in September. The group 

health plan commences a new plan year 

each September 1. Effective September 

1, the plan sponsor elects to exempt its 

plan from section 2727 of the PHS Act. 

The plan cannot, on the basis of its 

exemption election, decline to pay for 

the claims incurred on August 24. 

(ii) If a group health plan is cosponsored by two or more employers, 

then only plan enrollees of the nonFederal governmental employer(s) with 

a valid election under this section are 

affected by the election. 

(6) Stop-loss or excess risk coverage. 

For purposes of this section— 

(i) Subject to paragraph (a)(6)(ii) of 

this section, the purchase of stop-loss or 

excess risk coverage by a self-funded 

non-Federal governmental plan does not 

prevent an election under this section. 


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(ii) Regardless of whether coverage 

offered by an issuer is designated as 

‘‘stop-loss’’ coverage or ‘‘excess risk’’ 

coverage, if it is regulated as group 

health insurance under an applicable 

State law, then for purposes of this 

section, a non-Federal governmental 

plan that purchases the coverage is 

considered to be fully insured. In that 

event, a plan may not be exempted 

under this section from the 

requirements described in paragraph 

(a)(1) of this section. 

(7) Construction. Nothing in this part 

should be construed as imposing 

collective bargaining obligations on any 

party to the collective bargaining 

process. 

(b) Form and manner of election—(1) 

Election requirements. The election 

must meet the following requirements: 

(i) Be made in an electronic format in 

a form and manner as described by the 

Secretary in guidance. 

(ii) Be made in conformance with all 

of the plan sponsor’s rules, including 

any public hearing requirements. 

(iii) Specify the beginning and ending 

dates of the period to which the election 

is to apply. This period can be either of 

the following periods: 

(A) A single specified plan year, as 

defined in § 144.103 of this subchapter. 

(B) The ‘‘term of the agreement,’’ as 

specified in paragraph (b)(2) of this 

section, in the case of a plan governed 

by collective bargaining. 

(iv) Specify the name of the plan and 

the name and address of the plan 

administrator, and include the name 

and telephone number of a person CMS 

may contact regarding the election. 

(v) State that the plan does not 

include health insurance coverage, or 

identify which portion of the plan is not 

funded through health insurance 

coverage. 

(vi) Specify each requirement 

described in paragraph (a)(1) of this 

section from which the plan sponsor 

elects to exempt the plan. 

(vii) Certify that the person signing 

the election document, including (if 

applicable) a third party plan 

administrator, is legally authorized to 

do so by the plan sponsor. 

(viii) Include, as an attachment, a 

copy of the notice described in 

paragraph (f) of this section. 

(2) ‘‘Term of the agreement’’ defined. 

Except as provided in paragraphs 

(b)(2)(i) and (ii), for purposes of this 

section ‘‘term of the agreement’’ means 

all group health plan years governed by 

a single collective bargaining agreement. 

(i) In the case of a group health plan 

for which the last plan year governed by 

a prior collective bargaining agreement 

expires during the bargaining process 

for a new agreement, the term of the 

prior agreement includes all plan years 

governed by the agreement plus the 

period of time that precedes the latest of 

the following dates, as applicable, with 

respect to the new agreement: 

(A) The date of an agreement between 

the governmental employer and union 

officials. 

(B) The date of ratification of an 

agreement between the governmental 

employer and the union. 

(C) The date impasse resolution, 

arbitration or other closure of the 

collective bargaining process is finalized 

when agreement is not reached. 

(ii) In the case of a group health plan 

governed by a collective bargaining 

agreement for which closure is not 

reached before the last plan year under 

the immediately preceding agreement 

expires, the term of the new agreement 

includes all plan years governed by the 

agreement excluding the period that 

precedes the latest applicable date 

specified in paragraph (b)(2)(i) of this 

section. 

(3) Construction—(i) Dispute 

resolution. Nothing in paragraph 

(b)(1)(ii) of this section should be 

construed to mean that CMS arbitrates 

disputes between plan sponsors, 

participants, beneficiaries, or their 

representatives regarding whether an 

election complies with all of a plan 

sponsor’s rules. 

(ii) Future elections not preempted. If 

a plan must comply with one or more 

requirements described in paragraph 

(a)(1) of this section for a given plan 

year or period of plan coverage, nothing 

in this section should be construed as 

preventing a plan sponsor from 

submitting an election in accordance 

with this section for a subsequent plan 

year or period of plan coverage. 

(c) Filing a timely election—(1) Plan 

not governed by collective bargaining. 

Subject to paragraph (c)(4) of this 

section, if a plan is not governed by a 

collective bargaining agreement, a plan 

sponsor or entity acting on behalf of a 

plan sponsor must file an election with 

CMS before the first day of the plan 

year. 

(2) Plan governed by a collective 

bargaining agreement. Subject to 

paragraph (d)(4) of this section, if a plan 

is governed by a collective bargaining 

agreement that was ratified before 

March 23, 2010, a plan sponsor or entity 

acting on behalf of a plan sponsor must 

file an election with CMS before the first 

day of the first plan year governed by a 

collective bargaining agreement, or by 

the 45th day after the latest applicable 

date specified in paragraph (b)(2)(i) of 

this section, if the 45th day falls on or 

after the first day of the plan year. 

(3) Verifying timely filing. For 

elections submitted via hard copy 

through U.S. Mail, CMS uses the 

postmark on the envelope in which the 

election is submitted to determine that 

the election is timely filed as specified 

under paragraphs (c)(1) or (2) of this 

section, as applicable. If the latest filing 

date falls on a Saturday, Sunday, or a 

State or Federal holiday, CMS accepts a 

postmark on the next business day. 

(4) Filing extension based on good 

cause. CMS may extend the deadlines 

specified in paragraphs (c)(1) and (2) of 

this section for good cause if the plan 

substantially complies with the 

requirements of paragraph (e) of this 

section. 

(5) Failure to file a timely election. 

Absent an extension under paragraph 

(c)(4) of this section, a plan sponsor’s 

failure to file a timely election under 

paragraph (c)(1) or (2) of this section 

makes the plan subject to all 

requirements of this part for the entire 

plan year to which the election would 

have applied, or, in the case of a plan 

governed by a collective bargaining 

agreement, for any plan years under the 

agreement for which the election is not 

timely filed. 

(d) Additional information required— 

(1) Written notification. If an election is 

timely filed, but CMS determines that 

the election document (or the notice to 

plan enrollees) does not meet all of the 

requirements of this section, CMS may 

notify the plan sponsor, or other entity 

that filed the election, that it must 

submit any additional information that 

CMS has determined is necessary to 

meet those requirements. The additional 

information must be filed with CMS by 

the later of the following dates: 

(i) The last day of the plan year. 

(ii) The 45th day after the date of 

CMS’s written notification requesting 

additional information. 

(2) Timely response. For submissions 

via hard copy via U.S. Mail, CMS uses 

the postmark on the envelope in which 

the additional information is submitted 

to determine that the information is 

timely filed as specified under 

paragraph (d)(1) of this section. If the 

latest filing date falls on a Saturday, 

Sunday, or a State or Federal holiday, 

CMS accepts a postmark on the next 

business day. 

(3) Failure to respond timely. CMS 

may invalidate an election if the plan 

sponsor, or other entity that filed the 

election, fails to timely submit the 

additional information as specified 

under paragraph (d)(1) of this section. 

(e) Notice to enrollees—(1) Mandatory 

notification. (i) A plan that makes the 

election described in this section must 

notify each affected enrollee of the 


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election, and explain the consequences 

of the election. For purposes of this 

paragraph (e), if the dependent(s) of a 

participant reside(s) with the 

participant, a plan need only provide 

notice to the participant. 

(ii) The notice must be in writing and, 

except as provided in paragraph (e)(2) of 

this section with regard to initial 

notices, must be provided to each 

enrollee at the time of enrollment under 

the plan, and on an annual basis no later 

than the last day of each plan year (as 

defined in § 144.103 of this subchapter) 

for which there is an election. 

(iii) A plan may meet the notification 

requirements of this paragraph (e) by 

prominently printing the notice in a 

summary plan description, or 

equivalent description, that it provides 

to each enrollee at the time of 

enrollment, and annually. Also, when a 

plan provides a notice to an enrollee at 

the time of enrollment, that notice may 

serve as the initial annual notice for that 

enrollee. 

(2) Initial notices. (i) If a plan is not 

governed by a collective bargaining 

agreement, with regard to the initial 

plan year to which an election under 

this section applies, the plan must 

provide the initial annual notice of the 

election to all enrollees before the first 

day of that plan year, and notice at the 

time of enrollment to all individuals 

who enroll during that plan year. 

(ii) In the case of a collectively 

bargained plan, with regard to the initial 

plan year to which an election under 

this section applies, the plan must 

provide the initial annual notice of the 

election to all enrollees before the first 

day of the plan year, or within 30 days 

after the latest applicable date specified 

in paragraph (b)(2)(i) of this section if 

the 30th day falls on or after the first 

day of the plan year. Also, the plan must 

provide a notice at the time of 

enrollment to individuals who— 

(A) Enroll on or after the first day of 

the plan year, when closure of the 

collective bargaining process is reached 

before the plan year begins; or 

(B) Enroll on or after the latest 

applicable date specified in paragraph 

(b)(2)(i) of this section if that date falls 

on or after the first day of the plan year. 

(3) Notice content. The notice must 

include at least the following 

information: 

(i) The specific requirements 

described in paragraph (a)(1) of this 

section from which the plan sponsor is 

electing to exempt the plan, and a 

statement that, in general, Federal law 

imposes these requirements upon group 

health plans. 

(ii) A statement that Federal law gives 

the plan sponsor of a self-funded nonFederal governmental plan the right to 

exempt the plan in whole, or in part, 

from the listed requirements, and that 

the plan sponsor has elected to do so. 

(iii) A statement identifying which 

parts of the plan are subject to the 

election. 

(iv) A statement identifying which of 

the listed requirements, if any, apply 

under the terms of the plan, or as 

required by State law, without regard to 

an exemption under this section. 

(f) Subsequent elections—(1) Election 

renewal. A plan sponsor may renew an 

election under this section through 

subsequent elections. The timeliness 

standards described in paragraph (c) of 

this section apply to election renewals 

under this paragraph (f). 

(2) Form and manner of renewal. 

Except for the requirement to forward to 

CMS a copy of the notice to enrollees 

under paragraph (b)(1)(viii) of this 

section, the plan sponsor must comply 

with the election requirements of 

paragraph (b)(1) of this section. In lieu 

of providing a copy of the notice under 

(b)(1)(viii), the plan sponsor may 

include a statement that the notice has 

been, or will be, provided to enrollees 

as specified under paragraph (e) of this 

section. 

(3) Election renewal includes 

provisions from which plan not 

previously exempted. If an election 

renewal includes a requirement 

described in paragraph (a)(1) of this 

section from which the plan sponsor did 

not elect to exempt the plan for the 

preceding plan year, the advance 

notification requirements of paragraph 

(e)(2) of this section apply with respect 

to the additional requirement(s) of 

paragraph (a) from which the plan 

sponsor is electing to exempt the plan. 

(4) Special rules regarding renewal of 

an election under a collective 

bargaining agreement—(i) If protracted 

negotiations with respect to a new 

agreement result in an extension of the 

term of the prior agreement (as provided 

under paragraph (b)(2)(i) of this section) 

under which an election under this 

section was in effect, the plan must 

comply with the enrollee notification 

requirements of paragraph (e)(1) of this 

section, and, following closure of the 

collective bargaining process, must file 

an election renewal with CMS as 

provided under paragraph (c)(2) of this 

section. 

(ii) If a single plan applies to more 

than one bargaining unit, and the plan 

is governed by collective bargaining 

agreements of varying lengths, 

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

respect to an election renewal, applies 

to the plan as governed by the 

agreement that results in the earliest 

filing date. 

(g) Requirements not subject to 

exemption—(1) Genetic information. 

Without regard to an election under this 

section that exempts a non-Federal 

governmental plan from any or all of the 

provisions of §§ 146.111 and 146.121, 

the exemption election must not be 

construed to exempt the plan from any 

provisions of this part 146 that pertain 

to genetic information. 

(2) Enforcement. CMS enforces these 

requirements as provided under 

paragraph (j) of this section. 

(h) Effect of failure to comply with 

certification and notification 

requirements—(1) Substantial failure— 

(i) General rule. Except as provided in 

paragraph (h)(1)(iii) of this section, a 

substantial failure to comply with 

paragraph (e) or (g)(1) of this section 

results in the invalidation of an election 

under this section with respect to all 

plan enrollees for the entire plan year. 

That is, the plan is subject to all 

requirements of this part for the entire 

plan year to which the election 

otherwise would have applied. 

(ii) Determination of substantial 

failure. CMS determines whether a plan 

has substantially failed to comply with 

a requirement of paragraph (e) or 

paragraph (g)(1) of this section based on 

all relevant facts and circumstances, 

including previous record of 

compliance, gravity of the violation and 

whether a plan corrects the failure, as 

warranted, within 30 days of learning of 

the violation. However, in general, a 

plan’s failure to provide a notice of the 

fact and consequences of an election 

under this section to an individual at 

the time of enrollment, or on an annual 

basis before a given plan year expires, 

constitutes a substantial failure. 

(iii) Exceptions—(A) Multiple 

employers. If the plan is sponsored by 

multiple employers, and only certain 

employers substantially fail to comply 

with the requirements of paragraph (e) 

or (g)(1) of this section, then the election 

is invalidated with respect to those 

employers only, and not with respect to 

other employers that complied with 

those requirements, unless the plan 

chooses to cancel its election entirely. 

(B) Limited failure to provide notice. 

If a substantial failure to notify enrollees 

of the fact and consequences of an 

election is limited to certain 

individuals, the election under this 

section is valid only if, for the plan year 

with respect to which the failure has 

occurred, the plan agrees not to apply 

the election with respect to the 

individuals who were not notified and 

so informs those individuals in writing. 

(2) Examples—(i) 


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Example 1. A self-funded, non-Federal 

group health plan is co-sponsored by 10 

school districts. Nine of the school districts 

have fully complied with the requirements of 

paragraph (e) of this section, including 

providing notice to new employees at the 

time of their enrollment in the plan, 

regarding the group health plan’s exemption 

under this section from requirements of this 

part. One school district, which hired 10 new 

teachers during the summer for the upcoming 

school year, neglected to notify three of the 

new hires about the group health plan’s 

exemption election at the time they enrolled 

in the plan. The school district has 

substantially failed to comply with a 

requirement of paragraph (e) of this section 

with respect to these individuals. The school 

district learned of the oversight six weeks 

into the school year, and promptly (within 30 

days of learning of the oversight) provided 

notice to the three teachers regarding the 

plan’s exemption under this section and that 

the exemption does not apply to them, or 

their dependents, during the plan year of 

their enrollment because of the plan’s failure 

to timely notify them of its exemption. The 

plan complies with the requirements of this 

part for these individuals for the plan year of 

their enrollment. CMS would not require the 

plan to come into compliance with the 

requirements of this part for other enrollees. 

(ii) 

Example 2. Two non-Federal governmental 

employers cosponsor a self-funded group 

health plan. One employer substantially fails 

to comply with the requirements of 

paragraph (e) of this section. While the plan 

may limit the invalidation of the election to 

enrollees of the plan sponsor that is 

responsible for the substantial failure, the 

plan sponsors determine that administering 

the plan in that manner would be too 

burdensome. Accordingly, in this example, 

the plan sponsors choose to cancel the 

election entirely. Both plan sponsors come 

into compliance with the requirements of 

this part with respect to all enrollees for the 

plan year for which the substantial failure 

has occurred. 

(i) Election invalidated. If CMS finds 

cause to invalidate an election under 

this section, the following rules apply: 

(1) CMS notifies the plan sponsor 

(and the plan administrator if other than 

the plan sponsor and the administrator’s 

address is known to CMS) in writing 

that CMS has made a preliminary 

determination that an election is 

invalid, and states the basis for that 

determination. 

(2) CMS’s notice informs the plan 

sponsor that it has 45 days after the date 

of CMS’s notice to explain in writing 

why it believes its election is valid. The 

plan sponsor should provide applicable 

statutory and regulatory citations to 

support its position. 

(3) CMS verifies that the plan 

sponsor’s response is timely filed as 

provided under paragraph (c)(3) of this 

section. CMS will not consider a 

response that is not timely filed. 

(4) If CMS’s preliminary 

determination that an election is invalid 

remains unchanged after CMS considers 

the plan sponsor’s timely response (or 

in the event that the plan sponsor fails 

to respond timely), CMS provides 

written notice to the plan sponsor (and 

the plan administrator if other than the 

plan sponsor and the administrator’s 

address is known to CMS) of CMS’s 

final determination that the election is 

invalid. Also, CMS informs the plan 

sponsor that, within 45 days of the date 

of the notice of final determination, the 

plan, subject to paragraph (i)(1)(iii) of 

this section, must comply with all 

requirements of this part for the 

specified period for which CMS has 

determined the election to be invalid. 

(j) Enforcement. To the extent that an 

election under this section has not been 

filed or a non-Federal governmental 

plan otherwise is subject to one or more 

requirements of this part, CMS enforces 

those requirements under part 150 of 

this subchapter. This may include 

imposing a civil money penalty against 

the plan or plan sponsor, as determined 

under subpart C of part 150. 

(k) Construction. Nothing in this 

section should be construed to prevent 

a State from taking the following 

actions: 

(1) Establishing, and enforcing 

compliance with, the requirements of 

State law (as defined in § 146.143(d)(1)), 

including requirements that parallel 

provisions of title XXVII of the PHS Act, 

that apply to non-Federal governmental 

plans or sponsors. 

(2) Prohibiting a sponsor of a nonFederal governmental plan within the 

State from making an election under 

this section. 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 4. The authority citation for part 147 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

■ 5. Section 147.104 is amended by 

revising paragraph (b)(1)(i) and adding 

paragraph (h) to read as follows: 

§ 147.104 Guaranteed availability of 

coverage. 

* * * * * 

(b) * * * 

(1) * * * 

(i) Group market. (A) Subject to 

paragraph (b)(1)(i)(B) of this section, a 

health insurance issuer in the group 

market must allow an employer to 

purchase health insurance coverage for 

a group health plan at any point during 

the year. 

(B) In the case of a group health plan 

in the small group market that cannot 

comply with employer contribution or 

group participation rules for the offering 

of health insurance coverage, as allowed 

under applicable State law and in the 

case of a QHP offered in the SHOP, as 

permitted by § 156.1250(c) of this 

subchapter, a health insurance issuer 

may restrict the availability of coverage 

to an annual enrollment period that 

begins November 15 and extends 

through December 15 of each calendar 

year. 

(C) With respect to coverage in the 

small group market, and in the large 

group market if such coverage is offered 

through a Small Business Health 

Options Program (SHOP) in a State, 

coverage must become effective 

consistent with the dates described in 

§ 155.725(a)(2) of this subchapter, 

except as provided in paragraph 

(b)(1)(iii) of this section. 

* * * * * 

(h) Construction. Nothing in this 

section should be construed to require 

an issuer to offer coverage otherwise 

prohibited under applicable Federal 

law. 

■ 6. Section 147.106 is amended by— 

■ A. Revising paragraphs (c)(1) and (e). 

■ B. Redesignating paragraphs (f), (g), 

and (h) as paragraphs (h), (i) and (j). 

■ D. Adding new paragraphs (f) and (g). 

The revisions and additions read as 

follows: 

§ 147.106 Guaranteed renewability of 

coverage. 

* * * * * 

(c) * * * 

(1) The issuer provides notice in 

writing, in a form and manner specified 

by the Secretary, to each plan sponsor 

or individual, as applicable, provided 

that particular product in that market 

(and to all participants and beneficiaries 

covered under such coverage) of the 

discontinuation at least 90 calendar 

days before the date the coverage will be 

discontinued. 

* * * * * 

(e) Exception for uniform 

modification of coverage. (1) Only at the 

time of coverage renewal may issuers 

modify the health insurance coverage 

for a product offered to a group health 

plan or an individual, as applicable, in 

the following: 

(i) Large group market. 

(ii) Small group market if, for 

coverage available in this market (other 

than only through one or more bona fide 

associations), the modification is 

consistent with State law and is 


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effective uniformly among group health 

plans with that product. 

(iii) Individual market if the 

modification is consistent with State 

law and is effective uniformly for all 

individuals with that product. 

(2) For purposes of this paragraph (e), 

modifications made solely pursuant to 

applicable Federal or State law are 

considered a uniform modification of 

coverage. Other types of modifications 

are considered a uniform modification 

of coverage if the product that has been 

modified meets all of the following 

criteria: 

(i) The product is offered by the same 

health insurance issuer (within the 

meaning of section 2791(b)(2) of the 

PHS Act). 

(ii) The product is offered as the same 

product type (e.g., preferred provider 

organization (PPO) or health 

maintenance organization (HMO)). 

(iii) The product covers a majority of 

the same counties in its service area; 

(iv) The product has the same costsharing structure, except for variation in 

cost sharing solely related to changes in 

cost and utilization of medical care, or 

to maintain the same level of coverage 

described in sections 1302(d) and (e) of 

the Affordable Care Act. 

(v) The product provides the same 

covered benefits, except for changes in 

benefits that cumulatively impact the 

plan-adjusted index rate for the product 

(as described in § 156.80(d)(2)) by no 

more than 2 percent (not including 

changes required by applicable Federal 

or State law). 

(3) A State may establish criteria that 

broaden, but not restrict, the definition 

of a uniform modification of coverage 

under paragraph (e)(2) of this section. 

(f) Notice of renewal of coverage. If an 

issuer is renewing coverage as described 

in paragraph (a) of this section, or 

uniformly modifying coverage as 

described in paragraph (e) of this 

section, the issuer must provide to each 

plan sponsor or individual, as 

applicable, written notice of the renewal 

in a form and manner specified by the 

Secretary. 

(g) Construction. Nothing in this 

section should be construed to require 

an issuer to renew or continue in force 

coverage for which continued eligibility 

would otherwise be prohibited under 

applicable Federal law. 

* * * * * 

PART 148—REQUIREMENTS FOR THE 

INDIVIDUAL HEALTH INSURANCE 

MARKET 

■ 7. The authority citation for part 148 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

■ 8. Section 148.101 is revised to read 

as follows: 

§ 148.101 Basis and purpose. 

This part implements sections 2741 

through 2763 and 2791 and 2792 of the 

PHS Act. Its purpose is to guarantee the 

renewability of all coverage in the 

individual market. It also provides 

certain protections for mothers and 

newborns with respect to coverage for 

hospital stays in connection with 

childbirth and protects all individuals 

and family members who have, or seek, 

individual health insurance coverage 

from discrimination based on genetic 

information. 

■ 9. Section 148.102 is revised to read 

as follows: 

§ 148.102 Scope, applicability, and 

effective dates. 

(a) Scope and applicability. (1) 

Individual health insurance coverage 

includes all health insurance coverage 

(as defined in § 144.103 of this 

subchapter) that is neither health 

insurance coverage sold in connection 

with an employment-related group 

health plan, nor short-term, limitedduration coverage as defined in 

§ 144.103 of this subchapter. 

(2) The requirements that pertain to 

guaranteed renewability for all 

individuals, to protections for mothers 

and newborns with respect to hospital 

stays in connection with childbirth, and 

to protections against discrimination 

based on genetic information apply to 

all issuers of individual health 

insurance coverage in the State. 

(b) Applicability date. Except as 

provided in § 148.124 (certificate of 

creditable coverage), § 148.170 

(standards relating to benefits for 

mothers and newborns), and § 148.180 

(prohibition of health discrimination 

based on genetic information), the 

requirements of this part apply to health 

insurance coverage offered, sold, issued, 

renewed, in effect, or operated in the 

individual market after June 30, 1997. 

§ 148.103 [Removed] 

■ 10. Section 148.103 is removed. 

■ 11. Section 148.120 is revised to read 

as follows: 

§ 148.120 Guaranteed availability of 

individual health insurance coverage to 

certain individuals with prior group 

coverage. 

The rules for guaranteeing the 

availability of individual health 

insurance coverage to certain eligible 

individuals with prior group coverage 

have been superseded by the 

requirements of § 147.104 of this 

subchapter, which set forth Federal 

requirements for guaranteed availability 

of coverage in the group and individual 

markets. 

■ 12. Section 148.122 is amended by— 

■ A. Revising paragraphs (a), (d)(1), and 

(g). 

■ B. Redesignating paragraph (h) as 

paragraph (i). 

■ C. Adding new paragraph (h). 

The revisions and addition read as 

follows: 

§ 148.122 Guaranteed renewability of 

individual health insurance coverage. 

(a) Applicability. This section applies 

to non-grandfathered and grandfathered 

health plans (within the meaning of 

§ 147.140 of this subchapter) that are 

individual health insurance coverage. 

See also § 147.106 of this subchapter for 

requirements relating to guaranteed 

renewability of coverage with respect to 

non-grandfathered health plans. 

* * * * * 

(d) * * * 

(1) Provides notice in writing, in a 

form and manner specified by the 

Secretary, to each individual provided 

coverage of that type of health insurance 

at least 90 calendar days before the date 

the coverage will be discontinued. 

* * * * * 

(g) Exception for uniform 

modification of coverage. (1) An issuer 

may, only at the time of coverage 

renewal, modify the health insurance 

coverage for a policy form offered in the 

individual market if the modification is 

consistent with State law and is 

effective uniformly for all individuals 

with that policy form. 

(2) For purposes of this paragraph (g), 

modifications made solely pursuant to 

applicable Federal or State law are 

considered a uniform modification of 

coverage. Other types of modifications 

are considered a uniform modification 

of coverage if the product that has been 

modified meets all of the following 

criteria: 

(i) The product is offered by the same 

health insurance issuer (within the 

meaning of section 2791(b)(2) of the 

PHS Act). 

(ii) The product is offered as the same 

product type (e.g., preferred provider 

organization (PPO) or health 

maintenance organization (HMO)). 

(iii) The product covers a majority of 

the same counties in its service area; 

(iv) The product has the same costsharing structure, except for variation in 

cost sharing solely related to changes in 

cost and utilization of medical care, or 

to maintain the same level of coverage 


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Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 15869 

described in sections 1302(d) and (e) of 

the Affordable Care Act. 

(v) The product provides the same 

covered benefits, except for changes in 

benefits that cumulatively impact the 

rate for the product by no more than 2 

percent (not including changes required 

by applicable Federal or State law). 

(3) A State may establish criteria that 

broaden, but not restrict, the definition 

of a uniform modification of coverage 

under paragraph (g)(2) of this section. 

(h) Notice of renewal of coverage. If an 

issuer is renewing coverage as described 

in paragraph (b) of this section, or 

uniformly modifying coverage as 

described in paragraph (g) of this 

section, the issuer must provide to each 

individual written notice of the renewal 

in a form and manner specified by the 

Secretary. 

* * * * * 

■ 13. Section 148.124 is revised to read 

as follows: 

§ 148.124 Certification and disclosure of 

coverage. 

(a) General rule. The rules for 

providing certificates of creditable 

coverage and demonstrating creditable 

coverage have been superseded by the 

prohibition on preexisting condition 

exclusions. See § 147.108 of this 

subchapter for rules prohibiting the 

imposition of a preexisting condition 

exclusion. 

(b) Applicability. The provisions of 

this section apply beginning December 

31, 2014. 

■ 14. Section 148.126 is revised to read 

as follows: 

§ 148.126 Determination of an eligible 

individual. 

The rules for guaranteeing the 

availability of individual health 

insurance coverage to certain eligible 

individuals with prior group coverage 

have been superseded by the 

requirements of § 147.104 of this 

subchapter, which set forth Federal 

requirements for guaranteed availability 

of coverage in the group and individual 

markets. 

■ 15. Section 148.128 is revised to read 

as follows: 

§ 148.128 State flexibility in individual 

market reforms—alternative mechanisms. 

The rules for a State to implement an 

acceptable alternative mechanism for 

purposes of guaranteeing the availability 

of individual health insurance coverage 

to certain eligible individuals with prior 

group coverage have been superseded 

by the requirements of § 147.104 of this 

subchapter, which set forth Federal 

requirements for guaranteed availability 

of coverage in the group and individual 

markets. 

■ 16. Section 148.220 is amended by— 

■ A. Revising the introductory text. 

■ B. Revising paragraph (b)(3). 

■ C. Redesignating paragraphs (b)(4) 

through (6) as paragraphs (b)(5) through 

(7), respectively. 

■ D. Adding new paragraph (b)(4). 

The revisions and additions read as 

follows: 

§ 148.220 Excepted benefits. 

The requirements of this part and part 

147 do not apply to individual health 

insurance coverage in relation to its 

provision of the benefits described in 

paragraphs (a) and (b) of this section (or 

any combination of the benefits). 

* * * * * 

(b) * * * 

(3) Coverage only for a specified 

disease or illness (for example, cancer 

policies) if the policies meet the 

requirements of § 146.145(b)(4)(ii)(B) 

and (C) of this subchapter regarding 

noncoordination of benefits. 

(4) Hospital indemnity or other fixed 

indemnity insurance only if— 

(i) The benefits are provided only to 

individuals who have other health 

coverage that is minimum essential 

coverage within the meaning of section 

5000A(f) of the Internal Revenue Code. 

(ii) There is no coordination between 

the provision of benefits and an 

exclusion of benefits under any other 

health coverage. 

(iii) The benefits are paid in a fixed 

dollar amount per day of hospitalization 

or illness or per service (for example, 

$100/day or $50/visit) regardless of the 

amount of expenses incurred and 

without regard to the amount of benefits 

provided with respect to the event or 

service under any other health coverage. 

(iv) A notice is displayed prominently 

in the plan materials in at least 14 point 

type that has the following language: 

‘‘THIS IS A SUPPLEMENT TO HEALTH 

INSURANCE AND IS NOT A 

SUBSTITUTE FOR MAJOR MEDICAL 

COVERAGE. LACK OF MAJOR 

MEDICAL COVERAGE (OR OTHER 

MINIMUM ESSENTIAL COVERAGE) 

MAY RESULT IN AN ADDITIONAL 

PAYMENT WITH YOUR TAXES.’’ 

* * * * * 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS, 

AND RISK ADJUSTMENT UNDER THE 

AFFORDABLE CARE ACT 

■ 17. The authority citation for part 153 

continues to read as follows: 

Authority: Secs. 1311, 1321, 1341–1343, 

Pub. L. 111–148, 24 Stat. 119. 

■ 18. Section 153.500 is amended by 

revising the definition of ‘‘adjustment 

percentage,’’ as added on March 11, 

2014 (79 FR 13835), effective on May 

12, 2014, to read as follows: 

§ 153.500 Definitions. 

* * * * * 

Adjustment percentage means, with 

respect to a QHP: 

(1) For benefit year 2014, for a QHP 

offered by a health insurance issuer 

with allowable costs of at least 80 

percent of after-tax premium in a 

transitional State, the percentage 

specified by HHS for such QHPs in the 

transitional State; and otherwise zero 

percent. 

(2) For benefit year 2015, for a QHP 

offered by a health insurance issuer in 

any State, two percent. 

* * * * * 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 19. The authority citation for part 155 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301, 1302, 1303, 1304, 1311, 

1312, 1313, 1321, 1322, 1331, 1332, 1334, 

1402, 1411, 1412, 1413, Pub. L. 111–148, 124 

Stat. 119 (42 U.S.C. 18021–18024, 18031– 

18033, 18041–18042, 18051, 18054, 18071, 

and 18081–18083). 

■ 20. Section 155.120 is amended by 

revising paragraph (c) to read as follows: 

§ 155.120 Non-interference with Federal 

law and non-discrimination standards. 

* * * * * 

(c) Non-discrimination. (1) In carrying 

out the requirements of this part, the 

State and the Exchange must: 

(i) Comply with applicable nondiscrimination statutes; and 

(ii) Not discriminate based on race, 

color, national origin, disability, age, 

sex, gender identity or sexual 

orientation. 

(2) Exception. Notwithstanding the 

provisions of paragraph (c)(1) of this 

section, an organization that receives 

Federal funds to provide services to a 

defined population under the terms of 

Federal legal authorities that 

participates in the certified application 

counselor program under § 155.225 may 

limit its provision of certified 

application counselor services to the 

same defined population. If the 

organization limits its provision of 

certified application counselor services 

pursuant to this exception, but is 

approached for certified application 

counselor services by an individual who 

is not included in the defined 

population that the organization serves, 

the organization must refer the 


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individual to other Exchange-approved 

resources that can provide assistance. If 

the organization does not limit its 

provision of certified application 

counselor services pursuant to this 

exception, the organization must 

comply with paragraph (c)(1) of this 

section. 

■ 21. Section 155.206 is added to read 

as follows: 

§ 155.206 Civil money penalties for 

violations of applicable Exchange 

standards by consumer assistance entities 

in Federally-facilitated Exchanges. 

(a) Enforcement actions. If an 

individual or entity specified in 

paragraph (b) of this section engages in 

activity specified in paragraph (c) of this 

section, the Department of Health and 

Human Services (HHS) may impose the 

following sanctions: 

(1) Civil money penalties (CMPs), 

subject to the provisions of this section. 

(2) Corrective action plans. In the 

notice of assessment of CMPs specified 

in paragraph (l) of this section, HHS 

may provide an individual or entity 

specified in paragraph (b) of this section 

the opportunity to enter into a 

corrective action plan to correct the 

violation instead of paying the CMP, 

based on evaluation of the factors set 

forth in paragraph (h) of this section. In 

the event that the individual or entity 

does not follow such a corrective action 

plan, HHS could require payment of the 

CMP. 

(b) Consumer assistance entities. 

CMPs may be assessed under this 

section against the following consumer 

assistance entities: 

(1) Individual Navigators and 

Navigator entities in Federallyfacilitated Exchanges, including 

grantees, sub-grantees, and all personnel 

carrying out Navigator duties on behalf 

of a grantee or sub-grantee; 

(2) Non-Navigator assistance 

personnel authorized under § 155.205(d) 

and (e) and non-Navigator assistance 

personnel entities in Federallyfacilitated Exchanges, including but not 

limited to individuals and entities 

under contract with HHS to facilitate 

consumer enrollment in QHPs in 

Federally-facilitated Exchanges; and 

(3) Organizations that the Federallyfacilitated Exchanges have designated as 

certified application counselor 

organizations and individual certified 

application counselors carrying out 

certified application counselor duties in 

the Federally-facilitated Exchanges. 

(c) Grounds for assessing CMPs. HHS 

may assess CMPs against a consumer 

assistance entity if, based on the 

outcome of the investigative process 

outlined in paragraphs (d) through (i) of 

this section, HHS has reasonably 

determined that the consumer 

assistance entity has failed to comply 

with the Federally-facilitated Exchange 

requirements and standards applicable 

to the consumer assistance entity, 

unless a CMP has been assessed for the 

same conduct under 45 CFR 155.285. 

(d) Basis for initiating an investigation 

of a potential violation. (1) Information. 

Any information received by HHS that 

indicates that a consumer assistance 

entity may have engaged or may be 

engaging in activity specified in 

paragraph (c) of this section may 

warrant an investigation. Information 

that might trigger an investigation 

includes, but is not limited to, the 

following: 

(i) Complaints from the general 

public; 

(ii) Reports from State regulatory 

agencies, and other Federal and State 

agencies; or 

(iii) Any other information that 

indicates potential involvement in 

activity specified in paragraph (c) of this 

section. 

(2) Who may file a complaint. Any 

entity or individual, or the legally 

authorized representative of an entity or 

individual, may file a complaint with 

HHS alleging that a consumer assistance 

entity has engaged or is engaging in an 

activity specified in paragraph (c) of this 

section. 

(e) Notice of investigation. If HHS 

learns of a potential violation described 

in paragraph (c) of this section through 

the means described in paragraph (d) of 

this section, HHS must provide a 

written notice of its investigation to the 

consumer assistance entity. This notice 

must include the following: 

(1) Description of the activity that is 

being investigated. 

(2) Explanation that the consumer 

assistance entity has 30 days from the 

date of the notice to respond with 

additional information or 

documentation, including information 

or documentation to refute an alleged 

violation. 

(3) State that a CMP might be assessed 

if the allegations are not, as determined 

by HHS, refuted within 30 days from the 

date of the notice. 

(f) Request for extension. In 

circumstances in which a consumer 

assistance entity cannot prepare a 

response to HHS within the 30 days 

provided in the notice of investigation 

described in (e) of this section, the 

entity may make a written request for an 

extension from HHS detailing the reason 

for the extension request and showing 

good cause. If HHS grants the extension, 

the consumer assistance entity must 

respond to the notice within the time 

frame specified in HHS’s letter granting 

the extension of time. Failure to respond 

within 30 days, or, if applicable, within 

an extended time frame, may result in 

HHS’s imposition of a CMP depending 

upon the outcome of HHS’s 

investigation of the alleged violation. 

(g) Responses to allegations of 

noncompliance. In determining whether 

to impose a CMP, HHS may review and 

consider documents or information 

received or collected in accordance with 

paragraph (d)(1) of this section, as well 

as additional documents or information 

provided by the consumer assistance 

entity in response to receiving a notice 

of investigation in accordance with 

paragraph (e)(2) of this section. HHS 

may also conduct an independent 

investigation into the alleged violation, 

which may include site visits and 

interviews, if applicable, and may 

consider the results of this investigation 

in its determination. 

(h) Factors in determining 

noncompliance and CMPs, if any. In 

determining whether there has been 

noncompliance by the consumer 

assistance entity, and whether CMPs are 

appropriate, 

(1) HHS must take into account the 

following: 

(i) The consumer assistance entity’s 

previous or ongoing record of 

compliance, including but not limited to 

compliance or noncompliance with any 

corrective action plan under section (c) 

of this section. 

(ii) The gravity of the violation, which 

may be determined in part by— 

(A) The frequency of the violation, 

taking into consideration whether any 

violation is an isolated occurrence, 

represents a pattern, or is widespread; 

and 

(B) Whether the violation caused, or 

could reasonably be expected to cause, 

financial or other adverse impacts on 

consumer(s), and the magnitude of those 

impacts; 

(2) HHS may take into account the 

following: 

(i) The degree of culpability of the 

consumer assistance entity, including 

but not limited to— 

(A) Whether the violation was beyond 

the direct control of the consumer 

assistance entity; and 

(B) The extent to which the consumer 

assistance entity received 

compensation—legal or otherwise—for 

the services associated with the 

violation; 

(ii) Aggravating or mitigating 

circumstances; or 

(iii) Other such factors as justice may 

require. 

(i) Maximum per-day penalty. The 

maximum amount of penalty imposed 


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for each violation is $100 for each day 

for each consumer assistance entity for 

each individual directly affected by the 

consumer assistance entity’s 

noncompliance; and where the number 

of individuals cannot be determined, 

the Exchange may reasonably estimate 

the number of individuals directly 

affected by the violation. 

(j) Settlement authority. Nothing in 

§ 155.206 limits the authority of HHS to 

settle any issue or case described in the 

notice furnished in accordance with 

paragraph (e) or to compromise on any 

penalty provided for in this section. 

(k) Limitations on penalties. (1) 

Circumstances under which a civil 

money penalty is not imposed. HHS will 

not impose any civil money penalty on: 

(i) Any violation for the period of time 

during which none of the consumer 

assistance entities knew, or exercising 

reasonable diligence would have 

known, of the violation; or 

(ii) The period of time after any of the 

consumer assistance entities knew, or 

exercising reasonable diligence would 

have known, of the failure, if the 

violation was due to reasonable cause 

and not due to willful neglect and the 

violation was corrected within 30 days 

of the first day that any of the consumer 

assistance entities against whom the 

penalty would be imposed knew, or 

exercising reasonable diligence would 

have known, that the violation existed. 

(2) Burden of establishing knowledge. 

The burden is on the consumer 

assistance entity or entities to establish 

to HHS’s satisfaction that the consumer 

assistance entity did not know, or 

exercising reasonable diligence would 

have known, that the violation existed, 

as well as the period of time during 

which that limitation applies; or that the 

violation was due to reasonable cause 

and not due to willful neglect and was 

corrected pursuant to the elements in 

subparagraph (k)(1)(ii). 

(l) Notice of assessment of CMP. If 

HHS proposes to assess a CMP in 

accordance with this section, HHS will 

send a written notice of this decision 

to— 

(1) The consumer assistance entity 

against whom the sanction is being 

imposed, which notice must include the 

following: 

(i) A description of the basis for the 

determination; 

(ii) The basis for the CMP; 

(iii) The amount of the CMP, if 

applicable; 

(iv) The date the CMP, if applicable, 

is due; 

(v) Whether HHS would permit the 

consumer assistance entity to enter into 

a corrective action plan in place of 

paying the CMP, and the terms of any 

such corrective action plan; 

(vi) An explanation of the consumer 

assistance entity’s right to a hearing 

under paragraph (m) of this section; and 

(vii) Information about the process for 

filing a request for a hearing. 

(m) Appeal of proposed sanction. Any 

consumer assistance entity against 

which HHS has assessed a sanction may 

appeal that penalty in accordance with 

the procedures set forth at 45 CFR Part 

150, Subpart D. 

(n) Failure to request a hearing. (1) If 

the consumer assistance entity does not 

request a hearing within 30 days of the 

issuance of the notice of assessment of 

CMP described in paragraph (l) of this 

section, HHS may require payment of 

the proposed CMP. 

(2) HHS will notify the consumer 

assistance entity in writing of any CMP 

that has been assessed and of the means 

by which the consumer assistance entity 

may pay the CMP. 

(3) The consumer assistance entity 

has no right to appeal a CMP with 

respect to which it has not requested a 

hearing in accordance with paragraph 

(m) of this section unless the consumer 

assistance entity can show good cause 

in accordance with § 150.405(b) of this 

subchapter for failing to timely exercise 

its right to a hearing. 

■ 22. Section 155.210 is amended— 

■ A. By revising paragraph (c)(1)(iii). 

■ B. In paragraph (d)(3) by removing 

‘‘or,’’ after the semicolon. 

■ C. In paragraph (d)(4) by removing the 

period at the end of the paragraph and 

adding a semicolon in its place. 

■ D. By adding paragraphs (d)(5) 

through (9) and (e)(6) and (7). 

The revision and additions read as 

follows: 

§ 155.210 Navigator program standards. 

(c) * * * 

(1) * * * 

(iii) Meet any licensing, certification 

or other standards prescribed by the 

State or Exchange, if applicable, so long 

as such standards do not prevent the 

application of the provisions of title I of 

the Affordable Care Act. Standards that 

would prevent the application of the 

provisions of title I of the Affordable 

Care Act include but are not limited to 

the following: 

(A) Except as otherwise provided 

under § 155.705(d), requirements that 

Navigators refer consumers to other 

entities not required to provide fair, 

accurate, and impartial information. 

(B) Except as otherwise provided 

under § 155.705(d), requirements that 

would prevent Navigators from 

providing services to all persons to 

whom they are required to provide 

assistance. 

(C) Requirements that would prevent 

Navigators from providing advice 

regarding substantive benefits or 

comparative benefits of different health 

plans. 

(D) Requiring that a Navigator hold an 

agent or broker license or carry errors or 

omissions insurance. 

(E) In a Federally-facilitated 

Exchange, imposing standards that 

would prohibit individuals or entities 

from acting as Navigators that would be 

eligible to participate as Navigators 

under standards applicable to the 

Federally-facilitated Exchange. 

(F) In a Federally-facilitated 

Exchange, imposing standards that 

would, as applied or as implemented in 

a State, prevent the application of 

requirements applicable to the 

Federally-facilitated Exchange. 

* * * * * 

(d) * * * 

(5) Charge any applicant or enrollee, 

or request or receive any form of 

remuneration from or on behalf of an 

individual applicant or enrollee, for 

application or other assistance related to 

Navigator duties; or 

(6) Provide compensation to 

individual Navigators on a perapplication, per-individual-assisted, or 

per-enrollment basis. 

(7) Provide gifts, including gift cards 

or cash, unless they are of nominal 

value, or provide promotional items that 

market or promote the products or 

services of a third party, to any 

applicant or potential enrollee in 

connection with or as an inducement for 

application assistance or enrollment. 

(8) Solicit any consumer for 

application or enrollment assistance by 

going door-to-door or through other 

unsolicited means of direct contact, 

including calling a consumer to provide 

application or enrollment assistance 

without the consumer initiating the 

contact. 

(9) Initiate any telephone call to a 

consumer using an automatic telephone 

dialing system or an artificial or 

prerecorded voice. 

(e) * * * 

(6) Ensure that applicants— 

(i) Are informed of the functions and 

responsibilities of Navigators; 

(ii) Provide authorization in a form 

and manner as determined by the 

Secretary prior to a Navigator’s 

obtaining access to an applicant’s 

personally identifiable information, and 

that the Navigator maintains a record of 

the authorization provided. The 

Exchange must establish a reasonable 

retention period for maintaining these 

records. In Federally-facilitated 

Exchanges, this period is three years, 


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unless a different retention period has 

already been provided under 45 CFR 

92.42 and 45 CFR 74.53 or other 

applicable Federal law; and 

(iii) May revoke at any time the 

authorization provided the Navigator 

pursuant to paragraph (e)(6)(ii) of this 

section. 

(7) Maintain a physical presence in 

the Exchange service area, so that faceto-face assistance can be provided to 

applicants and enrollees. 

* * * * * 

■ 23. Section 155.215 is amended by 

adding paragraphs (f) and (g) to read as 

follows: 

§ 155.215 Standards applicable to 

Navigators and Non-Navigator Assistance 

Personnel carrying out consumer 

assistance functions under §§ 155.205(d) 

and (e) and 155.210 in a Federally-facilitated 

Exchange and to Non-Navigator Assistance 

Personnel funded through an Exchange 

Establishment Grant. 

* * * * * 

(f) State or Exchange standards. All 

non-Navigator entities or individuals 

carrying out consumer assistance 

functions under § 155.205(d) and (e) 

must comply with the eligibility 

standard set forth under 

§ 155.210(c)(1)(iii), except for 

§ 155.210(c)(1)(iii)(D). 

(g) Consumer authorization. All nonNavigator entities or individuals 

carrying out consumer assistance 

functions under § 155.205(d) and (e) 

must establish procedures to ensure that 

applicants— 

(1) Are informed of the functions and 

responsibilities of non-Navigator 

assistance personnel; 

(2) Provide authorization in a form 

and manner as determined by the 

Secretary prior to a non-Navigator 

assistance personnel’s obtaining access 

to an applicant’s personally identifiable 

information, and that the non-Navigator 

assistance personnel maintains a record 

of the authorization provided. The 

Exchange must establish a reasonable 

retention period for maintaining these 

records. In Federally-facilitated 

Exchanges, this period is three years, 

unless an different retention period has 

already been provided in applicable 

Federal law; and 

(3) May revoke at any time the 

authorization provided the nonNavigator assistance personnel pursuant 

to paragraph (g)(2) of this section. 

■ 24. Section 155.225 is amended— 

■ A. In paragraph (b)(1)(i) by removing 

‘‘and’’ after the semicolon. 

■ B. In paragraph (b)(1)(ii) by removing 

the period at the end of the paragraph 

and adding ‘‘; and’’ in its place. 

■ C. By adding paragraph (b)(1)(iii). 

■ D. In paragraph (d)(5) by removing 

‘‘and’’ after the semicolon. 

■ E. In paragraph (d)(6) by removing the 

period at the end of the paragraph and 

adding a semicolon in its place. 

■ F. By adding paragraphs (d)(7) and (8). 

■ G. By revising paragraphs (f)(1) and (2) 

and (g). 

The revisions and additions read as 

follows: 

§ 155.225 Certified application counselors. 

* * * * * 

(b) * * * 

(1) * * * 

(iii) Maintain a physical presence in 

the Exchange service area, so that faceto-face assistance can be provided to 

applicants and enrollees. 

* * * * * 

(d) * * * 

(7) Is recertified on at least an annual 

basis after successfully completing 

recertification training as required by 

the Exchange; and 

(8) Meets any licensing, certification, 

or other standards prescribed by the 

State or Exchange, if applicable, so long 

as such standards do not prevent the 

application of the provisions of title I of 

the Affordable Care Act. Standards that 

would prevent the application of the 

provisions of title I of the Affordable 

Care Act include but are not limited to 

the following: 

(i) Requirements that certified 

application counselors refer consumers 

to other entities not required to act in 

the best interest of applicants assisted. 

(ii) Requirements that would prevent 

certified application counselors from 

providing services to all persons to 

whom they are required to provide 

assistance. 

(iii) Requirements that would prevent 

certified application counselors from 

providing advice regarding substantive 

benefits or comparative benefits of 

different health plans. 

(iv) In a Federally-facilitated 

Exchange, imposing standards that 

would prohibit individuals or entities 

from acting as certified application 

counselors that would be eligible to 

participate as certified application 

counselors under standards applicable 

to the Federally-facilitated Exchange. 

(v) In a Federally-facilitated 

Exchange, imposing standards that 

would, as applied or as implemented in 

a State, prevent the application of 

requirements applicable to the 

Federally-facilitated Exchange. 

* * * * * 

(f) * * * 

(1) Are informed of the functions and 

responsibilities of certified application 

counselors; 

(2) Provide authorization prior to a 

certified application counselor 

obtaining access to an applicant’s 

personally identifiable information and 

that the organization or certified 

application counselor maintains a 

record of the authorization. The 

Exchange must establish a reasonable 

retention period for maintaining these 

records. In Federally-facilitated 

Exchanges, this period is three years, 

unless a different retention period has 

already been provided under other 

applicable Federal law; and 

* * * * * 

(g) Fees, consideration, solicitation, 

and marketing. Organizations 

designated by the Exchange under 

paragraph (b) of this section and 

certified application counselors must 

not— 

(1) Impose any charge on applicants 

or enrollees for application or other 

assistance related to the Exchange; 

(2) Receive any consideration directly 

or indirectly from any health insurance 

issuer or issuer of stop-loss insurance in 

connection with the enrollment of any 

individuals in a QHP or a non-QHP; 

(3) Provide compensation to 

individual certified application 

counselors on a per-application, perindividual- assisted, or per-enrollment 

basis; 

(4) Provide gifts, including gift cards 

or cash, unless they are of nominal 

value, or provide promotional items that 

market or promote the products or 

services of a third party, to any 

applicant or potential enrollee in 

connection with or as an inducement for 

application assistance or enrollment; 

(5) Solicit any consumer for 

application or enrollment assistance by 

going door-to-door or through other 

unsolicited means of direct contact, 

including calling a consumer to provide 

application or enrollment assistance 

without the consumer initiating the 

contact; or 

(6) Initiate any telephone call to a 

consumer using an automatic telephone 

dialing system or an artificial or 

prerecorded voice. 

■ 25. Section 155.240 is amended by 

adding paragraph (e) to read as follows: 

§ 155.240 Payment of premium. 

* * * * * 

(e) Premium calculation. The 

Exchange may establish one or more 

standard processes for premium 

calculation. 

(1) For a Federally-facilitated 

Exchange, the premium for coverage 

lasting less than one month must equal 

the product of— 


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(i) The premium for one month of 

coverage divided by the number of days 

in the month; and 

(ii) The number of days for which 

coverage is being provided in the month 

described in paragraph (e)(1)(i) of this 

section. 

(2) [Reserved] 

■ 26. Section 156.260 is amended by 

revising paragraph (g) to read as follows: 

§ 155.260 Privacy and security of 

personally identifiable information. 

* * * * * 

(g) Improper use and disclosure of 

information. Any person who 

knowingly and willfully uses or 

discloses information in violation of 

section 1411(g) of the Affordable Care 

Act will be subject to a CMP of not more 

than the maximum amount specified in 

section 1411(h)(2) of the Affordable Care 

Act per person or entity, per use or 

disclosure, consistent with the bases 

and process for imposing civil penalties 

specified at § 155.285 of this subpart, in 

addition to other penalties that may be 

prescribed by law. 

■ 27. Section 155.285 is added to 

subpart C to read as follows: 

§ 155.285 Bases and process for imposing 

civil penalties for provision of false or 

fraudulent information to an Exchange or 

improper use or disclosure of information. 

(a) Grounds for imposing civil money 

penalties. (1) HHS may impose civil 

money penalties on any person, as 

defined in paragraph (a)(2) of this 

section, if, based on credible evidence, 

HHS reasonably determines that a 

person has engaged in one or more of 

the following actions: 

(i) Failure to provide correct 

information under section 1411(b) of the 

Affordable Care Act where such failure 

is attributable to negligence or disregard 

of any rules or regulations of the 

Secretary with negligence and disregard 

defined as they are in section 6662 of 

the Internal Revenue Code of 1986: 

(A) ‘‘Negligence’’ includes any failure 

to make a reasonable attempt to provide 

accurate, complete, and comprehensive 

information; and 

(B) ‘‘Disregard’’ includes any careless, 

reckless, or intentional disregard for any 

rules or regulations of the Secretary. 

(ii) Knowing and willful provision of 

false or fraudulent information required 

under section 1411(b) of the Affordable 

Care Act, where knowing and willful 

means the intentional provision of 

information that the person knows to be 

false; or 

(iii) Knowing and willful use or 

disclosure of information in violation of 

section 1411(g) of the Affordable Care 

Act, where knowing and willful means 

the intentional use or disclosure of 

information in violation of section 

1411(g). Such violations would include, 

but not be limited to, the following: 

(A) Any use or disclosure performed 

which violates relevant privacy and 

security standards established by the 

Exchange pursuant to § 155.260; 

(B) Any other use or disclosure which 

has not been determined by the 

Secretary to be in compliance with 

section 1411(g)(2)(A) of the Affordable 

Care Act pursuant to § 155.260(a); and 

(C) Any other use or disclosure which 

is not necessary to carry out a function 

described in a contract with a nonExchange entity executed pursuant to 

§ 155.260(b)(2). 

(2) For purposes of this section, the 

term ‘‘person’’ is defined to include, but 

is not limited to, all individuals; 

corporations; Exchanges; Medicaid and 

CHIP agencies; other entities gaining 

access to personally identifiable 

information submitted to an Exchange 

to carry out additional functions which 

the Secretary has determined ensure the 

efficient operation of the Exchange 

pursuant to § 155.260(a)(1); and nonExchange entities as defined in 

§ 155.260(b) which includes agents, 

brokers, Web-brokers, QHP issuers, 

Navigators, non-Navigator assistance 

personnel; certified application 

counselors, in-person assistors, and 

other third party contractors. 

(b) Factors in determining the amount 

of civil money penalties imposed. In 

determining the amount of civil money 

penalties, HHS may take into account 

factors which include, but are not 

limited to, the following: 

(1) The nature and circumstances of 

the conduct including: 

(i) The number of violations; 

(ii) The severity of the violations; 

(iii) The person’s history with the 

Exchange including any prior violations 

that would indicate whether the 

violation is an isolated occurrence or 

represents a pattern of behavior; 

(iv) The length of time of the 

violation; 

(v) The number of individuals 

affected or potentially affected; 

(vi) The extent to which the person 

received compensation or other 

consideration associated with the 

violation; and 

(vii) Any documentation provided in 

any complaint or other information, as 

well as any additional information 

provided by the individual to refute 

performing the violation. 

(2) The nature of the harm resulting 

from, or reasonably expected to result 

from, the violation including: 

(i) Whether the violation resulted in 

financial harm; 

(ii) Whether there was harm to an 

individual’s reputation; 

(iii) Whether the violation hindered or 

could have hindered an individual’s 

ability to obtain health insurance 

coverage; 

(v) The actual or potential impact of 

the provision of false or fraudulent 

information or of the improper use or 

disclosure of the information; and 

(vi) Whether any person received a 

more favorable eligibility determination 

for enrollment in a QHP or insurance 

affordability program, such as greater 

advance payment of the premium tax 

credits or cost-sharing reductions than 

he or she would be eligible for if the 

correct information had been provided. 

(3) No penalty will be imposed under 

paragraph (a)(1)(i) of this section if HHS 

determines that there was a reasonable 

cause for the failure to provide correct 

information required under section 

1411(b) of the Affordable Care Act and 

that the person acted in good faith. 

(c) Maximum penalty. The amount of 

a civil money penalty will be 

determined by HHS in accordance with 

paragraph (b) of this section. 

(1) The following provisions provide 

maximum penalties for a single ‘‘plan 

year,’’ where ‘‘plan year’’ has the same 

meaning as at § 155.20 of this part: 

(i) Any person who fails to provide 

correct information as specified in 

paragraph (a)(1)(i) of this section may be 

subject to a maximum civil money 

penalty as specified in section 

1411(h)(1)(A)(i) of the Affordable Care 

Act for each application, as defined at 

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

pursuant to which a person fails to 

provide correct information. 

(ii) Any person who knowingly and 

willfully provides false information as 

specified in paragraph (a)(1)(ii) of this 

section may be subject to a maximum 

civil money penalty as specified in 

section 1411(h)(1)(B) of the Affordable 

Care Act for each application, as defined 

at paragraph (c)(1)(iii) of this section, on 

which a person knowingly and willfully 

provides false information. 

(iii) For the purposes of this 

subsection, ‘‘application’’ is defined as 

a submission of information, whether 

through an online portal, over the 

telephone through a call center, or 

through a paper submission process, in 

which the information is provided in 

relation to an eligibility determination; 

an eligibility redetermination based on 

a change in an individual’s 

circumstances; or an annual eligibility 

redetermination for any of the 

following: 

(A) Enrollment in a qualified health 

plan; 


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(B) Premium tax credits or cost 

sharing reductions; or 

(C) An exemption from the individual 

shared responsibility payment. 

(2) Any person who knowingly or 

willfully uses or discloses information 

as specified in paragraph (a)(1)(iii) of 

this section may be subject to the 

following civil money penalty: 

(i) A civil money penalty for each use 

or disclosure described in paragraph 

(a)(1)(iii) of this section of not more than 

the maximum amount specified in 

section 1411(h)(2) of the Affordable Care 

Act per use or disclosure. 

(ii) For purposes of this subsection, a 

use or disclosure includes one separate 

use or disclosure of a single individual’s 

personally identifiable information 

where the person against whom a civil 

money penalty may be imposed has 

made the use or disclosure. 

(3) These penalties may be imposed in 

addition to any other penalties that may 

be prescribed by law. 

(d) Notice of intent to issue civil 

money penalty. If HHS intends to 

impose a civil money penalty in 

accordance with this part, HHS will 

send a written notice of such intent to 

the person against whom it intends to 

impose a civil money penalty. 

(1) This written notice will be either 

hand delivered, sent by certified mail, 

return receipt requested, or sent by 

overnight delivery service with 

signature upon delivery required. The 

written notice must include the 

following elements: 

(i) A description of the findings of fact 

regarding the violations with respect to 

which the civil money penalty is 

proposed; 

(ii) The basis and reasons why the 

findings of fact subject the person to a 

penalty; 

(iii) Any circumstances described in 

paragraph (b) of this section that were 

considered in determining the amount 

of the proposed penalty; 

(iv) The amount of the proposed 

penalty; 

(v) An explanation of the person’s 

right to a hearing under any applicable 

administrative hearing process; 

(vi) A statement that failure to request 

a hearing within 60 calendar days after 

the date of issuance printed on the 

notice permits the assessment of the 

proposed penalty; and 

(vii) Information explaining how to 

file a request for a hearing and the 

address to which the hearing request 

must be sent. 

(2) The person may request a hearing 

before an ALJ on the proposed penalty 

by filing a request in accordance with 

the procedure to file a request specified 

in the notice of intent to issue a civil 

money penalty. 

(e) Failure to request a hearing. If the 

person does not request a hearing 

within 60 calendar days of the date of 

issuance printed on the notice described 

in paragraph (d) of this section, HHS 

may impose the proposed civil money 

penalty. 

(1) HHS will notify the person in 

writing of any penalty that has been 

imposed, the means by which the 

person may satisfy the penalty, and the 

date on which the penalty is due. 

(2) A person has no right to appeal a 

penalty with respect to which the 

person has not timely requested a 

hearing in accordance with paragraph 

(d) of this section. 

(f) Appeal of proposed penalty. 

Subject to paragraph (e)(2) of this 

section, any person against whom HHS 

has imposed a civil money penalty may 

appeal that penalty in accordance with 

the rules and procedures outlined at 45 

CFR part 150, subpart D, excluding 

§§ 150.461, 150.463, and 150.465. 

(g) Enforcement authority. (1) CMS. 

CMS may impose civil money penalties 

up to the maximum amounts specified 

in paragraph (d) of this section for any 

of the violations described in paragraph 

(a) of this section. 

(2) OIG. In accordance with the rules 

and procedures of 42 CFR part 1003, 

and in place of imposition of penalties 

by CMS, the OIG may impose civil 

money penalties for violations described 

in paragraphs (a)(1)(ii) and (iii) of this 

section. 

(h) Settlement authority. Nothing in 

this section limits the authority of CMS 

to settle any issue or case described in 

the notice furnished in accordance with 

§ 155.285(d) or to compromise on any 

penalty provided for in this section. 

(i) Limitations. No action under this 

section will be entertained unless 

commenced, in accordance with 

§ 155.285(d), within 6 years from the 

date on which the violation occurred. 

■ 28. Section 155.320 is amended by 

revising the section heading and 

removing paragraph (d)(4). 

The revision reads as follows: 

§ 155.320 Verification process related to 

eligibility for insurance affordability 

programs. 

* * * * * 

■ 29. Section 155.330 is amended by 

revising paragraph (d)(2)(ii) to read as 

follows: 

§ 155.330 Eligibility redetermination during 

a benefit year. 

* * * * * 

(d) * * * 

(2) * * * 

(ii) Comply with the standards 

specified in paragraph (e)(2) of this 

section. 

* * * * * 

■ 30. Section 155.400 is amended by 

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

follows: 

§ 155.400 Enrollment of qualified 

individuals into QHPs. 

* * * * * 

(e) Premium payment. Exchanges 

may, and the Federally-facilitated 

Exchange will, require payment of the 

first month’s premium to effectuate an 

enrollment. 

(f) Processing enrollment transactions. 

The Exchange may provide 

requirements to QHP issuers regarding 

the instructions for processing 

electronic enrollment-related 

transactions. 

■ 31. Section 155.420 is amended by 

revising paragraphs (b)(2)(i) through 

(iii), (c), (d)(1), (d)(6)(iii), and (e) 

introductory text to read as follows: 

§ 155.420 Special enrollment periods. 

* * * * * 

(b) * * * 

(2) * * * 

(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, but may 

permit the qualified individual or 

enrollee to elect a later coverage 

effective date. If the Exchange permits 

the qualified individual or enrollee to 

elect a later coverage effective date, the 

Exchange must ensure coverage is 

effective on the date elected by the 

qualified individual or enrollee. 

(ii) In the case of marriage, or in the 

case where a qualified individual loses 

minimum essential coverage or other 

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), (d)(9), or 

(d)(10) 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. 

* * * * * 

(c) Availability and length of special 

enrollment periods. (1) Unless 

specifically stated otherwise herein, a 

qualified individual or enrollee has 60 


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days from the date of a triggering event 

to select a QHP; 

(2) A qualified individual or enrollee 

whose coverage specified in paragraph 

(d)(1) or whose eligibility for qualifying 

coverage in an eligible-employer 

sponsored plan as specified in 

paragraph (d)(6)(iii) of this section will 

end within the next 60 days has 120 

days from the date that is 60 days prior 

to the end of such coverage or eligibility 

to select a QHP, including prior to the 

end of his or her existing coverage or 

eligibility for qualifying coverage in an 

eligible-employer sponsored plan as 

specified in paragraph (d)(6)(iii) of this 

section, although he or she is not 

eligible for advance payments of the 

premium tax credit until the end of his 

or her existing coverage or eligibility for 

qualifying coverage in an eligibleemployer sponsored plan as specified in 

paragraph (d)(6)(iii) of this section; 

(3) In the case of a qualified 

individual or enrollee eligible for a 

special enrollment period as described 

in paragraphs (d)(4), (d)(5), (d)(9), or 

(d)(10) of this section, the Exchange may 

define the length of this special 

enrollment period as appropriate based 

on the circumstances of the special 

enrollment period, in accordance with 

guidelines issued by HHS. 

(d) * * * 

(1) The qualified individual or his or 

her dependent loses minimum essential 

coverage, is enrolled in any noncalendar year individual health 

insurance policy as described in 

§ 147.104(b)(2) of this subchapter, even 

if the qualified individual or his her or 

dependent has the option to renew the 

expiring non-calendar year individual 

health insurance policy, or loses 

pregnancy-related coverage described 

under section 1902(a)(10)(A)(i)(IV) and 

(a)(10)(A)(ii)(IX) of the Social Security 

Act (42 U.S.C. 1396a(a)(10)(A)(i)(IV), 

(a)(10)(A)(ii)(IX)). 

* * * * * 

(6) * * * 

(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. 

* * * * * 

(e) Loss of coverage. Loss of minimum 

essential coverage or other coverage 

described in paragraph (d)(1) of this 

section includes those circumstances 

described in 26 CFR 54.9801–6(a)(3)(i) 

through (iii). Loss of coverage does not 

include voluntary termination or loss 

due to— 

* * * * * 

■ 32. Section 155.430 is amended by 

revising paragraph (d)(6) and adding 

paragraph (e) to read as follows: 

§ 155.430 Termination of coverage. 

* * * * * 

(d) * * * 

(6) In the case of a termination in 

accordance with paragraph (b)(2)(v) of 

this section, the last day of coverage in 

an enrollee’s prior QHP is the day before 

the effective date of coverage in his or 

her new QHP, including any retroactive 

enrollments effectuated under 

§ 155.420(b)(2)(iii). In cases of 

retroactive terminations dates, the 

Exchange will ensure that appropriate 

actions are taken to make necessary 

adjustments to advance payments of the 

premium tax credit, cost-sharing 

reductions, premiums, and claims. 

* * * * * 

(e) Termination, cancellation, and 

reinstatement. The Exchange may 

establish operational instructions as to 

the form, manner, and method for 

addressing each of the following: 

(1) Termination. A termination is an 

action taken after a coverage effective 

date that ends an enrollee’s coverage 

through the Exchange for a date after the 

original coverage effective date, 

resulting in a period during which the 

individual was covered by the issuer. 

(2) Cancellation. A cancellation is 

specific type of termination action that 

ends a qualified individuals’ enrollment 

on the date coverage became effective 

resulting in coverage never having been 

effective with the QHP. 

(3) Reinstatement. A reinstatement is 

a correction of an erroneous termination 

or cancellation action and results in 

restoration of an enrollment with no 

break in coverage. 

§ 155.505 [Amended]. 

■ 33. Section 155.505 is amended in 

paragraph (b)(4) by removing ‘‘; and’’ at 

the end of the paragraph and adding a 

period in its place. 

■ 34. Section 155.530 is amended by 

revising paragraph (a)(1) to read as 

follows: 

§ 155.530 Dismissals. 

(a) * * * 

(1) Withdraws the appeal request in 

writing or by telephone, if the appeals 

entity is capable of accepting telephonic 

withdrawals. 

(i) Accepting telephonic withdrawals 

means the appeals entity— 

(A) Records in full the appellant’s 

statement and telephonic signature 

made under penalty of perjury; and 

(B) Provides a written confirmation to 

the appellant documenting the 

telephonic interaction. 

(ii) [Reserved] 

* * * * * 

■ 35. Section 155.555 is amended by— 

■ A. Redesignating paragraphs (d) 

introductory text, (d)(1), (d)(2) 

introductory text, (d)(2)(i), (ii), (iii), 

(d)(3), and (d)(4) as paragraphs (d)(1) 

introductory text, (d)(1)(i), (d)(1)(ii) 

introductory text, (d)(1)(ii)(A), (B), (C), 

(d)(1)(iii), and (d)(2). 

■ B. Revising new paragraph (d)(2) 

introductory text. 

The revision reads as follows: 

§ 155.555 Employer appeals process. 

* * * * * 

(d) * * * 

(2) Upon receipt of an invalid appeal 

request, the appeals entity must 

promptly and without undue delay send 

written notice to the employer that the 

appeal request is not valid because it 

fails to meet the requirements of this 

section. The written notice must inform 

the employer— 

* * * * * 

■ 36. Section 155.625 is revised to read 

as follows: 

§ 155.625 Options for conducting eligibility 

determinations for exemptions. 

(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); or 

(2) For an application submitted 

before November 15, 2014, through the 

approach described in paragraph (b) of 

this section. 

(b) Use of HHS service. 

Notwithstanding the requirements of 

this subpart, for an application 

submitted before November 15, 2014, 

the Exchange may adopt an exemption 

eligibility determination made by HHS, 

provided that— 

(1) The Exchange adheres to the 

eligibility determination made by HHS; 

(2) The Exchange furnishes to HHS 

any information available through the 

Exchange that is necessary for an 

applicant to utilize the process 

administered by HHS; and 

(3) The Exchange call center and 

Internet Web site specified in 

§ 155.205(a) and (b), respectively, 


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provide information to consumers 

regarding the exemption eligibility 

process. 

■ 37. Section 155.705, as amended 

March 11, 2014 (79 FR 13838), and 

effective May 12, 2014, is amended by— 

■ A. Revising paragraphs (b)(2) and 

(b)(3)(ii) introductory text and (b)(3)(iv) 

introductory text. 

■ B. Adding paragraph (b)(3)(vi). 

The revisions and addition read as 

follows: 

§ 155.705 Functions of a SHOP. 

* * * * * 

(b) * * * 

(2) Employer choice requirements. 

With regard to QHPs offered through the 

SHOP for plan years beginning on or 

after January 1, 2015, the SHOP must 

allow a qualified employer to select a 

level of coverage as described in section 

1302(d)(1) of the Affordable Care Act, in 

which all QHPs within that level are 

made available to the qualified 

employees of the employer, unless the 

SHOP makes an election pursuant to 

paragraph (b)(3)(vi) of this section. 

(3) * * * 

(ii) Unless the SHOP makes an 

election pursuant to paragraph (b)(3)(vi) 

of this section, for plan years beginning 

on or after January 1, 2015, a SHOP: 

* * * * * 

(iv) Unless the Secretary makes an 

election pursuant to paragraph (b)(3)(vi) 

of this section, for plan years beginning 

on or after January 1, 2015, a Federallyfacilitated SHOP will provide a 

qualified employer a choice of two 

methods to make QHPs available to 

qualified employees: 

* * * * * 

(vi) For plan years beginning in 2015, 

the SHOP may, based on the 

recommendation of a State regulatory 

agency, elect to provide employers only 

with the options set forth at paragraph 

(b)(3)(ii)(B) or in the case of a Federallyfacilitated SHOP, only with the option 

set forth at paragraph (b)(3)(iv)(B) of this 

section, only if: 

(A) The implementation of paragraphs 

(b)(3)(ii)(A) or (b)(3)(iv)(A) of this 

section would result in significant 

adverse selection in the State’s small 

group market resulting in market 

disruptions that could not be 

remediated by sections 1312(c), 1342, 

and 1343 of the Affordable Care Act 

(relating to single risk pool, risk 

corridors, and risk adjustment); or 

(B) There are insufficient issuers of 

qualified health plans or qualified 

stand-alone dental plans in the SHOP to 

allow for meaningful choice among 

qualified health plans or qualified 

stand-alone dental plans for all levels of 

coverage as described in section 

1302(d)(1) of the Affordable Care Act. 

* * * * * 

■ 38. Section 155.725 is amended by 

revising paragraphs (c) and (e) to read as 

follows: 

§ 155.725 Enrollment periods under SHOP. 

* * * * * 

(c) Annual employer election period. 

(1) Notwithstanding any other 

paragraph in this section, for coverage 

beginning in 2015, a qualified 

employer’s annual election period may 

begin no sooner than November 15, 

2014. 

(2) The SHOP must provide qualified 

employers with a standard election 

period prior to the completion of the 

employer’s plan year and before the 

annual employee open enrollment 

period, in which the qualified employer 

may change its participation in the 

SHOP for the next plan year, 

including— 

(i) The method by which the qualified 

employer makes QHPs available to 

qualified employees pursuant to 

§ 155.705(b)(2) and (3); 

(ii) The employer contribution 

towards the premium cost of coverage; 

(iii) The level of coverage offered to 

qualified employees as described in 

§ 155.705(b)(2) and (3); and 

(iv) The QHP or QHPs offered to 

qualified employees in accordance with 

§ 155.705. 

* * * * * 

(e) Annual employee open enrollment 

period. The SHOP must establish a 

standardized annual open enrollment 

period for qualified employees prior to 

the completion of the applicable 

qualified employer’s plan year and after 

that employer’s annual election period. 

* * * * * 

■ 39. Section 155.740 is amended by— 

■ A. Redesignating paragraphs (g) 

introductory text, (g)(1) introductory 

text, (g)(1)(i), (g)(1)(ii), (g)(2), and (g)(3) 

as paragraphs (g)(1)(i) introductory text, 

(g)(1)(i)(A), (g)(1)(i)(B), (g)(1)(ii), and 

(g)(2). 

■ B. Revising paragraph (i)(1)(i). 

The revision read as follows: 

§ 155.740 SHOP employer and employee 

eligibility appeals requirements. 

* * * * * 

(i) * * * 

(1) * * * 

(i) Withdraws the request in 

accordance with the standards set forth 

in § 155.530(a)(1); or 

* * * * * 

■ 40. Subpart O is added to read as 

follows: 

Subpart O—Quality Reporting Standards for 

Exchanges 

Sec. 

155.1400 Quality rating system. 

155.1405 Enrollee satisfaction survey 

system. 

Subpart O—Quality Reporting 

Standards for Exchanges 

§ 155.1400 Quality rating system. 

The Exchange must prominently 

display the quality rating information 

assigned to each QHP on its Web site, 

in accordance with § 155.205(b)(1)(v), as 

calculated by HHS and in a form and 

manner specified by HHS. 

§ 155.1405 Enrollee satisfaction survey 

system. 

The Exchange must prominently 

display results from the Enrollee 

Satisfaction Survey for each QHP on its 

Web site, in accordance with 

§ 155.205(b)(1)(iv), as calculated by HHS 

and in a form and manner specified by 

HHS. 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 41. The authority citation for part 156 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301–1304, 1311–1313, 1321– 

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

Pub. L. 111–148, 124 Stat. 119 42 U.S.C. 

18021–18024, 18031–18032, 18041–18042, 

18044, 18054, 18061, 18063, 18071, 18082, 

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

■ 42. Section 156.130 is amended by 

revising paragraph (d) to read as 

follows: 

§ 156.130 Cost-sharing requirements. 

* * * * * 

(d) Increase annual dollar limits in 

multiples of 50. For a plan year 

beginning in a calendar year after 2014, 

any increase in the annual dollar limits 

described in paragraphs (a) and (b) of 

this section that does not result in a 

multiple of 50 dollars will be rounded 

down, to the next lowest multiple of 50 

dollars. 

* * * * * 

■ 43. Section 156.200 is amended by 

revising paragraph (b)(5) and adding 

paragraph (h) to read as follows: 

§ 156.200 QHP issuer participation 

standards. 

* * * * * 

(b) * * * 

(5) Implement and report on a quality 

improvement strategy or strategies 

described in section 1311(c)(1)(E) of the 

Affordable Care Act consistent with the 


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standards of section 1311(g) of the 

Affordable Care Act, disclose and report 

information on health care quality and 

outcomes described in sections 

1311(c)(1)(H), (c)(1)(I), and (c)(3) of the 

Affordable Care Act, and implement 

appropriate enrollee satisfaction surveys 

consistent with section 1311(c)(4) of the 

Affordable Care Act; 

* * * * * 

(h) Operational requirements. As a 

condition of certification of a QHP, an 

issuer must attest that it will comply 

with all QHP operational requirements 

described in Subparts D, E, H, K, L and 

M of this part. 

■ 44. Section 156.265 is amended by 

revising paragraph (d) to read as 

follows: 

§ 156.265 Enrollment process for qualified 

individuals. 

* * * * * 

(d) Premium payment. A QHP 

issuer— 

(1) Must follow the premium payment 

process established by the Exchange in 

accordance with § 155.240. 

(2) Must, for QHPs offered through a 

Federally-facilitated Exchange, establish 

the date by which a qualified individual 

that has selected a QHP within the 

enrollment period dates in § 155.410(b) 

of this subchapter must make a 

premium payment in order to effectuate 

coverage by the applicable coverage 

date, provided that: 

(i) The payment date is no later than 

the day before the coverage effective 

date. 

(ii) The payment date policy is 

applied consistently to all applicants in 

a non-discriminatory manner. 

* * * * * 

■ 45. Section 156.602 is amended by 

redesignating paragraph (e) as paragraph 

(f) and adding a new paragraph (e) to 

read as follows: 

§ 156.602 Other coverage that qualifies as 

minimum essential coverage. 

* * * * * 

(e) Foreign group health coverage. (1) 

Foreign group health coverage for 

expatriates. The following types of 

foreign group health coverage will be 

recognized as minimum essential 

coverage for expatriates: 

(i) Group health coverage for citizens 

or nationals of the United States 

working abroad, provided by either of 

the following: 

(A) A foreign, self-insured group 

health plan. 

(B) Health insurance regulated by a 

foreign government or health coverage 

provided by a foreign national health 

plan with respect to a citizen or national 

of the United States who, for such 

month, is physically absent from the 

United States for at least one day of the 

month, or who is physically present in 

the United States for an entire month if 

the coverage provides health benefits 

within the United States. 

(ii) Group health coverage for nonUnited States citizens or nationals 

residing in the United States, provided 

by a self-insured group health plan, 

health insurance regulated by a foreign 

government, or health coverage 

provided by a foreign national health 

plan, if the coverage provides health 

benefits within the United States. 

(2) Notice. The sponsor, issuer, or 

plan administrator of foreign group 

health coverage as described in this 

paragraph (e) must provide notice to 

enrollees who are citizens or nationals 

of the United States of its minimum 

essential coverage status and must 

comply, if applicable, with the 

information and reporting requirements 

of section 6055 of the Code and 

implementing regulations with respect 

to those enrollees. 

(3) Definition of expatriate. For 

purposes of this section, an expatriate 

means an individual for whom there is 

a good faith expectation that such 

individual will reside outside of their 

home country or outside of the United 

States for at least six months of a 12- 

month period and any covered 

dependents. 

* * * * * 

■ 46. Section 156.604 is amended by 

revising paragraphs (a)(2) introductory 

text and (d) to read as follows: 

§ 156.604 Requirements for recognition as 

minimum essential coverage for types of 

coverage not otherwise designated 

minimum essential coverage in the statute 

or this subpart. 

(a) * * * 

(2) Procedural requirements for 

recognition as minimum essential 

coverage. To be considered for 

recognition as minimum essential 

coverage, the sponsor of the coverage, 

government agency, health insurance 

issuer, or plan administrator must 

submit the following information to 

HHS: 

* * * * * 

(d) Notice. Once recognized as 

minimum essential coverage, the 

sponsor of the coverage, government 

agency, health insurance issuer, or plan 

administrator must provide notice to all 

enrollees of its minimum essential 

coverage status and must comply with 

the information reporting requirements 

of section 6055 of the Code and 

implementing regulations. 

■ 47. Section 156.800 is amended by 

adding paragraph (d) to read as follows: 

§ 156.800 Available remedies; Scope. 

* * * * * 

(d) HHS may consult and share 

information about QHP issuers with 

other Federal and State regulatory and 

enforcement entities to the extent that 

the consultation and information is 

necessary for HHS to determine whether 

an enforcement remedy under subpart I 

is appropriate. 

■ 48. Section 156.805 is amended by— 

■ A. Removing ‘‘or’’ after the semicolon 

in paragraph (a)(6). 

■ B. Removing the period in paragraph 

(a)(7) and adding ‘‘; or’’ in its place. 

■ C. Adding paragraph (d)(3). 

■ D. Revising paragraph (e)(2). 

The revisions and additions read as 

follows: 

§ 156.805 Bases and process for imposing 

civil money penalties in Federally-facilitated 

Exchanges. 

* * * * * 

(d) * * * 

(3) HHS will deliver notice under this 

paragraph by either hand delivery, 

certified mail, return receipt requested, 

or by overnight delivery service with 

signature upon delivery required. 

(e) * * * 

(2) HHS will notify the issuer in 

writing of any penalty that has been 

assessed under this subpart and of the 

means by which the QHP issuer or 

another responsible entity may satisfy 

the CMP assessment. 

* * * * * 

■ 49. Section 156.806 is added to read 

as follows: 

§ 156.806 Notice of non-compliance. 

If HHS learns of a potential violation 

described in § 156.805 or if a State 

informs HHS of a potential violation, 

prior to imposing any CMPs, HHS must 

provide a written notice to the issuer, to 

include the following: 

(a) Describe the potential violation. 

(b) Provide 30 days from the date of 

the notice for the QHP issuer to respond 

and to provide additional information to 

refute an alleged violation. 

(c) State that a civil money penalty 

may be assessed if the allegations are 

not, as determined by HHS, refuted. 

■ 50. Section 156.810 is amended— 

■ A. By revising paragraph (a)(6). 

■ C. In paragraph (a)(9) by removing 

‘‘or’’ after the semicolon. 

■ D. In paragraph (a)(10) by removing 

the period and adding a semicolon in its 

place. 

■ E. By revising paragraph (a)(11). 

■ F. By adding a new paragraph (a)(12). 

■ G. By revising paragraph (d) 

introductory text. 

The revisions and additions read as 

follows: 


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§ 156.810 Bases and process for 

decertification of a QHP offered by an 

issuer through a Federally-facilitated 

Exchange. 

(a) * * * 

(6) The QHP no longer meets the 

applicable standards set forth under 

subpart C of Part 156. 

* * * * * 

(12) The QHP issuer substantially fails 

to meet the requirements related to the 

cases forwarded to QHP issuers under 

Subpart K; or 

(13) The QHP issuer substantially fails 

to meet the requirements related to the 

offering of a QHP under Subpart M. 

* * * * * 

(d) Expedited decertification process. 

For decertification actions on grounds 

described in paragraphs (a)(6), (7), (8), 

or (9) of this section, HHS will provide 

written notice to the QHP issuer, 

enrollees, and the State department of 

insurance in the State in which the QHP 

is being decertified. The written notice 

must include the following: 

* * * * * 

■ 51. Section 156.1105 is amended by 

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

follows: 

§ 156.1105 Establishment of standards for 

HHS-approved enrollee satisfaction survey 

vendors for use by QHP issuers in 

Exchanges. 

* * * * * 

(d) Monitoring. HHS will periodically 

monitor HHS-approved enrollee 

satisfaction survey vendors to ensure 

ongoing compliance with the standards 

in paragraph (b) of this section. If HHS 

determines that an HHS-approved 

enrollee satisfaction survey vendor is 

non-compliant with the standards 

required in paragraph (b) of this section, 

the survey vendor may be removed from 

the approved list described in paragraph 

(c) of this section and/or the submitted 

survey results may be ineligible to be 

included for ESS results. 

(e) Appeals. An enrollee satisfaction 

survey vendor that is not approved by 

HHS after submitting the application 

described in paragraph (a) of this 

section may appeal HHS’s decision by 

notifying HHS in writing within 15 days 

from receipt of the notification of not 

being approved and submitting 

additional documentation 

demonstrating how the vendor meets 

the standards in paragraph (b) of this 

section. HHS will review the submitted 

documentation and make a final 

approval determination within 30 days 

from receipt of the additional 

documentation. 

■ 52. Section 156.1120 is added to 

subpart L to read as follows: 

§ 156.1120 Quality rating system. 

(a) Data submission requirement. (1) 

A QHP issuer must submit data to HHS 

and Exchanges to support the 

calculation of quality ratings for each 

QHP that has been offered in an 

Exchange for at least one year. 

(2) In order to ensure the integrity of 

the data required to calculate the QRS, 

a QHP issuer must submit data that has 

been validated in a form and manner 

specified by HHS. 

(3) A QHP issuer must include in its 

data submission information only for 

those QHP enrollees at the reporting 

level specified by HHS. 

(b) Timeline. A QHP issuer must 

annually submit data necessary to 

calculate the QHP’s quality ratings to 

HHS and Exchanges, on a timeline and 

in a standardized form and manner 

specified by HHS. 

(c) Marketing requirement. A QHP 

issuer may reference the quality ratings 

for its QHPs in its marketing materials, 

in a manner specified by HHS. 

(d) Multi-State plans. Issuers of multiState plans, as defined in § 155.1000(a) 

of this subchapter, must provide the 

data described in paragraph (a) of this 

section to the U.S. Office of Personnel 

management, in the time and manner 

specified by the U.S. Office of Personnel 

Management. 

■ 53. Section 156.1125 is added to 

subpart L to read as follows: 

§ 156.1125 Enrollee satisfaction survey 

system. 

(a) General requirement. A QHP issuer 

must contract with an HHS-approved 

enrollee satisfaction survey (ESS) 

vendor, as identified by § 156.1105, in 

order to administer the Enrollee 

Satisfaction Survey of the QHP’s 

enrollees. A QHP issuer must authorize 

its contracted ESS vendor to report 

survey results to HHS and the Exchange 

on the issuer’s behalf. 

(b) Data requirement. (1) A QHP 

issuer must collect data for each QHP, 

with more than 500 enrollees in the 

previous year that has been offered in an 

Exchange for at least one year and 

following a survey sampling 

methodology provided by HHS. 

(2) In order to ensure the integrity of 

the data required to conduct the survey, 

a QHP issuer must submit data that has 

been validated in a form and manner 

specified by HHS, and submit this data 

to its contracted ESS vendor. 

(3) A QHP issuer must include in its 

data submission information only for 

those QHP enrollees at the reporting 

level specified by HHS. 

(c) Marketing requirement. A QHP 

issuer may reference the survey results 

for its QHPs in its marketing materials, 

in a manner specified by HHS. 

(d) Timeline. A QHP issuer must 

annually submit data necessary to 

conduct the survey to its contracted ESS 

vendor on a timeline and in a 

standardized form and manner specified 

by HHS. 

(e) Multi-State plans. Issuers of multiState plans, as defined in § 155.1000(a) 

of this subchapter, must provide the 

data described in paragraph (b) of this 

section to the U.S. Office of Personnel 

management, in the time and manner 

specified by the U.S. Office of Personnel 

Management. 

PART 158—ISSUER USE OF PREMIUM 

REVENUE: REPORTING AND REBATE 

REQUIREMENTS 

■ 54. The authority citation for part 158 

continues to read as follows: 

Authority: Section 2718 of the Public 

Health Service Act (42 U.S.C. 300gg–18), as 

amended. 

■ 55. Section 158.150 is amended by 

revising paragraph (b)(2)(i)(A)(6) to read 

as follows: 

§ 158.150 Activities that improve health 

care quality. 

* * * * * 

(b) * * * 

(2) * * * 

(i) * * * 

(A) * * * 

(6) Commencing with the 2012 

reporting year and extending through 

the first reporting year in which the 

Secretary requires ICD–10 as the 

standard medical data code set, 

implementing ICD–10 code sets that are 

designed to improve quality and are 

adopted pursuant to the Health 

Insurance Portability and 

Accountability Act (HIPAA), 42 U.S.C. 

1320d–2, as amended, limited to 0.3 

percent of an issuer’s earned premium 

as defined in § 158.130. 

* * * * * 

■ 56. Section 158.211 is amended by 

revising paragraph (a) to read as follows: 

§ 158.211 Requirement in States with a 

higher medical loss ratio. 

(a) State option to set higher 

minimum loss ratio. For coverage 

offered in a State whose law provides 

that issuers in the State must meet a 

higher MLR than that set forth in 

§ 158.210, the State’s higher percentage 

must be substituted for the percentage 

stated in § 158.210. If a State requires 

the small group market and individual 

market to be merged and also sets a 

higher MLR standard for the merged 

market, the State’s higher percentage 

must be substituted for the percentage 


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Federal Register / Vol. 79, No. 55 / Friday, March 21, 2014 / Proposed Rules 15879 

stated in § 158.210 for both the small 

group and individual markets. 

* * * * * 

■ 57. Section 158.220 is amended by 

revising paragraph (a) to read as follows: 

§ 158.220 Aggregation of data in 

calculating an issuer’s medical loss ratio. 

(a) Aggregation by State and by 

market. In general, an issuer’s MLR 

must be calculated separately for the 

large group market, small group market 

and individual market within each 

State. However, if a State requires the 

small group market and individual 

market to be merged, then the data 

reported separately under subpart A for 

the small group and individual market 

in that State must be merged for 

purposes of calculating an issuer’s MLR 

and any rebates owing. 

* * * * * 

■ 58. Section 158.221 is amended by 

adding paragraphs (b)(6) and (7) to read 

as follows: 

§ 158.221 Formula for calculating an 

issuer’s medical loss ratio. 

* * * * * 

(b) * * * 

(6) The numerator of the MLR in the 

individual and small group markets in 

States that adopted the transitional 

policy outlined in the CMS letter dated 

November 14, 2013 must be the amount 

specified in this paragraph (b), except 

that issuers that provided transitional 

coverage may multiply the total 

incurred claims and expenditures for 

activities that improve health care 

quality incurred in 2014 in the 

respective State and market by a factor 

of 1.0001. 

(7) The numerator of the MLR in the 

individual and small group markets for 

issuers participating in the State and 

Federal Exchanges (sometimes referred 

to as ‘‘Marketplaces’’) must be the 

amount specified in this paragraph (b), 

except that the total incurred claims and 

expenditures for activities that improve 

health care quality incurred in 2014 in 

the respective State and market may be 

multiplied by a factor of 1.0004. 

* * * * * 

■ 59. Section 158.231 is amended by 

revising paragraph (a) to read as follows: 

§ 158.231 Life-years used to determine 

credible experience. 

(a) The life-years used to determine 

the credibility of an issuer’s experience 

are the life-years for the MLR reporting 

year plus the life-years for the two prior 

MLR reporting years. If a State requires 

the small group market and individual 

market to be merged, then life-years 

used to determine credibility must be 

the life-years from the small group 

market and the individual market for 

the MLR reporting year plus the lifeyears from the small group market and 

the individual market for the two prior 

MLR reporting years. 

* * * * * 

■ 60. Section 158.243 is amended by 

revising paragraph (b)(1) and adding 

paragraph (b)(3) to read as follows: 

§ 158.243 De minimis rebates. 

* * * * * 

(b) * * * 

(1) Except as provided in paragraph 

(b)(3) of this section, an issuer must 

aggregate and distribute any rebates not 

provided because they did not meet the 

minimum threshold set forth in 

paragraph (a) of this section by 

aggregating the unpaid rebates by 

individual market, small group market 

and large group market in a State and 

use them to increase the rebates 

provided to enrollees who receive 

rebates based upon the same MLR 

reporting year as the aggregated unpaid 

rebates. An issuer must distribute such 

aggregated rebates by providing 

additional premium credit or payment 

divided evenly among enrollees who are 

being provided a rebate. 

* * * * * 

(3) If distribution of aggregated 

unpaid rebates according to paragraph 

(b)(1) of this section would result in any 

enrollee(s) receiving rebates that exceed 

their premium paid during the MLR 

reporting year, or if no enrollees receive 

rebates based upon the same MLR 

reporting year as the aggregated unpaid 

rebates, then the issuer must not 

aggregate the unpaid rebates according 

to paragraph (b)(1) of this section and 

must instead distribute them according 

to § 158.241 directly to those enrollees 

whose rebates did not meet the 

minimum threshold set forth in 

paragraph (a) of this section. 

Dated: March 11, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: March 13, 2014. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2014–06134 Filed 3–17–14; 4:15 pm] 

BILLING CODE 4120–01–P 


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