36456 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Rules and Regulations 

■ 25. Section 257.105 is amended by 

adding paragraph (h)(14) to read as 

follows: 

§ 257.105 Recordkeeping requirements. 

* * * * * 

(h) * * * 

(14) The demonstration, including 

long-term performance data, supporting 

the suspension of groundwater 

monitoring requirements as required by 

§ 257.90(g). 

* * * * * 

■ 26. Section 257.106 is amended by 

adding paragraph (h)(11) to read as 

follows: 

§ 257.106 Notification requirements. 

* * * * * 

(h) * * * 

(11) Provide the demonstration 

supporting the suspension of 

groundwater monitoring requirements 

specified under § 257.105(h)(14). 

* * * * * 

■ 27. Section 257.107 is amended by 

adding paragraph (h)(11) to read as 

follows: 

§ 257.107 Publicly accessible internet site 

requirements. 

* * * * * 

(h) * * * 

(11) The demonstration supporting 

the suspension of groundwater 

monitoring requirements specified 

under § 257.105(h)(14). 

* * * * * 

[FR Doc. 2018–16262 Filed 7–27–18; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 153 

[CMS–9920–F] 

RIN 0938–AT65 

Adoption of the Methodology for the 

HHS-Operated Permanent Risk 

Adjustment Program Under the Patient 

Protection and Affordable Care Act for 

the 2017 Benefit Year 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Final rule. 

SUMMARY: This final rule adopts the risk 

adjustment methodology that HHS 

previously established for the 2017 

benefit year. In February 2018, a district 

court vacated the use of statewide 

average premium as a basis for the HHSoperated risk adjustment methodology 

for the 2014, 2015, 2016, 2017, and 2018 

benefit years. Accordingly, HHS is 

issuing this final rule to allow charges 

to be collected and payments to be made 

for the 2017 benefit year. We hereby 

adopt the final rules set out in the 

publication in the Federal Register on 

March 23, 2012 and the publication in 

the Federal Register on March 8, 2016. 

DATES: These provisions of this final 

rule are effective on July 30, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Abigail Walker, (410) 786–1725; Adam 

Shaw, (410) 786–1091; Jaya Ghildiyal, 

(301) 492–5149; or Adrianne Patterson, 

(410) 786–0686. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Legislative and Regulatory 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) was enacted on March 

30, 2010. These statutes are collectively 

referred to as ‘‘PPACA’’ in this final 

rule. Section 1343 of the PPACA 

established an annual permanent risk 

adjustment program under which 

payments are collected from health 

insurance issuers that enroll relatively 

low-risk populations, and payments are 

made to health insurance issuers that 

enroll relatively higher-risk populations. 

Consistent with section 1321(c)(1) of the 

PPACA, the Secretary is responsible for 

operating the risk adjustment program 

on behalf of any state that elected not 

to do so. For the 2017 benefit year, HHS 

is responsible for operation of the risk 

adjustment program in all 50 states and 

the District of Columbia. 

HHS sets the risk adjustment 

methodology that it uses in states that 

elect not to operate the program in 

advance of each benefit year through a 

notice-and-comment rulemaking 

process with the intention that issuers 

will be able to rely on the methodology 

to price their plans appropriately (45 

CFR 153.320; 76 FR 41930, 41932 

through 41933; 81 FR 94058, 94702 

(explaining the importance of setting 

rules ahead of time and describing 

comments supporting that practice)). 

In the July 15, 2011 Federal Register 

(76 FR 41929), we published a proposed 

rule outlining the framework for the risk 

adjustment program. We implemented 

the risk adjustment program in a final 

rule, published in the March 23, 2012 

Federal Register (77 FR 17219) 

(Premium Stabilization Rule). In the 

December 7, 2012 Federal Register (77 

FR 73117), we published a proposed 

rule outlining the proposed Federally 

certified risk adjustment methodologies 

for the 2014 benefit year and other 

parameters related to the risk 

adjustment program (proposed 2014 

Payment Notice). We published the 

2014 Payment Notice final rule in the 

March 11, 2013 Federal Register (78 FR 

15409). In the June 19, 2013 Federal 

Register (78 FR 37032), we proposed a 

modification to the HHS-operated 

methodology related to community 

rating states. In the October 30, 2013, 

Federal Register (78 FR 65046), we 

finalized the proposed modification to 

the HHS-operated methodology related 

to community rating states. We 

published a correcting amendment to 

the 2014 Payment Notice final rule in 

the November 6, 2013 Federal Register 

(78 FR 66653) to address how an 

enrollee’s age for the risk score 

calculation would be determined under 

the HHS-operated risk adjustment 

methodology. 

In the December 2, 2013 Federal 

Register (78 FR 72321), we published a 

proposed rule outlining the Federally 

certified risk adjustment methodologies 

for the 2015 benefit year and other 

parameters related to the risk 

adjustment program (proposed 2015 

Payment Notice). We published the 

2015 Payment Notice final rule in the 

March 11, 2014 Federal Register (79 FR 

13743). In the May 27, 2014 Federal 

Register (79 FR 30240), the 2015 fiscal 

year sequestration rate for the risk 

adjustment program was announced. 

In the November 26, 2014 Federal 

Register (79 FR 70673), we published a 

proposed rule outlining the proposed 

Federally certified risk adjustment 

methodologies for the 2016 benefit year 

and other parameters related to the risk 

adjustment program (proposed 2016 

Payment Notice). We published the 

2016 Payment Notice final rule in the 

February 27, 2015 Federal Register (80 

FR 10749). 

In the December 2, 2015 Federal 

Register (80 FR 75487), we published a 

proposed rule outlining the Federally 

certified risk adjustment methodology 

for the 2017 benefit year and other 

parameters related to the risk 

adjustment program (proposed 2017 

Payment Notice). We published the 

2017 Payment Notice final rule in the 

March 8, 2016 Federal Register (81 FR 

12204). 

In the September 6, 2016 Federal 

Register (81 FR 61455), we published a 

proposed rule outlining the Federally 

certified risk adjustment methodology 

for the 2018 benefit year and other 

parameters related to the risk 

adjustment program (proposed 2018 

Payment Notice). We published the 

2018 Payment Notice final rule in the 

December 22, 2016 Federal Register (81 

FR 94058). 


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1New Mexico Health Connections v. United 

States Department of Health and Human Services 

et al., No. CIV 16–0878 JB/JHR (D.N.M. 2018). 

2See, Summary Report on Permanent Risk 

Adjustment Transfers for the 2017 Benefit Year, 

available at https://downloads.cms.gov/cciio/ 

Summary-Report-Risk-Adjustment-2017.pdf. 

3See, July 7, 2018 United States District Court 

Ruling Puts Risk Adjustment On Hold, available at 

https://www.cms.gov/Newsroom/ 

MediaReleaseDatabase/Press-releases/2018-Pressreleases-items/2018-07-07.html and the July 9, 

2018, Summary Report on Permanent Risk 

Adjustment Transfers for the 2017 Benefit Year 

https://downloads.cms.gov/cciio/Summary-ReportRisk-Adjustment-2017.pdf. Also see the CMS 

Memo: Implications of the Decision by United 

States District Court for the District of New Mexico 

on the Risk Adjustment and Related Programs (July 

12, 2018), available at https://www.cms.gov/CCIIO/ 

Resources/Regulations-and-Guidance/Downloads/ 

Implications-of-the-Decision-by-United-StatesDistrict-Court-for-the-District-of-New-Mexico-onthe-Risk-Adjustment-and-Related-Programs.pdf. 

4See the definition for ‘‘risk adjustment covered 

plan’’ at 45 CFR 153.20. 5See 78 FR 15409 at 15417. 

In the November 2, 2017 Federal 

Register (82 FR 51042), we published a 

proposed rule outlining the benefit and 

payment parameters for the 2019 benefit 

year, and to further promote stable 

premiums in the individual and small 

group markets. We proposed updates to 

the risk adjustment methodology and 

amendments to the risk adjustment data 

validation process (proposed 2019 

Payment Notice). We published the 

2019 Payment Notice final rule in the 

April 17, 2018 Federal Register (83 FR 

16930). We published a correction to the 

2019 risk adjustment coefficients in the 

2019 Payment Notice final rule in the 

May 11, 2018 Federal Register (83 FR 

21925). 

B. The New Mexico Health Connections 

Court’s Order 

On February 28, 2018, in a suit 

brought by the health insurance issuer 

New Mexico Health Connections, the 

United States District Court for the 

District of New Mexico (the district 

court) vacated the use of statewide 

average premium in the HHS-operated 

risk adjustment methodology for the 

2014, 2015, 2016, 2017, and 2018 

benefit years. The district court 

reasoned that HHS had not adequately 

explained its decision to adopt a 

methodology that used the statewide 

average premium as the cost-scaling 

factor to ensure that amounts collected 

from issuers equal payments made to 

issuers for the applicable benefit year, 

that is, a methodology that maintains 

the budget neutrality of the program for 

the applicable benefit year.1 The district 

court otherwise rejected New Mexico 

Health Connections’ arguments. HHS’s 

reconsideration motion remains 

pending with the district court. 

HHS recently announced the 

collection and payment amounts for the 

2017 benefit year as calculated under 

the HHS-operated risk adjustment 

methodology that uses the statewide 

average premium.2 However, without 

this administrative action (that is, 

issuing this final rule), HHS would be 

unable to make those collections or 

distribute the payments for the 2017 

benefit year, which total billions of 

dollars.3 Uncertainty and delay in the 

distribution of those payments, which 

issuers anticipated when they set 

premiums for the 2017 benefit year, 

could add uncertainty to the market, as 

issuers are now in the process of 

determining the extent of their market 

participation and the rates and terms of 

plans they will offer for the 2019 benefit 

year. 

II. Provisions of the Final Rule 

This final rule adopts the HHSoperated risk adjustment methodology 

previously published at 81 FR 12204 for 

the 2017 benefit year with an additional 

explanation regarding the use of 

statewide average premium and the 

budget neutral nature of the program. 

This rule does not make any changes to 

the previously published HHS-operated 

risk adjustment methodology for the 

2017 benefit year. 

The risk adjustment program provides 

payments to health insurance issuers 

that enroll higher risk populations, such 

as those with chronic conditions, 

thereby reducing incentives for issuers 

to structure their plan benefit designs or 

marketing strategies in order to avoid 

these enrollees and lessening the 

potential influence of risk selection on 

the premiums that issuers charge. 

Instead, issuers are expected to set rates 

based on average risk and compete 

based on plan features rather than 

selection of healthier enrollees. The 

program applies to any health insurance 

issuer offering plans in the individual or 

small group markets, with the exception 

of grandfathered health plans, group 

health insurance coverage described in 

45 CFR 146.145(c), individual health 

insurance coverage described in 45 CFR 

148.220, and any plan determined not to 

be a risk adjustment covered plan in the 

applicable Federally certified risk 

adjustment methodology.4 In 45 CFR 

part 153, subparts A, B, D, G, and H, 

HHS established standards for the 

administration of the permanent risk 

adjustment program. In accordance with 

§ 153.320, any risk adjustment 

methodology used by a state, or by HHS 

on behalf of the state, must be a 

Federally certified risk adjustment 

methodology. 

As stated in the 2014 Payment Notice 

final rule, the Federally certified risk 

adjustment methodology developed and 

used by HHS in states that elect not to 

operate the program is based on the 

premise that premiums for this market 

should reflect the differences in plan 

benefits, quality, and efficiency—not the 

health status of the enrolled 

population.5 HHS developed the risk 

adjustment payment transfer formula 

that calculates the difference between 

the revenues required by a plan based 

on the projected health risk of the plan’s 

enrollees and the revenues that a plan 

can generate for those enrollees. These 

differences are then compared across 

plans in the state market risk pool and 

converted to a dollar amount based on 

the statewide average premium. HHS 

chose to use statewide average premium 

and normalize the risk adjustment 

transfer formula to reflect state average 

factors so that each plan’s enrollment 

characteristics are compared to the state 

average and the total calculated 

payment amounts equal total calculated 

charges in each state market risk pool. 

Thus, each plan in the risk pool receives 

a risk adjustment payment or charge 

designed to compensate for risk for a 

plan with average risk in a budget 

neutral manner. This approach supports 

the overall goal of the risk adjustment 

program to encourage issuers to rate for 

the average risk in the applicable state 

market risk pool, and avoids the 

creation of incentives for issuers to 

operate less efficiently, set higher 

prices, develop benefit designs or create 

marketing strategies to avoid high risk 

enrollees. Such incentives could arise if 

HHS used each issuer’s plan’s own 

premium in the risk adjustment 

payment transfer formula, instead of 

statewide average premium. 

As explained above, the district court 

vacated the use of statewide average 

premium in the HHS-operated risk 

adjustment methodology for the 2014 

through 2018 benefit years on the 

ground that HHS did not adequately 

explain its decision to adopt that aspect 

of the risk adjustment methodology. The 

district court recognized that use of 

statewide average premium maintained 

the budget neutrality of the program, but 

concluded that HHS had not adequately 

explained the underlying decision to 

adopt a methodology that kept the 

program budget neutral, that is, that 

ensured that amounts collected from 

issuers would equal payments made to 

issuers for the applicable benefit year. 

Accordingly, HHS is providing 

additional explanation herein. 


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6For examples of PPACA provisions 

appropriating funds, see PPACA secs. 1101(g)(1), 

1311(a)(1), 1322(g), 1323(c). For examples of 

PPACA provisions authorizing the appropriation of 

funds, see PPACA secs. 1002, 2705(f), 2706(e), 

3013(c), 3015, 3504(b), 3505(a)(5), 3505(b), 3506, 

3509(a)(1), 3509(b), 3509(e), 3509(f), 3509(g), 3511, 

4003(a), 4003(b), 4004(j), 4101(b), 4102(a), 4102(c), 

4102(d)(1)(C), 4102(d)(4), 4201(f), 4202(a)(5), 

4204(b), 4206, 4302(a), 4304, 4305(a), 4305(c), 

5101(h), 5102(e), 5103(a)(3), 5203, 5204, 5206(b), 

5207, 5208(b), 5210, 5301, 5302, 5303, 5304, 

5305(a), 5306(a), 5307(a), 5309(b). 

7See 42 U.S.C. 18063. 

8Compare 42 U.S.C. 18063 (failing to specify 

source of funding other than risk adjustment 

charges), with 42 U.S.C. 1395w–116(c)(3) 

(authorizing appropriations for Medicare Part D risk 

adjusted payments); 42 U.S.C. 1395w–115(a) 

(establishing ‘‘budget authority in advance of 

appropriations Acts’’ for risk adjusted payments 

under Medicare Part D). 

9 It has been suggested that the annual lump sum 

appropriation to CMS for program management was 

potentially available for risk adjustment payments. 

The lump sum appropriation for each year was not 

enacted until after the applicable rule announcing 

the methodology to calculate payments for the 

applicable benefit year. Moreover, HHS does not 

believe that the lump sum is legally available for 

risk adjustment payments. As the underlying 

budget requests reflect, the lump sum is for program 

management expenses, such as administrative costs 

for various CMS programs such as Medicaid, 

Medicare, the Children’s Health Insurance Program, 

and the PPACA’s insurance market reforms—not for 

the program payments themselves. CMS would 

have elected to use the lump sum for these 

important program management expenses even if 

CMS had discretion to use all or part of the lump 

sum for risk adjustment payments. 

10See, e.g., September 12, 2011, Risk Adjustment 

Implementation Issues White Paper, available at: 

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

Downloads/riskadjustment_whitepaper_web.pdf. 

First, Congress designed the risk 

adjustment program to be implemented 

and operated by states if they choose to 

do so. Nothing in section 1343 of the 

PPACA requires a state to spend its own 

funds on risk adjustment payments or 

allows HHS to impose such a 

requirement. Thus, while section 1343 

may have provided leeway for states to 

spend additional funding on the 

program if they voluntarily chose to do 

so, HHS could not have required 

additional funding within the HHSoperated risk adjustment methodology. 

Second, while the PPACA did not 

include an explicit requirement that the 

risk adjustment program be operated in 

a budget-neutral manner, it also does 

not proscribe designing the program in 

a budget-neutral manner. In fact, 

although the statutory provisions for 

many other PPACA programs 

appropriated or authorized amounts to 

be appropriated from the U.S. Treasury, 

or provided budget authority in advance 

of appropriations,6 the PPACA neither 

authorized nor appropriated additional 

funding for risk adjustment payments 

beyond the amount of charges paid in, 

nor authorized HHS to obligate itself for 

risk adjustment payments in excess of 

charges collected.7 Indeed, unlike the 

Medicare Part D statute, which 

expressly authorizes the appropriation 

of funds and provides budget authority 

in advance of appropriations to make 

Part D risk-adjusted payments, the 

PPACA’s risk adjustment statute makes 

no reference to additional 

appropriations whatsoever.8 Because 

Congress omitted from the PPACA any 

provision appropriating independent 

funding or creating budget authority in 

advance of an appropriation for the risk 

adjustment program, HHS could not— 

absent another source of 

appropriations—have designed the risk 

adjustment program in a way that 

required payments in excess of 

collections consistent with binding 

appropriations law. Thus, as a practical 

matter, Congress did not give HHS 

discretion to implement a program that 

was not budget neutral. 

Furthermore, if HHS had elected to 

adopt a HHS-operated risk adjustment 

methodology that was contingent on 

appropriations from Congress in the 

annual appropriations process that 

would have created uncertainty for 

issuers in the amount of risk adjustment 

payments they could expect. That 

uncertainty would undermine one of the 

central objectives of the risk adjustment 

program, which is to assure issuers in 

advance that they will receive risk 

adjustment payments if, for the 

applicable benefit year, they enroll a 

high risk population compared to other 

issuers in the state market risk pool. The 

budget-neutral framework spreads the 

costs of covering higher-risk enrollees 

across issuers throughout a given state 

market risk pool, thereby reducing 

incentives for issuers to engage in riskavoidance techniques such as designing 

or marketing their plans in ways that 

tend to attract healthier individuals, 

who cost less to insure. Moreover, 

relying on the possibility in each year’s 

budget process for appropriation of 

additional funds to HHS that could be 

used to supplement risk adjustment 

transfers would have required HHS to 

delay setting the parameters for any risk 

adjustment payment proration rates 

until well after the plans were in effect 

for the applicable benefit year.9 Without 

the adoption of a budget-neutral 

framework, HHS would have needed to 

assess a charge or otherwise collect 

additional funds, or prorate risk 

adjustment payments to balance the 

calculated risk adjustment transfer 

amounts. The resulting uncertainty 

would have conflicted with one of the 

overall goals of the risk adjustment 

program—to reduce incentives for 

issuers to avoid enrolling individuals 

with higher than average actuarial risk. 

In light of the budget-neutral 

framework discussed above, HHS also 

chose not to use a different parameter 

for the payment transfer formula under 

the HHS-operated methodology, such as 

each plan’s own premium, that would 

not have automatically achieved 

equality between risk adjustment 

payments and charges in each benefit 

year. As set forth in prior discussions,10

use of the plan’s own premium or some 

similar parameter would have required 

the application of a balancing 

adjustment in light of the program’s 

budget neutrality—either reducing 

payments to issuers owed a payment, 

increasing charges on issuers due a 

charge, or splitting the difference in 

some fashion between issuers owed 

payments and issuers assessed charges. 

Such adjustments would have impaired 

the risk adjustment program’s goals, 

discussed above, of encouraging issuers 

to rate for the average risk in the 

applicable risk pool and avoiding the 

creation of incentives for issuers to 

operate less efficiently, set higher 

prices, develop benefit designs or create 

marketing strategies to avoid higher-risk 

enrollees. Use of an after-the-fact 

balancing adjustment is also less 

predictable for issuers than a 

methodology that can be calculated in 

advance of a benefit year. Such 

predictability is important to serving the 

risk adjustment program’s goals of 

premium stabilization and reducing 

issuer incentives to avoid enrolling 

higher-risk populations. Additionally, 

using a plan’s own premium to scale 

transfers may provide additional 

incentive for plans with high-risk 

enrollees to increase premiums in order 

to receive additional risk adjustment 

payments. As noted by commenters to 

the 2014 Payment Notice proposed rule, 

transfers may be more volatile from year 

to year and sensitive to anomalous 

premiums if they were scaled to a plan’s 

own premium instead of the statewide 

average premium. Scaling the risk 

adjustment transfers by the statewide 

average premium promotes premium 

stabilization by encouraging pricing to 

average risk in a risk pool, and results 

in a calculation of equal payments and 

charges. 

In the risk adjustment methodologies 

applicable to the 2018 and 2019 benefit 

years, HHS has adjusted statewide 

average premium by reducing it by 14 

percent to account for an estimated 

proportion of administrative costs that 

do not vary with claims. HHS is not 

applying this adjustment retroactively to 

the 2017 benefit year, but is instead 


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11See 76 FR 41930, 41932–33. Also see 81 FR 

94058, 94702. 

12https://downloads.cms.gov/cciio/SummaryReport-Risk-Adjustment-2017.pdf. 

13The risk adjustment methodology for those 

benefit years was published at the February 27, 

2015 Federal Register (80 FR 10749) and the March 

8, 2016 Federal Register (81 FR 12203). 

maintaining the definition of statewide 

average premium previously established 

for the 2017 benefit year. As discussed 

above, HHS has repeatedly stressed the 

importance of providing a risk 

adjustment methodology in advance of 

the benefit year to which it applies to 

provide issuers the opportunity to price 

their plans accordingly.11 To protect the 

settled expectations of issuers that have 

structured their pricing and offering 

decisions in reliance on the previously 

promulgated 2017 benefit year 

methodology, this rule maintains for the 

2017 benefit year the description of 

statewide average premium set forth in 

the 2017 Payment Notice. 

Therefore, for the 2017 benefit year, 

we are issuing this final rule that adopts 

the HHS-operated risk adjustment 

methodology previously established for 

the 2017 benefit year in the Federal 

Register publications cited above, 

including use of statewide average 

premium. As set forth in reports 

previously issued, HHS has completed 

final risk adjustment calculations for the 

2017 benefit year, but has not yet 

collected or paid risk adjustment 

amounts to issuers of risk adjustment 

covered plans. The provisions of this 

final rule adopt the methodology that 

applies to collection and payment of 

risk adjustment amounts for the 2017 

benefit year. Because this final rule does 

not alter any previously announced risk 

adjustment methodology, the amounts 

previously calculated by HHS have not 

changed by virtue of this rule’s 

issuance. 

HHS will begin collection of the 2017 

benefit year risk adjustment charge 

amounts announced in the Summary 

Report on Permanent Risk Adjustment 

Transfers for the 2017 Benefit Year 12

through netting pursuant to 45 CFR 

156.1215(b) and subsequently issuing 

invoices if an amount remains 

outstanding in the September 2018 

monthly payment cycle. HHS will begin 

making the 2017 benefit year risk 

adjustment payments outlined in the 

Summary Report on Permanent Risk 

Adjustment Transfers for the 2017 

Benefit Year as part of the October 2018 

monthly payment cycle, continuing on 

a monthly basis as collections are 

received. Under this timeline, issuers 

would receive invoices on or about 

September 11–13, 2018 and payments 

would begin to be made around October 

22, 2018. 

III. Adoption of the Methodology for the 

HHS-Operated Permanent Risk 

Adjustment Program Under the Patient 

Protection and Affordable Care Act 

This rule adopts the final rules set out 

in the publication in the March 23, 2012 

Federal Register (77 FR 17220 through 

17252) and publication in the March 8, 

2016 Federal Register (81 FR 12204 

through 12352). For the 2017 benefit 

year, in states where HHS is operating 

the risk adjustment program under 

section 1343 of the PPACA, HHS will 

use the criteria and methods as 

specified in the publication in the 

March 23, 2012 Federal Register (77 FR 

17220 through 17252) and publication 

in the March 8, 2016 Federal Register 

(81 FR 12204 through 12352). 

IV. Waiver of Proposed Rulemaking 

and Delay in Effective Date 

Under the Administrative Procedure 

Act (APA) (5 U.S.C. 553), a notice of 

proposed rulemaking and an 

opportunity for public comment are 

generally required before issuing a 

regulation. We also ordinarily provide a 

30-day delay in the effective date of the 

provisions of a rule in accordance with 

the APA (5 U.S.C. 553(d)), unless the 

rule is a major rule and subject to the 

60-day delayed effective date required 

by the Congressional Review Act (5 

U.S.C. 801(a)(3)). However, these 

procedures can be waived if the agency, 

for good cause, finds that notice and 

public comment and delay in effective 

date are impracticable, unnecessary, or 

contrary to public interest and 

incorporates a statement of the finding 

and its reasons in the rule issued. See 

5 U.S.C. 553(d)(3); 5 U.S.C. 808(2). 

HHS has determined that issuing this 

rule in proposed form, such that it 

would not become effective until after 

public comments are submitted, 

considered, and responded to in a final 

rule, would be impracticable, 

unnecessary, and contrary to the public 

interest. As discussed above, immediate 

administrative action is imperative to 

maintain the stability and predictability 

in the individual and small group 

insurance markets. It is also consistent 

with settled expectations in that this 

rule adopts the risk adjustment 

methodology previously established for 

the 2017 benefit year.13 Under normal 

operations, risk adjustment invoices for 

the 2017 benefit year would be issued 

beginning in August 2018 and risk 

adjustment payments for the 2017 

benefit year would be made beginning 

in the September 2018 monthly 

payment cycle. Accordingly, it is now 

less than 2 months until risk adjustment 

payments for the 2017 benefit year, 

expected to total $5.2 billion, are due to 

begin. Immediate action is also 

necessary to maintain issuer confidence 

in the HHS-operated risk adjustment 

program. Issuers have already accounted 

for expected risk adjustment transfers in 

their rates for the 2017 benefit year and 

uncompensated payments for the 2017 

benefit year could lead to higher 

premiums in future benefit years as 

issuers incorporate a risk premium into 

their rates. Issuers file rates for the 2019 

benefit year in the summer of 2018, and 

if a projected $5.2 billion in risk 

adjustment payments is unavailable or 

there is uncertainty as to whether 

payments for the 2018 benefit year will 

be made, there is a serious risk issuers 

will substantially increase 2019 

premiums to account for the 

uncompensated risk associated with 

high-risk enrollees. Consumers enrolled 

in certain plans could see a significant 

premium increase, which could make 

coverage in those plans particularly 

unaffordable for unsubsidized enrollees. 

Furthermore, issuers are currently 

making decisions on whether to offer 

qualified health plans (QHPs) through 

the Exchanges for the 2019 benefit year, 

and, for the Federally-facilitated 

Exchange (FFE), this decision must be 

made before the August 2018 deadline 

to finalize QHP agreements. In states 

with limited Exchange options, a QHP 

issuer exit would restrict consumer 

choice, and put additional upward 

pressure on Exchange premiums, 

thereby increasing the cost of coverage 

for unsubsidized individuals and 

federal spending for premium tax 

credits. The combination of these effects 

could lead to significant, involuntary 

coverage losses in certain state market 

risk pools. 

Additionally, HHS’s failure to make 

timely risk adjustment payments could 

impact the solvency of plans providing 

coverage to sicker (and costlier) than 

average enrollees that require the influx 

of risk adjustment payments to continue 

operations. When state regulators 

determine issuer solvency, any 

uncertainty surrounding risk adjustment 

transfers jeopardizes regulators’ ability 

to make decisions that protect 

consumers and support the long-term 

health of insurance markets. Therefore, 

HHS has determined that delaying the 

effective date of the use of statewide 

average premium in the payment 

transfer calculation under the HHSoperated risk adjustment methodology 

for the 2017 benefit year to allow for 


daltland on DSKBBV9HB2PROD with RULES
36460 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Rules and Regulations 

proposed rulemaking and comment is 

impracticable and contrary to the public 

interest because consumers would be 

negatively impacted by premium 

changes should risk adjustment 

payments be interrupted or confidence 

in the program undermined. 

There is also good cause to proceed 

without notice and comment for the 

additional reason that such procedures 

are unnecessary here. HHS has received 

and considered comments in issuing the 

2014 through 2017 Payment Notices. In 

each of these rulemaking processes, 

parties had the opportunity to comment 

on HHS’s use of statewide average 

premium in the payment transfer 

formula under the HHS-operated risk 

adjustment methodology. Because this 

final rule adopts the same HHS-operated 

risk adjustment methodology issued in 

the 2017 Payment Notice final rule, the 

comments received in those 

rulemakings are sufficiently current to 

indicate a lack of necessity to engage in 

further notice and comment. In the 2014 

Payment Notice final rule, we received 

a number of comments in support of our 

proposal to use the statewide average 

premium as the basis for risk adjustment 

transfers. In subsequent benefit year 

rulemakings, some commenters 

expressed a desire for HHS to use a 

plan’s own premium. HHS addressed 

those comments by reiterating that we 

had considered the use of a plan’s own 

premium instead of the statewide 

average premium and chose to use 

statewide average premium. As this 

approach supports the overall goal of 

the risk adjustment program to 

encourage issuers to rate for the average 

risk in the applicable state market risk 

pool, and avoids the creation of 

incentives for issuers to operate less 

efficiently, set higher prices, develop 

benefit designs or create marketing 

strategies to avoid high risk enrollees. 

V. Collection of Information 

Requirements 

This document does not impose 

information collection requirements, 

that is, reporting, recordkeeping, or 

third-party disclosure requirements. 

Consequently, there is no need for 

review by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501, et seq.). 

VI. Regulatory Impact Analysis 

A. Statement of Need 

This final rule adopts the HHSoperated risk adjustment methodology 

for the 2017 benefit year set forth in the 

2017 Payment Notice final rule to 

ensure that the risk adjustment program 

works as intended to protect consumers 

from the effects of adverse selection and 

premium increases due to issuer 

uncertainty. The Premium Stabilization 

Rule and previous Payment Notices 

noted above provided detail on the 

implementation of the risk adjustment 

program, including the specific 

parameters applicable for the 2017 

benefit year. 

B. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

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

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999), the Congressional 

Review Act (5 U.S.C. 804(2), and 

Executive Order 13771 on Reducing 

Regulation and Controlling Regulatory 

Costs. Executive Orders 12866 and 

13563 direct agencies to assess all costs 

and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

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

OMB has determined that this final 

rule is ‘‘economically significant’’ 

within the meaning of section 3(f)(1) of 

Executive Order 12866, because it is 

likely to have an annual effect of $100 

million in any 1 year. In addition, for 

the reasons noted above, OMB has 

determined that this is a major rule 

under the Congressional Review Act. 

This final rule offers a further 

explanation on budget neutrality and 

the use of statewide average premium in 

the risk adjustment payment transfer 

formula when HHS is operating the 

permanent risk adjustment program 

established in section 1343 of the 

PPACA on behalf of a state for the 2017 

benefit year. We note that we previously 

estimated transfers associated with the 

risk adjustment program in the Premium 

Stabilization Rule and the 2017 

Payment Notice, and that the provisions 

of this final rule do not change the risk 

adjustment transfers previously 

estimated under the HHS-operated risk 

adjustment methodology established in 

those final rules. The approximate risk 

adjustment transfers for the 2017 benefit 

year are $5.179 billion. As such, we also 

adopt the RIA in the 2017 Payment 

Notice proposed and final rules. 

Dated: July 23, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: July 24, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2018–16190 Filed 7–25–18; 4:15 pm] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 1 

[MD Docket Nos. 18–175; FCC 18–65] 

Assessment and Collection of 

Regulatory Fees for Fiscal Year 2018 

AGENCY: Federal Communications 

Commission. 

ACTION: Final action. 

SUMMARY: In this document, the Federal 

Communications Commission 

(Commission) makes decisions 

involving submarine cables, 

international bearer circuits, and the 

calculation of cable television 

subscribers. 

DATES: This final action is effective 

August 29, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Roland Helvajian, Office of Managing 

Director at (202) 418–0444. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s FY 2018 

Report and Order (FY 2018 Report and 

Order), FCC 18–65, MD Docket No. 18– 

175 adopted on May 21, 2018 and 

released on May 22, 2018. The full text 

of this document is available for 

inspection and copying during normal 

business hours in the FCC Reference 

Center, 445 12th Street SW, Room CY– 

A257, Portals II, Washington, DC 20554, 

and may also be purchased from the 

Commission’s copy contractor, BCPI, 

Inc., Portals II, 445 12th Street SW, 

Room CY–B402, Washington, DC 20554. 

Customers may contact BCPI, Inc. via 

their website, http://www.bcpi.com, or 

call 1–800–378–3160. This document is 

available in alternative formats 

(computer diskette, large print, audio 

record, and braille). Persons with 

disabilities who need documents in 

these formats may contact the FCC by 

email: FCC504@fcc.gov or phone: 202– 

418–0530 or TTY: 202–418–0432. 


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