39644 Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules 

5A request from ODEQ that raises an isuse not 

previously subject to comment, presents new data, 

requires EPA to examine its interpretion of the 

applicable law, or where EPA wishes to re-examine 

its present position on a matter will be processed 

through notice and comment rulemaking in the 

Federal Register. 

receipt of the next NESHAP delegation 

request from ODEQ.5

XIII. Proposed Action 

In today’s action, the EPA is 

proposing to approve an update to the 

Oklahoma NESHAP delegation that 

would provide the ODEQ with the 

authority to implement and enforce 

certain newly incorporated NESHAP 

promulgated by the EPA and 

amendments to existing standards 

currently delegated, as they existed 

though September 1, 2016. As requested 

in ODEQ’s June 25, 2018 letter, this 

proposed delegation to ODEQ does not 

extend to sources or activities located in 

Indian country, as defined in 18 U.S.C. 

1151. 

XIV. Statutory and Executive Order 

Reviews 

Under the CAA, the Administrator 

has the authority to approve section 

112(l) submissions that comply with the 

provisions of the Act and applicable 

Federal regulations. In reviewing 

section 112(l) submissions, the EPA’s 

role is to approve state choices, 

provided that they meet the criteria and 

objectives of the CAA and of the EPA’s 

implementing regulations. Accordingly, 

this proposed action would merely 

approve the State’s request as meeting 

Federal requirements and does not 

impose additional requirements beyond 

those imposed by state law. For that 

reason, this proposed action: 

• Is not a significant regulatory action 

subject to review by the Office of 

Management and Budget under 

Executive Orders 12866 (58 FR 51735, 

October 4, 1993) and 13563 (76 FR 3821, 

January 21, 2011); 

• does not impose an information 

collection burden under the provisions 

of the Paperwork Reduction Act (44 

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

• is certified as not having a 

significant economic impact on a 

substantial number of small entities 

under the Regulatory Flexibility Act (5 

U.S.C. 601 et seq.); 

• does not contain any unfunded 

mandate or significantly or uniquely 

affect small governments, as described 

in the Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4); 

• does not have Federalism 

implications as specified in Executive 

Order 13132 (64 FR 43255, August 10, 

1999); 

• is not an economically significant 

regulatory action based on health or 

safety risks subject to Executive Order 

13045 (62 FR 19885, April 23, 1997); 

• is not a significant regulatory action 

subject to Executive Order 13211 (66 FR 

28355, May 22, 2001); 

• is not subject to requirements of 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (15 U.S.C. 272 note) because 

application of those requirements would 

be inconsistent with the CAA; and 

• does not provide EPA with the 

discretionary authority to address, as 

appropriate, disproportionate human 

health or environmental effects, using 

practicable and legally permissible 

methods, under Executive Order 12898 

(59 FR 7629, February 16, 1994). 

List of Subjects 

40 CFR Part 61 

Environmental protection, 

Administrative practice and procedure, 

Air pollution control, Arsenic, Benzene, 

Beryllium, Hazardous substances, 

Mercury, Intergovernmental relations, 

Reporting and recordkeeping 

requirements, Vinyl chloride. 

40 CFR Part 63 

Environmental protection, 

Administrative practice and procedure, 

Air pollution control, Hazardous 

substances, Intergovernmental relations, 

Reporting and recordkeeping 

requirements. 

Authority: 42 U.S.C. 7401 et seq. 

Dated: July 25, 2018. 

Wren Stenger, 

Multimedia Division Director, Region 6. 

[FR Doc. 2018–17139 Filed 8–9–18; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 153 

[CMS–9919–P] 

RIN 0938–AT66 

Patient Protection and Affordable Care 

Act; Adoption of the Methodology for 

the HHS-Operated Permanent Risk 

Adjustment Program for the 2018 

Benefit Year Proposed Rule 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Proposed rule. 

SUMMARY: This rule proposes to adopt 

the risk adjustment methodology that 

HHS previously established for the 2018 

benefit year. In February 2018, a district 

court vacated the use of statewide 

average premium in the HHS-operated 

risk adjustment methodology for the 

2014 through 2018 benefit years. HHS is 

proposing to adopt the HHS-operated 

risk adjustment methodology for the 

2018 benefit year as established in the 

final rules published in the March 23, 

2012 Federal Register and the December 

22, 2016 Federal Register. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5:00 p.m. on September 7, 2018. 

ADDRESSES: In commenting, please refer 

to file code CMS–9919–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

Comments, including mass comment 

submissions, must be submitted in one 

of the following three 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–9919–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–9919–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Krutika Amin, (301) 492–5153; Jaya 

Ghildiyal, (301) 492–5149; or Adrianne 

Patterson, (410) 786–0686. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All comments 

received before the close of the 

comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: http://

www.regulations.gov. Follow the search 

instructions on that website to view 

public comments. 


daltland on DSKBBV9HB2PROD with PROPOSALS
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1See, Updated 2019 Benefit Year Final HHS Risk 

Adjustment Model Coefficients. July 27, 2018. 

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

Regulations-and-Guidance/Downloads/2019- 

Updtd-Final-HHS-RA-Model-Coefficients.pdf. 

2See, https://www.cms.gov/CCIIO/Resources/ 

Regulations-and-Guidance/Downloads/2017-RAFinal-Rule-Resumption-RAOps.pdf. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

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 

document. 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 2018 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 (see 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). 

In the November 2, 2017 Federal 

Register (82 FR 51042), we published a 

proposed rule outlining the Federally 

certified risk adjustment methodology 

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). On July 27, 

2018, consistent with 45 CFR 

153.320(b)(1)(i), we updated the 2019 

benefit year final risk adjustment model 

coefficients to reflect an additional 

recalibration related to an update to the 

2016 enrollee-level EDGE dataset.1

In the July 30, 2018 Federal Register 

(83 FR 36456), we published a final rule 

that adopted the 2017 benefit year risk 

adjustment methodology in the March 

23, 2012 Federal Register (77 FR 17220 

through 17252) and in the March 8, 

2016 Federal Register (81 FR 12204 

through 12352). In light of the court 

order described below, this final rule 

sets forth additional explanation of the 

rationale supporting the use of 

statewide average premium in the HHSoperated risk adjustment payment 

transfer formula for the 2017 benefit 

year, including the reasons why the 

program is operated in a budget neutral 

manner. This final rule permitted HHS 

to resume 2017 benefit year program 

operations, including collection of risk 

adjustment charges and distribution of 

risk adjustment payments. HHS also 

provided guidance as to the operation of 

the HHS-operated risk adjustment 

program for the 2017 benefit year in 

light of publication of this final rule.2

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 statewide 


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3New Mexico Health Connections v. United 

States Department of Health and Human Services 

et al., No. CIV 16–0878 JB/JHR (D.N.M. 2018). 4See the definition for ‘‘risk adjustment covered 

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

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), and 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). 

average premium as the cost-scaling 

factor to ensure that amounts collected 

from issuers equal the amount of 

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.3 The district 

court otherwise rejected New Mexico 

Health Connections’ arguments. HHS’s 

motion for reconsideration remains 

pending with the district court. 

II. Provisions of the Proposed Rule 

This rule proposes to adopt the HHSoperated risk adjustment methodology 

that was previously published at 81 FR 

94058 for the 2018 benefit year with an 

additional explanation regarding the use 

of statewide average premium and the 

budget neutral nature of the risk 

adjustment program. This rule does not 

propose to make any changes to the 

previously published HHS-operated risk 

adjustment methodology for the 2018 

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 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 that state 

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 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. 

First, Congress designed the risk 

adjustment program to be implemented 

and operated by states if they chose 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 funds on the program 

if they voluntarily chose to do so, HHS 

could not have required such additional 

funding. 

Second, while the PPACA did not 

include an explicit requirement that the 

risk adjustment program be operated in 

a budget neutral manner, it also did not 

prohibit HHS from designing the 

program in that 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.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 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 elected to adopt 

a risk adjustment methodology that was 

contingent on appropriations from 


daltland on DSKBBV9HB2PROD with PROPOSALS
Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules 39647 

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 

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 annual lump 

sum was 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 for example, September 12, 2011, Risk 

Adjustment Implementation Issues, White Paper, 

available at: https://www.cms.gov/CCIIO/Resources/ 

Files/Downloads/riskadjustment_whitepaper_

web.pdf. 

Congress through the annual 

appropriations process, that would have 

created uncertainty for issuers regarding 

the amount of risk adjustment payments 

they could expect for a given benefit 

year. That uncertainty would have 

undermined 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 

higher-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 risk-avoidance techniques such as 

designing or marketing their plans in 

ways that tend to attract healthier 

individuals, who cost less to insure. 

Moreover, relying on 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. Any 

later-authorized program management 

appropriations made to CMS, moreover, 

were not intended to be used for 

supplementing risk adjustment 

payments, and were allocated by the 

agency for other, primarily 

administrative, purposes.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 the overall goals of the 

risk adjustment program—to stabilize 

premiums and 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 a 

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, as 

discussed above, of encouraging issuers 

to rate for the average risk in the 

applicable state market risk pool, and 

avoiding the creation of incentives for 

issuers to operate less efficiently, set 

higher prices, or develop benefit designs 

or create marketing strategies to avoid 

high-risk enrollees. Use of an after-thefact 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. In the 2014 Payment 

Notice final rule, we noted that we 

received a number of comments in 

support of our proposal to use statewide 

average premium as the basis for risk 

adjustment transfers, while 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 

statewide average premium and chose to 

use statewide average premium, as this 

approach supports the overall goals 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 employ riskavoidance techniques. 

Although HHS has not yet calculated 

risk adjustment payments and charges 

for the 2018 benefit year, immediate 

administrative action is imperative to 

maintain the stability and predictability 

in the individual and small group 

insurance markets. This proposed rule 

would ensure that collections and 

payments may be made for the 2018 

benefit year in a timely manner. 

Without this administrative action, the 

uncertainty related to the HHS-operated 

risk adjustment methodology for the 

2018 benefit year could add uncertainty 

to the individual and small group 

markets, as issuers are now in the 

process of determining the extent of 

their market participation and the rates 

and benefit designs for plans they will 

offer for the 2019 benefit year. Issuers 

file rates for the 2019 benefit year 

during the summer of 2018, and if there 

is uncertainty as to whether payments 

for the 2018 benefit year will be made, 

there is a serious risk that 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. 


daltland on DSKBBV9HB2PROD with PROPOSALS
39648 Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules 

11See 81 FR 94058 at 94099. 

In light of the district court’s decision 

to vacate the use of statewide average 

premium in the risk adjustment 

methodology on the ground that HHS 

did not adequately explain its decision 

to adopt that aspect of the methodology, 

we offer an additional explanation in 

this rule and are proposing to maintain 

the use of statewide average premium in 

the applicable state market risk pool for 

the payment transfer formula under the 

HHS-operated risk adjustment 

methodology for the 2018 benefit year. 

Therefore, HHS proposes to adopt the 

methodology previously established for 

the 2018 benefit year in the Federal 

Register publications cited above that 

applies to the calculation, collection 

and payment of risk adjustment 

transfers under the HHS-operated 

methodology for the 2018 benefit year. 

This includes the adjustment to the 

statewide average premium, reducing it 

by 14 percent, to account for an 

estimated proportion of administrative 

costs that do not vary with claims.11 We 

seek comment on the proposal to use 

the statewide average premium. 

However, in order to protect the settled 

expectations of issuers that structured 

their pricing and offering decisions in 

reliance on the previously promulgated 

2018 benefit year methodology, all other 

aspects of the risk adjustment 

methodology are outside of the scope of 

this rulemaking, and HHS does not seek 

comment on those finalized aspects. 

III. 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.). 

IV. Regulatory Impact Analysis 

A. Statement of Need 

This rule proposes to maintain 

statewide average premium as the costscaling factor in the HHS-operated risk 

adjustment methodology and continue 

the operation of the program in a budget 

neutral manner for the 2018 benefit year 

to protect consumers from the effects of 

adverse selection and premium 

increases due to issuer uncertainty. The 

Premium Stabilization Rule, previous 

Payment Notices, and other rulemakings 

noted above provided detail on the 

implementation of the risk adjustment 

program, including the specific 

parameters applicable for the 2018 

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 

proposed 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 proposed rule offers further 

explanation of 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 2018 

benefit year. We note that we previously 

estimated transfers associated with the 

risk adjustment program in the Premium 

Stabilization Rule and the 2018 

Payment Notice, and that the provisions 

of this proposed rule do not change the 

risk adjustment transfers previously 

estimated under the HHS-operated risk 

adjustment methodology established in 

those final rules. The approximate 

estimated risk adjustment transfers for 

the 2018 benefit year are $4.8 billion. As 

such, we also incorporate into this 

proposed rule the RIA in the 2018 

Payment Notice proposed and final 

rules. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this proposed rule, and, when we 

proceed with a subsequent document, 

we will respond to the comments in the 

preamble to that document. 

Dated: July 30, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: August 2, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2018–17142 Filed 8–8–18; 4:15 pm] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 11 

[PS Docket Nos. 15–94, 15–91; FCC 18– 

94] 

Emergency Alert System; Wireless 

Emergency Alerts 

AGENCY: Federal Communications 

Commission. 

ACTION: Further motice of proposed 

rulemaking. 

SUMMARY: In this document, the Federal 

Communications Commission (FCC or 

Commission) seeks comment on 

whether additional alert reporting 

measures are needed; whether State 

EAS Plans should be required to include 

procedures to help prevent false alerts, 

or to swiftly mitigate their consequences 

should a false alert occur; and on factors 

that might delay or prevent delivery of 

Wireless Emergency Alerts (WEA) to 

members of the public and measures the 

Commission could take to address 

inconsistent WEA delivery. 

DATES: Comments are due on or before 

September 10, 2018 and reply 

comments are due on or before October 

9, 2018. 

ADDRESSES: You may submit comments, 

identified by PS Docket Nos. 15–94, 15– 

91 by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Federal Communications 

Commission’s Website: http://

www.fcc.gov/ecfs/. Follow the 

instructions for submitting comments. 


daltland on DSKBBV9HB2PROD with PROPOSALS