[Federal Register Volume 83, Number 155 (Friday, August 10, 2018)]
[Proposed Rules]
[Pages 39644-39648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17142]


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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.

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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.

[[Page 39645]]

    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\
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    \1\ See, 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.
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    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 HHS-operated 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\
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    \2\ See, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
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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

[[Page 39646]]

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.
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    \3\ New Mexico Health Connections v. United States Department of 
Health and Human Services et al., No. CIV 16-0878 JB/JHR (D.N.M. 
2018).
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II. Provisions of the Proposed Rule

    This rule proposes to adopt the HHS-operated 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 Sec.  
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.
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    \4\ See the definition for ``risk adjustment covered plan'' at 
45 CFR 153.20.
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    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.
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    \5\ See 78 FR 15409 at 15417.
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    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.
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    \6\ For 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).
    \7\ See 42 U.S.C. 18063.
    \8\ Compare 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).
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    Furthermore, if HHS elected to adopt a risk adjustment methodology 
that was contingent on appropriations from

[[Page 39647]]

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.
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    \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.
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    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-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. 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 risk-avoidance techniques.
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    \10\ See 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.
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    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.

[[Page 39648]]

    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.
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    \11\ See 81 FR 94058 at 94099.
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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 
cost-scaling 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