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[Federal Register Volume 78, Number 118 (Wednesday, June 19, 2013)]
[Proposed Rules]
[Pages 37031-37095]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-14540]

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* * * * *

GLOSSARY OF TERMS

* * * * *
    Conditional demand feature Has the meaning provided in rule 2a-7.
* * * * *
    Credit rating agency Any nationally recognized statistical rating 
organizations, as that term is defined in section 3(a)(62) of the 
Securities Exchange Act of 1934.
* * * * *
    Demand feature Has the meaning provided in rule 2a-7.
* * * * *
    Guarantee For purposes of Question 63, has the meaning provided in 
paragraph (a)(16)(i) of rule 2a-7.
    Guarantor For purposes of Question 63, the provider of any 
guarantee.
* * * * *
    Illiquid security Has the meaning provided in rule 2a-7.
* * * * *
    Maturity The maturity of the relevant asset, determined without 
reference to the maturity shortening provisions contained in paragraph 
(i) of rule 2a-7 regarding interest rate readjustments.
* * * * *
    Risk limiting conditions The conditions specified in paragraph (d) 
of rule 2a-7.
* * * * *
    WAL Weighted average portfolio maturity of a liquidity fund 
calculated taking into account the maturity shortening provisions 
contained in paragraph (i) of rule 2a-7, but determined without 
reference to the exceptions in paragraph (i) of rule 2a-7 regarding 
interest rate readjustments.
    WAM Weighted average portfolio maturity of a liquidity fund 
calculated taking into account the maturity shortening provisions 
contained in paragraph (i) of rule 2a-7

    By the Commission.

    Dated: June 5, 2013.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-13687 Filed 6-18-13; 8:45 am]

BILLING CODE 8011-01-P

[[Page 37031]]

Vol. 78

Wednesday,

No. 118

June 19, 2013

Part III

Department of Health and Human Services

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45 CFR Parts 144, 147, 153, et al.

 Patient Protection and Affordable Care Act; Program Integrity: 
Exchange, SHOP, Premium Stabilization Programs, and Market Standards; 
Proposed Rule

Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / 
Proposed Rules

[[Page 37032]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 147, 153, 155, and 156

[CMS-9957-P]
RIN 0938-AR82

Patient Protection and Affordable Care Act; Program Integrity: 
Exchange, SHOP, Premium Stabilization Programs, and Market Standards

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule sets forth financial integrity and 
oversight standards with respect to Affordable Insurance Exchanges; 
Qualified Health Plan (QHP) issuers in Federally-facilitated Exchanges 
(FFEs); and States with regard to the operation of risk adjustment and 
reinsurance programs. It also proposes additional standards with 
respect to agents and brokers. These standards, which include financial 
integrity provisions and protections against fraud and abuse, are 
consistent with Title I of the Patient Protection and Affordable Care 
Act as amended by the Health Care and Education Reconciliation Act of 
2010, referred to collectively as the Affordable Care Act.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on July 19, 2013.

ADDRESSES: In commenting, please refer to file code CMS-9957-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9957-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    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-9957-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:

a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members. Comments erroneously mailed to 
the addresses indicated as appropriate for hand or courier delivery may 
be delayed and received after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Leigha Basini at (301) 492-4307, or 
Noah Isserman at (301) 492-4401 for general information. Ariel Novick 
at (301) 492-4309, for matters related to cost-sharing reductions and 
advance payments of the premium tax credit.

Adam Shaw at (410) 786-1091, for matters related to the risk 
adjustment, reinsurance and risk corridors programs.
Shelley Bain at (301) 492-4453, or Anne Pesto at (410) 786-3492, for 
matters related to Part 155, Subpart M.
Cindy Yen at (301) 492-5142, for matters related to Part 155, Subparts 
C and E, and Part 156.
Scott Dafflitto at (301) 492-4198, for matters relating to SHOP.
Jacob Ackerman at (301) 492-4179, for matters related to Parts 144 and 
Part 147 and the single risk pool.
Rebecca Zimmermann at (301) 492-4396, for matters related to quality 
standards, Part 156, Subpart L.

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 Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the internet at http://www.gpo.gov/fdsys.

Acronyms and Short Forms

    Because of the many organizations and terms to which we refer by 
acronym in this proposed rule, we are listing these acronyms and their 
corresponding terms in alphabetical order below:

Affordable Care Act The Affordable Care Act of 2010 (which is the 
collective term for the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) and the Health Care and Education Reconciliation 
Act (Pub. L. 111-152))

ALJ Administrative Law Judge
APTC Advance payments of the premium tax credit
ARF Allowable rating factor
AV Actuarial Value
CAHPS[supreg] Consumer Assessment of Healthcare Providers and 
Systems
CFR Code of Federal Regulations
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
DOI State Department of Insurance
DOL U.S. Department of Labor
FEHB Federal Employees Health Benefits
FFE Federally-facilitated Exchange
FFE API Federally-facilitated Exchange application programming 
interface
FF-SHOP Federally-facilitated Small Business Health Options Program
GAAP Generally-accepted accounting principles
GAAS Generally accepted auditing standards

[[Page 37033]]

GAGAS Generally accepted governmental auditing standards
GAO United States Government Accountability Office
HHS U.S. Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
IRS Internal Revenue Service
MLR Medical Loss Ratio
NAIC National Association of Insurance Commissioners
NCQA National Committee for Quality Assurance
OIG Office of the Inspector General of the U.S. Department of Health 
and Human Services
OMB Office of Management and Budget
PHS Act Public Health Service Act
PII Personally Identifiable Information
PRA Paperwork Reduction Act
QHP Qualified Health Plan
SHOP Small Business Health Options Program
The Code Internal Revenue Code of 1986
TIN Taxpayer Identification Number

Executive Summary

    Starting on January 1, 2014, qualified individuals and qualified 
employers will be able to be covered by private health insurance 
through competitive marketplaces called Affordable Insurance Exchanges, 
or ``Exchanges'' (also called Health Insurance Marketplaces). This 
proposed rule sets forth oversight and financial integrity standards 
with respect to Exchanges, QHP issuers in Federally-facilitated 
Exchanges (FFEs), and States with regard to the operation of risk 
adjustment and reinsurance programs. It also proposes additional 
standards for special enrollment periods, survey vendors that may 
conduct enrollee satisfaction surveys on behalf of QHP issuers in 
Exchanges, issuer participation in an FFE, and States' operation of a 
SHOP. Finally, it proposes additional standards for agents and brokers, 
geographic rating areas, and guaranteed availability and renewability. 
Nothing in these proposed regulations would limit the authority of the 
Office of the Inspector General of the U.S. Department of Health and 
Human Services (OIG) as prescribed by the Inspector General Act of 1978 
or any other law.
    Although many of the proposed provisions in this proposed rule 
would become effective by 2014, we do not believe that affected parties 
will have difficulty complying with the provisions by their effective 
dates, because most of the proposed standards are based on existing 
standards currently in effect in the private market, were previously 
proposed through the Blueprint process, discussed in agency-issued sub-
regulatory guidance, or were discussed in the preambles to the Exchange 
Establishment Rule,\1\ Premium Stabilization Rule,\2\ and the HHS 
Notice of Benefit and Payment Parameters for 2014.\3\ In addition to 
general comments on the substance of the proposed provisions, we seek 
input on ways to implement these proposed policies to minimize burden.
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    \1\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Exchange Standards for 
Employers, 77 FR 18310 (March 27, 2012).
    \2\ Patient Protection and Affordable Care Act; Standards 
Related to Reinsurance, Risk Corridors and Risk Adjustment, 77 FR 
17220 (March 23. 2012).
    \3\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2014 and Amendments to the HHS 
Notice of Benefit and Payment Parameters for 2014, 78 FR 15410 and 
15541 (Mar. 11, 2013).
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Table of Contents

I. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
    C. Structure of the Proposed Rule
II. Provisions of the Proposed Rule
    A. Part 144--Requirements Related to Health Insurance Coverage
    B. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    C. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment under the Affordable Care Act
    1. Subpart A--General Provisions
    2. Subpart C--State Standards Related to the Reinsurance Program
    3. Subpart D--State Standards Related to the Risk Adjustment 
Program
    4. Risk Adjustment Methodology
    5. Subpart E--Health Insurance Issuer and Group Health Plan 
Standards Related to the Reinsurance Program
    6. Subpart F--Health Insurance Issuer Standards Related to the 
Risk Corridors Program
    7. Subpart G--Health Insurance Issuer Standards Related to the 
Risk Adjustment Program
    8. Subpart H--Distributed Data Collection for HHS-Operated 
Programs
    D. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart A--General Provisions
    2. Subpart B--General Standards Related to the Establishment of 
an Exchange
    3. Subpart C--General Functions of an Exchange
    4. Subpart D--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exchange Participation and Insurance 
Affordability Programs
    5. Subpart E--Exchange Functions in the Individual Market: 
Enrollment in Qualified Health Plans
    6. Subpart H--Exchange Functions: Small Business Health Options 
Program (SHOP)
    7. Subpart M--Oversight and Program Integrity Standards for 
State Exchanges
    E. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. Subpart A--General Provisions
    2. Subpart C--Qualified Health Plan Minimum Certification 
Standards
    3. Subpart D--Federally-facilitated Exchange Qualified Health 
Plan Issuer Standards
    4. Subpart E--Health Insurance Issuer Responsibilities with 
Respect to Advance Payments of the Premium Tax Credit and Cost-
sharing Reductions
    5. Subpart H--Oversight and Financial Integrity Standards for 
Issuers of Qualified Health Plans in Federally-facilitated Exchanges
    6. Subpart I--Enforcement Remedies in Federally-facilitated 
Exchanges
    7. Subpart J--Administrative Review of QHP Issuer Sanctions in 
Federally-facilitated Exchanges
    8. Subpart K--Cases Forwarded to Qualified Health Plans and 
Qualified Health Plan Issuers in Federally-facilitated Exchanges by 
HHS
    9. Subpart L--Quality Standards
    10. Subpart M--Qualified Health Plan Issuer Responsibilities
III. Collection of Information Requirements
IV. Response to Comments
V. Regulatory Impact Analysis

I. Background

A. Legislative Overview

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised 
several provisions of the Patient Protection and Affordable Care Act, 
was enacted on March 30, 2010. In this proposed rule, we refer to the 
two statutes collectively as the ``Affordable Care Act.'' Subtitles A 
and C of Title I of the Affordable Care Act reorganized, amended, and 
added to the provisions of part A of Title XXVII of the Public Health 
Service Act (PHS Act) relating to health insurance issuers in the group 
and individual markets and to group health plans that are non-Federal 
governmental plans. As relevant here, these PHS Act provisions include 
section 2701 (fair health insurance premiums), section 2702 (guaranteed 
availability of coverage), and section 2703 (guaranteed renewability of 
coverage).
    Starting on October 1, 2013 for coverage starting as soon as 
January 1, 2014, qualified individuals and qualified employers will be 
able to purchase QHPs--private health insurance that has been certified 
as meeting certain standards--through competitive marketplaces called 
Exchanges or Health Insurance

[[Page 37034]]

Marketplaces. The Departments of Health and Human Services, Labor, and 
the Treasury have been working in close coordination to release 
guidance related to QHPs and Exchanges in several phases. The word 
``Exchanges'' refers to both State Exchanges, also called State-based 
Exchanges, and Federally-facilitated Exchanges (FFEs). In this proposed 
rule, we use the terms ``State Exchange'' or ``FFE'' when we are 
referring to a particular type of Exchange. When we refer to ``FFEs,'' 
we are also referring to State Partnership Exchanges, which are a form 
of FFEs.
    In this proposed rule, we encourage State flexibility within the 
boundaries of the law. Sections 1311(b) and 1321(b) of the Affordable 
Care Act provide that each State has the opportunity to establish an 
Exchange. Section 1311(b)(1) gives each State the opportunity to 
establish an Exchange that both facilitates the purchase of QHPs and 
provides for the establishment of a Small Business Health Options 
Program (SHOP) that will help qualified employers enroll their 
employees in QHPs. Section 1311(b)(2) contemplates the separate 
operation of the individual market Exchange and the SHOP under 
different governance and administrative structures, because it permits 
the individual market Exchange and SHOP to be merged only if States 
have adequate resources to assist both populations (individual and 
small employers) as a merged entity.
    Section 1311(c)(4) of the Affordable Care Act directs the Secretary 
to establish an enrollee satisfaction survey system that would evaluate 
the level of enrollee satisfaction of members in each QHP offered 
through an Exchange with more than 500 enrollees in the previous year.
    Section 1321(a) of the Affordable Care Act provides general 
authority for the Secretary to establish standards and regulations to 
implement the statutory requirements related to Exchanges, QHPs, and 
other components of Title I of the Affordable Care Act.
    Section 1321(c)(1) requires the Secretary of Health and Human 
Services (referred to throughout this rule as the Secretary) to 
establish and operate an FFE within States that either: do not elect to 
establish an Exchange; or, as determined by the Secretary, will not 
have any required Exchange operational by January 1, 2014.
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to enforce the Exchange standards using civil money penalties 
(CMPs) on the same basis as detailed in section 2723(b) of the PHS 
Act.\4\ Section 2723(b) of the PHS Act authorizes the Secretary to 
impose CMPs as a means of enforcing the individual and group market 
reforms contained in Title XXVII, Part A of the PHS Act when a State 
fails to substantially enforce these provisions.
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    \4\ Section 1321(c) of the Affordable Care Act erroneously cites 
to section 2736(b) of the PHS Act instead of 2723(b) of the PHS Act. 
This was clearly a typographical error, and we have interpreted 
section 1321(c) of the Affordable Care Act to incorporate section 
2723(b) of the PHS Act.
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    Section 1311(d)(5)(A) of the Affordable Care Act provides that 
States, when establishing Exchanges, must ensure that such Exchanges 
are self-sustaining beginning in 2015, including allowing Exchanges to 
charge assessments or user fees to participating issuers to generate 
funding to support their operations. Section 1311(d)(5)(B) contains a 
prohibition on the wasteful use of funds. When operating an FFE under 
section 1321(c)(1) of the Affordable Care Act, HHS has the authority 
under sections 1321(c)(1) and 1311(d)(5)(A) to collect and spend such 
user fees. In addition, 31 U.S.C. 9701 permits a Federal agency to 
establish a charge for a service provided by the agency. Office of 
Management and Budget (OMB) Circular A-25 Revised establishes Federal 
policy regarding user fees and specifies that a user charge will be 
assessed against each identifiable recipient for special benefits 
derived from Federal activities beyond those received by the general 
public.
    Section 1311(e)(1)(B) of the Affordable Care Act specifies that an 
Exchange may certify a health plan as a QHP if the Exchange determines 
that making available such a health plan through the Exchange is in the 
interests of qualified individuals and qualified employers in the State 
or States in which the Exchange operates.
    Section 1312(c) of the Affordable Care Act directs a health 
insurance issuer to consider all enrollees in all health plans (other 
than grandfathered health plans) offered by such issuer to be members 
of a single risk pool for each of its individual and small group 
markets. Section 1312(c) of the Affordable Care Act gives States the 
option to merge the individual and small group markets within the State 
into a single risk pool.
    Section 1312(e) of the Affordable Care Act directs the Secretary to 
establish procedures under which a State may permit agents and brokers 
to enroll qualified individuals and qualified employers in QHPs through 
an Exchange, and to assist individuals in applying for advance payments 
of the premium tax credit and cost-sharing reductions.
    Section 1313 of the Affordable Care Act, combined with section 1321 
of the Affordable Care Act, provides the Secretary with the authority 
to oversee the financial integrity, compliance with HHS standards, and 
efficient and non-discriminatory administration of State Exchange 
activities. Section 1313(a)(6)(A) of the Affordable Care Act specifies 
that payments made by, through, or in connection with an Exchange are 
subject to the False Claims Act (31 U.S.C. 3729, et seq.) if those 
payments include any Federal funds.
    Section 1341 of the Affordable Care Act establishes a transitional 
reinsurance program which begins in 2014 and is designed to provide 
issuers with greater payment stability as insurance market reforms are 
implemented and Exchanges facilitate increased enrollment. Section 1342 
of the Affordable Care Act establishes a temporary risk corridors 
program which permits the Federal government and QHPs to share in gains 
or losses resulting from inaccurate rate setting from 2014 through 
2016. Section 1343 of the Affordable Care Act establishes a permanent 
risk adjustment program which is intended to provide increased payments 
to health insurance issuers that attract higher-risk populations, such 
as those with chronic conditions, and eliminate incentives for issuers 
to avoid higher-risk enrollees.
    Section 1401 of the Affordable Care Act amended the Internal 
Revenue Code (26 U.S.C.) to add section 36B, allowing a refundable 
premium tax credit to help individuals and families afford health 
insurance coverage. Under sections 1401, 1411, and 1412 of the 
Affordable Care Act and 45 CFR part 155, subpart D, an Exchange will 
make a determination of advance payments of the premium tax credit for 
individuals who enroll in QHP coverage through an Exchange and seek 
financial assistance. Section 1402 of the Affordable Care Act provides 
for the reduction of cost sharing for certain individuals enrolled in a 
QHP through an Exchange, and section 1412 of the Affordable Care Act 
provides for the advance payment of these reductions to issuers.
    Section 1411(g) of the Affordable Care Act specifies that 
information provided by an applicant or received from a Federal agency 
may be used only for the purpose of, and to the extent necessary in 
ensuring the efficient operation of the Exchange, including for the 
purpose of verifying the eligibility of an individual to enroll through 
an Exchange, to claim a premium tax credit or cost-sharing reduction, 
or for verifying the amount of the tax credit or reduction.

[[Page 37035]]

    Section 1411(h) of the Affordable Care Act sets forth civil 
penalties that any person will be subject to if a person provides 
inaccurate information as part of the application or improperly uses or 
discloses information.
    Unless otherwise specified, the provisions in this proposed rule 
related to the establishment of minimum functions of an Exchange are 
based on the general authority of Secretary under section 1321(a)(1) of 
the Affordable Care Act. Nothing in these proposed regulations would 
limit the authority of the OIG as prescribed by the Inspector General 
Act of 1978 or any other law.

B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on a number of polices related 
to the operation of Exchanges, including the SHOP, and premium 
stabilization programs. HHS has held a number listening sessions with 
consumers, providers, employers, health plans, and State 
representatives to gather public input. HHS consulted with stakeholders 
through regular meetings with the National Association of Insurance 
Commissioners (NAIC), regular contact with States through the Exchange 
grant process, and meetings with tribal leaders and representatives, 
health insurance issuers, trade groups, consumer advocates, employers, 
and other interested parties. We considered all of the public input as 
we developed the policies in this proposed rule.

C. Structure of the Proposed Rule

    The regulations outlined in this proposed rule would be codified in 
45 CFR parts 144, 147, 153, 155, and 156. Part 153 outlines select 
oversight provisions related to the premium stabilization programs, 
such as maintenance of records, and sanctions for failing to establish 
a dedicated distributed data environment. Part 155 outlines the 
standards relative to the establishment, operation, and minimum 
functionality of Exchanges, including oversight provisions related to 
State Exchanges, such as those pertaining to financial integrity and 
maintenance of records. It also includes standards for States' 
establishment of a SHOP and agents and brokers. Part 156 outlines the 
standards for health insurance issuers with respect to participation in 
an Exchange, including minimum certification standards for QHPs and 
select oversight provisions related to QHP issuers in FFEs, such as 
those pertaining to maintenance of records, compliance reviews, and 
sanctions. It also includes provisions related to quality, the handling 
of consumer cases by issuers, and issuer standards related to the SHOP.
    We note that this rule includes standards for the SHOP to 
coordinate with the functions of the individual market Exchange for 
determining eligibility for insurance affordability programs in Sec.  
155.705(c). This provision was previously proposed in recent rulemaking 
and published in the Federal Register (78 FR 4723) on January 22, 2013. 
We received several comments on this provision. Some commenters 
supported the proposal in Sec.  155.705(c), while other commenters 
raised concerns that the proposed rules were overly burdensome and 
unrealistic in scope and practicability.
    After review of comments, and in light of the proposal included in 
this rule permitting a State to operate only a SHOP including the 
changes to part 155 of this rule, we are reproposing Sec.  155.705(c) 
in this rulemaking.

II. Provisions of the Proposed Regulations

A. Part 144--Requirements Related to Health Insurance Coverage

    In Sec.  144.102(c), we propose a technical correction to clarify 
whether coverage sold through associations is group or individual 
coverage under the PHS Act. The Market Reform Rule \5\ provided, among 
other things, that if health insurance coverage ``is offered to an 
association's employer-member that is maintaining a group health plan 
that has fewer than two participants who are current employees on the 
first day of the plan year,'' the coverage is considered individual 
health insurance coverage for purposes of Title XXVII of the PHS Act. 
This statement reflects the definition of ``individual market'' under 
the Health Insurance Portability and Accountability Act of 1996 
(HIPAA), but does not reflect the amendments made by the Affordable 
Care Act redefining ``small employer'' to include an employer with an 
average of at least one employee.\6\ Accordingly, we propose to delete 
the reference to group health plans with fewer than two participants 
who are current employees on the first day of the plan year from the 
rule. We propose conforming amendments to the definitions of ``group 
market'' and ``individual market'' in Sec.  144.103.
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    \5\ Patient Protection and Affordable Care Act; Health Insurance 
Market Rules; Rate Review'' 78 FR 13406 (February 27, 2013).
    \6\ Section 2791(e)(1)(B) and (e)(4) of the PHS Act.
---------------------------------------------------------------------------

    In Sec.  144.103, we propose to amend the definition of ``policy 
year'' with respect to non-grandfathered coverage in the individual 
market or in a market in which the State has merged the individual and 
small group risk pools, pursuant to section 1312(c)(3) of the 
Affordable Care Act and implementing regulations at 45 CFR 156.80(c). 
Under this proposal, ``policy year'' means a calendar year for which 
health insurance coverage provides coverage for health benefits. This 
is consistent with the proposed technical clarification to Sec.  
147.104 discussed below.
    We also propose to amend the definitions of ``small employer'' and 
``large employer'' in Sec.  144.103, consistent with PHS Act section 
2791(e), as amended by the Affordable Care Act. Section 2791(e)(2) 
generally defines a large employer as an employer with an average of at 
least 101 employees. Section 2791(e)(4) generally defines a small 
employer as an employer with an average at least one but not more than 
100 employees. Pursuant to section 1304(b)(3) of the Affordable Care 
Act, each State has the option to limit small employers to having no 
more than 50 employees until 2016.
    Although the Affordable Care Act amended the definitions of ``small 
employer'' and ``large employer'' for purposes of the PHS Act, ERISA 
and the Code continue to define a small employer as one that has 50 or 
fewer employees.\7\ Additionally, although the Affordable Care Act 
removed an exception for very small plans contained in PHS Act section 
2721(a) (providing that title XXVII of PHS Act generally does not apply 
to plans (and health insurance coverage offered in connection with such 
plans) with less than two participants who are current employees), 
parallel provisions in ERISA (section 732(a)) and the Code (section 
9831(a)(2)) generally continue to provide that the requirements of part 
7 of ERISA, and chapter 100 of the Code, do not apply to such plans. 
The Departments of HHS, Labor, and the Treasury recognize that these 
statutory changes may create a conflict between the provisions of title 
XXVII of the PHS Act and part 7 of ERISA and chapter 100 of the Code 
with respect to insured group health plans. We solicit comments on what 
interpretations of the statute, if any, are necessary to ensure smooth 
implementation across the PHS Act, ERISA, and the Code, including 
comments to help ensure that shared provisions are administered to have 
the same effect at all times, as required under HIPAA section 104 and 
the

[[Page 37036]]

Departments' Memorandum of Understanding.\8\
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    \7\ See Affordable Care Act Implementation FAQs--Set 5, Q8 
(December 22, 2010). Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
    \8\ See 64 FR 70164 (December 15, 1999).
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B. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets

1. Fair Health Insurance Premiums (Sec.  147.102)
    Section 2701 of the PHS Act, as added by the Affordable Care Act, 
and implementing regulations at 45 CFR 147.102, direct a health 
insurance issuer offering non-grandfathered health insurance coverage 
in the individual and small group markets, beginning with plan or 
policy years starting in 2014, to limit any variation in premium rates 
with respect to a particular plan or coverage to family size, age, 
tobacco use, and geographic rating area. Under Sec.  147.102(c), 
generally, issuers in the individual and small group markets must 
calculate premiums on a per-member basis by adding the rate of each 
covered family member or employees and their dependents to determine 
the total family or group premium, respectively.
    HHS has received several inquiries since the issuance of the Market 
Reform Rule asking whether geographic rating in the small group market 
is based on employee or employer address. HHS has also received several 
inquiries asking which rating areas should be used for individual 
market coverage if family members live in multiple locations.
    PHS Act section 2701(a)(4) and Sec.  147.102(c) require any rating 
variation for age and tobacco use to be applied on a per-member basis, 
but do not impose the same requirement on rating for geography. 
Accordingly, consistent with guidance released on April 26, 2013 
describing our intended clarification,\9\ we propose to clarify in 
Sec.  147.102(a)(1)(ii) that the rating area is determined in the small 
group market using the principal business address of the group 
policyholder, and in the individual market, using the address of the 
primary policyholder, regardless of the location of other individuals 
covered under the plan or coverage. This would apply both inside and 
outside of the Exchange and SHOP. We seek comment on this proposal.
---------------------------------------------------------------------------

    \9\ Questions and Answers Related to the Health Insurance Market 
Reforms, (April 26, 2013). Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/qa_hmr.html.
---------------------------------------------------------------------------

    Additionally, to clarify the connection between the premium rating 
requirements of PHS Act section 2701 and the single risk pool 
requirement of section 1312(c) of the Affordable Care Act, we propose 
in Sec.  147.102(a) to add a cross-reference to the single risk pool 
standard codified in 45 CFR 156.80. Because of this connection, HHS 
considers both provisions to be subject to the general enforcement 
authority under PHS Act section 2723.
2. Guaranteed Availability and Renewability of Coverage (Sec. Sec.  
147.104, 147.106)
    Section 2702 of the PHS Act, as amended by the Affordable Care Act, 
generally directs a health insurance issuer that offers health 
insurance coverage in the individual or ``group market'' in a State to 
accept every individual or employer in the State that applies for such 
coverage. Section 2703 of the PHS Act, as amended by the Affordable 
Care Act, generally requires an issuer in the individual or ``group'' 
market to renew or continue in force coverage at the option of the plan 
sponsor or individual, as applicable. Both of these statutes and their 
implementing regulations, codified at 45 CFR 147.104 and 147.106, do 
not distinguish between the different segments of the group market, 
meaning the large group and small group markets. We explained in the 
preamble of the Market Reform Rule (78 FR 13419), in the context of the 
market withdrawal exception to guaranteed renewability, that because 
the statutory language refers only to the ``group market,'' the 
regulations implement the statute without segmenting the group market.
    After further review and consideration of the statutory provisions, 
we are proposing to clarify that the guaranteed availability and 
renewability requirements apply within the applicable market segment 
(the individual, small group, or large group market). This 
clarification is consistent with the information we provided in a 
document titled, ``Frequently Asked Questions on Health Insurance 
Marketplaces,'' dated May 14, 2013.\10\ We recognize that issuers in 
the large group and small group markets may be subject to distinct 
requirements under the PHS Act (for example, requirement to cover the 
essential health benefits package under section 2707(a)) and that 
failing to segment the markets for purposes of guaranteed availability 
and guaranteed renewability would have consequences not contemplated by 
the PHS Act. Accordingly, we propose amendments recognizing the 
distinction of the large group and small group markets for purposes of 
the guaranteed availability and guaranteed renewability requirements. 
The proposed clarifications would make clear, for example, that a 
health insurance issuer must offer to a large employer all products 
that are approved for sale in the large group market, but not those 
products approved for sale only in the small group market, and vice 
versa. We propose similar amendments recognizing the distinction of the 
large group and small group segments of the group market for purposes 
of the guaranteed renewability provisions.
---------------------------------------------------------------------------

    \10\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/marketplace-faq-5-14-2013.pdf.
---------------------------------------------------------------------------

    Also, in Sec.  147.104(b)(2), we propose a clarification that, as 
of January 1, 2015, all non-grandfathered coverage in the individual 
market or in a market in which the State has merged the individual and 
small group risk pools, pursuant to section 1312(c)(3) of the 
Affordable Care Act and implementing regulations at 45 CFR 156.80(c), 
must be offered on a calendar year basis. This simply clarifies the 
intent of the Market Reform Rule. It is essential that all non-
grandfathered coverage in the individual and merged markets be on a 
calendar year basis as of January 1, 2015 to line up with coverage in 
the Exchanges and also to be consistent with the requirements of the 
single risk pool in Sec.  156.80. For purposes of new enrollment 
effective on any date other than January 1, the first policy year 
following such enrollment may comprise a prorated policy year, ending 
on December 31.

C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment under the Affordable Care Act

    In this part, we propose certain provisions related to program 
integrity for State-operated risk adjustment and reinsurance programs. 
Specifically, we propose an accounting requirement for State-operated 
reinsurance and risk adjustment programs, and requirements relating to 
summary reports and independent external audits for these programs. We 
also propose a provision restricting the use of reinsurance funds for 
administrative expenses, which we discussed in the preamble to the HHS 
Notice of Benefit and Payment Parameters for 2014 \11\ (2014 Payment 
Notice). In addition, we propose record retention standards for States 
operating risk adjustment, and for contributing entities and 
reinsurance-eligible plans when HHS operates reinsurance on behalf of a 
State. We seek comment on these proposals. We set forth a general

[[Page 37037]]

description of these provisions in a document titled, ``Frequently 
Asked Questions on Health Insurance Marketplaces,'' dated May 14, 
2013.\12\
---------------------------------------------------------------------------

    \11\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2014, 78 FR 15410 (March 11, 
2013).
    \12\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/marketplace-faq-5-14-2013.pdf.
---------------------------------------------------------------------------

    We intend to engage in further consultations with stakeholders, and 
to propose additional standards related to the oversight of the premium 
stabilization programs in future regulations and guidance, including 
standards governing data validation for risk adjustment when HHS 
operates that program on behalf of a State.
1. Subpart A--General Provisions
a. Definitions (Sec.  153.20)
    In this section, we propose an amendment to the definition of a 
``contributing entity.'' The current definition states that 
``Contributing entity means a health insurance issuer or self-insured 
group health plan. A self-insured group health plan is responsible for 
the reinsurance contributions, though it may elect to use a third party 
administrator or administrative services only contractor for transfer 
of the reinsurance contributions.'' This definition does not address 
the situation in which the benefit provided to a participant under a 
group health plan is partially insured, and partially self-insured (for 
example, the medical benefits are provided under a self-insured 
arrangement but the prescription drug benefits are provided under an 
insured arrangement, or vice versa). However, the reinsurance 
contribution counting rules at 45 CFR 153.405(f), which we promulgated 
in the 2014 Payment Notice, do address this situation, and place 
liability for reinsurance contributions on the plan. We propose to 
amend the definition of ``contributing entity'' to clarify that for 
purposes of that definition, a self-insured group health plan includes 
a group health plan that is partially self-insured and partially 
insured, but only where the insured coverage does not constitute major 
medical coverage (whether or not the self-insured coverage is major 
medical coverage).\13\ This amendment would clarify that if a group 
health plan is structured in such a manner, the group health plan would 
be liable for reinsurance contributions under the counting rules 
applicable to self-insured group health plans at 45 CFR 153.405(f), but 
if the insured coverage is major medical coverage, the issuer is liable 
for the contributions. For a discussion of group health plans under 
which certain coverage options under the plan are insured and other 
coverage options are self-insured, see the last paragraph of the 
preamble discussion of proposed Sec.  153.400 below.
---------------------------------------------------------------------------

    \13\ We described some of the characteristics of major medical 
coverage in the 2014 Payment Notice, at 78 FR 15456. We propose 
further clarification of this concept below.
---------------------------------------------------------------------------

2. Subpart C--State Standards Related to the Reinsurance Program
    Section 1341 of the Affordable Care Act provides for the 
establishment of a transitional reinsurance program in each State to 
help stabilize premiums for coverage in the individual market from 2014 
through 2016. The reinsurance program is designed to alleviate the need 
to build into premiums the unknown costs of enrolling individuals with 
significant unmet medical needs. In subparts C and E of 45 CFR part 
153, finalized on March 23, 2012 in the Premium Stabilization Rule (77 
FR 17220), we established standards for the administration of the 
reinsurance program. Below, we propose certain provisions related to 
the oversight of State-operated reinsurance programs.
a. Maintenance of Records (Sec.  153.240(c))
    We propose to amend 45 CFR 153.240(c), a maintenance of records 
requirement applicable when a State establishes the reinsurance 
program, to be consistent with proposed Sec.  153.310(c)(4), a 
maintenance of records requirement for State-operated risk adjustment 
programs, which is discussed below. We propose to amend Sec.  
153.240(c) such that if a State establishes a reinsurance program, the 
State would be directed to maintain documents and records relating to 
the reinsurance program, whether paper, electronic, or in other media, 
for each benefit year for at least 10 years, and make them available 
upon request from HHS, the OIG, the Comptroller General, or their 
designees, to any such entity. The documents and records must be 
sufficient to enable an evaluation of the State-operated reinsurance 
program's compliance with Federal standards. States would also be 
directed to ensure that their contractors, subcontractors, and agents 
similarly maintain and make relevant documents and records available 
upon request from HHS, the OIG, the Comptroller General, or their 
designees. We note that a State may satisfy this standard by archiving 
these documents and records and ensuring that they are accessible if 
needed in the event of an investigation, audit, or other review. We 
seek comment on this proposal.
b. General Oversight Requirements for State-Operated Reinsurance 
Programs (Sec.  153.260)
    HHS expects that States will operate the reinsurance program under 
section 1341 of the Affordable Care Act in an effective and efficient 
manner, and in accordance with the provisions of subpart C of 45 CFR 
part 153. We are therefore proposing, pursuant to our authority under 
sections 1321(a)(1) and 1341 of the Affordable Care Act, certain 
general oversight requirements for State-operated reinsurance programs. 
In Sec.  153.260(a), we propose that a State establishing the 
reinsurance program would be directed to ensure that its applicable 
reinsurance entity keeps, for each benefit year, an accounting of the 
following: (1) All reinsurance funds received from HHS for reinsurance 
payments and for administrative expenses; (2) all claims for 
reinsurance payments received from issuers of reinsurance-eligible 
plans; (3) all reinsurance payments made to issuers of reinsurance-
eligible plans; and (4) all administrative expenses incurred for the 
State's reinsurance program. This accounting must be kept in accordance 
with generally accepted accounting principles (GAAP), consistently 
applied. This accounting would enable HHS to ensure that the 
appropriate amount of reinsurance funds collected by the Federal 
government is spent for reinsurance payments and administrative 
expenses. We seek comment on this proposal.
    In Sec.  153.260(b), we propose that a State that establishes the 
reinsurance program would be directed to submit to HHS and make public 
a summary report on its reinsurance program operations for each benefit 
year, in the manner and timeframe specified by HHS. This report must 
include a summary of the accounting for the benefit year as set forth 
in proposed Sec.  153.260(a). We note that, in the interest of 
transparency, HHS intends to publish periodic reports on its operation 
of the reinsurance program on States' behalf. We anticipate that these 
reports will not correspond entirely in format and substance to those 
required of States that operate the reinsurance program due to the fact 
that HHS is already subject to a number of auditing and program 
integrity requirements, including requirements relating to periodic 
reviews of improper payments of Federal funds under the Improper 
Payments Elimination and Recovery Act of 2010.
    In Sec.  153.260(c), we propose that a State that establishes the 
reinsurance program engage an independent qualified auditing entity to 
perform a

[[Page 37038]]

financial and programmatic audit of the program for each benefit year 
in accordance with generally accepted auditing standards (GAAS). This 
auditing entity would be licensed, be in good standing in one or more 
States, and be free from bias or the appearance of bias. This entity 
may be a government entity. Pursuant to proposed Sec.  153.260(c)(2), 
the State would be directed to ensure that this audit addresses the 
prohibitions set forth in proposed Sec.  153.265 (concerning improper 
use of reinsurance funds for administrative expenses). We seek comment 
on this proposal, and intend to provide more information on auditing 
standards in future guidance.
    In paragraph (c)(1), we propose that the State provide to HHS the 
results of the independent external audit for each benefit year, and in 
paragraph (c)(3), we propose that the State identify to HHS any 
material weakness or significant deficiency identified in the audit (as 
these terms are defined in GAAS issued by the American Institute of 
Certified Public Accountants, and Government Auditing Standards issued 
by the Government Accountability Office (GAO) \14\). We further propose 
that the State address in writing to HHS how it intends to correct any 
such material weakness or significant deficiency. To ensure 
transparency and accountability of a State-operated reinsurance 
program's finances and activities, we propose in paragraph (c)(4) that 
the State make public a summary of the results of the external audit, 
including any material weakness or significant deficiency in a manner 
and timeframe specified by HHS. We believe that these measures are 
necessary to ensure the proper use of reinsurance contributions under 
the national contribution rate, which HHS will collect from all 
contributing entities pursuant to 45 CFR 153.220. We seek comment on 
this proposal.
---------------------------------------------------------------------------

    \14\ See, Government Auditing Standards (2011 Revision), 
available at: http://www.gao.gov/yellowbook. For public companies, 
the Public Company Accounting Oversight Board (PCAOB) sets audit 
standards. See, http://pcaobus.org/Standards/Auditing/Pages/default.aspx. For non-public companies, the AICPA sets audit 
standards. See, http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
---------------------------------------------------------------------------

c. Restrictions on Use of Reinsurance Funds for Administrative Expenses 
(Sec.  153.265)
    To achieve the intended purposes of the reinsurance program, 
reinsurance contributions collected must be spent on reinsurance 
payments, payments to the U.S. Treasury, and on reasonable expenses to 
administer the reinsurance program. As stated in the 2014 Payment 
Notice, the total reinsurance contributions to be collected for Federal 
administrative expenses for operating reinsurance for the 2014 benefit 
year is $20.3 million, resulting in a national per capita contribution 
rate of $0.11 annually for HHS administrative expenses. The funds for 
administrative expenses will be collected by HHS from all contributing 
entities, and will be apportioned as follows: $0.055 of the total 
administrative expenses collected per capita will be allocated to 
administrative expenses incurred in the collection of contributions 
from contributing entities; and $0.055 of the total administrative 
expenses collected per capita will be allocated to expenses incurred 
for activities supporting the administration of payments to issuers of 
reinsurance-eligible plans.
    The total amounts allocated towards administrative expenses for 
reinsurance payments will be allocated in proportion to the State-by-
State total requests for reinsurance payments made under the national 
reinsurance payment parameters. Thus, if a State that operates 
reinsurance receives total requests for reinsurance payments under the 
national reinsurance payment parameters that represent 5 percent of the 
total requests received for all States, then the State would receive a 
disbursement of 5 percent of the reinsurance contributions allocated to 
expenses incurred to support administration of payments to reinsurance-
eligible plans to support its administration of reinsurance payments in 
that State. Pursuant to proposed Sec.  153.260(a), a State operating 
reinsurance would be directed to keep an accurate accounting of the 
reinsurance funds received from HHS for administrative expenses and all 
the administrative expenses incurred for the State-operated reinsurance 
program. If a State incurs fewer expenses in operating reinsurance for 
a benefit year than are allocated to it under the national reinsurance 
contribution rate, the State would be directed to carry over those 
funds for use in operating reinsurance in subsequent benefit years.
    Section 1311(d)(5)(B) of the Affordable Care Act prohibits an 
Exchange from utilizing any funds intended for the administrative and 
operational expenses of the Exchange for staff retreats, promotional 
giveaways, excessive executive compensation, or promotion of Federal or 
State legislative and regulatory modifications. In Sec.  153.265, we 
propose to extend these prohibitions to State-operated reinsurance 
programs so that a State establishing the reinsurance program would be 
directed to ensure that its applicable reinsurance entity does not use 
any funds for the support of operations of the reinsurance program, 
including any reinsurance contributions collected under the national 
contribution rate for administrative expenses, for any of the 
prohibited purposes stated in section 1311(d)(5)(B) of the Affordable 
Care Act. We seek comment on this proposal.
3. Subpart D--State Standards Related to the Risk Adjustment Program
    The risk adjustment program is a permanent program created by 
section 1343 of the Affordable Care Act that transfers funds from 
lower-risk, non-grandfathered plans to higher-risk, non-grandfathered 
plans in the individual and small group markets, inside and outside of 
the Exchanges. In subparts D and G of 45 CFR part 153, finalized March 
23, 2012 (77 FR 17220), we established standards for the administration 
of the risk adjustment program. A State approved (or conditionally 
approved) by the Secretary to operate an Exchange may establish a risk 
adjustment program. Alternatively, a State may have HHS operate a risk 
adjustment program on its behalf. Pursuant to our authority under 
sections 1321(a)(1) and 1343 of the Affordable Care Act, we propose 
below certain provisions related to the oversight of State-operated 
risk adjustment programs.
a. Maintenance of Records (Sec.  153.310(c)(4))
    In Sec.  153.310(c)(4), we propose that a State operating a risk 
adjustment program would be directed to maintain documents and records 
relating to the risk adjustment program, whether paper, electronic, or 
in other media, for each benefit year for at least 10 years, and make 
them available upon request from HHS, the OIG, the Comptroller General, 
or their designees, to any such entity. The documents and records must 
be sufficient to enable the evaluation of a State-operated risk 
adjustment program's compliance with Federal standards. States would 
also be directed to ensure that their contractors, subcontractors, and 
agents maintain and make those documents and records available upon 
request from HHS, the OIG, the Comptroller General, or their designees. 
We note that a State may satisfy this standard by archiving these 
documents and records and ensuring that they are accessible if needed 
in the event of an investigation, audit, or other review. This 
provision is consistent with the requirements set forth in proposed 
Sec.  153.240(c), which contains

[[Page 37039]]

record retention standards for State-operated reinsurance programs. We 
seek comment on this proposal.
b. Interim Report and State Summary Report (Sec.  153.310(d))
    In Sec.  153.310(d)(3), we propose that, in addition to the 
requirements set forth in 45 CFR 153.310(d)(1) and (d)(2), to obtain 
recertification from HHS to operate risk adjustment for a third benefit 
year, a State would be directed to, in the first benefit year for which 
it operates risk adjustment, provide to HHS an interim report, in a 
manner specified by HHS, that includes a detailed summary of its risk 
adjustment activities in the first 10 months of the benefit year. We 
propose that this report would be due no later than December 31st of 
the first benefit year for which a State operates risk adjustment. The 
interim report is intended to provide HHS with the information needed 
to assess the State's compliance with the applicable Federal standards 
related to risk adjustment. We note that because the process for 
receiving certification to operate risk adjustment begins more than one 
year before the beginning of the applicable benefit year, the first 
benefit year for which an interim report based on the first year's 
operations could be used for certification purposes is the third 
benefit year. We intend to provide more information on the risk 
adjustment interim report in future guidance, and we seek comment on 
the content and format of this report.
    We propose to amend 45 CFR 153.310(f) and re-designate it as Sec.  
153.310(d)(4). In Sec.  153.310(d)(4), we propose that in order to 
obtain recertification from HHS to operate risk adjustment for each 
benefit year after the third benefit year for which it is certified, 
each State operating a risk adjustment program would be directed to 
submit to HHS and make public a detailed summary of risk adjustment 
program operations for the most recent benefit year for which risk 
adjustment operations have been completed, in the manner and timeframe 
specified by HHS. We propose in Sec.  153.310(d)(4)(i) that this 
summary report include the results of a programmatic and financial 
audit for the benefit year of the State-operated risk adjustment 
program conducted by an independent qualified auditing entity in 
accordance with GAAS. As discussed above, this entity, which may be a 
government entity, must be licensed and in good standing in one or more 
States, and must be free from bias or the appearance of bias. In Sec.  
153.310(d)(4)(ii), we propose that the summary report would identify to 
HHS any material weakness or significant deficiency (as these terms are 
defined in GAAS issued by the American Institute of Certified Public 
Accountants, and Government Auditing Standards issued by the GAO \15\) 
identified in the external audit and address in writing to HHS how the 
State intends to correct any such material weakness or significant 
deficiency.
---------------------------------------------------------------------------

    \15\ See, Government Auditing Standards (2011 Revision), 
available at: http://www.gao.gov/yellowbook. For public companies, 
the Public Company Accounting Oversight Board (PCAOB) sets audit 
standards. See, http://pcaobus.org/Standards/Auditing/Pages/default.aspx. For non-public companies, the AICPA sets audit 
standards. See, http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
---------------------------------------------------------------------------

    We seek comment on these proposals, including on the content and 
format of the summary reports.
c. General Oversight Requirements for State-Operated Risk Adjustment 
Programs (Sec.  153.365)
    To enable HHS to recertify States to operate risk adjustment 
pursuant to 45 CFR 153.310(d), HHS proposes in Sec.  153.365 that a 
State operating a risk adjustment program keep an accounting of all 
receipts and expenditures related to risk adjustment payments and 
charges and the administration of risk adjustment-related functions and 
activities for each benefit year. This accounting would be kept in 
accordance with GAAP, consistently applied. This requirement parallels 
proposed Sec.  153.260(a), which applies to the reinsurance program 
when operated by a State.
4. Risk Adjustment Methodology
a. Modification to the Transfer Formula in the HHS Risk Adjustment 
Methodology (78 FR at 15430-15434)
    In the Payment Notice (78 FR 15430-34), we noted our intent to 
modify the risk adjustment payment transfer formula in order to 
accommodate community rated States that utilize family tiering rating 
factors. In non-community rated States, family policy premiums must be 
developed by summing the applicable rates of each individual covered 
under the policy, as required under 45 CFR 147.102(c)(1). In the case 
of families with more than three children in non-community rated 
States, only the applicable rates of the three oldest covered children 
under age 21 are counted towards the family policy premium rate (for 
example, for a family with four children under age 21, only the 
applicable individual rates of the three oldest children would count 
towards the family policy premium). These family rating requirements do 
not apply to community rated States that utilize family tiering rating 
factors. In community rated States, family tiering rating factors do 
not have to yield premiums that are equal to the sum of each policy 
member's applicable rate, nor do they have to be set in a way that only 
counts the rates of the oldest three children under age 21 within a 
family policy. For example, a community rated State could establish a 
family tiering rating factor of 1.0 for an adult policy, 1.8 for a 
policy covering one adult and one or more children, 2.0 for a policy 
covering two adults, and 2.8 for a policy covering two adults and one 
or more children.
    In order to account for the differences in family rating practices 
between family tiering States and non-family tiering States, we are 
proposing two changes to the risk adjustment payment transfer formula 
that HHS will use when operating risk adjustment on behalf of a State. 
These changes would only apply to States that are using family tiering 
rating structures. In the 2014 Payment Notice, we stated that billable 
members exclude children who do not count towards family rates (that 
is, children who do not count toward family policy premiums are 
excluded) (78 FR 15432, 15434). We propose to clarify that in the case 
of family tiering States, billable members would be based on the number 
of children that implicitly count towards the premium under a State's 
family rating factors. For example, assume a State has the following 
four family tiers: One adult; one adult plus one or more children; two 
adults; and two adults plus one or more children. Under this tiering 
structure, only one child would be counted as a billable member in the 
payment transfer formula, because additional children covered under a 
family policy would not affect the policy's premium.
    Additionally, we are proposing a modification to the allowable 
rating factor (ARF) formula that would be used for family tiering 
States. In the Payment Notice (78 FR 15433), the ARF is calculated as 
the member month weighted average of the age factor applied to each 
billable enrollee. In non-family tiering States, the ARF is intended to 
measure the extent to which plans are increasing or decreasing their 
premiums based on allowable age rating factors. In the case of family 
tiering States, premium revenue will not vary by age-specific rating 
factors. Rather, policy level premiums will vary only based on the 
family tiering factors. In order to capture the impact of the family 
tiering factors on plans' premium revenue we are proposing that the ARF 
formula for family tiering States be

[[Page 37040]]

based on the family tiering factors instead of age rating factors.
    Specifically, for family tiering States, the ARF would be 
calculated at the level of the subscriber, as follows:
[GRAPHIC] [TIFF OMITTED] TP19JN13.013

Where:

ARFs is the rating factor for the subscriber (s) (based 
on family size/composition) and Ms is the number of 
billed person-months that are counted in determining the subscriber 
(s) premium.

    We note that aside from the changes to the billable member months 
definition and the ARF formula discussed above, payment transfers in 
family tiering States will be calculated using the formulas provided in 
the Payment Notice (78 FR at 15431-34). Additionally, the changes to 
the billable member month definition and the ARF formula would not 
apply to community rated States that do not implement family tiering 
rating factors.
5. Subpart E--Health Insurance Issuer and Group Health Plan Standards 
Related to the Reinsurance Program
a. Reinsurance Contribution Funds (Sec.  153.400)
    In some health coverage arrangements, an insured group health plan 
may provide benefits through more than one policy to the same covered 
lives, where each policy standing alone does not constitute major 
medical coverage, but the total benefits do.\16\ Under such an 
arrangement, a group health plan could, for example, have two policies 
with different issuers, one providing benefits for hospitalization and 
the other providing benefits for outpatient treatments and prescription 
drugs, with the same individuals simultaneously enrolled in both 
policies. In such a situation, the question has been raised as to 
whether the issuers would be required to make reinsurance contributions 
for the insured policies since neither policy would constitute major 
medical coverage, and whether the group health plan would be required 
to make reinsurance contributions because it would not be a self-
insured plan.
---------------------------------------------------------------------------

    \16\ We note that, after 2014, such arrangements generally would 
only be permissible in the large employer group context, as issuers 
of small employer group market insurance coverage are required to 
provide all essential health benefits under any policy they offer 
that does not qualify as ``excepted benefits.''
---------------------------------------------------------------------------

    Therefore, to clarify the application of the rules (solely for the 
purpose of reinsurance contributions), we propose to amend paragraph 
(a)(1)(i) of 45 CFR 153.400(a) and add a new paragraph (a)(3) that 
would address liability for reinsurance contributions in cases where an 
insured group health plan provides health insurance coverage through 
more than one policy to the same covered lives, where, as described 
above, none of the policies provides major medical coverage 
individually, but their combined benefits meet the definition of major 
medical coverage. This paragraph (a)(3) would be an exception to the 
rule under paragraph (a)(1)(i), which provides that an issuer of health 
insurance coverage is not required to make reinsurance contributions 
for coverage to the extent the coverage is not major medical coverage.
    Under the proposed paragraph (a)(3), notwithstanding paragraph 
(a)(1)(i), a health insurance issuer providing coverage under a group 
health plan would make reinsurance contributions for lives under its 
health insurance coverage even if the insurance coverage does not 
constitute major medical coverage, if (i) The group health plan 
provides health insurance coverage for the same covered lives through 
more than one insurance policy that in combination constitute major 
medical coverage but individually do not; (ii) the lives are not 
covered by self-insured coverage of the group health plan (except for 
self-insured coverage limited to excepted benefits); and (iii) the 
health insurance coverage under the policy offered by the health 
insurance issuer represents a percentage of the total health insurance 
coverage offered in combination by the group health plan greater than 
the percentage offered under any of the other policies. Clause (i) 
describes the arrangement described in the paragraphs above. Clause 
(ii) makes clear that this exception would apply where group health 
coverage was divided only among insurance policies, and no portion of 
the coverage is self-insured.\17\ Finally, clause (iii) describes how 
to determine which issuer is liable for reinsurance contributions in 
the situation described above--where multiple insurance policies cover 
the same lives in an insured group health plan and each insurance 
policy is not major medical coverage, but in combination they are. We 
propose in that clause that an issuer of health insurance coverage 
providing a percentage of the benefits provided by the group health 
plan that is greater than the percentage provided by any of the other 
insurance policies would be liable for the reinsurance contributions. 
We further propose that for purposes of paragraph (a)(3), the 
percentage of coverage offered under various policies would be 
determined based on the average premium per covered life for those 
policies. In the event that the percentage of coverage for two or more 
insurance policies is equal, the issuer of the policy that provides the 
greatest portion of in-network hospitalization benefits will be 
responsible for reinsurance contributions. For example, if an insured 
group health plan covered the same lives under two different health 
insurance policies, one with a monthly average premium per covered life 
of $250 and the other with a monthly average premium per covered life 
of $200, the issuer of the insurance policy with the monthly average 
premium per covered life of $250 would be liable for the reinsurance 
contributions.
---------------------------------------------------------------------------

    \17\ As discussed in relation to the amendment to 45 CFR 153.20 
above, where a group health plan has mixed self-insured and insured 
coverage, liability for reinsurance contributions, if any, falls 
upon the self-insured plan, as already established under our rules.
---------------------------------------------------------------------------

    Because an issuer of group health insurance coverage that does not, 
by itself, constitute major medical coverage, may not be aware of the 
existence of, or premium for, other health insurance coverage obtained 
by a plan sponsor covering the same lives under a group health plan, we 
are considering directing such an issuer to seek a representation from 
the plan sponsor regarding the relative percentage of coverage offered 
by the issuer. We seek comment on whether and in what circumstances an 
issuer should be entitled to rely upon such representations and what 
other means we should consider for ensuring that the relevant issuer 
knows of its obligation to make the reinsurance contributions, 
including with respect to any role that the employer should have in 
ensuring that issuers have information necessary to determine which 
issuer is responsible for reinsurance contributions.
    We seek comment on these proposals, as well as alternative 
approaches that should be considered for determining responsibility for 
reinsurance contributions in such circumstances. For example, the 
liability rules could impose responsibility for the reinsurance 
contributions on the issuer of the coverage that provides the 
hospitalization coverage or the rules could allocate liability among 
the issuers in proportion to the benefits offered under the respective 
policies.
    We are also considering proposing a definition for ``major medical 
coverage'' that would provide additional clarity around the 
responsibility to make payments. While HHS believes that responsibility 
for issuers and group

[[Page 37041]]

health plans is clear, we seek comment on what further clarification is 
needed and what the definition should be.
    Finally, we have received inquiries as to how reinsurance 
contribution obligations would be addressed in the case of a group 
health plan under which some benefit options for employees are insured 
by an issuer, and some options offer benefits without the involvement 
of an issuer in insuring the benefits (because either the group health 
plan or some non-issuer entity assumes the risk for that coverage 
option). We are proposing that in such a case, if a coverage option is 
insured by an issuer, the issuer would be responsible for the 
reinsurance contribution associated with that coverage option. If an 
employee coverage option under such a group health plan is not insured 
(because either the group health plan or other non-issuer assumes the 
risk), then the group health plan would be responsible for the 
reinsurance contribution associated with that coverage option. We seek 
comment on this proposed approach.
b. Maintenance of Records (Sec.  153.405(h) and Sec.  153.410(c))
    Pursuant to our obligation to safeguard Federal funds, we propose 
to amend Sec.  153.405 by adding paragraph (h), in which we propose 
that a contributing entity would be directed to maintain documents and 
records, whether paper, electronic, or in other media, sufficient to 
substantiate the enrollment count submitted pursuant to that section 
for at least 10 years, and make that evidence available upon request 
from HHS, the OIG, the Comptroller General, or their designees, to any 
such entity, for verification of reinsurance contribution amounts. We 
also propose to amend Sec.  153.410 by adding paragraph (c), in which 
we propose that an issuer of a reinsurance-eligible plan in a State 
where HHS operates reinsurance would be directed to maintain documents 
and records, whether paper, electronic, or in other media, sufficient 
to substantiate the requests for reinsurance payments made pursuant to 
that section for at least 10 years, and make that evidence available 
upon request from HHS, the OIG, the Comptroller General, or their 
designees, (or, in a State where the State is operating reinsurance, 
the State or its designee), to any such entity, for verification of 
reinsurance payment requests. We note that these standards may be 
satisfied if the contributing entity or issuer of a reinsurance-
eligible plan archives the documents and records and ensures that they 
are accessible if needed in the event of an investigation, audit, or 
other review. These proposed provisions are consistent with the 
requirements for record retention under the False Claims Act and those 
set forth in proposed Sec.  153.620(b), which apply to issuers of risk 
adjustment covered plans. We seek comment on these proposals.
6. Subpart F--Health Insurance Issuer Standards Related to the Risk 
Corridors Program
    Section 1342(a) of the Affordable Care Act provides that ``a 
qualified health plan offered in the individual or small group market'' 
is to participate in the risk corridors program. In the Exchange 
Establishment Rule, we stated that a stand-alone dental plan is ``a 
type of qualified health plan.'' However, we did not intend for all 
requirements applicable to a QHP to apply to stand-alone dental plans. 
For example, under 45 CFR 155.1065(a)(3), certain QHP standards are not 
applicable to a stand-alone dental plan if they cannot be met, given 
the limited benefit package offered by the plan. We believe that it 
would not be appropriate to subject stand-alone dental plans to the 
risk corridors program because such plans are considered excepted 
benefits plan under section 2791(c) of the PHS Act, meaning that these 
plans are not subject to the Federal prohibition on underwriting 
premiums or the requirement to base pricing using the single risk pool 
or fair health insurance premiums limitations. Thus, although States 
have the option to prohibit underwriting for excepted benefits plans, 
and issuers of stand-alone dental plans in an FFE may voluntarily 
choose to underwrite these plans, we believe that, in general, an 
issuer of a stand-alone dental plan will not be subject to the same 
rate-setting uncertainty in 2014 as the issuer of a major medical plan, 
and will not need the premium risk-sharing protections of risk 
corridors.\18\
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    \18\ In the preamble to the Exchange Establishment Rule, we note 
that each Exchange can require, as a condition of certification, 
comprehensive medical QHPs to offer and price the pediatric dental 
EHB (if covered) separately, if doing so would be in the best 
interest of consumers. For the 2014 coverage year, CMS will not 
require comprehensive medical QHP issuers that provide pediatric 
dental coverage to offer and price the pediatric dental EHB 
separately from the rest of the plan in connection with 
certification by an FFE. We have provided this guidance in Chapter 4 
of the 2014 Letter to Issuers on Federal and Partnership 
Marketplaces (April 5, 2013).
---------------------------------------------------------------------------

    We note that stand-alone dental plans are similarly excluded from 
participation in the two other premium stabilization programs--
reinsurance and risk adjustment. We also note that, consistent with the 
exclusion of excepted benefits plans from the medical loss ratio (MLR) 
requirements, stand-alone dental claims would not be pooled along with 
an issuer's other claims for the purposes of determining ``allowable 
costs'' in the risk corridors calculation, as defined at 45 CFR 
153.500. We seek comment on this approach.
7. Subpart G--Health Insurance Issuer Standards Related to the Risk 
Adjustment Program
    We propose to amend Sec.  153.620(b) to add a standard that would 
direct an issuer that offers risk adjustment covered plans to maintain 
documents and records, whether paper, electronic, or in other media, 
sufficient to enable the evaluation of the issuer's compliance with 
applicable risk adjustment standards, and to make that evidence 
available upon request from HHS, OIG, the Comptroller General, or their 
designees (or in a State where the State is operating risk adjustment, 
the State or its designee), to any such entity. This standard, which is 
consistent with other records maintenance standards in this proposed 
rule, would direct an issuer of a risk adjustment covered plan to 
retain additional records--not only those pertaining to data 
validation--to substantiate its compliance with risk adjustment 
standards, whether risk adjustment is operated by HHS or a State. We 
note that we anticipate that the bulk of the record maintenance 
obligations will relate to data validation, but that certain records, 
for instance those relating to premium rating or small group status, 
will not. We seek comment on this proposal.
8. Subpart H--Distributed Data Collection for HHS-Operated Programs
a. Failure To Comply With HHS-Operated Risk Adjustment and Reinsurance 
Data Requirements (Sec.  153.740)
    In Sec.  153.740(a), we propose that HHS may pursue an enforcement 
action for CMPs against an issuer in a State where HHS operates the 
reinsurance or risk adjustment program, if an issuer fails to: (a) 
establish a secure, dedicated distributed data environment pursuant to 
45 CFR 153.700(a); (b) provide HHS with access to enrollee-level plan 
enrollment information, enrollee claims data, or enrollee encounter 
data through its dedicated distributed data environment pursuant to 45 
CFR 153.710(a); (c) otherwise comply with the requirements of 45 CFR 
153.700 through 153.730; (d) adhere to the reinsurance data submission

[[Page 37042]]

requirements set forth in 45 CFR 153.420; or (e) adhere to the risk 
adjustment data submission and data storage requirements set forth in 
45 CFR 153.610 through 153.630.
    Risk Adjustment: For risk adjustment covered plans, HHS will need 
access to the risk adjustment enrollee-level plan enrollment 
information, enrollee claims data, or enrollee encounter data from the 
issuer by April 30th of the year following the applicable benefit year 
in order to calculate payment transfers based on claims experience and 
premiums as set forth in 45 CFR 153.730. Pursuant to section 1321(c)(2) 
of the Affordable Care Act, in HHS's role in operating risk adjustment 
on behalf of a State, to enforce the risk adjustment standards, we 
propose to apply the standards in proposed Sec.  156.805 in connection 
with the imposition of CMPs under this section. If a risk adjustment 
covered plan does not comply with the requirements set forth in 45 CFR 
153.610 through 153.630 and 45 CFR 153.700 through 153.730, we intend 
to apply the proposed sanction so that the level of the enforcement 
action would be proportional to the level of the violation. While we 
would reserve the right to impose penalties up to the maximum amounts 
proposed in Sec.  156.805(c), as a general principle, we intend to work 
collaboratively with issuers to address problems in establishing 
dedicated distributed data environments in 2014. In our application of 
the proposed sanction, we would take into account the totality of the 
issuer's circumstances, including such factors as an issuer's previous 
record (if any), the frequency and level of the violation, and any 
aggravating or mitigating circumstances. Our intent is to encourage QHP 
issuers to address non-compliance and not to severely affect their 
financial condition, especially where the issuer demonstrates good 
faith in monitoring compliance with applicable standards, identifies 
any suspected occurrences of non-compliance, and attempts to remedy any 
non-compliance. We note that HHS would reserve the right to impose, or 
not impose, CMPs as appropriate. For instance, if an issuer of a risk 
adjustment covered plan does not establish a dedicated distributed data 
environment or provide access to the necessary risk adjustment data to 
permit HHS to timely calculate the applicable risk adjustment transfer 
amounts, we are proposing that HHS will assess the default risk 
adjustment charge described below. However, HHS may elect to pursue 
CMPs in conjunction with the imposition of the default risk adjustment 
charge if an issuer failed to comply with applicable data security or 
privacy standards, putting the interests of third-parties at risk.
    Reinsurance: Similar to our proposal for risk adjustment covered 
plans, we propose that an issuer of a reinsurance-eligible plan may be 
subject to CMPs for failure to comply with 45 CFR 153.420, or 45 CFR 
153.700 through 153.730. In our application of the proposed sanction, 
we would take into account the totality of the issuer's circumstances, 
including such factors as an issuer's previous record (if any), the 
frequency and level of the violation, and any aggravating or mitigating 
circumstances. In certain cases, we may not pursue CMPs. For example, 
if an issuer of a reinsurance-eligible plan fails to set up a dedicated 
distributed data environment or meet certain data requirements stated 
above, and as a consequence, HHS would not have the necessary data to 
calculate or distribute reinsurance payments for the reinsurance-
eligible plan, the reinsurance-eligible plan would not receive 
reinsurance payments that it otherwise might have received. However, 
HHS would reserve the right to pursue CMPs irrespective of whether or 
not an issuer becomes ineligible for reinsurance payments as a result 
of failing to comply with 45 CFR 153.420, or 45 CFR 153.700 through 
153.730.
b. Default Risk Adjustment Charge
    As described in the Premium Stabilization Rule and the 2014 Payment 
Notice, HHS will employ a distributed data collection approach for risk 
adjustment. Under this approach, issuers in States where HHS operates 
risk adjustment will be required to establish dedicated, secure data 
environments, and provide HHS with access to ``masked'' \19\ enrollee-
level plan enrollment information, enrollee claims data, and enrollee 
encounter data pursuant to 45 CFR 153.710 and 45 CFR 153.720. We would 
not store any enrollee PII or individual claim-level information in 
connection with this data collection, except for the purposes of data 
validation and audit. We believe that this approach minimizes issuer 
burden while protecting enrollees' privacy. Issuers must provide access 
to required risk adjustment data by April 30th of the year following a 
benefit year in order for HHS to calculate risk adjustment payment 
transfer amounts pursuant to 45 CFR 153.730.
---------------------------------------------------------------------------

    \19\ As described at 45 CFR 153.720(b), masked data means data 
associated with a unique identifier, where the unique identifier 
does not include the enrollee's PII.
---------------------------------------------------------------------------

    In cases where an issuer does not set up a dedicated distributed 
data environment or submits inadequate risk adjustment data, HHS would 
not have the required risk adjustment data from the issuer to calculate 
risk scores or payment transfers. This data is necessary to properly 
calculate risk adjustment payments and charges for the entire 
applicable market for the State. If HHS cannot perform this calculation 
for a particular issuer, risk adjustment payment transfers would be 
affected for all other issuers in the State market because payments 
transfers are determined within a market within a State such that they 
will net to zero. Therefore, we believe that we must establish an 
administrative capability to calculate payments and charges for all 
plans, to avoid penalizing those plans that submit timely, complete 
risk adjustment data.
    Pursuant to section 1343(b) of the Affordable Care Act, we have the 
authority to develop and apply criteria and methods for carrying out 
risk adjustment activities, such as applying a default charge to 
issuers in the individual or small group market that fail to provide 
complete data. Under the HHS-operated risk adjustment methodology, we 
require a balanced payment transfer approach in which issuers with a 
higher risk enrollee population will receive a payment, while issuers 
with a lower risk enrollee population will be assessed a charge in 
order to stabilize premiums; these transfers will be calculated 
simultaneously and will net to zero in each market in each State. Under 
the balanced payment transfer approach, we believe we must calculate 
risk adjustment transfers for issuers that fail to provide data in a 
timely fashion into the risk adjustment payment transfer formula so 
that compliant issuers are not penalized. If issuers that would 
otherwise be subject to risk adjustment charges do not comply with 
these standards, payments to compliant issuers would be smaller and 
charges owed by compliant issuers would be larger.
    Therefore, in Sec.  153.740(b), we propose that if an issuer of a 
risk adjustment covered plan fails to establish a dedicated distributed 
data environment or fails to provide HHS with access to risk adjustment 
data in such environment by April 30th of the year following the 
applicable benefit year in accordance with Sec.  153.610(a), Sec.  
153.700, Sec.  153,710, or Sec.  153.730, such that HHS cannot apply 
its Federally certified risk adjustment methodology to calculate the

[[Page 37043]]

plan's risk adjustment payment transfer amount in a timely fashion, HHS 
would assess a default risk adjustment charge. We note that delaying 
our calculation of risk adjustment payment transfers in a market in a 
State until all risk adjustment covered plans submit complete risk 
adjustment data would weaken the integrity of the April 30th data 
submission deadline and would jeopardize related deadlines for the risk 
corridors and MLR programs. We seek comment on our proposed default 
charge approach. We intend to provide future guidance on any applicable 
review processes available to those issuers for whom we propose to 
assess a default charge.
    We are considering two different methods for calculating the 
default risk adjustment charge. One option would be to use the highest 
per-member-per-month charge among risk adjustment covered plans in a 
risk pool in the market in the plan's geographic rating area. A second 
option would be to use a per-member-per-month default charge that is 
two standard deviations above the mean charge in the market in the 
plan's geographic rating area. With respect to this second option, we 
believe that a two standard deviation calculation will adequately 
encourage compliance with the applicable data requirements while 
remaining tied to the market realities of the applicable geographic 
rating area.
    In order to calculate a plan's risk adjustment payment transfer 
amount, we must consider the enrollment data of the plan. As such, if a 
risk adjustment covered plan fails to provide HHS with enrollment data, 
we propose that the default charge would be based on the average 
enrollment in the State market. If enrollment data is provided, we 
propose that the default charge would be based on average annual 
enrollment for the plan in a risk pool in the State market. We seek 
comment on these methods, other appropriate methods for calculating a 
default risk adjustment charge, and other sources of data HHS could use 
to determine enrollment data for non-compliant issuers, such as MLR or 
NAIC filings, or information supplied by a State Department of 
Insurance (DOI). We also seek comment on whether to allocate a non-
compliant issuer's default charge to issuers in the market as part of 
payments and charges in the concurrent benefit year, during a 
subsequent benefit year, or sometime between annual payments and 
charges processes.

D. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act

1. Subpart A--General Provisions
a. Definitions (Sec.  155.20)
    Section 1311(b) of the Affordable Care Act provides States with the 
opportunity to establish and operate an Exchange that both facilitates 
the purchase of QHPs and provides for the establishment of a SHOP. 
Previously, we have interpreted this provision to mean that a State 
must elect to carry out both these functions in order to establish an 
``Exchange'' in accordance with the Affordable Care Act.\20\ However, 
since we advanced that interpretation of the statute, some States in 
which HHS would otherwise operate both the individual market Exchange 
and the SHOP have expressed a desire to establish and operate only a 
SHOP, and not to establish and operate an individual market Exchange. 
In light of HHS's limited resources, and these States' willingness to 
take on operation of the SHOP-specific functions required by the 
Affordable Care Act, we now interpret sections 1311(b) and 1321 of the 
Affordable Care Act to permit a State to elect to establish just a 
SHOP.\21\ This interpretation is supported by the language in section 
1311(b)(2) of the Affordable Care Act, which contemplates the separate 
operation of the individual market Exchange and the SHOP under 
different governance and administrative structures, because it permits 
the individual market Exchange and SHOP to be merged only if the State 
has adequate resources to assist both populations (individuals and 
small employers) as a merged entity. It is also supported by section 
1321(c) of the Affordable Care Act, which provides that if a State will 
not have ``any required Exchange operational'' the Secretary shall 
``establish and operate such Exchange'' (emphasis added). Thus, under 
the interpretation we now propose, if the State will establish only a 
SHOP, and will not operate the individual market Exchange, the 
Secretary must establish and operate the individual market Exchange.
---------------------------------------------------------------------------

    \20\ See Exchange Establishment Rule, 77 FR at 18395, see also 
id. at 18314, 18316, and 18326.
    \21\ We previously signaled our intent to propose this approach 
through rulemaking. See http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/shop-marketplace-5-10-2013.pdf.
---------------------------------------------------------------------------

    We propose to amend 45 CFR 155.20 to reflect this new flexibility 
for States by modifying the definition for ``Exchange.''
Exchange
    We propose that ``Exchange'' would mean a governmental agency or 
non-profit entity that meets the applicable standards of Part 155 and 
makes QHPs available to qualified individuals and/or qualified 
employers. Unless otherwise identified, under the proposed definition 
this term would include an Exchange serving the individual market for 
qualified individuals and a SHOP serving the small group market for 
qualified employers, regardless of whether the Exchange is established 
and operated by a State (including a regional Exchange or subsidiary 
Exchange) or by HHS.
    We also clarify that we intend the phrase ``meets the applicable 
standards of this part'' in the proposed amendment to the definition to 
refer to any applicable standard of Part 155, including but not limited 
to the proposed amendments to Sec. Sec.  155.100, 155.105, and 155.200 
discussed below, and the special rules applicable to regional Exchanges 
pursuant to Sec.  155.140 (together with the proposed amendments to 
that section). Pursuant to the proposed amendment to the definition, 
there could be several types of Exchanges operating in a State, all of 
which would meet the regulatory definition, so long as the applicable 
standards of Part 155 were met. We further clarify that there must be 
an individual market Exchange and a SHOP in each State. We invite 
general comments on this proposal, including on whether we should amend 
provisions of Part 155 in addition to those we propose amending here to 
provide States with the flexibility to establish and operate only a 
SHOP.
    We are also adding a new definition for ``issuer customer service 
representative.''
Issuer Customer Service Representative
    For the same reasons that we propose adding Sec.  155.415 below, we 
propose to define an ``issuer customer service representative'' to mean 
an employee, contractor, or agent of a QHP issuer that provides 
assistance to applicants and enrollees, but is not licensed as an 
agent, broker, or producer under State law.
    We are also making a clarification regarding the definition of 
``qualified health plan.''
Qualified Health Plan
    With regard to the definition of ``qualified health plan'' in the 
preamble to the Exchange Establishment Rule, we stated that health 
plans that are ``substantially the same'' as a QHP are

[[Page 37044]]

treated as the same QHP for purposes of 45 CFR 156.255(b), which 
requires a QHP issuer to charge the same premium rate for each QHP of 
the issuer without regard to whether the plan is offered through an 
Exchange or whether the plan is offered directly from the issuer or 
through an agent. In the Premium Stabilization Rule, we offered similar 
guidance with respect to which plans offered outside the Exchange would 
be considered the same QHP for purposes of the risk corridors program 
(77 FR 17237), and stated that HHS might clarify this standard in 
future rulemaking or guidance.
    We are now proposing to specify that, for a plan offered outside 
the Exchange to be considered the same plan as one that is certified as 
a QHP and offered through the Exchange, among other things, the 
benefits package, provider network, service areas, and cost-sharing 
structure of the two offerings must be identical. Under this proposal, 
a plan that is certified as a QHP and that meets the requirements for 
sale in the applicable market outside of the Exchange is a QHP for the 
entire applicable market within a State. We note that nothing in this 
proposal would relieve an issuer of a plan that has been certified as a 
QHP by the Exchange from the requirement to charge the same premium for 
the QHP sold to consumers outside of the Exchange (pursuant to sections 
1301(a)(C)(iii) of the Affordable Care Act and 45 CFR 156.255(b) and 45 
CFR 147.104).
    We also propose to clarify that a plan sold to consumers outside of 
the Exchange would only be subject to the risk corridors program if it 
is the same as a QHP actually offered by that issuer on the Exchange. 
We believe that sections 1301(a)(1)(A) and 1311(e) of the Affordable 
Care Act, and the definition of a QHP at 45 CFR 155.20, contemplate 
certification of a QHP for offer on the Exchange, so that (with the 
exception of stand-alone dental plans) a plan sold to consumers 
exclusively outside of the Exchange could not obtain QHP certification. 
We note that the EHB final rule \22\ outlined an arrangement where 
health insurance issuers could offer a health plan to an individual 
without the pediatric dental EHB if the issuer is reasonably assured 
that the individual has obtained the EHB through an Exchange-certified 
stand-alone dental plan (78 FR 12853).
---------------------------------------------------------------------------

    \22\ Patient Protection and Affordable Care Act; Standards 
Related to Essential Health Benefits, Actuarial Value, and 
Accreditation (78 FR 12834) (February 25, 2013).
---------------------------------------------------------------------------

    We believe that the proposed policy set forth in this section is 
consistent with the intent of the statute and existing regulations with 
respect to the offering and certification of QHPs, and helps to 
maintain the integrity of the risk corridors program, which we believe 
is intended primarily to stabilize premiums of plans offered through 
the Exchanges.
    We request comment on all aspects of this approach, particularly on 
issues that may be raised by this approach for State requirements for 
product or policy form filings, including filings for coverage riders 
(whether mandatory or optional), State-required benefits, and State-
required service areas (including tiered networks within service 
areas). We seek comment on whether the criteria laid out above--
benefits, provider network, service areas, and cost-sharing structure--
are the proper criteria for determining whether offerings are the same 
plan, and whether additional criteria such as allowances for de minimis 
variations that do not change plan actuarial value should be included, 
or whether no criteria are necessary because it is clear from State 
oversight processes when a plan is the same plan or a different plan. 
We also seek comment on how this proposed approach would affect what is 
considered a new plan offering, and the potential impact of this 
proposal on plan renewals. Finally, we seek comment on the operational 
feasibility of the proposed requirements, particularly with regard to 
issuers in the small group market.
2. Subpart B--General Standards Related to the Establishment of an 
Exchange
a. Establishment of a State Exchange, Approval of a State Exchange, 
(Sec. Sec.  155.100, 155.105, and 155.140)
    Consistent with our proposed amendments to the definition of 
``Exchange'' in Sec.  155.20, we propose to amend Sec.  155.100 to 
permit a State to operate only a State-based SHOP while the individual 
market Exchange is operated as an FFE. This proposed amendment would 
permit a State to elect to establish and operate only the SHOP and to 
focus on effective implementation of that program. A State that is 
electing to establish only a SHOP must establish an Exchange entity--
consistent with section 1311(d)(1) of the Affordable Care Act and 
Sec. Sec.  155.100(b) and 155.110--to perform only the SHOP functions.
    We considered whether to propose allowing a State to establish and 
operate only the individual market Exchange while HHS operates the 
SHOP, but decided not to do so for the reasons described below. 
Accordingly, under the proposed amendments, a State could not elect to 
establish and operate just the individual market Exchange. We believe 
that building and operating the SHOP is an excellent way for a State to 
move towards operating both a SHOP and an individual market Exchange. 
Further, while a State operating a SHOP has a variety of options 
available to ensure a robust choice of QHPs and issuers, for example, 
through its direct regulation of the individual and small group 
insurance markets, these options may not be available to HHS because 
they would require HHS to go beyond its traditional market role under 
the PHS Act. The only tool HHS can rely upon for incentivizing issuer 
participation in the SHOP is the QHP certification process, and this 
tool is a limited one if the individual market Exchange is operated by 
the State.\23\ Additionally, if the State has already built the 
structure and systems needed to run an individual market Exchange, it 
would be inefficient and burdensome for HHS to step in and build those 
functions solely so that it can operate the SHOP, when the State would 
be in a better position to operate both Exchanges. Therefore, we have 
not proposed that a State be allowed to operate an individual market 
Exchange while the Department is responsible for the operation of an 
FF-SHOP in the State. As discussed above, we seek comment generally on 
this proposal, and particularly on this aspect of it.
---------------------------------------------------------------------------

    \23\ See, HHS Notice of Benefit and Payment Parameters for 2014 
Proposed Rule, 77 FR 73185.
---------------------------------------------------------------------------

    We propose in Sec.  155.100(a)(3) that a State that has timely 
applied for certification of an Exchange for 2014, and that has 
received conditional approval for its application, would be able to 
modify its Blueprint pursuant to 45 CFR 155.105(e) to exclude the 
operation of the individual market Exchange functions for 2014.\24\ 
Because such States have been preparing to establish and operate both 
the individual market and SHOP Exchanges, they would be in a position 
to establish and operate just the SHOP in 2014. In contrast, States 
that have not received conditional approval to operate both Exchanges, 
but which want to operate only a SHOP for 2014, would have to develop a 
fully functioning SHOP by the time open enrollment begins on October 1, 
2013; this is a

[[Page 37045]]

compressed time frame to accomplish establishment and full operation. 
Therefore, under this proposed rule, States that have not received 
conditional approval for 2014 may not exercise the option to operate 
only a SHOP for the 2014 plan year. For the 2015 plan year and beyond, 
we would consider new Blueprints from States proposing to operate only 
the SHOP, pursuant to 45 CFR Sec.  155.106. We seek comment on this 
proposed approach.
---------------------------------------------------------------------------

    \24\ In guidance, we have previously signaled our intent to 
propose this approach through rulemaking. See Small Business Health 
Options Program (SHOP)-Only Marketplace FAQs (May 10, 2013). 
available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/shop-marketplace-5-10-2013.pdf.
---------------------------------------------------------------------------

    We further propose to amend Sec.  155.105 so that the Exchange 
approval criteria set forth therein would be consistent with the 
Exchange operational models now proposed in Sec. Sec.  155.20, 155.100, 
and 155.200, and to permit HHS to operate only a FFE that will make 
QHPs available to qualified individuals when a State has elected to 
operate only an Exchange providing for the establishment of a SHOP 
pursuant to proposed Sec.  155.100(a)(2). In paragraphs (b)(1) and 
(b)(2) we clarify that a State establishing and operating only a SHOP 
would have to perform the minimum functions described in subpart H and 
all applicable references to other subparts contained therein, and need 
not comply with other provisions that by their express terms apply only 
to an individual market Exchange.
    We propose to amend paragraph (f) to clarify that where a State has 
elected to establish and operate only a SHOP, the FFE must meet the 
requirements set forth in Sec. Sec.  155.120(c), 155.130, and subparts 
C, D, E, and K of this part; however, it need not implement the 
standards for the establishment of a SHOP described in subpart H. We 
seek comment on this proposal.
    We are also proposing an amendment to Sec.  155.105(f) to clarify 
that the regulatory provisions that will apply in an FFE include the 
nondiscrimination requirements of Sec.  155.120(c). Section 155.120(c), 
as written, applies to all Exchanges, and its previous omission from 
the list of provisions referenced in Sec.  155.105(f) was inadvertent.
    We propose to amend Sec.  155.140 to clarify how a subsidiary or 
regional Exchange may operate in light of the proposed amendments to 
permit a State to establish and operate an Exchange only providing for 
the establishment of a SHOP. Under this proposal, a State establishing 
and operating only a SHOP could still establish subsidiary SHOP 
Exchanges. Multiple States that wish to establish and operate only 
SHOPs could still form a regional Exchange only providing for the 
establishment of a SHOP across the region covered by the participating 
states.
    Previously, we had created the standards for regional and 
subsidiary Exchanges such that the geographic area served by such 
Exchanges must be the same for the individual market Exchange and the 
SHOP.\25\ We propose in paragraph (c)(2)(ii) to generally preserve this 
standard, except in the case of an Exchange established pursuant to 
proposed Sec.  155.100(a)(2).
---------------------------------------------------------------------------

    \25\ See Exchange Establishment Rule, 77 FR 18322.
---------------------------------------------------------------------------

    In paragraph (c)(2)(ii)(A), we propose that in the case of a 
regional Exchange established pursuant to proposed Sec.  155.100(a)(2) 
to provide only for the establishment and operation of a SHOP, the 
regional SHOP would be required to encompass a geographic area that 
matches the combined geographic areas of the individual market 
Exchanges established by HHS to serve the States establishing the 
regional SHOP.
    In paragraph (c)(ii)(B), we propose that in the case of a 
subsidiary Exchange established pursuant to Sec.  155.100(a)(2) to 
provide only for the establishment and operation of a SHOP, the 
combined geographic area of all subsidiary SHOPs established by the 
State would be required to encompass the geographic area of the 
individual market Exchange established by HHS to serve the State.
    In addition, under 45 CFR 153.310(a), a State that elects to 
operate an Exchange is eligible to establish a risk adjustment program 
using a methodology that has obtained federal certification. We are 
considering whether a State that elects to operate a SHOP but not an 
individual market Exchange under the proposed approach described above 
should be eligible to establish a risk adjustment program, and in 
particular whether such a State should be eligible to establish a risk 
adjustment program only for the small group market or should be 
required to establish the program for both markets. We seek comment on 
this issue.
3. Subpart C--General Functions of the Exchange
a. Functions of an Exchange (Sec.  155.200)
    Consistent with the proposed amendments described above to 
Sec. Sec.  155.20, 155.100, 155.105, and 155.140, which permit a State 
to operate only an Exchange providing for the establishment of a SHOP, 
in Sec.  155.200 we propose that a State operating only an Exchange 
which provides for the establishment of a SHOP need perform only the 
minimum functions described in subpart H and all applicable provisions 
of other subparts referenced therein. Under such circumstances, the 
Exchange operated by HHS need not perform the minimum functions related 
to the establishment of a SHOP.
b. Ability of States To Permit Agents and Brokers to Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    Section 1312(e) of the Affordable Care Act authorizes the Secretary 
to establish procedures that permit agents and brokers to enroll 
qualified individuals and qualified employers in QHPs through an 
Exchange, and to assist individuals in applying for advance payments of 
the premium tax credit and cost-sharing reductions, to the extent 
allowed by States.
    In 45 CFR 155.220(c), 155.220(d), and 155.220(e), we established 
general Exchange standards that agents and brokers must meet to assist 
individuals in enrolling in QHPs and applying for advance payments of 
the premium tax credit and cost-sharing reductions, including 
registration, training, compliance with the privacy and security 
standards adopted by the Exchange, compliance with applicable State 
law, and execution of an agreement with the Exchange. Section 
155.220(c)(3) established additional standards for agents and brokers 
that use Internet Web sites to assist qualified individuals in 
enrolling in a QHP.
    In CMS's guidance titled ``Role of Agents, Brokers, and Web-brokers 
in Health Insurance Marketplaces,'' \26\ we further clarified that in 
States where an FFE is operating, agents or brokers assisting 
individuals in selecting or enrolling in individual market QHPs through 
an FFE may use one of two pathways. First, an agent or broker may use a 
QHP issuer's Internet Web site to assist or enroll individuals, if the 
agent or broker has a relationship with an issuer, and the issuer has 
direct enrollment capabilities. Alternatively, an agent or broker may 
use an FFE Internet Web site to assist individuals.
---------------------------------------------------------------------------

    \26\ Role of Agents, Brokers, and Web-brokers in Health 
Insurance Marketplaces, (May 1, 2013). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/agent-broker-5-1-2013.pdf.
---------------------------------------------------------------------------

    Regardless of what pathway they use, all agents and brokers must 
register with CMS before they may assist qualified individuals in 
enrolling in individual market coverage through an FFE. Once an agent 
or broker has completed the registration process, which includes 
undergoing basic CMS identity proofing, completing an FFE training 
course, and signing an agreement with CMS, he or she will receive an 
active FFE user identification number, which will be the agent's or 
broker's unique identifier in an FFE. This would allow CMS to monitor 
and oversee the activities of

[[Page 37046]]

agents and brokers in an FFE, which is discussed in more detail later 
in this section, and would also facilitate payment for agent and broker 
services from issuers.
Web-broker Policies and Procedures
    Section 155.220(c)(3) establishes standards that apply if an agent 
or broker uses its publicly-facing Internet Web site to assist 
individuals in selecting or enrolling in a QHP through the Exchange. 
Agents or brokers who do so are referred to as ``Web-brokers'' for the 
purposes of this proposed rule. We propose amending Sec.  
155.220(c)(3)(i), which currently requires that a Web-broker meet all 
standards for disclosure and display of QHP information contained in 
Sec. Sec.  155.205(b)(1) and 155.205(c). In particular, Sec.  
155.205(b)(1) requires the display of standardized comparative 
information on each available QHP, including its: (a) Premium and cost-
sharing information; (b) summary of benefits and coverage; (c) metal 
level (bronze, silver, gold, or platinum); (d) enrollee satisfaction 
survey results; (e) quality ratings; (f) medical loss ratio, (g) 
transparency of coverage measures, and (h) provider directory.
    After taking into consideration concerns from issuers, we propose 
to limit the Web-broker's obligation to disclose and display the QHP 
information to all the information provided to the Web-broker by the 
Exchange or directly by the issuer. We recognize that an Exchange may 
not be able to provide all Web-brokers with certain data elements 
necessary to meet the Sec.  155.205(b)(1) requirements, such as premium 
and rate information, depending upon confidentiality requirements, the 
extent to which Web-brokers are appointed by individual QHP issuers, 
and State laws regarding agent and broker appointments. We also 
recognize that some of the required data, such as quality rating and 
enrollee satisfaction survey results, may not be available in the first 
year of Exchange operations, in which case Web-brokers would also not 
need to display this information. We seek comment on whether this 
provision should be limited to FFEs.
    We note that we do not intend this amendment to alter Web-brokers' 
obligations to meet all existing standards for disclosure and display 
of QHP information contained in Sec.  155.205(c), regardless of the 
availability of QHP issuer information from issuers or the Exchange. 
Additionally, the Web-broker should display all information provided by 
the Exchange or an issuer in a manner that is as consistent with the 
requirements in Sec.  155.205(b)(1) as possible. We solicit comments on 
how to monitor this provision to ensure that Web-brokers display QHP 
information received by an Exchange or QHP issuers in a manner 
consistent with the QHP information displayed on an Exchange Web site.
    Even if a Web-broker is unable to display certain QHP information 
identified in Sec.  155.205(b)(1) because it is not provided by the 
Exchange or a QHP issuer, it must still display a list of all available 
QHPs for the consumers to view, as required by Sec.  155.220(c)(3)(ii). 
We also propose that, to address situations where the Web-broker is 
unable to display certain QHP information identified in Sec.  
155.205(b)(1), the Web-broker must display a link to the Exchange Web 
site so the consumer may obtain the additional information.
    Instead of modifying only Sec.  155.220(c)(3)(i), we considered 
removing Sec.  155.220(c)(3)(ii), which requires Web-brokers to provide 
consumers with the ability to view all QHPs offered through the 
Exchange. We decided not to propose this approach so that the consumer 
would be aware of all available QHP options, even if some of the 
specific plan details may not be available on the Web-broker's Internet 
Web site. We invite comment on this proposal.
    We also propose to amend Sec.  155.220(c)(3) by adding a new 
paragraph (c)(3)(vii), which would require Web-brokers' Internet Web 
sites in an FFE to prominently display language notifying consumers 
that: (a) the Web-broker's Internet Web site is not an FFE Web site; 
(b) the Web-broker's Web site might not display all QHP data available 
on the Exchange Web site; (c) the Web-broker has entered into an 
agreement with HHS pursuant to Sec.  155.220(d); and (d) the Web-broker 
agrees to comply with standards specified in Sec.  155.220(c) and (d). 
We believe that this additional standard is in the best interest of the 
consumers in an FFE, as it will help consumers distinguish between an 
FFE Web site and the Internet Web sites of Web-brokers, and it will 
inform consumers that agents and brokers must comply with FFE standards 
and requirements before they can assist and enroll consumers. We 
welcome comments on this proposal. HHS expects to make available an 
application programming interface that would permit Web-brokers to use 
their public-facing Internet Web sites to assist consumers in enrolling 
through individual market QHPs offered through an FFE (``FFE API''). An 
FFE API would allow a person seeking to enroll in a QHP to initiate his 
or her shopping experience on a Web-broker's Internet Web site, connect 
securely to an FFE Web site to complete the eligibility application and 
determination process, and return securely to the Web-broker's Internet 
Web site compare and select QHPs.
    We understand that some Web-brokers may enter into arrangements 
with other agents and brokers under which those agents and brokers 
would be able to enroll qualified individuals in an FFE through the 
Web-broker's Internet Web site. We are concerned about these 
arrangements that would allow other agents and brokers to use the Web-
broker's connection to HHS, because they would not require the agent or 
broker to be a party to the Web-broker's agreement with HHS, or to 
become an employee or subcontractor of the Web-broker. We are 
considering prohibiting such arrangements outright, in part because 
such entities are not a party to the Web-broker's agreement with HHS. 
However, we also want to make sure that agents and brokers have many 
possible avenues to participate in the FFE. If we do not prohibit such 
arrangements, we believe that a Web-broker should not be able to enter 
into these arrangements unless the Web-broker ensures that the agent or 
broker using its connection to HHS agrees to comply with the same FFE 
standards and requirements applicable to Web-brokers under Sec.  
155.220(c) and (d). We therefore propose to add a new Sec.  
155.220(c)(4) that would require any Web-broker who makes an Internet 
Web site available to other agents and brokers for this purpose to 
require as a condition of agreement or contract that the agent or 
broker accessing and using the Internet Web site complies with Sec.  
155.220(c) and (d). We also propose that the Web-broker would be 
required to provide to HHS a list of agents and brokers who are under 
such arrangements, and that the Web-broker be required to ensure that 
the agent or broker accessing or using the Internet Web site would be 
required to comply with the policies that the Web-broker would be 
required to develop under Sec.  155.220(d)(4), as proposed below. 
Because we would require the agent or broker accessing or using the 
Web-broker's connection to comply with Sec.  155.220(d), that agent or 
broker would also have to enter into a Web-broker agreement with HHS. 
If the agent or broker accessing or using the Internet Web site fails 
to comply with either provision, both parties to the arrangement would 
be found to be noncompliant with the regulatory

[[Page 37047]]

requirements, and HHS would have cause to terminate its agreements with 
both parties. We seek comments on this circumstance and proposal, on 
whether these arrangements should be prohibited outright, and on 
whether there are other options to consider.
Agent and Broker Policies and Procedures on Privacy and Security in an 
FFE
    Section 155.220(d)(3) currently directs all agents or brokers 
assisting qualified individuals with enrollment in QHPs to comply with 
the Exchange privacy and security requirements. We propose to establish 
a new standard in Sec.  155.220(d)(4) requiring agents and brokers 
assisting or enrolling consumers in the individual market of an FFE to 
establish policies and procedures implementing the privacy and security 
standards pursuant to Sec.  155.220(d)(3); to train their employees, 
representatives, contractors, and agents with regard to those policies 
and procedures on a periodic basis; and to ensure that their employees, 
representatives, contractors, and agents comply with those policies and 
procedures. Because agents and brokers will have access to PII provided 
by consumers we want to ensure that the agents and brokers have 
appropriate procedures, training and monitoring safeguards in place to 
protect PII. We invite comments on the appropriate frequency of 
retraining requirements.
Standards for Agent and Broker Agreement Termination in an FFE
    We propose adding a new Sec.  155.220(f), which would require 
agents and brokers who wish to terminate their agreement with an FFE to 
send to HHS a 30-day advance written notice of the intent to terminate. 
This notice would also include the intended date of termination. If the 
notice does not specify a date of termination, or the date is not 
acceptable to HHS, HHS may set a date that will be no less than 30 days 
from the date of the agent or broker's notice of termination. We 
believe that this additional standard would be in the best interest of 
FFE consumers, as the 30-day pre-termination period would allow agents 
and brokers to complete any application or enrollment activity 
initiated prior to the notice. As of the date of termination, an agent 
or broker would not be able to conduct business in an FFE, although the 
agent's or broker's related duty to protect and maintain the privacy 
and security of PII it has created, collected, accessed, or acquired 
during its period of relationship with an FFE would survive the 
termination. We are considering whether to require such agents and 
brokers to also directly notify their clients of the termination plan 
during the pre-termination period. We welcome comment on this proposal.
    We also propose to establish new standards for agents and brokers 
in the FFEs, so that agents and brokers that register with an FFE have 
a clear understanding of the rights and standards governing their 
participation in an FFE. In new section Sec.  155.220(g), we propose 
the standards under which HHS may terminate an agent's or broker's 
agreement with an FFE for cause.
    In Sec.  155.220(g)(1), we propose that HHS may pursue termination 
with notice of an agent's or broker's agreement with an FFE executed 
pursuant to Sec.  155.220(d) if, in HHS's determination, a specific 
finding of noncompliance or pattern of noncompliance is sufficiently 
severe. Under this proposal, termination of the agreement with notice 
would mean that after a 30-day opportunity to cure, HHS would take 
necessary steps to prohibit an agent or broker from assisting or 
enrolling individuals in an individual market QHP offered through an 
FFE, or a Web-broker's ability to securely exchange information with 
HHS.
    In Sec.  155.220(g)(2), we propose that an agent or broker would be 
considered noncompliant if HHS finds that the agent or broker violated: 
(a) Any standard specified under Sec.  155.220; (b) any term or 
condition of its agreement with the FFE, including but not limited to 
the FFE privacy and security standards; (c) any applicable State law; 
or (d) any other applicable Federal law.
    We propose that if HHS finds noncompliance or patterns of 
noncompliance to be sufficiently severe, such a finding would form the 
basis for a termination for cause. We believe that HHS must maintain 
the ability to terminate an agent's or broker's agreement for cause to 
protect the interest of consumers in cases of severe violations and 
patterns of violations, particularly violations with respect to privacy 
and security protections. Specific findings of noncompliance that HHS 
might determine to be sufficiently severe to warrant termination for 
cause would include, but not be limited to, violations of the Exchange 
privacy and security standards. Patterns of noncompliance that HHS 
might determine to be sufficiently severe to warrant termination for 
cause would include, for example, repeated violations of any of the 
standards set forth in Sec.  155.220 for which the agent or broker was 
previously found to be noncompliant. We seek comment on this proposal 
and on other circumstances that should result in an HHS termination for 
cause.
    Prior to pursuing the termination of an agent's or broker's 
agreement for cause, we are considering implementing informal 
procedures, which may be published in future sub-regulatory guidance. 
The informal procedures would allow agents and brokers, at HHS 
discretion, to resolve certain noncompliance issues within a time 
period determined reasonable by HHS. Through this informal process, HHS 
would notify an agent or broker of the reason for the potential 
termination, the potential consequences of continued noncompliance, and 
any applicable administrative procedures. However, HHS would retain the 
right to bypass these informal procedures.
    Upon identification of a sufficiently severe violation under the 
proposed Sec.  155.220(g)(2), HHS would formally notify the agent or 
broker of the specific finding of noncompliance or pattern of 
noncompliance, as proposed in Sec.  155.220(g)(3). The agent or broker 
would then have a period of 30 days from the date of the notice to 
correct the noncompliance to HHS's satisfaction, through good-faith 
efforts. If after 30 days, the noncompliance is not appropriately 
addressed, HHS may terminate the agreement for cause. In Sec.  
155.220(g)(4), we propose that termination for cause would result in 
the loss of the ability to assist individuals enroll in QHPs and 
transact data with HHS, including transactions through the FFE API. We 
believe this approach would provide an opportunity for agents and 
brokers to remedy any noncompliance issue in advance of a potential 
termination for cause.
    We request comment on the informal resolution approach we are 
considering implementing through future sub-regulatory guidance, 
specifically on whether we should consider any alternative proposals. 
We also solicit comment on the appropriate time length for a cure 
period, and on whether we should include a provision permitting HHS to 
terminate an agent's or broker's agreement immediately and permanently 
for cause if findings of noncompliance are sufficiently egregious. We 
are also considering an option that would allow HHS to immediately but 
temporarily suspend an agent or broker by prohibiting the agent or 
broker from assisting individuals to enroll in a QHP offered through 
the FFE and/or ability to securely exchange information with HHS, 
including through the FFE API, without advance notice. We are 
considering this option because there

[[Page 37048]]

may be instances where a specific violation could pose immediate harm 
to consumers or to HHS's ability to properly administer the FFE. Under 
this scenario, as soon as possible following the temporary suspension, 
HHS would notify to the agent or broker of HHS's action and the 
noncompliance issue. If the agent or broker satisfactorily addresses 
the issue, HHS would notify the agent or broker that the temporary 
suspension had been lifted. We request comments on this approach, and 
the circumstances under which it would be needed.
    We further propose a new section Sec.  155.220(h) to establish a 
one-level process through which an agent or broker may request 
reconsideration of HHS's decision to terminate the agreement for cause. 
In Sec.  155.220(h)(2), we propose that an agent or broker must submit 
a request for reconsideration to an appropriate HHS designee 
(``reconsideration entity'') within 30 calendar days of the date of the 
notice in order to obtain a reconsideration. In Sec.  155.220(h)(3), we 
propose that the reconsideration entity would provide the agent or 
broker with a written reconsideration decision within 30 calendar days 
of the date it receives the request for reconsideration. This decision 
would constitute HHS's final determination.
    We believe this approach would afford agents and brokers an 
opportunity to furnish any facts and information that might not have 
been considered as part of HHS's decision to terminate the agreement 
for cause, and to provide due process. We intend to provide future 
guidance on the manner and form in which agents and brokers should 
present requests for reconsideration, HHS's designation of an 
appropriate reconsideration entity, and additional procedures related 
to agent and broker revocation and reconsideration. We invite comments 
on this reconsideration proposal.
    We expect that States will continue to license and monitor agents 
and brokers, and will continue to oversee and regulate all agents and 
brokers, both inside and outside of the Exchange. We expect that all 
State laws related to agents and brokers, including State laws related 
to appointments, contractual relationships with issuers, and licensing 
and marketing requirements, will continue to apply. Therefore, to avoid 
duplication of oversight activities related to agents and brokers 
enrolling or assisting consumers through an FFE, HHS will focus its 
oversight activities primarily on ensuring that agents and brokers in 
an FFE meet the standards outlined in Sec.  155.220. In particular, HHS 
plans to focus its oversight efforts on protecting the privacy and 
security of PII, to the extent this is not already covered under 
existing State or Federal law.
    Prior to releasing additional guidance on agent and broker 
activities in the FFE, we intend to collaborate with State DOIs to 
further develop standard operating procedures for an FFE that will be 
critical to HHS oversight of agents and brokers working with an FFE. We 
encourage comment on the information required to carry out these 
activities, and on any existing definitions, timeframes, or procedures 
described in our proposed amendments to Sec.  155.220.
c. Electronic Information Exchange With Covered Entities (Sec.  
155.270)
    Section 155.270 of 45 CFR directs Exchanges that perform electronic 
transactions with a covered entity to use standards, implementation 
specifications, operating rules, and code sets adopted by the Secretary 
in 45 CFR parts 160 and 162. When 45 CFR 155.270 was finalized in its 
current form, HHS believed that the HIPAA standard transactions, as 
defined in 45 CFR Parts 160 and 162, were the most appropriate 
standards for transmitting information electronically between Exchanges 
and issuers. Since then, the Accredited Standards Committee X12, also 
known as ``ASC X12,'' \27\ which governs the electronic transactions 
addressed in 45 CFR parts 160 and 162, has determined that the current 
transaction used to communicate payment-related information, the HIPAA 
ASC X12 005010X218 (820), cannot provide the program-level payment 
information necessary for the risk adjustment, reinsurance, and risk 
corridors programs, and therefore does not meet the business 
requirements of the Affordable Care Act programs. As a result, the ASC 
X12 standards body developed and finalized the ASC X12 005010X306 
(820), referred to as the ``HIX 820.'' The HIX 820 has the same 
security and technical requirements as HIPAA standards, but it is a new 
implementation of the transaction, so it has not yet been adopted by 
the Secretary in 45 CFR parts 160 and 162. We believe that the HIX 820 
is the most appropriate method for transmitting payment-related 
information between the Exchange and a covered entity. For this reason, 
and to provide for flexibility should similar situations arise in the 
future, we propose to amend Sec.  155.270 to specify that to the extent 
that an Exchange performs electronic transactions with a covered 
entity, an Exchange must use standards, implementation specifications, 
operating rules, and code sets that are adopted by the Secretary in 45 
CFR parts 160 and 162 or that are otherwise approved by HHS. We further 
propose to approve the HIX 820 transaction for transmitting payment-
related information between the Exchange and a covered entity. We seek 
comment on this proposal.
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    \27\ ASC X12 is chartered by the American National Standards 
Institute. See, http://www.x12.org/.
---------------------------------------------------------------------------

d. Oversight and Monitoring of Privacy and Security Requirements (Sec.  
155.280)
    In Sec.  155.280, consistent with section 1411(g) and (h) of the 
Affordable Care Act, we propose that HHS will monitor any individual or 
entity who would be subject to the privacy and security requirements as 
established and implemented by an Exchange under Sec.  155.260.
    We propose in Sec.  155.280(a) that HHS will oversee and monitor 
the FFEs and non-Exchange entities associated with FFEs for compliance 
with the privacy and security standards established and implemented by 
the FFEs pursuant to Sec.  155.260 for compliance with those standards. 
HHS will monitor State Exchanges for compliance with the privacy and 
security standards established and implemented by the State Exchanges 
pursuant to Sec.  155.260. In addition, we propose that State Exchanges 
will oversee and monitor non-Exchange entities associated with the 
State Exchange for compliance with the standards implemented by the 
State Exchange pursuant to Sec.  155.260.
    In Sec.  155.280(b), we propose the oversight activities that HHS 
may conduct in order to ensure adherence to the privacy and security 
requirements in Sec.  155.260. These may include, but are not limited 
to, audits, investigations, inspections and any reasonable activities 
necessary for appropriate oversight of compliance with the Exchange 
privacy and security standards as permitted under sections 1313(a)(2) 
and (a)(3) of the Affordable Care Act.
    In Sec.  155.280(c)(1)(i) and (ii), we propose definitions for the 
terms ``incident'' and ``breach'' as they apply to privacy and 
security. We considered but declined to use the definitions for these 
terms provided under the HIPAA regulations because the protected health 
information (PHI) that triggers the HIPAA requirements is considered a 
subset of PII,\28\ and we believe that the

[[Page 37049]]

HIPAA definitions would not provide broad enough protections to satisfy 
the requirements under the Privacy Act of 1974 (5 U.S.C. 552a), the e-
Government Act of 2002 (Pub. L. 107-347), other laws to which HHS is 
subject, or the expectations of the other Federal agencies that will be 
providing PII to facilitate Exchange eligibility determinations. We 
considered the definitions and explanations for ``incident'' in the 
following publications: OMB Memorandum M-06-19, OMB Memorandum M-07-16, 
and the National Institute of Standards and Technology Special 
Publication 800-61, and propose that ``incident'' would mean, the act 
of violating an explicit or implied security policy, which includes 
attempts (either failed or successful) to gain unauthorized access to a 
system or its data, unwanted disruption or denial of service, the 
unauthorized use of a system for the processing or storage of data; and 
changes to system hardware, firmware, or software characteristics 
without the owner's knowledge, instruction, or consent. We propose that 
the definition for ``breach'' be the same as the definition in OMB 
Memorandum M-07-16, Safeguarding and Responding to the Breach of 
Personally Identifiable Information, which defines ``breach'' as the 
loss of control, compromise, unauthorized disclosure, unauthorized 
acquisition, unauthorized access, or any similar term referring to 
situations where persons other than authorized users and for an other 
than authorized purpose have access or potential access to personally 
identifiable information, whether physical or electronic. We welcome 
comment on the use of these definitions for incident and breach as they 
relate to PII.
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    \28\ Compare the definitions of individually identifiable health 
information and protected health information at 45 CFR 160.103 and 
the definition of PII in Office of Management and Budget (OMB) 
Memorandum M-07-16 (see 77 FR 18340 for an explanation of how the 
OMB definition of PII applies to Exchanges).
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    In Sec.  155.280(c)(2) we propose that in the event of an incident 
or breach, the entity where the incident or breach occurs would be 
responsible for reporting and managing it according to the entity's 
documented incident handling or breach notification procedures. We 
believe that incident handling and breach notification procedures 
should be among the written policies and procedures required for 
Exchanges under Sec.  155.260(d). Non-Exchange entities associated with 
the Exchanges would be required to have policies and procedures in 
place for reporting breaches and incidents as a condition of the 
contracts or agreements that are required under Sec.  155.260(b). Under 
Sec.  155.260(a)(3)(viii), Exchanges would also be required to 
establish accountability standards that would include the development 
and implementation of policies and procedures including incident 
handling and breach notification procedures.
    In Sec.  155.280(c)(3) we propose that FFEs, non-Exchange entities 
associated with FFEs, and State Exchanges must report all privacy and 
security incidents and breaches to HHS within one hour of discovering 
the incident or breach. We also propose that a non-Exchange entity 
associated with a State Exchange must report all privacy and security 
incidents and breaches to the State Exchange with which they are 
associated. We welcome comment on these proposals.
4. Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Eligibility Process (Sec.  155.310)
    In our consultations with states and in the operational development 
of Exchanges, we have identified with States the need to establish a 
standardized process for handling applications that are submitted 
without information that is necessary for determining eligibility. It 
is our understanding that States have an existing process for handling 
incomplete applications for other programs, such as Medicaid, and may 
want to establish a consistent process for handling incomplete 
applications submitted to the Exchange. Accordingly, the language of 
this proposed regulation is designed to provide flexibility to States 
so they may align this process with Medicaid and CHIP. Further, we 
intend to work with States to implement these procedures and in 2014 to 
accommodate States with processes established for handling incomplete 
applications that does not match the process described in these 
regulations.
    We are adding Sec.  155.310(k), to provide that if an application 
filer does not provide sufficient information on an application for the 
Exchange to conduct an eligibility determination for enrollment in a 
QHP through the Exchange, or for insurance affordability programs (if 
the application includes a request for an eligibility determination for 
insurance affordability programs), the Exchange will provide notice 
through the eligibility determination notice described in 45 CFR 
155.310(g). The notice would indicate that information necessary to 
complete an eligibility determination is missing, specifying the 
missing information, and include instructions on how to provide the 
missing information. We propose that the Exchange will provide the 
applicant with a period of no less than 15 days and no more than 90 
days from the date this notice is sent to the applicant to provide the 
necessary information. Further, we propose that during this period, the 
Exchange will not proceed with the applicant's eligibility 
determination or provide advance payments of the premium tax credit or 
cost-sharing reductions, unless an application filer has provided 
sufficient information to determine his or her eligibility for 
enrollment in a QHP through the Exchange, in which case the Exchange 
must make such a determination for enrollment in a QHP. We propose that 
the Exchange may make an eligibility determination for enrollment in a 
QHP through the Exchange if an applicant has provided sufficient 
information to make an eligibility determination for enrollment in a 
QHP through the Exchange. For example, if there is sufficient 
information to determine eligibility for enrollment in a QHP, but an 
applicant who requested an eligibility determination for insurance 
affordability programs has not provided information regarding employer-
sponsored coverage, which is needed to determine eligibility for 
advance payments of the premium tax credit and cost-sharing reductions, 
the Exchange will determine the applicant's eligibility for enrollment 
in a QHP through the Exchange but may not provide advance payments of 
the premium tax credit or cost-sharing reductions.
    We believe this process is consistent with current Medicaid and 
CHIP policies regarding the process for handling incomplete 
applications. We propose a flexible timeframe of no less than 15 days 
and no more than 90 days. While we believe it does not benefit an 
applicant to have a long timeframe because no advance payments of the 
premium tax credits and cost-sharing reductions will be provided during 
the period, we understand that State Medicaid and CHIP agencies use 
periods similar to this length, and we also believe that it is 
important to allow flexibility for the Exchange to align with the time 
period for inconsistencies, which is a period of 90 days as specified 
in 45 CFR 155.315(f)(2)(ii). We note that the online and telephonic 
applications are structured to minimize situations in which an 
applicant can fail to provide necessary information. Accordingly, we 
anticipate that this paragraph will be implicated most frequently with 
respect to paper applications. We seek comment

[[Page 37050]]

on this proposal, including whether Exchange flexibility is 
appropriate; whether 15 days and 90 days are the right lower and upper 
limits; and whether additional language is needed to ensure 
coordination between the Exchange, Medicaid, and CHIP.
b. Verification of Eligibility for Minimum Essential Coverage Other 
Than Through an Eligible Employer-Sponsored Plan (Sec.  155.320)
    As finalized in the Exchange Establishment Rule, Sec.  155.320(b) 
specifies standards related to the verification of eligibility for 
minimum essential coverage other than through an eligible employer-
sponsored plan. We propose to redesignate paragraph (b)(1) as (b)(1)(i) 
and (b)(2) as (b)(1)(ii) to consolidate the standards for Exchange 
responsibilities in connection with verification of eligibility for 
minimum essential coverage other than through an eligible employer-
sponsored plan. In paragraph (b)(1)(i), we also propose to add the 
phrase ``for verification purposes'' to the end of existing text. This 
would clarify that HHS would provide a response to the Exchange to 
verify the information transmitted from the Exchange to HHS about an 
applicant's eligibility for or enrollment in minimum essential coverage 
other than through an eligible employer sponsored plan, Medicaid, CHIP, 
or the Basic Health Program. The Exchange would submit specific 
identifying information to HHS and HHS would verify applicant 
information with information from the Federal and State agencies or 
programs that provide eligibility and enrollment information regarding 
minimum essential coverage. Such agencies or programs may include but 
are not limited to Veterans Health Administration, TRICARE, and 
Medicare. HHS will work with the appropriate Federal and State agencies 
to complete the appropriate computer matching agreements, data use 
agreements, and information exchange agreements which will comply with 
all appropriate Federal privacy and security laws and regulations. The 
information obtained from Federal and State agencies will be used and 
redisclosed by HHS as part of the eligibility determination and 
information verification process set forth in subpart D of part 155.
    In connection with the proposal to redesignate paragraph (b)(2) to 
paragraph (b)(1)(ii), we are not proposing any change to the text of 
the provision as previously finalized. Consistent with the 
authorizations for the disclosure of certain information under 42 CFR 
435.945(c) and 457.300(c), this regulation provides for an Exchange to 
verify whether an applicant has already been determined eligible for 
coverage through Medicaid, CHIP, or the Basic Health Program, using 
information obtained from the agencies administering such programs.
    Finally, we propose to add paragraph (b)(2) to provide that 
consistent with 45 CFR 164.512(k)(6)(i) and 45 CFR 155.270, a health 
plan that is a government program providing public benefits, is 
expressly authorized to disclose PHI, as that term is defined at 45 CFR 
160.103, that relates to eligibility for or enrollment in the health 
plan to HHS for verification of applicant eligibility for minimum 
essential coverage as part of the eligibility determination process for 
advance payments of the premium tax credit or cost-sharing reductions. 
We intend for this provision to enable any health plan that is a 
government program within the scope of 45 CFR 164.512(k)(6)(i) to 
disclose the protected health information necessary for HHS to be able 
to verify of minimum essential coverage as required to conduct 
eligibility determinations for insurance affordability programs. We 
seek comment on this proposal.
c. Administration of Advance Payments of the Premium Tax Credit and 
Cost-Sharing Reductions (Sec.  155.340)
    We propose to amend Sec.  155.340 by adding paragraph (h), which 
sets forth additional requirements applicable when a State Exchange is 
facilitating the collection and payment of premiums to QHP issuers. We 
propose that if the Exchange discovers that it did not reduce an 
enrollee's premium by the amount of the advance payment of the premium 
tax credit in accordance with 45 CFR 155.340(g), the Exchange would be 
required to refund to the enrollee any excess premium paid by or for 
the enrollee. The Exchange would also notify the enrollee of the 
improper application of the advance payment of the premium tax credit 
no later than 30 calendar days after the Exchange discovers it. We note 
that an Exchange may provide the refund to the enrollee by reducing the 
enrollee's portion of the premium in the following month, as long as 
the reduction is provided no later than 30 calendar days after the 
Exchange discovers the improper application of the advance payment of 
the premium tax credit. If the Exchange elects to provide the refund by 
reducing the enrollee's portion of the premium for following month and 
the refund exceeds the enrollee's portion of the premium for the 
following month, then the Exchange would need to refund to the enrollee 
the excess, no later than 30 calendar days after the Exchange discovers 
the improper application of the advance payment of the premium tax 
credit. These provisions are similar to the policy we propose in Sec.  
156.460, when a QHP issuer is collecting premiums directly from 
enrollees and fails to apply the advance payment of the premium tax 
credit to the enrollee's portion of the premiums. The parallel 
requirements are designed to ensure that all enrollees, regardless of 
whether a QHP issuer or the Exchange is collecting premiums, are 
afforded the same level of protection.
    We are considering requiring the Exchange to provide to HHS for 
each quarter, in a manner and timeframe specified by HHS, a report 
detailing the occurrence of any improper application of the advance 
payment of the premium tax credit. We believe that it is important that 
an Exchange timely address improper applications of the advance 
payments of the premium tax credit in order to mitigate potential harm 
to enrollees. However, we recognize that, given operational 
constraints, it may be difficult at this point for Exchanges to develop 
systems that can produce these types of quarterly reports for the 2014 
benefit year. Therefore, we are considering requiring Exchanges to 
provide such reports to HHS beginning in the 2015 benefit year. We seek 
comment on whether HHS should establish a minimum error rate or 
threshold before an Exchange is required to inform HHS of such improper 
applications of the advance payment of the premium tax credit in a 
quarterly report, as well as what an appropriate error rate or 
threshold should be. For example, we are considering requiring issuers 
to report the number of enrollees for whom the Exchange improperly 
applied the advance payment of the premium tax credit compared to the 
total number of enrollees in the Exchange receiving Federal premium 
subsidies. We also seek comment on whether such reports should be 
provided to HHS less frequently than quarterly.
5. Subpart E--Exchange Functions in the Individual Market: Enrollment 
in Qualified Health Plans
a. Allowing Issuer Customer Service Representatives To Assist With 
Eligibility Applications (Sec.  155.415)
    Section 1413 of the Affordable Care Act directs the Secretary to 
establish, subject to minimum requirements, a streamlined enrollment 
process for enrollment in QHPs and all insurance affordability 
programs. Many issuers

[[Page 37051]]

currently have customer service representatives who assist applicants 
in the application and plan selection process and assist enrollees in 
making changes to their coverage. Some of these representatives might 
not be licensed by the State as agents, brokers, or producers. 
Accordingly, we propose to add section Sec.  155.415 that would, at the 
Exchange's option and to the extent permitted by State law, permit 
issuer customer service representatives who do not meet the definition 
of agent or broker in Sec.  155.20 to assist qualified individuals in 
the individual market with: (a) Applying for an eligibility 
determination or redetermination for coverage through the Exchange; (b) 
applying for insurance affordability programs; and (c) facilitating the 
selection of a QHP offered by the issuer represented by the customer 
service representative, provided that such issuer customer service 
representatives meet the proposed requirements set forth in Sec.  
156.1230(a)(2).
b. Special Enrollment Periods (Sec.  155.420)
    In accordance with section 1311(c)(6)(C) of the Affordable Care 
Act, the Secretary must establish special enrollment periods for all 
Exchanges, including special enrollment periods specified in section 
9801 of the Internal Revenue Code of 1986 and under circumstances 
similar to such periods under Part D of title XVIII of the Social 
Security Act. Under this authority, we propose to amend Sec.  
155.420(d) to clarify that a special enrollment period will be 
available when a Exchange determines that a consumer has been 
incorrectly or inappropriately enrolled in coverage due to misconduct 
on the part of the non-Exchange entity. We propose to add a new 
paragraph Sec.  155.420(d)(10) to create this new special enrollment 
period for qualified individuals. We propose to limit this special 
enrollment opportunity to the individual market Exchange and not extend 
it to the SHOP.
    We propose that the Exchange would extend a special enrollment 
period to a qualified individual when, in the determination of the 
Exchange, misconduct on the part of a non-Exchange entity has caused 
the qualified individual to be enrolled incorrectly or inappropriately 
in coverage such that they are not enrolled in QHP coverage as desired, 
are not enrolled in their selected QHP, or have been determined 
eligible for but are not receiving advance payments of the premium tax 
credit or cost-sharing reductions.
    Non-Exchange entities will be performing enrollment activities, 
including providing assistance with enrollment activities, and in some 
cases will be enrolling consumers directly in QHPs. Consumers would be 
harmed if they fail to enroll in a health plan or are enrolled in a QHP 
they did not select as a result of misconduct on the part of a non-
Exchange entity. Consumers would also be harmed if they are eligible 
for, but not receiving advance payments of the premium tax credit or 
cost-sharing reductions as a result of misconduct on the part of a non-
Exchange entity. The proposed provision would ensure that all qualified 
individuals and enrollees have similar protections against these harms.
    For purposes of this proposed provision, we would interpret a non-
Exchange entity providing enrollment assistance or conducting 
enrollment activities to include, but not be limited to, those 
individuals and entities that are authorized by the Exchange to assist 
with enrollment in QHPs (such as a Navigator, as described in Sec.  
155.210; non-Navigator consumer assistance personnel, as authorized by 
Sec.  155.205(d) and (e); a certified application counselor, as 
described in proposed Sec.  155.225; an agent or broker assisting 
consumers in an Exchange under Sec.  155.220; issuer customer service 
representatives assisting consumers in an Exchange under proposed Sec.  
155.415; or a QHP conducting direct enrollment under proposed Sec.  
156.1230).
    We further propose in Sec.  155.420(d)(10) that misconduct on the 
part of a non-Exchange entity providing enrollment assistance or 
conducting enrollment activities could include, but would not be 
limited to, the failure of a non-Exchange entity to comply with 
applicable requirements set forth in Exchange regulations or other 
applicable Federal or State laws.
    For purposes of the proposed provision, the Exchange could base the 
determination triggering the special enrollment period on findings of 
HHS or a State; the Exchange's evaluation of consumer complaints, 
including the complaint of the affected individual; audits; information 
provided by the consumer, issuer, or non-Exchange entity; or other 
mechanisms. All requests for special enrollment periods, including 
those that may be initiated by the Exchange through its own audits or 
other mechanisms, should be evaluated by the Exchange as part of the 
eligibility determination process established pursuant to 45 CFR 
155.310. We expect to develop further guidance and standard operating 
procedures for making the determinations that would trigger this 
special enrollment period. If a qualified individual is harmed due to 
an error or inaction on the part of a non-Exchange entity, the 
qualified individual may also seek to demonstrate the existence of 
exceptional circumstances to the Exchange under existing regulations at 
Sec.  155.420(d)(9). If the Exchange determines that the error or 
inaction on the part of the non-Exchange entity caused the qualified 
individual to be harmed (including, but not limited to failure to be 
enrolled in a health plan, enrolled in the incorrect health plan or 
failure to receive advance payments of the premium tax credit or cost-
sharing reduction), the Exchange may provide for a special enrollment 
opportunity to correct the error.
    We solicit comments on these proposals.
6. Subpart H--Exchange Functions: Small Business Health Options Program 
(SHOP)
a. Standards for the Establishment of a SHOP (Sec.  155.700)
    We propose to amend Sec.  155.700 by adding a definition for ``SHOP 
application filer.''
    We propose that ``SHOP application filer'' would mean an applicant, 
an authorized representative, an agent or broker of the employer, or an 
employer filing for its employees where not prohibited by other law. By 
broadening who can file an employee application beyond just an 
employee, we propose to permit the entities that have traditionally 
assisted employees in filing applications to provide such assistance.
b. Functions of a SHOP (Sec.  155.705)
    In Sec.  155.705, we propose adding paragraph (b)(6)(i) so that a 
SHOP would require QHP issuers to make changes to rates at a uniform 
time that is no more frequently than quarterly. This proposed paragraph 
would conform to the proposed issuer standard at Sec.  156.80 regarding 
the frequency of indexed rate updates. In paragraph (b)(6)(ii), we 
propose providing issuers participating in the FF-SHOP with the maximum 
amount of flexibility permitted under Sec.  156.80 as proposed in this 
rule and new (b)(6)(i), standardizing the effective dates for rate 
updates in the FF-SHOP, and providing that FF-SHOP issuers would have 
to submit rates to HHS 60 days in advance of the effective date. 
Consistent with technical guidance provided to issuers through the 
Health Insurance Oversight System on April 8, 2013, issuers would be 
able to submit updated quarterly rates for the FF-SHOP no sooner than 
for the third

[[Page 37052]]

quarter of 2014, due to current system limitations.\29\
---------------------------------------------------------------------------

    \29\ See Rate Changes for Small Group Market Plans and System 
Processing of Rates (April 8, 2013).
---------------------------------------------------------------------------

    We are also re-proposing a new pargraph (c). We previously proposed 
this paragraph in a recent rulemaking \30\ to coordinate SHOP functions 
with the functions of the individual market Exchange for determining 
eligibility for insurance affordability programs. We propose that in 
Exchanges where the State or Federal government operates both the 
individual market and SHOP Exchanges, the SHOP would provide data 
related to the eligibility and enrollment for a qualified employee 
(that is, an employee who is enrolled in a QHP through the SHOP or is 
eligible to enroll in coverage through a SHOP because of an offer of 
coverage from a qualified employer) to the individual market Exchange 
that corresponds to the service area in which the SHOP is operating. We 
intend this proposal to ensure that the Exchange can use SHOP data for 
purposes of verifying enrollment in an eligible employer-sponsored plan 
and eligibility for qualifying coverage in an eligible employer-
sponsored plan. We now re-propose this standard with an exemption for a 
State operating only a SHOP. Developing such data sharing would be a 
challenge in such a State.
---------------------------------------------------------------------------

    \30\ See 78 FR 4723.
---------------------------------------------------------------------------

    In paragraph (d), we propose to provide additional flexibility to 
States with respect to the operation of the SHOP Navigator program when 
the State has elected to establish and operate only the SHOP. In most 
cases, there need not be separate Navigator programs for the SHOP and 
individual market Exchange. However, when the SHOP is operated by the 
State, and the individual market Exchange is operated by the Federal 
government, there would be two Navigator programs: a Federal Navigator 
program for the individual market Exchange, and a State Navigator 
program for the SHOP. We propose to clarify that when a State 
establishes and operates a SHOP independently of a Federally-
facilitated individual market Exchange, as proposed in this rulemaking, 
the SHOP would have the flexibility to focus its Navigator program on 
outreach and education to small employers. If the State takes this 
option, SHOP Navigators would be able to fulfill their statutory and 
regulatory obligations under section 1311(i) of the Affordable Care Act 
and 45 CFR 155.210 to facilitate enrollment in QHPs, and to refer 
consumers with complaints, questions, and grievances to applicable 
offices of health insurance consumer assistance or ombudsmen, by 
referring small businesses to agents and brokers for these types of 
assistance, so long as State law permits agents and brokers to carry 
out these functions. The option of carrying out these two Navigator 
functions via referrals to agents and brokers would not be available in 
any other circumstances. Additionally, this provision would not prevent 
a State operating a separate SHOP from requiring SHOP Navigators to 
perform the full range of Navigator services with equal focus and 
without making referrals to agents and brokers, if it so desires.
c. Application Standards for SHOP (Sec.  155.730)
    In Sec.  155.730, we propose amending the application filing 
standard to relieve SHOPs of having to of accept paper applications and 
accept applications by telephone. Such relief may reduce the cost of 
operating a SHOP while permitting SHOPs to provide applications in the 
manner that will best serve their enrollees. Nothing in this proposed 
standard would prohibit SHOPs from accepting paper applications or 
applications by telephone. Additionally, in this section we clarify 
that an employer or an employee application may be filed by a ``SHOP 
application filer,'' that is, an applicant, an authorized 
representative of the applicant, an agent or broker, and, if not 
prohibited by other law, an employer filing on behalf of employees. By 
broadening who can file an employee application beyond just an 
employee, we propose to permit the entities that have traditionally 
assisted employees in filing applications to provide such assistance.
d. Termination of Coverage (Sec.  155.735)
    In Sec.  155.735, we propose that each SHOP would be required to 
develop uniform standards for the termination of coverage in a QHP. 
Standardizing the timing, form, and manner of a group's termination in 
the SHOP would ensure that an employer offering coverage through 
multiple health insurance issuers (that is, in a SHOP offering employee 
choice) will be subject to uniform, predictable termination policies. 
Some SHOPs have considered developing termination standards using their 
authority to establish a uniform enrollment timeline and process 
pursuant to Sec.  155.720(b). We propose this section to clarify the 
authority for SHOPs to establish termination standards and to set such 
standards for the FF-SHOP. Because SHOPs will not be required to offer 
employee choice and premium aggregation until plan years beginning on 
or after January 1, 2015, we created a transition policy such that 
these standards would be required starting in 2015. However, we are 
proposing these standards now, for two reasons. First, State Exchanges 
may desire to implement employee choice and premium aggregation in 2014 
and, if so, would be required to apply these standards. Second, we are 
proposing these standards in response to comments received from issuers 
on the Exchange Final Rule and 2014 Payment Notice requesting detailed 
guidance well in advance of implementation to so that they are better 
able to build conforming systems.
    Proposed paragraph (b) addresses employer requests for termination 
of employer group coverage. In paragraph (b)(1), we propose that each 
SHOP would be required to set policies regarding advance notice of such 
terminations and when coverage will end following the SHOP's receipt of 
notice that an employer wishes to terminate coverage.
    In paragraph (b)(2), we propose that employer-requested 
terminations of employer group coverage through an FF-SHOP would be 
effective only on the last day of a month. We also propose that notice 
of termination would have to be received from the employer on or before 
the 15th of a given month for it to be effective on the last day of 
that month. If notification of termination is provided after the 15th 
of the month, we propose the group's coverage be terminated on the last 
day of the following month.
    Proposed paragraph (c) addresses terminations of employer group 
coverage for non-payment of premiums. In paragraph (c)(1), we propose 
that each SHOP would be required to establish standards for termination 
due to non-payment, including defining grace periods, due dates for 
premium payments made to a SHOP pursuant to Sec.  155.705(b)(4), 
employer and employee notices, and reinstatement policies. Standardized 
grace periods, due dates for payment and reinstatement policies, and 
notices would ensure that an employer offering coverage through 
multiple health insurance issuers is subject to clear and consistent 
rules.
    In paragraph (c)(2), we propose the policies for terminations for 
non-payment of premiums in the FF-SHOP. As proposed, payment for a 
group's coverage for a given month would be due to the FF-SHOP by the 
first day of the coverage month. Additionally, we propose that the 
employer would have a 31-day grace period from the first day of the 
coverage month for making this payment. Having reviewed the State-

[[Page 37053]]

provided small group market payment grace periods rules that currently 
exist, we believe a grace period of this length would never be shorter 
than the protections currently offered by any State and therefore does 
not prevent the application of existing State law.
    In paragraph (c)(2)(iii), we propose that an employer would have 30 
days from the date of its termination from coverage under the FF-SHOP 
to request the reinstatement of its group in the previous coverage. 
Additionally, we propose that the employer would pay in full all 
outstanding premiums and the premium for the next month's coverage 
before reinstatement could occur.
    Proposed paragraph (d) addresses terminations of employee or 
dependent coverage. In paragraph (d)(1), we propose that each SHOP 
would be required to establish consistent policies across QHP issuers 
regarding the process and effective dates for termination of employee 
and dependent coverage in the SHOP. Furthermore, this provision would 
clarify the specific circumstances under which the SHOP would be 
permitted to terminate an employee's coverage.
    In paragraph (d)(2), we propose that in the FF-SHOP, terminations 
for the reasons enumerated in paragraph (d)(1) would be effective on 
the last day of the month in which the FF-SHOP receives notice of the 
event. We further propose that the FF-SHOP must have received notice 
prior to the proposed date of the termination. Notwithstanding the 
standards promulgated in 45 CFR 147.120, under this proposed standard a 
person who loses coverage as a dependent when she turns 26 years old 
would have to be covered on the parent's plan through the end of the 
month.
    In paragraph (e), we direct that all SHOPs comply with the general 
administrative requirements of Sec.  155.430(c). This compliance would 
ensure that the SHOP keeps sufficient records of terminations and that 
reasonable accommodations would be made for enrollees with 
disabilities.
    In paragraph (f), we propose that the standards set in this section 
would apply to all SHOPs for coverage beginning on or after January 1, 
2015. Additionally, because these provisions propose to harmonize 
issuer termination policies where employee choice exists, we propose 
that SHOPs offering employee choice and premium aggregation prior to 
January 1, 2015 would need to comply with these standards by the time 
they are operational. We do not expect this provision to place 
additional burden on such States, as we expect them to have already 
developed such policies consistent with this proposal pursuant to Sec.  
155.720(b).
7. Subpart M--Oversight and Financial Integrity Standards for State 
Exchanges
    Sections 1311, 1313, and 1321 of the Affordable Care Act provide 
the Secretary with oversight of financial integrity and program 
integrity in the State Exchanges. More specifically, the statutory 
authority for HHS oversight of the programmatic integrity of an 
Exchange is found in section 1313(a)(1) of the Affordable Care Act, 
which requires an Exchange to keep an accurate accounting of all 
activities as stated above, and section 1313(a)(2) of the Affordable 
Care Act which gives the Secretary the authority to investigate the 
affairs of an Exchange and examine the properties and records of an 
Exchange in relation to activities undertaken by an Exchange. In 
addition, section 1313(a)(5) of the Affordable Care Act directs the 
Secretary to provide for the efficient and non-discriminatory 
administration of Exchange activities and to implement any measure or 
procedure that the Secretary determines is appropriate to reduce fraud 
and abuse. The key principles underlying the Secretary's State Exchange 
oversight program design include: effectiveness, efficiency, integrity, 
coordination, transparency and accountability in State Exchange 
operations. The State Exchange oversight program builds on existing 
State oversight efforts, where possible, by coordinating with State 
authorities to address compliance issues and concerns. State Exchange 
compliance with the Affordable Care Act and the regulatory requirements 
being proposed in this proposed rule (if finalized) would include 
submitting financial and operational reports and maintaining records in 
a standardized fashion.
    These proposed standards will enable HHS to carry out its 
responsibility of ensuring that Federal funds are used appropriately in 
the administration of State Exchange activities. Therefore, we are 
proposing that the State Exchange must submit to HHS financial reports 
and must oversee its activities to ensure that it is complying with 
Federal requirements, such as those governing eligibility 
determinations for advance payments of the premium tax credit and cost-
sharing reductions.
    These sections, Sec.  155.1200 and Sec.  155.1210, would ensure 
that the State Exchange has financial and operational safeguards in 
place to avoid making inaccurate eligibility determinations, including 
those related to advance payment of the premium tax credit, cost-
sharing reductions, and enrollments. These sections are not intended to 
be a part of any prospective measurement program that may be required 
under the Improper Payments Elimination and Recovery Act at 31 U.S.C. 
3321.
    We are not proposing that these standards should be applicable to 
the FFE, because CMS, which will operate the FFE, is already subject to 
similar standards in its role as a government agency. For example, OMB 
Circular A-123 dated December 21, 2004, provides instruction on 
internal controls (financial and operational) for Federal agencies.
a. General Financial Integrity and Oversight Requirements (Sec.  
155.1200)
    Section 1313(a)(1) of the Affordable Care Act requires an Exchange 
to keep an accurate accounting of all activities, receipts, and 
expenditures, and annually submit to the Secretary a report concerning 
such accounting. In Sec.  155.1200(a), we propose that the State 
Exchange maintain an accounting of all its receipts and expenditures, 
in accordance with GAAP. In addition, we propose that the State 
Exchange develop and implement a process for monitoring all Exchange-
related activities for effectiveness, efficiency, integrity, 
transparency and accountability. We believe that these activities would 
help to ensure State Exchange compliance with Federal requirements as 
set forth in Part 155 and ensure the appropriate administration of 
Federal funds, including advance payment of the premium tax credit and 
cost-sharing reductions. In Sec.  155.1200(b), we propose that the 
State Exchange submit several types of reports to HHS. The State 
Exchange would submit at least annually a report to allow for 
transparency of State Exchanges activities. The report must include a 
financial statement presented in accordance with GAAP. This report is 
due to HHS by April 1st of each year. Additionally, the State Exchange 
must submit reports in a form and manner to be specified by HHS 
regarding eligibility and enrollment. These reports will focus on 
eligibility determination errors, non-discrimination safeguards, 
accessibility of information, and fraud and abuse incidences. The State 
Exchange must also submit performance monitoring data that includes 
financial sustainability, operational efficiency, and, consumer 
satisfaction. We solicit comments on our approach, including comments 
on the content, format, and timing of such reports.
    Section 1313(a)(3) of the Affordable Care Act requires that an 
Exchange be

[[Page 37054]]

subject to an annual audit by the Secretary. In Sec.  155.1200(c), we 
propose that the State Exchange engage an independent qualified 
auditing entity, whether governmental or private, which meets accepted 
professional and business standards and follows generally accepted 
governmental auditing standards (GAGAS), to perform an independent 
external financial and programmatic audit of the State Exchange. This 
entity should be selected to avoid any real or potential perception of 
conflict of interest, including being free from personal, external and 
organizational impairments to independence or the appearance of such 
impairments of independence. External audits are a standard practice 
used to maintain accountability and internal controls. An external 
audit will help ensure the consistency and accuracy of State Exchange 
financial reporting and program activities. We propose that this 
requirement may be satisfied through an audit by an independent State-
government entity. The State Exchange will submit to HHS, concurrent 
with the annual report, the results of the audit along with proposals 
on how it will remedy any material weakness or significant deficiency 
(the terms ``material weakness'' and ``significant deficiency'' are 
defined in OMB Circular A-133, Audits of States, Local Governments and 
Non-Profit Organizations).
    In Sec.  155.1200(d), we propose that independent audits address 
specific processes and activities of State Exchanges including 
financial and programmatic activities and those related to the 
verification and determination of applicants' eligibility for 
enrollment in the State Exchanges and the subsequent enrollments. We 
propose that the external audit address whether the Exchange is 
complying with Sec.  155.1200(a)(1) by keeping an accurate accounting 
of Exchange receipts and expenditures in accordance with generally 
accepted accounting principles (GAAP). We note that accurate 
eligibility determinations by the State Exchanges are important to the 
implementation of the Affordable Care Act. Failure to apply Federal 
standards appropriately could result in improper Federal payments in 
the form of advance payments of the premium tax credit and cost sharing 
reductions. Therefore, we also propose that the external audits and 
annual reports required under paragraphs (b) and (c) of this section 
address State Exchange processes and procedures to comply with the 
standards for Exchanges under 45 CFR Part 155 related to advance 
payments of the premium tax credit and cost-sharing reductions. These 
standards include the requirements under subpart D regarding 
eligibility determinations, including the requirements regarding the 
confidentiality, disclosure, maintenance, and use of information as set 
forth in 45 CFR 155.302(d)(3); subpart E regarding individual market 
enrollment in QHPs; and subpart K regarding QHP certification. We 
propose that such audits and annual reports assess whether a State 
Exchange has processes and procedures in place to prevent improper 
eligibility determinations and enrollment transactions. Assessing 
whether State Exchanges are complying with Federal requirements in 
these areas will assist in ensuring that eligible individuals are 
appropriately enrolled and receiving appropriate advance payments of 
the premium tax credit and cost-sharing reductions. Determining whether 
there are appropriate internal controls and standard operating 
procedures in place to identify and correct weaknesses in these 
particular areas will mitigate the creation of improper payments, 
thereby safeguarding Federal funds.
    We seek comment on the proposed annual audits, and other activities 
that State Exchanges should specifically be required to audit annually 
or on an interim basis.
b. Maintenance of Records (Sec.  155.1210)
    Under section 1313(a)(2) of the Affordable Care Act, the Secretary, 
in coordination with the Inspector General of HHS, may investigate, 
examine properties and records, and require periodic reports from the 
State Exchange. Under section 1313(a)(3) of the Affordable Care Act, 
the State Exchange is subject to annual audits by the Secretary. We 
anticipate conducting a limited number of targeted audits each year, 
informed by information from the external audit, annual report, 
prospective measurement programs of improper payments, consumer 
complaints, or other data sources. To prepare for such audits, the 
State Exchange would be required to maintain records pursuant to this 
section. Preparation for such audits would also require the State 
Exchange to ensure its contractors, subcontractors, and agents maintain 
these records.
    In Sec.  155.1210, we propose the requirements for records 
maintenance for the State Exchange. We propose that the State Exchange 
and its contractors, subcontractors, and agents maintain records for 10 
years, including documents and records (whether paper, electronic or 
other media) and other evidence of accounting procedures and practices 
of the State Exchange. These records must be sufficient and appropriate 
to respond to any periodic auditing, inspection or investigation of the 
State Exchange's financial records or to enable HHS or its designee to 
appropriately evaluate the State Exchange's compliance with Federal 
requirements. In addition, we propose that the State Exchange must make 
all records of this section available to HHS, the OIG, the Comptroller 
General, or their designees, upon request. We have proposed this 10-
year retention period to be consistent with the statute of limitations 
for the False Claims Act at 31 U.S.C. 3731. We request comment on 
auditing procedures and the length of document retention requirements.

E. Part 156--Health Insurance Issuer Standards Under the Affordable 
Care Act, Including Standards Related To Exchanges

1. Subpart A--General Provisions
a. Definitions (Sec.  156.20)
    We propose to amend 45 CFR 156.20 by adding the definitions for 
``Delegated entity,'' ``Downstream entity,'' ``Enrollee satisfaction 
survey vendor,'' and ``Registered user of the enrollee satisfaction 
survey data warehouse,'' in alphabetical order to read as follows:
Delegated Entity
    We propose to define a delegated entity as any party, including an 
agent or a broker that enters into an agreement with a QHP issuer to 
provide administrative services or health care services to qualified 
individuals, qualified employers, or qualified employees and their 
dependents.
Downstream Entity
    We propose to define a downstream entity as any party, including an 
agent or a broker, that enters into an agreement with a delegated 
entity or with another downstream entity for purposes of providing 
administrative or health care services related to the agreement between 
the delegated entity and the QHP issuer. The term ``downstream entity'' 
is intended to reach the entity that directly provides administrative 
services or health care services to qualified individuals, qualified 
employers, or qualified employees and their dependents.
Enrollee Satisfaction Survey Vendors
    We propose to define an ``enrollee satisfaction survey vendor'' as 
an organization that has relevant survey administration experience (for 
example, Consumer Assessment of Healthcare

[[Page 37055]]

Providers and Systems (CAHPS[supreg]) surveys), organizational survey 
capacity, and quality control procedures for survey administration.
Exchange
    An ``Exchange'' has the meaning given to the term in Sec.  155.20 
of this subchapter. Registered user of the enrollee satisfaction survey 
data warehouse
    We propose to define a ``registered user of the enrollee 
satisfaction survey data warehouse'' as enrollee satisfaction survey 
vendors, QHP issuers, and Exchanges authorized to access CMS's secure 
data warehouse to submit survey data and to preview survey results 
prior to public reporting.
b. Single Risk Pool (Sec.  156.80)
    We are proposing to add a new paragraph (d)(3) in Sec.  156.80 to 
clarify when issuers may modify rates under the single risk pool 
provision. These proposed market-wide rate modification limitations 
would align with the limitations on rate setting schedules in the 
Exchange and SHOP, which is necessary to reduce the risk of adverse 
selection between plans offered outside the Exchange and QHPs offered 
through the Exchange. Furthermore, the frequency of rate modifications 
affects the rate review process because each time an issuer adjusts its 
index rate, the new rates of all of its plans must be subjected to rate 
review.
    Accordingly, in paragraph (d)(3)(i), we propose that issuers in 
individual markets or markets in which the individual and small group 
risk pools were merged by the State would be permitted to make changes 
to their market-wide adjusted index rate and plan-specific pricing on 
an annual basis, as discussed in the preamble to the Market Reform Rule 
(78 FR 13422). In a State in which the individual and small group risk 
pools were merged by the State, an issuer would be able to adjust its 
index rate and plan-specific pricing no more frequently than annually, 
since the stricter standard of the individual market must be applied to 
the entire merged market for consistency throughout the single risk 
pool.
    In paragraph (d)(3)(ii), we propose that issuers in the small group 
market generally would be permitted to make such changes on a quarterly 
basis, beginning with rates effective for the third quarter of 2014. 
This proposal is consistent with technical guidance provided to issuers 
through the Health Insurance Oversight System on April 8, 2013.\31\ 
These quarterly rates would apply to both new and renewing business for 
the entire plan year, depending on the plan year of the employer. For 
example, if an employer's plan year begins February 1 and the issuer 
had adjusted its index rate on January 1, the issuer's January 1 rate 
would apply to the employer's plan only on February 1. Additionally, 
although the issuer would be able to adjust its index rate on a 
quarterly basis in the small group market, any new rates set by the 
issuer after February 1 would apply only upon the plan's renewal the 
following year. As discussed in section II.D.6.b of this preamble and 
the April 8, 2013 technical guidance to issuers, due to current system 
limitations, the submission of rates updated on a quarterly basis (or 
any basis other than an annual basis) cannot currently be processed for 
QHPs in the FF-SHOPs. Accordingly, in order to align with the timing of 
the adjustments permitted in the SHOP based on these operational 
considerations, issuers would be required under the amendment to this 
section to set rates for non-grandfathered plans in the small group 
market on an annual basis market-wide until the FF-SHOPs' capability to 
process quarterly rate updates is established. We anticipate that the 
FF-SHOPs will be capable of processing quarterly updated rates 
effective for the third quarter of 2014.
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    \31\ Rate Changes for Small Group Market Plans and System 
Processing of Rates (April 8, 2013).
---------------------------------------------------------------------------

2. Subpart C--Qualified Health Plan Minimum Certification Standards
a. Additional Standards Specific to SHOP (Sec.  156.285)
    We propose to amend Sec.  156.285 to ensure that all QHP issuers 
offering coverage in a SHOP comply with the termination of coverage 
requirements proposed at Sec.  155.735 as a condition of certification 
for plan years beginning on or after January 1, 2015, when Sec.  
155.735 will apply to all SHOPs. Some SHOPs may decide to implement 
employee choice and premium aggregation before January 1, 2015, and 
Sec.  155.735 would apply in such SHOPs as an operational requirement.
3. Subpart D--Federally-Facilitated Exchange Qualified Health Plan 
Issuer Standards
a. Changes of Ownership of Issuers of Qualified Health Plans in the 
Federally-Facilitated Exchange (Sec.  156.330)
    Proposed Sec.  156.330 describes the notice required to be 
submitted by QHP issuers offering QHPs through FFEs, including the FF-
SHOPs, when such issuers undergo a change of ownership, as recognized 
by the State in which the issuer offers the QHP, during the term of its 
QHP agreement. We propose that the issuer be required to notify HHS, in 
a manner to be specified by HHS, and provide the legal name, the 
Taxpayer Identification Number (TIN) of the new owner, and the 
effective date of the change at least 30 days prior to the date of 
change. We also propose that the new owner must agree to adhere to all 
applicable statutes and regulations. These provisions would provide HHS 
with adequate notice so that it could monitor or audit the new owner to 
ensure that the new owner meets all QHP certification standards and 
clarify that the new owner would agree to adhere to all applicable 
statutes and regulations. We considered proposing a standard similar to 
that in the Medicare Parts C and D programs, in which HHS, the current 
issuer, and the prospective new issuer would enter into a novation 
agreement prior to the change of ownership. We further considered 
requiring the prospective new issuer to submit financial and solvency 
information to HHS in advance of the change of ownership. However, 
based on research of existing State law, we believe that such standards 
could largely duplicate existing State requirements. We welcome 
comments about the 30-day notice requirement, about the information 
being requested when a change of ownership occurs, and about whether to 
specifically require a novation.
b. Standards for Downstream and Delegated Entities (Sec.  156.340)
    Section 1321(a)(1)(B) of the Affordable Care Act establishes that 
the Secretary must issue regulations setting forth standards for the 
offering of QHPs through the Exchanges. Based on this general 
authority, we propose in Sec.  156.340 standards for delegated and 
downstream entities, similar to existing standards for such entities 
that contract with Medicare Advantage organizations, described at 42 
CFR 422.504(i)(3)-(4). In Sec.  156.340(a), we propose the general 
requirement that, notwithstanding any relationship(s) that a QHP issuer 
may have with delegated or downstream entities, the QHP issuer 
maintains responsibility for its compliance and the compliance of any 
of its delegated or downstream entities, with all applicable standards, 
including those we propose at Sec.  156.340(a)(1) through (4). In 
paragraphs (a)(1) through (a)(4), we propose that the QHP issuer be 
required to comply with Federal standards,

[[Page 37056]]

specifically the obligations as set forth under: subpart C of part 156, 
which governs QHP minimum certification standards; subpart K of part 
155, which governs Exchange functions pertaining to QHP certification; 
subpart H of part 155, which governs the Exchange functions of the 
SHOP; standards in Sec.  155.220 with respect to assisting with 
enrollment in QHPs; and standards in Sec.  156.705 and Sec.  156.715 
for maintenance of records and compliance reviews for QHP issuers 
operating in an FFE and an FF-SHOP.
    Because a QHP issuer generally cannot enforce an agreement to which 
it is not a party, we believe that the most legally effective way to 
ensure that a QHP issuer retains the necessary control and oversight 
over its delegated or downstream entities would be to require that all 
agreements governing the relationships among a QHP issuer and its 
delegated and downstream entities (that is, those between the QHP 
issuer and its delegated entity; those between the delegated entity and 
any downstream entity; and those between downstream entities) contain 
provisions specifically describing each of the delegated and downstream 
entity's obligations to fulfill the QHP issuer's responsibilities 
proposed in paragraph (a) of this section. Such a requirement would be 
similar to the existing requirement for agreements governing the 
relationship among entities that contract with Medicare Advantage 
organizations, described at 42 CFR 422.504(i)(3)-(4). Therefore, in 
Sec.  156.340(b)(1)-(2), we propose that all agreements among the QHP 
issuer's delegated and downstream entities be required to specify 
delegated activities and reporting responsibilities, and either provide 
for revocation of the delegated activities and reporting standards, or 
specify other remedies in instances where HHS or the QHP issuer 
determines that such parties have not performed satisfactorily.
    Furthermore, we propose in Sec.  156.340(b)(3) that all agreements 
among the QHP issuer's delegated and downstream entities be required to 
specify that the delegated or downstream entity must comply with all 
applicable laws and regulations relating to the standards specified 
under paragraph (a) of this section. In Sec.  156.340(b)(4) of this 
proposed rule, we propose that the QHP issuer's agreement with any 
delegated or downstream entity must specify that the delegated and 
downstream entity must permit access by the Secretary and the OIG or 
their designees in connection with their right to evaluate through 
audit, inspection, or other means, to the delegated or downstream 
entity's books, contracts, computers, or other electronic systems, 
including medical records and documentation, relating to the QHP 
issuer's obligations in accordance with Federal standards under 
paragraph (a) of this section until 10 years from the final date of the 
agreement period. Such a requirement would be similar to the existing 
requirement for agreements governing the relationship among entities 
that contract with Medicare Advantage organizations, described at 42 
CFR 422.504(i)(2)-(4).
    Finally, we propose in Sec.  156.340(b)(5) that all existing 
agreements contain specifications described in paragraph (b) of this 
section by no later than January 1, 2015. We believe the effective date 
recognizes the time that QHP issuers may need to amend existing 
agreements with delegated and downstream entities to comply with the 
requirements under paragraph (b). For agreements that are newly entered 
into as of October 1, 2013, we propose an effective date for the 
specifications described in paragraph (b) of this section to be no 
later than the effective date of the agreement.
4. Subpart E--Health Insurance Issuer Responsibilities With Respect to 
Advance Payments of the Premium Tax Credit and Cost-Sharing Reductions
    In this subpart, pursuant to section 1321(a)(1)(B) of the 
Affordable Care Act, we propose standards for oversight of QHP issuers 
with respect to cost-sharing reductions and advance payments of the 
premium tax credit. We believe that it is important to establish robust 
oversight relating to cost-sharing reductions and advance payments of 
the premium tax credit in order to ensure that Federal funds are used 
efficiently and in full compliance with the provisions of the 
Affordable Care Act, and that consumers receive the financial 
assistance afforded them under the statute. The standards proposed in 
this subpart are consistent with the information we provided in the 
``Frequently Asked Questions on Health Insurance Marketplaces'' dated 
May 14, 2013.\32\
---------------------------------------------------------------------------

    \32\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/marketplace-faq-5-14-2013.pdf.
---------------------------------------------------------------------------

    In particular, we propose requirements and timeframes for refunds 
to eligible enrollees and providers when a QHP issuer incorrectly 
applies the cost-sharing reductions or advance payments of the premium 
tax credit, or incorrectly assigns an individual to a plan variation 
(or standard plan without cost-sharing reductions), resulting in the 
enrollee or the provider paying a portion of the cost sharing or 
premium amount that should otherwise have been reduced. The proposed 
provisions are intended to ensure that enrollees and providers are 
promptly refunded any excess cost sharing they should not have paid.
a. Definitions (Sec.  156.400)
    Section 156.400 of this subpart defines a ``most generous,'' and a 
``more generous,'' plan variation. We propose to supplement those 
definitions by clarifying that the definitions of a ``least generous,'' 
and a ``less generous,'' plan variation have the opposite meanings of 
the existing definitions of a ``most generous,'' or a ``more generous'' 
plan variation. Specifically, we propose that, as between two plan 
variations (or a plan variation and a standard plan without cost-
sharing reductions), the plan variation or standard plan without cost-
sharing reductions designed for the category of individuals first 
listed in 45 CFR 155.305(g)(3) would be deemed the less generous one. 
The term less generous is used in this proposed rule to address 
circumstances in which a QHP issuer would reassign an enrollee from a 
more generous plan variation to a less generous plan variation (or 
standard plan without cost-sharing reductions), as discussed in greater 
detail below. We also propose a technical modification to change ``QHP 
or plan variation'' to ``standard plan or plan variation'' to clarify 
that a plan variation is not distinct from a QHP.
b. Improper Plan Assignment and Application of Cost-Sharing Reductions 
(Sec.  156.410(c)-(d))
    To address misapplication of cost-sharing reductions due to an 
enrollee, in Sec.  156.410, we propose to add new paragraphs (c) and 
(d) to specify the actions a QHP issuer would take if it does not 
provide the appropriate cost-sharing reductions to an individual, or if 
it does not assign an individual to the appropriate plan variation (or 
standard plan without cost-sharing reductions) in accordance with Sec.  
156.410(a)-(b) or Sec.  156.425(a)-(b) of this subpart. The QHP issuer 
is responsible under these provisions for ensuring that individuals are 
assigned to the appropriate plan variation (or standard plan without 
cost-sharing reductions) and ensuring that the cost-sharing reduction 
is applied when the cost sharing is collected. We believe that 
enrollees and providers should be held harmless if the QHP issuer 
misapplies the cost-sharing reduction, such that the QHP issuer should 
not recoup excess funds paid for the individual or to the provider.

[[Page 37057]]

However, because we believe an enrollee should be afforded at a minimum 
the financial assistance specified in the statute and regulations, we 
believe that the QHP issuer should be responsible for refunding any 
excess cost sharing paid by the enrollee or provider, as applicable.
    Accordingly, in paragraph (c)(1), we propose that if a QHP issuer 
fails to ensure that an individual assigned to a QHP plan variation 
receives the cost-sharing reductions required under the applicable plan 
variation, taking into account the requirement regarding cost sharing 
previously paid under other plan variations of the same QHP under Sec.  
156.425(b), the QHP would notify the enrollee of the improper 
application of the cost-sharing reductions and refund any excess cost 
sharing paid by or for the enrollee during such period no later than 30 
calendar days after discovery of the improper application of the cost-
sharing reductions. This refund would be paid to the person or entity 
that paid the excess cost sharing, whether the enrollee or the 
provider.
    In paragraph (c)(2), we propose that if a QHP issuer provides an 
enrollee assigned to a plan variation more cost-sharing reductions than 
required under the applicable plan variation, taking into account Sec.  
156.425(b) concerning continuity of deductibles and out-of-pocket 
amounts, if applicable, then the QHP issuer will not be eligible for 
reimbursement of any excess cost-sharing reductions provided to the 
enrollee, and may not seek reimbursement from the enrollee or the 
provider for any of the excess cost-sharing reductions. As noted above, 
because the QHP issuer is responsible for ensuring the cost-sharing 
reduction is provided appropriately, we do not believe that the QHP 
issuer should be able to recoup overpayments of cost-sharing reductions 
that resulted from the QHP issuer's own errors.
    In paragraph (d), we propose that if a QHP issuer does not comply 
with Sec.  156.410(b) by improperly assigning an enrollee to a plan 
variation (or standard plan without cost-sharing reductions), or the 
QHP issuer does not change the enrollee's assignment due to a change in 
eligibility in accordance with Sec.  156.425(a), in each case, based on 
the eligibility and enrollment information or notification provided by 
the Exchange, then the QHP issuer would, no later than 30 calendar days 
after discovery of the improper assignment, reassign the enrollee to 
the applicable plan variation (or standard plan without cost-sharing 
reductions) and notify the enrollee of the improper assignment.
    If a QHP issuer reassigns an enrollee from a more generous to a 
less generous plan variation of a QHP (or a standard plan without cost-
sharing reductions), for example from a silver plan variation with an 
87 percent AV to a silver plan variation with an 73 percent AV, to 
correct an improper assignment on the part of the issuer pursuant to 
proposed paragraph (d)(1), the QHP issuer will not be eligible for, and 
may not seek from the enrollee or provider, reimbursement for any of 
the excess cost-sharing reductions provided to or for the enrollee 
following the effective date of eligibility required by the Exchange. 
Because the QHP issuer is responsible for assigning and reassigning the 
enrollee to a plan variation of a QHP (or standard plan without cost-
sharing reductions) and because of the reliance interests of the 
enrollee, we believe that the QHP issuer should not be able to recover 
excess cost-sharing reductions if it erroneously assigns an individual 
to a more generous plan variation. This aligns the policy proposed in 
this section with respect to the misapplication of the cost-sharing 
reductions.
    Conversely, proposed paragraph (d)(2) provides that, if a QHP 
issuer reassigns an enrollee from a less generous plan variation (or a 
standard plan without cost-sharing reductions) to a more generous plan 
variation of a QHP (for example from a silver plan variation with an 87 
percent AV to a silver plan variation with an 94 percent AV) to correct 
an improper assignment on the part of the issuer, the QHP issuer would 
recalculate the individual's liability for cost sharing paid between 
the effective date of eligibility required by the Exchange and the date 
on which the issuer effectuated the change. The QHP issuer would refund 
any excess cost sharing paid by or for the enrollee during such period, 
no later than 30 calendar days after discovery of the incorrect 
assignment. This refund would be paid to the person or entity that paid 
the excess cost sharing, whether the enrollee or the provider. For 
example, if a QHP issuer improperly assigned an individual to a silver 
plan variation with an 87 percent AV for the plan year starting January 
1, 2014, but on March 1, 2014, discovers that the individual should 
have been assigned to a silver plan variation with a 94 percent AV, 
then the QHP issuer would be required to reassign the individual to the 
silver plan variation with a 94 percent AV by March 31, 2014. The 
issuer would also refund any excess cost sharing paid by or for the 
enrollee between January 1, 2014 and the date the reassignment is 
effectuated, that is, March 31, 2014.
    We seek comment on the proposed approach, including the 30 calendar 
day timeframe for QHP issuers to reassign an individual to the correct 
plan variation and refund any excess cost sharing paid by or for the 
enrollee. We also seek comment on whether the timeframe should depend 
on the point in the month the issuer discovers the improper assignment, 
considering the amount of time issuers may require to effectuate the 
reassignment, as well as the impact on enrollees due to a delay in 
reassignment. We note that the date of the reassignment will not affect 
the initial effective date of eligibility, and that the enrollee would 
still be refunded any excess cost sharing paid by or for the enrollee 
between the effective date of eligibility and the date of the 
reassignment.
    We are also considering requiring that, for each quarter, a QHP 
issuer provide to HHS and the Exchange, in a manner and timeframe 
specified by HHS, a report detailing the occurrence of any improper 
applications of cost-sharing reductions in violation of the standards 
finalized and proposed in Sec.  156.410(a) and (c) and Sec.  
156.425(b), as well as instances when it did not refund any excess cost 
sharing paid by or for an enrollee in accordance with proposed Sec.  
156.410(c)(1) and Sec.  156.410(d)(2), or was reimbursed for excess 
cost sharing provided in violation of proposed Sec.  156.410(d)(1). 
This quarterly report would alert HHS and the Exchange to patterns of 
such errors or omissions, and could identify areas where issuer 
performance can be improved. However, we recognize that, given 
operational constraints, it may be difficult at this point for QHP 
issuers to develop systems that can produce these types of quarterly 
reports for the 2014 benefit year. Therefore, we are considering 
requiring issuers to produce these reports beginning in the 2015 
benefit year. We seek comment on the proposed approach, including 
whether such reports should be provided less frequently. We also seek 
comment on whether HHS should establish a minimum error rate or 
threshold before a QHP issuer is required to inform HHS of such 
improper applications of cost-sharing reductions in the quarterly 
report, as well as what an appropriate error rate or threshold should 
be.
c. Failure To Reduce an Enrollee's Premium To Account for Advance 
Payments of the Premium Tax Credit (Sec.  156.460(c))
    We also propose to add new paragraph (c) to Sec.  156.460, related 
to the

[[Page 37058]]

failure to reduce an enrollee's share of premium to account for advance 
payments of the premium tax credit. In paragraph (c), we propose that 
if a QHP issuer discovers that it did not reduce the portion of the 
premium charged to or for the enrollee for the applicable month(s) by 
the amount of the advance payment of the premium tax credit as required 
in Sec.  156.460(a)(1), the QHP issuer would be required to refund to 
the enrollee any excess premium paid by or for the enrollee and notify 
the enrollee of the improper assignment no later than 30 calendar days 
after the QHP issuer discovers the improper assignment. We note that a 
QHP issuer may provide the refund to the enrollee by reducing the 
enrollee's portion of the premium in the following month, as long as 
the reduction is provided no later than 30 calendar days after the QHP 
issuer discovers the improper assignment. If the QHP issuer elects to 
provide the refund by reducing the enrollee's portion of the premium 
for the following month, and the refund exceeds the enrollee's portion 
of the premium for the following month, then the QHP issuer would need 
to refund to the enrollee the excess no later than 30 calendar days 
after the QHP issuer discovers the improper assignment.
    Additionally, we are also considering that for each quarter 
beginning in 2015, a QHP issuer would be required to provide a report 
to HHS and the Exchange, in a manner and timeframe specified by HHS, 
detailing the occurrence of instances of improper applications of the 
requirements of Sec.  156.460. This would be similar to the quarterly 
reporting requirements with respect to the misapplication of cost-
sharing reduction discussed in the previous section of this subpart, 
and we note that we would anticipate utilizing a single process for 
issuers to submit such quarterly reports. We seek comment on the 
proposed approach, including the timeframe for issuers to refund any 
excess premiums to enrollees, the timeframes for providing the 
quarterly report to HHS and the Exchange, whether HHS should also 
establish a minimum rate or threshold before a QHP issuer is required 
to notify HHS of any such instances, and what an appropriate rate or 
threshold would be.
d. Oversight of the Administration of Cost-Sharing Reductions and 
Advance Payments of the Premium Tax Credit Programs (Sec.  156.480)
    In Sec.  156.480, we propose general provisions related to the 
oversight of QHP issuers in relation to cost-sharing reductions and 
advance payments of the premium tax credit. Cost-sharing reduction 
reimbursements and advance payments of the premium tax credit are 
Federal funds, which will pass from HHS directly to QHP issuers. 
Therefore, we believe that it is necessary for HHS to oversee QHP 
issuer compliance in these areas, regardless of whether the QHP is 
offered through a State Exchange or an FFE. We seek comment on this 
approach, including with respect to how HHS may coordinate with State 
Exchanges and State authorities to address non-compliance with Federal 
requirements regarding cost-sharing reductions or advance payments of 
the premium tax credit. We note that in States where there is a State 
Exchange, the State has enforcement authority over QHP issuers that are 
not in compliance with the standards set forth in subpart E of this 
Part. If the State does not enforce such standards against the QHP 
issuers in the individual market participating on the State Exchange, 
HHS will enforce QHP issuer compliance with these requirements, 
including the imposition of CMPs as provided for under Section 1321(c) 
of the Affordable Care Act. In instances where HHS enforces QHP issuer 
compliance with respect to cost-sharing reductions and advanced 
payments of the premium tax credit, we envision CMPs would be imposed 
using the same standards and processes as proposed for QHP issuers in 
an FFE in subpart I of this Part.
    To effectively oversee the provision of cost-sharing reductions and 
advance payments of the premium tax credit by issuers of QHPs on State 
Exchanges, we propose to apply certain standards proposed in part 156, 
subpart H for QHP issuers participating in FFEs to QHP issuers 
participating in the individual market on a State Exchanges. In 
paragraph (a), we propose to extend the standards set forth in proposed 
Sec.  156.705 concerning maintenance of records to a QHP issuer in the 
individual market on a State Exchange in relation to cost-sharing 
reductions and advance payments of the premium tax credit. We also 
propose that QHP issuers ensure that any delegated entities and 
downstream entities adhere to these requirements, in parallel with the 
standards for QHP issuers on an FFE proposed in Sec.  156.340. We 
believe applying these provisions to QHP issuers participating in State 
Exchanges is necessary to allow HHS, pursuant to its oversight 
authority, to access records and investigate compliance with the 
requirements of this subpart. We note that a QHP issuer and its 
delegated entities and downstream entities may satisfy this standard by 
maintaining the relevant records for a period of 10 years and ensuring 
that they are accessible if needed in the event of an investigation or 
audit.
    We also propose that QHP issuers participating in State Exchanges 
and FFEs be subject to reporting and oversight requirements that are 
intended to assist in monitoring a QHP issuer's compliance with Federal 
standards with regard to cost-sharing reductions and advance payments 
of the premium tax credit, in order to safeguard Federal funds 
distributed through these programs, and to correct improper payments to 
the QHPs.
    In paragraph (b), we propose that an issuer that offers a QHP in 
the individual market through a State Exchange or an FFE report to HHS 
annually, in a timeframe and manner required by HHS, summary statistics 
with respect to administration of cost-sharing reductions and advance 
payments of the premium tax credit. This proposed provision would 
permit HHS to obtain summary information regarding cost-sharing 
reductions and advance payments of the premium tax credit across a 
broad range of issuers to identify systemic issues and errors, without 
requiring annual audits. We contemplate that this information will 
include (1) The total amount of cost-sharing paid under each plan 
variation, including the amount paid by the individual and amount 
reduced by the cost-sharing reductions program, (2) an annual error 
rate reflecting the misapplication of the cost-sharing reductions and 
advance payments of the premium tax credit by plan variation, and (3) 
the total number of enrollees who received a refund as well as the 
total and average refunds made to enrollees and providers by plan 
variation resulting from underpayments. Additionally, in paragraph (c), 
as is required under other Federal programs such as Medicare Advantage, 
we propose that HHS or its designee may audit an issuer that offers a 
QHP in the individual market through a State Exchange or an FFE to 
assess compliance with the requirements of this subpart. An audit may 
be triggered by sources such as the annual reports proposed in Sec.  
156.480(b) of this Part, consumer complaints, and information received 
from State regulatory agencies. We note that we intend to coordinate 
any audits of QHP issuers in an FFE with the compliance reviews 
proposed in Sec.  156.715 of subpart H. We seek comment on these 
proposed reporting requirements, including the operational readiness of 
issuers to report these data, our proposed approach to audits, and how 
such oversight activities may be

[[Page 37059]]

coordinated with State Exchange oversight activities to avoid 
duplication of effort.
5. Subpart H--Oversight & Financial Integrity Requirements for Issuers 
of Qualified Health Plans in Federally-Facilitated Exchanges
    a. Maintenance of Records for the Federally-facilitated Exchanges 
(Sec.  156.705)
    Section 1313(a)(2) of the Affordable Care Act authorizes HHS to 
examine records and solicit reports regarding activities undertaken by 
the Exchanges. So that HHS can prepare for and successfully complete 
compliance reviews and audits to account for expenditures and protect 
against fraud and abuse, we propose that QHP issuers must retain 
certain records. The record retention standards we propose in this 
section are similar to those already established for the Medicare 
Advantage Program, and described at 42 CFR 422.504(d).
    We propose in Sec.  156.705(a) that issuers offering QHPs in an FFE 
maintain all documents and records (whether paper, electronic, or other 
media) and other evidence of accounting procedures and practices, which 
are critical for HHS to conduct activities necessary to safeguard the 
financial and programmatic integrity of the FFEs. We propose that such 
activities include: (1) periodic auditing of the QHP issuer's financial 
records related to the QHP issuer's participation in an FFE, and to 
evaluate the ability of the QHP issuer to bear the risk of potential 
financial losses; and (2) compliance reviews and other monitoring of a 
QHP issuer's compliance with all Exchange standards applicable to 
issuers offering QHPs in the FFE listed in part 156. We considered 
requiring maintenance of other types of records, but we propose 
limiting our scope to Exchange-specific records as applicable to the 
FFEs. We seek comment on the type and scope of records we propose must 
be maintained by QHP issuers participating in the FFEs.
    In Sec.  156.705(b), we propose to clarify that the records 
described in proposed paragraph (a) of this section include the sources 
listed in proposed Sec.  155.1210(b)(2), (b)(3), and (b)(5). Our intent 
is to align record maintenance standards of the FFEs and State 
Exchanges to the extent possible.
    In Sec.  156.705(c), we propose that issuers offering QHPs in an 
FFE must maintain the records described in this section, as well as 
records required by Sec.  155.710 (to determine SHOP eligibility), for 
10 years. This proposed standard parallels standards in part 155 as 
well as existing part 153 standards (45 CFR 153.240(c), 153.520(e) and 
153.620(b) and proposed Sec. Sec.  153.310(c)(4), 153.405(h), and 
153.410(c)). It is also consistent with the statute of limitations for 
the False Claims Act (31 U.S.C. 3731(b)). Our proposed 10-year record 
retention requirement supports the Federal government's right under the 
False Claims Act to investigate and pursue claims based on violations 
involving Federal funds that have occurred within the last 10 years.
    Proposed Sec.  156.705(d) explains that the records referenced in 
paragraph (a) must be made available to HHS, the OIG, the Comptroller 
General, or their designees, upon request.
    These proposed standards pertain only to Exchange-specific areas of 
concern (for example, matters pertaining to advance payments of premium 
tax credits or cost-sharing reductions) within the FFEs, as HHS would 
expect the State DOI to oversee the maintenance of records pertaining 
to other aspects of QHP issuer operations as required under State law. 
We welcome comments on these proposed standards.
    b. Compliance Reviews of QHP Issuers in Federally-facilitated 
Exchanges (Sec.  156.715)
    Section 1313(a)(5) of the Affordable Care Act requires the 
Secretary to establish any measure or procedure that the Secretary has 
authority to implement in Title I of the Affordable Care Act or any 
other act to protect against fraud and abuse. Additionally, in 
accordance with section 1321 of the Affordable Care Act, the Secretary 
has the authority to issue regulations on the establishment and 
operation of an Exchange, the offering of QHPs through the Exchange, 
the establishment of reinsurance and risk adjustment programs, and 
other requirements as the Secretary determines appropriate.
    Based on this authority, we propose in Sec.  156.715(a) that 
issuers offering QHPs in an FFE be subject to compliance reviews by HHS 
to ensure ongoing compliance with Exchange standards applicable to 
issuers offering QHPs in the FFE. We envision our oversight of QHP 
issuers in FFEs to be primarily focused on Exchange standards 
applicable only to issuers offering QHPs in the FFE because oversight 
of market-wide standards will generally be performed by States as part 
of their regulatory oversight. We intend to rely on data related to 
these standards to inform our selection of the QHP issuers for 
compliance reviews. We anticipate that the majority of QHP issuers 
selected for compliance review will be identified using a risk-based 
approach and include an analysis of the data collected by an FFE during 
certification and the plan year. Given the primary role States play in 
regulating health insurance, these compliance reviews will be less 
rigorous than in Medicare Advantage. In paragraph (b), we describe the 
proposed scope of documents that HHS may inspect as part of the 
compliance review. We propose that HHS may review the records of the 
QHP issuer pertaining to its activities within an FFE, which include 
but are not limited to the QHP issuer's books and contracts, policy 
manuals and other QHP plan benefit information provided to the QHP 
issuer's enrollees, and the QHP issuer's policies and procedures 
related to the QHP issuer's activities in an FFE. We further propose 
that the scope of information subject to the compliance review include 
any other information reasonably necessary, as determined by HHS, for 
HHS to: (a) evaluate the QHP's issuer's compliance with Exchange 
standards applicable to issuers offering QHPs in the FFE and their 
performance in the FFE; (b) verify that the QHP issuer has performed 
the duties attested to as part of the QHP certification process; and 
(c) assess the likelihood of fraud and abuse. An example of an area 
that may be reviewed, evaluated, or inspected is compliance with proper 
application and documentation of advance payments of the premium tax 
credit and cost-sharing reductions. We invite comment regarding other 
areas that should be included or considered for inclusion in the 
compliance reviews.
    We note that under section 1311(e)(1)(B) of the Affordable Care 
Act, which is codified in 45 CFR 155.1000(c), the Exchange may make the 
health plan available on the Exchange if doing so is in the interest of 
the qualified individuals and qualified employers. Accordingly, under 
Sec.  156.715(c), we propose that HHS's findings from compliance 
reviews may be used in conjunction with other findings related to the 
QHP issuer's compliance with certification standards to confirm that 
permitting the issuer's QHPs to be available in an FFE is in the 
interest of qualified individuals and qualified employers as provided 
under Sec.  155.1000(c)(2).
    In Sec.  156.715(d), similar to requirements for Medicare Part C 
audits, we propose that QHP issuers in an FFE make available to HHS the 
issuer's premises, physical facilities, and equipment for compliance 
reviews. We believe that on-site reviews are standard within the health 
insurance industry

[[Page 37060]]

across a broad range of products and that QHP issuers would therefore 
be used to such a standard, even if they have not participated in the 
Medicare Part C program. We expect to focus our compliance review 
efforts around FFE-related standards and activities, which we believe 
will reduce the burden on QHP issuers that have been selected for 
compliance reviews. We considered the two ways of conducting compliance 
reviews: an onsite review for which reviewers would be physically 
present on the QHP issuer's premises, and a desk review, during which 
the reviews would be conducted off-site. Recognizing the need to be 
flexible depending on the specific circumstances giving rise to the 
need for a compliance review, we propose that HHS will have the 
discretion to conduct either an onsite or desk review. We further 
propose in this paragraph that Sec.  156.715, as proposed, is not 
intended to supplant the application of any other Federal laws and 
regulations related to information privacy and security.
    In Sec.  156.715(e), we propose a time period for which HHS may 
conduct compliance reviews. We propose that HHS may conduct compliance 
reviews of a QHP issuer's operations during any plan benefit year for 
up to 10 years from the last day of that plan benefit year, except when 
a QHP is no longer available through an FFE, HHS would be able to 
conduct a compliance review of the last plan benefit year of that QHP 
only up to 10 years from the last day that the QHP's certification was 
effective. For example, if a QHP's current benefit plan year ended on 
December 31, 2014, then HHS may conduct a compliance review of that 
benefit plan year until December 31, 2024. If QHP was decertified on 
May 1, 2014, then HHS may conduct a compliance review of the QHP's last 
benefit plan year until May 1, 2024. In the event that the 10 year 
review period ends during an ongoing compliance review, the ongoing 
compliance review would be permitted to continue beyond the 10 year 
review period. We invite comments on this proposal.
6. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges
    In subpart I, we propose the enforcement remedies that may be used 
in an FFE with respect to QHP issuers participating in an FFE.
    a. Available Remedies; Scope (Sec.  156.800)
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to enforce Exchange standards applicable to issuers offering 
QHPs in the FFE using CMPs as detailed in section 2723(b) of the PHS 
Act ``without regard to any limitation on the application of those 
provisions to group health plans.'' Section 2723(b) of the PHS Act 
authorizes the Secretary to impose CMPs as a means of enforcing the 
individual and group market reforms contained in Title XXVII, Part A of 
the PHS Act when a State fails to substantially enforce these 
provisions.
    Section 1311(d)(4) of the Affordable Care Act requires an Exchange 
to implement procedures for the certification, recertification, and 
decertification of health plans as QHPs. Accordingly, we propose that 
HHS may determine that a QHP offered through an FFE will be decertified 
and no longer offered through an FFE under specified circumstances, 
including where the QHP no longer meets the conditions of the general 
certification criteria under 45 CFR 155.1000(c). We intend to focus our 
enforcement efforts on Exchange standards applicable to issuers 
offering QHPs in the FFE given that enforcement of market-wide 
standards will generally be performed by States as part of their 
traditional regulatory roles. In the interest of avoiding duplication 
of efforts, we intend to generally rely on determinations by States 
that have the authority to enforce Federal standards related to 
participation in a Federally-facilitated Exchange and are in fact, 
substantially enforcing these standards. In Sec.  156.800, paragraphs 
(a) and (b), we propose CMPs and QHP decertification, respectively, as 
the two formal enforcement actions that HHS may take against issuers of 
QHPs offered in an FFE. These are the two tools that the Affordable 
Care Act authorizes the Secretary to use for addressing areas of non-
compliance of QHP issuers in FFEs. As with our proposed approach to 
monitoring QHP issuers participating in an FFE, we intend to coordinate 
our enforcement actions with State efforts in order to streamline the 
oversight of QHP issuers by HHS and States and to avoid inappropriately 
duplicative enforcement actions. We solicit comment on the use of these 
proposed compliance tools. We also invite comments on how HHS can 
collaborate with States on enforcement actions.
    b. Bases and Process for Imposing Civil Money Penalties in 
Federally-facilitated Exchanges (Sec.  156.805)
    In Sec.  156.805(a), we propose the bases on which HHS can impose 
CMPs on QHP issuers in FFEs. We propose imposing CMPs where there 
misconduct in the FFE or substantial non-compliance with Exchange 
standards applicable to issuers offering QHPs in the FFE. Examples 
include falsifying information furnished to an individual or entity 
upon which HHS relies to make evaluations of the QHP issuer's ongoing 
compliance with Exchange standards applicable to issuers offering QHPs 
in the FFE, or which have the effect of hindering the operations of an 
FFE. We intend to apply these penalties in a manner such that the level 
of the enforcement action would vary based on our assessment of the 
scope or level of the violation, taking into account the issuer's 
previous record of compliance, the frequency of the violation, and any 
aggravating or mitigating factors. Because QHPs are one of several 
commercial market insurance products operating in State markets, HHS 
will seek not to unnecessarily duplicate or interfere with the 
traditional regulatory roles played by State DOIs. HHS generally 
intends to focus its QHP oversight to Exchange standards applicable to 
issuers offering QHPs (for example, correctly administering advance 
payments of the premium tax credits and cost-sharing reductions and 
offering benefits consistent with those set forth in the QHP 
applications approved by HHS) because oversight of market-wide 
standards will generally be performed by States in their traditional 
regulatory roles. We will also seek to work collaboratively with State 
Departments of Insurance on topics of mutual concern, in the interest 
of efficiently deploying oversight resources and avoiding unnecessarily 
duplicative regulatory roles. We seek comment on this proposal.
    In Sec.  156.805(b), we propose factors that HHS may take into 
consideration in determining the amount of CMPs to assess. HHS 
recognizes that 2014 will be a transitional year for issuers offering 
QHPs. As a general principle, while HHS proposes to establish authority 
to impose penalties consistent with this proposed rule, we note that we 
intend to work collaboratively with issuers to address problems that 
may arise, particularly in 2014. We propose that an issuer's previous 
and ongoing record of compliance; the level of the violation, including 
the frequency of the violation and the impact of the violation on 
affected individuals; as well as any aggravating or mitigating 
circumstances be taken into consideration. Section 2723(b)(2)(C) of the 
PHS Act limits the CMP amount to $100 for each day for each individual 
adversely affected. Therefore in Sec.  156.805(c), we propose that the 
maximum amount of penalty imposed for each violation to be $100 per day 
for each QHP issuer, for each individual adversely affected by the non-
compliance. For violations where the number of individuals adversely

[[Page 37061]]

affected by the non-compliance cannot be determined, we propose giving 
HHS the authority to estimate the number of individuals likely to be 
adversely affected by the non-compliance. We solicit comment on these 
proposals in addition to comments on whether an appropriately fixed 
maximum penalty amount per occurrence, per submission, or per some 
other relevant marker, or alternatively on a formula for estimating the 
number of individuals adversely affected by the violation would be more 
appropriate.
    We expect this amount to be necessary and adequate for encouraging 
issuers to correct identified occurrences of non-compliance as quickly 
as possible. Our intent is to encourage QHP issuers to address issues 
of non-compliance rather than to impose a punitive monetary assessment, 
especially in situations where the issuer demonstrates good faith in 
monitoring compliance with applicable standards, identifying any 
occurrences of non-compliance, and resolving of issues of non-
compliance. We believe that taking into consideration the various 
factors proposed in paragraph (b) provides HHS flexibility to consider 
the totality of the circumstances in determining a reasonable amount of 
CMP to assess. In paragraph (d), we propose standards for notifying QHP 
issuers of the intent to assess a civil money penalty, which notice 
must include an explanation of the QHP issuer's right to a hearing 
under subpart J of this part, which appeals process we propose to model 
after the process that applies to appeals of HIPAA violations. Section 
156.805(e) contains our proposed provisions on the consequences of 
failing to timely request a hearing, which we have modeled after 45 CFR 
150.347.
    We seek comment on the content and scope of these provisions.
c. Bases and Process for Decertification of a QHP Offered by an Issuer 
through the Federally-facilitated Exchanges (Sec.  156.810)
    Section 1311(d)(4) of the Affordable Care Act directs that each 
Exchange must implement procedures for the certification, 
recertification, and decertification of health plans as QHPs, 
consistent with guidelines developed by the Secretary. We have 
considered the possibility of decertification at (1) the issuer level, 
(2) the QHP level, and (3) both at the issuer level and at the QHP 
level. We considered all three options because some of the bases for 
de-certification include failure to comply with applicable standards at 
the issuer level, while others uniquely involve compliance at the QHP 
level. However, since certification is granted at the plan (QHP) level, 
we propose that decertification should also occur at the QHP level.
    In Sec.  156.810(a), we propose the bases for decertification. We 
considered events that are likely to undermine the integrity or 
operations of an FFE, harm the health of enrollees by limiting access 
to healthcare, and or substantially interfere with HHS' ability to 
ensure that QHPs offered in an FFE are in the interests of qualified 
individuals and qualified employers. Recognizing that QHP issuers are 
voluntarily electing to participate in an FFE, and that participation 
is not required by any statutory mandate, we expect the majority of QHP 
issuers to cooperate with HHS in resolving any issues of non-
compliance. As such and absent any extraordinary circumstances, we 
expect few decertifications, especially in the first plan year. With 
these considerations in mind, we propose in paragraph (a)(1), that a 
QHP may be decertified if the issuer substantially fails to comply with 
Federal laws and regulations applicable to QHP issuers participating in 
an FFE. In paragraphs (a)(2), (3), and (4), we propose that a QHP may 
be decertified if the issuer substantially fails to comply with other 
specific Federal standards applicable to its participation in an FFE, 
as related to the risk adjustment program, transparency in coverage, 
QHP marketing and benefit design, privacy and security standards, and 
advance payment of the premium tax credit and cost-sharing reductions. 
In paragraph (a)(5), we propose that a QHP may be decertified if the 
issuer operates in a manner that hinders the efficient and effective 
administration of an FFE. In paragraph (a)(6), we propose that failure 
of a QHP to meet the requirements of the applicable certification 
criteria would be a basis for decertification. In paragraph (a)(7), we 
propose that a QHP may be decertified when there is credible evidence 
that the issuer has committed or participated in fraudulent or abusive 
activities affecting the Exchange, including submission of false or 
fraudulent data. In paragraphs (a)(8) and (9), we propose as bases for 
decertification, when the QHP issuer substantially fails to meet 
Federal standards related to enrollees' ability to access necessary 
medical items and services which failure could have the effect of 
seriously harming enrollees. In paragraph (a)(10), we propose as a 
basis for decertification, when the State recommends to HHS that the 
QHP should no longer be available in an FFE. We note that in the first 
year, we expect decertification under these bases to be used only in 
extreme cases, and only after the issuer has a sufficient opportunity 
to come into compliance, unless the deficiency is egregious and the 
harm to enrollees or to the integrity or operations of the FFE is 
immediate and severe.
    In Sec.  156.810(b)(1), we propose that HHS may consider a previous 
or ongoing regulatory or enforcement actions taken by a State against a 
QHP issuer as a factor in determining whether to decertify a QHP 
offered by that issuer. We believe this is important to ensure that 
mitigating factors identified by the State are thoroughly considered in 
the decision to decertify a QHP. We believe that, by collaborating with 
the State in which a QHP is being considered for decertification, we 
can make a more informed decision about whether decertification is an 
appropriate course of action by HHS. In paragraph (b)(2), we propose 
that HHS may decertify a QHP offered by an issuer in an FFE based on a 
determination or action of a State as they relate to the issuer 
offering QHPs in an FFE, including, but not limited to, when a State 
places an issuer or its parent organization into receivership or when 
the State has recommended to HHS that a QHP should no longer be made 
available in an FFE. We invite comments on whether these bases are 
appropriate.
    In Sec.  156.810(c) and (d), we propose two processes for 
decertification actions, in consideration of the different bases which 
may result in decertification. Where the basis for decertification does 
not put the QHP enrollees' ability to access necessary medical items 
and services at risk or substantially compromise the integrity of FFEs, 
we propose a standard decertification process under Sec.  156.810(c). 
Under the standard process, we propose that written notice of the 
decertification would be sent to the QHP issuer, enrollees in the QHP 
being decertified, and the State DOI in the State in which the QHP is 
being decertified. The written notice would specify the effective date 
of the decertification, which would not be earlier than 30 days after 
the date of issuance of the notice. Additionally, we propose that the 
written notice would state the reason for the decertification, 
including the legal basis; inform the issuer of the effect of 
decertification and the procedure for appeal; and inform the QHP 
enrollees of the effect of decertification and the availability of a 
special enrollment period under Sec.  155.420.

[[Page 37062]]

    Where the basis for a decertification is one in which the QHP 
enrollees' ability to access necessary medical items or services is at 
risk or the integrity of an FFE is substantially compromised, we 
propose that the QHP issuer would be subject to an expedited 
decertification process under Sec.  156.810(d). This would include 
cases in which there is credible evidence of fraud, the issuer 
substantially fails to provide enrollees of its QHPs access to 
necessary medical items or services, or other specified circumstances. 
We propose that the expedited decertification process would be similar 
to the standard process, except that the effective date of the 
decertification could be immediate. We recognize that, under the 
expedited decertification process, a QHP issuer may lose enrollees 
during the appeal process. However, given that the bases for expedited 
decertification are limited to when the enrollees' ability to access 
needed health items or services is at risk or the integrity of an FFE 
is substantially compromised, and that enrollees should be offered an 
opportunity to transition to another QHP in these circumstances, we 
believe that this expedited decertification process is appropriate. 
Furthermore, the QHP issuer's interests are adequately protected by the 
opportunity for a hearing after decertification, and the potential for 
QHP reinstatement depending on the outcome of the appeal process.
    Both the standard and expedited decertification processes would 
afford the issuer of the decertified QHP the right to appeal the 
decertification through an administrative hearing process under Sec.  
156.810(e), only the timing of that appeal would differ. We propose 
that, under the standard decertification process, the appeal would be 
available prior to the decertification; under the expedited 
decertification process, the appeal generally would be available post-
decertification. Under Sec.  156.810(e), we propose that an issuer may 
appeal the decertification of a QHP offered by that issuer by filing a 
request for hearing under part 156, subpart J. If the issuer makes a 
request for hearing and the decertification is proceeding under the 
standard process, we propose that the decertification would not take 
effect until after the final administrative decision in the appeal, 
notwithstanding the effective date specified in the notice of 
decertification. If the decertification is proceeding under the 
expedited process, we propose that the decertification would still take 
effect on the effective date specified in the notice of 
decertification; however, we propose that the certification of the QHP 
could be reinstated immediately upon issuance of a final administrative 
decision that the QHP should not be decertified.
    We welcome comment on all of the proposed decertification 
procedures, specifically, we invite comment on the two processes for 
decertification (standard and expedited) and the bases for each 
process.
7. Subpart J--Administrative Review of QHP Issuer Sanctions in a 
Federally-Facilitated Exchange
a. Administrative Review in a Federally-Facilitated Exchange 
(Sec. Sec.  156.901-156.963)
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to use CMPs as a means to enforce the Exchange standards, 
including in an FFE. Section 1311(d)(4)(A) of the Affordable Care Act 
authorizes Exchanges, including an FFE, to take action to decertify 
QHPs offered through the Exchange. Enforcement actions taken by a 
Federal agency are generally subject to the Administrative Procedure 
Act, 5 U.S.C. 554 and 556. Consequently, we believe that QHP issuers in 
an FFE that are subject to an enforcement action authorized by the 
Affordable Care Act and proposed subpart I of 45 CFR part 156 are 
entitled to the protections provided by the Administrative Procedure 
Act, including a hearing.
(1) Civil Money Penalty
    45 CFR 150.401 through 150.463 sets forth an administrative hearing 
process for individuals and entities against whom a CMP has been 
imposed in the individual and group health markets. This process is 
intended to provide the individual or entity an opportunity to submit 
evidence to be considered by the administrative law judge (ALJ). 45 CFR 
150.401 through 150.463 establish the evidentiary and procedural rules 
governing the administrative hearing. Under these provisions, the ALJ 
decides whether there is a basis for assessing a CMP against the 
individual or entity and whether the amount assessed is reasonable. In 
order to appeal the CMP, an individual or entity must request a hearing 
within 30 days after the date of the issuance of a notice of 
assessment. If no hearing is requested, the assessment constitutes a 
final and un-appealable order.
    We believe that the process set forth in 45 CFR 150.401 through 
150.463 is similar to the processes most States have in place for 
issuers to appeal State enforcement actions. These regulations also 
established the administrative review process for enforcement actions 
against individuals and entities for HIPAA violations, which have been 
expanded to apply to appeals of market-wide reform enforcement actions. 
Because the process established in 45 CFR Part 150 is similar to 
existing State appeals processes, and we expect that issuers should be 
familiar with HIPAA enforcement processes given the long history of 
that statute, we believe there is significant benefit in modeling the 
administrative hearing process for appeals of sanctions against QHP 
issuers in an FFE after the process established in Part 150. 
Furthermore, we believe that the process as described in the relevant 
sections of Part 150 sufficiently protects the procedural rights of QHP 
issuers. Therefore, we propose in 45 CFR 156.901 through 156.963 an 
administrative appeals process modeled after that set forth in 45 CFR 
150.401 through 150.463. We seek comment on whether this process, as 
proposed, should include additional protections and whether certain 
provisions could be eliminated to expedite the administrative review 
process and reduce administrative burden. We also invite comments on 
whether other models, such as the appeals process for CMPs under 
section 1128A of the Social Security Act, would be more appropriate 
models to use. We propose numbering these sections in a manner similar 
to the numbering in Part 150 for simplicity.
(2) Decertification of QHPs
    Section 1311(d) of the Affordable Care Act requires an FFE to 
implement procedures for decertification of QHPs offered through an 
FFE. 45 CFR 155.1080 codifies this requirement and, in paragraph (d) 
requires an FFE to establish a process for appealing the 
decertification of a QHP. We considered two approaches to the 
decertification appeals process. The first approach would be to expand 
the proposed process for CMP appeals to include appeals of 
decertifications of QHPs offered in an FFE. Under this approach, the 
issuer of a QHP that is being decertified would have the opportunity to 
request a hearing before an ALJ. The appeals process would be governed 
by explicit procedural and evidentiary rules that would afford issuers 
due process protections. As explained above, this approach is modeled 
after the HIPAA administrative hearing process for CMPs assessed 
against issuers in the group and individual markets, and is similar to 
appeals processes that currently exist at the

[[Page 37063]]

State level. We note that the HIPAA administrative process has been 
expanded to apply to appeals of enforcement actions of market-wide 
reform standards. We believe this approach would be familiar to QHP 
issuers and would therefore cause minimal confusion and uncertainty. 
The second approach that we considered is the hearing process used for 
terminations of contracts with Medicare Part C organizations under 42 
CFR 422.510(a), which appeals process is described at 42 CFR part 422, 
subpart N. Under this approach, the hearing would take place before a 
hearing officer rather than an ALJ. Although the Medicare Part C 
approach might take less time to result in a final administrative 
decision on decertification, we considered the possibility that QHP 
issuers that are unfamiliar with the Medicare program could be confused 
by this hearing process. Therefore, after careful consideration of the 
benefits and risks of the two approaches, we propose modeling the 
hearing process for QHP decertification after the HIPAA process. 
Similar to our proposal for the CMP appeals hearing process, for 
decertification hearings, we propose generally to adopt the regulatory 
process set forth 45 CFR part 150, subpart D. Although we propose to 
preserve the large majority of the regulatory text from part 150, there 
are two principal exceptions. In Sec.  156.903(a), we propose modifying 
the part 150 approach to expand the scope of the ALJ's authority to 
issue a decision concerning the decertification of a QHP in an FFE. In 
Sec.  156.917(a), we propose modifying the part 150 approach by 
including a paragraph (a)(3) to provide that the ALJ has the authority 
to hear and decide whether a basis exists for an FFE's determination to 
decertify a QHP. In other places, where necessary, we make conforming 
amendments to refer to appeals of decertifications as well as of CMP 
assessments; otherwise, our intent is to not alter the regulatory 
process set forth in 45 CFR part 150, subpart D. We seek comment on 
whether this appeals process should include additional protections or 
whether certain aspects of the part 150 approach could be eliminated to 
expedite the administrative review process and reduce administrative 
burden. We also invite comments on whether other models, such as the 
appeals process for CMPs under section 1128A of the Social Security 
Act, would be more appropriate models to use.
8. Subpart K--Cases Forwarded to Qualified Health Plans and Qualified 
Health Plan Issuers in Federally-Facilitated Exchanges by HHS
a. Standards (Sec.  156.1010)
    We propose in Sec.  156.1010 to set requirements for resolving 
cases forwarded to the QHP issuer operating in an FFE by HHS. A case is 
communication brought by a complainant that expresses dissatisfaction 
with a specific person or entity subject to State or Federal laws 
regulating insurance, concerning the person or entity's activities 
related to the offering of insurance, other than a communication with 
respect to an adverse benefit determination as defined in 45 CFR 
147.136(a)(2)(i). Cases could include concerns about the operations of 
a QHP issuer operating in an FFE such as: waiting times when contacting 
an issuer's call center, the demeanor of customer service personnel, or 
the failure to receive materials related to coverage under the QHP, 
such as the Summary of Benefits and Coverage. While we expect that most 
cases will be brought by or on behalf of QHP applicants and enrollees, 
some cases may be brought by providers or other interested parties. HHS 
recognizes that States currently play an important role in handling 
various types of cases related to health plans and issuers, and HHS 
envisions the States will continue to play an important role in 
assisting applicants, enrollees, providers and others. We anticipate 
that many cases will be presented in the first instance to the State 
DOI and will be addressed by the State in accordance with its own laws, 
regulations, and processes. For a case forwarded to a QHP issuer 
operating in an FFE by a State, the QHP issuer is expected to comply 
with applicable standards established by State laws and regulations. 
Additionally, some cases not related to FFE-specific topics will be 
brought to HHS rather than to the State. HHS intends to work with each 
State to ensure that such cases are addressed by the State in 
accordance with its own laws, regulations, and processes. We intend 
that cases received by a QHP issuer operating in an FFE directly from a 
complainant or the complainant's authorized representative will be 
handled by the issuer through its internal customer service process. 
For cases related to FFE-specific topics brought to HHS, we propose 
that such cases will be addressed and resolved by HHS and the issuer, 
as appropriate, pursuant to the proposed standards in Sec.  156.1010.
    In Sec.  156.1010(a), we propose the definition of a case. In Sec.  
156.1010(b), we propose that QHP issuers operating in an FFE must 
investigate and resolve, as appropriate, cases brought by a complainant 
or the complainant's authorized representative and forwarded to the 
issuer by HHS. QHP issuers operating in an FFE are reminded that issues 
and inquiries related to an adverse benefit determination as defined in 
45 CFR 147.136(a)(2)(i) are not covered by this proposed section, and 
are subject to the regulations governing internal claims appeals and 
external review in 45 CFR 147.136.
    Section 156.1010(c) proposes that cases may be forwarded to a QHP 
issuer operating in an FFE through a casework tracking system developed 
by HHS, or through other means as determined by HHS. Cases may be input 
into a tracking system developed by HHS by a variety of individuals, 
including HHS staff, Navigators and other assistors, and Consumer 
Assistance Programs.
    Section 156.1010(d) proposes that cases forwarded by HHS to a QHP 
issuer operating in an FFE must be resolved within 15 calendar days of 
receipt of the case. We propose that such cases involving the need for 
urgent medical care must be resolved no more than 72 hours after 
receipt of the case. QHP issuers operating in an FFE must make every 
effort to quickly resolve cases when an enrollee has an urgent need to 
access needed medical items and services, pursuant to proposed 
paragraph (e) of this section. We further propose that, for cases 
forwarded by HHS to a QHP issuer operating in an FFE, where applicable 
State laws and regulations establish timeframes for case resolutions 
that are stricter than the standards under this paragraph, QHP issuers 
are required to comply with the stricter State laws and regulations.
    In 156.1010(e) we propose that an urgent case is one in which there 
is an immediate need for health services because a non-urgent standard 
could seriously jeopardize the enrollee's or potential enrollee's life, 
or health or ability to attain, maintain, or regain maximum function.
    In Sec.  156.1010(f), for cases forwarded by HHS we propose that 
QHP issuers operating in an FFE are required to provide notice to 
complainants regarding the disposition of a case as soon as possible 
upon resolution of the case, but in no event later than seven (7) 
business days after the case is resolved. Notification may be by verbal 
or written means as determined most expeditious by the QHP issuer.

[[Page 37064]]

    In Sec.  156.1010(g), we propose that the QHP issuer operating in 
an FFE must document in a casework tracking system developed by HHS, or 
by other means determined by HHS, that the case has been resolved, no 
later than seven (7) business days after resolution of the case. The 
resolution record must include a clear and concise narrative explaining 
how the case was resolved including information about how and when the 
complainant was notified of the resolution.
    In Sec.  156.1010(h) we propose that cases received by a QHP issuer 
operating in an FFE from the State in which the issuer offers QHPs must 
be investigated and resolved according to applicable State laws and 
regulations. In addition, QHP issuers operating in an FFE must 
cooperate fully with a State, HHS, or any other appropriate regulatory 
authority that is handling a case.
    HHS will use casework data within the HHS developed casework 
tracking system, including data entered by HHS and other users such as 
QHP issuers operating in FFEs, Consumer Assistance Programs, and 
Navigators, to identify trends, areas of concern, and compliance 
issues.
9. Subpart L--Quality Standards
a. Establishment of Standards for HHS-approved Enrollee Satisfaction 
Survey Vendors for Use by QHP Issuers in Exchanges (Sec.  156.1105)
    Section 1311(c)(4) of the Affordable Care Act directs the Secretary 
to develop an enrollee satisfaction survey that evaluates the level of 
enrollee satisfaction with each QHP that is offered through an 
Exchange, for QHPs that had more than 500 enrollees in the previous 
year. The results of the evaluation are to be publicly reported on the 
Exchange's Internet portal, in a manner that allows for easy comparison 
of enrollee satisfaction levels among comparable plans. HHS intends to 
begin public reporting of these survey results in 2016. 45 CFR 
155.200(d) directs Exchanges to oversee the implementation of enrollee 
satisfaction surveys and the assessment and ratings of health care 
quality and outcomes, in accordance with sections 1311(c)(1), 
1311(c)(3) and 1311(c)(4) of the Affordable Care Act. Further, as part 
of minimum certification standards, 45 CFR 156.200(b)(5) directs QHP 
issuers to disclose and report information on health care quality and 
outcomes and implement appropriate enrollee satisfaction surveys.
    In order to carry out these functions, we propose processes under 
which HHS would approve and oversee enrollee satisfaction survey 
vendors that will administer enrollee satisfaction surveys on behalf of 
QHP issuers. In future rulemaking, we intend to direct QHP issuers to 
contract with HHS-approved enrollee satisfaction survey vendors to 
fulfill the requirements established in 45 CFR 156.200(b)(5). The 
enrollee satisfaction survey vendors would need to be approved by mid-
2014 to allow time for QHP issuers to contract with these vendors by 
late 2014, well before any relevant quality reporting standards must be 
implemented. We have previously stated that quality reporting standards 
(including the enrollee satisfaction survey) would be implemented in 
2016, and available for consumers to use during 2017 open 
enrollment.\33\ This implementation timeline is reflective of the 
earliest possible time that issuers would be able to report performance 
data on their QHP populations. HHS intends to also utilize the enrollee 
satisfaction survey information to engage in oversight activities of 
QHP issuers and in QHP recertification decisions.
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    \33\ General Guidance on Federally-facilitated Exchanges, May 
16, 2012. Available at http://cciio.cms.gov/resources/files/ffe-guidance-05-16-2012.pdf.
---------------------------------------------------------------------------

    We also intend to establish, in future rulemaking, that the 
enrollee satisfaction survey be modeled on the CAHPS[supreg] Health 
Plan survey which typically assesses patients' satisfaction with their 
health care, personal doctors, and health plans. To administer the 
CAHPS[supreg] survey to Medicare Parts C and D enrollees, Medicare 
Parts C and D utilize a similar process to the one we are proposing in 
Sec.  156.1105 to approve enrollee satisfaction survey vendors. We 
anticipate that enrollee satisfaction survey vendors would also be 
responsible for submitting survey results directly to HHS and other 
entities specified by HHS, such as Exchanges. We also plan to 
promulgate additional quality reporting standards for QHP issuers and 
Exchanges. We seek comment on this proposed approach to approving and 
monitoring enrollee satisfaction survey vendors.
    In Sec.  156.1105(a), we propose an application and approval 
process for enrollee satisfaction survey vendors. We propose that only 
HHS-approved enrollee satisfaction survey vendors could administer the 
survey on behalf of QHP issuers. We believe that this proposed process 
will help to ensure that survey results are valid, reliable, and 
unbiased. This process would also allow QHP issuers to easily find 
approved vendors since we plan to publish a list of approved vendors. 
We propose that enrollee satisfaction survey vendors will be approved 
for one-year terms, which could mean that, to maintain their HHS 
approval, each vendor would submit annual applications to HHS 
demonstrating that the vendor meets all of the application and approval 
requirements. Survey vendor application forms will be developed and 
released at a later date. Survey vendors that are not approved by HHS 
are invited to re-apply. HHS will work with those vendors so that they 
could meet the standards specified in Sec.  156.1105(b) for re-
application. We are also considering developing a process for revoking 
HHS approval of vendors and a related appeals process in future 
rulemaking. We seek comment on these processes.
    In paragraph (b), we propose the standards that an enrollee 
satisfaction survey vendor must meet to be approved by HHS.
    We have not proposed specific minimum business criteria in 
paragraph (b)(11) for enrollee satisfaction survey vendors. However, we 
intend to align these criteria with existing criteria set for Medicare 
Advantage CAHPS[supreg] Survey vendors, including but not limited to 
relevant survey experience and organizational survey capacity. 
Specifically, we are considering the following criteria: (a) Having at 
least two years of experience conducting similar types of survey 
administration; (b) possessing appropriate staff credentials and 
expertise to conduct survey administration; and (c) minimum facility 
requirements, such as ability to store secure data. We seek comment on 
these minimum business criteria and any additional criteria that we 
should consider.
    Finally, we propose in paragraph (c) that once HHS has approved 
enrollee satisfaction survey vendors, HHS would publish a list of 
approved entities on an HHS Web site.
10. Subpart M--Qualified Health Plan Issuer Responsibilities
a. Confirmation of HHS Payment and Collections Reports (Sec.  156.1210)
    We anticipate sending each applicable issuer a monthly payment and 
collections reports that will show, with respect to certain provisions 
under Title I of the Affordable Care Act, payments HHS owes to the 
issuer, as well as those the issuer owes HHS. For the 2014 calendar 
year, we anticipate this report will include advance payments of the 
premium tax credit and advance payments of cost-sharing reductions that 
HHS is paying to the issuer for each policy listed on the payment 
report, any

[[Page 37065]]

amounts owed by the issuer for FFE user fees, as well as any 
adjustments from previous payments under those programs. Any applicable 
issuer will need to review this payment and collections report against 
the payments it expects for each policy based on the eligibility and 
enrollment information transmitted by the Exchange, and, any amounts it 
expects HHS to collect for FFE user fees. In order to ensure accurate 
payments and make adjustments, in Sec.  156.1210, we propose that, 
within 15 calendar days of the date of a payment and collections 
report, the issuer would either confirm to HHS that the payment and 
collections report accurately lists payments owed by HHS and the issuer 
for the timeframe specified in the payment and collections report, or 
describe to HHS any inaccuracy it identifies in these amounts 
(including incorrect payment amounts, or extra or missing policies in 
the report). These notifications would be provided in a format 
specified by HHS. HHS will work with issuers to resolve any 
discrepancies between the amounts listed in the payment and collections 
report and the amounts the issuer believes it should receive for the 
time period specified on the report.
    This proposed provision will help align enrollment and eligibility 
data transmitted by the Exchange, payments provided by and collected by 
HHS, and the issuer's own records of payments due. In addition to the 
provisions proposed in Sec.  156.410 and Sec.  156.460 of this Part, 
this proposed provision will also help ensure that the correct amounts 
of advance payments of the premium tax credit and advance cost-sharing 
reductions are paid to issuers on behalf of eligible individuals. We 
note the need to protect enrollees from unanticipated tax liability 
that could result if the advance payments of the premium tax credit 
they receive are greater than the amounts of premium tax credit 
available to them. We seek comment on this provision, and in particular 
on the length of time issuers should have to respond to the payment and 
collections report.
b. Direct Enrollment With the QHP Issuer in a Manner Considered To Be 
Through the Exchange (Sec.  156.1230)
    Section 1413 of the Affordable Care Act directs the Secretary to 
establish, subject to minimum requirements, a streamlined enrollment 
process for enrollment in QHPs and all insurance affordability 
programs. We anticipate that many individuals will approach issuers 
directly for purposes of QHP enrollment. Many issuers currently use 
their Web sites to enroll individuals into health coverage. 
Accordingly, consistent with HHS's guidance titled ``Affordable 
Exchanges Guidance: Letter to Issuers on Federally-facilitated and 
State Partnership Exchanges,'' \34\ we propose to add paragraph Sec.  
156.1230(a)(1)(i) that would allow, at the Exchange's option, a QHP 
issuer to enroll an applicant who initiates enrollment directly with 
the QHP issuer in a manner that is considered enrollment through the 
Exchange if the QHP issuer follows the enrollment process for qualified 
individuals set forth in Sec.  156.265.
---------------------------------------------------------------------------

    \34\ Affordable Exchanges Guidance: Letter to Issuers on 
Federally-facilitated and State Partnership Exchanges, (April 5, 
2013). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf
---------------------------------------------------------------------------

    We are also proposing paragraphs (a)(1)(ii)-(a)(1)(v) whereby QHP 
issuers that seek to directly enroll a qualified individual in a manner 
considered to be through the Exchange would be required to meet certain 
minimum consumer protections. The proposed protections would ensure 
that consumers know how to access available coverage options and are 
able to make informed plan selections. We propose in a new paragraph 
Sec.  156.1230(a)(1)(ii) that QHP issuers that seek to directly enroll 
qualified individuals in a manner considered to be through the Exchange 
must provide applicants the ability to view the QHPs offered by the 
issuer with data elements set forth at 45 CFR 155.205(b)(1). Under this 
proposal, QHP issuers would need to ensure their Web sites provide 
standardized comparative information on each available QHP offered by 
the QHP issuer, including premium and cost-sharing information; the 
summary of benefits and coverage established under section 2715 of the 
PHS Act; identification of whether the QHP is a bronze, silver, gold or 
platinum metal level or a catastrophic plan; the results of the 
enrollee satisfaction survey, as described in section 1311(c)(4) of the 
Affordable Care Act; quality ratings assigned in accordance with 
section 1311(c)(3) of the Affordable Care Act; MLR information as 
reported to HHS in accordance with 45 CFR part 158; transparency of 
coverage measures reported to the Exchange during certification; and 
the provider directory in accordance with Sec.  156.230. We note that 
for 2014, the information referenced in 45 CFR 155.205(b)(1)(iv), (v), 
and (vii) will not be required because the information will not be 
available.
    We also propose in Sec.  156.1230(a)(1)(iii) that QHP issuers that 
seek to directly enroll qualified individuals in a manner considered to 
be through the Exchange using the issuer's Web site must clearly 
distinguish between QHPs for which the consumer is eligible and non-
QHPs that the issuer may offer. We propose that this distinction must 
also clearly articulate that APTC and CSRs apply only to QHPs offered 
through the Exchange.
    In addition, in Sec.  156.1230(a)(1)(iv) we propose that QHP 
issuers that seek to directly enroll qualified individuals in a manner 
considered to be through the Exchange be required to notify applicants 
of the availability of other QHP products offered through the Exchange 
to consumers, regardless of whether they apply through a Web site, in-
person or by phone. The QHP issuer would also be required to display 
the Web link to or describe how to access the Exchange Web site. We 
seek comment if HHS should require a universal disclaimer to be 
displayed by the issuer that informs applicants that other coverage 
options exist in the Marketplace and that not all coverage options are 
displayed.
    In Sec.  156.1230(a)(1)(v) we propose that a QHP issuer be required 
to ensure that, when an applicant initiates enrollment directly with 
the QHP issuer and the QHP issuer seeks to directly enroll the 
applicant in a manner considered to be through the Exchange, the 
applicant is allowed to select an APTC amount, if applicable, in 
accordance with Sec.  155.310(d)(2), provided that the applicant makes 
the attestations required by Sec.  155.310(d)(2)(ii).
    In Sec.  156.1230(a)(2) we propose that, if permitted by the 
Exchange pursuant to Sec.  155.415 of this part, a QHP issuer seeking 
to directly enroll applicants in a manner considered to be through the 
Exchange enter into an agreement with the Exchange prior to allowing 
any of its customer service representatives to assist qualified 
individuals in the individual market with: (a) Applying for an 
eligibility determination or redetermination for coverage through the 
Exchange; (b) applying for insurance affordability programs; or (c) 
facilitating the selection of a QHP offered by the issuer represented 
by the customer service representative whereby the QHP issuer would 
agree to require each of its customer service representatives to at a 
minimum: (i) receive training on QHP options and insurance 
affordability programs, eligibility, and benefits rules and 
regulations; (ii) comply with the Exchange's privacy and security 
standards adopted consistent with Sec.  155.260; and (iii) comply with 
applicable State law related to the sale, solicitation, and negotiation 
of health insurance products, including

[[Page 37066]]

applicable State law related to agent, broker, and producer licensure; 
confidentiality; and conflicts of interest. We solicit comments on 
these proposals.
    We also propose to add paragraph (a)(3) to ensure that the premium 
that a QHP issuer charges to a qualified individual or enrollee is the 
same as was accepted by the Exchange in its certification of the QHP 
issuer after accounting for any APTC. We propose that if the QHP issuer 
identifies an error in the amount it has charged the qualified 
individual, the QHP issuer must retroactively correct the error no 
later than 30 calendar days after its discovery. We also propose that 
for issuers of QHPs in the FFE, HHS may review the premiums charged to 
qualified individuals through the compliance reviews proposed in Sec.  
156.715(a).
    Finally, in paragraph (b), we state that the individual market FFE 
will permit the conduct set forth in this section, to the extent 
permitted by applicable State law.
c. Enrollment Process for Qualified Individuals (Sec.  156.1240)
    We realize that a segment of the population that will seek health 
insurance coverage through an Exchange will not have bank accounts or 
credit cards, and we have received numerous questions and comments on 
this topic. These people should be able to access coverage through an 
Exchange on the same basis as those with a bank account or credit card 
and should not be unable to access coverage merely due to the inability 
to pay their share of the premium. Therefore, we propose to require QHP 
issuers at a minimum accept a variety of payment formats, including, 
but not limited to, paper checks, cashier's checks, money orders, and 
replenishable pre-paid debit cards, so that individuals without a bank 
account will have readily available options for making monthly premium 
payments. Issuers may also offer electronic funds transfer from a bank 
account and automatic deduction from a credit or debit card as payment 
options. We seek comment on this proposal and whether other payment 
methods should be included.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office and Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 (PRA) 
requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The following sections of this document contain estimates of burden 
imposed by the associated information collection requirements (ICRs); 
however, not all of these estimates are subject to the ICRs under the 
PRA for the reasons noted. Salaries for the positions cited were mainly 
taken from the Bureau of Labor Statistics (BLS) Web site (http://www.bls.gov/oco/ooh_index.htm).
    The salaries for the health policy analyst and the senior manager 
were taken from the Office of Personnel Management Web site. Fringe 
Benefits estimates were taken from the BLS March 2013 Employer Costs 
for Employee Compensation Report.\35\
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    \35\ BLS March 2013 Employer Costs for Employee Compensation 
Report (March 12, 2013). Available at http://www.bls.gov/news.release/ecec.toc.htm
---------------------------------------------------------------------------

A. ICRs Regarding Program Integrity Provisions Related to State 
Operation of the Reinsurance Program (Sec.  153.260)

    In Sec.  153.260 of this proposed rule, we direct a State-operated 
reinsurance program to: (1) Keep an accurate accounting of reinsurance 
contributions, payments, and administrative expenses; (2) submit to HHS 
and make public a summary report on program operations; and (3) engage 
an independent qualified auditing entity to perform a financial and 
programmatic audit for each benefit year. Fewer than 10 States have 
informed HHS that they will operate reinsurance for the 2014 benefit 
year. While these reinsurance records requirements are subject to the 
PRA, we believe the associated burden is exempt under 5 CFR 
1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i), since fewer than 10 entities 
would be affected. Therefore, we are not seeking approval from OMB for 
these information collection requirements.

B. ICRs Regarding Program Integrity Provisions Related to State 
Operation of the Risk Adjustment Program (Sec.  153.310(c)(4) and Sec.  
153.310(d)(3)-(4), and Sec.  153.365)

    In Sec.  153.310(c)(4), Sec.  153.310(d)(3)-(4), and Sec.  153.365 
of this proposed rule, we require a State operating risk adjustment to: 
(1) Retain records for a 10-year period; (2) submit an interim report 
in its first year of operation; (3) submit to HHS and make public a 
summary report on program operations for each benefit year; and (4) 
keep an accurate accounting for each benefit year of all receipts and 
expenditures related to risk adjustment payments, charges, and 
administrative expenses. Fewer than 10 States have informed HHS that 
they will operate risk adjustment for the 2014 benefit year. Since the 
burden associated with collections from fewer than 10 entities is 
exempt from the PRA under 5 CFR 1320.3(c)(4) and 44 U.S.C. 
3502(3)(A)(i), we are not seeking approval from OMB for the risk 
adjustment information collection requirements. However, if more than 
nine States elect to operate risk adjustment in the future, we will 
seek approval from OMB for these information collections.

C. ICRs Regarding Maintenance of Records for Contributing Entities and 
Reinsurance-Eligible Plans (Sec.  153.405(h) and Sec.  153.410(c))

    In Sec.  153.405(h) and Sec.  153.410(c), we propose record 
retention standards for contributing entities and reinsurance-eligible 
plans. In proposed Sec.  153.405(h), we require contributing entities 
to maintain documents and records, whether paper, electronic, or in 
other media, sufficient to substantiate the enrollment count submitted 
pursuant to this section for a period of at least 10 years, and must 
make that evidence available upon request to HHS, the OIG, the 
Comptroller General, or their designees, to any such entity, for 
purposes of verification of reinsurance contribution amounts. This 
requirement may be satisfied if the contributing entity archives the 
documents and records and ensures that they are accessible if needed in 
the event of an investigation or audit.
    We estimate that 26,200 contributing entities will be subject to 
this requirement, based on the Department of Labor's (DOL) estimated 
count of self-insured plans and the number of fully insured issuers 
that we estimate will make reinsurance contributions.\36\ We

[[Page 37067]]

believe that most of these contributing entities will already have the 
systems in place for record maintenance, and that the additional burden 
associated with this requirement is the time, effort, and additional 
labor cost required to maintain the records. On average, we estimate 
that it will take each contributing entity approximately 5 hours 
annually to maintain records. We estimate that it will take an 
insurance operations analyst 5 hours (at $38.49 an hour) to meet these 
requirements. On average, the cost for each contributing entity would 
be approximately $192.45 annually. Therefore, for 26,200 contributing 
entities, we estimate an aggregate burden of $5,042,190 and 131,000 
hours as a result of this requirement.
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    \36\ We use an estimate of self-insured entities published by 
the DOL in the March 2013 ``Report to Congress: Annual Report of 
Self-insured Group Health Plans,'' which reflects only those self-
insured health plans (including 19,800 self-insured plans and 4,000 
plans that mixed self-insurance and insurance) that are required to 
file a Form 5500 with the DOL.
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    In proposed Sec.  153.410(c), we require issuers of reinsurance-
eligible plans to maintain documents and records, whether paper, 
electronic, or in other media, sufficient to substantiate the requests 
for reinsurance payments made pursuant to this section for a period of 
at least 10 years, and must make that evidence available upon request 
to HHS, the OIG, the Comptroller General, or their designees, (or, in 
the case of a State operating reinsurance, the State or its designees), 
to any such entity, for purposes of verification of reinsurance payment 
requests. We estimate that 1,900 issuers of reinsurance-eligible plans 
will be subject to this requirement, based on HHS's most recent 
estimate of the number of fully insured issuers that will submit 
requests for reinsurance payments. On average, we estimate that it will 
take each issuer of a reinsurance-eligible plan approximately 10 hours 
annually to maintain records. We estimate that it will take an 
insurance operations analyst 10 hours (at $38.49 an hour) to meet these 
requirements. On average, the cost estimate for each issuer is 
approximately $384.90 annually. Therefore, for 1,900 issuers, we 
estimate an aggregate burden of $731,310 and 19,000 hours as a result 
of this requirement.
    The burden estimates for these two recordkeeping requirements are 
broad estimates that include not only the maintenance of data, but all 
records and documents that may be necessary to substantiate the 
enrollment count and requests for reinsurance payments made pursuant to 
45 CFR 153.405 and 153.410, respectively. Because the scope of these 
requirements is substantially less than the scope of the recordkeeping 
requirement applicable to a State operating reinsurance, these 
estimates are lower than those that were set forth for State-operated 
reinsurance programs record maintenance requirement (45 CFR 153.240(c)) 
in the Premium Stabilization Rule published March 23, 2012 (77 FR 
17220), and the associated information collection request approved 
under OMB Control Number 0938-1155. We note that we will account for 
the additional burden associated with submitting this information to 
HHS in a future information collection request that will go through the 
requisite notice and comment period and subsequent OMB review and 
approval process.

D. ICRs Related to Ability of States To Permit Agents and Brokers To 
Assist Qualified Individuals, Qualified Employers, or Qualified 
Employees Enrolling in Qualified Health Plans in the Federally-
Facilitated Exchange (Sec.  155.220)

    Section 155.220 authorizes HHS to terminate an agent's or broker's 
agreement with an FFE if HHS determines that the agent or broker is out 
of compliance with the standards outlined in 45 CFR 155.220. Section 
155.220(g) sets forth the process whereby an agent or broker can 
request reconsideration of HHS's termination. Specifically, the agent 
or broker must submit the request for reconsideration within 30 
calendar days of receipt of the date of the notice of termination.
    The burden estimates for the reporting requirements in Sec.  
155.220 reflect our assumption that there will be 254,095 agents and 
brokers registered in an FFE. The NAIC indicates that there are between 
600,000 and 700,000 total licensed brokers selling health insurance at 
any point in time in the United States. We selected the midpoint, 
650,000, as our estimate of the number of licensed brokers. We estimate 
that 37 percent of these brokers are in States with State Exchanges. 
This means an estimated 63 percent, or 409,500, are in FFE States. We 
estimate that 85 percent, or 348,000, will be registered in an FFE. 
States have traditionally overseen agents and brokers in the health 
insurance market and we expect that States will continue in that 
regulatory role and be the primary regulator of agents and brokers in 
their respective States. Given that our oversight of agents and brokers 
will be narrowly tailored to FFE-specific standards, we expect 
terminations to be infrequent, especially in the first plan year. For 
purposes of this burden estimate, we assume that two agents or brokers 
will have their access suspended or revoked and that both agents or 
brokers will appeal these actions. We solicit comments on these 
assumptions.
    As stated in Sec.  155.220(g)(2), an agent or broker may submit a 
request for reconsideration of any termination decision by HHS within 
30 calendar days of notification of the decision. We assume the need to 
terminate an agent's or broker's agreement with an FFE will occur only 
rarely. For purposes of this initial burden estimate we estimate that 
revocation notices will be sent to 2 agents or brokers each year. The 
hour burden associated with this action is the time and effort needed 
by the agent or broker to create the written request and submit it 
electronically to HHS. The associated costs are labor costs for 
gathering the necessary background information and then preparing and 
submitting the request.
    We assume that all agents and brokers who receive a notice of 
termination will submit a request for reconsideration. We expect the 
request to address the issues presented in the original notice of 
termination from HHS. The hours involved in preparing and submitting 
this request may vary. For the purpose of this burden estimate we 
estimate that it will take 18 hours for an agent or broker to prepare 
and submit this request: 10 hours (at $28.81 an hour) for the brokerage 
clerk to gather and assemble necessary background materials and 8 hours 
(at $41.15 an hour) for the agent or broker to prepare the written 
request and submit it electronically. This is a total of 18 hours 
annually at a cost of $617.30 per agent or broker. Therefore, we 
estimate an aggregate burden of 36 hours at a cost of $1,234.60 for the 
two agents or brokers. We solicit comments on these estimates.

E. ICRs Related to the Eligibility Process (Sec.  155.310)

    Section Sec.  155.310(k) provides that if an Exchange does not have 
enough information to conduct an eligibility determination for advance 
payments of the premium tax credit or cost-sharing reductions, the 
Exchange must provide notice to the applicant regarding the incomplete 
application. We anticipate that this notice requirement is not a 
separate notice to an individual but text within the eligibility 
determination notice described in Sec.  155.310(g) and discussed in a 
separate information collection request that is associated with the 
notice of proposed rulemaking that published on January 22. 2013 (78 FR 
4594). We therefore do not include a separate burden estimate to 
develop this notice but the time and cost associated

[[Page 37068]]

with this notice is included within the estimate in Sec.  155.310(g).
    Section 155.310(k)(2) provides that the Exchange must provide the 
applicant with a period of no less than 15 days and no more than 90 
days from the date on which the notice is sent to the applicant to 
provide the information needed to complete the application to the 
Exchange.
    Given the fact that the Exchange eligibility process is entirely 
new and involves the use of new electronic data sources in combination 
with a new application, it is not possible to provide estimates for the 
number of applicants for whom we expect to have an incomplete 
application. However, we anticipate that this number will decrease as 
applicants become more familiar with the eligibility process, as more 
data become available electronically, and as customer service resources 
evolve based on experience.
    Therefore, we estimate the time and effort for one individual to 
comply with this provision. We expect that this will take an individual 
one hour to gather the relevant documentation and enter the missing 
information online or contact the call center to provide the necessary 
information. Our estimate that it will take an individual one hour to 
gather the relevant documentation depends on whether or not the 
individual already has the necessary documentation on hand, or whether 
the documents are presently unavailable and the individual needs to 
spend additional time to gather the documentation. As such, it could 
take significantly less time if an individual already had the documents 
on hand, or potentially more time if certain documents were unavailable 
at the time an individual needed to complete the application.

F. ICRs Related to Oversight and Financial Integrity Standards for 
State Exchanges (Sec.  155.1200 to Sec.  155.1210)

    In subpart M of part 155, we describe the information collection 
and third-party disclosure standards related to the oversight and 
financial integrity of State Exchanges.
    Section 155.1200(a)(1)-(3) requires the State Exchange to follow 
GAAP and to monitor and report to HHS all Exchange-related activities. 
This includes keeping an accurate accounting of all Exchange receipts 
and expenditures. The burden associated with this reporting requirement 
is the time and effort needed to develop and submit Exchange-related 
activities to HHS. The State Exchanges will electronically maintain the 
information as a result of normal business practices; therefore, the 
burden does not include the time and effort needed to maintain the 
Exchange-related activity information. State Exchanges most likely will 
already have accounting systems in place to store accounting 
information. The burden associated with this requirement includes a 
computer programmer taking 8 hours (at $48.61 an hour) to modify the 
system to maintain and monitor the information required under Sec.  
155.1200(a)(1) through (3), an analyst taking 8 hours (at $58.05 an 
hour) to pull the necessary data under Sec.  155.1200(a)(1) through (3) 
in the State Exchange accounting system, and a senior manager taking 2 
hours (at $77.00 an hour) to oversee the development and transmission 
of the reported data. We estimate that it will take 18 total hours at a 
cost of $1,007.28 for each State Exchange. We estimate the total burden 
to be 324 hours for a total cost of $18,131.04 for all State Exchanges.
    Section 155.1200(b)(1) requires the State Exchange to submit a 
financial statement, in accordance with GAAP to HHS. The information 
under Sec.  155.1200(b) must be submitted at least annually by April 1 
to HHS and must also be publicly displayed. The burden associated with 
this reporting requirement is the time and effort needed to develop and 
submit the financial statement to HHS. The State Exchanges will 
electronically submit the information. Therefore, the burden is the 
time and effort needed to develop and publically display the financial 
statement. The State Exchanges will electronically maintain the 
information as a result of normal business practices, therefore the 
burden does not include the time and effort needed to develop and 
maintain the financial information. The burden associated with this 
requirement includes a computer programmer taking 40 hours (at $48.61 
an hour) to design the financial statement report, an analyst taking 8 
hours (at $58.05 an hour) pulling the necessary data and inputting it 
into the financial statement report, and a senior manager taking 2 
hours (at $77.00 an hour) overseeing the development and transmission 
of the reported data. We estimate a burden of 50 total hours for each 
State Exchange at a cost of $2,562.80, for a total cost of $45,410.40 
for all Exchanges.
    Section 155.1200(b)(2) requires the State Exchange to submit 
eligibility and enrollment reports to HHS. The State Exchanges will 
electronically maintain the information as a result of normal business 
practices, therefore the burden does not include the time and effort 
required to develop and maintain the source information. The burden 
associated with this reporting requirement includes the time and effort 
necessary for a computer programmer taking 40 hours (at $48.61 an hour) 
to design the report template, an analyst taking 8 hours (at $58.05 an 
hour) to compile the statistics for the report for submission to HHS, a 
privacy officer taking 8 hours (at $64.98 an hour) and senior manager 
taking 2 hours (at $77.00 an hour) overseeing the development and 
submission of the reported data. The burden also includes the time and 
effort necessary to post the data on the State Exchange Web site. We 
estimate an initial year burden of 58 hours at a cost of $3,082.64 to 
each State Exchange and a total burden of 1,044 hours at a cost of $55, 
487.52 for all State Exchanges.
    As discussed in Sec.  155.1200(b)(3), the State Exchange will 
report performance monitoring data to HHS. The performance monitoring 
data includes information on financial sustainability, operational 
efficiency, and consumer satisfaction which will be reported on an 
annual basis. The State Exchanges will electronically maintain the 
information as a result of normal business practices developed under 
Establishment Grants from HHS for this purpose. Therefore the burden 
does not include the time and effort needed to develop and maintain the 
performance data. The burden associated with meeting the reporting 
requirement includes the time and effort necessary for a computer 
programmer taking 40 hours (at $48.61 an hour) to design the report, 
for an analyst taking 12 hours (at $58.05 an hour) to pull data into 
the report and prepare for submission to HHS and for a senior manager 
taking 2 hours (at $77.00 an hour) to oversee the development and 
transmission of the reported data. Section 155.1200(b) requires the 
State Exchange to submit to HHS and to display publicly financial, 
eligibility and enrollment reports and performance data at least 
annually. For those measures reported annually, we estimate that in the 
initial year a burden of 54 hours for the State Exchanges at a cost of 
$2,795.00 each and a total burden of $50,031.00.
    Section 155.1200(c)(1) through (3) direct the State Exchange to 
engage an independent audit/review organization to perform an external 
financial and programmatic audit of the State Exchange. The State 
Exchange must provide the results of the audit and identify any 
material weakness or significant deficiency and any intended corrective 
action. The burden associated with meeting this third party disclosure 
requirement includes the burden for an

[[Page 37069]]

analyst level employee taking 3 hours (at $48.61 an hour) to pull data 
into a report, the time and effort necessary for a health policy 
analyst taking 2 hours (at $58.05 an hour) to prepare the report of the 
audit results, and the time for senior management taking 1 hour (at 
$77.00 an hour) to review and submit to HHS. We estimate a burden of 6 
hours for each State Exchange at a cost of $338.93 and a total burden 
of $6,100.74.
    As stated in Sec.  155.1210(a), the State Exchange and its 
contractors and subcontractors must maintain for 10 years, books, 
records, documents, and other evidence of accounting procedures and 
practices. Section 155.1210(b) specifics the records contain 
information concerning management and operation of the State Exchange's 
financial and other record keeping systems. The records must include 
financial statements, including cash flow statements, and accounts 
receivable and matters pertaining to the costs of operation. 
Additionally, the records must contain any financial report filed with 
other Federal programs or State authorities. Finally, the records must 
contain data and records relating to the State Exchange's eligibility 
verifications and determinations, enrollment transactions, appeals, 
plan variation certifications, QHP contracting data, consumer outreach, 
and Navigator grant oversight information. State Exchanges most likely 
already have systems in place to store records. The burden associated 
with this record keeping requirement includes the time and effort 
necessary for a network administrator taking 16 hours (at $46.86 an 
hour) to modify the State systems to maintain the information required 
under Sec.  155.1210(b), for a health policy analyst taking 8 hours (at 
$58.05 an hour) to enter the data under Sec.  155.1210(b) into the 
State Exchange record retention system, and for senior management 
taking 2 hours (at $73.41 an hour) to oversee record collection and 
retention. We estimate that it will take 26 hours for the State 
Exchange to comply with this requirement for a total of 468 hours. We 
estimate one year burden for the State Exchanges at a cost of $1360.98 
each and a total burden of $24,497.64.

G. ICRs Related to Change of Ownership (Sec.  156.330)

    The QHP issuer must notify HHS of the change in a manner to be 
specified by HHS and provide the legal name and tax identification 
number of the new owner of the QHP and the effective date of the change 
of ownership. The information must be submitted at least 30 days prior 
to the effective date of the change of ownership. The burden associated 
with the QHP issuer notifying HHS of a change of ownership includes a 
health policy analyst taking 1 hour to draft a notice of change of 
ownership and 1 one hour for a senior manager to review the notice and 
transmit it electronically to HHS. We estimate that it will cost a QHP 
issuer $128.43 to comply with this reporting requirement. At this time, 
we cannot estimate the number of QHP issuers that will be reporting 
changes of ownership. When it becomes clearer as to the potential 
number that may report a change of ownership, we will update our 
estimates to reflect the potential number.

H. ICRs Related to Oversight of Cost-Sharing Reductions and Advance 
Payments of the Premium Tax Credit (Sec.  156.480)

    In proposed Sec.  156.480(a), we propose to extend the standards 
set forth in proposed Sec.  156.705 concerning maintenance of records 
to a QHP issuer in the individual market on State Exchange with respect 
to cost-sharing reductions and advance payments of the premium tax 
credit. We believe that the burden of maintaining records related to 
cost-sharing reductions and advance payments of the premium tax credit 
for QHP issuers in an FFE is already accounted for in the burden for 
proposed Sec.  156.705, described elsewhere in the Collection of 
Information section of this proposed rule. On average, we estimate each 
QHP issuer in a State Exchange will incur a cost of approximately 
$2,232.54 to comply with this record maintenance requirement. This 
reflects 46 hours of work by an insurance operations analyst (at $38.49 
an hour) and 6 hours by a senior manager (at $77 an hour), for a total 
of 52 burden hours. Based on our most recent estimates, we assume that 
there will be approximately 791 QHP issuers in the individual market on 
State Exchanges in 2014. Therefore, we estimate an aggregate burden of 
41,132 hours and a total cost of approximately $1,765,939.10 as a 
result of this requirement.
    In Sec.  156.480(b), we propose that, for each benefit year, an 
issuer that offers a QHP in the individual market through a State 
Exchange or an FFE report to HHS annually, in a timeframe and manner 
required by HHS, summary statistics with respect to cost-sharing 
reductions and advance payments of the premium tax credit. This 
proposed provision will permit HHS to obtain critical information 
regarding cost-sharing reductions and advance payments of the premium 
tax credit across a broad range of issuers to identify systemic 
problems and errors, without requiring intrusive annual investigations. 
We believe that QHP issuers will already have the information and data 
systems in place necessary to generate a summary report, and that there 
will only be a small additional burden as a result of this submission 
requirement. We estimate that it will take an insurance operations 
analyst 16 hours (at $38.49 an hour) annually and one senior manager 2 
hours (at $77 an hour) to gather summary information and prepare a 
report for submission to HHS. Therefore, we estimate an additional 
burden of 21,600 hours and total costs of approximately $923,808 for 
1,200 QHP issuers ($769.84, on average, for each QHP issuer) as a 
result of this requirement.

I. ICRs Related to Oversight and Financial Integrity Standards for 
Issuers of Qualified Health Plans in the Federally-Facilitated Exchange 
(Sec.  156.705 to Sec.  156.715)

    The burden estimates for the collections of information in Part 
156, Subpart H, of the regulation reflect the assumption that an FFE 
will include 409 QHP issuers. The labor categories and salary estimates 
used to calculate the cost burden of these collections on issuers are 
derived from the Bureau of Labor Statistics' (BLS) May 2012 
Occupational Employment Statistics data for selected occupations. These 
burden estimates generally reflect burden for the first year. We 
anticipate that the burden in subsequent years will be significantly 
lower because issuers will have met many of the requirements in the 
regulation, including developing automated processes that will reduce 
the total time, effort, and financial resources they need to expend in 
order to respond to the collections in this subpart. For this reason, 
these estimates should be considered an upper bound of burden for 
issuers.
    Section 156.705 provides that issuers offering QHPs in an FFE must 
maintain all documents and records (whether paper, electronic or other 
media), and other evidence of accounting procedures and practices 
necessary for HHS to conduct activities necessary to safeguard the 
financial and programmatic integrity of the FFEs. Such activities 
include: (1) Periodic auditing of the QHP issuer's financial records, 
including data related to the QHP issuer's ability to bear the risk of 
potential financial losses; and (2) compliance reviews and other 
monitoring of a QHP issuer's compliance with all Exchange standards 
applicable to issuers offering QHPs in

[[Page 37070]]

the FFEs listed in part 156. These standards are limited to Exchange-
specific records as applicable to the FFEs, and are not enforced by 
States as primary regulators. This standard mirrors the maintenance of 
records standard applicable to State Exchanges and set forth in Sec.  
155.1210. The burden includes utilizing existing technology and systems 
to process and maintain this information. We estimate that it will take 
100 hours at a cost of $4,420.60 for a QHP issuer to maintain these 
records for a total of 30,000 hours and $1,326,180.00.
    Section 156.705(d) provides that QHP issuers must make all records 
described in paragraph (a) of this section available to HHS, the OIG, 
the Comptroller General, or their designees, upon request. In 
estimating the annual hour and cost burden on QHP issuers of making 
these records available to such authorities upon request, we assumed 
that such requests would normally be made in connection with a formal 
audit or compliance review or a similar process. Our burden estimates 
for this section address the hour and cost burden of making records 
available to HHS, the OIG, the Comptroller General, or their designees, 
for audit. Our estimates reflect our assumptions that about 47 QHP 
issuers would be subject to a formal audit in a given year and that the 
burden on issuers of making the records available would include the 
time, effort, and associated cost of compiling the information, 
reviewing it for completeness, submitting it to the auditor(s), and 
participating in telephone or in-person interviews. We anticipate using 
a risk-based approach to selection of the majority of QHP issuers for 
compliance review so that burdens to the issuer community would 
generally be linked to the QHP issuers' risk. We estimate it will take 
90 hours at a cost of $4,221.20 for an issuer to make their records 
available for an audit for a total of 9,000 hours and $422,120.00 
across all QHP issuers subject to this requirement, which we estimate 
at an upper end as 100 issuers.
    Section 156.715 establishes the general standard that QHP issuers 
are subject to compliance reviews. Our burden estimates for Sec.  
156.715 address the estimated annual hour and cost burden on QHP 
issuers of complying with the records disclosure requirements 
associated with compliance reviews conducted by an FFE.
    Section 156.715 provides standards for compliance reviews in the 
FFEs, stating that QHP issuers offering QHPs in the FFEs may be subject 
to compliance reviews. This section also describes the categories of 
records and information issuers must make available to an FFE in 
conducting such reviews.
    Compliance reviews evaluate a QHP issuer's compliance with the 
Affordable Care Act and applicable regulations. Compliance reviews will 
target high-risk QHP issuers and not every issuer will be reviewed each 
year. The results of compliance reviews will also provide insight into 
trends across the compliance statuses of QHP issuers, enabling HHS to 
prioritize areas of oversight and technical assistance.
    We assume that HHS will conduct desk reviews of 31 QHP issuers each 
year. For each QHP issuer desk review we estimate an average of 40 
hours for administrative work to assemble the requested information, 
19.5 hours to review the information for completeness, and 30 minutes 
to submit the information to HHS. There will also be an additional 10 
hours to spend on phone interviews conducted by the reviewer and 2 
hours to spend speaking through processes with the reviewer. We 
estimate it will take 72 hours at a cost of $2,877.40 for an issuer to 
make information available to HHS for a desk review for a total of 
2,232 hours and $89,199.40 across all issuers that may be subject to 
this information collection requirement.
    We assume that HHS will conduct onsite reviews of 16 QHP issuers 
each year. For each onsite review we estimate it will take an average 
of 40 hours for administrative work to assemble the requested 
information, 19.5 hours to review the information for completeness and 
30 minutes to submit the information to HHS in preparation for an 
onsite review. An onsite review requires an additional 2 hours to 
schedule the onsite activities with the compliance reviewer, 4 hours 
for introductory meeting, 8 hours to tour reviewers onsite, 10 hours of 
interview time, 2 hours to walk through processes with the reviewer, 
and 4 hours for concluding meetings. This is a total of approximately 
60 hours of preparation time and an additional 30 hours for onsite time 
for each QHP. We estimate it will take 90 hours at a cost of $3,566.84 
for an issuer to make information available to HHS for an onsite 
review. We estimate that the burden for all respondents that may be 
subject to this information collection will be 1,440 hours at a cost of 
$57,069.44.
    In cases in which HHS could potentially require clarification 
around submitted information, HHS may need to contact QHP issuers 
within 30 days of information submission. This would be the case for 
approximately 20 issuers. We estimate it will take an issuer 2 hours at 
a cost of $53.75 to respond to questions for a total of 40 hours and 
$1,075.00.

J. ICRs Regarding Enforcement Remedies in Federally-Facilitated 
Exchanges (Sec.  156.800 to Sec.  156.810)

    Subpart I of Part 156 discusses the enforcement remedies in the 
FFEs. Section 156.800 authorizes HHS to impose sanctions on QHP issuers 
in an FFE that are not in compliance with Federal standards. These 
sanctions may be in the form of a CMP, as set forth in Sec.  156.805; 
or decertification of QHPs, as set forth in Sec.  156.810. The burden 
estimates for the collections of information in this Part reflect our 
assumption that there will be 409 QHP issuers and 12,000-18,000 QHPs in 
all FFEs.
    Section 156.805(a) sets forth the general process and bases for 
imposing a CMP on issuers offering QHPs in an FFE. As explained in the 
preamble to Subpart I, HHS intends to work collaboratively with QHP 
issuers, where possible, especially during the first plan year, when 
problems arising concerning compliance with applicable standards. CMPs 
will be imposed only for serious issues of non-compliance. We expect to 
provide technical assistance to issuers, as appropriate, to assist them 
in maintaining compliance with the applicable standards. We also plan 
to coordinate with States in our oversight and enforcement activities 
to avoid inappropriately duplicative enforcement efforts. Consequently, 
we anticipate that CMPs will be rare, especially in the first benefit 
year. For purposes of calculating the estimated burden, we assume that 
one issuer each year will be subject to a CMP and that the issuer will 
request an appeal of the enforcement action. We seek comment on these 
assumptions.
    Section 156.810 sets forth the bases for the decertification of a 
QHP in an FFE and the general process for decertification. As with 
CMPs, HHS expects that decertification will be relatively infrequent, 
and reserved for only serious instances of non-compliance with 
applicable standards. Therefore, for purposes of this estimated burden, 
we assume that only one QHP in an FFE will be decertified each year. We 
assume that the issuer offering the decertified QHP will appeal the 
decertification action. We solicit comments on these assumptions.
    Because we anticipate that fewer than 10 issuers would be subject 
to a decertification or CMP in a given year, we have not calculated a 
burden estimate. If the number of issuers approaches 10, we will submit 
a burden

[[Page 37071]]

estimate at that time. We solicit comments on this section and these 
assumptions.

K. ICRs Regarding Administrative Review of QHP Issuer Sanctions in a 
Federally-Facilitated Exchange (Sec.  156.901 to Sec.  156.963)

    Subpart J of Part 156 sets forth the administrative process for 
issuers subject to a CMP or decertification of a QHP offered by the 
issuer to appeal the enforcement action. In this process, an ALJ 
decides whether there is a basis for HHS to assess a CMP against the 
issuer and whether the amount of an assessed penalty is reasonable, or 
whether there is a basis for decertifying a QHP offered by the issuer, 
as applicable. Section 156.905 (intended to parallel 45 CFR 150.405) 
provides that a party has a right to a hearing before an ALJ if it 
files a valid request for a hearing within 30 days after the date of 
issuance of HHS's notice of proposed assessment decertification. An 
issuer's request for a hearing must include the information listed in 
Sec.  156.907.
    The burden associated with this request includes the time and 
effort needed by the issuer to create the written request and submit it 
electronically to the appropriate entity. The associated costs are 
labor costs for gathering the necessary background information and then 
preparing and submitting the written statement. The burden estimates 
for the collections of information in Part 156, Subpart J, of the 
regulation reflect the assumption that there will be a total of 409 QHP 
issuers in all FFEs.
    We base our burden estimate on the assumptions that one issuer will 
be subject to CMPs and that one issuer will have a QHP that it offers 
in an FFE decertified. We assume that both issuers will choose to 
exercise their right to a hearing and will submit a valid request for 
hearing. The hours involved in preparing this request may vary; for the 
purpose of this burden estimate we estimate an average of 24 hours will 
be needed: 10 hours for the compliance officer to gather and assemble 
necessary background materials and prepare the written request, 12 
hours for an attorney to review the background materials and written 
request and provide recommendations to the senior manager, and 2 hours 
for the senior manager to discuss the attorney's recommendations and 
submit the written request electronically. We estimate that it will 
take 24 hours at a cost of $1,649.02 for an issuer to prepare and 
submit a request for a hearing for a total of 48 hours and $3,298.04for 
both issuers. This estimate includes any statement of good cause under 
Sec.  156.805(e)(3), if applicable. We solicit comments on these 
assumptions.
    As stated in Sec.  156.905, an issuer has the right to a hearing 
before an ALJ if the issuer files a request for a hearing that complies 
with Sec.  156.907(a) within 30 days of the issuance of a notice of 
proposed assessment or decertification from HHS under Sec.  156.805 or 
Sec.  156.810. The request for a hearing must identify any factual or 
legal bases for the assessment or decertification with which the issuer 
disagrees. It must also describe with reasonable specificity the basis 
for the disagreement, including any affirmative facts or legal 
arguments on which the respondent is relying. The request must also 
identify the relevant notice of assessment or decertification by date 
and attach a copy of the notice.
    An issuer's request for a hearing must include the information 
listed in Sec.  156.907. The burden associated with this request 
includes the time and effort needed by the issuer to create the written 
request and submit it electronically to the appropriate entity. The 
only associated costs are labor costs for gathering the necessary 
background information and then preparing and submitting the written 
request.
    Because we only estimate that one issuer per year would appeal a 
CMP and one issuer will have its QHP offered in an FFE decertified, we 
do not include this burden estimate in our overall calculation of 
burden for this proposed rule. We seek comment on this assumption.

L. ICRs Regarding Consumer Cases Related to Qualified Health Plans and 
Qualified Health Plan Issuers (Sec.  156.1010)

    In subpart K of part 156, we describe the information collection 
requirements that pertain to the resolution of consumer cases related 
to QHPs and QHP issuers. Section 156.1010(e) states that QHP issuers 
must record a clear and concise narrative documenting the resolution of 
a consumer case in the HHS-developed casework tracking system. The 
burden associated with this requirement is the time and effort 
necessary for a QHP issuer to gather the necessary information related 
to the consumer complaint, draft the narrative, and enter the narrative 
into the electronic HHS-developed case tracking system. For the purpose 
of estimating burden, we estimate 1,200 issuers. We estimate that it 
will take approximately 60 hours annually at a cost of $8,580.87 for 
the time and effort to develop and submit the narrative to HHS for a 
total of 72,000 hours and a cost of $10,297,044.00 for all respondents.

M. ICRs Related to Quality Standards (Sec.  156.1105)

    In subpart L of part 156, we describe the information collection 
and disclosure requirements that pertain to the approval of enrollee 
satisfaction survey vendors. The burden estimate associated with these 
disclosure requirements includes the time and effort required for 
survey vendors to develop, compile, and submit the application 
information and any documentation necessary to support oversight in the 
form and manner required by HHS. HHS is developing a model enrollee 
satisfaction survey vendor application that will include data elements 
necessary for HHS review and approval. In the near future, HHS will 
publish the model application and will solicit public comment. At that 
time, and per the requirements outlined in the PRA, we will estimate 
the burden on survey vendors for complying with this provision of the 
regulation. We solicit comment on the burden for the application and 
review process for these entities.

N. ICRs Related to Confirmation of Payment and Collection Reports 
(Sec.  156.1210)

    In Sec.  156.1210, we propose that, within 15 calendar days of the 
date of a payment and collections report from HHS, the issuer must, in 
a format specified by HHS, either confirm to HHS that the payment and 
collections report accurately lists for the timeframe specified in the 
report applicable payments owed by the issuer to HHS and the payments 
owed to the issuer by HHS; or describe to HHS any inaccuracy it 
identifies in the payment and collections report. We believe that 
issuers will generally be able to perform this confirmation 
automatically, and that there will only be a small additional burden as 
a result of this requirement. We estimate that it will take an 
insurance operations analyst 1 hour (at $38.49 an hour) monthly to make 
the comparison and note any discrepancies to HHS (approximately $461.88 
for each issuer annually). Based on our most recent estimates, we 
believe that 2,400 issuers will be affected by this requirement, 
resulting in aggregate burden of approximately $1,108,512.

O. ICRs Related to Enrollment Process for Qualified Individuals (Sec.  
156.1230)

    Proposed Sec.  156.1230(a)(1)(ii) would require issuers who pursue 
the option to use their Web site to enroll qualified individuals into 
QHPs directly, to provide information on available QHPs. The QHP 
information required to be

[[Page 37072]]

posted on the Web site would include premium and cost-sharing 
information, the summary of benefits and coverage, levels of coverage 
(``metal levels'') for each QHP, results of the enrollee satisfaction 
survey, quality ratings, medical loss ratio information, transparency 
of coverage measures, and a provider directory. Under proposed Sec.  
156.1230(a)(1)(i), an issuer would also be required to direct an 
individual to complete an application with the Exchange and receive 
eligibility determinations from the Exchange to allow for an accurate 
plan selection process. Additionally, Sec.  156.1230(a)(1)(iv) would 
require the issuer Web site to inform applicants about the availability 
of other QHP products available through an Exchange and to display a 
Web link to the appropriate Exchange Web site. Finally, an issuer would 
submit enrollment information back to the Exchange.
    The burden for this requirement would be for the issuer to develop 
its own template and code and integrate it with the Exchange. After 
this initial step, the burden on the issuer would be to maintain the 
Internet Web site by populating the Web site with information collected 
per information collection requirements in this rule and future 
rulemaking by HHS. We do not have an estimate on the number of issuers 
who will choose to utilize the direct to enrollment approach subject to 
these third-party disclosure requirements. We estimate that it will 
take 610 hours at a cost of $32,104.25 for an issuer to meet these 
third-party disclosure requirements.
    Proposed Sec.  156.1230(a)(2) would allow qualified individuals to 
apply for an eligibility determination or redetermination for coverage 
through the Exchange and insurance affordability programs, and select 
QHPs with the assistance of an issuer customer service representative 
if the issuer customer service representative complies with the terms 
of an agreement between the issuer and the Exchange. The agreement 
would ensure that an issuer customer service representative receives 
training and provide additional standards governing the conduct of 
issuer customer service representatives.
    The burden for this requirement would include the time and effort 
necessary to develop training materials for the customer service 
representative and the time and effort necessary to amend the agreement 
between the issuer and the Exchange if the Exchange implements this 
provision.
    The Exchange would be required to develop training materials for 
issuer staff. We assume that the 18 State Exchanges will implement this 
standard. However, we expect Exchanges would use training materials 
that will either be developed by HHS for other types of assister 
training, including agent/broker training or use their own training 
materials that they have already developed for other assisters. 
Therefore, we anticipate that the time and costs associated with 
developing a training program for issuers will be minimal. We estimate 
it will take a training specialist 10 hours at $26.64 an hour and a 
training and development manager 5 hours at $64.43 an hour to develop 
training materials for the customer service representative, for a total 
time burden of 15 hours. The estimated cost burden for developing 
training materials for issuer customer service representatives for each 
Exchange is therefore $588.55 with a total cost of $10,593.90 across 
all respondents if 18 State Exchanges undertake these activities.
    As specified in Sec.  156.1230(a)(2), each Exchange would amend its 
agreement with every issuer wanting its staff to assist consumers. We 
assume that the 18 State Exchanges will implement this standard. We 
estimate it will take a health policy analyst 20 hours at $49.35 an 
hour and a senior manager 10 hours at $79.08 an hour to amend an 
agreement with the issuer, for a total time burden of 30 hours. The 
estimated burden for amending the agreements for each Exchange is 
therefore 30 hours at a cost of $1,777.87 and a total cost of 
$32,001.66.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-9957-P], Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

IV. 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 preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the OMB.

A. Summary

    As stated earlier in this preamble, this proposed rule sets 
financial integrity and oversight standards with respect to Exchanges; 
QHP issuers in an FFE; and States in regards to the operation of risk 
adjustment and reinsurance. It also proposes additional standards for 
special enrollment periods; survey vendors that may conduct enrollee 
satisfaction surveys on behalf of QHP issuers in Exchanges; issuer 
participation in an FFE; and States' operation of the SHOP. Finally, it 
proposes additional standards for SHOPs, agents and brokers and 
customer service representatives; privacy and security; geographic 
rating areas; and guaranteed availability and renewability.
    HHS has crafted this proposed rule to implement the protections 
intended by Congress in an economically efficient manner. We have 
examined the effects of this proposed rule as required by Executive 
Order 12866 (58 FR 51735, September 1993, Regulatory Planning and 
Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354), section 1102(b) of the Social Security Act, the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). In 
accordance with OMB Circular A-4, HHS has quantified the benefits and 
costs where possible, and has also provided a qualitative discussion of 
some of the benefits and costs that may stem from this proposed rule.

B. Executive Orders 13563 and 12866

    Executive Order 12866 (58 FR 51735) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). Executive 
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and 
reaffirms the principles, structures, and definitions governing 
regulatory review as established in Executive Order 12866.
    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a proposed 
rule--(1) Having an annual effect on the economy of $100 million

[[Page 37073]]

or more in any one year, or adversely and materially affecting a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering the 
budgetary impacts of entitlement grants, user fees, or loan programs or 
the rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year), and a ``significant'' regulatory action is subject to review by 
the OMB. OMB has designated this proposed rule as a ``significant 
regulatory action.'' Even though it is not certain whether it would 
have economic impacts of $100 million or more in any one year, HHS has 
provided an assessment of the potential costs and benefits associated 
with this proposed regulation.
1. Need for Regulatory Action
    Starting in 2014, qualified individuals and qualified employers 
will be able to use coverage provided by QHPs--private health insurance 
that has been certified as meeting certain standards--through 
Exchanges. A transitional reinsurance program and a permanent risk 
adjustment program would be in place to ensure premium stability for 
health insurance issuers as enrollment increases and issuers enroll 
high-risk individuals. This proposed rule would establish general 
oversight requirements for State-operated reinsurance and risk 
adjustment programs; establish oversight of issuers inside and outside 
of the Exchange when HHS operates risk adjustment or reinsurance on 
behalf of a State; and establish oversight and monitoring of State 
Exchanges, FFEs, SHOPs (both State Exchanges and FFEs) and issuers of 
QHPs, specifically with respect to financial integrity, maintenance of 
records, and privacy and security of PII. This proposed rule would also 
restrict the use of funds for administrative expenses generated for 
State Exchanges and State-operated reinsurance programs; propose 
procedures for oversight of advance payments of the premium tax credit 
and cost-sharing reductions; propose procedures to ensure the accuracy 
of data collection, calculations, and submissions; allow a State to 
establish and operate only the SHOP and establish standards for SHOPs; 
establish requirements for customer service representatives and agents 
and brokers who assist consumers; establish requirements for enrollee 
satisfaction survey vendors; and propose additional standards for 
special enrollment periods.
2. Summary of Impacts
    In accordance with OMB Circular A-4, Table V.1 below depicts an 
accounting statement summarizing HHS's assessment of the benefits and 
costs associated with this regulatory action. The period covered by the 
RIA is 2014-2017.
    HHS anticipates that the provisions of this proposed rule will 
ensure smooth operation of Exchanges, integrity of the reinsurance and 
risk adjustment programs, safeguard the use of Federal funds, prevent 
fraud and abuse, increase access to healthcare coverage and provide 
consumer protections. Affected entities such as States, QHP issuers, 
agents, and brokers would incur costs to maintain records, submit 
reports to HHS and Exchanges, comply with privacy and security 
standards for PII, provide records for compliance reviews, and to 
comply with enforcement actions. In accordance with Executive Order 
12866, HHS believes that the benefits of this regulatory action justify 
the costs.

                                           Table V.1--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
* Ensure integrity of reinsurance and risk adjustment programs, smooth functioning of State Exchanges and FFEs.
* Prevent fraud and abuse.
* Safeguard the use of Federal funds provided as cost-sharing reductions and advance payments of the premium tax
 credit and provide value for taxpayers' dollars.
* Enable a State to focus on effective implementation of the SHOP by allowing it to operate a State-based SHOP
 while the Exchange is operated as an FFE.
* Increased access to fair and unbiased customer assistance and information about coverage options for
 consumers, enabling consumers to make informed decisions.
* Ensure privacy and security protections.
* Ensure prompt refund of any excess premium paid or any excess cost sharing.
----------------------------------------------------------------------------------------------------------------
                                            Estimate.....................  Year dollar     Discount       Period
                                                                                               rate      covered
                                                                                            percent
----------------------------------------------------------------------------------------------------------------
Costs:
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year).............  $23.3 million \1\............         2013            7    2014-2017
                                            $23.2 million \2\............         2013            3    2014-2017
----------------------------------------------------------------------------------------------------------------
Annual costs related to financial oversight, maintenance of records and reporting requirements for State
 Exchanges and State-operated reinsurance and risk-adjustment programs; record retention requirements for
 contributors and recipients for reinsurance programs; audit costs for State programs--Exchanges, risk
 adjustment and reinsurance; costs for QHP issuers related to reporting requirements, record maintenance,
 audits, Web site standards, training for customer service representatives, and documentation of resolution of
 consumer cases; costs to agents and brokers and QHPs related to enforcement actions..
----------------------------------------------------------------------------------------------------------------

[[Page 37074]]

 
Qualitative:
* Costs to Exchanges and non-Exchange entities associated with FFEs and agents and brokers assisting consumers,
 to comply with privacy and security standards.
* Costs incurred by enrollee satisfaction survey vendors related to annual application and meeting HHS
 standards.
* Possible reduction in costs for SHOPs due to elimination of the requirement to accept paper applications and
 applications by telephone.
* Cost incurred by SHOPs to develop uniform standards for the termination of a group's coverage in a QHP and to
 keep sufficient records of terminations and reasonable accommodations.
----------------------------------------------------------------------------------------------------------------
Note: 1. Approximately $20.6 million of these costs are estimated in section III and $2.7 million are estimated
  below in the RIA, including the audit costs in Table V.2. 2. Approximately $20.5 million of these costs are
  estimated in section III and $2.7 million are estimated below in the RIA, including the audit costs in Table
  V.2.

3. Anticipated Benefits and Costs
    Starting in 2014, individuals and small businesses will be able to 
use health insurance coverage purchased through Exchanges. The 
Congressional Budget Office estimated that the number of people 
enrolled in coverage through Exchanges will increase from 7 million in 
2014 to 26 million in 2017.\37\ Exchanges will create competitive 
marketplaces where qualified individuals and qualified employers can 
shop for insurance coverage, and are expected to reduce the unit price 
of quality insurance for the average consumer by pooling risk and 
promoting competition.
---------------------------------------------------------------------------

    \37\ ``CBO's February 2013 Estimate of the Effects of the 
Affordable Care Act on Health Insurance,'' Congressional Budget 
Office, February 2013.
---------------------------------------------------------------------------

    The proposed rule would specify the standards and processes for the 
oversight and accountability of entities responsible for operations of 
the Exchanges and reinsurance and risk adjustment programs. Affected 
entities would include States, in their roles of establishing and 
operating Exchanges and SHOPs and administering reinsurance and risk 
adjustment programs; FFEs and FF-SHOPs; issuers of QHPs; health 
insurance issuers offering coverage both inside and outside of the 
Exchange when HHS operates risk adjustment or reinsurance on behalf of 
the State; contractors or other subsidiaries of these organizations; 
and insurance agents and brokers.
a. Benefits
    This proposed rule would implement oversight, record maintenance 
and enforcement provisions that would ensure integrity of the 
reinsurance and risk adjustment programs, State Exchanges and FFE 
functions; prevent fraud and abuse; and establish consumer protection 
measures.
    The proposed rule includes provisions that would create a system of 
oversight, financial integrity and program integrity in the Exchanges 
and the risk adjustment, reinsurance and risk corridors programs. The 
proposed oversight requirements for HHS-operated and State-operated 
reinsurance and risk-adjustment programs would ensure that these 
programs are effective and efficient, and use program funds 
appropriately. The proposed standards would also ensure that Federal 
funds are used appropriately in the administration of State Exchange 
activities. By monitoring financial reports and overseeing State 
Exchange activities, HHS would safeguard the use of Federal funds 
provided as cost-sharing reductions and advance payments of the premium 
tax credit and provide value for taxpayers' dollars.
    The proposed rule would also allow a State to operate a State-based 
SHOP while the Exchange is operated as an FFE. This would enable the 
State to focus on effective implementation of the SHOP and gain 
experience that would help prepare it to operate both a SHOP and State 
Exchange in the future. Each SHOP would also be required to develop 
uniform standards for the termination of coverage in a QHP, starting in 
2015, unless the SHOP offers employee choice before then. Standardizing 
the timing, form, and manner of a group's termination in the SHOP would 
ensure that an employer offering coverage through multiple health 
insurance issuers (under the SHOP `employee choice'' model) will be 
subject to uniform, predictable termination policies.
    The proposed rule would implement consumer protections that would 
ensure privacy and security of PII, increased access to customer 
assistance, information about coverage options and allow consumers to 
make informed coverage decisions. Permitting issuer customer service 
representatives to assist individuals with applying for eligibility 
determinations or redeterminations for coverage through the Exchange 
would increase assistance available to consumers, while the training 
and compliance standards would ensure that such assistance is fair and 
unbiased. The proposed rule would establish requirements for customer 
service representatives and agents and brokers who assist consumers, 
requiring them to comply with registration and training requirements. 
The proposed rule would also establish standards under which HHS could 
terminate its relationship with agents and brokers in the FFE, to help 
ensure that agents and brokers continue to meet Exchange standards. In 
addition, the requirement for QHP issuers conducting direct enrollment 
to provide standardized comparative information on their Web-sites 
would ensure that consumers can readily differentiate and compare plan 
choices leading to informed decisions. Consumers without bank accounts 
or credits cards would also have a variety of payment options.
    The provisions of this rule would also ensure that enrollees are 
promptly refunded any excess premium paid or any excess cost sharing 
they should not have paid. Individuals harmed by misconduct on the part 
of non-Exchange entities would also be eligible for a special 
enrollment period. A QHP would also be required to promptly reassign an 
enrollee improperly assigned to a plan variation (or standard plan 
without cost-sharing reductions), minimizing consumer harm.
    The annual application requirement for enrollee satisfaction survey 
vendors would allow HHS to ensure that these entities participate in 
relevant training and post-training certification, follow protocols 
related to quality assurance and the use of HHS data, and adhere to 
privacy and security standards when handling data. This would help to 
ensure that ultimately the enrollee satisfaction survey data are 
reliable and valid and that the information is sufficiently protected.
    The proposed enforcement actions such as CMPs and decertification 
of a QHP, termination of agent and broker agreement for participation 
in the

[[Page 37075]]

individual market of an FFE, would improve program performance, reduce 
non-compliance by QHPs and agents and brokers, and decrease the 
likelihood of errors and adverse outcomes for consumers.
b. Costs
    Affected entities would incur costs to comply with the provisions 
of this proposed rule. Costs related to information collection 
requirements subject to PRA are discussed in detail in section III and 
include administrative costs incurred by States, issuers and agents and 
brokers related to record maintenance and reporting requirements; 
oversight and financial integrity standards; enforcement actions; 
enrollment process for qualified individuals; and training requirements 
. In this section we discuss other costs related to the proposed 
provisions.
    States operating reinsurance programs would be required to maintain 
records. The costs related to this provision are generally accounted 
for in the RIA of the Payment Notice and are not included in this RIA. 
States operating reinsurance would be required to keep an accurate 
accounting for each benefit year, of all reinsurance funds received 
from HHS for reinsurance payments and for administrative expenses, as 
well as all claims for reinsurance payments from issuers of 
reinsurance-eligible plans, all payments made to those issuers, and all 
administrative expenses incurred. State-operated reinsurance programs 
will already have a system in place to track reinsurance funds received 
from HHS, claims from and payments to issuers, and expenses incurred to 
operate the reinsurance program. The cost for States operating 
reinsurance to maintain any records associated with the reinsurance 
program was previously estimated in the RIA of the Payment Notice, and 
we believe that the administrative costs associated with this 
requirement are generally accounted for in that estimate.
    State-operated reinsurance programs would submit to HHS annually 
and make public a summary report of their program operations, which 
would include a summary of the accounting kept pursuant to proposed 
Sec.  153.260(a). We assume that the data already collected and used to 
report to issuers and HHS would be the same used to prepare this annual 
report. Therefore, the cost associated with this requirement is the 
incremental time and cost to prepare an annual report to HHS and the 
public on program operations. We estimate it will take insurance 
management analysts 16 hours (at $51 per hour) and a senior manager 2 
hours (at $77 per hour) to prepare the report. Therefore, we estimate 
it would cost each State that operates reinsurance approximately $970 
to submit this report to HHS. Because two States will operate 
reinsurance in the 2014 benefit year, we estimate that an aggregate 
cost of $1,940 as a result of this requirement in the first year. We 
note that HHS will provide a portion of the reinsurance contributions 
it collects to a State operating reinsurance for the purposes of 
supporting State administration of reinsurance payments, which would 
likely cover the costs associated with this requirement.
    A State operating a risk adjustment program would be directed to 
maintain documents and records relating to the risk adjustment program, 
whether paper, electronic or in other media, for each benefit year for 
at least 10 years, and make them available upon request from HHS, the 
OIG, the Comptroller General, or their designees, to any such entity. 
The documents and records must be sufficient to enable the evaluation 
of a State-operated risk adjustment program's compliance with Federal 
standards. States would also be directed to ensure that their 
contractors, subcontractors, and agents maintain and make those 
documents and records available upon request from HHS, the OIG, the 
Comptroller General, or their designees. States operating risk 
adjustment programs should already have the documents and records of 
accounting procedures needed for periodic audits. Therefore we estimate 
that the additional burden associated with this requirement is the 
time, effort, and additional labor cost required to maintain and 
archive the records. We assume that it would take an insurance 
operations analyst 10 hours (at $38.49 an hour) to maintain records. 
Therefore, the average cost for each state would be approximately $385. 
Because one State will operate risk adjustment for the 2014 benefit 
year, we estimate an aggregate cost of $385 to comply with this 
requirement in the first year.
    A State operating a risk adjustment program would be required to 
submit by December 31st of the first benefit year an interim summary 
report on the first 10 months of risk adjustment activities, in order 
to obtain re-certification for the third benefit year. The cost of 
complying with this provision is the time and effort to write the 
interim report and submit it to HHS. We estimate it would take an 
insurance management analyst 16 hours (at $51 per hour) and a senior 
manager 2 hours (at $77 per hour) to prepare the interim summary 
report. Therefore, we estimate it would cost each state operating risk 
adjustment $970 to submit this report to HHS (an aggregate cost of $970 
in the 2014 benefit year). A State operating a risk adjustment program 
would submit and make public, a summary report of its risk adjustment 
program operations for each benefit year after the first benefit year 
for which the State operates the program. We propose that this summary 
report include the results of a programmatic and financial audit for 
each benefit year conducted by an independent qualified auditing 
entity. We believe the cost of this annual report would be the same as 
the cost of producing the interim first-year report above, except for 
the cost of audits required in subsequent years, and these annual audit 
costs are estimated later in this RIA. These estimates also include the 
administrative costs related to the requirement for State-operated risk 
adjustment programs to keep accurate accounting for each benefit year 
of all receipts and expenditures related to risk adjustment payments, 
charges, and administration of the program.
    States would face a variety of costs due to the monitoring 
requirements in this proposed rule. Conducting oversight of the 
Exchanges, State-operated risk adjustment and reinsurance programs, 
administration of the advance payments of the premium tax credit or 
cost-sharing reductions, and other activities require independent 
external audits, investigations, rectification of errors, and the 
development of summary reports which would be submitted to HHS. The 
estimated total audit costs for State reinsurance, risk adjustment and 
Exchange programs are presented in Table V.2. It is expected that 18 
States will establish State Exchanges in 2014 and we assume that number 
will stay the same during the period covered by the RIA. We also assume 
that each State would conduct a financial audit and a programmatic 
audit annually, which would encompass reinsurance and risk adjustment 
programs. Financial audit costs are estimated based on prices among the 
big four audit firms for governmental entities of similar size to those 
of the anticipated State Exchanges for a financial statement audit and 
Yellowbook Report (report on internal controls) that reflects different 
levels of cost for small, medium, and large entities, for entities with 
low, medium, and high risk. Programmatic audit estimates reflect the 
experience of Federal entitlement programs similar to Medicaid audited 
under an A-133 program compliance supplement, and vary only by the size 
of the program (small medium and large). For example, a small Exchange 
judged to have low

[[Page 37076]]

risk would have a combined financial and programmatic audit cost of 
$90,000; a large Exchange, in a State that also administers a 
reinsurance program (which implies a more complex, high risk operation) 
would have combined financial and programmatic audit costs of $360,000. 
Audit prices are based on 2012 pricing and reflect an annual increase 
of 3 percent each year, based on recent industry experience.

        Table V.2.--Estimated Audit Costs for State Programs: Exchanges, Risk Adjustment and Reinsurance
----------------------------------------------------------------------------------------------------------------
                                                       2014            2015            2016            2017
----------------------------------------------------------------------------------------------------------------
Mid-range point estimate........................      $2,572,000      $2,649,160      $2,728,635      $2,810,494
Range...........................................  $2,320,000-$2,  $2,389,600-$2,  $2,461,288-$2,  $2,535,127-$3,
                                                         820,000         904,600         991,738         081,490
----------------------------------------------------------------------------------------------------------------

    Exchanges and non-Exchange entities associated with FFEs and agents 
and brokers permitted by States to assist consumers would incur costs 
to comply with the privacy and security standards for PII, informing 
individuals about related policies, procedures and technologies 
developing policies and procedures, executing training, posting privacy 
policies on Web sites and providing reports of any violations to HHS. 
Issuers would also incur expenses to provide privacy and security 
training to their customer service representatives. It is anticipated 
that Exchanges and issuers' IT systems will need minimal changes to 
comply with these provisions.
    The proposed rule would require the enrollee satisfaction survey 
vendors engaged by issuers to meet HHS standards. Survey vendors would 
apply for approval annually in order to administer enrollee 
satisfaction surveys to QHP enrollees on behalf of a QHP issuer. 
Vendors would incur costs to submit the annual applications to HHS and 
to meet the requirements necessary to meet approval.
    The proposed rule would also amend existing requirements so that 
SHOPs would no longer be required to accept paper applications and 
applications by telephone. This could reduce the cost of operating a 
SHOP. A SHOP would also incur costs to develop uniform standards for 
the termination of a group's coverage in a QHP and to keep sufficient 
records of terminations and reasonable accommodations.

C. Regulatory Alternatives

    Under the Executive Order, HHS is required to consider alternatives 
to issuing rules and alternative regulatory approaches. HHS considered 
the following alternatives while developing this proposed rule:
1. Increased Uniformity of FFE and State Exchange Standards
    Under this alternative, HHS would require a single standard for 
Exchanges across the nation regardless of whether the Exchange was 
established and operated by a State or was Federally-facilitated. The 
proposed rule would defer to State discretion in oversight of QHPs. 
This element of State flexibility would be precluded if greater 
uniformity in operations and standards were to be imposed. Greater 
standardization would have an uncertain impact on Federal oversight 
activities but would likely impose greater costs of compliance on State 
operations and issuers of QHPs in those States.
2. Placing More Responsibility on the States to Oversee Standards, 
Including Those for FFES
    Under this alternative, HHS would place more responsibility on 
States and State Exchanges to interpret and meet statutory 
requirements. This approach could create a number of problems. If every 
State developed its own monitoring standards, oversight of different 
Exchanges could be quite uneven, as States across the country have 
varying levels of fiscal resources with which to monitor activities. 
States currently have certain levels of responsibility under the 
Affordable Care Act to oversee standards for Exchanges, QHPs, and other 
programs. State Exchanges also have latitude in the number, type, and 
standardization of plans they certify and accept into the Exchange as 
QHPs.
    There are a number of provisions in the Affordable Care Act that 
devolve responsibilities from the Federal government to States. 
Increased devolution could decrease the need of Federal oversight, 
while granting States increased flexibility to regulate Exchanges 
within their borders. There would also be a decrease in oversight-
related activities for the Federal government such as HHS 
investigations or audits. On the other hand, States would likely face 
an increase in their own oversight activities and related costs.
    HHS believes that the options adopted for this proposed rule strike 
the best balance of ensuring efficient operation and integrity of 
Exchanges and the reinsurance and risk adjustment programs while 
providing flexibility to the States and minimizing the burden on 
States.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires agencies that issue a 
rule to analyze options for regulatory relief of small businesses if a 
rule has a significant impact on a substantial number of small 
entities. The RFA generally defines a ``small entity'' as--(1) A 
proprietary firm meeting the size standards of the Small Business 
Administration (SBA), (2) a nonprofit organization that is not dominant 
in its field, or (3) a small government jurisdiction with a population 
of less than 50,000 (States and individuals are not included in the 
definition of ``small entity''). HHS uses as its measure of significant 
economic impact on a substantial number of small entities a change in 
revenues of more than 3 percent to 5 percent. HHS anticipates that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities.
    As discussed in the Web Portal final rule published on May 5, 2010 
(75 FR 24481), HHS examined the health insurance industry in depth in 
the RIA we prepared for the proposed rule on establishment of the 
Medicare Advantage program (69 FR 46866, August 3, 2004). In that 
analysis it was determined that there were few, if any, insurance firms 
underwriting comprehensive health insurance policies (in contrast, for 
example, to travel insurance policies or dental discount policies) that 
fell below the size thresholds for ``small'' business established by 
the SBA (currently $7 million in annual receipts for health 
issuers).\38\ In addition, HHS used the data from Medical Loss Ratio 
(MLR) annual report submissions for the 2011 MLR reporting year to 
develop an estimate of the number of small entities

[[Page 37077]]

that offer comprehensive major medical coverage. These estimates may 
overstate the actual number of small health insurance issuers that 
would be affected, since they do not include receipts from these 
companies' other lines of business. It is estimated that out of 466 
issuers nationwide, there are 22 small entities each with less than $7 
million in earned premiums that offer individual or group health 
insurance coverage and would therefore be subject to the requirements 
of this proposed regulation. Thirty six percent of these small issuers 
belong to larger holding groups, and many if not all of these small 
issuers are likely to have other lines of business that would result in 
their revenues exceeding $7 million. It is uncertain how many of these 
466 issuers would offer QHPs and be subject to the provisions of this 
proposed rule. Based on this analysis, however, HHS expects that this 
proposed rule will not affect small issuers.
---------------------------------------------------------------------------

    \38\ ``Table of Size Standards Matched To North American 
Industry Classification System Codes,'' effective January 7, 2013, 
U.S. Small Business Administration, available at http://www.sba.gov.
---------------------------------------------------------------------------

    Some of the agents and brokers affected by the provisions of this 
proposed rule may be small entities and would incur costs to comply 
with the provisions of this proposed rule. The size threshold for 
``small'' business established by the SBA is currently $7 million in 
annual receipts for insurance agencies and brokerages. We anticipate 
that agents and brokers will continue to be an important source of 
assistance for many consumers seeking access to health insurance 
coverage through an Exchange, including those who own and/or are 
employed by small businesses. Due to lack of data, HHS is unable to 
estimate how many agents and brokers permitted by States to assist 
consumers would be small entities. We invite comments on this issue.

E. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 
requires that agencies assess anticipated costs and benefits before 
issuing any proposed rule that includes a Federal mandate that could 
result in expenditure in any one year by State, local or tribal 
governments, in the aggregate, or by the private sector, of $100 
million in 1995 dollars, updated annually for inflation. In 2013, that 
threshold level is approximately $141 million.
    UMRA does not address the total cost of a proposed rule. Rather, it 
focuses on certain categories of cost, mainly those ``Federal mandate'' 
costs resulting from--(1) imposing enforceable duties on State, local, 
or tribal governments, or on the private sector; or (2) increasing the 
stringency of conditions in, or decreasing the funding of, State, 
local, or tribal governments under entitlement programs.
    The proposed rule would direct States to undertake oversight 
activities for State Exchanges, State-operated reinsurance and risk 
adjustment programs. The costs related to oversight activities, 
recordkeeping, reporting and audits are estimated to be approximately 
$2.8 million in 2014. There are no mandates on local or tribal 
governments. The private sector, for example, QHP issuers and agents 
and brokers, would incur costs to comply with the record maintenance 
and reporting requirements set forth in this proposed rule. The related 
costs are estimated to be approximately $21.8 million in 2014. However, 
consistent with policy embodied in UMRA, this proposed rule has been 
designed to be a low-burden alternative for State, local and tribal 
governments, and the private sector while achieving the objectives of 
the Affordable Care Act.

F. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications.
    States are the primary regulators of health insurance coverage. 
States will continue to apply State laws regarding health insurance 
coverage. However, if any State law or requirement prevents the 
application of a Federal standard, then that particular State law or 
requirement would be preempted. State requirements that are more 
stringent than the Federal requirements would be not be preempted by 
this proposed rule. Accordingly, States have significant latitude to 
impose requirements with respect to health insurance coverage that are 
more restrictive than the Federal law.
    States would continue to license, monitor and regulate all agents 
and brokers, both inside and outside of Exchanges. All State laws 
related to agents and brokers, including State laws related to 
appointments, contractual relationships with issuers, and licensing and 
marketing requirements, would continue to apply. Under the proposed 
rule, States would have the option to operate only a State-based SHOP 
while the Exchange is operated as an FFE. The proposed rule would also 
provide additional flexibility to States with respect to the operation 
of a SHOP-specific Navigator program when the State operates only a 
SHOP Exchange. The State Exchange oversight program builds on State 
oversight efforts, where possible, by coordinating with State 
authorities to address compliance issues and concerns. HHS would 
coordinate enforcement actions for QHP issuers with State efforts in 
order to streamline the oversight of QHP issuers by States and to avoid 
inappropriate duplication of enforcement actions. Because QHPs are one 
of several commercial market insurance products operating in State 
markets, HHS would not seek to inappropriately duplicate or interfere 
with the traditional regulatory roles played by the State DOIs. HHS 
would generally confine its QHP oversight to Exchange-specific 
requirements and attributes. HHS would also seek to work 
collaboratively with State DOIs on topics of mutual concern, in the 
interest of efficiently deploying oversight resources and avoiding 
needlessly duplicative regulatory roles. HHS may consider the 
regulatory action taken by a State against a QHP issuer as a factor in 
determining whether to decertify a QHP. As mentioned earlier in the 
preamble, HHS recognizes that States play an important role in handling 
consumer cases related to health insurance and HHS anticipates that 
States will continue to assist consumers with these grievances and 
complaints. QHP issuers are expected to comply with standards 
established by State law and regulation for cases forwarded to an 
issuer by a State in which it offers QHPs.
    The requirements specified in this proposed rule would impose 
direct costs on State and local governments and we seek comments on how 
to minimize those costs. State Exchanges and State-operated reinsurance 
and risk-adjustment programs would be required to undertake oversight, 
record maintenance and reporting activities.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policymaking discretion of the States, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected States. Throughout the process of developing this proposed 
rule, HHS has attempted to balance the States' interests in regulating 
health insurance issuers, and the Congress' intent to provide uniform 
protections to consumers in every State. By doing so, it is HHS' view 
that it has complied with the requirements of Executive Order 13132. 
Under the requirements set forth in section 8(a) of Executive Order 
13132, and by the signatures affixed to this rule, HHS certifies that 
the CMS Center for Consumer Information and Insurance Oversight

[[Page 37078]]

has complied with the requirements of Executive Order 13132 for the 
attached proposed rule in a meaningful and timely manner.

G. Congressional Review Act

    This proposed rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can 
take effect, the Federal agency promulgating the rule shall submit to 
each House of the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has been transmitted to the Congress and the Comptroller General 
for review.

List of Subjects

45 CFR Part 144

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, and State regulation of health insurance.

45 CFR Part 153

    Administrative practice and procedure, Adverse selection, Health 
care, Health insurance, Health records, Organization and functions 
(Government agencies), Premium stabilization, Reporting and 
recordkeeping requirements, Reinsurance, Risk adjustment, Risk 
corridors, Risk mitigation, State and local governments.

45 CFR Part 155

    Administrative practice and procedure, Health care access, Health 
insurance, Reporting and recordkeeping requirements, State and local 
governments, Cost-sharing reductions, Advance payments of premium tax 
credit, Administration and calculation of advance payments of the 
premium tax credit, Plan variations, Actuarial value.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
Committees, Brokers, Conflict of interest, Consumer protection, Grant 
programs-health, Grants administration, Health care, Health insurance, 
Health maintenance organization (HMO), Health records, Hospitals, 
American Indian/Alaska Natives, Individuals with disabilities, Loan 
programs-health, Organization and functions (Government agencies), 
Medicaid, Public assistance programs, Reporting and recordkeeping 
requirements, State and local governments, Sunshine Act, Technical 
assistance, Women, and Youth.
    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR parts 144, 147, 153, 155, 
and 156 as set forth below:

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
1. The authority citation for part 144 is revised to read as follows:

    Authority:  Secs. 2701 through 2763, 2791, and 2792 of the 
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92).
0
2. Section 144.102 is amended by revising the second sentence of 
paragraph (c) to read as follows:

Sec.  144.102  Scope and applicability.

* * * * *
    (c) * * * If the coverage is offered to an association member other 
than in connection with a group health plan, the coverage is considered 
individual health insurance coverage for purposes of 45 CFR parts 144 
through 148. * * *
* * * * *
0
3. Section 144.103 is amended by revising the definitions of ``Group 
market,'' ``Individual market,'' ``Large employer,'' ``Policy year,'' 
and ``Small employer'' to read as follows:

Sec.  144.103  Definitions.

* * * * *
    Group market means the market for health insurance coverage offered 
in connection with a group health plan.
* * * * *
    Individual market means the market for health insurance coverage 
offered to individuals other than in connection with a group health 
plan.
* * * * *
    Large employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 101 employees on business days during the preceding 
calendar year and who employs at least 1 employee on the first day of 
the plan year. In the case of plan years beginning before January 1, 
2016, a State may elect to define large employer by substituting ``51 
employees'' for ``101 employees.''
* * * * *
    Policy year means, with respect to--
    (1) A grandfathered health plan offered in the individual health 
insurance market, the 12-month period that is designated as the policy 
year in the policy documents of the individual health insurance 
coverage. If there is no designation of a policy year in the policy 
document (or no such policy document is available), then the policy 
year is the deductible or limit year used under the coverage. If 
deductibles or other limits are not imposed on a yearly basis, the 
policy year is the calendar year.
    (2) A non-grandfathered health plan offered in the individual 
health insurance market, or in a market in which the State has merged 
the individual and small group risk pools, beginning January 1, 2015, a 
calendar year for which health insurance coverage provides coverage for 
health benefits.
* * * * *
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 1 but not more than 100 employees on business days 
during the preceding calendar year and who employs at least 1 employee 
on the first day of the plan year. In the case of plan years beginning 
before January 1, 2016, a State may elect to define small employer by 
substituting ``50 employees'' for ``100 employees.''
* * * * *

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
4. The authority citation for part 147 continues to read as follows:

    Authority:  Secs. 2701 through 2763, 2791, and 2792 of the 
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
0
5. Section 147.102 is amended by revising paragraph (a) introductory 
text and adding a sentence at the end of paragraph (a)(1)(ii) to read 
as follows:

Sec.  147.102  Fair health insurance premiums.

* * * * *
    (a) In general. With respect to the premium rate charged by a 
health insurance issuer in accordance with Sec.  156.80 of this 
subchapter for health insurance coverage offered in the individual or 
group market--
    (1) * * *
    (ii) * * * For purposes of this paragraph (a)(1), rating area is 
determined in the small group market using the group policyholder's 
principal business address and in the individual market using the 
primary policyholder's address.
* * * * *

[[Page 37079]]

0
6. Section 147.104 is amended by revising paragraph (a), adding a 
sentence at the end of paragraph (b)(2), and revising paragraphs 
(c)(2), (d)(1)(ii), and (d)(2) introductory text to read as follows:

Sec.  147.104  Guaranteed availability of coverage.

    (a) Guaranteed availability of coverage in the individual and group 
market. Subject to paragraphs (b) through (d) of this section, a health 
insurance issuer that offers health insurance coverage in the 
individual, small group, or large group market in a State must offer to 
any individual or employer in the State all products that are approved 
for sale in the applicable market, and must accept any individual or 
employer that applies for any of those products.
* * * * *
    (b) * * *
    (2) * * * As of January 1, 2015, health insurance coverage in the 
individual market or in a market in which the State has merged the 
individual and small group risk pools must be offered on a calendar 
year basis.
* * * * *
    (c) * * *
    (2) An issuer that denies health insurance coverage to an 
individual or an employer in any service area, in accordance with 
paragraph (c)(1)(ii) of this section, may not offer coverage in the 
individual, small group, or large group market, as applicable, for a 
period of 180 calendar days after the date the coverage is denied. This 
paragraph (c)(2) does not limit the issuer's ability to renew coverage 
already in force or relieve the issuer of the responsibility to renew 
that coverage.
* * * * *
    (d) * * *
    (1) * * *
    (ii) It is applying this paragraph (d)(1) uniformly to all 
employers or individual in the large group, small group, or individual 
market, as applicable, in the State consistent with applicable State 
law and without regard to the claims experience of those individuals, 
employers and their employees (and their dependents) or any health 
status-related factor relating to such individuals, employees, and 
dependents.
    (2) An issuer that denies health insurance coverage to any employer 
or individual in a State under paragraph (d)(1) of this section may not 
offer coverage in the large group, small group, or individual market, 
as applicable, in the State before the later of either of the following 
dates:
* * * * *
    7. Section 147.106 is amended by revising paragraphs (a) and (d)(1) 
introductory text to read as follows:

Sec.  147.106  Guaranteed renewability of coverage.

    (a) General rule. Subject to paragraphs (b) through (d) of this 
section, a health insurance issuer offering health insurance coverage 
in the individual, small group, or large group market is required to 
renew or continue in force the coverage at the option of the plan 
sponsor or the individual, as applicable.
* * * * *
    (d) * * *
    (1) An issuer may elect to discontinue offering all health 
insurance coverage in the individual, small group, or large group 
market, or all markets, in a State in accordance with applicable State 
law only if--
* * * * *

PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS AND RISK 
ADJUSTMENT UNDER THE AFFORDBALE CARE ACT

    8. The authority citation for part 153 continues to read as 
follows:

    Authority: Secs. 1321, 1341-1343, Pub. L. 111-148, 24 Stat. 119.
    9. Section 153.20 is amended by revising the definition of 
``contributing entity'' to read as follows:

Sec.  153.20  Definitions.

* * * * *
    Contributing entity means a health insurance issuer or a self-
insured group health plan (including a group health plan that is 
partially self-insured and partially insured, where the health 
insurance coverage does not constitute major medical coverage). A self-
insured group health plan is responsible for the reinsurance 
contributions, although it may elect to use a third party administrator 
or administrative services-only contractor for transfer of the 
reinsurance contributions.
* * * * *
    10. Section 153.240 is amended by revising paragraph (c) to read as 
follows:

Sec.  153.240  Disbursement of reinsurance payments.

* * * * *
    (c) Maintenance of records. If a State establishes a reinsurance 
program, the State must maintain documents and records relating to the 
reinsurance program, whether paper, electronic, or in other media, for 
each benefit year for at least 10 years, and make them available upon 
request from HHS, the OIG, the Comptroller General, or their designees, 
to any such entity. The documents and records must be sufficient to 
enable the evaluation of the State-operated reinsurance program's 
compliance with Federal standards. The State must also ensure that its 
contractors, subcontractors, and agents similarly maintain and make 
relevant documents and records available upon request from HHS, the 
OIG, the Comptroller General, or their designees, to any such entity.
* * * * *
0
11. Section 153.260 is added to subpart C to read as follows:

Sec.  153.260  General oversight requirements for State-operated 
reinsurance programs.

    (a) Accounting requirements. A State that establishes a reinsurance 
program must ensure that its applicable reinsurance entity keeps an 
accounting for each benefit year of:
    (1) All reinsurance contributions received from HHS for reinsurance 
payments and for administrative expenses;
    (2) All claims for reinsurance payments received from issuers of 
reinsurance-eligible plans;
    (3) All reinsurance payments made to issuers of reinsurance-
eligible plans; and
    (4) All administrative expenses incurred for the reinsurance 
program.
    (b) State summary report. A State that establishes a reinsurance 
program must submit to HHS and make public a report on its reinsurance 
program operations for each benefit year in the manner and timeframe 
specified by HHS. The report must summarize the accounting for the 
benefit year kept pursuant to paragraph (a) of this section.
    (c) Independent external audit. A State that establishes a 
reinsurance program must engage an independent qualified auditing 
entity to perform a financial and programmatic audit for each benefit 
year of its State-operated reinsurance program in accordance with 
generally accepted auditing standards. The State must:
    (1) Provide to HHS the results of the audit, in the manner and 
timeframe to be specified by HHS;
    (2) Ensure that the audit addresses the prohibitions set forth in 
Sec.  153.265;
    (3) Identify to HHS any material weakness or significant deficiency 
identified in the audit, and address in writing to HHS how the State 
intends to correct any such material weakness or significant 
deficiency; and
    (4) Make public a summary of the results of the audit, including 
any material weakness or significant deficiency, in the manner and 
timeframe to be specified by HHS.

[[Page 37080]]

0
12. Section 153.265 is added to subpart C to read as follows:

Sec.  153.265  Restrictions on use of reinsurance funds for 
administrative expenses.

    A State that establishes a reinsurance program must ensure that its 
applicable reinsurance entity does not use any funds for the support of 
reinsurance operations, including any reinsurance contributions 
provided under the national contribution rate for administrative 
expenses, for any of the following purposes:
    (a) Staff retreats;
    (b) Promotional giveaways;
    (c) Excessive executive compensation; or
    (d) Promotion of Federal or State legislative or regulatory 
modifications.
0
13. Section 153.310 is amended by adding paragraphs (c)(4), (d)(3) and 
(d)(4), and by removing paragraph (f) to read as follows:

Sec.  153.310  Risk adjustment administration.

* * * * *
    (c) * * *
    (4) Maintenance of records. A State operating a risk adjustment 
program must maintain documents and records relating to the risk 
adjustment program, whether paper, electronic, or in other media, for 
each benefit year for at least 10 years, and make them available upon 
request from HHS, the OIG, the Comptroller General, or their designees, 
to any such entity. The documents and records must be sufficient to 
enable the evaluation of the State-operated risk adjustment program's 
compliance with Federal standards. A State operating a risk adjustment 
program must also ensure that its contractors, subcontractors, and 
agents similarly maintain and make relevant documents and records 
available upon request from HHS, the OIG, the Comptroller General, or 
their designees, to any such entity.
    (d) * * *
    (3) In addition to requirements set forth in paragraphs (d)(1) and 
(d)(2) of this section, to obtain recertification from HHS to operate 
risk adjustment for a third benefit year, the State must, in the first 
benefit year for which it operates risk adjustment, provide to HHS an 
interim report, in a manner specified by HHS, including a detailed 
summary of its risk adjustment activities in the first 10 months of the 
benefit year, no later than December 31 of the applicable benefit year.
    (4) To obtain recertification from HHS to operate risk adjustment 
for each benefit year after the third benefit year, each State 
operating a risk adjustment program must submit to HHS and make public 
a detailed summary of its risk adjustment program operations for the 
most recent benefit year for which risk adjustment operations have been 
completed, in the manner and timeframe specified by HHS.
    (i) The summary must include the results of a programmatic and 
financial audit for each benefit year of the State-operated risk 
adjustment program conducted by an independent qualified auditing 
entity in accordance with generally accepted auditing standards.
    (ii) The summary must identify to HHS any material weakness or 
significant deficiency identified in the audit and address in writing 
to HHS how the State intends to correct any such material weakness or 
significant deficiency.
* * * * *
0
14. Section 153.365 is added to subpart D to read as follows:

Sec.  153.365  General oversight requirements for State-operated risk 
adjustment programs.

    If a State is operating a risk adjustment program, it must keep an 
accounting of all receipts and expenditures related to risk adjustment 
payments and charges and the administration of risk adjustment-related 
functions and activities for each benefit year.
0
15. Section 153.400 is amended by revising paragraph (a)(1)(i) and by 
adding paragraph (a)(3) to read as follows:

Sec.  153.400  Reinsurance contribution funds.

    (a) * * *
    (1) * * *
    (i) Such plan or coverage is not major medical coverage, subject to 
paragraph (a)(3) of this section.
* * * * *
    (3) Notwithstanding paragraph (a)(1)(i) of this section, a health 
insurance issuer must make reinsurance contributions for lives covered 
by its group health insurance coverage even if the insurance coverage 
does not constitute major medical coverage, if -
    (i) The group health plan provides health insurance coverage for 
those covered lives through more than one insurance policy that in 
combination constitute major medical coverage but individually do not;
    (ii) The lives are not covered by self-insured coverage of the 
group health plan (except for self-insured coverage limited to excepted 
benefits); and
    (iii) The health insurance coverage under the policy offered by the 
health insurance issuer represents a percentage of the total health 
insurance coverage offered in combination by the group health plan 
greater than the percentage offered under any of the other policies. 
For purposes of this paragraph, the percentage of coverage offered 
under various policies is determined based on the average premium per 
covered life for those policies. In the event that the percentage of 
coverage for two or more insurance policies is equal, the issuer of the 
policy that provides the greatest portion of in-network hospitalization 
benefits will be responsible for reinsurance contributions.
* * * * *
0
16. Section 153.405 is amended by adding paragraph (h) to read as 
follows:

Sec.  153.405  Calculation of reinsurance contributions.

* * * * *
    (h) Maintenance of records. A contributing entity must maintain 
documents and records, whether paper, electronic, or in other media, 
sufficient to substantiate the enrollment count submitted pursuant to 
this section for a period of at least 10 years, and must make that 
evidence available upon request from HHS, the OIG, the Comptroller 
General, or their designees, to any such entity, for purposes of 
verification, investigation, audit, or other review of reinsurance 
contribution amounts.
0
17. Section 153.410 is amended by adding paragraph (c) to read as 
follows:

Sec.  153.410  Requests for reinsurance payment.

* * * * *
    (c) Maintenance of records. An issuer of a reinsurance-eligible 
plan must maintain documents and records, whether paper, electronic, or 
in other media, sufficient to substantiate the requests for reinsurance 
payments made pursuant to this section for a period of at least 10 
years, and must make that evidence available upon request from HHS, the 
OIG, the Comptroller General, or their designees, or, in a State where 
the State is operating reinsurance, the State or its designee, to any 
such entity, for purposes of verification, investigation, audit, or 
other review of reinsurance payment requests.
0
18. Section 153.620 is amended by revising paragraph (b) to read as 
follows:

Sec.  153.620  Compliance with risk adjustment standards.

* * * * *
    (b) Issuer records maintenance requirements. An issuer that offers 
risk adjustment covered plans must also maintain documents and records, 
whether paper, electronic, or in other media, sufficient to enable the 
evaluation of the issuer's compliance

[[Page 37081]]

with applicable risk adjustment standards, and must make that evidence 
available upon request to HHS, OIG, the Comptroller General, or their 
designees, or in a State where the State is operating risk adjustment, 
the State or its designee to any such entity.
0
19. Section 153.740 is added to subpart H to read as follows:

Sec.  153.740  Failure to comply with HHS-operated risk adjustment and 
reinsurance data requirements.

    (a) Enforcement actions. If an issuer of a risk adjustment covered 
plan or reinsurance-eligible plan fails to establish a dedicated 
distributed data environment in a manner and timeframe specified by 
HHS; fails to provide HHS with access to the required data in such 
environment in accordance with Sec.  153.700(a) or otherwise fails to 
comply with the requirements of Sec.  153.700 through Sec.  153.730; 
fails to adhere to the reinsurance data submission requirements set 
forth in Sec.  153.420; or fails to adhere to the risk adjustment data 
submission and data storage requirements set forth in Sec.  153.610 
through Sec.  153.630, HHS may impose civil money penalties in 
accordance with the procedures set forth in Sec.  156.805 of this 
subchapter.
    (b) Default risk adjustment charge. If an issuer of a risk 
adjustment covered plan fails to establish a dedicated distributed data 
environment or fails to provide HHS with access to the required data in 
such environment in accordance with Sec.  153.610(a), Sec.  153.700, 
Sec.  153.710, or Sec.  153.730 such that HHS cannot apply the 
applicable Federally certified risk adjustment methodology to calculate 
the risk adjustment payment transfer amount for the risk adjustment 
covered plan in a timely fashion, HHS will assess a default risk 
adjustment charge.

PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED 
STANDARDS UNDER THE AFFORDABLE CARE ACT

0
20. The authority citation for part 155 continues to read as follows:

    Authority: Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1334, 1402, 
1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-
18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 18081-
18083.

0
21. Section 155.20 is amended by revising the definition for 
``Exchange'' and by adding a definition for ``Issuer customer service 
representative'' in alphabetical order to read as follows:

Sec.  155.20  Definitions.

* * * * *
    Exchange means a governmental agency or non-profit entity that 
meets the applicable standards of this part and makes QHPs available to 
qualified individuals and/or qualified employers. Unless otherwise 
identified, this term includes an Exchange serving the individual 
market for qualified individuals and a SHOP serving the small group 
market for qualified employers, regardless of whether the Exchange is 
established and operated by a State (including a regional Exchange or 
subsidiary Exchange) or by HHS.
* * * * *
    Issuer customer service representative means an employee, 
contractor, or agent of a QHP issuer that provides assistance to 
applicants and enrollees, but is not licensed as an agent, broker, or 
producer under State law.
* * * * *
0
22. Section 155.100 is amended by revising paragraph (a) to read as 
follows:

Sec.  155.100  Establishment of a State Exchange.

    (a) General requirements. Each State may elect to establish:
    (1) An Exchange that facilitates the purchase of health insurance 
coverage in QHPs in the individual market and that provides for the 
establishment of a SHOP; or
    (2) An Exchange that provides only for the establishment of a SHOP.
    (3) Timing. For plan years beginning before January 1, 2015, only 
States with a conditionally approved Exchange Blueprint may elect to 
establish an Exchange that provides only for the establishment of a 
SHOP, pursuant to the process in Sec.  155.105(e). For plan years 
beginning on or after January 1, 2015, any State may elect to establish 
an Exchange that provides only for the establishment of a SHOP, 
pursuant to the process in Sec.  155.106(a).
* * * * *
0
23. Section 155.105 is amended by revising paragraphs (b)(1), (b)(2) 
and (f) to read as follows:

Sec.  155.105  Approval of a State Exchange.

* * * * *
    (b) * * *
    (1) The Exchange is able to carry out the required functions of an 
Exchange consistent with subparts C, D, E, H, and K of this part unless 
the State is approved to operate only a SHOP by HHS pursuant to Sec.  
155.100(a)(2), in which case the Exchange must perform the minimum 
functions described in subpart H and all applicable provisions of other 
subparts referenced therein;
    (2) The Exchange is capable of carrying out the information 
reporting requirements in accordance with section 36B of the Code, 
unless the State is approved to operate only a SHOP by HHS pursuant to 
Sec.  155.100(a)(2); and
* * * * *
    (f) HHS operation of an Exchange. (1) If a State does not elect to 
operate an Exchange under Sec.  155.100(a)(1) or an electing State does 
not have an approved or conditionally approved Exchange pursuant to 
Sec.  155.100(a)(1) by January 1, 2013, HHS must (directly or through 
agreement with a not-for-profit entity) establish and operate such 
Exchange within the State. In this case, the requirements in Sec.  
155.120(c), Sec.  155.130 and subparts C, D, E, H, and K of this part 
will apply.
    (2) If an electing State has an approved or conditionally approved 
Exchange pursuant to Sec.  155.100(a)(2) by January 1, 2013, HHS must 
(directly or through agreement with a not-for-profit entity) establish 
and operate an Exchange that facilitates the purchase of health 
insurance coverage in QHPs in the individual market and operate such 
Exchange within the State. In this case, the requirements in Sec.  
155.120(c), Sec.  155.130 and subparts C, D, E, and K of this part will 
apply to the Exchange operated by HHS.
0
24. Section 155.140 is amended by revising paragraph (c)(2)(ii) to read 
as follows:

Sec.  155.140  Establishment of a regional Exchange or subsidiary 
Exchange.

* * * * *
    (c) * * *
    (2) * * *
    (ii) Encompass the same geographic area for its regional or 
subsidiary SHOP and its regional or subsidiary Exchange except:
    (A) In the case of a regional Exchange established pursuant to 
Sec.  155.100(a)(2), the regional SHOP must encompass a geographic area 
that matches the combined geographic areas of the individual market 
Exchanges established to serve the same set of States establishing the 
regional SHOP; and
    (B) In the case of a subsidiary Exchange established pursuant to 
Sec.  155.100(a)(2), the combined geographic area of all subsidiary 
SHOPs established in the State must encompass the geographic area of 
the individual market Exchange established to serve the State.
0
25. Section 155.200 is amended by revising paragraph (a) to read as 
follows:

[[Page 37082]]

Sec.  155.200  Functions of an Exchange.

    (a) General requirements. The Exchange must perform the minimum 
functions described in this subpart and in subparts D, E, H, and K of 
this part unless the State is approved to operate only a SHOP by HHS 
pursuant to Sec.  155.100(a)(2), in which case the Exchange operated by 
the State must perform the minimum functions described in subpart H and 
all applicable provisions of other subparts referenced therein while 
the Exchange operated by HHS must perform the minimum functions 
described in this subpart and in subparts D, E, and K of this part.
* * * * *
0
26. Section 155.220 is amended by revising paragraph (c)(3)(i); by 
adding paragraphs (c)(3)(vii), (c)(4), (d)(4), (f), (g), and (h); by 
removing the word ``and'' from the end of paragraph (c)(3)(v); and by 
removing the period at the end of paragraph (c)(3)(vi) and by adding 
``; and'' in its place to read as follows:--

Sec.  155.220  Ability of States to permit agents and brokers to assist 
qualified individuals, qualified employers, or qualified employees 
enrolling in QHPs.

* * * * *
    (c) * * *
    (3) * * *
    (i) Disclose and display all QHP information provided by the 
Exchange or directly by QHP issuers consistent with the requirements of 
Sec.  155.205(b)(1) and Sec.  155.205(c), and display a Web link to the 
Exchange Web site;
* * * * *
    (vii) For the Federally-facilitated Exchange, prominently display 
language notifying consumers that the agent's or broker's Web site is 
not the Exchange Web site, that the agent or broker's Web site might 
not display all QHP data available on the Exchange Web site, that the 
agent or broker has entered into an agreement with HHS pursuant to 
paragraph (d) of this section, and that the agent or broker agrees to 
conform to the standards specified in paragraph (c) and (d) of this 
section.
    (4) When an Internet Web site of an agent or broker is used to 
complete the QHP selection in the Federally-facilitated Exchange, and 
an agent or broker permits another agent or broker to access or use the 
Web site pursuant to an arrangement, the agent or broker who makes the 
Web site available must provide a list of agents and brokers who enter 
into such an arrangement to the Federally-facilitated Exchange, and 
must ensure that any agent or broker accessing or using the Web site 
pursuant to the arrangement:
    (i) Complies with paragraphs (c) and (d) of this section; and
    (ii) Complies with the policies and procedures that the agent or 
broker making the Web site available has established pursuant to 
paragraph (d)(4) of this section.
    (d) * * *
    (4) In the Federally-facilitated Exchange, comply with the 
following standards:
    (i) Establish policies and procedures to ensure compliance with 
paragraph (d)(3) of this section;
    (ii) Train its employees, representatives, contractors and agents 
with respect to the policies and procedures established pursuant to 
paragraph (d)(3) of this section on a periodic basis; and
    (iii) Ensure as a condition of contract or agreement that its 
employees, representatives, contractors, agents comply with the 
policies and procedures established pursuant to paragraph (d)(3) of 
this section.
* * * * *
    (f) Termination notice to HHS. (1) An agent or broker may terminate 
its agreement with HHS by sending to HHS a written notice at least 30 
days in advance of the date of intended termination.
    (2) The notice must include the intended date of termination, but 
if it does not specify a date of termination, or the date provided is 
not acceptable to HHS, HHS may set a different termination date that 
will be no less than 30 days from the date on the agent or broker's 
notice of termination.
    (3) When termination becomes effective, the agent or broker will 
not be able to assist any individual through the Federally-facilitated 
Exchange, but the agent or broker must continue to protect PII created, 
collected, use or disclosed during the term of the agreement with the 
Federally-facilitated Exchange.
    (g) Standards for termination for cause from the Federally-
facilitated Exchange. (1) If, in HHS's determination, a specific 
finding of noncompliance or pattern of noncompliance is sufficiently 
severe, HHS may terminate an agent's or broker's agreement with the 
Federally-facilitated Exchange for cause.
    (2) An agent or broker may be determined noncompliant if HHS finds 
that the agent or broker violated--
    (i) Any standard specified under this section;
    (ii) Any term or condition of its agreement with the Federally-
facilitated Exchange required under paragraph (d) of this section, 
including but not limited to compliance with Federally-Facilitated 
Exchange privacy and security standards;
    (iii) Any State law applicable to agents or brokers, as required 
under paragraph (e) of this section, including but not limited to State 
laws related to confidentiality and conflicts of interest; or
    (iv) Any Federal law applicable to agents or brokers.
    (3) HHS will notify the agent or broker of the specific finding of 
noncompliance or pattern of noncompliance, and after 30 days from the 
date of the notice, may terminate the agreement for cause if the matter 
is not resolved to the satisfaction of HHS.
    (4) After the period in paragraph (f)(3) of this section has 
elapsed, the agent or broker will no longer be registered with the 
Federally-facilitated Exchange or able to transact data through a 
secure connection with HHS.
    (h) Request for reconsideration of termination for cause from the 
Federally-facilitated Exchange. (1) Request for reconsideration. An 
agent or broker whose agreement with the Federally-facilitated Exchange 
has been terminated may request reconsideration of such action in the 
manner and form established by HHS.
    (2) Timeframe for request. The agent or broker must submit a 
request for reconsideration to the HHS reconsideration entity within 30 
calendar days of the date of the written notice from HHS.
    (3) Notice of reconsideration decision. The HHS reconsideration 
entity will provide the agent or broker with a written notice of the 
reconsideration decision within 30 calendar days of the date it 
receives the request for reconsideration. This decision will constitute 
HHS's final determination.
0
27. Section 155.270 is amended by revising paragraph (a) to read as 
follows:

Sec.  155.270  Use of standards and protocols for electronic 
transactions.

    (a) HIPAA administrative simplification. To the extent that the 
Exchange performs electronic transactions with a covered entity, the 
Exchange must use standards, implementation specifications, operating 
rules, and code sets that are adopted by the Secretary in 45 CFR parts 
160 and 162 or that are otherwise approved by HHS.
* * * * *
0
28. Section 155.280 is added to subpart C to read as follows:

Sec.  155.280  Oversight and monitoring of privacy and security 
requirements.

    (a) General. HHS will oversee and monitor the Federally-facilitated

[[Page 37083]]

Exchanges and non-Exchange entities associated with Federally-
facilitated Exchanges which are required to comply with the privacy and 
security standards established and implemented by a Federally-
facilitated Exchange pursuant to Sec.  155.260 for compliance with 
those standards. HHS will oversee and monitor State Exchanges for 
compliance with the standards State Exchanges establish and implement 
pursuant to Sec.  155.260. State Exchanges will oversee and monitor 
non-Exchange entities associated with the State Exchanges for 
compliance with the standards established and implemented by the State 
Exchange pursuant to Sec.  155.260.
    (b) Audits and investigations. HHS may conduct oversight activities 
that include but are not limited to the following: audits, 
investigations, inspections, and any reasonable activities necessary 
for appropriate oversight of compliance with the Exchange privacy and 
security standards. HHS may also pursue civil, criminal or 
administrative proceedings or actions as determined necessary.
    (c) Security and privacy incidents and breaches. (1) The following 
definitions apply to privacy and security incidents and breaches:
    (i) Incident means the act of violating an explicit or implied 
security policy, which includes attempts (either failed or successful) 
to gain unauthorized access to a system or its data, unwanted 
disruption or denial of service, the unauthorized use of a system for 
the processing or storage of data; and changes to system hardware, 
firmware, or software characteristics without the owner's knowledge, 
instruction, or consent.
    (ii) Breach means the loss of control, compromise, unauthorized 
disclosure, unauthorized acquisition, unauthorized access, or any 
similar term referring to situations where persons other than 
authorized users and for an other than authorized purpose have access 
or potential access to personally identifiable information, whether 
physical or electronic.
    (2) Incident or breach management. The entity where an incident or 
breach occurs is responsible for managing the incident or breach in 
accordance with the entity's documented incident handling and breach 
notification procedures.
    (3) Reporting. Federally-facilitated Exchanges, non-Exchange 
entities associated with the Federally-facilitated Exchange, and State 
Exchanges must report all privacy and security incidents and breaches 
to HHS within one (1) hour of discovering the incident or breach. A 
non-Exchange entity associated with a State Exchange must report all 
privacy and security incidents and breaches to the State Exchange with 
which they are associated.
0
29. Section 155.310 is amended by adding and reserving paragraph (j) 
and adding paragraph (k) to read as follows:

Sec.  155.310  Eligibility process.

* * * * *
    (j) [Reserved]
    (k) Incomplete application. If an application filer submits an 
application that does not include sufficient information for the 
Exchange to conduct an eligibility determination for enrollment in a 
QHP through the Exchange or for insurance affordability programs, if 
applicable, the Exchange must--
    (1) Provide notice to the applicant indicating that information 
necessary to complete an eligibility determination is missing, 
specifying the missing information, and providing instructions on how 
to provide the missing information; and
    (2) Provide the applicant with a period of no less than 15 days and 
no more than 90 days from the date on which the notice described in 
paragraph (k)(1) of this section is sent to the applicant to provide 
the information needed to complete the application to the Exchange.
    (3) During the period described in paragraph (k)(2) of this 
section, the Exchange must not proceed with an applicant's eligibility 
determination or provide advance payments of the premium tax credit or 
cost-sharing reductions, unless an application filer has provided 
sufficient information to determine his or her eligibility for 
enrollment in a QHP through the Exchange, in which case the Exchange 
must make such a determination for enrollment in a QHP.
0
30. Section 155.320 is amended by revising the section heading; by 
redesignating paragraphs (b)(1) and (b)(2) as paragraph (b)(1)(i) and 
(b)(1)(ii), by revising newly designated paragraph (b)(1), and by 
adding paragraph (b)(2) to read as follows:

Sec.  155.320  Verification of eligibility for minimum essential 
coverage other than through an eligible employer-sponsored plan.

* * * * *
    (b) * * *
    (1)(i) The Exchange must verify whether an applicant is eligible 
for minimum essential coverage other than through an eligible employer-
sponsored plan, Medicaid, CHIP, or the BHP, using information obtained 
by transmitting identifying information specified by HHS to HHS for 
verification purposes.
    (ii) The Exchange must verify whether an applicant has already been 
determined eligible for coverage through Medicaid, CHIP, or the BHP, if 
a BHP is operating in the service area of the Exchange, within the 
State or States in which the Exchange operates using information 
obtained from the agencies administering such programs.
    (2) Consistent with Sec.  164.512(k)(6)(i) of this subchapter, a 
health plan that is a government program providing public benefits, is 
expressly authorized to disclose protected health information, as that 
term is defined at Sec.  160.103 of this subchapter, that relates to 
eligibility for or enrollment in the health plan to HHS for 
verification of applicant eligibility for minimum essential coverage as 
part of the eligibility determination process for advance payments of 
the premium tax credit or cost-sharing reductions.
* * * * *
0
31. Section 155.340 is amended by adding paragraph (h) to read as 
follows:

Sec.  155.340  Administration of advance payments of the premium tax 
credit and cost-sharing reductions.

* * * * *
    (h) Failure to reduce enrollee's premiums to account for advance 
payments of the premium tax credits. If the Exchange discovers that it 
did not reduce an enrollee's premium by the amount of the advance 
payment of the premium tax credit, then the Exchange must refund to the 
enrollee any excess premium paid by or for the enrollee and notify the 
enrollee of the improper reduction no later than 30 calendar days after 
discovery of the improper reduction
0
32. Section 155.415 is added to read as follows:

Sec.  155.415  Allowing issuer customer service representatives to 
assist with eligibility applications.

    (a) Exchange option. An Exchange, to the extent permitted by State 
law, may permit issuer customer service representatives who do not meet 
the definition of agent or broker at Sec.  155.20 to assist individuals 
in the individual market with applying for a determination or 
redetermination of eligibility for coverage through the Exchange and 
insurance affordability programs, and to facilitate selection of a QHP 
offered by the issuer represented by the customer service 
representative, provided that such issuer customer service 
representatives meet the requirements set forth in Sec.  156.1230(a)(2) 
of this subchapter.

[[Page 37084]]

    (b) [Reserved]
0
33. Section 155.420 is amended by removing the period at the end of 
paragraph (d)(9) and by adding ``; and'' in its place, and by adding 
paragraph (d)(10) to read as follows:

Sec.  155.420  Special enrollment periods.

* * * * *
    (d) * * *
    (10) It has been determined by the Exchange that a qualified 
individual was not enrolled in QHP coverage, was not enrolled in the 
QHP selected by the individual, or is eligible for but is not receiving 
advance payments of the premium tax credit or cost-sharing reductions 
as a result of misconduct on the part of a non-Exchange entity 
providing enrollment assistance or conducting enrollment activities. 
For purposes of this provision, misconduct includes, but is not limited 
to, the failure of the non-Exchange entity to comply with applicable 
standards under this part, part 156 of this subchapter, or other 
applicable Federal or State laws, as determined by the Exchange.
* * * * *
0
34. In Sec.  155.700, paragraph (b) is amended by adding the definition 
of ``SHOP application filer'' in alphabetical order to read as follows:

Sec.  155.700  Standards for the establishment of a SHOP

* * * * *
    (b) * * *
    SHOP application filer means an applicant, an authorized 
representative, an agent or broker of the employer, or an employer 
filing for its employees where not prohibited by other law.

0
35. Section 155.705 is amended by revising paragraphs (b)(6)(i), and 
(b)(6)(ii), and by adding paragraphs (c) and (d) to read as follows:

Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (6) * * *
    (i) Require all QHP issuers to make any change to rates at a 
uniform time that is no more frequently than quarterly.
    (ii) In the FF-SHOP, rates may be updated quarterly with effective 
dates of January 1, April 1, July 1, or October 1 of each calendar 
year, beginning with rates effective no sooner than July 1, 2014. The 
updated rates must be submitted to HHS at least 60 days in advance of 
the effective date of the rates.
* * * * *
    (c) Coordination with individual market Exchange for eligibility 
determinations. A SHOP must provide data related to eligibility and 
enrollment of a qualified employee to the individual market Exchange 
that corresponds to the service area of the SHOP, unless the SHOP is 
operated pursuant to Sec.  155.100(a)(2).
    (d) Duties of Navigators in the SHOP. In States that have elected 
to operate only a SHOP pursuant to Sec.  155.100(a)(2), at State option 
and if State law permits the Navigator duties described in Sec.  
155.210(e)(3) and Sec.  155.210(e)(4) may be fulfilled through 
referrals to agents and brokers.

0
36. Section 155.730 is amended by revising paragraph (f) to read as 
follows:

Sec.  155.730  Application standards for SHOP.

* * * * *
    (f) The SHOP must:
    (1) Accept applications from SHOP application filers; and
    (2) Provide the tools to file an application via an Internet Web 
site.
* * * * *
0
37. Section 155.735 is added to subpart H to read as follows:

Sec.  155.735  Termination of coverage.

    (a) General requirements. The SHOP must determine the timing, form, 
and manner in which coverage in a QHP may be terminated.
    (b) Termination of employer group health coverage at the request of 
the employer. (1) The SHOP must establish policies for advance notice 
of termination required from the employer and effective dates of 
termination.
    (2) In the FF-SHOP, an employer may terminate coverage for all 
enrollees covered by the employer group health plan effective on the 
last day of any month, provided that the employer has given notice to 
the FF-SHOP on or before the 15th day of any month. If notice is given 
after the 15th of the month, the FF-SHOP may terminate the coverage on 
the last day of the following month.
    (c) Termination of employer group health coverage for non-payment 
of premiums. (1) The SHOP must establish policies for termination for 
non-payment of premiums, including but not limited to policies 
regarding due dates for payment of premiums to the SHOP, grace periods, 
employer and employee notices, and reinstatement provisions.
    (2) In an FF-SHOP--
    (i) For a given month of coverage, premium payment is due by the 
first day of the coverage month.
    (ii) If premium payment is not received 31 days from the first of 
the coverage month, the FF-SHOP may terminate the qualified employer 
for lack of payment.
    (iii) If a qualified employer is terminated due to lack of premium 
payment, but within 30 days following its termination the qualified 
employer requests reinstatement, pays all premiums owed including any 
prior premiums owed for coverage during the grace period, and pays the 
premium for the next month's coverage, the FF-SHOP must reinstate the 
qualified employer in its previous coverage.
    (d) Termination of employee or dependent coverage. (1) The SHOP 
must establish consistent policies regarding the process for and 
effective dates of termination of employee or dependent coverage in the 
following circumstances:
    (i) The employee or dependent is no longer eligible for coverage 
under the employer's group health plan;
    (ii) The employee requests that the SHOP terminate the coverage of 
the employee or a dependent of the employee under the employer's group 
health plan;
    (iii) The QHP in which the employee is enrolled terminates or is 
decertified as described in Sec.  155.1080;
    (iv) The enrollee changes from one QHP to another during the 
employer's annual open enrollment period or during a special enrollment 
period in accordance with Sec.  155.725(j); or
    (v) The enrollee's coverage is rescinded in accordance with Sec.  
147.128 of this subchapter.
    (2) In the FF-SHOP, termination is effective on the last day of the 
month in which the FF-SHOP receives notice of an event described in 
paragraph (d)(1) of this section, and notice must have been received by 
the FF-SHOP prior to the proposed date of termination.
    (e) Termination of coverage tracking and approval. The SHOP must 
comply with the standards described in Sec.  155.430(c).
    (f) Effective date. The provisions of Sec.  155.735 apply to 
coverage--
    (1) Beginning on or after January 1, 2015; and
    (2) In any SHOP providing qualified employers with the option 
described in Sec.  155.705(b)(2) or the option described in Sec.  
155.705(b)(4) before January 1, 2015, beginning with the date that 
option is offered.

0
38. Subpart M is added to read as follows:

Subpart M--Oversight and Program Integrity Standards for State 
Exchanges

Sec.
155.1200 General program integrity and oversight requirements.
155.1210 Maintenance of records.

[[Page 37085]]

Subpart M--Oversight and Program Integrity Standards for State 
Exchanges

Sec.  155.1200  General program integrity and oversight requirements.

    (a) General requirement. A State Exchange must:
    (1) Keep an accurate accounting of Exchange receipts and 
expenditures in accordance with generally accepted accounting 
principles (GAAP).
    (2) Monitor and report to HHS on Exchange related activities.
    (3) Collect and report to HHS performance monitoring data.
    (b) Reporting. The State Exchange must, at least annually, provide 
to HHS, in a manner specified by HHS, the following data and 
information:
    (1) A financial statement presented in accordance with GAAP by 
April 1 of each year,
    (2) Eligibility and enrollment reports, and
    (3) Performance monitoring data.
    (c) External audits. The State Exchange must engage an independent 
qualified auditing entity which follows generally accepted governmental 
auditing standards (GAGAS) to perform an annual independent external 
financial and programmatic audit and must make such information 
available to HHS for review. The State must:
    (1) Provide to HHS the results of the annual external audit; and
    (2) Inform HHS of any material weakness or significant deficiency 
and any intended corrective action identified in the audit;
    (d) External audit standard. The State Exchange must ensure that 
independent audits of State Exchange financial statements and program 
activities in paragraph (c) of this section address:
    (1) Compliance with paragraph (a)(1) of this section;
    (2) Compliance with requirements under subparts D, E, and K of this 
part;
    (3) Processes and procedures designed to prevent improper 
eligibility determinations and enrollment transactions; and
    (4) Identification of errors that have resulted in incorrect 
eligibility determinations.

Sec.  155.1210  Maintenance of records.

    (a) General. The State Exchange must maintain and must ensure its 
contractors, subcontractors, and agents maintain for 10 years, 
documents and records (whether paper, electronic, or other media) and 
other evidence of accounting procedures and practices, which are 
sufficient to do the following:
    (1) Accommodate periodic auditing of the State Exchange's financial 
records; and
    (2) Enable HHS or its designee(s) to inspect facilities, or 
otherwise evaluate the State- Exchange's compliance with Federal 
standards.
    (b) Records. The State Exchange and its contractors, 
subcontractors, and agents must ensure that the records specified in 
paragraph (a) of this section include, at a minimum, the following:
    (1) Information concerning management and operation of the State 
Exchange's financial and other record keeping systems;
    (2) Financial statements, including cash flow statements, and 
accounts receivable and matters pertaining to the costs of operations;
    (3) Any financial reports filed with other Federal programs or 
State authorities;
    (4) Data and records relating to the State Exchange's eligibility 
verifications and determinations, enrollment transactions, appeals, and 
plan variation certifications; and
    (5) Qualified health plan contracting (including benefit review) 
data and consumer outreach and Navigator grant oversight information.
    (c) A State Exchange must make all records and must ensure its 
contractors, subcontractors, and agents must make all records in 
paragraph (a) of this section available to HHS, the OIG, the 
Comptroller General, or their designees, upon request.

PART 156--HEALTH INSURANCE ISSUER STANARDS UNDER THE AFFORDABLE 
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES

0
39. The authority citation for part 156 continues to read as follows:

    Authority: Title I of the Affordable Care Act, sections 1301-
1304, 1311-1313, 1321, 1322, 1324, 1334, 1342-1343, and 1401-1402, 
Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18042).

0
40. Section 156.20 is amended by adding definitions for ``Delegated 
entity,'' ``Downstream entity,'' ``Enrollee satisfaction survey 
vendor,'' ``Exchange,'' and ``Registered user of the enrollee 
satisfaction survey data warehouse,'' in alphabetical order to read as 
follows:

Sec.  156.20  Definitions

* * * * *
    Delegated entity means any party, including an agent or broker, 
that enters into an agreement with a QHP issuer to provide 
administrative services or health care services to qualified 
individuals, qualified employers, or qualified employees and their 
dependents.
    Downstream entity means any party, including an agent or broker, 
that enters into an agreement with a delegated entity or with another 
downstream entity for purposes of providing administrative or health 
care services related to the agreement between the delegated entity and 
the QHP issuer. The term ``downstream entity'' is intended to reach the 
entity that directly provides administrative services or health care 
services to qualified individuals, qualified employers, or qualified 
employees and their dependents.
    Enrollee satisfaction survey vendor means an organization has 
relevant survey administration experience (e.g., CAHPS[supreg] 
surveys), organizational survey capacity, and quality control 
procedures for survey administration.
* * * * *
    Exchange has the meaning given to the term in Sec.  155.20 of this 
subchapter.
* * * * *
    Registered user of the enrollee satisfaction survey data warehouse 
means enrollee satisfaction survey vendors, QHP issuers, and Exchanges 
authorized to access CMS's secure data warehouse to submit survey data 
and to preview survey results prior to public reporting.
0
41. Section 156.80 is amended by adding paragraph (d)(3) to read as 
follows:

Sec.  156.80  Single risk pool.

* * * * *
    (d) * * *
    (3) Frequency of index rate and plan-level adjustments. A health 
insurance issuer may make the market-wide index rate adjustment 
described in paragraph (d)(1) of this section or the plan-level 
adjustments described in paragraph (d)(2) of this section--
    (i) With respect to the individual market or markets in which the 
individual and small group risk pools were merged by the State pursuant 
to paragraph (c) of this section, on an annual basis.
    (ii) With respect to the small group market, on an annual basis, 
and beginning the quarter after HHS issues notification that the FF-
SHOP can process quarterly rate updates, on a quarterly basis.
* * * * *
0
42. Section 156.285 is amended by revising paragraphs (d)(1)(i) and 
(iii) to read as follows:

Sec.  156.285  Additional standards specific to SHOP.

* * * * *
    (d) * * *
    (1) * * *

[[Page 37086]]

    (i) (A) Effective in plan years beginning on or after January 1, 
2015, requirements regarding termination of coverage established in 
Sec.  155.735 of this subchapter, if applicable to the coverage being 
terminated; otherwise
    (B) General requirements regarding termination of coverage 
established in Sec.  155.270 of this subchapter.
* * * * *
    (iii) (A) Effective in plan years beginning on or after January 1, 
2015, requirements regarding termination of coverage effective dates as 
set forth in Sec.  155.735 of this subchapter, if applicable to the 
coverage being terminated; otherwise
    (B) Requirements regarding termination of coverage effective dates 
as set forth in Sec.  156.270(i).
* * * * *
0
43. Subpart D is added to read as follows:
Subpart D--Federally-Facilitated Exchange Qualified Health Plan Issuer 
Standards
Sec.
156.330 Changes of ownership in a Federally-Facilitated Exchange.
156.340 Standards for downstream and delegated entities.

Subpart D--Federally-Facilitated Exchange Qualified Health Plan 
Issuer Standards

Sec.  156.330  Changes of ownership in a Federally-Facilitated 
Exchange.

    When a QHP issuer that offers one or more QHPs in a Federally-
facilitated Exchange undergoes a change of ownership as recognized by 
the State in which the issuer offers the QHP, the QHP issuer must 
notify HHS of the change in a manner to be specified by HHS, and 
provide the legal name and Taxpayer Identification Number (TIN) of the 
new owner and the effective date of the change at least 30 days prior 
to the effective date of the change of ownership. The new owner must 
agree to adhere to all applicable statutes and regulations.

Sec.  156.340  Standards for downstream and delegated entities.

    (a) General requirement. Effective October 1, 2013, notwithstanding 
any relationship(s) that a QHP issuer may have with delegated and 
downstream entities, a QHP issuer maintains responsibility for its 
compliance and the compliance of any of its delegated or downstream 
entities, as applicable, with all applicable standards, including--
    (1) Standards of subpart C of part 156 with respect to each of its 
QHPs on an ongoing basis;
    (2) Exchange processes, procedures, and standards in accordance 
with subparts H and K of part 155 and, in the small group market, Sec.  
155.705 of this subchapter;
    (3) Standards of Sec.  155.220 of this subchapter with respect to 
assisting with enrollment in QHPs; and
    (4) Standards of Sec.  156.705 and Sec.  156.715 for maintenance of 
records and compliance reviews for QHP issuers operating in a 
Federally-facilitated Exchange or FF-SHOP.
    (b) Delegation agreement specifications. If any of the QHP issuer's 
activities or obligations, in accordance with paragraph (a) of this 
section, are delegated to other parties, the QHP issuer's agreement 
with any delegated or downstream entity must--
    (1) Specify the delegated activities and reporting 
responsibilities;
    (2) Provide for revocation of the delegated activities and 
reporting standards or specify other remedies in instances where HHS or 
the QHP issuer determines that such parties have not performed 
satisfactorily;
    (3) Specify that the delegated or downstream entity must comply 
with all applicable laws and regulations relating to the standards 
specified under paragraph (a) of this section;
    (4) Specify that the delegated or downstream entity must permit 
access by the Secretary and the OIG or their designees in connection 
with their right to evaluate through audit, inspection, or other means, 
to the delegated or downstream entity's books, contracts, computers, or 
other electronic systems, including medical records and documentation, 
relating to the QHP issuer's obligations in accordance with Federal 
standards under paragraph (a) of this section until 10 years from the 
final date of the agreement period; and
    (5) Contain specifications described in paragraph (b) of this 
section by no later than January 1, 2015, for existing agreements; and 
no later than the effective date of the agreement for agreements that 
are newly entered into as of October 1, 2013.

0
44. Section 156.400 is amended by revising the definition of ``Most 
generous or more generous'' to read as follows:

Sec.  156.400  Definitions.

* * * * *
    Most generous or more generous means, as between a QHP (including a 
standard silver plan) or plan variation and one or more other plan 
variations of the same QHP, the standard plan or plan variation 
designed for the category of individuals last listed in Sec.  
155.305(g)(3) of this subchapter. Least generous or less generous has 
the opposite meaning.
* * * * *
0
45. Section 156.410 is amended by adding paragraphs (c) and (d) to read 
as follows:

Sec.  156.410  Cost-sharing reductions for enrollees.

* * * * *
    (c) Improper cost-sharing reductions. (1) If a QHP issuer fails to 
ensure that an individual assigned to a plan variation receives the 
cost-sharing reductions required under the applicable plan variation, 
taking into account Sec.  156.425(b) concerning continuity of 
deductibles and out-of-pocket amounts (if applicable), then the QHP 
issuer must, no later than 30 calendar days after discovery of the 
application of the cost-sharing reduction, refund any resulting excess 
cost sharing paid by or for the enrollee and notify the enrollee of the 
improper application.
    (2) If a QHP issuer provides an individual assigned to a plan 
variation more cost-sharing reductions than required under the 
applicable plan variation, taking into account Sec.  156.425(b) 
concerning continuity of deductibles and out-of-pocket amounts (if 
applicable), then the QHP issuer will not be eligible for reimbursement 
of any excess cost-sharing reductions provided to the enrollee, and may 
not seek reimbursement from the enrollee or the applicable provider for 
any of the excess cost-sharing reductions.
    (d) Improper assignment. If a QHP issuer does not assign an 
individual to the applicable plan variation (or standard plan without 
cost-sharing reductions) in accordance with Sec.  156.410(b) and Sec.  
156.425(a) based on the eligibility and enrollment information or 
notification provided by the Exchange, then the QHP issuer must, no 
later than 30 calendar days after discovery of the improper assignment, 
reassign the enrollee to the applicable plan variation (or standard 
plan without cost-sharing reductions) and notify the enrollee of the 
improper assignment such that--
    (1) If, pursuant to a reassignment under this paragraph (d), a QHP 
issuer reassigns an enrollee from a more generous plan variation to a 
less generous plan variation of a QHP (or a standard plan without cost-
sharing reductions), the QHP issuer will not be eligible for 
reimbursement for any of the excess cost-sharing reductions provided to 
the enrollee following the effective date of eligibility required by 
the Exchange, and may not seek reimbursement from the enrollee or the 
applicable provider for any of the excess cost-sharing reductions.

[[Page 37087]]

    (2) If, pursuant to a reassignment under this paragraph (d), a QHP 
issuer reassigns an enrollee from a less generous plan variation (or a 
standard plan without cost-sharing reductions) to a more generous plan 
variation of a QHP, the QHP issuer must recalculate the enrollee's 
liability for cost sharing paid between the effective date of 
eligibility required by the Exchange and the date the issuer 
effectuated the change, and must refund any excess cost sharing paid by 
or for the enrollee during such period, no later than 30 calendar days 
after discovery of the improper assignment.
0
46. Section 156.460 is amended by adding paragraph (c) to read as 
follows:

Sec.  156.460  Reduction of enrollee's share of premium to account for 
advance payments of the premium tax credit.

* * * * *
    (c) Refunds to enrollees for improper reduction of enrollee's share 
of premium to account for advance payments of the premium tax credit. 
If a QHP issuer discovers that it did not reduce the portion of the 
premium charged to or for an enrollee for the applicable month(s) by 
the amount of the advance payment of the premium tax credit in 
accordance with paragraph (a)(1) of this section, the QHP issuer must 
refund to the enrollee any excess premium paid by or for the enrollee 
and notify the enrollee of the improper reduction no later than 30 
calendar days after the QHP issuer's discovery of the improper 
reduction.

0
47. Section 156.480 is added to subpart E to read as follows:

Sec.  156.480  Oversight of the administration of the cost-sharing 
reductions and advance payments of the premium tax credit programs.

    (a) Maintenance of records. An issuer that offers a QHP in the 
individual market through a State Exchange must adhere to, and ensure 
that any relevant delegated entities and downstream entities adhere to, 
the standards set forth in Sec.  156.705 concerning maintenance of 
documents and records, whether paper, electronic, or in other media, by 
issuers offering QHPs in a Federally-facilitated Exchange, in 
connection with cost-sharing reductions and advance payments of the 
premium tax credit.
    (b) Annual reporting requirements. For each benefit year, an issuer 
that offers a QHP in the individual market through an Exchange must 
report to HHS, in the manner and timeframe required by HHS, summary 
statistics specified by HHS with respect to administration of cost-
sharing reduction and advance payments of the premium tax credit 
programs.
    (c) Audits. HHS or its designee may audit an issuer that offers a 
QHP in the individual market through an Exchange to assess compliance 
with the requirements of this subpart.

Subpart G--[Added and Reserved]

0
48. Subpart G is added and reserved.

0
49. Subpart H is added to read as follows:
Subpart H--Oversight and Financial Integrity Standards for Issuers of 
Qualified Health Plans in Federally-Facilitated Exchanges
Sec.
156.705 Maintenance of records for the Federally-Facilitated 
Exchange.
156.715 Investigations and compliance reviews in Federally-
facilitated Exchanges.

Subpart H--Oversight and Financial Integrity Standards for Issuers 
of Qualified Health Plans in Federally-facilitated Exchanges

Sec.  156.705  Maintenance of records for the Federally-facilitated 
Exchange.

    (a) General standard. Issuers offering QHPs in a Federally-
facilitated Exchange must maintain all documents and records (whether 
paper, electronic, or other media) and other evidence of accounting 
procedures and practices, necessary for HHS to do the following:
    (1) Periodically audit financial records related to QHP issuers' 
participation in a Federally-facilitated Exchange, and evaluate the 
ability of QHP issuers to bear the risk of potential financial losses; 
and
    (2) Conduct compliance reviews or otherwise monitor QHP issuers' 
compliance with all Exchange standards applicable to issuers offering 
QHPs in a Federally-facilitated Exchange as listed in this part.
    (b) Records. The records described in paragraph (a) of this section 
include the sources listed in Sec.  155.1210(b)(2), (b)(3), and (b)(5) 
of this subchapter.
    (c) Record retention timeframe. Issuers offering QHPs in a 
Federally-facilitated Exchange must maintain all records referenced in 
paragraph (a) of this section for 10 years.
    (d) Record availability. Issuers offering QHPs in a Federally-
facilitated Exchange must make all records in paragraph (a) of this 
section available to HHS, the OIG, the Comptroller General, or their 
designees, upon request.

Sec.  156.715  Investigations and compliance reviews in Federally-
facilitated Exchanges.

    (a) General standard. Issuers offering QHPs in the Federally-
facilitated Exchange may be subject to compliance reviews to ensure 
ongoing compliance with Exchange standards applicable to issuers 
offering QHPs in the Federally-facilitated Exchange.
    (b) Records. In preparation for or in the course of the compliance 
review, a QHP issuer must make available for HHS to review the records 
of the QHP issuer that pertain to its activities within the Federally-
facilitated Exchange. Such records may include, but are not limited to 
the following:
    (1) The QHP issuer's books and contracts, including the QHP 
issuer's policy manuals and other QHP plan benefit information provided 
to the QHP issuer's enrollees;
    (2) The QHP issuer's policies and procedures, protocols, standard 
operating procedures, or other similar manuals related to the QHP 
issuer's activities in the Federally-facilitated Exchange;
    (3) Any other information reasonably necessary for HHS to--
    (i) Evaluate the QHP issuer's compliance with QHP certification 
standards and other Exchange standards applicable to issuers offering 
QHPs in the Federally-facilitated Exchange;
    (ii) Evaluate the QHP's performance, including its adherence to an 
effective compliance plan, within the Federally-facilitated Exchange;
    (iii) Verify that the QHP issuer has performed the duties attested 
to as part of the QHP certification process; and
    (iv) Assess the likelihood of fraud or abuse.
    (c) Interest of qualified individuals and qualified employers. 
HHS's findings from the compliance reviews under this section may be in 
conjunction with other finds related to the QHP issuers' compliance 
with certification standards, used to confirm that permitting the 
issuer's QHPs to be available through the Federally-facilitated 
Exchange is in the interest of the qualified individuals and qualified 
employers as provided under Sec.  155.1000(c)(2) of this subchapter.
    (d) Onsite and desk reviews. The QHP issuer will make available, 
for the purposes listed in paragraph (c) of this section, its premises, 
physical facilities and equipment (including computer and other 
electronic systems), for HHS to conduct a compliance review as provided 
under this section.
    (1) A compliance review under this section will be carried out as 
an onsite or desk review based on the specific circumstances.
    (2) Unless otherwise specified, nothing in this section is intended 
to preempt Federal laws and regulations

[[Page 37088]]

related to information privacy and security.
    (e) Compliance review timeframe. A QHP issuer may be subject to a 
compliance review up to 10 years from the last day of that plan benefit 
year, or 10 years from the last day that the QHP certification is 
effective if the QHP is no longer available through a Federally-
facilitated Exchange; provided, however, that if the 10 year review 
period falls during an ongoing compliance review, the review period 
would be extended until the compliance review is completed.

0
50. Subpart I is added to read as follows:
Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges
Sec.
156.800 Available remedies; Scope.
156.805 Bases and process for imposing civil money penalties in 
Federally-facilitated Exchanges.
156.810 Bases and process for decertification of a QHP offered by an 
issuer through a Federally-facilitated Exchange.

Subpart I--Enforcement Remedies in Federally-facilitated Exchanges

Sec.  156.800  Available remedies; Scope.

    (a) Kinds of sanctions. HHS may impose the following types of 
sanctions on QHP issuers in a Federally-facilitated Exchange that are 
not in compliance with Exchange standards applicable to issuers 
offering QHPs in the Federally-facilitated Exchange:
    (1) Civil money penalties as specified in Sec.  156.805; and
    (2) Decertification of a QHP offered by the non-compliant QHP 
issuer in a Federally-facilitated Exchange as described in Sec.  
156.810.
    (b) Scope. Sanctions under this subpart are applicable only for 
non-compliance with QHP issuer participation standards and other 
standards applicable to issuers offering QHPs in a Federally-
facilitated Exchange.

Sec.  156.805  Bases and process for imposing civil money penalties in 
Federally-facilitated Exchanges.

    (a) Grounds for imposing civil money penalties. Civil money 
penalties may be imposed on an issuer in a Federally-facilitated 
Exchange by HHS if, based on credible evidence, HHS has reasonably 
determined that the issuer has engaged in one or more of the following 
actions:
    (1) Misconduct in the Federally-facilitated Exchange or substantial 
non-compliance with the Exchange standards applicable to issuers 
offering QHPs in the Federally-facilitated Exchange under subparts C 
through G of part 153 of this subchapter;
    (2) Limiting the QHP's enrollees' access to medically necessary 
items and services that are required to be covered as a condition of 
the QHP issuer's ongoing participation in the Federally-facilitated 
Exchange, if the limitation has adversely affected or has a substantial 
likelihood of adversely affecting one or more enrollees in the QHP 
offered by the QHP issuer;
    (3) Imposing on enrollees premiums in excess of the monthly 
beneficiary premiums permitted by Federal standards applicable to QHP 
issuers participating in the Federally-facilitated Exchange;
    (4) Engaging in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment into a QHP 
offered by the issuer (except as permitted by this part) by qualified 
individuals whose medical condition or history indicates the potential 
for a future need for significant medical services or items;
    (5) Intentionally or recklessly misrepresenting or falsifying 
information that it furnishes--
    (i) To HHS; or
    (ii) To an individual or entity upon which HHS relies to make its 
certifications or evaluations of the QHP issuer's ongoing compliance 
with Exchange standards applicable to issuers offering QHPs in the 
Federally-facilitated Exchange;
    (6) Failure to remit user fees assessed under Sec.  156.50(c); or
    (7) Failure to comply with the cost-sharing reductions and advance 
payments of the premium tax credit standards of subpart E of this part.
    (b) Factors in determining the amount of civil money penalties 
assessed. In determining the amount of civil money penalties, HHS may 
take into account the following:
    (1) The QHP issuer's previous or ongoing record of compliance;
    (2) The level of the violation, as determined in part by--
    (i) The frequency of the violation, taking into consideration 
whether any violation is an isolated occurrence, represents a pattern, 
or is widespread; and
    (ii) The magnitude of financial and other impacts on enrollees and 
qualified individuals; and
    (3) Aggravating or mitigating circumstances, or other such factors 
as justice may require, including complaints about the issuer with 
regard to the issuer's compliance with the medical loss ratio standards 
required by the Affordable Care Act and as codified by applicable 
regulations.
    (c) Maximum penalty. The maximum amount of penalty imposed for each 
violation is $100 for each day for each QHP issuer for each individual 
adversely affected by the QHP issuer's non-compliance; and where the 
number of individuals cannot be determined, HHS may estimate the number 
of individuals adversely affected by the violation.
    (d) Notice of intent to issue civil money penalty. If HHS proposes 
to assess a civil money penalty in accordance with this part, HHS will 
send a written notice of this decision to--
    (1) The QHP issuer against whom the civil money penalty is being 
imposed, whose notice must include the following:
    (i) A description of the basis for the determination;
    (ii) The basis for the penalty;
    (iii) The amount of the penalty;
    (iv) The date the penalty is due;
    (v) An explanation of the issuer's right to a hearing under subpart 
J of this part; and
    (vi) Information about where to file the request for hearing.
    (e) Failure to request a hearing. (1) If the QHP issuer does not 
request a hearing within 30 days of the issuance of the notice 
described in paragraph (d)(1) of this section, HHS may assess the 
proposed civil money penalty.
    (2) HHS will notify the QHP issuer in writing of any penalty that 
has been assessed and of the means by which the responsible entity may 
satisfy the judgment.
    (3) The QHP issuer has no right to appeal a penalty with respect to 
which it has not requested a hearing in accordance with subpart J of 
this part unless the QHP issuer can show good cause, as determined 
under Sec.  156.905(b), for failing to timely exercise its right to a 
hearing.

Sec.  156.810  Bases and process for decertification of a QHP offered 
by an issuer through a Federally-facilitated Exchange.

    (a) Bases for decertification. A QHP may be decertified on one or 
more of the following grounds:
    (1) The QHP issuer substantially fails to comply with the Federal 
laws and regulations applicable to QHP issuers participating in the 
Federally-facilitated Exchange;
    (2) The QHP issuer substantially fails to comply with the standards 
related to the risk adjustment, reinsurance, or risk corridors programs 
under 45 CFR Part 153, including providing HHS with valid risk 
adjustment, reinsurance or risk corridors data;

[[Page 37089]]

    (3) The QHP issuer substantially fails to comply with the 
transparency and marketing standards in Sec. Sec.  156.220 and 156.225;
    (4) The QHP issuer substantially fails to comply with the standards 
regarding advance payments of the premium tax credit and cost-sharing 
in subpart E of this part;
    (5) The QHP issuer is operating in the Federally-facilitated 
Exchange in a manner that hinders the efficient and effective 
administration of the Exchange;
    (6) The QHP no longer meets the conditions of the applicable 
certification criteria;
    (7) Based on credible evidence, the QHP issuer has committed or 
participated in fraudulent or abusive activities, including submission 
of false or fraudulent data;
    (8) The QHP issuer substantially fails to meet the requirements 
under Sec.  156.230 related to network adequacy standards or, Sec.  
156.235 related to inclusion of essential community providers;
    (9) The QHP issuer substantially fails to comply with the law and 
regulations related to internal claims and appeals and external review 
processes; or
    (10) The State recommends to HHS that the QHP should no longer be 
available in a Federally-facilitated Exchange.
    (b) State sanctions and determinations. (1) State sanctions. HHS 
may consider regulatory or enforcement actions taken by a State against 
a QHP issuer as a factor in determining whether to decertify a QHP 
offered by that issuer.
    (2) State determinations. HHS may decertify a QHP offered by an 
issuer in a Federally-facilitated Exchange based on a determinations or 
actions by a State as it relates to the issuer offering QHPs in a 
Federally-facilitated Exchange, including when a State places an issuer 
or its parent organization into receivership or when the State 
recommends to HHS that the QHP no longer be available in a Federally-
facilitated Exchange.
    (c) Standard decertification process. For decertification actions 
on grounds other than those described in Sec.  156.810(a)(7), (a)(8), 
or (a)(9), HHS will provide written notices to the QHP issuer, 
enrollees in that QHP, and the State department of insurance in the 
State in which the QHP is being decertified. The written notice must 
include the following:
    (1) The effective date of the decertification, which will be a date 
specified by HHS that is no earlier than 30 days after the date of 
issuance of the notice;
    (2) The reason for the decertification, including the regulation or 
regulations that are the basis for the decertification;
    (3) For the written notice to the QHP issuer, information about the 
effect of the decertification on the ability of the issuer to offer the 
QHP in the Federally-facilitated Exchange and must include information 
about the procedure for appealing the decertification by making a 
hearing request; and
    (4) The written notice to the QHP enrollees must include 
information about the effect of the decertification on enrollment in 
the QHP and about the availability of a special enrollment period, as 
described in Sec.  155.420 of this subchapter.
    (d) Expedited decertification process. For decertification actions 
on grounds described in Sec.  156.810(a)(7), (a)(8), or (a)(9), HHS 
will provide written notice to the QHP issuer, enrollees, and the State 
department of insurance in the State in which the QHP is being 
decertified. The written notice must include the following:
    (1) The effective date of the decertification, which will be a date 
specified by HHS; and
    (2) The information required by paragraphs (c)(2) through (c)(4) of 
this section.
    (e) Appeals. An issuer may appeal the decertification of a QHP 
offered by that issuer under paragraph (c) or (d) of this section by 
filing a request for hearing under subpart J of this part.
    (1) Effect of request for hearing. If an issuer files a request for 
hearing under this paragraph,
    (i) If the decertification is under paragraph (c) of this section, 
the decertification will not take effect prior to the issuance of the 
final administrative decision in the appeal, notwithstanding the 
effective date specified in the notice under paragraph (c)(1) of this 
section.
    (ii) If the decertification is under paragraph (d) of this section, 
the decertification will be effective on the date specified in the 
notice of decertification, but the certification of the QHP may be 
reinstated immediately upon issuance of a final administrative decision 
that the QHP should not be decertified.
    (2) [Reserved]

0
51. Subpart J is added to read as follows:
Subpart J--Administrative Review of QHP Issuer Sanctions in Federally-
Facilitated Exchanges
Sec.
156.901 Definitions.
156.903 Scope of Administrative Law Judge's (ALJ) authority.
156.905 Filing of request for hearing.
156.907 Form and content of request for hearing.
156.909 Amendment of notice of assessment or decertification request 
for hearing.
156.911 Dismissal of request for hearing.
156.913 Settlement.
156.915 Intervention.
156.917 Issues to be heard and decided by ALJ.
156.919 Forms of hearing.
156.921 Appearance of counsel.
156.923 Communications with the ALJ.
156.925 Motions.
156.927 Form and service of submissions.
156.929 Computation of time and extensions of time.
156.931 Acknowledgment of request for hearing.
156.935 Discovery.
156.937 Submission of briefs and proposed hearing exhibits.
156.939 Effect of submission of proposed hearing exhibits.
156.941 Prehearing conferences.
156.943 Standard of proof.
156.945 Evidence.
156.947 The record.
156.949 Cost of transcripts.
156.951 Posthearing briefs.
156.953 ALJ decision.
156.955 Sanctions.
156.957 Review by Administrator.
156.959 Judicial review.
156.961 Failure to pay assessment.
156.963 Final order not subject to review.

Subpart J--Administrative Review of QHP Issuer Sanctions in 
Federally-Facilitated Exchanges

Sec.  156.901  Definitions.

    In this subpart, unless the context indicates otherwise:
    ALJ means administrative law judge of the Departmental Appeals 
Board of HHS.
    Filing date means the date postmarked by the U.S. Postal Service, 
deposited with a carrier for commercial delivery, or hand delivered.
    Hearing includes a hearing on a written record as well as an in-
person or telephone hearing.
    Party means HHS or the respondent.
    Receipt date means five days after the date of a document, unless 
there is a showing that it was in fact received later.
    Respondent means an entity that received a notice of proposed 
assessment of a civil money penalty issued pursuant to Sec.  156.805 or 
a notice of decertification pursuant to Sec.  156.810(c) or Sec.  
156.810(d).

Sec.  156.903  Scope of Administrative Law Judge's (ALJ) authority.

    (a) The ALJ has the authority, including all of the authority 
conferred

[[Page 37090]]

by the Administrative Procedure Act (5 U.S.C. 554a), to adopt whatever 
procedures may be necessary or proper to carry out in an efficient and 
effective manner the ALJ's duty to provide a fair and impartial hearing 
on the record and to issue an initial decision concerning the 
imposition of a civil money penalty or the decertification of a QHP 
offered in a Federally-facilitated Exchange.
    (b) The ALJ's authority includes the authority to modify, 
consistent with the Administrative Procedures Act (5 U.S.C. 552a), any 
hearing procedures set out in this subpart.
    (c) The ALJ does not have the authority to find invalid or refuse 
to follow Federal statutes or regulations.

Sec.  156.905  Filing of request for hearing.

    (a) A respondent has a right to a hearing before an ALJ if it files 
a request for hearing that complies with Sec.  156.907(a), within 30 
days after the date of issuance of either HHS' notice of proposed 
assessment under Sec.  156.805, notice of decertification of a QHP 
under Sec.  156.810(c) or Sec.  156.810(d). The request for hearing 
should be addressed as instructed in the notice of proposed 
determination. ``Date of issuance'' is five (5) days after the filing 
date, unless there is a showing that the document was received earlier.
    (b) The ALJ may extend the time for filing a request for hearing 
only if the ALJ finds that the respondent was prevented by events or 
circumstances beyond its control from filing its request within the 
time specified above. Any request for an extension of time must be made 
promptly by written motion.

Sec.  156.907  Form and content of request for hearing.

    (a) The request for hearing must do the following:
    (1) Identify any factual or legal bases for the assessment or 
decertifications with which the respondent disagrees.
    (2) Describe with reasonable specificity the basis for the 
disagreement, including any affirmative facts or legal arguments on 
which the respondent is relying.
    (b) Identify the relevant notice of assessment or decertification 
by date and attach a copy of the notice.

Sec.  156.909  Amendment of notice of assessment or decertification 
request for hearing.

    The ALJ may permit CMS to amend its notice of assessment or 
decertification, or permit the respondent to amend a request for 
hearing that complies with Sec.  156.907(a), if the ALJ finds that no 
undue prejudice to either party will result.

Sec.  156.911  Dismissal of request for hearing.

    An ALJ will order a request for hearing dismissed if the ALJ 
determines that:
    (a) The request for hearing was not filed within 30 days as 
specified by Sec.  156.905(a) or any extension of time granted by the 
ALJ pursuant to Sec.  156.905(b).
    (b) The request for hearing fails to meet the requirements of Sec.  
156.907.
    (c) The entity that filed the request for hearing is not a 
respondent under Sec.  156.901.
    (d) The respondent has abandoned its request.
    (e) The respondent withdraws its request for hearing.

Sec.  156.913  Settlement.

    HHS has exclusive authority to settle any issue or any case, 
without the consent of the ALJ at any time before or after the ALJ's 
decision.

Sec.  156.915  Intervention.

    (a) The ALJ may grant the request of an entity, other than the 
respondent, to intervene if all of the following occur:
    (1) The entity has a significant interest relating to the subject 
matter of the case.
    (2) Disposition of the case will, as a practical matter, likely 
impair or impede the entity's ability to protect that interest.
    (3) The entity's interest is not adequately represented by the 
existing parties.
    (4) The intervention will not unduly delay or prejudice the 
adjudication of the rights of the existing parties.
    (b) A request for intervention must specify the grounds for 
intervention and the manner in which the entity seeks to participate in 
the proceedings. Any participation by an intervenor must be in the 
manner and by any deadline set by the ALJ.
    (c) The Department of Labor (DOL) or the Internal Revenue Service 
(IRS) may intervene without regard to paragraphs (a)(1) through (a)(3) 
of this section.

Sec.  156.917  Issues to be heard and decided by ALJ.

    (a) The ALJ has the authority to hear and decide the following 
issues:
    (1) Whether a basis exists to assess a civil money penalty against 
the respondent.
    (2) Whether the amount of the assessed civil money penalty is 
reasonable.
    (3) Whether a basis exists to decertify a QHP offered by the 
respondent in the Federally-facilitated Exchange.
    (b) In deciding whether the amount of a civil money penalty is 
reasonable, the ALJ--
    (1) Will apply the factors that are identified in Sec.  156.805 for 
civil money penalties.
    (2) May consider evidence of record relating to any factor that HHS 
did not apply in making its initial determination, so long as that 
factor is identified in this subpart.
    (c) If the ALJ finds that a basis exists to assess a civil money 
penalty, the ALJ may sustain, reduce, or increase the penalty that HHS 
assessed

Sec.  156.919  Forms of hearing.

    (a) All hearings before an ALJ are on the record. The ALJ may 
receive argument or testimony in writing, in person, or by telephone. 
The ALJ may receive testimony by telephone only if the ALJ determines 
that doing so is in the interest of justice and economy and that no 
party will be unduly prejudiced. The ALJ may require submission of a 
witness' direct testimony in writing only if the witness is available 
for cross-examination.
    (b) The ALJ may decide a case based solely on the written record 
where there is no disputed issue of material fact the resolution of 
which requires the receipt of oral testimony.

Sec.  156.921  Appearance of counsel.

    Any attorney who is to appear on behalf of a party must promptly 
file, with the ALJ, a notice of appearance.

Sec.  156.923  Communications with the ALJ.

    No party or person (except employees of the ALJ's office) may 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for both parties to participate. This 
provision does not prohibit a party or person from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.

Sec.  156.925  Motions.

    (a) Any request to the ALJ for an order or ruling must be by 
motion, stating the relief sought, the authority relied upon, and the 
facts alleged. All motions must be in writing, with a copy served on 
the opposing party, except in either of the following situations:
    (1) The motion is presented during an oral proceeding before an ALJ 
at which both parties have the opportunity to be present.
    (2) An extension of time is being requested by agreement of the 
parties or with waiver of objections by the opposing party.
    (b) Unless otherwise specified in this subpart, any response or 
opposition to a motion must be filed within 20 days of the party's 
receipt of the motion. The

[[Page 37091]]

ALJ does not rule on a motion before the time for filing a response to 
the motion has expired except where the response is filed at an earlier 
date, where the opposing party consents to the motion being granted, or 
where the ALJ determines that the motion should be denied.

Sec.  156.927  Form and service of submissions.

    (a) Every submission filed with the ALJ must be filed in 
triplicate, including one original of any signed documents, and 
include:
    (1) A caption on the first page, setting forth the title of the 
case, the docket number (if known), and a description of the submission 
(such as ``Motion for Discovery'').
    (2) The signatory's name, address, and telephone number.
    (3) A signed certificate of service, specifying each address to 
which a copy of the submission is sent, the date on which it is sent, 
and the method of service.
    (b) A party filing a submission with the ALJ must, at the time of 
filing, serve a copy of such submission on the opposing party. An 
intervenor filing a submission with the ALJ must, at the time of 
filing, serve a copy of the submission on all parties. Service must be 
made by mailing or hand delivering a copy of the submission to the 
opposing party. If a party is represented by an attorney, service must 
be made on the attorney.

Sec.  156.929  Computation of time and extensions of time.

    (a) For purposes of this subpart, in computing any period of time, 
the time begins with the day following the act, event, or default and 
includes the last day of the period unless it is a Saturday, Sunday, or 
legal holiday observed by the Federal government, in which event it 
includes the next business day. When the period of time allowed is less 
than seven days, intermediate Saturdays, Sundays, and legal holidays 
observed by the Federal government are excluded from the computation.
    (b) The period of time for filing any responsive pleading or papers 
is determined by the date of receipt (as defined in Sec.  156.901) of 
the submission to which a response is being made.
    (c) The ALJ may grant extensions of the filing deadlines specified 
in these regulations or set by the ALJ for good cause shown (except 
that requests for extensions of time to file a request for hearing may 
be granted only on the grounds specified in Sec.  156.905(b)).

Sec.  156.931  Acknowledgment of request for hearing.

    After receipt of the request for hearing, the ALJ assigned to the 
case or someone acting on behalf of the ALJ will send a letter to the 
parties that acknowledges receipt of the request for hearing, 
identifies the docket number assigned to the case, provides 
instructions for filing submissions and other general information 
concerning procedures, and sets out the next steps in the case.

Sec.  156.935  Discovery.

    (a) The parties must identify any need for discovery from the 
opposing party as soon as possible, but no later than the time for the 
reply specified in Sec.  156.937(c). Upon request of a party, the ALJ 
may stay proceedings for a reasonable period pending completion of 
discovery if the ALJ determines that a party would not be able to make 
the submissions required by Sec.  156.937 without discovery. The 
parties should attempt to resolve any discovery issues informally 
before seeking an order from the ALJ.
    (b) Discovery devices may include requests for production of 
documents, requests for admission, interrogatories, depositions, and 
stipulations. The ALJ orders interrogatories or depositions only if 
these are the only means to develop the record adequately on an issue 
that the ALJ must resolve to decide the case.
    (c) Each discovery request must be responded to within 30 days of 
receipt, unless that period of time is extended for good cause by the 
ALJ.
    (d) A party to whom a discovery request is directed may object in 
writing for any of the following reasons:
    (1) Compliance with the request is unduly burdensome or expensive.
    (2) Compliance with the request will unduly delay the proceedings.
    (3) The request seeks information that is wholly outside of any 
matter in dispute.
    (4) The request seeks privileged information. Any party asserting a 
claim of privilege must sufficiently describe the information or 
document being withheld to show that the privilege applies. If an 
asserted privilege applies to only part of a document, a party 
withholding the entire document must state why the nonprivileged part 
is not segregable.
    (5) The disclosure of information responsive to the discovery 
request is prohibited by law.
    (e) Any motion to compel discovery must be filed within 10 days 
after receipt of objections to the party's discovery request, within 10 
days after the time for response to the discovery request has elapsed 
if no response is received, or within 10 days after receipt of an 
incomplete response to the discovery request. The motion must be 
reasonably specific as to the information or document sought and must 
state its relevance to the issues in the case.

Sec.  156.937  Submission of briefs and proposed hearing exhibits.

    (a) Within 60 days of its receipt of the acknowledgment provided 
for in Sec.  156.931, the respondent must file the following with the 
ALJ:
    (1) A statement of its arguments concerning CMS's notice of 
assessment or decertification (respondent's brief), including citations 
to the respondent's hearing exhibits provided in accordance with 
paragraph (a)(2) of this section. The brief may not address factual or 
legal bases for the assessment or decertification that the respondent 
did not identify as disputed in its request for hearing or in an 
amendment to that request permitted by the ALJ.
    (2) All documents (including any affidavits) supporting its 
arguments, tabbed and organized chronologically and accompanied by an 
indexed list identifying each document.
    (3) A statement regarding whether there is a need for an in-person 
hearing and, if so, a list of proposed witnesses and a summary of their 
expected testimony that refers to any factual dispute to which the 
testimony will relate.
    (4) Any stipulations or admissions.
    (b) Within 30 days of its receipt of the respondent's submission 
required by paragraph (a) of this section, CMS will file the following 
with the ALJ:
    (1) A statement responding to the respondent's brief, including the 
respondent's proposed hearing exhibits, if appropriate. The statement 
may include citations to CMS's proposed hearing exhibits submitted in 
accordance with paragraph (b)(2) of this section.
    (2) Any documents supporting CMS's response not already submitted 
as part of the respondent's proposed hearing exhibits, organized and 
indexed as indicated in paragraph (a)(2) of this section (CMS's 
proposed hearing exhibits).
    (3) A statement regarding whether there is a need for an in-person 
hearing and, if so, a list of proposed witnesses and a summary of their 
expected testimony that refers to any factual dispute to which the 
testimony will relate.
    (4) Any admissions or stipulations.
    (c) Within 15 days of its receipt of CMS's submission required by

[[Page 37092]]

paragraph (b) of this section, the respondent may file with the ALJ a 
reply to CMS's submission.

Sec.  156.939  Effect of submission of proposed hearing exhibits.

    (a) Any proposed hearing exhibit submitted by a party in accordance 
with Sec.  156.937 is deemed part of the record unless the opposing 
party raises an objection to that exhibit and the ALJ rules to exclude 
it from the record. An objection must be raised either in writing prior 
to the prehearing conference provided for in Sec.  156.941 or at the 
prehearing conference. The ALJ may require a party to submit the 
original hearing exhibit on his or her own motion or in response to a 
challenge to the authenticity of a proposed hearing exhibit.
    (b) A party may introduce a proposed hearing exhibit following the 
times for submission specified in Sec.  156.937 only if the party 
establishes to the satisfaction of the ALJ that it could not have 
produced the exhibit earlier and that the opposing party will not be 
prejudiced.

Sec.  156.941  Prehearing conferences.

    An ALJ may schedule one or more prehearing conferences (generally 
conducted by telephone) on the ALJ's own motion or at the request of 
either party for the purpose of any of the following:
    (a) Hearing argument on any outstanding discovery request.
    (b) Establishing a schedule for any supplements to the submissions 
required by Sec.  156.937 because of information obtained through 
discovery.
    (c) Hearing argument on a motion.
    (d) Discussing whether the parties can agree to submission of the 
case on a stipulated record.
    (e) Establishing a schedule for an in-person hearing, including 
setting deadlines for the submission of written direct testimony or for 
the written reports of experts.
    (f) Discussing whether the issues for a hearing can be simplified 
or narrowed.
    (g) Discussing potential settlement of the case.
    (h) Discussing any other procedural or substantive issues.

Sec.  156.943  Standard of proof.

    (a) In all cases before an ALJ--
    (1) CMS has the burden of coming forward with evidence sufficient 
to establish a prima facie case;
    (2) The respondent has the burden of coming forward with evidence 
in response, once CMS has established a prima facie case; and
    (3) CMS has the burden of persuasion regarding facts material to 
the assessment or decertification; and
    (4) The respondent has the burden of persuasion regarding facts 
relating to an affirmative defense.
    (b) The preponderance of the evidence standard applies to all cases 
before the ALJ.

Sec.  156.945  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ will not be bound by 
the Federal Rules of Evidence. However, the ALJ may apply the Federal 
Rules of Evidence where appropriate; for example, to exclude unreliable 
evidence.
    (c) The ALJ excludes irrelevant or immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or 
needless presentation of cumulative evidence.
    (e) Although relevant, evidence is excluded if it is privileged 
under Federal law.
    (f) Evidence concerning offers of compromise or settlement made in 
this action will be inadmissible to the extent provided in the Federal 
Rules of Evidence.
    (g) Evidence of acts other than those at issue in the instant case 
is admissible in determining the amount of any civil money penalty if 
those acts are used under Sec.  156.805 of this part to consider the 
entity's prior record of compliance, or to show motive, opportunity, 
intent, knowledge, preparation, identity, or lack of mistake. This 
evidence is admissible regardless of whether the acts occurred during 
the statute of limitations period applicable to the acts that 
constitute the basis for liability in the case and regardless of 
whether HHS' notice sent in accordance with Sec.  156.805 referred to 
them.
    (h) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (i) All documents and other evidence offered or taken for the 
record will be open to examination by all parties, unless the ALJ 
orders otherwise for good cause shown.
    (j) The ALJ may not consider evidence regarding the willingness and 
ability to enter into and successfully complete a corrective action 
plan when that evidence pertains to matters occurring after HHS' notice 
under Sec.  156.805(d) or Sec.  156.810(c) or Sec.  156.810(d).

Sec.  156.947  The record.

    (a) Any testimony that is taken in-person or by telephone is 
recorded and transcribed. The ALJ may order that other proceedings in a 
case, such as a prehearing conference or oral argument of a motion, be 
recorded and transcribed.
    (b) The transcript of any testimony, exhibits and other evidence 
that is admitted, and all pleadings and other documents that are filed 
in the case constitute the record for purposes of an ALJ decision.
    (c) For good cause, the ALJ may order appropriate redactions made 
to the record.

Sec.  156.949  Cost of transcripts.

    Generally, each party is responsible for 50 percent of the 
transcript cost. Where there is an intervenor, the ALJ determines what 
percentage of the transcript cost is to be paid for by the intervenor.

Sec.  156.951  Posthearing briefs.

    Each party is entitled to file proposed findings and conclusions, 
and supporting reasons, in a posthearing brief. The ALJ will establish 
the schedule by which such briefs must be filed. The ALJ may direct the 
parties to brief specific questions in a case and may impose page 
limits on posthearing briefs. Additionally, the ALJ may allow the 
parties to file posthearing reply briefs.

Sec.  156.953  ALJ decision.

    The ALJ will issue an initial agency decision based only on the 
record and on applicable law; the decision will contain findings of 
fact and conclusions of law. The ALJ's decision is final and appealable 
after 30 days unless it is modified or vacated under Sec.  156.957.

Sec.  156.955  Sanctions.

    (a) The ALJ may sanction a party or an attorney for failing to 
comply with an order or other directive or with a requirement of a 
regulation, for abandonment of a case, or for other actions that 
interfere with the speedy, orderly or fair conduct of the hearing. Any 
sanction that is imposed will relate reasonably to the severity and 
nature of the failure or action.
    (b) A sanction may include any of the following actions:
    (1) In the case of failure or refusal to provide or permit 
discovery, drawing negative fact inferences or treating such failure or 
refusal as an admission by deeming the matter, or certain facts, to be 
established.
    (2) Prohibiting a party from introducing certain evidence or

[[Page 37093]]

otherwise advocating a particular claim or defense.
    (3) Striking pleadings, in whole or in part.
    (4) Staying the case.
    (5) Dismissing the case.
    (6) Entering a decision by default.
    (7) Refusing to consider any motion or other document that is not 
filed in a timely manner.
    (8) Taking other appropriate action.

Sec.  156.957  Review by Administrator.

    (a) The Administrator of CMS (which for purposes of this section 
may include his or her delegate), at his or her discretion, may review 
in whole or in part any initial agency decision issued under Sec.  
156.953.
    (b) The Administrator may decide to review an initial agency 
decision if it appears from a preliminary review of the decision (or 
from a preliminary review of the record on which the initial agency 
decision was based, if available at the time) that:
    (1) The ALJ made an erroneous interpretation of law or regulation.
    (2) The initial agency decision is not supported by substantial 
evidence.
    (3) The ALJ has incorrectly assumed or denied jurisdiction or 
extended his or her authority to a degree not provided for by statute 
or regulation.
    (4) The ALJ decision requires clarification, amplification, or an 
alternative legal basis for the decision.
    (5) The ALJ decision otherwise requires modification, reversal, or 
remand.
    (c) Within 30 days of the date of the initial agency decision, the 
Administrator will mail a notice advising the respondent of any intent 
to review the decision in whole or in part.
    (d) Within 30 days of receipt of a notice that the Administrator 
intends to review an initial agency decision, the respondent may 
submit, in writing, to the Administrator any arguments in support of, 
or exceptions to, the initial agency decision.
    (e) This submission of the information indicated in paragraph (d) 
of this section must be limited to issues the Administrator has 
identified in his or her notice of intent to review, if the 
Administrator has given notice of an intent to review the initial 
agency decision only in part. A copy of this submission must be sent to 
the other party.
    (f) After receipt of any submissions made pursuant to paragraph (d) 
of this section and any additional submissions for which the 
Administrator may provide, the Administrator will affirm, reverse, 
modify, or remand the initial agency decision. The Administrator will 
mail a copy of his or her decision to the respondent.
    (g) The Administrator's decision will be based on the record on 
which the initial agency decision was based (as forwarded by the ALJ to 
the Administrator) and any materials submitted pursuant to paragraphs 
(b), (d), and (f) of this section.
    (h) The Administrator's decision may rely on decisions of any 
courts and other applicable law, whether or not cited in the initial 
agency decision.

Sec.  156.959  Judicial review.

    (a) Filing of an action for review. Any responsible entity against 
whom a final order imposing a civil money penalty or decertification of 
a QHP is entered may obtain review in the United States District Court 
for any district in which the entity is located or in the United States 
District Court for the District of Columbia by doing the following:
    (1) Filing a notice of appeal in that court within 30 days from the 
date of a final order.
    (2) Simultaneously sending a copy of the notice of appeal by 
registered mail to HHS.
    (b) Certification of administrative record. HHS promptly certifies 
and files with the court the record upon which the penalty was 
assessed.
    (c) Standard of review. The findings of HHS and the ALJ may not be 
set aside unless they are found to be unsupported by substantial 
evidence, as provided by 5 U.S.C. 706(2)(E).

Sec.  156.961  Failure to pay assessment.

    If any entity fails to pay an assessment after it becomes a final 
order, or after the court has entered final judgment in favor of CMS, 
CMS refers the matter to the Attorney General, who brings an action 
against the entity in the appropriate United States district court to 
recover the amount assessed.

Sec.  156.963  Final order not subject to review.

    In an action brought under Sec.  156.961, the validity and 
appropriateness of the final order described in Sec.  156.945 is not 
subject to review.

0
52. Subpart K is added to read as follows:

Subpart K--Cases Forwarded to Qualified Health Plans and Qualified 
Health Plan Issuers in Federally-Facilitated Exchanges

Sec.  156.1010  Standards.

    (a) A case is a communication brought by a complainant that 
expresses dissatisfaction with a specific person or entity subject to 
State or Federal laws regulating insurance, concerning the person or 
entity's activities related to the offering of insurance, other than a 
communication with respect to an adverse benefit determination as 
defined in Sec.  147.136(a)(2)(i) of this subchapter. Issues related to 
adverse benefit determinations are not addressed in this section and 
are subject to the provisions in Sec.  147.136 of this subchapter 
governing internal claims appeals and external review.
    (b) QHP issuers operating in a Federally-facilitated Exchange must 
investigate and resolve, as appropriate, cases from the complainant 
forwarded to the issuer by HHS. Cases received by a QHP issuer 
operating in a Federally-facilitated Exchange directly from a 
complainant or the complainant's authorized representative will be 
handled by the issuer through its internal customer service process.
    (c) Cases may be forwarded to a QHP issuer operating in a 
Federally-facilitated Exchange through a casework tracking system 
developed by HHS or other means as determined by HHS.
    (d) Cases received by a QHP issuer operating in a Federally-
facilitated Exchange from HHS must be resolved within 15 calendar days 
of receipt of the case. Urgent cases as defined in Sec.  156.1010(e) 
that do not otherwise fall within the scope of Sec.  147.136 of this 
subchapter must be resolved no later than 72 hours after receipt of the 
case. Where applicable State laws and regulations establish timeframes 
for case resolution that are stricter than the standards contained in 
this paragraph, QHP issuers operating in a Federally-facilitated 
Exchange must comply with such stricter laws and regulations.
    (e) For cases received from HHS by a QHP issuer operating in a 
Federally-facilitated Exchange, an urgent case is one in which there is 
an immediate need for health services because the non-urgent standard 
could seriously jeopardize the enrollee's or potential enrollee's life, 
or health or ability to attain, maintain, or regain maximum function.
    (f) For cases received from HHS, QHP issuers operating in a 
Federally-facilitated Exchange are required to notify complainants 
regarding the disposition of the as soon as possible upon resolution of 
the case, but in no event later than seven (7) business days after the 
case is resolved. Notification may be by verbal or written means as 
determined most appropriate by the QHP issuer.
    (g) For cases received from HHS, QHP issuers operating in a 
Federally-facilitated Exchange must use the casework tracking system 
developed by HHS, or other means as determined by

[[Page 37094]]

HHS, to document, no later than seven (7) business days after 
resolution of the case, that the case has been resolved. The record 
must include a clear and concise narrative explaining how the case was 
resolved including information about how and when the complainant was 
notified of the resolution.
    (h) Cases received by a QHP issuer operating in a Federally-
facilitated Exchange from a State in which the issuer offers QHPs must 
be investigated and resolved according to applicable State laws and 
regulations. With respect to cases directly handled by the State, HHS 
or any other appropriate regulatory authority, QHP issuers operating in 
a Federally-facilitated Exchange must cooperate fully with the efforts 
of the State, HHS, or other regulatory authority to resolve the case.

0
53. Subpart L is added to read as follows:

Subpart L--Quality Standards

Sec.  156.1105  Establishment of standards for HHS-approved enrollee 
satisfaction survey vendors for use by QHP issuers in Exchanges.

    (a) Application for approval. An enrollee satisfaction survey 
vendor must be approved by HHS, in a form and manner to be determined 
by HHS, to administer, on behalf of a QHP issuer, enrollee satisfaction 
surveys to QHP enrollees. HHS will approve enrollee satisfaction survey 
vendors on an annual basis, and each enrollee satisfaction survey 
vendor must submit an application for each year that approval is 
sought.
    (b) Standards. To be approved by HHS, an enrollee satisfaction 
survey vendor must meet each of the following standards:
    (1) Sign and submit an application form for approval in accordance 
with paragraph (a) of this section;
    (2) Ensure, on an annual basis, that appropriate staff participate 
in enrollee satisfaction survey vendor training and successfully 
complete a post-training certification exercise as established by HHS;
    (3) Ensure the accuracy of their data collection, calculation and 
submission processes and attest to HHS the veracity of the data and 
these processes;
    (4) Sign and execute a standard HHS data use agreement, in a form 
and manner to be determined by HHS, that establishes protocols related 
to the disclosure, use, and reuse of HHS data;
    (5) Adhere to the enrollee satisfaction survey protocols and 
technical specifications in a manner and form required by HHS;
    (6) Develop and submit to HHS a quality assurance plan and any 
supporting documentation as determined to be relevant by HHS. The plan 
must describe in adequate detail the implementation of and compliance 
with all required protocols and technical specifications described in 
paragraph (b)(5) of this section;
    (7) Adhere to privacy and security standards established and 
implemented under Sec.  155.260 of this subchapter by the Exchange with 
which they are associated;
    (8) Comply with all applicable State and Federal laws;
    (9) Become a registered user of the enrollee satisfaction survey 
data warehouse to submit files to HHS on behalf of its authorized QHP 
contracts;
    (10) Participate in and cooperate with HHS oversight for quality-
related activities, including, but not limited to: review of the 
enrollee satisfaction survey vendor's quality assurance plan and other 
supporting documentation; analysis of the vendor's submitted data and 
sampling procedures; and site visits and conference calls; and,
    (11) Comply with minimum business criteria as established by HHS.
    (c) Approved list. A list of approved enrollee satisfaction survey 
vendors will be published on an HHS Web site.

0
54. Subpart M is added to read as follows:
Subpart M--Qualified Health Plan Issuer Responsibilities
Sec.
156.1210 Confirmation of HHS payment and collections reports.
156.1230 Direct enrollment with the QHP issuer in a manner 
considered to be through the Exchange.
156.1240 Enrollment process for qualified individuals.

Subpart M--Qualified Health Plan Issuer Responsibilities

Sec.  156.1210  Confirmation of HHS payment and collections reports.

    Within 15 calendar days of the date of a payment and collections 
report from HHS, the issuer must, in a format specified by HHS, either:
    (a) Confirm to HHS that the amounts identified in the payment and 
collections report for the timeframe specified in the report accurately 
reflects applicable payments owed by the issuer to HHS and the payments 
owed to the issuer by HHS; or
    (b) Describe to HHS any inaccuracy it identifies in the payment and 
collections report.

Sec.  156.1230  Direct enrollment with the QHP issuer in a manner 
considered to be through the Exchange.

    (a) A QHP issuer that is directly contacted by a potential 
applicant may, at the Exchange's option, enroll such applicant in a QHP 
in a manner that is considered through the Exchange. In order for the 
enrollment to be made directly with the issuer in a manner that is 
considered to be through the Exchange, the QHP issuer needs to comply 
with at least the following requirements:
    (1) QHP issuer general requirements. (i) The QHP issuer follows the 
enrollment process for qualified individuals consistent with Sec.  
156.265.
    (ii) The QHP issuer's Web site provides applicants the ability to 
view QHPs offered by the issuer with the data elements listed in Sec.  
155.205(b)(1)(i) through (viii) of this subchapter.
    (iii) The QHP issuer's Web site clearly distinguishes between QHPs 
for which the consumer is eligible and other non-QHPs that the issuer 
may offer, and indicate that APTC and CSRs apply only to QHPs offered 
through the Exchange.
    (iv) The QHP issuer informs all applicants of the availability of 
other QHP products offered through the Exchange and displays the Web 
link to or describes how to access the Exchange Web site.
    (v) The QHP issuer's Web site allows applicants to select and 
attest to an APTC amount, if applicable, in accordance with Sec.  
155.310(d)(2) of this subchapter.
    (2) QHP issuer customer service representative eligibility 
application assistance requirements. If permitted by the Exchange 
pursuant to Sec.  155.415 of this subchapter, and to the extent 
permitted by State law, a QHP issuer may permit its issuer customer 
service representatives who do not meet the definition of agent or 
broker at Sec.  155.20 of this subchapter to assist individuals in the 
individual market with applying for a determination or redetermination 
of eligibility for coverage through the Exchange and for insurance 
affordability programs, and to facilitate selection of a QHP offered by 
the issuer represented by the customer service representative, provided 
that such issuer customer service representatives comply with the terms 
of an agreement between the issuer and the Exchange under which the 
issuer customer service representative at least--
    (i) Receives training on QHP options and insurance affordability 
programs, eligibility, and benefits rules and regulations;
    (ii) Complies with the Exchange's privacy and security standards 
adopted

[[Page 37095]]

consistent with Sec.  155.260 of this subchapter; and
    (iii) Complies with applicable State law related to the sale, 
solicitation, and negotiation of health insurance products, including 
applicable State law related to agent, broker, and producer licensure; 
confidentiality; and conflicts of interest.
    (3) Premium accuracy requirements. A QHP issuer must ensure that
    (i) The premium it charges to an enrollee is the same amount as was 
accepted by the Exchange in its certification of the QHP issuer after 
accounting for any applicable APTC.
    (ii) No later than 30 calendar days after discovery of an incorrect 
amount it has charged an enrollee, retroactively correct any incorrect 
amounts collected.
    (iii) For issuers of QHPs in a Federally-facilitated Exchange, it 
allows HHS to review the premiums charged to qualified individuals 
through compliance reviews as set forth in Sec.  156.715(a).
    (b) Direct enrollment in a Federally-facilitated Exchange. The 
individual market Federally-facilitated Exchanges will permit issuers 
of QHPs in each Federally-facilitated Exchange to directly enroll 
applicants in a manner that is considered to be through the Exchange, 
pursuant to paragraph (a) of this section, to the extent permitted by 
applicable State law.

Sec.  156.1240  Enrollment process for qualified individuals.

    (a) Premium payment. A QHP issuer must--
    (1) Follow the premium payment process established by the Exchange 
in accordance with Sec.  155.240.
    (2) Offer method of payment options that do not discriminate 
against individuals without bank accounts or credit cards.
    (b) [Reserved]

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: May 28, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: May 31, 2013
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-14540 Filed 6-14-13; 1:00 pm]
BILLING CODE 4120-01-P
```