DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 431, 435, 436, 438, 440, 447, and 457 

Office of the Secretary 

45 CFR Parts 155 and 156 

[CMS-2334-F] 

RIN 0938-AR04 

Medicaid and Children’s Health Insurance Programs: Essential Health Benefits in 

Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processes, and 

Premiums and Cost Sharing; Exchanges: Eligibility and Enrollment 

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

ACTION: Final rule. 

SUMMARY: This final rule implements provisions of the Patient Protection and Affordable 

Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively referred to 

as the Affordable Care Act. This final rule finalizes new Medicaid eligibility provisions; 

finalizes changes related to electronic Medicaid and the Children’s Health Insurance Program 

(CHIP) eligibility notices and delegation of appeals; modernizes and streamlines existing 

Medicaid eligibility rules; revises CHIP rules relating to the substitution of coverage to improve 

the coordination of CHIP coverage with other coverage; and amends requirements for 

benchmark and benchmark-equivalent benefit packages consistent with sections 1937 of the 

Social Security Act (which we refer to as “alternative benefit plans”) to ensure that these benefit 

packages include essential health benefits and meet certain other minimum standards. This rule 

also implements specific provisions including those related to authorized representatives, 

notices, and verification of eligibility for qualifying coverage in an eligible employer-sponsored 
CMS-2334-F 2 

plan for Affordable Insurance Exchanges. This rule also updates and simplifies the complex 

Medicaid premium and cost sharing requirements, to promote the most effective use of services, 

and to assist states in identifying cost sharing flexibilities. It includes transition policies for 2014 

as applicable. 

DATES: The effective date for the additions of 42 CFR 435.118, 435.603, 435.911, 435.949, 

435.956, 435.1200, 457.315, 457.330 and 457.348; amendments to 42 CFR 431.10, 431.11, 

435.110, 435.116, 435.119, 435.907, 435.916, 435.940, 435.945, 435.948, 435.952, 457.340 and 

457.350; the removal of 42 CFR 435.953 and 435.955; and the redesignation of 42 CFR 435.911 

through 435.914 as 42 CFR 435.912 through 435.915 in CMS-2349 (FR Doc. 2012-6560) 

published on March 23, 2012, which were to become effective in January 1, 2014 are now 

effective October 1, 2013. 

Other provisions of this final rule that are codified in title 42 of the Code of Federal 

Regulations are effective January 1, 2014 with the exception of amendments to the following 

which are effective on October 1, 2013: 42 CFR 431.10, 431.11, 431.201, 431.205, 431.206, 

431.211, 431.213, 431.230, 431.231, 431.240, 435.119, 435.603, 435.907, 435.918, 435.1200, 

457.110, 457.348 , and 457.350; and the addition of 42 CFR 435.1205 and 457.370, which are 

effective on October 1, 2013. . 

Regulations in this final rule that are codified in title 45 of Code of Federal Regulations 

are effective on [OFR—insert date 60 days from publication in the FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT: 

Sarah deLone, (410) 786-0615, or Stephanie Kaminsky, (410) 786-4653, for provisions 

related to revisions to eligibility notice and fair hearing appeal processes and additional 

eligibility changes for Medicaid and CHIP. 

Melissa Harris, (410)786-3397, for provisions related to essential health benefits. 
CMS-2334-F 3 

 Leigha Basini, (301) 492-4307, for provisions related to Affordable Insurance 

Exchanges.

SUPPLEMENTARY INFORMATION: 

Executive Summary 

This final rule implements provisions of the Patient Protection and Affordable Care Act 

and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the 

Affordable Care Act). This rule reflects new statutory eligibility provisions, implements changes 

related to Medicaid and the Children’s Health Insurance Program (CHIP) eligibility notices, 

delegation of appeals, and other related administrative procedures with similar procedures used 

by other health coverage programs authorized under the Affordable Care Act. This final rule 

also modernizes and streamlines existing rules. 

 This final rule amends the requirements applicable to Medicaid benefit packages that 

provide benchmark or benchmark-equivalent coverage, to include requirements to meet new 

minimum standards, including the provision of essential health benefits, as required by the 

Affordable Care Act. In an effort to bring consistency and clarity to part 440, we are removing 

the terms “benchmark and benchmark-equivalent plan” where they appear together and are 

replacing these terms with “Alternative Benefit Plan” (ABP). 

Beginning in calendar year 2014, individuals and small businesses will be able to 

purchase private health insurance through competitive marketplaces called Affordable Insurance 

Exchanges, or “Exchanges.” This final rule: (1) specifies standards related to authorized 

representatives, (2) outlines criteria related to the verification of enrollment in and eligibility for 

minimum essential coverage through an eligible employer-sponsored plan, and (3) further 

specifies or amends other eligibility and enrollment provisions. This final rule does not address 

proposed provisions regarding Exchange eligibility appeals, to provide additional time for the 
CMS-2334-F 4 

careful development of standards that can be effectively implemented, particularly for those 

regarding coordination with Medicaid and CHIP. Additionally, this final rule does not address 

proposed provisions regarding the Children’s Health Insurance Program Reauthorization Act of 

2009 (CHIPRA), certified application counselors in an Exchange and SHOP coordination with 

individual market Exchanges. We intend to address these provisions in a future issuance. The 

intent of this final rule is to afford each state substantial discretion in the design and operation of 

the Exchange established by the state, with greater standardization provided where directed by 

the statute or where there are compelling practical, efficiency or consumer protection reasons. 

This final rule also updates and simplifies the complex Medicaid premium and cost 

sharing requirements to promote the most effective use of services and to assist states in 

identifying cost sharing flexibilities. 

Finally, this final rule provides notice that we are considering, for purposes of the initial 

open enrollment period for enrollment in a Qualified Health Plan through the Exchange, whether 

various provisions of the Medicaid and CHIP regulations should be effective October 1, 2013, or 

whether a later effective date is appropriate. 

In this final rule, we do not address all of the proposed regulatory changes to 42 CFR 

parts 431, 435 and 457. We are focusing on those changes that are most needed to implement 

the changes made by the Affordable Care Act starting in 2014. We intend to address certain of 

the other provisions in future rulemaking. 

Table of Contents 

To assist readers in referencing sections contained in this document, we are providing the 

following table of contents. 

Executive Summary 

I. Background 
CMS-2334-F 5 

A. Medicaid Eligibility Final Rule Part II 

B. Essential Health Benefits in Alternative Benefit Plans 

C. Exchanges: Eligibility and Enrollment 

D. Medicaid Premiums and Cost Sharing 

II. Provisions of the Proposed Regulations and Analysis of and Responses to Public Comments 

A. Medicaid Eligibility Expansion Part II 

1. Responses to General Comments 

2. Appeals - Delegation of Authority to Conduct Medicaid Fair Hearings 

3. Notices 

4. Medicaid Enrollment Changes Under the Affordable Care Act Needed to Achieve 

Coordination with the Exchange 

5. Medicaid Eligibility Requirements and Coverage Options Established by Other 

Federal Statutes 

6. Coordinated Medicaid/CHIP Open Enrollment Process 

7. Children’s Health Insurance Program Changes 

8. Premium Assistance 

9. Changes to Modified Adjusted Gross Income and MAGI Screen 

10. Single State Agency – Delegation of Eligibility Determinations to Exchanges 

11. Conversion of Federal Minimum Income Standards for Section 1931 of the Act 

B. Essential Health Benefits in Alternative Benefit Plans 

1. General Comments 

2. Alignment with Essential Health Benefits Provisions 

3. Modifications in applying the provisions of this final rule to Medicaid 

4. All Other Title XIX Provisions Apply 
CMS-2334-F 6 

5. Preventive Services as an EHB 

6. Other Changes to Simplify, Modernize, and Clarify Medicaid Benchmark 

Requirements and Coverage Requirements 

7. Summary 

C. Exchanges: Eligibility and Enrollment 

1. Definitions 

2. Approval of a State Exchange 

3. Functions of an Exchange 

4. Authorized Representatives 

5. General standards for Exchange notices 

6. Definitions and general standards for eligibility determinations 

7. Options for conducting eligibility determinations 

8. Eligibility standards 

9. Eligibility process 

10. Verification process related to eligibility for enrollment in a QHP through the 

Exchange 

11. Verifications related to eligibility for insurance affordability programs 

12. Eligibility redetermination during a benefit year 

13. Annual eligibility redetermination 

14. Administration of advance payments of the premium tax credit and cost-sharing 

reductions 

15. Coordination with Medicaid, CHIP, the Basic Health Program, and the Pre-existing 

Condition Insurance Plan 

16. Special eligibility standards and process for Indians 
CMS-2334-F 7 

17. Enrollment of qualified individuals into QHP’s 

18. Special enrollment periods 

19. Termination of coverage 

D. Medicaid Premiums and Cost Sharing 

1. Responses to General comments 

2. Definitions 

3. Update to Maximum Nominal Cost Sharing 

4. Higher Cost Sharing Permitted for Individuals with Incomes above 100 percent of the 

FPL 

5. Cost sharing for drugs 

6. Cost sharing for emergency department (ED) services 

7. Premiums 

8. Limitations on Premiums and Cost sharing 

9. Beneficiary and Public Notice Requirements 

III. Provisions of the Final Regulations 

IV. Collection of Information Requirements 

V. Regulatory Impact Analysis 

Regulations Text 

Acronyms and Terms 

Because of the many organizations and terms to which we refer by acronym in this final rule, we 

are listing these acronyms and their corresponding terms in alphabetical order below: 

[the] Act Social Security Act 

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 
CMS-2334-F 8 

and Education Reconciliation Act (Pub. L. 111-152)) 

AFDC Aid to Families with Dependent Children 

BBA Balanced Budget Act of 1997 

BHP Basic Health Program 

CHIP Children’s Health Insurance Program 

CHIPRA Children’s Health Insurance Program Reauthorization Act of 2009 

CMS Centers for Medicare & Medicaid Services 

[the] Code Internal Revenue Code of 1986 

DHS Department of Homeland Security 

DOL U.S. Department of Labor 

DRA Deficit Reduction Act of 2005 

EITC Earned Income Tax Credit 

EPSDT Early and periodic screening, diagnosis, and treatment 

FEHBP Federal Employees Health Benefits Program (5 U.S.C 8901, et seq.) 

FFE Federally-facilitated Exchange 

FFP Federal financial participation 

FMAP Federal medical assistance percentage 

FPL Federal poverty level 

HCERA Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted 

March 30, 2010) 

HHS [U.S. Department of] Health and Human Services 

IHS Indian Health Service 

INA Immigration and Nationality Act 

IRA Individual Retirement Account 
CMS-2334-F 9 

IRC Internal Revenue Code of 1986 

IRS Internal Revenue Service 

MAGI Modified adjusted gross income 

MEC Minimum Essential Coverage 

MMEA Medicare & Medicaid Extenders Act of 2010 (Pub. L. 111–309, enacted 

December 15, 2010) 

OMB Office of Management and Budget 

OPM U.S. Office of Personnel Management 

PHS Act Public Health Service Act 

PRA Paperwork Reduction Act of 1995 

PRWORA Personal Responsibility and Work Opportunity Reconciliation Act of 1996 

QHP Qualified Health Plan 

Secretary Secretary of HHS 

SEP Special enrollment period 

SHOP Small Business Health Options Program 

SMD State Medicaid Director 

SNAP Supplemental Nutrition Assistance Program 

SPA State Plan Amendment 

SSA Social Security Administration 

SSI Supplemental Security Income 

SSN Social Security number 

TANF Temporary Assistance for Needy Families

I. Background

A. Medicaid Eligibility Final Rule Part II
CMS-2334-F 10 

The Patient Protection and Affordable Care Act (Pub. L. 111–148, enacted on 

March 23, 2010), was amended by the Health Care and Education Reconciliation Act of 2010 

(Pub. L. 111–152, enacted on March 30, 2010). These laws are collectively referred to as the 

Affordable Care Act. In addition, section 205 of the Medicare & Medicaid Extenders Act of 

2010 (Pub. L. 111–309, enacted December 15, 2010) (MMEA) and the Middle Class Tax Relief 

and Job Creation Act of 2012 (Pub. L.112–96, enacted February 22, 2012) made additional 

amendments to the Social Security Act (the Act) provisions affected by the Affordable Care Act. 

The Affordable Care Act extends and simplifies Medicaid eligibility, and on 

March 23, 2012, we issued a final rule (referred to as the “Medicaid Eligibility final rule”) 

addressing certain key Medicaid and CHIP eligibility, enrollment, and renewal issues. 

 This final rule provides states with additional flexibility and guidance for delegation of 

appeals and implementation of electronic notices, and modernizes administrative procedures to 

further promote coordination across multiple health coverage programs, including enrollment in 

a qualified health plan through the Exchange with advance payments of the premium tax credits 

and cost -sharing reductions, as authorized by the Affordable Care Act, Medicaid and the 

Children’s Health Insurance Program (CHIP). These coverage programs are collectively 

referred to as “insurance affordability programs.” For more information on the legislative 

overview, please refer to the Medicaid, CHIP, and Exchanges proposed rule (78 FR 4594). 

B. Essential Health Benefits in Alternative Benefit Plans

For plan, policy, or coverage years (as applicable) beginning in 2014, most health 

insurance coverage1 in the individual and small group markets, Medicaid benchmark and 

benchmark-equivalent plans (now also known as Alternative Benefit Plans (ABPs)), and Basic 

 

1 For more information on status as a grandfathered health plans under the Affordable Care Act, please see Interim 

Final Rule, “Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan 
CMS-2334-F 11 

Health Programs (if applicable) will be required to cover essential health benefits (EHBs), 

consistent with the definition under section 1302 of the Affordable Care Act and implementing 

regulations at 45 CFR Parts 147, 155, and 156, Patient Protection and Affordable Care Act; 

Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation; Final Rule. 

Under that definition, EHBs include items and services in 10 statutory benefit categories, such as 

hospitalization, prescription drugs, and maternity and newborn care, and are equal in scope of 

benefits to a typical employer plan, which will constitute minimum coverage in an ABP. 

C. Exchanges: Eligibility and Enrollment 

1. Legislative Overview 

 Section 1311(b) and section 1321(b) of the Affordable Care Act provide that each 

state has the opportunity to establish an Exchange that: (1) facilitates the purchase of insurance 

coverage by qualified individuals through qualified health plans (QHPs); (2) assists qualified 

employers with the enrollment of their employees in QHPs; and (3) meets other standards 

specified in the Affordable Care Act. Section 1311(k) of the Affordable Care Act specifies that 

Exchanges may not establish rules that conflict with or prevent the application of regulations 

promulgated by the Secretary under subtitle D of title I of the Affordable Care Act. Section 

1311(d) of the Affordable Care Act describes the minimum functions of an Exchange, including 

the certification of QHPs. 

Section 1321 of the Affordable Care Act discusses state flexibility in the operation and 

enforcement of Exchanges and related requirements. Section 1321(c)(1) directs the Secretary to 

establish and operate an Exchange within each state that either: (1) does not elect to establish an 

Exchange, or (2) as determined by the Secretary on or before January 1, 2013, will not have an 

Exchange operational by January 1, 2014. Section 1321(a) also provides broad authority for the 

 

Under the Patient Protection and Affordable Care Act.” Available at 
CMS-2334-F 12 

Secretary to issue regulations setting standards to implement the statutory requirements related 

to Exchanges, QHPs, and other standards under title I of the Affordable Care Act. 

Section 1401 of the Affordable Care Act creates new section 36B of the Internal Revenue 

Code of 1986 (the Code), which provides for a premium tax credit for eligible individuals who 

enroll in a QHP through an Exchange. Section 1402 of the Affordable Care Act establishes 

requirements for reducing the cost-sharing obligations of eligible individuals who enroll in a 

QHP through an Exchange, including special cost-sharing rules for certain Indians. 

Under section 1411 of the Affordable Care Act, the Secretary is directed to establish a 

program for determining whether an individual meets the eligibility standards for enrollment in 

QHPs through the Exchange, advance payments of the premium tax credit, cost-sharing 

reductions, and exemptions from the shared responsibility payment under section 5000A of the 

Code. 

Sections 1412 and 1413 of the Affordable Care Act and section 1943 of the Social 

Security Act (the Act), as added by section 2201 of the Affordable Care Act, contain additional 

provisions regarding eligibility for advance payments of the premium tax credit and cost-sharing 

reductions, as well as provisions regarding simplification and coordination of eligibility 

determinations and enrollment with other insurance affordability programs. 

This final rule supplements and amends provisions originally published as the 

March 27, 2012 rule titled “Patient Protection and Affordable Care Act; Establishment of 

Exchanges and Qualified Health Plans; Exchange Standards for Employers” (hereafter referred 

to as “Exchange Final Rule”) (77 FR 18310) which encompasses key functions of Exchanges 

related to eligibility and enrollment. 

 

http://cciio.cms.gov/resources/regulations/index.html#gp. 
CMS-2334-F 13 

Unless otherwise specified, the provisions in this final rule related to the establishment of 

minimum functions of an Exchange are based on the general authority of the Secretary under 

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

2. Stakeholder Consultation and Input 

HHS has consulted with interested stakeholders on policies related to the eligibility 

provisions and Exchange functions. HHS held a number of listening sessions with consumers, 

providers, employers, health plans, and state representatives to gather public input, and released 

several documents for public review and comment. HHS also released a bulletin that outlined 

our intended regulatory approach to verifying access to employer-sponsored coverage and 

sought public comment on the specific approaches. 

 Finally, HHS consulted with stakeholders through regular meetings with the National 

Association of Insurance Commissioners (NAIC), regular contact with states through the 

Exchange grant process, consultation with Medicaid directors, and meetings with tribal leaders 

and representatives, health insurance issuers, trade groups, consumer advocates, employers, and 

other interested parties. 

 We considered input from these stakeholder meetings and in response to the bulletin on 

verifying access to employer-sponsored coverage, as well as comments provided in response to 

the proposed rule as we developed the policies in this final rule. 

3. Structure of the Final Rule 

The regulations related to Exchanges and QHPs outlined in this final rule are codified at 

45 CFR parts 155 and 156. Part 155 outlines the standards related to eligibility for insurance 

affordability programs to facilitate a streamlined process for eligibility for enrollment in a QHP 

through the Exchange and in insurance affordability programs. Part 156 outlines the standards 

for health insurance issuers for participation in an Exchange. This final rule: 
CMS-2334-F 14 

• Revises existing definitions and finalizes new definitions to 

45 CFR part 155 subpart A. 

• Provides a technical correction to 45 CFR part 155 subpart B. 

• Finalizes standards related to authorized representatives under 45 CFR part 155 

subpart C. 

• Finalizes standards related to eligibility determinations for enrollment in a QHP 

and for insurance affordability programs under 45 CFR part 155 subpart D. 

• Finalizes standards related to enrollment-related transactions, special enrollment 

periods, and terminations under 45 CFR part 155 subpart E. 

• Finalizes standards related to termination of coverage under 45 CFR part 156 

subpart C. 

4. Alignment with Related Rules and Published Information 

As noted above, on March 27, 2012, we published the Exchange final rule. This final 

rule revises and supplements the Exchange final rule, including by finalizing Exchange and 

Medicaid provisions associated with the eligibility changes under the Affordable Care Act of 

2010. 

D. Medicaid Premiums and Cost Sharing

Section 1916 of the Act describes long-standing limitations and requirements applicable 

in states that elect to provide for premiums and other cost sharing under Medicaid. Under 

section 1916 of the Act, certain individuals are protected from premiums and cost sharing, and 

cost sharing cannot be imposed on certain services. Permissible cost sharing under section 1916 

of the Act is limited to “nominal" amounts (except in some circumstances for non-emergency 

use of a hospital emergency room). Section 1916 of the Act also establishes authority for states 

to impose premiums on medically needy beneficiaries and specific groups of individuals with 
CMS-2334-F 15 

family incomes above 150 percent of the federal poverty level (FPL). The Deficit Reduction Act 

of 2005 (DRA) established a new section 1916A of the Act, which gives states additional 

flexibility, allowing for alternative premiums and cost sharing beyond what is permitted under 

section 1916 of the Act for somewhat higher income beneficiaries. Such alternative cost-sharing 

approaches may be targeted to specific groups of individuals and payment may be required as a 

condition of providing services. All premiums and cost sharing imposed under sections 1916 

and 1916A of the Act cannot exceed 5 percent of a family’s income. For more background 

information on the streamlined and expanded flexibility regarding premiums and cost sharing, 

please refer to (78 FR 4657 and 78 FR 4658). 

 We initially implemented the DRA authorities through regulations that mirrored the dual 

statutory provisions by adding a set of additional regulations on alternative cost sharing under 

section 1916A of the Act to existing regulations setting forth the framework for cost sharing 

under section 1916 of the Act. We believe states found this duality confusing and, in this final 

rule, we have integrated the two statutory authorities for premiums and cost sharing (sections 

1916 and 1916A of the Act) into a unified framework. 

II. Provisions of the Proposed Rule and Analysis of and Responses to Public Comments 

A. Medicaid Eligibility Part II Final Rule

In the January 22, 2013 Federal Register (78 FR 4594), we published the proposed rule 

entitled “Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing 

and Appeal Processes for Medicaid and Exchange Eligibility Appeals and Other Provisions 

Related to Eligibility and Enrollment for Exchanges, Medicaid and CHIP, and Medicaid 

Premiums and Cost Sharing.” 

We received a total of 741 timely comments from individuals, state Medicaid and CHIP 

agencies, advocacy groups, tribes and tribal organizations, policy and research organizations, 
CMS-2334-F 16 

health care providers, employers, insurers, and health care associations. The comments ranged 

from general support or opposition to the proposed provisions to very specific questions or 

comments regarding the proposed changes. 

In this final rule, we are only addressing some of the provisions of the proposed rule. We 

are reserving action on other provisions and intend to address those provisions in a subsequent 

final rule. We discuss below only those public comments associated with provisions addressed 

in this final rule. 

We have revised some of the proposed regulations after careful consideration of the 

comments received. Some comments were outside the scope of the proposed rule, and therefore, 

are not addressed in this final rule. In some instances, commenters raised policy or operational 

issues that will be addressed through forthcoming regulatory and subregulatory guidance to be 

provided subsequent to this final rule; therefore, some, but not all comments are addressed in the 

preamble to this final rule. 

Brief summaries of the proposed provisions that are being finalized in this rule, a 

summary of the public comments we received on those provisions (except specific comments on 

the paperwork burden or the economic impact analysis), and our responses to the comments are 

as follows. Comments related to the paperwork burden and the impact analyses are addressed in 

the “Collection of Information Requirements” and “Regulatory Impact Analysis” sections in this 

final rule. 

The following sections summarize comments about the rule in general, as well as specific 

comments about certain policies. . It should be noted that the summarized comments are 

structured to explain the provisions being finalized and do not necessarily follow the order of the 

regulation text: 

1. Responses to General Comments
CMS-2334-F 17 

Generally, commenters were supportive of the policies in the proposed rule to continue 

the process of streamlining Medicaid and CHIP eligibility rules, policies and procedures; to 

support a consumer friendly approach, and provide increased flexibility for states. 

Comment: Several commenters were concerned about the complexity of the proposed 

rules and the significance of the changes that need to be made to fully implement the provisions 

of the Affordable Care Act. Many commenters were concerned about the short timeframes for 

implementation and about states’ ability to make needed changes to policy, operations, and 

information technology systems. 

Response: We recognize that the timing of this final rule may result in implementation 

challenges, especially from a systems perspective. As such, we have evaluated the provisions of 

the January proposed rule and are finalizing in this rule only those provisions that we believe 

states are already in the process of implementing or must be finalized to meet statutory 

deadlines. The remaining provisions of the proposed rule will be addressed at a later date. 

We will continue to work with states to support their implementation efforts, ensure 

successful partnerships between states and the federal government. We will also continue to 

offer intensive technical assistance and support to states, and facilitate sharing of experience and 

knowledge across states. Consistent with one commenter’s recommendation, we will also utilize 

other tools, including subregulatory guidance and the State Operations and Technical Assistance 

(SOTA) initiative to address additional state questions that arise. 

2. Appeals - Delegation of Authority to Conduct Medicaid Fair Hearings 

 We proposed to implement sections 1413 and 2201 of the Affordable Care Act in part 

through procedures to coordinate Medicaid fair hearings under section 1902(a)(3) of the Act 

concerning eligibility for populations whose income is determined using modified adjusted gross 

income (MAGI)-based methodologies of the Act with appeals of eligibility determinations that 
CMS-2334-F 18 

are made using MAGI-based methodologies by Exchanges for advance payment of premium tax 

credits and cost-sharing reductions under section 1411(f) of the Affordable Care Act. Consistent 

with the requirements to streamline and coordinate eligibility determinations, under section 

1943(b)(3) of the Act, as added by section 2201 of the Affordable Care Act, we proposed to 

provide states with an option to delegate the authority to conduct appeals to an Exchange or 

Exchange appeals entity. The option is similar to the option states have to delegate Medicaid 

eligibility determinations to an Exchange under §431.10. We also proposed changes to existing 

regulations at part 431 subpart E to support further modernization and streamlining of the 

Medicaid fair hearing process. 

In this final rule, we are finalizing the provisions of our proposed rule related to 

delegation of authority to conduct Medicaid fair hearings to an Exchange and an Exchange 

appeals entity at sections §§431.10, 431.205(b), 431.206(d) and (e), 431.240 and the proposed 

rule related to reinstatement of an application at §§435.907(h) and 457.340(a). As discussed in 

section II.A.3. of this final rule (relating to notices), we also are adopting proposed revisions to 

the current regulations at sections §§431.211, 431.213, 431.230, and 431.231, related to 

modernizing the process of providing notices to applicants and beneficiaries of their fair hearing 

rights and decisions. In addition to providing substantive comments on the proposed regulations 

related to coordination of appeals across the Exchange, Medicaid and CHIP, a number of 

commenters requested delayed implementation of those provisions. To provide states with 

additional time to consider and effectuate implementation of such coordination, as well as to 

provide us with additional time to consider the comments received, we are not addressing 

proposed provisions at §§431.200, 431, 201, 431.205(e), 431.206(b), (c)(2), (e) as it relates to 

accessibility under §435.905(b), 431.210, 431.220, 431.221, 431.224, 431.232, 431.241, 

431.242, or 431.244. Further, we are not addressing the definitions related to appeals proposed 
CMS-2334-F 19 

in 435.4, nor the provisions related to coordination of appeals in §435.1200. We expect to 

address these proposed provisions in a subsequent rulemaking. Until final regulations are 

released, current rules in part 431, subpart E continue to apply. We note that while we are not 

finalizing our proposed rules relating to accessibility in the fair hearing process or as it relates 

appeals and notices at §431.205(e) and §431.206(e) at this time, fair hearing processes and 

notices must continue to be provided in an accessible manner in accordance with relevant federal 

statutes, including the Americans with Disabilities Act and Title VI of the Civil Rights Act of 

1964, as well as any applicable state laws. 

 We received the following comments regarding the proposed regulations related to 

delegation of fair hearings and reinstatement of applications in certain circumstances, which we 

are addressing in this rulemaking: 

 Comment: Many commenters supported our approach to permit delegation of fair 

hearings to an Exchange or Exchange appeals entity so that an integrated hearing could be 

conducted to address Medicaid and Exchange-related eligibility issues together. We also 

received comments supporting the proposals to streamline and simplify our current fair hearings 

rules. While not providing specific recommendations, the commenters asked that we consider 

additional measures to coordinate Medicaid and Exchange eligibility appeals even more 

effectively. A few commenters requested that the final rule maintain state flexibility for states to 

retain the Medicaid appeals function within the Medicaid agency. 

 Several commenters were concerned that our proposed rules require duplicative 

processes because states must maintain the infrastructure and capacity to hear MAGI-based 

appeals, even if the state delegates the authority to conduct fair hearings to an Exchange. One 

commenter requested that we eliminate the requirement at proposed §431.10(c)(1)(ii) and 

§431.205(b)(1)(ii) that an individual be provided an opportunity to request a fair hearing before 
CMS-2334-F 20 

the Medicaid agency when the state has otherwise delegated authority to conduct the individual’s 

fair hearing to the Exchange, and instead make this provision a state option. The commenter 

believed that this requirement would undermine the efficiencies achieved through delegation. 

Another commenter recommended that only one hearing opportunity be made available to 

individuals, instead of requiring a hearing if determined ineligible for Medicaid and a hearing 

related to the eligibility for advance payment of premium tax credits and cost-sharing reductions. 

 Response: We appreciate the support for the proposal to permit states to delegate MAGIbased eligibility appeals to an Exchange or Exchange appeals entity. We note that such 

delegation is at state option. States are not required to delegate such authority, but may continue 

to have the Medicaid agency conduct all Medicaid fair hearings. 

 We understand commenters’ concern about duplication of effort in requiring that 

Medicaid agencies retain an infrastructure independent of the Exchange appeals process to 

conduct MAGI-based Medicaid eligibility appeals when the state has delegated authority for 

MAGI-based eligibility appeals to an Exchange. There are two key reasons why the Medicaid 

agency must maintain its own appeals infrastructure. First, an individual whose application for 

Medicaid is denied or not acted upon with reasonable promptness has a right under section 

1902(a)(3) of the Act to an opportunity for a fair hearing before the Medicaid agency. We do not 

anticipate that individuals will necessarily prefer to have their appeal heard by the Medicaid 

agency, but the statute requires that the option be provided in such delegation through our 

regulations. Second, in a state where the Federally-facilitated Exchange (FFE) is operating, the 

HHS appeals entity will only conduct appeals related to MAGI-based eligibility determinations 

made by the FFE. Thus, in states where the FFE is operating, the Medicaid agency will need to 

conduct all Medicaid fair hearings related to MAGI-based eligibility determinations made by the 

Medicaid agency. For these reasons, we are finalizing the requirement as proposed. 
CMS-2334-F 21 

 States have options to streamline the appeals infrastructure and reduce the number of 

appeals that will come before the Medicaid agency, in addition to the options to delegate 

Medicaid appeals authority under this final rule as discussed above. In a state that has 

established a state-based Exchange, the state Medicaid agency may delegate authority to conduct 

fair hearings of MAGI-based determinations to the state-based Exchange by requesting a waiver 

under the Intergovernmental Cooperation Act of 1968 (ICA), as long as the state-based 

Exchange is a state agency and the state can assure sufficient oversight of the delegated fair 

hearing process. As we noted in the preamble to the proposed rule, when a state has an ICA 

waiver permitting delegation of fair hearings to another state agency, the state is not required to 

offer individuals an option to have their hearing conducted by the Medicaid agency. 

 In states where the FFE is operating, a state Medicaid agency that allows the FFE to 

make a Medicaid eligibility determination delegating such authority under §431.10(c)(1)(i) has 

appeal delegation options not available to a State that proceeds with the assessment model. If 

the Medicaid agency authorizes the FFE to make MAGI-based eligibility determinations, the 

agency may also delegate authority to the HHS appeals entity to conduct fair hearings related to 

determinations of Medicaid ineligibility made by the FFE, establishing an integrated appeals 

process with simultaneous appeals related to a determination of advance payments of the 

premium tax credits or cost-sharing reductions. The Medicaid agency would still need to 

maintain the ability to conduct fair hearings for eligibility determinations and denials made by 

the Medicaid agency, as well as when delegations are made under these regulations for 

individuals who opt out of a coordinated appeal before the Exchange or Exchange appeals entity, 

and specifically request a hearing before the Medicaid agency. States will also need to continue 

to conduct fair hearings related to non-MAGI based eligibility determinations, as well as fair 
CMS-2334-F 22 

hearings related to termination, suspension, or reduction of covered benefits and other adverse 

determinations. 

 Finally, with respect to the recommendation that a right to only one hearing be made 

available, we note that there are two separate statutory authorities for appeals related to Medicaid 

and enrollment in a QHP and eligibility for APTC and cost sharing reductions, at section 

1902(a)(3) of the Act and section 1411(f) of the Affordable Care Act, respectively. While we 

permit states to integrate these hearings and processes as much as possible, both state Medicaid 

agencies and the Exchange have distinct responsibilities to provide for such hearings, and we do 

not have authority to eliminate individuals’ statutory rights, or a Medicaid agency’s or 

Exchange’s statutory responsibility. We note that we are not addressing in this final rule the 

proposed requirements relating to coordination of notices. Those proposed rules will be 

addressed in future rulemaking. 

 Comment: Several commenters requested clarification of our proposals on delegation of 

Medicaid appeals to the FFE, a state-based Exchange, or a state with a partnership with the FFE. 

In addition, commenters sought clarification regarding when an individual’s appeals rights are 

triggered in states which have delegated authority to make Medicaid eligibility determinations to 

the Exchange versus states in which the Exchange will make only an assessment of potential 

Medicaid eligibility. A few commenters requested clarification about whether a delegation of 

authority to conduct Medicaid fair hearings to a state-based Exchange would extend to an appeal 

to the HHS appeals entity. The commenters were concerned that appeals could not be 

coordinated at the HHS appeals entity, rendering meaningless any efforts to achieve coordination 

at the state level. 

Response: States may choose to delegate authority to conduct Medicaid fair hearings for 

MAGI-based eligibility determinations to the Exchange operating in the state regardless of 
CMS-2334-F 23 

whether the Exchange is the FFE, the state-based Exchange or a partnership between the state 

and the FFE in accordance with the final rules at §431.10(c) and (d). There is no difference in 

the delegation authority under the regulations, as proposed or as finalized, based on the type of 

Exchange. In accordance with such delegation, the Exchange or Exchange appeals entity may 

provide a fair hearing on Medicaid issues, but individuals must have the option to have their 

Medicaid fair hearing heard directly before the single state agency. As discussed below, states 

with state-based Exchanges that are state governmental agencies also have an additional way to 

coordinate appeals, beyond delegation under our rules, through a waiver granted under the 

Intergovernmental Cooperation Act. Under such a waiver, individuals would not have a right to 

have their Medicaid appeal heard by the single state agency. 

In a state that has delegated authority to the Exchange to make Medicaid eligibility 

determinations based on MAGI, individuals have the right to request a fair hearing when the 

Exchange has determined the individual ineligible for Medicaid based on MAGI. Thus, the 

determination of ineligibility by the Exchange will trigger the individual’s appeal rights. If the 

state has delegated authority to the Exchange to conduct fair hearings under these regulations, 

such an individual found ineligible for Medicaid by the Exchange could request a fair hearing at 

the Exchange or Exchange appeals entity so that there would be one integrated hearing 

conducting the Exchange-related and Medicaid appeals at the same time, or the individual may 

instead request his or her Medicaid issue be heard at the Medicaid agency. If, an individual who 

is found by the Exchange to be not eligible for Medicaid based on MAGI seeks a determination 

based on non-MAGI criteria, the individual’s electronic account is transferred to the Medicaid 

agency for a full evaluation by the agency in accordance with §155.345(b) or (c) of the March 

2012 Exchange eligibility final rule. If the Medicaid agency still determines the individual 
CMS-2334-F 24 

ineligible, he or she would be able to appeal that decision using the Medicaid agency’s fair 

hearing process. 

In states in which the Exchange will make an assessment of Medicaid eligibility, and will 

not make final Medicaid eligibility determinations or denials, an assessment of ineligibility for 

Medicaid based on MAGI will not trigger Medicaid appeal rights. This is because an assessment 

is not a final Medicaid eligibility determination. As indicated in §155.302(b)(4) of the March 

2012 Exchange rule, as revised in this rulemaking, applicants assessed by the Exchange as not 

potentially eligible for Medicaid based on MAGI but as potentially eligible for Medicaid on 

another basis will be transferred to the Medicaid agency for a full Medicaid determination; for 

these applicants, Medicaid appeal rights will be triggered when the Medicaid agency makes a 

final eligibility determination. Under §155.302(b)(4), applicants assessed as not potentially 

eligible for Medicaid on any basis will have a choice whether to withdraw their Medicaid 

application or obtain a full determination by the Medicaid agency. If the applicant withdraws his 

or her Medicaid application, a final determination or denial of Medicaid will not be made, and 

therefore no appeal rights arise at that point. (The applicant will have the ability to reinstate 

their Medicaid application in certain circumstances, discussed more fully below). When an 

applicant obtains a formal determination by the Medicaid agency, the Medicaid agency’s 

determination will trigger appeal rights, if applicable. 

Finally, if a state agency delegates authority to conduct MAGI-based eligibility appeals 

to an Exchange, including a state-based Exchange, in accordance with §431.10(c) and (d) of this 

final rule, such a delegation would extend to any government agency adjudicating an Exchange 

appeal, including the HHS appeals entity. We note, however, that if a state delegates authority to 

conduct fair hearings through an ICA waiver to another state agency, including a state-based 

Exchange or state-based Exchange appeals entity, Medicaid decisions made by that entity could 
CMS-2334-F 25 

not be appealed to the HHS appeals entity. The ICA waiver is a waiver of single state agency 

requirements that permits alternative arrangements of state agency functions to another state 

agency. Once such an agency has issued a decision after a Medicaid fair hearing, that Medicaid 

decision would be the final decision of the Medicaid agency and thus no further right of appeal 

would be available to the individual. If the individual decided to appeal his or her advance 

payment of premium tax credit, cost-sharing reduction or Exchange eligibility decision to the 

HHS appeals entity, that entity would need to adhere to the Medicaid appeals entity decision 

under §155.302(b)(5), as revised in this final rule, and §155.345(h) which will prevent 

inconsistent decisions between the HHS appeals entity and the state-based Exchange or 

Exchange appeals entity. 

 Comment: Many commenters requested clarification on the scope of fair hearings that 

may be delegated from a Medicaid agency to an Exchange or Exchange appeals entity. 

Commenters specifically requested clarification regarding whether fair hearings of eligibility 

determinations on bases other than MAGI may be delegated to an Exchange or Exchange 

appeals entity, and whether findings other than MAGI-based income determinations may be 

delegated to an Exchange or Exchange appeals entity. 

Response: The term “MAGI-based determinations” is used to refer to determinations in 

which financial eligibility is determined using the MAGI-based methods described in §435.603 

of the March 2012 final Medicaid eligibility rule. However, in accordance with §435.911(c) of 

the March 2012 final Medicaid eligibility rule, a determination of eligibility based on MAGI also 

entails a determination that an individual meets the non-financial conditions of eligibility, 

including state residency and citizenship or satisfactory immigration status, and the denial of 

eligibility for an individual considered for coverage under a MAGI-based eligibility group may 

be based on failure to meet any of the financial or non-financial conditions of eligibility. A 
CMS-2334-F 26 

delegation of fair hearing authority under §431.10(c)(1)(ii) to an Exchange or Exchange appeals 

entity regarding a denial of MAGI-based eligibility will need to address any or all of the bases of 

denial, just as a fair hearing conducted by the Medicaid agency would. We note that we have 

made some technical modifications to the regulation text at §431.10(c)(1)(ii) to help clarify this 

point. As also noted in the preamble to the proposed rule, we remind states that while all appeals 

for an individual with a MAGI-based eligibility determination may be delegated to an Exchange 

or Exchange appeals entity under the regulation at §431.10(c)(1)(ii), the FFE will only accept a 

delegation of appeals involving determinations rendered by the FFE. 

The permissible scope of delegation under §431.10(c)(1)(ii) to an Exchange or Exchange 

appeals entity is limited to appeals of MAGI-based eligibility determinations. Appeals related to 

denials of eligibility for individuals excepted from application of MAGI-based methodologies 

(for example, eligibility based on disability) may not be delegated under the regulation. As 

discussed above, states may delegate such appeals to another state agency, including a statebased Exchange, by requesting an ICA waiver. 

Comment: One commenter asked whether there is a timeframe under which the 

individual must request a fair hearing before the Medicaid agency to effectuate the requirement 

under §431.10(c)(1)(ii) that the state agency must provide an individual an option to have his or 

her Medicaid appeal conducted at the Medicaid agency when delegating authority to conduct fair 

hearings to an Exchange or Exchange appeals entity. 

Response: An individual must be provided the opportunity to opt to have his or her 

Medicaid appeal adjudicated at a hearing conducted at the Medicaid agency, instead of having 

his or her appeal for both enrollment in a QHP and eligibility for APTC and CSR and eligibility 

for Medicaid addressed at an integrated hearing at the Exchange or Exchange appeals entity. 

Section 431.206(d) specifies that the individual must be informed of how to exercise this right. 
CMS-2334-F 27 

We note that we clarify our proposed regulation at §431.206(d) to require that individuals must 

be informed of this option in writing. We are revising the regulation text at §431.10(c)(1)(ii) to 

clarify that the request for a hearing before the Medicaid agency would need to be requested 

instead of the Exchange hearing. While we are not specifying a specific timeframe, we would 

expect that if an individual was opting for a hearing before the Medicaid agency, that request 

would be made at the time that the individual is requesting a hearing. Thus, we finalize these 

proposed regulations with these minor modifications. 

Comment: Many commenters believed that delegation of fair hearing authority under the 

regulation should be permitted. Some of the commenters emphasized the need to permit 

delegation only in the simplest manner reducing burden to the consumer, and without any 

duplication of appeals processes. A few commenters suggested we permit delegation under the 

regulation only to an independent state agency employing Administrative Law Judges, and that 

delegation to any other state agency still require an ICA waiver to ensure transparency and 

opportunity for stakeholder input. A few commenters asked for clarification of the conditions 

and process required when requesting an ICA waiver. One commenter opposed delegation of 

authority to conduct fair hearings to any other state or Exchange entity stating that any 

delegation is duplicative, as state agencies still will be required to conduct Medicaid MAGIbased hearings.

Response: Under proposed §431.10(c)(1)(ii), states would be able to delegate authority 

to conduct MAGI-based fair hearings to an Exchange or Exchange appeals entity, but to delegate 

Medicaid fair hearings to another state agency, states would need to request an ICA waiver. We 

sought comment on whether states also should be permitted to delegate authority to conduct fair 

hearings to another state agency under the regulation. 
CMS-2334-F 28 

The purpose of the proposed rule is to promote coordination of appeals and simplification 

of the appeals process by permitting delegation of Medicaid appeals to the Exchange or 

Exchange appeals entity. Because coordination between insurance affordability programs is a 

key goal of the Affordable Care Act, we are finalizing, with minor modifications, the proposed 

regulations at §431.10(c)(1)(ii) and at §431.205(b)(1)(ii) to permit delegation of authority to 

conduct Medicaid fair hearings for denials of MAGI-based eligibility to the Exchange or 

Exchange appeals entity, including the FFE, state-based Exchange or HHS or state-based 

Exchange appeals entity, provided these entities are government agencies or public authorities 

that maintain personnel standards on a merit basis. After consideration of the comments, we 

have determined not to extend authority to delegate Medicaid fair hearings to state agencies 

other than a state-based Exchange or an Exchange appeals entity under the regulations because it 

is already allowed through an ICA waiver. We note that the main goal and justification for the 

delegation of fair hearings under the regulation is to achieve coordination across insurance 

affordability programs, something which would not be served by delegation to another state 

agency. Furthermore, Medicaid agencies already can delegate conduct of fair hearings to other 

state agencies through an ICA waiver, and there is nothing additional that states would be able to 

accomplish through delegation under the regulation as opposed to an ICA waiver. Indeed, the 

flexibility available to states under an ICA waiver is greater than that which is available under 

the regulation since delegation of fair hearings under an ICA waiver does not require that states 

provide individuals a right to opt for a hearing before the Medicaid agency, nor would the 

delegation be limited to MAGI-related appeals. 

We have and will continue to apply similar conditions to the delegation of fair hearings 

under an ICA waiver as those we require under §431.10(c) and (d). As explained in the 

proposed rule, an ICA waiver may be requested through a straightforward process using a state 
CMS-2334-F 29 

plan amendment (SPA), and CMS staff is available to provide technical assistance to states in 

completing that process. We note that our rules relating to hearing officers do not require that 

hearing officers be Administrative Law Judges or set any particular qualifications for hearing 

officers other than impartiality. States have flexibility to set such requirements in implementing 

fair hearings as they see appropriate. Thus, we do not set standards regarding the qualifications 

of hearing officers for states that delegate authority to conduct fair hearings or specify rules if the 

state agency employs Administrative Law Judges in this final rule. 

Comment: One commenter expressed concern that the proposal to remove §431.10(e)(2) 

and (e)(3) weakens the single state agency authority when delegating authority to conduct 

appeals to another agency. Other commenters supported the removal of those paragraphs 

because they are inconsistent with the goals of delegation of authority of appeals. 

Response: We are finalizing our proposal to remove paragraphs §431.10(e)(2) and (e)(3) 

as they are inconsistent with the option to delegate the authority to conduct fair hearings to an 

Exchange. We believe that the proposed language in §431.10(e), which we are finalizing 

without modification, clearly provides that only the Medicaid agency may develop and issue 

rules and policy related to the Medicaid program. 

Comment: Several commenters requested clarification of the kinds of conclusions of law 

that could be subject to review by the agency under §431.10(c)(3)(iii). They also asked how the 

agency review process a state may establish to decisions made by an Exchange or Exchange 

appeals entity conducting Medicaid fair hearings under this provision relates to the “trumping 

rule” at §155.302(b)(5), which provides that if an appeals decision rendered by the Exchange or 

Exchange appeals entity conflicts with a fair hearing decision concerning the same individual 

rendered by the Medicaid agency, the Exchange must adhere to the Medicaid fair hearing 

decision. A number of commenters supported the limitation of the agency review process to 
CMS-2334-F 30 

conclusions of law. One commenter requested that the option be extended to findings of fact. 

Others recommend that the option be eliminated altogether. These commenters discussed that 

any review by the state agency of a hearing officer’s legal or factual conclusions would violate 

the due process protections afforded under Goldberg v. Kelly to have the appeal decided by a 

neutral arbiter. One commenter suggested that the regulation at §431.10(c) specify the 

timeframe in which the Exchange or Exchange appeals entity be required to issue a decision for 

the state agency to complete its review within the time limits set forth in §431.244. 

Response: We are finalizing this provision as proposed with minor revisions to clarify 

the scope of the review process. We note the provision at §431.10(c)(3)(iii) is a state option for 

Medicaid agencies to establish a process that permits a limited review of the decisions made by 

the Exchange or Exchange appeals entity to ensure Medicaid fair hearings are made with the 

proper application of federal and state Medicaid law and regulations, including subregulatory 

guidance and written interpretive policies. The proposed regulation text is being revised to 

clarify the scope of what the agency may review would be limited to the legal conclusions made 

during the fair hearing to ensure that they appropriately apply federal and state Medicaid law and 

regulations, including subregulatory guidance and written interpretive policies properly and that 

the review process be conducted by an impartial official who was not directly involved in the 

initial determination. 

By way of example, suppose that the Exchange hearing officer finds that an individual 

has $800 in wages and $200 in child support income each month and, based on these amounts, 

concludes that the individual’s MAGI-based household income is $1,000 per month. Suppose 

also that the applicable income standard for the applicable household size for this individual is 

$900 per month, and that the hearing officer upholds the initial denial of eligibility. The findings 

of $800 in wages and $200 of child support per month would be factual findings, which the 
CMS-2334-F 31 

Medicaid agency could not review under the option provided at §431.10(c)(3)(iii). However, 

the hearing officer’s inclusion of the wages and child support income in total MAGI-based 

household income involves an application of MAGI-based methodologies, described in 

§435.603 of the March 2012 Medicaid eligibility final rule, as implemented by the state, which 

would be reviewable as a conclusion of law. In this case, the inclusion of wages would be 

correct, but the inclusion of child support income would be incorrect, and the agency upon 

finding such an erroneous application of state or federal rules could reverse the hearing officer’s 

decision to conclude that, based on household income of $800, the individual is Medicaid 

eligible. 

Because of the important role that an impartial hearing officer plays in evaluating 

evidence and weighing credibility in making findings of fact, we are not extending the option at 

§431.10(c)(3)(iii) to include agency review of findings of fact. We note that fair hearings 

conducted under a delegation of authority in accordance with §431.10(c)(1)(ii) must be 

conducted in accordance with §431.10(d)(1), which requires that the delegation agreement 

between the agency and the Exchange or Exchange appeals entity must set forth the 

responsibilities of each party to effectuate the provisions of part 431 subpart E of the 

regulations. Section 431.205(d) provides that the fair hearing process under subpart E must meet 

the due process standards set forth in Goldberg v. Kelly, 397 U.S. 254 (1970), which requires 

that any review process be conducted by an impartial official, and be based solely on the 

information and evidence in the record. We have made a minor modification to 

§431.205(b)(1)(ii) to clarify that the hearing process provided through delegation of authority to 

conduct a fair hearing to an Exchange or Exchange appeals entity would include the review by 

the agency of the Exchange or Exchange appeal entity’s application of federal and state 

Medicaid law and regulations, if such review is elected by the state under §431.10(c)(3)(iii) and 
CMS-2334-F 32 

conducted by an impartial official who was not directly involved in the initial determination. We 

note also that the state’s election under §435.10(c)(3)(iii) to conduct this limited review does not 

create a right for the individual to request or receive a de novo hearing before the agency. 

The review process that can be established under §431.10(c)(3)(iii) functions completely 

independently from the “trumping rule” at §155.302(b)(5) of the Exchange proposed rule. The 

former comes into play when an individual’s fair hearing has been delegated to, and is heard by, 

the Exchange or Exchange appeals entity. The “trumping rule” at §155.302(b)(5) as modified by 

this rulemaking and at §155.345(h) is invoked when the Medicaid agency has conducted the 

Medicaid fair hearing relating to the appeal of a denial of Medicaid eligibility and the Exchange 

or Exchange appeals entity also has conducted a hearing related to an appeal of an award of 

advance payments of premium tax credits. Similar to the “trumping rule” at §155.302(b)(5) of 

the March 2012 Exchange final rule relating to initial eligibility determinations, if the Medicaid 

agency’s fair hearing decision conflicts with the Exchange appeals decision, the Exchange must 

adhere to the Medicaid agency or fair hearing decision for Medicaid eligibility under 

§155.302(b)(5) and §155.345(h). 

Finally, we do not believe it is necessary to require in the Medicaid regulations specified 

timeframes within which an Exchange, in conducting a delegated fair hearing, must transmit a 

decision to the Medicaid agency. Instead, as part of the agreement required under §431.10(d), in 

delegating the fair hearing authority to the Exchange or Exchange appeals entity, the parties will 

need to stipulate each party’s responsibilities to ensure that the time frames established under 

§431.244(f) are met. 

Comment: One commenter sought clarification of whether the review process of appeal 

decisions made by the Exchange which the commenter expressed as “required” at 
CMS-2334-F 33 

§431.10(c)(3)(iii) is considered in the agency’s quality assurance Payment Error Rate 

Measurement (PERM) sampling. 

Response: The regulation at §431.10(c)(3)(iii) does not set a requirement, but provides 

states an option to establish a review process of appeal decisions as a part of its oversight of the 

delegation of authority to conduct fair hearings to an Exchange or Exchange appeals entity. We 

note the agency has other means to oversee its delegation of authority to conduct hearings. 

Implications for PERM are beyond the scope of this regulation; we intend to issue additional 

guidance on PERM. 

Comment: Many commenters supported the reinstatement of an individual’s Medicaid 

application at §435.907(h) when the individual had withdrawn his or her application after an 

assessment of Medicaid ineligibility by the Exchange, appealed the level of APTC and CSR 

awarded by the Exchange, and the Exchange or Exchange appeals entity reversed the initial 

assessment and found the individual to be potentially eligible for Medicaid. A few commenters 

sought clarification regarding the retroactive nature of the reinstatement effective as of the date 

the individual submitted the application to the Exchange. Another commenter asked how this 

provision relates to the timeliness requirements for Medicaid agencies to process an application 

under §435.912 of the March 2012 Medicaid eligibility final rule. A few commenters raised a 

concern that if an Exchange appeals entity hearing officer upholds the finding of eligibility for 

advance payment for premium tax credit, the reinstatement would not take effect. These 

commenters recommended that the Medicaid application be reinstated whenever an individual 

files an appeal with the Exchange or Exchange appeals entity to capture a broader set of 

individuals who may be eligible for Medicaid or CHIP. 

Response: We appreciate the support for the provision at §435.907(h) to reinstate the 

Medicaid application of an individual who has withdrawn his or her Medicaid application upon 
CMS-2334-F 34 

initial assessment of Medicaid ineligibility by the Exchange, but who is subsequently assessed as 

potentially Medicaid eligible following an appeal related to an award of advance payments of the 

premium tax credits or cost sharing reductions. We are finalizing this provision as proposed, 

except to clarify that the 45-day or 90-day timeliness standards do not apply to these reinstated 

applications. By the time the Exchange appeal decision is rendered, 45 or 90 days from the date 

of application may already have elapsed, making compliance by the Medicaid agency unrealistic. 

Instead we clarify that the timeliness standards required under §435.912 of the March 2012 

Medicaid eligibility final rule apply based on the date the application is reinstated. However, we 

note that the 45 and 90 days prescribed in the regulation represent the outer limit for all 

applications. In the case of a reinstated application which has been the subject of an Exchange 

appeal, we would expect that the individual’s electronic account would be comprehensive, and 

that considerably less time would be needed for the Medicaid agency to act on the case. We 

would expect states to take this into account in establishing timeliness standards for prompt 

determinations on reinstated applications under §435.911(c) and §435.912 of the March 2012 

Medicaid eligibility final rule. The reinstated application must be made effective retroactive to 

the date the individual submitted his or her application to the Exchange (not the date the 

application is reinstated) to protect the effective date of coverage required under §435.914 of the 

current regulations (redesignated at §435.915 in the March 2012 Medicaid eligibility final rule). 

We also proposed a similar application reinstatement provision for CHIP at §457.340(a), which 

we are finalizing as proposed with a minor modification to remove the reference to §435.909 

which was inadvertently inserted in the proposed rule and has no relationship to CHIP. We note 

that states also will need to develop reasonable timeliness standards for such reinstated 

applications in accordance with §457.340(d) of the March 2012 Medicaid eligibility final rule. 
CMS-2334-F 35 

We have not modified the proposed regulation text to reinstate the Medicaid or CHIP 

application of every individual who has withdrawn his or her Medicaid or CHIP application in 

accordance with §155.302(b)(4) of the March 2012 Exchange final eligibility rule and who then 

subsequently appeals the determination of eligibility for advance payments of the premium tax 

credits or cost-sharing reductions at §435.907(h) and §457.340(a). We believe that the interests 

of individuals filing an Exchange appeal who should have been assessed as potentially Medicaid 

eligible by the Exchange, but who nonetheless withdrew their Medicaid application following 

the Exchange’s assessment, will be protected through the Exchange appeals process because the 

Medicaid application for those assessed potentially Medicaid eligible will be reinstated, and their 

account transferred to the Medicaid agency for a full determination. On the other hand, to 

reinstate the Medicaid application of every applicant for whom the Exchange appeals processes 

ultimately confirms the initial assessment of Medicaid ineligibility made by the Exchange – 

regardless of how high above the Medicaid income standard the individual’s income may be – 

would create confusion for individuals and impose, we believe, unnecessary administrative 

burden on state Medicaid agencies. We expect to work closely with Exchanges to ensure 

accurate assessments of Medicaid and CHIP eligibility in accordance with federal regulations. 

Comment: One commenter sought clarification of when Medicaid agencies will have to 

decide whether or not to delegate eligibility determinations or fair hearings to the Exchange, and 

whether there will be additional requirements if the agency chooses not to delegate such 

responsibility. 

Response: There is no deadline to elect to delegate eligibility determinations or appeals 

to an Exchange or Exchange appeals entity. As discussed in section II.A.6. of preamble, the 

regulation permitting delegation of eligibility and fair hearings goes into effect on October 1, 

2013. Once a state decides to delegate authority to conduct eligibility or appeals, it must 
CMS-2334-F 36 

indicate such an election through the state plan, establish a written agreement with the Exchange 

or Exchange appeals entity, and otherwise comply with the provisions set forth in the regulation. 

A state may revoke its delegation at a later time through the same process. Whether or not a 

state chooses to delegate authority, it must comply with the provisions of §435.1200, §457.348 

and §457.350, issued in the March 2012 Medicaid eligibility final rule, to ensure coordination 

across all insurance affordability programs and a seamless consumer experience. We proposed 

revisions to these provisions in the January 2013 proposed rule to address the agencies’ 

responsibilities to coordinate notices and appeals, but are not finalizing them in this final rule. 

Comment: One commenter questioned whether a state might be able to obtain the 

enhanced matching funds for systems enhancement at a 90/10 match for enhancement of their 

appeals systems. Another commenter asked for clarification as to whether federal financial 

participation (FFP) would be available for appeals delegated to an Exchange. 

Response: The enhanced FFP match rate of 90/10 for the design, development, and 

installation of eligibility systems is available only for components of the Medicaid Management 

Information System (MMIS), including eligibility and enrollment systems through the end of 

2015, subject to meeting the seven conditions and standards outlined in the April 19, 2011 final 

rule at 74 FR 21950. A 75/25 match rate is available for operations and maintenance of these 

systems. Appeals systems do not qualify for enhanced funding under these rules. Instead, FFP 

at a 50/50 rate is available. For more details on 75/25 match rate discussion, see 

http://www.medicaid.gov/State-Resource-Center/FAQ-Medicaid-and-CHIP-Affordable-CareAct-ACA-Implementation/Downloads/Affordable-Care-Act_-Newest-Version.pdf. The 

availability of FFP and responsibility for funding subject to cost allocation rules applies to 

administration of fair hearings in the same manner as any other context and is not affected by the 

state’s delegation decision. 
CMS-2334-F 37 

Comment: A few commenters suggested that we revise §431.240 to require that hearing 

officers who adjudicate Medicaid fair hearings abide by specific ethical standards, either the 

National Association of Hearing Officials’ Model Code of Ethics or the National Association of 

Administrative Law Judiciary’s Model Code of Judicial Conduct for State Administrative Law 

Judges. We did not receive any comments related to our proposed modification of §431.240 

related to access to information. 

Response: As discussed above, existing regulation at §431.240 require hearing officers 

to be impartial. Additionally, existing regulations at §431.205 require hearing systems to 

comport with due process standards of Goldberg v. Kelly, 397 U.S. 254 (1970). Current 

regulations do not require hearing officers to belong to a particular profession, and we did not 

propose to modify this policy in the proposed rule. Therefore, we are not making any changes to 

§431.240 in response to this comment. However, as noted above, we are addressing this 

comment, in part, by including that an impartial decision-maker must be used if a state is 

electing to establish a review process of legal conclusions made by hearing officers operating 

under delegated fair hearing authority. We also encourage states to examine this issue further 

and to ensure that the requirement to utilize impartial hearing officers at §431.240 are adhered to 

when conducting fair hearings. We finalize §431.240(c) without modification. 

3. Notices 

a. Electronic Notices (§435.918) 

 Current notice regulations require paper-based, written notices. To establish a more 

timely and effective notification process, proposed §435.918 would direct states to provide 

individuals with the option to receive notices through a secure, electronic format in lieu of 

written notice by regular mail. Consumer safeguards were proposed to ensure that individuals 

make a conscious choice to receive notices in electronic format, and would be able to opt-in and 
CMS-2334-F 38 

opt-out of their election. We solicited comments regarding the proposed consumer safeguards. 

In addition, we requested comments on whether other types of communications, in addition to 

eligibility notices, should be offered in electronic format. We are finalizing §431.206(e), to 

permit beneficiaries to receive notices regarding fair hearings electronically, consistent with 

proposed §435.918. We note that we are not addressing in this final rule comments related to 

accessibility of fair hearing notices. We will consider these comments and this portion of 

§431.206(e) when we finalize our rules related to accessibility for individuals who are limited 

English proficient and individuals with disabilities in a future rulemaking. We also proposed 

modifications to §§431.211, 431.213, 431.230, and 431.231 to update and modernize the 

language in the regulation to remove the term “mail” and instead use “send,” to reflect the option 

for beneficiaries to receive notices electronically, consistent with the consumer protections in 

proposed §435.918. We proposed in §457.110(a)(1) the same consumer option and protections 

for electronic notices in CHIP, and we are making technical changes in the final rule to better 

align the provisions. A modification was also proposed to paragraph (a) in §457.110 regarding 

the accessibility of information for individuals who are limited English proficient and individuals 

with disabilities. However, we will finalize this provision in future rulemaking. 

 We received many comments regarding the requirement to provide individuals with the 

option to receive notices electronically, the majority of which supported this option as an 

important part of modernizing the notification process provided that strong consumer protections 

are in place. 

Comment: We received many comments regarding proposed §435.918(a)(1), which 

would require the agency to confirm by regular mail the individual’s election to receive notices 

electronically. Some commenters recommended, instead, allowing electronic confirmation for 

individuals applying on-line. One commenter suggested that in states with a FFE, the FFE 
CMS-2334-F 39 

should be responsible for issuing all mailed confirmations. Also, several commenters were 

concerned that the proposed written confirmation actually required individuals to choose receipt 

of electronic notices twice, and that this would be confusing and burdensome for the agency and 

these consumers. Many other commenters encouraged CMS to maintain the requirement to 

confirm an individual’s election through regular mail to ensure that individuals have made an 

informed decision, and to provide them with an opportunity to change their election. One 

commenter suggested that the mailed confirmation include a list of the types of notices that the 

agency will send in electronic format. 

 Response: Proposed section §435.918(a)(1), redesignated §435.918(b)(1) in our final 

rule, requires the agency to send, via regular mail, written confirmation that an individual has 

elected to receive electronic notices and that forthcoming notices will be delivered 

electronically. This communication must also instruct the individual on how to change this 

election if the individual made the initial choice inadvertently or wishes to change his or her 

mind. The purpose of the mailed communication is to affirm the individual’s choice and allow 

the individual an early opportunity to opt-out of receiving notices in electronic format. The 

individual does not have to respond to this written notice to complete his or her election to 

receive electronic notices; he or she need only respond if he or she wanted to change the initial 

election. Therefore, there will not be any need for individuals to request electronic notices 

twice, as some commenters thought. We are clarifying at §435.918(b)(1) of the final regulation 

that it is the agency’s responsibility to ensure that the individual’s election to receive notices 

electronically is confirmed by regular mail, since the individual will receive all future 

communication from the Medicaid agency including information on how to establish an 

electronic account with the state, if he or she has not already done so. If a different arrangement 

makes more sense in a given state, the Medicaid agency and Exchange can delegate this 
CMS-2334-F 40 

responsibility to the other agency in the agreement entered into under §435.1200(b)(3). We are 

not requiring that this communication specify which types of notices will be delivered in 

electronic format, but suggest that states take this under consideration as it would enable 

individuals to better anticipate the type of notices that will be posted to an electronic account. 

We anticipate, based on one state’s experience piloting electronic notices, few individuals will 

revert back to paper notices. However, given that electronic notification will be a new approach 

for many individuals, we believe this is an important consumer protection to ensure that 

individuals make a deliberate choice regarding the format in which they receive information. In 

future years, when electronic notices are more prevalent, we will revisit whether written 

confirmation of the individuals choice to receive notices in electronic format is still a relevant 

consumer protection. 

 Comment: Several commenters requested that electronic notices be the default method 

for notice delivery such that if an individual fails to indicate whether he or she prefers an 

electronic or paper format for notices, notices would automatically be provided electronically. 

One commenter suggested that electronic notices should be the default for specific populations, 

such as those individuals determined eligible through an Exchange website. 

 Response: We maintain that electronic notices should be provided only if the individual 

affirmatively opts for such notices. The default approach makes an assumption that the 

individual has the technology to regularly retrieve notices posted to his or her electronic account. 

Even if an individual applies through an Exchange website, the individual may not have regular 

access to technology to enable ongoing retrieval of electronic notices. Consequently, we do not 

believe this change is appropriate at this time as it could pose a barrier to applicants and 

beneficiaries with limited access to technology. 
CMS-2334-F 41 

 Comment: Several commenters recommended that Medicaid and CHIP eligibility 

notices be provided in both electronic and in paper format until an individual indicates in writing 

that they no longer wish to receive such notices by regular mail. Some commenters also 

recommended that all notices regarding adverse actions always be sent in paper format via 

regular mail to allow for additional protection against delivery error. One commenter 

recommended that hearing scheduling notices should always be sent via regular mail to ensure 

adequate hearing slot availability. 

 Response: We are concerned that requiring agencies to provide dual electronic and paper 

notices may pose an administrative burden for some states. While we require that agencies 

provide individuals with a choice to receive notices in electronic format in lieu of paper format, 

at state option, all notices or a subset of notices, such as those relating to adverse actions, could 

be provided in dual formats. We appreciate the concern expressed for ensuring consumer 

protections against delivery error. In §435.918(a)(4), the agency is required to send an email or 

other electronic communication alerting the individual that a notice has been posted to his or her 

account. To guard against delivery error, if the required alert is returned as undeliverable, the 

agency must send such notice by regular mail within three business days of the date of the failed 

electronic communication. This requirement has been further clarified by a revision to 

§435.918(a)(5). We believe that electronic notices are likely to increase receipt of important 

eligibility information, as individuals will have greater flexibility to access notices regardless of 

changes to their postal address. 

 Comment: We received a few comments that recommended we amend §435.918 to 

include specific language noting the importance of ensuring that the notice must be accessible to 

persons who are limited English proficient and individuals with disabilities. 
CMS-2334-F 42 

 Response: We agree that all eligibility notices must be accessible to persons who are 

limited English proficient and individuals with disabilities, and we will be addressing such rules 

in future rulemaking. 

 Comment: One commenter requested clarification on what constitutes an 

“undeliverable” communication in §435.918(a)(5). 

 Response: “Non-delivery reports” are system messages that report the delivery status to 

the sender. We expect that if the agency receives a non-delivery report, this constitutes an 

undeliverable communication. 

 Comment: One commenter requested clarification regarding how to date a paper version 

of an electronic notice. When an electronic communication is undeliverable, indicating an 

individual may not be aware of an electronic notice posted to his or her account, §435.918(a)(5) 

requires that the agency send a paper version of the electronic notice within three business days. 

The commenter, noting the ability to send the paper version of the electronic notice within 24 

hours, supported maintaining the same date on both notices. 

 Response: It is important for the date of the paper notice to reflect the date it is sent, not 

the date of the undelivered electronic notice. We anticipate that while some states may be able 

to issue a paper version of the electronic notice within 24 hours, other states may take up to the 

required limit of 3 days. Individuals are given a limited time to take action, such as requesting a 

date for a hearing, and this is based on the date the notice is sent to the individual. 

 Comment: One commenter requested clarification as to whether agencies are required to 

monitor an individual’s account to determine if a notice was accessed. 

 Response: We are not requiring that agencies monitor accounts to determine whether 

notices are accessed. If the electronic alert is not undeliverable, the agency should assume an 

individual is able to access his or her notice. 
CMS-2334-F 43 

 Comment: One commenter recommended that we include a requirement that allows the 

agency to limit the number of times an individual can request that an electronic notice be 

provided in paper format. 

 Response: We believe that it is an important consumer protection to allow individuals to 

request notices in a paper format. Some individuals may not have the technology available to 

readily print notices from an electronic account. 

 Comment: A number of commenters supported offering additional types of 

communications through an electronic format. In addition to eligibility notices and information 

specified in subpart E of part 431, there are other communications that occur between an 

individual and the Medicaid or CHIP agency. Some of these communications include requests 

for additional information, annual renewal forms and reminders, premium payment information, 

and information on covered services. 

 Response: We do not believe it is necessary to amend §435.918(a) to include other types 

of communications. In §435.918(a), we specify that eligibility notices and information in part 

435, and notices and information required under subpart E of part 431, be provided in electronic 

format. For example, information on covered services must be available electronically in 

addition to paper format, as required by §435.905(a). Annual renewal forms must also be 

offered in electronic format in accordance with §435.916. We do not think it is appropriate or 

operationally feasible to require other types of communications to be provided electronically. 

We encourage states with the capacity to provide additional communications electronically, and 

with beneficiaries preferring that mode of communication, to do so, as long as in compliance 

with any existing regulations that govern the type of communication. 

 Comment: One commenter asked whether proposed §435.918(b), which asserts that the 

agency may only provide electronic notices if the individual elected to receive electronic notices 
CMS-2334-F 44 

and must be permitted to change such election at any time, is duplicative of paragraph 

§435.918(a). 

 Response: We agree with the commenter, and the provision has been amended by 

removing redundant language in §435.918(b)(1) and §435.918(b)(2). 

 Comment: A number of commenters requested a later effective date for implementing 

electronic notices. 

 Response: We recognize that states are at different places in the development of their 

eligibility and enrollment systems, and that the technology needs to be in place to offer 

beneficiaries and applicants the option to receive notices electronically. We have amended 

§435.918(a) to delay the requirement to provide notices electronically until January 1, 2015, but 

permit states to implement October 1, 2013 if their systems are ready. 

 Comment: One commenter suggested that we clarify whether “send” in §431.230 means 

send by mail or in electronic format consistent with §435.918. 

 Response: Under proposed §431.206(e), all information required under subpart E of part 

431 must be provided in electronic format in accordance with §435.918, if an individual elects to 

receive such information in electronic format. To further clarify, we have added to §431.201, 

that the definition of “send” means deliver by mail or in electronic format consistent with 

§435.918. 

 Comment: One commenter requested clarification regarding §431.231(c)(2), which 

provides beneficiaries 10 days to request a hearing from receipt of the notice of action. The date 

on which the notice is received is considered to be 5 days after the date on the notice, unless the 

beneficiary shows that he or she did not receive the notice within the 5-day period. The 

commenter specifically requested clarification regarding how an individual might show proof 

that they did not receive an electronic notice within the 5-day time period. 
CMS-2334-F 45 

 Response: We understand the concern expressed by the commenter, but do not believe 

that this issue is specific to the receipt of electronic notices, but receipt of notices in general. It 

is challenging for an individual to provide proof of a negative, however, it is important to 

provide individuals with the opportunity to demonstrate that they did not receive notices. One 

example of how an individual might demonstrate that he did not receive an electronic eligibility 

notice is by providing documentation that he closed the email account on record with the agency. 

If an individual cannot receive the emailed alert that a notice is posted to the electronic account, 

the individual is not in receipt of the notice. 

 Comment: A few commenters requested that we define whether the “5 days” 

§431.231(c)(2) refers to calendar days or business days. 

 Response: We are not defining whether the “5 days” refers to calendar days or business 

days, but allow states the flexibility to define this in their operating procedures. 

b. Coordinated Notices (§435.1200) 

For individuals whose electronic account is transferred to the Medicaid agency for a 

determination of eligibility from another insurance affordability program, §435.1200(d)(6) of the 

March 2012 Medicaid eligibility final rule directs that the Medicaid agency notify such other 

program of its final determination of eligibility or ineligibility only for individuals who have 

enrolled in the other program pending completion of the agency’s final determination. We 

proposed to redesignate and modify this requirement at §435.1200 (d)(5) to require that the 

Medicaid agency notify the other program of the final determination of Medicaid eligibility or 

ineligibility for all individuals whose electronic account was transferred from another insurance 

affordability program. The same requirement was proposed for CHIP at §457.348(d)(5). No 

comments were received regarding these specific provisions. We also proposed a number of 

other changes to §435.1200 and §457.348 relating to coordination of notices and appeals. In this 
CMS-2334-F 46 

final rule, we are codifying §435.1200(d)(5) of the proposed rule at paragraph §435.1200(d)(6). 

Other proposed changes to §435.1200 of the March 2012 Medicaid final eligibility rule, 

including the redesignation of paragraph (d)(6), as appropriate, will be addressed in subsequent 

rulemaking. We are also finalizing proposed §457.348(d)(5) as §457.348(c)(6), but other 

proposed changes to §457.348 will be addressed in subsequent rulemaking. 

4. Medicaid Enrollment Changes Under the Affordable Care Act Needed to Achieve 

Coordination with the Exchange 

a. Certified Application Counselors (§435.908 and §457.340) 

Many state Medicaid and CHIP agencies have a long history of supporting providers and 

other organizations to assist individuals in applying for and maintaining coverage. Commonly 

referred to as “application assisters” and referred to in this rulemaking as “certified application 

counselors,” these organizations and individuals provide direct assistance to individuals seeking 

coverage, and can play a key role in promoting enrollment among low-income individuals. The 

proposed regulations at §435.908(c) sought to ensure that certified application counselors, whom 

we expect to continue to play an important role in facilitating enrollment in the expanded 

coverage options available under the Affordable Care Act, will have the training and skills 

necessary to provide reliable, effective assistance to consumers. We proposed basic standards 

for states to certify application counselors, which we believe are consistent with the practice in 

many states today. These standards include proposed procedures to ensure that these trained 

certified application counselors have clear authority to access and protect confidential 

information about individuals they serve, and with that authority have a special relationship with 

the Medicaid agency that enables the counselors to track and monitor applications. The 

proposed regulations at §435.908(c), as finalized in this rulemaking, are applicable to CHIP, as 

well under §457.340(a) of the March 2012 Medicaid eligibility final rule; no revisions are 
CMS-2334-F 47 

needed or made to §457.340(a). We received the following comments concerning the proposed 

certified application counselor provisions: 

Comment: We received a few comments expressing support for the proposed 

requirement that states have a designated web portal for use by certified application counselors 

that has a secure mechanism for granting rights for only those activities the certified application 

counselor is certified to perform. Commenters stated that such a portal will increase the 

proportion of applications that are submitted electronically, thereby providing more applicants 

with access to electronic verification and real-time eligibility while increasing the state’s 

administrative efficiency. Other commenters also recommended a clarification that states may 

use the same portal for Navigators and non-Navigator assistance personnel authorized under 45 

CFR 155.205(d) and (e) with proper assignment of rights and functionality. 

Response: We appreciate the support for the establishment of a designated web portal 

for use only by properly trained and certified application counselors. However, given the 

systems challenges states face in preparing for the initial open enrollment period and starting up 

the new system of insurance affordability programs, we are concerned that requiring such a 

portal could disrupt well-functioning application counselor programs that exist today. Therefore, 

while we encourage states to consider such portals as an effective vehicle for administering and 

overseeing certified application counselor programs, we are removing from the final rule the 

requirement that such portals be established as proposed at §435.908(c)(3)(i). Although not 

required, states may elect to develop these portals to support the work of certified application 

counselors. 

Comment: One commenter requested that we issue guidance on the availability of 

federal funding to help support grants or payments to certified application counselors – in 
CMS-2334-F 48 

particular information about how Medicaid administrative claiming can be used to match 

community-based investments in application assistance. 

Response: FFP is available for state expenditures to certify and support certified 

application counselors, but, since community-based application counselors are not state or local 

employees, FFP is not available for salaries or other direct costs of certified application 

counselors. 

Comment: Many commenters requested that we require that certified application 

counselors be trained to provide culturally and linguistically competent services. They believed 

that it is not sufficient to remind Medicaid and CHIP agencies of their responsibility to ensure 

access to individuals with limited English proficiency and those living with disabilities, and 

urged us to provide states with specific guidance and examples of how to fulfill this 

responsibility. Some commenters recommended that to be certified, application counselors must 

be trained in providing culturally and linguistically appropriate services. Some commenters 

recommended that we require training for application counselors include accommodating the 

health care needs of specific populations, such as children. 

Response: Consistent with title VI of the Civil Rights Act of 1964, the Americans with 

Disabilities Act, and other civil rights laws, state Medicaid and CHIP agencies must ensure that 

their programs are accessible to individuals with limited English proficiency and individuals 

with disabilities. This responsibility is codified, in part, at §435.905(b), §435.907(g), 

§435.908(a), and §457.330 (incorporating by reference the requirements of §435.907) of the 

March 2012 Medicaid eligibility final rule, and is also contained in non-Medicaid specific 

regulations implementing the Americans with Disabilities Act and other civil rights laws. Note 

that clarifying changes were proposed in the January 2013 proposed rule to the accessibility 

standard in §435.905(b); those proposed changes are not addressed in this final rule, but we 
CMS-2334-F 49 

intend to address them in subsequent rulemaking. State agencies can use certified application 

counselors as a tool in meeting their responsibilities to make their programs accessible to 

individuals with limited English proficiency and individuals with disabilities. But, while some 

organizations providing application assistance to individuals applying for coverage under an 

insurance affordability program may be subject to civil rights laws independent of the fact that 

they are serving as a certified application assistor (for example, as a condition of accepting 

federal funding), we do not believe it appropriate to hold them responsible for meeting the 

accessibility standards established for state Medicaid and CHIP agencies under our regulations. 

Moreover, to require a community organization or provider with a mission to provide 

targeted assistance to one segment of the population to also be able to provide assistance to all 

others, would threaten the participation of valuable state partners in maximizing enrollment 

across the state’s entire population. 

Comment: Some commenters supported the option provided to states to certify 

application counselors. These commenters pointed to existing programs in which states work 

with community organizations to expand enrollment, and that state flexibility to continue 

current, successful programs is important. Other commenters recommended that certification of 

application counselors be required for all Medicaid and CHIP agencies. These commenters 

discussed that there will be organizations providing application assistance in every state, that 

these organizations need to be trained, and that consumers need to know who is available to 

provide competent assistance. 

Response: We agree that a network of application counselors can be a valuable asset and 

can support states’ outreach and enrollment efforts. We urge all states to consider working with 

interested organizations and providers in creating an application counselor program. However, 
CMS-2334-F 50 

we believe states are best able to determine the need for such a program, and we do not believe it 

is necessary to require that state Medicaid programs create such programs. 

Comment: We received a number of comments on certified application counselors and 

requirements related to conflicts of interest. Some commenters stated that in addition to 

receiving training on conflict of interests, certified application counselors should be 

contractually required to serve in the best interests of clients and to disclose any existing 

relationships with qualified health plans or insurance affordability programs to consumers. 

Some commenters recommended that health insurance issuers, their subsidiaries and licensed 

insurance brokers and agents be explicitly excluded from being certified as certified application 

counselors given their inherent financial conflict of interest. 

Response: We are clarifying the language in §435.908(c)(1)(iii) to make clear that 

certified application counselors must adhere to all rules prohibiting conflicts of interest. States 

may not certify any organization or individual who does not meet this standard, or who may be 

motivated to act in a manner contrary to best interest of the individual being helped. Thus, any 

organization that the state finds to have an inherent conflict could not, under the proposed 

regulation, be certified as an application counselor. We do not believe it necessary or 

appropriate to identify specific types of organizations as categorically barred from serving as 

application counselors and are finalizing this regulation as proposed. 

Comment: A few commenters requested that we require states to maintain a current list 

of certified application counselors on the agency website, and the list should include any 

limitations on services that they are certified to provide. Commenters suggested that it will be 

important for consumers to not only be informed of the functions and responsibilities of certified 

application assisters, as required in §435.908(c)(3)(i), but to also know who is certified and 
CMS-2334-F 51 

whether there are any limitations on the services each certified application counselor is certified 

to provide. 

Response: We encourage states to adopt the practice recommended by the commenter, 

as an effective mechanism to connect consumers with needed assistance. However, utilization of 

certified application counselors is at state option, and while we believe such a mechanism will 

enhance consumers’ ability to identify resources available to help with applications we do not 

think it appropriate to require states to post a current list of counselors on their website. We note 

that such a requirement could deter some states from creating or expanding their application 

counselor program if they do not have the resources to create and maintain such a list. 

Comment: A commenter asked CMS to clarify that states can meet their outstationing 

requirements under §435.904 with application counselors at the appropriate locations. They 

suggested that given the overlap of functions described it would seem inefficient to maintain 

separate systems of assistance. 

Response: States may be able to use certified application counselors to help meet the 

outstationing requirements set forth in current regulations at §435.904, under which state 

Medicaid agencies are required to provide pregnant women and children an opportunity to apply 

for coverage at designated “outstation locations.” Section 435.904(e) requires that, except for 

outstation locations that are infrequently used by the pregnant women and children targeted 

under the regulation, the state agency must have staff available at each outstation location. 

Under paragraph (e)(3) of that section, properly trained provider or contractor staff or volunteers 

– which could include organizations, staff and volunteers certified as application counselors – 

may be used in lieu of, or as a supplement to, agency staff to meet this requirement, subject to 

certain conditions set forth in the regulation. 
CMS-2334-F 52 

Comment: Commenters asked for clarification on the overlap of functions and 

certification requirements between certified application counselors in Medicaid and application 

counselors as proposed for the Exchange at §155.225. 

Response: Although the exact language of the Exchange application counselor 

regulation at proposed 45 CFR 155.225 (which is not being finalized in this rulemaking) and that 

of the Medicaid regulation at §435.908(c) differ, the policies reflected are consistent. The main 

substantive difference is that the Exchange regulation at proposed 45 CFR 155.225 would not 

permit certified application counselors to limit the activities that they agree to perform, but 

instead would require them to perform all assistance activities identified in the regulation, 

whereas states can permit Medicaid and CHIP application counselors to elect to limit the 

activities which they will perform for applicants. 

As noted in the preamble to the proposed rule, we remind the commenters that state 

Medicaid and CHIP agencies and the Exchange are charged under §435.1200 and §457.348 of 

the Medicaid eligibility final rule and proposed §155.345 of the Exchange rule to enter into 

agreements with each other to create a seamless and coordinated application and enrollment 

process across all insurance affordability programs, and the state agencies and the Exchange 

should consider such coordination in developing their application counselor programs. States 

could elect, for example, to create a single certification process for all insurance affordability 

programs, or each program could accept application counselors certified by another program. To 

the extent to which an application counselor is certified by one program but not the other, the 

counselor would assist the individual in submitting the single streamlined application for all 

insurance affordability programs to the entity by which they are certified. It is important to note 

that regardless of the entity to which the application counselor submits the application, the 

application will be evaluated for eligibility in QHPs and all insurance affordability programs. 
CMS-2334-F 53 

Comment: One commenter requested more information about the development and 

review of training materials for certified application counselors. This commenter stated that 

although the regulations provide that any individual providing customer service must be trained 

in a host of areas related to the insurance affordability programs, no specificity is provided about 

the development and review of the materials, and they requested clarification on whether states 

will have the opportunity to review and comment on materials prior to their use. We also 

received comments that recommended we require certified application counselors to apply for 

recertification annually or biannually to ensure that they are qualified and up to date on changes 

in policy and procedures. 

Response: Under §435.908(c)(1)(ii) and (iii), states must ensure that application 

counselors are properly trained prior to certification, and we expect states will need to develop 

training and any training materials to be used to satisfy this requirement. We note that materials 

will be developed by HHS for use by certified application counselors registered with an FFE, 

including State Partnership Exchanges, and state Medicaid and CHIP agencies may adapt such 

materials to support their training efforts. FFP is available for costs to the state of conducting 

training or testing of certified application counselors, including any costs to the state for 

preparation and assembly of training materials. Being effectively trained in the rules and 

regulations of the different insurance affordability programs in accordance with 

§435.908(c)(1)(ii) necessarily requires keeping abreast of any pertinent changes in those rules, 

and under these regulations states will need to ensure that application counselors are kept up-todate. However, there are different ways to accomplish this goal – annual or periodic 

recertification is one-way, refresher trainings or written communications may be another – and 

we believe states should have flexibility in determining the process that best works in each state. 
CMS-2334-F 54 

Comment: A few commenters recommended that applicants and enrollees be able to opt 

to designate their certified application counselor to receive copies of notices, or to access 

electronic notices in the client account. 

Response: As discussed in the preamble of the proposed rule, the certified application 

counselor program is not designed to provide the level of personal assistance to applicants and 

beneficiaries that is provided by an authorized representative, discussed in the next section in the 

preamble. However, there is nothing to prevent an applicant or beneficiary from designating a 

certified application counselor to also serve as his or her authorized representative, and for such 

counselor to assume that function, in accordance with §435.923, as finalized in this rulemaking. 

Comment: One commenter suggested that regulations governing application assistance 

are not necessary. The commenter believed that, absent any evidence that application counselors 

currently working in states to help individuals apply for Medicaid do not have the training and 

skills necessary to provide reliable, effective assistance to consumers, or would not meet 

confidentiality requirements, there is no reason to regulate state practices in this area. 

Response: We recognize the successful development of application assistor, or 

application counselor, programs by many states without the existence of federal regulations, and 

have aimed to develop regulations that will not disrupt existing, successful programs and 

practice. However, given the significant changes to the availability of and access to affordable 

health coverage created under the Affordable Care Act – including the advent of coverage in a 

QHP through the Exchange, with premium tax credits and cost sharing reductions available to 

qualifying individuals, the coordinated eligibility and enrollment process required across all 

insurance affordability programs, and the expansion in use of online applications, with the 

possibility confidential information being returned to consumers in real time through an 

electronic interface – we believe that establishment of baseline federal standards, to be applied 
CMS-2334-F 55 

consistently across states and programs, is important to safeguarding consumer interests and 

ensuring the integrity of the assistance provided. 

b. Authorized Representatives (§435.923) 

We proposed regulations intended to be consistent with current state policy and practice, 

regarding the definition, designation, and responsibilities of “authorized representatives” to act 

on behalf of applicants and beneficiaries in applying for and maintaining coverage. Authorized 

representatives have historically provided valuable support to individuals needing help 

navigating the application and enrollment process, as well as ongoing communications with the 

agency, particularly to seniors and individuals with disabilities, and we expect their role to 

continue. We proposed to define the term “authorized representative” as an individual or 

organization that acts responsibly on behalf of an applicant or beneficiary in assisting with the 

individual’s application and renewal of eligibility and other ongoing communications with the 

Medicaid or CHIP agency. Under current regulations at §435.907, retained in the March 2012 

Medicaid eligibility final rule, states must accept applications from authorized representatives 

acting on behalf of an applicant. We received the following comments concerning proposed 

provisions relating to authorized representatives: 

Comment: One commenter requested clarification on whether states may enforce 

additional requirements not specifically listed in the federal regulations on authorized 

representatives. An example of this would be state specific regulations governing who may 

serve as an authorized representative for individuals who are not medically or legally competent. 

Response: Under proposed §435.923(a), legal documentation of authority to act on behalf 

of an applicant or beneficiary under state law, such as a court order establishing legal 

guardianship or power of attorney may serve in place of a written designation from the applicant 
CMS-2334-F 56 

or beneficiary, signed and submitted in accordance with §435.923(f). Under the regulation, 

however, states may not limit authorized representatives to individuals identified in such a legal 

document or granted authorization under operation of state law or otherwise impose 

requirements other than those listed in §435.923 on other individuals whom an applicant or 

beneficiary wishes to have serve as his or her authorized representative. We have separated the 

regulation text as proposed at §435.923(a) at §435.923(a)(1) and §435.923(a)(2). 

Comment: We received a number of comments regarding who may serve as an 

authorized representative. One commenter recommended that organizations should not be 

permitted to be designated as authorized representatives. Another commenter recommended that 

we allow states to decide whether to permit organizations to be authorized representatives. The 

commenter suggested that by permitting only individuals to serve as authorized representatives, 

states will be better able to ensure transparency and accountability of the authorized 

representative. Another commenter recommended that we add a definition of organization to 

§435.923(e) to clarify what types of organizations may act as authorized representatives, for 

example, only non-profit organizations. 

Response: We believe that there are situations in which an individual may need an 

organization to serve as his or her authorized representative and it is appropriate for an 

organization to serve in this capacity, such as for individuals residing in a nursing home who do 

not have family available to assist them. We are finalizing the regulation as proposed in this 

regard. Protections at proposed §435.923(e), finalized in this rulemaking, are designed to ensure 

that organizations serving as an authorized representative adhere to laws and regulations relating 

to conflicts of interest and act in the best interest of the individual. 

Comment: We received a number of comments related to the timeframe for designation 

of authorized representatives. One commenter recommended that states be given options or 
CMS-2334-F 57 

flexibility in this area, explaining that states may wish to make the designation of the authorized 

representative last for 12 months by default, for example, unless the applicant or beneficiary 

designates otherwise. Another commenter recommended that we add that the authorization is 

valid until the application is denied or benefits are terminated and the appeal process is 

completed. 

Response: Our regulations clearly state that applicants and beneficiaries are able to 

change authorized representatives at any time. States may not make a designation automatically 

expire such that an individual would need to redesignate an authorized representative after a 

given period of time. However, they are allowed to provide beneficiaries with the opportunity to 

change their authorized representative at the renewal point. For example, states can indicate that 

a beneficiary has an authorized representative and remind the individual that they may keep or 

change the representative on the renewal document. 

Comment: One commenter asked for clarification on whether the scope of the 

authorization is defined by the beneficiary or applicant, or whether, once invoked, the 

representative assumes all of the duties named in the regulations, including “all other matters” 

with either agency. 

Response: We clarify that the scope of the authorization is defined by the Medicaid 

applicant or beneficiary. 

Comment: We received a number of comments on §435.923(c), specifically related to the 

fact that the designation of an authorized representative can only be revoked in writing. 

Commenters suggested that it would be more appropriate and efficient to allow the designation 

to be revoked by all of the modalities by which it can be made in the first place. 

Response: We agree with the commenter’s suggestion and have revised the regulation 

text accordingly. 
CMS-2334-F 58 

Comment: One commenter requested clarification on whether the permissions given the 

authorized representative may be granted in part, for example in tiers, if an applicant so chooses. 

The commenter suggested that an applicant may wish to authorize someone to sign his or her 

application, but not to receive his or her notices, for example. 

Response: We are clarifying that the permissions given to the authorized representative 

may be granted in part. The proposed regulation allows applicants and beneficiaries to designate 

an individual or organization to act on their behalf and that the scope of authorization is defined 

by the applicant or beneficiary. 

Comment: One commenter asked us to confirm that the definition provided for 

authorized representatives is the same definition that the Social Security Administration uses. 

Response: We clarify that the definition is not the same. 

Comment: A few commenters requested additional clarification regarding situations in 

which an individual is unable to personally elect an authorized representative due to medical 

incapacity. One commenter agreed that written designation by the individual or legal 

documentation should be obtained in most instances, but the proposed rule may be overly 

restrictive in that it could result in unreasonable delay in determining some individuals’ 

eligibility for Medicaid. The commenter recommends that states be given the authority to waive 

this regulation in instances when obtaining legal documentation to allow individuals or 

organizations to act as authorized representatives would be difficult. Another commenter 

suggested that legal documentation of authority to act on behalf of an application or beneficiary 

under state law, such as court order establishing legal guardianship or a power of attorney, 

should serve in place of written authorizations by the applicant or beneficiary. 

Response: Under section §435.923(a), legal documentation of authority to act on behalf 

of an applicant or beneficiary under state law, such as a court order establishing legal 
CMS-2334-F 59 

guardianship or power of attorney may serve in place of the applicant or beneficiary’s 

designation. The option to submit such documentation is intended to enable applicants who do 

not have the capacity to provide a signature to authorize representation. 

5. Medicaid Eligibility Requirements and Coverage Options Established by Other Federal 

Statutes 

a. Presumptive Eligibility for Children (§435.1102) 

 We proposed to revise existing regulations to align with the adoption of MAGI-based 

methodologies. 

Comment: One commenter suggested that presumptive eligibility could be better 

streamlined by using only a gross income standard for eligibility determinations. 

Response: Current regulations allow states to use either gross income or to have 

qualified entities make a closer approximation of the countable family income, which would be 

used for a regular determination by the state agency, by applying simple disregards. We believe 

it is appropriate to retain this flexibility for states once MAGI-based methodologies are in place. 

Therefore, we are codifying the flexibility of states in §435.1102(a), as proposed, to direct 

qualified entities to use either gross income or to apply simplified methods, as prescribed by the 

state, to better approximate MAGI-based household income, as defined in §435.603 of the 

March 2012 final rule. 

Comment: Many commenters objected to the state option to obtain an attestation of 

citizenship or satisfactory immigration status, or state residency as part of a presumptive 

eligibility determination. They suggested that requiring an attestation of immigration status 

would likely deter some potentially eligible individuals who often need urgent access to health 

care services from receiving care. Further the commenters suggested that the rules on 

immigration status are detailed and complex, and qualified entities cannot reasonably be 
CMS-2334-F 60 

expected to understand or explain them to individuals being asked to attest their status. Some 

commenters stated that states should have the option to request self-attestation of citizenship. 

Response: We clarify that our proposed rule gave states the option to require qualified 

entities or qualified hospitals to request this information but did not require it. We believe that 

this option is important in the context of extending the ability to conduct presumptive eligibility 

determinations to hospitals because it limits the possibility that individuals who are not citizens 

or qualified immigrants or residents of the state are found eligible on a presumptive basis, 

receive expensive services, only ultimately to be determined ineligible for Medicaid. Therefore, 

we are retaining the language as proposed and maintain this provision as a state option. 

Comment: One commenter requested that we add current foster care children as a 

presumptive eligibility group in our final regulation. 

Response: We clarify that former foster children are already a population that is eligible 

to be determined presumptively eligible. We do not currently have the authority to add current 

foster care children as a presumptive eligibility group, but this is unnecessary because current 

foster children are automatically eligible for Medicaid and do not need to be determined 

presumptively eligible. 

b. Presumptive Eligibility for Other Individuals (§435.1103) 

Comment: Some commenters stated that states should have the option to elect how many 

presumptive eligibility periods should be allowed for each pregnancy. Others supported our 

proposed rule to permit only one presumptive eligibility period per pregnancy. 

Response: We believe that providing pregnant women with one presumptive eligibility 

period per pregnancy is reasonable in accordance with section 1920 of the Act, under which 

pregnant women may receive ambulatory prenatal care during a presumptive eligibility period, 

defined as continuing through the date a full Medicaid determination is made under the State 
CMS-2334-F 61 

plan, or, if a woman does not submit a regular application through the end of the month 

following the month during which the presumptive eligibility determination was made. 

Therefore, we are finalizing the regulation as proposed to provide one presumptive eligibility 

period for pregnant women per pregnancy. 

c. Presumptive Eligibility Determined by Hospitals (§435.1110) 

We proposed to add §435.1110 to implement section 1902(a)(47)(B) of the Act, added by 

the Affordable Care Act, to give hospitals the option to determine presumptive eligibility for 

Medicaid. The statute provides hospitals participating in Medicaid with this option whether or 

not the state has elected to permit qualified entities of the state’s selection to make presumptive 

eligibility determinations for children, pregnant women or other specific populations under other 

sections of the statute. 

We received the following comments concerning the hospital presumptive eligibility 

provisions: 

Comment: We received many comments related to the establishment of standards under 

proposed §435.1110(d)(1) for hospitals that opt to make presumptive eligibility determinations. 

Some commenters encouraged CMS to provide states with maximum flexibility to implement 

presumptive eligibility standards for hospitals, while other commenters stated that the Secretary 

should establish federal standards applicable to hospitals making presumptive eligibility 

determinations in all states. Other commenters supported the flexibility given to state agencies 

to establish standards, and some stated that states should have even broader authority to establish 

clear criteria and qualifications which hospitals would have to meet to make presumptive 

eligibility determinations. Some believe that the Secretary should establish minimum federal 

standards and qualifications, with the state option to impose additional standards. Commenters 

generally requested additional guidance to states on how they must work with hospitals that elect 
CMS-2334-F 62 

to make presumptive eligibility determinations. Finally, some commenters stated that the 

Secretary should establish federal standards for hospitals that opt to make presumptive eligibility 

determinations under §435.1110 of the regulations, related to the proportion of individuals 

determined presumptively eligible by the hospital that submits a regular application and the 

percent of such individuals who are ultimately determined eligible by the agency. Commenters 

suggested that states should use the federal standards to determine which hospitals are capable of 

making presumptive eligibility determinations. 

Response: We are finalizing §435.1110(d)(1) as proposed. Oversight of qualified entities 

making presumptive eligibility determinations, including qualified hospitals under §435.1110, is 

a state responsibility. Under §435.1110(d)(1), states may establish state-specific standards for 

qualified hospitals that conduct presumptive eligibility determinations related to the success of 

assisting individuals determined presumptively eligible who submit a regular application and/or 

are approved for eligibility by the agency. We believe this is an area more appropriate for state 

flexibility, than for imposition of a uniform federal standard for all participating hospitals across 

all states. Therefore, we are finalizing §435.1110(d), as proposed. We will monitor 

implementation and consider whether further guidance is warranted. 

 Per §435.1110(d)(2), which we also are finalizing as proposed, state agencies are 

required to take appropriate correction action for any hospital that does not meet the standards 

established by the state or which the state otherwise determines is not making, or is not capable 

or making, presumptive eligibility determinations in accordance with state policies and 

procedures. In fulfilling their responsibility under §435.1110(d)(2), states may develop other 

proficiency standards, training and audits, with which hospitals would need to comply, to be 

authorized to make presumptive eligibility determinations in the state. 
CMS-2334-F 63 

Comment: We received many comments on the populations for which hospitals can make 

presumptive eligibility determinations. Some commenters stated that hospitals should be 

allowed to make presumptive eligibility determinations for all of the patient populations they 

serve. Some commenters recommended that states be given the option to elect and limit the 

populations that may be determined presumptively eligible by hospitals. Some commenters 

stated that the preamble did not align with the regulation text relating to this issue in the 

proposed rule. Many commenters requested additional clarification on the populations for which 

hospitals may make presumptive eligibility determinations. 

Response: We intended to propose that qualified hospitals must be permitted to make 

presumptive eligibility determinations based on income for all of the populations for which 

presumptive eligibility may be available in accordance with §435.1102 and §435.1103. The 

specific reference to children, pregnant women, parents and caretaker relatives, and other adults 

in proposed §435.1110(c)(1) was not intended to eliminate presumptive eligibility 

determinations by hospitals for other populations included in §435.1103 (that is, former foster 

care recipients or women with breast or cervical cancer or individuals seeking coverage of 

family planning services). We are revising the regulation text at §435.1110(c)(1) to clarify that 

states electing to limit the presumptive eligibility determinations which hospitals can make must 

permit the hospitals to make presumptive eligibility determinations based on income for all of 

the populations included in §435.1102 and §435.1103. Under §435.1110(c)(2), which we 

finalize as proposed in this rulemaking, states may also permit hospitals to make presumptive 

eligibility determinations for populations for which income is not the only factor of eligibility 

(for example, for individuals who may be eligible under an eligibility group based on disability, 

or individuals eligible under a demonstration project approved under section 1115 of the Act). 
CMS-2334-F 64 

Comment: A commenter expressed that hospitals wishing to make presumptive 

eligibility determinations should be required to attend training on policies and procedures 

established by the states. The commenter suggested that this was important to maximize the 

likelihood that eligible individuals complete the full Medicaid eligibility process. They 

supported the proposed rule that states may require hospitals electing to make presumptive 

eligibility determinations to assist individuals in completing and submitting the full application 

and understanding any documentation requirements. 

Response: In accordance with §435.1110(a) of the proposed rule, finalized as proposed 

in this rulemaking, states are required to provide Medicaid during a presumptive eligibility 

period, to individuals who are determined to be presumptively eligible by a qualified hospital, 

subject to the same requirements as apply to the State options under §§435.1102 and 435.1103 

regardless of whether the state otherwise has opted to provide Medicaid during a presumptive 

eligibility period under either of those sections. While not necessarily requiring establishment of 

a formal training program, current regulations at §435.1102(b) require states to provide qualified 

entities with information on relevant state policies and procedures and how to fulfill their 

responsibilities in making presumptive eligibility determinations. This requirement is 

unchanged in this rulemaking and will apply in the case of hospitals electing to be a qualified 

hospital under §435.1110. If a hospital does not follow state policies and procedures, or is not 

successful in helping individuals to submit regular applications in accordance with standards 

established by the state, proposed §435.1110(d)(2) would require states to institute appropriate 

corrective action, including (but not requiring) termination of the hospital as a qualified hospital. 

We are revising proposed §435.1110 (d) by adding paragraph (d)(3) to provide that the agency 

may disqualify a hospital as a qualified hospital only after it has first provided the hospital with 

additional training or taken other reasonable corrective action measures. 
CMS-2334-F 65 

Comment: A few commenters requested that states should be able to receive 100 percent 

FMAP for any recoupments or disallowances CMS may seek related to an improper eligibility 

determination by a hospital. One commenter questioned whether a state can make a qualified 

hospital liable when a presumptive eligibility determination results in a denial for a full 

Medicaid category. 

Response: Under existing regulations, there is no recoupment for Medicaid provided 

during a presumptive eligibility period resulting from erroneous determinations made by 

qualified entities. Payment for services is guaranteed during a presumptive eligibility period; 

without such a guarantee, providers could not rely on the determination. Under this provision, 

states will not be permitted to recoup money from the hospital (and CMS will not recoup FFP 

from the state). However, under §425.1110(d)(2), a state may disqualify a hospital from 

conducting presumptive eligibility determinations if the state finds that the hospital is not 

making, or is not capable of making, accurate presumptive eligibility determinations in 

accordance with applicable state policies and procedures. Such a disqualification is permitted 

only after the state has provided additional training or taken reasonable corrective action 

measures to address the issue. Finally, we clarify that states may not make a qualified hospital 

liable when an individual who was found presumptively eligible by the hospital submits a full 

application and is subsequently denied Medicaid eligibility. 

Comment: Some commenters requested that for individuals determined presumptively 

eligible by a hospital for the adult group under §435.119 of the March 2012 Medicaid final 

eligibility rule, a state should receive 100 percent federal funding for services provided unless 

and until the individual completes the eligibility process and is determined not “newly eligible” 

or eligible for coverage under the adult group. Commenters suggested that enhanced federal 

funding is necessary because there will not be sufficient information available to determine 
CMS-2334-F 66 

whether the presumptively eligible individual should be claimed at 100 percent federal funding 

or the state’s regular FMAP at the time of the initial presumptive eligibility determination. 

Response: While we understand the commenters’ concerns, there is no basis to provide 

the 100 percent FMAP during a presumptive eligibility period. The state would receive the 

increased FMAP provided under the Affordable Care Act only for individuals who the state 

determines actually (not presumptively) qualify for Medicaid under the adult group and are 

determined to be “newly eligible.” The methodology for such claims is set forth in the final 

FMAP regulation (78 FR 19918). However, states may retroactively adjust claiming to receive 

the enhanced matching rate for individuals determined presumptively eligible who subsequently 

complete a regular application, are determined by the state to be eligible for Medicaid under the 

adult group and are found to be “newly eligible.” Such retroactive adjustment may extend back 

to the first month of the month in which the regular application was filed or up to 3 months prior 

to the month of application in accordance with §435.914 of the regulations (redesignated at 

§435.915 in the March 2012 Medicaid final eligibility rule). 

Comment: One commenter requested that we confirm that §435.1110(b)(2) of the 

proposed rule gives states the option to require that to participate as a qualified hospital, a 

hospital must assist individuals in completing and submitting the full application and help 

individuals understand any documentation requirements. The commenter suggested that this 

function is the same as that of an application counselor and requests clarification on whether a 

state could also require that a hospital that performs presumptive eligibility determinations must 

follow regulations in §435.908 relating to certified application counselors. 

Response: Although we are not requiring hospitals that perform presumptive eligibility 

determinations to also furnish services of certified application counselors, states may impose 

specific requirements on hospitals to ensure that they fulfill their role in assisting individuals 
CMS-2334-F 67 

with completing and submitting the full application. At a minimum, states have a responsibility 

to ensure that an individual determined presumptively eligible by qualified hospitals is informed 

about how to apply and can obtain an application. 

Comment: We received several comments on the viability of presumptive eligibility 

determinations with the advent of real-time eligibility determinations. One commenter 

recommended that states should have the latitude to require hospitals to use the state’s online 

application system and determine presumptive eligibility only if a real-time full eligibility 

determination cannot be made. Another commenter suggested that if eligibility can be 

determined in real-time, then there is no need for presumptive eligibility, and asked us to clarify 

whether the state could terminate use of presumptive eligibility without violating the Affordable 

Care Act’s Maintenance of Medicaid Eligibility requirements, as added by section 2001(b) of the 

Affordable Care Act (codified at sections 1902(a)(74) and 1902(gg) of the Social Security Act 

(the Act). 

Response: We agree that the promise of real-time eligibility determinations makes the 

role of presumptive eligibility different than it has been in the past. In situations in which the 

individual files a regular application right away, the presumptive eligibility period would likely 

be considerably shorter – and eliminated altogether, as a practical matter, if a real-time 

determination is made. However, even with the most modernized systems, there inevitably will 

be individuals for whom a real-time eligibility determination will not be possible. There also 

will be individuals who will not be comfortable with the online application, and will instead opt 

to use the paper application. In such situations and for such individuals, presumptive eligibility 

remains a useful tool to facilitate prompt coverage and enrollment in the program. 

States have flexibility to minimize the length of presumptive eligibility periods by requiring that 

hospitals and other qualified entities assist individuals in submitting the single streamlined 
CMS-2334-F 68 

application online. States may not terminate use of presumptive eligibility for pregnant women 

or individuals with breast or cervical cancer prior to 2014 or for children prior to October 1, 

2019 without violating maintenance of effort. 

Comment: One commenter requested clarification on how hospital presumptive 

eligibility will interact with eligibility in breast and cervical cancer groups. 

Response: If a state has elected to provide presumptive eligibility for individuals with 

breast or cervical cancer under §435.1103(c)(2), it can limit qualified entities under that section 

to providers which conduct screenings for breast and cervical cancer under the state’s Centers for 

Disease Control and Prevention (CDC) breast and cervical cancer early detection program 

(BCCEDP), and if it has done so, the state may limit hospitals which may determine presumptive 

eligibility for individuals with breast or cervical cancer on that basis to hospitals that conduct 

screenings under the state’s BCCEDP. In states that do not opt to provide presumptive eligibility 

for individuals with Breast or Cervical Cancer under §435.1103(c), states similarly may limit 

hospitals’ ability to determine presumptive eligibility for individuals with breast or cervical 

cancer under §435.1110 to those that conduct screenings under the state’s BCCEDP. 

 

6. Coordinated Medicaid/CHIP Open Enrollment Process (§435.1205 and §457.370) 

We proposed to implement section 1943 of the Act and section 1413 of the Affordable 

Care Act to require that Medicaid and CHIP agencies begin accepting the single streamlined 

application during the initial open enrollment period to ensure a coordinated transition to new 

coverage that will become available in Medicaid and through the Exchange in 2014. Our 

proposed rule seeks to ensure that no matter where applicants submit the single, streamlined 

application during the initial open enrollment period, they will receive an eligibility 
CMS-2334-F 69 

determination for all insurance affordability programs and be able to enroll in appropriate 

coverage for 2014, if eligible, without delay. 

Comment: Many commenters supported the proposal in §435.1205(c)(1) that Medicaid 

and CHIP agencies to begin accepting the single streamlined application and MAGI 

determinations from the Exchange and to process MAGI eligibility starting in October 2013. 

Commenters believe this is necessary to ensure coordination with the Exchange, and to facilitate 

a seamless transition to the new coverage that will become available in Medicaid and through the 

Exchanges in 2014. Many commenters acknowledged that the public will be hearing about new 

coverage options throughout the summer and fall of 2013, and expressed concern that it would 

result in confusion if, when people went to apply for coverage and were found eligible for 

Medicaid (or their children eligible for Medicaid or CHIP), they were told to return several 

months later and submit a new application. 

 Response: We agree with the commenters that acceptance of the single streamlined 

application by state Medicaid and CHIP agencies starting in October 2013 is needed to ensure 

coordination with the Exchange, and in facilitating new coverage that will be available to 

Medicaid-eligible eligible individuals in January 2014. Therefore, we are finalizing the rule as 

proposed and confirm that individuals may not be required to return in January to reapply. 

Comment: Some commenters expressed concern that it is unreasonable to require states 

to comply with the prescribed time frames for coordinated enrollment with the Exchange in the 

proposed rule. They noted that states must make major policy, operations, and systems changes 

to implement federal requirements, which will impact agency eligibility staff, vendors, clients, 

and other stakeholders. Pending final and complete federal guidance, it is a significant challenge 

for states to develop policies, design efficient business processes, build systems and new 

interfaces, and effectively communicate changes to clients and stakeholders by the proposed 
CMS-2334-F 70 

federal implementation dates. One commenter noted that its state legacy system cannot process 

or transfer electronic accounts, which means that the proposed rule has effectively shortened the 

timeframe to implement its new eligibility system by 3 months. Another commenter noted that 

Medicaid eligibility systems, policies and staff are not structured to operate in a time-limited 

open enrollment environment or to apply competing eligibility criteria concurrently, and cannot 

be changed to do so with only a few months’ notice. 

Commenters recommended that Medicaid agencies not be required to begin accepting 

streamlined applications or determinations from the Exchange prior to January 1, 2014. Instead, 

during the initial open enrollment from October 1, 2013 to December 31, 2013, commenters 

requested that at state option, individuals may be required to apply separately to the Medicaid 

agency and to the Exchange and to have their eligibility determined by the corresponding 

agency. One state suggested, as an alternative, the information exchanged will be limited to only 

the Medicaid-specific information that is included in the single streamlined application. 

Response: We appreciate the operational challenges states face in preparing for 

implementation of the Affordable Care Act, but we believe that these effective dates are central 

to the success of open enrollment and we have consistently targeted the October 1 date as we 

have worked with states to finance and develop their IT systems. We have identified a set of 

seven critical success factors that states must meet by October 1 in an attempt to prioritize what 

must be accomplished within this timeframe. We have regularly shared these with states via 

webinars, on the CALT at https://calt.cms.gov/sf/go/doc16369?nav=1, through State Operational 

Technical Assistance (SOTA) calls and in IT gate reviews. These include the following: (1) 

ability to accept application data, (2) MAGI rules engine in eligibility system, (3) MAGI 

Conversion, (4) Submission of state income thresholds and flexibilities, (5) Connection to 
CMS-2334-F 71 

Federally Facilitated Exchange (or establishment of State Based Exchange), (6) Connection to 

Federal Data Services Hub, and (7) Ability to confirm Minimum Essential Coverage. 

We recognize the efforts that states are making across a broad range of areas, and have 

released regulations, information technology (IT) guidance, funding opportunities, business 

process models and other tools to assist states as they design, develop, implement, and operate 

new systems. We will continue to help states fully comply with all relevant eligibility and 

enrollment changes, as well as achieve the necessary degree of interoperability between IT 

components in the federal and state entities that work together to provide health insurance 

coverage through Medicaid and CHIP, and Exchanges. We are finalizing the regulation as 

proposed. 

Comment: Several commenters expressed concern that, in the states which are relying 

on the FFE and will not be ready to implement the single, streamlined application by October 

2013, there is a significant risk that people who apply for coverage through the FFE will be told 

that they are likely eligible for Medicaid or CHIP, and be sent away without any real opportunity 

to enroll in coverage or complete the application process. These commenters recommended that 

HHS strengthen this provision by setting forth a specific timeframe and set of procedures that 

states must follow to ensure that they are ready to implement the single, streamlined application 

when open enrollment begins in October 2013. Specifically, they recommended modifying the 

final rule to require states relying on the FFE to submit information, by September 1, 2013, on 

whether they intend to: (1) accept the FFE’s determinations of Medicaid/CHIP eligibility; or (2) 

to treat the FFE’s finding as an assessment and complete the eligibility determination 

themselves. In addition, they recommend including a provision to clearly outline that before a 

state can elect the option to treat the FFE’s findings as an assessment, the state must demonstrate 

that it is (or will be by October 2013) capable of acting upon such assessments in full accordance 
CMS-2334-F 72 

with federal law. 

Response: We have a process in place for working with states on implementation, 

including the adoption of mitigation strategies where necessary. We do not believe that a change 

in the regulations is needed to effectuate these strategies. 

Comment: Many commenters believe that it would be time-consuming and impractical 

to require states to evaluate all cases for eligibility effective in 2013, but that there is a subset of 

cases that states should be required to evaluate. Specifically, parents whose MAGI-based 

income falls very close to the state’s current income eligibility threshold for parents should be 

evaluated based on 2013 eligibility rules. Commenters suggested HHS provide guidance to 

states on the appropriate MAGI income threshold to use for determining whether an individual 

appears to be potentially eligibility under 2013 rules and should be assessed for eligibility using 

those rules. Some commenters also believe that states should be required to inform people when 

it appears that their children qualify for coverage under 2013 Medicaid and CHIP rules because 

families are more likely to pursue applications if they believe that their children will be found 

eligible for coverage. Finally, a few commenters believed states should be given the option to 

notify a subset of applicants about the process to apply for coverage with an effective date in 

2013 (for example, only those applicants who appear to be potentially eligible under 2013 rules 

based on the available information provided on the single streamlined application). 

 Some commenters stated that they are already planning for an October 2013 

implementation date of MAGI eligibility and requested that states be given this option without 

need for a waiver. These commenters recommend states have flexibility in handling applications 

based on 2013 rules for assessing 2014 coverage. States should be allowed to request applicants 

submit supplemental form that includes additional information to make MAGI determination, or 
CMS-2334-F 73 

to redirect applicants to new application; or, states should have flexibility to process applications 

using 2013 rules and determine eligibility based on MAGI proxy when possible. 

Response: We recognize the challenge of appropriately evaluating all applications 

submitted during the open enrollment period under both the MAGI-based rules effective January 

1, 2014 and under rule in effect in 2013. However, all applicants must have the opportunity to 

have their Medicaid eligibility assessed based on existing Medicaid rules for 2013 as well as for 

prospective enrollment effective January 2014. At a minimum under the regulation at 

§435.1205(c)(4)(ii), states must inform individuals who submit the single streamlined 

application during October – December 2013 that coverage may be available in 2013, but that a 

different application will need to be completed for consideration of such coverage, and how the 

individual can obtain and submit such application. Alternatively, under §435.1205(c)(4)(i), 

states can use the information on the single streamlined application submitted to make a 

determination of eligibility effective in 2013, based on 2013 rules, following up with the 

individual to obtain additional information if needed through additional questions or use of a 

supplemental form, if needed. States also can pursue a combination of these strategies – using 

the process outlined in §435.1205(c)(4)(i) for targeted individuals more likely to be found 

eligible under 2013 rules (for example, parents and caretaker relatives with MAGI-based income 

within a threshold margin of the applicable income standard and individuals indicating potential 

disability on the single streamlined application), while directing those not seen as likely-eligible 

under the 2013 rules to submit a separate application in accordance §435.1205(c)(4)(ii). 

States may wish to avoid having to operate two sets of rules for children, parents and 

caretaker relatives, pregnant women and other non-disabled, non-elderly adults that may be 

eligible for Medicaid enrollment during this period. To address this, we are offering states the 

opportunity to begin using the new MAGI-based methodology for these populations effective 
CMS-2334-F 74 

October 1, 2013, to coincide with the start of the open enrollment period. See State Health 

Official Letter #13-003: Facilitating Medicaid and CHIP Enrollment and Renewal in 2014 at 

http://www.medicaid.gov/Federal-Policy-Guidance/Downloads/SHO-13-003.pdf. 

Comment: One commenter stated that requiring post-eligibility data matching to ensure 

continued eligibility as of January 1, 2014 for individuals determined not eligible in OctoberDecember but eligible in January, creates an enormous burden during a time when new systems 

are being implemented and states will be experiencing the largest influx of newly eligible 

individuals into their system. The commenter noted this would create duplication of efforts 

when an individual who was determined eligible prior to January is already notified of their 

reporting requirements and states should be allowed to rely on recipients reporting rather than 

handling the same cases twice in a 3-4 month timeframe. 

Response: Post-eligibility data matching is an option for states to ensure continued 

eligibility as of January 1, 2014 and/or through the first regularly-scheduled renewal. It is not 

required. The agency also has the option to schedule the first renewal for individuals who apply 

during the open enrollment period, and determined eligible effective January 1, 2014, to occur 

anytime between 12 months from the date of application and January 1, 2015. Consistent with 

§435.916, beneficiaries are required to report any change in circumstances that may impact their 

eligibility. In the absence of any reported change that could affect eligibility, no post-eligibility 

data matching is required. 

Comment: One commenter requested that CMS clarify §435.1205(c)(3)(ii) that this state 

option [to schedule the first renewal under §435.916 to occur anytime between 12 months from 

the date of application and January 1, 2015] authorizes less than annual periods of 

coverage/eligibility before renewal in instances where renewal date is set before January 1, 2015. 
CMS-2334-F 75 

Response: This option does allow for less than 1 year of coverage for a limited time. For 

example, if someone applies on November 1, 2013, and is determined eligible for coverage to 

begin January 1, the state may schedule renewal on November 1, 2014. This would result in less 

than a year of coverage. This one-time option is intended to provide for ease of administration in 

the renewal of coverage for a large number of individuals whose coverage begins on January 1, 

2014 and would otherwise need to be renewed at the same time. 

Comment: We sought comments in the proposed rule on which sections of both this 

rulemaking as well as the March 2012 Medicaid eligibility final regulation need to be effective 

October 1, 2013 (as opposed to January 1, 2014) to enable states to meet their responsibilities 

under §435.1205 and §457.370 of this rulemaking. We received no comments in response to this 

request. 

 Response: In the absence of any comments regarding this question, we have determined 

that the following provisions of the March 2012 Medicaid eligibility final rule are effective 

October 1, 2013 for purposes of effectuating §435.1205 and §457.370 of this final regulation 

during the initial open enrollment period beginning October 1, 2013: 

• Sections 435.603, 435.911, 435.1200, 457.315, 457.330 and 457.348; 

• Amendments to §§431.10, 431.11, 435.110, 435.116, 435.119, 435.907, 435.916, 

435.940 – 435.956, 457.340 and 457.350, and the redesignation of §435.911 through §435.914 

as §435.912 through §435.915. 

In addition, the following provisions of this final rule are effective October 1, 2013: 

§§435.918, 435.1205, 457.370, and revisions to §§431.10, 431.11, 431.201, 431.205, 431.206, 

431.211, 431.213, 431.230, 431.231, 431.240, 435.119, 435.603, 435.907, 435.1200, 

457.110(a)(1), 457.348, and 457.350. 
CMS-2334-F 76 

 Although effective for purposes of codification in the Code of Federal Regulations 

October 1, 2013 for application during the initial October 1 – December 31 open enrollment 

period, absent a waiver under §1115 of the Social Security Act approved by the Secretary, 

financial eligibility based on MAGI-based methodologies codified at §435.603 and §457.315 

and eligibility for adults under §435.119 are not effective under the Affordable Care Act until 

January 1, 2014. Technical revisions to §435.119 to retain the applicability date of January 1, 

2014, even as the effective date of that section is moved to October 1, 2013, are made in this 

rulemaking. No revisions to §435.603 or §457.315 are required, as those sections, as published 

in the March 2012 Medicaid final eligibility rule, already provide for the January 1 applicability 

date. 

7. Children’s Health Insurance Program Changes 

a. CHIP Waiting Periods (§457.340 , §457.350, §457.805 and §457.810) 

We proposed revisions to existing regulations regarding prevention of substitution of 

coverage at §457.805 to limit the use of CHIP waiting periods to a maximum of 90 days. This 

policy aligns with section 1201 of the Affordable Care Act, which amended section 2708 of the 

Public Health Service Act to prohibit waiting periods exceeding 90 days for health plans and 

health insurance issuers offering group or individual coverage. This standard, though not 

directly applicable to CHIP, is currently exceeded in roughly half of the states that impose CHIP 

waiting periods today. We also proposed to require several exemptions to waiting periods, 

consistent with policies that many states have in place today, such as for individuals working for 

employers that stopped offering coverage of dependents. We received the following comments 

on our proposed waiting period policy as described below. 

Comment: Many commenters urged CMS to eliminate waiting periods on January 1, 

2014, rather than permit states to continue to impose waiting periods of any length of time for 
CMS-2334-F 77 

children. A few commenters encouraged CMS to retain its current policy of providing states 

with the discretion to maintain waiting periods and establish their own procedures to minimize 

displacement of private insurance, and some states expressed their intent to eliminate waiting 

periods in their CHIP programs in 2014. One commenter suggested that waiting periods be 

applied only to children with family incomes above 200 percent of the FPL. Commenters’ 

concerns with the proposed 90-day waiting period were related to the administrative burden of 

waiting periods for state CHIP agencies and Exchanges, potential hindrances to streamlined and 

coordinated enrollment, disruptions in continuity of care for children and a lack of evidence of 

substitution. 

Response: While we acknowledge the commenters’ concerns related to the continuation 

of waiting periods for children in 2014, we also see a need to permit states flexibility to 

determine an appropriate substitution prevention strategy, with a full range of options from 

monitoring to imposition of waiting periods up to 90 days. Some states have already eliminated 

their CHIP waiting periods and we encourage other states to consider taking this step. Nothing 

in this final rule precludes a state from doing so. States may also elect to eliminate waiting 

periods specifically for children at lower income levels and/or identify additional exemptions to 

the waiting period beyond those required in this rule. Therefore, to maintain states’ flexibility in 

identifying substitution strategies while also limiting the period of time a child may not be 

eligible for CHIP due to a waiting period, we are finalizing the provisions at §457.350, §457.805

and §457.810 as proposed to permit states to impose a waiting period of no more than 90 days, 

with certain specified exemptions. We note that this policy is consistent with the 90- day 

maximum waiting period described in Section 1201 of the Affordable Care Act. 

Comment: Many commenters were concerned that the proposed policy for a maximum 

90-day waiting period would require states and Exchanges to set up administratively complicated 
CMS-2334-F 78 

processes to temporarily enroll children in QHPs and to receive APTCs and CSRs while 

awaiting CHIP eligibility during the waiting period. Several commenters expressed concerns 

with the administrative complexity of the interactions that must occur between the Exchange and 

the CHIP agency if a waiting period is in place, including the requirement at §457.350 for the 

CHIP agency to send the electronic record back to the Exchange for enrollment in a QHP if the 

child is determined not eligible for CHIP. These commenters also expressed concern that these 

potential complications do not align with the streamlined eligibility and enrollment process 

envisioned by the Affordable Care Act. Many commenters stated that requiring the change to a 

90-day maximum waiting period policy would be administratively burdensome and costly to 

states at a time when information technology systems are already overburdened in preparation 

for significant eligibility changes in 2014. Some commenters highlighted that it is likely that 

some state systems will not have the capacity to track children who are locked out of CHIP 

during a waiting period and others expressed concern as to whether states or the Federal 

government have the capacity to smoothly implement waiting periods in the manner suggested in 

the proposed rule without a disruption in coverage for children. Some commenters also 

indicated that if waiting periods were to exist in 2014, state CHIP agencies would need to both 

track when these children would become eligible for CHIP and also initiate action to enroll 

children in the program. 

Response: For states that opt to apply a waiting period in 2014, we agree that 

transitioning a child from one insurance affordability program to another upon the conclusion 

of a 90-day waiting period may present operational challenges. States must take into 

consideration their system capabilities and weigh the perceived benefits of opting to have a 

waiting period against any additional administrative or system requirements needed to effectuate 

a seamless transition of such children from coverage in the Exchange and APTC to the state’s 
CMS-2334-F 79 

CHIP at the conclusion of the 90 day period. We agree that CHIP agencies will need to track 

when these children become eligible for CHIP as required at §457.350. In addition, we have 

further clarified at §457.340(d)(4), that without requiring new applications or information 

previously provided, CHIP agencies must implement processes to ensure a smooth transition for 

children from coverage through the Exchange to CHIP at the end of a waiting period, as well as 

facilitate the enrollment of otherwise CHIP-eligible children who have satisfied the waiting 

period, but who were not covered in the Exchange. For example, a state could automatically 

enroll a previously determined CHIP-eligible child at the end of the waiting period without 

requesting any additional information from the family. Another option would be for a state to 

suspend applications for all children subject to a waiting period. Once these children have 

completed the waiting period, the state would then reactivate the application and determine 

whether the child is eligible for CHIP based on the information previously provided on the 

application. There is nothing in the above options that precludes a state from checking data 

sources for updated information or processing a change in circumstances reported by the family. 

Comment: Many commenters stressed that waiting periods of any length could 

negatively impact children’s access to continuous and coordinated health coverage. For 

example, commenters expressed concern that the proposed rule permitting CHIP-eligible 

children to enroll in qualified health plans (QHPs) in the Exchange during a waiting period, and 

subsequently enroll in CHIP at the end of a waiting period, will stimulate churning between 

QHPs and CHIP. These commenters emphasized that disruptions in coverage will impact the 

health status of children who are left uninsured and/or may have to change plans or providers. 

Some commenters stated that movement between plans and programs will inhibit the QHPs’ 

ability to measure the quality of care provided to children, and makes it difficult to hold plans 

accountable for improvements in quality outcomes for children over time. 
CMS-2334-F 80 

Response: We acknowledge that the use of waiting periods may create delays in 

eligibility for CHIP and increase the likelihood of churning between the Exchange and CHIP, 

which could result in disruptions in coverage that could negatively impact the health status of 

children. Therefore, this final rule confirms states’ ability to eliminate waiting periods to 

accommodate these concerns. In addition, the final rule codifies the limitation of waiting periods 

to a maximum of 90 days, to be consistent with waiting periods under section 1201 of the 

Affordable Care Act. We encourage states to examine the costs and benefits of imposing a 

waiting period in the context of the Affordable Care Act. To make the transition from Exchange 

coverage to CHIP as smooth as possible for children, states that do choose to maintain waiting 

periods will need to meet the requirements at §457.350(i), including providing notification to the 

appropriate insurance affordability program (for example, the Exchange) promptly and without 

undue delay of the date on which the waiting period will end and the child will be eligible to 

enroll in CHIP. We will provide states with technical assistance in this area. 

Comment: Several commenters indicated that while there were initial concerns upon 

implementation of CHIP in the late 1990s that the incentives for substitution of public coverage 

for private coverage would be significant, states and researchers have had ample opportunity to 

examine this issue over the last 15 years. These commenters stated that numerous studies have 

shown that substitution is difficult to measure, there continues to be much conjecture regarding 

the degree to which substitution occurs, and that there is no evidence that procedures like 

waiting periods actually prevent substitution. These commenters also noted that there is 

evidence that uninsured children, including children in waiting periods, frequently forego 

medical services due to high out-of-pocket costs. 

One state reported that during an almost 15-year period, there has been no evidence that 

crowd out is a concern, including for children at higher income levels. The commenter reported 
CMS-2334-F 81 

that the percentage of children in families who dropped their employer sponsored coverage and 

substituted it for CHIP has been consistently below 2 percent since the inception of CHIP. This 

commenter recommended that we permit monitoring of crowd out at all income levels rather 

than continuing to require a substitution strategy, such as a waiting period, for higher income 

children. Another commenter stated that in their experience in operating CHIP, nearly all 

families with former employer-sponsored insurance meet at least one of the exemptions to 

waiting periods included in its CHIP state plan. 

Response: We recognize that there is a robust but inconclusive evidence base in the 

literature calling into question the prevalence of substitution. And, we are therefore, revising our 

existing regulations to provide states with flexibility to determine how best to operate their CHIP 

programs. The preamble of the existing regulation (66 FR 2490, January 11, 2001) required that 

states that provide CHIP coverage to children at or below 200 percent of the Federal poverty 

level (FPL) must have procedures for monitoring the rate of substitution of coverage, between 

200 and 250 percent of the FPL must monitor substitution and identify specific strategies to limit 

substitution if levels become unacceptable, and for coverage above 250 percent of the FPL states 

must describe how substitution is monitored and implement specific strategies to prevent 

substitution. We clarify in this final rule that effective January 1, 2014, monitoring of 

substitution is a sufficient approach for addressing substitution at all income levels. We expect 

that if this monitoring demonstrates a high rate of substitution, a state will consider strategies 

such as improving public outreach about the range of health coverage options that are available 

in that state. 

Comment: Some commenters requested that CMS provide clarity regarding the criteria 

for specific exemptions (for example, children with special health care needs), and suggested 

additional types of mandatory exemptions at the Federal level (for example, employees that have 
CMS-2334-F 82 

employers that have changed health plans or products). Some commenters noted that states have 

previously implemented many of the proposed required exemptions and that the majority of 

applicants already qualify for state-identified exemptions to the waiting period. 

Response: As noted by some commenters, many of the mandatory exemptions in the 

proposed rule have previously been instituted by states on a voluntary basis and have been 

effective. Therefore, we are adopting in our final rule the proposed exemptions at §457.805. In 

addition, and as discussed in the preamble of our proposed rule, we are adding an affordability 

exemption at §457.805(a)(i) for cases when a child’s parent is determined eligible for APTC for 

enrollment in a QHP through the Exchange because the employer-sponsored insurance (ESI) in 

which the family was enrolled is determined unaffordable in accordance with 26 CFR 1.36B–

2(c)(3)(v). We consider this exemption to be essential to preventing families from having to 

choose between continuing ESI that has been determined to be unaffordable for the parent, and 

thereby forgoing premium tax credits and cost-sharing reductions for enrollment in an QHP, or 

dropping the ESI and allowing their child to go without coverage for a period of time to qualify 

for CHIP. We note that states continue to have the flexibility to provide additional exemptions 

beyond those specified in this final rule, but other than the affordability exemption at 

§457.805(a)(i), there will be no additional exemptions added in this final rule. We note that we 

intend to issue further sub-regulatory guidance related to criteria for required waiting period 

exemptions. 

Comment: One commenter requested that CMS delay the effective date of this provision 

to give states adequate time to make the necessary changes related to its waiting period policy, 

such as a change in state law and/or budget. 

Response: This provision will be effective on January 1, 2014 unless a change in state 

law is needed for a state to comply with this provision. Specifically, for states with annual 
CMS-2334-F 83 

legislative sessions, the effective date for the application of the 90-day maximum waiting period 

and required exemptions must be no later than the first day of the next fiscal year beginning after 

the close of the first regular session of the 2014 state legislature. For states that have a 2-year 

legislative session, each year of the session is considered a separate regular session for this 

purpose. 

b. Limiting CHIP Premium Lock-Out Periods (§457.570) 

We proposed to define a CHIP premium lock-out as a period not exceeding 90 days 

when, at state option, a CHIP eligible child may not be permitted to reenroll in coverage if they 

have unpaid premiums or enrollment fees. Following a premium lock-out period, we proposed 

that the child must be permitted to enroll without regard to past due premiums. We proposed at 

§457.570 to permit states to impose premium lock-out periods only for families that have not 

paid outstanding premiums or enrollment fees, and only up to a 90-day period. We also 

specified that a premium lock-out period must end once a family has paid the premium or 

enrollment fee. We also invited comments on any alternative late payment policies to encourage 

families to make their CHIP premium payments in a timely manner to avoid gaps in coverage. 

We received the following comments concerning the proposed lock-out period provision. 

Comment: The majority of commenters supported the proposed rule requiring reasonable 

notice of non-payment, limiting the use of lock-outs only for non-payment of premiums (and 

only as long as the non-payment continues, and subject to a 90-day maximum), and disallowing 

states from requiring payment of outstanding premiums at the end of the lock-out period before 

re-enrollment. In particular, commenters strongly supported that the CHIP agency must review 

the family’s circumstances (§435.570(b)) to determine if their income has declined, making the 

child eligible for Medicaid or a lower cost-sharing category. Some commenters also strongly 

opposed the imposition of lock-out periods for any length of time for a CHIP child, and urged 
CMS-2334-F 84 

CMS to modify §457.570 to ban lock-out periods. These commenters indicated that lock-outs 

are contrary to the goals of a reformed health system, as well as the health of children. Some 

commenters stressed that a quarter of a year without health insurance can have a significant 

impact on a child’s healthy development, a child should not be subject to penalties for a failure 

to pay by another family member, and the Affordable Care Act recognizes that children should 

connect with their medical home eight times in the first year of life alone. One commenter also 

stated that lock-out periods in CHIP create disruptions in care, burdens on families, 

unnecessarily increase administrative costs, and that the elimination of lock-out periods is a an 

important consumer protection. 

A few commenters asked whether the process of premium collection and debt forgiveness 

will be aligned with the premium collection regulations for the Exchange. 

Response: In response to the support of our proposed rule by the majority of 

commenters, and comments received by states related to the need to continue to have nonpayment of premium policies in place to manage program costs (as described below), we are 

adopting in our final rule the proposed provisions that authorized states to institute a maximum 

90 day lock-out period for non-payment of premiums. Lock-outs are permitted for non-payment 

of premiums, but only as long as the non-payment continues and subject to a 90-day maximum. 

We also want to clarify that requirements related to reasonable notice of nonpayment, and review 

of the family’s circumstances to determine if their income has declined (for example, making the 

child eligible for Medicaid or a lower cost-sharing category), are existing regulatory provisions 

that we have not modified by this rulemaking. 

We appreciate the concerns expressed by some commenters with regard to the potential 

impact of any lock-out period on children, and for these reasons, we also adopted in the final rule 

the proposed restriction that lock-out periods may only apply to families who have not paid their 
CMS-2334-F 85 

premiums, and must end if a family pays its past due premium. We have also maintained the 

requirement that children must be permitted to enroll in CHIP subsequent to a 90 day lock-out 

period regardless of whether the family continues to owe past due premiums. In addition, we are 

also including requirements for non-payment of premium that are intended to align CHIP 

policies with policies applicable in the Exchange, to the extent possible. In CHIP and for those 

individuals with APTC in the Exchange, individuals are provided with a premium payment 

grace period, may be disenrolled for non-payment of premiums, and will not be required to pay 

past due premiums to reenroll in coverage. Exchange eligible individuals will have a longer 

grace period (90 days as opposed to 30 days) than CHIP, but will not be permitted to enroll in 

coverage until the next open enrollment period. Therefore, the amount of time an individual may 

have to wait before reenrollment in a Qualified Health Plan will vary, depending on when the 

premiums are missed in relation to the next scheduled open enrollment period, but will be no 

longer than 90 days for a child in CHIP . 

We note that neither CHIP nor the Exchange have explicit rules governing debt 

forgiveness policies. More information on the Exchange rules related to non-payment of 

premiums is available at http://www.gpo.gov/fdsys/pkg/FR-2012-03-27/pdf/2012-6125.pdf.

Comment: A few commenters requested clarification on policies governing non-payment 

of premiums. They requested clarification on policies related to “forgiving” past due premiums 

and enrollment fees, as well as whether a state can continue to try to obtain the outstanding 

premium amount without affecting eligibility. One commenter indicated that funds should be 

recoverable using a debt collection process. The same commenter also asked how many cycles 

of premium forgiveness would be allowed for an individual. Another commenter asked CMS to 

generally clarify what steps states and health plans would be permitted to take in situations in 

which a CHIP enrollee re-enrolls after a lock-out period and again does not pay premiums. 
CMS-2334-F 86 

Response: We believe that disenrolling a child from coverage and potentially requiring 

a child to go without coverage up to 90 days (assuming the family has not paid the premium or 

enrollment fee), is a significant deterrence to prevent a family from establishing a pattern of nonpayment of premiums and re-enrollment. Therefore, this rule does not place a limit/cap on the 

number of times an individual may be re-enrolled after non-payment of their premiums. Nothing 

in this rule precludes a state from electing to establish policies for collecting debt from families 

that have not made their premium payments. Nor does this rule preclude states and health plans 

from offering incentives to encourage timely payment of premiums. 

Comment: Some commenters recommended that states only be permitted to terminate 

coverage during a continuous eligibility period for failure to pay premiums as proposed at 

§457.342(b) after complying with the disenrollment protections at §457.570. Several 

commenters stressed that the proposed rule should be strengthened to capture the intent noted in 

the preamble that “prohibiting a child from enrollment after the family pays the unpaid premium 

or enrollment fee is counter to promoting enrollment in and continual coverage.” Some 

commenters also recommended that the final rule specify that if a family pays its outstanding 

premium between the end of their payment grace period and before the end of the lock-out 

period, the child be reinstated back to the effective end date with no gap in coverage and no loss 

of 12-month continuous eligibility (if applicable). 

Response: We agree that coverage terminations occurring during a continuous eligibility 

period for failure to pay premiums can be implemented only after complying with the 

disenrollment protections at §457.570, and we have modified §457.342(b) to clarify this 

requirement. In addition to the preamble language describing that families that pay their 

premiums or enrollment fees prior to the end of a lock-out period must be re-enrolled in CHIP, 

we have also specified this requirement at §457.570(c)(2) under this final rule. Section 
CMS-2334-F 87 

2103(e)(3) of the Act describes a statutory premium grace period during which CHIP enrollees 

may pay their monthly premiums before being disenrolled. This provision requires States to 

grant individuals enrolled in separate child health programs a 30-day grace period, from the 

beginning of a new coverage period, to pay any required premium before enrollment may be 

terminated. The new coverage period begins the month following the last period for which a 

premium was paid. Aside from these requirements, states have, and will continue to have, 

flexibility to determine when coverage can be reinstated. As specified in our proposed rule at 

§457.342(b), continuous eligibility may be terminated for failure to pay required premiums or 

enrollment fees. 

Comment: Some commenters expressed concerns for potential unintended consequences 

of the proposed policies. One commenter stated that the proposed rule creates an incentive for 

individuals who are otherwise able to pay their premium to cycle through CHIP eligibility every 

other three month period and encourages gaps in access to medical services for children, who 

may subsequently present to the CHIP with higher acuity levels and higher cost needs. The 

commenter also stated that the proposed rule increases costs for states and the federal 

government, and diminishes health outcomes for children. The commenter encouraged CMS to 

continue to require member accountability in the CHIP program by allowing the collection of 

outstanding premiums in the presence of a 90-day grace period. Another commenter objected to 

the proposed rule to limit lock-out periods to 90 days and allow an individual to re-enroll upon 

payment of past due premiums, regardless of whether the lock-out period has expired. The 

commenter stated that this approach creates adverse selection, in that families may stop paying 

their premium when they may not have immediate health care needs, and then again pay their 

premiums only when they are in need of health care. Additionally, this commenter stated 

individuals should be required to pay any past due premiums as a condition of retaining 
CMS-2334-F 88 

eligibility for CHIP, even after a lock-out period has been satisfied. This commenter also stated 

that the proposed rule discards the plain statutory authority of title XXI that delegates this policy 

to states. Another commenter noted that CHIP is a “stepping stone” between Medicaid and 

employer-sponsored insurance or Exchange coverage, and that premiums in its current CHIP are 

minimal in comparison to employer-based coverage and private coverage. The commenter 

requested that premiums not be waived in states with requirement to repay outstanding premiums 

and no lock-out period. The commenter stated that waiving premiums does not promote 

responsibility, intrinsic value, or the effective management of program costs for states. 

Response: The goal of allowing coverage for families that make current payments must 

be balanced with the concern that families will game the system to try to obtain coverage without 

paying premiums. We agree that there may be situations where families either elect, or are 

unable to pay their premiums multiple times during a given year. However, we are not aware of 

any evidence that these situations represent a significant number of cases. And, as stated in our 

response to the comment above, as long as states adhere to regulations at §457.570, nothing in 

this rule precludes a state from continuing to establish policies for collecting debt from families 

that have not made their premium payments. We also encourage states to continue implementing 

approaches for simplifying premium payment arrangements and coping with administrative 

concerns families may have, and we continue to encourage states in this area to minimize the 

number of families that are disenrolled for non-payment of premiums. 

Comment: One commenter stated that if CHIP lock-out periods are allowed in 2014, 

CMS should prohibit states that use this option from requiring children subject to a lock-out 

period to reapply for coverage and that a child returning to coverage following a lock-out period 

should be handled in the same manner as a renewal. The commenter believes that because such 

children were eligible for CHIP apart from non-payment of premiums or enrollment fees, the 
CMS-2334-F 89 

state agency should be able to reassess eligibility based on available electronic data sources and 

families should only be asked for additional information if what has already been provided and 

currently available electronic data are not sufficient to establish eligibility. 

Response: While we encourage states to consider the potential administrative cost 

savings and reduced burden on families that could result from assigning a pending eligibility 

status to a child for non-payment of premiums rather than requiring a new application, we will 

continue to permit states to have the flexibility to make this decision. 

Comment: One commenter requested clarification on whether a child can receive APTC 

or CSR during a premium lock-out period. 

Response: We anticipate that this issue will be addressed in further guidance from the 

Department of Treasury. 

Comment: The preamble to our proposed rule specified that a state may not require the 

collection of past due premiums or enrollment fees as a condition of eligibility for reenrollment 

once the lock-out period has expired, regardless of the length of the lock-out period. One 

commenter recommended that this policy also be specified in §457.570(c)(2). 

Response: Section 457.570(c)(2) clearly specifies that “a state may not require the 

collection of past due premiums or enrollment fees as a condition of eligibility for reenrollment 

once the State-defined lock out period has expired, regardless of the length of the lock-out 

period.” We have not made any modifications to this section. 

Comment: Some commenters indicated that providing multiple ways to pay premiums 

and sending multiple, non-threatening payment due reminders are helpful in encouraging 

payment. These commenters suggested that CMS consider future sub-regulatory guidance to 

states to promote best practices in premium payments. 
CMS-2334-F 90 

 Response: Most CHIPs report efforts to facilitate payment of premiums and enrollment 

fees, easing the process for families, and the majority of states also send multiple payment due 

reminders and allow a variety of payment methods (such as allowing families to make payments 

at multiple locations). We will consider issuing further sub-regulatory guidance in this area. 

8. Premium Assistance (§435.1015) 

We proposed to codify the last sentence of section 1905(a) of the Act that authorizes 

payment of “other insurance premiums for medical or any other type of remedial care or the cost 

thereof” to support enrollment of individuals eligible for Medicaid in plans in the individual 

market, including enrollment in QHPs doing business on the Exchange. Premium assistance is 

one mechanism for facilitating the coordinated system of coverage between Medicaid, CHIP, 

and the Exchange in 2014. It provides an option for states to assist families who wish to enroll 

in the same health plan when some family members are eligible for either Medicaid or CHIP 

while other family members obtain coverage in the Exchange with advance payments of the 

premium tax credit, and it can provide a way to minimize the extent to which individuals have to 

change plans when their circumstances change such that their eligibility for an affordable health 

insurance plan changes. The proposed rule reflected longstanding statutory provisions in light of 

the new coverage options available in 2014. We received the following comments to proposed 

premium assistance provisions: 

Comment: Many commenters were supportive of states’ ability to use premium 

assistance authority to purchase private insurance coverage for health plans in the individual 

market, including QHPs doing business on the Exchange. At the same time, however, they 

emphasized the importance of ensuring that Medicaid and CHIP-eligible individuals receive the 

full scope of services to which they are guaranteed in Medicaid and CHIP, such as the full range 

of pediatric services provided in Medicaid and CHIP. Commenters urged CMS to take steps to 
CMS-2334-F 91 

ensure that states provide families and individuals with all of the information they need 

regarding the benefits to which they are entitled. They noted that the information states track to 

ensure cost-effectiveness should also be used to assess whether children and adults are receiving 

the full package of Medicaid or CHIP services. One commenter suggested that states should be 

required to ensure that beneficiaries experience a seamless enrollment process and that they have 

a single insurance card and point of contact for all benefits. 

Response: Under all premium assistance arrangements, Medicaid and CHIP-eligible 

individuals remain Medicaid or CHIP beneficiaries and continue to be entitled to all 

Medicaid/CHIP benefits and cost sharing protections. Thus, we require at §435.1015(a)(2) and 

(a)(3) that the state agency furnish all benefits covered under the state plan that are not available 

through the individual health plan and also that the individual does not incur any cost sharing in 

excess of that allowed in Medicaid. We expect states to have mechanisms in place to ensure that 

beneficiaries understand their available choices of either direct state plan coverage or coverage 

through premium assistance for an individual health plan, including a QHP in the Exchange, 

under the premium assistance option, as well as how to access any additional benefits or cost 

sharing assistance. Therefore, we have revised §435.1015(b) to include provisions requiring 

informed choice and information on the process for accessing additional benefits and help with 

cost sharing, if the individual elects to receive coverage through the premium assistance option. 

We do not believe, however, that it is appropriate to direct through rulemaking the specific 

procedures states must employ to provide any necessary “wraparound” benefits or cost sharing; 

under the state plan option, states have the flexibility to determine how best to meet these cost 

sharing and benefit responsibilities. We have also clarified in §435.1015(b) that states must 

require that individuals who have elected to receive premium assistance must obtain covered 

items and services through the individual health plan to the extent that the insurer is 
CMS-2334-F 92 

contractually or otherwise responsible to pay for such benefits. 

 Comment: Some commenters expressed specific concerns about cost sharing policies 

and urged CMS to consider putting additional beneficiary protections in place specific to 

premium assistance to ensure that people understand the cost sharing differences between 

Medicaid and CHIP and QHPs. They recommended that we create requirements for 

coordination between Medicaid and the QHP issuer to ensure that people do not exceed 

permissible cost sharing and asked CMS to provide guidance on how to monitor cost sharing. 

 Response: We expect states to have mechanisms in place to provide benefits that wrap 

around health plan coverage to the extent that the health plan offers fewer benefits, or has greater 

cost sharing requirements than in Medicaid or CHIP. These mechanisms will need to be 

coordinated with the health plan to successfully implement a premium assistance program. As 

noted above, we are requiring at §435.1015(b) that states inform individuals how to access 

additional benefits not provided by the insurer, and also inform individuals how to receive cost 

sharing assistance. We are not proposing any specific requirements about the way in which such 

coordination can be effectuated, however, because we believe that states should have flexibility 

to develop effective coordination procedures consistent with state systems and procedures, 

including variation in state health care delivery systems. 

 Comment: Many commenters requested clarification of the cost-effectiveness test for 

premium assistance. They stressed the importance of a strong cost-effectiveness test to ensure 

that taxpayer dollars are spent wisely and also that beneficiaries do not lose important benefits 

and cost sharing protections. They were concerned that the proposed rule could be interpreted to 

include only the cost of premiums to purchase coverage and not to include in the test the costs 

associated with paying copayments, deductibles, and other cost sharing requirements. They 

believe that this should be clarified in the final rule to explicitly include cost sharing. Other 
CMS-2334-F 93 

commenters stated that this cost-effective analysis should be performed on an annual basis to 

ensure that the premium assistance program remains cost-effective even if Medicaid and the 

individual market experience different rates of cost growth. 

Response: Consistent with our approach to cost-effectiveness in all premium assistance 

authorities, we intend for states to consider the cost sharing requirements of the private health 

plan (and therefore the cost of providing the cost sharing protections) when determining whether 

premium assistance is a cost-effective option, and we agree that this should be clarified. 

Therefore, we are revising §435.1015(a)(4) accordingly. States implementing premium 

assistance must describe their cost-effectiveness methodology, and to the extent that such a 

methodology relies on annual per person costs, we would expect states to be re-running the 

analysis at least annually, as new cost data is available. 

 Comment: Many commenters requested additional detail on how the option would be 

operationalized by state Medicaid agencies, Exchanges, and QHPs. One noted that successful 

premium assistance programs require robust data sharing, data mining, automated calculations 

using cost-effective algorithms, and strong relationships with private insurers. Some 

commenters requested that CMS provide states with a template or other tools to simplify the 

implementation of premium assistance. 

 Response: We will continue to provide technical assistance to states on the operational 

aspects of pursuing this premium assistance approach, relying on the experience states have had 

over the years implementing premium assistance. 

Comment: Some commenters stated that families should have the choice of either 

premium assistance or direct Medicaid state plan coverage, even when premium assistance is 

cost-effective for the state, and they supported the proposed rule’s provision that states may not 

require enrollment in premium assistance as a condition of Medicaid eligibility. Other 
CMS-2334-F 94 

commenters requested that CMS remove the voluntary participation requirement either entirely, 

or if this requirement is retained, they asked that states be allowed to make participation in 

premium assistance mandatory for certain Medicaid enrollees, such as adults up to 138 percent 

of the FPL who would be part of the state’s Medicaid expansion population, or for pregnant 

women with incomes above 133 percent of the FPL. 

 Response: Consistent with the statute, we are retaining the provision at §435.1015(b) 

that states may not require a Medicaid-eligible individual, as a condition of receiving Medicaid 

benefits, to enroll in a health plan in the individual market through a premium assistance 

arrangement. Enrollment in individual market coverage is not a statutory condition for 

eligibility. We are also clarifying in §435.1015(b) that states must require that individuals who 

have elected to receive premium assistance must obtain covered items and services through the 

individual health plan to the extent that the insurer is contractually or otherwise responsible to 

pay for such benefits. This is consistent with the provision in section 1902(a)(17) of the Act 

that, in determining the amount of medical assistance, states may consider available resources, 

and the provision in section 1902(a)(25) of the Act that requires that states ensure that liable 

third parties pay primary to Medicaid. We address the issue of requiring enrollment in premium 

assistance for certain populations in the last response in this section. 

Comment: Several commenters expressed concern that permitting state Medicaid 

programs to establish premium assistance programs could affect premiums in the Exchange. 

Some commenters recommended that CMS revise the proposed §435.1015(a)(4) to require that 

premium assistance not increase federal costs and not increase premiums in the individual 

market. 

 Response: Medicaid beneficiaries enrolled in a QHP would be included in the individual 

market single risk pool of the health insurance issuer of the plan in which they are enrolled, just 
CMS-2334-F 95 

as any other individual obtaining coverage through such plans. §435.1015(a)(4) requires the cost 

of premium assistance to be “comparable” to the cost of providing direct coverage under the 

state plan. We do not use a more restrictive word to allow flexibility because the amount, 

duration, and scope of the QHP coverage, or the nature of the QHP service delivery system, 

might be different from direct coverage under the state plan. 

 Comment: Some commenters stated that CMS must take additional steps to ensure that 

states do not steer family members of Medicaid-eligible individuals into less expensive plans to 

accommodate a premium assistance model and also to ensure that any enrollees who will be 

using premium tax credits have sufficient choice in QHPs. The commenters stated that 

regulations should require states to remain impartial in providing all available information on all 

QHPs so the family can choose the best plan or plans for the entire family, and also that 

Navigators, application assisters, and application counselors must be trained on the premium 

assistance program and provide impartial assistance to families. 

 Response: As noted above (and at §435.1015(b)), when a state implements the state plan 

premium assistance option, the beneficiary’s participation must be voluntary. We also expect 

states to ensure that application assisters and certified application counselors comply with the 

requirements in §435.908 of this part and §457.340 under subpart C of part 457, which include 

requirements that they be effectively trained in the eligibility and benefits rules and regulations 

governing enrollment in a QHP through the Exchange and all insurance affordability programs 

operated in the state. In addition, the Exchange regulations at 45 CFR 155.210 require that 

Exchange Navigators provide impartial information and assistance. A Medicaid or CHIP 

enrollee who is receiving benefits in whole or in part through a premium assistance arrangement 

with a QHP will not be eligible for a premium tax credit under section 36B of the Internal 

Revenue Code because such credits are not available to individuals who, for the coverage month, 
CMS-2334-F 96 

are eligible for minimum essential coverage through Medicaid or CHIP. 

 Comment: A few commenters questioned whether section 1905(a)(29) of the Act creates 

the authority for premium assistance in the individual market. Many commenters recommended 

that CMS eliminate the proposed policy to allow premium assistance for plans in the individual 

market, or otherwise tightly circumscribe it, citing cost concerns, as well as concerns about the 

operational complexity and potential consumer confusion for consumers created by the “wrap” 

requirement. 

Response: As we stated in the preamble of the proposed rule (78 FR 4624 and 4625), in 

section 1905(a)(29) of the Act, “medical assistance” is defined to include payment of part or all 

of the cost of “other insurance premiums for medical or any other type of remedial care or the 

cost thereof.” We have interpreted this provision to permit payment of FFP for premiums for 

health plans for Medicaid-eligible individuals, provided the state determines it cost-effective to 

do so. CMS has approved state premium assistance programs under this authority prior to the 

enactment of the Affordable Care Act. The Affordable Care Act provided for new rules 

regulating the operation of the individual and small group insurance markets, and expanded 

access to insurance coverage through QHPs participating in the Exchange. This results in new 

opportunities for states to deliver Medicaid coverage through the purchase of private health 

insurance in the individual market. Our goal is to work with states to ensure that their premium 

assistance approaches result in a cost-effective, seamless, and coordinated system of health care 

for beneficiaries. 

Comment: Several commenters recommended delaying implementation of premium 

assistance until rates are determined for QHPs in the Exchange, and the individual market has 

settled from the changes it will experience in 2014, and states have experience implementing the 

Medicaid expansion. 
CMS-2334-F 97 

 Response: As we noted above, premium assistance is an option available under current 

law. Some states have already expressed interest in using the premium assistance model to 

deliver benefits to their Medicaid expansion beneficiaries through QHPs doing business on the 

Exchange. In addition, beginning in 2014, some low-income children will be covered by 

Medicaid or CHIP while their parents obtain coverage in the Exchange with advance payments 

of the premium tax credit, and premium assistance provides an opportunity for state Medicaid 

and CHIP programs to offer coverage to such families through the same plan, even if supported 

by different payers. It also provides opportunities for continuity of care by increasing the 

likelihood that individuals could remain in the same health plan when moving back and forth 

between Medicaid and Exchange coverage due to fluctuations in income or other changes in 

circumstances. We are not establishing new authority but rather ensuring that the existing 

authority reflects the new coverage options in the individual and small group markets established 

by the Affordable Care Act. 

Comment: Many commenters supported the retention of the proposed regulation text 

that makes FFP available for payment of health plan premiums for “individuals” eligible for 

Medicaid. They believe that this language supports the enrollment of Medicaid-eligible 

individuals in individual market plans, including plans offering family coverage, while not 

incorporating limiting definitions of “family” that would unnecessarily limit the benefits of the 

rule to individuals in families that do not comprise a taxpayer household. One commenter asked 

for CMS to clarify the meaning of “family” as used in the premium assistance section of the 

preamble of the proposed rule. The commenter also questioned whether this option is limited to 

Medicaid and CHIP-eligible individuals who have family members enrolled in an individual 

health plan, and if so, asked if we proposed to limit this option to members of the same tax 

household, MAGI assistance group, or to immediate family members. 
CMS-2334-F 98 

 Response: We have not proposed a definition of “family” that is unique to premium 

assistance. Regulations at §435.603 of this part (and at §457.301 and §457.315 under subpart C 

of part 457 for CHIP) contain definitions and requirements related to family size, household, and 

MAGI-based income for the purposes of Medicaid and CHIP eligibility determinations. 

 The premium assistance option permits Medicaid or CHIP funds to be used to deliver 

coverage to Medicaid or CHIP-eligible individuals through the purchase of private health 

insurance, and it is not limited to Medicaid or CHIP-eligible individuals who have family 

members enrolled in a QHP. In some cases, the Medicaid or CHIP beneficiary could be enrolled 

in a health plan that provides individual coverage only, while in other situations, the Medicaid or 

CHIP beneficiary would be enrolled in a health plan that provides family coverage, depending 

on the categories of family coverage offered in the Exchange. 

 Comment: Some commenters, who were in favor of the continued authorization of 

premium assistance programs, stated that states should be allowed to determine how to make the 

concept work and urged CMS to allow complete state flexibility in designing and implementing 

benefit structures and cost sharing requirements. 

 Response: Individuals receiving coverage through premium assistance are Medicaid 

beneficiaries and are entitled to the full range of protections, including benefits and cost sharing, 

available under the law. States have flexibility under the state plan option to design how they 

will effectuate the coverage that is required while meeting applicable statutory and regulatory 

requirements. To the extent a state needs additional flexibility, the state may wish to explore 

demonstration options under section 1115 of the Act. 

Comment: Several commenters recommended that premium assistance programs might 

require, or best be operated under, a Medicaid section 1115 demonstration. 

 Response: States have the flexibility to adopt premium assistance as an option under the 
CMS-2334-F 99 

state plan if it is voluntary for beneficiaries and adheres to all applicable statutory and regulatory 

provisions. Enrollment in individual market coverage is not a statutory condition of eligibility. 

Some states have expressed interest in submitting proposals for section 1115 demonstrations to 

require enrollment in premium assistance and to allow for consideration of a broader range of 

factors when cost-effectiveness is assessed. In response to these inquiries, we will consider 

approving a limited number of premium assistance demonstrations that are determined to further 

the objectives of the Medicaid program and which will test these new arrangements and inform 

policy. For states that implement premium assistance through a section 1115 demonstration, 

which could include mandatory enrollment into premium assistance, we will only consider 

demonstrations under which states make arrangements with the health plan to provide 

wraparound benefits and cost sharing assistance. For further information on the section 1115 

option, including guidelines for proposals, please refer to Premium Assistance Frequently Asked 

Questions (FAQs) that CMS issued on March 29, 2013, available at http://medicaid.gov/StateResource-Center/FAQ-Medicaid-and-CHIP-Affordable-Care-Act-ACAImplementation/Downloads/FAQ-03-29-13-Premium-Assistance.pdf

9. Changes to Modified Adjusted Gross Income and MAGI Screen 

 We proposed to implement sections 1902(e)(14) and 1943 of the Act, and section 1413 of 

the Affordable Care Act as they pertain to the definition of “modified adjusted gross income” 

(MAGI) and “household income” in section 36B(d)(2) of the Internal Revenue Code of 1986 

(“36B definitions”). We also proposed a modification to previously issued regulations 

implementing section 1902(e)(14)(I) of the Act. The proposed rule applied the 5 percent 

disregard established by the Act for purposes of determining the income eligibility of an 

individual for medical assistance whose eligibility is determined based on MAGI, provided the 

determination was for the eligibility group with the highest income standard under which the 
CMS-2334-F 100 

individual could be determined eligible using MAGI-based methodologies. The proposed 

changes are discussed in more detail in the January 22, 2013 Medicaid Eligibility proposed rule 

(78 FR 4625 through 4627). We received the following comments concerning the proposed 

changes to MAGI provisions: 

 Comment: Some commenters supported the proposal to apply the 5 percent disregard 

only to the highest income threshold under a MAGI-group available for the individual and the 

related impact on the number of individuals for whom states will be able to claim the “newly 

eligible” enhanced match rate. 

 Response: The Affordable Care Act established a 5 percentage point of the FPL 

disregard “for the purposes of determining income eligibility” for individuals whose eligibility is 

based on MAGI. The objective of the proposal is to balance giving beneficiaries the benefit of 

the disregard for eligibility purposes, with the intent to give states the opportunity to claim 

enhanced match for all newly eligible individuals if the state chooses to extend coverage to the 

new adult group. We propose doing so by ensuring that the disregard is applied to the income 

calculation of individuals for whom the disregard matters for a determination of eligibility for 

Medicaid under MAGI-based rules—that is, those for whom the application of the disregard 

means the difference between being eligible for Medicaid and being ineligible. These 

individuals are those whose income is within 5 FPL percentage points of the highest net income 

standard for which they can obtain Medicaid eligibility under MAGI-based income rules. The 

disregard would not be applied for a determination of eligibility for a particular eligibility group, 

but rather for eligibility for Medicaid. 

 Comment: One commenter questioned whether the proposed policy is consistent with 

federal law, which the commenter views as entitling all applicants to the 5 percent disregard. 

The commenter stated that our proposed policy could affect beneficiaries’ cost sharing or 
CMS-2334-F 101 

benefits because it could result in a change in their eligibility groups. Some commenters noted 

that, for example, some parents could receive ABP coverage instead of the traditional Medicaid 

benefit package. The commenters noted, however, that this concern should be minimal since 

newly eligible adults who are medically frail and likely to need additional services covered under 

the regular Medicaid benefit package would have a choice of benefit package, between what is 

offered through an ABP that is based on section 1937 requirements, inclusive of EHB’s, and 

ABP coverage that is not subject to section 1937 requirements, and includes the services 

approved in the state’s Medicaid plan. Other commenters cited concerns about pregnant women 

and categories that offer only limited pregnancy-related services. 

 Response: The proposal to apply the 5 percent disregard to determine Medicaid 

eligibility rather than eligibility for a particular category is consistent with section 1902(e)(14)(I) 

of the Act. It is not necessarily the case that not applying the 5 percent disregard for purposes of 

determining eligibility category would result in moving individuals into a different eligibility 

group with different benefit and possibly cost-sharing rules because if the 5 percent disregard 

were applied as a general disregard, states would set income eligibility standards at levels that 

would compensate for that impact. For example, if the 5 percent disregard was applied 

generally, states might set the income eligibility standard for parents at a level 5 percent less than 

they would otherwise. Moreover, any adverse impact of a shift of beneficiaries from the parent 

group to the new adult group with coverage through an ABP will be minimized by the medically 

frail exception to benchmark coverage limitations. For pregnant women with income at the 

border between full benefits and pregnancy-related benefits, although the absence of the 

disregard may result in a pregnancy-related benefit package instead of full benefits, our March 

2012 rule revised §435.116(d)(3) to clarify that a State’s coverage of pregnancy-related services 

must be consistent with §440.210(a)(2) and §440.250(p), which allows States to provide 
CMS-2334-F 102 

additional services related to pregnancy to pregnant women (see 77 FR 17149). 

 Comment: Several commenters recommended that CMS not revise the MAGI disregard 

rules. They raised concerns that there is too little time for states to make the systems and 

business process updates required to comply with the October 1, 2013 open enrollment period. 

They noted that the proposed rule requires more complex programming compared to simply 

adding 5 percent to all MAGI-based categories and that this policy could impact a state’s ability 

to implement the MAGI requirements timely. In addition, they noted that although the 90/10 

matching funds are available to make such systems-related changes, states must still finance 10 

percent of the cost of these changes despite experiencing severe budgetary issues. 

 Response: We understand that many states relied up on the March 2012 final eligibility 

rule when planning their eligibility system builds for 2014. We appreciate that it may be 

difficult at this point in time to make programming changes for eligibility systems and have 

those changes take effect by January 1, 2014. In light of this challenge, we are finalizing our 

proposal, but we will not take any compliance actions for states whose systems cannot 

accommodate this eligibility determination requirement. We will approve eligibility 

determination systems even if as of January 1, 2014, the system applies the 5 percent disregard 

across the board to all individuals whose eligibility is determined using MAGI-based rules, 

based on a state’s assurance that by January 1, 2015 the state will update the system to apply the 

disregard only for a determination of eligibility for Medicaid under MAGI-based rules. 

Comment: Some commenters requested that states that are not expanding to cover the 

new adult group—and thus not claiming enhanced FMAP--should have the option to use the new 

calculation and continue to apply the 5 percent across- the-board disregard. Others requested 

that all states be given the option to apply the 5 percent disregard only to the highest income 

threshold under MAGI as proposed in our proposed rule. 
CMS-2334-F 103 

Response: We believe that applying the 5 percent FPL disregard to determine eligibility 

based on overall eligibility rather than eligibility group is the best interpretation of section 

1902(e)(14)(I) of the Act. Therefore, we are adopting our proposed policy as final, subject to the 

flexibility in implementation schedules discussed above. 

Comment: One commenter asked whether the 5 percent MAGI income disregard would 

be applicable to only eligibility for the coverage group or whether it would also be applicable to 

cost-sharing or premium determinations --within the coverage group. 

Response: Under this final rule, the 5 percent disregard under section 1902(e)(14)(I) of 

the Act applies to income determinations relative to Medicaid eligibility. It does not apply to 

determine into which eligibility group an individual should be placed. Nor is it intended to be 

applied to determine income for premium or cost-sharing payments. 

Comment: One commenter requested clarification about whether, in a state that 

implements the eligibility expansion under section 2001 of the Affordable Care Act (that is, 

adopts the adult group), the state would need to apply the 5 percent disregard to a parent or 

caretaker relative age 65 or older that was not eligible for the expansion group. 

 Response: The 5 percent disregard is not applied based on an eligibility group, but based 

on whether the disregard would affect MAGI-based income eligibility for Medicaid as stated 

above. In the case of a parent or caretaker relative age 65 or older, the 5 percent disregard would 

be applied in determining MAGI-based income if the individual would otherwise be ineligible 

based on income. For example, if the parent/caretaker eligibility standard in a state was 80 

percent of FPL and the individual’s income before application of the disregard put them over the 

80 percent standard, the 5 percent disregard would be applied and the individual would be 

eligible if the disregard brought their countable income below 80 percent of the FPL. 

 Comment: Another commenter asked for clarification of whether the 5 percent is only 
CMS-2334-F 104 

applied when an individual would not be eligible in another group or if it would apply to all 

individuals being determined for eligibility in the group. The commenter specifically asked 

about whether the 5 percent disregard would be applied to keep family coverage in the 

Transitional Medical Assistance (TMA) group. 

 Response: TMA is beyond the scope of this rulemaking. TMA will be addressed in 

future guidance. 

 Comment: Several commenters questioned whether applying the 5 percent disregard to 

the MAGI income standards equivalent being produced through the process generally referred to 

as ‘MAGI conversion’ creates a double counting of the disregard. Other commenters asked 

whether states are being required to expand their income levels for pregnant women and children 

by 5 percent due to application of the disregard. 

 Response: We considered carefully the requirements in section 1902(e)(14)(A) of the 

Act in our December 2012 guidance to states on the establishment of converted MAGI-based 

income standards equivalent to levels used at the enactment of the Affordable Care Act ( “MAGI 

conversion”). See http://www.medicaid.gov/Federal-PolicyGuidance/downloads/SHO12003.pdf. Under this guidance, converted MAGI-based income 

standards are set without regard to the 5 percent disregard, since the MAGI income conversion 

requirements in section 1902(e)(14)(A) of the Act are independent of the 5 percent disregard at 

section 1902(e)(14)(I) of the Act. MAGI-equivalent income standards are established taking 

into account disregards that are currently in effect but which will no longer be in effect under 

MAGI. As a result, there is no double-counting of the 5 percent disregard. The 5 percent 

disregard would apply once when calculating an individual’s MAGI-based income if the 

individual would otherwise be ineligible. 

 Comment: Several commenters requested clarification regarding how the 5 percent 
CMS-2334-F 105 

disregard under MAGI applies to applicants under a separate CHIP program. Similarly, 

commenters asked how the 5 percent disregard is applied to individuals at the boundary between 

Medicaid and CHIP eligibility. 

 Response: The 5 percent disregard should be applied to individuals who may be eligible 

for the highest income standard under the applicable Title of the Act (for example, Title XIX or 

Title XXI) for which the individual may be determined eligible using MAGI-based 

methodologies. Therefore, in states that have separate CHIP programs, the income disregard 

should be applied both for the highest Title XIX eligibility group available to the child, as well 

as to the separate CHIP program to cover similarly situated children at a higher income standard. 

The result would be that children with a MAGI in the 5 percent band above the Medicaid income 

standard at issue would be determined eligible for Medicaid. To clarify, we are modifying the 

language in the final rule at §435.603(d)(4) to specify that the 5 percent disregard should be 

applied to the highest income standard in the applicable Title of the Act under which the 

individual may be determined eligible using MAGI-based methodologies. We do not believe 

this will impact the children for whom the state can claim enhanced match, because the state can 

claim enhanced match for any child whose income is greater than the upper income threshold 

under Medicaid on March 31, 1997, whether that child is covered under Title XIX or Title XXI. 

 Comment: One commenter asked whether there is any reason it would not be 

permissible for a state to program its eligibility system to build in the 5 percent disregard and 

effectively set the income limit at 5 percent higher than the state’s established limit for MAGI 

related eligibility groups. 

 Response: Because the disregard is applied at the individual level, increasing the 

eligibility income standard for a group would not be the best way to program an eligibility 

system. Furthermore, doing so would be inconsistent with the statutory purpose of developing a 
CMS-2334-F 106 

uniform income determination methodology applicable in all states, which could be applied by 

the Exchange as well as the State Medicaid or CHIP agency. Therefore, this would not be 

permissible. Instead if the eligibility system cascades sequentially through possible eligibility 

options, it should apply the 5 percent as one last eligibility step, only when the system has 

returned a determination of ineligibility because the individual is over scale for income. 

10. Single State Agency – Delegation of Eligibility Determinations to Exchanges (§431.10 and 

§431.11) 

We proposed to revert to the policy proposed in the Medicaid eligibility proposed rule 

published on August 17, 2011 (76 FR 51148), that single state Medicaid agencies will be limited 

to delegating eligibility determinations to Exchanges that are government agencies maintaining 

personnel standards on a merit basis. We retained many of the provisions strengthening the 

control and oversight responsibilities of the single state agency including the authority to issue 

policies, rules and regulations on program matters and to exercise discretion in the 

administration or supervision of the plan. We also proposed to make changes to §431.11 

regarding state organization. We received the following comments concerning the proposed 

changes to the single state agency provisions:

Comment: The majority of commenters strongly support the decision to revert to the 

policy originally proposed in the August 2011 Medicaid eligibility rule that delegation of the 

authority to determine eligibility for Medicaid is limited to Exchanges that are government 

agencies maintaining personnel standards on a merit basis. One state specifically commented 

that it supports this change as it allows states to maintain program integrity. Several other 

commenters noted that this construct has been a consistent legal interpretation for many decades. 

Other commenters noted that many state Medicaid employees are trained social workers who 

have the knowledge and experience to help our country's most vulnerable citizens, ensuring 
CMS-2334-F 107 

consistency and accessibility to benefits. 

Response: We appreciate commenters support for our proposed policy, and therefore, we 

are adopting in this final rule the policy that delegation of the authority to determine eligibility 

for Medicaid is limited to Exchanges that are government agencies maintaining personnel 

standards on a merit basis. This is the policy that we originally proposed in our August 2011 

proposed rule and that was re-proposed in the January 2013 proposed rule. We believe that 

under the best read of the statute, determining Medicaid eligibility is an inherently governmental 

function that must be performed by governmental agencies. 

For purposes of delegation, we are treating a quasi-governmental entity or public 

authority running an Exchange and employing merit system protection principles as a 

government agency such that delegation to it would be permitted. Although we were explicit in 

the proposed regulation at §431.10(c)(1)(i)(B), §431.10(c)(2) and §431.10(c)(3)(i) regarding 

authority to delegate to public authorities, we are deleting these references to public authorities 

in the final rule to conform with the Exchange regulation which only explicitly requires at 

§155.20 that Exchanges be governmental agencies or non-profit entities established by a state. 

Comment: Some commenters wrote that they especially appreciate the recognition that 

Medicaid agencies would not be parties to contractual relationships between the Exchange and 

an entity engaged by the Exchange to determine eligibility, which would make it impossible for 

the Medicaid agency to provide appropriate oversight. They support maintaining the 

requirement that the Medicaid agency provide oversight when responsibility for the eligibility 

determination is delegated to another agency, because monitoring and oversight is necessary 

regardless of whether the delegation is to a government or non-government agency. They 

recommended that such oversight should include review of a sample of eligibility decisions 

made by the Exchange, scrutiny of the “logic” used in information technology systems to ensure 
CMS-2334-F 108 

that Medicaid policy is being applied in an accurate manner, regular observations of the 

processes used by the Exchange in making eligibility determinations, participation by Medicaid 

agency staff in training of Exchange staff, and monitoring of complaints and appeals. Many 

commenters suggested more specific requirements in regulation that should be added to 

§431.10(d), specifying the oversight and monitoring required in the agreement between the 

Medicaid agency and Exchange or Exchange appeals entity include training for the Exchange or 

Exchange appeals entity, as well as monitoring of the systems being built. 

Response: We agree that the single state agency should be required to provide oversight 

when responsibility for the eligibility determination is delegated to another agency and are 

finalizing our proposal requiring this. We appreciate the commenter’s various suggestions 

regarding quality control and oversight by the Medicaid agency and believe they are within the 

ambit of what is intended by §431.10(c)(3)(ii), requiring the Medicaid agency to exercise 

appropriate oversight over the eligibility determinations and appeals decisions made by such 

agencies to ensure compliance with paragraphs (c)(2) and (c)(3)(i) of this section and institute 

corrective action as needed. We believe §431.10(c)(3)(ii) can be exercised in various ways 

including those suggested by the commenters. We also agree that participation by Medicaid 

agency staff in training of Exchange staff would be valuable. We believe that the requirements 

in §431.10(d) which specify the requirements for the agreement between the Medicaid agency 

and the Exchange or Exchange appeals entity include the requisite quality control and oversight 

language. 

Comment: Many commenters recommended ways to ensure a coordinated system by 

engaging non-profits and private contractors in the process of supporting the Medicaid and CHIP 

eligibility determination, while not allowing them to determine eligibility. Recommendations 

included providing assistance to consumers with the application and enrollment process as 
CMS-2334-F 109 

certified application counselors and operating call centers, providing basic information to 

potential applicants. One commenter suggested that any contract over the amount of $1 million 

entered into by the State for services which support eligibility determination, such as datamatching or application/eligibility screening, be submitted to the Department of Health and 

Human Services for review. 

Response: We agree that certified application counselors and call center administration 

are ways to engage non-profits and private contractors in the Medicaid eligibility process while 

assuring all final eligibility determinations are made by governmental entities. However, we do 

not believe it necessary to subject state contracts for support services related to eligibility 

determinations to special oversight rules. We believe that the single state agency’s responsibility 

for determining and/or overseeing eligibility determinations includes oversight of such support 

functions. 

Comment: One commenter noted that, while there is value in continuing the role of 

public employees in Medicaid eligibility determinations, this decision can be expected to have 

the inadvertent effect of requiring “hand offs” in some states between privatized Exchanges and 

Medicaid agencies. Specifically, in states operating a privatized Exchange, the Exchange will 

now be unable to conduct a full Medicaid determination, which means that an individual who 

applies for coverage via an Exchange and is found likely eligible for Medicaid will be “bounced” 

to the Medicaid agency for a final determination. Families with children, in particular, are likely 

to be “bounced” because they are eligible for Medicaid or CHIP at far higher income levels than 

adults in all states. As a result the commenter recommended that §435.1200(d) include a new 

subpart requiring states to report to HHS and to make publicly available data on the share of 

applicants who are determined potentially eligible for Medicaid or CHIP by an Exchange who 

are eventually enrolled. Moreover, they recommended that procedures should be outlined for 
CMS-2334-F 110 

HHS to evaluate the data and take corrective action if data revealed that significant numbers of 

people are “falling through the cracks” because they must navigate multiple agencies when 

trying to secure coverage for themselves or their children. 

Response: States will be required to establish performance standards in their state plans 

in accordance with §435.912. To further this work, earlier this year, we issued a request for 

information (RFI) regarding performance indicators for Medicaid and CHIP business functions. 

The RFI explained that CMS intends to begin collecting and reporting on information including 

data regarding individual (applicant and beneficiary) experience with eligibility and enrollment. 

One of the indicators proposed under the eligibility and enrollment domain was “accurate 

eligibility determinations,” including a proposed “accurate transfer rate”. The accurate transfer 

rate would be measured by the percent of individuals transferred to Medicaid, CHIP, or the 

Exchange, as applicable, who are determined eligible by that agency. We are currently 

reviewing the comments received and finalizing our proposal for implementation of performance 

reporting. For further information about the RFI, see our website at 

http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-andSystems/Downloads/RFI-Performance-Indicators-1-24-13.pdf. 

Comment: One commenter requested that we provide public access to agreements 

between the Medicaid agency and other entities conducting determinations. Some commenters 

also requested that we require public posting of the agreements on internet websites. 

Response: We have provided in §431.10(d) that agreements with federal, state or local 

entities making eligibility determinations or appeals decisions be available to the Secretary upon 

request. To the extent that the Secretary requests and obtains a copy of an agreement under 

§431.10(d), the public can request a copy of the agreement through the Freedom of Information 

Act, 5 U.S.C. 552. These agreements may also be obtained at the state level under state freedom 
CMS-2334-F 111 

of information act laws. 

Comment: Some commenters opposed this policy reversal from the previous Medicaid 

eligibility rule, and noted that, since that rule was issued, several states have relied on it to 

inform their decisions on establishing a State-Based Exchange, as well as to plan for Exchange 

and Medicaid systems and operations in future years. They believe these decisions and activities 

cannot easily be amended or changed in a short timeframe, and this policy change could have a 

major impact on the work states have completed, as well as their future plans. They requested 

that CMS revoke the proposed change.

Response: We appreciate the challenges facing states, which is why we signaled nearly a 

year ago on May 16, 2012, in guidance titled “General Guidance on Federally-facilitated 

Exchanges” our intent, in light of public comments received on the final Medicaid and Exchange 

eligibility regulations, to propose further comment regarding ways that States could ensure 

coordinated systems when engaging non-profits and private contractors in the process of making 

Medicaid eligibility evaluations, while having government agencies make eligibility 

determinations. See 

http://cciio.cms.gov/resources/files/ffe_guidance_final_version_051612.pdf. We have also 

shared our intent to propose revised rules in webinars with states on the eligibility rules and in 

individual state meetings. 

11. Conversion of Federal Minimum Income Standards for Section 1931 of the Act (§435.110 

and §435.116) 

We proposed to require conversion of the federal minimum income standard for section 

1931 of the Act to comport with the new rules regarding modified adjusted gross income 

(MAGI) that will take effect on January 1, 2014. Sections 1902(e)(14)(A) and (E) of the Act 

ensure that, in the aggregate, individuals who would have been eligible under Medicaid rules in 
CMS-2334-F 112 

effect prior to the Affordable Care Act remain eligible once the new MAGI-based methodologies 

go into effect. Our proposal to direct conversion of the federal minimum standard for section 

1931 implements the conversion requirements in the statute more consistently, which is 

particularly important in light of the Supreme Court’s decision in National Federation of 

Independent Business v. Sebelius, ____ U.S. _____; 132 S. Ct. 2566; 183 L.Ed. 2d 450 (2012). 

The proposed changes are discussed in more detail in the January 22, 2013 proposed rule (78 FR 

4628 and 4629). 

We received no comments on our proposed policy to convert the federal minimum 

standard for section 1931 of the Act, and therefore, are finalizing our proposal in §435.110. This 

policy relates to the coverage levels for parents and caretaker relatives in states that do not 

implement the eligibility expansion in section 2001 of the Affordable Care Act to provide 

coverage for the low-income adult group. In addition, because pregnancy benefits for pregnant 

women under §435.116(d)(4)(i) are tied to the same May 1, 1988 AFDC income standard for the 

applicable family size, we are finalizing our proposal in §435.116 that this income limit should 

also be converted. 

B. Essential Health Benefits in Alternative Benefit Plans

Section 1937 of the Act provides states with the flexibility to amend their Medicaid state 

plans to provide for the use of benefit packages other than the standard Medicaid state plan 

benefit package offered in that state, for certain populations defined by the state. These ABPs 

are based on benchmark or benchmark-equivalent packages. There are four benchmark packages 

described in section 1937 of the Act: 

● The benefit package provided by the Federal Employees Health Benefit plan (FEHB) 

Standard Blue Cross/Blue Shield Preferred Provider Option; 
CMS-2334-F 113 

● State employee health coverage that is offered and generally available to state 

employees; 

● The health insurance plan offered through the Health Maintenance Organization 

(HMO) with the largest insured commercial non-Medicaid enrollment in the state; and 

● Secretary-approved coverage, which is a benefit package the Secretary has determined 

to provide coverage appropriate to meet the needs of the population provided that coverage. 

 Benchmark-equivalent coverage is provided when the aggregate actuarial value of the 

proposed benefit package is at least actuarially equivalent to the coverage provided by one of the 

benefit packages described above, for the identified Medicaid population to which it will be 

offered. Section 1937 of the Act further provides that certain categories of benefits must be 

provided in any benchmark-equivalent plan, and other categories of benefits must include 

“substantial actuarial value” compared to the benchmark package. 

 That said, we appreciate that it may be difficult at this point to make changes to the ABP 

that take effect by January 1, 2014. In light of this challenge, we will partner with states to work 

as quickly as possible to come into full compliance with these provisions. We do not intend to 

pursue compliance actions on these issues to the extent that states are working toward but have 

not completed a transition to the new ABPs on January 1, 2014. 

Conforming Changes to Medicaid to Align with Essential Health Benefits

We proposed to implement section 2001(c) of the Affordable Care Act that modifies the 

benefit provisions of section 1937 of the Act. Specifically, section 2001(c) of the Affordable 

Care Act added mental health benefits and prescription drug coverage to the list of benefits that 

must be included in benchmark-equivalent coverage; required the provision of Essential Health 

Benefits (EHBs) beginning in 2014; and directed that section 1937 benefit plans that include 

medical/surgical benefits and mental health and/or substance use disorder benefits comply with 
CMS-2334-F 114 

the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 

(MHPAEA). 

 In addition, we proposed to implement section 1902(k)(1) of the Act, which requires that 

medical assistance for ,the new eligibility adult group for low-income adults under section 

1902(a)(10)(A)(i)(VIII) of the Act must receive medical assistance provided through an ABP 

(which must include coverage of EHBs as of the same date). . 

We also proposed to implement section 1937(a)(2)(B)(viii) of the Act, which provides 

that individuals in the new mandatory eligibility group for former foster care children under age 

26 are exempt from mandatory enrollment in an ABP. 

We proposed to implement section 1937(b)(7) of the Act, which provides that medical 

assistance to individuals described in section 1905(a)(4)(C) of the Act (individuals of child 

bearing age) through enrollment in an ABP shall include family planning services and supplies. 

We proposed to codify in §440.345(e) the process to determine how often states would 

need to update ABPs after December 31, 2015. 

We also proposed to add a new §440.347 to incorporate section 2001(c)(5) of the 

Affordable Care Act. 

Furthermore, anti-discrimination provisions found at section 1302(b)(4) of the Affordable 

Care Act were proposed to be codified §440.347(e). 

1. General Comments 

Comment: One commenter stated they support the structure for implementing EHBs as 

proposed. 

 Response: CMS appreciates the support.

2. Alignment with Essential Health Benefits Provisions 

a. Scope of Alternative Benefit Plans (§440.305) 
CMS-2334-F 115 

We proposed to add the new adult eligibility group as an eligibility group that must 

receive benefits consistent with section 1937 of the Act. We also proposed that groups provided 

ABP coverage under section 1937 of the Act may be identified based on individual 

characteristics and not by the amount or level of FMAP funding. 

Comment: Many commenters commended the addition of language prohibiting states 

from targeting Medicaid expansion populations solely on the basis of applicable matching rate. 

In addition, many commenters applauded language proposing to codify the flexibility HHS has 

given to states to use the Secretary-approved option in section 1937 of the Act to extend 

comprehensive Medicaid coverage to the newly-eligible expansion population. The commenters 

further urged CMS to partner with states to ensure that this population’s full range of mental 

health and substance use needs and other health needs will be met. 

Response: We thank the commenters for their support. 

Comment: One commenter questioned the inclusion of the sentence which states, 

“Enrollment in ABPs must be based on the characteristics of the individual rather than the 

amount or level of federal matching funds.” The commenter stated this to be an unnecessary 

statement since eligibility for FMAP is based on eligibility category. It is unclear why 

enrollment in a benchmark plan would impact FMAP. 

Response: People who qualify for eligibility under the new adult eligibility group will be 

determined to be either newly eligible or already eligible. For Medicaid coverage provided to 

the newly eligible population, the state will receive 100 percent FMAP in 2014 and for those 

who are determined to be eligible under December 2009 state rules, the state will receive its 

otherwise applicable FMAP. We included this language to clarify that states may not design 

different benefit packages based on the level of FFP they will receive, but rather the benefit 

package should be designed based on the medical needs of the population being served 
CMS-2334-F 116 

Comment: One commenter believed that the use of ABPs will assist states with 

expanding coverage in a meaningful way. However, the new adult population may have unique 

health care needs, including a high incidence of behavioral health and social issues. The 

commenter believed that the use of the ABPs would be most beneficial if they are used to tailor 

the scope of services and alignment of benefits to ensure adequate delivery systems for high need 

populations. 

Response: Section 1937 of the Act offers flexibility for states to provide medical 

assistance by designing different benefit packages plan for different groups of eligible 

individuals. We agree with the commenter that ABPs can be successfully designed to meet the 

needs of the new adult population, including those with varying health care needs. As long as 

each benefit package contains all of the EHBs, much flexibility exists for states to meet the 

needs of beneficiaries. 

 Comment: One commenter was concerned that individuals age 50 to 64 may not be 

provided EHBs that are at least equal to those available to high-income individuals who purchase 

coverage on the commercial markets. 

Response: We understand that there could be some variation in EHBs as defined for the 

individual market and for Medicaid based on the selection of different benchmark plans to define 

EHBs. But the flexibility to select different benchmark plans to define EHBs for Medicaid 

ABPs will allow states to address the unique needs of each circumstance and promote 

administrative simplicity, while still providing a floor for coverage. As long as that floor is met, 

Medicaid beneficiaries in the new adult group can also receive benefits from the selected 

coverage options under section 1937 of the Act or through substitution of benefits. 

Comment: One commenter stated it is important that all individuals obtaining Medicaid 

coverage under the Affordable Care Act receive health coverage appropriate for their needs, 
CMS-2334-F 117 

including strong coverage for mental health and substance use disorders. The commenter also 

wrote it is important that traditionally Medicaid eligible populations that may be enrolled in 

ABPs are guaranteed adequate coverage. 

Response: ABP flexibility is an option that states can choose to use in redesigning their 

current Medicaid benefit program. The requirement that ABPs include EHBs and comply with 

mental health parity requirements ensures a minimum level of sufficiency of the coverage. 

Comment: One commenter requested that HHS require or give states the option to 

provide EPSDT coverage to 19- and 20-year olds who qualify for the new adult group. 

Response: The existing provisions of §440.345 require states to make available EPSDT 

services as defined in section 1905(r) of the Act that are medically necessary for those 

individuals under age 21 who are covered under the State plan. We did not propose to change 

this requirement. To the extent that any medically necessary EPSDT services are not covered 

through the ABP plan, states must supplement the ABP plan to ensure access to these services. 

EPSDT provisions apply to 19- and 20-year olds who qualify for the new adult group. 

Comment: One commenter believed that the Affordable Care Act provided an 

unprecedented opportunity to improve access to somatic and behavioral health treatment for the 

“jail-involved” population. The commenter noted that up to 6 million incarcerated individuals 

have income below 133 percent which would make them newly eligible for Medicaid under the 

Affordable Care Act. These individuals could represent up to 1/3 of the newly eligible 

population, underscoring the importance of considering the particular circumstances of 

incarcerated individuals in implementation of the Affordable Care Act. 

Response: Paragraph (A) following section 1905(a)(29) of the Act and implementing 

regulations at §435.1009, specify that Medicaid is prohibited from making payments for care or 

services for any individual who is an inmate of a public institution, except as an inpatient in a 
CMS-2334-F 118 

medical institution. We read this prohibition to apply generally to medical assistance, whether 

provided through the regular coverage plan or through an ABP. Regular coverage or regular 

Medicaid benefit package is defined as Medicaid state plan services including services defined in 

section 1905(a), 1915(i), 1915(j) and 1945 authorities. Thus, while we agree with the 

commenter that incarcerated individuals may be eligible for Medicaid, they would not be entitled 

to ABP benefits inconsistent with the payment exclusion. We note that this is consistent with the 

exclusion of incarcerated individuals from eligibility to enroll in coverage through the 

Exchanges. It is also consistent with the responsibility under the Eighth Amendment of the 

United States Constitution of governmental entities to provide necessary medical care to 

individuals who they are holding as inmates, which effectively creates a liable third party for 

such care. 

States should suspend, rather than terminate, the Medicaid eligibility of individuals who 

are enrolled in Medicaid when entering a public institution, so as to ensure ease of reinstitution 

of coverage post-release. Additionally, if an individual is not already enrolled in Medicaid, 

states can enroll eligible individuals prior to their release so that the individual can receive 

Medicaid covered services in a timely manner upon discharge. 

Comment: One commenter believed that the new eligibility category is likely to attract 

younger and healthier populations than traditional Medicaid. The commenter believed that a 

percentage of those who are newly eligible will acquire a condition or disability after they are 

enrolled in an ABP. The commenter recommended that HHS standardize an effective process 

for ensuring that beneficiaries whose health status changes have the opportunity to access in a 

timely manner other ABP or traditional state Medicaid plans which meet their needs. The 

following standards were suggested: a process for participants to request and receive clinically 

appropriate benefits not routinely covered by the plan; a process for participants to request and 
CMS-2334-F 119 

receive coverage for benefits beyond the limits set by the plan where extraordinary 

circumstances exist; and a process for participants to request and receive coverage of specialty 

care not routinely coverage by the plan when medically necessary and appropriate. 

Response: As noted, states have the flexibility to define different benefit packages to 

meet the needs of disparate populations. In addition, individuals in the new adult group meeting 

the exemption criterion found in section 1937 of the Act have the ability to choose between ABP 

benchmark coverage designed by the state using the rules of section 1937 of the Act including 

EHBs as a minimum level of coverage, or ABP benchmark coverage defined as the state’s 

approved regular state plan benefit package, which is not subject to the requirements of section 

1937 of the Act. 

Comment: One commenter supported providing states with flexibility to add state plan 

benefits and services found in base-benchmark plans to benchmark-equivalent benefits. The 

commenter also believed it would helpful to clarify that adding such benefits would be possible 

and appropriate for individuals in the Medicaid expansion group. 

Response: We appreciate the commenter’s support, and clarify here that individuals in 

the new adult group can receive benchmark-equivalent coverage or Secretary-approved coverage 

which can include a broader range of services than in public employee or commercial benchmark 

coverage options. 

Comment: One commenter interpreted the proposed rule to say that individuals who are 

newly eligible adults – and not deemed medically frail – do not qualify for additional services 

above and beyond what is required under section 1937 of the Act and the EHB. Based on that 

interpretation, if a state wanted to provide wrap around services for a particular population, in 

which some of the newly eligible would fall under, it would not be allowable unless the state 

created a Secretary-approved plan that incorporates the benefits into the underlying plan. The 
CMS-2334-F 120 

commenter requested that CMS clarify and/or confirm the interpretation of this provision. 

Response: We confirm that the individual’s interpretation is correct. Section 1902(k)(1) 

of the Act provides that individuals in the new adult group receive benchmark or benchmarkequivalent coverage subject to the requirements of section 1937 of the Act (except that 

individuals who would otherwise be exempt may choose to receive benchmark or benchmarkequivalent coverage that is not limited by section 1937 of the Act, and thus have the option of 

benchmark or benchmark-equivalent coverage that is equal to the Medicaid benefit package 

otherwise available). Such coverage can be in the form of Secretary-approved coverage, which 

may, at state option, include a broader range of services than public employee or commercial 

benchmark options. 

 Comment: Many commenters requested CMS clarify that the federal matching rate is 

based on the individual and not the services provided. A few commenters requested clarification 

that services provided through the Secretary-approved ABP process for Medicaid expansion 

individuals will be covered at the enhanced rate and that Medicaid expansion individuals who 

are exempted into traditional Medicaid coverage will also be covered at the enhanced rate. 

Response: We clarify that the enhanced FMAP rate for newly eligible individuals is 

available for all services they receive. The matching rate is based on the individual, not on the 

services provided to them. 

Comment: One commenter urged HHS to clarify the flexibility that states will have to 

design multiple ABPs targeting specific populations. The commenter understands this provision 

will allow states to put in place ABPs for sub-populations within the newly eligible group (that 

is, people living with chronic viral hepatitis or other chronic conditions) and urges CMS to 

clarify that this is an appropriate use of the ABP flexibility. 

Response: Section 1937 of the Act provides states with significant flexibility to design 
CMS-2334-F 121 

Medicaid benefit coverage under the State plan. There are many options in selecting an ABP, 

and states may offer different ABPs to different targeted populations (except that, as discussed 

elsewhere, targeting cannot be based on the amount or level of federal matching funding). 

Section 1937 of the Act provides states with the statutory construct to provide an ABP without 

regard to requirements at sections 1902(a)(1) (related to state-wideness) and 1902(a)(10)(B) 

(related to comparability) of the Act. This flexibility is provided at §440.376 and §440.380, 

respectively. 

Comment: One commenter was unclear why the term ABP is being used. The 

Affordable Care Act references ABPs specifically for evaluation of the ABPs as required under 

the Class Independence Advisory Council. Other sections reference alternative benefits or 

programs specifically under section 1937 of the Act or the establishment of Basic Health Plans. 

The commenter believed the use of the term is confusing and unnecessary since benchmark plans 

are not alternative plans or programs as originally identified in the law. Another commenter 

found §440.305 confusing as paragraph (a) refers to “benchmark and benchmark-equivalent” 

however paragraph (b) refers to ABP. The commenter suggested revising paragraph (a) by 

replacing benchmark and benchmark-equivalent with ABP. 

Response: The Deficit Reduction Act of 2005 amended the Act by adding a new section 

1937 of the Act to provide for the use of benefit packages other than the standard benefit 

package, namely benchmark and benchmark-equivalent packages. The Affordable Care Act 

made statutory changes to section 1937 of the Act, one of which is the requirement that section 

1937 coverage packages include EHBs. We issued regulations outlining how the precise 

parameters of EHBs will be established in the non-grandfathered plans in the individual and 

small group markets and, to some degree, how they will be implemented in section 1937 

coverage plans. In that regulation, the term “base-benchmark” was used to refer to the base plan 
CMS-2334-F 122 

used by states to determine EHBs for coverage plans in the non-grandfathered plans in the 

individual and small group markets. That base-benchmark plan becomes the EHB-benchmark 

plan after it is supplemented with any missing categories of EHBs. In an effort to prevent 

confusion between the term “benchmark” used for the non-grandfathered plans in the individual 

and small group markets, and the use of “benchmark” by section 1937 coverage plans, we chose 

from the statutory construct of section 1937 of the Act the term “Alternative Benefit Plan” 

(ABP) to hereafter refer to Medicaid benchmark and benchmark-equivalent plans as ABP. 

Comment: One commenter indicated that there was no adult group under section 

1902(a)(10)(A)(i)(VIII) of the Act on or before February 8, 2006 so the exception in subsection 

(b) does not appear to fit. 

Response: Section 6044 of the Deficit Reduction Act of 2005 amended Title XIX by 

adding a new section 1937 of the Act that allows States to amend their Medicaid State plan to 

provide for ABPs and limits application of this provision to individuals whose eligibility is based 

on an eligibility category under section 1905(a) of the Act that could have been covered under 

the State’s plan on or before February 8, 2006. In 2010, section 2001(a)(1) of the Affordable 

Care Act amended Title XIX to establish a new optional adult eligibility group for low-income 

adults age 19 to 64. Effective January 1, 2014, States that implement this new eligibility group 

must provide medical assistance for that group through an ABP. As specified, all provisions of 

section 1937 of the Act apply to the new adult eligibility group except that those individuals in 

the new adult group who meet the exemption criteria will have a choice between ABP 

benchmark benefits as defined by the state under the rules of section 1937 of the Act and ABP 

benchmark benefits defined as the state’s approved Medicaid state plan, without regards to the 

rules of section 1937 of the Act. 

Comment: A few commenters believed the final rule should clarify that an ABP 
CMS-2334-F 123 

designed for individuals within the new adult eligibility group can align with traditional 

Medicaid coverage through the process of designing of a Secretary-approved plan. 

Response: We understand the importance of this issue, and reiterate guidance here. 

Secretary-approved coverage, which can include the full regular Medicaid state plan benefit 

package, is one of the four statutorily specified coverage benchmarks available under section 

1937 of the Act. States can choose to use Secretary-approved coverage to significantly align the 

benefits offered to the new adult eligibility group with the regular state Medicaid package. Like 

with the other three statutorily specified coverage benchmarks, the Secretary-approved coverage 

must include EHBs as described in section 1302(b) of the Affordable Care Act and applicable 

regulations. In all cases, EHBs are first defined as the benefits from the base benchmark plan 

and supplemented with benefits from other base benchmark plans as necessary. CMS is 

clarifying in this rule that substitution of benefits as defined at §156.115(b) is applicable to 

EHBs in ABPs. We believe that states will appreciate this added flexibility. Substitution of 

benefits can occur benefit by benefit. The benefits must fit into the same EHB category and the 

benefits being interchanged must be actuarially equivalent. Benefits do not have to be similar in 

nature, they must only be in the same EHB category and actuarially equivalent. Furthermore, 

states may substitute more than one benefit that when combined are actuarially equivalent to a 

single benefit. States may use their Medicaid state plan benefits for substitution if the state plan 

benefit is actuarially equivalent and in the same EHB category of benefit that will be replaced. ,-

, 

Comment: Consistent with the provisions of sections 1902(k)(1) and 1903(i)(36) of the 

Act, the commenter requested that CMS confirm that the coverage for individuals eligible only 

through section 1902(a)(10)(A)(i)(VIII) of the Act is limited to benchmark or benchmarkequivalent coverage. 
CMS-2334-F 124 

 Response: That is correct. This still leaves states with significant flexibility to design 

coverage using the options of benchmark coverage, which includes Secretary-approved 

coverage, and benchmark equivalent coverage. Section 1937 of the Act must also provide 

EHBs, which through selection of a base-benchmark plan, supplementation and substitution, will 

be used to define the EHBs. EHBs are then incorporated with the section 1937 benchmark 

coverage to lead to a complete benefit package. 

 Comment: Several commenters stated that the option to offer specialized benefit 

packages, in the form of more than one ABP, to different target populations creates an 

administrative burden and confusion for families. The option to offer specialized benefit 

packages might require more than one design process and public notice; additional actuarial 

analyses of the different benefit packages for rate setting; an extra process for tracking 

individuals; and a state’s contracted MCOs would have to manages different benefit packages. 

Response: The flexibility to provide specialized benefit packages to one or more targeted 

populations is at the option of the state. Each state will determine whether it is appropriate or 

administratively feasible to design and offer different benefit packages for different groups of 

beneficiaries. 

Comment: One commenter was concerned with the disparities in coverage that the 

proposed EHB policy would create. That is, the guidance suggests that the policy only 

mandatorily applies to the newly eligible category of adults. In states that wish to take up the 

new expansion option this creates a situation in which the higher income expansion population 

will receive a more generous benefit package than the existing population would receive. 

Response: We understand the commenter’s concern, and it is true that the benefit 

package may be different because of the requirement that ABPs provide EHBs. However, it is 

not clear that the ABP benefit package provided to the new adult eligibility group will be more 
CMS-2334-F 125 

generous than the existing Medicaid benefit package. In addition, we remind readers that the 

EHB requirements apply to all individuals receiving services through an ABP, not just those in 

the new adult group. 

Summary: We did not make any changes to proposed regulation text as a result of 

comments in this section. 

b. Exempt individuals (Former foster care children) (§440.315) 

 We proposed to implement section 1937(a)(2)(B)(viii) of the Act, added by section 2004 

of the Affordable Care Act, as amended by section 10201(a) of the Affordable Care Act, by 

providing that individuals eligible under section 1902(a)(10)(A)(i)(IX) of the Act will be exempt 

from mandatory enrollment in an ABP. . 

Comment: Many commenters commended HHS for confirming that the new former 

foster care children group is exempt from mandatory enrollment. Many other commenters 

expressed support for affirming at §440.315(h) that former foster care children are statutorily 

exempt from mandatory enrollment in an ABP, and therefore, can access the full Medicaid 

benefit, including EPSDT services, up to age 21. 

Response: We appreciate commenter support. Individuals under age 21 receive EPSDT 

either through the ABP or as additional coverage that supplements the ABP. 

Comment: One commenter wrote that while the proposed rule clarifies that former foster 

care youth up to age 26 are eligible for full Medicaid benefits, may not be mandated into an 

ABP, and will have access to full EPSDT services up to age 21, after age 21, former foster care 

youth will no longer have access to EPSDT benefits and requested clarification as to the 

meaning of “full Medicaid benefits.” According to the commenter, the American Academy of 

Pediatrics recently reported that children in foster care experience significantly higher rates of 

medical and mental health challenges, and therefore, believes that youth aging out of foster care 
CMS-2334-F 126 

require comprehensive health coverage that recognizes their unique needs. Once a youth turns 

21 they lose EPSDT coverage but continue to have the same health needs. The commenter 

therefore requested that CMS define “full Medicaid benefits” to include benefits akin to EPSDT, 

including dental coverage, mental health services and physical health care. 

One commenter stated she appreciates the clarification that former foster care children 

are exempt from mandatory enrollment in an ABP and that they will receive full Medicaid 

benefits. However, it is not clear whether this means they can receive EPSDT. The commenter 

urged CMS to consider mandating, or at a minimum, allowing states to provide EPSDT benefits 

for this at risk population because in a majority of states oral health is not part of the adult 

Medicaid benefit package and evidence suggests that roughly 35 percent of children in foster 

care have significant oral health problems. Making sure oral health issues are addressed as 

former foster care youth move into adulthood will have a significant impact. 

Response: We acknowledge that children in foster care generally experience 

significantly higher rates of medical and mental health challenges and that these health 

challenges often continue after aging out of foster care. For this reason, Congress provided 

statutory protection for an individual who receives aid or assistance under part B of title IV of 

the Act for children in foster care or an individual for whom adoption or for whom foster care 

assistance is made available under part E of title IV of the Act, without regard to age, by 

exempting these individuals from mandatory enrollment in an ABP. 

Under the existing provisions of §440.345, States must make available EPSDT services, 

as defined in section 1905(r) of the Act, for those individuals under age 21 who are enrolled in 

an ABP. To the extent that medically necessary EPSDT services are not otherwise covered 

through the ABP for individuals under 21, states are required to supplement the ABP to ensure 

access to these services. However, there is no statutory authority to require states to provide 
CMS-2334-F 127 

EPSDT services beyond age 21. We note that states have the flexibility to design an ABP 

targeted to former foster care children that provides a more comprehensive array of health 

coverage than is provided through the regular state plan and to offer voluntary enrollment in 

such a plan. Through the ABP option, states can provide this population with oral health and 

other services not otherwise available to adults through State plan coverage. 

 Summary: We have not changed proposed regulation text as a result of comments 

received in this section. 

c. Benchmark-equivalent health benefits coverage (Prescription drugs and mental health 

benefits) (§440.335) 

We proposed to implement section 2001(c) of the Affordable Care Act that added mental 

health benefits and prescription drug coverage to the list of benefits that must be included in 

benchmark-equivalent coverage.

Comment: Many commenters were supportive of paragraphs (b)(7) and (b)(8) 

implementing the statutory requirements for benchmark-equivalent coverage to include 

prescription drugs and mental health benefits. A few commenters commended the broad list of 

services included in the proposed rule. 

Response: We agree that the inclusion of prescription drugs and mental health benefits 

as defined within ABPs are important and necessary and we appreciate the support of 

commenters regarding the coverage of the benchmark-equivalent health benefits. 

Comment: A few commenters were pleased that HHS listed services that can be vital to 

people with disabilities and chronic health conditions as allowable in benchmark-equivalent and 

Secretary-approved coverage. 

Response: We acknowledge the special medical needs of individuals with chronic health 

conditions. The final rule provides a clear path to coverage for chronic disease management 
CMS-2334-F 128 

under §440.347. 

Comment: A number of commenters requested that CMS clarify paragraph (c)(1). The 

commenters believed that CMS is suggesting it will use a similar policy for benchmarkequivalent coverage as it does for Secretary-approved coverage and, thus, allow addition of 

benefits through the benchmark-equivalent coverage process. The commenters believed there is 

no legal impediment to this approach and supported it. The commenters urged CMS to confirm 

this interpretation. 

Response: We confirm this interpretation. The rule provides states the flexibility to 

include coverage for benefits beyond the required coverage and allows for states to create 

benchmark-equivalent coverage that can include benefits not available through the benchmark 

options. 

Comment: Numerous commenters were confused by the language in §440.335(c)(1) 

allowing addition of services available in “2 or more” benchmark options, as opposed to the 

language of “1 or more” which appears in §440.330 and in current regulation. The commenters 

believed this may be a clerical error and recommended the “1 or more” language to maximize 

state flexibility. 

Response: A clerical error was made in §440.335(c)(1). The regulation has been 

corrected to read, “...for any additional benefits of the type which are covered in 1 or more of 

the standard benchmark...” 

Comment: One commenter was concerned that only provision §440.335(c)(1) was being 

amended leaving (c)(2) and (c)(3) intact. The commenter believed this will result in conflict 

with newly added §440.335(b)(7) and (8) as these provisions provided that four benefits 

(prescription drugs, mental health, vision and hearing services) must represent 75 percent of the 

actuarial value and are not required to be covered. 
CMS-2334-F 129 

Response: We disagree that the existing provision §440.335(c)(2) will conflict with 

§440.335(b)(7) and (b)(8). The actuarial value of the coverage for prescription drugs, mental 

health services; vision services; and hearing services must still be at least 75 percent of the 

actuarial value of the coverage for that category of service in the benchmark plan used for 

comparison by the state. 

However, provision §440.335(c)(3) is in conflict with §440.335(b)(7) and (b)(8). The 

state will, by default, meet the conditions of (c)(3) because prescription drugs and mental health 

services are now required benchmark-equivalent coverage and states will not have an option to 

provide such coverage as regulation currently allows. States also have the ability to add vision 

and hearing services through new requirements for additional coverage at §440.335(c), for 

individuals not in the new adult group. Individuals in the new adult group can receive these 

vision and hearing services, at state option, through the use of Secretary-approved coverage. 

Therefore, we have stricken §440.335(c)(3) from the final rule. 

Summary: As a result of comments received in response to the proposed regulation, 

CMS has deleted §440.335(c)(3) from the final rule. Additionally, an error was made in 

§440.335(c)(1). The regulation has been corrected to read, “...for any additional benefits of the 

type which are covered in 1 or more of the standard benchmark coverage packages described in 

§440.330(a) through (c) of this part or State plan benefits ...” Otherwise, CMS has not made any 

changes to this section. 

d. EPSDT and other required benefits (family planning services and supplies) (§440.345) 

We proposed to codify section 2303(c) of the Affordable Care Act by adding paragraph 

(b) to §440.345 to provide that ABP coverage provided to individuals described in section 

1905(a)(4)(C) of the Act (individuals of child bearing age), include family planning services and 

supplies.
CMS-2334-F 130 

Comment: Many commenters thanked CMS for codifying the important provision 

requiring that ABP coverage provided to individuals of child-bearing age include family 

planning services and supplies. This will help insure that Medicaid beneficiaries can access 

essential family planning services and supplies regardless of the type of Medicaid plan in which 

they are enrolled. 

Response: We thank the commenters for their support. 

Comment: One commenter requested further clarification as to the specific services and 

supplies that fall into this category. Clarification was also requested on which services are 

covered for individuals of child bearing age, including minors who can be considered to be 

sexually active, who are eligible under the state plan, and who want such services required under 

section 1905(a)(4)(C) of the Act. Because family planning services are not clearly defined in 

federal law or regulation, the commenter urged CMS to clarify in this rule that family planning 

services and supplies include but are not be limited to: examination and treatment by medical 

professionals; medically appropriate laboratory examinations and tests; counseling services and 

patient education; medically approved methods; procedures, pharmaceutical supplies; and 

devices to prevent contraception and infertility services, including sterilization reversal. 

Several recommended HHS clarify family planning to specify coverage of section 

1905(a)(4)(C) of the Act services and supplies and require states to assure compliance with 

section 1902(a)(23) of the Act freedom of choice for family planning services and supplies, since 

it is likely that many states will contract with managed care organizations, some of which may 

have no Medicaid experience. They believe that explicitly requiring freedom of choice will 

increase the likelihood that all plans will comply with the freedom of choice requirement. 

Response: Family planning services and supplies are described in section 1905(a)(4)(C) 

of the Act. We have chosen not to use this rule as the vehicle for issuing additional guidance on 
CMS-2334-F 131 

family planning services, as such guidance would need to have broader implications than this 

rule provides. In addition, we do not believe it is necessary to address issues relating to 

beneficiary choice of family planning provider in this provision, since this provision deals only 

with coverage issues under an ABP, and not with issues such as freedom of choice of provider. 

That issue is separately addressed in our regulations at §431.51 and §441.20. 

Comment: One commenter addressed section 2(B)(1) of the preamble, specifically the 

statement “Consistent with the current law, states have the flexibility within those statutory and 

regulatory constructs to adopt prior authorization and other utilization control measures, as well 

as policies that promote the use of generic drugs.” The commenter is concerned that the 

interpretation of this statement could provide too much flexibility for states in the use of 

utilization control measures, creating a barrier to necessary family planning supplies for 

Medicaid enrollees, as women need access to the full range of contraceptive methods to utilize 

the method most effective for them. The commenter requested HHS to issue sub-regulatory 

guidance that prohibits barriers to the full range of FDA-approved contraceptive methods 

guaranteed under the Affordable Care Act. 

Response: Prior authorization and utilization control measures are common practices 

used within regular Medicaid, public employee, and commercial insurance products. Benefit 

packages designed within ABPs also have this flexibility. These approaches should not be used 

as a barrier to needed services. This proposed rule and final rule added the Affordable Care Act 

requirement that all ABPs must include coverage of family planning services and supplies. 

Nothing in the final rule authorizes deviation from the protection of beneficiary free choice of 

family planning provider, consistent with section 1902(a)(23) of the Act and §431.51, or an 

exception to the requirement at §441.20 that the state plan provide that beneficiaries are 

protected from coercion or mental pressure and are free to choose the method of family planning 
CMS-2334-F 132 

to be used. 

Comment: One commenter wrote that discrimination in benefit plan design is a 

persistent practice in the insurance industry and the exclusion of treatment for infertility is one 

example. Infertility affects an estimated 12 percent of women of child bearing age and infertility 

treatments are more commonly prescribed for women than for men. Another commenter 

recommended that the list of required categories of services for benchmark-equivalent coverage 

incorporate each of the benefits including family planning services and supplies required under 

EHB as specified in §440.347(a) for consistency and clarity and to ensure consumer protections. 

Response: Coverage of infertility services is generally at the option of the state. 

However, coverage of infertility services becomes part of the ABP benefit package either: (1) if 

the state selects a coverage plan under section 1937 of the Act that includes such coverage or 

chooses to include such coverage as part of a benchmark-equivalent coverage plan; or, (2) if the 

base-benchmark plan chosen by the State to define EHBs covers infertility treatment in an EHB 

category, unless the state elects the option set forth in 45 CFR 156.115(b) to substitute 

actuarially equivalent benefits in defining EHBs. We are reiterating here that CMS is clarifying 

in this rule that substitution of benefits as defined at 45 CFR 156.115(b) is applicable to EHBs in 

ABPs. We believe that states will appreciate this added flexibility. Under 45 CFR 

156.115(b)(1), substitution of benefits can occur benefit by benefit. The benefits must fit into 

the same EHB category and the benefits being interchanged must be actuarially equivalent. 

Furthermore, states may substitute more than one benefit that when combined are actuarially 

equivalent to a single benefit. States may use their Medicaid state plan benefits for substitution 

if the state plan benefit is actuarially equivalent and in the same category of benefit that will be 

replaced. We do believe it is necessary to explicitly list the EHB categories in the regulation text 

for benchmark-equivalent coverage, as section 1937 of the Act was amended to require both 
CMS-2334-F 133 

benchmark and benchmark-equivalent coverage to include all EHBs. States will identify 

substituted benefits in the ABP SPA when submitted to CMS. 

Summary: We will not be making changes to proposed regulation text as a result of 

comments received. 

e. EPSDT and other required benefits (Mental health parity) (§440.345)) 

Section 2001 (c) of the Affordable Care Act directed that benefit plans under section 

1937 of the Act that include medical and surgical benefits and mental health and/or substance 

use disorder benefits comply with MHPAEA and we codified this at §440.345(c) in the proposed 

rule. 

Comment: Almost all commenters expressed support for the requirement in §440.345(c) 

requiring that mental health or substance abuse benefits must be provided by ABPs and must 

comply with MHPAEA. Many also commended CMS for clarifying that ABPs must include 

mental health parity as this will lead to the provision of necessary services to millions of 

individuals. A number of commenters wrote about how extremely important it is that all 

individuals gaining Medicaid eligibility under the Affordable Care Act receive coverage 

appropriate for their needs including strong coverage of mental health and substance use 

disorders. Many expressed their appreciation for CMS’s strong support for this provision. Many 

stated that they appreciated the proposed rule’s explicit recognition of the Affordable Care Act 

requirement that ABPs must provide the EHBs, including mental health and substance use 

disorder (MH/SUD) services. 

Response: CMS thanks the commenters for their support on the language in the 

regulation. 

Comment: Some commenters asked CMS to provide additional detail on how the 

requirements of MHPAEA apply to ABPs including details on how to supplement benchmark or 
CMS-2334-F 134 

benchmark-equivalent coverage to bring it into compliance with parity and how to identify 

violations in parity compliance. Commenters requested clarification that MHPAEA requires 

ABPs to offer the same scope of MH/SUD services as medical services, including adequate 

prescription drug coverage. 

Response: On January 16, 2013, CMS released a State Health Official Letter regarding 

the application of MHPAEA to Medicaid MCOs, CHIP, and ABPs. This guidance specifically 

states that all Medicaid ABPs (including Secretary-approved coverage) must meet the parity 

requirements, regardless of whether services are delivered in managed care or non-managed care 

arrangements. This includes ABPs for individuals in the new low-income Medicaid expansion 

group, effective January 1, 2014. 

Comment: Many commenters wrote that more than just requiring compliance was 

needed in this final rule because of the documented disparity between coverage of medical 

surgical benefits and coverage of MH/SUD services in commercial and employer health 

coverage. With about one quarter of adults suffering from a diagnosed mental health disorder, 

disparity in services and cost sharing has wide ranging impact. Some stated that studies and 

literature indicate deficits in employer coverage of mental health benefits and that limits on 

MH/SUD services were lower than those for medical surgical benefits. Some commenters stated 

that in clarifying the application of mental health parity CMS should make clear that if 

psychiatric rehabilitation services are provided, so must psychiatric habilitation be required, and 

that CMS should assure that a robust package of mental health coverage is part of ABPs. 

Commenters indicated that supplementation, substitution, parity and other protections are the 

best approaches for EHBs to meet the complex health needs of the low-income adults who will 

gain Medicaid eligibility under expansion. The commenters encouraged CMS to do whatever is 

within its authority to encourage all plans to expand their mental health and substance use 
CMS-2334-F 135 

disorder treatment to provide better care by providing the full range of MH/SUD services and to 

ultimately reduce costs and unnecessary loss of productivity and life. 

Response: States must offer services in all ten EHB categories, including MH/SUD 

services, and must provide such MH/SUD services in a manner that complies with the parity 

requirements of MHPAEA. We do not intend to require or request states to include specific 

services within EHB categories offered by their ABP. As states determine their ABP service 

package, states must use all of the EHB services from the base-benchmark plan selected by the 

state to define EHBs for Medicaid, substituting or supplementing as necessary. We believe this 

will allay concerns expressed by commenters, as commercial plans must also adhere to mental 

health parity requirements. 

Comment: One commenter wrote that final MHPAEA regulations are not yet released, 

and therefore, CMS should provide a detailed framework for determining and enforcing parity 

compliance in this final rule. The commenter recommended that HHS establish a clear process 

for how states can modify a plan to ensure parity compliance if it is not compliant; clarify that 

the term “treatment limitation” includes both quantitative and non-quantitative treatment 

limitations and includes limits on scope of service and duration of treatment; require full 

disclosure of benefit and medical management criteria from states and plans to ensure MHPAEA 

compliance in ABPs; ensure that ABPs may not apply a financial requirement or treatment 

limitation, as specified in MHPAEA; include examples of parity violations and detailed 

information on how to supplement coverage that falls short of the parity requirements; and 

review all ABPs to ensure compliance with MHPAEA. 

 Response: The January 16, 2013 CMS State Health Officials Letter provided a 

framework for States to apply MHPAEA to ABPs. Since the release of this State Health 

Officials Letter, we have also provided technical assistance to states regarding the application of 
CMS-2334-F 136 

MHPAEA to ABPs prior to submission of the ABP state plan amendments. 

Comment: A commenter requested that we clarify the applicability of mental health 

parity to Medicaid managed care organizations that provide benchmark or benchmark-equivalent 

coverage. The commenter wanted to know if states would be required to provide services (for 

example; rehabilitation, habilitation, substance abuse services, etc.) that are optional services for 

Medicaid programs if they are not currently covered. 

Response: The January 16, 2013 State Health Official Letter specifically states that all 

Medicaid ABPs (including Secretary-approved coverage) must meet the parity requirements, 

regardless of whether services are delivered in managed care or non-managed care arrangements. 

In addition, under §440.347, ABPs must include MH/SUD services regardless of whether they 

are currently covered in the state’s Medicaid plan. 

Comment: One commenter requested that CMS clarify the guidelines concerning ABP 

benefit substitutions that involve mental health benefits. One wrote that substitutions should not 

be allowed if they would diminish the value of the mental health coverage provided by the EHBbenchmark plan on which ABP benefits are based. The commenter recommended that this issue 

be carefully monitored; if possible, CMS should develop an easily applied, objective test to 

evaluate whether a proposed benefit substitution would reduce the value of mental health 

coverage compared to the mental health coverage provided by the EHB benchmark plan. 

Additionally, some commenters stated there still is confusion about how to apply the parity 

requirements. Commenters encouraged CMS to issue explicit guidance on whether benchmark 

plans will be evaluated for compliance with parity requirements as necessary before they are 

approved by CMS as ABPs. 

Response: As discussed above and below in the summary, substitution will be allowed 

according to provisions at 45 CFR 156.115(b) except that states will perform substitution rather 
CMS-2334-F 137 

than issuers. We will review all ABP state plan amendment requests from states against 

applicable federal laws and regulations, including MHPAEA.

Comment: Some commenters wrote that because they are not specifically enumerated in 

MHPAEA, inpatient mental health substance abuse disorder (MH/SUD) services are often not 

covered. Many commenters stated that the definition of “inpatient” in the Interim Final Rules 

implementing MHPAEA leaves the definition up to the state and insurance companies. This is 

important and unfortunate because it allows for avoidance of MHPAEA and invites litigation. A 

number of commenters stated that HHS can easily rectify this deficiency by explicitly mandating 

residential coverage as an “inpatient service which must be offered on par with medical/surgical 

coverage.” Some urged CMS to explicitly restate the requirement that all Medicaid ABPs must 

cover MH/SUD services. A number of comments stated that inpatient services must be defined 

as including residential services, including Institutions for Mental Diseases (IMDs). HHS can 

improve the interpretation of relevant definitions by incorporating by reference those definitions 

as set forth by the American Psychiatric Association in its Diagnostic and Statistical Manual of 

Mental Disorders. By offering a federal floor of required services states can take comfort that 

they have met the mandated requirement. One commenter wrote that IMD restrictions present an 

access barrier for the expansion population and the Affordable Care Act is clear that ABPs 

should include the EHB hospitalization and mental health services that are included in 

commercial coverage that must cover EHB. Another commenter wrote that HHS should prohibit 

ABPs from including mental health benefits that are subject to higher limitations on amount, 

scope, and duration than benefits intended for physical/medical conditions, or narrowly 

specifying that mental health services cannot be a component of other EHB categories, such as 

the mental health rehabilitation needs that are required following a traumatic medical event. 

Response: States must offer services in all ABPs that reflect the ten EHB categories, 
CMS-2334-F 138 

including MH/SUD services. We do not intend to require states to include specific services 

within EHB categories offered through an ABP. Nor are we specifically requiring coverage of 

any particular residential mental health services as part of “inpatient services,” provided that the 

coverage complies with MHPAEA. States may, however, be required to provide residential 

mental health services that are included in the section 1937 coverage plan that is the basis for the 

ABP, or that is included in the base-benchmark plan selected by states to define EHBs for 

Medicaid. 

We clarify, however, that the IMD payment exclusion does apply to all medical 

assistance, even medical assistance furnished through an ABP. This means that FFP is not 

available for any services, including services provided through an ABP, furnished to an 

individual under age 65 who resides in an IMD, except for inpatient psychiatric hospital services 

furnished to individuals under age 21. Finally, we clarify that the requirement that all ABPs 

comply with MHPAEA includes compliance with MHPAEA requirements regarding treatment 

limits. 

Comment: A commenter wrote that under the traditional Medicaid program, the term 

“medical assistance” does not include care or services for any individual who is a patient in an 

institution for mental disease, but benchmark coverage does not have an express exclusion of 

care and services for such individuals. The commenter asserted that for benchmark coverage, 

which includes coverage for EHBs, exclusion of these same services for patients residing in an 

IMD would directly conflict with the plain language of the law because section 1937 of the Act 

provides for no exception for individuals between ages of 21 and 65 residing in an IMD, but 

does contain an exemption from other provisions of Title XIX (to which the IMD exclusion 

applies). The commenter states that just as an ABP is exempt from complying with the 

requirements related to state-wideness and comparability in the Medicaid statute because they 
CMS-2334-F 139 

conflict with the benchmark authority, so too is the plan exempt from complying with the IMD 

exclusion which cannot be applied in a consistent manner with the EHB requirements. The 

commenter also added that, just as application of the IMD exclusion to an ABP would be 

“directly contrary” to a state’s ability to offer EHBs, the exclusion is also contrary to any of the 

benchmark/benchmark-equivalent coverage described in the statute. Another commenter argued 

the same points and also stated that the IMD exclusion is not consistent with the definition of an 

ABP to include, among a selection of plans, the health insurance plan offered through the HMO 

that has the largest insured commercial non-Medicaid enrollment in the state. As such coverage 

would necessarily be available on par to individuals residing inside and outside of an IMD, the 

commenter asserted that Congress never intended the IMD exclusion to apply to Medicaid 

beneficiaries enrolled in an ABP. 

Response: We do not agree with the commenters’ statements that the IMD exclusion 

does not apply to medical assistance furnished through an ABP. The IMD exclusion is not a 

service or benefit exclusion. It is a payment exclusion that applies to all Medicaid services 

provided to an individual residing in an IMD, not solely a payment exclusion for services 

provided in or by an IMD. The statute excludes services furnished to residents of an IMD from 

the term “medical assistance,” and we read this exclusion to apply whether medical assistance is 

furnished through regular coverage or through an ABP. (Above we clarify that we have a parallel 

reading of the similar payment exclusion for inmates of a public institution.) Thus, we clarify 

that the IMD payment exclusion applies to coverage offered through ABPs. Benefits furnished 

through ABPs can be structured so that individuals have inpatient options for mental health 

treatment outside of IMDs, but to the extent that an individual resides in an IMD, the IMD 

exclusion would apply. We are not aware of any contrary congressional intent, and this position 

is consistent with the express statutory exclusion from the definition of medical assistance. 
CMS-2334-F 140 

Comment: A few commenters stated that MH/SUD services are sometimes provided in 

facilities that are considered an institution of mental disease for which FFP is excluded and 

requested that CMS reconcile the requirement that these services must be provided as an EHB . 

Response: For the reasons discussed above, we are clarifying that the IMD payment 

exclusion does apply to medical assistance furnished through ABPs. We expect that ABPs will 

ensure that coverage for MH/SUD services is available consistent with MHPAEA and the final 

regulations that govern EHBs under Medicaid. There may be options for inpatient services other 

than inpatient services in IMDs that states may wish to consider to meet MHPAEA obligations 

under ABPs. 

Comment: One commenter stated that exclusions for otherwise-covered benefits such as 

mental health services that treat eating disorders and gender disorders should not be permitted, as 

these exclusions carve out coverage explicitly on the basis of health condition and are 

discriminatory. 

Response: We will review ABP state plan amendments to ensure their compliance with 

applicable federal statutes and regulations, including MHPAEA, and EHB anti-discrimination 

provisions. 

Comment: One commenter stated that healthcare providers who provide MH/SUD 

treatment services were encouraged by the passage of MHPAEA but many states and insurance 

companies are “stonewalling” implementation and inclusion of MH/SUD treatment as a 

mandate. EHB requirements will not correct this problem unless HHS rules provide better 

clarity regarding implementation of parity, in particular inclusion of inpatient services. 

Response: MHPAEA does not require the provision of specific MH/SUD services. 

Rather, it requires these services to be provided in parity with medical/surgical services, when 

benefit packages include both sets of services. The release of the January 13, 2013 State Health 
CMS-2334-F 141 

Official Letter has provided initial guidance to states and managed care plans regarding the 

application of MHPAEA to the Medicaid program. We believe that guidance provides useful 

information to states regarding their efforts to apply MHPAEA to their Medicaid ABPs. In 

addition, CMS is reminding commenters that inpatient hospitalization is a required EHB for 

ABPs. 

Comment: One commenter stated that Medicaid regulations should employ the same 

disorder carve-outs for the expansion population as used for existing populations and remain in 

compliance with federal parity laws. Further, states should not be required to provide different 

or additional MH/SUD benefits to the expansion populations than what is furnished to existing 

beneficiaries. 

Response: This regulation does not prohibit states from using their current delivery 

systems or designing new delivery systems to offer EHBs, including MH/SUD services. States 

are required to offer MH/SUD services consistent with the process set forth in this regulation 

regarding the development of ABPs and MHPAEA. Because of the need to select a public 

employee or commercial plan to define EHBs for Medicaid, there could be differences between 

the ABP benefit package and the services otherwise offered in the regular Medicaid coverage 

package.. 

Comment: Many commenters strongly urged CMS to release final MHPAEA regulations 

as soon as possible and to include how to apply parity to EHBs and ABPs and to give examples 

of violations. A commenter stated that without the final rule on MHPAEA, effective compliance 

will not be possible. Another commenter requested prompt release of additional guidance 

referenced in the January 13, 2013 State Health Official Letter, concerning any requirements to 

apply parity principles across multiple managed care delivery systems and urged a flexible 

approach to measuring parity in carve-out setting in promotion of continuity for existing 
CMS-2334-F 142 

arrangements and authorities. 

Response: A response on the timing of a final MHPAEA regulation is beyond the scope 

of this regulation. 

Comment: One commenter wrote that insurance companies have sought to avoid 

implementation of MHPAEA and states that do not currently require mental health parity may be 

concerned that compliance will result in the state incurring the costs associated with the 

expansion of state mandates. Two commenters stated that there are lingering concerns with 

some of the parity language in the proposed regulation, which states in §440.345 that ABPs that 

provide both medical and surgical benefits, and mental health or substance use disorder benefits, 

must comply with MHPAEA. CMS should revise this language to make it clearer and more 

accurate. The commenters asserted that MHPAEA does not apply to coverage under section 

1937 of the Act that is delivered in a non-managed care arrangement; rather the Affordable Care 

Act extended the protections of MHPAEA to this coverage without amending MHPAEA. 

Specifically, regarding coverage under section 1937 of the Act, the Affordable Care Act requires 

that “the financial requirements and treatment limitations applicable to such mental health or 

substance use disorder benefits comply with the requirements of section 2705(a) of the PHS Act 

(MHPAEA) in the same manner as such requirements apply to a group health plan” and the final 

rule should include similar language. 

Response: It is unclear exactly what the commenter is asking, in terms of incurring 

expenses associated with state benefit requirements. Therefore, we will not be able to respond to 

this comment at this time. We disagree with the commenters’ assertion that mental health parity 

requirements do not apply to ABPs using non-managed care delivery systems. Parity 

requirements apply to all ABPs, regardless of the use of managed care. 

Comment: One commenter wrote that because of changes in the income eligibility 
CMS-2334-F 143 

standards we expect Medicaid expansion is more likely to enroll individuals who are working 

but have no insurance and who need this coverage to access treatment to maintain employment. 

People with addictions enter treatment at different phases and will use different parts of the 

continuum, and elimination of any part of the continuum would violate MHPAEA and cost 

human lives. The commenter urged CMS to adopt the same standards set forth in the proposed 

rule for the Affordable Care Act standards related to EHB, Actuarial Value, and Accreditation 

for purposes of Medicaid ABPs. Additionally, the commenter stated that MHPAEA holds out 

the promise that everyone will be able to get help but strong enforcement of MHPAEA is 

necessary. 

Response: It is unclear exactly what the commenter is asking. Therefore, we will not be 

able to respond to this comment at this time. 

Comment: A commenter wrote that this rule as proposed rule fails to link MHPAEA 

compliance to adherence to the Interim Final Rule which operationalizes MHPAEA. The 

previously issued Proposed Rule for Standards Related to Essential Health Benefits, which 

addressed the design of EHBs for commercial market insurance beneficiaries, made specific 

reference to the Interim Final Rule effectuating MHPAEA. The proposed rule simply says the 

EHBs of ABPs must comply with MHPAEA. The commenter questioned whether this lack of 

direct reference to the existing law mean Medicaid ABPS need not comply with all provisions of 

the Interim Rule. The commenter strongly urges CMS to clarify whether or not these ABPs must 

comply with all provisions of the Interim Final Rule and what if any law, in whole, or in part, it 

will use to assess ABP compliance with MHPAEA. 

Response: On January 16, 2013, CMS released a State Health Official Letter regarding 

the application of MHPAEA to Medicaid MCOs, CHIP, and ABPs. This guidance specifically 

states that all Medicaid ABPs, including Secretary-approved coverage, must meet the parity 
CMS-2334-F 144 

requirements, regardless of whether services are delivered in managed care or non-managed care 

arrangements. 

Comment: Several commenters wrote that exclusions of mental health, substance use 

disorders and behavioral health treatments that fail to meet the parity standards required by 

MHPAEA are discriminatory. Despite existing parity requirements state implementation and 

enforcement of MHPAEA has varied widely and patients seeking metal health services are 

frequently subjected to excessive and inappropriate non-quantitative limitations. Another 

commenter stated that CMS should identify a standard to determine whether the coverage 

provided complies with non-discrimination provisions of the Affordable Care Act. 

Response: As stated in the January 13th State Health Official Letter, ABPs must comply 

with MHPAEA. 

Comment: One commenter suggested that the goal of Affordable Care Act coverage was 

to include the 10 EHBs including mental health and substance use disorder services. 

Response: We agree with the commenter that one goal of Affordable Care Act coverage 

was to include coverage of the 10 EHB categories, including mental health and substance use 

disorder services in ABPs. We support providing a floor of coverage to Medicaid beneficiaries. 

As mental health parity also applies, this will lead to parity among mental health and substance 

use services and other medical and surgical services. 

Summary: We will not be making changes to proposed regulation text as a result of these 

comments. However, we are clarifying that the payment exclusion for services provided to 

individuals residing in an institute of mental disease (IMD) continues to apply to all individuals 

participating in ABPs. This is important because many commercial products offer coverage of 

residential services in settings that for Medicaid purposes are considered IMDs, and federal 

matching funds will not be available for medical assistance for individuals who reside in such 
CMS-2334-F 145 

settings. 

f. EPSDT and other required benefits (ABPs include EHBs and all updates and modifications) 

(§440.345) 

We proposed at §440.345(d) the requirement that ABPs provide EHBs and include all 

updates and modifications thereafter by the Secretary to the definition of EHBs. 

Comment: Several commenters wrote that the revisions make Federally Qualified Health 

Center (FQHC) requirements within ABPs less clear. The EHBs are the floor of ABP coverage 

and that the requirement to provide EHBs within ABP does not circumvent existing requirements 

within section 1937 of the Act, which includes coverage of FQHCs. The commenter stated to 

identify that the regulation as drafted is confusing as subsections (a) describing the requirement 

that at least the ten categories of EHBs be included in section 1937 of the Act and (b) describing 

the requirements to include the benefits covered in one of the state selected benchmark plans and 

subsection (a) does not indicate that it is a floor. The commenters requested that CMS reiterate 

or clarify revisions to the regulation to reaffirm this. 

Response: There are several benefits specified by section 1937 of the Act that are 

required in addition to EHBs. We did not change §440.365, which reflects section 1937(b)(4) of 

the Act, providing that states must assure access to these services through the benchmark or 

benchmark-equivalent coverage or otherwise, to rural health clinic services and FQHC services, 

even if the state does not contract with an FQHC or rural health clinic and that payment for these 

services must be made in accordance with the payment provisions of section 1902(bb) of the 

Act. The inclusion of EHBs within section 1937 of the Act establishes a minimum level for 

benefits, to which other benefits required as part of section 1937 of the Act are added. 

Comment: Many commenters were supportive of the Affordable Care Act’s application 

of EHB requirements to ABPs and providing a floor of benefits. Some commenters also 
CMS-2334-F 146 

supported inclusion of updates and modifications made thereafter. Some commenters went 

further to support the inclusion of mental health and substance use disorder benefits as consistent 

with the MHPAEA. 

One commenter generally supported implementing EHBs in ABPs to provide a stable set 

of core services for people receiving benefits in the ABP, and to help align the rules for patients 

and providers to ensure continuity of care. This is important for people who will churn between 

Medicaid, the commercial markets and potentially a state basic health plan. 

Response: CMS appreciates the support of commenters. 

Comment: A few commenters identified that EHB definitions will affect how individuals 

maintain access to health care, services and drugs and biologicals that they need. 

Response: We agree with these commenters. The new coverage will likely be different 

from the coverage that beneficiaries receive today. States will have discretion regarding how to 

define EHBs using the process outlined in this regulation, namely selecting the base-benchmark 

plan to define EHBs. For Medicaid, we remind readers that EHBs are only the floor for 

coverage, and states have options for offering coverage that exceeds this floor. States can also 

add additional coverage for beneficiaries receiving ABPs who are not eligible for the new adult 

group. 

Comment: One commenter suggested that home care services should be included in the 

Medicaid ABP to the same extent that they are included in the existing regular Medicaid 

program. 

Response: The rules for establishing coverage are different between the regular state 

Medicaid program and flexibility provided within section 1937 of the Act. States must provide 

home health services as a mandatory benefit in the regular Medicaid state plan. This is not a 

minimum requirement for coverage under of section 1937 of the Act and is not required as an 
CMS-2334-F 147 

element of EHBs. 

Comment: One commenter requested clarification that the Affordable Care Act 

established a floor of coverage using EHBs. Benefits should not be limited solely to EHBs as no 

ceiling was established. The Affordable Care Act only restricts costs for state mandated benefits 

from being passed onto the federal government via the EHBs. 

Response: Yes, EHBs are considered a minimum level of coverage. ABPs are not 

limited solely to EHB benefits; ABPs are constructed based on the coverage plan under section 

1937 of the Act selected by the state, including EHBs based on the state selected base 

benchmark plan, supplemented as necessary and subject to substitution of actuarially equivalent 

benefits as permitted under 45 CFR 156.115(b). The section 1937 coverage plan selected by the 

state can include a Secretary-approved coverage plan that may include benefits that are not 

available under other section 1937 coverage options. Furthermore, ABPs are required to cover 

certain benefits including rural health clinics, FQHCs, and family planning services and supplies. 

EPSDT services for individuals below age 21 also apply within section 1937 of the Act. 

MHPAEA also applies to the provision of MH/SUD services. 

Comment: One commenter requested that CMS consider adding an EHB requirement for 

hospitals and pediatricians to conduct risk assessments of all newborns for severe respiratory 

syncytial virus (RSV) disease. 

Response: These services can be covered if states select coverage options that cover such 

services. Furthermore, children must receive all EPSDT services as part of the ABP, and states 

may consider such risk assessments to be part of the required EPSDT screening services. For the 

new adult group, only 19- and 20-year olds will be covered by EPSDT. There are both 

requirements and flexibility for states in both selecting plans and constructing EHBs and section 

1937 coverage options. Please refer to the summary at the end of this section for further 
CMS-2334-F 148 

discussion of these steps and flexibilities. 

Summary: We have not made any changes to regulation text, based on public comments 

received. 

g. EPSDT and other required benefits (Process for updating EHBs) (§440.345) 

In §440.345(e), we proposed that the ABPs that include EHBs will remain effective 

through December 31, 2015 without a need for updating. We also proposed that we will consult 

with states and stakeholders and evaluate the process to determine updates to the ABPs after that 

date. 

Comment: Several commenters offered support of the intent of our proposed policy 

concerning the updating of ABPs that have been determined to include EHBs as of January 1, 

2014. One commenter supported the Department's intent to issue future guidance for updating 

EHB benefits for 2016 and subsequent years. Similarly, another commenter indicated support of 

the alignment of the transition period for updating ABPs with the transition period designated for 

updating EHBs in 45 CFR Part 156. 

Response: We appreciate the support. 

Comment: A few commenters indicated concern that imposing a requirement to update 

section 1937 benchmark plans would add significant new workload for states. One commenter 

believed that there is currently no statutory requirement to make updates to section 1937 plans, 

and suggested that the Secretary allow for grandfathering of currently offered section 1937 

benchmark benefit plans. Many commenters also recommended that HHS reserve some 

authority to resolve significant problems with the benefits package during this time period by 

revising the proposed provision to add that states with approved ABPs as of January 1, 2014 do 

not have to update benefits until December 31, 2015, “unless the Secretary determines that there 

are exceptional circumstances to update a plan.” Several commenters urged the Department to 
CMS-2334-F 149 

set up a formal mechanism to ensure that adequate data is collected for ABPs in 2014 and 2015 

to inform updating benefits in 2016 through a transparent process in which consumers help guide 

any necessary changes. Similarly, several other commenters urged the Department to consider a 

more robust stakeholder engagement in all aspects of processes used to assess the current EHB 

approach and whether to adopt a new approach in 2016. 

Response: CMS has been working with states to submit state plan amendments using a 

standardized template that includes the information needed for approval from CMS. The CMS 

review process allows for resolution of issues identified within the ABP prior to approval. We 

aligned the timeframes with CMS policy to allow for implementation efficiencies. As we 

develop the process, we will take into account balancing potential workload of the state and 

CMS and the need for information to keep the ABP current with changing commercial market 

products. It is important for ABPs to stay current with changes in the base-benchmark as well as 

with public employee or commercial plans that may have been selected as section 1937 coverage 

options. Commercial plans are usually updated annually. All ABP SPAs are required to have 

public notice and approved SPAs will be placed on a CMS website. We are also updating the 

Medicaid Statistical Information System (MSIS) to improve the quality, accuracy, and timeliness 

of data submitted to CMS by states. That said, we appreciate that it may be difficult at this point 

to make changes to the ABP that take effect by January 1, 2014. In light of this challenge, we 

will partner with states to work as quickly as possible to come into full compliance with these 

provisions. We do not intend to pursue compliance actions on these issues to the extent that 

states are working toward but have not completed a transition to the new ABPs on January 1, 

2014. 

Comment: One commenter indicated that the applicability of the proposed provision 

was unclear when applied to states that choose not to expand coverage as of January 1, 2014, but 
CMS-2334-F 150 

might choose to offer a benchmark benefit plan prior to December 31, 2015. 

Response: These provisions apply to all existing and new ABPs that have an effective 

date of January 1, 2014 or later. 

Summary: We will not be making changes to proposed regulation text as a result of 

comments received. 

h. Essential health benefits (§440.347) 

We proposed to add EHBs within section 1937 of the Act and that individuals in the new 

adult group who meet the criteria for exemption from mandatory enrollment will receive a 

choice of benchmark coverage defined as the benefit package using section 1937 rules or the 

state’s approved Medicaid state plan that is not subject to the section 1937 rules. We proposed a 

process for establishing EHBs within an ABP that is consistent with the general provisions for 

established EHBs in the individual and small group market, but reflects the particular 

circumstances of Medicaid. In particular, the process reflects the fact that the state establishes 

coverage rather than an insurance issuer, and that the coverage is consistent with the 

requirements of section 1937 of the Act. We also proposed that, while EHBs will be defined by 

the state using a selected base benchmark from the list of those plans that can be chosen to 

define EHBs in the individual and small group market, the base benchmark plan for defining 

EHBs for Medicaid can be different than the base benchmark plan chosen for the commercial 

market. We further proposed that there could be more than one base benchmark plan for 

defining EHBs for Medicaid ABPs. 

Comment: One commenter stated they support the structure for implementing Essential 

Health Benefits as proposed. 

 Response: CMS appreciates the support.

Comment: One commenter supported §440.347, which allows states to have more than 
CMS-2334-F 151 

one ABP to reflect the health care needs of a targeted population and use a different base 

benchmark plan for each ABP. A few commenters supported HHS implementing the statutory 

requirements to at a minimum include EHBs. One commenter supported the general approach to 

coverage of EHBs. Another commenter supported states having broad flexibility to choose a 

benchmark plan, including the same options available in the commercial market and the ability 

to use a different plan from the one that was selected for the state’s commercial plans. This 

commenter also recommended that the state’s Medicaid State Plan be considered for Secretaryapproved coverage for the ABPs. They requested clarification of the timeframe for approval of 

Secretary-approved plans. 

Response: We appreciate the support of our policy to allow states the flexibility to use 

different base benchmarks in Medicaid from those used for the non-grandfathered plans in the 

individual and small group markets. 

We confirm that Secretary-approved coverage is part of the ABP template, and can 

include the full coverage otherwise available under the approved state plan, as long as all 

requirements of this regulation are met. The entire template is considered a state plan 

amendment to be completed and submitted by the state to CMS for approval. The timing of 

action on state plan amendments is addressed in our regulations at §430.16, which include one 

90-day review period, the option for CMS to request additional information, and an additional 

90-day review period. 

Comment: One commenter requested that HHS clarify that states can design ABPs for 

subpopulations within the newly eligible group. 

Response: We confirm that states can offer different ABPs to subpopulations within the 

newly eligible group. Under section 1937(a)(1)(A) of the Act, coverage through an ABP can be 

offered to “groups specified by the State” without regard to the comparability or statewideness 
CMS-2334-F 152 

requirements at section 1902(a)(10)(B) of the Act and §440.240. (Other requirements, such as 

civil rights protections, still apply and may affect the nature of the groups that a state may 

specify.) As a result, states may offer ABPs that are appropriate for the unique characteristics of 

subgroups of the new adult group; for example, states may offer different ABPs to individuals in 

different geographic regions, or to individuals who have particular medical, service or support 

needs. 

Comment: The flexibility for states to select EHBs at §440.347(b) and (c) to achieve 

targeting of populations causes more harm than good according to some commenters. The 

commenters believe that states already have significant flexibility to target ABPs through the 

Secretary-approved process and the targeting flexibility adds little but creates confusion. CMS 

would be better served in terms of administrative simplicity, oversight, and consumer 

understanding if one EHB standard was applicable in the commercial markets and ABPs. These 

commenters recommend that HHS require states to use the state-selected base benchmark plan 

that applies for the commercial markets for ABPs as well. Another commenter believes that 

EHBs should establish a minimum floor of coverage and that all plans should be required to use 

the state-selected base-benchmark plan that applies for the commercial markets for purposes of 

section 1937 of the Act as well. This will reduce administrative burden and better align 

standards between EHB in the commercial markets and in Medicaid. 

Response: The flexibility provided at §440.347(b) and (c) permits states to design 

different benefit packages that at a minimum include EHBs. Alternatively, one benefit package 

could be used for multiple populations. States also have the choice to use the same base 

benchmark in ABPs and the commercial markets, which would result in aligning standards for 

EHB in coverage under ABPs and the commercial markets. We have adopted policies that 

would maximize state flexibility while ensuring sufficient coverage for beneficiaries. 
CMS-2334-F 153 

Comment: One commenter is seeking clarification of the phrase set forth in §440.347 

“consistent with the requirements set forth in 45 CFR [part] 156”, particularly if it adds 

obligations to the requirement to select a benchmark plan that includes benefits in each of the ten 

EHB categories. A few commenters request clarification of the specific provisions of 45 CFR 

Part 156 related to EHB that apply. 

Response: This regulation is consistent with the EHB requirements under 45 CFR Part 

156, but specifically addresses the application of those requirements for purposes of compliance 

with section 1937 of the Act as amended by section 2001(c) of the Affordable Care Act. The 

base-benchmark plans for defining EHBs include the same choices in both Medicaid and the 

non-grandfathered plans in the individual and small group markets. States may choose a 

different base benchmark plan for Medicaid than for the individual and small group markets. 

But, recognizing that Medicaid coverage is provided in a different context than coverage in the 

individual and small group markets, we provide that states may choose a different base 

benchmark plan for Medicaid than the individual and small group markets, and may choose more 

than one base benchmark plan for Medicaid. We also provide that states exercise the options 

available in the individual and small group market to insurance issuers. This regulation 

identifies those aspects of 45 CFR part 156 that are modified within Medicaid under the section 

of the preamble entitled “Modifications in Applying the Provisions of This Proposed Rule to 

Medicaid.” 

Comment: Several commenters suggested that the list of required categories of services 

for benchmark-equivalent coverage include the EHBs as specified in §440.347(a) for consistency 

and clarity as ABP coverage must include at least the EHBs. Another commenter suggested that 

CMS should pursue parity between Medicaid state plan benefits and the new ABP for newly 

eligible adults to assist with “churn” between Medicaid and the commercial markets. 
CMS-2334-F 154 

 Response: Section 1302 of the Affordable Care Act establishes EHBs that must be 

provided as part of benchmark benefit coverage. A benchmark-equivalent benefit package must 

be actuarially equivalent to the benchmark plan that is chosen. We do not believe it is necessary 

to specifically add the EHB categories to benchmark-equivalent coverage because we are instead 

setting out procedures to ensure that coverage includes EHBs that govern both benchmark and 

benchmark-equivalent coverage. 

Comment: Section 440.347(c) allows states to select more than one EHB option for 

ABPs. A few commenters urged CMS to limit states to choosing a single EHB option for 

Medicaid to provide a floor of benefits. They asserted that Congress intended consistency 

among ABPs by applying EHB requirements to them. Some commenters asserted that allowing 

for selection of multiple options will create unnecessary administrative burdens on state 

Medicaid programs and this commenter suggests that there should be only one EHB benchmark 

option for ABPs. But other commenters agreed with our proposed rule that, because ABPs serve 

a different population than private health plans, the single EHB benchmark does not need to be 

the same as the one chosen for the state’s individual and small group market. Another 

commenter asked that CMS clarify that states do not have the flexibility to vary amount, 

duration, and scope of benefits within populations on a plan-by-plan basis as currently allowed, 

which would only increase complexity. This commenter also requested clarification related to 

whether the limited authority provided through the DRA and now expanded through this rule can 

be superseded by section 1115 authority. This commenter also responded that a state may try to 

combine flexibilities for EHB, ABP, premium assistance, and amount, duration, and scope to 

shift to a model that has not been adequately explored for unintended consequences. 

Response: While it is true that coverage of EHBs will be required for non-grandfathered 

plans offered in both the individual and small group markets and Medicaid, we think it is 
CMS-2334-F 155 

important to provide states flexibility to define EHBs as appropriate in each context. In the nongrandfathered plans offered in the individual and small group markets, states have some 

flexibility to define EHBs through selection of a base benchmark plan. For Medicaid coverage, 

we believe that additional flexibility will enable states to tailor coverage to the needs of the 

Medicaid population. While states can, for simplicity, choose one standard to determine EHB in 

both the individual and group markets and in Medicaid, they are not required to do so. We are 

permitting states flexibility to choose a single standard or multiple standards for EHB in 

Medicaid to ensure a full range of coverage options. States must determine whether multiple 

standards would result in administrative burdens. We are reminding states that the floor of 

coverage is EHBs defined by the benefits, including limitations on amount, duration, and scope, 

from the selected base benchmark plan (but states may be required to, or may have options to, 

cover benefits above that floor consistent with section 1937 of the Act). Please refer to the 

summary at the end of this section for further discussion of these steps and flexibilities. 

Comment: Several commenters recommend that the Department ensure that Secretaryapproved coverage is actuarially equivalent to the other benchmark coverage options. These 

commenters support the clarification that Secretary-approved coverage must provide robust 

benefits. However, these commenters indicate that it is important for Secretary-approved 

coverage to provide the same level of coverage as other benchmark plan options to prevent 

newly eligible people from receiving lesser coverage. 

Response: This rule is not intended to change the assessment of Secretary-approved 

coverage, except to the extent that it must include EHBs. The standard that we apply for 

assuring the sufficiency of the benefit package established using Secretary-approved coverage is 

whether the benefits are appropriate to meet the needs of the population provided that coverage, 

as outlined in §440.330(d). EHBs establish a floor of benefits for ABP populations and must be 
CMS-2334-F 156 

provided with Secretary-approved coverage as with any ABP. Secretary-approved coverage 

permits states flexibility to design a benefit plan that might differ from the other options 

available under section 1937 of the Act. As mentioned previously, in all cases a state must first 

select a base benchmark to define EHBs. The EHBs in the base benchmark plan serve as the 

minimum floor of coverage that is supplemented for any missing EHBs. Using substitution, 

states may achieve a benefit package that includes benefits from the regular state plan. 

Comment: One commenter believed that extending full Medicaid benefits to the newlyeligible expansion population, supplemented as needed to comply with the EHB, parity, and 

other protections in the law, is the best approach for meeting the complex health needs of lowincome adults who will gain Medicaid eligibility under the expansion. The commenter urged 

CMS to work with States to ensure that this population’s full range of substance use disorders 

and mental health needs and other health needs will be met. The commenter further suggested 

that CMS include language in the final rule that explicitly restates the requirement that all 

Medicaid ABPs must cover mental health services and substance use disorder services for all 

enrollees. 

Response: States have much flexibility, but are not required to use benefits from their 

regular Medicaid benefit package for the new adult coverage group, as long as EHBs are 

assured. The statute and regulation direct that mental health parity requirements and EHB 

requirements, including the provision of mental health and substance use services, be met. In 

some circumstances, we anticipate that the coverage furnished to the new adult coverage group 

may include certain benefits, such as certain substance abuse treatment services, that the state 

has elected not to cover under the state’s regular Medicaid benefit package. 

Comment: The commenter stated general agreement with the approach that CMS has 

recommended for the ABP to be offered to certain populations under the expansion of Medicaid. 
CMS-2334-F 157 

The commenter requested clarification that the state would choose an ABP from four benchmark 

packages and would compare that choice to the private market EHB, supplementing coverage of 

the ABP if necessary to ensure that all EHB categories are included. 

Response: There are both requirements and flexibility for states in constructing EHBs 

and section 1937 coverage options. Please refer to the summary at the end of this section for 

further discussion of these steps and flexibilities. 

Comment: One commenter would like to underscore the importance of promoting 

seamless coverage among low-income individuals. Many of the individuals newly eligible for 

Medicaid in 2014 are likely to have fluctuations in income, and therefore are likely to “churn” 

between Medicaid and subsidized Exchange insurance coverage. This churn could result in 

treatment disruptions among patients and create administrative complexity for Exchanges, plans, 

and providers. Thus, promoting seamless coverage for this population and ensuring coordination 

of care during coverage transitions will be critical. 

Response: We appreciate the circumstances that the commenter identified for individuals 

that may have fluctuations in income. States have options for minimizing treatment disruptions 

and CMS will work with states to promote continuity of care. 

Comment: One commenter urges CMS to consider revising certain sections of the 

proposed rule to allow states the greatest opportunity to develop ABPs that are reflective of the 

population that they serve and ensure the long-term financial sustainability of this category of 

eligibility. This commenter believes that the proposed regulations create a cumbersome and 

confusing process and appear to strongly incentivize states to essentially mirror state plan 

benefits. This commenter wants maximum creativity to define the benefit package that will be 

provided to the newly eligible population, and encourages CMS to use this opportunity to allow 

for greater innovation at the state level by allowing design of benefit packages that simply take 
CMS-2334-F 158 

pieces of both Medicaid and the commercial market while also covering all EHBs. This 

approach will lead states to compare Medicaid to private and commercial market benefits and 

potentially add benefits to the Medicaid state plan. 

Response: We believe that the regulations offer significant flexibility for states to create 

benefit packages for all or for different groups of its newly eligible population. Appropriate 

benefit package design for the population’s needs may contribute to long–term financial 

stability. 

Comment: A few commenters were concerned with disparities in coverage as the 

guidance suggests that the policy only mandatorily applies to the newly eligible category of 

adults. In states that expand their Medicaid programs to include these new categories of 

eligibility, they note that a higher income expansion population will receive a more generous 

package than existing populations. This will create a churn in Medicaid where states will likely 

have to expand coverage for all adult populations within Medicaid to prevent churn. They assert 

that this would result in significant financial cost to states to expand benefits to all adults as new 

benefits for the existing population are ineligible for the enhanced match offered under the 

Affordable Care Act for the newly eligible expansion population. 

Response: The Medicaid statute provides that coverage may be different for those people 

who receive coverage through an ABP established under section 1937 and those who receive 

regular Medicaid coverage. People in the new adult group must receive benchmark or 

benchmark-equivalent benefits, including EHBs. Consistent with the statute, the rules 

promulgated in this regulation will apply to all ABPs, not just for those people in the new adult 

group. As long as ABP (including EHB) requirements are met, states have significant flexibility 

in designing benefit package options that approximate regular state plan benefits. 

Comment: Many commenters recommended that ABPs provide appropriate coverage to 
CMS-2334-F 159 

meet the needs of the population in all ten EHB categories as per the general requirements of 

§440.330. These commenters suggest that the lack of a minimum standard in each of the ten 

categories is a flaw in the Exchange EHB standard that gets further magnified in Medicaid. For 

women’s health, this is particularly important in terms of preventive services, prescription drugs, 

and maternity care. Several commenters support the EHB requirement as a strong floor for 

ABPs and indicate that states should have ample flexibility to add to the floor. These 

commenters also provided recommended regulatory language for §440.347(a) through (c). 

Response: EHBs are a floor to coverage and states have flexibility to design an ABP that 

includes coverage above the minimum level of EHBs. Section 1302(b)(2) of the Affordable 

Care Act directs the Secretary to determine EHBs by reference to benefits typically offered in 

the group market, which is the same standard that we are applying in Medicaid by requiring that 

states determine EHBs by selecting a base benchmark from among the regulatory options 

described in §156.100. All benefits within the base benchmark that defines EHBs will need to 

be incorporated into the ABP, supplemented as necessary and subject to substitution of 

actuarially equivalent benefits as permitted under 45 CFR 156.115(b). But the ABP can include 

other benefits based on the state choice of coverage option. 

For groups other than those in the new adult group, states can also offer additional 

benefits to supplement the benchmark or benchmark equivalent coverage that includes EHB and 

other required services. Sections 1902(k)(1) and 1903(i)(26) clarify that individuals in the new 

adult group receive benchmark or benchmark-equivalent coverage (that includes EHB and other 

required services and, as we explain below, for individuals who would otherwise be exempt from 

enrollment in an ABP, the option to receive an ABP that consists of regular Medicaid coverage). 

We intend to issue an ABP state plan amendment template and corresponding implementation 

guides for the states to use when submitting ABP state plan amendments. 
CMS-2334-F 160 

 Comment: One commenter supports requiring coverage of all ten EHBs, as this will go a 

long way toward ensuring that Medicaid participants have adequate health care coverage. They 

request that HHS define the scope and services within each of the ten benefit categories to ensure 

that the covered services are at a minimum the same and provide a level of guaranteed coverage. 

This is necessary to ensure that there is adequate coverage within categories and balance 

between categories, and necessary to determine if ABPs are equivalent to the EHB package and 

comply with Affordable Care Act. 

 Response: We thank the commenter for the support. 

Comment: One commenter indicated that ABPs should include an array of home care 

services that exist in traditional Medicaid benefit programs to comply with the American with 

Disabilities Act and Supreme Court Olmstead decision. To the extent that EHBs include 

institutional care or inpatient settings, a state must offer a choice of “the least restrictive 

environment.” Similarly, states that choose to provide services to individuals enrolled in ABPs 

that involve care in an institution should be required to include home and community-based care 

as well. 

Response: Section 1902(k)(1) of the Act provides that medical assistance for the new 

adult eligibility group is limited to benchmark and benchmark-equivalent coverage. Section 

1902(k)(1) of the Act also provides an exception to the requirements of section 1937 of the Act 

for individuals who would be described in the exemptions at section 1937(a)(2) of the Act. This 

means that individuals in the new adult eligibility group that otherwise meet the exemption 

criteria are required to be enrolled in benchmark or benchmark-equivalent coverage, but their 

benchmark or benchmark-equivalent coverage is not limited by the requirements of section 1937 

of the Act. Therefore, these individuals must have a choice to receive ABP benefits as defined 

by the state applying the requirements of section 1937 of the Act using benchmark or 
CMS-2334-F 161 

benchmark-equivalent coverage (including EHBs and other required coverage) or ABP benefits 

defined without regard to the requirements of section 1937 of the Act, which consists of regular 

Medicaid coverage under the state plan. Home care is not a standardized term in Medicaid, so 

clarification would be needed to determine which Medicaid benefit category is actually 

applicable. 

We agree that states are obligated to comply with the Americans with Disabilities Act 

and the Olmstead decision. 

Comment: One commenter requests that crisis services be included in the mental health 

and substance abuse services category in the EHB package. This commenter requests that it be 

offered by qualified health plans and in new Medicaid expansion benefits in each state. These 

are important services to the safety net and for 24/7 crisis care, suicide prevention and access to 

emergency health care services, especially in communities where emergency mental health 

clinics or mobile health services are unavailable. 

Response: CMS is not requiring specific services to be included in any of the EHB 

categories, but all ABPs must include all EHBs defined through the process described in our 

regulations. 

Comment: Several commenters suggest that EHBs should comply with a consistent 

standard across ABPs as they are concerned that the proposed rule allows for states to select 

more than one option for establishing EHB to implement multiple ABPs for targeted 

populations. These commenters also recognize the need for states to target populations to 

address specific health care needs. 

Response: We are providing flexibility for states to select base benchmark plans in 

Medicaid that are different than the one selected for the individual and small group market, and 

to select multiple base benchmark plans, to maximize the ability for states to define ABPs that 
CMS-2334-F 162 

serve the unique needs of Medicaid populations and subpopulations. 

Comment: One commenter requested CMS include autism coverage in the EHB package 

to correct the omission. Lack of coverage can create significant financial burden on families and 

discourages autism professionals from practice. Families also may decide to not pursue 

treatment. 

Response: States have choices in determining in the benefit package that will be covered 

in their state within federal guidelines, but all ABPs must provide for coverage of EPSDT 

services for individuals under the age of 21. We expect that services to treat autism may be 

covered through a variety of coverage categories and many would be included in a state’s ABP 

either because the services are within the section 1937coverage option or included as part of 

EHBs. 

Comment: One commenter applauds HHS for including coverage of the full package of 

EHBs, as it includes coverage of screening and brief counseling for domestic and interpersonal 

violence, in the Medicaid ABPs. 

Response: We thank the commenter for the support. While it is not certain that every 

ABP will include counseling for domestic and interpersonal violence, such services will be 

provided if they are part of the EHBs. 

Comment: One commenter believes that strong and comprehensive oversight and 

enforcement of EHBs and nondiscrimination standards at the state and federal level will help 

ensure consistent coverage of transplant benefits and eliminate discriminatory insurance 

practices. Therefore, the commenter asserted, ABPs must cover all EHB categories without 

discrimination for people who have or will acquire health conditions that lead to end stage organ 

failure. The commenter stated that a wide range of medical services are required during the 

transplant process and fall under the categories of ambulatory services, hospitalization, chronic 
CMS-2334-F 163 

disease management, mental health services, rehabilitative services, and prescription drugs. The 

commenter urged that all of these treatments must be covered under ABPs. 

Response: If transplant services are covered as part of the coverage option chosen by the 

state, or the benefits under the selected base benchmark plan, as supplemented (and subject to 

permissible substitution of benefits), then they will be covered as part of the ABP. 

Comment: According to one commenter, the Affordable Care Act specifies that entities 

covered under section 340B(a)(4) of the Public Health Services Act, which includes federally 

recognized Hemophilia Treatment Centers, be designated as essential community providers and 

that designation requires that qualified health plan networks to include Hemophilia Treatment 

Centers. This commenter requests that state Medicaid programs be encouraged or required to 

include essential community providers in their networks. 

Response: Coverage through an ABP remains subject to requirements under the state 

plan to provide for beneficiary free choice of provider, and provider payment rates that are 

consistent with efficiency, economy, and quality of care and assure sufficient access to services. 

States have options to limit free choice of provider in some circumstances, for example, 

managed care service delivery consistent with section 1932 of the Act, or through selective 

contracting arrangements authorized under a waiver under either section 1915 of the Act or 

section 1115(a) of the Act. In any of these cases, states must assure sufficient beneficiary access 

to services. 

Comment: Several commenters suggested that the review of EHB, in the private 

insurance market and Medicaid, consider whether limits in coverage and changes in medical 

evidence or scientific advancement affect whether enrollees have difficulty accessing services. 

The EHB should be based on the most recent and reliable clinical evidence available and a 

process should be developed to inform and shape EHBs based on these factors over time. If not 
CMS-2334-F 164 

available, there should be an allowance for some physician discretion. 

Response: Consistent with the provisions of section 1302(b) of the Affordable Care Act, 

CMS has in the regulations at 45 CFR part 156 defined EHBs by reference to coverage plans 

available in the commercial market. 

Comment: Several commenters also requested that review of EHBs be disaggregated to 

include demographic categories. HHS should require states to report enrollees’ race, ethnicity, 

language, sex, and disability status data uniformly, as well as data on other demographic areas 

such as sexual orientation and gender identity, as described in section 4302 of the Affordable 

Care Act. 

Response: This information does not appear to be related to the review of EHBs. We 

note, however, that we are developing a Transformed Medicaid Statistical Information System 

that will include expanded data elements regarding beneficiaries, claims and providers per 

Affordable Care Act. 

 Comment: One commenter supports inclusion of all ten EHB to reflect appropriate 

balance in each category and requested that anesthesia and pain management services be 

included in the ten categories of benefits covered by the ABPs. This commenter also requested 

that CRNAs and other non-physician providers who bill for Medicare Part B be included in 

Medicaid ABPs. 

 Response: The coverage of particular services will depend upon the coverage option 

selected by the state, and the EHBs that are determined based on the state-selected base 

benchmark plan, as supplemented (and subject to substitution of actuarially equivalent benefits) 

consistent with the process described in 45 CFR part 156. This rule will not affect the ability of 

states to set provider qualifications for covered services. 

 Comment: One commenter requested that dollar limits on a specific category of benefits 
CMS-2334-F 165 

and targeted use of utilization management techniques be prohibited. 

 Response: Annual dollar limits are prohibited in the public employee or commercial 

plans that are the basis for coverage options and the base benchmark options according to section 

2711 of the Public Health Service Act. Utilization management techniques are common practice 

for benefit management and will continue to be allowed in Medicaid. We expect that these 

practices will be non-discriminatory and not impede access to needed, covered services. 

Comment: One commenter indicated that HHS should specify in the final rule that to 

meet the health care needs of diverse segments of the population, an ABP must provide a process 

for participants to request and receive: clinically appropriate benefits not routinely covered by 

the plan, especially when the ABP is less costly than the covered benefit; coverage for benefits 

beyond limits set by the plan; coverage of specialty care not routinely covered by the plan when 

medically necessary and appropriate. 

Response: We are specifying in the final rule that, if an individual in the new adult group 

meets the criteria for exemption from mandatory enrollment in an ABP that would otherwise be 

applicable, then the individual would have a choice of an ABP that includes at least the EHBs, 

and is subject to the requirements of section 1937 of the Act, or benchmark or benchmarkequivalent coverage that is not subject to the requirements of section 1937 of the Act, and thus, 

includes all regular Medicaid state plan benefits. Other individuals do not have that choice but 

this rule does not affect their right to appeal denials of coverage through the state’s fair hearing 

system. 

Comment: Commenters requested clarification and further guidance on the 

supplementation process established in both the proposed rule for the EHBs in the commercial 

market and the proposed rule for EHBs in Medicaid ABPs. Many commenters requested that 

CMS clarify what benefits would constitute coverage in each category and identify a threshold to 
CMS-2334-F 166 

trigger supplementation of a benefit category. It appears that a single service could be 

determined to be sufficient to define an EHB in Medicaid and therefore would not achieve 

MHPAEA compliance. A few commenters also stated that a single service would not meet nondiscrimination requirements in addition to the balance requirement, which requires a much 

stronger minimum set of benefits in each category. One commenter requested clarification of the 

Medicaid EHB supplementation process including the extent to which the scope of services in 

one EHB category must be consistent with services offered other health service categories. 

Several commenters believe that additional provisions need to be added to ensure that the level 

of benefits in each EHB category are meaningful and adequate to meet the needs of the 

population. Several commenters also requested that CMS clarify what benefits would constitute 

coverage in each category and explain how CMS would enforce the non-discrimination and 

balance requirements. 

Response: Supplementation occurs when a base-benchmark plan does not include items 

or services within one or more of the categories of EHB. Benefits from the base benchmark that 

are determined to be EHBs must be included as an EHB, unless substituted by the state. While 

the rules at §156.115(b) indicates that the “issuer” may substitute benefits, in Medicaid, the state 

functions as the issuer and we thus provide that the state can exercise the option to substitute 

benefits. We indicated that requirements at §156.110 apply unless we specifically modified the 

approach in Medicaid. Section 156.110(e) that specifies balance requirements also apply to 

EHBs established in Medicaid. All benefits within the section 1937 coverage option must also 

be provided. CMS will conduct a review of all ABP SPAs to determine appropriateness for 

approval. 

There are both requirements and flexibility for states in constructing EHBs and section 

1937 coverage options. Please refer to the summary at the end of this section for further 
CMS-2334-F 167 

discussion of these steps and flexibilities. 

Comment: The HHS February 17, 2012 Bulletin allows for substitution of services 

within the rehabilitative and habilitative benefit, allowing the plan to facilitate substitution of 

services at the provider level based on patient need not predetermined by the issuer, according to 

one commenter. The November 20, 2012 Patient Protection and Affordable Care Act; Standards 

related to Essential Health Benefits, Actuarial Value, and Accreditation proposed rule indicated 

that the issuer would create a substituted benefit plan, which would leave providers with no 

choice but to provide services in the benefit package and potentially lead to an individual 

choosing a plan that does not cover the services that they need. 

Response: States, not issuers, define benefits within section 1937 of the Act. Section 

156.115(b) outlines the substitution policy that will also be applicable to Medicaid except that, in 

Medicaid, states have the role of issuers and will indicate the substituted benefits. Substitution 

requires that benefits be in the same EHB category and that they are actuarially equivalent. This 

means that a state for example, could substitute a personal care benefit for an in vitro fertilization 

benefit in the EHB Ambulatory Services category, as long as they were actuarially equivalent. 

Within the rehabilitative and habilitative services and devices EHB, benefits can be substituted 

as long as the resulting benefits still provide for coverage of both rehabilitative and habilitative 

services. We expect that the benefit design will result in clinically appropriate services based on 

medical necessity. The resulting ABP, which includes EHBs that have been supplemented if 

necessary, individual benefits that have at state option been substituted, and benefits from the 

section 1937 coverage option, must be approved by CMS. Once approved, a description of the 

benefits included in the final ABP should be publicly available so that beneficiaries are 

knowledgeable of the benefits to which they are entitled. That said, we appreciate that it may be 

difficult at this point to make changes to the ABP that take effect by January 1, 2014. In light of 
CMS-2334-F 168 

this challenge, we will partner with states to work as quickly as possible to come into full 

compliance with these provisions. We do not intend to pursue compliance actions on these 

issues to the extent that states are working toward but have not completed a transition to the new 

ABPs on January 1, 2014.Comment: Many commenters are concerned that there is no 

requirement regarding adequacy of benefits. These commenters specifically requested that HHS 

provide a cross-reference to §440.230(b) and state explicitly that the requirement that every 

service offered through the Medicaid state plan “be sufficient in amount, duration, and scope to 

reasonably achieve its purpose” also applies to EHBs in the ABPs. A few commenters 

recommended that the regulations be revised to require states to supplement the benefits in a 

benchmark plan if any service in the EHB category is not sufficient in amount, duration, or scope 

to reasonably achieve its purpose. 

Response: Under section 1937of the Act, states are authorized to offer ABPs that include 

benefits derived from public employee or commercial market products, essential health benefits 

and certain other required benefits. Sufficiency standards applicable to the traditional Medicaid 

benefit package generally do not apply to ABPs.. If Secretary-approved coverage is chosen as 

the section 1937 coverage option, however, then we would require that the benefit package must 

“provide appropriate coverage to meet the needs of the population provided that coverage” under 

§440.330(d). Sufficiency standards at §440.230 will be applied in our review of proposed 

Secretary-approved coverage. 

Comment: Many commenters requested that CMS reconsider the proposed approach and 

define comprehensive federal EHBs for section 1937 coverage that all states would be required 

to use to supplement their chosen benchmark or benchmark-equivalent coverage. They urged 

that CMS should go further and require states to cover comprehensive benefits in each of the 

EHB categories and work with states to ensure that minimum coverage is met. One commenter 
CMS-2334-F 169 

went further to suggest that CMS and HHS adopt a comprehensive, national EHB in 2016, when 

the trial period for the current approach is complete. 

Response: EHBs in Medicaid will generally be defined in the same fashion as they are 

defined in the individual and small group market, except for certain EHB categories discussed in 

the proposed rule and this final rule. This approach allows the public employee or commercial 

market plan selected by the state to define EHBs for Medicaid to set the floor for EHB coverage 

(with supplementation as needed and substituted as desired). States then have the authority to 

offer other services (including through Secretary-approved coverage for the new adult group). 

Comment: One commenter requested that HHS clarify that the requirement for balance 

among EHB categories ensures robust coverage in each category and cannot be used to lower 

other categories if one or more categories lacks robust coverage. 

Response: Consistent with the requirements of 45 CFR 156.110, EHB categories must be 

appropriately balanced to ensure that benefits are not unduly weighted toward any category. 

Any benefits that are determined to be EHBs from the base benchmark plan must be provided. 

Section 1937 of the Act also has an “equal to” standard that indicates that all benefits from a 

section 1937 coverage option must be provided. When Secretary-approved coverage is used, 

benefits must meet Medicaid sufficiency standards as well as the requirement that the benefit 

package be appropriate to meet the needs of the population. 

Comment: Many commenters reiterated concerns regarding the EHB proposed rule and 

EHB benchmark plan standards. This concern remains for ABPs as the Department does not 

sufficiently define the scope of coverage in any statutorily required category specifically 

maternity care. The base benchmark plans may include coverage of maternity services, but the 

plan documents do not specify which services define maternity coverage or provide details on 

coverage including limits. The lack of clear definitions further complicates the substitution and 
CMS-2334-F 170 

supplementation methodology. Several commenters want the Department to establish clear 

standards for what must be covered as required by sections 1302(b)(1) and 1302(b)(4)(C) of the 

Affordable Care Act to ensure a comprehensive standard. The adoption of coverage should not 

result in a discriminatory benchmark. 

One commenter expressed concerns related to the ambiguously defined EHB categories 

and encouraged HHS to definitively confirm the extent to which cost effective, clinically 

effective nutrition care services such as medical nutrition therapy are included as EHBs within 

Medicaid benchmark and benchmark-equivalent plans. This commenter requests adequate 

federal oversight and approval of benchmark plan selection by HHS to reflect the vital and 

unique role that nutrition plays in improving and maintaining health for all Americans, but also 

recognizes the need to define EHBs flexibly. This commenter seeks clarification in the final rule 

on the metrics and bases upon which HHS will determine whether a benchmark or benchmarkequivalent plan meets the EHBs mandated by Affordable Care Act. 

Response: Section 1937 of the Act permits states to offer coverage through an ABP 

without regard to sufficiency requirements that are applicable to regular state plan benefits, 

except that we would apply sufficiency standards in our review of proposed Secretary-approved 

coverage as the section 1937 coverage option. Substitution is allowed in section 1937 of the Act 

using requirements found at 45 CFR 156.115(b) except that the state will be exercising the 

option for substitution rather than an individual market issuer. 

Comment: Commenters requested that CMS provide clear regulatory guidance to states 

to ensure that the process for supplementing coverage to meet the additional requirements of 

Affordable Care Act is clear. This is especially important given that EHBs are not universally 

covered well by state Medicaid programs such as mental health and substance use services. 

Furthermore, for states that choose to use benchmark-equivalent coverage, this commenter 
CMS-2334-F 171 

requests that CMS establish clear limits on states’ ability to use benchmark-equivalent coverage 

to undermine the EHB protections as it appears that under the proposed rule that they can reduce 

the value of EHBs under the benchmark-equivalent option to anything short of elimination. 

These commenters request that CMS ensure the comprehensiveness of the benefits for all 

beneficiaries covered by section 1937 of the Act regardless of the ABP chosen by the state. 

Response: Benchmark-equivalent benefit packages must be at least actuarially 

equivalent to one of the section 1937 benchmark coverage options and must include benefits 

within certain categories of basic services. In addition, the Affordable Care Act amended section 

1937 of the Act to require the provision of EHBs in benchmark equivalent coverage, so we do 

not believe that use of this section 1937 coverage authority will undermine the EHB protections. 

The process for supplementation is found at 45 CFR 156.110(b)(1) through (4) and substitution 

requirements are at §156.110(b). All benchmark-equivalent coverage packages must adhere to 

section 1937 requirements, and must not violate the EHB anti-discrimination principles. 

Comment: One commenter recommended that HHS specify in the final rule that ABPs 

must include benefits routinely covered by the benchmark plan, regardless of whether those 

benefits are listed in the data collection template used to report base benchmark benefits to HHS. 

Furthermore, all benefits within categories of care that list more than one benefit must be 

covered. For example, an ABP should be required to cover as three distinct benefits 

rehabilitative services, habilitative services, and rehabilitative and habilitative devices as 

opposed to only covering one of them. 

Response: We intend to develop a template for states to use to define the ABP in 

Medicaid that will result in the submission of a state plan amendment. This is a different process 

than the one used for states to submit the base benchmark benefits for the individual and small 

group market. A state can select a different base benchmark plan for the individual and small 
CMS-2334-F 172 

group market than it does for Medicaid purposes. We anticipate issuing further guidance on 

these operational issues. 

Comment: One commenter strongly encourages CMS to provide further guidance on 

alignment issues during the plan comparison and supplementation process. This commenter 

encourages CMS to clarify that during supplementation, states must create the most 

comprehensive benefit package possible, drawing from services covered in either the section 

1937 coverage option or the comparison base benchmark plan, which could include drawing 

across categories if necessary to create a robust set of services that will result in adequate 

coverage of EHBs. 

Response: To clarify, the ABP must include as a floor the EHBs covered by the base 

benchmark plan selected by the state to define EHBs for Medicaid, supplemented as necessary 

and subject to substitution of actuarially equivalent benefits as permitted under 45 CFR 

156.115(b). Balance requirements of 45 CFR 156.110(e) also apply. In addition, the ABP must 

include any benefits from the section 1937 coverage option that are not in the base benchmark 

plan, whether they are EHBs or not. If the section 1937 coverage option that is one of the three 

public employee or commercial products provides a service in a greater amount, duration, or 

scope than the EHB provided in the base benchmark plan, the state must utilize that section 1937 

standard for that service. If the section 1937 coverage option is Secretary-approved coverage, 

then the state may choose which benefit to use. 

Comment: One commenter requests that HHS specify that appropriate balance of EHB 

coverage includes coverage of benefits across the care continuum, prohibits substitution between 

categories of EHB (for example, prohibit coverage of rehab therapy but include drug coverage) 

and between benefits (cover wheelchairs instead of rehabilitative hospital care to restore a 

person’s ability to walk), cover all EHBs within the settings and by specialists which provide the 
CMS-2334-F 173 

current standard of care, and protect patients’ access to appropriate and medically necessary care 

as provided by skilled medical professionals. 

Response: Substitution of benefits can be achieved when defining the EHBs according to 

45 CFR 156.115(b). Benefits must be in the same EHB category and actuarially equivalent. 

Balance requirements at 45 CFR 156.110(e) apply, as CMS did not indicate that they do not 

apply in Medicaid. CMS will be reviewing each state plan submission. As with all Medicaid 

services, states will establish medical necessity criteria for the receipt of ABP services. . 

Comment: A commenter indicated understanding that benefit substitution among EHB 

categories would be prohibited for ABPs as it is prohibited for Exchange plans. However, this 

commenter believes that substitution even within benefit categories could be extremely 

problematic for children’s and pregnant women’s access to needed services. Commenters urged 

HHS to prohibit substitutions or at a minimum give states the flexibility to disallow 

substitutions. If benefit substitution within categories is retained, this commenter recommends 

that a more restrictive standard than an actuarial equivalence test on the value of the benefits 

compared to the EHB benchmark plan be implemented. 

Response: Substitution of benefits within EHB categories will be at state option, 

according to parameters described in 45 CFR 156.115(b). This process will be the same for 

Exchange plans and ABPs, except that states will be in the role of the health insurance issuer for 

purposes of substitution. 

Comment: Commenters note that in some states the EHB benchmark covers services 

beyond those included in the Medicaid state plan. They argue that requiring states to supplement 

coverage to make it comparable to the EHB benchmark is not a workable solution for states, 

particularly for states that wish to expand in 2014. They further assert that some of the 

immediate operational challenges include the need to enroll new providers, set reimbursement 
CMS-2334-F 174 

rates, design claims and payment rules, and incorporate those rules into systems, and if managed 

care is used, new capitation rates will need to be designed, which will result in a large 

administrative burden. 

Response: It is true that ABPs under section 1937 of the Act will contain different 

benefits than those offered in regular Medicaid, based on the coverage options and EHBs that a 

state elects. These differences are inherent in the statutory design. While EHBs will establish a 

minimum level of benefits, that level may result in greater or lesser benefits than are available 

under regular Medicaid. ABPs require that benefits that are based on commercial insurance 

products include the benefit, the benefit description and limitations on amount, duration, and 

scope as the minimum standard. States have been working with CMS toward defining EHBs and 

ABPs and as part of that process states may need to undertake contracting activities and system 

changes to offer and administer the ABP. 

Comment: In the proposed rule concerning EHBs, requirements could be different in 

different states according to one commenter. Since two of the four benchmarks are tied to what 

is available to state employees in the state and what is available from the largest HMO in the 

state, employers may have confusion about the requirements in a particular state. This 

commenter requests identification of who oversees an employer that has employees with a 

principle place of employment in multiple states, and wonders whether it would be the 

Department of Labor. 

 Response: The standards discussed in this regulation relate to the implementation of 

EHBs for Medicaid. Employers do not offer Medicaid as part of their offerings to employees 

and therefore, this question is outside the scope of this regulation. 

 Comment: One commenter asked if, given the requirement that states must supplement 

the benchmark package if EHBs are not covered, states would be required to add these benefits 
CMS-2334-F 175 

to the state plan under the Secretary-approved coverage option that is based on state plan 

coverage. The commenter asserted that it is unclear if the state must supplement services that 

are covered in the base-benchmark selection for the Exchange, and that it is unclear if 

supplementation is only for the benchmark plans provided to newly eligible individuals or if 

states that are seeking to provide a Secretary-approved benchmark plan to newly eligible 

individuals will be required to amend the state plan to add the new EHB services not otherwise 

covered. The commenter also asked whether states would now be required to add services that 

are not currently covered and categorized as optional, and also wondered if EHB 

supplementation only applies to benefits for newly eligible people or must the state meet this 

requirement for all benchmarks offered regardless of population. 

 Response: States are required as part of the ABP to cover all EHBs. While most of the 

EHBs are also included under regular Medicaid coverage, there may be exceptions. For 

example, substance abuse services and habilitative services may not be part of a State’s regular 

Medicaid benefit. The EHB requirement applies to any ABP offered by the state, including 

those based on Secretary-approved coverage. 

Comment: One commenter indicated that the regulatory language fails to specify that 

states must supplement missing categories. This commenter recommends that the Department 

clarify that states must follow the process established in 45 CFR part 156 to ensure that any 

missing categories are supplemented in the final rule. The Department should also ensure that 

benefit design in ABPs does not result in less comprehensive benefits than the private insurance 

market, and therefore, ABPs should be required to include benefits at least as robust as those in 

the state’s full EHB package. 

 Response: EHBs establish a floor of benefits for ABPs offered under section 1937 of the 

Act and are based on commercial market products, which means at a minimum EHBs will 
CMS-2334-F 176 

include benefits at least as robust as those in the base benchmark chosen by the state. The 

supplementation process in section 1937 of the Act will follow 45 CFR 156.110(b). 

Comment: Several commenters generally supported the proposed process to designing 

the Medicaid ABP. However, HHS must establish transparent, minimum standards for states 

using “Secretary-approved” coverage. It will be critical to ensure that the state cannot develop 

an ABP based on the weakest benefit level available at each step of the process. The 

commenters expressed concern that the rule offers very little guidance about what the ABP must 

cover to meet the ten categories of EHBs required by Affordable Care Act and the scope of 

required coverage. They indicated that this lack of clarity may lead to people in the Medicaid 

expansion group not receiving the full range of services available to people at higher income 

levels accessing private market or Exchange coverage in their state. An additional commenter 

expressed that the youngest and most vulnerable citizens, the birth to three population, need to 

have access to all necessary high quality, comprehensive physical, developmental, mental health 

and medical care to ensure positive growth and development. 

Response: Current and proposed regulation at §440.335(d) states that Secretaryapproved coverage must be appropriate to meet the needs of the population being served. CMS 

will review proposed Secretary-approved coverage against that standard. And CMS will apply 

the sufficiency standards of §440.230 in evaluating benefits included in Secretary-approved 

coverage. In addition, all ABPs, including Secretary-approved, must include the full range of 

EPSDT services for individuals under age 21, which ensures that they will have access to 

comprehensive screening and necessary medical care. 

Comment: Several commenters expressed concern regarding the process proposed by 

CMS to demonstrate compliance with EHB, saying it is too burdensome and applying the EHB 

definition that was created for small group health plans for commercial products in the private 
CMS-2334-F 177 

market needlessly complicates section 1937 of the Act. They asserted that requiring that states 

begin by using one of the ten commercial benchmark plans as the EHB base is not useful for 

states that want to use the full Medicaid benefit set under Secretary-approved coverage. They 

argued that using the full Medicaid benefit set allows all Medicaid clients to receive the same 

benefit set and states would not have to operationalize a post-eligibility review process to screen 

people for opting out of the ABP for the traditional state plan. Their position was that, given the 

number of changes that states must implement in 2014, maintaining a single benefit set reduces 

administrative burden and confusion for clients and minimizes the number of required system 

changes. According to one commenter, it is essential that the new adult group have the same 

benefit set as the full state Medicaid benefit set. Furthermore, the commenter asserted that the 

mandatory Medicaid benefit set should be an option to serve as the basis for demonstrating EHB 

compliance under the Secretary-approved option without supplementation. A few commenters 

recommend that HHS create a second definition of EHB compliance that would be based on the 

Medicaid mandatory benefit set, limit that definition to the ABP in Medicaid programs, and 

allow states to use this benefit set as the basis to build a coverage option for Secretary-approved 

coverage. 

Response: Section 2001(c) inserted new paragraph (b)(5) into section 1937 of the Act. 

This amendment requires that benchmark and benchmark-equivalent benefit packages must 

provide EHBs described in section 1302(b) of the Affordable Care Act, beginning January 1, 

2014. The same process to define EHBs applies to both commercial plans and Medicaid, with 

adjustments only to reflect the unique nature of Medicaid. Thus, EHBs must be established 

within section 1937 using one of the state options for base benchmark plans as set forth in 45 

CFR part 156. States may still elect to offer Medicaid state plan benefits in their section 1937 

coverage option using Secretary-approved coverage, as long as all requirements of this 
CMS-2334-F 178 

regulation are met. 

Comment: Many commenters indicated that states electing state plan benefits using the 

Secretary-approved option should not be required to supplement with additional EHB services. 

Although they acknowledged that section 1937 of the Act requires inclusion of EHBs as defined 

under section 1302(b) of the Affordably Care Act, they asserted that this does not mandate 

importation of entire segments of coverage from private plans nor does it require a wholesale 

matching of these offerings in Medicaid. They asserted that implementing EHBs in section 1937 

of the Act in this way is onerous and could result in the relatively less vulnerable, higher income 

expansion group as compared with Medicaid beneficiaries receiving more generous benefits 

such as substance use disorder services. They further asserted that Congress certainly could not 

have intended for the new enrollees to end up receiving more robust coverage than the 

categorically needy base. They stated that this also creates administrative complexity for states 

and a situation where incoming beneficiaries who may be disabled must choose between 

disparate benefit schedules. The commenters believed that the only way to mitigate disparate 

benefit schedules is for states to expand all benefits for existing and new eligible beneficiaries, 

something states are not in a fiscal position to do. They further asserted that the Affordable Care 

Act did not authorize a departure from long standing state discretion under Title XIX to develop 

appropriately balanced benefits and suggested that, if states must expand all benefits for existing 

and newly eligible beneficiaries, then states must receive 100 percent FFP for these benefits. 

Response: We believe that our response to the question above also responds to this 

question; the statute requires that all ABPs, even Secretary-approved coverage, include EHBs. 

There are both requirements and flexibilities for states in constructing EHBs and section 1937 

coverage options. The process for defining and including EHBs is the process used under 

section 1302(b) of the Affordable Care Act, adapted to the unique circumstances of the Medicaid 
CMS-2334-F 179 

program. 

Comment: One commenter indicated that the intersection of §440.345(d) and 

§440.347(a) is confusing, and recommends that CMS clarify in regulation that EHBs form a 

floor for the ABPs and do not supplant any preexisting requirements under section 1937 of the 

Act and 42 CFR part 440, subpart C. Regulations would be clearer if §440.347 were worded as a 

definition of EHB rather than a restatement of the mandate to include EHB in an ABP and for 

clarity should simply reference relevant provisions in 45 CFR part 156. 

Response: Section 440.345(d) is intended to establish the universe of benefits required 

within the ABPs. In addition, state must assure access to RHC and FQHC services and 

transportation to and from medically necessary services as set forth at §440.365 and §440.390 

respectively. Section 440.347 is intended to specify the categories of EHBs and the process by 

which those EHBs are established within the ABP. Both sections should be read in conjunction 

to the other. 

Summary: We are adopting the following approach for treatment of individuals in the 

new adult group who meet the exemption criteria from mandatory enrollment in benchmark or 

benchmark-equivalent coverage in the final rule. If an individual in the new adult population 

meets the criteria for exemption, then they have a choice of the ABP based on benchmark or 

benchmark-equivalent coverage including at least the EHBs, or an ABP with coverage defined as 

the state’s approved Medicaid traditional state plan, which is not subject to any other 

requirement of section 1937 of the Act, including EHB requirements. We are not making any 

changes as a result of these comments. 

i. Essential health benefits (Non-discrimination policy) (§440.347) 

 Section 1302(b)(4) of the Affordable Care Act provides that benefit design cannot 

discriminate and CMS codified this section of the Affordable Care Act at §440.347(e). Benefit 
CMS-2334-F 180 

design discrimination policies do not prevent states from using targeting criteria to group people 

together to receive specific benefit packages.

Comment: One commenter expressed support for the inclusion of the new provision 

clarifying that individuals cannot be discriminated against based on their “age, expected length 

of life, or an individual’s present or predicted disability, degree of medical dependency, or 

quality of life or other health conditions.” The commenter seeks age-appropriate care and 

benefits for children, whether through family or child-only coverage. 

Response: We appreciate the support. 

Comment: Several commenters indicated that while they understand that section 1937 of 

the Act allows states the flexibility to amend Medicaid state plans to provide certain populations 

(as defined by the state) with benefits packages other than those offered in the standard Medicaid 

state plan, HHS must closely monitor this and ensure there is no discrimination in benefit design 

for certain populations. 

Response: Benefit design should not discriminate against individuals who receive a 

benefit package under section 1937 of the Act based on age, disability, life expectancy or 

condition but may include benefits designed to meet the special medical needs of segments of the 

covered population. Benefit packages designed in section 1937 of the Act include the same 

oversight as the regular Medicaid state plan. Aside from the EHB anti-discrimination 

requirements, §440.230(c) indicates that state Medicaid agencies cannot arbitrarily deny or 

reduce the amount, duration, or scope of a required service to an otherwise eligible recipient 

based solely on diagnosis, type of illness or condition. 

Comment: Several commenters expressed support of the requirement that EHB benefit 

design cannot discriminate on the basis of an individual’s age, expected length of life, or an 

individual’s present or predicted disability, degree of medical dependency, or quality of life or 
CMS-2334-F 181 

other health conditions. The commenters believe these non-discrimination provisions will 

require vigorous monitoring and strong enforcement. 

Response: We thank the commenters for their support. We expect states to comply with 

these provisions and implement benefit packages that do not discriminate. ABPs will be subject 

to the same monitoring process as currently used in the Medicaid state plan. 

Comment: Many commenters expressed support for the inclusion of a nondiscrimination provision in §440.347(e). But some commenters pointed out that, while the 

proposed rule recognized the importance of non-discriminatory plan design §440.347(e) fails to 

state the full range of nondiscrimination protections applicable to the EHB. Many commenters 

expressed concern that the preamble only references section 1302(b)(4) of the Act and the 

requirements proposed in §440.347(e) state only the protections under that statutory provision. 

Therefore the commenters believe that the requirements in §440.347(e) reflect an incomplete and 

insufficient standard. The commenters believe that the protections under section 1557 of the 

Affordable Care Act also apply, and the final rule must expressly state a comprehensive and 

consistent nondiscrimination standard, explicitly requiring EHB benefit design to comply with 

section 1557 of the Affordable Care Act. The commenters recommend the final rule be revised 

to include the language used in the nondiscrimination standard set out in the proposed EHB rule. 

The commenters believe that without the additional requirements the benefits of both section 

1557 and the Affordable Care Act as a whole in ensuring comprehensive coverage for all 

individuals will be undermined. Lastly, the commenters also requested the regulation prohibit 

ABPs from including all of the following: 

● Participant cost-sharing designs that are more burdensome on some benefits than 

others. 

● Unreasonable and arbitrary visit and dollar limits on a specific category of benefits, so 
CMS-2334-F 182 

as to discourage participation by individuals with brain injury. 

● Targeted use of utilization management techniques for some benefits, and not to 

others. 

● Defining the benefits in such a way to exclude coverage for those services based upon 

age, disability, expected length of life, or the willingness or capacity to participate in wellness 

programs or behavioral incentive programs. 

Response: Some of the protections sought by commenters are already contained in laws 

applicable to state Medicaid programs. Section 430.2, an existing regulation, identifies other 

regulations applicable to state Medicaid programs including 45 CFR part 80, which requires that 

programs receiving federal assistance, through the Department of Health and Human Services, 

include effectuation of Title VI of the Civil Rights Act of 1964 and 45 CFR part 84, which 

implements Section 504 of the Rehabilitation Act of 1973, prohibiting disability discrimination. 

In addition, state Medicaid programs are subject to the Age Discrimination Act of 1975. 

Therefore, these protections are already applicable to Medicaid. 

We appreciate commenters pointing out deficiencies in §440.347(e) and have revised it to 

align with the regulation implementing EHBs in the Exchanges. 

Comment: A few commenters indicated appreciation of CMS’s work to revise current 

Medicaid rules such that they incorporate statutory non-discrimination provisions from section 

1302(b)(4). The commenters strongly encourage CMS to also codify all statutory nondiscrimination provisions applicable to issuers of QHPs that meet EHB requirements. CMS 

should specify that §156.200 and §156.225 also apply to ABPs. Section 156.200 specifically 

prohibits discrimination based on factors including but not limited to race, disability, and age. 

Section 156.225 codifies section 1311(c)(1)(A) of the Affordable Care Act which prohibits 

marketing practices and benefit designs that result in discrimination against individuals with 
CMS-2334-F 183 

significant or high cost health care needs. The commenters believe that all Affordable Care Act 

non- discrimination provisions applicable to QHPs issuers and EHB standards must similarly 

apply to ABPs in Medicaid to ensure consistency of standards across all forms of all health care 

coverage. 

Response: The requirements in 45 CFR part 156 apply to QHP issuers and not Medicaid 

managed care plans. However, there are similar protections in place in the regulations governing 

Medicaid managed care plans. If ABPs are delivered through a Medicaid managed care plan, 

those protections, including marketing, appeals and grievances, beneficiary information, and 

non-discrimination based on health status will apply to the Medicaid managed care plans 

providing ABP benefits. There are similar protections on many of these issues for Medicaid fee 

for service delivery systems, requiring fair hearing, free choice of provider, and beneficiary 

information. 

We take this opportunity to clarify that States have the flexibility to use managed care to 

deliver ABP benefits without regard to statewideness and comparability of services. Further, 

freedom of choice of provider may also be disregarded to the extent the State can demonstrate 

that freedom of choice would be contrary to the effective and efficient implementation of an 

ABP. 

Comment: Many commenters also recommended §440.347(e) be amended as follows: 

EHBs cannot be based on a benefit design or implementation of a benefit design that 

discriminated on the basis of an individual’s race, color, national origin, sex, sexual orientation, 

gender identity, age expected length of life, or of an individual’s present or predicted disability, 

degree of medical dependency, or quality of life or other health conditions. Other commenters 

recommended §440.347(e) be amended as follows: (e) EHBs cannot be based on a benefit design 

or implementation of a benefit design that discriminates on the basis of an individual’s age, 
CMS-2334-F 184 

expected length of life, an individual’s present or predicted disability, degree of medical 

dependency, or quality of life or other health conditions, race, color, national origin, language, 

sex, sexual orientation or gender identity. 

Response: The suggested change to §440.347(e) is unnecessary because the protections 

described are already reflected in existing Medicaid regulations. 

Comment: Many commenters expressed concern about the lack of guidance under the 

proposed rule for monitoring and enforcement of the proposed nondiscrimination provisions, and 

believe that the final rule must better define how individual states will assess, monitor, and 

enforce the law’s nondiscrimination provisions. Moreover, the commenters do not believe it is 

sufficient to delegate all monitoring and enforcement to states. The commenters recommend the 

final rule define how CMS will take enforcement action when states are not ensuring compliance 

with the nondiscrimination standards established under the Affordable Care Act. The 

commenters also recommend that CMS develop a clear standard for what constitutes a 

discriminatory benefit design. This standard must address both individual cases of intentional 

discrimination and benefit designs that are facially neutral but that have the effect of 

systematically disadvantaging members of protected classes. Ultimately, this standard must 

make clear that the determination of whether a coverage limitation or exclusion is discriminatory 

should turn on the degree to which the benefit design is based on sound standards of clinical 

appropriateness rather than on arbitrary distinctions between health conditions or personal 

characteristics. To assist federal and state regulators in rectifying discrimination in benefit 

design, CMS should follow up on the final rule with sub-regulatory guidance explaining how to 

evaluate products for impermissible discrimination and providing examples of discriminatory 

benefit designs such as those listed above. In addition, CMS should require trained evaluators in 

each state to regularly and transparently review coverage available through ABPs for 
CMS-2334-F 185 

discriminatory benefit designs and to ensure identified instances of discrimination are remedied 

in an expedient manner. Where CMS determines that a state Medicaid agency is not fulfilling its 

responsibilities in this area, CMS should establish a review procedure to focus on ensuring that 

all services deemed part of the EHBs are available to all eligible individuals for whom they are 

medically necessary, without arbitrary discrimination on the basis of any protected personal 

characteristic. 

Response: ABPs are Medicaid state plan amendments and are subject to the same 

monitoring and oversight that occurs in the Medicaid state plan. Under this process, states 

review applicable requirements and design their program, including ABPs. The proposed design 

is submitted to CMS for approval, and CMS reviews the proposal for compliance with federal 

requirements. If approved, CMS may also review state implementation for compliance with 

federal requirements. In addition, issues can be raised by beneficiaries through the fair hearing 

process if services are denied. As with any Medicaid service, we recognize the important role 

that all stakeholders play in making CMS aware of any perceived ABP noncompliance. We will 

consider issuing further guidance on this topic. 

Comment: One commenter is concerned that the proposed rule does not establish 

sufficiently robust oversight or enforcement framework to provide states with essential guidance 

to implement such a program. The regulatory text does not expressly require the Exchanges, 

states or OPM to monitor plans for compliance with the prohibition on discrimination. This 

commenter urges CMS to adopt an express requirement in the regulatory text of the rule that the 

Exchanges, states and OPM monitor for non-discrimination. 

 Response: Medicaid is a federal and state partnership and as such, states have the first 

line of responsibility to design and implement their program in compliance with federal 

requirements, including the non-discrimination requirements. Federal oversight is implemented 
CMS-2334-F 186 

using the existing state plan process, as well as ongoing monitoring of program operations. 

Comment: Several commenters expressed concern that applying the EHB standard to 

prescription drug coverage in Medicaid would not provide appropriate protections for people 

with chronic conditions like cancer, diabetes, Parkinson’s, HIV/AIDS, schizophrenia, epilepsy, 

obesity and organ transplant recipients. The commenters believe that focusing on a number of 

drugs covered, as opposed to ensuring a breadth of drugs are covered, could result in a selection 

of drugs that meets the minimum requirement but discriminates against potential enrollees. 

 Response: While we understand the commenters’ concerns, the statute permits states a 

certain amount of flexibility in determining and structuring ABPs that meet the needs of 

enrollees and are consistent with overall state objectives. We must clarify a statement in the 

preamble to the proposed rule, indicating that requirements under section 1927 of the Act are 

applicable to ABPs under section 1937 of the Act. Section 1927 of the Act does not affect the 

flexibility of states to define ABP benefit packages consistent with a coverage benchmark and 

including EHBs. The amount, duration, and scope of prescription drug coverage would thus be 

governed by the requirements of section 1937 of the Act. To the extent that a prescription drug 

is within the scope of the ABP benefit as a covered outpatient drug, section 1927 of the Act is 

then applicable. For such covered outpatient drugs, since payment is available under the state 

plan, all drug rebate obligations under the rebate agreement are required for drug manufacturers 

under 1927(b) of the Act. 

To explain in more detail, the amount, duration, and scope of coverage for an ABP is 

determined under section 1937 of the Act, which authorizes benchmark or benchmark-equivalent 

coverage “notwithstanding any other provision that would be directly contrary.” But, the drug 

rebate obligation applies under section 1927 of the Act when payment is made under the 

Medicaid state plan for covered outpatient drugs as part of the ABP. In addition, to the extent 
CMS-2334-F 187 

that covered outpatient drugs are within the scope of ABP coverage, the protections and 

limitations for such coverage under section 1927 of the Act apply. So, for example, to the extent 

that coverage under an ABP includes a class of covered outpatient drugs, a state could impose 

limitations on that coverage only consistent with the provisions of section 1927(d) of the Act. In 

general the requirements for prescription drug coverage under section 1937 of the Act, through 

the requirement for coverage of EHBs, will mean that ABPs will meet existing section 1927 

requirements for Medicaid payment of covered outpatient drugs, which we believe will address 

the commenters’ concerns. We discuss the interaction between the requirements for prescription 

drug coverage under section 1937 of the Act with the requirements for covered outpatient drugs 

under section 1927 of the Act in further detail later in this final rule. 

Comment: Some of the commenters are concerned that CMS allows states to place 

limitations on amount, duration, and scope and adopt prior authorization and other utilization 

control measures, as well as policies that promote the use of generic drugs. The commenters 

believe that for people living with chronic conditions, use of utilization management techniques 

can have a detrimental impact and inhibit people from accessing needed treatments. The 

commenters also believe that these limitations can violate the non-discrimination requirements in 

the law. 

In particular, commenters indicated that it is imperative that non-discrimination 

protections found in §440.347 are strictly and clearly applied to the ABP prescription drug 

benefit. HIV care and treatment standards maintained by Federal agencies recommend a 

combination of medications for effective management of HIV disease (see 

http://www.aidsinfo.nih.gov). Quantitative limits on the number of drugs covered per month are 

discriminatory against people with HIV and others whose quality of life and health depend on 

access to a specific regimen of multiple prescription drugs to treat both HIV and co-occurring 
CMS-2334-F 188 

conditions as recommended by their medical provider. The application of the non-discrimination 

provisions should prohibit states from applying quantitative limits on monthly drug coverage for 

the expansion population, and the commenters urged that this standard also be applied to the 

traditional Medicaid population. If monthly drug limits are considered, there must be provisions 

to allow for a timely override process that does not delay immediate and uninterrupted access to 

the medications when recommended by a medical provider. 

Commenters also requested that CMS adopt a more robust standard for evaluating 

limitations on amount, duration, and scope and prior authorization and utilization control 

measures that may be discriminatory by design. These evaluations should be specific to the 

population and based on sound medical evidence regarding the prescription drugs necessary to 

provide adequate coverage. Restrictions to prescription drug coverage in Medicaid, such as 

monthly drug limits, could leave some Medicaid beneficiaries with less comprehensive coverage 

than that offered to individuals covered in the Exchange because of limitations that are 

discriminatory based on health care need. 

A few commenters also expressed concern that the proposed rule does not discuss the 

circumstances in which a limitation on drug coverage could violate the non-discrimination 

requirement. CMS should provide additional guidance about its interpretation of the 

nondiscrimination rule and its enforcement strategies, particularly for prescription drugs. The 

commenters believe that this should include oversight functions to actively monitor and test for 

discriminatory plan design and implementation, and to report such activities to CMS. For 

instance, the implications of plan substitutions within a category of EHBs or prescription drug 

cost-sharing designs for high risk enrollees should be considered. 

 Response: States have considerable flexibility in implementing the provision of 

Medicaid services through ABPs. While this flexibility permits states in some instances to limit 
CMS-2334-F 189 

prescription drug coverage based on the coverage offered under other public employee or 

commercial plans, it also includes the ability to exceed the amount, duration, and scope of 

prescription drugs covered by those plans, as long as the services provided are consistent with 

the Medicaid requirements. 

 The non-discrimination provisions adopted in this final rule at §440.347 require that 

states will need to assess whether their ABP benefits, including any limitations placed on the 

amount, duration and scope of any benefit, discriminate on the basis of the individual’s age, 

expected length of life or any individual’s present or predicted disability, degree of medical 

dependency, or quality of life or other health conditions. We will consider whether additional 

sub-regulatory guidance on these matters is needed. 

Comment: One commenter stated that private market carriers argue that exclusions for 

services or drugs commonly provided for the treatment of conditions such as HIV/AIDS are not 

discriminatory because they apply to all plan enrollees, regardless of their specific negative 

effect on people with these conditions. 

Response: Under the law, states must assess whether their ABP benefit designs, 

including service or drug exclusions that are applied to all beneficiaries, discriminate based on 

an individual’s age, expected length of life, or an individual’s present or predicted disability, 

degree of medical dependency, or quality of life or other health condition contrary to the nondiscrimination provisions being adopted in this final rule at §440.347. 

Comment: One commenter suggested that in developing an analysis framework to aid in 

testing for discriminatory plan benefits, CMS must ensure that ABPs refrain from using benefit 

designs that treat patients in a disparate manner based on age. For example, where FDA 

approves a drug or biologic for use in patients within a certain population, such as pediatrics, the 

commenter argued that ABPs should not be permitted to restrict coverage or employ varying 
CMS-2334-F 190 

utilization techniques for children of different age ranges within that pediatric population. The 

commenter requested CMS’ vigilant oversight to protect children from being subject to agebased discrimination in accessing FDA-approved products. 

Response: The non-discrimination provisions adopted in this final rule at §440.347 

require that states will need to assess whether their ABP benefits, including any limitations 

placed on the amount, duration and scope of any benefit, discriminate on the basis of the 

individual’s age, expected length of life or any individual’s present or predicted disability, 

degree of medical dependency, or quality of life or other health conditions. A limitation on 

medically necessary care provided to pediatric patients would violate the requirement under 

section 1937 of the Act that ABPs include the full range of medically necessary EPSDT 

screening and treatment services. Thus, the issue would not be one of benefit design but of 

compliance in providing a covered benefit. 

 Comment: A few commenters stated that CMS should adopt similar guidance and 

review processes as required under Medicare Part D program in the Medicaid EHB final rule. 

These proven non-discrimination policies and processes have been critically important in 

assuring that all Medicare beneficiaries -- from the healthiest beneficiaries to the most vulnerable 

beneficiaries with serious and chronic illnesses -- can obtain affordable Part D coverage that 

meets their individual needs. Additionally, CMS’ experience assessing Medicare Advantage 

plans’ cost-sharing and benefit designs for discriminatory effects may help point the way. 

Response: We appreciate the comments regarding the use of Part D non-discrimination 

standards and will consider those standards as we evaluate these issues and the need for further 

guidance. 

Comment: Several commenters indicated that meaningful non-discrimination protections 

will require a thoughtful and thorough review of preferred drug lists (PDLs). They stated that 
CMS-2334-F 191 

the following approaches could help ensure meaningful access: (1) PDLs should only be 

permitted to categorize a drug as non-preferred when there are genuine therapeutic alternatives 

classified as preferred; (2) PDLs should allow for appropriate access to drugs or drug classes 

needed for adherence to widely accepted treatment guidelines; (3) The most commonly used 

medications (or therapeutically similar medications) for conditions with high prevalence in the 

Medicaid population should be categorized as preferred drugs; and (4) Most importantly, 

medications used by particularly vulnerable Medicaid beneficiaries, such as those living with 

HIV/AIDS, cancer or serious mental illness, should be largely available as preferred drugs, given 

the importance of avoiding medical complications and interruptions in therapy for individuals 

with those conditions. 

Response: For covered outpatient drugs, a PDL is permitted under section 1927 of the 

Act, as long as it is under a prior authorization program that meets the requirements of section 

1927(d)(5) of the Act. Furthermore, as we discuss in the cost sharing sections of this final rule, a 

PDL may also be established for cost sharing purposes. 

Comment: Many commenters expressed concern that the regulation did not provide 

examples of what would be considered discriminatory benefit design. The commenters request 

CMS identify a clear standard to determine whether the coverage provided complies with the 

non-discrimination provisions of the Affordable Care Act. Additionally, the commenters believe 

that CMS should provide examples to States of what would constitute violations, monitor ABP 

coverage for compliance with the non-discrimination requirements, and enforce these provisions 

of the law. Many other commenters added that the rule also did not establish a process to bring 

discriminatory benefit design or practice into compliance. CMS should consider developing 

more detail in the final regulation defining these protections. This should include a process for 

bringing a State’s chosen benchmark or benchmark-equivalent option into compliance with the 
CMS-2334-F 192 

law. 

Response: States will submit Medicaid state plan amendments for federal approval to 

implement ABPs and receive FFP. The state will assure in that submission that they will comply 

with non-discriminatory requirements as set forth in §440.347(e). If issues are detected with 

adherence to these requirements, we will pursue appropriate action with the state to rectify the 

issues. As always, we appreciate the ongoing input of stakeholders to help inform states and 

CMS of concerns relating to these matters. 

Comment: One commenter indicated that it is unclear how the requirement that EHBs 

cannot be based on a benefit design or implementation of a benefit design that discriminates on 

the basis of an individual’s age, expected length of life, or of an individual’s present or predicted 

disability, degree of medical dependency, or quality of life or other health condition will be 

evaluated in the context of benchmark plans for specified population. It is unclear whether 

targeting permitted under other sections such as section 1915(i) of the Act would be permitted. 

The commenter wondered whether it would preclude the establishment of specialty plans based 

on diagnosis. 

Response: Section 1937 of the Act does allow for a waiver of comparability at 

§440.230(c); thus permitting states to identify groups of people, populations, based on certain 

characteristics such as presence of a chronic condition. States can then design benefit packages 

that are suitable for the population, but this activity does not permit benefit designs that are 

inherently discriminatory. 

Comment: A few commenters expressed concern that neither earlier rules on EHB nor 

this proposed rule specifically define “discrimination” in the context of discriminatory benefit 

design. The commenters urge HHS to develop and promulgate a definition of “discrimination” 

that will allow states to evaluate health plans uniformly. The proposed rule delegates entirely to 
CMS-2334-F 193 

states the task of evaluating EHB for discriminatory design or intent with no further guidance at 

all. The absence of a definition of discrimination will inevitably lead to a 50-state patchwork of 

definitions. The commenters strongly believe that the definition of discriminatory benefit design 

should not vary among states. 

Response: Medicaid is a federal and state partnership that allows states to design statespecific programs within broad federal guidelines and, more generally, that allocates 

responsibilities to both states and the federal government. By identifying states as accountable 

for determining that benefit design is not discriminatory, we recognize their important role in 

assuring compliance with this important statutory directive. Such accountability does not negate 

federal responsibility. As noted, we will consider whether further guidance on discrimination 

benefit design would be useful. 

Comment: One commenter pointed to the Affordable Care Act’s provision barring 

discrimination in EHB as prohibiting disability-based discrimination in making decisions about 

coverage, reimbursement rates, establishing incentive programs, and designing benefits, and the 

commenters believe those requirements should apply to Medicaid ABPs. The commenter 

recommends the Department provide additional guidance concerning applications of the 

Affordable Care Act EHB non-discrimination mandate to ABPs. The commenter believes the 

Department should also identify a minimum scope of services that plans must cover to comply 

with the Affordable Care Act’s parity and nondiscrimination requirements and the requirement 

that EHB take into account the “needs of diverse segments of the population, including . . . 

persons with disabilities.” 

Response: The United State Supreme Court decision in Olmstead v. L.C. rendered on 

June 22, 1999 held that unjustified segregation of people with disabilities constitutes 

discrimination in violation of Title II of the ADA. Public agencies must provide services to 
CMS-2334-F 194 

people in the community when services are appropriate, people do not oppose services in the 

community, and the community-based services can be reasonably accommodated, taking into 

account the resources available to the entity and the needs of others who are receiving disability 

services from the entity. Medicaid beneficiaries must receive services in the most integrated 

setting appropriate. We agree with the commenter that benefit design, including rate 

structures, should not create a pathway to institutionalization or segregation. Setting is not an 

appropriate targeting criterion, because it is potentially discriminatory as different benefits could 

be designed based on where individuals live and therefore, it would not be acceptable as a 

waiver of comparability. 

Comment: Many commenters recommend CMS use the following data to determine 

compliance with the non-discrimination requirements: 

● Medical necessity requirements for Medicaid must be evaluated and standardized, and 

HHS should monitor state implementation of medical necessity to ensure that people living with 

HIV, chronic disabilities and other chronic and complex conditions have unimpeded access to 

essential care and treatment. 

● Utilization management techniques, exclusions, and service limits must be closely 

monitored to ensure that plans have not put in place barriers to services or excluded or limited 

certain items or services solely to deny access to care for people with chronic and complex 

health conditions. The commenters urge HHS to develop a list of practices that amount to 

discrimination to help guide monitoring and enforcement activities. For instance, requiring step 

therapy for HIV treatment without a medical override provision is a discriminatory utilization 

management technique that should be barred. Similarly, a monthly limit on prescription drugs 

(for example, several states have monthly limits of three or four prescription drugs) is also per-se 

discriminatory, as applied to people living with HIV and other chronic conditions. 
CMS-2334-F 195 

● Physician network size and composition must be evaluated to ensure that Medicaid 

managed care plan networks include providers that are able to deliver quality care for people 

living with HIV and other chronic and complex conditions. A plan network that excludes HIV 

providers violates network adequacy standards outlined in qualified health plan standards and is 

a discriminatory plan design practice that forecloses access to EHB services. In addition, patient 

protections (for example, standing out-of-network referrals) will be necessary to ensure a smooth 

transition to coverage and to support continuity in care. The commenters strongly urge CMS to 

require Medicaid managed care plans to contract with Essential Community Providers, including 

Ryan White medical providers. 

● For chronic and complex conditions, where the standard of care is rapidly evolving, 

reference to clinical guidelines is particularly important to ensure that coverage decisions are 

based on established medically accepted guidelines. 

Response: Thank you for your suggestions. We agree that Medicaid managed care 

provider networks need to be adequate to provide services to all of their members. It is at state 

discretion to include (or not) standards for managed care providers in the contracts that the state 

holds with the managed care organizations in the state. Managed care entities can contract with 

any provider operating within the scope of their license to provide services. 

Comment: A few commenters recommend ongoing procedures for states to monitor and 

share data on how they are meeting their benefit design and anti-discrimination obligations over 

time, and make this information transparent and readily available in at least an aggregate fashion 

to HHS, the public, and to health advocates. 

Response: We appreciate the comments. We are currently redesigning data collection 

procedures and standards and will consider these comments. 

Comment: One commenter is requesting that any coverage under the Affordable Care 
CMS-2334-F 196 

Act, including Medicaid Programs, adequately cover therapies that cancer patients absolutely 

must take whether or not there is an actuarial equivalent at a lower cost. Coverage of drugs and 

services related to cancer care should not create cost barriers to patients through cost-sharing 

schemes such as burdensome co-pays and co-insurance. To do so would be unfairly 

discriminatory, and could impact a patient’s ability to access their care, particularly low-income 

patients enrolled in Medicaid. The commenter would like to see strong protections and oversight 

established to prevent discrimination. 

Response: We agree that a patient’s ability to pay cost sharing imposed for a service can 

affect a patient’s access to care and that low-income patients are particularly sensitive to such 

costs. Medicaid cost sharing rules at §447.52 generally and §447.53 for drugs apply to ABPs. 

States design cost sharing for therapies and drugs using those rules, and cost sharing rules may 

not be implemented in a manner that would be discriminatory. Annual dollar limits on services 

will not be allowed on benefits in the public employee or commercial plans that are the basis for 

the base benchmark options used to define EHBs per section 2711 of the Affordable Care Act. 

Comment: A few commenters believe that §440.347(e) sets out a strong nondiscrimination requirement. However, the commenters also believe that there will be times when 

individuals are going to need access to legal advocacy to seek redress from discrimination and 

enforce these due process protections. The commenters recommend that the states be required to 

assist individuals to use the due process and appeals processes, this would include: (1) 

information and assistance in pursuing complaints and appeals; (2) negotiation and mediation; 

(3) case advocacy assistance in interpreting relevant law; (4) reporting on patterns of noncompliance by plans as appropriate; and (5) individual case advocacy in administrative hearings 

and court proceedings relating to program benefits.
CMS-2334-F 197 

Response: We appreciate these suggestions; however, they are outside the scope of this 

regulation. 

Comment: Many commenters representing the Lesbian Gay Bi-Sexual and Transgender 

(LGBT) community stated that the final rules must also address gaps in enforcement of this 

prohibition on discriminatory exclusions by providing clear guidance to state Medicaid agencies 

on implementation of these nondiscrimination standards. Enforcement is a major concern for 

these commenters in two areas: (i) instances of discrimination against individual enrollees, and 

(ii) discriminatory benefit design. The former is very important for LGBT enrollees, and they 

encourage CMS to work with state Medicaid Directors to ensure that robust and transparent 

appeals procedures are equally available to all individuals who need them. With regard to 

discriminatory benefits design, they are particularly concerned about enforcement in the context 

of potential disagreement as to what kinds of benefit limitations and exclusions constitute 

impermissible discrimination in benefit design.

Response: We appreciate the concerns expressed by these commenters. We intend to 

work with states on these matters as well as consider ways in which discrimination for LGBT 

enrollees may be rooted in benefit limitations and exclusions as well as in appeals processes. 

Comment: Several commenters stated that the proposed rule requires that a Medicaid 

benchmark plan’s benefit design cannot be discriminatory, and the final regulation must ensure 

adequate protections against discrimination. The commenters recommend the regulation require 

the following non-discrimination standards: 

● Processes for review of plan benefits design to avoid discrimination caused by unfair 

utilization management techniques or other plan design elements. 

● Requirements for plans to disclose to all prospective and current members all utilization 

management techniques as well as all limits on services. 
CMS-2334-F 198 

● Final authority at the federal level to approve any state non-discrimination review 

processes to ensure appropriate measures are in place to guarantee that plans are meeting the 

requirements of this section. 

● Federal monitoring programs to ensure appropriate checks are in place to guarantee that 

plans are meeting federal requirements. 

In addition, the commenters urge CMS to clarify that Medicaid cost-sharing limits apply 

to the managed care organizations participating in the Medicaid program. For more details on 

non-discrimination standards, the commenters refer CMS to its proposed regulatory language for 

a comprehensive set of patient protections 

Response: In Medicaid, utilization management processes are at state discretion. States 

have flexibility to design and implement the Medicaid program in the state according to state 

policies and procedures. States will assure in the state plan amendment submission that antidiscrimination practices at §440.347(e) are met. We clarify here that Medicaid cost sharing 

parameters apply to services provided in a managed care delivery system. Furthermore, we have 

oversight responsibility of state programs to insure that federal rules and requirements are being 

followed. 

Comment: One commenter pointed out that §440.347 deals exclusively with patient nondiscrimination. The commenter indicated that there is also provider discrimination within health 

plans, where sometimes entire classes of healthcare professionals are excluded from providing 

services under the benefit solely based on their licensure or certification. The commenter 

believes such discrimination can limit or deny patient choice and access to a range of beneficial, 

safe and cost-efficient healthcare professionals, impairing competition, patient access to care, 

and optimal healthcare delivery. The commenter recommends the rule require ABPs offering 

EHBs to align payment systems to adhere to existing state provider non-discrimination laws as 
CMS-2334-F 199 

applicable, and to the federal provider non-discrimination provision in the Patient Protection and 

Affordable Care Act (Sec. 1201, Subpart 1, creating a new Public Health Service Act Sec. 2706, 

“Non-Discrimination in Health Care, 42 USC §300gg-5) slated to take effect January 1, 2014. 

Response: We require that all providers are operating within the scope of their licensure 

or certification when providing services to Medicaid beneficiaries. 

Summary: We appreciate the comments and suggestions and may consider further 

guidance. No change in the substance of the regulatory text is needed. However, CMS made 

grammatical changes to the regulation text at §440.347(e) as a result of comments received in 

this section. 

3. Modifications in applying the provisions of this final rule to Medicaid 

We proposed in the implementation of section 1937 of the Act and the provisions in the 

Affordable Care Act relating to EHBs, a process in Medicaid for designing ABPs. The 

Affordable Care Act modified section 1937 of the Act to implement two standards for minimum 

coverage provision; not only must EHBs, as defined by the Secretary, be provided, but all 

requirements of section 1937 of the Act continue to apply. Furthermore, we outlined 

expectations for specific EHBs as they are implemented in Medicaid including: habilitative 

services; pediatric or and vision services; prescription drugs; preventive services as an EHB; and 

the fact that all other Title XIX provisions apply. 

a. Essential health benefits (Rehabilitative and habilitative services and devices) (§440.347) 

The proposed rule requested comment on an approach for defining habilitative services in 

Medicaid and we reserved regulatory text to do so. We received varied comments, and are 

adopting in this final rule the requirement that services covered by the base benchmark are the 

floor of EHB coverage, substituted as desired by the state. Under 45 CFR 156.110(f), if no 

habilitative services and devices are included in the base benchmark, states have the option to 
CMS-2334-F 200 

determine generally the required EHB services that are in the category of habilitative services 

and devices. If the state has done so, the base benchmark, and coverage under the ABP, must 

reflect that determination. If the state has not made a general determination of the habilitative 

services that are required for this EHB category, the state must exercise the option set forth in 45 

CFR 156.115(a)(5) to determine EHB for the specific ABP. Under that option, habilitative 

services and devices must be included as EHBs either in an amount, duration, and scope no more 

restrictive in terms of treatment and benefit limitations than rehabilitative services and devices, 

or otherwise to an extent determined by the state and reported to HHS. In other words, if the 

base benchmark does not include habilitative services and devices, ABP coverage must, at a 

minimum, be based on the general state determination of habilitative services and devices that 

are included in EHBs, or on a Medicaid-specific determination for the particular ABP. 

While we are not prescribing a specific definition of habilitative services and devices for 

purposes of ABP coverage of EHB, we clarify here that states may choose to adopt service 

definitions similar to those issued by the National Association of Insurance Commissioners 

(NAIC), as follows: rehabilitative services and devices are defined as services and devices 

provided to assist a person to prevent deterioration and regain or maintain a skill or function 

acquired and then lost or impaired due to illness, injury or disabling conditions. The NAIC also 

defines habilitative services and devices as services and devices provided for a person to prevent 

deterioration or attain or maintain a skill or function never learned or acquired due to a disabling 

condition. CMS will consider the need for future guidance, once experience is gained in 

implementing these EHB services and devices. We also note that while there is a definition of 

habilitative services under existing sections 1915(c) and 1915(i) of the Act, this definition is not 

necessarily applicable and may in fact not be appropriate for the population covered under 

ABPs. 
CMS-2334-F 201 

Comment: A number of commenters believed that by requiring coverage of habilitative 

services in the ten mandatory EHB categories, Congress clearly indicated its intent to meet the 

health needs of individuals with functional limitations following illness, injury, disability or due 

to a chronic condition. The commenters recommended that HHS develop an objective minimum 

national standard for habilitative services based on “appropriate coverage to meet the needs of 

the population,” and allow states flexibility to add to this minimum for purposes of innovation. 

A few commenters recommended HHS better define this category of services including 

providing clarity as to how plan definitions and scope of coverage will be assessed to ensure 

compliance with non-discrimination provisions. A number of commenters requested HHS cover 

habilitation at parity with rehabilitation, with some comments suggesting this standard also 

require habilitative services under Medicaid to be at least as generously defined as in the private 

market. 

Many commenters requested that HHS require coverage of habilitative devices without 

arbitrary restrictions and caps that limit the effectiveness of the benefit. 

Several commenters recommended HHS include a set of habilitative services specifying 

the minimum type of services to be provided and specify that these services are a floor. 

Many commenters recommended that habilitation be covered separate and distinct from 

rehabilitation. For example, the plan cannot substitute rehabilitation for habilitation or apply 

only a single visit limit to both benefits. Each benefit must have separate and distinct limits 

which are applied based on medical necessity, not an arbitrary cap. 

One commenter requested that HHS recognize that habilitative services are similar in 

type and scope to rehabilitative services (for example, physical therapy, occupational therapy, 

speech-language pathology). One commenter believed that habilitation should be covered in the 

same setting and include the same type of providers and specialists as covered in the 
CMS-2334-F 202 

rehabilitation benefit. 

 A number of commenters believed that setting clear, comprehensive, and uniform 

standards for habilitative services will prevent non-aligned localized definitions that could create 

serious problems across programs and states. A few commenters requested formal guidance on 

what the minimal expectation is for habilitative services. 

A few commenters believed that when states adopt the habilitative benefit for ABP, HHS 

require that they do not impose financial requirements, quantitative treatment limitations, or 

financial limitations that are more restrictive than the predominant requirements or limitations 

that apply to all other benefit categories. 

Response: We believe the provision of habilitative services is in addition to rehabilitative 

services and devices as an EHB. As EHBs are based on commercial market products, we are 

interpreting rehabilitative services as an EHB to more closely align with commercial market 

definitions, rather than the broader definition of rehabilitation in Medicaid. We therefore, are 

establishing that the commercial market definition of EHBs is the floor of coverage, subject to 

substitution flexibilities. If the commercial market coverage is not adequate, states, not issuers, 

define the benefit. At state discretion, as indicated above, states may offer coverage of 

habilitative services and devices that is no more restrictive in terms of amount, duration, and 

scope than rehabilitative services and devices. We expect that the services will be clinically 

appropriate to meet the needs of individuals based on medical necessity. We have added this 

flexibility for states to define a minimum standard of coverage if the commercial market benefits 

are not adequate. We are suggesting, but not requiring, definitions of rehabilitative and 

habilitative services and devices, as indicated above, and will consider needs for future guidance. 

We are reiterating that the benefit flexibility under an ABP allows states considerable latitude to 

define the benefit package for each population and there may be services that are covered in 
CMS-2334-F 203 

some settings but not in other settings, or that are covered when furnished by some practitioners 

but not others. This is flexibility that exists currently in the commercial marketplace, and is 

extended to state Medicaid programs under section 1937 of the Act. 

Comment: One commenter recommended that the coverage and medical necessity 

determinations for habilitative services and devices should be based on clinical judgment of the 

effectiveness of the therapy, service, or device to address the deficit. In addition, HHS should 

make clear that such benefits are to cover maintenance of function not just improvements, to 

assure that individuals in need have access to care that prevents deterioration of their conditions. 

One commenter requested that HHS inform states that habilitative services need to be 

medically necessary and plans must be clear on how they define and determine medical 

necessity. 

Response: States may require that all services covered under Medicaid be medically 

necessary. Determining the specific coverage of habilitative services and devices will be done 

by the state, based on services found in the base benchmark plan selected by the state to define 

EHBs for Medicaid, and substituted as desired. If a base benchmark plan does not include 

habilitative services, consistent with 45 CFR 156.110(f) and 156.115(f), States will determine 

which services are included as EHB in the habilitative services and devices category. We agree 

with the commenter that habilitative services, generally speaking, cover acquisition and 

maintenance of skills, while rehabilitative services cover restoration of previously acquired 

skills, but we are not setting forth a specific definition of these terms at this time. 

Comment: One commenter recommended that HHS look to state Medicaid programs as a 

guide for defining what habilitation services should be covered under the EHB. A number of 

commenters requested that HHS require states and plans to adopt the definition of habilitative 

services put forth by the NAIC, which was included in the Department’s proposed rule defining 
CMS-2334-F 204 

medical and insurance terminology. Many commenters recommend that if the NAIC definition 

is not used, an alternate definition to consider is provided in Medicaid law under section 

1915(c)(5)(A) of the Act. 

Response: We appreciate these suggestions and find the definitions of rehabilitative 

services and devices and habilitative services and devices extremely useful. Habilitative services 

and devices as described in the base benchmark plan is the floor of coverage, subject to 

substitution flexibility. If a base benchmark plan does not include habilitative services, 

consistent with 45 CFR 156.110(f) and 156.115(f), States will determine which services are 

included as EHB in the habilitative services and devices category. States may choose to offer 

habilitative services and devices in no more restrictive in terms of amount, duration, and scope 

of treatment than is applied for rehabilitative services and devices. 

Comment: One commenter requested the state-defined habilitative benefit definition, as 

applied to section 1937 ABP in Medicaid, should not be extended to QHPs on the Exchange. 

This commenter indicated that in many states, Medicaid takes an expansive view of habilitative 

services, and there is a risk that if applied to the commercial market, this could raise costs on 

QHPs in the Exchange. States should have the option to either separately define habilitative 

services for Medicaid or apply the state-defined habilitative definition for the Exchange to the 

Medicaid programs, but not apply a broad Medicaid habilitative service definition to QHPs in 

the Exchange. 

Response: This regulation is focused on the parameters of the habilitative services and 

devices that are EHBs for purposes of section 1937 ABPs under the Medicaid program and, this 

regulation does not apply to QHPs. 

Comment: Many commenters recommended that states should be allowed to define 

habilitative services for their Medicaid program. 
CMS-2334-F 205 

Response: We are adopting the position in this final rule that states will have the ability 

to define habilitative services and devices. If the base benchmark plan selected by the state to 

define EHBs, does not include habilitative services and devices, states will define the habilitative 

services and devices that will be regarded as this EHB category and must be covered in the ABP. 

In so doing, states can choose to offer habilitative services and devices that are at a minimum no 

more restrictive in terms of amount, duration, and scope than rehabilitative services and devices. 

Comment: One commenter requested that HHS continue to allow states and issuers the 

flexibility to define habilitative services for the individual and small group markets as proposed 

in the EHB proposed rule and not be required to follow Medicaid definitions. 

Response: We reiterate that this regulation applies only to the Medicaid program, and 

has no bearing on the provision of habilitative services in the individual and small group 

markets. 

Comment: One commenter requested HHS clarify that states will be deemed to cover 

habilitation if they provide ABP enrollees with such services through a section 1915(c) waiver 

program. 

Response: The new adult eligibility group is not eligible for enrollment in section 

1915(c) waivers. However, states may also add section 1915(i) services to the ABP using 

Secretary-approved coverage, which may include some habilitative services and devices. But we 

do not see a reason to “deem” compliance with the habilitative services and devices EHB 

requirements just because a state may include some habilitative services and devices in those 

ways. The state must still determine habilitative services and devices that are EHBs in 

accordance with this regulation. 

 Comment: A few commenters recommended that if HHS does not use a national standard 

for Medicaid habilitative service benefits, then states should be required to base their definitions 
CMS-2334-F 206 

on documented and evidence-based criteria, such as those endorsed by a relevant national 

academy of providers or national disease group; and states should not automatically be allowed 

to use their Exchange habilitative services definitions unless it independently meets the criteria 

stated above. 

Response: We expect that states will consider the efficacy of services, evidence-based 

criteria, and the needs of the populations being served as they are designing habilitative services, 

based on the services found in the base benchmark selected by the state to define EHBs for 

Medicaid, and supplemented and substituted as necessary and desired. 

Comment: Many commenters recommended that the state-defined habilitative services 

for Exchanges should not apply to Medicaid. Instead, some commenters indicated that states 

should be required to define habilitative services through a public process that establishes 

minimum standards for coverage, while taking into account unique circumstances of the 

Medicaid population, including the impact of a restrictive definition on access to critical services 

in early intervention and special education. One commenter believed that states should have the 

option to offer parity. 

Response: In terms of complying with EHB requirements, the same basic framework 

applies to both ABPs and plans in the individual and small group markets. But that basic 

framework includes considerable flexibility that states can exercise in the Medicaid context. 

While states will ultimately determine coverage of habilitative services we encourage states to 

do so in recognition of the unique needs of the Medicaid population. As states work to identify 

coverable habilitative services, they are expected to consider input from the public in making the 

decisions. ABPs are subject to public notice requirements in §440.386. 

Comment: One commenter requested that the final rule ensure that the state’s Medicaid 

definition of habilitation is at least as generous as the definition used for Exchange plans. 
CMS-2334-F 207 

Response: While we believe that the procedures we are adopting to determine 

habilitative services included in EHB for Medicaid will generally be at least as generous as the 

parallel procedures for the individual and group market, we are not requiring that result. We 

believe that the procedures for Medicaid will lead to appropriate coverage for Medicaid 

beneficiaries while recognizing the state’s role in designing Medicaid coverage. 

Comment: Many commenters recommended against HHS allowing any of the potential 

flexibility, authorized in the Exchange, for issuers to define the habilitative benefit. Commenters 

were concerned that issuers would limit the range of services too narrowly. 

Response: States will retain flexibility to design services covered within the 

rehabilitative and habilitative services and devices EHB consistent with the procedures set forth 

in this final regulation. 

Comment: A few commenters recommended HHS require states to establish the same 

definition of habilitative services for ABP, QHPs, and Exchange, due to the significant amount 

of churn associated with the population being served. One commenter believed that habilitative 

services should have a common definition, but that definition should not necessarily determine 

what is covered by the Exchange or Medicaid. Those habilitative services that are to be covered 

should be separately established by the Exchange and by Medicaid, since this is a question of 

affordability and comprehensiveness. 

Response: We recognize the possibility for churn between Medicaid and the individual 

and small group markets. We believe the flexibility reflected in this regulation provides the 

basis for continuity between the commercial market and Medicaid. We are also allowing states 

to use provider qualifications from the commercial market plans to help minimize the possibility 

for provider changes if a person’s plan changes. 

Comment: One commenter indicated that currently under Medicaid, habilitation services 
CMS-2334-F 208 

are defined in statute and provided as an alternative to institutional services such as nursing 

home care. As noted in the regulation, employers do not cover the service consistent with 

Medicaid requirements. As a result, if parity is required without consideration of the scope of 

habilitation services offered, the result could be states exceeding the EHB standard. States 

should be provided the flexibility to define and provide coverage of habilitation services. 

Response: Habilitative services and devices are coverable services under the section 

1915(c) waiver program and the waiver program does provide a suggested definition. Section 

1915(i) also allows coverage of habilitative services and devices where states define the service. 

We are giving states flexibility to define habilitative services and devices within the standards 

finalized in this regulation. In addition, states may offer either habilitative or rehabilitative 

services in excess of these standards. 

Comment: Numerous commenters believed that states should not be allowed to define 

habilitative services through parity with rehabilitative services since the two service sets have 

totally distinct purposes and impact different sets of individuals. They asserted that parity is a 

poor standard because there is no certainty that the rehabilitative services level is itself adequate 

to begin with. 

Response: We appreciate the commenters’ concerns. We are establishing that the state 

may determine the ABP-covered benefit beyond the benefits included in the base benchmark 

plan,. To the extent that the base benchmark has no habilitative services, the state may elect to 

include as the EHB category habilitative services and devices coverage that is no more 

restrictive in amount, duration, and scope than the coverage of rehabilitative services and 

devices. We acknowledge that this standard does not guarantee provision of any particular 

habilitative or rehabilitative service. This will be in large part determined by the services offered 

in the plan selected by the state to define EHBs for Medicaid. 
CMS-2334-F 209 

Comment: One commenter requested HHS, at a minimum, afford flexibility to issuers 

allowing them to either provide parity by covering habilitative services in the same manner as 

rehabilitative services or report the services it decides to cover to HHS. 

Response: The procedures we have adopted recognize that states have the role that 

issuers have in the individual and small group market. Federal Medicaid works directly with 

state governments and not issuers. Therefore, we believe that having states define the 

habilitative services benefit instead of issuers, using the procedures finalized here, is the most 

appropriate approach. 

Comment: One commenter believed that habilitative services complement rehabilitative 

services and are integral to ensuring that the beneficiary receives comprehensive care that 

restores him/her to maximum functional levels. This commenter stated that both substitution 

among and parity between these services could be problematic if the beneficiary’s medical 

condition requires significantly more rehabilitative services than habilitative services and vice 

versa. 

Response: States may implement utilization management processes that allow for 

individuals who need additional services beyond the limits established in the ABP to receive 

such services based on medical necessity. States could substitute rehabilitative services for 

rehabilitative services and habilitative services for habilitative services. 

Comment: A number of commenters recommended that HHS remove the requirement 

that state Medicaid programs cover habilitative services, as this is not a separate mandated 

category of EHB services. Instead, a Section 1937 plan that covers either rehabilitative or 

habilitative services should be deemed to cover items and services within the general EHB 

category for rehabilitative-habilitative services. 

Alternatively, a few commenters recommended that HHS clarify that ABPs must cover 
CMS-2334-F 210 

all of the benefits within categories of care that list more than one benefit, as is the case for 

rehabilitative and habilitative services and devices. In particular, a plan should not be 

considered to meet the requirement of covering all EHBs unless it covers, as three distinct 

benefits, rehabilitative services, habilitative services, and rehabilitative and habilitative devices, 

as opposed to covering only one of the many benefits included in this category. 

Response: Habilitative services are listed as a required benefit category of EHB at 

section 1302(b)(1)(G) of the Affordable Care Act. It is part of a category of EHBs, but is 

distinct from rehabilitative services and devices. Both rehabilitative and habilitative services and 

devices must be offered in all ABPs. 

Comment: A number of commenters supported access to habilitative services and devices 

including autism services, durable medical equipment, orthotics, prosthetics, low vision aides, 

hearing aids, augmentative communication devices that aid in speech and hearing, and other 

assistive technology and supplies that are often critical to ensure individuals are able to function 

independently in the community. 

Response: We appreciate the comment and agree that these types of services could assist 

people with living in the community. We are not requiring any specific services to be offered 

within this EHB category. 

Comment: A number of commenters requested that HHS require coverage of services 

without age restrictions. They indicated that a pediatric-only habilitative benefit is inadequate, 

especially as the new eligibility category is for adults only. 

Response: EHBs including rehabilitative and habilitative services and devices apply to all 

individuals who receive a benefit package in ABPs, regardless of age. For the new adult group, 

only individuals who are ages 19 and 20 will qualify for EPSDT services. 

Comment: A few commenters requested HHS prohibit the exclusion of specific 
CMS-2334-F 211 

conditions or diagnoses from accessing the benefit. 

Response: ABPs allow for comparability to be waived, which results in allowing for 

targeting of individuals to specific benefit packages. However, all individuals in the new adult 

group and other individuals the state either mandates or offers voluntary enrollment into an ABP 

must receive all EHBs, including habilitative and rehabilitative services and devices. 

Comment: A few commenters recommended that states should define habilitation using 

EPSDT criteria. 

Response: Section 1905(a) of the Act does not include a service category for 

“habilitation services” so it is not useful to look to EPSDT coverage for guidance and EPSDT 

criteria do not apply under law to adults. For children, however, the EPSDT benefit must 

provide eligible individuals with any medically necessary service that is coverable under a 

section 1905(a) service category. Consistent with the law, these regulations extend the EPSDT 

benefit, which also includes children covered in an ABP. Therefore, children in an ABP should 

receive any covered section 1905(a) benefits that they require based on medical necessity. 

Comment: A few commenters requested that HHS cover habilitation services, which 

maintain an individual’s functional status, as defined by the HHS Summary of Benefits and 

Coverage regulations. 

Response: The HHS Summary of Benefits and Coverage regulations apply to private 

insurance markets, which do not include Medicaid. 

Comment: A few commenters cautioned against restricting services in EHB plans 

without allowing for an exception process. 

Response: States do have the flexibility to allow for exception processes for utilization 

management of the benefit; such exceptions must be based on medical need. 

Comment: One commenter recommended that the habilitative benefit cover the full array 
CMS-2334-F 212 

of health and ancillary service needs of children with special health care needs. The commenter 

believed that this is especially important for children aging out of foster care, as these children 

are at greater risk of having a chronic condition requiring habilitative services. 

A few commenters indicated that it is inappropriate for any one service to satisfy the 

requirement for a benchmark plan covering habilitative services. For example, providing only 

Applied Behavioral Analysis to children under the benchmark plan is inadequate to satisfy the 

full requirement of coverage of habilitative services. These commenters requested that the 

benchmark plan utilized be as comprehensive in its coverage as feasible. One commenter 

recommended defining habilitation and contrasting it with rehabilitation to help clarify the 

distinction between the two benefits. 

Response: We remind readers that states must not only comply with the standards 

finalized in this regulation, but must also include all habilitative services covered in the public 

employee or commercial plan selected by the state to define EHBs for Medicaid, supplemented 

and substituted as necessary and permitted. 

Comment: One commenter believed there should be no exclusion for services that may 

be educationally-relevant, as is the current policy in Medicaid. 

Response: Payment for Medicaid services must be for services that are medical or 

remedial in nature as specified by the particular authority from which the service is derived. 

Comment: One commenter requested HHS provide states a description of maintenance 

programs and clarify at what point services are no longer covered. 

Response: The level at which services no longer have clinical value is determined by the 

state through medical necessity criteria. 

Comments: One commenter requested that HHS clarify the clinical settings in which 

habilitative services may be covered and ensure that there is a prohibition against “school” 
CMS-2334-F 213 

exclusions. 

Response: Settings in which services are furnished are largely determined by the 

providers authorized by the state to deliver services. Practitioners within schools can become 

Medicaid providers if they meet the provider qualifications as established by the state. In ABPs, 

states may use provider qualifications for the benefit as defined for the commercial market, 

Medicaid provider qualification rules for the benefit, or a combination of both. 

Comment: A few commenters requested information related to the cost of adding 

habilitative services. 

Response: Habilitative services are not included in the benefit package typically 

included in the Medicaid state plan, and our limited experience does not allow for extrapolation 

for a nationally required service. States will initially receive 100 percent FMAP starting January 

1, 2014 to cover the cost of providing services to individuals who are considered newly eligible 

in the new adult group, and that funding will decline to 90 percent FMAP in 2020. For 

individuals who are considered not newly eligible in the new adult group and those who are not 

in the new adult group, FMAP will be provided at the state’s regular FMAP rate. 

Comment: Many commenters recommended that HHS prohibit the use of cost-sharing 

requirements or utilization management tools which target the habilitation benefit and are not 

applied to other EHB benefits. 

Response: We are not accepting this comment because states have the flexibility to 

impose cost sharing consistent with the exemptions and beneficiary protections set forth in 

sections 1916 and 1916A of the Act, which we address separately in this final rule. There is no 

exemption under those provisions for habilitation services. In determining how to exercise the 

flexibility to impose cost sharing, however, we recognize that states must consider their 

obligations under the Americans with Disabilities Act and must not implement a discriminatory 
CMS-2334-F 214 

benefit design. 

Comment: A few commenters were disappointed that HHS has chosen not to provide 

states any guidance regarding the habilitation benefit in ABP. 

Response: In the proposed rule, we solicited public comments on the EHB requirements 

for rehabilitative and habilitative services, including devices. We received considerable numbers 

of comments, and considered those comments carefully. We weighed concerns about burden 

and cost of expansive coverage against the benefits of wider access for beneficiaries to needed 

care. We also considered the treatment of these benefits in the commercial market. Based on 

this consideration, we are issuing in this final regulation the policy for coverage of rehabilitative 

and habilitative services, including devices. We hope that these policies provide the guidance 

requested by commenters. 

Comment: Many commenters requested HHS stipulate in the final regulation an ongoing 

process for data collection and evaluation related to ABP and Exchange coverage of habilitative 

services and devices. If this data were compared to the model definition of habilitation, that 

would give parameters for determining the adequacy of coverage for the first year of ABP and 

exchange operation. 

Response: CMS collects data from states in a variety of ways. The data will be available 

to help states, CMS and others determine what services are actually being provided, and it will 

help to inform us for future coverage decisions. 

Comment: One commenter indicated that states should be able to include as Medicaid 

state plan services any habilitative services included in either its Exchange EHB benchmark or 

ABP. 

Response: Habilitative services are only required in the Medicaid program for individuals 

in an ABP. Many states cover habilitative services under their section 1915(c) waivers. States 
CMS-2334-F 215 

interested offering habilitative services in other contexts should initiate conversations with CMS. 

Comment: One commenter believed the habilitative benefit proposed to be defined in the 

November 20, 2012 EHB proposed regulation is wholly inadequate and urged HHS to pursue 

promulgation of a strong, uniform definition of habilitative services for ABPs, as well as those 

offered through the Exchange. 

Response: The scope of this regulation is related to the definition of habilitation services 

as EHBs for purposes of Medicaid ABPs under section 1937 of the Act. This regulation does not 

extend to the definition of habilitation services as EHBs for purposes of the individual and small 

group markets. 

Comment: One commenter recommended that HHS have the authority to amend state 

defined coverage of habilitative services should evidence show that they provide insufficient 

coverage for users. 

Response: We anticipate that states will provide appropriate coverage of this service but 

section 1937 of the Act gives states a certain amount of flexibility to define ABPs that include 

the minimum coverage defined as EHBs. 

Comment: One commenter believed that by requiring section 1937 plans to cover 

habilitative services, CMS is creating a disconnect between the scope of services offered under 

the state plan and section 1937 coverage, in essence making the section 1937 plans more 

generous than current Medicaid state plans (which goes against congressional intent). 

Response: The Affordable Care Act established habilitative services as part of the EHB 

category “Rehabilitative and Habilitative Services and Devices.” EHBs are required to be 

offered as part of ABPs and are not required in other Medicaid state plan benefits for adults. 

ABP benefit packages will be different from those defined as the Medicaid state plan. 

Comment: One commenter believed that requiring habilitative coverage does little to 
CMS-2334-F 216 

ensure that appropriate services are available to individuals, as those requiring habilitative 

services are likely to be considered “medically frail”, exempting them from mandatory 

enrollment in the benchmark package. 

Response: Individuals in the new adult group who meet the criteria to otherwise be 

determined to be exempt for medical frailty, will have a choice between ABP coverage that is 

defined in accordance with the requirements of section 1937 of the Act, including the EHB 

requirements, or ABP coverage that is defined as the coverage available under the state’s 

approved Medicaid state plan. People who are not in the new adult group and are eligible for 

voluntary enrollment may be given a choice by the state between the benefit package defined 

using the ABP or the state’s approved Medicaid state plan. An individual who has such an 

election may obtain needed habilitation services if the state has elected to provide such coverage 

under the state plan under section 1915(i) of the Act. If not, such individuals who need 

habilitative services may wish to voluntarily enroll in an ABP defined under section 1937 of the 

Act, if the EHB benefit package, inclusive of habilitative services, meets their needs. 

Summary: We solicited public comments related to this provision in the proposed rule. 

We clarify in regulation text that the state will define rehabilitative and habilitative services. 

Services covered by the base benchmark are the floor of EHB coverage, substituted as desired by 

the state. Under 45 CFR 156.110(f), if no habilitative services and devices are included in the 

base benchmark, states have the option to determine generally the required EHB services that are 

in the category of habilitative services and devices. If the state has done so, the base benchmark, 

and coverage under the ABP, must reflect that determination. If the state has not made a general 

determination of the habilitative services that are required as this EHB category, the state must 

exercise the option set forth in 45 CFR 156.115(a)(5) to determine EHB for the specific ABP. 

Under that option, habilitative services and devices must be included as EHBs either in an 
CMS-2334-F 217 

amount, duration, and scope no more restrictive in terms of treatment and benefit limitations than 

rehabilitative services and devices, or otherwise to an extent determined by the state and reported 

to HHS. In other words, if the base benchmark does not include habilitative services and 

devices, ABP coverage must, at a minimum, be based on the general state determination of 

habilitative services and devices that are included in EHBs, or on a Medicaid-specific 

determination for the particular ABP. 

b. Pediatric Oral and Vision and EPSDT Services 

For Medicaid, medically necessary services, including pediatric oral and vision services, 

must be provided to eligible individuals under the age of 21 according to requirements of the 

EPSDT benefit. We clarified in the proposed rule that any limitations relating to pediatric 

services that may apply in the individual or small group market does not apply to Medicaid. In 

this final rule, we made no change from the proposed rule. 

Comment: Several commenters expressed appreciation for and support of the clarifying 

language in the preamble that confirmed that medically necessary services provided to eligible 

beneficiaries under the age of 21 must be provided under the EPSDT program, and that any 

limitation relating to pediatric services based on benchmarks would not apply to Medicaid for 

children enrolled in ABPs. 

 One commenter added that the EPSDT benefit ensures that Medicaid eligible children 

have access to a complete range of medically necessary services, concluding that this will prove 

especially important for children with chronic conditions. 

A separate commenter believed that the pediatric services category for benchmark plans 

for all populations must include a comprehensive pediatric services benefit modeled after 

EPSDT. 

Response: We generally agree with these commenters, that the EPSDT benefit is 
CMS-2334-F 218 

important in offering increased access and a comprehensive range of medically necessary 

services for children under the age of 21. For children enrolled in Medicaid, all medically 

necessary services in general, including pediatric oral and vision services, are covered under the 

Medicaid EPSDT benefit, which applies to every section 1937 ABP. As a result, EHB 

supplementation for pediatric services is not necessary in Medicaid. 

When assuring access to EPSDT services, a state has the option to offer medically 

necessary services to eligible children through either benchmark and benchmark-equivalent plan 

benefits without limitation or, alternatively, a state may meet the ESPDT requirement by 

providing services in combination with an eligible individual’s benchmark or benchmarkequivalent plan as additional benefits. The state Medicaid program must assure that eligible 

individuals enrolled in ABP coverage receive EPSDT services that can be accessed in the most 

beneficial and seamless manner for the population being served. 

Comment: One commenter believed that subjecting ABP benefit categories to EPSDT 

requirement, such as preliminary screening, would water down ABP benefit packages and serve 

as an artificial barrier to care that children need. The commenter believed that a robust pediatric 

vision services benefit, as envisioned by Congress in the Affordable Care Act, based on coverage 

typical in the commercial market, should not be interrupted by imposing a harmful screening 

requirement. 

Response: We disagree. The commenter may have a misunderstanding of the EPSDT 

screening requirements. States are required to adopt EPSDT screenings (that is, preventive 

visits) for well-child, vision, hearing, and dental services. States may also adopt a national 

periodicity schedule such as Bright Futures (the Guidelines for health of the American Academy 

of Pediatrics). Services are provided based on these periodicity schedules and at other intervals 

as determined medically necessary. The inclusion of screening requirements as part of the 
CMS-2334-F 219 

EPSDT mandate should not in any way “water down” benefits provided under ABPs to 

individuals under the age of 21. It should serve to ensure that children receive the necessary 

screenings and any additional services and treatments according to appropriate standards of 

care. 

Summary: No changes were made. CMS clarified in regulation text that EPSDT applies 

to pediatric services including oral and vision care as a result of comments received in this 

section. 

c. Essential health benefits (Prescription drugs) (§440.347) 

In the proposed rule, we proposed to add a new paragraph (b)(7) to include benchmarkequivalent health benefits coverage for prescription drugs. We also indicated in the preamble 

that section 1927 of the Act requirements for covered outpatient drugs also apply to such 

prescription drug benefits as an EHB. As we previously discussed, we are clarifying in this final 

rule that this statement may have been over-inclusive, since section 1927 requirements do not 

apply to ABPs to the extent that they conflict with the flexibility under section 1937 of the Act 

for states to define the amount, duration, and scope of the benefit for covered outpatient drugs. 

We received the following comments: 

Comment: A few commenters expressed support of paragraph (b)(7) of §440.335, which 

implements the statutory requirements for benchmark equivalent coverage of prescription drugs. 

Response: We appreciate the commenters’ support for the coverage of prescription drugs 

as required under section 1937 of the Act. 

Comment: A few commenters indicated that in the current Medicaid program, states 

limit the number of drugs and include other utilization control measures that are harmful to 

patients and deny them the therapies that meet their health needs as prescribed by their 

physician. Some state Medicaid programs limit patients to two to four brand name drugs per 
CMS-2334-F 220 

month. Such limitations clearly do not meet patients’ needs and the commenter urges CMS not 

to allow states to adopt them for the expansion population. Patients should be able to access the 

medications that they need as prescribed by their physicians. If they are not able to access 

appropriate medications, patients may become ill, impacting healthcare spending in the long run. 

The commenters further seek clarification on what is being proposed in the rule’s 

recommendation regarding prescription drug limits. While the rule proposes that the ABP has to 

meet the benefits in the state-selected EHB for the private market, the rule separately appears to 

replace the ABPs EHB drug benefit category with that described in section 1927 of the Act. In 

the final rule, the commenters ask for clarification on this matter and specifically on whether the 

ABP drug benefit is trumped by what is outlined in section 1927 of the Act, including with 

respect to any limitations. Furthermore, they are greatly concerned by the seemingly open ended 

ability of states to impose limits, and recommend that quantity limitations not apply to the ABP. 

Another commenter states that CMS’ final rule must clearly specify all the drug access 

protections that apply to Medicaid ABPs. The commenter believes that these protections are 

essential in the Medicaid context because Medicaid beneficiaries represent a vulnerable 

population that tends to have lower health status and fewer resources to obtain needed care. 

 Response: States have considerable flexibility in designing benefit packages for ABPs, 

including in the process of ensuring coverage of EHBs. While this flexibility permits states in 

some instances to limit prescription drug coverage based on the coverage offered under other 

public employee or commercial plans, it also includes the ability to exceed the amount, duration, 

and scope of prescription drugs covered under those plans. We also clarify that nothing in the 

commercial market implementation of EHBs, including prescription drugs, directly prohibits the 

utilization of monthly quantity limits. In developing ABPs, states must include prescription drug 

coverage to at least reflect the EHB-benchmark plan standards, including the requirement to 
CMS-2334-F 221 

have procedures in place that allow an enrollee to request and gain access to clinically 

appropriate drugs not otherwise covered. We believe these requirements will result in coverage 

that is similar to the coverage otherwise required under regular Medicaid state plan coverage. 

Comment: A few commenters stated that they support the rules governing coverage of 

prescription drugs under Medicaid (section 1927 of the Act) applying to the ABP requiring 

coverage of nearly all of the drugs produced by manufacturers who participate in the Medicaid 

drug rebate program. The breadth of coverage offered by the Medicaid drug benefit is important 

to meet the medication needs of people with HIV who rely on a complex and unique drug 

regimen to treat HIV infection and manage serious co-occurring conditions, such as heart 

disease, serious mental illnesses and hepatitis B or C. However, they have serious concerns 

regarding the flexibility afforded to states to apply quantitative limits on drug coverage, 

particularly given that these limits are not common practice in the private insurance market. 

Allowing these types of limits in ABPs threatens access to lifesaving care and treatment and 

undermines the letter and spirit of the Affordable Care Act’s EHB requirements for newly 

eligible Medicaid beneficiaries. It will also have the effect of undermining the adequacy of 

prescription drug coverage for those with chronic health needs. The commenters recommend 

that HHS apply the section 1927 requirement for the range of covered medications, but prohibit 

additional authority for quantitative limits or other limits except as legally applicable based on 

the underlying ABP and EHB benchmarks. The commenters further recommend that §440.347 

be amended to read: “(e)Prescription drugs. Prescription drugs will be offered at a minimum in 

accordance with the requirements of section 1927 of the Act and implementing regulations.” 

 Response: While drug rebate obligations under section 1927(b) of the Act are applicable 

to payment for covered outpatient drugs covered through an ABP, the amount, duration and 

scope of coverage for an ABP is determined under section 1937 of the Act, which authorizes 
CMS-2334-F 222 

benchmark or benchmark-equivalent coverage “notwithstanding any other provisions that would 

be directly contrary.” This being the case, we do not have the authority to require states, when 

establishing its benefits under its ABP, to meet the coverage requirements of section 1927 of the 

Act. Doing so would be directly contrary to flexibility with respect to the amount, duration, and 

scope of coverage provided under section 1937 of the Act. As for the commenters’ concerns 

with the limits provided under section 1927 of the Act as they apply to the Medicaid population, 

especially on disease specific or chronic care populations, we note that states have considerable 

discretion in the provision of Medicaid services including the ability to define the amount, 

duration, and scope of prescription drugs covered under ABPs. We also clarify that nothing in 

the commercial market implementation of EHBs, including prescription drugs, prohibits the 

utilization of monthly quantity limits. 

Comment: One commenter stated that in 2014, the Affordable Care Act requires that 

ABPs cover at “least essential health benefits, as described in section 1302(b) of Affordable Care 

Act”. The commenter continues that while CMS proposes that the EHB requirements described 

in its November 2012 EHB proposed rule apply to ABPs, the Medicaid EHB proposed rule does 

not spell out the minimum prescription drug coverage requirements that will govern ABPs. 

The commenter requests CMS clarify that Medicaid ABPs must cover at least the same 

number of drugs in a particular United States Pharmacopeia (USP) class that the state-selected 

benchmark plan pertinent to the ABP covers, consistent with the “Standards Related to Essential 

Health Benefits, Actuarial Value, and Accreditation” proposed rule. The commenter also 

requests that CMS consider identifying classes of drugs in which broad access to different drugs 

within the class is essential to assure that vulnerable patients have prompt access to the right 

medicine for a serious illness, and bolster the drug coverage requirements for those drug classes 

accordingly. 
CMS-2334-F 223 

 Response: As indicated above, states have considerable discretion in the provision of 

Medicaid services including the ability to define the amount, duration, and scope of prescription 

drug coverage under an ABP. In developing ABPs, states must include prescription drug 

coverage consistent with the EHB-benchmark plan standards. These standards are set forth at 45 

CFR 156.122 and include the requirement that health plans have procedures in place that allow 

an enrollee to request and gain access to clinically appropriate drugs not covered by the health 

plan. We believe such requirements will result in coverage that is similar to the coverage 

otherwise required under regular Medicaid state plan coverage. 

Comment: One commenter is concerned with the adequacy of the EHB prescription drug 

benefit, which will apply to Medicaid beneficiaries enrolled in ABPs effective January 1, 2014. 

Medicaid beneficiaries in ABPs including those low-income adults who are newly eligible for 

Medicaid under Affordable Care Act are entitled to coverage for EHB. The proposed rule 

codifies this requirement and incorporates the definitions and standards that were specified for 

EHB coverage in the individual and small group market in the EHB proposed rule that CMS 

published on November 26, 2012, including CMS’ proposed formulary standard for the 

prescription drug benefit. While the final rule states that USP will be used at least through “the 

years 2014 and 2015 during the transitional EHB policy” and thus it applies to the Medicaid 

ABPs during that time, the commenter urges CMS reconsider the use of the USP system as it is 

currently structured after 2015 given that many significant concerns remain. The commenter 

lists the following concerns regarding the EHB prescription drug benefit: 

● The inadequacy of the USP to represent the full range of categories and classes of 

drugs needed by the populations covered by the EHB, including Medicaid beneficiaries enrolled 

in ABPs, because the USP was created as a classification system to be used by Medicare Part D 

plans; 
CMS-2334-F 224 

● The need to incorporate specific protections for vulnerable populations to ensure 

appropriate access to vital medications; 

● The need to expand the USP categories and classes and include more detail to 

adequately represent the drugs needed by enrollees in plans subject to EHB; 

● The inability of USP categories and classes to capture all medical benefit drugs, 

including physician-administered drugs, and the need for CMS to specify that plans must offer 

robust coverage of drugs that are included as part of a comprehensive medical benefit, including 

a wider range of therapies, and should not rely on the USP categories and classes when 

determining coverage for physician-administered therapies; 

● A requirement that new therapies be reviewed and added to plan formularies within 90 

to 180 days through a process that mirrors the review process performed by independent 

Pharmacy and Therapeutic Committees in Medicare Part D to support timely access to new and 

innovative medications; 

● A requirement for specific appeals and exceptions procedures to ensure that patients 

have access to needed treatments, and the application of these procedures also apply to drugs that 

are covered as part of a comprehensive medical benefit; and, 

● The need for CMS to provide specific guidance about Medicaid ABPs regarding 

acceptable and unacceptable utilization management techniques, without which there is a real 

risk that plans could apply utilization management tools in a way that discriminates against 

individuals with more significant health care needs. 

Response: We appreciate the comments submitted regarding the application of the EHB 

requirements to ABPs, including the commenter’s concerns with the use of the USP 

classification system. As stated above, states have considerable discretion in the provision of 

Medicaid services including the ability to define the amount, duration, and scope of coverage 
CMS-2334-F 225 

under an ABP. We also clarify that nothing in the commercial market implementation of EHBs, 

including prescription drugs, prohibits the use of utilization management tools. In developing 

ABPs, states must include prescription drug coverage to reflect the EHB-benchmark plan 

standards, including the requirements at section 45 CFR 156.122. We believe these 

requirements will result in coverage that is similar to the coverage otherwise required under 

regular state plan coverage. 

Comment: A few commenters indicated that the preamble to the proposed rule says that 

all drugs of the companies that participate in the drug rebate program should be included in the 

ABP; however that language is not included in the language of the proposed regulation. The 

commenters recommended that the regulatory language be amended to correct that omission. 

Additionally, commenters agreed with HHS’ legal conclusion, stated at 78 FR 4631, that section 

1927 of the Act applies to ABPs and believe that this is a critical protection requiring coverage 

of a range of drugs necessary to meet the needs of the Medicaid population. The commenter 

recommends that HHS’ explicitly state this requirement in the regulation. 

Response: As noted earlier, we must clarify a statement in the preamble to the proposed 

rule, indicating that coverage requirements under section 1927 of the Act are applicable to ABPs 

under section 1937 of the Act. While drug rebate obligations under the rebate agreement are 

required for drug manufacturers under section 1927(b) of the Act, the amount, duration and 

scope of drug coverage under an ABP is determined under section 1937 of the Act. The drug 

rebate obligation applies because payment is made under the Medicaid state plan for covered 

outpatient drugs as part of the ABP. The amount, duration, and scope of coverage for an ABP 

are determined under section 1937 of the Act, which authorizes benchmark or benchmarkequivalent coverage “notwithstanding any other provision that would be directly contrary.” That 

said, to the extent that covered outpatient drugs are within the scope of coverage, the non-
CMS-2334-F 226 

coverage provisions under section 1927(d) of the Act would apply. For example, states will 

continue to be permitted to apply certain permissible restrictions such as prior authorization. 

However, when establishing such programs, states must continue to adhere to the requirements 

that states must respond within 24 hours for pre-authorization requests, except for excluded 

drugs listed at section 1927(d)(2) of the Act, and that at least a 72-hour supply of a covered 

outpatient prescription drug must be dispensed in an emergency situation. Further, we are 

revising §440.345 to add a new paragraph (f) that states that when states pay for covered 

outpatient drugs under their ABP’s prescription drug coverage, they must comply with the 

requirements of section 1927 of the Act.

Comment: A few commenters believed that ABPs are required by statute to include all 

outpatient drugs in the Medicaid drug rebate program, as well as meet the requirements for 

prescription drugs as proposed in the EHB proposed rule for the commercial market. These 

commenters also believe that in the absence of prescription drug coverage in a particular 

category or class, the ABP benefit must include at least one drug. They also recommend that the 

final rule clarify that prescription drug coverage within ABPs must provide the greater of the 

statutorily required coverage described in section 1927 of the Act, or the required EHB coverage 

described in the proposed rule issued November 26, 2012. Another commenter recommended 

that CMS require each ABP’s coverage of prescription drugs to be consistent with the state’s 

EHB standard. 

Response: As indicated above, states have considerable flexibility in implementing the 

provision of Medicaid services through ABPs. In developing ABPs, states must include 

prescription drug coverage to reflect the EHB-benchmark plan standards at section 45 CFR 

156.122 for prescription drug coverage. We believe these requirements will result in coverage 

that is similar to the coverage otherwise required under regular state plan coverage. 
CMS-2334-F 227 

Comment: A few commenters indicated that the regulatory text is correct at part 440, but 

the preamble is not, in that the rebate statute section 1927 of the Act does not apply to ABPs. 

They reasoned that the benefits under section 1937of the Act are mandatory benefits, and they 

explicitly refer to the prescription drugs of the essential health benefits and not to the covered 

outpatient drugs of the voluntary Medicaid benefit to which section 1927 of the Act applies. 

Thus, the EHB’s prescription drug coverage, which requires the greater of one drug in a class or 

the number of drugs in the class in the benchmark plan, should apply to ABPs. If it is 

determined that section 1927 of the Act applies, then all the requirements and protections of 

section 1927 of the Act should apply to ABPs. 

A commenter stated that the rebate statute applies exclusively to covered outpatient 

drugs; it requires manufacturers to pay rebates on covered outpatient drugs (when they are paid 

for under a state Medicaid plan); and it limits the restrictions that states can place on access to 

covered outpatient drugs. The statute defines a “covered outpatient drug” in terms of what is 

included in the definition and what is excluded. This commenter believes the term “covered 

outpatient drug” is a well understood term of art meaning those drugs to which the Medicaid 

rebate statute applies. If Congress had intended the Medicaid rebate statute to apply to Medicaid 

ABPs, then Congress would have stated this explicitly and described the drugs covered under an 

ABP as “covered outpatient drugs.” When Congress decided to apply the rebate statute to 

Medicaid managed care organizations, Congress made its decision clear and took the steps 

necessary to make its decision workable. For example, Congress explicitly revised the rebate 

statute to provide that covered outpatient drugs for which payment was made under the state 

Medicaid plan includes “such drugs as dispensed to individuals enrolled with a Medicaid 

managed care organization if the organization is responsible for coverage of such drugs,” among 

other changes. 
CMS-2334-F 228 

By contrast, the commenters assert that Congress took an entirely different approach with 

Medicaid ABPs. Unlike in the Medicaid MCO case, Congress never mentioned Medicaid 

rebates in the statutory provision authorizing ABPs, never mentioned ABPs in the Medicaid 

rebate statute, never established any mechanism for ABPs to report drug utilization data to states 

and for states to include this data in manufacturers’ rebate invoices, and never provided that state 

payments to ABPs would be premised on the understanding that states would collect Medicaid 

rebates. 

Similarly, the commenters indicate that section 1937 of the Act makes no mention of 

covered outpatient drugs. Instead, the drug-related provisions in section 1937 of the Act provide 

only that (1) benchmark-equivalent coverage must include “prescriptions drugs” (among other 

basic services required in benchmark-equivalent plans) and (2) starting in 2014, all ABPs must 

provide “at least essential health benefits as described in section 1302(b) of Affordable Care Act, 

which benefits include prescription drugs.” Thus in both of the statutory provisions referencing 

ABPs’ drug coverage, Congress omitted the term denoting those drugs that are subject to the 

Medicaid rebate statute and instead incorporated different terms with no connection to the rebate 

statute. And Congress’ decision to omit “covered outpatient drug” terminology is consistent 

with its decisions: (1) not to require to authorize reporting of ABP drug utilization data to states 

and manufacturers; and (2) not to address any implications of state rebate collection on ABP 

payments. Congress’ decision not to apply the rebate statute also is consistent with the purpose 

of section 1937 of the Act, which is to give State Medicaid programs more flexibility and allow 

them to operate more like commercial payers. 

Another commenter stated that the prescription drug benefit to be provided to Medicaid 

beneficiaries under section 1937 of the Act is not the same benefit as the “prescribed drugs” 

provided under a State plan under section 1905(a)(12) of the Act. Indeed, the coverage for 
CMS-2334-F 229 

prescription drugs made available to the Medicaid expansion population is derived from a 

different statutory authority than the traditional Medicaid option to provide coverage for 

“prescribed drugs.” The benefit under section 1905(a)(12) of the Act is optional for a State, 

while the prescription drug provided by an ABP is mandatory in accord with EHB requirements 

established by Affordable Care Act. Therefore, the commenter contends, and urges CMS to 

clarify in the final rule, that there is no statutory basis to apply section 1927 of the Act to these 

ABPs. 

In short, the commenters believe the statutory evidence demonstrates that Congress 

decided not to apply the Medicaid rebate statute to ABPs. When a word or phrase has become a 

term of art with a specialized meaning, that specialized meaning governs. Likewise, when 

Congress uses a term of art in one statutory provision but omits it in another (like section 1937 of 

the Act), then Congress intends a different meaning; “where Congress includes particular 

language in one section of a statute but omits it in another..., it is generally presumed that 

Congress acts intentionally and purposefully in disparate inclusion or exclusion.” Accordingly, 

applying the rebate statute to ABPs would be directly contrary to section 1937 of the Act and 

thus prohibited. 

Response: Drug rebate obligations are required for drug manufacturers under 1927(b) of 

the Act when payment occurs for covered outpatient drugs covered through an ABP. However, 

the amount, duration, and scope of drug coverage under an ABP are determined under section 

1937 of the Act. That is, the drug rebate obligation applies because payment is made under the 

Medicaid state plan for covered outpatient drugs provided as part of the ABP prescription drug 

benefit. The amount, duration, and scope of coverage for an ABP are determined under section 

1937 of the Act, which authorizes benchmark or benchmark-equivalent coverage 

“notwithstanding any other provision that would be directly contrary.” That said, to the extent 
CMS-2334-F 230 

that covered outpatient drugs are within the scope of coverage, the non-coverage provisions of 

section 1927 of the Act would apply. 

Comment: A commenter indicated that they anticipate that requiring ABPs to satisfy the 

requirements of both section 1927 of the Act and the EHB formulary standard may present 

significant practical challenges for the ABPs. The proposed rule does not explain how these two 

sets of requirements will fit together or whether and when the requirements of section 1927 of 

the Act will take precedence over the EHB formulary standard. For example, section 1927 of the 

Act requires manufacturers and the Secretary to enter into an agreement under which 

manufacturers must pay rebates to state Medicaid agencies for utilization of the manufacturer’s 

covered outpatient drugs, in return for the state coverage of such drugs, which may be restricted 

only within the set confines of section 1927(d) of the Act. The proposed EHB prescription drug 

benefit, by contrast, requires coverage of at least the greater of (1) one drug in every USP 

category and class; or (2) the same number of drugs in each category and class as the EHB 

benchmark plan. 

 Response: As we stated earlier, there is no authority to require states to meet 

requirements of section 1927 of the Act related to the amount, duration and scope of covered 

outpatient drugs under an ABP. States have some discretion in the provision of Medicaid 

services including the ability to define the amount, duration, and scope of coverage under an 

ABP. In developing ABPs, states must include prescription drug coverage to reflect the 

standards used to define EHBs for Medicaid. As stated earlier, we believe these requirements at 

45 CFR 156.122 will result in coverage that is similar to the coverage otherwise required under 

regular Medicaid state plan coverage. 

 Comment: A few commenters indicated that to the extent that CMS nonetheless decides 

to apply section 1927 to ABPs, it is of the utmost importance that CMS apply and stringently 
CMS-2334-F 231 

enforce both the coverage and access requirements of that section. CMS should explicitly 

indicate that the section 1927 safeguards on coverage and exclusions apply, in addition to the 

prescription drug benefit requirements of the EHB proposed rule. Any requirements for payment 

of rebates under section 1927 of the Act without adherence to the coverage and exclusion 

limitations violates the intent and spirit of that section. 

Another commenter indicated that the Medicaid rebate statute requires states that provide 

payment for drugs to cover all “covered outpatient drugs” of manufacturers that sign a Medicaid 

rebate agreement, subject to certain limitations on coverage that the statute describes very 

specifically. The rebate statute explicitly lists the limited circumstances in which a State 

Medicaid program may exclude or otherwise restrict coverage of a drug manufactured by a 

company with a Medicaid rebate agreement. 

Response: While drug rebate obligations under the rebate agreement with drug 

manufacturers under section 1927(b) of the Act are applicable to covered outpatient drugs 

covered through an ABP, the amount, duration, and scope of drug coverage under an ABP are 

determined under section 1937 of the Act alone. The drug rebate obligation applies when 

payment is made for covered outpatient drugs in accordance under the Medicaid state plan, 

including a state’s ABP. The amount, duration, and scope of coverage for an ABP is determined 

under section 1937 of the Act, which authorizes benchmark or benchmark-equivalent coverage 

“notwithstanding any other provision that would be directly contrary.” 

 Comment: One commenter recommended that the prescription drug benefit under ABPs 

should include all over-the-counter and prescription medications approved by the FDA to treat 

tobacco cessation. The commenter continues that tobacco cessation medications are currently on 

the list of “drugs subject to restriction” in section 1927(d) of the Act, and therefore, states are 

allowed to exclude coverage of these drugs. 
CMS-2334-F 232 

Response: Effective January 1, 2014, section 1927(d) of the Act requires states to 

provide coverage of non-prescription and prescription covered outpatient drugs used to treat 

tobacco cessation for all Medicaid beneficiaries. Notwithstanding that requirement, we note that 

there is no authority to require states to meet requirements of section 1927 of the Act related to 

the amount, duration, and scope of covered outpatient drugs under an ABP. States have 

considerable discretion in the provision of Medicaid services including the ability to define the 

amount, duration, and scope of coverage under an ABP. In developing ABPs, states must 

include prescription drug coverage to reflect the standards for defining EHBs in Medicaid. As 

stated earlier, we believe these requirements at 45 CFR 156.122 will result in coverage that is 

similar to the coverage otherwise required under regular Medicaid state plan coverage. 

Comment: A few commenters indicated that the agency says that the states have the 

flexibility to “adopt prior authorization and other utilization control measures, as well as policies 

that promote use of generic drugs.” The commenters believe there is potential for conflict 

between the prescription drug coverage of an ABP supplemented by the states’ essential health 

benefit standard, and a drug benefit that is consistent with the State’s Medicaid program. The 

commenter urged clarification of the coverage standard accompanied by protections to ensure 

that patients can appeal utilization controls that might prevent them from receiving necessary 

medications. 

One commenter recommended that CMS monitor the implementation of traditional 

Medicaid and ABP PDLs and utilization management techniques, and act to stop burdensome 

limitations that reduce access to care and could impact patient health because of limited access to 

needed drugs. The commenter also recommends requiring that decisions regarding PDLs take 

into account evidence-based clinical practice guidelines, and not just of drugs; and that CMS 

require that states only be permitted to classify a drug as non-preferred when there are genuine 
CMS-2334-F 233 

therapeutic alternatives classified as preferred. 

Response: Prescription drug coverage under an ABP is still subject to the provisions 

related to drug rebates, as well as the non-coverage provisions under section 1927(d) of the Act. 

Therefore, states will continue to be permitted to apply certain permissible restrictions such as 

prior authorization. However, when establishing such programs, states must continue to adhere 

to the requirements that states must respond within 24 hours for pre-authorization requests, 

except for excluded drugs listed at section 1927(d)(2) of the Act, and that at least a 72-hour 

supply of a covered outpatient prescription drug must be dispensed in an emergency situation. 

Furthermore, a state Medicaid agency’s Pharmacy and Therapeutics (P&T) Committee 

typically makes decisions on inclusion of preferred drugs in a therapeutic class when 

establishing a state’s PDL. Specifically, the P&T Committee reviews evidence-based 

information, along with review of comparative clinical trials to make such decisions regarding a 

state’s PDL. A PDL is permitted under section 1927 of the Act, as long as it is under a prior 

authorization program that meets the requirements of section 1927(d)(5) of the Act. 

Comment: One commenter recommends that individuals have access to the full range of 

available clotting factors without limitation through restrictive drug formularies, which 

negatively impacts patient care. Patients and physicians should make the choice of which 

therapy is appropriate. The commenter also noted that hemophilia patients should have access to 

a range of specialty pharmacy providers. Several commenters recommend that CMS require 

states to implement beneficiary protections consistent with Medicare Part D, including 

consideration of specific drugs, tiering, and utilization management strategies used in each 

formulary. 

Response: As we stated earlier, there is no authority to require states to meet 

requirements of section 1927 of the Act related to the amount, duration and scope of covered 
CMS-2334-F 234 

outpatient drugs under an ABP. States have considerable discretion in the provision of Medicaid 

services including the ability to define the amount, duration, and scope of coverage under an 

ABP. In developing ABPs, states must include prescription drug coverage to reflect the 

standards for defining EHBs in Medicaid. As we have noted in prior responses, we believe these 

requirements will result in coverage that is similar to the coverage otherwise required under 

regular Medicaid state plan coverage. 

Comment: One commenter stated that section 2001(c) of Affordable Care Act modified 

the benefit provisions of section 1937 of the Act. Among other things, section 2001(c) of the 

Affordable Care Act added mental health benefits and prescription drug coverage to the list of 

benefits that must be included in benchmark equivalent coverage; and directed that ABPs that 

include medical/surgical benefits and mental health and/or substance use disorder benefits 

comply with the Mental Health Parity and Addiction Equity Act of 2008. 

This being the case, the commenter encourages CMS to clarify and strengthen the 

guidance on drug formularies in the current parity regulations which make it difficult to 

determine whether a formulary satisfies the law’s parity standards. 

Response: While we appreciate the commenter's concern, the Interim Final Regulation 

regarding the Mental Health Parity and Addiction Equity Act of 2008 is not the subject of this 

final rule. 

Comment: One commenter suggested that CMS provide guidance to states on 

medication assisted treatment of substance abuse disorder. Specifically, states should be 

required to cover Methadone, Buprenorphine, Vivitrol, etc., in the EHB and that where needed 

states should expand the formulary to include all FDA approved medications for the treatment of 

substance use disorders. 

Response: CMS is not providing guidance regarding specific services offered in each of 
CMS-2334-F 235 

the ten essential health benefits in this final rule. 

Comment: One commenter requests that CMS encourage state Medicaid programs to 

utilize the 340B drug purchasing program provided by hemophilia treatment centers or HTCs so 

that individuals with hemophilia can receive their pharmacy services from their HTC. HTCs 

with 340B programs integrate clinical and pharmacy services to provide comprehensive highquality care to patients and closely monitor drug utilization, allowing for more immediate 

changes in treatment and better management of treatment costs. Patients benefit from lower cost 

prescriptions that reduce out-of-pocket spending and accumulation of costs towards caps on 

health insurance expenditures and ongoing education and support to ensure that they 

appropriately assess their treatment needs. Medicaid programs will benefit from better 

management of overall treatment costs through close monitoring of bleeds and factor use to 

reduce complications. 

Response: We appreciate the comments regarding the 340B program and coverage of 

drugs for hemophilia; however, the State’s utilization of the 340B drug purchasing program is 

outside the scope of this rule. 

Comment: CMS should establish clear requirements to assure that utilization data for 

populations eligible to receive Medicaid rebates is maintained separately from data from other 

lines of business. That is, the final regulation must provide clear rules to assure that plans 

maintain data on prescription drug claims appropriately and do not mix data from populations 

eligible for Medicaid rebates with data for other enrollees not eligible for Medicaid rebates. 

Because many plans may offer products in the exchanges as well as participate in Medicaid 

managed care (under either section 1903(m) of the Act, as well as Medicaid ABPs) the potential 

for confusion is high and clear rules are needed to assure that utilization for rebate-eligible 

patients is maintained separately from data for other lines of business. 
CMS-2334-F 236 

Response: If the state administers its ABP via a Medicaid MCO, the state will need to 

ensure the MCO distinguishes these claims from its other lines of business for the purpose of 

claiming Medicaid rebates consistent with the current requirement for such claims under section 

1927 of the Act. CMS expects to issue subregulatory guidance on collecting manufacturer 

rebates for ABPs. Manufacturers are not required under section 1927 of the Act to pay rebates 

absent a Medicaid payment for the drugs, which would not be present in the case of drugs 

dispensed to Medicaid beneficiaries that are enrolled in qualified health plans where the only 

Medicaid payment was premium assistance for the beneficiary. 

 Summary: Based upon the comments requesting clarification as to whether or not section 

1927 of the Act applies to prescription drug coverage provided under a state’s ABP, we will be 

adding paragraph (f) to §440.345 to require that when states pay for covered outpatient drugs 

under their ABP’s prescription drug coverage, states must comply with the requirements under 

section 1927 of the Act. 

4. All Other Title XIX Provisions Apply 

We clarified in the proposed rule that all other Title XIX of the Act provisions apply 

unless, as spelled out in section 1937 of the Act, a state can satisfactorily demonstrate that 

implementing such other provisions would be directly contrary to their ability to implement 

ABPs under section 1937 of the Act. 

Comment: We received one comment requesting that CMS elaborate on what is meant 

by the preamble language that all other provisions under title XIX of the Act apply, and whether 

states are required to cover the current mandatory Medicaid benefits, and ensure non-emergency 

transportation, when using an ABP for the new adult expansion group. 

Response: The Medicaid benchmark and benchmark-equivalent coverage was first 

authorized by the DRA, which included language stating that “notwithstanding any other 
CMS-2334-F 237 

provision of title XIX” states can offer medical assistance to certain Medicaid beneficiaries 

through benchmark or benchmark-equivalent benefit packages. As a result of CHIPRA changes 

to the DRA, CMS regulations were revised to implement this change in law. CHIPRA language 

provides clearly that a state’s benchmark or benchmark-equivalent programs may vary only from 

statutory requirements explicitly waived in section 1937 of the Act (statewideness and 

comparability), unless states can demonstrate that other provisions not identified in section 1937 

of the Act would be directly contrary to their ability to implement ABP. As such, in the 

proposed rule, we offered clarifying language in the preamble to reiterate that this current policy 

continues to apply. Due to statutory requirements, states may not disregard any provisions of 

title XIX and are therefore required to assure that all populations receiving ABPs, including the 

new adult expansion group, have access to transportation necessary to obtain Medicaid covered 

services. 

Summary: No changes will be made to the proposed regulation as a result of comments 

received in this section. 

5. Preventive Services as an EHB 

The EHB Final rule specified that, to provide EHB, a plan must provide coverage of 

preventive services. This requires plans to cover a broad range of preventive services including 

“A” or “B” services recommended by the United States Preventive Services Task Force; 

Advisory Committee for Immunization Practices recommended vaccines; preventive care and 

screening of infants, children and adults recommend by HRSA’s Bright Futures program, and 

additional preventive services for women recommended by the Institute of Medicine. We 

proposed that Title XIX premium and cost sharing provisions apply to preventive services for 

adults, but not for children. 

Comment: Many commenters commended HHS for including in ABPs the full range of 
CMS-2334-F 238 

preventive services required in the EHB, including all of the services specified in section 2713 of 

the PHS Act. The commenters believed this is a critical provision for vulnerable populations and 

will help achieve the Affordable Care Act objective of shifting health care emphasis from 

expensive interventions to cost-effective prevention. The commenters requested that HHS 

explicitly state this requirement (currently in the preamble at 78 FR 4631) in the regulation itself. 

Response: The language in the preamble to the proposed rule, originating in section 

2713 of the PHS Act, was included as a reference to the requirement to cover preventive services 

as part of providing EHB, which has been implemented by regulation codified at 45 CFR 

147.130. We do not believe this requires further clarification in this final rule. 

Comment: A number of commenters asked CMS to clarify its preamble language, “Title 

XIX premium and cost sharing provisions apply to preventive services.” Specifically, CMS 

should clarify whether it intends this to apply to the ABPs for the new expansion population 

and/or to current state Medicaid plan services. 

Response: We agree that this issue needs to be clarified, particularly in light of the 

issuance of the final rules implementing EHB requirements for the individual and small group 

markets. In the final regulations issued February 25, 2013 at 78 FR 12835, the provision of EHB 

was defined at 45 CFR 156.115(a)(4) to “include preventive health services described in [45 

CFR] §147.130”. That cross referenced provision describes the requirement for coverage of 

preventive services without cost sharing. As explained in the preamble to the proposed 

regulations, at 77 FR 70644, 70651 (Nov. 26, 2012), the intent was to include in the EHB 

coverage obligation the prohibition on cost sharing for preventive health services. Thus, while 

Medicaid cost sharing provisions at sections 1916 and 1916A of the Act apply generally to 

preventive services provided in ABPs, cost sharing may not be applied to preventive services 

that are within the definition of EHBs (described in 45 CFR 147.130). An ABP may include 
CMS-2334-F 239 

preventive services beyond the floor of coverage required as EHBs, and cost sharing may be 

applied to such preventive services at state option to the extent permissible under sections 1916 

and 1916A of the Act. 

Comment: One commenter requested clarification on whether the full range of United 

States Preventive Services Task Force (USPSTF) “A” and “B” services is specific to benchmark 

benefits offered to individuals that are newly eligible. 

Response: These services, along with IOM-recommended women’s preventive services, 

ACIP-recommended vaccines, and HRSA’s Bright Futures recommendations, comprise the 

preventive services EHB category that will be provided to all individuals in an ABP, including 

those in the new adult group. In addition, coverage of USPSTF “A” and “B” preventive services 

under section 4106 of the Affordable Care Act applies, at state option, to preventive services 

furnished under the regular state plan. States implementing the preventive services EHB in their 

ABP without cost sharing will be eligible for the additional 1 percentage point of FMAP (for 

newly eligible individuals, this increased FMAP will be available once Federal reimbursement of 

services drops below 100 percent). 

Comment: A few commenters were concerned that other preventive screenings 

recommended by the CDC are not included in the proposed rule. The commenters recommended 

the inclusion of all CDC hepatitis B and C screening recommendations as required components 

of Medicaid’s ABPs. 

Response: CMS recognizes the importance of CDC recommendations related to 

preventive services. The proposed rule was not meant to be an exhaustive list of all 

recommendations made by government agencies such as the USPSTF. States have the option to 

adopt CDC recommendations as long as they are in line with EHB preventive service statutory 

and regulatory guidance. 
CMS-2334-F 240 

Comment: A few commenters requested that HHS clearly define which tobacco cessation 

treatments are required to be covered as a preventive service under EHB. The commenters 

believed this definition should be comprehensive, and include – and require – all tobacco 

cessation medications approved by the FDA as well as individual, group and phone counseling. 

The commenters believed it should be based on and reference the most recent version of the 

Public Health Service Guideline Treating Tobacco Use and Dependence, to ensure that when and 

if the guideline is updated the benefit will be revised as appropriate. 

Response: We appreciate the commenter’s recommendations. Tobacco cessation 

programs are important preventive services. However, states have been given latitude on how to 

furnish this service within the bounds of statute, regulation, and sub-regulatory guidance. 

Tobacco cessation for pregnant women is defined in section 4107 of Affordable Care Act and is 

located at section 1905(a)(4)(D) of the Act. We also issued a letter to State Medicaid Directors 

dated June 24, 2011 that clarified policy related to this provision. The only tobacco cessation 

services required to be furnished in the EHB package are those recommended by the entities 

designated in section 2713 of the Public Health Service Act. 

Comment: Many commenters requested greater definition of the preventive services that 

states are required to cover to meet the EHB requirement. The commenters found it difficult to 

determine what preventive health services are covered and what the scope and limits of the 

coverage may be. 

Response: The definition of preventive services as an EHB includes a broad range of 

preventive services including: ‘‘A’’ or ‘‘B’’ services recommended by the United States 

Preventive Services Task Force; Advisory Committee for Immunization Practices (ACIP) 

recommended vaccines; preventive care and screening for infants, children and adults 

recommended by HRSA’s Bright Futures program/project; and additional preventive services for 
CMS-2334-F 241 

women recommended by Institute of Medicine (IOM). Further definition was not provided as 

these standards were established by experts in the field of prevention. 

Comment: A few commenters requested that HHS provide the following guidance: 

● Clarify in the language of the final rule that Medicaid ABP must cover all section 

2713 services. 

● Clarify that section 2713 coverage requirements apply even where there is overlap 

with EHB categories. 

● Create standards to ensure that section 2713 preventive service coverage offers 

meaningful incentives to providers. 

● Encourage states to align traditional Medicaid coverage with the section 2713 

preventive services requirement. 

Response: We appreciate the commenters’ request to include further descriptions within 

the final rule. The rule, as written, requires states to provide a robust set of preventive services 

that align with §147.130. The Affordable Care Act established §4106 effective January 1, 2013 

within regular Medicaid coverage, which includes a subset of the services implemented in §2713 

of the Public Health Service Act (PHSA). A State Medicaid Director Letter on §4106 was 

released on February 1, 2013 (http://www.medicaid.gov/Federal-PolicyGuidance/downloads/SMD-13-002.pdf). 

Comment: One commenter requested clarification regarding the interval after which a 

preventive service rated with an A or B by the USPSTF must be included in EHBs for Medicaid 

plans. The commenter encouraged HHS to establish an interval of no later than the 1-year 

minimum specified in section 2713(b)(1) of the Public Health Service Act, irrespective of any 

other timetable HHS choose for updating the EHBs more broadly over time. 

Response: Section 2713(b)(1) and (2) of the Public Health Service Act set forth the 
CMS-2334-F 242 

interval between the date on which a recommendation described in subsection (a)(1) or (a)(2) or 

a guideline under subsection (a)(3) is issued and the plan year for which of the requirements 

described in subsection (a) is effective for the service described in such recommendation or 

guideline. We believe that such an interval is appropriate for applicable preventive services 

included in the ABP. 

Comment: One commenter requested specificity around the process by which USPSTF 

recommendations will be incorporated into EHBs over time and the process for determining the 

frequency and intensity of USPSTF-recommended behavioral interventions. 

Response: A broad range of preventive services including all ‘‘A’’ or ‘‘B’’ services 

recommended by the United States Preventive Services Task Force must be incorporated in the EHB 

and are required to be implemented according to the effective date of the submitted SPA. If states 

want an effective date of January 1, 2014 for the entire ABP including these preventive services, 

then a SPA will need to be submitted by the end of the first calendar quarter of 2014. States are 

expected to keep abreast of changes to the USPSTF-recommended services to ensure provision of a 

current array of services. 

Comment: One commenter indicated that, to the extent that HHS does not specify the 

number of covered visits to registered dietician specialists for medical nutrition therapy, national 

practice guidelines should determine appropriate coverage. 

Response: We encourage states to consult and rely on national practice guidelines, as 

they design their benefit packages. 

Comment: One commenter requested that while HHS may be reluctant to explicitly 

require coverage of obesity treatment, HHS should clarify whether management of obesity and 

metabolic disorders are chronic disease management services and are therefore covered services 

under the “Preventive and Wellness Services and Chronic Disease Management” category of the 
CMS-2334-F 243 

EHB package. One commenter believed that beneficiaries affected by severe obesity should 

have access to bariatric surgery with comprehensive pre- and post-surgery nutrition evaluation 

and counseling to ensure the efficacy and cost effectiveness of the bariatric surgery benefit over 

the long term. 

Response: ‘‘A’’ or ‘‘B’’ services recommended by the United States Preventive Services 

Task Force must be incorporated in the EHB. Current USPSTF guidelines provide for the 

screening and counseling for obesity in both children and adults. Aside from the services 

specified at section 2713 of the Public Health Service Act, we are not mandating the provision of 

specific services through the EHB package. We agree that bariatric surgery, complete with 

appropriate counseling, can be a valuable service, and it will covered in the ABP if it is included 

in EHB definitions of the public employee or commercial plan selected by the state to define 

EHBs for Medicaid, supplemented and substituted as necessary and permitted. States may also 

choose to add this service to their ABP. 

Comment: One commenter asked HHS to clarify whether a state that chooses to use its 

current state plan as the ABP would need to add services to the state plan for ABP recipients if 

not all preventive services are included. The commenter also asked whether states would need to 

amend the state plan and provide these services for all Medicaid recipients of the state plan 

services. 

Response: The regular state plan does not need to be amended to reflect the breadth and 

depth of required preventive service coverage in an ABP. States will have to comply with the 

definition of preventive services for the EHB category within the ABP. States using Secretaryapproved coverage to implement a benefit package similar to their Medicaid state plan would 

need to ensure provision of all EHB preventive services through the ABP, even if such services 

are not available under the state plan. A state plan amendment will be required to implement an 
CMS-2334-F 244 

ABP for the new adult group and for any other categorically needy eligibility groups that a state 

may wish to enroll in an ABP. 

Comment: A number of commenters recommended that HHS apply the PHS Act 2713 

cost-sharing prohibition for preventive services under section 2713 of the PHS Act to the same 

preventive services covered by ABPs. The commenters believed these protections are essential 

to provide meaningful coverage to vulnerable population and avoid the unfair outcome of greater 

cost-sharing for poorer individuals. The commenters believed cost sharing on preventive 

services should be prohibited based on the authority of section 2713 of the PHS Act. One 

commenter believed that cost-sharing for preventive services is prohibited under the definition of 

EHB in regulations at 45 CFR 156.115, which state that the EHB include “preventive health 

services described in [45 CFR] §147.30.” The commenter explained that this section lists the 

services included in the definition of preventive health services and states that insurers “may not 

impose any cost-sharing requirements (such as copayment, coinsurance, or deductible) for those 

items or services.” The commenter believed the definition of preventive services in the EHB is 

unique in that it incorporated a prohibition on cost-sharing in the definition of the benefit. The 

commenter believed that by requiring EHB in ABPs, Congress intended to carry that prohibition 

on cost-sharing into Medicaid’s ABPs. A number of commenters believed that prohibiting cost 

sharing for preventive services is consistent with the provision giving states a percentage point 

increase in their FMAP under section 4106 of the Affordable Care Act. 

Response: We appreciate the concerns commenters raised regarding cost sharing for 

preventive services and we are adopting their suggested policies in light of the provisions of the 

recently issued EHB regulations for the individual and group markets at 45 CFR 156.115(a)(4). 

As stated above, states may not impose cost sharing for preventive services included in ABPs 

that are within the scope of EHBs, as defined at 45 CFR 147.130, but may impose cost sharing 
CMS-2334-F 245 

consistent with sections 1916 and 1916A of the Act on preventive services that go beyond that 

scope. This is because the definition of preventive services for purposes of the EHBs precludes 

cost sharing, and Medicaid ABPs must include EHBs. We clarify that the broader prohibitions 

on cost sharing for preventive services at section 2713 of the PHS Act apply only to group health 

plans and health insurance issuers providing group or individual health insurance coverage, and 

do not apply to Medicaid. For preventive health services beyond the scope of EHBs, we note 

that cost sharing is not allowed for preventive services provided to children under sections 1916 

and 1916A (b)(ii) of the Act. We agree with commenters that this preclusion of cost sharing for 

preventive service EHBs is consistent with the policies set forth in section 4106 of the 

Affordable Care Act, which added section 1905(b)(5) to the Act, giving states an increase in the 

federal medical assistance percentage for preventive services if the state did not impose cost 

sharing on such services. 

Comment: A number of commenters believe that cost sharing should not be applied to 

the EPSDT population. 

Response: While we discuss cost sharing issues at greater length in discussing the 

streamlined cost sharing regulations being issued in this final rule, for EPSDT for individuals 

enrolled in ABPs, we note that sections 1916 and 1916A (b)(ii) of the Act preclude cost sharing 

for individuals under age 18 who are mandatorily eligible, and preclude cost sharing for 

preventive services (such as well baby and well child care and immunizations) provided to 

children under 18 years of age regardless of family income. Section 1916(b)(2)(a) of the Act 

further states that cost sharing cannot be imposed under the plan for services furnished to 

individuals under 18 years of age (and, at the option of the State, individuals under 21, 20, or 19 

years of age, or any reasonable category of individuals 18 years of age or over). These 

provisions also apply to ABPs. 
CMS-2334-F 246 

Summary: No changes will be made to the proposed regulation as a result of comments 

received in this section. 

6. Other Changes to Simplify, Modernize, and Clarify Medicaid Benchmark Requirements and 

Coverage Requirements 

We proposed to make certain changes to the regulations to promote simplification and 

clarification where needed, and provide some additional flexibilities to states regarding benefit 

options. We received the following comments: 

a. Diagnostic, screening, preventive, and rehabilitative services (Preventive services) (§440.130) 

We proposed to conform our regulatory definition of preventive services at §440.130(c) 

with the statute relating to the issue of who can be providers of preventive services. Our current 

regulation states that preventive services must be provided by a physician or other licensed 

practitioner. This is not in alignment with the statutory provision at section 1905(a)(13) of the 

Act that defines “services ... recommended by a physician or other licensed practitioner of 

healing arts within the scope of their practice under state law.” We proposed to change the rule 

to make clear that physicians or other licensed practitioners may recommend these services. In 

our proposed rule, we inadvertently used punctuation that would have had the effect of 

eliminating the other three prongs of the preventive services definition, and we are restoring 

those prongs in this final rule. 

Comment: Many commenters commended HHS for conforming the regulatory definition 

relating to who can provide preventive services at section 1905(a)(13) of the Act that defines 

“services...recommended by a physician or other licensed practitioner of healing arts within the 

scope of their practice under State law.” Many commenters believed this change will improve 

access to preventive services, expand access to evidence based practices, and provide greater 

partnership between providers and advocates. The commenters urged CMS to preserve this 
CMS-2334-F 247 

important provision in the final rule. 

Response: We agree that the amended regulatory definition of who can provide 

preventive services will result in improved access to preventive services and facilitate 

partnership between providers and advocates. This provision has been codified in the final rule. 

Comment: A number of commenters believed that the amended regulatory definition will 

be especially important to low-income people who disproportionately access care through 

community-based and support services and may experience significant stigma and lower trust 

levels with other providers. 

One commenter believed current Medicaid regulations surrounding §440.130(c) have 

significantly limited the available care and treatment for Medicaid and CHIP-enrolled children 

who suffer from chronic diseases. 

Response: The amended definition may result in greater access for individuals who suffer 

from chronic disease as the pool of providers could increase significantly. 

Comment: A few commenters commended HHS for making reference to this regulatory 

change in a February 1, 2013 letter to State Medicaid Director. The letter stated that if the 

proposed regulatory change is finalized, then preventive services recommended by USPSTF or 

ACIP, and provided by practitioners other than physicians or other licensed practitioners, are 

eligible for the 1 percentage point FMAP increase established under the Affordable Care Act. 

Response: We attempt to provide as much notice as possible related to rule making and 

appreciate the commenter’s support. 

Comment: One commenter believed the proposed language, “(c) Preventive services 

means services recommended by a physician or other licensed practitioner of the healing arts 

acting within the scope of authorized practice under state law”, was overly broad. 

Response: The regulation is consistent with statutory language in section 1905(a)(13) of 
CMS-2334-F 248 

the Act. The final rule increases the number of providers able to furnish services. We are not 

changing regulation text at §440.130(c)(1) through (c)(3). 

Comment: One commenter believed that the proposed new definition in the rule 

represents a far broader view of the term “preventive services” than Congress contemplated in 

Affordable Care Act. For purposes of describing what services are included in EHB, “preventive 

services” are already extensively described at §147.130. The proposed revision in the definition 

of “preventive services” at §440.130 would not primarily affect the scope of preventive services 

required to be offered as EHB in the state benchmark plans. Rather, the amendment would 

greatly expand the scope of the preventive services benefit that may be offered as an optional 

service under standard state MA plans. 

Response: This change is not based on an interpretation of “preventive services” as it is 

used in the Affordable Care Act for purposes of EHB, but an interpretation of the coverage of 

preventive services under regular Medicaid under section 1905(a)(13) of the Act. This 

regulatory change will primarily impact the provision of preventive services under the regular 

state Medicaid plan. Section 4106 of the Affordable Care Act, ‘Improving Access to Preventive 

Services for Eligible Adults in Medicaid,’ broadens the section 1905(a)(13) preventive services 

benefit by providing a 1 percentage point FMAP increase on clinical preventive services that are 

assigned a grade of A or B by the USPSTF. 

Comment: A number of commenters believed the new definition could have a significant 

fiscal impact on states’ Medicaid programs because, as a part of EPSDT, the expanded scope of 

services must be offered to recipients under age of 21. 

Response: While we acknowledge that this change will result in additional providers 

being authorized to provide preventive services, it accurately reflects the statutory language for 

the preventive services benefit. In addition, broadening the scope of providers who can provide 
CMS-2334-F 249 

preventive services in the Medicaid program may reduce, rather than increase, program 

expenditures by making available services in the most efficient and effective settings. Providing 

broader access to these types of providers and benefits may assist individuals with improved 

health. 

Comment: A number of commenters requested clarification on preventive services. The 

commenters believed that the definition provided (§440.130) is broad and will be difficult for 

states to operationalize without more detail. The commenters requested a more precise 

definition that includes the current procedural terminology codes for each preventive service and 

that HHS work with states to develop preventive definitions. Without such guidance states and 

the federal government could end up inappropriately paying for air conditioners, ineffective 

weight loss programs, or similar services which are simply not appropriate. 

Response: States still have the ability to restrict preventive services to direct patient care 

that is medically necessary and is for the purpose of preventing disease, disability and other 

health conditions or their progression, prolonging life and promoting physical and mental health 

and efficiency. The commenters may have been confused because we inadvertently proposed to 

eliminate these other prongs of the preventive services definition, which we preserve in this final 

rule. States also have some options in determining coverage of preventive services, and can 

specify the options, and specific billing codes, for covered preventive services using the state 

plan amendment process. 

Comment: One commenter urged HHS to retain the current regulatory definition which 

established that the allowable providers of preventive services are physicians or other licensed 

practitioners. The commenter disagreed that the provider requirements for preventive services 

under the Affordable Care Act should be aligned with Medicaid provider requirements for the 

optional benefit category as established under section 1905(a)(13) of the Act. The commenter 
CMS-2334-F 250 

stated that the benefits are distinctly different and have different purposes, particularly for 

children up to the age 21. 

Response: We disagree with this position. Both section 1905(a)(13) of the Act and 

Affordable Care Act provide for a more robust set of preventive services than the current 

regulations, in allowing a broader pool of providers to deliver such services. In making this 

change in the final rule, we are aligning our regulation with the statutory coverage provision. 

States will continue to have some flexibility to determine the scope of covered preventive 

services in their state by submitting a SPA to do so. 

Comment: Many commenters were concerned that this broad language would allow for 

unlimited services as recommended by health care providers and other providers of the healing 

arts. These commenters requested that this be clarified to impose reasonable limits on services. 

Response: Under existing rules, states can establish limitations on amount, duration, and 

scope, on the optional preventive services provided the resulting benefit is sufficient to meet the 

purpose of the benefit. CMS reviews each state plan amendment submitted by states to 

determine the sufficiency of the benefit. 

Comment: One commenter recommended closer integration of community prevention 

and lifestyle changes into the Medicare and Medicaid programs, as an important opportunity to 

both effectively and often less expensively treat and prevent chronic disease, such as heart 

disease and diabetes. 

Response: We agree that greater coordination between Medicare and Medicaid will 

provide efficiencies and health outcomes for individuals with chronic disease as well as other 

conditions. Medicaid continues to build closer and more integrated community preventive 

services with Medicare. 

Comment: One commenter believed that Registered Dieticians should be designated as 
CMS-2334-F 251 

the recognized providers of nutrition services, including medical nutrition therapy and nutrition 

counseling because of RD’s demonstrated competency and effectiveness. This commenter stated 

that nutrition counseling is medically necessary for chronic disease states in which dietary 

adjustment has a therapeutic role, when it is prescribed by a physician and furnished by qualified 

provider. 

Response: We believe that Registered Dieticians have an important role in furnishing 

nutrition services. All preventive services should be furnished by qualified providers within 

their scope of practice. 

Comment: One commenter urged HHS to clarify that §440.130 of the proposed 

regulation does not dictate who can provide preventive services; it merely dictates what 

providers can recommend them, consistent with the totality of the statute. 

Response: The proposed regulation does not dictate who can provide preventive services; 

it defines who can recommend such services. States will have discretion to determine which 

providers will provide the service using the state plan amendment process. 

Summary: No changes to the proposed regulation will be made as a result of comments 

received in this section. 

b. Public notice (§440.386) 

 The proposed rule added a new provision to allow states greater flexibility when required 

to publish public notice associated with an ABP state plan amendment (SPA). We proposed 

modifying the public notice requirement for ABPs to require that such notice be given prior to 

implementing a SPA when the new ABP provides individuals with a benefit package equal to or 

enhanced beyond the state's approved state plan, or adds additional services to an existing ABP. 

We proposed the requirement to publish public notice no less than two weeks prior to submitting 

a SPA that establishes an ABP that provides coverage that is less than the coverage by a state's 
CMS-2334-F 252 

approved state plan or includes cost sharing of any type. Based on public comment, we are 

negating what we proposed, as we do not believe that 2 weeks is a sufficient time period. We 

will be reverting back to our existing policy of requiring the states to provide “a reasonable 

opportunity to comment” on all ABP SPAs prior to their submission to CMS. 

Comment: Many commenters supported requiring states to give public notice before 

implementation of a SPA that established an ABP. The commenters also commended HHS for 

requiring states to provide public notice regarding how they must comply with the requirement 

that children have access to EPSDT. 

Many commenters believed that the proposed public notice requirements at §440.386 are 

problematic and HHS should not use them as a model for all SPAs. Some commenters believed 

proposed §440.386 repeats the language of §440.305(d) requiring a “reasonable opportunity” for 

public comment, but then limits the public comment period to just two weeks for certain ABPs 

which the state Medicaid agency determines provide less coverage or higher cost sharing than 

existing benchmark plans, and other commenters believed that two weeks is an inadequate 

amount of time for meaningful stakeholder consideration and input. 

Many commenters believed HHS should require an advance notice and comment period 

of no less than 30 days as this aligns with other comment periods (such as the state comment 

period for section 1115 waivers) and is particularly important because of the time and effort 

required to conduct the benefit-by-benefit comparisons between non-aligned Medicaid state 

plans, ABP proposals and EHBs which will be necessary to provide meaningful input. 

Response: We have considered all of the comments concerning the requirement for 

public notice and agree with the commenters that two weeks is not sufficient to allow for a 

meaningful timeframe in which public comments can be solicited and considered. We are 

therefore revising §440.386 to revert to our existing ABP public notice policy currently found at 
CMS-2334-F 253 

§440.305(d). We would also like to clarify that the public notice requirements at §440.386 are 

applicable only to section 1937 ABPs. 

Comment: A number of commenters requested HHS require a mandatory 15-day period 

(sometimes referred to as a “cool down” period) for states to review comments received and 

incorporate suggestions into the final ABP submission. 

A few commenters believed that §440.386 creates a two tiered process whereby the 

state’s own evaluation of an ABP determines whether it is subject to public notice and comment. 

The commenters believed this kind of agency determination defeats the very purpose of 

transparency and stakeholder input. 

Many commenters believed that there is no compliance provision to help ensure 

meaningful participation by the public, unlike the reporting requirement of §431.412(viii) for 

section 1115 demonstrations. The commenters requested that any SPAs, including those 

establishing ABPs, should be subject to the same transparency and public input procedures and 

reporting requirement modeled upon those governing section 1115 demonstrations to help ensure 

meaningful participation by the public, and that HHS understands the issues raised at the state 

level when making the SPA approval decision. 

Response: In revising §440.386 to revert to our existing policy, we believe that we have 

provided a minimum floor that allows sufficient time for stakeholder feedback and state review. 

Comment: Numerous commenters requested that at a minimum, SPAs that materially 

change a state Medicaid program should be subject to increased transparency and stakeholder 

input requirements. 

Response: States will be required to follow existing public notice requirements, which 

requires that the state must have provided the public with advance notice of the State plan 

amendment and reasonable opportunity to comment prior to the submission of the SPA. 
CMS-2334-F 254 

Comment: A few commenters recommended that states should be required to provide 

detailed information on the ABP options under consideration. 

Response: The state is required to provide information regarding the ABP through the 

public notice process. 

Comment: A number of commenters requested that HHS include specific requirements 

for adequate public posting of the proposal, including that it be posted on an internet website, as 

well as a clear description of the process and timeline for comment submission. 

Response: We believe that states should have the flexibility to determine how best to 

provide public notice to the populations in their state. 

Comment: One commenter believed that notice and stakeholder engagement 

requirements should explicitly include HIV/AIDS programs within health departments. 

Response: We believe that all stakeholder groups, including HIV/AIDS, will be served 

by the public notice policy. 

Comment: One commenter noted that there were a number of different sources of 

information for public notice (including 59 FR 49249 (September 27, 1994); §447.205; and new 

transparency requirements for waiver and waiver renewals (see State Health Official (SHO) 

Letter #12-001)) and HHS could achieve efficiencies by streamlining notice requirements. 

Response: While there are various methods for providing public notice across programs, 

we believe that each serves its own purpose for that program. The public notice regulations 

under §440.386 provide the most efficient and effective policy for ABPs. 

Comment: One commenter proposed that HHS further define “substantial”, which 

triggers the “notice and comment” requirement. The commenter requested that HHS adopt a 

universal definition of “substantial” so that there is no confusion of the word’s meaning. 

Response: “Substantial” is used in the ABP public notice requirements. It means that 
CMS-2334-F 255 

eligibility, enrollment, benefits, cost sharing, payment methodologies, or delivery systems have 

changed significantly to affect beneficiaries. 

Comment: One commenter believed that requiring public notice for a SPA when an ABP 

provides a benefit package equal to or enhanced beyond a state’s approved state plan was 

puzzling. The commenter believed it added yet another public notice requirement with 

questionable return, particularly when this occurs prior to implementation. The commenter 

agreed that prior public notice should be required when providing a lesser benefit package than 

the approved State Plan, adding cost sharing or reducing benefits. 

Response: We believe, for the purpose of transparency, ABPs should be disseminated to 

the public. We believe it is important that all beneficiaries are made aware of changes being 

made to ABPs. 

Comment: One commenter requested that when a SPA is submitted providing less 

coverage the public should have at least 30 days to submit comments and the agency should 

provide a summary of the comments it receives and how the comments were addressed when it 

submits the SPA to CMS for approval. 

Response: Based on comments related to this section of the regulation, we will be 

continuing with the existing ABP public notice requirements. Requiring the state to provide a 

summary of the comments it receives and how the comments were addressed when it submits the 

SPA to CMS for approval could be too onerous to operationalize depending on the magnitude of 

comments received. CMS reserves the right to request, when appropriate, specific information 

on public comments. 

Comment: A few commenters requested that HHS publically release all ABPs selected 

and allow an opportunity for public comment to ensure plan adequacy. 
CMS-2334-F 256 

Response: All approved SPAs are public documents. If the commenter would like to 

comment on a particular SPA they may contact their specific state. 

Comment: Many commenters recommended HHS amend §430.12 by adding new 

paragraph (d) or deleting §440.386 (a) and (b) and replacing them with language that would 

require a 30 day public comment period and a 15 day review period for the state and outlined the 

detail to be included in the public notice. These commenters also included requirements for 

publication of public notice and information to be included in the SPA. 

Response: We appreciate the commenters’ thorough language recommendations. 

However, we believe that the current public notice policy sufficiently balances the need for 

transparency while preventing the impediment of the approval of SPAs in a timely manner. 

Comment: One commenter requested that HHS monitor the public information on 

Medicaid programs and State-Based Exchange, provide and consider issuing guidance on how to 

communicate benefit packages to enrollees and plan members in a clear and effective way, 

incorporating low literacy-level principles. The commenter suggested that HHS should consider 

requiring states to undergo a public stakeholder review process for these materials. 

Response: We thank the commenter for these recommendations and will take them under 

further review however they are beyond the scope of this regulation. 

Comment: One commenter requested that HHS require all state plan amendments be 

made public and subject to comment. 

Response: While we agree it is a good practice for states to place SPAs online; requiring 

states to do so is beyond the scope of this regulation. 

Comment: One commenter asked if HHS was going to require additional public notice 

requirements on anything that is related to cost-sharing. 

Response: Cost sharing of any type requires public notice per §440.386. 
CMS-2334-F 257 

Comment: One commenter believed there was a technical error made in the Part 440-

services. The commenter noted that the general provisions section §440.305 to §440.386 is not 

mentioned in the description of the changes to either §440.305 or §440.386. 

Response: CMS will take this opportunity to delete §440.305(d) as a new §440.386 has 

been added for public notice. 

Summary: CMS will delete §440.305(d), which was the section describing public notice 

requirements, as a new §440.386 has been added for public notice. We have reverted to our 

existing public notice requirements based on public comment on this section of the rule. 

c. Exempt individuals (Modifying definition of medically frail) (§440.315) 

The proposed rule updated the definition of the “medically frail” category of individuals 

exempted from mandatory enrollment, and solicited comment about whether to add SUD to the 

definition. The final rule adds individuals with chronic SUDs to the definition of “medically 

frail”, based on the overwhelming support in public comments. 

Comment: Many commenters strongly supported CMS’s definition of exempt 

individuals and clarification of medically frail. In supporting the definition of medically, many 

commenters also thanked the Secretary for including in the definition of medically frail, 

individuals with serious or disabling mental illness, (including children with serious emotional 

disturbances), and individuals with physical, intellectual or developmental disabilities that 

significantly impair their ability to perform one or more activities of daily living; many 

commenters agreed that individuals with a disability determination based on Social Security 

criteria should be exempted from mandatory enrollment in an ABP. 

One commenter stated that medically frail are an identifiable population with unique care 

and cost characteristics and this definition provides an opportunity for these individuals through 

practices that may not be included in the products offered through state exchanges. 
CMS-2334-F 258 

 Response: We are pleased with the overwhelming support for the clarified definition of 

“medically frail” displayed in the majority of comments. 

Comment: Many of the commenters urged CMS to include individuals with substance 

use disorders in the definition of medically frail because individuals with substance use disorders 

(SUD) have similar health needs as those with the other complex conditions included in the 

definition, and ABP coverage may be less likely to provide needed services and supports 

typically provided by Medicaid. 

Many commenters also pointed out that individuals with SUD cannot be considered 

disabled under Social Security law if SUD is a contributing factor material to the determination 

that the individual is disabled, regardless of the severity of the SUD. Particular concern was 

raised about benchmark coverage in states that may choose the weakest available benchmark 

plan option in an effort to limit perceived financial risk for the state, or to avoid political risk. 

Concern was also raised that beneficiaries living in states offering fewer benefits “suffer” from 

placement in clinically inappropriate levels of care resulting in poor outcomes and higher federal 

costs. 

One commenter wrote that SUD should be included in the definition of medically frail 

because scientific research indicates that addiction is a chronic brain disorder with intrinsic 

behavioral and social components, similar to other forms of mental illness. 

In supporting clarification of the definition of medically frail, a commenter wrote that the 

definition should include all those with disabling conditions because the reference plans that may 

serve as the model for benefits in ABPs are employer-sponsored insurance plans and may not be 

adequate to serve the needs of those who are too medically frail to work. 

Another commenter wrote that it supported clarifying the definition of medically frail by 

including all those with disabling conditions. Medicaid should provide more comprehensive 
CMS-2334-F 259 

benefits for individuals and this language will allow it to do so since employer sponsored plans 

often inadequately cover substance use disorders, therefore the commenter supports adding SUD 

to the definition of medically frail. 

Alternatively, a few commenters recommended that CMS not require that individuals 

with SUD be considered exempt from mandatory ABP enrollment. This commenter wrote that 

because states must design their ABPs to include a comprehensive array of mental and 

behavioral health services, inclusive of substance use treatment at parity with physical health 

services, it seems unnecessary and overly prescriptive to mandate the exemption of individuals 

with SUDs. 

 Response: Since publication, in 2010, of the Final Rule: State Flexibility for Medicaid 

Benefit Packages, numerous stakeholders have raised concern that individuals with SUD may 

not be appropriate for enrollment in an ABP because ABPs may not provide the same level of 

care provided by the standard Medicaid State plan. Individuals with a substance use disorder 

may have chronic health conditions and need an expanded array of behavioral health and 

possibly long term services and supports. 

Considering the overwhelming support for including SUD in the definition of medically 

frail, we have modified §440.315(f) to include as medically frail, individuals with chronic SUD. 

While we recognize that substance use is among the EHBs, we believe that individuals with this 

condition could be medically frail and should have the choice to elect voluntary enrollment in an 

ABP or receive full state plan benefits (for individuals in the new adult group, through an ABP 

that consists of full state plan benefits). 

Comment: One commenter wrote that while the definition of “medically frail” 

appropriately clarifies that individuals with serious mental illnesses and children with serious 

emotional disturbances are included among “individuals with disabling mental disorders” it 
CMS-2334-F 260 

inappropriately excludes people with psychiatric disabilities from another listed group – 

“individuals with a physical, intellectual or developmental disability that significantly impairs 

their ability to perform one or more activities of daily living.” People with psychiatric 

disabilities should continue to be included in that group. Particularly due to the lack of clarity 

about what may count as a “serious mental illness,” it is important to ensure that people with 

mental illness have the same opportunity as people with other disabilities to qualify for 

exemption on the grounds that their disability significantly impairs their ability to perform one or 

more daily living activities. 

Response: We acknowledge that individuals with serious mental illness tend to have 

significant co-morbid conditions that are going to require a different array of mental health and 

medical services, and long term services and supports that may not be available through an ABP. 

However, we do not believe it is necessary to explicitly specify that individuals with psychiatric 

disorders also qualify for “medically frail” due to deficiencies in activities of daily living. 

Individuals only need to meet one criterion within this definition to qualify for the exemption to 

mandatory enrollment. Section 440.315(f) provides states with a minimum standard for 

identifying individuals who are medically frail and states have the flexibility to expand this 

definition. 

Comment: A commenter wrote that the term medically frail should be replaced with 

individuals with disabilities. 

Response: We are retaining the term medically frail in our regulations because that term 

is specified in section 1937 of the Act and we believe it would be confusing to use a different 

term for the exemption. 

Comment: One commenter stated that CMS should avoid defining any new categories of 

medically frail as the concept of medically frail as outlined in the proposed rule is incomplete 
CMS-2334-F 261 

and unworkable, and more time and thought needs to be put into this before moving forward 

with final rules. The commenter believes there are both operational and implementation 

challenges to the new concept of medically frail contained in the proposed rule and since there is 

no clear definition of medically frail, or guidance on how a state would go about making that 

determination, if the rules were implemented as written, the likely result would be a significant 

disruption of the eligibility process and a large number of appeals. 

Response: Section 440.315 provides states with a minimum standard for exempting 

specified categories of individuals from mandatory enrollment in an ABP. We do not expect 

these exemptions to mandatory enrollment to be disruptive to the eligibility process as eligibility 

determination occurs first as a separate process. States will not need to determine whether a 

beneficiary qualifies as medically frail upfront but will need to have a process for identifying 

individuals who cannot be mandatorily enrolled into an ABP. 

Comment: We received many comments requesting that CMS provide further 

clarification regarding the operationalization and coverage implications of the proposed revision 

to the definition of medically frail, as well as clarifying how the revised definition will impact 

implementation. 

One commenter indicated that states have limited experience with ABP coverage under 

section 1937 of the Act, and it is unclear how exemption from mandatory enrollment in an ABP 

for individuals defined as medically frail (and other categories of exempt individuals) would be 

operationalized on a broader scale. Further, it may be operationally challenging to identify the 

range of individuals included in the proposed definition as medically frail, prior to eligibility 

determination and plan enrollment, particularly for individuals with SUDs. 

Several commenters requested CMS to provide clear, objective standards for defining 

medically frail, such as the criteria used to determine eligibility for Supplemental Security 
CMS-2334-F 262 

Income. One comment also expressed concern that any approach to identifying individuals who 

could be exempt from mandatory enrollment in an ABP not stigmatize individuals or create 

unintended barriers to seeking treatment. Several commenters wrote that the definition of 

medically frail is vague and will be difficult for states to operationalize. Another wrote that the 

impact of the medically frail definition will be significantly mitigated if CMS clarifies that a 

state’s existing Medicaid benefit package will be deemed to meet the ABP standards under the 

Secretary-approved coverage option. 

One commenter expressed concern that the definition of medically frail is so broad that 

there could be confusion, inconsistency, and costly implications to having such a broad set of 

individuals eligible for exemption and recommended that CMS should clearly and carefully 

define the set of individuals who would be exempt and not include individuals with chemical 

dependency in the definition. 

A number of commenters encouraged HHS to develop a systemic plan for how the 

medically frail that are enrolled into an ABP, based on the streamlined application collecting 

minimal information about disability or function, will be identified for exemption and stated 

HHS must develop requirements and supports for states to identify exemption eligibility. 

Several commenters expressed concern that the process of ensuring that all exempt 

individuals are identified and enrolled in the benefit plan that best service their health care needs 

(either an ABP or traditional Medicaid) will be very burdensome or difficult for states and asked 

that CMS provide further guidance on how this can be accomplished. Several of these 

commenters stated that ABPs are not well aligned with traditional Medicaid and urged CMS to 

provide further guidance to states on methods and strategies for identifying exempted individuals 

through the streamlined application process and enrolling them in the appropriate coverage. 

Another commenter envisioned situations where it may be beneficial for a medically frail 
CMS-2334-F 263 

individual to have access to an ABP rather than traditional Medicaid and urged CMS to design 

processes that ensure that individuals have the ability to make an informed choice about their 

Medicaid benefit options. 

Another commenter voiced concern that the proposed rule does not require a process to 

ensure that individuals are appropriately identified as potentially exempt when they apply for 

coverage. This commenter pointed out that individuals with serious mental illnesses and 

disabilities may not realize that they may qualify as exempt if they do not receive clear 

notification concerning (1) the possibility that they may be exempt, (2) the process for 

determining whether they are exempt, and (3) how to opt out of enrollment in an ABP if they are 

exempt. The final rule should require this type of notice and process. 

 Response: CMS acknowledges that many states will not have prior experience with 

implementation of an ABP, or with identifying individuals who are exempt from mandatory 

enrollment or who meet the criteria for exemption. We anticipate that for existing eligible 

individuals the state, if it chooses, will be able to screen beneficiaries it intends to enroll to 

identify exempt individuals by eligibility category and through the use of historic medical 

encounter data. 

For newly enrolled individuals, who are eligible based on income rather than disability, 

the state will not initially have information concerning their current health status or historic 

encounter data. Therefore, the enrollment process could be important to identifying if an 

individual meets the criteria of the statutory exemptions. One appropriate screening option 

includes beneficiaries identifying themselves as meeting the exemption criteria. We encourage 

states to implement a process to screen for exempt individuals using this minimum standard for 

identifying individuals who are medically frail. Proposed regulations that were not finalized as 

part of this rule at §435.917(b) and (c) set forth the information that must be provided to an 
CMS-2334-F 264 

individual regarding benefits and services and provide that the information must be sufficient to 

enable the individual to make an informed choice. Sample beneficiary notices will be provided 

to the states by CMS, incorporating questions posed to beneficiaries to aide in the selfidentification process. While the individual is being provided with this information through 

options counseling, the individual could be initially enrolled in benchmark or benchmarkequivalent coverage that is subject to section 1937 requirements. 

Comment: One commenter wrote that the phrase “disabling mental disorders” relies on 

non-measurable terms. The commenter believes that specific disorders, including SUDs, should 

be added if they meet a defined disability test. CMS should provide states with the flexibility to 

define medically frail or provide states with general guidelines that an individual would have to 

meet to qualify and allow states to set defined criteria. 

Response: To ensure appropriate service protection for individuals with disabilities and 

special medical needs, we have included a basic definition of medically frail that we anticipate 

will ensure that vulnerable individuals with special medical needs are not mandatorily enrolled 

in an ABP that may not provide appropriate medical treatment for their individual medical 

condition. Section 440.315(f) provides states with a minimum standard for defining medically 

frail populations. 

Comment: Several commenters stated that the underlying goal of the exemption from 

mandatory enrollment of vulnerable populations is to protect access to needed services. There 

may be instances where amount, duration and scope limitations are more restrictive under the 

Medicaid state plan rather than under the ABP, highlighting the need for beneficiaries to receive 

easily understandable information that allows them to compare coverage options. 

Response: CMS thanks the commenters’ for acknowledging the underlying purpose for 

exempting certain populations from mandatory enrollment in an ABP and concurs with this 
CMS-2334-F 265 

comment. Beneficiaries need to make individualized determinations of the benefit package 

(either the ABP or the regular state plan) that best meets their needs. 

Comment: Several commenters requested CMS provide further guidance on the 

enrollment and selection process for medically frail beneficiaries as this will be critical for those 

who qualify to be able to select the benefit plan that best meets their health care needs. The 

commenter wants to assure that, depending on the circumstances, medically frail individuals will 

not be forced into a plan that provides fewer benefits than the traditional Medicaid plan or the 

ABP. 

Response: The purpose of the criteria for the exempt categories is to assure that 

individuals with special medical needs will be enrolled in a coverage plan that best provides 

necessary services. The design and implementation of a process to determine medical frailty will 

likely be specific to each state. However, states will have to follow proposed regulations that 

were not finalized as part of this rule at §435.917(b) and (c) in that sufficient information must 

be provided to an individual about benefits and services to enable the individual to make an 

informed choice. 

 Comment: One commenter requested that CMS allow states to define the exempt 

medically frail population using objective measurable criteria. 

 Response: Section 440.315 provides states with a minimum set of criteria for exempting 

specified categories of individuals from mandatory enrollment in an ABP or for individuals in 

the new adult group, a choice between benchmark coverage that is either coverage defined in the 

ABP or benchmark coverage that is the state’s regular approved Medicaid state plan. 

Comment: One commenter recommended that the definition of “medically frail” include 

individuals that meet the Medicaid Health Home eligibility requirements in section 2703 of the 

Affordable Care Act. 
CMS-2334-F 266 

 Response: We believe that many enrollees in health homes, as they are individuals with 

chronic conditions that are serious and complex, will be covered by the existing definition of 

medically frail. But not all health home enrollees have that level of medical need, and we have 

determined that the suggested revision would not serve the limited purposes of the exemption. 

Comment: One commenter requested that the definition of medically frail include all 

people with disabilities, because this definition is one of the most essential provisions among all 

of the proposed rules, and because persons with disabilities would be imperiled as a result of 

mandatory enrollment in an ABP modeled after a commercial plan. 

One commenter stated that inclusion of individuals with SSI appears to broaden the 

definition of medically fragile for which there is currently no standard definition and historically 

states have been able to define. As a result, determinations for SSI will likely differ as other 

considerations are included in the determination. 

Response: In defining medically frail, §440.315 (f) covers a wide range of populations 

that will be determined to be eligible for voluntary enrollment, or in the case of individuals 

determined eligible for the new adult group, eligible to choose to receive benchmark benefits as 

defined in the ABP or benchmark benefits that are the state’s approved Medicaid state plan, 

assuring that these individuals will receive care that is appropriate to their medical needs. As 

proposed, §440.315(f) specifically includes individuals with disabling mental disorders 

(including children with serious emotional disturbances and adults with serious mental illness), 

individuals with serious and complex medical conditions, individuals with a physical, 

intellectual or developmental disability that significantly impairs their ability to perform one or 

more activities of daily living, and individuals with a disability determination, based on Social 

Security criteria, or in states that apply more restrictive criteria than the Supplemental Security 

Income (SSI) program, as the state plan criteria. Sufficient information must be provided to an 
CMS-2334-F 267 

individual about benefits and services to enable the individual to make an informed choice 

according to proposed regulations that were not finalized as part of this rule at §435.917(b) and 

(c). 

Section 440.315(f) provides states with a minimum standard for identifying individuals 

who are medically frail and states have the flexibility to expand this definition. 

Comment: One commenter wrote that, by including in the final rule such a broad 

description of medically frail, CMS could substantially increase the number of individuals who 

would be exempt from mandatory enrollment in section 1937 benefit plans. The commenter 

asserted that this would allow the states less flexibility in creating plans to best meet the needs of 

these individuals. The commenter wrote that this is particularly true if individuals with SUDs 

were to be included in the definition and strongly recommended not including people with SUD 

in the medically frail category as mental health and SUD services are required benefits under the 

EHB benefits package. The commenter also questioned the reasoning behind including people 

with SUD in the definition of medically frail. 

 Response: We do not agree that the definition of medically frail is too expansive and will 

unduly limit state flexibility. Nor do we think that inclusion of individuals with SUDs will be 

problematic. We recognize that a broader definition of medically frail individuals will mean that 

such individuals will only elect to enroll in an ABP if the benefits are designed to meet their 

needs at least as well as regular state plan coverage. 

Comment: One commenter wrote that if newly eligible individuals meet the criteria for 

exemption and are exempt from section 1937 of the Act, the Federal government needs to clarify 

if the enhanced funding for this group would be available for all services provided to those 

individuals. 

 Response: Yes, enhanced FMAP is available for all services provided to a newly eligible 
CMS-2334-F 268 

individual, whether that person chooses the ABP based on a benchmark or benchmark equivalent 

package that includes the EHBs in compliance with section 1937 of the Act, or chooses an ABP 

equal to the state’s approved regular state plan. 

 Comment: A number of commenters expressed concern how individuals who are exempt 

will be identified and requested further guidance on enrollment and selection process for 

medically frail so that those exempt can select the plan that best meets their needs. Several 

commenters recommended adding a requirement that the notice provided to individuals who 

have been found eligible for the expansion group include detailed information regarding how 

one can qualify for an exemption and the services and supports that would be available to a 

person who is exempt from mandatory enrollment in an ABP, and should include information 

regarding how to request and receive an exemption. A commenter suggested that this 

requirement should be added to §435.917. Another stated that those who may be exempt will 

need clear, consumer friendly information and decision support to help them understand their 

choices 

Another commenter voiced concern that the proposed rule does not require a process to 

ensure that individuals are appropriately identified as potentially exempt when they apply for 

coverage. Individuals with serious mental illnesses and disabilities may not realize that they 

may qualify as exempt if they do not receive clear notification concerning (1) the possibility that 

they may be exempt, (2) the process for determining whether they are exempt, and (3) how to opt 

out of enrollment in an ABP if they are exempt. The final rule should require this type of notice 

and process. 

A commenter expressed concern that the proposed rule does not issue requirements 

outlining the process states should use to identify people who are exempt and this is particularly 

pertinent given the ongoing confusion about whether or not states will be able to claim enhanced 
CMS-2334-F 269 

federal match for Medicaid expansions individuals who are exempt from ABP enrollment. The 

commenter fears states will incur high administrative costs managing different federal match 

rates for different Medicaid expansion individuals, creating an incentive to develop processes 

that implicitly or explicitly discourage exempt individuals from taking advantage of their right to 

enroll in traditional Medicaid. 

One commenter voiced concern that including in the definition of medically frail 

individuals with disabling mental disorders, individuals with serious and complex medical 

conditions, individuals with physical and intellectual or developmental disabilities that 

significantly impair their ability to perform one or more activities of daily living, or individuals 

with a disability determination based on Social Security criteria does not appear to be couched 

entirely within SSA disability criteria and that some individuals with substance use disorders 

who are not otherwise considered “disabled” under Medicaid may be viewed as medically frail 

and exempt for ABP. Therefore, individuals with SUDs would be included in a higher-level, 

comprehensive Medicaid benefit package, thereby increasing costs to the state without the 

benefit of the higher federal match under the Medicaid expansion to newly eligible adults. 

 Response: We intend that, as amended, §440.315 may expand the number of individuals 

who will qualify as exempt beyond the scope of those who are otherwise considered disabled to 

include other individuals whose medical needs mean that they are medically frail. We also agree 

that exempt individuals will need clear, consumer friendly information and decision support to 

help them understand their choices. For Medicaid beneficiaries who are not in the new adult 

group, existing requirements at§440.320 requires the state to provide each individual considering 

voluntary enrollment in an ABP a comparison of the ABP option versus the State plan option 

before the individual chooses to enroll. The comparison must also include information on the 

cost-sharing obligations of beneficiaries. CMS has proposed requirements that were not 
CMS-2334-F 270 

finalized as part of this rule at §435.917(b) and (c) that an individual must receive information 

based on eligibility regarding benefits and services that are available to them. Information must 

be sufficient for the individual to make an informed choice. Proposed regulations that were not 

finalized as part of this rule at §435.917(b) and (c) will apply to all Medicaid beneficiaries 

including adults in the new eligibility group. Individuals in the new adult group who otherwise 

meet criteria for exemption from mandatory enrollment may be enrolled in benchmark or 

benchmark-equivalent coverage subject to section 1937 requirements during the options 

counseling period to insure coverage during this time. 

Comment: Several commenters stated that CMS should further clarify which medical 

conditions are considered “serious and complex” and urged CMS to specify that chronic 

conditions such as HIV/AIDS and viral hepatitis, which may have co-morbidities, are serious 

and complex and individuals with serious and complex conditions should be exempted from 

mandatory enrollment in an ABP. Many commenters strongly recommended that HHS also 

include in the definition of medically frail or special medical needs, individuals with chronic 

health conditions because individuals with chronic illness should not be forced into an ABP 

package that will not meet their predictable needs, as this may lead to higher long term costs 

associated with poorly managed chronic conditions. 

One commenter indicated it was assumed that chronic kidney disease and end stage renal 

disease were considered to be chronic diseases and another commenter indicated that individuals 

with Cystic Fibrosis fall squarely within the medically frail definition. 

Another commenter wrote that it was assumed that long term cancer survivors managing 

complex treatment or a complicated set of late and long-term effects would fit the description of 

complex medical conditions and therefore could choose the most appropriate benefit plan. 

Some commenters also stated that being forced into a health plan that does not meet the 
CMS-2334-F 271 

needs of a person with chronic illness may lead to higher long-term costs associated with poorly 

managed chronic conditions. 

One of the commenters urged CMS to specifically include in the definition of medically 

frail individuals with chronic viral hepatitis. 

 Response: The exemption categories established by statute and the proposed clarification 

in §440.315 are intended to provide states with a minimum standard for exempting vulnerable 

populations. We agree with the commenters that illnesses such as HIV/AIDS, viral hepatitis, 

cancer and end stage renal disease are all serious chronic medical conditions. It would not be 

possible for CMS to include an exhaustive list of conditions that should qualify as medically 

frail, but we believe that the criteria as currently drafted is broad enough to include individuals 

for whom a choice of service package is most appropriate. 

Comment: Several commenters suggested that benchmark exempt populations are 

vulnerable and best serviced by traditional Medicaid. 

 Response: We expect the exemptions process or the process designed for individuals in 

the new adult group will provide these individuals with an informed choice of the benefit 

package that best meets their needs. 

Comment: A commenter wrote that the current exemption definition would create the 

need for a new frailty determination process for all newly eligible adults for states that 

implement an ABP that is different from the standard benefit. This is a concern for one state as 

it becomes an administration burden for the consumer and the state system with considerable 

fiscal implications and proposes a common benefit for adult populations in Medicaid that would 

avoid the frailty determination and exemption process. 

 Response: We acknowledge the writer’s concerns, and are not requiring any specific 

processes for implementing the exemptions criteria for the new adult group. We provided a 
CMS-2334-F 272 

minimum standard for identification of individuals who are medically frail and proposed 

regulations that were not finalized as part of this rule at §435.917(b) and (c) regarding benefits 

option counseling should be followed. Individuals may receive benchmark or benchmarkequivalent coverage subject to 1937 requirements during the options counseling period to insure 

coverage during this time. 

Comment: Two commenters wrote that some states have Medicaid and other public 

health care programs that have developed special initiatives designed to meet the needs of 

enrollees who have substance use disorders. They indicated that these initiatives may include 

provision of care management series, discouraging drug-seeking behavior by requiring care to be 

provide by a specified doctor and hospital, etc. The commenters asserted that exempting these 

individuals from mandatory ABP enrollment would make it far more difficult for Medicaid 

Programs to meet these individuals’ health care needs. While the writers agree with the 

characterization of a substance use disorder as “medically frail”, and thereby exempting them 

from mandatory enrollment in an ABP, it would make it more difficult for Medicaid Programs to 

meet these individuals’ care needs. 

Response: We appreciate the commenters’ concern but do not agree that exempting 

individuals with chronic SUD from mandatory ABP enrollment would make it more difficult for 

Medicaid programs to meet the individuals’ health care needs. Section 1937 of the Act provides 

states with the flexibility to redesign current Medicaid benefit coverage to provide unique 

programs for targeted populations and encourages states to be creative in the design of its 

coverage packages. The exemption of individuals with chronic SUD is not an impediment to 

providing quality care that meets the specific needs of this population. Conversely, the 

flexibility provided by ABPs encourages states to design comprehensive benefit packages that 

would encourage voluntary enrollment. 
CMS-2334-F 273 

Comment: One commenter wrote that states should be able to employ traditional 

Medicaid disability assessments in evaluating medically frail exemption and limit receipt of long 

term care services and supports to those undergoing asset testing. To ensure long term stability 

and a fiscally sound expansion, the commenter requested sufficient flexibility to limit receipt of 

non-EHB services including long term care services, to the non-expansion population via state 

plan amendment or section 1915(c) waiver and recommended revision to the medically frail 

exemption to align with the disability assessments already in use within Medicaid. 

 Response: We disagree with this commenter. We believe the current construct of the 

medically frail exemption category is in keeping with legislative construct 

Comment: A commenter wrote that the proposed revision to the definition of medically 

frail seems to run against the Affordable Care Act’s benefit design for the expansion population, 

that is, coverage tied to section 1937 of the Act and incorporation of an EHB standard from the 

individual and small group markets, which excludes coverage from long-term care and supports. 

The commenter asserted that Affordable Care Act congressional goals to contain the costs of the 

Medicaid expansion may be jeopardized if states are faced with widespread eligibility for long 

term care services without the traditional program integrity tools used to filter such services 

based on objective need. The commenter further asserted that existing ABP rules already 

exempt a broad range of vulnerable individuals as compared to traditional disability assessment 

and that within what is likely to be a large exempted class, these beneficiaries will access 

benefits otherwise excluded from the EHB standard, namely institutional or long term care 

through the state plan, at sizable cost to states and the federal government. Of particular concern 

to the commenter is the application of personal care services to a large exempt segment of the 

new adult group and these long-term care benefits would be accessed in the streamlined MAGI 

enrollment where asset evaluation would be prohibited. 
CMS-2334-F 274 

Response: The Affordable Care Act did not change the categories of individuals 

exempted from mandatory enrollment, and added the provision at section 1902(k)(1) of the Act, 

which contemplates that individuals who meet the conditions for exemption would receive ABP 

coverage that is not subject to the requirements of section 1937 of the Act. There is nothing in 

the Affordable Care Act that would preclude us from clarifying and amplifying the term 

“medically frail” to include populations that have high medical needs resulting from disabling 

mental disorders, substance use disorders, serious and complex medical conditions, or 

disabilities. We are clarifying in this final rule that the exemptions to benchmark or benchmarkequivalent coverage do not directly apply to the new adult population, but if an individual in the 

new adult population meets the criteria for exemption, then that individual has a choice of an 

ABP based on benchmark or benchmark-equivalent coverage including EHBs, or an ABP 

defined as the state’s approved Medicaid regular state plan, which is not subject to EHB 

requirements. Please see more detailed response above for additional information related to this 

provision. 

Summary: We changed the proposed regulation language at §440.315(f) by adding 

“chronic substance use disorders” to the definition of the medically frail exemption category. 

d. Benchmark health benefits coverage (Adding benefits to Secretary-approved coverage) 

(§440.330) 

In the proposed rule, we amended §440.330(d) by broadening the benefits available as 

Secretary-approved coverage from section 1905(a) benefits to benefits of the type that are 

available under 1 or more of the standard benchmark coverage packages or state plan benefits 

described in sections 1905(a), 1915(i), 1915(j), 1915(k) or 1945 of the Act, or any other 

Medicaid state plan benefits enacted under Title XIX, or benefits available under base 

benchmark plans described in §156.100. 
CMS-2334-F 275 

e. Secretary-approved health benefits coverage and §440.330(d) and State plan requirements for 

providing additional services (Adding benefits to Additional coverage) (§440.335) 

Comment: Many commenters offered general support for the flexibility allowed in the 

proposed rule to include a broader range of selected benefits through a Secretary-approved 

coverage package. 

Some commenters noted that the ability of states to select coverage corresponding to 

their full traditional Medicaid benefit as their ABP, which would be presented under the 

Secretary-approved coverage option, offers a clear distinction between the section 1937 

benchmark options and the EHB benchmark options set forth in 45 CFR part 156. 

Many commenters believed that the proposed language correctly offered states the option 

to use the Secretary-approved option in section 1937 of the Act to extend comprehensive 

Medicaid coverage to the new adult expansion group and that extending full Medicaid benefits to 

this population, supplemented as needed to comply with the EHBs, mental health parity and 

other protections in the law, is the best approach for meeting the complex health needs of the 

low-income adults who will gain Medicaid eligibility under the expansion. 

Response: The proposed provisions for defining Secretary-approved coverage sought to 

balance statutory requirements for establishing a minimum coverage standard through ABP with 

the flexibility that states may need when considering the appropriate range of ABP coverage 

relative to the medical needs of the population being served. States may also substitute benefits 

using the state’s approved Medicaid state plan benefits as long as the benefits are in the same 

EHB category and they are actuarially equivalent. We appreciate the commenters’ support. 

Comment: Some commenters were not clear on which state plan benefits may be 

included and, thus, urged HHS to clarify that state plan benefits enacted under Title XIX are 

available for inclusion through the Secretary-approved process irrespective of whether they have 
CMS-2334-F 276 

otherwise been implemented in a particular state Medicaid program. As an example, those 

commenters noted that a state that may conceivably want to design a Medicaid benchmark 

targeting vulnerable populations, such as individuals with dementia, and include a particularly 

relevant home support service that is not an otherwise available service in the state’s Medicaid 

program. 

Response: We wish to clarify for commenters that any benefits described in sections 

1905(a), 1915(i), 1915(j), 1915(j) or 1945 of the Act, and any benefits included in a selected 

benchmark coverage option may be included in an ABP whether or not those benefits are offered 

through a particular Medicaid program. 

Comment: Many commenters requested that, in addition to the provisions that Secretaryapproved coverage must meet the needs of the target population, HHS revise language to require 

that the final Secretary-approved benefits package be at least actuarially equivalent to one of the 

first three benchmark options, indicating that this would ensure that states use the Secretaryapproved option to provide a benefit that is innovative and comprehensive, and not solely to 

provide a benefit that is lesser. 

Many of the same commenters recommend amending §440.330(d) to read as follows: 

Any other health benefits coverage that the Secretary determines, upon application by a 

State, provides appropriate coverage to meet the needs of the population provided that 

coverage, and is at least actuarially equivalent to one of the benchmark options in 

paragraphs (a), (b), or (c). Secretarial coverage may include benefits of the type that are 

available under 1 or more of the standard benchmark coverage packages defined in 

§440.330(a) through (c) of this chapter, State plan benefits described in sections 1905(a), 

1915(i), 1915(j), 1915(k), and 1945 of the Act (whether actually covered in the state plan 

or not), any other Medicaid State plan benefits enacted under title XIX, or benefits 
CMS-2334-F 277 

available under base benchmark plans described in §156.100. 

Response: For commenters requesting that we require an actuarial equivalence 

study for Secretary-approved coverage against one of the three benchmark options at 

§440.330(a) through (c), the statute defines Secretary-approved coverage as one of the 

minimum standards for benchmark coverage, and as such, the benchmark options in 

§440.330(a) through (d) should serve as a reference for states considering the 

benchmark-equivalent coverage option offered in other regulatory provisions at 

§440.335. Section 1937 of the Act does not expressly mandate an actuarial study of 

Secretary-approved coverage Therefore, we are adopting §440.330(d) as proposed, and 

we believe that our clarification here will serve to clarify that a state plan benefit need 

not be offered through the regular state Medicaid program for its inclusion in benchmark 

coverage, or benchmark-equivalent coverage. 

Comment: Many commenters indicated support of the intent to revise §440.335(c)(1) to 

similarly align policy for benchmark-equivalent coverage as it does for Secretary-approved 

coverage and, thus, allow addition of benefits through the benchmark-equivalent coverage 

process. Commenters believed that there are no legal impediments to this approach and urged 

HHS to finalize the revision. 

Similarly, other commenters commended the Secretary for continuing to allow states the 

option for coverage of additional benefits in excess of the minimum required coverage for 

benchmark-equivalent plans and for revising the language to include home and communitybased services available under state plan options among these potential additional benefits. 

Many other commenters applauded HHS’s inclusion of various options for LTSS and 

care coordination support. Commenters generally offered strong support and commended the 

decision to enable states the flexibility necessary to align ABPs with state-plan options for home 
CMS-2334-F 278 

and community-based services, self-directed personal assistance services and attendant services, 

and other state Medicaid plan benefits described in section 1915(i), (j), (k) and section 1945 of 

the Act. 

One commenter indicated that the flexibility to offer such services may provide states 

further opportunity to offer home and community-based services to particular populations since 

the proposed rule retains the section 1937 waiver of comparability that allows states to choose 

target populations for receipt of specialized benefit packages. The commenter offered an 

example of a state that could design benefit packages that help support community living, 

including employment for persons with disabilities. 

One commenter was concerned that states may not take advantage of this flexibility, and 

suggested that CMS consider issuing additional guidance to states regarding the ability to cover 

services critical to chronic care management for the new adult eligibility group, such as the new 

health home benefit. 

Similarly, another commenter requested that CMS clarify how authorities at sections 

1915(i) and 1945 will be used given that individuals that would most likely benefit from these 

authorities will be exempt from enrollment: 

Response: CMS is providing states with additional options to craft benefit packages that 

most appropriately meet the needs of the population being served. Benefits that can now be 

included as Secretary-approved coverage may in fact assist people who do not yet qualify as 

medically frail. For instance, if someone needs assistance with medication administration, they 

may not yet meet the definition of medically frail, but they may benefit significantly from the 

service and in fact avoid progression toward that exemption group or meeting the associated 

criteria. We are in support of melding regular medical/surgical benefits with home- and 

community-based services that support people living the community and potentially avoiding or 
CMS-2334-F 279 

delaying hospitalization or institutionalization. 

Comment: One commenter indicated recognition that section 1915(i) of the Act has 

proven to be a particularly critical tool available to states to expand home and community based 

services and supports to cover a broad array of services that enable individuals with mental 

illnesses to succeed in their own homes. 

Response: We are in agreement with the commenter that section 1915(i) of the Act can 

serve as a critical tool available to states to expand an array of services that enable individuals 

with chronic condition to succeed independently. For this reason, we will finalize regulations to 

include section 1915(i) of the Act as a viable state plan option that states may consider for 

inclusion when selecting an ABP. 

Comment: A few commenters requested clarification from CMS that states may include 

section 1915(c) of the Act and other waiver-based services in their ABPs. Commenters stated 

concern that states may need flexibility to include additional services, such as personal care and 

other services that enable Medicaid beneficiaries to remain in their homes to their ABPs because 

section 1915(c) of the Act was not referenced in §440.360. 

Similarly, many state Medicaid agencies stated that the regulatory sections should 

expressly specify that states may provide ABP enrollees with access to section 1915(c) 

programs. The commenters indicated belief that section 1915(c) services are "state plan benefits 

enacted under Title XIX" given that section 1915(c) is found in Title XIX and offers services 

that a state plan may include as “medical assistance under such a plan.” The commenters also 

requested that CMS confirm their reading of §§440.330, 440.360, allowing states the option to 

provide enrollees with section 1915(c ) waiver services either as part of Secretary-approved ABP 

or as “additional services” available to non-expansion enrollees. 

Response: Section 1915(c) of the Act is not a state plan benefit, and therefore, is not 
CMS-2334-F 280 

consistent with our general principle that Secretary-approved or additional coverage consists of 

coverage under one of the benchmark coverage options or regular state plan benefits. Because 

the same services provided under section 1915(c) of the Act may be provided under section 

1915(i) of the Act, which can be offered in an ABP, we do not see any reason to add section 

1915(c) benefits as an exception to this general principle. 

Summary: No changes to the proposed regulation were made as a result of these 

comments. 

f. Benchmark-equivalent health benefits coverage and §440.360 State plan requirements for 

providing additional services (Adding benefits to Additional coverage) (§440.335) 

In the proposed rule, we amended §440.335(c) and §440.360 by broadening the benefits 

available as additional coverage from section 1905(a) benefits to benefits of the type that are 

available under 1 or more of the standard benchmark coverage packages or state plan benefits 

described in sections 1905(a), 1915(i), 1915(j), 1915(k) or 1945 of the Act, or any other 

Medicaid state plan benefits enacted under Title XIX, or benefits available under base 

benchmark plans described in §156.100. 

Comment: Many commenters believed that the proposed rule would prohibit states from 

providing wrap-around or other additional benefits to newly-eligible adults, but would allow 

states to provide additional benefits for other populations in ABPs. 

Many commenters shared the belief that the Affordable Care Act does not appear to 

prohibit states from providing additional services to the newly-eligible populations and that 

CMS should allow states flexibility to provide additional services to the newly eligible 

population without having to go through the additional process required for Secretary-approved 

coverage. Those commenters believed that if CMS determines that the law prohibits states from 

providing additional benefits to the newly-eligible population, it should allow states the ability to 
CMS-2334-F 281 

simply add these benefits using a streamlined process under the Secretary-approved option or 

through another mechanism. 

Several commenters urged CMS to clarify through the final rule that states may provide 

additional benefits to ABPs for those eligible through section 1902(a)(10(A)(i)(VIII) of the Act 

through the Secretary-approved coverage option, so as to not implicate the restriction on 

additional coverage for the new adult group contained through §440.360. Those commenters 

believed that the proposed language is misleading and could be interpreted that the expansion 

population is not able to receive additional benefits in any circumstances, noting that the intent 

of the proposed rule is that the expansion group is limited to benchmark ABP coverage. 

A number of commenters requested that CMS allow states the flexibility to provide 

additional benefits beyond what is minimally required in the benchmark to any or all populations 

in ABPs, including the expansion population. 

Similarly, another commenter urged CMS to allow states to be as expansive as they want 

to be in offering health care services to all beneficiaries of ABPs, including the newly eligible 

Medicaid expansion population, beyond what is minimally required within each state’s ABP. 

Other commenters noted that states may identify deficiencies and gaps in the commercial 

benchmark plan options that fall outside parity, non-discrimination, EHB and other 

requirements. In this situation, commenters believed that a state should be able to add benefits 

easily for its expansion population and CMS should provide states with all available flexibility to 

do so. 

Response: Section 1902(k)(1) of the Act is very clear that individuals eligible through 

the new adult expansion group are limited to benchmark or benchmark-equivalent coverage. In 

addition, there is a payment exclusion under section 1903(i)(26) of the Act for FFP in any 

additional coverage. “Additional services” authorized under section 1937 fall outside 
CMS-2334-F 282 

benchmark and benchmark-equivalent coverage. But we are addressing this concern by allowing 

states increased flexibility under this final rule to include broader benefits and services that are 

appropriate for the population being covered and that are similar to the benefit types listed in 

§440.360, through Secretary-approved coverage or benchmark-equivalent coverage. 

Comment: Many commenters indicated strong support for HHS’ proposed policy and 

commended the Department for clarifying the authority for states to provide a wide range of 

benefits in developing Secretary-approved coverage. In continuing, those commenters noted that 

many consumer stakeholders have misunderstood the allowance for inclusion of benefits under 

Secretary-approved coverage due to the general prohibition on adding services to Medicaid 

benchmarks and requested that the Department clarify that benefits can be added, but only 

through the Secretary-approved process. 

Other commenters urged CMS to consolidate these sections and clarify that, despite the 

prohibition on adding services to Medicaid benchmarks, states have the flexibility to offer 

additional and richer benefits to all those enrolled in ABPs, including the expansion group, by 

choosing the Secretary-approved coverage option. Those commenters also requested 

clarification that the federal match otherwise available for these populations is available for the 

additional benefits when they are approved by the Secretary. 

Similarly, other commenters requested that CMS clarify and confirm that the 

interpretation of this provision within the proposed rule is that if a state wanted to provide wraparound services for a particular population that some of the "newly eligible" population may fall 

under, it does not appear that would be allowed unless the state creates a Secretary-approved 

plan that incorporates the benefits into the underlying plan itself. 

One commenter indicated that it would be helpful for CMS to clarify that adding 

additional benefits is possible for individuals in the newly eligible group, and that the prohibition 
CMS-2334-F 283 

on additional coverage for the expansion group at §440.360 only applies to benefits that have not 

been included in the benchmark package selected by the state. The commenter also suggested 

that both benchmark-equivalent coverage and Secretary-approved coverage provide the state 

flexibility to include benefits that can be covered through a Medicaid state plan or a base 

benchmark option available to the state. 

Response: We reassert the statutory construct that does not allow the new adult group to 

received “additional” services. However, the broadening of Secretary-approved coverage to 

include the same options for services accomplishes the goal of allowing individuals in the new 

adult group access to that same robust benefit package. We reiterate that services provided 

under an ABP do not have to be offered under the regular state plan. 

Comment: Several commenters recognized that the Secretary's clarification that 

additional benefits may include those available under base benchmark plans (described in 

§156.100), in additional to standard benchmark coverage packages or standard state plan 

benefits. Those commenters were concerned about flexibility for states to model ABPs after any 

base benchmark, noting that not every base benchmark plan option may provide appropriate 

benefit levels for the Medicaid population. 

One commenter familiar with the needs of underserved and poor populations with 

chronic conditions was appreciative that the EHB rules builds upon protections already offered 

through existing rules that allow states to enroll certain populations in Medicaid benchmark 

plans, and grants states significant flexibility through regulations at §440.360 to develop a more 

comprehensive benefits package that will better meet the needs of people with HIV and others 

with chronic conditions. 

Response: As mentioned in previous responses, we believe the statute requires states to 

balance the appropriateness of the ABP package when considering the population being covered. 
CMS-2334-F 284 

Therefore, we believe our regulations encourage states to consider other options if their analysis 

reveals that the base benchmark options elected do not provide an appropriate level of benefits 

relative to the population being covered. 

Comment: A few commenters wished to emphasize that section 1937 of the Act requires 

states to provide FQHC services to beneficiaries who receive ABP coverage in the same manner 

as CMS previously stated and conveyed in the agency's April 30, 2010 final rule. The 

commenters emphasized that for situations where no FQHCs are available to section 

1902(a)(10(A)(i)(VII) of the Act enrollees under their managed care plan, then the state must 

provide the beneficiary enrolled in ABP coverage with FQHC services on a per-visit basis as 

required by section 1902(bb) of the Act. Alternatively, if a managed care entity is able to 

provide FQHC services to any beneficiary receiving ABP coverage, payments for such services 

must be made on a cost-related prospective payment system basis, with state supplemental 

payments provided where the PPS payment would exceed the amount provided under the 

managed care contract. 

Commenters indicated concern that because §440.360 is silent on states' obligation to 

provide FQHC and RHC services as part of benchmark or benchmark-equivalent coverage, the 

proposed regulation fails to distinguish clearly between required and "additional benefits" for the 

section 1937 package and that the omission of FQHC services from the list creates the 

impression that these services are not a required benefit within section 1937 coverage. 

Several commenters recommended that CMS clarify the FQHC services requirement by: 

(a) consolidating §440.365 into §440.345; or (b) independently reference §440.365 in §440.360 

by having the first sentence of regulatory provision §440.360 read, “In addition to the 

requirements of §440.345 and §440.365.” 

Response: We agree with the commenters that regulations at §440.365 continue to 
CMS-2334-F 285 

require that the state must provide that individuals enrolled in an ABP have access, through that 

coverage or otherwise, to rural health clinic services and FQHC services. Such required services 

are required as part of §440.365 and a state must assure to CMS that they are providing these 

services, which is different than adding additional services described at §440.360. FQHCs are 

considered Essential Community Providers in the commercial market, and we anticipate these 

entities playing a critical role in Medicaid ABPs as well. When these providers are part of the 

ABP provider network, reimbursement to them must adhere to statutory requirements. 

Summary: Minor grammatical edits to the proposed regulation were made as a result of 

these comments. 

g. Other Comments Received 

We received various other comments that did not relate specifically to provisions 

proposed in the proposed rule. 

Comment: One commenter stated that to realize the opportunity presented by the 

Affordable Care Act, it is essential that individuals who are admitted to jail and are eligible for 

Medicaid be enrolled in Medicaid either during incarceration or immediately upon release to the 

community. By law federal Medicaid matching funds are not available for the costs of needed 

items and services for individuals who are enrolled in Medicaid while they are inmates, unless 

they are admitted to a medical institution for treatment during the period of incarceration. 

Nonetheless, the suspension of benefits does not affect the Medicaid eligibility of inmates or 

their ability to enroll in the program if eligible. 

Response: Paragraph (A) following section 1905(a)(29) of the Act and implementing 

regulations at §435.1009, exclude from the definition of medical assistance care or services for 

any individual who is an inmate of a public institution, except as an inpatient in a medical 

institution. We read this exclusion to apply generally to medical assistance, whether provided 
CMS-2334-F 286 

through the regular coverage plan or through an ABP. Thus, while we agree with the commenter 

that incarcerated individuals may be eligible for Medicaid, they would not be entitled to benefits 

inconsistent with the exclusion. We note that this is consistent with the exclusion of incarcerated 

individuals from eligibility to enroll in coverage through the Exchange. It is also consistent with 

the responsibility under the Eight Amendment of the United States Constitution of governmental 

entities to provide necessary medical care to individuals who they are holding as inmates, which 

effectively creates a liable third party for such care. 

Individuals who are enrolled in Medicaid when entering a public institution should have 

their eligibility suspended, rather than terminated, as they remain eligible. This also ensures ease 

of reinstitution of coverage post-release. Additionally, if an individual is not already enrolled in 

Medicaid, states are encouraged to enroll eligible individuals prior to their release so that the 

individual can receive Medicaid covered services in a timely manner upon discharge. 

 Comment: A commenter requested additional guidance as to what type of information 

CMS will need to approve an ABP state plan amendment and how CMS will determine if mental 

health parity has been met. 

Response: We will be issuing a template for states to use to submit ABPs as a state plan 

amendment. At this time, mental health parity will be determined to be met with an assurance by 

the state. We will be developing more specific policy related to this topic in the near future. 

Comment: One commenter requested CMS clarify what Medicaid category the EHBs are 

applicable. The commenter wondered whether EHBs only apply to the expansion population 

and ABPs or does it also apply to individuals who are currently eligible for Medicaid. The 

commenter questioned whether, for example, current Medicaid benefits would need to be 

adjusted to include habilitative services. 

Response: EHBs apply only to section 1937 of the Act and were not extended into 
CMS-2334-F 287 

regular Medicaid. Therefore, regular Medicaid state plan benefits will not include the EHBs. 

Summary: No changes to the proposed regulation were made as a result of these 

comments. 

7. Summary 

ABPs are intended to offer states flexibility in designing benefit packages for the 

Medicaid population that are benchmarked to public employee or commercial plans. To ensure 

coverage of the kinds of services that will also be assured for those purchasing coverage in the 

individual and small group market, the law also requires that ABPs cover the ten EHBs specified 

by law. 

Recognizing that states face challenges in administering both their state plan benefits and 

ABPs, we have sought to provide as much flexibility in aligning those packages as possible. 

That said, we appreciate that it may be difficult at this point to make changes to the ABP that 

take effect by January 1, 2014. In light of this challenge, we will partner with states to work as 

quickly as possible to come into full compliance with these provisions. We do not intend to 

pursue compliance actions on these issues to the extent that states are working toward but have 

not completed a transition to the new ABPs on January 1, 2014.To establish its base benchmark 

for EHBs for Medicaid, the state can select the same or a different plan than the base benchmark 

used for the Exchanges. Once having selected the base benchmark plan for EHBs, the state 

maps the benefits to EHB categories, and then can engage in supplementation and/or 

substitution: 

● Through supplementation at 45 CFR 156.110, the state must add EHBs to a base 

benchmark plan that is missing a required category of EHBs. States can supply the missing 

EHBs from other base benchmark plans. 

● Through substitution at 45 CFR 156.115(b), the state can replace one or more of the 
CMS-2334-F 288 

benefits within each category of EHB, as long as it maps appropriately to the category and the 

services are actuarially equivalent to the services that are being substituted. State Medicaid 

programs can use this process to substitute Medicaid state plan benefits for public employee or 

commercial plan benefits, for example, as long as applicable requirements are met. States must 

provide notification to CMS that they have engaged in substitution and have an actuarial 

certification and analysis available for inspection. 

States must assure, as they evaluate their base benchmark for EHBs and take these steps 

that they also properly account for special Medicaid considerations discussed in this rule. When 

states pay for covered outpatient drugs under the ABP prescription drug benefit, they must 

comply with the requirements under section 1927 of the Act. Habilitative services and devices 

are defined by what is in the state selected base benchmark plan, substituted as desired. If not 

defined in the base benchmark, the state will define the benefit. For example, states may offer 

coverage of habilitative services and devices that is no more restrictive in terms of amount, 

duration, and scope than the rehabilitative services and devices covered under the applicable 

benchmark plan. We expect that the services will be clinically appropriate to meet the needs of 

individuals based on medical necessity. Pediatric oral and vision care must follow requirements 

of the EPSDT benefit. 

The final base benchmark plan for EHBs for Medicaid, after completion of these steps, 

provides the floor for Medicaid coverage to individuals in the ABP. 

States also select a section 1937 coverage option. If the section 1937 coverage option 

and the plan initially selected as the base benchmark for EHBs are the same, the state will meet 

all requirements by specifying as the final ABP the final base benchmark, as supplemented and 

subject to permissible substitution, and further supplemented to the extent necessary to ensure 

coverage required under section 1937 of the Act, including EPSDT services, family planning 
CMS-2334-F 289 

services, and FQHC and RHC services. 

If the section 1937 coverage option and the selected base benchmark plan are different 

(including when the state elects Secretary approved coverage option or benchmark equivalent 

coverage), states have to take the following steps to construct their final ABP: 

● If any other benefits are available in the section 1937 coverage option, add that 

benefit. 

● For any benefits in common from the section 1937 public employee or commercial 

market plan options, but with one having more robust qualities related to amount, duration, or 

scope, the benefit with the more robust coverage. 

● For any benefits in common from the section 1937 Secretary-approved coverage 

option, but with one having more robust qualities related to amount, duration, or scope, 

determine whether to apply the benefit with the more robust coverage. 

Alternatively, a state can first determine their ultimate goal in creating their benefit 

package (for example, wanting to create an ABP that mirrors the state’s regular Medicaid state 

plan benefit package as much as possible), and develop their ABP starting first with the selection 

of their 1937 coverage option. This would entail comparing the state plan benefit package with 

the base benchmark benefit package, supplementing the state plan benefit with EHBs as 

necessary, and applying permissible substitution of benefits consistent with 45 CFR 156.115(b) 

to better align with state plan benefits. 

C. Exchanges: Eligibility and Enrollment 

Throughout this proposed rule, we proposed technical corrections to regulation sections 

in part 155 to replace references to section 36B of the Code with the corresponding sections to 

the Department of Treasury’s final rule, Health Insurance Premium Tax Credit (26 CFR 1.36B-0 

et seq.), published in the May 23, 2012 Federal Register (77 FR 30377). We are finalizing 
CMS-2334-F 290 

these technical corrections as proposed. 

1. Definitions (§155.20) 

In §155.20, we proposed technical corrections to the definitions of “advance payments of 

the premium tax credit” and “application filer,” and added a definition of “catastrophic plan” by 

referencing the appropriate statutory provision within the Affordable Care Act. We did not 

receive specific comments on these technical corrections, and are thus finalizing them as 

proposed. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.20 of the proposed rule with a 

technical correction to the definition of advance payments of the premium tax credit, which we 

clarify refers to the payment of the tax credit authorized by 26 U.S.C. 36B and its implementing 

regulations. 

2. Approval of a State Exchange (§155.105) 

In §155.105, we proposed a technical correction to replace the reference to section 36B 

of the Code to the applicable Treasury regulation. We did not receive specific comments on this 

section, and are thus finalizing the provision as proposed. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.105 of the proposed rule without 

modification. 

3. Functions of an Exchange (§155.200) 

In §155.200, we proposed to clarify that the Exchange must also perform the minimum 

functions described in subpart F concerning appeals. The only comments we received supported 

this clarification. 

Summary of Regulatory Changes
CMS-2334-F 291 

We intend to finalize the clarification to paragraph (a) at a future date when subpart F is 

finalized, and so thus maintain the previous language from the Exchange final rule. 

4. Authorized Representatives (§155.227) 

We proposed to add §155.227, establishing minimum requirements for the designation of 

authorized representatives who may act on an applicant’s or enrollee’s behalf in the individual 

and small group markets. We noted in the preamble that the proposed rule for authorized 

representatives for Exchanges closely tracks the proposed rule for authorized representatives for 

Medicaid. 

In paragraph (a), we proposed that the Exchange must permit applicants and enrollees in 

the individual and small group markets to designate an individual person or organization to act 

on that applicant or enrollee’s behalf. We also proposed that an applicant or enrollee may have 

such a representative through operation of state law, subject to applicable privacy and security 

requirements. We also proposed that the Exchange must not restrict the option to designate an 

authorized representative to only certain groups of applicants or enrollees. We noted that the 

Exchange should ensure that the authorized representative agrees to maintain, or be legally 

bound to maintain, the confidentiality of any information regarding the applicant or enrollee 

provided by the Exchange, and that authorized representatives should adhere to applicable 

authentication and data security standards. Additionally, we proposed that the Exchange should 

ensure that the authorized representative is responsible for fulfilling all responsibilities 

encompassed within the scope of the authorized representation, as described in this section, to 

the same extent as the person he or she represents. 

In paragraph (b), we proposed the situations when the Exchange must permit an applicant 

or enrollee to designate an authorized representative. We also proposed that the single, 

streamlined application described in §155.405 will provide applicants the opportunity to 
CMS-2334-F 292 

designate an authorized representative and will collect the information necessary for such 

representative to enter into any associated agreements with the Exchange as part of the 

application process. We noted that applicants and enrollees who do not designate an authorized 

representative on their applications will subsequently be able to do so through electronic, paper 

formats, and other modalities, as described in §155.405(c)(2). We also noted that legal 

documentation of authority to act on behalf of an applicant or enrollee under state law, such as a 

court order establishing legal guardianship or a power of attorney, may serve in the place of the 

applicant or enrollee’s designation. 

In paragraph (c), we proposed that the Exchange must permit an applicant or enrollee to 

authorize a representative to -- (1) Sign the application on the individual’s behalf; (2) submit an 

update or respond to a redetermination for the individual; (3) receive copies of the individual’s 

notices and other communications from the Exchange; and (4) act on behalf of the individual in 

all other matters with the Exchange. 

In paragraph (d), we proposed that the Exchange must permit an applicant or enrollee to 

change or withdraw an authorization at any time. We also noted the authorized representative 

also may withdraw his or her representation by notifying the Exchange and the applicant or 

enrollee. 

In paragraph (e), we proposed that an authorized representative acting as either a staff 

member or volunteer of an organization and the organization itself must sign an agreement 

meeting the requirements proposed in regards to Exchange certified application counselors. We 

noted that while the protections afforded by such an agreement are important when an authorized 

representative is a member or volunteer of an organization, we believe that they are not logical in 

cases where an authorized representative is not acting on behalf of an organization. We sought 

comments on applying the protections in paragraph (e) to authorized representatives more 
CMS-2334-F 293 

broadly. 

In paragraph (f), we proposed that the Exchange require authorized representatives to 

comply with any applicable state and federal laws concerning conflicts of interest and 

confidentiality of information. 

In paragraph (g), we proposed that the designation of an authorized representative must 

be in writing, including a signature, or through another legally binding format, and be accepted 

through all of the modalities described in §155.405(c) of this part. 

We received the following comments concerning the proposed authorized representative 

provisions. 

Comment: Several commenters recommended that the Exchange be required to make 

clear the powers and duties authorized representatives may have with respect to the Exchange, as 

well as all other requirements of §155.227, in a manner that is easily understandable by both the 

authorized representative and applicant or enrollee. 

Response: In the final rule, we added a provision to paragraph (a) specifying that the 

Exchange must provide information regarding the powers and duties that an authorized 

representative may have with respect to Exchange activities to both the applicant or enrollee and 

the authorized representative. 

Comment: Several commenters suggested that an authorized representative should have 

an affirmative duty to notify the Exchange and the applicant or enrollee on whose behalf he or 

she is acting of any revocation or material change in the authorized representative’s legal 

authority to act on behalf of the applicant or enrollee. These commenters also suggested that 

such a material change or revocation should result in revocation of the authorized 

representative's authority to act on behalf of the consumer for Exchange purposes. 

Response: We have clarified in §155.227(d)(2) of the final rule that an authorized 
CMS-2334-F 294 

representative must notify the Exchange and the applicant or enrollee on whose behalf he or she 

is acting when the authorized representative no longer has legal authority to act on behalf of the 

applicant or enrollee. 

Comment: Several commenters asked HHS to clarify which legal documentation may 

serve in the place of an affirmative representation to designate an authorized representative. 

Other commenters recommended clarifying that a power of attorney may be used for such a 

purpose only if it authorizes the holder to act in the types of activities permitted under 

§155.227(c). One commenter recommended that legal documentation to act as an authorized 

representative be required, as opposed to optional, to protect vulnerable applicants or enrollees. 

Another commenter recommended adding language that authorizes the Exchange to dictate the 

form or manner of the authorization. A few commenters also expressed concerns about the 

proposed requirement that the designation of an authorized representative be in writing including 

a signature or other legally binding format. 

Response: In paragraph (a)(2), we outline the form and manner of how an applicant or 

enrollee may designate another person as his or her authorized representative, specifying that 

this designation should be in a legally binding format. We also provide examples of legal 

documentation that could be used to designate an authorized representative in lieu of a signed 

document, including, but not limited to, a court order establishing legal guardianship or a power 

of attorney. While we do not require that legal documentation be provided before the Exchange 

may recognize an individual as an authorized representative, we anticipate that Exchanges will 

have procedures in place to ensure that applicants and enrollees have control over whom they 

designate as an authorized representative. For example, Exchanges have flexibility to require 

that the designation should occur through a signed agreement or legally binding document. In 

general, an Exchange could accept any document that is valid for designating an authorized 
CMS-2334-F 295 

representative in the state, and that permits the holder to perform the activities specified in 

§155.227(c), in place of an affirmative representation to designate an authorized representative. 

We emphasize that to be used in this manner, documentation has to give the authority needed to 

be an authorized representative for the activities specified in §155.227(c). 

Comment: A few commenters inquired about the relationship between an authorized 

representative designated through the Exchange and a QHP issuer, and recommended that an 

applicant or enrollee be required to complete a separate authorization form to designate a 

representative to act on his or her behalf in interactions with the QHP issuer. Commenters 

expressed an understanding that QHP issuers would be responsible for developing and executing 

the authorized representative forms that govern interactions between the enrollee and the issuer. 

Response: Subject to applicable law, we believe that the authorized representative 

designated by an applicant or enrollee through the Exchange process should also be able to serve 

in the same capacity with the QHP issuer, and that streamlining this process is important to 

minimize the burden on applicants or enrollees who need authorized representation. Therefore, 

we would urge QHP issuers to allow an Exchange authorized representative to serve in the same 

capacity with the QHP issuer. We note that the companion guide2

 that will be used by all 

Exchanges for sending enrollment data to QHP issuers has fields that may accommodate this 

information. 

Comment: Some commenters suggested that HHS develop some conflict of interest 

standards to ensure that consumers are protected when interacting with entities that may benefit 

from becoming an authorized representative. Other commenters suggested banning all 

organizations from becoming authorized representatives, because some entities may benefit from 

becoming an authorized representative. 
CMS-2334-F 296 

Response: We appreciate the comments and plan to monitor organizations acting as 

authorized representatives over time to determine whether more specificity is needed. 

Additionally, §155.227(e) of the final rule clarifies that authorized representatives must comply 

with applicable state and federal laws regarding conflicts of interest. 

Comment: Several commenters recommended that an applicant or enrollee should be 

able to authorize their representative to engage in fewer than all of the activities described in the 

proposed rule. 

Response: In the final rule, we maintain language specifying that an Exchange must 

allow applicants and enrollees to authorize a representative to perform the full range of activities 

listed in the rule. We also add language to §155.227(c) clarifying that the Exchange may (but 

need not) permit consumers to authorize fewer than all of the listed activities, so long as the 

Exchange is able to track the specific permissions for each authorized representative. We note 

that for plan years beginning before January 1, 2015, the FFE will not have the operational 

capacity to support the authorization of representatives to perform less than the full range of 

activities listed in the rule. 

Comment: Several commenters urged that the provision in proposed §155.227(d) that the 

applicant or enrollee notify both the Exchange and the representative that the representative is no 

longer authorized to act on his or her behalf be removed. Other commenters suggested that the 

applicant or enrollee should notify only the Exchange. 

Response: In the final rule, we clarify that the responsibility for notifying a 

representative whose authorization has been discontinued by an applicant or enrollee falls only 

on the Exchange. 

Comment: One commenter expressed support for a policy that would permit the 

 

2 Standard Companion Guide Transaction Information, (March 22, 2013). Available at: 
CMS-2334-F 297 

Exchange to terminate a designation after a given period of time to be determined by the 

Exchange. This commenter noted that this aligns with the 5-year limit on authorizations from 

enrollees to allow Exchanges to request tax information for conducting annual redeterminations 

in accordance with §155.335(k). 

Response: In the final rule, we have added a provision specifying that authorized 

representatives will notify the Exchange if they are no longer authorized to act in that capacity. 

As long as a person has the authority to act as an authorized representative, there is no need to 

terminate or reauthorize that relationship after a set amount of time. An applicant or enrollee 

may also modify the authorization at any time. 

Comment: A commenter suggested that compliance agreements for authorized 

representatives should be available directly from HHS, instead of Exchanges, for entities such as 

multi-employer plans that are subject to federal regulation under ERISA, the Code, and the TaftHartley Act, but not to state insurance regulation. The commenter noted that the relationships 

between plans and plan participants and beneficiaries established under the Taft-Hartley Act 

should continue to be recognized in regulations implementing the Affordable Care Act. 

Response: We expect that authorized representatives will be used primarily by applicants 

and enrollees who are unable to represent themselves or who are seriously challenged in 

representing themselves in their relationship with the Exchange. Accordingly, authorized 

representatives’ agreements are between an applicant or enrollee and his or her authorized 

representative regarding representation before the Exchange. 

Comment: One commenter sought clarification on whether staff or volunteers of 

organizations must be trained and certified as Exchange certified application counselors under 

proposed §155.225(b) to serve as authorized representatives. 

 

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/companion-guide-for-ffe-enrollment-transaction-v15.pdf
CMS-2334-F 298 

Response: The rule does not require authorized representatives to be trained and certified 

as certified application counselors. The role of an authorized representative is distinct from the 

role of a certified application counselor. Specifically, certified application counselors, for which 

standards will be finalized in a future regulation, provide guidance and assistance to applicants 

and enrollees who will interact with the Exchange on their own behalf, while authorized 

representatives are commonly used by applicants or enrollees who are unable to represent 

themselves, and have the legal authority to actually sign for an applicant or enrollee and make 

other decisions on his or her behalf. 

Comment: Several commenters suggested that requiring organizations to enter into 

agreements and follow a set of standards as proposed in §155.227(e) will lead to disruptions in 

the availability of assistance and lead to real harm to persons who need assistance. Other 

commenters expressed concerns that every authorized representative would have to be certified. 

Response: In light of the commenters’ concerns, and the protections for consumers that 

already apply to all Exchange authorized representatives, we have not finalized the proposed 

requirement that organizations and staff and volunteers of organizations sign a separate 

agreement. We recognize that authorized representatives are given significant authority, and 

accordingly, we need to ensure that the privacy and security of applicants’ and enrollees’ 

personal data are protected. We note that all authorized representatives, not just organizations 

and those working for organizations, will be subject to the privacy and security standards 

established and implemented by the Exchange consistent with 45 CFR 155.260 through 

agreements, as is required by 45 CFR 155.260(b)(2). This will be further clarified in 

subregulatory guidance. Since all authorized representatives will be subject to privacy and 

security standards, in this final rule, we removed the requirement for organizations and staff and 

volunteers of organizations to sign a separate agreement 
CMS-2334-F 299 

We have also not finalized the provision in the proposed rule that would have subjected 

authorized representatives who are staff and volunteers of organizations, and their organizations, 

to the proposed standards for Exchange certified application counselors. This proposal was 

motivated in large part by a concern that staff and volunteers of such organizations might be 

likely to have conflicts of interest. This concern, however, is addressed by §155.227(e), which 

clarifies that authorized representatives must comply with applicable state and federal laws 

regarding conflicts of interest. 

Comment: One commenter suggested requiring legal documentation when an applicant 

or enrollee changes or withdraws his or her authorization. 

Response: Applicants and enrollees will not always have legal documents to substantiate 

discontinuing an authorization. When an applicant or enrollee appoints a new authorized 

representative, including to replace an existing authorized representative, he or she should follow 

the same process as an applicant or enrollee who appoints an authorized representative for the 

first time. 

Comment: Another commenter recommended that an enrollee should not be able to 

designate an authorized representative if he or she failed to do so during the application process. 

Response: We see no need to limit an applicant or enrollee’s ability to designate an 

authorized representative solely to the application process, particularly as some enrollees may 

develop a need for an authorized representative after submitting an application, choosing a plan, 

and maintaining coverage for many years. 

Comment: Several commenters sought clarification about whether an applicant or 

enrollee who applies through the Exchange with the assistance of an authorized representative 

and is subsequently transferred to the state Medicaid agency would need to redesignate his or her 

authorized representative. 
CMS-2334-F 300 

Response: If the application is transferred to the state Medicaid agency, the authorized 

representative designation would be transferred as well. 

Comment: One commenter inquired about whether the Exchange will be deemed liable 

for any breaches of confidentiality that are beyond the control of the Exchange. A commenter 

also requested that HHS modify language to make it clear that it is the legal duty of the 

authorized representative to maintain confidentiality in daily practice. 

Response: We appreciate this comment and recognize that this issue applies more 

broadly. There are potentially some instances in which a person that provides application 

assistance, including an authorized representative, could negligently disclose an applicant’s or 

enrollee’s information under circumstances that the Exchange could not have prevented. We 

note that authorized representatives will need to comply with the same privacy and security 

standards that the Exchange adopts consistent with § 155.260, or with more stringent standards, 

pursuant to § 155.260(b). Additionally, paragraph (e) of the final rule requires authorized 

representatives to comply with applicable state and federal laws concerning conflicts of interest 

and confidentiality of information. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.227 of the proposed rule, with a few 

modifications. For clarity and consistency with the terminology defined in §155.20, and to make 

it clear that we intend authorized representatives to provide assistance both in the SHOP 

Exchanges and in the individual market Exchanges, we replaced the terms “individual” and/or 

“employee” with the terms “applicant” and/or “enrollee” to describe the people helped by 

authorized representatives. To further indicate that we intend authorized representatives to 

provide assistance both in the SHOP and in the individual market Exchanges, we clarify in 

§155.227(a) that an applicant or enrollee can designate an authorized representative in the 
CMS-2334-F 301 

individual or small group market Exchange and have added “subpart H” to the regulation text to 

account for the functions that an authorized representative may perform in a SHOP. To avoid 

confusion with the defined term “qualified individual,” we use the term “person” instead of 

“individual” in the final rule when describing individual persons acting as an authorized 

representative. 

We added paragraph (a)(5) to specify that the Exchange must provide information about 

the powers and duties of an authorized representative both to the applicant or enrollee and to the 

authorized representative. We redesignated proposed paragraphs (c)(1) through (c)(4) as 

(c)(1)(i) through (c)(1)(iv), and added a new paragraph (c)(2), which allows an Exchange to 

permit an applicant or enrollee to authorize a representative to perform fewer than all of the 

activities described in paragraph (c)(1) of this section, provided that the Exchange tracks the 

specific permissions of each authorized representative. Additionally, we removed paragraph 

(d)(1), and redesignated proposed paragraphs (d)(2) and (d)(3) as paragraphs (d)(1) and (d)(2). 

We modified the language in redesignated paragraph (d)(1) to explain that the Exchange, not the 

applicant or enrollee, will notify the authorized representative when an applicant or enrollee 

notifies the Exchange that he or she is no longer represented by his or her previously authorized 

representative. We further modified redesignated paragraph (d)(2) to clarify that an authorized 

representative will notify the Exchange and the applicant or enrollee on whose behalf he or she is 

acting when the authorized representative no longer has legal authority to act on behalf of the 

applicant or enrollee. We also deleted paragraph (e) and redesignated paragraphs (f) and (g) as 

(e) and (f), respectively. We also made the following technical corrections. We made a 

technical correction in paragraph (a)(1) to specify that authorized representatives are permitted 

to assist individuals apply for eligibility determinations or redeterminations for exemptions from 

the shared responsibility payment under subpart G of this part. We made technical corrections in 
CMS-2334-F 302 

paragraphs (a)(2) and (g) to clarify that the designation of an authorized representative must be 

in a written document signed by the applicant or enrollee instead of saying it must be in writing, 

including a signature. We also added the word “must” to paragraphs (a)(3), (a)(4), and (f) to 

clarify that the activities described in those paragraphs are required Exchange functions. We 

made a technical correction in paragraph (d) to move the words “the applicant or enrollee 

notifies” to the paragraph they modify. Finally, we made a technical correction in paragraph (f), 

to clarify what is meant by legally binding format by adding “as described in §155.227(a)(2).” 

5. General standards for Exchange notices (§155.230) 

In §155.230, we proposed to make a technical correction in paragraph (a) to clarify that 

the general standards for notices apply to all notices sent by the Exchange to individuals or 

employers. 

 We also proposed to revise paragraph (a) by redesignating paragraph (a)(1) as paragraph 

(a)(4) and redesignating paragraph (a)(2) as paragraph (a)(5). We proposed to revise 

redesignated (a)(2) to change “; and” to “.” We proposed to add new paragraph (a)(1) to indicate 

that any notice required to be sent by the Exchange to individuals or employers must be written 

and include an explanation of the action that is reflected in the notice, including the effective 

date of the action, and we proposed to add new paragraph (a)(2) to require the notice to include 

any factual findings relevant to the action. We proposed to revise paragraph (a)(3) to clarify that 

the notice must include the citation to, or identification of, the relevant regulations that support 

the action. We note that the contents of notices are subject to privacy and security provisions in 

§155.260, including the limitations on disclosure of information. 

Furthermore, we proposed to add paragraph (d) to allow the Exchange to provide notices 

either through standard mail, or if an individual or employer elects, electronically, provided that 

standards for use of electronic notices are met as set forth in §435.918, which contains a parallel 
CMS-2334-F 303 

provision. We did not propose that the standards specifically described under proposed 

paragraph (d) would apply to the SHOP, and sought comment regarding this issue. We received 

the following comments concerning the proposed provisions for standards for Exchange notices: 

Comment: Several commenters supported our proposal to clarify that the general 

standards for notices under §155.230 apply to notices sent by the Exchange to both individuals 

and employers, and they supported the changes and additions proposed under paragraph (a). 

Many commenters indicated that the Exchange should be required to include contact information 

for both customer service and consumer assistance resources in notices, and commenters 

indicated that HHS should make copies of the applicable statute or regulation available upon 

request by consumers. One commenter stated the notice needs to include a clear explanation of 

any next steps and the timeframe by which action needs to be taken, while another commenter 

emphasized that notices should contain information about where individualized and unbiased 

counseling is available for the individual. Lastly, a few commenters suggested that we add 

“laws or regulations” to §155.230(a)(3). 

Response: In response to comments received, we clarify that while the standards under 

§155.230 generally do apply to notices sent by the individual market Exchange to both 

individuals and employers, HHS does not expect that the Exchange will have the information 

necessary to provide an employer with a choice to receive the notice specified in §155.310(h) 

regarding eligibility for advance payments of the premium tax credit electronically, as we do not 

expect that individuals will provide e-mail information for employers on the application. 

Accordingly, we expect that notices sent from the Exchange to employers will likely be provided 

by standard mail, at least in the early years of program implementation. We will continue to 

work with employers regarding how best to implement notices from the Exchange to employers 

in an efficient manner. 
CMS-2334-F 304 

We intend to consider the suggestions regarding notice content in the development of 

model notices, and encourage Exchanges to do the same in developing notices they will use. We 

expect that notices will include clear information about next steps and timeframe by which 

action needs to be taken. We acknowledge the value of including contact information for both 

customer service and consumer assistance resources in notices. We recognize that including a 

list of all available consumer assistance resources will make the notice longer, and so note that 

this is an area in which Exchanges have flexibility. We also note that applicable federal 

regulations are and will remain available through public websites. 

Comment: Several commenters reinforced their support for the use of plain language to 

help notify enrollees of their rights and to properly explain health coverage options that may be 

available to consumers. One commenter recommended the notice include clear information 

about how to get help if the individual does not understand the notice, as well as clear 

information that an individual does not have to take the premium tax credit in advance. 

Response: All notices specified under 45 CFR parts 155 and 156 are required to meet the 

accessibility standards described under §155.205(c), which specify that information must be 

provided in plain language and in a manner accessible to limited English proficient individuals. 

We expect Exchanges to make consumers aware of the reconciliation process applicable to 

advance payments of the premium tax credit as a part of the initial Exchange educational 

materials, as well as at the time that an individual selects a QHP. HHS is working with states to 

identify all key messages that should be communicated to individuals through notices and other 

Exchange processes, and will take these comments into consideration for implementation. 

Comment: Commenters generally expressed support for the electronic notice standards 

proposed under §155.230(d), while some expressed concerns or suggestions related to the 

proposed standards. Commenters raised a variety of concerns about how consumers who elect to 
CMS-2334-F 305 

receive electronic notices may not actually receive them, including as a result of not checking email regularly. One commenter urged that Exchanges should be required to change the 

enrollee’s delivery method for notices if the Exchange finds that electronic notices are not being 

opened. One commenter suggested that written notifications should cease only after clear and 

unambiguous expression from an enrollee that they no longer wish to receive paper notifications, 

and that the Exchange should be required to track whether electronic notices are delivered and 

opened by an enrollee. Another commenter recommended that individuals be allowed to decide 

which notices they receive electronically or by mail. One commenter suggested that electronic 

notices should be in addition to, rather than replace, mailed paper notices. Lastly, one 

commenter recommended modifying the notice provision so that if an individual elects to receive 

electronic notices, the Exchange also always would send a mailed notice in addition to the 

electronic notice when the Exchange is taking an adverse action or when the consumer is 

required to take an additional action to maintain his or her eligibility for enrollment in a QHP, 

advance payments of the premium tax credit, or cost-sharing reductions. 

Response: We do not expect that the Exchange will track and monitor when an 

individual opens e-mails and electronic notices. As described in the electronic notice standards 

under §435.918, which are incorporated by reference under §155.230(d), applicants will receive 

paper notices by mail until they affirmatively elect to receive electronic notices. We expect 

Exchanges to remain consistent in their overall approach to distributing notices, as required 

under §155.230(d). Individuals will be able to control how they receive notices. Additionally, 

under §435.918(b)(6), an individual will be able to request any notice posted in the individual’s 

electronic account to be sent through regular mail. Furthermore, nothing precludes the Exchange 

from providing an individual with the choice to receive some types of notices electronically and 

others through regular mail (for example, notices concerning adverse actions). Accordingly, we 
CMS-2334-F 306 

are finalizing this provision as proposed, with one modification to allow the individual market 

Exchange to choose to delay the implementation of the process described in 42 CFR 

435.918(b)(1) regarding sending a mailed confirmation of the choice to receive electronic 

notices, given the time available for implementation. 

Comment: Some commenters supported the exclusion of the SHOP Exchange from the 

electronic notice standards under §155.230(d), while others expressed support for the SHOP 

being able to send all notices electronically. Many commenters urged that employers in the 

SHOP should have a choice regarding to how they receive notices, and some expressed concern 

about employers not having a choice. One commenter recommended that the SHOP be allowed 

to choose between offering both written and electronic notices, to allow qualified employers and 

employees to select which method they prefer; or to only offer paper notices. The commenter 

noted that allowing states to adopt an electronic-only approach for notice delivery might be 

problematic for some employers. Another commenter indicated that the proposed rule is not 

clear about what the default format would be for notices sent by the SHOP. 

Response: Based on the comments received and because we believe it is important for 

employers to be able to choose how they receive notices, we are modifying the proposed rule to 

allow an employer or employee in any SHOP to elect to receive electronic notices, provided that 

the standards for electronic notices in §435.918(b)(2), (b)(3), (b)(4), and (b)(5) are met for the 

employer or employee. Accordingly, the SHOP must: (1) Permit the employer or employee to 

change such election, at any time, and inform the employer or employee of this right; (2) Post 

notices to the employer or employee’s electronic account within one business day of notice 

generation; (3) Send an e-mail or other electronic communication alerting the employer or 

employee when a notice has been posted; and (4) If an electronic communication is 
CMS-2334-F 307 

undeliverable, send the notice by regular mail within three business days of the date of the failed 

electronic communication. 

Comment: Several commenters asked for clarification regarding how electronic notice 

standards apply to QHP issuers, and they suggested that QHP issuers also be allowed to offer 

enrollees the option of receiving electronic notices. Some commenters recommended that the 

Exchange adopt electronic notice standards for QHP issuers similar to those applicable to the 

individual market Exchange. One commenter recommended that the single, streamlined 

application include an option for applicants to elect to receive notices from the QHP issuer 

electronically, in addition to the election to receive notices from the Exchange electronically. 

One commenter requested that a provision be added permitting managed care organizations to 

provide electronic notices. 

Response: The provisions related to electronic notice standards under part 155 of the 

proposed rule apply to the individual market and SHOP Exchange. We acknowledge the 

importance of QHP issuers being able to send, and enrollees being able to choose to receive, 

electronic notices, and we clarify that nothing in this regulation precludes QHP issuers from 

offering their enrollees the option to receive notices electronically. We understand that most 

QHP issuers already make electronic notices available as an option to their current enrollees, and 

we are supportive of QHP issuers continuing to make this option available to enrollees when 

they are participating in the Exchange. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.230 of the proposed rule with a few 

modifications. We renumber proposed paragraph (d) as paragraph (d)(1) and modify it to 

specify the electronic notice standards for an individual market Exchange, while also adding 

paragraph (d)(2) to establish the electronic notice standards for a SHOP. We also add language 
CMS-2334-F 308 

to allow the individual market Exchange to choose to delay the implementation of the process 

described in 42 CFR 435.918(b)(1) regarding sending a mailed confirmation of the choice to 

receive electronic notices. We provide in paragraph (d)(2) that an employer or employee in any 

SHOP may elect to receive electronic notices, provided that the requirements for electronic 

notices in §435.918(b)(2), (b)(3), (b)(4), and (b)(5) are met for the employer or employee. 

6. Definitions and general standards for eligibility determinations (§155.300) 

In §155.300, we proposed technical corrections in paragraph (a) to the definitions of 

“minimum value,” “modified adjusted gross income,” and “qualifying coverage in an eligible 

employer-sponsored plan,” and also removed the definition of “adoption taxpayer identification 

number.” We are finalizing the technical corrections as proposed, with an additional technical 

correction to specify the appropriate definition of minimum value. 

Comment: Several commenters recommended that HHS should not cross-reference in 

§155.300 to the affordability standard for eligible employer-sponsored coverage in the 

Department of the Treasury’s premium tax credit regulation, 26 CFR 1.36B-0 et seq., as the 

Department of the Treasury regulation is based on individual rather than family coverage. 

Response: The Department of the Treasury maintains the legal authority to interpret and 

implement the eligibility standards for the premium tax credit, including those related to 

affordability and minimum value of coverage in an eligible employer-sponsored plan, because 

those are based on provisions of the Code. The proposed technical corrections do not revise the 

policy regarding the Exchange’s determination of the affordability of eligible employersponsored coverage, but simply update the cross-reference to align with the Department of the 

Treasury’s implementing regulation. As such, we are finalizing the technical corrections as 

proposed. 

Summary of Regulatory Changes
CMS-2334-F 309 

 We are finalizing the provisions proposed in §155.300 of the proposed rule with a 

technical correction to specify the appropriate definition of minimum value. 

7. Options for conducting eligibility determinations (§155.302(a) and (b), and (d)) 

 In §155.302, we promulgated provisions as interim final with request for comments in the 

Exchange final rule (77 FR 18310, at 18451-52). We proposed to modify some of the provisions 

in §155.302 in the proposed rule (78 FR 4594, 4635). 

In paragraph (a) of the interim final rule, we provided that the Exchange may fulfill its 

minimum functions under this subpart by either executing all eligibility functions, directly or 

through contracting arrangements described in §155.110(a), or through a combination of this 

approach and one or both of the approaches identified in paragraphs (b) and (c), which apply 

when other entities make eligibility determinations for insurance affordability programs. We 

proposed a revision to the interim final rule in paragraph (a)(1) to specify that Medicaid and 

CHIP eligibility determinations made by the Exchange may only be made by a government 

agency that maintains personnel standards on a merit basis. 

In paragraph (b) of the interim final rule, we provided that the Exchange may conduct an 

assessment of eligibility for Medicaid and CHIP rather than an eligibility determination for 

Medicaid and CHIP, provided that the Exchange make such an assessment based on the 

applicable Medicaid and CHIP MAGI-based income standards and citizenship and immigration 

status, using verification rules and procedures consistent with Medicaid and CHIP regulations, 

without regard to how such standards are implemented by the state Medicaid and CHIP agencies. 

In paragraph (b)(2) of the interim final rule, we provided that notices and other activities 

that must be conducted in connection with an eligibility determination for Medicaid or CHIP 

would be conducted by the Exchange consistent with the standards identified in this subpart or 

by the applicable state Medicaid or state CHIP agency consistent with applicable law. 
CMS-2334-F 310 

In paragraph (b)(3) of the interim final rule, we provided that if the Exchange assesses an 

applicant potentially eligible for Medicaid or CHIP, the Exchange would transmit such the 

applicant’s information to the State Medicaid or CHIP agency for a formal determination of 

eligibility for such insurance affordability program. We explained in the preamble to the interim 

final rule that the Exchange would consider the applicant ineligible for Medicaid or CHIP for 

purposes of eligibility for advance payments of the premium tax credit and cost-sharing 

reductions until the state Medicaid or CHIP agency notified the Exchange that the applicant was 

eligible for Medicaid or CHIP. 

In paragraph (b)(4) of the interim final rule, we proposed that if the Exchange assesses an 

applicant not potentially eligible for Medicaid or CHIP based on the applicable Medicaid and 

CHIP MAGI-based income standards, the Exchange must consider such an applicant as 

ineligible for Medicaid or CHIP for purposes of determining eligibility for advance payments of 

the premium tax credit and cost-sharing reductions, and notify the applicant and provide him or 

her with the opportunity to withdraw his or her application for Medicaid and CHIP or request a 

full determination of eligibility for Medicaid and CHIP from the applicable state agencies. To 

the extent that an applicant withdraws his or her application for Medicaid and CHIP, the 

applicant would not receive a formal approval or denial for Medicaid and CHIP. 

We proposed a revision to the interim final rule in paragraph (b)(4)(i)(A) to specify that, 

if an applicant who is not assessed as potentially eligible for Medicaid or CHIP by the Exchange 

withdraws his or her application for Medicaid or CHIP, and then appeals his or her eligibility 

determination for advance payments of the premium tax credit or cost-sharing reductions and is 

found potentially eligible for Medicaid or CHIP, the Medicaid or CHIP application is not 

considered withdrawn. The purpose of this revision is to reinstate the Medicaid and CHIP 
CMS-2334-F 311 

application date, which is used in determining the effective date of coverage under Medicaid and 

CHIP. 

We provided in paragraph (b)(4)(i)(B) that the Exchange must notify and provide an 

applicant who is assessed as not potentially eligible for Medicaid and CHIP with the opportunity 

to request a full determination of eligibility for Medicaid and CHIP by the applicable state 

Medicaid and CHIP agencies. For an applicant who requests a full Medicaid and CHIP 

determination, we provided that the Exchange must transmit all information provided as part of 

the application, update, or renewal that initiated the assessment, and any information obtained or 

verified by the Exchange to the state Medicaid and CHIP agency. We provided that the 

Exchange must consider such an applicant as ineligible for Medicaid or CHIP for purposes of 

determining eligibility for advance payments of the premium tax credit and cost-sharing 

reductions until the state Medicaid or CHIP agency notifies the Exchange that the applicant has 

been determined eligible for Medicaid or CHIP. 

We provided in paragraph (b)(5) that, under an assessment model discussed above, the 

Exchange must adhere to the eligibility determination for Medicaid or CHIP made by the 

Medicaid or CHIP agency. We provided in paragraph (b)(6) that the Exchange and the 

applicable state Medicaid and CHIP agencies must enter into an agreement specifying their 

respective responsibilities in connection with eligibility determinations for Medicaid and CHIP, 

which requirement complements the standards in §435.1200(d). In accordance with these 

standards, when the Exchange performs an assessment and transmitted it to the state Medicaid or 

CHIP agency, and the Exchange is providing advance payments of premium tax credits pending 

an eligibility determination for Medicaid and CHIP, the Exchange will receive a notification of 

the final determination of eligibility for Medicaid and CHIP made by the receiving agency. This 
CMS-2334-F 312 

approach helps avoid duplicative requests for information from applicants and verification of 

information. 

We proposed a revision to the interim final rule in paragraph (b)(5) to specify that the 

Exchange also will adhere to the appeals decision for Medicaid or CHIP eligibility 

determinations made by the state Medicaid or CHIP agency or appeals entity for such agency. 

In paragraph (d) of the interim final rule, we provided the standards to which the 

Exchange must adhere when assessments of eligibility for Medicaid and CHIP based on MAGI 

and eligibility determinations for advance payments of the premium tax credit and cost-sharing 

reductions are made in accordance with paragraphs (b) and (c); such standards include that all 

eligibility processes are streamlined and coordinated across applicable agencies, that such 

arrangement does not increase administrative costs and burden on applicants, enrollees, 

beneficiaries, or application filers, or increase delay, and that applicable requirements under part 

155 and section 6103 of the Code are met. 

 Comment: Several commenters raised concerns regarding §155.302(a) as promulgated in 

the interim final rule, as they believed it could permit non-public agencies to conduct eligibility 

determinations for Medicaid and CHIP, which they worried would have a negative impact on 

consumer assistance, timeliness, accuracy, and the potential for conflicts of interest. Some 

commenters wanted to ensure that agreements between state Medicaid agencies and private 

entities related to the eligibility determination process would be relayed to HHS for appropriate 

review. Several commenters recommended clear language to specify that a private Exchange is 

not permitted to make final determinations regarding an applicant’s eligibility for Medicaid and 

CHIP. One commenter wanted HHS to strengthen the conflict of interest language and specify 

that the Exchange may not contract out eligibility determinations for advance payments of the 
CMS-2334-F 313 

premium tax credit and cost-sharing reductions due to such determinations being inherently 

governmental. 

Response: We appreciate these comments regarding the interim final rule, as well as 

comments received regarding the proposed revisions to paragraph (a)(1) of the interim final rule 

that would specify that any contracting arrangement for eligibility determinations for Medicaid 

and CHIP is subject to the standards in 42 CFR 431.10(c)(2). In response to these comments, we 

are finalizing §155.302(a) with the proposed revision to paragraph (a)(1), with a minor 

clarification to specify that the reference to 42 CFR 431.10(c)(2) is specific to contracting 

arrangements for eligibility determinations for Medicaid and CHIP. Specifically, this means that 

an Exchange contractor may make eligibility determinations for Medicaid and CHIP if it is a 

government agency or public authority that maintains personnel standards on a merit basis. We 

note that 42 CFR 431.10(d) specifies that agreements regarding the delegation of eligibility 

determinations by state Medicaid agencies must be available to the Secretary, upon request. 

Exchanges are permitted to contract eligibility determinations for advance payments of the 

premium tax credit and cost-sharing reductions in accordance with §155.110(a). 

 Comment: Many commenters expressed concerns about the potential bifurcation of the 

eligibility process under §155.302(b) for Medicaid, CHIP, and advance payments of the 

premium tax credit and cost-sharing reductions in terms of its impact on various stakeholders. 

Commenters urged that HHS maintain the “no wrong door” approach envisioned by the 

Affordable Care Act to ensure that an individual is appropriately screened for all relevant 

insurance affordability programs. As such, some commenters requested that by 2016, HHS 

revisit the decision to allow states to implement eligibility systems in the manner as described in 

the interim final rule, while also evaluating whether more Exchanges move from making 

assessments to determinations during the intervening time period. Commenters recommended 
CMS-2334-F 314 

that, if HHS retains this provision, HHS should specify that states must demonstrate they have 

the capacity to manage electronic accounts and applicant information in so as not to increase the 

burden on individuals and families by requesting duplicate information or increase the 

administrative costs for state Medicaid and CHIP agencies related to file transfers or 

unnecessarily duplicative verification processes. Some commenters wanted HHS to require the 

Exchange to notify the transferring program that it had received the electronic account and report 

its final eligibility determination, to protect applicants. Furthermore, commenters urged HHS to 

establish a process for monitoring and enforcing the standards, as well as educating the public, 

regarding the division of eligibility responsibilities between the Exchange and relevant Medicaid 

and CHIP agencies. Commenters stated that if such monitoring uncovers noncompliance with 

performance standards or other requirements, HHS should require the Exchanges and state 

Medicaid and CHIP agencies to submit corrective action plans. 

Response: We appreciate the suggestions from commenters, and note that many of these 

recommendations are already included in the interim final rule. We intend to monitor the 

efficiency of how states implement assessment or determination models to determine whether to 

propose revisions in future years. We believe that the existing language in §155.302(b) is 

augmented by §155.345(g) and 42 CFR 435.1200, which specify that the Exchange and the state 

Medicaid and CHIP agencies must have the capacity to manage electronic accounts, and also 

that the Exchange will notify the transferring Medicaid or CHIP agency regarding the receipt of 

an electronic account as well as of its final eligibility determination. Accordingly, we do not 

modify this provision further to address these comments. Although we do not establish a formal 

process for monitoring and taking enforcement action for noncompliance with these standards in 

the regulation text, HHS will continue to evaluate the need for such processes during the 

implementation of these regulations. 
CMS-2334-F 315 

 Comment: Several commenters suggested that states should adopt procedures that would 

allow Exchanges to assess eligibility for Medicaid based on factors other than MAGI, and 

potentially also allowing the Exchange to assess eligibility for other programs, including the 

Supplemental Nutritional Assistance Program. Some commenters urged HHS to require 

Exchanges to develop appropriate screening standards to identify vulnerable populations that 

might be eligible for certain programs on a basis other than MAGI. 

Response: This comment is outside the scope of §155.302(b) of the interim final rule, as 

this provision only concerns the use of MAGI determinations, while §155.345(b) concerns the 

duties of the Exchange for Medicaid eligibility based on factors other than MAGI. We note that 

Exchanges are not precluded from entering into agreements with Medicaid and CHIP agencies to 

make eligibility determinations for Medicaid based on factors other than MAGI. 

 Comment: Some commenters requested that HHS provide greater specificity throughout 

§155.302(b) to indicate that contracting agreements, verifications rules and standards, notices, 

and other activities discussed must adhere to the specific standards of §§155.302(d) and 

155.345(g), and 42 CFR part 431, subpart E. 

Response: As noted earlier, §155.302(b) only applies in place of the standards elsewhere 

in subpart D that specify that the Exchange will make eligibility determinations for Medicaid and 

CHIP based on MAGI, rather than assessments; it does not conflict with standards provided 

elsewhere in subpart D that address other components of the eligibility process that are 

unaffected by whether the Exchange is making assessments or determinations of eligibility for 

Medicaid and CHIP. As such, Exchanges are still guided by other provisions in subpart D, such 

as §155.345(g). Provisions in 42 CFR part 431 concern standards for Medicaid agencies, which 

continue to apply to Medicaid agencies in accordance with that part notwithstanding the role of 

the Exchange for Medicaid eligibility. Finally, §155.302(a)(2) already specifically states that 
CMS-2334-F 316 

use of the option in §155.302(b) is subject to §155.302(d), so we do not believe that it is 

necessary to add further references to §155.302(d). 

 Comment: Some commenters supported the increased level of flexibility for the 

Exchange to make assessments of eligibility for Medicaid and CHIP based on MAGI, rather than 

determinations. However, these commenters expressed concerns about relying on applicants 

who are not assessed as potentially eligible for Medicaid or CHIP based on MAGI to selfidentify as potentially eligible based on non-MAGI standards or proactively request a full 

determination from the state Medicaid and CHIP agencies, as opposed to placing greater burden 

on the Exchange to take additional steps to proactively identify applicants who might be 

Medicaid eligible based on non-MAGI standards. One commenter also asked HHS to clarify 

that in cases where an Exchange conducts an assessment of Medicaid eligibility; the assessment 

must include an assessment of Medicaid eligibility on bases other than MAGI. These 

commenters suggested that HHS encourage states to utilize a process whereby individuals who 

enroll in a QHP, but are subsequently determined eligible for Medicaid, are able to transition 

into the same carrier’s Medicaid product if the QHP also operates a Medicaid health plan. 

Response: We appreciate the concerns regarding how to create a streamlined process 

that is minimally burdensome on individuals and families, and results in accurate eligibility 

determinations. Under §155.345(b) and (c), the Exchange will evaluate applications for 

applicants who are not eligible for Medicaid based on MAGI for possible Medicaid eligibility 

based on factors other than MAGI, and must provide an opportunity for applicants and enrollees 

to request a full determination of Medicaid eligibility based on factors other than MAGI. If the 

Exchange evaluates an applicant as potentially eligible for Medicaid based on factors other than 

MAGI, or the applicant or enrollee requests a full determination of Medicaid eligibility, 

§155.345(d) specifies that the Exchange will transmit the applicant’s information to the state 
CMS-2334-F 317 

Medicaid agency for a full determination. The Exchange has the same responsibilities regarding 

eligibility for Medicaid based on factors other than MAGI under the assessment and the 

determination models, which we believe is appropriate because the single, streamlined 

application that will be used by the Exchange does not request all the information necessary to 

conduct a full determination of Medicaid eligibility based on factors other than MAGI. Rather, 

it includes an opportunity for an application filer to indicate that an applicant has limitations in 

daily activities or lives in a medical facility or nursing home, which are factors that are 

considered in determining eligibility for Medicaid based on factors other than MAGI. If 

answered affirmatively, the Exchange will trigger a referral to the applicable state Medicaid 

agency such that the state Medicaid agency can determine the applicant’s eligibility for 

Medicaid, including based on factors other than MAGI. Further, we note that the assessment of 

eligibility for Medicaid based on MAGI is designed to be a robust evaluation, and we expect that 

the number of applicants who will receive an assessment that is inconsistent with the final 

determination will be limited. We note that while comments related to HHS encouraging a 

process to help individuals transition between QHPs and Medicaid products of the same carrier 

is outside the scope of this regulation, Exchanges maintain the flexibility to pursue such an 

option.

 Comment: Some commenters noted the need for high levels of coordination between the 

Exchange and state Medicaid and CHIP agencies. A few commenters also wanted HHS to 

provide guidance with a view toward minimizing the situations in which an individual will enroll 

in a QHP through the Exchange pending the outcome of a Medicaid or CHIP eligibility 

determination and then be subsequently determined eligible for Medicaid or CHIP. 

Response: We agree that a high degree of coordination is needed to manage an 

assessment model, and believe that the language in §155.302(b) and (d), as well as §155.345, 
CMS-2334-F 318 

prescribes an appropriate set of standards. We recognize the challenges that may occur related to 

individuals who enroll in a QHP pending the outcome of a Medicaid or CHIP eligibility 

determination, but we believe that these are outweighed by the benefits associated with 

providing eligible individuals with health coverage pending the completion of an eligibility 

determination for Medicaid or CHIP, and we note that enrolling in a QHP through the Exchange 

during such a period is the individual’s choice. With that, we expect that as states implement 

their Exchanges and as eligibility systems for the Exchange, Medicaid, and CHIP mature, the 

need for multiple entities to take part in processing an application will lessen, and the time 

needed to complete the entire eligibility process will also decrease, which will reduce the need 

for interim coverage. 

 Comment: One commenter worried that the remainder of subpart D concerning the 

eligibility process was not updated to reflect §155.302(b). 

Response: We note that §155.302(b) provides that the Exchange may conduct an 

assessment of MAGI-based eligibility for Medicaid and CHIP, rather than a determination of 

eligibility for Medicaid and CHIP, in accordance with the specified standards, 

“[n]otwithstanding the requirements of this subpart[.]” In view of this language, we did not 

update other provisions in subpart D to reflect §155.302(b). We note that §155.302(b) does not 

supersede other provisions, such as those in §155.345, that set additional standards for 

Exchanges in coordinating with Medicaid and CHIP agencies.

 Comment: Some commenters worried that the Exchange assessment provision would 

allow the Exchange the assess eligibility without applying Medicaid rules and procedures. 

Commenters recommended that, under an assessment model, the Exchange should provide 

presumptive eligibility for Medicaid, which they believed was particularly important for children 

and pregnant women, while the application is transferred to the Medicaid and CHIP agencies and 
CMS-2334-F 319 

a determination is made. One commenter suggested HHS develop a universal model for tracking 

children as they move from one coverage type to another, which Exchanges should be required 

to implement. 

Response: Section 155.302(b)(1) specifies that an assessment will be made based on, 

“the applicable Medicaid and CHIP MAGI-based income standards and citizenship and 

immigration status, using verification rules consistent with 42 CFR parts 435 and 457, without 

regard to how such standards are implemented by the State Medicaid and CHIP agencies.” We 

maintain this language in this final rule, which ensures that the Exchange will use standard 

Medicaid rules and procedures in making an eligibility assessment. We appreciate the 

commenter’s recommendations related to presumptive eligibility, but note that HHS’ approach in 

establishing an assessment model was premised on having the Medicaid or CHIP agency make 

all eligibility determinations that result in the provision of benefits under Medicaid or CHIP. 

Accordingly, we do not specify that the Exchange will make presumptive determinations under 

an assessment model. HHS will continue to work with Exchanges and Medicaid and CHIP 

agencies to ensure that vulnerable populations, such as children and pregnant women, receive the 

correct eligibility determinations for insurance affordability programs in a timely fashion.

 Comment: Some commenters recommended that the interim final rule be amended to 

eliminate or strictly limit differences between the procedures used by Exchanges in assessing 

eligibility for Medicaid and CHIP, and those used by state Medicaid and CHIP agencies in 

determining eligibility, with HHS permitting Federally-facilitated Exchanges and State 

Partnership Exchanges to have slightly more flexibility for differences than State-based 

Exchanges. 

Response: We agree that the differences between the procedures used by Exchanges and 

their partner Medicaid and CHIP agencies in conducting eligibility determinations should be 
CMS-2334-F 320 

limited, and believe that §155.302(b)(1) already accomplishes this to a significant extent. We 

reiterate that an assessment under §155.302(b) will be robust and will involve the execution of 

detailed MAGI-based eligibility rules and verification procedures. Further, we believe that there 

is little reason for the use of an assessment model in a state that operates a state-based Exchange, 

given the availability of shared information technology services and the status of the state-based 

Exchange as a state, rather than a federal, entity. We intend to continue to work closely with 

states to ensure that systems and processes are appropriately integrated, with the goal of reducing 

administrative costs, burden on consumers, and the time needed to complete the eligibility 

process. 

 Comment: Several commenters recommended that HHS set a specific timeliness 

standard regarding the electronic transmission of the application along with all relevant 

information collected from either the application or available electronic data sources from the 

Exchange to the state Medicaid or CHIP agency to ensure that eligibility determinations are 

provided without undue delay. Some commenters requested that HHS specify that an Exchange 

must complete an eligibility determination in no more than 30 days (with up to 60 days for 

evaluations based on factors other than MAGI under §155.345(b)) and complete the transfer of 

an individual’s electronic file, where required, within one business day; some commenters also 

urged greater alignment between Exchange and Medicaid timeliness and other performance 

standards. 

Response: In §155.302(b)(3) and (b)(4)(ii)(A), we specify that information will be 

transferred promptly, and without undue delay. Further, in §155.310(e)(1), we specify that the 

Exchange will make an eligibility determination promptly, and without undue delay. We believe 

that this is an appropriate approach to initial timeliness standards, given the fact that this is an 

entirely new program, and we intend to work closely with states to monitor and improve the 
CMS-2334-F 321 

timeliness of all aspects of the eligibility and enrollment process. Further, we note that we agree 

with the commenter’s suggestion regarding the alignment of performance standards, and intend 

to issue future guidance on this topic.

Comment: Several commenters suggested that HHS modify §155.302(b)(6) related to the 

standards for agreements entered into between the Exchange and state Medicaid and CHIP 

agencies to provide greater specificity regarding eligibility determinations, transfer procedures, 

notice and appeals processes, and consumer assistance. Additionally, these commenters asked 

that the agreements be made readily available to the public in addition to HHS, while also 

providing a period for public review and comments on the agreements prior to their approval by 

HHS.

Response: We finalize §155.302(b)(6) from the interim final rule with a clarification 

that, like the agreements specified in §155.345(a), the agreement under §155.302(b)(6) will be 

made available to HHS upon request. To the extent that the Secretary requests and obtains a 

copy of an agreement under §155.302(b)(6), the public can request the agreement through the 

Freedom of Information Act, 5 U.S.C. 552. The public may also obtain copies of these 

agreements under applicable state freedom of information laws. We believe that there are ample 

opportunities for public input for Exchange operations, particularly given that the standards that 

will govern the content of these agreements are specified in this regulation. We also note again 

that §155.302(b) does not supersede other provisions, such as those in §155.345, that set 

additional standards for Exchanges in coordinating with Medicaid and CHIP agencies. 

 Comment: One commenter wanted to ensure that HHS would review and approve all 

state Medicaid verification plans. 

Response: This comment is outside of the scope of this regulation. We note, however, 

that as described in 42 CFR 435.945(j), state Medicaid verification plans must be available to the 
CMS-2334-F 322 

Secretary of HHS upon request, thereby enabling appropriate oversight of verification standards. 

 Comment: One commenter sought clarification as to whether an Exchange could choose 

to perform neither an assessment nor a determination for Medicaid and CHIP. 

Response: We clarify that the Exchange must make either determinations or assessments 

for Medicaid and CHIP based on MAGI for applications that include a request for an eligibility 

determination for insurance affordability programs. However, we note that the Exchange is 

permitted to contract with an eligible contracting entity, including the state Medicaid agency, to 

conduct eligibility determinations for Medicaid and CHIP, consistent with §155.302(a).

 Comment: Several commenters recommended that an applicant who appears to be 

eligible for Medicaid based on factors other than MAGI be flagged by the Exchange early in the 

process, and if the Exchange does not assess such an applicant as potentially eligible for 

Medicaid or CHIP based on MAGI, the applicant should not have to request a full eligibility 

determination from the state agency under §155.302(b)(4)(i)(B) to receive an eligibility 

determination for Medicaid based on factors other than MAGI. 

Response: As noted above, §155.302(b) does not supersede §155.345(b), which specifies 

that the Exchange will assess information provided on an application by an applicant who is not 

eligible for Medicaid based on MAGI to determine whether he or she is potentially eligible for 

Medicaid based on factors other than MAGI. We clarify that this provision applies in an 

Exchange that is implementing the option under §155.302(b), such that if the Exchange does not 

assess an applicant as potentially eligible for Medicaid based on MAGI, it will then examine the 

application to determine whether to transfer the applicant to the state Medicaid agency for 

consideration of Medicaid eligibility based on other factors.

Comment: Commenters recommended that the provision at §155.302(b)(4)(i)(A), 

allowing an individual the opportunity to withdraw his or her Medicaid and CHIP application, be 
CMS-2334-F 323 

eliminated or modified to allow only individuals above a certain income threshold to withdraw 

their Medicaid and CHIP applications. Others commenters were concerned that language 

notifying an individual of his or her opportunity to withdraw would be confusing and lead to 

individuals being dissuaded from pursuing a Medicaid or CHIP eligibility determination. 

Response: When an applicant requests an eligibility determination for insurance 

affordability programs, the single, streamlined application is an application for Medicaid and 

CHIP (as well as for eligibility for enrollment in a QHP through the Exchange, and related 

insurance affordability programs), so it needs to end in either a final determination of eligibility 

for Medicaid or CHIP (approval or denial), or a withdrawal of the application as it relates to 

Medicaid and CHIP. When a state Medicaid or CHIP agency elects to have the Exchange make 

assessments of Medicaid or CHIP eligibility, rather than determinations, the Exchange is unable 

to provide a final determination of Medicaid or CHIP eligibility, including a denial of Medicaid 

or CHIP eligibility. Accordingly, withdrawal allows the assessment model to function such that 

an applicant does not require a formal, final denial of Medicaid and CHIP from the state 

Medicaid or CHIP agency to gain eligibility for advance payments of the premium tax credit and 

cost-sharing reductions, if otherwise eligible. This approach provides significant efficiencies for 

consumers by not requiring multiple eligibility determinations, as well as for Exchanges and 

Medicaid and CHIP agencies. Given that the proposed approach preserves the application date 

for purposes of Medicaid and CHIP in the event of an appeal, we note that the only implication 

of withdrawing an application in this context is that the applicant can no longer request a 

determination from the state Medicaid or CHIP agency based on the withdrawn application, and 

would instead need to submit another application to be considered for those programs (other than 

on appeal). 
CMS-2334-F 324 

We acknowledge commenters’ concerns regarding the potential for confusion when an 

applicant is given the opportunity to withdraw his or her Medicaid and CHIP application. To 

reduce the potential for consumer confusion and administrative burden on the consumer and the 

Exchange associated with this requirement, we offer the following option in implementing this 

provision. Upon notifying an applicant that the Exchange has assessed him or her as not 

potentially eligible for Medicaid or CHIP, the Exchange will provide an opportunity for the 

applicant to request a determination of Medicaid or CHIP eligibility from the state Medicaid or 

CHIP agency. Rather than expressly asking the applicant if he or she wants to withdraw the 

application for purposes of Medicaid or CHIP eligibility (instead of requesting a determination 

from the state agencies), the Exchange may consider the application withdrawn for purposes of 

Medicaid and CHIP eligibility if the applicant does not affirmatively request a determination 

from the state Medicaid or CHIP agency within a time period specified in the notice to the 

applicant, provided that the notice that communicates the opportunity to request a determination 

from the state Medicaid or CHIP agency and the time limit for doing so also specifies that the 

Exchange will take this approach to withdrawal. This will allow an appropriate disposition for 

each application, as it relates to Medicaid and CHIP, and will help alleviate any confusion 

associated with the opportunity to expressly withdraw an application, without creating any 

adverse impacts for consumers. 

Comment: A few commenters requested language that explicitly preserves the date of 

application when an applicant withdraws his or her Medicaid or CHIP application. 

Response: Provisions related to preserving the date of the Medicaid or CHIP application 

are contained in this final rule at 42 CFR 435.907(h). 

Comment: Commenters supported the inclusion of language that requires the application 

to not be considered withdrawn if, upon appeal, the applicant is found potentially eligible for 
CMS-2334-F 325 

Medicaid or CHIP. A few commenters requested that any subsequent review finding potential 

eligibility for Medicaid or CHIP be sufficient to nullify the withdrawal. 

Response: We are finalizing proposed language requiring the application to not be 

considered withdrawn if, upon appeal, the applicant is found potentially eligible for Medicaid or 

CHIP. The additional suggestions to amend this provision would expand the scope of the 

provision beyond its intended scope. Further, it would be impossible to administer the 

commenters’ suggestion to nullify a withdrawal when any future review finds potential 

eligibility for Medicaid or CHIP eligibility, beyond the parameters established in this rule, since 

subsequent eligibility determinations and redeterminations will not necessarily be connected to 

the withdrawn application. 

Comment: Commenters supported the additional proposed language in §155.302(b)(5) 

requiring the Exchange to adhere to State Medicaid or CHIP agency appeals decisions. 

Response: We are finalizing the proposed language with a modification such that the 

Exchange appeals entity, in addition to the Exchange, will adhere to the eligibility determination 

or appeals decision for Medicaid or CHIP made by the Medicaid or CHIP agency, or the appeals 

entity for such agency. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.302(a) with one clarification that any 

contracting arrangement for eligibility determinations for Medicaid and CHIP is subject to the 

standards in §431.10(c)(2). We are finalizing the provision proposed in §155.302(b)(5) with a 

slight technical modification to add “Exchange appeals entity.” We are finalizing 

§155.302(b)(6) of the interim final rule issued at 77 FR 18310, 18451-52 with a modification to 

specify that the agreement under §155.302(b)(6) must be made available to HHS upon request. 

We are finalizing the provisions proposed in paragraph (d) of the proposed rule without 
CMS-2334-F 326 

modification. We are otherwise finalizing the other provisions of the interim final rule with the 

exception of §155.302(c), which we are not finalizing at this time. We are leaving the text of 

§155.302(c) as an interim final rule as published at 77 FR 18310, 18451-52. 

8. Eligibility standards (§155.305) 

In §155.305, we proposed to add paragraph (a)(3)(v) regarding residency standards for 

eligibility for enrollment in a QHP when an individual attests to being temporarily absent from 

the service area of the Exchange but intends to return to the service area of the Exchange and 

otherwise meets the residency standards, unless another Exchange verifies that the individual 

meets the residency standard in that Exchange. We also proposed technical corrections within 

paragraph (f) to replace the references to section 36B of the Code to the application Treasury 

regulations. 

 We proposed to amend paragraph (f)(3) to clarify the availability of advance payments of 

the premium tax credit and cost-sharing reductions to applicants enrolled in a QHP, that is not a 

catastrophic plan, through the Exchange. We did not receive specific comments on this 

amendment, and we are thus finalizing the provision as proposed. 

 We also proposed to add paragraph (h) to codify the eligibility standards for enrollment 

through the Exchange in a QHP that is a catastrophic plan, which are based on age or having in 

effect a certificate of exemption from the shared responsibility payment under section 5000A of 

the Code in specific categories. We proposed that all Exchanges must conduct eligibility 

determinations for a QHP that is a catastrophic plan within the Exchange. 

Comment: Commenters generally offered support for the provision at §155.305(a)(3)(v) 

specifying that the Exchange not deny or terminate an individual’s eligibility for enrollment in a 

QHP through the Exchange if he or she meets the residency standards described in 

paragraph (a)(3) but for a temporary absence from the service area of the Exchange. A few 
CMS-2334-F 327 

commenters recommended deleting the phrase that allowed the Exchange to deny or terminate 

eligibility if another Exchange verifies that the individual meets the residency standard of such 

Exchange; others suggested rephrasing the provision to allow an individual to maintain residency 

in the Exchange service area unless he or she is enrolled in another Exchange. Commenters 

recommending revisions disagreed with how this language would limit an applicant’s ability to 

establish residency, under the rules described in §155.305(a)(3), in more than one Exchange. 

Response: We are finalizing the provision without the proposed clause “unless another 

Exchange verifies that the individual meets the residency standard of such Exchange.” As 

commenters pointed out, under some circumstances, certain individuals may establish residency 

for purposes of Exchange enrollment in multiple Exchange service areas simultaneously (for 

example, under §155.305(a)(3)(iv)(B), if a parent expects to claim a child who lives in another 

state on the parent’s tax return, the child may enroll in a QHP through the Exchange either in the 

child’s state of residence, or the parent’s state of residence). Accordingly, while generally, 

applicants will establish residency in the Exchange service area in which they intend to reside, 

since there are exceptions to this general principle, this clause limiting residency to one 

Exchange service area is unnecessary. 

Comment: In response to the provision proposed at §155.305(a)(3)(v), some commenters 

expressed concern about operational challenges specific to providing and coordinating coverage 

while individuals are temporarily residing outside the Exchange service area. A few commenters 

asked that we further define the term “temporary” to ensure that the term is used consistently 

across Exchanges, and to help reduce consumer confusion and administrative inefficiencies. 

Response: We acknowledge that coordinating care for applicants while they are 

temporarily absent from the service area of the Exchange through which they enroll in a QHP 

may present challenges for QHP issuers. However, we believe this challenge is outweighed by 
CMS-2334-F 328 

the importance of maintaining continuity of coverage while an individual is temporarily absent 

from a particular Exchange service area. Additionally, in paragraph (a)(3)(v), we specify that 

“temporarily absent” means the applicant must intend to return to the Exchange service area 

when the purpose of the absence has been accomplished, so we do not believe that further 

definition is required in regulation. To ensure that applicants understand the implications of 

applying for coverage through a particular Exchange, we encourage Exchanges to notify 

applicants that they may want to apply for coverage through the Exchange where they meet the 

residency requirements and wish to most frequently access benefits. 

Furthermore, this provision should not be construed to impose any additional 

requirements on QHP issuers related to maintaining networks outside the Exchange service area 

or coordinating care for applicants temporarily absent from the Exchange service area. 

Comment: Commenters were divided regarding the Exchange’s role in determining 

eligibility for catastrophic plans inside and outside the Exchange, as some expressed support for 

what they interpreted as HHS limiting enrollment for catastrophic coverage to enrollment 

through the Exchange in QHPs that are catastrophic plans and urged flexibility for an Exchange 

to decide not to conduct eligibility determinations for catastrophic plans, while other 

commenters requested that the Exchange conduct eligibility determinations for QHPs that are 

catastrophic plans for enrollment both through and not through the Exchange. Commenters also 

urged HHS to clarify that an applicant still must be determined eligible for a QHP to enroll in a 

catastrophic plan through the Exchange. Commenters wanted to ensure that the Exchange would 

provide clear information to applicants considering purchasing different QHPs, including by 

describing the significance of enrolling in a catastrophic plan for applicants who are also 

determined eligible for advance payments of the premium tax credit. 
CMS-2334-F 329 

Response: We note that paragraph (h) only concerns eligibility for enrollment through 

the Exchange in a QHP that is a catastrophic plan. The Exchange will not be conducting 

eligibility determinations for enrollment outside the Exchange, including in a catastrophic plan. 

In finalizing this provision, we are modifying the provision from its proposed form to clarify that 

an individual must be determined eligible for enrollment in a QHP through the Exchange in 

accordance with §155.305(a) in addition to meeting the specific eligibility standards for 

enrollment in a catastrophic QHP through the Exchange. We believe that maintaining the 

provision specifying that the Exchange will determine eligibility for a QHP that is a catastrophic 

plan through the Exchange preserves flexibility for young adults and people for whom coverage 

would otherwise be unaffordable to have access to health coverage, and thus confirm that 

Exchanges will conduct determinations of eligibility for enrollment in a QHP that is a 

catastrophic plan through the Exchange. We expect that Exchanges will fully inform qualified 

individuals regarding the implications of enrolling in a QHP that is a catastrophic plan through 

the Exchange as they consider various health coverage options, particularly as it affects their 

eligibility for insurance affordability programs. 

Comment: Some commenters wanted us to clarify that Exchanges would grant 

certificates of exemption to all applicants eligible for enrollment in a catastrophic plan, which 

applicants could use to enroll in catastrophic plans outside the Exchange (at least temporarily), 

and suggested that issuers of catastrophic plans outside the Exchange should be permitted to rely 

solely on an attestation by the applicant that he or she is eligible to enroll in a catastrophic plan. 

Response: This provision does not concern catastrophic plans offered outside of the 

Exchange. As discussed in the Market Reforms final rule at 78 FR 13423, the statutory 

provisions related to eligibility for catastrophic plans apply to such coverage offered both inside 

and outside an Exchange. We maintain that approach and clarify that nothing in this proposal 
CMS-2334-F 330 

modifies the Market Reforms final rule related to the eligibility standards for a catastrophic plan. 

Similarly, the eligibility standards for catastrophic plans generally are specified at 

§156.155(a)(5), which provides that a catastrophic plan can only cover an individual who has 

either not attained the age of 30 prior to the first day of the plan or policy year, or has received a 

certificate of exemption in specified categories. While we specify that the Exchange will only 

conduct determinations of eligibility for enrollment through the Exchange in a QHP that is a 

catastrophic plan, in HHS’ Exemptions and Miscellaneous Minimum Essential Coverage 

proposed rule, at 78 FR 7368, we propose that the Exchange will determine eligibility for 

exemptions from the shared responsibility payment, and will provide a notice and an exemption 

certificate number to any individual determined eligible for such an exemption. If that provision 

is finalized as proposed, an issuer of a catastrophic plan offered outside the Exchange could 

request a copy of this notice from an applicant to validate his or her eligibility for enrollment in 

the catastrophic plan. 

Comment: Some commenters requested that the Exchange’s eligibility standards for 

enrollment through the Exchange in a QHP that is a catastrophic plan align with preamble 

language in the Market Reforms proposed rule at 77 FR 70601 such that an enrollee who turns 

30 in the middle of a coverage year would remain enrolled in the catastrophic plan for the 

duration of the plan year. One commenter also sought clarification that for coverage obtained 

through the Exchange, the first day of the plan year will always be the first of the year. 

Response: The eligibility standards related to age described in this provision follow the 

approach discussed within the Market Reforms proposed rule at 77 FR 70601. As such, we 

clarify that an enrollee turning 30 in the middle of a coverage year could remain enrolled in a 

QHP that is a catastrophic plan through the Exchange for that particular coverage year as long as 

he or she was not 30 prior to beginning of the plan year. We note that §147.104(b)(1)(ii) 
CMS-2334-F 331 

clarifies that in the individual market, the coverage effective dates must align with §155.410 

regarding initial open enrollment, and as such, for coverage obtained in the individual market 

through the Exchange, the first day of the plan year will always be the first day of the calendar 

year. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.305 of the proposed rule with two 

slight modifications: to remove the clause “unless another Exchange verifies that the individual 

meets the residency standard of such Exchange” in paragraph (a)(3)(v), and to revise paragraph 

(h)(1) to clarify an applicant must be eligible for enrollment in a QHP through the Exchange to 

be determined eligible for enrollment through the Exchange in a QHP that is a catastrophic plan. 

9. Eligibility process (§155.310) 

 In §155.310, we proposed to add paragraph (i) regarding a certification program under 

the Secretary’s program for determining eligibility for advance payments of the premium tax 

credit and cost-sharing reductions in accordance with section 1411(a) of the Affordable Care 

Act. We noted that this certification program would be distinct from the notice to employers 

required by section 1411(e)(4)(B)(iii) of the Affordable Care Act and paragraph (h) of §155.310. 

We proposed that the certification to the employer would consist of methods adopted by the 

Secretary of Treasury as part of the determination of potential employer liability under section 

4980H of the Code. We clarified that the certification program would address not only 

individuals on whose behalf advance payments of the premium tax credit and cost-sharing 

reductions are provided, but also individuals claiming the premium tax credit only on their tax 

returns. We solicited comments on this proposal. 

We proposed to amend previous language from paragraphs (i) and (i)(1), and combine 

those paragraphs in new paragraph (j), to align with proposed revisions in §155.335, which 
CMS-2334-F 332 

specified that the Exchange will redetermine eligibility on an annual basis for all qualified 

individuals, not only enrollees. We proposed to remove the previous paragraph (i)(2), which 

addressed situations in which a qualified individual did not select a plan before the date on which 

his or her eligibility would have been redetermined as a part of the annual redetermination 

process. Due to the proposed change to §155.335(a), this paragraph would no longer be 

necessary. We received the following comments concerning the proposed provisions: 

Comment: One commenter expressed support for the proposal to implement a 

certification process consisting of methods adopted by the Secretary of Treasury as part of the 

determination of potential employer liability under section 4980H of the Code, as described in 

proposed §155.310(i). In addition, several commenters expressed concern over the disclosure of 

applicant information to the employer for use in the certification process. Commenters were 

concerned that disclosing names in this context could have a chilling effect on employees who 

wish to seek Exchange coverage, making it less likely that individuals would enroll.

Response: For purposes of the certification program proposed and finalized in 

§155.310(i), we believe that only the minimum personally identifiable information necessary 

should be released to an employer. Additional information regarding the certification program is 

found in the regulations associated with §4980H of the Code. 

Comment: Commenters recommended removing the provision specifying that the 

Exchange will have an applicant attest to the accuracy of the information on file for him or her 

when he or she was previously determined eligible for enrollment in a QHP through the 

Exchange, did not select a QHP during his or her enrollment period, or was ineligible for an 

enrollment period, and then seeks a new enrollment period prior to his or her annual 

redetermination. Commenters characterized this as an undue burden on qualified individuals, 
CMS-2334-F 333 

since enrollees are not required to make the same attestation about their eligibility criteria 

remaining constant. 

Response: This provision was largely carried over from the Exchange final rule, with 

modifications to address changes proposed in §155.335. It is important for the Exchanges to 

ensure all eligibility criteria are satisfied with accurate information, before determining 

eligibility for benefits, some of which the enrollee could be liable to repay if eligibility 

information is not accurate at the time of enrollment. Moreover, enrollees are required to report 

changes that may affect their eligibility based on the standards in §155.305 throughout the year, 

and thus no additional burden is being placed on qualified individuals. Lastly, one alternative to 

this proposal would be to require qualified individuals who do not enroll in coverage when 

initially determined eligible to file a new application, which would be more burdensome than the 

approach in §155.310(j). Accordingly, we are finalizing §155.310(j) as proposed, with a slight 

technical correction for clarity to note that this paragraph only refers to an applicant who is 

determined eligible for enrollment in a QHP through the Exchange. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.310 of the proposed rule with a 

technical correction to specify that paragraph (j) only refers to an applicant who is determined 

eligible for enrollment in a QHP through the Exchange . 

10. Verification process related to eligibility for enrollment in a QHP through the Exchange 

(§155.315) 

 In §155.315, we proposed a technical correction in paragraph (b)(2) to clarify the 

procedures for an Exchange when the Social Security Administration indicates an individual is 

deceased. 
CMS-2334-F 334 

 We proposed to clarify the circumstances that trigger the inconsistency process described 

in paragraph (f)(1) and (2), such as when required electronic data is not contained within the 

electronic data source, and when sources of required data are not reasonably expected to be 

available within two days of the initial attempt to reach the data source. We also proposed to 

amend paragraph (f)(4) to clarify that during the clerical error resolution period provided in 

paragraph (f)(1), as well as during the period provided in paragraph (f)(2)(ii), the Exchange 

proceeds with the eligibility determination and provides eligibility for enrollment in a QHP and 

advance payments of the premium tax credit and cost-sharing reductions, as applicable, during 

such period, to the extent the applicant is otherwise qualified and meets the standards specified 

in paragraph (f)(4). 

 We proposed to add paragraph (j) concerning the verification process related to eligibility 

for enrollment through the Exchange in a QHP that is a catastrophic plan. We proposed that the 

Exchange may either accept the applicant’s attestation of age without further verification or 

examine available electronic data sources that have been approved by HHS for this purpose. To 

verify an applicant’s exemption from the shared responsibility payment, we proposed that this 

would be accomplished either through use of the Exchange’s records, or through verification of 

paper documentation if the certificate was issued by a different Exchange. In terms of the 

inconsistency process described in paragraph (f) of this section, we noted that applicant would 

not be determined eligible for enrollment through the Exchange in a QHP that is a catastrophic 

plan until verification of necessary information can be completed. We received comments that 

addressed both the eligibility standards and verification process related to QHPs that are 

catastrophic plans offered through the Exchange, and have addressed those comments above the 

preamble to §155.305(h). As such, we are finalizing this paragraph as proposed. 
CMS-2334-F 335 

Comment: Several commenters supported our proposed technical correction in 

paragraph (b)(2) regarding situations in which the Social Security Administration indicates that 

an individual is deceased. Others recommended allowing additional time, and many commenters 

suggested providing an additional 90 days when an applicant has demonstrated a good faith 

effort to resolve the issue. Some commenters sought clarification on the availability of appeal 

rights regarding inconsistencies with Social Security Administration data, specifically, whether 

individuals had the right to appeal during the 90-day period or whether they must wait until after 

a final determination has been made. 

Response: As noted in §155.315(f)(3), the Exchange has the authority to extend the 

inconsistency period within §155.315(f)(2)(ii) based on a good faith effort on the part of the 

applicant. We note that an applicant will not be able to appeal an eligibility decision until he or 

she receives a notice containing an approval or denial of eligibility. Further details regarding 

appeals will be provided in subsequent rulemaking. We continue to work with the Social 

Security Administration and other federal agencies to determine the role of other federal 

agencies in the appeals process. Accordingly, we are finalizing the provision as proposed. 

Comment: Some commenters disagreed with the proposal at §155.315(f) that specifies 

that the Exchange must trigger the inconsistency period when electronic data is required but it is 

not reasonably expected that data sources will be available within 2 days of the initial request to 

the data source. Commenters recommended that if verification cannot occur promptly, or in 

“real time,” the inconsistency period should be triggered immediately, along with the provision 

of eligibility based on an applicant’s attestation. Some commenters mentioned specifically that 

an inability to verify citizenship and immigration status through electronic data should lead to 

the immediate trigger of the inconsistency period, to align with Medicaid regulations. 
CMS-2334-F 336 

Commenters supported timelines according to which the Exchange should be required to 

contact the application filer for documentation or additional information when data sources are 

unavailable. Some commenters supported the requirement of a 2-day period prior to requesting 

information from the application filer, and some recommended extending it to 5 days. 

Commenters also recommended that the Exchange continue to attempt data matches after 

notifying the application filer so the entire burden is not immediately shifted to the application 

filer. 

Response: Since the publication of the proposed rule, we have confirmed that data from 

IRS, SSA, and DHS should be available every day. Accordingly, we are modifying the proposed 

provision to finalize the rule to reduce the waiting period reduced from 2 days to 1 day. Further, 

we also add new paragraph (f)(6) to clarify the applicability of §155.315(f). 

First, in paragraph (f)(6), we specify that that the Exchange will not apply such a waiting 

period when electronic data to support the verifications specified in §155.315(d) (residency), or 

§155.320(b) (minimum essential coverage, other than minimum essential coverage in an eligible 

employer-sponsored plan) is required but it is not reasonably expected that electronic data 

sources will be available within 1 day of the initial request to the data source; instead, the 

Exchange will accept the applicant’s attestation regarding the factor of eligibility for which the 

unavailable data source is relevant. While the data matching described in this subpart for these 

factors of eligibility is important, we do not believe that it should hold up an eligibility 

determination or cause the eligibility process to default to paper documentation when electronic 

data sources are unavailable. We also note that the use of electronic data as a primary method of 

verification of residency is an option for Exchanges. In addition, we clarify that 

§155.320(d)(3)(iii) specifies that when the Exchange does not have information from data 

sources for the verifications related to enrollment in an eligible employer-sponsored plan and 
CMS-2334-F 337 

eligibility for qualifying coverage in an eligible employer-sponsored plan, the Exchange will 

move forward with a sampling process. 

Second, we clarify that §155.320(c)(3) (family size and income for purposes of eligibility 

for advance payments of the premium tax credit and cost-sharing reductions) already specifies 

procedures to address situations in which electronic data sources with information about current, 

MAGI-based income are unavailable. We believe that these procedures should continue to 

govern these situations. 

We acknowledge commenters’ concerns about providing eligibility determinations in a 

timely fashion when electronic data sources are delayed in responding or do not respond. The 

proposed language at §155.315(f) minimizes the administrative and consumer burden associated 

with requesting documentation and providing coverage for a short period of time (when 

electronic data sources may quickly become available and indicate eligibility for a different 

insurance affordability program), with the need to provide prompt eligibility determinations. 

Accordingly, when electronic data from IRS, SSA, or DHS is necessary but unavailable, and it is 

reasonably expected that the necessary electronic data source will be available within 1 day, the 

Exchange will wait 1 day before making an eligibility determination, so as to not generate an 

eligibility determination that may be shown to be invalid less than 24 hours later. This approach 

also avoids the need to request documentation when an electronic data match will make the 

documentation request unnecessary less than 24 hours later. If it is not reasonably expected that 

the necessary electronic data source will be available within 1 day, or it is reasonably expected 

that the necessary electronic data source will be available within 1 day, but this expectation 

proves incorrect, then the Exchange will determine the applicant’s eligibility using his or her 

attestation regarding the factor of eligibility for which the electronic data source is unavailable, 

and will follow the remaining procedures in §155.315(f) to attempt to complete the verification. 
CMS-2334-F 338 

We believe this approach is responsive to commenters’ concerns and satisfies the need to reduce 

administrative burden and the burden on application filers while still ensuring accurate eligibility 

determinations. We also note that the Exchange has the flexibility to continue checking whether 

such data sources have become available leading up to the triggering of the inconsistency period 

and during such inconsistency period. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.315 of the proposed rule, with a few 

modifications. We are modifying paragraph (f) to provide that if key electronic data sources are 

unavailable and not reasonably expected to be available within 1 day, the Exchange will make an 

eligibility determination based on an applicant’s attestation and trigger the inconsistency period 

in paragraph (f). The proposed language specified a 2-day period. We also added a new 

paragraph (f)(6) to clarify that the Exchange will accept an applicant’s attestation regarding three 

specific factors of eligibility when electronic data is required but it is not reasonably expected 

that data sources will be available within 1 day of the initial request to the data source. We are 

also modifying paragraph(f)(5) of this section by deleting paragraph (f)(5)(ii) and combining 

paragraph (f)(5)(i) with paragraph (f)(5), because the language that previously appeared in 

paragraph (f)(5)(ii) regarding effective dates conflicted with the requirements under §155.330(f). 

Lastly, we modify the language in paragraph (j) related to the verification of eligibility for 

enrollment through the Exchange in a QHP that is a catastrophic plan for purposes of clarity. 

11. Verifications related to eligibility for insurance affordability programs (§155.320) 

In §155.320, we proposed to amend and make technical corrections in paragraph (c)(1), 

in accordance with the legislative change made by Pub. L. 112–56 concerning the treatment of 

Social Security benefits related to MAGI, to incorporate Social Security benefits when verifying 

projected annual household income. We also proposed to remove language concerning an 
CMS-2334-F 339 

adoption taxpayer identification number, and to replace references to section 36B of the Code 

with the applicable Treasury regulation. We received comments supporting these revisions 

without further suggestions, and are thus finalizing the amendments and technical corrections as 

proposed. 

We proposed to amend and make technical corrections in paragraph (c)(3) to specify that 

the Exchange verify that neither advance payments of the premium tax credit nor cost-sharing 

reductions are already provided on behalf of an individual, and align with the revised policy that 

the Exchange incorporate Social Security benefits when verifying projected annual household 

income. We did not receive specific comments regarding the proposed changes to paragraph 

(c)(3), and are thus finalizing the changes as proposed. 

 We proposed to clarify when additional verification is necessary as part of the process to 

verify an expected increase in projected annual household income when compared to annual 

income data. We proposed to add language regarding the circumstances under which annualized 

current income data will be sufficient to support an expected decrease in projected annual 

household income. We also proposed to replace references to section 36B of the Code with 

references to the applicable Treasury regulation. 

We proposed to consolidate paragraphs (d) and (e), currently entitled “Verification 

related to enrollment in an eligible employer-sponsored plan” and “Verification related to 

eligibility for qualifying coverage in an eligible employer-sponsored plan,” respectively, into 

new paragraph (d). The standards proposed in paragraph (d) set forth the rules for verifying 

enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage in an 

eligible employer-sponsored plan. We proposed that the Exchange must verify whether an 

applicant reasonably expects to be enrolled in an eligible employer-sponsored plan or is eligible 

for qualifying coverage in an eligible employer-sponsored plan for the benefit year for which 
CMS-2334-F 340 

coverage is requested. As a result of the proposed consolidation of paragraphs (d) and (e), we 

proposed to redesignate paragraph (f) as paragraph (e). 

In paragraph (d)(2), we proposed the data sources the Exchange will use to verify access 

to employer-sponsored coverage, which include 1) data about enrollment in an eligible 

employer-sponsored plan and eligibility for qualifying coverage in an eligible employersponsored plan from any electronic data sources that are available to the Exchange and which 

have been approved by HHS for this purpose based on evidence showing that such data sources 

are sufficiently current, accurate, and minimize administrative burden; 2) data regarding 

enrollment in an eligible employer-sponsored plan or eligibility for qualifying coverage in an 

eligible employer-sponsored plan based on federal employment obtained by transmitting 

identifying information specified by HHS to HHS; 3) data from the SHOP that operates in the 

state in which the Exchange is operating; and 4) any available data regarding the employment of 

an applicant and the members of his or her household, as defined in 26 CFR 1.36B-1(d), from 

any electronic data sources that are available to the Exchange and have been approved by HHS 

for this purpose, based on evidence showing that such data sources are sufficiently current, 

accurate, and minimize administrative burden. 

 We proposed that data regarding employment would not be used to identify 

inconsistencies that need to be resolved to maintain eligibility, and would instead only be used to 

determine whether an individual should be part of the pool of individuals from which a sample is 

taken for review. We solicited comment on whether data regarding employment should only be 

used as a point of information for applicants to help prompt accurate attestations, and not as a 

point of comparison for the purposes of identifying inconsistencies as part of the verification 

described in this paragraph, since these data sources do not directly address enrollment in an 

eligible employer-sponsored plan or eligibility for qualifying coverage in an eligible employer-
CMS-2334-F 341 

sponsored plan. We also solicited comment on the feasibility of making the necessary systems 

connections by October 1, 2013, and whether alternative approaches should be considered for 

the first year of operations. 

To verify enrollment in an eligible employer-sponsored plan and eligibility for qualifying 

coverage in an eligible employer-sponsored plan, we proposed that the Exchange follow the 

inconsistency process specified in §155.315(f) if an applicant’s attestation is not reasonably 

compatible with information from a data source authorized by HHS, data regarding federal 

employment, data from SHOP, or other information provided by the application filer or in the 

records of the Exchange. Further, if the Exchange does not have any of the information from a 

data source authorized by HHS, from data regarding federal employment, or from data from the 

SHOP for an applicant, and either does not have any available electronic data regarding the 

employment of an applicant and the members of his or her household or an applicant’s 

attestation is not reasonably compatible with any available data regarding the employment of an 

applicant and the members of his or her household, we proposed that the Exchange would place 

the applicant into a pool of applicants from which it would select a statistically-significant 

sample of applicants, from whose employers the Exchange would request information regarding 

enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage in an 

eligible employer-sponsored plan. 

We solicited comments on whether handling inconsistencies with any available data 

regarding the employment of an applicant and the members of his or her household through the 

sampling process, rather than through the procedures specified in §155.315(f), is a suitable 

approach. 

 We requested comments on a methodology by which an Exchange could generate a 

statistically significant sample of applicants and whether there are ways to focus the sample on 
CMS-2334-F 342 

individuals who are most likely to have access to affordable, minimum value coverage. 

 In clause (d)(3)(iii)(A), we proposed that the Exchange would provide notice to an 

applicant who is selected as part of the sample indicating that the Exchange would be contacting 

any employer identified on the application for the applicant and the members of his or her 

household, as defined in 26 CFR 1.36B-1(d), to verify whether the applicant is enrolled in an 

eligible employer-sponsored plan or is eligible for qualifying coverage in an eligible employersponsored plan for the benefit year for which coverage is requested. We sought comment on 

ways the Exchange may communicate this sampling process to consumers with the intention of 

minimizing confusion. 

We proposed that the Exchange would proceed with all other elements of the eligibility 

determination using the applicant’s attestation while the sample-based review is occurring, and 

provide eligibility for enrollment in a QHP through the Exchange to the extent that an applicant 

is otherwise qualified. Consistent with §155.315(f), we proposed that during the sample-based 

review, the Exchange would ensure that advance payments of the premium tax credit and costsharing reductions are provided on behalf of an applicant who is otherwise qualified for such 

payments and reductions, as described in under §155.305 of this subpart, if the tax filer attests to 

the Exchange that he or she understands that any advance payments of the premium tax credit 

paid on his or her behalf are subject to reconciliation. 

When an applicant is selected for the sample-based review, we proposed in clause 

(d)(3)(iii)(D) that the Exchange make reasonable attempts to contact any employer identified on 

the application for the applicant and the members of his or her household, as defined in 26 CFR 

1.36B-1(d), to verify whether the applicant is enrolled in an eligible employer-sponsored plan or 

is eligible for qualifying coverage in an eligible employer-sponsored plan for the benefit year for 

which coverage is requested. 
CMS-2334-F 343 

 We discussed one alternative approach, under which the Exchange would request 

documentation from consumers who were selected as part of the sample, instead of attempting to 

contact their employers. We chose not to propose this approach since the application will 

already solicit all necessary information from consumers, so it is unclear what would be gained 

through a second information request to consumers. We solicited comment on this alternative 

and other alternatives to implement this process while minimizing burden on consumers, 

employers, and Exchanges. We also sought comment on ways the Exchange can most efficiently 

interact with employers, including other entities that employers may rely upon to support this 

process, such as third-party administrators. 

 In clause (d)(3)(iii)(E), we proposed that if the Exchange receives any information from 

an employer relevant to the applicant’s enrollment in an eligible employer-sponsored plan or 

eligibility for qualifying coverage in an eligible employer-sponsored plan as a result of the 

sample-based review, the Exchange would determine the applicant’s eligibility based on such 

information and in accordance with the effective dates specified in §155.330(f) of this subpart 

and, if such information changes the applicant’s eligibility determination, notify the applicant 

and his or her employer or employers of such determination in accordance with the notice 

requirements specified in §155.310(g) and (h) of this part. 

We also proposed that if, after a period of 90 days from the date on which the notice 

specified in clause (d)(3)(iii)(A) is sent to the applicant, the Exchange is unable to obtain the 

necessary information from an employer, the Exchange will determine the applicant’s eligibility 

based on his or her attestation regarding that employer. We solicited comment on this proposal 

to not provide an additional notice to the applicant and his or her employer when the applicant’s 

eligibility does not change as a result of the sample-based review and whether it is preferable to 

include an additional notice to the applicant and employer at the end of the 90-day period. 
CMS-2334-F 344 

In clause (d)(3)(iii)(G), we proposed that to carry out the sampling process described 

above, the Exchange must only disclose an individual’s information to an employer to the extent 

necessary for the employer to identify the employee. We solicited comments on this proposed 

approach and whether there are ways these procedures can further minimize burden on the 

Exchange, employers, and consumers. 

 We also highlighted steps we are taking to help consumers with providing information 

related to access to employer-sponsored coverage on the application. We suggested the use of a 

voluntary pre-enrollment template to assist applicants in gathering the information about access 

to coverage through an eligible employer-sponsored plan as required by the Exchange to 

determine eligibility for advance payments of the premium tax credit and cost-sharing 

reductions. We sought comments on the use of this pre-enrollment template and ways it could 

be used to assist consumers with providing the necessary information to complete the 

verification described in paragraph (d) while minimizing burden on employers. 

Lastly, in paragraph (d)(4), we also proposed that the Exchange may rely on HHS to 

conduct this verification. We proposed that under this option, the Exchange would send 

applicant information to HHS; HHS would take on all verification activities specified in 

regulation, including data matching with the Office of Personnel Management (OPM), SHOP, 

available employment data, and the sample-based review; and the Exchange would integrate the 

result into its eligibility process and send the individual and employer notices described in 

§155.310(g) and (h) of this part. Further, we proposed that under such an arrangement, the 

Exchange and HHS would enter into an agreement specifying their respective responsibilities in 

connection with the verifications described in paragraph (d); other activities required in 

connection with the verifications described are performed by the Exchange in accordance with 

the standards identified in this subpart or by HHS in accordance with the agreement; and the 
CMS-2334-F 345 

Exchange provides all relevant application information to HHS through a secure, electronic 

interface, promptly and without undue delay. We solicited comments on this proposed option. 

Comment: In reference to the proposed language at §155.320(c)(3)(vi)(C), which 

specifies that the Exchange will request additional information regarding projected annual 

household income when an application filer’s attestation is in excess of annual income data, but 

below annualized current income data by a “significant amount,” commenters recommended that 

the phrase “significant amount” be replaced with a percent threshold. Some commenters 

recommended a threshold of 20 percent, specifically. 

Response: To preserve the Exchange’s flexibility to determine what may constitute a 

significant amount, we are finalizing this provision as proposed. 

Comment: Commenters recommended replacing the standard “not reasonably 

compatible” with the term “significantly and materially incompatible,” defined further by 

commenters as “making an important change to the outcome.” Such commenters suggested only 

using the process described in §155.315(f) if an attestation is significantly and materially 

incompatible with other information. Further, commenters suggested easing verification rules 

for individuals who comply with information requests, including attestations, and for whom 

required data is not available. 

Response: In §155.300(d) of the Exchange final rule, we include in the definition of 

“reasonably compatible” that the “difference or discrepancy does not impact the eligibility of the 

applicant, including the amount of advance payments of the premium tax credits or category of 

cost-sharing.” This definition allows for Exchange flexibility in verifying application 

information, and where appropriate, the final rule provides for a more prescriptive reasonable 

compatibility standard, in reference to specific verifications. We believe it is an ideal approach 

to provide flexibility in the case of many verifications, but for areas in which the outcome of the 
CMS-2334-F 346 

eligibility determination is sensitive to small changes, provide a more specific approach. 

Therefore, we finalize the reasonable compatibility standards used in §155.320(c), with some 

changes described herein, and without changing the overall definition of “reasonable 

compatibility,” defined in §155.300(d), which is used throughout Exchange and Medicaid 

regulations. 

For income verification, for the first year of operations, we are providing Exchanges with 

temporarily expanded discretion to accept an attestation of projected annual household income 

without further verification, as described below. Under current regulations, when data described 

in paragraph (c)(1)(i) of this section is available for the tax household but the attested annual 

household income is more than 10 percent below the annual income computed in accordance 

with clause (c)(3)(ii)(A) of this section, the Exchange must use annualized data from the MAGIbased income sources, specified in paragraph (c)(1)(ii), to the extent it is available, to verify the 

attestation of annual household income. If such data is not available or does not support the 

attestation, clause (c)(3)(vi)(C) specifies that the Exchange must follow the procedures specified 

in §155.315(f)(1) through (4), which includes requesting documentation to verify the attestation 

of project annual household income. The attestation is not supported by the data when the 

attestation is more than 10 percent below the annual income as computed using data sources. 

For the first year of operations, we will exercise enforcement discretion under this provision 

such that each Exchange will have the option, only when the attestation under (c)(3)(ii)(B) is 

greater than ten percent below the annual household income computed in accordance with clause 

(c)(3)(ii)(A) and MAGI-based income data from the sources specified in paragraph (c)(1)(ii) is 

unavailable to request a reasonable explanation for the discrepancy from the applicant, and if 

such explanation is insufficient, follow the procedures specified in §155.315(f)(1) through (4) for 

a statistically significant sample of the population that would otherwise be subject to such 
CMS-2334-F 347 

procedures under clause (c)(3)(vi)(D). For those individuals who are not part of this sample, the 

Exchange may accept the attestation of projected annual household income without further 

verification for purposes of the Exchange’s eligibility determination. We expect that any 

Exchange that exercises this option will monitor the process closely and adjust the targeting and 

size of the sampled population as needed to ensure an effective verification process. We note 

that we believe this exercise of enforcement discretion concerning the Exchange’s obligations to 

verify income information in these specific circumstances is made in the context of all 

information – including the actual household income amounts for 2014 – being available at the 

end of the year for the reconciliation performed under section 36B(f) of the Code. 

Comment: We received comments that asked if, following the 90-day inconsistency 

period under §155.315(f), when invoked under clause (c)(3)(vi)(C) of this section, the applicant 

has not responded and data sources indicate that the applicant is eligible for Medicaid or CHIP, 

the Exchange should notify the applicant and offer to enroll him or her in Medicaid or CHIP, in 

states where the Exchange can make that determination, or transmit the file to the Medicaid or 

CHIP agency if the Exchange cannot make that determination. 

Response: This recommendation is not specific to §155.320(c)(3). However, we note 

that, under §155.320(c)(3)(iii), an attestation that reflects an increase compared to the tax data 

would generally be accepted without further verification (for purposes of eligibility for advance 

payments of the premium tax credit and cost-sharing reductions); therefore, if an applicant attests 

to a projected annual household income that would qualify him or her for advance payments of 

the premium tax credit or cost-sharing reductions but MAGI-based income sources indicate that 

income is lower than the applicant’s attestation, even if such data indicates Medicaid or CHIP 

eligibility, the attestation would be accepted without further verification. We note that this 
CMS-2334-F 348 

scenario assumes that the applicant has not attested to projected annual household income that 

would be consistent with eligibility for Medicaid or CHIP under the applicable MAGI standard. 

Comment: One commenter expressed support for continuing to examine ways in which 

employer reporting under the Affordable Care Act can be streamlined both in timeframe and in 

the number of elements to prevent inefficient or duplicative reporting. 

Response: We agree with the commenter. As stated in the proposed rule, the 

Administration will continue to consider ways to streamline reporting under the Affordable Care 

Act. 

Comment: One commenter recommended that applicants should first attest to whether or 

not they have any offer of coverage. The commenter suggested it is unnecessary to verify 

enrollment in or eligibility for qualifying coverage in an eligible employer-sponsored plan for 

everyone who applies for insurance affordability programs. Another commenter recommended 

that the Exchange only ask for general information about employee contributions to the 

employer-sponsored plan, eligibility for the plan, and whether the plan provides minimum value 

rather than specifically identifying to the employer the particular employee who has requested 

premium tax credits. 

Response: We appreciate the commenter’s suggestion regarding ways to expedite the 

application process, and are working to consider similar suggestions received based on the public 

comment period for the single, streamlined application. To this end, we have designed the 

employer-sponsored coverage section of the single, streamlined application to ask a threshold 

question of whether the individual has an offer of coverage through a job, including an offer 

through a spouse or parent’s job and then if the answer is “no,” allow the individual to skip the 

remaining employer-sponsored coverage questions on the application. We will also collect 

employer contact information as necessary to send the employer notice described in §155.310(h). 
CMS-2334-F 349 

The paper application for enrollment in a QHP through the Exchange and insurance affordability 

programs can be found at: 

http://www.cciio.cms.gov/resources/other/Files/AttachmentC_042913.pdf. 

Comment: We received several comments regarding available data sources proposed in 

§155.320(d)(2). Some commenters suggested that HHS work on developing an employersponsored coverage data source that would be available to states at a significantly reduced cost. 

One commenter specifically recommended that data sources that reflect information 

regarding employment be used as a point of information for applicants only, and not as a basis 

for identifying an inconsistency that must be resolved to maintain eligibility. The commenter 

suggested that relying on employment data to support the verification of enrollment in an eligible 

employer-sponsored plan and eligibility for qualifying coverage in an eligible employersponsored plan may create a barrier to coverage and unduly delay enrollment of eligible 

applicants. 

One commenter requested that data regarding federal employment as specified in 

§155.320(d)(2)(ii) be made available through the federal data services hub and requested that 

HHS release a technical description of the service as soon as possible. 

Response: As one commenter noted, HHS conducted an extensive search of available 

data sources and found that no comprehensive data source will be available by October 1, 2013. 

Current legislative and operational barriers prohibit HHS from requiring employers to report 

information directly to Exchanges or requiring Exchanges to obtain employer data from the 

Internal Revenue Service. The proposed rule included an interim solution to support this 

verification until a more robust verification process can be developed. We remain committed to 

working with any interested parties on solutions that make employer reporting more efficient. 
CMS-2334-F 350 

We agree with the comment above suggesting that employment data not be used as the 

basis for generating inconsistencies or identifying individuals for inclusion in the sample-based 

review, since it is not specific to employer-sponsored coverage. Accordingly, we do not believe 

that it is necessary to specify the use of employment data, and so are removing paragraph 

(d)(2)(iv) and modifying paragraph (d)(3)(iii) to remove the provision specifying that the 

Exchange will obtain employment data. We clarify that notwithstanding this deletion, 

Exchanges may use employment data as a tool to assist consumers in providing accurate 

attestations to the Exchange regarding employer-sponsored coverage. 

Lastly, we are currently working with our federal partners at the Office of Personnel 

Management to develop a service through the hub to verify data regarding federal employment 

as is necessary to implement proposed 155.320(d)(2)(ii). We expect to release a detailed 

technical description of this service in the near future. 

Comment: We received several comments on the pre-enrollment template developed to 

assist consumers with collecting information related to eligibility for qualifying coverage in an 

eligible employer-sponsored plan. Many commenters expressed support for the voluntary 

template and efforts to facilitate employers reporting such information to Exchanges. One 

commenter suggested that employers pre-populate the form and distribute it online to employees 

without being specifically requested to do so by individual employees. Another commenter 

expressed concern over asking employees to gather information from employers, suggesting that 

it could pose problems and force employees not to seek Exchange coverage. 

A few commenters suggested ways to implement the template including providing the 

template on the date of hire or in conjunction with other information about employer-sponsored 

coverage provided by the employer to employees. One commenter suggested large employers 

have an incentive to report this information to employees to avoid having employees request 
CMS-2334-F 351 

information from them on an individual basis. Another commenter suggested that the template 

would need to allow employers to report multiple premium contributions and/or plan actuarial 

values. 

Response: We developed the pre-enrollment template, which is a tool to help an 

individual complete the questions related to employer-sponsored coverage on the single, 

streamlined application, based on extensive input from employers and other stakeholders. While 

the use of the template is voluntary, we believe it will facilitate the collection of related 

employer-sponsored coverage information from employers, and in doing so, streamline the 

application process, and increase the accuracy of eligibility determinations. To this end, we also 

note that employers have the option of combining the employer coverage tool with the notice 

specified under section 18B of the Fair Labor Standards Act, as added by section 1512 of the 

Affordable Care Act found at this link, http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf. As 

noted in the proposed rule, we also anticipate that employers will find additional ways to provide 

this information to their employees, including posting this pre-populated tool on a company 

website, or making this information available during benefit fairs, and we are supportive of 

additional efforts by employers to disseminate this information efficiently. The employer 

coverage tool can be found at: 

http://cciio.cms.gov/resources/other/Files/AttachmentC_042913.pdf. 

Comment: Several commenters generally supported the sampling approach proposed in 

§155.320(d)(3)(iii) and noted that contacting the employer directly is the most accurate and 

efficient way to verify information regarding access to qualifying employer-sponsored coverage. 

One commenter specifically supported the proposed approach to rely on the Exchange to reach 

out to employers for information about employer-sponsored coverage rather than relying on 

individuals to get the information from their employer. 
CMS-2334-F 352 

Some commenters expressed concern over the sampling approach, suggesting the process 

was burdensome for employers and Exchanges. Commenters urged HHS to develop sampling 

procedures that are as unobtrusive as possible and do not create confusion for an individual or an 

individual’s employer. One commenter urged the Administration to encourage States to use 

uniform processes in conjunction with HHS. One commenter recommended that final 

regulations specify timelines and specific information required for employer responses under 

§155.320(d)(3)(iii). Another commenter also recommended that final regulations permit 

employers to designate third-party administrators to respond and act on their behalf for the 

sample-based review. 

Some noted that contacts to employers create risks for employees who may have a very 

weak position or status with employers. Some commenters suggested that employees should be 

able to opt out of having the Exchange contact their employer. One commenter suggested that 

any verification process adopted by HHS should not invite retaliation against employees in any 

way. Another commenter suggested that the notice to employers in §155.310(h) communicate 

that employers are explicitly prohibited from retaliating against employees and provide 

accessible information about how employees may pursue a complaint or seek redress, including 

the time limit for filing a complaint. 

Response: We believe the sampling approach proposed in §155.320(d)(3)(iii) is the best 

interim approach for effectively completing this verification while minimizing burden on 

Exchanges and employers. As noted in the proposed rule, we believe that employers are in the 

best position to provide information regarding the employer-sponsored coverage that they offer 

to their employees. We maintain the approach of relying on Exchanges to reach out to a select 

number of employers to verify applicant information with some minor clarifications. 
CMS-2334-F 353 

We also appreciate the concerns raised related to burden on Exchanges and employers. 

We intend for Exchanges to contact employers in a standardized manner and only ask for 

information that is necessary for verifying access to qualifying employer-sponsored coverage. 

We do not include a timing standard for employers to respond to Exchange inquiries; however 

we expect that employers will respond to Exchange inquiries in a timely manner. With that 

stated, as proposed and finalized in §155.320(d)(3)(iii)(F), after a period of 90 days, the 

Exchange will conclude the sample-based review. 

Regarding the recommendation that final regulations permit employers to designate thirdparty administrators to respond and act on their behalf for this verification, we note that this rule 

finalizes standards related to Exchanges and therefore standards regarding activities of 

employers are outside the scope of this regulation. However, we believe that this would be a 

feasible approach, as long as it is consistent with any other authorities that may govern the 

delegation of employer responsibilities to other entities. 

We also acknowledge the comment expressing the concern that contacting employers 

might create risks for employees who may have a very weak position or status with employers. 

Section 18C of the Fair Labor Standards Act, as added by section 1558 of the Affordable Care 

Act, provides protections for employees that prohibit discrimination because the employee has 

received advance payments of the premium tax credit or cost-sharing reductions, and for other 

specified reasons. 

Allowing an individual to opt out of the sampling process under §155.320(d)(3)(iii) 

would prevent the Exchange from receiving accurate information for some individuals and 

increase the potential for a tax liability for the tax filer at tax filing. The opt-out process would 

also compromise the randomness, and potentially the statistical validity of the sample. 

Accordingly, we do not adopt this suggestion. 
CMS-2334-F 354 

Comment: We received several comments strongly supporting the approach in 

§155.320(d)(3)(iii)(C), reflecting the statutory requirement in section 1411(e)(4) of the 

Affordable Care Act, allowing an individual to receive advance payments of the premium tax 

credits and cost-sharing reductions during the 90-day sampling period if the individual is 

otherwise qualified. One commenter supported the recognition that applicants should be made 

aware that any advance payments of the premium tax credit could be subject to reconciliation. 

We also received comments in support of the provision in §155.320(d)(3)(iii)(F) allowing the 

Exchange to use an applicant’s attestation if no information is received from the employer. 

Another commenter noted that the burden of resolving inconsistencies should fall first on the 

Exchanges and only reach individuals when the Exchanges have exhausted all available means 

to resolve the inconsistency. 

Response: We believe it is important for the eligibility determination process to be 

consistent in how and when the Exchange requests supporting documentation throughout the 

eligibility determination process and to avoid unnecessary delay in eligibility determinations. 

We agree with commenters regarding the importance of collecting an attestation from a tax filer 

regarding his or her understanding of reconciliation prior to making advance payments of the 

premium tax credit, and therefore maintain this in the final rule. Additionally, we are finalizing 

our proposal to rely on an applicant’s attestation if the Exchange is unable to obtain the 

necessary information from an employer. 

Comment: One commenter was concerned that the timeframe for employers to provide 

information (within 90 days of notice regarding the Exchange’s intent to verify the applicant’s 

enrollment in an eligible employer-sponsored plan or eligibility for qualifying coverage through 

an eligible employer-sponsored plan) is too long and recommended shortening this period to 30 

days. 
CMS-2334-F 355 

Response: In proposed section §155.320(d)(3)(iii), which we maintain in the final rule, 

we provide that an Exchange will proceed with an applicant’s eligibility determination during 

the sampling process and ensure that advance payments of the premium tax credit and costsharing reductions are provided on behalf of an applicant who is otherwise qualified for such 

payments and reductions. This process is intended to ensure that eligibility determinations are 

not delayed due to the Exchange not being able to contact an employer. Under our authority 

under section 1411(a) and (d) of the Affordable Care Act and after consideration of a shorter 

timeframe, we came to the conclusion that 90 days is consistent with other similar processes, 

such as the inconsistency period specified in §155.315(f), and will also allow an appropriate 

opportunity for receiving a response from employers. 

Comment: Commenters supported the option to allow an Exchange to fulfill the 

requirements of this verification by relying on HHS to perform it. One commenter noted that 

this option is particularly helpful as no acceptable data sources will be available in their state by 

October 1, 2013. One commenter was pleased with this provision, noting that it welcomed 

efforts to reduce administrative and cost burdens involved with Exchange eligibility 

determination processes. One commenter expressed the need for more information from HHS 

specifying the steps it will take to complete this verification, and detail on the particular 

information HHS anticipates it will need. One commenter suggested a provision be included in 

the agreement between HHS and the Exchange to hold applicants harmless if a glitch in 

communication occurs. The commenter also suggested that consumers should not be required to 

submit duplicative information. One commenter asked that HHS consider expanding its 

employer-sponsored plan enrollment and eligibility verification process to include the sending of 

notices to individuals and employers described in §155.310(g) and (h), which occurs after an 

eligibility determination is made. 
CMS-2334-F 356 

Response: After reviewing and considering the appropriate public comments and 

completing a technical analysis, we have concluded that the service described in the proposed 

rule is not feasible for implementation for the first year of operations. This service would 

involve a large amount of systems development on both the state and federal side, which cannot 

occur in time for October 1, 2013. As such, in the final rule, we maintain the proposed language, 

with a clarification that the option to rely on HHS to perform this verification is effective for 

eligibility determinations that are effective on or after January 1, 2015—meaning that the 

Exchange will be able to rely on HHS to perform this function as part of the eligibility 

determination system under section 1411 of the Affordable Care Act beginning with open 

enrollment for the 2015 plan year. 

To provide relief to state-based Exchanges that were planning to rely on this service, we 

note that we are also delaying the date by which an Exchange must implement the sample-based 

review. For eligibility determinations for insurance affordability programs that are effective 

before January 1, 2015, we added paragraph (d)(3)(iv) to specify that if the Exchange does not 

have any of the information specified in §155.320(d)(2)(i) through (d)(2)(iii) for an applicant, 

the Exchange may accept the applicant’s attestation regarding enrollment in an eligible 

employer-sponsored plan and eligibility for qualifying coverage in an eligible employersponsored plan for the benefit year for which coverage is requested without further verification, 

instead of following the procedure in §155.320(d)(3)(iii). 

While we believe it is important for Exchanges to implement the procedure in 

§155.320(d)(3)(iii) to support program integrity and minimize financial risks on behalf of the tax 

filer at reconciliation, we acknowledge that some Exchanges may not have the resources and 

operational capability to conduct the sampling process in the first year. We note that the FFE 

will implement the verification process as specified in §155.320(d). 
CMS-2334-F 357 

For October 1, 2013, we expect that Exchanges will use OPM data provided by HHS and 

available through the hub and SHOP data available through the SHOP that corresponds to the 

individual market Exchange to identify inconsistencies with attested information, and follow the 

process established in §155.315(f) to resolve any such inconsistencies. We plan to continue 

working closely with Exchanges, and may propose regulatory amendments as necessary, to 

implement an increasingly effective verification process over time. 

We also note that we considered whether the distribution of notices could be part of a 

future service performed by HHS. The eligibility notices cited by the commenter involve 

information beyond what is involved with this verification service, including individual 

eligibility results, and the commenter’s proposal therefore would add significant complexity to 

an already-complex service. Accordingly, we are finalizing this provision as proposed. 

Comment: We solicited comment regarding the feasibility of making the necessary 

systems connections to support the verification of enrollment in an eligible employer-sponsored 

plan and eligibility for qualifying coverage in an eligible employer-sponsored plan by October 1, 

2013, and whether alternative approaches should be considered for the first year of operations. 

Several commenters expressed general support of the approach to verifying access to qualifying 

employer-sponsored coverage. However, one commenter expressed concern over the 

complexity of the verification procedures and questioned whether Exchanges will be able to 

implement these processes consistently by October 1, 2013. A small number of commenters 

recommended that HHS consider limiting verification to those situations in which it is essential 

to comply with the Affordable Care Act. One commenter agreed with the recommendation that 

the proposed strategy for verification should be temporary and that it should be revisited in 2016 

when more data become available. 
CMS-2334-F 358 

Response: We appreciate feedback from commenters on the proposed approach. We 

acknowledge the timing concerns with implementing the policies in the proposed rule for 

October 1, 2013 and will continue to work with Exchanges to develop interim solutions within 

the general construct of these regulations and related guidance. We believe that the proposed 

approach is minimally burdensome, particularly based on the approval of use of a sample-based 

review provided in §155.320(d)(3)(iii) instead of an inconsistency process, and another approach 

would necessitate manual review for a larger number of individuals. Accordingly, in the final 

rule, we maintain the provisions proposed in §155.320(d) with continued anticipation that the 

strategy will evolve as additional data and data sources become available and as more 

information is gained when the sample-based review is implemented. 

Comment: One commenter recommended that HHS allow Exchanges the flexibility to 

define the factors that would trigger the sample-based review and how to conduct the necessary 

investigations. Another commenter proposed that Exchanges should have flexibility to use 

whatever information they have at their disposal to identify individuals who are likely to have 

employer-sponsored coverage and to conduct a minimum number of follow up reviews. 

Response: We recognize that some Exchanges may have access to additional data 

sources that could be useful for these purposes. We note that proposed §155.320(d)(2)(i), which 

we are finalizing as proposed, allows the use of electronic data sources that are approved by 

HHS, which could include state-based or state-developed data sources. We encourage states to 

work with HHS to incorporate these data sources and other existing processes into the Exchange 

verification process. 

Comment: We received several comments on standards related to notices proposed 

throughout §155.320. Commenters suggested that any notices be clearly written in plain 

language at an appropriate reading level for employees with limited education and LEP 
CMS-2334-F 359 

individuals. One commenter recommended that notice of applicants’ appeal rights be provided 

to applicants if information from an employer results in a change to their eligibility status. 

Specifically regarding the notice described in §155.320(d)(3)(iii), one commenter 

suggested the notice clearly specify that the employee was selected as part of a purely random 

sample, rather than due to any indication of misinformation or inappropriate action on the part of 

the employee. Additionally, one commenter supported HHS developing notices and otherwise 

educating employers to help employers understand their potential tax liabilities. Finally, one 

commenter urged Exchange personnel, Navigators, certified application counselors and all 

consumer assistance personnel to be trained on these verification procedures. 

Response: All notices described in this part are subject to the general notices standards 

under §155.230, which include standards related content provided in the notice, including notice 

of appeal rights, and that the notices must conform to accessibility and readability standards. We 

agree that information regarding this verification will be important for Navigators and other 

entities helping consumers apply for coverage and intend to include information about this 

verification process related in training materials and other guidance documents produced by 

HHS. 

Comment: One commenter raised concerns over the potential for confusion that could 

result from unnecessary notifications to employers by Exchanges, for example, when employers 

receive the notice specified in §155.310(h) regarding potential tax liability under §4980H of the 

Code even though the employer may not in fact have any tax liability. 

Response: The proposed rule did not modify the requirements related to the employer 

notice as described in §155.310(h) and therefore the comment is outside of the scope of this rule. 

Comment: One commenter recommended that the verification process and information 

supplied should be considered confidential, and recommended that the final rule include 
CMS-2334-F 360 

language clarifying this and prohibiting the sharing of this information with anyone not directly 

required to verify the information. The commenter specified that the employer representative 

verifying the information at request of the Exchange should be prohibited from sharing the 

Exchange’s request for the information with any person not directly responsible for providing 

the information. 

Response: We agree with the suggestion that information supplied during the 

verification process described in §155.320(d)(3)(iii) should be protected and not disclosed to 

unauthorized parties. When an Exchange reaches out to an employer to confirm whether an 

applicant is enrolled in an eligible employer-sponsored plan or eligible for qualifying coverage 

in an eligible employer-sponsored plan, we do not intend for the Exchange staff to disclose the 

employee’s household income or any other taxpayer information, except the employee’s name or 

other identifying information. The employer would need to identify the employee to provide the 

Exchange with information about the plan options available to the employee. The Exchange 

would rely on information provided by the employee or employer when communicating with the 

employer, so that only the appropriate employer representatives are consulted during the samplebased review. We also note that like all information created, collected, used, or disclosed by the 

Exchange, information regarding employer-sponsored coverage is subject to the privacy and 

security protections established in §155.260. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.320(c) without modification. We are 

finalizing the provisions proposed in §155.320(d), with a few modifications. In paragraph 

(d)(2)(iii), we clarify that the Exchange must obtain any available data from the SHOP that 

corresponds to the state in which the Exchange is operating. In paragraph (d)(3)(iii), we modify 

language to specify that the Exchange must select a statistically significant random sample of 
CMS-2334-F 361 

applicants for whom the Exchange does not have any of the information specified in paragraphs 

(d)(2)(i) through (d)(2)(iii). Based on comments suggesting that employment data only be used 

to prompt applicants to encourage accurate attestations, we removed paragraph (d)(2)(iv). 

Additionally, we clarified paragraph (d)(4) to specify that the ability for the Exchange to satisfy 

the provisions of paragraph (d) by relying on HHS is effective for eligibility determinations for 

advance payments of the premium tax credit and cost-sharing reductions that are effective on or 

after January 1, 2015, and to clarify that the division of responsibilities under this option is 

subject to guidance issued by the Secretary. To accommodate this change, we added paragraph 

(d)(3)(iv) to clarify that for eligibility determinations for advance payments of the premium tax 

credit and cost-sharing reductions that are effective before January 1, 2015, if the Exchange does 

not have any of the information specified in paragraphs (d)(2)(i) through (d)(2)(iii) for an 

applicant, the Exchange may accept an applicant’s attestation regarding enrollment in an eligible 

employer-sponsored plan and eligibility for qualifying coverage in an eligible employersponsored plan for the benefit year for which coverage is requested, without further verification 

under paragraph (d)(3)(iii) of this section. Additionally, we deleted paragraph (d)(4)(iv) to 

remove the agreement associated with having HHS conduct this verification. Finally, we 

removed paragraph (e) and redesignated paragraph (f) as paragraph (e). As a result of the 

consolidation of former paragraphs (d) and (e) in paragraph (d) of this final rule, we also make a 

technical correction to §155.615(f)(2)(i) to modify the cross-reference in that provision to 

reference §155.320(d). 

12. Eligibility redetermination during a benefit year (§155.330) 

In §155.330, we proposed to amend paragraph (d)(1) to clarify that the Exchange would 

only conduct periodic examination of data sources to identify eligibility determinations for 

Medicare, Medicaid, CHIP, or the BHP, for enrollees on whose behalf advance payments of the 
CMS-2334-F 362 

premium tax credit or cost-sharing reductions are being provided. We also proposed revising 

paragraph (e) to specify how the Exchange would proceed when data matching indicates that an 

individual is deceased, such that the Exchange would modify eligibility status to account for the 

data after 30 days without a response to the notice sent. In situations where the Exchange 

identifies updated information regarding income, family size, or family composition, except 

information regarding death, we clarified that the enrollee-reported information would be subject 

to verification. 

 We also solicited comments about adding a provision to specify that Exchanges would 

include language in the eligibility determination notice after a redetermination resulting in a 

change in an enrollee’s level of cost-sharing reductions to also describe the specific changes to 

an enrollee’s deductible, co-pays, coinsurance, and other forms of cost-sharing reductions if they 

remained enrolled in the same QHP. 

 We proposed to amend paragraph (f) to incorporate changes as a result of eligibility 

appeals decisions, as well as changes that affect only enrollment or premiums, but do not affect 

eligibility. The proposed changes to paragraph (f) were designed to align eligibility effective 

dates and enrollment effective dates with one another, and to accommodate the limited situations 

in which retroactive eligibility may be necessary. 

 In paragraph (f)(1), we proposed that changes resulting from a redetermination, from an 

appeal decision, or affecting enrollment or premiums only, be implemented on the first day of 

the month following notice of the change. In paragraph (f)(2), we proposed that the Exchange 

may determine a reasonable point in a month, no earlier than the 15th, after which a change will 

not be effective until the first day of the month after the month specified in paragraph (f)(1). 

 In paragraph (f)(3), we proposed that the Exchange must implement changes resulting in 

a decreased amount of advance payments of the premium tax credit or cost-sharing reductions 
CMS-2334-F 363 

that occur after the 15th of the month, on the first day of the month after the month specified in 

paragraph (f)(1). In paragraph (f)(4), we proposed that the Exchange must implement changes 

that result in an increased level of cost-sharing reductions that occur after the 15th of the month, 

on the first day of the month after the month specified in paragraph (f)(1). Changes that result in 

an increased amount of advance payments of the premium tax credit would be implemented 

under paragraphs (f)(1) and (f)(2). 

 In paragraph (f)(5), we proposed that the Exchange implement a change associated with 

birth, adoption, placement for adoption, marriage, or loss of minimum essential coverage, on the 

coverage effective dates described in §155.420(b)(2)(i) and (ii). In paragraph (f)(6), we 

proposed that the Exchange may implement a change associated with the events described in 

§155.420(d)(4), (d)(5), and (d)(9) on an effective date that is based on the specific circumstances 

of each situation. In redesignated paragraph (f)(7), we proposed to maintain the existing 

language of what was originally paragraph (f)(3). 

 Comment: Commenters expressed general support for HHS’ proposal regarding when 

the Exchange determines through periodic data matching that an individual is deceased. One 

commenter sought clarification about whether the Exchange could terminate coverage 

retroactively to the date of death to align with non-group market standards. 

Response: In response to comments, we clarify in finalizing §155.430(d) that the 

Exchange will terminate coverage retroactively to the date of death. This revision is discussed in 

more detail in the response to comments regarding that provision below. 

Comment: Multiple commenters expressed strong support for including a provision in 

the final rule such that Exchange would include language regarding a change in an enrollee’s 

level of cost-sharing reductions as a result of a redetermination in the eligibility determination 

notice sent to the enrollee. Several commenters requested that the notice also include 
CMS-2334-F 364 

information about the enrollee’s eligibility for a special enrollment period as well as the deadline 

to make a decision to select a new plan if they so desired. Commenters also recommended that 

the notice include the potentially negative financial impact of changing QHPs. One commenter 

requested additional guidance regarding the implementation of cost-sharing reductions generally, 

and another stated that it could not comply with such a proposed change in Exchange design at 

this stage. 

Response: We clarify that §155.230(a)(1) specifies that the Exchange will provide 

language in the eligibility determination notice to the enrollee explaining the action reflected in 

the notice, which in this case includes the fact that an enrollee has been determined eligible for a 

new cost-sharing reduction level, his or her eligibility for a special enrollment period, the 

requisite deadlines, and the possible ramifications if an enrollee decides to change QHPs (for 

example, deductible resetting, whereby an individual who had accrued expenses towards the 

deductible cap for his or her previous QHP would have to start again from $0 in making costsharing payments towards the deductible and out-of-pocket limit). Since regulations do not 

specify that the Exchange will provide detailed, plan-specific information on cost-sharing 

reductions after initial plan selection, we will not require that it be provided by the Exchange 

when a change occurs. Rather, we expect that QHPs will make this information available. We 

will also not specify that the Exchange will describe the specific changes that could occur in 

different plans, which could require as many variations as there are plans. Exchanges maintain 

the flexibility to provide more detail. HHS provided general guidance regarding the 

implementation of cost-sharing reductions in subpart E of the final Payment Notice at 78 FR 

15410, 15474 et. seq. 

Comment: Commenters generally supported the effective dates we proposed in 

§155.330(f). Several commenters urged HHS to prioritize continuity of coverage in defining 
CMS-2334-F 365 

effective dates. Other commenters cautioned against requiring eligibility effective dates that 

would necessitate the return or repayment of claims, premiums, advance payments of the 

premium tax credit, or cost-sharing reduction payments. 

Response: We appreciate the importance of continuity of coverage, as well as the 

importance of clarity for consumers. As such, we are finalizing the provisions proposed in 

§155.330(f), with two modifications for clarity. First, we consolidate the provisions formerly 

proposed in §155.330(f)(3) and §155.330(f)(4) into a single provision covering decreases in 

advance payments of the premium tax credit and changes in cost-sharing reductions. Second, we 

remove the requirement formerly proposed in §155.330(f)(7), because the termination of 

coverage requirement in §155.430(d)(3) renders §155.330(f)(7) duplicative. 

Comment: Commenters requested that HHS require transparency and plain language in 

communicating effective dates to consumers, given the complexity of changing benefits, 

programs, and coverage. 

Response: We agree that transparency and plain language are of the upmost importance, 

and urge states and QHP issuers to share successful communication strategies among one 

another. We note that §155.230(b) specifies that all notices will be in plain language. HHS will 

also share model notice language for Exchanges to adapt to their specific needs. 

Comment: Some commenters questioned why advance payments of the premium tax 

credit and cost-sharing reductions could not always be implemented as of the first of the 

following month. 

Response: The 15th-of-the-month cutoff specified in §155.330(f)(3) concerning changes 

that result in a decreased amount of advance payments of the premium tax credit and changes in 

levels of eligibility for cost-sharing reductions aims to prevent consumers from incurring 

financial liabilities that may result from such changes in eligibility, which could also be very 
CMS-2334-F 366 

problematic for QHP issuers to implement. However, as noted above, Exchanges have 

flexibility to set a reasonable cut-off date for implementing changes that result in an increased 

level of advance payments of the premium tax credit, such that they could always be 

implemented on the first day of the following month, Accordingly, we are finalizing this 

provision as proposed. 

Comment: Some commenters sought reassurance that Exchanges would remain the 

system of record - the final authority on applicants’ and enrollees’ eligibility for enrollment 

through the Exchange and receipt of advance payments of the premium tax credit and costsharing reductions - and that all changes would be communicated to QHP issuers. Some 

commenters also requested flexibility for issuers to communicate changes to enrollees, consistent 

with current practices. 

Response: Exchanges are intended to be the final authority on applicants’ and enrollees’ 

eligibility for enrollment in a QHP through the Exchange, advance payments of the premium tax 

credit, and cost-sharing reductions (subject to applicable appeals). As specified in §155.310(g) 

and §155.400(b)(1), Exchanges will communicate information about all eligibility and 

enrollment changes to both enrollees and their health insurance issuers in a timely fashion. We 

also encourage QHP issuers to communicate transparently with enrollees regarding changes to 

their coverage, including how changes in an enrollee’s eligibility for cost-sharing reductions may 

affect the enrollee’s out-of-pocked costs related to coverage, provided that such communications 

are not confusing for consumers. 

Comment: Commenters supported our proposal in paragraph (f)(4) of this section to 

align enrollment effective dates with eligibility effective dates, but sought clarification on 

eligibility effective dates for individuals who opt not to select a new plan upon experiencing one 

of the special enrollment period triggering events described in §155.420(b)(2). 
CMS-2334-F 367 

Response: We clarify that the eligibility effective dates in §155.330(f)(4) apply only in 

situations in which an individual uses the special enrollment period to select a plan upon 

experiencing one of the triggering events described in §155.420(b)(2). Eligibility for individuals 

who experience a change related to marriage, birth, adoption, placement in foster care, or loss of 

minimum essential coverage, and who opt to maintain their existing QHP, follows the effective 

dates otherwise specified within §155.330(f). 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.330, with some modifications. First, 

we clarified that the effective dates in paragraph (f)(1)(ii) are based on the date specified in the 

appeal decision, and removed cross-references to appeals provisions in paragraph (f)(1)(ii), as 

we are not finalizing provisions related to eligibility appeals at this time. However, we maintain 

the substance of the provision, and intend to replace the cross-references when we finalize 

subpart F. Second, we consolidated the provisions formerly proposed in §155.330(f)(3) and 

§155.330(f)(4) into a single requirement in paragraph (f)(3) for decreases in advance payments 

of the premium tax credit and changes in cost-sharing reductions. Third, we modified newly 

designated (f)(4) to clarify that the Exchange will implement a change associated with the events 

described in §155.420(b)(2)(i) and (ii) of this part on the effective dates described in 

§155.420(b)(2)(i) and (ii) of this part respectively, instead of on the first day of the following 

month. Fourth, we removed the requirement formerly proposed in §155.330(f)(7), because the 

termination of coverage requirement in §155.430(d)(3) renders §155.330(f)(7) duplicative. 

13. Annual eligibility redetermination (§155.335) 

In §155.335, we proposed to amend paragraphs (a), (b), (c), (e), (f), (g), (h), (k), and (l) 

of this section to specify that subject to the limitations specified in paragraph (l) and new 

paragraph (m), the Exchange will conduct an annual eligibility redetermination for all qualified 
CMS-2334-F 368 

individuals, not only those who are enrolled in a QHP. Our proposal was to replace the word 

“enrollee” with the term “qualified individual” in these paragraphs. 

We proposed to amend paragraph (b) to include data regarding Social Security benefits 

as defined under 26 CFR 1.36B–1(e)(2)(ii). This reflects the revision we proposed to make in 

§155.320(c)(1)(i)(A). 

 We proposed to make technical corrections to paragraph (l) to specify that, if the 

Exchange does not have authorization to use a qualified individual's tax information, the 

Exchange will redetermine the qualified individual's eligibility only for enrollment in a QHP 

through the Exchange. 

 We proposed to add new paragraph (m), which would provide that, if a qualified 

individual does not select a QHP before the redetermination described in this section, and is not 

enrolled in a QHP through the Exchange at any time during the benefit year for which such 

redetermination is made, the Exchange must not automatically conduct a subsequent 

redetermination of his or her eligibility for a future benefit year. 

 Comment: Commenters supported HHS’ proposal to allow all qualified individuals to be 

redetermined for eligibility for enrollment in a QHP through the Exchange, regardless of whether 

they have enrolled in a QHP through the Exchange during the coverage year. Several 

commenters recommended omitting §155.335(m), the special rule, to allow states to continue 

redeterminations for non-enrolled qualified individuals, for at least 3 more years. 

 Response: We continue to believe that one redetermination for a qualified individual 

who does not select a QHP represents an appropriate balance between providing consumers with 

a streamlined ability to obtain coverage and the burden on the Exchange associated with 

redeterminations and on consumers who are not interested in enrolling. We intend to monitor 

take-up rates within the FFE and encourage state-based Exchanges to do the same, as this data 
CMS-2334-F 369 

will inform whether changes to this policy might be appropriate in the future. Accordingly, we 

are finalizing this provision as proposed. 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.335 of the proposed rule without 

modification, except we reserve paragraphs (c)(1) and (c)(2) as we continue to evaluate the 

appropriate information that will be included in the annual redetermination notice, and modify 

paragraph (c)(3) such that the previous reference to paragraph (c)(1), which is now reserved, 

instead refers to paragraph (b), which accurately refers to the updated information being 

retrieved by the Exchange. 

14. Administration of advance payments of the premium tax credit and cost-sharing 

reductions (§155.340) 

In §155.340, we proposed technical corrections in paragraphs (b) and (c) to replace the 

reference to section 36B of the Code to the applicable Treasury regulation. We did not receive 

specific comments on this section, and are thus finalizing the provision as proposed. 

Summary of Regulatory Changes

We are finalizing the technical corrections proposed in §155.340 of the proposed rule to 

specify the appropriate definition of minimum value. 

15. Coordination with Medicaid, CHIP, the Basic Health Program, and the Pre-existing 

Condition Insurance Plan (§155.345) 

In §155.345, we proposed to make a technical correction to paragraph (a) to clarify that 

the agreements that the Exchange enters into with the agencies administering Medicaid, CHIP, 

and the BHP, if applicable, must include a clear delineation of the responsibilities of each 

“agency” as opposed to each “program.” We proposed to amend paragraph (a)(2) to specify that 

the agreement the Exchange enters into with other agencies administering insurance affordability 
CMS-2334-F 370 

programs addresses the responsibilities of each agency to ensure prompt determinations of 

eligibility and enrollment in the appropriate program without undue delay, based on the date the 

application is submitted to, or redetermination is initiated by, the Exchange or another agency 

administering an insurance affordability program. We proposed to change the ordering of 

agencies listed for purposes of clarity. We also proposed to redesignate paragraph (a)(3) as 

paragraph (a)(4), and add a new paragraph (a)(3) to ensure that, as of January 1, 2015, the 

agreement delineates responsibilities for the provision of a combined eligibility notice, as 

defined in §435.4, to individuals and members of the same household, to the extent feasible, for 

enrollment in a QHP through the Exchange and for all insurance affordability programs. Section 

155.345(a)(3)(i) proposed that prior to January 1, 2015, the notice include coordinated content, 

as defined in §435.4, while §155.345(a)(3)(ii) and (g)(7) addressed the implementation of a 

combined eligibility notice requirement as of January 1, 2015. 

We proposed a phased-in approach for the provision of a combined eligibility notice in 

cases where the Exchange is performing assessments of eligibility for Medicaid and CHIP based 

on MAGI. 

We noted that, based on the operational readiness of the Exchange and other agencies 

administering insurance affordability programs, combined eligibility notices may be 

implemented earlier that January 1, 2015, but that in states where the FFE is conducting 

assessments rather than final determinations of eligibility, the FFE will only be able to provide 

an eligibility notice that includes coordinated content prior to January 1, 2015 (and not combined 

eligibility notices) for eligibility determinations made by the FFE. 

We proposed to make a technical correction in paragraph (f) to cite to the applicable 

Treasury regulation instead of Section 36B of the Code. 
CMS-2334-F 371 

We proposed a series of technical corrections throughout paragraphs (f) and (g) to clarify 

various provisions and to redesignate paragraphs as necessary to accommodate the changes 

described in the proposed rule. We proposed to add paragraph (g)(7) to require combined 

eligibility notices effective January 1, 2015. 

Comment: We received comments recommending that notices be consolidated and 

coordinated for all family members applying together even when individuals are eligible for 

different programs, at the very least for the initial eligibility determination notice. Commenters 

suggested that all notices need to clearly state by name all individuals to whom the notice 

applies, especially when notices are regarding termination. Some commenters indicated that the 

notice with coordinated content should clearly inform an individual what he or she is or may be 

eligible for, and should never begin with the ineligibility information. Commenters suggested 

that all agreements between the Exchange and the agencies administering Medicaid and CHIP be 

approved by HHS and be made publicly available, including on a public website. Some 

commenters stated that the public should be given an opportunity to provide input on the 

agreements and any changes that are made to the agreements. 

Response: We are finalizing this section as proposed, with minor modifications to 

reserve two provisions for finalization at a future date. We anticipate that initial eligibility 

determination notices will be consolidated for family members who apply together. 

Additionally, we expect that information about the program for which an individual is eligible, if 

any, will be displayed in notices before information about programs for which the individual is 

not eligible. We are reserving paragraphs (a)(3) and (g)(7), regarding coordinated content and 

combined notices, respectively, which we intend to finalize at a later date with the parallel 

Medicaid provisions. The Federally-facilitated Exchange will provide coordinated content in 

notices for October 1, 2013. We will take these recommendations into consideration as we 
CMS-2334-F 372 

develop model eligibility determination notices. We are not specifying that agreements between 

Medicaid and CHIP agencies and Exchanges be approved by HHS, as we think that the standards 

included in regulation represent an appropriate level of federal oversight at this time. However, 

we will work with Exchanges to monitor operations over time, and reevaluate this decision as 

needed. 

Comment: Many commenters expressed support for combined eligibility notices. Some 

commenters expressed general support of the phased in approach for combined eligibility 

notices, but strongly recommended minimizing the delay in the implementation of combined 

notices so that it only affects the initial annual open enrollment period. Commenters suggested 

that the requirement for a combined eligibility notice should be effective for redetermination 

notices and eligibility notices for the open enrollment period beginning on October 15, 2014. 

Some commenters were supportive of the January 1, 2015 implementation date of combined 

eligibility notices, while others recommended a January 1, 2016 implementation date. One 

commenter recommended that the effective date be set as January 1, 2014, and that HHS allow 

those states that cannot update their technology in time for January 2014 to seek approval from 

HHS for delaying implementation, rather than a nationwide delay in implementation. Many 

commenters asked HHS to reiterate that the phased-in approach does not diminish the principles 

of the Affordable Care Act to promote coordination between the Exchange, Medicaid, and CHIP, 

beginning in October 2013. 

Response: We appreciate commenters’ suggestions. We intend to finalize this provision 

at a future date with the parallel Medicaid provision, and so have reserved paragraph (g)(7) for 

the purposes of this rule. The Federally-facilitated Exchange will provide coordinated content in 

notices for October 1, 2013. 
CMS-2334-F 373 

Comment: Several commenters noted that state flexibility is important in determining 

when to issue combined or separate, coordinated eligibility notices. One commenter opposed the 

requirement for agencies administering insurance affordability programs to provide coordinated 

content in notices before January 1, 2014, and specifically recommended that at initial annual 

open enrollment each agency should be responsible for issuing its own eligibility determination 

notice based on the eligibility determination completed for the program or programs that agency 

administers, without regard for the other insurance affordability programs. Many other 

commenters, however, expressed support for a coordinated eligibility notice prior to the 

implementation of a combined eligibility notice. Another commenter believed that the state is 

best suited to determine which agency should provide the notice of eligibility determination, and 

opposed to the requirement under §155.345(a)(3)(ii) that the combined eligibility notice be 

provided by the agency that makes the last determination of eligibility. One commenter noted 

that HHS should consider additional situations where a combined eligibility notice is feasible, 

but not beneficial to the applicant(s). Another commenter suggested that HHS consider 

additional flexibility for notices to be sent immediately for consumers who receive a final 

eligibility determination, and include an explanation in the notice about the status of any other 

determinations that are in progress for other applicants in the household. 

Many commenters stated that HHS should ensure that the combined eligibility notice 

includes complete information about Medicaid appeal rights. Other commenters stated that the 

combined eligibility notice should include a statement that the individual might be eligible for 

additional benefits and more affordable coverage through Medicaid, and specify how the 

individual can be screened for Medicaid eligibility. 

Response: In the proposed rule, HHS noted two situations in which the combined 

eligibility notice would not be advantageous for consumers, and HHS sought comment on 
CMS-2334-F 374 

additional situations in which the combined eligibility notice would not be advantageous. As 

one commenter suggested, HHS explained one situation in which a combined eligibility notice is 

not appropriate is where multiple family members apply together, and some members receive a 

final eligibility determination while other members need to be transferred to a different agency 

for a final determination to be made for other insurance affordability programs. We will work 

closely with states to determine when the issuance of a combined eligibility notice is not 

appropriate, including situations in which it is not advantageous for the last agency that makes a 

determination of eligibility based on MAGI to issue a combined eligibility notice. Furthermore, 

we clarify that while the Exchange will make determinations or assessments of MAGI-based 

eligibility for Medicaid and CHIP in accordance with §155.305(c) and (d), and §155.302(b), the 

Exchange is not required to complete the Medicaid and CHIP enrollment process for eligible 

individuals. 

We expect that combined eligibility notices will include a description of appeal rights in 

accordance with §155.230(a)(5), including Medicaid appeal rights, as well as information about 

how an individual can request a full eligibility determination from the state Medicaid or CHIP 

agency. And, as noted above, we intend to finalize paragraphs (a)(3) and (g)(7) at a future date 

alongside parallel Medicaid provisions, and we are reserving these paragraphs for the purposes 

of this final rule. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.345 of the proposed rule with a few 

minor modifications. We reserve §§155.345(a)(3) and (g)(7) for finalization at a later date. 

Pursuant to the discussion in the preamble associated with 42 CFR 431.10(c) and (d), we add 

new paragraph (h) to clarify that the Exchange and the Exchange appeals entity must adhere to 

the eligibility determination or appeals decision for Medicaid or CHIP made by the State 
CMS-2334-F 375 

Medicaid or CHIP agency, or the appeals entity for such agency, which is consistent regardless 

of whether the Exchange is making eligibility determinations or assessments for Medicaid and 

CHIP. Accordingly, we redesignate previous paragraphs (h) and (i) as paragraphs (i) and (j). 

16. Special eligibility standards and process for Indians (§155.350) 

In §155.350, we proposed to make a technical correction in paragraph (a)(1) to replace 

the reference to section 36B of the Code with a reference to the applicable Treasury regulation. 

We did not receive specific comments on this section, and are thus finalizing the provision as 

proposed. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.350 of the proposed rule without 

modification. 

17. Enrollment of qualified individuals into QHP’s (§155.400) 

In §155.400, we proposed to add paragraph (b)(3) to clarify the requirement that the 

Exchange send updated eligibility and enrollment information for all enrollment-related 

transactions to HHS promptly and without undue delay. This added further specificity to the 

existing requirement that the Exchange send eligibility and enrollment information to HHS under 

paragraph (b)(1) of this section. After considering several comments in response to this 

proposal, we are finalizing the provision as proposed. 

Comment: Commenters were supportive of the proposal that the Exchange would send 

updated information for all enrollment-related transactions to HHS promptly and without undue 

delay. One commenter sought clarification about cancellations, and wanted to ensure that QHP 

issuers did not violate the Affordable Care Act’s ban on discrimination in coverage of benefits 

related to preexisting conditions. Another commenter inquired about whether the specific issuer 
CMS-2334-F 376 

reporting requirements associated with this provision may vary according to the different 

Exchange models. 

Response: We note that the cancellations by QHP issuers referred to in the preamble to 

this provision in the proposed rule could occur for various reasons, such as when an individual 

voluntarily cancels his or her health insurance selection before the coverage effective date. In 

terms of issuer reporting requirements, each Exchange maintains flexibility to determine its own 

issuer reporting requirements relative to enrollment transactions, consistent with the law and 

applicable regulations. This provision specifically addresses only the requirement that the 

Exchanges report updated eligibility and enrollment information to HHS. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.400 of the proposed rule without 

modification. 

18. Special enrollment periods (§155.420) 

In §155.420, we proposed to clarify the scope of the special enrollment periods 

throughout this section and add paragraph (a)(2) clarifying that our usage of “dependent” refers 

to any individual who is or who may become eligible for coverage under the terms of a QHP 

because of a relationship to a qualified individual enrollee. 

 We proposed to amend paragraph (b) to specify that the effective dates described therein 

apply both to qualified individuals first enrolling in a QHP through the Exchange through a 

special enrollment period, as well as to current enrollees. As the effective dates regarding 

advance payments of the premium tax credit and cost-sharing reductions are now addressed in 

§155.330(f), we proposed removing such language in paragraph (b)(2)(i). We also solicited 

comments as to whether we should expand the special effective dates in paragraph (b)(2)(i) 

concerning birth, adoption, or placement of adoption to cover children placed in foster care as 
CMS-2334-F 377 

well, which would also necessitate a corresponding change to the triggering events described 

within paragraph (d)(2) that specifically address that special enrollment period. 

 We proposed to add paragraph (b)(2)(iii) regarding the effective dates for a special 

enrollment period under paragraphs (d)(4), (d)(5), and (d)(9) to align with a similar provision 

proposed in §155.330(f). This would ensure that the Exchange could tailor an effective date 

based on the circumstances surrounding an error by the Exchange, a contract violation by the 

QHP issuer, or other “exceptional circumstances”. 

 To align the effective dates under this section with the effective dates for eligibility as 

proposed in §155.330(f), we proposed to add paragraph (b)(4) to ensure that the Exchange 

adhere the modified effective dates related to advance payments of the premium tax credit and 

cost-sharing reductions proposed in §155.330(f). As such, we proposed to remove language in 

paragraphs (b)(2) and (b)(3) that previously addressed this issue. 

 We also proposed to amend paragraph (d) to specify which triggering events will allow a 

qualified individual or enrollee, or his or her dependent to qualify for a special enrollment 

period. This was designed to permit all members of a household, in certain situations, to enroll 

in or change QHP’s together in response to an event experienced by one member of the 

household, and we proposed technical corrections throughout paragraph (d) to ensure that the 

revised language allows for the dependent to qualify for a special enrollment period as well, 

subject to whether the QHP covers the dependent. While we did not modify the scope of each 

triggering event described within paragraph (d), we solicited comments regarding whether we 

should permit such movement of related individuals for other special enrollment periods. 

 We proposed to add language specifying that the triggering event in the case of a QHP 

decertification is the date of the notice of decertification, whereas the triggering event in all other 
CMS-2334-F 378 

cases associated with a qualified individual or his or her dependent losing minimum essential 

coverage is the date the individual or dependent loses eligibility for minimum essential coverage. 

 We also proposed to amend paragraphs (d)(6)(i) and (ii) to specify that the Exchange will 

provide a special enrollment period for an enrollee or his or her dependent enrolled in the same 

QHP who is determined newly eligible or newly ineligible for advance payments of the premium 

tax credit or who experiences a change in eligibility for cost-sharing reductions. We also 

modified the language within paragraph (d)(6)(iii) to allow a qualified individual or his or her 

dependent who is enrolled in qualifying coverage in an eligible employer-sponsored plan and 

who are determined newly eligible for advance payments of the premium tax credit to qualify for 

this special enrollment period prior to when he or she will cease to be eligible for qualifying 

coverage in an eligible employer-sponsored plan, provided that eligibility for advance payments 

of the premium tax credit and cost-sharing reductions are not available for an individual who is 

enrolled in an eligible employer-sponsored plan. Allowing these qualified individuals or 

dependents to be determined eligible for this special enrollment period up to 60 days prior to the 

end of his or her employer-sponsored coverage protects them from potential gaps in coverage. 

 Finally, we proposed to add a new paragraph (d)(10) to provide a special enrollment 

period for a qualified individual or his or her dependent that is enrolled in an eligible employersponsored plan that does not provide qualifying coverage, and is allowed to terminate his or her 

existing coverage. The Exchange would allow such an individual to access this special 

enrollment period up to 60 days prior to the end of his or her coverage in an eligible employersponsored plan, to protect them from potential gaps in coverage. 

Comment: Several commenters supported our clarification in paragraph (a) aligning the 

definition of “dependent” to refer to those family members that would be eligible to enroll in 

coverage under a QHP, and commended HHS for allowing dependents to change QHPs or enroll 
CMS-2334-F 379 

in a new QHP together with their family members for certain special enrollment periods when 

eligible. Some commenters wanted to ensure that family members would be adequately 

informed about the benefits of enrolling in plans together as well as the potential drawbacks of 

failing to do so. However, several comments also raised concerns that this proposed definition 

was too plan-specific and would ultimately lead to greater confusion among families in terms of 

eligibility for special enrollment periods. Other commenters sought flexibility for the definition 

of “dependent” to correspond with state law, as opposed to a potentially narrower definition set 

by a QHP issuer. 

Response: We believe that clarifying that the meaning of “dependent” aligns with 26 

CFR 54.9801–2, the regulation implementing section 9801(f) of the Code, throughout this 

section, including for the special enrollment periods not specified in section 9801(f) of the Code, 

helps to promote efficient operations and uniform standards to guide QHP issuers and 

Exchanges. Furthermore, this will ensure that state laws regarding the definition of “dependent” 

will be maintained within the Exchange, as this does not contradict state laws, but rather 

corresponds with state laws that already require issuers cover certain dependents. We intend to 

provide the appropriate information through the eligibility determination notice to an individual 

and their family members to adequately inform them of all of their options when determined 

eligible for a special enrollment period. 

Comment: Some commenters supported our proposal to expand certain special 

enrollment periods to dependents to allow family members to enroll in a new QHP together in 

response to an event experience by one member of the tax household, while others sought 

clarification or an expansion of this approach to other triggering events. Commenters requested 

clarification as to whether the proposed rules sought to limit the applicability of special 

enrollment periods to dependents enrolled in the same QHP with an enrollee, or to members of 
CMS-2334-F 380 

the tax household who may be receiving a portion of the advance payments of the premium tax 

credit, as well as if paragraph (d)(2) limited the special enrollment period to only the qualified 

individual and the “new” dependent. Other commenters recommended that the special 

enrollment period in paragraph (d)(3) related to citizenship or immigration status should apply 

both to the individual who is newly qualified along with eligible dependents. 

Response: As noted above regarding the definition of “dependent”, family members 

eligible to enroll in a QHP are determined eligible for a special enrollment period when specified 

in paragraph (d) of this section. This is not limited to only those members of a tax household on 

whose behalf advance payments of the premium tax credit are provided or who are enrolled in 

the same QHP. When a family member who experiences any of the triggering events in 

paragraph (d) of this section, that includes dependents in addition to qualified individuals or 

enrollees, selects a QHP as part of a special enrollment period, the Exchange will permit all 

members of the tax household to enroll together assuming they are all eligible to enroll in the 

particular QHP. If a specific family member experiences a triggering event, but fails to select a 

QHP within the relevant special enrollment period, his or her dependent does not have the ability 

to choose a different QHP during this period separately. Furthermore, in response to comments, 

we clarify that the special enrollment period in paragraph (d)(3) of this section, related to 

citizenship or immigration status, will apply to both the individual who is newly qualified as well 

as his or her dependents, if eligible for coverage under a QHP. We note that the special 

enrollment period described in paragraph (d)(3) only applies to an individual who was not 

previously a citizen, national, or lawfully present, as opposed to an individual switching between 

one of these statuses. 

Comment: In response to HHS’ solicitation for comments regarding modifying the 

special effective dates in paragraph (b)(2), which correspond directly to the triggering events 
CMS-2334-F 381 

described within paragraph (d)(2), many commenters urged HHS to include the placement of a 

foster child as a triggering event within the special enrollment period. Several commenters also 

raised concerns about our proposed modifications to the triggering event for the special 

enrollment period described in paragraph (d)(6), related to being newly eligible or ineligible for 

advance payments of the premium tax credit, or a change in eligibility for cost-sharing 

reductions. Some commenters opposed our proposal that only enrollees would be eligible for 

this special enrollment period if newly eligible or ineligible for advance payments of the 

premium tax credit instead of qualified individuals at any point during the coverage year, and 

recommended that we not finalize this proposal in favor of retaining the language adopted in the 

Exchange final rule. 

Response: We appreciate the comments regarding placement in foster care as it related 

to special effective dates, and will add language in paragraph (b)(2) to include the placement of a 

foster child as one of the triggering events listed therein, as well as make the corresponding 

change regarding the special enrollment period in paragraph (d)(2). We note, however, that due 

to the availability of Medicaid to foster children, it is unclear how frequently this special 

enrollment period will be used. Due to ongoing considerations regarding the risk pool, we are 

finalizing our proposed modifications to paragraph (d)(6) to specify that this special enrollment 

period only applies to those individuals who are already enrolled in a QHP through the 

Exchange. 

Comment: Multiple commenters expressed general support for the modifications we 

proposed to special enrollment periods throughout paragraph (d), including our proposal to allow 

a prospective special enrollment period for qualified individuals enrolled in eligible employersponsored coverage to prevent gaps in coverage. In regards to the proposed revision to 

paragraph (d)(6)(iii) related to employer-sponsored coverage, some commenters suggested that 
CMS-2334-F 382 

the triggering event should not be limited to when an individual is enrolled in employersponsored coverage, but should also cover non-enrolled individuals whose offer of employersponsored coverage does not meet the affordability or minimum value standards. Other 

commenters wanted HHS to allow a qualified individual to be determined eligible for advance 

payments of the premium tax credit within the window of their special enrollment period, but 

prior to when their employer-sponsored coverage ended. 

Response: We believe that individuals with an affordable offer of employer-sponsored 

coverage that meets minimum value should be encouraged to enroll in a plan with their 

employer. If after enrolling, their lowest-cost self-only plan option changes during the coverage 

year such that it no longer meets the affordability and minimum value standards, and an 

individual reports this to the Exchange, the Exchange will accordingly determine them eligible 

for a special enrollment period under paragraph (d)(6). As such, this provision creates incentives 

for individuals to enroll in affordable employer-sponsored coverage, while also minimizing 

potential gaps in coverage if a change in coverage occurs during the year such that an applicant 

would be newly eligible for advance payments of the premium tax credit if their employer 

terminates coverage or changes their plan options. In addition, we are consolidating proposed 

paragraph (d)(10), which provided a special enrollment period to an individual who was enrolled 

in non-qualifying coverage in an eligible employer-sponsored plan, into paragraph (d)(6) and 

modifying it to clarify that consistent with the eligibility standards for advance payments of the 

premium tax credit, the special enrollment period is available for an individual who is enrolled in 

any eligible employer-sponsored plan, and is not eligible for qualifying coverage in an eligible 

employer-sponsored plan. For example, this modification ensures that an individual who is 

enrolled in family coverage but for whom the lowest-cost self-only plan is unaffordable in 

accordance with the Code can access this special enrollment period, as intended in the proposed 
CMS-2334-F 383 

regulation. We will maintain the prospective ability for an enrollee to select a QHP up to 60 

days before their eligible employer-sponsored coverage ends or their employer allows him or her 

to drop coverage if the lowest-cost self-only plan offer is non-qualifying. We note that the 

Exchange cannot provide an individual with advance payments of the premium tax credit while 

he or she is enrolled in eligible employer-sponsored coverage, as specified in 26 CFR 1.36B2(a)(2). 

Comment: A few commenters raised concerns regarding the notice that individuals 

would receive if determined eligible for a special enrollment period, and wanted to ensure that 

the notice would prevent confusion by providing clear guidance to individuals by helping them 

understand the premiums they would be responsible for, and to help them enroll in a QHP in a 

timely fashion. 

Response: The Exchange will not have information regarding actual premiums at the 

time of an initial eligibility determination notice, since an individual will not have selected a 

plan at that point. HHS also developed model notices, released alongside this final rule, that 

reflect how an Exchange should clearly communicate an individual’s eligibility for an SEP and 

the instructions for how he or she can enroll in a QHP. 

Comment: Several commenters also urged HHS to specify additional triggering events 

for special enrollment periods. Some commenters recommended additional triggering events 

described in Medicare Part D, unaffordable rate increases, and misinformation provided to an 

individual regarding minimum essential coverage or advance payments of the premium tax credit 

or cost-sharing reductions. One commenter wanted HHS to include any change in family size as 

a triggering event, raising particular concerns about pregnancy to allow a woman enrolled in a 

catastrophic plan to change QHPs prior to the birth of a newborn. Several commenters requested 

that HHS clarify that certain triggering events would qualify as a special enrollment period under 
CMS-2334-F 384 

“exceptional circumstances” described in paragraph (d)(9) of this section, such as provider 

religious objections to covering certain health services to women. 

Response: We believe that the current special enrollment periods previously proposed 

appropriately account for changes in circumstances that necessitate when individuals would need 

to select a new or different QHP and balance these needs with considerations regarding the risk 

pool. In addition, we note that §147.104(b)(2) specifies that in 2014, an Exchange must provide 

a special enrollment period for individuals enrolled in non-calendar year individual health 

insurance policies beginning on the date that is 30 days prior to the date the policy year ends in 

2014. 

Furthermore, a state may establish additional special enrollment periods to supplement 

those described in this section as long as they are more consumer protective than those contained 

in this section and otherwise comply with applicable laws and regulations. 

HHS intends to issue further guidance related to how Exchanges will determine the 

triggering events that constitute “exceptional circumstances” under paragraph (d)(9) of this 

section. For the issue raised regarding provider religious objections, we believe that there are 

other remedies available to consumers who encounter such situations. 

Comment: One commenter sought clarification that the special enrollment periods only 

apply to the individual market as opposed to the small group market. 

Response: We confirm that the language in §155.420 regarding special enrollment 

periods only applies in its entirety to the individual market. Separate provisions pertain to the 

small group market as discussed at §155.725(a)(3), which excludes §155.420(d)(3) and (d)(6). 

Comment: Some commenters raised concerns regarding our proposals within this section 

that pertain to effective dates. Commenters requested clarification on whether the effective dates 

related to errors by the Exchange or contract violations by QHP issuers would involve setting 
CMS-2334-F 385 

retroactive enrollment dates. Some commenters suggested that the Exchange provide flexibility 

to individuals related to retroactivity for errors as some individuals may not want the Exchange 

to implement an earlier effective date. If allowing for retroactivity, commenters urged that the 

Exchange’s flexibility related to errors or contract violations should only be provided to correct 

the unfair outcome. Commenters asked that the effective date be set for the individual on what it 

would have been without the error, and requested that the Exchange only set the effective date 

according to paragraph (b)(1) of this section if the date on which the determination would have 

been effective without the error cannot be ascertained. Several commenters also raised concerns 

about HHS’ proposal to remove the language about effective dates for advance payments of the 

premium tax credit and cost-sharing reductions within this section. Some commenters worried 

about an Exchange instituting earlier effective dates under paragraph (b)(3) of this section, 

particularly the FFE in 2014. 

Response: Outside of a technical correction within paragraph (b)(3) of this section, we 

did not propose any changes to the provision related to the Exchange instituting earlier effective 

dates if all participating QHP issuers agree to effectuate coverage in a shorter timeframe. We 

believe that there are sufficient regulatory safeguards for QHP issuers in 2014 if they inform the 

Exchange that they are not prepared to institute earlier effective dates. In terms of the 

Exchange’s flexibility related to retroactive eligibility and enrollment in cases of errors or 

contract violations, we note that the outcome is still contingent on an individual selecting a QHP 

when determined eligible for a special enrollment period. This preserves the ability for an 

individual to choose to enroll on a particular date, or to choose not to enroll. 

Summary of Regulatory Changes

We are finalizing the provisions proposed in §155.420 of the proposed rule with the 

following modifications. First, in paragraphs (b)(2)(i) and (d)(2), we expand the special 
CMS-2334-F 386 

enrollment period and special effective dates for birth, adoption, and placement for adoption to 

also include placement in foster care. Second, in paragraph (d)(3), we clarify that the special 

enrollment period for an individual who was not a citizen, national, or lawfully present noncitizen and gains such status also applies to his or her dependents, if eligible under the Exchange 

eligibility rules. Third, we modify paragraph (d)(6) to incorporate the special enrollment period 

proposed in paragraph (d)(10), with modifications to reflect that it accommodates individuals 

who are enrolled in an eligible employer-sponsored plan, but are not eligible for qualifying 

coverage in an eligible employer-sponsored plan. Accordingly, we delete paragraph (d)(10). 

19. Termination of coverage (§155.430) 

In §155.430, we proposed to amend paragraph (b)(1) to clarify that it specifically refers 

to enrollee-initiated terminations. We proposed to add paragraph (b)(1)(i) to account for 

circumstances in which, through periodic data matching, an Exchange finds an enrollee eligible 

for other minimum essential coverage, thus resulting in the enrollee's ineligibility for advance 

payments of the premium tax credit. We also proposed in paragraph (b)(1)(ii), that at the time of 

plan selection, the Exchange would provide a qualified individual with the opportunity to choose 

to remain enrolled in a QHP if the Exchange identifies that he or she has become eligible for 

other minimum essential coverage, and the enrollee does not request a termination in accordance 

with paragraph (b)(1)(i). 

We proposed to amend paragraph (d)(1) to specify that changes in advance payments of 

the premium tax credit and cost-sharing reductions, including terminations, adhere to the 

effective dates specified in §155.330(f). 

Comment: Several commenters cautioned against requiring retroactive termination 

effective dates that would necessitate the return or repayment of claims, premiums, advance 

payments of the premium tax credit, or cost-sharing reduction payments. However, other 
CMS-2334-F 387 

commenters urged HHS to modify termination effective dates in §155.430(d) such that for 

qualified individuals who gained, or were going to gain other coverage, the termination effective 

dates would be the day before the other coverage begins, regardless of when the enrollee notifies 

the Exchange of his or her other coverage. 

Response: We appreciate the comments concerning this provision, and have modified 

the termination effective date at §155.430(d)(2)(iii) for enrollee-requested terminations such that 

QHP issuers and Exchanges may only terminate coverage effective on or after the date on which 

the enrollee requests termination, and not retroactively. We have also clarified in 

§155.430(d)(2)(iv) that the last day of coverage in a QHP for an enrollee who is determined 

eligible for Medicaid, CHIP or the BHP is the day before the individual is determined eligible 

for such coverage, rather than retroactive to the Medicaid or CHIP eligibility effective date. 

Comment: One commenter recommended amending §155.430(d) to specify that changes 

in eligibility, including terminations, must adhere to the effective dates specified in §155.330(f), 

to ensure alignment of processes. 

Response: We agree with the commenter, and have modified the termination effective 

dates in §155.430(d)(3) to cross-reference §155.330(f). 

Comment: Commenters sought clarification of why an enrollee who is eligible for other 

minimum essential coverage would elect to remain enrolled in a QHP without advance payments 

of the premium tax credit. 

Response: While 26 CFR 1.36B-2 specifies that premium tax credits are not available to 

support enrollment in a QHP through the Exchange for an individual who is eligible for other 

minimum essential coverage, such an individual is free to remain enrolled in a QHP through the 

Exchange, without advance payments of the premium tax credit and cost-sharing reductions, if 

he or she remains eligible for enrollment in a QHP through the Exchange. It is possible that an 
CMS-2334-F 388 

individual would want to maintain enrollment without advance payments of the premium tax 

credit and cost-sharing reductions for continuity of coverage reasons. As we proposed in 

155.430(b)(2)(ii), the Exchange must provide an opportunity at the time of QHP selection for an 

individual to choose to remain enrolled in a QHP if he or she has become eligible for other 

minimum essential coverage. If the individual does not choose to remain enrolled in a QHP 

upon such a change, the Exchange would initiate termination upon completion of the 

redetermination process specified in §155.330. 

Comment: Commenters recommended that in addition to the opportunity at plan 

selection, enrollees should be given a second opportunity to elect to remain enrolled in a QHP 

without advance payments of the premium tax credit and cost-sharing reductions when the 

Exchange finds the enrollee is eligible for other minimum essential coverage through a periodic 

data match. 

Response: Exchanges are free to provide additional opportunities for individuals to 

request termination, or to request to remain enrolled in a QHP without advance payments of the 

premium tax credit or cost-sharing reductions, upon losing eligibility for such benefits. In 

paragraph (b)(1)(ii), we have clarified that the opportunity provided at the time of plan selection 

is effective both in cases of periodic data matching as well as when an enrollee reports gaining 

eligibility for other minimum essential coverage that would make him or her ineligible for 

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

Comment: A commenter raised a concern that the proposed revision to the termination 

provision in §155.430(b)(2) broadly permits an individual whose coverage was already 

effectuated during the initial open enrollment period to notify the Exchange or QHP issuer of his 

or her termination of coverage, and switch QHPs. 
CMS-2334-F 389 

Response: Individuals are free to terminate enrollment in a QHP through the Exchange 

at any time. Individuals who wish to begin other coverage in a QHP through the Exchange must 

be within an open or special enrollment period to do so. Each Exchange has the flexibility to 

decide whether to allow enrollees for whom coverage has been effectuated to change QHPs 

during any remaining time in an open or special enrollment period. For October 1, 2013, the 

FFE will not permit an enrollee to change QHPs in such a situation. As noted above, such an 

individual may qualify for a new special enrollment period as specified in 45 CFR 155.420. 

Comment: One commenter noticed that the proposed provisions did not clarify whether 

the Exchange would be permitted to terminate coverage retroactively to the date of death. The 

commenter recommended that the Exchanges have the flexibility to align with non-group market 

standards, and allow for retroactive terminations when the Exchange obtains updated 

information regarding a death. 

Response: We agree with the commenter, and have added paragraph §155.430(d)(7) to 

clarify that in the case of termination due to death, the last day of coverage is the date of death, 

which means that coverage could be terminated retroactively. 

Comment: A commenter noticed that there were conflicting provisions regarding 

terminations at §155.430 and §156.270(b). Section 156.270(b) specifies that QHP issuers must 

notify both the Exchange and enrollees of the effective date and reason for termination at least 

30 days prior to the last day of coverage, and §155.430(d) specifies that in some cases, QHP 

issuers may effectuate termination in fewer than 30 days. 

Response: We have modified §156.270(b) in this final rule to align the coverage 

termination standards for Exchanges and QHP issuers. We have also clarified that QHP issuers 

will promptly notify both enrollees and the Exchange of the termination reason and termination 

effective date when the QHP initiates a termination. 
CMS-2334-F 390 

Summary of Regulatory Changes

 We are finalizing the provisions proposed in §155.430 of the proposed rule, with the 

following modifications: We modified paragraph (b)(1)(ii) to specify that the opportunity 

provided by the Exchange at the time of plan selection for an individual to choose to remain 

enrolled in a QHP if he or she becomes eligible for other minimum essential coverage applies 

both to situations in which eligibility for other minimum essential coverage is identified via a 

periodic data match, as well as situations in which the individual reports the change to the 

Exchange. We modified the termination effective date provision at paragraph (d)(2)(iii), for 

enrollee-requested terminations, such that QHP issuers and Exchanges may only terminate 

prospectively, not retroactively. We modified paragraph (d)(2)(iv), which concerns terminations 

for enrollees who are determined eligible for Medicaid, CHIP or the BHP, such that the last day 

of coverage is the day before the individual is determined eligible for such coverage, rather than 

retroactive to the Medicaid or CHIP eligibility effective date. We also modified the termination 

effective dates in paragraph (d)(3) to cross-reference §155.330(f). We added paragraph (d)(7) to 

clarify that in the case of termination due to death, the last day of coverage is the date of death. 

In addition, we are finalizing an amendment to §156.270(b) to align the coverage termination 

requirements for Exchanges and QHP issuers. 

D. Medicaid Premiums and Cost Sharing

1. Responses to General comments (§447.51 through §447.57) 

Comment: Many commenters supported the streamlined and consolidated approach to the 

revised cost sharing rules. One commenter believed that removing the distinction between the 

requirements of sections1916 and 1916A of the Act was confusing and lost some of the 

differences in the statutory provisions. The commenter was also concerned that under the 

revised rules, states will no longer have to explicitly invoke the use of alternative (section 1916A 
CMS-2334-F 391 

of the Act) cost sharing through the state plan amendment process. One commenter stated that 

CMS should not provide more specific requirements in the regulations to give states more 

flexibility. 

 Response: We maintain the streamlined and consolidated structure in the final 

regulation, which we believe is consistent with the flexibilities and limitations provided in both 

sections 1916 and 1916A of the Act. We believe that consolidation will simplify the rules for 

beneficiaries, providers, and states, and will also simplify the state plan amendment (SPA) 

process. States will continue to be required to submit a SPA to impose new or revised cost 

sharing or premiums, and CMS will review such SPAs to ensure compliance with the regulations 

and statute. 

Comment: Two commenters recommended that rather than remove current §447.58 and 

reserve it, this provision should be used to implement the long-standing statutory provision that 

the cost sharing provisions of sections 1916 and 1916A of the Act cannot be waived unless a 

state meets the criteria required under section 1916(f) of the Act. 

Response: The terms of section 1916(f) of the Act, relating to the requirements states 

must meet for the Secretary to approve a waiver of the cost sharing provisions of sections 1916 

and 1916A of the Act are clear. We do not believe it is necessary at this time to issue regulations 

setting forth the Secretary’s substantive authority under section 1115 of the Act, and such an 

action would be outside of the scope of this rulemaking. We note that we issued procedural 

regulations at 77 FR 11678(Feb. 27, 2012) governing demonstration applications in accordance 

with section 1115(d) of the Act (as added by section 10201(i) of the Affordable Care Act). 

Comment: One commenter stated that given the statutory constraints implemented in the 

regulations, states should be given additional flexibility through the use of a standard waiver 

template applicable to newly eligible adults. One commenter stated that for MAGI-based 
CMS-2334-F 392 

eligibility groups, states should be able to impose premiums and cost sharing on individuals with 

income over 100 percent of the FPL that is equivalent to what those individuals would be subject 

to if they were enrolled in the Exchange. 

Response: Section 1916A of the Act and these regulations provide considerable 

flexibility for states to impose cost sharing on individuals with income over 100 percent of the 

FPL, including the ability to target cost sharing, charge higher amounts, and make the cost 

sharing enforceable. But the statute provides for cost sharing protections for the Medicaid 

population that are not the same as the protections for individuals enrolled in coverage through 

the Exchange. To waive the Medicaid cost sharing requirements and go beyond the flexibilities 

provided in section 1916A of the Act for individuals covered under the state plan, the Secretary 

must find that the requirements of section 1916(f) of the Act have been met. We do not believe 

that a template for waiving the cost sharing requirements in accordance with section 1916(f) of 

the Act is needed at this time. Except for certain specified eligibility groups, sections 1916 and 

1916A of the Act limit premiums imposed under the state plan on those with income over 150 

percent of the FPL. 

Comment: One commenter noted that it appears we left in place §§447.66 through 

447.82 of the current regulations and suggested that CMS remove these sections. 

 Response: This was a drafting error and we have removed those sections in the final 

rule. Those sections reflected alternative premiums and cost sharing requirements under section 

1916A of the Act that have been integrated into new streamlined cost sharing regulations that 

reflect both sections 1916 and 1916A of the Act. 

2. Definitions (§447.51) 

We proposed to add a definition for premiums, which includes enrollment fees and other 

similar charges. We also proposed to add a definition for cost sharing to encompass deductibles, 
CMS-2334-F 393 

copayments, coinsurance, and other similar charges. Because each of these charges would be 

included within cost sharing, we proposed to remove separate requirements related to 

deductibles, copayments, and coinsurance; instead all cost sharing would be subject to a single 

set of rules. We also proposed new definitions for purposes of the premium and cost sharing 

regulations for preferred drugs, emergency and non-emergency services, and alternative nonemergency service providers, since the cost sharing rules vary for these items and services. We 

received the following comments concerning the proposed definitions: 

Comment: Several commenters recommended that we revise the definition of alternative 

non-emergency service provider at §447.54 to mean “a Medicaid-participating provider, such as 

a physician’s office, health care clinic, community health center, hospital outpatient department, 

or similar provider that is actually available and accessible and can provide clinically appropriate 

services for the diagnosis or treatment of a non-emergency condition in a timely manner.” 

 Response: We are finalizing the definition as proposed in §447.51. The revisions 

suggested by the commenters regarding the alternative non-emergency provider being available 

and accessible and being able to provide for the diagnosis or treatment of a non-emergency 

condition are implicit in the requirements that must be met at §447.54(d) before the imposition 

of cost sharing for non-emergency use of the ED. However, we have revised the definition of 

non-emergency services for clarity; this revision is not a substantive change. 

 Comment: Several commenters recommended that we remove the term “coinsurance” 

from the definition of cost sharing at §447.51, since few states charge coinsurance and the statute 

does not use the term. They discussed that eliminating the term “coinsurance” would further the 

goal of simplification. 

 Response: We agree that very few states elect the option to charge coinsurance, but it is 

still an option available to states under the statute, which allows for other “similar charges.” 
CMS-2334-F 394 

Therefore we are maintaining the term “coinsurance” in the definition of cost sharing in the final 

rule. With the streamlining of the regulations in this final rule, states that do elect to charge 

coinsurance must ensure it does not exceed the limits defined in §447.52-54. 

 Comment: We solicited comments on whether we should add definitions of “inpatient 

stay” and “outpatient services” to take into account situations in which an individual is 

discharged and soon thereafter returns to an inpatient facility for continued treatment of the same 

condition. One commenter supported the inclusion of a definition of “inpatient stay” and 

recommended that we adopt the approach taken in Medicare to define a “benefit period” and 

prohibit a second copay for any inpatient stay within the same benefit period. Some commenters 

also supported the addition of a definition of “outpatient services” giving states broad flexibility 

to determine which services may be subject to cost sharing. No commenters opposed adding 

definitions of these terms. 

Response: We are adding a definition of “inpatient stay” in the final rule at §447.51 to 

mean the services received during a continuous period of inpatient days in either a single 

medical institution or multiple medical institutions, and also to include a return to an inpatient 

institution after a brief period when the return is for treatment of a condition that was present in 

the initial period. We also add that the definition of ‘inpatient” has the same meaning as in 

§440.2. We believe this is in the best interest of beneficiaries with chronic conditions who may 

have frequent visits to the hospital or other institution for treatment of the same condition, and is 

consistent with the limitations on cost sharing established in the statute. We also add a definition 

of “outpatient services” for purposes of cost sharing to mean any service or supply not meeting 

the definition of an inpatient stay. This definition will include cost sharing for any services 

outside an institutional setting, not otherwise exempt by statute or regulations, excluding drugs 

and non-emergency use of the hospital emergency department which are defined separately. We 
CMS-2334-F 395 

note that these definitions are applicable only to cost sharing and do not constitute any change in 

definition specific to the provision of benefits or services. 

Comment: One commenter requested CMS provide additional information to states 

regarding how the proposed definition of cost sharing will affect the offset to expenses that states 

can report for Medicaid FFP (§447.51). 

Response: Nothing in the definition of “cost sharing” at §447.51 changes the rule related 

to FFP. Per §447.56(e), which is unchanged from current rules, no FFP is available for any 

premiums or cost sharing that should have been paid by the beneficiary, except for amounts that 

the agency pays as bad debts of providers who are paid in accordance with Medicare reasonable 

cost principles. 

Comment: One commenter recommended revising the definition of a premium at 

§447.51 to exclude enrollment fees because premiums are generally applied on an annual or 

periodic basis whereas enrollment fees are generally a onetime payment. The commenter 

recommends that states should have the flexibility to require an enrollment fee in addition to 

premiums. 

 Response: The statute defines a premium to include any enrollment fee or similar charge, 

and therefore the limitations on total premium charges include both premiums and enrollment 

fees. As the Secretary does not have the authority to change this requirement, we are finalizing 

the definition of premiums as proposed. States do have the flexibility to impose both a monthly 

premium and an initial enrollment fee within the limitations for premiums described in this rule. 

3. Update to Maximum Nominal Cost Sharing (§447.52) 

We proposed to implement sections 1916(a)(3) and (b)(3) of the Act relating to nominal 

cost sharing, and to revise the maximum amount of nominal cost sharing for outpatient services. 

For beneficiaries with incomes at or below 100 percent of the FPL, cost sharing for outpatient 
CMS-2334-F 396 

services may not exceed nominal. For those with income above 100 percent of the FPL, cost 

sharing can either be limited to nominal or may extend up to 10 or 20 percent of the cost of the 

service, depending on the income of the beneficiary. Currently, maximum allowable nominal 

cost sharing is tied to what the agency pays for the service, not to exceed $3.90 for services for 

which the state pays more than $50. Because this can be confusing and burdensome for states, 

providers, and beneficiaries, we proposed to allow instead a flat $4 maximum allowable charge 

for outpatient services. This is a modest $0.10 increase from the current maximum, and as we 

noted as a basis for the proposed rule, the majority of state services are reimbursed at more than 

$50. The proposed changes are discussed in more detail in the January 22, 2013 Medicaid 

Eligibility Expansion proposed rule (78 FR 4658 and 4659). We received the following 

comments concerning the proposed update to the maximum nominal cost sharing provisions: 

Comment: Many commenters wanted CMS to eliminate cost sharing for Medicaid 

beneficiaries altogether because of the extensive research showing that cost sharing on lowincome populations creates barriers to accessing needed care, with particular consequence for 

those with special health care needs. One commenter recommended that CMS revise the cost 

sharing regulations to align with the lowest eligibility threshold for Medicaid based on modified 

adjusted gross income created by the Affordable Care Act (for example, 133 percent of the FPL) 

and create two tiers of cost sharing – one for those with income at or below 133 percent of the 

FPL and one for those with income above 133 percent of the FPL. One other commenter 

recommended that individuals with income below 133 percent of the FPL should be exempt from 

cost sharing. 

Response: We recognize the studies indicating that cost sharing may impact 

beneficiaries’ access to needed and prescribed services, given the low incomes of most of those 

who are enrolled in Medicaid. However, the statute authorizes states to impose cost sharing, 
CMS-2334-F 397 

subject to certain limitations. Additionally, the Affordable Care Act did not modify the cost 

sharing provisions of sections1916 and 1916A of the Act. Section 1916A of the Act 

distinguishes between individuals with income at or below 100 percent of the FPL, those with 

income above 100 and at or below 150 percent of the FPL, and those with income above 150 

percent of the FPL. We do not have the authority to revise the income thresholds set out in 

statute or to preclude states from imposing cost sharing on individuals with income under 133 

percent of the FPL consistent with the limitations in sections 1916 and 1916A of the Act, as 

implemented in these regulations. States do not, of course, have to implement cost sharing to the 

extent authorized by the statute, and most do not do so. We note that in §447.51 of the final rule 

we add a definition of Federal poverty level (FPL) to use the acronym throughout the regulation. 

No substantive change is intended. 

 Comment: Several commenters stated that cost sharing is unnecessary in the context of 

managed care because the point of managed care is to manage utilization and ensure care is 

provided in the most appropriate settings. The commenters argue that managed care already 

achieves the goals that states are attempting to achieve through cost sharing and that cost sharing 

interferes with the medical management effectuated through managed care programs. Another 

commenter believed the rules did not provide enough flexibility in the managed care context. 

One commenter requested that CMS clarify that Medicaid agencies can permit managed care 

organizations to not impose cost sharing on enrollees. 

 Response: While managed care can play a role in ensuring more appropriate 

utilization of health care services, the statute does not limit the imposition of cost sharing to feefor-service delivery systems. In general, states may not establish different cost sharing 

requirements for beneficiaries served by a fee-for-service versus a managed care delivery system 

unless all beneficiaries have the same opportunity to participate in fee-for-service versus 
CMS-2334-F 398 

managed care and to enjoy the benefits of lower cost sharing imposed under one service delivery 

mechanism versus the other. Section 4708(b) of the Balanced Budget Act of 1997 specifically 

removed the statutory cost sharing exemption for enrollees in managed care organizations. 

Managed care organizations may choose not to impose state plan cost sharing on their members, 

but the state must still consider the amount of cost sharing under the state plan in determining the 

actuarial soundness of the capitated payment to the managed care organization. Section 1916A 

of the Act allows states to target cost sharing to specified eligibility groups, as described at 

§447.52(d) of this final rule, and states may target cost sharing specifically to those eligibility 

groups who may be enrolled in managed care, but the targeting must be based on the eligibility 

group and not solely on the basis of enrollment in managed care. However, states may charge 

different co-pays to incentivize the use of certain care models—for example lower co-pays to 

encourage use of primary care medical homes or other patient-centered coordinated care 

models—to the extent that those models provide a different service from those offered at a more 

traditional medical provider, and the particular model of care is broadly available to 

beneficiaries. This is permissible because the state is differentiating co-payments based on the 

service provided, and because all individuals have the choice to receive such services, 

comparability is met. 

Comment: Some commenters recommended that CMS should restore the use of the term 

“nominal,” as that term is used in the existing regulations. They argue that the Act specifically 

limits cost sharing to “nominal” amounts and directs the Secretary to determine what constitutes 

a “nominal” amount each year to ensure that cost sharing amounts are not onerous for 

beneficiaries. 

 Response: The streamlining proposed does not negate the requirements at section 1916 

of the Act that cost sharing for certain populations be nominal in amount. Section 1916 of the 
CMS-2334-F 399 

Act gives the Secretary authority to define nominal cost sharing, which we do at proposed 

§§447.52, 447.53 and 447.54. The amounts described in these sections are the maximum that 

can be imposed on individuals with income at or below 100 percent of the FPL, since these 

individuals may not be subject to the higher cost sharing allowable under section 1916A of the 

Act. The proposed amounts will be updated annually based on the CPI-U, starting 

October 1, 2015. As mentioned, in streamlining the regulations implementing sections 1916 and 

1916A of the Act, we did not use the term “nominal” in the regulatory text, but the amounts 

permitted were set based on the determination that they were nominal amounts. 

Comment: Many commenters agreed with severing the tie between maximum cost 

sharing amounts and what the agency pays for the service but believed that a flat $4 maximum 

amount proposed at §447.52 was too burdensome for Medicaid beneficiaries with income at or 

below 100 percent of the FPL. Many commenters recommended that CMS should set maximum 

cost sharing amounts based on the income and health status of the beneficiaries and 

recommended using Medicare as a model, which establishes two tiers for Part D copayments for 

individuals with income at or below 100 percent of the FPL and individuals with incomes over 

100 percent of the FPL, and recommend the Medicaid cost sharing maximum should be limited 

to $2.10 for those at or below 100 percent of the FPL which is the approximate average of the 

FY 2013 maximum copayment amounts. 

 Response: Sections 1916 and 1916A of the Act allow for different levels of cost sharing 

for individuals with income at or below 100 percent of the FPL versus those with income over 

100 percent of the FPL, similar to the two-tiered structure established for Medicare Part D which 

the commenters recommend. Section 1916A of the Act further differentiates maximum cost 

sharing levels for those with income above 100 or at or below 150 percent of the FPL and those 

with income over 150 percent of the FPL. Current regulations already allow states to charge all 
CMS-2334-F 400 

non-exempt beneficiaries up to $3.90 for many services, and as described previously, we believe 

the $4 maximum charge is comparable, particularly given that the next update to this nominal 

amount has been postponed under this rule until October 1, 2015. We also note that while this is 

the maximum level at which states may set their cost sharing obligations, they may establish 

lower levels of cost sharing. 

 We note that under current regulations at §447.56, states have the option to establish 

different cost sharing charges for individuals at different income levels. We inadvertently 

omitted this section from the proposed rule and are restoring this option in the final rule at 

§447.52(g). We specify in the final rule that if the state imposes cost sharing charges that vary 

by income, it must ensure that lower income individuals have lesser cost sharing than higher 

income individuals. 

Comment: One commenter expressed concern that the simplified $4 maximum for 

individuals with income at or below 100 percent of the FPL would create a disparity with the 

percentage-based maximum cost sharing for individuals with income above 100 percent of the 

FPL. 

Response: It was not our intent to establish a cost sharing system under which lower 

income beneficiaries could be subjected to higher cost sharing than their higher income 

counterparts. Our intent was to define maximum nominal cost sharing, as described under 

sections 1916(a)(3) and (b)(3) of the Act, as $4 for outpatient services. If a state seeks to use the 

authority provided under section 1916 of the Act to impose nominal cost sharing on individuals 

with income at or below 100 percent of the FPL, such cost sharing must also be applied to 

individuals with income above 100 percent of the FPL. Section 1916 of the Act does not allow 

for targeted cost sharing on different groups of individuals, so any cost sharing established under 

this authority is applicable to all non-exempt individuals. The 10 and 20 percent maximums 
CMS-2334-F 401 

established for individuals with income over 100 percent of the FPL are specific to cost sharing 

established under the authority of section 1916A of the Act. This authority specifically allows 

for cost sharing of up to 10 percent of the cost of the service for individuals above 100 and at or 

below 150 percent of the FPL and 20 percent for individuals with income above 150 percent of 

the FPL, with slightly different maximums for drugs and non-emergency use of the emergency 

department. For a specific outpatient service, a state may establish nominal cost sharing under 

the authority of section 1916 of the Act for all non-exempt individuals covered under the state 

plan in an amount not to exceed $4 (as adjusted for inflation), and the state may also establish 

targeted cost sharing for specified individuals under section 1916A of the Act for that same 

outpatient service, in an amount not to exceed 10 percent of the cost of the service. In such a 

case, the cost sharing imposed under the section 1916 authority may not exceed 10 percent of the 

cost of the service if that amount is less than the maximum nominal amount allowed for 

individuals with income under 100 percent of the FPL, because the state must ensure that lower 

income individuals are charged less than individuals with higher income, as described at 

§447.52(g). 

Comment: We solicited comments on the best approach to cost sharing for an inpatient 

stay for individuals with income at or below 100 percent of the FPL. We indicated we were 

considering a maximum cost sharing amount less than what is allowed in current regulation. 

Most commenters believed that the current regulations allowing cost sharing of up to 50 percent 

of what the agency pays for the first day of inpatient care was too great a burden for individuals 

at this income level. A few commenters recommended a maximum copayment of $10, one 

commenter recommended $100, and many recommended that the cost sharing for inpatient care 

should be the same as for outpatient services and be limited to $4. 

 Response: We are revising the regulations to limit maximum cost sharing charges for an 
CMS-2334-F 402 

inpatient stay, for individuals with income at or below 100 percent the FPL, to $75. This $75 

limit will encompass most hospital cost sharing established by state Medicaid programs today 

and will align with the ratio of cost sharing for inpatient versus outpatient services with similar 

charges provided under private insurance plans. To provide a transition period for the small 

number of states with existing inpatient cost sharing exceeding $75, we are adding a new 

paragraph at §447.52(b)(2). Under paragraph (b)(2), states with inpatient cost sharing that 

exceeds $75, as of [INSERT DATE OF PUBLICATION IN THE FEDERAL REGISTER], 

must submit a plan to CMS that provides for reducing inpatient cost sharing to $75 by July 1, 

2017. We redesignate the succeeding paragraphs, accordingly.

Comment: We solicited comments on whether we should define nominal cost sharing 

differently for community-based long term services and supports (LTSS) due to the frequency 

with which these services are provided and utilized by beneficiaries. Many commenters 

supported a separate approach to LTSS because they are concerned about the financial burden 

that an individual needing these services could face if a state were allowed to charge up to $4 for 

each service and most recommended that such services be exempted from cost sharing. 

Commenters were also concerned that allowing cost sharing for LTSS would discourage 

individuals from utilizing LTSS and leave many to opt for institutional care, which is more 

costly for states in the long run. Some commenters recommended that consideration be given to 

limiting the number of copayments permitted per week, month, or other specified timeframe for 

those with significant service needs, including adults with serious mental illness. One 

commenter opposed establishing different limits for community-based long term services and 

supports as it would be administratively burdensome for states. This commenter also pointed out 

that no specific mention is made in the regulations to long-term care community-based services 
CMS-2334-F 403 

provided under sections 1915(c), 1915(d), 1915(i), or 1915(k) of the Act. The commenter 

suggested that perhaps these defined packages are the more appropriate starting place if separate 

cost-sharing rules for these services are considered, but we need to take into account the fact that 

some individuals already contribute to the cost of these services in accordance with the posteligibility treatment of income rules under part 435 subpart H. 

 Response: We agree with commenters that additional protections for non-exempt 

individuals receiving community-based LTSS are appropriate to ensure that receiving care in the 

community, rather than in an institution, remains a financially viable option for such individuals, 

but the statute does not authorize the Secretary to require an exemption. We note that few states 

now impose cost sharing on LTSS. We encourage all states to consider the significant 

consequences of imposing cost sharing on such services, and remind states that they are required 

to comply with the Americans with Disabilities Act and Section 504 of the Rehabilitation Act as 

interpreted in the Olmstead v. L.C. and E.W (“Olmstead”) to ensure they are not placing 

individuals at risk of institutionalization. While we are not directing an exemption for LTSS, we 

agree with commenters that additional protections are necessary for individuals with high service 

needs, and we are revising the proposed aggregate limit for premiums and cost sharing to protect 

all beneficiaries with high medical needs. As discussed further under §447.56, the 5 percent 

aggregate limit applies to all individuals regardless of income. In addition, if premiums and cost 

sharing could exceed 5 percent of family income, states are required to have a mechanism to 

track such premiums and cost sharing in a manner that does not rely on beneficiaries. To 

provide protections to individuals with high service needs and ensure their cost sharing does not 

exceed the aggregate limit, we encourage states to consider prospectively ending a beneficiary’s 

cost sharing obligation at a specified time of the applicable month or quarter given the frequency 

of utilization and the predictability of services provided under an approved plan of care, for 
CMS-2334-F 404 

example. We note that such an approach must take into account the cost sharing for items or 

services that may be received outside the plan of care, such as drugs for example, which would 

also contribute to the 5 percent aggregate limit. 

We considered different options for a separate definition of nominal cost sharing specific 

to LTSS but have determined the most effective way to ensure ongoing affordability of care for 

beneficiaries who are frequent and regular consumers of care, including but not limited to those 

who need LTSS, is to ensure that there is an effective aggregate cap on cost sharing. Aggregate 

out of pocket limits are a common practice in the commercial market and we believe the 

extension of the aggregate limit is consistent with industry practice and will provide the greatest 

protections for beneficiaries, consistent with statutory provisions, while still maintaining states’ 

flexibility to establish appropriate cost sharing mechanisms for their programs. 

 Comment: One commenter believed that proposed §447.52(b)(2), which relates to 

maximum allowable cost sharing when the state does not have fee-for-service payment rates, is 

confusing and could be read to only apply to those with income at or below 100 percent of the 

FPL. 

 Response: We agree and have revised the paragraph, redesignated in this final rule as 

§447.52(b)(3), to be clear that, “in states that do not have fee-for-service payment rates, any cost 

sharing imposed on individuals at any income level may not exceed the maximum amount 

established for individuals with income at or below 100 percent of the FPL.” The same 

clarification to the regulation text is made at §447.53(c). 

Comment: Some commenters recommended that the Secretary provide states the 

flexibility to determine the cost sharing methodology that best aligns with their delivery system 

and provider categories, for example allowing flat co-payments and premiums, co-payments 

based on a percentage of what the agency pays for the service, or premiums calculated as a 
CMS-2334-F 405 

percentage of family income. 

Response: The regulations at proposed §§447.52, 447.53 and 447.54 establish maximum 

limits on the cost sharing that states can impose. While we are no longer requiring that the 

maximum cost sharing amounts be based on what the agency pays for the service, nothing in the 

regulations preclude states from setting their cost sharing amounts on such basis provided that 

the amounts charged do not exceed maximum permissible levels. Similarly, provided that the 

specific limits set out in the statute and codified in the regulations – including the aggregate limit 

not to exceed 5 percent of family income – are respected, states have the flexibility under 

§447.55 to structure premiums in the manner suggested, although, as noted, statutory authority to 

impose premiums is limited. 

Comment: We received several comments suggesting we clarify that states can apply 

different levels of cost sharing for their current Medicaid populations as compared to adults who 

will become eligible under the adult group. 

 Response: In general, any cost sharing established under the state plan must apply to all 

beneficiaries who are not specifically exempted per the requirements at §447.56(a) to ensure 

comparability. There are two exceptions to this requirement, as follows. First, states may vary 

the cost sharing obligation by income level, reflected at §447.52(g) of the final rule, such that 

individuals with family income below a certain threshold could be subject to lower cost sharing 

than those at higher income levels. A state could, for example, decide not to impose cost sharing 

on individuals with incomes below 50 percent of the FPL, and to impose a $1 copayment on 

individuals with income above 50 percent of the FPL. We note that states should have adequate 

processes in place to ensure providers and beneficiaries are aware of who can be charged what 

cost sharing so it is appropriately applied. Second, reflected at §447.52(d), as redesignated in the 

final rule, states may establish different levels of cost sharing for targeted groups of individuals 
CMS-2334-F 406 

with income above 100 percent of the FPL. In this final rule, we clarify that for cost sharing 

imposed for non-preferred drugs and non-emergency services furnished in an ED, states may 

target to specified individuals with income below 100 percent of the FPL as well as those above, 

as discussed below. Thus, states could impose different cost sharing on individuals eligible in 

the new Adult group, or any other eligibility group, with income greater than 100 percent of the 

FPL than that imposed on other beneficiaries. 

Comment: One commenter stated that proposed §447.52(f), which lists the information 

that must be included in the state plan for each cost sharing charge imposed, is revised from the 

current regulations at§447.53(d) but that we did not provide a rationale for the revisions. 

Response: We consolidated the state plan requirements currently contained in 

§§447.53(d) and 447.68 into one new section, redesignated as §447.52(i) in the final regulation. 

The state plan requirements for tracking beneficiary cost sharing related to the aggregate limit 

are contained in §447.56(f)(2) of this final rule. In consolidating the state plan requirements for 

cost sharing under the authority of both sections 1916 and 1916A of the Act, we sought 

generally to maintain the current requirements, while removing any unnecessary regulatory 

provisions. For example, we removed the requirement that states describe the basis for 

determining the charge, because these regulations no longer require states to base their cost 

sharing charges on what the agency pays for the service and this provision was no longer 

necessary. We note that we are making minor technical changes to paragraph §447.52(i)(4) to 

improve the structure of the paragraph and delete extraneous language. No substantive changes 

are intended. 

Comment: One commenter recommended that CMS require that state plans identify 

whether a cost sharing charge is being imposed under the authority of section 1916 or section 

1916A of the Act. 
CMS-2334-F 407 

Response: With the streamlining of the regulations we do not believe it is necessary for 

states to specify what authority they are relying on to impose cost sharing. In their state plan, the 

states seeking to impose or continue cost sharing will need to detail who will be subject to cost 

sharing, for what service, how much, and whether providers may deny services for lack of 

payment. We will review state plan amendments to ensure compliance with sections 1916 and 

1916A of the Act and these regulations. 

 Comment: One commenter requested that we clarify that the regulation authorizes states 

to allow providers to deny services for nonpayment of cost sharing, but does not confer authority 

on states to require providers to do so. One commenter recommended that we include a 

provision that providers are not prevented from reducing or waiving the application of a cost 

sharing requirement on a case-by-case basis. 

Response: The requirements at §§447.52(e)(1) and (e)(2), as redesignated in this final 

rule, are clear that, while states may allow providers to deny services to individuals with income 

above 100 percent of the FPL who have failed to pay cost sharing charges, states are not required 

to permit providers to do so (and providers may only deny services if the state opts to permit 

them to do so). Further, §447.52(e)(3) is clear that even if the state exercises this option, 

providers are not prohibited from nonetheless electing to provide the service to individuals who 

do not pay their cost sharing obligations. This is not at state option – it is a provider option– and 

we do not believe it is necessary to be included in the state plan. 

Comment: A few commenters suggested that the regulations authorize states to allow 

providers to deny services for non-payment of cost sharing charges in more situations, including 

for those with income at or below 100 percent of the FPL. The commenters believe that such 

provider enforcement, particularly in the context of nonemergency use of the emergency room, 

would be appropriate. 
CMS-2334-F 408 

Response: We are unable to extend the scope of the regulations beyond the statutory 

authority provided in sections 1916 and 1916A of the Act, both of which only allow states to 

impose provider-enforceable cost sharing to non-exempt individuals with income over 100 

percent of the FPL and thereby assure the provision of services to lower income individuals who 

may not be able to afford the charge. These provisions of sections 1916 and 1916A of the Act 

cannot be waived unless the state meets the requirements of section 1916(f) of the Act.

Comment: One commenter recommended that the table at §447.52(b) be clarified to 

clearly specify that the amounts are maximum amounts to correspond with the language in 

§447.52(b). 

 Response: We agree with the commenter and have made the revision to §§447.52(b), 

447.53(b) and 447.54(b). 

Comment: One commenter asked if cost sharing must be imposed or if it is an allowable 

activity. 

Response: States are not required to impose cost sharing, it is an option. Some states do 

not impose cost sharing. Furthermore, if a state does impose cost sharing, it has the option to 

charge less than the maximum amounts. Many states do so today. 

Comment: One commenter requested clarification as to whether §447.52(e) (relating to 

the prohibition against multiple charges) includes premiums. 

 Response: §447.52(e) has been redesignated as §447.52(f) in this final rule and pertains 

to cost sharing only, which is defined in §447.51 to include any copayment, coinsurance, 

deductible or similar charge. Premiums are not encompassed in this definition, and states may 

impose both a premium and cost sharing on a given individual subject to the applicable 

conditions on such charges. 

 Comment: One commenter recommended revising the rule to allow states to waive or 
CMS-2334-F 409 

reduce cost-sharing for outpatient services delivered by designated high-value providers or in 

high-value care settings, even if those services may otherwise be subject to cost-sharing. One 

commenter requested clarification that the cost sharing rules may not be applied to different 

types of practitioners based on their licensure and that cost sharing within a category of services 

is not used to discriminate against health care practitioners acting within their state-defined 

licensure. 

 Response: Nothing in the regulations prevents a state from determining which services 

are subject to cost sharing and the amount charged, or by what type of provider the service is 

delivered. As suggested by the commenter, states could differentiate cost sharing for services 

provided by a designated high value provider as long as the state ensures that all beneficiaries 

have access to such providers. 

Comment: One commenter recommended that we include in the final rule, language 

currently at §447.60 that was omitted from the proposed rule, which requires that any cost 

sharing charges imposed by managed care organization on Medicaid enrollees be in accordance 

with the requirements set forth in the regulations. 

 Response: We agree with the commenter. The omission of this provision was not 

intentional and we have included this requirement in the final rule at §447.52(h). 

 Comment: One commenter believed that if deductibles are an option for a state, they 

should be administered at an individual level on an annual basis because the commenter believes 

monthly and/or family-level deductibles are complex, confusing, and not the standard generally 

used by health plans especially when combined with other cost sharing. 

 Response: Deductibles are permitted at an individual level under the statute and these 

regulations. Any deductible imposed by a state must be within the maximum amounts 

established in §§447.52-54, and subject to the aggregate limit described in §447.56(f) of this 
CMS-2334-F 410 

final rule. 

4. Higher Cost Sharing Permitted for Individuals with Incomes above 100 percent of the FPL 

(§447.52) 

We proposed to consolidate the current multiple cost sharing rules implementing sections 

1916 and 1916A of the Act, respectively, into one set of streamlined cost sharing regulations for 

both statutory authorities at proposed §447.52. Under section 1916 of the Act, states may 

impose nominal cost sharing on individuals not exempted by the statute. Under section 1916A 

of the Act, statute states may impose cost sharing at higher than nominal levels for nonexempt 

individuals with incomes above 100 percent of the FPL. For individuals with income above 100 

and at or below 150 percent of the FPL, section 1916A of the Act permits cost sharing for 

nonexempt services up to 10 percent of the cost paid by the state for such services. (Different 

rules, discussed below, pertain to cost sharing for drugs and emergency department services). 

For individuals with income above 150 percent of the FPL, such cost sharing may not exceed 20 

percent of the cost paid by the state. We received the following comments concerning the 

proposed provision for higher cost sharing permitted for individuals with incomes above 

100 percent of the FPL: 

Comment: A few commenters were concerned that we proposed to permit cost sharing 

for children. 

 Response: We did not propose new policy in the proposed rule related to cost sharing for 

children. Section 1916A of the Act permits states to impose cost sharing on certain children by 

exempting children covered under mandatory eligibility categories. This statutory option, 

implemented at §447.70 of the current regulations, is retained in this rulemaking at 

§447.56(a)(1)(i) through (VI). We revised the description of children who are exempt from 

premiums and cost sharing at §447.56(a)(1)(i)(iii) to reflect the consolidation of different 
CMS-2334-F 411 

statutory eligibility groups for children under a single regulatory section at §435.118 of the 

March 2012 final rule. We also made a technical change to the description of children exempt 

from premiums and cost sharing under §447.56(a)(1)(i)(iv) to reflect the changes in the types of 

assistance available under Title IV-E of the Act. These are not substantive changes and are 

intended solely to assist states in appropriately identifying those children who may be charged 

premiums and cost sharing and exempting those who may not, as described in the statute. 

Comment: One commenter recommended that CMS specify health centers’ statutory 

responsibility related to the grants provided under section 330 of the Public Health Services Act 

(PHSA) to provide services regardless of ability to pay and clarify that states may not impose on 

health centers any obligations that conflict with these requirements. The same commenter also 

recommended that CMS add an exception at §447.56(c)(3), entitling FQHCs to full Medicaid 

payment in situations in which they are required to collect cost sharing that would directly 

conflict with the section 330 requirements to waive a portion of the Medicaid cost sharing, and at 

§447.56(e)(1) to authorize FFP for cost sharing amounts waived by an FQHC. At a minimum, 

the commenter recommends that CMS and HRSA issue joint guidance to minimize the tension 

between the Medicaid and section 330 of the PHSA regulations concerning patient payment 

obligations for services provided by FQHCs. 

Response: The obligations of FQHCs related to their section 330 grants, as well as 

reimbursement to FQHCs, are beyond the scope of this regulation. This regulation does not 

require that FQHCs bill patients for cost sharing, but it does require that the payment to the 

provider take into account the cost sharing obligation. This requirement that states deduct a 

beneficiary’s cost sharing obligation from the payment to providers is not new policy. It is 

contained in current regulations at §§447.57 and 447.82, redesignated at §447.56(c) in this final 

rule. FQHC services are not specified as exempt from cost sharing under sections 1916 or 
CMS-2334-F 412 

1916A of the Act and we do not believe that the Secretary has authority to mandate that states 

nonetheless exempt such services from cost sharing based on FQHCs’ section 330 obligations. 

States, however, do have the flexibility to exempt particular services (including FQHC services) 

from cost sharing and/or to adjust the amount of cost sharing imposed, consistent with the 

regulations. 

Comment: Some commenters recommended permitting flat-dollar copayments for all 

income groups, which they think would be easiest for enrollees and providers to understand and 

for Medicaid plans to administer. One commenter requested that we clarify how a limit based on 

10 percent of the cost the agency pays for the service for individuals with family income above 

100 percent but at or below 150 percent of the FPL and 20 percent of the cost the agency pays 

for the service for individuals with income over 150 percent of the FPL, would apply to FQHC 

services reimbursed under the prospective payment system (PPS). The commenter is concerned 

that because the amount of reimbursement under the PPS varies by health center, the maximum 

allowable cost sharing obligation for a particular service or visit would differ from health center 

to health center, and that this would be administratively burdensome for states, managed care 

plans, and providers; inequitable for beneficiaries; and could impede access to FQHC services. 

The commenter recommends that we revise the rule to provide that the maximum cost sharing 

for all individuals for FQHC services reimbursed under the PPS rate be the same as the 

maximum rate for individuals with income at or below 100 percent of the FPL. 

Response: Section 1916A of the Act sets the maximum allowable cost sharing for 

individuals with income over 100 percent and at or below 150 percent of the FPL at 10 percent 

of what the agency pays for the service and for individuals with income over 150 percent of the 

FPL, at 20 percent of what the agency pays. We do not have the authority to change the 

maximum amount to a flat fee. We note that these percentages represent the maximum 
CMS-2334-F 413 

allowable charges. States have the flexibility to establish lesser cost sharing amounts for any 

service, and they may use a flat fee as long as it does not exceed the maximum level permitted. 

In determining the cost sharing for a particular service, states also can use the average payment 

made for the service across providers or units of the service to develop a consistent cost sharing 

amount within the maximum amount allowed by statute and regulation. 

Comment: One commenter asked for clarification regarding the definitions of income 

that states should use in setting cost sharing charges, other than to say that the definitions of 

household income in §435.603 should be used in determining the aggregate limit on costsharing. The commenter sought further clarification on the meaning of “family income” and 

suggested that states be required to describe their methodology in their state plan for approval by 

the Secretary as reasonable. 

 Response: In the interest of streamlining the requirements and reducing administrative 

burden, we are not requiring states to include, in their state plans, the methodology for 

determining income specific to premiums and cost sharing. For individuals whose financial 

eligibility is determined based on modified adjusted gross income (MAGI), “family income” for 

the purposes of imposing premiums or cost sharing or for defining the aggregate limit means 

“household income” using MAGI-based methods, as set forth in §435.603. For individuals who 

are exempt from MAGI under section 1902(e)(14)(D) of the Act, implemented at §435.603(j) of 

the regulations, we are still examining options related to income determinations. 

Comment: One commenter stated that we do not have the authority to allow targeted cost 

sharing because it would violate comparability and recommended that we delete proposed 

§447.52(c), relating to “targeted cost sharing.” Another commenter stated that additional 

targeting and variation of cost sharing within groups would add unnecessary complexity and 

should not be used. 
CMS-2334-F 414 

Response: We are retaining the option for states to target cost sharing to specified 

groups of individuals. Comparability is required for cost sharing imposed under section 1916 of 

the Act. However, section 1916A(a)(1) of the Act provides that, “a State, at its option and 

through a state plan amendment, may impose premiums and cost sharing for any group of 

individuals (as specified by the State) and for any type of services ... and may vary such 

premiums and cost sharing among such groups or types, consistent with the limitations 

established under this section.” This provision is codified in current regulations at §447.62(a). 

Therefore, at redesignated §447.52(d) of the final rule states may apply targeted cost sharing on 

specified groups of individuals; such cost sharing is limited to individuals with income over 100 

percent of the FPL, per the requirements of section 1916A of the Act. We have revised 

§447.52(d), adding paragraphs (1) and (2) to clarify that for cost sharing imposed for nonpreferred drugs and non-emergency services furnished in an ED, the state may target to 

individuals below 100 percent of the FPL as well as those above, as allowed by section 1916A of 

the Act. 

Comment: We solicited comments on whether the regulations should specify ways in 

which states may target different defined groups of individuals (with income over 100 percent of 

the FPL) for differential cost sharing under proposed §447.52(c). One commenter suggested that 

the regulation should make it clear that targeting must be reasonable, that individuals with lower 

incomes may not be charged more than those with higher incomes, and that targeting may not 

discriminate based on gender, physical or mental disability, age, race, ethnicity, or any other 

protected classification. Another commenter requested that the Secretary include criteria that 

must be considered by states in targeting cost sharing to particular types of beneficiaries. 

 Response: Section 1916A of the Act gives states authority to target premiums and cost 

sharing to any group of individuals with income above 100 percent of the FPL (for cost sharing 
CMS-2334-F 415 

imposed for non-preferred drugs or non-emergency use of the emergency department, states can 

target to individuals at all income levels as discussed above), and to vary such premiums and 

cost sharing among the groups. In examining all the possible ways in which targeting could be 

applied, we believe targeting based on eligibility group or income level are the only targeting 

methods consistent with section 1916A of the Act, which will not lead to discriminatory 

practices. Thus, states can choose to impose premiums or cost sharing on individuals with 

income above 100 percent of the FPL in particular eligibility groups and to vary them by income 

level within the group. States may not target solely on the basis of delivery system – managed 

care, fee-for-service, and primary care case management – but may target eligibility groups 

covered through a specific service delivery system like managed care. States may not target 

based on disease-type or chronic condition. We note that states can impose cost sharing on 

whichever non-exempt service they choose for individuals at any income level subject to 

limitations in the regulations, and are not required to impose cost sharing on all non-exempt 

services in the state plan. For the recommendation regarding lower income versus higher income 

individuals, as noted above, we added §447.52(g) to specify that if a state imposes incomerelated charges, it may not impose a higher charge for lower-income individuals than is charged 

for higher-income individuals. 

5. Cost sharing for drugs (§447.53) 

 We proposed to establish a single provision governing cost sharing for drugs which 

would apply to nonexempt individuals at all income levels. To provide additional flexibility to 

states, and to further encourage the use of preferred drugs, we proposed to define “nominal cost 

sharing” as no more than $8 for non-preferred drugs and $4 for preferred drugs for individuals 

with income at or below 150 percent of the FPL. For individuals with family income above 

150 percent of the FPL, per section 1916A(c) of the Act, a higher cost sharing charge may be 
CMS-2334-F 416 

established for non-preferred drugs, not to exceed 20 percent of the cost the agency pays for the 

drug. While states may not impose cost sharing on exempt individuals for preferred drugs, states 

may elect to impose cost sharing for non-preferred drugs on individuals who are otherwise 

exempt up to the nominal cost sharing amount. Cost sharing for a non-preferred drug must be 

limited to the amount imposed for a preferred drug if the individual's prescribing provider 

determines that the preferred drug for treatment of the same condition either will be less 

effective for the individual or will have adverse effects for the individual or both. Under the 

proposed rule, states would have the flexibility to apply differential cost sharing for preferred 

versus non-preferred drugs. For example, a state may charge $1 for preferred and $5 for nonpreferred drugs or $0 for preferred and $8 for non-preferred drugs. We received the following 

comments concerning the proposed cost sharing for drugs provisions: 

Comment: A few commenters suggested we take an approach that distinguishes between 

formulary generic and formulary brand drugs (instead of preferred and non-preferred). One 

commenter noted that this approach may be more helpful in the managed care context. One 

commenter requested clarification as to whether the requirement that all drugs be considered 

preferred for cost sharing purposes if the agency does not differentiate between preferred and 

non-preferred, is a de facto preferred status. The commenter was concerned that this could result 

in lower cost sharing for more expensive brand name drugs that are not identified by the state as 

non-preferred. One commenter was opposed to the definition of preferred drugs at proposed 

§447.51 to include all drugs if the agency does not differentiate between preferred and nonpreferred drugs. 

Response: Section 1916A of the Act allows states to have different cost sharing levels 

for preferred and non-preferred drugs, but does not speak to generic versus brand name drugs. 

States may use a variety of methods to determine preferred and non-preferred drugs including 
CMS-2334-F 417 

whether the drug is a brand or generic. States also maintain other cost control measures, such as 

mandatory generic substitution policies. The definition of preferred drugs, which includes all 

drugs if the agency does not differentiate between preferred and non-preferred drugs, is 

consistent with section 1916A(c) of the Act and current regulations at §447.70(a). 

 Comment: Several commenters disagreed with the proposed policy to allow cost sharing 

for up to $4 for preferred drugs and $8 for non-preferred drugs. They described research 

showing that even low prescription drug copayments may cause very low income people to 

defer filling prescriptions. The commenters argue that Medicaid beneficiaries cannot be 

incentivized to select a preferred drug, as is accomplished with some success among middle 

class consumers; instead, with such high cost sharing differentials, Medicaid enrollees will go 

without the “non-preferred” drug even if it is medically necessary and would work far more 

effectively than a preferred drug. These commenters recommend that CMS define nominal 

drug cost sharing in relation to the income and health status of the Medicaid population and 

amend the table at §447.53(b) to establish maximum cost sharing as follows: individuals with 

family income at or below 150 percent of the FPL – Preferred drugs: $1.10, Non-preferred 

drugs: $3.30; individuals with family income exceeding 150 percent of the FPL – Preferred 

drugs: $1.10; Non-preferred drugs: $4.20. Two other commenters expressed concern with the 

$8 copay for non-preferred drugs if states have latitude to classify most or all of the brand-name 

drugs in a therapeutic class as non-preferred. One commenter stated the proposed increase in 

cost sharing is unnecessary because states already have many tools to control prescription drug 

costs and have high utilization of generic drugs. Other commenters appreciated the flexibility 

proposed for cost sharing. One commenter welcomed the increased maximum cost sharing, and 

one commenter stated that allowing states to charge higher cost sharing for non-preferred drugs, 

when effective, lower-cost alternatives are available, is a reasonable policy. 
CMS-2334-F 418 

 Response: We agree that cost sharing is just one of many tools that states may use to 

manage drug utilization, and states may determine that higher cost sharing does not enhance 

their efforts to promote the use of preferred drugs. However, we also agree that it is a tool 

permitted under the statute. In the final rule we are maintaining the option for states to impose 

cost sharing of up to $4 for preferred drugs and $8 for non-preferred drugs for all individuals, 

including those with income at or below 150 percent of the FPL, and for those with income 

above 150 percent of the FPL, to continue to establish higher non-preferred drug cost sharing of 

up to 20 percent of the cost of the drug. As described at §447.53(e), as revised in the final rule, 

if a prescriber finds that the non-preferred drug is medically necessary, the state must have a 

process in place to limit cost sharing for that drug to the amount for preferred drugs. 

Comment: One commenter suggested that the final rule require a cap on cost sharing for 

non-preferred drugs as a necessary protection for this vulnerable population. 

 Response: The 5 percent aggregate limit on cost sharing in the current regulation and 

included in this final regulation at §447.56(f) applies to all cost sharing, including that for nonpreferred drugs. States have the option to establish additional cost sharing limits for particular 

services, such as drugs at §447.56(f)(5) of the final rule, but we do not have the authority to 

mandate a cost sharing cap specific to non-preferred drugs. 

Comment: A few commenters stated that CMS was circumventing the statutory 

requirements of section 1916A of the Act by setting two different maximum “nominal” amounts 

for preferred and non-preferred drugs because the Act requires that cost sharing for all drugs 

imposed on individuals with income under 150 percent of the FPL must not exceed the 

“nominal” cost sharing as otherwise determined under section 1916 of the Act. Additionally, the 

commenter notes that section 1916A of the Act explicitly allows states to charge up to twice the 

nominal amount for non-emergency care furnished in an emergency department, so if Congress 
CMS-2334-F 419 

intended to allow the same for non-preferred drugs, Congress would have provided such an 

option in the statute. 

 Response: Section 1916 of the Act gives the Secretary the authority to define nominal 

cost sharing. There is nothing in the statute which requires a single definition of what is 

considered to be nominal. Moreover, the general cost differential between preferred and nonpreferred drugs merits a different nominal maximum for each type, therefore we believe it is 

appropriate to establish a $4 nominal maximum for preferred drugs and an $8 nominal maximum 

for non-preferred drugs. 

Comment: One commenter expressed concern for vulnerable populations that require 

certain classes of drugs, such as HIV antiretroviral drugs, and recommended they be available at 

the “preferred” drug cost-sharing level. 

Response: States have the discretion to designate which covered drugs within each class 

of drugs will be considered preferred or non-preferred. Beneficiaries must always have access to 

necessary drugs at the preferred drug rate because a given drug cannot be considered nonpreferred unless the state has an equivalent drug available at the preferred rate. In addition, 

§447.53(e), as revised in this final rule, requires states to provide a non-preferred drug at the 

preferred drug cost sharing level, if the prescribing provider determines that the preferred drug 

would be less effective or have adverse effects on the individual. 

Comment: A few commenters recommended that we convert the non-preferred 

prescription drug copayment to a flat dollar amount for individuals with incomes over 

150 percent of the FPL instead of basing cost sharing on what the agency pays for the drug. 

Response: As discussed above, section 1916A of the Act sets the maximum allowable 

non-preferred drug cost sharing level for individuals with income over 150 percent of the FPL at 

20 percent of what the agency pays for the drug. CMS does not have the authority to change the 
CMS-2334-F 420 

maximum amount allowed to a flat fee, but states may construct their charges as flat fees as long 

as such fees are within the maximums established by law. 

 Comment: One commenter supported the proposed increase of allowable cost sharing for 

non-preferred drugs when Medicaid recipients and not Medicaid pharmacy providers bear 

responsibility for the higher cost sharing. The commenter requested that, when enhanced cost 

sharing for prescription drugs is implemented, we mandate states to condition services on the 

payment of such cost sharing. Alternatively, the commenter requested that CMS mandate states 

to develop a mechanism whereby participating pharmacies can submit unpaid cost sharing 

amount to the state for payment. One commenter recommended that HHS require states to 

implement cost sharing provisions for prescription drugs and to permit providers to withhold 

medication (whether preferred or non-preferred) from beneficiaries for failure to pay cost 

sharing.

Response: The imposition of premiums or cost sharing is an option permitted states 

under sections 1916 and 1919A of the Act and cannot be mandated by the Secretary. The statute 

stipulates that providers, including pharmacies, may not deny services to individuals with 

income at or below 100 percent of the FPL due to inability to pay their cost sharing obligation. 

States have the option to allow providers to deny services to individuals with income over 100 

percent of the FPL if they do not pay required cost sharing. If a state opts to allow providers to 

deny services if the individual does not pay the cost sharing, this must be indicated in their state 

plan. Regardless of whether an individual pays the cost sharing, states must deduct the payment 

made to the provider by the amount of the individual’s cost sharing obligation in accordance 

with §447.56(c) of this final rule. We do not have the statutory authority to alter these 

requirements in the manner being suggested by the commenters. 

Comment: One commenter requested clarification as to whether states have the option to 
CMS-2334-F 421 

impose cost sharing for non-preferred drugs on individuals otherwise exempt from cost sharing. 

One commenter recommended that states should have the option to impose cost sharing on 

exempt individuals for certain classes of prescription drugs that the state identifies as elective or 

controversial, such as narcotics. 

Response: Section 1916A of the Act allows states to impose cost sharing for nonpreferred drugs on otherwise exempt individuals, provided that such cost sharing does not 

exceed a nominal amount. At §447.53(b) of the final rule, we have defined nominal cost sharing 

for preferred drugs as no more than $4 and for non-preferred drugs at no more than $8. We are 

revising §447.53(d) in the final rule to clarify that cost sharing for non-preferred drugs imposed 

on otherwise exempt populations cannot exceed the nominal amount defined in §447.53(b) in 

accordance with section 1916A(c) of the Act. While states may impose cost sharing on some 

drugs and not other drugs, all cost sharing must be consistent with the requirements of 

§447.53(b) and, if there are no drugs identified as non-preferred drugs in a class, cost sharing for 

drugs in that class cannot exceed the nominal amounts for preferred drugs. Identification of 

“elective” or “controversial” drugs is beyond the scope of this regulation. 

 Comment: A few commenters stated that the proposed cost-effectiveness standard for 

determining which drugs are non-preferred is inappropriate and does not include the antidiscrimination protections contained in the Affordable Care Act. The commenter believed that 

this standard would threaten access to needed treatment and would result in broad, one-size-fitsall policies that do not reflect important differences in individual beneficiary needs and 

circumstances. One commenter recommended that the definition of preferred drugs not be 

restricted to low-cost or exclusively generic agents, and should encourage the inclusion of highvalue brand agents, especially when a generic equivalent is not available. The commenter 

believed that preferred and non-preferred drugs should be chosen based on clinical value, not 
CMS-2334-F 422 

solely on the basis of acquisition price. One commenter recommended that the definition of 

preferred and non-preferred drugs be determined based on clinical assessment of the individual. 

One commenter recommended that the definition of preferred drugs be expanded to include the 

generic equivalent of brand named drugs. 

 Response: The definition of preferred drugs for cost sharing purposes at §447.51 does 

not prescribe the type of drugs that the state designates as preferred or non-preferred, and 

requiring the inclusion of certain drugs on a state’s preferred drug list is beyond the scope of this 

regulation. However we do not believe that preferred drug programs limit individuals’ access to 

necessary drugs. These regulations require that states establish a process through which a 

beneficiary can access a non-preferred drug, which his or her provider has determined to be 

medically necessary for the beneficiary, with cost sharing limited to the amount applicable to 

preferred drugs. We believe that this policy would not violate any non-discrimination standards 

since all beneficiaries are subject to the Medicaid requirements of the preferred drug list, which 

direct that it be developed in a manner that does not discriminate against any particular class of 

individual, or type of disability or disease. In addition, as previously noted in guidance (SMDL 

#04-006, September 9, 2004), states need to assure that patients continue to have access to 

needed medications so in addition to cost considerations, a preferred drug list should be based on 

clinical criteria that considers the efficacy of the drug to others in that class. 

Comment: Several commenters were concerned that allowing states to impose cost 

sharing of up to 20 percent of what the agency pays for a non-preferred drug, for individuals 

with income over 150 percent of the FPL, would be overly burdensome for individuals with 

chronic conditions. 

 Response: Section 1916A(2)(B) of the Act provides for the flexibility to impose cost 

sharing at these levels for individuals with incomes above 150 percent of the FPL. We did not 
CMS-2334-F 423 

propose to change this flexibility, which is codified at §447.74 of the current regulations, and is 

moved to §447.53 in this final rule. The Secretary does not have the authority to change or 

reduce the percentage of the cost of the item or service that is the maximum allowable cost 

sharing because the statute is clear. We note that such cost sharing is subject to the aggregate 

limit codified at §447.56(f) of this final rule. 

Comment: Several commenters suggested that we revise §447.53(e) to provide more 

detailed requirements for the process states must have in place to allow for cost sharing at the 

preferred drug level, in the case of a non-preferred drug that the prescribing provider has 

determined would be less effective or may adversely affect the individual. The commenters 

stated that any process should take into account the electronic claims processing used by 

pharmacies and pharmacists and should be easy for the prescriber to invoke. Several commenters 

also recommended that states be required to describe their process in the state plan and provider 

manuals. One commenter believed that this requirement undermined the intent of the regulations 

to encourage the use of less expensive preferred drugs because for a state to actually cover a nonpreferred drug, the prescriber already has to receive prior-authorization, meaning most, if not all 

non-preferred drugs would have to be provided at the lower cost sharing amount. 

 Response: States must have a process in place for providing prior authorization of 

medically necessary drugs that meets the existing requirements at section 1927(d)(5) of the Act, 

therefore we are not prescribing additional requirements in this regulation or requiring states to 

describe the process in their state plan. However, we are revising the final rule to add the word 

“timely” to the process states must use to allow for cost sharing at the preferred drug level in 

accordance with the section 1927 of the Act. We will monitor state implementation and 

determine whether additional guidance is necessary. 

6. Cost sharing for emergency department (ED) services (§447.54) 
CMS-2334-F 424 

 Sections 1916(a)(3) and 1916(b)(3) of the Act, allow states to obtain a waiver to impose 

cost sharing for non-emergency use of the ED that does not exceed twice the nominal amount for 

other outpatient services. Section 1916A(e)(2)(A) of the Act also allows cost sharing for 

individuals with income above 100 percent of the FPL and at or below 150 percent the FPL in an 

amount not to exceed twice the nominal amount as determined by the Secretary. We proposed to 

consolidate current regulations at §447.54(b) and §447.72 related to non-emergency use of the 

ED into proposed §447.54. To facilitate states’ ability to utilize flexibility provided in existing 

regulations, for all individuals with income at or below 150 percent of the FPL, we proposed to 

allow cost sharing of no more than $8, which represents twice nominal, for non-emergency use 

of the ED without requiring a waiver. The proposed changes are discussed in more detail in the 

January 22, 2013 Medicaid Eligibility Expansion proposed rule (78 FR 4659 and 4660). We 

received the following comments concerning the proposed provision for cost sharing specific to 

non-emergency use of the ED: 

Comment: Many commenters opposed the policy to allow up to $8 for non-emergency 

use of the ED because it might cause individuals with incomes at or below 150 percent of the 

FPL to forego necessary services, including potentially lifesaving services, and because many 

Medicaid beneficiaries go to the ED because they lack access to regular sources of primary care. 

Foregoing necessary services may result in adverse health outcomes requiring more expensive 

care later. Many commenters recommended that the maximum allowable cost sharing should be 

set at $3.30 for individuals with family income at or below 100 percent of the FPL, $6.30 for 

individuals with family income from 101-150 percent of the FPL and $12.00 for individuals with 

family income above 150 percent of the FPL. Several other commenters recommended that the 

maximum allowable cost sharing amount for non-emergency use of the ED be limited to $4 to 

align with the what is proposed for other services. Several commenters recommended that CMS 
CMS-2334-F 425 

allow states the flexibility to impose cost sharing for non-emergency use of the ED that exceeds 

$8, to decrease inappropriate use of the ED. One commenter recommended that up to three 

times the outpatient services copayment (rather than two) should be allowed in states that are 

working to expand access to alternative options for care. Many commenters recommended that 

for individuals with family income at or below 100 percent of the FPL, we revise the regulations 

to allow cost sharing for non-emergency use of the ED, only when no cost sharing (rather than 

lesser cost sharing) is imposed to receive such care through an outpatient department or other 

alternative health care provider in the geographic area of the hospital ED involved. 

 Response: We believe it is important for states to have options to incentivize care in the 

most appropriate settings and to encourage individuals to develop a regular source of care, to the 

extent that beneficiaries are assured timely access to needed care. One option to achieve this is 

through cost sharing initiatives, therefore, we are finalizing §447.54(b) as proposed, however we 

note that we have made some minor technical changes in the final rule to spell out the term 

emergency department instead of using the acronym ED and to refer to non-emergency services 

instead of treatment. The technical changes are for clarification only and are not intended to be 

substantive. The $8 maximum for non-emergency use of the ED is twice the nominal amount for 

outpatient services, which is the maximum allowable cost sharing permitted under sections 1916 

and 1916A of the Act for individuals with income at or below 150 percent of the FPL. The 

statute does not limit the amount states can impose for non-emergency use of the ED on 

individuals with income over 150 percent of the FPL (other than through the aggregate cap of 5 

percent of family income), and we do not have the authority to limit such cost sharing through 

regulation. Section 1916 of the Act requires that there be an accessible alternative provider to 

provide the services, but does not require that there be no cost sharing for such services and 

section 1916A of the Act requires there be lesser cost sharing for services provided by the 
CMS-2334-F 426 

alternative provider, or no cost sharing if the cost sharing is being applied to an otherwise 

exempt individual. To streamline the requirements to make it administratively feasible for states 

to meet this requirement, we are maintaining the proposed policy in the final rule that services 

provided by an alternative provider must be available with lesser cost sharing or no cost sharing 

only if the individual is otherwise exempt from cost sharing. We note that for individuals with 

income at or below 100 percent of the FPL the state may not allow a provider – including a 

hospital ED – to deny services in the event that an individual is unable to pay the cost sharing. 

 We note that in the final rule we are deleting §431.57 of this subchapter relating to the 

waiver of cost sharing requirements for states to impose cost sharing for non-emergency services 

furnished in an ED. This language is redundant with §447.54(b) of the final rule, which allows 

states may impose cost sharing up to twice the nominal amount for such services through the 

state plan. In addition to this technical change, we updated the citations to the cost sharing 

regulations at §§435.121, 435.831, 436.831, 438.108, 440.250, 447.15, 447.20, and 457.540. 

Comment: One commenter recommended that CMS make public the amount of 

documented Medicaid savings in states that have imposed cost sharing for non-emergency use of 

the ED. 

Response: We are not revising the rule to require states to document savings. However, we 

will examine available options for sharing best practices and other data available from states 

with successful ED diversion programs. 

Comment: Several commenters noted a drafting error at §447.54(c), which they believe 

should be revised to read: “... not to exceed the maximum amount established in paragraph (b) 

of this section...” The commenters also believed we made an error in §447.54(d), which they 

think should read “... to impose cost sharing under paragraph (a), (b) or (c) of this section of 

non-emergency....” 
CMS-2334-F 427 

 Response: We agree that there was a drafting error in paragraph (c) and have corrected 

the provision in this final rule. However, paragraph (d) was written as intended, and is finalized 

as proposed. Paragraphs (a) and (c) provide the authority to impose cost sharing, while 

paragraph (b) describes the maximum allowable amounts. 

Comment: One commenter recommended that cost sharing for non-emergency use of the 

ED should be permitted for any visit to the ED that does not result an inpatient stay. 

 Response: Sections 1916 and 1916A of the Act prohibit cost sharing for emergency 

services. As there are many emergency conditions and services that do not result in an inpatient 

stay, the commenters’ suggested policy would violate the statute. 

Comment: Many commenters recommended that states that impose cost sharing for nonemergency services provided in an ED be required to permit newly-enrolled individuals to make 

at least one non-emergency ED visit before requiring them to pay this cost-sharing obligation. 

 Response: States have the option to establish such a policy under current regulations and 

the new rule as finalized, but we do not think it appropriate to require it. 

Comment: Some commenters suggested that we designate underserved areas and/or 

certain periods of time in which insufficient access warrants exemption from cost sharing for 

non-emergency use the ED. 

 Response: Per §447.54(d), before imposing cost sharing for non-emergency use of the 

ED, the hospital must provide the individual with a name of and location of an available and 

accessible provider and provide a referral to coordinate scheduling. If geographical or other 

circumstances prevent the hospital from meeting this requirement, the cost sharing may not be 

imposed. 

 Comment: Several commenters asked that we refrain from adding more specificity or 

requirements in the regulation itself, for example imposing further requirements or pre-
CMS-2334-F 428 

conditions on a state’s authority to impose cost sharing for non-emergency services provided in 

an ED, which they believed would limit the ability of states to account for variation across states. 

A few commenters were concerned that we had added a new requirement in stipulating that 

hospitals ensure that an alternative provider is available to provide needed services with lesser or 

no cost sharing. They were concerned the use of the term “ensure” in proposed §447.54(d)(2)(ii) 

would require hospitals to “ensure” something beyond their control, presenting unnecessary 

administrative burden for state administrators and hospitals. Many commenters stated that CMS 

should remove the requirements at proposed §447.54(d)(2)(iii) that ED staff provide a referral 

and coordinate scheduling with an available and accessible alternative non- emergency services 

provider, because it is administratively burdensome and takes time and resources away from 

patient care. In addition, they argue that compliance is infeasible given hospitals’ limited access 

to current, accurate information on the availability of appointments with other providers. The 

commenters believed that these requirements will make it difficult for states to take up the option 

afforded under the statute and that it would be less costly for an ED to provide treatment for the 

non-emergency conditions than to coordinate a referral. One commenter stated that the 

requirement to provide a referral is unnecessary because in many state managed care programs, 

every enrollee has a primary care provider and 24-hour call-in lines are available, enabling 

hospitals providing the care to contact either the enrollee’s primary care provider or the 24-hour 

call-in line as an alternative to following the steps listed in §447.54(d). Another commenter 

stated that the language in proposed §447.54(d)(2)(iii) differs from the requirement at 

current§447.80(b)(2)(iii), and that the revised language would impose additional burdens on 

states’ ability to effectively implement cost sharing. The commenter noted that current 

§447.80(b)(2)(iii) requires hospitals to provide “a referral to coordinate scheduling of treatment 

by an available and accessible alternative non-emergency services provider,” while proposed 
CMS-2334-F 429 

§447.54(d)(2)(iii) requires hospitals to “coordinate scheduling and provide a referral for 

treatment by this provider.” 

 Response: We did not intend to add additional requirements for hospitals related to cost 

sharing for non-emergency use of the ED. Rather, our intent was to clarify the existing 

language. To eliminate any confusion, we are replacing the word “ensure” with “determine” in 

§447.54(d)(2)(iii), as redesignated in the final regulation. This is consistent with the statutory 

requirement that before collecting cost sharing for non-emergency use of the ED, hospitals must 

provide individuals with the name and location of an available and accessible provider that can 

provide the service with lesser or no cost sharing. States share in this responsibility, of course, 

and will need to work with hospitals to ensure that hospitals are able to determine whether such 

care is available and accessible. The goal underlying the policy is to ensure that the right care is 

provided at the right time in an appropriate setting. 

The language in proposed §447.54(d)(2)(iii), redesignated at §447.54(d)(2)(iv) of this 

final rule, was intended to clarify the referral requirement, which is in current regulation at 

§447.80(b)(2), and which reflects statutory language. We did not intend to change the substance 

of the rule. However, to avoid any confusion we are revising §447.54(d)(2)(iv) to reinstate the 

language from the current rule that hospitals must provide a referral to coordinate scheduling for 

treatment by an alternative provider. To confirm that the alternative non-emergency services 

provider is “actually available and accessible” as required by statute, it is important that 

scheduling be done onsite, with the beneficiary present, to the maximum extent possible. We 

recognize that this may not be possible during certain hours of the night, in which case follow-up 

scheduling may be necessary. Hospitals can and should take advantage of the existence of a call 

line and assigned primary care providers in satisfying the coordination requirements in the 

statute and regulations, and states should assure, before imposing such cost sharing, that 
CMS-2334-F 430 

procedures are in place that can facilitate hospitals’ ability to carry out these responsibilities, 

including outside of regular business hours. 

Comment: One commenter requested clarification of the referral requirement, including 

whether a patient should have a scheduled appointment, or just the information necessary to 

make an appointment, with an alternative provider when he or she leaves the hospital; whether 

community clinics or FQHCs may serve as alternative, non-emergency providers for referral 

from the ED; and the appropriate process for completing a referral when physician offices are 

closed. One commenter requested that we define “timely manner” in proposed §447.54(d)(2)(ii). 

Response: The regulations are not prescriptive on the exact process to be used by 

hospitals. States have flexibility to establish processes to meet the coordination goals in the 

statute and regulations in a manner that best accommodates their systems and provider networks. 

The extent to which a state relies on managed care or establishes patient centered medical 

homes, for example, may impact how a state would meet the requirements in the regulation. As 

noted above, whenever possible, hospitals should attempt to schedule the appointment while the 

patient is present, but if that is not feasible, the hospital would need to follow up to ensure that 

an alternative provider is “actually available and accessible” in a timely manner, as required by 

statute. 

Section 1916A (e)(4)(B) of the Act describes an alternative non-emergency services 

provider as one “that can provide clinically appropriate services for the diagnosis or treatment of 

a condition contemporaneously with the provision of the non-emergency services that would be 

provided in an emergency department.” Any Medicaid participating providers, including clinics 

that can do so, are acceptable. Because we do not think that there is a uniform definition of 

timeliness that is appropriate for all situations, we are not defining “timely manner” in the 

regulation. In meeting a general timeliness standard, however, states should direct hospitals to 
CMS-2334-F 431 

consider the medical needs of the individual to assess (1) whether care is needed right away or if 

a short delay in treatment would be sufficient, and (2) any particular challenges the person may 

face in accessing follow-up care, such as leave from employment, child care, or ability to receive 

language assistance services or accessible care for people with disabilities. States will need to 

work with the hospitals, non-emergency providers, and managed care organizations participating 

in their Medicaid programs to design a referral network and system that fulfills the statutory 

requirements prior to imposing cost sharing amounts for non-emergency services provided by a 

hospital ED. The intent of this provision is to provide an additional tool to ensure that care is 

provided in a timely and appropriate manner to drive better quality at lower costs. It is not to be 

implemented in a way that results in people not getting the care they need. 

Comment: One commenter believed that we omitted from proposed §447.54(d) some of 

the statutory requirements that hospitals must meet before collecting cost sharing for nonemergency use of the ED, including the obligation to inform the recipient that he or she does not 

have an emergency medical condition and the requirement to notify the recipient of the 

applicable cost sharing for treatment of a non-emergency condition in the ED. 

 Response: We did not omit any of the statutory requirements in the proposed rule. The 

requirement that the hospital inform individuals whether or not they need emergency services, 

and of the cost sharing obligation to receive services in the ED is implicit in the requirements 

that the assessment be performed and that the hospital provide the individual with the name and 

location of an available and accessible alternative provider that can provide services with lesser 

or no cost sharing. We do not see a need to state as much explicitly in the text of the regulation. 

However, for clarity, we have added a new paragraph (i) at §447.54(d)(2) requiring hospitals to 

“inform the individual of the amount of his or her cost sharing obligation for non-emergency 

services provided in the emergency department.” Proposed §§447.54(d)(2)(i) through (iii) are 
CMS-2334-F 432 

redesignated in this final rule as §§447.54(d)(2)(ii) through (iv), respectively. 

Comment: A few commenters recommended that the Secretary ensure that the safeguards 

at §447.54(d) are observed by states that impose cost sharing for non-emergency use of the ED. 

Response: We will ensure through the state plan amendment process that the 

requirements of §447.54(d) are met, and expect to oversee implementation to the extent feasible. 

 Comment: One commenter recommended that the final rule include requirements for 

oversight and reporting to ensure that higher cost-sharing is not imposed without verification of 

the availability of alternative providers able to furnish non-emergency care. In addition, the 

commenter recommended enhanced requirements for verification in rural and other areas with a 

shortage of primary care physicians and specialists that will see Medicaid patients that there is 

available and accessible care by an alternative provider. A few commenters recommended that, 

at a minimum, the ED should be required to specify what the particular patient’s cost-sharing 

obligation will be, including in the case of a patient with income above 150 percent of the FPL, 

that the patient may be responsible for 100 percent of the charges. The commenter also believed 

that, prior to an emergency room providing non-emergency care to a Medicaid beneficiary the 

hospital should be required to obtain written consent from the individual to receive the nonemergency care in the ED and to take responsibility for any cost-sharing obligation for such care. 

 Response: The statute, codified at §447.54(d) in this rulemaking, sets forth clear 

requirements that states must effectuate to establish cost sharing for non-emergency use of the 

ED, including a requirement that hospitals provide information on available and accessible 

providers who can provide the needed non-emergency services with lesser or no cost sharing. 

States must ensure that hospitals are able to meet these requirements, whether in a rural, 

suburban, or urban setting. We ensure that states are in compliance with the statute and 

regulations through the state plan amendment process and will consider whether further 
CMS-2334-F 433 

reporting is necessary for oversight purposes. For cost sharing for individuals with income 

above 150 percent of the FPL, we note that the statute does not require states to make such 

patients responsible for 100 percent of the charges for non-emergency use of the ED, but also 

does not limit the cost sharing that states can impose on individuals in this income bracket for 

non-emergency use of the ED. At proposed §447.52(b)(3), finalized in this rulemaking at 

§447.52(c), any cost sharing imposed for any service may not equal or exceed the amount the 

agency pays for the service; such cost sharing is also limited by the 5 percent aggregate limit 

described at §447.56(f). 

Comment: Several commenters stated that the rule does not provide a clear methodology 

for determining "non-emergency" status. One commenter highlighted the preamble discussion in 

the proposed regulation about the difficulty in determining whether a service is needed to 

address an emergency situation based on Current Procedural Terminology (CPT) codes alone, 

and the lack of guidance on other standards that could be used, and requested that CMS more 

clearly define “non-emergency” or provide states latitude to define as needed. Another 

commenter shared our concerns about CPT codes and noted that, while the imposition of nonemergency ED cost sharing is not administratively feasible without some type list, any protocols 

must also avoid violation of the emergency screening requirements under the Emergency 

Medical Treatment and Active Labor Act (EMTALA). One commenter stated that the EMTALA 

requirements are sufficient to determine which individuals should be subject to cost sharing for 

non-emergency use of the ED, and that states should not have to describe the processes in the 

state plan. Another commenter expressed concern about beneficiaries’ general ability to 

distinguish between “emergency” and “non-emergency” symptoms. The commenter was 

concerned that adequate protections be in place to ensure that beneficiaries are not punished for 

seeking emergency care when doing so is appropriate under a prudent layperson standard. 
CMS-2334-F 434 

Another commenter agreed that in distinguishing between “emergency” and “non-emergency” 

conditions, hospitals must use the prudent layperson definition, not a discharge diagnosis. One 

commenter stated clinical reviews of ER claims to look at presenting conditions such as chest 

pain seem would be administratively burdensome, and could delay treatment, referral, or 

payment to providers. Other commenters requested that we either clearly define “nonemergency” services or provide states with the latitude to define them as needed, and several 

commenters asked us to maintain the maximum level of flexibility in the rule to facilitate 

appropriate and feasible implementation of non-emergency ED cost sharing. 

 Response: “Non- emergency” services are defined at §447.51, which cross references to 

the current definition of emergency services at §438.114. This definition relies on a prudent 

layperson standard, in that a medical condition manifests itself by acute symptoms of sufficient 

severity that a prudent layperson that possesses an average knowledge of health and medicine 

could deduce that they need emergency medical attention. We agree that it is difficult to 

implement a system to differentiate non-emergency from emergency services for cost sharing 

purposes in a way that ensures beneficiary protections consistent with the prudent layperson 

standard. We continue to believe that the use of diagnosis and procedure codes alone is not an 

appropriate process for determining non-emergency services, as doing so would not adequately 

protect beneficiaries legitimately seeking ED services based on the prudent layperson standard, 

for whom a CPT code assigned after care is provided may indicate a non-emergency condition. 

We sought comments on feasible methodologies for states and hospitals to use to make this 

distinction, but did not receive any recommendations. Therefore, we are not making any 

revisions in the final rule to prescribe how states can and should distinguish between 

“emergency” and “non-emergency” conditions for cost sharing purposes. We remain open to 

states’ proposals for distinguishing between “emergency” and “non-emergency” conditions and 
CMS-2334-F 435 

will review such proposals through the state plan amendment process. As successful models 

emerge we will develop further guidance. 

Comment: One commenter asked if would be reasonable to have the Medicaid agency 

reimburse hospitals for the medical screening that they must conduct. Another commenter asked 

if a hospital could be reimbursed for providing a referral and giving advice on other appropriate 

providers. 

Response: To the extent the provider properly bills the Medicaid agency for an 

assessment or evaluation conducted on a Medicaid beneficiary, the provider would be entitled to 

payment for the service as provided for in the state’s Medicaid State plan. States may also 

establish payment specifically for the medical screening exam required by EMTALA and/or for 

coordination of referrals to alternative non-emergency services providers. 

Comment: One commenter suggested that CMS allow hospitals to charge the maximum 

allowable cost-sharing amount for non-emergent care, and then refund the beneficiary if needed. 

The commenter expressed concern that hospitals will not be able to impose cost sharing on 

beneficiaries after they have left the ED. 

 Response: The statute requires that before providing and imposing cost sharing for nonemergency services in an ED, the hospital must inform the beneficiary of the cost sharing 

obligation tied to those services and provide the name and location of an available, accessible, 

alternative provider that can provide the services with no or lesser cost sharing. This allows the 

beneficiary to forgo treatment in the ED if they do not have the ability to pay the cost sharing. If 

the individual decides to stay and receive the services at the ED, the hospital can impose the cost 

sharing while the person is still present. 

 Comment: One commenter stated that for hospitals, the collection of Medicaid costsharing amounts for non-emergency care in ED settings can prove difficult, leading to lack of 
CMS-2334-F 436 

payment and increases in bad debt. 

 Response: The statute allows states to impose cost sharing for non-emergency care in an 

ED and sets out the requirements that hospitals must meet to collect such cost sharing. We do 

not have the authority to take away this option or ignore the statutory requirements and will work 

with states and the hospital community to share best practices and potentially issue further 

guidance. 

Comment: One commenter requested clarification as to whether urgent care centers are 

subject to the guidelines for cost sharing for non-emergency use of the ED. 

 Response: No, this rule only pertains to non-emergency services furnished in an ED. 

 Comment: A few commenters supported what they believed was a new option regarding 

cost sharing for non-emergency services provided in the ED to beneficiaries who are otherwise 

exempt from cost sharing. 

 Response: This is not a new option. This is a statutory option described at section 

1916A(e)(2)(B) of the Act and codified in current regulations at §447.70(b). 

Comment: One commenter stated that instead of focusing on cost sharing, which could 

result in harm to patients, we should focus on best practices for medically sound ways of 

reducing unnecessary emergency department visits, such as electronic exchange of patient 

information, care coordination, patient education on appropriate use of the ED, and guidelines 

for prescribing narcotics. One commenter was concerned that focusing on cost sharing does not 

address why patients seek care in an ED, and that hospitals trying to decrease non-emergency 

ED use will inadvertently run afoul of either EMTALA or their state’s emergency access rules. 

The commenter recommended that some form of safe harbor be established for hospitals trying, 

in good faith, to encourage the most appropriate use of resources for non-emergency care. 

 Response: We agree that there are many strategies which states can and have 
CMS-2334-F 437 

implemented to address the problem of non-emergency use of hospital EDs. However, whether 

or not cost sharing is the most effective way to address non-emergency use of the ED, it is an 

option provided to states in the statute. We are available to work with all states in exploring the 

full range of options to reduce non-emergency use of the ED, and to share best practices which 

emerge. 

7. Premiums (§447.55) 

We proposed one simplified, consolidated section of the regulations to implement the 

options authorized under sections 1916 and 1916A of the Act relating to the imposition of 

premiums on individuals with family income above 150 percent of the FPL, and describe the 

options to impose premiums for specific populations. The proposed changes are discussed in 

more detail in the January 22, 2013 Medicaid Eligibility Expansion proposed rule (78 FR 4660). 

We received the following comments concerning the proposed premiums provisions: 

Comment: Several commenters recommended that we revise proposed §447.55(a)(2) to 

clarify that states are allowed to impose premiums on qualified disabled and working individuals 

if the individual’s income exceeds 150 percent of FPL. The commenters also noted that 

proposed §447.55(c) does not reflect statutory requirements in section 1916 of the Act that limit 

aggregate premium expenses for individuals provided medical assistance under section 

1902(a)(10)(A)(ii)(XV) or 1902(a)(10)(A)(ii)(XVI) of the Act and the Ticket to Work and Work 

Incentives Improvement Act of 1999 (TWWIIA), to no more than 7.5 percent of the individual’s 

family income for those whose annual income does not exceed 450 percent of the FPL. 

 Response: We agree with the commenters. Due to a drafting error, the allowable 

premiums and limitations described at proposed §447.55 were not clear. We have revised 

paragraph (a) and paragraph (c) (redesignated as paragraph (b) for clarity), of §447.55 to address 

this error. Paragraph (b)(1) describes the limitations on prepayment; paragraph (b)(2) describes 
CMS-2334-F 438 

the options for terminating an individual for failure to pay, paragraph (b)(3) describes the 

statutory requirements noted by the commenter for individuals receiving medical assistance 

under TWWIIA, and paragraph (b)(4) describes the state’s option to waive premiums for any 

individual or family. In addition to these clarifications, we revised the description of pregnant 

women who may be charged premiums at §447.55(a)(1) to reflect the consolidation of different 

statutory eligibility groups for pregnant women under a single regulatory section at §435.116 of 

the March 2012 final rule. This is not a substantive change and is intended solely to assist states 

in appropriately identifying those beneficiaries who may be charged premiums, as described in 

the statute. As noted above, we made a similar revision to the description of children who are 

exempt from premiums and cost sharing at §447.56(a)(1)(i) through (iii) of this final rule. 

 Comment: Several commenters recommended that §447.55 be revised to clarify that 

premiums can only be imposed on medically needy individuals after their spend-down amount is 

met and they are receiving Medicaid; they cannot be included as part of the spend down. 

 Response: An individual cannot be subject to a premium unless he or she is eligible for 

Medicaid. States may not impose a premium until the month in which the individual has met his 

or her spend-down and becomes eligible. 

Comment: Several commenters recommended that the regulations require a process for 

waiving premiums in cases of undue hardship; and that the process adopted by a state should 

be set forth in the state plan and reflected in state law and other public documents. One 

commenter asked for CMS to provide examples of “hardship.” 

Response: The decision to waive premiums due to hardship is a matter of state policy. 

Such policies do not require prior authorization from the Secretary. Therefore we are not 

revising the regulations as suggested. 

Comment: One commenter stated that “sliding scale" premiums imposed on the 
CMS-2334-F 439 

medically needy under §457.55 must actually "slide" so that there is a lowest-income group of 

individuals for whom there is no premium and that premiums for higher income individuals 

increase linearly or quasi-linearly up to $20 for those at or near 150 percent of the FPL. One 

commenter stated the $20 allowable premium should be removed from the regulation. 

 Response: Section 1916 of the Act expressly permits states to impose premiums on 

medically needy individuals on a sliding scale, but does not require that the lowest income 

medically needy individuals are charged $0 premiums. Current regulations at §447.52 allow for 

premiums on a sliding-scale basis up to $19, and we are finalizing the proposal to increase that 

amount to $20. We have revised the regulations at §447.55(a)(5) to clarify that, if premiums are 

imposed on medically needy individuals on a sliding scale, the agency must impose an 

appropriately higher premium for individuals at higher levels of income, with $20 being the 

maximum allowable premium at the highest income level. States may choose to set their highest 

premium at a level below $20. 

Comment: One commenter asked for clarification of the consequences for “nonpayment” that are described at proposed §447.55(c)(1)(ii) and (2)(ii). The commenter 

recommends that termination be allowed for failure to make full payment, and that partial 

payment is not adequate to prevent termination from the program. 

 Response: As noted previously, due to a drafting error, we have revised §447.55(c) 

(redesignated as paragraph (b) of the final rule) to clarify the consequences for non-payment for 

all individuals subject to premiums. As described in paragraph (2), except for medically needy 

individuals, states have the option to terminate any individual who has failed to pay all or part of 

his or her premium obligation. The state may not terminate an individual prior to 60 days after 

the failure to pay the premium. The state may not terminate an individual who, during that time 

period, has paid the premium due in full. To reiterate current policy, we also added a new 
CMS-2334-F 440 

paragraph (5) to §447.56(b) to indicate that no further consequences can be applied for nonpayment of Medicaid premiums, including “lock-out” periods. We note that we redesignated 

paragraph (c) as paragraph (b) in the final rule to move the state plan requirements after the 

section related to consequences for non-payment. This change is to improve the flow of the 

regulation and is not intended to be substantive. 

Comment: One commenter was concerned that proposed §447.55(c) would permit states 

to terminate Medicaid coverage for failure to pay premiums for as little as 60 days. While the 

commenter calls this an improvement over the current regulation, which they believe does not 

establish any minimum grace period, the commenter believed that states should be encouraged to 

work with beneficiaries on a payment schedule to avoid a termination. 

 Response: Proposed §447.55(c), redesignated as §447.55(b) in the final rule, does not 

represent new policy. This option, established under both sections 1916 and 1916A of the Act, 

is currently codified at §447.80 for individuals with income over 150 percent of the FPL who are 

subject to premiums under section 1916A of the Act. In this final rule, we are simply codifying 

the requirements as they relate to premiums imposed under the authority of section 1916(c) of 

the Act. 

8. Limitations on Premiums and Cost sharing (§447.56) 

We proposed a single streamlined approach to implement the limitations on premium and 

cost sharing established under sections 1916 and 1916A of the Act wherever the policies align. 

Sections 1916(a), (b), and (j), and 1916A(b)(3) of the Act specify certain groups of individuals 

as exempt from premiums and/or cost sharing, including certain children, pregnant women, 

certain American Indians and Alaska Natives (AI/ANs), certain individuals residing in an 

institution, individuals receiving hospice care and individuals eligible under the optional 

eligibility group for individuals with breast and cervical cancer under §435.213 of this part. The 
CMS-2334-F 441 

proposed changes are discussed in more detail in the January 22, 2013 Medicaid Eligibility 

Expansion proposed rule (78 FR 4660 and 4661). We received the following comments 

concerning the proposed limitations on premiums and cost sharing provisions: 

Comment: Two commenters recommended that proposed §447.54(c), which permits 

states to impose cost sharing for non-emergency use of the ED on individuals otherwise exempt 

from cost sharing, should not apply to AI/AN beneficiaries who are exempt from cost sharing. 

 Response: We are finalizing the regulation as proposed. Sections 1916A(c)(2)(B) and 

1916A(e)(2)(B) of the Act permit states to charge nominal cost sharing to individuals otherwise 

exempt from cost sharing under section 1916A(b)(3)(B) of the Act for non-preferred drugs and 

non-emergency use of an ED. There is no differential treatment under the statute for AI/ANs as 

compared to other individuals who are otherwise exempt from cost sharing. However, such cost 

sharing must be limited to the nominal and neither a pharmacy nor a hospital ED may deny 

services if the individual does not pay the cost sharing. 

Comment: We solicited comments about requiring states to periodically renew an 

AI/AN's cost sharing exemption based on current or previous use of a service from an Indian 

health care provider or through referral under contract health services. A number of commenters 

supported proposed §447.56(a)(1)(vii) to exempt AI/ANs who are currently receiving, or have 

ever received a service from an Indian health care provider or through referral under contract 

health services from any cost sharing. Several commenters were concerned that requiring 

renewal of status for the exemption would be administratively burdensome for both AI/AN 

individuals and state Medicaid agencies and could lead to exempt individuals being subject to 

impermissible cost sharing. A few commenters recommended that if renewal of the AI/AN 

exemption status is required, that such renewal be limited to no more than once every three 

years, which is the period of time used by IHS for determining “active users” in an IHS or tribal 
CMS-2334-F 442 

service unit. No commenters supported a renewal policy for AI/AN exemption. 

 Response: We are adopting the AI/AN exemption as proposed because we do not see 

any particular utility in requiring renewal of status, since the underlying eligibility for IHS or 

tribal health services is unlikely to change, and we agree that renewal of status can be 

burdensome for both the beneficiary and the provider. Once the exemption for an individual at 

§447.56(a)(1)(x), as redesignated in this final rule, is established, a renewal of such exemption 

will not be necessary. We note that we added a definition of contract health service at §447.51 

for clarity and made a technical correction under the definition of Indian to reflect revised 

citations to 25 U.S.C due to changes made by the Affordable Care Act. We do not intend these 

to be substantive changes to the regulations. 

Comment: One commenter recommended we permit states to implement specific 

processes to track separate cost sharing for AI/ANs related to the 5 percent aggregate limit as 

permitted by current regulation. 

Response: We do not see a need for states to separately track cost sharing for AI/AN 

beneficiaries, the majority of whom are exempt from cost sharing under the regulations. For any 

individuals permissibly subject to cost sharing, the same 5 percent aggregate limit applied to 

other beneficiaries, and the same requirement to track cost sharing charges, would apply. 

 Comment: A few commenters suggested states should have broad latitude in applying 

verification procedures to exempt AI/ANs who are eligible for or currently or have ever received 

a service from an Indian provider or through referral under contract health services (CHS) from 

premiums and cost sharing respectively, and that procedures that create the least burden on 

individuals, including electronic processes, be employed by states. They recommended that selfattestation of status for the AI/AN cost sharing exemption be permitted, that if verification is 

required that electronic data matching should be used to the maximum extent possible, and that 
CMS-2334-F 443 

we provide a list of possible documents which states could use when electronic verification is 

not available. 

 Response: There are no specific federal requirements regarding the process for 

verifying premiums and cost sharing exemptions for AI/ANs. States have flexibility to establish 

their own processes for verifying who is eligible to receive or has ever received a service from an 

Indian provider or through referral under CHS, including the use of self-attestation, electronic 

data matches or reasonable paper documentation, as long as the process is not unduly burdensome 

on AI/ANs. 

Comment: One commenter requested that CMS clarify that family planning supplies are 

exempt from differential cost-sharing for non-preferred drugs. Another commenter 

recommended that CMS clarify that the limitations on premiums and cost sharing also apply to 

family planning-related services, including office visits. Commenters believed that this 

clarification is particularly important for coverage of family planning under the state plan, 

permitted under section 1902(a)(10)(A)(ii)(XXI) of the Act, as added by section 2303 of the 

Affordable Care Act, which defines “medical assistance” covered under this option to include 

both family planning and family planning-related services. 

 Response: Under sections 1916 and 1916A of the Act and §447.53 and §447.70 of the 

current regulation, family planning services and supplies, including contraceptives and 

pharmaceuticals for which the state properly claims or could claim at an enhanced federal 

match, are exempt from cost sharing. We did not propose any changes to this exemption, which 

is codified at §447.56(a)(2)(ii) of this final rule. We do not have the statutory authority to 

require states to exempt “family planning-related services,” which are a separate category of 

services, but states have the option to do so. 

Comment: One commenter requested that we clarify that pregnant women receiving 
CMS-2334-F 444 

services during a period of presumptive eligibility are also exempt from premiums and cost 

sharing. 

Response: Individuals who are receiving benefits during a presumptive eligibility period, 

but who have not yet been determined Medicaid eligible by the agency, based on a regular 

application, including pregnant women, may not be subjected to the premiums. In addition, all 

pregnancy-related services are exempt from cost sharing, including during a period of 

presumptive eligibility. As described in the March 2012 final eligibility rule, “Pregnancy related 

services” is presumed to include all services otherwise covered under the state plan unless the 

state has justified classification of a service as not pregnancy-related in its state plan. 

Comment: Many commenters supported the provision in proposed §447.56(a)(1)(v) to 

give states the option to exempt individuals from cost sharing if they are receiving long term 

services and supports in a home or community-based setting and are required to contribute to the 

cost of care in a manner similar to the post-eligibility treatment of income for institutionalized 

individuals under part 435 subpart H of the regulations. Many commenters recommended that 

we require states to exempt such individuals because imposing cost sharing could push 

individuals into more restrictive settings in violation of the requirements of the Americans with 

Disabilities Act (ADA), as applied by the Supreme Court in the Olmstead decision. A few 

commenters recommended that we require states to exempt all individuals receiving services in a 

home and community-based setting regardless of whether they are required to contribute to the 

cost of their care. Finally, one commenter asked that we clarify that we are not proposing to 

extend the same post-eligibility treatment of income rules used for institutional services to 

individuals receiving services in a home and community based setting who, in addition to any 

contribution for the cost of their care, also generally have to cover other basic living expenses, 

such as for housing and food, and would not be able to cover such expenses if they were required 
CMS-2334-F 445 

to contribute all but a nominal amount of their income to cover the cost of the services received, 

as is the case for institutionalized individuals. 

Response: As noted above, we do not see a statutory basis to require this exemption, 

therefore in the final rule, at §447.56(a)(1)(viii), as redesignated, we maintain the option for 

states to exempt individuals receiving services in a home and community-based setting, whose 

medical assistance is reduced by amounts reflecting available income other than required for 

personal needs. This option is consistent with state authority under section 1916A of the Act to 

target cost sharing to specified groups. In addition, states may target cost sharing at particular 

types of services, and could determine not to impose cost sharing on home and community-based 

services. We also note that if an individual has his or her medical assistance reduced to account 

for available income, the individual would be able to deduct any premiums or cost sharing from 

the calculation of available income used to determine the level of medical assistance provided. 

There would be no modification of current regulations relating to post-eligibility treatment of 

income or share-of-cost. Again, we remind states of their obligations under Olmstead.

Comment: One commenter recommended that former foster care children covered under 

§435.150 should be exempt from premiums and cost sharing. Several commenters 

recommended that states be given the express option to exclude medically frail individuals from 

cost sharing. 

Response: While we understand that these are populations upon which states may not 

wish to impose cost sharing, we do not see a clear basis to support a federally-mandated 

exemption. States are free to use targeted cost sharing, in accordance with §447.52(d), to limit 

the impact of cost sharing as needed to address issues of non-exempt populations that the state 

determines are particularly vulnerable. 

Comment: One commenter requested clarification on the provision at §447.56(c)(3), 
CMS-2334-F 446 

which is specific to providers that the agency reimburses under Medicare reasonable cost 

reimbursement principles. The commenter asked whether the policy that an agency may increase 

its payment to offset uncollected deductible, coinsurance, copayment, or similar charges that are 

bad debts of such providers was a change or consistent with current law. 

Response: This policy is contained in the current regulations at §447.57(b). However, 

consistent with the new definition of cost sharing included at §447.51 of this final rule, we are 

replacing the reference to “deductible, coinsurance, copayment, or similar” with “cost sharing” 

in the final rule. 

Comment: Many commenters recommended that we amend sections 1916 and 1916A of 

the Act to clarify that the preventive services included in the EHBs are exempt from cost 

sharing, because low income individuals enrolled in Medicaid ABPs may be responsible for cost 

sharing for some of the preventive services that are available to higher income individuals in the 

private market with no cost sharing. 

Response: Section 1916A of the Act and the final rule at §447.56(a)(2)(iii) do require 

exemption of preventive services for children under age 18. At a minimum such services must 

include those specified at §457.520, which reflect the well-baby and well child care and 

immunizations in the Bright Futures guidelines issued by the American Academy of Pediatrics. 

We do not see a basis to broaden this statutory exemption under the Medicaid program to 

extend to preventive services for older individuals. States have the flexibility to exempt 

additional services from cost sharing and could determine to exempt preventive services for all 

beneficiaries.

Comment: Many commenters recommended that we exempt services associated with 

“never events” from cost sharing. 

Response: We agree with commenters that services associated with “never events” 
CMS-2334-F 447 

should not be subject to cost sharing. In accordance with §447.26(c)(1), “no medical assistance 

will be paid for “provider preventable conditions” as defined in this section. We interpret 

medical assistance in this context to include any state plan imposed cost sharing, and providers, 

who are not permitted to claim reimbursement from the agency for these services, also are not 

entitled to charge the beneficiary any cost sharing amount. To clarify this requirement, we have 

included provider-preventable services, also known as “never events,” among the list of 

exempted services at §447.56(a)(2)(v). 

Comment: One commenter recommended that we revise §447.56(a)(2)(iv) to require that 

all services provided to pregnant women be considered as pregnancy-related, except those 

services specifically identified in the state plan as not being related to the pregnancy, only if the 

state is able to justify and the Secretary concurs, that the service is not pregnancy-related. 

 Response: States have the discretion to determine pregnancy-related services within the 

parameters of §440.210(a)(2). We are seeking to align the standard related to cost sharing with 

what is required for the provision of pregnancy-related services, and maintain in the final rule 

that all services provided to pregnant women will be considered pregnancy related unless the 

state has justified classification of a service as not pregnancy-related in its state plan. 

 Comment: One commenter asked that we clarify what is meant by "nonexempt" and 

"otherwise exempt populations,” per the reference to allowing states to impose cost-sharing at 

higher than nominal levels for nonexempt individuals and applying cost sharing to otherwise 

exempt populations at §447.56. 

Response: Exempt populations are defined at sections 1916(a), (b) and (j) and 1916A(b) 

of the Act and at §447.53 and §447.70 of the current regulations. These populations are exempt 

from cost sharing under section 1916 and 1916A(a) of the Act, respectively, but are not exempt 

from cost sharing under section 1916A(c) or (e) of the Act, which pertain to alternative cost 
CMS-2334-F 448 

sharing for non-preferred drugs and non-emergency use of the ED. These exemptions were 

consolidated at §447.56(a) of the proposed rule and maintained in the final rule. When using the 

term “nonexempt” we are referring to beneficiaries who do not fall into one of the groups 

exempted under §447.56(a) of the final rule and therefore may be subject to cost sharing. 

“Otherwise exempt populations” refers to those populations that are generally required to be 

exempted from cost sharing but are not exempt from cost sharing under section 1916A(c) or (e) 

of the Act. Section 1916A of the Act allows states to impose cost sharing for drugs and nonemergency use of the ED on “otherwise exempt populations,” meaning that such cost sharing 

may be imposed on beneficiaries who are exempted from all other cost sharing per §447.56(a).

Comment: Many commenters were concerned that the aggregate limit described in 

proposed §447.56(f) does not apply to individuals with income at or below 100 percent of the 

FPL. Another commenter was concerned that these rules created a new requirement for states to 

apply the aggregate limit to cost sharing imposed under section 1916 of the Act. A few 

commenters urged the Secretary to lower the aggregate limit to something less than 5 percent. 

Response: Under sections 1916 and 1916A of the Act, aggregate premiums and cost 

sharing imposed may not exceed 5 percent of an individual’s income. This is a statutory limit 

and we do not have the authority to require states to apply a lower cap. However, we are 

revising the final regulation at §447.56(f)(1), and redesignating the succeeding paragraphs 

accordingly, to provide that the aggregate limit applies to all premiums and cost sharing 

incurred by all individuals in the Medicaid household, at all income levels. At §447.56(f)(2) of 

the final rule, we maintain the requirement in current regulation that states must track all 

incurred Medicaid premiums and cost sharing for all members of the Medicaid household, if 

such premiums and cost sharing could place any family member at risk of reaching the 

aggregate limit. 
CMS-2334-F 449 

Comment: Many commenters recommended we revise proposed §447.56(f)(3) to require 

states to inform beneficiaries, at risk of reaching the aggregate limit, of the automated process 

used to track premiums and cost sharing, and how they can obtain ongoing information about 

how far they are from reaching the limit. 

Response: Section 447.56(f)(2), as redesignated in this final rule, requires that if a state 

imposes cost sharing that could result in individuals reaching the aggregate limit, the state must 

describe their process for tracking the premiums and cost sharing in their state plan. Current 

regulations at §447.64(d)(2), redesignated at§447.56(f)(3) in this final rule, do require the state 

to notify beneficiaries and providers when the beneficiary reaches the cap. We are revising this 

paragraph to restore language currently in §447.68(d) that was inadvertently removed in the 

proposed rule indicating that the state must inform beneficiaries and providers of the 

beneficiaries’ aggregate limit. States must also have a process in place for beneficiaries to 

request a reassessment of their aggregate limit. We believe these rules provide the best balance 

between minimizing administrative burden on states and modernizing the Medicaid program to 

ensure beneficiaries are not charged amounts in excess of the aggregate. We do not believe 

these rules prevent states from establishing processes by which beneficiaries can regularly check 

their status regarding the aggregate limit. To allow states flexibility, we are not specifying the 

mechanisms by which such notifications must occur. 

Comment: One commenter recommended that the regulation should use a single, annual 

(not monthly) cost sharing maximum, such as that used for the Part D low-income subsidy, since 

renewals are completed on an annual basis, and therefore cost-sharing maximums are most 

effectively implemented on a well-established calendar-year basis. 

Response: Section 1916A of the Act requires that the aggregate limit be applied on a 

monthly or quarterly basis as determined by the state; an annual limit is not permitted under the 
CMS-2334-F 450 

statute. 

Comment: Once commenter requested that we clarify what is meant by “premiums or 

cost sharing rules that could place beneficiaries at risk of reaching the aggregate family limit” in 

proposed §447.56(f)(3). 

 Response: If a state imposes premiums and/or cost sharing at a level that could result in 

cumulative premiums and cost sharing exceeding 5 percent of a beneficiary’s family income (for 

all family members on Medicaid, over the course of a month or quarter as determined by the 

state), the state must implement an effective tracking mechanism to ensure the cap is not 

exceeded. For example, a state may establish a prescription drug copayment targeted to 

individuals with family income above 150 percent of the FPL, and set the copay at $1 for 

preferred drugs and $2 for non-preferred drugs. If this is the only cost sharing to which these 

individuals are subject, and they do not pay a premium, then it is unlikely that any beneficiary 

would accumulate cost sharing charges in excess of 5 percent of his or her family income, and 

the state would not have to establish a tracking mechanism. However, if these same 

beneficiaries were also assessed a premium of 4 percent of family income, beneficiaries may be 

at risk of reaching the aggregate limit and the state would need to establish a tracking 

mechanism. Anyone with income under 100 percent of the FPL, who is subject to any cost 

sharing would likely be at risk of reaching the aggregate limit and a tracking mechanism would 

likely be required. We will work with states to determine their need for a tracking mechanism 

through the state plan amendment process. 

We note that if more than one Medicaid beneficiary resides in a household, then the 

premiums or copayments of each beneficiary in the household would count toward the aggregate 

limit. We do not specifically define when cost sharing may place beneficiaries at risk of 

reaching the aggregate limit, because of the many different combinations of cost sharing and 
CMS-2334-F 451 

premium charges which it would be possible for states to impose. We will monitor state 

compliance through the state plan amendment process. 

 Comment: One commenter requested further guidance on ways to track cost sharing for 

beneficiaries who change plans during the year. 

 Response: For individuals who change plan mid-year, the state must establish a 

mechanism to continue tracking through the transition to ensure that they do not exceed the cap. 

Alternatively, a state could suspend any additional cost sharing until the next monthly or 

quarterly period begins. We have in the past encouraged, and continue to encourage, states to 

track cost sharing through their Medicaid Management Information System (MMIS). As we 

review state plan amendments and conduct audits, we will share best practices that emerge 

among states to promote effective and efficient tracking systems. 

Comment: Many commenters recommended that we remove the requirement at proposed 

§447.56(f)(3) that states have an automated mechanism for tracking each family’s incurred 

premiums and cost sharing because it is costly and presents a substantial administrative and 

operational burden on state Medicaid agencies, their contractors, and providers. Instead, the 

commenters recommended that the state should have an opportunity to develop its own 

mechanism for tracking a Medicaid enrollee’s premium and cost sharing spending. A few 

commenters also recommended that states should have the option of having the enrollees track 

their own information. One commenter asked that we clarify that a state that delegates 

responsibility for the administration of cost sharing to managed care organizations must ensure 

the availability of complete and timely information necessary for performing this role. 

Response: We have revised §447.56(f)(2) in this final rule to remove the word 

“automated” and replace it with “effective.”. CMS will review state proposals through the state 

plan amendment process to ensure that tracking mechanisms employed by states are effective in 
CMS-2334-F 452 

ensuring that incurred premiums and cost sharing do not exceed the aggregate limit and that the 

tracking mechanism does not rely on beneficiaries. We note that under current regulations states 

must account for cost sharing amounts in their MMIS to ensure appropriate provider payment 

and must calculate each family’s aggregate limit--from data in the state’s eligibility system--and 

provide that information to the beneficiary. States may claim federal matching funds to update 

their MMIS and eligibility systems as necessary to implement a tracking system that uses the 

data already available in their systems to implement the aggregate limit. States have the 

flexibility to develop any effective process that does not rely on beneficiaries, and contains 

timely and accurate information so that beneficiaries do not exceed their aggregate limits. In 

addition, a state may delegate this responsibility, as appropriate, to their managed care 

organizations although we are not requiring that they do so. Tracking of premiums and cost 

sharing is standard industry practice among health plans, including those that participate in the 

Medicaid program, and is consistent with implementing the requirements of the Affordable Care 

Act out-of-pocket limits for all Americans, which will require tracking by all private health 

insurance plans. 

Comment: One commenter stated that the flexibilities provided in the proposed rule, 

including the higher cost sharing limits, are negated by the continued application of the 

aggregate limit. The commenter argues that the high cost sharing limits effectively will serve as 

a provider rate cut, which will trigger further decrease in access to health care for Medicaid 

beneficiaries. The commenter recommends that we allow exceptions to the 5 percent aggregate 

limit and the automated tracking requirements, allowing states to propose in their state plan 

reasonable assumptions and methodologies to limit maximum out-of-pocket costs at an 

individual or family level. The commenter believed such an approach, coupled with provisions 

for exceptions and an appeals process involving clear timelines to preserve access to care, would 
CMS-2334-F 453 

be consistent with the spirit of the statute. 

Response: We do not understand the connection that the commenter is making between 

the aggregate limit and effective provider reimbursement rates. Once the limit is reached, the 

beneficiary may not be charged any cost sharing amounts, and providers will be paid the full 

reimbursement rate by the state. Regardless, the application of an aggregate limit, which is 

common practice in commercial insurance as well, is required by section 1916A of the Act, as 

added by the Deficit Reduction Act of 2005; we do not have authority to eliminate this 

requirement through regulation. 

9. Beneficiary and Public Notice Requirements (§447.57) 

We proposed to codify existing policy to ensure that beneficiaries, providers, and the 

general public all have access to effective notice of Medicaid premium and cost sharing charges. 

Appropriate vehicles for providing notice might include the agency website, newspapers with 

wide circulation, web, and print media reaching racial, ethnic, and linguistic minorities, 

stakeholder meetings, and formal notice and comment in accordance with the state's 

administrative procedures. We received the following comments concerning the proposed 

provisions for beneficiary and public notice requirements: 

Comment: One commenter asked for clarification on what constitutes a method to which 

applicants, beneficiaries, and providers are “likely to have access,” and whether publication on a 

state website would be an acceptable method. One commenter strongly disagreed that state 

legislative hearings do not provide sufficient public, beneficiary and provider notice and 

recommended that such hearings be included as one of the options for providing sufficient 

notice. 

Response: To allow flexibility for different state processes while ensuring provision of 

meaningful notice, we are not prescribing the particular method or format that states must use to 
CMS-2334-F 454 

provide the required notice, but instead proposed parameters at §447.57, finalized with one 

revision (discussed below) in this rulemaking, regarding what constitutes sufficient notice. We 

provided examples of acceptable methods in the preamble to the proposed rule, including notice 

on the state agency’s website. As stated in the preamble to the proposed rule, we do not believe 

that legislation discussed at a hearing or posted on a website is adequate, since state legislation 

and legislative hearings often are not accessible or understandable to many beneficiaries, 

providers or other interested members of the public. 

Comment: Many commenters supported the proposal to require that states provide 

additional public notice if proposed cost sharing is substantially modified during the state plan 

amendment (SPA) approval process. Many of these same commenters also recommended that 

we require states to provide at least a 30-day comment period on any revisions to a SPA 

involving premiums or cost sharing charges. A few commenters were concerned that the 

proposed rule would be too burdensome on states and recommended that no additional public 

notice requirements be imposed on states. 

Response: We have revised the regulations at §447.57(c) to require states to provide 

additional public notice if proposed cost sharing is substantially modified during the SPA 

approval process. We are also applying this rule to premiums that are substantially modified 

during the SPA process. We are not, however, accepting the recommendation that states should 

have to provide a second 30 day comment period for any revisions made to the state’s cost 

sharing policy during the SPA approval process, as we believe this would be overly burdensome 

on states and significantly delay the SPA process. 

III. Provisions of the Final Regulations 

 For the most part, this final rule incorporates the provisions of the proposed rule. We 

received many comments about the complexity of the proposed rules and the significance of the 
CMS-2334-F 455 

changes that need to be made to fully implement the provisions of the Affordable Care Act. 

Many commenters were concerned about the short timeframes for implementation and about 

states’ ability to make needed changes to policy, operations, and information technology 

systems. We recognize that the timing of this rule may result in implementation challenges, 

especially from a systems perspective. Therefore, we have evaluated the provisions of the 

January proposed rule that are necessary to meet the deadlines and are finalizing in this rule only 

those provisions that we believe states will be reasonably able to (or have already been planning 

to) implement by January 1, 2014. Remaining provisions will be finalized in future rulemaking. 

Those provisions, included in this final rule, that differ from the proposed rule are as follows: 

Change to §431.10

• Clarified responsibilities of single state agency related to delegation of fair 

hearings.

Change to §431.201 

• Added the definition of “send.” 

Change to §431.205

• Clarified language in §431.205(b).

Change to §431.206

• Clarified in §431.206(d) that an individual has a right to a hearing before the 

Medicaid agency instead of the Exchange or Exchange appeals entity.

Change to §435.603

• Specified in §435.603(d)(4) that the 5 percent disregard should be applied to the 

highest income standard in the applicable Title of the Act under which the individual 

may be determined eligible using MAGI-based methodologies. 

Change to §435.908
CMS-2334-F 456 

• Deleted paragraph §435.908(c)(3)(i).

Change to §435.918

• Allowed for delayed implementation of electronic notices and required that the 

Agency ensure that an individual’s election to receive notices electronically is 

confirmed by regular mail and that the individual is informed of his or her right to 

change such election. 

Change to §435.923

• Clarified in §435.923(a) that any authorization granted under operation of state 

law may serve in place of written authorization by the applicant or beneficiary.

Change to §435.1015

• Clarified that states are required to consider the cost sharing requirements of the 

private health plan when determining whether premium assistance is a cost-effective 

option. 

Changes to §435.1110

• Revised §435.1110(c)(1) to make clear that states electing to limit the 

presumptive eligibility determinations which hospitals can make must permit the 

hospitals to make presumptive eligibility determinations based on income for all of 

the populations included in §435.1102 and §435.1103 

• Adding paragraph (d)(3) to provide that the agency may disqualify a hospital as a 

qualified hospital only after it has first provided the hospital with additional training 

or taken other reasonable corrective action measures. 

Change to §435.1200

• Codified §435.1200 (d) (5) of proposed rule at §435.1200 (d)(6). 

Changes to §447.51
CMS-2334-F 457 

• Added definition of “inpatient stay” and “outpatient services.” 

• Added definition of Federal poverty level (FPL) to use the acronym throughout the 

regulation. No substantive change is intended. 

• Added a definition of contract health service, for clarity (not a substantive change to the 

regulations). 

Changes to §447.52

• Revised the maximum cost sharing allowed for an inpatient stay to $75 and added a new 

paragraph at (b)(2), to require states with inpatient cost sharing that exceeds the amount 

in the final rule, as of [INSERT DATE OF PUBLICATION IN THE FEDERAL 

REGISTER], to submit a plan to CMS that provides for reducing inpatient cost sharing 

to $75 on or before July 1, 2017. 

• Revised paragraph (b)(3) to be clear that, “in states that do not have fee-for-service 

payment rates, any cost sharing imposed on individuals at any income level may not 

exceed the maximum amount established for individuals with income at or below 100 

percent of the FPL 

• Revised §447.52(d), adding paragraphs (1) and (2) to clarify that for cost sharing 

imposed for non-preferred drugs and for non-emergency services provided in a hospital 

emergency department under, the agency may target to a specified group of individuals 

regardless of income. 

• Added and amended paragraph (g) to restore the option to establish different cost sharing 

charges for individuals at different income levels. 

• Added paragraph (h) to restore requirement that any cost sharing charges imposed by 

managed care organization on Medicaid enrollees be in accordance with the requirements 

set forth in the regulations. 
CMS-2334-F 458 

• Added paragraph (i) to consolidate the state plan requirements currently contained in 

§447.53(d) and §447.68. 

Changes to §447.53

• Revised paragraph (d) to clarify that cost sharing for non-preferred drugs imposed on 

otherwise exempt populations cannot exceed the nominal amount defined in §447.53(b) 

in accordance with section 1916A(c) of the Act. 

• Revised paragraph (e) to require that states must have a timely process to allow for cost 

sharing at the preferred drug level if the prescribing provider determines that the 

preferred drug would be less effective or have adverse effects on the individual to ensure 

that access to necessary drugs is not delayed. 

Changes to §447.54

• Amended paragraph (d)(2)(iii) to replace the word “ensure” with “determine.” 

• Added new paragraph (i) at §447.54(d)(2) requiring hospitals to inform the individual of 

the amount of his or her cost sharing obligation for non-emergency services provided in 

the ED 

Changes to §447.55 

• Due to a drafting error we revised this section to accurate reflect who can be charged 

premiums and what consequences for non-payment exist for specified groups 

• Revised at paragraph (a)(1) the description of pregnant women who can be charged 

premiums to reflect the consolidation of different statutory eligibility groups for 

pregnant women under a single regulatory section at §435.116 of the March 2012 final 

rule. This is not a substantive change and is intended solely to assist states in 

appropriately identifying those pregnant women who may be charged as described in the 

statute. 
CMS-2334-F 459 

• Revised paragraph (a)(5) to clarify that, if premiums are imposed on a sliding scale, the 

agency must impose an appropriately higher premium for individuals at higher levels of 

income, with $20 being the maximum allowable premium at the highest income level. 

• Added a new paragraph (5) to §447.55(b) to indicate that no further consequences can be 

applied for non-payment of Medicaid premiums, including “lock-out” periods. 

Changes to §447.56

• Revised at paragraph (a)(1)(i) the description of children who are exempt from premiums 

and cost sharing at §447.56(a)(1)(i) through (iii) and (iv) to reflect the consolidation of 

different statutory eligibility groups for children under a single regulatory section at 

§435.118 of the March 2012 final rule, and to reflect the changes in the types of 

assistance available under Title IV-E of the Act. These are not substantive changes and 

are intended solely to assist states in appropriately identifying those children who may be 

charged premiums and cost sharing and exempting those who may not, as described in 

the statute. 

• Amended paragraph (a)(2)(v) to include provider-preventable services, also known as 

“never events,” among the list of exempted services . 

• Revised paragraph (f)(2) to restore language currently in §447.68(d) that was 

inadvertently removed in the proposed rule indicating that the state must inform 

beneficiaries and providers of the beneficiaries’ aggregate limit. 

Changes to §447.57

• Revised language at paragraph (c) to require states to provide additional public notice if 

proposed cost sharing is substantially modified during the SPA approval process. 

Change to §457.110

• Required that states provide individuals with a choice to receive notices and 
CMS-2334-F 460 

information required under this subpart and subpart K of this part, in electronic format or 

by regular mail. 

Change to §457.570

• Adding paragraph (c)(2)

Change to §457.810

• Added language requiring protections against substitution of coverage in states 

that operate premium assistance programs. 

Changes to §155.20

• Clarifies the definition of advance payments of the premium tax credit. 

Changes to §155.200

• Removes the reference to subpart F, as it will be finalized in a future rule.

Changes to §155.227

• Clarifies that for the purpose of §155.227, the terms “applicant” and “enrollee” 

describe people on whose behalf authorized representatives are acting, and that the term 

“person” describes an individual acting as an authorized representative. 

• Clarifies that authorized representatives are permitted to provide assistance in the 

individual and SHOP Exchanges, as well as for individuals seeking an exemption from the 

shared responsibility payment. 

• Adds language ensuring that the Exchange provides information to both the 

applicant or enrollee and the authorized representative regarding the powers and duties of an 

authorized representative. 

• Adds language allowing an Exchange to permit an applicant or enrollee to 

authorize their representative to perform fewer than all of the activities described in this section, 

provided that the Exchange tracks the specific permissions of each authorized representative. 
CMS-2334-F 461 

• Clarifies that an authorized representative will notify the Exchange and the 

applicant or enrollee on whose behalf he or she is acting when the authorized representative no 

longer has legal authority to act on behalf of the applicant or enrollee. 

• Clarifies that the Exchange, not the applicant or enrollee, will notify the 

authorized representative when an applicant or enrollee notifies the Exchange that an authorized 

representative is no longer acting on his or her behalf. 

• Removes the provision that organizations as well as staff and volunteers of 

organizations must enter an agreement with the Exchange. 

Changes to §155.230

• Clarifies electronic notice standards for an individual market Exchange, and 

specifies that the individual market Exchange may choose to delay the 

implementation of the process described in §435.918(b)(1) regarding sending a 

mailed confirmation of the choice to receive electronic notices. 

• Adds standards to distinguish notice standards for a SHOP and adds language to 

allow an employer or employee in any SHOP to elect to receive electronic notices. 

Changes to §155.300

• Clarifies the appropriate cross-reference for the definition of minimum value. 

Changes to §155.302

• Clarifies that any contracting arrangement for eligibility determinations for 

Medicaid and CHIP is subject to the standards in §431.10(c)(2). 

• Clarifies that the Exchange appeals entity, in addition to the Exchange, must 

adhere to the eligibility determination or appeals decision for Medicaid or CHIP made by the 

Medicaid or CHIP agency, or the appeals entity for such agency. 
CMS-2334-F 462 

• Specifies that the agreement under §155.302(b)(6) will be made available to HHS 

upon request. 

Changes to §155.305

• Removes the clause “unless another Exchange verifies that the individual meets 

the residency standard of such Exchange” related to temporary residence. 

• Clarifies that an applicant must be eligible for enrollment in a QHP through the 

Exchange to be determined eligible for enrollment through the Exchange in a QHP that is a 

catastrophic plan. 

Changes to §155.310

• Clarifies that the provision regarding duration of eligibility determinations 

without enrollment only refers to an applicant who is determined eligible for enrollment in a 

QHP through the Exchange. 

Changes to §155.315

• Modifies procedures for situations in which key data sources are unavailable and 

not reasonably expected to be available within 1 day, such that the Exchange will make an 

eligibility determination based on an applicant’s attestation and trigger the inconsistency period 

in paragraph (f). 

• Clarifies that the Exchange will accept an applicant’s attestation regarding three 

specific factors of eligibility when electronic data is required but it is not reasonably expected 

that data sources will be available within 1 day of the initial request to the data source, and that 

for purposes of eligibility for advance payments of the premium tax credit and cost-sharing 

reductions, other sections in this subpart already address situations in which data regarding 

MAGI-based income is unavailable. 
CMS-2334-F 463 

• Clarifies that paragraph (f)(5)(i) of this section will follow the effective dates 

specified in §155.330(f) 

• Modifies the language concerning the verification related to eligibility for 

enrollment through the Exchange in a QHP that is a catastrophic plan for the purpose of clarity. 

Changes to §155.320

• Clarifies that the Exchange must obtain any available data from the SHOP that 

corresponds to the State in which the Exchange is operating. 

• Modifies language to specify that the Exchange must select a statistically 

significant random sample of applicants for whom the Exchange does not have any of the 

information specified in paragraphs (d)(2)(i) through (d)(2)(iii). 

• Removes language specifying that the Exchange must use any available data 

regarding employment of an applicant and members of his or her household. 

• Specifies that for eligibility for enrollment in a QHP through the Exchange that is 

effective before January 1, 2015, if the Exchange does not have any of the information specified 

in paragraphs (d)(2)(i) through (d)(2)(iii) for an applicant, the Exchange may accept an 

applicant’s attestation regarding enrollment in an eligible employer-sponsored plan and 

eligibility for qualifying coverage in an eligible employer-sponsored plan for the benefit year for 

which coverage is requested without further verification, instead of following sampling 

procedures. 

• Clarifies that the ability for the Exchange to satisfy the provisions of paragraph 

(d) of this section by relying on HHS is effective for eligibility for enrollment in a QHP through 

the Exchange that is effective on or after January 1, 2015, and clarifies that the division of 

responsibilities under this option is subject to guidance issued by the Secretary. 
CMS-2334-F 464 

• Removes language concerning the agreement associated with having HHS 

conduct this verification. 

Changes to §155.330

• Removes cross-references to appeals provisions, and clarifies that an Exchange 

must implement changes resulting from an appeal decision on the date specified in the appeal 

decision. 

• Consolidates standards for decreases in advance payments of the premium tax 

credit and changes in cost-sharing reductions. 

• Specifies that a change associated with birth, adoption, placement for adoption 

and placement in foster care must be implemented on the coverage effective date described in 

§155.420(b)(2)(i) and (ii). 

• Removes duplicative cross-references regarding termination of coverage. 

Changes to §155.340

• Clarifies the appropriate cross-reference for the minimum value standard 

Changes to §155.345

• Reserves paragraphs (a)(3) and (g)(7) for future finalization. 

• Clarifies that the Exchange and Exchange appeals entity will adhere to the 

eligibility determination or appeals decision relating to an individual’s eligibility for Medicaid or 

CHIP made by the state’s Medicaid or CHIP agency or the appeals entity for such agency. 

Changes to §155.420

• Clarifies that the special effective dates for birth, adoption, and placement for 

adoption also apply to placement in foster care. 

• Expands special enrollment period for birth, adoption, and placement for adoption 

to also include placement in foster care. 
CMS-2334-F 465 

• Clarifies that the special enrollment period for an individual who was not a 

citizen, national, or lawfully present non-citizen and gains such status also applies to his or her 

dependents, if eligible for coverage through the Exchange. 

• Modifies the special enrollment period for enrollees newly eligible or ineligible 

for advance payments of the premium tax credit or who experience a change in eligibility for 

cost-sharing reductions to reflect that the special enrollment period accommodates individuals 

enrolled in an eligible employer-sponsored plan, but not eligible for qualifying coverage in an 

eligible employer-sponsored plan. 

Changes to §155.430

• Modifies language to allow applicants and enrollees to request termination from 

their QHP, in the event they report access to other minimum essential coverage and become 

ineligible for advance payments of the premium tax credit and cost-sharing reductions. 

• Modifies standards for enrollee-requested termination effective dates, such that 

QHP issuers and Exchanges may only terminate prospectively, and not retroactively. 

• Clarifies that terminations for enrollees who are determined eligible for Medicaid, 

CHIP or the BHP, such that the last day of coverage is the day before the individual is 

determined eligible for such coverage, rather than retroactive to the Medicaid or CHIP eligibility 

effective date. 

• Aligns termination effective dates to appropriately cross-reference with eligibility 

effective dates. 

• Adds language to clarify that in the case of termination due to death, the last day 

of coverage is the date of death. 

Changes to §156.270
CMS-2334-F 466 

• Modifies coverage termination requirements such that standards for QHP issuers 

align with those for Exchanges.

IV. Collection of Information Requirements 

Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in 

the Federal Register and solicit public comment before a collection of information requirement is 

submitted to the Office of Management and Budget (OMB) for review and approval. To fairly 

evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) 

of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following 

issues: 

• The need for the information collection and its usefulness in carrying out the 

proper functions of our agency. 

• The accuracy of our estimate of the information collection burden. 

• The quality, utility, and clarity of the information to be collected. 

• Recommendations to minimize the information collection burden on the affected 

public, including automated collection techniques. 

 In the January 22, 2013 (78 FR 4593) proposed rule, we requested public comment on 

each of the rule’s information collection requirements (ICRs). The comments and our response 

are discussed below. 

Background

 This final rule continues to implement key provisions of the Affordable Care Act 

including the completion of the streamlining of eligibility for children, pregnant women, and 

adults that were initiated in the Medicaid eligibility final rule published on March 23, 2012 (77 

FR 17144). This rule also modifies CHIP rules relating to substitution of coverage and premium 

lock-out periods, which are important to a coordinated system of coverage across programs. 
CMS-2334-F 467 

Finally, this rule includes provisions related to authorized representatives, the procedures for 

verifying access to qualifying employer-sponsored coverage, catastrophic coverage and other 

provisions related to eligibility and enrollment. 

 The policies in this rule will result in a reduction in burden for individuals applying for 

and renewing coverage, as well as for states. The Medicaid program and CHIP will be made 

easier for states to administer and for individuals to navigate by streamlining Medicaid eligibility 

and simplifying Medicaid and CHIP eligibility rules for most individuals, Even though there are 

short-term burdens associated with the implementation of the final rule, the Medicaid program 

and CHIP will be easier for states to administer over time due to the streamlined eligibility and 

coordinated efforts for Medicaid, CHIP, and the new affordable insurance exchanges. 

The final rule also continues to implement provisions related to the establishment of 

Exchanges. This final rule: (1) specifies standards related to authorized representatives, 

(2) outlines criteria related to the verification of enrollment in and eligibility for minimum 

essential coverage through an eligible employer-sponsored plan, and (3) further specifies or 

amend standards related to other eligibility and enrollment provisions. The description of the 

burden estimates associated with these provisions is included in the information collection 

requirements outlined in section D. 

Section A outlines the information collection requirements that involve Medicaid and 

CHIP eligibility and enrollment. Section B outlines the information collection requirements that 

involve Exchange eligibility and enrollment. 

We used data from the Bureau of Labor Statistics to derive average costs for all estimates 

of salary in establishing the information collection requirements. Salary estimates include the 

cost of fringe benefits, calculated at 35 percent of salary, which is based on the June 2012

Employer Costs for Employee Compensation report by the U.S. Bureau of Labor Statistics. 
CMS-2334-F 468 

A. Medicaid and CHIP Information Collection Requirements (ICRs) to be Addressed 

through Separate Notices and Comment Process Under the Paperwork Reduction Act 

1. ICRs Regarding State Plan Amendments 

1a. Sections 431.10, 431.11, 431.206, 431.211, 431.213, 431.230, 431.231, 431.240, 435.110, 

435.116, 435.603, 435.907, 435.908, 435.918, 435.1101, 435.1102, 435.1103, 435.1110, 

435.1200, 435.1205, 440.130, 440.210, 440.220, 440.305, 440.315, 440.330, 440.335, 440.345, 

447.52-54, 457.110, 457.340, 457.350, 457.351, 457.355, 457.570, and 457.805 

 These amendments to the Medicaid and CHIP state plans are necessary to reflect changes 

in statute and federal policy. While we are aware of the need to estimate the PRA burden 

associated with the submission of state plan amendments related to the provisions identified 

above, those amendments will be addressed as part of the electronic state plan filing process 

being developed by CMS (the MACPro system) and submitted to OMB for approval under OCN 

0938-1188 (CMS-10434). 

1b. Sections 435.113, 435.114, 435.223, and 435.510 

Since we are eliminating the provisions in §§435.113, 435.114, 435.223, and 435.510, 

states will no longer be required to submit state plan amendments related to those provisions. 

The provisions have been approved by OMB under OCN 0938-1147). 

B. Medicaid Eligibility and Enrollment 

1. ICRs Regarding Delegation of Eligibility Determinations and Appeals (§§431.10(c), 431.11. 

and 457.1120) 

In §431.10(c), a state may delegate authority to make eligibility determinations and to 

conduct fair hearings. States generally have written agreements with various entities for similar 

purposes. Under this final rule, agreements may need to be modified or new agreements 

established. However, states that use the same agency to administer more than one program (for 
CMS-2334-F 469 

example, Medicaid and the Exchange) will not need an agreement for the determination of 

eligibility by that agency. 

 Delegation of eligibility determinations was approved under OMB control number 0938-

1147. This rule sets out changes in the existing requirement related to the type of agencies that 

can make Medicaid and CHIP eligibility determinations. These amendments do not change the 

burden associated with the requirement. Medicaid and CHIP agencies will need to establish new 

agreements to delegate authority to conduct eligibility appeals. The burden associated with the 

delegation of appeals is the time and effort necessary for the Medicaid and CHIP agencies to 

create and execute the agreements with the organization to which they are delegating authority. 

 There are 53 Medicaid agencies (the 50 states, the District of Columbia, Northern 

Mariana Islands, and American Samoa) and 43 CHIP agencies, for a total of 96 agencies. For 

the purpose of developing the cost , we estimate that half of these agencies will establish an 

agreement with an organization to conduct fair hearings. We estimate a one-time burden of 50 

hours to develop an agreement that can be used with the organization. It will take an additional 

10 hours for Medicaid and 10 hours for a separate CHIP agency to negotiate and execute the 

agreement with the organization for a total time burden of 2,880 hours [(53 +43)/2 x (50 + 10)] 

across all agreements. For the purpose of the cost , we estimate it will take a health policy 

analyst 40 hours at $49.35 an hour and a senior manager 10 hours at $79.08 an hour to complete 

the model agreement (for a total of $2,764.80) plus 10 additional hours ($49.35) for a health 

policy analyst to execute a completed agreement with each organization. The estimated cost for 

each agreement is $3,258.30 for a total cost of $156,398.40. 

2. ICRs Regarding Fair Hearing Processes (§§431.205(e), and 431.206(d) and (e)) 

In §§431.205(e) and 431.206(e), the hearing system and information must be accessible 

to persons who are limited English proficient and to persons with disabilities. While states are 
CMS-2334-F 470 

required to make the hearing system accessible, we believe the associated burden is exempt from 

the PRA (see 5 CFR 1320.3(b)(2)) since we believe that the time, effort, and financial resources 

necessary to comply with this requirement will be incurred by persons during the normal course 

of their activities and should, therefore, be considered as a usual and customary business 

practice. 

 In §431.206(d), states are required to inform individuals that they may have their hearing 

before the agency (instead of the Exchange or the Exchange appeals entity) and the method by 

which the individual may make such election. There are 53 Medicaid agencies (the 50 states, the 

District of Columbia, Northern Mariana Islands, and American Samoa) and 43 CHIP agencies 

for a total of 96 agencies that will be subject to this requirement. The burden associated with 

providing this choice is developing the process and workflow to enable the choice and sending 

the request for the fair hearing to the appropriate agency. We estimate it will take each agency 

an average of 70 hours to create the process and workflow required in providing the choice. For 

the purpose of the cost , we estimate it will take a health policy analyst 40 hours at $49.35 an 

hour, a senior manager 10 hours at $79.08 an hour, and a computer programmer 20 hours at 

$52.50 to complete the process and workflow. The estimated cost for each agency is $3814.80. 

The total estimated cost is $366,220.80. 

3. ICRs Regarding Application Counselors (§435.908(c)) 

 In §435.908(c), states have the option to authorize certain staff and volunteers of 

organizations to act as certified application counselors. The burden associated with the 

requirements to assist individuals with the application process is the time and effort necessary for 

the state to create agreements with these organizations, to create a registration process for 

assistors, and to train staff on the eligibility and confidentiality rules and requirements and how 

to assist applicants with the completing the application. 
CMS-2334-F 471 

 We estimate the 50 states, the District of Columbia, Northern Mariana Islands, and 

American Samoa will establish agreements with on average 20 organizations in their state or 

territory for a total of 1,060 agreements related to application assistance. As part of this 

estimate, we assumed that state Medicaid and CHIP agencies will be party to the same 

agreements and, therefore, will not establish separate agreements. 

 The first burden associated with this provision is the time and effort necessary for the 

state Medicaid and CHIP agencies to establish an agreement. To develop an agreement, we 

estimate that it will take each of the 53 states and territories 50 hours to develop a model 

agreement. For the purpose of the cost, we estimate it will take a health policy analyst 40 hours 

at $49.35 an hour and a senior manager 10 hours at $79.08 to develop an agreement. The 

estimated cost is $2,764.80 (per state) or $146,534.40 (total) while the total annual hour burden 

is 2,650 hours. 

To negotiate and complete the agreement, we estimate that each of the 53 

states/territories will execute 20 agreements. For the purpose of the cost, we estimate it will take 

a health policy analyst 10 hours at $49.35 an hour to execute each agreement. The estimated 

cost is $9,870 (per state) or $523,110 (total) while the total annual hour burden is 10,600 hours. 

To develop and execute the model agreements, the total cost is $669,644.40 for 13,250 

hours of labor. 

 The next burden associated with this provision is the time and effort necessary for the 53 

states and territories to establish the registration process and workflow for the application 

counselors. We estimate it will take each state or territory an average of 70 hours (3,710 total 

hours) to create the registration process and workflow for the application counselors. For the 

purpose of the cost, we estimate it will take a health policy analyst 40 hours, at $49.35 an hour, a 

senior manager 10 hours, at $79.08 an hour, and a computer programmer 20 hours at $52.50 to 
CMS-2334-F 472 

complete the registration process and workflow. The estimated cost for each state or territory is 

$3,814.80. The total estimated cost is $202,184.40. 

 The next burden associated with this provision is the time and effort necessary for the 53 

state Medicaid and CHIP agencies to provide training to the application counselors. For the 

purpose of the cost , we estimate it will take a training specialist 40 hours at $26.64 an hour and 

a training and development manager 10 hours at $64.43 an hour to develop training materials for 

the application counselors, for a total time burden of 2,650 hours. The estimated cost for each 

state or territory is $1,709.90. The total estimated cost is $90,624.70. 

 Lastly, we estimate that each state or territory will offer 50 hours of training sessions to 

train individuals to assist applicants with Medicaid and CHIP applications for a total time burden 

of 2650 hours. For the purpose of the cost, we estimate it will take a training specialist 50 hours 

at $26.64 an hour to train the application counselors. The estimated cost for each agency is 

$1,332. The total estimated cost is $70,596. 

4. ICRs Regarding Eligibility Determination Notices (§435.918, §457.110,) 

 In §435.918 and §457.110, states must electronically provide notices to individuals when 

elected. 

 The burden associated with the requirements to deliver notices is the time necessary for 

the state staff to: familiarize themselves with the requirements related to notices; (2) develop the 

language for approval, denial, termination, suspension, and change of benefits notices; and (3) 

program the language in the Medicaid and CHIP notice systems so that the notice can be 

populated and generated based on the outcome of the eligibility determination and be delivered 

in an electronic format. 

 We estimate 53 state Medicaid agencies (the 50 states, the District of Columbia, Northern 

Mariana Islands, and American Samoa) and 43 CHIP agencies (in states that have a separate or 
CMS-2334-F 473 

combination CHIP), totaling 96 agencies, will be subject to this requirement. We estimate that it 

will take each Medicaid and CHIP agency 194 hours annually to develop, automate, and 

distribute the notice of eligibility determination. For the purpose of the cost burden, we estimate 

it will take a health policy analyst 138 hours at $49.35 an hour, a senior manager 4 hours at 

$79.08, an attorney 20 hours at $90.14, and a computer programmer 32 hours at $52.50 to 

complete the notices. The estimated cost burden for each agency is $10,609.42. The total 

estimated cost burden is $1,018,504.30, and the total annual hour burden is 18,624 hours. 

5. ICRs Regarding Authorized Representatives (§435.923(a)) 

 Section 435.923(a) sets out minimum requirements for the designation of authorized 

representatives. We are also applying these provisions to state CHIP agencies through the 

addition of a cross reference in §457.340. 

 We are aware of the need to estimate the PRA burden associated with the collection of 

information related to authorizing an individual to act as a representative of an applicant, to 

permit self-attestation for individuals who do not have access to documentation, and the 

citizenship and immigration verification requirements. These requirements were addressed as 

part of the single, streamlined application under OCN 0938-1191 (CMS-10440). 

6. ICRs Regarding Presumptive Eligibility Determined by Hospitals (§435.1110) 

 Under §435.1110(d)(1), states may establish state-specific standards for qualified 

hospitals that conduct presumptive eligibility determinations related to the success of assisting 

individuals determined presumptively eligible who submit a regular application and/or are 

approved for eligibility by the agency. States also have a great deal of flexibility in determining 

and implementing the standards appropriate for their programs as well as appropriate corrective 

action measures for hospitals which do not meet the state standards. 
CMS-2334-F 474 

 This change is necessary to reflect changes in federal policy. A state’s election of statespecific standards will affect their Medicaid state plan. While we are aware of the need to 

estimate the burden associated with the submission of the state plan amendment, that amendment 

will be addressed under the electronic state plan filing process being developed by CMS (the 

MACPro system) and submitted to OMB for approval under OCN 0938-1188 (CMS-10434). 

The amendment and its estimated burden will also be made available for public comment 

through the PRA process. 

 In §§435.1101(b) and 457.355 (by reference to §435.1101), states are required to provide 

qualified entities with training in all applicable policies and procedures related to presumptive 

eligibility. The burden associated with this provision is the time and effort necessary for the 

states and territories to provide training to the hospitals. We estimate 50 states, the District of 

Columbia, Northern Mariana Islands, and American Samoa will be subject to this requirement. 

As part of this estimate, we assumed that state Medicaid agencies and CHIP agencies, where 

there are separate agencies, will develop and use the same training. 

 For the purpose of the cost, we estimate it will take a training specialist 40 hours at 

$26.64 an hour and a training and development manager 10 hours at $64.43 an hour to develop 

training materials for the qualified entities, for a total time burden of 2,650 hours. The estimated 

cost for each state or territory is $1,709.90. The total estimated cost is $90,624.70. 

 We also estimate that each state or territory will offer 50 hours of training sessions to 

qualified entities, for a total time burden of 2,650 hours. For the purpose of the cost, we estimate 

it will take a training specialist 50 hours at $26.64 an hour to train the qualified entities. The 

estimated cost for each agency is $1,332. The total estimated cost is $70,596. 

7. ICRs Regarding ABP SPA-related Requirements (§§440.305, 440.315, 440.330, 440.335, 

440.345, 440.347, 440.360, and 440.386) 
CMS-2334-F 475 

 In the proposed rule, CMS requested comment on habilitative services (§440.347(d)) and 

on the “medically frail” definition (§440.315(f)). Comments and CMS’ response can be found in 

section B.3.a of this preamble. We also requested comment on essential health benefits 

(rehabilitative and habilitative services and devices) (§440.347). See section II.B. of this 

preamble for the comments and our response. Additional comments were solicited for exempt 

individuals (modifying definition of “medically frail”) (§440.315). Comments and CMS’ 

response can be found in the ABP portion of this preamble. 

CMS also received many comments on the proposed changes to: (1) the public notice 

requirement in §440.386 (see section II.B.7.b. of this preamble for the comment and our 

response); (2) public notice in §440.386 and prescription drug coverage in §440.345(f) (see 

section II.B.3.i. of this preamble for the comment and our response); (3)essential health benefits 

(non-discrimination policy) under §440.347 (see section II.B.2.d of this preamble); and (4) 

EPSDT and other required benefits (family planning services and supplies) under §440.345 ( see 

the comments and responses section of the ABP portion of this preamble). As a result of 

comments received, CMS is finalizing the public notice requirements in this final rule without 

change. 

We also received a number of comments requesting clarification to our statement in the 

preamble that the section 1927 requirements apply to the ABP prescription drug benefit. 

 Specifically, commenters requested clarification, as part of this final rule, as to how section 

1927 of the Act applies to prescription drug coverage under the ABP since ABP requirements for 

prescription drug coverage must meet the minimum EHB prescription drug requirements at 

section 1937 of the Act. Based upon those comments, we have clarified in the regulation that 

when states pay for covered outpatient drugs under a state’s ABP, the section 1927 requirements 

apply. There is no additional information collection burden associated with this clarification. 
CMS-2334-F 476 

While this rule has finalized policy related to these provisions, these policies do not result 

in any additional information collection requirements. Rather, the policy clarifications are 

interpretations of information that is already being collected. 

The information collection requirements and burden estimates associated with 

§§440.305, 440.315, 440.330, 440.335, 440.345, 440.347, 440.360, and 440.386 have been 

approved by OMB through March 31, 2016, under OCN 0938-1188 (CMS-10434). This rule 

will not impose any new or revised SPA-related reporting, recordkeeping, or third party 

disclosure requirements and, therefore, does not require additional OMB review under the 

authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). 

8. ICRs Regarding Cost Sharing and Premiums (§§447.52, 447.53, 447.54, 447.55 and 447.56) 

The Deficit Reduction Act of 2005 (DRA) established a new section 1916A of the Act, 

which gives states additional flexibility, allowing for alternative premiums and cost sharing, 

beyond what is allowed under section 1916 of the Act, for somewhat higher income 

beneficiaries. Such alternative cost sharing may be targeted to specific groups of beneficiaries 

and payment may be required as a condition of providing services. Thus, in accordance with the 

DRA we reviewed and made changes to the current cost sharing and premiums regulations under 

§§447.52 through 447.56. 

In a review of these sections we found that 45 states including the District of Columbia 

impose cost-sharing and 40 states impose premiums on beneficiaries. While these provisions are 

subject to the PRA, we believe that any changes a state makes to its current state plan under any 

of these sections is a usual and customary practice under 5 CFR 1320.3(b)(2) and, as such, the 

burden associated with it is exempt from the PRA. 

For those states electing to impose cost-sharing or premiums for the first time will only 

need to submit a state plan amendment one time for review. We estimate it will take each 
CMS-2334-F 477 

agency in this circumstance an average of 2 hours to fill out the state plan pre-print for either 

cost-sharing or premiums and submit it for approval. Thus we anticipate six states may impose 

cost-sharing and 11 states and the District of Columbia may impose premiums on beneficiaries. 

For the purpose of the cost burden, we estimate it will take a health policy analyst 1 hour at 

$49.35 an hour and a senior manager 1 hour at $79.08 an hour to complete the process and 

submission of each new state plan amendment. The estimated cost burden for each agency is 

$128.43. The total estimated cost burden is $2,183.31. 

9. ICRs Regarding Beneficiary and Public Notice Requirements (§447.57) 

In §447.57(a), 53 Medicaid agencies will be required to make available a public schedule 

describing current premiums and cost sharing requirements containing the information in 

paragraphs (a)(1) through (6). In §447.57(b), agencies are required to make the public schedule 

available to those identified in paragraphs (b)(1) through (4). 

Prior to submitting a SPA for Secretary approval to establish or modify existing 

premiums or cost sharing or change the consequences for non-payment, §447.57(c) requires that 

the state: (1) provide the public with advance notice of the SPA (specifying the amount of 

premiums or cost sharing and who is subject to the charges); (2) provide a reasonable 

opportunity to comment on SPAs that propose to substantially modify premiums and cost 

sharing; (3) submit documentation to demonstrate that these requirements were met; and (4) 

provide additional public notice if cost sharing is modified during the SPA approval process. 

In §447.57(d), the information must be provided in a manner that ensures that affected 

beneficiaries and providers are likely to have access to the notice and are able to provide 

comments on proposed state plan amendments. 

We estimate it will take each Medicaid agency an average of 6 hours to create the process 

and workflow required in providing the schedule and notice. For the purpose of the cost burden, 
CMS-2334-F 478 

we estimate it will take a health policy analyst 4 hours at $49.35 an hour and a senior manager 2 

hours at $79.08 an hour to complete the process and workflow. The estimated cost burden for 

each agency is $355.56. The total estimated cost burden is $18,844.68. 

C. Part 155 --Exchange Establishment Standards and Other Related Standards Under the 

Affordable Care Act

 For purposes of presenting an estimate of paperwork burden, we reflect the participation 

of 18 State-Based Exchanges. It is important to note that the Exchange provisions found in part 

155, subparts D and E discussed below involve several information collections that will occur 

through the single, streamlined application for enrollment in a QHP and for insurance 

affordability programs described in §155.405. We have accounted for the burden associated 

with these collections in the Supporting Statement for Data Collection to Support Eligibility 

Determinations for Insurance Affordability Programs and Enrollment through Health Benefits 

Exchanges, Medicaid, and Children’s Health Insurance Program Agencies (CMS-10440; OCN 

0938-1191). 

 We also highlight that the Supporting Statement includes several information collections 

from regulatory provisions finalized in the Exchange final rule (77 FR 18310). We have 

included these information collections in this PRA package to address PRA requirements related 

to those provisions as they were not included in the information collection section of the 

Exchange final rule. 

 Lastly, we have not included information regarding information collections associated 

with certified application counselors, eligibility appeals, and SHOP coordination with individual 

market Exchanges, which we will finalize at a future date with the corresponding regulatory 

provisions. 

1. ICRs Regarding Authorized Representatives (§155.227) 
CMS-2334-F 479 

Section 155.227(a) provides that an applicant or enrollee, subject to applicable privacy and 

security requirements, may designate an individual person or organization as his or her 

authorized representative. One method for designating an authorized representative is by 

submitting legal documentation of the representative’s authority. Exchanges have the option to 

make available an “Appointment of Authorized Representative Form” at the time of application 

or anytime thereafter for an individual to designate an authorized representative. Such a form 

would collect identifying and contact information about the applicant, enrollee, and requested 

authorized representative. Requested data elements would include the following for both the 

applicant or enrollee and the requested representative: name, address, phone number, email 

address, date of birth, and relationship. The applicant, enrollee, or authorized representative 

could obtain the form from the Exchange website or from an assister (such as a Navigator, nonNavigator in-person assister, etc.), and could submit it to the Exchange by mail or online at any 

time. We expect that the Exchange would use this information to authorize the authorized 

representative to act on behalf of the applicant or enrollee. An authorized representative could 

also submit this form if the applicant or enrollee is unable to do so. 

 HHS is currently developing a model Appointment of Authorized Representative Form to 

be used by the Federally-facilitated Exchanges and will make that form available to State-based 

Exchanges, which would also decrease the burden on State-based Exchanges to develop such a 

form. If a state opts not to use the form provided by HHS, we estimate the burden associated for 

the time and effort necessary for a State-based Exchange to develop the Appointment of 

Authorized Representative Form to be 30 hours. This includes a 10 hours from a mid-level 

health policy analyst at an hourly cost of $49.35 and 10 hours from an operations analyst at an 

hourly cost of $54.45 for drafting the form with 4 hours of managerial oversight at an hourly cost 
CMS-2334-F 480 

of $79.08 and 6 hours of legal review at an hourly cost of $90.14. The estimated cost per Statebased Exchange is $1,895, for a total cost of $34, 113 for 18 State-based Exchanges. 

 For an applicant, enrollee, or prospective authorized representative, we estimate that it 

will take up to 5 minutes to review instructions and complete an Appointment of Authorized 

Representative Form. While we expect most applicants, enrollees, or prospective authorized 

representatives to complete the Authorized Representative Form, an applicant, enrollee, or 

prospective authorized representative may also comply with this provision by providing the 

necessary information online, by phone, by mail, or in-person. We expect a similar burden on 

the applicant, enrollee, or authorized representative to comply with this provision through such 

means. If the applicant, enrollee, or authorized representative chooses to submit an 

“Appointment of Authorized Representative Form,” the burden for a State-based Exchange to 

process the submitted information will be approximately 10 minutes at a cost of $3.39 per 

submission. We anticipate that an eligibility support staff person will scan, digitize, and link the 

form to an applicant’s or enrollee’s account, review the submitted information, and update the 

authorized representative’s and applicant’s or enrollee’s account, if applicable. 

2. ICRs Regarding Notices (§§155.302, 155.310, 155.315, 155.320, 155.330, 155.335, 

155.345, 155.355, 155.410, 155.715, 155.720, 155.725, and 155.1080) 

Several provisions in subparts D and E outline specific scenarios in which the Exchange 

will send a notice to individuals and employers throughout the eligibility and enrollment process. 

HHS is currently developing model eligibility determination notices and several other models for 

notices described in 45 CFR parts 155, 156, and 157 which will decrease the burden on 

Exchanges to establish such notices. For some notices, the Exchange will include specific notice 

text in another notice, such as the eligibility determination notice, rather than send an entirely 

separate notice (effectively, two notices are combined into one). The purpose of these notices is 
CMS-2334-F 481 

to alert the individuals and employers who receive the notice of actions taken by the Exchange. 

When possible, we anticipate that the Exchange will consolidate notices when multiple members 

of a household are applying together and receive an eligibility determination at the same time. 

The notice may be in paper or electronic format but must be in writing and sent after an 

eligibility determination has been made by the Exchange. We anticipate that a large volume of 

enrollees will request electronic notification while others will opt to receive the notice by mail. 

As a result of certain enrollees opting to receiving the notice by mail in some instances, we 

estimated the associated mailing costs for the time and effort needed to mail notices in bulk to 

enrollees as appropriate. 

We expect that the electronic eligibility determination notice will be dynamic and include 

information tailored to all possible outcomes of an application throughout the eligibility 

determination process. To develop the paper and electronic notices, Exchange staff will need to 

learn eligibility rules and draft notice text for various decision points, follow up, referrals, and 

appeals procedures. A health policy analyst, senior manager, and legal counsel will review the 

notice. The Exchange will then engage in review and editing to incorporate changes from the 

consultation and user testing including review to ensure compliance with plain writing, 

translation, and readability standards. We intend that Exchanges will work closely with the state 

Medicaid or CHIP agency to develop coordinated notices. Finally, a developer will program the 

template notice into the eligibility system so that the notice may be populated and generated in 

the correct format according to an individual’s preference to receive notices, via paper or 

electronically, as the applicant moves through the eligibility process. 

If a state opts not to use the model notices provided by HHS, we estimate that the 

Exchange effort related to the development and implementation of the eligibility notice will 

necessitate 44 hours from a health policy analyst at an hourly cost of $49.35 to learn eligibility 
CMS-2334-F 482 

rules and draft notice text; 20 hours from an attorney at an hourly cost of $90.14 and 4 hours 

from a senior manager at an hourly cost of $79.08 to review the notice; and 32 hours from a 

computer programmer at an hourly cost of $52.50 to conduct the necessary development. In 

total, we estimate that this will take a total of 100 hours for each Exchange, at a cost of 

approximately $5,971 per Exchange and a total cost of $107,478 for 18 State-Based Exchanges. 

We expect that the burden on the Exchange to maintain this notice will be significantly lower 

than to develop it. 

Section 155.310(h) specifies that the Exchange will notify an employer that an individual 

in an employee’s tax household has been determined eligible for advance payments of the 

premium tax credit and/or cost-sharing reductions based in part on the employer not offering 

minimum essential coverage or not offering qualifying coverage in an eligible employersponsored plan. Upon making such an eligibility determination, the Exchange will send a notice 

to the employer with information identifying the employee, along with a notification that the 

employer may be liable for the payment under section 4980H of the Code, and that the employer 

has a right to appeal this determination. Because this notice will be sent to an employer at the 

address as provided by an application filer on the application, we anticipate all of these notices 

will be sent by mail. As a result, we estimated the associated mailing costs for the time and 

effort needed to mail notices in bulk to employers. Like the eligibility notice, the employer 

notice above will be developed and programmed into the eligibility system. However, unlike the 

eligibility notice, we expect the information on the employer notice to be minimal in comparison 

to the eligibility notice and therefore the burden on the Exchange to develop the notice to be 

substantially less. Further, as with the individual eligibility notice, HHS will provide model 

notice text for Exchanges to use in developing this notice.

3. ICRs Regarding Verification of Enrollment in an Eligible Employer-Sponsored Plan and 
CMS-2334-F 483 

Eligibility for Qualifying Coverage in an Eligible Employer-Sponsored Plan (§155.320) 

 Section 155.320(d) proposes the process for the verification of enrollment in an eligible 

employer-sponsored plan and eligibility for qualifying coverage in an eligible employersponsored plan. Paragraph (d)(2) specifies that the Exchange will obtain relevant data from any 

electronic data source available to the Exchange which has been approved by HHS, as well as 

data from certain specified electronic data sources. This will involve the development and 

execution of data sharing agreements; however, this burden is already captured in the data 

sharing agreements described in §155.315. As these verification activities will all be electronic, 

we do not expect for there to be any additional burden than that which is required to design the 

overall eligibility and enrollment system. 

 Paragraph (d)(3)(iii)(A) proposes that the Exchange provide notice to certain applicants 

indicating that the Exchange will be contacting any employer identified on the application to 

verify whether the applicant is enrolled in an eligible employer-sponsored plan or is eligible for 

qualifying coverage in an eligible employer-sponsored plan for the benefit year for which 

coverage is requested. The burden associated with this notice to certain applicants is addressed 

in 155.310(g) as this will not be a separate notice, but incorporated into the eligibility 

determination notice described in the above paragraph. 

 In paragraph (d)(3)(iii)(D), we propose that the Exchange make reasonable attempts to 

contact any employer to which the applicant attested employment to verify whether the applicant 

is enrolled in an eligible employer-sponsored plan or is eligible for qualifying coverage in an 

eligible employer-sponsored plan for the benefit year for which coverage is requested. We note 

that the flexibility we provide to State-Based Exchanges for the first year of operations will 

significantly reduce the burden of this information collection in the first year. 

 It is difficult to estimate the burden associated with this information collection as the 
CMS-2334-F 484 

calculation involves identifying the number of individuals for whom employer-sponsored 

coverage information will be unavailable. As such, below, we estimate the time and cost 

associated with the Exchange making a reasonable attempt to contact one employer. We 

estimate the time associated with this information collection to be a total of 2.2 hours per 

employer at a total cost of $34. 

4. ICRs Regarding Electronic Transmissions (§§155.310, 155.315, 155.320, and 155.340) 

 Sections 155.310, 155.315, 155.320, 155.330, and 155.340 involve the electronic 

transmission of data to determine eligibility for enrollment in a QHP and for insurance 

affordability programs. Section 155.310(d)(3) specifies that the Exchange must notify the state 

Medicaid or CHIP agency and transmit all information from the records of the Exchange for an 

applicant determined eligible for Medicaid or CHIP to the Medicaid or CHIP agency to ensure 

that the Medicaid or CHIP agency can provide the applicant with coverage promptly and without 

undue delay. This applicant information will be transmitted electronically from the Exchange to 

the agency administering Medicaid or CHIP once a determination has been made that the 

applicant is eligible for such program. The purpose of this data transmission is to notify the 

agency administering Medicaid or CHIP that an individual is newly eligible and thus the agency 

should facilitate enrollment in a plan or delivery system. Data will be transmitted through a 

secure electronic interface. 

 Sections 155.315 and 155.320 include transactions necessary to verify applicant 

information. We expect there to be no transactional burden associated with the electronic 

transactions needed to implement §§155.315 and 155.320. As these transmission functions will 

all be electronic, we do not expect for there to be any additional burden than that which is 

required to design the overall eligibility and enrollment system. 
CMS-2334-F 485 

 In §155.340, the Exchange must provide the relevant information, such as the dollar 

amount of the advance payment and the cost-sharing reductions eligibility category, to enable 

advance payments of the premium tax credit and cost-sharing reductions, reconciliation of the 

advance payments of the premium tax credit, and administration of the employer responsibility 

requirements. As we anticipate that these transmissions of information will all be electronic, we 

do not expect for there to be any additional burden than that which is required to design the 

overall eligibility and enrollment system. 

5. ICRs Regarding Reporting Changes (§§155.315, 155. 330, and 155.335) 

Section 155.315(f) outlines the process for resolving inconsistencies identified through 

the verification process. In §155.330(c)(1), we state that the Exchange will verify any 

information reported by an enrollee in accordance with the processes specified in §§155.315 and 

155.320 prior to using such information in an eligibility redetermination. Section 155.335(e) 

provides that the Exchange will require a qualified individual to report any changes for the 

information listed in the notice described in §155.335(c) of this section within 30 days from the 

date of the notice. It is not possible at this time to provide estimates for the number of applicants 

for whom a reported change will necessitate the adjudication of documentation, but we anticipate 

that this number will decrease as applicants become more familiar with the eligibility process 

and as more data become available. As such, for now, we note that the burden associated with 

this provision is one hour for an individual to collect and submit documentation, and 12 minutes 

(or 0.2 hours) for eligibility support staff at an hourly cost of $28.66 to review the 

documentation. 

6. ICRs Regarding Enrollment and Termination (§§155.400, 155.405, and 155.430) 

In part 155, subpart E, we describe the requirements for Exchanges in connection with 

enrollment and disenrollment of qualified individuals through the Exchange. These information 
CMS-2334-F 486 

collections are associated with sending eligibility and enrollment information to QHP issuers and 

to HHS, maintaining records of all enrollments in QHPs through the Exchange, reconciling 

enrollment information with QHP issuers and HHS, and retaining and tracking coverage 

termination information. The burden estimates associated with these provisions include the time 

and cost to meet these record requirements. We estimate that it will take 142 hours annually for 

an Exchange to meet these recordkeeping requirements for a total of 2,556 hours for 18 StateBased Exchanges. 

In the case of the requirement related to termination standards, the burden includes 

estimates related to the maintenance and transmission of coverage termination information, as 

well as the time and effort needed to develop the system to collect and store the information. We 

estimate that it will take 30 hours of a health policy analyst at an hourly rate of $58.05, 20 hours 

for a computer programmer at an hourly rate of $52.50, and 20 hours for an operations analyst at 

an hourly rate of $54.45 for a total of 70 hours annually per Exchange and a total of 1,260 hours 

for 18 Exchanges, for the time and effort to meet this standard. We estimate a cost of $3,881 for 

one Exchange and a total cost of 69,858 for 18 State-Based Exchanges. 

7. ICRs Regarding Agreements (§§155.302 and 155.345) 

Section 155.345(a) specifies that an Exchange and the corresponding state Medicaid and 

CHIP agencies will enter in to an agreement regarding the coordination of eligibility 

determinations, and §155.302(b)(6) specifies that to the extent that an Exchange is making 

assessments of eligibility for Medicaid and CHIP, rather than determinations, the Exchange will 

enter into an agreement with the state Medicaid and CHIP agencies regarding this arrangement. 

These agreements are necessary to minimize burden on individuals, ensure prompt 

determinations of eligibility and enrollment in the appropriate program without undue delay and 

to provide standards for transferring an application between the Exchange and other entities 
CMS-2334-F 487 

administering insurance affordability programs. The specific number of agreements needed may 

vary depending on how states choose to divide responsibilities regarding eligibility 

determinations; where the Exchange is making assessments, we expect that the agreement 

described in §155.302(b)(6) will be combined with the agreement in §155.345(a). 

The burden associated with this provision is the time and effort necessary for the 

Exchange to establish or modify an agreement for eligibility determinations and coordination of 

eligibility and enrollment functions. If an Exchange chooses to draft separate agreements for 

each insurance affordability program, then the estimate will likely increase. 

 In either case, we estimate it will take each Exchange an average of 105 hours to create a 

new agreement, although we assume that such agreements will be largely standardized across 

states, and that HHS will provide model agreements for state Medicaid and CHIP agencies and 

the Exchange to use. This includes a mid-level health policy analyst and an operations analyst 

reviewing the agreement with managerial oversight and comprehensive review of the agreement 

by operations analyst. We estimate a cost of $6,733 per Exchange. 

8. ICRs Regarding Notices from QHP Issuers (§§156.260, 156.265, 156.270, and 156.290). 

First, §156.260(b) provides that QHP issuers will notify a qualified individual of his or 

her effective date of coverage, in accordance with the effective dates of coverage established by 

the Exchange in accordance with §155.410(c) and (f). Second, under §156.270(b), QHP issuers 

will send a notice of termination of coverage to an enrollee if the enrollee’s coverage in the QHP 

is being terminated in accordance with §155.430(b)(1)(i), (b)(2)(ii) or (b)(2)(iii). Third, 

§156.270(f) provides that QHP issuers will provide enrollees with a notice about the grace 

period for non-payment of premiums. QHP issuers will send this notice to enrollees who are 

delinquent on premium payments. Fourth, §156.265(e) provides that QHP issuers will provide 

new enrollees with an enrollment information package, which we anticipate that issuers may 
CMS-2334-F 488 

combine with the notification of coverage effective date described in §156.260(b). Lastly, under 

§156.290(b), QHP issuers will provide a notice to enrollees if the issuer elects not to seek 

recertification of a QHP. 

We anticipate that some of the above QHP issuer required notices are similar in nature to 

the notices that issuers currently send to enrollees. For example, it is standard practice for 

issuers to provide new enrollees with information about their enrollment in a plan, their effective 

date of coverage, and if and when their coverage is terminating. Accordingly, we anticipate that 

QHP issuers will review, update, and revise notice templates that they utilize currently as they 

work to address the notice requirements described below and to ensure that the notices include 

the appropriate information. Similar to notices that will be issued by the Exchange, we expect 

that for QHP-issued notices, an analyst will develop text, and a peer analyst, manager, and legal 

counsel for the issuer will review the notices, including a review to ensure compliance with plain 

writing, language access, and readability standards as required under §156.250(c). Finally, a 

developer will need to incorporate programming changes into the issuer’s noticing system to 

account for the changes and updates that will be necessary to ensure that the QHP issuer is in 

compliance with the notice standards set forth in this rule and to ensure the notice can be 

populated and generated according to an individual’s preference to receive notices. We estimate 

that the burden related to the development and implementation of this notice will necessitate 

44 hours from a health policy analyst at an hourly cost of $49.35 to learn appeals rules and draft 

notice text; 20 hours from an attorney at an hourly cost of $90.14 and four hours from a senior 

manager at an hourly cost of $79.08 to review the notice; and 32 hours from a computer 

programmer at an hourly cost of $52.50 to conduct the necessary development. In total, we 

estimate that this will take a total of 100 hours for each QHP issuer, at a cost of approximately 
CMS-2334-F 489 

$5,971 per issuer. We expect that the burden on QHP issuers to maintain this notice will be 

significantly lower than to develop it. 

However, we believe that the burden estimate described under §155.310(g) likely 

represents an upper bound estimate of the burden on issuers to develop each of these notices as 

in some cases the notice described under §155.310(g) will be somewhat more dynamic to 

address the additional information we expect to be included in that notice. 

 Since the above estimate applies to one notice, and we described 5 notices under part 

156, the total burden estimate is $40,710. Due to uncertainty regarding the number of 

individuals who will choose to receive paper notices, as well as some uncertainty regarding the 

frequency of circumstances that will trigger notices in accordance with this part, we have only 

included an estimate of the printing and mailing costs for a QHP issuer to send one notice to a 

qualified individual or enrollee. 

9. ICRs Regarding Notices and Third-Party Disclosures in the SHOP (§§157.205(e) and (f)) 

45 CFR part 157 includes several instances in which qualified employers participating in 

the SHOP Exchange will need to provide information to employees or to the SHOP Exchange. 

We include the data elements for these notifications in appendix A of this PRA package. For the 

individual market Exchange, we anticipate that a large share of enrollees will elect to receive 

electronic notices while the rest will receive notices by mail. We do not make this assumption 

for notices described here as we expect that qualified employers would provide notices to 

employees in whatever format the qualified employer usually provides notices to employees; in 

paper, electronically, or in a combination of both formats. We estimate that the associated 

printing costs for paper notices will be approximately $0.10 per notice. We do not take mailing 

costs into consideration for notices provided by qualified employers, as we expect that if 

qualified employers provide notices in paper format, the employer may provide the employee 
CMS-2334-F 490 

with the notice in person, instead of mailing the notice. We do not have a reasonable way to 

estimate total printing costs for notices provided by qualified employers in the SHOP Exchange 

due to uncertainty regarding the number of employees who will choose to receive paper notices, 

as well as some uncertainty regarding the frequency of circumstances that will trigger notices in 

accordance with this part. 

First, §157.205(e) specifies that a qualified employer provide an employee with 

information about the enrollment process. A qualified employer will inform each employee that 

he or she has an offer of coverage through the SHOP Exchange, and instructions for how the 

employee can apply for and enroll in coverage. We anticipate that the qualified employer will 

also provide information about the acceptable formats in which an employee may submit an 

application; online, on paper, or by phone, as described under §157.205(c). If the employee 

being offered coverage was hired outside an initial or annual enrollment period, the notice will 

also inform the employee if he or she is qualified for a special enrollment period. Second, in 

§157.205(f) we provide that a qualified employer will notify the SHOP Exchange regarding an 

employee’s change in eligibility for enrollment in a QHP through the SHOP Exchange, including 

when a dependent or employee is newly eligible, or is no longer eligible. 

We expect that the information that qualified employers will provide to employees and 

the SHOP Exchange, as described above, will be somewhat standardized. Additionally, we 

anticipate that qualified employers will generate notices using a manual process. We expect that 

for a qualified employer to establish a notice, the qualified employer will need 20 hours from a 

human resources specialist at an hourly cost of $40.68 to develop the text; and four hours from a 

human resources manager at an hourly cost of $75.01 and ten hours from an attorney at an 

hourly cost of $90.14 to review the notices. We do not anticipate that a developer will be needed 

to develop the notices described in this part since we expect that in most cases, these notices will 
CMS-2334-F 491 

be manually generated on demand. Accordingly, we expect that the burden hours for developing 

each of the notices will be approximately 34 hours, for a total of 68 hours per qualified 

employer, at a total cost of $4,030. We expect that the burden on the qualified employer to 

maintain the notices will be significantly lower than to develop the notices. 

D. Summary of Annual Burden Estimates 

TABLE 1: Proposed Annual Recordkeeping and Reporting Requirements 

Regulation 

Section(s) 

OMB 

& 

CMS 

ID #s Respondents 

Responses 

(total) 

Burden 

per 

Response 

(hours) 

Total 

Annual 

Burden 

(hours) 

Labor Cost 

of Reporting 

($) 

Total Cost 

($) 

42 CFR 431.10, 

431.11, and 

457.1120 

OCN 

0938-

New; 

CMS10456 

48 48 60 2,880 3,258 (per 

respondent) 

156,398 

 

§§435.917, 435.918, 

457.110, and 

457.340 

OCN 

0938-

New; 

CMS10456 

96 96 194 18,624 10,609 (per 

respondent) 

1,018,504 

§§435.923 and 

457.340 (develop 

and execute 

agreements) 

OCN 

0938-

New; 

CMS10456 

53 1060 12.5 13,250 12,635 (per 

respondent) 

669,644 

§§435.923 and 

457.340 (create 

registration process 

and work flow) 

OCN 

0938-

New; 

CMS10456 

53 53 70 3,710 3,815 (per 

respondent) 

202,184 

§§435.923 and 

457.340 (develop 

training materials) 

OCN 

0938-

New; 

CMS10456 

53 53 50 2,650 1,710 (per 

respondent) 

90,625 

§§435.923 and 

457.340 (train 

application assistors) 

OCN 

0938-

New; 

CMS10456 

53 53 50 2,650 1,332 (per 

respondent) 

70,596 

§§435.1101(b) and 

457.355 

OCN 

0938-

New; 

CMS10456 

53 53 50 2,650 1,710 (per 

respondent) 

90,625 

§447.57 0938-

New; 

CMS10456 

53 53 6 318 210 (per 

respondent) 

11,130 

§155.227 (ICRs 

Regarding 

Authorized 

Representatives) 

OCN 

0938-

New; 

CMS18 18 30 540 1,895 (per 

respondent) 

34,113 
CMS-2334-F 492 

Regulation 

Section(s) 

OMB 

& 

CMS 

ID #s Respondents 

Responses 

(total) 

Burden 

per 

Response 

(hours) 

Total 

Annual 

Burden 

(hours) 

Labor Cost 

of Reporting 

($) 

Total Cost 

($) 

10400 

§§155.302, 155.310, 

155.315, 155.320, 

155.330, 155.335, 

155.345, 155.410, 

155.715, 155.720, 

155.725, and 

155.1080 (ICRs 

Regarding Notices) 

OCN 

0938-

New; 

CMS10400 

18 18 100 1,800 5,971 (per 

respondent) 

107,478 

§155.320 (ICRs 

Regarding 

Verification of 

Enrollment in an 

Eligible EmployerSponsored Plan and 

Eligibility for 

Qualifying Coverage 

in an Eligible 

EmployerSponsored Plan) 

OCN 

0938-

New; 

CMS10400 

1 -- 2.2 -- 34 (for one 

respondent) 

-- 

§§155.315, 155. 

330, 155.335 (ICRs 

Regarding Reporting 

Changes) 

OCN 

0938-

New; 

CMS10400 

18 18 .2 -- 29 (for one 

respondent) 

5.73 

§§155.400 and 405 

(ICRs Regarding 

Enrollment) 

OCN 

0938-

New; 

CMS10400 

18 18 142 2,556 7,254 (per 

respondent) 

136,314 

§155.430 (ICRs 

Regarding 

Termination) 

OCN 

0938-

New; 

CMS10400 

18 18 70 1,260 3,881 (per 

respondent) 

69,858 

§§ 155.302, 155.345 

(ICRs Regarding 

Agreements) 

OCN 

0938-

New; 

CMS10400 

18 18 105 1,890 6,733 (per 

respondent) 

121,194 

§§156.260, 156.265, 

156.270, and 

156.290 (ICRs 

Regarding Notices 

from QHP Issuers) 

OCN 

0938-

New; 

CMS10400 

18 18 100 1,800 5,971 (per 

respondent) 

107,478 

§157.205(e) and (f) 

(ICRs Regarding 

Notices and Third 

Party Disclosures in 

the SHOP) 

OCN 

0938-

New; 

CMS10400 

-- -- 68 -- 4,030 (per 

respondent) 

-- 

TOTAL 55,578 2,886,146.73 

E. Submission of PRA-Related Comments
CMS-2334-F 493 

 We have submitted a copy of this final rule to OMB for its review of the rule’s 

information collection and recordkeeping requirements. These requirements are not effective 

until they have been approved by the OMB. 

 To obtain copies of the supporting statement and any related forms for the proposed 

paperwork collections referenced above, access the CMS website at 

http://www.cms.gov/Regulations-andGuidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html, or call the Reports 

Clearance Office at 410–786–1326. 

 We invite public comments on these potential information collection requirements. 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 

final rule; or 

2. Submit your comments to the Office of Information and Regulatory Affairs, Office of 

Management and Budget, Attention: CMS Desk Officer, (CMS–2334–P) Fax: (202) 395–6974; 

or E-mail: OIRA_submission@omb.eop.gov. PRA-specific comments must be received by 

[INSERT DATE 30 DAYS AFTER THE DATE OF PUBLIC INSPECTION AT THE 

OFFICE OF THE FEDERAL REGISTER].

V. Regulatory Impact Analysis 

A. Overall Impact

We have examined the impact of this rule as required by Executive Order 12866 on 

Regulatory Planning and Review (September 30, 1993) and Executive Order 13563 on 

Improving Regulation and Regulatory Review (January 18, 2011). Executive Orders 12866 and 

13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if 
CMS-2334-F 494 

regulation is necessary, to select regulatory approaches that maximize net benefits (including 

potential economic, environmental, public health and safety effects, distributive impacts, and 

equity). A regulatory impact analysis (RIA) must be prepared for rules with economically 

significant effects ($100 million or more in any 1 year). The Office of Management and Budget 

has determined that this rulemaking is “economically significant” within the meaning of section 

3(f)(1) of Executive Order 12866, because it is likely to have an annual effect of $100 million in 

any one year. Accordingly, we have prepared a Regulatory Impact Analysis that presents the 

costs and benefits of this rulemaking. The RIA published with the March 2012 Medicaid 

eligibility final rule detailed the impact of the Medicaid eligibility changes related to 

implementation of the Affordable Care Act. The majority of Medicaid eligibility provisions 

included in this final rule were described in that detailed RIA and do not need to be repeated 

here. In the April 30, 2010 final rule on State Flexibility for Medicaid Benefit Packages, the 

assumptions utilized in modeling the estimated economic impact of the associated provisions 

took into perspective the costs of the benefit package for the new adult group. Coverage of these 

benefits was already accounted for in the April 30, 2010 final rule, and therefore, does not need 

to be repeated here. 

For coverage beginning on or after January 1, 2014, individuals and small businesses will 

be able to purchase private health insurance –known as qualified health plans-- through 

competitive marketplaces called Affordable Insurance Exchanges, or “Exchanges.” This final 

rule: (1) outlines criteria related to the verification of enrollment in an eligible employersponsored plan and eligibility for qualifying coverage in an eligible employer-sponsored plan in 

connection with advance payments of the premium tax credit and cost-sharing reductions; and 

(2) further specifies or amends other eligibility and enrollment provisions to provide detail 

necessary for state implementation. This rule continues to afford states substantial discretion in 
CMS-2334-F 495 

the design and operation of the Exchange established by a state, with greater standardization 

provided where directed by the statute or where there are compelling practical, efficiency or 

consumer protection reasons. 

B. Estimated Impact of the Medicaid Premium and Cost Sharing Provisions

The provisions in this final rule related to Medicaid premiums and cost sharing clarify 

and update existing flexibilities and provide new flexibility for states for cost sharing for 

outpatient services, drugs, and non-emergency use of the emergency department. As states 

contemplate the changes required under the Affordable Care Act, more states may consider 

utilizing these flexibilities to either establish or expand cost sharing. We believe these proposed 

policies will encourage less costly care and decreased use of unnecessary services, which will 

reduce state and federal costs for the specified services. The following chart summarizes our 

estimate of the anticipated effects of this final rule. 

TABLE 2: Estimated Total Impact of Changes in Maximum Medicaid Cost Sharing, 

FY 2014-2018, in millions of dollars 

Year 2014 2015 2016 2017 2018 

2014-

2018 

Federal -25 -45 -70 -70 -70 -280 

State -15 -30 -45 -45 -50 -185 

Total -40 -75 -115 -115 -120 -465 

Source: CMS’ Office of the Actuary 

We estimate that this final rule will result in total savings of $465 million over 5 years, 

including $280 million in cost savings to the federal government and $185 million in savings to 

states. These savings may be attributed primarily to the increased maximum allowable cost 

sharing for outpatient services, drugs, and non-emergency use of the emergency department. 

Such savings are offset only nominally by the decreased maximum allowable cost sharing for an 

inpatient stay. In addition to direct savings from increased cost sharing, we assume some 

declines in utilization as enrollees subject to new cost sharing requirements choose to decrease 

their use of services. 
CMS-2334-F 496 

C. Estimated Impact of Exchange Provisions 

The provisions in this final rule amend select provisions of the Exchange Establishment 

final rule (77 FR 18319, March 27, 2012). Our approach in this regulatory impact analysis was 

to build off of the analysis presented in the Exchange Establishment final rule, available at 

http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf. We do not believe 

the provisions in this final rule significantly alter our prior estimates of the impact of Exchanges 

on the budget or on enrollment in health insurance, and therefore, this final rule does not 

significantly alter the regulatory impact analysis drafted as part of such rulemaking. This section 

summarizes benefits and costs of the Exchange provisions presented in this final rule. 

1. Methods of Analysis 

The estimates in this analysis reflect estimates from the FY 2014 President’s Budget for 

State Planning and Establishment Grants, which incorporate the costs associated with state 

implementation of the provisions proposed in this rule. 

2. Benefits of the Proposed Regulation 

The provisions included in this final rule amend provisions of the Exchange 

Establishment final rule. We do not believe the modifications made significantly alter the 

benefits associated with these provisions. Therefore, we refer to the benefits discussion included 

in the regulatory impact analysis associated with the Exchange Establishment final rule for a full 

analysis. The Exchange Establishment final rule regulatory impact analysis can be found at 

http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf. 

3. Costs of the Proposed Regulation 

The Affordable Care Act and the implementing regulations found in subpart D of this 

final rule and the Exchange Establishment final rule provide for a streamlined system based on 

simplified eligibility rules, and an expedited process that will facilitate enrollment of eligible 
CMS-2334-F 497 

individuals and minimize costs to states, Exchanges and to the federal government. To support 

this new eligibility structure, states seeking to operate Exchanges are expected to build new or 

modify existing information technology (IT) systems. We believe that how each state builds and 

assembles the components necessary to support its Exchange and Medicaid infrastructure will 

vary and depend on the level of maturity of current systems, current governance and business 

models, size, and other factors. It is important to note that, although states have the option to 

establish and operate an Exchange, there is no federal requirement that each state establish an 

Exchange. We believe the proposed provisions provide options and flexibility to states that 

minimize costs and burden on Exchanges, consumers, employers and other entities. We also 

believe that overall administrative costs may increase in the short term as states build IT 

systems; however, in the long term, states may see savings through the use of more efficient 

systems. 

Any administrative costs incurred in the development of IT infrastructure to support the 

Exchange may be funded through Exchange Planning and Establishment Grants to states. The 

federal government expects that these grants will fund the development of IT systems that can be 

used by many states who either develop their own Exchanges or who partner with the federal 

government to provide a subset of Exchange services.3

 Costs for IT infrastructure that will also 

support Medicaid must be allocated to Medicaid, but are eligible for a 90 percent federal 

matching rate to assist in development.4

 

In general, as noted in our discussion of benefits, we anticipate that the final rule will 

increase take-up of health insurance; therefore, one type of rule-induced cost will be associated 

 

3

 For example, CMS has awarded a number of Early Innovator grants to develop efficient and replicable IT systems 

that can provide the foundation for other states’ work in this area. These amounts vary from $6 million to $48 

million per state. 

4 Medicaid Program; Federal Funding for Medicaid Eligibility Determination and Enrollment Activities, Final rule, 

75 Fed. Reg. 21950 (April 19, 2011) 
CMS-2334-F 498 

with providing additional medical services to newly-enrolled individuals. A recent study found 

that insured individuals received more hospital care and more outpatient care than their 

uninsured counterparts.5 

Below we include estimated federal government payments related to grants for Exchange 

startup. States’ initial costs due to the creation of Exchanges will be funded by these grants. 

Performing eligibility determinations is a minimum function of the Exchange; therefore the 

Exchange costs to develop the infrastructure for the provisions included in this final rule are 

covered by these grant outlays.

TABLE 3: Estimated Federal Government Outlays for the Affordable Insurance 

Exchanges FY 2013 - FY2017, in billions of dollars 

Year 2013 2014 2015 2016 2017 2013-

2017 

Grant Authority 

for Exchange 

Start upa

 1.5 2.1 1.7 0.8 0.2 6.2 a

 FY 2014 President’s Budget 

D. Alternatives Considered

We considered two alternatives to the Exchange provisions. 

● Alternative #1: Require paper documentation to verify access to employersponsored coverage. 

Section 155.320(d) of the final rule provides a process for verification related to 

enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage in an 

eligible employer-sponsored plan. The proposed process relies on available electronic data 

sources, with the use of paper documentation in situations in which information submitted by an 

applicant is not reasonably compatible with information in electronic data sources, along with a 

sample-based review for situations in which no data is available. 

 

5 Finkelstein, A. et al., (2011). The Oregon Health Insurance Experiment: Evidence from the First Year," National 
CMS-2334-F 499 

The alternative model we considered would require the Exchange to require individuals 

to submit paper documentation to verify this information in all circumstances. This may increase 

the burden on individuals to submit this documentation to the Exchange, which may not be 

readily available to the applicant, but on employers, who will have to produce this information at 

the request of applicants, and will also require additional time and resources for Exchanges to 

accept and process the paper documentation needed for an eligibility determination. In addition, 

it could ultimately increase the amount of time it will take for an individual to receive health 

coverage through the Exchange or an insurance affordability program, could reduce the number 

of states likely to operate an Exchange due to increased administrative costs, and could dissuade 

individuals from seeking coverage through the Exchange. 

● Alternative #2: Require Paper Notices from the Exchange 

In §155.230(d), we provide that the Exchange will provide the option to an individual or 

employer to receive notices electronically. We anticipate that this will be accommodated by the 

Exchange generating electronic notices, storing them on a secure website, and notifying 

individuals and employers through a generic e-mail or text message communication that a notice 

is available for review. 

The alternative model would require the Exchange to send all notices in paper form via 

US mail. This would significantly increase administrative costs for printing and mailing, and 

also generate significant volumes of undeliverable mail which would be returned to the 

Exchange. 

Summary of Costs for Each Alternative

The paper-driven process outlined under alternatives 1 and 2 would ultimately increase 

the amount of time it would take for an individual to receive health coverage through the 

 

Bureau of Economic Research Working Paper Series, 17190. 
CMS-2334-F 500 

Exchange or an insurance affordability program, would increase administrative costs, and would 

dissuade individuals from seeking coverage through the Exchange. 

E. Limitations of the Analysis

A number of challenges face estimators in projecting the Exchange, Medicaid, and CHIP 

benefits and costs under the Affordable Care Act and its implementing regulations, including this 

final rule. Health care cost growth is difficult to project, especially for people who are currently 

not in the health care system – the population targeted for the Medicaid eligibility changes and 

new insurance affordability programs. Such individuals could have pent-up demand and thus 

have costs that may be initially higher than other enrollees in health coverage, while they might 

also have better health status than those who have found a way (for example, “spent down”) to 

enroll in Medicaid. 

For the Exchange provisions, we use the President’s Fiscal Year 2014 Budget as an 

estimate of the costs associated with the Exchange provisions. It is difficult to isolate the effects 

associated with these particular provisions of the Affordable Care Act, and therefore, in this 

analysis, we discuss the evidence relating to the provisions of this final rule in combination with 

related provisions of the Affordable Care Act . Further, with limited previous data and 

experiences, there is even greater uncertainty than in estimating the implications of modifying a 

previously existing program. Accordingly, we supplement the regulatory impact analysis with a 

qualitative discussion on the specific provisions of this rule. 

F. Accounting Statement 

As required by OMB Circular A-4 (available at 

http://www.whitehouse.gov/omb/circulars_a004_a-4/), in Table X we have prepared an 

accounting statement table showing the classification of the impacts associated with 

implementation of this final rule. 
CMS-2334-F 501 

TABLE 4: Accounting Statement: Classification of Estimated Net Costs and Transfers, 

 (in millions) 

Units 

Category Estimates Year Dollar Discount Rate Period Covered 

Benefits 

Not Estimated 2012 7% 2013 - 2017 Annualized 

Monetized 

($million/year) Not Estimated 2012 3% 2013 - 2017 

Qualitative 

The Exchanges, combined with other actions being taken to implement the 

Affordable Care Act, will improve access to health insurance, with numerous 

positive effects, including reduced morbidity and fewer medical 

bankruptcies. The Exchange will also serve as a distribution channel for 

insurance reducing administrative costs as a part of premiums and providing 

comparable information on health plans to allow for a more efficient 

shopping experience. 

Costs* 

Annualized 1,311 2012 7% 2013 - 2017 

Monetized 

($million/year) 1,283 2012 3% 2013 - 2017 

Qualitative

Unquantified costs include State implementation costs above the amount 

covered by Federal grants; and increased medical costs associated with more 

widespread enrollment in health insurance. 

Transfers

Annualized 54.4 2013 7% 2014 - 2018 

Monetized 

($million/year) 55.3 2013 3% 2014 - 2018 

From Whom to 

Whom Beneficiaries to Federal Government 

Annualized 35.8 2013 7% 2014 - 2018 

Monetized 

($million/year) 36.5 2013 3% 2014 - 2018 

From Whom to 

Whom Beneficiaries to State Governments 

*These costs include grant outlays to States to establish Exchanges; most of these Exchange-establishment costs 

been included in the accounting statement for the Exchange final rule. 

G. Regulatory Flexibility Analysis
CMS-2334-F 502 

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) requires agencies to prepare 

an initial regulatory flexibility analysis to describe the impact of the final rule on small entities, 

unless the head of the agency can certify that the rule will not have a significant economic 

impact on a substantial number of small entities. The Act generally defines a “small entity” as 

(1) a proprietary firm meeting the size standards of the Small Business Administration (SBA); 

(2) a not-for-profit 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 to 5 percent. 

As discussed above, this final rule is necessary to implement certain standards related to 

the establishment and operation of Exchanges as authorized by the Affordable Care Act. 

Specifically, this final rule: (1) provides criteria related to the verification of enrollment in an 

eligible employer-sponsored plan and eligibility for qualifying coverage in an eligible employersponsored plan; and (2) further specifies or amends standards related to other eligibility and 

enrollment provisions to provide detail necessary for state implementation. 

The intent of this rule is to continue to afford states substantial discretion in the design 

and operation of an Exchange, with greater standardization provided where directed by the 

statute or where there are compelling practical, efficiency or consumer protection reasons. 

For the purposes of the regulatory flexibility analysis, we expect the following types of 

entities to be affected by this final rule--(1) QHP issuers; and (2) employers. We believe that 

health insurers will be classified under the North American Industry Classification System 

(NAICS) Code 524114 (Direct Health and CMS–9989-P 166 Medical Insurance Carriers). 

According to SBA size standards, entities with average annual receipts of $7 million or less will 

be considered small entities this NAICS code. Health issuers could also possibly be classified in 
CMS-2334-F 503 

621491 (HMO Medical Centers) and, if this is the case, the SBA size standard will be $30 

million or less. 

1. QHP Issuers

This rule proposes standards for Exchanges that affect eligibility determinations for 

enrollment in a QHP through the Exchange, advance payments of the premium tax credit, costsharing reductions, Medicaid, and CHIP. Although these standards are for Exchanges, they also 

affect health plan issuers that choose to participate in an Exchange. QHP issuers receive 

information from an Exchange about an enrollee to enable the QHP issuer to process the correct 

level of advance payments of the premium tax credit and cost-sharing reductions. The issuer of 

the QHP will adjust an enrollee’s net premium to reflect the advance payments of the premium 

tax credit, as well as make any changes required to ensure that cost-sharing reflects the 

appropriate level of reductions. QHP issuers benefit significantly from advance payments of the 

premium tax credit and cost-sharing reductions, but may face some administrative costs relating 

to receiving enrollee information from an Exchange. 

As discussed in the Web Portal interim final rule (75 FR 24470, 24481 (May 5, 2010), 

HHS examined the health insurance industry in depth in the Regulatory Impact Analysis we 

prepared for the final rule on establishment of the Medicare Advantage program published on 

August 3, 2004 (69 FR 46866). In that analysis we 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 

insurers, based on North American Industry Classification System Code 524114).6

Additionally, as discussed in the Medical Loss Ratio interim final rule (75 FR 74918), the 
CMS-2334-F 504 

Department used a data set created from 2009 National Association of Insurance Commissioners 

(NAIC) Health and Life Blank annual financial statement data to develop an updated estimate of 

the number of small entities that offer comprehensive major medical coverage in the individual 

and group markets. For purposes of that analysis, the Department used total Accident and 

Health (A&H) earned premiums as a proxy for annual receipts. The Department estimated that 

there were 28 small entities with less than $7 million in accident and health earned premiums 

offering individual or group comprehensive major medical coverage; however, this estimate may 

overstate the actual number of small health insurance issuers offering such coverage, because it 

does not include receipts from these companies’ other lines of business. 

2. Employers

The establishment of SHOP in conjunction with tax incentives for eligible employers will 

provide new opportunities for employers to offer affordable health insurance to their employees. 

A detailed discussion of the impact on employers related to the establishment of the SHOP is 

found in the RIA for the Exchange final rule, 77 FR 18010 (March 23, 2012) and available at 

http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf

Except in the Exchange provisions, few of the entities that meet the definition of a small 

entity as that term is used in the RFA (for example, small businesses, nonprofit organization, and 

small governmental jurisdictions with a population of less than 50,000) will be impacted directly 

by this final rule. Individuals and states are not included in the definition of a small entity. In 

addition, the impact of the majority of this rule was addressed in the RIA accompanying the 

March 2012 Medicaid eligibility rule (77 FR 17144, March 23, 2012). Therefore, the Secretary 

has determined that this final rule will not have a significant economic impact on a substantial 

number of small entities, and we have not prepared a regulatory flexibility analysis. 

 

‘Table of Size Standards Matched To North American Industry Classification System Codes,’’ effective November 
CMS-2334-F 505 

Additionally, section 1102(b) of the Act requires us to prepare a regulatory impact 

analysis if a final rule may have a significant economic impact on the operations of a substantial 

number of small rural hospitals. This analysis must conform to the provisions of section 604 of 

the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a 

hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. We 

are not preparing an analysis for section 1102(b) of the Act because the Secretary has determined 

that this final rule will not have a direct economic impact on the operations of a substantial 

number of small rural hospitals. 

H. Unfunded Mandates

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that 

agencies assess anticipated costs and benefits before issuing any rule whose mandates require 

spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation, by state, 

local, or tribal governments, in the aggregate, or by the private sector. In 2013, that threshold is 

approximately $141 million. This final rule does not mandate expenditures by state 

governments, local governments, tribal governments, in the aggregate, or the private sector, of 

$140 million. The majority of state, local, and private sector costs related to implementation of 

the Affordable Care Act were described in the RIA accompanying the March 2012 Medicaid 

eligibility rule (77 FR 17144, March 23, 2012). Furthermore, the final rule does not set any 

mandate on states to set up an Exchange. 

I. Federalism

Executive Order 13132 establishes certain requirements that an agency must meet when 

it promulgates a final rule that imposes substantial direct effects on states, preempts state law, or 

otherwise has federalism implications. We wish to note again that the impact of changes related 

 

5, 2010, U.S. Small Business Administration, available at http://www.sba.gov. 
CMS-2334-F 506 

to implementation of the Affordable Care Act were described in the RIA of the March 2012 

Medicaid eligibility rule (77 FR 17144, March 23, 2012). As discussed in the March 2012 RIA, 

we have consulted with states to receive input on how the various Affordable Care Act 

provisions codified in this final rule will affect states. We continue to engage in ongoing 

consultations with Medicaid and CHIP Technical Advisory Groups (TAGs), which have been in 

place for many years and serve as a staff level policy and technical exchange of information 

between CMS and the states. Through consultations with these TAGs, we have been able to get 

input from states specific to issues surrounding the changes in eligibility groups and rules that 

will become effective in 2014. 

Because states have flexibility in deciding whether to implement an Exchange and, if a 

State opts to, in the design of its Exchange, state decisions will ultimately influence both 

administrative expenses and overall premiums. However, because states are not required to 

create an Exchange, these costs are not mandatory. For states electing to create an Exchange, the 

initial costs of the creation of the Exchange will be funded by Exchange Planning and 

Establishment Grants. After this time, Exchanges will be financially self-sustaining with 

revenue sources left to the discretion of the state. In the Department’s view, while this final rule 

does not impose substantial direct effects on state and local governments, it has federalism 

implications due to direct effects on the distribution of power and responsibilities among the 

state and federal governments relating to determining standards relating to health insurance 

coverage (that is, for QHPs) that is offered in the individual and small group markets. Each state 

electing to establish a State-Based Exchange must adopt federal standards contained in the 

Affordable Care Act and in this final rule, or have in effect a state law or regulation that 

implements these federal standards. However, the Department anticipates that the federalism 

implications (if any) are substantially mitigated because states have choices regarding the 
CMS-2334-F 507 

structure and governance of their Exchanges. Additionally, the Affordable Care Act does not 

require states to establish an Exchange; but if a state elects not to establish an Exchange or the 

state’s Exchange is not approved, HHS will establish and operate an Exchange in that state. 

Additionally, states will have the opportunity to participate in state Partnership Exchanges that 

will allow states to leverage work done by other states and the federal government. 

In compliance with the requirement of Executive Order 13132 that agencies examine 

closely any policies that may have federalism implications or limit the policy making discretion 

of the states, the Department has engaged in efforts to consult with and work cooperatively with 

affected states, including participating in conference calls with and attending conferences of the 

National Association of Insurance Commissioners and consulting with state officials on an 

individual basis. 

In accordance to the requirements set forth in section 8(a) of Executive Order 13132, and 

by the signatures affixed to this regulation, the Department certifies that CMS has complied with 

the requirements of Executive Order 13132 for the attached proposed regulation in a meaningful 

and timely manner. 

J. Congressional Review Act

This final 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, this final rule, and has been transmitted to Congress and 

the Comptroller General for review. 

 In accordance with the provisions of Executive Order 12866, this regulation was 

reviewed by the Office of Management and Budget.
CMS-2334-F 508 

List of Subjects 

42 CFR Part 431

Grant programs-health, Health facilities, Medicaid, Privacy, Reporting and recordkeeping 

requirements. 

42 CFR Part 435 

Aid to Families with Dependent Children, Grant programs-health, Medicaid, Reporting 

and recordkeeping requirements, Supplemental Security Income (SSI), Wages. 

42 CFR Part 436 

Aid to Families with Dependent Children, Grant programs-health, Guam, Medicaid, 

Puerto Rico, Supplemental Security Income (SSI), and Virgin Islands. 

42 CFR Part 438 

Grant programs-health, Medicaid, and Reporting and recordkeeping requirements. 

42 CFR Part 440 

Grant programs-health, Medicaid. 

42 CFR Part 447

Accounting, Administrative practice and procedure, Drugs, Grant programs-health, 

Health facilities, Health professions, Medicaid, Reporting and recordkeeping requirements, 

Rural areas. 

42 CFR Part 457 

Administrative practice and procedure, Grant programs-health, Health insurance, 

Reporting and recordkeeping requirements. 

45 CFR Part 155

Administrative practice and procedure, Advertising, Brokers, Conflict of interest, 

Consumer protection, Grant programs-health, Grants administration, Health care, Health 
CMS-2334-F 509 

insurance, Health maintenance organization (HMO), Health records, Hospitals, Indians,

Individuals with disabilities, Loan programs-health, Organization and functions (Government 

agencies), Medicaid, Public assistance programs, Reporting and recordkeeping requirements, 

Safety, state and local governments, Technical assistance, Women, and Youth. 

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, 

Indians, Individuals with disabilities, Loan programs-health, Organization and functions 

(Government agencies), Medicaid, Public assistance programs, Reporting and recordkeeping 

requirements, Safety, State and local governments, Sunshine Act, Technical Assistance, Women, 

and Youth.
CMS-2334-F 510 

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 

42 CFR chapter IV as set forth below: 

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION 

1. The authority citation for part 431 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act, (42 U.S.C. 1302). 

2. Section 431.10 is amended by revising paragraph (a), adding paragraph (b)(3), and 

revising paragraphs (c), (d), and (e) to read as follows: 

§ 431.10 Single State agency. 

(a) Basis, purpose, and definitions. (1) This section implements section 1902(a)(4) and 

(5) of the Act. 

 (2) For purposes of this part – 

Appeals decision means a decision made by a hearing officer adjudicating a fair hearing 

under subpart E of this part. 

Exchange has the meaning given to the term in 45 CFR 155.20.

Exchange appeals entity has the meaning given to the term “appeals entity,” as defined in 

45 CFR 155.500. 

Medicaid agency is the single State agency for the Medicaid program. 

(b) * * * 

(3) The single State agency is responsible for determining eligibility for all individuals 

applying for or receiving benefits in accordance with regulations in part 435 of this chapter and 

for fair hearings filed in accordance with subpart E of this part. 

(c) Delegations. (1) Subject to the requirement in paragraph (c)(2) of this section, the 

Medicaid agency -- 
CMS-2334-F 511 

(i)(A) May, in the approved state plan, delegate authority to determine eligibility for all 

or a defined subset of individuals to— 

(1) The single State agency for the financial assistance program under title IV-A (in the 

50 States or the District of Columbia), or under title I or XVI (AABD), in Guam, Puerto Rico, or 

the Virgin Islands; 

(2) The Federal agency administering the supplemental security income program under 

title XVI of the Act; or 

(3) The Exchange. 

(B) Must in the approved state plan specify to which agency, and the individuals for 

which, authority to determine eligibility is delegated. 

(ii) Delegate authority to conduct fair hearings under subpart E of this part for denials of 

eligibility for individuals whose income eligibility is determined based on the applicable 

modified adjusted gross income standard described in § 435.911(c) of this chapter, to an 

Exchange or Exchange appeals entity, provided that individuals who have requested a fair 

hearing of such a denial are given a choice to have their fair hearing instead conducted by the 

Medicaid agency. 

(2) The Medicaid agency may delegate authority to make eligibility determinations or to 

conduct fair hearings under this section only to a government agency which maintains personnel 

standards on a merit basis. 

 (3) The Medicaid agency – 

 (i) Must ensure that any agency to which eligibility determinations or appeals decisions 

are delegated – 

 (A) Complies with all relevant Federal and State law, regulations and policies, including, 

but not limited to, those related to the eligibility criteria applied by the agency under part 435 of 
CMS-2334-F 512 

this chapter; prohibitions against conflicts of interest and improper incentives; and safeguarding 

confidentiality, including regulations set forth at subpart F of this part. 

 (B) Informs applicants and beneficiaries how they can directly contact and obtain 

information from the agency; and 

 (ii) Must exercise appropriate oversight over the eligibility determinations and appeals 

decisions made by such agencies to ensure compliance with paragraphs (c)(2) and (c)(3)(i) of 

this section and institute corrective action as needed, including, but not limited to, rescission of 

the authority delegated under this section. 

 (iii) If authority to conduct fair hearings is delegated to the Exchange or Exchange 

appeals entity under paragraph (c)(1)(ii) of this section, the agency may establish a review 

process whereby the agency may review fair hearing decisions made under that delegation, but 

that review will be limited to the proper application of federal and state Medicaid law and 

regulations, including sub-regulatory guidance and written interpretive policies, and must be 

conducted by an impartial official not directly involved in the initial determination.

(d) Agreement with Federal, State or local entities making eligibility determinations or 

appeals decisions. The plan must provide for written agreements between the Medicaid agency 

and the Exchange or any other State or local agency that has been delegated authority under 

paragraph (c)(1)(i) of this section to determine Medicaid eligibility and for written agreements 

between the agency and the Exchange or Exchange appeals entity that has been delegated 

authority to conduct Medicaid fair hearings under paragraph (c)(1)(ii) of this section. Such 

agreements must be available to the Secretary upon request and must include provisions for: 

(1) The relationships and respective responsibilities of the parties, including but not 

limited to the respective responsibilities to effectuate the fair hearing rules in subpart E of this 

part; 
CMS-2334-F 513 

(2) Quality control and oversight by the Medicaid agency, including any reporting 

requirements needed to facilitate such control and oversight; 

(3) Assurances that the entity to which authority to determine eligibility or conduct fair 

hearings will comply with the provisions set forth in paragraph (c)(3) of this section. 

(4) For appeals, procedures to ensure that individuals have notice and a full opportunity 

to have their fair hearing conducted by either the Exchange or Exchange appeals entity or the 

Medicaid agency. 

(e) Authority of the single State agency. The Medicaid agency may not delegate, to 

other than its own officials, the authority to supervise the plan or to develop or issue policies, 

rules, and regulations on program matters. 

3. Section 431.11 is amended by -- 

A. Removing paragraph (b). 

B. Redesignating paragraphs (c) and (d), as paragraphs (b) and (c), respectively. 

C. Revising newly redesignated paragraphs (b) and (c). 

The revisions read as follows: 

§431.11 Organization for administration. 

* * * * * 

 (b) Description of organization. (1) The plan must include a description of the 

organization and functions of the Medicaid agency. 

(2) When submitting a state plan amendment related to the designation, authority, 

organization or functions of the Medicaid agency, the Medicaid agency must provide an 

organizational chart reflecting the key components of the Medicaid agency and the functions 

each performs. 

 (c) Eligibility determined or fair hearings decided by other entities. If eligibility is 
CMS-2334-F 514 

determined or fair hearings decided by Federal or State entities other than the Medicaid agency 

or by local agencies under the supervision of other State agencies, the plan must include a 

description of the staff designated by those other entities and the functions they perform in 

carrying out their responsibilities. 

§ 431.57 [Removed] 

4. Section 431.57 is removed. 

5. Section 431.201 is amended by adding the definition of “send” in alphabetical order to 

read as follows: 

§431.201 Definitions. 

* * * * * 

Send means deliver by mail or in electronic format consistent with §435.918 of this 

chapter. 

* * * * *

6. Section 431.205 is amended by revising paragraphs (b)(1) and (2) to read as follows: 

 § 431.205 Provision of hearing system. 

* * * * * 

(b) * * * 

(1) A hearing before – 

(i) The Medicaid agency; or 

(ii) For the denial of eligibility for individuals whose income eligibility is determined 

based on the applicable modified adjusted gross income standard described in§435.911(c) of 

this chapter, the Exchange or Exchange appeals entity to which authority to conduct fair hearings 

has been delegated under § 431.10(c)(1)(ii), provided that individuals who have requested a fair 

hearing are given the choice to have their fair hearing conducted instead by the Medicaid 
CMS-2334-F 515 

agency; at state option the Exchange or Exchange appeals entity decision may be subject to 

review by the Medicaid agency in accordance with § 431.10(c)(3)(iii); or 

 (2) An evidentiary hearing at the local level, with a right of appeal to the Medicaid 

agency. 

* * * * * 

7. Section 431.206 is amended by adding paragraphs (d) and (e) to read as follows: 

§ 431.206 Informing applicants and beneficiaries. 

* * * * * 

 (d) If, in accordance with § 431.10(c)(1)(ii), the agency has delegated authority to the 

Exchange or Exchange appeals entity to conduct the fair hearing, the agency must inform the 

individual in writing that – 

(1) He or she has the right to have his or her hearing before the agency, instead of the 

Exchange or the Exchange appeals entity; and 

(2) The method by which the individual may make such election; 

 (e) The information required under this section may be provided in electronic format in 

accordance with § 435.918 of this chapter. 

8. Section 431.211 is revised to read as follows: 

§431.211 Advance notice. 

The State or local agency must send a notice at least 10 days before the date of action, 

except as permitted under §§ 431.213 and 431.214. 

9. Section 431.213 is amended by revising the introductory text to read as follows: 

§ 431.213 Exceptions from advance notice. 

The agency may send a notice not later than the date of action if -- 

* * * * * 
CMS-2334-F 516 

§ 431.230 [Amended] 

10. In § 431.230, amend paragraph (a) introductory text by removing the term “mails” 

and adding in its place the term “sends”. 

11. Section 431.231 is amended by revising the section heading and paragraph (c)(2) to 

read as follows: 

§431.231 Reinstating services. 

* * * * * 

(c) * * * 

(2) The beneficiary requests a hearing within 10 days from the date that the individual 

receives the notice of action. The date on which the notice is received is considered to be 5 days 

after the date on the notice, unless the beneficiary shows that he or she did not receive the notice 

within the 5-day period; and 

* * * * * 

12. Section 431.240 is amended by adding paragraph (c) to read as follows. 

§431.240 Conducting the hearing. 

* * * * * 

(c) A hearing officer must have access to agency information necessary to issue a proper 

hearing decision, including information concerning State policies and regulations. 

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE 

NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA 

13. The authority citation for part 435 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 

14. Section 435.110 is amended by eepublishing paragraph (c) introductory text and 

revising paragraph (c)(1) to read as follows: 
CMS-2334-F 517 

§435.110 Parents and other caretaker relatives. 

* * * * * 

(c) Income standard. The agency must establish in its State plan the income standard as 

follows: 

(1) The minimum income standard is a State's AFDC income standard 

in effect as of May 1, 1988 for the applicable family size converted to a MAGI-equivalent 

standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and 

(E) of the Act. 

* * * * * 

15. Section 435.116 is amended by republishing paragraph (d)(4) introductory text and 

revising paragraph (d)(4)(i) to read as follows: 

§435.116 Pregnant women. 

* * * * * 

(d) * * * 

(4) Applicable income limit for full Medicaid coverage of pregnant women. For 

purposes of paragraph (d)(1) of this section-- 

(i) The minimum applicable income limit is the State's AFDC income 

standard in effect as of May 1, 1988 for the applicable family size converted to a MAGIequivalent standard in accordance with guidance issued by the Secretary under section 

1902(e)(14)(A) and (E) of the Act. 

* * * * * 

16. Section 435.119 is amended by revising the introductory text in paragraph (b) to 

read as follows: 
CMS-2334-F 518 

§435.119 Coverage for individuals age 19 or older and under age 65 at or below 133 

percent FPL 

* * * * * 

(b) Eligibility. Effective January 1, 2014, the agency must provide Medicaid to 

individuals who: 

* * * * * 

§ 435.121 [Amended] 

17. In §435.121 , amend paragraph (f)(1)(iii) by removing the reference “§ 447.52 or § 

447.53” and by adding in its place the reference “§ 447.52, ,§ 447.53, or § 447.54”. 

18. Section 435.603 is amended by— 

A. In paragraph (b), adding the definitions of “Child,” “Parent,” and “Sibling” in 

alphabetical order. 

B. Revising paragraphs (c) and (d)(1). 

C. Adding paragraph (d)(4). 

The revisions and additions read as follows: 

§435.603 Application of modified adjusted gross income (MAGI). 

* * * * * 

(b) * * * 

Child means a natural or biological, adopted or step child. 

* * * * * 

Parent means a natural or biological, adopted or step parent. 

Sibling means natural or biological, adopted, half or step sibling. 

* * * * * 
CMS-2334-F 519 

(c) Basic rule. Except as specified in paragraph (i), (j) and (k) of this section, the agency 

must determine financial eligibility for Medicaid based on ‘‘household income’’ as defined in 

paragraph (d) of this section. 

(d) * * *

(1) General rule. Except as provided in paragraphs (d)(2) through (d)(4) of this section, 

household income is the sum of the MAGI-based income, as defined in paragraph (e) of this 

section, of every individual included in the individual's household. 

* * * * * 

(4) Effective January 1, 2014, in determining the eligibility of an individual using 

MAGI-based income, a state must subtract an amount equivalent to 5 percentage points of the 

Federal poverty level for the applicable family size only to determine the eligibility of an 

individual for medical assistance under the eligibility group with the highest income standard 

using MAGI-based methodologies in the applicable Title of the Act, but not to determine 

eligibility for a particular eligibility group. 

* * * * * 

19. Section 435.907 is amended by adding paragraph (h) to read as follows. 

§435.907 Application

* * * * * 

(h) Reinstatement of withdrawn applications. (1) In the case of individuals described in 

paragraph (h)(2) of this section, the agency must reinstate the application submitted by the 

individual, effective as of the date the application was first received by the Exchange.

(2) Individuals described in this paragraph are individuals who – 

(i) Submitted an application described in paragraph (b) of this section to the Exchange; 
CMS-2334-F 520 

(ii) Withdrew their application for Medicaid in accordance with 45 CFR 

155.302(b)(4)(A); 

(iii) Are assessed as potentially eligible for Medicaid by the Exchange appeals entity. 

20. Section 435.908 is amended by adding paragraph (c) to read as follows: 

§435.908 Assistance with application and renewal. 

* * * * * 

(c) Certified Application Counselors. (1) At State option, the agency may certify staff 

and volunteers of State-designated organizations to act as application assisters, authorized to 

provide assistance to applicants and beneficiaries with the application process and during 

renewal of eligibility. To be certified, application assisters must be – 

(i) Authorized and registered by the agency to provide assistance at application and 

renewal; 

(ii) Effectively trained in the eligibility and benefits rules and regulations governing 

enrollment in a QHP through the Exchange and all insurance affordability programs operated in 

the State, as implemented in the State; and 

(iii) Trained in and adhere to all rules regulations relating to the safeguarding and 

confidentiality of information and prohibiting conflict of interest, including regulations set forth 

at part 431, subpart F of this chapter, and at 45 CFR 155.260(f), regulations relating to the 

prohibition against reassignment of provider claims specified in §447.10 of this chapter, and all 

other State and Federal laws concerning conflicts of interest and confidentiality of information. 

(2) For purposes of this section, assistance includes providing information on insurance 

affordability programs and coverage options, helping individuals complete an application or 

renewal, working with the individual to provide required documentation , submitting 

applications and renewals to the agency, interacting with the agency on the status of such 
CMS-2334-F 521 

applications and renewals, assisting individuals with responding to any requests from the agency, 

and managing their case between the eligibility determination and regularly scheduled renewals. 

Application assisters may be certified by the agency to act on behalf of applicants and 

beneficiaries for one, some or all of the permitted assistance activities. 

(3) If the agency elects to certify application assisters, it must establish procedures to 

ensure that – 

(i) Applicants and beneficiaries are informed of the functions and responsibilities of 

certified application assisters; 

(ii) Individuals are able to authorize application assisters to receive confidential 

information about the individual related to the individual’s application for or renewal of 

Medicaid; and 

(iii) The agency does not disclose confidential applicant or beneficiary information to an 

application assister unless the applicant or beneficiary has authorized the application assister to 

receive such information. 

(4) Application assisters may not impose, accept or receive payment or compensation in 

any form from applicants or beneficiaries for application assistance. 

21. Section 435.918 is added to read as follows: 

§435.918 Use of electronic notices.

(a) Effective no earlier than October 1, 2013 and no later than January 1, 2015, the 

agency must provide individuals with a choice to receive notices and information required under 

this part or subpart E of part 431 of this chapter in electronic format or by regular mail and must 

be permitted to change such election. 

(b) If the individual elects to receive communications from the agency electronically, the 

agency must – 
CMS-2334-F 522 

(1) Ensure that the individual’s election to receive notices electronically is confirmed by 

regular mail. 

(2) Ensure that the individual is informed of his or her right to change such election to 

receive notices through regular mail. 

(3) Post notices to the individual’s electronic account within 1 business day of notice 

generation. 

(4) Send an email or other electronic communication alerting the individual that a notice 

has been posted to his or her account. The agency may not include confidential information in 

the email or electronic alert. 

(5) Send a notice by regular mail within three business days of the date of a failed 

electronic communication if an electronic communication is undeliverable. 

(6) At the individual’s request, provide through regular mail any notice posted to the 

individual’s electronic account. 

22. Section 435.923 is added to read as follows: 

§435.923 Authorized Representatives. 

(a)(1) The agency must permit applicants and beneficiaries to designate an individual or 

organization to act responsibly on their behalf in assisting with the individual’s application and 

renewal of eligibility and other ongoing communications with the agency. Such a designation 

must be in accordance with paragraph (f) of this section, including the applicant’s signature, and 

must be permitted at the time of application and at other times. 

(2) Authority for an individual or entity to act on behalf of an applicant or beneficiary 

accorded under state law, including but not limited to, a court order establishing legal 

guardianship or a power of attorney, must be treated as a written designation by the applicant or 

beneficiary of authorized representation. 
CMS-2334-F 523 

(b) Applicants and beneficiaries may authorize their representatives to— 

(1) Sign an application on the applicant’s behalf; 

(2) Complete and submit a renewal form; 

(3) Receive copies of the applicant or beneficiary’s notices and other communications 

from the agency; 

(4) Act on behalf of the applicant or beneficiary in all other matters with the agency. 

(c) The power to act as an authorized representative is valid until the applicant or 

beneficiary modifies the authorization or notifies the agency that the representative is no longer 

authorized to act on his or her behalf, or the authorized representative informs the agency that he 

or she no longer is acting in such capacity, or there is a change in the legal authority upon which 

the individual or organization’s authority was based. Such notice must be in accordance with 

paragraph (f) of this section and should include the applicant or authorized representative’s 

signature as appropriate. 

(d) The authorized representative— 

(1) Is responsible for fulfilling all responsibilities encompassed within the scope of the 

authorized representation, as described in paragraph (b)(2) of this section, to the same extent as 

the individual he or she represents; 

(2) Must agree to maintain, or be legally bound to maintain, the confidentiality of any 

information regarding the applicant or beneficiary provided by the agency. 

(e) The agency must require that, as a condition of serving as an authorized 

representative, a provider or staff member or volunteer of an organization must affirm that he or 

she will adhere to the regulations in part 431, subpart F of this chapter and at 45 CFR 155.260(f) 

(relating to confidentiality of information), § 447.10 of this chapter (relating to the prohibition 

against reassignment of provider claims as appropriate for a facility or an organization acting on 
CMS-2334-F 524 

the facility’s behalf), as well as other relevant State and Federal laws concerning conflicts of 

interest and confidentiality of information. 

(f) For purposes of this section, the agency must accept electronic, including 

telephonically recorded, signatures and handwritten signatures transmitted by facsimile or other 

electronic transmission. Designations of authorized representatives must be accepted through all 

of the modalities described in § 435.907(a). 

23. Add an undesignated center heading and 435.1015 to read as follows: 

FFP for Premium Assistance 

§435.1015 FFP for premium assistance for plans in the individual market. 

(a) FFP is available for payment of the costs of insurance premiums on behalf of an 

eligible individual for a health plan offered in the individual market that provides the individual 

with benefits for which the individual is covered under the State plan, subject to the following 

conditions: 

(1) The insurer is obligated to pay primary to Medicaid for all health care items and 

services for which the insurer is legally and contractually responsible under the individual health 

plan, as required under part 433 subpart D of this chapter; 

 (2) The agency furnishes all benefits for which the individual is covered under the State 

plan that are not available through the individual health plan; 

(3) The individual does not incur any cost sharing charges in excess of any amounts 

imposed by the agency under subpart A of part 447; and 

(4) The total cost of purchasing such coverage, including administrative expenditures, 

the costs of paying all cost sharing charges in excess of the amounts imposed by the agency 

under subpart A of part 447, and the costs of providing benefits as required by (a)(2) of this 

section, must be comparable to the cost of providing direct coverage under the State plan. 
CMS-2334-F 525 

(b) A State may not require an individual to receive benefits through premium assistance 

under this section, and a State must inform an individual that it is the individual’s choice to 

receive either direct coverage under the Medicaid State plan or coverage through premium 

assistance for an individual health plan. A State must require that an individual who elects 

premium assistance obtain through the insurance coverage all benefits for which the insurer is 

responsible and must provide the individual with information on how to access any additional 

benefits and cost sharing assistance not provided by the insurer. 

Subpart L—Options for Coverage of Special Groups under Presumptive Eligibility

 24. The heading for subpart L is revised as set forth above. 

 25. Section 435.1102 is amended by— 

A. Revising the section heading. 

B. Revising paragraph (a). 

C. Removing “and” at the end of paragraph (b)(2)(iv)(B) and adding “and” at the end of 

paragraph (b)(2)(v)(B); 

D. Adding paragraph (b)(2)(vi). 

E. Revising paragraph (b)(3). 

F. Removing paragraph (b)(4). 

G. Adding paragraphs (d) and (e). 

The revisions and additions read as follows: 

§435.1102 Children covered under presumptive eligibility. 

 (a) The agency may elect to provide Medicaid services for children under age 19 or a 

younger age specified by the State during a presumptive eligibility period following a 

determination by a qualified entity, on the basis of preliminary information, that the individual 

has gross income (or, at state option, a reasonable estimate of household income, as defined in 
CMS-2334-F 526 

§435.603 of this part, determined using simplified methods prescribed by the agency) at or 

below the income standard established by the State for the age of the child under §435.118(c) or 

under §435.229 if applicable and higher. 

(b) * * * 

(2) * * * 

(vi) Do not delegate the authority to determine presumptive eligibility to another entity. 

(3) Establish oversight mechanisms to ensure that presumptive eligibility determinations 

are being made consistent with the statute and regulations. 

* * * * * 

(d) The agency – 

(1) May require, for purposes of making a presumptive eligibility determination under 

this section, that the individual has attested to being, or another person who attests to having 

reasonable knowledge of the individual’s status has attested to the individual being, a – 

(i) Citizen or national of the United States or in satisfactory immigration status; or 

(ii) Resident of the State; and 

(2) May not – 

(i) Impose other conditions for presumptive eligibility not specified in this section; or 

(ii) Require verification of the conditions for presumptive eligibility. 

(e) Notice and fair hearing regulations in subpart E of part 431 of this chapter do not 

apply to determinations of presumptive eligibility under this section. 

 26 Section 435.1103 is added to Subpart L read as follows: 

§435.1103 Presumptive eligibility for other individuals. 

 (a) The terms of §435.1101 and §435.1102 apply to pregnant women such that the 

agency may provide Medicaid to pregnant women during a presumptive eligibility period 
CMS-2334-F 527 

following a determination by a qualified entity that the pregnant woman has income at or below 

the income standard established by the State under §435.116(c), except that coverage of services 

provided to such women is limited to ambulatory prenatal care and the number of presumptive 

eligibility periods that may be authorized for pregnant women is one per pregnancy. 

 (b) If the agency provides Medicaid during a presumptive eligibility period to children 

under §435.1102 or to pregnant women under paragraph (a) of this section, the agency may also 

apply the terms of §§ 435.1101 and 435.1102 to the individuals described in one or more of the 

following sections of this part, based on the income standard established by the state for such 

individuals and providing the benefits covered under that section: §§ 435.110 (parents and 

caretaker relatives), 435.119 (individuals aged 19 or older and under age 65), 435.150 (former 

foster care children), and 435.218 (individuals under age 65 with income above 133 percent 

FPL). 

 (c)(1) The terms of §§ 435.1101 and 435.1102 apply to individuals who may be eligible 

under § 435.213 of this part (relating to individuals with breast or cervical cancer) or § 435.214 

of this part (relating to eligibility for limited family planning benefits) such that the agency may 

provide Medicaid during a presumptive eligibility period following a determination by a 

qualified entity described in paragraph (c)(2) of this section that– 

(i) The individual meets the eligibility requirements of §435.213; or 

(ii) The individual meets the eligibility requirements of §435.214, except that coverage 

provided during a presumptive eligibility period to such individuals is limited to the services 

described in §435.214(d). 

(2) Qualified entities described in this paragraph include qualified entities which 

participate as providers under the State plan and which the agency determines are capable of 

making presumptive eligibility determinations. 
CMS-2334-F 528 

 27. Section 435.1110 is added to Subpart L to read as follows: 

§435.1110 Presumptive eligibility determined by hospitals. 

 (a) Basic rule. The agency must provide Medicaid during a presumptive eligibility 

period to individuals who are determined by a qualified hospital, on the basis of preliminary 

information, to be presumptively eligible subject to the same requirements as apply to the State 

options under §§ 435.1102 and 435.1103, but regardless of whether the agency provides 

Medicaid during a presumptive eligibility period under such sections.

 (b) Qualified hospitals. A qualified hospital is a hospital that – 

 (1) Participates as a provider under the State plan or a demonstration under section 1115 

of the Act, notifies the agency of its election to make presumptive eligibility determinations 

under this section, and agrees to make presumptive eligibility determinations consistent with 

State policies and procedures; 

(2) At State option, assists individuals in completing and submitting the full application 

and understanding any documentation requirements; and 

(3) Has not been disqualified by the agency in accordance with paragraph (d) of this 

section. 

(c) State options for bases of presumptive eligibility. The agency may – 

(1) Limit the determinations of presumptive eligibility which hospitals may elect to 

make under this section to determinations based on income for all of the populations described in 

§435.1102 and §435.1103; or 

(2) Permit hospitals to elect to make presumptive eligibility determinations on additional 

bases approved under the State plan or an 1115 demonstration. 

 (d) Disqualification of hospitals. (1) The agency may establish standards for qualified 

hospitals related to the proportion of individuals determined presumptively eligible for Medicaid 
CMS-2334-F 529 

by the hospital who: 

(i) Submit a regular application, as described in §435.907, before the end of the 

presumptive eligibility period; or 

(ii) Are determined eligible for Medicaid by the agency based on such application. 

(2) The agency must take action, including, but not limited to, disqualification of a 

hospital as a qualified hospital under this section, if the agency determines that the hospital is 

not– 

 (i) Making, or is not capable of making, presumptive eligibility determinations in 

accordance with applicable state policies and procedures; or 

 (ii) Meeting the standard or standards established by the agency under paragraph (d)(1) 

of this section. 

 (3) The agency may disqualify a hospital as a qualified hospital under this paragraph 

only after it has provided the hospital with additional training or taken other reasonable 

corrective action measures to address the issue. 

28. Section 435.1200 is amended by revising paragraph (d)(6) to read as follows: 

§435.1200 Medicaid Agency responsibilities for a coordinated eligibility and enrollment 

process with other insurance affordability programs 

* * * * * 

(d) * * * 

(6) Notify such program of the final determination of the individual’s eligibility or 

ineligibility for Medicaid. 

* * * * * 

29. Section 435.1205 is added to read as follows: 

§435.1205 Alignment with exchange initial open enrollment period. 
CMS-2334-F 530 

(a) Definitions. For purposes of this section – 

 Eligibility based on MAGI means Medicaid eligibility based on the eligibility 

requirements which will be effective under the State plan, or waiver of such plan, as of January 

1, 2014, consistent with §§ 435.110 through 435.119, 435.218 and 435.603. 

(b) Medicaid agency responsibilities to achieve coordinated open enrollment. For the 

period beginning October 1, 2013 through December 31, 2013, the agency must 

(1) Accept all of the following: 

(i) The single streamlined application described in §435.907. 

(ii) Via secure electronic interface, an electronic account transferred from another 

insurance affordability program. 

 (2) For eligibility based on MAGI, comply with the terms of §435.1200 of this part, such 

that -- 

 (i) For each electronic account transferred to the agency under paragraph (c)(1)(ii) of 

this section, the agency consistent with either of the following: 

(A) Section 435.1200(c), accepts a determination of Medicaid eligibility based on 

MAGI, made by another insurance affordability program. 

(B) Section 435.1200(d), determines eligibility for Medicaid based on MAGI. 

(ii) Consistent with §435.1200(e), for each single streamlined application submitted 

directly to the agency under paragraph (b)(1)(i) of this section – 

(A) Determine eligibility based on MAGI; and 

(B) For each individual determined not Medicaid eligible based on MAGI, determine 

potential eligibility for other insurance affordability programs, based on the requirements which 

will be effective for each program, and transfer the individual’s electronic account to such 

program via secure electronic interface. 
CMS-2334-F 531 

(iii) Provide notice and fair hearing rights, in accordance with §435.917 of this part, part 

431 subpart E of this chapter, and §435.1200 for those determined ineligible for Medicaid. 

(3) For each individual determined eligible based on MAGI in accordance with paragraph 

(c)(2) of this section – 

(i) Provide notice, including the effective date of eligibility, to such individual, 

consistent with §435.917 of this part, and furnish Medicaid. 

(ii) Apply the terms of §435.916 (relating to beneficiary responsibility to inform the 

agency of any changes in circumstances that may affect eligibility) and §435.952 (regarding use 

of information received by the agency). The first renewal under §435.916 of this part may, at 

State option, be scheduled to occur anytime between 12 months from the date of application and 

12 months from January 1, 2014. 

(4) For eligibility effective in 2013, for all applicants – 

(i) Consistent with the requirements of subpart J of this part, and applying the eligibility 

requirements in effect under the State plan, or waiver of such plan, as of the date the individual 

submits an application to any insurance affordability program – 

(A) Determine the individual's eligibility based on the information provided on the 

application or in the electronic account; or 

(B) Request additional information from the individual needed by the agency to 

determine eligibility based on the eligibility requirements in effect on such date, including on a 

basis excepted from application of MAGI-based methods, as described in §435.603, and 

determine such eligibility if such information is provided; and 

(C) Furnish Medicaid to individuals determined eligible under this clause or provide 

notice and fair hearing rights in accordance with part 431 subpart E of this part if eligibility 

effective in 2013 is denied; or 
CMS-2334-F 532 

(ii) Notify the individual of the opportunity to submit a separate application for coverage 

effective in 2013 and information on how to obtain and submit such application. 

PART 436--ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS

30. The authority citation for part 436 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 

§436.831 [Amended] 

31. In §436.831, amend paragraph (e)(1) by removing the reference “§447.51 or 

§447.53” and by adding in its place the reference “§447.52, ,§447.53, or §447.54”. 

PART 438--MANAGED CARE 

 32. The authority citation for part 483 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 

§438.108 [Amended] 

33. Section 438.108 is amended by removing the reference “§§447.50 through 447.60” 

and by adding in its place the reference “§§447.50 through 447.57”. 

PART 440-SERVICES: GENERAL PROVISIONS 

 34. The authority citation for part 440 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 

 35. Section 440.130 is amended by revising paragraph (c) to read as follows: 

§440.130 Diagnostic, screening, preventive, and rehabilitative services. 

* * * * * 

 (c) Preventive services means services recommended by a physician or other licensed 

practitioner of the healing arts acting within the scope of authorized practice under State law to -

- 

 (1) Prevent disease, disability, and other health conditions or their progression; 
CMS-2334-F 533 

 (2) Prolong life; and 

 (3) Promote physical and mental health and efficiency. 

* * * * * 

 36. Section 440.305 is amended by revising paragraphs (a) and (b) and removing 

paragraph (d). 

The revisions read as follows: 

§440.305 Scope. 

(a) General. This subpart sets out requirements for States that elect to provide medical 

assistance to certain Medicaid eligible individuals within one or more groups of individuals 

specified by the State, through enrollment of the individuals in coverage, identified as 

“benchmark” or “benchmark-equivalent.” Groups must be identified by characteristics of 

individuals rather than the amount or level of FMAP. 

(b) Limitations. A State may only apply the option in paragraph (a) of this section for an 

individual whose eligibility is based on an eligibility category under section 1905(a) of the Act 

that could have been covered under the State’s plan on or before February 8, 2006, except that 

individuals who are eligible under section 1902(a)(10)(A)(i)(VIII) of the Act must enroll in an 

Alternative Benefit Plan to receive medical assistance. 

* * * * * 

 37. Section 440.315 is amended by revising the introductory text and paragraphs (f) and 

(h) to read as follows: 

§440.315 Exempt individuals. 

 Individuals within one (or more) of the following categories are exempt from mandatory 

enrollment in an Alternative Benefit Plan, unless the individuals are eligible under section 

1902(a)(10)(A)(i)(VIII) of the Act. Individuals in that eligibility group who meet the conditions 
CMS-2334-F 534 

for exemption must be given the option of an Alternative Benefit Plan that includes all benefits 

available under the approved State plan. 

* * * * * 

(f) The individual is medically frail or otherwise an individual with special medical 

needs. For these purposes, the State’s definition of individuals who are medically frail or 

otherwise have special medical needs must at least include those individuals described in 

§438.50(d)(3) of this chapter, individuals with disabling mental disorders (including children 

with serious emotional disturbances and adults with serious mental illness), individuals with 

chronic substance use disorders, individuals with serious and complex medical conditions, 

individuals with a physical, intellectual or developmental disability that significantly impairs 

their ability to perform 1 or more activities of daily living, or individuals with a disability 

determination based on Social Security criteria or in States that apply more restrictive criteria 

than the Supplemental Security Income program, the State plan criteria. 

* * * * * 

 (h) The individual is eligible and enrolled for Medicaid under §435.145 of this chapter 

based on current eligibility for assistance under title IV-E of the Act or under §435.150 of this 

chapter based on current status as a former foster care child. 

* * * * * 

 38. Section 440.330 is amended by revising paragraph (d) to read as follows: 

§440.330 Benchmark health benefits coverage. 

* * * * * 

(d) Secretary-approved coverage. Any other health benefits coverage that the Secretary 

determines, upon application by a State, provides appropriate coverage to meet the needs of the 

population provided that coverage. Secretarial coverage may include benefits of the type that are 
CMS-2334-F 535 

available under 1 or more of the standard benchmark coverage packages defined in paragraphs 

(a) through (c) of this section, State plan benefits described in section 1905(a), 1915(i), 1915(j), 

1915(k) or section 1945 of the Act, any other Medicaid State plan benefits enacted under title 

XIX, or benefits available under base benchmark plans described in 45 CFR 156.100. 

(1) States wishing to elect Secretary-approved coverage should submit a full description 

of the proposed coverage (including a benefit-by-benefit comparison of the proposed plan to one 

or more of the three other benchmark plans specified above or to the State’s standard full 

Medicaid coverage package), and of the population to which coverage will be offered. In 

addition, the State should submit any other information that will be relevant to a determination 

that the proposed health benefits coverage will be appropriate for the proposed population. 

(2) [Reserved] 

 39. Section 440.335 is amended by— 

 A. Adding paragraphs (b)(7)and (8). 

B. Revising paragraph (c)(1). 

C. Removing paragraph (c)(3). 

 The revisions and additions read as follows: 

§440.335 Benchmark-equivalent health benefits coverage. 

* * * * * 

 (b) * * * 

 (7) Prescription drugs. 

 (8) Mental health benefits. 

 (c) * * * 

 (1) In addition to the types of benefits of this section, benchmark-equivalent coverage 

may include coverage for any additional benefits of the type which are covered in 1 or more of 
CMS-2334-F 536 

the standard benchmark coverage packages described in §440.330(a) through (c) or State plan 

benefits, described in section 1905(a), 1915(i), 1915(j), 1915(k) and 1945 of the Act, any other 

Medicaid State plan benefits enacted under title XIX, or benefits available under basebenchmark plans described in 45 CFR 156.100. 

 * * * * * 

40. Section 440.345 is amended by revising the section heading and adding paragraphs 

(b) through (f) to read as follows: 

§440.345 EPSDT and other required benefits. 

* * * * * 

 (b) Family planning. Alternative Benefit Plans must include coverage for family planning 

services and supplies. 

 (c) Mental health parity. Alternative Benefit Plans that provide both medical and surgical 

benefits, and mental health or substance use disorder benefits, must comply with the Mental 

Health Parity and Addiction Equity Act. 

 (d) Essential health benefits. Alternative Benefit Plans must include at least the essential 

health benefits described in §440.347, and include all updates or modifications made thereafter 

by the Secretary to the definition of essential health benefits. 

 (e) Updating of benefits. States are not required to update Alternative Benefit Plans that 

have been determined to include essential health benefits as of January 1, 2014, until December 

31, 2015. States will adhere to future guidance for updating benefits beyond that date, as 

described by the Secretary. 

 (f) Covered outpatient drugs. To the extent states pay for covered outpatient drugs 

under their Alternative Benefit Plan’s prescription drug coverage, states must comply with the 

requirements under section 1927 of the Act. 
CMS-2334-F 537 

41. Section 440.347 is added to read as follows:

§440.347 Essential health benefits. 

(a) Alternative Benefit Plans must contain essential health benefits coverage, including 

benefits in each of the following ten categories, consistent with the applicable requirements set 

forth in 45 CFR part 156:

(1) Ambulatory patient services; 

(2) Emergency services; 

(3) Hospitalization; 

(4) Maternity and newborn care; 

(5) Mental health and substance use disorders, including behavioral health treatment; 

(6) Prescription drugs; 

(7) Rehabilitative and habilitative services and devices, except that such coverage shall 

be in accordance with §440.347(d); 

(8) Laboratory services; 

(9) Preventive and wellness services and chronic disease management; and 

(10) Pediatric services, including oral and vision care, in accordance with section 

1905(r) of the Act.

(b) Alternative Benefit Plans must include essential health benefits in one of the state 

options for establishing essential health benefits described in 45 CFR 156.100, subject to 

supplementation under 45 CFR 156.110(b) and substitution as permitted under 45 CFR 

156.115(b). 

(c) States may select more than one base benchmark option for establishing essential 

health benefits in keeping with the flexibility for States to implement more than one Alternative 

Benefit Plan for targeted populations. 
CMS-2334-F 538 

(d) To comply with paragraph (a) of this section, Alternative Benefit Plan coverage of 

habilitative services and devices will be based on the habilitative services and devices that are in 

the applicable base benchmark plan. If habilitative services and devices are not in the applicable 

base benchmark plan, the state will define habilitative services and devices required as essential 

health benefits using the methodology set forth in 45 CFR 156.115(a)(5). 

(e) Essential health benefits cannot be based on a benefit design or implementation of a 

benefit design that discriminates based on an individual’s age, expected length of life, present or 

predicted disability, degree of medical dependency, quality of life or other health conditions. 

 42. Section 440.360 is revised to read as follows: 

§440.360 State plan requirements for providing additional services. 

 In addition to the requirements of §440.345, the State may elect to provide additional 

coverage to individuals enrolled in Alternative Benefit Plans, except that the coverage for 

individuals eligible only through section 1902(a)(10)(A)(i)(VIII) of the Act is limited to 

benchmark or benchmark-equivalent coverage. The State must describe the populations covered 

and the payment methodology for these benefits. Additional benefits must be benefits of the 

type, which are covered in 1 or more of the standard benchmark coverage packages described in 

§440.330(a) through (c) or State plan benefits including those described in sections 1905(a), 

1915(i), 1915(j), 1915(k) and 1945 of the Act and any other Medicaid State plan benefits enacted 

under title XIX, or benefits available under base benchmark plans described in 45 CFR 156.100. 

43. Section 440.386 is added to read as follows: 

§440.386 Public notice. 

 Prior to submitting to the Centers for Medicare and Medicaid Services for approval of a 

State plan amendment to establish an Alternative Benefit Plan or an amendment to substantially 

modify an existing Alternative Benefit Plan, a state must have provided the public with advance 
CMS-2334-F 539 

notice of the amendment and reasonable opportunity to comment for such amendment, and have 

included in the notice a description of the method for assuring compliance with §440.345 related 

to full access to EPSDT services, and the method for complying with the provisions of section 

5006(e) of the American Recovery and Reinvestment Act of 2009. 

PART 447--PAYMENTS FOR SERVICES 

44. The authority citation for part 447 continues to read as follows: 

Authority: Section 1102 of the Social Security Act (42 U.S.C. 1302). 

45. Section 447.15 is revised to read as follows: 

§447.15 Acceptance of State payment as payment in full.

A State plan must provide that the Medicaid agency must limit participation in the 

Medicaid program to providers who accept, as payment in full, the amounts paid by the agency 

plus any deductible, coinsurance or copayment required by the plan to be paid by the individual. 

The provider may only deny services to any eligible individual on account of the individual's 

inability to pay the cost sharing amount imposed by the plan in accordance with §447.52(e). The 

previous sentence does not apply to an individual who is able to pay. An individual's inability to 

pay does not eliminate his or her liability for the cost sharing charge. 

§447.20 [Amended] 

46. In §447.20, amend paragraphs (a)(1) and (2) by removing the reference “§§447.53 

through 447.56” wherever it occurs and adding in its place the reference “§§447.52 through 

447.54”. 

47a. Remove the undesignated center headings which appear above §§ 447.50, 447.51, 

447.53, 447.59, and 447.62. 

47b. Add a new undesignated center above revised §§ 447.50 through 447.57 to read as 

follows: 
CMS-2334-F 540 

Medicaid Premiums and Cost Sharing 

Sec. 

447.50 Premiums and cost sharing: Basis and purpose. 

447.51 Definitions. 

447.52 Cost sharing. 

447.53 Cost sharing for drugs. 

447.54 Cost sharing for services furnished in a hospital emergency department. 

447.55 Premiums. 

447.56 Limitations on premiums and cost sharing. 

447.57 Beneficiary and public notice requirements. 

Medicaid Premiums and Cost Sharing 

§447.50 Premiums and cost sharing: Basis and purpose. 

Sections 1902(a)(14), 1916 and 1916A of the Act permit states to require certain 

beneficiaries to share in the costs of providing medical assistance through premiums and cost 

sharing. Sections 447.52 through 447.56 specify the standards and conditions under which states 

may impose such premiums and or cost sharing. 

§447.51 Definitions 

As used in this part – 

Alternative non-emergency services provider means a Medicaid provider, such as a 

physician’s office, health care clinic, community health center, hospital outpatient department, or 

similar provider that can provide clinically appropriate services in a timely manner. 

Contract health service means any health service that is: 

(1) Delivered based on a referral by, or at the expense of, an Indian health program; and 
CMS-2334-F 541 

(2) Provided by a public or private medical provider or hospital that is not a provider or 

hospital of the IHS or any other Indian health program 

Cost sharing means any copayment, coinsurance, deductible, or other similar charge. 

Emergency services has the same meaning as in §438.114 of this chapter. 

Federal poverty level (FPL) means the Federal poverty level updated periodically in the 

Federal Register by the Secretary of Health and Human Services under the authority of 42 

U.S.C. 9902(2). 

Indian means any individual defined at 25 U.S.C. 1603(13), 1603(28), or 1679(a), or who 

has been determined eligible as an Indian, under 42 CFR 136.12. This means the individual: 

(1) Is a member of a Federally-recognized Indian tribe; 

(2) Resides in an urban center and meets one or more of the following four criteria: 

(i) Is a member of a tribe, band, or other organized group of Indians, including those 

tribes, bands, or groups terminated since 1940 and those recognized now or in the future by the 

State in which they reside, or who is a descendant, in the first or second degree, of any such 

member; 

(ii) Is an Eskimo or Aleut or other Alaska Native; 

(iii) Is considered by the Secretary of the Interior to be an Indian for any purpose; or 

(iv) Is determined to be an Indian under regulations promulgated by the Secretary; 

(3) Is considered by the Secretary of the Interior to be an Indian for any purpose; or 

(4) Is considered by the Secretary of Health and Human Services to be an Indian for 

purposes of eligibility for Indian health care services, including as a California Indian, Eskimo, 

Aleut, or other Alaska Native. 

Indian health care provider means a health care program operated by the Indian Health 

Service (IHS) or by an Indian Tribe, Tribal Organization, or Urban Indian Organization 
CMS-2334-F 542 

(otherwise known as an I/T/U) as those terms are defined in section 4 of the Indian Health Care 

Improvement Act (25 U.S.C. 1603). 

Inpatient stay means the services received during a continuous period of inpatient days in 

either a single medical institution or multiple medical institutions, and also includes a return to 

an inpatient medical institution after a brief period when the return is for treatment of a condition 

that was present in the initial period. Inpatient has the same meaning as in §440.2 of this chapter. 

Non-emergency services means any care or services that are not considered emergency 

services as defined in this section. This does not include any services furnished in a hospital 

emergency department that are required to be provided as an appropriate medical screening 

examination or stabilizing examination and treatment under section 1867 of the Act. 

Outpatient services for purposes of imposing cost sharing means any service or supply 

not meeting the definition of an inpatient stay. 

Preferred drugs means drugs that the state has identified on a publicly available schedule 

as being determined by a pharmacy and therapeutics committee for clinical efficacy as the most 

cost effective drugs within each therapeutically equivalent or therapeutically similar class of 

drugs, or all drugs within such a class if the agency does not differentiate between preferred and 

non-preferred drugs. 

Premium means any enrollment fee, premium, or other similar charge. 

§447.52 Cost sharing. 

(a) Applicability. Except as provided in §447.56(a) (exemptions), the agency may 

impose cost sharing for any service under the state plan. 

(b) Maximum Allowable Cost Sharing. (1) At State option, cost sharing imposed for any 

service (other than for drugs and non-emergency services furnished in an emergency department, 

as described in §§447.53 and 447.54 respectively) may be established at or below the amounts 
CMS-2334-F 543 

shown in the following table (except that the maximum allowable cost sharing for individuals 

with family income at or below 100 percent of the FPL shall be increased each year, beginning 

October 1, 2015, by the percentage increase in the medical care component of the CPI-U for the 

period of September to September of the preceding calendar year, rounded to the next higher 5-

cent increment): 

Services Maximum Allowable Cost Sharing 

Individuals with 

Family Income 

<100% of the FPL

Individuals with 

Family Income 

101-150% of the 

FPL 

Individuals with 

Family Income 

>150% of the FPL 

Outpatient Services 

(physician visit, 

physical therapy, 

etc.)

$4 10 % of cost the 

agency pays 

20% of cost the 

agency pays 

Inpatient Stay $75 

10 % of total cost 

the agency pays for 

the entire stay 

20% of total cost the 

agency pays for the 

entire stay 

(2) States with cost sharing for an inpatient stay that exceeds $75, as of [OFR—Insert 

date of publication], must submit a plan to CMS that provides for reducing inpatient cost sharing 

to $75 on or before July 1, 2017.. 

(3) In states that do not have fee-for-service payment rates, any cost sharing imposed on 

individuals at any income level may not exceed the maximum amount established , for 

individuals with income at or below 100 percent of the FPL described in paragraph (b)(1) of this 

section. 

(c) Maximum cost sharing. In no case shall the maximum cost sharing established by the 

agency be equal to or exceed the amount the agency pays for the service. 

(d) Targeted cost sharing. (1) Except as provided in paragraph (d)(2) of this section, the 

agency may target cost sharing to specified groups of individuals with family income above 100 

percent of the FPL. 
CMS-2334-F 544 

(2) For cost sharing imposed for non-preferred drugs under §447.53 and for nonemergency services provided in a hospital emergency department under §447.54, the agency 

may target cost sharing to specified groups of individuals regardless of income. 

(e) Denial of service for nonpayment. (1) The agency may permit a provider, including a 

pharmacy or hospital, to require an individual to pay cost sharing as a condition for receiving the 

item or service if— 

(i) The individual has family income above 100 percent of the FPL, 

(ii) The individual is not part of an exempted group under §447.56(a), and 

(iii) For cost sharing imposed for non-emergency services furnished in an emergency 

department, the conditions under §447.54(d) of this part have been satisfied. 

(2) Except as provided under paragraph (e)(1) of this section, the state plan must specify 

that no provider may deny services to an eligible individual on account of the individual's 

inability to pay the cost sharing. 

(3) Nothing in this section shall be construed as prohibiting a provider from choosing to 

reduce or waive such cost sharing on a case-by-case basis. 

(f) Prohibition against multiple charges. For any service, the agency may not impose 

more than one type of cost sharing. 

(g) Income-related charges. Subject to the maximum allowable charges specified in §§ 

447.52(b), 447.53(b) and 447.54(b), the plan may establish different cost sharing charges for 

individuals at different income levels. If the agency imposes such income-related charges, it 

must ensure that lower income individuals are charged less than individuals with higher income. 

(h) Services furnished by a managed care organization (MCO). Contracts with MCOs 

must provide that any cost-sharing charges the MCO imposes on Medicaid enrollees are in 
CMS-2334-F 545 

accordance with the cost sharing specified in the state plan and the requirements set forth in 

§§447.50 through 447.57. 

(i) State Plan Specifications. For each cost sharing charge imposed under this part, the 

state plan must specify—

(1) The service for which the charge is made; 

(2) The group or groups of individuals that may be subject to the charge; 

(3)The amount of the charge; 

(4) The process used by the state to— 

(i) Ensure individuals exempt from cost sharing are not charged, 

(ii) Identify for providers whether cost sharing for a specific item or service may be 

imposed on an individual and whether the provider may require the individual, as a condition 

for receiving the item or service, to pay the cost sharing charge; and 

(5) If the agency imposes cost sharing under §447.54, the process by which hospital 

emergency room services are identified as non-emergency service. 

§447.53 Cost sharing for drugs. 

(a) The agency may establish differential cost sharing for preferred and non-preferred 

drugs. The provisions in §447.56(a) shall apply except as the agency exercises the option under 

paragraph (d) of this section. All drugs will be considered preferred drugs if so identified or if 

the agency does not differentiate between preferred and non-preferred drugs. 

(b) At state option, cost sharing for drugs may be established at or below the amounts 

shown in the following table (except that the maximum allowable cost sharing shall be increased 

each year, beginning October 1, 2015, by the percentage increase in the medical care component 

of the CPI-U for the period of September to September of the preceding calendar year, rounded 
CMS-2334-F 546 

to the next higher 5-cent increment. Such increase shall not be applied to any cost sharing that is 

based on the amount the agency pays for the service): 

Services Maximum Allowable Cost Sharing 

Individuals with 

Family Income 

< 150% of the FPL 

Individuals with 

Family Income 

>150% of the FPL 

Preferred Drugs $4 $4 

Non-Preferred Drugs $8 20% of the cost the 

agency pays 

(c) In states that do not have fee-for-service payment rates, cost sharing for prescription 

drugs imposed on individuals at any income level may not exceed the maximum amount 

established for individuals with income at or below 150 percent of the FPL in paragraph (b) of 

this section. 

(d) For individuals otherwise exempt from cost sharing under §447.56(a), the agency 

may impose cost sharing for non-preferred drugs, not to exceed the maximum amount 

established in paragraph (b) of this section. 

(e) In the case of a drug that is identified by the agency as a non-preferred drug within a 

therapeutically equivalent or therapeutically similar class of drugs, the agency must have a 

timely process in place so that cost sharing is limited to the amount imposed for a preferred drug 

if the individual's prescribing provider determines that a preferred drug for treatment of the same 

condition either will be less effective for the individual, will have adverse effects for the 

individual, or both. In such cases the agency must ensure that reimbursement to the pharmacy is 

based on the appropriate cost sharing amount. 

§447.54 Cost sharing for services furnished in a hospital emergency department. 
CMS-2334-F 547 

(a) The agency may impose cost sharing for non-emergency services provided in a 

hospital emergency department. The provisions in §447.56(a) shall apply except as the agency 

exercises the option under paragraph (c) of this section. 

(b) At state option, cost sharing for non-emergency services provided in an emergency 

department may be established at or below the amounts shown in the following table (except that 

the maximum allowable cost sharing identified for individuals with family income at or below 

150 percent of the FPL shall be increased each year, beginning October 1, 2015, by the 

percentage increase in the medical care component of the CPI-U for the period of September to 

September of the preceding calendar year, rounded to the next higher 5-cent increment): 

Services Maximum Allowable Cost Sharing 

Individuals with 

Family Income <

150% of the FPL 

Individuals with 

Family Income 

>150% of the FPL 

Non-emergency Use of the 

Emergency Department $8 No Limit 

(c) For individuals otherwise exempt from cost sharing under §447.56(a), the agency may 

impose cost sharing for non-emergency use of the emergency department, not to exceed the 

maximum amount established in paragraph (b) of this section for individuals with income at or 

below 150 percent of the FPL. 

(d) For the agency to impose cost sharing under paragraph (a) or (c) of this section for 

non-emergency use of the emergency department, the hospital providing the care must— 

(1) Conduct an appropriate medical screening under §489.24 subpart G to determine that 

the individual does not need emergency services. 

(2) Before providing non-emergency services and imposing cost sharing for such 

services: 
CMS-2334-F 548 

(i) Inform the individual of the amount of his or her cost sharing obligation for nonemergency services provided in the emergency department; 

(ii) Provide the individual with the name and location of an available and accessible 

alternative non-emergency services provider; 

(iii) Determine that the alternative provider can provide services to the individual in a 

timely manner with the imposition of a lesser cost sharing amount or no cost sharing if the 

individual is otherwise exempt from cost sharing; and 

(iv) Provide a referral to coordinate scheduling for treatment by the alternative provider. 

(e) Nothing in this section shall be construed to: 

(1) Limit a hospital's obligations for screening and stabilizing treatment of an emergency 

medical condition under section 1867 of the Act; or 

(2) Modify any obligations under either state or federal standards relating to the 

application of a prudent-layperson standard for payment or coverage of emergency medical 

services by any managed care organization. 

§447.55 Premiums. 

(a) The agency may impose premiums upon individuals whose income exceeds 150 

percent of the FPL, subject to the exemptions set forth in §447.56(a) and the aggregate 

limitations set forth in §447.56(f) of this part, except that: 

(1) Pregnant women described in described in paragraph (a)(1)(ii) of this section may be 

charged premiums that do not exceed 10 percent of the amount by which their family income 

exceeds 150 percent of the FPL after deducting expenses for care of a dependent child. 

(i) The agency may use state or local funds available under other programs for payment 

of a premium for such pregnant women. Such funds shall not be counted as income to the 

individual for whom such payment is made. 
CMS-2334-F 549 

(ii) Pregnant women described in this clause include pregnant women eligible for 

Medicaid under §435.116 of this chapter whose income exceeds the higher of – 

(A) 150 percent FPL; and 

(B) If applicable, the percent FPL described in section 1902(l)(2)(A)(iv) of the Act up to 

185 percent FPL. 

(2) Individuals provided medical assistance only under sections 1902(a)(10)(A)(ii)(XV) 

or 1902(a)(10)(A)(ii)(XVI) of the Act and the Ticket to Work and Work Incentives Improvement 

Act of 1999 (TWWIIA), may be charged premiums on a sliding scale based on income. 

(3) Disabled children provided medical assistance under section 1902(a)(10)(A)(ii)(XIX) 

of the Act in accordance with the Family Opportunity Act, may be charged premiums on a 

sliding scale based on income. The aggregate amount of the child’s premium imposed under this 

paragraph and any premium that the parent is required to pay for family coverage under section 

1902(cc)(2)(A)(i) of the Act, and other cost sharing charges may not exceed: 

(i) 5 percent of the family’s income if the family’s income is no more than 200 percent of 

the FPL. 

(ii) 7.5 percent of the family’s income if the family’s income exceeds 200 percent of the 

FPL but does not exceed 300 percent of the FPL. 

(4) Qualified disabled and working individuals described in section 1905(s) of the Act, 

whose income exceeds 150 percent of the FPL, may be charged premiums on a sliding scale 

based on income, expressed as a percentage of Medicare cost sharing described at section 

1905(p)(3)(A)(i) of the Act. 

(5) Medically needy individuals, as defined in §§435.4 and 436.3 of this chapter, may be 

charged on a sliding scale. The agency must impose an appropriately higher charge for each 
CMS-2334-F 550 

higher level of family income, not to exceed $20 per month for the highest level of family 

income. 

(b) Consequences for non-payment. (1) For premiums imposed under paragraphs (a) (1), 

(a)(2), (a)(3) and (a)(4) of this section, the agency may not require a group or groups of 

individuals to prepay. 

(2) Except for premiums imposed under paragraph (a)(5) of this section, the agency may 

terminate an individual from medical assistance on the basis of failure to pay for 60 days or 

more. 

(3) For premiums imposed under paragraph (a)(2) of this section— 

(i) For individuals with annual income exceeding 250 percent of the FPL, the agency may 

require payment of 100 percent of the premiums imposed under this paragraph for a year, such 

that payment is only required up to 7.5 percent of annual income for individuals whose annual 

income does not exceed 450 percent of the FPL. 

(ii) For individuals whose annual adjusted gross income (as defined in section 62 of the 

Internal Revenue Code of 1986) exceeds $75,000, increased by inflation each calendar year after 

2000, the agency must require payment of 100 percent of the premiums for a year, except that 

the agency may choose to subsidize the premiums using state funds which may not be federally 

matched by Medicaid. 

(4) For any premiums imposed under this section, the agency may waive payment of a 

premium in any case where the agency determines that requiring the payment will create an 

undue hardship for the individual or family. 

(5) The agency may not apply further consequences or penalties for non-payment other 

than those listed in this section. 
CMS-2334-F 551 

(c) State plan specifications. For each premium, enrollment fee, or similar charge 

imposed under paragraph (a) of this section, subject to the requirements of paragraph (b) of this 

section, the plan must specify— 

(1) The group or groups of individuals that may be subject to the charge; 

(2) The amount and frequency of the charge; 

(3) The process used by the state to identify which beneficiaries are subject to premiums 

and to ensure individuals exempt from premiums are not charged; and 

(4) The consequences for an individual or family who does not pay. 

§447.56 Limitations on premiums and cost sharing. 

(a) Exemptions. (1) The agency may not impose premiums or cost sharing upon the 

following groups of individuals: 

(i) Individuals ages 1 and older and under age 18 eligible under §435.118 of this chapter. 

(ii) Infants under age 1 eligible under §435.118 of this chapter whose income does not 

exceed the higher of – 

(A) 150 percent FPL (for premiums) or 133 percent FPL (for cost sharing); and 

(B) If applicable, the percent FPL described in section 1902(l)(2)(A)(iv) of the Act up to 

185 percent FPL. 

(iii) Individuals under age 18 eligible under §435.120-§435.122 or §435.130 of this 

chapter. 

(iv) Children for whom child welfare services are made available under Part B of title IV 

of the Act on the basis of being a child in foster care and individuals receiving benefits under 

Part E of that title, without regard to age. 

(v) At state option, individuals under age 19, 20 or age 21, eligible under §435.222 of this 

chapter. 
CMS-2334-F 552 

(vi) Disabled children, except as provided at §447.55(a)(4) (premiums), who are 

receiving medical assistance by virtue of the application of the Family Opportunity Act in 

accordance with sections 1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act. 

(vii) Pregnant women, except for premiums allowed under §447.55(a)(1) and cost sharing 

for services specified in the state plan as not pregnancy-related, during the pregnancy and 

through the postpartum period which begins on the last day of pregnancy and extends through 

the end of the month in which the 60-day period following termination of pregnancy ends. 

(viii) Any individual whose medical assistance for services furnished in an institution, or 

at state option in a home and community-based setting, is reduced by amounts reflecting 

available income other than required for personal needs. 

(ix) An individual receiving hospice care, as defined in section 1905(o) of the Act. 

(x) An Indian who is eligible to receive or has received an item or service furnished by an 

Indian health care provider or through referral under contract health services is exempt from 

premiums. Indians who are currently receiving or have ever received an item or service 

furnished by an Indian health care provider or through referral under contract health services are 

exempt from all cost sharing. 

(xi) Individuals who are receiving Medicaid because of the state’s election to extend 

coverage as authorized by §435.213 of this chapter (Breast and Cervical Cancer). 

(2) The agency may not impose cost sharing for the following services: 

(i) Emergency services as defined at section 1932(b)(2) of the Act and §438.114(a) of 

this chapter; 

(ii) Family planning services and supplies described in section 1905(a)(4)(C) of the Act, 

including contraceptives and pharmaceuticals for which the State claims or could claim Federal 
CMS-2334-F 553 

match at the enhanced rate under section 1903(a)(5) of the Act for family planning services and 

supplies; 

(iii) Preventive services, at a minimum the services specified at §457.520 of chapter D, 

provided to children under 18 years of age regardless of family income, which reflect the wellbaby and well child care and immunizations in the Bright Futures guidelines issued by the 

American Academy of Pediatrics; and 

(iv) Pregnancy-related services, including those defined at §§440.210(a)(2) and 

440.250(p) of this chapter, and counseling and drugs for cessation of tobacco use All services 

provided to pregnant women will be considered as pregnancy-related, except those services 

specifically identified in the state plan as not being related to the pregnancy. 

(v) Provider-preventable services as defined in §447.26(b). 

(b) Applicability. Except as permitted under §447.52(d) (targeted cost sharing), the 

agency may not exempt additional individuals from cost sharing obligations that apply generally 

to the population at issue. 

(c) Payments to providers. (1) Except as provided under paragraphs (c)(2) and (c)(3) of 

this section, the agency must reduce the payment it makes to a provider by the amount of a 

beneficiary's cost sharing obligation, regardless of whether the provider has collected the 

payment or waived the cost sharing. 

(2) For items and services provided to Indians who are exempt from cost sharing under 

paragraph (a)(1)(x) of this section, the agency may not reduce the payment it makes to a 

provider, including an Indian health care provider, by the amount of cost sharing that will 

otherwise be due from the Indian. 
CMS-2334-F 554 

(3) For those providers that the agency reimburses under Medicare reasonable cost 

reimbursement principles, in accordance with subpart B of this part, an agency may increase its 

payment to offset uncollected cost sharing charges that are bad debts of providers. 

(d) Payments to managed care organizations. If the agency contracts with a managed 

care organization, the agency must calculate its payments to the organization to include cost 

sharing established under the state plan, for beneficiaries not exempt from cost sharing under 

paragraph (a) of this section, regardless of whether the organization imposes the cost sharing on 

its recipient members or the cost sharing is collected. 

(e) Payments to states. No FFP in the state's expenditures for services is available for— 

(1) Any premiums or cost sharing amounts that recipients should have paid under 

§§447.52 through 447.55 (except for amounts that the agency pays as bad debts of providers 

under paragraph (c)(3) of this section; and 

(2) Any amounts paid by the agency on behalf of ineligible individuals, whether or not 

the individual had paid any required premium, except for amounts for premium assistance to 

obtain coverage for eligible individuals through family coverage that may include ineligible 

individuals when authorized in the approved state plan. 

(f) Aggregate limits. (1) Medicaid premiums and cost sharing incurred by all individuals 

in the Medicaid household may not exceed an aggregate limit of 5 percent of the family’s 

income applied on either a quarterly or monthly basis, as specified by the agency. 

 (2) If the state adopts premiums or cost sharing rules that could place beneficiaries at 

risk of reaching the aggregate family limit, the state plan must indicate a process to track each 

family’s incurred premiums and cost sharing through an effective mechanism that does not rely 

on beneficiary documentation. 
CMS-2334-F 555 

(3) The agency must inform beneficiaries and providers of the beneficiaries aggregate 

limit and notify beneficiaries and providers when a beneficiary has incurred out-of-pocket 

expenses up to the aggregate family limit and individual family members are no longer subject to 

cost sharing for the remainder of the family’s current monthly or quarterly cap period. 

(4) The agency must have a process in place for beneficiaries to request a reassessment of 

their family aggregate limit if they have a change in circumstances or if they are being 

terminated for failure to pay a premium. 

(5) Nothing in paragraph (f) shall preclude the agency from establishing additional 

aggregate limits, including but not limited to a monthly limit on cost sharing charges for a 

particular service. 

§447.57 Beneficiary and public notice requirements. 

(a) The agency must make available a public schedule describing current premiums and 

cost sharing requirements containing the following information: 

(1) The group or groups of individuals who are subject to premiums and/or cost sharing 

and the current amounts; 

(2) Mechanisms for making payments for required premiums and cost sharing charges; 

(3) The consequences for an applicant or recipient who does not pay a premium or cost 

sharing charge; 

(4) A list of hospitals charging cost sharing for non-emergency use of the emergency 

department; and 

(5) A list of preferred drugs or a mechanism to access such a list, including the agency 

website. 
CMS-2334-F 556 

(b) The agency must make the public schedule available to the following in a manner that 

ensures that affected applicants, beneficiaries, and providers are likely to have access to the 

notice: 

(1) Beneficiaries, at the time of their enrollment and reenrollment after a redetermination 

of eligibility, and when premiums, cost sharing charges, or aggregate limits are revised, notice to 

beneficiaries must be in accordance with §435.905(b) of this chapter; 

(2) Applicants, at the time of application; 

(3) All participating providers; and 

(4) The general public. 

(c) Prior to submitting to the Centers for Medicare & Medicaid Services for approval a 

state plan amendment (SPA) to establish or substantially modify existing premiums or cost 

sharing, or change the consequences for non-payment, the agency must provide the public with 

advance notice of the SPA, specifying the amount of premiums or cost sharing and who is 

subject to the charges. The agency must provide a reasonable opportunity to comment on such 

SPAs. The agency must submit documentation with the SPA to demonstrate that these 

requirements were met. If premiums or cost sharing is substantially modified during the SPA 

approval process, the agency must provide additional public notice. 

§§ 445.58 through 447.82 [Removed] 

47c. Remove §§ 445.58 through 447.82. 

PART 457--ALLOTMENTS AND GRANTS TO STATES 

48. The authority citation for part 457 continues to read as follows: 

Authority: Section 1102 of the Social Security Act (42 U.S.C. 1302). 

49. Section 457.10 is amended by adding the definitions of “Exchange appeals entity,” 

and “Premium Lock Out” to read as follows: 
CMS-2334-F 557 

§457.10 Definitions and use of terms. 

* * * * * 

Exchange appeals entity has the meaning given to the term “appeals entity,” as defined in 

45 CFR 155.500. 

* * * * * 

 Premium Lock-Out is defined as a State-specified period of time not to exceed 90 days 

that a CHIP eligible child who has an unpaid premium or enrollment fee (as applicable) will not 

be permitted to reenroll for coverage in CHIP. Premium lock-out periods are not applicable to 

children who have paid outstanding premiums or enrollment fees. 

* * * * * 

50. Section 457.110 is amended by adding paragraph (a)(1) and a reserved paragraph 

(a)(2) to read as follows: 

§457.110 Enrollment assistance and information requirements. 

(a) * * * 

 (1) The State may provide individuals with a choice to receive notices and information 

required under this subpart and Subpart K of this part, in electronic format or by regular mail, 

provided that the State establish safeguards in accordance with § 435.918 of this chapter. 

(2) [Reserved] 

* * * * * 

51. Section §457.340 is amended by revising paragraph (a) and adding paragraph (d)(3) 

to read as follows: 

§457.340 Application for and enrollment in CHIP. 
CMS-2334-F 558 

(a) Application and renewal assistance, availability of program information, and Internet 

Website. The terms of §435.905, §435.906, §435.907(h), §435.908, and §435.1200(f) of this 

chapter apply equally to the State in administering a separate CHIP. 

* * * * * 

(d) * * * 

(3) In the case of individuals subject to a period of uninsurance under this part, the state 

must identify and implement processes to facilitate enrollment of CHIP-eligible children who 

have satisfied a period of uninsurance (as described under §457.805). To minimize burden on 

individuals, a state may not require a new application or information already provided by a 

family immediately preceding the beginning of a waiting period. States must also ensure that the 

proper safeguards are in place to prevent a disruption in coverage for children transitioning from 

coverage under another insurance affordability program after the completion of a period of 

uninsurance. 

* * * * * 

52. Section 457.348 is amended by adding paragraph (c)(6) to read as follows: 

§457.348 Determinations of Children’s Health Insurance Program eligibility by other 

insurance affordability programs 

* * * * * 

(c)* * * 

(6) Notify such program of the final determination of the individual’s eligibility or 

ineligibility for CHIP. 

* * * * * 

53. Section 457.350 is amended by revising paragraphs paragraph (i) to read as follows: 

§457.350 Eligibility screening and enrollment in other insurance affordability programs.
CMS-2334-F 559 

* * * * * 

(i) Applicants found potentially eligible for other insurance affordability programs. For 

individuals identified in paragraph (b)(3) of this section, including during a period of 

uninsurance imposed by the state under §457.805 , the state must— 

(1) Promptly and without undue delay, consistent with the timeliness standards 

established under §457.340(d), transfer the electronic account to the applicable program via a 

secure electronic interfaces. 

(2) [Reserved.] 

(3) In the case of individuals subject to a period of uninsurance under this part, the state 

must notify such program of the date on which such period ends and the individual is eligible to 

enroll in CHIP. 

* * * * * 

54. Section 457.370 is added to read as follows: 

§457.370 Alignment with Exchange initial open enrollment period. 

The terms of §435.1205 apply equally to the State in administering a separate CHIP, 

except that the State shall make available and accept the application described in §457.330 , shall 

accept electronic accounts as described in §457.348, and furnish coverage in accordance with 

§457.340. 

§457.540 [Amended] 

55. In §457.540, amend paragraph (a) by removing the reference “§447.52” and by 

adding in its place the reference “§447.52, §447.53, or §447.54”. 

56. Section 457.570 is amended by revising paragraph (c) and adding paragraph (d) to 

read as follows:

§457.570 Disenrollment protections. 
CMS-2334-F 560 

* * * * * 

 (c) The State must ensure that disenrollment policies, such as policies related to nonpayment of premiums, do not present barriers to the timely determination of eligibility and 

enrollment in coverage of an eligible child in the appropriate insurance affordability program. A 

State may not--

(1) Establish a premium lock-out period that exceeds 90-days in accordance with 

§457.10 of this part. 

(2) Continue to impose a premium lock-out period after a child’s past due premiums have 

been paid. 

(3) Require the collection of past due premiums or enrollment fees as a condition of 

eligibility for reenrollment once the State-defined lock out period has expired, regardless of the 

length of the lock- out period. 

 (d) The State must provide the enrollee with an opportunity for an impartial review to 

address disenrollment from the program in accordance with §457.1130(a)(3).

57. Section 457.805 is revised to read as follows: 

§457.805 State plan requirement: Procedures to address substitution under group health 

plans. 

(a) State plan requirements. The state plan must include a description of reasonable 

procedures to ensure that health benefits coverage provided under the State plan does not 

substitute for coverage provided under group health plans as defined at §457.10. 

(b) Limitations. (1) A state may not, under this section, impose a period of uninsurance 

which exceeds 90 days from the date a child otherwise eligible for CHIP is disenrolled from 

coverage under a group health plan. 
CMS-2334-F 561 

(2) A waiting period may not be applied to a child following the loss of eligibility for and 

enrollment in Medicaid or another insurance affordability program. 

(3) If a state elects to impose a period of uninsurance following the loss of coverage 

under a group health plan under this section, such period may not be imposed in the case of any 

child if: 

(i) The premium paid by the family for coverage of the child under the group health plan 

exceeded 5 percent of household income; 

(ii) The child’s parent is determined eligible for advance payment of the premium tax 

credit for enrollment in a QHP through the Exchange because the ESI in which the family was 

enrolled is determined unaffordable in accordance with 26 CFR 1.36B–2(c)(3)(v). 

(iii) The cost of family coverage that includes the child exceeds 9.5 percent of the 

household income. 

(iv) The employer stopped offering coverage of dependents (or any coverage) under an 

employer-sponsored health insurance plan; 

(v) A change in employment, including involuntary separation, resulted in the child’s loss 

of employer-sponsored insurance (other than through full payment of the premium by the parent 

under COBRA); 

(vi) The child has special health care needs; and 

(vii) The child lost coverage due to the death or divorce of a parent. 

58. Section 457.810 is amended by revising paragraph (a) to read as follows: 

§457.810 Premium assistance programs: Required protections against substitution. 

* * * * * 

(a) Period without coverage under a group health plan. For health benefits coverage 

provided through premium assistance for group health plans, the following rules apply: 
CMS-2334-F 562 

(1) Any waiting period imposed under the state child health plan prior to the provision of 

child health assistance to a targeted low-income child under the state plan shall apply to the same 

extent to the provision of a premium assistance subsidy for the child and shall not exceed 90 

days. 

(2) States must permit the same exemptions to the required waiting period for premium 

assistance as specified under the state plan at §457.805(a)(2), and §457.805(a)(3) for the 

provision of child health assistance to a targeted low-income child. 

* * * * * 
CMS-2334-F 

Title 45 

For the reasons set forth in the preamble, the Department of Health and Human Services 

amends 45 CFR subtitle A, subchapter B, as set forth below: 

PART 155 --EXCHANGE ESTABLISHMENT STANDARDS AND OTHER 

RELATED STANDARDS UNDER THE AFFORDABLE CARE ACT 

59. The authority citation for part 155 is revised to read as follows: 

Authority: Sections 1301, 1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 

1331, 1332, 1334, 1402, 1413, 1321, 1322, 1331, 1332, 1334, 1402, 1411, 1412, 1413 of 

the Affordable Care Act, Pub. L 111-148, 124 Stat 199.

60. Section 155.20 is amended by revising the definitions of “Advance payments 

of the premium tax credit,” and adding a definition of “Catastrophic plan” to read as 

follows: 

§155.20 Definitions.

* * * * * 

Advance payments of the premium tax credit means payment of the tax credit 

authorized by 26 U.S.C. 36B and its implementing regulations, which are provided on an 

advance basis to an eligible individual enrolled in a QHP through an Exchange in 

accordance with section 1412 of the Affordable Care Act. 

* * * * * 

Catastrophic plan means a health plan described in section 1302(e) of the 

Affordable Care Act. 

* * * * * 
CMS-2334-F 

 61. Section 155.105 is amended by revising paragraph (b)(2) to read as follows: 

§155.105 Approval of a State Exchange. 

* * * * * 

(b) * * * 

(2) The Exchange is capable of carrying out the information reporting 

requirements of 26 CFR 1.36B-5; 

* * * * * 

62. Section 155.227 is added to read as follows: 

§155.227 Authorized representatives. 

 (a) General rule. (1) The Exchange must permit an applicant or enrollee in the 

individual or small group market, subject to applicable privacy and security 

requirements, to designate an individual person or organization to act on his or her behalf 

in applying for an eligibility determination or redetermination, under subpart D, G, or H 

of this part, and in carrying out other ongoing communications with the Exchange. 

(2) Designation of an authorized representative must be in a written document 

signed by the applicant or enrollee, or through another legally binding format subject to 

applicable authentication and data security standards. If submitted, legal documentation 

of authority to act on behalf of an applicant or enrollee under State law, such as a court 

order establishing legal guardianship or a power of attorney, shall serve in the place of 

the applicant’s or enrollee’s signature. 

(3) The Exchange must ensure that the authorized representative agrees to 

maintain, or be legally bound to maintain, the confidentiality of any information 
CMS-2334-F 

regarding the applicant or enrollee provided by the Exchange. 

(4) The Exchange must ensure that the authorized representative is responsible for 

fulfilling all responsibilities encompassed within the scope of the authorized 

representation, as described in this section, to the same extent as the applicant or enrollee 

he or she represents. 

(5) The Exchange must provide information both to the applicant or enrollee, and 

to the authorized representative, regarding the powers and duties of authorized 

representatives. 

(b) Timing of designation. The Exchange must permit an applicant or enrollee to 

designate an authorized representative: 

(1) At the time of application; and 

(2) At other times and through methods as described in §155.405(c)(2). 

(c) Duties. (1) The Exchange must permit an applicant or enrollee to authorize 

his or her representative to: 

(i) Sign an application on the applicant or enrollee’s behalf; 

(ii) Submit an update or respond to a redetermination for the applicant or enrollee 

in accordance with §155.330 or §155.335; 

(iii) Receive copies of the applicant’s or enrollee’s notices and other 

communications from the Exchange; and 

(iv) Act on behalf of the applicant or enrollee in all other matters with the 

Exchange. 

(2) The Exchange may permit an applicant or enrollee to authorize a 
CMS-2334-F 

representative to perform fewer than all of the activities described in paragraph (c)(1) of 

this section, provided that the Exchange tracks the specific permissions for each 

authorized representative. 

(d) Duration. The Exchange must consider the designation of an authorized 

representative valid until: 

(1) The applicant or enrollee notifies the Exchange that the representative is no 

longer authorized to act on his or her behalf using one of the methods available for the 

submission of an application, as described in §155.405(c). The Exchange must notify the 

authorized representative of such change; or 

(2) The authorized representative informs the Exchange and the applicant or 

enrollee that he or she no longer is acting in such capacity. An authorized representative 

must notify the Exchange and the applicant or enrollee on whose behalf he or she is 

acting when the authorized representative no longer has legal authority to act on behalf of 

the applicant or enrollee. 

(e) Compliance with State and Federal law. The Exchange must require an 

authorized representative to comply with applicable state and federal laws concerning 

conflicts of interest and confidentiality of information. 

 (f) Signature. For purposes of this section, designation of an authorized 

representative must be through a written document signed by the applicant or enrollee, 

or through another legally binding format, as described in §155.227(a)(2), and must be 

accepted through all of the modalities described in §155.405(c). 

63. Section 155.230 is amended by revising paragraph (a) and adding paragraph 
CMS-2334-F 

(d) to read as follows: 

§155.230 General standards for Exchange notices. 

(a) General requirement. Any notice required to be sent by the Exchange to 

individuals or employers must be written and include: 

(1) An explanation of the action reflected in the notice, including the effective 

date of the action. 

(2) Any factual findings relevant to the action. 

(3) Citations to, or identification of, the relevant regulations supporting the action. 

(4) Contact information for available customer service resources. 

(5) An explanation of appeal rights, if applicable. 

* * * * * 

(d) Electronic notices. (1) The individual market Exchange must provide required 

notices either through standard mail, or if an individual or employer elects, electronically, 

provided that the requirements for electronic notices in 42 CFR 435.918 are met, except 

that the individual market Exchange is not required to implement the process specified in 

42 CFR 435.918(b)(1) for eligibility determinations for enrollment in a QHP through the 

Exchange and insurance affordability programs that are effective before January 1, 2015. 

(2) The SHOP must provide required notices either through standard mail, or if an 

employer or employee elects, electronically, provided that the requirements for electronic 

notices in 42 CFR 435.918(b)(2) through (5) are met for the employer or employee. 

64. Section 155.300(a) is amended by removing the definition of “Adoption 

taxpayer identification number” and revising the definitions of “Minimum value,” 
CMS-2334-F 

“Modified Adjusted Gross Income (MAGI),” and “Qualifying coverage in an eligible 

employer-sponsored plan” to read as follows: 

§155.300 Definitions and general standards for eligibility determinations. 

(a) * * * 

Minimum value when used to describe coverage in an eligible employersponsored plan, means that the employer-sponsored plan meets the standards for 

coverage of the total allowed costs of benefits set forth in §156.145.

Modified Adjusted Gross Income (MAGI) has the same meaning as it does in 26 

CFR 1.36B-1(e)(2). 

* * * * * 

Qualifying coverage in an eligible employer-sponsored plan means coverage in an 

eligible employer-sponsored plan that meets the affordability and minimum value 

standards specified in 26 CFR 1.36B-2(c)(3). 

* * * * * 

65. Section 155.302 is amended by revising paragraphs (a), (b), and (d) to read as 

follows: 

§155.302 Options for conducting eligibility determinations. 

(a) Options for conducting eligibility determinations. The Exchange may satisfy 

the requirements of this subpart— 

(1) Directly or through contracting arrangements in accordance with §155.110(a), 

provided that any contracting arrangement for eligibility determinations for Medicaid and 

CHIP is subject to the standards in 42 CFR 431.10(c)(2); or 
CMS-2334-F 

(2) Through a combination of the approach described in paragraph (a)(1) of this 

section and one or both of the options described in paragraph (b) or (c) of this section, 

subject to the standards in paragraph (d) of this section. 

(b) Medicaid and CHIP. Notwithstanding the requirements of this subpart, the 

Exchange may conduct an assessment of eligibility for Medicaid and CHIP, rather than 

an eligibility determination for Medicaid and CHIP, provided that – 

(1) The Exchange makes such an assessment based on the applicable Medicaid 

and CHIP MAGI-based income standards and citizenship and immigration status, using 

verification rules and procedures consistent with 42 CFR parts 435 and 457, without 

regard to how such standards are implemented by the State Medicaid and CHIP agencies. 

(2) Notices and other activities required in connection with an eligibility 

determination for Medicaid or CHIP are performed by the Exchange consistent with the 

standards identified in this subpart or the State Medicaid or CHIP agency consistent with 

applicable law. 

(3) Applicants found potentially eligible for Medicaid or CHIP. When the 

Exchange assesses an applicant as potentially eligible for Medicaid or CHIP consistent 

with the standards in paragraph (b)(1) of this section, the Exchange transmits all 

information provided as a part of the application, update, or renewal that initiated the 

assessment, and any information obtained or verified by the Exchange to the State 

Medicaid agency or CHIP agency via secure electronic interface, promptly and without 

undue delay. 
CMS-2334-F 

(4) Applicants not found potentially eligible for Medicaid and CHIP. (i) If the 

Exchange conducts an assessment in accordance with paragraph (b) of this section and 

finds that an applicant is not potentially eligible for Medicaid or CHIP based on the 

applicable Medicaid and CHIP MAGI-based income standards, the Exchange must 

consider the applicant as ineligible for Medicaid and CHIP for purposes of determining 

eligibility for advance payments of the premium tax credit and cost-sharing reductions 

and must notify such applicant, and provide him or her with the opportunity to – 

(A) Withdraw his or her application for Medicaid and CHIP, unless the Exchange 

has assessed the applicant as potentially eligible for Medicaid based on factors not 

otherwise considered in this subpart, in accordance with §155.345(b), and provided that 

the application will not be considered withdrawn if he or she appeals his or her eligibility 

determination for advance payments of the premium tax credit or cost-sharing reductions 

and the appeals entity described in §155.500(a) finds that the individual is potentially 

eligible for Medicaid or CHIP; or 

(B) Request a full determination of eligibility for Medicaid and CHIP by the 

applicable State Medicaid and CHIP agencies. 

(ii) To the extent that an applicant described in paragraph (b)(4)(i) of this section 

requests a full determination of eligibility for Medicaid and CHIP, the Exchange must – 

(A) Transmit all information provided as a part of the application, update, or 

renewal that initiated the assessment, and any information obtained or verified by the 

Exchange to the State Medicaid agency and CHIP agency via secure electronic interface, 

promptly and without undue delay; and 
CMS-2334-F 

(B) Consider such an applicant as ineligible for Medicaid and CHIP for purposes 

of determining eligibility for advance payments of the premium tax credit and costsharing reductions until the State Medicaid or CHIP agency notifies the Exchange that 

the applicant is eligible for Medicaid or CHIP. 

(5) The Exchange and the Exchange appeals entity adheres to the eligibility 

determination or appeals decision for Medicaid or CHIP made by the State Medicaid or 

CHIP agency, or the appeals entity for such agency. 

(6) The Exchange and the State Medicaid and CHIP agencies enter into an 

agreement specifying their respective responsibilities in connection with eligibility 

determinations for Medicaid and CHIP, and provide a copy of such agreement to HHS 

upon request. 

* * * * * 

(d) Standards. To the extent that assessments of eligibility for Medicaid and 

CHIP based on MAGI or eligibility determinations for advance payments of the premium 

tax credit and cost-sharing reductions are made in accordance with paragraphs (b) or (c) 

of this section, the Exchange must ensure that – 

(1) Eligibility processes for all insurance affordability programs are streamlined 

and coordinated across HHS, the Exchange, the State Medicaid agency, and the State 

CHIP agency, as applicable; 

(2) Such arrangement does not increase administrative costs and burdens on 

applicants, enrollees, beneficiaries, or application filers, or increase delay; and 
CMS-2334-F 

(3) Applicable requirements under 45 CFR 155.260, 155.270, and 155.315(i), and 

section 6103 of the Code for the confidentiality, disclosure, maintenance, and use of 

information are met. 

 66. Section 155.305 is amended by— 

 A. Revising paragraphs (f)(1)(i), (f)(1)(ii)(B), (f)(2)(ii), (f)(2)(iii), (f)(3), and 

(f)(5). 

B. Adding paragraphs (a)(3)(v), and (h). 

The revisions and additions read as follows: 

§155.305 Eligibility standards. 

(a) * * * * 

(3) * * * * 

(v) Temporary absence. The Exchange may not deny or terminate an individual’s 

eligibility for enrollment in a QHP through the Exchange if the individual meets the 

standards in paragraph (a)(3) of this section but for a temporary absence from the service 

area of the Exchange and intends to return when the purpose of the absence has been 

accomplished. 

* * * * * 

 (f) * * * 

 (1) * * * 

(i) He or she is expected to have a household income, as defined in 26 CFR 

1.36B-1(e), of greater than or equal to 100 percent but not more than 400 percent of the 

FPL for the benefit year for which coverage is requested; and 
CMS-2334-F 

 (ii) * * * 

(B) Is not eligible for minimum essential coverage, with the exception of 

coverage in the individual market, in accordance with section 26 CFR 1.36B-2(a)(2) and 

(c). 

(2) * * * 

(ii) He or she is expected to have a household income, as defined in 26 CFR 

1.36B-1(e) of less than 100 percent of the FPL for the benefit year for which coverage is 

requested; and 

(iii) One or more applicants for whom the tax filer expects to claim a personal 

exemption deduction on his or her tax return for the benefit year, including the tax filer 

and his or her spouse, is a non-citizen who is lawfully present and ineligible for Medicaid 

by reason of immigration status, in accordance with 26 CFR 1.36B-2(b)(5). 

(3) Enrollment required. The Exchange may provide advance payments of the 

premium tax credit on behalf of a tax filer only if one or more applicants for whom the 

tax filer attests that he or she expects to claim a personal exemption deduction for the 

benefit year, including the tax filer and his or her spouse, is enrolled in a QHP that is not 

a catastrophic plan, through the Exchange. 

* * * * * 

(5) Calculation of advance payments of the premium tax credit. The Exchange 

must calculate advance payments of the premium tax credit in accordance with 26 CFR 

1.36B-3. 

* * * * * 
CMS-2334-F 

(h) Eligibility for enrollment through the Exchange in a QHP that is a catastrophic

plan. The Exchange must determine an applicant eligible for enrollment in a QHP 

through the Exchange in a QHP that is a catastrophic plan as defined by section 1302(e) 

of the Affordable Care Act, if he or she has met the requirements for eligibility for 

enrollment in a QHP through the Exchange, in accordance with §155.305(a), and either-- 

(1) Has not attained the age of 30 before the beginning of the plan year; or 

(2) Has a certification in effect for any plan year that he or she is exempt from the 

requirement to maintain minimum essential coverage under section 5000A of the Code 

by reason of -- 

(i) Section 5000A(e)(1) of the Code (relating to individuals without affordable 

coverage); or 

(ii) Section 5000A(e)(5) of the Code (relating to individuals with hardships). 

 67. Section 155.310 is amended by— 

A. Redesignating paragraph (i) as paragraph (j). 

B. Adding new paragraph (i). 

C. Revising newly redesignated paragraph (j). 

The addition and revision read as follows: 

§155.310 Eligibility process. 

* * * * * 

 (i) Certification program for employers. As part of its determination of whether 

an employer has a liability under section 4980H of the Code, the Internal Revenue 

Service will adopt methods to certify to an employer that one or more employees has 
CMS-2334-F 

enrolled for one or more months during a year in a QHP for which a premium tax credit 

or cost-sharing reduction is allowed or paid. 

(j) Duration of eligibility determinations without enrollment. To the extent that 

an applicant who is determined eligible for enrollment in a QHP through the Exchange 

does not select a QHP within his or her enrollment period, or is not eligible for an 

enrollment period, in accordance with subpart E, and seeks a new enrollment period prior 

to the date on which his or her eligibility is redetermined in accordance with §155.335, 

the Exchange must require the applicant to attest as to whether information affecting his 

or her eligibility has changed since his or her most recent eligibility determination before 

determining his or her eligibility for a special enrollment period, and must process any 

changes reported in accordance with the procedures specified in §155.330. 

 68. Section 155.315 is amended by revising paragraphs (b)(2), (f) introductory 

text, (f)(4) introductory text, and (f)(5) and by adding paragraphs (f)(6) and (j) to read as 

follows: 

§155.315 Verification process related to eligibility for enrollment in a QHP through 

the Exchange. 

* * * * * 

(b) * * * 

(2) To the extent that the Exchange is unable to validate an individual’s Social 

Security number through the Social Security Administration, or the Social Security 

Administration indicates that the individual is deceased, the Exchange must follow the 

procedures specified in paragraph (f) of this section, except that the Exchange must 
CMS-2334-F 

provide the individual with a period of 90 days from the date on which the notice 

described in paragraph (f)(2)(i) of this section is received for the applicant to provide 

satisfactory documentary evidence or resolve the inconsistency with the Social Security 

Administration. The date on which the notice is received means 5 days after the date on 

the notice, unless the individual demonstrates that he or she did not receive the notice 

within the 5 day period. 

* * * * * 

(f) Inconsistencies. Except as otherwise specified in this subpart, for an applicant 

for whom the Exchange cannot verify information required to determine eligibility for 

enrollment in a QHP through the Exchange, advance payments of the premium tax credit, 

and cost-sharing reductions, including when electronic data is required in accordance 

with this subpart but data for individuals relevant to the eligibility determination are not 

included in such data sources or when electronic data from IRS, DHS, or SSA is required 

but it is not reasonably expected that data sources will be available within 1 day of the 

initial request to the data source, the Exchange: 

* * * * * 

(4) During the periods described in paragraphs (f)(1) and (f)(2)(ii) of this section, 

must: 

* * * * * 

(5) If, after the period described in paragraph (f)(2)(ii) of this section, the 

Exchange remains unable to verify the attestation, the Exchange must determine the 

applicant’s eligibility based on the information available from the data sources specified 
CMS-2334-F 

in this subpart, unless such applicant qualifies for the exception provided under 

paragraph (g) of this section, and notify the applicant of such determination in 

accordance with the notice requirements specified in §155.310(g), including notice that 

the Exchange is unable to verify the attestation. 

(6) When electronic data to support the verifications specified in §155.315(d) or 

§155.320(b) is required but it is not reasonably expected that data sources will be 

available within 1 day of the initial request to the data source, the Exchange must accept 

the applicant’s attestation regarding the factor of eligibility for which the unavailable 

data source is relevant. 

* * * * *

(j) Verification related to eligibility for enrollment through the Exchange in a 

QHP that is a catastrophic plan. The Exchange must verify an applicant’s attestation that 

he or she meets the requirements of §155.305(h) by – 

(1) Verifying the applicant’s attestation of age as follows – 

(i) Except as provided in paragraph (j)(1)(iii) of this section, accepting his or her 

attestation without further verification; or 

(ii) Examining electronic data sources that are available to the Exchange and 

which have been approved by HHS for this purpose, based on evidence showing that 

such data sources are sufficiently current and accurate, and minimize administrative costs 

and burdens. 

(iii) If information regarding age is not reasonably compatible with other 

information provided by the individual or in the records of the Exchange, the Exchange 
CMS-2334-F 

must examine information in data sources that are available to the Exchange and which 

have been approved by HHS for this purpose based on evidence showing that such data 

sources are sufficiently current and accurate. 

(2) Verifying that an applicant has a certification of exemption in effect as 

described in §155.305(h)(2). 

(3) To the extent that the Exchange is unable to verify the information required to 

determine eligibility for enrollment through the Exchange in a QHP that is a catastrophic 

plan as described in paragraphs (j)(1) and (2) of this section, the Exchange must follow 

the procedures specified in §155.315(f), except for §155.315(f)(4). 

 69. Section 155.320 is amended by— 

A. Revising paragraphs (c)(1)(i) heading, (c)(1)(i)(A), (c)(1)(ii), (c)(3)(i)(D), 

(c)(3)(ii)(A), (c)(3)(iii)(A) and (B), (c)(3)(vi), (c)(3)(vii), (c)(3)(viii), and (d). 

B. Adding paragraphs (c)(3)(i)(E) and (c)(3)(iii)(C). 

C. Removing paragraph (e). 

D. Redesignating paragraph (f) as paragraph (e). 

The revisions and additions read as follows: 

§155.320 Verification process related to eligibility for insurance affordability 

programs. 

* * * * * 

(c) * * * 

(1) * * * 

(i) Data regarding annual household income. (A) For all individuals whose 
CMS-2334-F 

income is counted in calculating a tax filer’s household income, as defined in 26 CFR 

1.36B-1(e), or an applicant’s household income, calculated in accordance with 42 CFR 

435.603(d), and for whom the Exchange has a Social Security number, the Exchange 

must request tax return data regarding MAGI and family size from the Secretary of the 

Treasury and data regarding Social security benefits described in 26 CFR 1.36B1(e)(2)(iii) from the Commissioner of Social Security by transmitting identifying 

information specified by HHS to HHS. 

* * * * * 

(ii) Data regarding MAGI-based income. For all individuals whose income is 

counted in calculating a tax filer’s household income, as defined in 26 CFR 1.36B-1(e), 

or an applicant’s household income, calculated in accordance with 42 CFR 435.603(d), 

the Exchange must request data regarding MAGI-based income in accordance with 42 

CFR 435.948(a). 

* * * * * 

(3) * * * 

(i) * * * 

(D) If the Exchange finds that an applicant’s attestation of a tax filer’s family size 

is not reasonably compatible with other information provided by the application filer for 

the family or in the records of the Exchange, with the exception of the data described in 

paragraph (c)(1)(i) of this section, the Exchange must utilize data obtained through other 

electronic data sources to verify the attestation. If such data sources are unavailable or 

information in such data sources is not reasonably compatible with the applicant’s 
CMS-2334-F 

attestation, the Exchange must request additional documentation to support the attestation 

within the procedures specified in §155.315(f). 

(E) The Exchange must verify that neither advance payments of the premium tax 

credit nor cost-sharing reductions are being provided on behalf of an individual using 

information obtained by transmitting identifying information specified by HHS to HHS. 

* * * * * 

(ii) * * * * *

 (A) The Exchange must compute annual household income for the family 

described in paragraph (c)(3)(i)(A) of this section based on the data described in 

paragraph (c)(1)(i) of this section; 

* * * * * 

(iii) * * * 

(A) Except as specified in paragraph (c)(3)(iii)(B) and (C) of this section, if an 

applicant’s attestation, in accordance with paragraph (c)(3)(ii)(B) of this section, 

indicates that a tax filer’s annual household income has increased or is reasonably 

expected to increase from the data described in paragraph (c)(3)(ii)(A) of this section for 

the benefit year for which the applicant(s) in the tax filer’s family are requesting 

coverage and the Exchange has not verified the applicant’s MAGI-based income through 

the process specified in paragraph (c)(2)(ii) of this section to be within the applicable 

Medicaid or CHIP MAGI-based income standard, the Exchange must accept the 

applicant’s attestation regarding a tax filer’s annual household income without further 

verification. 
CMS-2334-F 

 (B) If data available to the Exchange in accordance with paragraph (c)(1)(ii) of 

this section indicate that a tax filer’s projected annual household income is in excess of 

his or her attestation by a significant amount, the Exchange must proceed in accordance 

with §155.315(f)(1) through (4). 

(C) If other information provided by the application filer indicates that a tax 

filer’s projected annual household income is in excess of his or her attestation by a 

significant amount, the Exchange must utilize data available to the Exchange in 

accordance with paragraph (c)(1)(ii) of this section to verify the attestation. If such data 

is unavailable or are not reasonably compatible with the applicant’s attestation, the 

Exchange must proceed in accordance with §155.315(f)(1) through (4). 

* * * * * 

(vi) Alternate verification process for decreases in annual household income and

situations in which tax return data is unavailable. If a tax filer qualifies for an alternate 

verification process based on the requirements specified in paragraph (c)(3)(iv) of this 

section and the applicant’s attestation to projected annual household income, as described 

in paragraph (c)(3)(ii)(B) of this section, is greater than ten percent below the annual 

household income computed in accordance with paragraph (c)(3)(ii)(A) of this section, or 

if data described in paragraph (c)(1)(i) of this section is unavailable, the Exchange must 

attempt to verify the applicant’s attestation of the tax filer’s projected annual household 

income by following the procedures specified in paragraph (c)(3)(vi)(A) through (G) of 

this section. 

 (A) Data. The Exchange must annualize data from the MAGI-based income 
CMS-2334-F 

sources specified in paragraph (c)(1)(ii) of this section, and obtain any data available 

from other electronic data sources that have been approved by HHS, based on evidence 

showing that such data sources are sufficiently accurate and offer less administrative 

complexity than paper verification. 

(B) Eligibility. To the extent that the applicant’s attestation indicates that the 

information described in paragraph (c)(3)(vi)(A) of this section represents an accurate 

projection of the tax filer’s household income for the benefit year for which coverage is 

requested, the Exchange must determine the tax filer’s eligibility for advance payments 

of the premium tax credit and cost- sharing reductions based on the household income 

data in paragraph (c)(3)(vi)(A) of this section. 

(C) Increases in annual household income. If an applicant’s attestation, in 

accordance with paragraph (c)(3)(ii)(B) of this section, indicates that a tax filer’s annual 

household income has increased or is reasonably expected to increase from the data 

described in paragraph (c)(3)(vi)(A) of this section to the benefit year for which the 

applicant(s) in the tax filer’s family are requesting coverage and the Exchange has not 

verified the applicant’s MAGI-based income through the process specified in paragraph 

(c)(2)(ii) of this section to be within the applicable Medicaid or CHIP MAGI-based 

income standard, the Exchange must accept the applicant’s attestation for the tax filer’s 

family without further verification, unless the Exchange finds that an applicant’s 

attestation of a tax filer’s annual household income is not reasonably compatible with 

other information provided by the application filer or available to the Exchange in 

accordance with paragraph (c)(1)(ii) of this section, in which case the Exchange must 
CMS-2334-F 

request additional documentation using the procedures specified in §155.315(f). 

(D) Decreases in annual household income and situations in which electronic data 

is unavailable. If electronic data are unavailable or an applicant’s attestation to projected 

annual household income, as described in paragraph (c)(3)(ii)(B) of this section, is more 

than ten percent below the annual household income as computed using data sources 

described in paragraphs (c)(3)(vi)(A) of this section, the Exchange must follow the 

procedures specified in §155.315(f)(1) through (4). 

(E) If, following the 90-day period described in paragraph (c)(3)(vi)(D) of this 

section, an applicant has not responded to a request for additional information from the 

Exchange and the data sources specified in paragraph (c)(1) of this section indicate that 

an applicant in the tax filer’s family is eligible for Medicaid or CHIP, the Exchange must 

not provide the applicant with eligibility for advance payments of the premium tax credit, 

cost-sharing reductions, Medicaid, CHIP or the BHP, if a BHP is operating in the service 

area of the Exchange. 

(F) If, at the conclusion of the period specified in paragraph (c)(3)(vi)(D) of this 

section, the Exchange remains unable to verify the applicant’s attestation, the Exchange 

must determine the applicant’s eligibility based on the information described in 

paragraph (c)(3)(ii)(A) of this section, notify the applicant of such determination in 

accordance with the notice requirements specified in §155.310(g), and implement such 

determination in accordance with the effective dates specified in §155.330(f). 

(G) If, at the conclusion of the period specified in paragraph (c)(3)(vi)(D) of this 

section, the Exchange remains unable to verify the applicant’s attestation for the tax filer 
CMS-2334-F 

and the information described in paragraph (c)(3)(ii)(A) of this section is unavailable, the 

Exchange must determine the tax filer ineligible for advance payments of the premium 

tax credit and cost-sharing reductions, notify the applicant of such determination in 

accordance with the notice requirement specified in §155.310(g), and discontinue any 

advance payments of the premium tax credit and cost-sharing reductions in accordance 

with the effective dates specified in §155.330(f).

(vii) For the purposes of paragraph (c)(3) of this section, “household income” 

means household income as specified in 26 CFR 1.36B-1(e). 

(viii) For the purposes of paragraph (c)(3) of this section, “family size” means 

family size as specified in 26 CFR 1.36B-1(d). 

* * * * 

(d) Verification related to enrollment in an eligible employer-sponsored plan and 

eligibility for qualifying coverage in an eligible employer-sponsored plan. (1) General 

requirement. The Exchange must verify whether an applicant reasonably expects to be 

enrolled in an eligible employer-sponsored plan or is eligible for qualifying coverage in 

an eligible employer-sponsored plan for the benefit year for which coverage is requested. 

(2) Data. The Exchange must – 

(i) Obtain data about enrollment in and eligibility for an eligible employersponsored plan from any electronic data sources that are available to the Exchange and 

which have been approved by HHS, based on evidence showing that such data sources 

are sufficiently current, accurate, and minimize administrative burden. 

(ii) Obtain any available data regarding enrollment in employer-sponsored 
CMS-2334-F 

coverage or eligibility for qualifying coverage in an eligible employer-sponsored plan 

based on federal employment by transmitting identifying information specified by HHS 

to HHS for HHS to provide the necessary verification using data obtained by HHS. 

(iii) Obtain any available data from the SHOP that corresponds to the State in 

which the Exchange is operating. 

(3) Verification procedures. (i) Except as specified in paragraphs (d)(3)(ii) or (iii) 

of this section, the Exchange must accept an applicant’s attestation regarding the 

verification specified in paragraph (d) of this section without further verification. 

(ii) If an applicant’s attestation is not reasonably compatible with the information 

obtained by the Exchange as specified in paragraphs (d)(2)(i) through (iii) of this section, 

other information provided by the application filer, or other information in the records of 

the Exchange, the Exchange must follow the procedures specified in §155.315(f). 

(iii) Except as specified in paragraph (d)(3)(iv) of this section, if the Exchange 

does not have any of the information specified in paragraphs (d)(2)(i) through (iii) of this 

section for an applicant, the Exchange must select a statistically significant random 

sample of such applicants and – 

(A) Provide notice to the applicant indicating that the Exchange will be contacting 

any employer identified on the application for the applicant and the members of his or her 

household, as defined in 26 CFR 1.36B-1(d), to verify whether the applicant is enrolled 

in an eligible employer-sponsored plan or is eligible for qualifying coverage in an 

eligible employer-sponsored plan for the benefit year for which coverage is requested; 

(B) Proceed with all other elements of the eligibility determination using the 
CMS-2334-F 

applicant’s attestation, and provide eligibility for enrollment in a QHP to the extent that 

an applicant is otherwise qualified; 

(C) Ensure that advance payments of the premium tax credit and cost-sharing 

reductions are provided on behalf of an applicant who is otherwise qualified for such 

payments and reductions, as described in §155.305, if the tax filer attests to the Exchange 

that he or she understands that any advance payments of the premium tax credit paid on 

his or her behalf are subject to reconciliation; 

(D) Make reasonable attempts to contact any employer identified on the 

application for the applicant and the members of his or her household, as defined in 26 

CFR 1.36B-1(d), to verify whether the applicant is enrolled in an eligible employersponsored plan or is eligible for qualifying coverage in an eligible employer-sponsored 

plan for the benefit year for which coverage is requested; 

(E) If the Exchange receives any information from an employer relevant to the 

applicant’s enrollment in an eligible employer-sponsored plan or eligibility for qualifying 

coverage in an eligible employer-sponsored plan, the Exchange must determine the 

applicant’s eligibility based on such information and in accordance with the effective 

dates specified in §155.330(f), and if such information changes his or her eligibility 

determination, notify the applicant and his or her employer or employers of such 

determination in accordance with the notice requirements specified in §155.310(g) and 

(h); 

(F) If, after a period of 90 days from the date on which the notice described in 

paragraph (d)(3)(iii)(A) of this section is sent to the applicant, the Exchange is unable to 
CMS-2334-F 

obtain the necessary information from an employer, the Exchange must determine the 

applicant’s eligibility based on his or her attestation(s) regarding coverage provided by 

that employer. 

 (G) To carry out the process described in paragraph (d)(3)(iii) of this section, the 

Exchange must only disclose an individual’s information to an employer to the extent 

necessary for the employer to identify the employee. 

 (iv) For eligibility determinations for advance payments of the premium tax credit 

and cost-sharing reductions that are effective before January 1, 2015, if the Exchange 

does not have any of the information specified in paragraphs (d)(2)(i) through (iii) of this 

section for an applicant, the Exchange may accept an applicant’s attestation regarding 

enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage 

in an eligible employer-sponsored plan for the benefit year for which coverage is 

requested without further verification, instead of following the procedure in paragraph 

(d)(3)(iii) of this section. 

(4) Option to rely on verification performed by HHS. For eligibility 

determinations for advance payments of the premium tax credit and cost-sharing 

reductions that are effective on or after January 1, 2015, the Exchange may satisfy the 

provisions of paragraph (d) of this section by relying on a verification process performed 

by HHS, provided that – 

 (i) The Exchange sends the notices described in §155.310(g) and (h); 

(ii) Other activities required in connection with the verifications described in this 

paragraph are performed by the Exchange in accordance with the standards identified in 
CMS-2334-F 

this subpart or in accordance with guidance issued by the Secretary; and 

(iii) The Exchange provides all relevant application information to HHS through a 

secure, electronic interface, promptly and without undue delay. 

 * * * * *

70. Section 155.330 is amended by revising paragraphs (d)(1)(ii), (e)(2), and (f), 

and by removing paragraph (e)(3). 

The revisions read as follows: 

§155.330 Eligibility redetermination during a benefit year.

 * * * * * 

 (d) * * * 

 (1) * * * 

(ii) For an enrollee on whose behalf advance payments of the premium tax credit 

or cost-sharing reductions are being provided, eligibility determinations for Medicare, 

Medicaid, CHIP, or the BHP, if a BHP is operating in the service area of the Exchange. 

* * * * * 

 (e) * * * 

(2) Data matching. (i) If the Exchange identifies updated information regarding 

death, in accordance with paragraph (d)(1)(i) of this section, or regarding any factor of 

eligibility not regarding income, family size, or family composition, the Exchange must – 

(A) Notify the enrollee regarding the updated information, as well as the 

enrollee’s projected eligibility determination after considering such information. 
CMS-2334-F 

(B) Allow an enrollee 30 days from the date of the notice to notify the Exchange 

that such information is inaccurate. 

(C) If the enrollee responds contesting the updated information, proceed in 

accordance with §155.315(f) of this part. 

(D) If the enrollee does not respond within the 30-day period specified in 

paragraph (e)(2)(i)(B), proceed in accordance with paragraphs (e)(1)(i) and (ii) of this 

section. 

(ii) If the Exchange identifies updated information regarding income, family size, 

or family composition, with the exception of information regarding death, the Exchange 

must -- 

 (A) Follow procedures described in paragraph (e)(2)(i)(A) and (B) of this section; 

and 

 (B) If the enrollee responds confirming the updated information, proceed in 

accordance with paragraphs (e)(1)(i) and (ii) of this section. 

 (C) If the enrollee does not respond within the 30-day period specified in 

paragraph (e)(2)(i)(B) of this section, maintain the enrollee’s existing eligibility 

determination without considering the updated information. 

(D) If the enrollee provides more up-to-date information, proceed in accordance 

with paragraph (c)(1) of this section. 

* * * * * 

(f) Effective dates. (1) Except as specified in paragraphs (f)(2) through (f)(5) of 

this section, the Exchange must implement changes— 
CMS-2334-F 

(i) Resulting from a redetermination under this section on the first day of the 

month following the date of the notice described in paragraph (e)(1)(ii) of this section; or 

(ii) Resulting from an appeal decision, on the date specified in the appeal 

decision; or 

(iii) Affecting enrollment or premiums only, on the first day of the month 

following the date on which the Exchange is notified of the change; 

(2) Except as specified in paragraphs (f)(3) through (5) of this section, the 

Exchange may determine a reasonable point in a month after which a change described in 

paragraph (f)(1) of this section will not be effective until the first day of the month after 

the month specified in paragraph (f)(1) of this section. Such reasonable point in a month 

must be no earlier than the 15th of the month. 

(3) Except as specified in paragraphs (f)(4) and (5) of this section, the Exchange 

must implement a change described in paragraph (f)(1) of this section that results in a 

decreased amount of advance payments of the premium tax credit, or a change in the 

level of cost-sharing reductions, and for which the date of the notices described in 

paragraphs (f)(1)(i) and (ii) of this section, or the date on which the Exchange is notified 

in accordance with paragraph (f)(1)(iii) of this section is after the 15th of the month, on 

the first day of the month after the month specified in paragraph (f)(1) of this section. 

(4) The Exchange must implement a change associated with the events described 

in §155.420(b)(2)(i) and (ii) on the coverage effective dates described in 

§155.420(b)(2)(i) and (ii), respectively.
CMS-2334-F 

(5) Notwithstanding paragraphs (f)(1) through (f)(4) of this section, the Exchange 

may provide the effective date of a change associated with the events described in 

§155.420(d)(4), (d)(5), and (d)(9) based on the specific circumstances of each situation. 

71. Section 155.335 is amended by revising paragraphs (a), (b), (c), (e), (f), (g), 

(h), (k)(1), and (l) , and adding paragraph (m) to read as follows: 

§155.335 Annual eligibility redetermination. 

 (a) General requirement. Except as specified in paragraphs (l) and (m) of this 

section, the Exchange must redetermine the eligibility of a qualified individual on an 

annual basis. 

 (b) Updated income and family size information. In the case of a qualified 

individual who requested an eligibility determination for insurance affordability 

programs in accordance with §155.310(b) of this part, the Exchange must request 

updated tax return information, if the qualified individual has authorized the request of 

such tax return information, data regarding Social Security benefits, and data regarding 

MAGI-based income as described in §155.320(c)(1) of this part for use in the qualified 

individual’s eligibility redetermination. 

 (c) Notice to qualified individual. The Exchange must provide a qualified 

individual with an annual redetermination notice including the following: 

 (1) [Reserved] 

 (2) [Reserved] 

 (3) The qualified individual’s projected eligibility determination for the following 

year, after considering any updated information described in paragraph (b) of this section, 
CMS-2334-F 

including, if applicable, the amount of any advance payments of the premium tax credit 

and the level of any cost-sharing reductions or eligibility for Medicaid, CHIP or BHP. 

* * * * * 

 (e) Changes reported by qualified individuals. (1) The Exchange must require a 

qualified individual to report any changes for the information listed in the notice 

described in paragraph (c) of this section within 30 days from the date of the notice. 

 (2) The Exchange must allow a qualified individual, or an application filer, on 

behalf of the qualified individual, to report changes via the channels available for the 

submission of an application, as described in §155.405(c)(2) . 

 (f) Verification of reported changes. The Exchange must verify any information 

reported by a qualified individual under paragraph (e) of this section using the processes 

specified in §155.315 and §155.320, including the relevant provisions in those sections 

regarding inconsistencies, prior to using such information to determine eligibility. 

 (g) Response to redetermination notice. (1) The Exchange must require a 

qualified individual, or an application filer, on behalf of the qualified individual, to sign 

and return the notice described in paragraph (c) of this section. 

 (2) To the extent that a qualified individual does not sign and return the notice 

described in paragraph (c) of this section within the 30-day period specified in paragraph 

(e) of this section, the Exchange must proceed in accordance with the procedures 

specified in paragraph (h)(1) of this section. 

 (h) Redetermination and notification of eligibility. (1) After the 30-day period 

specified in paragraph (e) of this section has elapsed, the Exchange must— 
CMS-2334-F 

 (i) Redetermine the qualified individual’s eligibility in accordance with the 

standards specified in §155.305 using the information provided to the qualified individual 

in the notice specified in paragraph (c) of this section, as supplemented with any 

information reported by the qualified individual and verified by the Exchange in 

accordance with paragraphs (e) and (f) of this section. 

 (ii) Notify the qualified individual in accordance with the requirements specified 

in §155.310(g). 

 (iii) If applicable, notify the qualified individual employer, in accordance with the 

requirements specified in §155.310(h). 

 (2) If a qualified individual reports a change for the information provided in the 

notice specified in paragraph (c) of this section that the Exchange has not verified as of 

the end of the 30-day period specified in paragraph (e) of this section, the Exchange must 

redetermine the qualified individual’s eligibility after completing verification, as 

specified in paragraph (f) of this section. 

* * * * * 

 (k) * * * 

(1) The Exchange must have authorization from a qualified individual to obtain 

updated tax return information described in paragraph (b) of this section for purposes of 

conducting an annual redetermination. 

* * * * * 

 (l) Limitation on redetermination. To the extent that a qualified individual has 

requested an eligibility determination for insurance affordability programs in accordance 
CMS-2334-F 

with §155.310(b) and the Exchange does not have an active authorization to obtain tax 

data as a part of the annual redetermination process, the Exchange must redetermine the 

qualified individual’s eligibility only for enrollment in a QHP and notify the enrollee in 

accordance with the timing described in paragraph (d) of this section. The Exchange may 

not proceed with a redetermination for insurance affordability programs until such 

authorization has been obtained or the qualified individual continues his or her request 

for an eligibility determination for insurance affordability programs in accordance with 

§155.310(b). 

(m) Special rule. The Exchange must not redetermine a qualified individual's 

eligibility in accordance with this section if the qualified individual's eligibility was 

redetermined under this section during the prior year, and the qualified individual was not 

enrolled in a QHP through the Exchange at the time of such redetermination, and has not 

enrolled in a QHP through the Exchange since such redetermination. 

 72. Section 155.340 is amended by revising paragraphs (b) heading, (b)(1), and 

(c) to read as follows: 

§155.340 Administration of advance payments of the premium tax credit and costsharing reductions. 

* * * * * 

(b) Requirement to provide information related to employer responsibility. (1) In 

the event that the Exchange determines that an individual is eligible for advance 

payments of the premium tax credit or cost-sharing reductions based in part on a finding 

that an individual’s employer does not provide minimum essential coverage, or provides 
CMS-2334-F 

minimum essential coverage that is unaffordable, within the standard of 26 CFR 1.36B2(c)(3)(v), or provide minimum essential coverage that does not meet the minimum value 

standard of §156.145, the Exchange must transmit the individual’s name and taxpayer 

identification number to HHS. 

* * * * * 

 (c) Requirement to provide information related to reconciliation of advance 

payments of the premium tax credit. The Exchange must comply with the requirements 

of 26 CFR 1.36B-5 regarding reporting to the IRS and to taxpayers. 

 * * * * * 

 73. Section 155.345 is amended by— 

A. Revising paragraphs (a) introductory text and (a)(2). 

B. Redesignating paragraph (a)(3) as paragraph (a)(4). 

C. Adding reserved paragraph (a)(3). 

D. Revising paragraphs (f) introductory text, (g) introductory text, and (g)(2) 

through (5). 

E. Adding paragraph (g)(6). 

 F. Redesignating paragraphs (h) and (i) as paragraphs (i) and (j). 

G. Adding new paragraph (h). 

The revisions and addition read as follows: 

§155.345 Coordination with Medicaid, CHIP, the Basic Health Program, and the 

Pre-existing Condition Insurance Plan. 
CMS-2334-F 

(a) Agreements. The Exchange must enter into agreements with agencies 

administering Medicaid, CHIP, and the BHP, if a BHP is operating in the service area of 

the Exchange, as are necessary to fulfill the requirements of this subpart and provide 

copies of any such agreements to HHS upon request. Such agreements must include a 

clear delineation of the responsibilities of each agency to – 

* * * * * 

(2) Ensure prompt determinations of eligibility and enrollment in the appropriate 

program without undue delay, based on the date the application is submitted to or 

redetermination is initiated by the Exchange or the agency administering Medicaid, 

CHIP, or the BHP; 

(3) [Reserved] 

 (4) Ensure compliance with paragraphs (c), (d), (e), and (g) of this section. 

* * * * *

(f) Special rule. If the Exchange verifies that a tax filer’s household income, as 

defined in 26 CFR 1.36B-1(e), is less than 100 percent of the FPL for the benefit year for 

which coverage is requested, determines that the tax filer is not eligible for advance 

payments of the premium tax credit based on §155.305(f)(2), and one or more applicants 

in the tax filer’s household has been determined ineligible for Medicaid and CHIP based 

on income, the Exchange must – 

* * * * * 

(g) Determination of eligibility for individuals submitting applications directly to 

an agency administering Medicaid, CHIP, or the BHP. The Exchange, in consultation 
CMS-2334-F 

with the agency or agencies administering Medicaid, CHIP, and the BHP if a BHP is 

operating in the service area of the Exchange, must establish procedures to ensure that an 

eligibility determination for enrollment in a QHP, advance payments of the premium tax 

credit, and cost-sharing reductions is performed when an application is submitted directly 

to an agency administering Medicaid, CHIP, or the BHP if a BHP is operating in the 

service area of the Exchange. Under such procedures, the Exchange must— 

* * * * * 

(2) Notify such agency of the receipt of the information described in paragraph 

(g)(1) of this section and final eligibility determination for enrollment in a QHP, advance 

payments of the premium tax credit, and cost-sharing reductions. 

(3) Not duplicate any eligibility and verification findings already made by the 

transmitting agency, to the extent such findings are made in accordance with this part. 

(4) Not request information or documentation from the individual already 

provided to another agency administering an insurance affordability program and 

included in the transmission of information provided on the application or other 

information transmitted from the other agency. 

(5) Determine the individual’s eligibility for enrollment in a QHP, advance 

payments of the premium tax credit, and cost-sharing reductions, promptly and without 

undue delay, and in accordance with this subpart. 

(6) Follow a streamlined process for eligibility determinations regardless of the 

agency that initially received an application. 
CMS-2334-F 

 (h) Adherence to state decision regarding Medicaid and CHIP. The Exchange 

and the Exchange appeals entity must adhere to the eligibility determination or appeals 

decision for Medicaid or CHIP made by the State Medicaid or CHIP agency, or the 

appeals entity for such agency. 

* * * * * 

74. Section 155.350 is amended by revising paragraph (a)(1)(ii) to read as 

follows: 

§155.350 Special eligibility standards and process for Indians.

 (a) * * * 

(1) * * * 

 (ii) Is expected to have a household income, as defined in 26 CFR 1.36B-1(e) that 

does not exceed 300 percent of the FPL for the benefit year for which coverage is 

requested. 

* * * * * 

75. Section 155.400 is amended by adding paragraph (b)(3) to read as follows: 

§155.400 Enrollment of qualified individuals into QHPs. 

* * * * * 

(b) * * * 

(3) Send updated eligibility and enrollment information to HHS promptly and 

without undue delay, in a manner and timeframe as specified by HHS. 

* * * * * 

76. Section 155.420 is amended by revising paragraphs (a), (b)(2), (b)(3), adding 
CMS-2334-F 

paragraph (b)(4), and revising paragraph (d) to read as follows: 

§155.420 Special enrollment periods. 

 (a) General requirements. (1) The Exchange must provide special enrollment 

periods consistent with this section, during which qualified individuals may enroll in 

QHPs and enrollees may change QHPs. 

 (2) For the purpose of this section, “dependent”, has the same meaning as it does 

in 26 CFR 54.9801-2, referring to any individual who is or who may become eligible for 

coverage under the terms of a QHP because of a relationship to a qualified individual or 

enrollee. 

 (b) * * * 

(2) Special effective dates. (i) In the case of birth, adoption, placement for 

adoption, or placement in foster care, the Exchange must ensure that coverage is effective 

for a qualified individual or enrollee on the date of birth, adoption, placement for 

adoption, or placement in foster care. 

(ii) In the case of marriage, or in the case where a qualified individual loses 

minimum essential coverage, as described in paragraph (d)(1) of this section, the 

Exchange must ensure that coverage is effective for a qualified individual or enrollee on 

the first day of the following month. 

 (iii) In the case of a qualified individual or enrollee eligible for a special 

enrollment period as described in paragraphs (d)(4), (d)(5), or (d)(9) of this section, the 

Exchange must ensure that coverage is effective on an appropriate date based on the 

circumstances of the special enrollment period, in accordance with guidelines issued by 
CMS-2334-F 

HHS. Such date much be either— 

 (A) The date of the event that triggered the special enrollment period under (d)(4), 

(d)(5), or (d)(9) of this section; or 

 (B) In accordance with the regular effective dates specified in paragraph (b)(1) of 

this section. 

(3) Option for earlier effective dates. Subject to the Exchange demonstrating to 

HHS that all of its participating QHP issuers agree to effectuate coverage in a timeframe 

shorter than discussed in paragraph (b)(1) or (b)(2)(ii) of this section, the Exchange may 

do one or both of the following for all applicable individuals: 

 (i) For a QHP selection received by the Exchange from a qualified individual in 

accordance with the dates specified in paragraph (b)(1) or (b)(2)(ii) of this section, the 

Exchange may provide a coverage effective date for a qualified individual earlier than 

specified in such paragraphs. 

 (ii) For a QHP selection received by the Exchange from a qualified individual on 

a date set by the Exchange after the fifteenth of the month, the Exchange may provide a 

coverage effective date of the first of the following month. 

 (4) Advance payments of the premium tax credit and cost-sharing reductions. 

Notwithstanding the standards of this section, the Exchange must ensure that advance 

payments of the premium tax credit and cost-sharing reductions adhere to the effective 

dates specified in §155.330(f). 

 * * * * * 

(d) The Exchange must allow a qualified individual or enrollee, and, when 
CMS-2334-F 

specified below, his or her dependent, to enroll in or change from one QHP to another if 

one of the following triggering events occur: 

 (1) The qualified individual or his or her dependent loses minimum essential 

coverage: 

 (i) In the case of a QHP decertification, the triggering event is the date of the 

notice of decertification as described in §155.1080(e)(2); or 

 (ii) In all other cases, the triggering event is the date the individual or dependent 

loses eligibility for minimum essential coverage; 

 (2) The qualified individual gains a dependent or becomes a dependent through 

marriage, birth, adoption, placement for adoption, or placement in foster care. 

(3) The qualified individual, or his or her dependent, which was not previously a 

citizen, national, or lawfully present individual gains such status; 

(4) The qualified individual's or his or her dependent’s, enrollment or nonenrollment in a QHP is unintentional, inadvertent, or erroneous and is the result of the 

error, misrepresentation, or inaction of an officer, employee, or agent of the Exchange or 

HHS, or its instrumentalities as evaluated and determined by the Exchange. In such 

cases, the Exchange may take such action as may be necessary to correct or eliminate the 

effects of such error, misrepresentation, or inaction; 

(5) The enrollee or, his or her dependent adequately demonstrates to the 

Exchange that the QHP in which he or she is enrolled substantially violated a material 

provision of its contract in relation to the enrollee; 

(6) Newly eligible or ineligible for advance payments of the premium tax credit, 
CMS-2334-F 

or change in eligibility for cost-sharing reductions. (i) The enrollee is determined newly 

eligible or newly ineligible for advance payments of the premium tax credit or has a 

change in eligibility for cost-sharing reductions; 

(ii) The enrollee’s dependent enrolled in the same QHP is determined newly 

eligible or newly ineligible for advance payments of the premium tax credit or has a 

change in eligibility for cost-sharing reductions; or 

(iii) A qualified individual or his or her dependent who is enrolled in an eligible 

employer-sponsored plan is determined newly eligible for advance payments of the 

premium tax credit based in part on a finding that such individual is ineligible for 

qualifying coverage in an eligible-employer sponsored plan in accordance with 26 CFR 

1.36B-2(c)(3), including as a result of his or her employer discontinuing or changing 

available coverage within the next 60 days, provided that such individual is allowed to 

terminate existing coverage. The Exchange must permit an individual who is enrolled in 

an eligible employer-sponsored plan and will lose eligibility for qualifying coverage in an 

eligible employer-sponsored plan within the next 60 days to access this special 

enrollment period prior to the end of his or her existing coverage, although he or she is 

not eligible for advance payments of the premium tax credit until the end of his or her 

coverage in an eligible employer-sponsored plan; 

(7) The qualified individual or enrollee, or his or her dependent, gains access to 

new QHPs as a result of a permanent move; 

(8) The qualified individual who is an Indian, as defined by section 4 of the 

Indian Health Care Improvement Act, may enroll in a QHP or change from one QHP to 
CMS-2334-F 

another one time per month; 

(9) The qualified individual or enrollee, or his or her dependent, demonstrates to 

the Exchange, in accordance with guidelines issued by HHS, that the individual meets 

other exceptional circumstances as the Exchange may provide;

 * * * * 

 77. Section 155.430 is amended by revising paragraphs (b)(1), (d)(1), (d)(2)(iii), 

(d)(2)(iv), (d)(3), and by adding paragraph (d)(7) to read as follows:

§155.430 Termination of coverage. 

* * * * * 

(b) * * * 

(1) Enrollee-initiated terminations. (i) The Exchange must permit an enrollee to 

terminate his or her coverage in a QHP, including as a result of the enrollee obtaining 

other minimum essential coverage, with appropriate notice to the Exchange or the QHP. 

(ii) The Exchange must provide an opportunity at the time of plan selection for an 

enrollee to choose to remain enrolled in a QHP if he or she becomes eligible for other 

minimum essential coverage and the enrollee does not request termination in accordance 

with paragraph (b)(1)(i) of this section. If an enrollee does not choose to remain enrolled 

in a QHP in such a situation, the Exchange must initiate termination of his or her 

coverage upon completion of the redetermination process specified in §155.330. 

* * * * * 

 (d) * * * 

(1) For purposes of this section-- 
CMS-2334-F 

(i) Reasonable notice is defined as at least fourteen days before the requested 

effective date of termination; and 

 (ii) Changes in eligibility for advance payments of the premium tax credit and 

cost sharing reductions, including terminations, must adhere to the effective dates 

specified in §155.330(f). 

 (2) * * * 

 (iii) On a date on or after the date on which the termination is requested by the 

enrollee, subject to the determination of the enrollee’s QHP issuer, if the enrollee’s QHP 

issuer agrees to effectuate termination in fewer than fourteen days, and the enrollee 

requests an earlier termination effective date. 

 (iv) If the enrollee is newly eligible for Medicaid, CHIP, or the BHP, if a BHP is 

operating in the service area of the Exchange, the last day of QHP coverage is the day 

before the individual is determined eligible for Medicaid, CHIP, or the BHP. 

(3) In the case of a termination in accordance with paragraph (b)(2)(i) of this 

section, the last day of QHP coverage is the last day of eligibility, as described in 

§155.330(f), unless the individual requests an earlier termination effective date per 

paragraph (b)(1) of this section. * * * * * 

(7) In the case of a termination due to death, the last day of coverage is the date of 

death. 

* * * * * 

78. Section 155.615 is amended by revising paragraph (f)(2)(i) to read as follows: 

§155.615 Verification process related to eligibility for exemptions. 
CMS-2334-F 

 * * * * * 

 (f) * * * 

(2) * * * 

(i) For any applicant who requests an exemption based on the hardship described 

in §155.605(g)(2), the Exchange must verify the unavailability of affordable coverage 

through the procedures used to determine eligibility for advance payments of the 

premium tax credit, as specified in subpart D of this part, including the procedures 

described in §155.315(c)(1), and the procedures used to verify eligibility for qualifying 

coverage in an eligible employer-sponsored plan, as specified in §155.320(d), except as 

specified in §155.615(f)(2)(ii).

* * * * * 

PART 156 –HEALTH INSURANCE ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING STANDARDS RELATED TO 

EXCHANGES 

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

Authority: Sections 1301, 1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 

1324, 1334, 1341, 1342, 1343, 1402, 1413, 1321, 1322, 1331, 1332, 1334, 1341, 1342, 

1343, 1401, and 1402 of the Affordable Care Act, Pub. L 111-148, 124 Stat 199.

 80. Section 156.270 is amended by revising paragraph (b) to read as follows: 

§156.270 Termination of coverage for qualified individuals. 

* * * * * 
CMS-2334-F 

(b) Termination of coverage notice requirement. If a QHP issuer terminates an 

enrollee’s coverage in accordance with §155.430(b)(1)(i), (ii), or (iii), the QHP issuer 

must, promptly and without undue delay: 

(1) Provide the enrollee with a notice of termination of coverage that includes the 

termination effective date and reason for termination. 

(2) [Reserved]

* * * * *

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. 

BILLING CODE 4120-01-P 

[FR Doc. 2013-16271 Filed 07/05/2013 at 11:15 am; Publication Date: 07/15/2013]